Edited Transcript of ALIM earnings conference call or presentation 30-Apr-20 1:00pm GMT

In the first quarter this year, we continue to build on the growth that we achieved in the second half of 2019. Revenues for the quarter were $14.5 million, up 12% compared to the $12.9 million reported in the first quarter of last year.

Importantly, we achieved this growth despite the temporary shortage of inventory in our U.S. business and then the end of quarter impact caused by the COVID-19 pandemic. Additionally, the comparative quarter in 2019 included an estimated benefit of $800,000 in ILUVIEN sales related to the stock out of OZURDEX, a competitive product in Germany.

All factors considered, we are especially pleased with our first quarter 2020 results and growth. U.S. net sales in the period were $7.1 million, up 4% over 2019’s first quarter. End-user demand for ILUVIEN declined to 855 units in the first quarter of 2020 compared to 939 in the same period last year. We believe this decrease in end-user demand was primarily driven by the impact of the coronavirus, reducing patient visits with physicians and therefore injection volumes in addition to the temporary out-of-stock situation we counted earlier in the quarter. We addressed the temporary out-of-stock situation in February, and we believe we currently have sufficient inventory in our supply chain to meet demand. We continue to work with our third-party manufacturers regarding production of ILUVIEN during this pandemic.

Turning to our International segment. We continue to benefit from geographic diversity in line with our strategy and our prior guidance. Our International segment continues to grow as a percentage of our revenue. In the first quarter of 2020, we reported International segment sales of $7.5 million, up 23% versus the $6.1 million reported last year. Importantly, we saw growth across all of our international markets in Q1, driven by both ILUVIEN’s diabetic macular edema indication as well as uptake in usage behind our uveitis indication.

In addition to these positive revenue results, we realized positive adjusted EBITDA for the second consecutive quarter, recognizing $1.3 million in the first quarter of 2020 compared to $27,000 in the first quarter of 2019.

Interest expense on our debt facility was only $1.1 million for the quarter. The first quarter is typically a seasonally low volume quarter for ILUVIEN due to the change in the calendar year and the impact on patient insurance approvals and deductibles in the U.S. We are very proud of our performance in the first quarter, given both our positive revenue results and our positive adjusted EBITDA and also believe they are both key indicators of our financial stability as we move forward.

I’ll now turn the call over to Phil to review the first quarter results in more detail. And afterward, I will provide some insights into our operations and our plans to deal with the COVID-19 environment. Phil?

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J. Philip Jones, Alimera Sciences, Inc. – CFO [4]

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Thanks, Rick, and hello, everyone. Our detailed financial results from the first quarter are in our earnings press release from last evening, and you can — which can be found on our website. Our consolidated net revenue grew approximately 12% to $14.5 million compared to $12.9 million in the first quarter of 2019. Total operating expenses decreased by approximately 4% to $12.2 million for the first quarter of 2020 compared to $12.7 million for the first quarter of 2019. The decrease was due to higher levels of investment and spending in 2019 on market access in Europe for the uveitis indication, the U.S. direct-to-patient program and the European uveitis launch.

In February 2020, we announced that we achieved a revenue milestone of $30 million in trailing 6-month revenues stipulated in our debt agreement with Solar. This achievement enabled us to draw down an additional $2.5 million to strengthen our balance sheet. We also added approximately $300,000 in cash to our balance sheet in the normal course of business during the quarter. As a result, on March 31, 2020, we had cash and cash equivalents of approximately $12.2 million, an increase of $2.8 million from the $9.4 million in cash and cash equivalents that we reported on December 31, 2019.

As we reported last week, on April 22, we obtained an additional $1.8 million in support from the federal government under the Paycheck Protection Program. And as mentioned previously, please refer to our earnings release for additional financial information.

And with that, I’ll now turn the call back over to Rick to speak to our plans relative to COVID-19 situation. Rick?

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Richard S. Eiswirth, Alimera Sciences, Inc. – President, CEO & Director [5]

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Thank you, Phil. Like many companies, the COVID-19 environment has brought many challenges to our company over the last several weeks. As we’ve previously discussed, almost all of our employees are working from home. Both our access and patients’ access to physicians have been limited in the regions where we operate since mid-March. Patients have also been unwilling to visit physicians due to concerns about possible exposure to the coronavirus. As a result, ILUVIEN utilization has been suppressed. These limitations had an adverse impact on our business late in the first quarter and in the month of April. Even as restrictions are lifted in certain regions, we expect that the pandemic will continue to adversely impact our ability to operate as we did before, and it is difficult to project the extent of that impact today as this situation continues to evolve.

As we announced earlier this month, we have withdrawn any previously communicated guidance regarding revenue growth and cash flow in 2020. However, we do believe that the COVID-19 experience highlights the unique value of ILUVIEN. As you may recall, the true value of ILUVIEN is its continuous microdosing technology that is designed to reduce the recurrence of inflammation and edema to offer clinical benefits for extended periods of time, which often reduce the need for frequent physician visits. We think this is significant for vulnerable patients with DME and noninfectious uveitis affecting the posterior segment, who are at higher risk for things like COVID-19 and who have other comorbidities. We believe that the pandemic highlights the value of ILUVIEN and the physician treatment paradigms. Specifically, ILUVIEN can mitigate the loss of the therapeutic benefit in patients treated with short-acting acute therapies and the inability of physicians to provide re-treatment during and after the epidemic when patients cannot or are not willing to visit the office. Both may prove particularly attractive if a second wave of COVID-19 infection hits as predicted by some health experts.

ILUVIEN provides continuous treatment for up to 3 years. This is just important — just as important for non-pandemic environments when DME and uveitic patients miss visits and injections as a result of other serious illnesses or other reasons. The reduction in the number of office visits and procedures that ILUVIEN offers can reduce the risk of COVID-19 exposure to patients with other comorbidities. The reduction in the number of lost visits and the procedures can also relieve the burden on practices and hospitals across the U.S. and Europe as patients start coming back for treatment.

We believe ILUVIEN is well positioned, and we have the opportunity now for physicians to see the therapy in a new light. Physicians will need to manage through the significant backlog of patients that is currently building, and we believe they will need to reduce the risk of COVID-19 exposure to patients by adopting a therapy like ILUVIEN that requires fewer office visits than short-acting acute therapies.

Despite the current limitations that are resulting in lower volume of ILUVIEN sales, we believe it is important to continue working with hospitals and physician practices across our markets to provide ILUVIEN for patients in need. To address the current environment, yet support this belief, we quickly made the decision to manage our cost structure in the second quarter, minimizing all non-payroll spending where possible to mitigate any anticipated loss of revenue in this quarter. We don’t believe that significant external spending on the commercial and medical activities to promote ILUVIEN can deliver efficient benefit at this time in most circumstances.

We do believe that our employees are both critical — are critical to both serving our customers and patients as the pandemic-related restrictions are lifted in the coming weeks and months and in realizing the long-term value of ILUVIEN. Therefore, although we have significantly reduced spending with external vendors, we have not made any changes with respect to staffing at this time, and we do not have any plans to do so. While our employees are working from home, they are engaging with doctors, providing valuable education and virtual content through webinars, advisory boards and CME programs.

We are preparing our sales force with remote detailing capabilities to speak to physicians online, where access may remain limited in the hospitals and physician practices for a while. And we are continuing our social media strategy, urging patients and doctors to consider ILUVIEN with its consistent dosing and long-lasting vision benefit, especially given the enhanced importance of these benefits while social distancing remains in effect.

We believe this strategy as well as the funds we receive from the Paycheck Protection Program for payroll costs will help us mitigate the loss of revenue during the second quarter. This will allow us to continue to serve physicians treating patients facing a loss of vision from diabetic macular edema and uveitis affecting the posterior segment of the eye.

With the discussion now moving toward markets reopening, we are cautiously optimistic that the restrictions on patient treatments will abate, and we hope to begin to getting back to a more normal method of doing business before the end of this quarter. However, due to the geographic reach of Alimera Sciences, our reentry to the market will be staged based upon the level and duration of government restrictions remaining and the ability to see physicians from region to region. We are developing reentry plans for each country and territory in which we operate individually. We believe there are many patients out there who risk significant decline in their vision and would expect these patients to be in line for a treatment as soon as practical.

It would be an understatement to say that the COVID-19 pandemic is having a significant impact on many businesses, some of which will never recover. It has certainly impacted our business, but we see it as an opportunity to be more appreciated and to create more value for Alimera shareholders. Our opportunity to grow revenue in the future remains significant beyond COVID-19, and our corporate priorities remain as stated before: Increasing unit demand for ILUVIEN in both the U.S. and our international markets where we have direct sales and in other markets in which we work with distributors; expanding geographically into new markets in which ILUVIEN is approved; increasing the market availability of ILUVIEN as a treatment for noninfectious uveitis affecting the posterior segment of the eye; and assisting our partners and delivering strong growth of ILUVIEN as a treatment for DME with anticipated launches in their markets for the uveitis indication later this year and into next.

And with that overview, we are now ready to take questions from the operator.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Today’s first question comes from Andrew J. D’Silva with B. Riley FBR, Inc.

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Andrew Jacob D’Silva, B. Riley FBR, Inc., Research Division – Senior Analyst [2]

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You both sound healthy, and everything from that regard is going okay. But just to start, obviously, one of the clear benefits ILUVIEN has versus other offerings, as you referenced, is this ability to help with adherence, carrying that over now to COVID-19, especially as it relates to potential emergent use and how ILUVIEN has the ability to limit the number of hospital visits as it relates to COVID-19. So basically, the question is, to date, have actual providers reached out to get more information on ILUVIEN as it relates to its ability to help with some of the guidelines related to social distancing and shelter in place? Or is that maybe more of a marketing idea that you guys are thinking about utilizing in a potential future second outbreak that could potentially take place?

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

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I mean it’s a little bit of a mixed bag. I would say, anecdotally, we have had some doctors reach out to us and connect with us and say things as significant as, “Gosh, I wish I’ve had more ILUVIEN patients or more patients on ILUVIEN before they started,” because it would help with the inability of patients to come back to the office. I think it’s a message that we certainly do think about a lot, and we are starting to test with some doctors. But frankly, until recently, we thought it was a little bit too raw or a little bit too soon to push that too hard. It is something that — with the doctors we have closer relationships, we are pushing because we do think that benefit is there. And I think there’s a significant opportunity for that in Europe as we move forward because a lot of the public hospitals have had physicians redeployed to other disease states and they expect a big rush of patients to come back in at some point. And so I think this is something to help manage the burden on those hospitals and the utilization later. We hope that carries over to the U.S., too. But it’s a little bit too early to tell, but that’s sort of anecdotal feedback, but it’s certainly in our plans to emphasize it more thoroughly.

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

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Okay. Great. And then when we’re looking at the European sales, do you suspect that part of the reason why it was so strong was because of the ability to expand the amount of time between patient visits or do you expect it’s just more related to some other factors like getting the label expansion for uveitis or just a better distribution footprint?

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Richard S. Eiswirth, Alimera Sciences, Inc. – President, CEO & Director [5]

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Well, it’s a combination of things. I mean, I think going back to some things we’ve discussed before, we talked about just a fantastic presence that we had at the EURETINA conference back in September with respect to both DME and uveitis and ILUVIEN being talked about, how valuable it is in reducing the recurrence of the diseases. And I talked about Dr. Mandell who has been saying that they needed to think about using ILUVIEN as the — a new or better way to treat the disease. So I think there’s continued to be overhang with respect to that in DME. I think the uveitis indication has certainly helped. I think probably what we’ve seen over the last 3 months is a greater percentage of our usage in Germany and the U.K. probably being for uveitis, which has certainly helped just because physicians often — although we don’t necessarily agree with this, but physicians consider the uveitis patient to be a little bit more severe because they’re younger and that inflammation unchecked can lead pretty quickly to blindness. So I do think it’s probably a little bit more weighted toward uveitis in Europe over the last couple of months, but I do think our DME business continues to get stronger there as well.

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

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Okay. That makes sense. And you touched on this as far as the reopening goes in Medicare changing its guidance. I was just curious if you could give any sort of just anecdotal thoughts on how things have gone so far in the second quarter? And if there has been any sort of change that you’ve noticed with providers since that guidance change was made by Medicare?

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Richard S. Eiswirth, Alimera Sciences, Inc. – President, CEO & Director [7]

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You know in the — I mean, we’re 28 days in the quarter or 29 days in the quarter, so I’m very hesitant to give a lot of guidance on where we’re going to end up because this situation continues to change every day. I will tell you that what we hear from talking to physicians out there is that their patient volumes coming through their practices is anywhere from 60% to 80% down or they’re seeing 20% to 40% of the patients that they had been seeing prior to some of the quarantine and the shelter in place and social distancing rules.

Overall, from a global perspective, I don’t feel like our business is down quite that much. And that’s probably due to the patients that are being put on ILUVIEN, whether it’s for DME or uveitis or probably some of the more severe patients. And they are — they just can’t sit out of the office that long and be untreated. So they’re finding a way to get back in. So we’ve been hurt, but probably not to that extent. Anecdotally, things feel like it’s getting a little bit better over the last 2 weeks, but it’s a very, very small number to even come to any conclusion what it’s going to look like for the full quarter. So we’re going to continue to position that we’re really withholding guidance for the quarter until we have a better feel.

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

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No, that’s fair. That was interesting data, too. And then just last question, as it relates to either getting a regional approval or reimbursement set in place for uveitis launches either in Portugal or the Benelux countries, is there any sort of update there that you can provide?

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Richard S. Eiswirth, Alimera Sciences, Inc. – President, CEO & Director [9]

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Yes. I mean, it’s all in progress. We hope — we certainly hope we’re working with our partner, Horus, on the Benelux launch. And the hope that — sitting at home and quarantine in space, that process has slowed down a little bit. Once people sort of get back in the office, we’ll have a better feel on how to project that. But we are working. We’re still actively working with the team at Horus every day, even though we’re at home, on how to get them set up for the fourth quarter, most likely for the DME launch in the Benelux territories.

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

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Best of luck going forward, and stay safe and healthy.

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Richard S. Eiswirth, Alimera Sciences, Inc. – President, CEO & Director [11]

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Absolutely. Andy, hope you and your family are safe too.

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Operator [12]

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The next question comes from James Molloy of Alliance Global Partners.

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James Francis Molloy, Alliance Global Partners, Research Division – MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [13]

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Rick, had a question on EU versus the U.S. on getting sort of hit the hardest as you’re seeing in the second quarter. And I thought your comments were illustrative on the 20% to 40% of the prior volumes anecdotally sort of what you’re seeing. Is that — can you sort of compare and contrast the EU versus U.S.? And sort of which, you think, is maybe getting hit the hardest and where you may be seeing signs of a potential turnaround?

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Richard S. Eiswirth, Alimera Sciences, Inc. – President, CEO & Director [14]

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Well, I mean, I think what we’ve seen is sort of — the pandemic sort of moved East to West across our geographies, the same way it has across the world, right? So we started to see an impact in Europe sooner. And I think we’re starting to see sort of a release of some of the pressure in Europe as well sooner. I think that Europe has been helped by the fact that we had that uveitis indication, as I alluded to in my comments to Andy earlier. So I think that’s really why you see a little bit more impact in the U.S. Canada, we did, we had that brief out-of-stock situation in the U.S. as well that hurt us. I think if I was to try to quantify, and it is a little bit of a guess, but I sort of split the shortfall in our quarter about a 30% to 40% tied to the stock out and somewhere between 60% and 70% tied to the coronavirus in the U.S., where we’re all. Certainly, if we hadn’t any either one of those issues, I was very, very comfortable with the mid-teens to — mid- to high-teens growth that we had talked about before in the U.S. because the demand is certainly out there. It’s just been hampered by the coronavirus recently.

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James Francis Molloy, Alliance Global Partners, Research Division – MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [15]

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Okay. And I guess it would seem your comment earlier that the 20% to 40% seems to be sort of down — or 20% to 40% volume appears to be somewhat of a hard floor given that you’ve — the more severe patients really have to get into see the doctor and. Obviously, knowing sales can go to 0 at some point, but what do you think the lowest level you guys are likely going to get to? Is the 20%, 40% down seem at this point like sort of the worst-case scenario?

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Richard S. Eiswirth, Alimera Sciences, Inc. – President, CEO & Director [16]

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Well, my reference to the 20% to 40% down was the volume of patients that are going through the doctor’s office. It’s not specific to our sales because what we’re seeing from a sales perspective is different in every geography. But I do think that the 20% to 40% is probably the bottom of what the doctors will see. The doctors, specifically in the U.S., they’ve got to get back to work because — all these individual practices is there — that’s where their salary comes from, right? They’ve got to get back to work. They got to start seeing patients. So I expect that you’re going to start to see, especially if states are opening up, I mean in Georgia, where we are, is one of the first to open up, I expect that these patients will start making their way back to the office over the course of the month of May, for sure.

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James Francis Molloy, Alliance Global Partners, Research Division – MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [17]

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Last question. Obviously, this disease — isn’t taking a vacation just because of COVID. The last question is, any rethinking on the cost structure at Alimera, given your experience now with folks working from home? Is there — are there opportunities to look at some of your fixed costs that you don’t need? And maybe kind of shot in the dark, any opportunity for the doctors should this continue to take this into — or for a nurse practitioner to take this into a patient’s home and treat the patient. I know it’s not the most complicated procedure. Is this something that could be done at a — in home basis?

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Richard S. Eiswirth, Alimera Sciences, Inc. – President, CEO & Director [18]

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Yes. Look, we really stripped down our external spending, as I’ve said during the quarter, because we’re trying to make sure we mitigate the loss. And frankly, unlike quite a few other companies out there, where they’ve had to either layoff or furlough employees, I just, I don’t think that’s the right answer for Alimera long term, right? So we’ve temporarily really adjusted our cost structure. I think that the COVID situation will change how we need to operate going forward, right? There’s the ability to do more virtual stuff, and I think some of that will stick. So I think we will continue to evaluate what we do and where we allocate that spending. But as I’ve always said, with respect to Alimera, our goal is to really drive revenue and maintain financial stability. So even as we generate more and more revenue, I would expect there to be, over the longer term, just a shift in our cost, if anything, but continue to man that slightly positive EBITDA, so that we’re investing dollars and to grow in the top line.

With respect to the doctors, I do know that there are physicians out there and retina specialists that, at the moment, are trying to utilize telemedicine a little bit more. But that’s challenging for retina specialists, right? I mean, you can’t do an OCT and look at the back of the eye and figure out how much fluids in the back of the eye over the telephone or over a computer. So I’m sure it will have some changes in the day-to-day operations of the physician practices, but I don’t think that you’re going to be able to avoid the frequent office visits, unless they shift to more greater usage of something like ILUVIEN that provides that more durability and reduces the recurrence of the disease. And certainly, we plan to try to leverage that positioning over the coming months and year.

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Operator [19]

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Please proceed.

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William Patrick Fafinski, Craig-Hallum Capital Group LLC, Research Division – Research Analyst [20]

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This is actually Will Fafinski, on for Alex here. First one for me. I’m just wondering how you guys are positioning the sales force to sell in this post-COVID world. And if you can just comment on their ability to access the retina clinics in the medium to longer term?

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

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Yes, sure. So we are putting all of the — all of our sales reps globally in a position where they can use — do virtual meetings with the doctors and engage with them over the Internet and engage with them remotely because we think it’s really important and critical that they have that. With respect to what access is going to be, it’s really on a region-by-region basis and on a doctor-by-doctor basis. And so we actually have some training that will be happening today and tomorrow to sort of prepare the reps individually on how to think about, they go back to market in their individual territories, the types of questions they ask doctors to make sure the doctors are comfortable with them visiting. We are providing full PPE for all of our reps, so that if they are able to go into the doctor’s offices soon, they’re protected and they’re protecting the doctors, the office staff and the patients in that office as well.

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William Patrick Fafinski, Craig-Hallum Capital Group LLC, Research Division – Research Analyst [22]

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Got it. Understood. And then just on a higher level, would you say that some of these ILUVIEN orders are lost during the COVID shutdowns? Are these lost forever or would you guys expect to see some pent-up demand once centers start to come back online?

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Richard S. Eiswirth, Alimera Sciences, Inc. – President, CEO & Director [23]

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Well, it’s the same thing I said earlier. It’s a little bit too early to tell, but I certainly — I don’t believe these patients are lost forever. Because the reality is the only other alternative to ILUVIEN are these acute therapies that I’ve often said last a month or 2 months or 3 months on the outside. So even if the patients happen to get in acute therapy, they’re back and available for ILUVIEN in a very short period of time. I do hope that the value of ILUVIEN is sort of a little bit more clear, a little more evidence to the doctors as we go through this because a patient that, for example, needed to be treated every 6 weeks and did not get that retreatment until 8 or 9 weeks later most likely suffered a more significant loss of visual acuity for a period of time than they had in a long time or had ever lost. And the value of ILUVIEN being on board and protecting that eye consistently every day, hopefully that’s a little more clear to the doctors. So my hope is that we see a bump, but I don’t have any insight into how or when that might occur at this time.

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William Patrick Fafinski, Craig-Hallum Capital Group LLC, Research Division – Research Analyst [24]

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No, completely understood. That’s extremely helpful. And then last one for me. You touched on it with Andy, but how much is uveitis really contributing to the strength or did contribute to the strength here in Q1? And just during the shutdowns in EU, are docs still ordering ILUVIEN for uveitis cases since that’s more time-dependent at the EU side. Just any more color there would help.

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Richard S. Eiswirth, Alimera Sciences, Inc. – President, CEO & Director [25]

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Yes. So we don’t have specific script data on uveitis versus DME in Europe. I do know that some of the larger uveitis centers have been increasing the usage of ILUVIEN. We had a — we worked with Moorfields Hospital in the U.K. to put on a webcast on how they had modified their sort of treatment regimen for treating uveitis patients that were more severe in this case, and we had a couple hundred doctors or technicians on that call. So I know it is being discussed more and more out there. I can’t quantify it, but I can tell you I’m really happy that we have that indication in Europe. And I’m thrilled with what our team in Europe has done in the way they’ve positioned that drug and continue to work with the KOLs over there and increasing usage. So it certainly helped. The only other thing I’d say about it, Will, is I’ve tried to stress the point many times that although we have 1 product, we do continue to diversify our story, whether it is being in more and more countries or with that additional indication in Europe. And that diversification is another thing that helps us weather some of the ups and downs that you have in any story.

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Operator [26]

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Our next question comes from Yi Chen with H.C. Wainwright.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division – MD of Equity Research & Senior Healthcare Analyst [27]

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Could you remind us that what is the reason for the shortage in stock in the U.S. in the first quarter? And do you expect to recur in the future?

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

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Yes. As we talked about back during the fourth quarter call, it was a combination of increased demand in the fourth quarter. And then literally, over the Christmas holidays, we had an issue with a piece of manufacturing equipment that needed to be repaired, which was, frankly, just more difficult to deal with over the Christmas holidays. So it’s been repaired, we’re working on redundancies there. There will always be risk as a small company that we have single source of supply. But we feel like we’re in pretty good shape for inventory and staying well ahead of the game now. And we haven’t had any issues with suppliers shutting down or slowing deliveries to us during the pandemic. So I feel like we’re in good shape there.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division – MD of Equity Research & Senior Healthcare Analyst [29]

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And could you provide us a breakdown of the current sales force distribution between U.S. and Europe?

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

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Sure. In the U.S., we have 30 territories, we have 30 reps in the U.S. Our total field force, when you take into account the regional directors, our reimbursement specialists, our thought leader liaisons, et cetera, it’s about 45 employees out in the field in the U.S. And then in Europe, our field force is probably about 30 employees spread across Portugal, Germany and the U.K.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division – MD of Equity Research & Senior Healthcare Analyst [31]

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Got it. Last question. In Germany, I heard that the government has made it mandatory to wear a face mask everywhere in a public places. Do you think in countries like Germany or other European countries who have similar policies, they might recover — economy might recover faster than the U.S. and therefore, your sales in Europe could resume back to normal levels sooner than the U.S.?

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Richard S. Eiswirth, Alimera Sciences, Inc. – President, CEO & Director [32]

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Yi, that’s a tough one for me to answer. I mean, I really can’t comment on the economy in Germany and how quickly that might recover. I’m probably not the best person to answer that today. I mean, I think our — we do have some reps that have been able to get out in the field in Germany and actually see doctors over the last week. I don’t — I honestly don’t know if I would say that, that’s because Germany has done a better job of maintaining the situation or simply because the recovery is sort of spreading sort of East to West, as I referred to earlier.

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Operator [33]

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(Operator Instructions) Our next question comes from [Lawrence Lytton] with [Second Line Capital].

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Unidentified Analyst, [34]

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It sounds like you’re keeping the staffing at normal levels. But in terms of some external costs, you’re cutting where possible. So what is the cash cost reduction that you’re able to take out of the quarter going forward?

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

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So Larry, we’re not quantifying that. I will tell you that our payroll cost is just under about 50% of what we spend on a regular basis, right? So we’re able to — there’s a lot that we can manage out there. We’re really looking that on a day-to-day basis as the sales continue to evolve. And frankly, I’ll probably make more changes next week if some of the trends continue. But really, our goal is to try to operate right there around breakeven for the quarter if we can do it. And that’s sort of the way we’re kind of managing the expenses.

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Unidentified Analyst, [36]

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Okay. And what are the buckets of the nonpayroll costs that you’re looking at?

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

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Sure. Well, I mean, just for example, there’s a couple that are really easy in this environment and that we, obviously, with, a field force of about 75 people between the U.S. and Europe, spend a lot of money on travel and entertainment, right? And all of that is out the door right now. There’s several trade shows or meetings that have been canceled recently. The Royal College of Ophthalmology in the U.K., some of the — some more promotional spending that we would do out there just engaging with doctors and SABs to meet in place where we have in-person meetings, a lot of that stuff has just been canceled or postponed. But even when I say postponed, I mean, frankly, the reality is we’re going to have to relook at our budgets for the third quarter and the fourth quarter to make sure that spending is appropriate. So we’re not going to — when I say postponed, it’s maybe kicked out there to evaluate for the future as opposed to postponed because we’ll look at our overall spending for Q3 and Q4 as we learn more about what the recovery might look like.

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Unidentified Analyst, [38]

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Okay. That sounds great. Have we violated any debt covenants already? Or are we at risk, you think, over the next several months to violate any debt covenants that would trigger some event?

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

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Yes. So we have not violated any debt covenants at this point, Larry. We were in great shape through the end of the quarter. It’s a 6-month trailing revenue covenant. So we’ll have to evaluate that come June. We are in constant dialogue with Solar Capital, who’s been a great partner. As you know, they refinanced the debt with us back in January. So I — who knows what that looks like if that were to happen, but we’re literally in contact with Solar on a weekly basis, and I feel pretty good that they’ll work with us because I think even if I have a downturn in revenue this quarter, which everybody is, we feel pretty good that we’re one of the stronger companies in their portfolio, and they want to work with us. So we’re in constant dialogue with them, as I said.

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Operator [40]

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The next question is a follow-up from James Molloy with Alliance Global Partners.

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James Francis Molloy, Alliance Global Partners, Research Division – MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [41]

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Just a quick question on the number of reps. What’s the current count that you guys have on reps? And I imagine you obviously stabilized the turnover that happened last year, given there’s nowhere to go, I presume. Just comment on those 2 things, please?

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

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Yes. So we’ve got — we have 30 sales reps in the U.S. and a total field force of about 45. We have 19 or 20 sales reps in Europe and a total field force of about 30 people.

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Operator [43]

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At this time, we are showing no further questioners in the queue. So this concludes our question-and-answer session. At this time, I would like to turn the conference over to Rick Eiswirth, President and CEO of Alimera Sciences, for any closing remarks.

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

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Thank you all for participating on today’s call. As we’ve said, these are extraordinary times for everyone, and we certainly appreciate your continued interest in Alimera Sciences.

From all of our employees at Alimera, we hope that you and your loved ones remain well, and we look forward to potentially better times for all when we visit with you again on our earnings call for the second quarter. Thanks, and have a great day.

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Operator [45]

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The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.