# Ocugen, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Ocugen, Inc.](/companies/ocgn.md) (CIK 1372299)
- Form: 10-Q
- Filed: 2024-11-14
- Accepted by EDGAR: Nov 14, 2024, 20:25 ET
- Period: 2024-09-30
- Accession: 0001628280-24-047846
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1372299/000162828024047846/ocgn-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1372299/000162828024047846/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $1.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $3.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$13.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$40.9m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$13.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$40.2m | us-gaap:NetIncomeLoss |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$31.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $3.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $38.7m | us-gaap:Cash |
| Current assets | at 2024-09-30 | $40.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $61.9m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $15.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $21.3m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $1.6m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $1.3m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $40.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 36,333 characters.

*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, 2023, included in our 2023 Annual Report. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business and related financing, include forward-looking statements that involve risks, uncertainties, and assumptions. These statements are based on our beliefs and expectations about future outcomes and are subject to risks and uncertainties that could cause our actual results to differ materially from anticipated results. Except as required by law, we undertake no obligation to publicly update these forward-looking statements, whether as a result of new information, future events, or otherwise. You should read the "Risk Factors" section included in our 2023 Annual Report, 2024 Quarterly Reports, and the "Risk Factors" and "Disclosure Regarding Forward-Looking Statements" sections of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.*

### Overview

We are a biotechnology company focused on discovering, developing, and commercializing novel gene and cell therapies and vaccines that improve health and offer hope for patients across the globe.

Our technology pipeline includes:

- **Modifier Gene Therapy Platform —** Based on the use of nuclear hormone receptors ("NHRs"), we believe our modifier gene therapy platform has the potential to address many retinal diseases, including rare genetic diseases such as retinitis pigmentosa ("RP") (OCU400) and Leber congenital amaurosis ("LCA") (OCU400), with a gene-agnostic approach. We also believe our modifier gene therapy platform has the potential to address multifactorial retinal diseases including dry age-related macular degeneration ("dAMD") using OCU410, which affects millions of patients in the United States alone, and Stargardt disease (OCU410ST), which is a rare genetic disease. We are actively dosing patients in the U.S. in a Phase 3 liMeliGhT clinical trial for OCU400 for the treatment of RP. We also received approval from Health Canada to initiate a Phase 3 trial for OCU400 for the treatment of RP. In August 2024, we received approval from the FDA to begin our expanded access program (EAP) for the treatment of adult patients, aged 18 or older, with RP. After completion of a Phase 1/2 trial for OCU400 for the treatment of LCA, we will discuss alignment for Phase 3 strategy with the FDA. OCU410 is currently dosing in Phase 2 of the ArMaDa Phase 1/2 clinical trial for the treatment of geographic atrophy ("GA"), an advanced form of dAMD. Additionally, OCU410ST, has completed Phase 1 of the GARDian Phase 1/2 clinical trial for the treatment of Stargardt disease. Both OCU410 and OCU410ST studies have completed the low, medium, and high dose cohorts in the Phase 1 part of the Phase 1/2 trials to date.
- **Novel Biologic Therapy for Retinal Diseases —** OCU200 is a novel fusion protein consisting of two human proteins, tumstatin and transferrin. OCU200 possesses unique features which potentially enable it to treat vascular complications of diabetic macular edema ("DME"), diabetic retinopathy ("DR"), and wet age related macular degeneration ("AMD"). Tumstatin is the active component of OCU200 and binds to integrin receptors, which play a crucial role in disease pathogenesis. Transferrin is expected to facilitate the targeted delivery of tumstatin into the retina and choroid and potentially help increase the interaction between tumstatin and integrin receptors. In October 2024, we announced that the FDA cleared the investigational new drug application for the Phase 1 clinical trial for OCU200. We expect initiation of the OCU200 clinical trial in the fourth quarter of 2024.
- **Regenerative Cell Therapy Platform —** Our Phase 3-ready regenerative cell therapy platform technology, which includes NeoCart (autologous chondrocyte-derived neocartilage), is being developed for the repair of knee cartilage injuries in adults. We received concurrence from the FDA on the confirmatory Phase 3 trial design and have completed renovating an existing facility into a current Good Manufacturing Practice ("cGMP") facility to support clinical study and initial commercial launch. This facility is needed to generate patient-specific NeoCart implant from chondrocytes derived from knee biopsy. We intend to initiate the Phase 3 trial contingent on adequate availability of funding.
- **Inhaled Mucosal Vaccine Platform —** Our next-generation, inhaled mucosal vaccine platform includes OCU500, a COVID-19 vaccine; OCU510, a seasonal quadrivalent flu vaccine; and OCU520, a combination quadrivalent seasonal flu and COVID-19 vaccine. We have completed IND-enabling studies and GMP manufacturing of clinical trial material for OCU500. We are currently collaborating with the National Institute of Allergy and Infectious Diseases ("NIAID") for early clinical studies for OCU500. NIAID intends to initiate a Phase 1 clinical trial after IND clearance. We are continuing discussions with relevant government agencies as well as strategic partners regarding developmental funding for our OCU510 and OCU520 platforms.

### Modifier Gene Therapy Platform

We are developing a modifier gene therapy platform designed to fulfill unmet medical needs related to retinal diseases, including inherited retinal diseases ("IRDs"), such as RP, LCA, Stargardt disease; and multifactorial diseases such as dAMD. Our modifier gene therapy platform is based on the use of NHRs, which have the potential to achieve homeostasis — the basic biological processes in the retina to restore a healthy state from a diseased state. Unlike single gene replacement therapies, which only target one genetic mutation, our modifier gene therapy platform, through its use of NHRs, represents a unique, gene-agnostic approach to address not just the mutated gene but provide a molecular "reset" of health and survival of gene networks. OCU400, our lead product candidate in our modifier gene therapy platform, has received Orphan Drug Designation ("ODD") from the FDA for RP and LCA, a regenerative medicine advanced therapy ("RMAT") designation for the treatment of RP associated with *NR2E3* and rhodopsin ("*RHO")* mutations from the FDA, and Orphan Medicinal Product Designation ("OMPD") from the European Commission ("EC"), based on the recommendation of the European Medicines Agency ("EMA"), for RP and LCA. These broad ODD, RMAT, and OMPD designations further support the broad (gene-agnostic) therapeutic potential of OCU400 to treat multiple IRDs such as RP and LCA associated with mutations in multiple genes.

We completed enrolling, dosing, and recruiting RP and LCA patients in the Phase 1/2 trial for OCU400. The objective of this study was to assess the safety and efficacy of unilateral subretinal administration of OCU400 in *NR2E3* and rhodopsin ("*RHO")*-related RP patients and centrosomal protein 290 ("*CEP290")*-related LCA patients in the United States.

In February 2024, in continuation of the preliminary analyses update, we announced an update for 18 participants. The trial update was an extension of the positive preliminary data from September 2023. The positive trial update demonstrated that OCU400 continued to be generally safe and well-tolerated in subjects across different mutations and dose levels. 89% of participants demonstrated preservation or improvement in OCU400 treated eyes either on best corrected visual acuity ("BCVA") or low-luminance visual acuity ("LLVA") or multi-luminance mobility test ("MLMT") scores from baseline. 78% of participants demonstrated stabilization or improvement in OCU400 treated eyes in MLMT scores from baseline. 80% of *RHO* mutation subjects experienced either stabilization or increase in MLMT scores from baseline.

In April 2024, the FDA cleared our IND amendment to initiate a Phase 3 liMeliGhT clinical trial of OCU400 for RP. OCU400 is the first gene therapy program to enter Phase 3 with a broad RP indication. This Phase 3 trial will enroll 150 subjects, distributed 1:1 into two separate arms (RHO: N=75, and Gene Agnostic: N=75). In each arm subjects will be further randomized into 2:1 ratio to treated and untreated control groups. Subjects will be followed for a year after dosing for primary end point analyses. In the Phase 1/2 OCU400 clinical trial a MLMT scale was the primary functional endpoint. For the Phase 3 OCU400 clinical trial, an updated mobility course will be used, Luminance Dependent Navigation Assessment ("LDNA") that includes a wider range of light intensity (0.04-500 Lux) and Lux Levels (0-9) with a uniform correlation between Lux level and Lux intensity. More than 60% of intent-to-treat (ITT) patients from the Phase 1/2 clinical trial (*RHO* and *NR2E3*) meet the responder criteria (Responder ≥ 2 Lux level improvement) for Phase 3.

In April 2024, the Committee for Medicinal Products for Human Use (CHMP) of the EMA reviewed the study design, endpoints and planned statistical analysis of the pivotal OCU400 Phase 3 liMeliGhT clinical trial for RP and provided acceptability of the U.S.-based trial for submission of a Marketing Authorization Application (MAA). The EMA provided this opinion based on safety, tolerability, and efficacy of OCU400 demonstrated in the Phase 1/2 study.

In June 2024, the first patient was dosed in the Phase 3 clinical trial for OCU400 for the treatment of RP. The Phase 3 clinical trial is on track to complete enrollment in the first half of 2025, file the Biologics License Application ("BLA") and MAA in the first half of 2026, and pursue commercialization in 2027. After completion of Phase 1/2 for OCU400 for the treatment of LCA, we will discuss alignment for Phase 3 strategy with the FDA.

In August 2024, we received notification from the FDA to begin our EAP for the treatment of adult patients with RP with OCU400. This program is available for patients with early, intermediate to advanced RP with at least minimal retinal preservation who may benefit from the mechanism of action of OCU400 prior to approval of the BLA.

We also received approval from Health Canada to initiate a Phase 3 trial for OCU400 for the treatment of RP. The Health Canada trial will run in parallel with the U.S. FDA trial, expediting the ability to potentially provide a gene-agnostic treatment option to approximately 110,000 patients in the United States and Canada.

OCU410 and OCU410ST are being developed utilizing the nuclear receptor gene RAR-related orphan receptor A ("*RORA")*, for the treatment of GA secondary to dAMD and Stargardt disease, respectively. OCU410 is a potential one-time, curative therapy with a single sub-retinal injection. OCU410 targets multiple pathways associated with AMD pathogenesis, in contrast to products currently approved or under development that treat only one cause of GA, require multiple injections per year, and have safety considerations. OCU410ST has received ODD from the FDA for the treatment of *ABCA4*-associated retinopathies, including Stargardt disease.

OCU410 is currently dosing in Phase 2 of the Phase 1/2 ArMaDa clinical trial. OCU410ST has completed Phase 1, and the DSMB approved enrollment for the second phase of the Phase 1/2 GARDian clinical trial.

Phase 2 of the OCU410 ArMaDa clinical trial is a randomized expansion phase in which subjects will be randomized in a 1:1:1 ratio to either one of two OCU410 dose groups or to an untreated control group. We plan to complete dosing in the Phase 1/2 ArMaDa clinical trial by early 2025.

In November 2023, the first patient was dosed in the Phase 1/2 trial to assess the safety and efficacy of OCU410ST for Stargardt disease. Phase 1 is a multicenter, open-label, dose ranging study. Phase 2 will be a randomized, outcome accessor-blinded, dose-expansion study in which adult and pediatric subjects will be randomized in a 1:1:1 ratio to either one of two OCU410ST dose groups or to an untreated control group. In August 2024, we announced the high dose was complete in the third cohort of Phase 1/2 study. In October 2024, we announced that the DSMB approved proceeding to Phase 2 using high and medium doses.

### Novel Biologic Therapy for Retinal Diseases

We are developing OCU200, which is a novel fusion protein containing parts of human transferrin and tumstatin. OCU200 is designed to treat DME, DR, and wet AMD. We have completed the technology transfer of manufacturing processes to our contract development and manufacturing organization ("CDMO") and have produced trial materials to initiate a Phase 1 trial. In April 2023, the FDA placed our IND application to initiate a Phase 1 trial targeting DME on clinical hold, as part of the FDA's request for additional information related to CMC. In October 2024, we announced that the FDA lifted the clinical hold on our IND application for the Phase 1 clinical trial for OCU200. We expect initiation of the OCU200 clinical trial in the fourth quarter of 2024.

### Regenerative Cell Therapy Platform

NeoCart is a Phase 3-ready, regenerative cell therapy technology that combines breakthroughs in bioengineering and cell processing to enhance the autologous cartilage repair process. NeoCart is a three-dimensional tissue-engineered disc of new cartilage that is manufactured by growing the patient's own chondrocytes, the cells responsible for maintaining cartilage health. Current surgical and nonsurgical treatment options for knee cartilage injuries in adults are limited in their efficacy and durability. In prior clinical studies, Phase 2 and Phase 3, NeoCart has shown potential to accelerate healing, reduce pain, and provide regenerative native-like cartilage strength with durable benefits post transplantation. NeoCart was shown to be generally well-tolerated and demonstrated greater clinical efficacy than microfracture surgery at two years after treatment. Based on this clinical benefit, the FDA granted a RMAT designation to NeoCart for the repair of full-thickness lesions of knee cartilage injuries in adults. Additionally, we received concurrence from the FDA on the confirmatory Phase 3 trial design where chondroplasty will be used as a control group. We have completed renovating an existing facility into a cGMP facility in accordance with the FDA's regulations in support of NeoCart manufacturing for personalized Phase 3 trial material. We intend to initiate the Phase 3 trial contingent on adequate availability of funding.

### Inhaled Mucosal Vaccine Platform

We are party to an exclusive license agreement (as amended, "WU License Agreement") with The Washington University in St. Louis ("Washington University"), pursuant to which we licensed the rights to develop, manufacture, and commercialize an inhaled mucosal COVID-19 vaccine for the prevention of COVID-19 in the United States, Europe, Japan, South Korea, Australia, China, and Hong Kong (the "Mucosal Vaccine Territory"). In addition, we internally developed technology related to the flu and COVID-19's vaccine design and filed intellectual property. We are developing a next-generation, inhalation-based mucosal vaccine platform based on a novel ChAd vector, which includes OCU500, a COVID-19 vaccine; OCU510, a seasonal quadrivalent flu vaccine; and OCU520, a combination quadrivalent seasonal flu and COVID-19 vaccine. Our inhaled mucosal vaccine platform is driven by our conviction to serve a major public health concern, which requires the endorsement and support of government funding in order to develop and ultimately commercialize our vaccine candidates. As these vaccine candidates are being developed to be administered via inhalation, we believe they have the potential to generate rapid local immune response in the upper airways and lungs, where viruses enter and infect the body. We believe this novel delivery route may help reduce or prevent infection and transmission as well as provide protection against new virus variants. In October 2023, OCU500 was selected by the NIAID Project NextGen for inclusion in clinical trials. OCU500 will be tested via two different mucosal routes, inhalation and intranasal delivery. NIAID intends to initiate a Phase 1 clinical trial after IND clearance. We are continuing discussions with relevant government agencies as well as strategic partners regarding developmental funding for our OCU510 and OCU520 platforms.

### Results of Operations

### Comparison of the Three Months Ended September 30, 2024 and 2023

The following table summarizes the results of our operations for the three months ended September 30, 2024 and 2023 (in thousands):

|  | Three months ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Collaborative arrangement revenue | $1,136 | $3,699 | $(2,563) |
| Total Revenue | 1,136 | 3,699 | (2,563) |
| Operating expenses |  |  |  |
| Research and development | 8,108 | 7,048 | 1,060 |
| General and administrative | 6,280 | 9,082 | (2,802) |
| Total operating expenses | 14,388 | 16,130 | (1,742) |
| Loss from operations | (13,252) | (12,431) | (821) |
| Other income (expense), net | 282 | 714 | (432) |
| Net loss | $(12,970) | $(11,717) | $(1,253) |

We believe the following table provides more transparency as to the type of research and development expenses incurred. The following table summarizes our research and development expenses by product candidate for the three months ended September 30, 2024 and 2023 (in thousands):

|  | Three months ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| OCU400 | $1,492 | $1,334 | $158 |
| OCU410 and OCU410ST | 759 | 884 | (125) |
| NeoCart | 104 | 194 | (90) |
| COVAXIN | (65) | 452 | (517) |
| Inhaled mucosal vaccine platform | 664 | 36 | 628 |
| OCU200 | 48 | 238 | (190) |
| Unallocated costs: |  |  |  |
| Research and development personnel costs | 3,745 | 3,209 | 536 |
| Facilities and other support costs | 791 | 338 | 453 |
| Other | 570 | 363 | 207 |
| Total research and development | $8,108 | $7,048 | $1,060 |

### Collaborative arrangement revenue

Collaborative arrangement revenue decreased by $2.6 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was due to our quarterly reassessment of the amount of co-development services provided by us to the business partner in the collaboration agreement.

### Research and development expense

Research and development expense increased by $1.1 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily due to $0.6 million related to OCU500, which is driven by an increase in preclinical activities and GMP manufacturing of Phase 1 clinical trial material; $0.5 million in employee-related expenses; $0.5 million primarily driven by an increase in depreciation expense. These increases were partially offset by a decrease of $0.5 million related to the termination of the COVAXIN program; $0.2 million related to OCU200, which is driven by a decrease in preclinical activities.

### General and administrative expense

General and administrative expense decreased by $2.8 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily due to $2.2 million in professional services fees and $0.6 million related to reduced headcount.

### Other income (expense), net

Other income (expense), net decreased by $0.4 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily due to $0.4 million in interest earned on our cash and restricted cash, which had a lower average balance compared to prior year.

### Comparison of the Nine Months Ended September 30, 2024 and 2023

The following table summarizes the results of our operations for the nine months ended September 30, 2024 and 2023 (in thousands):

|  | Nine months ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Collaboration revenue | $3,291 | $4,627 | $(1,336) |
| Total revenues | 3,291 | 4,627 | (1,336) |
| Operating expenses |  |  |  |
| Research and development | 23,836 | 31,794 | (7,958) |
| General and administrative | 20,372 | 26,839 | (6,467) |
| Total operating expenses | 44,208 | 58,633 | (14,425) |
| Loss from operations | (40,917) | (54,006) | 13,089 |
| Other income (expense), net | 743 | 1,898 | (1,155) |
| Net loss | $(40,174) | $(52,108) | $11,934 |

We believe the following table provides more transparency as to the type of research and development expenses incurred. The following table summarizes our research and development expenses by product candidate for the nine months ended September 30, 2024 and 2023 (in thousands):

|  | Nine months ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| OCU400 | $5,190 | $3,942 | $1,248 |
| OCU410 and OCU410ST | 2,598 | 3,168 | (570) |
| NeoCart | 459 | 966 | (507) |
| COVAXIN | 8 | 8,719 | (8,711) |
| Inhaled mucosal vaccine platform | 2,160 | 591 | 1,569 |
| OCU200 | 324 | 571 | (247) |
| Unallocated costs: |  |  |  |
| Research and development personnel costs | 9,590 | 11,552 | (1,962) |
| Facilities and other support costs | 2,168 | 1,147 | 1,021 |
| Other | 1,339 | 1,138 | 201 |
| Total research and development | $23,836 | $31,794 | $(7,958) |

### Collaborative arrangement revenue

Collaborative arrangement revenue decreased by $1.3 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was due to our quarterly reassessment of the amount of co-development services provided by us to the business partner in the collaboration agreement.

### Research and development expense

Research and development expense decreased by $8.0 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was primarily due to $8.7 million related to the termination of the COVAXIN program and $2.0 million related to reduced headcount. These decreases were partially offset by an increase of $1.6 million related to OCU500, which is driven by an increase in preclinical activities and GMP manufacturing of Phase 1 clinical trial material and $1.2 million related to OCU400, which is driven by an increase in non-cash co-development services provided by our collaboration arrangements business partner.

### General and administrative expense

General and administrative expense decreased by $6.5 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was primarily due to $3.1 million in professional service fees and $3.1 million related to reduced headcount.

### Other income (expense), net

Other income (expense), net decreased by $1.2 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was primarily due to $1.1 million in interest earned on our cash and restricted cash, which had a lower average balance compared to prior year.

### Liquidity and Capital Resources

As of September 30, 2024, we had $38.7 million in cash. We have not generated revenue from our product candidates to date, and have primarily funded our operations through the sale of common stock, warrants to purchase common stock, the issuance of convertible notes and debt, and grant proceeds. Since our inception and through September 30, 2024, we have raised a gross aggregate of $338.9 million to fund our operations, of which $325.1 million was from gross proceeds from the sale of our common stock and warrants, $10.3 million was from the issuance of convertible notes, $3.3 million was from the issuance of debt, and $0.2 million was from grant proceeds.

Subsequent to September 30, 2024, the Company entered into a debt financing transaction with Avenue Capital for net proceeds of $29.2 million. The loan has a maturity date of November 1, 2028, of which the first 24 months are interest only, and bears interest at a variable rate per annum equal to the greater of the Prime Rate plus 4.25% or 12.25%. Additionally, the Lender has the right to convert an aggregate amount of up to $6.0 million of the outstanding principal amount into shares of Common Stock at a conversion price per share equal to a 80% of the trading price on the date of conversion, which shall be at Lenders' option. In the event the Company elects to prepay the Term Loans in full, Lenders shall have 10 days to elect to exercise its conversion right prior to such prepayment. All conversion rights shall terminate on Term Loans payoff. Notwithstanding the foregoing, the aggregate amount of Common Stock issued pursuant to the “Conversion Right” and the “Equity Grant” shall not exceed a number of shares equal to 19.9% of the Company’s outstanding Common Stock. The agreement is collateralized by all of the Company’s assets in which the agent is granted senior secured lien. The Company also grants the Lenders a negative pledge on the Company’s intellectual property. In connection with the debt financing transaction, the Company entered into a Subscription Agreement with Avenue Capital, pursuant to which the Company issued 1,056,338 shares of Common Stock to Avenue Capital with an issue date of November 6, 2024.

During the three months ended September 30, 2024, we issued and sold 32.7 million shares of our common stock at a public offering price of $1.15 per share pursuant to the July 2024 Public Offering. We received net proceeds of $34.7 million after deducting equity issuance costs.

During the year ended December 31, 2023, we issued and sold 30.0 million shares of our common stock at a public offering price of $0.50 per share pursuant to an underwriting agreement (the "May 2023 Public Offering"). We received net proceeds of $14.8 million after deducting equity issuance costs.

During the year ended December 31, 2023, we sold 4.5 million shares of our common stock under the At Market Issuance Sales Agreement ("Sales Agreement") with certain agents and received net proceeds of $5.6 million after deducting equity issuance costs of $0.2 million. The Sales Agreement was terminated in February 2023.

Since our inception, we have devoted substantial resources to research and development and have incurred significant net losses and may continue to incur net losses in the future. We incurred net losses of approximately $40.2 million and $52.1 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $326.3 million. In addition, we had accounts payable and accrued expenses and other current liabilities of $14.0 million and indebtedness of $2.9 million.

The following table provides a summary of our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):

|  | Nine months ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(31,778) | $(50,752) |
| Net cash (used in) provided by investing activities | (3,372) | 5,799 |
| Net cash provided by financing activities | 34,686 | 20,865 |
| Effect of changes in exchange rate on cash and restricted cash | 3 | 2 |
| Net (decrease) in cash and restricted cash | $(461) | $(24,086) |

#### Operating activities

Cash used in operating activities was $31.8 million for the nine months ended September 30, 2024, and primarily consisted of a net loss of $40.2 million adjusted for non-cash items including stock-based compensation of $5.6 million, depreciation and amortization of $1.4 million, non-cash lease expense of $0.6 million, non-cash expense from collaborative arrangements, net of $2.4 million, other non-cash items of $0.1 million, and a change in net working capital of $3.1 million.

Cash used in operating activities was $50.8 million for the nine months ended September 30, 2023, and primarily consisted of a net loss of $52.1 million adjusted for non-cash items including $4.4 million in expenses related to COVAXIN, due to the impairment of the advanced payment for the supply of COVAXIN as well as the associated loss on the disposal of related fixed assets, stock-based compensation of $7.5 million, non-cash expense from collaborative arrangements, net of $1.1 million, non-cash lease expense of $0.4 million, depreciation and amortization of $0.5 million, other non-cash items of $0.3 million, and a change in net working capital of $10.7 million.

#### Investing activities

Cash used in investing activities was $3.4 million for the nine months ended September 30, 2024, and primarily consisted of payments related to the purchases of property and equipment. Cash provided by investing activities was $5.8 million for the nine months ended September 30, 2023, and primarily consisted of gross proceeds of $17.5 million from the maturities of marketable securities, classified as available-for-sale, during the nine months ended September 30, 2023, which was partially offset by purchases of $3.9 million of marketable securities, classified as available-for-sale, during the nine months ended September 30, 2023 as well as purchases of $7.8 million of property and equipment during the nine months ended September 30, 2023.

#### Financing activities

Cash provided by financing activities was $34.7 million for the nine months ended September 30, 2024 compared to cash provided by financing activities of $20.9 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, cash provided by financing activities primarily consisted of gross proceeds of $37.6 million received from the July 2024 Public Offering before deducting equity issuance costs of $2.9 million. During the nine months ended September 30, 2023, cash provided financing activities primarily consisted of gross proceeds of $20.8 million received from the May 2023 Public Offering and pursuant to the Sales Agreement.

### Contractual Obligations

We have commitments under certain licensing and development agreements, lease obligations, debt agreements, and consulting agreements. There have been no material changes to our contractual obligations as reported in our 2023 Annual Report.

### Funding requirements

We expect to continue to incur significant expenses in connection with our ongoing activities, particularly as we continue research and development, including preclinical and clinical development of our product candidates, prepare to manufacture our product candidates, prepare for the potential 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.

Factors impacting our future funding requirements include, without limitation, the following:

- the initiation, progress, timing, costs, and results of trials for our product candidates;
- the preparation and submission of Investigational New Drug applications, or INDs, with the FDA for current and future product candidates;
- the outcome, timing, and cost of the regulatory approval process for our product candidates;
- the costs of manufacturing and commercialization;
- the costs related to doing business internationally with respect to the development and commercialization of our product candidates;
- the cost of filing, prosecuting, defending, and enforcing our patent claims and other intellectual property rights;
- the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us;
- the acquisition of or in-licensing of additional product candidates and technologies;
- the costs of expanding infrastructure to support our development, commercialization, and business efforts, including the costs related to the development of a laboratory and manufacturing facility;
- the costs involved in recruiting and retaining skilled personnel;
- the extent to which we in-license or acquire other products, product candidates, or technologies and out-license our product candidates; and
- the impact of geopolitical turmoil, macroeconomic conditions, social unrest, political instability, terrorism, or other acts of war.

As of September 30, 2024, we had cash of approximately $38.7 million. This amount will not be sufficient to fund our operations over the next 12 months. Due to the inherent uncertainty involved in making estimates and the risks associated with the research, development, and commercialization of biotechnology products, we may have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. Given this uncertainty, and despite the additional funding from the debt transaction with Avenue Capital, we will need to raise significant additional capital in order to fund our operations until we recognize significant revenue from product sales. Our management continues to evaluate different strategies to obtain the funding required for our future operations. These strategies may include, but are not limited to: public and private placements of equity and/or debt, payments from potential strategic research and development arrangements, sales of assets, licensing and/or collaboration arrangements with pharmaceutical companies or other institutions, funding from the government, particularly for the development of our novel inhaled mucosal vaccine platform, or funding from other third parties. Our ability to secure funding is subject to numerous risks and uncertainties, including, but not limited to the impact of the geopolitical turmoil, macroeconomic conditions, and the impact of inflation and as a result, there can be no assurance that these funding efforts will be successful. If we cannot obtain the necessary funding, we will need to delay, scale back, or eliminate some or all of our research and development programs and commercialization efforts; 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 continued spending that will be necessary to continue to research, develop, and commercialize our product candidates, there is substantial doubt about our ability to continue as a going concern within one year after the date that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are issued.

### Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements during the periods presented, and we do not currently have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

### Critical Accounting Policies and Significant Judgments and Estimates

The preparation of financial statements in conformity with GAAP requires us to make judgments, estimates, and assumptions in the preparation of our condensed consolidated financial statements. Actual results could differ from those estimates. There have been no material changes to our critical accounting policies and estimates as reported in our 2023 Annual Report.

### Recently Adopted Accounting Pronouncements

For a discussion of recently adopted accounting pronouncements, see Note 2 in the notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

## Controls and procedures

As filed, 2,972 characters.

### Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of September 30, 2024. Based upon this 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 not effective because of a material weakness related to the design and operating effectiveness of controls over the accounting for collaborative arrangements that was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023. Notwithstanding the identified material weakness, the Company's management, including our principal executive officer and principal financial officer, has concluded the Company's Condensed consolidated financial statements included in this Form 10-Q present fairly, in all material respects, the Company's financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. generally accepted accounting principles.

### Remediation

The Company’s plan to remediate the identified material weakness was previously described in Part II, Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2023. The remediation plan includes improving the design and operation of management's controls over the technical accounting analysis, the determination of the transaction price, calculating the progress towards the satisfaction of the performance obligations under the collaborative arrangements, and determining the value of the non-cash consideration received under collaborative arrangements. Specifically, during the three months ended September 30, 2024, the Company implemented controls to obtain relevant information from third parties on a timely basis, including actual costs incurred, actual noncash consideration received, and estimates to complete and review the accounting for collaborative arrangements during the financial statement close process. The material weakness cannot be considered remediated until the newly designed and implemented controls operate effectively for a sufficient period of time and management has concluded, through testing, that the control is operating effectively.

### Changes in Internal Control Over Financial Reporting

The third quarter 2024 remediation activities described above are 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 three months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 2,918 characters.

Except as set forth below, there have been no material changes in our risk factors as previously disclosed in our 2023 Annual Report. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, or future results.

***The terms of our Loan and Security Agreement with Avenue Capital Management II, L.P. and the lenders listed therein require us to meet certain operating covenants and place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.***

On November 6, 2024, we entered into a Loan and Security Agreement with Avenue Capital Management II, L.P. and related entities (together, “Avenue”) (the “Loan and Security Agreement”) that is secured by a lien on all of our assets. The Loan and Security Agreement contains customary affirmative and negative covenants and events of default. Affirmative covenants include, among others, covenants requiring us to protect and maintain our intellectual property and comply with all applicable laws, deliver certain financial reports and maintain insurance coverage. Negative covenants include, among others, covenants restricting us from transferring any part of our business or intellectual property, incurring additional indebtedness, engaging in mergers or acquisitions, repurchasing shares, paying dividends or making other distributions, making investments, and creating other liens on our assets, including our intellectual property, in each case subject to customary exceptions. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility. These restrictions may include, among other things, limitations on the incurrence of additional debt and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay dividends, redeem capital stock or make investments. If we default under the terms of the Loan and Security Agreement or any future debt facility, Avenue may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations. Further, if we were to be liquidated, Avenue’s right to repayment would be senior to the rights of the holders of our common stock. Avenue could declare an event of default upon the occurrence of any event that could reasonably be expected to result in what they interpret as a material adverse effect as defined under the Loan and Security Agreement. Any declaration by Avenue of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline.

Filed Nov 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-047846. Last ingested by Listed: Oct 24, 2026, 15:12 ET. No prices; not investment advice.