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

Good morning, everyone, and welcome to the Abeona Therapeutics Second Quarter 2024 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Greg Gin, Vice President of Investor Relations and Corporate Communications. Greg, the floor is yours.

Thank you, Jenny. Good morning and thank you for joining us on our second quarter 2024 conference call. During this call, we will refer to the press release issued this morning announcing the second 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. Also joining us for the Q&A session will be Dr. Brian Kevany, Chief Technical Officer. And with that, I will now turn the call over to Vish Seshadri to lead us off. Vish?

Thank you, Greg. Good morning, everyone. We appreciate everybody joining this call. We're excited to provide our second quarter update, and I'll start with the status of the BLA resubmission process. As a reminder, the complete response letter highlighted the need for additional CMC information pertaining to in general validation requirements for certain manufacturing and release testing methods. The CRO that we received in April 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 or clinical data to support the approval of pz-cel. Since our last quarterly call, we've continued to make tremendous progress and have now generated the necessary data and reports to address nearly all of the CRO items with work ongoing for 2 outstanding items. Specifically, we've completed the work necessary to address deficiencies pertaining to RCR or replication-competent retrovirus assay, sterile filter validation, container closure integrity testing, host cell DNA, visual control testing validation and importantly, data that support the extension of product shelf life. For the 2 outstanding items, namely our rapid sterility assay and cell-based identity assay, feasibility data that informed the design of our validation protocols have been generated and we have finalized the validation protocols and have initiated the validation runs. I'm pleased to say we successfully completed a Type A meeting with the FDA last week wherein we gained preliminary alignment on the acceptability of the data that addressed several of the CMC deficiencies noted in the CRO. In addition, we also gained the FDA input on validation protocols for the rapid sterility and cell-based identity assays, and that has been incorporated into the validation procedures that are now ongoing. Based on the FDA's written responses to our questions in premeeting materials and our minutes from this meeting, we believe we have clarity and alignment with the FDA on the content of our BLA resubmission for pz-cel. We are, therefore, on track to resubmit the BLA for pz-cel this year. If the BLA resubmission is accepted for review, we expect the FDA to set a PDUFA date 6 months from the date of resubmission. Beyond the progress on pz-cel, we announced in July a nonexclusive agreement with Beacon Therapeutics, allowing Beacon to evaluate our patented AAV204 capsid for the development and commercialization of potential gene therapies in select ophthalmology indications with an option to evaluate up to 9 targets. We look forward to collaborating with Beacon and believe this agreement underscore AAV204's potential to enable efficient targeting in the eye of novel AAV-based gene therapies for ophthalmic diseases with high unmet need. Finally, I'll mention that we completed $75 million underwritten offering with institutional investors in May, strengthening our balance sheet and extending our cash runway well beyond anticipated significant regulatory milestone and commercial launch of pz-cel. I'll now turn the call over to our Chief Commercial Officer, Dr. Madhav Vasanthavada, to provide an update on our commercialization readiness activities. Madhav?

Thanks, Vish, and good morning, everyone. We are building a solid foundation to prepare for a successful launch of pz-cel following its potential approval. And we are very excited by the feedback we've been hearing from multiple stakeholders. I'll start with our support for medical education activities at various conferences where we have had great conversations with EB physicians and patients. At the Society for Investigative Dermatology, SID, Annual Meeting in May, we presented our new long-term safety data of pz-cel in 18 RDEB patients with the longest follow-up period of 11 years. As key takeaway, in addition to the generally well-tolerated safety profile, no squamous cell carcinoma was reported in any of the 128 pz-cel-treated sites during the follow-up. Squamous cell carcinomas have been reported in nontreated sites unrelated to pz-cel. Then in July, at the Society of Pediatric Dermatology, SPD, Annual Meeting, we presented data illustrating pz-cel's ability to cover wounds of various sizes, including large areas and on different anatomical locations. Based on our interactions with health care professionals, whether they plan to treat with pz-cel themselves or refer to qualified treatment centers, they are ed enthusiastic about pz-cel's potential to make a difference in addressing the persistent unmet needs of RDEB patients. We recently attended the debra Care Patient Conference in Atlanta, where we noticed so many RDEB patients, almost all of them having significant wounds on their bodies wrapped in bandages. pz-cel has the potential to heal large body surface areas, including the toughest to treat wounds while demonstrating meaningful pain and itch reduction based on clinical data from 2 trials, a Phase I/IIa study with up to 8 years of follow-up and the intra-patient randomized Phase III VITAL study. pz-cel is the only product in the RDEB space with more than a decade of clinical experience to show not only a clean long-term safety profile, but also durable wound healing after only a single application. These aspects of pz-cel make it a highly differentiated and clinically meaningful potential treatment for RDEB patients, caregivers and physicians. At the debra Care Conference, we also shared a clinical research update and data on wound healing following the pz-cel treatment process. The interest from patients, caregivers and providers was palpable when they saw the before and after pz-cel wound healing pictures for several large and chronic wounds. We also heard from patients who have received pz-cel, including a few who had recently completed their second pz-cel treatment, they shared -- they reached out to share with us the life-changing impact that pz-cel has had on their lives and the lives of their loved ones. Such testimonials highlight the transformation potential of pz-cel therapy. Taking our efforts with the payer community, we are excited to announce that our ongoing discussions with major commercial payers are generating positive results. Payers are recognizing the clinical value of pz-cel and its potential to address significant unmet needs in the current treatment landscape, enhancing our optimism for favorable coverage and broad and timely patient access post approval. Lastly, from a site onboarding standpoint, each interaction with targeted experienced EB centers is allowing us to deepen relationships and increase our readiness towards site activation. Massive service agreement negotiations are ongoing, and we remain on track for potential launch approximately 3 months after pz-cel approval. All of these sites remain highly engaged, and we plan to accelerate our onboarding activities soon after BLA resubmission is complete. With that, I will now hand 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, 2024, and 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, short-term investments and restricted cash of $123 million as of June 30, 2024. This compares to $62.7 million as of March 31, 2024. Net cash used in operating activities was $12.7 million for the 3 months ended June 30, 2024. Based on our current operating plan and assumptions, with our existing cash resources, also including the credit facility, we estimate we have sufficient financial resources to fund our operations into 2026. Our cash runway assumptions do not account for any potential revenue from commercial sales or 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 $9.2 million for the 3 months ended June 30, 2024, compared to $8.5 million for the 3 months ended June 30, 2023. Our spend in general and administrative activities was $8.6 million for the 3 months ended June 30, 2024, compared to $5 million for the 3 months ended June 30, 2023. The increase in general and administrative expenses is primarily due to commercial and launch preparation costs. Net income was $7.4 million for the second quarter of 2024. It's important to note that the net income in the second quarter of 2024 included a $24.9 million gain resulting from the quarterly remeasurement of the fair value of warrant liability. These warrants are required to be classified as a liability and remeasured at fair market value each reporting period. Net loss in the second quarter of 2023 was $16.7 million, including an $8.6 million loss resulting from the quarterly remeasurement of the fair value of warrant liabilities. And with that, I'll hand the call back over to Vish for brief closing remarks before opening the call for Q&A.

Thanks, Joe. In closing, we have made significant progress in less than 4 months since receiving the complete response letter. We are in a much better position than we could have hoped for, and we are on track for the BLA resubmission in the second half of 2024. We remain committed to bringing pz-cel to patients with RDEB as quickly as possible. I firmly believe we will get there. Operator, please open the Q&A session.

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

This is Farzin on for Maury. For the 2 remaining outstanding items related to sterility assays and identity assays, can you say more about what the FDA feedback was? Like I mean, are they asking for you to replicate something for a new iteration? Or are they asking for a new experiment there?

Thank you for that question. So let me take the first outstanding item, which is the rapid sterility test. As a reminder, this is a method that was suggested by the FDA themselves because of prior experience with this approach. The suggestions were primarily to the statistical approach that we're using to establish the comparability between the current gold standard USP 71 method of looking at sterility and what we have developed and it is not a development of a new experimental method per se. So I just wanted to clarify what that input was to the validation procedure. We don't see this as even a major amendment to how we were validating. This was out of abundance of caution; we wanted the FDA to take a look at our validation protocol and approach and suggest if they had a preference for one statistical method versus other. So that's really what we had, and that's why we wanted to hold off in starting the validation experiment until we got that feedback. So that's regarding the sterility assay. Regarding the identity assay, we've actually started the validation work, and we have pretty good alignment from the FDA on our approach in how we look at the cell composition of our sheet. The discussion was more around what kind of characterization data to be included and how we put justifications in place that -- the way we've developed these identity assays. So I hope that addresses the 2 questions. Happy to talk further about it if you are interested.

Got it. And then did the FDA provide feedback on the retroviral replication assay? Is that one good to go? Or there is no more feedback from the FDA?

Yes, that one is good to go. Even before we had the Type A meeting, we had written back and forth with the FDA and shared the data that we've generated and wanted the confirmation that this really addresses the need for the RCR assay, and we have that behind us now.

Got it. And then one quick one is that will you need to have another formal meeting with the FDA? Or is there any more granularity on the -- when in second half can you submit?

So we do not plan to have any more formal meetings with the FDA like a Type A or Type B meeting per se, but we are not guiding exactly when the second half of this year we're planning the resubmission purely because the validation runs are ongoing as we speak, and it's just a matter of when they get completed. So it's tricky to predict when exactly these types of experiments will be completed, the reports generated, all the I's dotted and T's crossed. So we will guide as previously we had done, we remain on track for a second half of the year submission.

Your next question is coming from Dae Gon Ha of Stifel.

[Audio Gap] the second half question a little bit more. Was there any direct feedback on additional data or additional assay? I mean it seems like the last time we spoke; everything was on track to be sort of at the end of the Type A meeting. That seemed almost like the rate-limiting step before you resubmit. So I'm just wondering if there was anything additional that you need to run or anything additional that needs to be completed to kind of fulfill the dotting of the T's and the -- I guess, dotting on the I's and crossing the T's, if you will. And then one question for Madhav. In your prepared remarks, you were talking about on track for launching about 3 months after pz-cel approval. Did I hear that correct? And if so, just wondering what additional work needs to get done to get the sites on board. It seems like 6 months is quite a bit of time, but now you're estimating about 3 more months beyond that. So any update on that would be great.

Great. Thank you, Dae Gon. Let me address your first question regarding any additional data. We have generated a lot of feasibility data for those 2 outstanding topics that I spoke about. And if you really look at the laundry list of the number of things that we had to do, you're looking at the tip of the iceberg here, right? I mean these are just the 2 aspects. But they are also the more -- relatively more complex assays. And before conducting validation, we have generated the feasibility data that informed the design. And having done that, we wanted to make sure that we put the protocol in front of the FDA and make sure that they're aligned with how we've approached it, right? So it's really input on that. It is not additional work that they've suggested. It's essentially a statistical approach as to how you establish comparability. In fact, I'm only talking about what is that little piece within the complex question of sterility that we needed to tweak based on the FDA's feedback. But there are many, many different aspects of it that we've already aligned on. So we're good to go on that. So even having just that piece in the validation protocol that they advise to follow a slightly different approach is a pretty big win for us because it could have come in multiple different ways. And having known this clarity, we feel pretty confident based on all the data we've generated using the system in-house. As a reminder, both of these assays are done in-house. We're not getting this done through a vendor. So that's something that's assuring it's in our control. So it's just a matter of generating that data. And I know that previously we had not guided exactly when in the second half. And we leave it at that because it's all the pins fall in place exactly the way we wanted, maybe end of September, early October. We don't want to go into the guessing speculating game right now, is it quarter 3 or is it quarter 4, but we do feel quite confident that it will get done this year. And to your other question on what kind of site onboarding activities would be completed by the time we get approval and what has to be triggered after I'll let Madhav address that.

Thanks, Dae Gon, for the question. So we are very much engaged with the sites in training them, but there are certain aspects that can only be done after a product insert or prescribing information is given, which is beyond past approval. So training the sites on the actual product information. Once we have the price point, we have to note that as part of the chargemaster in the hospital institutions, the P&T Committee and the agenda item that is placed on there in certain institutions. So things of that nature that can only be done after we have the label very similar to autologous CAR T-cell therapies as a model. And having launched those therapies, we typically guide 2 to 3 months is usually the time frame that's needed for post-approval activations. We'll, of course, be working as soon as we can in getting the centers ready so that first patient can be treated because that's really our intent there. Hopefully, that gives some context. Yes.

Yes. No, that's very helpful. I guess on that point, on the pricing and reimbursement, you also talked about some payer discussions being fruitful. I was wondering if you could comment on sort of the poly, I guess, combo therapy type of discussions? Have you had that? What are the sort of feedback on payer side about funding both VYJUVEK as well as pz-cel?

Generally, when you look at the pz-cel's profile, it's resonating extremely well. I think payers understand VYJUVEK is on the market, Filsuvez is on the market. And the profile for pz-cel is distinct and differentiated in that for large and chronic wounds, especially where there's a very heavy burden. We haven't heard any major direct objections of blocking one versus the other because the modalities are distinct. So, so far, so good. And we are, of course, also working with payers to making sure that the access policies that we eventually come out with are favorable because these patients require multiple treatment options. And the fact that pz-cel is a one -- single application for durable years of wound coverage versus VYJUVEK where -- or Filsuvez where there is a -- you can pause continue and that kind of thing. It also works favorably from that perspective.

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

Congratulations on all the progress. I just wanted to ask one quick clarificatory point regarding the process via which the FDA will consider the resubmission. What is the statutory timing with which the FDA would need to respond to the BLA resubmission once it is filed and to sign a PDUFA date? Can you just remind us what that time frame is, please?

Yes. It is understanding -- Ram, great to hear from you. Thank you for the question. Our understanding is that upon resubmission, in a 2-week time frame, the FDA indicates their acceptance of the resubmission and determines also at that point in time, whether it's a Type 1 or a Type 2 variation of the resubmission. We anticipate this may be Type 2 kind of variation, but that's to be determined. In terms of timing, if it is a Type 2, then it is 6 months from the time of resubmission that the FDA would likely set a PDUFA date. I hope that answers the question.

Yes, very much so. And just a quick other follow-up is if we just, for a moment, think about the hypothetical scenario in which you receive a PRV and elect to monetize it. In such a context, can you give us a sense of whether strategically you would look to broaden your product offering, specifically in the dermatology space or if you would think strategically about potentially broadening your reach into other rare diseases as you think about the optimal commercial strategy for the company.

Great question, Ram. So you're talking about pipeline and other assets here, not just the pz-cel life cycle management. So pz-cel's life cycle management itself is one avenue we haven't really discussed very much whether it's ex-U.S. expansion or whether we're talking about other types of applications because we're hearing from a lot of patients that they want pz-cel to be applied for hand surgeries and things like that, which we haven't evaluated clinically, right? So that's one aspect of it. The other aspect of it is we have core competencies in engineered cell therapy with the pz-cel experience. So that is very applicable, as you can see in multiple engineered cell therapy avenues in a disease-agnostic way. And when I say disease-agnostic way, the entire commercial infrastructure that we set up for autologous cell therapy itself is -- can have a translational effect in multiple other therapeutic areas just by the nature of how -- whether it's a skin-to-skin or a vein-to-vein process and the patient experience that is involved here, right? So -- and do not forget, we also have our ophthalmology platform where we have AAV -- novel AAV capsids with tropism and transaction efficiencies in select eye compartments. And we haven't forgotten those. In the background, there's work that is going on with especially our retinitis program. And so in what all different directions, I think it's going to be sowing the seeds in a few different multiple avenues and then letting those saplings grow and see where we can actually best marry both the R&D and commercial infrastructure we're building with a pz-cel launch and which -- where the areas of promise are showing up. So I think it's really going to be a discovery process. We'll talk more and more about it as we get closer to pz-cel launch. But just to avoid being schizophrenic right now, we're so focused on the pz-cel launch itself because that is really the most critical deliverable for the company.

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

This is Rick Miller on for Kristen. On the fast approach that the FDA suggested, are you able to characterize whether this is a more stringent approach? Or what was the motivation do you think for suggesting this specific approach?

Yes. Thank you, Rick. Can you repeat that question? I just want to make sure I understand it correctly before I respond.

Yes. So I believe you mentioned a statistics -- a statistical approach that the FDA suggested related to 1 of the 2 remaining outstanding items. So just kind of if you're able to characterize whether this approach is a more stringent approach? Or what do you think the motivation there was for suggesting this specific approach?

Yes. The motivation is purely precedented, right? The FDA has a preference for a certain type of approach. Guidances do not always exactly specify how to interpret when it comes to actual experimentation. For the given context of how we conduct the experiment, we have a very sensitive rapid detection assay that we've developed for sterility, which is actually not the first time. I think this bioluminescence methods exist for other companies and therapeutic products. And historically, we've used USP 71 approaches to how we look at sterility. And I think when we show that method A and method B are equivalent, there are multiple different approaches of showing that. And here what the FDA has given clear instructions to us is that when you're looking at either a noninferiority or a comparability in terms of how you quantitate any microorganisms you spike in our matrix and show that you're able to detect with equal level of sensitivity that requires a certain way of statistical handling. So that's really what the feedback was about. So I hope that gives a little bit more color.

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

I had a quick question on -- in the PRV market, I know that Biogen recently reported they sold their last 1 for $89 million, down a little from $100 million to sort of have been going. Have you guys seen any softening in the PRV market or anything further -- anything going on there that you guys are noting assuming again, you get the approval and get a PRV and look to monetize it?

Thank you for that question, Jim. I'll let Joe address the question here.

Yes. Thanks for that, Jim. Yes, other than that example that you mentioned, I have not seen any softening. I'm still seeing deals north of $100 million, $103 million or so. I think the going rate is normally about $100 million still.

Yes. And Jim, it's -- usually it's an optimization between speed and pricing, right? And in our case, the advantage of being funded so well beyond the approval time frame allows us to optimize our pricing rather than for speed. I think that's what is important. But overall, if you look at the last several months or years even, the price of the PRV has been rather steady at around that $100 million mark. So I will leave it at that, but we're confident that we're not doing a fire sale here.

Excellent. Absolutely not. No. And then maybe given the competitive -- VYJUVEK selling pretty well, getting off to a nice jump. Has that impacted -- or has there any change to a potential -- looking at a potential partnership rather than a self-launch or some sort of combination thereof on your end, should -- again, should you get approval?

Jim, we are very much committed for self-launch, actually, even more so now that VYJUVEK's performance. I mean I think VYJUVEK's performance, the first gene therapy, what it clearly shows is the willingness for patients and the community to try gene therapies for a genetic disorder like this, right? So that I think is a class. This is a good sign. And the fact that pz-cel, all things that you are aware of in terms of clinical differentiation and everything what we communicated, is a very strong value proposition. These patients for their large surface areas require a solution, which pz-cel can offer and the willingness to pay from payer communities is so high for an ultra-rare disease. So it's a profitable business model from that perspective. And so I think this is the right step for Abeona at this time, launching it ourselves and with a finite centers of excellence model, and we have a great team in place. All the people here from -- on commercial team with prior cell therapy and launches and experience and even from market access, having launched Zolgensma and gene therapy experience. So I think we have put together a really good team focused on the launch. And then, of course, we can scale it to other opportunities, as Ram was asking earlier.

Okay. Then maybe last question here, any updates on sort of the earlier state -- early state pipeline? Obviously, you guys have your hands full getting this through. But any thoughts on your earlier stage and sort of the next key catalysts we should keep an eye on for?

Yes. Thanks, Jim. Earlier-stage assets, the AAV-based ophthalmology assets that we have. We've continued to generate further numbers in our preclinical data, which are encouraging, especially with our RS1 program and hopefully, in a future scientific conference, we will be able to provide an R&D update with more data there. But in terms of any committed development into clinical trials, it's something that's TBD. We'll communicate more about these programs as we get closer to the pz-cel launch, and as I mentioned, just so our organization, which is thin and lean is very focused on a successful pz-cel launch. That's really the reason why we haven't spoken so much about our ophthalmology program.

Well, that appears to be the end of our question-and-answer session. I will now turn the call back over to Vish for closing remarks.

Thank you, Jenny. Thank you, everyone, for joining us for today's business update. With that, we'll talk to you again soon.

Thank you very much. This does conclude today's conference call. You may now disconnect your phone lines and have a wonderful day. Thank you for your participation.