Abeona Therapeutics Inc. — Q3 2015 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2015. The interim financial statements are unaudited. Abeona is a development-stage biopharmaceutical company focused on gene therapies and plasma-based treatments for rare diseases; its revenue base remained small and it reported losses.
Key financial metrics
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Total revenue | $285,000 | $236,000 | $825,000 | $691,000 |
| Operating expenses | $6.449 million | $869,000 | $13.118 million | $3.355 million |
| Operating loss | $6.164 million | $633,000 | $12.293 million | $2.664 million |
| Net loss attributable to common stockholders | $6.073 million | $2.209 million | $12.186 million | $17.026 million |
| Loss per common share | $0.19 | $4.15 | $0.47 | $32.46 |
- MuGard royalties were $134,000 for Q3 and $373,000 for the first nine months, up from $84,000 and $243,000, respectively. Licensing revenue was nearly unchanged: $151,000 for Q3 and $452,000 for nine months.
- Cash and cash equivalents were $43.282 million at September 30, 2015, versus $11.520 million at December 31, 2014. Working capital was $42.120 million, up from $8.657 million.
- Operating cash use was $7.546 million for the first nine months, compared with $509,000 in 2014. Financing provided $35.652 million, including common-stock offerings and warrant exercises; investing activities provided $3.656 million, including $3.697 million of cash acquired with Abeona Ohio.
- Total liabilities were $16.476 million and stockholders’ equity was $73.073 million at September 30. Short-term notes payable were zero; liabilities included a $4.0 million payable due to a licensor and $6.489 million of contingent acquisition consideration. The filing does not present these amounts as conventional funded debt.
- Gross profit and operating or net margins are not clearly presented as metrics in the filing; the company reported an operating loss against limited revenue.
Material changes and developments
- Operating expenses rose sharply year over year, reflecting increased product development and staffing, as well as substantial stock-based compensation and higher legal, audit, investor-relations, and other administrative costs.
- For the first nine months, net loss narrowed from 2014, principally because the 2014 period included an $11.810 million loss on the fair value of a preferred-stock derivative and preferred-stock dividends. Those preferred shares were converted into common stock in December 2014; no comparable derivative loss or preferred dividends were recorded in 2015.
- In May 2015, Abeona acquired Abeona Therapeutics LLC for 3,979,761 shares valued at $31.758 million, plus estimated contingent consideration of $6.489 million. The preliminary purchase-price allocation included $38.955 million of goodwill. Merger costs of $375,000 were expensed.
- The company raised $15.5 million in a July registered direct placement and received $4.635 million from exercise of $5.00 warrants. Additional equity issuances increased shares outstanding and diluted existing holders.
- After quarter-end, on October 6, 2015, Abeona announced a Stanford University license for AAV LK19 to support its Fanconi anemia and rare blood disease programs.
Outlook, risks, and unusual items
- Management expects continued losses and substantial spending on research and development, preclinical work, clinical trials, and regulatory compliance. The filing provides no specific revenue, earnings, cash-burn, or clinical-development guidance.
- Management states that the company has incurred negative operating cash flows since inception and cannot assure sustained profitability or that it can generate enough product sales or royalties. Additional financing may be necessary and could dilute shareholders.
- Key programs include ABO-101 and ABO-102 for Sanfilippo syndrome, ABO-201 for juvenile Batten disease, ABO-301 for Fanconi anemia, and PTB-101 for alpha-1 antitrypsin deficiency. The filing describes promising preclinical findings but does not report clinical efficacy results in this text.
- A material weakness in internal control over financial reporting, previously identified in the 2014 Form 10-K, remained under remediation. Management had not completed its review of disclosure-control effectiveness as of the filing. Abeona hired a Director of Finance and Operations and an Accounting Assistant to improve segregation of duties.
- A former Genaera shareholder’s lawsuit was dismissed in its entirety by the District Court on November 10, 2015; the plaintiff appealed the following day. Abeona said it would continue to contest the claims. The filing reports no other material pending legal proceedings.
- Risks include clinical and regulatory uncertainty, the need for additional capital, dependence on licensing and commercialization partners, and potential intellectual-property infringement claims or the inability to obtain necessary licenses.
Important facts for investors to verify
- Cash runway relative to the company’s ongoing operating cash use and anticipated development costs; no formal runway estimate is provided here.
- Progress, timing, and funding needs for clinical trials and regulatory milestones across the lead programs.
- Whether remediation resolves the disclosed material weakness and whether management concludes disclosure controls are effective.
- The terms and potential dilution from future financing, warrant exercises, and any cash or stock payments tied to acquisition milestones.
- The status of the appealed lawsuit and any material changes to the company’s licensing or intellectual-property position.