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Edited Transcript of ALIM earnings conference call or presentation 27-Feb-20 2:00pm GMT

Q4 2019 Alimera Sciences Inc Earnings Call

ALPHARETTA Mar 26, 2020 (Thomson StreetEvents) -- Edited Transcript of Alimera Sciences Inc earnings conference call or presentation Thursday, February 27, 2020 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* J. Philip Jones

Alimera Sciences, Inc. - CFO

* Richard S. Eiswirth

Alimera Sciences, Inc. - President, CEO & Director

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Conference Call Participants

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* Alexander David Nowak

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Andrew Jacob D'Silva

B. Riley FBR, Inc., Research Division - Senior Analyst

* James Francis Molloy

Alliance Global Partners, Research Division - MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst

* Yi Chen

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Jules Abraham

CORE IR - Director of Public Relations

* Ron Chez

- Private Investor

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Presentation

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Operator [1]

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Good morning, and welcome to the Alimera Sciences Fourth Quarter and Full Year 2019 Financial Results and Corporate Update Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Jules Abraham, CORE IR. Please go ahead.

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Jules Abraham, CORE IR - Director of Public Relations [2]

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Good morning, and thank you for participating in today's conference call. Joining me today 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 SEC today, and Alimera's press release that accompanies this call, particularly the cautionary statements in there.

Today's conference call includes adjusted EBITDA, a 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. 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, February 27, 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.

It's now my pleasure to turn the call over to Rick Eiswirth. Rick?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [3]

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Thank you, Jules, and good morning to everyone on the call. I'm really pleased to share that we reported strong results to finish out the 2019 calendar year with sales in the fourth quarter of $17.3 million, our best quarter ever for revenue generation. Revenue growth for the full year of 2019 was approximately 16% as we delivered nearly $54 million in total revenue for the year. We closed out 2019 with strong growth over the fourth quarter of 2018, which was also a strong quarter for us.

You may recall that our results in the fourth quarter of 2018 were positively impacted in Europe by a shortage of OZURDEX, providing an estimated incremental $2.4 million in onetime revenue. I'm particularly pleased that the fourth quarter of 2019 surpassed last year's fourth quarter and grew 15% year-over-year despite the loss of that onetime revenue.

We are also pleased that our fourth quarter demonstrated the strength of our business in both the U.S. and our international segments. We indicated on our third quarter call that our objective was to return the U.S. segment to growth as our field force continued to gain experience. I'm very happy to report that we met this objective, realizing a record quarterly end-user demand for ILUVIEN, a 14% increase in end-user demand units over the fourth quarter of 2018, and a 9% sequential increase over the third quarter of 2019. Our strengthened U.S. sales team is performing solidly behind the ILUVIEN brand promise as this is resonating with our physician customers. That message is strong and clear, that ILUVIEN is the only therapy that controls the recurrence of the disease, so patients can see better, longer, with fewer injections.

Because of the uptick in U.S. sales in Q4 and a manufacturing issue over the holidays, we did have to manage an out-of-stock situation for 4 weeks in the current first quarter. However, we were able to closely work with many of our physician offices to reschedule patients or utilize consignment units on hand in the doctor's offices to minimize any disruption.

Additionally, our distributors continue to take orders for ILUVIEN and maintain a backlog. We were able to ship product to our distributors at the end of last week, and our distributors have already shipped over 300 units through Wednesday of this week. As a result, although it is early, we do not expect the outage to have a material impact on the first quarter.

As we turn our focus to our international segment, I'd like to remind everyone that Alimera is unique as a small ophthalmology company having both the U.S. and international presence. We are greatly encouraged that our international segment continues to contribute materially to our revenue and cash flow. In the fourth quarter of 2019, we grew our international business by 26% compared to the fourth quarter of last year. And for the year, international revenues were $21.7 million, up 49% compared to 2018 and another record for the international business.

Three factors drove our international growth in 2019: continued growth of our DME business in our direct markets; continued expansion in our distributor markets, specifically the rapid adoption in France, following the launch of ILUVIEN in the first half of the year; and the launch of the indication for noninfectious uveitis affecting the posterior segment of the eye in the U.K. and Germany in the fourth quarter.

Both geographic expansion and the launch of ILUVIEN for patients suffering from uveitis in Europe, [DME] markets remain key components of our growth strategy going forward. You may recall that the results of the Phase III trial demonstrated a median disease-free recurrence period more than 9x greater than the control arm, and that the average patient had a 68% reduction in the number of recurrences of uveitis over 3 years.

We believe that these data, the strong real-world results we are seeing for the DME indication and the response from patients all demonstrate the unique value that ILUVIEN delivers in treating retinal disease by reducing the recurrence of inflammation.

These factors underscore our message to physicians that ILUVIEN provides longer term and more consistent disease control. The true value of ILUVIEN is its continuous microdosing technology that is designed to offer 2 distinguishing benefits as the only nonacute therapy to treat DME globally and uveitis in Europe.

The first benefit is to consistently treat the condition, continuously delivering a micro dose of the drug to minimize the edema and inflammation of the retina. The other benefit is to significantly reduce the recurrence of the disease, and therefore, the number of injections a patient must endure. These benefits enable physicians to provide what their patients want, longer-lasting vision with fewer injections.

In addition to the strong revenue performance across our business segments, we were able to achieve a significant milestone, completing 2019 with slightly positive adjusted EBITDA for the full year. We believe this further demonstrates the uniqueness of Alimera in the landscape of small, independent ophthalmology companies. I would like to congratulate and thank all the employees at Alimera, each of whom contributed greatly to this significant milestone.

During our third quarter call, we expressed our expectation of positive cash flow in the fourth quarter, and we were able to do that, generating approximately $500,000 in cash from operations during the quarter. I want to reiterate our goal of generating positive adjusted EBITDA in 2020 and maintaining cash neutrality after covering our interest payments on our debt facility. We enhanced our ability to meet this goal by refinancing our debt with Solar Capital on December 31, 2019.

In that refinancing, we extended our interest-only period through December 2022. I'm pleased to announce that we also triggered a significant milestone in the Solar agreement upon the completion of the fourth quarter. Under our agreement with Solar, we were eligible to receive an additional $2.5 million advance upon achieving at least $30 million in revenue for any trailing 6-month period on or before November 30, 2020. We achieved that as of December 31, 2019, with $30.2 million in revenue over the final 6 months of the year. As a result, we believe that our cash position is sufficient to fund our operations for the foreseeable future, and we do not have plans for any additional financing at this time.

As we look forward, we believe 2020 will be a major year for executing and growing ILUVIEN sales and market share. Our corporate priorities include the following: continue to grow unit demand for ILUVIEN in both the U.S. and our international markets where we have direct sales; continue to expand the uptake of ILUVIEN into more hospitals in the U.K. and Germany as a treatment for uveitis as well as obtaining reimbursement in Portugal, which is necessary to launch this indication there; continue to assist our distributors in delivering strong growth of ILUVIEN for DME, and support their anticipated launches behind the uveitis indication in the second half of the year.

I'll now turn the call over to Phil, who will review our financial results for the third quarter. Phil?

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J. Philip Jones, Alimera Sciences, Inc. - CFO [4]

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Thanks, Rick, and hello, everyone. During the fourth quarter of 2019, our consolidated net revenue grew approximately 15% to $17.3 million compared to $15.1 million in the fourth quarter of 2018.

U.S. net revenue was approximately $9.5 million for the fourth quarter of 2019, up approximately 7% from $8.9 million for the same period of 2018. U.S. end-user demand, which represents units purchased by physicians and pharmacies from our distributors, was up 14% in the fourth quarter of 2019, increasing to 1,164 units compared to 1,019 units for the fourth quarter of 2018. As we have previously shared, our GAAP revenues in the U.S. do not always correlate with end-user demand, due to the timing of purchases by our specialty distributors.

Net revenue from international segment increased 26% to approximately $7.8 million for the fourth quarter of 2019 compared to approximately $6.2 million for the same period last year. This was driven by growth in our European DME business as well as the launches of ILUVIEN's uveitis indication in Germany and the U.K.

Research, development and medical affairs expenses decreased by approximately 7% to $2.7 million in the fourth quarter of 2019 compared to $2.9 million in the fourth quarter of 2018.

General and administrative expenses decreased by approximately 5% to $3.8 million for the fourth quarter of 2019 compared to approximately $4 million in the fourth quarter of 2018.

Sales and marketing expenses during the fourth quarter of 2019 were approximately $6.5 million, up 7% to $6.1 million for the fourth quarter of 2018. The increase was primarily attributable to increases in marketing costs associated with the launch of our direct-to-patient advertising program.

Total operating expenses were approximately $13.6 million for the fourth quarter of 2019 compared to $13.7 million for the 3 months ended December 31, 2018. In the fourth quarter of 2019, we reported adjusted EBITDA of $2.6 million compared to $2.4 million in the fourth quarter of 2018.

The growth in both our U.S. and international segment, along with our containing expenses primarily drove the increase in our adjusted EBITDA. For the fourth quarter of 2019, we generated net income of approximately $500,000 compared to net loss of approximately $1.2 million for the fourth quarter of 2018.

Before we get into any EPS discussions, it should be noted that all EPS calculations reflect our one-for-15 reverse stock split. Basic and diluted net income per share for the fourth quarter of 2019 was $0.08 per share on approximately 6.2 million weighted average shares outstanding. This compares to basic and diluted net loss per share for the fourth quarter of 2018 of $0.27 per share on approximately 4.8 million weighted average shares outstanding.

Turning to our results for the full year. Revenues for 2019 were $53.9 million, up 16%, compared to approximately $46.6 million for 2018. Research, development and medical affairs expenses decreased by approximately $300,000 or 3% to $11 million compared to $11.3 million in 2018. The decrease was primarily attributable to decreases in clinical studies and scientific communications.

General and administrative expenses decreased by approximately $500,000 or 3% to $14 million compared to $14.5 million for 2018. The decrease was primarily attributable to a onetime severance expense incurred in 2018.

Sales and marketing expenses increased by approximately $1.5 million or 6% to $25 million compared to $23.5 million in 2018. The increases were mainly attributable to the launch of our direct-to-patient advertising pilot program in the United States and market access costs associated with uveitis in the European area.

Total expenses in 2019 were $52.6 million compared to $52 million in 2018. Net loss for the full year of 2019 was $10.4 million compared to a net loss of approximately $16.4 million for the full year of 2018.

Our earnings per share calculation in 2018 was impacted by our preferred stock exchange, which resulted in a $38.3 million gain attributable to our common shareholders. Therefore, net income available to shareholders in 2018 was approximately $21.9 million.

Basic and diluted net loss per share for 2019 was $2.19 per share on approximately 4.9 million weighted average shares outstanding. This compares to basic net income per share of $3.74 on approximately 5.9 million weighted average shares outstanding and diluted net income per share of 3-point -- $3.71 per share on approximately 5.9 million weighted average shares outstanding for 2018.

On December 31, 2019, we had cash and cash equivalents of approximately $9.4 million. As Rick mentioned, on December 31 of last year, we refinanced our debt with Solar Capital, extending our interest-only period through December 2022. We announced this past Monday that we achieved a revenue milestone stipulated in our new agreement with Solar, which enabled us to draw down an additional $2.5 million to strengthen our balance sheet. As a result, we believe that we are in good financial position to fund the growth of our business going forward without further dilution to our shareholders, and have no plans to issue equity at this time.

In addition to the out-of-stock situation Rick described earlier, and the recent uncertainties associated with the coronavirus that we are monitoring, I want to remind everyone of the seasonality of our business. The first quarter tends to be considerably lighter than other quarters due to change in the calendar year and the impact of patient insurance approvals and deductibles.

In the U.S., physician practices will reverify patient insurance plans in the first quarter, which typically slows down the time for ILUVIEN injections. In Europe, many hospitals restart their annual budget, leading to a delay in patient acceptance for ILUVIEN injections.

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

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [5]

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Thank you, Phil. As I said earlier, we are very pleased with our fourth quarter and full year results. Looking back on my first year as CEO, I believe we have accomplished much of what we set out to do at the beginning of the year. We continue to grow ILUVIEN organically, increasing the usage of ILUVIEN for DME in our existing markets. We expanded geographically, launching ILUVIEN in France with our distributor Horus Pharmaceuticals.

We obtained approval for ILUVIEN for new indication for uveitis patients in Europe, and we are able to commercialize ILUVIEN for uveitis patients before the end of the year. As a result, approximately 7,900 eyes were treated with ILUVIEN globally in 2019 compared to approximately 6,000 units in 2018. That's growth in global demand of 32%, which enabled us to report record revenues for the year, and more importantly, achieve financial independence.

As Phil indicated, we believe our cash on hand is sufficient to fund the continued growth of ILUVIEN without the infusion of additional capital. We have accomplished a lot at Alimera this past year. But as I always tell our team, we are just getting started. I and we continue to believe that we have a better mousetrap, a better way to treat DME and uveitis because of ILUVIEN's unique continuous microdosing, making it the only drug that can help patients see better longer with fewer injections. The opportunity for additional utilization is significant.

In 2020, we intend to continue to grow ILUVIEN organically in our existing markets, make ILUVIEN available for uveitis patients in more markets and continue to expand geographically.

And with that overview, we are now ready to take questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Andrew J. D'Silva of B. Riley FBR.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [2]

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Congrats on the very strong close to 2019. I just have a few quick questions. Could you please just discuss the current status of the sales force? Maybe a little bit of context, where they were when you maybe started the fourth quarter and where they are today that will give us a little bit of a reference point?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [3]

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Yes. Sure, Andy. I mean I think the sales team continues to strengthen. We have 30 sales territories right now. I believe we have 1 opening in a new territory that we -- sorry, not a new territory, we do have 1 opening in the New York City market right now. The staff was full at the beginning of the quarter. We did have some turnover in December. We turned over, I believe, 3 or 4 reps. But honestly, they were the underperforming territories. And I expect that to be sort of the normal going forward, so nothing out of the normal course there.

Just had our National Sales Meeting in the U.S., and we had a similar one in Europe. And I will tell you that the enthusiasm of the sales team, both in the U.S. and in Europe, is at an all-time high. So I feel real good about where they are, and I think we can continue to get better. But to give you some perspective, we ended 2019 in the U.S. with our largest end user demand ever in December.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [4]

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Okay. Okay, that's good context. And then as far as the fourth quarter goes, internationally, do you have insight on stocking orders, either new regions or -- because of uveitis becoming relevant in the U.K. and Germany? Just curious if there was a bolus of ILUVIEN sales that seem maybe unusual to you? And maybe you could be -- likely attribute it to the label expansion?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [5]

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Yes. So Andy, it's a great question. And I think the growth in the fourth quarter comes from a couple of places. One, if you recall during the third quarter call, I talked about an outstanding presence that we had at the EURETINA conference in Europe, right? And we had symposiums for both uveitis and DME. And frankly, Professor Bandello from Italy stood on the podium and talked about ILUVIEN being the best way to treat DME as a disease.

So I think there was some carryforward of that in Europe. We also did launch the uveitis indication in Germany and the U.K. at the end of September. And we know that we've gotten some very quick and rapid uptake in a few hospitals. I do have a little bit of I don't want to say concern, but we want to continue to monitor the situation. We don't know how much of the uveitis that we're seeing in the fourth quarter and even right now, is a bolus of patients and what the steady run rate will be. But at the same time, I don't think it's been broadly accepted across a large number of hospitals yet in either Germany or the U.K. So I think we've got the ability to continue to expand into more hospitals with that uveitis indication, even if we've absorbed the bolus in some of the early hospital or early adopters.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [6]

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And excluding just destocking -- not destocking, but the out of stock that took place in the first quarter, are you at least seeing a trend adjusting for seasonality carryover in Europe as it relates to maybe hospitals that weren't using ILUVIEN prior to the uveitis launch, still using it and ordering or trying to order now that we're into the first quarter?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [7]

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We've 2 separate issues there. So the short period of stock-out was in the U.S. only, so I'll come back to that in just a moment. With respect to uveitis, we are seeing that usage continue in the quarter. I'll give you one example though. Moorfields Hospital in London is a hospital that's used very limited amounts for the DME indication over time, but I believe in the first 2 or 3 months, treated about 70 patients with uveitis.

So big uptake in a couple of limited hospitals.

We've seen the same thing at the University Hospital in Munich, Germany. So it's being received well. And I will tell you, one of the great things, and I've always said that we thought there could be some overhang longer term. As you see a lot of uveitis physicians and KOLs talking to their peers saying, this is so obvious because it reduces the recurrence of the disease and uveitis, you guys need to smarten up and use it more often in DME. So we think that there will continue to be overhang as more of the uveitis physicians use the drug as well.

The stock-out was isolated to the U.S. and as I've said, we had product last week, end of last week that we shipped out to the distributors. We've shipped out more than -- those distributors, I'm sorry, have shipped out more than 300 units to the end users in the U.S., which candidly, 300 units was more than we did in a month at times last year. So we feel real good about the rebound from that. And at the rate the reps were selling in November and December, we don't anticipate there being any material impact. But obviously, we're 3 days back in stock right now, so we'll have to see. But we feel pretty good about it.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [8]

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Okay. And I'll lump my last 2 questions together. Just any insight into how the DC programs are going as far as outreach to consumers and patients? And then any update on Canada? I know that it's not going to be a large market for you, but you obviously have substantial contribution margins. So just interested to see if there's been any updates on the reimbursement side there?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [9]

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Yes. Sure. So with respect to the direct-to-consumer programs, we just got some early data in in the past couple of weeks on that because the program ran through the end of the year. It was very, very promising. I will tell you that the program was very well received, the message seemed to resonate with the patients. And we certainly saw an uptick in usage in the markets and in the benefit investigations that are being submitted in those markets.

Right now, we're trying to sort of work through that data and try to figure out which pieces of the program were the most effective, whether it was social media or Pandora or some of the printed materials and things like that. So over the next couple of months, we will be sitting down with the doctors and trying to evaluate what had an impact. And if they indeed were responding to the patients and look at how we might broaden that later. But right now, we've got the programs sort of on hold while we evaluate all that data. It was really good data, and we felt like we got a great response from it.

With respect to Canada. Unfortunately, in Canada, our partner there is struggling a little bit with the pricing and reimbursement. And I think they're having to resubmit right now. So we don't really have great insight into when that might be resolved at this point in time. But again, as I've said, although Canada is certainly a nice add-on for us as we continue to expand geographically, we did never -- we did not ever expect it to be a huge material part of what we're doing.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [10]

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Congrats on the progress and continued momentum in 2020.

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Operator [11]

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The next question comes from Alex Nowak of Craig-Hallum Capital Group.

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Alexander David Nowak, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [12]

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Congrats on a solid finish to the year here. Just wanted to follow up on Andy's question around the stock-out. Just -- can you explain more exactly what happened with that stock-out? Was this an issue with your CMO just unable to make ILUVIEN? Or was this just an -- you experienced the higher sell-through at the end of Q4 and just ran out of stock?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [13]

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Yes. I think we were selling a lot more in the fourth quarter than we expected. And candidly, right around the Christmas holidays, they had a -- one piece of equipment broke down that had to be repaired. And just because of the Christmas holidays, it took a little bit longer than we expected it to or would have in the normal course of business. So just slowed us down. But I would tell you, Alex, our team and frankly, the doctors responded phenomenally to this.

We prepared the market for it. We talked to doctors. Our team talked to the doctors about rescheduling patients and holding them out, and we've seen the rebound in the sales and the deliveries this week. And candidly, my sales reps, my MSLs, my reimbursement team, everybody in the field and including the doctors said from the very beginning, "Hey, this is manageable. We've dealt with much longer stock-outs in the past. As long as we know we're getting product back, we'll be able to handle it." And that was echoed by the physicians. So I think we're fine, and we're out of the woods with it. It was unfortunate, but it was a combination, like I said, of volume and then that one issue with the manufacturing happening during the Christmas holidays.

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Alexander David Nowak, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [14]

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Okay. Understood. And then for U.S. growth, I mean it was a little bit varied in 2019 just because you had the sales force transition. And as we reached through Q4, the growth has slowly incrementally gotten better and better. So as you're going here into 2020, do you think high single-digit or more like teens growth is achievable here? What's the right number we should be thinking about?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [15]

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Yes. We're still targeting mid- to high-teens growth. That's where we believe we can end up. We got back to what, 14% in the fourth quarter. And we still think there's room for the team to improve. If you go back to 2018, we grew about 17% end-user demand when we had consistency in the field. So we're hoping we can get back to mid- to high teens.

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Alexander David Nowak, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [16]

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Okay. Excellent. And then just going over to international. That ended at about $7 million in the quarter. You mentioned the seasonality element, so we hear that loud and clear. But what is the right number to kind of build off in 2020? Because if we look in 2019, the normalized run rate per quarter has been about $3 million. I think you're going to be well above that number starting in 2020. So just maybe help us out there, so we can model this appropriately.

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [17]

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Yes. I mean I think, I think the $7 million is a little bit high. But at the same time, we ended the year closer to, what, a $24 million run rate there. And I think that's a good place to start off within Europe.

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Alexander David Nowak, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [18]

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Got it. Okay. That sounds good. And then just last question from me. Just your current thoughts on M&A. Last quarter, there was a thought there'd be potentially some M&A in the future. I think your commentary has changed since last quarter and you said you're just kind of rallying around ILUVIEN, which I think makes sense. But just your current thoughts there?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [19]

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Yes. So I mean look, Alex, we think we've got a pretty valuable platform here. We think as a small company, especially valued where we are, we're pretty unique in that we've got a retina presence both in the U.S. and in Europe. And there's -- and making money -- or excuse me, generating a little bit of EBITDA, and hopefully, a little bit more cash next year.

We have a platform that could be leveraged because the moment we drop something else in the bag, it should, for the most part, go straight to the bottom line. That said, we think we're in a pretty enviable place as a small company, too, in that we are going to be generating cash next year. And we don't have to do anything to change our story, right? We can focus on ILUVIEN, continue to grow and be opportunistic.

So we're going to continue to look. But the reality is, if we just continue to execute the story the way it is, we should increase shareholder value. And we'll look for the right thing at the right time for us. So we're going to be looking, but we're not in any rush to do anything. We don't want to do the wrong transaction if there's something out there.

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Operator [20]

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The next question comes from James Molloy of Alliance Global Partners.

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James Francis Molloy, Alliance Global Partners, Research Division - MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [21]

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And it looks like a pretty good quarter in the fourth quarter. I know you mentioned the first quarter typically is weaker. If you take a look at the fourth quarter, is that shaping up to typically be stronger going forward every year? Is it how we should have shaped the quarters going forward?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [22]

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We expect the fourth -- yes, the fourth quarter is typically a stronger quarter for us. And the reason for that is even though there's a lot of subsidization of co-pays and things like that, a lot of people seem to try to push these higher-priced products into the fourth quarter, right? And we always seem to see an uptake in the U.S., specifically, of usage in the fourth quarter as people are trying to get these procedures done before the insurance year runs out.

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James Francis Molloy, Alliance Global Partners, Research Division - MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [23]

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Got it. And I know one of the questions has always been the retreatment. 3 years going up and every sort of call, it seems like we ask about it. Is there -- have you seen it as a way to say how many maybe retreatments coming through? Or is that an impact that could be happening here?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [24]

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Yes. So Jim, I -- there definitely is an impact of it, right, and it's a positive impact. It's a very hard one to triangulate because of the -- just because of the HIPAA rules and things like that. But what we can tell is that about 10% of the patients that were treated back in 2016 came through for repeat benefit investigations. So where we help provide looking at the insurance, understand what the co-pays are for the doctor, making sure pre-authorization is not required, all those types of things, about 10% of those patients from 2019 came back through. Now that's not always an accurate measurement because sometimes the patient has moved to a different office, comes through with a different number or something like that or a physician's office has stopped using that system.

But we know they're coming back there and physicians are looking at those. And I know that our new VP of Sales, Andy Young, that joined us in the middle of this year, is really, really focused with the team in the U.S. specifically, at looking at the data, on where the business came from 3 years ago and where the business came from in the first half of the year to make sure we're getting better repeat business. Any doctor that's already made the decision to use ILUVIEN is the best one to get to continue to use it. So we're really focused on that. I know it's coming through, but it's very hard to quantify.

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James Francis Molloy, Alliance Global Partners, Research Division - MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [25]

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Understood. I know it's always been a challenge to figure that -- those numbers out. Have you guys seen any ability to take pricing? And I know it's been unit growth. Has there been any pricing growth? Do you anticipate there will be any pricing growth at any point?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [26]

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No. No, there's not. We have not taken any price increases. And at this point, we really don't perceive there being any opportunity to increase price. If you look across in the ophthalmology space, and specifically retina drugs, we're not aware of any retina drugs that have been able to take a price increase. And it's -- a lot of it has to do with the fact that most of these drugs are reimbursed through buy-and-bill.

And so the doctors are getting reimbursed based on sort of an average sales price looking back over 6 months historically. So if you raise price, they arguably will be under-reimbursed for a few months at a time, and you'd have a negative impact on usage. So you just typically don't see it in this space.

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James Francis Molloy, Alliance Global Partners, Research Division - MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [27]

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Okay. And last couple of questions if I may. The anterior uveitis indication in EU, is that -- how much would you attribute to the strong growth in the fourth quarter or the strong growth really throughout the year to that indication? And then the final question, I guess, you touched on it briefly. I know the coronavirus is all over the news, Italy getting locked down, in China, what have you. Any thoughts on potential impact that may have?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [28]

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Sure. Sure. So with respect to uveitis, again, because it's -- ILUVIEN goes out in a box based on the order regardless of what the indication is, we don't have specific script data in Germany and the U.K. to tell us how much is uveitis and how much is DME. I know there's some DME growth, as I said, coming off of continued improvement in our messaging, more alignment with our medical team. What we saw at EURETINA, from an advocacy standpoint, but also the launch of uveitis in some of these hospitals.

So I think it's a combination of both. And I think the growth in usage in uveitis is going to have a positive impact on DME as well.

With respect to the coronavirus, we're continuing to monitor the situation. We either operate directly or through partners. We operate in the U.S., Europe, including Italy and the Middle East. None of the ILUVIEN parts or the drug itself are made in China. It's all done in either Mexico or final assembly in the U.S. So we do think we have limited our exposure with respect to China. I do know that in Italy, with some of the announcements in Italy, they recently restricted access to some of the hospitals to personnel from pharmaceutical companies. So if that continues and that spreads throughout Europe and were to make its way to the U.S., that obviously will impact the ability for us to have a presence in front of the doctors. But at the same time, these patients still need to be treated, right? And a lot of them need to be treated fairly often because they're on these acute therapies.

So we're going to continue to monitor the situation. We don't know anything right now. I mean obviously, there's some risk out there for us like there is any other country. One of the things we're -- company. One of the things we're looking at is doing some e-detailing as well and trying to accelerate that. We are trying to set that up for some remote territories and trying to accelerate the development of that right now in case this becomes more of an issue.

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Operator [29]

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The next question comes from Yi Chen of H.C. Wainwright.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [30]

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First question is, do you expect overall operating expenses to remain relatively at the same level in 2020?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [31]

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Yes. So I think, Yi, we do expect to increase the operating expenses in line with revenue growth, right? To the extent we can generate cash to pay the interest cost on the debt. As we've always said, we want to continue to grow ILUVIEN. We want to get to the point where we are not relying on raising additional capital. But from that point forward, the expectation is to be sort of cash neutral. And so the goal is, as we generate more margin above our operating costs and above paying off the debt, that we will take that cash and reinvest it in the business to try to continue to grow the top line.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [32]

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Got it. Second question, could you tell us the -- how many stock, how many common stock is currently outstanding? And whether the 1.3 million participating shares will be added each quarter for calculating the EPS going forward?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [33]

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I'm going to ask Phil to answer that.

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J. Philip Jones, Alimera Sciences, Inc. - CFO [34]

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Yes. Currently outstanding, we have 4,965,949 shares of common stock outstanding.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [35]

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And in calculating the fourth quarter EPS, there is 1.3 million participating shares added. Is that the way going to be for each quarter going forward?

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J. Philip Jones, Alimera Sciences, Inc. - CFO [36]

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Yes. That should be -- there's actually no change to that moving forward.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [37]

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Okay. And when do you expect to file the 10-K?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [38]

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We're tentatively planning to file the 10-K either this Friday or Monday.

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Operator [39]

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Our next question comes from [Ron Chez], a private investor.

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Ron Chez, - Private Investor [40]

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Do you have -- what is your expectation about retaining customers, retaining patients that were treated 3 years ago as you go forward? Do you expect to retreat 100% of them, 50%? What's your goal and expectation?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [41]

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Yes. So Ron, as I addressed earlier, we think we're seeing about 10% of the patients right now coming through for benefit investigations in. So the doctors evaluating their insurance coverage for that second ILUVIEN injection. Candidly, the way ILUVIEN works, it works as monotherapy in 50% to 60% of the patients is what we're seeing. So it works very well by itself. I think conservatively, we would probably model out ourselves at somewhere in that 30% to 35% repeat range until we have a little bit more experience. And one of the reasons we discount that down is it is working longer in some circumstances than we expect. And these DME patients have a lot of other comorbidities. So we know from some of our reps being out in the field and talking to doctors about retreatments that we're losing some of these patients to mortality. So I conservatively say, our goal is to get to 30%. It hopefully can be higher as we learn more. But where we are right now, I think 30% is what I would think about.

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Ron Chez, - Private Investor [42]

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Are you working harder now to get good data in that area?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [43]

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Yes, we are. We are. And I think, as I said, Andy Young, our new VP of Sales, is really focused on utilizing, frankly, more efficiently than I think we've done in the past, the data on where the business has come from, where the opportunities for those retreatments are as we're targeting the reps out there in the field.

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Ron Chez, - Private Investor [44]

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Do you have a goal for new doctors? Or how many doctors do you have now? And how many would you expect to add this year as new doctor customers?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [45]

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So Ron, we don't have great transparency into the exact number of doctors. We know it based on accounts. And we typically ship to between 400 and 500 accounts on an annual basis, and there's probably 900 to 1,000 retina practices out there. We estimate, inside of those accounts that are using the product there's somewhere between 600 and 800 doctors that are using the product on a regular basis. There is some data out there in the marketplace. It's a limited sample, but at the ASRS Meeting last year, a survey amongst the doctors said about 50% of the doctors had not used ILUVIEN yet. So when I say I think there's significant opportunity out there, it's getting to those doctors and getting greater usage there.

I believe, and I say this repeatedly to the team, I mean I really do believe we've got a better mousetrap. And I'm going to continue to be bullish about that. It's a better way to treat the disease. The patients deserve the opportunity to reduce the recurrence and stop that disease coming back so that they can see more consistently over time. And I think our messaging is getting better, and we are continuing to get to new doctors on a regular basis. So that -- when I talk about the big opportunity in front of us, it's to get to more of those doctors and get them using ILUVIEN earlier in the treatment paradigm.

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Ron Chez, - Private Investor [46]

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You have good data tracking that now?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [47]

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Well, we have what I'm sharing. We don't have script data. And the reason we don't have script data is because these patients -- excuse me, these physicians use the buy-and-bill model. So it's bought at the practice level and you don't have data at the doctor level.

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Ron Chez, - Private Investor [48]

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But I'm talking about good data with respect to number of offices then as opposed to...

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [49]

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Oh yes. Absolutely. Absolutely. We see that we've got great transparency on the offices and where the product is going on a daily basis with our distributors.

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Ron Chez, - Private Investor [50]

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Your goal for this year in terms of adding doctors?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [51]

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Yes. I'd like to get 100 new practices using the product, if I could.

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Ron Chez, - Private Investor [52]

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And you talked about taking it slow with regard to looking for acquisitions, bolt-on or whatever, which makes sense to me given the circumstances. Are people approaching -- on the other end of this, are people approaching you to acquire your company?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [53]

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I think we always hear people interested in what we're doing here at Alimera, I think, because if you look at the ophthalmology space, we are pretty unique in that we've gotten to the point where we're at $54 million in revenue this year. And we obviously expect to be quite a bit higher next year, where other companies in the space are struggling with launches and seem to be quite a bit of ways from profitability.

But at this time, there's no transaction that we're pursuing or anything like that. I believe you have to build companies as if you're going to run them forever. And if you do that, they become attractive to other parties. And so our goal is to continue to grow ILUVIEN, leveraging the platform we have. And if that happens, that happens. But it's certainly something that we don't sit around waiting to happen.

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Ron Chez, - Private Investor [54]

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I agree with your commentary completely, but are -- have you -- have people extended interest to you on occasion in the last year?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [55]

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Ron, even if they could, I couldn't comment on that. I'm sort of restricted under Reg FD to comment on things like that, even if it had happened. So I'm going to have to say no comment on that.

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Ron Chez, - Private Investor [56]

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And one last question, and that is the stock price is unpleasant for everyone. Any specific plans to talk to retail brokers or others who may have an interest in the stock?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [57]

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Yes. Ron, we're out on the road quite often. We're planning some non-deal roadshows to get out there and talk to investors, both retail and institutional. In the coming months, we're presenting at the Oppenheimer Conference in March and at the Wainwright Conference in London in April as well at this point in time.

So we were on the road pretty aggressively in the fall, and our plan is to get out there pretty aggressively in March, April and May as well. We're very bullish on the story. We think we made great progress, and we want to try to get more people in front of us to hear our story.

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Ron Chez, - Private Investor [58]

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Last question. Are the officers continuing with the stock purchase plan?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [59]

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Well, the stock purchase plan that we all had in place was terminated as of December 31. And we've been in a blackout window since then. But we all participate in an ESP, employee stock purchase, plan through the company as well on a regular basis, too, so...

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Ron Chez, - Private Investor [60]

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Are you going to have the same kind of plan going forward as you did last year?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [61]

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I'm not sure at this point in time, Ron. I can't comment for the whole executive team, and I haven't made a decision myself on what I'm going to do, but I am participating in the ESPP plan right now.

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Operator [62]

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This concludes the question-and-answer session. I would like to turn the conference back over to Rick Eiswirth for closing remarks.

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [63]

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I want to thank all of you for participating on today's call and for your interest in Alimera Sciences. As I said, I think we had a great year, and we appreciate your support and interest in our story. We look forward to sharing our progress on our next quarterly conference call when we report our first quarter results. Thank you, and have a great day.

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Operator [64]

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The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.