DALLAS, TX / ACCESSWIRE / April 27, 2016 / Stonegate Capital Partners initiates research coverage on Alimera Sciences, Inc. (NASDAQ: ALIM).
Company Description
Since its founding in 2003, Alimera Sciences, Inc. has focused on researching, developing and commercializing therapeutics for the eye. In 2005, the Company acquired licensing rights to ILUVIEN®, a long-term corticosteroid implant. Subsequently, Alimera began primarily concentrating on diseases affecting the retina, and particularly on diabetic macular edema (DME), a multi-billion dollar market with a significant and rapidly growing patient population that was underserved by available therapeutics. ILUVIEN received FDA approval in September 2014, and Alimera began marketing the product in the U.S. in April 2015. In addition to the U.S., ILUVIEN is approved for marketing, or is currently marketed, in 17 European countries, Australia, Canada and the Middle East. Alimera is based in Alpharetta, Georgia and has approximately 150 employees.
Summary
Alimera has displayed solid, sequential growth in revenue and new accounts since its early 2015 product launch, despite some challenges; however, doctors are seeing the benefits of treating DME, a long-term, chronic disease, with ILUVIEN, a long-term sustainable therapeutic.
- In 2015, the Company grew revenue by 166% over the previous year to reach $22.4 million. The majority of the growth is due to the U.S. launch of ILUVIEN and the corresponding growth in accounts from four in January 2015 to 312 by year-end. Management has the goal of breakeven EBITDA by Q4 2016.
- The current standard of care for DME involves anti-VEGF therapies, including EYLEA from Regeneron (NASDAQ: REGN) and Lucentis from Genentech (subsidiary of Roche Holding AG). However, approximately 40% to 50% of people with DME do not adequately respond to anti-VEGF treatments, leaving a very large population with unmet needs, and creating an estimated $2 billion market opportunity for ILUVIEN.
- ILUVIEN offers multiple advantages over anti-VEGFs, including lower price, longer duration, and greater effectiveness in treating inflammation. It is noteworthy, however, that Alimera is not in direct competition with these industry giants—we believe that there is a place for each of these therapies in the treatment of DME.
- Alimera recently reported over 5,000 injections globally to date, with only 7 reported incidents of filtration surgery (glaucoma surgery), demonstrating an even better safety profile in "real life" than in trials. This is a critical competitive advantage in marketing of this relatively still new approach to treatment, alleviating what worries doctors the most concerning patient safety.
- The January 1, 2016 activation of ILUVIEN's J-code, a code that uniquely identifies ILUVIEN for reimbursement, should ease the process, and eliminate the uncertainty, of reimbursement. The Company has reported that the number of benefit investigations (BIs), which are leading indicators of future sales, has increased substantially since the issuance of the J-code, providing evidence that physicians have likely delayed the purchase of ILUVIEN until the code is in place, which bodes well for 2016 sales.
- Alimera has an impressive management team, especially for a company of this size. This group of senior executives, most of whom have worked together for the last 13 years, have decades of experience working in multi-national pharmaceutical companies, have launched multiple pharmaceutical products in both the U.S. and abroad, and have proven track records in their respective areas of expertise.
- The Company reported revenue growth in 2015 of approximately 170%, and we have conservatively estimated that sales will climb Y-O-Y in 2016 approximately 70%, reaching in excess of $38M, which is an EV/S multiple of 2.7x vs. the average of the competitors of 4.8x.
Valuation
We are projecting total revenue of $38.4M, or a 71% increase FY16 E over FY15. We believe this to be a conservative estimate given the growth potential in such a significant market. We have assumed improving gross margins over the year, growing from an average of 92.1% in FY15 to an annual average of approximately 92.9% for FY16 E. We do not project significant increases in overhead in the upcoming year, in line with management's comments, and note that the team plans to continue investing in R&D as commercialization of ILUVIEN continues to progress through increasing physician (as well as patient) awareness of the medical benefits.
Alimera has recently reported bringing the Company into compliance with newly negotiated terms on its Hercules debt facility, and thus for the time being we have factored in approximately $4.1M in interest expense for FY16 E. The Company also has a significant deferred tax asset as of 12/31/15 that will defray the majority of tax costs in the foreseeable future. We estimate a net loss of ($31.9M), or ($0.65) per diluted share, for FY16 E, vs. the prior year's loss of ($30.6M), or ($0.69) per share. Adjusted EBITDA, a clearer reflection of operations for ALIM, improves from ($31.4M) in FY15 to ($18.1M) in FY16 E.
The Company had cash on hand of $31M as of 12/31/15 and a recently renegotiated credit facility bringing the Company into line with covenants, but we note the likelihood of raising or accessing additional capital in the upcoming year as Alimera grows its top line.
On a comparable company basis for FY16 estimates, ALIM currently trades at an EV/S multiple of 2.7x while its industry peers trade at an average multiple of 4.8x, EV/S. The Company is well positioned to capture additional share within its sizable target market, with an experienced management team, a seasoned sales and marketing team in place and its permanent J-code now approved to facilitate reimbursement. With continued execution of its growth strategy leading to further improvement in its financial metrics and expansion within its target population both domestically and abroad, ALIM should not stay at its current price point for long.
The full report can be accessed by clicking the following link:
http://www.stonegateinc.com/reports/ALIM_April_2016 Final.pdf
About Stonegate Capital Partners
Stonegate Capital Partners is a Dallas-based corporate advisory firm dedicated to serving the specialized needs of small-cap public companies. Since our inception, our mission has been to find innovative, undervalued public companies for our network of leading institutional investors who seek high quality investment opportunities.
SOURCE: Stonegate Capital Partners
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