Abeona Therapeutics Inc (NASDAQ: ABEO)
Abeona Therapeutics announced on Thursday the pricing of its public offering of common shares, agreeing to sell six million shares at $7.00 per share and granting the underwriters an additional 30-day option to purchase an additional 900K shares at the same price. Total expected proceeds from the deal are estimated to bring Abeona over $48 million dollars before deducting underwriting fees, discounts, and expenses that are part of the agreement. No warrants were attached to this deal.
Abeona Attracts A Huge Deal With No Pesky Warrants Attached
Investors truly need to stop and smell the rose petals that are laced all over this deal. Not only was Abeona able to strike a deal at prices not seen since June of 2015, ABEO also closed this deal without the need to sweeten the pot with warrants, those pesky perks that allow investors to sell the common shares, profit the difference, and then hold the remaining warrants that essentially provide a free, no-cost option to purchase shares at a later date.
With the deal announced today, the terms are straight up. ABEO will receive roughly $48 million in cold hard cash (less fees). In “cash burn speak,” it means that Abeona will have enough working capital in the bank to not cause a single hair on the CFO’s head to turn gray, at least from a financial perspective.
Money Isn’t Everything….Whaaaaaaaaaat?
True, money isn’t everything; but I usually hear that argument from people that either don’t have any or from the 1%’ers who need an excuse to explain why their kids are strung out on the club drug of the week.
Money is everything in the investment world. For emerging companies like Abeona, it is the life force that allows continuity and flexibility. It allows a company to manage both planned as well as unexpected events. It provides the comfort of maintaining the ability to attract and keep strong talent, and it keeps options available for potential mergers and acquisitions. Those things are important, however, one of the most important attributes of being financially independent is that it provides leverage, especially for an emerging company (like ABEO) that may be actively seeking partnership or licensing agreements in the near future.
For Abeona, $48 Million Dollars Can Last A Long, Long Time
Net cash used by ABEO for the first six months of 2016 totaled $5.6 million dollars. No, I did not make a typo. ABEO only burned through $5.6 million dollars for an entire six-month period of 2016.
Although investors should expect that the cash burn rate will rise to support additional clinical trial and related legal and regulatory expenses, the increase is not expected to be substantial, perhaps even remaining close to the $1 million dollar per month level for the near term.
Abeona can spend so little because the bulk of expenses are being picked up by their trial partners. Abeona is not, per se, the trial sponsor for the Sanfilippo study. That trial is being funded by Nationwide Childrens Hospital. Abeona supplies the gene therapy treatment, product support, and expertise. But, the bulk of the remaining cost is covered by the study centers, grants, and awards.
Now that ABEO has the cash on hand to throw 100% of its focus toward treating and potentially curing debilitating diseases such as Sanfilippo and EB, investors, too, can focus on the clinical and scientific developments without the nagging issue of additional funding requirements lurking in the background.
In the biotech industry, where money is an illness’s kryptonite, Abeona has become uncommon it that it has achieved a sense of long-term financial security.
Jefferies: A New Banker To The Abeona Table
Abeona is most certainly pleased to have yet another prime investment banking firm form a relationship with the company. Jefferies, who led this deal, joins an elite group of other investment banks that have enriched Abeona on prior deals. Inclusive to that list of analyst and investment bank notables are Cantor Fitzgerald, Maxim, Soros Fund, Knoll Capital, and Perceptive Advisors.
From that list, Soros Fund, Perceptive Advisors, and Knoll Capital are also 5% holders of the stock, representing a significant block of stock that is sitting in both strong and diligent hands. Additionally, the average 12-month price target from the group sits at roughly $15.00 a share, and now, with Jefferies in the game, my expectation is that they will soon initiate coverage and offer a price target well in excess of the $7.00 a share that they will be peddling to their clients.
What Exactly Impresses The Analysts?
With money in hand and a stable of coverage, Abeona is primed to expedite its trials, two of which have already gained the attention of keen investors.
In treating Sanfilippo, ABEO is working to repair a defective gene that limits the body’s natural production of a specific enzyme. That enzyme is extremely critical in providing the body the means to eliminate certain sugars from the lysosome in the cell. Without the ability to eliminate the waste, the body continues to essentially poison itself by not having the ability to shed the waste from the cell. Sadly, the effects from Sanfilippo are often fatal. Even worse, the disease effects primarily pediatric patients and the debilitating effects are difficult to watch, with tremendous effect on families, friends, and patients alike.
In its Sanfilippo trial, the FDA has just granted fast track status to the company, alongside it being awarded Orphan Drug designation by the EMA just several days ago.
Analysts are further impressed with Abeona’s results thus far in the treatment of EB. This condition, epidermolyis bullosa, results in a patient’s lack of ability to produce the protein necessary to act as an adhesive between the layers of the skin. This disease results in patients getting horribly painful blisters and ulcerative wounds to the skin. Skin can literally fall off of a patient. Without this protein doing its job to keep skin connected, the associated side effects from the open wounds range from serious infection to complications that can lead to death. Abeona is showing remarkable early success in this therapy as well.
In targeting EB, Abeona is further addressing an opportunity to treat a second unmet medical need.
My previous article provided a more in-depth look at the science at Abeona. To read it, click here.
Putting My Money, Along With Their Money…ABEO Looks Strong
The old adage of putting your money where your mouth is rings true here. I am a dedicated long in Abeona and have been impressed by the science, their early but encouraging success, and with management. In a prior article I questioned whether or not ABEO was doing everything right. Well, I absolutely believe that they are. And, several top analysts and banking institutions tend to agree.
Gene therapy is advancing quickly and the the science is gaining both believers and traction. The encouraging results from both the Sanfilippo and EB studies is a testament not only to the science, but to the management team that recognized and implemented key and distinct variables that have led to the early success.
The strategic and scientific decision to use specific vectors within the gene therapy treatment is an indication of the knowledge as well as the company’s ability to interpret and act upon key data.
With money in the bank and two gene therapy treatments that are delivering promising results, Abeona should soon gain traction as yet another banker, Jefferies, should be poised to recommend the stock. From that point, it should only be a short matter of time before Abeona might enjoy the billion dollar valuations like that of its competitors, one of which is not as clinically successful as ABEO.
Abeona is doing well, and this deal further derisks the stock from an investor’s perspective. Technicals indicate that the stock is slightly overbought at these levels, but after a 110% run during the prior sixty days, a slight retracement can be expected.
However, for those that attempt to time this stock in hopes of purchasing at lower levels, keep in mind that the company has guided toward additional milestone announcements during the fourth quarter of this year. With clinical data pending on an “any moment” time schedule, perhaps the prudent choice would be to simply sit and enjoy the ride.
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