Ocugen, Inc. — Q1 2023 Form 10-Q Summary
Business Context and Reporting Period
Ocugen is a clinical-stage biotechnology company developing gene therapies, cell therapies, biologics, and vaccines. The company operates as one segment and has not generated revenue from product candidates. This unaudited report covers the three months ended March 31, 2023, compared with the three months ended March 31, 2022.
- Modifier gene therapy: OCU400 for inherited retinal diseases; OCU410 for dry AMD; and OCU410ST for Stargardt disease.
- Regenerative medicine: NeoCart for adult knee cartilage injuries.
- Vaccines: OCU500, OCU510, and OCU520 inhaled mucosal vaccine candidates.
- Biologic therapy: OCU200 for diabetic macular edema, diabetic retinopathy, and wet AMD.
Financial Performance and Position
| Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change |
|---|---|---|---|
| Revenue | None reported | None reported | — |
| Research and development expense | $9.6 million | $7.9 million | +$1.6 million |
| General and administrative expense | $8.2 million | $10.1 million | -$1.9 million |
| Total operating expenses | $17.8 million | $18.0 million | -$0.3 million |
| Loss from operations | $17.8 million | $18.0 million | Improved by $0.3 million |
| Other income, net | $1.3 million | $0.0 million | +$1.2 million |
| Net loss | $16.5 million | $18.0 million | Improved by $1.5 million |
| Net loss per share | $0.07 | $0.09 | Improved |
| Net cash used in operating activities | $18.2 million | $15.1 million | +$3.2 million use |
- Cash and cash equivalents were $68.3 million at March 31, 2023, compared with $77.6 million at December 31, 2022.
- Marketable securities were $8.5 million, resulting in cash, cash equivalents, and investments of approximately $76.7 million.
- Total assets were $96.3 million; total liabilities were $20.5 million; and stockholders’ equity was $75.8 million.
- Accumulated deficit was $229.5 million.
- Debt carrying value was $2.3 million, including $1.3 million classified as current. Outstanding borrowings carried a fixed 4.0% interest rate.
- Net cash provided by investing activities was $3.4 million, primarily reflecting $9.0 million of marketable-security maturities, partly offset by security purchases and $1.6 million of property and equipment purchases.
- Financing activities provided $5.5 million, principally from the sale of common stock under the at-the-market program.
- Stock-based compensation expense was $2.7 million.
Material Changes Versus the Prior Comparable Period
- Research and development expense increased primarily because of higher employee-related costs, modifier gene therapy development, inhaled mucosal vaccine preclinical work, and COVAXIN clinical expenses. These increases were partly offset by lower OCU200 costs.
- General and administrative expense declined because of lower professional-service and pre-commercialization costs, partially offset by higher employee-related expense.
- Other income increased largely because of $0.7 million of interest income earned on cash, cash equivalents, and investments.
- Operating cash burn increased to $18.2 million from $15.1 million.
- The company sold approximately 4.5 million common shares for $5.6 million of net proceeds during the quarter. The related at-the-market sales agreement was terminated on February 27, 2023.
- Common shares outstanding increased to approximately 226.4 million at March 31, 2023 from approximately 221.6 million at December 31, 2022.
Guidance, Outlook, Commentary, Risks, and Unusual Items
- Management expects available cash, cash equivalents, and investments to fund operations into the first quarter of 2024, but states that these resources will not meet capital requirements for the next 12 months.
- The financial statements disclose substantial doubt about the company’s ability to continue as a going concern within one year after issuance of the financial statements. Additional equity or debt financing, collaboration or licensing income, asset sales, and government funding will be required.
- Management expects to prioritize the modifier gene therapy platform and limit vaccine-development spending from the second quarter of 2023 unless government funding is obtained.
- OCU400: The company reported preliminary positive safety and visual-function data from early Phase 1/2 cohorts, plans to dose pediatric patients in the second quarter of 2023, and intends to begin a Phase 3 trial near the end of 2023 subject to FDA discussions.
- OCU410 and OCU410ST: The company intended to submit IND applications in the second quarter of 2023.
- NeoCart: The company intends to initiate a Phase 3 trial in 2024 and is renovating a facility for GMP manufacturing.
- OCU200: The FDA placed the Phase 1 IND application on clinical hold in April 2023 pending additional chemistry, manufacturing, and controls information.
- COVAXIN: Following the FDA’s April 2023 cancellation of EUAs for monovalent vaccines, the company determined that continued North American development was not commercially viable. It is evaluating the accounting impact on a $4.1 million COVAXIN-related prepaid asset and the Series B preferred stock.
- Subsequent to March 31, 2023, the company borrowed an additional $0.5 million under the EB-5 Loan Agreement.
- A securities class action was dismissed with prejudice in March 2023, but the lead plaintiff appealed. Related derivative litigation remains stayed pending resolution of the appeal; no loss accrual was recorded.
- On May 1, 2023, Nasdaq notified the company that its stock had traded below the $1.00 minimum bid price for 30 consecutive business days. The company had until October 30, 2023, to regain compliance, subject to possible additional relief.
Most Important Facts for Investors to Verify
- Actual cash runway and the timing, amount, and terms of required future financing.
- Progress and regulatory feedback for OCU400, including pediatric enrollment and the proposed Phase 3 trial.
- Resolution of the FDA clinical hold on OCU200 and any resulting development delays or costs.
- Whether the COVAXIN prepaid asset and Series B preferred stock require impairment, reclassification, or other accounting adjustments.
- Progress and funding availability for the inhaled mucosal vaccine platform and the timing of planned IND submissions.
- Compliance with Nasdaq’s minimum bid-price requirement and the potential effects of any reverse split or delisting risk.
- Cash-burn trends, debt maturities, lease commitments, and dilution from additional equity issuance, options, RSUs, and warrants.
- Outcomes of the securities-litigation appeal and related derivative proceedings.