S-4 1 d701045ds4.htm S-4 S-4
Table of Contents

As filed with the Securities and Exchange Commission on June 14, 2019

Registration No. 333-                

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

 

 

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Histogenics Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   3842   04-3522315
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

Histogenics Corporation

c/o Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP

One Marina Park Drive, Suite 900

Boston, MA 02210

(781) 312-5013

(Address including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Adam Gridley

President

Histogenics Corporation

c/o Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP

One Marina Park Drive, Suite 900

Boston, MA 02210

(781) 312-5013

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Jonathan Lieber

Interim Chief Financial Officer

Histogenics Corporation

c/o Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
One Marina Park Drive, Suite 900

Boston, MA 02210

(781) 312-5013

 

Marc F. Dupré

Keith J. Scherer

Albert W. Vanderlaan

Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
One Marina Park Drive, Suite 900
Boston, MA 02210
(617) 648-9100

 

Shankar Musunuri, Ph.D., MBA

Chief Executive Officer and Chairman

Ocugen, Inc.

5 Great Valley Parkway, Suite 160

Malvern, PA 19355

(484) 328-4701

 

Stephen A. Jannetta

James W. McKenzie, Jr.

Jacquelynne M. Hamilton

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103

(215) 963-5000

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions under the Merger Agreement described herein.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.  ☐


Table of Contents

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

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 7(a)(2)(B) of the Securities Act.  ☒

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13(e)-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Security Being Registered

 

Amount

to be
Registered (1)

  Proposed
Maximum
Offering Price
Per Share
 

Proposed
Maximum
Aggregate

Offering Price (2)

 

Amount of

Registration Fee (3)

Common stock, $0.01 par value per share

 

637,797,198

  N/A   $6,392,775   $774.80

 

 

(1)

Relates to common stock, $0.01 par value per share, of Histogenics Corporation, a Delaware corporation (“Histogenics”), issuable to holders of common stock, $0.001 par value per share, of Ocugen, Inc., a Delaware corporation (“Ocugen”), in the proposed merger of Restore Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Histogenics, with and into Ocugen (the “merger”). The amount of Histogenics common stock to be registered is based on the estimated number of shares of Histogenics common stock that are expected to be issued pursuant to the merger, after taking into account the expected issuance by Ocugen immediately prior to the merger of 9,148,544 shares of Ocugen common stock (4,574,272 of which will be held in escrow for the benefit of certain accredited investors) pursuant to a securities purchase agreement entered into by and among Ocugen, Histogenics and certain accredited investors dated as of June 13, 2019 (the “Securities Purchase Agreement”), and before taking into account the effect of a reverse stock split of Histogenics common stock, assuming a pre-split exchange ratio of 28.7650 shares of Histogenics common stock for each outstanding share of Ocugen common stock.

(2)

Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f) of the Securities Act of 1933, as amended, based upon the estimated book value of the Ocugen securities to be exchanged in the merger (which such calculation takes into effect the receipt of gross proceeds of approximately $25.0 million by Ocugen pursuant to the closing of the transactions contemplated by the Securities Purchase Agreement, which is expected to occur following the date hereof and prior to or concurrently with the consummation of the merger). Ocugen is a private company, and no market exists for its securities.

(3)

This fee has been calculated pursuant to Section 6(b) of the Securities Act of 1933, as amended.

 

 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Table of Contents

The information in this proxy statement/prospectus/information statement is not complete and may be changed. Histogenics may not sell its securities pursuant to the proposed transactions until the Registration Statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus/information statement is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION, DATED JUNE 14, 2019

PROPOSED MERGER

YOUR VOTE IS VERY IMPORTANT

To the Stockholders of Histogenics Corporation and Ocugen, Inc.:

Histogenics Corporation (“Histogenics”) and Ocugen, Inc. (“Ocugen”) have entered into an Agreement and Plan of Merger and Reorganization, as amended (the “Merger Agreement”), pursuant to which a wholly-owned subsidiary of Histogenics will merge with and into Ocugen, with Ocugen surviving as a wholly-owned subsidiary of Histogenics (the “merger”). Ocugen and Histogenics believe that the merger will result in a clinical-stage biopharmaceutical company focused on developing innovative therapies to address rare and underserved eye diseases.

At the effective time of the merger (the “Effective Time”), each share of common stock of Ocugen, $0.001 par value (“Ocugen common stock”), will be converted into the right to receive 28.7650 shares of common stock of Histogenics, $0.01 par value (“Histogenics common stock”), subject to adjustment for the reverse stock split of Histogenics common stock to be implemented prior to the consummation of the merger as discussed in this proxy statement/prospectus/information statement. Histogenics will assume outstanding and unexercised warrants and options to purchase shares of Ocugen capital stock, and in connection with the merger they will be converted into warrants and options, as applicable, to purchase shares of Histogenics common stock. At the Effective Time, Histogenics’ stockholders will continue to own and hold their existing shares of Histogenics common stock, and all outstanding and unexercised warrants to purchase shares of Histogenics common stock will remain in effect pursuant to their terms. As of immediately prior to the Effective Time, all outstanding and unexercised options to purchase shares of Histogenics common stock will be cancelled and have no further force and effect. In connection with the merger, on June 13, 2019, Ocugen and Histogenics entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain accredited investors (the “Investors”) pursuant to which, among other things, Ocugen agreed to issue to the Investors shares of Ocugen common stock immediately prior to the merger and Histogenics agreed to issue to the Investors warrants to purchase shares of Histogenics common stock on the fifth trading day following the consummation of the merger (the “Investor Warrants”) in a private placement transaction for an aggregate purchase price of approximately $25.0 million (subject to setoff for amounts outstanding of approximately $2.4 million under certain senior secured notes previously issued to certain of the Investors by Ocugen) (the “Pre-Merger Financing”). Immediately after the merger, after giving effect to the Pre-Merger Financing and based on the exchange ratio of 28.7650, current holders of Ocugen’s capital stock and options and warrants to purchase shares of Ocugen common stock, are expected to own, or hold rights to acquire, in the aggregate approximately 86.24% of the fully-diluted common stock of Histogenics, which for these purposes is defined as the outstanding common stock of Histogenics plus Series A Convertible Preferred Stock and outstanding warrants of Histogenics, excluding the Investor Warrants (the “Fully-Diluted Common Stock of Histogenics”), and Histogenics’ current stockholders and warrantholders are expected to own, or hold rights to acquire, in the aggregate approximately 13.76% of the Fully-Diluted Common Stock of Histogenics.

Shares of Histogenics common stock are currently listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “HSGX.” Prior to consummation of the merger, Histogenics intends to file an initial listing application with Nasdaq pursuant to Nasdaq’s “reverse merger” rules. After completion of the merger, Histogenics will be renamed Ocugen, Inc. and expects to trade on Nasdaq under the symbol “OCGN.” On                , 2019, the last trading day before the date of this proxy statement/prospectus/information statement, the closing sale price of Histogenics common stock on Nasdaq was $                per share.

Histogenics is holding a special meeting of its stockholders (the “Histogenics special meeting”) in order to obtain the stockholder approvals necessary to complete the merger, the Pre-Merger Financing and related matters. At the Histogenics special meeting, which will be held at 9:00 a.m., local time, on                , 2019 at the offices of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP located at One Marina Park Drive, Suite 900, Boston, MA 02210, unless postponed or adjourned to a later date, Histogenics will ask its stockholders to, among other things:

 

  1.

approve the Merger Agreement, and the transactions contemplated thereby, including the merger, the issuance of shares of Histogenics common stock to Ocugen’s stockholders pursuant to the terms of the Merger Agreement and the change of control resulting from the merger;


Table of Contents
  2.

approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics to effect a reverse stock split of Histogenics common stock, within a range, as determined by Histogenics’ board of directors, of one new share for every 53 to 67 (or any number in between) shares outstanding;

 

  3.

approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics to change the corporate name of Histogenics from “Histogenics Corporation” to “Ocugen, Inc.”;

 

  4.

approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics to increase the number of authorized shares of Histogenics common stock to a total number of 200,000,000 shares;

 

  5.

approve the issuance of: (a) shares of Histogenics common stock upon the exercise of the Investor Warrants to be issued in the Pre-Merger Financing, and (b) additional shares of Histogenics common stock that may be issued following the closing of the Pre-Merger Financing, in each case pursuant to the Securities Purchase Agreement and as required by and in accordance with Nasdaq Listing Rule 5636;

 

  6.

consider and vote upon an adjournment of the Histogenics special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1 or 2; and

 

  7.

transact such other business as may properly come before the Histogenics special meeting or any adjournment or postponement thereof.

As described in the accompanying proxy statement/prospectus/information statement, certain of Ocugen’s stockholders who in the aggregate own approximately 93% of the outstanding shares of Ocugen common stock (excluding shares of common stock issuable pursuant to the Securities Purchase Agreement), and certain of Histogenics’ stockholders who in the aggregate own approximately 0.5% of the outstanding shares of Histogenics common stock, are parties to voting agreements with Histogenics and Ocugen, whereby such stockholders have agreed to vote their shares in favor of the adoption or approval, among other things, of the Merger Agreement and the approval of the transactions contemplated therein, including the merger, the issuance of shares of Histogenics common stock to Ocugen’s stockholders and the change of control resulting from the merger, subject to the terms of the voting agreements.

In addition, following the registration statement on Form S-4, of which this proxy statement/prospectus/information statement is a part, being declared effective by the U.S. Securities and Exchange Commission (the “SEC”) and pursuant to the conditions of the Merger Agreement and the voting agreements, Ocugen’s stockholders who are party to the voting agreements will each execute an action by written consent of Ocugen’s stockholders, referred to as the written consent, adopting the Merger Agreement, thereby approving the transactions contemplated therein, including the merger. No meeting of Ocugen’s stockholders to adopt the Merger Agreement and approve the merger and related transactions will be held; all of Ocugen’s stockholders will have the opportunity to elect to adopt the Merger Agreement, thereby approving the merger and related transactions, by signing and returning to Ocugen a written consent.

After careful consideration, Histogenics’ board of directors (the “Histogenics Board”) has (i) determined that the merger and all related transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of Histogenics and its stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated therein and (iii) determined to recommend, upon the terms and subject to the conditions set forth in the Merger Agreement, that its stockholders vote to approve the Merger Agreement and the transactions contemplated thereby. The Histogenics Board recommends that Histogenics’ stockholders vote “FOR” Proposal Nos. 1, 2, 3, 4, 5 and 6.

After careful consideration, Ocugen’s board of directors (the “Ocugen Board”) has (i) determined that the merger and all related transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of Ocugen and its stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated therein and (iii) determined to recommend, upon the terms and subject to the conditions set forth in the Merger Agreement, that its stockholders vote to approve the Merger Agreement and the transactions contemplated thereby. The Ocugen Board recommends that each Ocugen stockholder sign and return the written


Table of Contents

consent, indicating its (i) adoption and approval of the Merger Agreement and the transactions contemplated thereby, (ii) acknowledgement that the approval given is irrevocable and that such stockholder is aware of its rights to demand appraisal for its shares pursuant to Section 262 of the General Corporation Law of the State of Delaware (“DGCL”), and that such stockholder has received and read a copy of Section 262 of the DGCL, and (iii) acknowledgement that by its approval of the merger it is not entitled to appraisal rights with respect to its shares in connection with the merger and thereby waives any rights to receive payment of the fair value of its capital stock under the DGCL (collectively, the “Required Ocugen Stockholder Approval”).

More information about Histogenics, Ocugen and the proposed transaction is contained in this proxy statement/prospectus/information statement. Histogenics and Ocugen urge you to read the accompanying proxy statement/prospectus/information statement carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 29.

Histogenics and Ocugen are excited about the opportunities the merger brings to both Histogenics’ and Ocugen’s stockholders, and thank you for your consideration and continued support.

 

Adam Gridley

  

Shankar Musunuri, Ph.D., MBA

President

  

Chief Executive Officer and Chairman

Histogenics Corporation

  

Ocugen, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus/information statement. Any representation to the contrary is a criminal offense.

The accompanying proxy statement/prospectus/information statement is dated                , 2019, and is first being mailed to Histogenics’ and Ocugen’s stockholders on or about                , 2019.


Table of Contents

Histogenics Corporation

c/o Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP

One Marina Park Drive, Suite 900

Boston, MA 02210

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held On                , 2019

Dear Stockholder of Histogenics:

On behalf of the board of directors of Histogenics Corporation, a Delaware corporation (“Histogenics”), we are pleased to deliver this proxy statement/prospectus/information statement for the 2019 special meeting of stockholders of Histogenics (the “Histogenics special meeting”) and for the proposed merger between Histogenics and Ocugen, Inc., a Delaware corporation (“Ocugen”), pursuant to which Restore Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Histogenics (“Merger Sub”), will merge with and into Ocugen, with Ocugen surviving as a wholly-owned subsidiary of Histogenics (the “merger”). In connection with the merger, on June 13, 2019, Ocugen and Histogenics entered into a securities purchase agreement (the “Securities Purchase Agreement”), with certain accredited investors (the “Investors”), pursuant to which, among other things, Ocugen agreed to issue to the Investors shares of Ocugen common stock immediately prior to the merger, and Histogenics agreed to issue to the Investors on the fifth trading day following the consummation of the merger warrants to purchase shares of Histogenics common stock (the “Investor Warrants”) in a private placement transaction for an aggregate purchase price of approximately $25.0 million (subject to setoff for amounts outstanding of approximately $2.4 million under certain senior secured notes previously issued to certain of the Investors by Ocugen) (the “Pre-Merger Financing”). The Histogenics special meeting will be held on                , 2019, at 9:00 a.m. local time at the offices of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP located at One Marina Park Drive, Suite 900, Boston, MA 02210 for the following purposes:

 

  1.

To consider and vote upon a proposal to approve the Agreement and Plan of Merger and Reorganization, dated as of April 5, 2019, by and among Histogenics, Merger Sub, and Ocugen, a copy of which is attached as Annex A-1 to this proxy statement/prospectus/information statement, as amended (the “Merger Agreement”), and the transactions contemplated thereby, including the merger, the issuance of shares of Histogenics common stock to Ocugen’s stockholders pursuant to the terms of the Merger Agreement and the change of control resulting from the merger.

 

  2.

To approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics to effect a reverse stock split of Histogenics common stock, within a range, as determined by Histogenics’ board of directors, of one new share for every 53 to 67 (or any number in between) shares outstanding, in the form attached as Annex D to this proxy statement/prospectus/information statement.

 

  3.

To approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics to change the corporate name of Histogenics from “Histogenics Corporation” to “Ocugen, Inc.” in the form attached as Annex E to this proxy statement/prospectus/information statement.

 

  4.

To approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics to increase the number of authorized shares of Histogenics common stock to a total number of 200,000,000 shares, in the form attached as Annex F to this proxy statement/prospectus/information statement.

 

  5.

To approve the issuance of: (a) shares of Histogenics common stock upon the exercise of the Investor Warrants to be issued in the Pre-Merger Financing, and (b) additional shares of Histogenics common stock that may be issued following the closing of the Pre-Merger Financing, in each case pursuant to the Securities Purchase Agreement and as required by and in accordance with Nasdaq Listing Rule 5636.

 

  6.

To consider and vote upon an adjournment of the Histogenics special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1 or 2.


Table of Contents
  7.

To transact such other business as may properly come before the Histogenics special meeting or any adjournment or postponement thereof.

The board of directors of Histogenics (the “Histogenics Board”) has fixed                 , 2019, as the record date for the determination of stockholders entitled to notice of, and to vote at, the Histogenics special meeting and any adjournment or postponement thereof. Only holders of record of shares of Histogenics common stock at the close of business on the record date are entitled to notice of, and to vote at, the Histogenics special meeting. At the close of business on the record date, Histogenics had                shares of common stock outstanding and entitled to vote. A complete list of such stockholders entitled to vote at the Histogenics special meeting will be available for examination at the Histogenics offices in Boston, Massachusetts during normal business hours for a period of ten days prior to the Special Meeting.

Your vote is important. The affirmative vote of the holders of a majority of the shares of Histogenics common stock entitled to vote and present in person or represented by proxy at the Histogenics special meeting is required for approval of Proposal Nos. 1, 5 and 6. The affirmative vote of the holders of a majority of shares of Histogenics common stock having voting power outstanding on the record date for the Histogenics special meeting is required for approval of Proposal Nos. 2, 3 and 4. Each of Proposal Nos. 1 and 2 are conditioned upon each other. Therefore, the merger cannot be consummated without the approval of Proposal Nos. 1 and 2.

Proposal Nos. 3, 4 and 5 are conditioned upon the consummation of the merger. If the merger is not completed or the stockholders do not approve Proposal No. 3, Histogenics will not change its name to “Ocugen, Inc.” If the merger is not completed or the stockholders do not approve Proposal No. 4, the increase in the number of authorized shares of Histogenics common stock will not be effected. If the merger is not completed or the stockholders do not approve Proposal No. 5, the Pre-Merger Financing will not be effected except that Histogenics’ stockholders’ approval of the Pre-Merger Financing is a condition to the closing of the Pre-Merger Financing. Proposal Nos. 1 and 2 are not conditioned on Proposal Nos. 3, 4 or 5 being approved.

Even if you plan to attend the Histogenics special meeting in person, Histogenics requests that you sign and return the enclosed proxy card to ensure that your shares will be represented at the Histogenics special meeting if you are unable to attend.

THE HISTOGENICS BOARD HAS DETERMINED AND BELIEVES THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS ADVISABLE TO, AND IN THE BEST INTERESTS OF, HISTOGENICS AND ITS STOCKHOLDERS AND HAS APPROVED EACH SUCH PROPOSAL. THE HISTOGENICS BOARD RECOMMENDS THAT HISTOGENICS’ STOCKHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.

By Order of the Histogenics Board of Directors,

Adam Gridley

President

Boston, Massachusetts

            , 2019


Table of Contents

REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus/information statement incorporates important business and financial information about Histogenics that is not included in or delivered with this document. You may obtain this information without charge through the SEC website (www.sec.gov) or upon your written or oral request by contacting Histogenics Corporation, Attention Investor Relations, c/o Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, One Marina Park Drive, Suite 900, Boston, MA 02210 or by calling (781) 312-5013.

You may also request additional copies from Histogenics’ proxy solicitor using the following contact information:

INNISFREE M&A INCORPORATED

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders Call Toll-Free: 888-750-5834

Banks and Brokers Call Collect: 212-750-5833

To ensure timely delivery of these documents, any request should be made no later than                , 2019 to receive them before the special meeting.

For additional details about where you can find information about Histogenics, please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus/information statement.

 

(i)


Table of Contents

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE MERGER

     1  

PROSPECTUS SUMMARY

     9  

SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

     24  

RISK FACTORS

     29  

FORWARD-LOOKING STATEMENTS

     113  

THE SPECIAL MEETING OF HISTOGENICS’ STOCKHOLDERS

     115  

THE MERGER

     120  

THE MERGER AGREEMENT

     173  

AGREEMENTS RELATED TO THE MERGER

     188  

MATTERS BEING SUBMITTED TO A VOTE OF HISTOGENICS’ STOCKHOLDERS

     198  

HISTOGENICS BUSINESS

     210  

OCUGEN BUSINESS

     228  

HISTOGENICS MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     284  

OCUGEN MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     302  

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

     319  

MANAGEMENT PRIOR TO AND FOLLOWING THE MERGER

     319  

EXECUTIVE COMPENSATION OF THE COMBINED COMPANY OFFICERS AWARDS

     341  

RELATED PARTY TRANSACTIONS OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED ORGANIZATION

     347  

DESCRIPTION OF HISTOGENICS’ CAPITAL STOCK

     353  

COMPARISON OF RIGHTS OF HOLDERS OF HISTOGENICS STOCK AND OCUGEN STOCK

     358  

PRINCIPAL STOCKHOLDERS OF HISTOGENICS

     372  

PRINCIPAL STOCKHOLDERS OF OCUGEN

     374  

PRINCIPAL STOCKHOLDERS OF COMBINED ORGANIZATION

     377  

LEGAL MATTERS

     380  

EXPERTS

     380  

WHERE YOU CAN FIND MORE INFORMATION

     380  

TRADEMARK NOTICE

     382  

PROFORMA COMBINED INDEX TO FINANCIAL STATEMENTS

     PF1  

HISTOGENICS CORPORATION INDEX TO FINANCIAL STATEMENTS

     HSGX K-1  

OCUGEN, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     OCGN AUD-1  

ANNEX A-1—AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

     A-1-1  

ANNEX A-2—CONSENT AND AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

     A-2-1  

ANNEX B—OPINION OF HISTOGENICS FINANCIAL ADVISOR DATED JUNE  13, 2019

     B-1  

ANNEX C—APPRAISAL RIGHTS (SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW)

     C-1  

ANNEX D—AMENDMENT TO SIXTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION (REVERSE STOCK SPLIT)

     D-1  

ANNEX E—AMENDMENT TO SIXTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION (HISTOGENICS NAME CHANGE)

     E-1  

ANNEX F—AMENDMENT TO SIXTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION (SHARE INCREASE)

     F-1  

 

(ii)


Table of Contents

QUESTIONS AND ANSWERS ABOUT THE MERGER

Except where specifically noted, the following information and all other information contained in this proxy statement/prospectus/information statement does not give effect to the proposed reverse stock split within a range, as determined by the Histogenics Board, of one new share for every 53 to 67 (or any number in between) shares outstanding, as described in Proposal No. 2 beginning on page 198 in this proxy statement/prospectus/information statement (the “Histogenics Reverse Stock Split”).

The following section provides answers to frequently asked questions about the merger. This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections.

 

Q:

What is the merger?

 

A:

Histogenics, Merger Sub and Ocugen entered into the Agreement and Plan of Merger and Reorganization on April 5, 2019 (the “Original Merger Agreement”). On June 13, 2019, the parties entered into Consent and Amendment No. 1 to Agreement and Plan of Merger and Reorganization, a copy of which is attached as Annex A-2 (the “Merger Agreement Amendment,” and together with the Original Merger Agreement, the “Merger Agreement”). The Merger Agreement contains the terms and conditions of the proposed merger of Histogenics and Ocugen. Under the Merger Agreement, Merger Sub will merge with and into Ocugen, with Ocugen surviving as a wholly-owned subsidiary of Histogenics. This transaction is referred to as “the merger.”

At the effective time of the merger (the “Effective Time”), each share of Ocugen common stock outstanding immediately prior to the Effective Time (excluding certain shares to be canceled pursuant to the Merger Agreement and shares held by stockholders who have exercised and perfected appraisal rights as more fully described in the section entitled “The Merger—Appraisal Rights” in this proxy statement/prospectus/information statement) will be converted into the right to receive 28.7650 shares of Histogenics common stock, subject to adjustment for the Histogenics Reverse Stock Split (the “exchange ratio”). In connection with the merger, on June 13, 2019, Ocugen and Histogenics entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain accredited investors (the “Investors”) pursuant to which, among other things, Ocugen agreed to issue to the Investors shares of Ocugen common stock immediately prior to the merger and Histogenics agreed to issue to the Investors warrants to purchase shares of Histogenics common stock on the fifth trading day following the consummation of the merger (the “Investor Warrants”) in a private placement transaction for an aggregate purchase price of approximately $25.0 million (subject to setoff for amounts outstanding of approximately $2.4 million under certain senior secured notes previously issued to certain of the Investors by Ocugen) (the “Pre-Merger Financing”).

As a result of the merger and after giving effect to the Pre-Merger Financing, based on the exchange ratio of 28.7650, current holders of Ocugen’s capital stock and options and warrants to purchase shares of Ocugen common stock, are expected to own, or hold rights to acquire, in the aggregate approximately 86.24% of the fully-diluted common stock of Histogenics, which for these purposes is defined as the outstanding common stock of Histogenics plus Series A Convertible Preferred Stock and outstanding warrants of Histogenics, excluding the Investor Warrants (the “Fully-Diluted Common Stock of Histogenics”), and Histogenics’ current stockholders and warrantholders are expected to own, or hold rights to acquire, in the aggregate approximately 13.76% of the Fully-Diluted Common Stock of Histogenics. Histogenics will assume outstanding and unexercised warrants and options to purchase shares of Ocugen capital stock, and such securities will be converted into warrants and options, as applicable, to purchase shares of Histogenics common stock.

At the Effective Time, Histogenics’ stockholders will continue to own and hold their existing shares of Histogenics common stock and Series A Convertible Preferred Stock, and all outstanding warrants to purchase shares of Histogenics common stock will remain in effect pursuant to their terms. As of immediately prior to the Effective Time, all outstanding and unexercised options to purchase shares of

 

1


Table of Contents

Histogenics common stock will be cancelled and have no further force and effect. After the completion of the merger, Histogenics will change its corporate name to “Ocugen, Inc.” as required by the Merger Agreement (the “Histogenics Name Change”).

 

Q:

What will happen to Histogenics if, for any reason, the merger does not close?

 

A:

If, for any reason, the merger does not close, the Histogenics Board may elect to, among other things, attempt to sell or otherwise dispose of the various assets of Histogenics, dissolve and liquidate its assets or commence bankruptcy proceedings. If Histogenics decides to dissolve and liquidate its assets, Histogenics would be required to pay all of its debts and contractual obligations, and to set aside certain reserves for potential future claims. There can be no assurances as to the amount or timing of available cash left to distribute to stockholders after paying the debts and other obligations of Histogenics and setting aside funds for reserves.

 

Q:

Why are the two companies proposing to merge?

 

A:

Ocugen and Histogenics believe that the merger will result in a clinical-stage biopharmaceutical company focused on developing innovative therapies to address rare and underserved eye diseases. For a discussion of Histogenics’ and Ocugen’s reasons for the merger, please see the section entitled “The Merger—Histogenics Reasons for the Merger” and “The Merger—Ocugen Reasons for the Merger” in this proxy statement/prospectus/information statement.

 

Q:

Why am I receiving this proxy statement/prospectus/information statement?

 

A:

You are receiving this proxy statement/prospectus/information statement because you have been identified as a stockholder of Histogenics as of the record date, or a stockholder of Ocugen eligible to execute the Ocugen written consent. If you are a stockholder of Histogenics, you are entitled to vote at the 2019 special meeting of stockholders of Histogenics (the “Histogenics special meeting”), which has been called for the purpose of approving the Merger Agreement and the transactions contemplated thereby, including the merger and the issuance of shares of Histogenics common stock pursuant to the Merger Agreement. If you are a stockholder of Ocugen, you are being requested to sign and return the Ocugen written consent to adopt the Merger Agreement and approve the transactions contemplated thereby, including the merger.

This document serves as:

 

   

a proxy statement of Histogenics used to solicit proxies for the Histogenics special meeting;

 

   

a prospectus of Histogenics used to offer shares of Histogenics common stock in exchange for shares of Ocugen’s capital stock in the merger; and

 

   

an information statement of Ocugen used to solicit the written consent of its stockholders for the adoption of the Merger Agreement and the approval of the merger and related transactions.

 

Q:

What is required to consummate the merger?

 

A:

To consummate the merger, Histogenics’ stockholders must approve Proposal Nos. 1 and 2.

Proposal No. 1, the approval of the merger and the issuance of Histogenics common stock pursuant to the Merger Agreement by Histogenics’ stockholders and the change of control resulting from the merger, requires the affirmative vote of the holders of a majority of the shares of Histogenics’ outstanding common stock entitled to vote and present in person or represented by proxy at the Histogenics special meeting. Proposal Nos. 2 and 3, the approval of the amendments to the sixth amended and restated certificate of incorporation of Histogenics to effect the Histogenics Reverse Stock Split and the Histogenics Name Change, each requires the affirmative vote of the holders of a majority of the shares of Histogenics common

 

2


Table of Contents

stock having voting power outstanding on the record date for the Histogenics special meeting. Each of Proposal Nos. 1 and 2 are conditioned upon each other. Therefore, the merger cannot be consummated without the approval of Proposal Nos. 1 and 2. Proposal Nos. 3, 4 and 5 are conditioned upon the consummation of the merger. If the merger is not completed or the stockholders do not approve Proposal No. 3, Histogenics will not change its name to “Ocugen, Inc.” If the merger is not completed or the stockholders do not approve Proposal No. 4, the increase in the number of authorized shares of Histogenics common stock will not be effected. If the merger is not completed or the stockholders do not approve Proposal No. 5, the Pre-Merger Financing will not be effected. Proposal Nos. 1 and 2 are not conditioned on Proposal Nos. 3, 4 or 5 being approved.

The adoption and approval of the Merger Agreement and the transactions contemplated thereby requires the written consent of the holders of a majority of the shares of Ocugen common stock outstanding as of the record date for the written consent.

Certain of Ocugen’s stockholders who in the aggregate own approximately 93% of the outstanding shares of Ocugen common stock (excluding shares of common stock issuable pursuant to the Securities Purchase Agreement), and certain of Histogenics’ stockholders who in the aggregate own approximately 0.5% of the outstanding shares of Histogenics common stock, are parties to voting agreements with Histogenics and Ocugen, whereby such stockholders have agreed, subject to the terms of the voting agreements, to vote their shares in favor of the adoption or approval, among other things, of the Merger Agreement and the transactions contemplated therein, including the merger and the issuance of Histogenics common stock to Ocugen’s stockholders pursuant to the Merger Agreement. In addition, following the registration statement on Form S-4, of which this proxy statement/prospectus/information statement is a part, being declared effective by the U.S. Securities and Exchange Commission (the “SEC”) and pursuant to the conditions of the Merger Agreement, Ocugen’s stockholders who are party to the voting agreements will each execute written consents approving the merger and related transactions. Stockholders of Ocugen, including those who are parties to voting agreements, are being requested to execute written consents providing such approvals.

In addition to the requirement of obtaining the stockholder approvals described above and appropriate regulatory approvals, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived. For a more complete description of the closing conditions under the Merger Agreement, we urge you to read the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” in this proxy statement/prospectus/information statement.

 

Q:

What Proposals are to be voted on at the Histogenics special meeting, other than the merger proposals required in connection with the merger?

 

A:

At the Histogenics special meeting, the holders of Histogenics common stock will also be asked to consider the following proposals, along with any other business that may properly come before the Histogenics special meeting or any adjournment or postponement thereof:

 

   

Proposal No. 3 to approve an amendment to Histogenics’ sixth amended and restated certificate of incorporation to change the corporate name of Histogenics from “Histogenics Corporation” to “Ocugen, Inc.”;

 

   

Proposal No. 4 to approve an amendment to Histogenics’ sixth amended and restated certificate of incorporation to increase the number of authorized shares of Histogenics common stock to a total number of 200,000,000 shares, in the form attached as Annex F to this proxy statement/prospectus/information statement;

 

   

Proposal No. 5 to approve the issuance of: (a) shares of Histogenics common stock upon the exercise of the Investor Warrants to be issued in the Pre-Merger Financing, and (b) additional shares of Histogenics common stock that may be issued following the closing of the Pre-Merger Financing, in each case pursuant to the Securities Purchase Agreement and as required by and in accordance with Nasdaq Listing Rule 5636; and

 

3


Table of Contents
   

Proposal No. 6 to approve an adjournment of the Histogenics special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1 or 2.

The approval of Proposal Nos. 3, 4, 5 and 6 are not conditions to the merger. Proposal Nos. 3, 4 and 5 are each conditioned upon the consummation of the merger via the approval of Proposal Nos. 1 and 2. If the merger is not completed or the stockholders do not approve Proposal No. 3, the change of Histogenics’ name will not become effective. If the merger is not completed or the stockholders do not approve Proposal No. 4, the increase in the number of authorized shares of Histogenics common stock will not be effected. If the merger is not completed or the stockholders do not approve Proposal No. 5, the Pre-Merger Financing will not be effected except that Histogenics’ stockholders’ approval of the Pre-Merger Financing is a condition to the closing of the Pre-Merger Financing. Proposal Nos. 1 and 2 are not conditioned upon any of Proposal Nos. 3, 4, 5 or 6 being approved. All of such proposals, together with the merger proposals, are referred to collectively in this proxy statement/prospectus/information statement as the proposals.

 

Q:

What will Ocugen’s stockholders, warrant holders and option holders receive in the merger?

 

A:

As a result of the merger, and after giving effect to the Pre-Merger Financing, based on the exchange ratio of 28.7650, current holders of Ocugen’s capital stock and options and warrants to purchase shares of Ocugen common stock will become entitled to receive shares, or rights to acquire shares, of Histogenics common stock equal to, in the aggregate, approximately 86.24% of the Fully-Diluted Common Stock of Histogenics.

Histogenics will assume outstanding and unexercised warrants and options to purchase shares of Ocugen capital stock, and in connection with the merger they will be converted into warrants and options, as applicable, to purchase shares of Histogenics common stock, with the number of Histogenics shares subject to such warrant or option, and the exercise price, being appropriately adjusted to reflect the exchange ratio between Histogenics common stock and Ocugen capital stock determined in accordance with the Merger Agreement.

For a more complete description of what Ocugen’s stockholders, warrant holders and option holders will receive in the merger, please see the sections entitled and “The Merger Agreement—Merger Consideration” in this proxy statement/prospectus/information statement.

 

Q:

What will Histogenics’ stockholders, warrant holders and option holders receive in the merger?

 

A:

At the Effective Time, Histogenics’ stockholders will continue to own and hold their existing shares of Histogenics common stock, Series A Convertible Preferred Stock, and all outstanding and unexercised warrants to purchase shares of Histogenics common stock will remain in effect pursuant to their terms. All outstanding and unexercised options to purchase shares of Histogenics common stock will be cancelled for no consideration immediately prior to the Effective Time.

 

Q:

Who will be the directors of Histogenics following the merger?

 

A:

In connection with the merger, the Histogenics Board will be expanded to include a total of seven directors. Pursuant to the terms of the Merger Agreement, all of such directors will be designated by Ocugen.

 

Name

   Age     

Current Principal Affiliation

Shankar Musunuri, Ph.D., MBA

     55      Ocugen Chief Executive Officer, Executive Chairman of the Board, Co-Founder

Martin M. Coyne

     70      Ocugen Director

Uday Kompella, Ph.D.

     52      Ocugen Director

Frank Leo

     63      Ocugen Director

Manish Potti

     33      Ocugen Director

Suha Taspolatoglu, M.D.

     57      Ocugen Director

Junge Zhang

     52      Ocugen Director

 

4


Table of Contents
Q:

Who will be the executive officers of Histogenics immediately following the merger?

 

A:

Immediately following the consummation of the merger, the executive management team of Histogenics is expected to be composed solely of the members of the Ocugen executive management team prior to the merger:

 

Name

   Age     

Position

Shankar Musunuri, Ph.D., MBA

     55      Chief Executive Officer, Executive Chairman of the Board, Co-Founder

Daniel Jorgensen, M.D., M.P.H., MBA

     59      Chief Medical Officer

Rasappa Arumugham, Ph.D.

     67      Chief Scientific Officer

Vijay Tammara, Ph.D.

     59      Vice President, Regulatory & Quality

Kelly Beck, MBA, SPHR, SHRM-SCP, PMP

     42      Vice President, Investor Relations & Administration

 

Q:

As a stockholder of Histogenics, how does the Histogenics Board recommend that I vote?

 

A:

After careful consideration, the Histogenics Board recommends that Histogenics’ stockholders vote:

 

   

“FOR” Proposal No. 1 to approve the Merger Agreement and the transactions contemplated thereby, including the merger, the issuance of shares of Histogenics common stock to Ocugen’s stockholders in the merger and the change of control resulting from the merger;

 

   

“FOR” Proposal No. 2 to approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics to effect the Histogenics Reverse Stock Split;

 

   

“FOR” Proposal No. 3 to approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics to effect the Histogenics Name Change;

 

   

“FOR” Proposal No. 4 to approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics to increase the number of authorized shares of Histogenics common stock to a total number of 200,000,000 shares;

 

   

“FOR” Proposal No. 5 to approve the issuance of: (a) shares of Histogenics common stock upon the exercise of the Investor Warrants to be issued in the Pre-Merger Financing, and (b) additional shares of Histogenics common stock that may be issued following the closing of the Pre-Merger Financing, in each case pursuant to the Securities Purchase Agreement and as required by and in accordance with Nasdaq Listing Rule 5636; and

 

   

“FOR” Proposal No. 6 to adjourn the special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1 or 2.

 

Q:

As a stockholder of Ocugen, how does the Ocugen Board recommend that I vote?

 

A:

After careful consideration, the Ocugen Board recommends that Ocugen’s stockholders execute the written consent indicating their vote in favor of the adoption of the Merger Agreement and the approval of the merger and the transactions contemplated by the Merger Agreement.

 

Q:

What risks should I consider in deciding whether to vote in favor of the merger or to execute and return the written consent, as applicable?

 

A:

You should carefully review the section of this proxy statement/prospectus/information statement entitled “Risk Factors,” which sets forth certain risks and uncertainties related to the merger, risks and uncertainties to which the combined company’s business will be subject, and risks and uncertainties to which each of Histogenics and Ocugen, as an independent company, is subject.

 

5


Table of Contents
Q:

When do you expect the merger to be consummated?

 

A:

We anticipate that the merger will occur during the third quarter of 2019, soon after the Histogenics special meeting to be held on             , 2019 but we cannot predict the exact timing. For more information, please see the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” in this proxy statement/prospectus/information statement.

 

Q:

What are the material U.S. federal income tax consequences of the merger to U.S. Holders of Ocugen shares?

 

A:

Ocugen believes that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, a U.S. Holder (as defined on page 167) of Ocugen common stock should not recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of Ocugen common stock for shares of Histogenics common stock in the merger, except with respect to cash received by a U.S. Holder of Ocugen common stock in lieu of a fractional share of Histogenics common stock.

Please review the information in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” for a more complete description of the material U.S. federal income tax consequences of the merger to U.S. Holders of Ocugen common stock. The tax consequences to you of the merger will depend on your particular facts and circumstances. Please consult your tax advisors as to the specific tax consequences to you of the merger.

 

Q:

What are the material U.S. federal income tax consequences of the Histogenics Reverse Stock Split to Histogenics U.S. Holders?

 

A:

A Histogenics U.S. Holder generally should not recognize gain or loss upon the Histogenics Reverse Stock Split, except to the extent a Histogenics U.S. Holder receives cash in lieu of a fractional share of Histogenics common stock. Please review the information in the section entitled “Proposal No. 2: Approval of the Histogenics Reverse Stock Split—Material U.S. Federal Income Tax Consequences of the Histogenics Reverse Stock Split” for a more complete description of the material U.S. federal income tax consequences of the Histogenics Reverse Stock Split to Histogenics U.S. Holders.

The tax consequences to you of Histogenics Reverse Stock Split will depend on your particular facts and circumstances. Please consult your tax advisors as to the specific tax consequences to you.

 

Q:

What do I need to do now?

 

A:

Histogenics and Ocugen urge you to read this proxy statement/prospectus/information statement carefully, including its annexes and information incorporated herein, and to consider how the merger affects you.

If you are a stockholder of Histogenics, you may provide your proxy instructions in one of four different ways. First, you can mail your signed proxy card in the enclosed return envelope. Second, you may provide your proxy instructions via phone by following the instructions on your proxy card or voting instruction form. Third, you may provide your proxy instructions via the Internet by following the instructions on your proxy card or voting instruction form. Finally, you may vote in person at the Histogenics special meeting, as described below. Please provide your proxy instructions only once, unless you are revoking a previously delivered proxy instruction, and as soon as possible so that your shares can be voted at the Histogenics special meeting.

If you are a stockholder of Ocugen, you may execute and return your written consent to Ocugen in accordance with the instructions provided by Ocugen.

 

Q:

What happens if I do not return a proxy card or otherwise provide proxy instructions, as applicable?

 

A:

If you are a stockholder of Histogenics, the failure to return your proxy card or otherwise provide proxy instructions (a) will reduce the aggregate number of votes required to approve Proposal Nos. 1, 5 and 6, (b)

 

6


Table of Contents
  will have the same effect as voting against Proposal Nos. 2, 3 and 4 and (c) your shares will not be counted for purposes of determining whether a quorum is present at the Histogenics special meeting.

 

Q:

May I vote in person at the special meeting of stockholders of Histogenics?

 

A:

If your shares of Histogenics common stock are registered directly in your name with Histogenics’ transfer agent as of the record date, you are considered to be the stockholder of record with respect to those shares, and the proxy materials and proxy card are being sent directly to you by Histogenics. If you are a stockholder of Histogenics of record, you may attend the Histogenics special meeting and vote your shares in person. Even if you plan to attend the Histogenics special meeting in person, Histogenics requests that you sign and return the enclosed proxy to ensure that your shares will be represented at the Histogenics special meeting if you become unable to attend. If your shares of Histogenics common stock are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in “street name,” and the proxy materials are being forwarded to you by your broker or other nominee together with a voting instruction card. As the beneficial owner, you are also invited to attend the Histogenics special meeting. Because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Histogenics special meeting unless you obtain a proxy from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the Histogenics special meeting.

 

Q:

When and where is the special meeting of Histogenics’ stockholders?

 

A:

The Histogenics special meeting will be held at 9:00 a.m., local time, on              , 2019 at the offices of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP located at One Marina Park Drive, Suite 900, Boston, MA 02210, unless postponed or adjourned to a later date. Subject to space availability, all of Histogenics’ stockholders as of the record date, or their duly appointed proxies, may attend the Histogenics special meeting.

 

Q:

If my Histogenics shares are held in “street name” by my broker, will my broker vote my shares for me?

 

A:

Unless your broker has discretionary authority to vote on certain matters, your broker will not be able to vote your shares of Histogenics common stock without instructions from you. Brokers are not expected to have discretionary authority to vote for any of the Proposals. To make sure that your vote is counted, you should instruct your broker to vote your shares, following the procedures provided by your broker.

 

Q:

May I change my vote after I have submitted a proxy or provided proxy instructions?

 

A:

Histogenics’ stockholders of record, other than those Histogenics’ stockholders who are parties to voting agreements, may change their vote at any time before their proxy is voted at the Histogenics special meeting in one of three ways. First, a stockholder of record of Histogenics can send a written notice to the Secretary of Histogenics stating that it would like to revoke its proxy. Second, a stockholder of record of Histogenics can submit new proxy instructions either on a new proxy card or via the Internet. Third, a stockholder of record of Histogenics can attend the Histogenics special meeting and vote in person. Attendance alone will not revoke a proxy. If a stockholder of Histogenics of record or a stockholder who owns Histogenics shares in “street name” has instructed a broker to vote its shares of Histogenics common stock, the stockholder must follow directions received from its broker to change those instructions.

 

Q:

Who is paying for this proxy solicitation?

 

A:

Histogenics and Ocugen will share equally the cost of printing and filing of this proxy statement/prospectus/information statement and the proxy card. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of Histogenics common stock for the

 

7


Table of Contents
  forwarding of solicitation materials to the beneficial owners of Histogenics common stock. In addition, Histogenics has engaged Innisfree M&A Incorporated, a proxy solicitation firm, to solicit proxies from Histogenics’ stockholders for a fee of $20,000 plus costs associated with solicitation campaigns. Histogenics will also reimburse Innisfree M&A Incorporated for reasonable out-of-pocket expenses. Histogenics will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials.

 

Q:

Who can help answer my questions?

 

A:

If you are a stockholder of Histogenics and would like additional copies, without charge, of this proxy statement/prospectus/information statement or if you have questions about the merger, including the procedures for voting your shares, you should contact Innisfree M&A Incorporated, Histogenics’ proxy solicitor, by telephone at 888-750-5834. Banks and Brokers should contact Innisfree M&A Incorporated by telephone at 212-750-5833.

If you are a stockholder of Ocugen, and would like additional copies, without charge, of this proxy statement/prospectus/information statement or if you have questions about the merger, including the procedures for voting your shares, you should contact:

Ocugen, Inc.

5 Great Valley Parkway, Suite 160

Malvern, PA 19355

(484) 328-4701

Attn: Kelly Beck

 

8


Table of Contents

PROSPECTUS SUMMARY

This summary highlights selected information from this proxy statement/prospectus/information statement and may not contain all of the information that is important to you. To better understand the merger, the proposals being considered at the Histogenics special meeting and Ocugen’s stockholder actions that are the subject of the written consent, you should read this entire proxy statement/prospectus/information statement carefully, including the Original Merger Agreement attached as Annex A-1 and Merger Agreement Amendment attached as Annex A-2 and the other annexes to which you are referred herein. For more information, please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus/information statement.

The Companies

Histogenics Corporation

c/o Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP

One Marina Park Drive, Suite 900

Boston, MA 02210

(781) 312-5013

Attn: Adam Gridley

Histogenics historically developed restorative cell therapies that may offer rapid-onset pain relief and restored function. Histogenics’ technology platform has the potential to be used for a broad range of restorative cell therapy indications.

Ocugen, Inc.

5 Great Valley Parkway, Suite 160

Malvern, PA 19355

(484) 328-4701

Attn: Shankar Musunuri

Ocugen is clinical-stage biopharmaceutical company focused on discovering, developing and commercializing a pipeline of innovative therapies that address rare and underserved eye diseases. Ocugen’s broad pipeline of promising ophthalmology programs in development include:

Modifier Gene Therapy Platform

Ocugen is developing a modifier gene therapy platform for unmet medical needs in the area of retinal diseases, including inherited retinal diseases (“IRDs”). Ocugen’s modifier gene therapy platform is novel in that it targets nuclear hormone receptor (“NHR”) genes that have the potential to restore homeostasis to the retina and may target multiple genes that are associated with a range of IRDs. Unlike single-gene replacement therapies, which only target one genetic mutation, Ocugen believes that its gene therapy platform, through its use of NHRs, may impact multiple genes that are associated with a range of genetically diverse diseases. Ocugen’s first gene therapy candidate, OCU400, received Orphan Drug Designation (“ODD”) from the Food and Drug Administration (the “FDA”), for the treatment of NR2E3 mutation-associated retinal degenerative disease using an adeno-associated virus vector. Ocugen plans to initiate a Phase 1/2a clinical trial for OCU400 in the next two years.

Ocular Surface Disease Programs

 

   

Ocugen has a late-stage, Phase 3 program, OCU300, that has also received ODD from the FDA. OCU300 is a small molecule therapeutic currently in Phase 3 clinical development for patients with



 

9


Table of Contents
 

ocular graft-versus-host disease (“oGVHD”), and consists of FDA-approved brimonidine tartrate formulated as a topical nanoemulsion based on Ocugen’s OcuNanoE™ technology. Ocugen is the first and only company to receive ODD for the treatment of oGVHD.

 

   

Ocugen has completed a Phase 3 clinical trial for OCU310 (brimonidine 0.2%, OcuNanoE™) for the treatment of dry eye disease (“DED”) that was initiated in September 2018 with the first patient dosed in December 2018. Although the study showed that OCU310 is safe and well-tolerated, it did not meet its co-primary endpoints for symptom and sign. However, a pre-specified exploratory efficacy endpoint of reduction in redness (sign) from the baseline visit, measured by Validated Bulbar Redness score, was statistically significantly better for OCU310 relative to placebo at both Day 14 and Day 28. Post-hoc analysis of the Phase 3 clinical trial is ongoing, subsequent to which a consultation with the FDA will be undertaken. Ocugen is evaluating its options and timing for the continued development of OCU310, including partnering for future clinical trials.

Retinal Disease Programs

 

   

Ocugen is developing OCU200, a novel fusion protein that is currently in preclinical development for treating wet age-related macular degeneration (“wet AMD”). Ocugen expects to initiate a Phase 1/2 clinical trial for OCU200 within the next two years. In addition, Ocugen plans to expand the therapeutic applications of OCU200 beyond wet AMD.

 

   

Ocugen’s novel biologic, OCU100, for the treatment of retinitis pigmentosa (“RP”) has received ODD in the United States and the European Union.

Restore Merger Sub, Inc.

Merger Sub is a wholly-owned subsidiary of Histogenics, and was formed solely for the purposes of carrying out the merger.

The Merger (see page 120)

If the merger is completed, Merger Sub will merge with and into Ocugen, with Ocugen surviving as a wholly-owned subsidiary of Histogenics.

At the Effective Time, each share of Ocugen common stock outstanding immediately prior to the Effective Time (excluding certain shares to be canceled pursuant to the Merger Agreement and shares held by stockholders who have exercised and perfected appraisal rights as more fully described in the section entitled “The Merger—Appraisal Rights” in this proxy statement/prospectus/information statement) will be converted into the right to receive 28.7650 shares of Histogenics common stock, subject to adjustment for the Histogenics Reverse Stock Split (the “exchange ratio”).

Immediately after the merger, after giving effect to the Pre-Merger Financing and based on the exchange ratio of 28.7650, current holders of Ocugen’s capital stock and options and warrant to purchase shares of Ocugen common stock, are expected to own, or hold rights to acquire, in the aggregate approximately 86.24% of the Fully-Diluted Common Stock of Histogenics, and Histogenics’ current stockholders and warrantholders are expected to own, or hold rights to acquire, in the aggregate approximately 13.76% of the Fully-Diluted Common Stock of Histogenics. Histogenics will assume outstanding and unexercised warrants and options to purchase shares of Ocugen capital stock, and such securities will be converted into warrants and options, as applicable, to purchase shares of Histogenics common stock. On May 8, 2019, Histogenics entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Medavate Corp., a Colorado corporation (“Medavate”), pursuant to which Histogenics has agreed to sell substantially all of its assets relating to its NeoCart program,



 

10


Table of Contents

including, without limitation, intellectual property, business and license agreements and clinical trial data, to Medavate in return for a cash payment of $6.5 million (the “Asset Consideration”), conditioned upon the consummation of the merger (the “Asset Sale”).

For a more complete description of the exchange ratio, please see the section entitled “The Merger Agreement” in this proxy statement/prospectus/information statement.

The closing of the merger will occur no later than the second business day after the last of the conditions to the merger has been satisfied or waived (other than those conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of each such conditions), or at such other time as Histogenics and Ocugen agree. Histogenics and Ocugen anticipate that the consummation of the merger will occur in the third quarter of 2019. However, because the merger is subject to a number of conditions, neither Histogenics nor Ocugen can predict exactly when the closing will occur or if it will occur at all. After completion of the merger, assuming that Histogenics receives the required stockholder approval of Proposal No. 3, Histogenics will be renamed “Ocugen, Inc.”

Reasons for the Merger (see page 145)

The merger will produce a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing a pipeline of innovative therapies that address rare and underserved eye diseases. Histogenics and Ocugen believe that the combined company will have the following characteristics found in successful biotech companies:

 

   

Broad Product Pipeline. The combined company will focus on developing innovative therapies to treat rare and underserved eye diseases through a combination of therapeutic approaches that utilize small molecules, biologics, and gene therapies. Ocugen has developed a broad pipeline which includes OCU300, an orphan drug candidate for oGVHD, and OCU310 for DED; and its modifier gene therapy platform and OCU400, a gene augmentation therapy for patients with inherited retinal diseases caused by mutations in the NR2E3 gene, which recently received ODD from the FDA.

 

   

Novel Biologic Programs. The combined company has made pre-clinical progress toward its retinal disease programs which includes novel biologic therapies for wet AMD as well as for RP.

 

   

Management Team. The combined company will be led by the experienced senior management from Ocugen.

 

   

Cash Resources. The combined company is expected to have approximately $25 million in cash and cash equivalents at the closing of the merger after giving effect to the Pre-Merger Financing and the Asset Sale, which Ocugen believes is sufficient to enable Ocugen to implement its near-term business plans following the merger.

Each of Histogenics’ and Ocugen’s respective board of directors also considered other reasons for the merger, as described herein. For example, the Histogenics Board considered, among other things:

 

   

the strategic alternatives of Histogenics to the merger, including the discussions that Histogenics’ executive management and the Histogenics Board previously conducted with other potential strategic partners and investors;

 

   

the results of substantial efforts made over a three-month period following Histogenics’ announcement of its disappointing results from its NeoCart Phase 3 clinical trial in September 2018 to solicit strategic alternatives for Histogenics to the merger, including the discussions that Histogenics’ executive management had during this period with other strategic transaction candidates as further discussed in the section titled “The Merger—Background of the Merger”;



 

11


Table of Contents
   

the results of substantial efforts made over a three-month period following Histogenics’ announcement of the FDA decision to require another clinical trial of NeoCart in December 2018 to solicit strategic alternatives for Histogenics to the merger, including the discussions that Histogenics’ executive management and Canaccord Genuity (as defined below) had on Histogenics’ behalf during this period with other strategic transaction candidates (including reverse merger transactions and asset sales) as further discussed in the section titled “The Merger—Background of the Merger”;

 

   

the risks associated with, and uncertain value and costs to stockholders of, winding down operations of Histogenics; and

 

   

the risks of continuing to operate Histogenics on a stand-alone basis, including developing its NeoCart program and the need to raise additional funding and expend significant resources to advance this portfolio and to rebuild its infrastructure and management to continue its operations.

In addition, the Ocugen Board approved the merger based on a number of factors, including the:

 

   

potential increased access to sources of capital and a broader range of investors to support the clinical development of its products than it could otherwise obtain if it continued to operate as a privately held company;

 

   

potential to provide its current stockholders with greater liquidity by owning stock in a public company;

 

   

Ocugen Board’s belief that no alternatives to the merger were reasonably likely to create greater value for Ocugen’s stockholders, or enable accelerated investment in Ocugen’s portfolio, after reviewing the various strategic options to enhance stockholder value that were considered by the Ocugen Board;

 

   

cash resources of the combined organization expected to be available at the closing of the merger after giving effect to the Pre-Merger Financing; and

 

   

Ocugen’s expectation that the merger will be treated as a reorganization for U.S. federal income tax purposes.

Opinion of the Histogenics Financial Advisor (see page 151)

The Histogenics Board engaged Canaccord Genuity LLC (“Canaccord Genuity”) to provide financial advisory services and to assist the Histogenics Board in the consideration and evaluation of potential strategic transactions on Histogenics’ behalf. At a meeting of the Histogenics Board held on June 13, 2019 to evaluate the merger, Canaccord Genuity delivered to the Histogenics Board an oral opinion, which opinion was confirmed by delivery of a written opinion, dated June 13, 2019, to the effect that, as of that date and based upon and subject to certain assumptions, factors and qualifications set forth in the written opinion, the exchange ratio was fair, from a financial point of view, to Histogenics. Canaccord Genuity did not express any view on, and its opinion did not address, any other term or aspect of any other agreements or arrangements contemplated by the Merger Agreement or entered into in connection with the merger, including, without limitation, the Pre-Merger Financing or the Asset Sale.

The full text of Canaccord Genuity’s written opinion is attached to this proxy statement/prospectus/information statement as Annex B and is incorporated into this proxy statement/prospectus/information statement by reference. The description of Canaccord Genuity’s opinion set forth in this proxy statement/prospectus/information statement is qualified in its entirety by reference to the full text of such opinion. Histogenics stockholders are encouraged to read Canaccord Genuity’s opinion carefully and in its entirety for a description of the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Canaccord Genuity in connection with its opinion. Canaccord Genuity’s opinion was addressed to



 

12


Table of Contents

the Histogenics Board, was only one of many factors considered by the Histogenics Board in its evaluation of the merger and only addresses the fairness, from a financial point of view and as of the date of the opinion, to Histogenics of the exchange ratio. Canaccord Genuity’s opinion does not address the relative merits of the merger as compared to other business strategies or transactions that might be available to Histogenics, nor does it address the underlying business decision of Histogenics to proceed with the merger. Canaccord Genuity’s opinion was directed to and for the information of the Histogenics Board only (in its capacity as such) in connection with its evaluation of the merger and does not constitute advice or a recommendation to the Histogenics Board or any other person as to how the Histogenics Board or such person should vote with respect to the merger or otherwise act on any other matter with respect to the merger.

For a more complete description, see the section of this proxy statement/prospectus/information statement captioned “The Merger—Opinion of the Histogenics Financial Advisor.”

Material U.S. Federal Income Tax Consequences of the Merger (see page 165)

Ocugen believes that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Accordingly, a U.S. Holder (as defined on page 167) of Ocugen common stock is not expected to recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of Ocugen common stock for shares of Histogenics common stock in the merger, except with respect to cash received by a U.S. Holder of Ocugen common stock in lieu of a fractional share of Histogenics common stock.

Please review the information in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” for a more complete description of the material U.S. federal income tax consequences of the merger to U.S. Holders of Ocugen common stock. The tax consequences to you of the merger will depend on your particular facts and circumstances. Please consult your tax advisors as to the specific tax consequences to you of the merger.

Material U.S. Federal Income Tax Consequences of the Histogenics Reverse Stock Split (see pages 202 and 203)

A Histogenics U.S. Holder generally should not recognize gain or loss upon the Histogenics Reverse Stock Split, except to the extent a Histogenics U.S. Holder receives cash in lieu of a fractional share of Histogenics common stock. Please review the information in the section entitled “Proposal No. 2: Approval of the Histogenics Reverse Stock Split—Material U.S. Federal Income Tax Consequences of the Histogenics Reverse Stock Split” for a more complete description of the material U.S. federal income tax consequences of the Histogenics Reverse Stock Split to Histogenics U.S. Holders.

The tax consequences to you of the Histogenics Reverse Stock Split will depend on your particular facts and circumstances. Please consult your tax advisors as to the specific tax consequences to you.

Overview of the Merger Agreement

Merger Consideration (see page 173)

At the Effective Time, each share of Ocugen common stock outstanding immediately prior to the Effective Time (excluding certain shares to be canceled pursuant to the Merger Agreement and shares held by stockholders who have exercised and perfected appraisal rights as more fully described in the section entitled “The Merger—Appraisal Rights” in this proxy statement/prospectus/information statement) will automatically be converted into the right to receive 28.7650 shares of Histogenics common stock, subject to adjustment for the Histogenics Reverse Stock Split (the “exchange ratio”).



 

13


Table of Contents

Immediately after the merger, after giving effect to the Pre-Merger Financing and based on the exchange ratio of 28.7650, current holders of Ocugen’s capital stock and options and warrant to purchase shares of Ocugen common stock, are expected to own, or hold rights to acquire, in the aggregate approximately 86.24% of the Fully-Diluted Common Stock of Histogenics, and Histogenics’ current stockholders and warrantholders are expected to own, or hold rights to acquire, in the aggregate approximately 13.76% of the Fully-Diluted Common Stock of Histogenics. Histogenics will assume outstanding and unexercised warrants and options to purchase shares of Ocugen capital stock, and such securities will be converted into warrants and options, as applicable, to purchase shares of Histogenics common stock. On May 8, 2019, Histogenics entered into the Asset Purchase Agreement with Medavate, pursuant to which Histogenics will sell substantially all of its assets relating to its NeoCart program, including, without limitation, intellectual property, business and license agreements and clinical trial data, to Medavate in return for the Asset Consideration, conditioned upon the consummation of the merger.

The Merger Agreement does not include a price-based termination right, and there will be no adjustment to the total number of shares of Histogenics common stock that Ocugen’s stockholders will be entitled to receive for changes in the market price of Histogenics common stock after the date the Merger Agreement was signed. Accordingly, the market value of the shares of Histogenics common stock issued pursuant to the merger will depend on the market value of the shares of Histogenics common stock at the time the merger closes, and could vary significantly from the market value on the date of this proxy statement/prospectus/information statement.

Treatment of Histogenics’ Series A Convertible Preferred Stock, Stock Options and Warrants (see page 174)

The number of shares of common stock underlying each outstanding shares of Series A Convertible Preferred Stock will be adjusted to account for the Histogenics Reverse Stock Split. Prior to the closing of the merger, the Histogenics Board will adopt appropriate resolutions and take all other actions necessary and appropriate to provide that each unexpired and unexercised option to purchase Histogenics common stock will be cancelled in full effective as of immediately prior to the Effective Time. The number of shares of common stock underlying each warrant and the exercise price for such warrants will be adjusted to account for the Histogenics Reverse Stock Split. The terms governing the Series A Convertible Preferred Stock and warrants to purchase Histogenics common stock will otherwise remain in full force and effect following the closing of the merger.

Treatment of Ocugen’s Stock Options and Warrants (see page 175)

Pursuant to the Merger Agreement, at the Effective Time:

 

   

each option to purchase shares of Ocugen common stock that is outstanding and unexercised immediately prior to the Effective Time granted under the Ocugen, Inc. 2014 Stock Option Plan, whether or not vested, will be assumed by Histogenics and will become an option to purchase that number of shares of Histogenics common stock equal to the product obtained by multiplying (i) the number of shares of Ocugen common stock that were subject to such option immediately prior to the Effective Time by (ii) the exchange ratio, rounded down to the nearest whole share. The per share exercise price for shares of Histogenics common stock issuable upon exercise of each Ocugen option assumed by Histogenics shall be determined by dividing (a) the per share exercise price of Ocugen common stock subject to such Ocugen option, as in effect immediately prior to the Effective Time, by (b) the exchange ratio, rounded up to the nearest whole cent. Any restriction on the exercise of any Ocugen option assumed by Histogenics will continue in full force and effect and the term, exercisability, vesting schedule and other provisions of such Ocugen option shall otherwise remain unchanged; and

 

   

each warrant to purchase shares of Ocugen capital stock outstanding and unexercised immediately prior to the Effective Time will be assumed by Histogenics and will become a warrant to purchase that number of shares of Histogenics common stock equal to the product obtained by multiplying (i) the



 

14


Table of Contents
 

number of shares of Ocugen common stock that were subject to such warrant immediately prior to the Effective Time by (ii) the exchange ratio, rounded down to the nearest whole share. The per share exercise price for shares of Histogenics common stock issuable upon exercise of each Ocugen warrant assumed by Histogenics shall be determined by dividing (a) the per share exercise price of Ocugen’s capital stock subject to such Ocugen warrant, as in effect immediately prior to the Effective Time, by (b) the exchange ratio, rounded up to the nearest whole cent. Any restriction on any Ocugen warrant assumed by Histogenics shall continue in full force and effect and the terms and other provisions of such Ocugen warrant shall otherwise remain unchanged.

 

Conditions

to the Completion of the Merger (see page 176)

To consummate the merger, Histogenics’ stockholders must approve Proposal Nos. 1 and 2. Additionally, Ocugen’s stockholders must (i) adopt and approve the Merger Agreement and the transactions contemplated thereby, (ii) acknowledge that the approval given is irrevocable and that such stockholders are aware of their rights to demand appraisal for their shares pursuant to Section 262 of the General Corporation Law of the State of Delaware (“DGCL”), and that such stockholders have received and read a copy of Section 262 of the DGCL, which is included as Annex C in this proxy statement/prospectus/information statement, and (iii) acknowledge that by their approval of the merger the approving stockholders are not entitled to appraisal rights with respect to their shares in connection with the merger and thereby waive any rights to receive payment of the fair value of their capital stock under the DGCL.

In addition to obtaining such stockholder approvals and appropriate regulatory approvals, each of the other closing conditions set forth in the Merger Agreement, as described under the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” in this proxy statement/prospectus/information statement must be satisfied or waived.

No Solicitation (see page 179)

Each of Histogenics and Ocugen agreed that, except as described below, from the date of the Merger Agreement until the earlier of the consummation of the merger or the termination of the Merger Agreement in accordance with its terms, Histogenics and Ocugen and any of their respective subsidiaries will not, nor will either party or any of its subsidiaries authorize any of the directors, officers, employees, agents, attorneys, accountants, investment bankers, advisors or representatives retained by it or any of its subsidiaries to, directly or indirectly:

 

   

solicit, initiate or knowingly encourage, induce or facilitate the communication, making, submission or announcement of, any “acquisition proposal” (as defined in the section entitled “The Merger Agreement—No Solicitation” below), or “acquisition inquiry” (as defined in the section entitled “The Merger Agreement—No Solicitation” below);

 

   

furnish any non-public information with respect to it to any person in connection with or in response to an acquisition proposal or acquisition inquiry;

 

   

engage in discussions or negotiations with any person with respect to any acquisition proposal or acquisition inquiry;

 

   

approve, endorse or recommend an acquisition proposal;

 

   

execute or enter into any letter of intent or similar document or any contract contemplating or otherwise relating to an “acquisition transaction” (as defined in the section entitled “The Merger Agreement—No Solicitation” below) (other than a confidentiality agreement as permitted by the Merger Agreement); or

 

   

publicly propose to do any of the above.



 

15


Table of Contents

Termination of the Merger Agreement (see page 185)

Either Histogenics or Ocugen can terminate the Merger Agreement under certain circumstances, which would prevent the merger from being consummated.

Termination Fee (see page 186)

If the Merger Agreement is terminated under certain circumstances, Histogenics or Ocugen will be required to pay the other party a termination fee of up to $0.6 million or $0.7 million, respectively.

Securities Purchase Agreement (see page 189)

On June 13, 2019, Ocugen and Histogenics entered into the Securities Purchase Agreement with the Investors pursuant to which, among other things, (i) Ocugen agreed to sell to the Investors an aggregate of 4,574,272 shares of Ocugen common stock (the “Initial Shares) and deposit an additional 4,574,272 shares of Ocugen common stock into escrow for the benefit of the Investors if 80% of the volume-weighted average trading price of a share of Histogenics common stock on Nasdaq for the first three trading days immediately following the closing date of the Pre-Merger Financing is lower than the price paid by the Investors for the Initial Shares (the “Additional Shares” and together with the Initial Shares the “Ocugen Financing Shares”), and (ii) Histogenics agreed to issue warrants representing the right to acquire an amount of Histogenics common stock up to the amount issuable in exchange for 200% of the Ocugen Financing Shares upon consummation of the merger, as further described below (the “Series A Warrants”), additional Series B warrants to purchase shares of Histogenics common stock, as further described below (the “Series B Warrants”), and additional Series C warrants to purchase 50 million shares of Histogenics common stock (which number shall not be adjusted as a result of the Histogenics Reverse Stock Split) as further described below (the “Series C Warrants” together with the Series A Warrants and the Series B Warrants, the “Investor Warrants” and, together with the Ocugen Financing Shares, the “Purchased Securities”), and the Investors agreed to purchase the Purchased Securities, for an aggregate purchase price of approximately $25.0 million (subject to setoff for amounts outstanding of approximately $2.4 million under certain senior secured notes previously issued to certain of the Investors by Ocugen) (the “Purchase Price”).

Upon the consummation of the merger, each Initial Share will automatically be converted into the right to receive a number of shares of Histogenics common stock equal to the exchange ratio (the “Converted Initial Shares”). Further, upon consummation of the merger, each Additional Share placed into escrow will automatically be converted into the right to receive a number of shares of Histogenics common stock equal to the exchange ratio (the “Converted Additional Shares”). The number of Converted Additional Shares issuable pursuant to the Securities Purchase Agreement will be determined by subtracting (i) the aggregate number of shares of Histogenics common stock issued in exchange for the Initial Shares (as adjusted for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, reverse stock splits and similar events) from (ii) the quotient determined by dividing (a) the aggregate Purchase Price by (b) 80% of the sum of the average of the volume-weighted average price of a share of Histogenics common stock on Nasdaq for the first three trading days immediately following the closing date of the Pre-Merger Financing, divided by three. Any Converted Additional Shares not issuable to the Investors will be returned to Histogenics as treasury shares.

The closing of the Pre-Merger Financing is subject to the satisfaction or waiver of certain conditions.

Series A Warrants

The Series A Warrants will have an initial exercise price per share equal to 125% of the aggregate Purchase Price divided by the sum of (i) the number of Converted Initial Shares and (ii) the number of Converted Additional



 

16


Table of Contents

Shares without giving effect to any limitation on delivery contained in the Securities Purchase Agreement, will be immediately exercisable and will have a term of 60 months from the date of issuance. The Series A Warrants will be exercisable for an amount of Histogenics common stock up to the amount issuable upon consummation of the merger in exchange for 200% of the Ocugen Financing Shares purchased by the holder.

Series B Warrants

The Series B Warrants will have an exercise price per share of $0.01, will be immediately exercisable and will expire on the day following the later to occur of (i) the Reservation Date (as defined in the section entitled “Agreements Related to the Merger—Series A Warrants” in this proxy statement/prospectus/information statement), and (ii) the date on which such Series B Warrant has been exercised in full (without giving effect to any limitation on exercise contained therein) and no shares remain issuable thereunder. The Series B Warrants will be initially exercisable for an amount of Histogenics common stock equal to the number (if positive) obtained by subtracting (i) the sum of (a) the number of Converted Initial Shares and (b) the number of Converted Additional Shares delivered or deliverable to the holder pursuant to the Securities Purchase Agreement, from (ii) the quotient determined by dividing (a) the pro rata portion of the Purchase Price paid by such holder by (b) 80% of the sum of the volume-weighted average prices of a share of Histogenics common stock on Nasdaq for the first three trading days immediately following the closing date of the Pre-Merger Financing, divided by three.

Additionally, every ninth trading day up to and including the 45th trading day (each, a “Reset Date”) following (i) each date on which a registration statement registering any registrable securities for resale by a holder of Purchased Securities is declared effective and/or is available for use, (ii) if there is no effective registration statement that is available for use registering all of the shares issuable upon exercise of the Series A Warrant, the Series B Warrants and the Series C Warrants, the earlier to occur of (a) the first date on which the holders can sell all the shares issuable upon exercise of the Series A Warrants, the Series B Warrants and the Series C Warrants without restriction or limitation pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), and (b) the six month anniversary of the closing date of the Pre-Merger Financing (such earlier date, the “Six Month Reset Date”) and (iii) in the event of a Public Information Failure (as defined in the section entitled “Agreements Related to the Merger—Securities Purchase Agreement” in this proxy statement/prospectus/information statement) at any time following the Six Month Reset Date, then the earlier to occur of (a) the date the Public Information Failure is cured and no longer prevents the holder from selling all of the shares issuable upon exercise of the Series A Warrants, the Series B Warrants and the Series C Warrants pursuant to Rule 144 without restriction or limitation, (b) the first date on which the holders can sell all the shares issuable upon exercise of the Series A Warrants, the Series B Warrants and the Series C Warrants without restriction or limitation pursuant to Rule 144 under the Securities Act and without the requirement to be in compliance with Rule 144(c)(1), and (c) the one year anniversary of the closing date of the Pre-Merger Financing (such 45 trading day period, the “Reset Period” and each such 45th trading day after (i), (ii), or (iii), the “End Reset Date”), the number of shares issuable upon exercise of the Series B Warrants shall be increased to the number (if positive) obtained by subtracting (i) the sum of (a) the number of Converted Initial Shares and (b) the number of Converted Additional Shares delivered or deliverable to the holder pursuant to the Securities Purchase Agreement, from (ii) the quotient determined by dividing (a) the pro rata portion of the Purchase Price paid by such holder, by (b) the greater of (y) 80% of the arithmetic average of the two lowest dollar volume-weighted average prices of a share of Histogenics common stock on Nasdaq during the applicable Reset Period immediately preceding the applicable Reset Date to date and (z) $1.00 (which amount shall not be adjusted for reverse stock splits or other similar events).

The Series C Warrants

The Series C Warrants will be exercisable for up to 50 million shares of Histogenics common stock and will have an exercise price equal to 125% of the aggregate Purchase Price divided by the sum of (i) the number of



 

17


Table of Contents

Converted Initial Shares and (ii) the number of Converted Additional Shares without giving effect to any limitation on delivery contained in the Securities Purchase Agreement, will be immediately exercisable and will expire upon the later of (i) 12 months from the date of issuance and (ii) the 45th trading day immediately following the earlier to occur of (ii) the date the holder can sell all shares issuable upon exercise of the Series A Warrants, the Series B Warrants and the Series C Warrants pursuant to Rule 144 without restriction or limitation and without the requirement to be in compliance with Rule 144(c)(1), provided that if such date falls on a day other than a business day or on which trading does not take place on Nasdaq (a “Holiday”), the next day that is not a Holiday (the “Series C Expiration Date”).

If the volume-weighted average trading price of a share of Histogenics common stock on Nasdaq is less than or equal to $1.20 per share (as adjusted for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, reverse stock splits and similar events) on any five trading days following the date of issuance and prior to the Series C Expiration Date, the holder may, in lieu of making any cash payment in connection with the exercise of the Series C Warrants, elect to receive a number of shares of Histogenics common stock equal to the number of Series C Warrants. The number of shares issuable upon exercise and the exercise price of the Series C Warrants shall not be adjusted by the Histogenics Reverse Stock Split.

Registration Rights Agreement

In connection with the Pre-Merger Financing, Histogenics entered into the Registration Rights Agreement with the Investors (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, Histogenics is required to file an initial resale registration statement with respect to shares of Histogenics common stock (the “Registrable Securities”) held by or issuable to the Investors, within 10 days of the closing of the Pre-Merger Financing. Additionally, Histogenics is required to file additional resale registration statements with respect to the Registrable Securities within 30 days of each End Reset Date, to the extent that such Registrable Securities are not already registered for resale on a prior registration statement. Histogenics will be required to use its best efforts to maintain the effectiveness of these registration statements until the Registrable Securities covered by these registration statements have been disposed of or are no longer Registrable Securities.

 

Financing

Lock-Up Agreements

In connection with the Pre-Merger Financing, Histogenics and Ocugen will enter into lock-up agreements with each officer, director or other person that will be subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to Histogenics immediately following the consummation of the merger, and each holder of greater than 3% of Ocugen common stock (excluding the shares of Ocugen common stock issuable pursuant to the Securities Purchase Agreement) immediately prior to the consummation of the merger (the “Financing Lock-Up Parties”), pursuant to which each of the Financing Lock-Up Parties will agree that until the date that is 30 calendar days after the Trigger Date (as defined in the section entitled “Agreements Related to the Merger—Securities Purchase Agreement” in this proxy statement/prospectus/information statement), subject to certain customary exceptions, such Financing Lock-Up Party will not and will cause its affiliates not to (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of or lend, directly or indirectly, any shares of Histogenics common stock or any securities convertible into, exercisable or exchangeable for or that represent the right to receive Histogenics common stock, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Financing Lock-Up Party’s shares of Histogenics common stock or such other securities, in cash or otherwise, (iii) make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of Histogenics common stock or such other securities, in cash or otherwise, (iv) grant any proxies or powers of



 

18


Table of Contents

attorney with respect to any shares of Histogenics common stock or such other securities, deposit any shares of Histogenics common stock or such other securities into a voting trust or enter into a voting agreement or similar arrangement or commitment with respect to any shares of Histogenics common stock or such other securities, or (v) publicly disclose the intention to do any of the foregoing.

Voting Agreements and Written Consents (see page 188)

In order to induce Histogenics to enter into the Merger Agreement, certain stockholders of Ocugen are parties to a voting agreement with Ocugen and Histogenics pursuant to which, among other things, each stockholder has agreed, solely in its capacity as a stockholder of Ocugen, to vote all of its shares of Ocugen’s capital stock in favor of (i) the adoption and approval of the Merger Agreement and the transactions contemplated thereby, (ii) acknowledgement that the approval given for the Merger Agreement is irrevocable and that the stockholder is aware of its appraisal rights under the DGCL, and (iii) acknowledgement that the stockholder is not entitled to appraisal rights by voting in favor of the transaction and waiving appraisal rights under the DGCL. Additionally, each stockholder has agreed, solely in its capacity as a stockholder of Ocugen, to vote against any competing acquisition proposal and any action, proposal or transaction that would reasonably be expected to result in a material breach of the voting agreement. These stockholders of Ocugen have also granted an irrevocable proxy to Ocugen and its designee to vote their respective Ocugen’s capital stock in accordance with the voting agreements. Ocugen’s stockholders may vote their shares of Ocugen capital stock on all other matters not referred to in such proxy.

The Ocugen stockholders who are parties to these voting agreements include all directors, executive officers and certain stockholders, which represents approximately 93% of the outstanding shares of Ocugen capital stock on an as converted to common stock basis.

The Ocugen stockholders who are party to a voting agreement held, as of June 6, 2019:

 

   

an aggregate of 12,096,944 shares of Ocugen common stock, representing approximately 93% of all outstanding shares of Ocugen common stock;

 

   

an aggregate of 3,188,810 shares of Ocugen common stock held by Series A Stockholders (as defined in the Amended and Restated Stockholders Agreement, dated as of May 25, 2017, by and among certain stockholders of Ocugen and Ocugen, as amended, the “Ocugen Stockholders Agreement”) and Series B Stockholders (as defined in the Ocugen Stockholders Agreement), representing approximately 83% of the outstanding shares held by the Series A Stockholders and Series B Stockholders, considered as a single class; and

 

   

an aggregate of 1,862,585 shares of Ocugen common stock held by Series B Stockholders, representing approximately 90% of the outstanding shares held by the Series B Stockholders as a class.

Following the effectiveness of the registration statement of which this proxy statement/prospectus/information statement is a part and pursuant to the Merger Agreement, these stockholders will execute a written consent providing for such adoption and approval.

Under these voting agreements, subject to certain exceptions, such stockholders have also agreed not to sell or transfer shares of Ocugen’s capital stock and securities held by them, or any voting rights with respect thereto, until the earlier of the termination of the Merger Agreement or the completion of the merger. To the extent that any such sale or transfer is permitted pursuant to the exceptions included in the voting agreement, each person to which any shares of Ocugen’s capital stock or securities are so sold or transferred must agree in writing to be bound by the terms and provisions of the voting agreement, subject to certain further exceptions.

In addition, in order to induce Ocugen to enter into the Merger Agreement, certain of Histogenics’ stockholders have entered into voting agreements with Histogenics and Ocugen pursuant to which, among other things, each



 

19


Table of Contents

such stockholder has agreed, solely in his, her or its capacity as a stockholder of Histogenics, to vote all of his, her or its shares of Histogenics common stock in favor of Proposal Nos. 1, 2 and 3. Additionally, each such stockholder has agreed, solely in his, her or its capacity as a stockholder of Histogenics, to vote against any competing acquisition proposal and any action, proposal or transaction that would reasonably be expected to result in a material breach of the voting agreement. These stockholders of Histogenics have also granted Histogenics and its designee an irrevocable proxy to vote their respective shares in accordance with the voting agreements. Histogenics’ stockholders may vote their shares of Histogenics common stock on all other matters not referred to in such proxy.

The Histogenics stockholders who are parties to these voting agreements are:

 

   

Adam Gridley

 

   

Jonathan Lieber

 

   

David Gill

 

   

Kevin Rakin

As of June 6, 2019, the stockholders of Histogenics who are party to a voting agreement (including any affiliated entities) owned an aggregate of 484,964 shares of Histogenics common stock representing approximately 0.5% of the outstanding shares of Histogenics common stock.

Under these voting agreements, subject to certain exceptions, such stockholders also have agreed not to sell or transfer their shares of Histogenics common stock and securities held by them until the earlier of the termination of the Merger Agreement or the completion of the merger. To the extent that any such sale or transfer is permitted pursuant to the exceptions included in the voting agreements, each person to whom any shares of Histogenics common stock or securities are so sold or transferred must agree in writing to be bound by the terms and provisions of the voting agreement, subject to certain further exceptions.

Lock-up Agreements (see page 189)

As a condition to the closing of the merger, certain stockholders of each of Histogenics and Ocugen and their affiliates, have entered into lock-up agreements, pursuant to which such parties have agreed not to, except in limited circumstances, offer, pledge, sell, contract to sell, transfer or dispose of, directly or indirectly, engage in swap or similar transactions with respect to, or make any demand for or exercise any right with respect to, any shares of Histogenics common stock or any security convertible into or exercisable or exchangeable for Histogenics common stock, including, as applicable, shares received in the merger and issuable upon exercise of certain warrants and options, during the period commencing at the Effective Time and continuing until the date that is 180 days from the Effective Time.

Each of the stockholders who is party to a Histogenics voting agreement is a party to a lock-up agreement. As of June 6, 2019, Histogenics’ stockholders who have executed lock-up agreements owned in the aggregate approximately 0.5% of the outstanding common stock of Histogenics.

As of June 6, 2019, Ocugen’s stockholders who have executed lock-up agreements beneficially owned in the aggregate approximately 93% of all outstanding shares of Ocugen common stock.

Management Following the Merger (see page 320)

Effective as of the closing of the merger, Histogenics’ executive officers are expected to include:

 

Name

   Age     

Position

Shankar Musunuri, Ph.D., MBA

     55      Chief Executive Officer, Executive Chairman of the Board, Co-Founder


 

20


Table of Contents

Name

   Age     

Position

Daniel Jorgensen, M.D., M.P.H., MBA

     59      Chief Medical Officer

Rasappa Arumugham, Ph.D.

     67      Chief Scientific Officer

Vijay Tammara, Ph.D.

     59      Vice President, Regulatory & Quality

Kelly Beck, MBA, SPHR, SHRM-SCP, PMP

     42      Vice President, Investor Relations & Administration

 

Interests

of Certain Directors, Officers and Affiliates of Histogenics and Ocugen (see pages 158 and 159)

In considering the recommendation of the Histogenics Board with respect to the issuance of common stock of Histogenics pursuant to the Merger Agreement and the other matters to be acted upon by Histogenics’ stockholders at the Histogenics special meeting, Histogenics’ stockholders should be aware that certain members of the Histogenics Board and executive officers of Histogenics have interests in the merger that may be different from, or in addition to, interests they have as Histogenics’ stockholders.

As of June 6, 2019, Histogenics’ directors and executive officers (including affiliates) beneficially owned, in the aggregate approximately 7.2% of the outstanding shares of common stock of Histogenics. As of June 6, 2019, Histogenics’ directors and officers beneficially owned, in the aggregate, 1,109,840 options to purchase Histogenics common stock, all of which will be cancelled immediately prior to the closing of the merger.

The compensation arrangements with Histogenics’ officers and directors are discussed in greater detail in the section entitled “The Merger—Interests of Histogenics Directors and Executive Officers in the Merger” in this proxy statement/prospectus/information statement.

In addition, Ocugen’s directors and executive officers will be entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement. Following completion of the merger, it is expected that the combined organization will provide compensation to non-employee directors. Histogenics’ current director compensation program will be suspended at the time of the closing of the merger and the director compensation policies for the combined organization following the merger will be re-evaluated by the compensation committee and board of directors of the combined organization following completion of the merger and may be subject to change. Non-employee directors of the combined organization are, however, expected to receive annual cash retainers and equity compensation, although the amount of such compensation has not yet been determined.

As of June 6, 2019, Ocugen’s directors and executive officers beneficially owned: (i) approximately 64% of the outstanding shares of common stock of Ocugen, (ii) approximately 31% of the outstanding shares of common stock of Ocugen held by Series A Stockholders and Series B Stockholders, (iii) approximately 50% of the outstanding shares of common stock of Ocugen held by Series B Stockholders, and (iv) warrants to purchase

575,102 shares of Ocugen common stock, all of which will be converted into warrants to purchase Histogenics common stock in connection with the closing of the merger pursuant to the Merger Agreement, and (iv) options to purchase 421,000 shares of Ocugen common stock, all of which will be converted into options to purchase Histogenics common stock in connection with the closing of the merger pursuant to the Merger Agreement.

The compensation arrangements with Ocugen’s officers and directors are discussed in greater detail in the section entitled “The Merger Agreement—Interests of Ocugen Directors and Executive Officers in the Merger” in this proxy statement/prospectus/information statement.

Certain of Ocugen’s and Histogenics’ executive officers and directors have also entered into voting agreements, pursuant to which certain directors, officers and stockholders of Ocugen and Histogenics, respectively, have agreed, solely in their capacity as stockholders of Ocugen and Histogenics, respectively, to vote all of their shares



 

21


Table of Contents

of Ocugen capital stock or Histogenics common stock in favor of the adoption or approval, respectively, of the Merger Agreement and the transactions contemplated therein in connection with the merger. The voting agreements are discussed in greater detail in the section entitled “Agreements Related to the Merger—Voting Agreements and Written Consent” in this proxy statement/prospectus/information statement.

Risk Factors (see page 29)

Both Histogenics and Ocugen are subject to various risks associated with their businesses and respective assets. In addition, the merger poses a number of risks to each company and its respective stockholders, including the possibility that the merger may not be completed and the following risks:

 

   

the exchange ratio is not adjustable based on the market price of Histogenics common stock, so the merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed;

 

   

failure to complete the merger may result in either Histogenics or Ocugen paying a termination fee or expenses to the other and could harm the price of Histogenics common stock and the future business and operations of each company;

 

   

the merger is subject to approval by the Histogenics stockholders and Ocugen stockholders;

 

   

the merger may be completed even though material adverse changes may result solely from the announcement of the merger, changes in the operations of Histogenics and Ocugen operate that apply to all companies generally and other causes;

 

   

some of Histogenics’ and Ocugen’s respective officers and directors have interests that are different from or in addition to those considered by other stockholders of Ocugen and Histogenics and which may influence them to support or approve the merger;

 

   

the market price of the combined organization’s common stock may decline as a result of the merger;

 

   

Histogenics’ and Ocugen’s stockholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with or following the merger;

 

   

the Investor Warrants, if exercised, contain price-based adjustment provisions which, if triggered, may cause substantial additional dilution to the combined organization’s stockholders;

 

   

during the pendency of the merger, Histogenics and Ocugen may not be able to enter into a business combination with another party under certain circumstances because of restrictions in the Merger Agreement, which could adversely affect their respective businesses;

 

   

certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement;

 

   

because the lack of a public market for shares of Ocugen’s capital stock makes it difficult to evaluate the fairness of the merger, Ocugen’s stockholders may receive consideration in the merger that is less than the fair market value of the shares of Ocugen’s capital stock and/or Histogenics may pay more than the fair market value of the shares of Ocugen’s capital stock; and

 

   

if the conditions to the merger are not met, the merger will not occur.

These risks and other risks are discussed in greater detail under the section entitled “Risk Factors” in this proxy statement/prospectus/information statement. Histogenics and Ocugen both encourage you to read and consider all of these risks carefully.



 

22


Table of Contents

Regulatory Approvals (see page 165)

In the United States, Histogenics must comply with applicable federal and state securities laws and the rules and regulations of Nasdaq in connection with the issuance of shares of Histogenics common stock and the filing of this proxy statement/prospectus/information statement with the SEC. As of the date hereof, the registration statement of which this proxy statement/prospectus/information statement is a part has not become effective.

Nasdaq Stock Market Listing (see page 169)

Prior to consummation of the merger, Histogenics intends to file an initial listing application with Nasdaq pursuant to Nasdaq “reverse merger” rules. If such application is accepted, Histogenics anticipates that Histogenics common stock will be listed on Nasdaq following the closing of the merger under the trading symbol “OCGN.”

 

Anticipated

Accounting Treatment (see page 169)

The merger will be recorded by Histogenics using the reverse asset acquisition method of accounting. For accounting purposes, Ocugen is considered to be acquiring Histogenics in the merger.

 

Appraisal

Rights (see page 169)

Holders of Histogenics common stock are not entitled to appraisal rights in connection with the merger. Ocugen’s stockholders are entitled to appraisal rights in connection with the merger under Delaware law. For more information about such rights, see the provisions of Section 262 of the DGCL attached hereto as Annex C, and the section entitled “The Merger—Appraisal Rights” in this proxy statement/prospectus/information statement.

 

Comparison

of Stockholder Rights (see page 358)

Both Histogenics and Ocugen are incorporated under the laws of the State of Delaware and, accordingly, the rights of the stockholders of each are currently, and will continue to be, governed by the DGCL. If the merger is completed, Ocugen’s stockholders will become stockholders of Histogenics, and their rights will be governed by the DGCL, Histogenics’ amended and restated bylaws and, Histogenics’ sixth amended and restated certificate of incorporation, as amended by the amendments set forth in Annex D, Annex E and Annex F, assuming Proposal Nos. 2, 3 and 4 are approved. The rights of Histogenics’ stockholders contained in Histogenics’ sixth amended and restated certificate of incorporation and Histogenics’ amended and restated bylaws differ from the rights of Ocugen’s stockholders under Ocugen’s amended and restated certificate of incorporation and Ocugen’s bylaws, as more fully described under the section entitled “Comparison of Rights of Holders of Histogenics Stock and Ocugen Stock” in this proxy statement/prospectus/information statement.



 

23


Table of Contents

SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL DATA

The following tables present summary historical financial data for Histogenics and Ocugen, summary unaudited pro forma condensed financial data for Histogenics and Ocugen, and comparative historical and unaudited pro forma per share data for Histogenics and Ocugen.

 

Selected

Historical Financial Data of Histogenics

The selected financial data as of December 31, 2018 and 2017 and for the years ended December 31, 2018 and 2017 are derived from the Histogenics audited financial statements prepared using accounting principles generally accepted in the United States (“U.S. GAAP”), which are included in this proxy statement/prospectus/information statement. The statement of operations data for the three months ended March 31, 2019 and 2018, as well as the balance sheet data as of March 31, 2019, are derived from the Histogenics unaudited condensed financial statements included in this proxy statement/prospectus/information statement. Histogenics’ unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP on the same basis as its audited annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal, recurring adjustments, necessary for the fair presentation of those unaudited condensed financial statements. The financial data should be read in conjunction with “Histogenics Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Histogenics’ financial statements and related notes appearing elsewhere in this proxy statement/prospectus/information statement. Histogenics’ historical results are not necessarily indicative of results to be expected in any future period.

 

     Years Ended December 31,  
     2018      2017  

Statements of Operations Data (dollars in thousands, except per share data):

     

Operating expenses:

     

Research and development

   $ 15,634      $ 15,566  

General and administrative

     10,204        9,384  

Loss due to asset impairment

     4,270        —    
  

 

 

    

 

 

 

Total operating expenses

     30,108        24,950  
  

 

 

    

 

 

 

Loss from operations

     (30,108      (24,950

Other income (expense), net

     21,465        (1,464
  

 

 

    

 

 

 

Net loss

   $ (8,643    $ (26,414
  

 

 

    

 

 

 

Net loss per share, basic

   $ (0.23    $ (0.99
  

 

 

    

 

 

 

Net loss per share, diluted

   $ (0.79    $ (0.99
  

 

 

    

 

 

 

Weighted-average shares of common stock outstanding, basic

     36,398,450        22,669,819  
  

 

 

    

 

 

 

Weighted-average shares of common stock outstanding, diluted

     37,090,197        22,619,819  
  

 

 

    

 

 

 


 

24


Table of Contents
     Three Months Ended March 31,  
     2019      2018  
     (unaudited)  

Statements of Operations Data (dollars in thousands, except per share data)

     

Operating expenses:

     

Research and development

     1,583        3,286  

General and administrative

     2,929        2,807  

Restructuring

     2,789        —    

Loss on asset impairment

     750        —    

Total operating expenses

     8,051        6,093  

Loss from operations

     (8,051      (6,093

Other income (expense)

     (1,364      (8,740

Net loss

   $ (9,415    $ (14,833

Net loss per common share—basic and diluted

   $ (0.12    $ (0.52

Weighted-average shares used to compute net loss per common share—basic and diluted

     80,484,113        27,670,118  

 

     December 31,      March 31,  
     2018      2017      2019  
                   (unaudited)  

Balance Sheet Data (in thousands):

        

Cash and cash equivalents

   $ 15,542      $ 7,081      $ 7,376  

Working capital (a)

     13,527        4,370        5,823  

Total assets

     17,428        11,035        14,838  

Accumulated deficit

     (216,830      (208,187      (226,245

Total stockholders’ deficit

     (458      (11,268      (5,532

 

(a)

Working capital is defined as current assets less current liabilities.

Selected Historical Consolidated Financial Data of Ocugen

The selected consolidated financial data as of December 31, 2018 and 2017 and for the years ended December 31, 2018 and 2017 are derived from Ocugen’s audited consolidated financial statements prepared using U.S. GAAP, which are included in this proxy statement/prospectus/information statement. These historical results are not necessarily indicative of results to be expected in any future period. The selected consolidated financial data should be read in conjunction with Ocugen’s consolidated financial statements and the related notes to those statements included in this proxy statement/prospectus/information statement and “Ocugen Management’s Discussion and Analysis of Financial Condition and Results of Operations.”



 

25


Table of Contents
     Years Ended December 31,  
     2018      2017  

Selected Consolidated Statements of Operations Data (dollars in thousands, except per share data):

     

Operating expenses:

     

Research and development

   $ 10,322      $ 4,927  

General and administrative

     5,819        2,862  
  

 

 

    

 

 

 

Total operating expenses

     16,141      7,789  
  

 

 

    

 

 

 

Loss from operations

     (16,141      (7,789

Other income (expense):

     

Change in fair value of derivative liabilities

     1,665        —    

Interest income

     19        31  

Interest expense

     (3,751      (56

Other expense

     (12      (1
  

 

 

    

 

 

 

Total other expense

     (2,079      (26
  

 

 

    

 

 

 

Net loss

   $ (18,220    $ (7,815
  

 

 

    

 

 

 

Net loss per share of common stock, basic and diluted

   $ (1.76    $ (0.82
  

 

 

    

 

 

 

Basic and diluted weighted average shares outstanding

     10,347,418        9,483,504  
  

 

 

    

 

 

 

 

     Three Months Ended March 31,  
     2019      2018  

Selected Consolidated Statements of Operations Data (in thousands, except per share data):

     

Operating expenses:

     

Research and development

   $
3,793
 
   $
3,012
 

General and administrative

     1,048        982  
  

 

 

    

 

 

 

Total operating expenses

     4,841        3,994  
  

 

 

    

 

 

 

Loss from operations

     (4,841      (3,994

Other income (expense):

     

Change in fair value of warrant liability

     (776      (245

Interest income

     1        7  

Interest income

     (696      (799

Other expense

     (1      (8
  

 

 

    

 

 

 

Total other income (expense)

     (1,472      (1,045
  

 

 

    

 

 

 

Net loss

     (6,313      (5,039
  

 

 

    

 

 

 


 

26


Table of Contents
     December 31,      March 31,  
     2018      2017      2019  

Selected Consolidated Balance Sheet Data (in thousands):

        

Cash and cash equivalents

   $ 1,628      $ 6,202      $ 309  

Working capital (a)

     (12,168      5,082        (18,269

Total assets

     2,454        6,630        1,582  

Total liabilities

     15,164        2,195        20,189  

Additional paid-in capital

     18,517        17,442        18,932  

Accumulated deficit

     (31,237      (13,018      (37,550

Total stockholders’ (deficit) equity

     (12,710      4,435        (18,607

 

(a)

Working capital is defined as current assets less current liabilities.

 

Selected

Unaudited Pro Forma Condensed Combined Financial Data of Histogenics and Ocugen

The following information does not give effect to the Histogenics Reverse Stock Split described in Proposal No. 2 discussed in this proxy statement/prospectus/information statement.

The following selected unaudited pro forma condensed combined financial data was prepared using the reverse asset acquisition method of accounting under U.S. GAAP. For accounting purposes, Ocugen is considered to be acquiring Histogenics and the merger is expected to be accounted for as an asset acquisition as the fair value of the acquired preclinical assets is deemed to be substantially concentrated in a group of similar assets that do not meet the definition of a business. The Histogenics and Ocugen unaudited pro forma combined balance sheet data assume that the merger took place on March 31, 2019, and combines the Histogenics and Ocugen historical balance sheets at March 31, 2019. The Histogenics and Ocugen unaudited pro forma condensed combined statements of operations data assume that the merger took place as of January 1, 2018, and combines the historical results of Histogenics and Ocugen for the three months ended March 31, 2019 and the year ended December 31, 2018.

The selected unaudited pro forma condensed combined financial data are presented for illustrative purposes only and are not necessarily indicative of the combined financial position or results of operations of future periods or the results that actually would have been realized had the entities been a single entity during these periods. The selected unaudited pro forma condensed combined financial data as of and for the three months ended March 31, 2019 and the year ended December 31, 2018 are derived from the unaudited pro forma condensed combined financial information and should be read in conjunction with that information. For more information, please see “Unaudited Pro Forma Condensed Combined Financial Information” elsewhere in this proxy statement/prospectus/information statement.

The unaudited pro forma condensed combined financial information assumes that, at the Effective Time, each share of Ocugen common stock will be converted into the right to receive shares of Histogenics common stock such that, immediately following the Effective Time, and after giving effect to the Pre-Merger Financing, Histogenics’ stockholders and warrantholders as of immediately prior to the Effective Time are expected to own, or hold rights to acquire, in the aggregate approximately 13.76% of the Fully-Diluted Common Stock of Histogenics, and current holders of Ocugen’s capital stock and options and warrant to purchase shares of Ocugen common stock, are expected to own, or hold rights to acquire, in the aggregate approximately 86.24% of the Fully-Diluted Common Stock of Histogenics. Histogenics will assume outstanding and unexercised warrants and options to purchase shares of Ocugen capital stock, and such securities will be converted into warrants and options, as applicable, to purchase shares of Histogenics common stock. On May 8, 2019, Histogenics entered into the Asset Purchase Agreement with Medavate, pursuant to which Histogenics will sell substantially all of its assets relating to its NeoCart program, including, without limitation, intellectual property, business and license



 

27


Table of Contents

agreements and clinical trial data, to Medavate in return for the Asset Consideration, conditioned upon the consummation of the merger.

 

     Year Ended
December 31,
2018
     Three Months
Ended
March 31, 2019
 

Selected Unaudited Pro Forma Condensed Combined Statement of Operations (in thousands, except per share data)

     

Revenue

   $ —        $ —    

Total operating expenses

     46,248        12,612  

Net loss

     (23,528      (14,883

Net loss per share, basic and diluted

     (0.03      (0.02

 

     As of
March 31,
2019
 

Selected Unaudited Pro Forma Condensed Combined Balance Sheet Data (in thousands)

  

Cash, cash equivalents and short-term investments

   $ 38,585  

Total assets

     47,320  

Total liabilities

     29,414  

Stockholders’ equity

     17,906  

Comparative Historical and Unaudited Pro Forma Per Share Data

The information below reflects the historical net loss and book value per share of Histogenics common stock and the historical net loss and book value per share of Ocugen common stock in comparison with the unaudited pro forma net loss and book value per share after giving effect to the proposed merger of Histogenics with Ocugen on a pro forma basis. The unaudited pro forma net loss and book value per share does not give effect to the Histogenics Reverse Stock Split.

You should read the tables below in conjunction with the audited financial statements of Histogenics included in this proxy statement/prospectus/information statement and the audited financial statements of Ocugen included in this proxy statement/prospectus/information statement and the related notes and the unaudited pro forma condensed combined financial information and notes related to such financial statements included elsewhere in this proxy statement/prospectus/information statement.

 

    Year Ended
December 31, 2018
     Three
Months Ended
March 31, 2019
 

Histogenics Historical Per Share Data

    

Net loss per share, basic and diluted

  $ (0.23) and (0.79    $    (0.12) 

Book value per share

  $ (0.01    $    (0.06) 

Ocugen Historical Per Share Data

    

Net loss per share, basic and diluted

  $ (1.76    $    (0.61) 

Book value per share

  $ (1.23    $    (1.80) 

Combined Organization Per Share Data

    

Net loss per share, basic and diluted

  $ (0.57    $    (0.17) 

Book value per share

  $ (0.28    $    (0.27) 


 

28


Table of Contents

RISK FACTORS

The combined organization will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus/information statement, you should carefully consider the material risks described below before deciding how to vote your shares of stock. In addition, you should read and consider the risks associated with Histogenics’ business because these risks may also affect the combined organization—these risks can be found under the heading “Risk Factors—Risks Related to Histogenics” in this proxy statement/prospectus/information statement and in Histogenics’ Annual Report on Form 10-K, as updated by subsequent Quarterly Reports on Form 10-Q, and other documents Histogenics has filed with the SEC and incorporated by reference into this proxy statement/prospectus/information statement. You should also read and consider the other information in this proxy statement/prospectus/information statement and the other documents incorporated by reference into this proxy statement/prospectus/information statement. Please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus/information statement.

Risks Related to the Proposed Merger

The exchange ratio set forth in the Merger Agreement is not adjustable based on the market price of Histogenics common stock, so the merger consideration at the closing of the merger may have a greater or lesser value than at the time the Merger Agreement was signed.

The Merger Agreement has set the exchange ratio for the Ocugen capital stock at 28.7650, subject to adjustment for the reverse stock split of Histogenics common stock to be implemented prior to the consummation of the merger. Applying the exchange ratio of 28.7650, current holders of Ocugen’s capital stock and options and warrant to purchase shares of Ocugen common stock, are expected to own, or hold rights to acquire, in the aggregate approximately 86.24% of the Fully-Diluted Common Stock of Histogenics, and Histogenics’ current stockholders and warrantholders are expected to own, or hold rights to acquire, in the aggregate approximately 13.76% of the Fully-Diluted Common Stock of Histogenics.

Any changes in the market price of Histogenics common stock before the completion of the merger will not affect the number of shares of Histogenics common stock issuable to Ocugen’s stockholders pursuant to the Merger Agreement. Therefore, if before the completion of the merger the market price of Histogenics common stock increases from the market price of Histogenics common stock on the date of the Merger Agreement, then Ocugen’s stockholders could receive merger consideration with substantially greater value than the value of such merger consideration on the date of the Merger Agreement. Similarly, if before the completion of the merger the market price of Histogenics common stock declines from the market price on the date of the Merger Agreement, then Ocugen’s stockholders could receive merger consideration with substantially lower value than the value of such merger consideration on the date of the Merger Agreement. The Merger Agreement does not include a price-based termination right. Because the exchange ratio does not adjust as a result of changes in the market price of Histogenics common stock, for each one percentage point change in the market price of Histogenics common stock, there is a corresponding one percentage point rise or decline, respectively, in the value of the total merger consideration payable to Ocugen’s stockholders pursuant to the Merger Agreement.

Failure to complete the proposed merger may result in Histogenics and Ocugen paying a termination fee to the other party and could significantly harm the market price of Histogenics common stock and negatively affect the future business and operations of each company.

If the proposed merger is not completed and the Merger Agreement is terminated under certain circumstances, Histogenics or Ocugen may be required to pay the other party a termination fee of up to $600,000 or $700,000, respectively. Even if a termination fee is not payable in connection with a termination of the Merger Agreement, each of Histogenics and Ocugen will have incurred significant fees and expenses, which must be paid whether or not the merger is completed. Further, if the proposed merger is not completed, it could significantly harm the market price of Histogenics common stock.

 

29


Table of Contents

In addition, if the Merger Agreement is terminated and the board of directors of Histogenics or Ocugen determines to seek another business combination, there can be no assurance that either Histogenics or Ocugen will be able to find a partner and close an alternative transaction on terms that are as favorable or more favorable than the terms set forth in the Merger Agreement.

The proposed merger is subject to approval of the Merger Agreement by Histogenics’ stockholders and the Ocugen stockholders. Failure to obtain these approvals would prevent the closing of the merger.

Before the proposed merger can be completed, the stockholders of each of Histogenics and Ocugen must approve the Merger Agreement. Failure to obtain the required stockholder approvals may result in a material delay in, or the abandonment of, the merger. Any delay in completing the proposed merger may materially adversely affect the timing and benefits that are expected to be achieved from the proposed merger.

The Merger may be completed even though certain events occur prior to the closing that materially and adversely affect Histogenics or Ocugen.

The Merger Agreement provides that either Histogenics or Ocugen can refuse to complete the proposed merger if there is a material adverse change affecting the other party between April 5, 2019, the date of the Merger Agreement, and the closing of the merger. However, certain types of changes do not permit either party to refuse to complete the proposed merger, even if such change could be said to have a material adverse effect on Histogenics or Ocugen, including:

 

   

general business, economic or political conditions or conditions generally affecting the industries in which Ocugen or Histogenics, as applicable, operates;

 

   

any natural disaster or any acts of war, armed hostilities or terrorism;

 

   

any changes in financial, banking or securities markets;

 

   

with respect to Histogenics, any change in the stock price or trading volume of Histogenics excluding any underlying effect that may have caused such change;

 

   

with respect to Histogenics, failure to meet internal or analysts’ expectations or projects or the results of operations;

 

   

any clinical trial programs or studies, including any adverse data, event or outcome arising out of or related to any such programs or studies;

 

   

any change in accounting requirements or principles or any change in applicable laws, rules, or regulations or the interpretation thereof;

 

   

any effect resulting from the announcement or pendency of the proposed merger or any related transactions; and

 

   

the taking of any action, or the failure to take any action, by either Histogenics or Ocugen required to comply with the terms of the Merger Agreement.

If adverse changes occur and Histogenics and Ocugen still complete the merger, the market price of the combined organization’s common stock may suffer. This in turn may reduce the value of the merger to the stockholders of Histogenics, Ocugen individually or on a combined basis.

Some Histogenics and Ocugen officers and directors have interests in the proposed merger that are different from the respective stockholders of Histogenics and Ocugen and that may influence them to support or approve the merger without regard to the interests of the respective stockholders of Histogenics and Ocugen.

Certain officers and directors of Histogenics and Ocugen participate in arrangements that provide them with interests in the proposed merger that are different from the interests of the respective stockholders of Histogenics

 

30


Table of Contents

and Ocugen, including, among others, the continued service as an officer or director of the combined organization, severance benefits, the acceleration of stock option vesting, continued indemnification and the potential ability to sell an increased number of shares of common stock of the combined organization in accordance with Rule 144 under the Securities Act.

For example, Ocugen has entered into certain employment and severance benefits agreements with certain of its executive officers that may result in the receipt by such executive officers of cash severance payments and other benefits in the event of a covered termination of employment of each executive officer’s employment. In addition, and for example, certain of Ocugen’s directors and executive officers have options, subject to vesting, to purchase shares of Ocugen common stock which, at the closing of the merger, shall be converted into and become options to purchase shares of Histogenics common stock, certain of Ocugen’s directors and executive officers are expected to become directors and executive officers of Histogenics upon the closing of the merger, and all of Histogenics’ and Ocugen’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement. These interests, among others, may influence the officers and directors of Histogenics and Ocugen to support or approve the proposed merger.

The market price of Histogenics common stock following the merger may decline as a result of the merger.

The market price of Histogenics common stock may decline as a result of the merger for a number of reasons including if:

 

   

investors react negatively to the prospects of the combined organization’s product candidates, business and financial condition following the merger;

 

   

the effect of the merger on the combined organization’s business and prospects is not consistent with the expectations of financial or industry analysts; or

 

   

the combined organization does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts.

Histogenics and Ocugen securityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined organization following the closing of the merger as compared to their current ownership and voting interest in the respective companies.

After the completion of the merger, the current securityholders of Histogenics and Ocugen will own a smaller percentage of the combined organization than their ownership in their respective companies prior to the merger. Immediately after the merger, it is currently estimated that Ocugen securityholders will own, or hold rights to acquire, approximately 86.24% of the Fully-Diluted Common Stock of Histogenics, and Histogenics securityholders, whose shares of Histogenics common stock will remain outstanding after the merger, will own, or hold rights to acquire, approximately 13.76% of the Fully-Diluted Common Stock of Histogenics. These estimates are based on the anticipated exchange ratio and are subject to adjustment as provided in the Merger Agreement. See also the risk factor above titled, “The exchange ratio is not adjustable based on the market price of Histogenics common stock, so the merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.

Histogenics and Ocugen stockholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with or following the merger.

If the combined organization is unable to realize the strategic and financial benefits currently anticipated from the proposed merger, Histogenics’ and Ocugen’s stockholders will have experienced substantial dilution of their ownership interests in their respective companies without receiving the expected commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined organization is able to realize only part of the expected strategic and financial benefits currently anticipated from the proposed merger.

 

31


Table of Contents

The combined company will need to raise additional capital by issuing securities or debt or through licensing or other strategic arrangements, which may cause dilution to the combined company’s stockholders or restrict the combined company’s operations or impact its proprietary rights.

The combined company may be required to raise additional funds sooner than currently planned. Although the Merger Agreement does not condition the completion of the merger upon either company holding a minimum amount of cash at the effective time of the merger, if either or both of Histogenics or Ocugen hold less cash at the time of the closing of the merger than the parties currently expect, the combined company will need to raise additional capital sooner than expected. Additional financing may not be available to the combined company when it needs it or may not be available on favorable terms. To the extent that the combined company raises additional capital by issuing equity securities, such an issuance may cause significant dilution to the combined company’s stockholders’ ownership and the terms of any new equity securities may have preferences over the combined company’s common stock. Any debt financing the combined company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if the combined company raises additional funds through licensing, partnering or other strategic arrangements, it may be necessary to relinquish rights to some of the combined company’s technologies or product candidates and proprietary rights, or grant licenses on terms that are not favorable to the combined company.

During the pendency of the proposed Merger, Histogenics and Ocugen may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.

Covenants in the Merger Agreement impede the ability of Histogenics and Ocugen to make acquisitions, subject to certain exceptions relating to fiduciary duties, as set forth below, or to complete other transactions that are not in the ordinary course of business pending completion of the proposed merger. As a result, if the merger is not completed, the parties may be at a disadvantage to their competitors during such period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets, or other business combination outside the ordinary course of business with any third party, subject to certain exceptions relating to fiduciary duties. Any such transactions could be favorable to such party’s stockholders.

Certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit each of Histogenics and Ocugen from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when such party’s board of directors determines in good faith that an unsolicited alternative takeover proposal is or is reasonably likely to lead to a superior takeover proposal and that failure to cooperate with the proponent of the proposal would be reasonably likely to be inconsistent with the applicable board’s fiduciary duties.

Because the lack of a public market for Ocugen’s capital stock makes it difficult to evaluate the value of Ocugen’s capital stock, the stockholders of Ocugen may receive shares of Histogenics common stock in the merger that have a value that is less than, or greater than, the fair market value of Ocugen’s capital stock.

The outstanding capital stock of Ocugen is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Ocugen. Because the percentage of Histogenics common stock to be issued to Ocugen’s stockholders was determined based on negotiations between the parties, it is possible that the value of Histogenics common stock to be received by Ocugen’s stockholders will be less than the fair market value of Ocugen, or Histogenics may pay more than the aggregate fair market value for Ocugen.

 

32


Table of Contents

If the conditions to the merger are not met, the merger will not occur.

Even if the merger is approved by the stockholders of Histogenics and Ocugen, specified conditions must be satisfied or waived to complete the merger. Histogenics and Ocugen cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the merger will not occur or will be delayed, and Histogenics and Ocugen each may lose some or all of the intended benefits of the proposed merger. Additionally, if the merger does not occur, Histogenics may not have sufficient cash to conduct an orderly wind-down and dissolution of Histogenics. Histogenics would not be able to raise additional capital through the sale of its NeoCart program prior to approval from its stockholders as such assets constitute substantially all of Histogenics’ assets. Histogenics may seek an immediate dissolution, subject to a vote of its stockholders, in the event the merger is not completed.

Litigation relating to the proposed merger could require Histogenics or Ocugen to incur significant costs and suffer management distraction, and could delay or enjoin the proposed merger.

Histogenics and Ocugen could be subject to demands or litigation related to the proposed merger, whether or not the merger is consummated. Such actions may create uncertainty relating to the merger, or delay or enjoin the merger, and responding to such demands. In addition, such demands or litigation could lead to a dissolution or bankruptcy if the costs associated with such demands or litigation are significant enough.

Risks Related to Histogenics

Risks Related to Histogenics’ Financial Condition and Histogenics’ Need for Additional Financing, and Additional Risks Related to the Merger

There is no assurance that the merger will be completed in a timely manner or at all. If the merger is not consummated, Histogenics’ business could suffer materially and Histogenics’ stock price could decline.

The closing of the merger is subject to the satisfaction or waiver of a number of closing conditions, as described above, including the required approvals by Histogenics and Ocugen stockholders and other customary closing conditions. See the risk factors above titled, “The proposed merger is subject to approval of the Merger Agreement by Histogenics’ stockholders and the Ocugen stockholders. Failure to obtain these approvals would prevent the closing of the merger” and “If the conditions to the merger are not met, the merger will not occur.” If the conditions are not satisfied or waived, the merger may be materially delayed or abandoned. If the merger is not consummated, Histogenics’ ongoing business may be adversely affected and, without realizing any of the benefits of having consummated the merger, Histogenics will be subject to a number of risks, including the following:

 

   

Histogenics has incurred and expects to continue to incur significant expenses related to the merger even if the merger is not consummated;

 

   

Histogenics could be obligated to pay Ocugen a termination fee of up to $600,000 under certain circumstances set forth in the Merger Agreement;

 

   

the market price of Histogenics common stock may decline to the extent that the current market price reflects a market assumption that the merger will be completed; and

 

   

matters relating to the merger have required and will continue to require substantial commitments of time and resources by Histogenics’ remaining employees and consultants, which could otherwise have been devoted to other opportunities that may have been beneficial to Histogenics.

Histogenics also could be subject to litigation related to any failure to consummate the merger or to perform its obligations under the Merger Agreement. If the merger is not consummated, these risks may materialize and may adversely affect its business, financial condition and the market price of Histogenics common stock.

 

33


Table of Contents

If the merger is not completed, Histogenics may be unsuccessful in completing an alternative transaction on terms that are as favorable as the terms of the merger with Ocugen, or at all, and Histogenics may otherwise be unable to continue to operate its business. The Histogenics Board may decide to pursue a dissolution and liquidation of Histogenics. In such an event, the amount of cash available for distribution to its stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.

Histogenics’ assets currently consist primarily of cash, cash equivalents and short-term investments, Histogenics’ NeoCart assets, the remaining value, if any, of Histogenics’ deferred tax assets, Histogenics’ listing on the Nasdaq Capital Market and the Merger Agreement with Ocugen. While Histogenics has entered into the Merger Agreement with Ocugen, the closing of the merger may be delayed or may not occur at all and there can be no assurance that the merger will deliver the anticipated benefits Histogenics expects or enhance stockholder value. If Histogenics is unable to consummate the merger, the Histogenics Board may elect to pursue an alternative strategy, one of which may be a strategic transaction similar to the merger. Attempting to complete an alternative transaction like the merger will be costly and time consuming, and Histogenics can make no assurances that such an alternative transaction would occur at all. Alternatively, the Histogenics Board may elect to continue its operations to advance NeoCart into a further Phase 3 clinical trial, which would require that Histogenics obtain additional funding, which it does not currently believe could be completed, and to resume its efforts to seek potential collaborative, partnering or other strategic arrangements for Histogenics’ NeoCart assets, including a sale or other divestiture of its NeoCart assets, or the Histogenics Board could instead decide to pursue a dissolution and liquidation of Histogenics’ company. In such an event, the amount of cash available for distribution to Histogenics’ stockholders will depend heavily on the timing of such decision, as with the passage of time the amount of cash available for distribution will be reduced as Histogenics continues to fund Histogenics’ operations. In addition, if the Histogenics Board were to approve and recommend, and Histogenics’ stockholders were to approve, a dissolution and liquidation of Histogenics’ company, Histogenics would be required under Delaware corporate law to pay Histogenics’ outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to Histogenics’ stockholders. Histogenics’ commitments and contingent liabilities may include severance obligations, regulatory, clinical and preclinical obligations, and fees and expenses related to the merger. As a result of this requirement, a portion of Histogenics’ assets would need to be reserved pending the resolution of such obligations. In addition, Histogenics may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, the Histogenics Board, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of Histogenics common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of the company.

The issuance of shares of Histogenics common stock to Ocugen stockholders in the merger will substantially dilute the voting power of Histogenics’ current stockholders.

If the merger is completed, each outstanding share of Ocugen common stock will be converted into the right to receive a number of shares of Histogenics common stock equal to the exchange ratio. Immediately following the merger, after giving effect to the Pre-merger Financing, the former Ocugen securityholders immediately before the merger are expected to own, or hold rights to acquire, approximately 86.24% of the Fully-Diluted Common Stock of Histogenics, and Histogenics’ securityholders immediately before the merger are expected to own, or hold rights to acquire, approximately 13.76% of the Fully-Diluted Common Stock of Histogenices. The issuance of shares of Histogenics common stock to Ocugen stockholders in the merger will reduce significantly the relative voting power of each share of Histogenics common stock held by Histogenics’ current stockholders. Consequently, Histogenics’ stockholders as a group will have significantly less influence over the management and policies of the combined company after the merger than prior to the merger. See also the risk factor above titled, “The exchange ratio set forth in the Merger Agreement is not adjustable based on the market price of Histogenics common stock, so the merger consideration at the closing of the merger may have a greater or lesser value than at the time the Merger Agreement was signed.

 

34


Table of Contents

Histogenics has incurred losses since inception, and Histogenics anticipates that it will incur continued losses for the foreseeable future.

Histogenics has incurred net losses in each year since its inception, including net losses of $8.6 million in 2018 and $26.4 million in 2017. As of March 31, 2019, Histogenics had an accumulated deficit of $226.2 million. Histogenics anticipates that its existing cash, cash equivalents and marketable securities will be sufficient to fund its operations into the middle of 2019. Accordingly, these factors, among others, raise substantial doubt about Histogenics’ ability to continue as a going concern. The amount of its future net losses will depend, in part, on the amount and timing of its expenses. These net losses have had, and will continue to have, an adverse effect on its stockholders’ equity and working capital.

As a result of Histogenics’ decision to discontinue its NeoCart development efforts, Histogenics’ activities are focused solely on completing the merger. Accordingly, if, for any reason, the merger is not consummated, Histogenics will resume its efforts to seek additional funds through potential collaborative, partnering or other strategic arrangements to provide it with the necessary resources to complete another alternative strategic transaction or wind-down and dissolve. However, Histogenics does not have sufficient capital resources and Histogenics will require significant additional financial resources in order to initiate and complete a further Phase 3 clinical trial for NeoCart. Based on its recent strategic process, Histogenics does not believe that it would be able to consummate a financing on reasonable terms sufficient to obtain such additional financial resources.

If the merger is not completed and Histogenics is unable to raise sufficient additional funds for the development of its NeoCart program, whether through potential collaborative, partnering or other strategic arrangements or otherwise, which it does not believe it would be able to do on reasonable terms, Histogenics will likely determine to cease operations, wind-down and dissolve (whether in or out of a bankruptcy or court proceeding to do so).

If Histogenics does not successfully complete the merger, it will need to raise substantial additional capital and will likely be unable to raise the capital necessary to permit the continued development of its NeoCart program, which would likely cause it to cease operations.

At March 31, 2019, Histogenics had cash, cash equivalents and short-term investments of $7.4 million. If the merger is not completed, based on Histogenics’ current business plan and spending assumptions as a standalone company, Histogenics estimates that its current cash, cash equivalents and short-term investments, together with interest thereon, will be sufficient to meet its projected operating requirements into July 2019. Histogenics has based its cash sufficiency estimates on its current business plan and its assumptions that may prove to be wrong. Histogenics could utilize its available capital resources sooner than it currently expects, and it could need additional funding sooner than currently anticipated.

Histogenics’ future funding requirements will depend on many factors, including:

 

   

its ability to successfully complete the merger;

 

   

the scope, rate of progress and cost of its NeoCart program;

 

   

the terms and timing of any potential collaborative, partnering and other strategic arrangements that Histogenics may establish;

 

   

the amount and timing of any licensing fees, milestone payments and royalty payments from potential collaborators, if any;

 

   

potential future clinical trial results;

 

   

the cost and timing of regulatory filings and/or approvals to commercialize any potential future product candidates and any related restrictions, limitations, and/or warnings in the label of an approved product candidate;

 

   

the effect of competing technological and market developments; and

 

35


Table of Contents
   

the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, and the cost of defending any other litigation claims.

While Histogenics has been able to fund its operations to date, Histogenics has no source of revenue, nor does it expect to generate product revenue for the foreseeable future. Histogenics does not have any commitments for future external funding.

Until Histogenics can generate a sufficient amount of product revenue, which it may never do, it will need to finance future cash needs through potential collaborative, partnering or other strategic arrangements, as well as through public or private equity offerings or debt financings or a combination of the foregoing. If Histogenics is unable to raise additional funds, it will need to continue to reduce its expenditures in order to preserve its cash. Further cost-cutting measures that Histogenics may take may not be sufficient to enable it to meet its cash requirements, and they may negatively affect Histogenics’ business and its ability to derive any value from its NeoCart program. In any event, in order to further the development of its NeoCart program, Histogenics will need to raise substantial additional capital, which it does not currently believe it will be able to do on reasonable terms, if at all. Histogenics’ failure to do so would likely result in it determining to cease operations.

To the extent that Histogenics raises additional funds through potential collaborations, partnering or other strategic arrangements, it may be necessary to relinquish rights to some of its technologies or product candidates and intellectual property rights thereof, or grant licenses on terms that are not favorable to it, any of which could result in Histogenics’ stockholders having little or no continuing interest in its NeoCart assets as stockholders or otherwise. To the extent Histogenics raises additional funds by issuing equity securities, Histogenics’ stockholders would experience significant dilution, particularly given its currently-depressed stock price, and debt financing, if available, may involve restrictive covenants. Histogenics’ stockholders will experience additional, perhaps substantial, dilution should Histogenics again raise additional funds by issuing equity securities. Any additional debt or equity financing that Histogenics raises may contain terms that are not favorable to it or its stockholders. Histogenics’ ability to raise additional funds and the terms upon which it is able to raise such funds have been severely harmed by the failure of the NeoCart Phase 3 clinical trial to meet its primary endpoint and the resulting significant uncertainty regarding Histogenics’ prospects to continue as a going concern. If Histogenics is unable to complete the merger, its ability to raise additional funds and the terms upon which it is able to raise such funds may also be adversely affected by the uncertainties regarding its financial condition, uncertainties with respect to the prospects for its NeoCart program, the sufficiency of its capital resources, potential future management turnover, and volatility and instability in the global financial markets. As a result of these and other factors, there is no guarantee that sufficient additional funding will be available to Histogenics on acceptable terms, or at all.

If the sale of Histogenics’ assets relating to its NeoCart program, including patents, other intellectual property, licenses and clinical trial data is not completed, Histogenics will have less cash than currently anticipated.

On May 8, 2019, Histogenics entered into the Asset Purchase Agreement with Medavate pursuant to which Medavate will acquire all of the assets relating to the NeoCart program, including patents, other intellectual property, licenses and clinical trial data, in consideration for the payment of the Asset Consideration, conditioned upon the consummation of the merger. Completion of the Asset Sale is subject to and expected to take place immediately following the closing of the merger. It is possible, however, that factors outside of Histogenics’ control could require the parties to complete the Asset Sale at a later time, or not to complete the Asset Sale at all.

Histogenics is substantially dependent on its remaining employee and key consultants to facilitate the consummation of the merger.

In January and March 2019, the Histogenics Board implemented restructuring plans involving reductions in headcount to reduce operating costs and conserve cash, along with other cash conservation measures relating to

 

36


Table of Contents

its facilities. The positions eliminated as part of the restructuring plans together represented all but one member of its workforce, including its Chief Executive Officer, Chief Operating Officer, Chief Medical Officer and Chief Business Officer. Histogenics has engaged Mr. Adam Gridley, its former Chief Executive Officer, Mr. Stephen Kennedy, its former Chief Operating Officer, and certain former key employees as consultants to assist with its ongoing operation and in order to consummate the merger. Despite Histogenics’ efforts to retain these persons, one or more may terminate their services with Histogenics on short notice. The loss of the services of any of these persons could potentially harm Histogenics’ ability to consummate the merger, to run its day-to-day business operations, as well as to fulfill its reporting obligations as a public company.

The pendency of the merger could have an adverse effect on the trading price of Histogenics common stock and its business, financial condition and prospects.

While there have been no significant adverse effects to date, the pendency of the merger could disrupt Histogenics’ business in many ways, including:

 

   

the attention of its remaining consultants and employees may be directed toward the completion of the merger and related matters and may be diverted from Histogenics’ day-to-day business operations; and

 

   

third parties may seek to terminate or renegotiate their relationships with Histogenics as a result of the merger, whether pursuant to the terms of their existing agreements with Histogenics or otherwise.

Should they occur, any of these matters could adversely affect the trading price of Histogenics common stock or harm its business, financial condition and prospects.

Risks Related to Histogenics’ Historical Business

The FDA has indicated an additional Phase 3 clinical trial for NeoCart would be required before the FDA would consider accepting a BLA submission for NeoCart.

On December 20, 2018, Histogenics had a telephonic meeting with senior members of the FDA. Based on the feedback received from the FDA, while the NeoCart Phase 3 clinical trial resulted in certain compelling data, the FDA indicated that an additional Phase 3 clinical trial would need to be completed before it would accept a submission of a Biologics License Application (“BLA”) for NeoCart. The FDA indicated receptivity to novel clinical trial methodologies and regenerative medicine advanced therapy designations in order to support additional data for a future potential submission. However, considering the time and funding required to conduct such a trial, Histogenics discontinued the development of NeoCart and does not plan to submit a BLA.

Histogenics has historically been a clinical-stage cell therapy company with a limited operating history of developing late-stage product candidates. There is a limited amount of information about Histogenics upon which to evaluate its product candidates and business prospects, making an investment in its common stock unsuitable for many investors.

Histogenics has historically been a clinical-stage company focused on the development of restorative cell therapies (“RCTs”), a class of products that are designed to offer patients rapid-onset pain relief and restored function through the repair of damaged or worn tissue. Histogenics was formed in 2000 and has a limited operating history. Since inception Histogenics has devoted substantially all of its resources to the development of its therapy technology platform, the clinical and preclinical advancement of its product candidates, the creation, licensing and protection of related intellectual property rights and the provision of general and administrative support for these operations. Histogenics has not yet obtained regulatory approval for any product candidates in any jurisdiction or generated any significant revenues from product sales. Histogenics has discontinued its development of NeoCart and it is currently in the process of completing the merger, as described elsewhere in these Risk Factors.

 

37


Table of Contents

Histogenics’ inability to utilize its net operating loss carryforwards before they expire may adversely affect its results of operations and financial condition.

As of December 31, 2018, Histogenics had federal and state net operating loss carryforwards of approximately $67 million and $67 million, respectively, which may be utilized against future federal and state income taxes. In general, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating loss carryforwards (“NOLs”) to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders, generally stockholders beneficially owning five percent or more of its common stock, applying certain look-through and aggregation rules, increases by more than 50% over such stockholders’ lowest percentage ownership during the testing period, generally three years. Purchases of Histogenics common stock in amounts greater than specified levels, which will be beyond its control, could create a limitation on its ability to utilize its NOLs for tax purposes in the future. In addition, the closing of a strategic transaction may result in the limitation of Histogenics’ NOLs, which may affect the value it receives in such a strategic transaction. Limitations imposed on its ability to utilize NOLs could cause it to pay U.S. federal and state income taxes earlier than it would otherwise be required if such limitations were not in effect and could cause such NOLs to expire unused. Furthermore, Histogenics may not be able to generate sufficient taxable income to utilize its NOLs before they expire beginning in 2037. In addition, at the state level there may be periods during which the use of NOLs is suspended or otherwise limited, which would accelerate or may permanently increase state taxes owed. If any of these events occur, Histogenics may not derive some or all of the expected benefits from its NOLs, and its results of operations and financial condition may be adversely affected as a result.

Histogenics may fail to comply with any of its obligations under existing agreements pursuant to which it licenses rights or technology, which could result in the loss of rights or technology that are material to its business and as a result possibly material to a potential strategic partner.

Histogenics is a party to several technology licenses that are important to its business including material licenses from Purpose Co., Ltd., Angiotech Pharmaceuticals (US), Inc. and Angiodevice International GmbH. The rights licensed under these agreements, including rights relating to its tissue processor and bioadhesives are material to its cell therapy technology platform and the continued development of NeoCart and any future product candidates a strategic partner may choose to develop. These licenses impose various commercial, contingent payment, royalty, insurance, indemnification and other obligations on Histogenics. If Histogenics fails to comply with these obligations, the licensor may have the right to terminate the license, in which event Histogenics would lose valuable rights under its license agreements and the ability to develop or commercialize product candidates. Any termination or reversion of its rights under the foregoing agreements may have a material adverse effect on its business, prospects and results of operations and could significantly impair its ability to successfully complete the merger or any potential strategic transaction on terms that are favorable to its stockholders, or at all.

Histogenics may face product liability claims and, if successful claims are brought against it, Histogenics may incur substantial liability and costs. If the use of its product candidates harms patients, or is perceived to harm patients even when such harm is unrelated to its product candidates, Histogenics’ regulatory approvals could be revoked or otherwise negatively impacted and it could be subject to costly and damaging product liability claims.

The use of NeoCart in clinical trials exposes it to the risk of product liability claims. Product liability claims might be brought against Histogenics by participants in clinical trials, consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with its product candidates and any products for which Histogenics obtains marketing approval. There is a risk that NeoCart could result in future adverse events in patients who were previously treated, and that such adverse events may not be detected for a long period of time. Such events could subject Histogenics to costly litigation, and if it cannot successfully defend against product liability claims require it to pay substantial amounts of money to injured patients. In addition, regardless of merit or eventual outcome, product liability claims may result in:

 

   

increased costs due to related litigation;

 

38


Table of Contents
   

distraction of management’s attention from its primary business;

 

   

substantial monetary awards to patients or other claimants; and

 

   

potential impairment of its ability to successfully complete a potential strategic transaction.

Histogenics carries product liability insurance that it believes is sufficient in light of its historical clinical programs; however, it may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect it against losses due to liability. On occasion, large judgments have been awarded in class action lawsuits based on cell or tissue therapies or medical treatments that had unanticipated adverse effects. In addition, under some of Histogenics’ agreements with clinical trial sites, it was required to indemnify the sites and their personnel against product liability and other claims. A successful product liability claim or series of claims brought against Histogenics or any third parties whom it is required to indemnify could cause its stock price to decline further and, if judgments exceed its insurance coverage, could adversely affect its results of operations and business.

Histogenics does not carry insurance for all categories of risk that its business may encounter and it may not be able to receive or maintain insurance with adequate levels of coverage. Any significant uninsured liability may require it to pay substantial amounts, which would adversely affect its financial position and results of operations and could significantly impair its ability to successfully complete the merger or any potential strategic transaction on terms that are favorable to its stockholders, or at all.

Changes in government funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, properly administer drug innovation, or prevent new products and services from being developed or commercialized by Histogenics’ life science tenants, which could negatively impact its business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including budget and funding levels, government closures or shutdowns, the ability to hire and retain key personnel, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Budgetary pressures and or the closure of the federal government may result in a reduced ability by the FDA to perform its role. Specifically, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical employees. If a prolonged government shutdown occurs, it could delay the ability of a prospective strategic partner to discuss any potential regulatory path forward for NeoCart and as a result delay the merger or any potential strategic transaction.

Legislative or regulatory healthcare reforms in the United States and abroad may make it more difficult and costly for a future partner to obtain regulatory approval of NeoCart and to produce, market and distribute NeoCart if an approval is obtained.

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory approval, manufacture and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect NeoCart or any other products that a strategic partner may choose to develop. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of NeoCart or any future product candidates. Recent presidential and congressional elections in the U.S. could result in significant changes in, and uncertainty with respect to, legislation, regulation and government policy that could significantly impact Histogenics’ business and the health care industry. Histogenics cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on its business in the future. Such changes could, among other things, require:

 

   

changes to manufacturing methods;

 

39


Table of Contents
   

additional studies, including clinical studies;

 

   

recall, replacement, or discontinuance of NeoCart;

 

   

the payment of additional taxes; or

 

   

additional record keeping.

Each of these requirements would likely entail substantial time and cost and could adversely harm the future prospects for its business and its financial results which could impair its ability to successfully complete the merger or any potential strategic transaction on terms that are favorable to its stockholders, or at all.

Histogenics has identified material weaknesses in its internal controls over financial reporting and may identify additional material weaknesses in the future that may cause it to fail to meet its reporting obligations or result in material misstatements of its financial statements.

Histogenics’ management team is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

Histogenics has identified a material weakness in its internal controls relating to the accounting for transactions that are either highly complex and/or unusual in nature. In such instances, Histogenics seeks to augment its internal accounting capabilities by obtaining assistance from third-parties who have greater expertise in such areas. Examples of situations such as these include (but are not limited to) the determination of the initial and periodic fair value of warrants that are liability classified and the accounting treatment for the termination of Histogenics’ collaboration agreement with Intrexon Corporation (“Intrexon”). For example, during the third quarter of 2018, Histogenics identified a material weakness in its internal controls relating to the valuation of the warrant liability. Because the valuation of the warrants is exceedingly complex and requires highly specialized skills to perform and review, Histogenics uses the assistance of a third-party service provider to perform such valuation. In the third quarter of 2018, the third-party service provider made an error in the valuation that was not detected by management in its review process but was identified by Histogenics’ independent registered public accounting firm. In the fourth quarter of 2018, Histogenics identified a material weakness in its internal controls related to the accounting treatment for the contingent liability associated with the termination agreement entered into with Intrexon which terminated Histogenics’ collaboration agreement with Intrexon. In this instance, Histogenics concluded after numerous discussions with its independent registered public accounting firm that it had incorrectly accounted for the contingent liability. In both cases these items were discovered prior to the issuance of the financial statements. The identified material weakness did not result in a misstatement to its consolidated financial statements or disclosures; however, it could result in misstatements of certain account balances (such as warrant liability, change in fair value of warrant liability and accrued expenses due to Intrexon) or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Histogenics has implemented additional review procedures, including engaging a second third-party service provider to assist in its review of the work of the third-party service provider preparing the warrant valuation analysis and will seek to implement a similar procedure for other unusual or complex transactions going forward.

Histogenics cannot assure you that it will not have additional material weaknesses or significant deficiencies in its internal control over financial reporting. If Histogenics identifies any other material weaknesses or significant deficiencies that may exist, the accuracy and timing of its financial reporting may be adversely affected, it may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements. These could result in a material decline in its stock price and could significantly impair its ability to successfully complete the merger or any potential strategic transaction on terms that are favorable to its stockholders, or at all.

 

40


Table of Contents

Histogenics’ internal computer systems, or those of its development partners, third-party clinical research organizations or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of its product development programs.

Despite the implementation of security measures, Histogenics’ internal computer systems and those of its development partners, third-party clinical research organizations, data management organizations and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While Histogenics has not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in its operations, it could result in a material disruption of its programs. For example, the loss of any NeoCart clinical trial data could result in delays in Histogenics regulatory approval efforts and significantly increase its costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to Histogenics’ data or applications or other data or applications relating to its technology or product candidates, or inappropriate disclosure of confidential or proprietary information, Histogenics could incur liabilities and the further development NeoCart or any future product candidates could be delayed.

Histogenics relies on email and other messaging services in connection with its operations. Histogenics may be targeted by parties using fraudulent spoofing and phishing emails to misappropriate passwords, payment information or other personal information or to introduce viruses through Trojan horse programs or otherwise through its networks, computers, smartphones, tablets or other devices. Despite its efforts to mitigate the effectiveness of such malicious email campaigns through a variety of control and non-electronic checks, spoofing and phishing may damage Histogenics’ business and increase its costs. Histogenics does not currently maintain a cyber insurance policy. Any of these events or circumstances could materially adversely affect Histogenics’ business, financial condition and operating results and could significantly impair its ability to successfully complete the merger or any potential strategic transaction on terms that are favorable to its stockholders, or at all.

Histogenics uses hazardous chemicals and biological materials in its business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly. Histogenics may incur significant costs complying with environmental laws and regulations.

Histogenics’ research and development and manufacturing processes involve the controlled use of hazardous materials, including chemicals and biological materials. Histogenics’ operations produce hazardous waste products. Histogenics cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. Histogenics may be sued for any injury or contamination that results from its use or the use by third parties of these materials, and its liability may exceed its insurance coverage and its total assets. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of these hazardous materials and specified waste products, as well as the discharge of pollutants into the environment and human health and safety matters.

Compliance with environmental laws and regulations may be expensive and may impair Histogenics’ research, development and production efforts. If Histogenics fails to comply with these requirements, it could incur substantial costs, including civil or criminal fines and penalties, clean-up costs or capital expenditures for control equipment or operational changes necessary to achieve and maintain compliance. In addition, Histogenics cannot predict the impact on its business of new or amended environmental laws or regulations or any changes in the way existing and future laws and regulations are interpreted and enforced.

Histogenics’ employees or consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.

Histogenics is exposed to the risk of employee and consultant fraud or other misconduct. Misconduct by employees or consultants could include intentional failures to comply with the regulations of the FDA or foreign regulators, failure to provide accurate information to regulatory authorities, failure to comply with manufacturing

 

41


Table of Contents

standards Histogenics has established, failure to comply with federal and state health care fraud and abuse laws and regulations in the United States and abroad, failure to report financial information or data accurately, and failure to comply with its own internal company policies. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee or consultant misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause harm to Histogenics’ reputation. Histogenics has adopted a code of business conduct and ethics, but it is not always possible to identify and deter employee misconduct, and the precautions Histogenics takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting Histogenics from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against Histogenics, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on its business, including the imposition of significant fines or other sanctions.

In addition, during the course of Histogenics’ operations its directors, executives, employees and consultants may have access to material, nonpublic information regarding its business, its results of operations or potential transactions it is considering. Histogenics may not be able to prevent a director, executive, employee or consultant from trading in its common stock on the basis of, or while having access to, material, nonpublic information. If a director, executive, employee or consultant was to be investigated or an action was to be brought against a director, executive, employee or consultant for insider trading, it could have a negative impact on Histogenics’ reputation and its stock price. Such a claim, with or without merit, could also result in substantial expenditures of time and money and divert attention of Histogenics’ management team from other tasks important to the success of its business.

Costs associated with being a public reporting company are significant, and public reporting requirements divert significant company resources and management attention.

Histogenics is subject to the reporting requirements of the Exchange Act and the other rules and regulations of the SEC. Compliance with the various reporting and other requirements applicable to public reporting companies requires considerable time, attention of management and financial resources and Histogenics will need to maintain such compliance in order to complete the merger.

Further, the listing requirements of Nasdaq require that Histogenics satisfy certain corporate governance requirements relating to director independence, distributing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct. Histogenics management and other personnel will need to devote a substantial amount of time to ensure that it complies with all of these requirements. Moreover, the reporting requirements, rules and regulations will increase Histogenics’ legal and financial compliance costs and will make some activities more time-consuming and costly. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for Histogenics to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms.

Histogenics’ business is subject to the risks of earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by manmade problems such as terrorism. If any of Histogenics’ manufacturing, processing or storage facilities are damaged or destroyed, its business and prospects would be adversely affected.

A significant natural disaster, such as an earthquake, fire or flood, or a significant power outage, could have a material adverse impact on Histogenics’ business, operating results and financial condition. If any of Histogenics’ manufacturing, processing or storage facilities, or any of the equipment in such facilities were to be

 

42


Table of Contents

damaged or destroyed, it may result a lack of any definitive offer to consummate a strategic transaction, or, if Histogenics receives such a definitive offer, the terms may not be as favorable as anticipated or may not result in the consummation of a transaction.

Histogenics has historically produced materials for its clinical trials at its manufacturing facilities located in Waltham, Massachusetts, and produced its critical raw materials for use in NeoCart production in its facilities located in Lexington, Massachusetts. If these facilities or the equipment in them are significantly damaged or destroyed, a strategic partner may not be able to quickly or inexpensively replace such manufacturing capacity. In addition, natural disasters could affect Histogenics’ third-party service providers’ and manufacturers ability to perform services and provide materials for it or a strategic partner on a timely basis. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, Histogenics’ efforts to complete a strategic transaction may be impeded. For example, acts of terrorism could cause disruptions in Histogenics’ business or the business of its third-party service providers, partners, customers or the economy as a whole which could significantly impair its ability to successfully complete the merger or any potential strategic transaction on terms that are favorable to its stockholders, or at all.

Histogenics is increasingly dependent on information technology systems, infrastructure and data.

Histogenics is increasingly dependent upon information technology systems, infrastructure and data. Its computer systems may be vulnerable to service interruption or destruction, malicious intrusion and random attack. Security breaches pose a risk that sensitive data, including intellectual property, clinical data, trade secrets or personal information may be exposed to unauthorized persons or to the public. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could include the deployment of harmful malware, denial-of service, social engineering and other means to affect service reliability and threaten data confidentiality, integrity and availability. Histogenics’ key business partners face similar risks, and a security breach of their systems could adversely affect Histogenics’ security posture. While Histogenics continues to invest in data protection and information technology, there can be no assurance that its efforts will prevent service interruptions, or identify breaches in its systems, that could adversely affect its business and operations and/or result in the loss of critical or sensitive information or the illegal transfer of funds to unknown persons, which could result in financial, legal, business or reputational harm. Any of these issues could significantly impair Histogenics’ ability to successfully complete the merger or any potential strategic transaction on terms that are favorable to its stockholders, or at all.

Risks Related to Regulatory Matters

Histogenics is subject to numerous U.S. federal and state laws pertaining to health care fraud and abuse, including anti-kickback, self-referral, false claims and fraud laws, and any violation by Histogenics of such laws could result in fines or other penalties.

The Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Histogenics cannot assure you that its internal control policies and procedures will protect it from reckless or negligent acts committed by its employees, future distributors, partners, collaborators or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties or prosecution and have a negative impact on Histogenics’ business, results of operations and reputation.

Risks Related to Histogenics’ Intellectual Property

Histogenics’ ability to execute a strategic transaction may depend on its ability to protect its intellectual property and its proprietary technologies.

Histogenics’ ability to execute a strategic transaction may depend in part on its ability to maintain patent protection and trade secret protection for its product candidates, proprietary technologies and their uses as well as

 

43


Table of Contents

Histogenics’ ability to operate without infringing upon the proprietary rights of others. There can be no assurance that Histogenics’ patent applications or those of its licensors will result in additional patents being issued or that issued patents will afford sufficient protection against competitors with similar technology, nor can there be any assurance that the patents issued will not be infringed, designed around, or invalidated by third parties. Even issued patents may later be found unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. The degree of future protection for Histogenics’ proprietary rights is uncertain. Only limited protection may be available and may not adequately protect Histogenics’ rights or permit it to gain or keep any competitive advantage. This failure to properly protect the intellectual property rights relating to these product candidates could have a material adverse effect on Histogenics financial condition and results of operations and ability to complete the merger.

Composition-of-matter patents are generally considered to be the strongest form of intellectual property protection as such patents provide protection without regard to any method of use. Histogenics cannot be certain that the claims in its patent applications covering composition-of-matter of its product candidates will be considered patentable by the U.S. Patent and Trademark Office and courts in the United States or by the patent offices and courts in foreign countries, nor can Histogenics be certain that the claims in its issued composition-of-matter patents will not be found invalid or unenforceable if challenged. Method-of-use patents protect the use of a product for the specified method. This type of patent does not prevent a competitor from making and marketing a product that is identical to Histogenics’ product for a use that is outside the scope of the patented method. Moreover, even if competitors do not actively promote their product for Histogenics’ targeted indications, physicians may prescribe these products “off-label.” Although off-label prescriptions may infringe or contribute to the infringement of method-of-use patents, the practice is common and such infringement is difficult to prevent or prosecute.

The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that Histogenics or any of its future development partners will be successful in protecting its product candidates by obtaining and defending patents. These risks and uncertainties include the following:

 

   

The U.S. Patent and Trademark Office and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

 

   

Patent applications may not result in any patents being issued.

 

   

Patents that may be issued or in-licensed may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable, or otherwise may not provide any competitive advantage.

 

   

Histogenics’ competitors, many of whom have substantially greater resources than Histogenics does and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with, or eliminate its ability to make, use and sell Histogenics’ potential product candidates.

 

   

There may be significant pressure on the U.S. government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for treatments that prove successful, as a matter of public policy regarding worldwide health concerns.

 

   

Countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop, and market competing product candidates.

In addition, Histogenics relies on the protection of its trade secrets and proprietary know-how. Although Histogenics has taken steps to protect its trade secrets and unpatented know-how, including entering into

 

44


Table of Contents

confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants and advisors, third parties may still obtain this information or may come upon this or similar information independently. If any of these events occurs or if Histogenics otherwise loses protection for its trade secrets or proprietary know-how, the value of this information may be greatly reduced.

If Histogenics or any of its future development or collaborative partners are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation could have a material adverse effect on Histogenics’ business.

Histogenics’ success also depends on its ability and the ability of its current or future development or collaborative partners to develop, manufacture, market and sell its product candidates without infringing upon the proprietary rights of third parties. Numerous U.S. and foreign-issued patents and pending patent applications owned by third parties exist in the fields in which Histogenics is developing product candidates, some of which may contain claims that overlap with the subject matter of its intellectual property or are directed at its product candidates, technologies or methods of manufacture. When Histogenics becomes aware of patents held by third parties that may implicate the manufacture, development or commercialization of its product candidates, Histogenics evaluates its need to license rights to such patents. If Histogenics needs to license rights from third parties to manufacture, develop or commercialize its product candidates, there can be no assurance that it will be able to obtain a license on commercially reasonable terms or at all. Failure to obtain a license on commercially reasonable terms or at all could impair Histogenics’ ability to successfully complete the merger or any potential strategic transaction on terms that are favorable to its stockholders, or at all.

Because patent applications can take many years to issue there may be currently pending applications, unknown to Histogenics, that may later result in issued patents upon which Histogenics’ product candidates or proprietary technologies may infringe. Similarly, there may be issued patents relevant to its product candidates of which Histogenics is not aware.

There is a substantial amount of litigation involving patent and other intellectual property rights in the biologics industry generally. If a third-party claims that Histogenics or any of its licensors, suppliers or development partners infringe upon a third-party’s intellectual property rights, Histogenics may have to:

 

   

seek to obtain licenses that may not be available on commercially reasonable terms, if at all;

 

   

abandon an infringing product candidate or redesign its products or processes to avoid infringement;

 

   

pay substantial damages including, in an exceptional case, treble damages and attorneys’ fees, which Histogenics may have to pay if a court decides that the product candidate or proprietary technology at issue infringes upon or violates the third-party’s rights;

 

   

pay substantial royalties or fees or grant cross-licenses to its technology; or

 

   

defend litigation or administrative proceedings that may be costly whether Histogenics wins or loses, and which could result in a substantial diversion of its financial and management resources.

Histogenics may be involved in lawsuits to protect or enforce its patents or the patents of its licensors, which could be expensive, time consuming and unsuccessful.

Third parties may infringe upon Histogenics’ patents or the patents of its licensors. To counter infringement or unauthorized use, Histogenics may be required to file infringement claims, which can be expensive and time consuming. An adverse result in any litigation or defense proceedings could put one or more of its patents at risk of being invalidated, found to be unenforceable or interpreted narrowly and could put Histogenics’ patent applications at risk of not issuing. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of Histogenics’ confidential information could be compromised by disclosure during this type of litigation.

Most of Histogenics’ competitors are larger than it is and have substantially greater resources. They are, therefore, likely to be able to sustain the costs of complex patent litigation longer than Histogenics could. In

 

45


Table of Contents

addition, the uncertainties associated with litigation could have a material adverse effect on Histogenics ability to raise the funds necessary to continue its clinical trials, continue its internal research programs, in-license needed technology, or enter into development partnerships that would help Histogenics bring its product candidates to market.

In addition, any future patent litigation, interference or other administrative proceedings will result in additional expense and distraction of Histogenics’ personnel. An adverse outcome in such litigation or proceedings may expose Histogenics, or any of its future development partners to loss of its proprietary position, expose it to significant liabilities or require it to seek licenses that may not be available on commercially acceptable terms, if at all. Failure to obtain a license on commercially reasonable terms or at all could impair Histogenics’ ability to successfully complete the merger or any potential strategic transaction on terms that are favorable to its stockholders, or at all.

Histogenics issued patents could be found invalid or unenforceable if challenged in court which could have a material adverse effect on Histogenics’ business could impair its ability to successfully complete a potential strategic transaction.

If Histogenics or any of its future development partners were to initiate legal proceedings against a third party to enforce a patent covering one of Histogenics’ product candidates or one of its future product candidates, technologies or methods of manufacture, the defendant could counterclaim that Histogenics’ patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non- enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the U.S. Patent and Trademark Office, or made a misleading statement, during prosecution. Third parties may also raise similar claims before the U.S. Patent and Trademark Office even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, Histogenics cannot be certain that there is no invalidating prior art, of which Histogenics and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, Histogenics would lose at least part, and perhaps all, of the patent protection on such product candidate. Such a loss of patent protection would have a material adverse impact on Histogenics’ business and could impair its ability to successfully complete the merger or any potential strategic transaction on terms that are favorable to its stockholders, or at all.

Histogenics may be subject to claims that its consultants or independent contractors have wrongfully used or disclosed alleged trade secrets of their other clients or former employers to it, which could subject Histogenics to costly litigation.

As is common in the biotechnology industry, Histogenics engages the services of consultants to assist it in the development of its product candidates. Many of these consultants were previously employed at, or may have previously or may be currently providing consulting services to, other biotechnology or pharmaceutical companies, including its competitors or potential competitors. Histogenics may become subject to claims that its company or a consultant inadvertently or otherwise used or disclosed trade secrets or other information proprietary to their former employers or their former or current clients. Litigation may be necessary to defend against these claims. Even if Histogenics is successful in defending against these claims, litigation could result in substantial costs and be a distraction to its management team and could impair its ability to successfully complete the merger or any potential strategic transaction on terms that are favorable to its stockholders, or at all.

Changes in U.S. patent law could diminish the value of patents in general, which could materially impair Histogenics’ ability to protect its product candidates.

As is the case with other biotechnology companies, Histogenics’ success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involve

 

46


Table of Contents

technological and legal complexity. Therefore, obtaining and enforcing biotechnology patents is costly, time consuming and inherently uncertain. In addition, Congress recently passed patent reform legislation. The Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to Histogenics’ ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the U.S. Patent and Trademark Office, the laws and regulations governing patents could change in unpredictable ways that would weaken Histogenics’ ability to obtain new patents or to enforce its existing patents and patents it might obtain in the future.

Histogenics may not be able to protect its intellectual property rights throughout the world which could materially, negatively affect its business.

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and Histogenics’ intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, Histogenics may not be able to prevent third parties from practicing its inventions in all countries outside the United States, or from selling or importing products made using its inventions in and into the United States or other jurisdictions. Competitors may use Histogenics’ technologies in jurisdictions where it has not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where Histogenics has patent protection, but enforcement is not as strong as that in the United States. These products may compete with Histogenics’ product candidates and its patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology, which could make it difficult for Histogenics to stop the infringement of its patents or marketing of competing products in violation of its proprietary rights generally. Proceedings to enforce Histogenics’ patent rights in foreign jurisdictions could result in substantial costs and divert its efforts and attention from other aspects of its business, could put its patents at risk of being invalidated or interpreted narrowly and its patent applications at risk of not issuing and could provoke third parties to assert claims against it. Histogenics may not prevail in any lawsuits that it initiates and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, Histogenics’ efforts to enforce its intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that it develops or license and may adversely affect its business and could significantly impair its ability to successfully complete a potential strategic transaction on terms that are favorable to its stockholders, or at all.

If Histogenics’ trademarks and trade names are not adequately protected, then it may not be able to build name recognition in its markets of interest and its business may be adversely affected.

Histogenics’ registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. Histogenics may not be able to protect its rights to these trademarks and trade names, which it needs to build name recognition by potential partners or customers in its markets of interest. Over the long term, if Histogenics is unable to establish name recognition based on its trademarks and trade names, then it may not be able to compete effectively and its business may be adversely affected.

 

47


Table of Contents

Risks Related to Histogenics Common Stock

Histogenics received deficiency letters in October 2018 and December 2018 from the Nasdaq Listing Qualifications Department (the “Staff”) of Nasdaq notifying Histogenics that it was not in compliance with Nasdaq Listing Rule 5550(a)(2) and Nasdaq Listing Rule 5550(b)(2). If Histogenics were to fail to regain compliance, its shares could be delisted from the Nasdaq Capital Market, which could materially reduce the liquidity of its common stock and have an adverse effect on its market price. A delisting could limit Histogenics’ strategic alternatives and ability to consummate a potential transaction.

On October 17, 2018, Histogenics received a deficiency letter from the Staff notifying it that, for the 30 consecutive business days prior to October 17, 2018, the closing bid price for Histogenics common stock had closed below a minimum $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (“Rule 5550(a)(2)”). The Nasdaq deficiency letter has no immediate effect on the listing of its common stock, and its common stock will continue to trade on The Nasdaq Capital Market under the symbol “HSGX” at this time. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), Histogenics was given 180 calendar days, or until April 15, 2019 to regain compliance with Rule 5550(a)(2).

On April 16, 2019, Histogenics received a letter (the “Letter”) from the Staff notifying Histogenics that, based upon Histogenics’ continuing non-compliance with Rule 5550(a)(2), the Staff had determined that Histogenics common stock would be delisted from Nasdaq unless Histogenics timely requested a hearing before a Nasdaq Hearings Panel (the “Panel”). The Letter also noted that Histogenics was not eligible for a second 180 day grace period as it does not comply with the stockholders’ equity initial listing requirement for The Nasdaq Capital Market.

Accordingly, Histogenics timely requested a hearing before the Panel, which took place in May 2019. On May 31, 2019, Histogenics received a decision letter from the Panel (the “Decision”), indicating that the Panel had granted Histogenics’ request to continue its listing on The Nasdaq Capital Market in order to complete the proposed merger with Ocugen. The Decision specifies that Histogenics shall complete the merger no later than September 30, 2019, and demonstrate to the satisfaction of the Staff and the Panel that the combined entity meets all of the applicable requirements for initial listing on The Nasdaq Capital Market. The Panel reserved the right to reconsider the terms of the extension based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of Histogenics’ common stock on The Nasdaq Capital Market inadvisable or unwarranted. Histogenics’ common stock will continue to trade on The Nasdaq Capital Market under the symbol “HSGX” through the earlier of the expiration of the extension period granted by the Panel or the closing of the proposed merger.

Further, on December 19, 2018, Histogenics received a deficiency letter from the Staff notifying it that for the last 30 consecutive business days prior to December 18, 2018, the market value of its listed securities were less than $35 million, which does not meet the requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2) (“Rule 5550(b)(2)”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), Nasdaq has provided Histogenics with 180 calendar days, or until June 17, 2019, to regain compliance with Rule 5550(b)(2). If Histogenics regains compliance with Rule 5550(b)(2), Nasdaq will provide written confirmation to Histogenics and close the matter. If Histogenics does not regain compliance with this requirement by June 17, 2019, Histogenics will receive written notification from the Staff that its securities are subject to delisting. At that time, it may appeal the delisting determination to a Hearing Panel.

The December 2018 deficiency letter did not result in the delisting of Histogenics common stock from The Nasdaq Capital Market. To regain compliance with Rule 5550(b)(2), the market value of Histogenics’ listed securities must meet or exceed $35 million for a minimum of ten consecutive business days during the 180-day grace period ending on or before June 17, 2019 (Nasdaq has the discretion to monitor compliance for as long as 20 consecutive business days before deeming Histogenics in compliance). Histogenics could also regain compliance with Nasdaq’s alternative continued listing requirements by having stockholders’ equity of $2.5 million or more, or net income from continuing operations of $500,000 in the most recently completed fiscal year.

 

48


Table of Contents

A delisting would also likely make it more difficult for Histogenics to obtain financing through the sale of its equity. Any such sale of equity would likely be more dilutive to its current stockholders than would be the case if Histogenics’ shares were listed.

Histogenics may not satisfy The Nasdaq Capital Market’s other requirements for continued listing. If Histogenics cannot satisfy these requirements, Nasdaq could delist its common stock and could impact its ability to consummate the merger.

Histogenics common stock is listed on The Nasdaq Capital Market under the symbol “HSGX.” To continue to be listed on Nasdaq, Histogenics’ is required to satisfy a number of conditions. Other than the deficiency letters discussed in the immediately prior risk factor, Histogenics previously received two letters from Nasdaq, with the first letter in November 2016 notifying it of its failure to maintain a minimum market value of listed securities of $50,000,000 for the 30 consecutive business days. Histogenics subsequently regained compliance with this listing standard in March 2017. The second letter in May 2017 notified Histogenics of its failure to maintain a minimum of $10,000,000 in stockholders’ equity as required for companies trading on The Nasdaq Global Market. In response to the second letter, Histogenics transferred its securities to The Nasdaq Capital Market in June 2017 to regain compliance with the minimum stockholders’ equity requirement.

Histogenics cannot assure you that it will be able to satisfy the Nasdaq listing requirements in the future. If Histogenics is delisted from Nasdaq, trading in its shares of common stock may be conducted, if available, on the “OTC Bulletin Board Service” or, if available, via another market. In the event of such delisting, an investor would likely find it significantly more difficult to dispose of, or to obtain accurate quotations as to the value of the shares of Histogenics common stock, and its ability to raise future capital through the sale of the shares of its common stock or other securities convertible into or exercisable for its common stock could be severely limited. A determination could also then be made that Histogenics common stock is a “penny stock” which would require brokers trading in its common stock to adhere to more stringent rules and possibly result in a reduced level of trading. This could have a long-term impact on Histogenics’ ability to raise future capital through the sale of its common stock.

The trading price of Histogenics common stock has been, and is likely to continue to be, volatile, and you might not be able to sell your shares at or above the price you paid.

Histogenics’ stock price has been and will likely continue to be volatile for the foreseeable future. The realization of any of the risks described in these risk factors or other unforeseen risks could have a dramatic and adverse effect on the market price of its common stock. The trading price of its common stock is likely to continue to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond Histogenics’ control. These factors include those discussed elsewhere in this “Risk Factors” section and others such as:

 

   

its ability to consummate a strategic transaction, the value of such transaction including whether it is deemed to enhance stockholder value or deliver expected benefits;

 

   

announcements about Histogenics or about its competitors including clinical trial results, regulatory approvals, or new product candidate introductions and the revenue and growth potential of such new products;

 

   

developments concerning its current or future development partners, licensors or product candidate manufacturers;

 

   

litigation and other developments relating to its patents or other proprietary rights or those of its competitors;

 

   

conditions in the pharmaceutical or biotechnology industries, regulations or concerns related to cell and gene therapies, and the economy as a whole;

 

49


Table of Contents
   

governmental regulation and legislation;

 

   

the recruitment or departure of members of its Board, management team or other key personnel;

 

   

changes in its operating results;

 

   

any changes in the financial projections it may provide to the public, its failure to meet these projections, or changes in recommendations by any securities analysts that elect to follow its common stock;

 

   

any change in securities analysts’ estimates of its performance, or its failure to meet analysts’ expectations;

 

   

the expiration of market standoff or contractual lock-up agreements;

 

   

sales or potential sales of substantial amounts of its common stock; and

 

   

price and volume fluctuations in the overall stock market or resulting from inconsistent trading volume levels of its shares.

In recent months and years, the stock market in general, and the market for pharmaceutical and biotechnological companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations. In addition, Brexit or actions taken by the current presidential administration and Congress could adversely affect United States, European or worldwide economic or market conditions and could contribute to instability and volatility in global financial markets. Broad market and industry factors may seriously affect the market price of Histogenics common stock, regardless of its actual operating performance.

Histogenics’ quarterly operating results may fluctuate substantially, which may cause the price of its common stock to fluctuate substantially.

Histogenics expects its quarterly operating results to be subject to fluctuations. Histogenics’ net income or loss and other operating results may be affected by numerous factors, including:

 

   

its ability to complete the merger or any strategic transaction;

 

   

derivative instruments recorded at fair value, including but not limited to the change in fair value of warrants issued in connection with a private placement completed in 2016;

 

   

asset impairments, severance costs, lease termination costs, transaction and other costs triggered by a wind down of its operations; and

 

   

any lawsuits in which it may become involved.

If Histogenics’ quarterly operating results fall below the expectations of investors or securities analysts, the price of its common stock could decline substantially. Furthermore, any quarterly fluctuations in its operating results may, in turn, cause the price of its stock to fluctuate substantially.

Histogenics expects its stock price to continue to be volatile, and securities class action litigation has often been instituted against companies following periods of volatility of their stock price or after the announcement of a change in control transaction. Any such litigation, if instituted against Histogenics, could result in substantial costs and a diversion of its management’s attention and resources.

In the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against Histogenics, could result in substantial costs and a diversion of its management’s attention and resources. This litigation, if instituted against it could also impair its ability to successfully complete a potential strategic transaction on terms that are favorable to its stockholders, or at all.

 

50


Table of Contents

If securities analysts do not publish research, publish unfavorable research about Histogenics’ business (or the combined company’s business) or cease coverage of the company, its stock price and trading volume could decline.

The trading market for Histogenics common stock will depend in part on the research and reports that securities and industry analysts publish about it or its business (including the business of the combined company following consummation of the merger). In the event one or more of the analysts who covers Histogenics downgrades its stock or publishes unfavorable research about its business, or if its clinical trials or operating results fail to meet the analysts’ expectations, its stock price would likely decline. Recently, several securities analysts ceased coverage of Histogenics, and if one or more of the remaining analysts ceases coverage of Histogenics or fails to publish reports on it regularly, demand for Histogenics’ stock could decrease, which could cause its stock price and trading volume to decline.

Raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution to Histogenics’ existing stockholders, restrict its operations or require it to relinquish proprietary rights.

To the extent that Histogenics raises additional capital by issuing equity securities, the share ownership of existing stockholders will be diluted. Any future debt financing may involve covenants that restrict Histogenics’ operations, including limitations on its ability to incur liens or additional debt, pay dividends, redeem its stock, make certain investments, and engage in certain merger, consolidation, or asset sale transactions. In addition, if Histogenics seeks funds through arrangements with collaborative partners, these arrangements may require it to relinquish rights to some of its technologies or product candidates or otherwise agree to terms unfavorable to it.

Histogenics has never paid and does not intend to pay cash dividends and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of Histogenics common stock.

Histogenics has never paid cash dividends on any of its capital stock, and it currently intends to retain future earnings, if any, to fund the development and growth of its business. Therefore, you are not likely to receive any dividends on Histogenics common stock for the foreseeable future or at all. Since Histogenics does not intend to pay dividends, your ability to receive a return on your investment will depend on any future appreciation in the market value of Histogenics common stock. There is no guarantee that Histogenics common stock will appreciate or even maintain the price at which you have purchased it.

Provisions in Histogenics’ sixth amended and restated certificate of incorporation and amended and restated bylaws and Delaware law might discourage, delay or prevent a change in control of Histogenics or changes in its management and, therefore, depress the market price of its common stock.

Histogenics’ sixth amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could depress the market price of its common stock by acting to discourage, delay or prevent a change in control of Histogenics or changes in its management that the stockholders of Histogenics may deem advantageous. These provisions among other things:

 

   

establish a classified board of directors so that not all members of the board are elected at one time;

 

   

permit the board of directors to establish the number of directors;

 

   

provide that directors may only be removed “for cause”;

 

   

require super-majority voting to amend some provisions in Histogenics’ certificate of incorporation and bylaws;

 

   

authorize the issuance of “blank check” preferred stock that the Histogenics Board could use to implement a stockholder rights plan;

 

   

eliminate the ability of Histogenics’ stockholders to call special meetings of stockholders;

 

51


Table of Contents
   

prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of Histogenics’ stockholders;

 

   

provide that the board of directors is expressly authorized to make, alter or repeal Histogenics’ bylaws; and

 

   

establish advance notice requirements for nominations for election to the Histogenics Board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

In addition, Section 203 of the DGCL may discourage, delay or prevent a change in control of Histogenics. Section 203 imposes certain restrictions on merger, business combinations and other transactions between Histogenics and holders of 15% or more of its common stock.

Histogenics is an emerging growth company and the extended transition period for complying with new or revised financial accounting standards and reduced disclosure and governance requirements applicable to emerging growth companies could make Histogenics common stock less attractive to investors.

Histogenics is an emerging growth company. Under the Jumpstart Our Business Startups Act (the “Jobs Act”), emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. Histogenics plans to avail itself of this exemption from new or revised accounting standards and, therefore, it may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

For as long as Histogenics continues to be an emerging growth company, it also intends to take advantage of certain other exemptions from various reporting requirements that are applicable to other public companies, including reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory stockholder vote on executive compensation and any golden parachute payments not previously approved, exemption from the requirement of auditor attestation on its internal control over financial reporting and exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). If Histogenics does, the information that it provides stockholders may be different than what is available with respect to other public companies.

Investors could find Histogenics common stock less attractive because it will rely on these exemptions, which may make it more difficult for investors to compare its business with other companies in its industry. If some investors find Histogenics common stock less attractive as a result, there may be a less active trading market for its common stock and its stock price may be more volatile. In addition, it may be difficult for Histogenics to raise additional capital as and when needed. If Histogenics is unable to do so, its financial condition and results of operations could be materially and adversely affected.

Histogenics will remain an emerging growth company until the earliest of: (1) the end of the fiscal year in which the market value of its common stock that is held by non-affiliates exceeds $700.0 million as of the end of the second fiscal quarter; (2) the end of the fiscal year in which it has total annual gross revenue of $1.07 billion or more during such fiscal year; (3) the date on which it issues more than $1.0 billion in non-convertible debt in a three-year period or (4) December 31, 2019, the end of the fiscal year following the fifth anniversary of the completion of its initial public offering.

 

52


Table of Contents

Risks Related to Ocugen

Risks Related to Ocugen’s Financial Position and Capital Requirements

Ocugen has incurred significant losses from operations and negative cash flows from operations since its inception. Ocugen expects to incur losses over the next several years and may never achieve or maintain profitability.

Since inception, Ocugen has incurred significant net losses and expects to continue to incur net losses for the foreseeable future. Ocugen has not generated any revenue to date and has funded its operations to date through the sale of common stock, warrants to purchase common stock, the issuance of convertible notes, and borrowings under credit facilities. Ocugen incurred net losses of approximately $6.3 million for the three months ended March 31 2019, $18.2 million for the year ended December 31, 2018, and $7.8 million for the year ended December 31, 2017. As of March 31, 2019, Ocugen had an accumulated deficit of $37.5 million and a cash and cash equivalents balance of $0.3 million.

Ocugen has devoted substantially all of its financial resources and efforts to research and development, including preclinical studies and clinical trials. Ocugen expects that over the next several years it will continue to incur losses from operations as it increases its expenditures in research and development in connection with clinical trials and other development activities. Ocugen’s net losses may fluctuate significantly from quarter to quarter and year to year.

Ocugen anticipates that its expenses will increase substantially as compared to prior periods as it completes its Phase 3 trial with respect to OCU300, prepares to commence Phase 1 trials with respect to OCU400 and OCU200, and otherwise develops and prepares for commercialization of its product candidates, as a result of increased headcount, including management personnel to support its clinical, manufacturing and commercialization activities, expanded infrastructure, increased legal, compliance, accounting and investor and public relations expenses associated with being a public company, and increased insurance premiums, among other factors. Ocugen may seek to obtain additional financing in the future through the issuance of common stock, through other equity or debt financings or through collaborations or partnerships with other companies. Ocugen may not be able to raise additional capital on terms acceptable to it, or at all, and any failure to raise capital as and when needed could compromise its ability to execute on its business plan and cause it to delay or curtail operations until such funding is received.

In addition, Ocugen’s license agreements with the University of Colorado, the University of Illinois at Chicago and The Schepens Eye Research Institute impose, among other obligations, royalty, milestone payment, and other financial obligations on it, and Ocugen may enter into additional licensing and funding arrangements with third parties that may impose additional royalty, milestone payment, insurance and other obligations on it.

Due to the inherently unpredictable nature of preclinical and clinical development, Ocugen is unable to estimate with any certainty the costs it will incur and the timelines it will require in its continued development efforts. Additionally, its expenses will also increase if, and, as it:

 

   

pursues the clinical development of OCU300 and OCU310, through Phase 3 clinical development and otherwise pursues the preclinical and clinical development of its product candidates;

 

   

initiates preclinical studies and clinical trials for any additional product candidates that it may pursue in the future;

 

   

seeks marketing approvals for product candidates that successfully complete clinical development;

 

   

establishes sales, marketing and distribution capabilities for its product candidates for which it obtains marketing approval;

 

   

scales up its manufacturing processes and capabilities to support its clinical trials of its product candidates and commercialization of any of its product candidates for which it obtains marketing approval;

 

53


Table of Contents
   

expands its operational, financial and management systems and increases personnel, including personnel to support its clinical development, manufacturing and commercialization efforts and its operations as a public company;

 

   

hires additional clinical, quality control, scientific and management personnel;

 

   

leverages its proprietary OcuNanoE technology to advance high-value therapeutics into preclinical and clinical development;

 

   

in-licenses or acquires the rights to other products, product candidates or technologies;

 

   

develops, maintains, expands and protects its intellectual property portfolio; and

 

   

increases its product liability insurance coverage as it expands its commercialization efforts.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, Ocugen is unable to predict the timing or amount of increased expenses or when, or if, it will be able to achieve profitability. Ocugen’s expenses will increase if:

 

   

it is required by the FDA, European Medicines Agency (“EMA”) or other foreign regulatory agencies to perform trials or studies in addition to those currently expected;

 

   

there are any delays in enrollment of patients in or completing its clinical trials or the development of its product candidates; or

 

   

there are any third-party challenges to Ocugen’s intellectual property portfolio, or the need arises to defend against intellectual property-related claims.

Ocugen’s ability to become and remain profitable depends on its ability to generate revenue. Ocugen does not expect to generate revenue that is sufficient to achieve profitability unless and until it obtains marketing approval for and commercializes one of its product candidates. Ocugen does not expect to commercialize any of its product candidates before 2021, if ever. This will require it to be successful in a range of challenging activities, including:

 

   

completing and obtaining favorable results from its ongoing Phase 3 clinical trial of OCU300 for the treatment of ocular redness and discomfort in patients with oGVHD;

 

   

completing and obtaining favorable results from Phase 3 clinical trials of OCU310 for relief from the signs and symptoms of DED;

 

   

obtaining marketing approval for OCU300, OCU310, or any other product candidates;

 

   

discovering additional product candidates;

 

   

manufacturing at commercial scale, marketing, selling and distributing those products for which it obtains marketing approval;

 

   

achieving an adequate level of market acceptance of and obtaining and maintaining coverage and adequate reimbursement from third-party payors for its products; and

 

   

obtaining, maintaining and protecting its intellectual property rights.

Ocugen is only in the preliminary stages of many of these activities, and it may never succeed in these activities or generate revenue that is sufficient to achieve profitability. Even if Ocugen does achieve profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis. If it fails to become profitable or is unable to sustain profitability on a continuing basis, then it may be unable to continue its operations at planned levels and be forced to reduce or terminate its operations. Ocugen’s failure to become profitable or inability to remain profitable would decrease the value of the company and could impair its ability to raise capital, expand its business, maintain its research and development efforts, continue or undertake commercialization efforts, diversify its product offerings or even continue its operations. A decline in the value of the company could also cause you to lose all or part of your investment.

 

54


Table of Contents

Ocugen’s recurring operating losses have raised substantial doubt regarding its ability to continue as a going concern.

Ocugen’s recurring operating losses raise substantial doubt about its ability to continue as a going concern. For the year ended December 31, 2018, Ocugen had a net loss of $18.2 million, working capital of $(12.2) million and net cash used in operating activities of $11.6 million. Ocugen has no current source of revenue to sustain its present activities, and it does not expect to generate revenue until and unless it receives regulatory approval of and successfully commercialize its product candidates. As a result, Ocugen concluded that there is substantial doubt about its ability to continue as a going concern, and its independent registered public accounting firm included an explanatory paragraph with regard to its ability to continue as a going concern in its report on Ocugen’s financial statements as of and for the year ended December 31, 2018 included elsewhere in this prospectus. The perception of Ocugen’s ability to continue as a going concern may make it more difficult for it to obtain financing for the continuation of its operations and could result in the loss of confidence by investors, suppliers and employees.

Ocugen’s limited operating history may make it difficult for you to evaluate the success of its business to date and to assess its future viability.

Ocugen has a limited operating history, and its operations to date have been limited to organizing and staffing the company, acquiring rights to intellectual property, business planning, raising capital and developing OCU300, OCU310 and other product candidates. Consequently, any predictions you make about Ocugen’s future success or viability may not be as accurate as they could be if it had a longer operating history.

In addition, as a new business, Ocugen may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. Ocugen will need to transition from a company with a research and development focus to a company capable of supporting commercial activities. It may not be successful in such a transition.

Ocugen expects its financial condition and operating results to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond its control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

Ocugen will need substantial additional funding. If Ocugen is unable to raise capital when needed, it could be forced to delay, reduce or eliminate its product development programs or commercialization efforts.

Ocugen expects to devote substantial financial resources to its ongoing and planned activities, particularly as it conducts multiple clinical trials and, assuming positive results from these trials, seeks marketing approval for OCU300 and continues the development of and potentially seeks marketing approval for other clinical and preclinical product candidates, including OCU310, OCU400, OCU200 and OCU100. Ocugen expects its expenses to increase substantially in connection with its ongoing activities, particularly as it advances its preclinical activities and clinical trials. In addition, its expenses will further increase if it suffers any delay in its ongoing Phase 3 clinical program for OCU300, or commencement of its Phase 1/2 clinical programs for OCU400 and OCU200, including delays in enrollment of patients. Ocugen also expects to devote additional financial resources to conducting research and development, initiating clinical trials of, and potentially seeking regulatory approval for, other potential product candidates, including product candidates that it may develop from its OcuNanoE program.

If Ocugen obtains marketing approval for OCU300, or any other product candidate that it develops, it expects to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing. Furthermore, upon the closing of this offering, Ocugen expects to incur additional costs associated with operating as a public company, hiring additional personnel and expanding its facilities. Accordingly, Ocugen may need to obtain substantial additional funding in connection with its continuing operations. If it is unable to raise capital when needed or on attractive terms, it could be forced to delay, reduce or eliminate its research and development programs or any future commercialization efforts.

 

55


Table of Contents

Ocugen’s future capital requirements will depend on many factors, including:

 

   

the progress, costs and results of its Phase 3 clinical trials for OCU300 and OCU310, any clinical trials for its preclinical product candidates, and any clinical activities for regulatory review of OCU300, OCU310, or its other product candidates outside of the United States;

 

   

the costs and timing of process development and manufacturing scale-up activities associated with OCU300, OCU310, and its preclinical product candidates;

 

   

the costs, timing and outcome of regulatory review of OCU300, OCU310 and its preclinical product candidates;

 

   

the costs of commercialization activities for OCU300, OCU310, or its preclinical product candidates if it receives, or expects to receive, marketing approval, including the costs and timing of establishing product sales, marketing, distribution and outsourced manufacturing capabilities;

 

   

subject to receipt of marketing approval, revenue received from commercial sales of OCU300, OCU310, or its preclinical product candidates;

 

   

its ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements;

 

   

the scope, progress, results and costs of any product candidates that it may derive from its OcuNanoE program or any other product candidates that it may develop;

 

   

the extent to which it in-licenses or acquires rights to other products, product candidates or technologies; and

 

   

the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting its intellectual property rights and defending against any intellectual property-related claims.

As of March 31, 2019, Ocugen had cash and cash equivalents of approximately $0.3 million. Ocugen believes that the net proceeds from the Pre-Merger Financing and the Asset Sale, together with the existing cash and cash equivalents of the combined company, will enable it to fund its operating expenses and capital expenditure requirements through mid-2020. However, Ocugen has based this estimate on assumptions that may prove to be wrong, and its operating plan may change as a result of many factors currently unknown to it. As a result, it could deplete its capital resources sooner than it currently expects and may need additional funding sooner than it estimates.

Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete. Ocugen may never generate the necessary data or results required to obtain regulatory approval of products with the market potential sufficient to enable it to achieve profitability. Ocugen does not expect to generate revenue from sales of any product candidates until at least 2021, if at all. Accordingly, it will need to obtain substantial additional financing to achieve its business objectives. In addition, it may seek additional capital due to favorable market conditions or strategic considerations, even if it believes it has sufficient funds for its current or future operating plans. Adequate additional financing may not be available to it on acceptable terms, or at all. If adequate funds are not available to it on a timely basis, it may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for one or more of its product candidates or delay, limit, reduce or terminate its establishment of sales and marketing capabilities or other activities that may be necessary to commercialize its product candidates.

Raising additional capital may cause dilution to stockholders, including Histogenics stockholders after the merger, restrict Ocugen’s operations or require it to relinquish rights to its technologies or product candidates.

Until such time, if ever, as Ocugen can generate substantial product revenues, it expects to finance its cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing

 

56


Table of Contents

arrangements and marketing and distribution arrangements. To the extent that Ocugen raises additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting its ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If Ocugen raises additional funds through collaborations, strategic alliances, licensing arrangements or marketing and distribution arrangements, it may have to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to it. If Ocugen is unable to raise additional funds through equity or debt financings when needed, it may be required to delay, limit, reduce or terminate its product development or future commercialization efforts or grant rights to develop and market products or product candidates that it would otherwise prefer to develop and market on its own.

If Ocugen is unable to use carryforward tax losses or benefit from favorable tax legislation to reduce its taxes, its business, results of operations and financial condition may be adversely affected.

Ocugen has incurred significant net operating losses since its inception. As of December 31, 2018, Ocugen had federal net operating loss carryforwards of approximately $23.7 million. State net operating losses are not materially different from federal net operating losses. If it is unable to use carryforward tax losses to reduce its future taxable income and liabilities in its business, results of operations and financial condition may be adversely affected.

Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” which will occur if there is a cumulative change in ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. A corporation that experiences an ownership change will generally be subject to an annual limitation on the use of its pre-ownership change net operating losses equal to the value of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate (subject to certain adjustments). The annual limitation for a taxable year generally is increased by the amount of any “recognized built-in gains” for such year and the amount of any unused annual limitation in a prior year. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

Recent U.S. tax legislation may materially adversely affect Ocugen’s financial condition, results of operations and cash flows.

Recently-enacted U.S. tax legislation has significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate, limiting interest deductions, modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions generally referred to as “orphan drugs”), adopting elements of a territorial tax system, imposing a one-time transition tax, or repatriation tax, on all undistributed earnings and profits of certain U.S.-owned foreign corporations, revising the rules governing net operating losses and the rules governing foreign tax credits, and introducing new anti-base erosion provisions. Many of these changes are effective immediately, without any transition periods or grandfathering for existing transactions. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and Internal Revenue Service (the “IRS”), any of which could lessen or increase certain adverse impacts of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities.

 

57


Table of Contents

While some of the changes made by the tax legislation may adversely affect Ocugen in one or more reporting periods and prospectively, other changes may be beneficial on a going forward basis. Ocugen continues to work with its tax advisors and auditors to determine the full impact that the recent tax legislation as a whole will have on it. Ocugen urges its investors to consult with their legal and tax advisors with respect to such legislation.

Ocugen’s existing and future indebtedness may limit cash flow available to invest in the ongoing needs of its business.

As of March 31, 2019, Ocugen had $1.0 million of outstanding principal borrowings under the EB-5 Loan Agreement, which it is required to repay on the seventh anniversary of the date of the last disbursement under the EB-5 Loan Agreement (unless terminated earlier pursuant to the terms of the EB-5 Loan Agreement). Ocugen is also eligible to borrow an additional $9.0 million under the EB-5 Loan Agreement, limited by the amount of funds raised by the Lender and subject to availability under the program and certain job creation requirements by it. Ocugen’s obligations under this agreement are secured by substantially all of its assets other than its intellectual property. Ocugen could in the future incur additional indebtedness beyond its borrowings under the EB-5 Loan Agreement.

Ocugen’s debt combined with its other financial obligations and contractual commitments could have significant adverse consequences, including:

 

   

requiring it to dedicate a substantial portion of cash flow from operations or cash on hand to the payment of interest on, and principal of, its debt, which will reduce the amounts available to fund working capital, capital expenditures, product development efforts and other general corporate purposes;

 

   

increasing its vulnerability to adverse changes in general economic, industry and market conditions;

 

   

subjecting it to restrictive covenants that may reduce its ability to take certain corporate actions or obtain further debt or equity financing;

 

   

limiting its flexibility in planning for, or reacting to, changes in its business and its industry; and

 

   

placing it at a competitive disadvantage compared to its competitors that have less debt or better debt servicing options.

Ocugen intends to satisfy its current and future debt service obligations with its existing cash and funds from external sources. Nonetheless, it may not have sufficient funds or may be unable to arrange for additional financing to pay the amounts due under its existing debt. Funds from external sources may not be available on acceptable terms, if at all. In addition, a failure to comply with the covenants under the EB-5 Loan Agreement could result in an event of default and acceleration of amounts due. If an event of default occurs and the Lender accelerates the amounts due under the EB-5 Loan Agreement, Ocugen may not be able to make accelerated payments, and the Lender could seek to enforce security interests in the collateral securing such indebtedness.

Risks Related to Ocugen’s Business and the Development of its Product Candidates

Ocugen is substantially dependent on the success of its product candidates and cannot guarantee that these product candidates will successfully complete development, receive regulatory approval, or be successfully commercialized.

Ocugen currently has no products approved for commercial distribution. Ocugen has invested a significant portion of its efforts and financial resources in the development of its product candidates. Ocugen’s business depends entirely on the successful development and commercialization of its product candidates, which may never occur. Ocugen’s ability to generate revenues in the near term is substantially dependent on its ability to develop, obtain regulatory approval for, and then successfully commercialize its product candidates. Ocugen currently generates no revenues from sales of any products, and it may never be able to develop or commercialize a marketable product.

 

58


Table of Contents

Ocugen currently has limited experience with its product candidates. For OCU300, it has not conducted any clinical studies specifically with its nanoemulsion in patients with oGVHD. The formulation used in previous clinical studies conducted in patients with oGVHD is different from Ocugen’s proposed OCU300 nanoemulsion. The different formulation may impact the final Phase 3 clinical study results for OCU300. As further described in this prospectus, Ocugen has evaluated results from an investigator-led retrospective analyses of the use of brimonidine tartrate 0.15% eye drops in patients with oGVHD and an investigator-led prospective Phase 1/2 clinical trial assessing the use of 0.15% and 0.075% brimonidine tartrate eye drops in patients with oGVHD. The formulations used in these studies are different than its proposed OCU300 formulation. These studies and results are not sufficient to establish the safety and efficacy of OCU300 and the results from these studies should be viewed with caution. The results from these studies may not be predictive of adequate and well-controlled prospective studies. Additionally, these clinical studies were small and not powered for statistical significance and the Phase 1/2 clinical study was discontinued early due to slow enrollment. These studies may not be predictive of the results of later studies conducted with the OCU300 formulation for which Ocugen intends to seek marketing approval. Moreover, although a dose ranging study was recommended but not required by FDA, Ocugen does not intend to conduct such a study and has proceeded directly into Phase 3 clinical trials. Ocugen’s Phase 3 clinical program for OCU300 consists of two clinical trials evaluating OCU300, the first of which is expected to include approximately 60 patients with oGVHD. Ocugen initiated the first Phase 3 trial of OCU300 in June 2018 and the first patient was dosed in December 2018. The timing of the completion of the Phase 3 clinical trials for OCU300 is dependent, in part, on its ability to locate and enroll a sufficient number of eligible patients on a timely basis, as well as a sample size re-estimation based on data from the first 50% of enrolled patients. Ocugen may need to conduct additional studies before it can submit a marketing application for approval of OCU300.

Ocugen has completed a Phase 3 clinical trial for OCU310 that was initiated in September 2018 with the first patient dosed in December 2018. Although the study showed that OCU310 is safe and well-tolerated, it did not meet its co-primary endpoints for symptom and sign. However, a pre-specified exploratory efficacy endpoint of reduction in redness (sign) from the baseline visit, measured by Validated Bulbar Redness score, was statistically significantly better for OCU310 relative to placebo at both Day 14 and Day 28. Post-hoc analysis of the Phase 3 clinical trial is ongoing, subsequent to which a consultation with the FDA will be undertaken Ocugen is evaluating its options and timing for the continued development of OCU310, including partnering for future clinical trials. Ocugen will need to conduct additional studies before it can submit a marketing application for approval of OCU310.

Ocugen’s product candidates will require additional clinical and non-clinical development, regulatory approval, commercial manufacturing arrangements, establishment of a commercial organization, significant marketing efforts, and further investment before it generates any revenues from product sales. Ocugen cannot assure you that it will meet its timelines for its clinical trials, which may be delayed or not completed for a number of reasons.

Ocugen is not permitted to market or promote any of its product candidates before it receives regulatory approval from the FDA or comparable foreign regulatory authorities, and it may never receive such regulatory approval for any of its product candidates. Even if its product candidates are approved, they may be subject to limitations on the indicated uses and populations for which they may be marketed. They may also be subject to other conditions of approval, may contain significant safety warnings, including boxed warnings, contraindications, and precautions, may not be approved with label statements necessary or desirable for successful commercialization, or may contain requirements for costly post-market testing and surveillance, or other requirements, including the submission of a risk evaluation and mitigation strategy (“REMS”) to monitor the safety or efficacy of the products. If Ocugen does not receive FDA approval for, and successfully commercialize its product candidates, it will not be able to generate revenue from these product candidates in the United States in the foreseeable future, or at all. Any significant delays in obtaining approval for and commercializing its product candidates will have a material adverse impact on its business and financial condition.

 

59


Table of Contents

Ocugen has not previously submitted a marketing application to the FDA, or similar marketing application to comparable foreign authorities, for any product candidate, and it cannot be certain that its product candidates will be successful in clinical trials or receive regulatory approval.

Its product candidates are susceptible to the risks of failure inherent at any stage of product development, including the appearance of unexpected or unacceptable adverse events or failure to demonstrate efficacy in clinical trials. Further, its product candidates may not receive regulatory approval even if they are successful in clinical trials.

The success of Ocugen’s product candidates and its ability to generate revenues from its product candidates will depend on many factors including its ability to:

 

   

complete and obtain favorable results from its clinical and preclinical trials with respect to its product candidates;

 

   

apply for and receive marketing approval from the applicable regulatory authorities;

 

   

receive approval for its manufacturing processes and third-party manufacturing facilities from the applicable regulatory authorities;

 

   

recruit and enroll qualified patients for clinical trials with respect to its product candidates in a timely manner;

 

   

expand and maintain a workforce of experienced scientists and others with experience in the relevant technology to continue to develop its product candidates;

 

   

launch and create market demand for its product candidates through marketing and sales activities, and any other arrangements to promote these product candidates that it may otherwise establish;

 

   

receive regulatory approval for claims that are necessary or desirable for successful marketing;

 

   

hire, train, and deploy marketing and sales representatives or contract with a third-party for marketing and sales representatives to commercialize product candidates in the United States;

 

   

manufacture product candidates in sufficient quantities and at acceptable quality and manufacturing cost to meet commercial demand at launch and thereafter;

 

   

establish and maintain agreements with wholesalers, distributors, and group purchasing organizations on commercially reasonable terms;

 

   

pursue partnerships with, or offer licenses to, qualified third-parties to promote and sell product candidates in domestic and key foreign markets where it receives marketing approval;

 

   

maintain patent and trade secret protection and regulatory exclusivity for its product candidates;

 

   

qualify for, identify, register, maintain, enforce and defend intellectual property rights and claims covering its products and intellectual property portfolio;

 

   

not infringe on others’ intellectual property rights;

 

   

launch commercial sales of its product candidates, whether alone or in collaboration with others;

 

   

achieve market acceptance of its product candidates by patients, the medical community, and third-party payors;

 

   

achieve appropriate reimbursement, pricing, and payment coverage for its product candidates;

 

   

effectively compete with other therapies and establish a market share; and

 

   

maintain a continued acceptable safety and efficacy profile of its product candidates following launch.

To the extent Ocugen is not able to do any of the foregoing, its business may be materially harmed. Moreover, successful development of its product candidates for additional indications, if any, or for use in broader patient populations and its ability to broaden the label for any approved product candidates will depend on similar factors.

 

60


Table of Contents

If it is required to conduct additional clinical trials or other testing of its product candidates that it develops beyond those that it currently expects, if it is unable to successfully complete clinical trials of its product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, Ocugen may:

 

   

be delayed in obtaining marketing approval for its product candidates;

 

   

not obtain marketing approval at all;

 

   

obtain approval for indications or patient populations that are not as broad as intended or desired;

 

   

obtain approval without labeled claims necessary for Ocugen to successfully market its products;

 

   

obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings, and contraindications;

 

   

be subject to additional post-marketing testing requirements, surveillance requirements, or REMS; or

 

   

have the product removed from the market after obtaining marketing approval.

To the extent any of the foregoing should occur, its business may be materially harmed.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable. If Ocugen is not able to obtain, or if there are delays in obtaining, required regulatory approvals, it will not be able to commercialize its product candidates as expected, and its ability to generate revenue will be materially impaired.

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. These may require Ocugen to amend its clinical trial protocols, conduct additional studies that require regulatory or Institutional Review Board (“IRB”) approval, or otherwise cause delays in the approval or rejection of an application. Ocugen has not obtained regulatory approval for any product candidate and it is possible that none of its existing product candidates or any product candidates it may seek to develop in the future, will ever obtain regulatory approval. Moreover, its product candidates will require additional studies, as well as additional manufacturing development before it will be able to submit marketing applications to the applicable regulatory authorities. Any delay in obtaining or failure to obtain required approvals could materially adversely affect its ability to generate revenue from the particular product candidate, which likely would result in significant harm to its financial position and adversely impact its stock price.

Ocugen’s product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, marketing, promotion, sale, and distribution, are subject to comprehensive regulation by the FDA, other regulatory agencies in the United States and similar regulatory authorities outside the United States. Failure to obtain marketing approval for a product candidate will prevent Ocugen from commercializing the product candidate. Ocugen has no experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-parties to assist it in this process. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy for that indication. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities and clinical trial sites by the regulatory authorities. The FDA or other similar regulatory authorities may determine that its product candidates are not effective, only moderately effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude Ocugen from obtaining marketing approval or prevent or limit commercial use.

 

61


Table of Contents

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. This is especially true for rare and/or complicated diseases. Failure can occur at any time during the clinical trial process. Ocugen has limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval.

The results of preclinical studies, preliminary study results, and early clinical trials of Ocugen’s product candidates may not be predictive of the results of later-stage clinical trials or the ultimately completed trial. Preliminary and final results from such studies may not be representative of study results that are found in larger, controlled, blinded, and more long-term studies. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Preclinical and early clinical studies may also reveal unfavorable product candidate characteristics, including safety concerns. A number of companies have suffered significant setbacks in advanced clinical trials, notwithstanding promising results in earlier trials. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical trial participants.

Ocugen’s future clinical trial results may not be successful. Moreover, should there be a flaw in a clinical trial, it may not become apparent until the clinical trial is well advanced.

Ocugen may also experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent its ability to receive marketing approval or commercialize its product candidates, including:

 

   

regulators, including the FDA and the National Institutes of Health, or IRBs or Institutional Biosafety Committees (“IBCs”) may not authorize Ocugen or its investigators to commence or continue a clinical trial, conduct a clinical trial at a prospective trial site, or amend trial protocols, or regulators, IRBs or IBCs may require that it modify or amend its clinical trial protocols;

 

   

Ocugen may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites and its contract research organizations (“CROs”);

 

   

regulators may require it to perform additional or unanticipated clinical trials to obtain approval or it may be subject to additional post-marketing testing, surveillance, or REMS requirements to maintain regulatory approval;

 

   

clinical trials of its product candidates may produce negative or inconclusive results, or its studies may fail to reach the necessary level of statistical significance, and it may decide, or regulators may require it, to conduct additional clinical trials or abandon product development programs;

 

   

clinical trials of its product candidates may not produce the necessary results on all study endpoints. By example, for OCU310, the FDA has advised Ocugen that it will be required to demonstrate efficacy on its primary endpoints for marketing approval for the indication of relief of the signs and symptoms of DED. Ocugen expects that it will also be required to demonstrate effectiveness of both of the co-primary endpoints for marketing approval of OCU300 for the indication of treatment of ocular redness and discomfort in patients with oGVHD. If Ocugen’s product candidates do not achieve statistical significance in both primary endpoints in its Phase 3 clinical trials, the FDA may require it to conduct additional clinical trials to support the approval of its proposed indications;

 

   

the number of patients required for clinical trials of its product candidates may be larger than it anticipates, enrollment in these clinical trials may be slower than it anticipates, or participants may drop out of these clinical trials or be lost to follow-up at a higher rate than it anticipates. By example, the Phase 1/2 clinical study of brimonidine tartrate in patients with oGVHD was discontinued early due to slow enrollment;

 

62


Table of Contents
   

Ocugen’s third-party contractors may fail to comply with regulatory requirements or the clinical trial protocol, or meet their contractual obligations to it in a timely manner, or at all, or it may be required to engage in additional clinical trial site monitoring;

 

   

Ocugen, the regulators, IRBs or IBCs may require the suspension or termination of clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks, undesirable side effects, or other unexpected characteristics (alone or in combination with other products) of the product candidate, or due to findings of undesirable effects caused by a chemically or mechanistically similar therapeutic or therapeutic candidate;

 

   

changes in marketing approval policies during the development period rendering its data insufficient to obtain marketing approval;

 

   

changes in or the enactment of additional statutes or regulations;

 

   

changes in regulatory review for submitted product applications;

 

   

the cost of clinical trials of its product candidates may be greater than it anticipates or it may have insufficient funds for a clinical trial or to pay the substantial user fees required by the FDA upon the filing of a marketing application;

 

   

the supply or quality of its product candidates or other materials necessary to conduct clinical trials of its product candidates may be insufficient or inadequate;

 

   

Ocugen may decide, or regulators may require it, to conduct or gather, as applicable, additional clinical trials, analyses, reports, data, or preclinical trials, or it may abandon product development programs;

 

   

it may fail to reach an agreement with regulators, IRBs or IBCs regarding the scope, design, or implementation of its clinical trials. For instance, the FDA or comparable foreign regulatory authorities may require changes to its study design that make further study impractical or not financially prudent;

 

   

it may have delays in adding new investigators or clinical trial sites, or it may experience a withdrawal of clinical trial sites;

 

   

patients that enroll in its studies may misrepresent their eligibility or may otherwise not comply with the clinical trial protocol, resulting in the need to drop the patients from the study, increase the needed enrollment size for the study or extend the study’s duration;

 

   

there may be regulatory questions or disagreements regarding interpretations of data and results, or new information may emerge regarding its product candidates;

 

   

the FDA or comparable foreign regulatory authorities may disagree with its study design, including endpoints, or its interpretation of data from preclinical studies and clinical trials or find that a product candidate’s benefits do not outweigh its safety risks;

 

   

the FDA or comparable foreign regulatory authorities may not accept data from studies with clinical trial sites in foreign countries;

 

   

the FDA or comparable foreign regulatory authorities may disagree with its intended indications;

 

   

the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes or its contract manufacturer’s manufacturing facility for clinical and future commercial supplies;

 

   

the data collected from clinical trials of its product candidates may not be sufficient to the satisfaction of the FDA or comparable foreign regulatory authorities to support the submission of a marketing application, or other comparable submissions in foreign jurisdictions or to obtain regulatory approval in the United States or elsewhere;

 

63


Table of Contents
   

the FDA or comparable foreign regulatory authorities may take longer than it anticipates to make a decision on its product candidates; and

 

   

it may not be able to demonstrate that a product candidate provides an advantage over current standards of care or current or future competitive therapies in development.

Ocugen’s product candidate development costs will also increase if it experiences delays in testing or approvals, and it may not have sufficient funding to complete the testing and approval process for any of its product candidates. Ocugen may be required to obtain additional funds to complete clinical trials and prepare for possible commercialization of its product candidates. Ocugen does not know whether any preclinical tests or clinical trials above what it currently has planned will be required, will begin as planned, will need to be restructured, or will be completed on schedule, or at all. Significant delays relating to any preclinical or clinical trials also could shorten any periods during which it may have the exclusive right to commercialize its product candidates or allow its competitors to bring products to market before it does. This may prevent Ocugen from receiving marketing approvals and impair its ability to successfully commercialize its product candidates and may harm its business and results of operations. In addition, many of the factors that cause, or lead to, delays in clinical trials may ultimately lead to the denial of marketing approval of any of its product candidates. If any of this occurs, its business, financial condition, results of operations, and prospects will be materially harmed.

Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that Ocugen’s data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. The number and types of preclinical studies and clinical trials that will be required for regulatory approval also varies depending on the product candidate, the disease or condition that the product candidate is designed to address, and the regulations applicable to any particular product candidate. Approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. The foregoing may cause delays or limitations in the approval or the decision not to approve an application. It is possible that its product candidates will never obtain the appropriate regulatory approvals necessary for Ocugen to commence product sales.

Finally, even if Ocugen was to obtain approval, regulatory authorities may approve any of its product candidates for fewer or more limited indications, populations, or uses than it requests, may contain significant safety warnings, including black box warnings, contraindications, and precautions, may grant approval contingent on the performance of costly post-marketing clinical trials, surveillance, or other requirements, including REMS to monitor the safety or efficacy of the product, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of these scenarios could compromise the commercial prospects for Ocugen’s product candidates.

If Ocugen experiences delays in obtaining approval, if it fails to obtain approval of a product candidate or if the label for a product candidate does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate, the commercial prospects for such product candidate may be harmed and Ocugen’s ability to generate revenues from that product candidate will be materially impaired.

The FDA may determine that Ocugen’s product candidates have undesirable side effects that could delay or prevent their regulatory approval or commercialization.

Undesirable side effects caused by Ocugen’s product candidates could cause it, IRBs, and other reviewing entities or regulatory authorities to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. For example, if concerns are raised regarding the safety of one of Ocugen’s product candidates as a result of undesirable side effects identified during clinical or preclinical testing, the FDA may order it to cease further

 

64


Table of Contents

development, decline to approve such product candidate or issue a letter requesting additional data or information prior to making a final decision regarding whether or not to approve the product candidate. FDA requests for additional data or information can result in substantial delays in the approval of a new product candidate.

Undesirable side effects caused by or any unexpected characteristics (alone or in combination with other products) for any of Ocugen’s product candidates could also result in denial of regulatory approval by the FDA or other comparable foreign authorities for any or all targeted indications or the inclusion of unfavorable information in Ocugen’s product labeling, such as limitations on the indicated uses or populations for which the products may be marketed or distributed, a label with significant safety warnings, including boxed warnings, contraindications, and precautions, a label without statements necessary or desirable for successful commercialization, or may result in requirements for costly post-marketing testing and surveillance, or other requirements, including REMS, to monitor the safety or efficacy of the products. These could prevent Ocugen from commercializing and generating revenues from the sale of its product candidates.

While there have been a few adverse events that have occurred in the investigator-led clinical studies of brimonidine tartrate for the treatment of ocular redness and discomfort in patients with oGVHD and Ocugen’s clinical trials of brimonidine tartrate for relief from the signs and symptoms of dry eye disease, overall brimonidine tartrate was well-tolerated. Ocugen does not have any studies exploring long term exposure in these patient populations to brimonidine tartrate or its product candidates. Ocugen’s understanding of the relationship between its product candidates and any adverse effects may change as it gathers more information, and unexpected adverse effects may occur.

Many compounds that initially showed promise in clinical or earlier stage testing have later been found to cause side effects that prevented further development of the compound. In addition, adverse events which had initially been considered unrelated to the study treatment may later be found to be caused by the study treatment. Moreover, incorrect or improper use of Ocugen’s product candidates (including use more frequently than is prescribed) by patients could cause unexpected side effects or adverse events. There can be no assurance that Ocugen’s product candidates will be used correctly, and if used incorrectly, such misuse could prevent its receipt or maintenance of marketing authorization, resulting in label changes or regulatory authority safety communications or warnings, or hamper commercial adoption of its product candidate, if approved, at the rate it currently expects.

For those product candidates that are based on previously approved products, such as OCU300 and OCU310, subjects and patients may also experience adverse events that are included on the label for the FDA approved products.

If any of Ocugen’s product candidates is associated with serious adverse events or undesirable side effects or have properties that are unexpected, Ocugen may need to abandon development or limit development of that product candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. The therapeutic-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may significantly harm Ocugen’s business, financial condition, results of operations, and prospects.

If Ocugen experiences delays or difficulties in the enrollment of patients in clinical trials, its completion of clinical trials and receipt of necessary regulatory approvals could be delayed or prevented.

Ocugen may not be able to initiate or continue conducting clinical trials for its product candidates if it is unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. Competitors may also have ongoing clinical trials for product candidates that are intended to treat the same indications as its product candidates, and patients who

 

65


Table of Contents

would otherwise be eligible for Ocugen’s clinical trials may instead enroll in clinical trials of its competitors’ product candidates. Patient enrollment is affected by other factors including:

 

   

the size and nature of the patient population (for instance, Ocugen is pursuing clinical trials for certain orphan indications, for which the size of the patient population is limited);

 

   

the severity of the disease under investigation;

 

   

the existence of current treatments for the indications for which it is conducting clinical trials;

 

   

the eligibility criteria for and design of the clinical trial in question, including factors such as frequency of required assessments, length of the study and ongoing monitoring requirements;

 

   

the perceived risks and benefits of the product candidate, including the potential advantages or disadvantages of the product candidate being studied in relation to other available therapies;

 

   

competition in recruiting and enrolling patients in clinical trials;

 

   

efforts to facilitate timely enrollment in clinical trials;

 

   

patient referral practices of physicians;

 

   

effectiveness of publicity created by clinical trial sites regarding the trial;

 

   

patients’ ability to comply with the specific instructions related to the trial protocol, proper documentation, and use of the product candidate;

 

   

an inability to obtain or maintain patient informed consents;

 

   

the risk that enrolled patients will drop out before completion or not return for post-treatment follow-up;

 

   

the ability to monitor patients adequately during and after treatment;

 

   

the ability to compensate patients for their time and effort; and

 

   

the proximity and availability of clinical trial sites for prospective patients.

Ocugen’s inability to enroll a sufficient number of patients for its clinical trials would result in significant delays and could require it to abandon one or more clinical trials altogether. In particular, there may be low or slow enrollment, and the studies may enroll subjects that do not meet the inclusion criteria, requiring the erroneously enrolled subjects to be excluded and the trial population to be increased. By example, the Phase 1/2 clinical study examining the use of brimonidine tartrate eye drops in patients with oGVHD was discontinued early due to slow enrollment. Moreover, patients in Ocugen’s clinical trials, especially patients in its control groups, may be at risk for dropping out of its studies if they are not experiencing relief of their disease. A significant number of withdrawn patients would compromise the quality of its data.

Enrollment delays in Ocugen’s clinical trials may result in increased development costs for its product candidates, or the inability to complete development of its product candidates, which would cause the value of its company to decline, limit its ability to obtain additional financing, and materially impair its ability to generate revenues.

Ocugen’s development and commercialization strategy for OCU300 and OCU310 depends, in part, on published scientific literature and the FDA’s prior findings regarding the safety and efficacy of approved products. If Ocugen is not able to pursue this strategy, it will need to conduct additional development activities beyond what it currently plans, its development costs will increase, and it may be delayed in receiving regulatory authority approval. The submission of 505(b)(2) New Drug Applications may also subject it to the risk of patent infringement lawsuits or regulatory actions that would delay or prevent its submission of a marketing application to the FDA, or the FDA’s review and approval of its marketing applications.

The Hatch-Waxman Act added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act, or FDCA. Section 505(b)(2) permits the filing of a New Drug Application, or NDA, where at least some of the information

 

66


Table of Contents

required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. The FDA interprets Section 505(b)(2) of the FDCA, for purposes of approving an NDA, to permit the applicant to rely, in part, upon published literature and/or the FDA’s previous findings of safety and efficacy for an approved product. The FDA also requires companies to perform additional clinical trials or measurements to support any deviation from the previously approved product and to support the reliance on the applicable published literature or referenced product, referred to as bridging. The FDA may then approve the new product candidate for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant, if such approval is supported by study data. The label, however, may require all or some of the limitations, contraindications, warnings or precautions included in the reference product’s label, including a black box warning, or may require additional limitations, contraindications, warnings or precautions.

Ocugen currently plans to pursue marketing approval for OCU300 in the United States through 505(b)(2) NDAs and will be completing bridging analyses prior to NDA submission. If the FDA disagrees with its conclusions regarding the appropriateness of its reliance on a reference listed drug or published literature or if it is not otherwise able to bridge to the reference listed drug or published literature to demonstrate that its reliance is scientifically appropriate, it could be required to conduct additional clinical trials or other studies to support its NDA, which could lead to unanticipated costs and delays or to the termination of its development program. If Ocugen is unable to obtain approval for its pharmaceutical formulations through the 505(b)(2) NDA process, it may be required to pursue the more expensive and time consuming 505(b)(1) approval process, which consists of full reports of investigations of safety and effectiveness conducted by or for the applicant.

There may also be circumstances under which the FDA would not allow Ocugen to pursue a 505(b)(2) application. For instance, should the FDA approve a pharmaceutically equivalent product to its product candidates, Ocugen would no longer be able to use the 505(b)(2) regulatory pathway. In that case, it is the FDA’s policy that the appropriate submission would be an Abbreviated New Drug Application, or ANDA, for a generic version of the approved product. Ocugen may, however, not be able to immediately submit an ANDA or have an ANDA approval made effective, as it could be blocked by others’ periods of patent and regulatory exclusivity protection.

Notwithstanding the approval of a number of products by the FDA under Section 505(b)(2), pharmaceutical companies and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2) is successfully challenged, the FDA may change its policies and practices with respect to Section 505(b)(2) regulatory approvals, which could delay or even prevent the FDA from approving any NDA that Ocugen submits pursuant to the 505(b)(2) process. It is also not uncommon for a sponsor of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition.

If Ocugen cannot seek approval for OCU300 and OCU310 through the 505(b)(2) regulatory pathway, it may need to conduct additional clinical trials, provide additional data and information and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required to obtain FDA approval for OCU300 and OCU310, and the complications and risks associated with approval of OCU300 and OCU310, would likely substantially increase. Even if Ocugen is allowed to pursue the 505(b)(2) regulatory pathway to FDA approval, it cannot assure you that OCU300 and/or OCU310 will receive the requisite approvals for commercialization. Moreover, Ocugen’s inability to pursue a 505(b)(2) application could result in new competitive products reaching the market more quickly than its product candidates, which could hurt its competitive position and its business prospects.

Ocugen’s use of the 505(b)(2) regulatory pathway may also subject it to the risk of patent infringement lawsuits or other regulatory actions that could prevent its submission of a marketing application for OCU300 and

 

67


Table of Contents

OCU310, or prevent the FDA making the approval of a marketing application effective. Applicants submitting NDAs under Section 505(b)(2) of the FDCA must provide a patent certification for the patents listed in FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book, for all reference listed drugs and for all brand name products identified in published literature upon which the 505(b)(2) application relies. The possible certifications are that (1) no patent information has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. If there are any listed patents for the reference listed or brand name products that Ocugen relies upon for its 505(b)(2) applications, the FDA may not approve its 505(b)(2) product candidates until all listed patents have expired, unless Ocugen challenges the listed patents through the last type of certification, also known as a paragraph IV certification, or otherwise indicates that it is not seeking approval of a patented method of use.

If Ocugen does challenge a listed patent through a paragraph IV certification, under the Hatch Waxman Act, the holder of the patents or NDAs that the 505(b)(2) application references may file a patent infringement lawsuit after receiving notice of the paragraph IV certification. Filing of a patent infringement lawsuit against the filer of the 505(b)(2) application within 45 days of the patent or NDA owner’s receipt of notice triggers a one time, automatic, 30-month stay of the FDA’s ability to make the 505(b)(2) NDA approval effective. In such a case, the FDA may not make the 505(b)(2) NDA approval effective until the earlier of 30 months from the receipt of the notice of the paragraph IV certification, the expiration of the patent, when the infringement case concerning each such patent was favorably decided in the applicant’s favor or settled, or such shorter or longer period as may be ordered by a court. Accordingly, Ocugen may invest a significant amount of time and expense in the development of one or more product candidates only to be subject to significant delay and patent litigation before such product candidates may be commercialized, if at all. In addition, a 505(b)(2) application approval may, in some cases, not be submitted, or may, in other cases, not be made effective until any existing non-patent regulatory exclusivities have expired or, if possible, are carved out from the label.

Companies that produce branded reference listed drugs routinely bring litigation against applicants that seek regulatory approval to manufacture and market new forms of their branded products. These companies often allege patent infringement or other violations of intellectual property rights as the basis for filing suit. Likewise, patent holders may bring patent infringement suits against companies that are currently marketing and selling such products. Litigation to enforce or defend intellectual property rights is often complex and often involves significant expense and can delay or prevent introduction or sale of Ocugen’s product candidates. If patents are held to be valid and infringed by Ocugen’s product candidates in a particular jurisdiction, it may be required to cease selling, relinquish or destroy existing stock, or pay monetary damages in that jurisdiction unless it can obtain a license from the patent holder. There may also be situations where Ocugen uses its business judgment and decides to market and sell its approved products, notwithstanding the fact that allegations of patent infringement(s) have not been finally resolved by the courts, which is known as an “at risk launch.” The risk involved in doing so can be substantial because the remedies available to the owner of a patent for infringement may include, among other things, damages measured by the profits lost by the patent owner which may be greater than the profits earned by the infringer. In the case of willful infringement, such damages may be increased up to three times. An adverse decision in patent litigation could have a material adverse effect on Ocugen’s business, financial position, and results of operations and could cause the market value of its common stock to decline.

Changes in product candidate manufacturing or formulation may result in additional costs or delay.

As product candidates are developed through preclinical studies to late-stage clinical trials toward approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, manufacturing sites, and formulation, are altered along the way in an effort to optimize processes and results. Any of these changes could cause Ocugen’s product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. Such changes may also require additional testing, FDA notification, or FDA approval. For instance, the FDA may require that

 

68


Table of Contents

Ocugen conducts a comparability study that evaluates the potential differences in the product candidate resulting from the change. Delays in designing and completing such a study to the satisfaction of the FDA could delay or preclude its development and commercialization plans, and the regulatory approval of its product candidates. It may also require the repetition of one or more clinical trials, increase clinical trial costs, delay approval of Ocugen’s product candidates and jeopardize its ability to commence product sales and generate revenue. Any of the foregoing could limit its future revenues and growth. Any changes would also require that Ocugen devote time and resources to manufacturing development and would also likely require additional testing and regulatory actions on its part, which may delay the development of its product candidates.

Ocugen may not be successful in its efforts to develop product candidates based on its OcuNanoE nanoemulsion formulation or expand the use of its OcuNanoE nanoemulsion formulation for treating additional diseases and conditions.

Ocugen is currently directing some of its development efforts towards developing its product candidate based on its OcuNanoE™ nanoemulsion formulation and applying its OcuNanoE™ nanoemulsion formulation to support therapeutic interventions of ocular diseases with the potential of improving the tear film stability and targeting of drug molecules to the specialized tissues. Ocugen has product candidates at various stages of development for treatment of eye diseases and is exploring the potential use of its OcuNanoE™ nanoemulsion formulation in other diseases. Ocugen’s existing product candidates and any other potential product candidates that it identifies may not be suitable for continued preclinical or clinical development, including as a result of being shown to have harmful side effects, a lack of efficacy or other characteristics that indicate that such product candidates are unlikely to be products that will receive marketing approval and achieve market acceptance. If Ocugen does not successfully develop and commercialize its product candidates based upon its OcuNanoE™ nanoemulsion formulation, it will not be able to obtain substantial product revenues in future periods.

Ocugen may expend its limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because Ocugen has limited financial and managerial resources, it focuses on research programs and product candidates that it identifies for specific indications. As a result, it may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ocugen’s resource allocation decisions may cause it to fail to capitalize on viable commercial products or profitable market opportunities. Ocugen’s spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If it does not accurately evaluate the commercial potential or target market for a particular product candidate, it may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for Ocugen to retain sole development and commercialization rights to such product candidate.

Ocugen may in the future conduct clinical trials for product candidates at sites outside the United States, and the FDA may not accept data from trials conducted in such locations.

Ocugen may in the future choose to conduct one or more of its clinical trials outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of these data is subject to conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and be performed by qualified investigators in accordance with ethical principles. The trial population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. If the FDA does not accept the data from any trial that Ocugen conducts outside the United States, it would likely result in the need for additional trials, which would be costly and time-consuming and could delay or permanently halt Ocugen’s development of the applicable product candidates. Moreover, trials conducted outside the United States would be subject to the laws of the applicable foreign jurisdiction. Failure to comply with such laws could result in regulatory enforcement action.

 

69


Table of Contents

Failure to obtain marketing approval in international jurisdictions would prevent Ocugen’s product candidates from being marketed abroad.

In order to market and sell its products in jurisdictions outside the United States, Ocugen must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedures vary among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. Ocugen’s clinical trials of its product candidates may not be sufficient to support an application for marketing approval outside the United States.

Ocugen, or any eventual collaborators, may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. However, the failure to obtain approval in one jurisdiction may compromise Ocugen’s ability to obtain approval elsewhere. Ocugen may not be able to file for marketing approvals and may not receive necessary approvals to commercialize its products in any market.

Additionally, on June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as Brexit. On March 29, 2017, the United Kingdom formally notified the European Union of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. Since a significant proportion of the regulatory framework in the United Kingdom is derived from European Union directives and regulations, the withdrawal could materially impact the regulatory regime with respect to the approval of Ocugen’s product candidates in the United Kingdom or the European Union. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent Ocugen from commercializing its product candidates in the United Kingdom and/or the European Union and restrict its ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, Ocugen may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for its product candidates, which could significantly and materially harm its business.

Regulatory approval is limited by the FDA to those specific indications and conditions for which approval has been granted, and Ocugen may be subject to fines, penalties, injunctions, or other enforcement actions if it is determined to be promoting the use of its products for unapproved or “off-label” uses, resulting in damage to Ocugen’s reputation and business.

Ocugen must comply with requirements concerning advertising and promotion for any product candidates for which it obtains marketing approval. Promotional communications with respect to therapeutics are subject to a variety of legal and regulatory restrictions and continuing review by the FDA, Department of Justice, Department of Health and Human Services’ Office of Inspector General, state attorneys general, members of Congress, and the public. When the FDA or comparable foreign regulatory authorities issue regulatory approval for a product candidate, the regulatory approval is limited to those specific uses and indications for which a product is approved. If Ocugen is not able to obtain FDA approval for desired uses or indications for its product candidates, it may not market or promote them for those indications and uses, referred to as off-label uses, and Ocugen’s business may be adversely affected. Ocugen further must be able to sufficiently substantiate any claims that it makes for its products including claims comparing its products to other companies’ products and must abide by the FDA’s strict requirements regarding the content of promotion and advertising.

 

70


Table of Contents

While physicians may choose to prescribe products for uses that are not described in the product’s labeling and for uses that differ from those tested in clinical studies and approved by the regulatory authorities, Ocugen is prohibited from marketing and promoting the products for indications and uses that are not specifically approved by the FDA. These off-label uses are common across medical specialties and may constitute an appropriate treatment for some patients in varied circumstances. Regulatory authorities in the United States generally do not restrict or regulate the behavior of physicians in their choice of treatment within the practice of medicine. Regulatory authorities do, however, restrict communications by companies concerning off-label use.

If Ocugen is found to have impermissibly promoted any of its product candidates, it may become subject to significant liability and government fines. The FDA and other agencies actively enforce the laws and regulations regarding product promotion, particularly those prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted a product may be subject to significant sanctions. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or curtailed. Thus, Ocugen will not be able to promote any products it develops for indications or uses for which they are not approved.

In the United States, engaging in the impermissible promotion of Ocugen’s products, following approval, for off-label uses can also subject Ocugen to false claims and other litigation under federal and state statutes, including fraud and abuse and consumer protection laws. Such litigation can lead to civil and criminal penalties and fines, agreements with governmental authorities that materially restrict the manner in which it promotes or distributes therapeutic products and does business through, for example, corporate integrity agreements, suspension or exclusion from participation in federal and state healthcare programs, suspension and debarment from government contracts, and refusal of orders under existing government contracts. These false claims statutes include the federal civil False Claims Act, which allows any individual to bring a lawsuit against a company on behalf of the federal government alleging submission of false or fraudulent claims, or causing others to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid. If the government decides to intervene 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. These False Claims Act lawsuits against sponsors of drugs and biologics have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements, up to $3.0 billion, pertaining to certain sales practices and promoting off-label uses. In addition, False Claims Act lawsuits may expose sponsors to follow-on claims by private payers based on fraudulent marketing practices. This growth in litigation has increased the risk that companies will have to defend a false claim action, and pay settlements fines or restitution, as well as criminal and civil penalties, agree to comply with burdensome reporting and compliance obligations, and be excluded from Medicare, Medicaid, or other federal and state healthcare programs. If Ocugen does not lawfully promote its approved products, if any, it may become subject to such litigation and, if it does not successfully defend against such actions, those actions may have a material adverse effect on its business, financial condition, results of operations and prospects.

In the United States, the distribution of product samples to physicians must further comply with the requirements of the U.S. Prescription Drug Marketing Act, and the promotion of biologic and pharmaceutical products are subject to additional FDA requirements and restrictions on promotional statements. If the FDA determines that Ocugen’s promotional activities violate its regulations and policies pertaining to product promotion, it could request that Ocugen modify its promotional materials or subject it to regulatory or other enforcement actions, including issuance of warning letters or untitled letters, suspension or withdrawal of an approved product from the market, requests for recalls, payment of civil fines, disgorgement of money, imposition of operating restrictions, injunctions or criminal prosecution, and other enforcement actions. These regulatory and enforcement actions could significantly harm Ocugen’s business, financial condition, results of operations, and prospects.

 

71


Table of Contents

Even if Ocugen’s product candidates receive regulatory approval, it will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, any of Ocugen’s product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal, and Ocugen may be subject to penalties if it fails to comply with regulatory requirements or experiences unanticipated problems with its products.

Any product candidate for which Ocugen obtains marketing approval will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities, including requirements related to the manufacturing processes, post-approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising, marketing, and promotional activities for such product. These requirements further include submissions of safety and other post-marketing information, including manufacturing deviations and reports, registration and listing requirements, the payment of annual fees, continued compliance with current good manufacturing practices (“cGMPs”), or cGMP-requirements relating to manufacturing, quality control, quality assurance, and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and good clinical practices, or GCPs, for any clinical trials that Ocugen conducts post-approval.

Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses and populations for which the product may be marketed or to the conditions of approval, including significant safety warnings, such as boxed warnings, contraindications, and precautions that are not desirable for successful commercialization. Any approved products may also be subject to a REMS that render the approved product not commercially viable or other post-market requirements, such as Phase 4 studies, or restrictions. Moreover, the FDA and comparable foreign regulatory authorities will continue to closely monitor the safety profile of any product even after approval. If the FDA or comparable foreign regulatory authorities become aware of new safety information after approval of any of Ocugen’s product candidates, they may, among other actions, withdraw approval, require labeling changes or establishment of a REMS or similar strategy, impose significant restrictions on a product’s indicated uses or marketing, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. Any such restrictions could limit sales of the product.

Ocugen and any of its collaborators, including its contract manufacturer, could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs and other FDA regulatory requirements. Application holders must further notify the FDA, and depending on the nature of the change, obtain FDA pre-approval for product and manufacturing changes.

In addition, later discovery of previously unknown adverse events or that the product is less effective than previously thought or other problems with Ocugen’s products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements both before and after approval, may yield various results, including:

 

   

restrictions on manufacturing, distribution, or marketing of such products;

 

   

restrictions on the labeling, including restrictions on the indication or approved patient population, and required additional warnings, such as black box warnings, contraindications, and precautions;

 

   

modifications to promotional pieces;

 

   

issuance of corrective information;

 

   

requirements to conduct post-marketing studies or other clinical trials;

 

   

clinical holds or termination of clinical trials;

 

   

requirements to establish or modify a REMS or a comparable foreign authority may require that Ocugen establish or modify a similar strategy;

 

   

changes to the way the product is administered;

 

72


Table of Contents
   

liability for harm caused to patients or subjects;

 

   

reputational harm;

 

   

the product becoming less competitive;

 

   

warning, untitled, or cyber letters;

 

   

suspension of marketing or withdrawal of the products from the market;

 

   

regulatory authority issuance of safety alerts, Dear Healthcare Provider letters, press releases, or other communications containing warnings or other safety information about the product;

 

   

refusal to approve pending applications or supplements to approved applications that Ocugen submits;

 

   

recalls of products;

 

   

fines, restitution or disgorgement of profits or revenues;

 

   

suspension or withdrawal of marketing approvals;

 

   

refusal to permit the import or export of Ocugen’s products;

 

   

product seizure or detention;

 

   

FDA debarment, suspension and debarment from government contracts, and refusal of orders under existing government contracts, exclusion from federal healthcare programs, consent decrees, or corporate integrity agreements; or

 

   

injunctions or the imposition of civil or criminal penalties, including imprisonment.

Non-compliance with any foreign jurisdictions’ requirements, including requirements regarding the protection of personal information, can also lead to significant penalties and sanctions.

Any of these events could prevent Ocugen from achieving or maintaining market acceptance of the particular product candidate, if approved, or could substantially increase the costs and expenses of developing and commercializing such product, which in turn could delay or prevent Ocugen from generating significant revenues from its sale. Any of these events could further have other material and adverse effects on its operations and business and could adversely impact its stock price and could significantly harm its business, financial condition, results of operations, and prospects.

The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of Ocugen’s product candidates, that could limit the marketability of its product candidates, or that could impose additional regulatory obligations on it. Changes in medical practice and standard of care may also impact the marketability of its product candidates.

If Ocugen is slow or unable to adapt to changes in existing requirements, standards of care, or the adoption of new requirements or policies, or if it is not able to maintain regulatory compliance, it may lose any marketing approval that it may have obtained and be subject to regulatory enforcement action.

Should any of the above actions take place, they could adversely affect Ocugen’s ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on Ocugen’s operating results and financial condition.

Ocugen will need to obtain FDA approval of any proposed product names, and any failure or delay associated with such approval may adversely affect its business.

Any name Ocugen intends to use for its product candidates will require approval from the FDA regardless of whether it has secured a formal trademark registration from the U.S. Patent and Trademark Office (the

 

73


Table of Contents

“USPTO”). The FDA typically conducts a review of proposed product names, including an evaluation of the potential for confusion with other product names. The FDA may also object to a product name if it believes the name inappropriately implies medical claims or contributes to an overstatement of efficacy. If the FDA objects to any of Ocugen’s proposed product names, it may be required to adopt alternative names for its product candidates. If Ocugen adopts alternative names, it would lose the benefit of any existing trademark applications for such product candidate and may be required to expend significant additional resources in an effort to identify a suitable product name that would qualify under applicable trademark laws, not infringe the existing rights of third-parties, and be acceptable to the FDA. Ocugen may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit its ability to commercialize its product candidates.

In the future Ocugen may seek FDA designations to facilitate product candidate development, such as fast track or breakthrough designation. Ocugen may not receive any such designations or if it receives such designations they may not lead to faster development or regulatory review or approval and it does not increase the likelihood that Ocugen’s product candidates will receive marketing approval.

In the future, Ocugen may seek product designations, such as fast track or breakthrough designation, which are intended to facilitate the development or regulatory review or approval process for product candidates. Receipt of such a designation is within the discretion of the FDA. Accordingly, even if Ocugen believes one of its product candidates meets the criteria for a designation, the FDA may disagree. In any event, the receipt of such a designation for a product candidate may not result in a faster development process, review, or approval compared to product candidates considered for approval under conventional FDA procedures and does not assure ultimate marketing approval by the FDA. In addition, the FDA may later decide that the product candidates no longer meet the designation conditions, in which case any granted designations may be revoked.

OCU300, OCU400 and OCU100 have received Orphan Drug Designation from the FDA. However, there is no guarantee that Ocugen will be able to maintain this designation, receive this designation for any of its other product candidates, or receive or maintain any corresponding benefits, including periods of exclusivity.

Ocugen has obtained from the FDA Office of Orphan Products Orphan Drug Designations (“ODD”) for OCU300 for oGVHD, OCU400 for NR2E3 mutation-associated retinal degenerative disease and OCU100 for RP. Ocugen was the first company to receive ODD for oGVHD from the FDA. It has obtained orphan medical product designation from the European Commission for OCU100 for RP in the European Union. Ocugen may also seek ODD for its other product candidates, as appropriate. While ODD does provide Ocugen with certain advantages, it neither shortens the development time or regulatory review time of a product candidate nor gives the product candidate any advantage in the regulatory review or approval process.

Generally, if a product candidate with ODD subsequently receives marketing approval before another product considered by the FDA to be the same, for the same orphan indication, the product is entitled to a period of marketing exclusivity, which precludes the EMA or the FDA from approving another marketing application for the same drug or biologic for the same indication for a specified time period. The applicable period is seven years in the United States and ten years in Europe. The European exclusivity period can be reduced to six years if a product no longer meets the criteria for ODD or if the product is sufficiently profitable so that market exclusivity is no longer justified.

Ocugen may not be able to obtain any future ODDs that it applies for, ODDs do not guarantee that Ocugen will be able to successfully develop its product candidates, and there is no guarantee that Ocugen will be able to maintain any ODDs that it receives. For instance, ODDs may be revoked if the FDA finds that the request for designation contained an untrue statement of material fact or omitted material information, or if the FDA finds that the product candidate was not eligible for designation at the time of the submission of the request.

Moreover, even if Ocugen is able to receive and maintain ODDs, it may ultimately not receive any period of regulatory exclusivity if its product candidates are approved. For instance, Ocugen may not receive orphan

 

74


Table of Contents

product regulatory exclusivity if the indication for which it receives FDA approval is broader than the ODD. Orphan exclusivity may also be lost for the same reasons that ODD may be lost. Orphan exclusivity may further be lost if Ocugen is unable to assure a sufficient quantity of the product to meet the needs of patients with the rare disease or condition.

Even if Ocugen obtains orphan exclusivity for any of its current or future product candidates, that exclusivity may not effectively protect the product from competition as different products can be approved for the same condition or products that are the same as Ocugen’s can be approved for different conditions. Even after an orphan product is approved, the FDA can also subsequently approve a product containing the same principal molecular features for the same condition if the FDA concludes that the later product is clinically superior. The FDA may further grant ODD to multiple sponsors for the same compound or active molecule and for the same indication. If another sponsor receives FDA approval for such product before Ocugen does, Ocugen would be prevented from launching its product in the United States for the orphan indication for a period of at least seven years unless it can demonstrate clinical superiority. Moreover, third-party payors may reimburse for products off-label even if not indicated for the orphan condition.

Risks Related to the Commercialization of Ocugen’s Product Candidates

Ocugen faces significant competition from other biologic, pharmaceutical and biotechnology companies, academic institutions, government agencies, and other research organizations. Ocugen’s operating results will suffer if it fails to compete effectively.

The development and commercialization of new therapeutic products is highly competitive. Ocugen faces competition with respect to its current product candidates and will face competition with respect to any product candidates that Ocugen may seek to develop or commercialize in the future, from major biologic and pharmaceutical companies, specialty biologic and 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.

Ocugen’s product candidates will target markets that are already served by a variety of competing products. Many of these existing products have achieved widespread acceptance among clinicians, patients and payors. In addition, many of these products are available on a generic basis, and Ocugen’s product candidates may not demonstrate sufficient additional clinical benefits to clinicians, patients or payors to justify a higher price compared to generic products. In many cases, insurers or other third-party payors, particularly Medicare, seek to encourage the use of generic products.

Ocugen is developing OCU300 for the treatment of ocular redness and discomfort in patients with oGVHD. Any product that is developed for the treatment of ocular redness and ocular discomfort in patients with oGVHD could directly compete with OCU300. There are several product candidates in preclinical and clinical development in the United States for oGVHD. If any of these product candidates is approved, it could reduce the overall market opportunity for OCU300. These product candidates are being developed by pharmaceutical companies, biotechnology companies, and specialty pharmaceutical and generic drug companies of various sizes, such as Genentech, Inc., in co-development with the University of Illinois at Chicago and the National Eye Institute, Michigan Cornea Consultants, PC in collaboration with Kresge Eye Institute, and the University of Utah. There are also other product candidates for the treatment of ocular redness and ocular discomfort in patients with oGVHD in the United States in earlier stage development.

Ocugen is developing OCU310 for the relief of the signs and symptoms of dry eye disease. Any product that is developed for dry eye disease could directly compete with OCU310. Current disease management approaches for dry eye disease in the United States include the following: over-the-counter artificial tear eye drops, which are used on an intermittent or chronic basis to provide short term symptomatic relief of dryness and irritation;

 

75


Table of Contents

off-label prescription drugs, including topical steroid drops and/or other similar products, which are prescribed on occasion for treatment of dry eye disease; and on-label prescription drugs, including Restasis® and Xiidra®. Restasis® is approved for increasing tear production in patients whose tear production is presumed to be suppressed due to ocular inflammation associated with keratoconjunctivitis sicca and Xiidra® is approved for treatment of the signs and symptoms of dry eye disease. Both are typically used chronically as part of the dry eye management regimen, which also includes artificial tears and other palliative therapies, such as hot compresses for the eye and lid hygiene management. Devices, such as punctal plugs that are inserted into the tear ducts to inhibit tear drainage, resulting in more moisture on the surface of the eye may also be used.

Moreover, there are several product candidates in preclinical and clinical development in the United States for the treatment of dry eye disease. If any of these product candidates is approved, it could reduce the overall market opportunity for OCU310. These product candidates are being developed by pharmaceutical companies, biotechnology companies, and specialty pharmaceutical and generic drug companies of various sizes, such as Mimetogen Pharmaceuticals, Inc., Sun Pharmaceuticals (Seciera), ReGenTree LLC (TGN-259), Allergan plc, Kala Pharmaceuticals (KPI-121 1.0% and KPI-121 0.25%), Aldeyra Therapeutics, Inc. (reproxalap) and Kissei Pharmaceutical Co., Ltd (KCT-0809). There are also other product candidates for dry eye disease in the United States in earlier stage development.

See “Business—Competition” for additional information regarding competing products and product candidates.

Ocugen’s ability to compete may also be affected by whether competing products are available over-the-counter. As stated above, there are competing products for dry eye disease that are currently available over-the-counter. Competitors may seek to switch products that are currently only available with a prescription to over-the-counter use. Moreover, in view of legislative efforts to modify FDA’s over-the-counter monograph system, it may become easier for competitors to market products for over-the-counter use, increasing competition.

Ocugen’s ability to compete may further be affected in many cases by insurers or other third-party payors, particularly Medicare, seeking to encourage the use of generic or biosimilar products. Generic products are currently being used for certain of the indications that Ocugen is pursuing, and additional products are expected to become available on a generic basis over the coming years.

Ocugen’s commercial opportunities could be reduced or eliminated if its competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that Ocugen may develop. Ocugen’s competitors also may obtain FDA or other regulatory approval for their products more rapidly than Ocugen may obtain approval for its products, which could result in Ocugen’s competitors establishing a strong market position before Ocugen is able to enter the market. In addition, Ocugen’s ability to compete may be affected in many cases by insurers or other third-party payors coverage decisions.

Many of the companies against which Ocugen is competing or against which it may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than Ocugen does. Mergers and acquisitions in the biologic, pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of Ocugen’s competitors. Early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third-parties compete with Ocugen in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, Ocugen’s programs.

 

76


Table of Contents

If Ocugen is unable to establish effective marketing and sales, capabilities or enter into agreements with third-parties to market and sell its product candidates, if they are approved, Ocugen may be unable to generate product revenues.

Ocugen currently does not have a commercial infrastructure for the marketing, sale, and distribution of biologic and pharmaceutical products. If approved, in order to commercialize its products, Ocugen must build its marketing, sales, and distribution capabilities or make arrangements with third-parties to perform these services. Ocugen may not be successful in doing so. Should Ocugen decide to develop its own marketing capabilities, it may incur expenses prior to product launch or even approval in order to recruit a sales force and develop a marketing and sales infrastructure. If a commercial launch is delayed as a result of FDA requirements non-approval or other reasons, Ocugen would incur these expenses prior to being able to realize any revenue from sales of its product candidates. Even if Ocugen is able to effectively hire a sales force and develop a marketing and sales infrastructure, its sales force and marketing teams may not be successful in commercializing its product candidates.

Subject to successful results of Ocugen’s ongoing and anticipated Phase 3 clinical trials and FDA approval of any of its product candidates, Ocugen may build a commercial team of specialty sales and marketing representatives in support of OCU300 and possibly other preclinical product candidates that Ocugen develops in the United States, if and when they are approved, as well as distribution capabilities. As discussed below, Ocugen may also partner with third parties to commercialize and distribute OCU300, OCU310, or its other product candidates.

There are risks involved with Ocugen establishing its own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive, time-consuming, and could delay any product launch. Further, Ocugen may underestimate the size of the sales force required for a successful product launch and may need to expand its sales force earlier and at a higher cost than it anticipated. If the commercial launch of Ocugen’s product candidates for which it recruits a sales force and establish marketing capabilities is delayed or does not occur for any reason, Ocugen would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and Ocugen’s investment would be lost if it cannot retain or reposition its sales and marketing personnel.

Ocugen may also seek marketing approval and explore commercialization of OCU300 and OCU310 in certain markets outside the United States. It may also consider seeking marketing approval outside the United States for other preclinical product candidates in future. If Ocugen decides to seek regulatory approval for any of its product candidates outside the United States (including OCU300 and OCU310), it may need to seek additional patent approvals, licenses to patents held by third parties and/or face claims of infringing third-party patent rights.

Ocugen may also or alternatively decide to collaborate with a third-party or contract sales organization to commercialize any approved product candidates, in which event, its ability to generate product revenues may be limited. By example, as further described in “Business—Our Strategy,” Ocugen may retain commercialization rights to OCU300 or OCU310 or utilize a variety of collaboration, distribution and other marketing arrangements with one or more third parties to commercialize OCU300 or OCU310. Ocugen’s product revenues and its profitability, if any, under any such third-party collaboration, distribution or other marketing arrangements are likely to be lower than if Ocugen were to market, sell and distribute OCU300 or OCU310 entirely itself.

Ocugen may not be successful in entering into arrangements with third parties to sell, market and distribute its product candidates or may be unable to do so on terms that are favorable to it. In addition, Ocugen would have less control over the sales efforts of any other third-parties involved in its commercialization efforts and any of them may fail to devote the necessary resources and attention to sell and market its product candidates effectively. Ocugen could also be held liable if they failed to comply with applicable legal or regulatory requirements.

 

77


Table of Contents

If Ocugen does not establish sales, marketing and distribution capabilities successfully, either on its own or in collaboration with third parties, it will not be successful in commercializing any product candidates for which it receives marketing approval.

Ocugen has no prior experience in the marketing, sale, and distribution of biologic and pharmaceutical products, and there are significant risks involved in the building and managing of a commercial infrastructure. The establishment and development of commercial capabilities, including compliance plans, to market any products Ocugen may develop will be expensive and time consuming and could delay any product launch, and Ocugen may not be able to successfully develop this capability. Ocugen will have to compete with other biologic, pharmaceutical and biotechnology companies to recruit, hire, train, manage, and retain marketing and sales personnel. In the event Ocugen is unable to develop a team of marketing and sales representatives, it may not be able to commercialize its product candidates, which would limit Ocugen’s ability to generate product revenues. Factors that may inhibit Ocugen’s efforts to commercialize its product candidates include:

 

   

the inability to recruit, train, manage, and retain adequate numbers of effective sales and marketing personnel;

 

   

the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe its product candidates;

 

   

Ocugen’s inability to effectively oversee a geographically dispersed sales and marketing team;

 

   

the costs associated with training sales and marketing personnel on legal and regulatory compliance matters and monitoring their actions;

 

   

an inability to secure adequate coverage and reimbursement by government and private health plans;

 

   

reduced realization on government sales from mandatory discounts, rebates and fees, and from price concessions to private health plans and pharmacy benefit managers necessitated by competition for access to managed formularies;

 

   

the clinical indications for which the products are approved and the claims that Ocugen may make for the products;

 

   

limitations or warnings, including distribution or use restrictions, contained in the products’ approved labeling;

 

   

any distribution and use restrictions imposed by the FDA or to which Ocugen agrees as part of a mandatory REMS or voluntary risk management plan;

 

   

liability for sales or marketing personnel who fail to comply with the applicable legal and regulatory requirements;

 

   

the lack of complementary products to be offered by sales personnel, which may put Ocugen at a competitive disadvantage relative to companies with more extensive product lines; and

 

   

unforeseen costs and expenses associated with creating an independent sales and marketing organization or engaging a contract sales organization.

Should any of the foregoing occur, Ocugen may not be successful in commercializing any product candidates for which it receives marketing approval.

If Ocugen’s product candidates do not achieve broad market acceptance, the revenues that it generates from their sales will be limited.

Ocugen has never commercialized a product candidate for any indication. Even if Ocugen’s product candidates are approved by the appropriate regulatory authorities for marketing and sale, they may not gain acceptance among physicians, patients, third-party payors, and others in the medical community. If any product candidates

 

78


Table of Contents

for which Ocugen obtains regulatory approval do not gain an adequate level of market acceptance, it may not generate significant product revenues or become profitable. Market acceptance of Ocugen’s product candidates by the medical community, patients, and third-party payors will depend on a number of factors, some of which are beyond Ocugen’s control. For example, physicians are often reluctant to switch their patients and patients may be reluctant to switch from existing therapies even when new and potentially more effective or safer treatments enter the market.

While there are no drugs currently approved in the United States for treatment of oGVHD, there are several product candidates in clinical development for treatment of oGVHD in the United States. It is possible that doctors may rely on these treatments rather than OCU300, if and when it is approved for marketing by the FDA.

Current treatments used in the United States for dry eye disease include over-the-counter artificial tears, Restasis®, Xiidra® and off-label use of corticosteroids. There are also several product candidates in clinical development by third parties for dry eye disease. It is possible that doctors may rely or continue to rely on these treatments rather than OCU310, if and when it is approved for marketing by the FDA.

If generic or biosimilar versions of any products that compete with any of Ocugen’s product candidates are approved for marketing by the FDA, they would likely be offered at a substantially lower price than Ocugen expects to offer for its product candidates, if approved. In the case of OCU300 and OCU310, it is also possible that physicians may prescribe other less expensive brimonidine tartrate products off label rather that prescribe OCU300 or OCU310. As a result, clinicians, patients and third-party payors may choose to rely on products other than Ocugen’s product candidates for the treatment of ocular redness and discomfort in patients with oGVHD or for the treatment of the signs and symptoms of dry eye disease.

Efforts to educate the medical community and third-party payors on the benefits of Ocugen’s product candidates may require significant resources and may not be successful. If any of Ocugen’s product candidates is approved but does not achieve an adequate level of market acceptance, Ocugen may not generate significant revenues and it may not become profitable. The degree of market acceptance of any of Ocugen’s product candidates will depend on a number of factors, including:

 

   

the efficacy of its product candidates;

 

   

the prevalence and severity of adverse events associated with such product candidates;

 

   

interactions of its products with other medicines patients are taking and any restrictions on the use of its products together with other medications;

 

   

the clinical indications for which the products are approved and the approved claims that Ocugen may make for the products;

 

   

limitations or warnings contained in the product’s FDA-approved labeling, including potential limitations or warnings for such product candidates that may be more restrictive than other competitive products;

 

   

changes in the standard of care for the targeted indications for such product candidates, which could reduce the marketing impact of any claims that Ocugen could make following FDA approval, if obtained;

 

   

the relative convenience and ease of administration of such product candidates;

 

   

cost of treatment versus economic and clinical benefit in relation to alternative treatments or therapies;

 

   

the availability of third-party formulary coverage and adequate coverage or reimbursement by third-parties, such as insurance companies and other healthcare payors, and by government healthcare programs, including Medicaid and particularly by Medicare in light of the prevalence of dry eye disease in persons over age 55;

 

79


Table of Contents
   

the price concessions required by third party payors to obtain coverage;

 

   

the extent and strength of Ocugen’s marketing and distribution of such product candidates;

 

   

the safety, efficacy, and other potential advantages over, and availability of, alternative treatments already used or that may later be approved;

 

   

distribution and use restrictions imposed by the FDA with respect to such product candidates or to which Ocugen agrees as part of a REMS or voluntary risk management plan;

 

   

the timing of market introduction of such product candidates, as well as competitive products;

 

   

its ability to offer such product candidates for sale at competitive prices;

 

   

the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

 

   

the extent and strength of its third-party manufacturer and supplier support;

 

   

the approval of other new products;

 

   

adverse publicity about the product or favorable publicity about competitive products; and

 

   

potential product liability claims.

The potential market opportunities for Ocugen’s product candidates are difficult to precisely estimate. Ocugen’s estimates of the potential market opportunities are predicated on many assumptions, which may include industry knowledge and publications, third-party research reports, and other surveys, some of which Ocugen may have commissioned. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While Ocugen believes these industry publications and third-party research, surveys and studies are reliable, it has not independently verified such data. In addition, while Ocugen believes that its internal assumptions are reasonable, these assumptions involve the exercise of significant judgment on the part of its management, are inherently uncertain, and the reasonableness of these assumptions has not been assessed by an independent source. If any of the assumptions proves to be inaccurate, the actual markets for Ocugen’s product candidates could be smaller than its estimates of the potential market opportunities, and as a result its product revenue may be limited, and it may be more difficult for it to achieve or maintain profitability.

Ocugen’s product candidates may face competition sooner than anticipated.

Both Ocugen’s drug and biologic product candidates, if approved, may face competition from other products that are the same as or similar to its product candidates. If the FDA or comparable foreign regulatory authorities approve generic or similar versions of any of Ocugen’s product candidates that receive marketing approval, or such authorities do not grant its products appropriate periods of regulatory exclusivity before approving generic or similar versions of Ocugen’s products, the sales of its products could be adversely affected.

In the case of Ocugen’s drug product candidates, once an NDA is approved, the product will become a “reference listed drug” in the FDA’s Orange Book. Other applicants may then seek approval of generic versions of Ocugen’s products through submission of ANDAs in the United States. In support of an ANDA, a generic applicant would not need to conduct full clinical studies. Rather, the applicant generally must show that its product has the same active ingredient(s), dosage form, strength, route of administration, conditions of use and labeling, among other commonalities, as the reference listed drug and that the generic version is bioequivalent to the reference listed drug, meaning it is available at the site of action at the same rate and to the same extent as the reference listed drug. Generic products may be significantly less costly to bring to market than the reference listed drug and companies that produce generic products are generally able to offer them at lower prices and are generally preferred by third party payors. As a result, the FDA, the administration and Congress have recently taken steps to encourage increased generic drug competition in the market in an effort to bring down drug costs.

 

80


Table of Contents

Following the introduction of a generic drug, a significant percentage of the sales of any branded product or reference listed drug is typically lost to the generic product. Moreover, in addition to generic competition, Ocugen could face competition from other companies seeking approval of drug products that are similar to its products using the 505(b)(2) regulatory pathway. Such applicants may be able to rely on Ocugen’s product candidates, if approved, or other approved drug products or published literature to develop drug products that are similar to Ocugen’s. The introduction of a drug product similar to Ocugen’s product candidates could expose it to increased competition.

Any ANDA or 505(b)(2) applicants seeking to rely upon any of Ocugen’s product candidates, if such product candidates are approved, would need to submit patent certification statements with their applications for any of Ocugen’s patents that are listed in the FDA’s Orange Book. There are detailed rules and requirements regarding the patents that may be submitted to the FDA for listing in the Orange Book. Ocugen may be unable to obtain patents covering its product candidates that contain one or more claims that satisfy the requirements for listing in the Orange Book. If one of Ocugen’s product candidates is approved and a patent covering that product candidate is not listed in the Orange Book, an ANDA or 505(b)(2) applicant would not have to submit a patent certification with regard to such patent to the FDA, in which case, Ocugen would not receive the protections provided by the Hatch Waxman Act, as further described in this prospectus.

Moreover, if an ANDA or 505(b)(2) applicant files a paragraph IV challenge to any patents that Ocugen may list in the FDA’s Orange Book and if Ocugen does not file a patent infringement lawsuit within 45 days of receiving notice of a paragraph IV certification, the ANDA or 505(b)(2) applicant would not be subject to a 30-month stay. If Ocugen did file such an action, the litigation or other proceedings to enforce or defend its intellectual property rights would likely be complex in nature, may be expensive and time consuming, may divert its management’s attention from its core business, and may result in unfavorable results that could adversely impact its ability to prevent third parties from competing with its products. Accordingly, upon approval of its product candidates Ocugen may be subject to generic competition or competition from similar products, or may need to commence patent infringement proceedings, which would divert its resources.

Ocugen currently anticipates that it may be eligible for three years of non-patent marketing exclusivity in the United States for OCU300 and OCU310 if they are approved. These three years, however, would only protect Ocugen’s modifications in formulation or approved uses in comparison to the reference listed drug, would not prevent other companies from submitting full NDAs, and would not prevent physicians from prescribing other products off-label or third-party payors from reimbursing for them. By example, even if Ocugen receives approval for OCU300 and OCU310, physicians may prescribe other brimonidine tartrate products off-label for the treatment of ocular discomfort and ocular redness in patients with oGVHD or the treatment of the signs and symptoms of dry eye disease. Moreover, applicants may be able to rely on a reference listed drug that is not one of Ocugen’s product candidates, or, in the case of 505(b)(2) applicants, published literature, in which case any periods of patent or non-patent protection that it may have may not prevent FDA from making an approval effective.

Similarly, if the FDA licenses OCU400, OCU200 or OCU100, Ocugen may face competition from biosimilar products. The enactment of the Biologics Price Competition and Innovation Act of 2009, or BPCIA, as part of the Affordable Care Act, or ACA, created an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. As in the generic drug product space, the FDA and the administration are taking steps to encourage increased biosimilar competition in the market in an effort to bring down the cost of biologic products. If another company pursues approval of a product that is biosimilar to any biologic product for which Ocugen receives FDA approval, it may need to pursue costly and time-consuming patent infringement actions, which may include certain statutorily specified regulatory steps before an infringement action may be brought. Biosimilar applicants may also be able to bring an action for declaratory judgment concerning Ocugen’s patents, requiring that it spend time and money defending the action.

 

81


Table of Contents

Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the original branded product was approved under a BLA. Certain changes, however, and supplements to an approved BLA, and certain subsequent applications filed by the same sponsor, manufacturer, licensor, predecessor in interest, or other related entity do not qualify for the 12-year exclusivity period. Moreover, there have been efforts to decrease this period of exclusivity to a shorter timeframe. Future proposed budgets, international trade agreements and other arrangements or proposals may affect periods of exclusivity. Ocugen’s biologic product candidates may qualify for the BPCIA’s 12-year period of exclusivity, however, there is a risk that the FDA will not consider Ocugen’s product candidates to be reference products for competing products, potentially creating the opportunity for biosimilar competition sooner than anticipated. Additionally, this period of regulatory exclusivity does not apply to companies pursuing regulatory approval via their own traditional BLA, rather than via the abbreviated pathway. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of Ocugen’s reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. It is also possible that payers will give reimbursement preference to biosimilars, even over reference biologics, absent a determination of interchangeability.

For certain of Ocugen’s drug and biologic product candidates, it may seek pediatric exclusivity, which is another type of non-patent marketing exclusivity in the United States, as further described in this prospectus. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application. Ocugen cannot provide any assurance that pediatric exclusivity will be obtained for any of its product candidates.

To the extent Ocugen does not receive any anticipated periods of regulatory exclusivity or to the extent FDA or foreign regulatory authorities approve any biosimilar, interchangeable, generic, similar, or other competing products, its business would be adversely impacted. Competition that Ocugen’s products may face from generic, biosimilar, interchangeable, similar, or other competing products could materially and adversely impact Ocugen’s future revenue, profitability, and cash flows and substantially limit its ability to obtain a return on the investments it has made in those product candidates.

Ocugen faces potential product liability exposure, and if successful claims are brought against it, Ocugen may incur substantial liability for its product candidates and may have to limit their commercialization.

The use of Ocugen’s product candidates in clinical trials, and the sale of any of its product candidates for which it obtains regulatory approval, exposes Ocugen to the risk of product liability claims. Ocugen faces inherent risk of product liability related to the testing of its product candidates in human clinical trials and will face an even greater risk if Ocugen commercially sells any product candidates that it may develop. For example, Ocugen may be sued if any product candidate it develops allegedly causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. Product liability claims might be brought against Ocugen by consumers, healthcare providers or others using, administering or selling its products. If Ocugen cannot successfully defend itself against these claims, it will incur substantial liabilities or be required to limit development or commercialization of its product candidates. Even successful defense would require significant financial and management resources. Regardless of merit or eventual outcome, liability claims may result in:

 

   

loss of revenue from decreased demand for Ocugen’s products and/or product candidates;

 

   

impairment of Ocugen’s business reputation or financial stability;

 

   

costs of related litigation;

 

   

substantial monetary awards to patients or other claimants;

 

   

diversion of management attention;

 

82


Table of Contents
   

withdrawal of clinical trial participants and potential termination of clinical trial sites or entire clinical programs;

 

   

the inability to commercialize Ocugen’s product candidates;

 

   

significant negative media attention;

 

   

decrease in Ocugen’s stock price; or

 

   

initiation of investigations, and enforcement actions by regulators; and product recalls, withdrawals, revocation of approvals, or labeling, marketing or promotional restrictions.

Ocugen currently holds $5.0 million in product liability insurance coverage in the aggregate, with a per incident limit of $3.0 million, which may not be adequate to cover all liabilities that it may incur. Ocugen may need to increase its insurance coverage as it expands its clinical trials. Ocugen will need to further increase its insurance coverage if it commences commercialization of any of its product candidates for which it obtains marketing approval. Insurance coverage is increasingly expensive. Ocugen may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. On occasion, large judgments have been awarded in class action lawsuits based on therapeutics that had unanticipated side effects. A successful product liability claim or series of claims brought against Ocugen could cause its stock price to fall and, if judgments exceed its insurance coverage, could decrease its cash and adversely affect its business and its prospects.

Risks Related to Ocugen’s Dependence On Third Parties

Ocugen relies, and expects to continue to rely, on third parties to conduct, supervise, and monitor its preclinical studies and clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials or failing to comply with regulatory requirements.

Ocugen relies on third parties, study sites, and others to conduct, supervise, and monitor its preclinical and clinical trials for its product candidates and does not currently plan to independently conduct clinical or preclinical trials of any other potential product candidates. Ocugen expects to continue to rely on third parties, such as CROs clinical data management organizations, medical and scientific institutions, and clinical and preclinical investigators, to conduct its preclinical studies and clinical trials. For example, for the clinical studies completed to date concerning the use of brimonidine tartrate for the treatment of ocular discomfort and ocular redness in patients with oGVHD, Ocugen relied on an investigator to sponsor and conduct the studies. For the clinical study concerning the use of brimonidine tartrate for the treatment of the signs and symptoms of dry eye disease, while Ocugen sponsored the study, it relied on third-party vendors and investigators for the conduct of the study.

While Ocugen has agreements governing the activities of such third parties, it has limited influence and control over their actual performance and activities. For instance, Ocugen’s third-party service providers are not its employees, and except for remedies available to it under its agreements with such third parties Ocugen cannot control whether or not they devote sufficient time and resources to its ongoing clinical, non-clinical, and preclinical programs. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct Ocugen’s preclinical studies or clinical trials in accordance with regulatory requirements or its stated protocols, if they need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to Ocugen’s protocols, regulatory requirements or for other reasons, Ocugen’s trials may be repeated, extended, delayed, or terminated, it may not be able to obtain, or may be delayed in obtaining, marketing approvals for its product candidates, it may not be able to, or may be delayed in its efforts to, successfully commercialize its product candidates, or it or they may be subject to regulatory enforcement actions. As a result, Ocugen’s results of operations and the commercial prospects for its product candidates would be harmed, its costs could increase and its ability to generate revenues could be delayed. To the extent Ocugen is unable to successfully identify and manage the performance of third-party service providers in

 

83


Table of Contents

the future, its business may be materially and adversely affected. Ocugen’s third-party service providers may also have relationships with other entities, some of which may be its competitors, for whom they may also be conducting trials or other therapeutic development activities that could harm Ocugen’s competitive position.

Ocugen’s reliance on these third-parties for development activities will reduce its control over these activities. Nevertheless, Ocugen is responsible for ensuring that each of its studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and its reliance on third parties does not relieve it of its regulatory responsibilities. For example, Ocugen will remain responsible for ensuring that each of its trials is conducted in accordance with the general investigational plan and protocols for the trial. Ocugen must also ensure that its preclinical trials are conducted in accordance with good laboratory practices (“GLPs”), as appropriate. Moreover, the FDA and comparable foreign regulatory authorities require Ocugen to comply with GCPs for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity, and confidentiality of trial participants are protected. Regulatory authorities enforce these requirements through periodic inspections of trial sponsors, clinical and preclinical investigators, and trial sites. If Ocugen or any of its third-party service providers fail to comply with applicable GCPs or other regulatory requirements, it or they may be subject to enforcement or other legal actions, the data generated in its trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require it to perform additional studies.

In addition, Ocugen will be required to report certain financial interests of its third-party investigators if these relationships exceed certain financial thresholds or meet other criteria. The FDA or comparable foreign regulatory authorities may question the integrity of the data from those clinical trials conducted by investigators who may have conflicts of interest.

Ocugen cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of its trials complies with the applicable regulatory requirements. In addition, Ocugen’s clinical trials must be conducted with product candidates that were produced under cGMP conditions. Failure to comply with these regulations may require it to repeat clinical trials, which would delay the regulatory approval process. Ocugen is also required to register certain clinical trials and post the results of certain completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in enforcement actions and adverse publicity.

Agreements with third parties conducting or otherwise assisting with Ocugen’s clinical or preclinical studies might terminate for a variety of reasons, including a failure to perform by the third parties. If any of Ocugen’s relationships with these third parties terminate, it may not be able to enter into arrangements with alternative providers or to do so on commercially reasonable terms. Switching or adding additional third parties involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new third party commences work. As a result, if Ocugen needs to enter into alternative arrangements, it could delay its product development activities and adversely affect its business. Though Ocugen carefully manages its relationships with its third parties, there can be no assurance that it will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on its business, financial condition and prospects, and results of operations.

Ocugen also relies on other third parties to store and distribute its products for the clinical and preclinical trials that it conducts. Any performance failure on the part of its distributors could delay development, marketing approval, or commercialization of its product candidates, producing additional losses and depriving it of potential product revenue.

 

84


Table of Contents

If the manufacturers upon whom Ocugen relies fail to produce its product candidates or components in the volumes that it requires on a timely basis, or fail to comply with stringent regulations applicable to biologic and pharmaceutical manufacturers, Ocugen may face delays in the development and commercialization of, or be unable to meet demand for, its product candidates and may lose potential revenues.

Ocugen does not manufacture any of its product candidates or any product components, and it does not currently plan to develop any capacity to do so. Ocugen expects to rely on a qualified supplier to manufacture and supply to it a minimum amount of brimonidine tartrate (the drug substance used in the manufacture of OCU300 and OCU310) for use in process validation campaigns and future commercial needs. Ocugen expects to rely on another third-party manufacturer (U.S. based) to supply commercial drug products of OCU300 and OCU310 if and when approved for marketing by applicable regulatory authorities. Ocugen expects to rely on its qualified supplier and other third parties to manufacture clinical supplies of other product candidates and commercial supplies of all of its products, if and when approved for marketing by applicable regulatory authorities, as well as for packaging, serialization, storage, distribution and other production logistics.

Ocugen’s current and anticipated future dependence upon others for the manufacture of its product candidates or any product that it develops may adversely affect its future profit margins and its ability to commercialize any products that receive marketing approval on a timely and competitive basis. In addition, any performance failure on the part of its existing or future manufacturers could delay clinical development or marketing approval.

If these third-party manufacturers do not successfully carry out their contractual duties, meet expected deadlines or manufacture Ocugen’s product candidates in accordance with regulatory requirements, if there are disagreements between Ocugen and such parties, or if such parties are unable to expand capacities to support commercialization of any of Ocugen’s product candidates for which it obtains marketing approval, Ocugen may not be able to produce, or may be delayed in producing sufficient product candidates to meet its supply requirements. Any delays in obtaining adequate supplies with respect to Ocugen’s product candidates and components may delay the development or commercialization of its product candidates.

Ocugen may not succeed in its efforts to establish manufacturing relationships or other alternative arrangements for any of its product candidates, components, and programs. Ocugen’s product candidates may compete with other products and product candidates for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that are both capable of manufacturing for Ocugen and willing to do so. Moreover, because Ocugen’s product candidates must be manufactured under sterile conditions, the number of manufacturers who can meet this requirement are even more limited. If Ocugen’s existing third-party manufacturers, or the third parties that it engages in the future to manufacture a product or component for commercial sale or for its clinical trials should cease to continue to do so for any reason, Ocugen would likely experience delays in obtaining sufficient quantities of its product candidates for it to meet commercial demand or to advance its clinical trials while it identifies and qualifies replacement suppliers. These third-party facilities may also be affected by natural disasters, such as floods or fire, or such facilities could face manufacturing issues, such as contamination or regulatory findings following a regulatory inspection of such facility. In such instances, Ocugen may need to locate an appropriate replacement third-party relationship, which may not be readily available or on acceptable terms, which would cause additional delay and increased expense. The addition of a new or alternative manufacturer may also require FDA approvals and may have a material adverse effect on Ocugen’s business.

If for any reason Ocugen is unable to obtain adequate supplies of its product candidates or the components used to manufacture them, it will be more difficult for it to develop its product candidates and compete effectively. Further, even if Ocugen does establish such collaborations or arrangements, its third-party manufacturers may breach, terminate, or not renew these agreements.

Ocugen or its third-party manufacturers may also encounter shortages in the raw materials, therapeutic substances, or active pharmaceutical ingredients necessary to produce its product candidates in the quantities needed for its clinical trials or, if its product candidates are approved, in sufficient quantities for

 

85


Table of Contents

commercialization or to meet an increase in demand. Such shortages may occur for a variety of reasons, including capacity constraints, delays or disruptions in the market, and shortages caused by the purchase of such materials by Ocugen’s competitors or others. Ocugen’s or its third-party manufacturers’ failure to obtain the raw materials, therapeutic substances, or active pharmaceutical ingredients necessary to manufacture sufficient quantities of its product candidates may have a material adverse effect on its business.

Any problems or delays Ocugen experiences in preparing for commercial-scale manufacturing of a product candidate or component, including manufacturing validation, may result in a delay in FDA approval or commercial launch of the product candidate or may impair its ability to manufacture commercial quantities or such quantities at an acceptable cost, which could result in the delay, prevention, or impairment of commercialization of its product candidates and could adversely affect its business. Furthermore, if Ocugen’s commercial manufacturers fail to deliver the required commercial quantities of its product candidates on a timely basis and at commercially reasonable prices, it would likely be unable to meet demand for its products and it would lose potential revenues.

While Ocugen has a commercial supply arrangement with a supplier, if its supplier does not perform as it expects or if Ocugen is not able to enter into a final contractual agreement, it may be required to replace its supplier with one or more other suppliers. If this were to occur, Ocugen may incur added costs and delays in identifying and qualifying any such replacements. Additional manufacturers and testing laboratories for its product candidates will be considered for long-term commercial supply if and when such product candidates are approved for marketing by applicable regulatory authorities.

The manufacture of biologic and pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of therapeutics often encounter difficulties in production, particularly in scaling up initial production. These problems include difficulties with production costs and yields, quality control, including stability of the product candidate and quality assurance testing, shortages of qualified personnel, and compliance with strictly enforced federal, state, and foreign regulations. If Ocugen’s manufacturers were to encounter any of these difficulties and were unable to perform as agreed, its ability to provide product candidates to patients in its clinical trials and for commercial use, if approved, would be jeopardized. Reliance on third-party manufacturers entails exposure to risks to which it would not be subject if it manufactured the product candidate itself, including:

 

   

inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;

 

   

competition with other product candidates and products for access to a limited number of suitable manufacturing facilities that operate under cGMP regulations;

 

   

reliance on the third party for regulatory compliance and quality assurance;

 

   

reduced day-to-day control over the manufacturing process for Ocugen’s product candidates as a result of using third-party manufacturers for all aspects of manufacturing activities;

 

   

reduced control over the protection of its trade secrets and know-how from misappropriation or inadvertent disclosure;

 

   

termination, breach or nonrenewal of manufacturing agreements with third parties in a manner or at a time that may be costly or damaging to Ocugen or result in delays in the development or commercialization of its product candidates; and

 

   

disruptions to the operations of Ocugen’s third-party manufacturers or suppliers caused by conditions unrelated to its business or operations, including the bankruptcy of the manufacturer or supplier.

In addition, all manufacturers of Ocugen’s product candidates and therapeutic substances must comply with cGMP requirements enforced by the FDA that are applicable to both finished products and their active

 

86


Table of Contents

components used both for clinical and commercial supply. The FDA enforces these requirements through its facilities inspection program. Ocugen’s manufacturers must be approved by the FDA pursuant to inspections that will be conducted after it submits its marketing applications to the agency. Ocugen manufacturers will also be subject to continuing FDA and other regulatory authority inspections should it receive marketing approval. Further, Ocugen, in cooperation with its contract manufacturers, must supply all necessary chemistry, manufacturing, and control documentation to the FDA in support of a marketing application on a timely basis.

The cGMP requirements include quality control, quality assurance, and the maintenance of records and documentation. Manufacturers of Ocugen’s product candidates and the therapeutic substances and active pharmaceutical ingredients necessary to produce its product candidates may be unable to comply with its specifications, cGMP requirements and with other FDA, state, and foreign regulatory requirements. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of a product candidate that may not be detectable in final product testing. If Ocugen’s contract manufacturers cannot successfully manufacture material that conforms to its specifications and the strict regulatory requirements of the FDA or other regulatory authorities, they will not be able to secure or maintain regulatory approval for their manufacturing facilities. Any such deviations may also require remedial measures that may be costly and/or time-consuming for Ocugen or a third party to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon or by Ocugen or third parties with whom Ocugen contracts could materially harm its business. Any delays in obtaining products or product candidates that comply with the applicable regulatory requirements may result in delays to clinical trials, product approvals, and commercialization. It may also require that Ocugen conduct additional studies.

While Ocugen is ultimately responsible for the manufacture of its product candidates, other than through its contractual arrangements, Ocugen has little control over its manufacturers’ compliance with these regulations and standards. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of its product candidates or if it withdraws any such approval in the future, Ocugen may need to find alternative manufacturing facilities, which would significantly impact its ability to develop, obtain and maintain regulatory approval for or market its product candidates, if approved. Any new manufacturers would need to either obtain or develop the necessary manufacturing know-how, and obtain the necessary equipment and materials, which may take substantial time and investment. Ocugen must also receive FDA approval for the use of any new manufacturers for commercial supply.

A failure to comply with the applicable regulatory requirements may result in regulatory enforcement actions against Ocugen’s manufacturers or Ocugen, including fines and civil and criminal penalties, including imprisonment, suspension or restrictions of production, injunctions, delay, withdrawal or denial of product approval or supplements to approved products, clinical holds or termination of clinical studies, warning or untitled letters, regulatory authority communications warning the public about safety issues with the product, refusal to permit the import or export of the products, product seizure, detention, or recall, operating restrictions, suits under the civil False Claims Act, corporate integrity agreements, or consent decrees. Depending on the severity of any potential regulatory action, Ocugen’s clinical or commercial supply could be interrupted or limited, which could have a material adverse effect on its business.

Ocugen does not currently have arrangements in place for redundant supply for bulk pharmaceutical and biologic substances and finished products. Any change in Ocugen’s manufacturers could be costly because the commercial terms of any new arrangement could be less favorable and because the expenses relating to the transfer of necessary technology and processes could be significant.

 

87


Table of Contents

Ocugen may rely on third parties to perform many essential services for any products that it commercializes, including services related to warehousing and inventory control, distribution, government price reporting, customer service, accounts receivable management, cash collection, and pharmacovigilance and adverse event reporting. If these third parties fail to perform as expected or to comply with legal and regulatory requirements, Ocugen’s ability to commercialize its product candidates will be significantly impacted and it may be subject to regulatory sanctions.

Ocugen may retain third-party service providers to perform a variety of functions related to the sale and distribution of its product candidates, key aspects of which will be out of its direct control. These service providers may provide key services related to warehousing and inventory control, distribution, customer service, accounts receivable management, and cash collection. If Ocugen retains a service provider, it would substantially rely on it as well as other third-party providers that perform services for it, including entrusting its inventories of products to their care and handling. If these third-party service providers fail to comply with applicable laws and regulations, fail to meet expected deadlines, or otherwise do not carry out their contractual duties to Ocugen, or encounter physical or natural damage at their facilities, Ocugen’s ability to deliver product to meet commercial demand would be significantly impaired and it may be subject to regulatory enforcement action.

In addition, Ocugen may engage third parties to perform various other services for it relating to pharmacovigilance and adverse event reporting, safety database management, fulfillment of requests for medical information regarding its product candidates and related services. If the quality or accuracy of the data maintained by these service providers is insufficient, or these third parties otherwise fail to comply with regulatory requirements, Ocugen could be subject to regulatory sanctions.

Additionally, Ocugen may contract with a third party to calculate and report pricing information mandated by various government programs. If a third party fails to timely report or adjust prices as required, or errors in calculating government pricing information from transactional data in its financial records, it could impact Ocugen’s discount and rebate liability, and potentially subject it to regulatory sanctions or False Claims Act lawsuits.

Ocugen may collaborate with third parties for the development or commercialization of its product candidates. Ocugen may not be successful in establishing or maintaining collaborative relationships, which could adversely affect its ability to develop and commercialize its product candidates.

In the future Ocugen may seek collaboration arrangements with biologic, pharmaceutical or biotechnology companies for the development or commercialization of its product candidates. Ocugen may utilize a variety of types of collaboration, distribution and other marketing arrangements with third parties to develop and commercialize its product candidates outside the United States. Ocugen may also enter into arrangements with third parties to perform these services in the United States if it does not establish its own sales, marketing and distribution capabilities in the United States or if it determines that such third-party arrangements are otherwise beneficial. For example, Ocugen may utilize a variety of collaboration, distribution and other marketing arrangements with one or more third parties to facilitate commercialization of OCU300. Ocugen may also consider potential collaborative partnership opportunities for sales, marketing, distribution, development, or licensing or broader collaboration arrangements, including with large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. Ocugen is not currently party to any such arrangement.

The success of future collaboration arrangements that Ocugen may enter into will depend heavily on the efforts and activities of its collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to collaboration arrangements. Accordingly, if Ocugen does enter into any such arrangements with any third parties in the future, it will likely have limited control over the amount and timing of resources that its collaborators dedicate to the development or commercialization of its product candidates. Ocugen’s ability to generate revenues from these arrangements will depend on its collaborators’

 

88


Table of Contents

abilities and efforts to successfully perform the functions assigned to them in these arrangements. Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve if neither of the parties has final decision-making authority. Moreover, collaborations with biologic and pharmaceutical companies and other third parties are often terminated or allowed to expire. Any such termination or expiration would adversely affect Ocugen financially and could harm its business reputation.

Ocugen may also license the right to market and sell its product candidates under its collaborators’ labeler codes. Alternatively, Ocugen may enter into agreements with collaborators to market and sell its product candidates under its own labeler code, in which case errors and omissions by collaborators in capturing and transmitting transactional data may impact the accuracy of its government price reporting.

Any future collaborations Ocugen might enter into may pose a number of risks, including the following:

 

   

collaborators may not perform their obligations as expected;

 

   

collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to these collaborations;

 

   

collaborators may not pursue development of product candidates and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;

 

   

collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

 

   

collaborators could fail to make timely regulatory submissions for a product candidate;

 

   

collaborators may not comply with all applicable regulatory requirements or may fail to report safety data in accordance with all applicable regulatory requirements, which could subject them or Ocugen to regulatory enforcement actions;

 

   

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with Ocugen’s product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than Ocugen’s;

 

   

product candidates discovered in collaboration with Ocugen may be viewed by its collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of Ocugen’s product candidates;

 

   

a collaborator with marketing and distribution rights to one or more of Ocugen’s product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product candidate or product;

 

   

disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for Ocugen with respect to product candidates, or might result in litigation or arbitration, any of which would be time consuming and expensive;

 

   

collaborators may not properly maintain or defend Ocugen’s intellectual property rights or may use its proprietary information in such a way as to invite litigation that could jeopardize or invalidate Ocugen’s intellectual property or proprietary information or expose it to potential litigation;

 

89


Table of Contents
   

collaborators may infringe the intellectual property rights of third parties, which may expose Ocugen to litigation and potential liability; and

 

   

collaborations may be terminated for the convenience of the collaborator and, if terminated, Ocugen could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.

Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner, or at all. If any collaborations Ocugen might enter into in the future do not result in the successful development and commercialization of product candidates or if one of Ocugen’s collaborators subsequently terminates its agreement with it, Ocugen may not receive any future research funding or milestone or royalty payments under the collaboration. If Ocugen does not receive the funding it expects under the agreements, its development of its product candidates could be delayed, and Ocugen may need additional resources to develop its product candidates and its product platform. All of the risks relating to product development, regulatory approval and commercialization described in this prospectus also apply to the activities of Ocugen’s collaborators.

Additionally, if any future collaborator of Ocugen’s is involved in a business combination, the collaborator might deemphasize or terminate development or commercialization of any product candidate licensed to it by Ocugen. If one of Ocugen’s collaborators terminates its agreement with Ocugen, Ocugen may find it more difficult to attract new collaborators and its reputation in the business and financial communities could be adversely affected.

Should Ocugen desire to pursue a collaboration agreement but is not able to establish collaborations, it may have to alter its development and commercialization plans and its business could be adversely affected.

For some of Ocugen’s product candidates, Ocugen may decide to collaborate with pharmaceutical or biotechnology companies for the development and potential commercialization of those product candidates. Ocugen faces significant competition in seeking appropriate collaborators and whether it reaches a definitive agreement for a collaboration will depend, among other things, upon its assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to Ocugen’s ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with Ocugen for its product candidate. Ocugen may also be restricted under future license agreements from entering into agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

Should Ocugen desire to pursue a collaboration agreement but is unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, it may have to curtail the development of a product candidate, reduce or delay its development program or one or more of its other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase its expenditures and undertake development or commercialization activities at its own expense. If Ocugen elects to fund and undertake development or commercialization activities on its own, it may need to obtain additional expertise and additional capital, which may not be available to it on acceptable terms or at all. If Ocugen fails to enter into collaborations and does not have sufficient funds or expertise to undertake the necessary development and

 

90


Table of Contents

commercialization activities, it may not be able to further develop its product candidates or bring them to market or continue to develop its product platform and its business may be materially and adversely affected.

Risks Related to Legal and Compliance Matters

If Ocugen fails to comply with federal and state healthcare laws, including fraud and abuse and health and other information privacy and security laws, it could face substantial penalties and its business, financial condition, results of operations, and prospects could be adversely affected.

As a biologic and pharmaceutical company, Ocugen is subject to many federal and state healthcare laws, including those described in the section entitled “Business-Government Regulation and Product Approval” of this prospectus, such as the federal Anti-Kickback Statute, the federal civil and criminal False Claims Acts, the civil monetary penalties statute, the Medicaid Drug Rebate statute and other price reporting requirements, the Veterans Health Care Act of 1992, the federal Health Insurance Portability and Accountability Act of 1996 (as amended by the Health Information Technology for Economics and Clinical Health Act), the Foreign Corrupt Practices Act of 1977, the Patient Protection and Affordable Care Act of 2010, and similar state laws. Ocugen may also be subject to laws regarding transparency and patient privacy. Even though Ocugen does not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, certain federal and state healthcare laws, and regulations pertaining to fraud and abuse, reimbursement programs, government procurement, and patients’ rights are and will be applicable to its business. Ocugen would be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which it conducts its business.

Efforts to ensure that Ocugen’s business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that Ocugen’s business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If Ocugen or its operations are found to be in violation of any federal or state healthcare law, or any other governmental laws or regulations that applies to it, Ocugen may be subject to penalties, including civil, criminal, and administrative penalties, damages, fines, imprisonment, disgorgement, suspension and debarment from government contracts, and refusal of orders under existing government contracts, exclusion from participation in U.S. federal or state health care programs, corporate integrity agreements, and the curtailment or restructuring of its operations, any of which could materially adversely affect its ability to operate its business and its financial results. If any of the physicians or other healthcare providers or entities with whom Ocugen expects to do business is found not to be in compliance with applicable laws, it may be subject to criminal, civil or administrative sanctions, including but not limited to, exclusions from participation in government healthcare programs, which could also materially affect its business.

Although an effective compliance program can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security, reimbursement, and fraud laws may prove costly. Any action against Ocugen for violation of these laws, even if Ocugen successfully defends against it, could cause it to incur significant legal expenses and divert its management’s attention from the operation of its business.

Ocugen is subject to new legislation, regulatory proposals and healthcare payor initiatives that may increase its costs of compliance, and adversely affect its ability to market its products, obtain collaborators, and raise capital.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of Ocugen’s product candidates, restrict or regulate post-approval activities and affect its ability to profitably sell any products for which it obtains marketing approval. The biopharmaceutical industry has been a particular focus of these efforts and has been significantly affected by legislative initiatives. Ocugen expects that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that it may receive for any approved products.

 

91


Table of Contents

In 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or the ACA, included provisions of importance to Ocugen’s business, including, without limitation, its ability to commercialize and the prices it may obtain for any of its product candidates that are approved for sale. These provisions include:

 

   

an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, including products approved through the 505(b)(2) regulatory pathway;

 

   

an increase in the statutory minimum rebates a sponsor must pay under the Medicaid Drug Rebate Program;

 

   

a Medicare Part D coverage gap discount program, in which participating sponsors must agree to offer 50% point-of-sale discounts off negotiated drug prices of drugs and biologics approved under an NDA or BLA (including drugs approved pursuant to the 505(b)(2) regulatory pathway) during the coverage gap period as a condition for the sponsors’ outpatient drugs to be covered under Medicare Part D;

 

   

expansion of healthcare fraud and abuse laws, including the federal False Claims Act and the federal Anti-Kickback Statute, and the addition of new government investigative powers, and enhanced penalties for noncompliance;

 

   

extension of sponsor’s Medicaid rebate liability to managed Medicaid plans;

 

   

expansion of eligibility criteria for Medicaid programs;

 

   

expansion of the entities eligible for discounts under the Public Health Service Acts or the PHSA, pharmaceutical pricing program; and

 

   

creation of a special Medicare Part B payment methodology for biosimilars approved under PHSA Section 351(k) in which providers are paid the ASP of the biosimilar plus the margin based on ASP of the reference biologic.

The ACA was recently amended to repeal the individual insurance mandate, and efforts to repeal and replace portions of the law may continue. It remains to be seen, however, whether new legislation will be enacted and, if so, precisely what any new legislation could provide and what impact it will have on the availability of healthcare and containing or lowering the cost of healthcare. For example, it is possible that any repeal and replacement initiatives, if enacted into law, could ultimately result in fewer individuals having health insurance coverage or in individuals having insurance coverage with less generous benefits. Accordingly, such reforms, if enacted, could have an adverse effect on anticipated revenue from product candidates that Ocugen may successfully develop and for which it may obtain marketing approval and may affect its overall financial condition and ability to develop or commercialize product candidates. The timing and scope of any potential future legislation to repeal and replace ACA provisions is highly uncertain in many respects.

Since the ACA was enacted in 2010, other legislative and regulatory changes have been proposed and adopted. These changes include, among other things, aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went effective on April 1, 2013 and will remain in effect through 2024 unless additional Congressional action is taken. More recently, the Bipartisan Budget Act increased sponsor responsibility for prescription costs in the Medicare Part D coverage gap, and also extended sponsor responsibility for prescription costs in the Medicare Part D coverage gap to biosimilars, which had previously been exempt. In addition, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. CMS promulgated regulations governing sponsors’ obligations and reimbursement under the Medicaid Drug Rebate Program, and recently promulgated a regulation that limited Medicare Part B payment to certain hospitals for outpatient drugs purchased under the 340B program. To the extent that Ocugen licenses the right to sell a product to another entity under that entity’s labeler code, the licensee would further have healthcare reimbursement and pricing regulatory responsibilities.

 

92


Table of Contents

Ocugen expects that current law and federal and state healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, increased regulatory burdens and operating costs, decreased net revenue from its biologic and pharmaceutical products, decreased potential returns from its development efforts, new payment methodologies and in additional downward pressure on the price that Ocugen receives for any approved product and/or the level of reimbursement physicians receive for administering any approved product it might bring to market. Reductions in reimbursement levels may negatively impact the prices Ocugen receives or the frequency with which any products it may develop are prescribed or administered. Any reduction in reimbursement from Medicare or other government healthcare programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent it from being able to generate revenue, attain profitability or commercialize its products.

The costs of prescription pharmaceuticals and biologics in the United States has also been the subject of considerable discussion in the United States, and members of Congress and the Trump Administration have stated that they will address such costs through new legislative and administrative measures. The pricing of prescription pharmaceuticals and biologics is also subject to governmental control outside the United States. In certain countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, Ocugen may be required to conduct a clinical trial that compares the cost-effectiveness of its product candidates to other available therapies. If reimbursement of its products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, Ocugen’s ability to generate revenues and become profitable could be impaired.

Legislative and regulatory proposals may also be made to expand post-approval requirements and restrict sales and promotional activities. Ocugen cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of its product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject Ocugen to more stringent product labeling and post-marketing testing and other requirements.

In addition, there have been a number of other legislative and regulatory proposals aimed at changing the biologic and pharmaceutical industry. For instance, the Drug Quality and Security Act, or DQSA, imposes obligations on sponsors of biologic and pharmaceutical products related to product tracking and tracing. Among the requirements of this legislation, sponsors are required to provide certain information regarding the product to individuals and entities to which product ownership is transferred, will be required to label products with a product identifier, and are required keep certain records regarding the product. The transfer of information to subsequent product owners by manufacturers is also required to be done electronically. Sponsors are also required to verify that purchasers of the sponsors’ products are appropriately licensed. Further, manufacturers have product investigation, quarantine, disposition, and FDA and trading partner notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products that would result in serious adverse health consequences of 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. Future licensees or affiliates may also have responsibilities under DQSA.

Compliance with the federal track and trace requirements may increase Ocugen’s operational expenses and impose significant administrative burdens. As a result of these and other new proposals, Ocugen may determine to change its current manner of operation, provide additional benefits or change its contract arrangements, any of which could have a material adverse effect on its business, financial condition, and results of operations.

 

93


Table of Contents

Ocugen’s employees, independent contractors, consultants, commercial partners, principal investigators, or CROs may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on its business.

Ocugen is exposed to the risk of employee fraud or other misconduct. Misconduct by employees, independent contractors, consultants, commercial partners, manufacturers, investigators, or CROs could include intentional, reckless, negligent, or unintentional failures to comply with FDA regulations, comply with applicable fraud and abuse laws, provide accurate information to the FDA, properly calculate pricing information required by federal programs, comply with federal procurement rules or contract terms, report financial information or data accurately or disclose unauthorized activities to Ocugen. This misconduct could also involve the improper use or misrepresentation of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to Ocugen’s reputation. It is not always possible to identify and deter this type of misconduct, and the precautions Ocugen takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting it from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Moreover, it is possible for a whistleblower to pursue a False Claims Act case against Ocugen even if the government considers the claim unmeritorious and declines to intervene, which could require Ocugen to incur costs defending against such a claim. Further, due to the risk that a judgment in a False Claims Act case could result in exclusion from federal health programs or debarment from government contracts, whistleblower cases often result in large settlements. If any such actions are instituted against Ocugen, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on its business, financial condition, and results of operations, including the imposition of significant fines or other sanctions.

Ocugen’s business and operations would suffer in the event of system failures.

Ocugen’s internal computer systems and those of its CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war, and telecommunication and electrical failures. If such an event were to occur and cause interruptions in its operations, it could result in a material disruption of its product candidate development and, if such product candidates are approved, commercialization programs. For example, the loss of clinical trial data from completed, ongoing or planned clinical trials could result in delays in its regulatory approval efforts and significantly increase its costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to its data or applications, or inappropriate disclosure of personal, confidential or proprietary information, Ocugen could incur liability and regulatory enforcement actions, and the further development of any of its product candidates could be delayed.

Ocugen is subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing its operations. If it fails to comply with these laws, it could be subject to civil or criminal penalties, other remedial measures and legal expenses, be precluded from developing manufacturing and selling certain products outside the United States or be required to develop and implement costly compliance programs, which could adversely affect its business, results of operations and financial condition.

Ocugen’s operations are subject to anti-corruption laws, including the U.K. Bribery Act 2010, or Bribery Act, the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws that apply in countries where it does business and may do business in the future. The Bribery Act, FCPA and these other laws generally prohibit Ocugen, its officers, and its employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. Compliance with the FCPA, in particular, is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

 

94


Table of Contents

Ocugen may in the future operate in jurisdictions that pose a high risk of potential Bribery Act or FCPA violations, and it may participate in collaborations and relationships with third parties whose actions could potentially subject it to liability under the Bribery Act, FCPA or local anti-corruption laws. In addition, Ocugen cannot predict the nature, scope or effect of future regulatory requirements to which its international operations might be subject or the manner in which existing laws might be administered or interpreted. If Ocugen expands its operations outside of the United States, it will need to dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which it plans to operate.

Ocugen is also subject to other laws and regulations governing its international operations, including regulations administered by the governments of the United Kingdom and the United States, and authorities in the European Union, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws. In addition, various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If Ocugen expands its presence outside of the United States, it will require Ocugen to dedicate additional resources to comply with these laws, and these laws may preclude Ocugen from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit Ocugen’s growth potential and increase its development costs.

There is no assurance that Ocugen will be completely effective in ensuring its compliance with all applicable anti-corruption laws, including the Bribery Act, the FCPA or other legal requirements, including Trade Control laws. If Ocugen is not in compliance with the Bribery Act, the FCPA and other anti-corruption laws or Trade Control laws, it may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on its business, financial condition, results of operations and liquidity. The Securities and Exchange Commission also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions. Any investigation of any potential violations of the Bribery Act, the FCPA, other anti-corruption laws or Trade Control laws by U.K., U.S. or other authorities could also have an adverse impact on Ocugen’s reputation, its business, results of operations and financial condition.

Risks Related to Ocugen’s Intellectual Property

Ocugen may be unable to obtain and maintain patent protection for its technology and product candidates, or the scope of the patent protection obtained may not be sufficiently broad or enforceable, such that its competitors could develop and commercialize technology and products similar or identical to Ocugen’s, and Ocugen’s ability to successfully commercialize its technology and product candidates may be impaired.

Ocugen’s success depends in large part on its ability to obtain and maintain patent protection in the United States and other countries with respect to its proprietary technology and product candidates. Ocugen has sought to protect its proprietary position by filing in the United States and in certain foreign jurisdictions patent applications related to its novel technologies and product candidates.

The patent prosecution process is expensive and time-consuming, and Ocugen may not have filed, maintained or prosecuted and may not be able to file, maintain and prosecute all necessary or desirable patents or patent applications at a reasonable cost or in a timely manner. Ocugen may also fail to identify patentable aspects of its research and development output before it is too late to obtain patent protection.

The patent position of pharmaceutical and biotechnology companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of its patent rights are highly uncertain. Ocugen’s pending and future patent applications may fail to result in issued patents in the United States or in other foreign countries which protect its technology or product candidates, or which effectively prevent others from

 

95


Table of Contents

commercializing competitive technologies and products. In addition, the laws of foreign countries may not protect Ocugen’s rights to the same extent as the laws of the United States, and the standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, unlike patent law in the United States, European patent law precludes the patentability of methods of treatment of the human body and imposes substantial restrictions on the scope of claims it will grant of broader than specifically disclosed embodiments. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, Ocugen cannot be certain whether it or its licensors were the first to make the inventions claimed in its owned or licensed patents or pending patent applications, or that it or its licensors were the first to file for patent protection of such inventions. Databases for patents and publications, and methods for searching them, are inherently limited so Ocugen may not know the full scope of all issued and pending patent applications. As a result, the issuance, scope, validity, enforceability and commercial value of Ocugen’s patent rights are uncertain. Ocugen’s pending and future patent applications may not result in patents being issued which protect its technology or product candidates, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. In particular, during prosecution of any patent application, the issuance of any patents based on the application may depend upon Ocugen’s ability to generate additional preclinical or clinical data that support the patentability of its proposed claims. Ocugen may not be able to generate sufficient additional data on a timely basis, or at all. Moreover, changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of its patents or narrow the scope of its patent protection.

Even if Ocugen’s owned and licensed patent applications issue as patents, they may not issue in a form that will provide Ocugen with any meaningful protection for its proprietary technology and product candidates, prevent competitors from competing with it, or otherwise provide it with any competitive advantage. Ocugen’s competitors may be able to circumvent its owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. In particular, a competitor may develop an approach to deliver drugs through the mucus layer to the underlying target tissue that uses a different approach than Ocugen’s OcuNanoE™ nanoemulsion formulation, and therefore may not infringe on its patent rights.

The issuance of a patent is not conclusive as to its inventorship, ownership, scope, validity or enforceability, and Ocugen’s owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit its ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of its technology and product candidates. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, Ocugen’s patent portfolio may not provide it with sufficient rights to exclude others from commercializing products similar or identical to Ocugen’s.

Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of Ocugen’s patent applications and the enforcement or defense of its issued patents.

On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The USPTO developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, became effective on March 16, 2013. The first to file provisions limit the rights of an inventor to patent an invention if not the first to file an application for patenting that invention, even if such invention was the first invention. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of Ocugen’s patent applications and the enforcement or defense of its issued patents, which could have a material adverse effect on its business, financial condition, results of operations and

 

96


Table of Contents

prospects. For example, the Leahy-Smith Act created a new administrative tribunal known as the Patent Trial and Appeals Board, or PTAB, that provides a venue for companies to challenge the validity of competitor patents at a cost that is much lower than district court litigation and on timelines that are much faster. Although it is not clear what, if any, long term impact the PTAB proceedings will have on the operation of Ocugen’s business, the outcome of patent challenge proceedings before the PTAB since its inception in 2013 have resulted in the invalidation of many U.S. patent claims. The availability of the PTAB as a lower-cost, faster and potentially more potent tribunal for challenging patents could therefore increase the likelihood that Ocugen’s own patents will be challenged, thereby increasing the uncertainties and costs of maintaining, defending and enforcing them.

If Ocugen is not able to obtain patent term extension in the United States under the Hatch-Waxman Act and in foreign countries under similar legislation, thereby potentially extending the term of its marketing exclusivity for its product candidates, its business may be materially harmed.

Depending upon the timing, duration and specifics of FDA marketing approval of its product candidates, one of the U.S. patents covering each of such product candidates or the use thereof may be eligible for up to five years of patent term extension under the Hatch-Waxman Act. The Hatch-Waxman Act allows a maximum of one patent to be extended per FDA approved product to account for the patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only those claims covering such approved drug product, a method for using it or a method for manufacturing it may be extended. Patent term extension also may be available in certain foreign countries upon regulatory approval of Ocugen’s product candidates. Nevertheless, Ocugen may not be granted patent term extension either in the United States or in any foreign country because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the term of extension, as well as the scope of patent protection during any such extension, afforded by the governmental authority could be less than Ocugen requests.

If Ocugen is unable to obtain patent term extension or restoration, or the term of any such extension is less than it requests, the period during which it will have the right to exclusively market its product may be shortened and its competitors may obtain approval of competing products following its patent expiration sooner, and its revenue could be reduced, possibly materially.

It is possible that Ocugen will not obtain patent term extension under the Hatch-Waxman Act for a U.S. patent covering one of its product candidates even where that patent is eligible for patent term extension, or if Ocugen obtains such an extension, it may be for a shorter period than it had sought. Further, for Ocugen’s licensed patents, it does not have the right to control prosecution, including filing with the USPTO, a petition for patent term extension under the Hatch-Waxman Act. Thus, if one of Ocugen’s licensed patents is eligible for patent term extension under the Hatch-Waxman Act, it may not be able to control whether a petition to obtain a patent term extension is filed, or obtained, from the USPTO.

Ocugen may become involved in lawsuits to protect or enforce its patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.

Competitors and other third parties may infringe, misappropriate or otherwise violate its owned and licensed patents, trade secrets, or other intellectual property. As a result, to counter infringement, misappropriation or unauthorized use, Ocugen may be required to file infringement or misappropriation claims or other intellectual property related proceedings, which can be expensive and time-consuming. Any claims Ocugen asserts against perceived infringers could provoke such parties to assert counterclaims against it alleging that it infringes their patents or that its asserted patents are invalid. In addition, in a patent infringement or other intellectual property related proceeding, a court may decide that a patent of Ocugen’s is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that Ocugen’s patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of Ocugen’s patents at risk of being invalidated, held unenforceable or

 

97


Table of Contents

interpreted narrowly, and could put any of its patent applications at risk of not yielding an issued patent. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of Ocugen’s confidential information or trade secrets could be compromised by disclosure during this type of litigation.

Ocugen may be subject to a third-party preissuance submission of prior art to the USPTO, or become involved in other contested proceedings such as opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings in the United States or elsewhere, challenging its patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, Ocugen’s patent rights, allow third parties to commercialize its technology or product candidates and compete directly with it, without payment to it, or result in Ocugen’s inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by Ocugen’s patents and patent applications is threatened, it could dissuade companies from collaborating with it to license, develop or commercialize current or future product candidates.

In the United States, the FDA does not prohibit clinicians from prescribing an approved product for uses that are not described in the product’s labeling. Although use of a product directed by off-label prescriptions may infringe Ocugen’s method-of-treatment patents, the practice is common across medical specialties, particularly in the United States, and such infringement is difficult to detect, prevent or prosecute.

Third parties may initiate legal proceedings alleging that Ocugen is infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of Ocugen’s business.

Ocugen’s commercial success depends upon its ability to develop, manufacture, market and sell OCU300, OCU310, and other product candidates and use its proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property and other proprietary rights of third parties. There is a considerable amount of intellectual property litigation in the biotechnology and pharmaceutical industries. Ocugen may become party to, or threatened with, infringement litigation claims regarding its products and technology, including claims from competitors or from non-practicing entities that have no relevant product revenue and against whom its own patent portfolio may have no deterrent effect. Moreover, Ocugen may become party to future adversarial proceedings or litigation regarding its patent portfolio or the patents of third parties. Such proceedings could also include contested post-grant proceedings such as oppositions, inter partes review, reexamination, interference or derivation proceedings before the USPTO or foreign patent offices.

The legal threshold for initiating litigation or contested proceedings is low, so even lawsuits or proceedings with a low probability of success might be initiated and require significant resources to defend. Litigation and contested proceedings can also be expensive and time-consuming, and Ocugen’s adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than Ocugen does. The risks of being involved in such litigation and proceedings may increase as Ocugen’s product candidates near commercialization and as it gains the greater visibility associated with being a public company. Third parties may assert infringement claims against it based on existing patents or patents that may be granted in the future. Ocugen may not be aware of all such intellectual property rights potentially relating to its product candidates and their uses. Thus, it does not know with certainty that OCU300, OCU310, or any of its other product candidates, or its development and commercialization thereof, do not and will not infringe or otherwise violate any third party’s intellectual property.

If Ocugen is found to infringe, misappropriate or otherwise violate a third party’s intellectual property rights, it could be required to obtain a license from such third party to continue developing and marketing its products and technology. However, Ocugen may not be able to obtain any required license on commercially reasonable terms or at all. Even if Ocugen was able to obtain a license, it could be non-exclusive, thereby giving its competitors access to the same technologies licensed to it and could require it to make substantial licensing and royalty

 

98


Table of Contents

payments. Ocugen could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, it could be found liable for monetary damages, including treble damages and attorneys’ fees if it is found to have willfully infringed a patent, and could be forced to indemnify its customers or collaborators. A finding of infringement could also result in an injunction that prevents Ocugen from commercializing its product candidates or forces it to cease some of its business operations, which could materially harm its business. In addition, Ocugen may be forced to redesign its product candidates, seek new regulatory approvals and indemnify third parties pursuant to contractual agreements. Claims that Ocugen has misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on its business.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and Ocugen’s patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance, renewal and annuity fees on any issued patent must be paid to the USPTO and foreign patent agencies in several stages or annually over the lifetime of Ocugen’s owned and licensed patents and patent applications. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In certain circumstances, Ocugen relies on its licensing partners to pay these fees to, or comply with the procedural and documentary rules of, the relevant patent agency. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If Ocugen or its licensors fail to maintain the patents and patent applications covering its product candidates, it would have a material adverse effect on its business.

Certain aspects of OCU300, OCU310 and Ocugen’s other product candidates, and certain aspects of its OcuNanoE nanoemulsion formulation, are protected by patents exclusively licensed from other companies or institutions. If these third parties terminate their agreements with Ocugen or fail to maintain or enforce the underlying patents, or Ocugen otherwise loses its rights to these patents, its competitive position and its market share in the markets for any of its approved products will be harmed.

A substantial portion of Ocugen’s patent portfolio is in-licensed. As such, Ocugen is a party to license agreements and certain aspects of its business depend on patents and/or patent applications owned by other companies or institutions. In particular, Ocugen holds exclusive licenses for patent families relating to OCU300, OCU310, other of its product candidates, and some aspects of its OcuNanoE nanoemulsion formulation.

Pursuant to Ocugen’s license arrangement with University of Illinois at Chicago (“UIC”), which relates to OCU300 and OCU310, Ocugen is responsible for and control patent prosecution of licensed patent families developed jointly pursuant to the license arrangement with UIC, while Ocugen and UIC are each responsible for and control patent prosecution of licensed patent families developed or held individually by Ocugen or UIC, respectively.

Pursuant to Ocugen’s license arrangement with University of Colorado (“CU”), which relates to OCU200 and OCU100, Ocugen is responsible for and control patent prosecution of all patent families licensed under the CU license arrangement.

Pursuant to Ocugen’s license arrangement with The Schepens Eye Research Institute (“SERI”), which relates to nuclear hormone receptor (“NHR”) genes NR1D1, NR2E3, RORA, NUPR1, and NR2C1, from and after December 19, 2017, Ocugen has the right to assume responsibility and control patent prosecution of licensed

 

99


Table of Contents

patent families relating to these NHR genes. Additionally, Ocugen is responsible for and control patent prosecution for any patent applications developed in connection with the SERI licensing arrangement filed after December 19, 2017 that are owned jointly by Ocugen and SERI or solely by Ocugen.

Ocugen’s rights with respect to in-licensed patents and patent applications may be lost if the applicable license agreement expires or is terminated. Ocugen is likely to enter into additional license agreements to in-license patents and patent applications as part of the development of its business in the future, under which it may not retain control of the preparation, filing, prosecution, maintenance, enforcement and defense of such patents. If Ocugen is unable to maintain these patent rights for any reason, its ability to develop and commercialize its product candidates could be materially harmed.

Ocugen’s licensors may not successfully prosecute certain patent applications, the prosecution of which they control, under which Ocugen is licensed and on which its business depends. Even if patents issue from these applications, Ocugen’s licensors may fail to maintain these patents, may decide not to pursue litigation against third-party infringers, may fail to prove infringement, or may fail to defend against counterclaims of patent invalidity or unenforceability.

Risks with respect to parties from whom Ocugen has obtained intellectual property rights may also arise out of circumstances beyond Ocugen’s control. In spite of Ocugen’s best efforts, its licensors might conclude that it has materially breached its intellectual property agreements and might therefore terminate the intellectual property agreements, thereby removing its ability to market products covered by these intellectual property agreements. If Ocugen’s intellectual property agreements are terminated, or if the underlying patents fail to provide the intended market exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products similar or identical to Ocugen’s. Moreover, if its intellectual property agreements are terminated, Ocugen’s former licensors and/or assignors may be able to prevent it from utilizing the technology covered by the licensed or assigned patents and patent applications. This could have a material adverse effect on Ocugen’s competitive business position and its business prospects.

Some intellectual property which Ocugen owns or has licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements, and a preference for U.S. industry. Compliance with such regulations may limit Ocugen’s exclusive rights, subject it to expenditure of resources with respect to reporting requirements, and limit its ability to contract with non-U.S. manufacturers.

Some of the intellectual property rights that Ocugen owns or licenses have been generated through the use of United States government funding and may therefore be subject to certain federal regulations under the Bayh-Dole Act. To the best of Ocugen’s knowledge, Ocugen’s intellectual property for OCU400 for the treatment of NR2E3 mutation-associated retinal degenerative disease is subject to the Bayh-Dole Act. As a result, the United States government may have certain rights to intellectual property embodied in these patents and patent applications. In general, the Bayh-Dole Act provides the U.S. government certain rights in inventions developed using a government funded program, such as U.S. government’s right to a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, under the Bayh-Dole Act the U.S. government has the right to require any invention developed using U.S. government funding to be granted exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as “march-in rights”). Under the Bayh-Dole Act, the U.S. government also has the right to take title to inventions developed using a U.S. government funded program, if one fails to disclose the invention to the government and fail to file an application to register the intellectual property within specified time limits. In addition, the U.S. government may acquire title to these inventions in any country in which a patent application is not filed within specified time limits. Intellectual property generated under a government funded program is also subject to certain reporting requirements. In addition, the Bayh-Dole

 

100


Table of Contents

Act requires that any products subject to the Bayh-Dole Act be manufactured substantially in the United States. However, under the Bayh-Dole Act, this manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable efforts to manufacture the product substantially in the United States were unsuccessful or that under the circumstances domestic manufacture is not commercially feasible. Any exercise by the government of any of the foregoing rights under the Bayh-Dole Act may affect Ocugen’s competitive position, business, financial condition, results of operations and prospects.

If Ocugen fails to comply with its obligations in its intellectual property licenses and funding arrangements with third parties, it could lose rights that are important to its business.

Ocugen’s license agreements with CU, UIC, and SERI under which Ocugen licenses certain of its patent rights and a significant portion of the technology for OCU300, OCU310, and other product candidates, impose royalty and other financial obligations on it and other substantial performance obligations. Ocugen may also enter into additional licensing and funding arrangements with third parties that may impose diligence, development and commercialization timelines and milestone payment, royalty, insurance and other obligations on it. If Ocugen fails to comply with its obligations under current or future license and collaboration agreements, its counterparties may have the right to terminate these agreements, in which event Ocugen might not be able to develop, manufacture or market any product that is covered by these agreements or may face other penalties under the agreements. Such an occurrence could diminish the value of Ocugen’s products and product candidates. Termination of these agreements or reduction or elimination of Ocugen’s rights under these agreements may result in Ocugen having to negotiate new or reinstated agreements with less favorable terms or cause it to lose its rights under these agreements, including its rights to important intellectual property or technology.

In addition, it is possible that CU, UIC or SERI may conclude that Ocugen has materially breached the applicable license agreement and might therefore terminate the agreement, thereby removing its ability to market products covered by its license agreements with CU, UIC, or SERI, respectively. If any license agreement is terminated, or if the underlying patents fail to provide the intended market exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products similar or identical to Ocugen’s. Moreover, if any of Ocugen’s license agreements is terminated, the counterparty and/or its assignors may be able to prevent it from utilizing the technology covered by the licensed or assigned patents and patent applications. This could have a material adverse effect on Ocugen’s competitive business position and its business prospects.

In addition, the agreements under which Ocugen currently licenses intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what Ocugen believes to be the scope of its rights to the relevant intellectual property or technology or increase what Ocugen believes to be its financial or other obligations under the relevant agreement, either of which could have a material adverse effect on its business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that Ocugen has licensed prevent or impair its ability to maintain its current licensing arrangements on commercially acceptable terms, Ocugen may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on its business, financial conditions, results of operations, and prospects.

Ocugen may not be able to protect its intellectual property and proprietary rights throughout the world.

Filing, prosecuting, and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect Ocugen’s rights to the same extent as the laws of the United States. Consequently, Ocugen may not be able to prevent third parties from practicing its inventions in all countries outside the United States, or from selling or importing products made using its inventions in and into the United States or other jurisdictions. Competitors may use Ocugen’s technologies in jurisdictions where it has not obtained patent protection to develop their own products and, further, may export

 

101


Table of Contents

otherwise infringing products to territories where Ocugen has patent protection or licenses, but enforcement is not as strong as that in the United States. These products may compete with Ocugen’s products, and its patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for Ocugen to stop the infringement of its patents or marketing of competing products in violation of Ocugen’s intellectual property and proprietary rights generally. Proceedings to enforce its intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert its efforts and attention from other aspects of its business, could put its patents at risk of being invalidated or interpreted narrowly, could put its patent applications at risk of not issuing, and could provoke third parties to assert claims against it. Ocugen may not prevail in any lawsuits that it initiates, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, Ocugen’s efforts to enforce its intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that it develops or licenses.

Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If Ocugen or any of its licensors is forced to grant a license to third parties with respect to any patents relevant to its business, its competitive position may be impaired, and its business, financial condition, results of operations, and prospects may be adversely affected.

Ocugen may be subject to claims by third parties asserting that its employees or it has misappropriated their intellectual property or claiming ownership of what Ocugen regards as its own intellectual property.

Many of Ocugen’s and its licensors’ employees and contractors were previously employed at other biotechnology, medical device or pharmaceutical companies, including its competitors or potential competitors. Although Ocugen tries to ensure that its employees and contractors do not use the proprietary information or know-how of others in their work for it, Ocugen may be subject to claims that these individuals or it has used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary to defend against these claims.

In addition, while it is Ocugen’s policy to require its employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to it, Ocugen may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that it regards as its own. Furthermore, Ocugen is unable to control whether its licensors have obtained similar assignment agreements from their own employees and contractors. Ocugen’s and their assignment agreements may not be self-executing or may be breached, and Ocugen or its licensors may be forced to bring claims against third parties, or defend claims they may bring against Ocugen, to determine the ownership of what Ocugen regards as its intellectual property.

If Ocugen or its licensors fail in prosecuting or defending any such claims, in addition to paying monetary damages, Ocugen may lose valuable intellectual property rights or personnel which could have a material adverse effect on its competitive business position and prospects. Such intellectual property rights could be awarded to a third party, and Ocugen could be required to obtain a license from such third party to commercialize its technology or products, which may not be available on commercially reasonable terms or at all. Even if Ocugen is successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.

 

102


Table of Contents

Intellectual property litigation or other legal proceedings relating to intellectual property could cause Ocugen to spend substantial resources and distract its personnel from their normal responsibilities.

Even if resolved in Ocugen’s favor, litigation or other legal proceedings relating to intellectual property claims may cause it to incur significant expenses and could distract Ocugen’s technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of Ocugen common stock. Such litigation or proceedings could substantially increase Ocugen’s operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. Ocugen may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of Ocugen’s competitors may be able to sustain the costs of such litigation or proceedings more effectively than Ocugen can because of their greater financial resources and may also have an advantage in such proceedings due to their more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have an adverse effect on Ocugen’s ability to compete in the marketplace.

If Ocugen is unable to protect the confidentiality of its trade secrets, its business and competitive position would be harmed.

In addition to seeking patents for Ocugen’s technology and product candidates, Ocugen also relies on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain its competitive position. Ocugen seeks to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as its employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. Ocugen also enters into confidentiality and invention or patent assignment agreements with its employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose Ocugen’s proprietary information, including its trade secrets, and Ocugen may not be able to obtain adequate remedies for such breaches. Detecting the disclosure or misappropriation of a trade secret and enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of Ocugen’s trade secrets were to be lawfully obtained or independently developed by a competitor, Ocugen would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with Ocugen. If any of Ocugen’s trade secrets were to be disclosed to or independently developed by a competitor, its competitive position would be harmed.

Risks Related to Employee Matters and Managing Growth

Ocugen’s future success depends on its ability to retain key executives and to attract, retain and motivate qualified personnel.

Ocugen is highly dependent on the research and development, clinical and business development expertise of Shankar Musunuri, Ph.D., MBA, its Chief Executive Officer, Chairman of the Board and Co-Founder, Daniel Jorgensen, M.D., M.P.H., MBA, its Chief Medical Officer, Rasappa Arumugham, Ph.D., its Chief Scientific Officer, as well as the other principal members of its management, scientific and clinical team. Although Ocugen has entered into employment agreements with its executive officers, each of them may terminate their employment with Ocugen at any time. Ocugen does not maintain “key person” insurance for any of its executives or other employees.

Recruiting and retaining qualified scientific, clinical, manufacturing, legal and sales and marketing personnel will also be critical to Ocugen’s success. The loss of the services of Ocugen’s executive officers or other key employees could impede the achievement of its research, development and commercialization objectives and seriously harm its ability to successfully implement its business strategy. Furthermore, replacing executive

 

103


Table of Contents

officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in its industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and Ocugen may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. Ocugen also experiences competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, Ocugen relies on consultants and advisors, including scientific and clinical advisors, to assist Ocugen in formulating its research and development and commercialization strategy. Ocugen’s consultants and advisors may be employed by employers other than it and may have commitments under consulting or advisory contracts with other entities that may limit their availability to Ocugen. If Ocugen unable to continue to attract and retain high quality personnel, its ability to pursue its growth strategy will be limited.

Ocugen expects to expand its development, regulatory and manufacturing capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, Ocugen may encounter difficulties in managing its growth, which could disrupt its operations.

Ocugen expects to experience significant growth in the number of its employees and the scope of its operations, particularly in the areas of drug development, clinical, regulatory affairs, manufacturing, sales, marketing and distribution. To manage its anticipated future growth, Ocugen must continue to implement and improve its managerial, operational and financial systems, expand its facilities and continue to recruit and train additional qualified personnel. Due to Ocugen’s limited financial resources and its limited experience in managing such anticipated growth, it may not be able to effectively manage the expansion of its operations or recruit and train additional qualified personnel. The expansion of Ocugen’s operations may lead to significant costs and may divert its management and business development resources. Any inability to manage growth could delay the execution of its business plans or disrupt its operations.

Risks Related to Ocugen Common Stock

An active, liquid and orderly market for the combined company’s common stock may not develop, and you may not be able to resell your common stock at or above the purchase price.

There has been no public market for Ocugen common stock. Although Histogenics common stock is listed on Nasdaq, and Ocugen and Histogenics have applied to have the combined company’s common stock listed on Nasdaq, an active trading market for the combined company’s common stock may never develop or be sustained following the merger. Ocugen, Histogenics and their financial advisors will set the final reverse split ratio to target a trading price to provide for sufficient liquidity. The price that the combined company trades at immediately after the merger may not necessarily reflect the price at which investors in the market will be willing to buy and sell the shares on a sustained basis. In addition, an active trading market may not develop following the consummation of the merger or, if it is developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair the combined company’s ability to raise capital by selling shares and may impair the combined company’s ability to acquire other businesses or technologies using the combined company’s shares as consideration, which, in turn, could materially adversely affect the combined company’s business.

The trading price of the shares of the combined company’s common stock could be highly volatile, and purchasers of the combined company’s common stock after the merger could incur substantial losses.

The combined company’s stock price is likely to be volatile. The stock market in general and the market for stock of biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above their purchase price. The market price for the combined company’s

 

104


Table of Contents

common stock may be influenced by those factors discussed in this “Risk Factors” section and many others, including:

 

   

the combined company’s ability to enroll subjects in its ongoing and planned clinical trials;

 

   

results of the combined company’s clinical trials and preclinical studies, and the results of trials of the combined company’s competitors or those of other companies in the combined company’s market sector;

 

   

regulatory approval of the combined company’s product candidates, or limitations to specific label indications or patient populations for its use, or changes or delays in the regulatory review process;

 

   

regulatory developments in the United States and foreign countries;

 

   

changes in the structure of healthcare payment systems, especially in light of current reforms to the U.S. healthcare system;

 

   

the success or failure of the combined company’s efforts to acquire, license or develop additional product candidates;

 

   

innovations or new products developed by the combined company’s or its competitors;

 

   

announcements by the combined company or its competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

 

   

manufacturing, supply or distribution delays or shortages;

 

   

any changes to the combined company’s relationship with any manufacturers, suppliers, licensors, future collaborators or other strategic partners;

 

   

achievement of expected product sales and profitability;

 

   

variations in the combined company’s financial results or those of companies that are perceived to be similar to the combined company;

 

   

market conditions in the biopharmaceutical sector and issuance of securities analysts’ reports or recommendations;

 

   

trading volume of the combined company’s common stock;

 

   

an inability to obtain additional funding;

 

   

sales of the combined company’s stock by insiders and stockholders;

 

   

general economic, industry and market conditions other events or factors, many of which are beyond the combined company’s control;

 

   

additions or departures of key personnel; and

 

   

intellectual property, product liability or other litigation against the combined company.

In addition, in the past, stockholders have initiated class action lawsuits against biopharmaceutical companies following periods of volatility in the market prices of these companies’ stock. Such litigation, if instituted against the combined company, could cause Ocugen to incur substantial costs and divert management’s attention and resources, which could have a material adverse effect on the combined company’s business, financial condition and results of operations.

The combined company’s failure to meet the continued listing requirements of the Nasdaq could result in a delisting of the combined company’s common stock.

If, after listing, the combined company fails to satisfy the continued listing requirements of the Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to

 

105


Table of Contents

delist the combined company’s common stock. Such a delisting would likely have a negative effect on the price of the combined company’s common stock and would impair your ability to sell or purchase the combined company’s common stock when you wish to do so. In the event of a delisting, the combined company can provide no assurance that any action taken by the combined company to restore compliance with listing requirements would allow the combined company’s common stock to become listed again, stabilize the market price or improve the liquidity of the combined company’s common stock, prevent the combined company’s common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.

After the merger, the combined company’s executive officers, directors and principal stockholders, if they choose to act together, will continue to control or significantly influence all matters submitted to stockholders for approval.

Following the completion of the merger, the combined company’s executive officers, directors and greater than 5% stockholders will own, in the aggregate, approximately 47.42% of Ocugen’s outstanding common stock (assuming no exercise of outstanding options). As a result, such persons or their appointees to the combined company’s board of directors, acting together, will have the ability to control or significantly influence all matters submitted to the combined company’s board of directors or stockholders for approval, including the appointment of the combined company’s management, the election and removal of directors and approval of any significant transaction, as well as the combined company’s management and business affairs. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving the combined company, or discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of the combined company’s business, even if such a transaction would benefit other stockholders.

Ocugen does not currently intend to pay dividends on the combined company’s common stock, and, consequently, your ability to achieve a return on your investment will depend on appreciation, if any, in the price of the combined company’s common stock.

Ocugen has never declared or paid any cash dividend on Ocugen common stock. Ocugen currently anticipates that it will retain future earnings for the development, operation and expansion of the combined company’s business and does not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, the terms of any future debt agreements may preclude the combined company from paying dividends. Any return to stockholders will therefore be limited to the appreciation of their stock. There is no guarantee that shares of the combined company’s common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.

Sales of a substantial number of shares of the combined company’s common stock by the combined company’s stockholders in the public market could cause the combined company’s stock price to fall.

Sales of a substantial number of shares of the combined company’s common stock in the public market or the perception that these sales might occur could significantly reduce the market price of the combined company’s common stock and impair the combined company’s ability to raise adequate capital through the sale of additional equity securities.

Based on the exchange ratio of 28.7650, upon the closing of the merger, the combined company will have outstanding a total of 600,817,865 shares of common stock after the merger, assuming no exercise of outstanding options or warrants (including the Investor Warrants). Of these shares, only 252,364,307 shares of common stock will be freely tradable, without restriction, in the public market immediately following the merger, unless they are purchased by one of the combined company’s affiliates.

Ocugen’s directors and executive officers and holders of approximately 93% of Ocugen’s outstanding shares of common stock (excluding securities issued to the Investors pursuant to the Securities Purchase Agreement) have

 

106


Table of Contents

entered into lock-up agreements with Histogenics pursuant to which they may not, with limited exceptions, for a period of 180 days from the date of the Effective Time, offer, sell or otherwise transfer or dispose of any of the Histogenics’ securities, without the prior written consent of Histogenics, subject to certain exceptions. Sales of these shares, or perceptions that they will be sold, could cause the trading price of the combined company’s common stock to decline. After the lock-up agreements expire, up to an additional 348,453,558 shares of common stock will be eligible for sale in the public market.

Additionally, in connection with the Pre-Merger Financing, Histogenics and Ocugen will enter into lock-up agreements with each officer, director or other person that will be subject to Section 16 of the Exchange Act, with respect to Histogenics immediately following the consummation of the merger, and each holder of greater than 3% of Ocugen common stock (excluding the shares of Ocugen common stock issuable pursuant to the Securities Purchase Agreement) immediately prior to the consummation of the merger (the “Financing Lock-Up Parties”), pursuant to which each of the Financing Lock-Up Parties will agree that until the date that is 30 calendar days after the Trigger Date (as defined in the section entitled “Agreements Related to the Merger—Securities Purchase Agreement” in this proxy statement/prospectus/information statement), subject to certain customary exceptions, such Financing Lock-Up Party will not and will cause its affiliates not to (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of or lend, directly or indirectly, any shares of Histogenics common stock or any securities convertible into, exercisable or exchangeable for or that represent the right to receive Histogenics common stock, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Financing Lock-Up Party’s shares of Histogenics common stock or such other securities, in cash or otherwise, (iii) make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of Histogenics common stock or such other securities, in cash or otherwise, (iv) grant any proxies or powers of attorney with respect to any shares of Histogenics common stock or such other securities, deposit any shares of Histogenics common stock or such other securities into a voting trust or enter into a voting agreement or similar arrangement or commitment with respect to any shares of Histogenics common stock or such other securities, or (v) publicly disclose the intention to do any of the foregoing.

After the merger, the holders of 1,827,666 shares of Histogenics’ outstanding common stock, or approximately 1.9% of Histogenics’ total outstanding common stock as of March 31, 2019, will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to vesting and the 180-day lock-up agreements described above. See “Description of Histogenics’ Capital Stock—Registration Rights.” Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by affiliates, as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of the combined company’s common stock.

Ocugen will incur significant increased costs as a result of operating as a public company, and its management will be required to devote substantial time to new compliance initiatives.

As a public company, Ocugen will incur significant legal, accounting and other expenses that Ocugen did not incur as a private company. Ocugen will be subject to the reporting requirements of the Exchange Act, which will require, among other things, that Ocugen files with the U.S. Securities and Exchange Commission, or SEC, annual, quarterly and current reports with respect to Ocugen’s business and financial condition. In addition, Sarbanes-Oxley, as well as rules subsequently adopted by the SEC and Nasdaq to implement provisions of Sarbanes-Oxley, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted additional rules and regulations in these areas, such as mandatory “say on pay” voting requirements that will apply to Ocugen when it ceases to be an emerging growth company. Stockholder activism, the current

 

107


Table of Contents

political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which Ocugen operates its business in ways Ocugen cannot currently anticipate.

Ocugen expects the rules and regulations applicable to public companies to substantially increase Ocugen’s legal and financial compliance costs and to make some activities more time consuming and costly. If these requirements divert the attention of Ocugen’s management and personnel from other business concerns, they could have a material adverse effect on Ocugen’s business, financial condition and results of operations. The increased costs will increase Ocugen’s net loss, and may require Ocugen to reduce costs in other areas of its business or increase the prices of its products or services. For example, Ocugen expects these rules and regulations to make it more difficult and more expensive for Ocugen to obtain director and officer liability insurance, and Ocugen may be required to incur substantial costs to maintain the same or similar coverage. Ocugen cannot predict or estimate the amount or timing of additional costs Ocugen may incur to respond to these requirements. The impact of these requirements could also make it more difficult for Ocugen to attract and retain qualified persons to serve on its board of directors, its board committees or as executive officers.

If securities or industry analysts do not publish research or reports or publish unfavorable research or reports about the combined company’s business, the combined company’s stock price and trading volume could decline.

The trading market for the combined company’s common stock will depend in part on the research and reports that securities or industry analysts publish about the combined company, its business, its market or its competitors. Ocugen does not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of the combined company, the trading price for the combined company’s stock would be negatively impacted. In the event the combined company obtains securities or industry analyst coverage, if one or more of the analysts who covers the combined company downgrades its stock, the combined company’s stock price would likely decline. If one or more of these analysts ceases to cover the combined company or fails to regularly publish reports on the combined company, interest in the combined company’s stock could decrease, which could cause the combined company’s stock price or trading volume to decline.

If the combined company fails to maintain proper and effective internal control over financial reporting, Ocugen’s ability to produce accurate and timely financial statements could be impaired, investors may lose confidence in the combined company’s financial reporting and the trading price of the combined company’s common stock may decline.

Pursuant to Section 404 of Sarbanes-Oxley, the combined company’s management will be required to report upon the effectiveness of the combined company’s internal control over financial reporting beginning with the annual report for the combined company’s fiscal year ending December 31, 2019. Additionally, if the combined company reaches an accelerated filer threshold, the combined company’s independent registered public accounting firm will be required to attest to the effectiveness of the combined company’s internal control over financial reporting. The rules governing the standards that must be met for management to assess the combined company’s internal control over financial reporting are complex and require significant documentation, testing and possible remediation. To comply with the requirements of being a reporting company under the Exchange Act, the combined company will need to upgrade its information technology systems; implement additional financial and management controls, reporting systems and procedures; and hire additional accounting and finance staff. If the combined company or, if required, its auditors are unable to conclude that the combined company’s internal control over financial reporting is effective, investors may lose confidence in the combined company’s financial reporting and the trading price of the combined company’s common stock may decline.

The combined company cannot assure you that there will not be material weaknesses or significant deficiencies in the combined company’s internal control over financial reporting in the future. Any failure to maintain internal

 

108


Table of Contents

control over financial reporting could severely inhibit the combined company’s ability to accurately report its financial condition, results of operations or cash flows. If the combined company is unable to conclude that its internal control over financial reporting is effective, or if the combined company’s independent registered public accounting firm determines the combined company has a material weakness or significant deficiency in the combined company’s internal control over financial reporting once that firm begin its Section 404 reviews, investors may lose confidence in the accuracy and completeness of the combined company’s financial reports, the market price of the combined company’s common stock could decline, and the combined company could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in the combined company’s internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict the combined company’s future access to the capital markets.

Provisions in the combined company’s charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.

The anticipated amended and restated certificate of incorporation and amended and restated bylaws of the combined company that will be in effect immediately after consummation of the merger will contain provisions that could significantly reduce the value of the combined company’s shares to a potential acquiror or delay or prevent changes in control or changes in the combined company’s management without the consent of the combined company’s board of directors. The provisions in the combined company’s charter documents are expected to include the following:

 

   

a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of the combined company’s board of directors;

 

   

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 

   

the exclusive right of the combined company’s board of directors, unless the board of directors grants such right to the stockholders, to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the combined company’s board of directors;

 

   

the prohibition on removal of directors without cause due to the classified board of directors;

 

   

the ability of the combined company’s board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;

 

   

the ability of the combined company’s board of directors to alter Ocugen’s amended and restated bylaws without obtaining stockholder approval;

 

   

the required approval of at least 66-2/3% of the shares entitled to vote to adopt, amend or repeal the combined company’s amended and restated bylaws or repeal certain provisions of the combined company’s amended and restated certificate of incorporation;

 

   

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of Ocugen’s stockholders;

 

   

an exclusive forum provision providing that the Court of Chancery of the State of Delaware will be the exclusive forum for certain actions and proceedings;

 

   

the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer or the board of directors, which may delay the ability of the combined company’s stockholders to force consideration of a proposal or to take action, including the removal of directors; and

 

109


Table of Contents
   

advance notice procedures that stockholders must comply with in order to nominate candidates to the combined company’s board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of the combined company.

The combined company is also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.

The combined company’s amended and restated bylaws will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between the combined company and its stockholders, which could limit the combined company’s stockholders’ ability to obtain a favorable judicial forum for disputes with the combined company or its directors, officers or employees.

The combined company’s amended and restated bylaws will provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on the combined company’s behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against the combined company arising pursuant to the Delaware General Corporation Law, the combined company’s amended and restated certificate of incorporation or the combined company’s amended and restated bylaws, or any action asserting a claim against the combined company that is governed by the internal affairs doctrine. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the combined company or its directors, officers or other employees, which may discourage such lawsuits against the combined company and its directors, officers and other employees. By agreeing to this provision, however, stockholders will not be deemed to have waived the combined company’s compliance with the federal securities laws and the rules and regulations thereunder. Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. If a court were to find the choice of forum provisions in the combined company’s amended and restated bylaws to be inapplicable or unenforceable in an action, the combined company may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect the combined company’s business and financial condition.

If the merger does not qualify as a “reorganization” for U.S. federal income tax purposes, U.S. Holders of Ocugen common stock will be required to recognize gain or loss for U.S. federal income tax purposes upon the exchange of their Ocugen common stock for Histogenics common stock in the merger.

The U.S. federal income tax consequences of the merger to U.S. Holders (as defined under the heading “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) will depend on whether the merger qualifies as a “reorganization” for U.S. federal income tax purposes. Histogenics’ and Ocugen’s obligations to effect the merger are subject to the satisfaction, or waiver, at or prior to the effective time of the merger, of the condition that each company receive an opinion of counsel, dated as of the closing date of the merger, to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. If, contrary to the opinions from counsel, the merger fails to qualify as a reorganization within the meaning of Section 368(a) of the Code, a U.S. Holder of Ocugen common stock would recognize gain or loss for U.S. federal income tax purposes on each share of Ocugen common stock surrendered in the merger for Histogenics common stock and any cash received in lieu of a fractional share. For a more complete discussion of the material U.S. federal income tax consequences of the merger, please carefully review the information set forth in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.”

 

110


Table of Contents

Ocugen’s ability to use net operating loss carryforwards and other tax attributes may be limited in connection with the merger and other ownership changes.

Ocugen has incurred substantial losses during its history and does not expect to become profitable in the near future, and Ocugen may never achieve profitability. To the extent that Ocugen continues to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire (if at all). At December 31, 2018, Ocugen had federal and state NOL carryforwards of approximately $47.4 million. Such federal and state NOL carryforwards will begin to expire in 2033, unless previously utilized. At December 31, 2018, Ocugen had federal and state research and development credit available carryforwards of approximately $0.5 million and less than $0.1 million, respectively. The federal research and development credit carryforwards will begin expiring in 2034, unless previously utilized. The state research and development credits do not expire.

Under the Tax Act, federal NOLs generated in taxable years ending after December 31, 2017, may be carried forward indefinitely but federal NOLs generated in taxable years beginning after December 31, 2017 may only be used to offset 80% of Ocugen’s taxable income annually. Ocugen’s NOL carryforwards are subject to review and possible adjustment by the IRS and state tax authorities. Under Sections 382 and 383 of the Code, Ocugen’s federal NOL and research and development tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50 percentage points. Ocugen’s ability to utilize its NOL carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including in connection with the merger. Similar rules may apply under state tax laws. Ocugen has not yet determined the amount of the cumulative change in its ownership resulting from the merger, the Pre-Merger Financing or other transactions, or any resulting limitations on its ability to utilize its NOL carryforwards and other tax attributes. If Ocugen earns taxable income, such limitations could result in increased future tax liability to Ocugen and its future cash flows could be adversely affected. Ocugen has recorded a full valuation allowance related to its NOLs and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.

The combined company could be subject to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for the combined company, because biotechnology and pharmaceutical companies have experienced significant stock price volatility in recent years. If the combined company faces such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm the combined company’s business.

The combined organization may never pay dividends on the combined organization’s common stock so any returns would be limited to the appreciation of the combined organization’s stock.

Ocugen and Histogenics currently anticipate that the combined organization will retain future earnings for the development, operation and expansion of the combined organization’s business and do not anticipate it will declare or pay any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock.

Certain of the Investor Warrants contain price-based adjustment provisions which, if triggered, may cause substantial additional dilution to the combined organization’s stockholders.

The Investor Warrants will be issued on the fifth trading day following the merger and will be exercisable immediately upon issuance. Certain of the Investor Warrants contain price-based adjustment provisions, pursuant to which the number of shares of the combined organization’s common stock that are issuable upon exercise of such Investor Warrants may be adjusted upward based upon the volume weighted average trading price of the

 

111


Table of Contents

combined organization’s common stock after closing and in the event of certain dilutive issuances by the combined organization. Even if the combined organization’s stock increases in value after the merger, the number of shares of the combined organization’s common stock issuable upon exercise of the Investor Warrants may still increase. The circumstances under which the number of shares of the combined organization’s common stock issuable upon exercise of the Investor Warrants may be adjusted upward are set forth in the Investor Warrants and described in the sections entitled “Agreements Related to the Merger-Series A Warrants,” “Agreements Related to the Merger-Series B Warrants” and “Agreements Related to the Merger-Series C Warrants” in this proxy statement/prospectus/information statement.

If the Investor Warrants are exercised, additional shares of the combined organization’s common stock will be issued, which will result in dilution to our then-existing stockholders and increase the number of shares eligible for resale in the public market. Assuming (i) the merger is effected, (ii) an exchange ratio of 28.7650 shares of pre-reverse stock split Histogenics common stock for each outstanding share of Ocugen common stock as of immediately prior to the merger, (iii) a total of 13,024,138 shares of Ocugen common stock issued and outstanding as of immediately prior to the merger, (iv) the issuance of the maximum number of Converted Additional Shares and (v) ignoring restrictions in the Securities Purchase Agreement preventing exercises of Investor Warrants if the exercising Investor would beneficially own in excess of 4.99% or 9.99% of the outstanding common stock of Histogenics (including the shares of common stock issuable upon such exercise), following the issuance of the maximum number of shares issuable upon exercise of the Investor Warrants, the Investors would hold an aggregate of approximately 89.7% of Histogenics’ total outstanding common stock following such issuance. Sales of substantial numbers of such shares in the public market could depress the market price of the combined organization’s common stock. If the adjustment provisions in the Investor Warrants are triggered, a substantial number of additional shares of the combined organization’s common stock may become issuable upon exercise of the Investor Warrants, potentially increasing the impact of any subsequent exercise of the Investor Warrants and resale of the shares issuable pursuant thereto.

 

112


Table of Contents

FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus/information statement and the documents incorporated by reference into this proxy statement/prospectus/information statement contain forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the United States Securities Act of 1933, as amended (the “Securities Act”)) concerning Histogenics, Ocugen, the merger and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of the management of Histogenics, as well as assumptions made by, and information currently available to, management. Forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as “may,” “will,” “should,” “would,” “expect,” “plan,” “believe,” “intend,” “look forward,” and other similar expressions among others. Statements that are not historical facts are forward-looking statements. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation: (i) the risk that the conditions to the closing of the merger are not satisfied, including the failure to timely obtain stockholder approval for the transaction, if at all; (ii) uncertainties as to the timing of the consummation of the merger and the ability of each of Histogenics and Ocugen to consummate the merger; (iii) risks related to Histogenics’ ability to manage its operating expenses and its expenses associated with the merger pending closing; (iv) risks related to the failure or delay in obtaining required approvals from any governmental or quasi-governmental entity necessary to consummate the merger; (v) the risk that as a result of adjustments to or exercise of the Investor Warrants, stockholders of the combined company could be substantially and materially diluted; (vi) risks related to the market price of Histogenics common stock relative to the exchange ratio; (vii) unexpected costs, charges or expenses resulting from the transaction; (viii) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger; (ix) the uncertainties associated with the clinical development and regulatory approval of product candidates, including potential delays in the commencement, enrollment and completion of clinical trials; (x) risks related to the inability of the combined company to obtain sufficient additional capital to continue to advance these product candidates and its preclinical programs; (xi) uncertainties in obtaining successful clinical results for product candidates and unexpected costs that may result therefrom; (xii) risks related to the failure 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 (xiii) risks associated with the possible failure to realize certain anticipated benefits of the merger, including with respect to future financial and operating results. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties. Except as required by applicable law, Histogenics undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

For a discussion of the factors that may cause Histogenics, Ocugen or the combined organization’s actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied in such forward-looking statements, or for a discussion of risk associated with the ability of Histogenics and Ocugen to complete the merger and the effect of the merger on the business of Histogenics, Ocugen and the combined organization, see the section entitled “Risk Factors” beginning on page 29.

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports filed with the SEC by Histogenics including the risk factors included in Histogenics’ most recent Annual Report on Form 10-K and Current Reports on Form 8-K filed with the SEC. See the section entitled “Where You Can Find More Information” beginning on page 380.

 

113


Table of Contents

If any of these risks or uncertainties materialize or any of these assumptions prove incorrect, the results of Histogenics, Ocugen or the combined organization could differ materially from the forward-looking statements. All forward-looking statements in this proxy statement/prospectus/information statement are current only as of the date on which the statements were made. Histogenics and Ocugen do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any statement is made or to reflect the occurrence of unanticipated events.

 

114


Table of Contents

THE SPECIAL MEETING OF HISTOGENICS’ STOCKHOLDERS

Date, Time and Place

The Histogenics special meeting will be held on                , 2019, at the offices of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP located at One Marina Park Drive, Suite 900, Boston, MA 02210 commencing at 9:00 am local time. Histogenics is sending this proxy statement/prospectus/information statement to its stockholders in connection with the solicitation of proxies by the Histogenics Board for use at the Histogenics special meeting and any adjournments or postponements of the Histogenics special meeting. This proxy statement/prospectus/information statement is first being furnished to Histogenics’ stockholders on or about                , 2019.

Purpose of the Histogenics Special Meeting

The purpose of the Histogenics special meeting is:

 

1.

To approve the Merger Agreement, and the transactions contemplated thereby, including the merger, the issuance of Histogenics common stock to Ocugen’s stockholders in accordance with the Merger Agreement and the change of control resulting from the merger.

 

2.

To approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics to effect the Histogenics Reverse Stock Split, in the form attached as Annex D to this proxy statement/prospectus/information statement.

 

3.

To approve the amendment to the sixth amended and restated certificate of incorporation of Histogenics to effect the Histogenics Name Change in the form attached as Annex E to this proxy statement/prospectus/information statement.

 

4.

To approve the amendment to the sixth amended and restated certificate of incorporation of Histogenics to increase the number of authorized shares of Histogenics common stock to a total number of 200,000,000 shares, in the form attached as Annex F to this proxy statement/prospectus/information statement.

 

5.

To approve the issuance of: (a) shares of Histogenics common stock upon the exercise of the Investor Warrants to be issued in the Pre-Merger Financing, and (b) additional shares of Histogenics common stock that may be issued following the closing of the Pre-Merger Financing, in each case pursuant to the Securities Purchase Agreement and as required by and in accordance with Nasdaq Listing Rule 5636.

 

6.

To consider and vote upon an adjournment of the Histogenics special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1 and 2.

 

7.

To transact such other business as may properly come before the Histogenics special meeting or any adjournment or postponement thereof.

Recommendation of The Histogenics Board

 

   

The Histogenics Board has determined that the transactions contemplated by the Merger Agreement, including the merger, the issuance of shares of Histogenics common stock to Ocugen’s stockholders pursuant to the Merger Agreement and the change of control resulting from the merger are fair to, advisable and in the best interest of Histogenics and its stockholders and has approved and declared advisable the Merger Agreement and such transactions. The Histogenics Board recommends that Histogenics’ stockholders vote “FOR” Proposal No. 1 to approve the Merger Agreement and the transactions contemplated thereby, including the merger, the issuance of shares of Histogenics common stock to Ocugen’s stockholders and the change of control resulting from the merger.

 

   

The Histogenics Board has determined that the Histogenics Reverse Stock Split is fair to, advisable and in the best interest of Histogenics and its stockholders and has approved and declared advisable the

 

115


Table of Contents
 

Histogenics Reverse Stock Split. The Histogenics Board recommends that Histogenics’ stockholders vote “FOR” Proposal No. 2 to approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics effecting the Histogenics Reverse Stock Split.

 

   

The Histogenics Board has determined that the Histogenics Name Change is fair to, advisable and in the best interest of Histogenics and its stockholders and has approved and declared advisable the Histogenics Name Change. The Histogenics Board recommends that Histogenics’ stockholders vote “FOR” Proposal No. 3 to approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics effecting the Histogenics Name Change.

 

   

The Histogenics Board has determined that the amendment to Histogenics’ sixth amended and restated certificate of incorporation to increase the number of authorized shares of Histogenics common stock to a total number of 200,000,000 shares is fair to, advisable and in the best interest of Histogenics and its stockholders and has approved and declared advisable such amendment to Histogenics’ sixth amended and restated certificate of incorporation. The Histogenics Board recommends that Histogenics’ stockholders vote “FOR” Proposal No. 4 to approve such amendment to the sixth amended and restated certificate of incorporation of Histogenics effecting the increase in authorized shares of Histogenics common stock.

 

   

The Histogenics Board recommends that Histogenics’ stockholders vote “FOR” Proposal No. 5 to approve the issuance of: (a) shares of Histogenics common stock upon the exercise of the Investor Warrants to be issued in the Pre-Merger Financing, and (b) additional shares of Histogenics common stock that may be issued following the closing of the Pre-Merger Financing, in each case pursuant to the Securities Purchase Agreement and as required by and in accordance with Nasdaq Listing Rule 5635.

 

   

The Histogenics Board has determined and believes that adjourning the Histogenics special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1 or 2 is advisable to, and in the best interests of, Histogenics and its stockholders and has approved and adopted the proposal. The Histogenics Board recommends that Histogenics’ stockholders vote “FOR” Proposal No. 6 to adjourn the Histogenics special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1 or 2.

Record Date and Voting Power

Only holders of record of Histogenics common stock at the close of business on the record date,                , 2019, are entitled to notice of, and to vote at, the Histogenics special meeting. There were approximately             holders of record of Histogenics common stock at the close of business on the record date. At the close of business on the record date,            shares of Histogenics common stock were issued and outstanding. Each share of Histogenics common stock entitles the holder thereof to one vote on each matter submitted for stockholder approval. See the section entitled “Principal Stockholders of Histogenics” in this proxy statement/prospectus/information statement for information regarding persons known to Histogenics’ management to be the beneficial owners of more than 5% of the outstanding shares of Histogenics common stock.

Voting and Revocation of Proxies

The proxy accompanying this proxy statement/prospectus/information statement is solicited on behalf of the Histogenics Board for use at the Histogenics special meeting.

If you are a stockholder of record of Histogenics as of the record date referred to above, you may vote in person at the Histogenics special meeting or vote by proxy using the enclosed proxy card. Whether or not you plan to attend the Histogenics special meeting, Histogenics urges you to vote by proxy to ensure your vote is counted.

 

116


Table of Contents

You may still attend the Histogenics special meeting and vote in person if you have already voted by proxy. As a stockholder of record you may vote in any of the following ways:

 

   

to vote in person, attend the Histogenics special meeting and Histogenics will provide you a ballot when you arrive.

 

   

to vote using the proxy card, simply mark, sign and date your proxy card and return it promptly in the postage-paid envelope provided. If you return your signed proxy card to Histogenics before the Histogenics special meeting, Histogenics will vote your shares as you direct on the proxy card.

 

   

to vote by telephone or on the Internet, dial the number on the proxy card or voting instruction form or visit the website on the proxy card or voting instruction form to complete an electronic proxy card. You will be asked to provide the Histogenics number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m., Eastern time on                , 2019 to be counted.

If your shares of Histogenics common stock are held by your broker as your nominee, that is, in “street name,” the enclosed voting instruction card is sent by the institution that holds your shares. Please follow the instructions included on that proxy card regarding how to instruct your broker to vote your shares of Histogenics common stock. If you do not give instructions to your broker, your broker can vote your shares of Histogenics common stock with respect to “discretionary” items but not with respect to “non-discretionary” items. Discretionary items are proposals considered routine under certain rules applicable to brokers on which your broker may vote shares held in “street name” in the absence of your voting instructions. On non-discretionary items for which you do not give your broker instructions, your shares of Histogenics common stock will be treated as broker non-votes. It is anticipated that all proposals will be non-discretionary items.

All properly executed proxies that are not revoked will be voted at the Histogenics special meeting and at any adjournments or postponements of the Histogenics special meeting in accordance with the instructions contained in the proxy. If a holder of Histogenics common stock executes and returns a proxy and does not specify otherwise, the shares represented by that proxy will be voted “FOR” Proposal No. 1 to approve the Merger Agreement and the transactions contemplated thereby, including the merger, the issuance of shares of Histogenics common stock to Ocugen’s stockholders pursuant to the Merger Agreement and the change of control resulting from the merger; “FOR” Proposal No. 2 to approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics effecting the Histogenics Reverse Stock Split; “FOR” Proposal No. 3 to approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics to effect the Histogenics Name Change; “FOR” Proposal No. 4 to approve an amendment to the sixth amended and restated certificate of incorporation of Histogenics to increase the number of authorized shares of Histogenics common stock to a total number of 200,000,000; “FOR” Proposal No. 5 to approve the issuance of (a) shares of Histogenics common stock upon the exercise of the Investor Warrants to be issued in the Pre-Merger Financing, and (b) additional shares of Histogenics common stock that may be issued following the closing of the Pre-Merger Financing, in each case pursuant to the Securities Purchase Agreement and as required by and in accordance with Nasdaq Listing Rule 5635; and “FOR” Proposal No. 6 to approve the adjournment of the Histogenics special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1 or 2 in accordance with the recommendation of the Histogenics Board.

Histogenics’ stockholders of record, other than those Histogenics’ stockholders who have executed voting agreements, may change their vote at any time before their proxy is voted at the Histogenics special meeting in one of three ways. First, a stockholder of record of Histogenics can send a written notice to the Secretary of Histogenics stating that the stockholder would like to revoke its proxy. Second, a stockholder of record of Histogenics can submit new proxy instructions either on a new proxy card or by telephone or via the Internet. Third, a stockholder of record of Histogenics can attend the Histogenics special meeting and vote in person. Attendance alone will not revoke a proxy. If a stockholder of Histogenics of record or a stockholder who owns shares of Histogenics common stock in “street name” has instructed a broker to vote its shares of Histogenics common stock, the stockholder must follow directions received from its broker to change those instructions.

 

117


Table of Contents

Required Vote

The presence, in person or represented by proxy, at the Histogenics special meeting of the holders of a majority of the shares of Histogenics common stock outstanding and entitled to vote at the Histogenics special meeting is necessary to constitute a quorum at the meeting. Abstentions and broker non-votes will be counted towards a quorum. Approval of Proposal Nos. 1, 5 and 6 requires the affirmative vote of the holders of a majority of the shares of Histogenics common stock entitled to vote and present in person or represented by proxy at the Histogenics special meeting. Approval of Proposal Nos. 2, 3 and 4 requires the affirmative vote of holders of a majority of Histogenics common stock having voting power outstanding on the record date for the Histogenics special meeting.

Votes will be counted by the inspector of election appointed for the Histogenics special meeting, who will separately count “FOR” and “AGAINST” votes, abstentions and broker non-votes. Abstentions will be counted towards the vote total and will have the same effect as “AGAINST” votes for Proposal Nos. 1, 2, 3, 4, 5 and 6. Broker non-votes will have the same effect as “AGAINST” votes for Proposal Nos. 2, 3 and 4. For Proposal Nos. 1, 5 and 6, broker non-votes will have no effect and will not be counted towards the vote total, but will be used to determine whether a quorum is present at the Histogenics special meeting.

Each of Proposal Nos. 1 and 2 are conditioned upon each other. Therefore, the merger cannot be consummated without the approval of Proposal Nos. 1 and 2. Proposal Nos. 3, 4 and 5 are conditioned upon the consummation of the merger. If the merger is not completed or the stockholders do not approve Proposal No. 3, Histogenics will not change its name to “Ocugen, Inc.” If the merger is not completed or the stockholders do not approve Proposal No. 4, the increase in the number of authorized shares of Histogenics common stock will not be effected. If the merger is not completed or the stockholders do not approve Proposal No. 5, the Pre-Merger Financing will not be effected except that Histogenics’ stockholders’ approval of the Pre-Merger Financing is a condition to the closing of the Pre-Merger Financing. Proposal Nos. 1 and 2 are not conditioned on Proposal Nos. 3, 4 or 5 being approved.

As of June 6, 2019, the directors and executive officers of Histogenics and other stockholders who signed voting agreements beneficially owned approximately 0.5% of the outstanding shares of Histogenics common stock entitled to vote at the Histogenics special meeting. Pursuant to the voting agreements, each such director, executive officer and other signatory stockholder has agreed to be present (in person or by proxy) at the Histogenics special meeting to vote all shares of Histogenics common stock owned by him, her or it as of the record date in favor of Proposal Nos. 1, 2 and 3. Additionally, each such stockholder has agreed, solely in his, her or its capacity as a stockholder of Histogenics, to vote against any competing acquisition proposal and any action, proposal or transaction that would reasonably be expected to result in a material breach of the voting agreement. As of June 6, 2019, Histogenics is not aware of any affiliate of Ocugen owning any shares of Histogenics common stock entitled to vote at the Histogenics special meeting.

Solicitation of Proxies

In addition to solicitation by mail, the directors, officers, employees and agents of Histogenics may solicit proxies from Histogenics’ stockholders by personal interview, telephone, telegram or otherwise. Histogenics and Ocugen will share equally the costs of printing and filing this proxy statement/prospectus/information statement and proxy card. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of Histogenics common stock for the forwarding of solicitation materials to the beneficial owners of Histogenics common stock. In addition, Histogenics has engaged Innisfree M&A Incorporated, a proxy solicitation firm, to solicit proxies from Histogenics’ stockholders for a fee of $20,000 plus costs associated with solicitation campaigns. Histogenics will also reimburse Innisfree M&A Incorporated for reasonable out-of-pocket expenses. Histogenics will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials. Histogenics has not retained a proxy solicitor with respect to the Histogenics special meeting.

 

118


Table of Contents

Other Matters

As of the date of this proxy statement/prospectus/information statement, the Histogenics Board does not know of any business to be presented at the Histogenics special meeting other than as set forth in the notice accompanying this proxy statement/prospectus/information statement. If any other matters should properly come before the Histogenics special meeting, it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the persons voting the proxies.

 

119


Table of Contents

THE MERGER

This section and the section entitled “The Merger Agreement” in this proxy statement/prospectus/information statement describe the material aspects of the merger, including the Merger Agreement. While Histogenics and Ocugen believe that this description covers the material terms of the merger and the Merger Agreement, it may not contain all of the information that is important to you. You should carefully read this entire proxy statement/prospectus/information statement for a more complete understanding of the merger and the Merger Agreement, including the Original Merger Agreement attached as Annex A- 1 and Merger Agreement Amendment attached as Annex A-2, and the other documents to which you are referred herein. See the section entitled “Where You Can Find More Information” in this proxy statement/prospectus/information statement.

Background of the Merger

Historical Background for Histogenics

Summary of Histogenics and NeoCart Phase 3 Clinical Trial Results in 2018

Histogenics historically focused on the development of restorative cell therapies, including its product candidate, NeoCart, which is an innovative cell therapy that utilizes various aspects of Histogenics’ restorative cell therapy platform to treat tissue injury in the field of orthopedics, specifically cartilage damage in the knee.

In the third quarter of 2018, Histogenics announced that its Phase 3 clinical trial of NeoCart (the “NeoCart Phase 3 Trial”) did not meet the primary endpoint of a statistically significant improvement in pain and function in a dual threshold responder analysis one year after treatment as compared to microfracture. Based on the totality of the data, Histogenics initiated a dialogue with the FDA in the third quarter of 2018 to discuss the regulatory path forward for NeoCart. Histogenics’ primary objective in these discussions was to determine whether the FDA would accept a submission of a BLA for NeoCart without data from an additional clinical trial. Histogenics had a constructive dialogue with the FDA, which included requests for, and review of, additional statistical analyses, different subgroup analyses, and secondary endpoints. These additional analyses did not change the conclusion that the NeoCart Phase 3 trial failed to meet its primary and secondary endpoints.

In December 2018, Histogenics received final feedback from the FDA indicating that while the NeoCart Phase 3 Trial resulted in certain compelling data, particularly the early response in pain and function and the data in certain lesion sizes, an additional Phase 3 clinical trial would need to be completed before the FDA would accept the submission of a BLA for NeoCart. The FDA indicated receptivity to novel clinical trial methodologies and regenerative medicine advanced therapy designations in order to support additional data for a future potential submission. However, considering the time and funding required to conduct such a trial, Histogenics discontinued the development of NeoCart.

As a result of the FDA feedback, Histogenics initiated a process to evaluate strategic alternatives to maximize value for its stakeholders. Histogenics conducted the process with the assistance of Canaccord Genuity, as its financial advisor, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP (“Gunderson Dettmer”), as its general corporate and securities counsel, Richards, Layton & Finger, P.A. (“RLF”), as its Delaware counsel, and Katten Muchin Rosenman LLP (“Katten”), as its litigation and insolvency counsel. During the process, Histogenics, with the assistance of its advisors, evaluated a full range of potential strategic alternatives, including but not limited to, acquisitions, business combinations, joint ventures, public and private capital raises and recapitalization, sale transaction options (including a sale of assets or intellectual property) and other possible alternatives, including a wind-down of operations and a liquidation and dissolution of Histogenics, or Chapter 11 bankruptcy protection to complete or execute a restructuring transaction or liquidation.

In January and March 2019, Histogenics implemented restructuring plans that were approved by the Histogenics Board involving reductions in headcount to reduce operating costs and conserve cash, along with other cash

 

120


Table of Contents

conservation measures relating to Histogenics facilities. The positions eliminated as part of the restructuring plans collectively represented all but one member of Histogenics’ workforce, including its Chief Executive Officer, Chief Operating Officer, Chief Medical Officer and Chief Business Officer. Histogenics engaged Mr. Adam Gridley, its former Chief Executive Officer, Mr. Stephen Kennedy, and its former Chief Operating Officer, along with a limited number of additional employees as consultants to assist with its continuing evaluation of strategic alternatives. Mr. Gridley has retained his titles of president, treasurer and secretary of Histogenics while he continues to provide consulting services to Histogenics and remains a member of the Histogenics Board.

Detailed Background of Interactions Relating to the Merger and Histogenics’ Strategic Processes

The Histogenics Board and Histogenics senior management periodically have evaluated Histogenics’ long- and short-term strategic options, including capital formation or other investment transactions, potential strategic alliances, prospects for mergers and acquisitions, strategic acquisitions and divestitures and other business combinations, as well as its continued operations as an independent company, each with a view toward enhancing stockholder value. The following is a summary of material events, meetings and discussions that are relevant to the Histogenics Board’s decision to approve the Merger Agreement and recommend the Merger to Histogenics’ stockholders.

In March 2018, a senior executive of a publicly traded biopharmaceutical company (“Company A”) contacted Histogenics’ executive management seeking an update on the NeoCart Phase 3 Trial, and its commercialization plans for NeoCart in the event it was approved by the FDA. Executives of Histogenics and Company A held several discussions, the companies entered into a confidentiality agreement on March 15, 2018, and Histogenics’ executive management presented in-person to Company A management at Company A’s offices in March 2018 regarding Histogenics’ ongoing operations and business plan. Company A was subsequently granted access to the data room maintained by Histogenics, which contained legal and financial due diligence materials (the “Data Room”).

In March 2018, Histogenics’ executives met separately with senior executives of a publicly traded biopharmaceutical company (“Company B”) and a private biopharmaceutical company (“Company C”) at the annual meeting of the American Academy of Orthopaedic Surgeons (the “2018 AAOS Meeting”) to discuss the commercialization plans, fundraising plans, and status of the NeoCart Phase 3 Trial.

In April 2018, Mr. Gridley spoke with the chief executive officer of Company A regarding Company A’s interest in potential commercial collaborations, and the interest of Company A in a possible acquisition of Histogenics.

In April 2018, Company C invited a senior representative of Histogenics to present to Company C’s executive management team regarding Histogenics’ ongoing operations and business plan.

During April 2018 and May 2018, representatives of Company A and Histogenics held several due diligence conference calls and in-person meetings to discuss the NeoCart program and the information provided to Company A through the Data Room.

Company C and Histogenics entered into a confidentiality agreement on May 8, 2018. In May 2018, at the request of Company C, Company C executive management visited Histogenics’ headquarters for an in-person management presentation during which management of Company C and Histogenics discussed potential commercial collaboration opportunities.

During June 2018, Company C was given access to the Data Room and conducted due diligence activities on Histogenics through the Data Room.

In June 2018, based on guidance from the Histogenics Board, Mr. Gridley reached out to a publicly traded biopharmaceutical company (“Company D”) to inform them of the ongoing interest from other parties to determine if there would be interest in a commercial collaboration or acquisition of Histogenics by Company D.

 

121


Table of Contents

In June 2018, senior management of Company A indicated to Mr. Gridley that it would not be proceeding with any transaction with Histogenics at that time due to other Company A priorities.

Histogenics and Company D entered into a confidentiality agreement on July 18, 2018 and Company D provided a written request to Histogenics to provide certain business, financial, legal and other due diligence materials for review.

In August 2018, Mr. Gridley and an executive officer of a private biopharmaceutical company (“Company E”) held a preliminary call regarding a potential strategic transaction, and the companies entered into a confidentiality agreement on August 27, 2018.

On August 28, 2018, Histogenics unblinded the data from the NeoCart Phase 3 Trial. During analysis following such unblinding, it was determined that the NeoCart Phase 3 Trial had failed to meet its primary endpoint. On August 29, 30 and 31, 2018, the Histogenics Board held informational meetings at which Histogenics’ executive management discussed the data from the NeoCart Phase 3 Trial with the members of the Histogenics Board present at such meetings. During these meetings, the Histogenics Board also discussed plans to engage with the FDA, along with Histogenics’ fundraising and strategic options. Following these meetings, Histogenics’ executive management team informed the Histogenics Board that it would revise its fundraising plans to determine if there was financing available to allow Histogenics time to engage with the FDA to determine if they would accept a BLA based on the available NeoCart data set from the NeoCart Phase 3 Trial. During these meetings and in other calls with Mr. Gridley, the Histogenics Board discussed establishing a special committee comprised of independent members of the Board to evaluate Histogenics’ strategic options and instructed management to contact Canaccord Genuity, one of Histogenics’ financial advisors in earlier financing transactions, to assist the Histogenics Board in engaging in a review of Histogenics’ strategic alternatives, and to determine if the previously interested parties or other parties may be interested in acquisitions, financings, collaborations or other strategic transactions with Histogenics. Following the engagement of Canaccord Genuity, Canaccord Genuity took certain actions on behalf of Histogenics as described in the remainder of this section at the direction of the Histogenics Board, the Special Committee formed by the Histogenics Board or Histogenics’ management acting in accordance with the instructions of the Histogenics Board or the Special Committee.

The Histogenics Board held a further informational meeting on September 4, 2018 at which time the members of the Histogenics Board present at the meeting, and based on discussions with the other members of the Histogenics Board, instructed Gunderson Dettmer to prepare the documentation necessary to form a special committee to review strategic alternatives. On September 5, 2018, the members of the Histogenics Board executed an action by unanimous written consent forming such special committee, consisting of Dr. Kong (chairman) and Messrs. Baltzell, Gill and Johnson (the “Special Committee”). While the Special Committee was officially formed on September 5, 2018, it had also met on an interim, ad hoc basis for several months prior to such formal formation (though with no delegated power or authority during such interim period). Pursuant to the September 5, 2018 written consent, the Special Committee was delegated the exclusive power and authority to (1) consider, evaluate and comprehensively review Histogenics’ strategic options, including, but not limited to, potential strategic partnerships or transactions, cost reductions, reorganization, wind-down, liquidation or bankruptcy (collectively, without limitation, the “Strategic Options”); (2) take into consideration Histogenics’ risk profile and the potential impact of any Special Committee recommendation on Histogenics’ business model and strategic plan; (3) periodically report its recommendations relating to the Strategic Options to the full Histogenics Board; and (4) perform such other duties as may be requested by the Histogenics Board.

Histogenics announced the results of the NeoCart Phase 3 Trial in a press release and held a conference call with investors on September 5, 2018. Following the announcement and at the direction of the Special Committee, representatives of Canaccord Genuity and Histogenics contacted from September 10, 2018 to October 25, 2018 approximately 37 orthopedic, regenerative medicine and pharmaceutical companies worldwide to determine if they were interested in a potential strategic transaction with Histogenics.

 

122


Table of Contents

On September 6, 2018, the Special Committee held a conference call with Histogenics’ executive management, Gunderson Dettmer and representatives of Canaccord Genuity to discuss the status of the strategic options and outreach.