LAIDLAW & COMPANY Est. 1842

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1 LAIDLAW & COMPANY London New York San Francisco Boston EQUITY RESEARCH Company Report Alimera Sciences (ALIM - $1.15) Continued Execution, EU Uveitis Potential Approval Imminent We recently spent some time with senior management and come away incrementally more positive as growth is expected to continue, while ALIM strives to improve their messaging in the medical community. As a reminder, ALIM is coming off a strong 4Q18 with topline of $15.1M, which beat our expectations by $1.9M even though ALIM had pre-announced FY18 revenues of >$45M (4Q18: topline >$13M). We do, however, want to point out to investors that ~$2.5M of ex-us sales resulted from a recall of AGN s Ozurdex in certain EU countries. While we expect Ozurdex s reintegration to the market to negatively impact Iluvien sales, we believe additional physician exposure to Iluvien could ultimately help grow the topline. Additionally, Iluvien sales have historically been affected by seasonality leading to relative softness in 1 st and 3 rd quarters. Importantly, we expect this 3-year product (launched just over 3 years ago), to start benefiting from repeat users, which could serve as an important testament to its efficacy. While ALIM has been a DME story for the past few years, we have adjusted our numbers to reflect the potential approval of Yutiq for uveitis in the EU in 1H19. Although a much smaller market, we see a quicker penetration as anti- VEGF isn t part of the treatment paradigm in uveitis. Although difficult, the ultimate goal is to alter physicians perception of success as current acute treatments lead to constant fluctuations of retinal thickness. ALIM also recently announced Iluvien reimbursement in France, which is positive in our opinion, as France is the EU country with the most use of intravitreal steroid for DME. With positive adjusted EBITDA in 4Q18, and upcoming potential EU uveitis indication, we are maintaining our Buy rating and raising our PT from $2.25 to $2.75. Organic growth expected to continue despite Ozurdex bump. Although ~$2.5M of ex-us 4Q18 sales resulted from Ozurdex recall, we believe that yoy topline growth is expected as ALIM continues to work on their messaging to the medical community and more patients become eligible for re-treatment. EU Uveitis around the corner, French pricing resolved. With potential Yutiq EU approval in 1H19 as well as recent French reimbursement (largest EU intravitreal steroid users for DME), we have adjusted our numbers accordingly, which led to an increase in price target from $2.25 to $2.75. Maintain our Buy and raising our PT from $2.25 to $2.75. Our $2.75 PT is based on US Iluvien at $1.50/share, EU Iluvien at $0.75/share and EU Yutiq at $0.50/share. Earnings Estimates: (per share) 1Q 2Q 3Q 4Q FY P/E FY18 ($0.08) ($0.05) ($0.04) ($0.01) ($0.17) NA FY17 ($0.10) ($0.03) ($0.07) ($0.09) ($0.29) NA FY16 ($0.21) ($0.15) ($0.14) ($0.09) ($0.57) NA FY15 ($0.26) ($0.23) ($0.20) ($0.22) ($0.92) NA Source: estimates Healthcare / Biotechnology Ticker: ALIM Rating: Buy Price Target: higher $2.75 Trading Data: Last Price (03/07/2019) $ Week High (03/06/2019) $ Week Low (01/02/2019) $0.72 Market Cap. (MM) $81.3 Shares Out. (MM) 71.0 Analyst Francois Brisebois, (857) FOR ANALYST CERTIFICATION AND DISCLOSURES, PLEASE SEE DISCLOSURES SECTION AT THE END OF THIS REPORT. This report has been prepared by Laidlaw & Co (UK), Ltd. Investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. All prices are those current at the end of the previous trading session unless otherwise indicated. Prices and consensus estimates are sourced from a reliable market source

2 Figure 1: Valuation Sum-of-the-parts value Segment Valuation Per share (000's) value Illuvien - US $164,860 $1.50 Illuvien - EU $80,292 $0.75 Yutiq - EU $41,635 $0.50 Net cash '19 & tech value ($13,675) $0.00 SUM $231,477 $2.75 Shares out '19E (000) 109,317 Source: Company Reports: estimates Alimera Sciences Page 2 of 8 Francois Brisebois

3 Figure 2: Quarterly Income Statement Alimera Sciences Quarterly income statement 2018A 2018A 2019E 2019E ($000 except per share) 1QA 2QA 3QA 4QA Year 1QE 2QE 3QE 4QE Year Revenues Iluvien - US $7,000 $7,999 $8,500 $8,900 $32,399 $9,071 $9,978 $10,091 $10,658 $39,798 Iluvien ex-us 2,800 2,918 2,600 6,200 14,518 3,391 3,875 4,589 5,303 17,159 Total Revenue $9,802 $10,917 $11,137 $15,114 $46,970 $12,462 $13,853 $14,680 $15,961 $56,956 Expenses: Cost of Revenue (COGS) 1,276 1, ,325 4,679 1,371 1, ,075 5,904 Gross Margin 8,526 9,804 10,172 13,789 42,291 11,091 12,329 13,746 13,886 51,052 Research and development 2,822 2,777 2,799 2,876 11,274 3,000 3,000 3,000 3,000 12,000 General & administration 3,855 3,229 3,446 3,995 14,525 5,000 5,000 5,500 5,500 21,000 Sales & marketing 5,969 5,926 5,480 6,142 23,517 8,250 8,250 9,250 9,250 35,000 Total operating expenses 12,646 11,932 11,725 13,013 49,316 16,250 16,250 17,750 17,750 68,000 Income (loss) from Operations (4,120) (2,128) (1,553) 776 (7,025) (5,159) (3,921) (4,004) (3,864) (16,948) Int inc (expense), other net (1,151) (1,178) (1,211) (1,236) (4,776) (1,000) (1,000) (1,000) (1,000) (4,000) Income (loss) before taxes (5,271) (3,306) (2,764) (460) (11,801) (6,159) (4,921) (5,004) (4,864) (20,948) Income tax exp (benefit) (739) (738) (1,251) (1,459) (4,187) Adjusted NI ex-1x & noncash (5,271) (3,382) (2,792) (462) (11,907) (5,420) (4,183) (3,753) (3,405) (16,761) 1x items & non-cash exp (2,413) (618) 37,672 (787) 33,854 EPS as reported (7,684) (4,000) 34,880 (1,249) 21,947 Adjusted EPS ex-1x & noncash ($0.08) ($0.05) ($0.04) ($0.01) ($0.17) ($0.08) ($0.06) ($0.05) ($0.04) ($0.22) EPS as reported ($0.11) ($0.06) $0.39 ($0.02) $0.25 Weighted avg. shares (000) 69,883 70,022 70,038 70,066 70,738 70,366 70,666 79,968 80,268 75,317 Fully diluted shares (000) 103, ,022 88, ,066 88, , , , , ,317 Source: Company Reports: estimates Alimera Sciences Page 3 of 8 Francois Brisebois

4 Figure 3: Annual Income Statement Alimera Sciences Annual income statement ($000 except per share) 2015A 2016A 2017A 2018A 2019E 2020E Revenues Iluvien - US 15,169 25,827 26,146 32,399 39,798 45,337 Iluvian ex-us 7,269 8,506 9,766 14,518 17,159 33,730 Total Revenue $22,438 $34,333 $35,912 $46,970 $56,956 $79,067 Expenses: Cost of Revenue (COGS) 1,317 2,344 3,438 4,679 5,904 5,302 Gross Margin 21,121 31,989 32,474 42,291 51,052 73,765 R&D 14,840 12,375 9,944 11,274 12,000 16,000 General & administration 14,190 15,263 13,039 14,525 21,000 25,000 Sales & marketing 28,090 29,431 23,210 23,517 35,000 44,000 Total op exp 57,120 57,069 46,193 49,316 68,000 85,000 Inc/(loss) from Ops (35,999) (25,030) (13,719) (7,025) (16,948) (11,235) Int income (exp), net (4,693) (5,178) (5,579) (4,776) (4,000) (4,000) Other expenses, net (106) (40) 5 (65) - - Inc/(loss) before taxes (40,692) (30,208) (19,298) (11,801) (20,948) (15,235) Income tax exp (benefit) 130 (172) (4,187) (4,571) Adjusted NI ex-1x & noncash ($40,822) ($30,204) ($19,461) ($11,907) ($16,761) ($10,665) 1x items & non-cash exp 10,177 (2,970) (2,540) 33, EPS as reported ($30,645) ($33,174) ($22,001) $21,947 $0 $0 Adj EPS ex-1x & non-cash items ($0.92) ($0.57) ($0.29) ($0.17) ($0.22) ($0.12) EPS as reported ($0.69) ($0.63) Weighted avg. shares (000) 44,450 52,802 66,994 70,738 75,317 86,143 Fully diluted shares (000) 76,615 86, ,728 88, , ,143 Source: Company Reports: estimates Alimera Sciences Page 4 of 8 Francois Brisebois

5 Major Risks Exogenous events could impact our outlook. We believe pharmaceutical companies have the least control over competitive, political, and regulatory risks. Although we have incorporated competitive assumptions into our forecasts, there may be other risks beyond the scope of our analysis. Changes in the drug reimbursement system, as well as any political or regulatory amendments, may significantly influence the earnings power of these companies. Actual clinical results and the FDA s conclusions may deviate from expectations. Many of our assumptions are based on a review of incomplete clinical trial data available in the public domain. Often, our conclusions are drawn from early stage data, which may not be reflected by pivotal studies. Furthermore, the FDA s conclusions may not coincide with our own, materially changing our revenue and earnings assumptions. Compliance issues, product recalls, and other mandates by regulatory authorities could materially change our expectations. Regulatory compliance issues, ranging from accounting irregularities to defective manufacturing practices, could materially change our assumptions and earnings outlook. Unanticipated product recalls and labeling changes could also have adverse consequences on our earnings assumptions. Legal risks could lead to additional liabilities and revenue loss. In addition to the expenses incurred by patent challenges, product liability and other legal suits could occur and lead to additional liabilities and revenue loss, which could substantially change our financial assumptions. Alimera Sciences Page 5 of 8 Francois Brisebois

6 DISCLOSURES: ANALYST CERTIFICATION The analyst responsible for the content of this report hereby certifies that the views expressed regarding the company or companies and their securities accurately represent his personal views and that no direct or indirect compensation is to be received by the analyst for any specific recommendation or views contained in this report. Neither the author of this report nor any member of his immediate family or household maintains a position in the securities mentioned in this report. EQUITY DISCLOSURES For the purpose of ratings distributions, regulatory rules require the firm to assign ratings to one of three rating categories (i.e. Strong Buy/Buy-Overweight, Hold, or Underweight/Sell) regardless of a firm's own rating categories. Although the firm s ratings of Buy/Overweight, Hold, or Underweight/Sell most closely correspond to Buy, Hold and Sell, respectively, the meanings are not the same because our ratings are determined on a relative basis against the analyst sector universe of stocks. An analyst's coverage sector is comprised of companies that are engaged in similar business or share similar operating characteristics as the subject company. The analysis sector universe is a sub-sector to the analyst's coverage sector, and is compiled to assist the analyst in determining relative valuations of subject companies. The composition of an analyst's sector universe is subject to change over time as various factors, including changing market conditions occur. Accordingly, the rating assigned to a particular stock represents solely the analyst's view of how that stock will perform over the next 12-months relative to the analyst's sector universe. Additional information available upon request. RATINGS INFORMATION Rating and Price Target Change History 3 Year Rating Change History 3 Year Price Change History Source: Created by: Blue-Compass.net * Previous Close 3/7/2019 Rating System* Strong Buy (SB) Expected to significantly outperform the sector over 12 months. % of Companies Under Coverage With This Rating % of Companies for which has performed services for in the last 12 months Investment Banking Brokerage 0.00% 0.00% 0.00% Buy (B) Expected to outperform the sector average over 12 months % 25.81% 3.23% Hold (H) Sell (S) Expected returns to be in line with the sector average over 12 months. Returns expected to significantly underperform the sector average over 12 months. 4.84% 1.61% 0.00% 0.00% 0.00% 0.00% ADDITIONAL COMPANIES MENTIONED Allergan plc (AGN Not Rated) ADDITIONAL DISCLOSURES As of the date of this report, neither the author of this report nor any member of his immediate family or household maintains an ownership position in the securities of the company (ies) mentioned in this report. This report does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Laidlaw & Co (UK), Ltd. recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. The securities, instruments, or strategies discussed in this report may not be suitable for all investors, and certain investors may not be eligible to purchase or participate Alimera Sciences Page 6 of 8 Francois Brisebois

7 in some or all of them. This report is not an offer to buy or sell or the solicitation of an offer to buy or sell any security/instrument or to participate in any particular trading strategy. Associated persons of Laidlaw & Co (UK), Ltd not involved in the preparation of this report may have investments in securities/instruments or derivatives of securities/instruments of companies mentioned herein and may trade them in ways different from those discussed in this report. While Laidlaw & Co (UK), Ltd., prohibits analysts from receiving any compensation. Bonus or incentive based on specific recommendations for, or view of, a particular company, investors should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. With the exception of information regarding Laidlaw & Co (UK), Ltd. this report is based on public information. Laidlaw & Co (UK), Ltd makes every effort to use reliable, comprehensive information, but we make no representation that it is accurate or complete and it should not be relied upon as such. Any opinions expressed are subject to change and Laidlaw & Co (UK), Ltd disclaims any obligation to advise you of changes in opinions or information or any discontinuation of coverage of a subject company. Facts and views presented in this report have not been reviewed by, and may not reflect information known to, professionals in other Laidlaw & Co (UK), Ltd business areas. Laidlaw & Co (UK), Ltd associated persons conduct site visits from time to time but are prohibited from accepting payment or reimbursement by the company of travel expenses for such visits. The value of and income from your investments may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instruments prices. market indexes, operational or financial conditions of companies or other factors. There may be time limitations on the exercise of options or other rights in securities/instruments transactions. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. If provided, and unless otherwise stated, the closing price on the cover page is that of the primary exchange for the subject company's securities/instruments. Any trademarks and service marks contained in this report are the property of their respective owners. Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages of any kind relating to such data. This report or any portion thereof may not be reprinted, sold or redistributed without the written consent of Laidlaw & Co (UK), Ltd. This report is disseminated and available primarily electronically, and, in some cases, in printed form. The information and opinions in this report were prepared by Laidlaw & Co (UK), Ltd. For important disclosures, please see Laidlaw & Co (UK), Ltd. s disclosure website at or contact your investment representative or Laidlaw & Co (UK), Ltd at 521 Fifth Ave, 12th Floor, New York, NY USA Laidlaw & Co. (UK), Ltd. Alimera Sciences Page 7 of 8 Francois Brisebois

8 NOTES: Alimera Sciences Page 8 of 8 Francois Brisebois