Alimera Sciences(ALIM) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Alimera Sciences, Inc.'s unaudited condensed consolidated financial statements and notes for Q2 2024 and FY 2023 are presented Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (In thousands) | Metric (In thousands) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $10,828 | $12,058 | | Accounts receivable, net | $37,079 | $34,545 | | Inventory | $3,455 | $1,879 | | Total current assets | $55,408 | $52,423 | | Total assets | $150,377 | $153,524 | | Total current liabilities | $19,838 | $21,913 | | Notes payable, net of discount | $69,731 | $64,489 | | Total liabilities | $111,589 | $107,354 | | Total stockholders' equity | $38,788 | $46,170 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (In thousands, except share and per share data) | Metric (In thousands, except share and per share data) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | $27,000 | $17,538 | $50,011 | $31,084 | | Gross profit | $23,169 | $15,113 | $42,827 | $26,631 | | Total operating expenses | $23,246 | $16,321 | $45,206 | $31,141 | | Loss from operations | $(77) | $(1,208) | $(2,379) | $(4,510) | | Net loss before income taxes | $(3,354) | $(10,004) | $(9,637) | $(14,972) | | Net loss | $(3,311) | $(10,029) | $(9,562) | $(14,997) | | Net loss applicable to common stockholders | $(3,311) | $(10,698) | $(9,562) | $(15,680) | | Net loss per share — basic and diluted | $(0.06) | $(1.32) | $(0.18) | $(2.07) | Condensed Consolidated Statements of Comprehensive Loss Condensed Consolidated Statements of Comprehensive Loss (In thousands) | Metric (In thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(3,311) | $(10,029) | $(9,562) | $(14,997) | | Foreign currency translation adjustments | $(51) | — | $(199) | $172 | | Total other comprehensive (loss) income | $(51) | — | $(199) | $172 | | Comprehensive loss | $(3,362) | $(10,029) | $(9,761) | $(14,825) | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (In thousands) | Metric (In thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $460 | $(8,205) | | Net cash used in investing activities | $(132) | $(75,443) | | Net cash (used in) provided by financing activities | $(1,348) | $97,123 | | Net change in cash and cash equivalents and restricted cash | $(1,229) | $13,503 | | Cash and cash equivalents and restricted cash — end of period | $10,861 | $18,807 | Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (In thousands, except share data) | Metric (In thousands, except share data) | Balance, December 31, 2023 | Balance, June 30, 2024 | | :--------------------------------------- | :------------------------- | :--------------------- | | Common Shares | 52,354,450 | 52,387,763 | | Common Stock Amount | $524 | $524 | | Additional Paid-In Capital | $462,446 | $464,825 | | Accumulated Deficit | $(418,490) | $(428,052) | | Accumulated Other Comprehensive Loss | $(2,706) | $(2,905) | | Total Stockholders' Equity | $46,170 | $38,788 | Notes to Condensed Consolidated Financial Statements This section provides detailed notes on Alimera Sciences, Inc.'s accounting policies, significant transactions, and financial position 1. NATURE OF OPERATIONS Alimera Sciences, Inc. specializes in ophthalmic retinal pharmaceuticals and is undergoing a merger with ANI Pharmaceuticals, Inc. - Alimera Sciences, Inc. specializes in ophthalmic retinal pharmaceuticals, focusing on DME and NIU-PS with ILUVIEN® and YUTIQ® products[31] - The Company entered a Merger Agreement with ANI Pharmaceuticals, Inc. on June 21, 2024, where shareholders will receive $5.50 in cash and one contingent value right (CVR) per share[36][49] - CVRs entitle holders to potential milestone payments based on $140.0 million (2026) and $160.0 million (2027) net revenue targets for ILUVIEN and YUTIQ[49][50] 2. BASIS OF PRESENTATION Interim financial statements are prepared under U.S. GAAP and SEC regulations, with management anticipating sufficient liquidity - Interim financial statements are prepared in accordance with U.S. GAAP and SEC regulations, to be read with the 2023 Annual Report on Form 10-K[52][53] - As of June 30, 2024, cash and cash equivalents totaled $10.9 million, with management anticipating sufficient cash flow for the next 12 months[53] 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines the Company's key accounting policies, including asset acquisitions, foreign currency translation, and recent ASU adoptions - Pharmaceutical product licenses are accounted for as asset acquisitions, with costs assigned based on relative fair values[55] - Foreign subsidiary financial statements are translated into U.S. dollars, with translation adjustments in accumulated other comprehensive income (loss)[56] - ASU No. 2022-03 (Fair Value Measurement) and ASU No. 2023-07 (Segment Reporting) were adopted effective January 1, 2024, with no material financial impact[56][57] - New accounting standards, including ASU 2023-09 (Income Tax Disclosures), are not yet effective, with ASU 2023-09 effective January 1, 2025[58][59][60] 4. REVENUE RECOGNITION Revenue is recognized upon customer control of goods/services, including variable consideration and collaboration/license fees - Revenue is recognized when customers obtain control of goods or services, including estimates for variable consideration like rebates and discounts[62][64][65] - Collaboration and license revenue from upfront fees and milestone payments are recognized upon IP delivery or achieving high-probability sales targets[71][73] Provision for Credit Losses (In thousands) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :----------------------------- | :----------------------------- | | Beginning balance | $1,222 | $— | | Provision for credit losses | $176 | $1,496 | | Write-off of bad debt | $(1,212) | $(1,311) | | Ending Balance | $186 | $185 | 5. LEASES The Company applies FASB ASC 842 for leases, with practical expedients for transition and specific accounting for ROU assets and liabilities - The Company applies FASB ASC 842 – Leases, electing practical expedients and not recognizing ROU assets/liabilities for short-term leases[79] Operating Lease Supplemental Balance Sheet Information (In thousands) | Metric | June 30, 2024 | December 31, 2023 | | :----- | :------------ | :---------------- | | Right-of-use assets, net | $996 | $1,124 | | Total lease assets | $996 | $1,124 | | Total lease liabilities | $2,226 | $2,460 | Finance Lease Supplemental Balance Sheet Information (In thousands) | Metric | June 30, 2024 | December 31, 2023 | | :----- | :------------ | :---------------- | | Property and equipment, net | $589 | $554 | | Total lease assets | $589 | $554 | | Total lease liabilities | $489 | $450 | - Operating lease costs were $0.1 million (three months) and $0.3 million (six months) ended June 30, 2024[82] - Cash paid for operating leases was $0.2 million for both periods, while finance lease payments were $0.1 million and $0.2 million respectively[84][90] 6. INVENTORY Inventories are valued at the lower of cost or net realizable value using the FIFO method, comprising component parts, work-in-progress, and finished goods - Inventories are valued at the lower of cost or net realizable value using the FIFO method, including component parts, work-in-progress, and finished goods[92] Inventory Composition (In thousands) | Inventory Type | June 30, 2024 | December 31, 2023 | | :------------- | :------------ | :---------------- | | Component parts | $653 | $688 | | Work-in-process | $308 | $134 | | Finished goods | $2,494 | $1,057 | | Total Inventory | $3,455 | $1,879 | 7. INTANGIBLE ASSETS This section details the amortization and carrying amounts of ILUVIEN and YUTIQ intangible assets - The ILUVIEN intangible asset has a gross carrying amount of $25.0 million, with amortization expense of $0.5 million (three months) and $1.0 million (six months)[95] - The YUTIQ intangible asset, acquired for $75.0 million upfront, has a gross carrying amount of $96.4 million, with amortization expense of $2.4 million (three months) and $4.8 million (six months)[98] 8. LICENSE AGREEMENTS This section details the Company's exclusive license agreements for ILUVIEN and YUTIQ, including royalties and milestone payments - The Company holds a worldwide exclusive license from EyePoint for ILUVIEN technology, with royalties payable on global net revenues[101][102] - Alimera acquired exclusive commercialization rights to YUTIQ for $75.0 million upfront, plus $7.5 million in guaranteed 2024 quarterly payments and future royalties[104] - A June 19, 2024, agreement with SWK Funding, LLC modified the royalty payment to 3.125% on FAc product net revenues, with a change of control buyout option[109] - An exclusive license agreement with Ocumension (Hong Kong) Limited for ILUVIEN in Asia included a $10.0 million upfront payment and potential $89.0 million in milestone payments[113][114] - Royalty expense was $0.8 million (three months) and $1.7 million (six months) ended June 30, 2024, an increase from 2023[111] 9. LOAN AGREEMENTS This section details the Company's loan agreements, including refinancing, interest rates, and exit fee arrangements - The 2019 loan agreement with SLR Investment Corp. was refinanced and amended, increasing the facility to $72.5 million as of March 6, 2024[118][123] - The 2019 Loan Agreement's interest rate was approximately 10.48% as of June 30, 2024, with interest-only payments until April 30, 2025[124] - SLR exit fees, totaling up to $3.8 million, were triggered by revenue milestones, recognizing $1.1 million (Q1) and $0.3 million (Q2) in interest expense[126][127][128][129][130] 10. EARNINGS (LOSS) PER SHARE Basic and diluted EPS calculations are presented, noting that net losses render common stock equivalents anti-dilutive - Basic and diluted EPS are calculated using the two-class method, though preferred stockholders are not obligated to share in losses[135] - Due to net losses, basic and diluted net loss per share were identical, as common stock equivalents were anti-dilutive[136] Common Stock Equivalents Excluded from Diluted Net Loss Per Share Calculation | Metric | June 30, 2024 | June 30, 2023 | | :----- | :------------ | :------------ | | Common stock warrants | 1,600,000 | 1,600,000 | | Stock options | 3,275,893 | 1,217,045 | | Restricted stock units ("RSUs") | 869,638 | — | | Performance stock units ("PSUs") | 900,000 | — | | Total | 6,645,531 | 48,089,919 | 11. STOCKHOLDERS' EQUITY This section details changes in stockholders' equity, including preferred stock elimination and common stock issuance - The Company repurchased and eliminated all remaining 600,000 shares of Series A Convertible Preferred Stock in 2023[139] - In 2023, Series B Convertible Preferred Stock was issued for $79.0 million, converting into 43,617,114 common shares and Pre-Funded Warrants[140][141][142] - As of June 30, 2024, 52,387,763 common shares were outstanding, with no preferred stock outstanding[142] 12. STOCK-BASED COMPENSATION This section details stock-based compensation expenses, equity incentive plans, and stock option/RSU/PSU activity - The 2023 Equity Incentive Plan replaced the 2019 Plan, with a share reserve increasing annually by 6% of outstanding common stock[144][145] - Stock option compensation expense was approximately $0.5 million (three months) and $1.0 million (six months), with $4.5 million unrecognized[147] Stock Option Activity (Three Months Ended June 30) | Metric | 2024 Options | Weighted Average Exercise Price ($) | 2023 Options | Weighted Average Exercise Price ($) | | :----- | :----------- | :---------------------------------- | :----------- | :---------------------------------- | | Options outstanding at beginning of period | 3,239,384 | 7.38 | 1,216,953 | 18.03 | | Grants | 64,000 | 3.00 | 17,321 | 2.55 | | Forfeitures and expirations | (27,491) | 12.80 | (17,229) | 45.18 | | Options outstanding at period end | 3,275,893 | 7.25 | 1,217,045 | 17.43 | - Restricted stock and RSU compensation expense was $0.3 million (three months) and $0.6 million (six months), with $3.0 million unrecognized[160][161] - PSU compensation costs were $0.9 million for both periods, with 299,999 PSUs vesting in July 2024[165] 13. INCOME TAXES This section discusses deferred tax assets, valuation allowances, and net operating loss carry-forwards - Deferred tax assets and liabilities are recognized, with a full valuation allowance against U.S. deferred tax assets due to operating losses[168] - A tax benefit of less than $0.1 million was recorded for both periods, with the effective tax rate impacted by valuation allowances[170] - As of December 31, 2023, federal NOL carry-forwards were $146.8 million and state NOLs were $106.8 million, subject to Section 382 limitations[170][171] 14. SEGMENT INFORMATION Operations are managed as three reportable segments: U.S., International, and Operating Cost, evaluated by adjusted segment income or loss - Operations are managed as three reportable segments: U.S., International, and Operating Cost, evaluated by adjusted segment income or loss[175] - For Q2 2024, U.S. segment net revenue was $17.6 million (65% of consolidated), and International segment net revenue was $9.4 million[179] - For H1 2024, U.S. segment net revenue was $32.1 million (64% of consolidated), and International segment net revenue was $17.9 million[184] - Two large U.S. distributors accounted for 65% (three months) and 64% (six months) of consolidated product revenues[178] 15. FAIR VALUE This section outlines the Company's fair value measurements, including the hierarchy and valuation of derivative instruments - The Company applies FASB ASC 820, Fair Value Measurements, establishing a hierarchy based on input observability[186][187] - The Ocumension warrant asset is a Level 2 derivative instrument, valued using the Black-Scholes model, with changes in the statement of operations[188][191] Assets Measured at Fair Value (In thousands) | Metric | Level 1 | Level 2 | Level 3 | Total | | :----- | :------ | :------ | :------ | :---- | | Warrant asset (June 30, 2024) | $— | $7 | $— | $7 | | Warrant asset (December 31, 2023) | $— | $52 | $— | $52 | 16. SUBSEQUENT EVENTS This section reports significant events occurring after the reporting period, including new manufacturing agreements and equity vesting - On July 17, 2024, a new Manufacturing Services Agreement was entered with Siegfried Irvine for ILUVIEN manufacturing and supply[192] - In July 2024, 299,999 PSUs vested, and in August 2024, Pre-Funded Warrants were exercised for 1,996,402 common shares[194] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Alimera Sciences, Inc.'s financial condition, operations, merger activities, products, market, and liquidity for Q2 2024 and FY 2023 Overview Alimera Sciences, Inc. is a global pharmaceutical company focused on improving retinal health through long-term treatment of chronic retinal diseases - Alimera Sciences, Inc. is a global ophthalmic retinal pharmaceutical company, improving retinal health with ILUVIEN® and YUTIQ®[196] Agreement and Plan of Merger with ANI Pharmaceuticals, Inc. and ANIP Merger Sub INC. This section details the merger agreement with ANI Pharmaceuticals, Inc., including terms, conditions, and associated costs - On June 21, 2024, Alimera entered a Merger Agreement with ANI Pharmaceuticals, Inc., converting each common share into $5.50 cash and one CVR[197] - The merger is subject to customary closing conditions, including regulatory and stockholder approvals, with Alimera restricted from soliciting alternative proposals[198][200] - CVRs offer potential milestone payments based on $140.0 million (2026) and $160.0 million (2027) net revenue targets for ILUVIEN and YUTIQ[210][211][213] - Merger Agreement costs totaled $2.2 million for both periods ended June 30, 2024, recorded in general and administrative expenses[215] ILUVIEN and YUTIQ This section describes ILUVIEN and YUTIQ, their commercialization, and their CONTINUOUS MICRODOSING™ technology - ILUVIEN (0.19 mg) is commercialized for DME and NIU-PS globally, while YUTIQ (0.18 mg) is for chronic NIU-PS in the U.S[216] - Both products use CONTINUOUS MICRODOSING™ to deliver consistent FAc levels for up to three years, mitigating side effects and reducing recurrence[217][218][225] Disease Overview and Market Opportunity This section outlines the market opportunity for DME and uveitis, and ongoing clinical studies for ILUVIEN and YUTIQ - DME affects 750,000 people in the U.S., and chronic NIU-PS affects 60,000-100,000 people annually, both leading causes of blindness[227][228][231] - The NEW DAY Study (300 DME patients) evaluates ILUVIEN, with data expected in 2025; the SYNCHRONICITY Study (110 patient eyes) evaluates YUTIQ[232][233][235] - ILUVIEN is also being studied in a DRCR Retina Network trial for preventing visual acuity loss from radiation retinopathy[237] Where We Market ILUVIEN to Treat Diabetic Macular Edema ("DME") This section lists territories where ILUVIEN is authorized, reimbursed, and available for treating Diabetic Macular Edema (DME) ILUVIEN Marketing Authorization, Reimbursement, and Availability for DME | Category | Territories | | :------- | :---------- | | Indication for Treatment of DME | U.S., Australia, Bahrain, United Arab Emirates, U.K., Germany, France, Italy, Spain, Portugal, Ireland, Austria, Norway, Poland, the Netherlands, Luxembourg | | Territories Where ILUVIEN Has Received Reimbursement Approval to Treat DME | U.S., Kuwait, Lebanon, United Arab Emirates, U.K., Germany, France, Italy, Spain, Portugal, Ireland, Luxembourg, the Netherlands | | Territories Where ILUVIEN is Currently Available to Treat DME | U.S., Bahrain, Kuwait, Lebanon, United Arab Emirates, U.K., Belgium, Czech Republic, Germany, France, Italy, Spain, Portugal, Ireland, Austria, Luxembourg, Denmark, Norway, Finland, Sweden, the Netherlands | Where We Market ILUVIEN and YUTIQ to Treat Chronic Non-Infectious Uveitis Affecting the Posterior Segment of the Eye ("NIU-PS") This section lists territories where ILUVIEN and YUTIQ are authorized, reimbursed, and available for treating chronic NIU-PS ILUVIEN and YUTIQ Marketing Authorization, Reimbursement, and Availability for NIU-PS | Category | Territories | | :------- | :---------- | | Indication for the Treatment of NIU-PS | U.S. (YUTIQ), U.K., Germany, France, Spain, Portugal, Ireland, Italy, Austria, Belgium, Denmark, Norway, Finland, Sweden, Poland, Czech Republic, the Netherlands, Luxembourg, United Arab Emirates (ILUVIEN) | | Territories Where ILUVIEN Has Received Marketing Authorization to Treat NIU-PS | U.K., Germany, France, Spain, Portugal, Ireland, Italy, Austria, Belgium, Denmark, Norway, Finland, Sweden, Poland, Czech Republic, the Netherlands, Luxembourg, United Arab Emirates | | Territories Where ILUVIEN Has Received Reimbursement Approval to Treat NIU-PS | U.K., Germany, Ireland, Italy, France, Portugal, Spain, Czech Republic, Luxembourg, the Netherlands | | Territories Where ILUVIEN is Currently Marketed to Treat NIU-PS | U.K., Germany, France, Spain, Portugal, Ireland, Italy, Austria, Belgium, Denmark, Norway, Finland, Sweden, Czech Republic, the Netherlands, Luxembourg, United Arab Emirates | Where We Sell ILUVIEN Direct This section identifies the countries where Alimera Sciences, Inc. directly markets and sells ILUVIEN - Alimera commercially markets ILUVIEN directly in the U.S., Germany, the U.K., Portugal, and Ireland[243] Where We Sell ILUVIEN Through Distributors This section lists the countries where Alimera Sciences, Inc. sells ILUVIEN through third-party distributors - The Company sells ILUVIEN through distributors across Europe, Australia, New Zealand, China, Western Pacific, and the Middle East[244] Sources of Revenues Revenue is primarily generated from ILUVIEN and YUTIQ sales, supplemented by licensing fees and royalties - Revenue is primarily from ILUVIEN and YUTIQ sales, with additional sources including upfront fees, milestone payments, and royalties[264] - Sales efforts focus on formulary access, physician education on product efficacy and safety, and patient/caregiver education[245][246] - For Q2 2024, two large U.S. pharmaceutical distributors accounted for 65% of consolidated product revenues[247] Transactions with Ocumension Therapeutics ("Ocumension") This section details the exclusive license agreement with Ocumension for ILUVIEN in Asia, including upfront payments and warrants - An exclusive license agreement with Ocumension for ILUVIEN in Asia included a $10.0 million upfront payment and potential $89.0 million in milestone payments[248][250] - The Company received 1,000,000 non-transferable warrants from Ocumension, revalued at each reporting date[252] Agreements with EyePoint Parent and EyePoint This section outlines licensing, collaboration, and supply agreements with EyePoint for ILUVIEN and YUTIQ - Alimera holds a worldwide license from EyePoint for steroid use in its proprietary insert technology for ocular diseases[254] - The New Collaboration Agreement converted profit share to a royalty of 6% (up to $75.0 million) and 8% (above), with a $15.0 million Future Offset[255] - Alimera acquired exclusive commercialization rights to YUTIQ for $75.0 million upfront, plus $7.5 million in guaranteed 2024 quarterly payments and future royalties[256] - A commercial supply agreement with EyePoint Parent ensures exclusive YUTIQ supply for U.S. commercialization until May 2025, with automatic renewals[257] SWK Agreements This section details agreements with SWK Funding, LLC, including royalty sales and modifications to royalty payments - EyePoint sold its royalty interest under the New Collaboration Agreement to SWK Funding, LLC in December 2020[259] - A June 19, 2024, agreement with SWK modified the royalty payment to 3.125% on FAc product net revenues, with a change of control buyout option[260] Consolidated Results of Operations This section provides a consolidated overview of the Company's financial performance, including revenue, expenses, and net loss per share Revenue Net revenue increased significantly, driven by YUTIQ acquisition and higher ILUVIEN unit sales Net Revenue (In thousands) | Period | 2024 | 2023 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Three Months Ended June 30 | $27,000 | $17,538 | $9,462 | 54% | | Six Months Ended June 30 | $50,011 | $31,084 | $18,927 | 61% | - Net revenue increase was primarily driven by YUTIQ in the U.S. segment and increased ILUVIEN unit sales internationally[264][265] Cost of Goods Sold, Excluding Depreciation and Amortization, and Gross Profit Cost of goods sold increased due to higher product sales, while gross profit and margin remained stable Cost of Goods Sold (COGS) and Gross Profit (In thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | COGS (excluding D&A) | $(3,831) | $(2,425) | $(7,184) | $(4,453) | | Gross Profit | $23,169 | $15,113 | $42,827 | $26,631 | | Gross Margin | 86% | 86% | 86% | 86% | - COGS increase was primarily due to increased product sales, driven by the YUTIQ acquisition and higher ILUVIEN unit sales[266][268] Research, Development and Medical Affairs Expenses Research, development, and medical affairs expenses increased due to higher consultant, clinical study, and personnel costs Research, Development and Medical Affairs Expenses (In thousands) | Period | 2024 | 2023 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Three Months Ended June 30 | $4,263 | $3,648 | $615 | 17% | | Six Months Ended June 30 | $8,624 | $7,812 | $812 | 10% | - The increase was primarily due to higher consultant, clinical study, personnel, and ILUVIEN registration costs[271][272] General and Administrative Expenses General and administrative expenses increased significantly, mainly due to professional fees related to the ANI Merger Agreement General and Administrative Expenses (In thousands) | Period | 2024 | 2023 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Three Months Ended June 30 | $7,379 | $4,373 | $3,006 | 68% | | Six Months Ended June 30 | $12,811 | $8,544 | $4,267 | 51% | - The increase was mainly driven by $2.0 million in professional fees for the ANI Merger Agreement, higher personnel costs, and stock-based compensation[274] Sales and Marketing Expenses Sales and marketing expenses increased due to higher personnel costs and expanded marketing efforts for YUTIQ Sales and Marketing Expenses (In thousands) | Period | 2024 | 2023 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Three Months Ended June 30 | $8,511 | $6,434 | $2,077 | 33% | | Six Months Ended June 30 | $17,593 | $12,238 | $5,355 | 44% | - The increase was primarily due to higher personnel costs and increased marketing costs for YUTIQ, conventions, and customer engagement[276] Operating Expenses Total operating expenses increased significantly, driven by merger-related costs, sales and marketing expansion, and amortization Total Operating Expenses (In thousands) | Period | 2024 | 2023 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Three Months Ended June 30 | $23,246 | $16,321 | $6,925 | 42% | | Six Months Ended June 30 | $45,206 | $31,141 | $14,065 | 45% | - Total operating expenses increased due to $2.2 million in merger-related G&A, $1.8 million in sales/marketing expansion, $1.2 million in YUTIQ amortization, and $1.2 million in stock compensation[263][277] Interest Expense and Other, Net Interest expense increased significantly due to triggered exit fees and higher interest on additional borrowings Interest Expense and Other, Net (In thousands) | Period | 2024 | 2023 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Three Months Ended June 30 | $3,153 | $1,694 | $1,459 | 86% | | Six Months Ended June 30 | $6,892 | $3,361 | $3,531 | 105% | - The increase was primarily due to $1.4 million in triggered exit fees and increased interest on additional borrowings[263][279] Basic and Diluted Net Loss Applicable to Common Stockholders per Share of Common Stock Basic and diluted net loss per share were identical due to net losses, rendering potentially dilutive securities anti-dilutive Net Loss Per Share | Period | 2024 | 2023 | | :----- | :--- | :--- | | Three Months Ended June 30 | $(0.06) | $(1.32) | | Six Months Ended June 30 | $(0.18) | $(2.07) | - Basic and diluted net loss per share were identical due to net losses, making potentially dilutive securities anti-dilutive[263][280][281] Results of Operations – Segment Review This section reviews the financial performance of the U.S., International, and Operating Cost segments, highlighting key revenue and expense drivers - Segments (U.S., International, Operating Cost) are evaluated based on segment income or loss, adjusted for non-cash items[283] U.S. Segment Results U.S. segment net revenue increased significantly, driven by the YUTIQ acquisition, while G&A decreased and S&M increased U.S. Segment Net Revenue and Gross Profit (In thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | $17,558 | $11,876 | $32,110 | $19,456 | | Gross profit | $15,633 | $10,586 | $28,761 | $17,261 | - U.S. net revenue increased by 48% (three months) and 65% (six months), primarily driven by the YUTIQ acquisition[285][288][291] - U.S. G&A expenses decreased by 73% (three months) and 59% (six months), mainly due to reduced bad debt and insurance costs[289][292] - U.S. S&M expenses increased by 23% (three months) and 42% (six months), driven by higher personnel and YUTIQ marketing costs[290][293] International Segment Results International net revenue increased significantly due to distributor stocking and end-user demand, with higher sales and marketing expenses International Segment Net Revenue and Gross Profit (In thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | $9,442 | $5,662 | $17,901 | $11,628 | | Gross profit | $7,536 | $4,527 | $14,066 | $9,370 | - International net revenue increased by 65% (three months) and 54% (six months), driven by increased distributor stocking and end-user demand[294][296][298] - International S&M expenses increased by 29% (three months) and 21% (six months), primarily due to higher marketing and personnel costs[297][299] Operating Cost Segment Results Operating Cost segment expenses increased, primarily driven by professional fees related to the ANI Merger Agreement Operating Cost Segment Expenses (In thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research, development and medical affairs expenses | $2,137 | $1,033 | $4,462 | $3,266 | | General and administrative expenses | $5,263 | $2,619 | $8,920 | $4,814 | | Sales and marketing expenses | $474 | $225 | $908 | $291 | | Total operating expenses | $7,874 | $3,877 | $14,290 | $8,371 | - Operating Cost G&A expenses increased by 104% (three months) and 85% (six months), largely due to $2.0 million in ANI Merger Agreement professional fees[300][301][303][304] Other Other operating expenses increased significantly, mainly due to higher depreciation, amortization, and stock compensation Other Operating Expenses (In thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating expenses | $4,552 | $2,083 | $8,481 | $2,989 | | Depreciation and amortization | $3,093 | $1,866 | $6,178 | $2,547 | - Operating expenses in 'Other' increased by 119% (three months) and 183% (six months), primarily due to higher depreciation, amortization from YUTIQ, and increased stock compensation[306][307][308] Liquidity and Capital Resources This section discusses the Company's cash position, funding outlook, debt, and equity transactions Overview The Company has incurred recurring losses and negative cash flow, but anticipates sufficient liquidity for the next 12 months, assuming merger consummation - The Company incurred recurring losses and negative cash flow, with a stockholders' equity deficit of $428.1 million as of June 30, 2024[309] - As of June 30, 2024, cash and equivalents totaled $10.9 million, with sufficient funding anticipated for 12 months, assuming merger consummation[310][311] - Non-consummation of the merger may necessitate alternative financing, potentially leading to substantial dilution or requiring lender permission[311] Sources and Uses of Cash for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 Operating cash flow improved significantly, while investing activities decreased and financing activities shifted to net cash used - Net cash provided by operating activities was $0.5 million, a significant improvement from $8.2 million used in the prior year[313][314] - Net cash used in investing activities was $0.1 million, significantly lower than $75.4 million in 2023, which included intangible asset acquisition[315] - Net cash used in financing activities was $1.3 million, primarily due to licensor obligations and exit fees, partially offset by $5.0 million from loan amendment[315] Indebtedness This section details the Company's loan agreements, including facility increases, interest-only periods, and compliance with covenants - The 2019 Loan Agreement with SLR Investment Corp. was amended, increasing the facility to $72.5 million, with interest-only payments until April 30, 2025[317][322] - The Company maintained compliance with its revenue covenant, with non-compliance potentially accelerating loan maturity[324] - Increased SOFR rates would raise interest costs, potentially impacting operations and debt obligations[323] Series A Convertible Preferred Stock and Elimination The Company repurchased and eliminated all remaining Series A Convertible Preferred Stock in 2023 - In 2023, the Company repurchased and eliminated the remaining 600,000 shares of Series A Convertible Preferred Stock[325] Series B Preferred Stock Financings and Elimination Series B Convertible Preferred Stock was issued and subsequently converted into common shares and Pre-Funded Warrants - In 2023, Series B Convertible Preferred Stock was issued for $79.0 million, converting into 43,617,114 common shares and Pre-Funded Warrants[327] - In August 2024, Pre-Funded Warrants were exercised for 1,996,402 common shares, with no remaining outstanding warrants[328] Common and Preferred Stock The Company's authorized capital stock includes common and preferred shares, with only common shares outstanding as of June 30, 2024 - Authorized capital includes 150,000,000 common shares and 10,000,000 preferred shares; 52,387,763 common shares were outstanding as of June 30, 2024[329] Contractual Obligations and Commitments This section details contractual obligations, including clinical study expenses and manufacturing agreements - The NEW DAY Study incurred $0.6 million (three months) and $1.6 million (six months) in expenses, with $1.5 million expected for H2 2024[330] - A new Manufacturing Services Agreement with Siegfried Irvine for ILUVIEN manufacturing was entered on July 17, 2024, with a five-year term[332] - The Cadence Agreement for ILUVIEN applicator component manufacturing expires October 30, 2025, with less than $1.0 million expected for H2 2024[333][334] Off-Balance Sheet Arrangements The Company has no relationships with unconsolidated entities or financial partnerships resulting in off-balance sheet arrangements - The Company has no off-balance sheet arrangements with unconsolidated entities or financial partnerships[336] Impact of Recent Accounting Pronouncements Refer to Note 3 in the Interim Financial Statements for details on recent accounting pronouncements and their anticipated effects - Refer to Note 3 in the Interim Financial Statements for details on recent accounting pronouncements and their anticipated effects[337] Foreign Exchange Fluctuations in foreign currency exchange rates negatively impacted net product revenue for the six months ended June 30, 2024 - Foreign currency exchange rate fluctuations decreased net product revenue by approximately $0.1 million for the six months ended June 30, 2024[338] Non-GAAP Financial Measure The Company provides non-GAAP Adjusted EBITDA to offer additional insight into its underlying performance - The Company provides non-GAAP Adjusted EBITDA for additional insight into underlying performance, used consistently by management[339] Reconciliation of U.S. GAAP Net Loss to Non-GAAP Adjusted EBITDA (In thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | U.S. GAAP net loss | $(3,311) | $(10,029) | $(9,562) | $(14,997) | | Non-GAAP adjusted EBITDA | $6,714 | $875 | $8,518 | $(1,521) | ITEM 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Alimera Sciences, Inc. is exempt from providing market risk disclosures in its Form 10-Q - The Company is exempt from market risk disclosures as it qualifies as a "smaller reporting company"[343] ITEM 4. Controls and Procedures Management concluded Alimera Sciences, Inc.'s disclosure controls were effective as of June 30, 2024, with no material changes in internal control - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2024, by management[344] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2024[345] - Control systems provide reasonable assurance, acknowledging inherent limitations where misstatements may not be detected[346] PART II. OTHER INFORMATION ITEM 1. Legal Proceedings Alimera Sciences, Inc. is not a party to any threatened or pending material litigation and has no contingency reserves - The Company is not involved in any threatened or pending material legal proceedings and has no contingency reserves[347] ITEM 1A. Risk Factors This section updates risk factors from the 2023 Form 10-K, focusing on economic uncertainties, the pending ANI merger, and manufacturing/regulatory challenges Economic Uncertainties and Downturns Prolonged economic uncertainties, geopolitical tensions, and supply chain disruptions may adversely affect the Company's business - Prolonged economic uncertainties, including inflationary pressures, geopolitical tensions, and supply chain disruptions, may adversely affect the business[349] - Negative economic trends could impact reimbursement from government and private insurers, potentially reducing product sales and revenue[350] Risks Related to the Pending Merger with ANI Pharmaceuticals Failure to complete the ANI merger could lead to stock price decline, termination fees, business disruption, and differing interests for executives - Failure to complete the merger could lead to stock price decline, a $10.4 million termination fee, negative publicity, and diverted management resources[353][355] - Merger pendency could disrupt operations, affect employee retention, and strain relationships with collaborators, suppliers, and customers[354] - Executive officers and directors may have interests in the merger that differ from stockholders, including accelerated equity vesting and severance[359] - If the merger is consummated, stockholders receive cash and CVRs, but lose equity interests in the surviving corporation, limiting future upside[360] Manufacturing and Regulatory Compliance Risks Non-compliance with cGMP, supplier issues, and changes in manufacturing processes pose significant risks to commercialization and regulatory approvals - Failure to comply with FDA cGMP and similar foreign regulations could harm commercialization and approvals, leading to sanctions or production interruptions[360] - EyePoint Parent, a YUTIQ supplier, received an FDA warning letter in July 2024 for cGMP violations, potentially affecting YUTIQ supply[360][361] - Changes in manufacturing processes or facilities require prior FDA review/approval, potentially delaying product launch or requiring additional clinical testing[362] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds Alimera Sciences, Inc. reports no unregistered sales of equity securities or use of proceeds for the period - None reported[365] ITEM 3. Defaults Upon Senior Securities Alimera Sciences, Inc. reports no defaults upon senior securities for the period - None reported[365] ITEM 4. Mine Safety Disclosures Mine Safety Disclosures are not applicable to Alimera Sciences, Inc.'s operations - Not applicable[365] ITEM 5. Other Information Alimera Sciences, Inc. reports no other information for the period - Not applicable[365] ITEM 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including the Merger Agreement, organizational documents, and certifications - Key exhibits include the Merger Agreement, organizational documents, equity incentive plans, loan agreements, manufacturing services agreements, and certifications[367] Signatures The report was signed by Richard S. Eiswirth, Jr., President and CEO of Alimera Sciences, Inc., on August 7, 2024 - The report was signed by Richard S. Eiswirth, Jr., President and Chief Executive Officer of Alimera Sciences, Inc., on August 7, 2024[368]