Abeona Therapeutics Inc. (ABEO) Earnings Call Transcript & Summary

Good day, and welcome to the Abeona Therapeutics First Quarter 2024 Conference Call. [Operator Instructions] I would now like to turn the call over to your host, Greg Gin, Vice President of Investor Relations and Corporate Communications at Abeona. Please go ahead.

Thank you, Kelly. Good morning, and thank you for joining us on our first quarter 2024 conference call. During this call, we will refer to the press release issued this morning announcing the first quarter results which is available on our corporate website at www.abeonatherapeutics.com. I would like to note that remarks made during today's call may contain projections and forward-looking statements. Forward-looking statements are made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements are based on current expectations and are subject to change, and actual results may differ materially from those expressed or implied in the forward-looking statements. Various factors that could cause actual results to differ include, but are not limited to, those identified under the Risk Factors section in our Form 10-K and periodic reports filed with the SEC. These documents are available on our website at www.abeonatherapeutics.com. On the call today with prepared remarks are Dr. Vish Seshadri, Chief Executive Officer; Dr. Madhav Vasanthavada, Chief Commercial Officer and Head of Business Development; and Joe Vazzano, Chief Financial Officer. Joining us for the Q&A session as well will be Dr. Brian Kevany, our Chief Technical Officer. And with that, I will now turn the call over to Vish Seshadri to lead us off. Vish?

Thank you, Greg. We appreciate everybody joining the call this morning. In order to continue to progress our pz-cel program well beyond anticipated regulatory milestones and through commercial launch, Abeona must be well capitalized. The leadership team has recently been focused on addressing our funding needs. In early May, we completed an underwritten offering with institutional investors that raised $75 million in gross proceeds. Participants in the offering included existing and new investors who are some of the most respected blue-chip institutional health care investors. This was a significant development for Abeona and we're grateful to our investors to demonstrate their support. Importantly, financing not only has extended our cash runway into 2026, which is well beyond anticipated significant regulatory milestones and commercial launch of pz-cel, but we believe it further validates the great potential for pz-cel. We now stay resolutely focused on working with the FDA to address the CMC deficiencies noted in the CRL and making the BLA resubmission towards bringing pz-cel to RDEB patients as soon as possible. As a brief recap of our regulatory update call in late April, we received a CRL from the FDA based on the need for additional CMC information before the pz-cel BLA can be approved. In general, the information needed to satisfy the CMC requests pertains to validation requirements for certain manufacturing and release testing methods. The CRL did not identify any deficiencies related to the clinical efficacy or clinical safety data in the BLA and the FDA did not request any new clinical trials of clinical data to support the approval of pz-cel. Since the update call, we have already made progress towards addressing the CMC deficiencies noted in the CRL. We have now completed the Matrix interference study to validate the replication competent retrovirus or RCR assay. We believe the outcome of this study will satisfy the agency's ask for RCR or assay validation based on our discussion with the FDA in late March. We have also completed the container closure integrity testing for the RVV and the validation reports are in place. We continue to interact with the FDA through informal meetings to gain the agency's alignment on our approach, especially on topics where interpretation of existing guidance in the context of our therapy is required. Looking ahead to the coming weeks and months, we're working on completing deliverables that would address all remaining deficiencies noted in the CRM to enable to resubmission of the BLA. We anticipate completion of all these work streams in the late Q2 to early Q3 time frame and anticipate completing the BLA resubmission in the second half of 2024. We do plan to request a Type A meeting with the FDA in early Q3. The goal of this meeting would be to gain alignment with the agency on the sufficiency of our data to address the outstanding, substantive and critical CMC items. As always, we will continue to be transparent with the outcomes of the meeting after completion. I'll now turn the call over to our Chief Commercial Officer, Madhav Vasanthavada to provide an update on our commercialization readiness activities.

Thank you, Vish. We remain confident in the potential of pz-cel as a game-changing therapy for RDEB patients and our momentum towards commercial readiness continues. Because the FDA did not identify any clinical efficacy or clinical safety-related issues with our BLA, our confidence in our clinical value story remains strong and so does our positioning and messaging with various stakeholders, whether they are the payers or providers. And that is huge for us. In speaking with physicians that are targeted treatment sites, as well as with patient groups like DEBRA and [ EBRT ], there is continued enthusiasm for the value of pz-cel. We hear from physicians including prominent physicians in the EB space about the need for using complementary treatment modalities for DEB patients. pz-cel, if approved, would be the only therapy, which in clinical trials has addressed large body surface areas, including toughest to treat wounds and demonstrated wound healing and pain reduction with years of durability after a single application. These aspects of pz-cel would make it a highly differentiated and clinically meaningful for RDEB patients. In light of the updated BLA timeline, our launch strategy now is to focus on prioritizing activities that we can front load with payers through the payer discussions with the goal of having better access and a faster access upon approval. We will also focus on exchanging scientific data with ED physician community through various forums to strengthen pz-cel medical awareness. In that regard of scientific exchange, our abstract discussing 11 years of safety profile from long-term follow-up of pz-cel has been accepted as a late breaker for presentation at this week's Society for Investigative Dermatology, SID Annual Meeting in Dallas. With more than 11 years of safety in the earliest treated patient, pz-cel would have, upon its potential approval, one of the longest durations of safety follow-up available for gene therapy. Besides disseminating scientific data, as we wait for regulatory approval, we will also be generating new clinical data that could also benefit payer discussions. You may recall, we have an active Phase IIIb study that is currently enrolling new and previously treated RDEB patients, where we have treated 4 patients to date, all of whom have elected to come back as repeat pz-cel patients for their previously untreated wounds. This study also allows treating patients that have received or are currently receiving recently approved treatments for dystrophic EB. And generating such data will help us shape better access policies for pz-cel post-approval. Speaking of payer discussions, we have had nearly a dozen one-on-one engagements with commercial payers through pre-approval information exchange since the last time we spoke. And payers continue to be impressed with the clinical value story of pz-cel and the unmet need it can address, which is encouraging from coverage and access perspective. Lastly from site onboarding standpoint, we are continuing to work with our initial network of 5 to 7 high-volume EB centers and are taking advantage of the regulatory time to refine and strengthen launch readiness and building a high-touch patient services program. We want to make sure that sites will be ready to treat as soon as possible post pz-cel approval, and we'll keep you updated on progress. With that, I'll now hand the call over to our Chief Financial Officer, Joe Vazzano, to discuss our financial results.

Thanks, Madhav. I would like to remind everyone that you can find additional details on our financial results for the three months ended March 31, 2024, in our most recent Form 10-Q, which is available on our website. Starting with the financial resources on our balance sheet, we had cash, cash equivalents, restricted cash and short-term investments of $62.7 million as of March 31, 2024 as compared to $52.6 million as of December 31, 2023. Net cash used in operating activities was $14.5 million for the three months ended March 31, 2024. Based on our current operating plan and assumptions, with our existing cash resources, also including the credit facility and combined with the gross proceeds from our recent $75 million equity offering, we estimate we have sufficient financial resources to fund operations into 2026. Our cash runway assumptions do not account for any potential revenue from commercial sales of pz-cel or proceeds from the sale of a priority review voucher or PRV if awarded by the FDA. I'll remind you that pz-cel has been granted rare pediatric disease designation by the FDA. So upon its potential approval, we believe that we are eligible to receive a PRV. Research and development expenses were $7.2 million for three months ended March 31, 2024, compared to $8 million for the three months ended March 31, 2023. Our spend on general and administrative activities was $7.1 million for the three months ended March 31, 2024, compared to $4 million for the three months ended March 31, 2023. Net loss was $31.6 million for the first quarter of 2024 or $1.16 loss per common share. It is important to note that the net loss in the first quarter of 2024 included a noncash loss of $17.3 million related to the change in fair value of warrant liabilities. These warrants are required to be classified as liability and remeasured at fair market value each reporting period. Net loss in the first quarter of 2023 was $9.1 million or $0.54 loss per common share. With that, operator, please open the Q&A session.

[Operator Instructions] Your first question is coming from Maury Raycroft with Jefferies.

I was going to ask just a clarification one for the BLA submission timeline change to your second versus third quarter. Is there any more behind that? Is it just a softening of time line just to make sure that you get everything in on time or maybe more perspective there that you can add?

It's really the latter. We're still on track and a resubmission in quarter 3 is very much our plan. Just the softening of the language in the second half of 2024 is to accommodate external uncertainties like when the FDA grants us a meeting because we do want it to be doubly, triply sure that we've squared off all the questions that they've asked us during the CRL and that we've satisfied those as -- and our plan is to actually validate them with the FDA before we make the resubmission, so there's no surprise. So just to give -- if it's on the border line of last day of quarter 3 versus beginning of quarter 4, we wanted to keep that broadly as second half, but there is no material change in our thinking of how rigorously we're looking to complete the work that we need to do as discussed in the previous conference call after we announced the CRL. Hope that addresses your question?

Yes, that is helpful. And for the cell-based identity assay. Can you talk a little bit more about just alignment on that assay with FDA due to the novel nature of that assay? And maybe talk about the progress that's made there and the plan to make sure that there is alignment with FDA going to the BLA.

So the cell-based identity assay really looks at what's the cell composition of our product, and we are continuing to gain alignment with the FDA through our informal meetings with the agency. We have a fairly good understanding on what is required to be done to address the sensitivity and the specificity. So we've made those proposals and the agency has indicated that our approach seems fairly straightforward and that this will be a review issue with the data that we generate. And we are confident that we'll be able to provide the necessary data based on the feasibility runs that we've done so far and identifying markers that are specific to keratinocytes. Just as a reminder, our product is primarily keratinocyte. So we need to have an antibody that can detect keratinocytes and is not binding to other types of cells that you may find in its environment. and we're able to deliver that kind of specificity and sensitivity. So we're fairly confident that we'll have the identity assay in place by the time we do the resubmission.

And then maybe last question for the SID late-breaking abstract, given there seems to be at least a numerical difference in SCC where there was no SEC treated sites but SCC at non-treated sites and where you don't see this with VYJUVEK. Have you discussed with KOLs and potentially FDA whether prevention of SCC could be included in the label? And how should we think about this in respect to demographics for patients who may be at higher risk of SCC?

We've been giving a lot of thought to this. What we do know is in order to get the label claim that pz-cel would be preventative measure to avoid SCCs happening. It's a little too premature to have that level of data to date, but the early indications of our data are definitely encouraging. It's probably going to be a longer-term effort on our part to demonstrate that clinically. However, what we do know from published literature is that large chronic wounds are the originating areas where you typically see squamous cell carcinomas. And so to treat those types of wounds is high priority from a patient risk perspective. And that is well aligned and agreed upon by the medical community. So we will still prioritize treating those patients at high risk but whether our label can include a claim like that, it's TBD, but it may require additional data generation for the future, but we're definitely looking into that.

[Operator Instructions] Your next question is coming from Kristen Kluska with Cantor Fitzgerald.

Great to see that a lot of new investors are taking a look at the company. And I wanted to ask two key questions that we've been getting from a lot of some of these newer investors. I guess, first, can you remind us about the importance of understanding the endpoints that you looked at in the Phase III trial relative to the size of the wounds that you treated? And then also looking at least 50% wound healing, at least 75% wound healing, how do we understand that these data are very important relative to just understanding the complete wound healing?

We often tend to forget those nuances, right? So it's important to remind ourselves the endpoints of the study as well as the types of wounds that we have treated in our pivotal study as well as the Phase I/IIa. With pz-cel, we treated the toughest to treat wounds. And when I say that, there are two dimensions to that. One is the wound size. The minimum wound size required was 20 centimeters squared, but there are some wounds that run into hundreds of centimeter squared where we needed to quite like apply multiple graft, multiple pz-cel sheets in that area. And that is something that we often forget. So that is a size aspect of our wounds, the second is the chronicity. Chronic wounds are definitely different from what we are hearing from these experts. They are different type of wounds compared to the recurrent wounds, and they cannot self-heal themselves. If you look at our complete wound healing rate, zero chronic wounds ever completely healed in our study. So that tells you that the wound type itself that we're treating is very different here. And so that's one thing. The second is, of course, the other primary endpoint that we're looking at is pain reduction, but I will come to that later. Why do we have 50% wound healing and not 100% wound healing in fact, in VIITAL, we've looked at all 3 levels of wound healing, 50%, 75% and complete, which is 100% wound healing. And in all those three aspects, we have shown that there's a highly statistically significant difference in the healing rates what we see with pz-cel versus the control. It's important to note that for these types of sizes of wounds even a 50% wound healing leads to a very significant outcome for the patient when you look at their quality of life and their pain reduction. But I would emphasize that 2/3 of the wound, 67% showed even greater than 75% wound healing. And the way we score for 100% wound healing is extremely stringent in the case of the VIITAL study, which is if there is even a small patch of crusted area. If you cannot -- you cannot obviously pick on that crust and see if the wound healed underneath that. So when you have this element of doubt, it was not scored as a completely healed wound, even though the rest of the wound was completely healed, and therefore, when you cannot verify that under the crust or even if there is a microscopic dot, a red dot on the wound, we wouldn't score that as a completely healed wound. So these are some of the new nuances when you look at numbers there. But regardless, when you look at the -- wound pictures speak volumes of how the difference is between healed -- treated healed wound versus the control wounds. So that is also further corroborated by our second clinical endpoint, which is pain reduction, where we found that there is significant patient reported outcome that is ultimately what is important. And when we look at wounds that started with a high pain score of 6 or worse on a 10-point scale, the mean reduction in pain was 5.7%. So that basically underscores how much of an alleviation of pain this therapy is able to offer to these patients in addition to purely the wound healing aspect of it. I hope I addressed your question. If not, please do ask me further details. I'm happy to address that Kristen.

You did answer it.

I just wanted to add to what Vish said in terms of our baseline characteristics, besides numbers, the average duration of wounds that were open in our VIITAL to remind was 5 years with some of the wounds that had never closed for up to 21 years, right? So these are the types of wounds that had hardened and especially in adult patients, where you have these chronic wounds that have not healed with other treatment modalities, we have been able to show most of our patients in VIITAL were adult patients, and we have been able to show these kinds of data with them. So I think that is pretty profound, knowing that these wounds haven't healed, and at 6 months, we are able to show this kind of wound closures.

And then often for rare diseases, I know you've done things like genetic modeling to try to understand what the actual patient pool size is. But often with rare diseases as new therapies come online, others unreleased, in development. We started to see increase in some of the patients that are identified. So as you guys are doing a lot of diligence with KOLs, preparing for potential approval. I'm curious if you've heard any commentary about the market size and if there's been any changes in the last few years with all the development in the space?

Yes. Go ahead, Madhav.

Yes. I just -- I think what we are definitely hearing is an increase in genetic testing and collecting more biopsies, especially with -- as you said, similar to other rare diseases as more therapies come on market; a, the misclassification that has been happening in the EB space, we heard one of the reports from DEBRA with as high as 75% of EB patients were misclassified. We hope that, that kind of misclassification and that there is an accurate diagnosis that happens. But definitely on the right track with later genetic testing and there is certainly advocacy from physicians to be able to test sooner and early on.

There appear to be no further questions in queue. I would now like to turn the call back over to Vish Seshadri for any closing remarks.

Thank you, Kelly, and thank you all for joining us today. In closing, we remain committed to bringing pz-cels to patients with RDEB as quickly as possible. I firmly believe we will get there. Thank you, everyone, for joining us today for today's business update. With that, we'll talk to you again soon. Thank you.

Thank you, everyone. 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.