Clearside Biomedical, Inc.

Good day and thank you for standing by. Welcome to the ClearSight Biomedical Q2 2022 Financial Results and Corporate Update Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Janet Colbin, Clearsight Investor Relations.

Please go ahead. 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 Lizeski, our Chief Executive Officer Dr. Thomas Chula, our Chief Medical Officer and Chief Development Officer, and Charlie Degman, 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.

Thank you, Jenny. Over the last three months, we've made significant progress on multiple fronts. With the approval of Zypier, the advancement of CLSAX, and broader use of our SCS microinjector with select partners, we've created a new paradigm in retinal drug delivery. On the clinical operation side, we achieved a significant milestone by successfully completing dosing in OASIS, our CLSAX Phase I-IIA clinical trial. CLSAX combines the pan-VEGF inhibition from the highly potent TKI excedinib with targeted delivery to the affected choreoretinal 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 four cohorts. We expect to report our final three-month OASIS safety and tolerability data from all four cohorts in November of this year. We believe that this comprehensive data set will provide more insight into the potential benefits of CLSAX-injected superchoroid length. To further assist our planned clinical activities for CLSAx, we announced in June the appointment of Susan Coltis 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 ClearSight 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, Zypyr, 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 Zypyr 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 CLSAX should the final data readout from OASIS be supported. If it is, this will position us to initiate activities by the end of this year for our phase two 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 Chula to elaborate on our OASIS study and recent progress made by our partners. Tom?

Thank you, George, and good morning, everyone. Starting with our lead program, CLSAx, I'm thrilled to discuss the tremendous progress we've made over the last three months as we completed enrollment in OASIS. With the growing awareness of supracordial 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 three and four of OASIS with eight patients in each arm. Cohort three patients received a dose of one-half milligram, and cohort four patients received a doubling of that dose to one milligram. This final cohort four 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 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 one and two, as well as the one month initial safety data from cohort three, received by our safety monitoring committee, have all demonstrated that CLSAX 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 setup. There is also an ongoing extension study to follow patients in cohorts two, three, and four for up to three additional months after completion of OASIS. We look forward to presenting the individual patient safety and tolerability data from both cohorts three and four, as well as the complete analysis from all four dosing cohorts in November, as this will facilitate our selection of the most appropriate dosing protocol for our phase two trial. Our development and commercialization partner programs continue to advance as well. Arctic Vision, our Xifeir commercialization partner in Asia, has two clinical programs ongoing. They're 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, Ora Biosciences delivered a presentation at the International Society of Ocular Oncology on their Phase II trial investigating AU011, a virus-like drug conjugate, delivered via our SCS microinjector for the treatment of coronal melanoma. ORA has stated that they plan to finalize a decision on the right of administration for AU011 and initiate their pivotal program before the end of the year. Regenexx Bio has also progressed RGX314, an investigational one-time gene therapy that utilizes Regenexx Bio's proprietary NAVAAV8 vector to deliver a gene encoding a therapeutic antibody fragment to inhibit VEGF. Regenexx Bio is currently running two Phase II trials evaluating supracordial delivery of RGX314 via our SCS microinjector. The ADA 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. Regenexx Bio plans to present additional supracordial 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 ClearSight 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 supercoital delivery approach. Our commercial partner, Bausch & Lomb, had a strong presence, featuring their commercial launch of Xythir, which recently received its permanent J code. This is an important milestone for a commercial drug, as U.S. physicians used 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 supracordial space to help treat patients with macular edema associated with uveitis. With four agents in six clinical trials, the conversation around delivery of drugs into the supracordial 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 supracordial space. The versatility of our office space SCS microinjector allows us to potentially treat peripheral and macular disorders as the SCS microinjector expands the supracordial space circumferentially and posteriorly to deliver drugs to the macula. This occurs since a natural pressure gradient drives injectate towards the lower pressure posterior supracordial space. In addition to ASRS, we also had a strong presence at the OIS Retina Innovation Summit and at ARGO 2022 and ASCRS annual meetings. Also, awareness of supracordial 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 Ophthalmologic Society, and the Asia-Pacific Academy of Ophthalmology, as well as the Congress of the Asia-Pacific Vitra-Retinal Society. To support our outreach and education to the physician community, three papers were published last quarter in peer-reviewed Medline Index journals to support Xypher and the attributes of supracordial delivery. We're also pleased that the well-known comprehensive retinal care journal, Retinal Physician, published a special edition entitled, Supercordial Drug Delivery Technology. This publication highlights the potential versatility of the supracoital delivery system. There are six 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 Zypyr to treat uveitic macular edema, and potential uses in gene therapy and 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 Degnan, to review our financial results. Charlie?

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 break down 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 pre-specified sales milestone for Zypyr by March 31st, 2024. The terms of the agreement also provide for an additional milestone payment of $20 million to us upon attainment of a second pre-specified 2024 sales milestone for Zypure. In exchange, healthcare royalties will receive royalties and milestone payments due to clear side from Zypure from certain SES microinjector license agreements. This includes payments from our current partnerships with Bausch & Lomb, Arctic Vision, Regenexx Bio, and Aura Bioscience. Importantly, the arrangement with healthcare royalty specifically excludes all of our internally developed assets and programs, including CLSAX, as well as any future in-license assets. The repayment amount is capped at 2.5, the total payments made by healthcare royalty. If certain parameters are not met by the end of 2024, this cap will be increased to 3.4 times 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 total $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 TLS-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 Webb Bush Pack Row Healthcare Conference tomorrow. Later this month, we will also be participating in the AC 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.

Thanks, Charlie. We are building significant momentum leveraging our proprietary supercorridor space platform technology featuring our SES 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 CLSAx 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 clear sight. 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.

As a reminder, to ask a question, you will need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised. Please stand by while we compile the Q&A roster. And your first question comes from the line of Stacey Lee from South Defoe. Your line is open.

Hi, this is Stacey calling for Annabelle. Congrats on a great quarter. Two questions on our end. Do you have any color on reception to Zypere? Bausch and Lomb didn't report anything in terms of sales, but can you provide anything that you're hearing from the field as far as you know, overall reception, real-world experience, and the ease of adoption for the product and procedure. And then secondly, for CLAX, some of the cables that have commented on competing next-gen products that are extended duration, envision using these TAN and 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 three-month duration versus six or 12 that the others are shooting for? Thank you.

All right. Well, thanks for that question, Tom. Between Tom and Charlie, do you want to address the BAUSH activities with Zypyr? You guys are close to that.

Yeah, I'll go first, and then Tom can comment on, you know, ASRS. All I could say is, you know, BAUSH, although they didn't give sales numbers on Zypyr, CEO Joe Papa was very positive positive about his KOL interactions at conferences, and it appears to be a lot of excitement around the product. But, you know, as we know, they haven't been giving sales estimates. But from my point of view and from our partners, nothing but positive remarks. And, Tom, we got a conference and, you know, heard some things firsthand, I could imagine. So I'll kick it over to Tom.

Sure. The reception for his IPR has been really fantastic. As we discussed earlier, Bausch & Lomb plans to train all U.S. retina physicians as well as all U.S. uveitis physicians. And the training program is quite robust. But physicians feel like this program prepares them well. I've received so many unsolicited emails from retina specialists around the country congratulating ClearSide, complementing the training program, and I think it's gone really well.

Tom, you might want to address the second part of that question, which was a PAMVEGF activity of the tyrosine kinase inhibitors and use in maintenance, and our view on duration and use in maintenance.

Sure. So, it's a good question. In terms of these small molecule tyrosine kinase inhibitors, you know, 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 supracordial space have prolonged durability. And we've noted that in our preclinical studies. I think the questioner mentioned that we're shooting for three months. durability but that's not necessarily the case our our trial is a three-month trial but we also have an extension trial for a total of six months of follow-up in terms of these therapies what we feel is potentially very important is safety because as we've seen with biological and gene therapies safety has been a concern we know that exitinib is a well-established small molecule and has less propensity for inflammation than a biologic or a gene therapy. And this has been borne out in our cohorts one and two data release. There were no study suspension stopping rules, no signs of inflammation, no signs of individual dispersion of the drug or any intraocular pressure safety signals. And as we escalate to these higher doses in cohorts three and four, we think that the pan-VEGF inhibitory attributes of Exitinib, coupled with its high potency, coupled with the suprachoroidal targeted delivery to affected chorioritinal 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.

Amazing. That was really helpful. Thank you so much.

Your next question comes from the line of Rohit Wajin from Niedermann Company. Your line is open.

Hi, good morning. This is Rohit on for search. Thanks for taking my questions. I think just talk about your confidence level that you'll see the full 65 million, uh, the financing, uh, based on the 2024 sales milestone that you discussed. And then, uh, post funding, can you talk about how you prioritize the pipeline, uh, and any timelines associated? Thank you.

Uh, Charlie, do you want to take the first part? And I'll probably take the second part of that.

Sure. You know, as you know, we said, we, we, uh, You know, we can't talk about what the milestones for the other payments, but obviously, you know, we went into this agreement planning on getting all these milestones. So, you know, we feel confident, but, you know, it's going to be based on Zypier sales. So, you know, they're not unreasonable milestones, but, you know, I can't really comment or place guarantees on it. But, you know, we found this deal fully expecting to receive all the cash. I'm sorry, the second question was prioritization.

Well, go ahead. You can say something.

No, you get it.

Okay. I was just going to say that we currently are, we have a number of opportunities in our non-CLSAX pipeline. Obviously, CLSAX 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 two. As for 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 we can create the most value, and that's 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 approach pipeline plan for what we see as a number of really interesting opportunities in the supercorridor space. For us as an internal pipeline, and that doesn't count the interest that we have from several companies to use our supercoital 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.

Great. Thank you.

Okay, your next question comes from the line off. Catherine Oconee with JMP Securities. Your line is now open.

Hi, this is Catherine. I'm calling on behalf of John Wollobin from JMP. I just have a question about the phase two study and what do you guys expect to see in the data from the phase one to a data that would warrant further investigation into phase two?

Tom, you want to address that? 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 corrective visual acuity, on some anatomic parameters, including fluorescent angiography and OCT, as well as need for retreatment. In terms of what we expect, exitinib is a well-established small molecule, so there's less propensity for inflammation. And as I mentioned earlier, that was borne out in cohorts one and two. So we expect to see continued evidence of safety as we escalate. And also at these higher doses, you know, we have this pan-VEGF effect with Exitinib. And that allows us to potentially break through a ceiling of efficacy with focused VEGF-A inhibition. We can couple that with the ability to target very high levels to the affected coronary retinal tissue here with the portal delivery. And we think that further leverage the benefits of pan-VEGF inhibition. And then finally, you know, 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 were levels in the retina and in the RPE and choroid out to six months that were several log orders higher than the IC50 for the VEGF receptor 2. So in summary, you know, we're looking for safety primarily. But we're also hoping to see holistic signs of efficacy based on BCDA anatomic parameters and weight treatment, as well as durability.

Your next question comes from the line of Yi Chen with HCWainwright. Your line is now open.

Thank you for taking my question. So in the future clinical trials of OCOS-AX, we always target highly treatment-experienced anti-VEGF sub-responder patients or the patient population could change in future trials.

I can take that. So that's a really insightful question. In the current trial, as in many first-in-man trials, oftentimes you'll have treatment-experienced patients. But these are highly treatment-experienced patients. And we set a high bar for ourselves because we're requiring them to have active disease at screening. And that's confirmed by an independent reading center. So in essence, we're assessing 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, you know, as we learn more and more about suprachoroidal excitinib, you know, we don't feel compelled to follow that exact set of eligibility criteria. So that may change going forward. But at least for this By requiring patients to have active disease, we have a better potential to assess for a biologic effect than if we had patients in the trial with inactive disease.

Got it. Thank you.

And again, in order to ask a question, please press star 11 on your telephone. then wait for the automated message advising that your hand is raised. Your next question comes from the line of William Wood from B Reilly. Your line is now open.

Hi, this is William Wood. I'm from B Reilly. Appreciate you taking that question and 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 human or animals, you know, maybe providing a little extra color on the PK profile, local response, et cetera.

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 you know, safety and repeat safety dosing? Sure. You might be able to add some color to that, though.

Sure. I'm suffice it to say that, you know, 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, you know, excitinib is an already approved molecule. It's 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 a 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 for inflammation.

Appreciate that. And then one extra, if I may, you've got, you're obviously reading out cohort three, cohort four 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 six months from cohorts one, two, or maybe even three.

So, we didn't We don't have, we decided not to do an extension study on cohort one. Cohort one was done with an extraordinarily low dose. Our preclinical study suggested that we would have levels, but we decided not to do the extension study for cohort one. We did include the extension studies for cohorts two, three, and four. We'll report out extension data from cohort two. in November, along with the three-month data from cohorts three and four. The extension data from cohort three and four will in turn be read out in the first quarter of 2023. Was there a second part to that question?

No, I believe just general color on what we may be expecting in November.

Sure. So, you know, as I alluded to earlier, we set a very high bar for ourselves. These are heavily treated treatment-experienced patients. On average, in cohorts one and two, patients had in the mid-20s prior injections. I believe the mean number of injections the year prior was nine. And despite 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 biological effect. it'd be very difficult to assess for biologic effect if the patients are heavily treated and inactive because many of those patients don't require treatment. So, you know, the readout will be just as we had in the past, very transparent. We'll include best corrective visual acuity, central subfield thickness, re-treatment, and we'll also, you know, because we'll be analyzing all four cohorts, may provide some additional color with respect to the OCT parameters as well as angiographic parameters.

Really helpful. I appreciate it. Thank you again.

And I see no further questions at this time. I will now extend the conference back to Dr. Basiewski.

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 operating. You may now disconnect the call. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.