Abeona Therapeutics Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. The unaudited filing was dated August 9, 2019. Abeona is a clinical-stage gene- and cell-therapy company; it reported no revenue in either 2019 period.
Financial results and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $276,000 | $0 | $807,000 |
| Research and development expense | $16.3 million | $7.9 million | $28.0 million | $16.1 million |
| General and administrative expense | $5.6 million | $4.6 million | $11.3 million | $7.5 million |
| Total expenses | $24.0 million | $12.8 million | $43.0 million | $24.0 million |
| Net loss | $23.9 million | $12.2 million | $42.5 million | $22.8 million |
| Loss per share, basic and diluted | $0.49 | $0.26 | $0.88 | $0.48 |
- Six-month operating cash use was $30.3 million, versus $13.1 million in 2018. Investing activities provided $41.7 million, mainly from short-term investment maturities; financing provided $13.0 million, including $12.6 million from common-stock sales.
- At June 30, cash and cash equivalents were $42.6 million and short-term investments were $19.9 million, totaling $62.5 million. Working capital was $39.4 million, down from $68.5 million at year-end 2018. Current assets were $64.9 million and current liabilities $25.5 million.
- Total liabilities were $52.3 million, including $30.0 million payable to a licensor and $8.4 million in operating lease liabilities. The filing reports no conventional borrowings.
- No meaningful gross margin is reported: the company had no revenue and is not yet product-sales-focused. Operating loss was $24.0 million for Q2 and $43.0 million for the first half.
Material changes and notable items
- Compared with 2018, first-half R&D expense rose $11.9 million, primarily from clinical and development work on EB-101, ABO-102, ABO-101 and other gene-therapy programs, and increased scientific staffing. G&A rose $3.8 million, mainly from compensation, professional fees and rent.
- Depreciation and amortization increased to $3.7 million for the first half from $0.5 million, reflecting REGENXBIO license amortization and investment in the Cleveland manufacturing facility.
- In Q2, Abeona sold 1.66 million shares under its open-market sale agreement for $12.6 million. Shares outstanding were 49.25 million at June 30, versus 47.94 million at December 31, 2018.
- An arbitration ruling concerning the EB Research Partnership and EB Medical Research Foundation agreement required cancellation of 450,000 shares still held by the claimants. Abeona recorded a non-cash expense of $367,000; the ruling was in the company’s favor.
- Adoption of lease accounting resulted in recognition of right-of-use assets and lease liabilities. The company also disclosed corrections to previously reported 2018 revenue and losses related to its ASC 606 adoption.
Outlook, risks and commitments
- Management said existing resources were sufficient for at least the next 12 months, while also pursuing a liquidity program intended to support operations through at least the end of 2020. Potential measures include equity financing, out-licensing or asset sales, expenditure deferrals, restructuring or headcount reductions.
- Abeona expects continued losses and substantial R&D and manufacturing spending; it gave no specific revenue, earnings or cash-burn guidance. Management highlighted potential dilution from equity issuance and the possibility of delaying or reducing programs if financing is unavailable.
- The company described four programs in clinical development: EB-101, ABO-101, ABO-102 and ABO-202. The filing identifies the ability to initiate a Phase III RDEB trial in Q4 2019 as a forward-looking objective, not a guaranteed outcome.
- Key risks include clinical-trial efficacy and safety, regulatory outcomes, patient enrollment, manufacturing scale-up and cGMP compliance, intellectual-property protection, competition, and the need for additional capital.
- Under the REGENXBIO license, Abeona owed a further $10 million by November 4, 2019. The agreement also includes annual fees, some guaranteed, potential commercial milestones and royalties.
- Stockholder derivative litigation concerning director compensation was settled in May 2019; the related Dos Ramos action was dismissed in August 2019. Management reported no material changes to the risk factors in the 2018 Form 10-K and said disclosure controls were effective.
Important facts for investors to verify
- Whether the liquidity plan delivers funding through the stated horizon, and how much additional equity or other financing may be required.
- Actual cash burn and the remaining cash, investment and working-capital balance in subsequent filings.
- Progress, enrollment, safety and regulatory status for EB-101, ABO-102, ABO-101 and ABO-202, including the stated Phase III timing objective.
- Fulfillment of REGENXBIO payment obligations and the effect of future license fees, milestones and royalties on cash needs.
- Future share issuance under the open-market sale agreement and its dilution impact.