Clearside Biomedical, Inc.
Q4 2019 Earnings Call Transcript

Published: 11 Mar 2020

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the Clearside Biomedical Fourth Quarter 2019 Financial Results and Corporate Update Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program Jenny Kobin, Investor Relations. Please go ahead.

[Jenny Kobin:]

Good afternoon everyone and thank you for joining us on the call today. Before we begin, I would like to remind you that during today's call, we will be making certain forward-looking statements. Various remarks that we make during this call about the company's future expectations, plans, and prospects constitute forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995.

[George Lasezkay:]

Thank you, Jenny. Good afternoon and thank you for joining us on the call today. During 2019, the management team and I worked closely with our Board of Directors to reevaluate the company's overall strategy. In August, we announced our plans to out-license rights to our lead asset XIPERE, in order to dedicate our resources to further develop our proprietary suprachoroidal space or SCS injection platform. Our two-pronged strategy includes building an internal research and development pipeline in areas such as novel small molecules and gene therapy as well as creating strategic collaborations with other companies to enable access to the SCS to deliver their proprietary product candidates. I'm tremendously proud of the entire Clearside organization. They embraced this plan and worked tirelessly to accomplish these strategic objectives. In less than one year, we've added two validating R&D collaborations that will begin using our SCS Microinjector in clinical trials in 2020. We've concluded preclinical studies for asset CLS-AX and plan to begin a clinical trial later this year. We've also secured two key partnerships to further develop and commercialize XIPERE in the U.S., Canada, and Greater China. Importantly, these -- under these collaborations we have received non-dilutive funding through upfront payments and we are eligible to receive over $200 million in potential future development and sales milestone payments as well as royalties on net sales that can be used to further support our internal R&D efforts.

[Thomas Ciulla:]

Thank you, George. This afternoon I will provide a summary of clinical and scientific information related to our internal research and development pipeline and touch on the clinical plans of our partners. Last month we had numerous presentations delivered on our pipeline in suprachoroidal injection platform at both Angiogenesis and at Macula Society Annual Meetings. These presentations mark a new chapter for Clearside, one in which we both publicly embrace what we've learned from XIPERE and initiate our efforts to advance our pipeline. At these meetings we had top retina specialists presenting exciting material on our SCS platform, gene therapy and axitinib. The presentations portray strong scientific rationale to address real unmet needs and we have received very positive feedback from the medical community. Furthermore, these particular meetings represent key Retina Congresses. Angiogenesis only selects the most innovative therapies and technologies for presentation and has become a top meeting globally. And Macula Society is perhaps the most selective U.S. based retina society attended by top U.S. and international retina specialists. Importantly at Macula Society, first public data was presented on CLS-AX. In his presentation, Dr. Shree Kurup, Director of the Retina Service at Case Western University provided evidence for the use of CLS-AX as a potential long-acting therapy for neovascular age-related macular degeneration. Suprachoroidal axitinib or CLS-AX has the potential to address primary needs for neovascular AMD patients as its durability may reduce treatment burden, while maintaining vision.

[Charles Deignan:]

Thank you, Tom. Our specific financial numbers for the quarter and the full year 2019 were published this afternoon in our earnings press release and are available on our website. Therefore, I would like to spend this time providing an overview of our financial plans for 2020. As we reported our cash and cash equivalents at the end of December 2019 totaled $22.6 million, which included the partner licensing revenue and private placement funding received in the fourth quarter of 2019. Please note that in the fourth quarter, R&D expenses were positively impacted by vendor credits of $2 million upon reconciliation of the final retinal vein occlusion trial costs. However, we do expect that R&D expenses will increase over the next several quarters as we complete the work to resubmit our NDA for XIPERE and submit an IND for CLS-AX. Based on our current outlook, we expect to have sufficient resources to fund planned operations into the first quarter of 2021. We continue to carefully monitor our cash position to maintain expenses while advancing our programs. And with that, I will turn the call back over to George for his final remarks.

[George Lasezkay:]

Thank you, Charlie. I truly believe in the potential advantages of delivering drugs into the SCS, the versatility of our SCS injection platform and our ability to develop and deliver treatments that restore and preserve vision for people with serious back of the eye diseases. I also believe in the commitment of our team to improve the lives of these patients. I am honored to have been asked by the Board to serve as Clearside's President and CEO and I've entered into an employment agreement with the company reflecting that new position. I look forward to continuing to work closely with the entire Clearside team and the medical and investment communities. In summary, in 2020 we are laser focused on getting our first product to the regulatory finish line and our next development product into the clinic while also advancing our early-stage research and development pipeline and working with our partners to broaden the reach of our suprachoroidal injection technology. I would now like to ask the operator to open the call up for questions.

[Operator:]

Certainly. Our first question comes from the line of Liana Moussatos from Wedbush Securities. Your question please.

[Liana Moussatos:]

Thank you for taking my questions and congratulations on your progress and to George for becoming official. I have two questions. One is will the design of the Phase 1/2a CLS-AX or wet AMD have any efficacy endpoints or biomarkers? And the second is, will 2020 OpEx be a lot higher than 2019?

[George Lasezkay:]

Thanks Liana for the questions and thank you for your kind remarks. I'm glad to be here. So thank you. I'll turn -- I'll ask Tom to answer the first question about trial design.

[Thomas Ciulla:]

Yeah, thank you for the question. I can't comment on the specifics right now since it's still in the planning stages, but what I can generally tell you is that this is going to be a very straightforward standard Phase 1/2a study for neovascular AMD. It will be a single-dose escalation study with several cohorts. And as you know in these studies these early studies especially this first in man suprachoroidally injected axitinib study, the primary endpoint has to be safety. But of course we'll look at visual acuity and OCT and we'll have some efficacy signals. But again these early single-dose escalation studies are really geared more towards safety since this will be the first time axitinib's injected into the suprachoroidal space.

[Charles Deignan:]

And Liana it's Charlie. So our OpEx -- so I would -- for you, I would look at Q4 and how we're trending there. We had -- earlier in the year we had our commercial organization that we no longer have so costs have trended down. You need to add that. You'll see in our press release a $2 million credit we received. So if you take that filing we have to -- we'll have -- our costs would go up quarterly as we get closer to filing -- resubmitting our IND and kicking off this clinical trial, but not a dramatic increase from our current spending.

[Liana Moussatos:]

Thank you very much.

[Operator:]

Thank you. Our next question comes from the line of Annabel Samimy from Stifel. Your question please.

[Annabel Samimy:]

Hi, guys. Congratulations on the deal today and also for the official appointment, George. So I have a few questions. The first is can you tell us a little bit about the ideal axitinib profile that you're seeking given that it's a pan-VEGF inhibitor, would you be seeking just for extended durability or increased efficacy, especially in light of what could be an increasingly competitive market? The second is, whether -- for the Bausch resubmission -- I'm sorry, for the NDA resubmission and the deal with Bausch, I guess, one, it's -- I couldn't help notice that you mentioned, you're still in the planning phases of getting stability data. So the manufacturing issues, is that -- those are manufacturing issues of your particular manufacturer that have nothing to do with the XIPERE right now? Or does it have to do something specific with the manufacturing of XIPERE? And then once you figure that out you can plan the stability batches. So I just want to clarify that. And once you get that in place, has Bausch shared any of their commercialization plans? I know you had a lot of medical meetings and presentations that seems to be taking a little bit of a pause right now. Is that going to mess up any of their commercialization plans? And then, finally, can you help us with the structure of your licensing revenue? You had a nice bump this quarter. Obviously, you're getting some milestones and some revenues in. How should we be thinking about licensing revenue rates going forward? The upfront payment from the Arctic deal should we recognize that right away, should we put on the balance sheet? How should we be modeling these out? Thanks.

[George Lasezkay:]

Okay. Thanks for three questions, Annabel, which is so funny.

[Annabel Samimy:]

I had a few. I said a few. Not a couple.

[George Lasezkay:]

I was writing like a maniac here to try to keep track of it all. Let me have Tom answer the first question about the ideal axitinib profile, because it's a very good question and I think Tom can answer that. And then, I will take the question about the manufacturing issues that you raised.

[Thomas Ciulla:]

Again, it's an excellent question. So, I think, in terms of unmet need, one of the biggest unmet need is treatment burden. We know in the real world, patients only receive six to seven anti-VEGF-A injections and yield only a one to three-letter improvement in vision at one year. So the real unmet need with respect to treatment burden having longer-acting therapies. And then the second unmet need is that, there seems to be a ceiling of efficacy. In some of the trials in a Harvard trial, for example, if you went up on doses, you didn't have a better efficacy outcome, so there seems to be a ceiling of efficacy. So I think those are the two unmet needs we want to address with CLS-AX. And then in terms of delving into this a little bit more, I think, number one, axitinib itself, as you know, is a pan-VEGF inhibitor, it inhibits after receptor. There's evidence now that when you use an anti-VEGF A, you upregulate other factors including VEGF-C and D and this may contribute to resistance or that ceiling of efficacy. So we think pan-VEGF inhibition has potential to be more efficacious. And then number two, we think there is particular benefits with injecting in the suprachoroidal space. Small molecule suspensions like triamcinolone and axitinib have very long durability. We know from the studies we've done that, it will last many months in the suprachoroidal space. And that gives us a potential to address that treatment burden issue. And the other potential benefits of injecting the suprachoroidal space includes targeting the layer of the eye where the choroidal neovascularization starts. So we can get very high levels there and potentially enhance efficacy through its administration in the suprachoroidal space. And then another advantage, the final advantage, I think, of suprachoroidal injection is that, we're compartmentalizing the drug in that space and that gives us a potential safety advantages. We're going to limit off-target effects by compartmentalizing it there. So a long-winded answer to your question, but we think that we can address very important unmet needs with suprachoroidal axitinib.

[George Lasezkay:]

Okay. Thanks, Tom. Let me try to address the issues that you raised regarding the NDA resubmission in Bausch and product. On the manufacturing issues, here's what I can tell you. We've been working with our contract manufacturer and also in consultation with Bausch to produce the registration batches and the stability data that we need for the NDA resubmission. The specific question you asked about is the contract manufacturer is still working to finalize certain manufacturing activities that aren't specifically related to XIPERE. They apply to multiple clients inside their facility, we happen to be one. That work is still ongoing, which has contributed to the delay that we've just announced. But those activities are coming close to completion. And with that the contract manufacturer should be able to focus on the steps necessary to produce the registration batches that we need and therefore we can submit that for stability data in order to resubmit our NDA. So we believe that taking all of this into account, we're now on track for the NDA resubmission to be by the end of August, as we've announced. Regarding the commercialization plans, we know that Bausch is working to produce those commercial – or are putting together commercialization plans. We are not intimately involved in their development of commercialization plans but we have been – our medical affairs team is working with their teams to help them prepare for launch. So part of what we're doing is probably working into their commercialization plans but we don't have an intimate knowledge of exactly their thoughts on where and when and how they'll commercialize the product at least at this time. Charlie do you want to take the last question Annabel had?

[Charles Deignan:]

Yes sure, Annabel. So yes, we just announced today a $4 million Arctic – I wouldn't – I can't give you a definitive number. We still are analyzing about my – I'm suspecting we will be able to take that money upfront, so no deferred on that. As we've announced, we'll have a number of milestones – potential milestones hit this year. We'll have from our other partners. Unfortunately we have confidential agreements that we can't discuss those. But what we did have announced is Bausch will – we have a $15 million milestone payments related – up to our approval – U.S. approval. So I would imagine on approval will – that will hit there. But I can't – unfortunately there are other milestones. At this point we can't discuss the timing or amounts of those.

[Annabel Samimy:]

Okay. So just to clarify on the milestones of cash that takes you to the first quarter 2021, does that include only the milestones that you've realized to date or what you expect this year as well?

[Charles Deignan:]

Yes. So the guidance is what our year-end cash is can get us into 2021.

[Annabel Samimy:]

Okay. Great. Thanks. I’ve got questions for all of you today.

[Charles Deignan:]

Yes, you’ve got it.

[Operator:]

Thank you. Our next question comes from the line of Esther Hong from Janney. Your question please.

[Esther Hong:]

Thanks for taking my question. So with your platform and potential for partnerships, what can we expect in the near-term in terms of future areas of partnership? Are you looking at – would you be focused on additional ex U.S. or additional indications where the platform could be used? And then second are you planning to partner CLS-AX? Or will this remain an internal program? Thanks.

[George Lasezkay:]

Let me take the latter part – last part first. We intend to keep CLS-AX internal. We have no plans to partner that at this time. In terms of the additional collaborations, we're going to be very, very picky about what we do in terms of any additional collaborations. We are very happy with REGENXBIO. We're very happy with Aura. We believe they were validating for our injection system. We are being very careful about keeping a good portion of the ophthalmic space for us in our internal pipeline. And so I would not expect right now anything on the near horizon in terms of collaborations that we would announce similar to REGENXBIO or Aura. That's not in our current thinking but we're opportunistic. Where there's a collaboration that makes sense and we think it fits us strategically and doesn't compromise our internal strategic plan for our pipeline we're always open to doing that. But right now our focus is building the internal pipeline and maintaining good relations with our current collaboration partners.

[Esther Hong:]

Great. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Boris Peaker from Cowen. Your question please.

[Boris Peaker:]

Good afternoon. I guess the first question I have to ask in this environment the ARVO meeting is canceled as of now. On their website it still says it's on but if it's canceled when would you be presenting these results?

[George Lasezkay:]

Tom you want to handle?

[Thomas Ciulla:]

Sure. So we actually had 15 abstracts accepted this year. And as you might know, they actually are published in the IOVS Journal, the official journal of ARVO, so they do become publicly available. We have also submitted abstracts to Retina Society to the American Society of Retina Specialists and we're planning to submit to the American Academy of Ophthalmology. So we'll be sort of have some version of these abstracts or presentations at these other meetings should ARVO be canceled or postponed.

[Boris Peaker:]

Got you. Okay. And my second question, in terms of your Chinese partnership announced today, I'm just curious what's the time line for bringing XIPERE to China? And are there clinical studies that need to be done? Or will – is Arctic Vision just planning to file on existing clinical data?

[George Lasezkay:]

Thanks for that question. I'll take that. I can't give you any specifics about when Arctic is planning to initiate their clinical trials or they see the product being approved in China. That's something that's confidential to them. There is the possibility that they could file with existing U.S. data but right now as far as we can tell they're planning to initiate at least one clinical trial. But that – that's still for them to decide. There's one or two ways they could go. I believe at this point in time, they're planning on a clinical trial. That would be questions better directed at them at this time.

[Boris Peaker:]

Great. Thank you, very much for taking my questions.

[Operator:]

Thank you. Our next question comes from the line of Serge Belanger from Needham and Company. Your question please.

[Serge Belanger:]

Hey good afternoon. Just a couple of questions for me. First on XIPERE. You've now completed two out-licensings for major geographies. I think Europe is the last remaining one that remains un-partnered. Can you give us details on what the European opportunity looks like for a product like XIPERE, I guess relative to the U.S. opportunity?

[George Lasezkay:]

Thanks, Serge. This is George. We have looked at the European opportunity. We think there's some unique challenges in Europe, but that remains open for partnering and potential partnering. We think probably the opportunity there is smaller than the U.S., but I think that really requires a lot more analysis on our part or potential partner's part. So right now, the EU is not our focus. We're focusing on making sure that the U.S.-Canadian collaboration with Bausch goes very well. The launch is successful and as well now, working very closely with our new Chinese partner to make sure that it gets off on the right foot in Mainland China and the Greater China area. That's really our focus now. And we'll consider things about the EU at another time. But that -- we really want to make sure that especially in the United States, this gets off to the right start. And that's really where our focus is at this time.

[Serge Belanger:]

Okay. And you talked about a new preclinical program for therapeutic transgenes. Can you just provide a little more details on what potential indications this program could address?

[George Lasezkay:]

Sure. I'll let Tom take that.

[Thomas Ciulla:]

Thanks for the question Serge. It's an interesting question. We haven't disclosed exactly what therapeutic transgenes we're going to -- or we are looking into. But what I can tell you is that, DNA nanoparticles are not viral capsids with antigens in an immune response, so there's much less of an immune response. That allows us to increase the dose and potentially even repeat dosing. The other key attribute is that, they can carry much larger genes in AAV. So, for example, Stargardt and Usher, both have genes that are too large to fit into current AAV vectors. So obviously, we're exploring a variety of transgenes. We have presented already some data suggesting that at least in rabbits, when we deliver these DNA nanoparticle using a marker gene, we have equivalent activity, whether it's delivered suprachoroidally or subretinally. So, there's potential to have an office-based gene therapy with large genes that's potentially repeatable. And obviously -- I was at Spark previously have experience with Luxturna inherited retinal disease, so that's an area that we're currently exploring.

[Serge Belanger:]

Thank you.

[Operator:]

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Dr. Lasezkay for any further remarks.

[George Lasezkay:]

Thank you once again for joining us on the call this afternoon. We appreciate your continued interest in Clearside and we look forward to updating you on our progress. Operator, you may now disconnect.

[Operator:]

Thank you. Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.