Abeona Therapeutics Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. The unaudited filing describes a clinical-stage biopharmaceutical company developing cell and gene therapies for rare genetic diseases. Its lead programs include EB-101 for RDEB and ABO-102 and ABO-101 for Sanfilippo syndrome types A and B. MuGard is a marketed product licensed to commercial partners.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 or prior date |
|---|---|---|
| Total revenue | $2.598 million | $0.186 million |
| Research and development | $8.162 million | $2.198 million |
| General and administrative | $2.878 million | $3.022 million |
| Total operating expenses | $11.214 million | $5.470 million |
| Operating loss | $8.616 million | $5.284 million |
| Net loss | $8.463 million; $0.18 per share | $5.247 million; $0.13 per share |
| Cash used in operations | $4.082 million | $5.857 million |
| Cash and cash equivalents | $131.995 million at March 31, 2018 | $137.750 million at December 31, 2017 |
| Working capital | $127.697 million | $134.985 million at December 31, 2017 |
Investing activities used $3.502 million, primarily reflecting capital expenditures, versus $0.074 million in Q1 2017. Financing activities provided $1.829 million, mainly from option and warrant exercises. Cash, cash equivalents, and restricted cash declined by $5.755 million during the quarter. The company reported total liabilities of $6.454 million, comprising accounts payable and deferred revenue; the balance sheet shows no debt. No gross margin is reported, and the filing does not provide a clear basis for assessing product-level margins.
Management said existing cash and cash equivalents should fund operating expenses and capital expenditure requirements for at least the next 12 months. The company has incurred operating losses and negative operating cash flow since inception, expects continued losses for several years, and may need additional financing; equity financing could dilute existing holders.
Material changes and notable items
- Revenue increased largely because $2.548 million of foundation-grant revenue was recorded in Q1 2018, compared with none in Q1 2017. MuGard royalties were $50,000 versus $35,000. License revenue was zero versus $151,000.
- Comparability is affected by adoption of ASC 606 on January 1, 2018. The adoption reduced deferred revenue and increased opening equity by $3.663 million. The company stated that the standard eliminated recognition of $151,000 of Q1 license revenue that would have been reported under ASC 605.
- R&D expense rose $5.964 million, primarily due to increased clinical and development work for EB-101, ABO-102, ABO-101, and other gene therapy programs, as well as higher scientific staffing and stock-option costs. G&A expense fell $0.144 million.
- Capital expenditures were $3.502 million; the filing notes construction in progress for Cleveland manufacturing facilities and a remaining construction commitment of $1.456 million.
- Shares outstanding were 47,232,940 at March 31, 2018 and 47,305,285 as of May 10, 2018. Weighted-average shares in Q1 2018 were 47,060,523, compared with 40,254,679 a year earlier.
Outlook, developments, and risks
The company’s development programs remain subject to clinical, manufacturing, regulatory, financing, and commercialization risks. Management cautioned that actual results could differ materially from forward-looking statements; sustained profitability is uncertain. The filing reports no material legal proceedings, no off-balance-sheet arrangements, and no material changes to the risk factors in the 2017 Form 10-K. Disclosure controls were concluded to be effective as of March 31, 2018.
- During Q1, Abeona reported updated ABO-102 Phase 1/2 results for 10 patients and preliminary 30-day safety and biopotency results for the first ABO-101 patient. These are clinical-stage findings, not evidence of established efficacy or approval.
- After quarter-end, the FDA granted RMAT designation to ABO-102 on April 23, 2018. The filing also reports post-quarter EMA orphan designation for ABO-202. During Q1, the FDA granted ABO-202 rare pediatric disease designation and orphan drug designation, and granted EB-101 RMAT designation.
- ABO-202 was anticipated to enter clinical trials in 2018. The company also described potential submission of a BLA for ABO-102 as dependent on further clinical data and regulatory requirements.
- On March 29, 2018, F. Carsten Thiel was appointed CEO; Timothy J. Miller remained President and became Chief Scientific Officer.
Investor facts to verify
- How much of the reported grant revenue reflects eligible expenses and milestone-based funding, and what remains available under the foundations’ grant commitment of up to approximately $13.85 million?
- Whether clinical data for ABO-102, ABO-101, and EB-101 support the expected development and regulatory timelines, including any BLA plans.
- Whether the stated cash runway of at least 12 months remains valid as R&D spending, manufacturing build-out, and clinical activity progress.
- The expected total cost and timing of Cleveland manufacturing construction, including the disclosed $1.456 million remaining commitment.
- Future financing needs and potential dilution, including the effect of outstanding options and warrants.