Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Abeona Q3 2021 earnings call. At this time, all participants are on a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. I would now like to turn the call over to Greg Gin, Head of Investor Relations. Please go ahead.
Thank you, Kelly. Good morning, everyone. I would like to welcome and thank you for joining us on our Q3 2021 conference call. The press release announcing the Q3 results and recent operational progress is available on our website at www.abeonatherapeutics.com. On the call today with prepared remarks are Vishwas Seshadri, CEO of Abeona, and Edward Carr, CFO. After the prepared remarks, we'll host the Q&A session. We are also joined by Dr. Brian Kevany, our Chief Technical Officer. Before we start, I will review our safe harbor statement. Remarks made during today's call may contain projections and forward-looking statements regarding future events. Forward-looking statements are made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements are based on current expectations and are subject to change, and actual results may differ materially from those expressed or implied in the forward-looking statements.
Various factors that could cause actual results to differ include, but are not limited to, those identified under the section entitled Risk Factors in the Company's annual report on Form 10-K and quarterly reports on Form 10-Q filed by the Company with the SEC. These documents are available on our website at www.abeonatherapeutics.com. With that, I will now turn the call over to Vish.
Thank you, Greg. Thank you, and good morning, everyone. Thank you for joining us this morning. This is my Q1 call since transitioning to CEO about four weeks ago, and I'm happy to update you on our substantial progress in the Q3 and since quarter end. I'm thrilled to be leading Abeona during this exciting and critical time in our life cycle. We are advancing two late-stage pivotal assets with Rare Pediatric Disease Designations, transformational potential, and key anticipated milestones in the coming months, including finishing patient accrual for the EB-101 phase III VIITAL study in the Q1 of 2022 and top-line data read out in the Q3 of 2022. We are continuing to work toward bringing our gene therapies as safely, effectively, and quickly as possible to patients who suffer from these diseases that have no approved treatments.
We have taken a big step toward that goal by recently enhancing our leadership and bench strength with gene therapy and biopharma industry veterans to prepare for two biologics license application submissions for our lead clinical programs in RDEB and MPS IIIA. These hires include Jon Voss as Head of Quality, Carl Denny as Head of Regulatory, and Kate Imhoff as Senior Director of Regulatory. All three bring considerable gene therapy experience with late-stage clinical and commercialized products in companies like AveXis, Sarepta Therapeutics, and Cellectis. Now let's take a closer look at EB-101, our investigational autologous gene-corrected cell therapy that has demonstrated a high rate of instantaneous wound healing and pain reduction for six years, the latest follow-up time point reported, after treatment of large chronic wounds in RDEB patients in the phase I/II study.
We are anticipating similar outstanding results from our ongoing phase III VIITAL study. As a reminder, the target for the VIITAL study is a treatment of approximately 35 large chronic wounds, each treated wound being paired with an untreated control wound within the same patient. Large chronic wounds are the most severe and problematic wounds in RDEB. Unlike small recurring wounds that can close spontaneously, these large chronic wounds have greater than 20 square cm of surface area and remain open for more than six months, very often for years, and cannot close themselves and are associated with severe pain that is often managed with opioids. I'm very pleased to report that since the last earnings call, we have continued to treat patients, and we are close to accruing the VIITAL study.
We have identified and are scheduling treatment for the final patients and anticipate treating them by Q1 of 2022. We therefore expect top-line study results in the Q3 of 2022 upon completing the 24-week follow-up for the last patient treated. The anticipated timing for BLA filing is year-end 2022 to early 2023. As previously mentioned, UMass Memorial Medical Center, the second clinical site in the VIITAL study, is now active and prescreening the patients. Turning to EB-101 manufacturing. As a reminder, we are a non-CDMO dependent company. We've manufactured the drug products for the phase III VIITAL study at our Cleveland facility. We have made significant progress in updating the Module three of the IND with information pertaining to manufacture of EB-101 in-house. We have also been advancing process characterization work and other CMC activities to support a BLA filing for EB-101.
We believe that bringing manufacturing and critical analytical assays for our assets in-house at Abeona is a key strategic advantage in the cell and gene therapy space. Let's turn to our adeno-associated virus platform and our second clinical program, ABO-102, investigational therapy for Sanfilippo syndrome type A or MPS IIIA. In the previous earnings call, we reported that we aligned with the FDA on the definition of the primary endpoint for the pivotal Transpher A study to enable registration. The primary endpoint is a neurocognitive assessment using raw score of Bayley Scales for Infant and Toddler Development, BSID, and the Kaufman Assessment Battery for Children, KABC-II, for children who attain a developmental age of 42 months.
We have since submitted an amended trial protocol reflecting the agreed upon endpoints. We have collaborated with experts in the MPS IIIA to finalize the statistical analysis plan, or SAP, which we are scheduled to discuss with the FDA in the Q1 of 2022 through the RMAT mechanism. As a reminder, we have already treated 10 patients with ABO-102 in the therapeutic dose cohort. The preservation of neurocognitive development is evaluated over a period of up to five years. Therefore, depending on the primary analysis methodology and the neurocognitive performance observed in the more recently dosed patients, we anticipate top line results from Transpher A anywhere between the Q4 of 2022 and Q2 of 2023.
We are excited about the safety and magnitude of benefits seen with ABO-102 in children treated early in age at the therapeutic dose for whom we have reported unprecedented trends in disease-specific biomarkers, preservation of neurocognitive development, as well as anatomical development using brain MRI, which was presented at the International Symposium on MPS and Related Diseases in the Q3 of 2021. The MRI data shows increased gray matter corpus callosum and amygdala volumes in the brain in three young patients with MPS IIIA treated at 24 months or before and at two years post-treatment as compared to afflicted patients without treatment, which is consistent with the preservation of neurocognitive development that we have previously reported.
While the triangulation of results from biomarker, neurocognitive development, and brain MRI builds clinical conviction about the treatment effect of ABO-102, this will be important also from a regulatory approval standpoint, as the FDA has indicated that they will consider all kinds of clinical data points holistically in regulatory decision-making. We have previously sourced the ABO-102 drug product from Nationwide Children's Hospital. Earlier this year, we commenced activities to be able to manufacture ABO-102 at our Cleveland facility. We are on track to complete manufacturing of 6 GMP lots of ABO-102 this year using animal-free materials.
We expect analytical comparability studies to establish equivalence of Abeona-produced drug product with that sourced from Nationwide Children's Hospital in the H1 of 2022 using the battery of tests as instructed by the FDA for ABO-102. Additionally, in preparation for commercial supply of ABO-102, we have initiated the construction of a 12,000 sq ft commercial AAV manufacturing facility at our Cleveland site. This facility will also have the capacity to support other AAV programs, including our preclinical ocular programs in the future. Let's move on to a brief update on our third clinical program, the ABO-101 Transpher B study in Sanfilippo type B or MPS IIIB.
As we first mentioned on the Q2 call, we have closed enrollment in the Transpher B study and are following patients treated in the study and under the Compassionate Use Program in Germany for safety and efficacy of ABO-101. As reported earlier, biomarker and safety data look encouraging. We look forward to seeing two-year neurocognitive data to assess efficacy of ABO-101 in the H2 of 2022. I will now briefly turn to our preclinical programs. While we are currently focused on rare diseases in our clinical programs, we intend to address larger areas of unmet medical need, and our preclinical programs are investigating novel AAV capsid in five undisclosed ophthalmic conditions with estimated U.S. prevalence ranging from 5,000-15,000 patients.
We previously shared data from non-human primates to determine optimal routes of administration with different novel capsids. Subsequently, we have made significant progress in generating mouse models for three indications, prepared the genetic constructs, produced the vectors with appropriate capsids, and developed assays to measure efficacy in the preclinical setting. We are encouraged by gene expression levels with our constructs in vitro studies. We're expanding the model mouse colonies and have already started dosing animals. We expect animal proof of concept data by mid-2022 and pre-IND meetings with the FDA in late 2022. Before I request Ed to review our financial results, I want to briefly comment on our formal settlement with REGENXBIO, which resolves our previously disclosed dispute over an arbitration award.
The settlement provides for payments by Abeona over a three-year period, and importantly, erases certain downside scenarios that could have made it challenging to make it to our next inflection points. With the arbitration uncertainty behind us, we are focused on completing the registration enabling studies and submitting BLA filings for both ABO-101 and ABO-102 to deliver these therapies to patients in need as quickly as we can. With that, I'll now turn over the call to Ed.
Thank you, Vish. I would like to remind everyone that the Form 10-Q is available on our website, which is where you can get additional details on our financial results for the three and nine months ended September 30th, 2021. Starting with the financial resources on our balance sheet, we had cash equivalents, and short-term investments of $67 million as of September 30th, 2021. Net cash used in operating activities was $10.3 million for the Q3 of 2021. As part of the settlement with REGENXBIO, we have agreed to make payments to REGENXBIO of $20 million in the Q4 of 2021, $5 million in November 2022, and $5 million no later than November 2024. As Vish mentioned, this settlement allows us to eliminate ongoing legal expenses, deployment of resources, and risks related to the dispute.
With our existing financial resources, we are continuing to drive our lead programs towards key milestones. Based on our existing cash equivalents, and short-term investments, our ability to access additional financial resources, and our financial flexibility to reduce operating expenses if required, we believe that we have sufficient resources to fund operations through at least the next 12 months. To further strengthen the balance sheet and prepare for BLA filings, commercial launch readiness, and the AAV facility build-out that Vish mentioned, we are exploring various options, including strategic partnering of pipeline assets and non-dilutive funding.
Turning to research and development activities in the Q3 of 2021, we spent $8 million, which is consistent with the $8 million spent in the Q3 of 2020. Our spend on general administrative activities was $6.1 million in the Q3 of 2021 compared to $4.4 million spent in the Q3 of 2020. General and administrative expenses include the cost of personnel not working directly on clinical and pre-clinical activities, as well as professional fees, insurance, rent, and office expenses. The increase in general administrative expenses in the Q3 of 2021 results primarily from increased stock-based compensation and professional fees, partially offset by decreased salary and related costs.
Gain on settlement with licensor was $6.7 million in the Q3 of 2021 as compared to zero in the same period of 2020 and resulted from the accounting for the settlement agreement with REGENXBIO. The PPP or Paycheck Protection Program loan forgiveness income was $1.8 million in the Q3 of 2021 as compared to zero in the same period of 2020 as a result of receiving the SBA or Small Business Administration's forgiveness of our PPP loan in July 2021. With that, I'll turn the call over to the operator to commence the Q&A session. Operator?
Certainly. The floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold a few moments while we poll for questions. Your first question is coming from Maury Raycroft with Jefferies. Please pose your question.
Hi, good morning, everyone. Congrats on the updates, and thanks for taking my questions. First, I wanted to ask on the press release that came out this morning on ABO-102 and the ICIEM conference. I guess maybe if you could just talk a little bit more about what you're going to be presenting at the conference and how these factors into the big picture plan for ABO-102.
Absolutely. Thank you, Maury, for the question. I will take this one. The data that we are presenting at ICIEM, the important part of the data is really the correlation that we see between Bayley scoring and Mullen. These are two different scales that are used in neurocognitive assessment. What we have shared in the past, the data from the Transpher A study in terms of developmental age equivalent and the wonderful results that we've seen for the first three dosed children are all based on the Mullen scores, but we've been collecting Bayley as well. The common question that arises is, how will the neurocognitive assessment look when you switch over to Bayley, which is now what's been agreed with the FDA as our primary endpoint for the study?
The data that shows correlation between Bayley and Mullen that we will be presenting at ICIEM shows that those scores are correlated at approximately 95% correlation. Therefore, what it implies is that you should almost expect similar results if you put our Bayley scores instead of Mullen in the current ongoing Transpher A study. I hope that answers this question, Maury. Happy to clarify if you have any other follow-ups on that.
Yeah. That helps to answer. It seems like this is going to be an important update that would likely go right into the filing for this program and help, I guess, align, make sure that the endpoints are aligned for one.
Thank you. Yes. Yes.
Got it. Okay. I also wanted to ask a question on EB-101 for RDEB. You mentioned that you were opening up this other site on the East Coast, UMass Medical School. Just wanted to see how recruiting is going there and if you can provide any more perspective into enrollment for the study.
Sure. Thanks for that question, Maury. As we previously shared, we have activated the UMass site now, and they are actively pre-screening patients. So we can expect patients to be treated there at any given point in time. We're definitely seeing more interest from patients who would not travel to the Stanford site because it would take from the East Coast a five-hour journey, and that's something that's prohibitive for many patients from participating. We would like to stress the fact that we already shared, which is we have identified the patients that we need, the last final patients that we need to complete accrual in the VIITAL study.
Most importantly, in getting patients treated at UMass, we have done a lot of work transferring the knowledge from Stanford so that UMass is fully up to speed with all the protocols and procedures because the way of treating EB-101 product for the patient has a lot of intricacies, and we wanted to make sure that nothing is missed in that tech transfer. That's what has taken this time, but we are very confident that UMass is an equally competent site that can apply EB-101, and they are actively screening patients.
Great. Okay, thanks for taking my questions. I'll hop back in the queue.
Thank you, Maury.
Your next question is coming from Ram Selvaraju with H.C. Wainwright. Please pose your question.
Hi, this is Mazin for Ram. Thanks very much for taking our questions. Firstly, just regarding the enrollment for the phase III VIITAL study for EB-101, is there a significant reason you changed guidance on completion of enrollment from the end of this year to Q1 2022?
Thanks for the question, Ram. The short answer is no, it's not a significant change in the timing, and it has nothing to do with patient availability for the study or patient interest in participating. We have a lot of patients who are interested. It's more a matter of logistics and experimental design. As you would think in commercial setting, any large chronic wound is absolutely appropriate for treatment of EB-101. But in our study, we have to randomize intra-patient wounds to have symmetry in the body. So if you have a wound in the upper right arm, you want a wound that is a control wound in the upper left arm, which puts some artificial constraints on who are the most appropriate patients. That's one factor which is unique to the clinical trial. You will not see that in the commercial setting.
That's one. Second, we have the patients identified. It's a matter of scheduling, and it's also a matter of we have an annual routine cGMP shutdown that happens in the last half of December, and at that time, we cannot manufacture. This is something that we do every year. If you missed during biopsy date by end of November, the next available slot goes to mid-January. That is the primary reason why this spilled over to quarter one 2022, and we're very confident that we're going to be approved in quarter one.
Okay. Appreciate the clarification. Regarding the neurological assessments, for the phase one and two ABO-101 study for MPS IIIB, have there been any current hindrance due to the ongoing pandemic for this assessment?
Thanks for the question, Ram. There is no specific hindrance for MPS IIIB neurocognitive assessments due to the pandemic per se, which is any different from the MPS IIIA program. As we've previously shared, for the MPS IIIB program, the timing of when we will have meaningful neurocognitive assessment requires that follow-up period, and that's what leads us to, based on the seven patients that have been dosed already, that meaningful time will be in the H2 of 2022, where we would have two-year follow-up for at least four or five patients. That's the time we can really make meaningful assessments of the MPS IIIB patients.
Okay. Just finally shifting to your gene therapy pipeline. You know, the MPS III space is relatively crowded. What do you think differentiates your AAV-based therapies? You know, in light of your AAV manufacturing facility, do you anticipate any kind of clear competitive advantage arising from this? If you have any plans to monetize your manufacturing facility or leverage it in some way? Thanks for taking our questions.
Yeah. Thanks for that question, Ram. I'll have to correct you on one point here. The MPS IIIA and MPS IIIB space is not crowded. We currently have nothing that works in this disease. There is no standard of care. There's no treatment at all. Our programs are the most advanced, and anything that is still in development is at least five to seven years away. We've only seen preclinical or clinical preliminary biomarker clinical data, and that's just systemic data, not anything to do with central nervous system. W e believe that this is unique there. The second part of your question, which had to do with manufacturing preparedness. We've made a strategic choice here. We don't want to be at the mercy of the CDMO. We want to be a non-CDMO-dependent company, which is why.
Even as we wait for our products to get approved, there are patients that are lined up for these therapies. Which is why in our latest protocol amendments, we're making provisions for patients to be treated in Transpher A, even though we have gotten the necessary accrual done for an efficacy analysis for registrational purposes. We don't want to lose any time, and these patients are waiting, which is why we've already started work on building out our AAV facility.
It also has to do with when EB-101 launches commercially, our current facility will become a single source, single product facility, which means we cannot any longer manufacture MPS IIIA ABO-102 product there, which is why we have already started to construct this new facility, and we want to be in time to be able to dose patients in need.
All right. Many thanks, Vish.
Thank you, Ram.
Next question is coming from Mani Foroohar with Leerink. Please pose your question.
Thanks, guys. I guess a couple questions around how you're thinking about strategic alternatives versus, sort of strategy on managing the balance sheet. Obviously, you mentioned some investments you have to make around, you know, the transition from EB to single source manufacturing to product manufacturing. Can you give us something exactly where your approximate cash funnel will be as you hit some of the key catalysts that you're talking about in terms of what the EB program and the gene therapy and the AAV program? And then secondarily, in a separate question, as you think about potentially out-licensing or partnering some of these assets, should we view the entire AAV platform as a single asset? Is it operationally even possible to license these programs and assets out to different recipients?
Like how should we think about the partner able quantum of your AAV programs?
Yeah. First, we'll take the first question, Mani, and thank you for that. Ed will be addressing your question that relates to cash balance and our build-out coming up to the next milestones. Ed?
Yeah, sure. Yes. I mean, yeah, as you know, there's $67 million on the balance sheet at the end of September. Just looking forward, as we mentioned in my prepared remarks, I think we have enough cash. I'm confident we have enough cash and financial flexibility, access to resources to get to the key milestone next year, which is the phase III VIITAL study readout. That would be a key inflection point for us. There's also some other key inflection points as we think about that even forward. We have the MPS IIIA.
Top-line data, hopefully assuming the magnitude of effects are still there, for late 2022, early 2023. You've got BLA filings, BLA approvals. I think there's a really healthy pipeline of inflection points as we look forward. One that we are obviously most myopic on is getting to this phase III VIITAL readout in Q3 of 2022. That's how I would answer that question. Hopefully, that's helpful.
Thank you, Ed. On the second part of your question, Mani which is the quantum for out-licensing. It's a little premature to give a definitive answer, but as you see, there is a whole portfolio or a spectrum of different potential partners for out-licensing, and their goals can be different. Some that will be interested in the platform as a whole, some that will be interested in late-stage assets where they have the ability to commercialize in certain geographies, depending on. We've seen all of those different shades of, you know, strategic positions of our potential partners, and we're open to all different types of arrangements, and that's all I could say right now. You know, our platform applies to multiple therapeutic areas as well.
As you know, our preclinical programs are in the ocular space, so there could be players that are specifically interested in ocular programs and are, you know, the MPS IIIA and IIIB are more in the neurological, neuropsychiatric kind of marketplace, and there are specific players that are interested in those types of assets. We are in a position to, you know, develop quanta or packets as in how these conversations ensue.
Great. That's helpful.
Absolutely.
Thanks, guys.
Thank you, Mani.
Your next question is coming from Kristen Kluska with Cantor Fitzgerald. Please pose your question.
Hi, good morning, everybody. Thanks for taking the questions. The first one I have is on EB-101. Wondering if you think this data top-line readout next year could include any longer-term findings beyond the six-month endpoint since some of these patients were enrolled early on ahead of the pandemic. Could you speak to the importance of your durability data from both this trial and then, of course, the phase I/II trial when potentially filing for BLA, given the FDA stance and focus on the effects across cell and gene therapies and durability?
Thank you, Kristen Kluska, for the question. First off, it's a very important question that you raised, the durability and the long-term benefit that we offer to patients. The regulatory requirement is a six-month time point. What you will see in a regulatory package is going to be six months from treatment and what is the level of wound healing and the pain reduction that we see, right? However, the long-term follow-up data that we have presented from our phase I/II study so far tell us that there's a lot more value proposition than the regulatory hurdle. We have seen up to six years of data and a patient that had 80% of the wounds treated at six years, showing 80% of the wounds showing greater than 75% closure, which is very significant, and also the pain reduction sustaining that way.
This is going to help us completely build out the value proposition and appropriately pricing our assets and commensurate with the value that we provide to patients. To your question about whether phase III data will also have similar, there'll be some patients that have a longer-term follow-up, two, three years out, that we will continue to publish and report on as the study continues. What is important is to recognize for both the phase I/II and the phase III, the patients are being followed for a period of 15 years. This is going to be a continuous data update over time, showing the durability of our therapies.
I hope that gives you a good sense to the full value proposition of the drug more than just the regulatory endpoint that we're looking at to get the product into the market.
Okay. Appreciate that. I had a question regarding the potential and exploration of strategic partnerships. Understand that your late-stage pipeline is rare disease-focused and that the ophthalmology pipeline, while not disclosed, you have indicated that some of these indications are a little bit larger. Wondering if we should be thinking or if the company's evaluating things on a geography basis. Perhaps are their certain regions where these diseases are more impacted? Also separately looking at the earlier pipeline, the AAV capsid library, could you discuss some areas that could be attractive for somebody to evaluate, including perhaps how some of these capsids could address some of the limitations that are currently observed in AAV-based gene therapies?
Absolutely. There's at least two parts to the question, Kristen. First, let me talk about the strategic partnerships and your question about geographic prevalence of some of the diseases that we are more mature in development. Our goal is to have these therapies commercialized in every geography. We currently don't for MPS 3A as well as EB, we do not have any variations on a per population basis, the incidence levels of these diseases being very different in different geographies. It's these are genetic disorders that happen in all different parts of the world. Our initial focus for launches, of course, are U.S. and Europe focused, but our goals are completely to expand beyond that to other geographies, including Asia-Pacific and everywhere there's a need.
This is where we are looking at potential strategic partners that have experience in those more emerging kinds of markets , and there is, I mean, we do know that there is interest in those types of geographic expansions where our data could be very useful. The short answer is yes, but it's not based on how much prevalence there is in certain geographies. It's just based on we're going about this in a little bit of a sequential way. The second part that you brought up is our AIM capsid library and how that could differentiate. Part of the beauty of the AIM capsid library is the tropism.
We have knowledge of what types of capsids have a preferential tropism for different types of tissues, and that's something that's going to be very helpful in addressing some of the current challenges, because as you know, immunological responses to AAV-based therapies are a big hindrance to optimizing the therapeutic effect of our drugs. By engineering capsids that can have tissue tropism, you're partly circumventing that, and this is definitely part of the value proposition that we come with our proprietary capsids, number one. The second is, beyond just the AIM capsids, we are also looking at how to circumvent other types of limitations in AAV-based therapies. For example, the size of the genes that you can package.
You cannot put more than four kilobase size into an AAV capsid, and here is where we're developing other methodologies where you could have recombination based. At ARVO, we've presented new data on recombination-based techniques where you can have larger genes, for example, ABCA4, delivered to the patients. This is something that, beyond just the capsid engineering that, we're focusing on overcoming some of the limitations of gene therapy as such. I hope that gives you some flavor as to where we're likely to be differentiated and advance our knowledge, Kristen.
Thank you, Vish. There appear to be no further questions in queue at this time. I'd like to turn the floor back over to Vish for any closing remarks.
Thank you very much. I have full conviction about the transformative value that Abeona's lead assets can deliver to patients. We're focused on our roadmap and making progress through disciplined execution. Our current leadership team is stronger than ever, especially with some important recent additions geared towards BLA readiness. I wanna thank our shareholders and our stakeholders who have listened to this call, and we'll talk to you on the Q4 call. Thank you.
Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.