Ocugen, Inc. Q3 FY2022 Earnings Call

Good morning and welcome to the Ocugen Third Quarter 2022 Business Update and Financial Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. Please note that this call is being recorded. I will now turn the call over to Tiffany Hamilton, Ocugen’s Head of Corporate Communications.

Thank you, Angela. Joining me today are Ocugen’s Chairman and CEO and Co-Founder, Dr. Shankar Musunuri, who will provide a business update and our Chief Accounting Officer and Senior Vice President of Finance, Jessica Crespo, who will provide more on our financial results. Earlier this morning, we issued a press release detailing business activity for Q3 2022. We encourage listeners to review the press release, which is available on our website at ocugen.com. This call is being recorded and a replay along with the accompanying slide presentation will be available on the Investors section of the Ocugen website for approximately 45 days. This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on the beliefs and assumptions of Ocugen Inc. and on information currently available to management. All statements contained in this presentation other than statements of historical facts are forward-looking statements. We may in some cases use terms such as predict, believe, potential, proposed, continue, estimate, anticipate, expect, plans, intend, may, could, might, will, should, or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Such statements are subject to numerous important factors, risks and uncertainties and may cause actual events or results to differ materially from our current expectations. These and other risks and uncertainties are most fully described in our periodic filings with the Securities and Exchange Commission, including the risk factors described in the section entitled Risk Factors and the quarterly and annual reports that we file with the SEC. Forward-looking statements that we make in this presentation speak only as of the date of this presentation. Except as required by law, we assume no obligation to update forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise after the date of this presentation. Finally, Ocugen’s third quarter 10-Q will be filed soon after today’s call. I will now turn the call to Dr. Musunuri.

Thank you, Tiffany. Good morning, and thank you for joining our call. I'm very proud of the important accomplishments we achieved in the third quarter. With courageous innovation as a driving force behind everything we do, we're diligently progressing with our cell and gene therapies and pursuing broader development and expansion of our vaccine program, which now includes a unique mucosal vaccine OCU500 for COVID-19. We're also very enthusiastic about the potential of our modified gene therapy platform that we shared in more detail at the American Academy of Ophthalmology Conference in Chicago and our first R&D Day last week. The Ocugen team continues to charge ahead to establish ourselves as a fully integrated patient-centric biotech company. As we meet our clinical and regulatory milestones, I'm especially confident that the team is well-poised to drive initiatives in new directions and break new ground for patients who have no effective therapeutic options and people who want choice in the fight against COVID-19. Today, we are going to provide updates on our vaccines, gene and cell therapy programs. I would like to start with Ocugen's vaccines program. COVID-19 remains persistent, and the world critically needs more effective and safe vaccine options. We are realizing some of the limitations of vaccines currently available in the United States in terms of their durability and capability to reduce transmission. Up until now, much of the attention has been on reducing hospitalization rates, but we need to think much more broadly and consider what threats new variants will pose and what is required to face the unique challenges that this next phase of COVID-19 will bring. As I alluded to earlier, in September, we announced our licensing agreement with Washington University to develop, manufacture, and commercialize its proprietary mucosal vaccine in the United States, Japan, and Europe. OCU500 has the potential to generate rapid local immunity in the nose, mouth, upper airways and lungs, where SARS-CoV-2 enters the body. We believe that the mucosal vaccine can help reduce the transmission rate by generating neutralizing IgG, mucosal IgA, and T cell responses. This approach represents a potential universal booster, regardless of previous COVID-19 vaccination. We intend to work closely with the US government agencies tasked with pandemic preparedness on the regulatory pathway and with the initiation of clinical trials. Additionally, we are addressing the public's need for a more durable immune response to COVID-19 with the continued development of our candidate vaccine, COVAXIN. Enrollment was completed and dosing continues in the Phase 2/3 immuno-bridging and broadening clinical trial, with top-line data expected in early 2023. We are encouraged that no safety concerns have been identified in the trial to date. As part of the technology transfer, we successfully completed a demonstration patch at Jubilant HollisterStier. We will have the ability to move forward once World Health Organization concerns with our partner have been resolved. Now moving on to our gene therapy program. Ocugen is deeply committed to our core technology, focused on inherited retinal diseases along with other blindness diseases affecting larger patient populations. We are making progress in our vital work in Retinitis Pigmentosa, a disease for which there is no cure, no medicines to block disease progression, and limited treatments to help manage the tragic journey that ultimately leads to blindness for patients. The independent data and safety monitoring board completed a review of safety data for subjects enrolled in Cohort 2 for the OCU400 Phase 1/2 clinical trial for Retinitis Pigmentosa and recommended proceeding to enroll subjects in Cohort 3. We have dosed the first patient and the company expects to complete Cohort 3 enrollment by the end of the year. By the end of the Phase 1/2 study, data will be collected and analyzed from dosed RP and LCA patients before initiating the Phase 3 efficacy trial. Currently, RP is associated with mutations in more than 100 genes, affecting approximately two million people globally. The current study will start enrolling patients with Leber Congenital Amaurosis, or LCA mutations. LCA is a rare eye disease associated with mutations in more than 25 genes. OCU410, also leveraging our modifier gene therapy platform, is being developed to utilize the nuclear hormone receptor gene, RORA for the treatment of dry age-related macular degeneration or Dry AMD, which affects approximately 9 to 10 million Americans alone. And this quarter, we are announcing the addition of OCU410ST to potentially treat Stargardt disease, an orphan disease that will be investigated along with Dry AMD. We have successfully completed cGMP manufacturing in support of clinical trials and are currently conducting IND-enabling studies. Ocugen is planning to file IND applications to initiate Phase 1/2 clinical trials for both these programs in Q2, 2023. Another product modality in the retinal disease space is based on a novel fusion protein. OCU200 is designed to address diseases such as diabetic macular edema, diabetic retinopathy, and Wet AMD. Ocugen is currently executing IND-enabling studies and is planning to submit an IND application in the first quarter of 2023 to initiate a Phase 1 trial targeting DME. Regarding our regenerative cell therapies, in May, we expanded our pipeline into cell therapy in orthopedics with NeoCart. NeoCart shows potential to accelerate healing and reduce pain, rebuilding damaged knee cartilage and limiting the progression of osteoarthritis. Ocugen is working with the FDA to complete the Phase 3 protocol to advance its development and is building its own manufacturing suite to prepare for the study. Earlier this year, the FDA granted a regenerative medicine advanced therapy, or RMAT designation, to NeoCart for the repair of full-thickness lesions of the knee cartilage in adults. Our ambitious clinical agenda and the rigor in clinical development to advance our pipeline is reflective of our culture of courageous innovation. We're relentless in our pursuit towards our long-term goals and reaching the patients who can potentially benefit from our diverse pipeline. I’ll now turn the call to Jess to provide our third quarter 2022 financial results.

Thank you, Shankar, and good morning, everyone. I'll now provide an overview of the key financial results for the third quarter of 2022. Our research and development expenses for the three months ended September 30, 2022, were $15.6 million compared to $6.3 million for the three months ended September 30, 2021. The increase in research and development is primarily driven by costs incurred to execute our clinical trials. General and administrative expenses for the three months ended September 30, 2022, were $7.5 million compared to $4.5 million for the third quarter of 2021. Our net loss was approximately $21.9 million or $0.10 net loss per share for the third quarter of 2022, compared to a net loss of approximately $10.8 million or $0.05 net loss per share for the third quarter of 2021. Our cash, cash equivalents, and restricted cash totaled $101.6 million as of September 30, 2022, compared to $95.1 million as of year-end December 31, 2021. We are focused on efficiently managing and prioritizing the use of our capital. Our plans to work with the US government agencies for support and the funding of our COVID-19 vaccine program have allowed us to extend our cash runway into the fourth quarter of 2023. That concludes my update for the quarter. Tiffany, back to you.

Thanks, Jess. And with that, we'll open the call for questions. Angela?

Your first question comes from Jennifer Kim with Cantor Fitzgerald. You may proceed.

Hey everyone. Congrats on the quarter and thanks for taking our questions. I have a few here. The first is, I think you mentioned that the R&D cost reflects the cost incurred for clinical trials. So I'm just wondering how should we think about those OpEx numbers going forward in terms of where G&A and R&D are at for the quarter. And I know that you said that you're building manufacturing sites to prepare for NeoCart and overall expansion. My second question is just the top line results for the Phase II/III for Covaxin. Can you walk us through what the next steps and the timeline for those steps would look like in terms of your discussions with agencies and the potential for conducting an adult safety trial, etc.?

Yes, Jennifer, good morning, thank you. I'll let Jess answer the first question.

Sure. Hi, Jennifer. So with regards to the cost on a go-forward basis, I think this quarter is probably a decent proxy for our go-forward expenses looking at R&D and G&A.

And your second question is related to NeoCart. Could you repeat your second question again?

Yes, yes, sure. For the Phase III, II, III data for Covaxin, can you walk us through sort of what the next steps would look like after the top line data and the timeline for that in terms of your discussions and where you should go next?

Yes, yes. So the top line data, as we stated, we have completed enrollment, and we are currently going to do the data analysis after we’re done with collecting all the samples from the patients after the second dose. And we're anticipating to release the top line results early next year. The study will get completed. Obviously, as we mentioned before, the data will also give some direction on dosing patients who have taken mRNA before. That means in addition to naive patients, we also had mRNA patients because it's really difficult to enroll 100% naive patients at this stage, especially due to the ongoing pandemic. Therefore, we are going to gather data from both naive patients and patients who have taken mRNA vaccines. Based on that, we are already working with the FDA on the next safety protocol, which we believe may be needed for a US study in the US demographic for BLA. However, based on the booster data, that will shed a lot of light into how we move forward because we believe Covaxin can serve as a strong booster with a broad immune response for people who have received mRNA shots, which are primarily based on the spike protein.

Okay. That's very helpful. And if I could squeeze one more question. As you expand to include LCA patients in your OCU400 trial, are you expanding at the Cohort 3 dose? And then how many LCA patients would then be needed to support moving into Phase III?

Yes. No, that's a good question. So yes, that's the plan just like you stated. Our goal is to go with the most tolerable dose with the FDA, and they will be recruiting three patients.

All right. Thanks, guys.

Thank you.

Thank you.

Your next question comes from the line of Robert LeBoyer with Noble Capital. Your line is open.

Good morning. I had a question on NeoCart and if there are any time frames that you can give us as to finalizing the Phase 3 protocol or starting the clinical trial?

Yes. Currently, Robert, there are two steps to it. One is getting our protocol finalized with the FDA. We've been working with them, and that will take some time. The second step, which is the most important, is getting our manufacturing ready. Cell therapy is complex and requires specialized, scientifically controlled environments. That's why Ocugen is committed to building our own facilities in our R&D expansion. We're preparing those facilities now. We anticipate they will be ready by the end of next year.

Okay, great. That’s very helpful. Thank you.

Your next question comes from the line of Daniil Gataulin with Chardan. Your line is open.

Good morning. Thank you for taking the question. Just a couple here. So, with two vaccines in the pipeline, the COVAXIN and OCU500, what is your strategy for them working together? Are you looking at them as being complementary? I just wanted to see what a big picture is for both of them.

Yes, absolutely. So OCU500, the mucosal vaccine is really needed to address virus transmission. We must control the transmission or the virus will continue to mutate. All experts in the field agree that we really need a mucosal vaccine to stop the entry of the virus. I believe this will be significant for the long-term. Our COVAXIN offers a broad immune response. Ideally, if everyone gets COVAXIN and establishes robust immunity, they will be able to fight off emerging variants. Then, the mucosal vaccine will serve as a booster that is inhaled or intranasally, making it convenient, even for children, in the long term. Furthermore, it's easier to produce this vaccine because it is based on the adenoviral vector platform. As new variants emerge, we can rapidly produce this vaccine compared to our traditional inoculated viral vaccine due to its whole virus approach. So, it is essential to develop the mucosal vaccine as we navigate through the pandemic.

Okay. Got it. That was helpful. And another one on OCU400, are you still guiding to report the initial data by mid-2023? And if so, what are some of the key metrics that we should be paying particular attention to?

Yes. I mean, we'll continue to monitor the data, and our goal is to present some data by mid-next year. As we mentioned before, in the Phase 1/2 clinical trial, the primary endpoint is safety; however, we are also monitoring efficacy based on observational endpoints. Each mutation may have a different endpoint leading into Phase 3. Therefore, we are focusing on multiple observational endpoints, both functional and structural. For structuring, we will examine the retina to check if any stabilization of degeneration occurs. Stabilization is crucial for these patients as it helps in protecting against degeneration. We are looking at structural aspects and functional aspects. Data from tests such as perimetry or mobility assessments will be shared in mid-next year.

Got it. Thank you very much.

Your next question comes from the line of Jonathan Aschoff with ROTH Capital Partners. Your line is open.

Thanks, guys, and good morning. My one question is on COVAXIN. To what extent or actually, I'm sorry, it's on OCU500. To what extent do you think that mucosal vaccination status prior to getting 500 might allow them to neutralize what's on that adenovirus and make it not really that effective?

Good morning, Jonathan. When you administer mucosal vaccines, it is essential to have a primed system, and most Americans are primed with mRNA vaccines. For those who have received two mRNA shots, the mucosal vaccine offers additional benefits. Our aim is to establish it as a universal booster vaccine that enhances existing vaccinations. The data indicates that individuals who are already primed will experience considerable advantages from the mucosal vaccine.

Your next question comes from the line of Uy Ear with Mizuho Securities. Your line is open.

Hi, guys. Thanks for taking my question. Just curious with vaccination, essentially, moving from government pay to commercial pay. Just wondering how you guys are thinking about the role of both COVAXIN and OCU500?

Yes. As you have seen, some of our competitors have announced pricing for their vaccines, many aiming to set prices around $100 per dose as they anticipate transitioning into a private market. COVAXIN follows a traditional path, serving as both a primary shot and booster. However, there’s substantial emphasis on the mucosal vaccine from government agencies and experts because of the fear that without controlling transmission, significant mutations may occur. Therefore, there's a strong need for it, and we're collaborating with government agencies. We believe that developing a novel solution to control transmission, especially in light of the largest democracies, like India and China, is crucial. They have successfully launched mucosal vaccines, and we need to accelerate our efforts in this domain. Our hope is that the government will strongly support the development of the mucosal vaccine, OCU500. In the short term, we believe that government assistance will be essential in this regard, and this may eventually lead to a private market opportunity in the future.

And just following up on your comments about the OCU500 being authorized in China and India, could you give us a sense of how effective that is in those countries and whether it's broadly used?

Yes. In India, the data is public. Both companies have released data from their clinical trials. In India, they have recently launched the mucosal vaccine, and the Phase III data looks favorable compared to COVAXIN in head-to-head comparisons, showing a strong immune response. They demonstrated robust IgG and mucosal myogenic response, and it also neutralizes emerging variants of concern. Moreover, the inhalation vaccine from China is being widely implemented across multiple large cities. While we cannot ascertain the exact data, publicly available information indicates that mucosal vaccines are proving beneficial in controlling the pandemic and reducing transmission.

There are no further questions at this time. This concludes the Q&A portion. I will now turn the call back over to Chairman, CEO and Co-Founder; Dr. Shankar Musunuri.

Thank you, Angela. I'd like to conclude the call with some additional parting thoughts. We have shown remarkable progress to achieve our vision of creating a fully integrated patient-centric biotechnology company that targets unmet medical needs and impacts public health. We pointed this out last week during our R&D Day that between 2023 and 2027, we're targeting BLA filings and product launches in each of the next five years, reflecting what we mean by courageous innovation. We believe our gene therapies have the potential to bring significant value to our patients and shareholders, as discussed at the R&D Day. We must prioritize our resources on gene therapies while seeking partnerships with government agencies for vaccines to support public health in the short term. Once we start gathering data next year on gene therapies, it will allow Ocugen to potentially form partnerships outside of the US to support our growth. In the long term, we will continue to strengthen our pipeline to become leaders in disease areas we represent and continue to offer hope for patients around the globe. Thank you for joining us today.

And everyone, have a great day.

This concludes today's call. You may now disconnect.