UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
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Registrant’s telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 9, 2024, the registrant had
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PART I - FINANCIAL INFORMATION |
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Item 1. |
Financial Statements (unaudited) |
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Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 |
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Consolidated Statements of Stockholders’ (Deficit) Equity for the three and six months ended June 30, 2024 and 2023 |
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Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II - OTHER INFORMATION |
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Item 1. |
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Item 1A |
Risk Factors |
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Item 2. |
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Item 5. |
Other Information |
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Item 6. |
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
CLEARSIDE BIOMEDICAL, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
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June 30, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ (deficit) equity |
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Current liabilities: |
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Accounts payable (includes $ |
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$ |
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$ |
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Accrued liabilities (includes $ |
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Current portion of operating lease liabilities |
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Deferred revenue |
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Total current liabilities |
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Liability related to the sales of future royalties, net |
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Warrant liabilities |
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Operating lease liabilities |
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Other non-current liabilities |
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Total liabilities |
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Stockholders’ (deficit) equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total stockholders’ deficit |
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Total liabilities and stockholders’ (deficit) equity |
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$ |
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$ |
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See accompanying notes to the consolidated financial statements.
3
CLEARSIDE BIOMEDICAL, INC.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
(unaudited)
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Three Months Ended |
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Six Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Cost of goods sold |
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Research and development (includes $ |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Interest income |
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Other income, net |
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Non-cash interest expense on liability |
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Net loss |
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$ |
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$ |
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$ |
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$ |
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Net loss per share of common stock — basic and diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average shares outstanding — basic and diluted |
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Net loss |
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$ |
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$ |
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$ |
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$ |
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Unrealized loss on available-for-sale investments |
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Comprehensive loss |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to the consolidated financial statements.
4
CLEARSIDE BIOMEDICAL, INC.
Consolidated Statements of Stockholders’ (Deficit) Equity
(in thousands, except share data)
(unaudited)
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Three and Six Months Ended June 30, 2024 |
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Accumulated |
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Other |
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Total |
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Common Stock |
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Additional |
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Accumulated |
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Comprehensive |
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Stockholders' |
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Shares |
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Amount |
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Paid-In-Capital |
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Deficit |
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Loss |
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(Deficit) Equity |
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Balance at December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
— |
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$ |
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Issuance of common stock under registered direct |
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— |
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— |
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Issuance of common stock under at-the-market |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Vesting and settlement of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock under employee stock |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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Balance at March 31, 2024 |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
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Balance at June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
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Three and Six Months Ended June 30, 2023 |
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Total |
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Common Stock |
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Additional |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Paid-In-Capital |
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Deficit |
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(Deficit) Equity |
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Balance at December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock under at-the-market |
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— |
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— |
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Vesting and settlement of restricted stock units |
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— |
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— |
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— |
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— |
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Issuance of common stock under employee |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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Balance at March 31, 2023 |
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Issuance of common stock under at-the-market |
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— |
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Exercise of stock options |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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Balance at June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to the consolidated financial statements.
5
CLEARSIDE BIOMEDICAL, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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Six Months Ended |
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2024 |
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2023 |
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Operating activities |
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Net loss |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Non-cash interest expense on liability related to the sales of |
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Depreciation |
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Share-based compensation expense |
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Change in fair value of warrant liabilities |
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Issuance costs allocated to warrant liabilities |
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Amortization and accretion of available-for-sale investments, net |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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( |
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Other assets and liabilities |
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( |
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Accounts payable and accrued liabilities (includes $ |
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Deferred revenue |
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Net cash used in operating activities |
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Investing activities |
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Acquisition of property and equipment |
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Purchase of short-term investments |
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Net cash used in investing activities |
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Financing activities |
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Proceeds from issuance of common stock and warrants under |
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Proceeds from at-the-market sales agreement, net of issuance costs |
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Payments to royalty purchase and sale agreement |
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Proceeds from exercise of stock options |
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Proceeds from shares issued under employee stock purchase plan |
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Net cash provided by financing activities |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalent, end of period |
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$ |
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$ |
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Supplemental disclosure |
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Purchase of property and equipment included in accrued liabilities |
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$ |
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$ |
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See accompanying notes to the consolidated financial statements.
6
CLEARSIDE BIOMEDICAL, INC.
Notes to the Consolidated Financial Statements
(unaudited)
1. The Company
Clearside Biomedical, Inc. (the “Company”) is a biopharmaceutical company focused on revolutionizing the delivery of therapies to the back of the eye through the suprachoroidal space (SCS®). Incorporated in the State of Delaware on
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 is subject to a number of risks and uncertainties similar to those of other life science companies at a similar stage of development, including, among others, the need to obtain adequate additional financing, successful development efforts including regulatory approval of products, compliance with government regulations, successful commercialization of potential products, protection of proprietary technology and dependence on key individuals.
Liquidity
The Company had cash, cash equivalents and short-term investments of $
Historically, the Company has funded its operations primarily through the sale of common stock and convertible preferred stock, the issuance of warrants, the issuance of long-term debt, and license agreements.
On February 6, 2024, the Company entered into a securities purchase agreement with institutional investors and an existing stockholder, pursuant to which the Company issued and sold, in a registered direct offering (the “Registered Direct Offering”): (i) an aggregate of
On January 31, 2024 (the “Amendment Effective Date”), the Company entered into a fourth amendment to the license agreement (as amended, the “Emory License Agreement”) with Emory University and Georgia Tech Research Corporation (collectively, the “Licensor”) pursuant to which the parties agreed to reduce the Sublicense Percentage (as defined in the Emory License Agreement) from a low double digit percentage to a high single digit percentage that the Company will pay the Licensor applicable to any fees or payments paid to the Company by any Sublicensee (as defined in the Emory License Agreement) of the Licensed Patents and/or Licensed Technology (each as defined in the Emory License Agreement), excluding (i) amounts paid to the Company by a Sublicensee to reimburse the Company for certain research and development costs pursuant to a written agreement between the Company and such Sublicensee, (ii) the value of intellectual property transferred or granted to the Company if necessary or helpful to the development or commercialization of Licensed Products (as defined in the Emory License Agreement) and (iii) amounts paid for shares of the Company’s stock. The payment to Licensor of any such Sublicense Percentage is due within 30 days of receipt by the Company of a qualifying payment from a Sublicensee, provided however, with respect to any qualifying payments received by the Company from a Sublicensee prior to January 1, 2025, the payment to Licensor of any such Sublicensee Percentage is due to Licensor by March 31, 2025. The parties also agreed to a revised annual license maintenance fee due each year (the “Maintenance Fee”) starting in 2023 through 2028, as follows: $
On December 22, 2023, Clearside Biomedical, Inc., through its wholly owned subsidiary Clearside Royalty LLC ("Royalty Sub"), entered into a letter agreement (the “Letter Agreement”) with HCR (as defined below) and HCR Clearside SPV, LLC (as assignee of HCR Collateral Management, LLC) (“Agent”) amending that certain Purchase and Sale Agreement, dated as of August 8, 2022, by and among Royalty Sub, HCR and Agent ("Purchase and Sale Agreement"). Pursuant to the terms of the Letter Agreement, Royalty Sub and Agent mutually agreed that Royalty Sub waived any and all rights to the $
On November 1, 2023, the Company, entered into a license agreement (the “BioCryst License Agreement”) with BioCryst Pharmaceuticals, Inc. (“BioCryst”) pursuant to which the Company granted BioCryst an exclusive, worldwide and sublicensable license to the Company’s SCS Microinjector for the delivery of BioCryst’s proprietary plasma kallikrein inhibitor known as avoralstat for the treatment and prevention of diabetic macular edema (“DME”). The Company received an upfront license fee payment of $
7
sales, with the highest royalty rate applied to sales over $
In May 2023, the Company terminated its at-the-market sales agreement with Cowen and Company, LLC (the "ATM Agreement"). The Company sold
In May 2023, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co. ("Cantor") under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, having an aggregate offering price of up to $
The Company has suffered recurring losses and negative cash flows from operations since inception and anticipates incurring additional losses until such time, if ever, that it can generate significant revenue. The Company has no current source of revenue to sustain present activities. The Company does not expect to generate other meaningful revenue until and unless the Company's licensees successfully commercialize XIPERE and the Company has fulfilled its obligations under the Purchase and Sale Agreement, its other licensees receive regulatory approval and successfully commercialize its product candidates, or the Company commercializes its product candidates either on its own or with a third party. 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.
The Company will continue to need to obtain additional financing to fund future operations, including completing the development, partnering and potential commercialization of its primary product candidates. The Company will need to obtain financing to complete the development and conduct clinical trials for the regulatory approval of its product candidates if requested by regulatory bodies. If such product candidates were to receive regulatory approval, the Company would need to obtain financing to prepare for the potential commercialization of its product candidates, if the Company decides to commercialize the products on its own.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Based on its current plans and forecasted expenses, the Company expects that its cash, cash equivalents and short-term investments as of the filing date, August 12, 2024 will enable the Company to fund its planned operating expenses and capital expenditure requirements into the third quarter of 2025. The Company has based this estimate on assumptions that may prove to be wrong, and it could exhaust its capital resources sooner than expected. Until the Company can generate sufficient revenue, the Company will need to finance future cash needs through public or private equity offerings, license agreements, debt financings or restructurings, collaborations, strategic alliances and marketing or distribution arrangements.
The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result should the Company be unable to continue as a going concern.
2. Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The Company's consolidated financial statements include the results of the financial operations of Clearside Biomedical, Inc. and its wholly-owned subsidiary, Clearside Royalty, LLC. a Delaware limited liability company, which was formed for the purposes of the transactions contemplated by the Purchase and Sale Agreement described in Note 5. All intercompany balances and transactions have been eliminated.
The Company’s consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments necessary for a fair statement of the Company’s consolidated financial position and results of operations for the interim periods presented. The results for the three and six months ended June 30, 2024 are not indicative of results to be expected for the full year ending December 31, 2024, any other interim periods or any future year or period. These unaudited financial statements should be read in conjunction with the audited consolidated financial statements and related footnotes, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 12, 2024.
Use of Estimates
The preparation of consolidated 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 consolidated financial statements and reported amounts of income and expenses during the reporting periods. Significant items
8
subject to such estimates and assumptions include the estimate of the total amount of future royalty revenue and milestone payments to be generated over the life of the Purchase and Sale Agreement, the fair value of common stock warrants, revenue recognition, the accounting for useful lives to calculate depreciation and amortization, clinical trial expense accruals, share-based compensation expense and income tax valuation allowance. Actual results could differ from these estimates.
Revenue Recognition
The Company recognizes revenue from its contracts with customers under Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. The Company’s primary revenue arrangements are license agreements, which typically include upfront payments, regulatory and commercial milestone payments and royalties based on future product sales. The arrangements may also include payments for the Company’s SCS Microinjector devices as well as payments for assistance and oversight of the customer’s use of the Company’s technology. In determining the amount of revenue to be recognized under these agreements, the Company performs the following steps: (i) identifies the promised goods and services to be transferred in the contract, (ii) identifies the performance obligations, (iii) determines the transaction price, (iv) allocates the transaction price to the performance obligations and (v) recognizes revenue as the performance obligations are satisfied.
The Company receives payments from its customers based on billing schedules established in each contract. Upfront and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under the arrangement. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.
Research and Development Costs
Research and development costs are charged to expense as incurred and include:
Costs for certain development activities, such as clinical trial activities, are recognized based on an evaluation of the estimated total costs for the clinical trial, progress to completion of specific tasks using data such as patient enrollment, pass-through expenses, clinical site activations, data from the clinical sites 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 contracts and any subsequent amendments, which may differ from the patterns of costs incurred, and are reflected in the consolidated financial statements as prepaid expenses or accrued liabilities.
Share-Based Compensation
Compensation cost related to share-based awards granted to employees, directors and consultants 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. The fair value of restricted stock units granted is measured based on the market value of the Company’s common stock on the date of grant. Share-based compensation costs are expensed on a straight-line basis over the relevant vesting period.
Compensation cost related to shares purchased through the Company’s employee stock purchase plan, which is considered compensatory, is based on the estimated fair value of the shares on the offering date, including consideration of the discount and the look-back period. The Company estimates the fair value of the shares using a Black-Scholes option pricing model. Compensation expense is recognized over the six-month withholding period prior to the purchase date.
All share-based compensation costs are recorded in general and administrative or research and development costs in the consolidated statements of operations and comprehensive loss based upon the recipient's underlying role within the Company.
9
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 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). Accretion on the discount associated with these investments is recorded in interest income. In addition, the Company evaluates the short-term 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.
Liability Related to the Sales of Future Royalties and Non-Cash Interest Expense
In connection with the Purchase and Sale Agreement, the Company recognizes a liability related to the sales of future royalties under ASC 470-10, Debt and ASC 835-30, Interest - Imputation of Interest. The initial funds received by the Company pursuant to the terms of the Purchase and Sale Agreement were recorded as a liability and are accreted under the effective interest method up to the estimated amount of future royalties and milestone payments to be made under the Purchase and Sale Agreement. The issuance costs were recorded as a direct deduction to the carrying amount of the liability and are amortized under the effective interest method over the estimated period the liability will be repaid. The Company estimates the total amount of future royalty revenue and milestone payments to be generated over the life of the Purchase and Sale Agreement, and a significant increase or decrease in these estimates could materially impact the liability balance and the related interest expense. If the timing of the receipt of royalty payments or milestones is materially different from the original estimates, the Company will prospectively adjust the effective interest and the related amortization of the liability and related issuance costs.
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480) and ASC Topic 815, Derivatives and Hedging (ASC 815). The assessment considers whether the warrants (i) are freestanding financial instruments pursuant to ASC 480, (ii) meet the definition of a liability pursuant to ASC 480, and (iii) meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company's own stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For warrants that meet all criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital, on the consolidated statement of stockholders’ deficit at the time of issuance. For warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance and on each consolidated balance sheet date thereafter.
The Company’s warrant liabilities are measured at fair value using a simulation model which takes into account, as of the valuation date, factors including the current exercise price, the expected life of the warrant, the current price of the Company's common stock, the expected volatility, holding cost, the risk-free interest rate for the term of the warrant and the likelihood of achieving certain future milestone events and the related impact to the price of the Company's common stock. The warrant liabilities are revalued at each reporting period and changes in fair value are recognized in other income (expense) in the consolidated statements of operations and comprehensive loss. The selection of the appropriate valuation model and the inputs and assumptions that are required to determine the valuation requires significant judgment and requires management to make estimates and assumptions that affect the reported amount of the related liability and reported amounts of the change in fair value. Actual results could differ from those estimates, and changes in these estimates are recorded when known.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU looks to enhance the transparency and decision usefulness of income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The main provisions to the rate reconciliation disclosure require public entities to disclose, on an annual basis, specific categories in the rate reconciliation and provide additional information for reconciling items that
10
meet a quantitative threshold. The main provisions to the income taxes paid disclosure require that all entities disclose on an annual basis: the amount of income taxes paid disaggregated by federal, state and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid meets a quantitative threshold. This ASU also requires all entities to disclose income (loss) from continuing operations before income tax expense (benefit) disaggregated between domestic and foreign and income tax expense (benefit) from continuing operations disaggregated by federal, state and foreign.
This ASU is to be applied on a prospective basis with an effective date for all public entities for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this ASU.
3. Property and Equipment, Net
Property and equipment, net consisted of the following (dollar amounts in thousands):
|
|
Estimated |
|
June 30, |
|
|
December 31, |
|
||
Furniture and fixtures |
|
|
$ |
|
|
$ |
|
|||
Machinery and equipment |
|
|
|
|
|
|
|
|||
Computer equipment |
|
|
|
|
|
|
|
|||
Leasehold improvements |
|
|
|
|
|
|
|
|
||
Work in process |
|
|
|
|
|
|
|
|
||
Total property and equipment |
|
|
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
|
|
$ |
|
|
$ |
|
||
4. Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Accrued research and development |
|
$ |
|
|
$ |
|
||
Accrued employee costs |
|
|
|
|
|
|
||
Accrued professional fees |
|
|
|
|
|
|
||
Accrued expense |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
5. Royalty Purchase and Sale Agreement
On August 8, 2022 (the “Closing Date”), the Company, through its wholly owned subsidiary Clearside Royalty LLC, a Delaware limited liability company ("Royalty Sub"), entered into the Purchase and Sale Agreement with entities managed by HealthCare Royalty Management, LLC ("HCR"), pursuant to which Royalty Sub sold to HCR certain of its rights to receive royalty and milestone payments payable to Royalty Sub under the Arctic Vision License Agreement, the Bausch License Agreement, that certain License Agreement, effective as of July 3, 2019, by and between the Company and Aura Biosciences, Inc. (the “Aura License Agreement”), that certain Option and License Agreement, dated as of August 29, 2019, by and between REGENXBIO Inc. and the Company (the “REGENXBIO License Agreement”), and any and all out-license agreements following the Closing Date for, or related to XIPERE or the SCS Microinjector technology (to be used in connection with compounds or products of any third parties) delivered, in whole or in part, by means of the SCS Microinjector technology) (collectively, "Post-Closing License Agreements"), excluding, for the avoidance of doubt, any in-licensed or internally developed therapies following the Closing Date (collectively, the “Royalties”), in exchange for up to $
11
royalties under the BioCryst License Agreement were sold to HCR pursuant to the terms of the Purchase and Sale Agreement providing for the sale of Royalties from Post-Closing License Agreements to HCR.
Under the terms of the Purchase and Sale Agreement, Royalty Sub received an initial payment of $
On December 22, 2023, the Company, through its wholly owned subsidiary Royalty Sub, entered into the Letter Agreement with the Agent amending the Purchase and Sale Agreement. Pursuant to the terms of the Letter Agreement, Royalty Sub and Agent mutually agreed that Royalty Sub waived any and all rights to the First Milestone Payment in connection with the closing of the transactions contemplated by the Purchase and Sale Agreement and agreed to the release of the First Milestone Payment to Agent.
Issuance costs pursuant to the Purchase and Sale Agreement consisting primarily of advisory and legal fees, totaled $
The following table summarizes the activity of the Purchase and Sale Agreement for the six months ended June 30, 2024 (in thousands):
Royalty Purchase and Sale Agreement balance at December 31, 2023 |
|
$ |
|
|
Non-cash interest expense |
|
|
|
|
Balance at June 30, 2024 |
|
$ |
|
|
|
|
|
|
|
Effective interest rate |
|
|
% |
|
6. Common Stock
The Company’s amended and restated certificate of incorporation authorizes the Company to issue
7. Common Stock Warrants
In September 2016, in connection with a loan agreement, the Company issued warrants to purchase up to
On February 6, 2024, the Company entered into a securities purchase agreement with institutional investors and an existing stockholder, pursuant to which the Company issued and sold, in a registered direct offering (i) an aggregate of
12
million as warrant liabilities and $
The following table summarizes the change in fair value of the warrant liabilities during the six months ended June 30, 2024 (in thousands):
Fair value of warrants at issuance February 9, 2024 |
|
$ |
|
|
Change in fair value during the period |
|
|
( |
) |
Fair value of warrants at June 30, 2024 |
|
$ |
|
The following table summarizes certain key inputs for the valuation of the Warrants at June 30, 2024:
Common stock price |
|
$ |
|
|
|
Exercise price per share |
|
$ |
|
|
|
Expected volatility |
|
|
|
% |
|
Risk-free interest rate |
|
|
|
% |
|
Contractual term (in years) |
|
|
|
|
|
Expected dividend yield |
|
|
|
% |
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.
Share-based compensation expense for options granted under the 2016 Plan is reflected in the consolidated statements of operations and comprehensive loss as follows (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes the activity related to stock options granted under the 2011 Plan and the 2016 Plan during the six months ended June 30, 2024:
|
|
|
|
|
Weighted |
|
||
|
|
Number of |
|
|
Average |
|
||
|
|
Shares |
|
|
Exercise Price |
|
||
Options outstanding at December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Exercised |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Options outstanding at June 30, 2024 |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Options exercisable at December 31, 2023 |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Options exercisable at June 30, 2024 |
|
|
|
|
|
|
||
13
As of June 30, 2024, the Company had $
Restricted Stock Units
The Company has granted restricted stock units (“RSUs”) to employees under the 2016 Plan. The shares underlying the RSU awards have vesting terms of four years from the date of grant subject to the employees’ continuous service and subject to accelerated vesting in specified circumstances. The fair value of the RSUs granted is measured based on the market value of the Company’s common stock on the date of grant and is recognized ratably over the requisite service period, which is generally the vesting period of the awards.
The total share-based compensation expense related to RSUs is reflected in the consolidated statements of operations and comprehensive loss as follows (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes the activity related to RSUs during the six months ended June 30, 2024:
|
|
|
|
|
Weighted Average |
|
||
|
|
Number of |
|
|
Grant Date |
|
||
|
|
Shares |
|
|
Fair Value |
|
||
Non-vested RSUs outstanding at December 31, 2023 |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
|
|
|
Non-vested RSUs outstanding at June 30, 2024 |
|
|
|
|
|
|
||
As of June 30, 2024, the Company had $
Employee Stock Purchase Plan
The 2016 Employee Stock Purchase Plan (the “2016 ESPP”) became effective on June 1, 2016. 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 share-based compensation expense recognized for the 2016 ESPP is reflected in the consolidated statements of operations and comprehensive loss as follows (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
During the six months ended June 30, 2024, the Company issued
9. Commitments and Contingencies
Lease Commitment Summary
In November 2022, the Company signed an amended office lease agreement to lease approximately
The Company recognizes a right-of-use asset for the right to use the underlying asset for the lease term, and a lease liability, which represents the present value of the Company’s obligation to make payments over the lease term.
14
Equipment leases with an initial term of 12 months or less are not recorded with operating lease liabilities. The Company recognizes expense for these leases on a straight-line basis over the lease term. The equipment leases were deemed to be immaterial.
Georgia Tech License Agreement
As described in Note 1, the Company entered into a fourth amendment to the Georgia Tech License Agreement pursuant to which the parties agreed to revised Maintenance Fee payments in exchange for a reduction to the contractual Sublicense Percentage owed by the Company on certain fees and other payments it may receive from future sublicensing activities. The Company paid the Maintenance Fee for 2023 in February 2024.
Year Ending December 31, |
|
Amount |
|
|
2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Total |
|
$ |
|
|
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 Other Agreements
Bausch + Lomb
On October 22, 2019, the Company entered into a License Agreement (as amended, the "Bausch License Agreement") with Bausch + Lomb (“Bausch”). Pursuant to the Bausch License Agreement, the Company has granted an exclusive license to Bausch to develop, manufacture, distribute, promote, market and commercialize XIPERE using the Company’s proprietary SCS Microinjector (the “Device”), as well as specified other steroids, corticosteroids and NSAIDs in combination with the Device (together with XIPERE, the “Products”), subject to specified exceptions, in the United States and Canada (the “Territory”) for the treatment of ophthalmology indications, including non-infectious uveitis.
Pursuant to the Bausch License Agreement, Bausch paid the Company an aggregate of $
Arctic Vision (Hong Kong) Limited
On March 10, 2020, the Company entered into a License Agreement (the “Arctic License Agreement”) with Arctic Vision (Hong Kong) Limited (“Arctic Vision”). Pursuant to the Arctic License Agreement, the Company has granted an exclusive license to Arctic Vision to develop, distribute, promote, market and commercialize XIPERE, subject to specified exceptions, in China, Hong Kong, Macau, Taiwan and South Korea (the “Arctic Territory”). Under the terms of the Arctic License Agreement, neither party may commercialize XIPERE in the other party’s territory. Arctic Vision has agreed to use commercially reasonable efforts to pursue the development and commercialization of XIPERE for indications associated with uveitis in the Arctic Territory. In addition, upon receipt of the Company’s consent, Arctic Vision will have the right, but not the obligation, to develop and commercialize XIPERE for additional indications in the Arctic Territory.
Pursuant to the Arctic License Agreement, Arctic Vision has paid the Company an aggregate of $
15
regulatory exclusivity of XIPERE in a given country, or (iii) ten years from the first commercial sale of XIPERE in a given country. The Company's rights to these royalties and milestone payments have been sold pursuant to the terms and conditions of the Purchase and Sale Agreement described in Note 5.
In August 2021, the Company entered into an amendment to the Arctic License Agreement to expand the territories covered by the license to include India and the ASEAN Countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam). In September 2021, the Company entered into a second amendment to the Arctic Vision License Agreement to expand the Arctic Territory to include Australia and New Zealand. The Company received an aggregate of $
BioCryst Pharmaceuticals, Inc.
On November 1, 2023, the Company entered into the BioCryst License Agreement pursuant to which the Company granted BioCryst an exclusive, worldwide and sublicensable license to the Company’s SCS Microinjector for the delivery of BioCryst’s proprietary plasma kallikrein inhibitor known as avoralstat for the treatment and prevention of DME.
The Company received an upfront license fee payment of $
BioCryst will be responsible for all development, regulatory and commercialization activities for avoralstat. The Company is responsible for supplying SCS Microinjectors to meet BioCryst’s reasonable needs.
Other
The Company periodically enters into short-term agreements with other customers 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 agreements are recognized as revenue over the term of the agreement.
11. Available-for-Sale Investments
The following table summarizes the fair value of the Company's short-term investments by type (in thousands):
|
|
June 30, 2024 |
|
|||||||||
|
|
Amortized |
|
|
Unrealized |
|
|
Fair |
|
|||
|
|
Cost |
|
|
Losses |
|
|
Value |
|
|||
Treasury bills |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Total available-for-sale investments |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
12. Fair Value Measurements
The Company’s material financial instruments at June 30, 2024 and December 31, 2023 consisted primarily of cash and cash equivalents and short-term investments. The fair values of cash and cash equivalents, short-term investments, 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 value hierarchy. The fair value of the warrant liabilities (see Note 7) require significant unobservable inputs and is classified as Level 3 in the fair value hierarchy.
There were
16
The following table summarizes the assets and liabilities that are measured at fair value and the classification by level of input within the fair value hierarchy (in thousands):
|
|
June 30, 2024 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Recorded |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Short-term investments |
|
|
|
|
|
|
|
|
|
|||||||