Earnings Call Transcript - ABEO Q3 2021

Operator, Operator

Good morning, everyone. Thank you for being here. Welcome to the Abeona Q3 2021 Earnings Call. I will now hand the call over to Greg Gin, Head of Investor Relations. Please proceed.

Greg Gin, Head of Investor Relations

Thank you, Kelly. Good morning, everyone. I would like to welcome and thank you for joining us on our third quarter 2021 conference call. The press release announcing the third quarter results and recent operational progress is available on our website at www.abeonatherapeutics.com. On the call today with prepared remarks are Vish Seshadri, CEO of Abeona; and Ed Carr, CFO. After the prepared remarks, we'll host a Q&A session. We are also joined by Dr. Brian Kevany, our Chief Technical Officer. Before we start, I will review our safe harbor statement. Remarks made during today's call may contain projections and forward-looking statements regarding future events. Forward-looking statements are made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements are based on current expectations and are subject to change, and actual results may differ materially from those expressed or implied in the forward-looking statements. Various factors that could cause actual results to differ include, but are not limited to, those identified under the section entitled Risk Factors in the company's annual report on Form 10-K and quarterly reports on Form 10-Q filed by the company with the SEC. These documents are available on our website at www.abeonatherapeutics.com. And with that, I will now turn the call over to Vish.

Vishwas Seshadri, CEO

Thank you, Greg. Thank you, and good morning, everyone. Thank you for joining us this morning. This is my first quarterly call since transitioning to CEO about 4 weeks ago, and I'm happy to update you on our substantial progress in the third quarter and since quarter end. I'm thrilled to be leading Abeona during this exciting and critical time in our life cycle. We are advancing 2 late-stage pivotal assets with rare pediatric designations, transformational potential and key anticipated milestones in the coming months, including finishing patient accrual for the EB-101 Phase III VITAL study in the first quarter of 2022 and top line data readout in the third quarter of 2022. We are continuing to work toward bringing our gene therapies as safely, effectively and quickly as possible to patients who suffer from these diseases that have no approved treatments. We have taken a big step towards that goal by recently enhancing our leadership and bench strength with gene therapy and biopharma industry veterans to prepare for 2 Biologics License Application submissions for our lead clinical program in RDEB and MPS IIIA. These hires include John Voss as Head of Quality, Carl Denny as Head of Regulatory, and Kate Imhof as Senior Director of Regulatory. All 3 bring considerable gene therapy experience with late-stage clinical and commercialized products in companies like AveXis, Sarepta Therapeutics and Cellectis. Now let's take a closer look at EB-101, our investigational autologous gene-corrected cell therapy that has demonstrated a high rate of instantaneous wound healing and pain reduction for 6 years, the latest follow-up time point reported after treatment of large chronic wounds in RDEB patients in the Phase I/II study. We are anticipating similar outstanding results from our ongoing Phase III VITAL study. As a reminder, the target for the VITAL study is the treatment of approximately 35 large chronic wounds, each treated wound being paired with an untreated control wound within the same patient. Large chronic wounds are the most severe and problematic wounds in RDEB. Unlike small, recurring wounds that can close spontaneously, these large chronic wounds have greater than 20-centimeter square of surface area and remain open for more than 6 months, very often for years, and cannot close themselves and are associated with severe pain that is often managed with opioids. I am very pleased to report that since the last earnings call, we have continued to treat patients, and we are close to accruing the VITAL study. We have identified and are scheduling treatment for the final patients and anticipate treating them by the first quarter of 2022. We, therefore, expect top line study results in the third quarter of 2022 upon completing the 24-week follow-up for the last patient treated. The anticipated timing for BLA filing is year-end 2022 to early 2023. As previously mentioned, UMass Memorial Medical Center, the second clinical site in the VITAL study, is now active and prescreening the patients. Turning to EB-101 manufacturing. As a reminder, we are a non-CDMO-dependent company. We've manufactured the drug product for the Phase III VITAL study at our Cleveland facility. We have made significant progress in updating the module 3 of the IND with information pertaining to manufacture of EB-101 in-house. We have also been advancing process characterization work and other CMC activities to support a BLA filing for EB-101. We believe that bringing manufacturing and critical analytical assays for our assets in-house at Abeona is a key strategic advantage in the cell and gene therapy space. Let's turn to our adeno-associated virus platform and our second clinical program, ABO-102, investigational therapy for Sanfilippo syndrome Type A or MPS IIIA. In the previous earnings call, we reported that we aligned with the FDA on the definition of the primary endpoint for the pivotal Transpher A study to enable registration. The primary endpoint is a neurocognitive assessment using raw score of Bayley scale for infant and toddler development, BSITD, and the Kaufman Assessment battery for children, KABC2, for children who attain a developmental age of 42 months. We have since submitted an amended trial protocol reflecting the agreed-upon endpoints. We have collaborated with experts in the MPS IIIA to finalize a statistical analysis plan, or SAP, which we are scheduled to discuss with the FDA in the first quarter of 2022 through the RMAT mechanism. As a reminder, we have already treated 10 patients with ABO-102 in the therapeutic dose cohort. The preservation of neurocognitive development is evaluated over a period of up to 5 years, therefore, depending on the primary analysis methodology and the neurocognitive performance observed in the more recently dosed patients, we anticipate top line results from Transpher A anywhere between the fourth quarter of 2022 and second quarter of 2023. We are excited about the safety and magnitude of benefit seen with ABO-102 in children treated early in age at the therapeutic dose for whom we have reported unprecedented trends in disease-specific biomarkers, preservation of neurocognitive development as well as anatomical development using brain MRI, which was presented at the International Symposium on MPS and Related Diseases in the third quarter 2021. The MRI data shows increased gray matter, corpus callosum and amygdala volumes in the brain in 3 young patients with MPS IIIA treated at 24 months or before and at 2 years post treatment as compared to afflicted patients without treatment, which is consistent with the preservation of neurocognitive development that we have previously reported. While the triangulation of results from biomarker, neurocognitive development and brain MRI builds clinical conviction about the treatment effect of ABO-102, this will be important also from a regulatory approval standpoint as the FDA has indicated that they will consider all kinds of clinical data points holistically in regulatory decision-making. We have previously sourced the ABO-102 drug product from Nationwide Children's Hospital. Earlier this year, we commenced activities to be able to manufacture ABO-102 at our Cleveland facility. We are on track to complete manufacturing of 6 GMP lots of ABO-102 this year using animal-free materials. We expect analytical comparability studies to establish equivalence of Abeona-produced drug product with that sourced from Nationwide Children's Hospital in the first half of 2022 using the battery of tests as instructed by the FDA for ABO-102. Additionally, in preparation for commercial supply of ABO-102, we have initiated the construction of a 12,000 square foot commercial AAV manufacturing facility at our Cleveland site. This facility will also have the capacity to support other AAV programs, including our preclinical ocular programs in the future. Let's move on to a brief update on our third clinical program, the ABO-101 Transpher B study in Sanfilippo Type B or MPS IIIB. As we first mentioned on the second quarter call, we have closed enrollment in the Transpher B study and are following patients treated in the study and under the compassionate use program in Germany for safety and efficacy of ABO-101. As reported earlier, biomarker and safety data look encouraging. We look forward to seeing 2-year neurocognitive data to assess efficacy of ABO-101 in the second half of 2022. I will now briefly turn to our preclinical programs. While we are currently focused on rare diseases in our clinical programs, we intend to address larger areas of unmet medical need, and our preclinical programs are investigating novel AAV capsids in 5 undisclosed ophthalmic conditions with estimated U.S. prevalence ranging from 5,000 to 15,000 patients. We previously shared data from nonhuman primates to determine optimal routes of administration with different novel capsids. Subsequently, we have made significant progress in generating mouse models for 3 indications, prepared the genetic constructs, produced the vectors with appropriate capsid and develop assays to measure efficacy in the preclinical setting. We are encouraged by gene expression levels with our constructs in in vitro studies. We're expanding the model mouse colonies and have already started dosing animals. We expect animal proof-of-concept data by mid-2022 and pre-IND meetings with the FDA in late 2022. Before I request Ed to review our financial results, I want to briefly comment on our formal settlement with REGENXBIO, which resolves our previously disclosed dispute over an arbitration award. The settlement provides for payments by Abeona over a 3-year period and, importantly, raises certain downside scenarios that could have made it challenging to make it to our next inflection points. With the arbitration uncertainty behind us, we are focused on completing the registration-enabling studies and submitting BLA filings for both EB-101 and ABO-102 to deliver these therapies to patients in need as quickly as we can. With that, I'll now turn over the call to Ed.

Edward Carr, CFO

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

Operator, Operator

Your first question is coming from Maury Raycroft with Jefferies.

Maurice Raycroft, Analyst

I wanted to ask about the press release that was issued this morning regarding ABO-102 and the ICIEM conference. Could you share more details about what you will be presenting at the conference and how this fits into your overall strategy for 102?

Vishwas Seshadri, CEO

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

Maurice Raycroft, Analyst

Yes, that helps the answer. It seems this will be an important update that will likely be incorporated into the filing for this program and will ensure that the endpoints are aligned. Got it. Okay. I also wanted to ask about EB-101 for RDEB. You mentioned that you're opening this other site at UMass med school on the East Coast. How is recruitment going there? Can you provide any additional insights into enrollment for the study?

Vishwas Seshadri, CEO

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

Operator, Operator

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

Unknown Analyst, Analyst

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

Vishwas Seshadri, CEO

Thanks for the question, Ram. The short answer is no, there hasn't been a significant change in the timing, and it is not related to patient availability for the study or their interest in participating. We have many interested patients. The issue lies more with logistics and the design of the experiment. In a commercial setting, any large chronic wound is suitable for EB-101 treatment. However, in our study, we need to randomize intrapatient wounds to maintain symmetry in the body. For example, if there is a wound on the upper right arm, there needs to be a controlled wound on the upper left arm, which creates some limitations on the most appropriate patients. This factor is specific to the clinical trial and will not be seen in a commercial setting. Additionally, we have identified the patients; the challenge is scheduling. There is also a routine annual cGMP shutdown that occurs in the last half of December, during which we cannot manufacture, and this happens every year. If an interim biopsy date is missed by the end of November, the next available slot is in mid-January. This is the primary reason for the delay into the first quarter of 2022, but we are very confident about accruing patients in that timeframe.

Unknown Analyst, Analyst

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

Vishwas Seshadri, CEO

Thank you for your question, Ram. There are no particular obstacles for MPS IIIB neurocognitive assessments caused by the pandemic, which is similar to the MPS IIIA program. As we have mentioned before, for the MPS IIIB program, the timing for obtaining significant neurocognitive assessments depends on the follow-up period. Based on the seven patients that have already been dosed, we anticipate that we will be able to conduct meaningful assessments in the second half of 2022, when we have a two-year follow-up for at least four or five patients. That will be the time for us to make significant assessments of the MPS IIIB patients.

Unknown Analyst, Analyst

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

Vishwas Seshadri, CEO

Thank you for your question, Ram. I need to clarify that the MPS IIIA and MPS IIIB space is not crowded. Currently, there are no effective treatments or standard care for this disease. Our programs are the most advanced, and any alternatives in development are at least 5 to 7 years away. What we've seen so far are only preclinical or preliminary clinical biomarker and ecto-systemic data; there's nothing related to the central nervous system. We consider our position in this area to be unique. Regarding your second question about manufacturing preparedness, we've made a strategic decision not to rely on a CDMO. Instead, we aim to be independent, which is important as we await product approvals. Patients are ready for these therapies, so we've amended our protocols to allow ongoing treatment in Transpher A, even after reaching the necessary enrolment for efficacy analysis required for registration. We are committed to minimizing any delays as these patients are waiting, which is why we've begun constructing our AAV facility. Additionally, as we prepare for the commercial launch of EB-101, our current facility will only be able to handle a single product. This means we won't be able to manufacture the MPS IIIA ABO-102 product there anymore, which is why the new facility is being constructed, ensuring we can treat patients in need in a timely manner.

Operator, Operator

Next question is coming from Mani Foroohar with SVB Leerink.

Mani Foroohar, Analyst

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

Vishwas Seshadri, CEO

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

Edward Carr, CFO

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

Vishwas Seshadri, CEO

Thank you, Ed. Regarding the second part of your question, Mani, about out-licensing, it's too early to provide a clear answer. However, there is a wide range of potential partners for out-licensing, each with different objectives. Some may be interested in the entire platform, while others might focus on late-stage assets where they can commercialize in specific regions. We have observed various strategic positions from our potential partners, and we are open to different types of arrangements. Our platform also spans multiple therapeutic areas. As you know, our preclinical programs are in the ocular space, attracting players specifically interested in those programs. Meanwhile, the MPS IIIA and IIIB programs fall within the neurological and neuropsychiatric sectors, which also have specific stakeholders interested in those assets. We are prepared to develop packages as these discussions progress.

Operator, Operator

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

Kristen Kluska, Analyst

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

Vishwas Seshadri, CEO

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

Kristen Kluska, Analyst

I appreciate that. I have a question regarding the exploration of strategic partnerships. I understand that your late-stage pipeline focuses on rare diseases, and while you have not disclosed details about the ophthalmology pipeline, you have mentioned that some of those indications may be larger. Should we be considering if the company is evaluating these opportunities based on geography? Are certain regions more affected by these diseases? Also, regarding the earlier pipeline, could you discuss some attractive areas related to the AIM capsid library, including how some of these capsids might overcome limitations currently seen in AAV-based gene therapies?

Vishwas Seshadri, CEO

Absolutely. There are at least two parts to your question. First, regarding our strategic partnerships and the geographic prevalence of the diseases we are further along in developing, our goal is to commercialize these therapies in all regions. Currently, for MPS IIIA and EB, we do not have variations in incidence levels based on population, as these genetic disorders occur worldwide. Our initial focus for launches is primarily in the U.S. and Europe, but we aim to expand to other regions, including Asia Pacific and anywhere there is a need. We are exploring potential strategic partners with more experience in emerging markets, and we recognize the interest in expanding geographically where our data can be beneficial. So, the short answer is yes, but our approach is sequential rather than based on prevalence in specific areas. The second part of your question pertains to our AIM capsid library and its potential differentiation. The strength of the AIM capsid library lies in its tropism; we understand which capsids have a preferential tropism for various tissues, which helps us tackle current challenges. Immunological responses to AAV-based therapies are a major obstacle to enhancing the therapeutic effect of our drugs. By engineering capsids with tissue tropism, we can partly overcome that issue, which is a key advantage of our proprietary capsids. Additionally, we are not only focused on AIM capsids but are also working to address other limitations of AAV-based therapies, such as the gene size packaging constraint of 4 kilobases. We have presented new data on recombination-based techniques that can deliver larger genes, like ABCA4, to patients. This highlights our commitment to overcoming some of the challenges in gene therapy. I hope this clarifies how we aim to differentiate ourselves and advance our understanding.

Operator, Operator

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

Vishwas Seshadri, CEO

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

Operator, Operator

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