Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

For the quarterly period ended June 30, 2018

OR

Commission File Number: 001-37783

 

Clearside Biomedical, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

(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)

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 August 6, 2018, the registrant had 32,024,223 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 

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Table of Contents

 

 

 

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

CLEARSIDE BIOMEDICAL, INC.

Balance Sheets

(in thousands, except share and per share data)

(unaudited)

 

 

See accompanying notes to the financial statements

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CLEARSIDE BIOMEDICAL, INC.

Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)

 

 

See accompanying notes to the financial statements.

 

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CLEARSIDE BIOMEDICAL, INC.

Statements of Cash Flows

(in thousands)

(unaudited)

 

 

See accompanying notes to the financial statements.

 

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CLEARSIDE BIOMEDICAL, INC.

Notes to the Financial Statements

(unaudited)

 

 

1. The Company

 

Clearside Biomedical, Inc. (the “Company”) is a late-stage clinical biopharmaceutical company developing first-in-class drug therapies to treat blinding diseases of the eye. The Company’s current product candidates are injected into the suprachoroidal space (“SCS”) using its proprietary SCS Microinjector, and focus on the treatment of diseases affecting the retina and choroid, especially diseases associated with macular edema. 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 receives regulatory approval of, and successfully commercializes, its product candidates. 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, 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 has funded its operations primarily through the proceeds of its public offerings of common stock, sale of convertible preferred stock and the issuance of long-term debt. On March 12, 2018, the Company closed a follow-on public offering in which it sold 6,538,462 shares of common stock at a public offering price of $13.00 per share, resulting in net proceeds of $79.6 million after deducting underwriting discounts and commissions and estimated offering expenses. On May 14, 2018, the Company entered into a second amended and restated loan agreement, which provides for up to $20.0 million in term loans, of which the Company borrowed $10.0 million on May 14, 2018 (see Note 5). The Company will continue to need to obtain additional financing to fund future operations, including completing the development and commercialization of its primary product candidates. The Company will need to expend substantial resources for research and development, including costs associated with the clinical testing of its product candidates. The Company will also need to obtain additional financing to conduct additional trials for the regulatory approval of its product candidates if requested by regulatory bodies, and to complete the development of any additional product candidates that might be acquired. If such products were to receive regulatory approval, the Company would need to prepare for the potential commercialization of its product candidates and fund the commercial launch of the products, if the Company decides to commercialize the products on its own. Moreover, the Company’s fixed expenses such as rent and other contractual commitments are substantial and are expected to increase in the future.

The Company had cash, cash equivalents and short-term investments of $84.4 million as of June 30, 2018. 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. Until the Company can generate a sufficient amount of revenue, the Company may finance future cash needs through public or private equity offerings, license agreements, debt financings, collaborations, strategic alliances and marketing or distribution arrangements. The Company has incurred losses and negative cash flows since inception and expects operating losses and negative cash flows to continue into the foreseeable future. Absent raising additional funds, the Company expects that it will be able to delay, reduce or eliminate certain research and development programs or reduce administrative expense while still advancing clinical trials for key product candidates in order that the cash on hand as of the filing date, August 8, 2018, will be sufficient to fund its operations into the fourth quarter of 2019.

 

 

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”).

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Unaudited Interim Financial Information

The accompanying balance sheet as of June 30, 2018, statements of operations and comprehensive loss for the three and six months ended June 30, 2018 and 2017 and statements of cash flows for the six months ended June 30, 2018 and 2017 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 June 30, 2018 and its results of its operations for the three and six months ended June 30, 2018 and 2017 and its cash flows for the six months ended June 30, 2018 and 2017. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2018 and 2017 are unaudited. The results for the three and six months ended June 30, 2018 are not indicative of results to be expected for the year ending December 31, 2018, 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, 2017.

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 the accounting for useful lives to calculate depreciation and amortization, clinical trial estimates and related accrued liabilities, share-based compensation expense and income tax valuation allowance. Actual results could differ from these estimates.

Research and Development Costs

Research and development costs are charged to expense as incurred and include, but are not limited to:

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. No material adjustments to these estimates have been recorded in these financial statements.

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 awards granted to non-employees is re-measured each period until the related service is complete. 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 and comprehensive loss based upon the underlying employees’ roles within the Company.

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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.

Short-Term Investments

Short-term investments are investments with original maturities of between 90 and 365 days when purchased and are comprised of commercial paper and treasury bills. The Company classifies its short-term investments as available-for-sale securities. Short-term investments are recorded at fair value and unrealized gains and losses are recorded within accumulated other comprehensive income (loss) until realized. In addition, the Company evaluates the short-investments with unrealized losses to determine whether such losses are other-than-temporary.

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

Accounting Pronouncements Recently Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers. Under ASU 2014-09, companies are required to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard also results in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and modifies guidance for multiple-element arrangements.

The Company adopted the standard effective January 1, 2018 using the modified retrospective transition method. After evaluating its current and prior license agreements, as well as its other collaboration agreements, the Company recorded the remaining $160,000 of deferred revenue as a cumulative adjustment to accumulated deficit. The adoption of the new standard did not have a material impact on the Company’s financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments. The update addresses eight specific cash flow matters with the objective of reducing diversity in practice in how certain cash receipts and payments are classified in the statement of cash flows. The update is effective for annual periods beginning after December 15, 2017, and interim periods within the period. The Company adopted the standard effective January 1, 2018, and the adoption did not have a material impact on its financial statements and related disclosures.

In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which addresses diversity in practice in the classification and presentation of a change in restricted cash on the statement of cash flows. The amendments in this update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Company adopted the standard effective January 1, 2018, resulting in a change to the presentation of restricted cash on the statements of cash flows.

The following table is a reconciliation of cash and cash equivalents and restricted cash reported within the balance sheets that sum to the total amounts in the statements of cash flows (in thousands).

Restricted cash consists of amounts held by a financial institution under a contractual agreement.

 

In May 2017, the FASB issued ASU 2017-9, Compensation-Stock Compensation: Scope of Stock Compensation Modification Accounting. The ASU was issued to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The update is effective for annual periods beginning

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after December 15, 2017, and interim periods thereafter. The Company adopted ASU 2017-9 effective January 1, 2018, and the impact on its financial statements and related disclosure would depend on any future modifications to its share-based awards.

 

Recent Accounting Pronouncements Not Yet Adopted

 

In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842), which requires lessees to recognize most leases on the balance sheet. This is expected to increase both reported assets and liabilities. For public companies, the standard will be effective for the first interim reporting period within annual periods beginning after December 15, 2018, although early adoption is permitted. Lessees and lessors will be required to apply the new standard at the beginning of the earliest period presented in the financial statements in which they first apply the new guidance, using a modified retrospective transition method. The requirements of this standard include a significant increase in required disclosures. The Company is currently assessing the impact that adopting this new accounting standard will have on its financial statements and related disclosures.

 

In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation: Improvements to Nonemployee Shared-Based Payment Accounting. The ASU update expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The new standard is effective for fiscal years and interim periods beginning after December 15, 2018. Early adoption is permitted, but no earlier than an entity’s adoption date of ASU 2014-09, Revenue from Contracts with Customers. The Company is currently assessing the impact that adopting this new accounting standard will have on its financial statements and related disclosures.

3. Property and Equipment, Net

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

 

 

4. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

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5. Long-Term Debt

Loan and Security Agreements

In September 2016, the Company entered into an amended and restated loan and security agreement, which was subsequently amended on October 31, 2017 (as amended, the “1^st A&R loan agreement”) with Silicon Valley Bank (“SVB”), MidCap Funding XII Trust and MidCap Financial Trust, which amended and restated in its entirety the Company’s prior loan and security agreement. The 1^st A&R loan agreement provided for new term loans of up to $15.0 million, with a floating interest rate equal to 7% plus the greater of (i) the 30-day U.S. LIBOR, as reported in the Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, or (ii) 0.50%.

Under the terms of the 1^st A&R loan agreement, an initial tranche of $8.0 million was advanced on September 28, 2016. The draw period for the remaining $7.0 million available under the 1^st A&R loan agreement expired on March 31, 2018. The Company was required to pay accrued interest only on the outstanding $8.0 million balance through December 31, 2017, followed by 30 equal payments of principal and accrued interest. The Company had the option to prepay the outstanding balance of the term loans in full, subject to a prepayment fee of 2% of the original principal amount of the aggregate term loans for any prepayments through May 31, 2020. A final payment of $0.5 million, was due at maturity of the loan on June 1, 2020, or upon the prepayment of the facility or the acceleration of amounts due under the facility as a result of an event of default, and was being accreted in long-term debt over the life of the loan. Of the $8.0 million borrowed, $5.3 million was used to repay all amounts outstanding under the prior loan agreement. Closing costs incurred in the refinancing portion of the loan were recorded as expense while the financing costs for the new portion of the loan are recorded in long-term debt and being accreted over the life of the loan. Upon repayment of the original loan agreement, all remaining closing costs associated with the original loan agreement were being accreted to long-term debt over the life of the 1^st A&R loan agreement.

On May 14, 2018, the Company entered into a second amended and restated loan and security agreement (the “2^nd A&R Loan Agreement”), with SVB, MidCap Funding III Trust and MidCap Financial Trust (together, “MidCap” and collectively with SVB, the “Lenders”), which amended and restated in its entirety the 1^st A&R loan agreement. The 2^nd A&R Loan Agreement provides for new term loans of up to $20.0 million, with a floating interest rate equal to 6.50% plus the greater of (i) the 30-day U.S. LIBOR, as reported in the Wall Street Journal on the last business day of the month the immediately precedes the month in which the interest will accrue, or (ii) 1.89%.

The Company borrowed an initial tranche of $10.0 million on May 14, 2018, of which $7.0 million was used to repay all amounts outstanding under the 1^st A&R loan agreement, including fees associated with the final payment. The prepayment fees were waived. Of the remaining $10.0 million available under the 2^nd A&R Loan Agreement, $5.0 million (the “Term B Loan”) will become available for draw beginning on the later of (i) October 31, 2018 and (ii) the date on which the Lenders have received evidence, in form and substance reasonably satisfactory to them, that the Company has produced positive Phase 3 data meeting the primary endpoints from its ongoing SAPPHIRE clinical trial. An additional $5.0 million (the “Term C Loan”) will become available for draw beginning on the later of (i) October 31, 2018 or (ii) the date on which the Lenders have received evidence, in form and substance reasonably satisfactory to them, that the U.S. Food and Drug Administration (the “FDA”) has accepted the Company’s New Drug Application (“NDA”) for its product candidate CLS-TA for the treatment of patients with non-infectious uveitis. Once the draw period for the Term B Loan or the Term C Loan, as applicable, has commenced, the Company may draw funds under the applicable loan at its discretion until the earlier of (i) March 31, 2019 and (ii) the occurrence of an event of default. The Company is required to pay accrued interest only on all amounts outstanding under the 2^nd A&R Loan Agreement through October 31, 2019 (or if the Term C Loan is made during the applicable draw period, through December 31, 2019), followed by consecutive equal monthly payments of principal and interest in arrears continuing through the maturity date of October 1, 2022. The Company has the option to prepay the outstanding balance of the term loans in full, subject to a prepayment fee of 3% of the original principal amount of each term loan for any prepayment prior the first anniversary of the date such term loan is funded or 2% of the original principal amount of each term loan for any prepayment on or after the first anniversary of the date such term loan is funded but prior to October 1, 2022. A final payment of 5.50% of the aggregate borrowed amount is due at maturity of the loan on October 1, 2022, or upon the prepayment of the facility or the acceleration of amounts due under the facility as a result of an event of default.

The Company accounted for the 2^nd A&R Loan Agreement as a modification in accordance with the guidance in ASC 470-50, Debt. Amounts paid to lenders and closing costs incurred in the refinancing portion of the loan were recorded as expense while the financing costs for the new portion of the loan, which consists of the final payment, are being accreted over the life of the loan and recorded in long-term debt. Upon repayment of the 1^st A&R loan agreement, all remaining closing costs associated with the 1^st A&R loan agreement are being accreted to long-term debt over the life of the 2^nd A&R Loan Agreement.

The term loans under the 2^nd A&R Loan Agreement are secured by substantially all of the Company’s assets, except that the collateral does not include any of the Company’s intellectual property. However, pursuant to the terms of a negative pledge arrangement, the Company has agreed not to encumber any of its intellectual property.

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Interest expense on the borrowings under the loan agreements was $186,000 and $162,000 for the three months ended June 30, 2018 and 2017, respectively, and $346,000 and $317,000 for the six months ended June 30, 2018 and 2017, respectively. Accretion of the scheduled final payment was $11,000 and $53,000 for the three months ended June 30, 2018 and 2017, respectively, and $60,000 and $105,000 for the six months ended June 30, 2018 and 2017, respectively. Accretion of the deferred debt issuance costs was $9,000 and $53,000 for the three months ended June 30, 2018 and 2017, respectively, and $23,000 and $105,000 for the six months ended June 30, 2018 and 2017, respectively.

As of June 30, 2018, the scheduled payments for the 2^nd A&R Loan Agreement, including the scheduled final payment in 2022, were as follows (in thousands):

 

 

6. Common Stock

The Company’s amended and restated certificate of incorporation authorizes the Company to issue 100,000,000 shares of $0.001 par value common stock. As of June 30, 2018 and December 31, 2017, there were 32,024,223 and 25,354,651 shares of common stock outstanding, respectively.

 

7. Stock Purchase Warrants

In September 2016, in connection with the 1^st A&R loan agreement (see Note 5), the Company issued warrants to the Lenders to purchase up to 29,796 shares of common stock at a price per share of $10.74. The warrants expire in September 2026, or earlier upon the occurrence of specified mergers or acquisitions of the Company, and are immediately exercisable. The warrants were recorded in equity and had a weighted average remaining life of 8.25 years as of June 30, 2018.

8. Share-Based Compensation

Share-based compensation is accounted for in accordance with the provisions of ASC 718, Compensation-Stock Compensation.

Stock Options

The Company has granted stock option awards to employees, directors and consultants from its 2011 Stock Incentive Plan (the “2011 Plan”) and its 2016 Equity Incentive Plan (the “2016 Plan”). The estimated fair value of options granted is determined as of the date of grant using the Black-Scholes option pricing model. The resulting fair value is recognized ratably over the requisite service period, which is generally the vesting period of the awards. Options granted to non-employees are re-measured at each financial reporting period until required services are performed.  

Share-based compensation expense for options granted under the 2011 Plan and the 2016 Plan is reflected in the statements of operations and comprehensive loss as follows (in thousands):

 

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The following table summarizes the activity related to stock options during the six months ended June 30, 2018:

 

 

As of June 30, 2018, the Company had $11.3 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of 2.7 years.

 

Employee Stock Purchase Plan

 

In January 2016, the Company’s board of directors adopted and approved, and in January 2016 the Company’s stockholders approved, the Clearside Biomedical, Inc. 2016 Employee Stock Purchase Plan (the “2016 ESPP”) which became effective on June 1, 2016. The first offering period for the 2016 ESPP commenced January 1, 2017. The 2016 ESPP is considered a compensatory plan and the fair value of the discount and the look-back period are estimated using the Black-Scholes option pricing model and expense is recognized over the six month withholding period prior to the purchase date. The Company has issued a total of 17,078 shares of common stock purchased under the 2016 ESPP. The Company has recorded $3,000 and $9,000 of share-based compensation expense for the three months ended June 30, 2018 and 2017, respectively, and $9,000 and $18,000 for the six months ended June 30, 2018 and 2017, respectively, in the statements of operations and comprehensive loss for the estimated number of shares to be purchased on the next purchase date following the conclusion of the applicable reporting period.

 

9. Commitments and Contingencies

Lease Commitment Summary

In November 2016, the Company signed an office lease agreement to lease approximately 20,000 square feet of office space in Alpharetta, Georgia for its corporate headquarters. The lease agreement is for a 6.5 year term with a renewal option for one additional five-year term. Rental payments are $35,145 per month subject to an increase of 3% per year. Rent expense under this lease is recognized on a straight-line basis over the term of the lease. In addition, the lease agreement requires payment of the pro-rata share of the annual operating expenses associated with the premises. The Company relocated to this new space in March 2017.

Total future minimum lease payments were as follows at June 30, 2018 (in thousands):

 

 

Rent expense was $58,000 for each of the three months ended June 30, 2018 and 2017 and $116,000 and $98,000 for the six months ended June 30, 2018 and 2017, respectively.

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Contract Service Providers

In the course of the Company’s normal business operations, it has agreements with contract service providers to assist in the performance of its research and development, clinical research and manufacturing. Substantially all of these contracts are on an as needed basis.

 

10. License and Collaboration Agreements

In August 2014, the Company entered into a royalty-bearing license agreement with NovaMedica LLC (“NovaMedica”). Under this agreement, the Company granted to NovaMedica the right to use the Company’s intellectual property to develop and commercialize the intended products (the “Covered Products”) and to have the exclusive right to sell those products in Russia and specified adjacent territories involving the use of the corticosteroid triamcinolone acetonide as the sole active pharmaceutical ingredient for administration in the SCS. In connection with this royalty-bearing license, NovaMedica made an upfront payment to the Company of $200,000. The Company is currently developing product candidates that, when completed, would be subject to this license giving NovaMedica the exclusive right to then sell the products in the specified geographic territories. In mid-December 2015, the Company received positive results from the Phase 2 clinical trial relating to the product candidate and determined, based on these results, that the intellectual property could become commercially feasible. Beginning in the first quarter of 2016, the Company began recognizing the $200,000 to revenue over the period of time estimated to complete clinical development and commercialization of the Covered Products and the beginning of the first set of patent expirations in 2027. On January 1, 2018, upon the adoption of ASU 2014-09, the Company accelerated the recognition of the deferred revenue and recorded the remaining balance of $160,000 as a cumulative adjustment to accumulated deficit. The Company recorded $5,000 and $10,000 of license revenue during the three and six months ended June 30, 2017, respectively, from this license agreement. NovaMedica is jointly owned by Rusnano MedInvest LLC and Domain Russia Investments Limited.

 

The Company has periodically entered into other short-term collaboration agreements, generally with performance obligations of one to two months, to evaluate the potential use of its proprietary SCS Microinjector with third-party product candidates for the treatment of various diseases. Funds received from these collaboration agreements are recognized as revenue over the term of the agreement. The Company recorded $125,000 of revenue from these collaboration agreements during the three and six months ended June 30, 2017.

 

11. Available-for-Sale Investments

 

The following table summarizes the Company’s available-for-sale investments (in thousands):

 

 

12. Fair Value Measurements

The Company records certain financial assets and liabilities at fair value in accordance with the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, on fair value measurements. As defined in the guidance, fair value, defined as an exit price, represents the amount that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering these assumptions, the guidance defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

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The Company’s material financial instruments at June 30, 2018 and December 31, 2017 consisted primarily of cash and cash equivalents, short-term investments and long-term debt. The fair value of cash and cash equivalents, government bonds, other current assets and accounts payable approximate their respective carrying values due to the short term nature of these instruments and are classified as Level 1 in the fair hierarchy. The fair value of long-term debt approximates the carrying value due to variable interest rates that correspond to market rates. The Company has determined its short-term investments, comprised of commercial paper, certificates of deposit, and corporate bonds, to be Level 2 in the fair value hierarchy. The fair value was determined using a market approach, based on prices and other relevant information generated by market transactions involving similar assets. The short-term investments consist of investments with original maturity dates from date of acquisition of 90 to 365 days and are classified as available-for-sale.

There were no significant transfers between Levels 1, 2 and 3 during the six months ended June 30, 2018 and the year ended December 31, 2017.

The following tables summarize the fair value of financial assets that are measured at fair value and the classification by level of input within the fair value hierarchy (in thousands):

 

 

 

13. Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, without consideration of the dilutive effect of potential common stock equivalents. Diluted net loss per share gives effect to all dilutive potential shares of common stock outstanding during this period. For all periods presented, the Company’s potential common stock equivalents, which included stock options and stock purchase warrants, have been excluded from the computation of diluted net loss per share as their inclusion would have the effect of reducing the net loss per share. Therefore, the denominator used to calculate both basic and diluted net loss per share is the same in all periods presented. The Company’s potential common stock equivalents that have been excluded from the computation of diluted net loss per share for all periods presented because of their antidilutive effect consisted of the following:

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions, or the negative of such words or phrases, are intended to identify “forward-looking statements.” We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those below and elsewhere in this Quarterly Report on Form 10-Q, particularly in Part II – Item 1A, “Risk Factors,” and our other filings with the Securities and Exchange Commission, or SEC. Statements made herein are as of the date of the filing of this Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes for the year ended December 31, 2017 appearing in our Annual Report on Form 10-K filed with the SEC on March 16, 2018.

Overview

We are a late-stage clinical biopharmaceutical company developing first-in-class drug therapies to treat blinding diseases of the eye. Our current product candidates are injected into the suprachoroidal space, or SCS, using our proprietary SCS Microinjector, and focus on the treatment of diseases affecting the retina and choroid, especially diseases associated with macular edema. With the suprachoroidal injection procedure, our product candidates are more directly administered to the retina and choroid as compared to other ocular drug administration techniques such as intravitreal injections. We believe treatment of eye disease via suprachoroidal injection may provide a number of benefits, including lower frequency of administration and faster onset of therapeutic effect. We hold the exclusive rights to develop and commercialize drugs for treatment via injection into the SCS. Our most advanced product candidates are based on commonly used ophthalmic drugs, which we believe will allow us to more efficiently and predictably pursue the regulatory approval of these product candidates under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act.

 

We are developing suprachoroidally injected CLS-TA, our proprietary, preservative-free formulation of the corticosteroid triamcinolone acetonide, or TA, to be administered suprachoroidally for the treatment of patients with non-infectious uveitis. On March 5, 2018, we announced positive topline results from our PEACHTREE Phase 3 clinical trial of CLS-TA for the treatment of macular edema associated with non-infectious uveitis. We enrolled 160 patients in the trial, of which 96 patients were randomized to the treatment arm to receive two 4.0 mg doses of suprachoroidal CLS-TA 12 weeks apart, and 64 patients were randomized to the control arm to undergo two sham procedures at the same 12-week intervals. Patients were evaluated every four weeks for a total of 24 weeks, and a total of 155 patients, or 97% of those enrolled, completed the full evaluation period of the trial. The trial met the primary endpoint with 47% of suprachoroidal CLS-TA patients gaining at least 15 letters in best corrected visual acuity, or BCVA, as measured using the Early Treatment of Diabetic Retinopathy Study, or ETDRS, scale, from baseline at week 24, compared to 16% of patients in the control arm. This improvement was statistically significant, with a p-value of less than 0.001. The improvement in BCVA from baseline was better in the treatment arm than the control arm at each monthly evaluation. The mean improvement from baseline was maintained throughout the evaluation period, with 9.6 letters gained at week 4 and 13.8 letters gained at week 24 in the treatment arm, compared to 1.3 letters gained at week 4 and 3.0 letters gained at week 24 in the control arm.

 

Administration of suprachoroidal CLS-TA resulted in a mean reduction from baseline of 153 microns in central subfield thickness, or CST, of the retina at week 24 in the treatment arm compared to an 18 micron mean reduction in the control arm, a result that was also statistically significant with a p-value of less than 0.001.

 

Suprachoroidal CLS-TA was generally well tolerated, with no treatment-related serious adverse events reported in the trial. Through 24 weeks, corticosteroid-related elevated intraocular pressure, or IOP, adverse events were reported for approximately 11.5% (11/96) of patients in the CLS-TA treatment arm, compared to 15.6% (10/64) of patients in the control arm, when including patients who received corticosteroid rescue medication. Specifically, 72% (46/64) of patients in the control arm were administered rescue medication, with 38 of the 46 receiving various forms of local corticosteroid treatments, such as intravitreal OZURDEX¬Æ (dexamethasone intravitreal implant) and subtenon and intravitreal triamcinolone acetonide.  Of those 38 control arm patients, ten, or 26.3%, experienced elevated IOP. In addition, over the course of this 24-week trial, adverse events involving changes in cataract grading from baseline were similar in each arm, with approximately 7.3% and 6.3% of patients in the CLS-TA treatment arm and control arm showing adverse event changes in cataract grading, respectively. Further, no cataract surgeries resulted from this trial.

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Additionally, commonly evaluated signs of inflammation resolved in at least two-thirds of treatment arm patients. For example, 67% of patients in the treatment arm with any level of vitreous haze at baseline had vitreous haze scores of zero by the final visit at week 24, compared to 23% of patients in the control arm whose vitreous haze resolved by week 24. Resolution of anterior chamber cells and anterior chamber flare was 72% and 79%, respectively, of patients in the CLS-TA treatment arm compared to 17% and 20%, respectively, of patients in the control arm.

 

With respect to durability of treatment effect, approximately 85% of the patients in the treatment arm did not receive rescue therapy, remaining on CLS-TA treatment over the 24 weeks of the trial, compared to approximately 28% of patients in the control arm.

 

In the treatment arm, 52% of patients could read 70 or more ETDRS letters, the minimum legal limit to qualify for a driver’s license in most states, at week 24, compared to 22% of patients in the control arm.

 

Based on the results from PEACHTREE and all of the other information from our development related to CLS-TA for the treatment of uveitis, we intend to submit a New Drug Application, or NDA, for CLS-TA for the treatment of patients with non-infectious uveitis by the end of 2018.

 

We are also developing CLS-TA in combination with an anti-vascular endothelial growth factor, or anti-VEGF, agent for the treatment of retinal vein occlusion, or RVO, a sight-threatening disorder resulting from the blockage of a retinal vein. We are exploring whether suprachoroidal CLS-TA together with an intravitreal injection of an anti-VEGF agent can provide earlier improved visual acuity and reduced macular edema, and reduced injection frequency as compared to administration of an intravitreal anti-VEGF agent alone.

 

We completed a Phase 2 clinical trial, which we refer to as TANZANITE, in 46 patients with RVO. In this trial, 23 patients in the combination arm initially received suprachoroidal CLS-TA together with an intravitreal injection of the anti-VEGF agent Eylea, or intravitreal Eylea, and 23 patients in the control arm initially received intravitreal Eylea alone. The objective of the trial was to determine whether patients receiving suprachoroidal CLS-TA together with intravitreal Eylea could sustain improvements in visual acuity and reductions in macular edema over the three months of the clinical trial while requiring fewer additional Eylea treatments than patients receiving intravitreal Eylea alone. Patients in each arm were evaluated at months one, two and three after the initial treatment using pre-specified criteria to determine if they continued to experience macular edema or reductions in visual acuity and therefore required additional intravitreal Eylea treatments. The primary objective of the trial was met, with patients in the combination arm requiring an aggregate of 60% fewer additional Eylea treatments than patients in the Eylea alone control arm over three months, a result that was statistically significant (p=0.013). In addition, based on a post-hoc analysis, 18 of the 23 patients, or 78%, in the combination arm of the trial did not require additional treatments during the three-month trial compared to 7 of the 23 patients, or 30%, in the control arm, a result that was also statistically significant (p=0.003). In the same Phase 2 trial, patients in the combination arm experienced greater improvement in visual acuity than those in the Eylea alone control arm, with a mean BCVA improvements at months one, two and three of 16, 20 and 19 letters, respectively, compared to improvements of 11, 12 and 11 letters, respectively. In addition, 52% of patients receiving CLS-TA together with intravitreal Eylea recovered three lines of vision by month 1, compared to 39% of patients receiving intravitreal Eylea alone. We also extended our evaluation of the patients who participated in the trial and did not receive any additional Eylea treatment during the initial three-month evaluation period to further assess the durability of suprachoroidal CLS-TA in combination with intravitreal Eylea for an additional six months following completion of the trial. Of the 32 eligible patients, the medical records of 31 patients were obtained for review. Based on combined data from TANZANITE and the extended evaluation period, 17 of the 23 patients in the combination arm, or 74%, did not receive any additional treatment over the nine-month period, compared to only 4 of 23 patients, or 17%, in the control arm.

 

Based on the results of TANZANITE and after incorporating feedback from an end-of-Phase 2 meeting with the FDA held in late 2016, we began to enroll patients in a Phase 3 clinical trial, which we refer to as SAPPHIRE, in the first quarter of 2017. In June 2018, we completed enrollment of 460 patients in SAPPHIRE, a multicenter, randomized, masked, controlled trial, to assess the efficacy and safety of suprachoroidal CLS-TA together with intravitreal Eylea in patients with RVO. Patients in the combination treatment arm will receive suprachoroidal CLS-TA together with intravitreal Eylea at the beginning of the trial, intravitreal Eylea alone at week 4 and suprachoroidal CLS-TA together with intravitreal Eylea at weeks 12 and 24. Patients in the control arm will receive intravitreal Eylea alone at the beginning of the trial and follow-up intravitreal Eylea alone every four weeks through and including week 24. After 24 weeks, patients will be followed for approximately an additional six months. While safety and efficacy analyses will be conducted at week 24 and at the end of the study after the additional six-month period, the primary endpoint of this trial will be to determine the proportion of patients in each arm with a BCVA improvement of at least 15 letters from baseline at eight weeks after initial treatment. Several secondary efficacy and safety endpoints will also be evaluated. We expect to report topline 8-week results from SAPPHIRE in the fourth quarter of 2018.

 

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In addition, in the third quarter of 2017, we began the start-up activities for a second Phase 3 clinical trial in patients with RVO, which we refer to as TOPAZ. We enrolled the first patient in TOPAZ in March 2018. Similar to the SAPPHIRE trial, TOPAZ is a multicenter, randomized, masked, controlled Phase 3 trial to assess the efficacy and safety of suprachoroidal CLS-TA together with an intravitreal anti-VEGF agent (either Lucentis or Avastin) in patients with RVO. Patients in the combination treatment arm will receive suprachoroidal CLS-TA together with an intravitreal anti-VEGF agent at the beginning of the trial, intravitreal anti-VEGF agent alone at week 4 and suprachoroidal CLS-TA together with intravitreal anti-VEGF agent at weeks 12 and 24. Patients in the control arm will receive intravitreal anti-VEGF agent alone at the beginning of the trial and follow-up intravitreal anti-VEGF agent alone every four weeks through and including week 24. After 24 weeks, patients will be followed for approximately an additional six months, with patients in each arm having the opportunity to receive treatment as needed based on monthly evaluations. The primary objective of this trial will be to determine the proportion of patients in each arm with a BCVA improvement of at least 15 letters from baseline at eight weeks after initial treatment. Several secondary efficacy and safety endpoints will also be evaluated. We anticipate total enrollment of approximately 460 patients in the trial.

 

We are also developing suprachoroidal CLS-TA for the treatment of diabetic macular edema, or DME. In April 2017, we completed enrollment of 20 patients with DME in an open-label, multi-center Phase 1/2 clinical trial, which we refer to as HULK, to obtain safety data and to observe efficacy outcomes from administering a combination of intravitreal Eylea and suprachoroidal CLS-TA, as well as suprachoroidal CLS-TA alone, over a six-month evaluation period. In November 2017, we announced preliminary results from the HULK trial. In the trial, we observed a mean change in visual acuity improvement from baseline for patients receiving suprachoroidal CLS-TA, with a greater improvement in treatment naïve eyes. Anatomic improvement was observed in all treated eyes, with more than two-thirds of those eyes achieving a greater than 50% reduction in excess central retinal thickness from baseline, based on monthly measurements through six months after initial treatment. In the treatment naïve group, 40% of patients did not require retreatment over the entire six months, with an additional 20% requiring only one retreatment. Suprachoroidal CLS-TA, including in patients who received multiple injections, was well tolerated, with a low incidence of ocular side effects, including IOP elevations.

In May 2018, we completed a Phase 2 clinical trial, which we refer to as TYBEE, evaluating the safety and efficacy of administering a combination of intravitreal Eylea and suprachoroidal CLS-TA to patients with DME, as compared to intravitreal Eylea alone. A total of 71 patients were randomly assigned 1:1 to receive either quarterly treatments of suprachoroidal CLS-TA together with intravitreal Eylea at months 0 and 3 in the combination arm or four monthly treatments of intravitreal Eylea plus a sham suprachoroidal procedure at months 0, 1, 2 and 3 in the control arm, with patients in both arms receiving intravitreal Eylea treatment at months 4 and 5 as needed. Patient follow-up in TYBEE was six months after initial treatment.

Each arm in this trial showed a statistically significant mean improvement in BCVA as measured by the ETDRS letter scale from baseline over six months (p=0.001). The improvements in BCVA in each arm were clinically and statistically similar with the combination arm and the Eylea alone arm gaining an average of 12.3 and 13.5 ETDRS letters respectively (p=0.664).

Additionally, administration of suprachoroidal CLS-TA together with intravitreal Eylea showed a mean reduction from baseline of 208 microns in CST of the retina at six months, compared to a 177 micron mean reduction in the control arm (p=0.156). Further, 93% of patients in the combination arm had a greater than 50% reduction in excess CST at six months, compared to 73% of patients in the control arm. There was significantly greater resolution in macular edema in the combination arm compared to the Eylea only arm at week 4, and this additional resolution was maintained through the 24-week trial.

Suprachoroidal CLS-TA in combination with intravitreal Eylea was generally well tolerated, with no treatment-related serious adverse events reported in the TYBEE trial through the 24-week evaluation period. Elevated IOP adverse events were reported for 8.3% (3/36) of patients in the combination arm, compared to 2.9% (1/35) of patients in the control arm. Both the combination and control arms reported cataract adverse events, with approximately 5.6% (2/36) of patients in the combination arm and 2.9% (1/35) of patients in the control arm developing cataracts. We are continuing to analyze data from the TYBEE trial along with expertise from our scientific advisors.

Finally, multiple nonclinical studies, both internally and with multiple collaborators, are underway in preclinical development areas such as gene therapy for inherited retinal disorders, neovascular age-related macular degeneration, also known as wet AMD, and other ocular diseases that may benefit from suprachoroidal administration of investigational product candidates.

If any of our product candidates are approved, we plan to commercialize them with a specialty team of 30 to 40 sales and medical marketing professionals to target the approximately 1,900 uveitis and retina specialists in the United States, and we may also pursue collaborations with third parties to commercialize any of our drugs approved for marketing outside the United States.

We have incurred net losses since our inception in May 2011. Our operations to date have been limited to organizing and staffing our company, raising capital, undertaking preclinical studies and other research and development initiatives and, beginning in 2013, conducting clinical trials of our most advanced drug candidates. To date, we have not generated any revenue, other than license revenue, and we have primarily financed our operations through public offerings and private placements of our equity securities, issuances of convertible promissory notes and loan agreements. As of June 30, 2018, we had an accumulated deficit of $161.4 million. We recorded net losses of $20.7 million and $13.8 million for the three months ended June 30, 2018 and 2017, respectively, and $37.3

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million and $24.1 million for the six months ended June 30, 2018 and 2017, respectively. We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the necessary development for and obtaining regulatory approval and preparing for potential commercialization of our product candidates.

We expect to continue to incur significant and increasing operating losses at least for the next several years. We do not expect to generate product revenue unless and until we successfully complete necessary development of, and obtain regulatory approval for, one or more of our product candidates. Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials and our expenditures on other research and development activities. We anticipate that our expenses will increase as we:

Components of Operating Results

Revenue

We have not generated any revenue from the sale of any drugs, and we do not expect to generate any revenue unless or until we obtain regulatory approval of and commercialize our product candidates. In 2014, we executed a license agreement with NovaMedica LLC, or NovaMedica, In connection with this agreement, we received an up-front payment of $200,000 from NovaMedica. We deferred recognizing these payments through 2015. In the first quarter of 2016, we began recognizing revenue related to the NovaMedica payment. In the first quarter of 2018, upon our adoption ASU 2014-09, Revenue from Contracts with Customers, the remaining $160,000 of deferred revenue was recorded as a cumulative adjustment to our accumulated deficit.

We may enter into additional collaboration agreements to evaluate the potential use of our proprietary SCS Microinjector with third-party product candidates for the treatment of various eye diseases.

Research and Development

Since our inception, we have focused on our development programs. Research and development expenses consist primarily of costs incurred for the research and development of our preclinical and clinical product candidates, which include:

We expense research and development costs to operations as incurred. The costs for some of our development activities, such as clinical trials, are recognized based on the terms of underlying agreements, as well as an evaluation of the progress to completion of

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specific tasks using data such as patient enrollment, clinical site activations and additional information provided to us by our vendors about their actual costs occurred.

Expenses related to activities, such as manufacturing and stability and toxicology studies, that are supportive of a product candidate itself, are classified as direct preclinical costs. Expenses related to clinical trials and similar activities, including costs associated with CROs, are classified as direct clinical costs. Expenses related to activities that support more than one development program or activity, such as salaries, share-based compensation and depreciation, are not classified as direct clinical costs or preclinical costs and are separately classified as unallocated.

For the three and six months ended June 30, 2018 and 2017, substantially all of our research and development expenses were related to the clinical development of our product candidates.

The following table shows our research and development expenses by program for the three and six months ended June 30, 2018 and 2017 (in thousands).

 

 

Our expenses related to clinical trials are based on estimates of patient enrollment and related expenses at clinical investigator sites as well as estimates for the services received and efforts expended under contracts with research institutions, consultants and CROs that conduct and manage clinical trials on our behalf. We generally accrue expenses related to clinical trials based on contracted amounts applied to the level of patient enrollment and activity according to the protocol. If future timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we would modify our estimates of accrued expenses accordingly on a prospective basis. Historically, any such modifications have not been material.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase over the next several years as we progress our product candidates through clinical development. However, it is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates, or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.

The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include, but are not limited to, the following:

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In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.

General and Administrative

General and administrative expenses consist primarily of salaries and other related costs, including share-based compensation, for personnel in executive, finance and administrative functions. General and administrative costs include facility related costs not otherwise included in research and development expenses, professional fees for legal, patent, consulting, and accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities and the potential commercialization of our product candidates. Additionally, we anticipate increased costs related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, including compliance with the Sarbanes-Oxley Act, director and officer insurance, and investor and public relations costs.

Other Income (Expense)

Other income consists of interest income earned on our cash and cash equivalents and short-term investments. Interest income is not considered significant to our financial statements.

Other expense primarily consists of interest expense under our loan agreements for the three and six months ended June 30, 2018 and 2017.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with U.S. GAAP, we evaluate our estimates and judgments on an ongoing basis. Significant estimates include assumptions used in the determination of share-based compensation and some of our research and development expenses. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We define our critical accounting policies as those accounting principles generally accepted in the United States of America that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. During the six months ended June 30, 2018, there were no significant changes to our critical accounting policies disclosed in our audited financial statements for the year ended December 31, 2017, which are included in our Annual Report on Form 10-K, as filed with the SEC on March 16, 2018, other than our adoption of ASU 2014-09, Revenue from Contracts with Customers, as described in Note 2 to our financial statements included in this report.

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Results of Operations for the Three Months Ended June 30, 2018 and 2017

The following table sets forth our results of operations for the three months ended June 30, 2018 and 2017.

 

 

Revenue. In the three months ended June 30, 2017, we recognized $5,000 of revenue associated with our agreement with NovaMedica and $125,000 of revenue associated with other collaboration agreements.

Research and development. Research and development expense increased by $5.9 million, from $11.5 million for the three months ended June 30, 2017 to $17.3 million for the three months ended June 30, 2018. This was primarily attributable to an increase in costs related to our clinical programs. Costs for our RVO program increased $5.7 million, which included purchases of Eylea for SAPPHIRE and start-up costs and purchases of Lucentis and Avastin for TOPAZ, and costs for our DME program increased $0.3 million. We also incurred a $0.2 million increase in regulatory costs in preparation for an NDA submission and a $0.3 million increase in employee-related costs due to an increase in headcount to support our increased clinical trial activities. These increases were partially offset by a $0.2 million decrease in clinical costs for our uveitis program, as PEACHTREE was completed during the first quarter of 2018, and a $0.4 million decrease in costs related to device and drug manufacturing.

General and administrative. General and administrative expenses increased by $1.3 million, from $2.3 million for the three months ended June 30, 2017 to $3.6 million for the three months ended June 30, 2018. The increase was primarily attributable to a $0.6 million increase in employee-related costs, an increase of $0.4 million in marketing-related expenses as we prepare for potential commercialization of CLS-TA and an increase of $0.1 million in patent-related expenses.

Other income (expense), net. Other income (expense), net for each of the three months ended June 30, 2018 and 2017 primarily consisted of interest on long-term debt, the amortization of financing costs, the accretion of warrants and the final payment related to our loan agreements, offset by interest income from our short-term investments.

 

Results of Operations for the Six Months Ended June 30, 2018 and 2017

The following table sets forth our results of operations for the six months ended June 30, 2018 and 2017.

 

 

Revenue. In the six months ended June 30, 2017, we recognized $10,000 of revenue associated with our agreement with NovaMedica and $125,000 of revenue associated with other collaboration agreements.

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Research and development. Research and development expense increased by $11.7 million, from $19.1 million for the six months ended June 30, 2017 to $30.7 million for the six months ended June 30, 2018. This was primarily attributable to an increase in costs related to our clinical programs. Costs for our RVO program increased $11.2 million, which included purchases of Eylea for SAPPHIRE and start-up costs and purchases of Lucentis and Avastin for TOPAZ, and costs for our DME program increased $1.3 million. We also incurred a $0.4 million increase in regulatory costs in preparation for an NDA submission and a $0.4 million increase in employee-related costs due to an increase in headcount to support our increased clinical trial activities. These increases were partially offset by a $0.8 million decrease in clinical costs for our uveitis program, as PEACHTREE was completed during the first quarter of 2018, and a $0.9 million decrease in costs related to device and drug manufacturing.

General and administrative. General and administrative expenses increased by $1.7 million, from $5.0 million for the six months ended June 30, 2017 to $6.6 million for the six months ended June 30, 2018. The increase was primarily attributable to a $1.1 million increase in employee-related costs, an increase of $0.5 million in marketing-related expenses as we prepare for potential commercialization of CLS-TA and an increase of $0.1 million in professional fees.

 

Other income (expense), net. Other income (expense), net for each of the six months ended June 30, 2018 and 2017 primarily consisted of interest on long-term debt, the amortization of financing costs, the accretion of warrants and the final payment related to our loan agreements, offset by interest income from our short-term investments.

 

Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations primarily through the proceeds of public offerings of our common stock, sales of convertible preferred stock and the issuance of long-term debt. As of June 30, 2018, we had cash, cash equivalents and short-term investments of $84.4 million. We invest any cash in excess of our immediate requirements primarily with a view to liquidity and capital preservation. As of June 30, 2018, our funds were held in cash, money market funds, commercial paper and treasury bills.

On March 12, 2018, we closed a follow-on public offering in which we sold 6,538,462 shares of common stock at a public offering price of $13.00 per share, resulting in net proceeds of $79.6 million after deducting underwriting discounts and commissions and estimated offering expenses.

On June 30, 2017, we entered into an at-the-market sales agreement with Cowen and Company LLC, or Cowen, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million through Cowen acting as our sales agent. As of the date of this report, we have not sold any shares of our common stock under the at-the-market facility.

On September 28, 2016, we entered into an amended and restated loan and security agreement with Silicon Valley Bank, or SVB, and entities affiliated with MidCap Financial Services, which we refer to collectively with SVB as the Lenders. The amended and restated loan and security agreement provided for new term loans of up to $15.0 million, with a floating interest rate equal to 7% plus the greater of (i) the 30-day U.S. LIBOR, as reported in the Wall Street Journal on the last business day of the month that immediately preceded the month in which the interest was to accrue, or (ii) 0.50%. We borrowed an initial tranche of $8.0 million on September 28, 2016, of which $5.3 million was used to repay all amounts outstanding under our prior loan agreement with SVB. The draw period for the remaining $7.0 million available under the amended and restated loan and security agreement expired on March 31, 2018. In connection with the amended and restated loan and security agreement, we issued warrants to the Lenders to purchase up to 29,796 shares of common stock at a price per share of $10.74. The warrants expire in September 2026, or earlier upon the occurrence of specified mergers or acquisitions of our company, and are immediately exercisable.

On May 14, 2018, we entered into a second amended and restated loan and security agreement with the Lenders, or the Loan Agreement, which amended and restated in its entirety the prior amended and restated loan and security agreement with the Lenders. The Loan Agreement provides for new term loans of up to $20.0 million, with a floating interest rate equal to 6.5% plus the greater of (i) the 30-day U.S. LIBOR, as reported in the Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue or (ii) 1.89%. We borrowed an initial tranche of $10.0 million on May 14, 2018, of which $7.0 million was used to repay all amounts outstanding under the amended and restated loan and security agreement, including the fees payable in connection with the final payment. The prepayment fees were waived. Of the remaining $10.0 million, $5.0 million, or the Term B Loan, will become available for draw beginning on the later of (i) October 31, 2018 and (ii) the date on which the Lenders have received evidence, in form and substance reasonably satisfactory to them, that we have produced positive Phase 3 data meeting primary endpoints from the SAPPHIRE trial. An additional $5.0 million, or the Term C Loan, will become available for draw beginning on the later of (i) October 31, 2018 and (ii) the date on which the Lenders have received evidence, in form and substance reasonably satisfactory to them, that the FDA has accepted the NDA for CLS-TA for the treatment of patients with non-infectious uveitis. Once the draw period for the Term B Loan or the Term C Loan, as applicable, has commenced, we may draw funds under the

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applicable term loan at our discretion until the earlier of (i) March 31, 2019 or (ii) the occurrence of an event of default. We are required to pay accrued interest only on outstanding amounts through October 31, 2019, or if the Term C Loan is made during the applicable draw period, through December 31, 2019, followed by consecutive equal monthly payments of principal and interest in arrears continuing through the maturity date of October 1, 2022. We have the option to prepay the outstanding balance of the term loans in full, subject to a prepayment fee of 3% of the original principal amount of each term loan for any prepayment prior the first anniversary of the date such term loan is funded or 2% of the original principal amount of each term loan for any prepayment on or after the first anniversary of the date such term loan is funded but prior to October 1, 2022. A final payment of 5.50% of the aggregate borrowed amount is due at maturity of the loan on October 1, 2022, or upon the prepayment of the facility or the acceleration of amounts due under the facility as a result of an event of default.

The term loans under the Loan Agreement are secured by substantially all of our assets, except that the collateral does not include any of our intellectual property. However, pursuant to the terms of a negative pledge arrangement, we have agreed not to encumber any of our intellectual property.

Funding Requirements

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, laboratory and related supplies, clinical costs, legal and other regulatory expenses and general overhead costs.

The successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of CLS-TA or any future product candidates, although we will require additional funding to complete our Phase 3 clinical program for CLS-TA as a potential treatment, together with an anti-VEGF agent, for RVO. We are also unable to predict when, if ever, material net cash inflows will commence from product sales. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that candidate.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings and potential collaboration, license and development agreements. We do not currently have any committed external source of funds, and, as described above, we may also be able to sell up to $50.0 million of our common stock under the at-the-market sales agreement with Cowen subject to the terms of that agreement and depending on market conditions. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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We also incur costs as a public company that we have not previously incurred or have previously incurred at lower rates, including increased costs and expenses for fees to members of our board of directors, increased personnel costs, increased directors and officers insurance premiums, audit and legal fees, investor relations fees and expenses for compliance with reporting requirements under the Exchange Act and rules implemented by the SEC and Nasdaq.

Outlook

Based on our research and development plans and our timing expectations related to the progress of our programs, including our ability to control spending by delaying, reducing or eliminating research and development programs or reducing administrative expense while still advancing clinical trials for our most advanced product candidates, we expect that our existing cash, cash equivalents and short-term investments, combined with anticipated available borrowing capacity under our 2nd A&R Loan Agreement, will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2019. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect. Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress in these trials is uncertain.

Cash Flows

The following is a summary of the net cash flows provided by (used in) our operating, investing and financing activities (in thousands):

 

 

During the six months ended June 30, 2018 and 2017, our operating activities used net cash of $35.2 million and $22.5 million, respectively. The use of cash in each period primarily resulted from our net losses. The increase in net loss for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 was primarily attributable to the higher research and development expenses described above.

During the six months ended June 30, 2018 and 2017, our net cash used in investing activities was $20.6 million and $0.9 million, respectively. In each period, cash flows used in investing activities related primarily to purchases and maturities of short-term, available-for-sale investments.

During the six months ended June 30, 2018 and 2017, our net cash provided by financing activities was $81.8 million and $5.3 million, respectively. The net cash provided by financing activities for the six months ended June 30, 2018 was comprised of the net proceeds of $79.6 million received from our March 2018 public offering of common stock, the net proceeds of $10.0 million from the 2^nd A&R Loan Agreement, offset by $8.3 million paid to satisfy our obligations under the prior loan agreement, and $0.4 million of proceeds from the exercise of stock options. During the six months ended June 30, 2017, our net cash provided by financing activities was primarily comprised of the net proceeds received from the underwriters’ exercise of their option to purchase additional shares in January 2017 as part of our public offering of common stock that initially closed in December 2016.

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Contractual Obligations 

 

The following table summarizes our significant contractual obligations as of June 30, 2018, which consisted of obligations under the lease for our corporate headquarters in Alpharetta, Georgia, obligations under the Loan Agreement and the obligations under a manufacturing supply agreement, or the Supply Agreement, with Gerresheimer Regensburg GmbH, a company incorporated under the laws of Germany, or Gerresheimer.

 

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.

Recent Accounting Pronouncements

See Item 1, “Financial Statements – Note 2, Significant Accounting Policies” for a discussion of recent accounting pronouncements and their effect on us.

JOBS Act

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. In addition, the JOBS Act defers the requirement to have the independent auditor assess the internal controls over financial reporting under Section 404(b) of the Sarbanes-Oxley Act. However, we still must comply with the Section 404(a) requirement that management assess our internal controls over financial reporting, and we began compliance with our annual report on Form 10-K for the year ended December 31, 2017.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As of June 30, 2018 and December 31, 2017, we had cash and cash equivalents of $35.2 million and $9.2 million, respectively. We generally hold our cash in interest-bearing money market accounts. As of June 30, 2018 and December 31, 2017, we had short-term investments of $49.2 million and $28.4 million, respectively. The short-term investments included commercial paper, certificates of deposit, treasury bills, corporate bonds and government bonds. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash equivalents and short-term investments and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents and short-term investments.

We do not engage in any hedging activities against changes in interest rates. As of June 30, 2018, our outstanding debt instruments carried a floating interest rate that is 6.5% plus the greater of (i) the 30-day U.S. LIBOR, reported in the Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue or (ii) 1.89%. As of December 31, 2017, our outstanding debt instruments carried a floating interest rate that is 7.0% plus the greater of (i) the 30-day U.S. LIBOR, reported in the Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue or (ii) 0.50%. We estimate that a one percentage point increase in the applicable interest rate under our loan

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agreements would have resulted in a $50,000 and $80,000 increase in interest expense for the six months ended June 30, 2018 and the year ended December 31, 2017, respectively.

We do not have any foreign currency or other material derivative financial instruments.

 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report at the reasonable assurance level.

Changes in Internal Controls over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended June 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

 

 

Item 1. Legal Proceedings

 

From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.

 

Item 1A. Risk Factors

 

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the Securities and Exchange Commission on March 16, 2018. There have been no material changes to the risk factors described in that report.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

 

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Item 6. Exhibits

 

 

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

 

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Exhibit 10.1

 

 

 

 

CLEARSIDE BIOMEDICAL, INC.

and

 

GERRESHEIMER REGENSBURG GMBH

 

 

______________________________________

 

SUPPLY AGREEMENT

FOR

PRODUCTS

______________________________________

 

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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CONTENTS

 

2

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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3

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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SUPPLY AGREEMENT FOR PRODUCTS

 

THIS AGREEMENT is made the 8^th day of May, 2018 (the “Effective Date”) BETWEEN:

Clearside Biomedical, Inc. a company incorporated under laws of the State of Delaware, USA and having its registered office at 900 North Point Parkway, Suite 200, Alpharetta 30005, USA, for and on behalf of itself and its Affiliates (“CLEARSIDE BIOMEDICAL”)

AND:

Gerresheimer Regensburg GmbH, a company incorporated under laws of Germany and having its registered office at Kumpfmühler Straße 2, 93047 Regensburg, Germany (“GERRESHEIMER”).

CLEARSIDE BIOMEDICAL and GERRESHEIMER may be hereinafter referred to as a/one “Party” and collectively as the “Parties”.

WHEREAS GERRESHEIMER develops, manufactures, distributes and sells plastic dispensing systems, components and devices for use in pharmaceutical and other healthcare products;

WHEREAS CLEARSIDE BIOMEDICAL develops, manufactures, distributes and sells pharmaceuticals and medical devices;

WHEREAS GERRESHEIMER has agreed to manufacture and supply the Products to CLEARSIDE BIOMEDICAL as stipulated in the Product Schedules, and CLEARSIDE BIOMEDICAL has agreed to purchase the Products in accordance with the terms of this Agreement.

NOW, IT IS HEREBY AGREED as follows:

“Affiliate” means in relation to one Party, any other corporation, firm, partnership or other entity or person which is directly or indirectly controlled by, in control of or under common control with the other.  For the purposes of this definition, control shall consist of the ownership of more than fifty percent (50%) of the voting stock of any organisation or the legal power to direct or cause the direction of the general management of the organisation as appropriate.  In case of GERRESHEIMER, the term Affiliates shall apply only to Affiliates of GERRESHEIMER Regensburg GmbH, which comprises companies which are directly or indirectly controlled by Gerresheimer Regensburg GmbH.

4

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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“Agreed Defective Product” has the meaning set forth in Clause 10.5.

“Agreement” means this supply agreement together with all its Schedules (the “Schedules”).

“Annual Price Review” has the meaning set forth in Clause 7.2.

“Applicable Law” means applicable laws, regulations, certification requirements and agreed standards in the European Union and the United States of America.

“Background IP” has the meaning set forth in Clause 15.1.

“Business Day(s)” means any day other than a Saturday, Sunday, or any other day which is a statutory public holiday in the United States of America and/or GERRESHEIMER’s country of manufacture of the applicable Product (as defined in the applicable Product Schedule).

“Calendar Quarter” has the meaning set forth in Clause 4.1.

“Certificate of Analysis” a document identified as such and provided by GERRESHEIMER to CLEARSIDE BIOMEDICAL that (i) sets forth the analytical test results for a specified lot of Product shipped to CLEARSIDE BIOMEDICAL or its designee hereunder and includes a certified quality control protocol, (ii) states that such Product is in conformance with the Specifications, and (iii) states that such Product is manufactured in accordance with the Specifications and cGMPs.

“cGMP” means the principles detailed in the U.S. Current Good Manufacturing Practices, 21 C.F.R. Parts 210 and 211 being implemented within the pharmaceutical manufacturing industry for such products; in each case as amended, promulgated or accepted from time to time.

“Change of Control” means either the ownership of more than fifty percent (50 %) of the ordinary share capital of the applicable Party carrying the right to vote at general meetings or the power to nominate a majority of the board of directors of such Party. The aforementioned shall not apply to a change in the legal or beneficial ownership or control if such change is part of a reorganisation or restructuring process between Affiliates of the Party, provided such Affiliate is not a direct competitor of the other Party.

“CLEARSIDE BIOMEDICAL Results” has the meaning set forth in Clause 15.5.

“Commercial Launch Anniversary” has the meaning set forth in Clause 4.1.

“Confidential Information” means without limitation any information disclosed to the Receiving Party in the course of or as a result of this Agreement by or on behalf of the Disclosing Party or any other person being involved in the exchange of information or learned or observed by the Receiving Party relating to (i) the Disclosing Party’s business or business plans, including, but not limited to, suppliers, customers, prospective customers, contractors, utilization data, cost and pricing data, software products, all proprietary information, Know-How, trade secrets, technical and non-technical materials, products, specifications, processes, sales and marketing

5

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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plans and strategies, and designs; (ii) information of any Third Parties for which the Disclosing Party has an obligation of confidentiality; (iii) any discussions and proceedings relating to any of the foregoing information, whether disclosed in oral, electronic, visual, written or any other form; and (iv) any information developed or derived by the Receiving Party from the information described in the foregoing clauses (i) – (iii), whether or not for or on behalf of the Disclosing Party. Confidential Information includes, without limitation, the existence and terms and conditions of this Agreement. The fact that the Disclosing Party may have marked or identified as confidential or proprietary any specific information shall be indicative that the Disclosing Party believes such information to be confidential or proprietary, but the failure to so mark information shall not conclusively determine that such information is or is not considered confidential information by the Disclosing Party.  

“Consents” has the meaning set forth in Clause 14.2.

“Defective Product” means Product not in compliance with the Specifications.

“Delivery” means a delivery of Products made in accordance with the terms of this Agreement and the relevant Firm Order and any applicable Purchase Order (and “Deliver” and “Delivered” shall be construed accordingly).

“Delivery Terms” means the terms for delivery of a Product as specified in the relevant Product Schedule. For each Delivery, GERRESHEIMER shall provide to CLEARSIDE BIOMEDICAL or its Affiliates, as applicable, the agreed Delivery documentation, but in any event, a Certificate of Analysis.

“Direct Labour Costs” mean the cost for personnel directly involved in the manufacturing process.

“Disclosing Party” means the Party or any of its Affiliates that discloses or causes to be disclosed Confidential Information to the Receiving Party.

“Dispute” has the meaning set forth in Clause 38.1.

“Documentation” has the meaning set forth in Clause 13.2.

“Equipment” means the CLEARSIDE BIOMEDICAL owned Product specific injection mould tooling and other equipment listed in the Product Schedules.

“Firm Order” has the meaning set forth in Clause 4.3.

“Forecast Schedule” has the meaning set forth in Clause 4.1.

“GERRESHEIMER Results” has the meaning set forth in Clause 15.5.

“Indemnified Party” has the meaning set forth in Clause 22.7.

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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“Indemnifying Party” has the meaning set forth in Clause 22.7.

“Initial Term” has the meaning set forth in Clause 2.

“Intellectual Property" or "IP" means Know-How, patent rights, trademarks, service marks, trade names, design rights, copyright (including rights in computer software) and any rights or property similar to any of the foregoing in any part of the world, whether registered or not, together with the right to apply for the registration of any such rights, and all rights or forms of protection having equivalent or similar effect, in any part of the world.

“Know-How” means a package of non-patented practical information, resulting from experience and testing, which is (i) secret, that is to say, not generally known or easily accessible, (ii) substantial, that is to say, significant and useful for the production of the Products, and (iii) identified, that is to say, described in a sufficiently comprehensive manner so as to make it possible to verify that it fulfils the criteria of secrecy and substantiality.

“Latent Defect” has the meaning set forth in Clause 10.2.

“Manufacturing Site” means the manufacturing facilities of GERRESHEIMER or its Affiliates as detailed in the applicable Product Schedule or such other manufacturing facilities of GERRESHEIMER (or of any duly authorised sub-contractor under this Agreement) as approved by CLEARSIDE BIOMEDICAL in writing.

“Materials” means the raw materials and components used in the manufacture of the Product, excluding the Pharmaceutical Component, which will be provided by CLEARSIDE BIOMEDICAL.

“Month” means a calendar month.

“Notice of Dispute” has the meaning set forth in Clause 38.1.

"Permitted User" means an individual who: (i) is a director, officer, consultant, contractor, agent or employee of the Receiving Party or any such person or legal entity directly engaged in this Agreement on behalf of the Receiving Party; (ii) is bound by confidentiality, nondisclosure and nonuse obligations no less restrictive than those contained herein; and (iii) has a need to know the Confidential Information in connection with the Agreement. In clarification of the foregoing, companies and/or agents covering the Receiving Party’s risks resulting out of this Agreement or insurance companies and/or agents to which the Receiving Party applies for such cover shall also be deemed as Permitted User, provided that they are party to an effective agreement with the Receiving Party protecting the Confidential Information on terms no less restrictive than those contained herein.

“Product” means such products as will be specified in the Product Schedules.

“Product Schedule” means a schedule in the form set out in Schedule 1. The initial Product Schedule is appended to this Agreement as Schedule 2.

7

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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“Pharmaceutical Component” means, in case the Parties have agreed on such proceedings, the pharmaceutical product to be incorporated into the Product as identified in the applicable Product Schedule.

“Purchase Order” has the meaning set forth in Clause 4.3.

“Quality Agreement” means the Quality Agreement as set forth in Schedule 3 between the Parties as amended from time to time.

“Quality Managers” means the person nominated in writing by CLEARSIDE BIOMEDICAL and the person nominated in writing by GERRESHEIMER who will be responsible for quality matters relating to this Agreement (and such persons as may from time to time be substituted by either Party for such persons).

“Recall” has the meaning set forth in Clause 16.3.

“Receiving Party” means the Party or any of its Affiliates who receives Confidential Information from the Disclosing Party.

“Refurbishment Program” has the meaning set forth in Clause 13.7.

“Regulator” means any relevant authority in the country of manufacture of the Product, and/or the country of sale and/or marketing of the Product, which regulates any aspect of the manufacture of the Product and/or the sale or marketing of the Product.

“Selling Price” means in respect of each Product, the price of the Product as set out in the relevant Product Schedule, as may be adjusted from time to time in accordance with this Agreement.

“Senior Representatives’ Meeting” has the meaning set forth in Clause 38.1.

“Specifications” means the specifications for the Product identified in the applicable Product Schedule as such specifications may be amended from time to time by written agreement of the Parties in accordance with this Agreement.

“Sprint Capacity” has the meaning set forth in Clause 4.4.

“Third Party” means any party other than CLEARSIDE BIOMEDICAL or GERRESHEIMER.

“Tooling & Equipment Warranty Period” has the meaning set forth in Clause 13.6.

“Year” means a calendar year.

8

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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This Agreement will commence on the Effective Date and will remain in force until the end of the Year containing the fifth (5^th) anniversary of the Effective Date (the “Initial Term”), unless terminated by either Party in its sole discretion upon at least twelve (12) month written notice to the other Party prior to the end of the Initial Term. Thereafter, this Agreement will automatically renew for successive periods of three (3) Years, until terminated in accordance with this Clause 2 (i.e., with at least twelve (12) month written notice to the other Party prior to the end of the renewal term).  The Initial Term, together with any renewal terms is referred to herein as the Term.

9

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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10

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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11

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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5.IDLE COSTS

5.1CLEARSIDE BIOMEDICAL understands that GERRESHEIMER may have plant space and equipment established for the purpose of manufacturing and supplying the Product to CLEARSIDE BIOMEDICAL. In the event CLEARSIDE BIOMEDICAL fails to purchase a Firm Order which leads to equipment to become idle through no fault of GERRESHEIMER, and such plant and equipment are otherwise ready for production, except in the case of a Force Majeure the following proposal shall be considered upon notification:

12

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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13

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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15

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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16

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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Subject to Force Majeure, in the event that GERRESHEIMER does not adhere to the actions and/or timelines assigned to GERRESHEIMER in the agreed CAPA plan and the Parties have not agreed on an amendment to the CAPA plan regarding such non-adherence, then GERRESHEIMER shall, upon CLEARSIDE’s reasonable request, provide reasonable assistance to CLEARSIDE BIOMEDICAL to qualify a THIRD PARTY manufacturer of PRODUCT. Parties shall bear any actual and duly documented costs incurred in providing such assistance at a ratio to be agreed between the Parties and in proportion to either Party’s contribution to the failure to adhere to the CAPA plan.  If such THIRD PARTY manufacturer utilizes Gerresheimer Results licensed pursuant to Section 15.3 or 25.10 in the manufacture of Product, CLEARSIDE BIOMEDICAL shall pay GERRESHEIMER the royalty or license fee as agreed in accordance with Sections 15.3 or 25.10.

 

17

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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18

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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In case of any defect of such Pharmaceutical Component, GERRESHEIMER shall not be deemed to be in breach of this Agreement or otherwise be liable in any manner whatsoever for any failure or delay in performing its obligations under this Agreement caused by such defect. Any timeframes agreed and affected will be consequently postponed.

Notwithstanding anything else in this Agreement, the warranties in Clause 22.1 do not apply to, GERRESHEIMER makes no warranties with respect to, and GERRESHEIMER shall have no liability whatsoever to CLEARSIDE BIOMEDICAL for the Pharmaceutical Component (except to the extent that such are damaged or impaired during manufacture or due to GERRESHEIMER’s non-adherence to the agreed storage conditions regarding Pharmaceutical Component as set forth in the mutually agreed packaging specification due to GERRESHEIMER’s gross negligence or willful misconduct).

Notwithstanding anything else in this Agreement, CLEARSIDE BIOMEDICAL shall indemnify and hold GERRESHEIMER harmless from and against any and all claims of third parties arising out of the usage of the Pharmaceutical Component. For the sake of clarification this in particular includes without limitation claims and/or damages incurred by a third party due to a non-compliance with the standards set forth in this Agreement as well as liability for health damage or for loss or damage to any third party’s property and all claims, demands, proceedings and causes of action resulting directly therefrom. This indemnity also applies irrespective of the legal basis of a claim. The limitations of Clause 23.4 shall expressly not apply to this Clause 11.2

19

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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GERRESHEIMER shall employ a person accountable for approval and release of batches of Product as notified by GERRESHEIMER in writing to CLEARSIDE BIOMEDICAL. Any such person will be suitably trained, qualified and experienced in order to perform the role in accordance with  Applicable Laws, including cGMPs.

GERRESHEIMER shall be obligated to deliver the Documentation upon the physical transfer of the Tooling and Equipment to CLEARSIDE BIOMEDICAL only to the extent they are in GERRESHEIMER’s possession; PROVIDED, HOWEVER, that GERRESHEIMER is not making any representation or warranty that, as between

20

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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CLEARSIDE BIOMEDICAL and the Equipment manufacturer that CLEARSIDE BIOMEDICAL will become the owner of such Documentation.

21

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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22

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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within twenty-four (24) hours advise CLEARSIDE BIOMEDICAL by telephone and email and provide all relevant information known to GERRESHEIMER regarding such investigation;

Fully cooperate with and allow any such inspection;

All inquiries related to Product or manufacturing process shall be copied to CLEARSIDE BIOMEDICAL within twenty-four (24) hours;

within twenty-four (24) hours send CLEARSIDE BIOMEDICAL a summary of any inspection report observations issued by any Regulator directly related to the manufacture, generation, processing, storage, transportation, distribution, treatment, disposal or other management of Product.

Respond to all inspection report observations by any Regulator and take all appropriate corrective actions required by such Regulator, in each case, within the timelines required by the Regulator.

23

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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24

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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25

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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GERRESHEIMER shall complete the documentation relating to the manufacture of the Product in accordance with cGMP and any other agreed requirements of CLEARSIDE BIOMEDICAL.

26

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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27

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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28

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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29

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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30

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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31

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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GERRESHEIMER shall maintain at its own cost full and sufficient Third Party, product liability, product recall insurance with a reputable insurance company for a value of at least [***] and on written request shall provide to CLEARSIDE BIOMEDICAL a copy of the certificate of the said insurance.

the non-breaching Party may without prejudice to any other rights or remedies which may be available to it terminate this Agreement with immediate effect by giving written notice of termination to the breaching Party.  

32

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33

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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34

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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In all other cases of CLEARSIDE BIOMEDICAL terminating this Agreement for whatever reasons GERRESHEIMER shall in general provide reasonable assistance to CLEARSIDE BIOMEDICAL to effect a complete transfer of the process of the manufacturing of the Product to another manufacturing site of CLEARSIDE BIOMEDICEAL’s choice. CLEARSIDE BIOMEDICAL shall reimburse GERRESHEIMER for any actual and duly documented costs incurred in providing such assistance on a time and material basis.

35

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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The Parties shall use their reasonable endeavours to minimise all such costs.

Other than as expressly provided for herein or in the Quality Agreement, any notice given in accordance with this Agreement shall be in writing in English and shall be properly served if sent by registered mail, email, or delivered by hand to the address of either Party as set out in this Agreement. Notices shall be deemed to have been served: (a) seven (7) Business Days after the date of deposit if sent by registered mail; or (b) on the next Business Day after being sent by email; or (c) if delivered by hand, on the date of delivery.  

GERRESHEIMER Contacts:

GerresheimerRegensburg GmbH

###

###

Medical Systems

Oskar-von-Miller-Strasse 6

92442 Wackersdorf

Germany

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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Copy to

Gerresheimer Regensburg GmbH

Head of Legal Affairs

Kumpfmuehler Strasse 2

93047 Regensburg

Germany

COMPANY Contacts:  

Clearside Biomedical, Inc.

900 North Point Parkway, Suite 200

Alpharetta, GA 30005

Attention: Chief Executive Officer

email: daniel.white@clearsidebio.com

 

Copy to:

Hutchison PLLC

3110 Edwards Mill Road, Suite 300

Raleigh, NC 27612

Attn:  William N. Wofford

email: bwofford@hutchlaw.com

 

37

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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38

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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Each Party shall pay all of its own fees and expenses (including all legal, accounting and other advisory fees) incurred in connection with the negotiation and execution of this Agreement.

39

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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40

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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41

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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IN WITNESS WHEREOF the Parties hereto have caused their duly authorised representatives to sign this Agreement on their behalf the day and year first before written.

 

SCHEDULES

Schedule 1 – Product Schedule Template

Schedule 2 – Product Schedule

Schedule 3 – Quality Agreement

Schedule 4 – Documentation Regarding Tooling and Equipment

42

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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Schedule 1

PRODUCT SCHEDULE TEMPLATE

 

43

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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44

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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Schedule 2

PRODUCT SCHEDULE

 

Clearside Biomedical, LLC

900 North Point Parkway
Suite 200
Alpharetta, GA  30005

 

Gerresheimer Peachtree City (USA), L.P.
650 Highway 74 South
Georgia 30269 Peachtree City, USA

Clearside Microinjector Kit.

 

[***]

 

[***]

 

[***]

 

[***]

 

45

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[***]

 

ISO 14644-1 Class 8

[***]

NA

[***]

As per the Supply Agreement Section #6

 

46

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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Payment terms set forth above are under the condition prerequisite that proper credit insurance is approved or a bank guarantee has been provided by Clearside. In the case that Clearside does not meet Gerresheimer Credit Requirements; all project costs will be pre-payment in advance of work performed or assets ordered.

 

[***]

[***]

 

[***]

[***]

 

Note:  [***]

 

 

 

 

47

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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To be updated once all PQs have been passed and serial production has started for all parts, including purchased parts

Minimum order quantities [***]

 

 

48

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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Schedule 3

QUALITY AGREEMENT

 

 

49

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Exhibit 10.1

 

This Quality Agreement (“Agreement”) is made and entered into this 8^th day of May, 2018 (the “Effective Date”) by and between Clearside Biomedical, Inc. (herein, “CLEARSIDE BIOMEDICAL”) a Delaware incorporated company with offices at 900 North Point Parkway, Suite 200, Alpharetta, GA 30005 and Gerresheimer Regensburg GmbH (herein referred to as “GERRESHEIMER”) a company incorporated under laws of Germany and having its registered office at Kumpfmühler Straße 2, 93047 Regensburg, Germany.  

This Agreement defines certain quality assurance requirements and establishes certain roles and responsibilities of the participating parties.  It is being entered into pursuant to the Supply Agreement.

This Agreement covers the manufacturing, packaging, testing, storage, and release for each clinical or commercially saleable Product made for CLEARSIDE BIOMEDICAL by GERRESHEIMER pursuant to the Supply Agreement.

GERRESHEIMER and CLEARSIDE BIOMEDICAL shall have shared responsibility for the performance of activities under their respective Quality Management Systems (QMS) as expressly defined within this Agreement.

In the event of conflict between the terms of this Agreement and the terms of the Supply Agreement, the Supply Agreement controls.  The terms and duties created herein shall supplement, but never supersede, those of the Supply Agreement.

“Supply Agreement” means that agreement entered into by the parties and made effective 8th day of May, 2018

Capitalized terms used but not otherwise defined herein shall have the meaning given to them in the Supply Agreement.  All other terms used but not defined in the Supply Agreement or this Agreement shall have the meaning given to them according to cGMP or in the standard promulgated by the International Organization for Standardization (the “ISO Standards”), as applicable.

CLEARSIDE BIOMEDICAL and GERRESHEIMER shall adhere to the terms as specified in this Agreement. Both parties shall promptly inform the other of any conflicts with the commitments, as stated, and work amicably towards resolution.

All manufacturing, quality assurance and quality control operations shall be according to cGMP and ISO 13485.  The Parties agree that compliance with certain aspects of ISO 13485 is a matter of interpretation and that the Parties will work together in good faith to resolve any differences in interpretation of the regulations.  This Agreement covers certain quality assurance aspects of manufacturing, packaging, testing, storage and release for Product made for CLEARSIDE BIOMEDICAL by GERRESHEIMER.

Quality systems shall be established, documented and maintained by and at GERRESHEIMER as a means of ensuring that Product conforms to Specifications.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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GERRESHEIMER shall have a system for changes that shall be approved in writing by CLEARSIDE BIOMEDICAL. These changes include components, primary packaging materials, labeling, suppliers (manufacturer of components/primary packaging materials), product formulation, manufacturing process, in-process and finished product requirements, CLEARSIDE BIOMEDICAL specific analytical test methods, and release requirements.  See Sections 3.3 and 3.4 of the Supply Agreement for further obligations with respect to changes.

CLEARSIDE BIOMEDICAL must be notified within 2 business days of deviations and /or non-conformances and CLEARSIDE BIOMEDICAL must approve any deviations and/or non-conformance that will affect the process or product quality if Gerresheimer wants to use deviated Product.  Such approval shall be in CLEARSIDE BIOMEDICAL’s sole discretion.  If deviated or non-conforming Product is rejected, returned, or disposed, CLEARSIDE BIOMEDICAL will not be notified; however any delay in delivery of finished Product will be communicated.

Procedures shall be established by GERRESHEIMER to ensure that all personnel have adequate combination of education, experience and training to perform job functions.

GERRESHEIMER shall maintain a system to assure the proper acceptance and identification of components, packaging materials, in-process materials and finished Product throughout manufacturing, packaging and warehousing.  Records shall be maintained to allow for the traceability of the specific lots of components and packaging materials used in a particular finished Product lot.

GERRESHEIMER shall manufacture, package and/or test products in accordance with the obligations of the Supply Agreement and this Agreement, and in accordance with 21 CFR Part 820 and ISO 13485 to meet the defined specifications provided by CLEARSIDE BIOMEDICAL.

CLEARSIDE BIOMEDICAL is responsible for defining the regulatory documentation to be maintained at GERRESHEIMER and what will be required to be sent to CLEARSIDE BIOMEDICAL.

CLEARSIDE BIOMEDICAL is responsible for submission, maintenance, approvals and updates/ amendments to regulatory filings for finished Product.

CLEARSIDE BIOMEDICAL shall have responsibility for Label Copy approval. CLEARSIDE BIOMEDICAL shall provide GERRESHEIMER Purchasing with approved label copy. GERRESHEIMER shall use only labels and labeling in compliance with standards/Specifications provided by CLEARSIDE BIOMEDICAL.

(a)  CLEARSIDE BIOMEDICAL Audits for assessment of GERRESHEIMER Quality Systems - See Section 21 of the Supply Agreement.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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(b)  Regulatory Audits - See Section 14 of the Supply Agreement.

CLEARSIDE BIOMEDICAL shall have responsibility for and shall process all Medical Device Reports (MDRs) or Incidents received on the Product in accordance with federal and/ or international regulations. GERRESHEIMER is responsible for notifying CLEARSIDE BIOMEDICAL immediately of any MDRs they may receive directly.

CLEARSIDE BIOMEDICAL shall be responsible for meeting all Device Listing filing requirements related to the product.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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GERRESHEIMER is responsible for the qualification of new or alternate components/packaging materials or suppliers.  GERRESHEIMER shall communicate any proposed change to CLEARSIDE BIOMEDICAL in writing prior to implementing the change.  CLEARSIDE BIOMEDICAL has the authority to restrict the proposed change.   To the extent the new or alternate components/packaging materials or suppliers are requested by CLEARSIDE BIOMEDICAL, the cost of such qualifications shall be the responsibility of CLEARSIDE BIOMEDICAL.  .

GERRESHEIMER is responsible for the incoming identification, sampling, testing and disposition of components and packaging materials according to written specifications and procedures agreed to by the supplier and CLEARSIDE BIOMEDICAL.

GERRESHEIMER shall be responsible for using components / primary materials from vendors approved by CLEARSIDE BIOMEDICAL and as stated on the specification sheets for each component.  

Prior to use, all components / materials must be found by GERRESHEIMER to be acceptable against reasonable pre-established standards.

Changes to test methods, component/primary material specifications or vendors must be evaluated against pre-established requirements such as regulatory requirements,

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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compendia, etc. and must be documented with change control history and approvals by CLEARSIDE BIOMEDICAL and GERRESHEIMER.

Deviation from existing component/material specifications must be documented and approved by CLEARSIDE BIOMEDICAL and GERRESHEIMER.

All testing and inspection must be documented.

All materials (components, packaging materials, product, in-process Product and finished Product) must be stored under conditions appropriate to maintain material integrity.

It is GERRESHEIMER’s responsibility to assure only components meeting the Specifications are used in Product manufacturing.  

It is GERRESHEIMER’s responsibility to assure that the Product is tested per procedures, specifications and sampling plans approved between CLEARSIDE BIOMEDICAL and GERRESHEIMER..

No changes to CLEARSIDE BIOMEDICAL specific test methods or product specification shall be made without evaluation and CLEARSIDE BIOMEDICAL approval. Changes to process specification outside of the validated process limits will also require CLEARSIDE BIOMEDICAL evaluation and approval.

Except as noted otherwise, GERRESHEIMER must notify CLEARSIDE BIOMEDICAL immediately or as soon as identifiable, the occurrence of a confirmed out-of-specification or questionable result, product failure or major testing deviation for products outside of the control from GERRESHEIMER.

Final release of Product is the responsibility of CLEARSIDE BIOMEDICAL..  GERRESHEIMER will forward a Certificate of Conformance and to CLEARSIDE BIOMEDICAL prior to CLEARSIDE BIOMEDICAL’s release of each shipment.

CLEARSIDE BIOMEDICAL is responsible for the issuance of label copy control documents of all printed packaging components.  CLEARSIDE BIOMEDICAL is responsible for providing the approved master label documents to GERRESHEIMER Purchasing.

GERRESHEIMER shall be responsible for the inspection of all receipts of printed copy against a master label through GERRESHEIMER’s normal receiving and inspection procedures.

GERRESHEIMER shall be responsible for print verification of all first receipts of new versions of printed copy.

All labels/labeling material shall be stored in a limited access area, controlled, and reconciled as required by QSRs.

GERRESHEIMER shall be responsible for segregating and quarantining any obsolete printed components.  Disposition of excess or obsolete material shall be performed with the approval of CLEARSIDE BIOMEDICAL unless otherwise agreed upon.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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GERRESHEIMER shall use established and agreed upon sampling plans.  CLEARSIDE BIOMEDICAL shall provide assistance when requested by GERRESHEIMER for classifying defects.

The finished Product must meet final product Specifications.

The following are the minimal records that should be maintained for the Product:

GERRESHEIMER is responsible for validation of appropriate equipment used and activities performed, unless otherwise agreed pursuant to the Supply Agreement or protocol.  This includes but is not limited to installation, operation and performance qualification of equipment for manufacturing, packaging and testing the product, unless otherwise agreed upon.  Additionally, computer systems, purified water systems and HVAC systems shall be adequately qualified/validated.  Cleaning/sanitizing procedures shall be validated to prevent Product contamination.  Analytical and microbiological methods shall be appropriately validated to test the quality, safety, efficacy and purity of components and Product.  Manufacturing and packaging processes will be appropriately validated.

GERRESHEIMER is responsible for notifying CLEARSIDE BIOMEDICAL on any technology changes that impact the Product, manufacturing and packaging process.  Notification shall be done prior to change implementation.  Reasonable exceptions to prior notification will be allowed to support immediate on-going production.  

All records must be retained by GERRESHEIMER for the later of five (5) years or the retention period prescribed by 21 CFR Part 820 and ISO 13485.  If CLEARSIDE BIOMEDICAL desires that any records be retained for a longer period, then it shall either take possession of the records from GERRESHEIMER, or request from GERRESHEIMER a proposal for extended retention.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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GERRESHEMER is responsible for maintaining a disaster contingency plan to ensure that record requirements can be met.

This Quality Agreement shall be reviewed annually by both parties.  This annual review does not preclude changes or amendments in the interim as needed.

This Quality Agreement will survive the Supply Agreement and extend the term of the Quality Agreement through the usable life of the product and/or until all regulatory obligations of the Contract Facility have been met.  

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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Quality Agreement Checklist₁

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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₁In the event of conflict between the foregoing checklist and the terms of this Agreement and/or the Supply Agreement, the terms of the Supply Agreement shall govern.

₂Responsibilities including consultations and document approvals are delineated within the Global Project RACI Matrix (responsibility assignment chart: Responsible/ Accountable/ Consulted/ Informed)

 

The parties hereby agree to the foregoing as of the Effective Date hereof.

 

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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Schedule 4

DOCUMENTATION REGARDING TOOLING AND EQUIPMENT

 

The following Documentation is necessary to effectively use, maintain, repair and/or modify the Tooling and Equipment pursuant to Clause 13 of this Agreement.

 

[***]

 

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Exhibit 10.2

Clearside Biomedical, Inc.

Change in Control Equity Acceleration Plan

Section 1.Introduction.

The Clearside Biomedical, Inc. Change in Control Equity Acceleration Plan (the “Plan”) is hereby established effective June 20, 2018 (the “Effective Date”).  The purpose of the Plan is to provide for equity acceleration for certain eligible employees of Clearside Biomedical, Inc. (the “Company”) upon certain events in connection with an acquisition of the Company.      

For purposes of the Plan, the following terms are defined as follows:

(a)“Affiliate” means any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act of 1933, as amended.  The Plan Administrator shall have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.

(b)“Board” means the Board of Directors of the Company or the Compensation Committee of the Board of Directors of the Company.

(c)“Cause” has the meaning ascribed to such term in the Equity Plan.

(d)“Change in Control” has the meaning ascribed to such term in the Equity Plan.  Once a Change in Control has occurred, no future events shall constitute a Change in Control for purposes of the Plan.  

(e)“Closing” means the initial closing of the Change in Control as defined in the definitive agreement executed in connection with the Change in Control.  In the case of a series of transactions constituting a Change in Control, “Closing” means the first closing that satisfies the threshold of the definition for a Change in Control.

(f)“Code” means the Internal Revenue Code of 1986, as amended.

(g)“Company” means Clearside Biomedical, Inc. or, following a Change in Control, the surviving Entity resulting from such event.

(h)“Continuous Service” has the meaning ascribed to such term in the Equity Plan.

(i)“Covered Period” means the period commencing immediately prior to the Closing of a Change in Control and continuing through the date that is twelve (12) months following the Closing of a Change in Control.

(j)“Covered Termination” means an employee’s Involuntary Termination that occurs within the Covered Period.  For such purposes, if the event giving rise to an employee’s right to resign as a result of a Constructive Termination arises within the Covered Period, and the employee’s resignation occurs not later than thirty (30) days after the expiration of the Company’s thirty-day cure period, such termination shall be a Covered Termination.  

 

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(k)“Eligible Employee” means an active employee of the Company who meets all the requirements to be eligible to receive Plan benefits as set forth in Section 2.

(l)“Employment Agreement” means any individual employment offer letter, contract or agreement that an Eligible Employee has with the Company or any of its Affiliates.

(m)“Entity” means a corporation, partnership, limited liability company or other entity.

(n)“Equity Plan” means the Company’s 2016 Equity Incentive Plan, as it may be amended from time to time.

(o)“Individual Severance Arrangement” means any Employment Agreement providing for severance benefits to an Eligible Employee or any other severance arrangement between the Eligible Employee and the Company other than the Plan.

(p)“Involuntary Termination” means the termination of the Eligible Employee’s Continuous Service by the Company or any of its Affiliates without Cause and other than as a result of death or disability, which constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h) without regard to any alternative definition thereunder).

(q)“Plan Administrator” means the Board prior to the Closing and the Representative upon and following the Closing.

(r)“Representative” means one or more members of the Board or other persons or Entities designated by the Board prior to or in connection with a Change in Control that will have authority to administer and interpret the Plan upon and following the Closing as provided in Section 5(a).

Section 2.Eligibility For Benefits.

(a)Eligible Employee.  An employee of the Company is eligible to participate in the Plan and will be treated as an Eligible Employee if (i) such employee is not an executive officer of the Company (as that term is defined in Section 16 of the Securities Exchange Act of 1934, as amended from time to time and Rule 16a-1 thereunder); and (ii) such employee remains in Continuous Service with the  Company or any of its Affiliates through immediately prior to the Closing of the Change in Control (or such employee has an Involuntary Termination immediately prior to the Closing of the Change in Control).  The determination of whether an employee is an Eligible Employee shall be made by the Plan Administrator, in its sole discretion, and such determination shall be binding and conclusive on all persons.

(b)No Change.  This Plan does not supersede the terms of any Individual Severance Arrangement.  

Section 3.Amount Of Benefit.

(a)Accelerated Vesting of Stock Awards.  Benefits under the Plan shall be provided to an Eligible Employee as follows:

(1)To the extent not previously vested: (A) the vesting and exercisability of all outstanding time-based stock options to purchase the Company’s common stock that are held by the Eligible Employee on such date shall be accelerated in full, (B) any time-based reacquisition or repurchase rights held by the Company in respect of common stock issued pursuant to any other stock award granted

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to the Eligible Employee by the Company shall lapse in full, and (C) the vesting of any other time-based stock awards granted to the Eligible Employee by the Company, and any issuance of shares triggered by the time-based vesting of such stock awards, shall be accelerated in full, in each case effective as of (x) if such options or stock awards are not assumed or substantially equivalent awards are not substituted by the acquiring or succeeding corporation in the Change in Control, immediately prior to the Closing of a Change in Control and (y) if such options or stock awards are assumed or substantially equivalent awards are substituted by the acquiring or succeeding corporation in the Change in Control, immediately upon the Eligible Employee’s Covered Termination.  In addition, with respect to any performance based vesting award held by the Eligible Employee that has vesting levels depending upon the level of performance, upon such events vesting acceleration shall occur with respect to the number of shares subject to the award as if the applicable performance criteria had been attained at a 100% level.  

(2)In order to give effect to the intent of the foregoing provision, notwithstanding anything to the contrary set forth in the Eligible Employee’s stock award agreements or the stock incentive or equity incentive plan or arrangement under which such stock award was granted that provides that any then unvested portion of the award will immediately expire upon the Eligible Employee’s termination of service, no unvested portion of the Eligible Employee’s stock award shall generally terminate any earlier than the effective date of the acceleration of vesting set forth in Section 3(a)(1); provided, however that after giving effect to the vesting acceleration provisions set forth above, the Eligible Employee’s stock awards shall remain subject to earlier termination in connection with a Change in Control or a Corporate Transaction (as each term is defined in the Equity Plan) in which the Eligible Employee’s stock award is not assumed, substituted or continued by the acquiring or surviving entity.

(b)Additional Benefits.  Notwithstanding the foregoing, the Company may, in its sole discretion, provide benefits to employees who are not Eligible Employees (“Non-Eligible Employees”) chosen by the Plan Administrator, in its sole discretion, and the provision of any such benefits to a Non-Eligible Employee shall in no way obligate the Company to provide such benefits to any other Non-Eligible Employee, even if similarly situated.  If benefits under the Plan are provided to a Non-Eligible Employee, references in the Plan to “Eligible Employee” (and similar references) shall be deemed to refer to such Non-Eligible Employee.

(c)Parachute Payments.  The following provisions shall not supersede any provisions to the contrary provided under any Individual Severance Arrangement, if applicable:

(1)Any provision of the Plan to the contrary notwithstanding, if any payment or benefit an Eligible Employee would receive from the Company pursuant to the Plan or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment will be equal to the Reduced Amount (defined below).  The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Eligible Employee’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.  If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the manner that results in the greatest economic benefit for the Eligible Employee.  If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata.

(2)In the event it is subsequently determined by the Internal Revenue Service that some portion of the Reduced Amount as determined pursuant to clause (x) in the preceding paragraph

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is subject to the Excise Tax, the Eligible Employee agrees to promptly return to the Company a sufficient amount of the Payment so that no portion of the Reduced Amount is subject to the Excise Tax.  For the avoidance of doubt, if the Reduced Amount is determined pursuant to clause (y) in the preceding paragraph, the Eligible Employee will have no obligation to return any portion of the Payment pursuant to the preceding sentence.

(3)Unless the Eligible Employee and the Company agree on an alternative accounting firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations.  If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder.  The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder.

Section 4.Transfer and Assignment.

The rights and obligations of an Eligible Employee under this Plan may not be transferred or assigned without the prior written consent of the Company.  The Plan shall be binding upon any entity or person who is a successor by merger, acquisition, consolidation or otherwise to the business formerly carried on by the Company without regard to whether or not such entity or person actively assumes the obligations hereunder and without regard to whether or not a Change in Control occurs

Section 5.Right to Interpret and Administer Plan; Amendment and Termination.

(a)Interpretation and Administration.  Prior to the Closing of a Change in Control, the Board shall be the Plan Administrator and shall have the exclusive discretion and authority to establish rules, forms, and procedures for the administration of the Plan and to construe and interpret the Plan and to decide any and all questions of fact, interpretation, definition, computation or administration arising in connection with the operation of the Plan, including, but not limited to, the eligibility to participate in the Plan and amount of benefits paid under the Plan.  The rules, interpretations, computations and other actions of the Board shall be binding and conclusive on all persons.  Upon and after the Closing, the Plan will be interpreted and administered in good faith by the Representative who shall be the Plan Administrator during such period.  All actions taken by the Representative in interpreting the terms of the Plan and administering the Plan upon and after the Closing will be final and binding on all Eligible Employees.  Any references in this Plan to the “Board” or “Plan Administrator” with respect to periods following the Closing of a Change in Control shall mean the Representative.

(b)Amendment and Termination.  The Plan Administrator reserves the right to amend or terminate the Plan or the benefits provided hereunder at any time in its discretion.  In addition, the Plan will automatically terminate following the satisfaction of all the Company’s obligations under the Plan.  

Section 6.No Implied Employment Contract.

The Plan shall not be deemed (i) to give any employee or other person any right to be retained in the employ of the Company or (ii) to interfere with the right of the Company to discharge any employee or other person at any time, with or without cause, which right is hereby reserved.

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Section 7.Legal Construction.

This Plan is intended to be governed by and shall be construed in accordance with the laws of the State of Delaware.

 

 

 

 

 

 

5

 

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Daniel H. White, certify that:

Date: August 8, 2018

 

 

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Charles A. Deignan, certify that:

Date: August 8, 2018

 

 

Exhibit 32.1

CERTIFICATIONS OF

PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Daniel H. White, President and Chief Executive Officer of Clearside Biomedical, Inc. (the “Company”), and Charles A. Deignan, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:

IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 8th day of August, 2018.