Abeona Therapeutics Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2019. The interim financial statements are unaudited. Abeona is a clinical-stage biopharmaceutical company developing gene and cell therapies for rare genetic diseases, including EB-101 for RDEB and AAV-based programs for Sanfilippo syndrome and other conditions.
Financial performance and position
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $1.7 million | $0 | $2.5 million |
| Research and development expense | $10.9 million | $13.2 million | $39.0 million | $29.2 million |
| General and administrative expense | $4.7 million | $5.0 million | $16.0 million | $12.5 million |
| Depreciation and amortization | $2.0 million | $0.5 million | $5.7 million | $1.0 million |
| Net loss | $17.4 million | $16.4 million | $59.9 million | $39.2 million |
| Loss per share, basic and diluted | $0.35 | $0.34 | $1.22 | $0.83 |
- Q3 revenue was nil because foundation revenue had already been recognized up to the cash received for work completed; MuGard royalties were also nil. Nine-month 2018 revenue included $2.4 million of foundation revenue and $0.1 million of royalties.
- For the nine months, operating cash use was $48.6 million, compared with $22.1 million in 2018. Investing activities provided $60.9 million, mainly from maturities of short-term investments; financing provided $17.4 million, including $17.0 million from open-market stock sales. Cash, cash equivalents and restricted cash ended the period at $49.0 million.
- At September 30, cash and cash equivalents were $47.9 million, short-term investments were zero, and working capital was $29.4 million. Total assets were $142.8 million; stockholders’ equity was $96.1 million. Accumulated deficit was $470.0 million.
- Liabilities included $30.0 million payable to REGENXBIO ($10.0 million current and $20.0 million long-term) and $8.2 million of operating lease liabilities. The filing does not report conventional borrowings or other interest-bearing debt.
- Margins are not meaningful to assess because the company reported no revenue in 2019 and remains in clinical development.
Material changes and notable items
- Q3 net loss increased by $1.0 million year over year despite lower R&D and G&A expense, primarily reflecting higher depreciation and amortization. Nine-month net loss rose by $20.7 million, as higher R&D, G&A, and amortization outweighed the absence of prior-year revenue.
- Nine-month R&D expense increased $9.7 million, mainly from clinical and development work on other gene therapy programs and added clinical, regulatory, manufacturing, and quality staff. Q3 R&D fell $2.3 million, primarily due to reduced third-party clinical and development activity.
- Depreciation and amortization increased largely because of amortization of the REGENXBIO license and depreciation related to the Cleveland production facility build-out. Adoption of the lease accounting standard in January 2019 resulted in recognition of lease assets and liabilities of approximately $8.9 million each.
- The company sold 3.1 million shares under its open-market sale agreement during the first nine months, raising $17.0 million. Shares outstanding were 51.1 million at September 30 and 51.2 million as of November 7, 2019.
- A May 2019 arbitration ruling in the company’s favor led to the return and cancellation of 450,000 shares and a $0.4 million non-cash expense. The ruling also required the claimants to bear arbitration costs and Abeona’s costs.
Liquidity, outlook and risks
- Management stated it believed available resources could fund operations for at least the next 12 months. It also described a program intended to seek liquidity through at least the end of 2020, including potential equity financing, out-licensing, spending reductions, restructuring, and asset sales. The company has incurred losses since inception and expects losses to continue; it gave no specific revenue or earnings guidance.
- In September 2019, Abeona retained Jefferies to advise on strategic alternatives, including partnering programs or a sale or merger. No outcome was disclosed.
- In September 2019, the FDA placed the planned EB-101 Phase III trial on clinical hold pending additional transport-stability data. Abeona said it was working with the FDA but could not predict when the hold would be lifted; trial timing and potential revenue are therefore uncertain.
- On November 1, 2019, after quarter-end, the company amended its REGENXBIO license payment schedule: the $10 million due November 4, 2019 was replaced by a $3 million payment due November 4, 2019 and an $8 million payment due April 1, 2020. The agreement also includes future annual fees, potential milestones, and royalties.
- A putative securities class-action complaint was filed November 1, 2019, alleging false or misleading statements and seeking unspecified damages. The company said it intended to defend the suit. Prior shareholder derivative matters described in the filing were dismissed or settled.
- Key risks include clinical and regulatory delays, manufacturing and CMC execution, ability to raise capital, continued cash burn, potential dilution or unfavorable partnering terms, and uncertainty about eventual product approval and commercialization.
Important facts for investors to verify
- Whether and when the FDA lifts the EB-101 clinical hold, and what additional transport-stability data are required.
- Actual cash runway and financing needs relative to management’s 12-month liquidity statement, including the REGENXBIO payment obligations.
- Any results of the strategic-alternatives review, including partnering, asset sales, or a potential merger or sale.
- Clinical progress, enrollment, safety and efficacy evidence, and manufacturing readiness across lead programs.
- Developments in the securities litigation and any resulting costs or exposure.