Ocugen, Inc. (OCGN) Q4 2021 Earnings Report, Transcript and Summary

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. [Operator Instructions] 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, and we hope you and your family are safe and well. We are here today to review with you some of the most 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 options double down on what I called courageous innovation. That phrase speaks to our purpose and commitment to development with a purpose and great, searching for new solutions to enduring challenges on working to bring a new COVID vaccine into 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 our business partners to position us for so much more in 2022. This slide highlights some of the critical milestones for Covaxin in the later 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 closing the gaps among populations who remain unvaccinated. In just one year, so much has changed that oxygen, our work for COVAXIN have evolved over the months 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 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 asking why the review can't move faster. We hear you. And we would note two things. The first is that, I'm pleased with the timeframe it took to have the Clinical Hold lifted. That took less than three months. The second is that, getting to the 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 are 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 that are determined make sense. And speaking of Canada, there is nothing – there's 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 that leaders have centered on the value of reestablishing a manufacturing and R&D hub within the region, and for supporting that nation's contribution, to innovation and public health. One final note about COVAXIN, we are pleased to share with you that we have made good progress towards establishing manufacturing capability at our partner Jubilant HollisterStier and Spokane, Washington. This has involved designing a robust manufacturing process, establishing a means to transport active ingredient and straight ad-direct from India to the US, selecting primary packaging components and establishing quality control strategies that will provide additional assurance that the final product meets rigorous FDA standards and can be safely administered to people. The technology transfer is going well. And we expect to complete qualification 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 of 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 a study are available on the National Institutes of Health website, clinicaltrials.gov. Our next candidate, OCU410 is IND-enabling study is underway to support a future Phase 1/2 clinical trial, and our novel biologic, OCU200, transferrin-tumstatin fusion protein that has potential to help those with diabetic macular edema, diabetic retinopathy, and wet age-related macular degeneration is progressing well with IND-enabling activities. 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 with the data readouts expected 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 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 years 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 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?

Good morning. Yes.

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 FDA checked it on time. The FDA is extremely busy too as so many applications on the vaccine side. So this is a typical questions, 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're able to wrap up this whole process within three months which is good considering in the workload 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 kind of predict perhaps the outcome of that pediatric EUA?

No, I think, I mean, let me clarify on the IND hold. Additional data was not, this is a clarification questions mostly. We didn't have to generate any additional data. Coming to the -- so the second question, are you asking about pediatric EUA?

Yes. I was just trying to cut and 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 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 phase 2 immuno-bridging and broadening study we're embarking on and that's for BLA. Now, the EUA was submitted Emergency Use Authorization for pediatric population, ages two to 18 based on the data generated by our partners, based on the immuno-bridging trial, which bridges data to large scale safety trial in adults. So that's under active review by 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 that will bridge with a large scale safety and efficacy trial. Typically, you do that's what other companies have done in US, too, when they apply for pediatric population, you bridge the pediatric to 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 efficacy trial. Typically, you also have to conduct a safety study in US demographic based on 21 CFR, and that bridges the safety of the population in the US with the data collected from elsewhere. So in addition to this immuno-bridging trial, we foresee doing a safety trial in the US population. So those are the two clinical trials required typically for BLA submission.

Perfect. Thanks, Shankar. And then just the last here. I know this is perhaps still being determined, but we're 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 bridging study, typically you need 200 subjects for immunogenicity trial. You don't need large population so that bridges neutralizing antibodies. And then there are other antibodies that are going to monitor. In our case, we'll be looking at not only spike, we will also be looking at nuclear capture protein others because this vaccine does provide a broadening immune response, unlike spike-based vaccines. And the second question you ask is on safety clinical trial. Typically, that requires more than what we need for emergency bridge. And those discussions are ongoing with FDA. And once we have the final agreement with them, on the number, we'll be providing updates to 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 the 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 upon how that progresses, the potential for near term revenues. So that could obviously change our cash runway. But if we exclude that or any benefit from that, and we have-- without that, we -- the capital that we have raised, we have sufficient capital to go well into the first quarter of next year. It gives us ample runway for the investment in our programs and all the trials that we have -- we’re contemplating to support the programs.

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

Sure, thank you. Thank you, Zegbeh.

[Operator Instructions] 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 honors of asking all the questions today. So just kind of moving on here, I think the next question as it 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 of the details around that.

Yes. So the US market, Zegbeh, is still evolving, right? But we still have the pandemic, which we believe will continue for next few years. So the – currently, obviously, the pediatric, that's the reason we have filed for pediatric EUA, that is a significant unmet medical need. And under age five group, there are no vaccines available. From 5 till 18 age group, there's only one vaccine option available and the vaccination rates -- the kids who got two doses from five to 11 range is about 25%. So to increase the vaccination rates, which are extremely important to prevent hospitalization and death, and in the pediatric populations, majority parents are looking for options. And that's the reason there is a great need for pediatric vaccines which are safe and effective. And we have provided significant amount of datasets to agency and requesting them to push for the AgCom [ph] meeting. Second thing is -- so the second opportunity is booster market. As you know, this pandemic will continue and people who got the vaccines, eventually they'll be looking for boosters, or people who are unvaccinated, they're also looking for options. And providing an option such as ours, with the broadening immune response, and the product which is built on known traditional platform technology such as polio vaccine, people can relate to. So some of the vaccine hesitancy folks who are still there who are not vaccinated to-date. And they can also get an option such as our vaccines. So there is a need for options and providing a vaccine with solid efficacy and safety. And also, which is built on a traditional platform will have, we believe, significant value. Because there are people out there that can really provide options to increase the vaccination rates. And in addition to that, the US government is doing a good job to the vaccine diplomacy, purchasing vaccines from US companies, and donating for global use. Unless global population is vaccinated everywhere of a certain extent, this pandemic is not going to be under control. Therefore, it's extremely important to having multiple vaccines in the toolkit, especially the vaccine -- our vaccine has expected shelf life of two years at refrigerator temperature, six months at room temperature. So, this vaccine will be an ideal vaccine for stockpiling and for vaccine diplomacy for 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 may be some strategies around how you plan to position that to kind of help with the enrollment of the study? And perhaps even some comments around the timing of how long do you think that could take?

So, I think the clinical trial information that is posted shortly on clinicaltrials.gov on Covaxin trial design, and the study will allow not only named population, but it allows subjects who got vaccinated, but there is a pause, I think they have a minimum six months of gap after the last vaccine doses, and they can be enrolled in the study. So, we have designed it very creatively and the details will be posted on clinicaltrials.gov after its posted, Zegbeh, if you have any further questions, we'll be happy to address. And, again, there's a great need for options in this country. And I mean, we get a lot of calls and questions from people across the country and we believe we'll 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?

So, OCU400 study is recruiting now. If you go to the clinicaltrials.gov, details are given. So, this is Phase 1/2 trial of two mutations and in each mutation, we are planning to recruit nine patients each. Then it's a dose escalation. And so we'll be able to recruit those patients. We have identified in multiple sites, and the process is ongoing. And we're 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 observation endpoints. So, we expect to provide updates in the second half.

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

Yes, absolutely Zegbeh. Great question. So, that's the good thing about this program. I mean, not only we are going into MLP-3, the mass gene mutation itself, in our Phase 1/2 clinical trials. We also are looking into robust mutation, which is a modifier approach. So that actually is -- that concept once we show activity in those patients, it's working that opens up the door for entire RP population potentially, you're talking about covering hundreds of mutation within RP. Similar to that there is a CEP290 mutation, which we are envisioning to initiate in those patients too within the next one year. And that covers LCA, which is Leber congenital amaurosis [indiscernible]. Our goal is to have at least these three mutations covered, which can represent RP and LCA, covering about 170 mutations, two million patients globally struggled with these diseases. So that's enormous opportunity to treat a lot of these patients globally, and significant population within the US and the EU. US has about 100,000 to 200,000 patients, covering between RP and LC. So it's a huge -- big size market and moreover, it would be a great help for these patients to rescue them who are in desperate need. As I mentioned in my past conference calls, many of these patients do become legally blind by the time they are mid 40s. So it's really important. There is a sense of urgency needed to rescue these patients. We hope we can 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 subject? And then I have a follow-up. Thanks.

So, thank you Brian, thank you. So let me start with a capacity question, is that UA 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 inactivated vaccine, it needs to excel facilities, they have actually scaled up to billion doses a year capacity. And what we have done in the interim, we established the packaging site in the US and the release testing site, so that we can release the product to our standards through Ocugen in the US. And those types are already established. So initial supply will immediately come from India, from our partners, which gets tested in the US and packaged in the US to release to the public. While the tech transfer is ongoing, and we are planning to build up to 100 million does capacity at Jubilant for good product. However, as I mentioned to you before, there are three aspects of supply we are envisioning; one, the pediatric use, the second part is bolster use in the US market, the third part, US vaccine global diplomacy. So I mean government purchasing doses for distribution abroad. So we believe with our partners significant capacity and the capacity we're building in the US, with our CMOs, we'll be able to supply whatever the needs are. And second question you have was related to reaching some other states and also the people who are unvaccinated. Currently, the distribution, as you know, is completely done by the government. They purchased the doses, the procurement is 100% done by government, and that they take care of the distribution for now. And they distribute the states and they're using their own network. So in future, obviously, that may change, if at all, this pandemic ever moves into endemic, and becomes a annual boasters and others are predicting, and therefore time, you know, when it gets to prioritization, then we have some time to work on those details. But for now, you know, all the vaccines are procured by the government and distributed the government. And obviously, we'll be working with some states and other governments, if there is a need, you know, in certain states for this vaccine, because an option many subjects are looking for, we'll be happy to have them up.

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

Yes, I mean, all those options are no, we'd be opportunistic. I mean, our goal is to maximize, you know, supply of this vaccine as needed. But we'll be exploring all those 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 will you need to see before expanding to other mutation types?

Yes, typically, I mean, this is a standard clinical trials with the gene therapy in my space to look into rare diseases. Typical, I mean, our trial follows exactly what others have done. It's a Phase 1/2 trial. The primary objective is safety. And you have to monitor these patients for a year on a – if it's three months, you have to check for safety. And for every mutation, you look into the clinical trial, you have multiple observational endpoints because then from those observational endpoints, once the study is done after one year, you pick the observation point and make one of them as a primary endpoint into the Phase 3. So that means in this case, Phase 3 primary endpoint, by the time we go to Phase 3 maybe different than Rhodopsin. So, as I mentioned before, Rhodopsin truly follows modified approach. So if we show the signal in Rhodopsin, it's working the way it's supposed to work, that opens up the door for many, many mutations. I mean, obviously, you know, we also have to be cognizant, is a rare diseases. And therefore, we will methodically do the clinical trials in few mutations, so to cover part of the RP, and cover LCA. So that, just as I mentioned before, although this decline, you know, cover those 100,000 limitations between RP and LCA. So the market size, you can look into populations, and US, between RP and LCA is 100,000 to 200,000 patients. And globally, it's about 2 million covering those 170 limitations. Currently, there's only one approved product for RPE65-mutantation that I believe has less than 1,000 patients in the US. So there's a significant unmet medical need, and a significant opportunity. And for the gene therapy pricing, Brian, I think there are a couple of products in the market. And you can take a look at it. And I think other companies are getting there, and they're 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 that one other slide you're planning to also expand into such an idea as well. So just curious, what kind of bar should which investors expect in terms of perhaps sequential improvement before you expand to other investigated mutation type?

Yeah. So on CEP290, Brian, we wanted to start with – for vaccine, we do have data on CEP290 on the preclinical and in other models, it's the same product, remember that so we don't have to repeat any top study. And so, it's a timing issue. So we're going to actually introduce that into the clinic. Since the agency has allowed us to go into production. We're confident they'll allow us to go into CEP290. We're also in discussions actually with the EMA. And we do have broad RPA and LCA, indications for the orphan drug designations in the EU. Therefore, we're also in touch with the EMA. And our goal is to at least complete the Phase 1/2 clinical trials for these three mutations in the US, while we are in communications with EMA, then eventually, when we go into clinical trials, after one year, what you're asking is, what do you want to see, I mean, obviously, CEP290, we don't believe we'll have any issues getting into the clinic with that. I mean, obviously, we'll be monitoring the rescue, disease progression from the – gene therapy, the single dose and see how it's protecting people who are dose. And based on the data and the disease progression and rescue, based on those endpoints were monitoring, we pick the primary endpoint and go into Phase 3. And once we and during this process, obviously, we believe coding to four articles is broad. And one for LCA, hopefully, should allow us for potentially broad RPA and LCA indications. So obviously, we'll be collecting a lot of data in Phase 1/2, and carefully moving into cautiously interface three for all three mutations. That's the plan together between US and EU. So we'll mark the programs that the US and EU that's the plan, eventually, for Phase 3 clinical trials. Typically the Phase 1 for one year, we hope, the Phase 3 will continue to be in the timeframe, because you do have to catch the signal and also show, based on the primary endpoint, adequate duration during the clinical trial.

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

Yes. Welcome.

Thank you, Brian.

Thank you.

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

Great. Thank you so much. And 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 concludes our conference for today. Thank you all for participating. You may now disconnect. Have a great day.