CLSDQ 10-Q
Clearside Biomedical, Inc. (CLSDQ)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
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Registrant’s telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 5, 2021, the registrant had
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PART I - FINANCIAL INFORMATION |
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Item 1. |
Financial Statements (unaudited) |
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Balance Sheets as of September 30, 2021 and December 31, 2020 |
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Statements of Operations for the three and nine months ended September 30, 2021 and 2020 |
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Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 |
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Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II - OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 6. |
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
CLEARSIDE BIOMEDICAL, INC.
Balance Sheets
(in thousands, except share and per share data)
(unaudited)
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September 30, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset |
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Restricted cash |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Current portion of long-term debt |
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— |
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Current portion of operating lease liabilities |
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Deferred revenue |
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Total current liabilities |
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Operating lease liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to the financial statements
3
CLEARSIDE BIOMEDICAL, INC.
Statements of Operations
(in thousands, except share and per share data)
(unaudited)
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Three Months Ended |
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Nine Months Ended |
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2021 |
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2020 |
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2021 |
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2020 |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Other income |
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Other expense |
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Net loss |
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$ |
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$ |
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$ |
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$ |
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Net loss per share of common stock — basic and diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average shares outstanding — basic and diluted |
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See accompanying notes to the financial statements.
4
CLEARSIDE BIOMEDICAL, INC.
Statements of Stockholders’ Equity
(in thousands, except share data)
(unaudited)
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Nine Months Ended September 30, 2021 |
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Total |
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Common Stock |
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Additional |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Paid-In-Capital |
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Deficit |
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Equity |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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Issuance of common shares under a direct |
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— |
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Issuance of common shares under at-the-market |
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— |
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Exercise of stock options |
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— |
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— |
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Vesting and settlement of restricted stock units |
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— |
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— |
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— |
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Issuance of common shares under employee stock |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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Balance at March 31, 2021 |
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Issuance of common shares under at-the-market |
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— |
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Exercise of stock options |
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— |
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— |
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Vesting and settlement of restricted stock units |
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— |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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Balance at June 30, 2021 |
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Issuance of common shares under at-the-market |
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— |
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Exercise of stock options |
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— |
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— |
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Vesting and settlement of restricted stock units |
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— |
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— |
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— |
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— |
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Issuance of common shares under employee stock |
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Share-based compensation expense |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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Balance at September 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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Nine Months Ended September 30, 2020 |
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Total |
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Common Stock |
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Additional |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Paid-In-Capital |
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Deficit |
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Equity |
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Balance at December 31, 2019 |
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$ |
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$ |
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$ |
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$ |
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Issuance of common shares under at-the-market |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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Balance at March 31, 2020 |
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Issuance of common shares under at-the-market |
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— |
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Exercise of stock options |
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— |
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— |
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Vesting and settlement of restricted stock units |
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— |
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— |
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— |
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— |
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Issuance of common shares under employee |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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Balance at June 30, 2020 |
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Issuance of common shares under at-the-market |
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— |
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Exercise of stock options |
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— |
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— |
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Vesting and settlement of restricted stock units |
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— |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance at September 30, 2020 |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to the financial statements.
5
CLEARSIDE BIOMEDICAL, INC.
Statements of Cash Flows
(in thousands)
(unaudited)
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Nine Months Ended |
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2021 |
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2020 |
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Operating activities |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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Share-based compensation expense |
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Gain on extinguishment of debt |
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Non-cash interest expense |
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Accretion of debt discount |
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— |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Other assets and liabilities |
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Accounts payable and accrued liabilities |
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Net cash used in operating activities |
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Investing activities |
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Acquisition of property and equipment |
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— |
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Net cash provided by (used in) investing activities |
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— |
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Financing activities |
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Proceeds from registered direct offering, net of issuance costs |
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Proceeds from at-the-market sales agreement, net of issuance costs |
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Proceeds from exercise of stock options |
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Proceeds from shares issued under employee stock purchase plan |
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Proceeds from long-term debt |
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Payments made on long-term debt |
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— |
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Net cash provided by financing activities |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period |
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$ |
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$ |
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Supplemental disclosure of noncash financing activities |
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Forgiveness of PPP Loan and accrued interest |
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$ |
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$ |
— |
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Reconciliation of cash, cash equivalents and restricted cash:
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September 30, |
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2021 |
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2020 |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash (including $ |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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See accompanying notes to the financial statements.
6
CLEARSIDE BIOMEDICAL, INC.
Notes to the Financial Statements
(unaudited)
1. The Company
Clearside Biomedical, Inc. (the “Company”) is a biopharmaceutical company focused on revolutionizing the delivery of therapies to the back of the eye through the suprachoroidal space (SCS®). Incorporated in the State of Delaware on
The Company’s activities since inception have primarily consisted of developing product and technology rights, raising capital and performing research and development activities. The Company has no current source of revenue to sustain present activities, and does not expect to generate meaningful revenue until and unless the Company's licensees successfully commercialize XIPERE™, its other licensees receive regulatory approval and successfully commercializes its product candidates or the Company commercializes its product candidates either on its own or with a third party. The Company is subject to a number of risks and uncertainties similar to those of other life science companies at a similar stage of development, including, among others, the need to obtain adequate additional financing, successful development efforts including regulatory approval of products, compliance with government regulations, successful commercialization of potential products, protection of proprietary technology and dependence on key individuals.
Liquidity
The Company had cash and cash equivalents of $
In August 2021, the Company entered into an amendment to the Arctic Vision License Agreement (as defined in Note 10 - License and Other Agreements) to expand the territories covered by the license to include India and the ASEAN Countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam). In September 2021, the Company entered into a second amendment to the Arctic Vision License Agreement to expand the territories covered by the license to include Australia and New Zealand. The Company received an aggregate of $
On October 25, 2021, the Company announced that the U.S. Food and Drug Administration (the "FDA") approved XIPERE (triamcinolone acetonide injectable suspension) for the treatment of macular edema associated with uveitis, a form of eye inflammation. The Company is entitled to an aggregate of $
The Company has funded its operations primarily through the sale of common stock and convertible preferred stock and the issuance of long-term debt. The Company will continue to need to obtain additional financing to fund future operations, including completing the development, partnering and potential commercialization of its primary product candidates. The Company will need to obtain financing to conduct additional trials for the regulatory approval of its product candidates if requested by regulatory bodies, and completing the development of any product candidates. If such products were to receive regulatory approval, the Company would need to obtain financing to prepare for the potential commercialization of its product candidates, if the Company decides to commercialize the products on its own.
The Company has suffered recurring losses and negative cash flows from operations since inception and anticipates incurring additional losses until such time, if ever, that it can generate significant revenue from its licensees' commercialization of XIPERE. In the absence of product or other revenues, the amount, timing, nature or source of which cannot be predicted, the Company’s losses will continue as it conducts its research and development activities.
Based on its current plans and forecasted expenses, the Company expects that its cash and cash equivalents as of the filing date, November 10, 2021, will enable it to fund its planned operating expenses and capital expenditure requirements into 2023. This estimate assumes receipt of the $
7
2. Significant Accounting Policies
Basis of Presentation
The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Unaudited Interim Financial Information
The accompanying balance sheet as of September 30, 2021, statements of operations for the three and nine months ended September 30, 2021 and 2020, statements of stockholders’ equity for the three and nine months ended September 30, 2021 and 2020 and statements of cash flows for the nine months ended September 30, 2021 and 2020 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of September 30, 2021, its results of its operations for the three and nine months ended September 30, 2021 and 2020, its changes in stockholders’ equity for the three and nine months ended September 30, 2021 and 2020 and its cash flows for the nine months ended September 30, 2021 and 2020. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2021 and 2020 are unaudited. The results for the nine months ended September 30, 2021 are not indicative of results to be expected for the year ending December 31, 2021, any other interim periods or any future year or period. These unaudited financial statements should be read in conjunction with the audited financial statements and related footnotes, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of income and expenses during the reporting periods. Significant items subject to such estimates and assumptions include revenue recognition, the accounting for useful lives to calculate depreciation and amortization, clinical trial expense accruals, share-based compensation expense and income tax valuation allowance. Actual results could differ from these estimates.
Effects of COVID-19
The COVID-19 pandemic has created global volatility, economic uncertainty and general market disruption. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require us to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.
Revenue Recognition
The Company recognizes revenue from its contracts with customers under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). The Company’s primary revenue arrangements are license agreements which typically include upfront payments, regulatory and commercial milestone payments and royalties based on future product sales. The arrangements may also include payments for the Company’s SCS Microinjector devices as well as payments for assistance and oversight of the customer’s use of the Company’s technology. In determining the amount of revenue to be recognized under these agreements, the Company performs the following steps: (i) identifies the promised goods and services to be transferred in the contract, (ii) identifies the performance obligations, (iii) determines the transaction price, (iv) allocates the transaction price to the performance obligations and (v) recognizes revenue as the performance obligations are satisfied.
The Company receives payments from its customers based on billing schedules established in each contract. Upfront and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under the arrangement. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.
8
Research and Development Costs
Research and development costs are charged to expense as incurred and include:
Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to the Company by its vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the patterns of costs incurred, and are reflected in the financial statements as prepaid or accrued expense.
Share-Based Compensation
Compensation cost related to share-based awards granted to employees is measured based on the estimated fair value of the award at the grant date. The Company estimates the fair value of stock options using a Black-Scholes option pricing model. Compensation expense for options granted to non-employees is determined as the fair value of consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. The fair value of restricted stock units granted is measured based on the market value of the Company’s common stock on the date of grant. Share-based compensation costs are expensed on a straight-line basis over the relevant vesting period.
Compensation cost related to shares purchased through the Company’s employee stock purchase plan, which is considered compensatory, is based on the estimated fair value of the shares on the offering date, including consideration of the discount and the look back period. The Company estimates the fair value of the shares using a Black-Scholes option pricing model. Compensation expense is recognized over the six-month withholding period prior to the purchase date.
All share-based compensation costs are recorded in general and administrative or research and development costs in the statements of operations based upon the underlying employees’ roles within the Company.
Cash Equivalents
Cash equivalents consist of short-term, highly liquid investments with an original term of three months or less at the date of purchase.
Concentration of Credit Risk Arising From Cash Deposits in Excess of Insured Limits
The Company maintains its cash in bank deposits that at times may exceed federally insured limits. The Company has not experienced any loss in such accounts. The Company believes it is not exposed to any significant risks with respect to its cash balances.
Recent Accounting Pronouncements
In December 2019, the FASB issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new ASU also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates. These changes aim to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing the disclosures. The Company adopted ASU 2019-12 on January 1, 2021, and the adoption did not have a material impact on its financial statements and related disclosures.
9
3. Property and Equipment, Net
Property and equipment, net consisted of the following (dollar amounts in thousands):
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Estimated |
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September 30, |
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December 31, |
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Furniture and fixtures |
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$ |
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$ |
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Machinery and equipment |
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Computer equipment |
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Leasehold improvements |
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||
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Less: Accumulated depreciation |
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|
( |
) |
|
|
( |
) |
|
|
|
|
$ |
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|
$ |
|
||
4. Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
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|
September 30, |
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|
December 31, |
|
||
|
|
2021 |
|
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2020 |
|
||
Accrued research and development |
|
$ |
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$ |
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||
Accrued employee costs |
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Accrued professional fees |
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Accrued expense |
|
|
|
|
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||
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|
$ |
|
|
$ |
|
||
5. CARES Act Paycheck Protection Program Loan
On April 20, 2020, the Company entered into a loan agreement with Silicon Valley Bank (the “PPP Lender”) under the terms of which the PPP Lender made a loan to the Company in an aggregate principal amount of $
Under the terms of the Note and the PPP Loan, interest accrued on the outstanding principal amount at the rate of
The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. On January 11, 2021, the Company was notified by the PPP Lender that the PPP Loan had been forgiven in full, including approximately $
6. Common Stock
The Company’s amended and restated certificate of incorporation authorizes the Company to issue
7. Stock Purchase Warrants
In September 2016, in connection with a loan agreement, the Company issued warrants to purchase up to
10
8. Share-Based Compensation
Share-based compensation is accounted for in accordance with the provisions of ASC 718, Compensation-Stock Compensation.
Stock Options
The Company has granted stock option awards to employees, directors and consultants from its 2011 Stock Incentive Plan (the “2011 Plan”) and its 2016 Equity Incentive Plan (the “2016 Plan”). The estimated fair value of options granted is determined as of the date of grant using the Black-Scholes option pricing model. The resulting fair value is recognized ratably over the requisite service period, which is generally the vesting period of the awards.
Share-based compensation expense for options granted under the 2011 Plan and the 2016 Plan is reflected in the statements of operations as follows (in thousands):
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Three Months Ended |
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|
Nine Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
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|
|
|
|
|
|
|
|
|
|
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||||
Total |
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$ |
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|
$ |
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|
$ |
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|
$ |
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||||
The following table summarizes the activity related to stock options during the nine months ended September 30, 2021:
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Weighted |
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||
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Number of |
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Average |
|
||
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Shares |
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Exercise Price |
|
||
Options outstanding at December 31, 2020 |
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$ |
|
||
Granted |
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||
Exercised |
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( |
) |
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Forfeited |
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Options outstanding at September 30, 2021 |
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Options exercisable at December 31, 2020 |
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Options exercisable at September 30, 2021 |
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||
As of September 30, 2021, the Company had $
Restricted Stock Units
The Company has granted restricted stock units (“RSUs”) to employees from the 2016 Plan. The shares underlying the RSU awards have vesting terms of two to four years from the date of grant subject to the employees’ continuous service and subject to accelerated vesting in specified circumstances. The fair value of the RSUs granted is measured based on the market value of the Company’s common stock on the date of grant and is recognized ratably over the requisite service period, which is generally the vesting period of the awards.
The total share-based compensation expense related to RSUs is reflected in the statements of operations as follows (in thousands):
|
|
Three Months Ended |
|
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Nine Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
11
The following table summarizes the activity related to RSUs during the nine months ended September 30, 2021:
|
|
|
|
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Weighted Average |
|
||
|
|
Number of |
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|
Grant Date |
|
||
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Shares |
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Fair Value |
|
||
Non-vested RSUs outstanding at December 31, 2020 |
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$ |
|
||
Granted |
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|
|
|
|
|
||
Vested |
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( |
) |
|
|
|
|
Non-vested RSUs outstanding at September 30, 2021 |
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|
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|
||
As of September 30, 2021, the Company had $
Employee Stock Purchase Plan
The 2016 Employee Stock Purchase Plan (the “2016 ESPP”) became effective on June 1, 2016. The 2016 ESPP is considered a compensatory plan and the fair value of the discount and the look-back period are estimated using the Black-Scholes option pricing model and expense is recognized over the six-month withholding period prior to the purchase date.
The share-based compensation expense recognized for the 2016 ESPP is reflected in the statements of operations and comprehensive loss as follows (in thousands):
|
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Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
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2021 |
|
|
2020 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
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|
|
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||||
Total |
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$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
9. Commitments and Contingencies
Lease Commitment Summary
In November 2016, the Company signed an office lease agreement to lease approximately
|
|
September 30, |
|
|
Operating lease right-of-use asset |
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$ |
|
|
|
|
|
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Liabilities |
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|
|
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Current portion of operating lease liabilities |
|
$ |
|
|
Operating lease liabilities |
|
|
|
|
Total operating lease liabilities |
|
$ |
|
|
The Company recognizes a right-of-use asset for the right to use the underlying asset for the lease term, and a lease liability, which represents the present value of the Company’s obligation to make payments over the lease term.
12
Minimum lease payments were as follows at September 30, 2021 (in thousands):
Year Ending December 31, |
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2021 |
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$ |
|
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2022 |
|
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2023 |
|
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Total minimum lease payments |
|
|
|
|
Less imputed interest |
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|
( |
) |
Total operating lease liabilities |
|
$ |
|
|
Equipment leases with an initial term of 12 months or less are not recorded with operating lease liabilities. The Company recognizes expense for these leases on a straight-line basis over the lease term. The equipment leases were deemed to be immaterial.
Operating lease cost was $
Contract Service Providers
In the course of the Company’s normal business operations, it has agreements with contract service providers to assist in the performance of its research and development, clinical research and manufacturing. Substantially all of these contracts are on an as needed basis.
10. License and Other Agreements
Bausch + Lomb
On October 22, 2019, the Company entered into a License Agreement with Bausch + Lomb, a division of Bausch Health Companies, Inc. (“Bausch”). Pursuant to the Bausch License Agreement, the Company has granted an exclusive license to Bausch to develop, manufacture, distribute, promote, market and commercialize XIPERE using the Company’s proprietary microinjector (the “Device”), as well as specified other steroids, corticosteroids and NSAIDs in combination with the Device (“Other Products,” and together with XIPERE, the “Products”), subject to specified exceptions, in the United States and Canada (the “Territory”) for the treatment of ophthalmology indications, including non-infectious uveitis.
On April 27, 2020, the Company and Bausch entered into an amendment to the Company’s License Agreement with Bausch dated October 22, 2019 (as amended, the “Bausch License Agreement”).
Pursuant to the Bausch License Agreement, Bausch made an upfront payment of $
The Bausch License Agreement will expire upon expiration of the royalty terms for all Products and countries in the Territory, with each royalty term for a given Product and country ending on the latest of (i) the date of expiration of the last-to-expire valid claim of any licensed patent rights covering such Product in such country in the Territory, (ii) the date of the loss of regulatory exclusivity for such Product in such country in the Territory, or (iii) ten years from the later of the first sale of such Product in such country in the Territory. Following the payment of the Pre-Launch Milestone Payments, Bausch may also terminate the Bausch License Agreement for convenience upon 180 days’ written notice. In addition, the Company can terminate the Bausch License Agreement if Bausch commences a legal action challenging the validity, enforceability or scope of any of the licensed patents. Both parties may terminate the Bausch License Agreement (i) upon a material breach of the Bausch License Agreement, subject to a specified cure period and specified exceptions, or (ii) if the other party encounters bankruptcy or insolvency.
The Company was responsible for all development expenses for XIPERE in the Territory until the Company's New Drug Application ("NDA") was approved by the FDA, subject to specified exceptions, as well as manufacturing costs in connection with the NDA. The Company was also responsible for all clinical and development expenses conducted to satisfy the FDA’s requests in the
13
complete response letter issued on October 18, 2019 related to the NDA and any subsequent complete response letter related to the NDA (the “CRL-related expenses”). Following FDA approval of XIPERE, Bausch is responsible for all such expenses.
Due to the refund provisions in the License Agreement, the upfront payment of $
Arctic Vision (Hong Kong) Limited
On March 10, 2020, the Company entered into a License Agreement (the “License Agreement”) with Arctic Vision (Hong Kong) Limited (“Arctic Vision”). Pursuant to the License Agreement, the Company has granted an exclusive license to Arctic Vision to develop, distribute, promote, market and commercialize XIPERE, subject to specified exceptions, in China, Hong Kong, Macau, Taiwan and South Korea (the “Arctic Territory”). Under the terms of the License Agreement, neither party may commercialize XIPERE in the other party’s territory. Arctic Vision has agreed to use commercially reasonably efforts to pursue development and commercialization of XIPERE for indications associated with uveitis in the Arctic Territory. In addition, upon receipt of the Company’s consent, Arctic Vision will have the right, but not the obligation, to develop and commercialize XIPERE for additional indications in the Arctic Territory.
Pursuant to the License Agreement, Arctic Vision paid the Company an upfront payment of $
In August 2021, the Company entered into an amendment to the Arctic Vision License Agreement to expand the territories covered by the license to include India and the ASEAN Countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam). In September 2021, the Company entered into a second amendment to the Arctic Vision License Agreement to expand the Arctic Territory to include Australia and New Zealand. The Company received an aggregate of $
Other
The Company periodically enters into short-term agreements with other customers to evaluate the potential use of its proprietary SCS Microinjector with third-party product candidates for the treatment of various diseases. Funds received from these agreements are recognized as revenue over the term of the agreement.
11. Fair Value Measurements
The Company records certain financial assets and liabilities at fair value in accordance with the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, on fair value measurements. As defined in the guidance, fair value, defined as an exit price, represents the amount that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering these assumptions, the guidance defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The Company’s material financial instruments at September 30, 2021 and December 31, 2020 consisted primarily of cash and cash equivalents, and at December 31, 2020, also included long-term debt. The fair values of cash and cash equivalents, other current assets and accounts payable approximate their respective carrying values due to the short term nature of these instruments and are classified as Level 1 in the fair value hierarchy. The fair value of long-term debt approximates the carrying value due to variable interest rates that correspond to market rates and is classified as Level 1 in the fair value hierarchy.
There were
14
12. Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, without consideration of the dilutive effect of potential common stock equivalents. Diluted net loss per share gives effect to all dilutive potential shares of common stock outstanding during this period. For all periods presented, the Company’s potential common stock equivalents, which included stock options, restricted stock units and stock purchase warrants, have been excluded from the computation of diluted net loss per share as their inclusion would have the effect of reducing the net loss per share. Therefore, the denominator used to calculate both basic and diluted net loss per share is the same in all periods presented.
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Three Months Ended |
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Nine Months Ended |
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2021 |
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2020 |
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2021 |
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2020 |
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Outstanding stock options |
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Non-vested restricted stock units |
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Stock purchase warrants |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions, or the negative of such words or phrases, are intended to identify “forward-looking statements.” We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those below and elsewhere in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission, or SEC, under the heading “Risk Factors”. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. Statements made herein are as of the date of the filing of this Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes for the year ended December 31, 2020 appearing in our Annual Report on Form 10-K filed with the SEC on March 15, 2021.
Overview
We are a biopharmaceutical company focused on revolutionizing the delivery of therapies to the back of the eye through the suprachoroidal space (SCS®). Our SCS injection platform, utilizing our proprietary SCS Microinjector®, enables an in-office, repeatable, non-surgical procedure for the targeted and compartmentalized delivery of a wide variety of therapies to the macula, retina or choroid to potentially preserve and improve vision in patients with sight-threatening eye diseases. We are developing our own pipeline of small molecule product candidates for administration via our SCS Microinjector and strategically partner our SCS injection platform with companies utilizing other ophthalmic therapeutic innovations. Our first product, XIPERE™ (triamcinolone acetonide injectable suspension) for suprachoroidal use, was approved by the U.S. Food and Drug Administration, or the FDA, in October 2021.
We are leveraging our SCS injection platform by building an internal research and development pipeline targeting chorioretinal diseases and by creating external collaborations with other companies. Using our suprachoroidal injection technology in conjunction with proprietary formulations of existing drugs as well as novel therapies, we believe we have created a broad therapeutic platform for developing product candidates to treat serious back of the eye diseases.
15
The current development status of our pipeline of internal product candidates and external collaborations is summarized in the chart below:
Internal Pipeline
Our first product, XIPERE, formerly known as CLS-TA, is a proprietary, preservative-free suspension of the corticosteroid triamcinolone acetonide, or TA, for administration via suprachoroidal injection. Corticosteroids are the standard of care in uveitis. They are effective at treating the inflammatory aspect of ocular disease, but when delivered locally, either topically as drops, intravitreally, or by periocular injection, they have been associated with significant side effects, such as cataract formation or exacerbation, and elevated intraocular pressure, or IOP, which can lead to glaucoma.
On October 25, 2021, we announced that the FDA approved XIPERE for the treatment of macular edema associated with uveitis. Uveitis is a set of ocular inflammatory conditions affecting approximately 350,000 patients in the United States and more than one million worldwide. Approximately one-third of uveitis patients develop uveitic macular edema, a build-up of fluid in the macula, the area of the retina responsible for sharp, straight-ahead vision. Macular edema is the leading cause of vision loss and blindness in uveitis patients and can occur from uveitis affecting any anatomic location—anterior, intermediate, posterior or panuveitis. The uveitis market is expected to grow to nearly $550 million by 2024 in the United States, and over $1 billion globally.
We are developing a proprietary suspension of axitinib, a tyrosine kinase inhibitor, or TKI, for suprachoroidal injection, which we refer to as CLS-AX. In our preclinical studies, administration of CLS-AX through suprachoroidal injection was well tolerated and showed durability over several months, providing us with the opportunity to potentially reduce treatment burden and address a primary need for neovascular age-related macular degeneration, or wet AMD, patients.
In August 2020, we announced that the FDA had accepted our Investigational New Drug application, or IND, for CLS-AX. In January 2021, we announced that the first patients had been enrolled in our Phase 1/2a clinical trial of CLS-AX, known as OASIS. In March 2021, we completed patient dosing in Cohort 1 of OASIS and in June 2021, reported that we achieved our safety and tolerability endpoints. In September 2021, we completed patient enrollment in Cohort 2 and expect to report data by the end of 2021. If the data from Cohort 2 are positive, we intend to continue the clinical trial with a dose escalation in Cohort 3. We have added a three-month extension study to follow Cohort 2 patients over a longer period of time.
We have initiated another small molecule program utilizing suprachoroidal administration of an integrin inhibitor suspension. Integrins play a role in pathologic processes, such as inflammation, angiogenesis and fibrosis. Integrin inhibition has had some recent preliminary validation in preclinical models and clinical studies of diabetic macular edema and macular degeneration conducted by others. We believe that integrin inhibition could potentially serve as primary therapy, adjunctive therapy to anti-VEGF agents or secondary therapy in refractory cases of diabetic macular edema and macular degeneration. Suprachoroidal delivery of an integrin inhibitor suspension could provide targeting, compartmentalization and durability advantages over topical or intravitreal delivery, similar to what we have observed in other preclinical studies of small molecule suspensions, such as triamcinolone acetonide and axitinib. Therefore, we are assessing ocular tolerability, distribution and pharmacokinetics of our integrin inhibitor suprachoroidal suspension in a series of preclinical studies. These studies are ongoing.
16
External Collaborations Pipeline
In addition to growing our internal pipeline, we are also focused on collaborating with other companies to provide access to the suprachoroidal space.
During the second half of 2019, we entered into three license and other agreements that we believe validate and expand the reach of our suprachoroidal injection platform. In October 2019, we announced that Bausch + Lomb, a division of Bausch Health Companies, Inc., or Bausch, acquired an exclusive license for the commercialization and development of XIPERE (triamcinolone acetonide suprachoroidal suspension) in the United States and Canada.
In October 2019, REGENXBIO Inc., or REGENXBIO, exercised its option to license our SCS Microinjector technology for in-office delivery of adeno-associated virus, or AAV,-based therapeutics to the SCS to potentially treat AMD, diabetic retinopathy and certain other conditions for which chronic anti-VEGF treatment is currently the standard of care. REGENXBIO is currently conducting two Phase 2 clinical trials using our SCS Microinjector technology: the Phase 2 trial entitled AAVIATE for the treatment of wet AMD and a second Phase 2 trial entitled ALTITUDE for the treatment of diabetic retinopathy. REGENXBIO reported positive initial data from both clinical trials in October 2021.
In July 2019, Aura Biosciences, or Aura, licensed our SCS Microinjector to deliver Aura’s proprietary drug candidates into the SCS for the potential treatment of certain ocular cancers, including choroidal melanoma. Aura is currently conducting a Phase 2 trial in choroidal melanoma comprised of an open-label, dose escalation phase and a randomized, masked dose expansion phase. Aura reported positive initial data on its Phase 2 clinical trial for the treatment of choroidal melanoma in October 2021. Aura has announced the randomized phase of the trial is planned to begin in the second half of 2022 and will serve as the first pivotal trial for the treatment of indeterminate lesions and choroidal melanoma.
In March 2020, we entered into a license agreement, or the Arctic Vision License Agreement, with Arctic Vision (Hong Kong) Limited, or Arctic Vision. Pursuant to the Arctic Vision License Agreement, we granted an exclusive license to Arctic Vision to develop, distribute, promote, market and commercialize XIPERE, subject to specified exceptions, in China, Hong Kong, Macau, Taiwan and South Korea, or the Arctic Territory. In December 2020, Arctic Vision announced approval of its IND for a Phase 3 clinical trial of XIPERE in China and they expect to begin Phase 3 clinical trials later this year.
In August 2021, we entered into an amendment to the Arctic Vision License Agreement to expand the territories covered by the license to include India and the ASEAN Countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam). In September 2021, we entered into a second amendment to the Arctic Vision License Agreement to expand the Arctic Territory to include Australia and New Zealand. We received an aggregate of $3.0 million in consideration for the expansion of the Arctic Territory.
These partnerships enable us to expand the use of our suprachoroidal injection platform to other indications and geographies globally. Under these license agreements, we are eligible to receive up to an aggregate of more than $200 million in potential future development and sales milestones, as well as and royalties from net sales of covered products.
We have incurred net losses since our inception. In recent years, our operations have consisted primarily of conducting preclinical studies and clinical trials, raising capital and undertaking other research and development initiatives. To date, we have not generated any revenue, other than license and other revenue, and we have primarily financed our operations through public offerings and private placements of our equity securities, issuances of convertible promissory notes and loan agreements. As of September 30, 2021, we had an accumulated deficit of $274.2 million. We recorded net losses of $4.9 million and $2.4 million for the three months ended September 30, 2021 and 2020, respectively, and net losses of $18.3 million and $11.1 million for the nine months ended September 30, 2021 and 2020, respectively. We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the necessary development for and obtaining regulatory approval of our product candidates, as well as discovering compounds and developing proprietary formulations to utilize with our SCS Microinjector.
We expect to continue to incur significant and increasing operating losses at least for the next several years. We do not expect to generate significant product or license and other revenue unless and until XIPERE is successfully commercialized by its licensees or until we successfully complete development of, obtain regulatory approval for and commercialize additional product candidates, either on our own or together with a third party. Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials and our expenditures on other research and development activities. Our clinical trial expenses have decreased significantly following our decision to discontinue late-stage clinical trials of XIPERE for indications other than uveitis. However, we expect clinical trial expenses to increase in 2021 as a result of our Phase 1/2a clinical trial of CLS-AX. We also will continue our efforts to seek to discover, research and develop additional product candidates and seek regulatory approvals in additional regions for XIPERE for the treatment of macular edema associated with uveitis. Based on our current research and development plans and expected near-term partnership milestone payments, we expect to have sufficient resources to fund our planned operations into 2023.
17
Impact of COVID-19 on Our Business
We have been actively monitoring the novel coronavirus, or COVID-19, situation and its impact globally. Our financial results for the three and nine months ended September 30, 2021 were not significantly impacted by COVID-19, and we currently do not expect any material impact on our financial results for the remainder of 2021. We continue to operate normally with the exception of enabling our employees to work from home and abiding by travel restrictions issued by federal and local governments.
As the COVID-19 pandemic continues, we may experience other disruptions that could severely impact our business, results of operations and prospects. The extent to which COVID-19 may impact our business, preclinical development and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted, such as the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the effectiveness of actions taken in the United States and other countries to contain and treat the disease and the impact of new variants or mutations of the coronavirus, such as the Delta variant.
Components of Operating Results
Revenue
We have not generated any revenue from the sale of any drugs, and we do not expect to generate any product revenue unless or until XIPERE is commercialized by our licensees or we obtain regulatory approval of and commercialize our product candidates, either on our own or with a third party. Our revenue in recent periods has been generated primarily from our license agreements. We are seeking to enter into additional license and other agreements with third parties to evaluate the potential use of our proprietary SCS Microinjector with the third party’s product candidates for the treatment of various eye diseases. These agreements may include payments to us for technology access, upfront license payments, regulatory and commercial milestone payments and royalties.
Research and Development
Research and development expenses consist primarily of costs incurred for the research and development of our preclinical and clinical product candidates, which include:
We expense research and development costs to operations as incurred. These costs include preclinical activities, such as manufacturing and stability and toxicology studies, that are supportive of a product candidate itself. In addition, there are expenses related to clinical trials and similar activities for each program, including costs associated with CROs. Clinical costs are recognized based on the terms of underlying agreements, as well as an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations and additional information provided to us by our vendors about their actual costs occurred. Expenses related to activities that support more than one development program or activity, such as salaries, share-based compensation and depreciation, are not classified as direct preclinical costs or clinical costs and are separately classified as unallocated.
18
The following table shows our research and development expenses by program for the three and nine months ended September 30, 2021 and 2020 (in thousands).
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
XIPERE (uveitis program) |
|
$ |
771 |
|
|
$ |
781 |
|
|
$ |
2,646 |
|
|
$ |
2,048 |
|
CLS-AX (wet AMD program) |
|
|
1,341 |
|
|
|
478 |
|
|
|
3,382 |
|
|
|
1,429 |
|
Total |
|
|
2,112 |
|
|
|
1,259 |
|
|
|
6,028 |
|
|
|
3,477 |
|
Unallocated |
|
|
3,035 |
|
|
|
2,231 |
|
|
|
8,669 |
|
|
|
7,124 |
|
Total research and development expense |
|
$ |
5,147 |
|
|
$ |
3,490 |
|
|
$ |
14,697 |
|
|
$ |
10,601 |
|
Our expenses related to clinical trials are based on estimates of patient enrollment and related expenses at clinical investigator sites as well as estimates for the services received and efforts expended under contracts with research institutions, consultants and CROs that conduct and manage clinical trials on our behalf. We generally accrue expenses related to clinical trials based on contracted amounts applied to the level of patient enrollment and activity according to the protocol. If future timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we would modify our estimates of accrued expenses accordingly on a prospective basis.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. It is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates, or if, when or to what extent we will generate revenues from the commercialization and sale of XIPERE or any of our product candidates that obtain regulatory approval.
The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that may include, among others:
In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.
General and Administrative
General and administrative expenses consist primarily of salaries and other related costs, including share-based compensation, for personnel in executive, finance and administrative functions. General and administrative costs historically included commercial pre-launch preparations for XIPERE, and also include facility related costs not otherwise included in research and development expenses, as well as professional fees for legal, patent, consulting, and accounting and audit services.
19
Other Income (Expense)
Other income consists of the gain on the extinguishment of the PPP Loan and accrued interest and interest income earned on our cash and cash equivalents and short-term investments. Interest income is not considered significant to our financial statements.
Other expense consists of interest expense incurred under our loan agreements.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with U.S. GAAP, we evaluate our estimates and judgments on an ongoing basis. Significant estimates include assumptions used in the determination of share-based compensation and some of our research and development expenses. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We define our critical accounting policies as those accounting principles generally accepted in the United States of America that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. During the nine months ended September 30, 2021, there were no significant changes to our critical accounting policies disclosed in our audited financial statements for the year ended December 31, 2020, which are included in our Annual Report on Form 10-K, as filed with the SEC on March 15, 2021.
Results of Operations for the Three Months Ended September 30, 2021 and 2020
The following table sets forth our results of operations for the three months ended September 30, 2021 and 2020.
|
|
Three Months Ended |
|
|
Period-to-Period |
|
||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
License and other revenue |
|
$ |
3,074 |
|
|
$ |
3,432 |
|
|
$ |
(358 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
5,147 |
|
|
|
3,490 |
|
|
|
1,657 |
|
General and administrative |
|
|
2,816 |
|
|
|
2,374 |
|
|
|
442 |
|
Total operating expenses |
|
|
7,963 |
|
|
|
5,864 |
|
|
|
2,099 |
|
Loss from operations |
|
|
(4,889 |
) |
|
|
(2,432 |
) |
|
|
(2,457 |
) |
Other income |
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
Other expense |
|
|
— |
|
|
|
(1 |
) |
|
|
1 |
|
Net loss |
|
$ |
(4,887 |
) |
|
$ |
(2,433 |
) |
|
$ |
(2,454 |
) |
Revenue. In the three months ended September 30, 2021 and 2020, we recognized $3.1 million and $3.4 million, respectively, of revenue associated with our license agreements. License revenue for the three months ended September 30, 2021 was primarily a result of a milestone payments received from Arctic Vision. License revenue for the three months ended September 30, 2020 was primarily a result of a milestone payments received from REGENXBIO.
Research and development. Research and development expense increased by $1.7 million, from $3.5 million for the three months ended September 30, 2020 to $5.1 million for the three months ended September 30, 2021. This increase was due to a $0.9 million increase in costs for the for CLS-AX program, including costs for OASIS, a Phase 1/2a clinical trial of CLS-AX and a $0.3 million increase in employee related costs. In addition, there was a $0.3 million increase in costs in our other programs.
20
General and administrative. General and administrative expenses increased by $0.4 million, from $2.4 million for the three months ended September 30, 2020 to $2.8 million for the three months ended September 30, 2021. This was primarily attributable to an increase in employee related costs.
Results of Operations for the Nine Months Ended September 30, 2021 and 2020
The following table sets forth our results of operations for the nine months ended September 30, 2021 and 2020.
|
|
Nine Months Ended |
|
|
Period-to-Period |
|
||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
License and other revenue |
|
$ |
3,888 |
|
|
$ |
7,883 |
|
|
$ |
(3,995 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
14,697 |
|
|
|
10,601 |
|
|
|
4,096 |
|
General and administrative |
|
|
8,525 |
|
|
|
8,107 |
|
|
|
418 |
|
Total operating expenses |
|
|
23,222 |
|
|
|
18,708 |
|
|
|
4,514 |
|
Loss from operations |
|
|
(19,334 |
) |
|
|
(10,825 |
) |
|
|
(8,509 |
) |
Other income |
|
|
1,001 |
|
|
|
— |
|
|
|
1,001 |
|
Other expense |
|
|
— |
|
|
|
(273 |
) |
|
|
273 |
|
Net loss |
|
$ |
(18,333 |
) |
|
$ |
(11,098 |
) |
|
$ |
(7,235 |
) |
Revenue. In the nine months ended September 30, 2021 and 2020, we recognized $3.9 million and $7.9 million, respectively, of revenue associated with our license agreements. License revenue for the nine months ended September 30, 2021 was primarily a result of milestone payments of $3.8 million received from Arctic Vision. License revenue for the nine months ended September 30, 2020 was primarily a result of milestone payments of $4.3 million received from Arctic Vision and $3.0 million received from REGENXBIO.
Research and development. Research and development expense increased by $4.1 million, from $10.6 million for the nine months ended September 30, 2020 to $14.5 million for the nine months ended September 30, 2021. This increase was primarily due to a $2.0 million increase in costs for the for CLS-AX program, including costs for OASIS, a Phase 1/2a clinical trial of CLS-AX, and a $0.6 million increase in costs related drug manufacturing for XIPERE. In addition, employee related costs increased $1.1 million during the same period.
General and administrative. General and administrative expenses increased by $0.4 million for the nine months ended September 30, 2021 and 2020. This increase was primarily a result of a $0.8 million increase in employee related costs, partially offset by a $0.3 million decrease in patent costs and professional fees.
Other income. Other income for the nine months ended September 30, 2021 was primarily comprised of the gain on the extinguishment of debt from the forgiveness of the PPP Loan and accrued interest.
Other expense. Other expense for the nine months ended September 30, 2020 primarily consisted of interest on long-term debt, the amortization of financing costs, the accretion of warrants and the final payment related to our prior loan agreement.
Liquidity and Capital Resources
Sources of Liquidity
We have funded our operations primarily through the proceeds of public offerings of our common stock, sales of convertible preferred stock and the issuance of long-term debt. As of September 30, 2021, we had cash and cash equivalents of $25.2 million. We invest any cash in excess of our immediate requirements primarily with a view to liquidity and capital preservation. As of September 30, 2021, our funds were held in cash and money market funds.
In April 2020, we entered into a loan agreement with Silicon Valley Bank under the terms of which Silicon Valley bank loaned us $1.0 million, or the PPP Loan, pursuant to the Paycheck Protection Program, or PPP, under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. In accordance with the requirements of the CARES Act, we used the proceeds primarily for payroll costs and other eligible expenses. The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. On January 11, 2021, we received notification from Silicon Valley Bank that the PPP loan was forgiven in full, including approximately $7,000 of accrued interest.
In March 2020, we entered into the Arctic License Agreement, pursuant to which Arctic Vision has agreed to pay us up to a total of $35.5 million. This amount includes an upfront payment of $4.0 million, which we received in March 2020, as well as an aggregate of up to $31.5 million in potential development milestone payments for specified events, including $4.0 million upon regulatory approval of XIPERE in the United States and potential sales milestone payments for achievement of specified levels of net
21
sales. Further, during the applicable royalty term, we will also be entitled to receive tiered royalties of 10-12% of net sales in the Arctic Territory, subject to customary reductions.
In October 2019, we announced that Bausch acquired an exclusive license for the commercialization and development of XIPERE in the United States and Canada. On October 25, 2021, we announced that the FDA approved XIPERE for the treatment of macular edema associated with uveitis. We are entitled to receive $5.0 million from Bausch within 30 days of FDA approval, and we are eligible to receive an additional $10.0 million upon completion of pre-launch activities for XIPERE. Bausch expects to launch XIPERE in the United States in the first quarter of 2022.
We have entered into an at-the-market sales agreement, or the ATM agreement, with Cowen and Company LLC, or Cowen, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million through Cowen acting as our sales agent. During the nine months ended September 30, 2021, we sold 2.9 million shares of our common stock for net proceeds of $12.2 million under the ATM agreement. As of September 30, 2021, there was $14.4 million available for sales of our common stock under the ATM agreement.
Funding Requirements
Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, research and development costs to build our product candidate pipeline, legal and other regulatory expenses and general overhead costs.
The successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of CLS-AX or any future product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from product sales. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that candidate.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings and potential collaboration, license and development agreements. Other than potential payments we may receive under our license and other agreements, we do not currently have any committed external source of funds, though, as described above, we may also be able to sell our common stock under the ATM agreement with Cowen subject to the terms of that agreement and depending on market conditions. We expect that we will require additional capital to fund our ongoing operations. Additional funds may not be available to us on a timely basis, on commercially reasonable terms, or at all. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If we raise funds through additional collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, including any future collaboration or licensing arrangement for XIPERE outside of the territories in which we have previously licensed or granted options to license XIPERE, we may be required to relinquish additional rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
We also incur costs as a public company, including costs and expenses for fees to members of our board of directors, accounting and finance personnel costs, directors and officers insurance premiums, audit and legal fees, investor relations fees and expenses for compliance with reporting requirements under the Exchange Act and rules implemented by the SEC and Nasdaq.
Outlook
We have suffered recurring losses and negative cash flows from operations since inception and anticipate incurring additional losses until such time, if ever, that we can obtain FDA approval to market and then generate significant milestone payments and
22
royalties from XIPERE and other licensing arrangements or revenues from other product candidates. We will need additional financing to fund our operations. Our plans primarily consist of raising additional capital, potentially in a combination of equity or debt financings or restructurings, or potentially entering into additional collaborations, partnerships and other strategic arrangements.
Based on our current plans and forecasted expenses, we expect that our cash and cash equivalents as of the filing date, November 10, 2021, will enable us to fund our planned operating expenses and capital expenditure requirements into 2023. This estimate assumes receipt of the $9.0 million of milestone payments that we are entitled receive from our licensees as a result of FDA approval of XIPERE. In addition, the estimate assumes receipt of the $10.0 million milestone payment that we are entitled to receive from Bausch upon completion of pre-launch activities for XIPERE. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect.
Cash Flows
The following is a summary of the net cash flows provided by (used in) our operating, investing and financing activities (in thousands):
|
|
Nine Months Ended |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Net cash (used in) provided by: |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(15,787 |
) |
|
$ |
(8,684 |
) |
Investing activities |
|
|
— |
|
|
|
(55 |
) |
Financing activities |
|
|
23,617 |
|
|
|
983 |
|
Net change in cash and cash equivalents |
|
$ |
7,830 |
|
|
$ |
(7,756 |
) |
During the nine months ended September 30, 2021 and 2020, our operating activities used net cash of $15.8 million and $8.7 million, respectively. The use of cash in each period primarily resulted from our net losses. The increase in net loss to $18.3 million for the nine months ended September 30, 2021 as compared to $11.1 million for the nine months ended September 30, 2020 was primarily attributable to higher research and development expenses related to the preclinical and clinical CLS-AX program in the nine months ended September 30, 2021 and higher license revenue in the nine months ended September 30, 2020.
During the nine months ended September 30, 2020, our net cash used in investing activities was $55,000, due to the purchase of equipment.
During the nine months ended September 30, 2021 our net cash provided by financing activities was $23.6 million. This primarily consisted of $11.1 million of net proceeds from the sale of shares of our common stock in a registered direct offering and $12.2 million of net proceeds from the sale of shares of our common stock under the ATM agreement. During the nine months ended September 30, 2020, our net cash provided by financing activities consisted of $5.1 million of net proceeds from the sale of shares of our common stock under the ATM agreement and $1.0 million of proceeds from the PPP Loan, partially offset by a payment of $5.3 million under our credit facility.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.
Recent Accounting Pronouncements
See Item 1, “Financial Statements – Note 2, Significant Accounting Policies” for a discussion of recent accounting pronouncements and their effect on us.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company’s
23
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting. However, we continue to monitor and assess the potential impact of the COVID-19 pandemic on our control environment.
24
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.
Item 1A. Risk Factors
Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. These risks could be amplified by the COVID-19 pandemic and its potential impact on the global economy generally and our business and industry in particular. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described below and in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission on March 15, 2021. There have been no material changes to the risk factors described in that report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
None.
25
Item 6. Exhibits
Exhibit No. |
|
Description |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
10.1*# |
|
|
|
|
|
10.2*# |
|
|
|
|
|
10.3* |
|
|
|
|
|
31.1* |
|
Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act. |
|
|
|
31.2* |
|
Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act. |
|
|
|
32.1** |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document |
|
|
|
101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* |
Filed herewith. |
** |
These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
# |
Pursuant to Item 601(b)(10) of Regulation S-K, certain confidential portions of this exhibit have been omitted by means of marking such portions with asterisks [***] as the identified confidential portions (i) are not material and (ii) the Registrant customarily and actually treats that information as private or confidential. |
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Clearside Biomedical, Inc. |
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Date: November 10, 2021 |
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By: |
/s/ Charles A. Deignan |
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Charles A. Deignan |
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Chief Financial Officer |
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(On behalf of the Registrant and as |
27