Ocugen, Inc. (OCGN) Earnings Call Transcript

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

Thank you, Samantha. 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 on our financial results. Earlier this morning, we issued a press release detailing business activity for Q2 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 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 subject to risks and uncertainties. We may, in some cases, use terms such as predicts, believes, potential, proposed, continue, estimates, anticipates, expects, plans, intends, may, could, might, will, should or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Such forward-looking statements include, but are not limited to, statements about the potential for NeoCart (autologous chondrocyte-derived neocartilage), if approved, to provide an innovative new option for repair of full-thickness lesions of the knee cartilage in adults as well as Ocugen's intention to begin dosing in Cohort 2 of the OCU400 clinical trial this month. Such statements are subject to numerous important risks -- factors, risks 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 and 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. 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 second 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, everyone, and thank you for joining. We hope you and your families are safe and well. Courageous innovation is a driving force behind everything we do at Ocugen. We are leading innovative clinical programs to ultimately make a significant impact on public health and address unmet medical needs around the globe. Developing great science requires harnessing the passion, persistence, patients and intellectual progress of our entire Ocugen team, and I'm very proud of what we are accomplishing. Using this mindset of courageous innovation, we are strengthening our dedication to eye care, pursuing broader commercialization of our vaccine program, and we have expanded our pipeline into the orthopedic space, which we will discuss later. The Ocugen team continues to charge ahead. And over the course of this past quarter, we saw great progress in establishing ourselves as a differentiated biotech company. As we continue to meet our regulatory milestones and engage with patients in a clinical setting, I'm especially confident that the team is well poised to advance our efforts. Today, we are going to provide updates on our vaccines, gene and cell therapy programs. Starting with vaccines. As we enter the third year of the COVID pandemic, we are facing new challenges as COVID-19 variants continue to emerge. At the World Vaccine Congress in late April, speakers all agreed that public health strategies need to expand and vaccine options beyond what is available in the current mRNA dominant landscape are necessary to contain the pandemic. This sentiment was reiterated during the recent White House Summit on the future of COVID-19 vaccines. Additionally, consumers want effective options for vaccinating themselves and their children, including vaccines built on a traditional platform. We are up to this challenge as we advance the COVAXIN program with our partner Bharat Biotech. Studies have shown COVAXIN provides durability through immune memory and a broader immune response that may be important for realizing the [ booster ] strategy for annual vaccinations. We are still a few years away from seeing an end to this pandemic and the need for delivering an additional COVID-19 vaccine option with a different MOA in the U.S. remains a priority. The Phase II/III immuno-bridging and broadening clinical trial, OCU-002 for COVAXIN is progressing well, and we are in the planning stages for starting the adult safety clinical trial this year, pending FDA discussions. Lancet Infectious Disease, which is a peer-reviewed journal recently published the Phase II/III clinical trial results of 526 children who demonstrated a superior response in the study [ for that shown ] in adults. Nature Scientific Reports published a study where COVAXIN generated a persistent cell-mediated memory immune response for up to 12 months. Additionally, it showed that a booster dose is safe and ensures persistent immunity to minimize breakthrough infections of COVID-19. These studies reinforce the point that COVAXIN is effective with a favorable safety profile. COVAXIN already has Emergency Use Authorization in Mexico for adults, and we submitted an application for pediatric emergency use in the 2- to 18-age group that is under review. We are currently working on commercializing the vaccine in Mexico. Now moving on to our gene therapy programs. And our founding focus, retinal diseases, is becoming clearer, especially with 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 the patient's [ tragic ] journey that ultimately leads to blindness. Ocugen has a deep commitment to its research and development programs for inherited retinal diseases, for which there are no treatment options, only one gene therapy modality exists. Our modifier gene therapy unlike traditional gene therapy has shown in preclinical models to affect the regulation of genes or nuclear hormone receptors or NHRs. Activating these NHRs, modulates gene activity and maintains [ immunostasis ]. When gene networks are not functioning properly, this unbalanced state can lead to disease, including a family of inherited retinal diseases that cause blindness. We completed the dosing of subjects with retinitis pigmentosa in Cohort 1 of our Phase I/II safety and efficacy clinical trial for OCU400, and the independent Data Safety Monitoring Board for the clinical trial recommends proceeding to dosing in Cohort 2. We expect to begin dosing in Cohort 2 this month, and we will provide periodic updates. This is a significant accomplishment in an innovative therapeutic category because for the first time by evaluating this modifier gene therapy concept with rhodopsin mutation in the ophthalmology disease space. By the end of the study, we will collect data from 18 patients, which will constitute 3 cohorts of 3 different doses before moving on to a Phase III clinical trial. If successful, this therapy has the potential to treat many mutations under RP. Currently, RP has about 150 mutations, affecting approximately 2 million people globally. This is a dire unmet medical need and shows where Ocugen can bring courageous innovation to bear. Our sense of urgency for rescuing [ one site ] is critical. And for us, it's personal. Our next candidate, OCU410, has IND-enabling studies underway to support a future Phase I/II clinical trial, targeting dry age-related macular degeneration. Ocugen is currently executing pre-IND studies, consistent with FDA discussions to support a Phase I/II clinical trial, which the company intends to initiate next year. We have partnered with CanSinoBIO to manufacture clinical trial materials and to support the CMC development for OCU400 and OCU410. It's also worth noting that we expanded our patent portfolio in June, then the United States Patent and Trademark Office issued the company an additional patent directed to methods for preventing or treating an ocular disease or disorder associated with retinal degenerative disease. Finally, we're expected to initiate a Phase I/IIa clinical trial next year for OCU200, our novel biologic that has the potential to help those with diabetic macular edema, diabetic retinopathy and wet age-related macular degeneration. We have completed the technology transfer of manufacturing processes to its contract development and manufacturing organization that will manufacture OCU200 clinical materials. Now moving on to our regenerative cell therapies. With the expansion of our pipeline into cell therapy in orthopedics, NeoCart marks an experimental therapy with the potential to accelerate healing and reduce pain, the rebuilding damaged knee cartilage and limiting the progression of osteoarthritis. NeoCart is a tissue-engineered [indiscernible] that is manufactured by growing chondrocytes, the cells responsible for maintaining cartilage health, which are derived from the patient. Recently, Ocugen entered into a collaborative research agreement with Brigham and Women’s Hospital, the teaching hospital of Harvard Medical School, to support NeoCart development and explore expansion of the pipeline. 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. We believe this RMAT designation will accelerate our time line in getting this product to market. Ocugen is currently working with the FDA to finalize the Phase III clinical protocol necessary to advance the clinical development of NeoCart for eventual market authorization. In summary, we have an ambitious clinical agenda and the rigor in our clinical development process to advance our pipeline and constant pursuit of our long-term vision. What's important to remember is that the strength of our pipeline is found in the diverse innovation we are exploring to address public health and unmet medical needs. I'm very proud of our team, who collectively shares in our vision. We were recently named one of the region’s Best Places to Work by the Philadelphia Business Journal. This recognition is a reflection of all our colleagues and our culture focused on courageous innovation. I will now turn the call to Jess to provide our second quarter 2022 financial results. Jess?

Thank you, Shankar, and good morning, everyone. I will now provide an overview of the key financial results for the second quarter of 2022. Our research and development expenses for the quarter ended June 30, 2022, were $9 million compared to $18.9 million for the quarter ended June 30, 2021. Research and development expenses for the second quarter in 2021 included a $15 million upfront payment to Bharat Biotech in connection with gaining rights to the Canadian market for COVAXIN. General and administrative expenses for the quarter ended June 30, 2022, were $10.6 million compared to $6.8 million for the second quarter of 2021. The increase in general and administrative expenses related to the increase -- an increase in infrastructure costs to support the growth of our organization. Our net loss was approximately $19.5 million or $0.09 net loss per share for the quarter ended June 30, 2022, compared to a net loss of approximately $26 million or $0.13 net loss per share for the quarter ended June 30, 2021. Our cash, cash equivalents and restricted cash totaled $115 million as of June 30, 2022, compared to $95.1 million as of year-end December 31, 2021. We expect our cash on hand will take us into the second quarter of 2023. We're exploring opportunities to increase our working capital, which may include the use of our current at-the-market program for the sale of our common stock. That concludes my update for the quarter. Tiffany, back to you.

Thanks, Jess. With that, we will open the call for questions. Samantha?

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

I have a couple of questions here. Maybe to start off with COVAXIN. I'm wondering, have you finalized what exactly studies [ you need ] and the protocols around those studies. And with the development of bivalents that could come in the fall, has anything changed in your mind in terms of your market opportunity?

Jennifer. Yes, the current study, the immuno-bridging and broadening study that is required -- that bridges the clinical data from U.S. demographic to data generated by our partners elsewhere, a large [indiscernible] clinical trial they have conducted to collect safety and efficacy. The second one, which is required, we believe, is a safety trial in the U.S. demographic, and we're still awaiting feedback from FDA. As soon as they provide that information, we're going to initiate the clinical trial. We're planning for that. So we believe those 2 are needed to [indiscernible] BLA as we planned. The second part of your question is in the bivalent. FDA recently changed the strategy, I think it's still upcoming. Science is evolving. So if this is the strategy we're going to go into the future with bivalent variants, and we'll be working towards that. However, we will be getting some data from our clinical trial, and we will do subanalysis of those subjects or patients who have received currently mRNA vaccines and how our vaccine is performing. Because we do provide broad immune responses compared to spike-based mRNA vaccines, and we also have long-term durability with memory response. So we have to see how those factors play out. Do we really need a bivalent vaccine strategy with our vaccine? We're going to carefully monitor that. And if we have to develop a bivalent vaccine, our partners are working on that and they're standby, so we'll be ready to do that for [indiscernible].

Okay. Great. My second question is on the OCU400 program. You mentioned that you're going to start dosing Cohort 2 this month, and you're going to give periodic updates. Could you give any color on what level of granularity will be in those updates? And how -- when can we expect to see, I guess, some real data from the patients in that program?

Yes. So these periodic updates. So the primary objective of Phase I/II clinical trial is safety, and we are monitoring multiple efficacy end points. We call them observational end points. Depending on the mutation, every mutation may have a different primary end point before we move on to the Phase III. So currently, the primary objective on a 3-month periodic basis, subject to our protocol and what we agreed with FDA. We'll be monitoring these patients. Safety outcomes will come out. And again, they get reviewed by DSMB on a periodic basis. That's our #1 outcome, and we [indiscernible] share with the market as it comes along. The second part is efficacy end points based on our observational end points. And that data, typically, I don't think we're going to get anything before -- anything before 6 months visit for our patients. And from 6 months to 1-year visits, when these patients go through that transition, we may be able to see some observations. And we see them, obviously, we'll go through the internal process and controls, then we'll be able to share that information to the markets.

Okay. So does that mean, I guess, with your -- the first patient in Cohort 1? I think they were dosed in March. We could see it like 6 to 12 months from there as when we could see some signals.

That's right. That's what [indiscernible].

Okay. Great. Okay. And then my last question on -- with your introduction of NeoCart, I'm wondering what are your thoughts on further expanding or diversifying your pipeline? Is that a priority in your mind?

NeoCart, I mean, are you asking specifically about NeoCart or further diversifying into a cartilage space?

More just to how you view priorities of the company. Are you comfortable with where your pipeline sits today? Or are you thinking about further opportunities to expand?

Yes. Yes, that's a good question. So NeoCart obviously was sitting in our [ back ], came through the reverse merger. And now we have very strong R&D and our teams in the organization with a solid biotech footprint. And so we started looking at it. And obviously, it looks very, very promising. There's so much of unmet medical need. That's why we started working on it. And obviously, we believe we have a strong biotech team that can support it for now. And obviously, this is a tip of the iceberg as you can look into the regenerative space in the cartilage. There's only one product available in the marketplace, and we believe we have a superior technology with the 3D, how we grow the sales with this proprietary technology and a strong patent portfolio. And this is the product we're going to focus on initially. Obviously, through our research and development, including the collaboration with Harvard Medical School. If any future pipeline expansion opportunities come up, we'll try to explore them. But our goal for now in the next couple of years is really focus on this, work with FDA and work on the manufacturing, work on clinical program and take it to the clinic sooner than later.

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

I was curious, what do you think is your best COVAXIN pitch for the 3 different areas of North America [indiscernible] differential among the 3 countries. But what is your best pitch in each of those countries, you think, for pushing the utility of COVAXIN against what's already out there?

Yes, I mean -- again the differentiation with COVAXIN vaccine compared to 3 or 4 authorized vaccines in the U.S., they're all spike based. That's a distinct difference. Ours is based on the whole virus-based vaccine with 2 adjuvants. So that means [ it has really ] broad immune response. That means you get antibody responses, be on spike, which may be needed. And also, there is a major publication, which talked about, which actually followed the patient up to 12 months and showed a T-cell and B-cell memory responses, which are important for durability. So when you have a broadened immune response, when you have durability, when you go into the future, it's not practical to get [ booster ] shots every 3 months. One has to look for almost like a matching like a flu season, annual [ booster ] shots. So for that, what you're looking for is an ideal vaccine, which has a durability, and which also has potential with a broadening immune response. Broadening immune response will potentially result in adaptive immunity. That means not only current variants, for the future variants. And if you have a -- your system is already prepared with the broadening immune responses with the memory, and if you do see some variants and which is going to happen in the future and at least you'll have ability to create with your adaptive immune system, attack it. And that's why it's really important. I think this is a very distinct and a unique vaccine in the North American market, including -- and but one other thing I would like to make is in Mexico, we are working on Emergency Use Authorization for pediatric population. And that's very important, too. I mean, obviously, we will be looking into that going into the future when you go into these annual boosters. The reason is the data our partners have generated in India on pediatric population is very strong. And not only it showed very good immune responses, it also showed solid safety. I mean they had a surveillance data after 36 million kids, teenage group got first dosed with the vaccine. And they collected surveillance data and the surveillance data clearly showed no cases of myocarditis, pericarditis or thrombosis, which are associated with current vaccines here in North America. So those are the distinct features of this vaccine. That's why we believe we can strongly position this product.

Okay. How are talks going for the manufacturing facility in Ontario. That wasn't part of the Q2 release. I was wondering how that was going.

Yes, that's going on. Obviously, we are also working with Canadian government to get support on that, as we mentioned before. And obviously, it's progressing. In fact, I mean, we're getting good support from the Canadian government, and we're happy to share that. And as soon as we have something concrete -- and it takes time to work with governments, but they're very supportive. And as we have something concrete, we'll definitely update the markets.

Okay. And need I await the impending 10-Q for this answer? Or can you give it to us now how much of the ATM has been used?

This is Jessica. We have not utilized any of the ATM at this point. We're going to be opportunistic about our use of it.

Your next question comes from the line of [indiscernible] with Mizuho.

Can you hear me?

Yes.

So I guess my first question is just to sort of elaborate a little bit on or get some more color on OCU400. Just wondering, when you do report data for the efficacy end point, just curious like how would you kind of define success in which of those metrics that are listed in clinicaltrials.gov are more important to you or more important, I guess, to clinicians in terms of how it would sort of help define success for this program. And...