Ocugen, Inc. 2020 Form 10-K Summary
Business context and reporting period
Ocugen is a clinical-stage biopharmaceutical company focused on gene therapies for retinal diseases and the development of COVAXIN, a whole-virion inactivated COVID-19 vaccine candidate. This Form 10-K covers the fiscal year ended December 31, 2020; subsequent events through March 19, 2021 are also disclosed.
- Pipeline: COVAXIN; OCU400 for inherited retinal diseases; OCU410 for dry age-related macular degeneration; and OCU200 for diabetic macular edema, diabetic retinopathy, and wet AMD.
- Development status: OCU400, OCU410, and OCU200 remained preclinical or pre-IND at year-end. The Company planned Phase 1/2a trials for OCU400 in the second half of 2021 and for OCU410 and OCU200 in 2022.
- Corporate structure: The 2019 merger with Histogenics was accounted for as a reverse asset acquisition, with Ocugen OpCo treated as the accounting acquirer.
Financial performance and liquidity
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Total revenue | $42.6 thousand | $0 | +$42.6 thousand |
| Research and development expense | $6.4 million | $8.1 million | -$1.7 million |
| In-process research and development expense | $7.0 million | $0 | +$7.0 million |
| General and administrative expense | $8.0 million | $6.1 million | +$1.9 million |
| Loss from operations | $21.3 million | $14.2 million | Loss increased $7.1 million |
| Net loss | $21.8 million | $20.2 million | Loss increased $1.6 million |
| Net loss per share | $0.31 | $1.46 | Basic and diluted |
| Net cash used in operating activities | $14.7 million | $16.9 million | Use decreased $2.2 million |
| Cash, cash equivalents and restricted cash | $24.2 million | $7.6 million | +$16.6 million |
Revenue was immaterial and consisted of collaboration revenue related to the Advaite COVID-19 testing-kit arrangement. Ocugen had no approved products, no product sales, and no history of profitability. Gross margin is not meaningful because the Company had no product revenue; operating and net margins were deeply negative.
- Financing activities generated $31.6 million of cash in 2020, primarily from equity offerings.
- Ocugen sold 108.1 million common shares through at-the-market offerings and received $36.3 million of net proceeds.
- Year-end total assets were $27.4 million, total liabilities were $5.8 million, and stockholders’ equity was $21.6 million.
- Debt carrying value was $2.1 million, consisting primarily of the $0.4 million PPP Note and $1.6 million carrying value of the EB-5 Loan Agreement borrowings. The PPP Note bears 1% interest and the EB-5 borrowings bear 4% interest and are secured by substantially all assets other than intellectual property.
- Management stated that year-end liquidity, together with $4.8 million of subsequent ATM proceeds and $21.2 million from a February 2021 registered direct offering, was expected to fund operations and capital expenditures for at least one year from issuance of the financial statements.
Material changes versus 2019
- Operating expenses increased primarily because the Company recorded a $7.0 million in-process research and development charge after the NeoCart asset ceased to qualify as held for sale.
- R&D expense declined due mainly to discontinued OCU310 activities, partly offset by $1.1 million of severance expense associated with a workforce reduction affecting five employees.
- G&A expense increased due to higher insurance premiums, employee costs, director fees, and severance.
- Interest expense declined as the Company’s convertible notes were converted or paid in 2019; no recurring derivative-liability remeasurement or debt-conversion loss was recorded in 2020.
- The April 2020 Warrant Exchange issued 21.9 million common shares and $5.6 million of promissory notes, which were repaid during 2020. The transaction generated a $12.5 million deemed dividend to warrant holders for earnings-per-share purposes.
- OCU300’s Phase 3 trial was discontinued after an interim analysis indicated it was unlikely to meet its co-primary endpoints. OCU310’s prior Phase 3 trial failed to meet its co-primary endpoints, and Ocugen discontinued both programs.
Guidance, outlook, commentary and risks
- In February 2021, Ocugen entered into an agreement with Bharat Biotech for exclusive U.S. rights to develop, manufacture, and commercialize COVAXIN. Ocugen will retain 45% of U.S. commercialization profits, with Bharat Biotech receiving the balance.
- COVAXIN had emergency-use approval in India, and Bharat Biotech reported 81% efficacy in the first interim analysis of its Indian Phase 3 trial. Ocugen had initiated FDA discussions, but had not submitted a U.S. EUA application as of the filing date.
- The FDA may reject or require supplemental analysis of Indian clinical data and may require U.S. clinical trials. Regulatory requirements, timelines, and the commercial opportunity for COVAXIN remained uncertain.
- Ocugen expected 2021 expenses to increase substantially as it evaluated COVAXIN’s U.S. regulatory and commercialization pathway and advanced OCU400, OCU410, and OCU200.
- Manufacturing and supply remain significant contingencies. Until technology transfer and alternative manufacturing arrangements are completed, Ocugen is substantially dependent on Bharat Biotech for COVAXIN supply and on CanSinoBIO for OCU400 clinical manufacturing.
- Key risks include continued losses and negative operating cash flow, the need for additional capital and potential dilution, clinical and regulatory failure, COVID-19-related disruptions, competition, dependence on collaborators and contract manufacturers, intellectual-property challenges, and the uncertain safety and efficacy profile of gene therapy.
- The Company had no material pending legal proceedings identified in the filing and no off-balance-sheet arrangements.
Investor verification checklist
- Verify the FDA’s acceptance of COVAXIN’s Indian clinical data, the timing and contents of any EUA submission, and the status of any required U.S. clinical studies.
- Verify COVAXIN supply agreements, manufacturing capacity, technology-transfer milestones, and the terms governing the 45% profit share.
- Verify cash burn, remaining ATM capacity, subsequent financing proceeds, and the timing and terms of future capital raises.
- Verify the treatment and potential recovery or sale of the NeoCart asset and any additional unusual charges.
- Verify OCU400’s IND submission and trial initiation, as well as regulatory progress for OCU410 and OCU200.
- Assess dilution from outstanding options, warrants, the Series B Convertible Preferred Stock issued to Bharat Biotech, and the Company’s limited remaining authorized common shares.
- Review license milestones, royalties, termination provisions, and intellectual-property obligations under the SERI, University of Colorado, CanSinoBIO, and Bharat Biotech agreements.