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

Good morning, and welcome to the Ocugen Third Quarter 2022 Business Update and Financial Results Call. [Operator Instructions] Please note, this call is being recorded. I will now turn the call over to Tiffany Hamilton, Ocugen's Head of Corporate Communications.

Thank you, Angela. Joining me today are Ocugen's Chairman, CEO and Co-Founder, Dr. Shankar Musunuri, who will provide a business update, and our Chief Accounting Officer and Senior Vice President of Finance, Jessica Crespo, who will provide more updates on our financial results. Earlier this morning, we issued a press release detailing business activity for Q3 2022. We encourage listeners to review this press release, which is available on our website at ocugen.com. This call is being recorded and a replay along with the accompanying slide presentation will be available on the Investors section of the Ocugen website for approximately 45 days. This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on the beliefs and assumptions of Ocugen Inc. and on information currently available to management. All statements contained in this presentation other than statements of historical fact, are forward-looking statements. 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 that 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, SEC, including the risk factors described in the section entitled Risk Factors in the quarterly and annual reports that we file with the SEC. Forward-looking statements that we make in this presentation speak only as of this date of this presentation, except as required by law. We assume no obligation to update forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise after the date of this presentation. Finally, Ocugen's third quarter 10-Q will be filed soon after today's call. I will now turn the call to Dr. Musunuri.

Thank you, Tiffany. Good morning, and thank you for joining our call. I'm very proud of the important accomplishments we achieved in the third quarter. With courageous innovation as a driving force behind everything we do, we're diligently progressing with our cell and gene therapies and pursuing broader development and expansion of our vaccine program, which now includes a unique mucosal vaccine or OCU500 for COVID-19. We're also very enthusiastic about the potential of our modified gene therapy platform that we shared in more detail at the American Academy of Ophthalmology Conference in Chicago and our first R&D Day last week. The Ocugen team continues to charge ahead to establish ourselves as a fully integrated patient-centric biotech company. As we meet our clinical and regulatory milestones, I am especially confident that the team is well poised to drive designs in new directions and break new ground for patients who have no effective therapeutic options and people who want choice in the fight against COVID-19. Today, we are going to provide updates on our vaccines, gene, and cell therapy programs. I would like to start with Ocugen's vaccines program. COVID-19 remains persistent, and the world critically needs more effective and safe vaccine options. We are realizing some of the limitations of vaccines currently available in the United States in terms of their durability and capability to reduce transmission. Up until now, much of the attention has been on reducing hospitalization rates, but we need to think much more broadly and consider what effects new variants will pose and what is required to face the unique challenges that this next phase of COVID-19 will bring. As I alluded to earlier, in September we announced our licensing agreement with Washington University to develop, manufacture and commercialize its proprietary mucosal vaccine in the United States, Japan and Europe. OCU500 has the potential to generate rapid local immunity in the nose, mouth, upper airways, and lungs, where SARS-CoV-2 enters and impacts the body. We believe that the mucosal vaccine can help reduce the transmission rate by generating neutralizing IgG, mucosal IgA and T cell responses. This approach represents a potential universal booster regardless of previous COVID-19 vaccination. We intend to work closely with the U.S. government agencies on pandemic preparedness, on the regulatory pathway, and the initiation of clinical trials. Additionally, we are addressing the public's need for a more durable immune response to COVID-19 with continued development of our candidate vaccine COVAXIN. Enrollment was completed and dosing continues in the Phase II/III immune-bridging and broadening clinical trial with topline data expected in early 2023. We are encouraged that no safety concerns have been identified in the trial to date. As part of the technology transfer, we successfully completed a demonstration patch at Jubilant Hollister. We will have the ability to move forward once World Health Organization concerns with our partner have been resolved. Now moving on to our gene therapy program, Ocugen is deeply committed to our core technology focused on inherited retinal diseases, along with other blindness diseases affecting larger patient populations. We are making progress in our vital work in retinitis pigmentosa, a disease for which there is no cure, no medicines to block disease progression, and limited treatments to help manage a patient's tragic journey that ultimately leads to blindness. The independent data and safety monitoring board completed a review of safety data for subjects enrolled in Cohort 2 for the OCU400 Phase I/II clinical trial for retinitis pigmentosa and recommended proceeding to enroll subjects in Cohort 3. We have dosed the first patient and the company expects to complete Cohort 3 enrollment by the end of the year. By the end of the Phase I/II study, data will be collected and analyzed from those RP and LCA patients before initiating the Phase III efficacy trial. Currently, RP is associated with mutations in more than 100 genes affecting approximately 2 million people globally. The current study will start enrolling patients with Leber congenital amaurosis, RLCA, CEP290 mutation. LCA is a rare eye disease associated with mutations in more than 25 genes. OCU410, also leveraging our modified gene therapy platform, is being developed to utilize the nuclear hormone receptor gene, hRORA, for the treatment of dry age-related macular degeneration or dry AMD, which affects approximately 9 million to 10 million Americans alone. And this quarter, we are announcing the addition of OCU410ST to potentially treat Stargardt disease, an orphan disease that will be investigated along with dry AMD. We have successfully completed TGMP manufacturing in support of clinical trials and are currently conducting IND-enabling study. Ocugen is planning to file IND applications to initiate Phase I/II clinical trials for both these programs in Q2 2023. Another product modality in the retinal disease space is based on a novel fusion protein. OCU200 is designed to treat life threatening diseases such as diabetic macular edema, diabetic retinopathy, and wet AMD. Ocugen is currently executing IND-enabling studies and is planning to submit an IND application in the first quarter of 2023 to initiate a Phase I trial targeting DME. Regarding our recent cell therapies, in May, we expanded our pipeline into cell therapy in orthopedics with NeoCart. NeoCart shows potential to accelerate healing and reduce pain, rebuilding damaged knee cartilage and limiting the progression of osteoarthritis. Ocugen is working with the FDA to complete the Phase III protocol, the advancement of development, and is building its own manufacturing suite to prepare for the study. Earlier this year, the FDA granted a Regenerative Medicine Advanced Therapy or RMAT designation to NeoCart for the repair of full thickness lesions of the knee cartilage in adults. Our ambitious clinical agenda and the rigor and clinical development advance our pipeline is reflective of our culture of courageous innovation. We're relentless in our pursuit towards our long-term goals and reaching the patients who can potentially benefit from our diverse pipeline. I will now turn the call to Jess to provide our third quarter 2022 financial results.

Thank you, Shankar, and good morning, everyone. I'll now provide an overview of the key financial results for the third quarter of 2022. Our research and development expenses for the 3 months ended September 30, 2022, were $15.6 million compared to $6.3 million for the 3 months ended September 30, 2021. The increase in research and development is primarily driven by costs incurred to execute on our clinical trials. General and administrative expenses for the 3 months ended September 30, 2022, were $7.5 million compared to $4.5 million for the third quarter of 2021. Our net loss was approximately $21.9 million or $0.10 net loss per share for the third quarter of 2022 compared to a net loss of approximately $10.8 million or $0.05 net loss per share for the third quarter 2021. Our cash, cash equivalents and restricted cash totaled $101.6 million as of September 30, 2022, compared to $95.1 million as of yearend December 31, 2021. We are focused on efficiently managing and prioritizing the use of our capital. Our plans to work with the U.S. government agencies for support and the funding of our COVID-19 vaccine program has allowed us to extend our cash runway into the fourth quarter of 2023. That concludes my update for the quarter. Tiffany, back to you.

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

[Operator Instructions] Your first question comes from the line of Jennifer Kim with Cantor Fitzgerald.

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

Yes, Jennifer, thank you. I'll let Jess answer the first question, then I'll do the second one.

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

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

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

Yes, yes. The topline data, as we stated, we have completed enrollment and we are currently going to do the data analysis after we're done with collecting all the samples from patients after their second dose. And we are anticipating to release the topline results early next year, and then the study will get completed. Obviously, as we mentioned before, the data will also give some direction on dosing patients who have taken mRNA before. That means in addition to neo patients, we also had mRNA patients because it's very difficult to enroll 100% neo patients at this stage in our pandemic case. And therefore, we are going to get data, booster data on patients who took mRNA with our vaccine. And so based on that, once again, we're already working with FDA on the next safety protocol, which we believe may be needed for the U.S. study in the U.S. demographic for BLA. But, however, based on the booster data, that should shed a lot of light into how we move forward. Because we believe COVAXIN can make a good booster with a broad immune response for people who took mRNA shot, which is only based on spike.

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

Yes. No, that's a good question. Yes, that's the plan, just like you stated. Our goal is to go with the most tolerable dose into LCA, and we will be recruiting 3 patients.

Your next question comes from the line of Robert LeBoyer with NOBLE Capital.

I had a question on NeoCart and if there are any timeframes that you can give us as to finalizing the Phase III protocol or starting the clinical trials?

Yes. Currently, Robert, we're still -- there are 2 steps to it. One is getting our protocol finalized with FDA. We've been working with them. It takes some time. The second step, most important step, I think that, I think we know we'll get that cleared off in the next few months. The actually most limiting is our manufacturing. Because cell therapy is almost like a personalized medicine, you don't need large manufacturing facilities. But you do need highly scientific, small facilities, it is very complex science, where we can manage with good control. That's why Ocugen has committed to build our own facilities in our R&D expansion. We're actually preparing those facilities. That's the rate limiting. One is getting a protocol agreement. The second most important step is getting our facilities ready for this. And we are anticipating those facilities will be ready by the end of next year.

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

Just a couple here. You have 2 vaccines in the pipeline, the COVAXIN and the OCU500. What is your strategy for them working together? Are you looking at them as being complementary? I just wanted to see what the big picture is for both of them.

Yes, absolutely. OCU500, obviously, mucosal vaccine is really needed irrespective of what your vaccinated status is. That will -- I mean, we had to control the transmission, right? I mean, that's really important. Otherwise, virus will continue to mutate. All the experts in the field believe you really need something mucosal vaccine, where you can stop the entry of virus. I think that's going to be good for the long term here. And our COVAXIN offers a broad immune response. I mean, ideally, if everyone gets COVAXIN and establishing a broad immune response, you have adopted immunity, so you'll have ability to fight off emerging variants potentially. And then you take a mucosal vaccine as a booster, which is inhaled or intranasal, which will be very convenient even for kids in the long term. And it's also easier to make this vaccine. It's based on our adenoviral-vectored platform. As the new variants come in on an annual basis, it's easy to produce this vaccine compared to how inaccurate a viral vaccine is, a whole virus vaccine. That's the distinct feature. Obviously, it's really needed. I mean this mucosal vaccine is the great, great need right now where the pandemic is going.

Okay. Got it. That was helpful. And another one on OCU400. Are you still guiding to report the initial data by mid-'23? And if so, what are some of the key metrics that we should be paying particular attention to?

Yes. We will continue to monitor the data and our goal is to give some data reads by mid-next year. And as we mentioned before, the Phase I/II clinical trial, the primary endpoint is safety. However, we are monitoring efficacy based on observational endpoints. And each mutation may have a different endpoint going into Phase III. That's the reason there are multiple observational endpoints looking at -- and broadly, functional as well as structural endpoint. Structural means under OCT, you'll be looking at the structure of the retina. Is there any stabilization or degeneration? Even stabilizing a signal is really important in these patients, right? You're protecting from degeneration, and so you're looking at structural aspects and functional aspects. Looking at like a perimetry or looking at mobility, and some of those data will be -- we're hoping to release by mid-next year.

Next question comes from the line of Jonathan Aschoff with ROTH Capital Partners.

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

I think when you give mucosal vaccines, typically, if your system is primed, it's really important. Most of Americans are primed with mRNA. If they have 2 shots, primed, mucosal vaccine does help. Our goal is to really target as a universal booster vaccine. That's our potential target. And people who are vaccinated before, I mean it's really important to have prime before they get the mucosal vaccine, at least the data is pointing out. That's where we get the full benefit.

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

Just curious, with vaccination essentially, I guess moving from government pay to commercial pay, just wondering how you guys are thinking about the role for both COVAXIN and I guess ultimately OCU500.

Yes. I think you have seen some of our competitors, vaccine players have announced their pricing. Some of them want to price it over $100 a dose. They're anticipating it will move into private market. However, COVAXIN follows the traditional path. Somebody wants to take it as a primary series, which would be a very good primary series vaccine as well as a booster. However, with the mucosal vaccine, there is a lot of emphasis from all the way from governmental agencies to all the experts in the field. They're supporting it. They're really worried about significant mutations coming up if you don't control the transmission. Therefore, there is a great need for it, and we are working with government agencies. We believe something novel like that, something to control the transmission, because in the largest democracies, I mean the countries out there including India and China, they launched mucosal vaccines, and we are way behind it. I think it's time. We're hoping our government will step up for the elections and support development of mucosal vaccine which is OCU500. And we believe for that, something like that to control the transmission, where everyone agrees, they should have government support. That's what we believe. And eventually, that may become private too in future years. But at least in the short term, we believe government should really support mucosal vaccine.

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

Yes. In India, I mean the data is public. Both the companies have published some of the data coming out of the clinical trial. I mean obviously, in India they just launched it, and their Phase III data looks good compared to COVAXIN head-to-head, and they showed a good not only IgG, also mucosal immunogenic response. They also stated it neutralizes emerging variants or variants of concern today, which is existing. And from the other vaccine in China, which is inhalation vaccine, it's widely rolled out. In fact, there is some public information out there as of last week. They rolled it out for many, many large cities in China. We don't know how the data is, but at least publicly available data looks good. Both of them are pointing out mucosal vaccines may be very beneficial to control this pandemic and transmission.

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

Thank you, Angela. I'd like to conclude the call with some additional parting thoughts. We have shown remarkable progress to achieve our vision of creating a fully integrated patient-centric biotechnology company that targets unmet medical need and impacts public health. We pointed this out last week during our R&D Day that between 2023 and 2027, we're targeting BLA filings and product launches in each of the next 5 years, reflecting what we mean by courageous innovation. We believe our gene therapies have potential to bring significant value to our patients and shareholders as discussed at the R&D Day. We have to prioritize our resources on gene therapies while seeking partnership with the government agencies for vaccines to support public health in the short term. Once we start getting data reads next year on gene therapies, it will allow Ocugen to potentially form partnerships outside of the U.S. to support our growth. In the long term, we will continue to strengthen our pipeline to become leaders in disease areas we represent and continue to offer hope for patients across the globe. Thank you for joining us today.

Everyone, have a great day.

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