Alimera Sciences, Inc. (NASDAQ:ALIM) Q2 2023 Earnings Call Transcript
Alimera Sciences, Inc. (NASDAQ:ALIM) Q2 2023 Earnings Call Transcript August 10, 2023
Alimera Sciences, Inc. misses on earnings expectations. Reported EPS is $-0.44 EPS, expectations were $0.06.
Operator: Ladies and gentlemen, thank you for standing by. Good morning, and welcome to the Alimera Sciences Second Quarter 2023 Financial Results Conference Call. [Operator Instructions]. 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.
Scott Gordon: Thank you. Good morning, and thank you all for participating in today's conference call. Joining me from Alimera's leadership team are Rick Eiswirth, President and Chief Executive Officer; and Russell Skibsted, 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, as well as Alimera's press release that accompanies this call, particularly the cautionary statements in it.
Today's conference call includes adjusted EBITDA and adjusted net product revenue, non-GAAP financial measures that Alimera believes can be useful in evaluating its performance. We should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, 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, August 10, 2023. 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.
It is now my pleasure to turn the call over to Rick Eiswirth. Rick, please go ahead.
Richard Eiswirth: Thank you, Scott, and good morning to everyone on the call. The second quarter has been full of exciting developments and strong performance for Alimera, and I'm encouraged by the foundation we are building to transform Alimera into the place to be in treating retinal disease. As you probably know, we made a transformative transaction during the second quarter to acquire the commercial rights to YUTIQ from EyePoint Pharmaceuticals. This brings together the only 2 approved long-term intravitreal therapies that help patients maintain vision longer with fewer injections by delivering continuous microdosing to reduce the recurrence of retinal disease. Importantly, this transaction has allowed us to leverage our U.S. commercial infrastructure with a second indication, as we already have in our international markets, and it provides a critical mass of revenue to help ensure the long-term stability of Alimera.
The second half of Q2 is primarily focused on incorporating YUTIQ into our operations and cross training our teams to sell both ILUVIEN and YUTIQ. Our expanded team now covering 35 territories across 6 regions, up from 29 territories in the first half of the year, was fully trained and in the field selling both ILUVIEN and YUTIQ beginning the week of July 24. We have also expanded our thought leader liaison, medical science beyond and reimbursement support teams in the field. I want to thank everyone at Alimera for the significant effort that went into achieving this important milestone in less than 10 weeks since the closing of the transaction. Despite some distractions created by this process, the acquisition had an immediate positive impact on Alimera, allowing us to deliver positive adjusted EBITDA in the second quarter despite only having the product in our portfolio for 6 weeks during the quarter.
Our global business continues to grow as we saw record quarterly global ILUVIEN end user demand of 1,601 units, up 13.5% over Q2 of 2022, including outstanding growth in our International segment, which was up 25% over the second quarter of last year. And since the acquisition, we added another 440 units of YUTIQ end user demand during the quarter, bringing total demand to over 2,000 units for our fluocinolone acetonide franchise. Based on numbers reported by EyePoint, the YUTIQ end-user demand for the full quarter was 1,001 units, up 11% over the second quarter of 2022. That demand drove record quarterly revenue of $17.5 million. We are pleased with this result, but we believe revenue could have been even higher during the quarter as a result of some aspects of planning for the acquisition of YUTIQ and the incorporation of YUTIQ into our commercial infrastructure.
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Prior to the transaction, we had some turnover in our field team associated with the new commercial entrants in Retina who are building their sales teams, and we maintain those vacancies longer into Q2 than we normally would in order to sort out the new territory alignment with YUTIQ on board. We also invested time out of the field of the legacy ILUVIEN sales force to learn about YUTIQ and chronic non-infectious uveitis affecting the posterior segment. Further, we had distributors reducing inventory at hand for YUTIQ and a shifting timing with our international distribution partners as we combined YUTIQ into our supply chain. In the second half of the year, we not only expect this to correct itself, but we also believe that further incorporating YUTIQ into our commercial structure will yield further revenue growth and increased adjusted EBITDA for the second half of the year.
Now that both products are merged together, we expect to have a broader presence with our customers at industry meetings. Recently, at the American Society of Retinal Surgeons, we showcased both products at the booth and we're pleased with the feedback we received from physicians on having the product combined in our company. We were also able to hold Alimera's first YUTIQ advisory boards at that meeting. And with that, I'll now turn the call over to Russell, who will review our financials in more detail.
Russell Skibsted: Thanks, Rick. Product revenue was up 20% to approximately $17.5 million for the second quarter of 2023 compared to about $14.6 million for Q2 '22. The increase was primarily due to the addition of YUTIQ into the U.S. portfolio midway through the quarter. U.S. product revenue increased 34% to approximately $11.9 million for the second quarter of '23 compared to U.S. product revenue of $8.9 million for the same period in 2022. This included approximately $3 million in YUTIQ revenue from the date of acquisition, which was May 17. As Rick mentioned, we believe the revenue could have been higher without turnover related to the new commercial entrants and our need -- and the need for our field teams to spend time training for both products.
Further, as we work to transfer the distribution of YUTIQ to our vendors, distributors reduced the inventory on hand, purchasing 18% fewer YUTIQ units from us than they sold to end users. We recently completed the transition to our supply chain vendors and expect this difference to be rectified this quarter. International net product revenue remained flat at approximately $5.7 million in Q2 '23, which was the same for Q2 '22. As Rick said, end-user demand was outstanding in our International segment. It was up 25% over the second quarter last year, but we experienced shipping timing discrepancy with our international distribution partners who sold 21% more units to end users than we were able to ship to them during the second quarter. We expect this to be corrected in the second half of this year.
Total operating expenses were approximately $16.3 million for Q2 in '23 compared to approximately $14.4 million in the same period last year. The increase was primarily due to approximately $630,000 in bad debt expense and approximately $1.2 million in amortization of the new intangible asset related to the YUTIQ transaction. As of June 30, 2023, Alimera had cash and cash equivalents of approximately $18.8 million compared to $13.1 million at March 31, 2023. On May 17, in conjunction with the closing of the YUTIQ transaction, we completed the second tranche of the financing from the first quarter which added $69 million in equity, plus we raised an additional $20 million in term debt. The tranche to equity was comprised of about $2.4 million in common stock and $66.6 million in Series B preferred.
On August 1, our shareholders approved the issuance of shares of common stock upon the conversion of the Series B preferred, which triggered the mandatory conversion of the Series B into common stock and prefunded warrants to purchase common stock. The conversion will be completed on August 15, where the Series B preferred from both tranche 1 and tranche 2, will be converted into approximately 45 million shares of common stock and common stock equivalents for approximately 2 million shares. Rick will now give you his closing comments.
Richard Eiswirth: Thank you, Russell. We're well on our way towards our goal to grow Alimera into a company uniquely focused on retina specialists and their patients. The addition of YUTIQ to our portfolio makes this 1 of very few companies to have multiple commercial products focused in the retina space. It also significantly transforms our financial outlook and stability. For the remainder of the year, we expect to continue looking at ways to bring YUTIQ and ILUVIEN together in our commercial and activities and further leverage our infrastructure to drive improved financial performance, positioning Alimera for a strong 2024. As we said following the transaction, we expect to generate more than $100 million in revenue and $20 million of EBITDA in 2024.
Before I turn the call over to the operator for questions, I also want to highlight that we completed enrollment in our landmark NEW DAY study. Remember, this is a head-to-head comparison of ILUVIEN and the leading anti-VEGF in naive or near-naive patients suffering from diabetic macular edema or DME. From this trial, we expect paradigm shifting data in early 2025 that will facilitate much earlier usage of ILUVIEN in the treatment of DME to help patients see better longer with fewer injections. And with that, I will turn the call over to the operator for questions. Thank you.
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