Abeona Therapeutics Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020; interim financial statements are unaudited. Abeona is a clinical-stage gene and cell therapy company developing treatments for rare genetic diseases, including EB-101 for RDEB and ABO-102/ABO-101 for MPS IIIA/IIIB. It has not generated significant product revenue or achieved profitability.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $7.0 million | None | $7.0 million | None |
| Research and development | $8.0 million | $10.9 million | $20.9 million | $39.0 million |
| General and administrative | $4.4 million | $4.7 million | $16.4 million | $16.0 million |
| Net loss | $7.2 million | $17.4 million | $68.4 million | $59.9 million |
| Loss per share, basic and diluted | $0.08 | $0.35 | $0.73 | $1.22 |
| Cash used in operating activities | Not separately stated for the quarter | $33.4 million | $48.6 million |
- At September 30, cash and cash equivalents were $8.4 million, short-term investments $88.4 million, and receivables $7.0 million—$103.9 million combined. Working capital was $65.8 million, versus $93.7 million at December 31, 2019.
- Total assets were $159.4 million and stockholders’ equity $115.1 million. Current liabilities were $38.7 million, including $30.1 million payable to licensor. The company also reported a $1.8 million PPP loan and $7.2 million of lease liabilities.
- Cash, cash equivalents and restricted cash decreased by $121.0 million in the first nine months, to $9.4 million. Investing cash outflow of $89.5 million mainly reflected net purchases of short-term investments; this reallocation is distinct from operating cash burn.
- Margins are not meaningful for this clinical-stage business; the filing reports no significant product revenue. The $7.0 million revenue was fixed consideration under the Taysha agreement.
Material changes and unusual items
- In August, Abeona sublicensed worldwide exclusive rights to its CLN1 gene-therapy program, ABO-202, and sold related inventory to Taysha Gene Therapies. The company recognized $7.0 million fixed revenue, collected in October. The contract also provides up to $26.0 million in event-based milestones, up to $30.0 million in sales-based milestones, and royalties; none of those variable amounts had been recognized.
- Nine-month net loss increased year over year despite lower R&D spending, primarily because of a $32.9 million non-cash impairment charge for REGENXBIO-licensed technology. The technology license terminated May 2, 2020; the remaining net carrying value was $1.9 million at quarter-end.
- R&D expense fell $18.1 million for the nine-month period, partly due to COVID-related reductions in clinical, manufacturing and development activity and the decision to internally manufacture EB-101 retrovirus. G&A rose $0.4 million, including higher salary-related costs partly associated with management changes.
- Interest and other expense was $2.7 million for the first nine months, mainly accrued interest on amounts disputed with REGENXBIO. The company recorded $30.1 million payable to licensor; REGENXBIO claims $28.0 million plus interest, while Abeona disputes liability. Accrued interest was $2.1 million at September 30. Arbitration was expected in the first half of 2021.
- In October 2020, all 9.0 million pre-funded warrants were exercised and converted into common shares. The filing reported 98.5 million shares outstanding on November 2, compared with 84.5 million common shares on the September 30 balance sheet.
Outlook, risks and contingencies
- Management said existing cash, cash equivalents, receivables and short-term investments were expected to fund operations for at least 12 months from the report date. It also said additional funding would be needed to complete planned R&D; no formal earnings or revenue guidance was provided.
- In October, Abeona retained Jefferies to review strategic alternatives, including partnerships for programs, a sale of assets, or a sale or merger of the company. There was no defined timeline or assurance of a transaction.
- The Phase III VIITAL study of EB-101 was paused in March due to COVID-19 and resumed enrollment in June. Management said clinical sites were active and MPS IIIA/IIIB trials continued, but warned that renewed disruptions could affect enrollment, manufacturing, suppliers, regulatory reviews and access to capital.
- The $1.8 million PPP loan may be eligible for forgiveness, but forgiveness is not assured. The filing also identifies potential repayment, audit, penalty and eligibility risks.
- Losses, cash requirements, dependence on future financing, uncertain clinical and regulatory outcomes, manufacturing risks, competition, intellectual-property issues and the REGENXBIO dispute are material risks. Abeona warned that it may need to delay, limit or terminate programs if it cannot obtain funding.
Most important facts for investors to verify
- Cash runway assumptions and the rate of operating cash use, particularly given $33.4 million operating cash outflow over nine months and management’s stated need for future funding.
- Outcome and timing of the REGENXBIO arbitration, including the potential $28.0 million claim plus interest and any implications of termination of the AAV9 license for affected programs.
- Progress, enrollment and timelines for VIITAL and the MPS IIIA/IIIB trials, including any continuing COVID-related effects.
- Whether Taysha milestones or royalties become payable, and how the CLN1 program transfer affects Abeona’s remaining pipeline and economics.
- PPP loan forgiveness and any impact of the post-quarter exercise of pre-funded warrants on share count and dilution.