Abeona Therapeutics Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Abiona Q1 2022 earnings call. At this time, all participants are on a listen-only mode. After management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to the host, Greg Chin, VP of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Kelly. Good morning, everyone. I would like to welcome and thank everyone for joining us on our first quarter 2022 conference call. Press release announcing the results is available on our website at www.abionatherapeutics.com. On the call today with prepared remarks are Vish Seshadri, Chief Executive Officer of Abiona, and Joe Vizzano, Chief Financial Officer. After the prepared remarks, we will host the Q&A session. And we are also joined by Dr. Brian Keveny, Chief Technical Officer and Head of Research. 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 vary differ- 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 other periodic reports filed by the company with the Securities and Exchange Commission. These documents are available on our website at www.abionatherapeutics.com. With that, I will now turn the call over to our CEO, Vish Seshadri. Vish?

Thank you, Greg. Good morning, everybody, and thank you for joining us this morning. It's been only a few short weeks since we last spoke in late March when we announced a new strategic plan in which we reprioritize our portfolio investments to preserve capital and extend our projected cash runway into the second quarter of 2023. Since then, we have moved quickly to divest ABiona of the MPS programs. In a joint press release with Ultragenyx issued this morning, we reported an exclusive license agreement where Ultragenyx will assume all further development and commercialization responsibilities for ABO-102, and in return, Abiona will be eligible to receive tiered royalties up to 10% on net sales and commercial milestone payments up to $30 million, following regulatory approval. We believe that Ultragenyx, with its deep expertise in rare genetic diseases, including MPS, is an ideal partner to potentially bring ABO-102 to patients who have been waiting too long for a first treatment. We have discontinued development of ABO-101 for MPS-3B, as we had announced in the previous earnings call. Offloading the MPS programs in addition to seizing the build-out of additional AAV facilities should significantly reduce our cash burn and allow Aviona to fund operations over the next 12 months. We have now focused our finite resources more narrowly on EB101 Pivotal Phase III Vital Study Readout, which is our most significant near-term clinical milestone. Having completed the accrual of vital, we expect top-line results of the study in late third quarter of 2022, which could support filing a biologics license application. Our increased focus on EB101 is supported by the compelling long-term results from the Phase 1-2 study in recessive dystrophic EB. In that study, as previously reported, EB101 demonstrated instantaneous wound healing and pain reduction in the majority of treated wounds up to six years after treatment of large chronic wounds in RDEV patients. Later this week, additional long-term follow-up data for up to eight years from the Phase 1-2 study will be featured during an oral presentation at the Society of Investigative Dermatology, SID, annual meeting. We therefore anticipate similar results from our phase three vital study. Remember, in vital, as in the phase one and two study, we treated large chronic wounds that measured greater than 20 centimeters squared of body surface area at baseline. These are the most severe and problematic wounds inflicting intense pain and causing the greatest clinical burden on our patients. Unlike small recurring wounds that can close spontaneously, large chronic wounds rarely close themselves and remain open for more than six months, and in many cases, remain open for years. In vital, we treated a total of 43 randomized large chronic wounds in 11 patients, and each of the 43 wounds was paired with an untreated control wound within the same patient. An additional 14 non-randomized wounds were also treated with EB-101. Regarding baseline wound characteristics, the mean body surface area of randomized wounds treated with EV101 per patient was 156 centimeters squared, the range being 80 to 200 centimeters squared. If you include the non-randomized wounds, the mean treated body surface area per patient in the study was 207 centimeters squared, the range being 120 to 240 centimeters squared. These baseline wound characteristics underscore the potentially unique value proposition of our investigational EB101 product in our debt. As we await results from Vital, we are aggressively exploring partnerships for commercialization of EB101. Also remember, EB101 has a rare pediatric designation, which means we have a potential opportunity for a priority review voucher at approval. Now, Turning briefly to our preclinical eye programs, at ARVO 2022 annual meeting in early May, we reported non-human primate data for AAV204, a novel AAV capsid from our AIM capsid library. The results showed AAV204's ability to produce more robust transduction in the macula area of the eye following administration directly into the vitreous of the eye by pararetinal administration which unlike subretinal administration does not create a retinal detachment. We're excited by AAV204's ability to achieve high macular and optic nerve transduction levels in non-human primates with a potentially less invasive and safer administration route than subretinal injection. We are investigating our novel AAV capsid in four undisclosed ophthalmic conditions with estimated US prevalence ranging from 5,000 to 15,000 patients. Looking ahead, we expect animal proof of concept data beginning in mid-2022 that could potentially support a pre-IND meeting with the FDA in the second half of 2022. I'll now turn the call over to Joe to review the financial results. Joe?

Thank you very much, Vish. 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 months ended March 31st, 2022. Starting with the financial resources on our balance sheet, we had cash, cash equivalents, restricted cash, and short-term investments of $37.2 million as of March 31st, 2022. Net cash used in operating activities was $13.3 million for the three months ended March 31st, 2022. Based on the reprioritization of portfolio investments, which includes our strategic focus now on the EB-101 and the disposition of the AB-102 and AB-101 programs, our estimated runway of current cash resources takes us into the second quarter of 2023. License and other revenues for the first quarter of 2022 were 0.3 million compared to zero in the first quarter of 2021. The revenue in the first quarter of 2022 consisted mainly of the recognition of deferred revenue related to grants for the AB 102 and AB 101 development programs. Turning to research and development activities, we spent $10.5 million for the three months ended March 31st, 2022, compared to $8.3 million in the three months ended March 31st, 2021. Our spend on general administrative activities was $4.2 million for Q1 of 2022 compared to $6.3 million in the same period of 2021. Net loss was $20.8 million for the first quarter of 2022 or a loss of $0.14 per common share as compared to a net loss of $16 million or a loss of $0.17 per common share in the first quarter of 2021. The net loss in the first quarter of 2022 includes $6.2 million in non-cash impairment charges resulting from the disposition of AB 102 and AB 101 development programs, as we focus resources on EB 101 and our preclinical I gene therapy programs. The impairment charges have no impact on the company's cash position or cash flow from operating activities. I'll now briefly touch on our initiatives to regain compliance with NASDAQ listing requirements. We recently requested a second 180-day period from NASDAQ to regain compliance with its minimum closing bid requirement of $1 per share. If the extension is granted, ABO would have until November to meet this requirement. As part of our strategy to regain compliance, we have called a special meeting of stockholders for June 14, 2022, for the approval of a proposal to enact a reverse stock split of the outstanding shares of a common stock. Stockholders, as of the record date of May 3, 2022, are entitled to attend the online special meeting, view the proxy statement, and vote. The link to participate is included in our first quarter results press release issued last week, which is available on the press releases page of our website. Also, earlier this month, we completed a $25 million private placement offering of convertible redeemable preferred stocks. The preferred stock permits the holders to vote together with ABO and its common stockholders on a proposal to affect the reverse stock split of the company's common stock at the special meeting. We believe by implementing these initiatives that we'll be able to maintain our NASDAQ listing as we look ahead toward the key expected milestones later this year. With that, I'll turn the call back over to the operator for the Q&A session.

Certainly. If you have any questions or comments, the floor is now open for this time. If you have any questions or comments, please press star 1 on your phone. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just one moment while we poll for questions. Your first question is coming from Maury Rakoff at Jefferies. Please pose your question. Your line is live.

Hi. Good morning. Congrats on the updates today, and thanks for taking my questions. And also thank you for the details from the R-DEP Phase III study. I guess for the 14 non-randomized wounds treated, is it fair to say that those were particularly large wounds? And can you talk more about how the treatment worked for those wounds? And also talk about your total R-DEP data and how that's going to fit into the BLA filing and the argument around the BLA.

Thank you, Maury. As always, pleasure talking to you. Thanks for the question. So your first question was about the 14 non-randomized wounds. And the 14 non-randomized wounds, just to be for avoidance of doubt, will not be part of the primary data set for our efficacy endpoints. The reason they are non-randomized is mostly inability to find an appropriate control wound. So we have the sheets created so the patient benefits by treating. And that's pretty much the goal of treatment. We will obviously report the results for those wounds in terms of wound healing and pain scoring and such endpoints. So that's something about the trial. So the 43 randomized wounds that I mentioned first, those are the primary analysis data set. Now, your second question was about how the treatment relates to the BLA filings. Now, as we announced on March 31st, that first quarter we completed treating the last patient who went into vital. And as you know, it's a six-month data point. So from March through September is our follow-up. Our team is diligently cleaning data real-time so there's not a back-end lag after database lock in order to report the results. So we feel fairly confident that by the end of quarter two, we should have those clinical results. So regarding BLA filing, our first goal is to get to the clinical results of the study in a very cost-efficient way. So we are certainly stage-gating capital-intensive BLA preparation work after the study reads out. So we're careful with the finite resources that we have today. So in the base case scenario, if we do that, we're going to look at a quarter two. Earlier we had, I think, communicated a quarter one, but it'll be a quarter two filing of the BLA in 2023. Now that said, there is a scenario, an upside scenario, where we may be able to accelerate that if we have a source of non-dilutive funding, mainly from a partnership for commercialization. And if such partnership happens prior to the study readout itself, then we may be able to trigger some of these BLA preparation activities early on. I hope I answered your questions, Maury. If I missed something, please do reiterate.

That was a really helpful perspective. And I guess for the partnership, if you can talk a little bit more about what you're looking for with the partner and where you're at with the process of finding a partner.

Yes, as I mentioned, we are aggressively exploring partnerships. There are some discussions and diligence. And we are looking mainly for a partner who will take on all activities that are related to launch readiness. And you can consider our role as being a supplier or a transfer of technology. And obviously, when we are sitting at a positive phase three study, our expectation for a partnership would be recognition of that result with an upfront payment and potentially royalties in the back end. Got it.

Okay. Thanks for taking my questions. I'll hop back in the queue.

Thank you, Maury.

Your next question is coming from Kristen Kleska with Cantor Fitzgerald. Please pose your question. Your line is left.

Good morning. This is Rick on for Kristen. Thank you for taking our question. We just have one for you here. It's about the Arvo poster. Could you talk a little bit about the AIM platform vector and pararetinal delivery? Is there anything you can say about how the AIM capsid used is optimized for pararetinal delivery? And is your plan to go forward with pararetinal delivery for the other undisclosed ophthalmic indications? Thanks.

Thank you for the question, Kristen. I'm going to request Brian Keveny, our head of research, to take this one.

Certainly. Yeah, so the AAV204 capsid was originally identified as being a potential candidate for intravitreal administration for its ability to enter the retina after an intravitreal injection. There was a paper published last year, two years ago, from Dr. Paul Seving's group at the NIH that that demonstrated the ability of capsids to enter the retina after this so-called pararetinal injection. This is a modified intravitreal injection where the virus is layered on top of the retina beyond the vitreous, but does not cause a retinal detachment, thus representing a potentially safer and less invasive method for administration. And, yes, there are several indications from our undisclosed I programs where we are intending to try and leverage AAV204 by a pararetinal administration to use for those indications.

Thank you.

There appear to be no questions in queue at this time. I would now like to turn the floor Maury Rakoff has popped back in the queue. Your line is live. Please pose your question.

Thanks for taking the follow-up. I just wanted to ask a question about the ultragenic steel, too. I'm wondering if there's any up front. And then for manufacturing at commercial scale, is that going to be a tech transfer of AAV9, or how is that going to work?

Thank you, Maury, for that question. The short answer to your first question, is there any upfront payment, is no. But I want to put context for that answer, which is our goal, our primary goal for EBIONA is twofold. One is have a partner take over all responsibility for further development, as you can appreciate clinical development as well as CMC are pretty capital intensive, and we wanted to reduce our operating expenses. So that was our first goal, while still retaining our value from the program in the back end. So that secured through the terms of the agreement that were disclosed. Now, secondly, our goal is towards the stakeholders of patients and the community in MTS. We wanted to make sure that a partner is able to most aggressively develop this product and bring it to patients as early as possible. So I hope that gives you some context behind the timing of the deal and the terms.

Yes, yeah, that's helpful. And maybe just last one on MPS3B, is it possible that you could end up out-licensing that program at some point as well?

It's very premature to comment on that, Maury, only because the follow-up for the study is very early, and we did not have the resources to have a lot of items in our portfolio, so we had to deprioritize that we have returned the license rights for that program over to NPH. So if the data look promising at a later date, hopefully there's future development prospects for that asset for NPS3B.

Got it. Okay. Thanks for taking my questions. Thank you, Maury.

There appear to be no further questions in queue at this time. I would now like to turn the floor back over to Vish Deshadri for any closing remarks.

Thank you. So we have implemented strategic changes to reduce operating expenses and extend our projected cash runway into the second quarter of 2023. Within that window, we plan to achieve a potentially value-creating milestone. I want to thank our team for their continued dedication in driving our efforts to make an impact for patients. I also want to thank our shareholders and other stakeholders who have listened to this call today, and we'll talk to you on the next quarterly call.

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.