Abeona Therapeutics Inc. — Q3 2017 Form 10-Q
Business context and reporting period. Clinical-stage biopharmaceutical company developing gene therapies for rare diseases, including ABO-102 for MPS IIIA and EB-101 for recessive dystrophic epidermolysis bullosa. This unaudited report covers the quarter and nine months ended September 30, 2017; comparisons are with the corresponding 2016 periods. The company also markets MuGard, with commercialization licensed to partners.
Financial results and liquidity
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Total revenue | $219,000 | $184,000 | $622,000 | $633,000 |
| Research and development | $3.277 million | $2.745 million | $11.283 million | $7.618 million |
| General and administrative | $2.166 million | $2.391 million | $7.830 million | $10.487 million |
| Total operating expenses | $5.581 million | $5.358 million | $19.708 million | $18.682 million |
| Net loss | $5.343 million | $2.624 million | $18.869 million | $14.871 million |
| Loss per share, basic and diluted | $0.13 | $0.08 | $0.47 | $0.45 |
Cash flow and balance sheet. Cash and cash equivalents were $56.522 million at September 30, 2017, down from $69.142 million at December 31, 2016. Net cash used in operations for the first nine months was $17.609 million, versus $9.621 million in 2016; investing used $156,000 and financing provided $5.145 million, principally from warrant exercises. Working capital was $55.756 million, down from $61.125 million at year-end 2016. Total liabilities were $5.851 million, mainly accounts payable and deferred revenue; the balance sheet reports no debt. The company had an accumulated deficit of $351.342 million. Revenue is too limited to provide a meaningful operating-margin assessment.
Material changes versus prior periods
- Q3 net loss increased by $2.719 million year over year, despite only a $223,000 rise in operating expenses. The principal difference was lower interest and miscellaneous income: $21,000 versus $2.551 million, which included prior-year contingent-consideration and settlement gains.
- For the first nine months, net loss increased by $3.998 million. R&D rose $3.665 million, primarily from clinical and development work on ABO-102, EB-101, ABO-101, and other gene-therapy programs. G&A fell $2.657 million, largely because of lower stock-based compensation.
- Nine-month operating cash use increased by $7.988 million from 2016. The filing attributes the increased development spending to advancing clinical and manufacturing work.
Outlook, developments, and risks
- Management expects continued losses and substantial R&D, preclinical, clinical, and regulatory spending for the next several years. It says the company has incurred negative operating cash flows since inception and cannot assure sustained profitability or sufficient future product or royalty revenue.
- After quarter-end, Abeona completed a public offering of 5.75 million shares at $16 per share, generating $92 million gross proceeds before offering costs. Cash was reported at $142.618 million as of October 31, 2017. These subsequent-period amounts are not included in the September 30 balance sheet.
- Nine Sanfilippo foundations agreed to provide up to approximately $13.85 million in milestone-contingent grants. The filing does not state that all funds were received.
- Management reported preliminary one-year ABO-102 cohort observations, including reduced CSF heparan sulfate and liver-volume normalization; the reported sample was small. No drug-related serious adverse events were reported in Cohort 1 through more than 2,000 cumulative follow-up days. The company said expansion-cohort data might support a BLA submission but cautioned it had no assurance from the FDA.
- Subsequent clinical milestones included enrollment of the first two patients in an ABO-102 expansion cohort and enrollment of the first patient at a Spanish clinical site. Clinical efficacy, safety, regulatory progress, manufacturing, financing needs, and potential shareholder dilution remain material uncertainties.
- The company reported effective disclosure controls and no material changes in internal control over financial reporting. It reported no material legal proceedings or off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the post-quarter offering proceeds, net of costs, and conditional foundation grants provide adequate runway relative to the company’s development spending and cash burn.
- The detailed ABO-102 clinical data, cohort sizes, adverse-event context, and FDA feedback; the filing provides no assurance of a BLA filing or approval.
- Whether increased R&D spending and clinical/manufacturing progress translate into durable clinical and regulatory milestones.
- The extent of future equity issuance and dilution; common shares outstanding were 40,924,659 at September 30 and 46,775,257 on November 13, 2017.
- The effects of adopting the new revenue-recognition and lease-accounting standards, which the company was still evaluating.