Abeona Therapeutics Inc. (ABEO) Q4 2017 Earnings Report, Transcript and Summary

Greetings, and welcome to Abeona Therapeutics Fourth Quarter Business Update Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christine Silverstein, Finance, Investor Relations. Thank you, Ms. Silverstein. You may begin.

Good morning and welcome. On the call today are Dr. Timothy J. Miller, President and CEO; and Jeffrey B. Davis, COO of Abeona Therapeutics. Dr. Miller will begin the call with an overview of the fourth quarter highlights and more recent developments at Abeona. After that, Jeff will provide commentary on the quarter, a brief overview of financials and provide a snapshot of our financial position. Following that, we will open the floor up to a few questions. Before I turn the call over to them, I need to remind our listeners that remarks made during this call may contain forward-looking statements. Forward-looking statements on this call are made pursuant to the Safe Harbor provisions and Federal Securities Laws. Information contained in the forward-looking statements is based on current expectations and is subject to change and actual results may differ materially from forward-looking statements. Some of the factors that could cause actual results to differ are discussed in the reports filed with the SEC. These documents are available on our website at www.abeonatherapeutics.com. With that said, it is now my great pleasure to introduce Dr. Timothy J. Miller. Tim, you have the floor.

Good morning, everyone. I would like to start with some overview. The fourth quarter was marked by several notable achievements in our clinical programs. Significant progress was made in the two lead clinical programs, EB-101 for Epidermolysis Bullosa and ABO-102 in MPS IIIA, and we initiated our third clinical program, ABO-101 in MPS IIIB along with additional enrollments at our global clinical sites for MPS IIIA. Data reported from these programs continue to underscore the durability and clinical benefits observed after administration of gene therapy. The strong safety and biopotency data observed in the three active clinical trials and the strategic initiative of building an in-house commercial GMP manufacturing facility further strengthens our position in developing gene and cell therapies to treat these devastating and rare pediatric diseases. Most recently, the FDA granted our Epidermolysis Bullosa program EB-101 with the Regenerative Medicine Advanced Therapy or RMAT designation. This program continues to advance as we finalize the clinical protocol before initiating the pivotal Phase 3 trial this year. Our MPS IIIA program now has four patients enrolled in Cohort 3 for the expanded Phase 1/2 clinical trial at a dose of 3E12 vg/kg while our MPS IIIB program reported initial safety and biopotency signals at 30 days post administration, demonstrating that the therapy is well tolerated and continuing to show very similar early biopotency signals as the MPS IIIA program, particularly with regards to significant reductions in the disease-specific heparan sulfate reductions in cerebral spinal fluid, urine, and plasma and greater than 300-fold increase in NAGLU enzyme activity. In our preclinical work, we achieved additional regulatory -- designations for our Batten or infantile CLN1 program. And in addition, we continue to work on optimizing our AIM vector platform, which continues to demonstrate exciting progress including enhanced tissue tropisms compared to naturally occurring AAV capsids. And we have non-human primate studies that are going to be initiated in the second quarter with the lead CNS targeted candidates. For some corporate achievements in the quarter, we did host our Research and Development Day on October 11th as our inaugural day in New York City, where Abeona management together with key opinion leaders and clinical experts presented an update on our clinical program to an over 80% crowd of institutional investors and equity analysts. That same week, we announced a grant from over nine Sanfilippo foundations from around the world of $13.85 million to further the clinical development of our MPS IIIA and IIIB gene therapies to help further our efforts in trying to find additional ways to treat patients for these unmet diseases. We also announced the groundbreaking in our manufacturing facility. In early October, we broke ground on the manufacturing facility located at our Cleveland offices. The finished 24,000 square foot facility will be built out and finished in the second quarter and validated over the following six months or so. This concept commercial facility was named The Elisa Linton Center for Rare Diseases in honor of a young girl who passed from Sanfilippo syndrome and whose family’s foundation in Kansas has been instrumental in raising funds and awareness for this rare and terminal disease. The center will initially be used to produce ABO-101 and ABO-102 gene therapies for the treatment of Sanfilippo syndrome and EB-101, our autologous cell therapy for the treatment of recessive dystrophic epidermolysis bullosa and it will also house Abeona’s expanded bio vector production facility, again for the concept to commercial vision that we have of being able to take things like our AIM vectors, be able to put in new constructs, make those vectors in-house, continue to produce clinical trial material on route to commercial for these unique and proprietary vectors that we use in delivery of novel gene therapies. In addition, the fourth quarter investment from high-quality investors and leading foundations is an achievement that demonstrates our internal capabilities and commitment to the advancement of our robust pipeline and next generation vector platform including MPS IIIA gene therapy products. We look forward to further strengthening our efforts with key hires, advancing clinical capabilities, and commercial expansion in the coming quarters. For some recent clinical progress for the EB-101 program, we did have some regulatory achievements. In January, we received the RMAT designation or EB-101, our autologous ex-vivo cell therapy for patients suffering from RDEB, which is the most severe form of the epidermolysis bullosa. The FDA granted this designation based on the data from the Phase 1/2 EB-101 clinical trial, which demonstrated significant wound healing and treated wounds for over two years. The designation is significant as it enables collaborative discussions with the senior FDA personnel priority review and expedited approval process to drug candidates where preliminary clinical trials have indicated that the therapy has offered substantial treatment advantages of over existing options for patients with serious or life-threatening diseases. Just as a reminder, there are no treatments for this particular disease, relying mainly on palliative care. The EB-101 program previously received the Breakthrough Therapy Designation, Rare Pediatric Disease designation and Orphan Drug designation. The latter was received by both the FDA and EMA. These designations are prerequisites for the FDA Priority Review Voucher or PRV process. We continue to work closely with the FDA through the Breakthrough and RMAT designations in preparation for the pivotal Phase 3 trial in our RDEB patients and we expect to provide guidance later this year, especially as we initiate the trial in the upcoming months. For the ABO-101 program for recent clinical achievements, during the quarter we enrolled three patients in our global expansion of the Phase 1/2 clinical trial for MPS IIIA, one in Australia, one in Spain and one in the U.S. Both received the Cohort 3 dose of 3E13 vg/kg. One additional patient in the U.S. has also received the Cohort 3 dose for total global number of four patients in the Cohort 3. In early February, we announced the topline data from our ABO-102 MPS IIIA trial, a WORLDSymposium for lysosomal storage disease with the main take away is being that the trial results presented showed significant time and dose dependent reduction of the underlying disease pathology including reductions in CSF and urinary and heparan sulfate fragments including total GAG and diminished liver volumes. Importantly, we also demonstrated evidence of targeted benefits at six months post treatment in Cohort 2 and at one year in Cohort 1. Alongside those results, the announcement of the FDA will allow Abeona to lower the enrollment age for the ABO-102 trials to include children as young as six months of age, allowing this to be the only clinical trial in development in the world that’s going to be able to enroll patients in the MPS III diseases as young as this young age. ABO-102 continues to be well-tolerated at all doses, all follow-up timeframes and has enabled and accelerated global enrollments to go over the upcoming months. We look forward to providing clinical and preclinical updates at important clinical conferences in the coming months. For the ABO-101 program, for the recent clinical achievements, in December, we announced that we’ve enrolled our first patient with ABO-101 Phase 1/2 clinical trial for MPS IIIB. In February, we reported on the initial safety and biopotency signals of that clinical based on the results that observed in the first treated patients at 30 days post injection. These results demonstrated that the gene therapy, very similar to our MPS IIIA program is well-tolerated at a dose of 2E13 vg/kg with early biopotency signals and significant disease specific reductions in heparan sulfate in the CSF, urine and plasma and has also demonstrated a 300-fold increase in NAGLU enzyme activity. ABO-101 has been granted Orphan Drug Designation in the United States and in Europe and also has the Rare Pediatric Disease Designation as part of the Priority Review Voucher process. For recent preclinical progress, we have IND-enabling studies continue for both the ABO-201 and ABO-202 gene therapy programs for the treatment of CLN3, also known as Juvenile Batten Disease, and CLN1 disease, also known as Infantile and Late Onset Batten Disease respectively. The ABO-202 program for the treatment of CLN1 disease has received two FDA designations. In March, we received the Rare Pediatric Disease Designation and in February, we received the Orphan Drug Designation, again demonstrating the importance of these programs and how the amount of preclinical data to-date has supported their translational targets into the clinic. For the AIM vector platform, initial studies have indicated that the AIM vectors can efficiently target multiple tissues with vector-selective tissue specificity, also with different routes of administration relative to the first generation vectors whether either intrathecal or intravenous or intramuscular. This provides second generation treatment approaches for patients with their redosing strategy or for patients that have neutralizing antibodies to natural AAV serotypes. We continue to develop the AIM chimeric AAV vectors, both internally and through strategic partnering efforts. And again as we entered in the primate studies with our lead candidates for a number of different targets particularly the CNS, we look forward to reporting out those results in the second half. And with that, I will turn it over to Jeff Davis for our fourth quarter summary financial results.

Thanks, Tim. I remind the listeners that we have recently filed the Form 10-K where you can get all the specific details on our financial results. But in summary, our cash, cash equivalents and marketable securities as of December 31, 2017 were $137.8 million compared to $56.5 million as of the end of the third quarter of last year, September 30, 2017. Net cash used in operations for the 12 months ending December 31, 2017 was $22.9 million compared to $13 million in the same period of 2016, an increase of $9.9 million. There were a number of things that impacted our cash balance in the fourth quarter and obviously through the aggregated annual results, both included an equity financing that was completed on October 19th where we announced the closing of $92 million underwritten public offering and the full exercise of the underwriters’ option to purchase additional shares. Again, that closed on October 19th. It was 5.75 million common shares at a public offering price of $16 per share. The gross proceeds to the Company were $92 million, before deducting underwriting discounts and commissions and offering expenses paid by the Company. We want to thank our bankers and our underwriters, and most importantly, syndicate of leading investment funds for participating in that financing. As Tim mentioned earlier, we also announced in October, a $13.85 million grant from a global network of nine Sanfilippo syndrome foundations for additional clinical development of our MPS IIIA and B gene therapies. From a revenue perspective, our revenues were $215,000 for the fourth quarter of 2017 compared with $256,000 for the similar quarter the year previously. 12 months ending December 31, 2017, the revenues were $837,000 compared to $889,000 in the same period in 2016. Revenues consisted of the combination of royalties from marketed products, primarily MuGard, and the recognition of deferred revenues related to upfront payments from early license agreements. Loss per share was $0.19 per share for the fourth quarter of 2017 compared to $0.18 in the comparable period in 2016. Loss per share was $0.66 per share for the 12 months ended December 31, 2017 compared with $0.64 loss per share in the same period of 2016. Total number of common shares outstanding as of the day that we filed the 10-Q, on March 15th, which would include the shares from the recently mentioned public offering as well as shares issued last year in the exercise of warrants is 47,226,000 shares. That’s the summary financials. With respect to upcoming investor relations and scientific events conferences, I would highlight on April 9th Abeona will be participating in a Biotech Innovations Conference put on by Bloomberg; during April 10th to the 14th, there is the American College of Medical Genetics and Genomics; May 16th through 19th is ASGCT, the American Society of Gene & Cell Therapy Annual Meeting this year in Chicago, as I believe it; and also during the same period, May 15th to the May 19th, the International Investigative Dermatology Meeting, where we expect presentations from our Company’s clinicians and KOLs, and we will update people on those planned presentations as we get closer to the scientific conferences. So, I believe that wraps up the prepared sort of comments. I think, we will turn it back to the moderator to take some Q&A.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Liav Abraham from Citi. Please proceed with your question.

Good morning. Just a couple of from our end. Firstly, Tim, can you update us on where you stand with respect to EB-101 as it relates to a dialogue with the FDA? When do you anticipate being able to communicate a final trial design? And I’m assuming this trial design will be very similar to your first trial. If you can make any comments on that, that would be helpful.

Sure. Hi, Liav. So, as part of the Breakthrough and RMAT designations, we get six scheduled meetings with the FDA. These usually get broken up between clinical, CMC, talking about the TPT. [Ph] So, we’ve had the first couple of these in -- and you continue to go back and forth. We’re very close to the finalizing the trial and design. We anticipate that the trial will start in the next couple of months. We’ll certainly provide guidance towards that. But again, as I think we’ve guided previously, the design is very similar to the Phase 1/2 with similar endpoints and similar number of patients. So, I think that we’ll be well-positioned for accelerating the enrollment from that as well.

And then, secondly, on your ABO-102 program, any comments on -- I guess, you probably do have a desire for Breakthrough RMAT designation. Any comments around timing there and whether you filed for that would be helpful.

Yes. Certainly with the number of treated patients that we have to-date and guided towards certainly would be -- and especially with the amount of data that we’ve shown, Breakthrough or RMAT certainly designations that we’ll be looking at and look forward to guiding you in the future that results when we might have those submissions and some of those designations.

And then, lastly on that same program, can you provide an update on number of patients enrolled in your ABO-102 program thus far? And particularly, given FDA allowing you to reduce the age of patients to be enrolled, whether you’ve identified the younger patients, what the willingness is of parents to enroll of their young patients, six months in that age range in that trial? Thank you.

Sure. We have -- in addition to the FDA, we have received regulatory approvals to treat down to six months of age in both Europe and in Australia now, and certainly have been working with the clinicians and really the global community finding and enrolling patients in that age bracket from six months up to two years. So, we look forward to presenting more of the enrollments. And we haven’t guided to the amount of patients that we are looking enroll at this point. But, we do go through pre-screening for many of these patients and look forward to updating again at some point in the near future.

Our next question comes from the line of Maury Raycroft with Jefferies. Please proceed with your question.

Hi, this is Besma [ph] on for Maury. I have a couple as well. So, we’ve heard something about status update for MPS IIIA patients. How about the MPS IIIB enrollment? Can you provide an update on that?

On the MPS IIIB, we’ve announced that we have treated one patient to-date. I think we have guided previously that as we enroll additional patients, we will be reporting more data out, primarily at the cohort level and especially as we move through some of the pre-specified endpoints whether it’s 30 days or six months. So, we look forward to providing again more guidance on that in the second half on the enrollments in MPS IIIB.

Sounds good. Thank you. Back to MPS IIIA, can you provide any status update on the patient queue [ph] from Cohort 2? And would you expect that the patients’ results would improve in the 12-month analysis?

We don’t have any update at this time. I believe that a patient’s due for an upcoming follow-up visit in the next few months and we will guide based on what clinicians provide us with data at that time.

Sounds good. And I have a one final question on your preclinical program, just a clarification. Are you planning on using any of the new AIM vectors for CLN1 and 3 or will you be going away AAV9, as you presented in the preclinical data? Thank you.

That’s a great question. So, the AIM vectors and certainly as we’re moving into non-human primates now, we have identified a number of lead candidates, both for intravenous administration for CNS-based diseases as well as intrathecal or other direct injections. We’ve identified some targets for intramuscular. So, certainly, we are looking at how we layer the AIM vectors into our existing pipeline as well as building out for some of our undisclosed target diseases.

Any specific on CLN1 and 3, since you’re in IND studies, I would assume that you have vector picked out but if you can provide any clarity on that? And that’s it from me. Thanks.

We look forward to providing some more guidance on that as preclinical studies move to completions.

Our next question comes from the line of Kennen MacKay with RBC Capital Markets. Please proceed with your question.

Hi. Good morning. This is Nick [ph] on for Kennen. Thanks for taking the questions and congrats on all the progress. A question -- two questions on the MPS IIIA program. I was wondering if you could provide any color regarding how many additional patients worth of data we might see at ASGCT, particularly in Cohort 3. And I guess more broadly, what biomarker and neurocog updates we might -- we could expect at the conference? And then I have a follow-up question as well. Thank you.

Sure. I am not sure that we will comment much on the number of patients that we will present additional data on at ASGCT. I think part of that is always a function of amount of drug and weight of patients. So, we’re looking for, as you enroll younger patients, they weigh less, so you can also enroll more of them. So, we are certainly forward to discussing additional enrollments in the MPS IIIA program. And with -- specific regard to biomarkers, we previously reported out on plasma, heparan sulfate for example, some enzyme activity. We are looking at other markers of reduction of neuronal loss such as GM2 and GM3. We talked about that at our recent R&D Day as something that has been tracking very explicitly with reductions in CSF heparan sulfate. So, we believe that those are also part of the totality of the data package, demonstrating efficacy after a single intravenous administration of the AAV gene therapy.

Great. And regarding a potential registrational trial for this program, have you had any discussions with the FDA or is this scheduled, or is there something in the current Phase 1 dataset that they’re looking towards, prior to initiating that process?

I think, we’ll provide guidance in the second half about how we’re looking and working with both the EMA and the FDA on our regulatory strategy for registration.

Our next question comes from the Elemer Piros with Cantor Fitzgerald. Please proceed with your question.

So, the question is coming back to the enrollment, Tim. So, in the first quarter, have you enrolled any IIIA or IIIB patients?

Yes. It seems to be a very active topic of discussion, Elemer. We’ll provide some guidance on our additional enrollment at some of the upcoming investor and clinical conferences.

Okay, okay. And also with the EB-101 program, do you anticipate that you’ll start the Phase 3 trial in coming months? So, where would the product be produced, at the Stanford facility or in Cleveland or maybe at different source?

So, actually it’s going to be produced at the Stanford facility, which produced the material for the Phase 1/2 trial. Stanford has really been a great partner and both the clinical and the CMC process. As we continue to build out the Cleveland facility and go through validation, we’ll certainly be looking to do a lot of patient comparability study going forward. And we’ll provide some more information on that as the facility moves to validation.

Okay, okay. And has this thought crossed your mind that now with the RMAT designation in place that you would discuss with the FDA on filing on the existing database for EB-101?

Yes. It’s a very interesting question, Elemer. We, with both the RMAT and the Breakthrough status -- that’s certainly been an active part of our discussions with the FDA. They have been very, very supportive of the program and trying to find additional ways to work with us for the success of the program for registration filing, again, as we move that program into really the Phase 3, certainly looking at ways to accelerate any path towards registration.

Okay. And my last question is on the cognitive and behavioral instruments that you plan to use for IIIB patients, if you could talk about those, because in the Leiter and Vineland scores, there appears to be a gap between the ages of two and six from the historical data.

We’ll be using the same neurocognitive and developmental neurocognitive instruments, Elemer. The Vineland and Mullen in particular are valid from birth through 98 years of age. And with I think the wealth of the natural history study data, the compare out there certainly looking forward to seeing very -- I would expect very similar results compared to MPS IIIA program. I think, it’s important to know too we’re looking at volumetric changes by MRI in the IIIB program as well as the IIIA program. We reported out on that late last year, showing improvements in different areas of the deep brain architecture, which again supports the clinical hypothesis of treating earlier and treating younger with again these fair doses of AAV gene therapy.

Our next question comes from the line of Ram Selvaraju with H.C. Wainwright. Please proceed with your question.

Hi. Thank you for taking my question. This is Julian [ph] on for Ram. Regarding EB-101, now that you have received RMAT in addition to Orphan and Pediatric Rare Disease designations for the drug, do you have any updates at this time regarding how long you would expect FDA to turn around an NDA for the drug if you were to submit one?

Well, I mean, these pathways enable instead of a 10-months turnaround and a 6-months turnaround, so certainly looking forward to utilizing an excavated review path.

There are no further questions in queue. I would like to hand the call back to management for closing comments.

Thank you, everyone. I can tell that there’s a lot of excitement around our MPS IIIA and EB-101 programs. And as we get additional patients enrolled and some more regulatory guidance, we look forward to updating everyone at additional conferences in the second half. Until then, best wishes and talk to you all soon.

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.