Abeona Therapeutics Inc. — Q2 2017 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2017; financial statements are unaudited. Abeona is a clinical-stage biopharmaceutical company focused on gene therapies for rare genetic diseases. Its lead programs included ABO-102 for Sanfilippo syndrome type A and EB-101 for recessive dystrophic epidermolysis bullosa (RDEB). MuGard licensing and royalties were a small source of revenue.
Financial performance and liquidity
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Total revenue | $217,000 | $214,000 | $403,000 | $449,000 |
| Research and development expense | $5.808 million | $3.018 million | $8.006 million | $4.873 million |
| General and administrative expense | $2.642 million | $3.730 million | $5.664 million | $8.096 million |
| Total operating expenses | $8.657 million | $6.929 million | $14.127 million | $13.324 million |
| Net loss | $8.279 million | $6.703 million | $13.526 million | $12.247 million |
| Loss per share, basic and diluted | $0.21 | $0.20 | $0.34 | $0.37 |
Revenue consisted of licensing income and royalties; the company reported no product-sales revenue in the presented results. No meaningful operating margin was reported given the very low revenue and ongoing development costs.
Cash and cash equivalents were $58.304 million at June 30, 2017, down from $69.142 million at December 31, 2016. Working capital was $55.049 million, down from $61.125 million. Six-month operating cash use was $10.839 million, versus $5.632 million in the prior-year period; investing cash use was $84,000 and financing cash provided was $85,000. Total liabilities were $7.581 million, including deferred revenue; the balance sheet showed no debt. Accumulated deficit was $345.999 million.
Changes versus prior comparable periods
- Q2 net loss increased by $1.576 million year over year, as higher R&D spending more than offset lower G&A expense.
- Six-month net loss increased by $1.279 million. R&D expense rose $3.133 million, mainly from clinical and development work on ABO-102, EB-101, ABO-101 and other gene therapy programs.
- Six-month G&A expense fell $2.432 million, primarily because of lower stock-based compensation and salary costs.
- Six-month revenue declined $46,000, reflecting lower royalties; licensing revenue was unchanged.
- Cash fell $10.838 million during the first half, and operating cash use was substantially higher than in the first half of 2016.
Outlook, developments and risks
- Management expected continued losses for several years as it funded research, preclinical work, clinical trials and regulatory compliance. The filing provided no specific financial guidance or stated cash-runway estimate.
- On July 18, 2017, Abeona reported that FDA feedback from a Type C meeting recommended advancing EB-101 into a pivotal Phase 3 trial. The company also cited collaborator-reported EB-101 wound healing of more than 50% for over two years after treatment.
- During the quarter, FDA granted orphan drug designation to ABO-201 for juvenile Batten disease; FDA also granted EB-101 orphan drug and rare pediatric disease designations. Australian regulatory approval to initiate an ABO-102 Phase 1/2 trial was announced in May.
- A May 2017 agreement formed Acestor Therapeutics, owned 80% by Abeona and 20% by Plasma Technologies. The agreement transferred a license to Acestor and waived Abeona’s $4.0 million payable to Plasma Technologies; Acestor instead agreed to pay Plasma Technologies 10% of proceeds from qualifying financing by November 26, 2017. Acestor was formed to seek approximately $5 million in financing.
- Key risks include clinical and regulatory uncertainty, the need to raise additional capital, continuing operating losses, and possible dilution if additional equity is issued. Management stated it could not assure sustained profitability or that product and royalty revenue would be sufficient.
Key facts for investors to verify
- Cash use and available liquidity relative to the timing and cost of planned trials, including the proposed EB-101 pivotal study.
- Whether Acestor obtained the contemplated financing and the resulting economic effects of the Plasma Technologies agreement.
- Subsequent clinical, regulatory and safety data for ABO-102, EB-101 and other pipeline programs; announcements are not evidence of approval or commercial success.
- The sustainability and composition of licensing and royalty revenue, which remained immaterial relative to operating expenses.
- Potential dilution: the filing disclosed 4,924,685 options and 3,736,617 warrants excluded from diluted EPS as antidilutive.