Abeona Therapeutics Inc. Q3 FY2020 Earnings Call

Good morning, and welcome to Abeona Therapeutics Third Quarter 2020 Financial Results Call. I will 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 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 the 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 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, 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 timelines 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 over 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 non-core assets while also providing to Abeona the opportunity to share in the 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 for 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?

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 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. Farzin, this is Michael. Thank you for the question. I'll start on this one. We are aiming to have a meeting early next year with the FDA to discuss our MPS IIIA program. We've had positive interactions with the EMA under the PRIME designation. The key aspect from the Phase I and Phase Ib trials is safety. The cohort 3 dose has demonstrated clear safety. We have also presented promising early biomarker data, including heparan sulfate levels in cerebrospinal fluid and a reduction in liver volume in these patients, along with the critical neurocognitive endpoint, particularly at the 2-year mark following treatment. We believe that early intervention is crucial, and for Transfer A, the developmental quotient remains above 60%, while for these three patients, it exceeded 70%. Our intention is to intervene early with the appropriate therapeutic dose to maintain neurocognitive abilities and motor skills as seen in unaffected children. We will present the data to the FDA, including biomarker, safety, and neurocognition data for the longest-treated patients. We hope to gain more clarity on our future path at that time. Thank you for your question, Farzin. These are some key markers to consider for Sanfilippo A syndrome patients, and we look forward to providing updates as we progress in early 2021. Thank you.

A follow-up question is for the process development activities to 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 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 timeline 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.

That makes a lot of sense to me. I have another question regarding the turnover on the leadership team. How should we consider timelines for the potential search for a new CEO, possible additions to the Board, and so on? Should we expect that to be an early 2021 event? Is the timing dependent on the process that Jefferies is assisting you with? What are your thoughts on this?

Yes, it's a great question, and I appreciate it. I'll address it in parts. First and foremost, I want to emphasize that our management team remains fully intact. The leadership team that was here under João, our former CEO, is still in place, and our functional leaders are handling the day-to-day decisions necessary to progress our programs. Our priority is to deliver these essential therapies to patients as swiftly as possible. We have a capable team, and their continuity is a great advantage. Regarding the CEO search, we are currently not seeking a new CEO. As mentioned in previous press releases, a special committee of our Board members is involved in overseeing day-to-day strategic discussions with the management team responsible for operations. Additionally, I want to note that my role has evolved; as the Chief Operating Officer, I now oversee all operational aspects of the organization. Touching on the strategic review, it’s important to clarify that regardless of press releases or personnel changes, as a small biotech company focused on expediting our therapies to patients safely and effectively, we are always on the lookout for the right partnerships and ways to streamline our efforts to accelerate our market entry. The review with Jefferies is ongoing, something we've done previously and will continue to pursue. If the right partnership opportunities arise, we will be receptive to them. However, we are also fully committed to advancing our internal programs. I hope this answers your questions about the CEO search, highlights our strong management team’s capabilities, and provides additional insight into the ongoing strategic review process, which aims to enhance our market timing. We remain open to pursuing the right opportunities, and if they don't materialize, as Ed pointed out regarding our financial health, we are confident in our ability to continue advancing our programs. 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, I'll address that. Thank you for your question. Just a reminder about the 2020 timeline for the VITAL program, EB-101. In March, Stanford faced some delays due to the COVID-19 pandemic, but operations resumed fully in June. We treated our first patient in March, followed by patients 2 and 3 in July and August. Currently, we are fully operational and collaborating with our team. Moving forward, we expect to complete patient accrual in the first half of next year, aiming for a minimum of 10 patients and a maximum of 15. We're hopeful to treat patient 4 soon, as we are currently screening patients and may begin this process before the end of the year or early next year. We've discussed our technical operations capability, which allows us to treat 2 patients a month, so our bold projections remain unchanged as we strive to deliver these therapies to patients as quickly as possible. We are still optimistic for the first half of next year. Regarding COVID-19, it has created challenges for us. During prescreening, some patients opted out due to travel concerns or chose other clinical trials closer to their homes. Nonetheless, we have a solid number of patients undergoing prescreening, and we are working with the sites and patient families to facilitate travel to Stanford. As for the second site, our plan was to establish a location on the East Coast to provide patients with a major academic facility for treatment, similar to what exists on the West Coast. This has proven challenging in major cities due to the pandemic. At this time, we have not been able to onboard that second site. However, we are confident in our ability to conduct the pivotal trial through Stanford without needing a second site immediately. We will continue to evaluate the option of a second site as we aim to gain more experience with the product and prepare for commercialization. Currently, we have not onboarded the second site, but we will remain open to opportunities in the East or Central regions to make travel easier for our patients. Keep in mind that setting up sites and completing the necessary IRB processes can be time-consuming. We still anticipate potentially finalizing 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 by 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 changes, gauze, wraps, and ointments. There's nothing FDA-approved or EMA-approved in this area right now. So we really don't view the life sciences and industry landscape doing trials in this space as 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 our 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 that a patient may have changed their plans. Some of the prescreen patients 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 for accruing 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. Let me address that in a few ways. First, regarding our internal capabilities, Abeona has made significant investments in our workforce over the last two years. We have built a strong team that positions us well for both our current programs and future pipeline products. Specifically, we have transitioned from an adherent-based system to a serum-free suspension system that is fully scalable. We've collaborated with our primary equipment manufacturers to ensure that we can deliver commercial material confidently in both the short and long term from our current facilities. As we expand our pipeline, we believe our existing facilities will continue to meet our needs. If necessary, we have also conducted preliminary engineering work with nearby facilities in the Cleveland area to enhance manufacturing capacity. We are well-prepared to meet Abeona's ongoing demands, and we have the flexibility to expand if the need arises. In terms of learning from others in the industry, we continue to network and absorb insights, particularly regarding comparability. These lessons have informed our approach. We have a dedicated assay development team in-house that enables us to swiftly adapt to changing requirements. For instance, when the agency introduced new requirements for physical titer two years ago, we quickly met and exceeded those standards using our internal capabilities. We actively monitor the evolving landscape and respond effectively through our internal resources.

And Kristen, I appreciate your kind words. Jay provided an excellent overview. When I joined Abeona earlier this year from the cell and gene therapy sector, I was particularly drawn to our tech operations team in Cleveland. You inquired about commercialization, and one lesson we've learned from our industry counterparts, including some transition from the CAR T field, is the importance of having agility in scaling without overbuilding. Jay's team has demonstrated great discipline in being flexible to meet demands while also considering market drivers before expanding as we pursue commercialization. From my observation over the past five to seven years in different contexts, I believe our Cleveland group is world-class. I'm very excited about their ability to advance our efforts.

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, that's a great question. At this time, there are no changes to the protocol. We remain very diligent in our communications with the FDA, and we have a strong relationship in this area. One of the major reasons we have the endpoint is due to elements like Canfield, objective cameras, and direct investigator assessments in the presence of clinicians and nursing staff. I commend you on your knowledge of the study. We have implemented these various levels of clinical check-in and oversight to ensure we gather the most comprehensive information for these patients. If any issues arise in the future, we are seeing some improvements, but if any challenges do emerge, it's reassuring that we have multiple measurements within the trial to provide backup. Currently, there are no changes to our protocol or our FDA pathway. However, we feel confident during these uncertain times knowing we have various measures in place to track 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 a 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.