Abeona Therapeutics Inc. — Q3 2018 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2018. Unaudited results. Abeona is a clinical-stage biopharmaceutical company developing cell and gene therapies for rare genetic diseases; it reported substantial R&D spending and continuing losses.
Key financial metrics
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Total revenue | $1.709 million | $0.219 million | $5.126 million | $0.622 million |
| Research and development | $13.150 million | $3.277 million | $29.228 million | $11.283 million |
| General and administrative | $4.970 million | $2.166 million | $12.475 million | $7.830 million |
| Total operating expenses | $18.625 million | $5.581 million | $42.672 million | $19.708 million |
| Operating loss | $16.916 million | $5.362 million | $37.546 million | $19.086 million |
| Net loss | $16.419 million | $5.343 million | $36.582 million | $18.869 million |
| Basic and diluted loss per share | $0.34 | $0.13 | $0.77 | $0.47 |
- Revenue composition: Grant revenue was $1.687 million in Q3 and $5.037 million for the nine months, primarily recognized to match eligible Sanfilippo program expenses. MuGard royalties were $22,000 and $89,000, respectively. No license revenue was reported in 2018.
- Margins: The filing does not provide a meaningful gross margin; revenue is limited and the company reports operating expenses rather than product cost of sales.
- Cash and liquidity: At September 30, cash and cash equivalents were $33.599 million and marketable securities were $78.625 million, totaling $112.224 million. Working capital was $104.220 million. Management stated existing cash and cash equivalents would fund operating and capital requirements for at least 12 months.
- Cash flow: Nine-month operating cash use was $22.144 million; capital expenditures were $8.580 million. Investing cash use was $87.205 million, largely reflecting purchases of marketable securities. Financing provided $5.478 million, mainly from warrant and option exercises. Cash, cash equivalents and restricted cash ended at $34.159 million.
- Debt and balance sheet: The balance sheet reports no debt. Total liabilities were $10.331 million, consisting of accounts payable; stockholders’ equity was $150.245 million. Accumulated deficit was $392.711 million.
Material changes versus comparable periods
- Q3 revenue rose to $1.709 million from $219,000, principally due to foundation grants. Nine-month revenue increased to $5.126 million from $622,000.
- Operating expenses rose $13.044 million in Q3 and $22.964 million for the nine months. R&D increases reflected clinical and manufacturing work on EB-101, ABO-102, ABO-101 and other programs; G&A also increased, including compensation, executive searches, legal and audit costs.
- Net loss widened by $11.076 million in Q3 and $17.713 million for the nine months. Loss per share increased to $0.34 and $0.77, respectively.
- Cash and cash equivalents plus marketable securities declined from $137.750 million at December 31, 2017 to $112.224 million at September 30, 2018. Property and equipment increased to $9.245 million from $1.374 million, reflecting capital investment including completion of a manufacturing facility.
- The company adopted ASC 606 on January 1, 2018 using the modified retrospective method. The $3.663 million cumulative adjustment increased opening equity and reduced deferred revenue. Under the new standard, previously recognized license revenue was not recognized in 2018; this accounting change affects comparability with 2017.
- Common shares outstanding increased from 46.888 million at year-end 2017 to 47.944 million at September 30, 2018. The company also had 5.999 million options and 2.221 million warrants excluded from diluted EPS as antidilutive.
Outlook, developments and risks
- Management expects continuing losses for several years while funding research, preclinical work, clinical trials and regulatory compliance; it gave no profitability guidance. It cautioned that sustained profitability may not be achieved.
- On August 17, 2018, Abeona established an at-the-market sale agreement allowing up to $150 million of common stock sales through Jefferies. No amount of sales under this agreement is specified in the supplied filing text. Additional equity financing could dilute existing holders.
- On September 12, the company announced authorization for a Phase 1/2 trial of ABO-101 for MPS IIIB in Spain. It also described plans to add European sites to the MPS IIIA trial. Trial results and regulatory outcomes remain uncertain.
- Subsequent event: On November 5, 2018, Abeona announced a REGENXBIO license for its NAV AAV9 vector covering MPS IIIA, MPS IIIB, CLN1 and CLN3 programs, subject to previously granted non-exclusive rights for MPS IIIA. Terms include a guaranteed $20 million upfront payment ($10 million at signing and $10 million within 12 months), $100 million in annual fees over years two through six (of which $20 million is guaranteed), up to $60 million in commercial milestones, and low-double-digit royalties on net sales. These commitments arose after quarter-end.
- Management cited clinical, manufacturing, financing, commercialization and regulatory uncertainties. It reported no material changes to the risk factors in its 2017 Form 10-K, no material pending legal proceedings, and no off-balance-sheet arrangements. Disclosure controls were concluded effective as of September 30, 2018.
Important facts for investors to verify
- Cash runway assumptions and the timing and size of future operating, manufacturing and clinical-trial expenditures.
- Payment obligations and guaranteed versus contingent fees under the REGENXBIO agreement, including funding sources and royalty economics.
- Whether Abeona uses the $150 million ATM facility and the resulting share dilution.
- Clinical progress, safety and efficacy data, enrollment, site expansion, and regulatory timelines for lead programs, particularly ABO-101, ABO-102 and EB-101.
- The effect of ASC 606 on future licensing revenue recognition and comparability with prior periods.