Abeona Therapeutics Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020; filed August 10, 2020. Abeona is a clinical-stage biopharmaceutical company developing gene and cell therapies for rare genetic diseases. It reported no revenue and has not achieved profitable operations.
Key financial metrics
| Metric | Q2 2020 / June 30, 2020 | Comparable period / prior year-end |
|---|---|---|
| Revenue | $0 | $0 in Q2 2019 |
| Research and development | $6.1 million for Q2; $12.9 million for H1 | $16.3 million for Q2 2019; $28.0 million for H1 2019 |
| General and administrative | $5.5 million for Q2; $12.0 million for H1 | $5.6 million for Q2 2019; $11.3 million for H1 2019 |
| Net loss | $13.0 million for Q2; $61.2 million for H1 | $23.9 million for Q2 2019; $42.5 million for H1 2019 |
| Loss per share, basic and diluted | $0.14 for Q2; $0.66 for H1 | $0.49 for Q2 2019; $0.88 for H1 2019 |
| Cash, cash equivalents and short-term investments | $107.9 million | $129.3 million at December 31, 2019 |
| Operating cash flow | $(22.7) million for H1 | $(30.3) million for H1 2019 |
| Total liabilities | $43.3 million | $45.0 million at December 31, 2019 |
| Working capital | $71.2 million | $93.7 million at December 31, 2019 |
Margins are not meaningful given the absence of revenue. At June 30, the company also reported $1.8 million in PPP loan payable, $7.5 million in lease liabilities, and $28.8 million payable to licensor. The licensor balance is disputed in arbitration. Management stated that existing cash, cash equivalents and short-term investments should fund operations for at least 12 months, but additional funding will be needed for all planned R&D.
Material changes versus comparable periods
- Q2 net loss narrowed year over year, primarily as R&D spending fell by $10.2 million amid reduced clinical, manufacturing and development activity during COVID-19 disruptions, as well as savings from planned internal retrovirus manufacturing.
- H1 net loss increased by $18.7 million year over year, largely because of a $32.9 million non-cash impairment of licensed technology, partly offset by lower R&D costs.
- H1 R&D fell $15.1 million year over year. H1 G&A rose $0.7 million, partly due to salary costs including severance associated with management changes.
- Cash and short-term investments declined by $21.4 million from year-end. H1 operating cash use was lower than in 2019; investing cash use included purchases of short-term investments.
Outlook, commentary and key risks
- Programs and COVID-19: Enrollment in the Phase III VIITAL study of EB-101 resumed in June after a March pause. The Phase I/II ABO-102 and ABO-101 trials continued treating patients. Manufacturing operations, clinical activity and development work had been scaled back and resumed in stages; further pandemic-related delays remain possible.
- REGENXBIO license and arbitration: The AAV9 license covering programs for MPS IIIA, MPS IIIB, CLN1 and CLN3 terminated May 2, 2020 after an unpaid fee. Abeona seeks a ruling that it owes no $28 million in disputed 2020 payments plus $0.8 million accrued interest; REGENXBIO counterclaims for those amounts. No arbitration schedule had been set. Loss of access to the licensed technology and potential future intellectual-property claims could affect these programs.
- PPP loan: Abeona received approximately $1.8 million and intended to use it for eligible purposes. Forgiveness is uncertain; the company also disclosed potential eligibility reviews, repayment and enforcement risks.
- Funding and development: Abeona expects continued losses and substantial development spending. Future capital needs depend on trial progress, manufacturing, regulatory outcomes, COVID-19 effects and access to financing. Additional equity could dilute existing holders; other financing or partnering could require concessions.
- Other items: The company canceled remaining contract-manufacturer work during Q2, eliminating a previously reported $6.3 million commitment. No quantified earnings or revenue guidance was provided.
Important facts for investors to verify
- Progress and outcome of the REGENXBIO arbitration, including the disputed $28 million and accrued interest, and the effect of license termination on affected programs.
- Whether PPP loan forgiveness is obtained and whether any SBA review or eligibility challenge arises.
- Cash burn, liquidity runway and financing needs as clinical and manufacturing activities resume; reconcile management’s working-capital discussion with the cash flow statement’s $22.7 million H1 operating cash use.
- COVID-19 effects on VIITAL enrollment, other trials, manufacturing capacity, suppliers and regulatory timelines.
- Share-count and dilution details: June 30 common shares outstanding were 84.8 million, while Q2 weighted-average shares used for loss per share were 93.2 million; confirm the effect of pre-funded warrants and other securities.