Ocugen, Inc. (OCGN) Earnings Call Transcript & Summary

Good morning, and welcome to the Ocugen Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Lisa DeScenza, Vice President of Integrated Communications at LavoieHealthScience to introduce Ocugen team. You may begin.

Thank you, operator. I'd like to welcome you to our conference call. With me today are Ocugen's Chairman and CEO; Dr. Shankar Musunuri; our CFO, and Sanjay Subramanian and are acting CMO and Chair of the Scientific Advisory Board, Dr. Mohamed Genead. Earlier this morning, Ocugen issued a press release including a business update and Q2 2020 financial results. We encourage listeners to review the press release, which is available on the Ocugen website at www.ocugen.com. This call is also being recorded, and a replay will be available on the Investors' section of the Ocugen's website for approximately 45 days. Before we begin our formal comments, I'll remind you that various remarks we make today constitute forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our business strategy, future results of operations and financial position, our ability to raise capital on terms acceptable to us; our prospective products, product approvals, research, development costs, timing and likelihood of success and plans and objectives of management for future operations. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our expectations and forecasts and can be identified by words such as anticipate, believe, contemplate, continue, could, estimate, expect, intend and other words of similar meaning. Any such forward-looking statements are not guarantees of future performance. 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 our 10-Q was filed this morning. Any information we provide on this conference call is provided only as of the day of this call, August 14, 2020, and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise. I will now turn the call over to Ocugen's Chairman and CEO, Dr. Shankar Musunuri.

Thank you, Lisa. Good morning, everyone, and thank you for joining us this morning. I'm very excited about the progress we have made this quarter despite the challenges of the global pandemic as we work to develop transformative therapies with the potential to cure blindness diseases. Our first gene therapy product candidate, OCU400 for retinitis pigmentosa is on track to enter the clinic with the 2 parallel Phase I/II trials in the next year. Our second gene therapy product, OCU410 for dry age-related macular degeneration and our first novel biologic OCU200 for major retinal diseases are on track to enter the clinic in 2022. Our business strategy of diversifying our product approaches to ensure portfolio diversification and reduce risk was shown to be prudent than in June when we decided to discontinue the Phase III trial of OCU300 for ocular graft versus host disease. A preplanned interim sample size analysis indicated, the trial was unlikely to meet its co-primary endpoints upon completion. As a result, we ceased development of OCU300 and initiated a workforce reduction as a part of our shift in focus towards the modifier gene therapy platform and novel biologics program. We will add resources where needed in the coming year to further strengthen our R&D and clinical development groups in support of our planned short-term and midterm goals of initiating 4 early-stage clinical trials within in the next 1 to 2 years. We were successful in raising capital through our ATM programs to extend our runway into first quarter of 2021. We will continue to raise capital to support our short- and mid-term value creation goals for our patients as well as shareholders. Today, we will provide an update on our progress as we drive our product pipeline forward. Sanjay will then share highlights of our second quarter 2020 financial results before the Q&A. Our management team and advisers are dedicated to creating long-term value for our shareholders as evidenced by the appointment of Dr. Mohamed Genead, as Chair of our Retinal Scientific Advisory Board, we are attracting top talent to drive our product development initiatives forward. Dr. Genead is an ophthalmologist, retinal specialist and inherited retinal disease expert with over 20 years of experience in ophthalmology and gene and cell therapies. His deep experience in ophthalmology and gene therapy will be instrumental as we advance our breakthrough modifier gene therapy platform into the clinic next year. He's also offering tremendous support to Ocugen as an acting Chief Medical Officer. We continue to be very excited about our modified gene therapy platform, which has the potential to treat a variety of inherited retinal diseases with a single gene therapy product. One of the biggest advantages of our modifier gene therapy platform is that it has the potential to eliminate the need for individual gene replacement and gene editing strategies and will therefore be highly differentiated from traditional gene therapy for eye diseases. Last month, we were granted our third FDA orphan drug designation for OCU400 for the treatment of RHO mutation associated retinal degenerative diseases. The RHO mutation is part of the retinitis pigmentosa group of rare genetic disorders that involve a breakdown in lots of cells in the retina and can lead to visual impairment and blindness. This is one of the more common mutations within the class accounting for approximately 12% of retinitis pigmentosa patients in the United States, adding to the orphan drug designations for OCU400 for NR2E3 and CEP290 mutation associated retinal degeneration, the ODD for RHO gene mutation associated retinal degeneration further supports Ocugen's breakthrough modifier gene therapy platform's potential to treat multiple blindness diseases with a single product. This week, we announced receipt of our fourth FDA orphan drug designation for OCU400 and PDE6B, a gene mutation resulting in retinitis pigmentosa and autosomal dominant congenital stationary night blindness, 4 orphan designations for a single gene therapy product, OCU400 is distinct in the ophthalmology space, and we are excited about taking this program into clinic next year for patients who are in desperate need of rescue from blindness diseases. Inherited retinal degenerations such as retinitis pigmentosa effect over 1.5 million people worldwide. Our 150 gene mutations have been identified as associated with retinitis pigmentosa, and this number represents only 60% of the retinitis pigmentosa patient population. The remaining 40% of these patients cannot be genetically diagnosed, make it difficult to develop individual treatments. We believe our modified gene therapy has the potential to eliminate the need for developing more than 150 individual products and provide one treatment option for all these patients. This month, our Chief Scientific Officer; Dr. Rasappa Arumugham, will highlight our breakthrough modified gene therapy platform as a part of the next-generation therapy seminar at this year's World Orphan Drug Congress USA Conference on August 24. We will also be providing updates at the 4 investor conferences in the U.S. and the gene therapy conference in Europe in September and October. Our strategic partnership with CanSinoBIO further solidifies our plans to enter the clinic in the next year for the development of OCU400. Our manufacturing activities are going well and as planned, including scaling up to 200-liter batch side for our planned Phase I/II trials. Our plan to scale up manufacturing to commercial levels at this time minimizes the risk of product inconsistency in future. Product consistency is extremely critical for any gene therapy product. We are on track with our IND-enabling GLP toxicology studies. Overall, we are very happy with the progress on this program and very excited to enter into the clinic next year as planned. For OCU200, we anticipate a pre-IND meeting with FDA later this year for this novel biologic for the treatment of major retinal diseases, including diabetic macular edema, diabetic retinopathy and wet age-related macular degeneration. We're also planning to secure manufacturing partner soon. For OCU410 to treat dry age-related macular degeneration, we are planning to meet with the FDA during the first half of next year to agree on roadmap for IND-enabling studies and early-stage clinical trials. Before I turn the call over to Sanjay, I just want to mention our continued commitment to our shareholders as we drive the development of our product pipeline and our deep commitment to patients by addressing rare and underserved blindness diseases through gene therapy and novel biologics. I will now turn the call over to Sanjay to provide our second quarter 2020 financial update. Sanjay?

Thank you, Shankar, and good morning, everyone. As Shankar mentioned before, the second quarter has been a very eventful quarter for Ocugen and strengthens our mission to develop gene therapies to cure blindness diseases. I will now provide an overview of key financial results for the second quarter of this year. We ended the quarter on June 30, 2020, with cash, cash equivalents and restricted cash totaling $15.1 million compared to $7.6 million as of year-end 2019. The increase in cash extends our run rate well into the first quarter of 2021. In the second quarter of this year, we recorded revenues of $43,000 pursuant to a collaboration agreement with Advaite, Inc. with respect to the development of Advaite's COVID-19 testing kits. At this time, we do not expect this agreement to be significant to Ocugen's overall business, but we will update the market as things develop. Our research and development expenses for the 3 months ended June 30, 2020, were $1.6 million compared to $1.2 million for the 3 months ended June 30, 2019. The increase was primarily due to severance-related costs partially offset by the reimbursement pursuant to the collaboration agreement with Advaite. General and administrative expenses for the 3 months ended June 30, 2020, were $1.8 million compared to $1.1 million for the 3 months ended June 30, 2019. The difference was driven by the increase in public company insurance expense and severance-related costs. Net loss was $3.6 million or $0.19 loss per share for the 3 months ended June 30, 2020, compared to a net loss of $3.5 million or $0.58 loss per share for the 3 months ended June 30, 2019. We ended the quarter with 135 million shares outstanding. In April, we completed an amendment in exchange of the CDC warrants for 21.9 million shares of common stock and noninterest-bearing unsecured notes of $5.6 million. To date, the company has made prepayments of $3.1 million on the unsecured notes from proceeds received under the May 2020 and June 2020 ATM. As a reminder, the warrant amendment and exchange helped address the overhang in our capital structure, and we currently do not have any of the premerger financing warrants outstanding. With that, we will open up the call for questions. Operator?

[Operator Instructions] Our first question comes from Keay Nakae with Chardan.

Two questions for you. First one, do you anticipate the publication of any additional preclinical data in any journals during the second half of the year?

Any additional data, could you repeat the question, Keay?

Yes. Publication of any preclinical data.

on OCU400?

Yes. Or any of your gene modifier technology?

Yes, yes, that's a good question, Keay. Currently, we're doing this year, based on the agreement we reached with the FDA and the pre-IND meeting, we're executing our IND-enabling studies. We have started our GLP toxicology studies. And obviously, some of the work is getting done. And the interim of any tox information will be available in the first half of next year.

Okay. Great. And to what extent is COVID impacting your ability to get that IND tox work done pre-IND tox work?

Keay. I'm sorry, your line is not very clear. Could you please repeat your question, please?

Sure. Can you hear me better now?

Yes, better. Yes.

My question was to what extent is COVID-19 impacting your ability to complete the pre-IND tox work?

Actually, so far, we don't have any impact of the COVID-19 and our studies are ongoing as planned.

Okay. And the fact that CanSino is busy developing their own SARS CoV-2 vaccine, that's not impacting you on the manufacturing side at all?

It's a great question, Keay. Yes, they are on the forefront and they're very busy. However, there's a strong commitment to our program. They're very excited to support us, and they are continuing to support us, including as I mentioned in my just earlier, they're trying to scale up the process to 200-layer scale, which is a commercial scale to minimize any risk on the CMC and manufacturing side. So we have a complete support and cooperation from CanSino.

[Operator Instructions] Our next question comes from Swayampakula Ramakanth with Wainwright.

This is RK from H.C. Wainwright. A couple of quick questions. In general, regarding retinitis pigmentosa patients, what percentage of these have the NR2E3 driven mutations? And are these mutations routinely identified? Or do you need to do some kind of a diagnostic on these patients before you enroll them into your clinical trials?

Yes. It's a good question, RK. On the prevalence rates, this is, again -- it's about less than 1000 patients in the U.S. and all the clinical trials for this, we have to do the genotyping. And I will also ask Dr. Genead, our acting CMO, who is on the call, to further address this. Dr Genead?

Yes. Thank you, Shankar. To answer your question, so we definitely need to genotype those patients prior to enrollment in our clinical trials. And this is kind of standard procedure being done right now in gene therapy trials, and we're definitely very confident to do that with our clinical site investigators. They are trained to do that. And so this will be a part of the process. Regarding the prevalence, as Shankar mentioned, these are rare diseases. But as you know, retinitis pigmentosa is one of the most common inherited retinal diseases and retinal degeneration, so rare, it's not like ultra-rare offering disease is very common as you saw the prevalence in our slide. Regarding the NR2E3, which is one of the mutation of the gene modifier. This genetic mutation has different clinical phenotypes, in only one. So one of them is retinitis pigmentosa, but there's other clinical disease implicated with this gene mutation. And that's the whole notion about the Ocugen-400 program that you apply one product for multi retinal degenerative diseases. For your question consist about RP or retinitis pigmentosa, they can see at around 1%, 2% of autosomal dominant retinitis pigmentosa.

So thank you very much for that, Dr. Genead. Is this genetic test currently available and validated? Or do you need to do some work to get a validated test before applying yet to your screening protocol?

Yes. No, this is our standard testing, the genetic testing for patients with inherited diseases or this has been done in for years right now, closing up to 20-plus years even earlier for systemic indications. So you take blood samples, and you send it to a genetic lab and you look at the mutations on the chromosomes and according to which mutation. So this is well established for the date has been done before, and there's some commercial product in the eye for oxygen therapy. So we're using the same procedure, nothing different than what has been used before in all other -- in separate trials for genotyping.

Perfect. And then, Shankar, in general, I know you're planning to do -- to get 4 programs up and running in the clinic over the next year, 1.5 years. In general, what would be the design of these Phase I studies? And also, how should we think about the development plans for those 4 programs that you want to get going within the next 12 months or so?

Yes. Yes. Good question, RK. I'll briefly explain high level then Dr. Genead can add in. The gene therapy programs, as we outlined in our deck, we are planning to initiate 2 parallel Phase I/II trials. And again, based on the guidance from FDA and the agreement, these are going to be small. You're talking about 9 patients in each trial with the 3 cohorts for a 1-year study because you have to monitor the patient safety for one year along with exploratory endpoints and then you're going to pick one of them to finalize and move into Phase III. And then OCU200 and OCU410, again, these are targeting major retinal diseases. And the Phase I/II programs will have obviously a lot more patients than OCU400. And Mohamed, do you want to add anything?

Yes, absolutely. Thank you, Shankar. A little more highlight. So for the OCU400, which is using the gene modifier platform technology in-house, we're going to start with the first in human, which will be the safety, the multi-ascending dose trial. And that was the FDA and the health authority required, especially with the novel product and what has all been done often in gene therapy space. This will be multi-ascending, will be at least 3 dose of low, mid, high dose of our OCU400 products, different concentration, obviously, different genomic loads, and then we will have independent data safety review to look at all this core before it was too late. And then we will look out as well as safety -- we will look at the efficacy trends in those patients. We will look at 2 different mutations in the first body of the, 2/3 study will start in humans by next year with OCU400. The first one will be for patients with NR2E3 mutation and the other one will be the results in RHO-associated mutation. That will be the first trial using the OCU400. Shifting to the OCU200, which is not a therapy, it is a novel biologic program in-house, we will be targeting the first indication for retina will be diabetic macular edema as our first lead indication with our novel biologic. We will start with the Phase I/IIa, will be up around close to 50-patient trials. We will look at patients with diabetic macular edema, we will look at our standard in efficacy endpoints safety, obviously is going to be the main objective. And also if you look at other efficacy endpoint on the visual acuity and the retinal segment which is being the standard endpoint to reduce patient population. This will be the idea with the 2 major programs of OCU400 and the OCU200. And then the OCU400 [indiscernible].

And our last question comes from Kristen Kluska with Cantor Fitzgerald.

Maybe just a follow-up from one of RK's questions. Given the 400 pipeline focuses on patients with very prevalent rates. What are you doing now to try to locate where some of these patients could be for the trial? And also, what are your broad thoughts on genetic testing efforts in general, given the marketing of LUXTURNA and also the increased number of clinical trials focusing on RP patients?

Dr. Genead, Go ahead.

Yes, absolutely. Thank you for your question. Great question. So we definitely are planning to build our patient registry and one of our plan is working now with the center of excellence in the country, not only in the U.S., but also in Europe. And as you know, for these kind of patients, I'm retina surgeon, so you see the patient in your general retina clinic, but it's more specialized so we have center of excellence enough for revenue generation in this country. So we are working now with our collaborator in the country and also elsewhere in Europe and find these patients. And we have the volume, we have the database, which will be a partner with some to find those patients. We did our ground work around that, it was our clinical fight and potential instigators in our trials. And so we will continue on that work as we go, you know further our development. Regarding all genotyping on the strategy for late involvement and our commercial strategy, that will be one of the key things for our clinical development and product development strategy, but [indiscernible] registry and we're working on with the clinical fight as I said earlier in the clinical receipt, and also with the patient group, actually group, which we are very close connected to and then I work with other foundations for each disease, we are targeting like foundations[indiscernible] and other foundation that have their own registry for those patients. So this is one of the areas we are looking at very carefully. And we started the work and we'll continue our work on that space.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I would now like to turn the call back over to Lisa DeScenza for any concluding remarks.

Thanks to everyone for taking the time to join the call this morning. We're dedicated to filling significant patient needs by bringing to market transformative therapies for blindness diseases. We look forward to providing further updates in the coming months. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.