Abeona Therapeutics Inc (ABEO) 2018 Q2 法說會逐字稿

Good morning, and welcome to the Abeona Therapeutics Inc. Second Quarter 2018 Earnings and Business Update Conference Call. Today's call is being recorded. (Operator Instructions)

For opening remarks and introductions, I would like to now turn the call over to Christine Silverstein, Senior Vice President, Finance and Investor Relations.

Thank you, and good morning, everyone. Today's call will be led by Carsten Thiel, our CEO. Following Carsten, Tim Miller, our President and CSO, will provide preclinical updates. After the updates, Juan Ruiz, our CMO, will join the question-and-answer portion.

Before I turn the call over to them, I need to remind our listeners that comments made during this call may contain forward-looking statements that involve risks and uncertainties. Forward-looking statements on this call are made pursuant to the safe harbor provisions of the federal securities laws. Information contained in the statements is based on current expectations and is subject to change, and actual results may differ materially from forward-looking statements. Some of the factors that could cause actual results to differ are discussed in the reports filed with the SEC. These documents are available on our website at www.abeonatherapeutics.com.

With that said, it is now my pleasure to introduce Dr. Carsten Thiel. Carsten, you have the floor.

Thank you, Christine, and good morning, everyone. The second quarter was marked with continued progress in our clinical, preclinical and corporate initiatives, which are critical to our continued success and mission to serve patients. And they align well with our strategic intent to deliver long-term growth and increased value for our shareholders.

The strength of our lead programs, which continue to demonstrate robust and durable clinical effects, is underscored by the achievement of additional regulatory designations and the recent appointment of key executives. Notably, the opening of our in-house GMP manufacturing facility in Cleveland reinforces Abeona's ongoing commitment to transforming patients' lives and bolsters our position for commercial readiness.

In a moment, I will provide more details on the quarter's events before turning the call over to my colleagues for additional updates on our programs, quarter financials and investor-related events. We will then open the floor for questions.

But first, I'd like to take a moment to acknowledge the recent important leadership changes taking place at our company. In laying the groundwork for the next stage of Abeona's growth, it is paramount to our future that we continue to establish strong, world-class expertise and leadership in all functions of our company. The following changes are part of our transformation.

I'm very pleased that earlier this month, Max Colao joined the company as our new Chief Commercial Officer. Max has more than 20 years of global pharmaceutical and biotechnology experience, having most recently served as the Senior Vice President of U.S. Commercial Operations at Alexion Pharmaceuticals. Over the past years, Max has led some of the most successful product launches of rare disease therapies in U.S. history. I'm excited to welcome Max to the Abeona team, as we look forward to key milestones in our rare genetic disease programs this year and continue building our team for commercial success.

Recently, we also welcomed Kristina Maximenko to the Abeona team as our Global Head of Human Resources. Kristina's knowledge and experience in HR and employment law will be of tremendous value, as we continue developing a vertically integrated professional organization with a vibrant culture and engaged workforce.

Finally, we announced that at the end of the third quarter, Jeff Davis is stepping down from his position as Abeona's Chief Operating Officer. I want to take a moment to recognize Jeff's contribution to our legacy. Jeff was amongst the first employees of our company and supported the evolution of our company from day 1, and under his guidance, Abeona has grown with discipline. On behalf of the Board of Directors and the leadership team, I'd like to collectively extend our gratitude to Jeff for his many contributions to Abeona over the past several years.

Let us now discuss the work completed in the second quarter and in recent weeks. There were 2 important regulatory designations that were received in the quarter.

Our lead clinical program, ABO-102 and MPS IIIa received regenerative medicine advanced therapy designation or RMAT. This underscores that the FDA views the evidence to be promising and with the potential to address the urgent and high unmet medical need for the MPS IIIA patient population. With this designation, we have the opportunity for more frequent interactions with the FDA as well as becoming eligible for priority review and accelerated approval timelines.

These additional benefits will ensure that our dialogue with the FDA will remain focused and on track to support our overall efforts on our path to regulatory review. We look forward to updating on clinical and CMC paths, as the new draft guidance released from the FDA is quite informative. We will be able to update on the outcome of this meeting in the second half of the year.

In parallel to the discussions with the FDA, we have initiated EMA's scientific advice process, and we are working with them on the regulatory review pathway in Europe for the MPS IIIA program. We will also be in a position to update on the outcome of this process in the second half of this year.

In addition to RMAT, we received one other regulatory designation in the quarter, which was granted to us by the EMA. The orphan drug designation received for ABO-202 for the treatment of patients with CLN1 disease or infantile Batten disease, which is a novel gene therapy approach using AAV through combination routes of delivery. In May, we announced clinical updates for our lead programs at the ASGCT Annual Meeting in Chicago.

Let me first start with EB-101, our autologous gene corrected skin graft cell therapy for patients suffering from recessive dystrophic epidermolysis bullosa or RDEB. This is the most severe form of epidermolysis bullosa or EB. It is a life-threatening genetic skin disorder characterized by devastating and painful consequences, including chronic skin blistering, open and painful wounds, esophageal strictures, corneal operations and a shorter life expectancy.

Due to gene mutations, patients with RDEB lack the Collagen VII protein, which is the main component of the anchoring fibrils that attach the dermis to the epidermis. Patients with RDEB suffer from intense pain throughout their lives and life-threatening complications with no effective treatments available to reduce the severity of their symptoms.

Data updated in May confirm that EB-101 is safe and well tolerated with durable efficacy throughout various time points up to 3 years post-administration. Collagen VII expression and reconstitution of anchoring fibrils were observed as early as 1 month post-engraftment on EB-101 treated wounds and remain functional after the full observation period of 3 years thus far. The advancements made through this trial, which is conducted at Stanford University, are significant because they demonstrate clinically meaningful improvements, durability and improved quality of life for these patients.

Also at ASGCT, we provided an update from our ABO-102 single-arm gene therapy trial for patients suffering from MPS IIIA. This is a rare, inherited, progressive and life-threatening metabolic disorder that affects children from a very young age. There are currently no approved treatment options available. MPS IIIA is caused by gene defect that leads to enzyme deficiency and the inability to metabolize toxic sugars. ABO-102 is an AAV gene therapy administered through a single intravenous infusion to treat the disease.

The results reported earlier in the quarter highlighted the 18 months efficacy and safety data, which continue to demonstrate time and dose-dependent improvement in underlying disease pathology, including decreased GAGs and CSF in urine, improved liver volumes and stabilized neurocognitive scores compared to natural history. In addition, Dr. Kevin Flanigan, the principal investigator, shared observations of behavioral progress posttreatment, such as improved muscle function, attention, social interaction, speech and sleep.

As you may remember, we had announced 11 patients treated in the trial. These patients have been enrolled in 3 dose escalating separate cohorts. Since that announcement, I'm pleased to report that 2 additional patients have been treated, both in Cohort 3, bringing the total number of treated patients in the trial to 13 for a greater than 5,200 days cumulative follow up.

Our Phase I/II trial is being conducted at 3 sites: Nationwide Children's Hospital in the U.S., Clinico de Santiago in Spain and Adelaide Women's and Children's Hospital in Australia. The sites continue to screen patients for Cohort 3, which we believe will be the therapeutic dose at 1 each of the 13, and we plan to complete the enrollment of this trial during the second half of this year.

Importantly, earlier this year, the FDA allowed us to lower the minimum enrollment age down to 6 months from the initial 2-year cut off, a meaningful amendment to investigate safety and efficacy across a broad range of patients and, in particular, at the onset of disease. Our safety profile remains consistent and promising with no serious drug-related adverse events. We look forward to reporting additional updates from cohorts of this trial as data are collected.

Our third clinical program is the ABO-101 gene therapy trial for patients with MPS IIIB. Like MPS IIIA, this is an autosomal recessive lysosomal storage disease with similar devastating effects, such as neurocognitive decline, speech and mobility loss and premature death. MPS IIIB is caused by a defect that leads to the deficiency of the NAGLU enzyme needed to break down complex sugar molecules called mucopolysaccharides or heparan sulfate.

The ABO-101 AAV gene therapy delivers a potentially transformative effect throughout the body with a single intravenous infusion. The results from the first patient enrolled continue to be very encouraging in demonstrating that ABO-101 is well tolerated. Consistent with our ABO-102 data, demonstrated in our MPS IIIA program, ABO-101 shows significant heparan sulfate reductions in cerebrospinal fluid, plasma and urine.

The first subject experienced a large increase in NAGLU enzyme activity observed at 30 days postinjection. The ongoing Phase I/II trial is enrolling patients at Nationwide Children's Hospital in Columbus, Ohio. We expect to open the first European site in Spain by the end of this year and also considering additional European sites that we will work with in France, the U.K. and in Germany.

Lastly, we hit one more corporate milestone during the quarter. On May 31, I had the privilege of dedicating the ribbon-cutting ceremony for our internal GMP manufacturing facility in Cleveland, the Elisa Linton Center for Rare Disease Therapies. Elisa Linton was a young girl born with MPS IIIB or Sanfilippo syndrome, as it's commonly named.

Despite her physical and cognitive challenges, Elisa became a symbol of hope and inspiration to everyone, especially families afflicted with Sanfilippo through the Sanfilippo Children's Research Foundation, a charity started by her parents. The 18 years of advocating for Sanfilippo community, fundraising and advancing research contributed to the initiation of clinical trials, which started in May 2016. Elisa, who was not an Abeona patient, passed away in October 2016.

The collective 25,000 square-foot facility will have the capability to manufacture clinical- and commercial-grade products over Abeona's multiple programs in addition to our proprietary vector lab. After decades of research and development, gene therapy is rapidly emerging as one of the most exciting areas in medicine and generating new hope for patients with rare and devastating inherited diseases.

The launch of this center is one more step on the way to delivering on our mission, to give hope, relief and extended life and better quality of life to patients, many of whom are children, suffering from diseases for which there are currently no treatment options. Working together to find a cure, this is our mission.

With that, I'll turn the call over to Dr. Tim Miller who will update you on our preclinical programs. Tim?

Thank you, Carsten. It's been an exciting quarter for our preclinical programs.

In the second quarter, we achieved an additional regulatory designation from the EMA for our ABO-202 program in CLN1 disease also known as infantile Batten disease, an inherited genetic disease in newborns that progresses very rapidly. Infantile Batten disease is our fourth lysosomal storage disease to receive multiple orphan product designations and has advanced to an IND-enabling study. So far, there have been no safety signals, and we anticipate that the study will be completed by year-end.

The orphan drug disease designation given to the program by the EMA is the program's third regulatory designation. In the preclinical studies, ABO-202 has demonstrated improved survival, cognition and muscle function in CLN mice with the disease that have been treated with the combination of intrathecal or intravenous delivery compared to mice administered with an either in intrathecal or intravenous delivery alone.

Our IND-enabling studies also continue for our CLN3 program, which has also received the orphan drug disease designation by the FDA and EMA. As we near the clinical stage, we are enthusiastic to work with the leading medical centers in the world of University of Rochester and University of Hamburg. These clinical sites have devoted years of work in evaluating the Natural History Study of patients with CLN3 and CLN1, and this Natural History Study data will be critical to evaluating efficacy in the upcoming clinical trials.

We continue to expand and advance our AIM vector platform, with close to over 100 AAV capsids that have demonstrated enhanced selectivity for specific tissues compared to naturally occurring AAV capsids viable to multiple routes of administration. This has enabled our in-house pipeline development to expand, and we look forward to continue to discuss this program in more detail in the future.

Large animal studies utilizing these vectors are ongoing, where we are assessing different capsids for their potential to also provide second- to third-generation treatment approaches in patients that may have neutralizing antibodies for natural AAV serotypes. The AIM toolbox will enable next-generation, potentially clinically superior gene therapy approaches to gene editing and replacement strategies for rare diseases.

Now that we have internal AAV vector core capabilities, with concepts to commercial GMP manufacturing in-house to provide timely discount for preclinical to late-stage clinical products, we look forward to being able to continue our product development in-house at our facility in Cleveland. It will be an exciting second half of the year.

I'll now turn the call back over to Christine, who will review our second quarter financials. Christine?

Thanks, Tim. I remind the listeners that we have recently filed the Form 10-Q, where you can get all the specific details on our financial results.

But in summary, our cash, cash equivalents and marketable securities as of June 30, 2018, were $120 million compared to $132 million as of the end of the first quarter March 31, 2018. Net cash used in operations for the capital expenditures for the 3 months ending June 30, 2018, was $9 million compared to $5 million in the same period of 2017, an increase of $4 million. Cash outflows were offset by inflows of approximately $600,000 from proceeds of the exercise of outstanding options from warrants. The total net cash outflow for the quarter was $8.4 million.

From a revenue perspective, our revenues were $819,000 for the second quarter of 2018 compared to $217,000 for the similar quarter the year prior. A portion of the increased quarterly revenues consisted of a recognition of foundation grants that were announced in the fourth quarter of 2017. A portion of these grants were received in the second quarter of 2018 and the amount recognized is matched against corresponding expenditures. Additional revenues consisted of royalties from marketed products, primarily MuGard.

Loss per share was $0.25 per share for the second quarter of 2018 compared to $0.21 per share in the comparable period in 2017. Total number of common shares outstanding as of the day we filed the 10-Q on August 9 was about 47.9 million shares.

That's the summary of financials. We will also be participating in several health care conferences throughout the remainder of this year. Particularly coming up, the Citi Biotech Conference in Boston, September 5 through 6, and then Jefferies Gene Therapy Summit on September 27.

And with that, I will turn it back over to Carsten.

Thank you, Christine. In summary, I'm excited about the progress we have made across our pipeline over the recent quarter and even more excited about the upcoming work ahead of us that includes important milestones for our company. I want to thank our hard-working staff, our investors, our clinical investigators and most of all, our patients for working with us to develop potentially curative therapies for their devastating diseases.

I will now turn over to the operator to open up for questions. Thank you.

(Operator Instructions) Our first question comes from the line of Liav Abraham with Citi.

Carsten or Tim, can you provide a little bit more granularity on -- maybe an update on your EB-101 trial? My understanding was that you're meant to start the pivotal trial around midyear. Where are you in this process? Maybe you can comment a little bit on your discussions with the FDA and any gating factors that have prevented you starting the trial thus far and when you anticipate starting this trial.

Thanks for the question on EB. Yes, I want to emphasize how important the EB program is for us. We're very pleased with the results of the Phase I study. We have communicated the impressive wound-healing effects and look forward to making progress with this program. With respect to the Phase III trial, we had previously disclosed the second half, and we are working diligently with our team in Cleveland, with the team in Stanford around our principal investigator, also with LCGM, the -- who provides the material for the Phase III trial, and together with the FDA in finalizing the product and getting ready for this trial. So far, I can say we're very pleased with the progress. The conversations and the dialogue with the FDA are very constructive. And I personally was delighted to see that the guidance or the draft guidance from FDA on clinical trials in EB patients has been consistent with our protocol development, specifically with the endpoints with patient-reported outcomes in how the trial should look like. The second piece of confidence for us is that patients have gone through screening for the trial already. So we're on a good way for the initiation of the trial. The third piece is really getting ready from a manufacturing point of view. There is an enormous set of complex activities going on from assay development, from training, hiring staff, training staff and test runs to get the site in Stanford ready for this trial. And as we progress to further milestones, we will disclose.

And then one additional question on your MPS IIIA program. I think you mentioned 2 additional patients enrolled. This is your previous disclosed number. Can you provide the ages of those patients?

Yes. So the MPS III program -- or IIIA program is really our second lead program. It is very encouraging, the progress that we have made. And I must say, our investigators in the U.S., in Spain and in Australia, the collaboration with patients and parents has been just amazing. And the results, so far, that we had disclosed are very, very encouraging. I'll let Juan speak in a moment and give more color on patient identification and screening, but I want to highlight how important the changes that we agreed with the FDA on the protocol to lower the age from 2 years down to 6 months. And for 2 reasons. One, it allows us to investigate this unique treatment in a broader age range. Secondly, it allows us to, in the third cohort, which is most likely the dose that we are looking at for commercialization, in that dose that we can include patients at a younger age. And remember, in the Natural History Study, those patients at the younger age are the ones who are not yet progressed on the pathological decline in neurocognitive function. So we haven't disclosed the individual ages of patients, but I'll let Juan provide a bit more context around the recent progress we have made.

Thank you so much, Carsten, and thank you, Liav, for this relevant question. As Carsten mentioned, we have not disclosed the age of the 2 additional patients that we have enrolled recently. But I can advise that they are on the younger side. As you know, based on the excellent safety record of the trial and the encouraging data, the efficacy data, with the agreement of our PIs and the DSMB, we proposed and the FDA approved an amendment to enroll children down to 6 months of age. And there is a wide consensus in the medical and scientific community that younger children will have better chances of getting benefits from the treatment. And so we are very, very pleased to be able to enroll the best potential candidate in our trial.

Our next question comes from the line of Justin Kim with Cantor Fitzgerald.

Since enrollment of the first Sanfilippo B patient at the end of last year, could you share any feedback or progress that's been made since?

Yes, absolutely. Thank you, Justin. So the phase -- the MPS IIIB trial is our third clinical trial. Very important for us because it's the second one in lysosomal storage disease. And important for us also from a perspective of synergy with the IIIA program because we are looking at similar diseases, similar investigators and also, fairly similar endpoints. The -- I'll let Juan speak a bit about the progress we are looking at over the next couple of months. But for me, I think that one of the most encouraging observations we have made even in the first patient is that we have seen no safety signals that would be of concern. We have seen preliminary efficacy results so far that are consistent with what we have seen in the IIIA program. And we have seen both on the side of substrate reduction and enzyme activity, remarkable effects, even shortly after the treatment with a 300-fold increase in enzyme activity. So Juan, why don't you give a bit more color what our next steps in that trial?

Yes. Thank you, Carsten and Justin. Our efforts are focused, actually, in screening candidates in the current clinical side at Nationwide Children's Hospital in Columbus, Ohio. But at the same time, we are working significantly in opening additional new sites in Europe, which we are confident that, as a result, will increase our ability to reach and treat more patients on this particular condition. But as you know, probably, it's less prevalent than Sanfilippo A or MPS IIIA. And this provides additional hurdle. But as I said, opening a new site in Europe over -- during the second half of the year will help us to increase our ability to enroll and address these patients.

Okay, great. And then maybe just to touch on that, has there been any preliminary observations with respect to screen failure rates? And how they may differ from the IIIA program?

Yes, I think I'll push it onto you, Juan.

Yes. Thank you. Well, we have seen a similar rate of screen failures, mainly associated with the prevalence of antibodies for AAV9 as we have seen in the IIIA program. No differences on this regard, except the prevalence is lower. And this delays, obviously, the identification of potential candidates.

Our next question comes from the line of Maury Raycroft with Jefferies.

Congrats on the progress. First, I wonder if you can discuss recent FDA-issued guidance for EB therapy development, including use of PROs, and maybe talk about recommendations from Scott Gottlieb related to gene therapy manufacturing endpoints. How should we be thinking about some of these recent updates?

Yes. Thank you for the question. So the guidance from FDA on EB trials is fairly high level. And as I mentioned before, the key components of the guidance in the endpoints and, in particular, in patient-reported outcomes is very consistent with the conversations we had with the FDA on our protocol for the Phase III study. I think you can recognize an emphasis on the patient experience, in particular, pain and itch. Remember, the patients suffer for many years from excruciating pain, cannot sleep and so these outcomes that we are building in our protocol are incredibly important. We have also seen that FDA representatives were very eager to understand the patient experience and feedback better in recent meetings earlier in the year. So for us, this is very encouraging. I think -- I don't mean to speak for the regulator, but our understanding of the statements on gene therapy and EB is an enormous support, a detailed understanding of the disease. But on the other hand, clearly, consistent expectations on CMC and the entire GMP manufacturing process.

Great. That's very helpful. And next, apologies if you've mentioned this earlier in the call, but I'm wondering if you're planning on a meeting with the FDA this half, maybe if you can provide any granularity as to when this half that can happen. And then what are the goals of the meeting? And how do you plan on disclosing the outcomes of that meeting? That's related to MPS IIIA.

Okay, IIIA. So for the IIIA program, the regulatory interactions are happening both on the FDA side as well as on the EMA side, with EMA being the scientific advice approach. The interactions on the U.S. side will include an FDA meeting focused on a number of questions. We have not and won't disclose those questions. But I think it's -- the unmet designation gives us a unique opportunity to engage with FDA on critical questions for the regulatory path going forward. So in the second half of this year, we expect progress, and we'll share that after it has happened.

Okay. All right. Then the last question is just on the Natural History Data. I was wondering if it's possible to go through an MPS IIIA patient's medical history, who wasn't included in a formal Natural History study and wasn't treated with the therapy, and potentially include some of those data on an ad hoc basis to build out your Natural History database. Any thoughts around that?

Are you speaking specifically about the Natural History Study in MPS or in EB?

Yes, for MPS. MPS.

Yes. So the Natural History Study that we have completed with 25 patients for both IIIA and IIIB included 15 patients for IIIA. That Natural History Study provided a good age spread from younger patients all the way to patients at the age of 8. And the benefit of that Natural History Study is that we are able to create a matching control at the same age range as we have in our Cohort 1 and 2 and to a large extent, for Cohort 3. Obviously, when you come to very young patients that -- potentially prior to the development of symptoms, that's a different story and the limitation of Natural History Studies. But what has been published is a very robust dataset so far. We will learn through the interactions with regulators whether that is sufficient or requires more. So far, we haven't heard that there's a need for additional data on the Natural History Study.

Our next question comes from the line of Ram Selvaraju with H.C. Wainwright.

Just a couple of quick ones from me. Firstly, can you provide an update on the current status of the Batten disease program? And also, could you comment on some recent findings in the CRISPR/Cas9 space? And whether or not that is, at this juncture, leading you to evaluate other gene-editing paradigms that could potentially be more precise and therefore at least theoretically safer?

Yes. Thanks, Ram. So let me address both questions. The 2 Batten's disease program, CLN1 and CLN3, as Tim highlighted, are making good progress. We're encouraged by what we have seen so far. And we're looking at both the opportunity of our AIM vector platform, obviously, as well as the comparison within the AAV9 capsids. So we're also looking at different modes of administration to identify the best way to treat these patients who have really no existing approved or effective therapies. So these are devastating diseases, and I think we are extremely motivated to progress both programs forward to help those patients. With respect to CRISPR/Cas9, I have the feeling, every 2 weeks, there's an up and then there's a down movement with the off-target discussions. And it is kind of difficult for everyone to come to a conclusive sense where this is heading. I continue to be motivated by the progress in the field. And we are definitely seeing this technology, CRISPR/Cas9 as -- and gene editing, as a promising future way to address diseases that cannot be addressed through gene therapy approaches. So there's probably other experts in the field and other companies who do only CRISPR/Cas9 and are more experienced in addressing your question, but I think so many people are working on this field now and finding solutions that I see it as one of the major opportunities for the future.

Our next question comes from the line of Kennen MacKay with RBC Capital Markets.

This is Justin on for Kennen. Congratulations on the quarter and recent expansion of the senior leadership team. Given the recent leadership changes, I was hoping you could help us understand sort of the vision at the senior leadership level and whether there are any other additional senior level roles that you're looking at expanding in the near term?

Yes. Thank you, Justin, for the question. So our ambition is clearly to build Abeona to a leading fully integrated gene and cell therapy company. The company has made amazing progress so far, but it is very clear to me that going forward, we need to add functional expertise at various levels. The company had not any commercial leadership in the past, so the addition of Max Colao is important, timely and will make a big difference on the way forward. I do see additional areas of expertise that we want to add to our team, and we will disclose those as we progress one step at a time. But it is clearly our ambition to be that company that has functional expertise in all aspects of what we do. And it's critical for us because we have a strong portfolio in the clinic, in the preclinic, our own vector platform and our own manufacturing facility.

That is all the time we have for questions. This does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

Thank you.