Oculis AG(OCS) - 2024 Q1 - Quarterly Report

Unaudited Condensed Consolidated Interim Statements of Financial Position This section presents the company's financial position, showing a decrease in total assets and equity from December 2023 to March 2024 Unaudited Condensed Consolidated Interim Statements of Financial Position (in CHF thousands) | Item | As of March 31, 2024 | As of December 31, 2023 | | :-------------------------------- | :------------------- | :-------------------- | | ASSETS | | | | Total non-current assets | 13,271 | 13,338 | | Other current assets | 4,371 | 8,488 | | Accrued income | 1,138 | 876 | | Short-term financial assets | 55,572 | 53,324 | | Cash and cash equivalents | 24,361 | 38,327 | | TOTAL ASSETS | 98,713 | 114,353 | | EQUITY AND LIABILITIES | | | | Total equity | 79,033 | 93,728 | | Total non-current liabilities | 1,527 | 1,537 | | Trade payables | 1,174 | 7,596 | | Accrued expenses and other payables | 8,358 | 5,948 | | Warrant liabilities | 8,439 | 5,370 | | Total current liabilities | 18,153 | 19,088 | | TOTAL EQUITY AND LIABILITIES | 98,713 | 114,353 | - Total assets decreased from CHF 114,353 thousand as of December 31, 2023, to CHF 98,713 thousand as of March 31, 2024[4] - Total equity decreased from CHF 93,728 thousand as of December 31, 2023, to CHF 79,033 thousand as of March 31, 2024[4] Unaudited Condensed Consolidated Interim Statements of Loss This section details the company's financial performance, highlighting a significant reduction in loss for the period due to the absence of merger and listing expenses Unaudited Condensed Consolidated Interim Statements of Loss (in CHF thousands, except loss per share data) | Item | For the three months ended March 31, 2024 | For the three months ended March 31, 2023 | | :----------------------------------- | :---------------------------------------- | :---------------------------------------- | | Grant income | 222 | 229 | | Operating income | 222 | 229 | | Research and development expenses | (10,856) | (6,148) | | General and administrative expenses | (4,694) | (4,042) | | Merger and listing expense | - | (34,863) | | Operating expenses | (15,550) | (45,053) | | Operating loss | (15,328) | (44,824) | | Finance income | 581 | 33 | | Finance expense | (41) | (1,279) | | Fair value adjustment on warrant liabilities | (3,069) | 422 | | Foreign currency exchange gain (loss) | 1,794 | (243) | | Finance result | (735) | (1,067) | | Loss before tax for the period | (16,063) | (45,891) | | Income tax expense | (30) | (124) | | Loss for the period | (16,093) | (46,015) | | Basic and diluted loss attributable to equity holders (per share) | (0.44) | (3.57) | - Loss for the period significantly decreased by 65% from CHF (46,015) thousand in Q1 2023 to CHF (16,093) thousand in Q1 2024, primarily due to the absence of the non-recurring merger and listing expense[7] - Research and development expenses increased by 76.6% from CHF (6,148) thousand in Q1 2023 to CHF (10,856) thousand in Q1 2024[7] - Basic and diluted loss per share improved from CHF (3.57) in Q1 2023 to CHF (0.44) in Q1 2024[7] Unaudited Condensed Consolidated Interim Statements of Comprehensive Loss This section outlines the total comprehensive loss, showing a substantial decrease primarily driven by improved foreign currency translation differences Unaudited Condensed Consolidated Interim Statements of Comprehensive Loss (in CHF thousands) | Item | For the three months ended March 31, 2024 | For the three months ended March 31, 2023 | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Loss for the period | (16,093) | (46,015) | | Other comprehensive profit/(loss): | | | | Actuarial gains/(losses) of defined benefit plans | - | (53) | | Foreign currency translation differences | 31 | (1,994) | | Other comprehensive profit/(loss) for the period | 31 | (2,047) | | Total comprehensive loss for the period | (16,062) | (48,062) | - Total comprehensive loss for the period decreased by 66.6% from CHF (48,062) thousand in Q1 2023 to CHF (16,062) thousand in Q1 2024[10] - Foreign currency translation differences shifted from a loss of CHF (1,994) thousand in Q1 2023 to a gain of CHF 31 thousand in Q1 2024[10] Unaudited Condensed Consolidated Interim Statements of Changes in Equity This section illustrates changes in equity, primarily reflecting the period's loss and contributions from share-based compensation Unaudited Condensed Consolidated Interim Statements of Changes in Equity (in CHF thousands) | Item | Balance as of December 31, 2023 | Loss for the period | Other comprehensive loss | Share-based compensation expense | Stock options exercised | Balance as of March 31, 2024 | | :------------------------------------ | :------------------------------ | :------------------ | :----------------------- | :------------------------------- | :---------------------- | :--------------------------- | | Share capital | 366 | - | - | - | 1 | 367 | | Share premium | 288,162 | - | - | - | 225 | 288,387 | | Reserve for share-based payment | 6,379 | - | - | 1,141 | - | 7,520 | | Accumulated losses | (199,780) | (16,093) | - | - | - | (215,873) | | Total equity | 93,728 | (16,093) | 31 | 1,141 | 226 | 79,033 | - Total equity decreased from CHF 93,728 thousand as of December 31, 2023, to CHF 79,033 thousand as of March 31, 2024, primarily due to the loss for the period[13] - Share-based compensation expense contributed CHF 1,141 thousand to equity in Q1 2024[13] Unaudited Condensed Consolidated Interim Statements of Cash Flows This section provides an overview of cash movements, indicating reduced operating cash outflow but a significant decrease in financing cash inflow compared to the prior year Unaudited Condensed Consolidated Interim Statements of Cash Flows (in CHF thousands) | Item | For the three months ended March 31, 2024 | For the three months ended March 31, 2023 | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net cash outflow from operating activities | (13,195) | (15,619) | | Net cash outflow from investing activities | (2,047) | - | | Net cash inflow from financing activities | 181 | 95,270 | | Increase/(Decrease) in cash and cash equivalents | (15,061) | 79,651 | | Cash and cash equivalents, beginning of period | 38,327 | 19,786 | | Cash and cash equivalents, end of period | 24,361 | 96,452 | - Net cash outflow from operating activities decreased by 15.6% from CHF (15,619) thousand in Q1 2023 to CHF (13,195) thousand in Q1 2024[16] - Net cash inflow from financing activities significantly decreased from CHF 95,270 thousand in Q1 2023 to CHF 181 thousand in Q1 2024, reflecting the one-time proceeds from the business combination and related financing in the prior year[16] - Cash and cash equivalents at the end of the period decreased from CHF 96,452 thousand in Q1 2023 to CHF 24,361 thousand in Q1 2024[16] Notes to the Unaudited Condensed Consolidated Interim Financial Statements This section provides detailed explanations and disclosures supporting the interim financial statements 1. Corporate Information Oculis Holding AG, a Swiss stock corporation incorporated on October 31, 2022, is a global biopharmaceutical company focused on developing innovative ophthalmology treatments - Oculis Holding AG was incorporated on October 31, 2022, in Zug, Switzerland[17] - The Company's purpose is the research, study, development, manufacture, promotion, sale, and marketing of biopharmaceutical products and substances in the field of ophthalmology[19] - Oculis is developing treatments to save sight and improve eye care with a differentiated pipeline including candidates for topical retinal treatments, topical biologics, and disease-modifying treatments[19] 2. Business Combination and Financing Activities This section details Oculis's business combination with EBAC, Nasdaq listing, and subsequent financing activities, including a significant merger and listing expense - Business combination with EBAC was consummated on March 2, 2023, resulting in Oculis's listing on the Nasdaq Global Market under the ticker symbol "OCS"[20] - The Company received gross proceeds of CHF 97.6 million ($103.7 million) from the Business Combination, comprising CHF 12.0 million from EBAC's trust account and CHF 85.6 million from PIPE investments and CLA conversions[20] - PIPE and CLA financing in March 2023 resulted in aggregate gross cash proceeds of CHF 85.6 million ($90.9 million) in exchange for 9,085,891 ordinary shares[23] - A non-recurring merger and listing expense of CHF 34.9 million was expensed in Q1 2023 as a share-based payment for listing service[24] - Legacy Oculis equity holders received 3,793,995 earnout shares and 369,737 earnout options, subject to forfeiture based on share price targets of $15.00, $20.00, and $25.00 by March 2, 2028[25][26][27] - A public offering in June 2023 issued 3,654,234 ordinary shares for total gross proceeds of CHF 38.2 million ($42.0 million)[28] 3. Basis of Preparation and Changes to the Group's Accounting Policies The unaudited condensed consolidated interim financial statements are prepared on a going concern basis in accordance with IAS 34, with CHF as the functional and presentation currency, and long-term viability dependent on future capital 3.A. Going Concern The Group's accounts are prepared on a going concern basis - The Group's accounts are prepared on a going concern basis[29] - The Board of Directors believes that with proceeds from the Business Combination, June 2023 public offering, and April 2024 Icelandic financing, the Group can meet financial obligations for at least the next 12 months[29] - The Company's long-term viability is dependent on its ability to raise additional capital to finance future operations, with potential strategies including public/private financings, debt financing, or collaboration agreements[30] 3.B. Statement of Compliance The unaudited condensed consolidated interim financial statements are prepared in accordance with International Accounting Standard (IAS) 34 - The unaudited condensed consolidated interim financial statements are prepared in accordance with International Accounting Standard (IAS) 34 - Interim Financial Reporting[31] - The Business Combination was accounted for as a capital re-organization in Q1 2023 within the scope of IFRS 2 Share-based Payment[32] 3.C. Functional Currency The interim condensed consolidated financial statements are expressed in Swiss Francs (CHF), which is the Company's functional and the Group's presentation currency - The interim condensed consolidated financial statements are expressed in Swiss Francs (CHF), which is the Company's functional and the Group's presentation currency[33] - The functional currency of Oculis Iceland is CHF, while other subsidiaries use their local currency[33] 4. Summary of Material Accounting Policies, Critical Judgments and Accounting Estimates There have been no material changes to the Group's accounting policies or estimates since December 31, 2023, with IFRS 18 impact under evaluation 4.A. Material Accounting Policies There have been no material changes to the material accounting policies applied by the Group - There have been no material changes to the material accounting policies applied by the Group in its audited consolidated financial statements as of and for the year ended December 31, 2023[35] 4.B. Critical Judgments and Accounting Estimates The critical accounting estimates, assumptions, and judgments made by management were consistent with those applied in the prior year - The critical accounting estimates, assumptions, and judgments made by management were the same as those applied and discussed in the audited consolidated financial statements for the year ended December 31, 2023[37] 4.C. Accounting Policies, New Standards, Interpretations, and Amendments Adopted by the Group No new IFRS Accounting Standards or amendments mandatory for 2024 had an impact, and IFRS 18's potential effect is being evaluated - No new IFRS Accounting Standards, amendments, or interpretations mandatory for the financial year beginning on January 1, 2024, have had any impact in the interim period[39] - The Company is evaluating whether IFRS 18, effective for periods beginning on or after January 1, 2027, will have a material effect on the consolidated financial statements[39] 5. Segment Information Oculis operates as a single reporting segment, with most non-current assets in Switzerland and significant property in Iceland - The Company is managed and operated as one business, with a single management team, and therefore has one reporting segment[40] Carrying Amount of Certain Non-Current Assets by Geographic Area (in CHF thousands, as of March 31, 2024) | Asset Type | Switzerland | Iceland | Others | Total | | :-------------------------- | :---------- | :------ | :----- | :------ | | Intangible assets | 12,206 | - | - | 12,206 | | Property and equipment, net | 14 | 227 | 18 | 259 | | Right-of-use assets | - | 661 | 58 | 719 | | Total | 12,220 | 888 | 76 | 13,184 | 6. Intangible Assets Intangible assets, primarily licenses for OCS-02 and OCS-05, remained stable at CHF 12.2 million - Intangible assets were CHF 12.2 million as of March 31, 2024, and December 31, 2023[42] - These assets represent licenses for OCS-02 (Licaminlimab) from Novartis for ophthalmic indications and OCS-05 (formerly ACT-01) from Accure for ophthalmology neuroprotective applications[42] 7. Income and Expenses Grant income was stable, operating expenses decreased due to the absence of prior year's merger costs, and finance result improved despite warrant fair value loss 7.A. Grant Income Grant income remained stable at CHF 0.2 million, reflecting reimbursements and tax credits for R&D projects - Grant income for the three months ended March 31, 2024, and 2023 was CHF 0.2 million[43] - Grant income reflects reimbursement of research and development expenses and income from research projects managed by Icelandic governmental institutions, qualifying for tax credits or cash reimbursements[43] 7.B. Operating Expenses Total operating expenses decreased significantly year-over-year due to the absence of the Q1 2023 merger and listing expense Operating Expenses by Category (in CHF thousands) | Category | Q1 2024 | Q1 2023 | | :------------------------------------ | :------ | :------ | | Personnel expense | 3,972 | 2,317 | | Operating expenses (excluding personnel) | 11,578 | 7,873 | | Merger and listing expense | - | 34,863 | | Total Operating Expenses | 15,550 | 45,053 | - Total operating expenses decreased by 65.4% year-over-year, primarily due to the absence of the CHF 34.9 million merger and listing expense incurred in Q1 2023[44] - Research and development expenses increased from CHF 6,148 thousand in Q1 2023 to CHF 10,856 thousand in Q1 2024, driven by clinical trial related expenses for OCS-01 DME DIAMOND-1 and DIAMOND-2 Phase 3 Stage 2, OPTIMIZE-2 Phase 3, and OCS-02 RELIEF Phase 2b clinical trials[44][45] 7.C. Finance Result The finance result improved due to increased finance income and foreign currency gains, despite a fair value loss on warrant liabilities Finance Result by Category (in CHF thousands) | Item | Q1 2024 | Q1 2023 | | :------------------------------------ | :------ | :------ | | Finance income | 581 | 33 | | Finance expense | (41) | (1,279) | | Fair value adjustment on warrant liabilities | (3,069) | 422 | | Foreign currency exchange gain (loss) | 1,794 | (243) | | Finance result | (735) | (1,067) | - Finance income significantly increased from CHF 33 thousand in Q1 2023 to CHF 581 thousand in Q1 2024, primarily from interest earned on short-term financial assets[46][47] - The fair value adjustment on warrant liabilities shifted from a gain of CHF 422 thousand in Q1 2023 to a loss of CHF (3,069) thousand in Q1 2024[46] - Foreign currency exchange result shifted from a loss of CHF (243) thousand in Q1 2023 to a gain of CHF 1,794 thousand in Q1 2024, mainly due to the strengthening of the U.S. dollar against the Swiss Franc[46][48] 8. Other Current Assets and Accrued Income Other current assets decreased significantly due to the utilization of prepaid clinical and technical development expenses, while accrued income increased Other Current Assets by Category (in CHF thousands) | Category | March 31, 2024 | December 31, 2023 | | :------------------------------------ | :------------- | :---------------- | | Prepaid clinical and technical development expenses | 3,026 | 6,748 | | Prepaid general and administrative expenses | 1,165 | 1,412 | | VAT receivable | 180 | 328 | | Total | 4,371 | 8,488 | - The decrease in prepaid clinical and technical development expenses relates to the commencement of significant clinical trials in Q4 2023[49] Movement of Accrued Income (in CHF thousands) | Item | Q1 2024 | Q1 2023 | | :------------------------------------ | :------ | :------ | | Balance as of January 1, | 876 | 912 | | Accrued income recognized during the period | 222 | 229 | | Foreign exchange revaluation | 40 | 24 | | Balance as of March 31, | 1,138 | 1,165 | - Accrued income is generated by incentives for research and development offered by the Icelandic government in the form of tax credits for innovation companies[50] 9. Share-Based Compensation Share-based compensation expense significantly increased in Q1 2024 following the adoption of the 2023 ESOP, impacting equity reserves - The Company adopted the 2023 Employee Stock Option and Incentive Plan (ESOP) on March 2, 2023, for granting equity incentives including share-based options, stock appreciation rights (SARs), and restricted shares[51] Weighted Average Grant Date Fair Value for Option Awards and SARs | Period | Weighted average grant date fair value (CHF per share) | | :------------------------------------ | :------------------------------------- | | For the three months ended March 31, 2024 | 8.36 | | For the three months ended March 31, 2023 | 4.68 | Stock Option and SAR Activity (Number of Awards) | Item | For the three months ended March 31, 2024 | For the three months ended March 31, 2023 | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Outstanding as of January 1, | 3,466,210 | 1,762,949 | | Options granted | 270,582 | 1,449,500 | | SARs granted | — | 134,765 | | Earnout options granted | — | 369,737 | | Forfeited | (55,928) | — | | Exercised | (90,590) | — | | Outstanding as of March 31, | 3,590,274 | 3,716,951 | - Share-based compensation expense increased significantly from CHF 0.1 million in Q1 2023 to CHF 1.1 million in Q1 2024[61] - The reserve for share-based payment increased from CHF 6.4 million as of December 31, 2023, to CHF 7.5 million as of March 31, 2024[61] 10. Cash and Cash Equivalents and Short-Term Financial Assets Cash and cash equivalents decreased, while short-term financial assets increased, with holdings primarily in CHF and USD Cash and Cash Equivalents by Currency (in CHF thousands) | Currency | As of March 31, 2024 | As of December 31, 2023 | | :--------------- | :------------------- | :-------------------- | | Swiss Franc | 5,157 | 19,144 | | US Dollar | 15,128 | 16,610 | | Euro | 3,907 | 2,020 | | Iceland Krona | 146 | 542 | | Other | 23 | 11 | | Total | 24,361 | 38,327 | Short-Term Financial Assets by Currency (in CHF thousands) | Currency | As of March 31, 2024 | As of December 31, 2023 | | :--------------- | :------------------- | :-------------------- | | Swiss Franc | 45,532 | 33,532 | | US Dollar | 9,016 | 15,148 | | Euro | 1,024 | 4,644 | | Total | 55,572 | 53,324 | - Short-term financial assets consist of fixed term bank deposits with maturities between three and six months[64] 11. Warrant Liabilities Warrant liabilities increased due to a fair value loss recognized in the period, driven by a higher share price - Warrant liabilities increased to CHF 8.4 million as of March 31, 2024, from CHF 5.4 million as of January 1, 2024[65][67] - The increase is primarily due to a fair value loss of CHF 3.1 million recognized in the unaudited condensed interim statement of loss, driven by a higher share price[65][67] - No warrant exercises occurred during the three months ended March 31, 2024, or 2023[65] 12. Accrued Expenses and Other Payables Accrued expenses and other payables increased, mainly due to higher product development, personnel, and general and administration costs Accrued Expenses and Other Payables by Category (in CHF thousands) | Category | As of March 31, 2024 | As of December 31, 2023 | | :------------------------------------ | :------------------- | :-------------------- | | Product development related expenses | 3,756 | 2,801 | | Personnel related expenses | 3,023 | 2,301 | | General and administration related expenses | 1,485 | 765 | | Other payables | 94 | 81 | | Total | 8,358 | 5,948 | - Total accrued expenses and other payables increased by 40.5% from CHF 5,948 thousand as of December 31, 2023, to CHF 8,358 thousand as of March 31, 2024[68] 13. Commitments and Contingencies Commitments for external research projects slightly decreased, with most obligations due within one to five years - Commitments for external research projects amounted to CHF 49.5 million as of March 31, 2024, a slight decrease from CHF 50.5 million as of December 31, 2023[69][71] External Research Project Commitments (in CHF thousands) | Period | As of March 31, 2024 | As of December 31, 2023 | | :-------------------- | :------------------- | :-------------------- | | Within one year | 23,402 | 23,625 | | Between one and five years | 26,097 | 26,867 | | Total | 49,499 | 50,492 | 14. Shareholders' Equity This section details conditional capital for future share issuances and a capital band allowing the Board to adjust share capital within a defined range - Conditional capital as of March 31, 2024, amounts to a maximum of CHF 173,468.43, split into 17,346,843 ordinary shares[72] - Conditional capital is designated for new bonds/debt instruments (CHF 50,000.00), employee benefit plans (CHF 77,226.02), EBAC public and private warrants (CHF 42,541.38), and earnout options (CHF 3,701.03)[72][73][75][76] - The Company has a capital band between CHF 367,894.66 (lower limit) and CHF 546,305.50 (upper limit), allowing the Board to increase or decrease share capital within this range until March 2, 2028[77] 15. Loss Per Share Basic and diluted loss per share significantly improved due to a substantial increase in the weighted-average number of shares from prior year's capital reorganization and offering Loss Per Share Calculations | Item | For the three months ended March 31, 2024 | For the three months ended March 31, 2023 | | :---------------------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net loss for the period attributable to Oculis shareholders (in CHF thousands) | (16,093) | (46,015) | | Weighted-average number of shares used to compute basic and diluted loss per share | 36,621,162 | 12,879,944 | | Basic and diluted net loss per share for the period, ordinary shares | (0.44) | (3.57) | - The weighted-average number of shares used to compute basic and diluted loss per share increased significantly due to the capital reorganization following the Business Combination in March 2023 and the follow-on offering in June 2023[79] - Potentially dilutive securities totaling 11,699,673 as of March 31, 2024, were not included in diluted loss per share calculations because they would be anti-dilutive[80] 16. Related Party Disclosures Key management compensation significantly increased, primarily driven by a substantial rise in share-based compensation and an expanded management team Key Management Compensation (in CHF thousands) | Item | For the three months ended March 31, 2024 | For the three months ended March 31, 2023 | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Salaries, cash compensation and other short-term benefits | 966 | 674 | | Pension | 92 | 86 | | Share-based compensation | 915 | 52 | | Total | 1,973 | 812 | - Total key management compensation increased by 143% year-over-year, with share-based compensation increasing by 1660% from CHF 52 thousand in Q1 2023 to CHF 915 thousand in Q1 2024[81] - The number of individuals reported as key management increased from 5 to 8, and the Board of Directors increased from 3 to 6, between Q1 2023 and Q1 2024[82] 17. Subsequent Events Oculis completed a CHF 53.5 million financing round in April 2024, extending its operational funding into H2 2026, and dissolved Merger Sub 2 - On April 22, 2024, the Company completed a financing with gross proceeds of approximately CHF 53.5 million ($58.8 million) through the issuance of 5,000,000 ordinary shares at CHF 10.70 ($11.75) per share[83] - The net proceeds from this financing, combined with current cash, cash equivalents, and short-term investments, are expected to fund operations and capital expenditure requirements into the second half of 2026[83] - On April 18, 2024, the Company completed the dissolution of Merger Sub 2, which resulted in a reclassification of CHF 5.0 million in cumulative translation adjustments to the Consolidated Statement of Loss for the year ended December 31, 2023[84]