Abeona (ABEO): Pivotal Data Readout Could Boost Shareholder Value

Abeona Therapeutics (NASDAQ:ABEO) is a great speculative biotech play to look into. That’s because it is gearing up to report results from its phase 3 pivotal study known as VITAL. This late-stage study is using its cell therapy known as EB-101 for the treatment of patients with recessive dystrophic epidermolysis bullosa (RDEB). Results from this trial are expected any day now before the end of 2022, therefore, this provides traders/investors with a huge catalyst to look forward to. Abeona wants to focus on this program for its pipeline, therefore, it chose to offload ABO-102 (now UX111) for Sanfilippo syndrome type A ((MPS IIIA)) to Ultragenyx Pharmaceutical (RARE). That is, Ultragenyx will be responsible for taking over this program and moving it forward in the clinic. In return, Abeona will be receiving tiered royalties and commercial milestone payments should this drug ultimately be approved by regulators. With proof of concept established with EB-101 in a prior study, plus year-end 2022 data readout of EB-101 for RDEB, these are the reasons why I believe it is a great speculative biotech play to look into.

EB-101 Could Possibly Provide A Great Long-Term Durable Treatment Option For RDEB Patients

The main program in the pipeline is EB-101, which is being developed for the treatment of patients with recessive dystrophic epidermolysis bullosa (RDEB). RDEB is a terrible skin condition by which there is lack of collagen protein in the skin. It is a condition by which wounds are large and blisters tend to form. Patients with RDEB suffer greatly because of pain and complications which occur because of it. That’s not the only problem to consider though for this patient population. The average life expectancy of someone who has it is 50 years of age. There are not currently any cures available for these patients, but there are treatments that attempt to control symptoms and pain. The main problem is that a mutation in the COL7A1 gene doesn’t allow the formation of Type VII collagen, which is necessary for the skin to be healthy. EB-101 is a cell therapy which is being developed to provide functional collagen VII to the patient’s own cells. The therapy is autologous, that is, cells are extracted from the patient and then transduced with the correct collagen gene necessary for proper formation. The final outcome is a fully formed sheet which is 5 to 7 cell layers thick. EB-101 is eventually applied to the wound in surgery which helps the patient to restore their functionality of COL7A1 gene encoding provided by the cells. In turn, EB-101 holds the potential to heal and provide pain relief for the patient. Even better, it provides a “one and done” scenario whereby it may be possible to avoid daily wound care. Abeona expects that EB-101 could produce estimated cumulative revenues of $1.5 billion over the products life cycle.

As I highlighted in the beginning Abeona Therapeutics is currently running its phase 3 VITAL study, which is using EB-101 for the treatment of patients with RDEB. It has been reported that the final patient completed their 6-month follow-up visit for this late-stage trial on October 4, 2022. This means within the next 3 to 4 weeks, investors should get an idea on whether or not this cell therapy succeeds in meeting the co-primary endpoints for this study. This means before the end of 2022, there will be a data readout from this VITAL study which could possibly boost shareholder value. Of course, both co-primary endpoints must be met for this to happen. Developing a treatment for large chronic wounds is not easy, as such, Abeona and the FDA came to an agreement on what the co-primary endpoints need to be in order for EB-101 to be approved for RDEB. The two co-primary endpoints necessary for regulatory approval are:

• Proportion of chronic wounds with ≥50% healing from baseline at week 24 (Those treated with EB-101 versus those not treated at all with EB-101)
• Pain reduction at dressing changes assesses by a mean difference in scores using the Wong-Baker FACES scale at week 24 (Treated EB-101 versus untreated EB-101)

The Wong-Baker Faces scale was developed by Donna Wong and Connie Baker. The scale shows a series of faces where a happy face is marked at “0” and then a crying face is marked as a “10” (worst pain possible). The patient chooses their level of pain on this scale. If both co-primary endpoints are met, then that would allow Abeona Therapeutics to seek for FDA approval of EB-101 for RDEB in the United States. Another added bonus to note would be that this cell therapy has been given Rare Pediatric Designation, as such, FDA approval of it would trigger its receival of a Priority Review Voucher (PRV). Why is such a Priority Review Voucher so important? Well, the company could sell it to another pharmaceutical company for around $100 million or more. This value isn’t coming out of thin air either; back on February 9, 2022 BioMarin (BMRN) sold its PRV to an undisclosed purchaser for $110 million. The biotech would forego its use of a the PRV if it chooses to sell it, but I think it is better this way because there is no near-term program in the pipeline where it could use it. Being able to obtain that much cash would help it launch the drug commercially as well.

Financials

According to the 10-Q SEC Filing, Abeona Therapeutics had cash, cash equivalents, restricted cash and short-term investments of $26 million as of June 30, 2022. A good thing to note is that by offloading ABO-102 to Ultragenyx, it has been able to reduce its cash burn. Net cash used in the most recently reported quarter to fund itself was $9 million. In the prior quarter, it used $13.7 million in net cash for operating activities. It believes it has enough cash to fund its operations at least until Q2 of 2023. The bad news is that this is not a lot of time, but on the flip side the data readout is expected soon before the end of 2022. If the data ends up being positive, that is both co-primary endpoints being met in the ongoing pivotal study, then it has two possible options. Abeona could sell shares of its common stock immediately to raise cash or it could find a suitable partner to provide upfront cash and funding to commercialize EB-101. Another possibility is that it could choose to raise cash before the release of results just in case the study is not successful.

Risks To Business

There are several risks that investors should be aware of before deciding to invest in this speculative biotech. The biggest risk to consider would be the final data readout from the phase 3 VITAL study, which is using EB-101 for the treatment of patients with RDEB. Final results from this late-stage study are expected to be released within a month before the end of 2022. This is a huge risk, because it is the first of its kind study for RDEB which is assessing pain as a co-primary endpoint. If the biotech can achieve statistical significance with respect to both co-primary endpoints noted above, then it will be able to file an application to the FDA for marketing approval of EB-101 for the treatment of patients with RDEB. The second risk to consider would be with respect to the financials, as I have highlighted above. It only expects its cash to fund its operations until Q2 of 2023. That means whether or not the results to be released soon are positive or not, it will likely have to find a way to raise cash in the coming months. With positive data from the VITAL study, it gains the ability to sell shares of its common stock at a higher price or find a partner willing to help commercialize EB-101. Otherwise, with negative results for EB-101, it will likely have to raise cash at a much lower stock price. In addition, as noted above it may not risk it by waiting to raise cash and raise before data is released from the VITAL study. The stock has traded lower by more than 80% over the past year. However, there were a few events that caused this. The first event being that the company raised cash back in December of 2021, causing the stock to trade lower by 18%. Another event that caused the stock to trade lower would have been the announcement of the reverse stock split, which caused the stock to trade lower by 25%. Since then, I think that investors may not have been looking at this name, causing the stock to trade lower. I believe this is due to the lack of any near-term catalysts. I believe my view now holds an advantage over bearish investors in that there is a huge catalyst rapidly approaching. That is, results from the phase 3 VITAL study using EB-101 for RDEB are expected before the end of 2022. Should the results turn out to be positive, with both endpoints being met, then I believe the stock could reverse and trade higher.

Conclusion

My overall view is that Abeona Therapeutics is a great speculative biotech play to look into. Its future, at the moment, is heavily reliant on the release of results from the phase 3 VITAL study, which is using EB-101 for the treatment of patients with RDEB. Results from this trial are expected before the end of 2022 and if the co-primary endpoints are met, then that would allow the company to file a Biologics Licensing Application (BLA) to the FDA in 2023. That would put possible BLA approval of EB-101 for this indication around Q1 of 2024. I already talked about the potential it has by offloading AB-102 to Ultragenyx for the treatment of patients with Sanfilippo syndrome type A. This program is being explored in a pivotal phase 3 study known as Transpher A. If this pivotal study is successful, then both companies can file a BLA to the FDA for AB-102 for the treatment of this patient population. Besides these drugs being advanced there is another candidate in the pipeline known as ABO-50X, which utilizes Abeona’s next generation AAV capsids known as AIM Vectors for gene therapies. What makes this unique is the ability to selectively target genetic payloads to the intended target, while at the same time avoiding an immune response observed with typical AAVs. The library has 100+ capsids ready to go target various organs such as: Liver, eye, lungs, muscle and other tissues. ABO-50X is being applied to be used towards retinal diseases. With a very important late-stage data readout for EB-101 for RDEB, plus the ongoing advancement of AB-102 by Ultragenyx, these are the reasons why I believe it is a great speculative biotech play to look into.