Abeona Therapeutics (ABEO) Stock: Is The Company Doing Everything Right?

Abeona Therapeutics Inc (NASDAQ: ABEO)

Abeona Therapeutics is one of those companies that is set enviably into a unique niche of science that, if they prove to be successful, should meet little competitive headwind. As a gene therapy company, ABEO is relatively insulated from the speed at which competitors can enter the market.  With new competitors restricted by regulatory hurdles and a high risk/reward profile, emerging competitors will need to choose their battles carefully.

ABEO may have strategically positioned itself to be one of the gene therapy success stories of the decade, and in doing so, competitors should be reluctant to compete against their science in the competitive landscape.

Gene Therapy? Isn’t That A Rock Band From The ’60s?

Well, not quite, although perhaps there is confusion because of the popularity of the fictitious band, Blue Jean Committee, which has been made relatively famous in the Documentary Now series.

Simply put, gene therapy is the transplantation of a normal gene into a cell that replaces a missing or defective gene. By replacing the missing or defective gene with a normal, properly functioning gene, the goal is to correct the normal function of the cell that will allow the body to effectively fix itself. But the term “simply put” should not lead any reader to believe that the science is actually that simple.

Many have tried and many have failed. However, that has not deterred the excitement about the emergence of credible gene therapy treatment. Abeona has received analyst coverage from Maxim, FBR & Co., Cantor Fitzgerald, and Jones Trading. The average price target for ABEO sits at roughly $14.00 dollars a share, with Maxim reiterating its “BUY” recommendation and affirming its $14.00 price target on October 13, 2016. Cantor Fitzgerald most recently weighed in with a $21.00 price target.

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What Is The Excitement All About, Specific To ABEO?

At ABEO, the excitement stems from the early, but encouraging results from its current trials treating Sanfilippo and RDEB. The chatter about the potential of gene therapy success has been stirring around the water cooler gossip committee for the past 25 years. Similar to stem cell therapy, it was a topic rooted in science fiction hoopla and considered to be years away from actual practice. However, like the advances seen in computer technology, the development of the procedure has been swift and productive.

Spark Therapeutics (ONCE), for instance, is demonstrating some very encouraging results related to functions within the eye, and AveXis (AVXS) is doing the same in their treatment of spinal muscular atrophy. These results are encouraging for all in the sector, inclusive of ABEO, in that as other companies continue to prove efficacy and contribute to the legitimacy of the science, the pathway for regulatory approval through the FDA becomes greater.

As always, clinical results will always rule the day when it comes to biotech, especially within emerging technologies such as DNA therapy, stem cell research, and gene therapy, those that have a leading position hold a tremendous strategic advantage over any emerging competitor, due to the high barriers to entry and the cost of failure.

So, Is Abeona Demonstrating Strong Clinical Results Too?

They are. And what I like about ABEO is that the information being absorbed by the market is not necessarily being disseminated through the normal company-generated channels. The success of one of their Sanfilippo patients, for instance, has gained a huge Facebook following and the results are being posted by third party participants, adding credibility to the early success. In the case of Eliza, who has the debilitating and often fatal Sanfilippo syndrome, the remarkable early success of the gene therapy treatment is being chronicled on a daily basis.

Sanfilippo syndrome is a lysosomal storage disease, whereby a single defective gene results in the lack of production of a specific enzyme, which retards or even eliminates the body’s ability to clear certain sugars from the lysosome in the cell. In simpler terms, the waste matter that would normally be eliminated from the cell and eventually the body, is not occurring. Thus, the body, in essence, is continually poisoning itself. The results of the body’s inability to cast off the waste has both devastating and often fatal results, a reason that Eliza’s story is gaining so much attention from both parent advocacy groups.and deep-pocketed investors. As of now, there is no approved treatment for Sanfilippo syndrome.

Abeona is also working to restore normal gene function for a rare condition called epidermolyis bullosa, or ” EB”, for short. This condition results in a patient’s lack of ability to produce certain proteins that works as an adhesive between the layers of a patients skin. EB, like Sanfilippo, is a pediatric disease that results in excessive and horribly painful blisters and ulcerative wounds to the skin. It’s a horribly debilitating disease and excruciating to witness and care for. ABEO is currently producing encouraging results on its path toward addressing this unmet medical need.

Is The Abeona Treatment Years Away?

Not necessarily. ABEO is working on a phase I/II study design, whereby they can produce data that demonstrates both clinical efficacy as well as meeting primary safety and tolerability requirements.

With Abeona’s first-in-man trials, the company and the FDA look at the safety endpoints and simultaneously develop clinical protocols and assessments that gauge efficacy and effectiveness. Based on the results of a phase I/II study, the FDA has been amenable, especially in rare and juvenile disease space, to grant marketing approval based on results from the single phase I/II trial. Add the support of the patient advocacy groups, similar to the effect that they had on getting the Sarepta (SRPT) treatment for Duchennes approved, and the path to approval for these novel gene therapies can be highly abbreviated. We saw such a case, for instance, with Galaxo Smith Kline’s (GSK) European marketing approval for its treatment of a rare, pediatric condition in SCID, and that trial enrolled only six children.

All This Sounds Expensive, Does ABEO Have Adequate Cash On Hand?

They do!  And that is a phrase not often read when referring to emerging biotech companies.

The company ended the first half of the year with approximately $34 million dollars in cash, while burning only about $1 million dollars per month during that same period. The low overhead, figuratively speaking, is due to the fact that its trials are run independently, to an extent , from ABEO. The Sanfilippo trial is being studied and financed by Nationwide Children’s Hospital, with ABEO acting as a supplier, if you will , of the gene therapy treatment.

Current cash on hand is projected to last well into the year 2018, and this excludes proceeds from potential grants or FDA Priority Review Vouchers, which can be worth tens to hundreds of millions of dollars on the open market. Abeona is now positioned to benefit from three potential PRV ‘s based on their study and intent to treat unmet pediatric diseases.

Will Abeona Bring Gene Therapy Mainstream?

I sure hope so. Investors often look past the real advances of the treatments and pay more attention to the P/L column. People tend to read less about the benefit of a treatment than they do about stocks being overvalued or hyped, failing to recognize the value of life and the tremendous sacrifices being made by both patients and the scientific community. With gene therapy demonstrating valid results, the science may become a far more appealing alternative for treatment than current courses of medical attention, based on gene therapies “once and done” method of treatment.

Is There Institutional Money Invested In Abeona?

Shareholders in ABEO are in good company, with Soros Fund, Perspective Advisors, and Knoll Capital each representing ownership of at least 5% of the company’s shares. It is likely that these investors, like others, see the humanitarian benefit to their investment and will be willing to support the company through the next stages of development.

For investors in ABEO, the next 12 months should be an interesting period. The water cooler science fiction talk from the 1980’s has made it to the forefront, and companies are actually producing therapies and treatments that allow the body to fix itself. Expectation for 2017 is for a couple of these gene therapy treatments to be approved for market. This will be a watershed moment for the sector and can have direct and positive impact on those that are also in process of delivering promising therapy candidates to market.

So, The Question Was…Is Abeona Doing Everything Right?

Without trying to sound like a pump artist, my response is yes.

Abeona is producing extremely encouraging results that investors can watch real time with Eliza. They also have three shots on goal for a PRV that can be extremely valuable to the company, and they have deep-pocketed investors owning in excess of 15% of the company stock.

Add to that the potential impact of the patient advocacy groups, coupled with the clinical success of the therapies, and the recipe for success looks quite appealing. In some sense, having others in the industry blaze the trail to commercialization of gene therapy products is not a bad thing. As Abeona continues to develop their unique treatments, they can also gauge the FDA to sense the direction that the administration is steering the science and react proactively to address issues raised.

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With ABEO doing things right, it should only be a matter of time before the stock reaches the valuations afforded to its non-competitive partners in the industry. Until then, investors should take advantage of the real time developments of Eliza and watch how this remarkable therapy can potentially save the lives of thousands of children per year.

Follow Analysis By Kenny Soulstring

Kenny Soulstring is the Chief Strategic Analyst at CNA Finance. For a limited time only, his analysis is available for free. Don’t miss out, subscribe below today!

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[Image Courtesy of Pixabay]

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