Ocugen, Inc. 2021 Q3 Form 10-Q Summary
Business context and reporting period
Ocugen is a clinical-stage biopharmaceutical company developing COVAXIN, a COVID-19 vaccine candidate for the United States and Canada, and retinal disease therapies including OCU400, OCU410, and OCU200. The unaudited Form 10-Q covers the quarter and nine months ended September 30, 2021, and was filed November 9, 2021.
The company had no products approved for commercial sale and generated no revenue in the quarter or nine-month period. Its principal activities remained research, development, regulatory preparation, manufacturing planning, and fundraising.
Financial performance and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $0 | $0, versus $43,000 in 2020 |
| Research and development expense | $6.3 million, up $4.8 million | $28.0 million, up $23.2 million |
| General and administrative expense | $4.5 million, up $2.8 million | $15.5 million, up $9.7 million |
| Total operating expenses | $10.8 million | $43.5 million |
| Net loss | $10.8 million, versus $10.5 million | $43.8 million, versus $18.0 million |
| Net loss per share | $0.05 | $0.23, versus $0.33 |
| Net cash used in operating activities | Not separately presented | $35.1 million, versus $10.4 million |
| Cash, cash equivalents, and restricted cash | Not separately presented | $107.5 million at September 30, 2021 |
Cash increased by $83.3 million during the first nine months, primarily because of $120.1 million in financing cash inflows, including registered direct offerings and ATM sales. Investing activities used $1.6 million. The company reported an accumulated deficit of $117.1 million.
Total liabilities were $9.2 million, including $1.7 million of long-term debt and no remaining PPP debt. The outstanding EB-5 principal was $1.5 million, with a carrying value of $1.7 million including accrued interest and net issuance costs. Operating lease liabilities totaled $1.5 million.
Material changes versus the prior comparable period
- Research and development expense increased primarily because of a $15.0 million upfront payment to Bharat Biotech for expanded Canadian COVAXIN rights, higher COVAXIN development and regulatory spending, and increased OCU400 and OCU200 activities.
- General and administrative expense rose because of higher stockholder meeting and proxy solicitation costs, stock-based compensation, professional fees, and employee-related expenses.
- Net loss increased by $25.8 million for the nine-month period, despite the absence of the $7.0 million in-process research and development write-off recorded in 2020.
- Cash used in operations increased by $24.7 million, principally due to the COVAXIN upfront payment and expanded development and corporate spending.
- The company raised net proceeds of $93.4 million from an April 2021 registered direct offering, $21.2 million from a February 2021 offering, and $4.8 million from ATM sales. Common shares outstanding increased to approximately 198.9 million at September 30, 2021 from approximately 184.0 million at December 31, 2020.
- The PPP Note was forgiven in May 2021, producing a $426,000 gain. The company also recorded a $761,000 loss from writing off a promissory note deemed uncollectible.
Guidance, outlook, risks, and unusual items
- Management stated that the September 30 cash balance would not meet capital requirements for the next 12 months and that additional equity or debt financing, collaborations, grants, asset sales, or other funding may be required.
- The filing includes substantial doubt about the company’s ability to continue as a going concern within one year after issuance of the financial statements. Management stated that failure to obtain funding could require delaying, reducing, or eliminating programs, pursuing strategic alternatives, or ceasing operations.
- For COVAXIN, the FDA recommended pursuing a Biologics License Application rather than an adult EUA. The company filed an IND for an adult Phase 3 immuno-bridging study in October 2021 and anticipated filing an adult BLA by the end of 2022. It also submitted a pediatric EUA request in November 2021; the filing states that FDA timing and outcome were unknown.
- The company completed a rolling submission to Health Canada, transitioned to a New Drug Submission, and stated that expiration of the applicable Interim Order did not affect the submission.
- Technology transfer to Jubilant HollisterStier for potential COVAXIN manufacturing had begun, while Bharat Biotech was expected to supply clinical materials and finished product before completion of the transfer.
- OCU400 remained in development with four FDA Orphan Drug Designations; the company filed an IND in November 2021 and planned to initiate a Phase 1/2 trial near year-end. OCU410 and OCU200 remained in preclinical or IND-enabling development.
- Two securities class actions and two related stockholder derivative actions were pending concerning statements about the COVAXIN regulatory pathway. The company believed the claims were without merit, had recorded no litigation accrual, and stated that the potential outcome could not yet be assessed.
- The company entered into a new seven-year office lease after quarter-end, with estimated base rent payments of $3.8 million over the initial term.
- Key risks include regulatory delays or non-approval, uncertain vaccine demand, competition from authorized COVID-19 vaccines, reliance on Bharat Biotech and other manufacturers, clinical and manufacturing execution, intellectual-property matters, COVID-19-related disruptions, and dilution from future financing.
Important facts for investors to verify
- Current cash runway and the timing, amount, and terms of any required financing.
- Progress and FDA feedback regarding the adult COVAXIN Phase 3 immuno-bridging study, BLA pathway, and pediatric EUA request.
- Status of the Health Canada submission and any Canadian authorization or approval.
- Completion, capacity, quality compliance, and commercial terms of the Jubilant HollisterStier technology transfer and manufacturing arrangement.
- Whether COVAXIN can achieve commercially meaningful demand despite competition and changing public-health conditions.
- Clinical progress and financing requirements for OCU400, OCU410, and OCU200.
- Potential dilution from outstanding options, warrants, and convertible preferred stock, including 10.5 million outstanding options, 946,179 warrants, and 547,450 shares issuable upon conversion of Series B preferred stock as of September 30, 2021.
- Developments, costs, and potential exposure related to the pending securities and derivative litigation.