Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Abeona Q3 2021 Earnings Call. [Operator Instructions] I would now like to turn the call over to Greg Gin, Head of Investor Relations. Please go ahead.

Thank you, Kelly. Good morning, everyone. I would like to welcome and thank you for joining us on our third quarter 2021 conference call. The press release announcing the third quarter results and recent operational progress is available on our website at www.abeonatherapeutics.com. On the call today with prepared remarks are Vish Seshadri, CEO of Abeona; and Ed Carr, CFO. After the prepared remarks, we'll host a Q&A session. We are also joined by Dr. Brian Kevany, our Chief Technical Officer. Before we start, I will 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 Vish.

Thank you, Greg. Thank you, and good morning, everyone. Thank you for joining us this morning. This is my first quarterly call since transitioning to CEO about 4 weeks ago, and I'm happy to update you on our substantial progress in the third quarter and since quarter end. I'm thrilled to be leading Abeona during this exciting and critical time in our life cycle. We are advancing 2 late-stage pivotal assets with rare pediatric designations, transformational potential and key anticipated milestones in the coming months, including finishing patient accrual for the EB-101 Phase III VITAL study in the first quarter of 2022 and top line data readout in the third quarter of 2022. We are continuing to work toward bringing our gene therapies as safely, effectively and quickly as possible to patients who suffer from these diseases that have no approved treatments. We have taken a big step towards that goal by recently enhancing our leadership and bench strength with gene therapy and biopharma industry veterans to prepare for 2 Biologics License Application submissions for our lead clinical program in RDEB and MPS IIIA. These hires include John Voss as Head of Quality, Carl Denny as Head of Regulatory, and Kate Imhof as Senior Director of Regulatory. All 3 bring considerable gene therapy experience with late-stage clinical and commercialized products in companies like AveXis, Sarepta Therapeutics and Cellectis. Now let's take a closer look at EB-101, our investigational autologous gene-corrected cell therapy that has demonstrated a high rate of instantaneous wound healing and pain reduction for 6 years, the latest follow-up time point reported after treatment of large, chronic wounds in RDEB patients in the Phase I/II study. We are anticipating similar outstanding results from our ongoing Phase III VITAL study. As a reminder, the target for the VITAL study…

Thank you, Vish. I would like to remind everyone that the Form 10-Q is available on our website, which is where you can get additional details on our financial results for the 3 and 9 months ended September 30, 2021. Starting with the financial reasons on our balance sheet, we had cash, cash equivalents and short-term investments of $67 million as of September 30, 2021. Net cash used in operating activities was $10.3 million for the third quarter of 2021. As part of the settlement with REGENXBIO, we have agreed to make payments to REGENXBIO of $20 million in the fourth quarter of 2021, $5 million in November 2022 and $5 million no later than November 2024. As Vish mentioned, this settlement allows us to eliminate ongoing legal expenses, deployment of resources and risks related to the dispute. With our existing financial resources, we are continuing to drive our lead programs toward key milestones. Based on our existing cash, cash equivalents and short-term investments, our ability to access additional financial resources and our financial flexibility to reduce operating expenses, if required, we believe that we have sufficient resources to fund operations through at least the next 12 months. To further strengthen the balance sheet and prepare for BLA filings, commercial launch readiness and the AAV facility build-out that Vish mentioned, we are exploring various options, including strategic partnering of pipeline assets and nondilutive funding. Turning to research and development activities in the third quarter of 2021, we spent $8 million, which is consistent with the $8 million spent in the third quarter of 2020. Our spend on general and administrative activities was $6.1 million in the third quarter of 2021 compared to $4.4 million spent in the third quarter of 2020. General and administrative expenses include the cost of personnel not working directly on clinical and preclinical activities as well as professional fees, insurance rent and office expenses. The increase in general and administrative expenses in the third quarter of 2021 results primarily from increased stock-based compensation and professional fees, partially offset by decreased salary and related costs. Gain on settlement with [indiscernible] licensor was $6.7 million in the third quarter of 2021 as compared to 0 in the same period of 2020 and resulted from the accounting for the settlement agreement with REGENXBIO. The PPP, or Paycheck Protection Program, loan forgiveness income was $1.8 million in the third quarter of 2021 as compared to 0 in the same period of 2020 as a result of receiving the SBA or Small Business Administration’s forgiveness of our PPP loan in July 2021. With that, I'll turn the call over to the operator to commence the Q&A session. Operator?

Certainly. [Operator Instructions] Your first question is coming from Maury Raycroft with Jefferies.

First, I wanted to ask on the press release that came out this morning on ABO-102 and the ICIEM conference. I guess maybe if you could just talk a little bit more about what you're going to be presenting at the conference, and how this is -- how this factors into the big picture plan for 102.

Absolutely. Thank you, Maury, for the question. I will take this one. The data that we are presenting at ICIEM, the important part of the data is really the correlation that we see between Bayley scoring and Mullen. These are 2 different scales that are used in neurocognitive assessment. What we have shared in the past, the data from the Transpher A study in terms of developmental age equivalent and the wonderful results that we've seen for the first 3-dose children are all based on the Mullen scores, but we've been collecting Bayley as well. So the common question that arises is how will the neurocognitive assessment look when you switch over to a Bayley, which is now what's been agreed with the FDA as our primary end point for the study. So the data that shows correlation between Bayley and Mullen that we will be presenting at ICIEM shows that those scores are correlated at approximately 95% correlation. And therefore, what it implies is that you should almost expect similar results if you put our Bayley scores instead of Mullen in the current ongoing Transpher A study. I hope that answers this question, Maury. Happy to clarify if you have any other follow-ups on that.

Yes, that helps the answer. And so it seems like this is going to be an important update that would likely go right into the filing for this program and help, I guess, align -- make sure that the end points are aligned for one.

Yes. Yes.

Got it. Okay. And then I also wanted to ask a question on EB-101 for RDEB. You noted -- you mentioned that you were opening up this other site on the East Coast, UMass med school. Just wanted to see how recruiting is going there. And if you can provide any more perspective into enrollment for the study?

Sure. Thanks for that question, Maury. As we previously shared, we have activated the UMass site now, and they are actively prescreening patients. So we can expect patients to be treated there at any given point in time. We're definitely seeing more interest from patients who would not travel to the Stanford site because it would take from the East Coast a 5-hour journey, and that's something that's prohibited for many patients from participating. And we would like to stress the fact that we already shared this, we have identified the patients that we need, the last final patient that we need to complete accrual in the VITAL study. Most importantly, in getting patients treated at UMass, we have done a lot of work transferring the knowledge from Stanford so that UMass is fully up to speed with all the protocols and procedures. Because the way of treating EB-101 product for the patient has a lot of intricacies, and we wanted to make sure that nothing is missed in that tech transfer. So that's what has taken this time, but we are very confident that UMass is an equally competent site that can apply EB-101, and they are actively screening patients.

Your next question is coming from Ram Selvaraju with H.C. Wainwright.

This is [ Mas ] on for Ram. So firstly, just regarding the enrollment for the Phase III VITAL study for EB-101. Is there a significant reason you changed guidance on completion of enrollment from the end of this year to Q1 2022?

Thanks for the question, Ram. The short answer is, no, it's not a significant change in the timing, and it has nothing to do patient availability for the study or patients' interest in participating. We have a lot of patients who are interested. It's more a matter of logistics and experimental design. As you would think, in commercial setting, any large, chronic wound is absolutely appropriate for treatment of EB-101. But in our study, we have to randomize intrapatient wounds to have symmetry in the body. So if you have a wound in the upper right arm, you want a wound that is a controlled wound in the upper left arm, which puts some artificial constraints on who are the most appropriate patients. And that's one factor which is unique to the clinical trial. You will not see that in the commercial setting. So that's one. And second is we have the patients identified. It's a matter of scheduling, and it's also a matter of -- we have an annual routine cGMP shutdown that happens in the last half of December. And at that time, we cannot manufacture, and this is something that we do every year. If you missed an interim biopsy date by end of November, the next available stock -- slot goes to mid-January. So that is the primary reason why that spilled over to quarter 1 2022. And we're very confident that we're going to be accrued in quarter 1.

Okay. I appreciate the clarification. And then regarding the neurological assessments for the Phase I/II AV-101 study for MPS IIIB, has there been any current hindrance due to the ongoing pandemic for this assessment?

Thanks for the question, Ram. There is no specific hindrance for MPS IIIB neurocognitive assessments due to the pandemic per se, which is any different from the MPS IIIA program. As you -- as we've previously shared, for the MPS IIIB program, the timing of when we will have meaningful neurocognitive assessment requires that follow-up period. And that's what leads us to -- based on the 7 patients that have been dosed already, that meaningful time will be in the second half of 2022, where we would have a 2-year follow-up for at least 4 or 5 patients. So that's the time we can really make meaningful assessments of the MPS IIIB patients.

Okay. And then just finally, shifting to your gene therapy pipeline. The MPS III space is relatively crowded. What do you think differentiates your AAV-based therapies? And in light of your AAV manufacturing facility, do you anticipate any kind of clear, competitive advantage arising from this? And if you have any plans to monetize your manufacturing facility or leverage it in some way?

Yes. Thanks for that question, Ram. I will have to correct you on one point here. The MPS IIIA and MPS IIIB space is not crowded. We currently have nothing that works in this disease. There is no standard of care. There's no treatment at all. And the -- our programs are the most advanced. And anything that is still in development is at least 5 to 7 years away. We have only seen preclinical or clinical preliminary biomarker clinical data and ecto-systemic data, not anything to do with central nervous system. So we believe that this is unique there. And the second part of your question, which had to do with manufacturing preparedness for -- we are -- we've made a strategic choice here. We don't want to be at the mercy of a CDMO. We want to be a non-CDMO-dependent company, which is why -- and even as we wait for our products to get approved, there are patients that are lined up for these therapies, which is why in our latest protocol amendments, we're making provisions for patients to be -- continue to be treated in Transpher A, even though we've gotten the necessary accrual done for an efficacy analysis for registrational purposes. So we don't want to lose any time, and these patients are waiting, which is why we've already started work on building out our AAV facility. And it also has to do with when EB-101 goes -- launches commercially, our current facility will become a single-source, single-product facility, which means we cannot any longer manufacture MPS IIIA ABO-102 product there, which is why we've already started to construct this new facility, and we want to be in time to be able to dose patients in need.

Next question is coming from Mani Foroohar with SVB Leerink.

I guess a couple of questions around how you're thinking about strategic alternatives versus sort of strategy on managing the balance sheet. Obviously, you mentioned some investments you have to make around the transition from you being a single-sourced manufacturing to product manufacturing. Can you give us some exactly where your approximate cash funnel will be as you hit some of the key catalysts that you're talking about in terms of the EB program and the gene therapy and the AAV program? And then secondarily, in the second question, as you think about potentially out-licensing or partnering some of these assets, should we view the entire AAV platform as a single asset? Is it operationally even possible to license these programs and assets out for different recipients? Like how should we think about the partner-able quantum of your AAV programs?

Yes. So first, we'll take the first question, Mani, and thank you for that. Ed will be addressing your question that relates to cash balance and our build-out coming up to the next milestones. Ed?

Yes, sure. Sure, yes. Yes. I mean as you know, there's $67 million on the balance sheet at the end of September. So just looking forward, as we mentioned in my prepared remarks, I think we have enough cash. I'm confident we have enough cash and financial flexibility, access to resources to get to the key milestone next year, which is the Phase III VITAL study readout. That would be a key inflection point for us. But there's also some other key inflection points as we think about that, even before we have the MPS IIIA top line data hopefully, I hope, assuming the magnitude of effect is still there for late 2022, early '23. You've got BLA filings, BLA approval. So I think there's a really healthy pipeline of inflection points as we look forward. So the one that we are obviously most myopic on is getting to this Phase III EB VITAL readout in Q3 of 2022. So that's how I would answer that question. Hopefully, that's helpful.

Thank you, Ed. On the second part of your question, Mani, which is the quanta for out-licensing. It's a little premature to give a definitive answer. But as you see, there is a whole portfolio or a spectrum of different potential partners for out-licensing, and their goals can be different: some that will be interested in the platform as a whole, some that will be interested in late-stage assets where they have the ability to commercialize in certain geographies. Depending on -- and we've seen all those different shades of strategic positions of our potential partners, and we're open to all different types of arrangements. And that's all I could say right now. But our platform applies to multiple therapeutic areas as well. As you know, our preclinical programs are in the ocular space. So there could be players that are specifically interested in ocular programs. And our -- the MPS IIIA and IIIB are more in the neurological, neuropsychiatric kind of marketplace, and there are specific players that are interested in those types of assets. So we are in a position to develop quanta or packets as and how these conversations ensue.

Your next question is coming from Kristen Kluska with Cantor Fitzgerald.

The first one I have is on EB-101. Wondering if you think this data top line readout next year could include any longer-term findings beyond the 6-month end point since some of these patients were enrolled early on ahead of the pandemic. And then could you speak to the importance of your durability data from both this trial, and then, of course, the Phase I/II trial when potentially filing for BLA given the FDA's stance and focus on the effects across cell and gene therapies and durability?

Thank you, Kristen, for the question. First off, it's a very important question that you raised, the durability and the long-term benefit that we offer to patients. The regulatory requirement is a 6-month time point. So what you will see in a regulatory package is going to be 6 months from treatment, and what is the level of wound healing and the pain reduction that we see, right? However, the long-term follow-up data that we have presented from our Phase I/II study, so far, tell us that there's a lot more value proposition than the regulatory hurdle. We have seen up to 6 years of data. And a patient that had 80% of the wounds treated at 6 years, showing 80% of the wounds showing greater than 75% closure, which is very significant and also the pain reduction sustaining that way. So this is going to help us completely build out the value proposition and be appropriately pricing our assets and commensurate with the value that we provide to patients. And to your question about whether Phase III data will also have similar, there will be some patients that have longer-term follow-up 2, 3 years out that we will continue to publish and report on as the study continues. What is important is to recognize what both the Phase I/II and the Phase III, the patients are being followed for a period of 15 years. So this is going to be a continuous data update over time, showing the durability of our therapies. So I hope that gives you a good sense to the full value proposition of the drug, more than just the regulatory end point that we're looking at to get the product into the market.

Okay. I appreciate that. And then I had a question regarding the potential and exploration of strategic partnerships. So understand that your late-stage pipeline is rare disease focus and that the ophthalmology pipeline, while not disclosed, you have indicated that some of these indications are a little bit larger. So wondering if we should be thinking -- or if the company is evaluating things on a geography basis. So perhaps are there certain regions where these diseases are more impacted? And then also separately, looking at the earlier pipeline, the AIM capsid library. Could you discuss some areas that could be attractive for somebody to evaluate, including perhaps how some of these capsids could address some of the limitations that are currently observed in AAV-based gene therapies?

Absolutely. So there's at least 2 parts to the question, Kristen. First, let me talk about the strategic partnerships and your question about geographic prevalence of some of the diseases that we are more mature in development. We -- our goal is to have these therapies commercialized in every geography. We currently don't, for MPS IIIA as well as EB, we do not have any variations on a per population basis, the incidence levels of these diseases being very different in different geographies. These are genetic disorders that happen in all different parts of the world. Our initial focus for launches, of course, are U.S. and Europe focused. But our goals are completely to expand beyond that to other geographies, including Asia Pacific and everywhere there's a need. And this is where we are looking at potential strategic partners that have more experience in those more emerging kind of markets. And there is -- I mean we do know that there are -- there is interest in those types of geographic expansions where our data could be very useful. So the short answer is yes, but it's not based on how much prevalence there is in certain geographies. It's just based on we're going about this a little bit of sequential way. The second part that you brought up is our AIM capsid library, and how that could differentiate. Part of the beauty of the AIM capsid library is the tropism. So we have knowledge of what types of capsids have a preferential tropism for different types of tissues. And that's something that's going to be very helpful in addressing some of the current challenges. Because as you know, immunological responses to AAV-based therapies is a big hindrance to optimizing the therapeutic effect of our drug. By engineering capsids that can have tissue tropism, you're partly circumventing that. And this is definitely part of the value proposition that we come with our proprietary capsids, number one. The second is beyond just the AIM capsids, we are also looking at how to circumvent other types of limitations in AAV-based therapies. For example, the size of the genes that you can package, you cannot put more than 4 kilobase sites into an AAV capsid. And here is where we are developing other methodologies where you could have recombination-based. At ARVO, we presented new data on recombination-based techniques where you can have larger genes, for example, ABCA4, delivered and -- to the patients. And this is something that, beyond just the capsid engineering, that we're focusing on overcoming some of the limitations of gene therapy as such. I hope that gives you some flavor as to where we're likely to be differentiated and advance our knowledge, Kristen.

There appears to be no further questions in queue at this time. I'd like to turn the floor back over to Vish for any closing remarks.

Thank you very much. I have full conviction about the transformative value that Abeona's lead assets can deliver to patients. We're focused on our road map and making progress through disciplined execution. Our current leadership team is stronger than ever, especially with some important recent additions geared towards BLA readiness. I want to thank our shareholders and our stakeholders who have listened to this call, and we'll talk to you on the fourth quarter call. Thank you.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.