Ocugen, Inc. (NASDAQ:OCGN) Q2 2023 Earnings Call Transcript

Ocugen, Inc. (NASDAQ:OCGN) Q2 2023 Earnings Call Transcript August 22, 2023

Operator: Good morning and welcome to Ocugen’s second quarter 2023 financial results and business update. Please note that this call is being recorded at this time. All participants’ lines are in listen-only mode. Following the speakers’ commentary, there will be a question and answer session. I will now turn the call over to Tiffany Hamilton, Ocugen’s Head of Corporate Communications. You may begin.

Tiffany Hamilton: Thank you Operator. Joining me today are Ocugen’s Chairman, CEO and Co-Founder. Dr. Shankar Musunuri, who will provide a business and financial update, and Dr. Arun Upadhyay, our Financial and Scientific Officer, Head of Research, Development and Medical, who is also on the call to answer questions during the Q&A. Yesterday afternoon, we issued a press release detailing business and operational highlights for the second quarter of 2023. 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 with the accompanying slide presentation will be available on the Investors section of the Ocugen website for approximately 45 days.

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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 predicts, believes, potential, proposed, continue, estimate, anticipate, expect, plans, intends, may, could, might, will, should, or other words that convey uncertainty of future events of outcomes to identify these forward-looking statements. Such statements include but are not limited to statements regarding our clinical development activities and related anticipated timelines. Such statements are subject to numerous important risk factors and uncertainties and may cause actual events or results to differ materially from our current expectations.

These and other risks and uncertainties are more fully described in our periodic filings with the Securities and Exchange Commission – the SEC, including the risk factors described in the section entitled, Risk Factors, and the quarterly and annual reports that we file with the SEC. Any 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 quarterly report on Form 10-Q covering the second quarter of 2023 has been filed. I will now turn the call to Dr. Musunuri.

Shankar Musunuri: Thank you Tiffany. Good morning and thank you all for joining us today. The second quarter of 2023 marked a period of continued progress toward our regulatory and clinical milestones, which we are dedicated to advancing through end of the year. With a strategic focus on our novel modified gene therapy and biologic-based ophthalmic programs, we expect to begin dosing patients across these platforms by the end of this year. We are on track to initiate OCU400 Phase III adult trials near the end of 2023, early 2024, subject to outcomes of ongoing Phase I/II trials and discussions with FDA on proposed Phase III trial plans. We also anticipate a clinical study results update for OCU400 this quarter. Investigational new drug applications were cleared by FDA for OCU410 and OCU410ST for geographic atrophy and Stargardt disease, respectively.

We plan to initiate Phase I/II trials by the end of 2023. We are also planning to initiate the Phase III clinical trial for regenerative cell therapy product candidate, Neocart, in the second half of 2024. This would mean Ocugen would have late-stage programs in gene and cell therapies in 2024. In an effort to conserve our working capital and advance our patient-centric agenda to develop a novel inhaled mucosal vaccine platform, we have submitted multiple proposals to obtain non-dilutive government funding and are having discussions with pertinent agencies to secure their support for our OCU500 vaccine series. Our first-in-class modifier gene therapy to treat multiple inherited retinal diseases remains unmatched industry wide. This unique gene-agnostic approach has the potential to address retinal diseases caused by mutations in multiple genes with one product.

Our goal is to build on the innovation of gene therapy and expand its potential to treat a wider population of patients suffering from a host of rare retinal diseases that single gene replacement therapies are unable to address. In the second quarter, we were honored to present in detail the mechanism of action and scientific basis for our modified gene therapy platform to preeminent researchers and medical professionals in attendance at the Association for Research in Vision and Ophthamology and Bioinformational conferences. As we advance our clinical agenda, we will continue to identify and secure opportunities to educate stakeholders on the differentiation and potential benefits of this innovative approach to gene therapy. In April, we announced encouraging and compelling positive preliminary safety and efficacy results from our OCU400 Phase I/II multi-center open label dose ranging clinical trial in patients afflicted with RP.

We believe the preliminary findings from this study supports the potential for our modified gene therapy to be a viable alternative to traditional treatments to the increasing population of patients suffering from these diseases. Enrolment is ongoing for all defined subjects in this study, adults with LCA and children between ages of 6 to 17. Pending positive feedback from the FDA, we aim to initiate our Phase III adult clinical trial near the end of this year or early 2024. We continue to execute our comprehensive strategy to develop OCU400 and bring it to market by 2026 with the goal of providing desperately needed treatment options for the estimated 125,000 patients in the U.S. alone that suffer from RP and LCA. In parallel, we’ll continue progressing our other modified gene therapy programs to address additional ophthalmic conditions.

We believe that upon successful realization of these goals, Ocugen will have built a vast commercial footprint that may hold significant upside for our shareholders and, most importantly, meet a critical medical need for patients. Dry age-related macular degeneration is one of the most prevalent neurodegenerative eye diseases affecting approximately 10 million people in the U.S. and nearly 266 million people worldwide. Dry AMD results in irreversible loss of sight among elderly populations leading to a lack of functional independence that severely impacts quality of life. A variety of biotechnology companies small and large are working to develop therapies for dry AMD; however, we believe our OCU410 candidate can offer a less burdensome option for our patients.

With OCU410, we are again investigating the potential for our novel modifier gene therapy to provide a one-time treatment option that targets all four hallmark conditions of dry AMD, including lipid metabolism, inflammation, oxidative stress, and complement activation. The current standard of care only targets the complement factor, requires multiple injections per year, and has reported side effects. We are excited to initiate the Phase I/II clinical trial this year because of the significant global unmet medical need. Moving onto OCU410ST, we are extremely pleased to receive orphan drug designation from the FDA to address ABCA4-associated retinal diseases such as Stargardt disease, RP19, and cone-rod dystrophy, for which there are currently no treatment options.

OCU410ST is a novel modified gene therapy that leverages nuclear hormone receptors to modulate cell activity and deployed as an AAV delivery platform for retinal delivery of the RAR related orphan receptor A. Nuclear hormone receptors are master gene regulators that help maintain homeostasis by regulating diverse physiological functions such as photoreceptor development and maintenance, metabolism, phototransduction, inflammation, and cell survival networks. We believe that by harnessing the power of nuclear hormone receptors, we can develop one-time treatments that can modulate cell activity disrupted by disease causing gene mutations. Now turning to our efforts to develop a series of next generation inhalation vaccines, for which the company intends to submit an IND application in 2024.

Pending government funding, in multiple preclinical trials mucosal vaccines have demonstrated vaccine-induced high neutralization titre and effector responses. Inhaled mucosal vaccines represent a distinct product candidate for trial that could help remedy major global health challenges and maximize our opportunity to serve a broader cross section of patients via a less invasive delivery mechanism with a potential for superior durability when compared with current intramuscular administration. Clinical studies using a similar vector of inhaled administration have shown mucosal antibodies, systemic antibodies and durable immune response up to one year with one fifth of the dose compared to traditional intramuscular vaccines. Greater ease of administration presents the potential for improved vaccination compliance and wider adoption, particularly amongst traditionally underserved populations and throughout the developing world.

Current COVID-19 vaccines are limited by lack of durability and marginal ability to prevent transmission. As a part of our commitment to address barriers to widespread vaccination to protect against COVID-19, we are developing this inhaled vaccine platform that includes OCU500, a biovalent COVID-19 inhaled vaccine, OCU510, a seasonal quadrivalent flu inhaled vaccine, and OCU520, a combination quadrivalent seasonal flu and biovalent COVID-19 inhaled vaccine. The OCU500 vaccine series is based on a novel shared platform designed to reduce transmission and protect against new variants with potential durability up to one year. To optimize resources across our diverse and critically needed development programs and maintain shareholder value, our team has been engaging with public health officials and federal government agencies to pursue non-dilutive funding to support the development of our OCU500 vaccine series.

We maintain an ongoing dialogue with respective agencies and anticipate receiving further information on the status of our pending request later this year. Earlier this year, the FDA notified us that they were putting a hold on our OCU200 program and requested additional information related to chemistry, manufacturing and controls. We are working with the FDA to release the hold and expect the Phase I trial to be initiated in Q4 2023. We believe OCU200 works with a distinct mechanism of action compared to existing therapies for the treatment of diabetic macular edema and targets multiple causative pathways such as angiogenesis, oxidation and inflammation, and has potential to offer better treatment to all patients. Neocart is our Phase III-ready regenerative cell therapy technology that combines novel advancement in bioengineering and cell processing to enhance the autologous cartilage repair process.

Manufacturing facility construction for Neocart is on target to be completed by end of 2023 as planned. The company plans to initiate the Phase III trial in subjects with articular cartilage defects in the second half of 2024. We are highly dedicated to completing our stated objectives with the strategies we believe will enable Ocugen to reach total value enhancing milestones and are planning to file BLAs across all first-in-class platform technologies, gene therapies, cell therapies and vaccines in the next three to five years. I will now provide an overview of the key financial results for second quarter 2023. Our research and development expenses for the quarter ended June 30, 2023 were $14.2 million compared to $9 million for the second quarter of 2022.

This included a non-recurring, non-cash expense of $4.4 million as a result of the impairment of the short term asset for the advanced payment of the supply of Covaxin, as well as the associated loss on the disposal of related fixed assets. General and administrative expenses for the quarter ended June 30, 2023 were $9.6 million compared to $10.6 million for the second quarter of 2022. Net loss was approximately $22.9 million or $0.10 net loss per share for the quarter ended June 30, 2023 compared to a net loss of approximately $19.5 million or $0.09 net loss per share for the second quarter of 2022. Our cash, cash equivalents and investments totaled $70.6 million as of June 30, 2023 compared to $90.9 million as of December 31, 2022. In May, we closed a public offering of 30 million shares of common stock for gross proceeds of $16.5 million.

Net proceeds from the offering are being used for general corporate purposes, capital expenditures, working capital, general and administrative expenses, and R&D. We are continuously exploring opportunities to increase our working capital and will be focused on seeking out corporate partnerships for gene therapies and non-dilutive funding for vaccines. That concludes my update for the quarter. Tiffany, back to you.

Tiffany Hamilton: Thank you Shankar. We will now open the call for questions. Operator?

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Q&A Session

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

Jennifer Kim: Hi, good morning. Thank you for taking my questions. I have two. The first is as you’re thinking about cash burn going forward and you’re seeking non-dilutive funding opportunities, excluding the one-time impairment expense, is this quarter a good basis as we think about quarterly burn? Then my second question is on the OCU400 program. Can you remind us what you’re looking for in that updated data this quarter as sort of the go/no-go for the Phase III adult trial? Thanks.

Shankar Musunuri: Yes Jennifer, good morning. Let me address the first question, then Arun is going to take the second one. Yes, there is a one-time impairment charge. There is also a non-cash stock comp charge of $2.6 million, and if you add those two, the cash comes out to be $15.9 million total per quarter, so that would be good guidance for you for the future. I’ll let Arun address the other question on the OCU400 program.

Arun Upadhyay: Thank you Shankar, thanks Jennifer. Yes, you are right – I think our this quarter update on OCU400 clinical Phase I/II data will guide us about our Phase III study. Yes, that’s the data that will be used as a basis for go/no-go decision for Phase III.

Jennifer Kim: Okay, and can you remind us what you’re looking for in that data?

Arun Upadhyay: Primarily we are looking at the functional improvement in the patients treated with OCU400, and the focus is going to be the RP patient.

Jennifer Kim: Okay, and then in your discussions with the FDA later on for the Phase III trial, is that going to focus on RP patients or are you also considering the inclusion of LCA patients? Thank you.

Arun Upadhyay: To begin with, we will start with the RP patients, and as we collect the data for LCA patients, then later we will include LCA. But to begin with, yes, we are planning to go with [indiscernible] RP patients.

Jennifer Kim: All right, thanks for taking my questions.

Operator: Our next question comes from the line of William Ramakanth from HC Wainwright. Please go ahead.

Swayampakula Ramakanth: Thank you, this is RK from HC Wainwright. A couple of quick questions on the 400 program, and then maybe one on the Neocart. On the 400, in terms of your discussions with the FDA, is that being planned once you see the data on the Phase I/II, or you have already initiated some initial conversations and started putting together a Phase III plan?

Shankar Musunuri: Thanks RK. We have not initiated our discussions with FDA yet, so once we complete the data analysis, only then we are going to reach out to FDA, but that is planned for this quarter related to the [indiscernible] and followed by reaching out to FDA.

Swayampakula Ramakanth: Thank you for that. Then on the 410 program, in terms of now that you have already been cleared by the FDA, what else needs to get done before you can initiate the Phase I/II study?

Arun Upadhyay: We need to get the site ready and initiate the patient screening, so that’s why I think we are planning to launch first subject in this study, both GA as well as Stargardt, this year. It’s more like getting ready with the clinical site.

Swayampakula Ramakanth: Got it. Then on the Neocart program, I’m just trying to understand, if the facility does get completed the end of ’23, what else needs to get done in terms of commissioning the plant, getting the clinical material ready, to add to your program on the Phase III study by second half? Is it just that, or is it, you know, you still have to design the protocol? I’m just trying to understand what all, because we have been talking about this program for almost a year and a half now.

Shankar Musunuri: Yes, so RK, the facility construction will be completed at the GMP facility by end of this year – it’s on target, and then as you know, as a GMP facility it takes a few months for getting the qualification done, and then they’ll be ready to produce Neocart in the facility. In the interim, obviously the team is going to prepare CMC and clinical sections and will continue to update those, so that they’re ready for submission next year before they start the clinical trial. We do have automatic designation, right – I just wanted to remind, [indiscernible] advanced therapy designation with FDA, so if we have any questions in the interim, we can always reach out to them and get clarification.

Swayampakula Ramakanth: Perfect. Thanks for taking my questions.

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

Robert LeBoyer: Good morning everyone. My question has to do with the upcoming data presentation, and I was wondering if you could disclose whether the data to be presented will update the previous data on all patients or whether it will just be in new patients that haven’t been reported, and wondering if there are any end points that you could share with us at this point.

Shankar Musunuri: Thank you, so yes, definitely we will be providing detailed updates when we kind of know, present this data to the market. But to address your first part of the question, whether it is going to include the percent we presented in our previous disclosure, yes, we will include those subjects as well as some new subjects which have completed additional follow-up visits. It will be a combination of both.

Robert LeBoyer: Great. You had mentioned corporate partnerships for the gene therapy. Can you discuss any type of arrangements, whether they’re going to be research and development or just marketing, or any objectives to the business development activities?

Shankar Musunuri: Robert, this is a [indiscernible] question. Obviously we will be open to–when you seek partnerships at this stage as a biotech, big pharma established with an infrastructure and everything else, obviously your first target is going to be commercial. As you know, complex science is involved in these clinical trials. Obviously when you’re going into Phase III, once we have the data out, we’ll obviously work very hard with any potential partners, and obviously as you know, if they are interested in commercial development, they will be interested in Phase III programs too, so I think we will keep our options open, whatever can maximize our value for Ocugen as well as make sure we have ability to provide market access to patients who desperately need this product.

Robert LeBoyer: Okay, great. Thank you very much.

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

Daniil Gataulin: Hey, good morning guys. Thank you for taking the questions. I’ve got a couple, one for OCU410 programs. Just wanted to ask strategically, how do you see it positioned long term, whether it’s viewed as a standalone approach or in combination with anything else, and the patient population that you will be targeting. The second question is for the inhaled vaccine series. Can you comment on your interactions to date regarding the funding, and particularly if you can comment on the interest in this program given that there are several other [indiscernible]? Thank you.

Arun Upadhyay: Thank you. I’ll take the first question. Yes, we are thinking of taking [indiscernible] standalone product, and to begin with, definitely we will be targeting the advanced form of AMD, that is geographic atrophy, but subsequently based on the outcome, it may further develop for early and intermediate stage depending on the clinical benefit coming from the GA trial. Regarding how we see this product against other, what we see in the market, as you all know that AMD is a multi-factor disease and so far we have been seeing in the space that most of the companies are focused on targeting only one pathway, and by the very nature of this disease, being multi-factor [indiscernible], there are various causes which lead to this disease.

Our product has potential to target all those pathways which are linked to dry AMD pathogenesis, so we believe that this could be a differentiated product and have potential to offer better clinical benefit compared to what we have right now.

Shankar Musunuri: Good morning. The second question related to government funding, again we have been working with various agencies and will provide an update. Obviously the current products, as you know, the vaccines we have especially for COVID, they lack a couple of things. One, they are struggling to control the transmission, there’s a lot of data available right now, and also they lack durability, so what would be an ideal option going into the future, I think there is definitely a need for mucosal vaccines – the scientific community agrees on that, and also that will provide systemic as well as mucosal immunity, so it can actually potentially prevent at the target of viral entry into mucosal systems. The second thing is durability.

We believe and the scientific community believes that COVID vaccinations, in order to gain the compliance with the public, you cannot keep on vaccinating every three months. That’s why people get vaccine fatigue, so you need to move into annual vaccinations such as flu, so your compliance here could go up, so that’s the intent. I think as we stated, there are ex-U.S. trials with inhalation vaccines using a similar technology that showed durability up to one year – that’s really important. There are two things – controlling transmission and durability are very important for next gen vaccines, and we believe our platform technology, inhalation vaccines for COVID and flu, they can provide that.

Daniil Gataulin: Got it, thank you so much.

Operator: 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 recognize the entire team for their resilient efforts to advance our patient-centric mission. To our shareholders and partners, thank you for your ongoing trust and support. We are already well into the second half of 2023 and are steadfast in our commitment to transparency and decision-making based on sound scientific principles, and a tireless work ethic dedicated to excellence in all phases of research, development and clinical testing. We remain confident that we’ll be able to fulfill our mission of developing novel therapies with innovative discoveries to bring to market effective treatments for patients suffering from a range of conditions that currently lack treatment options. We look forward to sharing more details on our progress in the coming months.

Tiffany Hamilton: Thanks everyone, have a great day.