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Edited Transcript of ALIM earnings conference call or presentation 30-Apr-19 1:00pm GMT

Q1 2019 Alimera Sciences Inc Earnings Call

ALPHARETTA May 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Alimera Sciences Inc earnings conference call or presentation Tuesday, April 30, 2019 at 1:00:00pm 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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* 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

* Scott Gordon

CorProminence, LLC - Co-Founder, President & Editor-In-Chief

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. Good morning, and welcome to the Alimera Sciences First Quarter 2019 Financial Results and Corporate Update Conference Call. (Operator Instructions) Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A replay of the call will be available approximately 1 hour after the end of the call through May 14, 2019.

I would now like to turn the conference over to Scott Gordon, President of Core IR, the company's Investor Relations firm. Please go ahead.

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Scott Gordon, CorProminence, LLC - Co-Founder, President & Editor-In-Chief [2]

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Thank you, Nancy, and good morning, everyone. And thank you for participating in today's conference call. Joining me from Alimera's leadership team are Rick Eiswirth, President and Chief Executive Officer; and Phil Jones, Chief Financial Officer.

During this call, management will be making a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts and generally can be identified by terms such as anticipates, estimates, believes, expects, intends, plans, projects, predicts, should, could, potential, may, will, would or the negative of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those statements. For details about these risks, please see the company's SEC filings, in particular, the Risk Factors section of the company's annual report on Form 10-K for 2018.

Today's conference call includes adjusted EBITDA, a non-GAAP financial measure that the company believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to net loss, it is (sic) [its] most directly comparable GAAP financial measure, see the reconciliation table located in Alimera's earnings release that accompanies this call. The content of this call contains time-sensitive information that is accurate only as of today, April 30, 2019. Except as required by law, Alimera disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.

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

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

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Thank you, Scott, and good morning, everyone. We made strong progress in the first quarter of 2019, achieving 34% revenue growth compared to the same period last year, and we obtained regulatory approval for a new indication of ILUVIEN in 17 European countries. This performance is consistent with our objective to accelerate growth in our business in 2019 and 2020 by focusing on 4 key initiatives. These initiatives are, number one, driving organic growth of new patient starts on ILUVIEN for diabetic macular edema, or DME. We intend to do this by continuing to communicate the uniqueness of ILUVIEN as the only nonacute therapy for DME and one that we believe can change the paradigm of treatment by reducing the recurrence of retinal edema to maintain vision longer with fewer injections. Number two, raising the awareness of physician practices. The patients treated in 2016 are likely in need of retreatment as many patients have reached their 3-year anniversary with the therapy. Number three, launching ILUVIEN's recently approved indication for non-infectious posterior uveitis in our direct European markets of Germany and the U.K. and helping prepare our distributor partners for launches later in 2019 and 2020. And number four, expanding our business by supporting the launch of ILUVIEN for DME in the countries where we have distributors with approved labeling.

For the first quarter, our performance was primarily driven by strong growth in our international sales, which more than doubled over the prior year period. Two elements contributed to this growth. First, as our distributors prepared for increased availability in Southern Europe, we filled stocking orders in Italy, Spain and France during the first quarter. Second, we were beneficiaries of physicians using ILUVIEN as a substitute for OZURDEX, a short-acting steroid implant that was out of stock in Europe for several months following a recall. This increased exposure to ILUVIEN has not only been substantial to our revenue line for the past 2 quarters, but we believe it will have a lasting effect on future growth as well. We have seen an increased level of consideration of ILUVIEN by both new and experienced physicians. We have been able to reengage with those that may have had only limited experience at launch. And we have new physician customers who have become familiar with ILUVIEN's benefits first hand, namely, ILUVIEN's unique continuous microdosing technology that delivers consistent and continuous treatment for up to 36 months.

Retention of the business that we gained in Europe is a major focus now that OZURDEX is back on the market, and we are working hard to retain as much of that business as we can by reminding physicians of unique -- of ILUVIEN's unique advantages. Our international sales base represented about 48% of our total sales in the first quarter. With ILUVIEN now available in France, Spain and in Italy, we have access to approximately the same number of DME patients in Europe as we do in the U.S.

Turning to our U.S. business. Although GAAP sales were relatively flat in comparison to the prior year, end-user demand grew 10% versus Q1 of 2018. We were a little disappointed in the aggregate growth as our sales were negatively impacted by greater-than-expected turnover in our sales force due to several new ophthalmic launches by other companies in the quarter. However, we are encouraged by the performance in territories that remain staffed during the quarter with growth in those territories of 18% versus the same period last year. We have replaced most of the departed reps in the impacted territories and expect to be fully staffed by the middle of the second quarter.

An important facet of our business today is the geographic breadth of our revenue generation. Whereas, in the past, a lesser performance in any region would adversely impact the overall sales performance, our broader geographic diversification allows us to absorb some inconsistency, and we are seeing sustainable growth. As we continue to expand both geographically and with the uveitis indication, this impact should strengthen further. Importantly, we achieved our goal of becoming adjusted EBITDA positive in the fourth quarter of last year. And as you can see by our results today, we maintained that discipline in the first quarter. In fact, in both periods, our cash position grew slightly. A key financial objective for us is to continue to generate positive adjusted EBITDA for the year and to maintain a strong positive operating cash position as the year progresses.

I'd now like to highlight some of our recent accomplishments that we believe will contribute to our growth going forward. In early March, we announced that our French distributor, Horus Pharma, attained national pricing and reimbursement for ILUVIEN in France, which triggered a launch of the product this month. As a reminder, Horus Pharma is responsible for all promotion, marketing and commercial activities for ILUVIEN in France. The first sales came in April as Horus made ILUVIEN available to patients in this new territory.

In February and March, we announced regulatory approvals for ILUVIEN in both Lebanon and Kuwait, respectively. When combined with the United Arab Emirates, ILUVIEN is now approved in 3 Middle Eastern countries. Our partner MEAgate International is responsible for regulatory and commercial activities in a total of 11 countries in the Middle East.

On March 25, we announced regulatory approval of ILUVIEN in Europe for non-infectious posterior uveitis. We are extremely pleased with the label that we received. The indication is for prevention of relapse in recurrent, non-infectious uveitis affecting the posterior segment of the eye. This indication highlights the promise that ILUVIEN's continuous microdosing minimizes the return or recurrence of edema. Under the mutual recognition procedure, we received market authorization for this indication in 17 European countries, and we are now in the local country phase, in which each country will provide approved labeling. Beyond labeling, we will then pursue reimbursement with each country having its own timeline. We expect to see the first launch of this new indication in Germany late in the second quarter of 2019 with other countries following on as reimbursement is achieved.

Just this past weekend, we highlighted 15 posters and 1 podium presentation at the ARVO Conference in Vancouver. The podium presentation was the first time the favorable 3-year clinical results of ILUVIEN in the treatment of non-infectious posterior uveitis was shared in a public forum. Importantly, the data in several posters addressed topics that continue to reaffirm the uniqueness that continuous microdosing brings to the treatment of DME. For example, data was presented on earlier intervention with ILUVIEN and the advantage of consistently minimizing the variation in retinal thickness.

Earlier this month, we appointed Dr. Samer Kaba, a trained neurologist with a fellowship in neuro-ophthalmology as our Chief Medical Officer. In this newly created position, Samer brings expertise in neuroprotection and neuroinflammation, which we believe will help us to further drive the unique value of ILUVIEN's continuous microdosing to deliver and maintain a drier retina and to change the paradigm of treatment for retinal disease. As demonstrated in the first quarter, our execution with respect to these opportunities provides a strong basis for future growth for both the remainder of this year and the longer term.

We have often emphasized the unique benefits of ILUVIEN for physicians treating DME, the ability to reduce the recurrence of the disease and the treatment burden. The patients also talk to us about their experience. They tell us about the reduced anxiety surrounding injections and the improved consistency of their vision. Therefore, we are launching a test of a direct-to-patient marketing program designed to increase patient awareness of ILUVIEN's benefits. In surveys that we conducted, we learned that awareness of ILUVIEN among patients is low, but their likelihood to seek information about it is high when exposed to the concept.

According to our research with patients, the 2 most important features of a DME treatment connect well with ILUVIEN's benefits: seeing better longer and having fewer injections. We are planning to run digital, radio and in-office marketing campaigns in a pilot program in 4 cities in the U.S. with the goal to educate and enable patients diagnosed with DME and their caregivers to ask the doctor if ILUVIEN treatment is right for them. We are pleased with the progress we have made so far this year and are excited about the opportunity to drive value for patients and for our shareholders as more patients in the U.S. and internationally begin to receive the benefits of ILUVIEN.

I'll now turn the call over to Phil, who will review our financial results for the first 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 first quarter of 2019, our consolidated net revenue grew 34% to $12.9 million compared to $9.6 million in the first quarter of 2018. U.S. net revenue was approximately $6.8 million for the first quarter of both 2019 and 2018. However, end-user demand, which represents units purchased by physicians and pharmacies from our distributors, increased 10.3% in the first quarter of 2019, increasing to 939 units compared to 851 units in the first quarter of 2018.

As we have previously shared, our GAAP revenues in the U.S. do not always perfectly correlate with end-user demand due to the timing of purchases by our specialty distributors. This discrepancy between GAAP revenue and end-user demand is due to the timing of distributor purchases in Q1 2019.

During the first quarter of 2019, Alimera's distributors purchased approximately 14% fewer units than they sold to end users, decreasing their stock on hand during the quarter.

The U.S. sales in the first quarter of 2019 were negatively impacted as our largest wholesaler, Besse Medical, changed their stocking policy to reduce the amount of ILUVIEN on hand at any point in time. The inventory work-down is now complete, so we expect this onetime event to have limited impact on subsequent quarters.

Net revenue from Alimera's International segment increased 118% to approximately $6.1 million for the first quarter of 2019. This compares to approximately $2.8 million for the same period last year. Research, development and medical affairs expenses during the first quarter were down 4% to $2.7 million compared to $2.8 million during the prior year period. General and administrative expenses for 2019's first quarter were approximately $3.4 million compared to approximately $3.8 million for the same period last year. The decrease was primarily attributable to decreases in personnel costs. Sales and marketing expenses during the first quarter of 2019 were approximately $5.9 million, down 2% compared to $6 million reported in the first quarter of 2018. Total operating expenses decreased $600,000 or 5% from $13.3 million for the 3 months ended March 31, 2018 to $12.7 million for the 3 months ended March 31, 2019.

I am pleased to reiterate that during the first quarter of 2019, we reported positive adjusted EBITDA of $27,000 compared to an adjusted EBITDA loss of $2.9 million for the first quarter of 2018. We continue to focus on maintaining positive adjusted EBITDA. Net loss for the 3 months ended March 31, 2019 was approximately $2.8 million, a significant decrease in comparison to a net loss of approximately $7.7 million for the 3 months ended March 31, 2018.

GAAP basic and diluted net loss per common share for the 3 months ended March 31, 2019 was $0.04 per share on approximately 70.7 million weighted average common shares outstanding. This compares to basic and diluted net loss per share of $0.11 on approximately 69.9 million weighted average common shares outstanding during the 3 months ended March 31, 2018, another significant improvement. On March 31, 2019, we had cash and cash equivalents of approximately $13.1 million, a slight increase from the $13 million in cash and cash equivalents that we reported on December 31, 2018.

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. To sum up, we continue to make good progress with our business, growing ILUVIEN usage in existing markets, penetrating new markets with our distribution partners and readying to launch a new indication in Europe. We believe that Alimera is well positioned for the next phase of growth and to increase shareholder value as the benefits of ILUVIEN continue to gain appreciation by the ophthalmology community. ILUVIEN is the only drug indicated to treat DME that works by reducing the recurrence of the disease, whereas other products treat the disease upon recurrence. For example, VEGF inhibitors like Lucentis and EYLEA are indicated for treatment on a monthly or bimonthly basis, but in practice are used on average of once every 3 months according to published Medicare data. This usage suggests that doctors are treating the disease episodically rather than treating the disease like the chronic condition that it is.

ILUVIEN's continuous microdosing technology is designed to deliver the consistency that the available acute therapies cannot. It has been shown in our clinical trials to maintain or improve vision by continuously minimizing the DME and the inflammation in the retina. And by doing this, it significantly reduces the need for repeat injections. This enables physicians to provide patients what they want for their disease management: longer-lasting vision with fewer injections.

We remain steadfast on driving this message into our target physician and patient audiences to continue to grow ILUVIEN's use with the goal of becoming a more integral part of the treatment paradigm.

With that overview, we're 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)

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [2]

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While we are waiting for the first question, I'd like to mention that I will be making a corporate presentation at the 20th Annual B. Riley FBR Investor Conference in Beverly Hills, California, which takes place from May 22 through May 23.

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Operator [3]

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Our first question comes from Andrew D. -- Andrew J. D'Silva from BJ Riley (sic) [B. Riley].

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

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Bookkeeping first, Phil, if you could. Domestic distributor units placed during the quarter, I didn't see the exact breakout for that. And then, if you also have a cash flow from operations and CapEx. And then, while you're answering that or pulling the information, last quarter, you noted OZURDEX constraints likely benefited ILUVIEN sales by about $2.5 million. Any sort of color on what kind of beneficial impact it had during this quarter?

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J. Philip Jones, Alimera Sciences, Inc. - CFO [5]

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Yes. Andy, for your first question, I believe you asked about the units. The units -- the GAAP units that we sold for the first quarter were 825 units. And again, that compared to the 939 end-user demand units that we had in the first quarter. And on the cash flow, cash flow from operations was approximately $300,000 for the first quarter. And I believe that answered the things you had, but let me know if that's...

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

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Just CapEx. Any sort of...

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J. Philip Jones, Alimera Sciences, Inc. - CFO [7]

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Oh, CapEx. CapEx was -- I mean, it was minimal, $15,000 for the first quarter.

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

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Okay. And then OZURDEX was the second question.

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J. Philip Jones, Alimera Sciences, Inc. - CFO [9]

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Could you repeat the question one more time, please? I'm sorry.

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

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Oh yes. Last quarter, you noted OZURDEX constraints likely benefited ILUVIEN sales by about $2.5 million. Just curious if you had a comparison for the first quarter as well.

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J. Philip Jones, Alimera Sciences, Inc. - CFO [11]

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Yes, we do. We feel like that the impact from OZURDEX in the first quarter was approximately $800,000 in our markets in -- internationally with no impact in the U.S.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [12]

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Oh, wow! Okay. So that -- I mean, the $12 million revenue number is adorable now, that's great to see. From sales recognized in France, Spain and Italy and new regions coming online, were there major stocking orders? And maybe just, now that accounting policies are kind of set for the year, at least in some regard, are you recognizing on a sales transfer basis from a revenue recognition for some of those partners? Or how are you doing it on an international basis once you ship the product?

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J. Philip Jones, Alimera Sciences, Inc. - CFO [13]

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Yes, just -- I mean if you look at the accounting policies now, we are guided by the new principles, the ASC 606. And essentially, each contract has to be reviewed independently of one another. So the revenue is going to be a little bit different depending on what country that we have sales into. But essentially, we did have a lot of stocking orders in the first quarter for France and for the other -- the other areas that are getting ready for launch. And that revenue will be somewhat lumpy as we move through the year based on the fact that they will be buying based on the market demand in those specific areas. So -- but we do believe that there will be further orders as we move through the year into various countries.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [14]

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Okay, great. And then maybe that kind of leads into the next question on seasonality. Obviously, historically, the first quarter has been generally the weakest and subsequent quarters have been materially better. Should we figure that trend to continue this year? Or are some of the benefits that happened internationally going to maybe create a little bit more volatility than we traditionally have seen?

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

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Andy, we certainly still expect to see some seasonality in the business. You have -- the 2 major things going on there is that in the U.S., obviously, as most people restart their new insurance plan year, with being a high-deductible -- excuse me, a high-priced product, doctors like to re-run those benefit investigations. And so it takes them a little bit longer to push those patients through the queue. And then the second thing is, in some of the European markets, Portugal is a good example of this, the hospitals like to reevaluate their formularies and everything at the beginning of the year. So sometimes they're -- we're slow in some of the European markets because of a similar thing. We think that will continue to impact us. Same type of seasonality you would see in the third quarter because of the holiday season since we don't get recurring prescriptions. With doctors out of the office, ILUVIEN doesn't get used. So you'll still see seasonality in the first and third quarter. We do think some of that is a little bit softened this quarter because of the impact of replacing some of the OZURDEX sales in January and February.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [16]

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But a from an international standpoint, I am just trying to get a sense of what the -- kind of the new run rate will look like for ILUVIEN. Is it -- historically, prior to the fourth quarter, it was around the $3 million mark for some time, and now you're closer to the $6 million mark. Obviously, 2 quarters don't necessarily make a trend, but is that closer to what reality should be like? Or is the $3 million mark maybe a better proxy for what we should think about?

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

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I think that's a good proxy, but you're certainly going to see continued growth off of that number. It's going to be a little bit choppy, as Phil alluded to, over the next couple of quarters because our distributors order in specific bulk lot sizes and then sell off those lots and will reorder. And so as their volume increases, they'll start to develop some consistency there. But I would expect, over the course of 2019, you'll see a little bit of inconsistency in the distributor orders from country to country until it smooths itself out.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [18]

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Good color. And then you mentioned in your prepared remarks that you had some sales team attrition during the quarter due to other launches. Can you maybe quantify that from how many sales reps left? And maybe what is the typical impact to a region's sales if there is no sales -- full-time sales team member kind of servicing that area? Is it a dramatic shift in actual revenue?

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

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Yes. So we certainly experienced some turnover there. I would say, over the first 3 months of the year, we probably had turnover close to 30% to 35% of the team, unfortunately. Most of those reps ended up going to other companies in ophthalmology. Most of the launches in the front-of-the-eye because there's several front-of-the-eye steroids that were being launched in the first quarter. The impact is variable, Andy, from territory to territory. If a rep has done a great job of really changing the paradigm, right, in getting that physician to integrate ILUVIEN into their practice, the practices continue to order, and we've had great experience there. In other territories, frankly, if it's a rep that has been more hunting from patient to patient with a little bit less stickiness in the business, and I think the best way to look at it is we said, in the territories we were consistent, we grew about 18%, but we only grew about 10% overall. So obviously, a little bit downward trend in some of those territories where we had the vacancy. We think that will be solved throughout the second quarter because we've filled the majority of those positions already.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [20]

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Ok, great. And then last question is related to uveitis. Are you going to separate that out when you report it? Or is that even possible as far as DME versus uveitis being a breakout line item? And then with retreatment for uveitis, would you expect that it would be more consistent than maybe retreatments with DME? I know we're talking a couple of years down the road here, but the reason I bring that up is just the difference between maybe diabetes verses uveitis from a patient profile. I'm just trying to get my hands around the sensitivity there.

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [21]

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Yes. So 2 things there. So we won't be able to report uveitis revenue separately. It's the same SKU in every country, and so we won't have individual script data on uveitis versus DME. But we certainly see to see -- see some improvement in the growth there. With respect to the retreatments, we don't really have a lot of data on ILUVIEN in uveitis beyond 3 years. As we mentioned the other day, the first 3-year data was presented at ARVO. I can tell you that, similar to DME, we have anecdotal evidence because we know physicians have used it off-label to treat uveitis at times, in Germany, specifically. I've had conversations with doctors where they haven't seen any uveitis flare-ups until 40 and 42 months out. And I also know that some have had it treated earlier in the 36-month mark. So I think similar to DME, it'll be on a patient-by-patient basis depending on the severity of the disease in that patient.

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Operator [22]

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Our next question comes from James Molloy from 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 [23]

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I had a question on the very strong EU print in the quarter, following up on the prior question. You mentioned that Italy, Spain and France are all stocked -- were all stocking in the quarter, ready for launch. How much impact was that in the quarter? And I wasn't sure on your answer, are you saying that more the $3 million level is the appropriate level or the $6 million level is the appropriate level going forward?

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J. Philip Jones, Alimera Sciences, Inc. - CFO [24]

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I believe -- to answer the last question first. I believe Rick indicated that the $6 million level is probably the more appropriate level. And just to give you some color on the numbers themselves, in our markets, the direct market grew at about 50% in the first quarter, while the international segment grew substantially more than that just because the basis of measure in the first quarter of 2018 was relatively small. Hopefully, that gives you what you needed.

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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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Great. Yes. And then on the retreatments. I know you that mentioned the retreatments should start coming through. First quarter is typically a slower quarter. When would you anticipate seeing that coming through? And -- we'll stop there, sorry.

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

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Yes, Jim. I mean we think that will slowly build throughout the year. We treated about 500 patients or so in the first quarter of 2016. So sales built over the course of that year as well. As I mentioned when I was addressing one of Andy's comments, we are -- we don't have specific information on individual patients. We do know that benefit investigations come back in on patients that we saw 3 years ago. So we know that it is starting to happen. When it happens, again, is on a patient-by-patient basis. Again, patients starting to be evaluated in that 30-month to 36-month time frame, if a physician sees a recurrence of the disease, they're injecting ILUVIEN in. We have a few physicians that are injecting really specifically based on the third anniversary date of treatment just to keep that consistent low dose on board. And then others that just continue to watch and wait. And we have patients where the edema hasn't come back as far as 42 months out that we know of. So it's starting to happen. It's very difficult to quantify at this time the specific impact of it.

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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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Understood. Then maybe I'll follow up on the reps. Could you talk to how many sort of reps who left? What number of those or percentages of those were sort of profitable or high -- your high-end reps? And will that impact -- I look at, traditionally, over the last number of years, the first quarter has been about 20% -- 18%, 20% of the total year sales, which would imply a nice $65 million run rate for 2019. How would -- how does the impact of the reps, do you think, impact that build-out through the rest of '19?

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

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Jim, it's -- I mean it's a mixed bag as far as the reps that we lost, I would say. Overall, frankly, I'm disappointed we lost the reps. It's something that we, frankly, probably weren't as prepared as we should have been for the demand out there in the ophthalmology space for some of these other launches. In some ways, I'm proud of the fact that we've certainly trained a lot of reps really well and people wanted to come after our people. So I think that's a good sign. Some of the reps were not -- were regrettable losses and some were probably a positive change for both us and the rep. As far as the longer-term potential and what it means over the course of the year, we've got an outstanding training program for getting reps up to speed pretty quickly. They get up to speed faster than they ever have. We've got a gentleman named Chad Carter that runs our training program, and he just does an outstanding job getting these reps on board and up to speed. And as I said, we should have a full team by mid-May and expect to be up and running pretty well for the rest of the year.

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James Francis Molloy, Alliance Global Partners, Research Division - MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [29]

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Understood. And last question on any pricing changes -- are you taking any pricing changes or anticipate taking any pricing changes in '19? And then any thoughts on potential new products and fewer reps?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [30]

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Sure. With respect to the pricing, we don't anticipate any pricing changes. The majority of doctors acquire ILUVIEN and do buy and bill. And that's the same thing that happens with most products in the retina space. So it's very, very challenging to implement a price increase, and we haven't seen anything from our customers -- our customers as well. The second part of Jim's question was? Oh, on the new products, Jim, look, we certainly believe that we have a little bit of a unique thing here at Alimera with a commercial structure both in the U.S. and Europe that we would like to leverage. We would love to find something else to put in the bag, and we will continue to be out there looking for it. But obviously, we need to be very prudent in what we're doing. Frankly, the fact that we are financially stable now, we think, is another asset that we have, and so we don't need to rush to do anything. So we're going to keep looking, but we're going to be very prudent in the things we look at.

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Operator [31]

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The next question comes from François Brisebois from Laidlaw.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [32]

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Just quickly here, this has been hit on a couple times now, but in the press release, it talks about the impact of the shortage of OZURDEX on the EU side again. And I think -- I just didn't hear quite well when you answered Andrew that there's $2.5 million of it in the first quarter here. I think I heard nothing. So I just want to understand why the growth seems so much bigger ex U.S. than in the U.S. if you have the same amount patients now that you're treating ex U.S. and in the U.S.

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

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No, Frank. What Phil had said is the impact in the first quarter from the OZURDEX recalls was probably about $800,000. If you look at the revenue in our direct markets, we probably grew between 50% and 60% in comparison to last year. And then, the remainder of the growth is from the orders from our distributors.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [34]

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Okay, okay, and then -- Okay. That makes sense. And then in terms of the direct-to-patient, you're seeing that patients might not be as aware as they should be of ILUVIEN as an option. Are you seeing the same thing with doctors, maybe not in the major centers, but that might still not be as aware as they should be about ILUVIEN?

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

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Frank, I don't think so. I mean I think the retina space is a pretty tight space. As we've said in the past, there's about 2,000 doctors. I mean there are certainly doctors out there that just where they're located geographically, we don't get to call on. But I would say that the awareness amongst the physician community of ILUVIEN is pretty high. This direct-to-patient type of campaign is something that we've considered for a long time. But frankly, until the user base was broad enough, it didn't make sense to be pushing patients in to see doctors where maybe the doctor wouldn't be receptive to using it. So as that user base has broadened, we think now is the appropriate time to start trying to push the patients there.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [36]

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Okay. And is the direct-to-patient effort a worldwide effort or is that mostly in the U.S.?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [37]

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It's just in the U.S., just in the U.S. A lot of the regulatory requirements in some of the foreign countries won't allow us to market directly to the patients.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [38]

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Understood. And then when you presented recently posters and the data keeps coming up about the minimization of variation in the retinal thickness. That seems to be something that doctors should kind of jibe to. Is this -- with the new CMO here, is this in the medical community? Are you seeing people react to that? Or are they kind of -- do they think the retinal thickness variation isn't as big of a deal?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [39]

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No, I think it's some that is -- I mean it's early, right? And with ILUVIEN, we're one of the first people that can really demonstrate that with the efficacy of our product. It certainly is part of the reason that we actually hired Dr. Kaba to come on board and join us. As a trained neurologist, he -- the eye is an extension of the brain, right? And we believe that there is a lot of underlying damage that is occurring when the edema continues to come back or even when you allow some of the inflammation to continue underneath. So Dr. Kaba is certainly going to help us find other ways to demonstrate the value of keeping that retina flat longer on protecting longer-term vision.

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Operator [40]

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

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [41]

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How does the company plan to use the data presented at ARVO to further penetrate the market for ILUVIEN? And particularly, are most doctors prescribing ILUVIEN as soon as patients fail anti-VEGF treatment today? If not, could Alimera potentially accelerate top line revenue growth by educating doctors to use ILUVIEN during early stage of DME?

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [42]

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Yes, so a couple things. I mean a lot of that data that was presented at ARVO, we believe is on point with our messaging about using ILUVIEN earlier or earlier intervention with a steroid in comparison to the anti-VEGFs or the unique value of reducing the fluctuations in the retinal edema. So it certainly will continue to be part of and get more into our messaging from a commercial perspective. I do think you see a shift going on in the marketplace of people starting to use steroids in general, both us and OZURDEX, earlier and specifically, ILUVIEN earlier. The early analysis tells doctors that they should be able to tell how well the anti-VEGFs are going to work after 3 anti-VEGF injections. Realistically, that doesn't happen across the broader population, but I would argue that, 3 years ago, when we launched ILUVIEN where physicians may do 10, 12, even 15 anti-VEGF injections before they would consider a switch. That continues to migrate down, maybe now they're doing 6 or 7. And there certainly are some that followed the early analysis more closely and only do 3. So I think -- your points are great when the doctors need to consider making that switch sooner, and we're seeing a shift that way. What we're trying to do with more and more data about the uniqueness of ILUVIEN is try to make that happen faster.

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Operator [43]

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

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Richard S. Eiswirth, Alimera Sciences, Inc. - President, CEO & Director [44]

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

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Operator [45]

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The conference is now concluded. You may disconnect your lines.