UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20222023
or | | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File NumberNumber: 001-36751
OCUGEN, INC.
(Exact name of registrant as specified in its charter)
___________________________________________________________ | | | | | |
| Delaware | 04-3522315 |
(State or other jurisdiction of
incorporation or organization) | (I.R.S. Employer
Identification No.) |
26311 Great Valley Parkway
Malvern, Pennsylvania 19355
(Address of principal executive offices, including zip code)
(484) 328-4701
(Registrant's telephone number, including area code)
___________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading
symbol(s) | | Name of each exchange
on which registered |
| Common Stock, par value $0.01 per share | | OCGN | | The Nasdaq Stock Market LLC (The Nasdaq Capital Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller
reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange ActAct.
| | | | | | | | | | | |
| Large accelerated filer | ☒☐ | Accelerated filer | ☐ |
Non-accelerated Filerfiler | ☐☒ | Smaller reporting company | ☐☒ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 29, 2022,28, 2023, there were 215,662,171226,430,141 outstanding shares of the registrant's common stock, $0.01 par value per share.
OCUGEN, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20222023
Unless the context otherwise requires, references to the "Company," "we," "our," or "us" in this report refer to Ocugen, Inc. and its subsidiaries, and references to "OpCo" refer to Ocugen OpCo, Inc., the Company's wholly owned subsidiary.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts contained in this Quarterly Report on Form 10-Q regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, and objectives of management are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," "would," or the negative of such terms and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties, and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.
The forward-looking statements in this Quarterly Report on Form 10-Q and those contained in our Annual Report on Form 10-K filed with the United States Securities and Exchange Commission ("SEC") on February 28, 20222023 (the "2021"2022 Annual Report") include, among other things, statements about:
•our estimates regarding expenses, future revenues, capital requirements, as well as the timing, and availability of, and the need for, additional financing to continue to advance our product candidates;
•our activities with respect to BBV152, known as COVAXIN outsideOCU400, including the United States,results from our vaccine candidate for the prevention of COVID-19 caused by SARS-CoV-2ongoing Phase 1/2 trial and our ability to successfully enroll and initiate dosing in humans,pediatric patients in collaboration with Bharat Biotech International Limited ("Bharat Biotech"), including our plansongoing Phase 1/2 trial and expectations regarding clinical development, manufacturing, pricing, regulatory review and compliance, reliance on third parties, and commercialization;subsequently complete a Phase 3 trial;
•our plans regardingability to successfully submit an amendment to the submission of a Biologics License ApplicationInvestigational New Drug ("BLA"IND") application to the U.S. Food and Drug Administration ("FDA") for adults ages 18 yearsNeoCart and older, including the need forto subsequently initiate a Phase 2/3 immuno-bridging and broadening clinical trial and a safety clinical trial to support a BLA submission for COVAXIN;
•the ability of our collaboration partner, Bharat Biotech, to successfully respond to the deficiencies identified in an inspection conducted by the World Health Organization ("WHO");trial;
•our ability to successfully comply with the FDA's requirements to lift the clinical hold placed on our Phase 2/3 immuno-bridging and broadening clinical trial for COVAXIN, as a result of our decision to voluntarily implement a temporary pause in commencing dosing of participants while we evaluate the statements made by the WHO following their inspection of Bharat Biotech's facilities;
•assuming the clinical hold is lifted by the FDA, our ability to successfully commence dosing and subsequently complete the Phase 2/3 immuno-bridging and broadening clinical trial, as well as our ability to initiate a safety clinical trial for COVAXIN, both to support a BLA submission;
•our activities with respect to evaluating a potential regulatory pathway for the pediatric use of COVAXIN in the United States;
•our activities with respect to resolving the deficiencies communicated by Health Canada in its Notice of Deficiency on our New Drug Submission for COVAXIN, including our responses provided to Health Canada;
•our activities with respect to commercializing COVAXIN in Mexico for use in adults over the ages of 18 years and our ability to obtain emergency use approval for COVAXIN for pediatrics in ages two to 18 years in Mexico;
•our ability to successfully obtain adequate supply of COVAXINfunding from Bharat Biotech, including any impact on clinical supply in light of the deficiencies identified in the inspection by the WHO, as well as to complete a technology transfer to our third-party manufacturer, Jubilant HollisterStier, and engage such manufacturer on commercially acceptable terms;
•anticipated market demand for COVAXIN for the adult and pediatric populationsgovernment agencies in the United States Canada, and Mexico;
•other countries to continue the development of our ability to successfully continue and complete the Phase 1/2 clinical trial for OCU400 pursuant to our IND application accepted by the FDA;inhaled mucosal vaccine platform;
•the uncertainties associated with the clinical development and regulatory approval of our product candidates, OCU400, OCU410, OCU410ST, NeoCart, and OCU200, including potential delays in the initiation, commencement, enrollment, and completion of current and future clinical trials;
•our ability to realize any value from our product candidates and preclinical programs being developed and anticipated to be developed in light of the inherent risks and difficulties involved in successfully bringing product candidates to marketcommercializing products and the risk that our products, if approved, will not achieve broad market acceptance;
•the uncertainties in obtaining successful clinicaltrial results for product candidates and unexpected costs that may result therefrom;
•our ability to comply with regulatory schemes and other regulatory developments applicable to our business and other regulatory developments in the United States Canada, Mexico, and other foreign countries;countries, including the extent to which developments with respect to the COVID-19 pandemic will affect the regulatory pathwaypathways available for COVID-19 vaccines in the United States, Canada, Mexico, or other jurisdictions;such countries;
•the performance of third-parties upon which we depend, including contract development and manufacturing organizations, suppliers, manufacturers, group purchasing organizations, distributors, and logistics providers;
•the pricing and reimbursement of our product candidates, if commercialized;
•our ability to obtain and maintain patent protection, or obtain licenses to intellectual property and defend our intellectual property rights against third-parties;
•our ability to maintain our relationships, profitability, and contracts with our key collaborators and commercial partners and our ability to establish additional collaborations and partnerships;
•our ability to recruit orand retain key scientific, technical, commercial, and management personnel and to retain our executive officers;
•our ability to comply with stringent U.S., Canadian, Mexican,United States and otherapplicable foreign government regulationregulations with respect to the manufacturemanufacturing of pharmaceutical products, including compliance with current Good Manufacturing Practice compliance,regulations, and other relevant regulatory authorities;
•the extent to which health epidemics and other outbreaks of communicable diseases, including the COVID-19 pandemic, geopolitical turmoil, including the ongoing invasion of Ukraine by Russia or increased trade restrictions between the United States, Russia, China, and other countries,macroeconomic conditions, social unrest, political instability, terrorism, or other acts of war
could disrupt our business and operations, including impacts on our development programs, global supply chain, and collaborators and manufacturers; and
•other matters discussed under the heading "Risk Factors" contained in this Quarterly Report on Form 10-Q, the 20212022 Annual Report and in any other documents we filehave filed with the SEC.
We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q and in the 20212022 Annual Report, particularly under the sectionssection titled "Risk Factors," that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations, or investments we may make.
You should read this Quarterly Report on Form 10-Q and the documents we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we do not assume any obligation to update any forward-looking statements.
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Solely for convenience, tradenames and trademarks referred to in this Quarterly Report on Form 10-Q appear without the ® or ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable ownerowners will not assert itstheir rights, to these tradenames or trademarks, as applicable. All tradenames, trademarks, and service marks included or incorporated by reference in this Quarterly Report on Form 10-Q are
the property of their respective owners. Further, for ease of reference, the name "COVAXIN" is used throughout this Quarterly Report on Form 10-Q to refer to the vaccine candidate, BBV152. The name COVAXINNeoCart has not been evaluated or cleared by the FDA or Health Canada.FDA.
OCUGEN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| Assets | Assets | | | | Assets | | | |
| Current assets | Current assets | | Current assets | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 129,771 | | | $ | 94,958 | | Cash and cash equivalents | $ | 68,259 | | | $ | 77,563 | |
| Marketable securities | | Marketable securities | 8,462 | | | 13,371 | |
| Prepaid expenses and other current assets | Prepaid expenses and other current assets | 8,256 | | | 7,688 | | Prepaid expenses and other current assets | 7,680 | | | 7,558 | |
| Total current assets | Total current assets | 138,027 | | | 102,646 | | Total current assets | 84,401 | | | 98,492 | |
| Property and equipment, net | Property and equipment, net | 1,921 | | | 1,164 | | Property and equipment, net | 7,952 | | | 6,053 | |
| Restricted cash | 151 | | | 151 | | |
| Other assets | Other assets | 1,628 | | | 1,800 | | Other assets | 3,946 | | | 4,087 | |
| Total assets | Total assets | $ | 141,727 | | | $ | 105,761 | | Total assets | $ | 96,299 | | | $ | 108,632 | |
| Liabilities and stockholders' equity | Liabilities and stockholders' equity | | | | Liabilities and stockholders' equity | | | |
| Current liabilities | Current liabilities | | Current liabilities | |
| Accounts payable | Accounts payable | $ | 3,896 | | | $ | 2,312 | | Accounts payable | $ | 8,092 | | | $ | 8,062 | |
| Accrued expenses | 3,537 | | | 4,325 | | |
| Accrued expenses and other current liabilities | | Accrued expenses and other current liabilities | 5,823 | | | 9,900 | |
| Operating lease obligations | Operating lease obligations | 254 | | | 363 | | Operating lease obligations | 512 | | | 498 | |
| Current portion of long term debt | | Current portion of long term debt | 1,256 | | | — | |
| Total current liabilities | Total current liabilities | 7,687 | | | 7,000 | | Total current liabilities | 15,683 | | | 18,460 | |
| Non-current liabilities | Non-current liabilities | | Non-current liabilities | |
| Operating lease obligations, less current portion | Operating lease obligations, less current portion | 1,180 | | | 1,231 | | Operating lease obligations, less current portion | 3,449 | | | 3,587 | |
| Long term debt, net | Long term debt, net | 1,731 | | | 1,712 | | Long term debt, net | 1,058 | | | 2,289 | |
| Other non-current liabilities | | Other non-current liabilities | 309 | | | 244 | |
| Total non-current liabilities | Total non-current liabilities | 2,911 | | | 2,943 | | Total non-current liabilities | 4,816 | | | 6,120 | |
| Total liabilities | Total liabilities | 10,598 | | | 9,943 | | Total liabilities | 20,499 | | | 24,580 | |
| Commitments and contingencies (Note 12) | 0 | | 0 | |
| Commitments and contingencies (Note 13) | | Commitments and contingencies (Note 13) | | | |
| Stockholders' equity | Stockholders' equity | | Stockholders' equity | |
| Convertible preferred stock; $0.01 par value; 10,000,000 shares authorized at March 31, 2022 and December 31, 2021 | | |
| Series A; 7 issued and outstanding at March 31, 2022 and December 31, 2021 | — | | | — | | |
| Series B; 54,745 issued and outstanding at March 31, 2022 and December 31, 2021 | 1 | | | 1 | | |
| Common stock; $0.01 par value; 295,000,000 shares authorized, 215,752,926 and 199,502,183 shares issued, and 215,631,426 and 199,380,683 shares outstanding at March 31, 2022 and December 31, 2021, respectively | 2,158 | | | 1,995 | | |
| Treasury stock, at cost, 121,500 shares at March 31, 2022 and December 31, 2021 | (48) | | | (48) | | |
| Convertible preferred stock; $0.01 par value; 10,000,000 shares authorized at March 31, 2023 and December 31, 2022 | | Convertible preferred stock; $0.01 par value; 10,000,000 shares authorized at March 31, 2023 and December 31, 2022 | |
| Series A; zero shares issued and outstanding at March 31, 2023 and December 31, 2022 | | Series A; zero shares issued and outstanding at March 31, 2023 and December 31, 2022 | — | | | — | |
| Series B; 54,745 shares issued and outstanding at March 31, 2023 and December 31, 2022 | | Series B; 54,745 shares issued and outstanding at March 31, 2023 and December 31, 2022 | 1 | | | 1 | |
| Common stock; $0.01 par value; 295,000,000 shares authorized, 226,548,693 and 221,721,182 shares issued, and 226,427,193 and 221,599,682 shares outstanding at March 31, 2023 and December 31, 2022, respectively | | Common stock; $0.01 par value; 295,000,000 shares authorized, 226,548,693 and 221,721,182 shares issued, and 226,427,193 and 221,599,682 shares outstanding at March 31, 2023 and December 31, 2022, respectively | 2,265 | | | 2,217 | |
| Treasury stock, at cost, 121,500 shares at March 31, 2023 and December 31, 2022 | | Treasury stock, at cost, 121,500 shares at March 31, 2023 and December 31, 2022 | (48) | | | (48) | |
| Additional paid-in capital | Additional paid-in capital | 278,704 | | | 225,537 | | Additional paid-in capital | 303,073 | | | 294,874 | |
| Accumulated other comprehensive income | | Accumulated other comprehensive income | 25 | | | 26 | |
| Accumulated deficit | Accumulated deficit | (149,686) | | | (131,667) | | Accumulated deficit | (229,516) | | | (213,018) | |
| Total stockholders' equity | Total stockholders' equity | 131,129 | | | 95,818 | | Total stockholders' equity | 75,800 | | | 84,052 | |
| Total liabilities and stockholders' equity | Total liabilities and stockholders' equity | $ | 141,727 | | | $ | 105,761 | | Total liabilities and stockholders' equity | $ | 96,299 | | | $ | 108,632 | |
See accompanying notes to condensed consolidated financial statements.
OCUGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share amounts)
(Unaudited)
| | | Three months ended March 31, | | Three months ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| Operating expenses | Operating expenses | | | | Operating expenses | | | |
| Research and development | Research and development | $ | 7,915 | | | $ | 2,872 | | Research and development | $ | 9,558 | | | $ | 7,915 | |
| General and administrative | General and administrative | 10,119 | | | 4,185 | | General and administrative | 8,193 | | | 10,119 | |
| Total operating expenses | Total operating expenses | 18,034 | | | 7,057 | | Total operating expenses | 17,751 | | | 18,034 | |
| Loss from operations | Loss from operations | (18,034) | | | (7,057) | | Loss from operations | (17,751) | | | (18,034) | |
| Other income (expense), net | Other income (expense), net | 15 | | | (20) | | Other income (expense), net | 1,253 | | | 15 | |
| Net loss and comprehensive loss | $ | (18,019) | | | $ | (7,077) | | |
| Net loss | | Net loss | $ | (16,498) | | | $ | (18,019) | |
| Other comprehensive income (loss) | | Other comprehensive income (loss) | | | |
| Foreign currency translation adjustment | | Foreign currency translation adjustment | (1) | | | — | |
| Comprehensive loss | | Comprehensive loss | $ | (16,499) | | | $ | (18,019) | |
| | Shares used in calculating net loss per common share — basic and diluted | Shares used in calculating net loss per common share — basic and diluted | 205,693,498 | | | 186,298,122 | Shares used in calculating net loss per common share — basic and diluted | 225,523,627 | | | 205,693,498 |
| Net loss per share of common stock — basic and diluted | Net loss per share of common stock — basic and diluted | $ | (0.09) | | | $ | (0.04) | | Net loss per share of common stock — basic and diluted | $ | (0.07) | | | $ | (0.09) | |
See accompanying notes to condensed consolidated financial statements.
OCUGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series A Convertible Preferred Stock | | Series B Convertible Preferred Stock | | Common Stock | | Treasury Stock | | Additional
Paid-in Capital | | Accumulated Other Comprehensive Income | | Accumulated
Deficit | | Total |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | |
| Balance at December 31, 2022 | — | | $ | — | | | 54,745 | | $ | 1 | | | 221,721,182 | | $ | 2,217 | | | $ | (48) | | | $ | 294,874 | | | $ | 26 | | | $ | (213,018) | | | $ | 84,052 | |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,689 | | | — | | | — | | | 2,689 | |
| Issuance of common stock for stock option exercises and restricted stock unit vesting, net | — | | | — | | | — | | | — | | | 348,555 | | | 3 | | | — | | | (4) | | | — | | | — | | | (1) | |
| Issuance of common stock for capital raises, net | — | | | — | | | — | | | — | | | 4,478,956 | | | 45 | | | — | | | 5,514 | | | — | | | — | | | 5,559 | |
| Other comprehensive income (loss) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | — | | | (1) | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (16,498) | | | (16,498) | |
| Balance at March 31, 2023 | — | | | $ | — | | | 54,745 | | | $ | 1 | | | 226,548,693 | | | $ | 2,265 | | | $ | (48) | | | $ | 303,073 | | | $ | 25 | | | $ | (229,516) | | | $ | 75,800 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series A Convertible Preferred Stock | | Series B Convertible Preferred Stock | | Common Stock | | Treasury Stock | | Additional
Paid-in Capital | | Accumulated Other Comprehensive Income | | Accumulated
Deficit | | Total |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | |
| Balance at December 31, 2021 | 7 | | $ | — | | | 54,745 | | | $ | 1 | | | 199,502,183 | | $ | 1,995 | | | $ | (48) | | | $ | 225,537 | | | $ | — | | | $ | (131,667) | | | $ | 95,818 | |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,299 | | | — | | | — | | | 3,299 | |
| Issuance of common stock for stock option exercises and restricted stock unit vesting, net | — | | | — | | | — | | | — | | | 277,323 | | | 3 | | | — | | | 177 | | | — | | | — | | | 180 | |
| Issuance of common stock for capital raises, net | — | | | — | | | — | | | — | | | 15,973,420 | | | 160 | | | — | | | 49,691 | | | — | | | — | | | 49,851 | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (18,019) | | | (18,019) | |
| Balance at March 31, 2022 | 7 | | | $ | — | | | 54,745 | | | $ | 1 | | | 215,752,926 | | | $ | 2,158 | | | $ | (48) | | | $ | 278,704 | | | $ | — | | | $ | (149,686) | | | $ | 131,129 | |
See accompanying notes to condensed consolidated financial statements.
OCUGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYCASH FLOWS
(in thousands, except share amounts)thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series A Convertible Preferred Stock | | Series B Convertible Preferred Stock | | Common Stock | | Treasury Stock | | Additional
Paid-in Capital | | Accumulated
Deficit | | Total |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | |
| Balance at December 31, 2021 | 7 | | $ | — | | | 54,745 | | $ | 1 | | | 199,502,183 | | $ | 1,995 | | | $ | (48) | | | $ | 225,537 | | | $ | (131,667) | | | $ | 95,818 | |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,299 | | | — | | | 3,299 | |
| Issuance of common stock for option exercises | — | | | — | | | — | | | — | | | 277,323 | | | 3 | | | — | | | 177 | | | — | | | 180 | |
| Issuance of common stock for underwritten offering, net | — | | | — | | | — | | | — | | | 15,973,420 | | | 160 | | | — | | | 49,691 | | | — | | | 49,851 | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (18,019) | | | (18,019) | |
| Balance at March 31, 2022 | 7 | | | $ | — | | | 54,745 | | | $ | 1 | | | 215,752,926 | | | $ | 2,158 | | | $ | (48) | | | $ | 278,704 | | | $ | (149,686) | | | $ | 131,129 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series A Convertible Preferred Stock | | Series B Convertible Preferred Stock | | Common Stock | | Treasury Stock | | Additional
Paid-in Capital | | Accumulated
Deficit | | Total |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | |
| Balance at December 31, 2020 | 7 | | $ | — | | | — | | | $ | — | | | 184,133,384 | | $ | 1,841 | | | $ | (48) | | | $ | 93,059 | | | $ | (73,302) | | | $ | 21,550 | |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 833 | | | — | | | 833 | |
| Issuance of common stock for option exercises | — | | | — | | | — | | | — | | | 157,468 | | | 2 | | | — | | | 174 | | | — | | | 176 | |
| At-the-market common stock issuance, net | — | | | — | | | — | | | — | | | 987,000 | | | 10 | | | — | | | 4,839 | | | — | | | 4,849 | |
| Registered direct offering common stock issuance, net | — | | | — | | | — | | | — | | | 3,000,000 | | | 30 | | | — | | | 21,174 | | | — | | | 21,204 | |
| Series B Convertible Preferred Stock issuance, net | — | | | — | | | 54,745 | | | 1 | | | — | | | — | | | — | | | 4,953 | | | — | | | 4,954 | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (7,077) | | | (7,077) | |
| Balance at March 31, 2021 | 7 | | | $ | — | | | 54,745 | | | $ | 1 | | | 188,277,852 | | | $ | 1,883 | | | $ | (48) | | | $ | 125,032 | | | $ | (80,379) | | | $ | 46,489 | |
| | | | | | | | | | | |
| Three months ended March 31, |
| 2023 | | 2022 |
| Cash flows from operating activities | | | |
| Net loss | $ | (16,498) | | | $ | (18,019) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | |
| Depreciation and amortization expense | 174 | | | 76 | |
| Amortization (accretion) on marketable securities | (143) | | | — | |
| Non-cash interest expense | 24 | | | 19 | |
| Non-cash lease expense | 131 | | | 179 | |
| Stock-based compensation expense | 2,689 | | | 3,299 | |
| Other | 352 | | | — | |
| Changes in assets and liabilities: | | | |
| Prepaid expenses and other current assets | (60) | | | (575) | |
| Accounts payable and accrued expenses | (4,784) | | | 131 | |
| Lease obligations | (125) | | | (176) | |
| Net cash used in operating activities | (18,240) | | | (15,066) | |
| Cash flows from investing activities | | | |
| Purchases of marketable securities | (3,947) | | | — | |
| Proceeds from the maturities of marketable securities | 9,000 | | | — | |
| Purchases of property and equipment | (1,612) | | | (223) | |
| Net cash provided by (used in) investing activities | 3,441 | | | (223) | |
| Cash flows from financing activities | | | |
| Proceeds from issuance of common stock, net | 5,731 | | | 50,177 | |
| Payment of equity issuance costs | (173) | | | (75) | |
| Payment of debt issuance costs | (62) | | | — | |
| Net cash provided by financing activities | 5,496 | | | 50,102 | |
| Effect of changes in exchange rate on cash, cash equivalents, and restricted cash | (1) | | | — | |
| Net (decrease) increase in cash, cash equivalents, and restricted cash | (9,304) | | | 34,813 | |
| Cash, cash equivalents, and restricted cash at beginning of period | 77,563 | | | 95,109 | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 68,259 | | | $ | 129,922 | |
| Supplemental disclosure of non-cash investing and financing transactions: | | | |
| Purchases of property and equipment | $ | 1,119 | | | $ | 611 | |
| Equity issuance costs | $ | — | | | $ | 71 | |
See accompanying notes to condensed consolidated financial statements.
OCUGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| | | | | | | | | | | |
| Three months ended March 31, |
| 2022 | | 2021 |
| Cash flows from operating activities | | | |
| Net loss | $ | (18,019) | | | $ | (7,077) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | |
| Depreciation and amortization expense | 76 | | | 44 | |
| Non-cash interest expense | 19 | | | 20 | |
| Non-cash lease expense | 179 | | | 68 | |
| Stock-based compensation expense | 3,299 | | | 833 | |
| Changes in assets and liabilities: | | | |
| Prepaid expenses and other assets | (575) | | | 493 | |
| Accounts payable and accrued expenses | 131 | | | 405 | |
| Lease obligations | (176) | | | (69) | |
| Net cash used in operating activities | (15,066) | | | (5,283) | |
| Cash flows from investing activities | | | |
| Purchase of property and equipment | (223) | | | (261) | |
| Net cash used in investing activities | (223) | | | (261) | |
| Cash flows from financing activities | | | |
| Proceeds from issuance of common stock | 50,177 | | | 28,125 | |
| Payment of equity issuance costs | (75) | | | (1,822) | |
| Financing lease principal payments | — | | | (6) | |
| Net cash provided by financing activities | 50,102 | | | 26,297 | |
| Net increase in cash, cash equivalents, and restricted cash | 34,813 | | | 20,753 | |
| Cash, cash equivalents, and restricted cash at beginning of period | 95,109 | | | 24,190 | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 129,922 | | | $ | 44,943 | |
| Supplemental disclosure of non-cash investing and financing transactions: | | | |
| Series B Convertible Preferred Stock issuance | $ | — | | | $ | 4,988 | |
| Purchase of property and equipment | $ | 611 | | | $ | 44 | |
| Right-of-use asset related to operating leases | $ | — | | | $ | 926 | |
| Equity issuance costs | $ | 71 | | | $ | 108 | |
See accompanying notes to condensed consolidated financial statements.
OCUGEN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Business
Ocugen, Inc., together with its wholly owned subsidiaries ("Ocugen" or the "Company"), is a biotechnology company focused on discovering, developing, and commercializing novel gene and cell therapies biologicals, and vaccines that improve health and offer hope for people and global communities.patients across the globe. The Company is headquartered in Malvern, Pennsylvania, and manages its business as 1one operating segment.
COVID-19 Vaccine Candidate
In February 2021, the Company entered into a Co-Development, Supply and Commercialization Agreement with Bharat Biotech International Limited ("Bharat Biotech"), pursuant to which the Company obtained an exclusive right and license under certain of Bharat Biotech's intellectual property rights, with the right to grant sublicenses to develop, manufacture, and commercialize COVAXIN for the prevention of COVID-19 caused by SARS-CoV-2 in the United States, its territories, and possessions. In June 2021 and April 2022, the Company entered into amendments to the Co-Development, Supply and Commercialization Agreement (as so amended, the "Covaxin Agreement"), pursuant to which the parties agreed to expand the Company's rights to develop, manufacture, and commercialize COVAXIN to include Canada and Mexico, respectively, in addition to the United States, its territories, and possessions (the "Ocugen Covaxin Territory"). COVAXIN is a whole-virion inactivated COVID-19 vaccine candidate and is formulated with the inactivated SARS-CoV-2 virus, an antigen, and an adjuvant. COVAXIN requires a 2-dose vaccination regimen given 28 days apart and is stored in standard vaccine storage conditions (2-8°C). COVAXIN was granted an Emergency Use Listing ("EUL") by the World Health Organization ("WHO") in November 2021.
The Company is pursuing Biologics License Application ("BLA") approval for COVAXIN in the United States based upon the recommendation of the U.S. Food and Drug Administration ("FDA"). In October 2021, the Company submitted an Investigational New Drug ("IND") application to the FDA to initiate a Phase 2/3 immuno-bridging and broadening clinical trial evaluating COVAXIN for adults ages 18 years and older, which was approved by the FDA in February 2022. The clinical trial is designed to evaluate whether the immune response observed in participants in a completed Phase 3 clinical trial in India is similar to a demographically representative, adult population in the United States. The Company voluntarily implemented a temporary pause in commencing dosing participants in the clinical trial while it evaluates the statements made by the WHO following their inspection of Bharat Biotech's manufacturing facility, wherein the WHO identified certain Good Manufacturing Practice ("GMP") deficiencies. As a result of the Company's decision to voluntarily pause commencing dosing in participants, the FDA placed the Company's Phase 2/3 immuno-bridging and broadening clinical trial on clinical hold. Assuming the Company is able to successfully work with the FDA to lift the clinical hold, the Company also plans to initiate a safety clinical trial, subject to discussions with the FDA.
In November 2021, the Company submitted a request to the FDA for Emergency Use Authorization ("EUA") for COVAXIN for pediatric use in ages two to 18 years in the United States. The EUA submission was based on the results of a Phase 2/3 immuno-bridging pediatric clinical trial conducted by Bharat Biotech in India. In March 2022, the FDA notified the Company that they declined to issue an EUA for COVAXIN for pediatric use. The Company intends to continue working with the FDA to evaluate a potential regulatory pathway for the pediatric use of COVAXIN in the United States.
The Company is also pursuing approval to market COVAXIN in Canada and recently expanded its commercialization rights for COVAXIN to include Mexico. In July 2021, the Company completed its rolling submission to Health Canada for COVAXIN. The rolling submission process, which was conducted through the Company's Canadian subsidiary, Vaccigen Ltd. ("Vaccigen"), was recommended and accepted under the Minister of Health's Interim Order Respecting the Importation, Sale and Advertising of Drugs for Use in Relation to COVID-19 ("Interim Order") and transitioned to a New Drug Submission ("NDS") for COVID-19. In December 2021, Health Canada provided the Company with a Notice of Deficiency ("NOD") regarding its NDS submission. Health Canada requested further analyses of the COVAXIN preclinical and clinical data, as well as additional information regarding chemistry, manufacturing, and controls ("CMC"). The Company has responded to and provided proposed resolutions for the deficiencies included in the NOD. The Company's responses are currently under review by Health Canada. COVAXIN is also currently under review by the Comisión Federal para la Protección contra Riesgos Sanitarios ("COFEPRIS") for emergency use for pediatrics in ages two to 18 years in Mexico. COFEPRIS previously approved emergency use for COVAXIN in Mexico for adults ages 18 years and older, which remains active.
The Company is evaluating its commercialization strategy for COVAXIN in the United States and Canada, if approved in either jurisdiction, and is actively preparing for commercialization in Mexico. In June 2021, the Company selected Jubilant HollisterStier as a manufacturing partner for COVAXIN to prepare for the commercial manufacturing of COVAXIN. The Company expects to enter into a master services agreement with Jubilant HollisterStier for the commercial manufacture of COVAXIN. In September 2021, the Company entered into a Development and Commercial Supply Agreement (the "Supply Agreement") with Bharat Biotech, pursuant to which Bharat Biotech will supply the Company with clinical trial materials and commercial supplies of COVAXIN finished drug product prior to the completion of a technology transfer. Following the completion of the technology transfer to Jubilant HollisterStier, which is in progress, Bharat Biotech will supply COVAXIN drug product components and continue to supply finished drug product as necessary for the commercial manufacture and supply of COVAXIN subsequent to a regulatory approval.
Modifier Gene Therapy Platform
The Company is developing a modifier gene therapy platform designed to fulfill unmet medical needs inrelated to retinal diseases, including inherited retinal diseases ("IRDs"), such as retinitis pigmentosa ("RP") and, Leber congenital amaurosis ("LCA"), and Stargardt disease, as well as dry age-related macular degeneration ("AMD"). with a single mutation-agnostic therapy. The Company's modifier gene therapy platform is based on the use of nuclear hormone receptors ("NHRs"), which have the potential to restore homeostasis — the basic biological processes in the retina. TheUnlike single-gene replacement therapies, which only target one genetic mutation, the Company believes that its modifier gene therapy platform, through its use of NHRs, represents a novel approach that has the potential both to address multiple retinal diseases caused by mutations in multiple genes with 1 product;a single unique product and potentiallyto address complex diseases such as dry AMD, that are potentially caused by imbalances in multiple gene networks.
The Company believes that OCU400 its first product candidate being developed with its modifier gene therapy platform, has the potential to be broadly effective in restoring retinal integrity and function across a range of genetically diverse IRDs, including RP and LCA. OCU400 has received 4 Orphan Drug DesignationsDesignation ("ODDs"ODD") from the FDA for the treatment of certain disease genotypes: nuclear receptor subfamily 2 group E member 3United States Food and Drug Administration ("NR2E3"), centrosomal protein 290 ("CEP290"), rhodopsin ("RHO"), and phosphodiesterase 6B ("PDE6ß"FDA") mutation-associated inherited retinal degenerations. Additionally, OCU400 has receivedand Orphan Medicinal Product Designation ("OMPD") from the European Commission ("EC") based onfor the recommendationtreatment of RP and LCA.
The Company is conducting a Phase 1/2 trial to assess the safety and efficacy of unilateral subretinal administration of OCU400 in patients with nuclear receptor subfamily 2 group E member 3 ("NR2E3") and rhodopsin ("RHO")-related RP and centrosomal protein 290 ("CEP290")-related LCA in the United States. The Company has completed dosing patients with RP in the dose-escalation portion of the European Medicines Agencytrial, which enrolled 10 patients to receive a low, medium, or high dose of OCU400 in the subretinal space. Additionally, the Company has completed dosing eight patients with RP in the dose-expansion portion of the trial and is continuing to enroll patients with LCA to receive the high dose, which was determined to be the maximum tolerable dose from the dose-escalation portion of the trial. In April 2023, the Company announced positive preliminary data among RP patients treated in the first two cohorts of the Phase 1/2 trial. In Cohorts 1 and 2 of the trial, seven participants with severe vision impairment due to RP associated with the RHO and NR2E3 gene mutations received a unilateral subretinal injection of either a low dose or a medium dose of OCU400, respectively. The preliminary results showed a favorable safety profile and visual improvements after treatment with OCU400 as measured by multi-luminance mobility testing ("EMA"MLMT") and best corrected visual acuity assessment ("BCVA"). In March 2023, the FDA approved the enrollment of pediatric patients in the ongoing Phase 1/2 trial for the treatment of RP and LCA.
In November 2021,LCA and the Company submitted an IND applicationintends to dose pediatric patients in the FDAsecond quarter of 2023. Additionally, the Company intends to initiate a Phase 1/2 clinical3 trial for OCU400 for the treatment of NR2E3 RP and RHO mutation associated RP, which was accepted byLCA near the FDA in December 2021. The Company has initiatedend of 2023, subject to discussions with the Phase 1/2 clinical trial, a multicenter, open-label, dose ranging study to assess the safety of unilateral subretinal administration of OCU400 in subjects with FDA.
NR2E3 and RHO-related RP in the United States. In March 2022, the first patient was dosed and the Company has continued enrolling additional study subjects in the Phase 1/2 clinical trial. The Company is additionally evaluating options to commence OCU400 clinical trials internationally.
The Company's second modifier gene therapy candidate,also developing OCU410 is being developed to utilizeand OCU410ST, utilizing the nuclear receptor genes RAR-related orphan receptor A ("RORA"), for the treatment of dry AMD.AMD and Stargardt disease, respectively. OCU410 is a potential one-time, curative therapy with a single sub-retinal injection. OCU410ST has received ODD from the FDA for the treatment of ABCA4-associated retinopathies, including Stargardt disease. The Company intends to submit Investigational New Drug ("IND") applications in the second quarter of 2023 to initiate Phase 1/2 trials.
Regenerative Medicine Cell Therapy Platform
NeoCart is a Phase 3-ready, regenerative medicine cell therapy technology that combines breakthroughs in bioengineering and cell processing to enhance the autologous cartilage repair process. NeoCart is a three-dimensional tissue-engineered disc of new cartilage that is manufactured by growing chondrocytes, the cells responsible for maintaining cartilage health. The chondrocytes are derived from the patient on a unique scaffold. In this therapy, healthy cartilage tissue is grown and implanted in the patient. Cartilage defects often lead to osteoarthritis if left untreated. Current surgical and nonsurgical treatment options are limited in their efficacy and durability. NeoCart has the potential to accelerate healing, reduce pain, and provide regenerative native-like
cartilage strength with durable benefits post transplantation. The FDA granted a regenerative medicine advanced therapy ("RMAT") designation to NeoCart for the repair of full-thickness lesions of knee cartilage injuries in adults. Additionally, the Company received concurrence from the FDA on the confirmatory Phase 3 trial design. The Company is currently executing pre-IND studies consistentrenovating an existing facility into a current Good Manufacturing Practice ("GMP") facility in accordance with FDA discussions tothe FDA's regulations in support aof NeoCart manufacturing for personalized Phase 1/2 clinical trial.3 trial material. The Company has engaged CanSino Biologics, Inc. ("CanSinoBIO")intends to manufacture clinical suppliesinitiate the Phase 3 trial in 2024.
Vaccines
The Company's vaccines platform is driven by its conviction to serve a public health concern, which requires the endorsement and support of government funding, both domestically and in licensed territories abroad, in order to develop and ultimately commercialize its vaccine candidates. Therefore, the Company's anticipated expenses for vaccines development from the second quarter of 2023 onward will be responsiblelimited as it devotes its current cash, cash equivalents, and investments to developing its modifier gene therapy platform. The Company is refocusing its efforts to develop an inhalation-based, next generation mucosal vaccine platform to overcome the limitations of current intramuscular COVID-19 treatments, namely sustained durability and transmissibility inhibition. While the Company continues to incur expenses for the CMC development for OCU400 and OCU410. CanSinoBIOof its inhaled mucosal vaccine platform to achieve IND readiness, any additional development will be responsiblereliant on government funding.
Inhaled Mucosal Vaccines
The Company is developing a novel inhaled mucosal vaccine platform, which includes OCU500, a bivalent COVID-19 vaccine; OCU510, a seasonal quadrivalent flu vaccine; and OCU520, a combination quadrivalent seasonal flu and bivalent COVID-19 vaccine. As these vaccine candidates are being developed to be administered through inhalation, the Company believes they have the potential to generate rapid local immunity in the upper airways and lungs where viruses enter and infect the body, which the Company believes may help reduce or prevent infection and transmission as well as provide protection against new virus variants. The Company intends to submit an IND application near the end of 2023 or in early 2024 and is continuing to work closely with government agencies to obtain funding for the costs associated with such activities.development of these inhaled mucosal vaccines.
Intramuscular COVID-19 Vaccine
In April 2023, the FDA announced the cancellation of emergency use authorizations ("EUA") issued to monovalent vaccines and the simplification of the vaccination schedule of bivalent vaccines that have EUAs in the United States. Accordingly, the Company has determined it is not commercially viable to continue the development of COVAXIN in its North American territory and consequently, will focus its efforts on the development of the inhaled mucosal bivalent vaccines.
Novel Biologic Therapy for Retinal Diseases
The Company's pipeline also includes a biologic product candidate,Company is developing OCU200, which is a novel fusion protein containing parts of human transferrin and tumstatin. OCU200 is designed to treat severely sight-threatening diseases such as diabetic macular edema ("DME"), diabetic retinopathy ("DR"), and wet AMD. The Company is currently establishing a current GMP process for the production of clinical trial materials and executing pre-IND studies consistent with FDA discussions to support a Phase 1/2a clinical trial. The Company has completed the technology transfer of manufacturing processes to its contract development and manufacturing organization ("CDMO") that will manufactureand has produced trial materials to initiate a Phase 1 trial. The Company submitted an IND application to the FDA in February 2023 to initiate a Phase 1 trial targeting DME. In April 2023, the FDA placed the Company's IND application for the Phase 1 trial on clinical hold as part of the FDA's request for additional information related to chemistry, manufacturing, and controls ("CMC") prior to initiating the Phase 1 trial. The Company intends to work with the FDA and provide requested information as promptly as possible, and does not currently expect the clinical hold to impact the anticipated overall timing of the OCU200 clinical supplies.development program.
Going Concern
The Company has incurred recurring net losses since inception and has funded its operations to date through the sale of common stock, warrants to purchase common stock, the issuance of convertible notes and debt, and grant proceeds. The Company incurred net losses of approximately $18.0$16.5 million and $7.1$18.0 million for the three months ended March 31, 20222023 and 2021,2022, respectively. As of March 31, 2022,2023, the Company had an accumulated deficit of $149.7$229.5 million and cash, cash equivalents, and restrictedinvestments totaling $76.7 million. This amount will not meet the Company's capital requirements over the next 12 months. The Company believes that its cash, totaling $129.9 million.cash equivalents, and investments will enable it to fund its operations into the first quarter of 2024. Due to the inherent uncertainty involved in making estimates and the risks associated with the research, development, and commercialization of biotechnology products, the Company may have based this estimate on assumptions that may prove to be wrong, and the Company's operating plan may change as a result of many factors currently unknown to the Company.
The Company is subject to risks, expenses, and uncertainties frequently encountered by companies in its industry. The Company intends to continue its research, development, and commercialization efforts for its product candidates, which will require significant additional funding. If the Company is unable to obtain additional financingfunding in the future and/or its research, development, and commercialization efforts require higher than anticipated capital, there may be a negative impact on the financial viability of the Company. The Company plans to increase working capitalfund its operations through public and private placements of equity and/or debt, payments from potential strategic research and development arrangements, sales of assets, government grants, licensing and/or collaboration arrangements with pharmaceutical companies or other institutions, or other funding from the government, particularly for the development of the Company's novel inhaled mucosal vaccine platform, or funding from other third parties. Such financing and funding may not be available at all, or on terms that are favorable to the Company. While Company management of the Company believes that it has a plan to fund ongoing operations, its plan may not be successfully implemented. Failure to generate sufficient cash flows from operations, raise additional capital, or appropriately manage certain discretionary spending, could have a material adverse effect on the Company's ability to achieve its intended business objectives.
As a result of these factors, together with the anticipated increase in spending that will be necessary to continue to research, develop, and commercialize the Company's product candidates, there is substantial doubt about the Company's ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued. The condensed consolidated financial statements do not contain any adjustments that might result from the resolution of any of the above uncertainties.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements included herein have been prepared in conformity with generally accepted accounting principles generally accepted("GAAP") in the United States ("GAAP") and under the rules and regulations of the United States Securities and Exchange Commission ("SEC") for interim reporting. The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, that are necessary to present fairly the Company's financial position, results of operations, and cash flows. The condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosures of the Company normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted under the SEC's rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto for the year ended December 31, 2021,2022, included in the Company's Annual Report on Form 10-K filed with the SEC on February 28, 20222023 (the "2021"2022 Annual Report").
The condensed consolidated financial statements include the accounts of Ocugen and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
In preparing the condensed consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions include those used in the accounting for research and development contracts, including clinical trial accruals, and the accounting and fair value measurement of equity instruments.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents. Cash equivalents may include bank demand deposits marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposit, commercial paper, and U.S. government agency securities and U.S. government agency obligations.treasuries. The Company records interest income received on its cash and cash equivalents to other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. The Company recorded $0.7 million as interest income for the three months ended March 31, 2023. The Company's restricted cash balance consistsas of March 31, 2022 consisted of cash held to collateralize a corporate credit card account.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash infrom the condensed consolidated balance sheets to the total amount shown in the condensed consolidated statements of cash flows (in thousands):
| | | As of March 31, | | As of March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| Cash and cash equivalents | Cash and cash equivalents | $ | 129,771 | | | $ | 44,792 | | Cash and cash equivalents | $ | 68,259 | | | $ | 129,771 | |
| Restricted cash | Restricted cash | 151 | | | 151 | | Restricted cash | — | | | 151 | |
| Total cash, cash equivalents, and restricted cash | Total cash, cash equivalents, and restricted cash | $ | 129,922 | | | $ | 44,943 | | Total cash, cash equivalents, and restricted cash | $ | 68,259 | | | $ | 129,922 | |
LeasesFair Value Measurements
The Company determines if an arrangement is a lease at inception. This determination generally depends on whetherfollows the arrangement conveys to the Company the right to control the useprovisions of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company, if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company's lease agreements include lease and non-lease components, which the Company has elected not to account for separately for all classes of underlying assets. Lease expense for variable lease components is recognized when the obligation is probable.
Operating leases are included in other assets and operating lease obligations in the Company's condensed consolidated balance sheets. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term and recognized as research and development expense or general and administrative expense based on the underlying nature of the expense. The Company currently leases real estate classified as operating leases. Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 842, Leases ("ASC 842") requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. The implicit interest rate was not readily determinable in the Company’s current operating leases. As such, the incremental borrowing rate was used based on the information available at the commencement date in determining the present value of lease payments.
The lease term for the Company's leases includes the non-cancellable period of the lease plus any additional periods covered by either an option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.
Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts probable to be payable under the exercise of an option to purchase the underlying asset if reasonably certain.
Variable payments not dependent on an index or rate associated with the Company's leases are recognized when the event, activity, or circumstance is probable. Variable payments include the Company's proportionate share of certain utilities and other operating expenses and are presented as operating expenses in the Company's condensed consolidated statements of operations and comprehensive loss in the same line item as expense arising from fixed payments.
Fair Value Measurements
The Company follows the provisions of FASB ASC Topic 820, Fair Value Measurements ("ASC 820"), which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
The carrying value of certain financial instruments, including cash and cash equivalents, accounts payable, and accrued expenses, approximates their fair valuesvalue due to the short-term nature of these instruments. As
Marketable Securities
The Company accounts for marketable securities in accordance with FASB ASC Topic 320, Investments - Debt and Equity Securities ("ASC 320"). The Company determines the appropriate classification of March 31, 2022,its investments in debt securities at the time of purchase. Debt securities are classified as trading securities if the security is bought and held primarily to be sold in the near term. Debt securities are classified as held-to-maturity if management has both the positive intent and ability to hold until the maturity of the security. All securities not classified as trading securities or held-to-maturity securities are classified as available-for-sale securities. The Company's current marketable securities are comprised of debt securities which are classified as available-for-sale securities in accordance with ASC 320. At the time of purchase, the Company believesclassifies marketable securities with maturities of 90 days or less as cash equivalents on the condensed consolidated balance sheets.
Available-for-sale securities are recorded at fair value based on inputs that are observable, either directly or indirectly, such as quoted prices for identical securities in active markets (Level 1) or quoted prices for similar securities in active markets or inputs that are observable (Level 2). Unrealized gains and losses are included in other comprehensive income (loss) in the condensed consolidated statements of operations and comprehensive loss. Amortization of premium or accretion of discount on debt securities are included in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.
The Company reviews investments in debt securities for other-than-temporary impairment if the fair value using Level 2 inputs of the borrowingsinvestment is less than the amortized cost basis. The assessment for other-than-temporary impairment is performed at the individual security level. To date, the Company has not recognized any impairments with respect to its debt securities.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash, cash equivalents, and investments. The Company's cash, cash equivalents, and investments are held in accounts at financial institutions that may exceed federally insured limits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to significant credit risk beyond the standard credit risk associated with commercial banking relationships.
Leases
The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company, if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company's lease agreements include lease and non-lease components, which the Company has elected not to account for separately for all classes of underlying assets. Lease expense for variable lease components is recognized when the obligation is probable.
The Company currently leases real estate classified as operating leases. Operating leases are included in other assets and operating lease obligations in the Company's condensed consolidated balance sheets. At lease commencement, the Company records a lease liability based on the present value of the lease payments over the expected lease term, including any options to extend the lease that the Company is reasonably certain to exercise, and records a corresponding right-of-use lease asset based on the lease liability, adjusted for any lease incentives received and any initial direct costs paid to the lessor prior to the lease commencement date. Lease expense is recognized on a straight-line basis over the lease term and recognized as research and development expense or general and administrative expense based on the underlying nature of the expense. FASB ASC Topic 842, Leases ("ASC 842") requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. The implicit interest rates were not readily determinable in the Company's current operating leases. As such, the incremental borrowing rates were used based on the information available at the commencement dates in determining the present value of lease payments.
The lease term for the Company's leases includes the non-cancellable period of the lease plus any additional periods covered by either an option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.
Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on an index or rate, and amounts probable to be payable under the EB-5 Loan Agreement (as definedexercise of an option to purchase the underlying asset, if reasonably certain.
Variable payments not dependent on an index or rate associated with the Company's leases are recognized when the event, activity, or circumstance is probable. Variable payments include the Company's proportionate share of certain utilities and other operating expenses and are presented as operating expenses in Note 7) approximate their carrying value. See Note 7 for additional information.the Company's condensed consolidated statements of operations and comprehensive loss in the same line item as expense arising from fixed lease payments.
Stock-Based Compensation
The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation — Stock Compensation ("ASC 718"). The Company has issued stock-based compensation awards including stock options and restricted stock units ("RSUs"), and has also accountsaccounted for certain issuances of preferred stock and warrants in accordance with ASC 718. ASC 718 requires all stock-based payments, including grants of stock options and RSUs, to be recognized in the condensed consolidated statements of operations and comprehensive loss based on their grant date fair values. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options granted. For RSUs, the fair value of the RSUsRSU is determined by the market price of a share of the Company's common stock on the grant date. The Company recognizes forfeitures as they occur.
Compensation expenseExpense related to stock-based compensation awards granted with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term. Stock-based compensation awards generally vest over a one to three year requisite service period andperiod. Stock options have a contractual term of 10 years. Compensation expense forExpense related to stock-based compensation awards with performance-based vesting conditions is only recognized whenrecorded to research and development expense or general and administrative expense based on the performance-based vesting condition is deemed probable to occur.underlying function of the individual that was granted the stock-based compensation award. Shares issued upon stock option exercise and RSU vesting are newly-issued common shares.
Estimating the fair value of stock options requires the input of subjective assumptions, including the expected life of the stock option, stock price volatility, the risk-free interest rate, and expected dividends. The assumptions used in the Company's Black-Scholes option-pricing model represent management's best estimates and involve a number of variables, uncertainties, assumptions, and the application of management's judgment, as they are inherently subjective. If any assumptions change, the Company's stock-based compensation expense could be materially different in the future.
Recently Adopted Accounting Standards
In November 2021,June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2021-10,2016-13, Government AssistanceFinancial Instruments — Credit Losses (Topic 832)326): Disclosures by Business Entities about Government AssistanceMeasurement of Credit Losses on Financial Instruments. This standard increasesThe FASB subsequently issued amendments to ASU No. 2016-13, which had the transparencysame effective date and transition date of transactionsJanuary 1, 2023. ASU No. 2016-13, as amended, requires that credit losses be reported using an expected losses model rather than the incurred losses model that was previously used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, these standards now require allowances to be recorded instead of reducing the government that are accountedamortized cost of the investment. These standards limit the amount of credit losses to be recognized for by applying a grant or contribution accounting model, and aims to reduce diversity that currently exists in the recognition, measurement, presentation, and disclosure of government assistance received by business entities dueavailable-for-sale debt securities to the lackamount by which carrying value exceeds fair value and requires the reversal of specific authoritative guidance in GAAP. This standard requires an entity to provide information regarding the nature of the transaction with a government and the related accounting policy used to account for this transaction, the line items on the consolidated balance sheet and consolidated statement of operations and comprehensive loss that are affected by the transaction and the amounts applicable to each financial statement line item, and the significant terms and conditions of the transaction, including commitments and contingencies.previously recognized credit losses if fair value increases. The standard was effective for the Company on January 1, 2022. The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40). This standard clarifies and reduces diversity in an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options, including warrants, that remain equity-classified after modification or exchange. The standard requires an entity to treat a modification or an exchange of a freestanding equity-classified written call option that remains equity-classified after the modification or exchange as an exchange of the original instrument for a new instrument. The standard additionally provides guidance on measuring and recognizing the effect of a modification or an exchange. The standard was effective for the Company on January 1, 2022.2023. The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity's Own Equity (Subtopic 815-40). This standard will have an effective and transition date of January 1, 2024. Early adoption is currently permitted. This standard simplifies an issuer's accounting for convertible instruments by eliminating two of the three models that require separate accounting for embedded conversion
features as well as simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. This standard also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and includeincludes the effect of potential share settlement (if the effect is more dilutive) for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. The standard requires new disclosures about events that occur during the reporting period andthat cause conversion contingencies to be met and about the fair value of a public business entity's convertible debt at the instrument level, among other things. The Company does not currently expect the adoption of this standard to have a material impact on the Company's condensed consolidated financial statements.
In June 2016,
3. Fair Value Measurements
The following table summarizes the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU No. 2016-13, which have the same effective date and transition date of January 1, 2023. ASU No. 2016-13, as amended, requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, these standards now require allowances to be recorded instead of reducing the amortized cost of the investment. These standards limit the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversalclassification by level of previously recognized credit losses ifinput within the fair value increases. The Company does not currently expecthierarchy of financial assets that are recurring fair value measurements (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2023 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Cash and cash equivalents | $ | 68,259 | | | $ | — | | | $ | — | | | $ | 68,259 | |
| Marketable securities | | | | | | | |
| U.S. government agency securities and treasuries | — | | | 4,478 | | | — | | | 4,478 | |
| Commercial paper | — | | | 3,984 | | | — | | | 3,984 | |
| Total assets | $ | 68,259 | | | $ | 8,462 | | | $ | — | | | $ | 76,721 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2022 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Cash and cash equivalents | $ | 76,564 | | | $ | 999 | | | $ | — | | | $ | 77,563 | |
| Marketable securities | | | | | | | |
| U.S. government agency securities and treasuries | — | | | 7,433 | | | — | | | 7,433 | |
| Commercial paper | — | | | 5,938 | | | — | | | 5,938 | |
| Total assets | $ | 76,564 | | | $ | 14,370 | | | $ | — | | | $ | 90,934 | |
As of March 31, 2023 and December 31, 2022, the adoptionvaluation of this standard to have a material impact on the Company's condensed consolidated financial statements.
3. License and Development Agreement
The Company entered intomarketable securities utilized Level 2 inputs in the Covaxin Agreement with Bharat Biotech to co-develop COVAXINfair value hierarchy. See Note 2 for the Ocugen Covaxin Territory. The Covaxin Agreement was originally entered into in February 2021 with respect to the U.S. market and was subsequently amended in June 2021 to add rights to the Canadian market, for whichadditional information. Further, the Company paid Bharat Biotech a non-refundable, upfront payment of $15.0 million atbelieves the execution of the amendment. The Company additionally agreed to pay Bharat Biotech $10.0 million within 30 days after the first commercial sale of COVAXIN in Canada. The Covaxin Agreement was amended a second time in April 2022 to add rights to the Mexican market. The Covaxin Agreement is a collaboration arrangement within the scope of ASC 808.
Pursuant to the Covaxin Agreement, the Company obtained an exclusive right and license under certain of Bharat Biotech's intellectual property rights, with the right to grant sublicenses, to develop, manufacture, and commercialize COVAXIN in the Ocugen Covaxin Territory. In consideration of the license and other rights granted to the Company by Bharat Biotech, the parties agreed to share any Operating Profits (as defined in the Covaxin Agreement) generated from the commercialization of COVAXIN in the Ocugen Covaxin Territory, with the Company retaining 45% of such profits, and Bharat Biotech receiving the balance of such profits.
Under the Covaxin Agreement, the Company is collaborating with Bharat Biotech to develop COVAXIN for their respective territories. Except with respect to manufacturing rights under certain circumstances subsequently described, the Company has the exclusive right and is solely responsible for researching, developing, manufacturing, and commercializing COVAXIN for the Ocugen Covaxin Territory. Bharat Biotech is responsible for researching, developing, manufacturing, and commercializing COVAXIN outside of the Ocugen Covaxin Territory. Bharat Biotech has agreed to provide to the Company preclinical and clinical data, and to transfer to the Company certain proprietary technology owned or controlled by Bharat Biotech, that is necessary for the successful commercial manufacture and supply of COVAXIN to support commercial sale in the Ocugen Covaxin Territory, if approved.
In September 2021, the Company entered into the Supply Agreement with Bharat Biotech, pursuant to which Bharat Biotech will supply the Company with clinical trial materials and commercial supplies of COVAXIN finished drug product prior to the completion of a technology transfer. Following the completion of the technology transfer to Jubilant HollisterStier, which is in progress, Bharat Biotech will supply COVAXIN drug product components and continue to supply finished drug product as necessary for commercial manufacture and supply of COVAXIN subsequent to a regulatory approval. In March 2021, the Company issued shares of Series B Convertible Preferred Stock (as defined in Note 8) as an advance payment for the supply of COVAXIN to be provided by Bharat Biotech under the Supply Agreement. See Note 8 for additional information about the Series B Convertible Preferred Stock issuance to Bharat Biotech.
The Covaxin Agreement continues in effect for the commercial life of COVAXIN, subject to the earlier termination of the Covaxin Agreement in accordance with its terms. The Covaxin Agreement also contains customary representations and warranties made by both parties and customary provisions relating to indemnification, limitation of liability, confidentiality, information and data sharing, and other matters. The Supply Agreement expires upon expiration of the Covaxin Agreement and may be earlier terminated by either party in the event of an uncured material breach or bankruptcy of the other party.fair value using Level 2
inputs of the borrowings under the EB-5 Loan Agreement (as defined in Note 8) approximates its carrying value. See Note 8 for additional information.
4. Marketable Securities
The following table provides the amortized cost basis and fair value of the Company's available-for-sale investments by security type as reflected on the condensed consolidated balance sheets (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2023 |
| Amortized Cost Basis | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
| U.S. government agency securities and treasuries | $ | 4,477 | | | $ | 1 | | | $ | — | | | $ | 4,478 | |
| Commercial paper | 3,984 | | | — | | | — | | | 3,984 | |
| Total marketable securities | $ | 8,461 | | | $ | 1 | | | $ | — | | | $ | 8,462 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2022 |
| Amortized Cost Basis | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
| U.S. government agency securities and treasuries | $ | 7,432 | | | $ | 1 | | | $ | — | | | $ | 7,433 | |
| Commercial paper | 5,938 | | | — | | | — | | | 5,938 | |
| Total marketable securities | $ | 13,370 | | | $ | 1 | | | $ | — | | | $ | 13,371 | |
As of March 31, 2023 as well as December 31, 2022, the Company's marketable securities comprised of investments that mature within one year.
5. Property and Equipment
The following table provides a summary of the major components of property and equipment as reflected on the condensed consolidated balance sheets (in thousands):
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| Furniture and fixtures | Furniture and fixtures | $ | 292 | | | $ | 284 | | Furniture and fixtures | $ | 337 | | | $ | 337 | |
| Machinery and equipment | Machinery and equipment | 907 | | | 855 | | Machinery and equipment | 1,783 | | | 1,685 | |
| Leasehold improvements | Leasehold improvements | 167 | | | 167 | | Leasehold improvements | 1,907 | | | 1,603 | |
| Construction in progress | Construction in progress | 996 | | | 232 | | Construction in progress | 4,712 | | | 3,049 | |
| Total property and equipment | Total property and equipment | 2,362 | | | 1,538 | | Total property and equipment | 8,739 | | | 6,674 | |
| Less: accumulated depreciation | Less: accumulated depreciation | (441) | | | (374) | | Less: accumulated depreciation | (787) | | | (621) | |
| Total property and equipment, net | Total property and equipment, net | $ | 1,921 | | | $ | 1,164 | | Total property and equipment, net | $ | 7,952 | | | $ | 6,053 | |
5.6. Operating Leases
The Company has commitments under operating leases for office, laboratory, and storagefuture manufacturing space including its current headquarters and future headquarters located in Malvern, Pennsylvania. The Company's operating lease for its current headquarters has anleases have initial termterms of approximately seven years which began in December 2020, and include options to extend the leases for up to 10 years. The options for extension have been excluded from the lease terms (and lease liabilities) as it is not reasonably certain that the Company has the option to extend for 1 additional five-year term. In October 2021, the Company entered into a lease agreement for its future headquarters. The lease agreement related to the future headquarters has an expected commencement date in the second quarter of 2022 and has an initial term of seven years. The aggregate estimated base rent payments due over the initial seven-year term are $3.8 million. The Company has the option to extend this lease agreement for 2 additional five-year terms.
The components of lease expense were as follows (in thousands):
| | | | | | | | | | | |
| Three months ended March 31, |
| 2022 | | 2021 |
| Operating lease cost | $ | 179 | | | $ | 68 | |
| Variable lease cost | 28 | | | 30 | |
| Total lease cost | $ | 207 | | | $ | 98 | |
Supplemental balance sheet information related to leases was as follows (in thousands):
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Right-of-use assets, net | $ | 1,424 | | | $ | 1,587 | |
| | | |
| Current lease obligations | $ | 254 | | | $ | 363 | |
| Non-current lease obligations | 1,180 | | | 1,231 | |
| Total lease liabilities | $ | 1,434 | | | $ | 1,594 | |
Supplemental information related to leases was as follows:
| | | | | | | | | | | |
| Three months ended March 31, |
| 2022 | | 2021 |
| Weighted-average remaining lease term — operating leases (years) | 5.4 | | 6.7 |
| Weighted-average discount rate — operating leases | 4.4 | % | | 4.6 | % |
FutureThe Company's future minimum operating lease base rent payments are approximately as follows (in thousands):
| | For the Years Ending December 31, | Amount | |
| Remainder of 2022 | $ | 243 | | |
| 2023 | 261 | | |
| For the years ending December 31, | | For the years ending December 31, | Amount |
| Remainder of 2023 | | Remainder of 2023 | $ | 574 | |
| 2024 | 2024 | 269 | | 2024 | 787 | |
| 2025 | 2025 | 277 | | 2025 | 810 | |
| 2026 | 2026 | 285 | | 2026 | 834 | |
| 2027 | | 2027 | 834 | |
| Thereafter | Thereafter | 293 | | Thereafter | 978 | |
| Total | Total | $ | 1,628 | | Total | $ | 4,817 | |
| Less: present value adjustment | Less: present value adjustment | (194) | | Less: present value adjustment | (856) | |
| Present value of minimum lease payments | Present value of minimum lease payments | $ | 1,434 | | Present value of minimum lease payments | $ | 3,961 | |
As aforementioned,
7. Accrued Expenses and Other Current Liabilities
The following table provides a summary of the major components of accrued expenses and other current liabilities as reflected on the condensed consolidated balance sheets (in thousands):
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Research and development | $ | 1,286 | | | $ | 1,894 | |
| Clinical | 117 | | | 3,310 | |
| Professional fees | 615 | | | 437 | |
| Employee-related | 1,592 | | | 2,752 | |
| Other | 2,213 | | | 1,507 | |
| Total accrued expenses and other current liabilities | $ | 5,823 | | | $ | 9,900 | |
8. Debt
In September 2016, in connection with the U.S. government's foreign national investor program, commonly known as the EB-5 Program, the Company entered into a lease agreement for its future headquarters in October 2021. The aggregate estimated base rent payments due over the initial seven-year term of $3.8 million are excluded from the future minimum operating lease base rent payments above, as the lease agreement related to its future headquarters has not yet commenced per ASC 842.
6. Accrued Expenses
Accrued expenses are as follows (in thousands):
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Research and development | $ | 376 | | | $ | 866 | |
| Clinical | 228 | | | 703 | |
| Professional fees | 1,490 | | | 747 | |
| Employee-related | 1,049 | | | 1,716 | |
| Other | 394 | | | 293 | |
| Total accrued expenses | $ | 3,537 | | | $ | 4,325 | |
7.Debt
In September 2016, pursuant to the U.S. government's Immigrant Investor Program, commonly known as the EB-5 program, the Company entered into anfinancing arrangement (the "EB-5 Loan Agreement") to borrowwhich provides for cumulative borrowings of up to $10.0 million from EB5 Life Sciences, L.P. ("EB-5 Life Sciences") in $0.5 million increments.as the lender. Borrowings may be limited by the amount of funds raised by EB-5 Life Sciences and are subject to certain job creation requirements by the Company. Borrowings are at a fixed interest rate of 4.0% per annum and are to be utilized in the clinical development, manufacturing, and commercialization of the Company's product candidates and for the general working capital needs of the Company. Outstanding borrowings pursuant toBorrowings associated with the EB-5 Loan Agreement including accrued interest, become due upon the seventh anniversary of the final disbursement. Amounts repaid cannot be re-borrowed. The EB-5 Loan Agreement borrowings are secured by substantially all assets of the Company, except forCompany's assets, with the exception of any patents, patent applications, pending patents, patent licenses, patent sublicenses, trademarks, and other intellectual property rights.rights held by the Company.
As of March 31, 2023, borrowings associated with the EB-5 Loan Agreement were made in $0.5 million increments. Cumulative borrowing amounts associated with the EB-5 Loan Agreement may be limited by the amount of funds raised by EB-5 Life Sciences and are also subject to certain job creation requirements by the Company. Under the terms and conditions of the EB-5 Loan Agreement, the Company has borrowed $1.5 million.$1.0 million during 2016, $0.5 million during 2020, and an additional $0.5 million in September 2022. Issuance costs wereare recognized as a reduction to the loan balance and are amortized to interest expense over the term of each borrowing. Subsequent to March 31, 2023, the loan.Company borrowed an additional $0.5 million under the EB-5 Loan Agreement.
As of March 31, 2023, outstanding borrowings carry a fixed interest rate of 4.0% per annum. Pursuant to the EB-5 Loan Agreement, each outstanding borrowing, including accrued interest, becomes due upon the seventh anniversary of the disbursement date, subject to certain extension provisions. Once repaid, amounts cannot be re-drawn.
The carrying values of the EB-5 Loan Agreement borrowings as of March 31, 20222023 and December 31, 20212022 are summarized below (in thousands):
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| Principal outstanding | Principal outstanding | $ | 1,500 | | | $ | 1,500 | | Principal outstanding | $ | 2,000 | | | $ | 2,000 | |
| Plus: accrued interest | Plus: accrued interest | 256 | | | 241 | | Plus: accrued interest | 327 | | | 307 | |
| Less: unamortized debt issuance costs | Less: unamortized debt issuance costs | (25) | | | (29) | | Less: unamortized debt issuance costs | (13) | | | (18) | |
| Carrying value, net | Carrying value, net | $ | 1,731 | | | $ | 1,712 | | Carrying value, net | 2,314 | | | 2,289 | |
| Less: current portion of long term debt | | Less: current portion of long term debt | (1,256) | | | — | |
| Long term debt, net of current portion | | Long term debt, net of current portion | $ | 1,058 | | | $ | 2,289 | |
8.9. Equity
Offerings of Common Stock
At-the-Market Offering
In June 2022, the Company entered into an At Market Issuance Sales Agreement ("Sales Agreement") with certain agents, pursuant to which the Company could, from time to time, offer and sell shares of its common stock having an aggregate gross sales price of up to $160.0 million. The offer and sale of the shares of common stock made pursuant to the Sales Agreement were made under the Company's Registration Statement on Form S-3ASR, which was previously filed with the SEC and became automatically effective on March 22, 2021, as supplemented by a prospectus supplement, dated June 10, 2022. During the three months ended March 31, 2023, the Company sold 4.5 million shares of its common stock and received net proceeds of $5.6 million after deducting issuance costs of $0.2 million. The Sales Agreement was terminated on February 27, 2023.
Public Offering
In February 2022, the Company entered into an underwriting agreement with an underwriter, pursuant to which the Company sold 16.0 million shares of its common stock at a public offering price of $3.13 per share (the "Public Offering"). Upon the closing of the Public Offering, the Company received net proceeds of $49.8 million, after deducting equity issuance costs payable by the Company.
COVAXIN Preferred Stock Purchase Agreement
On March 1, 2021, the Company entered into a preferred stock purchase agreement with Bharat Biotech, pursuant to which the Company agreed to issue and sell 0.1 million shares of the Company's Series B Convertible Preferred Stock, par value $0.01 per share (the "Series B Convertible Preferred Stock"), at a price per share equal to $109.60, to Bharat Biotech. On March 18, 2021, the Company issued the Series B Convertible Preferred Stock as an advance payment of $6.0 million for the supply of COVAXIN to be provided by Bharat Biotech pursuant to the Supply Agreement. In February 2022, the Company entered into a supply commitment to purchase $14.3 million of COVAXIN drug product components from Bharat Biotech to support the technology transfer from Bharat Biotech to Jubilant HollisterStier. The previously issued Series B Convertible Preferred Stock as an advance payment for the supply of COVAXIN to be provided by Bharat Biotech will be applied to this commitment.
Each share of Series B Convertible Preferred Stock is convertible, at the option of Bharat Biotech, into 10 shares of the Company's common stock (the "Conversion Ratio") only after (i) the Company received stockholder approval to increase the number of authorized shares of common stock under its Sixth Amended and Restated Certificate of Incorporation, which the Company received in April 2021, and (ii) the Company's receipt of shipments by Bharat Biotech of the first 10.0 million doses of COVAXIN manufactured by Bharat Biotech pursuant to the Development and Commercial Supply Agreement, and further on the terms and subject to the conditions set forth in the Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock. As of March 31, 2022,2023, the conversion condition relating to the delivery of the first 10.0 million doses of COVAXIN had not been met. The conversion rate of the Series B Convertible Preferred Stock is subject to adjustment in the event of a stock dividend, stock split, reclassification, or similar event with respect to the Company's common stock.
The Company accounted for the issuance of the Series B Convertible Preferred Stock in accordance with ASC 718 and recorded its grant date fair value of $5.0 million within stockholders' equity during the three monthsyear ended MarchDecember 31, 2021, with a corresponding short-term asset for the advanced payment for the dosessupply of COVAXIN included in prepaid expenses and other current assets in the condensed consolidated balance sheetssheet as of March 31, 2022 and December 31, 2021. The Company utilized the traded common stock price, adjusted by the Conversion Ratio, to value the Series B Convertible Preferred Stock and the Finnerty model to estimate a 15% discount rate for the lack of marketability of the instrument. The valuation incorporatesincorporated Level 3 inputs in the
fair value hierarchy, including the estimated time until the instrument's liquidity and the estimated volatility of the Company's common stock as of the grant date.
Offerings of Common Stock
Public Offering
In February 2022, the Company entered into an underwriting agreement with Cantor Fitzgerald & Co., pursuant to which the Company sold 16.0 million shares of its common stock at a public offering price of $3.13 per share (the "Public Offering"). Upon the closing of the Public Offering, the Company received net proceeds of $49.8 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Public Offering was made pursuant to the Company's Registration Statement on Form S-3ASR, which was previously filed with the SEC and became automatically effective on March 22, 2021, as supplemented by a prospectus supplement, dated February 22, 2022.
Registered Direct Offering
In February 2021, the Company entered into a securities purchase agreement with certain institutional investors pursuant to which the Company sold 3.0 million shares of its common stock at an offering price of $7.65 per share in a registered direct
offering (the "February 2021 Registered Direct Offering"). Upon the closing of the February 2021 Registered Direct Offering, the Company received net proceeds of $21.2 million after deducting equity issuance costs of $1.7 million.
At-the-Market Offering
During the three months ended March 31, 2021, the Company sold 1.0 million shares of the Company's common stock under an at-the-market offering and received net proceeds of $4.8 million after deducting equity issuance costs of $0.1 million.
9. Warrants
Liminal Warrants
On January 24, 2022 (the "Issuance Date"), the Company entered into a non-binding letter of intent ("LOI") with Liminal Biosciences Inc. ("Liminal") for the acquisition of Liminal's manufacturing site in Belleville, Ontario, Canada for a combination of cash and warrants to purchase the Company's common stock. Pursuant to the LOI, the Company issued warrants to purchase 2.3 million shares of the Company's common stock at an exercise price of $3.76, subject to certain adjustments (the "Liminal Warrants"). The Liminal Warrants vest and become exercisable upon closing of the transactions contemplated by the LOI and terminate on the tenth anniversary of the Issuance Date, unless earlier terminated in accordance with their terms. The Liminal Warrants are cancellable by the Company in the event the transactions contemplated by the LOI are not consummated. As of March 31, 2023 and December 31, 2022, allthe remaining balance of the Liminal Warrants were outstandingshort-term asset for the advanced payment for the supply of COVAXIN was $4.1 million.
Subsequent to March 31, 2023 and unvested.as mentioned in Note 1, the FDA announced the cancellation of EUAs issued to monovalent vaccines. Accordingly, the Company has determined it is not commercially viable to continue the development of COVAXIN in its North American territory. The Liminal Warrants are accounted for in accordance with ASC 718.
CompletionCompany is currently evaluating the accounting implications of the transaction proposedFDA's decision with respect to the short-term asset for the advanced payment for the supply of COVAXIN recorded in the LOI is subject to finalization of due diligence investigations bycondensed consolidated balance sheet, as well as the parties, the negotiation and execution of definitive transaction agreements, and other customary closing conditions including certain funding requirements. The LOI may be terminated at any time by mutual written consent of the Company and Liminal, among other termination provisions contained in the LOI.issued Series B preferred stock within stockholders' equity.
10. Warrants
Canada Warrants
In July 2021, the Company entered into a consulting agreement with an individual to provide services to the Company with regard to the Company's Canadian operations (the "Canada Consulting Agreement"). Compensation under the Canada Consulting Agreement includes, among other forms of compensation,included the issuance of warrants to purchase up to 0.2 million shares of the Company's common stock (the "Canada Warrants") and cash payments of up to $3.0 million, both dependent upon the achievement of certain milestones related to COVAXIN. The Canada Consulting Agreement terminates in July 2023, unless earlier terminated in accordance with its terms.
The Canada Warrants were issued on July 15, 2021, in a private placement transaction. The warrantholder has the right to exercise the Canada Warrants to purchase up to 0.2 million shares of the Company's common stock athave an exercise price of $6.36 per share, uponand were accounted for in accordance with ASC 718. The Canada Consulting Agreement terminates on July 15, 2023 and the achievement of certain milestones related to COVAXIN. The Canada Warrants terminate on July 15, 2031, unless earlier terminated in accordance with their terms. As of March 31, 20222023 and December 31, 2021,2022, all of the Canada Warrants were outstanding and unvested. Subsequent to March 31, 2023 and as mentioned in Note 1, the FDA announced the cancellation of EUAs issued to monovalent vaccines. Accordingly, the Company has determined it is not commercially viable to continue the development of COVAXIN in its North American territory. The Company is currently evaluating the implications of the FDA's decision with respect to the Canada Warrants are accounted for in accordance with ASC 718.Consulting Agreement and the Canada Warrants.
OpCo Warrants
Beginning in 2016, OpCo issued warrants to purchase the Company's common stock (the "OpCo Warrants"). As of March 31, 20222023 and December 31, 2021,2022, 0.6 million OpCo Warrants were outstanding. As of March 31, 2022,2023, the outstanding OpCo Warrants had a weighted-average exercise price of $6.23. The outstanding OpCo Warrants$6.23 per share and expire between 2026 and 2027.
10.11. Stock-Based Compensation
Stock-based compensation expense for stock options and RSUs is reflected in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
| | | Three months ended March 31, | | Three months ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| General and administrative | General and administrative | $ | 2,216 | | | $ | 590 | | General and administrative | $ | 1,952 | | | $ | 2,216 | |
| Research and development | Research and development | 1,083 | | | 243 | | Research and development | 737 | | | 1,083 | |
| Total | Total | $ | 3,299 | | | $ | 833 | | Total | $ | 2,689 | | | $ | 3,299 | |
As of March 31, 2022,2023, the Company had $27.9$17.8 million of unrecognized stock-based compensation expense related to stock options and RSUs outstanding. This expenseoutstanding, which is expected to be recognized over a weighted-average period of 2.3 years as of March 31, 2022.2.0 years.
Equity Plans
The Company maintains 2two equity compensation plans, the 2014 Ocugen OpCo, Inc. Stock Option Plan (the "2014 Plan") and the Ocugen, Inc. 2019 Equity Incentive Plan (the "2019 Plan", collectively with the 2014 Plan, the "Plans"). As of March 31, 2022,2023, the 2014 Plan and the 2019 Plan authorize for the granting of up to 0.8 million and 19.528.4 million equity awards with respect to the Company's common stock, respectively. In addition to stock options and RSUs granted under the Plans, the Company has granted certain stock options and RSUs as material inducements to employment in accordance with Nasdaq Listing Rule 5635(c)(4), which were granted outside of the Plans.
Stock Options to Purchase Common Stock
The following table summarizes the stock option activity:
| | | Number of Shares | | Weighted-Average Exercise Price | | Weighted Average Remaining Contractual Life | | Aggregate Intrinsic Value | | Number of Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Life (years) | | Aggregate Intrinsic Value
(in thousands) |
| Options outstanding at December 31, 2021 | 10,086,167 | | | $ | 2.59 | | | 8.8 | | $ | 24,664 | | |
| Stock options outstanding at December 31, 2022 | | Stock options outstanding at December 31, 2022 | 10,851,287 | | | $ | 2.95 | | | 8.3 | | $ | 1,385 | |
| Granted | Granted | 4,323,937 | | | $ | 4.42 | | | Granted | 3,700,996 | | | $ | 1.22 | | |
| Exercised | Exercised | (277,323) | | | $ | 0.65 | | | Exercised | (200,000) | | | $ | 0.42 | | |
| Forfeited | Forfeited | (130,327) | | | $ | 6.48 | | | Forfeited | (628,119) | | | $ | 2.88 | | |
| Options outstanding at March 31, 2022 | 14,002,454 | | | $ | 3.16 | | | 8.9 | | $ | 14,468 | | |
| Options exercisable at March 31, 2022 | 2,913,960 | | | $ | 2.37 | | | 8.3 | | $ | 4,431 | | |
| Stock options outstanding at March 31, 2023 | | Stock options outstanding at March 31, 2023 | 13,724,164 | | | $ | 2.53 | | | 8.5 | | $ | 599 | |
| Stock options exercisable at March 31, 2023 | | Stock options exercisable at March 31, 2023 | 5,199,957 | | | $ | 2.92 | | | 7.7 | | $ | 322 | |
There were 1.2 million of stock options with performance-based vesting conditions outstanding as of March 31, 2022 and December 31, 2021, of which 0.9 million were not yet vested and exercisable as of March 31, 2022 and December 31, 2021. The weighted average grant date fair values of stock options granted during the three months ended March 31, 2023 and 2022 were $1.01 and 2021 were $3.61, and $1.73, respectively. The total fair values of stock options vested during the three months ended March 31, 2023 and 2022 and 2021 were $2.8$5.6 million and $0.3$2.8 million, respectively.
RSUs
The following table summarizes the RSU activity:
| | | | | | | | | | | | | | | |
| Number of Shares | | Weighted-Average Grant-Date Fair Value | | | | |
| RSUs outstanding at December 31, 2021 | 191,811 | | | $ | 6.79 | | | | | |
| Granted | 1,130,270 | | | $ | 4.45 | | | | | |
| Forfeited | (20,812) | | | $ | 6.36 | | | | | |
| RSUs outstanding at March 31, 2022 | 1,301,269 | | | $ | 4.76 | | | | | |
| | | | | | | | | | | | | | | |
| Number of Shares | | Weighted Average Grant-Date Fair Value | | | | |
| RSUs outstanding at December 31, 2022 | 924,810 | | | $ | 4.12 | | | | | |
| Granted | 3,043,066 | | | $ | 1.23 | | | | | |
| Vested | (217,135) | | | $ | 4.56 | | | | | |
| Forfeited | (263,690) | | | $ | 2.01 | | | | | |
| RSUs outstanding at March 31, 2023 | 3,487,051 | | | $ | 1.73 | | | | | |
11.12. Net Loss Per Share of Common Stock
The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 20222023 and 20212022 (in thousands, except share and per share amounts):
| | | Three months ended March 31, | | Three months ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| Net loss — basic and diluted | Net loss — basic and diluted | $ | (18,019) | | | $ | (7,077) | | Net loss — basic and diluted | $ | (16,498) | | | $ | (18,019) | |
| Shares used in calculating net loss per common share — basic and diluted | Shares used in calculating net loss per common share — basic and diluted | 205,693,498 | | | 186,298,122 | Shares used in calculating net loss per common share — basic and diluted | 225,523,627 | | | 205,693,498 | |
| Net loss per common share — basic and diluted | Net loss per common share — basic and diluted | $ | (0.09) | | | $ | (0.04) | | Net loss per common share — basic and diluted | $ | (0.07) | | | $ | (0.09) | |
The following potentially dilutive securities have been excluded from the computation of diluted weighted-averageweighted average shares outstanding, as their inclusion would have been antidilutive:
| | | Three months ended March 31, | | Three months ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| Options to purchase common stock | 14,002,454 | | | 9,235,545 | |
| Stock options to purchase common stock | | Stock options to purchase common stock | 13,724,164 | | | 14,002,454 |
| RSUs | RSUs | 1,301,269 | | | 2,190 | RSUs | 3,487,051 | | | 1,301,269 |
| Warrants | Warrants | 3,110,655 | | | 870,017 | Warrants | 798,352 | | | 3,110,655 |
| Series A Convertible Preferred Stock (as converted to common stock) | Series A Convertible Preferred Stock (as converted to common stock) | 3,115 | | | 3,115 | Series A Convertible Preferred Stock (as converted to common stock) | — | | | 3,115 |
| Series B Convertible Preferred Stock (as converted to common stock) | Series B Convertible Preferred Stock (as converted to common stock) | 547,450 | | | 547,450 | Series B Convertible Preferred Stock (as converted to common stock) | 547,450 | | | 547,450 |
| Total | Total | 18,964,943 | | | 10,658,317 | Total | 18,557,017 | | | 18,964,943 |
12.13. Commitments and Contingencies
Commitments
The Company has commitments under certain license and development agreements, lease agreements, debt agreements, supply agreements, and consulting agreements. Commitments under certain license and development agreements include annual payments, payments upon the achievement of certain milestones, and royalty payments based on net sales of licensed products (commitments under the Company's licensing agreements are more fully described within Note 3 and within the Company's 20212022 Annual Report). Commitments under lease agreements are future minimum lease payments (see Note 5)6). Commitments under debt agreements are the future paymentpayments of principal and accrued interest under the EB-5 Loan Agreement (see Note 7). Commitments under supply agreements are purchases of drug product components to support the technology transfer from Bharat Biotech to Jubilant HollisterStier related to COVAXIN (see Note 8). Commitments under consulting agreements include payments upon the achievement of certain milestones related to COVAXIN (see Note 9)10).
Contingencies
In June 2021, a securities class action lawsuit was filed against the Company and certain of its officers and directorsagents in the U.S. District Court for the Eastern District of Pennsylvania ("Court") (Case No. 2:21-cv-02725) that purported to state a claim for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder, based on statements made by the Company concerning the announcement of the Company's decision to pursue the submission of a BLA for COVAXIN for adults ages 18 years and older rather than pursuing an EUA for the vaccine candidate. In July 2021, a second securities class action lawsuit was filed against the Company and certain of its officers and directorsagents in the Court (Case No. 2:21-cv-03182) that also purported to state a claim for alleged violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, based on the same statements as the first complaint. The complaints seek unspecified damages, interest, attorneys' fees, and other costs. OnIn March 31, 2022, the Court consolidated these two related securities class actionsaction lawsuits and appointed Andre Galan Bernd Benayon to serve as lead plaintiff. The lead plaintiff's amended complaint is duewas filed in June 2022. The Company filed a motion to dismiss the amended complaint in August 2022. The lead plaintiff's opposition to the motion to dismiss was filed in October 2022. The Company filed its reply in support of the motion to dismiss in November 2022. Oral argument on June 13, 2022.the motion to dismiss took place in January 2023. In March 2023, the Court granted the Company's motion to dismiss with prejudice. The lead plaintiff has appealed to the United States Court of Appeals for the Third Circuit regarding the order that was entered in March 2023, which dismissed the action with prejudice.
In August 2021, a stockholder derivative lawsuit was filed derivatively on behalf of the Company against certain of its officers and directorsagents and the nominal defendant Ocugen in the Court (Case No. 2:21-cv-03876) that purported to state a claim for breach of fiduciary duty and contribution for violations of Sections 10(b) and 21(d) of the Exchange Act, based on facts and circumstances relating to the securities class action lawsuits and seeking contribution and indemnification in connection with
claims asserted in the securities class action lawsuits. In September 2021, a second stockholder derivative lawsuit was filed derivatively on behalf of the Company against certain of its officers and directorsagents and the nominal defendant Ocugen in the Court (Case No. 2:21-cv-04169) that purported to state a claim for breach of fiduciary duties, unjust enrichment, abuse of control, waste of corporate assets, and contribution for violations of Sections 10(b) and 21(d) of the Exchange Act, based on the same allegations as the first complaint. The parties to both stockholder derivative lawsuits have stipulated to the consolidation of the two stockholder derivative lawsuits and also have submitted to the Court in each action a proposed order requesting a stay of the litigation pending a decision on any motion to dismiss filed in the securities class action lawsuits, which the Court entered onin April 12, 2022. In March 2023, the Court in the securities class action lawsuits granted the Company's motion to dismiss with prejudice. In March 2023, the parties to the stockholder derivative lawsuits stipulated to extend the stay of litigation pending resolution of any appeal filed in the securities class action lawsuits, which the Court entered in March 2023. As aforementioned, an appeal was filed by the lead plaintiff in the securities class action lawsuits in March 2023.
The Company believes that the lawsuits are without merit and intends to vigorously defend against them. At this time, no assessment can be made as to their likely outcome or whether the outcome will be material to the Company. No information is available to indicate that it is probable that a loss has been incurred and can be reasonably estimated as of the date of the condensed consolidated financial statements and, as such, no accrual for the loss has been recorded within the condensed consolidated financial statements.
13. 14. Subsequent Events
In April 2022,Subsequent to March 31, 2023, the Company and Bharat Biotech entered into a second amendmentborrowed $0.5 million pursuant to the Covaxin Agreement, wherebyEB-5 Loan Agreement. Refer to Note 8 for the parties agreed to expandterms and conditions of the Company's development, manufacturing, and commercialization rights to include Mexico, in addition to the United States and Canada. Pursuant to the Covaxin Agreement, the parties will share Operating Profits (as defined in the Covaxin Agreement) generated from the commercialization of COVAXIN in the Ocugen Territory, now including Mexico, with the Company retaining 45% of such profits, and Bharat Biotech receiving the balance of such profits. See Note 3 for additional information about the Covaxin Agreement.EB-5 borrowings.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements for the year ended December 31, 2021,2022, included in our 20212022 Annual Report. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business and related financing, include forward-looking statements that involve risks, uncertainties, and assumptions. These statements are based on our beliefs and expectations about future outcomes and are subject to risks and uncertainties that could cause our actual results to differ materially from anticipated results. Except as required by law, we undertake no obligation to publicly update these forward-looking statements, whether as a result of new information, future events, or otherwise. You should read the "Risk Factors" section included in our 20212022 Annual Report and the "Risk Factors" and "Disclosure Regarding Forward-Looking Statements" sections of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a biotechnology company focused on discovering, developing, and commercializing novel gene and cell therapies biologicals, and vaccines that improve health and offer hope for people and global communities.patients across the globe.
Our cutting-edge technology pipeline includes:
•COVID-19 Vaccine Candidate — COVAXIN is a whole-virion inactivated COVID-19 vaccine candidate being developed to prevent COVID-19, caused by SARS-CoV-2, in humans. We are co-developing COVAXIN with Bharat Biotech for the U.S., Canadian, and Mexican markets.
•Modifier Gene Therapy Platform — Based on the use of NHRs, we believe our modifier gene therapy platform has the potential to address many retinal diseases, including RP, LCA, dry AMD, and dry AMD.Stargardt disease, with a single mutation-agnostic therapy.
•Regenerative Medicine Cell Therapy Platform — Our Phase 3-ready regenerative medicine cell therapy platform technology, NeoCart (autologous chondrocyte-derived neocartilage), is being developed for the repair of knee cartilage injuries in adults.
•Vaccines — Our vaccines platform is driven by our conviction to serve a public health concern, which requires the endorsement and support of government funding, both domestically and in licensed territories abroad, in order to develop and ultimately commercialize our vaccine candidates. Therefore, our anticipated expenses for vaccines development from the second quarter of 2023 onward will be limited until if and when we receive such government endorsement and funding, while we devote our current cash, cash equivalents, and investments to developing our modifier gene therapy platform. We are developing an inhalation-based, next generation mucosal vaccine platform to overcome the limitations of current intramuscular COVID-19 treatments, namely sustained durability and transmissibility inhibition. Our novel inhaled mucosal vaccine platform includes OCU500, a bivalent COVID-19 vaccine; OCU510, a seasonal quadrivalent flu vaccine; and OCU520, a combination quadrivalent seasonal flu and bivalent COVID-19 vaccine.
•Novel Biologic Therapy for Retinal Diseases — We are developing OCU200 is a novel biologic product candidate,fusion protein containing human transferrin and tumstatin. OCU200 is designed to treat DME, DR, and wet AMD.
COVID-19 Vaccine Candidate
In February 2021, we entered into the Covaxin Agreement with Bharat Biotech, pursuant to which we obtained an exclusive right and license under certain of Bharat Biotech's intellectual property rights, with the right to grant sublicenses to develop, manufacture, and commercialize COVAXIN for the prevention of COVID-19 in the United States, its territories, and possessions. In June 2021 and April 2022, we entered into amendments to the Covaxin Agreement, pursuant to which we and Bharat Biotech agreed to expand our rights to develop, manufacture, and commercialize COVAXIN to include Canada and Mexico, respectively, in addition to the United States, its territories, and possessions. COVAXIN is formulated with the inactivated SARS-CoV-2 virus, an antigen, and an adjuvant. COVAXIN requires a two-dose vaccination regimen given 28 days apart and is stored in standard vaccine storage conditions (2-8°C). COVAXIN was granted an EUL by the WHO in November 2021.
The Phase 3 clinical trial conducted by Bharat Biotech in India in 25,798 adults ages 18 years and older, who were healthy or had stable chronic medical conditions, reported an overall estimated vaccine efficacy of COVAXIN against COVID-19 of 77.8%, with efficacy against severe COVID-19 of 93.4%, and efficacy against asymptomatic COVID-19 of 63.6%. Individuals with asymptomatic infection have a detectable viral load in nasal and saliva swabs and therefore are considered carriers of COVID-19. COVAXIN was generally well tolerated, with no clinically or statistically significant differences in reported adverse events in the vaccine and placebo groups. Additionally, a Phase 2/3 immuno-bridging clinical trial was conducted by Bharat Biotech in India to assess the protective immunity of COVAXIN in children ages two to 18 years. The results demonstrated a robust neutralizing antibody response comparable to that of the adults studied in the aforementioned Phase 3 clinical trial, and that COVAXIN was generally well tolerated. Further, data from clinical trials conducted by Bharat Biotech has shown that COVAXIN has neutralizing potential against multiple variants of concern including both the Omicron (B.1.1.529) and Delta (B.1.617.2) variants.
In June 2021, the FDA provided feedback to us regarding the data and information contained in a "Master File" that we previously submitted to the FDA and recommended that we pursue a BLA submission instead of an EUA application for COVAXIN for adults ages 18 years and older in the United States. In October 2021, we submitted an IND application to the FDA to initiate a Phase 2/3 immuno-bridging and broadening clinical trial evaluating COVAXIN for adults ages 18 years and
older, which was approved by the FDA in February 2022. The clinical trial is designed to evaluate whether the immune response observed in participants in the aforementioned completed Phase 3 clinical trial in India is similar to a demographically representative, adult population in the United States. We voluntarily implemented a temporary pause in commencing dosing participants in the clinical trial while we evaluate the statements made by the WHO following their inspection of Bharat Biotech's manufacturing facility, wherein the WHO identified certain GMP deficiencies. As a result of our decision to voluntarily pause commencing dosing in participants, the FDA placed our Phase 2/3 immuno-bridging and broadening clinical trial on clinical hold. Assuming we are able to successfully work with the FDA to lift the clinical hold, we also plan to initiate a safety clinical trial, subject to discussions with the FDA.
In November 2021, we submitted a request to the FDA for EUA for COVAXIN for pediatric use in ages two to 18 years in the United States. The EUA submission was based on the results of the aforementioned Phase 2/3 immuno-bridging pediatric clinical trial conducted by Bharat Biotech in India. In March 2022, the FDA notified us that they declined to issue an EUA for COVAXIN for pediatric use. We intend to continue working with the FDA to evaluate a potential regulatory pathway for the pediatric use of COVAXIN in the United States.
We are also pursuing approval to market COVAXIN in Canada and recently expanded our commercialization rights for COVAXIN under the Covaxin Agreement to include Mexico. In July 2021, we completed our rolling submission to Health Canada for COVAXIN. The rolling submission process, which was conducted through our Canadian subsidiary, Vaccigen, was recommended and accepted under the Interim Order and transitioned to a NDS for COVID-19. In December 2021, Health Canada provided us with a NOD regarding our NDS submission. Health Canada requested further analyses of the COVAXIN preclinical and clinical data, as well as additional information regarding CMC. We have responded to and provided proposed resolutions for the deficiencies included in the NOD. Our responses are currently under review by Health Canada. COVAXIN is also currently under review by COFEPRIS for emergency use for pediatrics in ages two to 18 years in Mexico. COFEPRIS previously approved emergency use for COVAXIN in Mexico for adults ages 18 years and older, which remains active.
We are evaluating our commercialization strategy for COVAXIN in the United States and Canada, if approved in either jurisdiction, and are actively preparing for commercialization in Mexico. In June 2021, we selected Jubilant HollisterStier as our manufacturing partner for COVAXIN to prepare for the commercial manufacturing of COVAXIN. We expect to enter into a master services agreement with Jubilant HollisterStier for the commercial manufacture of COVAXIN. In September 2021, we entered into the Supply Agreement with Bharat Biotech, pursuant to which Bharat Biotech will supply us with clinical trial materials and commercial supplies of COVAXIN finished drug product prior to the completion of a technology transfer. Following the completion of the technology transfer to Jubilant HollisterStier, which is in progress, Bharat Biotech will supply COVAXIN drug product components and continue to supply finished drug product as necessary for the commercial manufacture and supply of COVAXIN subsequent to a regulatory approval.
Modifier Gene Therapy Platform
We are developing a modifier gene therapy platform designed to fulfill unmet medical needs inrelated to retinal diseases, including IRDs, such as RP, and LCA, and Stargardt disease, as well as dry AMD. Our modifier gene therapy platform is based on the use of NHRs, which have the potential to restore homeostasis — the basic biological processes in the retina. Unlike single-gene replacement therapies, which only target one genetic mutation, we believe that our modifier gene therapy platform, through its use of NHRs, represents a novel approach that has the potential both to address multiple retinal diseases caused by mutations in multiple genes with one product;a single unique product and potentiallyto address complex diseases such as dry AMD, that are potentially caused by imbalances in multiple gene networks.
IRDs, such as RP and LCA, can lead to visual impairment and blindness and affect over two million people worldwide.blindness. RP and LCA are rooted in mutations of more than 175 different genes.associated with over 125 mutated genes that affect approximately 1.6 million individuals worldwide. We believe that OCU400 our first product candidate being developed with our modifier gene therapy platform, has the potential to be broadly effective in restoring retinal integrity and function across a range of genetically diverse IRDs, including RP and LCA. OCU400 has received four ODDsODD from the FDA and OMPD from the EC for the treatment of certain disease genotypes: NR2E3, CEP290, RHO, and PDE6ß mutation-associated inherited retinal degenerations. Additionally, OCU400 has received OMPD from the EC based on the recommendation of the EMA for RP and LCA, which weLCA. We believe demonstratesthese broad ODD and OMPD designations demonstrate that OCU400 has the potential to be a broad-spectrum therapeutic to treat manymultiple IRDs.
In November 2021, we submitted an IND application to the FDA to initiate a Phase 1/2 clinical trial These ODD and OMPD designations represent gene-agnostic broad coverage for OCU400 for the treatment of NR2E3 RP and RHO mutation associated RP, which was accepted by the FDA in December 2021. We have initiated the Phase 1/2 clinical trial, a multicenter, open-label, dose ranging study to assess the safety of unilateral subretinal administration of OCU400 in subjects with NR2E3 and RHO-related RP in the United StatesLCA and in March 2022, the first patient was dosed. In April 2022, an independent Data and Safety Monitoring Board for our Phase 1/2 clinical trial recommended that we continue enrolling additional study subjects in the current cohort at the target dose level and based onare not mutation-specific designations.
that recommendationWe are conducting a Phase 1/2 trial to assess the safety and efficacy of unilateral subretinal administration of OCU400 in patients with NR2E3 and RHO-related RP and CEP290-related LCA in the United States. We have completed dosing patients with RP in the dose-escalation portion of the trial, which enrolled 10 patients to receive a low, medium, or high dose of OCU400 in the subretinal space. Additionally, we have continued enrollment. completed dosing eight patients with RP in the dose-expansion portion of the trial and are continuing to enroll patients with LCA to receive the high dose, which was determined to be the maximum tolerable dose from the dose-escalation portion of the trial. In April 2023, we announced positive preliminary data among RP patients treated in the first two cohorts of the Phase 1/2 trial. In Cohorts 1 and 2 of the trial, seven participants with severe vision impairment due to RP associated with the RHO and NR2E3 gene mutations received a unilateral subretinal injection of either a low dose (1.66 x 1010 vg/mL) or a medium dose (3.33 x 1010 vg/mL) of OCU400, respectively. In the preliminary data analysis, the nine-month follow-up data for three patients and six-month follow-up data for four patients were evaluated. The preliminary results showed a favorable safety profile and visual improvements after treatment with OCU400 as measured by MLMT and BCVA. Over 70% of OCU400 treated eyes in low and medium dose cohorts demonstrated at least one Lux luminance level improvement in MLMT score and 66.7% of OCU400 treated eyes in the low dose cohort at the nine-month follow-up demonstrated at least two Lux luminance level improvement in MLMT score. Over 40% of OCU400 treated eyes demonstrated 8-11 letters of improvement as measured in BCVA score. In March 2023, the FDA approved the enrollment of pediatric patients in the ongoing Phase 1/2 trial for the treatment of RP and LCA and we intend to dose pediatric patients in the second quarter of 2023. Additionally, we intend to initiate a Phase 3 trial for OCU400 for the treatment of RP and LCA near the end of 2023, subject to discussions with the FDA.
We are additionally evaluating options to commence OCU400 clinical trials internationally.
Our second modifier gene therapy candidate,also developing OCU410 is being developed to utilizeand OCU410ST utilizing the nuclear receptor genes RORA for the treatment of dry AMD.AMD and Stargardt disease, respectively. OCU410 is a potential one-time, curative therapy with a single sub-retinal injection. OCU410ST has received ODD from the FDA for the treatment of ABCA4-associated retinopathies, including Stargardt disease. We intend to submit IND applications in the second quarter of 2023 to initiate Phase 1/2 trials.
Regenerative Medicine Cell Therapy Platform
NeoCart is a Phase 3-ready, regenerative medicine cell therapy technology that combines breakthroughs in bioengineering and cell processing to enhance the autologous cartilage repair process. NeoCart is a three-dimensional tissue-engineered disc of new cartilage that is manufactured by growing chondrocytes, the cells responsible for maintaining cartilage health. The chondrocytes are derived from the patient on a unique scaffold. In this therapy, healthy cartilage tissue is grown and implanted in the patient. Cartilage defects often lead to osteoarthritis if left untreated. Current surgical and nonsurgical treatment options are limited in their efficacy and durability. NeoCart has the potential to accelerate healing, reduce pain, and provide regenerative native-like cartilage strength with durable benefits post transplantation. The FDA granted a RMAT designation to NeoCart for the repair of full-thickness lesions of knee cartilage injuries in adults. Additionally, we received concurrence from the FDA on the confirmatory Phase 3 trial design. We are currently executing pre-IND studies consistentrenovating an existing facility into a current GMP facility in accordance with FDA discussionsthe FDA's regulations in support of NeoCart manufacturing for personalized Phase 3 trial material. We intend to initiate the Phase 3 trial in 2024.
Vaccines
Our vaccines platform is driven by our conviction to serve a public health concern, which requires the endorsement and support a Phase 1/2 clinical trial.of government funding, both domestically and in licensed territories abroad, in order to develop and ultimately commercialize our vaccine candidates. Therefore, our anticipated expenses for vaccines development from the second quarter of 2023 onward will be limited as we devote our current cash, cash equivalents, and investments to developing our modifier gene therapy platform. We have engaged CanSinoBIOare refocusing our efforts to manufacture clinical suppliesdevelop an inhalation-based, next generation platform to overcome the limitations of current intramuscular COVID-19 treatments, namely sustained durability and be responsibletransmissibility inhibition. While we continue to incur expenses for the CMC development for OCU400 and OCU410. CanSinoBIOof our inhaled mucosal vaccine platform to achieve IND readiness, any additional development will be responsiblereliant on government funding.
Inhaled Mucosal Vaccines
We are developing a novel inhaled mucosal vaccine platform, which includes OCU500, a bivalent COVID-19 vaccine; OCU510, a seasonal quadrivalent flu vaccine; and OCU520, a combination quadrivalent seasonal flu and bivalent COVID-19 vaccine. As these vaccine candidates are being developed to be administered through inhalation, we believe they have the potential to generate rapid local immunity in the upper airways and lungs where viruses enter and infect the body, which we believe may help reduce or prevent infection and transmission as well as provide protection against new virus variants. We intend to submit an IND application near the end of 2023 or in early 2024 and we are continuing to work closely with government agencies to obtain funding for the costs associated with such activities.development of these inhaled mucosal vaccines.
Intramuscular COVID-19 Vaccine
In April 2023, the FDA announced the cancellation of EUAs issued to monovalent vaccines and the simplification of the vaccination schedule of bivalent vaccines that have EUAs in the United States. Accordingly, we have determined it is not commercially viable to continue the development of COVAXIN in our North American territory and consequently, will focus our efforts on the development of the inhaled mucosal bivalent vaccines.
Novel Biologic Therapy for Retinal Diseases
Our pipeline also includes our biologic product candidate,We are developing OCU200, which is a novel fusion protein containing parts of human transferrin and tumstatin. OCU200 is designed to treat severely sight-threatening diseases such as DME, DR, and wet AMD. We are currently establishing a current GMP process for the production of clinical trial materials and executing pre-IND studies consistent with FDA discussions to support a Phase 1/2a clinical trial. We have completed the technology transfer of manufacturing processes to our CDMO that will manufactureand have produced trial materials to initiate a Phase 1 trial. We submitted an IND application to the FDA in February 2023 to initiate a Phase 1 trial targeting DME. In April 2023, the FDA placed our IND application for the Phase 1 trial on clinical hold as part of the FDA's request for additional information related to CMC prior to initiating the Phase 1 trial. We intend to work with the FDA and provide requested information as promptly as possible, and do not currently expect the clinical hold to impact the anticipated overall timing of the OCU200 clinical supplies.
Impact of COVID-19 on our Business
The COVID-19 pandemic remains ongoing and we continue to closely monitor the situation. Impacts from the COVID-19 pandemic still remain uncertain and subject to change and, as such, we cannot predict the specific duration or impact that the COVID-19 pandemic may have on our operations going forward, including our preclinical activities, current and future clinical trials, and commercialization activities. The extent to which the COVID-19 pandemic may impact our operations is dependent on future developments, including but not limited to: (i) the duration of the spread of the SARS-CoV-2 virus, including the spread of current and future variants, (ii) the future actions taken by governmental authorities and regulators with respect to the COVID-19 pandemic, and (iii) the impact on our partners, collaborators, and suppliers. We will continue to monitor the situation closely as these effects could have a material impact on our operations.development program.
Results of Operations
Comparison of the Three Months Ended March 31, 20222023 and 20212022
We have no products approved for commercial sale and have not generated significant revenue to date. We have never been profitable and have incurred net losses in each year since inception. The following table summarizes the results of our operations for the three months ended March 31, 20222023 and 20212022 (in thousands):
| | | Three months ended March 31, | | | Three months ended March 31, | |
| | 2022 | | 2021 | | Change | | 2023 | | 2022 | | Change |
| Operating expenses | Operating expenses | | | | | | Operating expenses | | | | | |
| Research and development | Research and development | $ | 7,915 | | | $ | 2,872 | | | $ | 5,043 | | Research and development | $ | 9,558 | | | $ | 7,915 | | | $ | 1,643 | |
| General and administrative | General and administrative | 10,119 | | | 4,185 | | | 5,934 | | General and administrative | 8,193 | | | 10,119 | | | (1,926) | |
| Total operating expenses | Total operating expenses | 18,034 | | | 7,057 | | | 10,977 | | Total operating expenses | 17,751 | | | 18,034 | | | (283) | |
| Loss from operations | Loss from operations | (18,034) | | | (7,057) | | | (10,977) | | Loss from operations | (17,751) | | | (18,034) | | | 283 | |
| Other income (expense), net | Other income (expense), net | 15 | | | (20) | | | 35 | | Other income (expense), net | 1,253 | | | 15 | | | 1,238 | |
| Net loss | Net loss | $ | (18,019) | | | $ | (7,077) | | | $ | (10,942) | | Net loss | $ | (16,498) | | | $ | (18,019) | | | $ | 1,521 | |
Research and development expense
Research and development expense increased by $5.0$1.6 million for the three months ended March 31, 20222023 compared to the three months ended March 31, 2021.2022. The increase was primarily due to increases of $1.9$1.0 million in employee-related expenses which excludes stock-basedexcluding stock based compensation expense, $1.0$0.9 million in technical service costs related to the development of our modifier gene therapy platform, $0.5 million related to our novel inhaled mucosal vaccine platform, which is driven by preclinical activities, and $0.3 million related to COVAXIN, development, regulatory,which is driven by an increase in clinical expenses and manufacturing activities, $0.8is offset by a decrease in costs related to CMC activities. These increases were partially offset by a decrease of $1.2 million in stock-based compensation expense, and $0.8 million inexpenses related to OCU200, which is driven by preclinical activities.
General and administrative expense
General and administrative expense increaseddecreased by $5.9$1.9 million for the three months ended March 31, 20222023 compared to the three months ended March 31, 2021.2022. The decrease was primarily due to decreases of $1.5 million in professional services and $0.8 million in pre-commercialization activities. These decreases were partially offset by an increase of $0.4 million in employee-related expenses.
Other income (expense), net
Other income (expense), net increased by $1.2 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The increase was primarily due to increases of $2.5$0.7 million in professional fees, including legalinterest earned on our cash, cash equivalents, and investments balance.
and consulting fees, $1.6 million in stock-based compensation expense, $0.8 million in COVAXIN pre-commercial activities, and $1.2 million in employee-related expenses, which excludes stock-based compensation expense. These increases were partially offset by a $1.2 million decrease in costs associated with obtaining an increase in the authorized shares of our common stock including proxy solicitation fees during 2021.
Liquidity and Capital Resources
As of March 31, 2022,2023, we had $129.9$76.7 million in cash, cash equivalents, and restricted cash.investments. We have not generated significant revenue from our product candidates to date, and have primarily funded our operations to date through the sale of common stock, warrants to purchase common stock, the issuance of convertible notes and debt, and grant proceeds. Since our inception and through March 31, 2022,2023, we have raised an aggregate of $269.6$285.5 million to fund our operations, of which $256.9$272.3 million was from gross proceeds from the sale of our common stock and warrants, $10.3 million was from the issuance of convertible notes, $2.2$2.7 million was from the issuance of debt, and $0.2 million was from grant proceeds.
In February 2022,During the three months ended March 31, 2023, we issued and sold 16.04.5 million shares of our common stock at a public offering price of $3.13 per share pursuant to the underwritten offering. WeSales Agreement and received net proceeds of $49.8$5.6 million after deducting underwriting discounts and commissions and offering expenses.equity issuance costs of $0.2 million.
Since our inception, we have devoted substantial resources to the research development, and commercialization of our product candidatesdevelopment and have incurred significant net losses and may continue to incur net losses in the future. We incurred net losses of approximately $18.0$16.5 million and $7.1$18.0 million for the three months ended March 31, 20222023 and 2021,2022, respectively. As of March 31, 2022,2023, we had an accumulated deficit of $149.7$229.5 million. Additionally,In addition, we had accounts payable and accrued expenses and other current liabilities of $7.4$13.9 million and indebtedness of $1.7 million as of March 31, 2022.$2.3 million.
The following table shows a summary of our cash flows for the three months ended March 31, 20222023 and 20212022 (in thousands):
| | | Three months ended March 31, | | Three months ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| Net cash used in operating activities | Net cash used in operating activities | $ | (15,066) | | | $ | (5,283) | | Net cash used in operating activities | $ | (18,240) | | | $ | (15,066) | |
| Net cash used in investing activities | (223) | | | (261) | | |
| Net cash provided by (used in) investing activities | | Net cash provided by (used in) investing activities | 3,441 | | | (223) | |
| Net cash provided by financing activities | Net cash provided by financing activities | 50,102 | | | 26,297 | | Net cash provided by financing activities | 5,496 | | | 50,102 | |
| Net increase in cash, cash equivalents, and restricted cash | $ | 34,813 | | | $ | 20,753 | | |
| Effect of changes in exchange rate on cash, cash equivalents, and restricted cash | | Effect of changes in exchange rate on cash, cash equivalents, and restricted cash | (1) | | | — | |
| Net (decrease) increase in cash, cash equivalents, and restricted cash | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $ | (9,304) | | | $ | 34,813 | |
Operating activities
Cash used in operating activities was $18.2 million for the three months ended March 31, 2023 compared to $15.1 million for the three months ended March 31, 2022 compared to $5.3 million for the three months ended March 31, 2021.2022. The increase in cash used in operating activities was primarily driven by an increaseincreases in our research andoperating expenses related to the continued development expenses forof our product candidates including expenses relatedand employee-related expenses. These increases were partially offset by decreases in professional services and pre-commercialization activities.
Investing activities
Cash provided by investing activities was $3.4 million for the three months ended March 31, 2023 compared to COVAXIN development, regulatory, and manufacturingcash used in investing activities anof $0.2 million for the three months ended March 31, 2022. The increase in professional fees, including legal and consulting fees,cash provided by investing activities was primarily driven by gross proceeds of $9.0 million from the maturities of marketable securities, classified as available-for-sale, during the three months ended March 31, 2023. This increase was partially offset by purchases of $3.9 million of marketable securities, classified as available-for-sale, during the three months ended March 31, 2023 and an increase of $1.4 million in employee-related expenses as we expand our headcountpurchases of property and continue to provide competitive compensation plans to support our development, commercialization, and business efforts.equipment during the three months ended March 31, 2023.
Financing activities
Cash provided by financing activities was $5.5 million for the three months ended March 31, 2023 compared to $50.1 million for the three months ended March 31, 2022 compared to $26.3 million for2022. During the three months ended March 31, 2021.2023, cash provided by financing activities primarily consisted of gross proceeds of $5.7 million received pursuant to the Sales Agreement, partially offset by payments of equity issuance costs of $0.2 million. During the three months ended March 31, 2022, cash provided by financing activities primarily consisted of gross proceeds of $50.0 million received from the underwritten offering that closed in February 2022. During the three months ended March 31, 2021, cash provided by financing activities primarily consisted of gross proceeds of $22.9 million received from the February 2021 Registered Direct Offering, gross proceeds of $5.0 million received under an at-the-market offering, and $0.2 million in proceeds from the exercise of stock options, partially offset by payments of equity issuance costs of $1.8 million.
Contractual Obligations
We have commitments under certain licensing and development agreements, lease obligations, debt agreements, and consulting agreements, and supply commitments.agreements. There have been no material changes to our contractual obligations as reported in our 20212022 Annual Report.
Funding requirements
We expect to continue to incur significant expenses in connection with our ongoing activities, particularly as we continue research and development, including preclinical and clinical development of our product candidates, contractcandidates; prepare to manufacture our product candidates,candidates; prepare for the potential commercialization of our product candidates,candidates; add operational, financial, and information systems to execute our business plan,plan; maintain, expand, and protect our patent portfolio,portfolio; explore strategic licensing, acquisition, and collaboration opportunities to expand our product candidate pipeline to support our future growth,growth; expand headcount to support our development, commercialization, and business efforts,efforts; and operate as a public company.
Factors impacting our future funding requirements include, without limitation, the following:
•the initiation, progress, timing, costs, and results of clinical trials for our product candidates;
•the outcome, timing, and cost of the regulatory approval process for our product candidates; including with respect to COVAXIN in the Ocugen Covaxin Territory;
•the costs of manufacturing and commercialization, including with respect to COVAXIN;commercialization;
•the costs related to doing business internationally with respect to ourthe development and commercialization of COVAXIN in Canada and Mexico;our product candidates;
•the cost of filing, prosecuting, defending, and enforcing our patent claims and other intellectual property rights;
•the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us;
•the costs of expanding infrastructure to support our development, commercialization, and business efforts;efforts, including the costs related to the development of a laboratory and manufacturing facility;
•the expenses needed to attractcosts involved in recruiting and retainretaining skilled personnel;
•the extent to which we in-license or acquire other products, product candidates, or technologies; and
•the impact of the COVID-19 pandemic onextent to which we out-license our activities;product candidates; and
•the impact of geopolitical turmoil, including the ongoing invasion of Ukraine by Russia or increased trade restrictions between the United States, Russia, China and other countries,macroeconomic conditions, social unrest, political instability, terrorism, or other acts of war.
As of March 31, 2022,2023, we had cash, cash equivalents, and restricted cashinvestments of approximately $129.9$76.7 million. This amount will not meet our capital requirements over the next 12 months. We believe that our cash, cash equivalents, and investments will enable us to fund our operations into the first quarter of 2024. Due to the inherent uncertainty involved in making estimates and the risks associated with the research, development, and commercialization of biotechnology products, we may have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. We will need to raise significant additional capital in order to fund our future operations. Our operating and capital requirements may change as a result of many factors currently unknown to us.operations until we recognize significant revenue from product sales. Our management is currently evaluating different strategies to obtain the funding required funding for our future operations. These strategies may include, but are not limited to: public and private placements of equity and/or debt, payments from potential strategic research and development arrangements, sales of assets, government grants, licensing and/or collaboration arrangements with pharmaceutical companies or other institutions, or other funding from the government, particularly for the development of our novel inhaled mucosal vaccine platform, or funding from other third parties. Our ability to secure funding is subject to numerous risks and uncertainties, including, but not limited to the impact of the COVID-19 pandemic, and geopolitical turmoil, related toincluding the ongoing invasion of Ukraine by Russia, and the impact of inflation and as a result, there can be no assurance that these funding efforts will be successful. If we cannot obtain the necessary funding, we will need to delay, scale back, or eliminate some or all of our research and development programs and commercialization efforts;efforts; consider other various strategic alternatives, including a merger or sale; or cease operations. If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition, and results of operations could be materially adversely affected.
As a result of these factors, together with the anticipated increase in spending that will be necessary to continue to research, develop, and commercialize our product candidates, there is substantial doubt about our ability to continue as a going concern within one year after the date that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are issued.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements during the periods presented, and we do not currently have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Significant Judgments and Estimates
The preparation of financial statements in conformity with GAAP requires us to make judgments, estimates, and assumptions in the preparation of our condensed consolidated financial statements. Actual results could differ from those estimates. There have been no material changes to our critical accounting policies and estimates as reported in our 20212022 Annual Report.
Recently Adopted Accounting Pronouncements
For a discussion of recently adopted accounting pronouncements, see Note 2 in the notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Other Company Information
None.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
There have been no material changes to our quantitative and qualitative disclosures about market risk as previously disclosed in our 2021 Annual Report.Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We have carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of March 31, 2022.2023. Based upon thatthis evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and (b) such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.disclosures. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
For a discussion of legal proceedings, see Note 1213 in the notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors.
Except as set forth below, there have been no material changes in our risk factors as previously disclosed in our 20212022 Annual Report. The risks described in our 2021 Annual Report and this Quarterly Report on Form 10-Q are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, or future results.
Our Phase 2/3 immuno-bridgingfailure to meet the continued listing requirements of The Nasdaq Capital Market ("Nasdaq") could result in a delisting of our common stock.
We must continue to satisfy Nasdaq continued listing requirements, including, among other things, certain corporate governance requirements and broadening clinical triala minimum closing bid price requirement of $1.00 per share. If a company fails for COVAXIN30 consecutive business days to meet the $1.00 minimum closing bid price requirement, Nasdaq will send a deficiency notice to the company, advising that it has been placedafforded a "compliance period" of 180 calendar days to regain compliance with the applicable requirements.
On May 1, 2023, we received a deficiency letter from Nasdaq notifying us that, for the last 30 consecutive business days, the closing bid price for our common stock was below the minimum $1.00 per share required for continued listing on clinical holdNasdaq pursuant to the minimum closing bid price requirement. The Nasdaq deficiency letter had no immediate effect on the listing of our common stock. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been given 180 calendar days, or until October 30, 2023, to regain compliance with the minimum closing bid price requirement by causing our stock to close above $1.00 for a minimum of 10 consecutive trading days. If we do not regain compliance with the FDA. If the clinical hold is not lifted in a timely manner, or at all, or if we experience additional delays or challenges in obtaining regulatory approval for COVAXIN in the United States,minimum closing bid price requirement by October 30, 2023, we may incur additional costs or experience delays in completing, or ultimately may be unableafforded a second 180 calendar day period to complete,regain compliance. To qualify, we would be required to meet the regulatory approvalcontinued listing requirement for market value of publicly held shares and commercialization processall other initial listing standards for COVAXIN inNasdaq, except for the United States.minimum bid price requirement. In addition, we would be required to notify Nasdaq of our intent to cure the deficiency during the second compliance period.
We cannot predict the speed at whichcan provide no assurance that we will be able to obtain regulatory marketing approval for adult use for COVAXIN in the United States, if at all. Our development efforts with respect to the U.S. market are ongoing and uncertain. We submitted an IND application to initiate a Phase 2/3 immuno-bridging and broadening clinical trial for COVAXIN to support a BLA submission, which was placed on clinical hold in November 2021. The clinical hold on our IND application was lifted in February 2022, which allowed us to initiate our Phase 2/3 immuno-bridging and broadening clinical trial for COVAXIN, OCU-002. In April 2022, the WHO announced the suspension of the supply of COVAXIN through United Nations procurement agencies, and recommended that countries using the vaccine take action as appropriate. The WHO announced that the suspension is in response to the outcome of a WHO inspection in March 2022, and the need to conduct process and facility upgrades to address recently identified deficiencies in GMP. Based on this announcement, we voluntarily implemented a temporary pause in commencing dosing of participants in the OCU-002 clinical trial while we evaluate the statements made by the WHO. Following notification to the FDA of our decision to implement the temporary pause, the FDA placed the OCU-002 clinical trial on clinical hold.
We will not be permitted to commence dosing in the OCU-002 clinical trial, or our planned safety clinical trial or other clinical trials that may be necessary or required to support our planned BLA submission, unless we are able to adequately address the FDA’s concerns which resulted in the clinical hold, which we may not be able to do. Although we intend to workregain compliance with the FDA to promptly resolve its questions, it is uncertain when,minimum closing bid price requirement by October 30, 2023, or if,by any date, or that we will be able to remain in compliance with other Nasdaq continued listing requirements. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our common stock, impairing your ability to sell or purchase shares of our common stock when you wish to do so. Ifso, and could result in a corresponding material reduction in the clinical hold is lifted, there can be no assurances that the resultsprice of any clinical trials we may conduct will resemble the results obtained by Bharat Biotech in their Phase 3 adult clinical trial in India.our common stock. In addition, it is unclear whetherdelisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and to what extentmay result in the FDA will allowpotential loss of confidence by investors and employees. In the event of a delisting, we can provide no assurance that any action taken by us to rely on clinical trial data generated by Bharat Biotech in India. Any resultsrestore compliance with listing requirements would allow the common stock to become listed again, stabilize the market price or improve the liquidity of the common stock, prevent the common stock from further clinical testing by Bharat Biotechdropping below the Nasdaq minimum bid price requirement, or by us may raise new questions and require us to redesign planned clinical trials, including revising proposed endpoints or adding new clinical trial sites or cohorts of subjects. Also, the FDA’s analysis of any clinical data may differ from our interpretation and the FDA may require that we conduct additional analysis or trials. If weincur additional costs or experience delays in completing, or ultimately are unable to complete, the regulatory approval and commercialization of COVAXIN in the United States, our business, financial condition, and results of operations would be materially adversely affected.
We have obtained the rights to develop, manufacture, and commercialize COVAXIN in Mexico. COVAXIN was approved for emergency use in Mexico for adults ages 18 years and older, and COVAXIN is currently under review by COFEPRIS for emergency use for pediatrics in ages two to 18 years. However, we have no experience in obtaining marketing approval for, or commercializing products in Mexico. Our results of operations may be negatively impacted if we are unable to successfully commercialize COVAXIN in Mexico.
In April 2022, we entered into a second amendment to the Covaxin Agreement that provides usprevent future non-compliance with the rights to develop, manufacture, and commercialize COVAXIN in Mexico. COVAXIN is under review by COFEPRIS for emergency use for pediatrics in ages two to 18 years. COFEPRIS previously approved emergency use for COVAXIN for use in adults ages 18 years and older, which remains active. We are actively preparing for the commercialization of COVAXIN in Mexico for use in the adult population.
We do not have experience in obtaining regulatory approval in Mexico nor do we have any prior experience in commercializing products in Mexico. We, or any collaborators, may not obtain emergency use approval for COVAXIN for pediatrics from COFEPRIS on a timely basis, if at all. Even if we are able to obtain emergency use approval for COVAXIN for use in the pediatric population, we may ultimately be required to obtain full regulatory approval to continue such use once the emergency use expires. Likewise, we may ultimately need to obtain full regulatory approval for COVAXIN for use in the adult population once the currently active emergency use approval expires. Generally, if we are required to seek full regulatory approval for COVAXIN in Mexico, our business may be subject to the same regulatory and economic risks as with product approval in the United States or Canada. To the extent we are not able to successfully commercialize COVAXIN in Mexico, our results of operations may suffer.Nasdaq's listing requirements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the period covered by this Quarterly Report on Form 10-Q, there were no sales by us of unregistered securities or purchases of equity securities by us that were not previously reported by us in a Current Report on Form 8-K.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.applicable.
Item 5. Other Information.
Not Applicable.None.
Item 6. Exhibits.
The exhibits listed below are filed or incorporated by reference in this Quarterly Report on Form 10-Q:
| | | | | | | | |
| Exhibit | | Description |
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4.110.1# | | |
| | |
10.1*# | | |
| | |
| 10.2*+ | | |
| | |
10.3*+ | | |
| | |
| 31.1* | | |
| | |
| 31.2* | | |
| | |
| 32.1** | | |
| | |
| 101.INS* | | Inline XBRL Instance Document |
| | |
| 101.SCH* | | Inline XBRL Taxonomy Extension Schema Document |
| | |
| 101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| | |
| 101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| | |
| 101.LAB* | | Inline XBRL Taxonomy Extension Label Linkbase Document |
| | |
| 101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
| 104 | | The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL |
_______________________
* Filed herewith.
** Furnished herewith.
# Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of RegulationRegulations S-K.
+ Indicates a management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | |
| Ocugen, Inc. |
| |
Dated: May 6, 20225, 2023 | /s/ Shankar Musunuri |
| Shankar Musunuri, Ph.D., MBA
Chairman, Chief Executive Officer, and Chairman
& Co-Founder
(Principal Executive Officer) |
| |
Dated: May 6, 20225, 2023 | /s/ Jessica CrespoQuan Vu |
| Jessica Crespo, CPAQuan Vu
Chief AccountingFinancial Officer and Senior Vice President, Finance/ Chief Business Officer (Principal Financial Officer) |
