Abeona Therapeutics Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; interim financial statements are unaudited. Comparative period is Q1 2015 unless otherwise stated.
Business context
Abeona is a development-stage biotechnology company focused on gene therapies and plasma-based treatments for rare diseases. Its pipeline includes ABO-101 and ABO-102 for Sanfilippo syndrome, ABO-201 for juvenile Batten disease, ABO-301 for Fanconi anemia, and PTB-101 for alpha-1 antitrypsin deficiency. MuGard is marketed through licensing partners; the company also holds FDA clearance for ProctiGard.
Financial results and liquidity
| Metric | Q1 2016 / March 31, 2016 | Comparable period / December 31, 2015 |
|---|---|---|
| Total revenue | $235,000 | $258,000 |
| Operating expenses | $6.395 million | $2.260 million |
| Operating loss | $6.160 million | $2.002 million |
| Net loss | $5.544 million; $0.17 per share | $2.000 million; $0.10 per share |
| Cash and cash equivalents | $37.395 million | $40.138 million |
| Working capital | $30.196 million | $39.091 million |
| Net cash used in operating activities | $2.516 million | $3.163 million |
License revenue was unchanged at $151,000; MuGard royalties declined to $84,000 from $107,000. The filing does not present gross profit or a gross margin. The company reported an accumulated deficit of $316.144 million. Total liabilities were $11.759 million, including $602,000 current and $4.115 million long-term deferred revenue, a $2.0 million contingent consideration liability, and a $4.0 million licensor payable reclassified to current. No borrowings are reported on the balance sheet at March 31.
The cash flow statement reports $2.516 million of operating cash use, $227,000 of investing cash use, and no financing cash flow, resulting in a $2.743 million decrease in cash. The MD&A separately states operating cash use of $2.156 million; this conflicts with the cash flow statement, while its stated year-over-year decrease of $647,000 agrees with the statement’s $2.516 million figure.
Material changes and unusual items
- Net loss increased by $3.544 million year over year, primarily as operating expenses rose by $4.135 million. R&D expense increased to $1.855 million from $453,000, largely reflecting clinical-trial preparation, additional scientific staff, and compensation costs.
- G&A expense increased to $4.366 million from $1.689 million. The increase included $2.747 million of additional stock-based and restricted-stock compensation; the company also cited higher legal and other costs.
- Interest and miscellaneous income was $618,000, including a $591,000 gain from a decrease in the fair value of contingent consideration and $24,000 of interest income. The contingent consideration liability fell from $2.591 million to $2.0 million.
- Working capital fell by $8.895 million, partly because the $2.0 million contingent consideration liability and $4.0 million licensor payable were classified as current.
Development updates, outlook and risks
- The company reported regulatory approvals in Spain for Phase 1/2 studies of ABO-101 and ABO-102 and said it planned to file clinical trial authorizations. The FDA had cleared the IND for ABO-102, enabling a Phase 1/2 study at Nationwide Children’s Hospital.
- Management expects losses to continue for several years as it funds research, preclinical work, clinical trials, and regulatory compliance. It states that substantial additional funding may be needed and that failure to obtain capital could jeopardize operations; equity financing could dilute existing shareholders.
- Abeona cautions that it may never achieve sustained profitability and identifies risks involving clinical and regulatory outcomes, financing, commercialization, licensing relationships, and development of its products. No quantitative cash-runway estimate or financial guidance is provided.
- Management reported no material changes to internal control over financial reporting during the quarter and no material weakness identified in its prior-year assessment. No legal proceedings were reported.
Important facts for investors to verify
- Reconcile the MD&A operating-cash-use figure of $2.156 million with the financial statement figure of $2.516 million.
- Review the timing and terms of the $4.0 million licensor payment and $2.0 million contingent consideration now classified as current liabilities.
- Assess cash needs and potential dilution against the ongoing clinical-development plans; the filing provides no explicit runway estimate.
- Track trial initiation, enrollment, safety, efficacy, and regulatory progress for ABO-101 and ABO-102, as well as funding and development milestones for the broader pipeline.
- Consider the effect of substantial stock-based compensation on reported expenses and shareholder dilution. Q1 2016 included $1.592 million of option compensation and $1.892 million of restricted-stock compensation.