ITEM 2.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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OVERVIEW
Abeona Therapeutics Inc. (together with
our subsidiaries, “we”, “our”, “Abeona” or the “Company”) is a Delaware corporation.
We are focused on developing and delivering gene therapy and plasma-based products for severe and life-threatening rare diseases.
Abeona's lead programs are ABO-101 (AAV NAGLU) and ABO-102 (AAV SGSH), adeno-associated virus (AAV)-based gene therapies for Sanfilippo
syndrome (MPS IIIB and IIIA, respectively). We are also developing ABO-201 (AAV CLN3) gene therapy for Juvenile Neuronal Ceroid
Lipofuscinoses (JNCL), also known as juvenile Batten disease, and ABO-301 (AAV FANCC) for Fanconi anemia (FA) disorder using a
novel CRISPR/Cas9-based gene editing approach to gene therapy program for rare blood diseases. In addition, we are also developing
rare plasma protein therapies including PTB-101 SDF Alpha™ (alpha-1 protease inhibitor) for inherited COPD using our proprietary
SDF™ (Salt Diafiltration) ethanol-free process. Our principal executive office is located at 3333 Lee Parkway, Suite 600,
Dallas, Texas 75219. Our website address is
www.abeonatherapeutics.com
.
Recent Developments
On August 4, 2016 we announced European
regulatory approval for Phase 1/2 Gene Therapy Clinical Trial utilizing ABO-102 for patients with MPS IIIA. The clinical study
was approved by the Agencia Espanola de Medicamentos y Productos Sanitarios, and the Company is conducting the Phase 1/2 clinical
study at Cruces University Hospital (Bilbao, Spain).
We entered into an agreement (“Agreement”)
with EB Research Partnership (“EBRP”) and Epidermolysis Bullosa Medical Research Foundation (“EBMRF”) to
collaborate on gene therapy treatments for epidermolysis bullosa (“EB”). The Agreement became effective on the execution
of two licensing agreements with The Board of Trustees of Leland Stanford Junior University (“Stanford”) described
below.
EBRP and EBMRF have the contractual right
to license from Stanford EB-101 (LZRSE-Col7A1 Engineered Autologous Epidermal Sheets (LEAES)), and wishes to have Abeona exercise
such rights and enter into a license with Stanford for such technology, and perform preclinical development and perform clinical
trials of a gene therapy treatment for Epidermolysis Bullosa based upon such in-licensed technology. Abeona shall also enter into
a license with Stanford for the AAV-based gene therapy EB-201 (AAV DJ COL7A1) technology, and Abeona shall perform preclinical
development and perform clinical trials of a gene therapy treatment for EB based upon such in-licensed technology.
In connection with the Agreement Abeona
will issue to EBRP and EBMRF an aggregate of 750,000 unregistered shares of Abeona Common Stock, $0.01 par value per share, 375,000
each to EBRP and EBMRF. The offer, sale, and issuance of the shares of Abeona common stock are exempt from registration pursuant
to Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. The recipients of securities under the
Agreement agreed that day are acquiring the securities for investment only and not with a view to or for sale in connection with
any distribution thereof and appropriate legends are to be affixed to the securities to be issued in conjunction with the Agreement.
The shares will be subject to restrictions on selling, transferring or otherwise disposing of such shares. These restrictions shall
lapse with respect to an aggregate 250,000 shares on the first anniversary of the issue date; and with respect to an additional
aggregate 500,000 shares on the second anniversary of the issue date. We have an option to acquire an additional license in the
future for an additional amount shares as set forth in the Agreement.
On August 3, 2016 we also entered into
two licensing agreements between us and Stanford to develop EB-101 (LZRSE-Col7A1 Engineered Autologous Epidermal Sheets (LEAES))
and EB-201 (AAV DJ COL7A1). And the second agreement to license the invention “Gene Therapy for Recessive Dystrophic EB using
Genetically Corrected Autologous Keratinocytes”. Under the terms of the licensing agreements, we will pay a upfront licensing
fees in cash, annual license maintenance fees and subject to the achievement of certain milestones, regulatory approval milestone
payments, and royalty payments on annual net sales of the licensed product.
On May 24, 2016 we announced that the FDA
has allowed an IND Application for our Phase 1/2 Clinical Study for ABO-101 for patients with Sanfilippo syndrome type B to be
conducted at Nationwide Children’s Hospital (Columbus, Ohio).
On May 17, 2016 we announced that the first
patient in a Phase 1/2 trial for ABO-102, a single treatment gene therapy strategy for patients with Sanfilippo syndrome type A,
has been enrolled at Nationwide Children’s Hospital (Columbus, Ohio).
Product Development Strategy
Abeona is focused on developing and delivering
gene therapy and plasma-based products for severe and life-threatening rare diseases. A rare disease is one that affects fewer
than 200,000 people in the United States. There are nearly 7,000 rare diseases, which may involve chronic illness, disability,
and often, premature death. More than 25 million Americans and 30 million Europeans have a severe and life-threatening disease.
While rare diseases can affect any age group, about 50% of people affected are children (15 million), and rare diseases account
for 35% of deaths in the first year of life. These rare diseases are often poorly diagnosed, very complex, and have no treatment
or not very effective treatment—over 95% of rare diseases do not have a single FDA or EMA approved drug treatment. However,
most rare diseases are often caused by changes in genes—80% are genetic in origin and can present at any stage of life. We
believe emerging insights in genetics and advances in biotechnology, as well as new approaches and collaboration between researchers,
industry, regulators and patient groups, provide significant opportunities to develop breakthrough treatments for rare diseases.
Developing Next Generation Gene Therapy
Gene therapy is the use of DNA as a potential
therapy to treat a disease. In many disorders, particularly genetic diseases caused by a single genetic defect, gene therapy aims
to treat a disease by delivering the correct copy of DNA into a patient's cells. The healthy, functional copy of the therapeutic
gene then helps the cell function correctly. In gene therapy, DNA that encodes a therapeutic protein is packaged within a "vector",
often a “naked” virus, which is used to transfer the DNA to the inside of cells within the body. Gene therapy can be
delivered by a direct injection, either intravenously (IV) or directly into a specific tissue in the body, where it is taken up
by individual cells. Once inside cells, the correct DNA is expressed by the cell machinery, resulting in the production of missing
or defective protein, which in turn is proposed to treat the patient's underlying disease and can provide long-term benefit.
Abeona is developing next generation adeno-associated
virus (AAV) gene therapies. Viruses such as AAV are utilized because they have evolved a way of encapsulating and delivering one
or more genes of the size needed for clinical application, and can be purified in large quantities at high concentration. Unlike
AAV vectors found in nature, the AAV vectors used by Abeona have been genetically-modified such that they do not replicate. Although
the preclinical studies in animal models of disease demonstrate the promising impact of AAV-mediated gene expression to affected
tissues such as the heart, liver and muscle, our programs use a specific virus that is capable of delivering therapeutic DNA across
the blood-brain barrier and into the central nervous system (CNS) and the somatic system (body), which we believe make them attractive
for addressing lysosomal storage diseases which have severe CNS manifestations of the disease.
Lysosomal storage diseases (LSD) are a
group of rare inborn errors of metabolism resulting from deficiency in normal lysosomal function. These diseases are characterized
by progressive accumulation of storage material within the lysosomes of affected cells, ultimately leading to cellular dysfunction.
Multiple tissues ranging from musculoskeletal and visceral to tissues of the central nervous system are typically involved in disease
pathology. Since the advent of enzyme replacement therapy (ERT) to manage some LSDs, general clinical outcomes have significantly
improved; however, treatment with infused protein is lifelong and continued disease progression is still evident in patients. Thus,
we believe that AAV-based gene therapy may provide a viable alternative or adjunctive therapy to current management strategies
for LSDs.
Our initial programs are focused on LSDs
such as Mucopolysaccharidosis (MPS) IIIA and IIIB. MPS III, also known as Sanfilippo syndromes type A and type B, MPS III is a
progressive neuromuscular disease with profound CNS involvement. Our lead product candidates, ABO-101 and ABO-102, have been developed
to replace the damaged, malfunctioning enzymes within target cells with the normal, functioning version. ABO-201 is a similar product,
using an AAV to deliver the correct lysosomal gene that is defective in juvenile neuronal ceroid lipofuscinosis. Delivered via
a single injection, these drugs are expected to be given only once.
ABO-101 for MPS III B and ABO-102
for MPS III A (Sanfilippo syndrome)
MPS type III (Sanfilippo syndrome) is a
group of four inherited genetic diseases, described as type A, B, C or D, which cause enzyme deficiencies that result in the abnormal
accumulation of glycosaminoglycans (sugars) in body tissues. MPS III is a lysosomal storage disease, a group of rare inborn errors
of metabolism resulting from deficiency in normal lysosomal function. The incidence of MPS III (all four types combined) is estimated
to be 1 in 70,000 births.
Mucopolysaccharides are long chains of
sugar molecules used in the building of connective tissues in the body. There is a continuous process in the body of replacing
used materials and breaking them down for disposal. Children with MPS III are missing an enzyme called heparan sulfate, which is
essential in breaking down used mucopolysaccharides. The partially broken down mucopolysaccharides remain stored in cells in the
body causing progressive damage. Babies may show little sign of the disease, but as more and more cells become damaged, symptoms
start to appear.
In MPS III, the predominant symptoms occur
due to accumulation within the central nervous system (CNS), including the brain and spinal cord, resulting in cognitive decline,
motor dysfunction, and eventual death. To date, there is no cure for MPS III and treatments are largely supportive.
Abeona is developing next generation AAV-based
gene therapies for MPS III, which will involve a one-time delivery of a normal copy of the defective gene to cells of the CNS with
the goal of reversing the effects of the genetic errors that cause the disease.
After a single dose in Sanfilippo preclinical
models, ABO-101 and ABO-102 induced cells in the CNS and peripheral organs to produce the missing enzymes which helped repair the
damage caused to the cells. Preclinical
in vivo
efficacy studies in Sanfilippo syndrome have demonstrated functional benefits
that remain for months after treatment. A single dose of ABO-101 or ABO-102 significantly restored normal cell and organ function,
corrected cognitive defects that remained months after drug administration, increased neuromuscular control and increased the lifespan
of animals with MPS III over 100% one year after treatment compared to untreated control animals. These results are consistent
with studies from several laboratories suggesting AAV treatment could potentially benefit patients with Sanfilippo Syndrome Type
A and B. In addition, safety studies conducted in animal models of Sanfilippo syndromes have demonstrated that delivery of ABO-101
or ABO-102 are well tolerated with minimal side effects.
On August 4, 2016 we announced European
regulatory approval for Phase 1/2 Gene Therapy Clinical Trial utilizing ABO-102 for patients with MPS IIIA. The clinical study
was approved by the Agencia Espanola de Medicamentos y Productos Sanitarios, and the Company is conducting the Phase 1/2 clinical
study at Cruces University Hospital (Bilbao, Spain).
On May 24, 2016 we announced that the FDA
has allowed an IND Application for our Phase 1/2 Clinical Study for ABO-101 for patients with Sanfilippo syndrome type B to be
conducted at Nationwide Children’s Hospital (Columbus, Ohio).
On May 17, 2016 we announced that the first
patient in a Phase 1/2 trial for ABO-102, a single treatment gene therapy strategy for patients with Sanfilippo syndrome type A,
has been enrolled at Nationwide Children’s Hospital (Columbus, Ohio).
ABO-201 for Juvenile Neuronal Ceroid
Lipofuscinoses (JNCL) (or Juvenile Batten Disease (JBD))
ABO-201 (AAV CLN3) is an AAV-based gene
therapy which has shown promising preclinical efficacy in delivery of a normal copy of the defective CLN3 gene to cells of the
CNS with the goal of reversing the effects of the genetic errors that cause JNCL. JNCL is a rare, fatal, autosomal recessive (inherited)
disorder of the nervous system that typically begins in children between 4 and 8 years of age. Often the first noticeable sign
of JNCL is vision impairment, which tends to progress rapidly and eventually result in blindness. As the disease progresses, children
experience loss of previously acquired skills (developmental regression). This progression usually begins with the loss of the
ability to speak in complete sentences. Children then lose motor skills, such as the ability to walk or sit. They also develop
movement abnormalities that include rigidity or stiffness, slow or diminished movements (hypokinesia), and stooped posture. Beginning
in mid- to late childhood, affected children may have recurrent seizures (epilepsy), heart problems, behavioral problems, and difficulty
sleeping. Life expectancy is greatly reduced. Most people with juvenile Batten disease live into their twenties or thirties. As
yet, no specific treatment is known that can halt or reverse the symptoms of JNCL.
JNCL is the most common form of a group
of disorders known as neuronal ceroid lipofuscinoses (NCLs). Collectively, all forms of NCL affect an estimated 2 to 4 in 100,000
live births in the United States. NCLs are more common in Finland, where approximately 1 in 12,500 individuals are affected, as
well as Sweden, other parts of northern Europe, and Newfoundland, Canada.
Most cases of JNCL are caused by mutations
in the CLN3 gene, which is the focus of our AAV-based gene therapy approach. These mutations disrupt the function of cellular structures
called lysosomes. Lysosomes are compartments in the cell that normally digest and recycle different types of molecules. Lysosome
malfunction leads to a buildup of fatty substances called lipopigments and proteins within these cell structures. These accumulations
occur in cells throughout the body, but neurons in the brain seem to be particularly vulnerable to damage. The progressive death
of cells, especially in the brain, leads to vision loss, seizures, and intellectual decline in children with JNCL.
ABO-301 for Fanconi Anemia (FA)
ABO-301 (AAV FANCC) is an AAV-based gene
therapy which has shown promising preclinical efficacy in delivery of a normal copy of the defective gene to cells of the hematopoietic
or blood system with the goal of reversing the effects of the genetic errors that cause Fanconi anemia (FA). FA is a rare (1 in
160,000) pediatric, autosomal recessive (inherited) disease characterized by multiple physical abnormalities, organ defects, bone
marrow failure, and a higher than normal risk of cancer. The average lifespan for people with FA is 20 to 30 years.
The major function of bone marrow is to
produce new blood cells. In FA, a DNA mutation renders the FANCC gene nonfunctional. Loss of FANCC causes skeletal abnormalities
and leads to bone marrow failure. FA patients also have much higher rates of hematological diseases, such as acute myeloid leukemia
(AML) or tumors of the head, neck, skin, gastrointestinal system, or genital tract. The likelihood of developing one of these cancers
in people with FA is between 10 and 30 percent. Aside from bone marrow transplantation (BMT) there are no specific treatments known
that can halt or reverse the symptoms of FA. Repairing fibroblast cells in FA patients with a functional FANCC gene is the focus
of our AAV-based gene therapy approach.
Using a novel CRISPR (clustered, regularly
interspaced short palindromic repeats)-Cas9 (CRISPR associated protein 9) system, researchers used a protein-RNA complex composed
of an enzyme known as Cas9 bound to a guide RNA molecule that has been designed to recognize a particular DNA sequence. The RNA
molecules guide the Cas9 complex to the location in the genome that requires repair. CRISPR-Cas9 uniquely enables surgically efficient
knock-out, knock-down or selective editing of defective genes in the context of their natural promoters, unlocking the potential
to treat both recessive and dominant forms of genetic diseases. Most importantly, this approach has the potential to allow for
more precise gene modification.
Plasma-based Therapeutics using the
SDF™ technology platform
Abeona’s proprietary patented Salt
Diafiltration Process™ (SDF
™
) focuses on ethanol-free extraction of therapeutic biologics from human plasma.
Plasma biologics are biopharmaceutical proteins extracted, purified, and formulated from human blood plasma by the use of biotechnological
processing techniques including precipitation, diafiltration, affinity chromatography, and ion-exchange chromatography. These products
are rendered virus-safe by means of chemical treatment, nanofiltration, and pasteurization. Plasma biologics primarily address
indications arising from genetic deficiencies, which are increasingly being identified by means of newly available rapid and low-cost
diagnostic genetic tests. Examples of plasma biologics include Alpha-1 Antitrypsin (also known as alpha-1 proteinase inhibitor,
A1PI), Intravenous Immune Globulin (IVIG), Anti-Hemophilic Factor VIII (AHF) and Albumin.
Plasma biologics are currently obtained
from human plasma by a fractionation process known as the Cohn Cold Ethanol Fractionation Process (Cohn Process), which was developed
prior to World War II to provide a stable solution of human albumin for the rapid treatment of hemorrhagic shock on the battlefield.
This process employs various concentrations of ethanol combined with adjustments of pH, ionic strength, and temperature to bring
about the necessary separations by precipitation. Ethanol can inactivate many of the plasma proteins.
In contrast to the highly denaturing Cohn
Process, Abeona’s SDF method involves a short two-step, ethanol-free salt precipitation process optimized to extract a wide
range of therapeutically useful biologic proteins from human blood plasma. SDF enables the production of higher yields of these
proteins compared with the Cohn Process.
PTB-101 SDF Alpha™ (alpha-1
protease inhibitor) for emphysema or chronic obstructive pulmonary disease (COPD)
due to severe congenital deficiency
of A1PI (alpha-1-antitrypsin deficiency)
Alpha-1 antitrypsin deficiency is a rare
(1 in 1,500 to 3,500) genetic (inherited) autosomal disorder that may cause lung disease from an inability to neutralize the enzyme
neutrophil elastase and liver disease from retained misfolded protein. Alpha-1 antitrypsin deficiency occurs worldwide, but its
prevalence varies by population. Alpha-1 antitrypsin is also known as alpha-1 proteinase inhibitor (A1PI).
About 10% of infants with alpha-1 antitrypsin
deficiency develop liver disease, which often causes yellowing of the skin and whites of the eyes (jaundice). Approximately 15%
of adults with alpha-1 antitrypsin deficiency develop liver damage (cirrhosis) due to the formation of scar tissue in the liver.
Signs of cirrhosis include a swollen abdomen, swollen feet or legs, and jaundice. Individuals with alpha-1 antitrypsin deficiency
are also at risk of developing a type of liver cancer called hepatocellular carcinoma.
Alpha-1 antitrypsin deficiency is inherited
with an autosomal codominant pattern, which means that two different versions of the gene may be active (expressed), and both versions
contribute to the genetic trait. The most common version (allele) of the SERPINA1 gene, called M, produces normal levels of alpha-1
antitrypsin. Most people in the general population have two copies of the M allele (MM) in each cell. Other versions of the SERPINA1
gene lead to reduced levels of alpha-1 antitrypsin. For example, the S allele produces moderately low levels of this protein, and
the Z allele produces very little alpha-1 antitrypsin. Individuals with two copies of the Z allele (ZZ) in each cell are likely
to have alpha-1 antitrypsin deficiency. Those with the SZ combination have an increased risk of developing liver and lung diseases
such as chronic obstructive pulmonary disease (COPD).
It is estimated that about 200,000 individuals
in the United States and Europe have severe alpha-1 antitrypsin deficiency. However, only about 5% of such individuals have been
diagnosed as symptoms caused by this deficiency are very similar to those of asthma and chronic obstructive pulmonary disease (COPD)
from non-genetic causes. Only about 1–2% of COPD patients have severe alpha-1 antitrypsin deficiency. The Global Initiative
for Chronic Obstructive Lung Disease (GOLD) defines COPD as group of airflow-limited diseases including emphysema and chronic bronchitis.
While severe alpha-1 antitrypsin deficiency can lead to or exacerbate all forms of COPD, it is considered to be the dominant cause
of Panacinar Emphysema, a form of emphysema which causes gradual destruction of all lung aveolii.
PTB-101 SDF Alpha™ (alpha1-proteinase
inhibitor) for Alpha-1 Antitrypsin Deficiency (Alpha-1)
Abeona is developing PTB-101 SDF Alpha™
(alpha-1-proteinase inhibitor) for chronic augmentation and maintenance therapy in adults with clinically evident panacinar emphysema
and other forms of COPD due to severe deficiency of alpha-1-proteinase inhibitor.
Polymer Hydrogel Technology (PHT™)
MuGard
®
(mucoadhesive
oral wound rinse) approved for mucositis, stomatitis, aphthous ulcers, and traumatic ulcers
MuGard
®
is our marketed
product for the management of oral mucositis, a frequent side-effect of cancer therapy for which there is no other established
treatment. MuGard, a proprietary nanopolymer formulation, received marketing clearance from the FDA in the US as well as Europe,
China, Australia, New Zealand and Korea. We launched MuGard in the U.S. in 2010 and licensed MuGard for commercialization in the
U.S. to AMAG Pharmaceuticals, Inc. (AMAG) in 2013. We licensed MuGard to RHEI Pharmaceuticals, N.V. (RHEI) for China and other
Southeast Asian countries; Hanmi Pharmaceutical Co. Ltd. (Hanmi) for South Korea; and Norgine B.V. (Norgine) for the European Union,
Switzerland, Norway, Iceland, Lichtenstein, Australia and New Zealand.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations primarily
through public and private sales of common stock, preferred stock, convertible notes and through licensing agreements. Our principal
source of liquidity is cash and cash equivalents. Licensing payments and royalty revenues provided limited funding for operations
during the period ended June 30, 2016. As of June 30, 2016, our cash and cash equivalents were $34,303,000.
As of June 30, 2016, our working capital
was $25,914,000. Our working capital at June 30, 2016 represented a decrease of $13,177,000 as compared to our working capital
of $39,091,000 as of December 31, 2015. The decrease in working capital at June 30, 2016 reflects six months of net operating costs
and changes in current assets and liabilities and the classification of contingent consideration liability ($2,000,000) and payable
to Licensor ($4,000,000) from long-term liabilities to current liabilities. The contingent consideration liability will be paid
in Abeona common stock if the milestone is met. The payable to Licensor may be paid in cash or stock at our discretion.
Net cash used in operating activities for
the six months ended June 30, 2016 was $5,632,000 as compared to $5,034,000 for the same period in 2015, an increase of $598,000.
The increase was primarily due to higher research and development spending in the first six months of 2016 offset by a $1.0 million
license payment made in the first quarter of 2015.
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.
We have incurred negative cash flows from
operations since inception, and have expended, and expect to continue to expend in the future, substantial funds to complete our
planned product development efforts. Since inception, our expenses have significantly exceeded revenues, resulting in an accumulated
deficit as of June 30, 2016 of $322,847,000. We 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.
Since our inception, we have devoted our
resources primarily to fund our research and development programs. We have been unprofitable 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.
SECOND QUARTER 2016 COMPARED TO SECOND QUARTER 2015
Our licensing revenue for the second quarter
of each of 2016 and 2015 was $150,000 for each period. We recognize licensing revenue over the period of the performance obligation
under our licensing agreements.
We recorded royalty revenue for MuGard
of $64,000 for second quarter of 2016 and $132,000 for the same period of 2015, a decrease of $68,000. We licensed MuGard to AMAG
on June 6, 2013 and currently receive quarterly royalties from AMAG under our agreement.
Total research and development spending
for the second quarter of 2016 was $3,018,000, as compared to $610,000 for the same period of 2015, an increase of $2,408,000.
The increase in expenses was primarily due to:
|
·
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increased development work for the manufactured
product for ABO-102 and other gene therapy products ($1,068,000);
|
|
·
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increased salary and related costs ($605,000)
from the hiring of scientific staff and annual bonus payments;
|
|
·
|
increased stock based compensation expense
for granted stock options ($231,000) and granted stock ($62,000);
|
|
·
|
increased clinical costs for our clinical
trial for ABO-102 and preparation for other clinical trials ($223,000); and
|
|
·
|
other net increases in research spending
($219,000).
|
Total general and administrative expenses
were $3,730,000 for the second quarter of 2016, as compared to $3,667,000 for the same period of 2015, an increase of $63,000.
The increase in expenses was due primarily to the following:
|
·
|
increased salary and related costs and
annual bonus payments ($376,000);
|
|
·
|
increased stock based compensation expense
for granted stock options ($346,000) offset by lower granted stock expense ($113,000);
|
|
·
|
offset by decreased legal fees ($299,000);
|
|
·
|
offset by decreased investor relations
fees ($219,000); and
|
|
·
|
offset by decreased net other general
and administrative expenses ($28,000).
|
Depreciation and amortization was $181,000
for the second quarter of 2016 as compared to $132,000 for the same period in 2015, an increase of $49,000. We are amortizing the
licenses for SDF Alpha and ABO-101 and ABO-201 over the life of the patents. The increase is due to amortization of licensed technology
of $15,000 and depreciation of $34,000.
Total operating expenses for the second
quarter of 2016 were $6,929,000 as compared to total operating expenses of $4,409,000 for the same period of 2015, an increase
of $2,520,000 for the reasons listed above.
Interest and miscellaneous income was $13,000
for the second quarter of 2016 as compared to $16,000 for the same period of 2015, a decrease of $3,000.
Interest and other expense was $1,000 for
the second quarter of 2016 as compared to $2,000 in the same period of 2015, a decrease of $1,000.
Net loss for the second quarter of 2016
was $6,703,000, or a $0.20 basic and diluted loss per common share as compared to a net loss of $4,113,000, or a $0.16 basic and
diluted loss per common share, for the same period in 2015, an increased loss of $2,590,000.
SIX MONTHS ENDED JUNE 30, 2016 COMPARED TO SIX MONTHS ENDED
JUNE 30, 2015
Our licensing revenue for the first six
months of 2016 and 2015 was $301,000. We recognize licensing revenue over the period of the performance obligation under our licensing
agreements.
We recorded royalty revenue for MuGard
of $148,000 for the first six months of 2016 and $239,000 for the same period of 2015, a decrease of $91,000. We licensed MuGard
to AMAG on June 6, 2013 and currently receive quarterly royalties from AMAG under our agreement.
Total research and development spending
for the first six months of 2016 was $4,873,000, as compared to $1,063,000 for the same period of 2015, an increase of $3,810,000.
The increase in expenses was primarily due to:
|
·
|
increased development work for the manufactured
product for ABO-102 and other gene therapy products ($1,393,000);
|
|
·
|
increased salary and related costs ($963,000)
from the hiring of scientific staff and annual bonus payments;
|
|
·
|
increased stock based compensation expense
for granted stock options ($553,000) and granted stock ($200,000);
|
|
·
|
increased clinical costs for our clinical
trial for ABO-102 and preparation for other clinical trials ($252,000); and
|
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·
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other net increases in research spending
($449,000).
|
Total general and administrative expenses
were $8,096,000 for the first six months of 2016, as compared to $5,356,000 for the same period of 2015, an increase of $2,740,000.
The increase in expenses was due primarily to the following:
|
·
|
increased stock based compensation expense
for granted stock options ($1,338,000) and granted stock ($1,642,000);
|
|
·
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increased salary and related costs and
annual bonus payments ($314,000);
|
|
·
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increased net other general and administrative
expense ($73,000).
|
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·
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offset by decreased investor relations
fees ($397,000); and
|
|
·
|
offset by decreased legal fees ($230,000).
|
Depreciation and amortization was $355,000
for the first six months of 2016 as compared to $250,000 for the same period in 2015, an increase of $105,000. We are amortizing
the licenses for SDF Alpha and ABO-101 and ABO-201 over the life of the patents. The increase is due to amortization of licensed
technology of $44,000 and depreciation of $61,000.
Total operating expenses for the first
six months of 2016 were $13,324,000 as compared to total operating expenses of $6,669,000 for the same period of 2015, an increase
of $6,655,000 for the reasons listed above.
Interest and miscellaneous income was $631,000
for the first six months of 2016 as compared to $19,000 for the same period of 2015, an increase of $612,000. Miscellaneous income
is higher in 2016 than for the same period in 2015 due to the change in the fair value of our contingent consideration liability
($591,000) related to the acquisition of Abeona Therapeutics LLC and interest income and other income ($21,000).
Interest and other expense was $3,000 for
the six months of 2016 as compared to $3,000 in the same period of 2015.
Net loss for the six months of 2016 was
$12,247,000, or a $0.37 basic and diluted loss per common share as compared to a net loss of $6,113,000, or a $0.27 basic and diluted
loss per common share, for the same period in 2015, an increased loss of $6,134,000.