What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-18 compared with 2023-03-29 · 317 added, 264 removed, 232 unchanged (71% of the section changed)

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

following discussion should be read in conjunction with our consolidated financial statements and related notes included in this Form

should read the following discussion and analysis together with our consolidated financial statements and related notes included in this

This discussion and analysis contains forward-looking statements, which involve risks and uncertainties.

As a result of many

factors, such as those described under “Forward-Looking Statements,” “Risk Factors” and elsewhere in this Form

10-K, our actual results may differ materially from those anticipated in these forward-looking statements.

is a clinical-stage biopharmaceutical company developing cell and gene therapies for life-threatening diseases.

Our lead clinical program

is EB-101, an autologous, engineered cell therapy currently in development for recessive dystrophic epidermolysis bullosa (“RDEB”).

In November 2022, we announced positive topline data from the VIITAL™ study evaluating the efficacy, safety and tolerability of

The VIITAL™ study met its two co-primary efficacy endpoints demonstrating statistically significant, clinically meaningful

improvements in wound healing and pain reduction in large chronic RDEB wounds.

Based on the positive topline results, we intend to submit

a Biologics License Application (“BLA”) for EB-101 to the U.S.

Food and Drug Administration (“FDA”) in late second

quarter of 2023 or early third quarter of 2023.

development portfolio also features adeno-associated virus (“AAV”) based gene therapies designed to treat ophthalmic

diseases using the novel AIM™ capsid platform that we have exclusively licensed from the University of North Carolina at

Chapel Hill, and internal AAV vector research programs.

is pz-cel, investigational autologous, COL7A1 gene-corrected epidermal sheets, currently in development for recessive dystrophic epidermolysis

bullosa (“RDEB”).

We have announced positive data from the VIITAL™ study evaluating the efficacy, safety and tolerability

The VIITAL™ study met both its two co-primary efficacy endpoints demonstrating statistically significant, clinically

meaningful improvements in wound healing and pain reduction in large chronic RDEB wounds.

On September 25, 2023, we submitted a Biologics

License Application (“BLA”) for pz-cel to the U.S.

Food and Drug Administration (“FDA”).

As part of the submission,

we requested Priority Review, which, if granted, would shorten the FDA’s review period to six months from the filing acceptance

of the BLA instead of ten months under standard review.

In November 2023, the FDA accepted and granted priority review for our BLA for

Under the Prescription Drug User Fee Act (“PDUFA”), the FDA has set a target action date of May 25, 2024.

have continued to prepare our current Good Manufacturing Practices (“cGMP”) commercial facility in Cleveland, Ohio for manufacturing

EB-101 drug product to support our planned BLA filing to the FDA.

EB-101 study drug product for all our VIITAL™ study participants

has been manufactured at our Cleveland facility.

Our preclinical programs are investigating the use of novel AAV capsids

in AAV-based therapies for serious eye diseases, including ABO-504 for Stargardt disease, ABO-503 for X-linked retinoschisis (XLRS) and

ABO-505 for autosomal dominant optic atrophy (ADOA).

In 2022, we evaluated the ability of our gene constructs and capsids to deliver and

express the recombinant protein in target eye tissues and rescue mutant phenotypes in mouse disease models.

The Company has submitted

a pre-Investigational New Drug (IND) application meeting request for XLRS to the FDA to gain alignment on IND enabling toxicity studies

and clinical trial design.

The Company expects to present new preclinical data from these programs at a future medical meeting in second

quarter of 2023.

pz-cel drug product to support our planned commercial launch of pz-cel, if approved.

Pz-cel study drug product for all our VIITAL™

study participants has been manufactured at our Cleveland facility.

As part of our commercial planning, we continue to engage with stakeholders

across the healthcare system, including public and private payors, and healthcare providers to better understand market access and potential

pricing for pz-cel.

We have also begun discussions with high volume treatment centers of excellence to onboard them for pz-cel application

upon potential FDA approval.

development portfolio also features adeno-associated virus (“AAV”) based gene therapies designed to treat ophthalmic diseases

using the novel AIM™ capsid platform that we have exclusively licensed from the University of North Carolina at Chapel Hill, and

internal AAV vector research programs.

preclinical programs are investigating the use of novel AAV capsids in AAV-based therapies for serious genetic eye diseases, including

ABO-504 for Stargardt disease, ABO-503 for X-linked retinoschisis (“XLRS”) and ABO-505 for autosomal dominant optic atrophy

We completed pre-Investigational New Drug Application (“pre-IND”) meetings with the FDA regarding the

preclinical development plans and regulatory requirements to support first-in-human trials.

January 8, 2024, we entered into a $50 million credit facility with the Avenue Venture Opportunities Fund, L.P.

The credit agreement,

which has a term of three and a half years, includes a first tranche of $20 million at closing, a second tranche of $10 million of committed

capital, and an additional accordion option to upsize the credit facility by an additional $20 million upon satisfaction of certain terms

and conditions.

Additionally,

the Bioresearch Monitoring (“BIMO”) inspection was conducted from January 22, 2024 through January 24, 2024 at our headquarters

in Cleveland, Ohio, and reviewed the conduct and practices that pertain to the clinical studies of pz-cel.

The FDA inspector did not

issue any observations or FDA Form 483s during the inspection.

The formal report from the FDA regarding the BIMO inspection will be

received at a later date.

FDA’s BIMO program is a comprehensive program of on-site inspections, data audits, and remote

regulatory assessments designed to monitor all aspects of the conduct and reporting of FDA regulated research.

The BIMO program was established

to assure the quality and integrity of data submitted to the agency in support of new product approvals and marketing applications.

the BIMO inspection, the BLA mid-cycle review meeting took place on January 25, 2024.

The FDA reaffirmed its earlier indication that

it does not currently plan to convene an Advisory Committee for pz-cel.

In addition, the FDA advised that Risk Evaluation and Mitigation

Strategies (REMS) are not anticipated for the pz-cel application at this time, though application review is ongoing, and reconfirmed

the PDUFA target action date of May 25, 2024, on which an approval decision on the pz-cel BLA is expected.

Subsequent to the mid-cycle review meeting, the FDA completed a Pre-License

Inspection (PLI) of our Cleveland, Ohio manufacturing facility related to our BLA for pz-cel.

During the inspection, the FDA reviewed

the facilities, systems, and processes at our Cleveland site.

The FDA also observed the manufacturing process for pz-cel, as well as performance

of in-process and release assays.

The two-week PLI, which was conducted by five FDA inspectors, concluded on March 1, 2024.

Upon completion

of the inspection, a Form 483 was issued with observations related to process controls.

On March 15, 2024, we submitted a response to

the FDA, outlining already implemented and ongoing steps toward resolution that follow FDA guidance provided during the audit.

the FDA completed the clinical study site inspections of the two clinical sites in the U.S.

that enrolled subjects in the pivotal Phase

3 VIITAL™ study supporting the pz-cel BLA with no Form 483 observations noted.

OF OPERATIONS

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General and administrative

Impairment of goodwill

Impairment of licensed technology

Impairment of right-of-use lease assets

Loss/(gain) on operating lease right-of-use assets

Impairment of construction-in-progress

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Loss from operations

Gain on settlement with licensor

PPP loan payable forgiveness income

Interest income

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and other revenues for the year ended December 31, 2023 was $3.5 million, as compared to $1.4 million for the same period of 2022.

revenue in 2022 resulted from a clinical milestone achieved in the second quarter of 2022 under a sublicense agreement we entered into

with Taysha Gene Therapies (“Taysha”) in October 2020 relating to an investigational AAV-based gene therapy for Rett syndrome,

including certain intellectual property relating to MECP2 gene constructs and regulation of their expression.

There was also revenue

consisting of the recognition of deferred revenue related to grants for the ABO-102 and ABO-101 development programs and revenue related

to the sublet of a portion of our existing leases.

revenue in 2021 resulted from a clinical milestone achieved in December 2021 under a sublicense agreement we entered into with Taysha

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

royalties expenses were $0.4 million for the year ended December 31, 2022, as compared to nil for the same period of 2021, an increase

of $0.4 million.

The increase in expense was due to royalties owed to our licensors resulting from the $1.0 million milestone due from

The revenues in both periods mainly result from clinical milestones achieved under a sublicense agreement we entered into with

Taysha Gene Therapies in October 2020 relating to an investigational AAV-based gene therapy for Rett syndrome.

In 2022, there was

also $0.3 million in revenue consisting of the recognition of deferred revenue related to grants for the ABO-102 and ABO-101

development programs.

royalty expenses were $1.6 million for the year ended December 31, 2023, as compared to $0.4 million for the same period of 2022, an

increase of $1.2 million.

The increase in expense was due to royalties owed to our licensors resulting from the milestones due from Taysha

related to Rett syndrome.

and development

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supplies and manufacturing facilities, and consultant-related expenses.

research and development spending for the year ended December 31, 2022 was $28.9 million, as compared to $38.7 million for the same period

of 2021, a decrease of $9.8 million.

The decrease in expenses was primarily due to:

clinical and development work for our cell and gene therapy product candidates and other related costs of $5.7 million which primarily

relates to the license out/discontinuation of our MPSIII programs;

non-cash stock compensation expenses of $3.2 million;

salary and related costs of $1.0 million;

partially offset by

other costs of $0.1 million.

expect our research and development activities to continue as we attempt to advance our product candidates towards potential regulatory

approval, reflecting costs associated with:

research and development spending for the year ended December 31, 2023 was $31.1 million, as compared to $29.0 million for the same

period of 2022, an increase of $2.1 million.

The increase in expenses was primarily due to an $2.2 million increase in salaries and $0.1 million in non-cash stock-based compensation costs due to increased headcount related to the filing of our BLA.

expect our research and development activities to continue as we work towards advancing our product candidates towards potential regulatory

approval, reflecting costs associated with the following:

and consultant-related expenses;

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and administrative expenses primarily consist of payroll and personnel costs, office facility costs, public reporting company related

costs, professional fees (e.g., legal expenses) and other general operating expenses not otherwise included in research and development

costs, professional fees (e.g., legal expenses), pre-commercial launch activity costs and other general operating expenses not otherwise

included in research and development expenses.

general and administrative expenses were $19.0 million for the year ended December 31, 2023, as compared to $17.3 million for the same

period of 2021, a decrease of $4.4 million.

The decrease in expenses was primarily due to:

professional fees of $3.9 million;

period of 2022, an increase of $1.7 million.

The increase in expenses was primarily due to:

salary and related costs of $1.8 million;

pre-commercial preparation costs of $1.2 million;

non-cash stock-based compensation of $1.6 million;

partially offset by

other costs of $0.8 million;

salary and related costs of $1.4 million.

impairment charge was nil for the year ended December 31, 2022, as compared to $32.5 million in the same period of 2021.

As of year-end

2021, the carrying value of our net assets was determined to exceed the fair value of our net assets, and therefore, we recorded a goodwill

impairment charge of $32.5 million.

other costs such as insurance, rent and offering costs of $2.9 million.

of licensed technology

of licensed technology was $1.4 million for the year ended December 31, 2022, as compared to nil in the same period of 2021.

technology was for the ABO-102 and ABO-101 development programs, which, as a result of our shift in priorities, we determined the licensed

technology had no future value and thus recorded impairment of $1.4 million for the year ended December 31, 2022.

of right-of-use lease assets

of right-of-use lease assets was $2.5 million for the year ended December 31, 2022, as compared to nil in the same period of 2021.

portion of the impairment was related to a lease for a future manufacturing facility for the ABO-102 and ABO-101 development programs,

which, as a result of our shift in priorities, we determined the portion of this lease had no future value and thus recorded impairment

of $1.6 million for the for the year ended December 31, 2022.

In addition, we sublet a portion of our leased properties which indicated

that a portion of the lease had a reduced future value and thus recorded impairment of $0.9 million for the year ended December 31, 2022.

of licensed technology was nil for the year ended December 31, 2023, as compared to $1.4 million in the same period of 2022.

technology was for the ABO-102 and ABO-101 development programs and as a result of our shift in priorities in 2022, we determined the

remaining value of the licensed technology had no future value and thus recorded an impairment charge of $1.4 million for the year ended

December 31, 2022.

on operating lease right-of-use assets

gain on operating lease right-of-use assets was $1.1 million for the year ended December 31, 2023, as compared to a loss on operating

lease right-of-use assets of $2.5 million in the same period of 2022.

The gain on operating lease right-of-use assets for 2023 was related

to the termination of our operating leases for office space that we no longer use, resulting in a gain from the difference between the

carrying value of the right-of-use lease assets and the related lease liabilities.

loss on operating lease right-of-use assets for 2022 was related to a lease for a future manufacturing facility for the ABO-102 and ABO-101

development programs, which, as a result of our shift in priorities in 2022, we determined the remaining value of the portion of this

lease had no future value and thus recorded an impairment charge of $1.6 million for the year ended December 31, 2022.

In addition, we

sublet a portion of our leased properties which indicated that a portion of the lease had a reduced future value and thus recorded impairment

of $0.9 million for the year ended December 31, 2022.

of construction-in-progress

of construction-in-progress was $1.8 million for the year ended December 31, 2022, as compared to nil in the same period of 2021.

of construction-in-progress was nil for the year ended December 31, 2023, as compared to $1.8 million in the same period of 2022.

construction-in-progress was for a facility for the ABO-102 and ABO-101 development programs.

As a result of our shift in priorities,

we determined the construction-in-progress facility had no future value and thus recorded impairment of $1.8 million for the for the

year ended December 31, 2022, which was net of a cash refund from the builder of approximately $1.5 million.

on settlement with licensor

on settlement with licensor was nil for the year ended December 31, 2022, as compared to $6.7 million in the same period of 2021.

November 12, 2021, we entered into a settlement agreement with REGENXBIO, Inc.

(“REGENXBIO”) to resolve all current disputes

between us and REGENXBIO.

The accounting for this settlement agreement resulted in a $6.7 million gain on settlement with REGENXBIO in

the year ended December 31, 2021.

loan payable forgiveness income

loan payable forgiveness income was nil for the year ended December 31, 2022, as compared to $1.8 million in the same period of 2021.

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

December 31, 2021.

income was $0.4 million for the year ended December 31, 2022, as compared to $40,000 in the same period of 2021.

we determined the remaining value of the construction-in-progress facility had no future value and thus, we recorded impairment of $1.8

million for the for the year ended December 31, 2022, which was net of a cash refund from the builder of $1.5 million.

income was $2.1 million for the year ended December 31, 2023, as compared to $0.4 million in the same period of 2022.

The increase resulted

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

from higher earnings on short-term investments driven by higher interest rates and increased average short-term investment balances.

expense was $0.4 million for the year ended December 31, 2023, as compared to $0.7 million in the same period of 2022.

The decrease results

primarily from the resolution of a disputed liability owed to our prior licensor, REGENXBIO.

primarily from the $5.0 million settlement payment made in November 2022 of a disputed liability owed to our prior licensor, REGENXBIO,

in fair value of warrant liabilities

change in fair value of warrant liabilities was $11.4 million for the year ended December 31, 2022, as compared to nil in the same period

We issued stock purchase warrants that are required to be classified as a liability and valued at fair market value at each

reporting period.

The change in the fair value of warrant liabilities resulted in a gain of $11.4 million due primarily to the reduction

in our stock price year over the year and a shorter term.

income was $0.1 million for the year ended December 31, 2022, as compared to $15,000 in the same period of 2021.

The increase was primarily

a result of a gain on lease termination of $0.3 million partially offset by $0.1 million of losses on the disposal of fixed assets.

change in fair value of warrant liabilities was a loss of $11.7 million for the year ended December 31, 2023, as compared to a gain of

$11.4 million in the same period of 2022.

issued stock purchase warrants that are required to be classified as a liability and valued at fair market value at each reporting period.

The change in the fair value of warrant liabilities is primarily due to the fluctuation in our stock price year over year and a shorter

income was $2.9 million for the year ended December 31, 2023, as compared to $0.1 million in the same period of 2022.

The change was

primarily a result of $2.1 million in other income related to the impact of the employee retention credit that we submitted for 2020

AND CAPITAL RESOURCES

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Financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

cash used in operating activities was $37.0 million for the year ended December 31, 2023, primarily comprised of our net loss of $54.2

million and decrease in operating assets and liabilities of $5.9 million and net non-cash charges of $2.1 million.

million and increases in operating assets and liabilities of $1.8 million partially offset by net non-cash charges of $19.0 million.

Non-cash charges consisted primarily of $11.7 million of the change in fair value of warrant liabilities, $4.8 million of stock-based

compensation and $2.2 million of depreciation and amortization.

cash used in operating activities was $43.5 million for the year ended December 31, 2022, primarily comprised of our net loss of $39.7

million and decrease in operating assets and liabilities of $5.9 million partially offset by net non-cash charges of $2.1 million.

cash provided by investing activities was $0.2 million for the year ended December 31, 2023, primarily comprised of proceeds from maturities

of short-term investments of $51.9 million and proceeds from the disposal of property and equipment of $0.2 million, partially offset

by purchases of short-term investments of $51.6 million and capital expenditures of $0.3 million.

cash used in investing activities was $24.0 million for the year ended December 31, 2022, primarily comprised of purchases of short-term

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of $52.6 million and proceeds from the disposal of property and equipment of $1.7 million.

cash provided by investing activities was $66.1 million for the year ended December 31, 2021, primarily comprised of proceeds from maturities

of short-term investments of $90.4 million, partially offset by purchases of short-term investments of $20.2 million and capital expenditures

of $4.1 million.

cash provided by financing activities was $37.1 million for the year ended December 31, 2023, primarily comprised of proceeds of $14.4

million from open market sales of common stock pursuant to the ATM Agreement (as defined below) and net proceeds of $23.0 million from

our July 2023 direct placement offering of common stock.

cash provided by financing activities was $43.2 million for the year ended December 31, 2022, primarily comprised of proceeds of $12.8

million from open market sales of common stock pursuant to the ATM Agreement (as defined below) and proceeds of $34.1 million from a

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redeemable preferred stock.

cash provided by financing activities was $24.9 million for the year ended December 31, 2021, primarily comprised of proceeds of $17.4

million from the issuance of common stock and warrants in a public offering, proceeds of $8.0 million from open market sales of common

stock pursuant to the ATM Agreement and proceeds of $0.8 million from the exercise of stock options, partially offset by the payment

of offering costs in a public offering of $1.5 million.

have historically funded our operations primarily through sales of common stock.

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We believe that our current cash and cash equivalents,

restricted cash and short-term investments are sufficient resources to fund operations through at least the next 12 months from the date

of this report on Form 10-K.

We may need to secure additional funding 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.

have an open market sale agreement with Jefferies LLC (as amended, the “ATM Agreement”) pursuant to which, we may sell

from time to time, through Jefferies LLC, shares of our common stock for an aggregate sales price of up to $150.0 million.

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 are currently subject to General Instruction I.B.6 of Form S-3, as a result

of which the amount of funds we can raise through primary public offerings of securities in any 12-month period using our

registration statement on Form S-3 is limited to one-third of the aggregate market value of the voting and non-voting common equity

held by non-affiliates.

We remain subject to this one-third limitation until such time our public float exceeds $75 million.

146,872 shares of our common stock under the ATM Agreement and received $8.1 million of net proceeds during the year ended December

We sold 3,479,016 shares of our common stock under the ATM Agreement and received $12.8 million of net proceeds during the

year ended December 31, 2022.

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.

We have not been profitable since inception and to date have received limited revenues

from the sale of products or licenses.

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.

restricted cash and short-term investments, as well as our credit facility with Avenue Venture Opportunities Fund, L.P, are sufficient

to fund operations through at least the next 12 months from the date of this report on Form 10-K.

We may need to secure additional funding

to carry out all of our planned research and development and potential commercialization activities.

If we are unable to obtain additional

financing or generate license or product revenue, the lack of liquidity and sufficient capital resources could have a material adverse

effect on our future prospects.

have an open market sale agreement with Jefferies LLC (as amended, the “ATM Agreement”) pursuant to which, we may sell from

time to time, through Jefferies LLC, shares of our common stock for an aggregate sales price of up to $150.0 million.

Any sales of shares

pursuant to this agreement are made under our effective “shelf” registration statement on Form S-3 that is on file with and

has been declared effective by the SEC.

We sold 3,659,882 shares of our common stock under the ATM Agreement and received $14.4 million

of net proceeds during the year ended December 31, 2023.

We sold 3,479,016 shares of our common stock under the ATM Agreement and received

$12.8 million of net proceeds during the year ended December 31, 2022.

Subsequent to December 31, 2023 and through March 1, 2024, we sold 724,659 shares of our common stock under the ATM

Agreement resulting in $5.3 million in net proceeds.

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 and potential commercialization efforts.

We have not been profitable since inception

and to date have received limited revenues from the sale of products or licenses.

We expect to incur losses for the next several years

as we continue to invest in commercialization, 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.

we raise additional funds by selling additional equity securities, the relative equity ownership of our existing investors will be diluted,

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costs involved in conducting clinical trials;

continuing impact to our business, operations, and clinical programs from the COVID-19 pandemic and government actions related thereto;

technological developments;

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(1) $20 million payable that was paid in 2021 after 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

(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.

As of December 31, 2022, we have recorded the payable to licensor in the contractual obligations as the

one remaining payments due to REGENXBIO under the Settlement Agreement.

Agreement, (2) $5 million on the first anniversary of the effective date of the Settlement Agreement that was paid in 2022, 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.

As of December 31, 2023, we have recorded the payable to licensor in the contractual

obligations as the one remaining payment due to REGENXBIO under the Settlement Agreement.

addition, we are also party to other license agreements, which include contingent payments.

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include contingent payments that will become payable if and when certain development, regulatory and commercial milestones are achieved.

During the next 12 months, we do not expect to make milestone payments related to such license agreements.

During the next 12 months, certain contingent payments could become due upon potential BLA approval and sales of pz-cel related to such

license agreements.

Accounting Estimates

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actual results could differ from those estimates and the differences could be material.

While our significant accounting policies are described

in greater detail in Note 1 to our consolidated financial statements appearing elsewhere in this Annual Report, we believe that the following

accounting policies are the most critical to the judgements and estimates used in the preparation of our consolidated financial statements.

account for leases pursuant to ASC 842, Leases (“ASC 842”).

ASC 842 requires the recognition of lease assets and lease

liabilities by lessees for those leases classified as operating leases .

We determine if an arrangement is a lease at inception

or when amended.

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 classification of our leases as operating or finance leases along with

the initial measurement and recognition of the associated right-of-use assets and lease liabilities is performed at the lease commencement

date or when amended.

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.

ASC 842 requires the recognition of lease assets and

lease liabilities by lessees for those leases classified as operating leases .

We determine if an arrangement is a lease at

inception or when amended.

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 classification of our leases as operating or

finance leases along with the initial measurement and recognition of the associated right-of-use assets and lease liabilities is

performed at the lease commencement date or when amended.

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.

we have no external borrowings, the incremental borrowing rates are determined using information on indicative borrowing rates that

would be available to us based on the value, currency and borrowing term provided by financial institutions, adjusted for company

and market specific factors.

Although we do not expect our estimates of the incremental borrowing rates to generate material

differences within a reasonable range of sensitivities, judgement is involved in selecting an appropriate rate, and the rate

selected for each lease will have an impact on the value of the lease liability and corresponding right-of-use lease asset in the

consolidated balance sheets.

The right-of-use asset is based on the measurement of the

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period in our lease term.

June 2023, we terminated one of our operating leases for office space.

The termination resulted in a gain of $1.1 million for the year

ended December 31, 2023, representing the difference between the carry value of the right-of-use assets and the related lease liabilities.

This gain is included in loss/(gain) on right-of-use lease assets in the consolidated statement of operations and comprehensive loss.

June of 2023, we modified one of our operating leases for office space to add up to 14,032 square feet to our existing facility in Cleveland,

The lease modification resulted in the recognition of $0.4 million of additional right-of-use assets and related lease liabilities

in our consolidated balance sheet during the year ended December 31, 2023.

March 31, 2022, we announced that we were pursuing a strategic partner to take over development activities of ABO-102 and we were discontinuing

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a reduced future value and thus recorded impairment of $0.9 million for the year ended December 31, 2022.

maintain licensed technology on our consolidated balance sheet until either the licensed technology agreement underlying it is completed

or the asset becomes impaired.

When we determine that an asset has become impaired or we abandon a project, we write down the carrying

value of the related intangible asset to its fair value and take an impairment charge in the period in which the impairment occurs.

licensed technology is amortized over the life of the patent or the agreement.

We test our intangible assets for impairment if indicators

are present or changes in circumstance suggest that impairment may exist.

Events that could result in an impairment, or trigger an interim

impairment assessment, include the receipt of additional clinical or nonclinical data regarding our drug candidate or a potentially competitive

drug candidate, changes in the clinical development program for a drug candidate or new information regarding potential sales for the

In connection with any impairment assessment, we compare the fair value of the asset as of the date of the assessment with the

carrying value of the asset on our consolidated balance sheets.

2022, in connection with the license of our ABO-102 asset for the treatment of Sanfilippo syndrome type A (MPS IIIA) to Ultragenyx and

the discontinuation of the ABO-101 program for the treatment of Sanfilippo syndrome type B (MPS IIIB), we recorded an impairment charge

of $1.4 million as we determined that there was no remaining value of the licensed technology.

2021, we did not impair any licensed technology.

Both impairment charges are

included in loss/(gain) on operating lease right-of-use assets in the consolidated statement of operations and comprehensive loss.

of Long-Lived Assets

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of the asset to the present value of the expected future cash flows associated with the use of the asset.

accordance with ASC 350 — Intangibles — Goodwill and Other, we test goodwill for impairment on an annual basis and

in the interim if events and circumstances indicate that goodwill may be impaired.

The events and circumstances that are considered include

business climate and market conditions, legal factors, operating performance indicators and competition.

Impairment of goodwill is evaluated

on a qualitative basis before calculating the fair value of the entity.

If the qualitative assessment suggests that impairment is more

likely than not, a quantitative impairment analysis is performed.

The quantitative analysis involves comparison of the fair value of

the entity with its carrying value.

The valuation of an entity requires judgment.

In making these judgments, we evaluate the financial

health of our business.

Decreases in the value of our common stock could cause the carrying value of the entity to exceed its fair value.

If the carrying amount of the entity exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited

to the total amount of goodwill.

If an event occurs that would cause a revision to the estimates and assumptions used in analyzing the

value of the goodwill, the revision could result in a noncash impairment charge that could have a material impact on the financial results.

experienced a steep decline in our share price during the year ended December 31, 2021.

We performed our annual goodwill impairment tested

as of year-end 2021 and determined that the carrying value of our net assets exceeded fair value using our market capitalization as a

proxy for fair value.

In accordance with ASC 350, we recognized an impairment loss for that excess of carrying value over fair value

but limited to the total amount of goodwill recorded on our consolidated balance sheets.

As a result, we recorded a goodwill impairment

charge of $32.5 million during the year ended December 31, 2021.

The undiscounted future operating cash flows require considerable judgement and are sensitive to changes in underlying assumptions such

as operating costs related to our current facilities, headcount requirements and our clinical costs.

As a result, there can be no assurance

that the estimates and assumptions made for purpose of our impairment determinations would prove to be an accurate predication of the

account for revenue under ASC 606, Revenue from Contracts with Customers , (“ASC 606”).

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revenue when (or as) we satisfy a performance obligation.

Exclusive Licenses

For licenses that are combined with other performance

obligation, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance

obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of

recognizing revenue.

We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and

related revenue recognition.

The measure of progress, and thereby periods over which revenue should be recognized, are subject to estimates

by management and may change over the course of the research and development and licensing agreement.

Such a change could have a material

impact on the amount of revenue we record in future periods.

Milestone Payments

At the inception of each arrangement that includes

research or development milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimate

the amount to be included in the transaction price using the most likely amount method.

If it is probable that a significant cumulative

revenue reversal would not occur, the associated milestone value is included in the transaction price.

An output method is generally used

to measure progress toward complete satisfaction of a milestone.

Milestone payments that are not within our control or the licensee, such

as regulatory approvals, are not considered probable of being achieved until those approvals are received.

We evaluate factors such as

the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making

this assessment.

There is considerable judgment involved in determining whether it is probable that a significant cumulative revenue reversal

would not occur.

At the end of each subsequent reporting period, we re-evaluate the probability of achievement of all milestones subject

to constraint and, if necessary, adjust our estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative

catch-up basis, which would affect revenue and earnings in the period of adjustment.

and Inventory Purchase Agreements Relating to CLN1 Disease:

In August 2020, we entered into sublicense and inventory purchase agreements

with Taysha Gene Therapies (“Taysha”) relating to a potential gene therapy for CLN1 disease.

Under the sublicense agreement,

Taysha received worldwide exclusive rights to intellectual property and know-how relating to the research, development, and manufacture

of the potential gene therapy, which we had referred to as ABO-202.

Under the inventory purchase agreement, we sold to Taysha certain

inventory and other items related to ABO-202.

We assessed these contracts at contract inception and determined that, under ASC 606, the

two contracts would be combined and accounted for as a single contract, with a single performance obligation.

We assessed the nature

of the promised license to determine whether the license has significant stand-alone functionality and evaluated whether such functionality

can be retained without ongoing activities by us and determined that the license has significant stand-alone functionality.

we have no ongoing activities associated with the license to support or maintain the license’s utility.

Based on this, we determined

that the pattern of transfer of control of the license to Taysha was at a point in time.

August 2020, we entered into sublicense and inventory purchase agreements with Taysha Gene Therapies (“Taysha”) relating

to a potential gene therapy for CLN1 disease.

Under the sublicense agreement, Taysha received worldwide exclusive rights to intellectual

property and know-how relating to the research, development, and manufacture of the potential gene therapy, which we had referred to

Under the inventory purchase agreement, we sold to Taysha certain inventory and other items related to ABO-202.

the nature of the promised license to determine whether the license has significant stand-alone functionality and evaluated whether such

functionality can be retained without ongoing activities by us and determined that the license has significant stand-alone functionality.

Furthermore, we have no ongoing activities associated with the license to support or maintain the license’s utility.

Based on this,

we determined that the pattern of transfer of control of the license to Taysha was at a point in time.

transaction price of the contract includes (i) $7.0 million of fixed consideration, (ii) up to $26.0 million of variable consideration

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At inception, we evaluated whether the milestone conditions had been achieved and if it was probable

that a significant revenue reversal would not occur before recognizing the associated revenue and determined that these milestone payments

were not within our control or the licensee’s control, such as regulatory approvals, and were not considered probable of being

achieved until those approvals were received.

Accordingly, at inception, we fully constrained the $26.0 million of event-based milestone

payments until such time that it is probable that significant revenue reversal would not occur.

The sales-based milestone payments and

other royalty-based payments are based on a level of sales for which the license is deemed to be the predominant item to which the royalties

We will recognize revenue for these payments at the later of (i) when the related sales occur, or (ii) when the performance obligation

to which some or all of the royalty has been allocated has been satisfied or partially satisfied.

To date, we have not recognized any

sales-based or royalty revenue resulting from this licensing arrangement.

the year ended December 31, 2021, Taysha achieved an event-based milestone payment and, accordingly, we recognized $3.0 million of revenue

as of December 31, 2021.

There was no revenue recognized under this agreement during the year ended December 31, 2022.

As of December

31, 2022 and 2021, we have a contract asset for nil and $3.0 million but did not have any contract liabilities as a result of this transaction.

We collected the $3.0 million of cash in January 2022 in full satisfaction of the contract asset.

that a significant cumulative revenue reversal would not occur before recognizing the associated revenue and determined that these milestone

payments were not within our control or the licensee’s control, such as regulatory approvals, and were not considered probable

of being achieved until those approvals were received.

Accordingly, at inception, we fully constrained the $26.0 million of event-based

milestone payments until such time that it is probable that significant cumulative revenue reversal would not occur.

The sales-based

milestone payments and other royalty-based payments are based on a level of sales for which the license is deemed to be the predominant

item to which the royalties relate.

We will recognize revenue for these payments at the later of (i) when the related sales occur, or

(ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied.

To date, we have not recognized any sales-based or royalty revenue resulting from this licensing arrangement.

was no revenue recognized under this agreement during the years ended December 31, 2023 and 2022.

As of December 31, 2023 and 2022, we

have no contract assets or contract liabilities as a result of this transaction.

Agreement Relating to Rett Syndrome:

In October 2020, we entered into a sublicense agreement with Taysha for a gene therapy for Rett

syndrome and MECP2 gene constructs and regulation of their expression.

The agreement grants Taysha worldwide exclusive rights to intellectual

property developed by scientists at the University of North Carolina at Chapel Hill, the University of Edinburgh and us, and our know-how

relating to the research, development, and manufacture of the gene therapy for Rett syndrome and MECP2 gene constructs and regulation

October 2020, we entered into a sublicense agreement with Taysha for a gene therapy for Rett syndrome and MECP2 gene constructs and regulation

of their expression.

The agreement grants Taysha worldwide exclusive rights to intellectual property developed by scientists at the University

of North Carolina at Chapel Hill, the University of Edinburgh and us, and our know-how relating to the research, development, and manufacture

of the gene therapy for Rett syndrome and MECP2 gene constructs and regulation of their expression.

assessed the nature of the promised license to determine whether the license has significant stand-alone functionality and evaluated

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We evaluated whether the milestone conditions have been achieved and if it is probable that a significant

revenue reversal would not occur before recognizing the associated revenue.

We determined that these milestone payments are not within

our control or the licensee’s control, such as regulatory approvals, and are not considered probable of being achieved until those

approvals are received.

Accordingly, we have fully constrained the $26.5 million of event-based milestone payments until such time that

it is probable that significant revenue reversal would not occur.

The sales-based milestone payments and other royalty-based payments

are based on a level of sales for which the license is deemed to be the predominant item to which the royalties relate.

We will recognize

revenue for these payments at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or

all of the royalty has been allocated has been satisfied or partially satisfied.

To date, we have not recognized any sales-based or royalty

revenue resulting from this licensing arrangement.

this arrangement, we recognized $1.0 million of revenue during the year ended December 31, 2022, which amount related solely to fixed

consideration.

We did not recognize any related revenue during the year ended December 31, 2021.

As of December 31, 2022 and 2021, we

do not have any contract assets or contract liabilities as a result of this transaction.

cumulative revenue reversal would not occur before recognizing the associated revenue.

We determined that these milestone payments are

not within our control or the licensee’s control, such as regulatory approvals, and are not considered probable of being achieved

until those approvals are received.

Accordingly, we have fully constrained the $26.5 million of event-based milestone payments until

such time that it is probable that significant cumulative revenue reversal would not occur.

The sales-based milestone payments and other

royalty-based payments are based on a level of sales for which the license is deemed to be the predominant item to which the royalties

We will recognize revenue for these payments at the later of (i) when the related sales occur, or (ii) when the performance obligation

to which some or all of the royalty has been allocated has been satisfied or partially satisfied.

To date, we have not recognized any

sales-based or royalty revenue resulting from this licensing arrangement.

this arrangement, we recognized $3.5 million and $1.0 million of revenue during the years ended December 31, 2023 and 2022, respectively,

which amount related solely to variable consideration.

As of December 31, 2023 and 2022, we do not have any contract assets or contract

liabilities as a result of this transaction.

Research and Development Expenses

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for services performed, on a pre-determined schedule or when contractual milestones are met;

however, some require advanced payments.

however, some require advance payments.

We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances

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There may be instances in which payments made to our vendors will exceed the level of services provided and

result in a prepayment of the clinical expense.

result in a prepayment of the expense.

In accruing service fees, we estimate the time period over which services will

be performed and the level of effort to be expended in each period .

If the actual timing of the performance of services or the level of effort varies from

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account for share-based compensation expense in accordance with ASC 718, Stock Based Compensation .

We have two share-based compensation

plans under which incentive and qualified stock options and restricted shares may be granted to employees, directors, and consultants.

We measure the cost of the employee/director/consultant services received in exchange for an award of equity instruments based on the

fair value for employees and directors and vesting date fair value of the award for consultants.

We use the Black-Scholes option pricing

model to determine the fair value of options as of the grant date and the Hull White I lattice model as of any option repricing dates.

The models used to determine the fair value of options includes assumptions for expected volatility, risk-free interest rate, dividend

yield and estimated expected term.

We use the closing price of our common stock as quoted on Nasdaq to determine the fair value of restricted

We account for forfeitures as they occur, which may result in the reversal of compensation costs in subsequent periods as the

We have share-based

compensation plans under which incentive and qualified stock options and restricted shares may be granted to employees, directors,

and consultants.

We measure the cost of the employee/director/consultant services received in exchange for an award of equity

instruments based on the fair value for employees and directors and vesting date fair value of the award for consultants.

Black-Scholes option pricing model to determine the fair value of options as of the grant date and the Hull White I lattice model as

of any option repricing dates.

The model used to determine the fair value of options includes assumptions for expected volatility,

risk-free interest rate, dividend yield and estimated expected term.

Expected volatility is estimated considering the

Company’s own historical volatility.

The risk-free interest rate is based on a treasury

instrument whose term is consistent with the expected term of the stock options.

The expected dividend yield is assumed to be zero

as we have never paid dividends and have no current plans to pay any dividends on our common stock.

Expected term is

estimated using the “simplified” method, as outlined in SEC Staff Accounting Bulletin No.

107, “Share-Based

Payment.” We use the closing price of our common stock as quoted on Nasdaq to determine the fair value of restricted stock.

account for forfeitures as they occur, which may result in the reversal of compensation costs in subsequent periods as the

forfeitures arise.

option-based compensation expense recognized for the years ended December 31, 2022 and 2021 was approximately $2.0 million and $5.3 million,

option-based compensation expense recognized for the years ended December 31, 2023 and 2022 was $1.4 million and $2.0 million, respectively.

Restricted stock-based compensation expense recognized for the years ended December 31, 2023 and 2022 was $3.4 million and $1.1 million,

respectively.

Restricted stock-based compensation expense recognized for the years ended December 31, 2022 and 2021 was approximately

$1.1 million and $3.7 million, respectively.

have issued warrants associated with capital raises from time to time.

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their fair value using the Black-Scholes pricing model.

The models used to determine the fair value of these warrants includes assumptions

The model used to determine the fair value of these warrants utilizes certain unobservable inputs and this therefore considered a Level

3 fair value measurement.

Inputs used in the model include assumptions

for expected volatility, risk-free interest rate, dividend yield and estimated expected term.

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periods recorded in the consolidated statements of operations and comprehensive loss.

in fair value of warrant liability recognized for the years ended December 31, 2022 and 2021 was approximately $11.4 million and nil,

respectively.

Certain inputs used in this Black-Scholes pricing model may fluctuate in future

periods based upon factors that are outside of our control, including a potential change in control.

A significant change in one or more

of these inputs used in the calculation of the fair value may cause a significant change to the fair value of our warrant liabilities,

which could also result in material non-cash gains or losses being reported in the Company’s statement of operations.

the inputs we utilized to value our warrant liabilities are highly subjective.

The assumptions used in calculating the fair value of our

warrant liabilities represent our best estimates, but these estimates involve inherent uncertainties and the application of management

As a result, if factors change and we use different assumptions, the fair value of the warrant liabilities may be materially

different in the future.

change in fair value of warrant liability recognized for the year ended December 31, 2023 resulted in a loss of $11.7 million.

in fair value of warrant liability recognized for the year ended December 31, 2022 resulted in a gain of $11.4 million.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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statements required by this Item are incorporated in this Annual Report on Form 10-K starting on page F-1 hereto.

Reference is made to Item 15 of this Form 10-K.

Reference is made to

Item 15 of this Form 10-K.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 7. Management’s Discussion and Analysis