Good afternoon, ladies and gentlemen, and welcome to the Second Quarter 2019 Clearside Biomedical, Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

[Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to your host, Ms. Jenny Kobin, Clearside Investor Relations. Ma’am, you may begin..

Thank you. Good afternoon, everyone, and thank you for joining us on the call today. Before we begin, I would like to remind you that during today’s call, we will be making certain forward-looking statements.

Various remarks that we make during this call about the company’s future expectations, plans and prospects constitute forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent Annual Report on Form 10-K for the year ended December 31, 2018, and filed with the SEC on March 15, 2019, and our other SEC filings available on our website.

In addition, any forward-looking statements represent our views as of today and should not be relied upon as representing our views as any subsequent date. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so even if our views change.

On today’s call, George Lasezkay, our Chief Executive Officer and member of the Board of Directors, will provide a strategic update. Dr. Tom Ciulla, our Chief Medical Officer, will provide R&D highlight. And Charlie Deignan, our Chief Financial Officer, will provide a financial summary. We will then open the call for your questions.

Brion Raymond, our Chief Commercial Officer is also with us today and available for Q&A. I would now like to turn the call over to George..

Thank you, Jenny. Good morning, everyone, and thank you for joining us on the call today. Over the last four months, I’ve been working with our team and the Board of Directors to reevaluate the company’s overall strategy.

We have concluded that in order to maximize the value of XIPERE, we expect to out-license rights globally rather than commercialize it on our own. XIPERE is currently under FDA review for the treatment of macular edema associated with uveitis.

We believe that a partner, or partners, will be able to bring XIPERE to market more efficiently and cost effectively if it’s approved.

We expect that any XIPERE out-licensed deals will not only the partner the rights to commercialize the product, but also the rights to engage in future clinical development of XIPERE for other indications such as diabetic macular edema if the partner elects to do so. This strategic shift manifests Clearside in a number of ways in the near term.

It lowers expenses and eliminates the inherent risks and investment related to building and maintaining a commercial infrastructure and it has the potential to provide Clearside with access to non-dilutive capital via potential upfront and milestone-based payments, and future royalties, which may be used to fund our internal R&D pipeline.

We have taken several important steps thus far in this process. We are in ongoing discussions with potential partners for licensing XIPERE both in the U.S. as well as most of the major markets in the rest of the world.

We have significantly reduced our commercial spend and budget to focus only on finalizing a few remaining critical items that should be helpful to ensure a successful launch by a future partner.

Our Chief Commercial Officer, Brion Raymond, who has significant experience in launching and commercializing ophthalmic products will remain a member of our senior management team as we work to secure a partner for XIPERE.

With this transition, we have extended our cash runway into the third quarter of 2020 which Charlie will discuss in more detail shortly.

Last month, we announced that Aura Biosciences licensed our SCS Microinjector to deliver their proprietary drug candidates into the suprachoroidal space for the potential treatment of ocular cancers, an area where there is a significant unmet medical need.

This licensing agreement with Aura demonstrates the applicability of our proprietary suprachoroidal injection platform for use by other companies interested in ophthalmic drug delivery. The collaboration may also provide future financial upside for Clearside from pre-specified milestone payments and sales royalties.

As with the Aura agreement, we are interested in additional external collaborations which can broaden the reach of our platform and potentially provide non-dilutive capital to the company giving us the means to strengthen our research and development program and build our own internal product pipeline.

We continue to educate the physician community about the benefits of XIPERE and delivery of various therapeutic agents, including gene therapy into the suprachoroidal space via our SCS Microinjector as a targeted, nonsurgical, repeatable office-based procedure. I will now turn the call over to our Chief Medical Officer, Tom Ciulla..

Thank you, George. And my comments this afternoon, I’m going to highlight three key topics, our scientific presentations, our new partner collaboration, and our current development activities. I will start with our recent presentations. As George mentioned, we continue to educate physicians on our suprachoroidal injection platform.

We had a strong presence at the recent American Society of Retinal Specialists or ASRS Annual Meeting with five presentations related to Clearside given by retina key opinion leaders. Let me give you the insights. First, Dr.

Christine Kay walked listeners through a 10-minute video slide presentation describing our nonclinical studies of gene therapy via suprachoroidal injection. The discussion breaks down the work we have done thus far in a concise, easy-to-follow manner. The video is available on the publications page of our website. Next, Dr.

Milan Shah gave an oral presentation on the clinical experience with our SCS Microinjector for suprachoroidal injection. Dr. Shah noted that by utilizing the proper techniques, SCS injections can be easily conducted in a physician’s office as a potentially useful, targeted delivery of drug to post your segment pathologies.

We believe these observations are important as we look to partner XIPERE and expand our internal development plans. Additionally, Dr.

Christopher Henry and Pauline Merrill each gave oral presentations on the importance of XIPERE for the potential treatment of macular edema due to non-infectious uveitis with an emphasis on the fact that statistically significant visual gains were achieved in all anatomic subtypes. And finally, Dr.

Michael Ip presented data from our Phase 2 TYBEE trial showing that fewer treatment visits were needed by patients with diabetic macular edema or DME when aflibercept was given in combination with XIPERE versus aflibercept monotherapy.

Importantly, opportunities for suprachoroidal delivery and uveitic macular edema and gene therapy were also featured in several professional journals distributed during the meeting. This included two articles in the official journal of the ASRS, Retina Times and a feature article in Ophthalmology Management.

Altogether, this recognition continues to build positive awareness of Clearside and our suprachoroidal injection platform. Now moving on to the next topic, I would like to share with you why we are excited about our licensing deal with Aura Biosciences, and why it is important for patients and for the promise of the technology.

Aura’s lead clinical program is a treatment for choroidal melanoma, which is a serious disease that is the most common primary intraocular tumor in adults. There is currently no well accepted treatment for these patients beyond radiation therapy or primary removal of the eye.

And even with treatment, the disease can result in visual loss due to radiation retinopathy or fatal liver metastasis.

Our SCS Microinjector is a nonsurgical alternative to intravitreal delivery of Aura’s proprietary anti-cancer drug candidates and may enable the delivery of higher concentrations of drug with lower dose to the choroid and adjacent areas.

As a retina specialist, I believe this treatment could yield an impactful outcome for patients, further validating our technology and expanding the reach of our platform into the ocular oncology setting. Moving on to our development update, my team has been working to increase the overall value for XIPERE for potential partners.

During the quarter, we had a positive meeting with the Austrian Medicines and Medical Devices Agency supporting a path forward for XIPERE registration for uveitic macular edema in the European Union. We have also explored a potential path forward to advance XIPERE monotherapy and DME that could be used in future regulatory dialogue with the U.S. FDA.

Internally, our discovery and research efforts are focused on performing nonclinical experiments around our gene therapy delivery program. We are also exploring novel small molecules that may show prolonged duration utilizing the SCS injection platform to address unmet needs in common retinal diseases.

In summary, physicians continue to provide positive feedback around the promise of our suprachoroidal space injection platform. We believe that our new strategy will give our R&D team increased opportunities to explore other treatment areas to advance our technology and help patients suffering from serious back-of-the-eye diseases.

I will now turn the call over to our Chief Financial Officer, Charlie Deignan, to review our financial results..

Thank you, Tom. I would like to provide a summary of key financial developments. We have significantly reduced R&D expenses since we have now closed down our two late-stage clinical trials. And as we reported in the earnings release, we also received a $2.6 million credit from our clinical trial vendor during our final reconciliations.

The shift in our commercial strategy positively impacts our overall financial position. We have completed prelaunch preparations such as product branding, injection training development, distribution network design, reimbursement support and pricing evaluations.

We do not expect to spend significant additional resources on commercial activities going forward. As of June 30, 2019, our cash and cash equivalents totaled $26.2 million. Based on our current R&D plans and lower administrative expenses, we expect our existing cash will enable us to fund our operations into the third quarter of 2020.

This does not include any partnership-related payments that we may gain through new agreements.

We will continue to carefully manage our resources to deliver on compelling opportunities we have in front of us, and we look forward to ongoing engagement with the investment community at several upcoming events, including the annual Wedbush and Janney health care conferences.

Now I'm pleased to turn the call back over to George for his closing remarks.

George?.

Thank you, Charlie. By extending our current cash runway, we can now dedicate additional resources to advancing our two-pronged development strategy centered on the use of our SCS injection platform.

This includes building an internal R&D pipeline in areas such as gene therapy and novel small molecules as well as creating additional external collaborations. Finally, I'm pleased to report that the Board and I have agreed to extend my term as CEO through March of next year, allowing us to maintain continuity through this critical transition period.

I'm very proud to remain a part of this positive, committed and forward-looking team that is focused on improving outcomes for patients and maximizing value for our shareholders. Now I'd like ask the operator to open the call for questions..

[Operator Instructions] Our first question comes from Donald Ellis of JMP Securities. Your line is open..

Thank you. Good afternoon guys. First question is about the partner for partner for uveitis. You're looking for a partnership that includes exclusively cash upfront or cash and a royalty stream. .

Don, this is George. Thanks for the question. We're looking for what you would expect of any typical license agreement. I can't be more specific than that, but we're – that's what we're looking for..

Okay..

A typical out-license agreement that would involve one or more territories..

Okay, great.

Next question regarding the cash runway to 3Q 2020, is that forecast based on not having R&D projects in-house? And might that change if you do bring projects in-house and spend money on R&D?.

Don, this is Charlie. Yes. So that forecast includes some internal research programs that we've talked about. And then as we partner this or have other collaborations that have upfront monies, it could fund other programs. But there is money in that forecast..

Okay, terrific. And last question.

The Aura Biosciences deal, do you have any idea – or can you give us some information and clarity on when they plan to get in the clinic? Or what that process might look like with your gene therapy?.

Yes Don Charlie. So unfortunately, we can't discuss Aura's development plans. And when we can, we'll let you know. .

Alright, understood. Thank you very much..

Wait, Don. I'll just add. We have kicked off the collaboration with them, and it started very positively. But as Charlie said, the plans for them to enter the clinic is a question better directed to Aura..

And there's information on their website as well..

Okay, great. Thanks..

Our next question comes from Liana Moussatos of Wedbush Securities. Your line is open..

This is Shveta for Liana. Thank you for taking our question. With the search for a partner for XIPERE uveitis program, do you think this would potentially delay the launch for uveitis? We were thinking of a potential launch in Q1.

Do you think this partnership will potentially push it later on in the year? What are your thoughts on that?.

Well, the only way we can answer that is to say that is probably going to be partner dependent. We're in our discussions with partners. It's – we have no insight at this point in time of what they would plan to do in terms of launching. So as we have more information, we can update you as it goes along.

But right now, that's going to be more of a partner's decision. .

Got it. And just one more question.

If you can provide us an update on your DME program? And when will we hear next from it?.

This is Tom, Shveta, Medical Officer. As you know, we completed a Phase II DME program called TYBEE that was presented at the American Society of Retina Specialists meeting recently. It showed that XIPERE has potential to relieve treatment burden in DME. It was greeted very positively by the retina community.

As we look to partner out XIPERE, of course, development of XIPERE for DME will be determined by the partner, but we'll certainly be able to provide them with some of the lessons learned along the way..

Great, thank you..

[Operator Instructions] I am showing no further questions at this time. I would now like to turn the conference back to Mr. Lasezkay..

Thank you. And thank you all for joining us on the call today. We appreciate your continued interest in Clearside, and we look forward to updating you on our progress. Operator, you may now disconnect. Thanks again..

Ladies and gentlemen this concludes today's conference. Thank you for your participation. And have a wonderful day. You may all disconnect..