Abeona Therapeutics Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited consolidated financial statements; amounts below are in U.S. dollars unless noted.
Business context and reporting period
Abeona is a clinical-stage cell and gene therapy company with no significant product revenue. Its lead program, pz-cel, is an investigational engineered cell therapy for recessive dystrophic epidermolysis bullosa (RDEB). The company also has preclinical AAV programs focused on ophthalmic diseases.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $7.2 million | $8.0 million; down 10% |
| General and administrative expense | $7.1 million | $4.0 million; up 78% |
| Total operating expenses / operating loss | $14.3 million / $(14.3) million | $12.0 million / $(12.0) million |
| Net loss | $(31.6) million | $(9.1) million |
| Basic and diluted loss per share | $(1.16) | $(0.54) |
| Cash used in operating activities | $14.5 million | $11.7 million |
| Cash, cash equivalents and restricted cash at quarter-end | $17.9 million | $5.0 million at March 31, 2023 |
| Cash resources, including short-term investments, at quarter-end | $62.7 million | $52.2 million at December 31, 2023 |
| Debt | $20.0 million principal; $18.1 million carrying value | No debt at December 31, 2023 |
No meaningful operating margin is presented because the company had no revenue. Quarter-end current assets were $66.7 million and current liabilities were $11.9 million. Total liabilities were $83.7 million, including $48.7 million of warrant liabilities; stockholders’ equity was a deficit of $8.9 million.
Material changes versus the prior comparable period
- Net loss increased by $22.5 million. The largest driver was a $17.3 million non-cash loss from remeasurement of warrant and derivative liabilities, compared with a $2.3 million gain in Q1 2023. The filing attributes the change primarily to the increase in the company’s share price and a shorter term.
- Operating expenses rose 19%. Lower R&D spending, mainly due to reduced clinical and development work, was more than offset by higher G&A, including pre-commercial preparation, compensation and stock-based compensation.
- Operating cash use increased by $2.8 million year over year. Financing provided $25.4 million, principally from $6.4 million of ATM sales and $19.0 million of net proceeds from the January loan.
- In January 2024, Abeona entered into a senior secured credit facility of up to $50 million and borrowed the initial $20 million tranche. The facility bears interest at 13.5% as of March 31, 2024.
Outlook, commentary and risks
- pz-cel regulatory update: The FDA issued a Complete Response Letter on April 16, 2024, after quarter-end. It cited outstanding Chemistry, Manufacturing and Controls (CMC) information and validation requirements, including matters from the pre-license inspection. The FDA did not identify clinical efficacy or safety deficiencies and did not request additional clinical trials or clinical data. Abeona’s proposed submission schedule did not leave the FDA sufficient review time before the May 25, 2024 target date. The filing gives no clear revised approval or resubmission date.
- Management’s clinical commentary: The company reported that its VIITAL study met both co-primary endpoints, with statistically significant and clinically meaningful improvements in wound healing and pain reduction. It continues preparing its Cleveland facility and engaging with treatment centers and payors, conditional on approval.
- Liquidity: On May 7, 2024, Abeona completed an underwritten offering of common stock and pre-funded warrants. The filing estimates net proceeds of approximately $70.2 million (gross proceeds of $75.0 million). Management believes quarter-end cash resources plus the offering proceeds will fund operating expenses and capital expenditures for at least 12 months from issuance of the statements. The company expects ongoing losses and may need additional funding; financing availability, regulatory delays and unanticipated costs could affect liquidity.
- Debt conditions: The $20 million loan is secured by substantially all company assets, carries a $5 million minimum unrestricted-cash covenant and is due July 1, 2027. Additional committed borrowing depends on FDA approval of pz-cel; a further tranche is at lenders’ discretion. The loan also includes warrants and a conversion feature that create fair-value liabilities and potential dilution.
- Other risks and contingencies: Abeona cautions that it may be unable to meet CMC requirements or its anticipated timeline, manufacture at commercial scale, obtain additional financing, or commercialize its candidates successfully. It reported no legal proceedings. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- FDA follow-up on the pz-cel CRL: required CMC evidence, submission and review timetable, and whether further manufacturing or inspection issues arise.
- Whether the approximately $70.2 million of estimated net offering proceeds, together with other resources, supports the stated 12-month liquidity outlook as operating cash use continues.
- Loan terms and covenant compliance, including the 13.5% interest rate, secured status, minimum cash requirement, and conditions for additional tranches.
- Potential dilution from the May offering, outstanding warrants and pre-funded warrants, the ATM program, and the loan-related conversion and warrant features.
- The effect of changes in share price and valuation assumptions on the significant Level 3 warrant and derivative liabilities, which materially affected reported net loss.