Abeona Therapeutics Inc. — 2017 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2017. The filing was signed March 16, 2018. This is an annual report; it does not provide separate fourth-quarter financial results.
Business context
Abeona is a clinical-stage biopharmaceutical company developing cell and gene therapies for rare genetic diseases. Its lead programs included EB-101 for recessive dystrophic epidermolysis bullosa and ABO-102 and ABO-101 for Sanfilippo syndrome types A and B. MuGard was its marketed product, commercialized through licensees. Revenue remained limited, and the company depended primarily on external financing.
Key financial metrics
| Metric | 2017 | 2016 |
|---|---|---|
| Total revenue | $837,000 | $889,000 |
| Research and development expense | $16.989 million | $10.655 million |
| General and administrative expense | $10.943 million | $13.290 million |
| Total operating expenses | $28.673 million | $24.770 million |
| Net loss | $27.319 million | $21.873 million |
| Basic and diluted loss per share | $0.66 | $0.64 |
| Cash used in operating activities | $22.935 million | $13.014 million |
| Cash and cash equivalents at year-end | $137.750 million | $69.142 million |
| Working capital at year-end | $134.985 million | $61.125 million |
Licensing revenue was unchanged at $602,000; MuGard royalties declined to $235,000 from $287,000. Operating and net margins are not meaningful indicators given very low revenue and substantial development spending. The filing does not report a conventional debt balance; total liabilities were $8.668 million, primarily deferred revenue and accounts payable. There was no material pending litigation reported. Cash flow from financing activities was $92.403 million, including $86.174 million net proceeds from the 2017 public offering and proceeds from warrant and option exercises.
Material changes and developments
- R&D expense rose $6.334 million, principally due to increased clinical and product-development work, including EB-101, ABO-102 and ABO-101. G&A expense fell $2.347 million, largely reflecting lower stock-based compensation.
- Net loss increased $5.446 million, also reflecting lower interest and miscellaneous income than in 2016. Operating cash use increased by $9.921 million.
- In October 2017, Abeona sold 5.75 million common shares at $16 each, raising approximately $92 million gross and $86.174 million net. Outstanding shares increased from 40.254 million at 2016 year-end to 46.888 million at 2017 year-end.
- Nine Sanfilippo foundations agreed to provide up to approximately $13.85 million in milestone-based grants; $2.6 million had been received by year-end and recorded as deferred revenue.
- The company reported first-patient dosing in Phase 1/2 trials for ABO-102 and ABO-101 in 2017. It also dedicated a Cleveland gene-therapy manufacturing facility and announced a manufacturing collaboration for ABO-102.
Outlook, commentary and risks
Management expected continued losses and substantial spending on research, preclinical work, clinical trials and regulatory compliance. The filing gave no quantified revenue, earnings or cash-flow guidance. ABO-202 was anticipated to enter clinical trials in 2018. Management said ABO-102 expansion-cohort data might support a future biologics license application, but noted there was no assurance that the FDA would agree.
Post-year-end updates described ABO-102 clinical data and preliminary 30-day safety and biopotency signals in the first ABO-101 patient; these were early findings from small patient cohorts, not established evidence of efficacy. The company also reported 2018 FDA designations for ABO-202 and EB-101. These subsequent developments do not change the 2017 financial results.
- Key risks include clinical or regulatory failure, delays, adverse events, manufacturing scale-up and dependence on third-party collaborators and contract manufacturers.
- Abeona reported awareness of a third-party AAV9 patent and expected to seek a license before commercialization of certain candidates; obtaining acceptable rights was not assured. Development also depends on licensed intellectual property, including the Nationwide Children’s Hospital licenses for ABO-101 and ABO-102.
- The company had an accumulated deficit of $359.792 million and stated that it would need substantial capital to fund operations. Further equity financing could dilute existing holders; insufficient funding could delay, reduce or end programs.
- Commercialization depends on market acceptance, reimbursement, competition, intellectual-property protection and licensees’ ability to sell MuGard. Management did not expect significant near-term product revenue.
- The company reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal controls. No material legal proceeding or off-balance-sheet arrangement was reported.
Important facts for investors to verify
- Current cash, operating cash burn and expected funding runway, including the timing and conditions attached to remaining foundation grants.
- Updated safety, efficacy, enrollment and regulatory milestones for ABO-102, ABO-101 and EB-101; assess the limited patient counts and duration of follow-up behind reported signals.
- Status and terms of required AAV9 and other third-party intellectual-property licenses, and continued rights under key university and hospital agreements.
- Manufacturing-facility readiness, production capacity and contract-manufacturing arrangements for clinical and potential commercial supply.
- Share-count dilution from financing, warrants and equity awards, and the resulting effect on per-share value.