Ocugen, Inc. 2021 Q2 Form 10-Q Summary
Business context and reporting period
Ocugen, Inc. is a development-stage biopharmaceutical company focused on COVAXIN, a COVID-19 vaccine candidate, and retinal disease therapies. The unaudited report covers the three and six months ended June 30, 2021, with comparative periods ended June 30, 2020.
- COVAXIN: exclusive U.S. and Canadian development and commercialization rights under the collaboration with Bharat Biotech.
- Retinal pipeline: OCU400 and OCU410 gene therapies and OCU200 biologic therapy; these programs remained preclinical or early clinical-stage.
- OCU300: Phase 3 development was discontinued in 2020 after an interim analysis indicated the trial was unlikely to meet its endpoints.
Financial results and liquidity
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $0.0 million in 2021 versus $0.04 million in 2020 | $0.0 million in 2021 versus $0.04 million in 2020 |
| Research and development expense | $18.9 million versus $1.6 million | $21.7 million versus $3.3 million |
| General and administrative expense | $6.8 million versus $1.8 million | $10.9 million versus $4.1 million |
| Net loss | $26.0 million versus $3.6 million | $33.0 million versus $7.6 million |
| Net loss per share | $0.13 versus $0.19 loss per share | $0.17 versus $0.30 loss per share |
| Net cash used in operating activities | Not separately provided | $27.1 million versus $7.8 million |
- Operating loss was $25.6 million for the quarter and $32.7 million for the six-month period. Operating margins were not meaningful because revenue was negligible.
- Cash, cash equivalents, and restricted cash totaled $115.8 million at June 30, 2021, compared with $24.2 million at December 31, 2020.
- Total assets were $124.3 million and stockholders’ equity was $116.4 million at June 30, 2021.
- Total debt was $1.7 million, consisting of the EB-5 loan; the $0.4 million PPP loan was forgiven in May 2021.
- Financing activities generated $120.0 million of cash during the first six months, primarily from registered direct offerings and an at-the-market offering.
- Management stated that the June 30 cash balance would not meet capital requirements over the next 12 months and disclosed substantial doubt about the Company’s ability to continue as a going concern.
Material changes versus the prior comparable period
- Research and development expense increased by $18.4 million for the six months, primarily due to a $15.0 million non-refundable payment to Bharat Biotech for Canadian rights, higher COVAXIN activity, and increased OCU400 and OCU200 development costs.
- General and administrative expense increased by $6.9 million for the six months, driven by stockholder meetings and proxy solicitation, higher stock-based compensation, professional fees, and employee-related costs.
- Operating cash usage increased by $19.3 million for the six months, reflecting higher development spending and the Bharat Biotech payment.
- The Company issued 13.0 million common shares in February and April registered direct offerings for net proceeds of approximately $114.6 million, and issued approximately 1.0 million shares under its ATM program for net proceeds of $4.8 million.
- Common shares outstanding increased from approximately 184.0 million at December 31, 2020 to approximately 198.7 million at June 30, 2021, excluding additional potential dilution from options, warrants, and preferred stock.
- The Company wrote off an approximately $0.8 million note receivable as uncollectible and recognized a $0.4 million gain from PPP loan forgiveness.
Guidance, outlook, risks, and unusual items
- The FDA recommended pursuing a Biologics License Application rather than an Emergency Use Authorization for COVAXIN in the United States. Ocugen expects an additional clinical trial may be required, potentially resulting in a longer and more costly regulatory process.
- Ocugen completed a rolling submission to Health Canada in July 2021, but approval and commercialization remain uncertain.
- The Company selected Jubilant HollisterStier as a potential commercial manufacturing partner and initiated technology transfer, but had not yet entered into a master services agreement. Supply remains dependent on Bharat Biotech, including for certain raw materials.
- Management expects higher research and development spending in 2021 and future periods for COVAXIN, OCU400, OCU410, and OCU200. Planned milestones included OCU400 Phase 1/2a trials in the United States, OCU410 and OCU200 Phase 1/2a trials in 2022, subject to funding and regulatory progress.
- The COVAXIN collaboration provides Ocugen 45% of profits generated in the U.S. and Canadian territory, with Bharat Biotech receiving the balance. A further $10.0 million payment is due to Bharat Biotech after the first commercial sale in Canada.
- Two securities class action lawsuits were filed in 2021 concerning statements about the COVAXIN regulatory pathway. The Company believes the claims are without merit; no loss was accrued because a probable and estimable loss could not be determined.
- Key risks include regulatory delays or rejection, additional trial requirements, manufacturing and technology-transfer failures, reliance on third parties, vaccine demand and competition, COVID-19 disruptions, intellectual-property disputes, dilution from future financing, and the need for substantial additional capital.
Most important facts for investors to verify
- Whether the FDA accepts the proposed COVAXIN BLA strategy and what additional clinical data, trial design, and timing it requires.
- Whether Health Canada accepts or authorizes the COVAXIN submission and under which regulatory pathway.
- Whether Ocugen and Jubilant HollisterStier execute the planned manufacturing agreement and complete technology transfer successfully.
- Actual cash burn, financing needs, and the Company’s ability to raise capital before its available cash is exhausted.
- Progress, costs, and regulatory status of OCU400, OCU410, and OCU200.
- Potential dilution from outstanding options, warrants, and convertible preferred stock, and the terms of future equity or debt financing.
- Developments and potential financial exposure related to the securities class action lawsuits and other contingencies.