Sofinnova Ventures, NEA Join $40M PIPE For Alimera Sciences

July 18, 2012 - Dow Jones VentureWire

By Brian Gormley

Alimera Sciences Inc. hasn\'t been able to persuade U.S. regulators to approve its drug for the blinding condition diabetic macular edema, but investors are making a $40 million bet that the publicly held company will fare much better in Europe.

The financing led by existing backer Palo Alto Investors, with participation from new investors Sofinnova Ventures and New Enterprise Associates , gives Alimera funds to launch the treatment in the U.K., France and Germany next year. The drug, Iluvien, is approved in the U.K, France, Austria and Portugal. Alimera is seeking clearances in Germany, Italy and Spain.

In diabetic macular edema, blood-vessel leakage causes swelling in the macula, the part of the retina responsible for central vision. Existing treatments include laser therapy and drugs that block vascular endothelial growth factor.

The U.S. Food and Drug Administration has passed on two opportunities to approve Iluvien, saying its benefits didn\'t outweigh its risks. The most recent setback occurred in November, when the FDA issued another \"complete response letter\" instead of an approval. One concern has been a rise in intraocular pressure seen in some patients who received Iluvien in a clinical trial called FAME.

European regulators seem to view the risk-benefit tradeoff differently for Iluvien, which is inserted into the back of the eye, where it releases a steroid for up to 36 months. Data from the FAME study showed that, at month 30, 38% of chronic diabetic macular-edema patients who had received Iluvien had improved by 15 letters or more on the eye chart compared to baseline. At the end of the 36-month study, 34% had the same result, according to Alimera.

Many investors have been evaluating Iluvien mostly on its U.S. potential, said Sofinnova General Partner Garheng Kong. Alimera\'s share price has dropped from about $8.50 to $2.76 since it received its second complete-response letter in November.

But the European market is also sizable, according to Cowen & Co. analyst Simos Simeonidis, who projects Iluvien will have peak-year sales of $217 million in 2019. That figure accounts only for sales in the U.K., France, Germany, Austria, Italy, Portugal and Spain, he said.

Though Alimera continues to pursue U.S. approval, Sofinnova believes Alimera can be highly profitable based on European sales alone, according to Dr. Kong. European physicians who treat retinal conditions are comfortable using steroids in the eye, he said. And since a single procedure delivers up to three years\' of treatment, Iluvien may also be more economical than monthly injections of other drugs.

Alimera, which went public in 2010 after raising just over $100 million from Domain Associates, Intersouth Partners, Scale Venture Partners, and others, is raising this new capital through a Series A convertible preferred stock financing. It is selling a million shares of Series A preferred stock and warrants to purchase an additional 300,000 shares of Series A preferred. For each unit consisting of one share of Series A preferred and a warrant to buy .3 of a share of Series A preferred, investors are paying $40.

Each share of Series A preferred is initially convertible into 13.75 shares of common stock, based on an initial conversion price of $2.91 per share, the company said.

Dr. Kong is joining the Alimera Sciences board.