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, 20212022
ORor | | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 001-36751
OCUGEN, INC.
(Exact Namename of Registrantregistrant as Specifiedspecified in its Charter)charter)
___________________________________________________________ | | | | | |
| Delaware | 04-3522315 |
(State or other jurisdiction of
incorporation or organization)
| (I.R.S. Employer
Identification No.)
|
263 Great Valley Parkway
Malvern, Pennsylvania 19355
(Address of principal executive offices, including zip code)
(484) 328-4701
(Registrant’sRegistrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the ActAct: | | | | | | | | | | | | | | |
| 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"large accelerated filer,” “accelerated" "accelerated filer,” “smaller " "smaller
reporting company,”" and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act | | | | | | | | | | | |
| Large accelerated filer | ☐☒ | Accelerated filer | ☐ |
| Non-accelerated Filer | ☒☐ | 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 7(a)(2)(B)13(a) of the SecuritiesExchange 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 30, 2021,29, 2022, there were 198,228,533215,662,171 outstanding shares of the registrant’sregistrant's common stock, $0.01 par value per share.
OCUGEN, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20212022
Unless the context otherwise requires, references to the “Company,” “we,” “our,”"Company," "we," "our," or “us”"us" in this report refer to Ocugen, Inc. and its subsidiaries, and references to “OpCo”"OpCo" refer to Ocugen OpCo, Inc., the Company’sCompany'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,”"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 contained in theour Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”("SEC") on March 19, 2021February 28, 2022 (the "2020"2021 Annual Report") include, among other things, statements about:
•our estimates regarding expenses, future revenue,revenues, capital requirements, andas well as the timing and availability of and the need for additional financing;
•our ability to obtain sufficient additional capitalfinancing to continue to advance our product candidates and our preclinical programs;candidates;
•our activities with respect to BBV152, known as COVAXIN outside the United States, our vaccine candidate for the prevention of COVID-19 caused by SARS-CoV-2 in humans, in collaboration with Bharat Biotech International Limited (“("Bharat Biotech”Biotech"), including our plans and expectations regarding clinical development, manufacturing, pricing, regulatory review and compliance, reliance on third parties, and commercialization, if authorized or approved;commercialization;
•our plans regarding the submission of a Biologics License Application ("BLA") to the U.S. Food and Drug Administration ("FDA") for adults ages 18 years and older, including the need for a Phase 2/3 immuno-bridging and broadening clinical trial and a safety clinical trial to support a BLA submission for COVAXIN;
•the extentability of our collaboration partner, Bharat Biotech, to which health epidemicssuccessfully respond to the deficiencies identified in an inspection conducted by the World Health Organization ("WHO");
•our ability to successfully comply with the FDA's requirements to lift the clinical hold placed on our Phase 2/3 immuno-bridging and other outbreaksbroadening clinical trial for COVAXIN, as a result of communicable diseases,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 COVID-19 pandemic, could disruptages of 18 years and our businessability 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 COVAXIN 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 operations;engage such manufacturer on commercially acceptable terms;
•anticipated market demand for COVAXIN for the adult and pediatric populations in the United States, Canada, and Mexico;
•our ability to successfully continue and complete the Phase 1/2 clinical trial for OCU400 pursuant to our IND application accepted by the FDA;
•the uncertainties associated with the clinical development and regulatory authorization or approval of our product candidates, including potential delays in the initiation, commencement, enrollment, and completion of clinical trials;
•our ability to realize any value from 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 market and the risk that products will not achieve broad market acceptance;
•uncertainties in obtaining successful clinical results for product candidates and unexpected costs that may result therefrom;
•our ability to maintain our collaboration with Bharat Biotech and to establish additional collaborations and/or partnerships;
•our ability to comply with regulatory schemes applicable to our business and other regulatory developments in the United States, Canada, Mexico, and other foreign countries; including the extent to which developments with respect to the COVID-19 pandemic will affect the regulatory pathway available for COVID-19 vaccines in the United States, Canada, Mexico, or other jurisdictions;
•the performance of third-parties upon which we depend, including third-party contract researchdevelopment and manufacturing organizations, and third-party suppliers, manufacturers, group purchasing organizations, distributors, and logistics providers;
•the pricing and reimbursement of our product candidates, if authorized or approved;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;partners and our ability to establish additional collaborations and partnerships;
•our ability to recruit or retain key scientific, technical, commercial, and management personnel orand to retain our executive officers;
•our ability to comply with stringent U.S., Canadian, Mexican, and other foreign government regulation inwith respect to the manufacture of pharmaceutical products, including current Good Manufacturing Practice compliance, 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, 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”"Risk Factors" contained in this Quarterly Report on Form 10-Q, the 20202021 Annual Report, and in any other documents we file 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 20202021 Annual Report, particularly under “Riskthe sections 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 that 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. WeExcept as required by law, we do not assume any obligation to update any forward-looking statements.
In addition, statements that “we believe”"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 TM™ 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 owner will not assert its 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.
OCUGEN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| Assets | Assets | | | | Assets | | | |
| Current assets | Current assets | | Current assets | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 44,792 | | | $ | 24,039 | | Cash and cash equivalents | $ | 129,771 | | | $ | 94,958 | |
| Advance for COVAXIN supply | 4,988 | | | 0 | | |
| Prepaid expenses and other current assets | Prepaid expenses and other current assets | 1,576 | | | 1,839 | | Prepaid expenses and other current assets | 8,256 | | | 7,688 | |
| | Total current assets | Total current assets | 51,356 | | | 25,878 | | Total current assets | 138,027 | | | 102,646 | |
| Property and equipment, net | Property and equipment, net | 762 | | | 633 | | Property and equipment, net | 1,921 | | | 1,164 | |
| Restricted cash | Restricted cash | 151 | | | 151 | | Restricted cash | 151 | | | 151 | |
| Other assets | Other assets | 1,578 | | | 714 | | Other assets | 1,628 | | | 1,800 | |
| Total assets | Total assets | $ | 53,847 | | | $ | 27,376 | | Total assets | $ | 141,727 | | | $ | 105,761 | |
| Liabilities and stockholders’ equity | | | | |
| Liabilities and stockholders' equity | | Liabilities and stockholders' equity | | | |
| Current liabilities | Current liabilities | | Current liabilities | |
| Accounts payable | Accounts payable | $ | 1,040 | | | $ | 395 | | Accounts payable | $ | 3,896 | | | $ | 2,312 | |
| Accrued expenses and other current liabilities | 2,703 | | | 2,941 | | |
| Short-term debt, net | 374 | | | 234 | | |
| Operating lease obligation | 164 | | | 44 | | |
| Accrued expenses | | Accrued expenses | 3,537 | | | 4,325 | |
| Operating lease obligations | | Operating lease obligations | 254 | | | 363 | |
| Total current liabilities | Total current liabilities | 4,281 | | | 3,614 | | Total current liabilities | 7,687 | | | 7,000 | |
| Non-current liabilities | Non-current liabilities | | Non-current liabilities | |
| Operating lease obligation, less current portion | 1,375 | | | 389 | | |
| Operating lease obligations, less current portion | | Operating lease obligations, less current portion | 1,180 | | | 1,231 | |
| Long term debt, net | Long term debt, net | 1,702 | | | 1,823 | | Long term debt, net | 1,731 | | | 1,712 | |
| | Total non-current liabilities | Total non-current liabilities | 3,077 | | | 2,212 | | Total non-current liabilities | 2,911 | | | 2,943 | |
| Total liabilities | Total liabilities | 7,358 | | | 5,826 | | Total liabilities | 10,598 | | | 9,943 | |
| Commitments and contingencies (Note 11) | 0 | | 0 | |
| Stockholders’ equity | | |
| Convertible preferred stock; $0.01 par value; 10,000,000 shares authorized at March 31, 2021 and December 31, 2020 | | |
| Series A; 7 issued and outstanding at March 31, 2021 and December 31, 2020 | 0 | | | 0 | | |
| Series B; 54,745 and 0 issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 1 | | | 0 | | |
| Common stock; $0.01 par value; 200,000,000 authorized; 188,277,852 and 184,133,384 shares issued at March 31, 2021 and December 31, 2020, respectively; 188,156,352 and 184,011,884 shares outstanding at March 31, 2021 and December 31, 2020, respectively | 1,883 | | | 1,841 | | |
| Treasury stock, at cost, 121,500 shares at March 31, 2021 and December 31, 2020 | (48) | | | (48) | | |
| Commitments and contingencies (Note 12) | | Commitments and contingencies (Note 12) | 0 | | 0 |
| Stockholders' equity | | Stockholders' equity | |
| Convertible preferred stock; $0.01 par value; 10,000,000 shares authorized at March 31, 2022 and December 31, 2021 | | 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 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 | | 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 | | 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 | | Treasury stock, at cost, 121,500 shares at March 31, 2022 and December 31, 2021 | (48) | | | (48) | |
| Additional paid-in capital | Additional paid-in capital | 125,032 | | | 93,059 | | Additional paid-in capital | 278,704 | | | 225,537 | |
| Accumulated deficit | Accumulated deficit | (80,379) | | | (73,302) | | Accumulated deficit | (149,686) | | | (131,667) | |
| Total stockholders’ equity | 46,489 | | | 21,550 | | |
| Total liabilities and stockholders’ equity | $ | 53,847 | | | $ | 27,376 | | |
| Total stockholders' equity | | Total stockholders' equity | 131,129 | | | 95,818 | |
| Total liabilities and stockholders' equity | | Total liabilities and stockholders' equity | $ | 141,727 | | | $ | 105,761 | |
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, | | |
| 2021 | | 2020 | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Operating expenses | | | | | | | |
| Research and development | $ | 2,872 | | | $ | 1,652 | | | | | |
| | | | | | | |
| General and administrative | 4,185 | | | 2,277 | | | | | |
| Total operating expenses | 7,057 | | | 3,929 | | | | | |
| Loss from operations | (7,057) | | | (3,929) | | | | | |
| Other income (expense) | | | | | | | |
| | | | | | | |
| Interest expense | (20) | | | (15) | | | | | |
| | | | | | | |
| Total other income (expense) | (20) | | | (15) | | | | | |
| Net loss and comprehensive loss | $ | (7,077) | | | $ | (3,944) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Shares used in calculating net loss per common share — basic and diluted | 186,298,122 | | | 52,627,228 | | | | | |
| Net loss per share of common stock — basic and diluted | $ | (0.04) | | | $ | (0.07) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
See accompanying notes to condensed consolidated financial statements.
OCUGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(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
Deficit | | Total |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | |
| Balance at December 31, 2020 | 7 | | | $ | 0 | | | 0 | | | $ | 0 | | | 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 | | | $ | 0 | | | 54,745 | | | $ | 1 | | | 188,277,852 | | | $ | 1,883 | | | $ | (48) | | | $ | 125,032 | | | | | $ | (80,379) | | | $ | 46,489 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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, 2019 | 7 | | | $ | 0 | | | 0 | | | $ | 0 | | | 52,746,728 | | | $ | 528 | | | $ | (48) | | | $ | 62,019 | | | | | $ | (51,480) | | | $ | 11,019 | |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 222 | | | | | — | | | 222 | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | (3,944) | | | (3,944) | |
| Balance at March 31, 2020 | 7 | | | $ | 0 | | | 0 | | | $ | 0 | | | 52,746,728 | | | $ | 528 | | | $ | (48) | | | $ | 62,241 | | | | | $ | (55,424) | | | $ | 7,297 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Three months ended March 31, |
| 2022 | | 2021 |
| Operating expenses | | | |
| Research and development | $ | 7,915 | | | $ | 2,872 | |
| General and administrative | 10,119 | | | 4,185 | |
| Total operating expenses | 18,034 | | | 7,057 | |
| Loss from operations | (18,034) | | | (7,057) | |
| Other income (expense), net | 15 | | | (20) | |
| Net loss and comprehensive loss | $ | (18,019) | | | $ | (7,077) | |
| | | |
| Shares used in calculating net loss per common share — basic and diluted | 205,693,498 | | | 186,298,122 |
| Net loss per share of common stock — basic and diluted | $ | (0.09) | | | $ | (0.04) | |
See accompanying notes to condensed consolidated financial statements.
OCUGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS' EQUITY
(in thousands)thousands, except share amounts)
(Unaudited)
| | | | | | | | | | | |
| Three months ended March 31, |
| 2021 | | 2020 |
| Cash flows from operating activities | | | |
| Net loss | $ | (7,077) | | | $ | (3,944) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | |
| Depreciation expense | 44 | | | 18 | |
| Non-cash interest expense | 20 | | | 15 | |
| Non-cash lease expense | 68 | | | 48 | |
| | | |
| Stock-based compensation expense | 833 | | | 222 | |
| | | |
| Changes in assets and liabilities: | | | |
| Prepaid expenses and other assets | 493 | | | 228 | |
| Accounts payable and accrued expenses | 405 | | | (1,225) | |
| Lease obligations | (69) | | | (48) | |
| Net cash used in operating activities | (5,283) | | | (4,686) | |
| Cash flows from investing activities | | | |
| Purchase of property and equipment | (261) | | | (53) | |
| Net cash used in investing activities | (261) | | | (53) | |
| Cash flows from financing activities | | | |
| Financing lease principal payments | (6) | | | (6) | |
| Proceeds from issuance of common stock | 28,125 | | | 0 | |
| Payment of equity issuance costs | (1,822) | | | 0 | |
| Proceeds from issuance of debt | 0 | | | 500 | |
| Payments of debt issuance costs | 0 | | | (6) | |
| Net cash provided by financing activities | 26,297 | | | 488 | |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 20,753 | | | (4,251) | |
| Cash, cash equivalents, and restricted cash at beginning of period | 24,190 | | | 7,595 | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 44,943 | | | $ | 3,344 | |
| Supplemental disclosure of non-cash transactions: | | | |
| Series B Convertible Preferred Stock issuance | $ | 4,988 | | | $ | 0 | |
| Equity issuance costs | $ | 108 | | | $ | 0 | |
| Purchase of property and equipment | $ | 44 | | | $ | 0 | |
| Right-of-use asset related to operating leases | $ | 926 | | | $ | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
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”("Ocugen" or the “Company”"Company"), is a biopharmaceuticalbiotechnology company focused on discovering, developing, and commercializing novel gene therapies, to cure blindness diseasesbiologicals, and developing a vaccine to save lives from COVID-19.vaccines that improve health and offer hope for people and global communities. The Company is locatedheadquartered in Malvern, Pennsylvania, and manages its business as 1 operating segment.
COVID-19 Vaccine Candidate
In February 2021, the Company entered into a Co-Development, Supply and Commercialization Agreement (the "Covaxin 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 humansthe 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"Ocugen Covaxin Territory”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 has beenwas granted approval for emergency use in India and millions have been dosed to date. The Phase 1 and Phase 2 clinical trials conducted in India reported strong Immunoglobulin Gan Emergency Use Listing ("IgG"EUL") responses against the spike protein, receptor-binding domain ("RBD"), and the nucleocapsid protein of the SARS-CoV-2 virus, along with strong cellular responses. Strong cellular responses are necessary for memory and long-term durability of vaccines. Both the Phase 1 and Phase 2 clinical trials were published in the Lancet. Bharat Biotech is currently conducting a Phase 3 clinical trial in India. Enrollment in the Phase 3 clinical trial is complete. In April 2021, COVAXIN demonstrated positive results in the second interim analysis of the Phase 3 clinical trial showing a vaccine efficacy in mild, moderate, and severe COVID-19 disease of 78%, efficacy against severe COVID-19 disease alone of 100%, and efficacy against asymptomatic COVID-19 infection of 70%. The 78% efficacy result represents a point estimate of vaccine efficacy with a 95% confidence interval of 61% to 88% against mild, moderate, and severe COVID-19 disease. In an in vitro study conducted by the Indian Council of Medical ResearchWorld Health Organization ("ICMR"WHO")-National Institute of Virology, COVAXIN demonstrated potential effectiveness against the Brazilian variant of SARS-CoV-2, B.1.1.28.2, which contains the E484K mutation found in New York. An additional in vitro study conducted by the ICMR-National Institute of Virology suggested that COVAXIN was effective against the U.K. variant, B.1.1.7, as well as the Indian double mutant variant, B.1.617. These studies suggest that COVAXIN vaccination may be effective against infection from multiple SARS-CoV-2 variants.November 2021.
The Company is currently evaluating the clinical and regulatory pathpursuing Biologics License Application ("BLA") approval for COVAXIN in the United States including obtaining Emergency Use Authorization ("EUA") frombased upon the recommendation of the U.S. Food and Drug Administration (the "FDA"("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 eventually, biologic license application (“BLA”) approvalbroadening 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,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 the Company's commercialization strategy, if authorized or approved. The Company has initiated discussions with the FDAadditional information regarding the development of COVAXIN and EUA. Consistent with the FDA guidance document on EUA for vaccines to prevent COVID-19, the company has submitted key information and data to date (including preclinical studies, chemistry, manufacturing, and controls ("CMC"),. The Company has responded to and clinical studies) as a “Master File”provided proposed resolutions for FDAthe 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 input prior to a planned EUA submission. older, which remains active.
The Company is currently waitingevaluating its commercialization strategy for additional data fromCOVAXIN 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, frompursuant to which Bharat Biotech will supply the ongoing Phase 3Company 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 an EUA submission. See Note 3 for additional information about the terms, rights,commercial manufacture and obligations under the Covaxin Agreement.supply of COVAXIN subsequent to a regulatory approval.
Modifier Gene Therapy Platform
The Company is developing a breakthrough modifier gene therapy platform to generate therapies designed to fulfill unmet medical needs in the area of retinal diseases, including inherited retinal diseases ("IRDs"), such as retinitis pigmentosa ("RP") and Leber congenital amaurosis ("LCA") and dry age-related macular degeneration ("AMD"). The Company's modifier gene therapy platform is based on nuclear hormone receptors (“NHRs”("NHRs"), which have the potential to restore homeostasis, the basic biological processes in the retina. Unlike single-gene replacement therapies, which only target 1 genetic mutation, the Company believes that itsThe modifier gene therapy platform, through its use of NHRs, represents a novel approach in that it mayhas the potential to address multiple retinal diseases caused by mutations in multiple genes with 1 product.product; and potentially 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 retinitis pigmentosa ("RP")RP and leber congenital amaurosis ("LCA").LCA. OCU400 has received 4 Orphan Drug
Designations ("ODDs") from the FDA for the treatment of certain disease genotypes: nuclear receptor subfamily 2 group E member 3 ("NR2E3"), centrosomal protein 290 ("CEP290"), rhodopsin ("RHO"), and phosphodiesterase 6B ("PDE6ß") mutation-associated inherited retinal degenerations. The Company is planning to initiate 2 Phase 1/2a clinical trials forAdditionally, OCU400 in the United States in the second half of 2021. OCU400 additionallyhas received Orphan Medicinal Product Designation ("OMPD") from the European Commission ("EC"), based on the recommendation of the European Medicines Agency ("EMA"), for RP and LCA in FebruaryLCA.
In November 2021, which the Company believes further supportssubmitted an IND application to the potential broad spectrum applicationFDA to initiate a Phase 1/2 clinical trial for OCU400 for the treatment of NR2E3 and RHO mutation associated RP, which was accepted by the FDA in December 2021. The Company has initiated the Phase 1/2 clinical trial, a multicenter, open-label, dose ranging study to assess the safety of unilateral subretinal administration of OCU400 to treat many IRDs.in subjects with 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 currentlyadditionally evaluating options to commence OCU400 clinical trials in Europe in 2022. internationally.
The Company's second modifier gene therapy candidate, OCU410, is being developed to utilize the nuclear receptor genes RAR-related orphan receptor A ("RORA") for the treatment of dry AMD. This candidate is currently in preclinical development. The Company is planningcurrently executing pre-IND studies consistent with FDA discussions to initiatesupport a Phase 1/2a2 clinical trialtrial. The Company has engaged CanSino Biologics, Inc. ("CanSinoBIO") to manufacture clinical supplies and be responsible for OCU410 in 2022.the CMC development for OCU400 and OCU410. CanSinoBIO will be responsible for the costs associated with such activities.
Novel Biologic Therapy for Retinal Diseases
The Company isCompany's pipeline also conducting preclinical development for itsincludes a biologic product candidate, OCU200. OCU200, is a novel fusion protein designed to treat severely sight-threatening diseases such as diabetic macular edema ("DME"), diabetic retinopathy ("DR"), and wet AMD. The Company hadis currently establishing a pre-Investigational New Drug ("IND") meetingcurrent GMP process for the production of clinical trial materials and executing pre-IND studies consistent with the FDA in November 2020 and received guidance on IND-enabling preclinical studiesdiscussions to support the Phase 1/2a study. The Company expects to initiate IND-enabling preclinical studies for OCU200 in 2021 and plans to initiate a Phase 1/2a clinical trialtrial. The Company has completed the technology transfer of manufacturing processes to its contract development and manufacturing organization ("CDMO") that will manufacture OCU200 clinical supplies.
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, debt, and grant proceeds. The Company incurred net losses of approximately $18.0 million and $7.1 million for OCU200the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, the Company had an accumulated deficit of $149.7 million and cash, cash equivalents, and restricted cash totaling $129.9 million.
The Company is subject to risks, expenses, and uncertainties frequently encountered by companies in 2022.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 financing in the future 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 capital 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 or other third parties. Such financing and funding may not be available at all, or on terms that are favorable to the Company. While 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 condensed consolidated financial statements included herein have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”("GAAP") and under the rules and regulations of the United States Securities and Exchange Commission (“SEC”("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’sCompany'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’sSEC'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, 2020,2021, included in the Company's Annual Report on Form 10-K filed with the SEC on March 19, 2021February 28, 2022 (the "2020"2021 Annual Report").
The condensed consolidated financial statements include the accounts of Ocugen Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform with current period presentation.
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 primarily 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.
Collaboration ArrangementsCash, Cash Equivalents, and Restricted Cash
The Company assessesconsiders 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 and U.S. government agency obligations. The Company's restricted cash balance consists of cash held to collateralize a corporate credit card account.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash in the condensed consolidated balance sheets to the total amount shown in the condensed consolidated statements of cash flows (in thousands):
| | | | | | | | | | | |
| As of March 31, |
| 2022 | | 2021 |
| Cash and cash equivalents | $ | 129,771 | | | $ | 44,792 | |
| Restricted cash | 151 | | | 151 | |
| Total cash, cash equivalents, and restricted cash | $ | 129,922 | | | $ | 44,943 | |
Leases
The Company determines if an arrangement is a lease at inception. This determination generally depends on whether collaborationthe 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.
Operating leases are subject toincluded 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”("ASC") Topic 808,842, Collaborative ArrangementsLeases (“("ASC 808”842"), based on whether they involve joint operating activities and whether both parties have active participation requires a lessee to discount its unpaid lease payments using the interest rate implicit in the arrangement and are exposed to significant risks and rewards. To the extentlease or, if that the arrangement falls within the scope of ASC 808, the Company assesses whether the payments between the Company and the collaboration partner are subject to other accounting literature. If payments from the collaboration partner represent consideration from a customer, the Company accounts for those payments within the scope of FASB ASC Topic 606, Revenue from Contracts with Customers. However, if the Company concludes thatrate cannot be readily determined, its collaboration partner isincremental borrowing rate. The implicit interest rate was not a customer, the Company will record royalty payments received as collaboration revenuereadily determinable in the period in whichCompany’s current operating leases. As such, the underlying sale occurs and record expenses and expense reimbursements as either research and
development expense or general and administrative expense, or a reduction thereof,incremental borrowing rate was used based on the underlying natureinformation 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 expenselease 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 expense reimbursement.an option to extend (or not to terminate) the lease controlled by the lessor.
Exit and Disposal Activities
The Company records liabilities for one-time termination benefitsLease payments included in accordance with FASB ASC Topic 420, Exit and Disposal Cost Obligations ("ASC 420"). In accordance with ASC 420, an arrangement for one-time termination benefits exists at the date the planmeasurement of the termination meetslease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts probable to be payable under the following criteria: (i) management commitsexercise of an option to a plan of termination, (ii)purchase the plan identifiesunderlying asset if reasonably certain.
Variable payments not dependent on an index or rate associated with the impacted employees and expected completion date, (iii) the plan identifies the terms of the benefits arrangement, (iv) it is unlikely significant changes to the plan will be made or the plan will be withdrawn, and (v) the plan has been communicated to employees. Costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits, are recognized ratably over the future service period.
The Company records liabilities for employee termination benefits covered by ongoing benefit arrangements in accordance with FASB ASC Topic 712, Compensation — Nonretirement Postemployment Benefits ("ASC 712"). In accordance with ASC 712, costs for termination benefits under ongoing benefits arrangementsCompany's leases are recognized when management has committed to a planthe event, activity, or circumstance is probable. Variable payments include the Company's proportionate share of terminationcertain utilities and other operating expenses and are presented as operating expenses in the costs are probable and estimable.
Severance-related charges, once incurred, are recognized as either research and development expense or general and administrative expense within theCompany's condensed consolidated statements of operations and comprehensive loss depending onin the job function of the employee.same line item as expense arising from fixed payments.
Fair Value Measurements
The companyCompany follows the provisions of the FASB ASC Topic 820, Fair Value Measurements (“("ASC 820”820"), which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value, and expands disclosure of fair measurements.
The carrying value of certain financial instruments, including cash and cash equivalents, accounts payable, and accrued expenses approximates their fair values due to the short-term nature of these instruments.
ASC 820 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)
As of March 31, 2021, the Company believes the fair values using Level 2 inputs of the PPP Note and the borrowings under the EB-5 Loan Agreement (both as defined in Note 7) approximate their carrying values. See Note 7 for additional information.
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 and cash equivalents 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 and U.S. government agency obligations. The Company’s restricted cash balance consists of cash held to collateralize a corporate credit card account.
The following table provides a reconciliationcarrying value of certain financial instruments, including cash and cash equivalents, accounts payable, and restricted cash in the condensed consolidated balance sheetsaccrued expenses approximates their fair values due to the total amount shown inshort-term nature of these instruments. As of March 31, 2022, the condensed consolidated statements of cash flows (in thousands):
| | | | | | | | | | | |
| As of March 31, |
| 2021 | | 2020 |
| Cash and cash equivalents | $ | 44,792 | | | $ | 3,193 | |
| Restricted cash | 151 | | | 151 | |
| Total cash, cash equivalents, and restricted cash | $ | 44,943 | | | $ | 3,344 | |
Property and Equipment, Net
Property and equipment is recorded at cost. Significant additions or improvements are capitalized, and expenditures for repairs and maintenance are charged to expense as incurred. Gains and losses on disposal of assets are included inCompany believes the condensed consolidated statements of operations and comprehensive loss. Depreciation is calculatedfair value using the straight-line method and is recognized over the expected useful lifeLevel 2 inputs of the underlying asset. The Company's property and equipment includes office equipment, lab equipment, leasehold improvements, and a right-of-use asset under a financing lease. The Company's office equipment includes computers and other office technology equipment with a useful life of five years as well as furniture and fixtures with a useful life of seven years. The Company's lab equipment has a useful life of five years. Leasehold improvements are amortized over the shorter of their useful lives or the remaining lease term. If a leasehold improvement transfers ownership to the Company at the end of the lease term, the leasehold improvement is amortized over its useful life. The right-of-use assetborrowings under the Company's financing lease is amortized over five years, which represents the estimated useful life of the underlying leased equipment.EB-5 Loan Agreement (as defined in Note 7) approximate their carrying value. See Note 7 for additional information.
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 current and historical 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 on 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 primarily leases real estate classified as operating leases. 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 rate is not readily determinable in the Company’s operating leases therefore the incremental borrowing rate is used based on the information available at the commencement date in determining the present value of lease payments.
The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company 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 lease payments not dependent on a rate or index associated with the Company’s leases are recognized when the event, activity, or circumstance is probable. Variable lease 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 lease payments.
Stock-based compensationStock-Based Compensation
The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation — Stock Compensation (“("ASC 718”718"). The Company has issued stock-based compensation awards consisting ofincluding stock options and restricted stock units ("RSUs")., and also accounts 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 RSUs is determined by the Company’s market price of a share of the Company's common stock aton the grant date. The Company recognizes forfeitures as they occur.
The Company’s stock-based awards are subject to service-based vesting conditions. Compensation expense 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 and have a contractual term of 10 years. Compensation expense for stock-based compensation awards with performance-based vesting conditions is only recognized when the performance-based vesting condition is deemed probable to occur. Shares issued upon stock option exercise and RSU vesting are newly issuednewly-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’sCompany's Black-Scholes option-pricing model represent management’smanagement's best estimates and involve a number of variables, uncertainties, assumptions, and the application of management’smanagement's judgment, as they are inherently subjective. If any assumptions change, the Company’sCompany's stock-based compensation expense could be materially different in the future.
Recently Adopted Accounting Standards
In December 2019,November 2021, the FASB issued Accounting Standards Update ("ASU") No. 2019-12,2021-10, Income TaxesGovernment Assistance (Topic 740)832): Simplifying the Accounting for Income TaxesDisclosures by Business Entities about Government Assistance. This standard removes certain exceptionsincreases the transparency of transactions with the government that are accounted for recognizing deferred taxes for investments, performing intraperiod allocations,by applying a grant or contribution accounting model, and calculating income taxesaims to reduce diversity that currently exists in interim periods.the recognition, measurement, presentation, and disclosure of government assistance received by business entities due to the lack of specific authoritative guidance in GAAP. This standard also adds guidancerequires an entity to reduce complexity in certain areas,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 recognizing franchise tax, recognizing deferred taxes for tax goodwill, allocating taxes to the members of a consolidated group,commitments and recognizing the effect of enacted changes in tax laws or rates during an interim period. Thiscontingencies. The standard was effective for the Company on January 1, 2021.2022. 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. 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 include 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 and 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, 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. These requireASU 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 reversal of previously recognized credit losses if fair value increases. The Company does not currently expect the adoption of these standardsthis standard to have a material impact on the Company's condensed consolidated financial statements.
3.License and Development AgreementsAgreement
In February 2021, theThe Company entered into the Covaxin Agreement with Bharat Biotech to co-develop COVAXIN a whole-virion inactivated COVID-19 vaccine being developed to prevent COVID-19 infection, 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 which the Company paid Bharat Biotech a non-refundable, upfront payment of $15.0 million at 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’sBiotech'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, to the Company, the parties agreed to share any profitsOperating 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. The Covaxin Agreement is a collaboration arrangement within the scope of ASC 808.
Under the Covaxin Agreement, the Company andis collaborating with Bharat Biotech will collaborate to develop COVAXIN for their respective territories. Except with respect to U.S. manufacturing rights under certain circumstances assubsequently described, below, the Company has the exclusive right and is solely responsible for researching, developing, manufacturing, and commercializing COVAXIN for the Ocugen Covaxin Territory. Bharat Biotech has the exclusive right and is solely responsible for researching, developing, manufacturing, and commercializing COVAXIN outside of the Ocugen Covaxin Territory.
Bharat Biotech has agreed to provide to the Company all 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, includingif approved.
In September 2021, the Company entered into the Supply Agreement with Bharat Biotech, pursuant to any EUA for the Ocugen Covaxin Territory granted by the FDA. In certain circumstances set forth in the Covaxin Agreement, and untilwhich 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 capablein progress, Bharat Biotech will supply COVAXIN drug product components and primarily responsiblecontinue to supply finished drug product as necessary for thecommercial manufacture and supply of COVAXIN for the Ocugen Covaxin Territory, Bharat Biotech has the exclusive rightsubsequent to manufacture COVAXIN for the Ocugen Covaxin Territory and is responsible for manufacturing and supplying clinical testing materials required for the Company’s development activities, and all of the Company’s requirements of commercial quantities of COVAXIN. The parties expect to enter into supply agreements setting forth the terms of such supply. Bharat Biotech has agreed to provide a specified minimum number of doses in calendar year 2021. Onregulatory approval. In March 18, 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 an expected future supply agreement.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.
4.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, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| Office equipment | $ | 221 | | | $ | 166 | | |
| Lab equipment | 545 | | | 452 | | |
| Furniture and fixtures | | Furniture and fixtures | $ | 292 | | | $ | 284 | |
| Machinery and equipment | | Machinery and equipment | 907 | | | 855 | |
| Leasehold improvements | Leasehold improvements | 158 | | | 177 | | Leasehold improvements | 167 | | | 167 | |
| Financing lease right-of-use asset | 64 | | | 64 | | |
| Construction in progress | | Construction in progress | 996 | | | 232 | |
| Total property and equipment | Total property and equipment | 988 | | | 859 | | Total property and equipment | 2,362 | | | 1,538 | |
| Less: accumulated depreciation | Less: accumulated depreciation | (226) | | | (226) | | Less: accumulated depreciation | (441) | | | (374) | |
| Total property and equipment, net | Total property and equipment, net | $ | 762 | | | $ | 633 | | Total property and equipment, net | $ | 1,921 | | | $ | 1,164 | |
5.Leases
Operating Leases
The Company has commitments under an operating lease with WPT Land 2 LP (the “Landlord”)leases for certain facilities used in its operations including for the use ofoffice, laboratory, office, and storage space including its current headquarters and future headquarters located in Malvern, Pennsylvania (the “Lease Agreement”).Pennsylvania. The Lease Agreement was determined to have twoCompany's operating lease components per ASC 842, a laboratory space lease
component (the "Initial Premises") and an office, storage, and future expanded laboratory space lease component (the "Expansion Premises"), with varying commencement dates. The Initial Premises commencement date occurred in December 2020 and the Expansion Premises commencement date occurred in January 2021. The Lease Agreementfor its current headquarters has an initial term of seven years, which began in December 2020, and the Company has the option to extend the Lease Agreement for 1 additional five yearfive-year term. The option for extension has been excluded from the lease term (and lease liability) for the Lease Agreement as it is not reasonably certain thatIn October 2021, the Company will exercise such option.
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 had a formerhas the option to extend this lease agreement with the Landlord for the Company's former office space. Pursuant to the terms of the Lease Agreement, the Company terminated the former lease agreement with the Landlord without penalty upon the commencement of the Expansion Premises in January 2021.2 additional five-year terms.
The components of lease expense were as follows (in thousands):
| | | Three months ended March 31, | | | Three months ended March 31, |
| | 2021 | | 2020 | | | 2022 | | 2021 |
| Operating lease cost | Operating lease cost | $ | 68 | | | $ | 48 | | | Operating lease cost | $ | 179 | | | $ | 68 | |
| Variable lease cost | Variable lease cost | 30 | | | 21 | | | Variable lease cost | 28 | | | 30 | |
| Total lease cost | Total lease cost | $ | 98 | | | $ | 69 | | | Total lease cost | $ | 207 | | | $ | 98 | |
Supplemental balance sheet information related to leases was as follows (in thousands):
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| Right-of-use assets, net | Right-of-use assets, net | $ | 1,528 | | | $ | 434 | | Right-of-use assets, net | $ | 1,424 | | | $ | 1,587 | |
| | Current lease obligations | Current lease obligations | $ | 164 | | | $ | 44 | | Current lease obligations | $ | 254 | | | $ | 363 | |
| Non-current lease obligations | Non-current lease obligations | 1,375 | | | 389 | | Non-current lease obligations | 1,180 | | | 1,231 | |
| Total lease liabilities | Total lease liabilities | $ | 1,539 | | | $ | 433 | | Total lease liabilities | $ | 1,434 | | | $ | 1,594 | |
Supplemental information related to leases was as follows:
| | | Three months ended March 31, | | Three months ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| Weighted-average remaining lease term — operating leases (years) | Weighted-average remaining lease term — operating leases (years) | 6.7 | | 1.8 | Weighted-average remaining lease term — operating leases (years) | 5.4 | | 6.7 |
| Weighted-average discount rate — operating leases | Weighted-average discount rate — operating leases | 4.6 | % | | 7.6 | % | Weighted-average discount rate — operating leases | 4.4 | % | | 4.6 | % |
Future minimum operating lease base rent payments are approximately as follows (in thousands):
| | For the Years Ending December 31, | For the Years Ending December 31, | Amount | For the Years Ending December 31, | Amount |
| Remainder of 2021 | $ | 163 | | |
| 2022 | 252 | | |
| Remainder of 2022 | | Remainder of 2022 | $ | 243 | |
| 2023 | 2023 | 261 | | 2023 | 261 | |
| 2024 | 2024 | 269 | | 2024 | 269 | |
| 2025 | 2025 | 277 | | 2025 | 277 | |
| 2026 | | 2026 | 285 | |
| Thereafter | Thereafter | 578 | | Thereafter | 293 | |
| Total | Total | $ | 1,800 | | Total | $ | 1,628 | |
| Less: present value adjustment | Less: present value adjustment | (261) | | Less: present value adjustment | (194) | |
| Present value of minimum lease payments | Present value of minimum lease payments | $ | 1,539 | | Present value of minimum lease payments | $ | 1,434 | |
As aforementioned, 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 and Other Current Liabilities
Accrued expenses and other current liabilities are as follows (in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Research and development | $ | 454 | | | $ | 512 | |
| Clinical | 115 | | | 117 | |
| Professional fees | 1,259 | | | 405 | |
| Employee-related | 336 | | | 963 | |
| Severance-related (1) | 405 | | | 712 | |
| Other | 134 | | | 232 | |
| Total accrued expenses and other current liabilities | $ | 2,703 | | | $ | 2,941 | |
_______________________
(1) In June 2020, the Company communicated notice to 5 employees of the termination of their employment as a result of the discontinuation of the Company's OCU300 product candidate for the treatment of symptoms associated with ocular graft-versus-host disease ("oGVHD"). This reduction represented one-third of the Company’s workforce at the time of communication. All terminations were “without cause” and each employee received termination benefits upon departure. The termination dates varied for each employee and ranged from June 30, 2020 to December 31, 2020. During the three months ended March 31, 2021, the Company made severance payments of $0.3 million. The Company expects to pay severance benefits of $0.4 million throughout the remainder of 2021. | | | | | | | | | | | |
| 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
The following table provides a summary of the carrying values for the components of debt as reflected on the condensed consolidated balance sheets (in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| PPP Note | $ | 421 | | | $ | 421 | |
| EB-5 Loan Agreement | 1,655 | | | 1,636 | |
| Total carrying value of debt, net | $ | 2,076 | | | $ | 2,057 | |
PPP Note
On April 30, 2020, the Company was granted a loan from Silicon Valley Bank ("SVB"), in the aggregate amount of $0.4 million, pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”). On June 5, 2020, the PPP Flexibility Act of 2020 (the "PPPFA") was signed into law amending the original terms of the PPP. Among other things, the PPPFA extended the deferral period for monthly principal and interest payments from six months to either (i) the date the Small Business Administration ("SBA") compensates the lender for any forgiven amounts or (ii) 10 months after the end of the borrower's loan forgiveness covered period. The PPPFA also extended the covered period for qualifying expenses from eight weeks to the earlier of 24 weeks or December 31, 2020. Certain amounts of the loan may be forgiven if they are used for qualifying expenses as described by the CARES Act.
The loan was in the form of a promissory note dated April 30, 2020 in favor of SVB (the "PPP Note"). The PPP Note matures on April 30, 2022 and bears interest at a rate of 1.0% per annum. Principal and interest payments are payable monthly commencing on either (i) the date the SBA compensates SVB for forgiven amounts or (ii) 10 months after the end of the Company's covered period, which ended in October 2020. If the PPP Note is fully forgiven, the Company will not be responsible for any payments. The Company did not provide any collateral or guarantees for the loan, nor did the Company pay any facility charge to obtain the loan. The PPP Note provides for customary events of default, including, among others, failure to make payment, bankruptcy, breaches of representations, and material adverse events.
As of March 31, 2021 and December 31, 2020, the carrying value of the PPP Note was $0.4 million.
EB-5 Loan Agreement
In September 2016, pursuant to the U.S. government’sgovernment's Immigrant Investor Program, commonly known as the EB-5 program, (the “EB-5 Program”), the Company entered into an arrangement (the “EB-5"EB-5 Loan Agreement”Agreement") to borrow up to $10.0 million from EB5 Life Sciences, L.P. (“("EB-5 Life Sciences”Sciences") in $0.5 million increments. BorrowingBorrowings may be limited by the amount of funds raised by the 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’sCompany's product candidates and for the general working capital needs of the Company. Outstanding borrowings pursuant to 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 for any patents, patent applications, pending patents, patent licenses, patent sublicenses, trademarks, and other intellectual property rights.
Under the terms and conditions of the EB-5 Loan Agreement, the Company has borrowed $1.0 million in 2016 and an additional $0.5 million in March 2020.$1.5 million. Issuance costs were recognized as a reduction to the loan balance and are amortized to interest expense over the term of the loan.
The carrying values of the EB-5 Loan Agreement borrowings as of March 31,
20212022 and December 31,
20202021 are summarized below (in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Principal outstanding | $ | 1,500 | | | $ | 1,500 | |
| Plus: accrued interest | 196 | | | 181 | |
| Less: unamortized debt issuance costs | (41) | | | (45) | |
| Carrying value | $ | 1,655 | | | $ | 1,636 | |
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Principal outstanding | $ | 1,500 | | | $ | 1,500 | |
| Plus: accrued interest | 256 | | | 241 | |
| Less: unamortized debt issuance costs | (25) | | | (29) | |
| Carrying value, net | $ | 1,731 | | | $ | 1,712 | |
8.Equity
COVAXIN Preferred Stock Purchase Agreement
On March 1, 2021, the Company entered into a Preferred Stock Purchase Agreement,preferred stock purchase agreement, pursuant to which the Company agreed to issue and sell 0.1 million shares of the Company’sCompany's Series B Convertible Preferred Stock, par value $0.01 per share (the “Series"Series B Convertible Preferred Stock”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 agreement expectedcommitment 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 entered into with respectprovided by Bharat Biotech will be applied to the parties' Covaxin Agreement (the "Supply Agreement").this commitment.
Each share of Series B Convertible Preferred Stock is convertible, at the option of Bharat Biotech, into 10 shares of the Company’sCompany's common stock (the "Conversion Ratio") only after (i) the Company’s receipt ofCompany 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’sCompany's receipt of shipments by Bharat Biotech of the first 10.0 million doses of COVAXIN manufactured by Bharat Biotech pursuant to the 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 (the "CertificateStock. As of Designation").March 31, 2022, 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. Subsequent to March 31, 2021, the Company's stockholders approved an increase in the number of the Company's authorized shares of common stock. See Note 12 for additional information.
Bharat Biotech is entitled to receive dividends on the Series B Convertible Preferred Stock equal (on an as-converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock, when and if such dividends are paid. Except as provided by law and certain protective provisions set forth in the Certificate of Designation, the Series B Convertible Preferred Stock has no voting rights. Upon a liquidation or dissolution of the Company, holders of Series B Convertible Preferred Stock would be entitled to receive the same amount that a holder of common stock would receive if the Series B Convertible Preferred Stock were fully converted to common stock.
The Company accounted for the issuance of the Series B Convertible Preferred Stock in accordance with ASC 718 and recorded theits grant date fair value of $5.0 million within equity during the three months ended March 31, 2021, with a corresponding short-term asset for the advanced payment for the doses of COVAXIN.COVAXIN included in prepaid expenses and other current assets in the condensed consolidated balance sheets 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 incorporates 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
OnIn February 7, 2021, the Company entered into a Securities Purchase Agreementsecurities purchase agreement with certain institutional investors pursuant to which the Company agreed to issue and sell in a registered direct offering,sold 3.0 million shares of the Company'sits common stock at an offering price of $7.65 per share in a registered direct
offering (the "February 2021 Registered Direct Offering"). TheUpon the closing of the February 2021 Registered Direct Offering, occurred on February 10, 2021 and 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 inunder an at-the-market offering (“ATM”) commenced in August 2020 (the "August 2020 ATM"). The Companyand received net proceeds of $4.8 million after deducting equity issuance costs of $0.1 million. The offering was made pursuant
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 Company's effective "shelf" registration statement on Form S-3 filed with the SEC on March 27, 2020, the base prospectus contained therein dated May 5, 2020, and the prospectus supplement related to the offering dated August 17, 2020. As of March 31, 2021,LOI, the Company had the remaining capacityissued warrants to raise $3.3purchase 2.3 million by issuing 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, 2022, all of the Liminal Warrants were outstanding and unvested. The Liminal Warrants are accounted for in accordance with ASC 718.
Completion of the transaction proposed in the LOI is subject to finalization of due diligence investigations by 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.
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 prospectus supplementCanada Consulting Agreement includes, among other forms of compensation, 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 upon the achievement of certain milestones related to COVAXIN. The Canada Consulting Agreement terminates in connectionJuly 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 August 2020 ATM.right to exercise the Canada Warrants to purchase up to 0.2 million shares of the Company's common stock at an exercise price of $6.36 per share upon 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, 2022 and December 31, 2021, all of the Canada Warrants were outstanding and unvested. The Canada Warrants are accounted for in accordance with ASC 718.
OpCo Warrants
Prior to 2018,Beginning in 2016, OpCo issued warrants to purchase the Company's common stock (the "OpCo Warrants") to investors of the Company pursuant to a stockholders' agreement and to 2 employees of the Company pursuant to their respective employment agreements.. As of March 31, 20212022 and December 31, 2020, 0.92021, 0.6 million OpCo Warrants were outstanding. As of March 31, 2022, the outstanding and exercisable andOpCo Warrants had a weighted averageweighted-average exercise price of $5.67 per share.$6.23. The outstanding OpCo Warrants expire between 2026 and 2027.
9.Stock-based10. Stock-Based Compensation
Stock-based compensation expense for stock options grantedand RSUs is reflected in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
| | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
| 2021 | | 2020 | | | | |
| General and administrative | $ | 590 | | | $ | 103 | | | | | |
| Research and development | 243 | | | 119 | | | | | |
| Total | $ | 833 | | | $ | 222 | | | | | |
| | | | | | | | | | | |
| Three months ended March 31, |
| 2022 | | 2021 |
| General and administrative | $ | 2,216 | | | $ | 590 | |
| Research and development | 1,083 | | | 243 | |
| Total | $ | 3,299 | | | $ | 833 | |
As of March 31, 2021,2022, the Company had $9.3$27.9 million of unrecognized stock-based compensation expense related to stock options outstanding under its equity plans.and RSUs outstanding. This expense is expected to be recognized over a weighted averageweighted-average period of 2.62.3 years as of March 31, 2021.2022.
Equity Plans
The Company maintains 2 equity compensation plans, the 2014 Ocugen OpCo, Inc. Stock Option Plan (the “2014 Plan”"2014 Plan") and the Ocugen, Inc. 2019 Equity Incentive Plan (the “2019 Plan”"2019 Plan", collectively with the 2014 Plan, the "Plans").
On the first business day of each fiscal year, pursuant to the "Evergreen" provision of the 2019 Plan, the aggregate number of shares that may be issued under the 2019 Plan will automatically increase by a number equal to the lesser of 4% of the total number of shares of the Company's common stock outstanding on December 31st of the prior year, or a number of shares of the Company's common stock determined by the Board of Directors.
As of March 31, 2021,2022, the 2014 Plan providesand 2019 Plan authorize for the granting of up to 0.40.8 million and 19.5 million equity awards inwith respect to the Company's common stock. As of March 31, 2021,stock, respectively. In addition to stock options and RSUs granted under the 2019 Plan provides forPlans, the granting of upCompany has granted certain stock options and RSUs as material inducements to 1.3 million equity awardsemployment in respect to
the Company's common stock, inclusiveaccordance with Nasdaq Listing Rule 5635(c)(4), which were granted outside of the additional shares authorized for issuance pursuant to the 2019 Plan's "Evergreen" provision on January 1, 2021.
As of March 31, 2021, an aggregate of 0.4 million and 8.8 million shares of the Company's common stock were issuable upon the exercise of outstanding stock options under the 2014 Plan and 2019 Plan, respectively.Plans.
Options to Purchase Common Stock
The following table summarizes the stock option activity under the Plans:activity:
| | | Number of Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Life (years) | | Aggregate Intrinsic Value (in thousands) | | Number of Shares | | Weighted-Average Exercise Price | | Weighted Average Remaining Contractual Life | | Aggregate Intrinsic Value |
| Options outstanding at December 31, 2020 | 4,224,433 | | | $ | 0.84 | | | 8.9 | | $ | 5,496 | | |
| Options outstanding at December 31, 2021 | | Options outstanding at December 31, 2021 | 10,086,167 | | | $ | 2.59 | | | 8.8 | | $ | 24,664 | |
| Granted | Granted | 5,192,550 | | | $ | 2.10 | | | $ | — | | Granted | 4,323,937 | | | $ | 4.42 | | |
| Exercised | Exercised | (157,468) | | | $ | 1.11 | | | $ | 980 | | Exercised | (277,323) | | | $ | 0.65 | | |
| Forfeited | Forfeited | (23,970) | | | $ | 13.52 | | | $ | — | | Forfeited | (130,327) | | | $ | 6.48 | | |
| Options outstanding at March 31, 2021 | 9,235,545 | | | $ | 1.51 | | | 9.3 | | $ | 49,598 | | |
| Options exercisable at March 31, 2021 | 860,287 | | | $ | 1.88 | | | 7.7 | | $ | 4,477 | | |
| Options outstanding at March 31, 2022 | | Options outstanding at March 31, 2022 | 14,002,454 | | | $ | 3.16 | | | 8.9 | | $ | 14,468 | |
| Options exercisable at March 31, 2022 | | Options exercisable at March 31, 2022 | 2,913,960 | | | $ | 2.37 | | | 8.3 | | $ | 4,431 | |
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 valuevalues of stock options granted during the three months ended March 31, 2022 and 2021 were $3.61 and 2020 were $1.73, and $0.42, respectively. The total fair valuevalues of stock options vested during the three months ended March 31, 2022 and 2021 were $2.8 million and 2020 was $0.3 million, and $0.1 million, respectively.
RSUs
10.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 | | | | | |
11. 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, 20212022 and 20202021 (in thousands, except share and per share amounts):
| | | Three months ended March 31, | | | Three months ended March 31, |
| | 2021 | | 2020 | | | 2022 | | 2021 |
| Net loss — basic and diluted | Net loss — basic and diluted | $ | (7,077) | | | $ | (3,944) | | | Net loss — basic and diluted | $ | (18,019) | | | $ | (7,077) | |
| | Shares used in calculating net loss per common share — basic and diluted | Shares used in calculating net loss per common share — basic and diluted | 186,298,122 | | | 52,627,228 | | | Shares used in calculating net loss per common share — basic and diluted | 205,693,498 | | | 186,298,122 |
| Net loss per common share — basic and diluted | Net loss per common share — basic and diluted | $ | (0.04) | | | $ | (0.07) | | | Net loss per common share — basic and diluted | $ | (0.09) | | | $ | (0.04) | |
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, | | |
| 2021 | | 2020 | | | | |
| Options to purchase common stock | 9,235,545 | | | 2,496,771 | | | | | |
| RSUs | 2,190 | | | 0 | | | | | |
| Warrants | 870,017 | | | 9,643,945 | | | | | |
| Series A Convertible Preferred Stock (as converted to common stock) | 3,115 | | | 3,115 | | | | | |
| Series B Convertible Preferred Stock (as converted to common stock) | 547,450 | | | 0 | | | | | |
| Total | 10,658,317 | | | 12,143,831 | | | | | |
Total warrants excluded from the computation of diluted weighted average shares outstanding for the three months ended March 31, 2021 is comprised of 0.9 million OpCo Warrants. Total warrants excluded from the computation of diluted weighted average shares outstanding for the three months ended March 31, 2020 is comprised of 0.9 million OpCo Warrants as well as an aggregate of 8.8 million warrants issued in October 2019 under a securities purchase agreement with certain accredited investors (the "SPA Warrants"). No SPA Warrants were outstanding as of March 31, 2021 and December 31, 2020.
| | | | | | | | | | | |
| Three months ended March 31, |
| 2022 | | 2021 |
| Options to purchase common stock | 14,002,454 | | | 9,235,545 |
| RSUs | 1,301,269 | | | 2,190 |
| Warrants | 3,110,655 | | | 870,017 |
| Series A Convertible Preferred Stock (as converted to common stock) | 3,115 | | | 3,115 |
| Series B Convertible Preferred Stock (as converted to common stock) | 547,450 | | | 547,450 |
| Total | 18,964,943 | | | 10,658,317 |
11.12. Commitments and Contingencies-Contingencies
Commitments
The Company has commitments under certain license and development agreements, lease agreements, debt agreements, supply agreements, and separationconsulting agreements. Commitments under certain license and development agreements primarily include annual payments, payments upon the achievement of certain milestones, and royalty payments based on net sales of licensed products. Commitmentsproducts (commitments under the Company's licensing agreements are more fully described within Note 3 and within the Company's 20202021 Annual Report.Report). Commitments under lease agreements are future minimum lease payments for operating leases. See(see Note 5 for additional information about commitments under lease agreements.5). Commitments under debt agreements are payments for any amount of principal and accrued interest under the PPP Note that is determined to be not forgiven by the SBA as well as the future payment of principal and accrued interest under the EB-5 Loan Agreement.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).
Contingencies
In June 2021, a securities class action lawsuit was filed against the Company and certain of its officers and directors 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 EUA for the vaccine candidate. In July 2021, a second securities class action was filed against the Company and certain of its officers and directors 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. On March 31, 2022, the Court consolidated these two related securities class actions and appointed Andre Galan Bernd Benayon to serve as lead plaintiff. The lead plaintiff's amended complaint is due on June 13, 2022.
In August 2021, a stockholder derivative lawsuit was filed derivatively on behalf of the Company against certain of its officers and directors 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 directors 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 on April 12, 2022.
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. Subsequent Events
In April 2022, the Company and Bharat Biotech entered into a second amendment to the Covaxin Agreement, whereby the parties agreed to expand 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 73 for additional information about commitments under debt agreements. Commitments under separation agreements are severance payments to be paid throughout the remainder of 2021 as a result of the reduction in force in connection with the Company's discontinuation of its OCU300 product candidate. See Note 6 for additional information about commitments under separation agreements.
Contingencies
From time to time, the Company is subject to claims in legal proceedings arising in the normal course of its business. The Company does not believe that it is currently party to any pending legal actions that could reasonably be expected to have a material adverse effect on the business, financial condition, results of operations, or cash flows.
12.Subsequent Events
Promissory Note
On April 13, 2021, the Company issued a promissory note in the principal amount of $0.8 million to a company (the “Promissory Note”). The Promissory Note bears interest at a rate per annum of 5%. The outstanding principal balance of the Promissory Note plus any accrued and unpaid interest thereon is payable in full on April 13, 2022. The Promissory Note may be prepaid in whole or in part at any time, together with any accrued and unpaid interest, without premium, penalty, or discount. The Promissory Note contains customary covenants and events of default, including, among others, failure to make payment, breach of agreement, and bankruptcy.
Increase in Authorized Shares of Common Stock
On April 14, 2021, the Company's stockholders approved an increase in the number of the Company's authorized shares of common stock from 200.0 million to 295.0 million. Following receipt of the stockholder approval, the Company filed a Certificate of Amendment to the Company's Sixth Amended and Restated Certificate of Incorporation with the State of Delaware to effect the increase in authorized shares.
Registered Direct Offering
On April 23, 2021, the Company entered into a securities purchase agreement with healthcare-focused institutional investors pursuant to which the Company agreed to issue and sell in a registered direct offering (the "April 2021 Registered Direct Offering") an aggregate of 10.0 million shares of the Company's common stock at an offering price of $10.00 per share. The closing of the April 2021 Registered Direct Offering occurred on April 27, 2021 and the Company received net proceeds of $93.4 million after deducting equity issuance costs of $6.6 million.Covaxin Agreement.
Item 2. Management’sManagement'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, 2020,2021, included in our 20202021 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. WeExcept 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”"Risk Factors" section included in our 20202021 Annual Report and the "Risk Factors" and “Disclosure"Disclosure Regarding Forward-Looking Statements”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 biopharmaceuticalbiotechnology company focused on discovering, developing, and commercializing novel gene therapies, to cure blindness diseasesbiologicals, and developing a vaccine to save lives from COVID-19.vaccines that improve health and offer hope for people and global communities.
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, infectioncaused by SARS-CoV-2, in humans. We are co-developing COVAXIN with Bharat Biotech for the U.S. market., Canadian, and Mexican markets.
•Modifier Gene Therapy Platform — Based on NHRs, we believe our modifier gene therapy platform has the potential to address many retinal diseases, including RP, LCA, and dry AMD.
•Novel Biologic Therapy for Retinal Diseases — We are developing OCU200, a novel biologic product candidate, 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 humansthe 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 Ocugen Covaxin Territory.United States, its territories, and possessions. 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 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.
COVAXIN has been granted approval for emergency use in India and millions have been dosed to date. The Phase 1 and Phase 2 clinical trials conducted in India reported strong IgG responses against the spike protein, RBD, and the nucleocapsid protein of the SARS-CoV-2 virus, along with strong cellular responses. Strong cellular responses are necessary for memory and long-term durability of vaccines. Both the Phase 1 and Phase 2 clinical trials were published in the Lancet. Bharat Biotech is currently conducting a Phase 3 clinical trial conducted by Bharat Biotech in India. EnrollmentIndia in the Phase 3 clinical trial is complete. In April 2021, COVAXIN demonstrated positive results in the second interim analysis of the Phase 3 clinical trial showing a25,798 adults ages 18 years and older, who were healthy or had stable chronic medical conditions, reported an overall estimated vaccine efficacy in mild, moderate, and severeof COVAXIN against COVID-19 disease of 78%77.8%, with efficacy against severe COVID-19 disease alone of 100%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 70%. The 78% efficacy result representsCOVID-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 point estimate of vaccine efficacy with a 95% confidence interval of 61% to 88% against mild, moderate, and severe COVID-19 disease. In an in vitro studyPhase 2/3 immuno-bridging clinical trial was conducted by Bharat Biotech in India to assess the ICMR-National Instituteprotective immunity of Virology, COVAXIN demonstrated potential effectiveness against the Brazilian variant of SARS-CoV-2, B.1.1.28.2, which contains the E484K mutation found in New York. An additional in vitro study conducted by the ICMR-National Institute of Virology suggested that COVAXIN was effective against the U.K. variant, B.1.1.7, as well as the Indian double mutant variant, B.1.617. These studies suggest that COVAXIN vaccination may be effective against infection from multiple SARS-CoV-2 variants.
We are currently evaluating the clinical and regulatory path for COVAXIN in children ages two to 18 years. The results demonstrated a robust neutralizing antibody response comparable to that of the United States including obtaining EUA from the FDA and, eventually, BLA approvaladults studied in the United States, as well as our commercialization strategy, if authorized or approved. We have initiated discussions with the FDA regarding the development of COVAXIN and EUA. Consistent with the FDA guidance document on EUA for vaccines to prevent COVID-19, we have submitted key information and data to date (including preclinical studies, CMC, and clinical studies) as a “Master File” for FDA review and input prior to a planned EUA submission. We are currently waiting for additional data from Bharat Biotech from the ongoingaforementioned 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
EUA submission. Dueolder, 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 crisisFDA for EUA for COVAXIN for pediatric use in India generatedages 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 current surgeFDA 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 COVID-19 cases it is experiencing, this process is taking longer than anticipated. the United States.
We are continuingalso pursuing approval to monitormarket COVAXIN in Canada and recently expanded our commercialization rights for COVAXIN under the situationCovaxin 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 intendaccepted under the Interim Order and transitioned to filea 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 EUA submissionCOVAXIN preclinical and clinical data, as soonwell as practicable.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 breakthrough modifier gene therapy platform to generate therapies designed to fulfill unmet medical needs in the area of retinal diseases, including IRDs, such as RP and LCA, and dry AMD. Our modifier gene therapy platform is based on 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 in that it mayhas the potential to address multiple retinal diseases caused by mutations in multiple genes with one product. product; and potentially address complex diseases, such as dry AMD, that are potentially caused by imbalances in multiple gene networks.
IRDs, such as RP a group of rare genetic disorders that involve a breakdown and loss of cells in the retina andLCA, can lead to visual impairment and blindness and affect over 2.0two million people worldwide. Over 150 gene mutations have been associated with RP and this number represents only 60%LCA are rooted in mutations of the RP population. The remaining 40% of RP patients cannot be genetically diagnosed, making it difficult to develop individual treatments.
more than 175 different genes. 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. For example, we believe OCU400 has the potential to eliminate the need for developing more than 150 individual products and provide one treatment option for all RP patients. OCU400 has received four ODDs from the FDA for the treatment of certain disease genotypes: NR2E3, CEP290, RHO, and PDE6ß mutation-associated inherited retinal degenerations. We are planning to initiate two Phase 1/2a clinical trials forAdditionally, OCU400 in the United States in the second half of 2021. OCU400 additionallyhas received OMPD from the EC based on the recommendation of the EMA for RP and LCA, in February 2021, which we believe further supportsdemonstrates that OCU400 has the potential broad spectrum application of OCU400to be a broad-spectrum therapeutic to treat many IRDs.
In November 2021, we submitted an IND application to the FDA to initiate a Phase 1/2 clinical trial for OCU400 for the treatment of NR2E3 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 States 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 on
that recommendation we have continued enrollment. We are currentlyadditionally evaluating options to commence OCU400 clinical trials in Europe in 2022. internationally.
Our second modifier gene therapy candidate, OCU410, is being developed to utilize the nuclear receptor genes RORA for the treatment of dry AMD. This candidate is currently in preclinical development. We are planningcurrently executing pre-IND studies consistent with FDA discussions to initiatesupport a Phase 1/2a2 clinical trialtrial. We have engaged CanSinoBIO to manufacture clinical supplies and be responsible for OCU410 in 2022.the CMC development for OCU400 and OCU410. CanSinoBIO will be responsible for the costs associated with such activities.
Novel Biologic Therapy for Retinal Diseases
We areOur pipeline also conducting preclinical development forincludes our biologic product candidate, OCU200. OCU200, is a novel fusion protein designed to treat severely sight-threatening diseases such as DME, DR, and wet AMD. We hadare currently establishing a current GMP process for the production of clinical trial materials and executing pre-IND meetingstudies consistent with the FDA in November 2020 and received guidance on IND-enabling preclinical studiesdiscussions to support the Phase 1/2a study. We expect to initiate IND-enabling preclinical studies for OCU200 in 2021 and plan to initiate a Phase 1/2a clinical trial fortrial. We have completed the technology transfer of manufacturing processes to our CDMO that will manufacture OCU200 in 2022.
Product Candidate for the Treatment of oGVHD
We were developing OCU300, a small molecule therapeutic for the treatment of symptoms associated with oGVHD. The Phase 3 clinical trial for OCU300 was discontinued in 2020 based on results of a pre-planned interim sample size analysis conducted by an independent Data Monitoring Committee, which indicated the trial was unlikely to meet its co-primary endpoints upon completion.supplies.
Impact of COVID-19 on our Business
The COVID-19 pandemic continues to evolveremains ongoing and we arecontinue to closely monitoringmonitor the situation. IfImpacts from the number of active cases of COVID-19 continuespandemic still remain uncertain and subject to be high inchange and, as such, we cannot predict the United States and elsewhere,specific duration or impact that the COVID-19 pandemic may delay enrollment inhave on our planned clinical trials. Among other things, continued spread of COVID-19 may result in limitations on global international travel, which may delay key trialoperations going forward, including our preclinical activities, including necessary interactions with regulators. We may be faced with limitations in employee resources that would otherwise be focused on the conduct ofcurrent and future clinical trials, including because of sickness of employees or their families orand commercialization activities. The extent to which the desire of employees to avoid contact with large groups of people. Moreover, weCOVID-19 pandemic may experience additional disruptions that could severely impact our business and development activities,operations is dependent on future developments, including but not limited to, strain on our suppliersto: (i) the duration of the spread of the SARS-CoV-2 virus, including the spread of current and other third partiesfuture variants, (ii) the future actions taken by governmental authorities and the disruption of our abilityregulators with respect to raise capital when needed on acceptable terms, if at all. Disruptions in our operations or supply chain, whether as a result of restricted travel, quarantine requirements or otherwise, could negatively impact our ability to proceed with our clinical trials, preclinical development, and other activities and delay our ability to receive product approval and generate revenue. Impacts that may result from the COVID-19 pandemic, remain highly uncertain and subject to change. We do not yet know(iii) the full extent of potential delays or impactsimpact on our business, our clinical trials, our preclinical development efforts, healthcare systems, orpartners, collaborators, and suppliers. We will continue to monitor the global economysituation closely as a whole. However, these effects could have a material impact on our operations,operations.
Results of Operations
Comparison of the Three Months Ended March 31, 2022 and we will continue to monitor the COVID-19 situation closely.
Financial Operations Overview2021
We have no products approved for commercial sale and have not generated significant revenue to date. We have never been profitable and have incurred operatingnet losses in each year since inception. We incurred net losses of approximately $7.1 million and $3.9 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, we had an accumulated deficit of $80.4 million and a cash, cash equivalents, and restricted cash balance of $44.9 million.
As of March 31, 2021, we viewed our operations and managed our business as one operating segment consistent with how our chief operating decision-maker, our Chief Executive Officer, makes decisions regarding resource allocation and assessing performance. As of March 31, 2021, substantially all of our assets were located in the United States. Our headquarters and operations are located in Malvern, Pennsylvania.
Research and development expense
Research and development costs are expensed as incurred. These costs consist of internal and external expenses, as well as depreciation on assets used within our research and development activities. Internal expenses include the cost of salaries, benefits, severance, and other related costs, including stock-based compensation, for personnel serving in our research and development functions, as well as allocated rent and utilities expenses. External expenses include development, clinical trials, patent costs, and regulatory compliance costs incurred with research organizations, contract manufacturers, and other third-party vendors. License fees paid to acquire access to proprietary technology are expensed to research and development unless it is determined that the technology is expected to have an alternative future use. All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred to research and development expense due to the uncertainty about the recovery of the expenditure. We record costs for certain development activities, such as preclinical studies and clinical trials, based on our evaluation of the progress to completion of specific tasks. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the condensed consolidated financial statements as prepaid or accrued research and development expense, as applicable. Our recording of costs for certain development activities requires us to use estimates. We believe our estimates and assumptions are reasonable under the current conditions; however, actual results may differ from these estimates.
Research and development expenses account for a significant portion of our operating expenses. We plan to incur research and development expenses for the foreseeable future as we expect to continue the development of our product candidates. We anticipate that our research and development expenses will be higher in 2021 as compared to prior periods as we evaluate the regulatory and commercialization path for COVAXIN in the United States as well as conduct preclinical and clinical activities with respect to our other product candidates. We are planning to initiate two Phase 1/2a clinical trials for OCU400 in the United States in the second half of 2021 and Phase 1/2a clinical trials for OCU410 and OCU200 in 2022. We are also currently evaluating options to commence OCU400 clinical trials in Europe in 2022.
Our research and development expenses are not currently tracked on a program-by-program basis for indirect and overhead costs. We use our personnel and infrastructure resources across multiple research and development programs directed toward identifying, developing, and commercializing product candidates.
At this time, due to the inherently unpredictable nature of preclinical and clinical development as well as regulatory approval and commercialization, we are unable to estimate with any certainty the costs we will incur and the timelines we will require in our continued development and commercialization efforts. As a result of these uncertainties, successful development and completion of clinical trials as well as regulatory approval and commercialization are uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each product candidate and are difficult to predict. We will continue to make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to our ability to enter into collaborations with respect to each product candidate, the scientific and clinical success of each product candidate as well as ongoing assessments as to the commercial potential of each product candidate.
General and administrative expense
General and administrative expense consists primarily of personnel expenses, including salaries, benefits, severance, insurance, and stock-based compensation expense, for employees in executive, accounting, and other administrative functions. General and administrative expense also includes corporate facility costs, including allocated rent and utilities, insurance premiums, legal fees related to corporate matters, and fees for auditing, accounting, and other consulting services.
We anticipate that our general and administrative expenses will be higher in 2021 as compared to prior periods as a result of higher corporate infrastructure costs including, but not limited to, accounting, legal, human resources, consulting, and investor relations fees. Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and expense as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates.
Severance-related expense
In June 2020, we communicated notice to five employees of the termination of their employment as a result of the discontinuation of our OCU300 product candidate for the treatment of symptoms associated with oGVHD. This reduction represented one-third of our workforce at the time of communication. All terminations were “without cause” and each employee received termination benefits upon departure. The termination dates varied for each employee and ranged from June 30, 2020 to December 31, 2020. As a result of the workforce reduction, we expect to pay severance benefits of $0.4 million throughout the remainder of 2021. During the three months ended March 31, 2021, we made severance payments of $0.3 million.
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 were no material changes to our critical accounting policies and estimates as reported in our 2020 Annual Report.
Results of Operations
Comparison of the Three Months Ended March 31, 2021 and 2020
The following table summarizes the results of our operations for the three months ended March 31, 20212022 and 20202021 (in thousands):
| | | Three months ended March 31, | | | Three months ended March 31, | |
| | 2021 | | 2020 | | Change | | 2022 | | 2021 | | Change |
| | Operating expenses: | | | | | | |
| Operating expenses | | Operating expenses | | | | | |
| Research and development | Research and development | $ | 2,872 | | | $ | 1,652 | | | $ | 1,220 | | Research and development | $ | 7,915 | | | $ | 2,872 | | | $ | 5,043 | |
| | General and administrative | General and administrative | 4,185 | | | 2,277 | | | 1,908 | | General and administrative | 10,119 | | | 4,185 | | | 5,934 | |
| Total operating expenses | Total operating expenses | 7,057 | | | 3,929 | | | 3,128 | | Total operating expenses | 18,034 | | | 7,057 | | | 10,977 | |
| Loss from operations | Loss from operations | (7,057) | | | (3,929) | | | (3,128) | | Loss from operations | (18,034) | | | (7,057) | | | (10,977) | |
| Other income (expense): | | |
| | Interest expense | (20) | | | (15) | | | (5) | | |
| | Total other income (expense) | (20) | | | (15) | | | (5) | | |
| Other income (expense), net | | Other income (expense), net | 15 | | | (20) | | | 35 | |
| Net loss | Net loss | $ | (7,077) | | | $ | (3,944) | | | $ | (3,133) | | Net loss | $ | (18,019) | | | $ | (7,077) | | | $ | (10,942) | |
Research and development expense
Research and development expense increased by $1.2$5.0 million for the three months ended March 31, 20212022 compared to the three months ended March 31, 2020.2021. The increase was primarily due to an increaseincreases of $0.7$1.9 million related to OCU400 preclinical activities, $0.4 million related to COVAXIN development, $0.3 million related to OCU200 preclinical activities, $0.2 million related to professional fees, and $0.1 million related toin employee-related expenses, which excludes stock-based compensation expense, partially offset by a decrease of $0.5$1.0 million related to the discontinuation of OCU300 clinical trialin COVAXIN development, regulatory, and manufacturing activities, $0.8 million in 2020.stock-based compensation expense, and $0.8 million in OCU200 preclinical activities.
General and administrative expense
General and administrative expense increased by $1.9$5.9 million for the three months ended March 31, 20212022 compared to the three months ended March 31, 2020.2021. The increase was primarily due to incurringincreases of $2.5 million in professional fees, including legal
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 and an increase of $0.5 million related
to stock-based compensation expense. See Note 12 in the notes to the condensed consolidated financial statements included in this report for additional information about the increase in the authorized shares of our common stock.during 2021.
Liquidity and Capital Resources
As of March 31, 2021,2022, we had $44.9$129.9 million in cash, cash equivalents, and restricted cash. We have not generated significant revenue 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, debt, and grant proceeds. Specifically, sinceSince our inception and through March 31, 2021,2022, we have raised an aggregate of $118.4$269.6 million to fund our operations, of which $105.8$256.9 million was from gross proceeds from the sale of our common stock and warrants, $10.3 million was from the issuance of convertible notes, $2.1$2.2 million was from debt, and $0.2 million was from grant proceeds.
In February 2021,2022, we issued and sold 3.016.0 million shares of our common stock at ana public offering price of $7.65$3.13 per share in the February 2021 Registered Direct Offering pursuant to a securities purchase agreement.the underwritten offering. We received net proceeds of $21.2 million. For additional information about the February 2021 Registered Direct Offering, see Note 8 in the notes to the condensed consolidated financial statements included in this report. In April 2021, we issued$49.8 million, after deducting underwriting discounts and sold 10.0 million shares of our common stock at ancommissions and offering price of $10.00 per share in the April 2021 Registered Direct Offering pursuant to a securities purchase agreement with healthcare-focused institutional investors. We received net proceeds of $93.4 million. For additional information about the April 2021 Registered Direct Offering, see Note 12 in the notes to the condensed consolidated financial statements included in this report.
Additionally, during the three months ended March 31, 2021, we sold 1.0 million shares of our common stock in the August 2020 ATM. We received net proceeds of $4.8 million. The offering was made pursuant to our effective "shelf" registration statement on Form S-3 filed with the SEC on March 27, 2020, the base prospectus contained therein dated May 5, 2020, and the prospectus supplement related to the offering dated August 17, 2020. As of March 31, 2021, we had remaining capacity to raise $3.3 million by issuing shares of our common stock under the prospectus supplement in connection with the August 2020 ATM. For additional information about the August 2020 ATM, see Note 8 in the notes to the condensed consolidated financial statements included in this report.expenses.
Since our inception, we have devoted substantial resources to the research, development, and developmentcommercialization of our product candidates and have incurred significant net losses and may continue to incur net losses in the future. We incurred net losses of approximately $7.1$18.0 million and $3.9$7.1 million for the three months ended March 31, 20212022 and 2020,2021, respectively. As of March 31, 2021,2022, we had an accumulated deficit of $80.4$149.7 million. Additionally, we had accounts payable and accrued expenses of $7.4 million and indebtedness of $1.7 million as of March 31, 2022.
The following table shows a summary of our cash flows for the three months ended March 31, 20212022 and 20202021 (in thousands):
| | | Three months ended March 31, | | Three months ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| Net cash used in operating activities | Net cash used in operating activities | $ | (5,283) | | | $ | (4,686) | | Net cash used in operating activities | $ | (15,066) | | | $ | (5,283) | |
| Net cash used in investing activities | Net cash used in investing activities | (261) | | | (53) | | Net cash used in investing activities | (223) | | | (261) | |
| Net cash provided by financing activities | Net cash provided by financing activities | 26,297 | | | 488 | | Net cash provided by financing activities | 50,102 | | | 26,297 | |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 20,753 | | | $ | (4,251) | | |
| Net increase in cash, cash equivalents, and restricted cash | | Net increase in cash, cash equivalents, and restricted cash | $ | 34,813 | | | $ | 20,753 | |
Operating activities
Cash used in operating activities was $15.1 million for the three months ended March 31, 2022 compared to $5.3 million for the three months ended March 31, 2021 compared to $4.7 million for the three months ended March 31, 2020.2021. The increase in cash used in operating activities was primarily driven by an increase in our research and development expenses for our product candidates, including expenses related to COVAXIN during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.
Investingdevelopment, regulatory, and manufacturing activities,
Cash used in investing activities was $0.3 million for the three months ended March 31, 2021 compared to $0.1 million for the three months ended March 31, 2020. The increase in cash used in investing activities was driven by an increase in purchases of propertyprofessional fees, including legal and equipment during the three months ended March 31, 2021consulting fees, and an increase in employee-related expenses as comparedwe expand our headcount and continue to the three months ended March 31, 2020.
provide competitive compensation plans to support our development, commercialization, and business efforts. Financing activities
Cash provided by financing activities was $50.1 million for the three months ended March 31, 2022 compared to $26.3 million for the three months ended March 31, 2021 compared to $0.5 million for2021. During the three months ended March 31, 2020.2022, 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 August 2020 ATM,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. During the three months ended March 31, 2020, cash provided by financing activities primarily consisted
Contractual Obligations
We have commitments under certain licensing and development agreements, lease obligations, debt agreements, consulting agreements, and supply commitments. There have been no material changes to our contractual obligations as reported in our 2021 Annual Report.
Indebtedness
In April 2020, we were granted a loan from SVB in the aggregate amount of $0.4 million, pursuant to the PPP of the CARES Act. The loan was in the form of a promissory note dated April 30, 2020 in favor of SVB. The PPP Note matures on April 30, 2022 and bears interest at a rate of 1.0% per annum. Principal and interest payments are payable monthly commencing on either (i) the date the SBA compensates SVB for any forgiven amounts or (ii) 10 months after the end of our loan forgiveness covered period, which ended in October 2020. Certain amounts of the loan may be forgiven if they are used for qualifying expenses as described by the PPP. If the PPP Note is fully forgiven, we will not be responsible for any payments. As of March 31, 2021, there was $0.4 million of principal outstanding under the PPP Note.
In September 2016, pursuant to the EB-5 program, we entered into the EB-5 Loan Agreement to borrow up to $10.0 million from EB-5 Life Sciences in $0.5 million increments. Borrowings are at a fixed interest rate of 4.0% and are to be utilized in the clinical development, manufacturing, and commercialization of our product candidates and for our general working capital needs. Outstanding borrowings pursuant to the EB-5 Program become due upon the seventh anniversary of the final disbursement. Amounts repaid cannot be re-borrowed. As of March 31, 2021, there was $1.5 million of principal outstanding under the EB-5 Loan Agreement.
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, contract to manufacture our product candidates, prepare for commercialization of our product candidates, add operational, financial, and information systems to execute our business plan, maintain, expand and protect our patent portfolio, explore strategic licensing, acquisition, and collaboration opportunities to expand our product candidate pipeline to support our future growth, expand headcount to support our development, commercialization, and business efforts, and operate as a public company.
OurFactors impacting our future funding requirements both near- and long-term, will depend on many factors, including, but not limited to: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 bycandidates; including with respect to COVAXIN in the FDA including EUA for COVAXIN;Ocugen Covaxin Territory;
•futurethe costs of manufacturing and commercialization, including with respect to COVAXIN;
•costs related to doing business internationally with respect to our development and commercialization of COVAXIN if authorized or approved;in Canada and Mexico;
•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 as well as the higher corporate infrastructure costs associated with operating as a public company;to support our development, commercialization, and business efforts;
•the expenses needed to attract and retain 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.pandemic on our activities; and
Although•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, social unrest, political instability, terrorism, or other acts of war.
As of March 31, 2022, we believe ourhad cash, cash equivalents, and restricted cash of approximately $129.9 million. This amount will enable usnot meet our capital requirements over the next 12 months. We will need to raise significant additional capital in order to fund our future operations. Our operating expenses and capital requirements through at least one year frommay change as a result of many factors currently unknown to us. Our management is currently evaluating different strategies to obtain the date the condensed consolidated financials included in this reportrequired funding for future operations. These strategies may include, but are issued, our management plans to continue to raise additional capital to support the development and commercialization of our product candidates throughnot limited to: public and private placements of equity and/or debt, payments from potential strategic research and development salearrangements, sales of assets, government grants, licensing and/or collaboration arrangements with pharmaceutical companies or other institutions, or other funding from the government. Theregovernment or other third parties. Our ability to secure funding is subject to numerous risks and uncertainties, including the impact of the COVID-19 pandemic and geopolitical turmoil related to the ongoing invasion of Ukraine by Russia, and as a result, there can be no assurance that these future 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;programs and commercialization 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 dodid 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 2021 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 report.Quarterly Report on Form 10-Q.
Other Company Information
None.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.There have been no material changes to our quantitative and qualitative disclosures about market risk as previously disclosed in our 2021 Annual Report.
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 Securities Exchange Act of 1934, as amended (the "Exchange Act")Act), as of March 31, 2021.2022. Based upon that 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’sSEC'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. 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.
From time to time, we are subject to claims inFor a discussion of legal proceedings, arisingsee Note 12 in the normal course of our business. We do not believe that we are currently partynotes to any pending legal actions that could reasonably be expected to have a material adverse effectthe condensed consolidated financial statements included in this Quarterly Report on our business, financial condition, results of operations, or cash flows.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 20202021 Annual Report. The risks described in our 20202021 Annual Report and this Quarterly Report on Form 10-Q are not the only risks facing our company.we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also may materially adversely affect our business, financial condition, or future results.
The ongoing COVID-19 pandemicOur Phase 2/3 immuno-bridging and actions taken in response to it may result in disruptions to our business operations, which would have a material adverse effect on our business, financial position, operating results, and cash flows.
In December 2019, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. Further, the President of the United States declared the COVID-19 pandemic a national emergency. The Governor of Pennsylvania declared a state of emergency and has issued orders impacting our business operations.
We are developing COVAXIN, the COVID-19 vaccine candidate developed in India by Bharat Biotech, for the U.S. market pursuant to the Covaxin Agreement. Our ability to obtain EUA or BLA approval depends on Bharat Biotech’s ability to complete its ongoing Phase 3broadening clinical trial offor COVAXIN in India, in which they have enrolled 25,800 participants between 18 to 98 years of age, including 2,433 over the age of 60 and 4,500 with comorbidities. Moreover, if authorized or approved, our ability to commercialize COVAXIN in the U.S. market will depend in parthas been placed on our ability obtain sufficient doses of the vaccine from Bharat Biotech to meet our anticipated needs for 2021. As of the date of this Quarterly Report on Form 10-Q, India is currently experiencing a significant surge in COVID-19 infections, including novel and variant strains of the virus, which has resulted in overwhelmed hospitals and shortages in oxygen, ventilators, and medical supplies. In addition, the Indian government has imposed a temporary suspension of the export of COVID-19 vaccines as a result of this wave of COVID-19 infections in India. The ongoing surge in COVID-19 infections in India presents risks that the completion of Bharat Biotech’s Phase 3 clinical trial will be delayed, due, in parthold by the diversion of medical resources and COVAXIN supply, patients’ unwillingness to complete required follow-up, andFDA. If the emergence of new strains of the virus that may reduce the efficacy of COVAXINclinical hold is not lifted in a timely manner, or otherwise complicate clinical development. The Indian government’s temporary suspension of the export of COVID-19 vaccines may require Bharat Biotech to focus its resources, including COVAXIN supply, on domestic Indian requirements and thereby prevent Bharat Biotech from shipping supply of COVAXIN abroad, including to the United States. Any such developmentsat all, or if we experience additional delays or challenges in clinical development or vaccine supply may cause significant delays in our ability to submit required documentation to the FDA, to obtain EUA or BLAobtaining regulatory approval for COVAXIN in the United States, we may incur additional costs or experience delays in completing, or ultimately may be unable to commercializecomplete, the regulatory approval and commercialization process for COVAXIN in the United States.
We cannot predict the speed at which we will be able to obtain regulatory marketing approval for adult use for COVAXIN in the United States, on our anticipated timelines.if at all. Our development efforts with respect to the U.S. market are ongoing and uncertain. We are currently waiting for additional data from Bharat Biotech from the ongoingsubmitted an IND application to initiate a Phase 2/3 immuno-bridging and broadening clinical trial for an EUA submission. DueCOVAXIN 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 current surgeoutcome of a WHO inspection in COVID-19 casesMarch 2022, and the need to conduct process and facility upgrades to address recently identified deficiencies in India,GMP. Based on this process is taking longer than anticipated. 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 are continuing to monitor the situation and intend to file the EUA submission as soon as practicable. Any significant delays could adversely affect our business, results of operations, or financial condition.
With respect to our gene therapy product candidates, we currently expectwill not be permitted to commence two Phase 1/2a clinical trials for OCU400, our product candidate for the treatment of multiple IRDs,dosing in the United States in the second half of 2021. If COVID-19 continues to spread in the United States and elsewhere, it may delay enrollment in theseOCU-002 clinical trial, or our planned safety clinical trials, and in anytrial or other clinical trials that may be necessary or required to support our planned BLA submission, unless we may commence for our other product candidatesare able to adequately address the FDA’s concerns which resulted in 2022. Some patientsthe clinical hold, which we may not be able to complydo. Although we intend to work with the FDA to promptly resolve its questions, it is uncertain when, or if, we will be able to do so. If the clinical hold is lifted, there can be no assurances that the results of any clinical trials we may conduct will resemble the results obtained by Bharat Biotech in their Phase 3 adult clinical trial protocols if any future quarantines impede patient movementin India. In addition, it is unclear whether and to what extent the FDA will allow us to rely on clinical trial data generated by Bharat Biotech in India. Any results from further clinical testing by Bharat Biotech or interrupt healthcare services. Moreover, limitations on global international travelby us may delay key trial activities, including necessary interactions with regulators, ethics committees,raise new questions and other important agencies and contractors. We may be faced with limitations in employee resources that would otherwise be focused on the conduct ofrequire us to redesign planned clinical trials, including becauserevising proposed endpoints or adding new clinical trial sites or cohorts of sicknesssubjects. Also, the FDA’s analysis of employeesany clinical data may differ from our interpretation and the FDA may require that we conduct additional analysis or their familiestrials. If weincur additional costs or experience delays in completing, or ultimately are unable to complete, the desireregulatory approval and commercialization of employeesCOVAXIN in the United States, our business, financial condition, and results of operations would be materially adversely affected.
We have obtained the rights to avoid contact with large groups of people. Any of the above could delay our planned clinical trialsdevelop, manufacture, and commercialize COVAXIN in Mexico. COVAXIN was approved for OCU400 or prevent us from completing these clinical trials at all,emergency use in Mexico for adults ages 18 years and harm our abilityolder, and COVAXIN is currently under review by COFEPRIS for emergency use for pediatrics in ages two to obtain18 years. However, we have no experience in obtaining marketing approval for, OCU400 or our other product candidates.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 us 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.
Moreover,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 experience additional disruptions that could severely impact our business and development activities, including, but not limited to, strainobtain emergency use approval for COVAXIN for pediatrics from COFEPRIS on our suppliers and other third parties, possibly resulting in supply disruptions of our product candidates for preclinical development and potential future clinical trials we expect to initiate, decrease in clinical enrollment in any clinical trials we initiate, and the ability to raise capital when needed on acceptable terms,a timely basis, if at all. Disruptions in our operations or supply chain, whether as a result of government intervention, restricted travel, quarantine requirements, or otherwise, could negatively impact our abilityEven if we are able to proceed with our clinical trials, preclinical development, and other activities and delay our ability to receive productobtain emergency use approval and generate revenue.
In addition, the continued spread of COVID-19 may lead to severe disruption and volatilityfor COVAXIN for use in the global capital markets, which could increase our cost of capital and adversely affect our abilitypediatric population, we may ultimately be required to accessobtain full regulatory approval to continue such use once the capital markets. It is possible thatemergency use expires. Likewise, we may ultimately need to obtain full regulatory approval for COVAXIN for use in the continued spread of COVID-19 could cause an economic slowdown or recession or cause other unpredictable events, each of which could adversely affectadult 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 results of operations, or financial condition.
The ultimate impact of the COVID-19 pandemic is highly uncertain andmay be subject to change. The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertainthe same regulatory and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, the emergence of any new mutations or variants of the virus, the duration of the outbreak, travel restrictions imposed by the United States, India, and other countries, business closures or business disruptioneconomic risks as with product approval in the United States India, and other countries, andor Canada. To the actions taken throughout the world, includingextent we are not able to successfully commercialize COVAXIN in Mexico, our markets, to contain COVID-19 or treat its impact. We do not yet know the full extentresults of potential delays or impacts on our business, our clinical trials, our preclinical development efforts, healthcare systems, or the global economy as a whole. However, these effects could have a material impact on our operations and we will continue to monitor the COVID-19 situation closely.may suffer.
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 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.
Item 5. Other Information.
Not Applicable.
Item 6. Exhibits.
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| Exhibit | | Description |
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3.1*4.1 | | |
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3.2 | | |
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| 10.1*# | | |
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| 10.2*+ | | |
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10.310.3*+ | | |
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10.4 | | |
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| 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 RegulationsRegulation 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 7, 20216, 2022 | /s/ Shankar Musunuri |
| Shankar Musunuri, Ph.D., MBA
Chief Executive Officer and Chairman
(Principal Executive Officer) |
| |
Dated: May 7, 20216, 2022 | /s/ Sanjay SubramanianJessica Crespo |
| Sanjay Subramanian
Jessica Crespo, CPA Chief FinancialAccounting Officer
(Principal Financial Officer and Accounting Officer) |
