U.S. Markets closed

Edited Transcript of ALIM earnings conference call or presentation 2-Mar-17 3:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Alimera Sciences Inc Earnings Call

ALPHARETTA Mar 2, 2017 (Thomson StreetEvents) -- Edited Transcript of Alimera Sciences Inc earnings conference call or presentation Thursday, March 2, 2017 at 3:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Jacob Goldberger

Alimera Sciences, Inc. - IR

* Dan Meyers

Alimera Sciences, Inc. - CEO

* Rick Eisworth

Alimera Sciences, Inc. - President, CFO

================================================================================

Conference Call Participants

================================================================================

* Boris Peaker

Cowen and Company - Analyst

* Francois Brisebois

Laidlaw & Company - Analyst

* Laura Engel

Stonegate Capital - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Greetings and welcome to the Alimera Sciences fourth quarter 2016 results call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jacob Goldberger. Thank you, Mr. Goldberger, you may begin.

--------------------------------------------------------------------------------

Jacob Goldberger, Alimera Sciences, Inc. - IR [2]

--------------------------------------------------------------------------------

Thank you. And thank you all for joining us today for the Alimera Sciences fourth quarter and full year ended 2016 financial results conference call. With me on the call today are Dan Myers, Chief Executive Officer and Rick Eisworth, President and Chief Financial Officer for Alimera.

Yesterday, the Company issued a press release announcing fourth quarter and year end 2016 results. Today's call is being web cast and recording will be posted to the Company's website. Following remarks by management, we will open up the call to your questions.

During the course of this call, management may make certain forward-looking statements regarding future events and the Company's future expected performance. These forward-looking statements reflect Alimera's current perspective on existing trends and information and can be identified by such words such as expect, plan, will, may, anticipate, believe, should, intend and other words of similar meaning. Any such forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties.

These risks are described in the risk factors and the management discussion and analysis sections of Alimera's annual report on Form 10-K for the fiscal year ended December 31, 2015 and quarterly report on form 10Q for the quarter ended September 30, 2016 which are on file with the Securities and Exchange Commission and available on the SEC's website.

Additional factors may also be set forth in those sections of Alimera's annual report on form 10K for the year ended December 31, 2016 to be filed with the SEC in the first quarter of 2017. You will see in Alimera's press release the Company is offering non-GAAP financial information. Alimera does so because it believes that such non-GAAP financial information can enhance an overall understanding of the Company's financial performance when considered together with GAAP figures.

Non-GAAP adjusted net loss excludes certain non-cash items. These non-GAAP metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for GAAP net loss and may not be comparable to similarly titled measures reported by other companies. Non-GAAP financial measures should only be read in conjunction with financial information reported under GAAP when understanding Alimera's operating performance.

For a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure, see the table located in Alimera's earnings release from yesterday. In addition, any unaudited or pro forma financial information is preliminary and does not purport to project financial positions or operating results of the Company. Actual results may differ materially.

For the benefit of those of you who may be listening to a replay of this call, this call was held and recorded Thursday, March 2nd at approximately 10 AM Eastern Time. Since then Alimera's may have made additional announcements related to the topics discussed herein. Please reference Alimera's most recent press releases and current filings with the SEC.

The forward-looking statements contained in this presentation are expressly qualified by the cautionary statement contained or referred to in this presentation. Alimera cautions investors not to rely too heavily on the forward-looking statements it makes or that are made on its behalf. These forward-looking statements speak only as of the date of this presentation. The Company undertakes no obligation and specifically declines any obligation to publicly update or revise any such forward-looking statements whether because of new information, future events or otherwise except as required by applicable law.

Now, I would like to turn the call over to Dan Myers, CEO of Alimera.

--------------------------------------------------------------------------------

Dan Meyers, Alimera Sciences, Inc. - CEO [3]

--------------------------------------------------------------------------------

Thank you, Jacob. Good morning, everyone and thank you for joining our call. We're pleased to speak with you today about the strong results we had in 2016 which we believe positions us well for the start of 2017. For both the full year and the fourth quarter of 2016, we are reporting record revenues in the United States and in Europe.

We strengthened our balance sheet with equity raise and the refinancing of our debt facility with Hercules and we also advanced our partnerships with distributors outside the United States to further the availability of ILUVIEN in 2017. In the fourth quarter of 2016, we recorded revenues of $10.7 million, a new record on a quarterly basis, representing growth of 84% over the fourth quarter of 2015.

For the full year 2016, we recognize record revenue of $34.3 million which represents growth of 53% over the $22.4 million recorded for the full year of 2015. This growth and revenue is evidence of continued adoption by physicians of ILUVIEN as they gain better understanding of its fit in their clinical practice. We continue to believe that ILUVIEN is the best product available to treat diabetic macular edema because it's the only drug therapy that enables the physician to treat the disease consistently every day.

This consistency for the physician and the patient is not available with the use of bolus injections of anti-VEGF therapy or shorter duration corticosteroids. The continuous release of ILUVIEN not only reduces the treatment burden but also provides more stability for the patient. Our real world data, as seen in clinics since commercial launch, supports the benefit of continuous every day delivery and the reduction in treatment burden.

As shown in the iris and Medisoft studies that have been presented in Europe, ILUVIEN is working in clinical practice as well, if not better and safer than it did in the pivotal FAME studies. This is not typically seen in our category. During 2016, this real world data in Europe contributed to approximately 100% revenue growth in both Germany and Portugal.

Now in 2017, we plan to use this real world data to support increased sales of ILUVIEN in the United States market. We have continued collecting data and are pleased to let you know that at the upcoming Association for Research and Vision and Ophthalmology, or the ARVO meeting, in Baltimore in May, we have had 27 abstracts accepted for presentation. Nine of those from the US, representing the largest presence of ILUVIEN at any global meeting since its launch. We believe this clinical data and a relentless focus will allow us to continue to build on our momentum from the end of 2016.

Looking at our business by geographic segment in the fourth quarter of 2016, we see that in the United States we recorded revenues of $8.3 million which represents an increase of 113% over the $3.9 million reported in the fourth quarter of 2015. We were very pleased with the strong conclusion to the year and the growth over the prior periods.

Our international segment, we recognize record quarterly revenues of $2.4 million in the fourth quarter of 2016 which is an increase of 26% over the $1.9 million reported in the fourth quarter of 2015.

Experienced brief familiarity and we believe that the positive experience that physicians in Germany, the UK and Portugal have had with ILUVIEN is fueling greater usage and we continue to expect to see growth in our existing markets in Europe in 2017 and we plan to supplement that growth with launches in new markets.

First, we expect to launch ILUVIEN directly in both Ireland and Austria in 2017 where we will leverage our existing sales forces in the United Kingdom and Germany respectively. Secondly, we believe our distributor will provide us additional sales in 2017.

Specifically in the Middle East, we recognize revenue in the second half of 2016 from a small number of unit sales to the distributor on a name patient basis but we fully expect that to grow in 2017 as the distributor expands its reach. Additionally, we announced recently the receipt of a price and a positive change in reimbursement status by our Italian partner SIFI who we expect will launch ILUVIEN in Italy in the second quarter of this year.

With that, I would now like turn the call over to Rick Eisworth who will elaborate on some of our plans for 2017 and take us through our financial results for fourth quarter and full year ended 2016. Rick?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [4]

--------------------------------------------------------------------------------

Thanks, Dan. Before we get into the numbers, I want to discuss certain aspects of our business that are important in assessing our growth.

Two years into the launch in the United States, it is clear that we will experience seasonality in our business and therefore we believe quarter-to-quarter, year-over-year comparisons are the most relevant in assessing the growth and success of our business. We do not benefit from the recurring scripts that a daily or shorter duration therapy might and as a result the sales will always be impacted by holidays, vacations and other times that physicians are out of the office.

Further, because we have a high-priced product that is used once every three years, insurance program renewals which occur at the beginning of the year will impact the timing of injections early in the year. In the US our business can also be effected by our distributor stocking practices. To remind you, our only two customers in the United States are special distributors that sell ILUVIEN downstream to physicians and specialty pharmacies.

Our sales to these specialty distributors will not always correlate with end user demand sales within a quarter because of their stocking practices, order timing and the relative size of our current business. Based on the timing of their orders, we will see fluctuations in our revenues quarter-to-quarter. For example, in the second quarter of 2016 our US distributors acquired a net inventory increase.

In the third quarter of 2016, they decreased their inventory and in the fourth quarter of 2016, they increased their inventory again. It is clear in our quarterly numbers for 2016 that these swings in distributor inventory levels impacted our reported revenue and any sequential analysis one might do. We expect this to continue which makes the sequential analysis of our business challenging. However, a quarter-over-quarter comparison of 2016 to 2015 indicates our business grew in each quarter versus the prior year which we believe speaks to the growth and adoption of ILUVIEN. We expect this trend to continue in 2017 as compared to the prior quarters in 2016.

As Dan mentioned, we are reporting $34.3 million in global revenue in 2016 which represents growth of 53% over the $22.4 million reported in the prior year. The $34.3 million in 2016 is comprised of approximately $25.8 million in the United States and approximately $8.6 million in our international segment.

On a quarterly perspective, consolidated revenue increased by approximately $4.9 million, or 84% to approximately $10.7 million for the three months ended December 31, 2016, compared to net revenue of approximately $5.8 million for the three months ended December 31, 2015. This increase was driven by increased sales of ILUVIEN in the United States, Germany and Portugal.

US net revenue increased by approximately $10.6 million, or 70% to approximately $25.8 million for the year ended December 31, 2016, compared to US net revenue of approximately $15.2 million for the year ended December 31, 2015. Because of broader acceptance of ILUVIEN in the marketplace and because ILUVIEN was available for sale for the full year ended December 31, 2016. The US growth of 70% year-over-year was driven by increased familiarity of ILUVIEN and the availability of a permanent [JAYCODE] in 2016.

US net revenue increased by approximately $4.4 million, or 113%, to approximately $8.3 million in the fourth quarter of 2016 compared to US net revenue of approximately $3.9 million in the fourth quarter of 2015. This increase was driven which increased end user demand for ILUVIEN in the US and the timing of certain purchases by the Company's two US distributors, as I mentioned earlier.

International net revenue increased by approximately $1.3 million, or 18%, to approximately $8.6 million for the year ended December 31, 2016, compared to approximately $7.3 million for the year ended December 31, 2015. The increase was primarily attributable to higher sales volumes in Portugal and Germany, offset by decreases in sales volume in the United Kingdom.

Revenue was further reduced by the decrease in the value of the British pound sterling and the Euro. In our international segment, our growth of 18% year-over-year was driven by unit sales more than doubling in both Germany and Portugal in comparison to the prior year. This growth was dampened by a downturn early in the year in the UK because of the availability and reimbursement of Ozurdex and [ILEA] as potential alternatives. We believe we absorbed the impact of this and expect growth in the UK in 2017.

International net revenue increased by approximately $500,000, or 26%, to approximately $2.4 million for the three months ended December 31, 2016 compared to approximately $1.9 million for the three months ended December 31, 2015. The increase was primarily attributable to higher sales in Germany and Portugal compared to the fourth quarter of 2015, offset by decreases in the value of the British pound sterling and the Euro.

Consolidated gross profit increased by $4.4 million, or 81%, to $9.8 million for the three months ended December 31, 2016, compared with $5.4 million for the three months ended December 31, 2015. Gross margin was 92% and 93% for the three months ended December 31, 2016 and 2015, respectively.

Consolidated gross profit increased by $11.3 million, or 55%, to $32 million for the year ended December 31, 2016, compared with $20.7 million for the year ended December 31, 2015. Gross margin was 93% and 92% for the years ended December 31, 2016 and 2015 respectively.

In 2017, we are focused on establishing Alimera's financial independence and driving toward operating profitability. We are focused on containing our spending to match our revenue growth with a goal of delivering revenue in excess of our cash operating expenses by the mid point of this year. Because our real world safety data has proven to be consistent with or better than the same study, we made some changes to two of our large post market clinical trials which will have a positive impact on our spending in 2017 and beyond.

In Europe, our registry study was originally designed to include 800 patients studied over five years. Because of positive safety signals, we saw approval from the regulatory authorities to decrease the size of that study to 550 patients. We have been given preliminary approval and expect to receive final approval in the near future but in the meantime we have capped our enrollment.

In the US, we started our PALADIN study in 2015 to assess the effectiveness of a prior course of corticosteroids in screening out potential high IOP responders to ILUVIEN. Since the start we have learned that many of the patients treated in the United Kingdom have received a corticosteroid in connection with a previous cataract surgery. With this information we assessed the UK patients in our European Registry Study and our Medisoft data analysis to determine if an IOP response or the lack of a response were indicative of any IOP response a patient may or may not have to ILUVIEN and confirm a connection.

This supported our belief that the safety profile in these data sets appears to be better than what we saw in the FAME studies and that a prior course is indeed an effective way of screening out potential high side effect responders to ILUVIEN. As a result, we reassessed the power and the size of the PALADIN study and determined that we would cease enrollment at 157 patients.

In addition to cost savings, capping enrollment provides another operational benefit in 2017. We get an early assessment of the data and then can provide this information to physicians in the US who continue to evaluate the proper course and type of corticosteroid to screen their patients. We expect this data, the first significant analysis of US use in a clinical setting to be available later this year. As we have seen in Europe, we expect this data will benefit our sales efforts in the US.

Also in the fourth quarter, we made a decision to shut down our operations in France due to the unwillingness of the French regulatory authorities to agree to a reasonable price for ILUVIEN. This shutdown will reduce our expenses in 2017. Further in our international segment in 2017. Further, in 2017 we will evaluate a distributor option to proceed to commercial availability of ILUVIEN in France.

Moving to a discussion of our reported expenses. Consolidated research development and medical affairs expenses for the fourth quarter of 2016 decreased by approximately $700,000, or 19%, to approximately $2.9 million, compared to $3.6 million reported during the fourth quarter of 2015. Consolidated research development and medical affairs expenses for the fiscal year 2016 decreased by approximately $2.4 million, or 16%, to $12.4 million compared to $14.8 million reported during fiscal year 2015.

The reduction was primarily attributable to decreases in cost paid to third parties related to potential product enhancements occurred during 2015 and a reduction in medical affairs and scientific communication costs associated with the US launch in 2015. These costs were offset by increases associated with maintaining the registration of ILUVIEN in the United States and increased pharmco vigilance costs as compared to the fiscal year 2015.

Consolidated, general and administrative expenses for the fourth quarter of 2016 increased by approximately $500,000, or 14%, to $4.2 million, compared to $3.7 million for the fourth quarter of 2015. This increase was attributable to one-time costs related to seeking refinancing and cost associated with our decision to close our operations in France.

Consolidated general and administrative expenses for fiscal year 2016 increased $1.1 million, or 8%, to approximately $15.3 million, compared to $14.2 million reported during fiscal year 2015. This increase was related to financing costs and costs incurred with our third party manufacturers of ILUVIEN. Consolidated sales and marketing expenses increased $300,000, or 4%, to $7.4 million for the three months ended December 31, 2016, compared to $7.1 million reported for the three months ended December 31, 2015.

Consolidated sales and marketing expenses increased $1.3 million, or 5%, to $29.4 million for the year ended December 31, 2016, compared to $28.1 million reported for the year December 31, 2015. The increase was primarily attributable to increases in commissions paid to our sales force associated with increased sales.

Alimera's GAAP net loss for the three months ended December 31, 2016 was approximately $5.9 million compared to approximately $10.7 million for the three months ended December 31, 2015. GAAP basic and diluted net loss per share for the fourth quarter of 2016 was $0.09 per share on $64.8 million weighted average shares outstanding, compared with $0.24 per share on $44.6 million weighted average sales outstanding during the fourth quarter of 2015. Alimera's GAAP net loss for the year ended December 31, 2016 was approximately $33.2 million compared to approximately $30.6 million for the three months ended December 31, 2015.

GAAP basic and diluted net loss per share for 2016 was $0.63 per share on 52.8 million weighted average shares outstanding, compared with $0.69 per share or 44.9 million weighted average shares outstanding for 2015. The GAAP net loss and GAAP basic and diluted net loss per share were affected by certain non-cash items including changes in the fair value of a derivative warrant liability and the loss on early extinguishment of debt.

Non-GAAP adjusted net loss for the three months ended December 31, 2016 was $6.8 million compared to a non-GAAP adjusted net loss for the three months ended December 31, 2015 of $10.9 million. Non-GAAP adjusted basic and diluted loss per share for the three months ended December 31, 2016 and 2015 were $0.10 per share and $0.24 per share, respectively. Net loss for basic and diluted weighted average shares outstanding per share and non-GAAP adjusted net loss per share were based on 64.8 million weighted average shares outstanding for the three months ended December 31, 2016, and 44.6 million weighted average shares outstanding for the three months ended December 31, 2015.

Non-GAAP adjusted net loss for the year ended December 31, 2016 was $33.2 million compared to a non-GAAP adjusted net loss for the year ended December 31, 2015 of $43.9 million. Non-GAAP adjusted basic and diluted loss per share for the years ended December 31, 2016 and 2015 were $0.63 per share and $0.99 per share respectively.

Net loss for basic and diluted weighted average shares outstanding per share and non-GAAP adjusted net loss per share was based on 52.8 million weighted average shares outstanding for the year ended December 31, 2016 and 44.5 million weighted average shares outstanding during the year ended December 31, 2015.

Turning now to our balance sheet. As of December 31, 2016, we had cash and cash equivalents of $31 million. In the third quarter we closed a public offering where we sold 18.9 million shares of common stock resulting in gross proceed of $26.5 million. In the fourth quarter, we completed an amendment to our term loan with Hercules which we anticipate gives us efficient funds to allow us to become cash positive in late 2017. Further, the amended facility provides us for up to $10 million in additional funds to be drawn down in the future for expansion.

With that, I would like to turn the call back over to Dan for closing comments.

--------------------------------------------------------------------------------

Dan Meyers, Alimera Sciences, Inc. - CEO [5]

--------------------------------------------------------------------------------

Thank you, Rick.

As said earlier, we're very pleased with the results of 2016 posting year-over-year revenue gains of 53%. As we look forward into 2017 we anticipate seeing quarter over quarter growth impacted by similar seasonality as seen in 2016. We continue to reach more doctors in the US and anticipate the availability of real world data at upcoming meetings we'll provide further evidence as to the benefits of using ILUVIEN with DME patients.

Our international segment continues to strengthen in our existing markets. In addition to the organic growth of our existing markets, we anticipate adding incremental sales in Ireland, Austria as well as from our distributors in Italy and the Middle East.

Thank you all for joining us today. I will now turn the call over to the moderator to begin our Q&A session.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Thank you. (Operator Instructions). Our first question comes from the line of Boris Peaker, with Cowen. Please proceed with your question.

--------------------------------------------------------------------------------

Boris Peaker, Cowen and Company - Analyst [2]

--------------------------------------------------------------------------------

Good morning and congratulations on excellent top line growth, certainly. I would like to probe specifically into that top line growth. Can you give us a sense of specifically what new drivers came into play in 2016 versus 2015 outside of the JAYCODE, just from the clinical perspective? And also, do you have any sense of how many of your patients may be coming from prior Ozurdex treatments?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [3]

--------------------------------------------------------------------------------

Yes. I think Boris, certainly as you mentioned, the JAYCODE did have an impact. I think it simply increased familiarity and getting broader reach with our sales team. We certainly have significantly increased our user base. Our user base probably grew by, you know, 30% to 35% over the course of 2016 and we certainly got deeper in the accounts that had been using ILUVIEN more. Because as I said, I think the familiarity more use, got them more and more comfortable with the side effects. And that definitely is what occurred in the US.

In Europe, as Dan pointed out, is the availability of that real world data and physicians got to see something new about how it's working in clinical practice today because as we have and said, you know, when we launched our drug both in Europe and the US, our data was quite old because of the time it took us to get through the FDA. With respect to your question on Ozurdex, you know, it's hard to put a percentage on that. I would say that the majority of the patients are probably receiving Ozurdex first. However, there is variety out there in what physicians are doing.

Some physicians use IVTA because they're not comfortable using Ozurdex and others will do a topical drop, topical Durezol or a topical Pred Forte, or something like that for a couple of weeks to do the test. The good thing about closing the PALADIN study early, as we've done, is we expect to have data later this year from that and that will give us a good feel for what types of tests they're using and if there's any difference in the effectiveness of those tests. And, we also are compiling what we're going to call the user database but it is a database of probably 200 to 250 patients from some of the larger practices that have been using ILUVIEN. I think it's four practices. And that should be available later this year too, which should give us more inside into that question.

--------------------------------------------------------------------------------

Boris Peaker, Cowen and Company - Analyst [4]

--------------------------------------------------------------------------------

Great. And on the Paladin study if we stick to that timeline, when do you anticipate some kind of publication or presentation of it to occur so you can actually market the results of it to the physicians?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [5]

--------------------------------------------------------------------------------

Yes. We think there will be some discussion at the ARVO meeting and then fuller analysis will come out over the course of the year. We should have a, I'm sorry, I'm double checking something right now, but I think we'll have a six-month extract to look at patients through six months at ARVO which occurs in early May, and then at the ASRS in August or September we will have a 12-month look at that data.

--------------------------------------------------------------------------------

Boris Peaker, Cowen and Company - Analyst [6]

--------------------------------------------------------------------------------

Got you. And my last question is maybe on European operation. Certainly would be nice to see an update of removing a country if you can't make it profitable like France, but I'm just curious in general on a stand-alone basis, what is the cash burn of the European operations and when is the path or timeline for at least the European operations an as whole to become cash flow positive?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [7]

--------------------------------------------------------------------------------

We're on the cusp of breaking even in Europe right now, and I expect that you will definitely see positive operating income from the European operations in the second quarter this year.

--------------------------------------------------------------------------------

Boris Peaker, Cowen and Company - Analyst [8]

--------------------------------------------------------------------------------

Great. Well congratulations on the progress and thank you for taking my questions.

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [9]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Operator [10]

--------------------------------------------------------------------------------

Our next question comes from the line of Francois Brisebois, with Laidlaw. Please, proceed with your question.

--------------------------------------------------------------------------------

Francois Brisebois, Laidlaw & Company - Analyst [11]

--------------------------------------------------------------------------------

Hi. Yes. This is Frank on for Jim. Thanks for taking the questions. Can you give us a little more color on what explains the UK rebound in the fourth quarter and how much of this is actually offset by the devaluation in the British pound?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [12]

--------------------------------------------------------------------------------

So in the UK they announced reimbursement for Eylea and Ozurdex in late 2015 and physicians started trying to play around with where those fit in their algorithm. Some physicians switching from Lucentis to Eylea before they would make a switch to a steroid. Other physicians using Ozurdex ahead of ILUVIEN. And so that certainly slowed down sales.

I think, similar to my answer to Boris, I think familiarity breeds growth with our product. As physicians get more and more comfortable with the side effect profile. And I think as they have experimented and switched to an alternative Anti-VEGF, or a different shorter term corticosteroid, they found that these patients that need a steroid, providing that consistent long-term dose that ILUVIEN provides is the path to go. We've certainly seen a change over time as I think that education has sort of grown on those alternative products in the UK.

--------------------------------------------------------------------------------

Francois Brisebois, Laidlaw & Company - Analyst [13]

--------------------------------------------------------------------------------

Great. And then how much, great top line growth here in the US, how much of the US business, can you break down if it's repeat orders or new sales growth?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [14]

--------------------------------------------------------------------------------

Well, it's a combination of both. As I said, we grew our user base over the course of 2016 by about 30% to 35%. And so we definitely increased the number of accounts that are ordering and using the product over the course of the year. But we did get deeper into all of those accounts as well.

--------------------------------------------------------------------------------

Francois Brisebois, Laidlaw & Company - Analyst [15]

--------------------------------------------------------------------------------

Okay, great. And then for 2017, in terms of top line or OpEx, EPS positive, what are the expectations there?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [16]

--------------------------------------------------------------------------------

We're not giving specific guidance for the full year. But we do expect as Dan said, we expect to report quarter over quarter growth throughout 2017 over the prior year.

--------------------------------------------------------------------------------

Francois Brisebois, Laidlaw & Company - Analyst [17]

--------------------------------------------------------------------------------

Okay, great. And more in terms of the sales reps a little bit. How many of them are currently at break even or profitable right now? And, any expectations on adding additional reps to drive growth? If so, like, how many?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [18]

--------------------------------------------------------------------------------

So on a stand-alone basis, almost all of our reps would be profitable right now because of the high price of ILUVIEN. You know, you don't have to sell that many units to cover your own costs. So we don't really have any territories that are "losing" money right now. At this point in time, we have what, 27 of our 31 territories are targeted to remain filled for the first half of the year and as we pick up volume and get to profitability, we'll probably refill the other four. Some of the four territories that are left open at this point in time simply weren't producing in line with what your question was and so we decided to keep those vacant and cover them with some existing resources until they start producing some sales.

--------------------------------------------------------------------------------

Francois Brisebois, Laidlaw & Company - Analyst [19]

--------------------------------------------------------------------------------

Okay, great. And, there are very few independent ophthalmic companies left in this space. Have you guys been approached by any strategic acquirer's or do you anticipate this being a realistic possibility?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [20]

--------------------------------------------------------------------------------

We obviously can't comment on anything specific like that. We think ILUVIEN is obviously a very valuable asset. We're building this Company as if we're going to have to run it forever but we certainly think that it would be a strategic asset for somebody else as well.

--------------------------------------------------------------------------------

Francois Brisebois, Laidlaw & Company - Analyst [21]

--------------------------------------------------------------------------------

Okay. Great. And then this is one right from Jim, this is more for Dan. Georgia Tech here isn't ranked in any pre season top 25 polls so do you think Paul Johnson should be on the hot seat here?

--------------------------------------------------------------------------------

Dan Meyers, Alimera Sciences, Inc. - CEO [22]

--------------------------------------------------------------------------------

(Laughter).

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [23]

--------------------------------------------------------------------------------

That's the most interesting question I've ever gotten there, Frank. I'm a big Paul Johnson fan. I think we're always underrated. I like being the underdog. We will be fine next year.

--------------------------------------------------------------------------------

Francois Brisebois, Laidlaw & Company - Analyst [24]

--------------------------------------------------------------------------------

All right, thank you. That's it.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

(Operator Instructions). Our next question comes from the line of Laura Engel, from Stonegate Capital Partners. Please, proceed with your question.

--------------------------------------------------------------------------------

Laura Engel, Stonegate Capital - Analyst [26]

--------------------------------------------------------------------------------

Good morning and congratulations on the exceptional quarter. I wanted to see just one specific. It looked like in Q4 there was a bump in your cost to goods pSivida sold as a percentage of revenues. What's contributing to that for this last quarter 2016?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [27]

--------------------------------------------------------------------------------

That would be we actually did have to make some payments under the profit sharing plan to pSivida in the fourth quarter. And the reason we were positive cash flow in the fourth quarter with respect to that calculation is because back in August, you may recall, we made a change to our terms with our distributors and shortened the terms by 30 days. And so in December we picked up an extra month of cash collections which sort of threw us into positive from a cash calculation and we had to make some payments to pSivida.

--------------------------------------------------------------------------------

Laura Engel, Stonegate Capital - Analyst [28]

--------------------------------------------------------------------------------

Okay. And then, any thoughts as far as pricing your two years into the, or I guess post launch, what's the feedback you're getting, what are your thoughts, how you've progressed in the past two years as far as acceptance and kind of the change the physicians have to process?

What are you hearing and what are your thoughts looking forward on that?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [29]

--------------------------------------------------------------------------------

I didn't hear the beginning of your question, I'm sorry, Laura. Were you asking about pricing or just more general adoption?

--------------------------------------------------------------------------------

Laura Engel, Stonegate Capital - Analyst [30]

--------------------------------------------------------------------------------

Pricing. And still the feedback you're getting from physicians. I know that was a change they to adjust to. And as far as where you are now, you have the approval codes but looking forward, any changes or will that be a status quo going forward as we model some of these numbers out?

--------------------------------------------------------------------------------

Dan Meyers, Alimera Sciences, Inc. - CEO [31]

--------------------------------------------------------------------------------

I think you should probably expect that we would not be taking price increases over the foreseeable quarters going forward. In this space, on a buy and bill model like this, reimbursed primarily by Medicare, it's quite difficult to raise price. As far as your question about the acceptance of price, I think we've had good experience in 2016, probably in 2015 in the US. There was a little bit of sticker shock for the doctors when they have to pre purchase roughly $8,800 and wait for the government to reimburse them or the private insurer.

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [32]

--------------------------------------------------------------------------------

I think now as doctors are beginning, as you've heard the word many times today, the familiarity with ILUVIEN, they've also begun to realize that when you take the amortized cost of ILUVIEN over three years versus the Anti-VEGF therapies we are far and away the best economic opportunity for the doctor, the patient and the medical payers. So I think we're comfortable right now that we bring great value over the three-year treatment pattern but I don't think at this point in time you would see us planning any price increases over the foreseeable future.

--------------------------------------------------------------------------------

Laura Engel, Stonegate Capital - Analyst [33]

--------------------------------------------------------------------------------

Okay. And then somewhat related, I know one of the gentleman asked about acquisitions. As far as expanding your own portfolio, where you are now, I know you're obviously still continuing with growth and focusing also on international, but what about opportunities for expanding through the purchase of additional products or earlier stage candidates?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [34]

--------------------------------------------------------------------------------

Yes. So Laura, we continue to look at opportunities out there and, you know, we would be opportunistic in that vein like we were when we found ILUVIEN ten years ago. The challenge we have right now is we think that our stock is significantly undervalued where it is and doesn't provide us the currency to go do those deals at what we think would be a fair price. So I think right now the focus is to drive to profitability as I said, get what we believe the value is for the stock up to where it should be, and then we will have currency to evaluate those options going forward.

--------------------------------------------------------------------------------

Laura Engel, Stonegate Capital - Analyst [35]

--------------------------------------------------------------------------------

Got it. I appreciate it and again, congratulations on the quarter. Thanks.

--------------------------------------------------------------------------------

Dan Meyers, Alimera Sciences, Inc. - CEO [36]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Operator [37]

--------------------------------------------------------------------------------

We have a follow-up question from the line of Francois Brisebois, from Laidlaw. Please, proceed with your follow-up question.

--------------------------------------------------------------------------------

Francois Brisebois, Laidlaw & Company - Analyst [38]

--------------------------------------------------------------------------------

Hi again it's Frank on for Jim. Thanks for taking the additional question. Just wondering, any anecdotal comments from the sales force on the counter detail from Allergan and how they overcome this with doctors?

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [39]

--------------------------------------------------------------------------------

We just happened to have our national sales meeting last month so we did get some experience in getting more feedback from the sales force and (inaudible) the customer. I think Allergan primarily is, and from the counter detail stand point, is focusing on the safety aspect of corticosteroids. Clearly, when we provide a longer benefit of three years versus anywhere from, most people would say three months with Ozurdex, although their label says six.

So I think what our sales force is finding is that to just have doctors experience the fact that as I said earlier, in the real world the incidence of managing IOP, certainly the incidence of IOP surgery, is much, much lower than what we saw in the FAME trial and the data that we had when we came out with the launch. So, I think that's kind of where the marketing battleground is right now on the idea of a product like ILUVIEN which provides such a benefit that we think is superior to Ozurdex over long-term efficacy, our reps are trying to battle the fact that in real world, doctors are not seeing the IOP signal that we saw in the FAME data which I think Allergan is kind of happy to talk about.

--------------------------------------------------------------------------------

Francois Brisebois, Laidlaw & Company - Analyst [40]

--------------------------------------------------------------------------------

Okay. Thank you. And one very last one here. Any thoughts on timing of trials for additional indications for ILUVIEN? Could that start before year end 2017 here?

--------------------------------------------------------------------------------

Dan Meyers, Alimera Sciences, Inc. - CEO [41]

--------------------------------------------------------------------------------

I'm not sure we could start by the end of the year. But as I stated in previous comments publicly, we've had some very encouraging meetings with the FDA around the indication of non-prolific diabetic retinopathy as well as retinal vein inclusion and in both cases the FDA indicated to us that if we wanted to pursue those added indications we could do so with one trial which of course would expedite approval for that added indication, and certainly cut the cost tremendously. We're happy about that and encouraged about that discussion with the FDA.

I guess I defer back to Rick's comment with other opportunities for products in the bag and potential acquisitions. We'll look at which of those or, both of those trials we'd want to start on the back side of the year after we believe we've driven to profitability. And we can fund those out of profits versus some of the capital and equity that we've raised. So, I think you'll see us in the back half of the year begin to talk to doctors, maybe look at different protocols. I wouldn't anticipate that we could enroll patients by that time but certainly we'll have a better feel and give you some guidance which of those trials we would be pursuing in 2018.

--------------------------------------------------------------------------------

Francois Brisebois, Laidlaw & Company - Analyst [42]

--------------------------------------------------------------------------------

All right. Great. Thank you very much.

--------------------------------------------------------------------------------

Operator [43]

--------------------------------------------------------------------------------

There are no further questions in the queue. I would like to hand the call back over to management for closing comments.

--------------------------------------------------------------------------------

Rick Eisworth, Alimera Sciences, Inc. - President, CFO [44]

--------------------------------------------------------------------------------

Okay, we would like to thank you for your time today and the questions and the opportunity to give you some insights as to where we think we are. Clearly, we are very happy with the way the year ended. We're excited about 2017. As we said earlier, we think we will continue to see on a seasonal basis the same kind of growth we saw in 2016 over 2015. We think that will continue in 2017 and look forward to updating you in the future. Thanks for your time.

--------------------------------------------------------------------------------

Operator [45]

--------------------------------------------------------------------------------

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.