Abeona Therapeutics Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Amounts below are in U.S. dollars; financial statement amounts are generally in millions unless noted. Abeona is a clinical-stage cell and gene therapy company with no significant product revenue. Its lead program is EB-101 for recessive dystrophic epidermolysis bullosa (RDEB), in the Phase 3 VIITAL trial.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $1.000 | $0 | $1.346 | $0 |
| Research and development | $6.658 | $8.533 | $17.203 | $16.868 |
| General and administrative | $3.460 | $5.182 | $7.684 | $11.444 |
| Net loss | $(8.295) | $(15.207) | $(29.086) | $(31.209) |
| Net loss attributable to common shareholders | $(12.077) | $(15.207) | $(32.868) | $(31.209) |
| Basic and diluted loss per common share | $(2.08) | $(3.93) | $(5.67) | $(8.18) |
- Q2 revenue was a $1.0 million clinical milestone under the Taysha sublicense for an investigational Rett syndrome therapy. Six-month revenue also included recognition of deferred grant revenue. The filing reports no product sales.
- Q2 operating loss was $8.008 million, compared with $13.715 million in Q2 2021. Six-month operating loss was $28.599 million, versus $28.312 million. Profitability and operating margins are not meaningful given the company’s development-stage operations and limited revenue.
- At June 30, cash and cash equivalents were $6.133 million, short-term investments $13.963 million, and restricted cash $5.891 million; total cash resources were approximately $26.0 million. Total assets were $44.719 million, down from $79.586 million at December 31, 2021.
- For the first six months, operating cash use was $22.700 million, compared with $25.074 million in 2021. Investing cash use was $0.323 million, versus $31.300 million provided in 2021; financing cash use was $3.782 million, versus $8.357 million provided in 2021. Cash, cash equivalents and restricted cash ended the period at $12.024 million.
- Total liabilities were $24.633 million. The balance sheet included $8.829 million payable to licensor, including $4.818 million current and $4.011 million long-term, and $8.535 million in operating lease liabilities. The filing reports no conventional borrowings in the presented balance sheet.
Material changes versus the prior comparable period
- Q2 net loss improved by $6.912 million year over year, reflecting lower R&D and G&A expenses and lower interest expense. Six-month net loss improved by $2.123 million, although total expenses rose 6% to $29.945 million, partly due to asset impairment charges.
- Q2 R&D declined 22% and G&A declined 33%. For the six months, R&D increased 2%, while G&A declined 33%; management attributed much of the G&A reduction to lower professional fees and stock-based compensation.
- Interest expense fell to $0.317 million in Q2 and $0.518 million for the six months, from $1.500 million and $2.920 million, respectively, primarily following resolution of a disputed liability with former licensor REGENXBIO.
- In March, Abeona said it would seek a strategic partner to assume ABO-102 development and discontinue ABO-101 development. The decision resulted in six-month impairment charges of $1.355 million for licensed technology, $1.561 million for a right-of-use lease asset and $1.792 million for construction-in-progress. A $1.460 million vendor refund in Q2 partially reversed the construction-in-progress impairment.
- In May, the company licensed ABO-102 worldwide to Ultragenyx, which assumed responsibility for its development, manufacturing and commercialization. Abeona may receive up to $30 million in commercial milestones and tiered royalties from mid-single-digit percentages up to 10% following approval; these contingent amounts were not recognized as revenue. Ultragenyx reimbursements for specified costs are recorded as a reduction of R&D expense.
Outlook, risks and unusual items
- Management expected topline VIITAL Phase 3 data in late Q3 or early Q4 2022. Target enrollment was achieved in Q1 2022. The company was preparing its Cleveland facility and BLA-related manufacturing documentation and reported alignment with FDA on CMC requirements; approval and timing remain uncertain.
- Management estimated existing cash resources would fund operating expenses only into Q2 2023. It stated that additional funding would be needed to further advance EB-101 toward potential approval or progress preclinical ophthalmology assets. The filing identifies substantial doubt about the company’s ability to continue as a going concern within one year, and says funding may not be available on acceptable terms or at all.
- Potential funding sources include equity or debt, commercial-partner payments and other strategic alternatives. Additional equity could dilute existing holders; failure to obtain funding could require curtailing programs, reducing costs or terminating operations.
- The May preferred-stock placement generated $22.468 million net proceeds, but holders exercised redemption rights in June and received $26.250 million from escrow. The transaction produced a $3.782 million deemed dividend, increasing the loss attributable to common shareholders beyond net loss.
- A 25-for-1 reverse stock split became effective July 1, 2022. On July 19, the company reported regaining Nasdaq’s minimum bid-price compliance. Management cited clinical, regulatory, manufacturing, financing, competition, intellectual-property and COVID-19-related uncertainties. No legal proceedings were reported; management concluded disclosure controls were effective.
Important facts for investors to verify
- Whether VIITAL topline results were delivered on the expected schedule, and what the full efficacy and safety data show.
- Current cash runway, subsequent financing or strategic transactions, and whether funding addresses the disclosed going-concern uncertainty.
- Progress and economics of the Ultragenyx ABO-102 license, including reimbursed costs, milestones and any future royalty eligibility.
- Updated R&D plans and cash requirements for EB-101 and the preclinical ophthalmology pipeline after discontinuation of ABO-101 and transfer of ABO-102.
- Current status of the REGENXBIO settlement payments, restricted cash collateral, lease obligations and any material changes to share count or dilution, including warrants and equity issuance capacity.