ABEO - NASDAQ

Good day, ladies and gentlemen, and welcome to the Abeona Q2 2022 Earnings Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Greg Gin, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Holly. Good morning, everyone. I would like to welcome and thank everyone for joining us on our second quarter 2022 conference call. The press release announcing the results is available on our website at www.abeonatherapeutics.com. On the call today with prepared remarks are Vish Seshadri, Chief Executive Officer of Abeona; and Joe Vazzano, Chief Financial Officer. After the prepared remarks, we will host the Q&A session. And we are also joined by Dr. Brian Kevany, 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 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 are 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 SEC. These documents are available on our website at www.abeonatherapeutics.com. And with that, I will now turn the call over to our CEO, Vish Seshadri. Vish?

Thank you, Greg. Good morning, everybody, and thank you all for joining us this morning. We are focused on developing transformational therapies for serious diseases with the highest unmet need. During the second quarter, we took decisive action to direct our resources toward our lead asset, EB-101. In May, we announced an exclusive agreement whereby Ultragenyx assumed all financial responsibility for the continued development of ABO-102 in for Sanfilippo syndrome type A or MPS IIIA, including certain prior development costs and other transition costs. In return, Abeona is eligible to receive tiered royalties on net sales and certain commercial milestone payments following regulatory approval. We have also discontinued development of ABO-101 for MPS IIIB. With the disposition of the MPS programs, we were able to extend our cash runway well beyond the vital readout into the second quarter of 2023. The additional runway puts us in a strong position to forge the optimal commercial partnership that fully appreciates the value of EB-101 post data readout. For recessive dystrophic epidomylysis bullosa, or RDEB, we are investigating EB-101's potential in treating the most debilitating aspects of the disease, that is large chronic wounds that typically do not heal spontaneously and inflict the greatest pain and clinical burden. It is very exciting to be reading out top line results from the EB-101 pivotal Phase III VITAL study in RDEB in the coming months. And following a potential positive outcome, we plan to submit a biologics license application with the FDA. This study reached an important milestone earlier this year when we achieved target enrollment in March. With our final patient visit for the VITAL study planned in mid-September, we anticipate reporting top line results around end of third quarter or early fourth quarter. The top line report will include data on wound characterization, the co-primary endpoints for efficacy as well as safety. In the meanwhile, we have continued our active engagement with potential partners to commercialize EB-101 with the goal of finalizing an agreement after release of top line data. Our steadfast belief in the promise of EB-101 for RDEB patients is supported by compelling long-term results from a completed Phase I/II study. In May, additional long-term follow-up data and quality of life data from the Phase I/II study were featured during an oral presentation at the Society of Investigative Dermatology, or SID, Annual Meeting. The data showed EB-101 treatment of large chronic RDEB wounds resulted in considerable wound healing at a mean of 5.9 years of follow-up and a maximum of 8 years of follow-up. In addition, reduced wound burden was associated with long-term symptomatic relief, including reduction in pain. Remember, in VITAL, as in the Phase I/II study, we treated large chronic wounds. Unlike the small recurring wounds that can close spontaneously, large chronic wounds cannot close themselves and remain open for more than 6 months. In fact, many wounds treated in VITAL had been chronically open for years. For that reason, we anticipate very little spontaneous healing in the untreated control arm of the study. 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 nonrandomized wounds were also treated with EB-101. Baseline wound characteristics underscore the large size and severe pain associated with wounds included in the VITAL study and include the following. Mean body surface area of randomized wounds treated with EB-101 per patient was 156-centimeter square. And if you included the nonrandomized wounds, mean treated body surface area per patient was 207-centimeter square. Remember, pain reduction is a second co-primary endpoint in VITAL. Pain for each wound is assessed during dressing change, the time at which pain is most intense using the Wong-Baker FACES Pain Rating Scale of 0 to 10. At baseline, many patients noted severe pain with 8 of the 11 patients reporting a minimum pain score of 6 in at least 1 randomized wound and 4 of the 11 patients reporting a maximum baseline pain score of 10 for certain randomized wounds. Clearly, the wounds that we have traded in VITAL are representative of the most problematic painful wounds that can lead patients to opioid use for pain management. EB-101 is the only investigational product that has a co-primary endpoint of pain reduction in the pivotal study. Turning briefly to our preclinical eye programs. At the ARVO 2022 Annual Meeting in early May, we reported nonhuman 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 macular area of the eye following administration directly into the vitreous of the eye but pararetinal administration, which unlike subretinal administration has not been associated with retinal detachment. We are excited by AAV204's ability to achieve high macular and optic nerve transduction levels in nonhuman primates with a potentially less invasive and safer administration route than subretinal injection. Looking ahead, we are excited to share that ongoing proof-of-concept studies in our undisclosed ophthalmic indications have begun to demonstrate proof of gene expression in target tissues Functional readouts from these studies will begin to be reported this quarter, which we hope will support pre-IND meetings with the FDA in the second half of 2022 to early 2023. I'll now turn the call over to Joe to review the financial results. Joe?

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 months ended June 30, 2022. Starting with the financial resources on our balance sheet, we had cash, cash equivalents, restricted cash and short-term investments of $26 million as of June 30, 2022. Net cash used in operating activities was $9 million for the second quarter of 2022 compared to $13.7 million in the first quarter of 2022. Based on our current operating plan and assumptions, our estimated runway of our current financial resources takes us into the second quarter of 2023. License and other revenues for the second quarter of 2022 were $1 million compared to 0 in the second quarter of 2021. The revenue in the second quarter of 2022 resulted from a clinical milestone achieved under a sublicense agreement with Taysha Gene Therapies related to an investigational AAV-based gene therapy for Rett syndrome. Turning to research and development activities. We spent $6.7 million for the 3 months ended June 30, 2022, compared to $8.5 million in the second quarter of 2021. Our spend on general and administrative activities was $3.5 million for the 3 months ended June 30, 2022, compared to $5.2 million in the same period of 2021. Net loss attributable to common shareholders was $12.1 million for the second quarter of 2022 or $2.08 loss per common share as compared to $15.2 million or $3.93 loss per common share in the second quarter of 2021. Lastly, in July, we regained compliance with the minimum bid price requirement for continued listing on the NASDAQ capital market. With that, I'll turn the call back over to the operator for the Q&A session. Operator?

[Operator Instructions] Your first question for today is coming from Maury Raycroft.

This is Farzin on for Maury from Jefferies. For the pain reduction endpoint, can you remind us how often you measure it? And then what is the delta that you expect to achieve on this standpoint? And can you also remind us what the specified calculations are for the same point?

Thank you so much for the question. Your first part of the question for the pain reduction endpoint is what is the frequency with which we measure. The -- when the patients are enrolled in the study prior to treating with EB-101, it's the first measurement of pain, and that's the baseline pain scores that we shared today on this call. Subsequently, we're measuring the progression of pain at each of our follow-up time points that includes week 12 as well as the most important time point, which is the week 24, which is going to determine the results as per the co-primary endpoint that we've agreed with the FDA. Although pain has been measured in our Phase I/II study as well in a different scale, which was a binary yes/no to pain associated with these large chronic wounds, there is a little bit of a difference in how it's measured in the VITAL study where pain is measured using the Wong-Baker FACES Scale on a 0 to 10 rating scale. So while we're not able to tell you exactly what is the magnitude of pain reduction that we anticipate in VITAL because all our past data is on a different scale, we are confident that the size of the study itself is adequately powered to detect a meaningful pain reduction. And again, going back to the baseline pain scores that I shared, 8 of the 11 patients have had a minimum pain score of at least 6 for 1 of their wound pairs. So that should give you a broad sense of how much scope for pain reduction there is, and 0 being the best pain score that you could achieve is a wound is completely healed. The second part, can you please repeat if there was any part of your question that was left unanswered? And apologies for that.

The prespecified calculations that go into this.

Right. The prespecified calculations is, essentially, what we're doing is looking at the treated arm. So there's 43 randomized wound pairs we're going to look at, and these are intrapatient paired. So we have a -- it's a test of statistical significance of mean pain reduction seen across the treated arm, which is the 43 treated wounds, compared to the untreated set of 43 controlled wounds.

Okay. Makes sense. And then for the wound, you're saying the mean is like 156 centimeters square. But is there anything else you can say on the range and the median? And then if you can comment how long patients have had these wounds. And this chronic wounds are like [indiscernible] how long they have been open for?

Yes. So the first question is the size itself. So 156 square is the mean body surface area that of wounds covered for the randomized wounds per patient. And if you include the nonrandomized wounds, I'd reported that it was 207-centimeter square. The range goes all the way per patient from 80 to 240. So that's the per patient body surface area covered range, so I hope that addresses the surface area question. And the second part of the question, how long the wound had been opened, and the answer is we will be -- as part of our top line results, we will be reporting our baseline characteristics. We know that many of these wounds have been open for years even though the clinical trial protocol itself admits wounds that have been open for a minimum of 6 months. And because many of these wounds have been opened for years, it's the reason why we do not anticipate that there will be a spontaneous closure, which means we will be looking at very small numbers in the control wound set for wound healing.

Your next question is coming from Kristen Kluska.

This is Kristen at Cantor Fitzgerald. Could you please remind us how you're viewing the market opportunity for EB-101? And in these estimates, how do you think about wounds that a single treatment might be durable over the long term versus others down the road that may require retreatment? And then based on patient profile, how many sheets do you think that an average patient may require?

Thank you for the question, Kristen, and great to hear from you. I have a 3-part question here. So first, let's talk about the market opportunity. We anticipate based on current epidemiology sources that in the U.S., we have at least 2,500 patients, and this is something that's also being validated with advocacy organizations as well. And if you look at those patients, we anticipate that roughly 70% of those patients will have large chronic wounds that will be specifically treated with EB-101. And on average, we anticipate 2 cycles of treatment per patient should cover the large chronic wound surface area in their body. So if you do the math and boil down to the number of treatment opportunities we have with the current pool of U.S. patients, you're looking at north of 3,000 treatment opportunities, and so that's the kind of epidemiological base of patients that we have. And you asked a question about the value proposition, I think, with a single one-and-done treatment versus chronically-applied treatments. Our goal and the target product profile for EB-101 for a given wound is a one-and-done treatment. So far from the Phase I/II study, I'd reiterate that we've seen a onetime treatment with follow-up data up to 8 years and sustenance of the wound healing as well as pain reduction, and that's important for our value proposition as we look at how we would be looking to price EB-101 as well. And just to be -- I mean, this is a disease where there are no approved products. And we have been talking to a lot of physicians, both formally and informally, through ad boards and such. And we're hearing that for any patient, both chronically-applied therapies for the small recurrent wounds; and one-and-done treatments, which are big guns for the large chronic wounds, are going to be needed at some point during the disease course for these patients. So we anticipate that the patients are going to see all types of treatments in their course of disease, so that's something that we should not forget. And a patient profile, what we have understood about recessive dystrophic EB, which is one of the most severe forms of EB, almost all patients are going to see large and chronic wounds in their lifetime. In fact, there are children that are born with large and chronic wounds as they are born, and so that's something that's very important to recognize. And so we anticipate pretty much the entire base of RDEB patients will have a wound profile, not just a patient profile that's going to require this kind of therapy. I hope I hit on all the parts of the question you asked, Kristen.

[Operator Instructions] Your next question for today is coming from Jim Molloy.

It's Jim from Alliance Global Partners. I had a quick question on potential partnership opportunities. I know obviously, you're waiting on the data and which depends on how it looks. But how would you characterize potential partners at this point for RDEB? And then also on the rare pediatric earlier voucher that you certainly seem more than eligible to get. What are the hurdles to actually getting that? And is there -- and given the hundreds of millions of dollars these things can sell for, has there been discussions with partners about should you get approval and get the voucher bidding more for that as well?

Thank you, Jim, for that question. So first, let me answer the question about the commercial -- ideal commercial partner and the type of partnership deals that we're looking to do. Our goal is to find a commercialization partner where all the launch and commercialization activities would be the responsibility of the partner while yet recognizing the value that we've built so far into EB-101. And our role would be basically to, of course, license the technology to them as well as take this all the way to the finish line of BLA approval. So that's going to be important and also potential supply of EB-101 upon BLA approval. Now what is important to recognize here is that unlike past deals that we have done, EB-101 will be clinically de-risked. So we're looking at a partnership that's starting after we've had a positive Phase III study with co-primary endpoints pre-agreed with the FDA. So it's a very de-risked program, and any partnership deal will give us the appropriate value for that de-risked asset. So that should be also something in the forefront of what the deal would look like. Now in terms of the question about the PRV, the priority review voucher that is an opportunity for us with BLA approval, yes, we do have rare pediatric designation. There are 2 requirements for a priority review voucher. One is you should have a rare pediatric designation. The second one is that you get a priority review for your own application, which we believe we will because of the high unmet need and the space that we're playing in. So the only hurdle then is the BLA approval itself. The priority review voucher is something we will apply for as we submit the BLA application. And typically, it gets granted when you get the BLA approved. So that's the only hurdle, and we are committed. When the study is positive, we're going to be putting together the most robust package for a BLA. So I hope that hit on all the aspects. Oh, I'm not able to speak a lot more about the specifics of what a deal would look like with a commercial partnership but just leave with the thought that this is a Phase III positive study and de-risked assets that we're partnering on. So that will have a valuation that's different from what, for example, we've done with ABO-102, where there's still a lot of clinical uncertainty ahead of us.

Maybe a quick follow-up if I could. How -- I mean, how early in the process? I know that obviously still some hurdles to go, and things still have to go right, but a good [indiscernible] will and they will. How early in the process would potential acquirers of a priority voucher? Reaching out to you already to say here's what we're looking at if you got to get it through. Or what does that process sort of start? Does it only start once you get it?

So if I -- Jim, just to restate your question, so I understood this correctly. So if we do get a priority review voucher, are we already lining up for potential buyers of such voucher? That's something that has relatively the most short lead time compared to other activities that need to happen getting to a BLA, right? So what we are seeing is a trend of PRVs selling almost instantaneously because the demand has been pretty strong. And you saw that the last PRV that was sold still went north of $100 million. I think it was $110 million a few weeks ago. So we're not very worried about the timing and pre-preparation for that part. I think the critical steps for us is getting the BLA approval and securing the PRV. And we -- as we had discussed in the previous earnings call, what's important is being mindful of our resources. All the minimally-intensive resources where we could prepare already for a BLA package, we're already doing now. But anything that is very capital-intensive to pull together a BLA package is stage gated upon the VITAL Phase III result, and that's what puts us at a BLA submission time line of quarter 2 of 2023. I hope that gives you some sense to how events are lined up and sequenced so we are most efficient with our resources.

[Operator Instructions] There are no further questions in queue. I would like to turn the floor back over to Vish for any closing remarks.

Thank you. In closing, we're excited and looking forward to reporting top line results from our VITAL EB-101 study, a potentially transformative milestone for Abeona. Over the coming weeks, we will analyze the data and lock the database, and we are on track to report top line results to you in late third quarter to early fourth quarter, and I want to thank the Abeona team for their continued dedication and efforts toward improving care for patients. I also want to thank our shareholders and other stakeholders who have listened to this call, and we'll talk to you on the next quarterly call.