CLSD.Q: Bankruptcy Sale Process Will Unlock Significant Equity Upside

Analysts have sharply raised their price target on Clearside Biomedical to approximately 90 dollars from 6 dollars, citing a reassessment of fair value despite more conservative assumptions on revenue growth, profitability, and required returns.

What's in the News

• Clearside Biomedical filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware, listing assets of 1 to 10 million dollars and liabilities of 50 to 100 million dollars (court filing).
• The company announced plans to pursue an auction and sale process under Section 363 of the U.S. Bankruptcy Code, seeking buyers for all or part of its assets, including its SCS Microinjector platform and related intellectual property (company announcement).
• Nasdaq notified Clearside that its common stock would be delisted due to the Chapter 11 filing and prior noncompliance with minimum market value requirements, with trading suspended on Nasdaq and shares moving to the OTC market under the symbol CLSDQ (Nasdaq notice).
• Clearside was removed from the Nasdaq Composite Index and dropped from the S&P TMI Index following the delisting determination (index provider notices).
• The company subsequently filed a Form 25 with the SEC to complete the delisting from Nasdaq and deregister its common stock under Section 12(b) of the Exchange Act, which will reduce its ongoing SEC reporting obligations (SEC filing).

Valuation Changes

• Fair Value Estimate has risen dramatically from approximately 6.00 dollars per share to about 90.00 dollars per share, implying a roughly 15 times increase in assessed equity value.
• Discount Rate has increased from about 8.18 percent to 12.50 percent, reflecting a significantly higher required return and risk premium applied in the updated valuation.
• Revenue Growth Assumption has fallen sharply from an implied 115.15 percent expansion to a negative 10.73 percent rate, indicating an expectation of contracting revenues rather than rapid growth.
• Net Profit Margin has been trimmed from roughly 23.22 percent to 20.88 percent, a modest reduction in anticipated long term profitability.
• Future P/E Multiple has surged from about 68.61 times to roughly 1,296.14 times, signaling a far more aggressive earnings multiple underpinning the new fair value estimate.