Abeona Therapeutics Inc. — Q2 2016 Form 10-Q
Reporting period: Three and six months ended June 30, 2016. Financial statements are unaudited. Abeona is a development-stage biotechnology company focused on gene therapies and plasma-based treatments for rare diseases; it also receives licensing and MuGard royalty revenue.
Financial performance and liquidity
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Total revenue | $214,000 | $282,000 | $449,000 | $540,000 |
| Operating expenses | $6.929 million | $4.409 million | $13.324 million | $6.669 million |
| Net loss | $6.703 million | $4.113 million | $12.247 million | $6.113 million |
| Loss per share, basic and diluted | $0.20 | $0.16 | $0.37 | $0.27 |
| Cash used in operating activities | Not stated for quarter | Not stated for quarter | $5.632 million | $5.034 million |
- At June 30, cash and cash equivalents were $34.303 million, down from $40.138 million at December 31, 2015. Working capital was $25.914 million, down $13.177 million.
- Total assets were $74.152 million and total liabilities were $12.672 million. The balance sheet reports no debt balance; $4.0 million payable to a licensor and $2.0 million contingent consideration were classified as current liabilities.
- Six-month investing cash use was $353,000; financing provided $150,000 from a restricted-stock issuance. The filing reports an accumulated deficit of $322.847 million.
- Revenue was immaterial relative to expenses, so the filing does not provide a meaningful operating margin. It reports no separate gross-profit figure.
Material changes and notable items
- Six-month revenue declined $91,000 year over year, entirely due to lower MuGard royalties ($148,000 versus $239,000); licensing revenue was unchanged at $301,000. Q2 royalties were $64,000 versus $132,000.
- Six-month R&D expense rose $3.810 million to $4.873 million, mainly for gene-therapy manufacturing and development, added scientific staff, stock compensation, and clinical-trial preparation. G&A rose $2.740 million to $8.096 million, largely due to stock-based compensation.
- Six-month net loss increased $6.134 million. Other income included a $591,000 benefit from the fair-value change in contingent consideration; this reduced the reported loss but was not operating revenue.
- Cash used in operations increased $598,000 year over year. The company attributed the increase primarily to higher R&D spending, partly offset by a $1.0 million license payment made in Q1 2015.
Business developments, outlook, and risks
- During the quarter, the FDA allowed the IND for a Phase 1/2 ABO-101 study in Sanfilippo syndrome type B, and the first patient was enrolled in the ABO-102 Phase 1/2 study for type A. On August 4, 2016, after quarter-end, the company announced European approval to conduct an ABO-102 Phase 1/2 trial in Spain.
- After quarter-end, Abeona entered Stanford licensing agreements and a collaboration involving EB-101 and EB-201 gene-therapy programs for epidermolysis bullosa. The company expects to issue 750,000 shares to two foundations and incur upfront and annual license fees, possible milestone payments, and royalties. The agreements also provide an option for an additional license.
- Management expects losses to continue for several years while it funds development, preclinical work, clinical trials, and regulatory compliance. It cautions that additional capital may be needed; failure to obtain it could jeopardize operations, while equity financing could dilute existing holders. The filing gives no specific revenue, earnings, or cash-runway guidance.
- Key risks include clinical and regulatory uncertainty, ability to raise capital, dependence on licensing partners, and the possibility that products will not achieve approval or commercial success. Management reported no material changes to internal control over financial reporting during the quarter. No material legal proceedings were reported.
Important facts for investors to verify
- Cash burn and projected funding needs against the $34.303 million cash balance, including expected timing and form of the licensor and contingent-consideration payments.
- Clinical-trial progress, enrollment, safety, and regulatory milestones for ABO-101 and ABO-102; distinguish quarter-end status from the post-quarter European approval.
- Terms, timing, and dilution impact of the 750,000-share epidermolysis bullosa collaboration and the financial obligations under the Stanford licenses.
- Drivers of rising R&D and stock-based compensation, and whether MuGard royalties or licensing revenue can meaningfully support operations.
- Whether further financing is required and its potential effect on shareholders; the filing does not state a clear cash-runway estimate.