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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37783

Clearside Biomedical, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	45-2437375
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
900 North Point Parkway, Suite 200 Alpharetta, GA	30005
(Address of principal executive offices)	(Zip Code)

(678) 270-3631

Registrant’s telephone number, including area code

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	CLSD	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 5, 2021, the registrant had 59,666,519 shares of common stock, $0.001 par value per share, outstanding.


		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Balance Sheets as of September 30, 2021 and December 31, 2020	3
	Statements of Operations for the three and nine months ended September 30, 2021 and 2020	4
	Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020	5
	Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	6
	Notes to the Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 6.	Exhibits	26
Signatures		27

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CLEARSIDE BIOMEDICAL, INC.

Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	25,217		$	17,287
Prepaid expenses		1,187			722
Other current assets		119			109
Total current assets		26,523			18,118
Property and equipment, net		283			416
Operating lease right-of-use asset		412			528
Restricted cash		160			260
Total assets	$	27,378		$	19,322
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	776		$	1,997
Accrued liabilities		2,996			1,582
Current portion of long-term debt		—			991
Current portion of operating lease liabilities		384			373
Deferred revenue		5,000			5,000
Total current liabilities		9,156			9,943
Operating lease liabilities		374			616
Total liabilities		9,530			10,559
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized and no shares issued at September 30, 2021 and December 31, 2020		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized at September 30, 2021 and December 31, 2020; 59,626,519 and 51,860,941 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		60			52
Additional paid-in capital		291,988			264,578
Accumulated deficit		(274,200	)		(255,867	)
Total stockholders’ equity		17,848			8,763
Total liabilities and stockholders’ equity	$	27,378		$	19,322

See accompanying notes to the financial statements

CLEARSIDE BIOMEDICAL, INC.

Statements of Operations

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
License and other revenue	$	3,074		$	3,432		$	3,888		$	7,883
Operating expenses:
Research and development		5,147			3,490			14,697			10,601
General and administrative		2,816			2,374			8,525			8,107
Total operating expenses		7,963			5,864			23,222			18,708
Loss from operations		(4,889	)		(2,432	)		(19,334	)		(10,825	)
Other income		2			—			1,001			—
Other expense		—			(1	)		—			(273	)
Net loss	$	(4,887	)	$	(2,433	)	$	(18,333	)	$	(11,098	)
Net loss per share of common stock — basic and diluted	$	(0.08	)	$	(0.05	)	$	(0.32	)	$	(0.24	)
Weighted average shares outstanding — basic and diluted		59,474,346			46,976,649			58,095,080			45,653,068

See accompanying notes to the financial statements.

CLEARSIDE BIOMEDICAL, INC.

Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


	Nine Months Ended September 30, 2021
										Total
	Common Stock				Additional		Accumulated			Stockholders'
	Shares		Amount		Paid-In-Capital		Deficit			Equity
Balance at December 31, 2020		51,860,941	$	52	$	264,578	$	(255,867	)	$	8,763
Issuance of common shares under a direct registered offering		4,209,050		4		11,074		—			11,078
Issuance of common shares under at-the-market sales agreement		1,186,579		2		3,247		—			3,249
Exercise of stock options		62,493		—		38		—			38
Vesting and settlement of restricted stock units		227,754		—		—		—			—
Issuance of common shares under employee stock purchase plan		31,908		—		54		—			54
Share-based compensation expense		—		—		1,154		—			1,154
Net loss		—		—		—		(7,351	)		(7,351	)
Balance at March 31, 2021		57,578,725		58		280,145		(263,218	)		16,985
Issuance of common shares under at-the-market sales agreement		1,397,436		1		7,083		—			7,084
Exercise of stock options		21,673		—		33		—			33
Vesting and settlement of restricted stock units		93,757		—		—		—			—
Share-based compensation expense		—		—		1,331		—			1,331
Net loss		—		—		—		(6,095	)		(6,095	)
Balance at June 30, 2021		59,091,591		59		288,592		(269,313	)		19,338
Issuance of common shares under at-the-market sales agreement		307,404		1		1,874		—			1,875
Exercise of stock options		100,194		—		149		—			149
Vesting and settlement of restricted stock units		93,757		—		—		—			—
Issuance of common shares under employee stock purchase plan		33,573		—		57		—			57
Share-based compensation expense		—		—		1,316		—			1,316
Net loss		—		—		—		(4,887	)		(4,887	)
Balance at September 30, 2021		59,626,519	$	60	$	291,988	$	(274,200	)	$	17,848


	Nine Months Ended September 30, 2020
										Total
	Common Stock				Additional		Accumulated			Stockholders'
	Shares		Amount		Paid-In-Capital		Deficit			Equity
Balance at December 31, 2019		44,413,372	$	44	$	248,770	$	(237,657	)	$	11,157
Issuance of common shares under at-the-market sales agreement		455,186		1		1,192		—			1,193
Share-based compensation expense		—		—		1,001		—			1,001
Net loss		—		—		—		(2,911	)		(2,911	)
Balance at March 31, 2020		44,868,558		45		250,963		(240,568	)		10,440
Issuance of common shares under at-the-market sales agreement		800,170		1		1,606		—			1,607
Exercise of stock options		58,333		—		72		—			72
Vesting and settlement of restricted stock units		512,550		—		—		—			—
Issuance of common shares under employee stock purchase plan		35,359		—		31		—			31
Share-based compensation expense		—		—		891		—			891
Net loss		—		—		—		(5,754	)		(5,754	)
Balance at June 30, 2020		46,274,970		46		253,563		(246,322	)		7,287
Issuance of common shares under at-the-market sales agreement		1,382,564		2		2,283		—			2,285
Exercise of stock options		194,883		—		144		—			144
Vesting and settlement of restricted stock units		375,025		—		—		—			—
Share-based compensation expense		—		—		841		—			841
Net loss		—		—		—		(2,433	)		(2,433	)
Balance at September 30, 2020		48,227,442	$	48	$	256,831	$	(248,755	)	$	8,124

See accompanying notes to the financial statements.

CLEARSIDE BIOMEDICAL, INC.

Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2021			2020
Operating activities
Net loss	$	(18,333	)	$	(11,098	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		133			136
Share-based compensation expense		3,801			2,733
Gain on extinguishment of debt		(998	)		—
Non-cash interest expense		—			59
Accretion of debt discount		—			129
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(475	)		1,441
Other assets and liabilities		(115	)		(105	)
Accounts payable and accrued liabilities		200			(1,979	)
Net cash used in operating activities		(15,787	)		(8,684	)
Investing activities
Acquisition of property and equipment		—			(55	)
Net cash provided by (used in) investing activities		—			(55	)
Financing activities
Proceeds from registered direct offering, net of issuance costs		11,078			—
Proceeds from at-the-market sales agreement, net of issuance costs		12,208			5,084
Proceeds from exercise of stock options		220			217
Proceeds from shares issued under employee stock purchase plan		111			31
Proceeds from long-term debt		—			991
Payments made on long-term debt		—			(5,340	)
Net cash provided by financing activities		23,617			983
Net increase (decrease) in cash, cash equivalents and restricted cash		7,830			(7,756	)
Cash, cash equivalents and restricted cash, beginning of period		17,647			22,955
Cash, cash equivalents and restricted cash, end of period	$	25,477		$	15,199
Supplemental disclosure of noncash financing activities
Forgiveness of PPP Loan and accrued interest	$	998		$	—

Reconciliation of cash, cash equivalents and restricted cash:


	September 30,
	2021		2020
Cash and cash equivalents	$	25,217	$	14,839
Restricted cash (including $100 for each period recorded in other current assets)		260		360
Cash, cash equivalents and restricted cash at end of period	$	25,477	$	15,199

See accompanying notes to the financial statements.

CLEARSIDE BIOMEDICAL, INC.

Notes to the Financial Statements

(unaudited)

1. The Company

Clearside Biomedical, Inc. (the “Company”) is a biopharmaceutical company focused on revolutionizing the delivery of therapies to the back of the eye through the suprachoroidal space (SCS®). Incorporated in the State of Delaware on May 26, 2011, the Company has its corporate headquarters in Alpharetta, Georgia.

The Company’s activities since inception have primarily consisted of developing product and technology rights, raising capital and performing research and development activities. The Company has no current source of revenue to sustain present activities, and does not expect to generate meaningful revenue until and unless the Company's licensees successfully commercialize XIPERE™, its other licensees receive regulatory approval and successfully commercializes its product candidates or the Company commercializes its product candidates either on its own or with a third party. The Company is subject to a number of risks and uncertainties similar to those of other life science companies at a similar stage of development, including, among others, the need to obtain adequate additional financing, successful development efforts including regulatory approval of products, compliance with government regulations, successful commercialization of potential products, protection of proprietary technology and dependence on key individuals.

Liquidity

The Company had cash and cash equivalents of $25.2 million as of September 30, 2021. On January 6, 2021, the Company entered into a securities purchase agreement with certain institutional purchasers that purchased 4.2 million shares of its common stock in a registered direct offering at a price of $2.851 per share. The Company raised net proceeds of $11.1 million after deducting offering expenses. During the nine months ended September 30, 2021, the Company sold 2.9 million shares of its common stock for net proceeds of $12.2 million under its at-the-market agreement with Cowen and Company, LLC.

In August 2021, the Company entered into an amendment to the Arctic Vision License Agreement (as defined in Note 10 - License and Other Agreements) to expand the territories covered by the license to include India and the ASEAN Countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam). In September 2021, the Company entered into a second amendment to the Arctic Vision License Agreement to expand the territories covered by the license to include Australia and New Zealand. The Company received an aggregate of $3.0 million in consideration for the expansion of the licensed territory.

On October 25, 2021, the Company announced that the U.S. Food and Drug Administration (the "FDA") approved XIPERE (triamcinolone acetonide injectable suspension) for the treatment of macular edema associated with uveitis, a form of eye inflammation. The Company is entitled to an aggregate of $9.0 million in milestone payments related to the approval of XIPERE from Arctic Vision (Hong Kong) Limited and Bausch + Lomb. In addition, the Company is entitled to receive $10.0 million from Bausch upon completion of pre-launch activities for XIPERE. Bausch expects to launch XIPERE in the United States in the first quarter of 2022.

The Company has funded its operations primarily through the sale of common stock and convertible preferred stock and the issuance of long-term debt. The Company will continue to need to obtain additional financing to fund future operations, including completing the development, partnering and potential commercialization of its primary product candidates. The Company will need to obtain financing to conduct additional trials for the regulatory approval of its product candidates if requested by regulatory bodies, and completing the development of any product candidates. If such products were to receive regulatory approval, the Company would need to obtain financing to prepare for the potential commercialization of its product candidates, if the Company decides to commercialize the products on its own.

The Company has suffered recurring losses and negative cash flows from operations since inception and anticipates incurring additional losses until such time, if ever, that it can generate significant revenue from its licensees' commercialization of XIPERE. In the absence of product or other revenues, the amount, timing, nature or source of which cannot be predicted, the Company’s losses will continue as it conducts its research and development activities.

Based on its current plans and forecasted expenses, the Company expects that its cash and cash equivalents as of the filing date, November 10, 2021, will enable it to fund its planned operating expenses and capital expenditure requirements into 2023. This estimate assumes receipt of the $9.0 million of milestone payments that the Company is entitled receive from its licensees as a result of the FDA approval of XIPERE. In addition, the estimate assumes receipt of the $10.0 million milestone payment that the Company is entitled to receive from Bausch upon completion of pre-launch activities for XIPERE. The Company has based this estimate on assumptions that may prove to be wrong, and it could exhaust its capital resources sooner than expected. Until the Company can generate sufficient revenue, the Company will need to finance future cash needs through public or private equity offerings, license agreements, debt financings or restructurings, collaborations, strategic alliances and marketing or distribution arrangements.

2. Significant Accounting Policies

Basis of Presentation

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Unaudited Interim Financial Information

The accompanying balance sheet as of September 30, 2021, statements of operations for the three and nine months ended September 30, 2021 and 2020, statements of stockholders’ equity for the three and nine months ended September 30, 2021 and 2020 and statements of cash flows for the nine months ended September 30, 2021 and 2020 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of September 30, 2021, its results of its operations for the three and nine months ended September 30, 2021 and 2020, its changes in stockholders’ equity for the three and nine months ended September 30, 2021 and 2020 and its cash flows for the nine months ended September 30, 2021 and 2020. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2021 and 2020 are unaudited. The results for the nine months ended September 30, 2021 are not indicative of results to be expected for the year ending December 31, 2021, any other interim periods or any future year or period. These unaudited financial statements should be read in conjunction with the audited financial statements and related footnotes, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of income and expenses during the reporting periods. Significant items subject to such estimates and assumptions include revenue recognition, the accounting for useful lives to calculate depreciation and amortization, clinical trial expense accruals, share-based compensation expense and income tax valuation allowance. Actual results could differ from these estimates.

Effects of COVID-19

The COVID-19 pandemic has created global volatility, economic uncertainty and general market disruption. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require us to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.

Revenue Recognition

The Company recognizes revenue from its contracts with customers under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). The Company’s primary revenue arrangements are license agreements which typically include upfront payments, regulatory and commercial milestone payments and royalties based on future product sales. The arrangements may also include payments for the Company’s SCS Microinjector devices as well as payments for assistance and oversight of the customer’s use of the Company’s technology. In determining the amount of revenue to be recognized under these agreements, the Company performs the following steps: (i) identifies the promised goods and services to be transferred in the contract, (ii) identifies the performance obligations, (iii) determines the transaction price, (iv) allocates the transaction price to the performance obligations and (v) recognizes revenue as the performance obligations are satisfied.

The Company receives payments from its customers based on billing schedules established in each contract. Upfront and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under the arrangement. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

Research and Development Costs

Research and development costs are charged to expense as incurred and include:



employee-related expenses, including salaries, benefits, travel and share-based compensation expense for research and development personnel;



expenses incurred under agreements with contract research organizations, contract manufacturing organizations and consultants that conduct preclinical studies and clinical trials;



costs associated with preclinical and clinical development activities;



costs associated with submitting regulatory approval applications for the Company’s product candidates;



costs associated with training physicians on the suprachoroidal injection procedure and educating and providing them with appropriate product candidate information;



costs associated with technology and intellectual property licenses;



costs for the Company’s research and development facility; and



depreciation expense for assets used in research and development activities.

Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to the Company by its vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the patterns of costs incurred, and are reflected in the financial statements as prepaid or accrued expense.

Share-Based Compensation

Compensation cost related to share-based awards granted to employees is measured based on the estimated fair value of the award at the grant date. The Company estimates the fair value of stock options using a Black-Scholes option pricing model. Compensation expense for options granted to non-employees is determined as the fair value of consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. The fair value of restricted stock units granted is measured based on the market value of the Company’s common stock on the date of grant. Share-based compensation costs are expensed on a straight-line basis over the relevant vesting period.

Compensation cost related to shares purchased through the Company’s employee stock purchase plan, which is considered compensatory, is based on the estimated fair value of the shares on the offering date, including consideration of the discount and the look back period. The Company estimates the fair value of the shares using a Black-Scholes option pricing model. Compensation expense is recognized over the six-month withholding period prior to the purchase date.

All share-based compensation costs are recorded in general and administrative or research and development costs in the statements of operations based upon the underlying employees’ roles within the Company.

Cash Equivalents

Cash equivalents consist of short-term, highly liquid investments with an original term of three months or less at the date of purchase.

Concentration of Credit Risk Arising From Cash Deposits in Excess of Insured Limits

The Company maintains its cash in bank deposits that at times may exceed federally insured limits. The Company has not experienced any loss in such accounts. The Company believes it is not exposed to any significant risks with respect to its cash balances.

Recent Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new ASU also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates. These changes aim to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing the disclosures. The Company adopted ASU 2019-12 on January 1, 2021, and the adoption did not have a material impact on its financial statements and related disclosures.

3. Property and Equipment, Net

Property and equipment, net consisted of the following (dollar amounts in thousands):


	Estimated Useful Lives (Years)	September 30, 2021			December 31, 2020
Furniture and fixtures	5	$	337		$	337
Machinery and equipment	5		176			176
Computer equipment	3		13			13
Leasehold improvements	Lesser of useful life or remaining lease term		667			667
			1,193			1,193
Less: Accumulated depreciation			(910	)		(777	)
		$	283		$	416

4. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):


	September 30,		December 31,
	2021		2020
Accrued research and development	$	1,594	$	234
Accrued employee costs		1,145		1,132
Accrued professional fees		82		56
Accrued expense		175		160
	$	2,996	$	1,582

5. CARES Act Paycheck Protection Program Loan

On April 20, 2020, the Company entered into a loan agreement with Silicon Valley Bank (the “PPP Lender”) under the terms of which the PPP Lender made a loan to the Company in an aggregate principal amount of $