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Edited Transcript of ALIM earnings conference call or presentation 19-Feb-19 2:00pm GMT

Q4 2018 Alimera Sciences Inc Earnings Call

ALPHARETTA Feb 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Alimera Sciences Inc earnings conference call or presentation Tuesday, February 19, 2019 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. - CEO, President & Director

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Conference Call Participants

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* Andrew Jacob D'Silva

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

* François Daniel Brisebois

Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity 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

* Jacob Goldberger

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Presentation

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Operator [1]

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Greetings, and welcome to the Alimera Sciences Fourth Quarter and Full Year 2018 Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jacob Goldberger of CG Capital. Thank you, sir. You may begin.

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Jacob Goldberger, [2]

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Thank you all for joining us today for the Alimera Sciences Fourth Quarter and Year-End 2018 Financial Results Conference Call. With me on the call today are Rick Eiswirth, President and Chief Executive Officer; and Phil Jones, Chief Financial Officer.

Yesterday, the company issued a press release announcing fourth quarter and full year 2018 results. You can find that press release at www.alimerasciences.com under the Investor Relations section. Today's call is being webcast and a recording will be posted to the company's website. Following remarks by management, we will open the call up to your questions.

During this call, management will make some forward-looking statements regarding future events and the company's future expected performance. These statements are not guarantees of future performance, are based on current expectations and involve inherent risks and uncertainties that could cause actual results to differ materially. For more information, please see the risk factors discussed in Alimera's recent filings with the SEC.

Alimera's presentation 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. For a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure, see the reconciliation table located in Alimera's earnings release from yesterday.

For the benefit of those of you who may be listening to the replay of this call, it was held and recorded on Tuesday, February 19, at approximately 9 a.m. Eastern Time. Since then, Alimera may have made additional announcements related to the topics discussed and filed its annual report on Form 10-K for 2018. Please refer to Alimera's most recent press releases and filings with the SEC.

Now I'd like to turn the call over to Rick Eiswirth, President and CEO of Alimera.

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

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Thank you, Jacob. Good morning, everyone, and thank you for joining us today. As this is my first call as CEO and Phil's first call as CFO, we are looking forward to sharing with you the excellent results we recorded in Q4 2018 and for the full year 2018. After I discuss Alimera's new leadership team and we go through the numbers, I will share some thoughts on my near-term vision for Alimera and the strategy to get there.

As we announced in November 2018, I was promoted to the position of President and Chief Executive Officer effective January 2. I can assure you that I am well versed with our business, having joined Alimera as CFO in 2005 and been the President for the past 3 years. I've also had the pleasure in 2019 of speaking directly with stockholders who own over 70% of our stock to share my vision with them. And I look forward to speaking with many more investors, both current and future.

Phil Jones, who will provide the financial portion of today's presentation, was promoted to the position of Chief Financial Officer. Phil joined Alimera nearly 4 years ago and was previously our VP of Finance. Before he joined us at Alimera, he held various senior financial positions at Theragenics, Superior Essex and Arjo Wiggins Medical as well as beginning his career with a large CPA firm.

Dave Holland assumed the title of Chief Marketing Officer and Senior VP of Corporate Communications. Dave was a cofounder of Alimera and has held various sales and marketing roles here ever since. Before founding Alimera, Dave was a Vice President of Marketing at Novartis and held various sales and marketing positions at CIBA VISION and Procter & Gamble.

Philip Ashman, previously our Senior VP and Managing Director of Europe, has been appointed Chief Operating Officer and Senior Vice President of Commercial Operations in Europe. Before he joined Alimera in 2013, Philip held management roles at Bayer, AstraZeneca, Sanofi and Schering-Plough. I believe this management team is well positioned to lead Alimera Sciences to its next trajectory of growth.

Turning to the financials now. 2018 was a record year for us in many ways. We saw substantial growth in both our U.S. and international segments behind our flagship ILUVIEN brand, which continues to gain traction in the markets where we compete. We are reporting record revenues of $15.1 million for the fourth quarter of 2018, a 66% increase over the fourth quarter of last year. And for the full year, we are reporting an increase of 31% to a new annual high of $47 million. Our revenue growth rates in both our U.S. and international segments accelerated significantly over 2017.

As you know, we closely monitor end-user demand or sales from our U.S. specialty distributors to physicians and pharmacies as a measure of our progress in the U.S. End-user demand was up approximately 16% for 2018 to 3,802 units versus 3,288 units in 2017. This represents acceleration in the adoption of ILUVIEN as 2017 end-user demand was up only 12% over 2016. As you can see in this chart, we have also grown U.S. demand in every quarter over the prior year period since launch and exceeded 1,000 units in a quarter for the first time during the fourth quarter of 2018, recording 1,119 units to end users.

Our international segment business increased 138% in the fourth quarter and 49% in 2018. While we experienced solid organic growth, we do believe that OZURDEX being removed from the market late in the year allowed us to obtain new patients and customers. Though the supply of OZURDEX is returning, we believe that doctors injected a bolus of patients that required treating. This has enabled us to get more clinicians comfortable with ILUVIEN. And we expect to retain some of this increased usage once OZURDEX is back in supply. We do not expect the international segment to continue to grow at this pace seen in the fourth quarter, but we still anticipate revenue acceleration into the first quarter of 2019 as our distributor partners begin to grow as well.

Turning to those distributor partners now. We have made progress in new markets in 2018 and expect to leverage those opportunities in 2019. Looking at Spain, as a reminder, our partner, Brill, reached agreement on reimbursement for ILUVIEN with the Spanish authorities in 2018. They are currently working with hospitals to include ILUVIEN on formularies in advance of a planned launch this quarter.

Our French partner, Horus, is currently engaged with the regulatory authorities and anticipates receiving a reimbursed price for ILUVIEN in the near future. Assuming this goal is met, Horus will launch early this year. We remain very optimistic about the opportunity for ILUVIEN in these Southern European markets as Spain and France are known for their use of intraocular steroids.

In December, we announced that our distribution partner, MEAgate, had received approval in pricing in the United Arab Emirates. In January, we received approval on Lebanon. And we expect to have agreed upon pricing in Lebanon in 2019.

Now for a more detailed review of our financials, I would like to hand the call over to Phil Jones, our CFO.

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

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Thank you, Rick. Good morning, everyone. During the fourth quarter of 2018, our consolidated net revenue grew 66% to $15.1 million compared to $9.1 million in the fourth quarter of 2017. For the year, consolidated net revenue grew 31% to $47 million compared to $35.9 million during 2017.

U.S. net revenue grew 37% to approximately $8.9 million for the 3 months ended December 31, 2018, compared to U.S. net revenue of approximately $6.5 million for the 3 months ended December 31, 2017. For the 12 months ended December 31, 2018, U.S. net revenue increased 24% to $32.3 million compared to $26.1 million in 2017. Both period increases in the U.S. were driven primarily by increased end-user demand, as Rick previously mentioned. U.S. end-user demand was up 16% for the year and 13% for the quarter.

As we have previously shared, our GAAP revenues in the U.S. do not always perfectly correlate with end-user demand due to timing of purchases by our specialty distributors. For those of you viewing the webcast, this chart shows the historical comparison between our quarterly GAAP sales and our end-user demand experienced each quarter for the last 3 years. You can see that the correlation improved significantly in 2018. However, there were still some differences.

During the fourth quarter of 2018, our distributors purchased approximately 7% more units than they sold to end users, increasing their stock on hand during the quarter. For the full year 2018, our distributors only purchased approximately 3% more units than they sold to end users, increasing their stock on hand during the most recent year. This continues to reflect the improvement in consistency between GAAP revenues and end-user demand versus last year.

Net revenues from Alimera's international segment increased 138% or approximately $6.2 million for the 3 months ended December 31, 2018, compared to approximately $2.6 million for the 3 months ended December 31, 2017. As Rick discussed, we attribute a significant amount of this to the shortage of OZURDEX in the U.K. and Germany during the period. For the year, international net revenue totaled $14.6 million, up 49% compared to $9.8 million in 2017.

Research, development and medical affairs expenses during the fourth quarter were down 6% to $2.9 million compared to $3.1 million during the prior year period. Total 2018 research, development and medical affairs expenses were $11.3 million compared to $12.8 million during 2017. The company incurred a one-time $2.9 million noncash charge during 2017 for the additional rights to uveitis acquired from EyePoint Pharmaceuticals. This decrease was offset by increased cost associated with ongoing clinical studies.

General and administrative expenses for the 3 months ended December 31, 2018, were approximately $4 million compared to approximately $3.4 million for the 3 months ended December 31, 2017. The increase was primarily attributable to approximately $600,000 in severance for our previous Chief Executive Officer. For the year, general and administrative expenses were approximately $14.5 million compared to $13 million during 2017.

Sales and marketing expenses during the fourth quarter of 2018 were approximately $6.1 million, down 8% compared to $6.6 million reported for the 3 months ended December 31, 2017. For the 12-month period, sales and marketing expenses totaled approximately $23.5 million during 2018 compared to $23.2 million during 2017.

Total operating expenses were approximately $13.7 million for the 3 months ended December 31, 2018, compared to approximately $13.8 million for the 3 months ended December 31, 2017. Total operating expenses for the year ended December 31, 2018, were approximately $52 million compared to approximately $48.9 million during the prior year period.

We were pleased to announce that during the fourth quarter of 2018, we reported positive adjusted EBITDA of $2.4 million compared to an adjusted EBITDA loss of $3.8 million during the fourth quarter of 2017. This was a significant goal for the company, and we are proud to have surpassed adjusted EBITDA breakeven during the quarter.

For the year, the adjusted EBITDA loss was approximately $2 million compared to an adjusted EBITDA loss of $8.8 million during 2017, a decrease of 77%. Net loss for the 3 months ended December 31, 2018, was approximately $1.2 million compared to a net loss of approximately $7.2 million for the 3 months ended December 31, 2017. For the year ended December 31, 2018, net loss totaled approximately $16.4 million compared to a net loss of approximately $22 million during the year ended December 31, 2017.

GAAP basic and diluted net loss per common share for the 3 months ended December 31, 2018, was $0.02 on approximately 70.1 million weighted average common shares outstanding compared to basic and diluted net loss per share of $0.10 on approximately 69.1 million weighted average common shares outstanding during the 3 months ended December 31, 2017. GAAP and diluted net income per share for the year ended December 31, 2018, was $0.25 on approximately 70 million and 70.7 million basic and diluted weighted average common shares outstanding respectively compared to a net loss per share of approximately $0.33 on 70 million weighted average common shares outstanding during the same period in 2017.

During the third quarter of 2018, we recorded a one-time gain on the extinguishment of the Series B Convertible Preferred Stock resulting from the exchange in September 2018 for new Series C Convertible Preferred Stock, which contributed $0.48 per share. This gain in preferred stock of approximately $38.3 million resulted in reported net income to shareholders of $21.9 million or $0.25 per basic and diluted share for the year ended December 31, 2018.

And finally, it is important to note that we generated cash from our operations in the fourth quarter of 2018. As of December 31, 2018, we had cash and cash equivalents of approximately $13 million and a slight increase in cash from $12.6 million at September 30, 2018.

I would now like to turn the call back over to Rick.

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

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Thank you, Phil. Phil, I have to say, it was nice not to have to read all the numbers this time. I appreciate that. As I mentioned before, I wanted to have a chance to share with you some of my thoughts on the catalyst that we believe will help with the continued growth of ILUVIEN in 2019 as well as some thoughts around my vision for potentially adding more revenue generators for us.

Essentially, we see 4 key growth drivers in 2019. The first is continued organic growth from our existing practitioner base, where we believe we can treat more of their patients, and from new physicians, who are willing to add ILUVIEN to their treatment regimen. We believe we can generate this growth, as we have continued to improve upon the position of ILUVIEN over the last 18 months, to help doctors better understand the unique opportunity ILUVIEN provides them to treat their patients.

ILUVIEN is the only non-acute therapy currently available to treat DME, which is typically both a chronic and persistent disease. The competitor products last anywhere from 1 to 3 months. And we believe they have inherent disadvantages in treating a persistent disease. Acute therapies, unless dosing regimens are appropriately customized for each patient and maintained consistently over time, allow for the recurrence of edema in DME patients.

ILUVIEN was designed to deliver this consistent dose of drug delivery every day for up to 3 years. It is through continuous microdosing that we can address the disease daily and control the recurrence of the swelling, the repeat swelling that leads to vision loss. Because of this, we can also significantly reduce the number of injections a patient needs to endure. Our messaging has been and will continue to emphasize these one-of-a-kind benefits of ILUVIEN. We do believe this messaging is effective. As I mentioned earlier, we saw an acceleration of growth in the U.S. in 2018 over 2017.

The second catalyst in 2019 should be the opportunity for our first material cycle of retreatments. As you know, ILUVIEN provides therapy for up to 36 months, which means that we do not benefit from recurring monthly scripts or even quarterly scripts as the competing acute therapies do. In 2016, we had not only a significant number of U.S. patients injected with ILUVIEN as their DME therapy, but the quality of patient choice was better as physicians became more comfortable with reimbursement following the receipt of a J-code in January 2016. We have looked at our top 20 account volumes for 2016. Those accounts treated approximately 1,000 patients in that year. If we can even achieve a 30% retreatment rate, you could see an additional 7% to 8% growth boost to our new patient volume.

A third potential driver is that we filed for approval for noninfectious posterior uveitis in the same 17 countries in Europe as we did for DME and expect approval on the first half of this year. Noninfectious posterior uveitis represents about 15% to 20% of the size of the DME market. It is currently treated by systemic steroids, which have significant side effects; by immunosuppressants; and by acute or short acting intravitreal steroids. These patients have episodes that can last months, be very unpredictable and frequently recur. The ability to provide consistent treatment over a long period of time is very appealing to these patients. If approved, we believe we will see additional revenue from ILUVIEN for uveitis in Europe in the second half of the year.

The final element to potentially drive revenue is our goal to continue expanding access to ILUVIEN to new markets while working with our distributor partners to ensure they have the support they need to successfully commercialize ILUVIEN. During 2018, we successfully opened new markets in Ireland and the United Arab Emirates. Leveraging our recent regulatory and reimbursement progress, we expect to expand the reach of ILUVIEN in 2019 in Spain, France and Lebanon and potentially other markets in the Middle East.

Beyond ILUVIEN, we see additional opportunities. We are somewhat unusual in having a commercial infrastructure for a growing retina product in both the U.S. and Europe. This is a leverageable asset. We intend to look for retina products with reasonable valuations that would be accretive and fit our current commercial model. We will be prudent in seeking these opportunities.

At Alimera, we bring a reenergized management team to a product that we believe provides a better way to treat DME and potentially posterior noninfectious uveitis. It is the only non-acute therapy available to treat retina disease and can help patients see better, longer and more consistently with fewer injections. I am confident that the shared vision our new management team has for Alimera will lead to growth and, of course, returns for our shareholders and that we have the abilities necessary to execute on that vision. We worked side-by-side for years and we are ready to turn to the next chapter of this organization.

Now I'd like to begin our Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from the line of Andrew D'Silva with B. Riley.

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

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A couple of quick bookkeeping ones first. If you could please just let me know what cash flow from operations and CapEx was for the year. And then just for modeling purposes, what was the exact GAAP units of ILUVIEN sold domestically during the fourth quarter? And then -- and while you're pulling that, can you just let me know if you're seeing continued benefit in Europe right now through the OZURDEX recall? And do you think that you're in a position to buck the traditional first quarter dip in a similar manner to what you did in the first quarter of 2018?

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J. Philip Jones, Alimera Sciences, Inc. - CFO [3]

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Andy, thanks for your questions. Looking at the beginning of the -- to give you the information you want, then I'll turn it over to Rick for the first part or the second part of your question. We sold 1,092 units for GAAP revenue in Q4. And for the year, our cash burn was about $11.6 million from an operational standpoint and included $175,000 from CapEx. Overall, that includes about $4.7 million in interest. So almost half of the -- half of that burn is related to interest payments.

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Richard S. Eiswirth, Alimera Sciences, Inc. - CEO, President & Director [4]

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Sure. With respect to OZURDEX, obviously it had a positive impact on us in the quarter. We think the overall impact was probably about $2.5 million in revenue in Germany and the U.K. But if you factor them in the results, we were still well ahead of consensus estimates both for the quarter and the year. We clearly treated a bolus of those patients. But the sales have continued to be strong, both in the U.K. and Germany, where we saw most of that effect so far in the first quarter. We think that obviously it's a positive development for Alimera in that we were able to treat that bolus of patients but more importantly, hopefully got more physicians comfortable using the product and accustomed to the side effect profile and will provide some lasting impact to us. As far as how much an impact to the seasonality, it's probably a little bit too early to tell that. We certainly will have seasonality in the U.S. business because of the way insurance renewals work and things like that as well as getting on hospital formularies in some of the other countries. So there's still going to be a seasonality impact, but we do hope to retain some of the OZURDEX business going forward.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [5]

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Okay, great. And I noticed you also increased the actual inventory on your balance sheet. It's now at an all-time high this quarter. Can you discuss what's that's tied to? Is it related to having to meet new distributor demand for stocking purposes? Or is it tied to domestic growth? Or anything that you can provide there would be useful.

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Richard S. Eiswirth, Alimera Sciences, Inc. - CEO, President & Director [6]

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Sure, Andy. It's actually a combination of two things. One, we had built up some inventory over the fourth quarter of the year to allow for initial shipments in some of the new countries, the Spanish partner and the French partner taking product. However, additionally, Brexit is still sitting out there as a question. Whether or not that occurs and in what form it occurs toward the end of March is an issue. And so we built up stock to deal with any challenges associated with any delays in rereleasing product as a result of the Brexit changes.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [7]

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Okay, that makes sense. And you highlighted the retreatment as 2016 patients start coming into -- to their second-time treatment for 2019. Are you seeing any anecdotal evidence of that at this point from the top 20% of physicians that you highlighted? Are they discussing what the retreatment is looking like and that they are actually going through that process?

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Richard S. Eiswirth, Alimera Sciences, Inc. - CEO, President & Director [8]

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Yes, I would say, I mean, your choice of word there is right, though. It's all anecdotal at this point because from a HIPAA standpoint, we can't see what's happening with each individual patient. However, I have spent some time with one physician who treated about 75 patients in 2016. And he said his intention was to retreat all those patients. Our VP of Sales was in the office with another physician a couple of weeks ago. And they were running a report out of their EMR system to identify patients that have been treated 3 years ago to look at them for scheduling retreatments. So we know it's occurring out there. But how specific it is and how much of an impact that's having on revenue already, it's hard to identify.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [9]

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Okay, fair enough. And last question for me, just related to Canada. My opinion, it seems like a very surprise approval. Assuming, from my standpoint, it should be at least a year before you get through the payer-related processing. But maybe you could let me know how we should think about Canada from a modeling standpoint.

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Richard S. Eiswirth, Alimera Sciences, Inc. - CEO, President & Director [10]

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Yes, I mean, the reality of Canada, the reimbursement process is pretty lengthy there, anywhere from 18 to 24 months. So you're probably talking about well into late 2020 or early 2021 before you would see any material revenue come out from Canada. And frankly at that point, typically Canada is about 8% the size of the opportunity in the U.S. With them in a new launch and us being quite a few years in and the revenue base right now, I wouldn't expect it to have a material impact on our revenue at that point in time.

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Operator [11]

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The next question is from the line of François Brisebois with Laidlaw.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [12]

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Just a couple here. So how much would you say -- you're still talking about education. How much do docs still need education? And are they up to speed, especially in the smaller centers, on the difference between DME and uveitis here, ex U.S., just in terms of the treatment paradigm?

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

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Well, I certainly don't think we need to do much to educate the doctors on the differences between DME and uveitis. I do think that the doctors may be more quick to adopt ILUVIEN in uveitis in Europe because there's no headwind from the anti-VEGFs. So they're not in a habit of injecting anti-VEGF so frequently with those patients. I mean, steroids are much more of a natural choice.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [14]

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And would you feel comfortable saying that steroids would be first-line with ILUVIEN? Or is this more of a let's try a generic one to make sure it kind of works because IOP doesn't seem to be a problem? Or is this just more of a first-line therapy?

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

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Well, I mean, it's a great question. It certainly depends on what the label is. And we'll have to see again what we ultimately get if we get something from the European health authorities. I would say that probably because ILUVIEN is a 3-year steroid, you're still going to have physicians inject some sort of shorter-term steroid to make sure that the patient indeed does have recurrent disease. But the reality is most of these uveitis patients do have recurrent disease, so they should be candidates for ILUVIEN.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [16]

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Okay, great. And then on the ex U.S. OZURDEX, I know you just touched on it. But could you give a little more color on the impact going forward? Is that $2.5 million all done in the fourth quarter and we shouldn't see any more of this from OZURDEX being taken off the market? Or just to frame that to make sure that's kind of not taken forward here.

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

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Yes. So the impact was about $2.5 million in the fourth quarter. What it is, going forward, as I said to Andy, it's a little bit challenging to estimate. We know that Allergan has been prioritizing the U.S. market. So we haven't seen an impact to the OZURDEX recall really in the U.S. market. And they are saying that they're going to have product back in full stock toward the end of the first quarter or some time in the second quarter. It appears that they are rationing stock in the European countries. And so it may be that ILUVIEN is being injected where OZURDEX is not available. But we also believe that we've improved some of the stickiness with some of those doctors because they've gotten experience, now they're familiar with ILUVIEN and they may be using it. So what exactly the impact will be on the first quarter? As I said, it's a little bit too early to tell.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [18]

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Okay. No, that's interesting. And then lastly, you touched on this in terms of M&A. Can you mention -- obviously, you guys have this ex U.S. specialty on the commercial front for back of the eye. Can you just remind us again of the criteria you're looking at when you do look at potential acquisition targets?

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

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Yes, I think it's simply something that would allow us to leverage our commercial team. We have a commercial presence, sales, reimbursement, medical support, et cetera, out there in the retina space. As you know, it's a fairly contained space. And I think looking at a product that would leverage that team is the priority for the next, I would say, 6 to 18 months. It could be pharmaceuticals. Obviously, that would be the much logical choice. I think there's some opportunities potentially out there in diagnostics or genetic testing or even on the device side, which would make sense because most of the retina specialists are doing surgery as well.

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Operator [20]

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The next question is from the line of Jim Molloy with 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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On the EU, the $2.5 million bump in the fourth quarter, you take that out, a $3.7 million in the quarter, that's a pretty good number -- pretty good jump from where you guys had been. Is that sort of the range, the run rate going forward we should be looking at for the EU in '19 and then we make some assumptions on how much that $2.5 million might be sort of sticky post the OZURDEX getting back in the market?

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

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Yes, I mean, we certainly feel good about the number. I mean, there was growth both in the U.S. and the international markets and the distributors come onboard. As we've stated before, the fourth quarter is typically a seasonally high month and the first quarter is a typically seasonally low month. So I think it's certainly a great baseline to work off of, but we still have to consider the seasonality moving forward.

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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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Okay, still anticipating the uveitis coming in here in the first half and adding, like you mentioned, 20% size of a DME, $1.3 million, $1.4 million to the EU sales. Is that something that we should expect to start flowing through second half of '19?

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

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Yes, well, it'd be a 15%-or-so impact in the second half of the year, correct.

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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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Excellent. And then could you talk about the size of the incremental sales from any potential acquisitions you might bring in to add to the bag? And as you're looking out there, are there multiple opportunities that are looking pretty good? Is pricing really becoming an issue, trying to find something you can sort of afford? Or is it on the timing of these potential acquisitions?

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

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Yes, Jim, I think it's probably too early to comment on anything specific. I mean, I think we have a goal to try to leverage that commercial team, and we're going to be out there aggressively looking for things. I think the reason the focus there is regardless of the size of any potential product we could add to the bag, it should be very, very accretive since we're at an adjusted EBITDA breakeven in the fourth quarter. And we hope we can maintain that going forward.

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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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All right, great. Final question, any thoughts on guidance for 2019?

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

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We typically have not provided specific guidance. I think I would say the same thing as we've said in the past that we would guide everybody if we're going to something in the high-teens to 20%. And we certainly hope we can outperform that based on some of the catalysts I explained here earlier.

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Operator [29]

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(Operator Instructions) Our next question is from the line of Yi Chen with 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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My first question is can you comment on the effectiveness of your marketing strategy in the U.S. in the second half 2018 and whether there will be any change in the strategy in 2019?

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

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Well, we certainly believe that it has been effective, as I said earlier in my comments. We think focusing on the uniqueness of ILUVIEN and that it treats the disease consistently every day, provides more stability to the eye, reduces the recurrence of the disease, those are things that are most important rather than making a comparison with respect to efficacy. And because of the progress we've been seeing, we expect to continue to do the same thing. There certainly will be additional datasets we hope to develop by looking at chart reviews with physicians and things like that to continue to support that story. But I think it is the same story but continue to get more bullish on it.

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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 is there's -- there was improvement in gross margin in second half 2018 compared to first half. Do you expect the gross margin -- any gross margin improvement further in 2019?

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J. Philip Jones, Alimera Sciences, Inc. - CFO [33]

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We probably do not see an improvement in gross margin for 2019. It should be fairly consistent. However, as we bring on more of our distributor partners and there's an increase in revenue from those partners, we probably will see a slight decrease overall in the gross margins due to that royalty that we get from those partners.

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Operator [34]

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It appears there are no further questions at this time. So I'd like to pass the floor back over to management for any additional concluding comments.

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Richard S. Eiswirth, Alimera Sciences, Inc. - CEO, President & Director [35]

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Great, thank you. Thank you all for listening and engaging with us today. We are excited about the future and thank all of our employees for their hard work and vision for success. I look forward to updating you on our progress throughout the year.

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Operator [36]

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Ladies and gentlemen, this does conclude today's teleconference. Again, we thank you for your participation. You may now disconnect your lines.