Clearside Biomedical(CLSD) - 2020 Q4 - Annual Report

Part I Business Clearside Biomedical develops treatments for back-of-the-eye diseases using its SCS Microinjector, advancing internal pipeline candidates and leveraging collaborations Overview and Technology Platform Clearside utilizes its proprietary SCS Microinjector platform for non-surgical, targeted drug delivery to the suprachoroidal space, aiming to improve treatment for back-of-the-eye diseases - Clearside is a biopharmaceutical company developing treatments for serious back-of-the-eye diseases using its proprietary SCS Microinjector to target the suprachoroidal space (SCS)[25] - The suprachoroidal injection platform is a novel, patented method for targeted, non-surgical, in-office drug delivery, potentially offering lower administration frequency and improved safety[27][28] - The company's intellectual property includes 22 issued U.S. patents and over 50 international patents covering the SCS Microinjector device, administration methods, and product candidates[28] Pipeline and Collaborations Clearside pursues internal development, led by CLS-AX for wet AMD, and external collaborations, including licensing XIPERE™ to Bausch and Arctic Vision, leveraging its SCS Microinjector platform - The internal pipeline focuses on small molecules and gene therapy, with CLS-AX for wet AMD as the most advanced program in a Phase 1/2a clinical trial[33][34] - Multiple external collaborations, including partnerships with Bausch, REGENXBIO, Aura Biosciences, and Arctic Vision, validate the SCS Microinjector platform[37] - Through license agreements, Clearside received $11.1 million in upfront payments and is eligible for over $200 million in potential future milestones plus royalties[37] XIPERE (triamcinolone acetonide suprachoroidal injectable suspension) XIPERE, for uveitic macular edema, is awaiting NDA resubmission to the FDA in Q2 2021 after addressing manufacturing issues, with commercial rights licensed to Bausch and Arctic Vision - XIPERE is being developed for macular edema associated with uveitis, affecting approximately 350,000 patients in the U.S.[39] - Following a Complete Response Letter (CRL) in October 2019, Clearside expects to resubmit the XIPERE NDA in Q2 2021, with an anticipated six-month FDA review[40][42] - The Phase 3 PEACHTREE trial met its primary endpoint, with 47% of XIPERE-treated patients gaining at least 15 letters in visual acuity at 24 weeks (p<0.001)[47] - Commercial rights are licensed to Bausch for the U.S. and Canada (up to $71 million in milestones) and to Arctic Vision for Greater China and South Korea (up to $35.5 million in upfront and milestone payments), plus royalties[44][45] CLS-AX (axitinib injectable suspension) CLS-AX, a proprietary axitinib suspension for wet AMD, is Clearside's lead internal candidate, with its Phase 1/2a OASIS trial enrolling patients and initial safety data expected mid-2021 - CLS-AX is a proprietary suspension of axitinib, a pan-VEGF inhibitor, being developed as a long-acting therapy for wet AMD[49] - The FDA accepted the IND for CLS-AX in August 2020, and the Phase 1/2a OASIS clinical trial enrolled its first patient in January 2021[50] - Patient dosing for the first cohort of the OASIS trial was completed in March 2021, with initial safety data expected in mid-2021[51] Competition Clearside faces intense competition from larger pharmaceutical companies, with XIPERE competing against existing corticosteroids and CLS-AX against established anti-VEGF therapies and other TKIs - XIPERE faces competition from other corticosteroids, including off-label Kenalog and approved products like Triesence, OZURDEX, Retisert, and Yutiq[59][60] - CLS-AX will compete against established anti-VEGF therapies for wet AMD, such as Lucentis, Eylea, and Beovu, and other TKIs in development[62][63] - Many competitors possess significantly greater financial, R&D, manufacturing, and marketing resources than Clearside[64] Intellectual Property Clearside's success relies on a robust IP portfolio, including 22 U.S. and over 60 foreign patents covering SCS delivery technology, with expirations between 2027 and 2041, and key licenses from Emory and Georgia Tech - The company's worldwide patent estate includes 22 granted U.S. patents and 61 issued foreign patents, covering devices, SCS administration methods, and therapeutic candidates[67] - Patents for SCS delivery technology, drug candidates, and therapeutic uses are expected to expire between 2027 and 2041, excluding potential extensions[69] - Clearside holds an exclusive worldwide license from Emory University and Georgia Tech Research Corporation for key microinjector drug delivery patents, requiring annual fees and future royalties[74][75] Government Regulation Clearside's combination products are extensively regulated by the FDA, primarily as drugs, pursuing the 505(b)(2) NDA pathway for XIPERE, and are subject to ongoing post-approval, healthcare, and reimbursement regulations - The company's product candidates are regulated as combination products, with the FDA's CDER having primary jurisdiction[81] - Clearside is pursuing the Section 505(b)(2) NDA pathway for XIPERE, allowing reliance on prior FDA findings and potentially reducing required studies[99][101] - The business is subject to numerous federal and state laws, including the Anti-Kickback Statute, False Claims Act, HIPAA, and transparency laws like the Physician Payments Sunshine Act[112][113][125] - Commercial success depends on adequate coverage and reimbursement from third-party payors, with a Category III CPT code for suprachoroidal injection effective since 2017[129] Risk Factors Clearside faces significant risks including substantial financial losses, going concern uncertainty, high development risks for novel technology, heavy reliance on third-party manufacturing and commercialization partners, regulatory delays, intense competition, and intellectual property challenges - The company has a history of significant losses ($18.2 million in 2020) and expects future losses, raising substantial doubt about its ability to continue as a going concern without additional capital[149][154] - The novel suprachoroidal injection approach may fail to gain market acceptance from physicians, patients, or payors[165] - Clearside is dependent on Bausch's commercialization efforts for XIPERE in the U.S. and Canada, with potential material harm if Bausch terminates the agreement due to lack of FDA approval by August 31, 2021[188][192] - The company relies on third-party CMOs for product manufacturing, and their failure to comply with cGMP or pass FDA inspections could significantly delay or prevent product approval[202][207] - The COVID-19 pandemic could adversely impact business operations, potentially delaying clinical trials due to hospital resource prioritization and disruptions to patient enrollment[183] Properties Clearside leases approximately 20,000 square feet of office space in Alpharetta, Georgia, with a lease term until September 2023 and a five-year renewal option - The company leases approximately 20,000 square feet of office space in Alpharetta, Georgia for its principal offices[355] - The current lease term extends until September 2023, with an option to renew for an additional five-year term[355] Legal Proceedings As of the report date, Clearside Biomedical is not a party to any material legal proceedings and is unaware of any pending or threatened actions that would materially affect its business - The company is not currently a party to any material legal proceedings[357] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Clearside Biomedical's common stock trades on Nasdaq under "CLSD", with 57,422,475 shares outstanding as of March 10, 2021, and no plans for future cash dividends - The company's common stock is listed on The Nasdaq Global Market under the ticker symbol "CLSD"[360] - The company has never declared or paid dividends and does not plan to in the foreseeable future[361] - As of March 10, 2021, there were 57,422,475 shares of common stock outstanding[362] Management's Discussion and Analysis of Financial Condition and Results of Operations Clearside reported a net loss of $18.2 million in 2020, driven by increased license revenue and reduced G&A expenses, but faces substantial doubt about its going concern ability with cash expected to fund operations into Q1 2022 Results of Operations In 2020, revenue increased to $7.9 million from license agreements, while R&D expenses slightly decreased to $15.1 million, and G&A expenses significantly fell to $10.8 million, resulting in a net loss of $18.2 million Results of Operations (in thousands) | | Year Ended December 31, 2020 | Year Ended December 31, 2019 | Period-to-Period Change | |:---|---:|---:|---:| | License and other revenue | $7,894 | $2,173 | $5,721 | | Operating expenses: | | | | | Research and development | 15,073 | 15,658 | (585) | | General and administrative | 10,756 | 16,819 | (6,063) | | Total operating expenses | 25,829 | 32,477 | (6,648) | | Loss from operations | (17,935) | (30,304) | 12,369 | | Other expense | (275) | (466) | 191 | | Net loss | $(18,210) | $(30,770) | $12,560 | Research and Development Expenses by Program (in thousands) | | 2020 | 2019 | 2018 | |:---|---:|---:|---:| | XIPERE (uveitis program) | $3,841 | $2,947 | $8,803 | | XIPERE (RVO program) | 84 | 2,323 | 44,432 | | CLS-AX (wet AMD program) | 2,169 | 67 | 3 | | Total program expense | 6,094 | 5,204 | 56,300 | | Unallocated | 8,979 | 10,454 | 11,991 | | Total R&D expense | $15,073 | $15,658 | $68,291 | - General and administrative expenses decreased by $6.1 million in 2020, primarily due to a $4.1 million reduction in marketing expenses following a shift to a partnership strategy for XIPERE[407] Liquidity and Capital Resources As of December 31, 2020, Clearside had $17.3 million in cash, with subsequent capital raises of $11.1 million and $3.3 million, but recurring losses raise substantial doubt about its going concern ability beyond Q1 2022 - As of December 31, 2020, the company had cash and cash equivalents of $17.3 million[414] - Subsequent to year-end, the company raised $11.1 million from a registered direct offering and $3.3 million from its at-the-market (ATM) facility[414][416] - Management expects existing cash and cash equivalents as of March 15, 2021, to fund planned operations into the first quarter of 2022[425] - Due to recurring losses and negative cash flows, management has concluded there is substantial doubt about the company's ability to continue as a going concern[425] Summary of Cash Flows (in thousands) | | 2020 | 2019 | 2018 | |:---|---:|---:|---:| | Net cash used in operating activities | $(13,120) | $(27,068) | $(79,200) | | Net cash (used in) provided by investing activities | (55) | 32,925 | (3,760) | | Net cash provided by financing activities | 7,867 | 8,695 | 81,779 | | Net change in cash and cash equivalents | $(5,308) | $14,552 | $(1,181) | Financial Statements and Supplementary Data The audited financial statements for 2020 report a net loss of $18.2 million, with total assets of $19.3 million and liabilities of $10.6 million, and the auditor's report highlights substantial doubt about the company's going concern ability Report of Independent Registered Public Accounting Firm Ernst & Young LLP issued an unqualified opinion on the financial statements, including a "Going Concern" paragraph highlighting substantial doubt due to recurring losses and negative cash flows - The auditor's report contains a "Going Concern" paragraph, highlighting recurring losses and negative cash flows that raise substantial doubt about the company's ability to continue as a going concern[445] Financial Statements As of December 31, 2020, the company reported $17.3 million in cash, $19.3 million in total assets, $10.6 million in total liabilities, $7.9 million in revenue, and a net loss of $18.2 million Balance Sheet Data (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | |:---|---:|---:| | Cash and cash equivalents | $17,287 | $22,595 | | Total current assets | $18,118 | $25,219 | | Total assets | $19,322 | $26,776 | | Total current liabilities | $9,943 | $10,903 | | Total liabilities | $10,559 | $15,619 | | Total stockholders' equity | $8,763 | $11,157 | Statement of Operations Data (in thousands) | | 2020 | 2019 | 2018 | |:---|---:|---:|---:| | License and other revenue | $7,894 | $2,173 | $30 | | Total operating expenses | $25,829 | $32,477 | $82,975 | | Net loss | $(18,210) | $(30,770) | $(82,818) | | Net loss per share | $(0.39) | $(0.81) | $(2.69) | Notes to Financial Statements Notes detail liquidity and going concern issues, ASC 606 adoption, $5.0 million debt prepayment, $1.0 million PPP loan forgiveness, and specifics of license agreements with Bausch, REGENXBIO, and Arctic Vision - The $5.0 million upfront payment from the Bausch license agreement remains deferred revenue as of Dec 31, 2020, due to FDA approval refund provisions[541] - The company received a $4.0 million upfront payment from Arctic Vision in March 2020 and $3.0 million in milestone payments from REGENXBIO in September 2020[543][545] - In May 2020, the company fully prepaid its outstanding $5.0 million principal loan balance plus fees[497] - The company received a $1.0 million PPP loan in April 2020, which was fully forgiven in January 2021[499] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2020, with no material changes to internal control over financial reporting during Q4 2020 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[559] - No material changes were made to the internal control over financial reporting during the fourth quarter of 2020[560] Part III Directors, Executive Compensation, Security Ownership, and Accountant Fees Information for Items 10-14, covering directors, executive compensation, security ownership, and accountant fees, is incorporated by reference from the company's 2021 Proxy Statement - Information for Part III (Items 10-14) is incorporated by reference from the company's 2021 Proxy Statement[567] Part IV Exhibits, Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including key license agreements, with financial statement schedules omitted as inapplicable - This section lists all exhibits filed with the annual report, including key license agreements with Bausch, REGENXBIO, and Arctic Vision[573][574] - Financial statement schedules have been omitted as inapplicable or because the information is already present in the financial statements and notes[572]