Abeona Therapeutics Inc. Q2 FY2025 Earnings Call

Good day everyone, and welcome to the Abeona Therapeutics Second Quarter 2025 Conference Call. It is now my pleasure to turn the floor over to your host, Greg Gin, VP of Investor Relations and Corporate Communications. The floor is yours, Greg.

Thank you, Matt. Good morning, and thank you for joining us on our second quarter 2025 results conference call. During this call, we will refer to the press release issued this morning announcing the financial results, which is available on our corporate website at www.abeonatherapeutics.com. We anticipate making projections and forward-looking statements during today's call, which are made pursuant to the safe harbor revisions of the federal securities laws. These forward-looking statements are based on current expectations and are subject to change. Actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those outlined in our Form 10-K and periodic reports filed with the SEC. These documents are available on our website at www.abeonatherapeutics.com. Joining me on today's call with prepared remarks are Dr. Vish Seshadri, Chief Executive Officer; Dr. Madhav Vasanthavada, Chief Commercial Officer; and Joe Vazzano, Chief Financial Officer. Also, Dr. Brian Kevany, Chief Technology Officer, will join us for the Q&A session. And with that, I will now turn the call over to Vish Seshadri to lead us off. Vish?

Thank you, Greg, and good morning, everyone. The second quarter of 2025 marked the biggest milestone achievement in Abeona history so far with the FDA approval of ZEVASKYN in April. ZEVASKYN is the first and only autologous cell-based gene therapy for the treatment of adult and pediatric patients with recessive dystrophic epidermolysis bullosa or RDEB. There is a persistent unmet need to meaningfully heal RDEB wounds. With ZEVASKYN's approval, the enthusiasm and positive feedback from the RDEB community has further increased our confidence that ZEVASKYN will become an important treatment option for people with RDEB. We're already seeing positive momentum in the early stage of our launch. We're now accepting patients and referrals from health care providers to initiate ZEVASKYN treatment at both our activated qualified treatment centers or QTCs, which are Lurie Children's Hospital of Chicago and Lucile Packard Children's Hospital at Stanford. We are on track for the first ZEVASKYN patient treatment and thus anticipate first commercial revenue in the third quarter of 2025. With the commercial launch tracking to plan and with encouraging feedback from QTC physicians and the patient community, we're very excited about ZEVASKYN's potential to improve the lives of people with RDEB. To dive deeper into our launch progress and the momentum in greater detail, I'll now hand the call to our Chief Commercial Officer, Dr. Madhav Vasanthavada. Madhav?

Thanks, Vish, and good morning, everyone. We are actively executing on our launch strategy, and I will provide specific updates on our initial progress, the near-term demand trends, the process for scheduling patients onto treatment and our momentum with payers. In the first 3 months since ZEVASKYN's approval, we have seen strong interest from the EB community. The 2 qualified treatment centers that have been onboarded have already identified more than a dozen patients as candidates for ZEVASKYN, and the process is underway to initiate their treatment. Moreover, we understand that referring physicians from other centers that are not QTCs have identified nearly 3 dozen additional immediate candidates. We expect patient referrals to further build as our promotional activities generate more ZEVASKYN awareness in the marketplace. With a total of approximately 50 identified patients and that number growing, we are actively working with Lurie and Stanford Children's to initiate treatment of those patients in the coming quarters, and we remain optimistic about our ability to treat 10 to 14 patients in 2025, as previously mentioned. In parallel, we are on track to increase our manufacturing capacity to treat 10 patients per month in mid-2026. While the volume of identified patients at our 2 existing QTCs is encouraging from a demand perspective, we will continue to activate additional QTCs to ease the travel burden on patients by expanding ZEVASKYN's geographic footprint, which we expect to further grow patient demand. We will announce new centers when they are ready to treat patients. Before I discuss the process for scheduling patients onto treatment, let me preface that the administrative process associated with ZEVASKYN during this early launch phase requires a long lead time and involves significant logistical steps. Currently, we project that the journey from patient identification to ZEVASKYN treatment will take approximately 3 to 4 months, and we anticipate this time frame will shorten and scheduling will become more predictable as our launch progresses, as we activate additional QTCs and established QTCs gain experience. Let me provide an overview of the administrative steps involved in ZEVASKYN treatment. The patient journey begins with an initial consultation with the physician at the QTC, which is then followed by payer medical authorization that can take a week or more. The next step of securing the financial agreement can take approximately 4 to 6 weeks. Once these steps are complete, the patient's biopsy is scheduled based on availability of both the patient and the care team. Our 25-day manufacturing process begins immediately after biopsy is received at our manufacturing facility and culminates in the patient's return to the QTC for treatment, which is when we recognize revenue. Throughout this journey, our Abeona Assist patient navigators are ready and committed to supporting patients and the centers in dealing with the logistics of biopsy and return to the QTC for treatment. Now despite all these logistical steps, we are happy to report the successful completion of our first commercial patient biopsy at Lurie Children's Hospital. Manufacturing is underway, and we expect this patient to receive treatment soon. Now turning to payers. We have made significant progress in securing widespread insurance coverage for ZEVASKYN. It's important to remember that 60% of RDEB lives are covered by commercial plans, 3% by Medicaid and the rest by Medicare. To date, we have achieved positive coverage with multiple national and regional payers. Importantly, even in the absence of formal coverage policies, ZEVASKYN is being accessed through the medical exception process. The prior authorization process has been highly successful with 100% of requests approved to date, including for Medicaid patients, with some approvals received as soon as 48 hours. Now this demonstrates strong clinical acceptance of ZEVASKYN among payers. The most notable milestone with regards to commercial payers is the recent decision by UnitedHealthcare, the largest commercial payer in the U.S., to cover ZEVASKYN in line with its FDA-approved label and with no additional restrictions. We hope that this sets a critical precedent for other payers and that it will be a major step towards ensuring broad access, and we are optimistic that this positive momentum with payers will continue. On the Medicaid front, we reached a key milestone by entering into a national drug rebate agreement with the CMS and have taken the steps necessary to ensure coverage across all 51 state Medicaid programs and Puerto Rico. In parallel, we are driving productive discussions to expedite coverage and reimbursement with a majority of state Medicaid programs, and this is already yielding results as states implement favorable Medicaid coverage criteria for ZEVASKYN. Overall, we are encouraged by these early market access trends. Finally, turning to our engagement with the RDEB community, the patient and community response continues to be exceptionally positive. We recently partnered with debra of America for a nationally broadcast webinar where a clinical trial patient shared her individual experience of durable wound healing following a single application. This patient received ZEVASKYN twice during our clinical trials to cover different wound areas. We are encouraged that so far, she has been experiencing durable healing even 3.5 years after treatment. We also engaged directly with the RDEB family at 3 regional meet-ups, at Columbia Presbyterian in New York City, Cincinnati Children's and the University of South Carolina in Los Angeles, where 3 unique patients from our strong together network shared their ZEVASKYN stories and showed their present day images of their still intact treated wounds. All 3 have so far experienced durable wound healing from their single treatment in clinical trials; 2 received treatment nearly 4 years ago, and 1 patient who received treatment 7 years ago. In summary, we are encouraged by our initial launch progress with nearly 50 ZEVASKYN patients having been identified between our 2 activated QTCs and a growing number of referrals. We remain optimistic about our ability to treat 10 to 14 patients this year. We are also actively onboarding new QTCs this year to further expand patient access. Reimbursement trends are strong, and the clinical interest from patients and physicians highlight ZEVASKYN's value proposition of providing significant wound healing from a single surgical application. As QTCs gain experience, we expect the centers to identify and treat more patients. With that, I will now pass the call over to our Chief Financial Officer, Joe Vazzano, to discuss our financial results. Joe?

Thanks, Madhav. I would like to remind everyone that you can find additional details on our financial results for the 3- and 6-months ended June 30, 2025, in our most recent Form 10-Q, which is available on our website. Starting with the financial resources on our balance sheet, we had unaudited cash, cash equivalents, short-term investments and restricted cash of $225.9 million as of June 30, 2025, which includes the net proceeds of the sale of the Priority Review Voucher that we received with ZEVASKYN approval. This compares to $98.1 million as of December 31, 2024. Our existing cash resources provide Abeona with robust financial flexibility, providing over 2 years of operating capital on our forecast without the need for further capital infusion and prior to accounting for ZEVASKYN sales. We anticipate that the first ZEVASKYN patient treatment will occur in the third quarter of 2025, which will initiate revenue generation, leading to our projected company-wide profitability in early 2026. As a reminder, revenue recognition occurs when the patient receives ZEVASKYN, that is upon surgical application. At this early stage in our launch, it is premature to provide revenue guidance. A quick note on our financial reporting going forward. As we transition into a revenue-generating commercial company, we will move away from providing cash runway guidance given the complexities of estimating future revenues in the early launch phase. In lieu of runway guidance, we plan to provide high-level forward cost guidance alongside regular updates on the commercialization in progress. Now turning to the statement of operations, research and development expenses were $5.9 million for the quarter ended June 30, 2025, compared to $9.2 million for the quarter ended June 30, 2024. The reduction in R&D expense was primarily due to costs capitalized into inventory and select costs such as engineering runs and other production costs reclassified as selling, general and administrative or SG&A expense following the approval of ZEVASKYN. Our spend on SG&A activities was $17.1 million for the quarter ended June 30, 2025, compared to $8.6 million for the quarter ended June 30, 2024. In addition to the reclassification of select R&D expense to SG&A, the increase in SG&A reflects increased headcount and professional costs associated with the commercial launch of ZEVASKYN. Net income was $108.8 million for the second quarter of 2025 or $2.07 per basic and $1.71 per diluted common share, including the gain from the sale of the PRV. Net income in the second quarter of 2024 was $7.4 million or $0.19 per basic and a net loss of $0.26 per diluted common share. In terms of upcoming Investor Relations activity, we plan to participate in 2 investor conferences in September, the Cantor Global Healthcare Conference and H.C. Wainwright Annual Global Investment Conference. And with that, I'll pass the call back to Vish for additional remarks before opening the call for Q&A.

Thank you, Joe. Turning to our pipeline. Beacon Therapeutics has exercised its option for a nonexclusive license to the patented AAV204 capsid for use in retinal diseases and genetic targets that are nonredundant with our AAV ophthalmology pipeline. As a reminder, AAV204 has been shown to achieve high macular and optic nerve transduction levels after para-retinal administration and has also been shown to facilitate transduction of both the inner and outer retina after intravitreal administration in mice and nonhuman primates. Now I want to turn to another partner pipeline program, AAV gene therapy UX111, which is being developed by Ultragenyx for Sanfilippo syndrome type A or MPS IIIA. In July, Ultragenyx reported that the FDA issued a CRL in its review of the UX111 BLA, requesting additional information and improvements on CMC procedures and validation. The FDA also provided observations from the manufacturing facility inspections. Ultragenyx believes the observations are readily addressable and many have already been addressed. On its 2Q '25 call last week, Ultragenyx noted that it aims to reach agreement on its plan to resolve the CRL observations through a Type A meeting with the FDA. Upon BLA resubmission, they expect a priority review period of up to 6 months. Next, I turn to another partner pipeline program, AAV gene therapy TSHA-102, which is being developed by Taysha Gene Therapies for the treatment of Rett Syndrome. In May, Taysha reported that it secured FDA alignment of both key elements of its pivotal trial design for TSHA-102 and the next steps to enable the initiation of the pivotal trials that could support a potential BLA submission. Taysha has subsequently commenced pivotal trial site activation and expects to begin patient enrollment in the fourth quarter of 2025. In June, clinical data highlighting the therapeutic potential of TSHA-102 were presented at the 2025 International Rett Syndrome Foundation, Rett Syndrome Scientific Meeting. With that, I will open the call for Q&A. Operator, please open the Q&A session.

Your first question is coming from Kristen Kluska from Cantor.

Nice to see there's so much momentum out of the gate. First, I wanted to just ask about how you're specifically defining identified patients? Are these patients that wound profiles that might make them good candidates for ZEVASKYN? Or are these patients that have indicated that they're potentially interested in receiving the treatment?

Sure. Kristen, Madhav, can you please take that one?

Yes, absolutely. Thanks, Kristen, for that question. So these patients that have been identified are really coming from the physicians, and physicians' criteria at this moment are for severe RDEB patients, and severe defined as patients with large wounds that have never healed in their lifetime so far. So we are really talking about the most clinically burdened patients, and physicians are very confident that these patients will want to get ZEVASKYN treatment. So that's really how they are looking at it. And again, this is really just the tip of the pool of patients that they have, and that's really the type of patient they want to prioritize first.

Given that there are more than 36 patients not included in the two QTCs, how should we approach the timing of their treatment? I understand you have a few more to open, so could these patients potentially wait for one of those openings? Or will there need to be additional travel for these patients?

Yes. We have already begun referring the 36 patients we discussed, and they are currently attending QTCs for their initial consultations. With nearly 50 patients identified as initial demand, we are focused on getting them started on treatment as quickly as possible while also working on activating additional treatment centers. Opening more centers will make travel easier for these patients, and we expect to identify more patients at these QTCs as well.

Okay. And then a last question from me. We had heard from the advocacy group that essentially all of the patients that participated in the trial said that if they had the option, they would do it again because of the benefits. So I know you have this Abeona Assist program that's been instrumental to help the whole patient journey, but how critical has been the face time or the conversations between patients that have already had ZEVASKYN through the trial that are now talking to potential patients that may want it in the commercial setting?

It's been really helpful for the patients from our strong together network who, again, as a reminder, are clinical trial patients who have seen the type of benefits durable, long-lasting wound healing, for them to talk directly with RDEB families, especially in these regional meet-ups that I mentioned. We've had these patients talking one-on-one and answering and addressing the questions. And when the rest of the community is seeing the type of healing and their patient experience, it's definitely motivating for the other patients.

Yes. And also, Kristen, to your question, yes, we believe these disease trial patients were pretty much treated in Stanford. Some of them have expressed interest in getting other areas treated as well. So there will be in that pool, not necessarily the Abeona Assist because these are already patients that have the relationship with the QTC. So they will, they are directly in touch with Stanford.

Your next question is coming from Maury Raycroft from Jefferies.

This is Amit on for Maury. Congrats on the progress. 2 from us. First, basically, in your view, how many cases does a center of excellence typically need to treat before adopting Pz-cel as a routine therapy? And is there a max capacity for the number of surgeries per month that these centers can handle? And I have a follow-up.

It sounds like your question is more about the site's own capacity and whether we have criteria for site selection based on what volume of patients makes it a QTC qualifiable site. Is that correct?

Yes. Partly that and partly, I wanted to know if there is a number that you think each of these centers need to do the surgery, to become comfortable with the entire process and start to adopt the sort of treatments routinely.

I can provide a brief answer, and Madhav can expand if necessary. Regarding the number of pretreatments, some locations will be administering their first ZEVASKYN treatment for commercial purposes. There aren't any practice treatments, as they have previously participated in clinical trials. Only two sites might have repeat patients from previous surgical applications: Stanford and UMass. Other sites, like Chicago Lurie, did not participate in clinical trials, so their first patient will also be a commercial one. They are not conducting any dry runs for patient treatments, but they have experience with many large RDEB patients since they have been chosen as treatment sites. The treatment experience for patients depends on how many specialists have worked with such patients, particularly anesthesiologists, surgeons, and the pediatric dermatologist leading the team. This infrastructure is crucial, and they have it in place. Madhav, feel free to provide additional details or share prior experiences with treating RDEB patients at the QTC centers.

Yes. I'll just say that early on physicians at the QTC, so at Chicago, for example, wanted to first treat 1 or 2 patients before even identifying additional patients. But now we are seeing that even though our first patient has not been treated yet, as they are talking to more patients and the conviction they've already started identifying more patients even without treating the very first patient. And these additional patients are currently going through the payer approval process. So that just speaks to the volume of conviction that these centers have just given the ZEVASKYN's profile and all the clinical data generated, and that is very encouraging. But with regards to the efficiencies of the process flow, etc., I think once 1 or 2 patients are treated at, let's say, at Lurie Children's, that's enough for them to scale this to go to the additional patients that they have in their routine care and offer ZEVASKYN to more patients. That's what we are hearing from the centers.

Yes, absolutely. And for the other 3 centers you're planning to open, do you have a sense of what the adoption numbers might look like there? Would those be similar to what we are seeing from the first 2?

It's about a couple of dozen patients based on our initial discussions we had with these centers. We also were able to triangulate that with a claims analysis. So these patients are disproportionately located in these centers. And so even the dozen patients that we have said so far, that at these 2 sites are obviously just a snapshot in time. And with the new QTCs that we identify, certainly, there are more patients, and these centers, they have EB clinics that typically tend to meet on a monthly basis, patients come in for their consultations. So as these EB clinic meetings and monthly consults happen, that gives an opportunity for these physicians to actually talk to their patients that are coming in and offering ZEVASKYN to more patients. So we see this as all going to be a compounding effect of patients being identified and in the funnel.

Your next question is coming from Stephen Willey from Stifel.

Congrats on the progress, and this is Tuli on for Steve. So I have 2 questions, and I have a follow-up for Joe. My first question is related to the activation of other QTCs. So when it comes to activating other QTCs in the future, how do you think about it? Should we think of Lurie Children's Hospital as a reliable proxy for these upcoming QTCs? And also, another one related to more future commercial guidance. So with these 2 activated QTCs, do you think you will be able to achieve the lower end of your patient guidance range? And then I'll have a follow-up for Joe.

Yes. I'll let Madhav answer that question, but I just wanted to have a clarifying question back, which is when you say Lurie proxy, do you mean in terms of patient numbers or experience? Can you just clarify that point?

Yes. More like a patient number, yes.

Got it. Got it. The short answer is that with just the 2 QTCs we have, as Madhav gave numbers, we have enough patients to treat in the near term, which is 2025 treatments that we've communicated. We're really when we're talking about the funnel and the 50 patients that are being identified, it's really building the momentum for 2026, right, because our manufacturing capacity is also ramping up as we speak. But go ahead, Madhav, you have a more granular everyday look into this.

No, nothing more to add. Vish, you captured it well. We have the demand. It's really a matter of how quickly we can put these patients on treatment in this particular year. But as Vish reiterated, again, we have, in terms of patient volume, sufficient work cut out for us, and that's really going to be in the coming quarters. So that's going to be our focus while at the same time, of course, trying to ramp additional sites as well.

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

I was wondering if you could just comment on 2 aspects regarding the mechanics of payment and reimbursement for ZEVASKYN. Firstly, are there differences in the ways in which you receive payment for ZEVASKYN? Or that you are in the ways you are envisaging receiving payment for ZEVASKYN related to the process of administration? Like for example, in every case, is the payment for the product all received and booked upfront? Or is part of it staged as patients move through the treatment process? And secondly, I was wondering if you could comment on the prior authorization situation if you're seeing any emergent trends indicating intent by any reimbursement agency to ask for patient status with respect to other RDEB treatments, the extent to which other RDEB treatments have already been tried before approving ZEVASKYN or if you don't expect that to ever be something that emerges in the future?

Great questions, Ram. Madhav, here is the right person for those. If I just have to recap, just to be clear, whilst the first one was more about the reimbursement mechanics of what triggers payment and if there's certain ways in which dollars are paid. And the second one is more about the prior authorization process, looking at what other treatments these are the patients and using that as a gating factor. Go ahead, Madhav.

Thank you, Ram, for those questions, and Vish. The payment process is not restricted. Revenue is recognized after a patient has been treated with ZEVASKYN. Regarding how Abeona books revenue, there are two ways a hospital can obtain the product: directly from Abeona or through a specialty pharmacy. In both situations, revenue is recognized after treatment. Concerning the prior authorization and financial agreement, the advantage is that hospitals can reach an agreement with the payer before placing an order with Abeona, reducing any potential risk for the hospital. This explains how the payment process works. Let me pause there, and Ram, does that answer your question before I discuss the therapies?

Yes. No, that's very clear.

Okay. Great. And then with regards to your second question, so far, we have not received any pushback from payers or any kind of resistance about that the patient should not have or should have received other approved treatments before getting ZEVASKYN. And all of our conversations we've been having, and this is really a kudos to the payers, for realizing the value and the value proposition of ZEVASKYN because you've got a therapy here that has the ability to treat vast areas of the body, and we recognize the high clinical burden on these patients with durable wound healing, and that is resonating well. So we hope that that trend will continue as payers also institute policies.

Your next question is coming from Jeff Jones from Oppenheimer.

Really appreciate the degree of granularity you're providing here. You mentioned 100% success rate on submitted prior authorizations. As we think about the timeline leading into the biopsies and eventual treatment, can you comment on how many prior authorizations have been submitted at this point? And as we think about timelines for the 1 biopsy done so far, if you're anticipating additional biopsies this quarter that would lead to treatments this quarter? And then I have a follow-up.

Yes. Thank you, Jeff, for that question. we can definitely share the numbers, but the thing is the prior auths that are in process are more than the ones that are approved, right? So the first 4 or 5 or something like that, we have seen that we've been able to get to the prior auths approvals. But it's a dynamic number. As we speak, these numbers keep changing so I don't want to throw out any numbers prematurely. But in regard to the time aspect that you asked, right, I mean how long would it take for these prior auths. I think that process is getting shorter and shorter. We are right now at a phase where not all calls have been put in place and prior auths are happening as medical exceptions. So even with that scenario to see the patients going through the prior auths process coming out the other end eventually with an approval is very encouraging. It's more qualitatively the nature of no blockage per se is what we want to communicate at this point in time. It's premature to give reimbursement success metrics otherwise because we have to look at trends over 1 or 2 quarters. But what we do have confidence is that the number of patients that are going through the funnel, I don't want to give specific biopsy numbers for Q3 versus Q4 and things like that. But just from the number of patients, and the demand and have been in the funnel so far, we feel optimistic that the 10 to 14 estimate that we've provided still remains very achievable, and we're looking forward to attaining that goal.

Great. Really appreciate it. And 1 follow-up question. As we talk about that ramp for patient dosing and the issue of production capacity, and I know you're looking at production capacity of 10 per month by mid-'26. Can you speak to any hurdles or risks there to that capacity coming online? Any concerns regarding FDA inspections, for example, given all of the events we've seen at the agency of late?

Yes, I believe our current CGMP facility has the capacity to support up to 10. As previously mentioned, we are increasing our capacity in increments of 2 patients at a time. We have completed all necessary hiring and adjustments to our operations to achieve that capacity by mid-next year. There are processes we need to follow, and while I wouldn't characterize them as catastrophic risks, we do need to have some diseases approved by the FDA to increase our patient count from 6 to 10. I’ll have our Chief Clinical Officer, Dr. Brian Kevany, provide more details on our plans and why we are confident we are on track. Brian, could you share some insights?

Yes, I would say our previous communications around this topic are consistent with where we expected to be at this stage. The transition from clinical to commercial manufacturing has gone very smoothly, including hiring, training, and preparing the facility for production, exactly as we had hoped. We remain on schedule to achieve our goal in the middle of next year. As Vish mentioned, we are having discussions with the agency, but we do not expect any inspections. These conversations are mainly about the other parts of our facility used for ZEVASKYN manufacturing, which we also use for our retrovirus manufacturing. It's really more of a meeting with the agency, and we don't foresee any inspections being necessary for that change. We are optimistic about reaching our anticipated goal of 10 patients per month by mid-next year.

Your next question is coming from James Molloy from Alliance Partners.

I was wondering, it's certainly been a great launch. I know it's a different manufacturing process than the other competitor in this space. But how should we think about the sort of remarkable launch and the expectations of how this should guide? What should we expect from you guys over the next year or so, next 2 years for your initial stage of launch?

Thanks for the question, Jim. We have been quite bold in how we articulated our launch, as patient demand is what drives our strength. In just three months since approval, the number of patients identified as ZEVASKYN gives us confidence that growth will continue as the first few patients go through this treatment experience. We believe there is still an unmet need in the RDEB community. We previously stated our goal is to treat 10 to 14 patients in 2025, with a growing pipeline for 2026. For an impressive launch at this early stage, we have removed all hurdles for patients to access therapy. Site readiness and activation are in progress, with two activated sites already, which is sufficient to meet our short-term targets for 2025. By the end of the year, we expect to see significant momentum, and I will have more metrics to share on what constitutes a remarkable launch. The reason we haven't set specific metrics yet is due to the many variables involved. Madhav detailed the treatment journey, which includes substantial time between milestones. We expect this time will shorten, enabling us to provide quantifiable measures of a successful launch by the end of 2025. We prefer not to rush into numbers given the unprecedented nature of this therapy and the patient population we are addressing. However, early trends are promising, and we are not ready to disclose specific KPIs at this time. That is understandable.

Absolutely. I know you got your hands full of the launch. But looking over the horizon or even over the pond, any thoughts on the EU filing, EU partners, potential EU launch?

We have started exploring the EU and Japan markets. The key question is whether we should supply from the Cleveland facility or establish a new manufacturing presence. Setting up manufacturing in a different location will take a significant amount of time, likely 3 to 4 years, due to the need for technology transfer, engineering runs, and fulfilling regulatory requirements. Therefore, we are considering whether the Cleveland facility can serve other markets. We are also expanding our capacity beyond the next 10 months, and that project is currently underway. We hope that while not all markets can be supplied, some select ones might be viable. We'll provide more updates towards the end of the year as our primary focus remains on the U.S. launch first.

Your next question is coming from Stephen Willey from Stifel.

Just 1 for Joe. How should we think about 2Q SG&A spend? Is that number a good surrogate for the next couple of quarters? Or should we expect that number to scale with an onboarding of additional QTCs?

Yes, that's a good question. I mean what I was alluding to on the call earlier is that as we're doing the engineering run, those costs are SG&A. So the mix between R&D, COGS, and SG&A will really vary depending on production output. So it's kind of tough to forecast that. But as we've stated previously, 3 patients a month is our breakeven point. So if you do the math on that, you can kind of see what our operating burn will be in a given year. It's just that the mix between those 3 different expense items might fluctuate quarter-by-quarter.

Yes. It's more of an accounting mix that shifts a little because of how the engineering runs were considered in the SG&A, but overall operating costs is a good trend what we've seen in Q2 this year.

Thank you. That concludes our Q&A session. I will now hand the conference back to Vish Seshadri for closing remarks. Please go ahead.

Thank you, everyone, for joining us in today's business update. We'll talk to you again soon.

Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.