Abeona Therapeutics Inc. (ABEO) Q3 2020 Earnings Report, Transcript and Summary

Good morning, and welcome to Abeona Therapeutics Third Quarter 2020 Financial Results Call. [Operator Instructions] I'll now introduce your host for today's conference Greg Gin, Vice President of Investor Relations at Abeona. Please go ahead.

Thank you, Christie. Good morning, everyone. I'd like to welcome and thank you for joining us on Abeona Therapeutics Third Quarter 2020 Conference Call. Yesterday, after the close of U.S. financial markets, we issued a press release announcing the third quarter results. The press release is posted on our website at www.abeonatherapeutics.com. On the call today with prepared remarks are Michael Amoroso, Chief Operating Officer of Abeona Therapeutics; and Ed Carr, Chief Accounting Officer. After the prepared remarks, we will host a Q&A session. We are also joined by Jay Bircher, Chief Technical Officer. Before we start, I'll review our safe harbor statement. Remarks made during today's call may contain projections and forward-looking statements regarding future events. Forward-looking statements are made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements are based on current expectations and are subject to change, and actual results may differ materially from those expressed or implied in the forward-looking statements. Various factors that could cause actual results to differ include, but are not limited to, those identified under the section entitled Risk Factors in the company's annual report on Form 10-K and quarterly reports on Form 10-Q filed by the company with the SEC. These documents are available on our website at www.abeonatherapeutics.com. And with that, I will now turn the call over to Michael. Michael?

Thank you, Greg, and good morning to our investment community. The Abeona team is excited to be with you this morning. We, at Abeona, remain committed to pursuing the development of our portfolio of advanced and early stage programs toward providing our novel gene and cell therapies to patients who currently have no approved treatment options. In the near term, we are focused on continuing our clinical programs in recessive dystrophic epidermolysis bullosa, or RDEB; and Sanfilippo Syndrome type A, also known as MPS IIIA; as well as Sanfilippo Syndrome type B, also known as MPS IIIB; to drive Abeona's as near- and long-term growth and unlock shareholder value. First, starting with EB-101 in our VITAL program. Enrollment is ongoing for the EB-101 pivotal Phase III VITAL study for RDEB. Three patients have been treated to date. As a reminder, target enrollment for the VITAL study is 10 to 15 RDEB patients with approximately 30 large chronic wound sites treated in total. We currently anticipate completing enrollment in the VITAL study in the first half of 2021, depending upon the impact from the COVID-19 pandemic, including travel restrictions and concerns about patient and/or staff safety. Based on the current expectation for completing enrollment, we would anticipate top line data for the VITAL study in late 2021. As a reminder, the pivotal endpoint will be 6 months post last-treated patient. Let's move on to our Phase I/II clinical trials for our adeno-associated virus, AAV, based investigational gene therapies, specifically ABO-102 and ABO-101 for MPS IIIA and IIIB, respectively. We refer to these respective trials as Transfer A and Transfer B. I'm proud to report that target enrollment in the Transfer A study for MPS IIIA, which was 15 to 22 patients, has been achieved. Total enrollment to date in Transfer A is 18 patients, including 12 patients who were dosed in cohort 3 with a higher dose limit of 3x10^13 vector genomes per kilogram. We, at Abeona, have made the decision to continue enrolling patients into the Transfer A study through the first quarter of 2021 given the lack of treatment options for patients afflicted with MPS IIIA as well as on the back of our encouraging data from cohort 3 from the safety and efficacy standpoint. Turning to the Transfer B study for MPS IIIB. To date, 11 patients have been dosed, including 4 patients dosed in cohort 3. A reminder, the cohort 3 upper dose for Transfer B is 1x10^14 vector genomes per kilogram. We anticipate completing target enrollment in Transfer B study, which is a range of 15 to 20 patients, in the first quarter of 2021 since COVID-19 has impacted some patients' ability to travel and undergo study treatment. Regarding treated patients in the Transfer A study, we have previously reported data showing preservation of neurocognitive skills between 18 months and 2 years post-treatment among 3 young patients who had been treated in the dose cohort 3 of the study. We are gathering additional neurocognitive assessment data from the high-dose cohort 3, with follow-up for each patient more than 2 years, some up to 3. These patients are between 3 and about 5.5 years of age and plan to -- we plan to present these results at a very near-term future medical meeting. The new data could provide additional evidence of ABO-102's potential to prevent further neurodegeneration and preserve a normalization in the acquisition of neurocognitive skills in young MPS IIIA patients versus the natural history of this disease, which indicates patients with MPS IIIA between 30 and 36 months of age tend to plateau in terms of gaining skills, and they start to regress thereafter to minimal levels of neurocognitive and behavioral skills. This data will be a very important time point later in the year, as we will be looking at each of these patients 2 years plus post their dosing. In the third quarter, we presented our plan toward registration of ABO-102 for MPS IIIA during the kickoff meeting under the EMA's PRIME program, which offers a path for accelerated review of promising therapies targeting unmet medical needs. Based on the meeting, along with our previous input from the Committee for Medicinal Products for Human Use, CHMP, and the Pediatric Committee of the EMA, PDCO, we anticipate submitting a marketing authorization application for EEU conditional approval for ABO-102 and MPS IIIA disease after the completion of 2-year follow-up neurocognitive assessment of the last patient treated in the Transfer A study. With regard to U.S. filing, we have engaged the FDA to discuss the regulatory path for ABO-102 and MPS IIIA. We're targeting a potential meeting to take place in the first quarter of 2021, of course, depending on the FDA's availability as they've been quite bogged down with the COVID-19 pandemic. We look forward to providing an update early next year on our ongoing plan and time lines for ABO-102 in the United States. Next, moving onward to our manufacturing and technical operation activities, one of the great areas of strength for Abeona Therapeutics. Process development at our GMP manufacturing facility in Cleveland, Ohio, is ongoing and is expected to enable production in-house of the retrovirus used for EB-101 manufacturing. This will provide Abeona with increased control of our supply chain, product quality, while at the same time, of course, reducing costs. In addition, process development activities to enable in-house manufacturing of commercial supply for our gene therapy products, ABO-102 and ABO-101, are ongoing. As Greg indicated, Jay Bircher, our Chief Technical Operations Officer, will join us during the question-and-answer portion, if any questions arise around our manufacturing. Next, turning to corporate updates. We entered into 2 strategic partnerships with Taysha Gene Therapies for ABO-202 for CLN1 disease, also known as infantile Batten's disease, and for an AAV-based gene therapy for Rett syndrome. These partnerships are expected to allow us to unlock near-term value in earlier-stage noncore assets while also providing to Abeona the opportunity to share in future success of these programs through achievement-based clinical, regulatory and sales milestones plus royalty-based payments on net sales. We're excited to work with this partnership in order to propel these gene therapy products to patients faster. Before I turn the call over to Ed for the financial portion of today's discussion, I wanted to say a few words about what excites me about Abeona while I've assumed my new role as operating leadership. Abeona has a significant foundation in place, which starts with our great people and their capability, our deep science and a robust pipeline, both near and longer term. In addition to our clinical programs, we are researching and developing next-generation AAV-based gene therapies using Abeona's novel capsids and capsids from the AIM technology platform. We intend to continue to develop chimeric AAV capsids capable of improved tissue targeting for various indications, including different monogenetic retinal disorders. Our Board of Directors and our senior management are fully committed to our company's future. It's an exciting time as we shape the future of Abeona, we shape the future for patients, and as we work toward addressing these unmet medical needs. With the organizational changes announced in October, I'm proud to report we have minimized distraction of the team. We have continued to stay poised to unlock the potential of our people and our pipeline, and I am privileged to lead this group going forward. I thank you for your time today. And with that, I'm going to turn this over to Ed Carr, our Chief Accounting Officer, for a financial update. Ed, please.

Thank you, Michael. I'd like to remind everyone that we have recently filed the Form 10-Q, which is available on our website and where you can get the details on our financial results. In summary, our cash, cash equivalents, receivables and short-term investments as of September 30, 2020, were $103.9 million compared to $129.3 million as of December 31, 2019. Accounts receivable was $7 million at September 30, 2020, which was paid in October 2020. We did not use our $150 million at-the-market offering program in the third quarter of 2020. Net cash used in operating activities was $10.7 million for the third quarter. Based on our current operating plans, we believe that we have sufficient resources with our existing cash, cash equivalents and short-term investments to fund operations through the next 12 months without accessing the $150 million at-the-market program as a potential source of cash. And with that, I will now turn it over to the operator for Q&A. Operator?

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

This is Farzin on for Maury. So with the upcoming discussion with FDA in the second half -- in the first quarter, you have a component with good safety and neurocognitive benefit. So what do you believe is the bar for success? And is there a possibility of approval based on the patients treated so far, particularly with the younger patients?

Yes. Maury (sic) [ Farzin ], this is Michael. Thank you for the question. I'll start on this one. So we're hoping to target a meeting early next year with the FDA to discuss our MPS IIIA program. We obviously have had really good interactions with the EMA under the PRIME designation. I think the bar that is most important, of course, from a Phase I, Phase Ib is safety. I think the cohort 3 dose has showed signs of absolutely being safe. I think we've shown some good early biomarker data, namely the heparan sulfate levels in cerebrospinal fluid as well as the decrease in liver volume in these patients as well as -- of course, the most important is the neurocognitive endpoint, specifically in the 2-year marker range after treatment. We believe that early intervention, while the developmental quotient -- I'll remind everybody for Transfer A, developmental quotient is still greater than 60%. For these 3 patients, it was greater than 70%. The idea here is to intervene early at the right dose, the right therapeutic dose in order to preserve neurocognitive capability and the ability for motor skills to continue to improve and gain as per a normal nonafflicted child. So we'll review the data at the time with the FDA, the biomarker data, the safety data as well as the neurocognition data of longest patients treated. And at that time, we hope to have some greater clarity of what our path forward will look like. So Maury (sic) [ Farzin ], I appreciate the question. I think these are some of the markers you should think about for the Sanfilippo A syndrome patients, and we'll look to report back as we have more in early 2021. Thank you for your question.

A follow-up question is for the process development activities enable in-house manufacturing of the 102 and 101 programs. Are you exploring your AIM factors? Or are you still using the AAV9?

Yes. I think what I'll do is I'll let Jay Bircher, our tech ops lead, answer this question. Jay, if you wouldn't mind?

We are continuing to use our AAV9 platform for both MPS IIIA and MPS IIIB.

And Maury (sic) [ Farzin] the only thing I would add to that is our AIM capsid platform is still being characterized through our preclinical team. They've made some nice gains this year, and we hope to talk more about that with you in the upcoming investor calls.

And our next question comes from Mani Foroohar with SVB Leerink.

A couple of quick ones. We'll start with what exactly is the status of the IP arbitration dispute with REGENX? How should we think about that resolution in terms of time line and your plan to communicate any resolution you reach there? And then I have a quick follow-up.

Sure. Good to hear your voice. Thanks for the question. The arbitration is ongoing, legal proceeding. We estimate arbitration hearing will take place in March of 2021. A full overview of the status is included in our 10-Q filing that's available on our website. At this point, I can't provide any additional answers about the arbitration apart from what's in the 10-Q and the timing that we're estimating for the hearing to take place.

Great. That makes a lot of sense to me. I guess, the other question, clearly, a little bit of a -- we'll say, a little bit of turnover on the leadership team. How should we think about time lines in terms of potential new CEO search, potential restocking to the Board, et cetera? Just should we think about that being sort of an early '21 event? Is that something that's contingent on the process that Jefferies is helping you with? How should we think about it?

Yes. It's a great question. I appreciate it. So I'll take that in pieces. First, I think the thing that's most important for us to remind everybody and our partners is our management team is fully intact in place. So the team who was here under João, our prior CEO, is fully in place. Our functional leaders are here for the day-to-day decision-making for our programs to move forward, which, again, is most important to get these much, much needed therapies to patients as quickly as possible. So we have a very, very capable team, and we've been able to keep our management team in place. As far as the CEO search going forward, at this time, we're not looking for a CEO. As we've discussed in press releases prior, we have a special committee comprised of some of our Board members who are helping and overseeing the day-to-day strategic discussions with the management team who, of course, oversee operations. Also at this time, my responsibilities have changed, and as the Chief Operating Officer, I'll have oversight and leadership of all operations of the organization. So the last part of that question, I think, asked a bit about the strategic review, and I want to qualify the strategic review a little bit. I think whether we send a press release or whether we have people who resign from the company or not, as a small biotech trying to get our therapies to patients in the most expedited way, safe and effective manner, I think we're always looking for the right partnerships, how we streamline activity in order to get to market fastest for these patients. So these -- this review with Jefferies is ongoing. It's something, as you know, we've done in the past. We continue to do it. If the right partnerships make sense for us, then we will absolutely be open to those partnerships. And otherwise, we have planned -- we're still full force forward with our internal team, moving these programs along. So hopefully, that recaps the CEO search, a bit about the strong management team and their capability who's here today and a little extra information about the strategic review process, which is ongoing, and again, really designed to help us propel and expedite our timing to market. If those right opportunities come along, I think we're very open to pursuing them. And if they don't, Ed spoke to you about the financial solvency. I think we feel strong that we could continue to move these programs along. Thank you for your question.

And our next question comes from Justin Zelin with B. Riley Securities.

So first on the VITAL study, can you comment on how enrollment has been progressing with COVID? I think your previous enrollment guidance last quarter was that you were expecting to enroll 1 to 2 patients per month. So is that expectation still in place? And can you discuss your plan on opening additional clinical sites?

Yes. Sure. I'll take that one. So thanks for the question and a good one. So just a reminder on the time line of 2020 for the VITAL program, EB-101. In March, Stanford had a bit of a hold due to the COVID-19 pandemic, and then operations fully resumed in June. Our first patient of 3 was treated in March, and then patients 2 and 3 in July and August. We are fully operational at this time, working with [indiscernible] and team. I think as we continue to look at our timing going forward, we, say, finish accrual first half of next year. We have a minimum of 10 patients, a maximum of 15. We're hopeful to treat patient 4 here. We're screening patients currently very soon, potentially before the end of the year or maybe early next year. I think if you -- we've talked about our technical operations capability. We can do 2 a month. So we have not changed our projections -- our bold projections right now because we know we need these therapies to the patients as fast as possible. So our time line is we're still hopeful for first half of next year. Of course, the other question you asked, COVID-19 has definitely made things challenging. We've had the prescreening of patients, as we've discussed before. Some of those patients we lost to an unwilling missed a travel or maybe a different clinical trial that was more local in their area than Stanford. But we still have a good amount of patients in the prescreening we're going through. And we're trying -- there was a bit of a hiatus on traveling, and we're trying now to work closely with the sites and the patient families to get them to Stanford. Last question, as far as a second site. As you know, our plans were to put a site on the East Coast for practical reasons, of course, so these patients had a West Coast major academic facility they could go to for treatment as well as an East Coast. That was a bit of a challenge in the major cities with the pandemic and the way it hit us. At this point in time, we were not able to onboard that second site. I will remind everybody, we feel very, very confident that we are able to approve the pivotal through Stanford. We didn't need a second site. A second site and so on, we'll continue to evaluate, and we'll be opportunistic as we want to get more experience with this product as we think beyond just pivotal but as we're going to get ready for commercialization. So that's our current plans right now. Second site is not onboarded. We're still going to be opportunistic with something on the East or Central to try to make things a little easier for our patients to travel. But at the same time, as you know, loading sites and going through IRBs can take a bit of time. And we still plan on potentially final accrual for the VITAL trial in the first half of next year. Thank you for your question.

Got it. So just a quick follow-up just on the comment you made. So given there's now a few competitive programs enrolling RDEB patients concurrently, do you expect that to continue to be a major issue in enrolling patients in this ultra-rare disease in the future?

No, I don't. I really don't. I mean if you look at the patient numbers, we're talking about 10, 11, 12, maybe up to 15 patients. You're talking about potential RDEB patients, about 2,500 in the United States are our best estimates. It's an ultra-rare space. It's never perfectly easy to understand the total market opportunity. These patients today have a standard of care, I'll remind you, of, unfortunately, wound dressing change, gauze, wraps, ointments. There's nothing FDA-approved or EMA-approved in this area right now. So we really don't look as the -- at the life sciences and industry landscape doing trials in this space in any way competitive. In fact, these patients usually have a trajectory into their 30s and 40s before they unfortunately meet their demise. So we know it's going to be a continuum of care, and we're going to need all the resources we can possibly have in armamentarium. As far as competing for patients at the same time on some of the clinical trials, I think there's enough patience to go around. These are small patient numbers. We don't feel that, that's a challenge. The bigger challenge is a patient may have changed their plans. Some of the prescreen patients, they just didn't feel comfortable maybe getting on a plane or staying in a hotel. But we don't think the competitive landscape accruing trials is an issue to accrue VITAL.

And next, we'll move to Kristen Kluska with Cantor Fitzgerald.

Sorry, I was muted. Congratulations, Michael, on your promotion. So maybe just one big-picture question on manufacturing for Jay. Given some of the recent developments in the gene therapy space, could you please walk through what you would view as the key strengths and capabilities at this time? And maybe how you're imagining your capacity and abilities, say, 5 years from now? And then also, what have you learned from others in this space in regards to preparing everything towards becoming a commercial-stage company potentially?

Thank you for the question, Kristen. So let me try to unpack that a couple of different ways. So first, with regards to our internal capability, really in the last 2 years, Abeona has invested heavily in the people infrastructure, so our human capital internally. We've developed a -- really a world-class team who has positioned Abeona, both in the near term with our current programs and long term with some of our pipeline products. And what I mean by that is we've moved from an adherent based system to a serum-free suspension system, fully scalable. We've actually done some work with some of our lead equipment manufacturers to scale our product to a point where we feel very comfortable providing commercial material, both in the near term and long term with existing facilities. And as we add additional pipeline products, we think our existing facilities will meet our needs. Should they not, we have also done some preliminary engineering work with some nearby facilities here in the Cleveland area to advance additional manufacturing capacity should it be required. So really, we're positioned today to meet the continuing needs of Abeona. And then should we need to do that -- should we need to expand in the future, we have the capability and the lever to pull to do that. In regards to what have we learned from others, I think we continue to network and learn from others in the space. I think the key for us is we learned from what people have had to do from a comparability perspective. We've taken those learnings in mind. From an assay development perspective, we have a full assay development team in-house that allows us to rapidly meet some of the changing needs. If you remember, 2 years ago, the agency put a requirement in -- on around physical titer and the specific requirements for all companies to meet that, and we were able to rapidly meet and exceed those requirements through our in-house capabilities. So we continue to survey the landscape and the changes that are happening and respond to those through our internal capabilities.

And Kristen, if I could just add to that, and thank you for your kind words. I think Jay gave a wonderful overview. I'll remind everybody when I joined Abeona early in this year coming from the cell and gene therapy space, I think one of the greatest things that attracted me was the capability of our tech ops group in Cleveland. And you asked about commercialization, and I think one of the things we've learned from some of our industry peers, we've brought some people over from the CAR T space, of course, as that was really the first upheaval of autologous cell therapy, personalized therapy. And I think we've learned that scaling -- having a nimbleness around scaling is so important and not overbuilding. And I think Jay's team has really showed a great discipline to have the flexibility to meet the needs, but also to make sure we're looking at the market impetuses before we build and continue to scale as we go to commercialization. So that's just the last piece I would add there, having observed it the last 5 to 7 years myself in other forums. I think our Cleveland group is world-class. I'm very, very excited about their capability to propel us forward.

Great. And then just a quick follow-up question. Are there any protocol changes or anything related to the RDEB study in case patients are unable to make all of their visits in light of COVID? So for example, home visits. I know you talked in great detail in the past about the different cameras to take photos of the wounds and whatnot, but anything else that you're doing to just completely make sure you're getting all of the data that's necessary for this patient group?

Yes, Kristen, great question. At this time, there is no protocol changes. We always continue to stay -- we're very, very diligent of communicating with the FDA. It's been a great relationship in this space. I will share with you one of the major reasons we have the endpoint, you talked about things like Canfield, the objective cameras, direct investigator assessments in front of the clinician and the whole nursing. So Kristen, I commend you. You know the study well. One of the reasons we have all of those levels of kind of clinical check-in and oversight is to make sure we have the most complete picture for these patients. If we do have issues going forward, we see them kind of resolving a bit and getting better, but if we do, it's great that we have all of these different measurements within the trial to help us from any level of a backup. But we -- at this time, there is no change in our protocol. There's no change with our FDA path at this point in time. But to your point, it's -- I think we feel very good about the uncertain times that we have multiple measures in order to track the patient progress.

And that does conclude our question-and-answer session for today. I'll turn it back over to Michael for any closing remarks.

Yes. I want to first thank our patients who were part of our trials, who believe in Abeona. And without them and our physicians, there's no way that we would be able to bring solutions to patients and the greater community. I want to thank our investment community for their consistent interest and their belief in Abeona. And I want to give an extra thanks to our employees for really staying focused and making sure that we keep the patient as our north star and our compass as we move forward. So there's times when there can be distractions, but I think this group exemplifies the opposite. They've been steadfast on the mission, and the mission is to provide cure for some of these patients with these afflicted diseases with high unmet need. So a thank you to the operator, a thank you to the team, and thanks to the investment community for being with us this morning.

And that does conclude today's conference call. We appreciate your participation. You may disconnect your lines at this time, and have a great day.