Alimera Sciences, Inc.

Q1 2024 Earnings Conference Call


spk04: Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Almera Sciences First Quarter and 2024 Financial Results and Corporate Update Conference call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Participants on this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately one hour after the end of the I would now like to turn the call over to Scott Gordon of Core IR, the company's investor relations firm. Please go ahead, sir.
spk08: Thank you, operator. Good morning and thank you for participating in today's conference call. Joining me from Almera's leadership team are Rick Eisworth, President and Chief Executive Officer, Elliot Maltz, Chief Financial Officer, Todd Wood, President of U.S. Operations, Philip Cashman, President and International Operations. During this call, management will be making forward-looking statements, including statements that address Almera's expectations for future performance or operational results, future financial position, outlook and guidance and timeline for achieving positive cash flow. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Almera's most recently filed periodic reports on Form 10Q, the Form 8K filed with the SEC today and the Form 10K filed with the SEC for the year ended December 31, 2023, as well as Almera's press release that accompanies this call, particularly the cautionary statements therein. Today's conference call will include references to adjusted EBITDA, which is a non-GAAP financial measure. Please see the explanatory language and reconciliation table located in Almera's earnings press release that accompanies this call. The contents of this call contains time-sensitive information that is accurate only as of today, May 14, 2024. Accepted as required by law, Almera disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Rick Eisworth. Rick, please go ahead.
spk05: Thank you, Scott, and good morning to everyone on the call. We experienced a very good first quarter, aligning with our internal expectations. As we continue to see the benefits of integrating UTIC in our U.S. portfolio, we're also seeing excellent growth in both our international distributor markets as well as some of our IT direct markets in Europe. In Q1, our consolidated global net revenue increased 70 percent over Q1 2023 to $23 million, driven primarily by the acquisition of UTIC and growth in global end-user demand, 23 percent on a pro-forma basis. You may note that this revenue is below that for Q4 2023, but this seasonal decline is anticipated each year as patient deductibles are reset and physicians resubmit their benefit verifications, lowering the utilization of higher-priced products like UTIC and Alluvium. As we communicated last quarter, we're now generating positive adjusted EBITDA on a quarterly basis, achieving $1.8 million in Q1 2024 versus an EBITDA loss of $2.4 million in Q1 2023. We reiterate our confidence in achieving $105 million in revenue and at least 20 percent adjusted EBITDA margins this year. As I mentioned before, we do expect our revenue to fluctuate quarter to quarter due to the seasonality of our business. Adjusted EBITDA will also fluctuate quarter to quarter due to this seasonality as spending is more consistent on a quarter to quarter basis. In our U.S. segment, net revenue in Q1 2024 increased 92 percent to $14.6 million versus $7.6 million in Q1 2023, primarily again due to the acquisition of UTIC. U.S. end user demand for our product was up 96 percent in Q1 versus the prior year, when including the addition of UTIC, and 2 percent on a pro forma basis. We believe that the growth of Alluvium and UTIC in Q1 softened from integrating a combined two-product sales call. We restructured the call plan to prioritize targets across current users and how to sell targets and enhance the level of effort against each product. We are seeing improvement as we've seen sequential growth in monthly end user demand for our products on an aggregate basis every month since December of last year. Further, our U.S. sales team has been selling both UTIC and Alluvium for three quarters now, and we're starting to see the value of cross-selling the two products to accounts in this quarter, as the percentage of accounts using both products has slightly increased from 26 percent to 28 percent. In order to accelerate the growth of both products, we're tightening our messaging decisions for both Alluvium and UTIC. For Alluvium and DME, we are refining the value proposition, linking the severity of disease to retinal thickness variability, as this concept is catching on with retin specialists and being utilized by our competition. If the swelling in the retina is allowed to recur as acute treatments wear off, it can lead to permanent retinal damage and vision loss over time. The sooner the retina can return to a healthy level and the more consistently it can stay there, the better opportunity to improve and save vision. For UTIC, our sales team now has the three-year data from the UTIC Pivotal 001 study that illustrates the benefit of long-term control for chronic non-infectious uveitis affecting the posterior segment of the eye. It shows that the median time to the first recurrence of uveitis is over 1,000 days for the UTIC patient, while it's less than 100 days for the SHAM patient, a substantial benefit. Turning to our international business, we are pleased with our continued momentum to begin the year. In Q1 2024, international net revenue grew 42 percent to $8.5 million, driven by a 53 percent increase in user demand. We continue to see growing utilization in the UK, Portugal, Ireland, Spain, and France. In March, the UK National Institute for Health and Care Excellence, or NICE, issued final guidance stating that the buccinal and acetinide intravitral implant is recommended for treating visual impairment caused by chronic diabetic macular edema, irrespective of one site. What this means for us is that now FACU patients, or those that have a natural lens, now have access to alluvium. NICE reimbursement to date has been limited to only pseudo-FACU patients, or those that have undergone cataract surgery. This is a significant expansion of our potential user base among the chronic diabetic microedema or DME patient population. According to the UK Macular Society, FACU patients represent up to 75 percent of the Macular DME population in the United Kingdom. We expect the availability of this wider reimbursement to positively impact utilization in the UK in the second half of 2024. NICE guidance can also impact reimbursement in other countries, such as Spain and Italy. We believe that this NICE decision, if adopted in other markets, will broaden our potential patient base in these countries as well. I would now like to highlight the continued progress and key milestones we achieved this quarter in our clinical trials. We reached the enrollment target for the Phase IV Open Label Synchronicity Study in January that we inherited from EyePoint just a few months after our acquisition of UT. This study, which we'll read out in the second half of next year, will provide retina specialists with a broader sense of the utility of our fusillan and setinide implant across a variety of patients with chronic non-infectious uveitis affecting the posterior segment of the eye, also known as NIUPS. This will potentially benefit both UTEP in the United States and leaving it in Europe and the Middle East. Additionally, we have three abstracts highlighting our UTEP column registry study presented last week at two meetings. The Association for Research, Envision, and Ophthalmology, also known as ARBO, and the Retinal World Congress, all demonstrating that real-world safety and efficacy outcomes are consistent with the pivotal clinical trial outcomes. Separately, we were pleased to announce that the first patient has been randomized in the DRCR Retina Networks Protocol AL. The study is titled, A Randomized Clinical Trial, Evaluating Intra-Virtual Charisma Injections for Fusillan and Setinide Intra-Virtual Implants versus Observation for the Prevention of Digital Acuity Loss Due to Radiation Retinopathy. This study will assess the development of macular edema and associated long-term visual acuity effects of consistent and continuous release corticosteroids or repeated injections of anti-virus GEP initiated near the time of radiation therapy compared to observation developing in patients at risk for radiation retinopathy. The study plans to include 600 patients with primary chordal melanoma receiving treatment with plaque brachyotherapy. Over 40 percent of radiation retinopathy patients have been shown to experience the devastating vision loss associated with radiation retinopathy within three years of treatment. Currently, there are no FDA-approved pharmacotherapies for radiation retinopathy. With that update, I'll now turn the call over to Elliott to review our first quarter financial results in greater detail.
spk10: Thanks, Rick, and hello, everyone. We completed quarter one as we anticipated, delivering results expected from the street. Consolidated net revenue in Q1 2024 was up 70 percent to approximately $23 million compared to $13.5 million in Q1 2023. Consistent with the seasonal business pattern we see in the first quarter of the calendar year, revenue was down versus the fourth quarter of 2023 as patient's insurance plans change and practices resubmit benefits verifications. Looking at our operational segments, U.S. net revenue increased 92 percent to approximately $14.6 million in Q1 2024 compared to $7.6 million in Q1 2023, driven primarily by the acquisition of UTIC. End user demand in the U.S. for our Fluid Cinalone Implants was 1,968 units in Q1 2024, a 2 percent increase compared to Q1 2023 on a pro-forma basis. International net revenue increased 42 percent to approximately $8.5 million in Q1 2024 compared to approximately $6 million in Q1 2023. The increase was driven primarily by end user demand growth of 23 percent in our direct markets and a 72 percent increase in the stock and shipments to our international distributors. Total end user demand in our international segment was a 53 percent to 2,060 units compared to Q1 2023 due to strong growth in our direct markets and soft performance from our distributors in France and Spain. Now looking at the rest of our P&L, total operating expenses in the first quarter of 2024 were approximately $22 million compared to approximately $14.8 million in Q1 2023. The increase was primarily attributable to $3.3 million of additional sales and marketing expenses driven by the expansion of our commercial infrastructure to support selling to products in the U.S. as well as $2.4 million in additional amortization expense attributable to the UTIC acquisition in May of 2023 as well as a $1.3 million increase in general and administrative expenses relating to $700,000 of personnel costs and $500,000 of stock-based compensation expense. Net loss was approximately $6.3 million in Q1 2024 compared to approximately $5 million in Q1 2023. We generated positive adjusted EBITDA again this quarter as planned. In Q1 2024, we generated approximately $1.8 million of adjusted EBITDA compared to an adjusted EBITDA loss of approximately $2.4 million in Q1 of 2023. On our last call, we noted that our target adjusted EBITDA margin is 20% for the full year. We remain confident in this guidance, but we anticipate adjusted EBITDA margins will fluctuate quarter to quarter since expenses remain relatively consistent but revenues fluctuate due to seasonality. As of March 31, 2024, we had cash and cash equivalents of approximately $14.3 million compared to $12.1 million at the end of 2023. This quarter, we increased our term loan agreement with our lender, SLR Capital Partners, by $5 million. This provides us with more operating flexibility and defrauds the impact of some upcoming contractual obligations such as the $7.5 million of consideration owed to iPoint in 2024 resulting from the acquisition of UT last year, of which $1.9 million was paid in March. Additionally, during Q1 2024, we triggered $1.1 million of revenue-based milestone fees under our term loan and exit fee agreements with SLR, and we expect to trigger the remaining $1.3 million over the rest of 2024. Now, I'll turn it back over to Rick to give his closing comments.
spk05: Thank you, Elliot. As we said, we are pleased with our start to 2024, which was consistent with our external expectations and previous guidance. However, there remains a significant opportunity to grow the utilization of alluvium and UT in 2024 and beyond. We believe that our success in growing utilization of alluvium in both DMA and uveitis in our international markets is the leading indicator for what we can accomplish with our flu-synil and acetinide franchise in the United States. We believe our restructured call plans in the U.S., which prioritize current users and high S.I. targets, will enhance the level of effort against each product and promote the cross-selling opportunity. As I commented earlier, we believe we are seeing early signs of success with sequential monthly demand growth since December and an uptick in the percentage of accounts utilizing both products. We believe that the numerous studies we've conducted around the world with alluvium are a good indicator that the New Day study will report a successful outcome and support the use of alluvium earlier in the treatment paradigm for DMA. And we believe the synchronicity study will highlight increased utility of the UT in the general retina specialist population. We remain confident in our ability to deliver more than $105 million in revenue this year and greater than 20% even in markets. Thank you very much. That concludes our prepared remarks and I now turn the call over to the operator for questions.
spk04: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Our first question comes from Chase Nickerbacher with Craig Hallam. Please go ahead.
spk02: Good morning, guys. Thanks for taking the questions. Maybe just first for me, more of a qualitative one. Just as you're engaged, as your sales force, you know, combined sales force are going out, looking to harvest this energy to post indications, are you finding that a lot of positions still that might be using your product in BME, for example, you know, we're not aware of the indication for UV-IS or maybe just kind of getting a sense of how warm the water is as far as those synergies still go and how much kind of more upside there is to drive awareness?
spk05: Yes, sure. I mean, I think it's a combination of a lot of things. Chase, I'm going to ask Todd to comment on this a little bit more, but I think it is an awareness issue, you know, making sure doctors know that we have both assets now to some extent where they're using one product. It is a challenge that the team has been trying to figure out how to streamline the conversation about BME and UV-IS to be able to talk about both in the same short window they get in the clinic, because there are quite a few products that are competing for clinic time with our team on the road now. And so, you know, you're getting less time in the clinic lane talking to the doctor and it's trying to squeeze both of those in the same conversation. But Todd, do you want to talk a little bit more about how we've been trying to refine that messaging?
spk03: Yeah,
spk05: yeah, certainly. Thanks,
spk03: Chase. Thanks for the question. And to add on to what Rick mentioned, sometimes for classic UV-IS and BME, they're different providers to different patients because sometimes it just gets referred on to a UV-IS specialist. And what we are currently engaging on is an education campaign because there's many disease states that are of chronic inflammation that are UV-etic. And so we're educating providers on the fact that they are probably seeing a lot of UV-IS even though it's not classic UV-IS that's tied to another disease. So that's currently what we're implementing right now to create that crossover.
spk02: Got it. And then kind of staying on the same line of taking a different tack. You know, taking a look at ASP data, it looks like there's never been any rebating done here on either product line. Have you given any thought to, you know, potentially initiating any sort of rebating strategy to kind of help drive those initial conversations forward and, you know, maybe drive some extra demand early in the combination of these indications in the US?
spk05: Yeah, Chase, it's a timely question. We actually have been looking at that. You know, we call it, we refer to it as a non-clinical value program. But we have implemented as of April 1st a non-clinical value program in the US where, you know, we are providing value back to the physician practices that are using Illuvian or UTIC more consistently. And frankly, there's a separate program for Illuvian and UTIC. And then there's a little bit more value provided back for those practices that are using both products more consistently. So, you know, we implemented that on April 1st. It's slowly been rolled out, you know, but we do expect that, you know, we'll have, you know, some small impact in Q2 and have an impact, greater impact as we move throughout the year.
spk02: Are you seeing any, you know, sort of impact on initial conversations from that, you know, non-clinical, you know, value that you're willing to add to your, you know, potential new customers as well? And then just lastly, on the model side, sales and marketing spend, would you expect that to kind of be flat from here or was there any sort of non-recurring or non-cash items in the quarter? Sorry if I missed it.
spk05: Yeah, well, I'll ask Todd to comment on some of the early feedback we've gotten from the, it's what we're referring to as the Amplify program on the non-clinical value. And then maybe Ellie can address the comment on the financials.
spk03: Yeah, the initial feedback has been very, very well. It's greatly accepted. Obviously, the marketplace has been anticipating something like this for some time. And as we've launched it, they've, we've just got a tremendous amount of positive feedback. Now it's just a matter to see what type of impact that is as we look at their purchasing patterns throughout the end of this quarter.
spk10: Yeah, and with regard to just total expense in the sales and marketing line, I think this quarter was maybe a bit higher than what we anticipate on a go-forward basis. We did have some one-time costs that were incurred during the first quarter of 24, which should normalize as we move through the rest of the year. Not a very material number, but maybe in the 5 to 10 percent range that we're talking about in terms of one-time cost that hit our P&L this quarter and sales and marketing marketing.
spk04: Got it. Thanks for the questions. Yeah. The next question comes from Yi Chen with HC Wainwright and Company. Please go ahead.
spk06: Hi, thank you for taking my question. With respect to the protocol ADL trial, does Unimar need to financially support your study?
spk05: I'm sorry. I didn't quite understand that. Yi, can you repeat the question?
spk06: The protocol ADL, the DRCR retinal network study with inluvium or fibrocyn-net injections, does Unimar need to financially fund this study?
spk05: Yes. We are making contributions of about a million and a quarter over the period of five years. It's pretty straight-lined over the course of the year. It's about a quarter of a million dollars a year.
spk06: Could you give us some color on how many radiation retinopathy patients out there could that potentially benefit for Unimar?
spk05: It's a pretty small population. It would be considered an orphan disease indication, probably less than 10,000 patients a year, but at the same time, there's nothing out there approved to treat it at this time.
spk06: Regarding the UK NICE recommendation for chronic DME patients with natural lens having access to the DME from the UK, do you expect to see?
spk05: It's hard to give specific guidance around that. The FACIC population is probably about 25 percent of the DME population. However, it's probably a little bit greater in the more chronic patients that it would be utilized specifically in the UK. But certainly over time, we think this can more than double the market for available patients in the UK. How quickly it will be adopted in those patients, it's a little bit unclear yet. We'll probably be able to tell you a little bit more after we get a quarter or two of experience with it. But we do know that in some of the hospitals, patients are already being identified where they've got, still have a FACIC lens, and they're being identified for utilization of a lumen. So it's starting to pick up, but probably won't be able to give much guidance until we get another quarter or two out.
spk06: Got it. Got it. And the first 1028 units for the quarter, that is the user demand, including US and ex-US territories. Is that correct?
spk05: Yes, that is correct. That's correct.
spk06: Okay. Got it. Got it. Thank you.
spk04: The next question comes from Naz Rahman with Maxim Group. Please go ahead.
spk07: Hi, everyone. Thanks for taking in our questions and congrats on the progress. Just a couple. I want to expand on the UK medical reimbursement question a little bit. Could you comment on how the reimbursement is in the UK or how it differs from other international territories and what the implication that that also means for your margins? How could the margin improvement, if any, later down the line?
spk05: So the reimbursement change doesn't have an impact on the margin because it's still going to be reimbursed at the same price. But Philip, maybe you could give a little bit of commentary on where we have FACIC restrictions and don't across Europe.
spk01: Yes. So the UK is one of the countries that adopted this pseudo-FACIC limitation. The other countries include Italy and Spain as well. And unfortunately, in Europe, the way things work, all of these reimbursement authorities speak to one another. So even in countries that don't have the limitation, there's a dampening impact, which it'll be interesting to see how it translates across Europe. But clearly, the UK guidance is now in place and implemented. We launched it at the end of April. So we're watching carefully to see how it progresses there. And we're working with our partners in Spain and Italy already to look at plans for how we can help them challenge the limitation in those countries too. But hopefully that helps. And just to echo what Rick said, because it's an important point, there has been no change in price at all with this. So in the sense of the United Kingdom, what we expect is more volume with the requisite impact of that volume coming through in the overall revenue.
spk07: Got it. That was helpful. Our next question is on the pipeline or indication expansion. You mentioned on the call, could you expand a little more about what you're thinking? And also, have you seen any potential off-label use of either UTIC or Lubion for RVO or potentially other indications?
spk05: Yes. So I think from a pipeline perspective, we've been holding some advisory boards and looking at potential opportunities to expand the indications for a Lubion, as we've discussed. I think that probably the leading candidate beyond potentially something in radiation retinopathy that could arise out of the DRCR study would be vein occlusion. We hear from physicians a lot that there's a need for a chronic long-term low-dose steroid in RVO. We do know that there are physicians that have utilized it on a compassionate use basis or have found patients that have signs of uveitis and DME with their RVO and treated those patients as well and have come back to us with cases where it works. But we are trying to work with the advisory boards to try to refine what exactly that available patient population would look like and what a trial structure would look like. That's something that we hope to flush out between now and the end of the year, where we could potentially redirect some of the spending from synchronicity and new day as that sort of bleeds down.
spk07: Got it. My last question is on the COMF study for UT. Could you provide some color on what we might see some data from that study or what conferences and data might be presented at?
spk05: Yes. So that study was a registry study and it's sort of slowly producing publications of participants in that study. As we mentioned, there were three presentations both at RVO and Red World Congress over the past couple of weeks. And as those papers are published, we'll be able to share those publicly, but those papers haven't been shared yet. They were just presentations at the meetings. But in general, what you're seeing there is that the registry studies are showing that the safety and efficacy is very, very consistent with what we saw in the BLO studies for uveitis. And I'd just like to remind you that the reason you see that, you see it across DME as well, is because the Lubion and Utique are, for the most part, they're self-compliant. Once they're injected in the eye, they deliver a very consistent low dose of glycine alone at night every day for three years. And you're not reliant on capacity at a doctor's office, a patient getting back to the office for consistent therapy. And it's why you don't see the same results in a real-world setting, but the anti-bed gess and the other acute therapies, because they're not injected at the same frequency they are in the clinical studies.
spk07: Got it. Thank you for taking our questions.
spk05: Absolutely. Thank you, Naz.
spk04: The next question comes from James Malloy with Alliance Global Partners. Please go ahead.
spk09: Hey, good morning, guys. Thank you for taking my questions. I had a question on margins in the quarter. Will you guys be able to decouple sort of the sales and marketing from sales? I see that thinking of the $23 million in the first quarter here. I know it's seasonality from the fourth quarter, but it looks similar to the $23 million you guys posted in the third quarter last year with better gross margins and better EBITDA margins. Is there a way to sort of get the margins going in the first quarter, or do you expect to see that going to improve through the year? What happens in the first quarter? That kind of questions the margins as well besides the seasonality.
spk10: Yes, I mean, there were some fixed costs that keep our business fairly consistent. That's the majority of our P&L structure, but there are some one-off items, some relating to integration of new hub services and transitioning from having two hubs supporting each product to having a single hub in the US. There were some non-recurring expenses in the first quarter that are tied to internal meetings to align the sales force on the cross-sell opportunity and to train reps on selling both products. We had some that came up from I-Point last year that needed more training and attention focusing on DME and vice versa for the legacy Alamara employees as they've taken on the UVI syndication and they're selling opportunity. We believe that the majority of those costs are now done and on a go-forward basis our P&L should reflect really the fixed cost structure we have with fewer of those one-off items that can weigh down a P&L for an individual quarter. So as we move through the rest of the year, we expect our costs to remain fairly stable and on a full year basis get us to that 20 percent even margin that we indicated in our guidance.
spk05: At one point, Jim, the last piece of operational integration was completed as of April 1st where we and I-Point provided benefit investigation hotlines where we would run benefits for the positions, offices to make sure the insurance coverage was there and the understood co-pays, etc. We were running two systems in parallel until April 1st which means we were incurring more costs and that integration was complete as of April 1st. So that's another issue you see.
spk09: That goes into sales and marketing expense in the quarter? Yes.
spk05: Yes, it does.
spk09: Thank you. Then what's the, do you guys break out the US alluvium versus Utique in the quarter?
spk05: We're not doing that going, we talked about that a couple of quarters ago. We're going to talk about the flu signal and the set-night franchise going forward because it's on a consolidated basis just like it is in Europe going forward.
spk09: Okay, great answer. Then maybe the last question, how many reps do you guys have currently in the field? And then keep talking a little bit about any anecdotal stories in the field on the new messaging and how that's been received.
spk05: Sure, right now we've got 35 territories in the US, but I'll ask Todd to comment on feedback on the messaging. Todd, if you want to do that?
spk03: Yes, sure. The messaging is getting, is being received quite well. And where this has been derived from is you look at some of the growth that we're experiencing internationally. Philip and his team have been out in front with this messaging a little bit before the US. So we've really bolstered our efforts around it with the new call plan that Rick mentioned a little bit earlier. And when you look at the advocacy use, our key proponents of the product, they're aware of fluctuating retina thickness. They take that into account with their treatment paradigm and they recognize that fluctuating thickness can lead to impaired vision. And then also on top of that early intervention is better to prevent impaired vision. So that's how the advocates of Alluvian are using the product today. So we're trying to expand that to a broader base and get more people on board with that since there is initial momentum from the advocacy groups.
spk09: Great, thank you for taking the questions.
spk04: This concludes our question and answer session. I would like to turn the conference back over to Rick Eisworth for any closing remarks.
spk05: Great, thank you. And I'd like to thank everyone for participating on today's call and your continued interest in Alimera. We do look forward to sharing our ongoing progress and we report our second quarter results in August. Thank you all and have a good day.
spk04: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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