What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-15 compared with 2021-07-28 · 145 added, 76 removed, 165 unchanged (57% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Therapeutics Inc., a Delaware corporation (together with our subsidiaries, “we,” “our,” “Abeona”

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includes three programs in clinical development—EB-101, ABO-101 and ABO-102—for which we hold several U.S.

Union (“EU”) regulatory designations, and a pipeline of additional earlier stage programs:

and European Union

(“EU”) regulatory designations, and a pipeline of additional earlier stage programs:

robust pipeline features early- and late-stage candidates with the potential to transform the treatment of devastating genetic diseases,

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OF COVID-19 PANDEMIC ON OUR BUSINESS

continue to assess the evolving impact of the COVID-19 pandemic on our business and take appropriate actions to manage our spending activities

continue to monitor the impact of the COVID-19 pandemic on our business and take appropriate actions to manage our spending activities

and preserve our cash resources.

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 it is important to keep our stakeholders

informed about how our response to COVID-19 is progressing and how our operations and financial condition may change.

While there have been vaccines developed and administered, and the spread of COVID-19 may eventually

be contained or mitigated, we cannot predict the timing of vaccine adoption or roll-out globally or the efficacy of such vaccines, including

against variants that emerge, and we do not yet know how businesses and our partners will operate in a post COVID-19 environment.

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 it is important to keep our stakeholders informed about how our response to

COVID-19 is progressing and how our operations and financial condition may change.

extent of the impact of the COVID-19 pandemic on our business, operations, and clinical trials continues to evolve and will depend on

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OF OPERATIONS

of Three Months Ended June 30, 2021 and June 30, 2020

research and development spending was $7.4 million for the second quarter of 2021, as compared to $6.1 million for the same period of

of Three Months Ended September 30, 2021 and September 30, 2020

and other revenues for the third quarter of 2021 were nil, as compared to $7.0 million for the same period of 2020.

The revenues in the

third quarter of 2020 were due to the sublicense and inventory purchase agreements we entered into with Taysha Gene Therapies (“Taysha”)

in August 2020 for ABO-202, an AAV gene therapy for CLN1 disease (also known as infantile Batten disease).

The agreements grant to Taysha

worldwide exclusive rights to intellectual property developed by scientists at the University of North Carolina at Chapel Hill and us,

and our know-how relating to the research, development and manufacture of the gene therapy.

research and development spending was $8.0 million for each of the third quarters of 2021 and 2020.

general and administrative spending was $6.1 million in the third quarter of 2021, as compared to $4.4 million for the same period of

2020, an increase of $1.7 million.

The increase in expenses was primarily due to:

clinical and development work for our gene and cell therapy product candidates ($1.0 million);

salary and related costs ($0.3 million).

general and administrative spending was $5.5 million in both the second quarter of 2021 and the second quarter of 2020.

and amortization was $0.8 million in both the second quarter of 2021 and the second quarter of 2020.

and miscellaneous income was approximately nil for the second quarter of 2021, as compared to $0.3 million for the same period in 2020.

The decrease resulted from lower earnings on short-term investments driven by lower interest rates and a lower average balance of short-term

expense was $1.5 million for the second quarter of 2021, as compared to $0.8 million for the same period of 2020.

The increase results

primarily from invoices received from REGENXBIO for accrued interest on the disputed amounts that we may owe to REGENXBIO

under the prior license agreement, which is discussed in Note 3 of our Notes to Condensed Consolidated Financial Statements.

loss was $15.2 million for the second quarter of 2021, or a $0.16 basic and diluted loss per common share as compared to a net loss of

$13.0 million, or a $0.14 basic and diluted loss per common share, for the same period in 2020.

The increase in the net loss results

primarily from increased research and development spending and increased interest expense.

of Six Months Ended June 30, 2021 and June 30, 2020

research and development spending was $14.6 million for the first six months of 2021, as compared to $12.9 million for the same period

stock-based compensation of $1.3 million;

professional fees of $0.7 million;

partially offset by

salary and related costs of $0.3 million.

and amortization was $0.8 million in each of the third quarters of 2021 and 2020.

Gain on settlement with licensor was $6.7

million in the third quarter of 2021, as compared to nil in the same period of 2020.

On November 12, 2021, we entered into a Settlement

Agreement with REGENXBIO to resolve all current disputes between us and REGENXBIO.

As of September 30, 2021, we have recorded the payable

to licensor in the balance sheet based on the present value of the payments due to REGENXBIO under the Settlement Agreement.

The accounting

for the Settlement Agreement resulted in a $6.7 million gain on settlement with REGENXBIO in the third quarter of 2021.

loan payable forgiveness income was $1.8 million in the third quarter of 2021, as compared to nil in the same period of 2020.

2021, we received notice from the SBA that our PPP loan had been forgiven so the PPP loan payable was reversed in the third quarter of

and miscellaneous income was nil for the third quarter of 2021, as compared to $0.3 million for the same period in 2020.

resulted from lower earnings on short-term investments driven by lower interest rates and a lower average balance of short-term investments.

Interest expense was $0.7 million for the third

quarter of 2021, as compared to $1.3 million for the same period of 2020.

The interest expense results from accrued interest under

the prior license agreement with REGENXBIO, which is discussed in Note 3 of our Notes to Condensed Consolidated Financial Statements.

The decrease results from a $0.6 million adjustment to accrued interest recorded in the third quarter of 2020 after it was determined

and ordered by the American Arbitration Association (“AAA”) tribunal that in accordance with the license agreement,

interest should be computed without compounding.

loss was $7.0 million for the third quarter of 2021, or a $0.07 basic and diluted loss per common share as compared to

a net loss of $7.2 million, or a $0.08 basic and diluted loss per common share, for the same period in 2020.

of Nine Months Ended September 30, 2021 and September 30, 2020

and other revenues for the first nine months of 2021 were nil, as compared to $7.0 million for the same period of 2020.

in revenue was due to the aforementioned sublicense and inventory purchase agreements we entered into with Taysha in August 2020.

research and development spending was $22.6 million for the first nine months of 2021, as compared to $20.9 million for the same period

of 2020, an increase of $1.7 million.

The increase in expenses was primarily due to increased clinical and development work for our gene

and cell therapy product candidates and other related costs of $1.7 million.

general and administrative spending was $18.1 million for the first nine months of 2021, as compared to $16.4 million for the same period

of 2020, an increase of $1.7 million.

The increase in expenses was primarily due to:

clinical and development work for our gene and cell therapy product candidates ($1.2 million);

salary and related costs ($0.5 million).

general and administrative spending was $12.0 million in both the first six months of 2021 and the same period of 2020.

and amortization was $1.6 million for the first six months of 2021, as compared to $2.9 million for the same period in 2020, a decrease

stock-based compensation of $1.9 million;

professional fees of $3.0 million;

partially offset by

salary and related costs of $3.1 million resulting from severance costs of $1.3 million recorded in the first nine months of 2020

and lower compensation costs of $1.8 million due to reduced general and administrative headcount in the first nine months of 2021;

other costs of $0.1 million.

and amortization was $2.4 million for the first nine months of 2021, as compared to $3.7 million for the same period in 2020, a decrease

of $1.3 million.

The decrease was driven by decreased amortization expense of $1.3 million on licensed technology in the first six months

The decrease was driven by decreased amortization expense of $1.3 million on licensed technology in the first nine months

of 2021, as compared to the same period in 2020, due to the write-off of the REGENXBIO licensed technology in the first quarter of 2020.

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agreement with REGENXBIO exceeded its fair value, we recorded a $32.9 million non-cash impairment charge in the first six months of 2020.

and miscellaneous income was approximately nil for the first six months of 2021, as compared to $0.9 million for the same period in 2020.

The decrease resulted from lower earnings on short-term investments driven by lower interest rates and a lower average balance of short-term

expense was $2.9 million for the first six months of 2021, as compared to $1.4 million for the same period of 2020.

Gain on settlement with licensor was $6.7

million in the first nine months of 2021, as compared to nil in the same period of 2020.

On November 12, 2021, we entered into a Settlement

Agreement with REGENXBIO to resolve all current disputes between us and REGENXBIO.

As of September 30, 2021, we have recorded the payable

to licensor in the balance sheet based on the present value of the payments due to REGENXBIO under the Settlement Agreement.

The accounting

for the Settlement Agreement resulted in a $6.7 million gain on settlement with REGENXBIO in the first nine months of 2021.

loan payable forgiveness income was $1.8 million in the first nine months of 2021, as compared to nil in the same period of 2020.

July 2021, we received notice from the SBA that our PPP loan had been forgiven so the PPP loan payable was reversed in the first nine

months of 2021.

and miscellaneous income was nil for the first nine months of 2021, as compared to $1.3 million for the same period of 2020.

resulted from lower earnings on short-term investments driven by lower interest rates and a lower average balance of short-term investments.

expense was $3.6 million for the first nine months of 2021, as compared to $2.7 million for the same period of 2020.

The increase results

primarily from invoices received from REGENXBIO for accrued interest on the disputed amounts that we may owe to REGENXBIO

under the prior license agreement, which is discussed in Note 3 of our Notes to Condensed Consolidated Financial Statements.

loss was $31.2 million for the first six months of 2021, or a $0.33 basic and diluted loss per common share as compared to a net loss

of $61.2 million, or a $0.66 basic and diluted loss per common share, for the same period in 2020.

The decrease in the net loss results

primarily from a licensed technology impairment charge of $32.9 million in the first six months of 2020.

primarily from accrued interest under the prior license agreement with REGENXBIO, which is discussed in Note 3 of our Notes to

Condensed Consolidated Financial Statements.

loss was $38.3 million for the first nine months of 2021, or a $0.40 basic and diluted loss per common share as compared

to a net loss of $68.4 million, or a $0.74 basic and diluted loss per common share, for the same period in 2020.

The decrease in the

net loss resulted primarily from a licensed technology impairment charge of $32.9 million in the first nine months of 2020.

AND CAPITAL RESOURCES

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principal source of liquidity is cash, cash equivalents and short-term investments.

As of June 30, 2021 and December 31, 2020, our cash,

cash equivalents, receivables and short-term investments were $77.6 million and $95.0 million, respectively.

Based on our existing

cash, cash equivalents and short-term investments, our ability to access additional financial resources and/or 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

As of September 30, 2021 and December 31, 2020, our

cash, cash equivalents and short-term investments were $67.0 million and $95.0 million, respectively.

Based on our existing cash, cash

equivalents and short-term investments, our ability to access additional financial resources and/or 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.

We will need to secure additional funding in the future to carry out all of 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.

of June 30, 2021 and December 31, 2020, our working capital was $38.0 million and $55.8 million, respectively.

The decrease in working

capital as of June 30, 2021 resulted primarily from $25.1 million of cash used for operating activities, partially offset by $8.4 million

of cash provided by financing activities.

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.

of September 30, 2021 and December 31, 2020, our working capital was $41.4 million and $55.8 million, respectively.

in working capital as of September 30, 2021 resulted primarily from $35.4 million of cash used for operating activities, partially offset

by $8.5 million of cash provided by financing activities and the positive impact on working capital of the Settlement Agreement with

REGENXBIO as described further below.

August 17, 2018, we entered into an open market sale agreement with Jefferies LLC (the “2018 ATM Agreement”).

the terms of the 2018 ATM Agreement, we are able to sell from time to time, through Jefferies LLC, shares of our common stock for an

the terms of the 2018 ATM Agreement, we were able to sell from time to time, through Jefferies LLC, shares of our common stock for an

aggregate sales price of up to $150 million.

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We sold 3,083,286 shares of our common

stock under the 2018 ATM Agreement and received $7.7 million of net proceeds during the six months ended June 30, 2021.

stock under the 2018 ATM Agreement and received $7.7 million of net proceeds during the nine months ended September 30, 2021.

Cumulatively,

as of June 30, 2021, we have sold an aggregate of 6,150,495 shares of our common stock under the 2018 ATM Agreement and received $24.6

as of September 30, 2021, we have sold an aggregate of 6,170,236 shares of our common stock under the 2018 ATM Agreement and received

$27.7 million of net proceeds.

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the patent of eight years.

On November 1, 2019, we entered into an amendment of the original license agreement.

On November 1, 2019, we entered into an amendment to the original license agreement.

The amended agreement

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payments, and those payments were the subject of an arbitration between the Company and REGENXBIO as noted below.

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

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 an agreement, 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.

There were no penalties for early termination of the license.

May 25, 2020, we filed an arbitration claim with the American Arbitration Association (“AAA”) alleging that REGENXBIO materially

breached the license agreement prior to termination and seeking, among other things, a declaration that as a result of REGENXBIO’s

material breach, we were not responsible for payments totaling $28 million (which would otherwise have been due in 2020) plus accrued

interest ($6.4 million as of June 30, 2021 based on invoices received from REGENXBIO).

REGENXBIO disputed our arbitration claim

and filed a counterclaim seeking payment of the $28 million plus interest, which REGENXBIO argued remained due.

An arbitration hearing

before a tribunal of three AAA arbitrators was held on March 8 and March 9, 2021.

On July 13, 2021, the tribunal found in favor of REGENXBIO

in connection with the parties’ arbitration claims and counterclaims.

Although the tribunal awarded REGENXBIO $28.0 million

plus interest, we believe that prior to the arbitration decision, the two companies had entered into a binding settlement agreement,

including $18.0 million payable to REGENXBIO over a two-year period.

We intend to seek enforcement of the settlement agreement.

On May 25, 2020,

we filed an arbitration claim with the American Arbitration Association (“AAA”) alleging that REGENXBIO materially breached

the license agreement prior to termination and seeking, among other things, a declaration that as a result of REGENXBIO’s material

breach, we were not responsible for payments totaling $28 million (which would otherwise have been due in 2020) plus accrued interest.

REGENXBIO disputed our arbitration claim and filed a counterclaim seeking payment of the $28 million plus interest, which REGENXBIO argued

remained due.

An arbitration hearing before a tribunal of three AAA arbitrators was held on March 8 and March 9, 2021.

On July 13, 2021,

the tribunal found in favor of REGENXBIO in connection with the parties’ arbitration claims and counterclaims.

The tribunal awarded

REGENXBIO $28.0 million plus interest.

2021, we filed a second arbitration claim with the AAA asserting that a settlement had been reached before the tribunal’s award

in the first arbitration was issued.

On September 14, 2021, REGENXBIO filed its answer, a counterclaim seeking attorney fees and costs,

and a request for permission to file a case dispositive motion.

A preliminary hearing was held on November 1, 2021, during which the

AAA Tribunal set timetables for discovery and for REGENXBIO’s filing of its case dispositive motion.

Those timetables were formalized

in a procedural order issued by the Tribunal on November 8, 2021.

Under the schedule set by the Tribunal, REGENXBIO’s opening brief

in support of its case dispositive motion was filed on November 8, 2021, briefing was scheduled to be completed on December 29, 2021,

and oral argument was scheduled for January 14, 2022.

REGENXBIO had also filed suit in the New York State Supreme Court Commercial Division

seeking enforcement of the original arbitration award, and we had requested that the Court stay that proceeding until the second arbitration

Oral argument on our request for a stay was set for March 10, 2022.

12, 2021, we entered into a settlement agreement (“Settlement Agreement”) with REGENXBIO to resolve all current disputes

between the parties including the aforementioned AAA arbitration and New York State Court action.

In accordance with the Settlement Agreement,

we agreed to pay REGENXBIO a total of $30 million, payable as follows:

(1) $20 million payable within one business day of the execution

of the Settlement Agreement, (2) $5 million on the first anniversary of the effective date of the Settlement Agreement, and (3) $5 million

upon the earlier of:

(i) the third anniversary of the effective date of the Settlement Agreement or (ii) the closing of a Strategic Transaction,

as defined in the Settlement Agreement.

Under the Settlement Agreement’s terms, the prior license agreement between the parties

was not reinstituted, and any future license agreement would need to be negotiated separately and require consideration in addition to

the consideration set forth in the Settlement Agreement.

As of September 30, 2021, we have recorded the payable to licensor in the balance

sheet based on the present value of the payments due to REGENXBIO under the Settlement Agreement.

our inception, we have incurred negative cash flows from operations and have expended, and expect to continue to expend, substantial

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on many factors, including:

evolving impact to our business, operations, and clinical programs from the COVID-19 pandemic and related effects on the U.S.

global economy;

impact to our business, operations, and clinical programs from the COVID-19 pandemic and related effects on the U.S.

and global economy;

successful development and commercialization of our gene and cell therapy and other product candidates;

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did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis