The nearly 25 percent uptick in shares of Alimera Sciences (NASDAQ:ALIM) last month looks impressive for biotech investors at first glance. Yet, the $68 million market capitalization may serve as a red flag: manipulators may move nanocap stocks without much effort. With that said, what drove Alimera stock higher last week?
On May 31, Alimera announced that the Spanish Ministry of Health approved the pricing and reimbursement of ILUVIEN, a drug that treats patients suffering from vision issues related to chronic diabetic macular edema (DME). The full reimbursement in the region should drive revenue growth higher in the quarters ahead.
On its conference call, management pointed to its mode of delivering the drug as the thing that most set it apart from others:
Today, corticosteroids are the standard-of-care in uveitis, and we expect ILUVIEN’s continuous microdosing delivery will be highly attractive to physicians and patients. We received acceptance of our filing with the Medicines and Healthcare products Regulatory Agency or MHRA in the United Kingdom late in the fourth quarter of 2017.
As Alimera improves awareness with doctors on the effective treatment, investors may safely forecast better sales and eventual profitability. In the first quarter, costs of $11.4 million exceeded revenue but as sales increase in the U.S. and globally, expect quarterly losses ending.
More important, insurance coverage for the high-priced drugs will pick up as the year progresses. This is due to patients getting through their deductibles first.
DME is the primary cause of vision loss. Around 19% of people with diabetes are diagnosed with the complication, with such numbers coming from based on The Wisconsin Epidemiologic Study of Diabetic Retinopathy.
Financials
Alimera is clearly a biotech speculation whose potential for growth improves with such announced approvals. In the first quarter, the company reported revenue growing 48 percent year-on-year, to $9.8 million. It lost $0.11 a share, more than analyst consensus estimates.
About $7 million of Alimera’s revenue came from the U.S., up 59 percent from last year. $2.8 million of the international revenue represents growth of 27 percent from last year. The approval in Spain will no doubt lead to an acceleration in revenue growth in the near-term.
Analysts Bullish on Alimera Stock
Despite the EPS and revenue miss, the average analyst price target, albeit based on just two analysts, is $2.65 a share. Analyst Andrew D’silva at B.Riley FBR initiated coverage on the company a few days ago with a “buy” rating and a $2.80 price target. His success rate over a two-year period is 46 percent but his average return is 27.6 percent.
In 2018, Alimera made 19 presentations on ILUVIEN predominantly in the two regions (the U.S. and Europe). The company mentioned that the product has plenty of support for patients. This suggests that once prescribed, patients will get the necessary high-quality support that will lift customer satisfaction.
The company submitted an application for treating patients having non-infectious posterior uveitis indication. If successful, ILUVIEN’s approval in the first half of 2019 would justify the recent rally in ALIM stock. The total addressable market is 20 percent of the DME market.
Takeaway on Alimera Stock
ILUVIEN usage is growing at a healthy pace in the U.S. Since January 2015, prescriptions grew by 175 percent. Although this slowed to 71 percent since January 2017, the application to treat a wider range of disease could increase distributor order volumes.
Chances are good that despite the stock’s nearly 25 percent rebound, Alimera stock will trade at above $1.00 a share and move higher for the rest of the year.
