Ocugen, Inc. (NASDAQ:OCGN) Q1 2023 Earnings Call Transcript May 5, 2023

Operator: Good morning, and welcome to the Ocugen’s First Quarter 2023 Financial Results and Business Update Call. Please note that this call is being recorded at this time. All participant lines are in a listen-only mode. Following the speakers’ commentary, there will be a question-and-answer session. I will now turn the call over to Sharon Choe, Ocugen’s Head of Investor Relations. You may begin.

Sharon Choe: Thank you, Monty. Joining 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 Chief Business Officer, Quan Vu, who will provide a financial update. Earlier this morning, we issued a press release detailing business and operational highlights for the first quarter of 2023. We encourage listeners to review the press release, which is available on our Web site at www.ocugen.com. This call is being recorded, and a replay with the accompanying slide presentation will be available on the Investors section of the Ocugen Web site for approximately 45 days. This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties.

We may, in some cases, use terms such as predict, believe, potential, propose, continue, estimate, anticipate, expect, plan, 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. Investors should familiarize themselves with the company’s filings for complete details. 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 quarterly report on Form 10-Q covering the first quarter of 2023 will be filed soon after today’s call. I will now turn the call to Dr. Musunuri.

Shankar Musunuri: Thank you, Sharon. Good morning and thank you all for joining us today. Looking at what we have achieved since we reported our 2022 fourth quarter and full year results, I’m kicking off today’s call with a high sense of accomplishment and optimism for the future of Ocugen. At the top of our list of highlights is the recent announcement of positive preliminary safety and efficacy results from the Phase 1/2 trial of our OCU400 program and the FDA’s Orphan Drug Designation for our OCU410ST program to potentially treat ABCA4-associated retinopathies such as Stargardt disease. We also forged ahead in our pursuit of non-dilutive government funding to support our inhaled vaccines pipeline and submitted multiple proposals to various federal agencies.

And we will begin seeking corporate partnerships for our gene therapies. I will also share updates on our OCU200 and NeoCart programs later in my commentary. 2023 is off to a strong start. And you can see we remain on track to achieve the significant milestones for the year that we first shared with you during the last business update webcast. Our modified gene therapy approach continues to be the leading differentiator for Ocugen. Unlike single gene replacement therapies, which only target one genetic mutation, we believe that our modifier gene therapy platform through its use of nuclear hormone receptors that presents a novel approach that has the potential to both address multiple retinal diseases caused by mutations in multiple genes with one product and to address complex diseases that are potentially caused by imbalances in multiple gene networks.

Currently, Ocugen has three modifier gene therapy programs, OCU400 for retinitis pigmentosa and Leber congenital amaurosis, which affects approximately 125,000 patients in the U.S. living with any of more than 125 associated mutated genes; OCU410 for dry age-related macular degeneration, a disease affecting approximately 10 million people in the U.S. alone; and OCU410ST for the treatment of ABCA4-associated retinopathies including Stargardt, retinitis pigmentosa, RP19, and cone-rod dystrophy 3, CORD3, diseases affecting 44,000 Americans. We recently announced positive preliminary safety and efficacy results from the Phase 1/2 trial of OCU400 for the treatment of retinitis pigmentosa and Leber congenital amaurosis. These preliminary positive results serve as the first clinical validation of the platform where patient responses across various genetic mutations support that OCU400 has the potential to transform the lives of many patients who are struggling with debilitating blindness diseases.

This Phase 1/2 trial is a multicenter, open label, dose ranging study. We have enrolled a total of 18 RP patients in this study, with 10 subjects in the dose escalation and eight subjects in the expansion phase. The age of subjects enrolled to date ranges from 18 to 77 years across rhodopsin and NR2E3 gene mutations. We further expanded this Phase 1/2 trial to enroll LCA patients with the CEP290 gene mutation and pediatric patients with NR2E3, RHO and CEP290 mutations. In Cohort 1, which is low dose, and Cohort 2, which is medium dose, a total of seven subjects with moderate to advanced visual impairment due to RP-associated with RHO and NR2E3 gene mutations received a unilateral subretinal injection of either a low dose, which is 1.66 x 10 to the 10 vg per mL in Cohort 1 or medium dose, which is 3.33 x 10 to the 10 vg per mL of OCU400 in Cohort 2, respectively.

In the preliminary data analysis, nine-month follow-up data for three subjects in Cohort 1 and six-month follow-up data for one subject from Cohort 1 and three subjects from Cohort 2 were assessed. Overall, preliminary results showed a favorable safety and tolerability profile for OCU400. Regarding efficacy, we looked at multi-luminescence mobility tests, or MLMT, a primary efficacy endpoint used in clinical trials for an FDA approved product in this disease area, and best corrected visual acuity, or BCVA. Key efficacy outcomes from seven subjects demonstrated four key points. 100% of treated eyes showed a stable or improved MLMT score trend. 71% of our OCU400 treated eyes demonstrated a one or more Lux level improvement in MLMT score compared to 29% of untreated eyes.

67% of our OCU400 treated eyes in Cohort 1 with the nine-month follow up demonstrated a two or more Lux level improvement in MLMT score compared to none of the untreated eyes. And 43% of OCU400 treated eyes demonstrated 8 to 11 letters of improvements in BCVA score compared to none of the untreated eyes. The early results from patients treated in the Phase 1/2 trial are encouraging and support the paradigm changing potential of our modifier gene therapy technology to address unmet medical needs for patients with RP and LCA. With this favorable safety profile and positive trend in efficacy signals, we are very eager to see longer term data and to potentially initiate Phase 3 clinical trials in the U.S. and EU. As I mentioned earlier, we received exciting news last week that the FDA granted Orphan Drug Designation for OCU410ST AAV5-hRORA for the treatment of ABCA4-associated retinopathies including Stargardt, RP19 and CORD3 diseases.

As a refresher, Orphan Drug Designation is granted by the FDA to certain products that show promise in the treatment, prevention or diagnosis of rare and serious diseases affecting fewer than 200,000 people in the United States. Additionally, the Orphan Drug Designation status allows for a potential seven-year market exclusivity specifically to the designated orphan use following FDA approval. Other development incentives include the clinical protocol, design assistance, and potentially accelerated review times. This designation represents a noteworthy milestone in our effort to develop innovative treatments for inherited retinal diseases. And while OCU410ST is intended to treat rare diseases, OCU410 are also targeting the network is aimed at treating dry age-related macular degeneration that affects hundreds of millions of people across the globe.

Using our modified gene therapy, we believe OCU410 potentially addresses shortcomings of current treatments for geographic atrophy that affects about 1 million people in the U.S., because it is a broad spectrum approach that has potential as a one-time curative therapy with a single subretinal injection. Now turning to vaccines. The OCU400 series of vaccines in development grants Ocugen a distinct product candidate profile status that could significantly impact major global health obstacles and maximize our opportunity to serve broader patient markets. Current COVID-19 vaccines are limited by a lack of durability and inability to stop transmission. As part of our commitment to address current gaps in the fight against COVID-19, we’re developing a novel inhalation vaccine platform that includes OCU500, a bivalent COVID-19 inhaled vaccine; OCU510, a seasonal quadrivalent flu inhaled vaccine; and OCU520, a combination quadrivalent seasonal flu and bivalent COVID-19 inhaled vaccine.

The OCU500 vaccine series is based on a novel chat platform designed to reduce transmission and protect against new variants with the potential durability up to one year. We decided to develop the flu vaccine in addition to addressing COVID-19, because flu will always be a health concern. There is also longer term business potential as Americans continue to be regularly vaccinated against the flu. For the 2022 to 2023 flu season, 50% of the U.S. population above six months of age received a seasonal flu shot, representing a market size of more than 170 million doses. To optimize resources across our diverse critically needed development programs and maintain shareholder value, our team has been busy in DC, speaking with the government agencies to pursue non-dilutive funding opportunities for our OCU400 vaccine series.

We have submitted multiple comprehensive proposals for review and consideration and maintain an ongoing dialogue with the respective agencies regarding the development of the inhaled vaccines platform. We look forward to updating you as we hear more. Last quarter, we submitted an investigational new drug application, IND, with the U.S. Food and Drug Administration to initiate a Phase 1 trial of OCU200 for treating diabetic macular edema, DME. The IND was placed on clinical hold by the FDA as part of its request for additional information related to chemistry, manufacturing and controls prior to initiating the Phase 1 trial. The company plans to respond to the FDA promptly to get FDA clearance to initiate the Phase 1 clinical trial. We believe OCU200 works with a distinct mechanism of action compared to existing therapies and targets multiple causative pathways, such as angiogenesis, oxidation, and inflammation, and has the potential to offer better treatment to all patients.

NeoCart is our Phase 3-ready regenerative cell therapy technology that combines novel advancement in bioengineering and cell processing to enhance the autologous cartilage repair process. We are in the process of renovating our facility to accommodate cGMP manufacturing on NeoCart and plan to complete construction in the fourth quarter of 2023, with the Phase 3 randomized controlled study in subjects with articular cartilage defect commencing in 2024. As you can see, we’re highly dedicated to completing our stated objective with sound strategies that we believe will enable Ocugen to reach several value-enhancing milestones over the course of 2023 and beyond. With that, I will now turn the call over to our Chief Financial Officer and Chief Business Officer, Quan Vu, to review our first quarter financial update.

Quan?

Quan Vu: Thank you, Shankar, and good morning, everyone. I will now provide an overview of the key financial results for the first quarter of 2023. Our research and development expenses for the quarter ended March 31, 2023 were 9.6 million compared to 7.9 million for the first quarter of 2022. General and administrative expenses for the quarter ended March 31, 2023 were 8.2 million compared to 10.1 million for the first quarter of 2022. Net loss was approximately 16.5 million or $0.07 net loss per share for the first quarter ended March 31, 2023 compared to a net loss of approximately 18 million or $0.09 net loss per share for the first quarter of 2022. Our cash, cash equivalents and investments totaled 76.7 million as of March 31, 2023 compared to 90.9 million as of December 31, 2022.

We expect that our cash, cash equivalents and investments balance will enable us to fund operations into the first quarter of 2024. We are continuously exploring opportunities to increase our working capital, and we’ll be focused on seeking out corporate partnerships for gene therapies and non-dilutive funding for vaccines, as Shankar mentioned earlier. That concludes my update for the quarter. Sharon, back to you.

Sharon Choe: Thanks, Quan. We will now open the call for question. Monty?

Q&A Session

Operator: The floor is now open for your questions. . Our first question comes from the line of Jennifer Kim from Cantor Fitzgerald. Please proceed.

Jennifer Kim: Hi. Good morning. Thanks for taking my questions. I have a couple of here. The first is you spoke about seeking potential partnerships with your gene therapy programs. I’m wondering, are you thinking of this on the basis of your lead program or the underlying platform technology or what type of structure are you looking for? And in terms of timing, is that something that you would seek post updated interim data and before initiating a Phase 3 program? And then my second question is on the inhaled vaccine. I know it’s hard to — it’s sort of asking a crystal ball, but do you know potentially when you might have some better visibility there?

Shankar Musunuri: Jennifer, good morning. I’ll let Quan answer the first question and I’ll get to the second one.

Quan Vu: Hi, Jennifer. So the answer to the first question is seeking partnerships is going to be related to the OCU400 specifically. As we continue to develop and see further data, that serves as further justification in providing more credence to the platform itself. So that in the future will definitely be an evaluative process of how the platform itself can be capitalized. With respect to data, we are initiating conversations now. Because as you — I’m sure you’re well aware, business development takes time. And so in the process, we’d like to establish those relationships, engage in discussion. And as more data comes out, we will continue to share that, and that will facilitate and if not expedite the entire business development process.

Shankar Musunuri: And Jennifer, can you repeat your second question related to COVID-19?

Jennifer Kim: Yes. So the inhaled vaccine platform, do you have — I know you submitted some proposals. Have you gotten any feedback in terms of when you might get more visibility on that end?

Shankar Musunuri: Not yet. And we’re actively working with them. When we get more information, we’ll let you know.

Jennifer Kim: Okay. And then maybe if I could sneak one more. The R&D burn for this quarter, is that a good basis when we’re thinking about, I guess, your go-forward burn?

Shankar Musunuri: Yes, it is.

Jennifer Kim: All right. Thanks, guys.

Shankar Musunuri: Thank you.

Operator: Our next question comes from the line of Jonathan Aschoff from ROTH Capital. Please proceed.

Jonathan Aschoff: Thanks, guys. I was wondering if you could elaborate on your key focus being gene therapy. I kind of noticed that the word biologics was removed from your company description.

Shankar Musunuri: Yes. We are — Ocugen, we’re really focused on modified gene therapy platform. And with the recent results — from the results we released, OCU400 in a way validates the platform. And so we’re really excited about it. Obviously, we’ll continue to move that program, as we stated before, and work with the regulatory agencies and the lineup of potentially Phase 3 clinical trials sooner than later. And that’s our focus. And obviously, that two other programs in the pipeline are coming through OCU410 targeting geographic atrophy, subset of dry AMD population, and OCU410ST with Stargardt disease. INDs are going to be filed this quarter. So once again, the company is going to focus our major effort on gene therapies, because there’s a lot of promise. There’s so much of unmet medical need.

Jonathan Aschoff: Okay. Can we have any other color on OCU200 via clinical hold, or is there just really nothing to say other than what’s in the press release?

Shankar Musunuri: Yes. At this stage, nothing to say. It’s related to CMC questions and the company is going to respond promptly.

Jonathan Aschoff: Okay. And can you help us — I’m sorry, I didn’t mean to cut you off there.

Shankar Musunuri: No, that’s it.

Jonathan Aschoff: Can you help us understand the drop in R&D? Is that vaccine or what is that?

Quan Vu: Yes. So a lot of the wind down now is obviously related to COVAXIN. And so as we begin to look at the various aspects of the company, which comes back to what Shankar just alluded to earlier, the heavy focus now will be on the development of the gene therapy platform. And so to that extent, the R&D expenses will be extraordinarily focused as well as the entire organization. And so the winding down on COVAXIN is one of the major factors that are causing the problem.

Jonathan Aschoff: Okay, because if you do that — you kind of have cash well, well, well into the first quarter of ’24. So is that just an overly conservative statement from lawyers?

Quan Vu: I can’t comment on the risk assessment placed by lawyers and how they draft the various things, Jonathan. But for the most part, we believe firmly that that is going to be the case. We believe that is a realistic estimate, perhaps could be conservative. But I think the thing that to take — the key takeaway here is that the organization using the examining operational efficiencies as with all companies moving forward in the biotech sector, as I’m sure you’re well aware, and given the challenging capital markets, we want to be extremely focused and cost conscious in order for us to achieve our goals. And so you can imagine that the longer we can extend this cash runway, the better it is for all stakeholders involved.

Jonathan Aschoff: I get it. Thank you very much.

Operator: Our next question comes from the line of Uy Ear from Mizuho. Please proceed.

Uy Ear: Hi, guys. Thanks for taking my question. I guess the first question I have is it looks like the timeline for NeoCart has sort of shifted to at least the cGMP manufacturing facility completion to 4Q from first half. And there doesn’t seem to be a date as well for when you’ll start the trial. And so just wondering if you can elaborate on that and as well as where does NeoCart now sits, I guess, in terms of priority, given what you just said about challenging capital markets, et cetera? Thanks.

Shankar Musunuri: Good morning, Uy. Just want to clarify, we always stated cGMP facility is going to be ready sometime later part of this year. So that’s pretty consistent. There is no change to that. We are planning to finish the facility, construction and everything else by the end of this year. As far as the clinical trial is concerned, yes, we are still targeting next year. Obviously, our priority is going to be focused on modified gene therapy platform, getting the other two clinical trials to get started, as well as Phase 3 started for our first program OCU400. And so the NeoCart obviously will take second preference compared to that priority wise. And our goal is to still initiate that Phase 3 clinical trial in 2024.

Uy Ear: Okay. Thanks. And second question I guess is when should we sort of expect to see more data from OCU400? I noticed that in the slide presentation, it only has initiation of Phase 3 in the fourth quarter. Just curious? Thanks.

Shankar Musunuri: So we are going to continue to monitor as we see patients on a three-month basis. And obviously, we will have another update on data we’re expecting sometime in third quarter this year.

Uy Ear: Okay. Thank you.

Operator: Our next question comes from the line of Robert LeBoyer from Noble Capital Markets. Please proceed.

Robert LeBoyer: Good morning. My only remaining question is on the OCU200 clinical hold and any timeframe on one that may be resolved?

Shankar Musunuri: We are trying to respond to the FDA continue to work with them. And I mean sooner than later, of course. And this is — we didn’t even start the clinical trial. This is a novel biologic. It’s a fusion protein. Sometimes it’s typical of agency has more questions. This one is related to CMC, nothing related to toxicity or anything else, just wanted to clarify. So we will be responding promptly. And as soon as we get clearance, we will notify the market.

Robert LeBoyer: Okay. Thank you very much.

Operator: Our next question comes from the line of Swayampakula Ramakanth from Wainwright. Please proceed.

Swayampakula Ramakanth: Thank you. This is RK from H.C. Wainwright. Good morning, Shankar and Quan. One question to each of you. Shankar, on the OCU400, have you started conversations with EMA as you start thinking beyond the current study and trying to get into pivotal studies?

Shankar Musunuri: Good morning, RK. We are planning to initiate those conversations a little later this year. Obviously, our goal is to align various regulatory agencies before we get into Phase 3.

Swayampakula Ramakanth: Thank you for that. And then, Quan, on the BD activities side of things, have you had any conversations at all with potential collaborators outside of the government agencies for the inhalation vaccine, especially with some of the flu vaccine players?

Quan Vu: Yes. So the focus on the OCU400 program is development. We are in its initial stages. We have had some initial conversations even before my time here, and kind of set the landscape. And then I think, ultimately, I am beginning to do a second reach out. But are you talking about just inhalation itself with respect to the 500 right now, or do you want to focus on the 400 –?

Swayampakula Ramakanth: Yes, because we have always for the last one year we’ve been hearing that folks are looking for government funds. But I guess they have trouble with the government raising their own debt limit. So if there was probably the funding, would this move forward at all and I’m looking for corporate partners?

Quan Vu: Yes, absolutely. And so the idea behind all this as part of our very focused play here is that we do indeed have the inhalation technology. However, as most of this centralizes around public health crises, we’re looking for that government support. I’m sure you’re well aware, RK, that with all these types of programs, government support is critical, not only from a funding perspective, but also from, in a way — the way that the politics work, for lack of a better word, supports these very programs. And so without that, these programs can get extraordinarily expensive, and we don’t intend to spend a lot more than we are. Our idea is to have enough development data in order to be able to apply for this funding, and to be able to advance it further. Without that support, it would be very challenging for small companies such as ourselves to do that.

Shankar Musunuri: And, RK, once we get there, if the opportunities exist for corporate partnerships, we will look into it.

Swayampakula Ramakanth: Terrific. And also, as Jonathan pointed out, since you don’t have biologics on your corporate mandate, does that mean OCU200 is also subject for BD activities?

Shankar Musunuri: I think OCU200 typically with the Phase 1, we do anticipate signal, even though it’s a dose escalation study. And if we do get a positive signal on efficacy, obviously, we will definitely evaluate that next year.

Quan Vu: To add on to that, RK, obviously, a lot of BD activity programs, as a lot of companies look for much derisk programs, and so these are relatively early. And as we advance them, we will have a bit more clarity. It’s very challenging to go out and have conversations with the various players in the market without pivotal data for the most part. But that does not preclude us, for example, from always establishing these relationships early and exploring the level of interest going forward.

Swayampakula Ramakanth: Fantastic. Thank you, gentlemen. Talk to you soon.

Operator: Our final question comes from the line of Daniil Gataulin from Chardan. Please proceed.

Daniil Gataulin: Hi. Good morning, guys. Thank you for taking the questions. So I have a couple on OCU400. Just wanted to ask if your next readout in the third quarter is going to include any patient level data? And in terms of, I guess, the timing for Phase 3, it looks like you’re planning on initiating that at the end of this year. But your one-year data from the Phase 1/2 is not going to come until at least the first quarter of 2024, just wanted to ask about your strategy there? And I have a quick follow up too.

Shankar Musunuri: Yes. We’re planning to release data in third quarter and update obviously. And at this stage, we haven’t decided and we’ll release patient level data, because we’ll also be working with regulatory agencies and we have to weigh those factors in. And the second thing is the 12-month duration for Phase 1/2, remember there’s an expansion phase after that durability. You’re right. It will be completed first quarter next year. However, what we’re looking for is at least for certain populations in this clinical trial crossing 12 months and collecting adequate safety. And the second thing we’ll be looking for to discuss with regulatory agencies is tuning in and finalizing our primary efficacy endpoint. And as we stated in our results, if we continue to look at that functional endpoint, that’s in an approved product already, it makes it easier with regulatory agencies.

And we confirm that if that’s what the endpoint as an efficacy endpoint going forward, it makes it easier. So we believe having adequate safety some level at least in certain patient populations crossing 12 months, which we’ll have this year, and also confirming with multiple mutations focusing on one efficacy potentially primary endpoint will help us because we are going after gene agnostic RP and LCA indication, having one efficacy endpoint will make it easier for Phase 3 design.

Daniil Gataulin: Got it. That makes sense. Thank you. And another quick follow up for pediatric Phase 1/2 for OCU400. How many pediatric patients you plan on enrolling and at which doses?

Quan Vu: We’re planning to enroll three to get some baseline safety data on these patients so that at least in Phase 3, we can include pediatric population.

Daniil Gataulin: I understood. All right. Thank you very much.

Quan Vu: Thank you.

Operator: Thank you. This concludes the Q&A portion. I will now turn the call back over to Chairman and CEO, Dr. Shankar Musunuri.

Shankar Musunuri: Thank you, operator. In closing, I would like to thank the entire team for their hard work and resilient efforts to advance our patient-centric mission. To our shareholders and partners, thank you for your ongoing trust and support. We look forward to sharing more details of our progress in the coming quarters.

Operator: Thanks, again, everyone. Have a great weekend.