Ocugen, Inc. 10-Q Summary
Business Context and Reporting Period
Ocugen, Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2020. The company is a clinical-stage biopharmaceutical developer focused on retinal diseases and blindness, including inherited retinal diseases, dry age-related macular degeneration, diabetic eye diseases, and wet AMD.
- Primary programs included OCU400, OCU410, and OCU200, all in preclinical or early development stages.
- Ocugen discontinued the OCU300 Phase 3 trial in June 2020 after an interim analysis indicated the trial was unlikely to meet its co-primary endpoints; the decision was not based on safety concerns.
- The company had no approved products and no product-sales revenue.
Financial Metrics
| Metric | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | Comparable Period |
|---|---|---|---|
| Revenue | $42,620 | $42,620 | $0 |
| Operating expenses | $3.4 million | $7.3 million | $2.3 million and $7.2 million, respectively |
| Loss from operations | $3.4 million | $7.3 million | $2.3 million and $7.2 million, respectively |
| Net loss | $3.6 million | $7.6 million | $3.5 million and $9.9 million, respectively |
| Net loss to common stockholders | $16.2 million | $20.1 million | $3.5 million and $9.9 million, respectively |
| Basic and diluted loss per share | $0.19 | $0.30 | $0.58 and $1.80, respectively |
- Cash, cash equivalents, and restricted cash were $15.1 million at June 30, 2020, compared with $7.6 million at December 31, 2019.
- Net cash used in operating activities was $7.8 million for the first six months of 2020, compared with $6.0 million in the prior-year period.
- Net cash provided by financing activities was $15.3 million, primarily from equity offerings.
- Accumulated deficit was $59.0 million.
- Total debt carrying value was $6.1 million, consisting principally of warrant exchange notes, EB-5 borrowings, and a PPP loan.
- Total liabilities were $9.1 million and stockholders’ equity was $14.6 million at June 30, 2020.
Material Changes Versus the Prior Comparable Period
- Revenue increased from zero to $42,620 due to royalty revenue under the Advaite COVID-19 testing collaboration. Ocugen also recorded approximately $0.2 million of related cost reimbursements as a reduction of research and development expense.
- Quarterly research and development expense increased by $0.4 million, primarily due to severance and OCU300 clinical-trial activity. Six-month research and development expense decreased by $1.8 million, mainly because OCU310 had been discontinued in 2019 and program activity declined.
- General and administrative expense increased by $0.7 million for the quarter and $1.9 million for the six-month period, driven by employee costs, professional fees, insurance premiums, and severance.
- The company recognized no 2020 losses from derivative fair-value changes or debt conversion, compared with $1.4 million and $0.3 million, respectively, in the first six months of 2019.
- Interest expense declined to $0.3 million for the six-month period from $1.0 million, primarily because prior convertible debt had been converted in 2019.
- Ocugen sold 59.1 million common shares through at-the-market offerings during the quarter for net proceeds of $15.4 million. Shares outstanding increased from 52.6 million at December 31, 2019 to 135.0 million at June 30, 2020.
- The company exchanged Series A warrants for 21.9 million shares and promissory notes. The transaction produced a $12.5 million deemed dividend attributed to common stockholders, materially increasing reported loss per share calculations.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management planned to initiate two Phase 1/2a OCU400 trials in the second half of 2021 and expected to initiate an OCU200 Phase 1/2a trial in the first half of 2022. OCU410 remained in preclinical development.
- Research and development spending was expected to increase modestly as the company prepared for planned clinical programs. General and administrative expenses were expected to increase with public-company infrastructure requirements.
- A workforce reduction affecting five employees, approximately one-third of the workforce, resulted in $0.7 million of severance charges. The company expected to pay $0.4 million in 2020 and $0.3 million in 2021 and estimated annualized cost savings of approximately $2.0 million beginning in 2021.
- Management stated that the June 30 cash balance was unlikely to satisfy near-term requirements or the company’s capital needs over the following 12 months. Additional equity or debt financing, asset sales, strategic arrangements, or licensing transactions were contemplated.
- The financial statements disclosed substantial doubt about the company’s ability to continue as a going concern within one year after issuance. Failure to obtain funding could require delaying, reducing, or eliminating programs, pursuing strategic alternatives, or ceasing operations.
- Warrant exchange notes had $4.5 million of principal outstanding at June 30, 2020, with a maturity date of April 21, 2021. The company made an additional $1.9 million payment on July 1, 2020.
- The company had a $0.4 million PPP loan bearing 1% interest and maturing April 30, 2022; forgiveness depended on qualifying use of proceeds and applicable program requirements.
- Ocugen received a Nasdaq deficiency notice regarding its minimum bid price. Following the temporary COVID-19-related tolling period, it had until September 7, 2020 to regain compliance, creating a potential delisting and financing risk.
- The Advaite collaboration involved a related-party relationship because Advaite was co-founded and managed by the son of Ocugen’s chief executive officer and chairman.
- The NeoCart intangible asset remained classified as held for sale at $7.0 million, although the related asset purchase agreement had not closed as of June 30, 2020.
Most Important Facts to Verify
- Whether Ocugen obtained sufficient financing after June 30, 2020 to address the disclosed going-concern uncertainty and planned development spending.
- The status of Nasdaq minimum-bid-price compliance and any resulting listing action.
- The remaining balance and repayment requirements of the warrant exchange notes after the July 1, 2020 payment.
- Whether the PPP loan was forgiven and the amount, if any, that remained payable.
- Progress, funding, and regulatory timelines for OCU400, OCU410, and OCU200.
- Whether the Advaite collaboration generated material additional royalties or created further related-party considerations.
- The closing or termination of the $7.0 million NeoCart asset sale.