Overview

Abeona Therapeutics (ABEO) is a clinical-stage biopharmaceutical company developing cell and gene therapies for life-threatening rare genetic diseases. The company's lead programs include EB-101 (gene-corrected skin grafts) for recessive dystrophic epidermolysis bullosa (RDEB), ABO-102 (AAV-SGSH), an adeno-associated virus (AAV) based gene therapy for Sanfilippo syndrome type A (MPS IIIA) and ABO-101 (AAV NAGLU), an AAV based gene therapy for Sanfilippo syndrome type B (MPS IIIB). Abeona Therapeutics is also developing ABO-201 (AAV-CLN3) gene therapy for juvenile Batten disease (JNCL), ABO-202 (AAV-CLN1) for treatment of infantile Batten disease (INCL), EB-201 for epidermolysis bullosa (EB), ABO-301 (AAV-FANCC) for Fanconi anemia (FA) disorder and ABO-302 using a novel CRISPR/Cas9-based gene editing approach to gene therapy for rare blood diseases. In addition, Abeona Therapeutics is developing a proprietary vector platform, AIM™, for next generation product candidates.

Recent Developments

On April 23, 2018, the company announced that the FDA granted Regenerative Medicine Advanced Therapy (RMAT) designation to ABO-102, its AAV-mediated gene therapy for the treatment of Sanfilippo syndrome Type A (MPS IIIA).

On April 20, 2018, the company announced that the European Medicines Agency (EMA) Committee for Orphan Medicinal Products has granted Orphan Drug designation (EMA/OD/013/18) for its gene therapy program ABO-202 for the treatment of subjects with neuronal ceroid lipofuscinosis, also known as Batten Disease, a fatal lysosomal storage disease that primarily affects the nervous system in children.

On March 29, 2018, F. Carsten Thiel Ph.D. was appointed by its Board of Directors as Chief Executive Officer. Timothy J. Miller, Ph.D. will remain President and assume the position of Chief Scientific Officer in charge of its clinical and preclinical research programs.

On March 15, 2018, the company announced that the FDA has granted Rare Pediatric Disease Designation for the ABO-202 program (AAV-CLN1), its AAV-based gene therapy for the treatment of CLN1 disease (infantile and late infantile onset Batten disease).

On February 12, 2018, the company announced that the FDA granted Orphan Drug Designation (ODD) to its ABO-202 program (AAV-CLN1), its AAV-based gene therapy for the treatment of infantile Batten disease.

ABO-202, developed with Steven Gray, Ph.D. and the support of The Saoirse Foundation, Taylor's Tale, Garrett the Grand Batten Fighter, Hayden's Batten Disease Foundation, and the Batten Disease Support and Research Association, is anticipated to enter clinical trials in 2018.

The preclinical data for ABO-202 were presented at the WORLDSymposium for Lysosomal Diseases held in San Diego, California from February 5-9, 2018. Key findings included:

CLN1 mice recapitulate the major features of the human disease manifestations;A single intrathecal (IT) injection of self-complementary adeno-associated virus 9 (scAAV9) encoding the human CLN1 gene to CLN1 mice at 1 week and 1 month (pre-symptomatic) significantly increased their survival, improved behavior and reduced motor deficits;Higher IT doses further improved these observations, suggesting that methods increasing CNS exposure may be beneficial and provided some survival and behavioral benefit to symptomatic INCL mice; andA combination approach delivering ABO-202 by both intravenous and intrathecal routes of administration further increased survival efficacy 50% and improved potential treatment options for older animals with advanced disease manifestations.

On February 8, 2018, the company announced updated clinical data from the ongoing Phase 1/2 trial for ABO-102 (AAV-SGSH), the Company’s investigational gene therapy for the treatment of Sanfilippo syndrome Type A (MPS IIIA), a rare autosomal-recessive lysosomal storage disease. The results demonstrate robust and durable clinical effects achieved throughout various time points post-administration. To date, 10 patients have been dosed with a single intravenous injection of ABO-102. Results were reported during the WORLDSymposium.

In the trial, subjects received a single intravenous injection of ABO-102 to facilitate systemic delivery of a corrective copy of the gene associated with onset and progression of MPS IIIA. Subjects were evaluated at multiple time points post-injection for safety assessments and signals of biopotency and clinical activity.

On February 7, 2018, the company reported preliminary 30-Day safety and biopotency signals from the first patient dosed in the Company’s ongoing Phase 1/2 trial for ABO-101, a gene therapy treatment for patients with MPS IIIB (Sanfilippo syndrome Type B), enrolling at Nationwide Children’s Hospital in Columbus, Ohio. The ABO-101 therapy involves a single intravenous injection of AAV gene therapy for subjects with MPS IIIB, a rare autosomal recessive disease causing neurocognitive decline, speech and mobility loss, and premature death. Abeona plans to enroll a total of three patients in Cohort 1 (2E13 vg/kg) before dose-escalating to the Cohort 2 dose (5E13 vg/kg).

The Phase 1/2 study is designed to evaluate safety and preliminary indications of efficacy of ABO-101 in subjects suffering from MPS IIIB. In the first patient treated in Cohort 1:

ABO-101, at a systemic dose of 2E13 vg/kg, is well-tolerated, with no treatment related adverse events or serious adverse events (SAEs) through 30 days of follow up;Early biopotency signals include significant heparan sulfate (HS) reductions observed in cerebral spinal fluid (50%), urine (69%), plasma (60%) and urinary total glycosaminoglycan (GAG) (67%);50% decline in CSF heparan sulfate from baseline supports previous AAV9 clinical observations that ABO-101 crossed the blood brain barrier after intravenous administration; andNormalized NAGLU enzyme activity observed represented by a greater than 300-fold increase over baseline at 30 days post administration.

Subjects in the Phase 1/2 trial receive a single, intravenous injection of ABO-101, which uses an AAV vector to introduce a corrective copy of the NAGLU gene associated with MPS IIIB disease. Subjects will be evaluated at multiple time points over the initial 30 days post-injection for safety assessments and initial signals of biopotency. Results in the first patient dosed with ABO-101 suggest strong CNS and broader systemic distribution, with the potential to reduce levels of glycosaminoglycans (GAGs) that represent the lysosomal storage pathology central to MPS IIIB disease progression.

On January 29, 2018, the company announced that the FDA has granted the Regenerative Medicine Advanced Therapy (RMAT) designation to EB-101, the Company’s gene-corrected autologous cell therapy product for patients with recessive dystrophic epidermolysis bullosa (RDEB).

Product Development Strategy

Abeona is focused on developing and delivering gene therapy products for severe and life-threatening rare diseases. A rare disease is one that affects fewer than 200,000 people in the U.S. There are nearly 7,000 rare diseases, which may involve chronic illness, disability, and often, premature death. More than 25 million Americans and 30 million Europeans have a severe, life-threating disease. While rare diseases can affect any age group, about 50% of people affected are children (15 million) and rare diseases account for 35% of deaths in the first year of life. These rare diseases are often poorly diagnosed, very complex, and have no treatment or not very effective treatment. Over 95% of rare diseases do not have a single FDA or EMA approved drug treatment, however, most rare diseases are often caused by changes in genes. Approximately 80% of rare diseases are genetic in origin and can present at any stage of life. The company believe emerging insights in genetics and advances in biotechnology, as well as new approaches and collaboration between researchers, industry, regulators and patient groups, provide significant opportunities to develop breakthrough treatments for rare diseases.

Developing Next Generation Gene Therapy

Gene therapy is the use of DNA as a potential therapy to treat a disease. In many disorders, particularly genetic diseases caused by a single genetic defect, gene therapy aims to treat a disease by delivering the correct copy of DNA into a patient’s cells. The healthy, functional copy of the therapeutic gene then helps the cell function correctly. In gene therapy, DNA that encodes a therapeutic protein is packaged within a ‘‘vector,’’ often a ‘‘naked’’ virus, which is used to transfer the DNA to the inside of cells within the body. Gene therapy can be delivered by a direct injection, either intravenously (IV) or directly into a specific tissue in the body, where it is taken up by individual cells. Once inside cells, the correct DNA is expressed by the cell machinery, resulting in the production of missing or defective protein, which in turn is used to treat the patient’s underlying disease and can provide long-term benefit.

Abeona is developing next-generation AAV gene therapies. Viruses such as AAV are utilized because they have evolved a way of encapsulating and delivering one or more genes of the size needed for clinical application, and can be purified in large quantities at high concentration. Unlike AAV vectors found in nature, the AAV vectors used by Abeona have been genetically-modified such that they do not replicate. Although the preclinical studies in animal models of disease demonstrate the promising impact of AAV-mediated gene expression to affected tissues such as the heart, liver and muscle, its programs use a specific virus that is capable of delivering therapeutic DNA across the blood brain barrier and into the central nervous system (CNS) and the somatic system (body), making them attractive for addressing lysosomal storage diseases which have severe CNS manifestations of the disease.

Lysosomal storage diseases (LSDs) are a group of rare inborn errors of metabolism resulting from deficiency in normal lysosomal function. These diseases are characterized by progressive accumulation of storage material within the lysosomes of affected cells, ultimately leading to cellular dysfunction. Multiple tissues ranging from musculoskeletal and visceral to tissues of the CNS are typically involved in disease pathology. Since the advent of enzyme replacement therapy (ERT) to manage some LSDs, general clinical outcomes have significantly improved; however, treatment with infused protein is lifelong and continued disease progression is still evident in patients. Thus, AAV-based gene therapy may provide a viable alternative or adjunctive therapy to current management strategies for LSDs.

The company's initial programs are focused on LSDs such as Mucopolysaccharidosis (MPS) III A and IIIB. MPSIII, also known as Sanfilippo syndromes type A and type B, is a progressive neuromuscular disease with profound CNS involvement. The company's lead product candidates, ABO-101 and ABO-102, have been developed to replace the damaged, malfunctioning enzymes within target cells with the normal, functioning version. ABO-201 is a similar product, using an AAV to deliver the correct lysosomal gene that is defective in juvenile neuronal ceroid lipofuscinosis. Delivered via a single injection, these drugs are only given once to a patient.

EB-101 for the Treatment of Recessive Dystrophic Epidermolysis Bullosa and EB-201 for the Correction of Gene Mutations in Skin Cells (Keratinocytes)

EB-101 (LZRSE-Col7A1 Engineered Autologous Epidermal Sheets (LEAES)), is an ex vivo gene therapy for the treatment of RDEB. EB-201 (AAVDJ-Col7A1) is a pre-clinical candidate targeting a novel, AAV-mediated gene editing and delivery approach to correct gene mutations in skin cells for patients with RDEB. The company entered into an agreement (the ‘‘EB Agreement’’) with EB Research Partnership (‘‘EBRP’’) and Epidermolysis Bullosa Medical Research Foundation (‘‘EBMRF’’) to collaborate on gene therapy treatments for EB.

The company entered into a license with Stanford effective August 3, 2016 for the EB-101 (LZRSE-Col7A1 Engineered Autologous Epidermal Sheets (LEAES)) technology, and Abeona Therapeutics has performed certain preclinical development work and are performing clinical trials of a gene therapy treatment for EB based upon such in-licensed technology.

The company also entered into a license with Stanford effective August 3, 2016 for the EB-201 (AAV DJ COL7A1) technology, and the company plan to perform preclinical development and clinical trials of a gene therapy treatment for EB based upon such in-licensed technology.

ABO-101 for MPS III B and ABO-102 for MPS III A (Sanfilippo syndrome)

MPS III (Sanfilippo syndrome) is a group of four inherited genetic diseases, described as type A, B, C or D, which cause enzyme deficiencies that result in the abnormal accumulation of glycosaminoglycans (sugars) in body tissues. MPS III is a lysosomal storage disease, a group of rare inborn errors of metabolism resulting from deficiency in normal lysosomal function. The incidence of MPS III (all four types combined) is estimated to be 1 in 70,000 births.

Mucopolysaccharides are long chains of sugar molecules used in the building of connective tissues in the body. There is a continuous process in the body of replacing used materials and breaking them down for disposal. Children with MPS III are missing an enzyme which is essential in breaking down used mucopolysaccharides. The partially broken down mucopolysaccharides remain stored in cells in the body causing progressive damage. Babies may show little sign of the disease, but as more and more cells become damaged, symptoms start to appear.

In MPS III, the predominant symptoms occur due to accumulation within the CNS, including the brain and spinal cord, resulting in cognitive decline, motor dysfunction, and eventual death. To date, there is no cure for MPS III and treatments are largely supportive.

Abeona is developing next-generation AAV-based gene therapies for MPS III, which involves a one-time delivery of a normal copy of the defective gene to cells of the CNS with the aim of reversing the effects of the genetic errors that cause the disease.

After a single dose in MPS III preclinical models, ABO-101 and ABO-102 induced cells in the CNS and peripheral organs to produce the missing enzymes which helped repair the damage caused to the cells. Preclinical in vivo efficacy studies in MPS III have demonstrated functional benefits that remain for months after treatment. A single dose of ABO-101 or ABO-102 significantly restored normal cell and organ function, corrected cognitive defects that remained months after drug administration, increased neuromuscular control and increased the lifespan of animals with MPS III over 100% one year after treatment compared to untreated control animals. These results are consistent with studies from several laboratories suggesting AAV treatment could potentially benefit patients with MPS III A and B. In addition, safety studies conducted in animal models of MPS III have demonstrated that delivery of ABO-101 or ABO-102 are well tolerated with minimal side effects.

ABO-201 for juvenile Batten disease (or Juvenile Neuronal Ceroid Lipofuscinoses) (JNCL) and ABO-202 (AAV-CLN1) gene therapy for treatment of infantile Batten disease (or Infantile Neuronal Ceroid Lipofuscinoses) (INCL)

ABO-201 (AAV CLN3) is an AAV-based gene therapy which has shown promising preclinical efficacy in delivery of a normal copy of the defective CLN3 gene to cells of the CNS with the aim of reversing the effects of the genetic errors that cause JNCL. JNCL is a rare, fatal, autosomal recessive (inherited) disorder of the nervous system that typically begins in children between 4 and 8 years of age. Often the first noticeable sign of JNCL is vision impairment, which tends to progress rapidly and eventually result in blindness. As the disease progresses, children experience loss of previously acquired skills (developmental regression). This regression usually begins with the loss of the ability to speak in complete sentences. Children then lose motor skills, such as the ability to walk or sit. They also develop movement abnormalities that include rigidity or stiffness, slow or diminished movements (hypokinesia), and stooped posture. Beginning in mid- to late childhood, affected children may have recurrent seizures (epilepsy), heart problems, behavioral problems, and difficulty sleeping. Life expectancy is greatly reduced. Most people with juvenile Batten disease live into their twenties or thirties. As yet, no specific treatment is known that can halt or reverse the symptoms of JNCL.

JNCL is the most common form of a group of disorders known as neuronal ceroid lipofuscinoses (NCLs). Collectively, all forms of NCL affect an estimated 2 to 4 in 100,000 live births in the United States. NCLs are more common in Finland, where approximately 1 in 12,500 individuals are affected, as well as Sweden, other parts of northern Europe, and Newfoundland, Canada.

Most cases of JNCL are caused by mutations in the CLN3 gene, which is the focus of its AAV-based gene therapy approach. These mutations disrupt the function of cellular structures called lysosomes. Lysosomes are compartments in the cell that normally digest and recycle different types of molecules. Lysosome malfunction leads to a buildup of fatty substances called lipopigments and proteins within these cell structures. These accumulations occur in cells throughout the body, but neurons in the brain seem to be particularly vulnerable to damage. The progressive death of cells, especially in the brain, leads to vision loss, seizures, and intellectual decline in children with JNCL.

ABO-202 (AAV9 CLN1) is an AAV-based gene therapy which has shown promising preclinical efficacy in delivery of a normal copy of the defective CLN1 gene to cells of the central nervous system with the aim of reversing the effects of the genetic errors that cause an infantile form of Batten disease (also known as infantile neuronal ceroid lipofuscinosis).

ABO-301 for Fanconi Anemia (FA) and ABO-302 for rare blood diseases using a novel CRISPR/Cas9-based gene editing approach to gene therapy for rare blood diseases

ABO-301 (AAV-FANCC) is an AAV-based gene therapy which has shown promising preclinical efficacy in delivery of a normal copy of the defective gene to cells of the hematopoietic or blood system with the aim of reversing the effects of the genetic errors that cause FA. FA is a rare (1 in 160,000) pediatric, autosomal recessive (inherited) disease characterized by multiple physical abnormalities, organ defects, bone marrow failure, and a higher than normal risk of cancer. The average lifespan for people with FA is 20 to 30 years.

The major function of bone marrow is to produce new blood cells. In FA, a DNA mutation renders the FANCC gene nonfunctional. Loss of FANCC causes skeletal abnormalities and leads to bone marrow failure. FA patients also have much higher rates of hematological diseases, such as acute myeloid leukemia or tumors of the head, neck, skin, gastrointestinal system, or genital tract. The likelihood of developing one of these cancers in people with FA is between 10 and 30 percent. Aside from bone marrow transplantation, there are no specific treatments known that can halt or reverse the symptoms of FA. Repairing fibroblast cells in FA patients with a functional FANCC gene is the focus of its AAV-based gene therapy approach.

Using a novel CRISPR (clustered, regularly interspaced short palindromic repeats)-Cas9 (CRISPR associated protein 9) system, researchers used a protein-RNA complex composed of an enzyme known as Cas9 bound to a guide RNA molecule that has been designed to recognize a particular DNA sequence. The RNA molecules guide the Cas9 complex to the location in the genome that requires repair. CRISPR-Cas9 uniquely enables surgically efficient knock-out, knock-down or selective editing of defective genes in the context of their natural promoters, unlocking the potential to treat both recessive and dominant forms of genetic diseases. Most importantly, this approach has the potential to allow for more precise gene modification.

Polymer Hydrogel Technology (PHT™)

MuGard® (mucoadhesive oral wound rinse) approved for mucositis, stomatitis, aphthous ulcers, and traumatic ulcers

MuGard is its marketed product for the management of oral mucositis, a frequent side-effect of cancer therapy for which there is no other established treatment. MuGard, a proprietary nanopolymer formulation, received marketing clearance from the FDA in the U.S. as well as Europe, China, Australia, New Zealand and Korea. The company launched MuGard in the U.S. in 2010 and licensed MuGard for commercialization in the U.S. to AMAG Pharmaceuticals, Inc. (AMAG) in 2013. The company licensed MuGard to RHEI Pharmaceuticals, N.V. for China and other Southeast Asian countries in 2010; Hanmi Pharmaceutical Co. Ltd. for South Korea in 2014; and Norgine B.V. for the European Union, Switzerland, Norway, Iceland, Lichtenstein, Australia and New Zealand in 2014.

Liquidity and Capital Resources

Abeona Therapeutics has historically funded its operations primarily through public and private sales of common stock, preferred stock, convertible notes and through licensing agreements. The company's principal source of liquidity is cash and cash equivalents. Licensing payments and royalty revenues provided limited funding for operations during the period ended March 31, 2018. As of March 31, 2018, its cash and cash equivalents were $131,995,000.

As of March 31, 2018, its working capital was $127,697,000. The company's working capital at March 31, 2018 represented a decrease of $7,288,000 as compared to its working capital of $134,985,000 as of December 31, 2017. The decrease in working capital at March 31, 2018 reflects three months of net operating costs and changes in current assets and liabilities offset by proceeds from exercise of stock options and warrants.

On October 16, 2017, the company announced a collaborative agreement between nine Sanfilippo foundations to provide up to approximately $13.85 million of grants to Abeona in installments for the advancement of the Company’s clinical stage gene therapies for Sanfilippo Syndrome Type A (MPS IIIA) and Sanfilippo Syndrome Type B (MPS IIIB), subject to the achievement of certain milestones. As of March 31, 2018, the company received $3.1 million in grants ($2.6 million in the fourth quarter 2017 and $0.5 million in the first quarter of 2018) and recorded them as deferred revenue. $2.6 million of the $3.1 million in grants were recorded as revenues in the first quarter of 2018.

If the company raise additional funds by selling additional equity securities, the relative equity ownership of its existing investors will be diluted and the new investors could obtain terms more favorable than previous investors.

Abeona Therapeutics has incurred negative cash flows from operations since inception, and have expended, and expect to continue to expend in the future, substantial funds to complete its planned product development efforts. Since inception, its expenses have significantly exceeded revenues, resulting in an accumulated deficit as of March 31, 2018 of $364,592,000. The company cannot provide assurance that the company will ever be able to generate sufficient product sales or royalty revenue to achieve profitability on a sustained basis, or at all.

Since its inception, Abeona Therapeutics has devoted its resources primarily to fund its research and development programs. Abeona Therapeutics has been unprofitable since inception and to date have received limited revenues from the sale of products. The company expect to incur losses for the next several years as the company continue to invest in product research and development, preclinical studies, clinical trials and regulatory compliance.