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

Good morning, and welcome to the Ocugen's First Quarter 2023 Financial Results and Business Update Call. Please note that this call is being recorded at this time. [Operator Instructions] Following the speaker's commentary, there will be a question-answer session. I will now turn the call over to Sharon Choe, Ocugen's Head of Investor Relations. You may begin.

Thank you, Mandi. Joining me today are Ocugen's Chairman, CEO and Co-Founder; Dr. Shankar Musunuri who will provide a business update; and our Chief Financial Officer and Chief Business Officer, Quan Vu, who will provide a financial update. Earlier this morning, we issued a press release detailing business and operational highlights for the first quarter of 2023. We encourage listeners to review the press release, which is available on our website at www.ocugen.com. This call is being recorded, and a replay with the accompanying slide presentation will be available on the Investors Section of the Ocugen 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, propose, continue, estimate, anticipate, expect, plan, intend, may, could, might, will, should, or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Such statements are subject to numerous important factors, risks and uncertainties, and may cause actual events or results to differ materially from our current expectations. Investors should familiarize themselves with the company's filings for complete details. Except as required by law, we assume no obligation to update forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise, after the date of this presentation. Finally, Ocugen's quarterly report on Form 10-Q, covering the first quarter of 2023, will be filed soon after today's call. I will now turn the call over to Dr. Musunuri.

Thank you, Sharon. Good morning, and thank you all for joining us today. Looking at what we have achieved since we reported our 2022 fourth quarter and full year results, I'm kicking off today's call with a high sense of accomplishment and optimism for the future of Ocugen. At the top of our list of highlights is the recent announcement of positive preliminary safety and efficacy results from the Phase 1/2 trial of our OCU400 program and the FDA's orphan drug designation for our OCU410ST program to potentially treat ABCA4 associated retinopathies such as Stargardt disease. We also forged ahead in our pursuit of non-dilutive government funding to support our inhaled vaccines pipeline, and submitted multiple proposals to various federal agencies. And we will begin seeking corporate partnerships for our gene therapies. I will also share updates on our OCU200 and NeoCart programs later in my commentary. 2023 is off to a strong start. And you can see we remain on track to achieve the significant milestones for the year that we first shared with you during the last business update webcast. Our modifier gene therapy approach continues to be the leading differentiator for Ocugen. Unlike single gene replacement therapies, which only target 1 genetic mutation, we believe that our modifier gene therapy platform, through its use of nuclear hormone receptors, represents a novel approach that has the potential to both address multiple retinal diseases caused by mutations in multiple genes with 1 product, and to address complex diseases that are potentially caused by imbalances in multiple gene networks. Currently, Ocugen has 3 modifier gene therapy programs: OCU400, retinitis pigmentosa and leber congenital amaurosis, which affects approximately 125,000 patients in the U.S. living with any of more than 125 associated mutated genes. OCU410 for dry age-related macular degeneration, a disease affecting approximately 10 million people in the U.S. alone. And OCU410ST for the treatment of ABCA4 associated retinopathies, including Stargardt, retinitis pigmentosa 19, RP19 and Cone-Rod Dystrophy 3, CORD3 diseases affecting 44,000 Americans. We recently announced positive preliminary safety and efficacy results from the Phase 1/2 trial of OCU400 for the treatment of retinitis pigmentosa and leber congenital amaurosis. These preliminary positive results serve as the first clinical validation of the platform where patient responses across various genetic mutations support that OCU400 has the potential to transform the lives of many patients who are struggling with debilitating blindness diseases. This Phase 1/2 trial is a multicenter, open-label dose-ranging study. We have enrolled a total of 18 RP patients in this study, with 10 subjects in the dose escalation and 8 subjects in the expansion phase. The age of subjects enrolled to date ranges from 18 to 77 years across Rhodopsin and NR2E3 gene mutations. We further expanded this Phase 1/2 trial to enroll LCA patients with the CEP290 gene mutation and pediatric patients with NR2E3 RHO and CEP290 mutations. In cohort 1, which is low dose and cohort 2, which is medium dose, a total of 7 subjects with moderate to advanced vision impairment due to RP associated with RHO and NR2E3 gene mutations received a unilateral subretinal injection of either a low dose, which is 1.66x 10 to the 10 mgs per ml, in Cohort 1, or medium dose, which is 3.33x 10 to the 10 mgs per ml of OCU400 in Cohort 2, respectively. In the preliminary data analysis, 9-month follow-up data for 3 subjects in Cohort 1 and 6-month follow-up data for 1 subject from Cohort 1 and 3 subjects from Cohort 2 were assessed. Overall, preliminary results showed a favorable safety and tolerability profile for OCU400. Regarding efficacy, we looked at multi-luminance mobility test or MLMT, a primary efficacy endpoint used in clinical trials for an FDA-approved product in this disease area, and best corrected visual acuity or BCVA. Key efficacy outcomes from 7 subjects demonstrated 4 key points. 100% of treated eyes showed a stable or improved MLMT score trend. 71% of OCU400 treated eyes demonstrated a 1 or more Lux Level improvement in MLMT score compared to 29% of untreated eyes. 67% of OCU400 treated eyes in Cohort 1 with a 9-month follow-up demonstrated a 2 or more Lux Level improvement in MLMT score compared to none of the untreated eyes. And 43% of OCU400 treated eyes demonstrated 8 to 11 letters of improvement in BCVA score compared to none of the untreated eyes. The early results from patients treated in the Phase 1/2 trial are encouraging, and support the paradigm-changing potential of our modifier gene therapy technology to address unmet medical needs for patients with RP and LCA. With this favorable safety profile and positive trend in efficacy signals, we are very eager to see longer-term data and to potentially initiate Phase III clinical trials in the U.S. and EU. As I mentioned earlier, we received exciting news last week that the FDA granted orphan drug designation for OCU410ST, AAV5 [ RHO RA ] for the treatment of ABCA4 associated retinopathies, including Stargardt, RP19 and CORD3 diseases. As a refresher, orphan drug designation is granted by the FDA to certain products that show promise in the treatment, prevention or diagnosis of rare and serious diseases affecting fewer than 200,000 people in the United States. Additionally, the orphan drug designation status allows for a potential 7-year market exclusivity specifically to the designated orphan use, following FDA approval. Other development incentives include the clinical protocol, design assistance and potentially accelerated review times. This designation represents a noteworthy milestone in our record to develop innovative treatments for inherited retinal diseases. And while OCU410ST is intended to treat rare diseases, OCU410, also targeting the [ RHO RA ] gene network, is aimed at treating dry age-related macular degeneration that affects hundreds of millions of people across the globe. Using our modifier gene therapy, we believe OCU410 potentially addresses shortcomings of current treatments for geographic atrophy that affects about 1 million people in the U.S., because it is a broad spectrum approach that has potential as a onetime curative therapy with a single subretinal injection. Now turning to vaccines. The OCU400 series of vaccines in development grants Ocugen a distinct product candidate profile status that could significantly impact major global health obstacles and maximize our opportunity to serve broader patient markets. Current COVID-19 vaccines are limited by a lack of durability and inability to stop transmission. As part of our commitment to address current gaps in the fight against COVID-19, we are developing a novel inhalation vaccine platform that includes OCU500, a bivalent COVID-19 inhaled vaccine, OCU510, a seasonal quadrivalent flu inhaled vaccine, and OCU520, a combination quadrivalent seasonal flu and bivalent COVID-19 inhaled vaccine. The OCU500 vaccine series is based on a novel chAd platform, designed to reduce transmission and protect against new variants with a potential durability up to 1 year. We decided to develop the flu vaccine in addition to addressing COVID-19 because flu will always be a health concern. There is also a longer-term business potential, as Americans continue to be regularly vaccinated against the flu. For the 2022 to 2023 flu season over 50% of the U.S. population above 6 months of age received a seasonal flu shot, representing a market size of more than 170 million doses. To optimize resources across our diverse at critically needed development programs and maintain shareholder value, our team has been busy in D.C., speaking with the government agencies to pursue nondilutive funding opportunities for our OCU400 vaccine series. We have submitted multiple comprehensive proposals for review and consideration, and maintain an ongoing dialogue with the respective agencies regarding the development of the inhaled vaccines platform. We look forward to updating you as we hear more. Last quarter, we submitted an Investigation of New Drug application, IND, with the U.S. Food and Drug Administration to initiate a Phase 1 trial of OCU200 for treating diabetic macular edema, DME. The IND was placed on clinical hold by the FDA as part of its request for additional information related to chemistry, manufacturing and controls prior to initiating the Phase 1 trial. The company plans to respond to the FDA promptly to get FDA clearance to initiate the Phase I clinical trial. We believe OCU200 works with a distinct mechanism of action compared to existing therapies, and targets multiple causative pathways such as angiogenesis, oxidation and inflammation and has a potential to offer better treatment to all patients. NeoCart is our Phase 3-ready region reduced cell therapy technology that combines novel advancement in bioengineering and cell processing to enhance the autologous cartilage repair process. We are in the process of renovating our facility to accommodate cGMP manufacturing for NeoCart, and plan to complete construction in the fourth quarter of 2023 with a Phase 3 randomized controlled study in subjects with articulate cartilage defect commencing in 2024. As you can see, we are highly dedicated to completing our stated objective with sound strategies that we believe will enable Ocugen to reach several value-enhancing milestones over the course of 2023 and beyond. With that, I will now turn the call over to our Chief Financial Officer, and Chief Business Officer, Quan Vu, to review our first quarter financial update. Quan?

Thank you, Shankar, and good morning, everyone. I will now provide an overview of the key financial results for the first quarter of 2023. Our research and development expenses for the quarter ended March 31, 2023, were $9.6 million compared to $7.9 million for the first quarter of 2022. General and administrative expenses for the quarter ended March 31, 2023, were $8.2 million compared to $10.1 million for the first quarter of 2022. Net loss was approximately $16.5 million or $0.07 net loss per share for the first quarter ended March 31, 2023, compared to a net loss of approximately $18 million or $0.09 net loss per share for the first quarter of 2022. Our cash, cash equivalents and investments totaled $76.7 million as of March 31, 2023, compared to $90.9 million as of December 31, 2022. We expect that our cash, cash equivalents and investment balance will enable us to fund operations into the first quarter of 2024. We are continuously exploring opportunities to increase our working capital and will be focused on seeking out corporate partnerships for gene therapies and nondilutive funding for vaccines, as Shankar mentioned earlier. That concludes my update for the quarter. Sharon, back to you.

Thanks, Quan. We will now open the call for questions. Mandi?

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

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

Jennifer, I'll let Quan answer the first question, and I'll get to the second one.

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

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

Yes. I was wondering. Yes, for the inhaled vaccine platform, do you have -- I know you submitted some proposals. Have you gotten any feedback in terms of when you might get more visibility on that end?

Not yet. Again, we're actively working with them. When we get more information, we'll let you know.

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

Yes, it is.

Our next question comes from the line of Jonathan Aschoff from Roth Capital.

I was wondering if you could elaborate on your key focus being gene therapy? I kind of noticed that the word Biologics was removed from your company description.

Yes. I mean, we are -- Ocugen, we're really focused on modifier gene therapy platform. And with the recent results, preliminary results we released, OCU400, it in a way validates the platform, and so we're very excited about it. Obviously, we'll continue to move that program as we stated before, and work with the regulatory agencies and then line up potentially Phase 3 clinical trials sooner than later. And that's our focus. And obviously, the 2 other programs in the pipeline are coming through: OCU410, targeting geographic atrophy, a subset of dry AMD population and OCU410ST with Stargardt disease. INDs are going to be filed this quarter. So once again, the company is going to focus our major effort on gene therapies because there's a lot of promise, there's so much of unmet medical need.

Okay. Can we have any other color on OCU200 via clinical hold? Or is there just really nothing to say other than what's in the press release?

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

Okay. And can you help us -- I'm sorry, I didn't mean to cut you off there.

No, that's it.

Can you help us understand the drop in R&D? Is that -- I mean vaccine, or what is that?

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

Okay. Because if you do that into the -- I mean, you kind of have cash, I mean, well, well, well into the first quarter of '24, so is that just an overly conservative statement from lawyers?

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

Our next question comes from the line of Uy Ear from Mizuho.