Greetings, and welcome to the Clearside Biomedical Third Quarter 2019 Financial Results and Corporate Update Conference Call. As a reminder, this conference call is being recorded. I would now like to introduce your host, Jenny Kobin, Clearside Investor Relations. Please go ahead..

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 annual report on Form 10-K for the year ended December 31, 2018, our quarterly report on Form 10-Q for the quarter ended June 30, 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 of 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. Thomas Ciulla, our Chief Medical Officer, will provide R&D highlights; 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 afternoon, everyone, and thank you for joining us on the call today. I'm pleased to report that we have made meaningful progress on our overall corporate strategy to broaden the reach of our suprachoroidal space injection platform. A component of this strategic plan is the establishment of key external collaborations.

Over the last three months, we have secured three significant partnerships that validate and will potentially expand the reach of our suprachoroidal injection platform.

Two weeks ago, we announced that Bausch Health and its Ophthalmic division, Bausch + Lomb, acquired an exclusive license for the commercialization and development of XIPERE in the United States and Canada.

As a reminder, XIPERE is our proprietary suspension of triamcinolone administered suprachoroidally with our SCS Microinjector for the treatment of macular edema associated with uveitis. We are thrilled to have licensed XIPERE to such a high-quality organization with a well-established and well-regarded presence in the ophthalmology community.

Bausch has the right to pursue development and commercialization of XIPERE for additional ophthalmic indications. And they also have the right to develop and commercialize our proprietary SCS Microinjector in combination with certain other specified corticosteroids and nonsteroidal anti-inflammatory drugs in the field of ophthalmology.

Licensing XIPERE to Bausch has achieved our primary corporate goal of finding a partner with an experienced ophthalmic sales force that can bring XIPERE to market more efficiently and cost effectively if approved. They also have the resources to potentially develop additional indications for XIPERE.

We believe this is a win for patients and for Bausch and also a win for Clearside as validation of the potential benefits of our proprietary method of accessing the suprachoroidal space. Also regarding XIPERE, as expected, last month, we received a complete response letter or CRL from the FDA.

Consistent with the outcome of the meeting we had with the FDA in August, the agency requested additional stability data on our triamcinolone suspension. The CRL also included one new request for additional data on clinical use of the final to-be-marketed SCS Microinjector delivery system. Importantly, the FDA did not identify any efficacy issues.

And there were no requests for further clinical efficacy studies. We currently believe we can readily address the issues raised by the FDA and resubmit our New Drug Application in the first quarter of next year. Tom will elaborate on the details of our planned NDA resubmission in his remarks.

In September, we announced an option and license agreement with REGENXBIO for exclusive worldwide rights to our proprietary in-office SCS Microinjector for the delivery of adeno-associated virus or AAV-based therapeutics to the suprachoroidal space to treat wet AMD, diabetic retinopathy and other conditions for which anti-VEGF treatment is currently the standard of care.

We are very pleased that REGENXBIO exercised their option last week. This is an exciting time for us to collaborate with REGENXBIO, one of the leaders in gene therapy field to evaluate the potential application of our injection platform for AAV ophthalmic gene therapy.

We believe the delivery of gene therapy through the suprachoroidal space can potentially provide a targeted in-office nonsurgical approach to treat patients with challenging retinal conditions.

Finally, in July, 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. This is a therapeutic area where there is a significant unmet medical need.

Based on their recent public comments, we expect Aura to submit an IND amendment and initiate a clinical trial using our SCS Microinjector in the first half of next year. Our research and development team has also made progress on earlier-stage research projects.

Our internal initiatives are focused on gene therapy delivery by nonviral DNA nanoparticles as well as small molecules that may show prolonged duration, utilizing the SCS injection platform to address unmet needs in the back-of-the-eye diseases.

Based on a fresh analysis of our prior data and recently presented data in the scientific community, we have decided to advance as our next development asset, our proprietary suspension of axitinib for suprachoroidal injection, which we refer to as CLS-AX. We are targeting submission of an investigational New Drug Application in mid-2020.

Tom will discuss this latest development in more detail in his remarks. The strategic shifts that we embarked on earlier this year has benefited Clearside in a number of ways.

We have eliminated the inherent risks and financial investment related to building and maintaining a commercial infrastructure for XIPERE ourselves while retaining a significant financial upside in its potential commercial success. Our recent collaborations have validated our investment in suprachoroidal delivery using our SCS Microinjector.

And as a result, we have expanded our overall internal and collaborative product development pipeline to include both gene therapy and small molecule opportunities, targeting a broad range of additional potential ophthalmic indications beyond uveitis to include choroidal melanoma, wet AMD and diabetic retinopathy.

We are entitled now to receive $7 million of nondilutive capital in upfront payments this year.

And finally, we are eligible to receive over $200 million in potential future development and sales milestones and have the opportunity to receive additional sales royalties from all 3 partnering deals, which may be used to continue to fund our internal R&D pipeline projects. I will now turn over the call to Tom Ciulla, our Chief Medical Officer..

Thank you, George. This afternoon, I'll provide a summary of clinical and scientific information related to our XIPERE NDA resubmission, our REGENXBIO partnership and our internal R&D progress. As background on XIPERE, it's helpful to understand the delivery approach.

Suprachoroidal injection is a novel drug-dispensing approach that employs proprietary piston syringe and a 30-gauge needle about 1 millimeter in length. The suprachoroidal injection procedure allows drugs to be administered into the transition region between the choroid and the sclera called the suprachoroidal space.

Suprachoroidal injection provides almost direct drug access to the retina, the retinal pigment epithelial cells and the choroid. Over the course of the development life cycle for XIPERE, Clearside made quality enhancements to the drug product manufacturing process.

While the formulation of the triamcinolone acetonide suspension has not changed, the FDA wants to verify the stability profile between the batches we submitted and the intended commercial product to ensure that the process enhancements have not affected the drug product.

During our meeting with the FDA in August, the agency provided clear guidance on the chemistry, manufacturing and controls or CMC data to be included in the NDA resubmission. We've been working closely with our contract manufacturer to produce the required material and to obtain the requested stability data.

The CRL also included a request for additional data on clinical use of the final to-be-marketed SCS Microinjector delivery system. We currently expect that this device use assessment will be conducted by at least 3 physicians in 30 patients per the FDA's recommendation.

We believe that this type of assessment can be conducted in a quick and streamlined approach with clinicians who have worked with us before and who are experienced in using the device.

Currently, over 1,000 suprachoroidal injections of XIPERE have been performed across multiple clinical studies and multiple diseases without any significant adverse events related to the injector. And as George mentioned in the CRL, the FDA did not identify any efficacy issues, and there were no request for further clinical efficacy studies.

We remain confident in the results of our clinical trials and the potential future approval of XIPERE. Our CMC, clinical and regulatory teams are working diligently to satisfy these requests in the CRL, and we expect to have a formal meeting with the FDA before the end of the year to discuss our plans for this device assessment.

Once we confirm our plans with the agency, we will prepare for and generate the requested data and expect to resubmit the NDA in the first quarter of next year. We believe the FDA will review the NDA resubmission within 6 months of the receipt date.

Next, our partnership with REGENXBIO further validates our suprachoroidal approach and the potential benefit in the growing gene therapy field. Dr. Peter Campochiaro's team at Johns Hopkins recently demonstrated in preclinical studies that AAV vector suprachoroidal gene transfer can produce widespread ocular transgene expression in several species.

Compared to subretinal injection in rats, suprachoroidal administration of REGENXBIO's asset, RGX-314, resulted in similar expression of anti-VEGF therapeutic protein and similar suppression of VEGF-induced vascular leakage.

Likewise, our own preclinical studies of nonviral DNA nanoparticle gene therapy showed similar activities of a marker team when administered subretinally or suprachoroidally.

We are excited to have the opportunity to collaborate with REGENXBIO to evaluate the application of our proprietary SCS microinjector for AAV gene therapy with the hope of offering patients nonsurgical, in-office access to onetime gene therapy treatment.

Internally, our discovery and R&D efforts have been primarily focused on performing nonclinical experiments around gene therapy and small molecules.

We are leveraging our learnings from the XIPERE development program, which demonstrated that suprachoroidal delivery of small molecule drug suspensions can target effective choroidal retinal tissues with potential for enhanced clinical efficacy and prolonged durability.

As part of our strategic shift, we have reviewed our internal assets to determine how we should proceed now that XIPERE has been successfully partnered.

After careful evaluation of our prior work and recently presented data in the scientific community, we have determined that our suspension of axitinib for suprachoroidal injection, CLS-AX, represents a very compelling opportunity.

With current wet AMD therapy, there is a ceiling of efficacy as increased dosage of more intense regimens yield no additional visual benefit.

Axitinib is currently approved to treat renal cell cancer, and with it's broad VEGF blockade, it may have efficacy advantages over existing retinal therapies, which predominantly focus on VEGF blockade and may up-regulate other forms of VEGF.

Axitinib achieves pan-VEGF blockade by acting at a different level of the angiogenesis cascade, directly inhibiting VEGF receptors-1, -2 and -3 with high potency and high specificity. Axitinib has been shown to effectively inhibit corneal, retinal and choroidal angiogenesis in multiple animal models by independent investigators.

In one of these studies, axitinib was shown to be more effectively inhibit experimental corneal neovascularization than other tyrosine kinase receptor inhibitors. In another study, axitinib showed better biocompatibility with ocular cells than other tyrosine kinase inhibitors.

In addition, current wet AMD therapy is associated with a very significant treatment burden. Real-world patients are undertreated, receiving only 6 to 7 injections in the first year and only improving by 1 to 3 letters.

Given the durability of small molecule suspensions in the suprachoroidal space, we have assessed the potential of a proprietary suspension of axitinib for suprachoroidal injection as a long-acting therapy for wet AMD in multiple species.

These preclinical studies have demonstrated reduced growth of experimental neovascularization with decreased fluorescein leakage as well as durable drug levels via suprachoroidal administration, supporting axitinib's potential to address current treatment burden.

Based on preclinical data, we believe that suprachoroidal injection, our proprietary suspension of axitinib has meaningful potential. First, axitinib demonstrates intrinsic high potency and achieves pan-VEGF inhibition through receptor blockade.

Second, preclinical results from Clearside and outside investigators show pharmacodynamic effect with reduced growth of experimental neovascularization and decreased fluorescein leakage. And third, suprachoroidal administration of axitinib can potentially achieve prolonged duration and targeted delivery to effected tissue layers.

Based on this data, we are working to submit an IND application for CLS-AX in mid-2020. Over the last several months, we have worked with prominent physicians to deliver over 10 data presentations at key medical congresses, including the American Academy of Ophthalmology or AAO Annual Meeting.

These presentations, combined with our recent partnerships with Aura Biosciences and REGENXBIO, has significantly expanded our presence into additional therapeutic areas, including ocular oncology, wet AMD and diabetic retinopathy.

We remain very encouraged by the support from the medical community and their enhanced understanding of the value of our suprachoroidal treatment approach. With that, I will now turn the call over to our CFO, Charlie Deignan, to review our financial results.

Charlie?.

Thank you. Thank you, Tom. I would like to provide a summary of key financial developments. General and administrative expenses were $3.8 million for the quarter ended September 30, 2019, compared to $3.9 million for the quarter ended September 30, 2018.

The research and development expenses for the quarter ended September 30, 2019, were $2.7 million compared to $20.1 million for the quarter ended September 30, 2018. We expect R&D expenses to increase over the next several quarters as we complete the work to resubmit our NDA for XIPERE and submitting an IND for CLS-AX.

As of September 30, 2019, our cash and cash equivalents totaled $22.6 million.

As we disclosed in our 8-K filing last month, in conjunction with our XIPERE licensing deal, we amended our loan agreement with Silicon Valley Bank, repaid $5 million of the outstanding principal balance and extended the period of interest-only payments up to an additional year.

Based on this debt repayment, upfront licensing payments and our planned increase in R&D expenses, we expect that our existing cash and cash equivalents will enable us to fund our operating expenses into the third quarter of 2020.

This does not include any additional partnership-related payments that we may gain from the achievement of development milestones. We look forward to ongoing engagement with the investment community at upcoming events, including the Stifel Healthcare Conference. Now I am pleased to turn the call back over to George for his closing remarks..

Thank you, Charlie. It was a productive quarter for Clearside, and we are proud to align ourselves with some of the leaders in the ophthalmology space. We expect to satisfy the request from the FDA and resubmit our XIPERE NDA in the first quarter of next year.

We are also excited to submit a new IND for axitinib and continue to expand our internal development pipeline. We appreciate the support of our shareholders over the last year and look forward to making additional progress. I would now like to ask the operator to open the call up for questions..

[Operator Instructions]. We do have our first question from the line of Liana Moussatos from Wedbush..

Congratulations on all your progress. So I remember from covering Clearside for a while that axitinib was part of a pipeline a few -- a couple of years ago. And in, I don't know, in 2017, it was discontinued because competition failed.

So what has happened since then that makes you so confident about your current formulation?.

Liana, this is George. And I'll start, and I'll also have Tom chime in. But in the past, you're correct that axitinib was part of the pipeline several years ago. And the work on it was put on hold. The company at that time had limited R&D resources, and it was singularly focused at that time on expanding the indications for XIPERE.

So when -- this summer, we started a review internally, and it makes sense to review your internal assets or any assets periodically from time to time as the science progresses and new data comes out.

And based on our recent assessment of both what we had done internally and what we've seen in the scientific community, we think that axitinib used in the suprachoroidal space really offers us an exciting development opportunity with a large market and a high unmet need, as Tom explained.

And I'll have Tom chime in and contribute more detail on, again, the rationale for making this move back to axitinib and taking it forward and filing the IND.

Tom?.

Thanks, George. So I've worked with our team to take a fresh look at our prior data as well as preclinical data from scientific researchers in the ophthalmology community. We believe there's evidence of potential treatment advantages using this therapy.

Axitinib demonstrates intrinsic high potency and achieves pan-VEGF inhibition to receptor blockade and therefore, may have efficacy advantages over existing therapies. We also know that in preclinical work done by independent investigators that axitinib has shown promising results in numerous ocular models.

We also believe that recent data on VEGF regulation indicates that there may be improved outcomes with broad VEGF blockade. And our own preclinical data has demonstrated durable drug levels as well as efficacy in preclinical models. So we believe we have one of the most potent tyrosine kinase inhibitors.

And when we combine it with suprachoroidal delivery, we can target the drug at the location of the disease while achieving durable drug levels.

Ultimately, we believe that axitinib and suprachoroidal suspension can reduce treatment burden and might even improve visual outcomes over current therapies, which predominantly focus on VEGF blockade or VEGF-A blockade, not broad VEGF blockade through VEGF receptor inhibition..

Okay.

Any comments on the competition problems 2, 3 years ago?.

In past years, is that your question?.

Right. The reason why was -- that it was discontinued and this is February 2017 press release was mentioned because competition had failed.

And everything you said sounds good, but do you have any insight right now or maybe we can follow-up later on why you guys look like it could succeed where the competition failed?.

I'm glad you asked that question. That's a good question. So the past trials you're referring to involves platelet-derived growth factor inhibitors added to VEGF-A therapy. And the company was looking at that as a combination therapy. But basically, I think it's not the perfect analogy.

But we have -- with a fresh look, we can see that we can completely inhibit VEGF. We achieved broad VEGF inhibition. Current therapies, as you know, focus on VEGF-A inhibition. And there's now some reports suggesting that when you inhibit VEGF-A, you have up-regulation of other members of the VEGF family.

And that's been shown both in AMD patients and also in metastatic cancer patients. So when you have up-regulation of these other factors, that could potentially lead to treatment resistance and insufficient response. So while that analogy was made a couple of years ago, I don't think it's a perfect analogy.

I think it's more about pan-VEGF inhibition or broad VEGF blockade. And there's also some clinical -- early clinical data suggesting that, that may actually achieve better visual outcomes in AMD patients.

So we're very excited about the prospect, not only because we can achieve broad VEGF blockade, but we can also target the suprachoroidal space, achieve high levels at the affected tissue level -- layers and also achieve durable drug levels..

[Operator Instructions]. We do have a follow-up question from Liana Moussatos from Wedbush..

Now I have a couple of questions for Charlie.

So well, operations spend in Q4 versus the Q3 and will 2020 be higher than 2019? And do you anticipate an increase in collaboration revenue in Q4 or in 2020 over Q3?.

You broke up a little bit on me. I think I heard you ask if R&D is going to go up.

Did I hear?.

Up..

Yes. So as I said earlier, well, we have some R&D costs related to wrapping up our NDA resubmission. So it will creep up not significantly. And as I said, we have guidance that says our current cash takes us into Q3 next year. So you can kind of do the math on the burn there. R&D, I think I heard revenue. So we have -- yes, we signed these 2 deals.

The Bausch deal came in and the REGENX option. I can't tell you today the proper accounting of that. We're still doing our research. The rules have changed. It's a little more complex on how you record those kind of revenues, but we will have received the cash this year..

Okay.

And do you anticipate collaboration revenue to go up in 2020 over what we saw this year so far?.

Well, the Bausch deals we announced was $20 million total in upfront, $5 million by signing. And then the other $15 million comes in around approval..

I'm showing no further questions at this time. I'm turning now the call back to Dr. George Lasezkay..

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

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. Have a wonderful day..