OCUGEN, INC. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements for the year endedDecember 31, 2021 , included in our 2021 Annual Report. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business and related financing, include forward-looking statements that involve risks, uncertainties, and assumptions. These statements are based on our beliefs and expectations about future outcomes and are subject to risks and uncertainties that could cause our actual results to differ materially from anticipated results. Except as required by law, we undertake no obligation to publicly update these forward-looking statements, whether as a result of new information, future events, or otherwise. You should read the "Risk Factors" section included in our 2021 Annual Report and the "Risk Factors" and "Disclosure Regarding Forward-Looking Statements" sections of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a biotechnology company focused on discovering, developing, and commercializing novel gene therapies, biologicals, and vaccines that improve health and offer hope for people and global communities.
Our cutting-edge technology pipeline includes:
•COVID-19 Vaccine Candidate - COVAXIN is a whole-virion inactivated COVID-19 vaccine candidate being developed to prevent COVID-19, caused by SARS-CoV-2, in humans. We are co-developing COVAXIN with Bharat Biotech for theU.S. , Canadian, and Mexican markets. •Modifier Gene Therapy Platform - Based on NHRs, we believe our modifier gene therapy platform has the potential to address many retinal diseases, including RP, LCA, and dryAMD .
•Novel Biologic Therapy for Retinal Diseases - We are developing OCU200, a novel
biologic product candidate, to treat DME, DR, and wet
COVID-19 Vaccine Candidate
InFebruary 2021 , we entered into the Covaxin Agreement with Bharat Biotech, pursuant to which we obtained an exclusive right and license under certain of Bharat Biotech's intellectual property rights, with the right to grant sublicenses to develop, manufacture, and commercialize COVAXIN for the prevention of COVID-19 inthe United States , its territories, and possessions. InJune 2021 andApril 2022 , we entered into amendments to the Covaxin Agreement, pursuant to which we and Bharat Biotech agreed to expand our rights to develop, manufacture, and commercialize COVAXIN to includeCanada andMexico , respectively, in addition tothe United States , its territories, and possessions. COVAXIN is formulated with the inactivated SARS-CoV-2 virus, an antigen, and an adjuvant. COVAXIN requires a two-dose vaccination regimen given 28 days apart and is stored in standard vaccine storage conditions (2-8°C). COVAXIN was granted an EUL by the WHO inNovember 2021 . The Phase 3 clinical trial conducted by Bharat Biotech inIndia in 25,798 adults ages 18 years and older, who were healthy or had stable chronic medical conditions, reported an overall estimated vaccine efficacy of COVAXIN against COVID-19 of 77.8%, with efficacy against severe COVID-19 of 93.4%, and efficacy against asymptomatic COVID-19 of 63.6%. Individuals with asymptomatic infection have a detectable viral load in nasal and saliva swabs and therefore are considered carriers of COVID-19. COVAXIN was generally well tolerated, with no clinically or statistically significant differences in reported adverse events in the vaccine and placebo groups. Additionally, a Phase 2/3 immuno-bridging clinical trial was conducted by Bharat Biotech inIndia to assess the protective immunity of COVAXIN in children ages two to 18 years. The results demonstrated a robust neutralizing antibody response comparable to that of the adults studied in the aforementioned Phase 3 clinical trial, and that COVAXIN was generally well tolerated. Further, data from clinical trials conducted by Bharat Biotech has shown that COVAXIN has neutralizing potential against multiple variants of concern including both the Omicron (B.1.1.529) and Delta (B.1.617.2) variants. InJune 2021 , the FDA provided feedback to us regarding the data and information contained in a "Master File" that we previously submitted to the FDA and recommended that we pursue a BLA submission instead of an EUA application for COVAXIN for adults ages 18 years and older inthe United States . InOctober 2021 , we submitted an IND application to the FDA to initiate a Phase 2/3 immuno-bridging and broadening clinical trial evaluating COVAXIN for adults ages 18 years and 22
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older, which was approved by the FDA inFebruary 2022 . The clinical trial is designed to evaluate whether the immune response observed in participants in the aforementioned completed Phase 3 clinical trial inIndia is similar to a demographically representative, adult population inthe United States . We voluntarily implemented a temporary pause in commencing dosing participants in the clinical trial while we evaluate the statements made by the WHO following their inspection of Bharat Biotech's manufacturing facility, wherein the WHO identified certain GMP deficiencies. As a result of our decision to voluntarily pause commencing dosing in participants, the FDA placed our Phase 2/3 immuno-bridging and broadening clinical trial on clinical hold. Assuming we are able to successfully work with the FDA to lift the clinical hold, we also plan to initiate a safety clinical trial, subject to discussions with the FDA. InNovember 2021 , we submitted a request to the FDA for EUA for COVAXIN for pediatric use in ages two to 18 years inthe United States . The EUA submission was based on the results of the aforementioned Phase 2/3 immuno-bridging pediatric clinical trial conducted by Bharat Biotech inIndia . InMarch 2022 , the FDA notified us that they declined to issue an EUA for COVAXIN for pediatric use. We intend to continue working with the FDA to evaluate a potential regulatory pathway for the pediatric use of COVAXIN inthe United States . We are also pursuing approval to market COVAXIN inCanada and recently expanded our commercialization rights for COVAXIN under the Covaxin Agreement to includeMexico . InJuly 2021 , we completed our rolling submission toHealth Canada for COVAXIN. The rolling submission process, which was conducted through our Canadian subsidiary, Vaccigen, was recommended and accepted under the Interim Order and transitioned to a NDS for COVID-19. InDecember 2021 ,Health Canada provided us with a NOD regarding our NDS submission.Health Canada requested further analyses of the COVAXIN preclinical and clinical data, as well as additional information regarding CMC. We have responded to and provided proposed resolutions for the deficiencies included in the NOD. Our responses are currently under review byHealth Canada . COVAXIN is also currently under review by COFEPRIS for emergency use for pediatrics in ages two to 18 years inMexico . COFEPRIS previously approved emergency use for COVAXIN inMexico for adults ages 18 years and older, which remains active. We are evaluating our commercialization strategy for COVAXIN inthe United States andCanada , if approved in either jurisdiction, and are actively preparing for commercialization inMexico . InJune 2021 , we selectedJubilant HollisterStier as our manufacturing partner for COVAXIN to prepare for the commercial manufacturing of COVAXIN. We expect to enter into a master services agreement withJubilant HollisterStier for the commercial manufacture of COVAXIN. InSeptember 2021 , we entered into the Supply Agreement with Bharat Biotech, pursuant to which Bharat Biotech will supply us with clinical trial materials and commercial supplies of COVAXIN finished drug product prior to the completion of a technology transfer. Following the completion of the technology transfer toJubilant HollisterStier , which is in progress, Bharat Biotech will supply COVAXIN drug product components and continue to supply finished drug product as necessary for the commercial manufacture and supply of COVAXIN subsequent to a regulatory approval.
Modifier Gene Therapy Platform
We are developing a modifier gene therapy platform designed to fulfill unmet medical needs in retinal diseases, including IRDs, such as RP and LCA, and dryAMD . Our modifier gene therapy platform is based on NHRs, which have the potential to restore homeostasis, the basic biological processes in the retina. Unlike single-gene replacement therapies, which only target one genetic mutation, we believe that our modifier gene therapy platform, through its use of NHRs, represents a novel approach that has the potential to address multiple retinal diseases caused by mutations in multiple genes with one product; and potentially address complex diseases, such as dryAMD , that are potentially caused by imbalances in multiple gene networks. IRDs, such as RP and LCA, can lead to visual impairment and blindness and affect over two million people worldwide. RP and LCA are rooted in mutations of more than 175 different genes. We believe that OCU400, our first product candidate being developed with our modifier gene therapy platform, has the potential to be broadly effective in restoring retinal integrity and function across a range of IRDs, including RP and LCA. OCU400 has received four ODDs from the FDA for the treatment of certain disease genotypes: NR2E3, CEP290, RHO, and PDE6ß mutation-associated inherited retinal degenerations. Additionally, OCU400 has received OMPD from the EC based on the recommendation of the EMA for RP and LCA, which we believe demonstrates that OCU400 has the potential to be a broad-spectrum therapeutic to treat many IRDs. InNovember 2021 , we submitted an IND application to the FDA to initiate a Phase 1/2 clinical trial for OCU400 for the treatment of NR2E3 and RHO mutation associated RP, which was accepted by the FDA inDecember 2021 . We have initiated the Phase 1/2 clinical trial, a multicenter, open-label, dose ranging study to assess the safety of unilateral subretinal administration of OCU400 in subjects with NR2E3 and RHO-related RP inthe United States and inMarch 2022 , the first patient was dosed. InApril 2022 , an independent Data andSafety Monitoring Board for our Phase 1/2 clinical trial recommended that we continue enrolling additional study subjects in the current cohort at the target dose level and based on 23
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that recommendation we have continued enrollment. We are additionally evaluating options to commence OCU400 clinical trials internationally.
Our second modifier gene therapy candidate, OCU410, is being developed to utilize the nuclear receptor genes RORA for the treatment of dryAMD . We are currently executing pre-IND studies consistent with FDA discussions to support a Phase 1/2 clinical trial. We have engaged CanSinoBIO to manufacture clinical supplies and be responsible for the CMC development for OCU400 and OCU410. CanSinoBIO will be responsible for the costs associated with such activities.
Novel Biologic Therapy for Retinal Diseases
Our pipeline also includes our biologic product candidate, OCU200, a novel fusion protein designed to treat severely sight-threatening diseases such as DME, DR, and wetAMD . We are currently establishing a current GMP process for the production of clinical trial materials and executing pre-IND studies consistent with FDA discussions to support a Phase 1/2a clinical trial. We have completed the technology transfer of manufacturing processes to our CDMO that will manufacture OCU200 clinical supplies.
Impact of COVID-19 on our Business
The COVID-19 pandemic remains ongoing and we continue to closely monitor the situation. Impacts from the COVID-19 pandemic still remain uncertain and subject to change and, as such, we cannot predict the specific duration or impact that the COVID-19 pandemic may have on our operations going forward, including our preclinical activities, current and future clinical trials, and commercialization activities. The extent to which the COVID-19 pandemic may impact our operations is dependent on future developments, including but not limited to: (i) the duration of the spread of the SARS-CoV-2 virus, including the spread of current and future variants, (ii) the future actions taken by governmental authorities and regulators with respect to the COVID-19 pandemic, and (iii) the impact on our partners, collaborators, and suppliers. We will continue to monitor the situation closely as these effects could have a material impact on our operations. Results of Operations
Comparison of the Three Months Ended
We have no products approved for commercial sale and have not generated significant revenue to date. We have never been profitable and have incurred net losses in each year since inception. The following table summarizes the results of our operations for the three months endedMarch 31, 2022 and 2021 (in thousands): Three months ended March 31, 2022 2021 Change Operating expenses Research and development $ 7,915$ 2,872 $ 5,043 General and administrative 10,119 4,185 5,934 Total operating expenses 18,034 7,057 10,977 Loss from operations (18,034) (7,057) (10,977) Other income (expense), net 15 (20) 35 Net loss$ (18,019) $ (7,077) $ (10,942)
Research and development expense
Research and development expense increased by$5.0 million for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 . The increase was primarily due to increases of$1.9 million in employee-related expenses, which excludes stock-based compensation expense,$1.0 million in COVAXIN development, regulatory, and manufacturing activities,$0.8 million in stock-based compensation expense, and$0.8 million in OCU200 preclinical activities.
General and administrative expense
General and administrative expense increased by
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and consulting fees,
Liquidity and Capital Resources
As ofMarch 31, 2022 , we had$129.9 million in cash, cash equivalents, and restricted cash. We have not generated significant revenue to date and have primarily funded our operations to date through the sale of common stock, warrants to purchase common stock, the issuance of convertible notes, debt, and grant proceeds. Since our inception and throughMarch 31, 2022 , we have raised an aggregate of$269.6 million to fund our operations, of which$256.9 million was from gross proceeds from the sale of our common stock and warrants,$10.3 million was from the issuance of convertible notes,$2.2 million was from debt, and$0.2 million was from grant proceeds.
In
Since our inception, we have devoted substantial resources to the research, development, and commercialization of our product candidates and have incurred significant net losses and may continue to incur net losses in the future. We incurred net losses of approximately$18.0 million and$7.1 million for the three months endedMarch 31, 2022 and 2021, respectively. As ofMarch 31, 2022 , we had an accumulated deficit of$149.7 million . Additionally, we had accounts payable and accrued expenses of$7.4 million and indebtedness of$1.7 million as ofMarch 31, 2022 .
The following table shows a summary of our cash flows for the three months ended
Three
months ended
2022 2021
Net cash used in operating activities $ (15,066) $ (5,283)
Net cash used in investing activities (223) (261)
Net cash provided by financing activities 50,102 26,297
Net increase in cash, cash equivalents, and restricted cash $ 34,813
Operating activities Cash used in operating activities was$15.1 million for the three months endedMarch 31, 2022 compared to$5.3 million for the three months endedMarch 31, 2021 . The increase in cash used in operating activities was primarily driven by an increase in our research and development expenses for our product candidates, including expenses related to COVAXIN development, regulatory, and manufacturing activities, an increase in professional fees, including legal and consulting fees, and an increase in employee-related expenses as we expand our headcount and continue to provide competitive compensation plans to support our development, commercialization, and business efforts.
Financing activities
Cash provided by financing activities was$50.1 million for the three months endedMarch 31, 2022 compared to$26.3 million for the three months endedMarch 31, 2021 . During the three months endedMarch 31, 2022 , cash provided by financing activities primarily consisted of gross proceeds of$50.0 million received from the underwritten offering that closed inFebruary 2022 . During the three months endedMarch 31, 2021 , cash provided by financing activities primarily consisted of gross proceeds of$22.9 million received from theFebruary 2021 Registered Direct Offering, gross proceeds of$5.0 million received under an at-the-market offering, and$0.2 million in proceeds from the exercise of stock options, partially offset by payments of equity issuance costs of$1.8 million . Contractual Obligations We have commitments under certain licensing and development agreements, lease obligations, debt agreements, consulting agreements, and supply commitments. There have been no material changes to our contractual obligations as reported in our 2021 Annual Report. 25
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Funding requirements
We expect to continue to incur significant expenses in connection with our ongoing activities, particularly as we continue research and development, including preclinical and clinical development of our product candidates, contract to manufacture our product candidates, prepare for commercialization of our product candidates, add operational, financial, and information systems to execute our business plan, maintain, expand and protect our patent portfolio, explore strategic licensing, acquisition, and collaboration opportunities to expand our product candidate pipeline to support our future growth, expand headcount to support our development, commercialization, and business efforts, and operate as a public company.
Factors impacting our future funding requirements include, without limitation, the following:
•the initiation, progress, timing, costs, and results of clinical trials for our product candidates;
•the outcome, timing, and cost of the regulatory approval process for our product candidates; including with respect to COVAXIN in the Ocugen Covaxin Territory;
•the costs of manufacturing and commercialization, including with respect to COVAXIN;
•costs related to doing business internationally with respect to our development
and commercialization of COVAXIN in
•the cost of filing, prosecuting, defending, and enforcing our patent claims and other intellectual property rights;
•the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us;
•the costs of expanding infrastructure to support our development, commercialization, and business efforts;
•the expenses needed to attract and retain skilled personnel;
•the extent to which we in-license or acquire other products, product candidates, or technologies; and
•the impact of the COVID-19 pandemic on our activities; and
•the impact of geopolitical turmoil, including the ongoing invasion ofUkraine byRussia or increased trade restrictions betweenthe United States ,Russia ,China and other countries, social unrest, political instability, terrorism, or other acts of war. As ofMarch 31, 2022 , we had cash, cash equivalents, and restricted cash of approximately$129.9 million . This amount will not meet our capital requirements over the next 12 months. We will need to raise significant additional capital in order to fund our future operations. Our operating and capital requirements may change as a result of many factors currently unknown to us. Our management is currently evaluating different strategies to obtain the required funding for future operations. These strategies may include, but are not limited to: public and private placements of equity and/or debt, payments from potential strategic research and development arrangements, sales of assets, government grants, licensing and/or collaboration arrangements with pharmaceutical companies or other institutions, or other funding from the government or other third parties. Our ability to secure funding is subject to numerous risks and uncertainties, including the impact of the COVID-19 pandemic and geopolitical turmoil related to the ongoing invasion ofUkraine byRussia , and as a result, there can be no assurance that these funding efforts will be successful. If we cannot obtain the necessary funding, we will need to delay, scale back, or eliminate some or all of our research and development programs and commercialization efforts? consider other various strategic alternatives, including a merger or sale? or cease operations. If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition, and results of operations could be materially adversely affected. As a result of these factors, together with the anticipated increase in spending that will be necessary to continue to research, develop, and commercialize our product candidates, there is substantial doubt about our ability to continue as a going concern within one year after the date that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are issued.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements during the periods presented, and we do not currently have any off-balance sheet arrangements as defined in the rules and regulations of theSEC . 26
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Critical Accounting Policies and Significant Judgments and Estimates
The preparation of financial statements in conformity with GAAP requires us to make judgments, estimates, and assumptions in the preparation of our condensed consolidated financial statements. Actual results could differ from those estimates. There have been no material changes to our critical accounting policies and estimates as reported in our 2021 Annual Report.
Recently Adopted Accounting Pronouncements
For a discussion of recently adopted accounting pronouncements, see Note 2 in the notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Other Company Information
None.
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