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Alimera Sciences Inc (NASDAQ:ALIM)
Q2 2020 Earnings Call
Jul 30, 2020, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Alimera Sciences Second Quarter 2020 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to turn the call over to Scott Gordon, President of CORE IR, the company's Investor Relations firm. Please go ahead.

Scott Gordon -- Investor Relations

Thank you, Stanford, and good morning everyone. Thank you for participating in today's conference call. Joining me from Alimera's leadership team are Rick Eiswirth, President and Chief Executive Officer and Phil Jones, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address Alimera's 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 Alimera's most recently filed periodic reports on Form 10-K and Form 10-Q. The Form 8-K filed with the SCC yesterday after the market closed and Alimera's press release that accompanies this call, particularly the cautionary statement in it.

Today's conference call includes adjusted EBITDA and non-GAAP financial measure that Alimera believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure, to net loss, its most directly comparable GAAP financial measure, please see the reconciliation table located in Alimera's earnings press release. The content of this call contains time-sensitive information that is accurate only as of today, July 30, 2020. Except as required by law, Alimera disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.

With that, it is now my pleasure to turn the call over to Rick Eiswirth. Rick, please go ahead.

Rick Eiswirth -- President and Chief Executive Officer

Thank you, Scott, and good morning to everybody on the call. I'm very excited to share the results that we delivered in the second quarter of this year, especially given the significant challenges that the Covid-19 pandemic has created throughout the world. We are reporting just over 10 million in consolidated net revenue for the second quarter of 2020. That compares to 10.9 million that we reported in the second quarter of last year. This was only an 8% decrease despite our limited access to physicians and reduced patient visits over the quarter as a result of the pandemic. We're going to discuss our revenue performance in a little more detail later. We were also very pleased with our ability to manage our bottom line and our balance sheet during these challenging times.

While we were able to limit our adjusted EBITDA loss to less than $300,000 during the quarter, which compares very favorably to the adjusted EBITDA loss of $2.1 million that we reported in the second quarter of last year. Importantly, we were able to achieve this without making any changes to our staffing levels across our entire global organization, retaining our commercial team intact, unlike many other small companies and some of our peers. Because of this, we are able to use some of the downtime to intensively train and prepare to engage with physicians in different ways and bring content to our positions across the markets in which we sell ILUVIEN, as restrictions have begun to lessen over the past few months. Additionally, we ended the quarter with an increase in cash over the first quarter, with approximately $13.5 million, up from $12.2 million at the end of the first quarter. As we previously stated, we believe the achievement of adjusted EBITDA breakeven in 2019 was an important milestone, and demonstrating our financial stability.

We made a strategic decision in early April to control our external expenses so that we would not allow the Covid pandemic to erode this accomplishment, while at the same time, preserving our workforce. I am proud of our performance. Our ability to deliver a better than expected top-line and manage expenses to mitigate the impact of the COVID 19 pandemic is a testament to all of our dedicated employees. Because of the COVID pandemic, many patients today are unwilling or unable to visit physicians. Practice and hospital capacity is constrained having to maintain social distancing. Patients are subject to potentially longer intervals between injections of acute or short-term therapeutic options. We believe now more than ever, that ILUVIEN is the right choice for patients suffering from DME, and in Europe non-infectious uveitis affecting the posterior segment of the eye.

Now, I'd like to provide a little more insight into our revenues for Q2, because we've been able to advance some aspects of our strategic growth strategy despite the challenges of COVID. In the U.S. our end-user demand was down as expected due to lesser patient volumes in physician offices. However, it was not off to the extent patient visits were. We generated 625 units in end-user demand for ILUVIEN in the second quarter of 2020, which was down from the 917 units reported in the second quarter of last year. That's off approximately 32%. But office visits and injection volume for DME patients were down an estimated 60% to 80% when the pandemic spiked in April and May. So we are quite pleased that the decline was limited to that level in May and June. On another positive note, our end-user demand has increased in the US since the low point in April as patients began to return offices. We'll reconcile difference shortly, but U.S. reported net revenue is $3.4 million for the second quarter of 2020, which is down 53% versus the prior year. This is a result of our U.S. distributors reducing inventory levels during the second quarter as their weekly volumes decreased.

We believe this is a timing issue, which we would expect to reverse over the remainder of the year, as our end-user demand volume returns in the U.S. Our international segment was a standout performer in this challenging environment. Reporting $6.6 million in revenue for the second quarter of 2020. That represents growth of 89% over the same period as last year. This performance was driven by several components of our strategic growth plans. In Germany and the U.K., we continued to see increased usage by physicians treating uveitis patients since our successful launch of that indication in those two markets late last year. We do believe that uveitis patients are often viewed as more severe or greater risk than DME patients, which may have led to less of a slowdown in patient visits and treatments. We also believe that we've done an outstanding job and continuing to shift the positioning that we've been toward earlier usage in Europe. I've spoken in the past about the impactful EURETINA 2019 meeting, during which ILUVIEN was presented as a great option for earlier usage. In Europe, we are seeing evidence of earlier use of ILUVIEN in DME.

And just last week, saw more early cases presented in web And last, our commitment to geographic expansion continues to pay dividends as our distributors in Spain and France both took additional stocking orders during the Second Quarter despite the COVID slowdown. In fact, Brill Pharma, our Spanish partner, reported a record month of end-user demand for the month of June. We believe that our message is resonating well with physicians that ILUVIEN is an important solution in the treatment of DME, especially during the pandemic when patients at higher risk for contracting COVID-19 are encouraged to minimize their contact with other people and groups while still being treated for their retina disease.

In fact, this past quarter, a U.K. hospital has introduced ILUVIEN into their treatment protocol specifically to help reduce patient visits into the clinic. As we move through the COVID-19 pandemic, we believe physicians will see ILUVIEN in a new light. It provides significant clinical benefits while reducing the number of visits for high-risk patients and can help doctors work through their backlog of patients who've been untreated or under-treated during the pandemic.

And with that, I'll now turn the call over to Phil to provide a brief review of our Second Quarter financial results. Phil.

J. Philip Jones -- Chief Financial Officer

Thanks, Rick, and hello everyone. I'll provide a summary of our financial results in the Second Quarter. For more information on these results, please refer to our press release issued yesterday afternoon, as well as our reports on Form 10-K and Form 10-Q filed with the SEC. During the second quarter of 2020, our consolidated net revenue declined 8% to $10 million compared to $10.9 million in the second quarter of 2019. U.S. net revenue was $3.4 million for the Second Quarter of 2020, down 53% year-over-year. As we previously shared, our GAAP revenues in the U.S. do not always correlate with end-user demand. The difference between GAAP revenue and the end-user demand is due to the timing of distributor purchases.

As weekly volumes decreased in the Second Quarter due to COVID-19, our distributors lowered their inventory levels and purchased approximately 36% fewer units than they sold to end-users. With end-user demand picking back up in recent months, we expect distributor stocking in the U.S. to increase in the third quarter of this year. This assumed states remain open and the economy continues to recover. Net revenue from our international segment increased 89% to $6.6 million for the Second Quarter of 2020, compared to $3.5 million in the Second Quarter of 2019. Despite the COVID-19 pandemic, our net revenue increased primarily by sales of our uveitis indication in the U.K. and Germany, and by increased business in our distributor markets. To meet the challenges of COVID-19 pandemic, we work to reduce external operating spend across all departments where possible during the quarter.

As a result, total operating expenses decreased by approximately 26% to $9.9 million for the second quarter 2020. This compares to $13.03 million reported in the second quarter of 2019. We achieved major expense reductions through reduced travel costs, decreased attendance at medical conferences that were canceled or converted to virtual meetings, and reduced spending on commercial and medical activities. As we stated in our previous earnings call, we have not made any changes to our staffing levels and do not have any plans to do so. In the second quarter of 2020 we reported an adjusted EBITDA loss of approximately $300,000 compared to $2.1 million adjusted EBITDA loss in the second quarter of 2019. For the second quarter of 2020, we reported a net loss of $2.5 million compared to a net loss of approximately $5 million for the second quarter of 2019.

Basic and diluted net loss per share for the second quarter of 2020 was $0.51 per share on approximately five million weighted average shares outstanding. This compares the basic and diluted net loss per share for the second quarter of 2019 of $1.06 per share on approximately 4.7 million weighted average shares outstanding. On June 30, 2020, we had cash and cash equivalents of approximately $13.5 million, an increase of $4.1 million from the $9.04 million dollars in cash and cash equivalents that were reported on December 31, 2019, and a $1.03 million increase from the $12.02 million dollars in cash and cash equivalents that we reported on March 31 2020.

With that, I'll now turn the call back over to Rick to wrap up our prepared remarks. Rick.

Rick Eiswirth -- President and Chief Executive Officer

Thank you, Phil. I'd now like to spend a few moments reviewing the highlights of our new date study. Our landmark trial comparing ILUVIEN to anti-VEGF therapy, as first-line therapy in the treatment of DME patients. On July 15, we hosted a conference call to discuss the details of the study. You can access a replay of that call on our website in the Investor Relations section, and you can find more details on clinicaltrials.gov as well. This is a very important trial for Alimera. One can validate our belief that ILUVIEN is a better mousetrap or a better way to treat DME, and one that we believe can give ILUVIEN access to a much greater share of the revenue in this multi-billion dollar market currently dominated by anti-VEGFs as the standard of care. On our recent call with our Chief Medical Officer, Dr. Samer Kaba and a practicing retina specialist Dr. Victor Gonzalez spoke to the shortcoming of the anti-VEGF therapy as the standard of care in treating DME.

First, anti-VEGF therapies treat the vascular aspects of DME and do not address all of the inflammatory aspects. If left unchecked, this inflammation can lead to greater edema and damage to the retina. Second, the anti-VEGF therapies do not work for all DME patients. Protocol demonstrated that despite six monthly injections with anti-VEGF therapy, a regimen that is much more frequent that occurs in the real world, 30% to 65% of patients continue to have persistent edema. Third, the current anti-VEGF therapies that are short-term or acute treatments require frequent injections for optimal results. To achieve optimal control of DME, anti-VEGF injections should be administered monthly to obtain the results shown in pivotal Phase III studies. There is a clear correlation across numerous studies that indicate fewer injections leads to lesser visual acuity results.

We shared data on that call from an analysis of over 35,000 patients on current anti-VEGF therapies. The patients do receive fewer injections in the real world. On average, fewer than four anti-VEGF injections per year. And finally, DME patients generally have multiple health problems that are frequently less adherent to visit schedules. These DME patients are burdened with multiple appointments with multiple healthcare providers because of their underlying disease. More than 50% of working patients take a day off to attend the clinic, making it a further challenge to attain more frequent injections. We believe that ILUVIEN addresses these issues for physicians and patients because it delivers a corticosteroid that provides broad anti-inflammatory protection and it delivers that corticosteroid in a consistent continuous microdose for up to three years to keep the edema in the eye quieter longer.

But we do need to run this trial to provide the data to physicians because there's not ever been a direct comparison between ILUVIEN or any other steroid and anti-VEGF therapy. As Dr Gonzalez shared on our call, retina specialists are highly data-driven. We have already accumulated significant data demonstrating why we believe that ILUVIEN should be used as first-line therapy for treating DME. Our user study showed that on average, patients' visual acuity was either improved or maintained with a significant reduction and treatment frequency from one treatment every 2.9 months pre-ILUVIEN to one treatment every 14.3 months post-ILUVIEN. User also showed that in 63% of 160 eyes treated in the study, ILUVIEN was sufficient as monotherapy, and no supplemental therapy was required. Our Iris and PALADIN studies also showed that ILUVIEN worked without supplemental therapy in a high percentage of patients.

We're very excited to advance the NEW DAY study and believe that in the coming months, the NEW DAY study can increase the awareness and discussion of ILUVIEN among physicians. Moving forward, we do expect that the pandemic will continue to adversely impact our business in ways we can't currently forecast, as we are still experiencing limited engagement in physician offices and hospitals. But so far, 2020 has been a really good year for Alimera. In light of all the difficult challenges resulting from the COVID-19 pandemic. For the first half of this year, we reported a total of 24.6 million in revenue, growth of 3% over the 23.8 million in 2019 despite the challenges of the pandemic. Importantly, we've maintained our goal of being adjusted EBITDA positive for the first six months of the year, recording $1 million in adjusted EBITDA. And we strengthened our balance sheet, adding cash without further dilution to our shareholders.

We accomplished all of this while retaining our staff, which we believe positions us well to reach our customers and increase the usage of ILUVIEN as the pandemic resolves and the economy fully reopens. We have prepared our sales force with remote detailing capabilities. We have been successful in developing and hosting educational webinars that speak to the value and benefit of ILUVIEN that can be provided to both DME patients and posterior uveitis patients.

We've continued to execute our strategy of pursuing organic growth in DME in our existing markets. Preparing for the launch of the posterior uveitis indication in more European markets and further expanding our geographic footprint, all of which we believe will continue to contribute to our growth in revenues and give patients the opportunity to see better, longer with fewer injections. But importantly, we believe that much of what we have achieved over the last few months has positioned us very well to absorb these challenges associated with the COVID pandemic and importantly to invest in Alimera's future by conducting the NEW DAY study, to enable us to gain a greater share of the multi-billion dollar market opportunity for treating diabetic macular edema.

With that overview, we are now ready to take questions, operator.

Questions and Answers:

Operator

[Operator Instructions] We take the question from the line of Alex Nowak from Craig-Hallum Capital Group. Please go ahead.

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Great. Good morning, everyone. Rick, based on your comment around ILUVIEN's decline being a lot less in the U.S. than the patient decline in the [indecipharable] as a whole, are you hearing from physicians specifically saying that they're moving to ILUVIEN because they just don't know when they're going to see that patient again and thus can't reliably do an anti-VEGF, and just following on to that, can you say what the growth in new doctors orders were throughout Q2?

Rick Eiswirth -- President and Chief Executive Officer

So, Alex, I think, I mean, it's a little bit of a mixed bag, it depends from physician to physician. We have heard feedback from physicians that some of them view ILUVIEN in a slightly different light and wish that they had had more patients on ILUVIEN when the pandemic started so that they would feel comfortable that patient Some sort of therapy onboard and the disease are being treated every day while they're out missing these.

So I do believe that there are some physicians that as patients have come back in, have considered ILUVIEN and put patients on ILUVIEN to give them more durable therapy because they don't know when they're going to come back. But obviously, with 625 units, it's hard to say that that's a trend at this point. We have seen a greater usage of ILUVIEN, I think, sorry, less of a decline in ILUVIEN usage than what we believe we're hearing about DME patient visits. And I think that's because some of these patients that are more severe are being treated and move to ILUVIEN a little bit faster, maybe.

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Okay, got it. And then, assuming you saw the rebound over the course of Q2 with April being the low watermark and increasing every month thereafter, how has the rebound in July for Q3 been here? Is each week in July still higher than the last or have you started to see any item start to plateau at all?

Rick Eiswirth -- President and Chief Executive Officer

Yeah. So it's, we've been a little bit up and down in July. I think we got a couple of days of sales still to report and get in for July. I think we will trend up a little bit in July over June. But I do think that, that's one of the reasons I said we continue to be adversely impacted. I do think we've seen a little bit of this second wave or spike in cases impact us a little bit. So we saw, we certainly saw Florida open up for example in late May and June, but then it seemed like some more restrictions in Florida impacted us, is just one example. So I don't think we're out of the woods yet. I do think we're trending up, but not nearly to the volumes we were doing in the fourth quarter of last year yet because of the restrictions.

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Okay, understood. And then how far penetrated are you into the uveitis population in the markets that you have reimbursed. Obviously, that's been what we think is a pretty good win for you from the OUS revenue. When would you expect to expand to new countries? Just any timeline update on that.

Rick Eiswirth -- President and Chief Executive Officer

Yeah. So we're doing pretty well in Germany, in the U.K. There is a key hospital in each of Germany and the U.K. that have really increased their usage for uveitis. I mentioned one of the U.K. hospitals changed their protocol to try to decrease the number of times patients are having to come in especially in this pandemic. So I'd say we've had great usage in a couple of hospitals, but I think there's still a lot of opportunity in both Germany and the U.K. for that indication. As far as other markets, some of the pricing negotiations have been slowed down a little bit this year because of COVID and because of people on the regulatory bodies being out. So I think most available occur in 2021 then we'll add Portugal, France, Spain, and hopefully Italy, hopefully, those four markets in 2021

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Okay. Got it. Just last quick question This is a little bit of a follow-up to prior questions, previous calls. The OUS number of about 6, 6.5 million, is that a new benchmark number or were there really any one-time stocking items in there that just make that number unsustainable when we put our models together?

Rick Eiswirth -- President and Chief Executive Officer

Yeah, I mean you do have a couple of stocking orders. As I mentioned, from our French and our Spanish distributors, which they went ahead and took in the second quarter, although their volume is down. So I think you'll see some inconsistency in the third or fourth quarter because they will have to work some of those down. So 6.6 might be a little bit high at this point. We're not going to give specific guidance because there's so much uncertainty out there still, but probably a little bit high because they continue to take the orders but now, they've got to work those off in the second half of the year.

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Okay, understood. Thank you.

Operator

We take the next question from the line of James Molloy from Alliance Global Partners. Please go ahead.

James Molloy -- Alliance Global Partners -- Analyst

Hey, guys. Thank you very much for taking the questions and excellent job in holding the line in Europe. I know a tougher environment in the U.S. How much do you speak to the control of the virus which seems to be in place in the EU versus the U.S. driving those volumes and I guess also the adjustments you've made for selling from home, working from home I guess. What have been the most effective of those adjustments that you've made, so you can keep going forward and keep the G&A at the lower levels?

Rick Eiswirth -- President and Chief Executive Officer

I'll answer the last part of the question. I don't think long term, we can continue to keep the cost of these levels because frankly we want to get out there and try to drive that top line faster. So we'll have to travel more reengage with doctors, be at some of the meetings and everything. I do think the mix in the way we engage will change, there'll be more virtual engagement. We have prepared and trained all of our reps to be able to detail virtually with the doctors. But frankly, there is a learning curve there for both the reps and the doctors. The doctors have to get used to that level engagement. Some doctors are comfortable with that already in some aren't. So I think that was something that will evolve over the rest of the year. I think with respect to your question about Europe, the German market is very, very strong and I think the reason we see the German market strong is because a lot of those physicians they're working private practices just like the U.S. doctors do, and they're motivated to get back there and continue to treat patients and make money. And so we've seen good control and the physicians in Germany can seem to have access to patients. It's a little bit more restricted in the countries like the U.K. and in Southern Europe where most of its nationalized healthcare in the hospitals are tied into the national system and therefore they get them close restricted to really control that social distancing so more access in Northern Europe than Southern Europe.

James Molloy -- Alliance Global Partners -- Analyst

Maybe a quick follow-up. What's been the reaction has there anecdotal reaction to the NEW DAY trial since you guys had your announcement a couple weeks ago and where does R&D go to as trial ramps up?

Rick Eiswirth -- President and Chief Executive Officer

I think we've definitely got some excitement generated around it. We've had a few inbound calls from physicians that have been interested in participating in the study and be in a clinical site. So we're pretty excited about that. We do have three or four sites that are now actively enrolling. In fact, I believe we had the first patient screened into the study yesterday, which hopefully means within the next couple of weeks, will be announced the first patient being randomized and in the study. So I think off to a good start there. With respect to the expenses, I'll let Phil comment on this, but I think you're probably looking at more R&D expenses like we saw in 18 and 19 because we moved some expenses away from PALADIN and the Irish study.

J. Philip Jones -- Chief Financial Officer

Yeah, Jim, I would confirm what Rick said. I mean, that will move back to that level of spending for those R&D expenses moved forward because we did have some of those items drop-off and we were able in Q2 to save some money through the COVID spending constraints we put on prior to the study being initiated.

James Molloy -- Alliance Global Partners -- Analyst

Thank you for taking the questions.

J. Philip Jones -- Chief Financial Officer

Sure.

Operator

The next question is from the line of Yi Chen from HC Wainwright. Please go ahead.

Yi Chen -- HC Wainwright -- Analyst

Thank you for taking my questions. At this point, would you be able to differentiate the prescriptions for uveitis versus prescriptions for DME in Europe?

Rick Eiswirth -- President and Chief Executive Officer

Yi, good morning. Unfortunately, we cannot, we don't have individual script data in Europe to know what is DME and what's uveitis. I do know anecdotally that we are seeing good sales, and much of the growth has made up from the uveitis side of the business though at this time.

Yi Chen -- HC Wainwright -- Analyst

Thank you. Got it. Second question is, in the U.S., do you expect distributors to maintain a low inventory level as the new COVID-19 cases continue to surge in the country?

Rick Eiswirth -- President and Chief Executive Officer

Well, I think it's going to, it will correlate directly with what our sales volumes are. Our sales volumes in the fourth quarter of last year in the U.S. were very high and they continue build up inventory and they've brought it down as COVID has suppressed some of that volume. It's very, very small numbers but as sales picked up in June and July we saw them start to close some of that gap. So I think that they will continue to build inventory if the weekly volumes dictate that they need to hold more.

Yi Chen -- HC Wainwright -- Analyst

Okay, got it. And do you expect sales and marketing expenses during the second half of the year to remain at second quarter levels?

Rick Eiswirth -- President and Chief Executive Officer

Not, not as low as the second quarter. I mean, we expect that will continue to recover some of the revenue, but our focus is going to continue for the third quarter to minimize any EBITDA loss in trying to operate right there to break even. There's quite a few trade shows and things like that that have been postponed. Retina has been canceled or will be virtual. The AAO that's in November will be virtual. So there's places where we're going to be able to control our spending just because the industry as a whole is not operating in person. So we think we can control expenses but the goal is to really spend at the level that we're generating revenue and operate right there break-even.

Yi Chen -- HC Wainwright -- Analyst

Got it. Thank you.

Rick Eiswirth -- President and Chief Executive Officer

Absolutely. Thank you.

Operator

Thank you. Participants that was the last question. I now hand the conference over to Rick for closing comments.

Rick Eiswirth -- President and Chief Executive Officer

All right, great. I want to thank you all for participating in today's call and for your interest in Alimera Sciences. We do look forward to sharing our progress in our next quarterly call. When we report our third quarter results. Thank you and have a wonderful day.

Operator

[Operator Closing Remarks]

Duration: 31 minutes

Call participants:

Scott Gordon -- Investor Relations

Rick Eiswirth -- President and Chief Executive Officer

J. Philip Jones -- Chief Financial Officer

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

James Molloy -- Alliance Global Partners -- Analyst

Yi Chen -- HC Wainwright -- Analyst

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