ALIMERA SCIENCES, INC. The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and the related notes (Interim Financial Statements) that appear elsewhere in this quarterly report on Form 10-Q. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results may differ materially from those discussed in these forward-looking statements due to a number of factors. For further information regarding forward-looking statements, please refer to the "Special Note Regarding Forward-Looking Statements and Projections" immediately after the index to this report above.
Overview
We market ILUVIEN directly in the
Where We Market ILUVIEN to Treat Diabetic Macular Edema (DME)
ILUVIEN has received marketing authorization for the use of ILUVIEN to treat DME for the indications and in the countries shown in the following table:
Countries
Where ILUVIEN
Countries Has Countries Where
Where ILUVIEN Has Received ILUVIEN is
Received Marketing Reimbursement Currently
Indication for the Authorization Approval to Marketed
Treatment of DME to Treat DME Treat DME to Treat DME
Treatment of DME in U.S., Australia, U.S., Kuwait, U.S., Kuwait,
patients who have been Canada, Kuwait, Lebanon and the Lebanon and the
previously treated Lebanon and the United Arab United Arab
with a course of United Arab Emirates Emirates
corticosteroids and Emirates
did not have a
clinically significant
rise in intraocular
pressure
Treatment of vision The United The U.K., The U.K.,
impairment associated Kingdom (U.K.), Germany, France, Germany, France,
with chronic DME Germany, France, Italy, Spain, Italy, Spain,
considered Italy, Spain, Portugal, Portugal,
insufficiently Portugal, Ireland, Ireland,
responsive to Ireland, Luxembourg and Austria,
available therapies Austria, the Netherlands Luxembourg,
Belgium, Denmark, Sweden,
Denmark, Norway, Finland and the
Finland, Sweden, Netherlands
Poland, Czech
Republic, the
Netherlands and
Luxembourg
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Where We Market ILUVIEN to Treat Recurrent Non-Infectious Uveitis Affecting the Posterior Segment of the Eye (NIU-PS)
ILUVIEN has received marketing authorization for the use of ILUVIEN to treat NIU-PS for the indications and in the countries shown in the following table:
Countries Countries
Where ILUVIEN Has Where ILUVIEN Has Countries Where
Received Received ILUVIEN is
Marketing Reimbursement Currently
Indication for the Authorization Approval to Treat Marketed
Treatment of NIU-PS to Treat NIU-PS NIU-PS to Treat NIU-PS
The prevention of The U.K., The U.K., The U.K. Germany,
relapse in recurrent Germany, France, Germany, Ireland Ireland,
NIU-PS Spain, Portugal, (private sector), Luxembourg,
Ireland, Austria, Luxembourg and Denmark, Sweden,
Belgium, Denmark, the Netherlands Finland and the
Norway, Finland, Netherlands
Sweden, Poland,
Czech Republic,
the Netherlands
and Luxembourg
We launched ILUVIEN for the NIU-PS indication in
ILUVIEN became commercially available in
Effects of the COVID-19 Pandemic
The unprecedented events of the COVID-19 pandemic, and its unpredictable duration, in the regions where we have customers, employees and distributors have had an adverse effect on our sales of ILUVIEN and thus on our net revenues and may in the future have an adverse effect on our liquidity and financial condition. These adverse effects of the pandemic on us have resulted from the following, among other factors:
•Governments and private parties imposed limitations on in-person access to physicians, which adversely affects us in at least two ways. First, these limitations can affect patient access to treatment. Because ILUVIEN is administered only by an injection into the eye, telemedicine is not a viable substitute when administration of treatment is required. Second, limitations on in-person access to physicians also makes it difficult or impossible for our sales representatives (including those employed by our distributors) to meet with retina specialists and their staff to educate them about ILUVIEN.
•Our business is also negatively affected by patients' concerns in the current environment. Prior to the pandemic, most of our ILUVIEN sales were driven by the use of ILUVIEN to treat diabetic macular edema, or DME. Given that health authorities have cited diabetes as a factor that places a person at higher risk for severe illness from the COVID-19 pandemic, many DME patients are unwilling to visit their physicians in person (even if otherwise permitted) for fear of contracting the COVID-19 coronavirus.
•In addition to the effects of limitations on in-person access to physicians, limitations on travel within and between the countries in which we market and sell ILUVIEN, as well as various types of "shelter in place" orders, have curtailed our in-person marketing activities.
These limitations and other effects of the COVID-19 pandemic have had an adverse impact on our revenues beginning late in the first quarter of 2020 and continuing through the date of this report. We expect these factors to continue to adversely impact our revenue and capital resources, and the extent and duration of that impact is uncertain at this time, particularly in light of the emergence of COVID-19 variants that may increase the transmissibility of the coronavirus or be more deadly, or both. As more and more people in our markets are vaccinated and as governmental restrictions are gradually lifted, however, we look forward to the prospect of a return to more normal conditions later this year and continuing the growth trends we saw prior to the COVID-19 pandemic. (Please refer to "Special Note Regarding Forward-Looking Statements and Projections" above.)
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In response to these developments, we have implemented measures to mitigate the impact of the pandemic on our financial position and operations. These measures include the following:
•We are continuing to manage our cost structure, managing spending where possible to mitigate any anticipated loss of revenue.
•Because we believe that our employees are critical to both (a) serving our customers and patients through alternative forms of engagement as the pandemic-related restrictions continue, and (b) realizing the long-term value of ILUVIEN, we have maintained our staffing levels and do not currently have any plans to reduce them.
On
•a Share Purchase Agreement with Ocumension, pursuant to which we offered and
sold to Ocumension 1,144,945 shares of our common stock at a purchase price of
•an Exclusive License Agreement (License Agreement) with a wholly owned
subsidiary of Ocumension, pursuant to which we granted an exclusive license for
the development and commercialization of our 190 microgram fluocinolone
acetonide intravitreal implant in applicator under Ocumension's own branded
label in
For more information about the Ocumension transaction, see Note 16 of our notes
to the accompanying Interim Financial Statements and our Current Report on Form
8-K filed with the
Sources of Revenues
Our revenues for the three months ended
License Agreement with
Under the
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Results of Operations
Three Months Ended
March 31,
2021 2020
(In thousands, except share and
per share data)
NET REVENUE $ 11,214 $ 14,535
COST OF GOODS SOLD, EXCLUDING DEPRECIATION AND
AMORTIZATION (1,562) (1,927)
GROSS PROFIT 9,652 12,608
RESEARCH, DEVELOPMENT AND MEDICAL AFFAIRS EXPENSES 3,213 2,883
GENERAL AND ADMINISTRATIVE EXPENSES 3,413 2,983
SALES AND MARKETING EXPENSES 4,818 5,870
DEPRECIATION AND AMORTIZATION 638 654
OPERATING EXPENSES 12,082 12,390
(LOSS) INCOME FROM OPERATIONS (2,430) 218
INTEREST EXPENSE AND OTHER (1,343) (1,292)
UNREALIZED FOREIGN CURRENCY GAIN (LOSS), NET 125 (81)
NET LOSS BEFORE TAXES (3,648) (1,155)
PROVISION FOR TAXES - (43)
NET LOSS $ (3,648) $ (1,198) NET LOSS PER COMMON SHARE - Basic and diluted
5,755,424 4,980,722
Net Revenue
We generate revenue from ILUVIEN, our only product. In addition to generating revenue from product sales, we intend to seek to generate revenue from other sources such as upfront fees, milestone payments in connection with collaborative or strategic relationships, and royalties resulting from the licensing of ILUVIEN or any future product candidates and other intellectual property. Additionally, revenue from our international distributors fluctuates depending on the timing of the shipment of ILUVIEN to the distributors and the distributors' sales of ILUVIEN to their customers.
Net revenue decreased by approximately
Cost of Goods Sold, Excluding Depreciation and Amortization, and Gross Profit
Gross profit is affected by costs of goods sold, which includes costs of manufactured goods sold and royalty payments to EyePoint under the New Collaboration Agreement. Additionally, cost of goods sold by our international distributors fluctuates depending on the revenue share attributable to the respective contract.
Cost of goods sold, excluding depreciation and amortization, decreased by
approximately
Gross profit decreased by approximately
Research, Development and Medical Affairs Expenses
Currently, our research, development and medical affairs expenses are primarily focused on activities that support ILUVIEN and include salaries and related expenses for research and development and medical affairs personnel, including medical science liaisons. Our research,
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development and medical affairs expenses also include costs related to the provision of medical affairs support, including symposia development for physician education, and costs related to compliance with FDA, EEA or other regulatory requirements. We expense both internal and external development costs as they are incurred.
Research, development and medical affairs expenses increased by approximately
General and Administrative Expenses
General and administrative expenses consist primarily of compensation for employees in executive and administrative functions, including finance, accounting, information technology, training and employee development. Other significant costs include facilities costs and professional fees for accounting and legal services, including legal services associated with obtaining and maintaining patents and managing license agreements. We expect to continue to incur significant costs to comply with the corporate governance, internal control and similar requirements applicable to public companies.
General and administrative expenses increased by approximately
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of third-party service fees and compensation for employees for the commercial promotion, the assessment of the commercial opportunity of, the development of market awareness for, the pursuit of reimbursement approval for and the commercialization of ILUVIEN, including launch plans for ILUVIEN in new markets. Other costs include professional fees associated with developing plans for ILUVIEN or any future products or product candidates and maintaining public relations.
Sales and marketing expenses decreased by approximately
Operating Expenses
As a result of the increases and decreases in various expenses described above,
total operating expenses decreased by approximately
Interest Expense and Other
Interest Expense and Other was
Basic and Diluted Net Loss Applicable to Common Stockholders per Share of Common Stock
We follow FASB Accounting Standards Codification, Earnings Per Share (ASC 260), which requires the reporting of both basic and diluted earnings per share. Because our preferred stockholders participate in dividends equally with common stockholders (if we were to declare and pay dividends), we use the two-class method to calculate EPS. However, our preferred stockholders are not contractually obligated to share in losses.
Basic EPS is computed by dividing net loss available to stockholders by the weighted average number of shares outstanding for the period. Diluted EPS is calculated in accordance with ASC 260 by adjusting weighted average shares outstanding for the dilutive effect of common stock options, restricted stock units and warrants. In periods where a net loss is recorded, no effect is given to potentially dilutive securities, because the effect would be anti-dilutive.
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Common stock equivalent securities that would potentially dilute basic EPS in
the future, but were not included in the computation of diluted EPS because they
were either classified as participating and do not share in losses or would have
been anti-dilutive, were approximately 1,715,210 for the three months ended
Results of Operations - Segment Review
The following selected unaudited financial and operating data are derived from our Interim Financial Statements. The results and discussions that follow reflect how executive management monitors the performance of our reporting segments.
During the first quarter of 2021, our Chief Executive Officer (CEO), who is our
chief operating decision maker (CODM), changed the manner in which the CODM
monitors performance, aligns strategies and allocates resources, which resulted
in a change in our operating segments. Our operations are now managed as three
operating segments:
Our
Each of our
U.S. Segment Three Months Ended March 31, 2021 2020 (In thousands) NET REVENUE$ 5,647 $ 7,068 COST OF GOODS SOLD, EXCLUDING DEPRECIATION AND AMORTIZATION (751) (759) GROSS PROFIT 4,896 6,309 RESEARCH, DEVELOPMENT AND MEDICAL AFFAIRS EXPENSES 725 1,107 GENERAL AND ADMINISTRATIVE EXPENSES 241 260 SALES AND MARKETING EXPENSES 3,278 4,154 OPERATING EXPENSES 4,244 5,521 SEGMENT INCOME FROM OPERATIONS $ 652 $ 788
Net revenue. Net revenue decreased by approximately
Cost of goods sold, excluding depreciation and amortization. Cost of goods sold,
excluding depreciation and amortization, decreased slightly by approximately
Research, development and medical affairs expenses. Research, development and
medical affairs expenses decreased by approximately
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three months ended
General and administrative expenses. General and administrative expenses
decreased by approximately
Sales and marketing expenses. Sales and marketing expenses decreased by
approximately
International Segment
Three Months Ended
March 31,
2021 2020
(In thousands)
NET REVENUE $ 5,567 $ 7,467
COST OF GOODS SOLD, EXCLUDING DEPRECIATION AND
AMORTIZATION (811) (1,168)
GROSS PROFIT 4,756 6,299
RESEARCH, DEVELOPMENT AND MEDICAL AFFAIRS EXPENSES 941 825
GENERAL AND ADMINISTRATIVE EXPENSES 587 550
SALES AND MARKETING EXPENSES 1,334 1,491
OPERATING EXPENSES 2,862 2,866
SEGMENT INCOME FROM OPERATIONS $ 1,894 $ 3,433 International Segment - three months ended
Net revenue. Net revenue decreased by approximately
Cost of goods sold, excluding depreciation and amortization. Cost of goods sold,
excluding depreciation and amortization, decreased by approximately
Research, development and medical affairs expenses. Research, development and
medical affairs expenses increased by approximately
General and administrative expenses. General and administrative expenses
increased by approximately
Sales and marketing expenses. Sales and marketing expenses decreased by
approximately
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Operating Cost Segment
Three Months Ended
March 31,
2021 2020
(In thousands)
RESEARCH, DEVELOPMENT AND MEDICAL AFFAIRS EXPENSES
2,396 1,901
SALES AND MARKETING EXPENSES 143 125
OPERATING EXPENSES 4,077 2,909
SEGMENT LOSS FROM OPERATIONS $ (4,077) $ (2,909) Operating Cost Segment - three months ended
Research, development and medical affairs expenses. Research, development and
medical affairs expenses increased by approximately
General and administrative expenses. General and administrative expenses
increased by approximately
Sales and marketing expenses. Sales and marketing expenses increased by approximately$10,000 , or 8%, to approximately$140,000 for the three months endedMarch 31, 2021 , compared to approximately$130,000 for the three months endedMarch 31, 2020 . Other Three Months EndedMarch 31, 2021 2020 (In thousands)
RESEARCH, DEVELOPMENT AND MEDICAL AFFAIRS EXPENSES
189 272
SALES AND MARKETING EXPENSES 63 100
DEPRECIATION AND AMORTIZATION 638 654
OPERATING EXPENSES 899 1,094
SEGMENT LOSS FROM OPERATIONS $ (899) $ (1,094) Our CEO, who is our chief operating decision maker, manages and evaluates our
Operating expenses in the Other decreased by approximately
Depreciation and amortization was approximately
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Liquidity and Capital Resources
Overview
Since inception, we have incurred recurring losses, negative cash flow from
operations and have accumulated a deficit in stockholders' equity of
As explained above in "Effects of the COVID-19 Pandemic," the unprecedented events of the COVID-19 pandemic, and its unpredictable duration, in the regions where we have customers, employees and distributors have had an adverse effect on our sales of ILUVIEN and thus on our net revenues and capital resources. The extent and duration of that impact is uncertain at this time, particularly in light of the emergence of COVID-19 variants that may increase the transmissibility of the coronavirus or be more deadly, or both.
Since
Indebtedness
2019 Solar Loan Agreement. On
On
On
(a)reflected Agent's consent to our delivery of Board-approved annual financial
projections for 2021 by
(b)specified the minimum revenue amount, calculated on a trailing six-month basis and tested at the end of each calendar quarter in 2021, that we must achieve for each such period (Revenue Covenant);
(c)required that the Revenue Covenant be tested at
(d)provided that in future years we must deliver to Agent and the Lenders as
soon as available after approval thereof by our Board, but no later than the
earlier of (x) 15 days after such approval and (y)
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entire current fiscal year as approved by our Board; provided that any revisions to such projections approved by our Board shall be delivered to Agent and the Lenders no later than seven days after such approval.
Paycheck Protection Program Loan. On
Recent
On
Current Cash Position
As of
We cannot be sure that additional financing will be available when needed or that, if available, the additional financing could be obtained on terms that are not significantly detrimental to us or our stockholders. If we were to raise additional funds by issuing equity securities, substantial dilution to existing stockholders could result, and the terms of any new equity securities may have a preference over our common stock. If we were to attempt to raise additional funds through strategic collaboration agreements, we may not be successful in obtaining those agreements, or in receiving milestone or royalty payments under them. If we were to attempt to raise additional funds through debt financing, we would be required to obtain the permission or participation of Solar Capital, which we might not be able to obtain. Our recurring losses and any potential needs to raise capital create substantial doubt about our ability to continue as a going concern for the next 12 months following the issuance of the Interim Financial Statements for the filing of this Form 10-Q.
Sources and Uses of Cash for the three months ended
For the three months ended
For the three months ended
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For the three months ended
For the three months ended
For the three months ended
For the three months ended
Contractual Obligations and Commitments
On
In
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established to facilitate off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of SEC Regulation S-K) or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships. We enter into guarantees in the ordinary course of business related to the guarantee of our own performance and the performance of our subsidiaries.
Impact of Recent Accounting Pronouncements
See Note 3 of our notes to Interim Financial Statements for a description of recent accounting pronouncements, including the expected dates of adoption and expected effects on results of operations and financial condition, if known.
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