Q4 2023 Alimera Sciences Inc Earnings Call
Participants
Rick Eiswirth; President and Chief Executive Officer; Alimera Sciences Inc
Elliot Maltz; Chief Financial Officer; Alimera Sciences Inc
Scott Gordon; IR; CORE IR
Alex Nowak; Analyst; Craig Hallum
James Molloy; Analyst; Alliance Global Partners
Presentation
Operator
Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Alimera Sciences fourth quarter and fiscal year 2023 financial results and corporate update conference call. (Operator Instructions) Participants on this call are advised that audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately one hour after the end of the call through June 7, 2024.
Scott Gordon
Thank you, Scott. Good morning, and thank you for participating on today's conference call. Joining me from Alimera's leadership team are Rick Eiswirth, President and Chief Executive Officer; and Elliot Maltz, Chief Financial Officer; and Todd Wood would be joining us, President, US Operations, in the question-and-answer session today.
During this call, management will be making forward-looking statements including statements that address Alimera's expectations for future performance or operational results, future financial position, outlook and guidance, and timeline for achieving positive cash flow. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Alimera's most recently filed periodic reports on Form 10-Q and Form 8-K filed with the SEC today, and Form 10-K to be filed with the SEC from year ended December 31, 2023, as well as Alimera's press release that accompanies this call, particularly the cautionary statements in it.
Today's conference call will include references to adjusted EBITDA, which is a non-GAAP financial measure. Please see the explanatory language and reconciliation table located in Alimera's earnings press release. The content on this call contains time-sensitive information that is accurate only as of today, March 7, 2024. Except as required by law, Alimera disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.
It is now my pleasure to turn the call over to Rick Eiswirth. Rick, please go ahead.
Rick Eiswirth
Thank you, Scott, and good morning to everyone on the call. 2023 was a pivotal year aground, where we exited 2023 much stronger than we came into it in 2023, we accomplished many goals. We completed a strategic and transformative transaction to obtain the commercial rights for Teak and expand our product portfolio we strengthened our balance sheet and simplified our capital structure. We established the critical mass to drive positive adjusted EBITDA moving forward as well as operating cash flow in 2024 we expanded our commercial team to drive growth and utilization of both product. And we completed the enrollment and both are to Phase four clinical sites New Day and Synchronicity that we expect will drive increased utilization of the Libyan annuity and future years.
As we head into 2024, we see the benefits of these transactions to be completed in 2023, we acquired UTi to consolidated rights to the civil, want to set nine combine technology in the U.S. and expand the indications available for us to serve patients with RET and conditions now that we have both Eluvia and any tick of the U.S., we believe that there's significant opportunity to increase their utilization in 2023. We learned that fewer than 30% of legacy Iluvien and intake accounts that utilize both products with our expanded sales force selling Iluvien NET in the U.S. and our marketing in the two indications as the same long-term consistently delivered low-dose technology provides durability that both our physicians and patients going on today in a product, we believe the opportunity to allow physicians to treat a broader array of patients is tremendous.
We spent the back half of the year incorporating UTi into our US business, training our commercial team to sell both products and promote both indications. We made significant progress with utilization of our products in the second half of 2023, up 9% over the second half of 2022 on a pro forma basis for the acquisition of UTi and the continued growth of Iluvien globally, our financial results have improved significantly in 2023. In Q4, our consolidated global net revenue grew 88% over Q4 of 2022 to 26.3 million. And for the year, our net revenue grew 49% over the full year of 2022 to 18.8 million. Importantly, as we projected, we are driving positive adjusted EBITDA and cash flow from operations now that we have critical mass for the larger portfolio, our adjusted EBITDA in the fourth quarter was 5 million, a significant improvement over Q4 2022 when we had an adjusted EBITDA loss of 1.2 million for the full year of 2023, we delivered positive adjusted EBITDA of 8.7 million compared to a loss of 7.9 million in 2020.
In our US segment, net revenue in Q4 2023 increased 104% to 19.2 million versus 9.4 million in Q4 of 2022. This contributed to a 66% increase in US revenue for the full year of 2023, 56.7 million. U.s. end-user demand for our products was up 4.4% in Q4 versus the prior year and 11% on a pro forma basis for the full year. Although we've made great commercial strides with the integration of Teak and the MDS indication, we believe we still have a significant opportunity ahead of us to maximize the benefits of selling to high-priority products to help accelerate growth in 2020 for Tognum has joined our team in December as President of our US operations, tailoring that wealth of experience for the successful brands such as Botox and Lumacan, who will be joining us on the call for the Q&A session.
We believe our international business for Iluvien at both indications under one brand is a great leading indicator of what is possible in the US. Our international business grew significantly in both Q4 and for the full year. In Q4 2023, international net revenue grew 54% to 7.1 million. And for the full year, net revenue was up 21% to $24 million. We experienced at 16.7% end user demand growth in Q4 and 11.8% for the full year to the international segment, driven by increasing end-user demand in our markets of the UK, Portugal, Ireland, Spain and France. Revenue from our distributor partners was also up for both the quarter and the full year. However, due to limited supply capacity, we were not able to fulfill all of the end user demand in the second half of the year after being up over 30% through the end of the second quarter. Moving into 2024, we believe we will no longer be faced with these supply issues in Q4.
Jason Werner joined our team as Chief Operating Officer, and we have made and continue to make additional investments to ensure available manufacturing capacity moving forward. As a result, we made significant distributor shipments in Q4 of 2023 and anticipate meeting end user demand in Europe in a timely manner.
Moving forward, we expect the international business to continue to be a significant contributor to our growth and we anticipate growing utilization of the uveitis indication in those markets as we introduce some of the positioning we have adopted following the acquisition of ETC. in the US when Jason joined us, I was pleased to name Dr. Phil Benson, who has been with us the past 10 years as the President of International Operations alone, Phil to spend 100% of his time focused on execution and growth of the international segments, both in our direct markets of Germany, the UK, Portugal and Ireland, but also in supporting our distributor partners throughout Europe and the Middle East. In February, we announced that the UK National Institute for Health and Care Excellence or NICE, has issued final draft guidance recommending the chronic diabetic macular edema or DME patients with a natural lens also known as speaker patients have access to Libya.
Nice reimbursement to date has been limited to only pseudophakic patients defined as those who have undergone cataract surgery, which has less than a third of the population. Now we have the potential to reach taking patients who have advanced to chronic DME for a significant expansion of our particular user base. We expect the availability of this wider reimbursement to positively impact utilization in the UK in the second half of 2024. This limitation has historically impacted reimbursement in other countries as well, such as Spain and Italy, which look to the NICE guidance as a contributing factor into reimbursement decisions. We believe that this NICE decision, if adopted in other markets, will broaden our potential patient base in these countries as well.
In previous calls, I shared that our goal for 2024 following the transaction was to achieve 100 million in consolidated revenue and annual annual EBITDA margin of 20%. As a result of our success in the second half of 2023 we are revising our financial guidance for 2020 for revenue to exceed 105 million in revenue with an adjusted EBITDA margin of 20% for the year, we do expect our business to fluctuate quarter to quarter given the seasonality of our business. Historically, we have seen low revenue in Q1, primarily from our primarily resulting from the new insurance year with the resetting of patient deductibles, which dampens utilization of high-priced products like aluminum, etc. in January and February, historically, Q1 revenue has been 10% to 15% below the previous quarter, and we would anticipate the same impact in Q1 of this year. Adjusted EBITDA will also fluctuate quarter-to-quarter as a result of this seasonality, but we are confident in our ability to deliver 20% margins annually. We are pleased to also have completed enrollment in two Phase four studies that we believe will provide impactful data and drive increased physician utilization in the future.
In June, we finished enrollment in our landmark NEW DAY study with 306 patients. The NEW DAY study is evaluating a women's utility that's currently baseline therapy in naive or near naive patients in a head-to-head study versus the leading anti-VEGF in the treatment of diabetic macular edema. This study is the first head-to-head comparison of long-term low-dose corticosteroid therapy versus anti-VEGF therapy in the treatment of DME. And we believe that if successful could change the treatment paradigm for DME by moving a long acting steroid implant earlier in the patient turn, which the last patient last visit in this study is projected for Q4 of this year, and we anticipate having data in early 2025.
In January, we announced the completion of enrollment in the Synchronicity study, which is a prospective open-label clinical study evaluating the safety and efficacy of beauty for the treatment of macular edema associated with chronic noninfectious uveitis affecting the posterior segment of the eye and related interocular inflammation. This study's purpose is to gain broader insight into the use of beauty by the general retina specialists in real-world clinical practice as opposed to those who practice solely iGA, especially in a trial. This is a two year follow-up study with an interim top line six month efficacy readout anticipated in the second half of this year.
And with that update, I will now turn the call over to Elliot to review our fourth quarter and fiscal year financial results in greater detail.
Elliot Maltz
Thanks, Rick, and hello, everyone. I am very pleased to have joined Alimera at such an exciting time and look forward to continuing discussions with you all. I'll take you through the numbers and then give a brief financing update. Consolidated net revenue in Q4 2023 was up 88% to approximately $26.3 million compared to 14 million in Q4 2022.
Looking at our operational segments, U.S. net revenue increased 104% to approximately 19.2 million in Q4 2023 compared to $9.4 million in Q4 2022 end user demand in the US for our fluid silicone implants was 2065 units in Q4 2023 which is up 4.5% compared to Q4 2022. On a pro forma basis, international net revenue increased 54% to approximately 7.1 million in Q4 2023 compared to approximately $4.6 million in Q4 2022. The increase was driven primarily by end user demand growth of 17% in our direct markets and stocking shipments to our international distributors that will more than double our Q4 2022 results.
Total end-user demand. Our international segment was 1,464 units, which is down about 6.5% compared to Q4 2022 due to limited inventory in our distributor markets of Spain and France during the quarter, however, as Rick noted, this was a result of limited supply in the second half of the year that has been addressed prospectively.
Now looking at the full year 2023 consolidated net revenue increased 49% to approximately $80.8 million compared to approximately $54.1 million in 2022. The increase in 2023 return on price was primarily attributable to one, the acquisition of boutique in the United States in May into strong growth throughout the year.
In our international segment, US net revenue increased 66% to 56.7 million in 2023 compared to $34.2 million in 2022 due to the acquisition of boutique in May, as well as the continued growth of Eluvia in our international segment, net revenue increased 21% to approximately 24 million in 2023 compared to approximately $19.9 million in 2022. We saw notable growth throughout the year in the European markets where we saw Iluvien directly, specifically the UK, Portugal and Ireland as well as Spain and France, where Iluvien is sold through international distribution partners.
Overall, international segment end-user demand was up 7% to 5,583 units compared to 5,211 units in 2022.
Now looking at the rest of our P&L, total operating expenses in the fourth quarter of 2023 were approximately $21.1 million compared to approximately $14 million in Q4 2022. The increase in the fourth quarter of 2023 was negatively impacted by one-time charges of approximately $1 million for bad debt expense related to pre COVID sales to one of our European distributors and approximately 0.5 million of severance expense. When comparing Q4 2023 with the prior year, there was also an additional 2.4 million of amortization expense from the intangible assets that resulted from the UTi acquisition. Total operating expenses for the full year 2023 were approximately $72 million compared to approximately $58 million in 2022.
The increase is due to the items I just mentioned as well as the acquisition staffing for you take net loss of approximately $3.8 million in both Q4 2023 and Q4 2022, despite additional 3.1 million of interest expense in the fourth quarter of 2023. For the full year, net loss was approximately 20.1 million in 2023 compared to a net loss of approximately $18.1 million in 2022. We are pleased to continue the trend of generating positive quarterly adjusted EBITDA in Q4 2023, we generated approximately 5 million of adjusted EBITDA compared to an adjusted EBITDA loss of approximately $1.2 million in Q4 2022.
For the full year, we generated approximately 8.7 million of adjusted EBITDA in 2023 compared to an adjusted EBITDA loss of approximately $7.9 million in 2022 as a result of posting the suggested EBITDA for the full year, we have met an important trigger in the term loan agreement with our lender SLR Capital Partners. This will allow for a 12-month extension of the interest-only period and defer the start of amortization payments to May of 2026. So long as you remain in compliance with the other terms of the loan facility. As of December 31st, 2023, we had cash and cash equivalents of approximately $12.1 million compared to $5.3 million at the end of 2022.
In addition to the effects of generating positive adjusted EBITDA this year, our cash position was improved by the strategic financing transactions in 2023 as a result of the revenue growth this year. In December, we triggered 1.3 million of revenue base milestone fees included in our term loans with SLR and we expect to trigger the remaining $2.4 million in 2024 as solar continues to be a great partner in order to preserve cash for working capital as we continue to grow the utilization of Iluvien in new Teak. Yesterday, we increased the size of our loan facility for an additional $5 million in cash. This provides us with more operating flexibility and defray the impact of some of upcoming contractual obligations.
Now I'll turn it back over to Rick to give his closing comments.
Rick Eiswirth
And earlier, as I mentioned, 2023 was a pivotal year for Alimera with the acquisition of UTi, providing the necessary critical mass to establish our financial stability for the future. We think that the second half of 2023 is a great demonstration of our ability to leverage the infrastructure we've built in the retina space in the US and in Europe. However, there is a significant opportunity to grow the utilization level of unit believing in a peak in 2024 and beyond.
We believe the calling on physicians and permitting communications will provide greater. We call value for retina specialists to it, they make treatment decisions. We believe that reach and frequency are critical to promoting the Bolivian into Teak, and we will be able to speak with more physicians more often in 2024, with our larger sales force being fully trained and in the field for a full year, we believe that carrying both the leaving and you take in one bag will grow both brands as we are able to cross-sell the benefits of long-term latest delivery for both indications to the same customer, increasing the likelihood of a customer considering using our products on more patients.
We believe that the numerous studies we've conducted around the world with Iluvien are a good indicator that NEW DAY study will report a successful outcome and support the use of the Libyan earlier into the treatment paradigm for DME. We believe the Synchronicity study will highlight increased utility boutique in the general random retina specialist practice. And for those and more reasons, we are bullish about 2024 and our ability to exceed 105 million revenue with an adjusted EBITDA margin of 20% for the full year.
Thinking.
That concludes our prepared remarks, and I will now turn the call over to the operator for questions.
Question and Answer Session
Operator
(Operator Instructions) Alex Nowak, Craig-Hallum Capital.
Alex Nowak
Good morning, everyone, and very transformational 2023 that the cross selling last quarter, it was cited at 27%. Right now, it's around the less than 30%. Where can that realistically go here over the next several years? And then maybe a further question out there for Todd. Just how do you think about utilization within the existing rental specialists?
Rick Eiswirth
How much can that grow as well?
So I guess I would come in First Data.
First of all, Alex, thanks for the comments to support. First of all, I can say that with respect to the cross-sell, you're never going to get 100% overlap there because you do have a population of specialists that treat uveitis. But certainly I think we internally aspire to get that number up over 50% the next 12 months if we can, we can do that to drive revenue. Todd, if you want to comment on the other questions?
Yes.
Yes, Rick and Hi, Alex, how are you?
Thanks for the question on?
Elliot Maltz
Yes, the crossover, I agree with Rick, right?
We're not going to get all of it because there are a little bit difference in terms of the focus of the specialty and what we're looking at, you'll be either specialists. But if we can expand in the postsurgical inflammation with boutique and get retina specialists, looking at post-surgical inflammation as it is ubiquitous and there's a crossover there. So it's going to be a little bit of work to doing that.
But I agree with Rick, that the 50% seems like a good number to get to and we won't get all of it, but there's opportunity for crossover.
And in the past, we've talked about there was trialing and new drugs in the DME and then likely be the US market as well.
Rick Eiswirth
Just what's the latest on, I guess more or less that can it would have environment out there for both DME and uveitis yes, I think, Jamie, you are seeing some of the competitive aspect of a new entrant into the space in the second half of the year last year of competing with another strong rival and you are seeing some sampling that occurred in the second half of the year. That was pretty aggressive. So I think that has impacted us a little bit, but consistent with what we've seen in the past whenever new anti-VEGF comes along, although there's trial in the end, there still seems to be that block of patients that that comes through you know, it needs really a corticosteroid to treat the broader inflammation in the eye that the answer, but I just can't address. So although we'd lose patients for a period of time, maybe the trial of a stronger anti-VEGF, those patients ultimately work their way through to us.
Yes, absolutely.
And when can we expect top line data for the NEW DAY study it will be on it will be sometime in early 2025. The last patient last visits in Q4, so probably toward the end of the first quarter, early second quarter in 2020 by.
Elliot Maltz
Okay, got it. And then just two more questions. The first one really around now that you have the global rights here to the product portfolio, the expansion on the R & D line moving this into additional indications, maybe increasing the size of the current indications? What are your thoughts there?
Yes.
Rick Eiswirth
Look, I think design, as we talked about on last call and said today, we are continuing to look at places where we can do some indication expansion. I think a quarter conservatively using accurate 40 or 50 years you guys have heard me say that before because they work rig and there are other indications we have the protocol from AL. with the DRC are where we're looking at radiation retinopathy. And we've been having some advisory boards with doctors looking at some other potential indications that we could develop as the NEW DAY study of the Synchronicity study roll off we would probably redeploy that capital rather than see a big increase in our costs.
Elliot Maltz
Okay.
Got it.
And then there's lastly, kind of a clarification around the interest expense. It looked like it came in pretty high here for Q4, which is a normal interest rate expense to assume for 2024. And with the addition of the $5 million on top of it?
Yes, I think we I can take that question on. So we would expect a typical run rate to be around, you know, ballpark, let's call a EPS 3.5 million on a quarterly basis, but this was adjusted in Q4 because we met the one of the exit fee milestones with our loan agreement with SLR. that triggered 1.3 million of additional interest expense, and we do anticipate triggering an additional 2.4 million of such contingent interest related payments during 2024. So we do anticipate that over the first six to nine months of the year and then interest expense will again begin to normalize.
Okay, got it.
Rick Eiswirth
I appreciate the update.
Elliot Maltz
Thank you.
Rick Eiswirth
And you don't.
Operator
James Molloy, Alliance Global Partners.
James Molloy
Hey, good morning, guys. Thank you very much for taking my questions. And I was wondering if you could walk through sort of the what message it is sort of has resonated best with the docs here in the fourth quarter going forward or hasn't that sort of changed over the year, if at all? And can you walk through how many how many reps currently have working in other retention has been through the year?
Rick Eiswirth
You're talking about account on this as well. I think the big opportunity for us, especially now that we can talk about the two indications, inflammatory diseases, diabetes and for DMA. lot of the patients that are easy for us to go after those that are already on either direction, right? Because either Texas or Allergan has been promoting against diabetes and DME for a while as well. And so there's just a broader group of patients there that we go after and assist.
I think those conversations are successful opportunity for us for us as we are as we move forward and continue to be in 2024, while we await the new data and Synchronicity data we have about, we have 35 territories across the country right now on nuclear, we've had sort of I would call the normal attrition. We have some people that we have decided to turnover in the sales force. We have not had too many people leave to go to competitors or anything like that this year because I think we've got a pretty strong culture here, but we'll always have some turnover in the back half of that sales team. Tom, if you have anything you want to add to that?
Yes.
Yes.
Elliot Maltz
I'll add to that, Rick.
And as Rick said, in our other taxes that you know that the target there's opportunity to displace that competitively. And when we look at messaging at the end, we look at our advocates of use, they viewed the disease a little bit differently earlier, some more severe earlier. And then they link the effectiveness of our product to preserving vision and lowering your risk of losing vision. So we really need to leverage those two items and then really clarify where to position it. So it gets positioned earlier in the treatment Paradyne's.
Craig, you then maybe a quick housekeeping. Maybe you touched on it or in the prepared comments already. What was the G&A jump in G&A in the fourth quarter?
So yes, a few items, one-off events during the fourth quarter there was about 1 million of bad debt expense that we recognized in the fourth quarter that was related to pre-COVID sales of one of our European distributors. And then there's another $0.5 million of the severance expense that we recognized during the fourth quarter. Additionally, we had higher stock-based compensation expense and this was a result of an equity grant to certain employees during the fourth quarter, which also drove have a higher G&A balance when you look at things quarter over quarter, okay. There's about $2 million or so of one-timers in the quarter of approximately a little bit higher when you factor in G&A. But you're in the right ballpark are great.
Rick Eiswirth
Thank you very much for the questions.
Thanks, Jim.
Operator
This concludes the question and answer session. I would like to turn the conference back over to Rick Eiswirth for any closing remarks.
Rick Eiswirth
Thank you, and thank you all for participating on today's call and for your continued interest and support of Alimera. And we look forward to sharing our ongoing progress when we report our first quarter results in late April.
Thank you.
All very much and have a wonderful day.
Operator
The conference has now concluded, and thank you for attending today's presentation. You may now disconnect.
