Abeona Therapeutics Inc. Q2 FY2020 Earnings Call

Good day and welcome to Abeona Therapeutics Second Quarter 2020 Financial Results and Business Update Conference Call. As a reminder, today's conference is being recorded. I'll now introduce your host for today's conference, Greg Gin, Vice President of Investor Relations at Abeona. Please go ahead.

Thanks, Christie. I'd like to welcome everyone, and thank you for joining us on Abeona Therapeutics conference call to discuss our second quarter 2020 financial results and business update. Yesterday after the close of U.S. financial markets, Abeona issued a press release, which is posted on our website at www.abeonatherapeutics.com. On the call today with prepared remarks are João Siffert, Chief Executive Officer of Abeona; and Ed Carr, Chief Accounting Officer. We are also joined by Michael Amoroso, Chief Commercial Officer. After prepared remarks, we will host the Q&A session. 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 results to differ include, but are not limited to, those identified under the section entitled Risk Factors in the company's annual reports 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 at www.abeonatherapeutics.com. And with that said, I will now turn the call over to João.

Thank you, Greg. Good morning, everyone, and thank you for joining us to review our second quarter 2020 financial results and business highlights. We remain committed to our important mission of working together to deliver gene and cell therapies for people impacted by serious diseases. During the past several months, our team has remained resilient in the face of the COVID-19 pandemic and has delivered on our goals in clinical development, manufacturing, and regulatory affairs toward bringing urgently needed treatments to patients with recessive dystrophic epidermolysis bullosa or RDEB and Sanfilippo syndrome, also known as MPS III. I'll start with the update on EB-101, our autologous gene-corrected cell therapy for the treatment of RDEB. Patients with RDEB face a lifelong struggle with fragile skin that easily tears and blisters. Most patients develop large wounds that remain unhealed, often covering a significant proportion of their body and currently rely solely on palliative measures that include very painful and time-consuming wound care. EB-101 has the potential to be the first approved therapy for RDEB and the only durable treatment to address large chronic wounds, which are the most painful and debilitating and require involved care and affect the majority of RDEB patients. We're pleased to report that we resumed study enrollment in our pivotal Phase III VITAL study in late June, following a pause due to the COVID pandemic. The second patient has since been treated and a third patient is expected to be treated in the coming weeks. Target enrollment for the VITAL study is 10 to 15 patients with RDEB, comprising approximately 30 large chronic wound sites treated in total. We continue to work closely with the team at Stanford to prescreen patients and to treat prescreen patients as soon as possible. We currently anticipate completing enrollment in the VITAL study in early 2021, depending on how long the impact of the COVID-19 pandemic lasts, including travel restrictions and concerns about patient and/or staff safety. Data from the completed Phase I/IIA trial of EB-101 reported to the Society for Pediatric Dermatology or SPD, 45th Annual Meeting in July, provided a detailed analysis of the considerable and durable reduction in wound burden resulting from EB-101 treatment of their large chronic RDEB wounds, lasting 3 to 5 years. Furthermore, wound healing at 50% or greater following EB-101 treatment was associated with no pain at the treated sites at 3, 4, and 5 years post-treatment compared with the presence of pain in 53% of wound sites at baseline prior to treatment. The ongoing VITAL study will further characterize the relationship between the reduction of wound burden and pain relief following EB-101 treatment. At SPD, we also presented a poster that provides insights on the significant disease burden of RDEB, highlighting data from a literature review of 65 studies under clinical, humanistic, and economic impact on patients living with RDEB and their families. The disease burden and management of RDEB take an extraordinary toll on quality of life, which underscores the need for therapies that reduce wound burden and the associated humanistic consequences and economic impact. Now let's turn to our adeno-associated virus, AAV-based investigational gene therapies, ABO-102 and ABO-101 for MPS IIIA and MPS IIIB, respectively. In July, we held a kickoff meeting under the EMA Priority Medicines or PRIME program, which included members of the Committee for Advanced Therapies, or CAT, and the Committee for Medicinal Products for Human Use, CHMP of BMA. At the meeting, we presented our plan toward registration of ABO-102 for MPS IIIA, taking advantage of the PRIME Designation. PRIME is EMA's program to accelerate assessment of promising therapies that demonstrate the potential to address substantial unmet medical need based on early clinical data. Based on the meeting, along with previous input from the CHMP and the pediatric committee, PDCO of BMA, we anticipate submitting a marketing authorization application for EU conditioned approval of ABO-102 for MPS IIIA in 2023. Regarding the U.S. regulatory path for ABO-102 and MPS IIIA, we're continuing to seek guidance from the FDA. We acknowledge that the FDA is currently focused on matters related to COVID-19 and all the life-threatening conditions as reflected in its issued guidance put out in May. We look forward to providing an update after we receive feedback from the FDA. Let's now move on to patient enrollment in our MPS III Phase I/II trials. Total enrollment to date in the Transpher A study for MPS IIIA is 17 patients, including 11 patients dosed in Cohort 3. Total enrollment to date in the Transpher B study for MPS IIIB is 9 patients, including 2 patients dosed in Cohort 3. We anticipate additional enrollment in the programs in the coming weeks and potentially completing enrollment in both Transpher A and Transpher B studies by the end of 2020. Updated positive interim data from the Transpher A and Transpher B studies was presented at the American Society of Gene & Cell Therapy 23rd annual meeting in May and during the MPS Expert Webinar of the International Symposium on MPS and related diseases in July. Both these presentations are available on our website. The findings support previously reported data showing preservation of neurocognitive skills now up to 2 years among the 3 young patients treated in Dose Cohort 3 of the Transpher A study. In addition, improvements in multiple disease-specific biomarkers and a favorable safety profile in MPS IIIA and MPS IIIB patients after treatment with ABO-101 and ABO-102 were observed in both studies. Turning to our manufacturing facilities, we resumed internal operations at our fully integrated quality and manufacturing facility in Cleveland in June. Our manufacturing activity supports the increased activity in our clinical programs, including manufacturing EB-101 drug product for the Phase III VITAL study. We also initiated process development that will enable production in-house of the retrovirus used for EB-101 manufacturing, providing us with increased control of the supply chain and product quality while reducing costs. We also resumed process development activities to enable in-house manufacturing of commercial supply of ABO-101 and ABO-102. We're now on the design stage for additional manufacturing facilities within the existing space to support the advancement of our clinical programs and also commercial manufacturing. Before I turn the call over to Ed for the final financial review, let me introduce and welcome Michael Amoroso, our new Chief Commercial Officer. Michael joined us in July and brings over 20 years of product commercialization experience in biotechnology and pharmaceutical industries with a focus on cell and gene therapies. Prior to joining Abeona, he held various commercial leadership positions at Kite, Eisai, Celgene, and Sanofi. At Kite, Michael was responsible for the worldwide commercial organization for the autologous CAR T-cell therapy YESCARTA. His proven track record in commercialization and supply chain management for personalized autologous cell therapies will be incredibly valuable as we plan for a potential go-to-market strategy for EB-101. I'll turn it over to Michael to say a few words. Michael?

Thank you, João. Good morning, everyone. I'm very excited to join Abeona. It's an exciting time to join the team, given the continued progress with the EB-101 VITAL study and the AAV clinical programs, and the clarity on the clinical development path and regulatory strategy in the EU for ABO-102. During my first few weeks on the job, I started working with the experienced team here to help plan for potential commercialization of EB-101 and the pre-commercialization strategy and activities for the AAV-based gene therapy programs. I look forward to providing updates on our progress on future calls and speaking with each of you. Thank you, João. Back to you.

All right. Thank you, Michael. We're very pleased to have Michael join the team. During the quarter, we also appointed George Migausky and Paul Mann as independent members of our Board of Directors. George and Paul are both highly regarded professionals with substantial financial management, operational business development, and capital raising experience in the biotechnology industry. In addition to their Board service, George serves as the Chairman of our Audit Committee, and Paul serves as a non-committee member.

Thank you, João. 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, and short-term investments, as of June 30, 2020, were $107.9 million compared to $129.3 million as of December 31, 2019. Net cash used in operating activities was $9.5 million for the second quarter of 2020. R&D spending was $6.1 million for the second quarter of 2020 compared to $16.3 million in the second quarter of 2019. The decrease in R&D expenses was primarily due to decreased manufacturing, clinical, and nonclinical development activities arising from the effects of the COVID-19 pandemic as well as cost savings associated with the decision to internally manufacture retrovirus for the EB-101 program. G&A expenses were $5.5 million for the second quarter of 2020 compared to $5.6 million in the second quarter of 2019. Net loss was $13 million or $0.14 per common share for the second quarter of 2020 compared to net loss of $23.9 million or $0.49 per common share for the second quarter of 2019. And with that, I will turn it back over to João for concluding remarks.

Thank you, Ed. Thanks again, everyone, for joining us today. We appreciate your interest in Abeona and our continued progress. In summary, it is a very exciting time for us as we continue to advance our clinical programs with the goal of providing safe and effective gene and cell therapies to patients who currently have no approved treatment options. To that end, we have delivered on key goals in clinical development, manufacturing, and regulatory affairs over the past several months. We have more left to accomplish and are keenly focused on working toward completing enrollment in our EB-101 pivotal VITAL study in RDEB and our gene therapy clinical studies in MPS IIIA and IIIB. With our strengthened leadership team, we're beginning to prepare for 3 potential commercial launches over the next 3 years. I'll now turn it over to the operator for Q&A. And thank you, everyone.

And our first question comes from Maury Raycroft with Jefferies.

Congrats on all the progress. First question, just wondering if you could talk more about the discussion with CHMP. I guess, maybe talk about the previous input you've gotten from them. And what aspects you've lined on for potential registration for the IIIA? I guess what else you have to do before the EMA application filing in 2023?

Thank you, Maury, for your question. This is an ongoing process. We are now having our third meeting with European regulators. This is different from scientific advice and isn’t a fully-binding agreement, but it seems that the feedback we are receiving is aligning towards a mutually agreed path, which I referenced in my prepared remarks. This encompasses both the duration and scope of the clinical data, dependent on the success of our long-term studies, including patients we have recently enrolled and those we expect to enroll by the end of the year. It also includes the process of creating a commercial-grade product, which we anticipate will be ready in the upcoming months, developed within Abeona. We have a clear plan for manufacturing the product and ensuring its suitability for commercial use. With these two major areas—CMC quality and clinical regulatory—we have a clear roadmap. Additionally, we are pleased to have enrolled more patients in the study, particularly younger patients who may benefit the most, as they do not have very advanced disease at this time.

Got it. That's helpful. And then for EB-101, you mentioned plans to dose additional patients in the coming weeks. I guess, can you say if this means that what you're seeing in the first 2 patients gives you the ability and confidence to pick up the pace with dosing multiple patients going forward? If you could talk more about that?

Yes. So we're obviously not going to comment on patient by patient, and it's probably too early to tell on these patients anyway because ultimately, the goal here is long-term duration and some of these patients were just treated. So we will not provide that. But it does reflect the fact, number one, that we've been able to manufacture successfully, that the administration of the treatment itself, the transplant of the EB-101 was done successfully, and then there were no safety concerns in the previously treated patients. So of course, all of these are good news. We take it for granted given the successful completion of the Phase I/IIA, but we obviously have cared deeply that this has done safely. I think we'll have more long-term data later in the year and early next year.

Yes, we just dosed a patient, and we have another patient scheduled for dosing. We hope to be able to dose at least two patients a month if everything goes well. However, much of this depends on scheduling, which can be unpredictable, especially during the pandemic.

And next, we'll go to Raghuram Selvaraju with H.C. Wainwright.

This is Blair Cohen on for Ram. A couple of questions for me. In the VITAL trial, are all the prescreen patients still eligible for enrollment? Or did you lose some of them? And if so, how many did you lose? And how many more will you need to prescreen in order to complete enrollment?

We don't have any knowledge of losing any patients. But of course, we have to go through scheduling these patients over time.

And I know you touched on this a little bit earlier, but what is likely to be the pace of treatment for the VITAL trial going forward? In other words, how many patients do you expect to treat per month?

I think realistically, 1 to 2 patients a month. I think 2 patients a month is our goal, and we are on track for that. But of course, a lot can happen still on the COVID disruption. So I think that ultimately will depend on how quickly we can resume full activities on the medical center side. From the internal side, we're equipped to treat 2 patients regularly.

Okay. And then building off of that, as far as the effects from COVID-19, can you comment on any larger execution issues that you may have going forward?

The main hurdle for execution over the past several months was one, travel restrictions and also the diversion of the resources and the medical centers to attend to the patients with COVID-19 infection. So these have eased up a bit. Obviously, things are still not back to normal. So it will depend on individual medical centers. We have, as we mentioned earlier in the call, been able to dose patients with Sanfilippo syndrome, acknowledging that this is a rapidly progressive disease. So there was an impetus to try and get to these patients as soon as possible, especially the young ones who were declining fast. And a bit more cautious would be patients with RDEB because these are kind of more frail patients with large exposed wounds and sort of perhaps more at risk for infection. So with that largely resolved, but again, it is not fully back to normal, we expect that we'll be able to resume activities in full, over the coming months. Enrollment is obviously being prioritized for these patients. The part that still is yet to resume fully is the follow-up visits. So, of course, we have followed these patients for safety remotely through virtual visits. But for some of these assessments, we need patients to come back on-site for both the Sanfilippo and EB program, and these are just being scheduled now as we speak.

Okay. Great. If I could just get one more in. I know you said for Europe, you're looking at an approval by 2023. Do you think that could come before U.S. approval? And what timeline are you looking at for a U.S. approval?

Yes. So of course, the timelines are mostly predicated on the activities we have to complete internally. So I can't comment, as I mentioned, on the FDA yet because they've been truly overwhelmed with the COVID efforts and prioritizing, as per their statement, PDUFA timelines such as drug approvals or new IP. But in terms of the time frame, this is gated by our ability to both manufacture and release new product, which obviously has eventually to be tested for comparability. And ultimately, the length of follow-up for patients who have been recently enrolled in the studies. We want to have the most as practical but as robust data set as we can going into a regulatory submission. So that includes the 3 patients who have been dosed, all the patients who've been dosed in the study for safety, and also additional young patients we just dosed and planted those before the end of the year. So that's how these timelines get us to 2023.

And our next question comes from Difei Yang with Mizuho Securities.

Just one question each on the EB-101 and ABO-102. So for the EB-101 program, would you be able to comment if you were able to activate the new site on the East Coast? And it sounded like you have done a fair amount of prescreening work. So is it safe to assume that these patients have been prescreened? What's left to do is really just to travel to the clinical sites and get treatment. Now second question is on ABO-102. And are you able to make comments with regards to the general understanding of the regulatory pathway in the U.S., will it be more or less similar to the European guidance?

Thank you for your question. Let me address it step by step. Regarding the second site, after the peak of the crisis, we began our preparations for it. This particular site, located on the East Coast, was significantly affected by the pandemic, leading to shutdowns for much of the last quarter. We hope to announce the second site in the coming months. As for the prescreen patients, we previously mentioned having 11 individuals who went through a formal prescreening process approved by the IRB, including all necessary tests and biopsies. The prescreening has taken place over the past year and a half, and we are now in the process of scheduling these patients. It’s important to note that these are real people with other commitments, so we sometimes have to adjust their travel plans. Overall, everything is on track. Another aspect impacting the study's completion rate is the number of wounds treated per patient. Our objective is to treat 10 to 15 patients, but we aim to cover 30 wound sites in total. If patients have more wound sites treated, we can potentially complete enrollment at the lower end of our target range. The Stanford team has been highly active and effective, working diligently to bring these patients in despite the ongoing international travel disruptions. We have had preliminary discussions with the FDA regarding the regulatory path, and they issued draft guidance earlier this year. However, we have not received any feedback from them on our submissions. Our goal is to align our plans to satisfy both European regulators and the FDA, as it will be a single product. Therefore, it is essential to wait for the FDA's input. We believe our current plan will largely meet their requirements, but we cannot make any predictions until we hear from them directly. The European Pharmacopoeia provides comprehensive quality and manufacturing guidelines, which often align with FDA standards. In general, the FDA and EMA communicate internally, and we will ensure to share any feedback we receive to maintain an open and collaborative approach. However, we have yet to receive any formal feedback.

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

A little more practical one. As you ramp up involvement, manufacturing, etc., on EB-101, can you give us a little sense of the tempo of any relevant increases in the R&D spend over the next few quarters? And then secondarily, could you give us a little clarity on the status of the licensing agreement with REGENX and the ongoing arbitration? It sounds like we should probably not be modeling that $28 million payment as a definite event.

To address the first question, let me start with the second question about the arbitration of legal proceedings. What I can share is what's included in our Q release, so I can't provide any additional comments on that. Could you please repeat your first question, Mani? I seem to have forgotten it.

Sure. You've talked about re-accelerating enrollment EB-101 moving forward. Like the R&D spend tempo as you ramp up those programs and related manufacturing.

As we enroll more patients, which constitutes the majority of our variable costs, the associated patient-related fees for procedures will increase, and this is intentional as it supports the progress of our programs. We have also made significant adjustments to our manufacturing supply chain by bringing retrovirus manufacturing in-house, which we expect will lead to substantial savings over the coming year. These changes are crucial for supply chain improvement, quality control, and risk reduction, while also helping to lower costs. As we finish enrollment in the Sanfilippo trials, expenses related to those trials will decrease. Although we will continue to monitor these patients long-term, the primary costs in the trials have been for treatment and initial assessments. Consequently, while some expenses will rise, others will decline, and after we complete enrollment, certain activities will also diminish. To broadly address your question, there could be a slight rise in R&D spending over the next six months, but it may stabilize thereafter.

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

Congrats on the progress, especially in light of everything that's going on. So the first question, as it relates to EB-101, you discussed a potential commercial launch in late 2022. Could you talk about how much time you might need to prepare for a launch after a potential approval? I guess what I'm trying to calculate is that given your rare pediatric disease designation, whether this approval could come before September 30, 2022, when you could potentially receive a voucher pending FDA timelines of course.

Kristen, thank you for your question. I'll let Michael share some insights. Preparing for a commercial launch ideally begins several years in advance because there are many tasks to address. Michael, with his extensive experience over the past month and a half with the company, can provide you with some initial thoughts on this.

Sure, João. Thank you. And Kristen, thank you for the question. Yes, I think João said it well, our commercialization efforts have begun now, right? With bringing myself in, we're starting to look at the right staff and team members to continue to bring into the organization to join the already very talented group in the clinical side of things. Preparation for launch absolutely starts now. Kristen, I think you spoke to the middle of '22. We have plenty of activities to get up and running. And that would obviously be with continuing to look at our footprint for sites for EB-101. So our activities have begun, and we'll continue to update on the progress during the ongoing quarterly calls.

Okay. Great. So I understand you're doing the preparations now, but I guess the question was more targeted towards once you have an actual approval in hand, how long that timeline could take? And whether or not you think you could potentially get this approval ahead of this aspiration for rare pediatric disease designation vouchers?

Yes. And Kristen, the idea is that as soon as we get an FDA approval, we will be ready to launch EB-101; we'll have our commercial supply, and we'll be able to launch immediately upon FDA approval. There will be no lag for us to treat our first patient.

That's very helpful. And then for the MPS IIIA study, you've indicated that Cohort 3 could treat anywhere between 9 to 16 subjects. And for MPS IIIB, that could be up to 5 patients for Cohort 3. So just given that you provided guidance today in terms of completing enrollment by the end of the year, could you discuss whether there's a specific patient number that you're targeting for each of these groups?

We do not have a specific number of patients at this point. However, we understand that there is a lead time from the identification and prescreening process before patients ultimately enroll in the study. We generally believe that we will have enough patients who meet the current inclusion criteria, which requires a development quotient greater than 60 or an age of less than 2 years. These patients are expected to have retained some neurocognitive function at the time of study entry. Therefore, considering the prescreening and the patients waiting to be treated, we should have a sufficient number of patients to generate a robust data set to support regulatory approval. This is contingent on how well the patients respond to treatment, but theoretically, we believe we can meet these parameters by the end of the year.

Okay. Great. And then the last question for me is that I recognize the meeting you had with the EMA related to ABO-102. But do you think the proposed outline could be similar to ABO-101? And are you thinking about any synergies across the 2 programs, given 1 or 2 is a little bit more advanced?

Yes. At all times we're thinking about that. And of course, we make an effort to also engage specifically regarding ABO-101 formally, right? So although we can make these parallels and of course any lessons learned from the MPS IIIA program, we are already using to anticipate and see the MPS IIIB program. So absolutely. But we ultimately need formal feedback, and we need the EMA and FDA to concur that this is actually a sensible plan, which we assume will be, but we obviously need to work on that. And even in process development for the manufacturing of a commercial-grade product, a lot of the learnings over the past year, including some of the process development we did for some other AAV vectors, including the MPS IIIA, ABO-102 vector will also serve well for the ABO-101 product. So I think that's correct. In summary, your assumption is correct. But obviously, we'll double-check this with the regulators.

And I'm showing no questions at this time. So I'll turn the call back to João Siffert.

Thank you, everyone. Again, appreciate everyone joining us this morning, and let us know if you have additional questions. And know that we're all very committed to fulfilling our mission. So thank you.

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