ABEONA THERAPEUTICS INC

Previous wording

You should read the following discussion and analysis together with our unaudited condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K/A for the year ended December 31, 2023 (the “Annual Report”). This discussion and analysis contains forward-looking statements, which involve risks and uncertainties. As a result of many factors, such as those described under “Forward-Looking Statements,” “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements.

Current wording

You should read the following discussion and analysis together with our unaudited condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”). This discussion and analysis contains forward-looking statements, which involve risks and uncertainties. As a result of many factors, such as those described under “Forward-Looking Statements,” “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements.

Previous wording

Abeona is a clinical-stage biopharmaceutical company developing cell and gene therapies for life-threatening diseases. Our lead clinical program is pz-cel, investigational autologous, COL7A1 gene-corrected epidermal sheets, currently in development for recessive dystrophic epidermolysis bullosa (“RDEB”). We have announced positive data from the VIITAL™ study evaluating the efficacy, safety and tolerability of pz-cel. The VIITAL™ study met both its two co-primary efficacy endpoints demonstrating statistically significant, clinically meaningful improvements in wound healing and pain reduction in large chronic RDEB wounds. On September 25, 2023, we submitted a Biologics License Application (“BLA”) for pz-cel to the U.S. Food and Drug Administration (“FDA”).

Current wording

Abeona is a clinical-stage biopharmaceutical company developing cell and gene therapies for life-threatening diseases. Our lead clinical program is pz-cel, investigational autologous, COL7A1 gene-corrected epidermal sheets, currently in development for recessive dystrophic epidermolysis bullosa (“RDEB”). In 2022, we announced positive data from the VIITAL™ study evaluating the efficacy, safety and tolerability of pz-cel. The VIITAL™ study met both its two co-primary efficacy endpoints demonstrating statistically significant, clinically meaningful improvements in wound healing and pain reduction in large chronic RDEB wounds. On September 25, 2023, we submitted a Biologics License Application (“BLA”) for pz-cel to the U.S. Food and Drug Administration (“FDA”).

Previous wording

In November 2023, the FDA accepted and granted priority review for our BLA for pz-cel, and subsequently, under the Prescription Drug User Fee Act (“PDUFA”), the FDA set a target action date of May 25, 2024. In April 2024, the FDA issued a Complete Response Letter (“CRL”) in response to the BLA. The CRL follows the completion of Abeona’s Late Cycle Review Meeting with the FDA in March 2024. At the Late Cycle Review Meeting and in a subsequent information request, the FDA noted that certain additional information needed to satisfy the Chemistry Manufacturing and Controls (“CMC”) requirements of the pz-cel BLA must be satisfactorily resolved before the application can be approved. In response, we submitted plans to the FDA with the commitment to provide certain CMC data prior to BLA approval, and full validation reports after approval in mid-2024. We discussed these plans with the FDA in a subsequent informal meeting. In the CRL, the FDA indicated that the proposed timing of the data submission by us would not have allowed sufficient time for the FDA to complete its review by the May 25, 2024 PDUFA date.

Current wording

In November 2023, the FDA accepted and granted priority review for our BLA for pz-cel, and subsequently, under the Prescription Drug User Fee Act (“PDUFA”), the FDA set a target action date of May 25, 2024. In April 2024, the FDA issued a Complete Response Letter (“CRL”) in response to the BLA. The CRL noted that certain additional information needed to satisfy the Chemistry Manufacturing and Controls (“CMC”) requirements of the pz-cel BLA must be satisfactorily resolved before the application can be approved. The CRL did not identify any deficiencies related to the clinical efficacy or clinical safety data in the BLA, and the FDA did not request any new clinical trials or clinical data to support the approval of pz-cel. On August 8, 2024 we completed a Type A Meeting with the FDA to discuss our forthcoming resubmission of our BLA. We expect to receive the FDA’s meeting minutes within the next few weeks and are on track to resubmit our BLA in the second half of 2024. Upon acceptance of the BLA, we expect the FDA to set a PDUFA date of six months from the date of submission.

Previous wording

Our development portfolio also features adeno-associated virus (“AAV”) based gene therapies designed to treat ophthalmic diseases using the novel AIM™ capsids that we have exclusively licensed from the University of North Carolina at Chapel Hill, and internal AAV vector research programs.

Current wording

Our development portfolio also features adeno-associated virus (“AAV”) based gene therapies designed to treat ophthalmic diseases using the novel AIM™ capsids that we have exclusively licensed from the University of North Carolina at Chapel Hill and developed internally through our AAV vector research programs.

Previous wording

On May 7, 2024, we closed on an underwritten offering of 12,285,056 shares of our common stock and, in lieu of common stock, pre-funded warrants to purchase 6,142,656 shares of our common stock, at an offering price of $4.07 per share, which is equal to the closing price on Thursday, May 2, 2024, or $4.0699 per pre-funded warrant, which represents the per share offering price for the common stock less the $0.0001 per share exercise price for each pre-funded warrant. The pre-funded warrants will be immediately exercisable at a nominal exercise price of $0.0001 per share and may be exercised at any time until the pre-funded warrants are exercised in full. We estimate that the net proceeds from the Offering will be approximately $70.2 million, after deducting the underwriting discounts and commissions and paying estimated offering expenses.

Current wording

On May 7, 2024, we sold 12,285,056 shares of our common stock and, in lieu of common stock, pre-funded warrants to purchase 6,142,656 shares of our common stock (the “2024 Pre-Funded Warrants”), for an aggregate purchase price of $75.0 million gross, or $70.2 million net of related costs. The offering price for each share of common stock was $4.07, and the offering price for the 2024 Pre-Funded Warrants was $4.0699, which represents the per share offering price for our common stock less a $0.0001 per share exercise price for each 2024 Pre-Funded Warrant. The 2024 Pre-Funded Warrants are immediately exercisable at a nominal exercise price of $0.0001 per share and may be exercised at any time until the pre-funded warrants are exercised in full. On June 24, 2024, 700,000 of the 2024 Pre-Funded Warrants were exercised, leaving 5,442,656 2024 Pre-Funded Warrants outstanding as of June 30, 2024.

Previous wording

Total general and administrative expenses were $7.1 million for the three months ended March 31, 2024, as compared to $4.0 million for the same period of 2023, an increase of $3.1 million. The increase in expenses was primarily due to:

Current wording

Total general and administrative expenses were $8.6 million for the three months ended June 30, 2024, as compared to $5.0 million for the same period of 2023, an increase of $3.6 million. The increase in expenses was primarily due to:

Previous wording

Interest income was $0.8 million for the three months ended March 31, 2024, as compared to $0.4 million in the same period of 2023. The increase resulted from higher earnings on short-term investments driven by higher interest rates and increased average short-term investment balances.

Current wording

Interest income was $1.2 million for the three months ended June 30, 2024, as compared to $0.4 million in the same period of 2023. The increase resulted from higher earnings on short-term investments driven by higher interest rates and increased average short-term investment balances.

Previous wording

Interest expense was $1.0 million for the three months ended March 31, 2024, as compared to $0.1 million in the same period of 2023. The increase was primarily due to the credit facility entered into by the Company in January 2024, resulting in recognized interest expense of $0.8 million.

Current wording

Interest expense was $1.1 million for the three months ended June 30, 2024, as compared to $0.1 million in the same period of 2023. The increase was primarily due to the credit facility entered into by the Company in January 2024, resulting in recognized interest expense of $1.0 million.

Previous wording

The change in fair value of warrant and derivative liabilities was a loss of $17.3 million for the three months ended March 31, 2024, as compared to a gain of $2.3 million for the same period in 2023.

Current wording

The change in fair value of warrant and derivative liabilities was a gain of $24.9 million for the three months ended June 30, 2024, as compared to a loss of $8.6 million for the same period in 2023.

Previous wording

We issued stock purchase warrants that are required to be classified as a liability and valued at fair market value at each reporting period. In addition, the conversion feature in our loan agreement is required to be classified as a liability and valued at fair market value at each reporting period. The change in the fair value of warrant and derivative liabilities was primarily due to the increase in our stock price year over the year and a shorter term.

Current wording

We issued stock purchase warrants that are required to be classified as a liability and valued at fair market value at each reporting period. In addition, the conversion feature in our loan agreement is required to be classified as a liability and valued at fair market value at each reporting period. The change in the fair value of warrant and derivative liabilities was primarily due to the decrease in our stock price year over the year and a reduced term of each of the warrants and derivative liabilities.

Previous wording

Other income was $0.2 million for the three months ended March 31, 2024, as compared to $0.4 million in the same period of 2023. The change was primarily a result of other income related to a refund of overpayment of franchise taxes that was received in 2023.

Current wording

Other income was $0.2 million for the three months ended June 30, 2024, as compared to $2.2 million in the same period of 2023. The change was primarily a result of $2.1 million in other income related to the impact of the employee retentional credit that was recorded in 2023.

Previous wording

Total research and development spending for the three months ended March 31, 2024 was $7.2 million, as compared to $8.0 million for the same period of 2023, a decrease of $0.8 million. The decrease in expenses was primarily due to:

Current wording

Total research and development spending for the six months ended June 30, 2024 was $16.4 million, as compared to $16.5 million for the same period of 2023, a decrease of $0.1 million. The decrease in expenses was primarily due to:

Previous wording

Cash Flows for the Three Months Ended March 31, 2024 and 2023

Current wording

Cash Flows for the Six Months Ended June 30, 2024 and 2023

Previous wording

Net cash used in operating activities was $14.5 million for the three months ended March 31, 2024, primarily comprised of our net loss of $31.6 million and decreases in operating assets and liabilities of $2.8 million and net non-cash charges of $19.9 million. Non-cash charges consisted primarily of $17.3 million of the change in fair value of warrant and derivative liabilities, $1.5 million of stock-based compensation and $0.5 million of depreciation and amortization.

Current wording

Net cash used in operating activities was $27.2 million for the six months ended June 30, 2024, primarily comprised of our net loss of $24.2 million and decreases in operating assets and liabilities of $0.4 million and net non-cash charges of $2.6 million. Non-cash charges consisted primarily of $(7.6) million of the change in fair value of warrant and derivative liabilities, $2.9 million of stock-based compensation and $1.0 million of depreciation and amortization.

Previous wording

Net cash used in operating activities was $11.7 million for the three months ended March 31, 2023, primarily comprised of our net loss of $9.1 million and decreases in operating assets and liabilities of $2.0 million and net non-cash charges of $0.6 million.

Current wording

Net cash used in operating activities was $22.0 million for the six months ended June 30, 2023, primarily comprised of our net loss of $25.8 million, increases in operating assets and liabilities of $5.1 million and net non-cash charges of $8.9 million.

Previous wording

Net cash used in investing activities was $7.8 million for the three months ended March 31, 2024, primarily comprised of proceeds from maturities of short-term investments of $22.3 million, offset by purchases of short-term investments of $29.3 million and capital expenditures of $0.7 million.

Current wording

Net cash used in investing activities was $51.9 million for the six months ended June 30, 2024, primarily comprised of proceeds from maturities of short-term investments of $39.4 million, offset by purchases of short-term investments of $89.9 million and capital expenditures of $1.4 million.

Previous wording

Net cash provided by investing activities was $2.2 million for the three months ended March 31, 2023, primarily comprised of proceeds from maturities of short-term investments of $10.4 million, partially offset by purchases of short-term investments of $8.0 million and capital expenditures of $0.2 million.

Current wording

Net cash provided by investing activities was $7.4 million for the six months ended June 30, 2023, primarily comprised of proceeds from maturities of short-term investments of $21.6 million, partially offset by purchases of short-term investments of $14.2 million.

Previous wording

Net cash provided by financing activities was $25.4 million for the three months ended March 31, 2024, primarily comprised of proceeds of $6.4 million from open market sales of common stock pursuant to the ATM Agreement (as defined below) and net proceeds of $19.0 million from our January 2024 Loan Agreement.

Current wording

Net cash provided by financing activities was $99.1 million for the six months ended June 30, 2024, primarily comprised of $70.2 million in net proceeds from sales of common stock, $10.0 million from open market sales of common stock pursuant to the ATM Agreement (as defined below) and net proceeds of $19.0 million from our January 2024 Loan Agreement.

Previous wording

Our principal source of liquidity is cash, cash equivalents, restricted cash and short-term investments, collectively referred to as our cash resources. As of March 31, 2024, our cash resources were $62.7 million. We believe that our current cash and cash equivalents, restricted cash and short-term investments and accounting for the gross proceeds from our $75.0 million underwritten offering that closed on May 7, 2024, are sufficient to fund operations through at least the next 12 months from the date of this report on Form 10-Q. We may need to secure additional funding to carry out all of our planned research and development and potential commercialization activities. If we are unable to obtain additional financing or generate license or product revenue, the lack of liquidity and sufficient capital resources could have a material adverse effect on our future prospects.

Current wording

Our principal source of liquidity is cash, cash equivalents, restricted cash and short-term investments, collectively referred to as our cash resources. As of June 30, 2024, our cash resources were $123.0 million. We believe that our current cash and cash equivalents, restricted cash and short-term investments are sufficient to fund operations through at least the next 12 months from the date of this report on Form 10-Q. We may need to secure additional funding to carry out all of our planned research and development and potential commercialization activities. If we are unable to obtain additional financing or generate license or product revenue, the lack of liquidity and sufficient capital resources could have a material adverse effect on our future prospects.

Previous wording

We have an open market sale agreement with Jefferies LLC (as amended, the “ATM Agreement”) pursuant to which, we may sell from time to time, through Jefferies LLC, shares of our common stock for an aggregate sales price of up to $150.0 million. Any sales of shares pursuant to this agreement are made under our effective “shelf” registration statement on Form S-3 that is on file with and has been declared effective by the SEC. We sold 889,315 shares of our common stock under the ATM Agreement and received $6.4 million of net proceeds during the three months ended March 31, 2024.

Current wording

We have an open market sale agreement with Jefferies LLC (as amended, the “ATM Agreement”) pursuant to which, we may sell from time to time, through Jefferies LLC, shares of our common stock for an aggregate sales price of up to $75.0 million. Any sales of shares pursuant to this agreement are made under our effective “shelf” registration statement on Form S-3 that is on file with and has been declared effective by the SEC. We sold 1,902,376 shares of our common stock under the ATM Agreement and received $10.0 million of net proceeds during the six months ended June 30, 2024.