Q4 2022 Alimera Sciences Inc Earnings Call
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Speaker 1: Thank you.
Speaker 2: Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Alameda Sciences 2022 Financial Results Conference call.
Speaker 2: 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 telephone keypad. To withdraw your question, please press star, then two.
Speaker 2: Participants of 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.
Speaker 2: A webcast replay of the call will be available approximately one hour after the end of the call through July 1, 2023. 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.
Speaker 3: Thank you, Jason. Good morning, everyone, and thank you for participating.
Speaker 3: and good morning everyone and thank you for participating in.
Speaker 3: Today's conference call. Joining me from Alumara's leadership team are Rick Eiswor, President and Chief Executive Officer.
Speaker 3: Russell Gibson, Chief Financial Officer.
Speaker 3: During this call, management will be making forward-looking statements, including statements that address aloe mare's expectations for future performance or operational results.
Speaker 3: 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 Alumara's most recently filed periodic reports on Form 10-K and Form 10-Q , including the Form 10-K and Form 8-K.legory.
Speaker 3: filed with the FTC today and Alameda's press release that accompanies this call, particularly the cautionary statements in it.
Speaker 3: Today's conference call includes adjusted EBITDA and adjusted net product revenue, non-GAAP financial measures that Alumara believes can be useful in evaluating its performance.
Speaker 3: You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, please see the reconciliation table located in Al Amara's earnings press relief.
Speaker 3: The content of this call contains time-sensitive information that is accurate only as of today, March 31, 2023.
Speaker 3: If accepted as required by law, Alameda 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 Eiswirth. Rick, please go ahead. Rick, please go ahead.
Speaker 4: Thank you, Scott, and good morning to everyone on this call. I'm very pleased to share that our company experienced robust revenue growth this past year in 2022, which was largely driven by significant end user gains in both our US and international segments.
Speaker 4: As a result, we believe we are very well positioned to continue sustaining this momentum in 2023, having strengthened our balance sheet and extended our terminal agreement just recently.
Speaker 4: We are excited to continue building on this success and remain committed to delivering value to our customers and shareholders.
Speaker 4: We reported net product revenue for 2022 of $54.1 million, a 13% increase over 2021, driven by record global end-user demand growth in both our U.S. and international segments.
Speaker 4: with 23% and 21% growth respectively.
Speaker 4: In fact, our global end-user demand in 2022 was 17% higher than in 2019, the last year unaffected by the COVID pandemic.
Speaker 4: So we are very pleased to have returned to pre-pandemic levels of growth.
Speaker 4: Also of note, our consolidated revenue and growth was materially impacted by the deterioration of the euro and the British pound, which reduced revenue by approximately 2.4 million in comparison to the prior year. Our adjusted net product revenue, which reflects revenue had foreign exchange rates remain constant over the period grew 18% year over year.
Speaker 4: Additionally, in 2022, we continued our geographic expansion by gaining approvals for our non-infectious uveitis indication affecting the posterior segment in five additional countries.
Speaker 4: France, Spain, Italy, Portugal, and Ireland, and gain reimbursement approval in the Czech Republic.
Speaker 4: We saw strong launches of the Uvitis indication in our French and Spanish markets in 2022, and we're excited to see the impact of alluvium being available for physicians and patients in these newly launched markets for a full year in 2023.
Speaker 4: Importantly, all of our distributors have high expectations in 2023 as we've already received firm purchase orders in excess of $8.8 million for 2023 from these partners.
Speaker 4: which is already 19% greater than our shipments to distributors in 2022.
Speaker 4: In 2022, we also achieved significant milestones for our business.
Speaker 4: We published the primary manuscript for our paladin study in the peer-reverber journal Ophthalmology. The American Journal of Ophthalmology also published a deeper dive into the value of alluvium and reducing injection and treatment burden, which as you know, continues to be a very hot topic in retina today.
Speaker 4: And we also submitted manuscripts to three other peer-reviewed journals in 2022, one of them an expert consensus on alluvian published this month in OSLI. This paper indicated that a group of prominent retina specialists gained consensus on topics such as.
Speaker 4: chronic low-grade inflammation and its associated cytokines being key drivers of DMA.
Speaker 4: that corticosteroids like Aluvian have a broad inflammatory mechanism of action.
Speaker 4: that Alluvian has a stable and manageable safety profile.
Speaker 4: and that alluvium is the only long-acting DME treatment that can reduce retinal thickness variability and treatment burden while significantly improving vision.
Speaker 4: We also look forward to the potential publication of two additional submissions in the coming months regarding both the manageability of the safety of apilumion and the value of controlling retinal thickness variability.
Speaker 4: On the clinical side, we continue our progress in enrolling patients in the landmark New Day study, our ongoing head-to-head clinical trial designed to demonstrate the advantages of Bolivian as baseline therapy over repeated anti-VEGF injections in the treatment of naive and near-naive patients suffering from DME.
Speaker 4: We enrolled an additional 137 patients in 2022, and as of today, the study is 92% enrolled. We expect to complete study recruitment during the second quarter.
Speaker 4: And we also entered into an agreement with the JAB Center for Health and Research Foundation, acting on behalf of the DRCR retina network to support and provide the Libyan for a randomized clinical trial evaluating intervertebral furosemab injections for flu, senol, and acetonide intervertebral implants versus observation.
Speaker 4: for the prevention of visual acuity loss due to radiation retinopathy. The study is also known as Protocol AL.
Speaker 4: loss due to radiation retinopathy. The study is also known as Protocol AL. When utilized,
Speaker 4: As baseline therapy, as is being used in our new day study for DME, we believe Aluvian's continuous microdosing delivery will prevent, delay, and reduce the occurrence of the complication of radiation retinopathy and its consequent vision loss for patients treated with plaque brachia therapy. There is no such thing as GMO or chronic immunomorphic association with an Millennium Ent Tre pour très repeats.
Speaker 4: We anticipate the DRCR starting this trial in the second quarter.
Speaker 4: And with that, I'll now turn the call over to Russell, who will review our financial results for the fourth quarter and full year.
Speaker 4: call over to Russell who will review our financial results for the fourth quarter and full year. Thanks Rick.
Speaker 3: Consolidated net product revenue for 2022 was $54.1 million. This was an increase of approximately 13% from the $48 million that we reported in 2021.
Speaker 3: Our 2022 revenue was negatively impacted by currency fluctuations of $2.4 million during the year.
Speaker 3: on a constant currency basis as Rick mentioned.
Speaker 3: Adjusted net product revenue grew 18% for the year.
Speaker 3: Recall that our consolidated revenue in 2021 included $11 million in non-product revenue that we received from our license agreement with Acumen
Speaker 3: That $11 million in 2021 was a one-time addition to our revenue. It should not be confused with revenue from product sales.
Speaker 3: U.S. product revenue was up 28% for the full year, from $26.7 million in 2021 to $34.2 million in 2022. This was driven primarily by the 23% increase in end-user demand. As we have previously shared,
Speaker 3: Our gap revenues in the United States do not always correlate with end user demand due to the timing of purchases by our specialty distributors.
Speaker 3: In the fourth quarter of 2022, Alimira's U.S. distributors purchased approximately 3% more units than were sold to end users.
Speaker 3: Net product revenue from our international segment decreased 11% from $19.9 million in 2022.
Speaker 3: This compares to the $21.2 million reported in the same period last year.
Speaker 3: But keep in mind, the $2.4 million negative currency fluctuation impacted our international segment, revenue recognition.
Speaker 3: So on a constant currency basis, international revenues would have been $22.3 million or a 5% growth over 2021. For the fourth quarter of 2021, our consolidated net-
Speaker 3: revenue was approximately $14.1 million, which was flat compared to the fourth quarter of the prior year, but negatively impacted by $600,000 due to the exchange rate deterioration.
Speaker 3: On a currency adjusted basis, Q4 product revenue is up 4% over Q4 of the prior year. Our U.S. segment revenue for the quarter was $9.4 million, which was up 12% versus a year ago. Our U.S. growth in fourth quarter was $9.4 million, which was up $9.4 million, which
Speaker 3: lagged what we expected and saw in the early quarters of 2023. This was due to some temporary challenges associated with the sampling of furosemab and the temporary unavailability of copay funds for all Medicare retina patients due to shortfalls in the chronic disease fund in October .
Speaker 3: The temporary shortage also impacted other branded drugs in a space like Aleya.
Speaker 3: Despite these challenges, however, we still had a strong quarter.
Speaker 3: Total operating expenses in 2022 were $57.8 million, an increase of 11% compared to the $52.2 million reported in the prior year.
Speaker 3: The year-over-year change was primarily due to investments that we initiated in the second half of 2021 to increase our engagement with physicians.
Speaker 3: as we emerged from the pandemic. We believe these efforts were successful and contributed to the significant end user demand growth than we saw in 2022.
Speaker 3: In Q4
Speaker 3: We noted that our, we noted this in our third quarter call, we began tapering our expenses in the fourth quarter to adjust our spending on a go-forward basis.
Speaker 3: to be more in line with pre-pandemic levels. As a result,
Speaker 3: Our Q4 2022 operating expenses were $14 million, which was down 5% from the same quarter the prior year and down 7% from the prior quarter in 2022.
Speaker 3: For the full year 2022, we reported an adjusted EBITDA loss of $7.9 million compared to a gain of $3.6 million in 2021.
Speaker 3: Keep in mind, however, that 21 included the one-time benefit of the $11 million for Maki Menshin.
Speaker 3: In Q4, our adjusted EBITDA loss was cut in half when compared to the third quarter. So we are making progress.
Speaker 3: On December 31, 2022, we had cash and cash equivalents of approximately $5.3 million.
Speaker 3: This compared to $5.5 million.
Speaker 3: that we reported in September 30th of 2022.
Speaker 3: As we decrease our cash burden,
Speaker 3: We announced on Monday that we also raise gross proceeds of $12 million in our March 2023 equity financing and this will bolster our cash position.
Speaker 4: With that, I'll turn it back to Rick. Thank you, Russell. As I said earlier, I'm very pleased with the significant global end-user demand we saw in 2022 and our return to growth. We believe that we strengthened the company and prepared it for future success with the transactions we completed last week.
Speaker 4: We believe that the repurchase of our Series A preferred stock returns significant real value to our common shareholders by eliminating the overhang of the $24 million liquidation preference. And as Russell said, the $12 million equity raise and extension of our debt facility allow us to continue focusing on meaningful growth and the generation of positive adjusted EBITDA and cash flow moving forward.
Speaker 4: Entering 2023, we believe we have returned to the scale at which we entered 2020 prior to the pandemic and anticipate generating positive adjusted EVA in 2023.
Speaker 4: And with that, I will turn the call over to the operator for questions.
Speaker 2: Thank you. Ladies and gentlemen, if you wish to ask a question on today's call, you will need to press the star key.
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Speaker 2: on your telephone. If your question has been answered and you wish to withdraw your request, you may do so by pressing the star then 2. If you're using a speakerphone, please pick up your handset before entering your request and speaking on the call.
Speaker 2: One moment please for the first question.
Speaker 2: Our first question comes from Alex Nowak from Craig Howland Capital. Please go ahead.
Speaker 5: Okay. Great. Good morning, everyone. So I want to – Okay.
Speaker 5: touch what you just left off on which is around the recent financial kind of structure that you announced earlier this week. The company we saw here in Q4, you're right around that break even mark. It does suggest that additional capital wasn't needed but the new capital also includes some additional tranches that could be pulled. I guess...
Speaker 5: The point blank question is what are you going to do with the new capital?
Speaker 4: Yeah, so I think there's a couple things. One, you know, we just, we want to strengthen the balance sheet in general because you always have to have cash for a rainy day, Alex, right? And some of that was done in concert with working with the lender to get the extension that we did. But we also, as I said, want to leverage the infrastructure that we have built as we move forward.
Speaker 4: We want to look for additional products to add for the bag and we're very pleased that both our lender in SLR and our new investors in Vielen and Calligan are supporting that effort as we move forward. Really excited to have the new board members and those new investors because I think their philosophy of building this company, making it a bigger retina company, bigger ophthalmology company is very consistent with my...
Speaker 5: understand why it all makes sense now. With the plan B, whether it be preclinical, early clinical, or these commercial products that you'd want to add, I mean, I had to think about the range of options there.
Speaker 4: Yeah, I mean, so obviously Alex, it's quite opportunistic, right? I think there's a lot of things we've looked at over the last couple of years. Some of those we've passed on, some of those we have missed, and frankly, some of those we're probably lucky that we missed on. I think the primary goal would be to find something that would be accretive to the financial statement immediately, so something that we could drop in the bag.
Speaker 5: but initial goals would be to find something that is an existing product or be available very soon for the market. Okay, that's great to hear. Maybe a couple of questions around the quarter, maybe expand a bit on the shortfalls in the Medicare funding. I think I missed that specific component in October . Just maybe what was the quantitative impact that you saw there?
Speaker 4: Yes, so the issue is the Medicare patient, we provide co-pay assistance for commercial patients to help subsidize co-pays. You can't do that for Medicare patients. So Medicare patients generally rely on a chronic disease fund for supplementation of their co-pay assistance.
Speaker 4: Around October 1st, the Chronic Disease Fund sent letters to the doctors saying that they were out of money and wouldn't be funding copay assistance for the foreseeable future the rest of the year. And so we think that had an impact on the utilization of alluvium during the quarter. We know that I believe during Regeneron's call they talked about the impact on ileo sales during the quarter.
Speaker 4: That funding came back toward the end of November , and they started funding co-pays during the year. So I believe our growth in end user demand in the US was between four and 5% over the quarter. We would have expected it to be up in the teens, and we think we'll be able to see that going forward. The other thing that happened that Russell mentioned in his comments is,
Speaker 4: When furosemab got its J code around October 1st as well, we believed that there was heavy sampling into the market for leftover samples that was going to be paid for. We think in connection with the lack of co-pay assistance that was available, there was an easy alternative that was free that doctors could use and postpone the utilization of other drugs by using furosemab at the time. Okay, got it. That makes sense.
Speaker 5: And, you know, regardless of, I guess, the copay assistance there on those trialing and the new drugs, when you've gotten, let's say, into December or, let's say, in the first quarter of 2023, has the trialing really subsided where you're not seeing as much of a head burn anymore, there's still prevalent out there.
Speaker 4: I think it's, I mean, I think it's, for the most part, it's cycled out, but you know, there were some cycling of that in the first quarter because, you know, quite a, that first map specifically is, you know, one of the things about it is it's more durable, right, than some of the other anti-veg Fs. Got it. And you put everything together, I mean, how should we be thinking about
Speaker 4: think that driving positive EBITDA and cash flow is a critical component of our future as we talked about. Internally we sort of model for conservatively 10% growth and try to drive EBITDA around that number and then we hope to positively surprise throughout the year.
Speaker 5: Okay, got it. The last question here, just around the New Day readout, timing around that. You go out a couple of years here with our convention in China. What's the sales potential there, or at least have a think about it?
Speaker 4: So, with respect to the New Day study, we expect to complete enrollment in the second quarter, I hope as early as the end of April . We're getting close to the final stretches there. If we can complete the enrollment in the second quarter, we would expect to have top-line data in late 2024.
Speaker 4: that we could begin talking about both commercially and medical presentations, etc., in early 2025. To be honest with you, it's a little bit too early to give you guidance on, you know, the, the occupation, what the occupation sales in China might be. But remember, we have a
Speaker 4: We took a significant amount of money up front, a very low margin on those unit sales, and then most of the revenue that would come in from what you mentioned in the future would be a milestone based if we get here. Probably a little bit too early to give projections on that. Okay. Understood. Appreciate the update. Great.
Speaker 2: Thank you for your support Alex. Our next question comes from Yi Chen from HC Wainwright. Please go ahead.
Speaker 5: Thank you for taking the question. Could you comment on whether there's a change in
Speaker 3: physicians practice today or at least change in their opinion of potentially using a steroid based product as a first line treatment.
Speaker 3: or at least change in their opinion of potentially using a steroid-based product as a first line treatment. Thank you.
Speaker 4: I'm not sure if I completely understand the question to you, but we do continue to see a shift in. I'm not sure if I completely understand the question to you, but we do continue to see
Speaker 4: We continue to see a shift in more physicians using steroids in their practice. I think there is more and more discussion out there at every industry meeting about the need to address the broader role of inflammation in diabetic macular edema. That's something that the anti-bijeffs can't do.
Speaker 4: as more of a mono-focused drug, right? The steroids have a very broad mechanism of action addressing multiple cytokines in the pathology of the disease. And frankly, the doctors are seeing the need to get that more under control. That's evidenced by a study I've referenced quite a few times from the DRCR, where they used anti-VEGFs on a monthly basis for six months.
Speaker 4: and regardless of what type of anti-VEGF it was, anywhere from 35 to 65% of the patients had persistent edema, right? And everybody believes that's because of the underlying inflammatory aspect. So I think you're seeing doctors see that data, see the positive impact, frankly, of both OsriVox and Alupian in treating these patients more broadly.
Speaker 4: and are starting to shift to steroids earlier. It's why both OzerDEX and Alluvian are growing. We also see a huge desire out there for longer term, more durable therapy. It's what is talked about with the potential higher dose of ILEA. It's what's discussed with the availability of furosemab. And frankly, we think we're very lucky that we've got Alluvian. We've had Alluvian for a while. It's clearly the most durable therapy buy.
Speaker 4: a significant measure compared to all of those alternatives, whether anti-VEGF or steroid. Got it.
Speaker 3: In the European markets, would you say DME is the primary driver for user demand, not you, the others?
Speaker 4: I'm sorry, you're hard to understand. I think you asked if DME or UVIDIS would be the primary driver. Is that correct? Yes, I'm asking in the European markets, is DME still the primary driver in grossing user demand? Not necessarily the UVIDIS indication, right?
Speaker 4: I would say it's both. I think we continue to drive greater usage in the DME segment as well. However, remember our DME label in Europe is a little bit more restricted so the expansion of the NIPU or uveitis indication is driving some of that more rapid uptake in these markets.
Speaker 4: The great thing for us is though, having a second indication to talk about there, we think gets us more time with the DME doctors. It gets them experience in uveitis to see the value of the durable therapy that then eventually translates into more usage in DME. So we're able to leverage that rapid growth and uptake in uveitis to then generate more utilization in DME.
Speaker 4: for us is though having a second indication to talk about there, we think gets us more time with the DME doctors. It gets them experience in uveitis to see the value of the durable therapy that then eventually translates into more usage in DME. So we're able to leverage that rapid growth and uptake in uveitis to then generate more utilization in DME. Got it.
Speaker 4: And lastly, would you expect the operating expenses to remain relatively stable throughout 2023? We do. We do. We're not quite down in Q4 at the level we would expect. You'll see some additional decreases in Q1 and then they should stay stable over the course of the year. At some point in that period, we do needed low-health care interchangeability.
Speaker 4: Would you expect the operating expenses to remain relatively stable throughout 2023? We do, we do. We're not quite down in Q4 at the level we would expect. You'll see some additional decreases in Q1 and then they should stay stable over the course of the year. Thank you.
Speaker 2: Great. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Rick Iseworth for any closing remarks.
Speaker 4: I want to thank everyone for participating on today's call and your continued support and interest in Alumira. We do look forward to sharing additional results as we go through the year, specifically our first quarter results which we probably release in early May. Thank you all and have a wonderful day.
Speaker 2: Thank you for attending today's presentation. You may now disconnect.