Abeona Therapeutics Inc. (ABEO) Q3 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Abeona Therapeutics Third Quarter 2019 Earnings Call. [Operator Instructions] At this time, it's my pleasure to turn the floor over to Ms. Sofia Warner, Investor Relations. Ma'am, the floor is yours.

Thank you. Good morning, and welcome, everyone. Today's call will be led by João Siffert, our Chief Executive Officer. Following João, Christine Silverstein, our CFO, will review our financials. 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 that involve risks and uncertainties. Forward-looking statements on this call are made pursuant to the safe harbor provisions of the federal securities laws. Information contained in these 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 may be found in the company's annual report on Form 10-K and quarterly reports on Form 10-Q filed by the company with the Securities and Exchange Commission. These documents are available on our website, www.abeonatherapeutics.com. With that said, it is now my pleasure to introduce to you Dr. João Siffert. João, you have the floor.

Thank you, Sofia, and thank you all for joining us today for our third quarter business highlights. I look forward to providing important updates on the progress and status of our gene and cell therapy development programs. On the call today, I'll review our key quarter accomplishments and then turn the call over to Christine to review our financials. I'd like to start off with an update on our lead and most advanced clinical program for recessive dystrophic epidermolysis bullosa or RDEB. RDEB is a debilitating and rare genetic skin disorder caused by mutations in Collagen VII that lead to defects in the anchoring fibrils, which attach to the dermis to the epidermis of the skin. RDEB patients have extremely fragile skin that blisters and tears, resulting in large wounds that can remain unhealed for years. These wounds can be very debilitating and cover a significant proportion of the patient's body. Today, RDEB patients have no available effective treatment options and are forced to rely on palliative treatments as well as painful, time-consuming and expensive wound care. Our clinical program for patients with RDEB is developing an autologous gene-corrected cell therapy that restores normal functioning Collagen VII to keratinocytes in their progenitors via a final delivered product called EB-101, which consists of gene-corrected keratinocyte sheets that are transplanted into open wounds. In September, we announced that we had received a clinical hold letter from the FDA stating that we couldn't begin our planned Phase III trial for EB-101 without submitting additional data relating to transport stability of the EB-101 to clinical sites. I'm pleased to say that we have since submitted to the FDA the additional data related to the transport stability of EB-101, along with the updated clinical protocol and the comparability protocol. These submissions were intended to address the outstanding items listed in our prior disclosures, including the clinical hold. We continue to anticipate that we'll receive CMC clearance in fourth quarter 2019 to move forward with the VIITAL Phase III trial initiation. As a reminder, the pivotal study will be a multicenter, randomized clinical trial assisting EB-101 -- assessing EB-101 in 10 to 15 RDEB patients with approximately 30 wound sites treated in total. As we have previously discussed, the primary end point of the study will be proportion of wounds with greater than 50% healing at 3 months, comparing treated with untreated wound sites on the same patients. Other end points will include the patient's global impression of change in pain from baseline as well as other patient reported outcomes, such as pain during dressing changes; pain quality and impact, in this case, using the PROMIS scale and the presence of itch, among others. We believe EB-101 is uniquely positioned to safely provide durable healing for most challenging to treat, large and painful RDEB wounds present in the majority of RDEB patients. In fact, a recent publication from our collaborators at Stanford University School of Medicine highlighted positive long-term data from the Phase I/IIa clinical trial of EB-101. Published in the October issue of the JCI Insight journal, this peer-reviewed article provided additional important data that further bolsters our confidence that EB-101 has the potential to provide sustained, durable healing even in the most challenging wounds. The results were from 7 patients with 42 treated wounds that had remained open from 3 to 20 years prior to treatment, averaging 11.2 years, highlighting their chronic and intractable nature. 3 years post treatment, the majority of EB-101 treated wounds remained healed and without pain, with 80% of wounds achieving 50% healing and 70% achieving greater or equal to 75% healing. These healing rates correspond to an unparalleled area of healed skin ranging from approximately 130 to 150 centimeter square for most study participants. Study provided additional data to support the clinically meaningful benefit of EB-101 in treating these large chronic wounds, demonstrating that greater than 50% healing, especially in these large wounds, was associated with improvement in pain -- patient reported pain, itch and wound healing and wound durability. On the molecular level, EB-101 treatment was also associated with long-term expression of Collagen VII, providing mechanism -- mechanistic support of the durability documented clinically for a gene-corrected cell therapy. There have been no treatment-related adverse events reported to date, and no replication-competent virus was detected at any time point. We couldn't be more pleased with these data and believe EB-101 has the potential to be a transformative treatment in terms of both the extent and the durability of wound healing for patients with RDEB. We look forward to begin the Phase III VIITAL study as soon as possible with hopes to ultimately provide the desperately needed treatment option for RDEB patients. Moving our focus now over to our MPS IIIA program. MPS IIIA, also known as Sanfilippo syndrome type A, is a rare lysosomal storage disease with no approved treatment that primarily affects the central nervous system or CNS. Currently developing ABO-102 and AAV9 gene therapy, which delivers a functional copy of the SGSH gene to the CNS and peripheral organs via a onetime intravenous infusion are those to correct the underlying deficiency in the SGSH enzyme to prevent the toxic accumulation of heparan sulfate in the cells that ultimately lead to rapid neuro development and physical decline in patients with MPS IIIA. In July, we announced data from our ongoing 2-year open-label dose escalation Phase I/II global clinical trial for patients with MPS IIIA study, ABT-001. Interim data for the 3 youngest patients enrolled in the highest dose cohort to Cohort 3, ages 26, 19 and 14 months at dosing, suggested that preservation of neurocognitive development could be achieved when MPS IIIA patients were treated during early stages of their disease. We also saw disease-relevant changes in biomarkers with robust and sustained dose-dependent reductions in all 3 cohorts. Combined with a favorable safety profile with no product-related serious adverse events to date, we believe ABO-102 has the potential to help patients to escape the devastating fate of neuro developmental and physical decline typically seen in these patients. We continue to screen patients into the study, and we'll provide an update when additional patients are treated. On the regulatory front, we remain on track for the FDA and EMA meetings planned in the fourth quarter of this year to discuss our development path forward and expect to provide additional updates when appropriate. Finally, I'd like to provide a brief update on ABO-101, our investigational gene therapy for the treatment of MPS IIIB, also known as Sanfilippo Syndrome type B. Like the MPS IIIA program -- like MPS IIIA, MPS IIIB is a rare, devastating and fatal lysosomal storage disease with no approved treatment that is characterized by intracellular heparan sulfate accumulation, leading to neuro development decline and other systemic manifestations and early death. We're encouraged by the progress in our 2-year open-label ABT-002 study designed to evaluate 2 doses of ABO-101 with the main objective of assessing safety and neuro developmental progress. Additional secondary end points include changes in CSF and urine heparan sulfate, liver volume and several others. We have now treated 6 patients across 2 dose cohorts in this study. ABO-101 has been well tolerated to date with no serious drug-related adverse events with up to 23 months of follow-up for the first patient enrolled with a range of 2 to 23 patients -- sorry, 2 to 23 months across the 6 patients. Preliminary data from the trial showed improvement in biomarkers, such as reduction in cerebral spinal fluid heparan sulfate levels and reduction in liver volume of similar magnitude that was observed following ABO-102 administration in patients with MPS IIIA. Enrollment continues across 3 sites in the U.S., Spain and our recently opened site in France. A brief update on our preclinical pipeline assets where data were presented at the European Society of the Gene and Cell Therapy Congress last month in Barcelona, Spain. Research updates were highlighted in 4 poster presentations featuring our novel AAV capsid library. These updates included data describing improved capsids for increased evasion of neutralizing antibodies against AAV -- natural AAV serotypes, support for intramuscular delivery of gene therapy, for delivery to the retina via intravitreal administration and peripheral nerve system tropism following IV administration in a Pompe disease model. Looking ahead, we're intensely focused on initiating a VIITAL Phase III trial for RDEB and reporting additional data from our lysosomal storage disorder gene therapies in the coming months. That said, as we approach year-end and the start of a Phase III clinical trial, we'll continue to be judicious and focus our efforts on this and our other lead programs. A review of strategic initiatives with Jefferies remains ongoing, with the goal of advancing the company's mission in maximizing shareholder value and stakeholder value overall. Before I turn the call over to Christine, I'd like to thank and acknowledge the patients, the families, clinicians, researchers and patient organizations that have made our work possible. We deeply value these partnerships and are committed to finding cures to those patients who most desperately need treatment options. With that, I'll turn over the call to Christine. Christine?

Sorry about that. There was quick glitch. Thank you, João. We have recently filed 10-Q where you can find all the specific information on our financial results. But in summary, our cash, cash equivalents and marketable securities as of September 30, 2019, were $47.9 million compared to $62.5 million as of June 30, 2019. Net cash used in operating activities for the quarter was $18.3 million as compared to $9 million in the same period of 2018, an increase in cash outflows of $9.3 million. As João mentioned earlier, we continue to focus on resource and cash management to drive our lead and later-stage clinical programs forward. R&D expenses for the 3 months ended September 30, 2019, were $10.9 million compared to $13.2 million in the same period of 2018. The decrease in research and development expense was primarily attributable to decreased clinical and development work as we carefully review third-party service contracts and delayed activities for certain programs. General and administrative expenses for the quarter were $4.7 million compared to $5 million in the same period of 2018. The decrease in G&A expenses was primarily due to the decreased rental, recruiting, professional fee and salary-related costs. Net loss was $0.35 per share for the third quarter of 2019 compared to $0.34 per share in the same period of 2018. That's the summary of the financials. And with that, I will now turn it over to the operator to take questions. Operator?

[Operator Instructions] We'll take our first question from Maury Raycroft with Jefferies.

So for EB-101, just wondering if you can provide any more specifics on when the additional transport data and info were submitted to FDA? And should we assume a response from FDA on the CMC clearance about 30 days after that date?

Maury, it's João here. So we believe we provided the answers to their questions. So exactly as they ask us, of course, everything was submitted subject to FDA review. And the general time line is within 30 days, but they sometimes have up to 45 days or even longer, depending on their review. So I can't -- more than the general sort of estimates, I can't comment further.

Okay, okay. And when they do provide answer on the CMC clearance, so provided that's positive, will that lift the clinical hold at the same time?

Yes, that's the expectation. We addressed their outstanding questions that we have disclosed previously, including the one specific question related to the clinical hold. So that's our expectation.

Got it. Okay. And then any more specifics on timing? Or how do you plan on dosing the first patient, I guess? Could that -- if the CMC clearance by the end of this year, could you dose the first patient by the end of this year or that more likely be a 1Q '20?

We'll move with the Phase III trial as expeditiously and as practical. In the end, it depends on logistics and coordination with the site. And as you recall, even if you biopsy a patient, there's about 4 weeks until you can manufacture the product. So even in the best case scenario, you'll have to wait for the EB-101 product to be ready to be delivered. We'll stand ready. Stanford stands ready. So we're just waiting for the FDA review.

Got it. Okay. And are there any more specifics you can say about how much time you have to wait after you dose that first patient?

We have not. Yes, there's not been codified and would just be a matter of scheduling with Stanford. We'll obviously want to make sure everything goes well with the first patient and then move forward and we could move pretty quickly after that.

Got it. Okay. And then other question is on your preclinical AAV. So there have been a few companies out there using AAV9 in DMD, and they run into some safety issues with intramuscular delivery. And so I'm just wondering, you guys have shown some interesting data with AAV110 and then AAV214 as well. Just wondering how far those are from potentially moving into the clinic? And if you could talk more about their muscle tropism and some of the differentiated profile of those 2 AAVs versus AAV9?

Yes. So these -- we presented this data on the ESGCT. We can share more specifics on that. But basically, they have pretty clear tropism with quite nice by distribution and expression when injected in muscle. So we would stand by the potential of this. Obviously, these are relatively early preclinical and would have to go through the standard preclinical assessment and in IND-enabling studies, assuming you have a project -- specific project. So for now, we're pleased and happy with the data presented, but there's no active lead being developed for this indication for DMD circling on.

We'll take our next question from Kennen MacKay with RBC Capital Markets.

This is Bikram on for Kennen. One for us on ABO-102, could you please remind us what the next steps are? And when will we see a follow-up data from Phase I/II? And you did mention you're going to expect some feedback in Q4. What are you expecting there?

So Bikram. It's João here again. So a couple of things. We've announced that we have the discussions with the agencies, both U.S. and EMA. We're talking about ABO-102, is that correct? Just to confirm.

Yes, ABO-102. Yes.

Yes. We had announced and we are on track for the meetings and discussions with the FDA and EMA on the program. So we have not specified when we'll provide updates. We'll have updates once we have something to update. And of course, this is a global program that needs to take into account feedback from both regulatory agencies because, ultimately, we want to converge this into a unified program as much as we can. So we're gathering all this information. We'll provide an update when we have something more concrete to share.

Okay. That is helpful. And one quick follow-up on PRO. So could you please remind us what the updated PROs were? And why -- what was the rationale behind the change of patient related outcomes?

Yes. So it was not a change rather than addition of PROs. So without getting too many specifics, Richard (sic) [ Bikram ], I think beyond the scope of the call, I think the agency wanted to -- us to consider including some of these subscales of the PROMIS, P-R-O-M-I-S. PROMIS scale battery is a large set of scales that have been studied and validated through the NIH collaborators over the years. They have a pretty broad use, and that -- those we selected a couple that we thought could be fitting for EB-101 patient assessment. It's not trivial, but it's something that we're willing to do since the FDA asked us to consider and then that leads have been incorporated in the clinical trial primarily to study burden of pain and also quality of pain.

We'll take our next question from Ram Selvaraju with H.C. Wainwright.

This is Edward on for Ram. You touched on this a little bit, but I was wondering, do you anticipate altering the supply chain or incurring any additional cost in order to comply with the need for this transport stability? And was the stability issue specific to EB-101? Or could those same issues appear in other pipeline assets?

Okay. So it's a compound question. So no, the supply chain is exactly as we had intended and the additional stability data were issued out of the current supply chain. So the product is manufactured at Abeona and transported to clinical sites. So there's been no operations and there's readily additional data to confirm stability. As for the other products, no, there's no impact or there's no relationship to any of the other products.

Okay. That's good to hear. And then with the strategic review ongoing, I was wondering if you could provide some guidance on how you anticipate OpEx spend to trend? And specifically, will any clinical development programs be put on, on internal hold until a solution is achieved?

I'll let our CFO speak a little bit.

Yes. Without -- thank you for your question. Without commenting any further on the strategic review, we just can't at this time. We are focusing on our later stage clinical programs and advancing them in an efficient manner. And we'll continue to manage our resources to support those programs, and that's what we can disclose at this moment.

We'll take our next question from Kristen Kluska with Cantor Fitzgerald.

The first one is in the VIITAL Study. Are you going to have any criteria in the protocol related to looking at the different size of wounds to demonstrate a potential broad effect across the different sized wounds? And then what about the wound age?

Thanks for your question. So yes, we obviously will characterize all the baseline characteristics for patients and also the specific wounds. The wounds location and size will be recorded as well. And of course, we need to be selective and that you have to have at least 2 wounds that are like-for-like, so we can do the intrapatient comparison between treated versus untreated wounds. So all these data will be collected. On -- as a requirement for study eligibility, the patients have to have a least 20 centimeter square of wound size -- 2 wounds at least 20 centimeter square to qualify for the study. We're looking. Again, these are chronic patients with chronic wounds that are large -- larger -- on the larger end of the spectrum.

Great. And then with your recent JCI publication, can you speak to the importance of the long-term data and how that's going to affect your conversations down the line with the agency? And also was there anything you're surprised about or any general findings as you study these patients long term?

Yes. So thanks for this additional question. Yes, we believe that the durability of healing -- wound healing is paramount for treatment of these patients. Obviously, there -- this is a chronic disease they're born with. They're genetic defect. And ultimately, healing is -- having open wounds is, by far, the most sort of disabling aspect of this disease that leads to all sorts of other complications. So if you can both heal the wound right away as we can with EB-101 once you apply it and maintain it healed over years, this is quite a remarkable feat given the fact that these wounds have been opened for so long. I do believe that durability of wound healing is relevant primarily, of course, for the patients, clearly, primarily important for the review of the regulators in terms of the value and importance of the treatment as part of the efficacy of the treatment and, ultimately, also the value of this particular product.

We'll take our next question from Difei Yang with Mizuho Holdings.

Just a couple on the RDEB program. So would you remind us if the primary end point has been agreed upon with the FDA? And then secondarily, with regard to CMC side of things, is transport stability is the only outstanding issue on for CMC?

Difei, thanks for your question. So yes, the primary outcome measure -- primary end point of the study is proportion of wounds that have 50 or greater percentage wound healing from baseline at 3 months. So as we stated before, just reiterating, this is agreed upon with the FDA. The second question is regarding the outstanding items that we've cited in terms of addressing the FDA concerns. So the only item listed in the clinical hold letter was a requirement of additional transport stability data. That's the only item that was listed in the clinical hold letter. In addition to that, as we had made prior disclosures, there were questions about PROs, which we have addressed -- we would answered by the updated protocol. And also we had -- also the FDA had requested us to submit a retrovirus comparability protocol. No new data on the comparability protocol itself, which we also have sent in after they provided some comments. So we've updated and submitted it. So we believe we have addressed the FDA questions. Of course, these are subject to their review.

And ladies and gentlemen, that is our final question today. We do appreciate your participation. Thank you. You may now disconnect, and have a great day.