Abeona Therapeutics (ABEO) Q3 2026 Earnings Call Transcript

DATE

Mon, Nov. 9, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations and Corporate Communications - Gregory Gin
• Chief Executive Officer - Vishwas Seshadri
• Chief Commercial Officer - Madhav Vasanthavada
• Chief Financial Officer - Joseph Vazzano
• Chief Technical Officer - Brian Kevany

TAKEAWAYS

• Net Revenue -- $13.5 million, representing an 18% increase compared with the prior quarter driven by increased ZEVASKYN treatment activity.
• Patient Treatments -- Six patients were treated with ZEVASKYN in the third quarter, bringing the total number of patients treated since launch to 15.
• Qualified Treatment Centers (QTCs) -- Eight total sites are now activated in the ZEVASKYN network following the addition of Cincinnati Children's and University of Florida Health.
• Operational Milestones -- Four centers now have first-hand ZEVASKYN treatment experience after the Children's Hospital of Philadelphia and the University of Texas Medical Branch completed their first treatments.
• Manufacturing Performance -- One lot out of 15 total treated since launch was out of specifications for the pan-CK identity assay, preventing revenue recognition for that specific treatment.
• Net Loss -- $4.8 million or $0.08 per share, compared with a net loss of $20.2 million or $0.35 per share in the second quarter.
• Research and Development Expenses -- $3.7 million, decreasing from $5 million in the prior quarter.
• Selling, General and Administrative Expenses -- $17.1 million, increasing from $15.8 million in the second quarter.
• Cash Position -- $134.9 million in cash, cash equivalents, and short-term investments as of Sept. 30, 2026.
• Acquisition of ABO-801 -- $20 million in common stock was issued upfront to Ellodi Pharmaceuticals, with no initial cash payment required for the Phase III-ready orphan drug candidate.
• Development Milestones -- $30 million is payable upon FDA approval of ABO-801, with up to an additional $30 million tied to specified commercial milestones.
• Royalties -- Low to mid-teens tiered royalties are eligible to be paid to Ellodi on net sales of ABO-801.
• PIPE Financing -- $30 million in gross proceeds from a private placement was announced to fund pipeline development and ZEVASKYN commercialization.
• Eosinophilic Esophagitis (EoE) Prevalence -- 360,000 diagnosed patients in the U.S. represent the target market for the ABO-801 program.
• Peak Revenue Potential -- Greater than $750 million in annual sales is estimated for ABO-801 due to growing disease prevalence.
• ABO-801 Development Costs -- $50 million to $60 million is the estimated clinical cost to bring the candidate through to FDA approval.
• Manufacturing Capacity -- 10 manufacturing slots per month is the target capacity by mid-2027, up from the current capacity of six per month.
• Gross Margin Targets -- 85% to 90% is the anticipated range for gross margins once full manufacturing capacity utilization is reached.
• FAYUVI Royalties -- Up to 8% in tiered royalties and commercial milestones are expected from Ultragenyx following the FDA approval of FAYUVI in Sept. 2026.
• Medicare Coverage -- 10% of recessive dystrophic epidermolysis bullosa patients are Medicare beneficiaries eligible for supplemental reimbursement under the New Technology Add-On Payment (NTAP).
• Systemic Absorption -- Less than 1% for ABO-801, which management stated contributed to the absence of observed corticosteroid-associated adverse events like adrenal suppression.
• Commercial Payer Access -- 95% of commercial lives now have payer coverage available for ZEVASKYN.

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RISKS

• Vasanthavada stated, "we expect treatment timing to remain variable through year-end," due to the time required to secure payer authorizations, negotiate single case agreements, and coordinate patient travel.
• Vasanthavada warned that the first quarter of 2027 will be a "truncated quarter" for biopsy collections because of the planned annual manufacturing shutdown from mid-Nov. 2026 to mid-Jan. 2027.
• Vazzano reported that revenue was not recognized for one treatment in the third quarter because the associated batch failed to meet the "release criterion for the identity assay."

SUMMARY

Abeona Therapeutics Inc. (NASDAQ:ABEO) reported significant progress in the commercial launch of ZEVASKYN while expanding its clinical pipeline through the strategic acquisition of ABO-801 for eosinophilic esophagitis. Management reported that the company is transitioning into a multi-product commercial-stage entity, supported by an 18% sequential increase in ZEVASKYN revenue and the activation of eight total treatment centers. The company stated that its immediate priorities include scaling manufacturing capacity to 10 slots per month by mid-2027 and initiating a Phase III trial for ABO-801 in mid-2027. This expansion is supported by a $30 million private placement and potential royalty streams from the recently approved FAYUVI program licensed to Ultragenyx.

• Management plans to initiate a Phase III study for ABO-801 in mid-2027 with top-line results anticipated around the end of 2028.
• CEO Seshadri stated, "ABO-801 is a Phase III-ready orphan drug with robust clinical data and a uniquely differentiated profile that can translate into a substantial peak annual revenue potential of greater than $750 million."
• The company will use the Dysphagia Symptom Questionnaire (DSQ) in its next Phase III trial after post-hoc analysis indicated the previous PROSE tool introduced variability that obscured treatment effects.
• Abeona reported that 10% of the patient population is now covered by Medicare NTAP status, which became effective Oct. 1, 2026, to provide supplemental reimbursement for hospitals.
• CFO Vazzano noted that most costs in Cleveland are fixed, stating, "once the supply becomes greater, then we expect our gross margins to improve significantly."
• The company stated that ABO-801 is designed as a once-daily orally disintegrating tablet taken at bedtime, which dissolves in less than 30 seconds without water.
• Management confirmed that one commercial patient has expressed interest in joining the Strong Together network to share positive healing experiences with the patient community.

INDUSTRY GLOSSARY

• ABO-801 (formerly APT-1011): A Phase III-ready once-daily oral disintegrating tablet formulation of fluticasone propionate for the treatment of eosinophilic esophagitis.
• DSQ (Dysphagia Symptom Questionnaire): A validated tool used to assess patient-reported symptoms of swallowing difficulty in clinical trials.
• EoE (Eosinophilic Esophagitis): A chronic inflammatory disease of the esophagus that affects swallowing and food intake.
• EREFS: An endoscopic scoring system used to assess edema, rings, exudates, furrows, and strictures in the esophagus.
• NTAP (New Technology Add-On Payment): A supplemental payment from Medicare to cover the cost of new and meaningfully differentiated medical technologies.
• pan-CK (Pan-cytokeratin): An identity assay used in the manufacturing process to confirm the cellular characteristics of the gene-corrected therapy.
• QTC (Qualified Treatment Center): A specialized hospital or medical facility certified to administer complex cell and gene therapies like ZEVASKYN.
• RDEB (Recessive Dystrophic Epidermolysis Bullosa): A rare and severe genetic skin disorder characterized by chronic wounds and fragile skin.
• ZEVASKYN (prademagene zamikeracel): An autologous cell-based gene therapy for the treatment of wounds in patients with RDEB.

Full Conference Call Transcript

Operator: Good morning, everyone, and welcome to Abeona Therapeutics 3Q 2026 Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Greg Gin, Vice President of Investor Relations and Corporate Communications. Greg, the floor is yours.

Gregory Gin: Thank you, Tom. Good morning, and thank you for joining us on our third quarter 2026 results conference call. During this call, we will refer to the press release issued this morning announcing the acquisition of APT-1011 and our third quarter financial results. They are available on our corporate website at www.abeonatherapeutics.com. Joining me on today's call are Dr. Vish Seshadri, Chief Executive Officer; Dr. Madhav Vasanthavada, Chief Commercial Officer; Joe Vazzano, Chief Financial Officer; as well as Dr. Brian Kevany, Chief Technical Officer. We will be making projections and forward-looking statements during today's call, which are made pursuant to the safe harbor provisions of the federal securities laws.

These forward-looking statements are based on current expectations and are subject to change. Actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those outlined in our Form 10-K and periodic reports filed with the SEC. These documents are available on our website at www.abeonatherapeutics.com. And with that, I will now turn the call over to Vish Seshadri to lead us off. Vish?

Vishwas Seshadri: Thank you, Greg, and good morning, everyone. This quarter represents an important point in Abeona's growth story as we continue to build the commercial foundation for ZEVASKYN while beginning to broaden and diversify opportunities that can unlock significant value for the company in the longer term. Toward that objective, today, we announced the acquisition of APT-1011, now ABO-801 from Ellodi Pharmaceuticals. ABO-801 is a Phase III product candidate for eosinophilic esophagitis or EoE, with both FDA orphan drug and Fast Track designations. But before elaborating further on the rationale and attractiveness of this opportunity, Madhav will first discuss the significant progress that we've made on the ZEVASKYN launch, which remains the foundation of our business and our immediate operating priority.

Madhav?

Madhav Vasanthavada: Thank you, Vish, and good morning, everyone. In the third quarter, we delivered ZEVASKYN growth with a net revenue of $13.5 million, an 18% increase compared with the prior quarter while continuing to strengthen the foundation for ZEVASKYN launch. During the quarter, 6 patients were treated, bringing the total number of patients treated with ZEVASKYN since launch to 15. Revenue was recognized for 5 of the 6 treatments. As previously stated in August, revenue was not recognized for one treatment because the associated batch was out of specifications for the pan-CK identity assay.

Also in the quarter, 2 of the activated QTCs, CHOP and UTMB, treated their first patients, bringing the total number of QTCs with ZEVASKYN treatment experience to 4. For a QTC, treating a patient for the first time, as you'll appreciate, is an important milestone because it validates their ability to execute the multistep process end-to-end across different stakeholders and speeds up their learning curve for future treatments. During the quarter, we activated 2 additional qualified treatment centers, Cincinnati Children's and University of Florida Health, bringing the ZEVASKYN network to 8 sites and further expanding geographic access for eligible patients.

Both centers are already advancing their first patients through prior authorization and financial clearance, and they initiated those processes more quickly than our initial QTCs. We believe this reflects a maturing launch infrastructure and the benefit of sharing learnings and best practices across the QTC network. More broadly, patients across all 8 centers are actively moving through the process. Although QTCs are working to advance their patients towards ZEVASKYN, as mentioned in prior calls, treatment timing can vary based on QTC and patient-related factors. These steps often include ensuring patients are clinically ready, securing payer authorizations, negotiating single case agreements and coordinating patient travel and surgery schedules.

Given the time required to schedule these steps for treatment, together with our planned annual manufacturing shutdown, we expect treatment timing to remain variable through year-end, with some patients currently progressing through the pathway in the advanced stages of the funnel, potentially moving into early 2027 for biopsy slots. Speaking of 2027, we will have entered the year from a fundamentally different position than we did at the start of this year. In looking at this map, RDEB patients will have access to 8 well-recognized qualified treatment centers, 4 of them having gained first-hand experience treating with ZEVASKYN.

Payer coverage available for more than 95% of commercial lives, baseline Medicaid coverage across all 50 states, a new technology add-on payment, NTAP status for Medicare beneficiaries and with necessary billing, coding and reimbursement infrastructure in place. As more centers gain first-hand experience with ZEVASKYN and patient wound healing outcomes continue to accrue, we expect real-world experience to support broader patient activity and uptake across the QTC network. We are confident in the important role ZEVASKYN can play for patients with RDEB, and we remain focused on the execution to realize that opportunity. With that, let me turn the call back over to Vish. Vish?

Vishwas Seshadri: Thanks, Madhav. With ZEVASKYN providing our commercial foundation, we have also been considering how to build on our capabilities and broaden our opportunities for value inflection. Through ZEVASKYN and our prior advancement of the program, which resulted in the approval of FAYUVI, we have built experience in late-stage clinical development, regulatory execution and commercialization. Our goal is to create a diversified revenue-generating company with multiple opportunities for durable growth. ABO-801 is well aligned with that strategy. It is a Phase III-ready orphan drug with robust clinical data and a uniquely differentiated profile that can translate into a substantial peak annual revenue potential of greater than $750 million in a disease of growing prevalence.

Just as importantly, we believe that our prior experiences in late-stage development position us to move the Phase III program forward without distracting our commercialization and manufacturing teams from the ZEVASKYN launch focus. Eosinophilic esophagitis, or EoE, is a growing disease with increasing unmet need with approximately 360,000 diagnosed patients in the U.S. today. It is a chronic lifelong inflammatory disease of the esophagus that can significantly affect swallowing and food intake. Over time, persistent inflammation can also lead to structural damage to the esophagus and exacerbate the condition. Because of that, EoE requires lifelong disease management.

The goal is not simply to manage symptoms, but also to control the underlying inflammation, restore and maintain normal structure of the esophagus while limiting adverse events of therapy. ABO-801 is a once-daily oral disintegrating tablet, or ODT, formulation of fluticasone propionate taken at bedtime. It is designed to deliver topical corticosteroid therapy directly across the esophagus. The tablet dissolves in the mouth in less than 30 seconds without water and acts both in proximal and distal esophagus with little to no systemic absorption. We think that this profile is important in a chronically managed disease like EoE. The treatment landscape of FDA-approved therapies comprises an oral corticosteroid, EOHILIA, and an injectable biologic, DUPIXENT.

While there are several injectable biologics in development, there is dearth of effective, safe and convenient oral therapies. We believe that the combination of targeted topical delivery, limited systemic exposure and convenient once-daily bedtime orally disintegrating tablet, or ODT, could offer a uniquely differentiated treatment option for patients with EoE. Importantly, ABO-801 has already been evaluated in 2 Phase III studies, giving us a substantial body of clinical experience to build on. Let me walk through those results, which are important not only in characterizing the activity and differentiated profile of the drug, but also in optimizing the design of the subsequent Phase III study. The 2 completed Phase III studies evaluated more than 350 patients combined.

Due to low systemic absorption of less than 1% for ABO-801, corticosteroid-associated AEs like adrenal suppression have not been observed. The efficacy data showed strong activity across physician-reported measures like histology, which is an FDA-required co-primary endpoint and endoscopic measurements of esophageal structure. On the right, you can see a representative example where rings and furrows, which are characteristic of EoE seen at baseline were corrected by week 12 and sustained at week 52. In addition, the studies also showed improvements in patient-reported symptoms. We believe the totality of these findings provides important evidence that ABO-801 is active in EoE.

Gastroenterologists place particular emphasis on endoscopic findings in EoE, including features such as edema, rings, exudates and furrows, known as EREFS. ABO-801 showed significant improvements in overall EREFS response at week 12 in FLUTE 2 and week 24 in FLUTE 3 studies. These findings indicate that ABO-801 had an effect not only on inflammation, but also on structural features of the disease in these trials. We also saw encouraging evidence of symptomatic improvement in both trials. While neither study individually met the co-primary patient-reported symptom endpoint, a post-hoc exploratory analysis pooling week 12 data from both trials showed a significant improvement in complete symptom response with ABO-801 compared with placebo with a p-value of 0.004.

Complete response was defined as patients reporting no episode of dysphagia in the final 14-day window of the 12 weeks. Importantly, the completed studies also gave us insight into why, despite the strong histologic and EREFS results, the individual studies missed the symptom endpoint. The DSQ, or dysphagia symptom questionnaire, the industry standard patient-reported outcome tool that has been validated and used in the studies of FDA-approved EoE therapies was not available to Ellodi at the time of the studies. So Ellodi developed a proprietary PRO tool called PROSE, which was used in FLUTE 2 and FLUTE 3. PROSE did not distinguish between solid, soft or liquid foods.

Instead, patients rated their swallowing difficulty on a 0 to 10 scale with limited guidance on how to assign a score. This may have introduced variability in how patients reported their symptoms, making it more difficult to distinguish treatment effect from background noise. In contrast, the DSQ first asks whether patients consume solid food. If the answer is no, the assessment does not proceed for that session. The DSQ then asks more objective questions about what patients did in response to swallowing difficulties using a defined numerical scale tied to those actions.

A post-hoc analysis mapping the DSQ to the FLUTE 3 study data showed that had the DSQ been used in the study, there would have been a high probability of meeting the symptom endpoint. We have described these data in greater detail in a clinical deck included on our 8-K filing and available on our corporate website. Importantly, the DSQ is now available to us, and we plan to use it as a symptom assessment tool in our next Phase III study. These learnings are informing our plans for the Phase III study.

We currently envision enrolling approximately 400 patients to evaluate 3 mg of ABO-801 once daily versus placebo with co-primary endpoints assessing symptoms using the DSQ and histologic response at week 12 and secondary endpoints at week 24 to assess durability of activity. We plan to discuss the study design with the FDA at a Type C meeting and currently anticipate initiating the study in mid-2027. While the timing of top line results will depend on study initiation and enrollment, we currently anticipate results around end of 2028. With that, I'll turn the call over to Joe to review our third quarter financial results and provide additional detail on the transaction and financing. Joe?

Joseph Vazzano: Thank you, Vish. For the third quarter, Abeona reported net ZEVASKYN revenue of $13.5 million, an 18% increase from $11.4 million in the second quarter. As Madhav noted, revenue was recognized for 5 ZEVASKYN treatments completed during the quarter. For the third quarter, cost of sales was $5.7 million compared with $4.2 million in the second quarter. R&D expenses were $3.7 million in the third quarter compared with $5 million in the second quarter, while SG&A expenses in the third quarter were $17.1 million compared with $15.8 million in the second quarter.

For the third quarter, we reported a net loss of $4.8 million or $0.08 per basic and diluted share compared with a net loss of $20.2 million or $0.35 per basic and diluted share in the second quarter. We ended the second -- we ended the third quarter with $134.9 million in cash, cash equivalents and short-term investments compared with $146.8 million at June 30. Turning to the transaction. At closing, Abeona issued to Ellodi $20 million of Abeona common stock with no upfront cash payment. Ellodi will also be eligible for a $30 million payment upon FDA approval of ABO-801 and up to an additional $30 million tied to specified commercial milestones.

In addition, Ellodi is eligible to receive tiered royalties on net sales ranging from the low to mid-teens. Alongside the transaction, $30 million private placement is intended to support our pipeline and commercialization efforts for ZEVASKYN. And importantly, our September 30 cash balance does not include the proceeds from the private placement. With that, I'll turn the call back to Vish before opening the call for Q&A. Vish?

Vishwas Seshadri: Thank you, Joe. Before closing, I also want to highlight another important development that reflects Abeona's history in advancing rare disease programs. In September, Ultragenyx received FDA approval of FAYUVI for Sanfilippo syndrome Type A. Abeona previously advanced the program before out-licensing it to Ultragenyx in 2022. Under the agreement, we are eligible for certain commercial milestone payments and tiered royalties on product sales. We are pleased to see the program advance to commercialization and congratulate the Ultragenyx team on this important milestone. To close, our immediate priority remains executing the ZEVASKYN launch and realizing its potential for patients with RDEB.

At the same time, we plan to advance ABO-801 with a disciplined approach to resourcing and capital allocation, and we will build a more diversified and durable company. I want to thank our employees, our QTC partners, the patients and families we serve and our shareholders for their continued support. With that, I'll turn the call back to the operator to open the line for questions.

Operator: [Operator Instructions] And the first question this morning is coming from Maury Raycroft from Jefferies.

Mohamad Amin Makarem: This is Amin on for Maury. A couple of questions from us. First, can you maybe quantify the current patient funnel by number of patients identified, approved for reimbursement, biopsy they're waiting for treatment? And also, it would be great if you can comment on the process maturing, where do you expect the commercial manufacturing success rate to settle? And should we view occasional batch failures as like an inherent part of the manufacturing process?

Madhav Vasanthavada: Thank you for that question, Amin. I mean, so with regard to the first aspect of the quantifying patient numbers, we are not, as mentioned on the previous call, guiding in terms of how the patients and the mid-quarter performances are. We can say that there are patients in each of the 8 QTCs -- some QTCs having more than 1 patient that are currently actively going through the process. We have visibility to sort of that level of patients that are in the prior auth process. Some of them have cleared their financial single case agreement and are looking to get scheduled for biopsies.

But overall, from both QTCs as well as out in the community physicians, there are patients that have been identified and coming into the process and into the QTCs. With regard to the manufacturing process itself -- the number of out-of-specs that we have indicated so far is 1 lot, right, out of the 15 that we have treated. So that has been sort of the success rate. It's rather high if you generally look compared to general autologous cell therapy process. And it's -- at this point, it's tough to say what exactly the percentage of out-of-spec will look like for future upcoming batches.

Mohamad Amin Makarem: Helpful. And if I can ask one follow-up. With the planned like site maintenance, when will you stop collecting biopsies in 4Q? And will you restart in Q1?

Madhav Vasanthavada: Yes. We'll be stopping collecting biopsies starting around mid-November and will resume again in mid-January. So first quarter also is going to get impacted, right, because you will have a truncated quarter in first quarter of next year, about 6 weeks of performance to collect biopsies and have those treatments realized in 1Q. So really, half of January and the month of Feb biopsies will convert into treatments, potentially convert into treatments in the first quarter.

Operator: Your next question is coming from Ram Selvaraju from H.C. Wainwright.

Raghuram Selvaraju: I just wanted to see if there had been any noteworthy process development or manufacturing improvements in the process for ZEVASKYN over the last couple of months that you expect to, in the long run, meaningfully improve efficiency or reduce processing time? And if so, if you could give us a sense of granularly what kind of impact those process development improvements are likely to have. I also wanted to see if you could give us an updated sense of when you anticipate it would be appropriate to consider the possibility of expanding manufacturing bandwidth for ZEVASKYN based on what you expect in terms of the kinetics of underlying market demand. And also just very quickly, one question on 801.

Can you comment on how this candidate might potentially be positioned in the market relative to, for example, the approach being pursued by Eupraxia?

Vishwas Seshadri: Thank you, Ram. So your first question about process improvements, we're making several process improvements to make our manufacturing robust, right? I'll give you a couple of granular examples. I don't want to get into everything. But we -- the first thing is having a consistent yield, right? We discussed there was one low-yield batch. We have a special team that has been put together to make those types of improvements. And one is how can we maximize cell yield from biopsies and how can we get more number of sheets as many as possible to the patients, right?

This is one of the big questions, and there are several process steps that have been put to test whether we can improve that. And as you may be aware, these types of changes to manufacturing require close work with the FDA, and that is already happening. So we have been in continuous conversations to see how this can be implemented and get the FDA's endorsement for such changes. So that is one area of process improvement. And when you say process improvement is process as well as assay and quality control testing improvement because -- which also includes the specification setting and things like that. There, again, we're working closely with the FDA.

Any change that you make, whether it's to process or release assays, it involves regulatory agency there. So we're working on those aspects and hope to see those improvements show up in our numbers as quickly as we can get these implemented. Your question about capacity expansion. We are already at a capacity of 6 patients per month. We've had a lot of interaction with the agency on getting that up because we have a certain manufacturing suite for retroviral vector manufacturing that can be converted and used also to add suites for drug product. And that's already a conversation we've had with the FDA.

We had a meeting and endorsement on how -- what data we need for that and the work to generate such data are already ongoing. So we are on track. I think we had indicated sometime in 2027, by mid-2027, we'll be ready to turn that switch on. The only thing we have not done is hire FTEs to man those additional suites, which we will very soon as soon as the data have been generated and submitted to the agency.

So that is on the topic of capacity expansion, and we can get up to 10 manufacturing slots a month within the clean room space we have right now, anything more than that will require additional construction work for more clean room space. So that is something we have not actively invested on at this point in time, but we have designs ready for that, and we can go as soon as we trigger that. So that's on capacity expansion. You asked about the -- how we position 801 versus Eupraxia. And as you're aware, Eupraxia is also fluticasone that is injected endoscopically at various points in the esophagus.

One is it's very hard to comment on Eupraxia specifically because their data are maturing. We have a small cohort at a certain specific dose that we've seen. We don't have large body of clinical data yet. So we will be closely watching what data we see. But if you look at the treatment landscape for EoE broadly, there's injectables and there is oral drugs. And I think the oral drug market has very little innovation going on at this point in time. There is -- after EOHILIA, there's not been any oral drug approved. All innovation right now is in the injectable biologics space, whether you're intercepting IL-4, IL-13 pathways or TSLP and all of that.

And we consider all that in one bucket because this kind of chronic management of disease requires lifelong therapy, and there is dearth for oral drugs in this market space. And this is really where this 801 design is so elegant because it's something that you don't have to put it in a suspension and drink a slurry with so many packets of Splenda or anything like that. It's tasteless and it's taken once at bedtime and it takes less than 30 seconds to dissolve. It is going to be a very different game-changing kind of therapeutic option in the space where a lot of innovation is coming in the injectables market. So I'll leave it there.

Of course, as more data come out from Eupraxia, which has some innovation on how infrequently you will be taking it and for a longer slow release mechanism, but we need more data to come out of that trial to comment further.

Operator: Your next question is coming from Stephen Willey from Stifel.

Joshua Nickerson: This is Josh on for Steve. Congrats on the progress here. So maybe just quickly on the base business. Just wondering about gross margin and maybe where or when we can expect to see some additional leverage here? And then a quick one on some of the patient dynamics now. Could you just maybe contextualize how significant or meaningful it is now that you have 4 experienced centers and maybe the experience from those 2 previous centers that have treated more patients, what the kinetics are from gaining that experience translating into additional patients screened and on treatment? And then I just have a follow-up.

Joseph Vazzano: Sure, Josh. I can handle the gross margin. So as we've stated before, most of our costs are fixed in Cleveland. So right now, once manufacturing -- well, excuse me, once the supply becomes greater, then we expect our gross margins to improve significantly because right now, you have all these allocated fixed costs that have to get allocated to the number of batches produced in a given time period. So as more patients get treated, those costs per batch come down significantly. And like we previously stated, we anticipate gross margins being in about the 85% to 90% range once we get to full manufacturing capacity utilization.

Madhav Vasanthavada: And Josh, with regard to the treatment experience at these initial QTCs, yes, there are patients. I think -- so some of these patients are treated at Stanford, we've had repeat patients even at Lurie Children's, and the newer ones, CHOP and UTMB also have identified patients and they are aligning those patients for treatment. I think one of the phenomena that we are seeing is that some of the physicians also want to see what the wound healing experience looks like, right, from these patients because this is, of course, a surgical procedure.

They want to have a better handle on not just the end-to-end process, the surgical nature of the post-op care and the coordination of the treatment, but also seeing what the wound healing outcomes look like. And as the healing matures and accrues, physicians are looking to just have greater conviction, right, and reaching out to their additional patients and assessing them for ZEVASKYN. So we are seeing that experience and the real-world outcome accruing. Some of the patients -- actually, one patient in our commercial setting has seen healing in that they have shown expressed interest in joining our Strong Together network.

As you know, that we have mentioned in previous calls, Strong Together network is a group of patients that have gone through clinical trial experience and want to share their positive experience with the rest of the patient community as well as what it is like going through the ZEVASKYN process. So it's a good sign that at least one of our commercial patients has shown interest in joining this group. And as these treatments continue to mature, that's exactly what we believe is how things are panning out. It is taking time.

It's taking time because physicians view this as a complex process, time taking, especially for patients and caregivers -- and coordinating the schedules is not as straightforward, right, versus other treatment modalities. So as we have these access to more treatment centers and patients with these treatment centers go through their first experience, we think that this is going to catalyze even more patient uptake. So more to come on that. Hopefully, it gives a little bit of a context with regard to where we are.

And one of the things our team has done well is creating enough peer-to-peer dialogue across QTCs where if they encounter a similar situation, that experience that a QTC has been through, they are readily able to share that. And so you don't reinvent the wheel for similar situations in the future. So this is also helping newer QTCs going through their first experiences, catch up on the learning curve more quickly.

Joshua Nickerson: Okay. That's very helpful. And then maybe just a quick one on 801. Could you just talk about maybe some of the synergies within your infrastructure now and some of the appetite for building out the commercial infrastructure to support commercialization for this asset?

Vishwas Seshadri: Sure. I think right now, our focus is on the clinical development of 801. We have -- I mean, I have to be credible here. If you look at the therapeutic area as well as the treatment modality, it's not a cell and gene therapy, right? It's a pill. It's a different type of modality, but much simpler, of course. And then if you take -- we're a rare derm approved product with ZEVASKYN. This is going to be a different set of physicians, the gastroenterologists still specialized enough that you can cover with a finite field force. But at this point in time, we are putting together a project team that will live like a new compartment.

One of the things about synergies is a double-edged sword, right? We want to do this without distracting anybody from our commercial team or the manufacturing teams for ZEVASKYN because that is our fundamental priority. So that team is going to be focused on ZEVASKYN commercialization. We do have development people with clinical and regulatory with basic infrastructure and knowledge having been through late-stage drug development and working with the FDA, and we'll leverage that part right now. And then we will be recruiting a few FTEs that have subject matter expertise in the EoE space. And with that operating as a completely different team, we'll be able to do this advancement without much of a distraction.

Now talking about commercialization for 801, we have some time. I think the basic commercial framework that we have for marketing, market access and medical, those leaders will be bringing in FTEs with the therapeutic area knowledge at the right points in time as we get closer and closer to approval. Typically, the T minus 24 or T minus 18, these are those time points where we will be looking to build some subject matter experts in those teams.

And then as you get closer, 6 months to 8 months before launch is when we really need to build field force and field-based market access people, which is going to be an important play here because -- we do see contracting with payers as a very important aspect of this launch because getting a favorable formulary status is really what's going to get us market share in this space. So all of that will come more towards the last year leading us to the launch. So there's going to be a very phased build-out. But rest assured, that is not going to disturb anything with ZEVASKYN. So that's the advantage of having not too much synergy in some ways.

Operator: Your next question is coming from Jeff Jones from Oppenheimer.

Jeffrey Jones: Two from us. On 801, can you speak to your confidence in this being a single Phase III trial and then the estimated cost of that trial? And any chance you can comment for ZEVASKYN on the number of biopsies collected for 4Q, given you're close to closing out biopsy collection for the quarter?

Vishwas Seshadri: Yes. I'll first let Madhav address the ZEVASKYN question. We always want to start with ZEVASKYN, and then we'll discuss 801. So Madhav, about the ZEVASKYN...

Madhav Vasanthavada: Jeff, this will be a short one. We -- as mentioned on prior calls, we are not providing any biopsy numbers, collections or those that are in the funnel for the mid-quarter. All I can reiterate is that there are patients at each of the 8 QTCs. It's just that they are going through the process, and we are not able to have a handle on exactly when they'll clear the process and how that will overlap with our upcoming shutdown, right? So therefore, some of the patients are going to move into first quarter, which is also going to be a truncated quarter for us. So we will keep you posted as we get there.

Vishwas Seshadri: And on the 801 question, is a single trial sufficient? And what will be the approximate cost of such studies? I will tell you this, right, starting with there are already 2 Phase III trials that have been conducted, and there's a very robust body of clinical data that we have from there. In the previous conversations that Ellodi have had with the FDA and also our own discussions during the diligence process with the previous head of the GI division, who was one of the key reviewers for both approved FDA drugs.

We understand -- our understanding is that a Phase III trial that addresses some of the gaps and misses from the previous 2 studies should get us ready for an NDA submission. However, we don't have that in writing, which is why we have -- the first thing that we plan to do is have a Type C meeting. And that is where we can get the confirmation because the FDA is never going to put that in writing that one trial is enough because they're going to say it's going to be a review issue.

But we feel based on the data we have in our hand that this should be -- and the precedents set with other approvals that this should be a sufficient study requirement. And then in terms of the cost, I'll let Joe speak to that.

Joseph Vazzano: Yes. Thanks. Yes. So the clinical development cost to get 801 to FDA approval is about $50 million to $60 million. So together with our cash balance of $135 million, the PIPE proceeds and future ZEVASKYN sales and FAYUVI royalties, we have more than sufficient capital to get 801 to approval.

Operator: Your next question is coming from Jim Molloy from Alliance Global.

Laura Suriel-Suarez: This is Laura on for Jim Molloy. So just 2 from us. So with the next Phase III trial for 801 planned to be initiated next year, when will the Type C meeting with the FDA take place? And what might you do differently in this upcoming Phase III trial in comparison to the 2 previous Phase III FLUTE trials that were already completed? And also on ZEVASKYN, the $30 million PIPE funding, you mentioned that, that will be used to help support the commercialization. So can you just talk a bit more about your plan here and the next phase of commercialization that you have planned for this program?

Joseph Vazzano: $30 million -- so yes, I could start with the $30 million. Yes, the $30 million -- excuse me, yes, the $30 million is separate from the asset acquisition. It was brought on to help support our product pipeline candidates and also with the commercialization of ZEVASKYN. As we talk about getting from 6 to 10 on that, that will have additional costs once we get there. So it's for the overall launch of ZEVASKYN as well.

Vishwas Seshadri: So it covers various corporate expenses, including our pipeline and commercialization. So that's the PIPE question. To address your question on the Phase III 801 study, what will be different, right? I think one aspect of it is the -- if you look at the past FLUTE 2 and FLUTE 3 studies, the 801 study, the reason why the studies missed a co-primary endpoint. If you look at the data, every aspect of the studies shows that the drug works. The physician-assessed endpoints met with statistical significance. The symptom endpoint, which is patient-reported is where those studies missed reaching statistical significance.

And we have looked at the data very carefully and tried to hypothesize what are all the various factors that led to such a result. And some of the point is what we see. I described the DSQ tool versus the PROSE tool. The PROSE tool was general to any type of food that patients take while they are reporting on their symptoms. And a patient on a placebo arm who may have had only a liquid diet on a given day will answer the tool in the same way as a patient who had steak, which is solid food on a given day.

It's not a -- the tool does not correct for these types of confounding variables, whereas the DSQ tool asks first, did you consume solid food. That was the very first question. And so if you did not consume solid food, you're already not going to proceed on that questionnaire. So these are small little details that have informed why the symptom endpoint is not reaching statistical significance because there's so much subjectivity and background noise that the signal doesn't stand out.

So what have we -- what are we planning to change in the next study that would give a better chance is really the DSQ tool instead of the PROSE tool that was used on a 0 to 10 scale. And we believe that is one improvement that we will definitely implement and this is very familiar to the FDA because the 2 drugs that they have approved have used this tool. The second aspect of it is powering the study. When we did the data analysis for the FLUTE 3 study and mapped the answers of the patients to a DSQ tool, we see about a roughly 13% increase in the responder rate compared to placebo.

So if you have that kind of delta in our next study design, 400 patients that we plan to accrue give us about 90% power to detect that. So that's really a second factor in how we are optimizing the future study. And finally, we're going to look at it at a 12-week time point. The reason for that is as time progresses on studies, patients start to modify their diets. That is a huge confounding factor as well. Even though we recommend that patients don't modify diet, it's going to happen. You cannot control that, and that only diverges more and more as time progresses. A 12-week endpoint is an optimal endpoint for co-primary.

We will also do a 24-week endpoint to confirm the durability of the results that we see. So that will be a secondary endpoint. So that is a third factor that will further optimize the study. And last but not the least, we will -- while we will have patients with a wide spectrum of disease severity, we're going to have more representation of moderate and severe patients as well because that's where the signal to noise can be best addressed, not that we will completely exclude milder patient types, but the proportions are going to be important there. So I just outlined 4 different variations that we're going to be implementing to optimize the upcoming Phase III study.

Operator: Your next question is coming from Boobalan Pachaiyappan from ROTH Capital.

Aaron Welch: This is Aaron on for Boobalan. So first on ZEVASKYN. When a patient receives treatment, but the batch doesn't qualify for revenue recognition, we just want to know how that affected the patient, hospital reimbursement and Abeona's economics and how we might distinguish a revenue recognition issue from a manufacturing or clinical performance issue?

Joseph Vazzano: Yes. So I can just touch a little bit on the revenue recognition, Aaron. So our agreements with the QTCs have a set quantity of sheets. So anything 4 or more is able to be billed to the QTC. If it's less than 4, like this one case that we had back in Q2, where only 3 sheets got delivered, we're not able to recognize revenue on that. Likewise, when the out-of-spec issue arose in earlier this quarter in Q3, it had to go under -- it was not able to be billed to the QTC because it didn't pass our quality release. So again, part of the agreements with each QTC is a quality agreement.

So it just -- we're not able to bill on that. And then Madhav can go a little bit more into.

Madhav Vasanthavada: Yes, I'll take the clinical part of the question, which is when we release a product that has an out-of-specification result, especially the pan-CK is what we're talking about because that's the one that happened. This assay does not affect safety or efficacy. We have all our safety tests the way we do every batch. They're going to -- only if they pass, we release an out-of-spec batch and all the efficacy parameters also passing. So this product is equivalent in every other way, except that the pan-CK identity test is what really failed. So it's -- there's no safety or efficacy question here.

We've taken a lot of effort in educating the sites as well as providing them, arming them with the right information to have the dialogue with the patient that should this happen, it does not impact the clinical profile of the drug in a meaningful way. And that -- we're seeing that their willingness to be treated even if an out-of-spec happens is the same because the science is pretty well understood here. It is -- and from a regulatory standpoint, every case is currently going through a single patient IND because the moment you miss specification, it's an investigational drug. And that's why we don't -- we cannot bill for that.

But we need -- at the 11th hour, we have to get an FDA approval for the single patient IND. And the processes for that are now well learned with one experience that we had. So we are -- our teams have been very proactive in working with other sites that should this kind of an event happen, then you don't really reinvent the wheel at the last moment. So we've taken a lot of efforts that if this ever repeats that the processes are smooth. So a product that has a good benefit-to-risk profile is available for the patient. I hope that answered your question.

Aaron Welch: Yes, that's great. And one more real quick on ABO-801. Could you talk about where in the patient journey ABO-801 would fit? Would this be post injectables or people that failed injectables or DUPIXENT?

Vishwas Seshadri: Yes. Given that this is an ODT, we're going to position this as a step in before biologic. That is how we are positioning it. Of course, in our trial, the Phase III trial, we will include patients who have had prior DUPIXENT, but there will be a washout period. So it doesn't preclude using this drug after biologic, but as a standard algorithm, it's going to be positioned as a step in before biologic and also given the pricing and the convenience and all those factors there.

Operator: This does conclude today's question-and-answer session. I would now like to pass the floor back to Vish Seshadri for closing remarks. Vish, back to you.

Vishwas Seshadri: Thank you. Thank you, everyone, for joining us in today's business update. We'll talk to you again soon.

Operator: Thank you. This does conclude today's conference call. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.

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