Ocugen, Inc. Q4 FY2021 Earnings Call

Good morning, and welcome to the Ocugen Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. Please note this conference is being recorded. I will now turn the conference over to Ken Inchausti, Head of Investor Relations and Communications for Ocugen. Sir, you may begin.

Thank you, operator. I'd like to welcome you to our conference call. With me today are Ocugen's Chairman, CEO, and Co-Founder, Dr. Shankar Musunuri, who will provide a business update, and our Chief Financial Officer and Head of Corporate Development, Sanjay Subramanian, who will provide a financial update. Earlier this morning, we issued a press release including a business update, and fourth quarter and full year financial results for 2021. We encourage listeners to review the press release, which is available on our website at www.ocugen.com. This call is also being recorded and a replay along with accompanying slide presentation will be available on the Investor section of the Ocugen website for approximately 45 days. As always, I need to advise you that this call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations, including, among other things, the uncertainties inherent in research and development of our product candidates, risks to our business related to the ongoing COVID-19 pandemic, uncertainty regarding whether and when we will be able to submit a Biologics License Application for Covaxin to the FDA, and whether and when we will receive regulatory approvals for Covaxin in the United States or Canada. These and other risks and uncertainties are more fully described in our periodic filings with the Securities and Exchange Commission, including the risk factors described in the section entitled Risk Factors in the quarterly and annual reports that we file with the SEC. You should read carefully the risks and uncertainties described in today's press release as well as the risk factors included in our filings with the SEC. Note that we intend to file our Form 10-K on March 1. I will now turn the call over to Ocugen's Chairman and CEO, Dr. Shankar Musunuri.

Thank you, Ken. Good morning, everyone, and thank you for joining. We hope you and your family are safe and well. We are here today to review some of the recent activities and events that transpired in the fourth quarter of 2021 and provide some perspective on the full year. 2021 was a transformational time for Ocugen, especially as we successfully progressed two different assets within our portfolio. Simultaneously, we expanded and diversified our team to match our growing clinical development, commercial, and R&D needs. This was a year in which we doubled down on what I call courageous innovation. That phrase speaks to our purpose and commitment to development with a purpose and searching for new solutions to enduring challenges. We are working to bring a new COVID vaccine into the US and Canada to initiating a clinical trial for a game-changing NR2 gene therapy that could potentially treat multiple genetic mutations with a single product. I'm proud of this team that has succeeded with our business partners to position us for much more in 2022. This slide highlights some of the critical milestones for Covaxin in the latter part of the year and into 2022. First, it's important to understand the context for the progress we made. We have seen that the science has evolved and our nation's strategies have changed. Today, the focus is on how to achieve ongoing protection and close the gaps among populations who remain unvaccinated. In just one year, so much has changed that our work for Covaxin has evolved to meet this moment. That led to our IND submission in late October and our EUA submissions in early November. That work has paid off. Last week, we received clearance from the FDA to initiate a clinical trial to support a Biological Licensing Application, or BLA. Our clinical program will be a Phase 2/3 immunobridging and broadening study. We will provide more details over the coming months as the study progresses. On the Pediatric EUA front, I'm pleased to say that there are discussions involving the data we have submitted, including Bharat Biotech’s immunogenicity data published in a pre-print server in late December 2021. Our own Omicron research showing effectiveness against this variant in the database of more than 36 million teens vaccinated with Covaxin in India, with more than 70% of Americans looking for options. Based on our latest Harris Poll, we know the need is great. We will continue advocating that the FDA gives the vaccine a fair shot by having it evaluated by its Independent Vaccine Advisory Committee, known as VRBPAC. We recognize that many of you have been asking for ongoing regulatory updates and why the review can't move faster. We hear you. And we would note two things. The first is that I am pleased with the timeframe it took to have the clinical hold lifted. That took less than three months. The second is that getting to this critical juncture required significant confidential dialogue with the FDA. Therefore, making public those details would have been detrimental to the review process. So once the review process starts, very little can be disclosed until there is clear guidance from the agency. In Canada, we have supplied a comprehensive set of responses to Health Canada from follow-up questions contained in what is known as a Notice of Deficiency. Remember that Covaxin is now under the new drug submission review, which will potentially lead us to full approval. We are following up with Health Canada in a manner that makes sense. Speaking of Canada, there is growing interest from local and provincial government officials about our interest in the manufacturing site owned by Liminal BioSciences outside of Belleville, Ontario. Positive discussions with leaders have centered on the value of reestablishing a manufacturing and R&D hub within the region, supporting the nation's contribution to innovation and public health. One final note about Covaxin; we are pleased to share that we have made good progress towards establishing manufacturing capability at our partner Jubilant HollisterStier in Spokane, Washington. This has involved designing a robust manufacturing process, establishing a means to transport active ingredient directly from India to the US, selecting primary packaging components, and establishing quality control strategies that will ensure the final product meets rigorous FDA standards and can be safely administered to people. The technology transfer is going well. We expect to complete qualification of manufacturing grants at Jubilant by the middle of this year. Now let's turn to our modifier gene therapy program. As you know, we submitted in November 2021 an investigational new drug application for a Phase 1/2 clinical trial for OCU400, our lead candidate in the modifier gene therapy platform for the treatment of Retinitis Pigmentosa resulting from genetic mutations Nr2e3 and Rhodopsin. Within 30 days, the FDA accepted our application, and our dose-ranging clinical trial is now recruiting. Details of the study are available on the National Institutes of Health website, clinicaltrials.gov. Our next candidate, OCU410, has an IND-enabling study underway to support a future Phase 1/2 clinical trial, and our novel biologic, OCU200, is a transferrin-tumstatin fusion protein that has potential to help those with diabetic macular edema, diabetic retinopathy, and wet age-related macular degeneration. This program is progressing well with IND-enabling activities and we are on track to initiate toxicology studies in non-human primates. So, 2022 is off to a fast start with clinical trials for two product candidates, data readouts expected in the second half of this year, ongoing discussions with the FDA surrounding our pediatric US submission for Covaxin, and continued progress on the remaining assets in our portfolio. I would like to thank our partners whose efforts are key to our progress. I'm very pleased with the progress we have made and know that we will provide updates throughout the year. I will now turn the call over to Sanjay to provide our fourth quarter and full year 2021 financial update. Sanjay?

Thank you, Shankar, and good morning everyone. I will now provide an overview of key financial results for the fourth quarter and full year of 2021. Our research and development expenses for the quarter ended December 31, 2021, were $7.1 million, compared to $1.6 million for the fourth quarter ended December 31, 2020. For the full year, research and development expenses for the year ended December 31, 2021, were $35.1 million, compared to $6.4 million for the year ended December 31, 2020. R&D expenses for 2021 included a $15 million upfront payment to Bharat Biotech for the additional rights and license to Covaxin in Canada. The remaining increase is attributed to the continued investment in the development activities for Covaxin and our ocular portfolio. General and Administrative expenses for the quarter ended December 31, 2021, were $7.5 million compared to $2.2 million for the fourth quarter ended December 31, 2020. For the full year ended December 31, 2021, G&A costs were $22.9 million, compared to $8 million for the year ended December 31, 2020. Our increase in G&A expenses relates to increased infrastructure costs to support the growth of the organization. Net loss was approximately $14.6 million or $0.07 net loss per share for the quarter ended December 31, 2021, compared to a net loss of approximately $3.8 million or $0.02 net loss per share for the previous year’s quarter ended December 31, 2020. For the year ended December 31, 2021, Ocugen reported a net loss of approximately $58.4 million, or $0.30 net loss per share, compared to a net loss of approximately $34.4 million, or $0.31 net loss per share for the year ended December 31, 2020, which included the in-process R&D expense of $7 million related to the reduction of the carrying value of an asset that was previously recorded as held for sale. Our cash, cash equivalents, and restricted cash totaled $95.1 million as of December 31, 2021, compared to $24.2 million as of December 31, 2020. Earlier this week, we raised net proceeds of $50 million before estimated offering expenses. This further strengthens our balance sheet and extends our runway. That concludes my update. Back to you, Ken.

Thanks, Sanjay. And with that, we will open up the call for questions. Operator?

We have another question from the line of Zegbeh Jallah from ROTH Capital Partners. Your line is open. Please go ahead.

Good morning. Thanks for taking my questions and congrats on the progress. I think the first question for me here is if you can just comment on the details around what was required to lift the clinical hold on the IND?

Good morning, Zegbeh.

Zegbeh, good morning. Thanks for the question. First of all, when you submit an IND, typically the FDA checks it on time. The FDA is extremely busy as they have many applications on the vaccine side. So this is a typical question; if they have any clarifications they need. And those are the questions they asked, and we promptly submitted our responses as I mentioned in our call, and we were able to wrap up this whole process within three months, which is good considering the workload the FDA has, and everything else going on.

Thanks. And then can you just clarify? So was it any additional data that was needed or just a reanalysis? I'm just trying to get a sense of that to predict perhaps the outcome of that pediatric EUA?

No, I think, I mean, let me clarify on the IND hold. Additional data was not required; these are clarification questions mostly. We didn't have to generate any additional data. Regarding the second question, are you asking about pediatric EUA?

Yes. I was just trying to gauge what might be required for the pediatric EUA based on the IND. So if you can just comment on that as well, that would be helpful, to the extent that you can.

Yes. So the IND is for the long-term Biological Licensing Application process and we're trying to bridge the data from the U.S. demographic with the data generated in a large clinical trial in India. So that’s a phase 2 immuno-bridging and broadening study we’re embarking on for the BLA. Now, the EUA was submitted for the pediatric population, ages two to 18, based on the data generated by our partners and our immuno-bridging trial, which bridges data to a large-scale safety trial in adults. So that's under active review by the PA.

Thanks, Shankar. And then as a follow-up, we got this question from investors, and they just kind of wanted some clarity on whether the FDA committed to providing an approval on the BLA if the bridging study comes out positive, meaning that you will not need any additional studies beyond the bridging study to support the BLA approval?

Yes. For the BLA approval, there are two things I think a deal looks for. One is immuno-bridging. Typically, you do that because you cannot keep on bridging with a large-scale safety and efficacy trial. Typically, you do that; that's what other companies have done in the U.S. too when they apply for the pediatric population. You bridge the pediatric to a large-scale efficacy and safety trial. Similarly, in this case for the BLA, we are bridging on the immunogenicity side. That’s kind of bridging it to the efficacy trial. Typically, you also have to conduct a safety study in the U.S. demographic based on 21 CFR, and that bridges the safety of the population in the U.S. with the data collected from elsewhere. So, in addition to this immuno-bridging trial, we foresee doing a safety trial in the U.S. population. Those are the two clinical trials typically required for BLA submission.

Perfect. Thanks, Shankar. And then just the last here. I know this is perhaps still being determined, but we were just wondering if there was a grade upon sample size for the bridging study or for the safety study. And then where are you regarding next steps that need to be completed prior to the initiation of the bridging study, for example, manufacturing site assessments, etcetera? And I was squeezing my last one here. And maybe Sanjay can just comment now with the recent public offering, can you provide your updated cash?

Okay, so let me take the first few questions. The population for the bridging study typically requires 200 subjects for the immunogenicity trial. You don't need a large population so that bridges neutralizing antibodies. There will be other antibodies that are monitored as well. In our case, we'll be looking at not only spike but also looking at nuclear capture protein and others because this vaccine does provide a broadening immune response unlike spike-based vaccines. The second question you ask is about the safety clinical trial. Typically, that requires more than what we need for emergency authorization. Those discussions are ongoing with the FDA. Once we have the final agreement on the number, we'll provide updates to the market. Sanjay, go ahead.

Thanks for the question. Regarding cash, we’re pleased that we did a financing earlier this week. It strengthens our balance sheet even further. The additional capital will help with the investment in our programs and Covaxin as well as all the ocular programs. As you know, we have the EUA for pediatric use for Covaxin pending at this point in time. So there's potential, depending on how that progresses, for near-term revenues. That could obviously change our cash runway. But if we exclude that or any benefit from that, without it, the capital we have raised provides sufficient capital to sustain us well into the first quarter of next year. It gives us ample runway for investment in our programs and all the trials that we’re contemplating to support those programs.

Thanks, Sanjay. And I'll get back in the queue, because I do have questions about OCU200.

Sure, thank you. Thank you, Zegbeh.

We have a follow-up question from Zegbeh Jallah from ROTH Capital Partners. Your line is open. Please go ahead.

I guess I have the honor of asking all the questions today. So just kind of moving on here, I think the next question relates to the Covaxin opportunities. Just having you comment, I guess, on the size of the market opportunity, as you think about perhaps being kind of a late player to the US market. And then maybe you can comment a bit on your survey findings as well and perhaps, who you surveyed and some details around that.

Yes. So the US market is still evolving. We still have the pandemic, which we believe will continue for the next few years. Currently, the pediatric population is the reason we have filed for pediatric EUA; there's a significant unmet medical need. Under the age of five group, there are no vaccines available. From the ages of five to 18, there is only one vaccine option available, and the vaccination rates – the kids who received two doses from the five to 11 range is about 25%. To increase the vaccination rates, which are extremely important to prevent hospitalization and death, the majority of parents are looking for options. That's why there is a great need for pediatric vaccines that are safe and effective. We have provided a significant amount of datasets to the agency and are requesting them to push for the AgCom meeting. The second opportunity is the booster market. As you know, this pandemic will continue, and people who received the vaccines will eventually look for boosters, and people who are unvaccinated are also looking for options. Providing an option such as ours with the broadening immune response and a product built on a known traditional platform technology, such as the polio vaccine, people can relate to that. Some of the vaccine-hesitant individuals who remain unvaccinated can also find an option in our vaccines. Thus, there is a need for diverse vaccine options providing a vaccine with solid efficacy and safety, especially since it is built on traditional platform technology which will have significant value. Moreover, the US government is doing well in vaccine diplomacy, purchasing vaccines from US companies and donating for global use. Unless the global population is vaccinated to a certain extent, this pandemic will not come under control. Therefore, it is extremely important to have multiple vaccines in the toolkit, particularly since our vaccine is expected to have a shelf life of two years at refrigerator temperature and six months at room temperature. Consequently, this vaccine will be ideal for stockpiling and global distribution.

Thanks, Shankar, that's really helpful in terms of how you're thinking you might have an advantage. But I guess what one would ask then is about how you're thinking about perhaps being able to enroll the study within the US and maybe some strategies around how you plan to position that to help with the enrollment of the study? And perhaps even some comments around the timing of how long do you think that could take?

I think the clinical trial information that is posted shortly on clinicaltrials.gov on Covaxin trial design will allow not only named populations, but also subjects who got vaccinated. However, there is a minimum six months gap after the last vaccine dose before they can be enrolled in the study. We have designed the trial creatively and the details will be posted on clinicaltrials.gov. If you have any further questions after the posting, we will be happy to address them. Again, there is a great need for options in this country. We receive many inquiries from people across the nation, and we believe we will be able to recruit very quickly in this trial.

Thanks, Shankar. And then just quickly for OCU400 program, we're very interested in just kind of wanting to get a sense of when you think data from that study could become available? And how much detail do you think you'll provide at the time of the next update?

The OCU400 study is currently recruiting. If you go to clinicaltrials.gov, details are available. This is a Phase 1/2 trial for two mutations, and we are planning to recruit nine patients for each mutation. It’s a dose escalation trial, so we'll be able to recruit those patients. We have identified multiple sites, and the process is ongoing. We are very excited about completing the recruitment this year and continue to provide updates in the second half of this year. Safety is the main goal for this study. In addition to that, we'll be looking at efficacy through observational endpoints. We expect to provide updates in the second half.

The key thing about this program is developing the potential to use it in multiple inherited retinal diseases. So I was just wondering, at what point are we going to be able to get a sense of its broad efficacy potential? And can you again comment on what you think the market opportunity could be for this program?

Yes, absolutely, Zegbeh. Great question. The good thing about this program is that not only are we focusing on the MLP-3 gene mutation in our Phase 1/2 clinical trials, but we are also looking into robust mutations with a modifier approach. Once we show activity in the patients, it opens the door for the entire RP population. We’re also looking into the CEP290 mutation, which we hope to initiate in patients within the next year. That covers Leber congenital amaurosis. Our goal is to have at least these three mutations covered, potentially treating around 170 mutations, impacting about two million patients globally who struggle with these diseases. This presents an enormous opportunity to treat many patients, including a significant population in the US and the EU. In the US, we estimate there are about 100,000 to 200,000 patients across RP and LCA, reflecting a significant and unmet medical need. As I mentioned in my past conference calls, many of these patients may become legally blind by the age of 40, so there is a real sense of urgency needed to rescue them. We hope to be there for them.

Thanks, Shankar, and congrats on the progress.

Thank you.

Great. Thanks, Zegbeh.

Our next question comes from the line of Brian Cheng from Cantor. Your line is open. Please go ahead.

Hey guys. Thanks for taking my questions, and congrats on the progress. So I have a three-part question for Covaxin, and I hope you can answer them. Can you comment on the manufacturing supply and capacity for Covaxin? And just from the capacity ramp-up perspective, I'm just curious how we should think about the capacity assuming that you will have the pediatric approval near-term? And lastly, when you think about the broad vaccine market in North America, do you expect to look for partners to speed up the production and even reaching out to additional unvaccinated subjects? And then I have a follow-up. Thanks.

Thank you, Brian. So let me start with capacity; as EUA is authorized, currently as I mentioned on the call, we are qualifying Jubilant HollisterStier; that plant is progressing really well. By mid-year it will be completing qualification runs. However, we have a plan; our partners in India, as you know, this is an inactivated vaccine. It needs excellent facilities, and they have actually scaled up to a billion doses a year capacity. In the interim, we established a packaging site in the US and a release testing site, so that we can release the product to our standards through Ocugen in the US. Those types are already established. The initial supply will immediately come from India from our partners, which gets tested in the US and will be packaged in the US to release to the public. While the tech transfer is ongoing, we are planning to build up to 100 million doses capacity at Jubilant for good product. As I mentioned before, there are three aspects of supply we are envisioning: the pediatric use, the second part is booster use in the US market, and the third part is US vaccine global diplomacy. We believe with our partners' significant capacity, along with what we're building in the US with our CMOs, we’ll be able to supply whatever needs arise. The second question you have is related to reaching some states and unvaccinated people. Currently, the distribution, as you know, is completely done by the government. They purchase the doses, and the procurement is managed entirely by the government, which takes care of the distribution for now. In the future, if and when this pandemic ever becomes endemic and turns into annual boosters, we will have some time to work on those details. For now, all vaccines are procured and distributed by the government, but we’ll be working with states and other governments when there is a need for this vaccine because many individuals are looking for options.

And then on partnership, do you think that you will need one eventually to ramp up on the outreach or even ramp up the capacity? You're actually thinking about the product approval for the adult population?

Yes, I mean, all those options are: we’d be opportunistic; our goal is to maximize the supply of this vaccine as needed, and we’ll explore all options.

Okay. Thanks, Shankar. And then maybe just one on OCU400. I'm curious if you can talk about or remind us about the market size opportunity with the mutations that you are initially targeting. And, you know, with regards to the Phase 1/2 study that you're running, can you talk about what you will need to see before expanding to other mutation types?

Yes, typically, our trial follows exactly what others have done in the gene therapy space for rare diseases. It’s a Phase 1/2 trial; the primary objective is safety. You have to monitor these patients for a year; if it's three months, you have to check for safety. For every mutation, you have multiple observational endpoints. Once the study is done after one year, you choose which observation point to make primary for Phase 3. In this case, the Phase 3 primary endpoint may differ from Rhodopsin. The Rhodopsin is following a modified approach. If we show a signal in Rhodopsin, it should work as intended and open doors for many mutations. We are also mindful that it is rare disease territory and will methodically conduct clinical trials for a few mutations to cover part of the RP and LCA cohorts. As I mentioned before, the US presents about 100,000 to 200,000 patients across RP and LCA; there is a significant unmet medical need and opportunity. For gene therapy pricing, Brian, I think there are a couple of products in the market; you can take a look at them. Other companies are pricing based on similar models.

And what do you need to see, just curious, what will you need to see in terms of efficacy before you expand into other mutation types? Because I noticed in one other slide you're planning to also expand into such an idea as well. So just curious, what kind of bar should investors expect in terms of maybe sequential improvement before you expand to other investigational mutation types?

On CEP290, we are looking to start with that and have preclinical data. It’s the same product, as you would recall, so we don’t need to repeat animal studies. It's mainly a timing issue, and we plan to introduce that into the clinic soon. We are confident the FDA will allow us into CEP290. We’re also in discussions with the EMA and have broad RPA and LCA indications for orphan drug designations in the EU. Therefore, we’re in touch with the EMA, and our goal is to complete the Phase 1/2 clinical trials for these three mutations in the US while communicating with the EMA. Eventually, when we go into clinical trials, we’ll monitor rescue and disease progression from the gene therapy, the single dose seeing how it protects patients, and based on the data, current progression, and rescue from those endpoints we are monitoring, we’d pick the primary endpoint and go into Phase 3. During this process, we believe coding to four articles will allow for broad RPA and LCA indications. Therefore, we’ll be collecting a wealth of data in Phase 1/2 and carefully advancing into Phase 3 for all three mutations. That's the plan for the US and EU in the future. We envision that Phase 1 will last for a year, while Phase 3 will progress over the timeframe; capturing a signal and ensuring adequate duration throughout the clinical trial is critical.

With that said, I look forward to your next update. Thank you, Shankar.

Yes. Welcome.

Thank you, Brian.

And there are no further questions at this time. Ken, you may continue for closing remarks.

Great. Thank you so much. We want to thank everybody who took the time to listen in on the call on both Covaxin and our modified gene therapy program, and we look forward to providing updates in the coming months. Thank you very much and have a great weekend. Bye.

That does conclude our conference for today. Thank you all for participating. You may now disconnect. Have a great day.