Clearside Biomedical Inc (NASDAQ:CLSD) Q2 2022 Earnings Conference Call August 9, 2022 8:30 AM ET
Company Participants
Jenny Kobin – Head of IR
George Lasezkay – President, CEO and Director
Tom Ciulla – Chief Medical Officer and Chief Development Officer
Charles Deignan – CFO
Conference Call Participants
Stacy Lee – Stifel
Rohit Bhasin – Needham & Company
Yi Chen – H.C. Wainwright
William Wood – B. Riley
Operator
Good day, and thank you for standing by. Welcome to the Clearside Biomedical Q2 2022 Financial Results and Corporate Update Call. [Operator Instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Jenny Kobin, Clearside Investor Relations. Please go ahead.
Jenny Kobin
Good morning, 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, 2021, 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, we have George Lasezkay, our Chief Executive Officer; Dr. Thomas Ciulla, our Chief Medical Officer and Chief Development Officer; and Charlie Deignan, our Chief Financial Officer. After our formal remarks, we will open the call for your questions.
I would now like to turn the call over to George.
George Lasezkay
Thank you, Jenny. Over the last 3 months, we’ve made significant progress on multiple fronts. With the approval of XIPERE, the advancement of CLS-AX and broader use of our SCS Microinjector with select partners, we’ve created a new paradigm in retinal drug delivery. On the clinical operations side, we achieved a significant milestone by successfully completing dosing in OASIS, our CLS-AX Phase I/IIa clinical trial. CLS-AX combines the pan-VEGF inhibition from the highly potent TKI, axitinib, with targeted delivery to the affected chorioretinal tissues, utilizing our proprietary SCS Microinjector.
OASIS is a single dose escalation trial. In May, we announced that we were able to accelerate initiation of Cohort 4 as a result of the positive safety data reviewed by the Safety Monitoring Committee. And we recently announced we have now completed enrollment in both Cohorts 3 and 4 with a total enrollment of 27 patients for all 4 cohorts. We expect to report our final 3-month OASIS’ safety and tolerability data from all 4 cohorts in November of this year. We believe that this comprehensive data set will provide more insight into the potential benefits of CLS-AX injected suprachoroidally.
To further assist our planned clinical activities for CLS-AX, we announced in June the appointment of Susan Coultas as our Chief Clinical Officer. Susan joins us with extensive operational experience and responsibility for advancing ophthalmic trials from early clinical stages through approval. Tom, as Chief Medical Officer and Chief Development Officer, continues to have overall management responsibility for the Clearside product pipeline and clinical development strategy, including all clinical trial design. We are excited to now have Susan on board to assume responsibility for clinical operational planning and to provide management oversight of the execution of our future clinical trials.
Yesterday, we announced that we entered into a royalty interest purchase and sale agreement with HealthCare Royalty Partners primarily to support the funding of our planned CLS-AX Phase II clinical trial. This transaction was achievable because of the successful U.S. FDA approval of our first commercial product, XIPERE, and the subsequent commercial launch of the product by our partner, Bausch + Lomb. The opportunity to obtain meaningful non-diluted capital by leveraging future royalties from XIPERE and certain SCS Microinjector license agreements provides us financial flexibility during this volatile market environment. We completed this financing now because the funds will assist us in advancing CLS-AX should the final data readout from OASIS be supportive. If it is, this will position us to initiate activities by the end of this year for our Phase II trial and enable us to begin enrolling patients soon thereafter. Charlie will discuss the details of the financing transaction shortly.
I will now turn the call over to Dr. Tom Ciulla to elaborate on our OASIS study and recent progress made by our partners. Tom?
Tom Ciulla
Thank you, George, and good morning, everyone. Starting with our lead program, CLS-AX, I’m thrilled to discuss the tremendous progress we made over the last 3 months as we completed enrollment in OASIS. With the growing awareness of suprachoroidal delivery and increased interest in our trial, we were able to complete enrollment of OASIS with a total of 27 patients. Last month, we completed dosing in Cohorts 3 and 4 of OASIS with 8 patients in each arm. Cohort 3 patients received a dose of 0.5 milligrams and Cohort 4 patients received a doubling of that dose to 1 milligram. This final Cohort 4 dose is 33-fold greater than our starting dose of 0.03 milligrams. The completion of enrollment in OASIS is a critical milestone for the company. I’m extremely grateful to the investors — to the investigators, patients and our team whose time and commitment made this possible.
As a reminder, OASIS is the first-in-human safety study. The data we have reported in Cohorts 1 and 2 as well as the 1-month initial safety data from Cohort 3 reviewed by our Safety Monitoring Committee have all demonstrated that CLS-AX has been well tolerated to date with no dose-limiting toxicities. In OASIS, we set a high standard for patient inclusion. Our enrollment criteria only allowed treatment-experienced patients with active disease as confirmed by an independent reading center. There is also an ongoing extension study to follow patients in Cohorts 2, 3 and 4 for up to 3 additional months after completion of OASIS. We look forward to presenting the individual patient safety and tolerability data from both Cohort 3 and 4 as well as the complete analysis from all 4 dosing cohorts in November, as this will facilitate our selection of the most appropriate dosing protocol for our Phase II trial.
Our development and commercialization partner programs continue to advance as well. Arctic Vision, our XIPERE commercialization partner in Asia has 2 clinical programs ongoing. They are currently conducting a Phase III trial in patients with macular edema associated with uveitis and a Phase I trial in patients with diabetic macular edema. In June, Aura Biosciences delivered a presentation at the International Society of Ocular Oncology on their Phase II trial investigating AU-011, a virus-like drug conjugate delivered via our SCS Microinjector for the treatment of choroidal melanoma. Aura has stated that they plan to finalize the decision on the right of administration for AU-011 and initiate their pivotal program before the end of the year.
REGENXBIO has also progressed RGX-314, an investigational onetime gene therapy that utilizes REGENXBIO’s proprietary NAV AAVIATE vector to deliver a gene encoding a therapeutic antibody fragment to inhibit VEGF. REGENXBIO is currently running 2 Phase II trials evaluating suprachoroidal delivery of RGX-314 via our SCS Microinjector. The AAVIATE trial has completed enrollment in Cohort 5 for the treatment of wet AMD and the ALTITUDE trial has completed enrollment for the treatment of diabetic retinopathy. REGENXBIO plans to present additional suprachoroidal data later this year. We look forward to further updates on the clinical programs from our partners.
I also want to take a few minutes to talk about the tremendous impact Clearside has made on the retina community. Last month, at the Annual Meeting for the American Society of Retina Specialists, it was quite humbling to realize all that we have accomplished with our novel suprachoroidal delivery approach. Our commercial partner, Bausch + Lomb, has a strong presence, featuring their commercial launch of XIPERE, which recently received its permanent J Code. This is an important milestone for a commercial drug as U.S. physicians use this code for billing and reimbursement to insurers and other payers. At ASRS, their team provided valuable clinical insights on the product as well as on its novel use of the suprachoroidal space to help treat patients with macular edema associated with uveitis.
With 4 agents in 6 clinical trials, the conversation around delivery of drugs into the suprachoroidal space was absolutely extraordinary. I was delighted to see the growing interest in our proprietary SCS Microinjector as physicians recognize this as an elegantly simple way to deliver therapeutics into the suprachoroidal space. The versatility of our office space SCS Microinjector allows us to potentially treat peripheral and macular disorders as the SCS Microinjector expands the suprachoroidal space circumferentially and posteriorly to deliver drugs to the MAC. This occurs into natural pressure gradient drives injectate towards a lower pressure posterior suprachoroidal space. In addition to ASRS, we also had a strong presence at the OIS Retina Innovation Summit and at ARVO 2022 in ASCRS Annual Meetings.
Also, awareness of suprachoroidal delivery is expanding in Asia with support from Arctic Vision, our partner. Arctic Vision will have presentations at the triple meeting of the World Ophthalmology Congress, the Chinese Ophthalmological Society and the Asia-Pacific Academy of Ophthalmology as well as the Congress of the Asia-Pacific Vitreo-Retina Society.
To support our outreach and education to the physician community, 3 papers were published last quarter in peer-reviewed MEDLINE-indexed journals to support XIPERE in the attributes of suprachoroidal delivery. We’re also pleased that the well-known comprehensive retinal care journal, Retinal Physician, published a special edition entitled Suprachoroidal Drug Delivery Technology. This publication highlights the potential versatility of the suprachoroidal delivery system. There are 6 articles that cover a summary of SCS delivery, biomechanics of SCS injector, flow mechanics of the injectate, the clinical trials leading to the approval of XIPERE to treat uveitic macular edema and potential uses in gene therapy in ocular oncology. There’s a link to the publication on our website and in the press release we released today.
With that, I’ll now turn the call over to our CFO, Charlie Deignan, to review our financial results. Charlie?
Charles Deignan
Thank you, Tom. Our financial results for the second quarter were published this morning in our press release and are available on our website. Therefore, I will summarize our recent financial transaction and current financial status. As George mentioned, yesterday, we announced that we entered into a royalty financing agreement with HealthCare Royalty Partners. The terms of the agreement breakdown as follows. In total, we may receive up to $65 million, all of which is non-dilutive funding to Clearside. We will receive an upfront cash payment this month of $32.5 million, less certain expenses. An additional $12.5 million will also be deposited in an escrow account this month to be released to us upon attainment of a prespecified sales milestone for XIPERE by March 31, 2024.
The terms of the agreement also provides for an additional milestone payment of $20 million to us upon attainment of a second prespecified 2024 sales milestone for XIPERE. In exchange, HealthCare Royalty will receive royalties and milestone payments due to Clearside from XIPERE from certain SCS Microinjector license agreements. This includes payments from our current partnerships with Bausch + Lomb, Arctic Vision, REGENXBIO and Aura Biosciences. Importantly, the arrangement with HealthCare Royalty specifically excludes all of our internally developed assets and programs, including CLS-AX as well as any future in-licensed assets. The repayment amount is capped at 2.5 of total payments made by HealthCare Royalty. If certain parameters are not met by the end of 2024, this cap will be increased to 3.4x the total payments made by HealthCare Royalty. Due to confidentiality agreements with our existing partners, we will not be publicly disclosing the sales milestones or other thresholds considered in this agreement.
Our cash and cash equivalents as of June 30, 2022, totaled $29 million. We expect that the combination of our existing $29 million plus the upfront payment of $32.5 million from the royalty transaction provides us with runway into 2024. Once we determine our Phase II clinical trial plans for CLS-AX, we will be able to fine-tune our runway guidance.
We have an active investment conference scheduled this month. We will be participating in the BTIG Biotechnology Conference later today and at the Wedbush PacGrow Healthcare Conference tomorrow. Later this month, we will also be participating in the H.C. Wainwright Ophthalmology Day. We look forward to these interactions and keeping you updated on our progress.
I’ll now turn the call back over to George for his closing remarks.
George Lasezkay
Thanks, Charlie. We are building significant momentum, leveraging our proprietary suprachoroidal space platform technology, featuring our SCS Microinjector. As a result, we were able to improve our financial resources, expand our management team, and we have multiple anticipated catalysts related to both our internal CLS-AX clinical trial and the clinical programs from our development and commercialization partners. We remain focused on both developing our own internal pipeline and partnering with other companies with strong interest in retinal diseases, where it makes strategic sense for Clearside.
As I conclude our formal remarks, I’d like to reiterate what Tom said and express my appreciation to our staff, our investigators and especially to the patients who participated in our OASIS trial. We look forward to announcing our final OASIS data in November.
I would now like to ask the operator to open the call up for questions.
Question-and-Answer Session
Operator
[Operator Instructions] And your first question comes from the line of Stacy Lee from Stifel.
Stacy Lee
This is Stacy calling for Annabel. Congrats on a great quarter. Two questions on our end. Do you have any color on reception to XIPERE? Bausch + Lomb didn’t report anything in terms of sales, but can you provide anything that you’re hearing from the field as far as overall reception, real-world experience and the ease of adoption for the product and procedure? And then secondly, for CLS-AX, some of the KOLs that have commented on competing next-gen products that are extended duration envision using these 10 VEGF as maintenance therapy after the patient has been stabilized on VEGF. Is this the way you are envisioning the project? And can you do that with only 3-month duration versus 6 or 12 that the others are shooting for?
George Lasezkay
All right. Well, thanks for that question. Tom — between Tom and Charlie, do you want to address the Bausch activities with XIPERE. You guys are close to that.
Charles Deignan
Yes, I’ll go first, and then Tom can comment on [Indiscernible]. All I could say is Bausch, although they didn’t give sales numbers on XIPERE, CEO, Joe Papa, was very positive about his KOL interactions at conferences and it appears to be a lot of excitement around the product. But as we know, they didn’t — they haven’t been giving sales estimates. But from my point of view and from our partners, nothing but positive remarks. And Tom, we’ve got a conference and heard some things firsthand. I could imagine so I’ll kick it over to Tom.
Tom Ciulla
Sure. The reception for XIPERE has been really fantastic. As we discussed earlier, Bausch + Lomb plans to train all the U.S. retina physicians as well as all U.S. uveitis physicians. And the training program is quite robust. Both physicians feel like this program prepares them well. I’ve received so many unsolicited e-mails from retina specialists around the country congratulating Clearside, complimenting the training program, and I think it’s gone really well.
George Lasezkay
You might want to address the second part of that question, which was a pan-VEGF activity of the tyrosine kinase inhibitors and use in maintenance and our view on duration and use and maintenance.
Tom Ciulla
Sure. So it’s a good question. In terms of the small molecule tyrosine kinase inhibitors, as I think the retina community is becoming more and more aware, even for newly approved therapies, especially for the office-based therapies, durability remains limited. And what we found is that small molecule suspensions in the suprachoroidal space have prolonged durability, and we’ve noted that in our preclinical studies. I think the question mentioned that we’re shooting for 3-month durability, but that’s not necessarily the case. Our trial is a 3-month trial, but we also have an extension trial for a total of 6 months of follow up.
In terms of these therapies, what we feel is potentially very important is safety because as we’ve seen with biologics and gene therapies, safety has been a concern. We know that axitinib is a well-established small molecule and has less propensity for inflammation than a biologic or gene therapy. And this has been borne out within our Cohorts 1 and 2 data release. There were no study suspension stopping rules, no signs of inflammation, no signs of intravitreal dispersion of the drug or any intraocular pressure safety signals. And as we escalate these higher doses in Cohorts 3 and 4, we think that the pan-VEGF inhibitory attributes of axitinib, coupled with its high potency, coupled with the suprachoroidal targeted delivery to effective chorioretinal tissues has potential for not only durability, but significant efficacy. Of course, OASIS is a very small study with small numbers. So we’ll be looking at all the data very holistically in terms of retreatment, visual acuity and anatomic signs.
Operator
Your next question comes from the line of Rohit Bhasin from Needham & Company.
Rohit Bhasin
This is Rohit on for Serge. Can you just talk about your confidence level that you’ll see the full $65 million of the financing based on the 2024 sales milestone that you discussed? And then post funding, can you talk about how you prioritize the pipeline and any time lines associated?
George Lasezkay
Charlie, do you want to take the first part, and I’ll probably take the second part of the question?
Charles Deignan
Sure. As we said, we can’t talk about what the milestones for the other payments. But obviously, we went into this agreement planning on getting all these milestones. So we feel confident, but it’s going to be based on XIPERE sales. So they’re not unreasonable milestones, but I can’t really comment or place guarantees on it. But we signed this deal fully expecting to receive all of the cash. I’m sorry, and the second question was prior to…
George Lasezkay
Go ahead, you can say something.
Charles Deignan
You got to — no you got…
George Lasezkay
Okay. I was just going to say that we currently are — we have a number of opportunities in our non-CLS-AX pipeline. Obviously, CLS-AX is the most important product for us. And our focus is really moving that into the clinic, if the OASIS data is supportive, moving that further into the clinic in Phase II. As to the other opportunities we have, we have several opportunities to add to our pipeline, and we’re currently looking at a prioritization of those opportunities to see what makes the most sense where it makes — where we can create the most value.
And that stuff that we’ll be working on through the end of this year and going into the beginning of next year to really come out and have a more concrete pipeline plan for what we see as a number of really interesting opportunities in the suprachoroidal space. For us as an internal pipeline, and that doesn’t count the interest that we have from several companies to use our suprachoroidal injection platform with their technology. So we have a number of conversations and projects ongoing that we will, over the next several months, prioritize and make some decisions on what we can move forward and where it creates the most value.
Operator
Your next question comes from the line of [Indiscernible] with JMP Securities.
Unidentified Analyst
This is [Kathryn], I’m calling on behalf of Jon Wolleben from JMP. I just had a question about the Phase II study. And what you guys expect to see the data from the Phase I/IIa data that would work for a further investigation into Phase II?
George Lasezkay
Tom, do you want to address that?
Tom Ciulla
Sure. So as I mentioned earlier, our first priority in this initial first-in-man OASIS study remains safety. And as I mentioned earlier, safety is really important these days in retina because we’ve seen some other therapies have problems with inflammation. So number one, it’s a safety study. But we’re also looking holistically at other aspects of the therapy. So we’re looking at stability based on best [Indiscernible] visual acuity on some anatomic parameters, including [Indiscernible] geography and OCT as well as need for retreatment.
In terms of what we expect, axitinib is a well-established small molecule. So there’s less propensity for inflammation. And as I mentioned earlier, that was borne out in Cohorts 1 and 2. So we expect to see continued evidence of safety as we [Indiscernible]. And also at these higher doses, we have this pan-VEGF effect with axitinib. And that allows us to potentially break through a ceiling of efficacy with focused VEGFA inhibition. We can couple that with the ability to target very high levels [Indiscernible] suprachoroidal delivery, and we think that further leverage the benefits of pan-VEGF inhibition.
And then finally, we’re looking for durability, and we’ve seen some impressive durability in our preclinical studies. We published a paper last year, showing in our rabbit pharmacokinetic model that there are levels in the retina and in the RPE and choroid out to 6 months that were several log orders higher than the IC50 for the VEGF receptor 2. So in summary, we’re looking for safety primarily, but we’re also hoping to see holistic signs of efficacy based on BCVA, anatomic parameters and retreatment as well as durability.
Operator
Your next question comes from the line of Yi Chen with H.C. Wainwright.
Yi Chen
So in the future clinical trials of CLS-AX, we always target a highly treatment-experienced anti-VEGF sub-responder patients or the patient population could change in future trials?
Tom Ciulla
I can take that. So that’s a really insightful question. We — in the current trial, as in many first-in-man trials, oftentimes, you’ll have treatment experience applications. But these are highly treatment-experienced patients, and we set a high bar for ourselves because we’re requiring that have active disease at screening, and that’s confirmed by an independent reading center. So in essence, we’re testing anti-VEGF sub-responders. And they’re sub-responders to numerous prior treatment. So we’re setting a high bar, but again, the study is geared towards safety. Going forward, as we learn more and more about suprachoroidal axitinib, we don’t feel compelled to follow that exact set of eligibility criteria. So that may change going forward. But at least for this study by requiring patients to have active disease, we have a better potential to assess for biologic effect than if we had patients in the trial with inactive disease.
Operator
[Operator Instructions] Your next question comes from the line of William Wood from B. Riley.
William Wood
This is William Wood on for Mamtani at B. Riley. Great to see the good news coming out today. I was just curious if you could give us maybe share your experience of repeated dosing in [Indiscernible] animals, maybe providing a little extra color on the PK profile local immune response, et cetera.
George Lasezkay
Well, Tom, that would be your question, but I think in the past, we’ve been somewhat careful about what we say in terms of our internal preclinical safety and repeat safety dosing. Add some color to that, Tom.
Tom Ciulla
Sure. I’m suffice it to say that the current dosing we’re using is supported by our preclinical safety studies. And as I mentioned earlier, so far, the safety profile has been pristine. Obviously, as we move forward, we’ll study repeat dosing. And we have preclinical studies, including GLP tox studies that will support the repeat dosing we plan to use. And you asked about inflammation. And as I mentioned earlier, axitinib is an already approved molecule, approved for renal cell carcinoma. We think small molecules have less propensity for inflammation compared to a biologic or a gene therapy. So in summary, the safety profile in humans with the single dose has been robust and pristine. We have preclinical data as well as the OASIS data to support repeat dosing. And we expect and hope that it will continue to be safe because as I said, it’s a small molecule with less propensity of inflammation.
William Wood
Appreciate that. And then one extra, if I may. You’ve got — you’re obviously reading out Cohort 3, Cohort 4 later this year in November. I was wondering if you could give us a little extra color on what we may be expecting? Specifically, I’m curious if we’ll see any open-label extension data for a total of 6 months from Cohorts 1, 2 or maybe even 3?
Tom Ciulla
So we didn’t — we don’t have — we decided not to do an extension study on Cohort 1. Cohort 1 was done with an extraordinarily low dose. Our preclinical study suggested that we would have different levels, but we decided not to do the extension study for Cohort 1. We did include the extension studies for Cohorts 2, 3 and 4. We’ll report out extension data from Cohort 2 in November, along with the 3-month data from Cohorts 3 and 4. The extension data from Cohort 3 and 4 will in turn be read out in the first quarter of 2023.
Was there a second part to that question?
George Lasezkay
No, I believe just general color on what we may be expecting in November.
Tom Ciulla
Sure. So as I alluded to earlier, we set a very high bar for ourselves. These are heavily treatment-experienced patients. On average, in Cohorts 1 and 2, patients had in the mid-20s of prior injections, I believe, the mean number of injections in the year prior was 9. And despite on being heavily treated, they had persistent activity as confirmed by the independent reading center. So as I said earlier, we set a high bar for ourselves. These are essentially anti-VEGF sub-responders. And therefore, we’re going to have a very holistic approach to our assessment. We’ll be looking at needs for retreatment. We’ll be looking at anatomic effects based on OCT and angiography, we’ll be looking at visual acuity.
And we think that by starting with this higher bar of active patients at screening, we have potential to assess for a biologic effect. It’d be very difficult to assess what biologic effect as the patients are heavily treated and inactive because many of those patients don’t require treatment. So the readout will be just as we had in the past, very transparent. We’ll include best corrected visual acuity, central subfield thickness, retreatment, and we’ll also — because we’ll be analyzing all 4 cohorts, may provide some additional color with respect to the OCT parameters as well as angiographic parameters.
Operator
And I see no further questions at this time. I would now like to turn the conference back to Dr. Lasezkay.
George Lasezkay
I want to thank everyone for joining us on the call this morning. We really appreciate your continued interest in Clearside, and I hope that you enjoy the rest of your summer. Operator, you may now disconnect the call. Thank you.
Operator
This concludes today’s conference call. Thank you for your participation. You may now disconnect.
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