Abeona Therapeutics Inc. Q3 FY2023 Earnings Call

Greetings, and welcome to the Abeona Therapeutics Third Quarter 2023 Conference Call. Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Greg Gin. Sir, you may begin.

Thank you, Ali. Good morning, everyone. I would like to welcome and thank everyone for joining us on our third quarter 2023 update conference call. The press release announcing the third quarter '23 results is available on our website. Before we start, I would like to note that remarks made during today's call may contain projections and forward-looking statements. 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 Risk Factors section in our Form 10-K and periodic reports filed with the Securities and Exchange Commission. These documents are available on our website. On today's call with prepared remarks are Dr. Vish Seshadri, Chief Executive Officer; Dr. Madhav Vasanthavada, Chief Commercial Officer and Head of Business Development; and Joe Vazzano, Chief Financial Officer. Also joining us for the Q&A session will be Dr. Brian Kevany, Chief Technical Officer. With that, I will now turn the call over to Vish Seshadri. Go ahead, Vish.

Thank you, Greg. Hello, everybody, and thank you for joining us this morning. I'm pleased to update you on our continued progress evolving from a clinical-stage company to one with a significant commercial opportunity. Let me start with the highlight that everyone at Abeona is thrilled about. We achieved perhaps the most meaningful milestone yet in Abeona's history at the end of September with submission to the FDA of our biologics license application, or BLA, for prademagene zamikeracel or pz-cel, which was formerly known as EB-101. Pz-cel is our investigational autologous COL7A1 gene-corrected epidermal sheet for recessive dystrophic epidermolysis bullosa or RDEB. As a reminder, in clinical trials, a one-time application of pz-cel demonstrated wound healing and pain reduction for the toughest to treat large chronic wounds. Some wounds treated in our Phase I/IIa clinical trial remained healed after 8 years. The sustained treatment effect we have seen is due to the integration of COL7A1 transgene into the host genome during retroviral transduction of patient keratinocytes, ex vivo. Our BLA submission represents a critical step towards the potential approval of pz-cel as the first therapy to provide instantaneous wound coverage and multi-year healing in RDEB wounds with a one-time application. I want to take a moment to thank many stakeholders who contributed to this milestone achievement, not just for Abeona but for the whole RDEB community: from the patients, caregivers, and physicians who participated in the vital clinical trial, the patient advocacy community, and to the FDA for their level of engagement and constructive guidance in the months leading up to the pre-BLA meeting that occurred in late August. I also would like to acknowledge our entire submission team for their tremendous determination over many months to prepare the BLA. We recently completed our Application Orientation Meeting with the FDA where we overviewed our BLA and walked them through our clinical data. Our understanding is that this meeting is one of the last steps before the FDA decides on acceptance of the application for formal review. Regarding what we can expect next, the FDA's decision on whether the BLA review process can start is typically made during the 60-day window following submission, which in our case, goes out to late November. With the BLA submission, we requested the FDA to grant a 6-month priority review. Under a priority review scenario, pz-cel could be approved in the second quarter of 2024. I'd remind you that pz-cel has been granted rare pediatric disease designation by the FDA. Thus, upon its potential approval, we continue to believe that we're eligible to receive a priority review voucher or PRV. It's permissible to sell PRVs, and other PRVs have been worth approximately $100 million based on recent PRV transactions. Planning for the potential success of our BLA, our manufacturing team is focusing on supporting the BLA review process, preparing for pre-approval site inspection, and scaling up our internal capabilities and staffing for commercial launch. In the first full year of launch, we currently plan to supply pz-cel for up to 120 patient treatments for manufacturing cycles per year. Following launch, we will assess our longer-term plan to further build up that capacity. We are excited about the prospects of transitioning to a commercial-stage organization with Abeona's first product launch. However, it is important to note that pz-cel will not be the first autologous therapy launch for the leadership team as Madhav and I will draw upon our previous launch experiences with Breyanzi and Abecma. As Chief Commercial Officer, Madhav will oversee all aspects of commercial strategy, planning, and operations. His extensive and diverse leadership experience across sales, marketing, and market access, coupled with a strong track record launching autologous cell therapies with a heavy focus on customer experience makes Madhav the ideal candidate to lead the stage build-out of our highly focused, nimble commercial organization to maximize the potential commercial opportunity for pz-cel. I'll now ask Madhav to talk about our near-term commercialization focus and launch preparations.

Thanks, Vish. We are, of course, excited for the potential commercial launch of pz-cel, pending FDA approval. In terms of our commercialization approach, our near-term product focus is simply on two main areas. One is to onboard and prepare 5 to 7 high-volume EB treatment centers so that they can treat with pz-cel upon approval. These centers already have the expertise in caring for EB patients and are geographically dispersed across the U.S., which would help make pz-cel treatment accessible for these patients. And two, working with commercial and government health insurance systems to ensure broad access for all eligible patients at a price point that captures the value of a transformative therapy like pz-cel might bring. We are happy with our progress so far on both these fronts. To elaborate further in terms of site onboarding, shortly after our BLA submission, we conducted an advisory board meeting that was attended by eight well-respected physicians, EB physicians from across the U.S. We discussed not only the clinical data and the care coordination needed for surgical application of pz-cel but also for the first time, we shared some of the before and after images from several large wounds across multiple anatomical areas treated with pz-cel as well as patients' and caregivers’ testimonials about their experiences with pz-cel in clinical trials. We're very encouraged by the physicians' feedback, which included their suggestions on ways to operationalize pz-cel at treatment centers. We have received interest from these physicians to initiate pz-cel site onboarding discussions at their institutions, and we are very excited by it. With respect to the second focus area of payer engagement, we will continue to engage payers over the coming months to educate them about pz-cel and further assess the price potential. Early feedback from payers and hospital administrators supports positive coverage for pz-cel and pricing in line with the value of a cell and gene therapy that provides instantaneous coverage for large wound areas and that demonstrates years of wound healing and pain reduction even in the toughest to treat RDEB wounds following a one-time application. Furthermore, we hope that the sustained effect we see in our clinical trials on wound areas with a one-time application of pz-cel could minimize the treatment burden incurred by patients and caregivers who continuously care for their wounds day after day and week after week with current standards of care. Additionally, in speaking with our clinical trial patients and the advocacy community, we continue to hear enthusiasm for pz-cel. In fact, in our ongoing Phase IIIb trial, all three patients are repeat patients who fully appreciate the involved nature of the procedure and have elected to receive pz-cel again for their previously untreated wound areas. We will continue to work with patient groups and make sure that the voices of the patients, families, and caregivers are well represented as we engage with the FDA and payers. Lastly, since our BLA submission, we have leveraged our network and moved quickly to fill crucial commercial roles, including key account management, market access, and marketing with proven biopharma veterans who bring additional launch and commercialization experience with autologous cell therapies. Their contributions will be an important piece of our launch planning. We intend to further build out our commercial organization and infrastructure in a stage-gated manner aligned to BLA acceptance. Now I'll hand the call over to Joe to discuss our third quarter financial results.

Thanks, Madhav. I would like to remind everyone that the Form 10Q is available on our website, which is where you can get additional details on our financial results for the three and nine months ended September 30, 2023. Starting with the financial resources on our balance sheet, we had cash, cash equivalents, restricted cash, and short-term investments of $54.1 million as of September 30, 2023, including $25 million in gross proceeds from the registered direct offering in July 2023 as compared to $37.1 million as of June 30, 2023. Based on our current operating plan and assumptions, our financial resources remain sufficient to fund our commercial launch preparations for pz-cel and our business operations into the fourth quarter of 2024. In other words, our cash runway extends beyond the potential commercial launch of pz-cel and receipt of a priority review voucher. Research and development expenses were $7.1 million for the three months ended September 30, 2023, compared to $5.5 million in the same period of 2022. Our spend on general and administrative activities was $4.2 million for the three months ended September 30, 2023, compared to $3.9 million in the same period of 2022. Net loss attributable to common shareholders was $11.8 million for the third quarter of 2023, or $0.48 loss per common share, compared to a net loss attributable to common shareholders of $6.4 million or $1 loss per common share in the third quarter of 2022. With that, I'll turn the call back to Vish for brief closing remarks before kicking off the Q&A session.

Thank you, Joe. I would like to close by reiterating what an exciting time this is for Abeona, for pz-cel, and for the RDEB community. Based on our strong clinical data and enthusiasm from the medical community, we believe that pz-cel could be an important potential treatment option for patients. With our BLA submission, we've demonstrated our ability to take a cell therapy product from research through clinical development. We are well positioned for potential market entry with extensive and diverse commercial and launch experience with autologous cell therapies. We're looking forward to the anticipated momentum in the coming months as we both advance pz-cel through the regulatory process toward potential approval and continue executing on our commercial readiness plan and ultimately to a potential U.S. launch of pz-cel. With that, operator, please open the Q&A session.

Our first question is coming from Kristen Kluska with Cantor Fitzgerald.

I was hoping you could elaborate or speak to some of the work you're doing now for patient identification early on. And given that some of these patients may need two of the procedures, any chance of the prior trial participants, including Phase I/II, being involved?

Thank you for that question, Kristen. Before I turn it over to Madhav, I'll just provide my thoughts, and Madhav will elaborate. Just to reiterate, your question is around prior identification of patients before potential launch and how, I think, the Phase I/II as well as I would say, in the vital patients would benefit from a potential launch. We can even provide some anecdotes from our current experience. And it's not just in the Phase I/II study and vital, but we're also having a Phase IIIb study that is going on for the 302 study where patients from both previous studies are coming for repeat treatment. So all of this augurs well as we prepare for launch. But for the specific question of patient identification, Madhav will take that.

Thanks, Kristen, for the question. I think the advisory board that we conducted recently was very assuring in that physicians continue to believe that these patients will require more than one therapy. So as we have patients being identified and the awareness is increasing with the topical gel right now with Vyjuvek, that is certainly one bolus of patients that we can look to bring on. We do know that there are patients in the centers of excellence who visit these centers for ongoing wound care management, whether it is infections or squamous cell carcinoma and the longer the wounds are chronic in nature, the greater the risk for these infections to happen. Speaking with physicians, we already know that some physicians are thinking about their patients who would benefit from pz-cel and are thinking of identifying in their own minds. But as we get closer to launch, we will continue to formalize our analysis and gather more tangible data based on claims analysis to concretely find out the volume we are talking about so that we can queue up in anticipation of approval.

Okay, please continue.

So I wanted to check if that helps answer your question.

Yes, yes. Very helpful. And assuming your timelines that you've laid out go as planned, how quickly do you think you'll be able to have this in the commercial field?

So post-approval, similar to autologous therapies, right after approval, we visit to do post-market commitments at the EB treatment centers and then very quickly have medical policies in place from the payers' standpoint. Our estimation is we're talking about maybe a month to two months ballpark to have these processes in place. That would be our sort of a launch, if you will. From then on, we have the physicians' ability to place an order for pz-cel. Our goal will be to have it as soon as we can post-FDA approval.

Our next question is coming from Maury Raycroft with Jefferies.

This is Yao Ung for Maury. Our first question is on the commercial opportunity. We think you recently said at the conference that your estimate of peak sales to be about $500 million. What kind of assumptions went into that estimate? And what do you need to build in terms of infrastructure to reach that target?

Yes, thanks for that question. In terms of the assumptions that we have indicated, for us, our ability to supply at the time of launch is around 120 patients in a given year. We look to ramp that scale over time as soon as we have a few initial treatment centers and have the experience to provide pz-cel, and then we estimate what the demand looks like so that we can increase the capacity. For the peak sales, we have a projection of 500 patients in a year over, I think, around a five-year time frame. So the peak sale we have projected there is with the 500 capacity over a five-year period. The pricing estimate we have also baked in is a seven-digit price point. These are the initial key assumptions, and we expect these patients to come in both de novo patients the first time as well as an average assumption that each recessive patient, given the large amounts of wounded area that they have, will require two such rounds of EB-101 treatment.

Yes. And if I can just add, one of the reasons we will be triggering any capacity expansion after launch and the initial experience with the first centers of excellence that we onboard is that we get a good sense of to what level we will need to expand that capacity. We're starting at 120 a year, and in a two-year post-launch scenario, should we ramp it up to 500 or 350 or even 700, I think some of those assumptions will be validated once we start seeing that initial demand and trends. And for that reason, what you're seeing as a peak opportunity of greater than $500 million is dependent on the capacity expansion in our assumptions. I hope that has given you some perspective there.

Got it. That makes sense. Thanks for the answer. Another one on commercial. We heard recently that Krystal reported about half of their scripts are actually from community doctors versus centers of excellence. Are you thinking about reaching maybe to some community doctors and get the initial steps done before patients are treated at centers of excellence? Or how does that report or sort of surprising update change how you're thinking about your launch?

Yes. So there are centers of excellence as well as community centers where these patients are present. At the time of launch, we believe that patients who are at the centers of excellence will be ideal candidates to get this therapy. Over time, we will look to expand outwards from centers of excellence, which are pz-cel trained centers to the centers of excellence that don't necessarily have the ability to surgically apply pz-cel, and then finally to the community centers. There are some 23 centers of excellence that we know of that see a lot of EB RDEB patients. We will look to educate these centers, so they are aware of the therapy, and we could have the referral in place. So that's our approach. We continue to work with patient advocacy groups. We have a strong partnership with multiple advocacy groups, DEBRA in particular. Given the nature of this patient community, we also anticipate a vast majority of these patients will be self-referrals. If we understand where these centers are that apply pz-cel procedures, that's going to be our approach. Even though the patients are in the community setting, for a treatment like this, which is a one-time procedure for those wounds that they are suffering from, there is a strong appetite, and there is a strong pull, versus if this were to be a chronically applied treatment, then yes, we would have to think hard. Here we feel the value proposition is very strong.

Okay. Got it. Just one last quick question. The Phase III trial enrolled patients six years or older. Do you think the label is going to have a minimum age of six? Or how do you think about unmet needs in patients under six years old?

Yes. That's a fantastic question. Thanks for that. It's going to be a dialogue that we will have to have with the FDA. So if you look at body surface area, this is a topically applied epidermal sheet, so dosage is something that is viewed differently here as a percentage of body surface area that we apply these sheets. For a small-stature patient, let's say, close to the six-year mark, we’ve applied six to eight sheets. In fact, we have applied 14 sheets across the two studies on the same patients that are seven years old. As a proportion of their body surface area, that's a significant percentage of coverage. Therefore, how the agency views the dosage will impact how they view a minimal age. The reason why the six-year age was selected as a minimum in our study was primarily the ability to report pain endpoints, understanding the Wong-Baker scale, which is validated for ages six and above. Now, that doesn't mean you couldn't apply therapy to a patient that's four years or three years old; that is up to negotiation. We believe that with the currently ongoing Phase IIIb study dropping that age limit below six years is also going to help build that experience. By the time we get approval, this will be locked in during the late stages of review with the FDA. Our anticipation is that it's going to be beneficial for patients even younger than six years of age. This is where the dialogue is currently happening among various types of physicians, plastic surgeons, and EV specialists. What is the age of a patient where we can safely have them follow best practices after application in order to immobilize these sheets? If patients move too much, the graft needs to take optimally, and how do we manage those patients that are younger than, let's say, 12 months old? These are all the types of questions we're currently answering to see what is that age, but we believe that it's definitely applicable to much younger than six years of age. More to come in the coming months on that topic.

Our next question is coming from James Molloy with Alliance Global Partners.

This is Laura on for Jim. So with the working on building out a commercial organization for pz-cel, have you also started the sales team hiring process yet? And have there been any challenges in getting numbers to join?

Thanks, Laura. I have to address your second question. Actually, we have had no issues at all in bringing on talent so far. We've got the leadership team in place on the commercial side. We have the head of marketing, the medical operations person, market access, and key account management, so we look to continue to scale the organization. We don’t need a whole lot of team, right? Because what we have been saying early on is that this is a therapy where a limited commercial infrastructure is required, given the pull. So that leads me to your first part of the question regarding sales. We don't anticipate having a sales team or a major sales team at launch because of the initial level of interest that exists in these centers. But over time, perhaps after the approval, we may look to bring on sales teams to continue to educate the outdoor community that is our bet. We will have a medical team in place, including medical science liaisons, who will continue to educate and have key account managers who will be the points of contact at these treatment centers where pz-cel will be placed. That's our model.

Got it. And then also going back to Krystal Biotech and now their launch of Vyjuvek for DEB, comparing this to pz-cel, what are your overall thoughts and what takeaways do you see for pz-cel from this particular launch?

Our takeaway is that this is great to see the uptake of these products. For far too long, these patients have had no therapeutic options and have been subjected to standard of care. The burden that they've had on treating their wounds has been devastating for everyone, so we are happy to see the awareness picking up. We are happy to see that patients are getting motivated. The insurance companies are beginning to cover these patients, and that was our major takeaway from following what's happening in this space: payers are beginning to clear up the access. What that means for pz-cel is fantastic positioning because we are coming as fast followers, which helps raise awareness for these patients and these physicians that there are therapeutic options coming into this space. For the paperwork and access clearance, which often takes several weeks, by the time pz-cel comes to market, we will be in a better position. These are the positive takeaways for us, and we continue to learn as we approach our approval timelines.

Just not to forget differentiation, right? We've heard very clearly from physicians that all these therapies are going to be needed by almost all the patients because the approach is very different. The value proposition is very different, and patients do have different types of wounds in their body. For the large wounds where there's a lot of pain and need instantaneous closure, the willingness to go for the big guns, if you may, like pz-cel is going to be there. What we've learned is that the pent-up demand in centers of excellence is already sufficient to take our launch infrastructure over and that's why we're not investing in a big sales force because we know these patients already exist.

Understood. Just one last question from us. You mentioned in the past the potential for pz-cel to be formulated as a spray to have different skin graft sizes used for patients. When might you look into trying to get these additional indications or administration methods onto the label?

I think from a perspective of life cycle management, we have to think hard. Whether it's even pz-cel that comes as a spray, there's probably going to be a whole new biological product. Clearly, there is some learning. We have been very disciplined in how to focus our finite resources. Our job with the pz-cel launch is not yet done as much as we're getting closer every day. We have these ideas. Some of the common unmet need that we hear is whether we can make glove-shaped grafts for mitten deformities. Hand surgeries are a big part of these patients, and the ask is can you do that? There’s a lot of unmet need from the patient community for these products. We're being careful to get the pz-cel launched and uptake first, and we will be on our way to investigate what improvements we can build. But clearly, that's going to be not EB-101 or EB-102; it will be a different product. We are keeping our eyes and ears open to further understand the unmet need and design these products appropriately.

As we have no further questions in the queue at this time, I would like to hand it back over to Mr. Seshadri for any closing comments.

Thank you. In closing, I want to thank our shareholders and other stakeholders who have listened to this call, and we'll talk to you again soon. Have a nice day.

Thank you. Ladies and gentlemen, this concludes today's conference, and you may disconnect your lines at this time, and we thank you for your participation.