ocgn-20201231

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________

FORM 10-K

___________________________________________________________

(Mark One)

For the fiscal year ended December 31, 2020

Commission File Number 001-36751

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OCUGEN, INC.

(Exact Name of Registrant as Specified in its Charter)

___________________________________________________________

263 Great Valley Parkway

Malvern,Pennsylvania19355

(Address of principal executive offices, including zip code)

(484) 328-4701

(Registrant’s telephone number, including area code)

___________________________________________________________

Securities registered pursuant to Section 12(b) of the Act

Title of each class Tradingsymbol(s) Name of each exchangeon which registered

Common Stock OCGN The Nasdaq Stock Market LLC(The Nasdaq Capital Market)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act

Yes ☐ No ☒

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange 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 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of June 30, 2020, the last day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $28.6 million, based upon the closing price of the registrant's common stock on June 30, 2020.

As of March 1, 2021, there were 188,088,860 outstanding shares of the registrant’s common stock, $0.01 par value per share.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Annual Report on Form 10-K incorporates certain information by reference from the registrant’s proxy statement for the 2021 annual meeting of stockholders to be filed no later than 120 days after the end of the registrant’s fiscal year ended December 31, 2020.

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Page

FORWARD LOOKING STATEMENTS

Part I

Item 1. Business 1

Item 1A. Risk Factors 32

Item 1B. Unresolved Staff Comments 77

Item 2. Properties 77

Item 3. Legal Proceedings 77

Item 4. Mine Safety Disclosures 77

Part II

Item 6. Selected Financial Data 78

Item 7A. Quantitative and Qualitative Disclosure About Market Risk 89

Item 8. Financial Statements and Supplementary Data 89

Item 9A. Controls and Procedures 89

Item 9B. Other Information 90

Part III

Item 10. Directors, Executive Officers and Corporate Governance 92

Item 11. Executive Compensation 92

Item 14. Principle Accountant Fees and Services 92

Part IV

Item 15. Exhibits and Financial Statement Schedules 93

Signatures

Consolidated Financial Statements F-1

Unless the context otherwise requires, references to the “Company,” “we,” “our,” or “us” in this report refer to Ocugen, Inc. and its subsidiaries, and references to “OpCo” refer to Ocugen OpCo, Inc., the Company’s wholly owned subsidiary.

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K and the documents incorporated by reference herein contain forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts contained in this Annual Report on Form 10-K or the documents incorporated by reference herein regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, and objectives of management are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would,” or the negative of such terms and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties, and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.

The forward-looking statements in this Annual Report on Form 10-K and the documents incorporated herein by reference include, among other things, statements about:

•our estimates regarding expenses, future revenue, capital requirements, and timing and availability of and the need for additional financing;

•our ability to obtain sufficient additional capital to continue to advance our product candidates and our preclinical programs;

•our activities with respect to COVAXIN, our vaccine candidate for the prevention of COVID-19, in collaboration with Bharat Biotech International Limited (“Bharat 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;

•the extent to which health epidemics and other outbreaks of communicable diseases, including the COVID-19 pandemic, could disrupt our business and operations;

•the uncertainties associated with the clinical development and regulatory authorization or approval of product candidates, including potential delays in the 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 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 and foreign countries;

•the performance of third-parties upon which we depend, including third-party contract research organizations (“CROs”), and third-party suppliers, manufacturers, group purchasing organizations, distributors, and logistics providers;

•the pricing and reimbursement of our product candidates, if authorized or approved;

•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 commercial partners;

•our ability to recruit or retain key scientific, technical, commercial, and management personnel or to retain our executive officers; and

•our ability to comply with stringent U.S. and foreign government regulation in the manufacture of pharmaceutical products, including Good Manufacturing Practice (“GMP”) compliance and other relevant regulatory authorities.

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,

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intentions, and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Annual Report on Form 10-K, particularly under “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 Annual Report on Form 10-K and the documents that we incorporate by reference herein and have filed as exhibits to this Form 10-K, completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Form 10-K, 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.

Solely for convenience, tradenames and trademarks referred to in this Annual Report on Form 10-K 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 Annual Report on Form 10-K are the property of their respective owners.

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PART I

Item 1. Business

OVERVIEW

We are a biopharmaceutical company focused on developing gene therapies to cure blindness diseases and developing a vaccine to save lives from COVID-19.

Our cutting-edge technology pipeline includes:

•COVID-19 Vaccine — COVAXIN is a whole-virion inactivated COVID-19 vaccine candidate being developed to prevent COVID-19 infection in humans. We are co-developing COVAXIN with Bharat Biotech for the U.S. market.

•Modifier Gene Therapy Platform — Based on nuclear hormone receptors ("NHRs"), we believe our gene therapy platform has the potential to address many retinal diseases, including retinitis pigmentosa ("RP"), leber congenital amaurosis ("LCA"), and dry age-related macular degeneration (“AMD”).

•Novel Biologic Therapies for Retinal Diseases — We are developing OCU200, a novel biologic product candidate, to treat diabetic macular edema (“DME”), diabetic retinopathy (“DR”), and wet AMD.

COVID-19 Vaccine

In February 2021, we entered into a Co-Development, Supply and Commercialization Agreement (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 humans in the United States, its territories and possessions (the “Ocugen Covaxin Territory”). Under the Covaxin Agreement, we will be solely responsible for such activities for the Ocugen Covaxin Territory.

COVAXIN is a whole-virion inactivated COVID-19 vaccine candidate being developed by Bharat Biotech, a global leader in vaccine innovation, and has been granted approval for emergency use in India. COVAXIN is formulated with the inactivated SARS-CoV-2 virus, an antigen, and an adjuvant therefore utilizing a historically proven approach to vaccine design. COVAXIN requires a two-dose vaccination regimen given 28 days apart and is stored in standard vaccine storage conditions (2-8°C). The Phase 1 and Phase 2 clinical trials conducted in India reported strong Immunoglobulin G ("IgG") 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. In an analysis from the National Institute of Virology, serum samples collected from individuals vaccinated with COVAXIN showed similar neutralization titer to the U.K. strain as to the original strain. No statistical difference was observed in neutralizing antibodies titer between the U.K. strain and the original strain. These results support COVAXIN's potential to generate immune responses to multiple protein antigens of the virus and thereby potentially reducing or eliminating potential viral escape.

Bharat Biotech is conducting a Phase 3 clinical trial in India. Enrollment in the Phase 3 clinical trial is complete. COVAXIN demonstrated a vaccine efficacy of 81% in the first interim analysis of the Phase 3 clinical trial, and an analysis from the National Institute of Virology indicated potential significant immunogenicity against the U.K. variant and other heterologous strains. We are currently evaluating the clinical and regulatory path for COVAXIN in the United States including obtaining Emergency Use Authorization ("EUA") from the U.S. Food and Drug Administration (the "FDA") and, eventually, biologic license application (“BLA”) approval in the U.S. market, as well as our commercialization strategy, if authorized or approved. We have initiated discussions with the FDA regarding the development of COVAXIN, but an EUA application has not been submitted at this time. We are also in active discussions with manufacturers in the United States to produce a significant number of doses of COVAXIN to support commercialization of the vaccine in the United States, if authorized or approved.

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 inherited retinal diseases ("IRDs") 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 gene therapy platform, through its use of NHRs, represents a novel approach in that it may address multiple retinal diseases with one product. IRDs such as RP, a group of rare genetic disorders that involve a breakdown and loss of cells in the retina and can lead to visual impairment and blindness, affect over 2.0 million people worldwide. Over 150 gene mutations have been associated with RP and this number

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represents only 60% of the RP population. The remaining 40% of RP patients cannot be genetically diagnosed, making it difficult to develop individual treatments. We believe our first gene therapy candidate, OCU400, has the potential to be broadly effective in restoring retinal integrity and function across a range of IRDs. 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 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. We are planning to initiate two Phase 1/2a clinical trials for OCU400 in the United States in the second half of 2021. OCU400 additionally received Orphan Medicinal Product Designation ("OMPD") from the European Commission, based on the recommendation of the European Medicines Agency ("EMA"), for RP and LCA in February 2021, which we believe further supports the potential broad spectrum application of OCU400 to treat many IRDs. We are currently evaluating options to commence OCU400 clinical trials in Europe in 2022. Our second 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. We are planning to initiate a Phase 1/2a clinical trial for OCU410 in 2022.

Novel Biologic Therapies for Retinal Diseases

We are also conducting preclinical development for our biologic product candidate, OCU200. OCU200 is a novel fusion protein designed to treat DME, DR, and wet AMD. We had a pre-Investigational New Drug ("IND") meeting with the FDA in November 2020 and received guidance on IND-enabling preclinical studies to support the Phase 1/2a study. We expect to initiate IND-enabling preclinical studies for OCU200 in 2021 and initiate a Phase 1/2a clinical trial for OCU200 in 2022.

OUR STRATEGY

Our product candidates have the potential to save lives from COVID-19 and cure blindness diseases. We are committed to developing these product candidates and bringing them to market to serve patients in multiple disease areas. Key elements of the strategy we employ to accomplish this objective include:

•Advancing our COVID-19 vaccine product candidate towards EUA and commercialization in the United States.We have initiated discussions with the FDA regarding the development of COVAXIN. COVAXIN has been granted approval for emergency use in India. A Phase 3 clinical trial is ongoing in India. COVAXIN demonstrated a vaccine efficacy of 81% in the first interim analysis of the Phase 3 clinical trial. We intend to advance the development of COVAXIN towards EUA and ultimately BLA approval in the United States.

•Establishing our modifier gene therapy platform and advancing OCU400 and OCU410 into clinical development. We intend to advance OCU400 and OCU410 into and through clinical development for the treatment of multiple IRDs and for the treatment of dry AMD, respectively. In addition to OCU400 and OCU410, we will also explore additional NHR-based product candidates for multiple eye disease indications. We expect to file the INDs to start Phase 1/2a clinical trials in the United States for OCU400 and OCU410 in the second half of 2021 and in 2022, respectively.

•Advancing preclinical biological programs into clinical development. We intend to advance OCU200 into and through clinical development for the treatment of DME, DR, and wet AMD. This candidate is currently in preclinical development. We expect to file the IND to start the Phase 1/2a clinical trial in 2022.

•Exploring potential partnerships with leading pharmaceutical and biotechnology companies to maximize patient access, global reach, and the value of our product candidates. We plan to explore licensing, intellectual property acquisitions, and collaboration opportunities with qualified potential partners in key global markets as needed to maximize the positive impact of our product candidates on patients globally.

COMPETITIVE STRENGTHS

Our key competitive strengths include:

•Vaccine Expertise. Key members of our management team and key advisors possess proven expertise and a track record of success in vaccine development and commercialization. We have established a vaccine scientific advisory board composed of leading academic and industry experts with extensive experience in the vaccine field. We intend to utilize this collective experience to evaluate the clinical and regulatory path to EUA and commercialization of COVAXIN in the United States.

•Orphan Drug Designations. 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. OCU400 has

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additionally received OMPD from the European Commission, based on the recommendation of the EMA, for RP and LCA, which we believe further supports the potential broad spectrum application of OCU400 to treat many IRDs.

•Gene Therapy Manufacturing. We have established a strategic partnership with CanSino Biologics Inc. ("CanSinoBIO") for chemistry, manufacturing, and controls ("CMC") development and manufacturing of clinical supplies for our first gene therapy candidate, OCU400. The partnership secures hard-to-find manufacturing capacity and expertise for gene therapy product development. We believe this partnership will accelerate the development timeline, increase reliability of our product candidate manufacturing, and provide a significant reduction in associated costs.

•Intellectual Property Portfolio. Our intellectual property portfolio contains patents and pending patent applications related to composition of matter, pharmaceutical compositions, and methods of use for our product candidates. As of March 1, 2021, our patent portfolio included a total of 45 issued or registered patents and 12 pending patent applications, including those licensed from leading institutions. Our patents and pending patent applications are for a diverse range of geographical locations representing major markets including both in the United States as well as in foreign countries.

•Licensing and Development Arrangements with Leading Institutions and Global Biotechnology Companies. We have licensing agreements with leading companies, academic institutions, and medical institutions that cover four of our product candidates. In February 2021, we entered into the Covaxin Agreement with Bharat Biotech with respect to the development and commercialization of COVAXIN in the United States. In December 2017, we entered into an exclusive worldwide license agreement with The Schepens Eye Research Institute ("SERI"), an affiliate of Harvard Medical School, pursuant to which we acquired patent rights for NHRs, including those used in our OCU400 and OCU410 programs. In March 2014, we entered into an exclusive worldwide license agreement with the University of Colorado ("CU") pursuant to which we acquired rights to the transferrin-tumstatin fusion protein technology used in OCU200 as well as other technology.

•Experienced Management Team and Highly Esteemed Scientific Advisory Boards. Our management team has extensive experience with a proven track record of success in developing, launching, and managing the life cycle of many biopharmaceuticals at leading pharmaceutical and biotechnology companies. We believe that the experience of our management team, our scientific advisory board members, and our broad network of relationships with leaders within the industry and the medical community provides us with insight into the identification of product opportunities, product development, and product commercialization.

OUR PRODUCT CANDIDATE PIPELINE

Our current product pipeline candidates are summarized in the following chart:

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COVID-19 VACCINE PRODUCT CANDIDATE

We have entered into the Covaxin Agreement with Bharat Biotech, pursuant to which we have obtained an exclusive right and license under certain of Bharat Biotech’s intellectual property rights, with the right to grant sublicenses, to develop, manufacture, and commercialize COVAXIN in the United States. COVAXIN is a whole-virion inactivated COVID-19 vaccine being developed to prevent COVID-19 infection in humans. We have initiated discussions with the FDA regarding the development of COVAXIN, including discussions about EUA.

Overview of COVID-19 and Available Prevention Options

In December 2019, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, was first reported to have surfaced in Wuhan, China. COVID-19 has since spread worldwide and has been declared a pandemic by the World Health Organization as well as declared a national emergency by the United States. SARS-CoV-2 is a newly discovered strand of coronavirus which can be contracted through contact with an infected person, through the air by coughing or sneezing, or through touching an object or surface contaminated with SARS-CoV-2. COVID-19 is predominantly a respiratory illness that can also affect other organs and can be fatal. Those infected with COVID-19 may experience a wide range of mild to severe symptoms including fever or chills, cough, shortness of breath or difficulty breathing, fatigue, and loss of taste or smell, among other symptoms. Symptoms typically appear two to 14 days after exposure to a person infected with COVID-19. Asymptomatic cases can occur among those infected with COVID-19, further contributing to the rapid spread of COVID-19 both in the United States and worldwide.

Since COVID-19 was first discovered in December 2019, new variants of SARS-CoV-2 have emerged. New variants of a virus emerge when a mutation to the virus' genes occurs. The emergence of new variants of viruses is not uncommon. Current research suggests that some of the new variants of SARS-CoV-2 identified thus far are more contagious and spread more rapidly than the originally identified virus and may cause more severe illness and be associated with higher rates of fatality.

Within the United States, the FDA utilizes EUA as a mechanism to facilitate the availability and use of medical countermeasures, including vaccines, during public health emergencies, which includes the current COVID-19 pandemic. Through the granting of an EUA, the FDA allows the use of unapproved medical products to prevent serious and life-threatening conditions when there are no adequate, approved, and available alternatives and that medical product meets certain regulatory criteria. For a COVID-19 vaccine for which there is adequate manufacturing information to ensure its quality and consistency, issuance of an EUA requires a determination by the FDA that the vaccine's benefits outweigh its risks based on data from at least one well-designed Phase 3 clinical trial that demonstrates the vaccine's safety and efficacy in a clear and compelling manner. It is the FDA's expectation that, following the submission of an EUA application and the issuance of an EUA, a sponsor will continue to collect placebo-controlled data in any ongoing trials for as long as feasible and would also work towards a submission of a BLA as soon as possible.

Three COVID-19 vaccine candidates have been issued EUAs by the FDA for the prevention of COVID-19 in the United States: the vaccine developed in a collaboration between Pfizer Inc. and BioNTech SE ("Pfizer/BioNTech SE"), the vaccine developed by Moderna Inc., and the vaccine developed by Johnson & Johnson/Janssen Biotech. Each of these COVID-19 vaccines is authorized for the use of the prevention of COVID-19. Pfizer/BioNTech SE's COVID-19 vaccine has been authorized for use for the prevention of COVID-19 in individuals 16 years of age and older. Moderna Inc.'s and Johnson & Johnson/Janssen Biotech's COVID-19 vaccines have been authorized for use for the prevention of COVID-19 in individuals 18 years of age and older. No COVID-19 vaccines have been approved under a BLA by the FDA.

Both Pfizer/BioNTech SE and Moderna Inc.'s COVID-19 vaccines are messenger RNA ("mRNA") vaccines. mRNA vaccines are a relatively new type of vaccine. They protect against infectious disease by providing instructions for cells to generate a spike protein, which triggers an immune response producing antibodies thereby protecting against future infection. mRNA vaccines do not contain an inactivated virus, which is the more historically common approach to vaccine development. Research is ongoing regarding the effectiveness of the mRNA vaccines on the emerging COVID-19 variants. Johnson & Johnson/Janssen Biotech's COVID-19 vaccine is a viral vector vaccine. It uses an adenovirus as a vector of an antigen's genetic code to mimic components of a pathogen (the SARS-CoV-2 virus). Antigens are produced to mimic the pathogen without causing severe disease. When the body encounters antigens, the body will induce a humoral and cellular immune response against the antigen by producing immune cells and antibodies thereby protecting against future infection if the body encounters the actual pathogen in the future.

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COVAXIN for the Prevention of COVID-19

COVAXIN is a whole-virion inactivated COVID-19 vaccine being developed to prevent COVID-19 infection. We are co-developing COVAXIN with Bharat Biotech, a global leader in vaccine innovation, for the prevention of COVID-19 in humans within the U.S. market. Pursuant to the Covaxin Agreement we entered into with Bharat Biotech, 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 Ocugen Covaxin Territory. Under the Covaxin Agreement, we will be solely responsible for such activities for the Ocugen Covaxin Territory.

COVAXIN is formulated with the inactivated SARS-CoV-2 virus, an antigen, and an adjuvant therefore utilizing a historically proven approach to vaccine design. COVAXIN utilizes the whole-virion inactivated SARS-CoV-2 virus to trigger the immune system to create antibodies against multiple antigens. COVAXIN has an antigen concentration of six micrograms and utilizes a toll-like receptor 7/8 agonist molecule (IMG) adsorbed to alum (Algel) as an adjuvant to increase and boost COVAXIN's immunogenicity. COVAXIN has certain characteristics that may be beneficial as compared to the currently authorized vaccines. As the FDA has recognized in its recently updated EUA guidance, the rise of COVID-19 genetic variants has raised concerns that these variants may be able to escape neutralization by vaccines. COVAXIN is designed to fulfill a significant unmet need in the U.S. national arsenal of vaccines against COVID-19. COVAXIN elicits a broad-spectrum immune response (including spike and nucleocapsid proteins) and induces both humoral and cellular responses. Therefore, we believe COVAXIN may be effective against the recently emerging new variants such as the U.K. (B.1.1.7), Brazilian (P.2), and South African (B.1.351) variants, thereby potentially minimizing or eliminating potential viral escape. In an analysis from the National Institute of Virology, serum samples collected from individuals vaccinated with COVAXIN showed similar neutralization titer to the U.K. strain as to the original strain. No statistical difference was observed in neutralizing antibodies titer between the U.K. strain and the original strain. Additionally, the inactivated virus platform is based on safe and proven technology. The inactivated viral vaccine approach is known to be safe in all age groups including infants (e.g., polio vaccine) and is easy to stockpile, store, and distribute as it requires only standard vaccine storage conditions (2-8°C).

The inactivated SARS-CoV-2 virus within COVAXIN is manufactured in a Biosafety Level 3 facility and inactivated using β-propiolactone treatment at a low temperature. As an inactivated virus vaccine, COVAXIN has the advantage of using all the proteins in the virus to elicit the immune response, rather than just spike proteins as in the mRNA and adenovirus vaccines. Compared to those vaccines, an inactivated whole-virion vaccine is expected to produce a more robust response that can elicit memory and cross-react with mutated strains. Once vaccinated with COVAXIN, the immune system can respond to a live infection of SARS-CoV-2. COVAXIN is administered in two doses occurring 28 days apart. COVAXIN is administered into the deltoid muscle of the upper arm.

Approximately 375 healthy adults aged 18 to 55 years were evaluated in the Phase 1 trial in India. Approximately 380 healthy adults and adolescents aged 12 to 65 years were evaluated in the Phase 2 trial in India. The Phase 1 and 2 trials conducted in India reported strong IgG responses against the spike protein, RBD, and the nucleocapsid protein of SARS-CoV-2 along with strong cellular responses. Strong cellular responses are necessary for memory and long-term durability of vaccines. A Phase 3 clinical trial in India began in November 2020 and is ongoing involving approximately 25,800 volunteers aged 18 to 98 years, including 2,433 over the age of 60 and 4,500 with comorbidities. Enrollment in the Phase 3 clinical trial is complete. COVAXIN demonstrated a vaccine efficacy of 81% in the first interim analysis of the Phase 3 clinical trial, and an analysis from the National Institute of Virology indicated potential significant immunogenicity against the U.K. variant and other heterologous strains.

In January 2021, COVAXIN was granted approval for emergency use in India. We are currently evaluating the clinical and regulatory path for COVAXIN in the United States including obtaining EUA from the FDA and, eventually, BLA approval in the U.S. market, as well as our commercialization strategy, if authorized or approved. We have initiated discussions with the FDA regarding the development of COVAXIN. We and Bharat Biotech agreed to share any profits generated from the commercialization of COVAXIN in the United States, with us retaining 45% of such profits, and Bharat Biotech receiving the balance of such profits.

OUR MODIFIER GENE THERAPY PLATFORM AND GENE THERAPY PRODUCT CANDIDATES

We are developing OCU400 using our breakthrough modifier gene therapy platform. OCU400 has received ODD from the FDA for the treatment of certain disease genotypes: NR2E3, CEP290, RHO, and PDE6ß mutation-associated inherited retinal degenerations. OCU400 additionally received OMPD from the European Commission, based on the recommendation of the EMA, for RP and LCA in February 2021, which we believe further supports the potential broad spectrum application of OCU400 to treat many IRDs. We plan to initiate two Phase 1/2a clinical trials for OCU400 in the United States in the second half of 2021, one Phase 1/2a clinical trial for the treatment of the NR2E3 disease genotype and one Phase 1/2a clinical trial for

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the treatment of the RHO disease genotype. We are currently evaluating options to commence OCU400 clinical trials in Europe in 2022. OCU400 is the first product candidate being developed by us with our modifier gene therapy platform utilizing NHRs. We are also utilizing our modifier gene therapy platform for the development of OCU410, a product candidate designed to treat dry AMD through the utilization of nuclear receptor genes RORA. We plan to initiate a Phase 1/2a clinical trial for OCU410 in 2022.

Breakthrough Platform Therapy Based on Nuclear Hormone Receptors

NHRs have long been known to play a critical role in modulating cellular homeostasis by regulating basic biological processes including development, metabolism, circadian cycle, and energy homeostasis. Our modifier gene therapy platform is being designed to target NHRs, which have the potential to restore homeostasis to the retina and to provide therapeutic benefit to patients suffering from IRDs. Moreover, unlike single-gene replacement therapies, which only target one genetic mutation, we believe that our NHR-based approach represents a breakthrough modifier gene therapy platform that has the potential to restore retinal integrity and function across a range of genetically diverse IRDs and other degenerative retinal diseases, leading to multiple potential product opportunities. This approach has shown potential to rescue many genetic defects and may lead to vision-sparing therapies for rare IRDs including a broad spectrum of RP as well as potentially LCA and other forms of retinal and macular degeneration, providing us with significant potential long-term value.

The NHR-based gene therapy platform encompasses the targeted delivery and expression of certain NHRs that are expressed naturally in retinal tissue. Preclinical studies conducted by Dr. Neena Haider and others have shown that NR2E3, a member of the NHR family, is a dual activator and repressor that, with other transcription factors, modulates cell fate and differentiation of rod and cone photoreceptor cells in the eye (Figure 1). The delivery of Nr2e3 in a mouse, lacking a functional Nr2e3 gene, restored the retina structure and function. We believe that NR2E3 may partially or fully rescue photoreceptors, which are responsible for light detection in the retina, from degeneration in patients with IRDs and improve patients' vision.

Figure 1 Schematic representation of the potential mechanism

impactingNR2E3retinal degeneration.

Figure 1 above includes the following definitions: corepressor ("coR"), coactivator ("coA"), enhanced S-cone syndrome ("ESCS"), Goldman Favre syndrome ("GFS"), clumped pigmentary retinal degeneration ("CPRD"), and autosomal dominant retinitis pigmentosa ("adRP"). Rod photoreceptors are displayed in grey and cone photoreceptors are displayed in blue, green, and red.

Dr. Haider’s lab at SERI, an affiliate of Harvard Medical School, and others have shown the preclinical phenotypic outcome results from a mutational load on a biological system that includes the primary mutation and other factors such as modifier alleles impacting the normal homeostatic state. The use of genetic modifiers represents a broadened means of potentially treating a variety of retinal degenerative diseases, as compared to single-gene replacement therapy. While single-gene replacement therapies have shown tremendous promise in rare retinal diseases, they are highly specific and cannot improve a multitude of disease-causing genetic defects. On the other hand, NHRs play a vital role in regulating retinal cell development, maturation, metabolism, visual cycle function, and survival (Figure 2).

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Figure 2 InteractingNR2E3andRORA Associated Gene Networks.

As displayed in Figure 2above,Ingenuity Pathway Analyses ("IPA Analyses") were conducted to evaluate embryonic day 18 targets and post-natal day 30 targets. An IPA Analysis of embryonic day 18 targets (analysis A above) identified nine gene networks with seven biological classifications. An IPA Analysis of post-natal day 30 targets (analysis B above) identified nine gene networks with six biological classifications. The venn diagrams show the unique and overlapping gene targets of both NR2E3 and RORA at embryonic day 18 and post-natal day 30. The comparison of RORA embryonic day 18 and post-natal day 30 or NR2E3 embryonic day 18 and post-natal day 30 show less overlap than RORA and NR2E3 at embryonic day 18 or RORA and NR2E3 at post-natal day 30.

Disease outcome is a result of a primary mutation as well as modifier alleles. NR2E3 is a master regulator of several key pathways in retinal development and function. NR2E3 potentially prevents and reduces disease by resetting the homeostatic state of key gene networks in the presence of a primary mutation (Figure 3).

Figure 3 Schematic representation of potentialNR2E3mediated therapy.

As displayed in Figure 3above, NR2E3 potentially resets key gene networks that contribute to retinal degeneration in RP. Figure 3 above includes the following definitions: photoreceptor cells ("PR") as well as the following gene networks: metabolism ("M"), inflammation, ("I"), oxidative stress ("O"), photoreceptor genes ("P"), and cell survival ("S").

In summary, NR2E3 regulates multiple transcriptional networks, such as cell survival, metabolism, inflammation, and phototransduction, that impact retinal diseases, such as RP. It was also demonstrated preclinically that RORA offers a protective allele in AMD where the loss of photoreceptor cells leads to blindness. NR2E3 regulates the expression of both Nuclear Receptor Subfamily 1 Group D Member 1 ("NR1D1") and RORA. Thus, the nuclear receptors work in overlapping networks to modulate normal retinal development and function. These receptors impact gene expression of hundreds of genes and numerous networks and, as such, may be potent modifiers of retinal disease and degeneration.

NR2E3 Modifier Gene Therapy Demonstrated Efficacy in many IRD models

Efficacy of Nr2e3 was evaluated in five RP models: FVB-Pde6ßrd1/NJ ("rd1"), Rhodopsin null allele ("Rho−/−"), B6.129S6(Cg)-Rhotm1.1Kpal/J ("RhoP23H"), BXD24/TyJ-Cep290rd16/J ("rd16"), and Nr2e3rd7/J ("rd7") following subretinal

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delivery. These models represent a heterogeneous group of RP diseases in humans and are relevant in establishing the modifier role of NR2E3. The effect of Nr2e3 gene therapy was evaluated at both early and late disease states in these animal models using a minimal number of seven animals per experimental group. C57BL6/J ("B6") in these models represents the control.

These animals were dosed with adeno-associated viral ("AAV"): AAV8-Nr2e3 inthesubretinal spaceat post-natal day zero and evaluated at post-natal day 30 (B6 and rd1) or post-natal day 90 to 120 (Rho−/−, RhoP23H, rd16, and rd7) using fundus imaging, electroretinogram ("ERG"), histology, and immunostaining of retinal layers. Considerable improvement was observed in the clinical phenotype for RhoP23H, rd16, and rd7 mice in fundus imaging, though not all models have a contrasting clinical phenotype (Figure 4). Further histological analyses of retinal sections demonstrated improvement in the integrity of the retinal layers, and overall anatomy and morphology of the retina in all of these models (Figure 5). Immunohistochemistry analyses of retina showed that Nr2e3 delivery enhanced the expression of opsin proteins (blue and green) in treated mice in all the models except rd7. In the rd7 model, the disease phenotype starts with a higher number of S-cone and a higher expression of opsin proteins. In this model, Nr2e3 treatments restored the physiological level of opsin proteins in photoreceptors (Figure 6) needed for normal vision. Similarly, treated animals showed improvement in retinal ERG signal, both in photopic (light-adapted) and scotopic (dark-adapted) conditions (Figure 7).

Figure 4:AAV8-Nr2e3 rescues clinical phenotype in multiple mouse models of RP.

Figure 4 above displays the fundus of post-natal day zero injected AAV8-Nr2e3 treated and untreated animals evaluated at post-natal day 30 (B6 and rd1) or post-natal day 90 to 120 (Rho−/−, RhoP23H, rd16, and rd7).

Figure 5: AAV8-Nr2e3 treatment preserves retinal morphology and retinal integrity in RP models.

Analysis A within Figure 5 above displays the hematoxylin and eosin staining of AAV8-Nr2e3 treated and untreated retinas. The white boxes in analysis A indicate the location of the cell count. Analysis B above displays the rescued and un-rescued regions in retinas treated with AAV8-Nr2e3. Analysis C above displays the cell layer numbers of the outer nuclear layer ("ONL") from AAV8-Nr2e3 treated and untreated animals in different RP models.

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Figure 6: AAV8-Nr2e3 preserves cone and rod opsin expression in multiple mouse models of RP.

Figure 6 above displays the immunohistochemistry of post-natal day zero injected AAV8-Nr2e3 to treated and untreated retinas labeled with green opsin, blue opsin, and rhodopsin. These treated and untreated retinas were evaluated at post-natal day 30 (B6 and rd1) or post-natal day 90 to 120 (Rho−/−, RhoP23H, rd16, and rd7). The right panel displays the semiquantitative analysis of cell counts of blue and green opsin-positive photoreceptor cells per 100 micrometers.

Figure 7: Improved ERG responses in AAV8-Nr2e3 treated RP retinas.

Analysis A within Figure 7 above displays the evaluation of photopic (light-adapted) and scotopic (dark-adapted) ERG B-wave amplitudes, which were evaluated at post-natal day 30 (B6 and rd1) or post-natal day 90 to 120 (Rho−/−, RhoP23H, and rd16) in AAV8-Nr2e3 treated and untreated animals. Analysis B above displays the percent increase in ERG B-wave responses in the treated RP models.

The efficacy of Nr2e3 was also evaluated in these animal models at a late disease stage. AAV8-Nr2e3 was injected subretinally at post-natal day 21 and evaluated two to three months post injection in Rho−/−, RhoP23H, rd16, and rd7 mice. Fundus imaging and histological analyses indicated a reduction in retinal degeneration in these models (Figure 8). The improvement in the rescue of retinal layers was between approximately 30% to 80% of the retina, depending on the delivery location and distribution of Nr2e3 following dosing. Approximately three to five layers of ONL cells were preserved in Nr2e3 treated animals compared with zero to one layer for untreated animals. These ONL photoreceptors induce phototransduction in the retina and thereby initiate the vision process. Immunohistochemistry labeling showed enhanced expression of blue and green cone opsins and rhodopsin in photoreceptors of treated groups compared to untreated groups (Figure 9) suggesting preservation of photoreceptors with light absorbing opsins.

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Figure 8: AAV8-Nr2e3 rescues RP degeneration after disease onset.

Figure 8 above displays analysis of animals injected with AAV8-Nr2e3 at post-natal day 21 and evaluated at two to three months post injection. Analysis A above displays the fundus of Rho−/−, RhoP23H, rd16, and rd7. Analysis B above displays the hematoxylin and eosin staining showing partial preservation of photoreceptor cells in treated mutant animals. Analysis C above shows the comparison of cell layer numbers of ONL between AAV8-Nr2e3 treated and untreated animals in the four RP models.

Figure 9: AAV8-Nr2e3 rescues rod and cone opsin expression after disease onset.

Figure 9 above displays the analysis of animals that were injected with AAV8-Nr2e3 at post-natal day 21 and evaluated two to three months after injection. The immunohistochemistry of green opsin, blue opsin, and rhodopsin of treated and untreated animals in Rho−/−, RhoP23H, rd16, and rd7 is shown within the left panel. The semiquantitative analysis of the cell counts of blue and green opsin-positive photoreceptor cells per 50 micrometers of the retina is shown within the right panels.

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Safety of NR2E3 in a Rodent Model

The safety of Nr2e3 was evaluated in healthy mice following subretinal administration. B6 mice were treated with AAV8-Nr2e3-green fluorescent protein ("GFP") fusion construct at post-natal day zero and evaluated after both seven days and one month for any toxic effect as well as expression of Nr2e3-GFP fusion protein in the retina. The expression of the Nr2e3 protein in a mouse retina did not show any detrimental effect on retinal cells, including photoreceptors (Figure 10). Also, there was no difference in retinal anatomy (as indicated by fundus), histology (the cell layers), expression of opsin and rhodopsin proteins (immunohistochemistry), and retinal function (as indicated by ERG recording) between treated and untreated mice (Figure 10). Expression of enhanced GFP-Nr2e3 fusion protein was observed at post-natal day 30 in treated animals. These results confirm that overexpression of the Nr2e3 protein following subretinal injection of AAV8-Nr2e3 was well-tolerated and safe to the retina.

Figure 10: Overexpression of AAV8-Nr2e3 has no detrimental effects on the retina.

The analysis in Figure 10 above utilized a population size of five animals and displays the B6 control AAV8-Nr2e3 treated animals showing no abnormalities. Analysis A above displays the following: fundus, hematoxylin and eosin histology staining, blue opsin, green opsin, and rhodopsin labeling of photoreceptor cells. Analysis B above displays the ERG response of the B6 control in both treated and untreated animals. The animals were injected at post-natal day zero and tissue was collected at post-natal day 30. Analysis C above displays the GFP label of AAV8-Nr2e3-GFP injected at post-natal zero with GFP expression assessed at both post-natal day seven and post-natal day 30.

Overview of Inherited Retinal Diseases and Current Treatment Options

IRDs are caused by genetic mutations that are passed down within families and lead to progressive disease, severe visual impairment, and blindness. Treating these conditions has been a significant challenge due to the sheer volume of potential therapeutic gene targets. Gene replacement therapy is a promising approach to provide a sustained restoration effect of normal retinal function for a mutated gene, but such therapies can only address one gene at a time, limiting their effectiveness. Developing a custom gene therapy for genetic defects in each of the more than 150 known gene defects linked to RP would not only be expensive but also may not be possible due to size, class, or localization that will impact delivery of the gene. Not all genes and disease expressions are amenable to gene therapy, and for the approximately 40% of patients whose genetic mutations remain unknown, there are few or no therapeutic options. Modifier gene therapy to ameliorate multiple forms of RP without requiring knowledge of the mutated gene, may provide a robust and feasible treatment for RP.

RP is a group of heterogeneous, pleiotropic IRDs that affect approximately one in every 4,000 individuals. RP is associated with over 150 gene mutations that affect over 2.0 million individuals worldwide. Currently, there is no cure for RP and over 40% of RP cannot be genetically diagnosed. RP is heterogeneous and varies greatly in age of onset, rate of progression, and even genetic etiology, yet a common pathology of photoreceptor cell degeneration develops.

There is currently no approved treatment which slows or stops the progression of multiple forms of RP. Proposed treatments for RP include gene-replacement therapy, retinal implant devices, retinal transplantation, stem cells, vitamin therapy, and other

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pharmacological treatments. Gene-replacement therapies are promising but are limited to treating just a single mutation and therefore cannot address the multiple mutations implicated by RP. In addition, while gene therapies may provide a new functional gene, they do not necessarily eliminate the underlying genetic defect which may still cause stress and toxic effects. Therefore, the development of gene specific replacement therapy is highly challenging, especially when multiple and unknown genes are involved.

Similar to RP, no or minimal treatment options are available for a large number of other retinal degenerative diseases including dry AMD and LCA. AMD is a degeneration of the macula of the retina that leads to impairment and loss of central vision. AMD is characterized by thickening and loss of normal architecture within the Bruch’s membrane, lipofuscin accumulation in the retinal pigment epithelium ("RPE"), and drusen formation beneath the RPE in the Bruch’s membrane. These deposits consist of complement components, other inflammatory molecules, lipids, lipoproteins B and E, and glycoproteins. Dry AMD involves the slow deterioration of the retina with submacular drusen, atrophy, loss of macular function, and central vision impairment. LCA is a group of IRDs characterized by severe impairment of vision or blindness at birth. LCA is caused by a degeneration and/or dysfunction of photoreceptors in the eye. Luxturna has been approved to treat LCA caused by retinoid isomerohydrolase ("RPE65") gene mutations. No treatment options have been approved by the FDA for LCA caused by mutation in other LCA causing genes.

As a result, there remains a significant unmet medical need for a treatment with application across multiple genetic forms of RP as well as other ocular degenerative diseases, such as dry AMD and LCA.

OCU400 for Inherited Retinal Disorders

OCU400 is our first product candidate being developed with our modifier gene therapy platform. OCU400 is a novel gene therapy product candidate with the potential to be broadly effective in restoring retinal integrity and function across a range of genetically diverse IRDs. OCU400 comprises a functional copy of a NHR gene, NR2E3, delivered to target cells in the retina using an AAV vector that has the potential to be used as a gene therapeutic not only for the treatment of retinal diseases associated with mutations in genes such as NR2E3, RHO, CEP290, and PDE6ß, but also other gene mutations associated with IRDs, including RP and LCA. As a potent modifier gene, expression of NR2E3 within the retina may help reset retinal homeostasis, potentially stabilizing cells and rescuing photoreceptor degeneration. OCU400 has received four ODDs from the FDA for the treatment of the following disease genotypes: NR2E3, RHO, CEP290, and PDE6ß mutation-associated inherited retinal degenerations. OCU400 additionally received OMPD from the European Commission, based on the recommendation of the EMA, for RP and LCA in February 2021, which we believe further supports the potential broad spectrum application of OCU400 to treat many IRDs.

We completed the preclinical studies in multiple animal models of RP using the mouse NHR gene, Nr2e3. In five unique mouse models of RP, treatment with the AAV-NR2E3 gene by subretinal injection effectively prevented the further development of multiple genetically diverse IRDs by protecting photoreceptors from further damage after disease onset. We have completed pilot toxicology studies in the large animal model and have started Good Laboratory Practice ("GLP") toxicology studies and non-GLP biodistribution studies. We have also successfully completed current Good Clinical Practice ("GCP") manufacturing at commercial scale (200 liters) for Phase 1/2a clinical supplies. After the completion of GLP toxicology studies, we are planning to file the IND application to initiate Phase 1/2a clinical trials.

OCU410 for the Treatment of Dry AMD

OCU410 is being developed for the treatment of dry AMD and is our second product candidate using a second candidate gene from our modifier gene therapy platform. OCU410 utilizes an AAV vector for the retinal delivery of the RORA gene. Various genes with AMD are regulated by RORA, which plays a role in numerous indications including the pathology of dry AMD. The RORA protein plays an important role in lipid metabolism and demonstrated an anti-inflammatory role, which we believe could be a potential therapeutic candidate for dry AMD. OCU410 is currently in preclinical development.

NOVEL BIOLOGIC PRODUCT CANDIDATE FOR RETINAL DISEASES

OCU200 is our novel biologic product candidate in preclinical development. OCU200 is a novel fusion protein designed to treat DR, DME, and wet AMD. We had a pre-IND meeting with the FDA in November 2020 and received guidance on IND-enabling preclinical studies to support the anticipated Phase 1/2a clinical trial. We expect to initiate IND-enabling preclinical studies for OCU200 in 2021. We plan to initiate a Phase 1/2a clinical trial for OCU200 in 2022.

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Overview of DR and DME

DR is a complication from diabetes arising from the over-accumulation of glucose, which can block blood vessels in the retina and cut off the blood supply, leading to damage to the blood vessels in the retina. DR is classified as two subtypes: non-proliferative DR and proliferative DR. Non-proliferative DR is the early stage in which blood vessels are not able to grow, blood vessel walls weaken, and nerve fibers in the retina may swell. Proliferative DR is the advanced stage in which damaged blood vessels are closed off, leading to growth of new abnormal blood vessels in the retina. This growth of new abnormal blood vessels in the retina can lead to scar tissue, which can result in the detachment of the retina from the back of the eye.

Complications from DR could lead to DME. In DME, bulges can protrude from the vessel walls, leading to the leakage of fluid and blood into the retina. This leakage results in swelling, or “edema,” in the central part of the retina, the macula, which is the region primarily responsible for central and color vision. DME may occur at any stage of DR, but is more likely to occur later in the disease progression. DME is the most common reason for vision loss for patients with DR.

DR and DME are the most common vision-threatening diseases occurring in diabetic patients. Approximately 7.7 million people are affected with DR and approximately 0.7 million with DME in the United States. The number of people affected by DR and DME is expected to increase as the number of diabetic patients increases, due to poor disease management and lifestyle-related changes.

Currently there are limited treatment options available for DR and DME patients and a significant unmet need for the development of safe and effective therapies. Current first-line treatments for DR and DME include laser photocoagulation, use of anti-vascular endothelial growth factor ("VEGF") therapy, and corticosteroids which are sub-optimally active in these patients. Anti-VEGF therapy and corticosteroids do not work effectively in approximately 50% of patients.

Additionally, current therapies target only one pathway associated with DR and DME, either angiogenesis (development of new blood vessels) with anti-VEGF therapy or inflammation in case of corticosteroid therapy. The development of a therapeutic which targets multiple causative pathways of DR and DME, such as angiogenesis, oxidation, and inflammation, would offer the best treatment option for all of these patients. We believe that OCU200 possesses unique characteristics to target these pathways and has the potential to offer better treatment options for all patients.

Overview of Wet AMD

OCU200 also has the potential to represent a superior treatment option for patients suffering from wet AMD. Most AMD cases begin as dry AMD and may progress towards the advanced “wet” form, which is characterized by penetration of abnormal blood vessels in the retina that leak blood and proteins. The result can be irreversible damage to photoreceptor cells and rapid, severe vision loss, particularly in the center of the field of vision, causing significant function impairment. If left untreated, neovascularization in wet AMD patients typically results in significant vision loss and the formation of a scar under the macular region of the retina. Wet AMD accounts for 90% of all AMD-related blindness.

Wet AMD is a leading cause of blindness in people over the age of 55 in the United States and the European Union. The incidence of wet AMD increases substantially with age, and we expect that the number of cases of wet AMD will increase with the growth of the elderly population in the United States. It has been estimated that approximately 11.0 million patients in the United States have some form of AMD of which, approximately 1.1 million, or 10%, suffer from wet AMD. Approximately 200,000 new cases of wet AMD are diagnosed each year in the United States.

Current therapies for wet AMD focus on reducing neovascularization through the inhibition of a single key regulator, VEGF. Current FDA approved therapeutics for wet AMD include intravitreal injection of either Lucentis or Eylea, which target VEGF. Bevacizumab (Avastin), the parent antibody from which ranibizumab was derived, is also used as an off-label treatment. Though these products have been effective in mitigating the disease symptoms, they have substantial limitations as demonstrated in clinical studies. For example, a significant percentage of patients do not respond to therapy and experience continuous deterioration of their vision. Additionally, the long-term, repeated dosing of anti-VEGF therapy results in reduced effectiveness and approximately 30-50% patients continue to show fluid persistence in the subretinal space, even after one to two years of treatment.

Given the above limitations of these existing treatments, we believe that a substantial unmet medical need still exists for the treatment of DR, DME, and wet AMD.

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OCU200 for the Treatment of DR, DME, and Wet AMD

OCU200 is being developed to treat severely sight-threatening diseases like DR, DME, and wet AMD. Patients affected by these diseases share common symptoms, such as blurriness in vision and progressive vision loss through disease progression. The formation of fragile and leaky new abnormal blood vessels leads to fluid accumulation in and around the retina, causing vision damage.

OCU200 is a novel fusion protein consisting of two human proteins, tumstatin and transferrin, that are already present normally in retinal tissues. OCU200 possesses unique features which enable it to efficiently target leaky blood vessels, regress the existing abnormal blood vessels, and inhibit the growth of new blood vessels in the retina and choroid. Tumstatin, which acts as an anti-VEGF, anti-inflammatory, and anti-oxidative agent, is the active component of OCU200. It binds to integrin receptors, which play a crucial role in disease pathogenesis. Transferrin facilitates the targeted delivery of tumstatin into the retina and choroid and potentially helps increase the interaction between tumstatin and integrin receptors. OCU200 is designed to address the limitations of current therapies by targeting multiple mechanisms associated with ocular neovascularization and inflammation specifically focusing on non-responders to currently available treatment options.

OCU200 demonstrated efficacy in an in-vitro cell culture model where it inhibited new vessel formation. In an animal model for DME and DR (oxygen-induced retinopathy in mice), OCU200 demonstrated comparable efficacy at a significantly lower dose (10 micrograms per eye) compared to existing approved therapy (Eylea, 20 micrograms per eye) in preventing disease manifestation and progression (Figure 11). In animal models for wet AMD (laser induced choroidal neovascularization in mice and rats), OCU200 demonstrated comparable or slightly better activity compared to anti-VEGF control groups in preventing the formation and growth of new leaky blood vessels and subsequent disease symptoms (Figure 11).

Figure 11OCU200 Demonstrated Efficacy in Animal Models for DR, DME, and Wet AMD.

COMPETITION

The biopharmaceutical industry is characterized by rapidly advancing technologies as well as a strong emphasis on intellectual property leading to a highly competitive environment for the development and commercialization of new vaccines and therapeutic products. We face competition with respect to our current product candidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future. We face competition from many different sources, including from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide. Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization.

We face, and will continue to face, intense competition from companies as well as institutions pursing research and development of vaccines, technologies, drugs, or other therapies that would compete with COVAXIN, if authorized and approved in the United States. Our competitors may develop vaccines or effective therapies or other treatment for COVID-19

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more rapidly or more effectively than us. The competitive landscape of potential COVID-19 vaccines and therapies has been rapidly developing since the beginning of the COVID-19 pandemic, with several hundreds of companies claiming to be investigating possible candidates and more than 5,000 studies registered worldwide as investigating COVID-19. We are aware of several competitors developing late-stage COVID-19 vaccines, including Pfizer Inc./BioNTech SE, Moderna, Inc., AstraZeneca PLC, Johnson & Johnson/Janssen Biotech, Inc., and Novavax, Inc. Vaccines developed by Pfizer Inc./BioNTech SE, Moderna, Inc., and Johnson & Johnson/Janssen Biotech have already been granted EUAs by the FDA. We are also aware of others pharmaceutical companies that are working on inactivated virus-based COVID-19 vaccines. Furthermore, the FDA has authorized and many companies are developing therapeutics to treat COVID-19.

The development and commercialization of new therapeutic products is also highly competitive. We are aware of several companies focusing on gene therapies for various ophthalmic indications, including Adverum Biotechnologies, Inc., Applied Genetic Technologies Corporation, MeiraGTx Holdings plc, IVERIC bio, Inc., REGENXBIO Inc., ProQR Therapeutics N.V., Generation Bio Co, Greybug Vision, Inc., and Spark Therapeutics, Inc. (acquired by the Roche Group in 2019). Spark Therapeutics' product Luxturna, which is currently the only gene therapy approved for an IRD in the United States, addresses only one out of at least 150 known mutations of the RPE65 gene. Companies that may compete with our OCU200 product candidate include the Roche Group, Regeneron Pharmaceuticals, Inc., Novartis AG, and Kodiak Sciences Inc. The Roche Group, Regeneron Pharmaceuticals, Inc., and Novartis AG have marketed anti-VEGF products.

Many of our competitors, either alone or with strategic partners, may have significantly greater financial resources to support research and development, manufacturing, preclinical testing, and clinical trials, as well as regulatory and marketing efforts. These organizations also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites, patient registration for clinical trials, and in acquiring technologies necessary for our programs. Early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.

MANUFACTURING

We utilize our in-house expertise and know-how to develop and scale up the manufacturing processes before these processes are transferred to third-party contract manufacturers and testing labs to understand and establish controls of critical process parameters and critical quality attributes. We also have personnel with deep product development experience who actively manage the third-party contract manufacturers producing products that are in our development and commercialization pipeline. In addition, our strategic partners CanSinoBIO and Bharat Biotech have state-of-the-art facilities with significant expertise in manufacturing.

Clinical and Commercial Supply of COVAXIN

In February 2021, we entered into the Covaxin Agreement with Bharat Biotech, pursuant to which we will be responsible for the manufacture of COVAXIN for the Ocugen Covaxin Territory. Bharat Biotech has agreed to provide to us all pre-clinical and clinical data, and to transfer to us 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, including pursuant to any EUA for the Ocugen Covaxin Territory approved by the FDA. In certain circumstances set forth in the Covaxin Agreement, and until we are capable and primarily responsible for the manufacture and supply of COVAXIN for the Ocugen Covaxin Territory, Bharat Biotech has the exclusive right to manufacture COVAXIN for the Ocugen Covaxin Territory and is responsible for manufacturing and supplying clinical testing materials required for our development activities, and all of our requirements of commercial quantities of COVAXIN.

Bharat Biotech has agreed to provide a specified minimum number of doses in calendar year 2021. We and Bharat Biotech will enter into supply agreements setting forth the terms of such supply. We are currently evaluating manufacturing opportunities for COVAXIN in anticipation of the technology transfer from Bharat Biotech. We are in active discussions with manufacturers in the United States to produce a significant number of doses of COVAXIN to support commercialization of the vaccine in the United States, if authorized or approved. For more information, see “—License and Development Agreements—Covaxin Agreement” and see Note 16 in the notes to the consolidated financial statements included in this report.

Clinical Supply of OCU400

In September 2019, we entered into a co-development and commercialization agreement (the “CanSinoBIO Agreement”) with CanSinoBIO with respect to the development and commercialization of the gene therapy product candidate, OCU400, with respect to certain disease indications (the “OCU400 Field”). The CanSinoBIO Agreement also grants CanSinoBIO an exclusive

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option (the “Option”) to obtain a non-exclusive license from us to manufacture Products (defined below) in the OCU400 Field in the CanSinoBIO Territory (defined below) for commercial sale by us or our affiliates in the Ocugen OCU400 Territory (defined below) but not including the United States, subject to the terms of a supply agreement to be negotiated by us and CanSinoBIO upon CanSinoBIO’s exercise of the Option. CanSinoBIO will have an exclusive license under our intellectual property and intellectual property jointly developed by CanSinoBIO and us (the “Joint IP”) to develop, manufacture, and commercialize products containing OCU400 (“Products”) in the OCU400 Field in and for China, Hong Kong, Macau, and Taiwan (the “CanSinoBIO Territory”) and we will maintain exclusive development, manufacturing, and commercialization rights under our intellectual property and have an exclusive license under the Joint IP with respect to Products in the OCU400 Field in and for any global location outside the CanSinoBIO Territory (the “Ocugen OCU400 Territory”). CanSinoBIO will be responsible for all costs for CMC development and manufacture of clinical supplies of OCU400 for all territories. CanSinoBIO will be solely responsible for all costs and expenses of its development activities in the CanSinoBIO Territory and we will be responsible for all costs and expenses of our development activities in the Ocugen OCU400 Territory. CanSinoBIO will pay us an annual royalty between mid-to-high single digits based on net sales of Products in the CanSinoBIO Territory, and we will pay to CanSinoBIO an annual royalty between low-to-mid single digits based on net sales of Products in the Ocugen OCU400 Territory. See Note 4 in the notes to the consolidated financial statements included in this report for additional information.

Clinical Supply of OCU200

In October 2020, we entered into a manufacturing agreement with a contract manufacturing organization for the manufacture of OCU200, our novel biologics product candidate for the treatment of DME, DR, and wet AMD. Under the manufacturing agreement, our manufacturer will manage all CMC and clinical manufacturing activities as well as provide supplies for IND-enabling preclinical studies and our planned Phase 1/2a clinical trials.

LICENSE AND DEVELOPMENT AGREEMENTS

We are party to license agreements under which we license or co-own patents, patent applications, technical information, and other intellectual property for our product candidates: COVAXIN, OCU400, OCU410, and OCU200. Certain diligence and financial obligations are tied to these agreements. We consider the following agreements to be material to our business.

Covaxin Agreement

In February 2021, we 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 U.S. market.

Pursuant to the Covaxin Agreement, 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, a whole-virion inactivated vaccine candidate, for the prevention of COVID-19 in humans in the Ocugen Covaxin Territory. In consideration of the license and other rights granted by Bharat Biotech to us, we and Bharat Biotech agreed to share any profits generated from the commercialization of COVAXIN in the Ocugen Covaxin Territory, with us retaining 45% of such profits, and Bharat Biotech receiving the balance of such profits.

Under the Covaxin Agreement, we and Bharat Biotech will collaborate to develop COVAXIN for our respective territories. Except with respect to U.S. manufacturing under certain circumstances as described below, we have the exclusive right and are 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 us all pre-clinical and clinical data, and to transfer to us 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, including pursuant to any EUA for the Ocugen Covaxin Territory approved by the FDA. Bharat Biotech has agreed to manufacture our supply of COVAXIN pending completion of a technology transfer described in the Covaxin Agreement and has agreed to provide a specified minimum number of doses in calendar year 2021. For more information, see “—Manufacturing—Clinical and Commercial Supply of COVAXIN” and see Note 16 in the notes to the consolidated financial statements included in this report.

License Agreement with The Schepens Eye Research Institute, Inc.

In December 2017, we entered into an exclusive license agreement with SERI, which was amended in January 2021 (as so amended the "SERI Agreement"). The SERI Agreement gives us an exclusive, worldwide, sublicensable license to patent

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rights, biological materials and technical information for NHR genes NR1D1, NR2E3 (OCU400), RORA (OCU410), Nuclear Protein 1, Transcriptional Regulator ("NUPR1"), and Nuclear Receptor Subfamily 2 Group C Member 1 ("NR2C1"). The January 2021 amendment to the SERI Agreement additionally grants us rights in co-owned intellectual property pursuant certain patent applications and provisional patent applications. Under the SERI Agreement, we may make, have made, use, offer to sell, sell, and import licensed products. Under this agreement, we must use commercially reasonable efforts to bring one or more licensed products to market as soon as reasonably practicable.

We have made payments of $0.2 million to SERI pursuant to the terms of the SERI Agreement since the SERI Agreement inception. The SERI Agreement requires us to pay licensing fees for patent rights granted, an annual license maintenance fee, payment of certain regulatory and commercial milestones in the aggregate amount of $16.1 million, and low single-digit percentage royalties on annual net sales of products that fall under the licensed patent rights.

SERI maintains control of patent preparation, filing, prosecution, and maintenance. We are responsible for SERI’s out-of-pocket expenses related to the filing, prosecution, and maintenance of the licensed patent rights. In the event that SERI decides to discontinue the prosecution or maintenance of the licensed patent rights, we have the right, but not the obligation, to file for, or continue to prosecute, maintain, or enforce such licensed patent rights. See Note 4 in the notes to the consolidated financial statements included in this report for additional information.

License Agreement with University of Colorado

In March 2014, we entered into an exclusive license agreement with CU, which was amended in January 2017 and clarified by a letter of understanding in November 2017 (as so amended and clarified, the “CU Agreement”). The CU Agreement gives us an exclusive, worldwide, sublicensable license to patents for OCU200 to make, have made, use, import, offer to sell, sell, have sold, and practice the licensed products in all therapeutic applications. Under the CU Agreement, we must use commercially reasonable efforts to develop, manufacture, sublicense, market, and sell the licensed products. Under the agreement, we have assumed primary responsibility for preparing, filing, and prosecuting broad patent claims for OCU200 for CU's benefit. Further, we have assumed primary responsibility for all patent activities, including all costs associated with the perfection and maintenance of the patents for OCU200.

We have made payments of $0.1 million to CU and issued 0.1 million shares of common stock to CU since the CU Agreement's inception pursuant to the terms of the CU Agreement. The CU Agreement requires the payment for certain regulatory milestones aggregating to $1.5 million, an annual minimum payment beginning the third year after the effective date, low single-digit percentage earned royalties on net sales, and royalties in the mid-teens on sublicense income of OCU200. See Note 4 in the notes to the consolidated financial statements included in this report for additional information.

INTELLECTUAL PROPERTY

We have applied, obtained, and licensed patent protection for our product candidates. We intend to maintain and defend our intellectual property rights to protect our technology, inventions, processes, and improvements that are commercially important to the development of our business. There is no guarantee that any of our current or future intellectual property will advance the commercial success of our product candidates. There is also no guarantee patents will be issued or registered for any pending patent applications or patent applications that we may file in the future. Our commercial success also depends in part on our non-infringement of the patents and proprietary rights of third parties.

As of March 1, 2021, our patent portfolio included a total of eight issued patents in the United States, 37 issued or registered patents in foreign countries, three pending patent applications in the United States, and nine pending patent applications in foreign countries. Our issued or registered patents and pending patent applications include those licensed from SERI and CU. Certain pending patent applications cover multiple of our product candidates. Our intellectual property includes compositions of matter, methods of use, product candidates, and other proprietary technology. As of March 1, 2021, we had exclusive rights or owned rights to: (i) one issued U.S. patent, two pending U.S. patent applications, and four pending foreign patent applications related to OCU400; (ii) two pending U.S patent applications and four pending foreign patent applications related to OCU410; and (iii) one issued U.S. patent, 24 issued or registered foreign patents, one pending U.S. patent application, and six pending foreign patent applications related to OCU200. 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, a whole-virion inactivated vaccine candidate, for the prevention of COVID-19 in the Ocugen Covaxin Territory. In some instances, we may need to license additional patents and trade secrets to commercialize our product candidates in certain territories.

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In addition to patents, we may rely, in some circumstances, on trade secrets to protect our technology. We seek to protect our proprietary technology and processes, and obtain and maintain ownership of certain technologies, in part, by confidentiality and invention assignment agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems.

GOVERNMENT REGULATION AND PRODUCT APPROVAL

Government authorities in the United States, at the federal, state, and local level, and in other countries, extensively regulate, among other things, the research, development, testing, approval, manufacture, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, sales, import, and export of biopharmaceutical and drug products such as those we are developing. In addition, labelers of biopharmaceutical and drug products (the entity owning the National Drug Code listed for a product) participating in Medicaid and Medicare are required to comply with mandatory price reporting, discount, rebate, and other requirements. The processes for obtaining regulatory approvals in the United States and in foreign countries, along with compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources.

FDA Regulation

In the United States, the FDA regulates drug products under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and its implementing regulations. In addition to the FDCA and its implementing regulations, biologic products are regulated under the Public Health Service Act (“PHSA”) and its implementing regulations. The process required by the FDA before product candidates may be marketed in the United States generally involves the following:

•completion of preclinical laboratory tests, animal studies, and formulation studies in compliance with the FDA’s GLP regulations;

•submission to the FDA of an IND, which must become effective before human clinical trials may begin at U.S. clinical trial sites;

•approval by an Institutional Review Board (“IRB”) for each clinical site, or centrally, before each trial may be initiated;

•adequate and well-controlled human clinical trials to establish the safety and efficacy, in the case of a drug product candidate, or safety, purity, and potency, in the case of a biologic product candidate for its intended use, performed in accordance with GCPs;

•development of manufacturing processes to ensure the product candidate’s identity, strength, quality, purity, and potency;

•submission to the FDA of a New Drug Application ("NDA"), in the case of a drug product candidate, or BLA, in the case of a biologic product candidate;

•satisfactory completion of an FDA advisory committee review, if applicable;

•satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the products are produced to assess compliance with current GMPs, and to assure that the facilities, methods, and controls are adequate to preserve the therapeutics’ identity, strength, quality, purity, and potency as well as satisfactory completion of an FDA inspection of selected clinical sites, selected clinical investigators to determine GCP compliance; and payment of user fees; and

•FDA review and approval of the NDA or BLA to permit commercial marketing for particular indications for use.

Preclinical Studies and IND Submission

The testing and approval process of product candidates requires substantial time, effort, and financial resources. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease. Preclinical studies include laboratory evaluation of chemistry, pharmacology, toxicity, and product formulation, as well as animal studies to assess potential safety and efficacy. Such studies must generally be conducted in accordance with the FDA’s GLPs. Prior to commencing the first clinical trial at a U.S. investigational site with a product candidate, an IND sponsor must submit the results of the preclinical tests and preclinical literature, together with manufacturing information, analytical data, any available clinical data or literature, and proposed clinical study protocols among other things, to the FDA as part of an IND.

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An IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, notifies the applicant of safety concerns or questions related to one or more proposed clinical trials and places the trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in FDA authorization to commence a clinical trial. A separate submission to an existing IND must also be made for each successive clinical trial conducted during product development.

Clinical Trials

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with federal regulations and GCP requirements, which include the requirements that all research subjects provide their informed consent in writing for their participation in any clinical trial, as well as review and approval of the study by an IRB. Investigators must also provide certain information to the clinical trial sponsors to allow the sponsors to make certain financial disclosures to the FDA. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the trial procedures, the parameters to be used in monitoring safety, the effectiveness criteria to be evaluated, and a statistical analysis plan. A protocol for each clinical trial, and any subsequent protocol amendments, must be submitted to the FDA as part of the IND. If a product candidate is being investigated for multiple intended indications, separate INDs may also be required. In addition, an IRB at each study site participating in the clinical trial and/or a central IRB must review and approve the plan for any clinical trial, informed consent forms, and communications to study subjects before a study commences at that site. An IRB considers, among other things, whether the risks to individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits, and whether the planned human subject protections are adequate. The IRB must continue to oversee the clinical trial while it is being conducted. Progress reports detailing the results of the clinical trials must also be submitted at least annually to the FDA and the IRB and more frequently if serious adverse events or other significant safety information is found.

The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements or if the trial poses an unexpected serious harm to subjects. The FDA or an IRB may also impose conditions on the conduct of a clinical trial. Clinical trial sponsors may also choose to discontinue clinical trials as a result of risks to subjects, a lack of favorable results, or changing business priorities.

Information about certain clinical trials, including a description of the study and study results, must be submitted within specific timeframes to the National Institutes of Health ("NIH") for public dissemination on their clinicaltrials.gov website. Sponsors or distributors of investigational products for the diagnosis, monitoring, or treatment of one or more serious diseases or conditions must also have a publicly available policy on evaluating and responding to requests for expanded access requests.

The manufacture of investigational drugs and biologics for the conduct of human clinical trials is subject to current GMP requirements. Investigational drugs and biologics and active ingredients and therapeutic substances imported into the United States are also subject to regulation by the FDA. Further, the export of investigational products outside of the United States is subject to regulatory requirements of the receiving country, as well as U.S. export requirements under the FDCA.

In general, for purposes of NDA and BLA approval, human clinical trials are typically conducted in three sequential phases, which may overlap or be combined.

•Phase 1—Studies are initially conducted in healthy human volunteers or subjects with the target disease or condition to test the product candidate for safety, dosage tolerance, structure-activity relationships, mechanism of action, absorption, metabolism, distribution, and excretion. If possible, Phase 1 trials may also be used to gain an initial indication of product effectiveness.

•Phase 2—Controlled studies are conducted in limited subject populations with a specified disease or condition to evaluate preliminary efficacy, identify optimal dosages, dosage tolerance and schedule, possible adverse effects and safety risks, and expanded evidence of safety.

•Phase 3—These adequate and well-controlled clinical trials are undertaken in expanded subject populations, generally at geographically dispersed clinical trial sites, to generate enough data to provide statistically significant evidence of clinical efficacy and safety of the product candidate for approval, to establish the overall risk-benefit profile of the product candidate, and to provide adequate information for the labeling of the product candidate. Typically, two Phase 3 trials are required by the FDA for product approval. Under some limited circumstances, however, the FDA may approve an NDA or BLA based upon a single Phase 3 clinical study.

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The FDA may also require, or companies may conduct, additional clinical trials for the same indication after a product is approved. These so-called Phase 4 studies may be made a condition to be satisfied after approval. The results of Phase 4 studies can confirm or refute the effectiveness of a product candidate, and can provide important safety information.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the product candidate as well as finalize a process for manufacturing the product in commercial quantities in accordance with current GMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, manufacturers must develop methods for testing the identity, strength, quality, potency, and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

There are also various laws and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances in connection with our research. In each of these areas, the FDA and other regulatory authorities have broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals.

Marketing Application Submission, Review by the FDA, and Marketing Approval

Assuming successful completion of the required clinical and preclinical testing, the results of product development, including CMC, non-clinical studies, and clinical trial results, including negative or ambiguous results, as well as positive findings, are all submitted to the FDA, along with the proposed labeling, as part of an NDA, in the case of a drug, or BLA, in the case of a biologic, requesting approval to market the product for one or more indications. In most cases, the submission of a marketing application is subject to a substantial application user fee. These user fees must be paid at the time of the first submission of the application, even if the application is being submitted on a rolling basis. Fee waivers or reductions are available in certain circumstances. One basis for a waiver of the application user fee is if the applicant employs fewer than 500 employees, including employees of affiliates, the applicant does not have an approved marketing application for a product that has been introduced or delivered for introduction into interstate commerce, and the applicant, including its affiliates, is submitting its first marketing application. Product candidates that are designated as orphan products, which are further described below, are also not subject to application user fees unless the application includes an indication other than the orphan indication.

In addition, under the Pediatric Research Equity Act ("PREA"), a BLA or NDA or supplement to a BLA or NDA for a new active ingredient, indication, dosage form, dosage regimen, or route of administration, must contain data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Orphan products are also exempt from the PREA requirements.

The FDA also may require submission of a risk evaluation and mitigation strategy (“REMS”) to ensure that the benefits of the product candidate outweigh the risks. The REMS plan could include medication guides, physician communication plans, and elements to assure safe use, such as restricted distribution methods, patient registries, or other risk minimization tools. An assessment of the REMS must also be conducted at set intervals. Following product approval, a REMS may also be required by the FDA if new safety information is discovered and the FDA determines that a REMS is necessary to ensure that the benefits of the product continue to outweigh the risks.

Once the FDA receives an application, it has 60 days to review the NDA or BLA to determine if it is substantially complete to permit a substantive review, before it accepts the application for filing. The FDA may request additional information. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review.

Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act (“PDUFA”), the FDA has set the review goal of completing its review of 90% of all applications for new molecular entities within 10 months of the 60-day filing date. The FDA also has the review goal of completing its review of 90% of non-new molecular entity marketing applications within 10 months of the agency’s receipt of the application. These review goals are referred to as the PDUFA date. The PDUFA date is only a goal, thus, the FDA does not always meet its PDUFA dates. The review process and the PDUFA date may also be extended if the FDA requests or the sponsor otherwise provides substantial additional information or clarification regarding the submission.

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The FDA may also refer certain applications to an advisory committee. Before approving a product candidate for which no active ingredient (including any ester or salt of an active ingredients) has previously been approved by the FDA, the FDA must either refer that product candidate to an external advisory committee or provide in an action letter, a summary of the reasons why the FDA did not refer the product candidate to an advisory committee. The FDA may also refer other product candidates to an advisory committee if FDA believes that the advisory committee’s expertise would be beneficial. An advisory committee is typically a panel that includes clinicians and other experts, which review, evaluate, and make a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

The FDA reviews applications to determine, among other things, whether a product candidate meets the agency’s approval standards and whether the manufacturing methods and controls are adequate to assure and preserve the product’s identity, strength, quality, potency, and purity. Before approving a marketing application, the FDA typically will inspect the facility or facilities where the product is manufactured, referred to as a Pre-Approval Inspection. The FDA will not approve an application unless it determines that the manufacturing processes and facilities, including contract manufacturers and subcontractors, are in compliance with current GMP requirements and are adequate to assure consistent production of the product within required specifications. Additionally, before approving a marketing application the FDA will inspect one or more clinical trial sites to assure compliance with GCPs.

After evaluating the marketing application and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a Complete Response Letter (“CRL”). A CRL indicates that the review cycle for the application is complete and the application is not ready for approval. It also describes all of the specific deficiencies that the FDA identified. A CRL generally contains a statement of specific conditions that must be met in order to secure final approval of the marketing application, and may require additional clinical or preclinical testing in order for the FDA to reconsider the application. The deficiencies identified may be minor, for example, requiring labeling changes; or major, for example, requiring additional clinical trials. If a CRL is issued, the applicant may either: resubmit the marketing application, addressing all of the deficiencies identified in the letter; withdraw the application; or request an opportunity for a hearing. The FDA has the goal of reviewing 90% of application resubmissions following a CRL in either two or six months of the resubmission date, depending on the kind of resubmission. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA may issue an approval letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications.

Even if the FDA approves a product, it may limit the approved indications or populations for use of the product, require that contraindications, warnings, or precautions be included in the product labeling, including a boxed warning, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a product’s safety and efficacy after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product. The FDA may also not approve label statements that are necessary for successful commercialization and marketing.

After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional labeling claims, are subject to further testing requirements and FDA review and approval. The FDA may also withdraw the product approval if compliance with the pre- and post-marketing regulatory standards are not maintained or if problems occur after the product reaches the marketplace. Further, should new safety information arise, additional testing, product labeling changes, or FDA notification may be required.

Emergency Use Authorization

The speed at which all parties are moving to create, test, and obtain authorization or approval of a vaccine for COVID-19 in the United States is highly unusual, and evolving or changing plans or priorities at the FDA, including changes based on new knowledge of COVID-19 and how the disease affects the human body, may significantly affect the regulatory pathway and timeline for COVAXIN authorization or approval in the United States. COVAXIN was granted approval for emergency use in India. A Phase 3 clinical trial is ongoing in India. The FDA may not accept data from the studies conducted with COVAXIN at clinical trial sites in India and may require us to conduct clinical studies in the United States before considering an application for an EUA. Results from clinical testing may raise new questions and require us to redesign proposed clinical trials, including revising proposed endpoints or adding new clinical trial sites or cohorts of subjects. In addition, the FDA’s analysis of any clinical data may differ from our interpretation and the FDA may require that we conduct additional analysis or trials.

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The FDA has the authority to grant an EUA to allow unapproved medical products to be used in an emergency to diagnose, treat, or prevent serious or life-threatening diseases or conditions when there are no adequate, approved, and available alternatives. If we are granted an EUA for COVAXIN in the United States, we would be able to commercialize COVAXIN without FDA approval. The EUA is only effective for the duration of the COVID-19 public health emergency. The FDA may revoke or terminate the EUA sooner if, for example, we fail to comply with the conditions of authorization or other terms of the EUA or our vaccine is determined to be less effective or safe than it was initially believed to be. We cannot predict how long, if ever, an EUA would remain in place.

Pediatric Exclusivity

Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity for both drugs and biologics, and also Orange Book listed patents in the case of drugs. Conditions for exclusivity include the FDA's determination that information relating to the use of a new drug in the pediatric population may produce health benefits in that population, the FDA making a written request for pediatric studies, and the applicant agreeing to perform and reporting on the requested studies within the statutory timeframe.

Orphan Products

The Orphan Drug Act provides incentives for the development of products for rare diseases or conditions. Specifically, sponsors may apply for and receive ODD if a product candidate is intended to treat rare diseases or conditions, which generally are diseases or conditions affecting less than 200,000 individuals in the United States, or affecting more than 200,000 in the United States and for which there is no reasonable expectation that the cost of developing and making the product available in the United States will be recovered from U.S. sales. ODD must be requested before submitting an NDA or BLA. Additionally, sponsors must present a plausible hypothesis for clinical superiority to obtain ODD if there is a product already approved by the FDA that is considered by the FDA to be the same as the already approved product and is intended for the same indication. This hypothesis must be demonstrated to obtain orphan exclusivity. If granted, prior to product approval, ODD entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs, tax advantages, and certain user-fee waivers. The tax advantages, however, were limited in the 2017 Tax Cuts and Jobs Act. In addition, if a product candidate receives FDA approval for the indication for which it has ODD, the product is generally entitled to orphan exclusivity, which means the FDA may not approve any other application to market the same product for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity. After the FDA grants ODD, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. ODD does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The first NDA or BLA applicant to receive FDA approval for a particular active moiety to treat a particular disease with FDA ODD is entitled to a seven-year exclusive marketing period in the United States for that product, for that indication. During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with Orphan Drug exclusivity by means of greater effectiveness, greater safety, or providing a major contribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Among the other benefits of ODD are tax credits for certain research activities and a waiver of the NDA or BLA application user fee.

Patent Term Restoration

If approved, drug and biologic products may also be eligible for periods of U.S. patent term restoration. If granted, patent term restoration extends the patent life of a single unexpired patent, that has not previously been extended, for a maximum of five years. The total patent life of the product with the extension also cannot exceed fourteen years from the product’ approval date. Subject to the prior limitations, the period of the extension is calculated by adding half of the time from the effective date of an IND to the initial submission of a marketing application, and all of the time between the submission of the marketing application and its approval. This period may also be reduced by any time that the applicant did not act with due diligence.

Special FDA Expedited Review and Approval Programs

The FDA has various programs that are intended to expedite or simplify the process for the development and FDA review of certain products that are intended for the treatment of serious or life threatening diseases or conditions, and demonstrate the potential to address unmet medical needs or present a significant improvement over existing therapy. The purpose of these programs is to provide important new therapeutics to patients earlier than under standard FDA review procedures.

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To be eligible for a Fast Track designation, the FDA must determine, based on the request of a sponsor, that a product candidate is intended to treat a serious or life threatening disease or condition and demonstrates the potential to address an unmet medical need. If Fast Track designation is obtained, sponsors may be eligible for more frequent development meetings and correspondence with the FDA. In addition, the FDA may initiate review of sections of an application before the application is complete. This “rolling review” is available if the applicant provides and the FDA approves a schedule for the remaining information. Whether the FDA is able to commence its review of portions of an application, however, before receipt of the complete submission, depends on a number of factors. In some cases, a Fast Track product may be eligible for accelerated approval or priority review.

The FDA may give a priority review designation to product candidates that are intended to treat serious conditions and, if approved, would provide significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of the serious condition. A priority review means that the goal for the FDA is to review an application within six months, rather than the standard review of 10 months under current PDUFA guidelines.

Drug or biological products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval, which means the FDA may approve the product based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. A drug or biologic candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect of the product. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, will allow the FDA to withdraw the drug or biologic from the market on an expedited basis. All promotional materials for drug or biologic candidates approved under accelerated regulations are subject to prior review by the FDA.

Under the provisions of the Food and Drug Administration Safety and Innovation Act, enacted in 2012, a sponsor can request designation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a product that is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Products designated as breakthrough therapies are eligible for intensive guidance on an efficient development program beginning as early as Phase 1 trials, a commitment from the FDA to involve senior managers and experienced review staff in a proactive collaborative and cross-disciplinary review, rolling review, and the facilitation of cross-disciplinary review.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

Post-approval Requirements

Any products manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements related to manufacturing, recordkeeping, and reporting, including adverse experience reporting, deviation reporting, shortage reporting, and periodic reporting, product sampling and distribution, advertising, marketing, promotion, certain electronic records and signatures, and post-approval obligations imposed as a condition of approval, such as Phase 4 clinical trials, REMS, and surveillance to assess safety and effectiveness after commercialization.

After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing annual program user fee requirements for approved products, excluding orphan products. In addition, manufacturers and other entities involved in the manufacture and distribution of approved therapeutics are required to register their establishments with the FDA and certain state agencies, list their products, and are subject to periodic announced and unannounced inspections by the FDA and these state agencies for compliance with current GMP and other requirements. Manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with current GMPs. Regulatory authorities may undertake regulatory enforcement action, withdraw product approvals, require label modifications, or request product recalls, among other actions, if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.

Changes to the manufacturing process are strictly regulated and often require prior FDA approval or notification before being implemented. FDA regulations also require investigation and correction of any deviations from current GMP and specifications,

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and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain current GMP compliance.

The FDA also strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market. A company can make only those claims relating to a product that are approved by the FDA. Physicians, in their independent professional medical judgment, may prescribe legally available products for unapproved indications that are not described in the product’s labeling and that differ from those tested and approved by the FDA. Biopharmaceutical companies, however, are required to promote their products only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including, but not limited to, criminal and civil penalties under the FDCA and False Claims Act ("FCA"), exclusion from participation in federal healthcare programs, mandatory compliance programs under corporate integrity agreements, suspension and debarment from government contracts, and refusal of orders under existing government contracts.

In addition, the distribution of prescription biopharmaceutical samples is subject to the Prescription Drug Marketing Act (“PDMA”), which regulates the distribution of samples at the federal level. Both the PDMA and state laws limit the distribution of prescription biopharmaceutical product samples and impose requirements to ensure accountability in distribution. Free trial or starter prescriptions provided through pharmacies are also subject to regulations under the Medicaid Drug Rebate Program and potential liability under anti-kickback and false claims laws.

Moreover, the enacted Drug Quality and Security Act imposes obligations on sponsors of biopharmaceutical products related to product tracking and tracing. Among the requirements of this legislation, sponsors are required to provide certain information regarding the products to individuals and entities to which product ownership is transferred, are required to label products with a product identifier, and are required to keep certain records regarding the product. The transfer of information to subsequent product owners by sponsors is also required to be done electronically. Sponsors must also verify that purchasers of the sponsors’ products are appropriately licensed. Further, under this legislation, manufactures have product investigation, quarantine, disposition, and notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products that would result in serious adverse health consequences or death to humans, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death. Similar requirements additionally are and will be imposed through this legislation on other companies within the biopharmaceutical product supply chain, such as distributors and dispensers, as well as certain sponsor licensees and affiliates.

Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in significant regulatory actions. Such actions may include refusal to approve pending applications, license or approval suspension or revocation, imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, cyber letters, modification of promotional materials or labeling, provision of corrective information, imposition of post-market requirements including the need for additional testing, imposition of distribution or other restrictions under a REMS, product recalls, product seizures or detentions, refusal to allow imports or exports, total or partial suspension of production or distribution, FDA debarment, injunctions, fines, consent decrees, corporate integrity agreements, suspension and debarment from government contracts, refusal of orders under existing government contracts, exclusion from participation in federal and state healthcare programs, restitution, disgorgement, civil or criminal penalties including fines and imprisonment, and adverse publicity, among other adverse consequences.

Additional controls for biologics

To help reduce the increased risk of the introduction of adventitious agents, the PHSA emphasizes the importance of manufacturing controls for products whose attributes cannot be precisely defined. The PHSA also provides authority to the FDA to immediately suspend licenses in situations where there exists a danger to public health, to prepare or procure products in the event of shortages and critical public health needs, and to authorize the creation and enforcement of regulations to prevent the introduction or spread of communicable diseases in the United States and between states.

After a BLA is approved, the product may also be subject to official lot release as a condition of approval. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of the product to the FDA together with a release protocol showing the results of all of the manufacturer’s tests performed on the lot. The FDA

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may also perform certain confirmatory tests on lots of some products before releasing the lots for distribution by the manufacturer.

In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products.

Gene therapy products are also subject to the NIH Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules, which require, among other things, that trials involving recombinant or synthetic nucleic acid molecules be reviewed by an Institutional Biosafety Committee (“IBC”). The IBC reviews, approves, and supervises research involving recombinant or synthetic nucleic acid molecules.

In addition to the regulations discussed above, there are a number of additional standards that apply to clinical trials involving the use of gene therapy. The FDA has issued various guidance documents regarding gene therapies, which outline additional factors that the FDA will consider during product development. By example, the FDA recommends that sponsors observe subjects for potential gene therapy-related delayed adverse events for a prolonged period of time.

Fraud and Abuse, Data Privacy and Security, and Transparency Laws and Regulations

Our business activities, including but not limited to, research, marketing, sales, promotion, distribution, medical education, and other activities following product approval will be subject to regulation by numerous federal and state regulatory and law enforcement authorities in the United States in addition to the FDA, including potentially the Department of Justice, the Department of Health and Human Services and its various divisions, including the Centers for Medicare and Medicaid Services (“CMS”) and the Health Resources and Services Administration, the Department of Veterans Affairs, the Department of Defense, and state and local governments. Our business activities must comply with numerous healthcare laws, including but not limited to, anti-kickback and false claims laws and regulations as well as data privacy and security laws and regulations, which are described below, as well as state and federal consumer protection and unfair competition laws. Moreover, to the extent that we license the right to sell our product candidates, if approved, to another entity under that entity’s labeler code, the licensee would have regulatory responsibilities, including healthcare, reimbursement, pricing, and reporting regulatory responsibilities.

The federal Anti-Kickback Statute, which regulates, among other things, marketing practices, educational programs, pricing policies, and relationships with healthcare providers or other entities, prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting, or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order, or the referral to another for the furnishing or arranging for the furnishing of any item or service reimbursable under Medicare, Medicaid, or other federal healthcare programs, in whole or in part. The term “remuneration” has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between biopharmaceutical industry members on one hand and prescribers, purchasers, formulary managers, and beneficiaries on the other. There are certain statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly, and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases, or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of a federal healthcare covered business, including purchases of products paid by federal healthcare programs, the statute has been violated. The Patient Protection and Affordable Care Act of 2010, as amended (the “ACA”), modified the intent requirement under the Anti-Kickback Statute to a stricter standard, such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the ACA also provided that a violation of the federal Anti-Kickback Statute is grounds for the government or a whistleblower to assert that a claim for payment of items or services resulting from such violation constitutes a false or fraudulent claim for purposes of the federal civil FCA.

The federal civil FCA prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to, or approval by, the federal government, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or avoiding, decreasing, or concealing an obligation to pay money to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. The civil FCA has been used to assert liability on the basis of kickbacks and other improper referrals, improperly reported government pricing metrics such as Best Price or Average

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Manufacturer Price, improper use of Medicare provider or supplier numbers when detailing a provider of services, improper promotion of off-label uses not expressly approved by the FDA in a product’s label, and allegations as to misrepresentations with respect to products, contract requirements, and services rendered. In addition, private payors have been filing follow-on lawsuits alleging fraudulent misrepresentation, although establishing liability and damages in these cases is more difficult than under the FCA. Intent to deceive is not required to establish liability under the civil FCA. Civil FCA actions may be brought by the government or may be brought by private individuals on behalf of the government, called “qui tam” actions. If the government decides to intervene in a qui tam action and prevails in the lawsuit, the individual will share in the proceeds from any fines or settlement funds. If the government declines to intervene, the individual may pursue the case alone. The civil FCA provides for treble damages and a civil penalty for each false claim, such as an invoice or pharmacy claim for reimbursement, which can aggregate into millions of dollars. For these reasons, since 2004, FCA lawsuits against biopharmaceutical companies have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements, as much as $3.0 billion, regarding certain sales practices and promoting off label uses. Civil FCA liability may further be imposed for known Medicare or Medicaid overpayments, for example, overpayments caused by understated rebate amounts, that are not refunded within 60 days of discovering the overpayment, even if the overpayment was not caused by a false or fraudulent act. In addition, conviction or civil judgment for violating the FCA may result in exclusion from federal health care programs, and suspension and debarment from government contracts, and refusal of orders under existing government contracts.

The government may further prosecute conduct constituting a false claim under the criminal FCA. The criminal FCA prohibits the making or presenting of a claim to the government knowing such claim to be false, fictitious, or fraudulent and, unlike the civil FCA, requires proof of intent to submit a false claim.

The civil monetary penalties statute is another potential statute under which biopharmaceutical companies may be subject to enforcement. Among other things, the civil monetary penalties statue imposes fines against any person who is determined to have knowingly presented, or caused to be presented, claims to a federal healthcare program that the person knows, or should know, is for an item or service that was not provided as claimed or is false or fraudulent.

Payment or reimbursement of prescription therapeutics by Medicaid or Medicare requires the product’s labeler to submit certified pricing information to CMS. The Medicaid Drug Rebate statute requires labelers, as a condition of payment by Medicaid, to calculate and report price points, which are used to determine Medicaid rebate payments shared between the states and the federal government and Medicaid payment rates for certain therapeutics, to pay quarterly rebates on prescriptions paid by Medicaid, and to provide a discount based on the Medicaid rebate percentage to certain hospitals and clinics under the 340B program. For most therapeutics paid under Medicare Part B, labelers must also calculate and report their Average Sales Price ("ASP"), which is used to determine the Medicare Part B payment rate. In addition, therapeutics covered by Medicaid are subject to an additional inflation penalty which can substantially increase rebate payments. For products approved under a BLA (including biosimilars) or an NDA, the Veterans Health Care Act (“VHCA”) requires labelers, as a condition of payment by Medicaid, to calculate and report to the Veterans Administration (“VA”) a different price called the Non-Federal Average Manufacturing Price, which is used to determine the maximum price that can be charged to certain federal agencies, referred to as the Federal Ceiling Price ("FCP"). Like the Medicaid rebate amount, the FCP includes an inflation penalty. A Department of Defense statute and regulation requires labelers to provide this discount on therapeutics dispensed by retail pharmacies when paid by the TRICARE Program, the health care program for military personnel, retirees, and related beneficiaries. All of these price reporting requirements create risk of submitting false information to the government, and potential FCA liability.

The VHCA also requires labelers of covered therapeutics participating in the Medicaid program to enter into Federal Supply Schedule contracts with the VA through which their covered therapeutics must be sold to certain federal agencies at FCP. This necessitates compliance with applicable federal procurement laws and regulations, including submission of commercial sales and pricing information, and subjects us to contractual remedies as well as administrative, civil, and criminal sanctions. In addition, the VHCA requires labelers participating in Medicaid to agree to provide different mandatory discounts to certain Public Health Service grantees and other safety net hospitals and clinics under the 340B program based on the labelers’s reported Medicaid pricing information. The 340B program has its own regulatory authority to impose sanctions for non-compliance and adjudicate overcharge claims against labelers by the purchasing entities.

The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) also created federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, a healthcare benefit program, regardless of whether the payor is public or private, in connection with the delivery or payment for health care benefits, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing, or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items, or services relating to healthcare matters. Additionally, the ACA

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amended the intent requirement of certain of these criminal statutes under HIPAA so that a person or entity no longer needs to have actual knowledge of the statute, or the specific intent to violate it, to have committed a violation.

The ACA further created new federal requirements for reporting, by applicable drug manufacturers of covered therapeutics, payments and other transfers of value to physicians and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members, including the Physician Payments Sunshine Act.

Further, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and its respective implementing regulations imposes certain requirements on covered entities relating to the privacy, security, and transmission of certain individually identifiable health information, known as protected health information. Among other things, HITECH, through its implementing regulations, makes HIPAA’s security standards and certain privacy standards directly applicable to business associates, defined as a person or organization, other than a member of a covered entity’s workforce, that creates, receives, maintains, or transmits protected health information on behalf of a covered entity for a function or activity regulated by HIPAA. HITECH also strengthened the civil and criminal penalties that may be imposed against covered entities, business associates, and individuals, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, other federal and state laws may govern the privacy and security of health and other information in certain circumstances, many of which differ from each other in significant ways and may not be preempted by HIPAA, thus complicating compliance efforts.

Many states have also adopted laws similar to each of the above federal laws, which may be broader in scope and apply to items or services reimbursed by any third-party payor, including commercial insurers. Certain state laws also regulate sponsors’ use of prescriber-identifiable data. Certain states also require implementation of commercial compliance programs and compliance with the pharmaceutical industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government, or otherwise restrict payments or the provision of other items of value that may be made to healthcare providers and other potential referral sources; impose restrictions on marketing practices; or require drug companies to track and report information related to payments, gifts, and other items of value to physicians and other healthcare providers.

Recently, states have enacted or are considering legislation intended to make drug prices more transparent and deter significant price increases, typically as consumer protection laws. These laws may affect our future sales, marketing, and other promotional activities by imposing administrative and compliance burdens.

If our operations are found to be in violation of any of the laws or regulations described above or any other applicable laws, we may be subject to penalties or other enforcement actions, including criminal and significant civil monetary penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, corporate integrity agreements, suspension and debarment from government contracts, and refusal of orders under existing government contracts, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. Enforcement actions can be brought by federal or state governments, or as “qui tam” actions brought by individual whistleblowers in the name of the government under the civil FCA if the violations are alleged to have caused the government to pay a false or fraudulent claim.

To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.

Coverage and Reimbursement

The commercial success of our product candidates and our ability to commercialize any approved product candidates successfully will depend in part on the extent to which governmental payor programs at the federal and state levels, including Medicare and Medicaid, private health insurers, and other third-party payors provide coverage for and establish adequate reimbursement levels for our product candidates. Government authorities, private health insurers, and other organizations generally decide which therapeutics they will pay for and establish reimbursement levels for healthcare. Medicare is a federally funded program managed by CMS through local fiscal intermediaries and carriers that administer coverage and reimbursement for certain healthcare items and services furnished to the elderly and disabled. Medicaid is an insurance program for certain categories of patients whose income and assets fall below state defined levels and who are otherwise uninsured that is both federally and state funded and managed by each state. The federal government sets general guidelines for Medicaid and each

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state creates specific regulations that govern its individual program, including supplemental rebate programs that restrict coverage to therapeutics on the state Preferred Drug List. Similarly, government laws and regulations establish the parameters for coverage of prescription therapeutics by health plans participating in state exchanges and TRICARE. Some states have also created pharmacy assistance programs for individuals who do not qualify for federal programs. In the United States, private health insurers and other third-party payors often provide reimbursement for products and services based on the level at which the government provides reimbursement through the Medicare or Medicaid programs for such products and services.

In the United States, the European Union, and other potentially significant markets for our product candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which often has resulted in average selling prices lower than they would otherwise be and sometimes at or below the provider’s acquisition cost. In the United States, it is also common for government and private health plans to use coverage determinations to leverage rebates from labelers in order to reduce the plans’ net costs. These restrictions and limitations influence the purchase of healthcare services and products and lower the realization on labelers’ sales of prescription therapeutics. Third-party payors are developing increasingly sophisticated methods of controlling healthcare costs. Third-party payors may limit coverage to specific therapeutic products on an approved list, or formulary, which might not include all of the FDA-approved products for a particular indication or might impose high copayment amounts to influence patient choice. Third-party payors also control costs by requiring prior authorization or imposing other dispensing restrictions before covering certain products and by broadening therapeutic classes to increase competition. Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. Absent clinical differentiators, third-party payors may treat products as therapeutically equivalent and base formulary decisions on net cost. To lower the prescription cost, labelers frequently rebate a portion of the prescription price to the third-party payors. Recently, purchasers and third-party payors have begun to focus on value of new therapeutics and sought agreements in which price is based on achievement of performance metrics.

Federal programs also impose price controls through mandatory ceiling prices on purchases by federal agencies and federally funded hospitals and clinics and mandatory rebates on retail pharmacy prescriptions paid by Medicaid and TRICARE. These restrictions and limitations influence the purchase of healthcare services and products. Legislative proposals to reform healthcare or reduce costs under government programs may result in lower reimbursement for our product candidates or exclusion of our product candidates from coverage. In addition, government programs like Medicaid include substantial penalties for increasing commercial prices over the rate of inflation which can affect realization and return on investment.

Private payors often rely on the lead of the governmental payors in rendering coverage and reimbursement determinations. Therefore, achieving favorable CMS coverage and reimbursement is usually a significant gating issue for successful introduction of a new product. In addition, many government programs as a condition of participation mandate fixed discounts or rebates from labelers regardless of formulary position or utilization, and then rely on competition in the market to attain further price reductions, which can greatly reduce realization on the sale.

Further, the increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the European Union will put additional pressure on product pricing, reimbursement, and utilization, which may adversely affect our future product sales and results of operations. These pressures can arise from rules and practices of managed care groups, competition within therapeutic classes, judicial decisions and governmental laws and regulations related to Medicare, Medicaid, and healthcare reform, biopharmaceutical coverage and reimbursement policies, and pricing in general. Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Sales of our product candidates will therefore depend substantially, both domestically and abroad, on the extent to which the costs of our products will be paid by health maintenance, managed care, pharmacy benefit, and similar healthcare management organizations, or reimbursed by government health administration authorities, such as Medicare and Medicaid, private health insurers, and other third-party payors.

As a result of the above, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our product candidates may not be considered medically necessary or cost-effective, or the rebate percentages required to secure coverage may not yield an adequate margin over cost. Additionally, companies are increasingly finding it necessary to establish bridge programs to assist patients access new therapies during protracted initial coverage determination periods.

Moreover, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved or that significant price concessions will not be required to avoid restrictive conditions. High health plan co-payment requirements may result in patients refusing prescriptions or seeking alternative therapies. Additionally, where a new indication

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has been approved for a drug previously approved under a different NDA or BLA, health plans may cover off-label use of the original drug, even if it cannot be marketed for the new indication. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in therapeutic development. Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our products and product candidates or exclusion of our products and product candidates from coverage. The cost containment measures that healthcare payors and providers are instituting and any healthcare reform could significantly reduce our revenues from the sale of any approved product candidates. We cannot provide any assurances that we will be able to obtain and maintain third-party coverage or adequate reimbursement for our product candidates in whole or in part.

Healthcare Reform Measures

The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals designed to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality, and expanding access. In the United States, the biopharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

For example, the ACA created hybrid payment methodology for biosimilars under Medicare Part B, which covers products administered by physicians in an outpatient setting, intended to neutralize the incentive to purchase higher priced biologics reimbursed at ASP plus 6% of ASP by paying providers ASP of a biosimilar but adding the margin based on ASP of the reference biologic. More recently, the Bipartisan Budget Act extended labeler responsibility for prescription costs in the Medicare Part D coverage gap to biosimilars, which had previously been exempt.

Similarly, the American Recovery and Reinvestment Act of 2009 established funding for the federal government to compare the effectiveness of different treatments for the same illness. The Agency for Healthcare Research and Quality among other things, conducts patient-centered outcome research, develops evidence-based tools and resources on medication therapies, maintains databases of health care related data and standards, and issues periodic reports on specific studies. Although the results of the comparative effectiveness studies are not intended to mandate coverage policies for public or private payors, it is not clear what effect, if any, the organization’s research has had or will have on the sales of any product, if any such product or the condition that it is intended to treat is the subject of a study. It is also possible that comparative effectiveness research demonstrating benefits in a competitor’s product could adversely affect the sales of our product candidates. If third-party payors do not consider our product candidates to be cost-effective compared to other available therapies, they may not cover our product candidates or may severely restrict access, once approved, as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.

OCGN US Equity

OCGN · 10-K · period ended 2020-12-31

Item 1. Business

OCGN US Equity☆

OCGN · 10-K · period ended 2020-12-31

Item 1. Business

OCGN US Equity