ITEM
1. FINANCIAL STATEMENTS
Abeona
Therapeutics Inc. and Subsidiaries
Condensed
Consolidated Balance Sheets
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
40,155,000
|
|
|
$
|
129,258,000
|
|
Short-term investments
|
|
|
75,887,000
|
|
|
|
-
|
|
Prepaid
expenses and other current assets
|
|
|
2,716,000
|
|
|
|
3,132,000
|
|
Total current assets
|
|
|
118,758,000
|
|
|
|
132,390,000
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
12,865,000
|
|
|
|
13,157,000
|
|
Right-of-use lease assets
|
|
|
7,802,000
|
|
|
|
8,047,000
|
|
Licensed technology, net
|
|
|
1,968,000
|
|
|
|
36,178,000
|
|
Goodwill
|
|
|
32,466,000
|
|
|
|
32,466,000
|
|
Other assets
and restricted cash
|
|
|
1,144,000
|
|
|
|
1,144,000
|
|
Total
assets
|
|
$
|
175,003,000
|
|
|
$
|
223,382,000
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,763,000
|
|
|
$
|
3,763,000
|
|
Accrued expenses
|
|
|
4,852,000
|
|
|
|
5,543,000
|
|
Current portion
of lease liability
|
|
|
1,702,000
|
|
|
|
1,699,000
|
|
Current portion
of payable to licensor
|
|
|
28,000,000
|
|
|
|
27,400,000
|
|
Deferred
revenue
|
|
|
296,000
|
|
|
|
296,000
|
|
Total current liabilities
|
|
|
36,613,000
|
|
|
|
38,701,000
|
|
|
|
|
|
|
|
|
|
|
Long-term lease
liabilities
|
|
|
6,013,000
|
|
|
|
6,251,000
|
|
Total liabilities
|
|
|
42,626,000
|
|
|
|
44,952,000
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Common stock - $0.01 par value; authorized
200,000,000 shares; issued and outstanding 83,622,135 at March 31, 2020 and December 31, 2019
|
|
|
836,000
|
|
|
|
836,000
|
|
Additional paid-in
capital
|
|
|
665,784,000
|
|
|
|
664,064,000
|
|
Accumulated deficit
|
|
|
(534,629,000
|
)
|
|
|
(486,470,000
|
)
|
Accumulated
other comprehensive income
|
|
|
386,000
|
|
|
|
-
|
|
Total
stockholders’ equity
|
|
|
132,377,000
|
|
|
|
178,430,000
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
175,003,000
|
|
|
$
|
223,382,000
|
|
The
accompanying notes are an integral part of these condensed consolidated statements.
Abeona
Therapeutics Inc. and Subsidiaries
Condensed
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
|
|
For
the three months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
6,818,000
|
|
|
|
11,737,000
|
|
General and administrative
|
|
|
6,412,000
|
|
|
|
5,659,000
|
|
Depreciation
and amortization
|
|
|
2,065,000
|
|
|
|
1,658,000
|
|
Licensed technology
impairment charge
|
|
|
32,916,000
|
|
|
|
-
|
|
Total expenses
|
|
|
48,211,000
|
|
|
|
19,054,000
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(48,211,000
|
)
|
|
|
(19,054,000
|
)
|
|
|
|
|
|
|
|
|
|
Interest and miscellaneous income
|
|
|
652,000
|
|
|
|
499,000
|
|
Interest expense
|
|
|
(600,000
|
)
|
|
|
-
|
|
Net loss
|
|
$
|
(48,159,000
|
)
|
|
$
|
(18,555,000
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
|
$
|
(0.52
|
)
|
|
$
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding –
basic and diluted
|
|
|
92,639,190
|
|
|
|
47,948,421
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(loss):
|
|
|
|
|
|
|
|
|
Change in unrealized
gains related to available-for-sale debt securities
|
|
|
386,000
|
|
|
|
-
|
|
Comprehensive
loss
|
|
$
|
(47,773,000
|
)
|
|
$
|
(18,555,000
|
)
|
The
accompanying notes are an integral part of these condensed consolidated statements.
Abeona
Therapeutics Inc. and Subsidiaries
Condensed
Consolidated Statements of Stockholders’ Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income
|
|
|
Equity
|
|
Balance, December 31, 2018
|
|
|
47,944,486
|
|
|
$
|
479,000
|
|
|
$
|
543,754,000
|
|
|
$
|
(410,188,000
|
)
|
|
$
|
-
|
|
|
$
|
134,045,000
|
|
Stock option-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
2,103,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,103,000
|
|
Restricted stock-based compensation
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
172,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
172,000
|
|
Common stock issued for cash exercise
of options
|
|
|
5,208
|
|
|
|
-
|
|
|
|
28,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,000
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(18,555,000
|
)
|
|
|
-
|
|
|
|
(18,555,000
|
)
|
Balance, March 31, 2019
|
|
|
47,949,694
|
|
|
$
|
479,000
|
|
|
$
|
546,057,000
|
|
|
$
|
(428,743,000
|
)
|
|
$
|
-
|
|
|
$
|
117,793,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
83,622,135
|
|
|
$
|
836,000
|
|
|
$
|
664,064,000
|
|
|
$
|
(486,470,000
|
)
|
|
$
|
-
|
|
|
$
|
178,430,000
|
|
Stock option-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
1,256,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,256,000
|
|
Restricted stock-based compensation
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
464,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
464,000
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(48,159,000
|
)
|
|
|
-
|
|
|
|
(48,159,000
|
)
|
Other comprehensive
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
386,000
|
|
|
|
386,000
|
|
Balance, March 31, 2020
|
|
|
83,622,135
|
|
|
$
|
836,000
|
|
|
$
|
665,784,000
|
|
|
$
|
(534,629,000
|
)
|
|
$
|
386,000
|
|
|
$
|
132,377,000
|
|
The
accompanying notes are an integral part of these condensed consolidated statements.
Abeona
Therapeutics Inc. and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
For
the three months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(48,159,000
|
)
|
|
$
|
(18,555,000
|
)
|
Adjustments to reconcile net loss to
cash used in operating activities:
|
|
|
|
|
|
|
|
|
Non-cash licensed technology impairment
charge
|
|
|
32,916,000
|
|
|
|
-
|
|
Depreciation and
amortization
|
|
|
2,065,000
|
|
|
|
1,658,000
|
|
Stock option-based
compensation expense
|
|
|
1,256,000
|
|
|
|
2,103,000
|
|
Restricted stock-based
compensation expense
|
|
|
464,000
|
|
|
|
172,000
|
|
Non-cash interest
expense
|
|
|
600,000
|
|
|
|
-
|
|
Accretion and interest
on short-term investments
|
|
|
(109,000
|
)
|
|
|
(169,000
|
)
|
Accretion of right-of-use
lease assets
|
|
|
245,000
|
|
|
|
150,000
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
-
|
|
|
|
43,000
|
|
Prepaid expenses
and other current assets
|
|
|
416,000
|
|
|
|
430,000
|
|
Accounts
payable, accrued expenses and lease liabilities
|
|
|
(2,926,000
|
)
|
|
|
(910,000
|
)
|
Net cash used in
operating activities
|
|
|
(13,232,000
|
)
|
|
|
(15,078,000
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(479,000
|
)
|
|
|
(1,226,000
|
)
|
Purchases of short-term investments
|
|
|
(75,392,000
|
)
|
|
|
-
|
|
Proceeds from
maturities of short-term investments
|
|
|
-
|
|
|
|
24,000,000
|
|
Net cash (used in)
provided by investing activities
|
|
|
(75,871,000
|
)
|
|
|
22,774,000
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
Proceeds from
exercise of stock options
|
|
|
-
|
|
|
|
28,000
|
|
Net cash provided
by financing activities
|
|
|
-
|
|
|
|
28,000
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash, cash
equivalents and restricted cash
|
|
|
(89,103,000
|
)
|
|
|
7,724,000
|
|
Cash, cash equivalents
and restricted cash at beginning of period
|
|
|
130,368,000
|
|
|
|
19,310,000
|
|
Cash, cash equivalents
and restricted cash at end of period
|
|
$
|
41,265,000
|
|
|
$
|
27,034,000
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
40,155,000
|
|
|
$
|
25,924,000
|
|
Restricted
cash
|
|
|
1,110,000
|
|
|
|
1,110,000
|
|
Total
cash, cash equivalents and restricted cash
|
|
$
|
41,265,000
|
|
|
$
|
27,034,000
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these condensed consolidated statements.
ABEONA
THERAPEUTICS INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
NOTE
1 – NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Background
Abeona
Therapeutics Inc., a Delaware corporation (together with our subsidiaries, “we,” “our,” “Abeona”
or the “Company”), is a clinical-stage biopharmaceutical company developing gene and cell therapies for life-threatening
rare genetic diseases. Our lead clinical programs consist of: (i) EB-101, an autologous, gene-corrected cell therapy for recessive
dystrophic epidermolysis bullosa (“RDEB”), (ii) ABO-102, an adeno-associated virus (“AAV”)-based gene
therapy for Sanfilippo syndrome type A (“MPS IIIA”), and (iii) ABO-101, an AAV-based gene therapy for Sanfilippo syndrome
type B (“MPS IIIB”). We have additional AAV-based gene therapies in various developmental stages designed to treat
the CLN1 and CLN3 forms of Batten Disease, cystic fibrosis and retinal diseases. In addition, we are developing next-generation
AAV-based gene therapies using our novel AIM™ capsid platform and internal AAV vector research programs. Our efforts
have been principally devoted to research and development, resulting in significant losses.
Basis
of Presentation
The
condensed consolidated balance sheet as of March 31, 2020 and the condensed consolidated statements of operations and comprehensive
loss, stockholders’ equity and cash flows for the three months ended March 31, 2020 and 2019 were prepared by management
without audit. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, except as otherwise
disclosed, necessary for the fair presentation of the financial position, results of operations, and changes in financial position
for such periods, have been made.
Certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These interim financial
statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K
for the year ended December 31, 2019. The results of operations for the period ended March 31, 2020 are not necessarily indicative
of the operating results that may be expected for a full year. The condensed consolidated balance sheet as of December 31, 2019
contains financial information taken from the audited Abeona consolidated financial statements as of that date.
Uses
and Sources of Liquidity
The
financial statements have been prepared on the going concern basis, which assumes the Company will have sufficient cash to pay
its operating expenses, as and when they become payable, for a period of at least 12 months from the date the financial report
was issued.
As
of March 31, 2020, we had cash, cash equivalents and short-term investments of $116.0 million and net assets of $132.4
million. For the three months ended March 31, 2020, we had cash outflows from operations of $13.2 million. We have not generated
any significant product revenues and have not achieved profitable operations. There is no assurance that profitable operations
will ever be achieved, and, if achieved, could be sustained on a continuing basis. In addition, development activities, clinical
and nonclinical testing, and commercialization of our products will require significant additional financing.
We
are subject to a number of risks similar to other life science companies, including, but not limited to, risks related to the
successful discovery and development of product candidates, obtaining the necessary regulatory approval to market our product
candidates, raising additional capital to continue to fund our operations, development of competing drugs and therapies, protection
of proprietary technology and market acceptance of our products. As a result of these and other risks and the related uncertainties,
there can be no assurance of our future success.
Based
upon our current operating plans, we believe that we have sufficient resources to fund operations through the next 12 months with
our existing cash and cash equivalents. We will need to secure additional funding in the future, to carry out all our planned
research and development 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.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amount of
assets and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenue and expenses during the reported period. Actual results could differ from these estimates and assumptions.
Cash
and Cash Equivalents
We
consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. We maintain
deposits primarily in financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal
Deposit Insurance Corporation (“FDIC”). We have not experienced any losses related to amounts in excess of FDIC limits.
Short-term
Investments
Short-term
investments consist of investments in U.S. government, U.S. agency and U.S. treasury securities. We determine the appropriate
classification of the securities at the time they are acquired and evaluate the appropriateness of such classifications at each
balance sheet date. We classify our short-term investments as available-for-sale pursuant to Accounting Standards Codification
(“ASC”) 320, Investments – Debt and Equity Securities. Investments classified as current have maturities
of less than one year. We review our short-term investments for other-than-temporary impairment whenever the fair value of a marketable
security is less than the amortized cost and evidence indicates that a short-term investment’s carrying amount is not recoverable
within a reasonable period of time.
Leases
We
account for leases in accordance with ASC 842, Leases. Right-of-use lease assets represent our right to use an underlying
asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. The measurement
of lease liabilities is based on the present value of future lease payments over the lease term. As our leases do not provide
an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining
the present value of future lease payments. The right-of-use asset is based on the measurement of the lease liability and includes
any lease payments made prior to or on lease commencement and excludes lease incentives and initial direct costs incurred, as
applicable. Rent expense for our operating leases is recognized on a straight-line basis over the lease term. We do not have any
leases classified as finance leases.
Our
leases do not have significant rent escalation, holidays, concessions, material residual value guarantees, material restrictive
covenants or contingent rent provisions. Our leases include both lease (e.g., fixed payments including rent, taxes, and insurance
costs) and non-lease components (e.g., common-area or other maintenance costs), which are accounted for as a single lease component
as we have elected the practical expedient to group lease and non-lease components for all leases.
Most
leases include one or more options to renew. The exercise of lease renewal options is typically at our sole discretion; therefore,
the majority of renewals to extend the lease terms are not included in our right-of-use assets and lease liabilities as they are
not reasonably certain of exercise. We regularly evaluate the renewal options and when they are reasonably certain of exercise,
we include the renewal period in our lease term.
Additional
information and disclosures required under ASC 842 is included in Note 6.
Restricted
Cash
In
November 2016, the Financial Accounting Standards Board issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted
Cash, requiring restricted cash and restricted cash equivalents to be included with cash and cash equivalents on the statement
of cash flows when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We
adopted this standard during the first quarter of 2018. Restricted cash is now included as a component of cash, cash equivalents
and restricted cash on our consolidated statements of cash flows. Restricted cash is recorded within other assets and restricted
cash in the accompanying consolidated balance sheets.
Loss
Per Common Share
We
have presented basic and diluted loss per common share on the statement of operations. Basic and diluted net loss per share is
computed by dividing net loss by the weighted-average number of shares of common stock and shares underlying “pre-funded”
warrants outstanding during the period. The “pre-funded” warrants are included in the computation of basic net loss
per share as the exercise price is negligible and they are fully vested and exercisable.
We
do not include the potential impact of dilutive securities in diluted net loss per share, as the impact of these items is anti-dilutive.
Potential dilutive securities result from outstanding stock options and “non-pre-funded” warrants. We did not include
the following potentially dilutive securities in the computation of diluted net loss per common share during the periods presented:
|
|
For
the three months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Warrants
|
|
|
70,000
|
|
|
|
1,820,686
|
|
Stock options
|
|
|
6,690,814
|
|
|
|
5,696,353
|
|
Total
|
|
|
6,760,814
|
|
|
|
7,517,039
|
|
NOTE
2 – SHORT-TERM INVESTMENTS
The
following table summarizes the available-for-sale investments held:
Description
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
U.S. government and agency
securities and treasuries
|
|
$
|
75,887,000
|
|
|
$
|
-
|
|
The
amortized cost of the available-for-sale debt securities, which is adjusted for amortization of premiums and accretion
of discounts to maturity, was $75,501,000 as of March 31, 2020. There were no material realized gains or losses recognized on
the sale or maturity of available-for-sale debt securities during the three months ended March 31, 2020 or 2019.
NOTE
3 – LICENSED TECHNOLOGY
On
November 4, 2018, we entered into a license agreement with REGENXBIO Inc. (“REGENXBIO”) to obtain rights to an
exclusive worldwide license (subject to certain non-exclusive rights previously granted for MPS IIIA), with rights to
sublicense, to REGENXBIO’s NAV AAV9 vector for gene therapies for treating MPS IIIA, MPS IIIB, CLN1 Disease and CLN3 Disease. Consideration for the rights granted under the original agreement included fees totaling $180 million and a running royalty on net sales, including: (i) an initial fee of $20
million, $10 million of which was due to REGENXBIO shortly after the effective date of the agreement, and $10 million of
which was due on the first anniversary of the effective date of the agreement in November 2019, (ii) annual fees totaling
$100 million, payable in $20 million annual installments beginning on the second anniversary of the effective date (the first
of which remains payable if the agreement is terminated before the second anniversary in November 2020), (iii) sales
milestone payments totaling $60 million, and (iv) royalties payable in the low double digits to low teens on net sales of
products covered under the agreement. The license is amortized over the life of the patent of eight years. On November 1,
2019, we entered into an amendment of the original license agreement. The amended agreement replaced the $10 million payment
due on November 4, 2019 with a $3 million payment due on November 4, 2019 and an additional $8 million payment (which
includes $1 million of interest) due no later than April 1, 2020. The payment due by April 1, 2020 and the guaranteed amount
of $20 million due on November 4, 2020 are recorded as payable to licensor on the consolidated balance sheet.
Prior
to the April 1, 2020 deadline, we engaged REGENXBIO in discussions in an attempt to renegotiate the financial terms of the
agreement, but we were unable to reach a mutual understanding that we believed would have been favorable for the Company or
our programs, and we did not make the $8 million payment due by April 1, 2020. On April 17, 2020, REGENXBIO sent us a written
demand for the $8 million fee, payable within a 15-day cure period after receipt of the demand letter. The license terminated
on May 2, 2020, when the 15-day period expired. We are not subject to early termination penalties, but under the agreement,
REGENXBIO is still due a total of $28 million.
As
of March 31, 2020, we considered the status of our discussions with REGENXBIO as a potential indicator of impairment in accordance
with ASC 360-10-35-21. Since our impairment testing indicated that the carrying value of the license agreement exceeded its fair
value, we recorded a $32.9 million non-cash impairment charge in the three months ended March 31, 2020.
On
May 15, 2015, we acquired Abeona Therapeutics LLC, which had an exclusive license through Nationwide Children’s Hospital
to the AB-101 and AB-102 patent portfolios for developing treatments for patients with Sanfilippo Syndrome Type A and Type B.
The license is amortized over the life of the license of 20 years.
Licensed
technology consists of the following:
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
Licensed technology
|
|
$
|
2,606,000
|
|
|
$
|
42,606,000
|
|
Less accumulated
amortization
|
|
|
638,000
|
|
|
|
6,428,000
|
|
Licensed technology,
net
|
|
$
|
1,968,000
|
|
|
$
|
36,178,000
|
|
The
aggregate estimated amortization expense for intangible assets remaining as of March 31, 2020 is as follows:
2020, remainder
|
|
$
|
130,000
|
|
2021
|
|
|
174,000
|
|
2022
|
|
|
174,000
|
|
2023
|
|
|
174,000
|
|
2024
|
|
|
174,000
|
|
Thereafter
|
|
|
1,142,000
|
|
Total
|
|
$
|
1,968,000
|
|
Amortization
on licensed technology was $1,294,000 and $1,345,000 for the three months ended March 31, 2020 and 2019, respectively.
NOTE
4 – FAIR VALUE MEASUREMENTS
We
calculate the fair value of our assets and liabilities that qualify as financial instruments and include additional information
in the notes to the consolidated financial statements when the fair value is different than the carrying value of these financial
instruments. The estimated fair value of receivables, prepaid expenses, other assets, accounts payable, accrued expenses, payable
to licensor and deferred revenue approximate their carrying amounts due to the relatively short maturity of these instruments.
U.S.
GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
at the measurement date. This guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure
fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.
The three levels of inputs used to measure fair value are as follows:
|
●
|
Level
1 – Quoted prices in active markets for identical assets or liabilities.
|
|
●
|
Level
2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities
in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other
inputs that are observable or can be corroborated by observable market data.
|
|
●
|
Level
3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value
of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar valuation
techniques that use significant unobservable inputs.
|
The
guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value.
We
have segregated all financial assets and liabilities that are measured at fair value on a recurring basis (at least annually)
into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement
date in the table below.
Financial
assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2020 and December 31, 2019
are summarized below:
Description
|
|
March
31, 2020
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
$
|
75,887,000
|
|
|
$
|
-
|
|
|
$
|
75,887,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensed technology, net
|
|
$
|
1,968,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,968,000
|
|
Goodwill
|
|
|
32,466,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,466,000
|
|
Description
|
|
December
31, 2019
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Non-recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensed technology, net
|
|
$
|
36,178,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
36,178,000
|
|
Goodwill
|
|
|
32,466,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,466,000
|
|
NOTE
5 – STOCK-BASED COMPENSATION
The
following table summarizes stock option-based compensation for the three months ended March 31, 2020 and 2019:
|
|
For
the three months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Research and development
|
|
$
|
744,000
|
|
|
$
|
1,032,000
|
|
General and administrative
|
|
|
512,000
|
|
|
|
1,071,000
|
|
Stock option-based compensation expense
included in operating expense
|
|
|
1,256,000
|
|
|
|
2,103,000
|
|
|
|
|
|
|
|
|
|
|
Total stock option-based compensation
expense
|
|
|
1,256,000
|
|
|
|
2,103,000
|
|
Tax benefit
|
|
|
-
|
|
|
|
-
|
|
Stock option-based
compensation expense, net of tax
|
|
$
|
1,256,000
|
|
|
$
|
2,103,000
|
|
Stock
Options: We estimate the fair value of each option award on the date of grant using the Black-Scholes option valuation model.
We then recognize the grant date fair value of each option as compensation expense ratably using the straight-line attribution
method over the service period (generally the vesting period). The Black-Scholes model incorporates the following assumptions:
|
●
|
Expected
volatility – we estimate the volatility of our share price at the date of grant using a “look-back” period
which coincides with the expected term, defined below. We believe using a “look-back” period which coincides with
the expected term is the most appropriate measure for determining expected volatility.
|
|
●
|
Expected
term – we estimate the expected term using the “simplified” method, as outlined in Staff Accounting Bulletin
No. 107, “Share-Based Payment.”
|
|
●
|
Risk-free
interest rate – we estimate the risk-free interest rate using the U.S. Treasury yield curve for periods equal to the
expected term of the options in effect at the time of grant.
|
|
●
|
Dividends
– we use an expected dividend yield of zero because we have not declared or paid a cash dividend, nor do we have any
plans to declare a dividend.
|
We
used the following weighted-average assumptions to estimate the fair value of the options granted for the periods indicated:
|
|
For
the three months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Expected volatility
|
|
|
111
|
%
|
|
|
109
|
%
|
Expected term
|
|
|
6.25
years
|
|
|
|
5
years
|
|
Risk-free interest rate
|
|
|
0.43
|
%
|
|
|
2.46
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
The
following table summarizes the options granted for the periods indicated:
|
|
For
the three months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Options granted
|
|
|
1,175,927
|
|
|
|
201,000
|
|
Weighted-average:
|
|
|
|
|
|
|
|
|
Exercise price
|
|
$
|
1.45
|
|
|
$
|
6.69
|
|
Grant date fair
value
|
|
$
|
1.21
|
|
|
$
|
5.29
|
|
Restricted
Common Stock: We did not grant any shares of restricted common stock to employees during the three months ended March 31,
2020 or 2019. The following table summarizes restricted common stock compensation expense for the three months ended March 31,
2020 and 2019:
|
|
For
the three months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Research and development
|
|
$
|
325,000
|
|
|
$
|
-
|
|
General and administrative
|
|
|
139,000
|
|
|
|
172,000
|
|
Restricted stock-based compensation
expense included in operating expense
|
|
|
464,000
|
|
|
|
172,000
|
|
|
|
|
|
|
|
|
|
|
Total restricted stock-based compensation
expense
|
|
|
464,000
|
|
|
|
172,000
|
|
Tax benefit
|
|
|
-
|
|
|
|
-
|
|
Restricted stock-based
compensation expense, net of tax
|
|
$
|
464,000
|
|
|
$
|
172,000
|
|
NOTE
6 – COMMITMENTS AND CONTINGENCIES
Operating
Leases
We
lease space under operating leases for manufacturing and laboratory facilities and administrative offices in Cleveland, Ohio, as
well as administrative offices in New York, New York. We also lease office space in Madrid, Spain as well as certain
office equipment under operating leases, which have a non-cancelable lease term of less than one year and therefore, we have
elected the practical expedient to exclude these short-term leases from our right-of-use assets and lease liabilities. We can
terminate the operating leases for our manufacturing and laboratory facilities and administrative offices in Cleveland early
at December 31, 2020 and pay for unamortized tenant improvements.
Components
of lease cost are as follows:
|
|
For
the three months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Operating lease cost
|
|
$
|
434,000
|
|
|
$
|
289,000
|
|
Variable lease cost
|
|
$
|
83,000
|
|
|
$
|
73,000
|
|
Short-term lease cost
|
|
$
|
18,000
|
|
|
$
|
47,000
|
|
The
following table presents information about the amount and timing of cash flows arising from operating leases as of March 31, 2020:
Maturity
of lease liabilities:
|
|
|
|
2020, remainder
|
|
$
|
1,275,000
|
|
2021
|
|
|
1,713,000
|
|
2022
|
|
|
1,727,000
|
|
2023
|
|
|
1,741,000
|
|
2024
|
|
|
1,781,000
|
|
Thereafter
|
|
|
1,885,000
|
|
Total undiscounted operating lease payments
|
|
|
10,122,000
|
|
Less: imputed
interest
|
|
|
2,407,000
|
|
Present value
of operating lease liabilities
|
|
$
|
7,715,000
|
|
|
|
|
|
|
Balance sheet classification:
|
|
|
|
Current portion of lease liability
|
|
$
|
1,702,000
|
|
Long-term lease
liability
|
|
|
6,013,000
|
|
Total operating
lease liabilities
|
|
$
|
7,715,000
|
|
|
|
|
|
|
Other information:
|
|
|
|
Weighted-average remaining lease term for operating leases
|
|
70 months
|
|
Weighted-average discount rate for operating
leases
|
|
|
9.6
|
%
|
We
have engaged a contract manufacturer to assist us with developing and defining the processes necessary to manufacture our RDEB
product candidate. We had a remaining commitment of $6.3 million at March 31, 2020. The amount is payable based on the completion
of specific activities outlined in the contracted project plan; we expect to spend the entire $6.3 million in 2020.
We
are not currently subject to any material pending legal proceedings as of March 31, 2020.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
OVERVIEW
Abeona
Therapeutics Inc., a Delaware corporation (together with our subsidiaries, “we,” “our,” “Abeona”
or the “Company”), is a clinical-stage biopharmaceutical company developing gene and cell therapies for life-threatening
rare genetic diseases. Our lead clinical programs consist of: (i) EB-101, an autologous, gene-corrected cell therapy for recessive
dystrophic epidermolysis bullosa (“RDEB”), (ii) ABO-102, an adeno-associated virus (“AAV”)-based gene
therapy for Sanfilippo syndrome type A (“MPS IIIA”), and (iii) ABO-101, an AAV-based gene therapy for Sanfilippo syndrome
type B (“MPS IIIB”). We have additional AAV-based gene therapies in various developmental stages designed to treat
the CLN1 and CLN3 forms of Batten Disease, cystic fibrosis and retinal diseases. Moreover, we are developing next-generation AAV-based
gene therapies using our novel AIM™ capsid platform and internal AAV vector research programs. We believe our product
candidates are eligible for orphan drug designation, breakthrough therapy designation, or other expedited review processes in
the U.S., Europe or Japan. Our pipeline includes five product candidates for which we hold several U.S. and EU regulatory designations:
Our
robust and diverse pipeline features early-stage and late-stage candidates with the potential to transform the treatment of devastating
genetic diseases, and we are conducting clinical trials in the U.S. and abroad.
Our
Mission and Strategy
Abeona
is at the forefront of gene and cell therapy research and development. We are a fully integrated company featuring innovative
research, therapies in clinical development, in-house manufacturing facilities, a robust pipeline, and scientific, clinical,
and commercial leadership. We see our mission as working together to create, develop, manufacture and deliver gene and cell therapies
to patients impacted by serious diseases. We partner with leading academic researchers, patient advocacy organizations
and caregivers to bring therapies that address the underlying cause of a broad spectrum of rare genetic diseases where no effective
treatment options exist today.
Since
our last fiscal year, we made significant progress toward fulfilling our goal of harnessing the promise of genetic medicine to
transform the lives of people impacted by serious diseases and redefine the standard of care through gene and cell therapies.
Our strategy to achieve this goal consists of:
Advancing
our Clinical Gene and Cell Therapy Programs and Research and Development with a Focus on Rare and Orphan Diseases.
We
have three programs in clinical development—EB-101, ABO-101 and ABO-102—and a pipeline of additional earlier stage
programs. Through our gene and cell therapy expertise in research and development, we believe we are positioned to rapidly introduce
novel therapeutics to transform the standard of care in devastating diseases and establish our leadership position in the
field.
Applying
Novel Next Generation AIM™ Capsid Technology to Develop New In-Vivo Gene Therapies.
We
are researching and developing next-generation AAV-based gene therapy using our novel capsids developed from the AIM™ Capsid
Technology Platform and additional Company-invented AAV capsids. We aim to continue to develop chimeric AAV capsids capable of
improved tissue targeting for various indications and potentially evading immunity to wildtype AAV vectors.
Establishing
Leadership Position in Commercial-Scale Gene and Cell-Therapy Manufacturing.
We
established current Good Manufacturing Practice (“cGMP”), clinical-scale manufacturing capabilities for gene-corrected
cell therapy and AAV-based gene therapies in our state-of-the-art Cleveland, OH facility. We believe that our platform provides
us with distinct advantages, including flexibility, scale, reliability, and the potential for reduced development risk, cost,
and faster times to market. We have focused on establishing internal Chemistry, Manufacturing and Controls (“CMC”)
capabilities that drive value for our organization through process development, assay development and manufacturing. We have also
deployed robust quality systems governing all aspects of product lifecycle from preclinical through commercial stage.
Establishing
Additional Gene and Cell Therapy Franchises and Adjacencies through In-Licensing and Strategic Partnerships.
We
seek to be the partner of choice in rare disease and have closely collaborated with leading academic institutions, key opinion
leaders, patient foundations and industry partners to generate novel intellectual property, accelerate research and development,
and understand the needs of patients and their families.
Maintaining
and Growing IP Portfolio.
We
strive to have a leading intellectual property portfolio. To that end, we seek patent rights for various aspects of our programs,
including vector engineering and construct design, our production process, and all features of our clinical products including
composition of matter and method of administration and delivery. We expect to continue to expand our intellectual property portfolio
by aggressively seeking patent rights for promising aspects of our product engine and product candidates.
IMPACT
OF COVID-19 PANDEMIC ON OUR BUSINESS
The
emergence of the coronavirus (“COVID-19”) pandemic has created extraordinary challenges and uncertainty across all
aspects of healthcare. We are monitoring the COVID-19 pandemic and its effects and have taken a number of measures to ensure the
safety of our patients and employees while sustaining our business operations during this uncertain time. We are fully focused
on getting through the pandemic by working closely with our clinical trial sites to ensure that patient safety remains paramount.
We
are actively assessing the impact of the COVID-19 pandemic on our business and are taking appropriate actions to manage our spending
activities and preserve our cash resources. We will continue to monitor the situation and may take further actions to adjust our
business operations that we determine are in the best interests of our patients, employees, suppliers and stockholders. While
we are unable to determine or predict the extent, duration or scope of the overall impact the COVID-19 pandemic will have on our
business, operations, financial condition or liquidity, we believe that it is important to share where we stand today, how our
response to COVID-19 is progressing and how our operations and financial condition may change as the fight against COVID-19 develops.
Clinical
Program Activities
We
remain committed to advancing our clinical programs, but recognize delays are inevitable in these uncertain times, especially
as global healthcare resources are justly redirected to those who need them most. We are continually assessing the dynamic situation
and have implemented measures to minimize disruption. We also are regularly reassessing plans along with associated processes
and policies to ensure our patients and employees are safe, and that continuity in our scaled back operations remains.
While
the full impact on our clinical programs cannot be quantified at this point, all current clinical trial sites remain active, providing
virtual and remote follow-up to ensure compliance with safety oversight. Nonetheless, our EB-101 clinical site at Stanford University
has paused patient dosing and delays are expected as the situation evolves globally. Clinical sites involved in the studies for
children with MPS IIIA and MPS IIIB remain active, but rate of enrollment has slowed due to inability of patients and their
families to travel to trial sites.
Manufacturing
Activities
Operations
at our Cleveland manufacturing facility have been significantly scaled back to ensure that employees and those around them have
the best chance to stay safe, and to accommodate reduced manufacturing and clinical development activities. Only employees deemed
essential by senior management to maintaining the manufacturing operation are entering the facility under strict safety protocols
to mitigate their risk.
We
have paused our manufacturing activities for EB-101 material, pending patient enrollment, as well as our AAV manufacturing and
process development activities. During this pause period, we are taking the opportunity to complete maintenance and monitoring
projects. We are ready to promptly resume our EB-101 manufacturing activities when patients are again ready to be treated in our
phase III study as well as our AAV process development and manufacturing activities. We are expecting to resume those activities
in the next few weeks but predicated on the evolution of the COVID-19 pandemic.
Business
Operations
Looking
inward, the safety of our employees is a top priority. We have instituted additional protective measures since news of COVID-19
broke, and we regularly assess and improve our safety practices and policies. Aside from clinical and manufacturing operations,
other business operations including regulatory, legal, finance and human resources are less impacted as remote work has continued
uninterrupted.
The
extent of the impact of the COVID-19 pandemic on our business, operations, and clinical trials will depend on certain developments,
including: (i) the duration of the declared health emergencies; (ii) actions being taken by governmental authorities and regulators
with respect to the pandemic; (iii) the impact on our partners, collaborators, and suppliers; and (iv) actions being taken by
us in response to this crisis. We remain dedicated to communicating regularly and openly with our stakeholders as more information
becomes available, including updates on material changes to prior guidance as we continue to follow applicable government, regulatory
and institutional guidelines.
RESULTS
OF OPERATIONS
Total
research and development spending for the first quarter of 2020 was $6.8 million, as compared to $11.7 million for the same period
of 2019, a decrease of $4.9 million. The decrease in expenses was primarily due to:
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decreased
clinical and development work for our gene and cell therapy product candidates ($4.5 million), partially resulting from scaled
back manufacturing, clinical and non-clinical development activities following on from the effects of the COVID-19 pandemic;
and
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decreased
salary and related costs ($0.4 million).
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Total
general and administrative expenses were $6.4 million for the first quarter of 2020, as compared to $5.7 million for the same
period of 2019, an increase of $0.7 million. The increase in expenses was primarily due to:
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increased
salary and related costs ($1.5 million), partially resulting from increased severance costs for certain executive positions;
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decreased
professional fees ($0.5 million);
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decreases
in net other general and administrative expenses ($0.3 million).
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Depreciation
and amortization were $2.1 million for the first quarter of 2020, as compared to $1.7 million for the same period in 2019, an
increase of $0.4 million. The increase was driven primarily by increased depreciation expense on fixed assets.
On
November 4, 2018, we entered into a license agreement with REGENXBIO Inc. (“REGENXBIO”) to obtain rights to an exclusive
worldwide license (subject to certain non-exclusive rights previously granted for MPS IIIA), with rights to sublicense, to REGENXBIO’s
NAV AAV9 vector for gene therapies for treating MPS IIIA, MPS IIIB, CLN1 Disease
and CLN3 Disease. The cost of the license was being amortized over the life of the patent of eight years. We had been engaged
in recent discussions with REGENXBIO in an attempt to renegotiate the financial terms of the agreement, but we have been unable
to reach a mutual understanding that we believed would have been favorable for the Company or our programs, and we did not make
an $8 million payment due by April 1, 2020. On April 17, 2020, REGENXBIO sent us a written demand for the $8 million fee, payable
within a 15-day cure period after receipt of the demand letter. The license terminated on May 2, 2020, when the 15-day period
expired. We are not subject to early termination penalties, but under the Agreement, REGENXBIO is still due a total of $28 million.
As
of March 31, 2020, we considered the status of our discussions with REGENXBIO as a potential indicator of impairment in accordance
with ASC 360-10-35-21. Since our impairment testing indicated that the carrying value of the license agreement exceeded its fair
value, we recorded a $32.9 million non-cash impairment charge in the first quarter of 2020.
Net
loss for the first quarter of 2020 was $48.2 million, or a $0.52 basic and diluted loss per common share as compared
to a net loss of $18.6 million, or a $0.39 basic and diluted loss per common share, for the same period in 2019. The increase
in the net loss results primarily from a licensed technology impairment charge of $32.9 million, partially offset by lower research
and development expenses of $4.9 million.
LIQUIDITY
AND CAPITAL RESOURCES
We
have historically funded our operations primarily through sale of common stock. The COVID-19 pandemic has negatively affected
the global economy and created significant volatility and disruption of financial markets. An extended period of economic disruption
could negatively affect our business, financial condition, and access to sources of liquidity.
Our
principal source of liquidity is cash and cash equivalents. As of March 31, 2020 and December 31, 2019, our cash and cash equivalents
were $40.2 million and $129.3 million, respectively.
As
of March 31, 2020 and December 31, 2019, our working capital was $82.1 million and $93.7 million, respectively. The decrease in
working capital at March 31, 2020 resulted primarily from $13.2 million of cash used for operating activities.
On
December 24, 2019, we closed an underwritten public offering of 32,382,945 shares of common stock at a public offering price of
$2.50 per share. In addition, as part of the offering, we sold to an existing investor “pre-funded” warrants to purchase
up to an aggregate of 9,017,055 shares of common stock at a purchase price of $2.4999 per pre-funded warrant, which equals the
public offering price per share of the common stock less the $0.0001 per share exercise price of each pre-funded warrant. The
gross proceeds to the Company were approximately $103.5 million, before deducting the underwriting discounts and commissions and
estimated offering expenses payable by the Company.
On
August 17, 2018, we entered into an open market sale agreement with Jefferies LLC. Pursuant to the terms of this agreement, we
may sell from time to time, through Jefferies LLC, shares of our common stock for an aggregate sales price of up to $150 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 did not sell any shares of our common stock under this
agreement during the three months ended March 31, 2020.
On
November 4, 2018, we entered into a license agreement with REGENXBIO Inc. to obtain rights to an exclusive worldwide license
(subject to certain non-exclusive rights previously granted for MPS IIIA), with rights to sublicense, to REGENXBIO’s
NAV AAV9 vector for gene therapies for treating MPS IIIA, MPS IIIB, CLN1
Disease and CLN3 Disease. Consideration for the rights granted under the original agreement included fees totaling $180
million and a running royalty on net sales, including: (i) an initial fee of $20 million, $10 million of which was due to
REGENXBIO shortly after the effective date of the agreement, and $10 million of which was due on the first anniversary of
the effective date of the agreement in November 2019, (ii) annual fees totaling $100 million, payable in $20 million annual
installments beginning on the second anniversary of the effective date (the first of which remains payable if the agreement
is terminated before the second anniversary in November 2020), (iii) sales milestone payments totaling $60 million, and (iv)
royalties payable in the low double digits to low teens on net sales of products covered under the agreement. The license
is amortized over the life of the patent of eight years. On November 1, 2019, we entered into an amendment of the original
license agreement. The amended agreement replaced the $10 million payment due on November 4, 2019 with a $3 million payment
due on November 4, 2019 and an additional $8 million payment (which includes $1 million of interest) due no later than April
1, 2020. The payment due by April 1, 2020 and the guaranteed amount of $20 million due on November 4, 2020 are recorded as
payable to licensor on the consolidated balance sheet.
Prior
to the April 1, 2020 deadline, we engaged REGENXBIO in discussions in an attempt to renegotiate the financial terms of the
agreement, but we were unable to reach a mutual understanding that we believed would have been favorable for the Company or
our programs, and we did not make the $8 million payment due by April 1, 2020. On April 17, 2020, REGENXBIO sent us a written
demand for the $8 million fee, payable within a 15-day cure period after receipt of the demand letter. The license terminated
on May 2, 2020, when the 15-day period expired. We are not subject to early termination penalties, but under the agreement,
REGENXBIO is still due a total of $28 million.
Since
our inception, we have incurred negative cash flows from operations and have expended, and expect to continue to expend, substantial
funds to complete our planned product development efforts. Since inception, our expenses have significantly exceeded revenues,
resulting in an accumulated deficit of $534.6 million as of March 31, 2020. We have not been profitable since inception
and to date have received limited revenues from the sale of products. We expect to incur losses for the next several years as
we continue to invest in product research and development, preclinical studies, clinical trials and regulatory compliance and
cannot provide assurance that we will ever be able to generate sufficient product sales or royalty revenue to achieve profitability
on a sustained basis, or at all.
If
we raise additional funds by selling additional equity securities, the relative equity ownership of our existing investors will
be diluted, and the new investors could obtain terms more favorable than previous investors. If we raise additional funds through
collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to
our technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be
favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to
delay, limit or terminate our product development programs or any future commercialization efforts or grant rights to develop
and market product candidates to third parties that we would otherwise prefer to develop and market ourselves.
In
light of the COVID-19 pandemic, we are carefully re-assessing key business activities and all associated spending decisions while
we await clarity on the timing of re-starting our clinical trials and manufacturing activities. When those activities re-start,
we expect to spend necessary funds on manufacturing activities and preclinical studies and clinical trials of potential products,
including research and development with respect to our acquired and developed technology. Our future capital requirements and
adequacy of available funds depend on many factors, including:
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the
impact to our business, operations, and clinical programs from the COVID-19 pandemic and related effects on the U.S. and global
economy;
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the
successful development and commercialization of our gene and cell therapy and other product candidates;
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the
ability to establish and maintain collaborative arrangements with corporate partners for the research, development and commercialization
of products;
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continued
scientific progress in our research and development programs;
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the
magnitude, scope and results of preclinical testing and clinical trials;
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the
costs involved in filing, prosecuting and enforcing patent claims;
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the
costs involved in conducting clinical trials;
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competing
technological developments;
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the
cost of manufacturing and scale-up;
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the
ability to establish and maintain effective commercialization arrangements and activities; and
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successful
regulatory filings.
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Due
to uncertainties and certain of the risks described above, including those relating to the COVID-19 pandemic and our ability to
successfully commercialize our product candidates, our ability to obtain applicable regulatory approval to market our product
candidates, our ability to obtain necessary additional capital to fund operations in the future, our ability to successfully manufacture
our products and our product candidates in clinical quantities or for commercial purposes, government regulation to which we are
subject, the uncertainty associated with preclinical and clinical testing, intense competition that we face, market acceptance
of our products, the potential necessity of licensing technology from third parties and protection of our intellectual property,
it is not possible to reliably predict future spending or time to completion by project or product category or the period in which
material net cash inflows from significant projects are expected to commence. If we are unable to timely complete a particular
project, our research and development efforts could be delayed or reduced, our business could suffer depending on the significance
of the project and we might need to raise additional capital to fund operations, as discussed in the risks above, including those
relating to the uncertainty of the success of our research and development activities and our ability to obtain necessary additional
capital to fund operations in the future.
We
plan to continue our policy of investing any available funds in suitable certificates of deposit, money market funds, government
securities and investment-grade, interest-bearing securities. We do not invest in derivative financial instruments.
OFF-BALANCE
SHEET ARRANGEMENTS
We
did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under
applicable SEC rules.