Q3 2022 Alimera Sciences Inc Earnings Call
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Ladies and gentlemen, thank you for standing by good morning, and welcome to the Alamo or Sciences third quarter 2022 financial results and corporate update conference call. At this time, all participants are in a listen only mode.
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A webcast replay of the call will be available approximately one hour. After the end of the call through February 14th 2023.
I would now like to turn the call over to Scott Gordon of core I or the company's Investor Relations firm. Please go ahead.
Thank you Danielle good morning, and thank.
Thank you all for participating in today's conference call. Joining me from <unk> leadership team are Rick is worth President and Chief Executive Officer.
Phil Jones, Chief Financial Officer.
During this call management will be making forward looking statements, including statements that address our marriage expectations for future performance or operational results.
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 <unk>. Most recently filed periodic reports on Form 10-K and Form 10-Q.
Form 8-K filed with the SEC today and element. This press release that accompanies this call, particularly the cautionary statements in it.
Today's conference call will include references to adjusted EBITDA.
And two adjustments in net product revenue to exclude fluctuations in foreign currency exchange rates, each of which is a non-GAAP financial measure.
Please see the explanatory language in reconciliation tables located in Allen mirrors earnings press release.
The content of this call contains time sensitive information that is accurate only as of today November 14 2022.
As required by law polymeric disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur. After this call.
Now my pleasure to turn the call over to Rick I Suppose Rick. Please go ahead.
Thank you Scott and good morning to everyone on the call. We're very pleased to delivered another strong performance really being global end user demand with record third quarter demand in both our U S and international segments.
Those were up 27% over the same period a year ago.
Year to date were also posting record performances in end user demand up 32% in the U S and 16% in Europe compared to the same nine month period last year.
Our reported revenue of $13 $6 million for the third quarter grew 11% over the third quarter of 2021, but was negatively impacted by the weakening euro and British pound Sterling that reduced our reported revenue by approximately $800000.
On a currency adjusted basis, our revenue growth was 18% compared to the prior year quarter.
Year to date through the end of the third quarter 2022, consolidated net revenues were $40 1 million compared to $34 million for the same nine month period in 2021.
Representing 18% growth.
But year to date revenues were also negatively impacted by approximately $1 $9 million due to the exchange rate fluctuations on a currency adjusted basis. Our revenue grew 23, 5% year to date.
In the U S segment, we saw third quarter revenues increased 27% to $8 $9 million year over year, our focus on increasing face to face interactions with customers across multiple formats.
To drive the strong performance as we saw end user demand of 1061 units a record third quarter for our U S segment and growth of 27% over 837 units in the third quarter of last year.
We are finding success with our challenged 22 program.
Our performance initiatives being driven by our regional sales directors.
And this program. The reasons are hyper focused on certain key accounts and work to drive cross functional collaboration and workflow within each account.
This 360 degree effort has so far demonstrated significantly positive result with accounts in this program growing at three times the rate of the broader account base to.
The success of this program is serving as a model for the entire organization and it's consistent with one of our key guiding principles of cross functional collaboration.
As a result, beginning in January 2023, we will broaden the scope of this program by increasing our sales regions to five without increasing the number of sales territories, allowing more time for the regional directors to focus on these initiatives, while providing the coaching and leadership of their respective sales teams.
Additionally, the positive pilot study data results and follow on data presentations and publications continue to be well received by written specials.
We intend to publish even more datasets from Palatin throughout next year.
These compelling data are enabling our U S commercial team to highlight the benefits of ILUVIEN, while addressing any challenges to the use of generally.
As a reminder, the Paladin study demonstrated that patients with diabetic macular edema or D me, who received a single dose I believe in demonstrated statistically significant improvements in best corrected visual acuity.
Central subfield thickness and treatment burden at 36 months as.
As well as proving the side effects of interactive pressure can be effectively mitigated when ILUVIEN is used in accordance with U S FDA label.
The data also shows that patients often achieve better results when aluminum used earlier in the treatment pathway for deeming.
Dr Sandra and sewer medical director of the Virginia Retina Center presented new data from the Paladin study at the American Academy of Ophthalmology Conference in October .
That data demonstrated that ILUVIEN can improve IL by reducing retinal thickness and the patients receiving ILUVIEN implant required 46% fewer therapies to manage their DB in the Paladin study on average.
These results reinforce the efficacy benefit of ILUVIEN demonstrate that do you mean.
And achieve better results with significantly fewer injections and further support the hypothesis of our new day study.
Turning to our international business, we reported $4 $7 million in product revenue during the third quarter down.
Down approximately 10% year over year. However.
However, international segment revenues were materially impacted by the effects of the foreign exchange rate fluctuations, which reduced our reported revenue by approximately $800000.
Currency adjusted basis, our international business was up 6% over the prior year period.
Overall International segment is strong with end user demand, having grown 16% year to date over the prior year.
But our international results reflect that some countries have been slower to return to growth than others. We expect almost all countries to return to growth in 2023.
Our opportunity to grow leaving behind the non infectious posterior uveitis indication remains a priority in our strategic growth.
In the first nine months, we obtain reimbursement in six European countries for our non infectious uveitis indication driving strong performance in our French and Spanish market specifically.
As a result, we saw record monthly end user demand in our international segment in October .
We expect sales for this indication will continue to fuel the sales growth of our international segment.
Turning to corporate initiatives in September we agreed to study <unk> ability to prevent visual acuity loss associated with radiation retinopathy for the DRC. Our retina network. This study they more critical a L anticipates enrolling 600 patients across three treatment arms with primary core.
Melanoma that will undergo radiation treatment for their condition.
<unk> will receive either an ILUVIEN implant.
<unk> injections of anti VEGF therapy or sham injections.
In each arm of the study patients will be monitored for the emergence of macular edema.
Objective is to determine if ILUVIEN for anti VEGF therapy can prevent or significantly reduce the occurrence and recurrence of radiation retinopathy.
Study is anticipated to begin in the first quarter of next year. When we look forward to participating in protocol a L. With the D. R. C. Our retina network to find the best solution for patients at risk for this treatment complication.
Turning to our landmark clinical study the <unk> study, we continue to enroll patients with the objective to demonstrate the benefits of ILUVIEN as baseline therapy for all patients diagnosed with D may.
Provide a significant reduction in the frequency of necessary injections and lead to better long term outcomes.
This head to head trial against the current standard of care is now more than 70% enrolled.
We have not enrolled patients for the study as fast as we would've liked in part due to the health care staffing shortages in the U S. Having caused a bit of a slowdown during the summer months. We now anticipate completing enrollment in early 2023, rather than the end of this year.
Assuming the primary objective of the New day study trial is met we believe that ILUVIEN will become a formidable competitor to the $7 $5 billion standard of care <unk> treatment and provide a significantly greater revenue opportunity for Eleanor.
And with that I'll now turn the call over to Bill to review, our third quarter financial results.
Thanks, Rick and Hello, everyone. During the third quarter of 2022, our consolidated net revenue was $13 $6 million.
11% versus the prior year as Rick previously shared third quarter 2022 revenue was negatively impacted by currency fluctuations.
On a currency adjusted basis revenue growth was 18% U S. Net revenue was $8 $9 million for the third quarter of 2022, an increase of 27% from the $7 million reported in the 2021 period.
U S end user demand, which represents units units purchased by physicians and pharmacies from our distributors increased 27% in the third quarter of 2022 to 1061 units compared to 837 units in the third quarter of 2021.
Net revenue from our international segment in the third quarter of 2022 decreased to $4 $7 million from the five point million $2 million that we reported in the third quarter of 2021.
The 10% decline in our international net revenue was due primarily to the impact of negative foreign exchange given the rise in the U S dollar relative to the euro as well as the mix of end user demand across our European markets.
Foreign currency impact was approximately $800000 for the quarter taking into account the impact from the exchange rate our revenue growth was approximately 6% in the quarterly comparison.
Importantly international end user demand was up approximately 27% year over year, driven by the recovery from COVID-19, and the increased utilization of ILUVIEN for non infectious uveitis.
Total consolidated operating expenses were $15 million in the third quarter of 2022, an increase of 20% compared to the $12 $5 million reported in the third quarter of 2021.
Higher operating expenses were driven by an increase in promotional and medical program investment intended to accelerate growth.
As we and our customers anticipate office visits and medical procedures. The increase in the latter part of 2022, given the recovery from COVID-19. Additionally, we saw increased extent and research development and medical affairs associated with product improvements New day study costs and travel related to.
<unk> engagement with clinicians.
We reported an adjusted EBITDA loss of $2 5 million <unk> million dollars in the third quarter of 2022 compared to an adjusted EBITDA loss of $1 $1 million in Q3 2021 for.
For the three months ended September 32022, we reported a net loss of $5 $3 million compared to a net loss of $4 $2 million for the three months ended September 32021.
Basic and diluted net loss per share for the third quarter of 2022 was 75 cents on approximately 7 million weighted average shares outstanding. This compares to basic and diluted net income per share for the third quarter of 2021 Ah 60 cents on approximately $6 9 million weighted average shares outstanding.
September 32022, we had cash and cash equivalents of $5 $5 million compared to $7 $9 million in cash and cash equivalents that we reported at June 32021.
Yeah.
After our cost structure prospectively.
Given the current macroeconomic environment and the lack of available capital in the public markets, we plan to limit our cash operating expenditures to less than $12 million per quarter in 2023, and an approximate 15% decrease to ensure the generation of positive adjusted EBITDA and neutral to positive cash flow.
After the close of Q2, we announced that Altamira was undertaking a series of initiatives to reduce operating costs to improve cash flow. The previously announced initiatives are expected to realize operating expense savings of up to $3 million annually and we have taken a number of actions to achieve this objective.
With health care access now fully reopened and our renewed focus on face to face interactions with our customers. We have decided that we can rationalize costs further by eliminating certain external programs such as our direct to patient advertising campaign we.
We believe that this will save the organization, an additional $2 million and operating cost annually for total savings of $5 million per year, when all cost rationalization initiatives are fully implemented.
We are focused on pulling these cost savings through in 2020, three which we believe will enable us to continue to grow our ILUVIEN business, while becoming sustainably EBITDA positive we plan to offer more details and guidance on our financial outlook. When we report our fourth quarter and year end earnings results next year and with that.
Now I'll turn the call back over to Rick.
Thank you Phil.
We are very pleased with our demand growth year over year across the business our focus on face to face interactions with our customers is paying off as retina specialists are adopting ILUVIEN more and more and in practices due to the benefits of the therapy.
We believe the continued progress in our new day trial in the upcoming study evaluation evaluating radiation retinopathy will increase visibility of ILUVIEN utility in the treatment of retinal diseases.
And to compound our growth initiatives, we are committed to rationalizing our operating expenses to achieve sustainable positive you get out beyond this year.
That concludes our prepared remarks, I'll now turn the call over to the operator for questions.
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Using a speakerphone please pick up your handset before entering your question speaking on the call. One moment. Please for the first question.
Yeah.
The first question comes from Alex No no lack of Craig Hallum Capital Group. Please go ahead.
Great Good morning, everyone.
Rick and Phil you know over the past couple of quarters. The company has accelerated spend because we thought it was necessary to accelerate the sales growth what is the risk here as you decrease the investments now that we're just not going to see sales grow as quickly as it has been or are we starting to see a sales decline next year or in the future years.
And maybe expand a bit more some of the programs are kind of beyond just the direct to patient program.
Yeah.
Yeah, So Alex I do think it is very sustainable.
We are really focused on making sure that all the dollars going forward are centered around the face to face engagement with the physicians right. So.
Anything that is not related to that sort of hand to hand combat on the ground.
Beat on the street have been with a doctor is very frequently are that things are going to be cut because we think the more engaged and we have the doctors that's really what drives the utilization. So we think we'll still have plenty of money to spend and we don't plan any cuts in the structure of our field team. In fact, you know the Gulf to make sure. We continue to pray to protect all those people just like we did at the outset of the pain.
Epic to maintain those.
Those relationships and.
And continue to invest in you know advisory boards formats.
Educational programs things like that with the doctors as groups. So as Phil alluded to we did do some restructuring in our European operations earlier. This year you do see some of the impact of the severance cost and things like that running through the third quarter, which is one of the reasons.
It's higher than normal.
And we were going to eliminate the DTP program going forward, we think that was very successful in generating some awareness.
While our offices were shut down or access to patients and physicians what isn't as good but we do think that the money spent around the face to face engagement with physicians is more impactful more powerful.
Okay that all makes sense and I guess.
As you think about next Gee, there Keith well, let's say Q4. This year Q4 seasonally is a very strong quarter for you. So I would expect to see maybe some cash flow positive in that quarter, but what do you think about 2023.
Should we expect the business to be at a cash flow neutral maybe cash flow positive run rate based on what youre seeing on the sales side, what you're seeing around the cost you get it back.
Yes, I do I do think that in 2023, you will see us be cash flow neutral to positive.
If you if you look at the expense projections, we just projected trying to get down below $12 million a quarter from an operating expense standpoint.
You can do the math and see that it only take very moderate growth to be positive cash flow at that level of expense and certainly less than what we had been seeing from a growth standpoint. So we think we're being very conservative there and we'll be able to drive that positive cash flow next year.
Okay, and maybe expand a bit more on the sales force structure changes for just right at the beginning of 2023 are our reps can be moved around to different territories with the new repetition. Just how are you thinking about any disruption time for ramp around the reps or is it pretty straight forward.
No there shouldn't be there shouldn't be any disruption there were actually there is no change to the field territories, we will still have roughly 30 territories.
Just going from four regional directors to five so reducing the span of control from seven or eight reps per our regional director to five to six and that's to allow a little bit more flexibility in those regional directors schedules.
To focus on key accounts right. So in our challenge 22 program. This year, we really tried to focus that cross functional effort around 18 to 20 accounts, we think we can.
Expand that are 30% to 35 accounts next year and I'm really pleased that the fifth regional director was an internal promotion. Its a gentleman that has run sales training in the U S ran global training force is very very familiar to the entire U S sales team and.
It's actually been a regional director in other organizations in the past. So he is a perfect fit for us and it should be very seamless transition for our team as we sort of reallocate the reporting lines there.
Okay that makes sense and then maybe can you talk through month by month, what happened throughout Q3, you know typically we do see end user demand increased sequentially in Q3, it didn't look like it happened.
Excluding all the ethics in tax and whatnot. So just what are you seeing in the market and then obviously October sounded pretty good but what are you seeing in October so far in November and then just lastly, it looks like there's $21 million and get that went into the current line on the balance sheet. Just curious was there some sort of covenant that was tripped or what was the reason for the boat from long term debt to current debt.
Yeah sure so Alex to be honest with you Q3 was a little bit inconsistent. We had a strong July we had a record in August I think August in the U S was the strongest August strongest month, we've ever had in the history of the company and then it dropped off a little bit in September one of the things. We think we are seeing a little bit as being phase III is.
Is there are there are a lot of the biz malware first map samples out there in the marketplace and we do think that there are a few doctors that are trialing. These sample for his mab units and a patient for one more shot at the anti VEGF before they switch over to Stewart and so we may be dealing with a little bit of a cycle there.
Pop back up pretty strong in October you know again, but we also know they put a lot of samples out there. This month. So that may be one issue you know we've got to cycle through temporarily let them, let them try this Bruce and Matt. We don't think in a lot of the doctors we talk to you in specifics are cheap retina specialists that there's really any difference now that is going to perform but.
It's perceived as a stronger <unk>.
Jeff and if you've got a free sample. There you know, we think they're giving that a shot so.
I think that is having a little bit of an impact did have a little bit of impact on the third quarter with respect to the debt. The debt is listed as current there because you know technically the debt starts to amortize them early next year we.
We're in the process of working with our lender our existing lender solar who we've had a really strong relationship to address that going forward.
And I think we'll be able to solve that I think our business from a global demand standpoint, as we've talked about today is it's really stronger than it's ever been despite the little bit of challenges there with tourists map. So.
We feel real good about going into 2023, we feel real good about the ability to manage the cash and are comfortable that we'll be able to work something out with solar in the by the end of the year.
Okay. That's great. Thanks for the answer I appreciate it.
Yeah, absolutely. Thank you.
The next question comes from Laura Sorry out of Alliance Global Partners. Please go ahead.
Hi, This is Lara cereal on for Jim Malloy. Thank you for taking our questions.
So regarding the agreement with the Dead Center for the study of ILUVIEN in mediation retinopathy.
As mentioned with the initiation expected to commence next year. When do you expect an overall in terms of like to be announced that this trial in particular and then also for the new day studying what is the overall timeline for this trial following expectation to complete enrollment early next year and when my topline data being reported thank you.
Yeah. So for the Dr. <unk>, Dr. <unk> study I think from a confidentiality standpoint need to let them speak publicly about their timelines.
But it is anticipated that will start next year. It's a 600 patient study. So it will take a while to enroll it is most likely going to take two years to enroll that study. So the data will you know it'll be quite some time before that that is actually available.
With respect to the new day study.
It is the 18 month endpoint.
So the hope is we have completed enrollment by the end of the first quarter and then we would still have data in 2024.
Got it thank you for taking our questions.
Yeah, absolutely. Thank you.
This concludes our question and answer session I would like to turn the conference back over to Rick is worth for closing remark.
Thank you I want to thank everybody for participating on today's call and your continued interest in Ala mirror and we look forward to sharing our ongoing progress when we report our fourth quarter and full year 2022 results early next year. Thank you and have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.