Abeona Therapeutics Inc. — Q1 2020 Form 10-Q
Business context and reporting period: Clinical-stage biopharmaceutical company developing gene and cell therapies for rare genetic diseases. This unaudited filing covers the three months ended March 31, 2020; balance-sheet comparisons are with December 31, 2019. Lead programs included EB-101 for RDEB and ABO-102 and ABO-101 for Sanfilippo syndromes.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development | $6.8 million | $11.7 million |
| General and administrative | $6.4 million | $5.7 million |
| Licensed technology impairment | $32.9 million | None |
| Net loss | $48.2 million | $18.6 million |
| Loss per share, basic and diluted | $0.52 | $0.39 |
| Cash used in operating activities | $13.2 million | $15.1 million |
At March 31, cash and cash equivalents were $40.2 million and short-term investments were $75.9 million, totaling $116.0 million. Working capital was $82.1 million, down from $93.7 million at year-end. Total assets were $175.0 million; stockholders’ equity was $132.4 million. The company reported no revenue, so operating margins are not meaningful.
There was no conventional borrowing disclosed. Liabilities included $28.0 million payable to REGENXBIO, $7.7 million of operating lease liabilities, and other current liabilities. The company reported a $534.6 million accumulated deficit. Cash and cash equivalents declined from $129.3 million at year-end, partly because $75.4 million was used to purchase short-term investments.
Material changes and unusual items
- Net loss increased primarily because of a $32.9 million non-cash impairment of licensed technology, partly offset by lower R&D spending.
- R&D expense fell $4.9 million year over year, primarily due to reduced clinical, manufacturing and development activity and lower salary-related costs. G&A rose $0.7 million, including higher salary and severance costs.
- After the quarter, the REGENXBIO NAV AAV9 license terminated on May 2, 2020, following nonpayment of an $8 million amount due April 1 and expiration of a cure period. Abeona no longer had the exclusive worldwide license for MPS IIIA, MPS IIIB, CLN1 and CLN3 programs. The filing states that $28 million remains due despite termination; no early termination penalty applies.
- Weighted-average shares used for Q1 2020 loss per share were 92.6 million, while period-end shares were 83.6 million. The filing explains that pre-funded warrants are included in the per-share calculation; investors should note the differing share measures.
Outlook, commentary and risks
Management stated that existing cash and cash equivalents were expected to fund operations for at least 12 months from the report’s issuance, based on current plans, while also warning that additional financing would be needed to carry out all planned R&D. The filing does not provide specific financial guidance or a quantified forecast.
COVID-19 had slowed enrollment in the MPS trials because of travel constraints, and EB-101 dosing at Stanford was paused. Manufacturing and process-development activities were scaled back or paused. Management said trial sites remained active with remote follow-up and expected to resume paused activities in the coming weeks, depending on the pandemic; it cautioned that delays and the overall financial impact could not yet be quantified.
Key risks include clinical and regulatory uncertainty, manufacturing and supply constraints, financing needs and potential dilution, and dependence on third parties. Abeona also disclosed a $6.3 million remaining contract-manufacturing commitment expected to be spent during 2020. It reported no material pending legal proceedings and no material change to other 2019 Form 10-K risk factors beyond the COVID-19 and license-related disclosures.
Important facts for investors to verify
- How the REGENXBIO license termination affects the affected programs, intellectual-property rights, and the timing and settlement of the $28 million payable.
- Whether COVID-19-related pauses and enrollment delays persist, and the resulting effects on clinical milestones and manufacturing plans.
- Cash runway assumptions and whether additional financing, licensing or spending reductions will be required.
- Cash burn and the composition and liquidity of short-term investments; the company reported $116.0 million in cash, equivalents and investments at March 31, 2020.
- The basis for the $32.9 million impairment and its implications for the remaining licensed-technology asset and relevant programs.