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

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

Thank you. 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 detail on our financial results. Earlier this morning, we issued a press release detailing business and operational highlights for the fourth quarter and full year of 2022. 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 of 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 subject to risks and uncertainties. We may, in some cases, use terms such as predict, believe, potential, proposed, continue, estimate, anticipate, expect, plan, intend, may, could, might, will, short 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. 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 10-K covering 2022 will be filed soon after today's role. I will now turn the call to Dr. Musunuri.

Thank you, Tiffany. Good morning, and thank you all for joining us today. I'm excited to share with you the significant progress Ocugen made in 2022. And during the first months of 2023, to further advance our diversified pipeline while continuously focusing on patients and pursuing courageous innovation. Fueled by our team's passion, dedication and visionary mindset, we witnessed progress across all our clinical programs. I will also provide more on our objectives for 2023, leading into 2024. Let me commence with an update on our gene therapy program. In December 2022, we announced that OCU400, our investigational drug candidate for the treatment of retinitis pigmentosa and leber congenital amaurosis was granted expanded orphan drug designations by the U.S. FDA, which supports the therapeutic potential of OCU400 to treat multiple inherited retinal diseases, the single product. OCU400 is symbolic of Ocugen's gene modifier approach that is based on nuclear hormone receptors, that regulate diverse physiological functions in the retina, such as development, metabolism, cellular functions and thereby establishes homeostasis to potentially restore retinal health and function. In the U.S., RP and LCA effect 110,000 and 15,000 people, respectively. And globally, these conditions affect approximately 1.6 million people and despite its prevalence, RP and LCA patients have limited treatment options as current accrued or in development gene therapies, focus on individual genes. OCU400 addresses shortcomings of current gene therapy [approaches], as a broad spectrum gene agnostic approach with genetically diverse inherited retinal diseases. We have completed enrollment of RP patients in the Phase I/II trial for protocol and continued to enroll patients with LCA. We also established the high dose to be the maximum tolerable dose. We plan to start the Phase III clinical trial near the end of 2023. OCU200, our biologic product candidate is a [recombinant] fusion protein consists of two human proteins: [tumstatin] and [transferrin] and is designed to treat severely sight-threatening diseases like diabetes, macular edema, diabetic retinopathy and wet AMD. Millions of patients worldwide are affected by these conditions. However, current therapies target only one pathway, either angiogenesis or information and up to 50% of patient populations, experience limited or no response to current treatments. 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. Yesterday, we submitted an investigation of new drug application, IND, with the U.S. Food and Drug Administration to initiate a Phase I clinical trial of OCU200 for treating diabetic macular edema, DME. This regulatory milestone fulfills the company's commitment to file the IND, OCU200, within the first quarter of 2023. We are proud to further advance OCU200, one of Ocugen's founding ophthalmic programs. Another major highlight in 2022, that I'd like to note is the expansion of our pipeline into cell therapy with NeoCart, a Phase III ready, regenerative cell therapy technology that combines the evolutionary advancement in bioengineering and cell processing to enhance the autologous cartilage repair process. We are developing NeoCart specifically for the treatment of articular cartilage defects in the knee, current therapies to treat cartilage damage in the knee are suboptimal with varying outcomes due to variable cellular responses. The current standard of care suffers strong factors such as pain, reduced knee function, failure to [autologous cartilage] damage, donor tissue availability and open surgery. In addition to receiving a regenerative medicine advanced therapy designation from the FDA, we received concurrence from the FDA on the confirmatory Phase III clinical trial design. We have already begun renovating our facility to accommodate CGMP manufacturing for clinical trials, and we are planning to initiate Phase III randomized controlled study in subjects with articular cartilage defects in the first half of 2024. Now turning to our vaccines portfolio and continued efforts to significantly mitigate the spread of COVID-19. From a public health perspective, we actively monitor the medical need for a more durable vaccine as more than 1 million cases of COVID-19 were diagnosed in the U.S. over the last 30 days. The International Health Regulations Emergency Committee of the World Health Organization recently held a meeting in January this year to discuss the state of the COVID-19 pandemic, which revealed that the global risk of COVID-19 and its ongoing transmission is high. This assessment was based on factors regarding circulating SARS-CoV-2 variants of concern, status of global vaccination and hybrid immunity and the unexpected and relatively early seasonal return of the flu, which further encumbers already constrained health care systems. The data backs this up. More than 5 million cases were diagnosed and nearly 40,000 people die worldwide in the last 28 days. Current COVID-19 vaccines are limited by lack of durability and inability to stop transmission. As part of our commitment to address current gaps and the fighting against COVID-19, we are developing a novel mucosal vaccine platform that includes OCU500, a [indiscernible] 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 500 series is based on a novel [indiscernible] platform decide to reduce transmission and protect against new variants. The OCU500 series is designed for annual boosters. For the 2022 to '23 flu season, over 50% of the U.S. population, about 6 months of age, received a seasonal flu shot, representing a market size of more than 170 million doses. The OCU500 series of vaccines in the development, brands Ocugen distinct product candidate profile status that could significantly impact major global health obstacles and maximize our opportunity to sell broader patient markets. Regarding our injectable COVID-19 vaccine already in development, COVAXIN, we successfully completed enrollment for our COVAXIN Phase II/III immuno-bridging and broadening clinical trial in December 2022 and reported top line data in January 2023. This data showed that COVAXIN was well tolerated and demonstrated immunogenicity. We plan to present final data and analysis at midyear. At the beginning of November 2022, we held Ocugen's first [indiscernible] day. Since the company's inception to showcase our dynamic pipeline and world-class team to investors, analysts, [indiscernible] and other key stakeholders of the company. During that meeting, we shared the long-term outlook for the company. On this call, I would like to spend some more time recapping our key priorities over the next 12 to 18 months. First, our gene therapy programs. We're anticipating OCU400 preliminary efficacy data midyear and plan to start the Phase III clinical trial near end of the year. For OCU410, we are on track to submit INDs to the FDA in the second quarter of 2023 to initiate Phase I/II trials for dry AMD [indiscernible] disease. With OCU410, we believe we have a potential onetime curative therapy with a single injection. Dry AMD FX vision and 10 million people in the U.S. and over 266 million people worldwide. Also targeting severe [eye] diseases, we look forward to the initiation of our OCU200 Phase I clinical trial with the preliminary data anticipated in the fourth quarter of this year. We plan to complete the CGMP facility construction for the manufacturing of NeoCart in the fourth quarter in support of initiating a Phase III clinical trial in the first half of 2024. For our inhaled vaccine series, we are planning to file an IND to initiate clinical trials in the fourth quarter of 2024. One overarching and imminent objective for Ocugen is to identify synergies and partnership with organizations that can help drive the development of our comprehensive pipeline. With that, I'm thrilled to -- I'm thrilled about the recent appointment of a new Chief Business Officer, [indiscernible], who is a seasoned healthcare business executive with more than two decades of experience in business development, strategy and finance. We look forward to benefiting from the prospects of [indiscernible] leadership and together, further evolve as a fully integrated patient-centric biotech company. Our strategic initiative to identify partnership but our programs is also critical for our operational objective to conserve capital and extend runway as appropriate. With that, I will now turn the call over to our Chief Accounting Officer, Senior Vice President of Finance, Jessica Crespo, to review our Q4 and 2022 financial metrics. Jess?

Thank you, Shankar, and good morning, everyone. I will now provide a brief overview of our key financial results for the fourth quarter and full year 2022. Our research and development expenses for the quarter ended December 31, 2022, were $17.2 million compared to $7.1 million for the fourth quarter of 2021. For the full year ended December 31, 2022, research and development expense was $49.8 million compared to $35.1 million for the year ended December 31, 2021, with the increase primarily driven by the advancement of our product candidates into clinical trials. General and administrative expenses for the fourth quarter ended December 31, 2022, were $6.9 million compared to $7.5 million for the fourth quarter of 2021. General and administrative expenses for the full year 2022 were $35.1 million compared to $22.9 million for the year ended December 31, 2021. Net loss was approximately $21.9 million or $0.10 net loss per common share for the quarter ended 2022 Q4, compared to a net loss of approximately $14.6 million or $0.07 net loss per share for the fourth quarter of 2021. Full year net loss was $81.4 million or $0.38 net loss per share compared to a net loss of $58.4 million for the full year of 2021 or $0.30 net loss per share. Our cash, cash equivalents and investments totaled $90.9 million as of December 31, 2022, compared to $95.1 million as of the year-end December 31, 2021. We expect that our cash, cash equivalents and investment balance will enable us to fund operations into the first quarter of 2024. We're continuously exploring opportunities to increase our working capital, and we'll be focused on seeking out partnerships and nondilutive funding, as Shankar mentioned during his prepared remarks. That concludes my update for the quarter. Tiff, back to you.

Thanks, Jess. We'll now open the call for questions. Operator?

[Operator Instructions] Our first question will come from the line of Uy Ear with Mizuho Securities.

I was wondering if you could sort of speak a little bit about your some more about the COVID program, particularly with COVAXIN. Could you sort of just help us understand where -- how it fits currently, I guess, within the changing landscape where the FDA, I guess, are moving forward with recommendations for bivalent and as well as companies developing as you guys are also with the 200 series in combination with the flu vaccine? That's my first question. And I guess my second question is on OCU400, could you sort of help us understand as you -- what should we expect, I guess, from the Phase II readout in midyear? And how would that help you to move into Phase III in terms of, I guess, trial designs as well as what sort of primary endpoint you would propose to the FDA?

Starting with the COVAXIN, first question to address. Yes, the market landscape is moving, obviously. And we -- as we stated before, we're anticipating the full data analysis by midyear. And obviously, COVAXIN is a good vaccine. I mean it has got solid data. It is given to a few hundred million people across the globe. That's favorable safety profile. And unfortunately, in U.S., we needed to do more work to bridge with U.S. demographic and population as stated by FDA. So the first trial, obviously, included immuno-bridging trial. That's what we are completing. And the second one, obviously, we are anticipating a safety trial, because you need -- immuno-bridge to efficacy, the large efficacy trials done over by partners in India. And the second step is, of course, the safety bridge. And we -- as we stated earlier, we needed to work with government agencies. Having more vaccine options is important in this -- especially with a favorable safety profile. We confirmed in our immuno-bridging trial, we didn't have any myocardiac [indiscernible] or thrombosis, any of the adverse events like you see with other vaccines. And again, consistently confirming the safety data generated by our partners elsewhere. So we believe this has a space provided, we do get some help and funding from the government. So that's where the COVAXIN is. I mean, as I stated before, there's more work to be done. Obviously, there's a need for multiple tools in the toolkit. The COVID is not done. It will be there for many years. And we believe with a favorable safety profile, vaccine, which is built on a traditional vaccine platform, such as Polio and other vaccines. This could be a vaccine in a toolkit, which could be beneficial for many patients or many subjects. Now coming to OCU400. Obviously, the landscape is changing. That's why we are in our OCU500 series, as you stated, with [emmulation] vaccine. The potential to control transmission and durability. There are two things which are issues to the current vaccines, and we believe the market is going to move into annual boosters. As we stated, there's a large market size for flu. Over 50% of Americans have taken flu shots every year. So ideally, if we can combine with our technology we have, which is unique and [indiscernible] platform and designing novel flu as well as COVID and also a combination vaccine will offer a long term as Ocugen can contribute into that space, Republican's perspective. Now changing gears coming to OCU400 question. As we said to you, we're monitoring multiple observational endpoints as a part of this efficacy analysis. And what we are anticipating is we have multiple things we're looking at from a structural perspective as well as functional endpoints. Our goal is to identify one endpoint. I mean, ideally, the same endpoint works for multiple mutations is good. But again, the data is going to tell that. And so we have to wait until we get the data. Our goal is to identify an appropriate endpoint based on the data from this Phase II clinical trial and then propose that endpoint with FDA and eventually EMA and finalize our Phase III design and then move on to Phase III clinical trial. And your question about the Phase III clinical design, it will be similar to -- pretty similar to the product which got approved in the U.S. several years ago in [indiscernible] space on gene therapy products. So the design will be similar to that.

Your next question comes from the line of Jennifer Kim with Cantor Fitzgerald.

I have a few here. I guess the first one is OCU200. I saw that you're going to get the Phase I started up, and we're going to see some initial data in the fourth quarter. And I'm wondering what should -- what are you looking for in that preliminary data? And how should we think about the design of that trial? And then second, I think you mentioned that your runway gets you to the first quarter of 2024. I'm wondering how do you think about -- I think previously, it was runway into end of this year. And I'm wondering, I guess, where -- how should we think about -- like how you're managing cash as you're balancing all these programs and how you are able to extend that?

Yes. OCU200, as we announced, it's a dose escalation study in a small population. Our goal is to look at the range of doses, and so we can pick one before we go into Phase II. So as a part of that -- I mean, obviously, we're going to look at CST, central software thickness, as other companies have looked at DME space, specifically. Once again, the primary objective of any Phase I clinical trial is safety as a part of the dose escalation to finalize the dose. And we'll be looking at observational endpoints and one of them is [indiscernible]. And the second question, extending runway into Q1. I'll let Jess answer that.

So in terms of the extension of our runway into the first quarter, we did utilize our ATM a bit. So that has helped us extend our runway into Q1 of 2024. But as Shankar mentioned, I mean we will need to raise capital in order to progress on all of our programs, and we're exploring many different options, including our focus on non-dilutive funding, as we stated.

Okay. Great. And maybe if I could squeeze one more question. With the two additional IND filings in the second quarter of this year, should we think about you -- our -- is initiation of those clinical programs, could that come this year? Or are you thinking more in, I guess, early next year?

As we stated -- yes, yes, yes -- again, I just wanted to confirm. The [indiscernible], we call it, we separated it out because [indiscernible] the targets dry age-related macular degeneration, specifically we'll be targeting late-stage patients in [indiscernible] and that's targeted for filing in second quarter of this year. Similarly, OCU410 [indiscernible] targeting orphan disease [indiscernible] is also targeted for second quarter of this year, IND filing.

Your next question will come from the line of Jonathan Aschoff with ROTH MKM.

Most have been answered, but did you say the NEO CART trial would start in the fourth quarter of next year or just sometime next year?

No. Actually, we stated [NEO CART] clinical trail start first half of next year. We are constructing CGMP manufacturing facility, and that will be complete by the end of this year.

Okay. And can you give us a little more clarity on how much is left on the ATM as of today?

Yes. So as part of our, I would say, general corporate housekeeping. We've canceled the ATM in connection with converting our automatic shelf into a regular shelf, so you'll see those filings come through today. So we'll put the ATM back up when and if it's appropriate for the appropriate amount. So at this point, [it's been careful].

Okay. But can you tell us how much of that ATM was actually used overall from the [indiscernible] end?

Yes. Under that ATM, we've sold approximately $14 million in terms of gross proceeds, and we've netted about $13.6 million.

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

Thank you for laying out some of the milestones for the COVAXIN programs. Could you give any time frames for -- well, you had mentioned the midyear top line or conclusions and full data. Could you give some of the time frames for the Phase III and some of the other program starts and milestones?

Robert, are you specifically referent to COVAXIN or other programs?

Excuse me?

Are you referring to COVAXIN and other programs?

Yes.

As we stated before -- yes. The COVAXIN, we are finishing up the current study and we'll have the final data analysis expecting midyear this year. And as I stated before, we may need to do a safety clinical trial. We're still waiting for FDA to respond that comments on our safety protocol. And once we get that, obviously, we -- as we stated, we are seeking government funds to conduct that clinical trial. So as far as other Phase III clinical trends are concerned, there are two more we talked about during this earnings call. One of them is our signature OCU400 modified gene therapy platform. So we're -- we have completed recruitment in our retinitis pigment dose up portion of Phase I/II clinical trial. And so based on data read, we're anticipating midyear on efficacy signal. And we're going to get into -- planning to get into Phase III by the end of this year for our OCU400 gene therapy Phase III clinical trial. And the second Phase III clinical trial is related to NeoCart, our cell therapy platform. And the rate limiting for that is -- it's [indiscernible] cell therapy. It's almost like a personalized medicine. So we're building our own manufacturing facilities renovating the existing facilities to convert them into CGMP manufacturing for cell therapy production. And we're anticipating that construction will be complete by the end of the year, and that will allow us to initiate Phase III clinical trials in the first half of 2024.

Your next question will come from the line of Sean Lee with H.C. Wainwright.

Just a quick question for me. So for the proposed NeoCart study, have you finalized on the endpoint in the study design yet?

Yes. I think the study design, as we agreed with the FDA, includes chondroplasty as a control, and that's different than prior control they used in the prior studies. The second thing is the endpoints will include [indiscernible] function.

Compared to the previous Phase III that histogenics ran with NeoCart, what would be the key differences?

The key differences are -- they had a [indiscernible] control, which is -- so what we did is we looked into the current standard of care, which is chondroplasty. And so based on that, we actually wanted to use chondroplasty and FDA agreed with that. The second thing is we're also going to restrict the lesion size to 3 centimeter square and really focus on that so that it's not very broad like they did before. So I think with these changes, we anticipate we'll have better prospects of relatively easily recruiting patients. That's important because chondroplasty is standard of care, not microfracture, and that's really important. That's an important change, and also focusing on a specific range for a lesion size is very important for us.

Great. One last final follow-up for the new manufacturing facility that you're building, would that be only for supporting materials to the Phase III? Or could you scale that up to potential commercial later as well?

Good questions, Sean. When we build these personalized medicine, many cell therapies, this is like a scale-out, not scale up. So these are very small -- you can call them bioreactors. We call them tissue engineering process units [indiscernible]. So these things are very small suites. So this can be used for commercial manufacturing too.

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

Congrats on all the progress. Just a couple of follow-ups, one on the cash runway in terms of bundling. Are you expecting to fund the OCU500 series vaccine programs internally or look for external funding? That's one. And two, in relation to 410 [indiscernible], the two INDs that you plan to file this year, are you planning to initiate the actual trials this year as well? Or are you planning to initiate those in 2024?

The first one is related to OCU500 series emulation vaccines. So as we stated before, we are funding the development of those vaccines and taking it to the clinic. So we're also in parallel working with various government agencies because of the need, we believe we are trying to secure funding from that. We do need their support to move them into the clinic, but the development part and preclinical studies, we have budgeted for it and we're going to complete them. And the second step -- question you had on OCU410 and OCU410 SE targeting dry AMD and [indiscernible] disease. Those INDs are scheduled to be filed planning in the second quarter of this year. And as soon as we get a positive nod from FDA, we will start dosing patients, this year.

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

Thank you, operator. I'd like to conclude the call with some additional remarks. I think it's clear that we are staying true to our mission as an integrated patient-centric biotechnology company that targets unmet medical needs. We believe we are in a position of strength, and we are poised to execute our goals with our pipeline over the course of 2023. We look forward to keeping you updated on our programs throughout the year. Thanks for your time today, and have a great week.

Thanks, everyone. Have a great day.

Thank you all for joining today's meeting. You may now disconnect.