Abeona Therapeutics, Inc. Stock

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.

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?

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?

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?

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?

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?

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 Instructions]

And the first question this morning is coming from Maury Raycroft from Jefferies.

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?

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.

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?

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.

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

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?

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.

Your next question is coming from Stephen Willey from Stifel.

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.

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.

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.

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?

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.

Your next question is coming from Jeff Jones from Oppenheimer.

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?

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...

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.

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.

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.

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

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?

$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.

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.

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

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?

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.

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.

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?

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.

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.

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

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.

Great. Thank you all for coming to the annual Morgan Stanley Global Healthcare Conference. My name is Ryuk Byun. I am the head of West Coast healthcare investment banking for Morgan Stanley. It's a pleasure of hosting the Abeona Therapeutics management team today. We'll go through a few questions. Recognizing that this is the first time Abeona's at our conference, would love to maybe start with a round of introductions.

Thank you so much for having us, Ryuk. I'm Vish Seshadri. I'm the President and CEO of Abeona, and it's a pleasure to attend the Morgan Stanley Conference. This is a very important year for us, the first full year of launch since we got our first approval. So very excited to be here.

Thank you, Ryuk. Madhav Vasanthavada, I'm the Chief Commercial Officer at Abeona.

Great. So maybe just to start with some high-level questions about Abeona, just so that the audience here and those listening in can get a better sense and hear from you. Abeona has made the transition from being a development stage biotech now to a commercial stage company, and congratulations. What has been the most different or most surprising about operating a company on the other side of approval?

Yes, thank you for that question. In fact, just to level set, our approval happened last year and we really launched this product in December when we treated the first patient with ZEVASKYN, which is an autologous cell-sheet based gene therapy for patients with recessive dystrophic EB, a connective tissue genetic disorder. And if you look at the launch itself, a lot of the transition that you see from being an R&D company to a commercial stage is what we would expect in the natural course. Madhav and myself, we have a lot of launch experiences in our past, including cell therapies such as these.

I think what you would normally expect is we've grown the company from being an 80, 90 people R&D stage company two, three years ago to now we're about 250 people with GMP manufacturing and supply. And as you can imagine, that in itself is a little bit of a cultural shift because our day-to-day is focused on launch performance and such indicators, moving from a data generation kind of a remit, right? But that comes with a little bit of a cultural shift, but what has been the constant is with our teams and our culture is the focus on the patient.

And now that we have an approval, we feel that responsibility, making sure that the benefit from this drug is going to be, and every time there's a patient at our site or in a conference, all our employees watch with the same spellbound attention as we always do, and that's really some of the most motivating events for us. So that hasn't changed. I think what is different, when you talk about a ultra-rare disease plus an autologous cell therapy with an 84-hour shelf life with a qualified treatment center requirement of a new team, that multidisciplinary team that you need which did not pre-exist. I think it brings with that some unique features of launch that you may not have seen very much with precedents. I think that's really what's unique, and there's a lot of learnings, and we're very excited to talk about it. But given where we are with the third quarter really from launch, I think we're laying some important elements of foundation right now. And things are looking good. We're very happy where we are and that is important.

Great. Can you just tell us about a little bit around the indication and the current treatment paradigm and the patient journey?

The indication really is this is a cell sheet-based gene therapy. This is a connective tissue genetic disorder where patients are missing a functional gene for collagen VII. Collagen VII is that glue that basically keeps skin intact, and the skin is two layers, right, and it's tethered, the two layers are tethered in normal skin, and you lose that integrity in patients that have the deficiency of collagen VII. So what happens over their lifetime is they have blistering and wounding of skin, so the integrity of the skin is lost, and that leads to a lot of complications.

They have large wounds that become chronic over lifetime, infections, sepsis. Nothing is normal in their lives, and it is there 24/7. They have to live, this is not episodic, they have to live with these wounds all through their lives and three, four times in a week they have to undergo wound dressing changes that take six, seven hours and they have to put bleach in the bathtub and there is so much procedural burden for patients and their families caring for these patients. And over their lifetime, they develop complications such as squamous cell carcinomas or sepsis.

And for these reasons, you do not see these patients often live beyond their 30s and 40s. So that is the kind of morbidity and mortality that the disease inflicts on these patients.

Right. And how, what treatment options are currently available for these patients?

For the longest time, these patients have had to rely on antibiotics, bandage changes, really nothing that addressed the root cause of genetic deficiency. It's just in the last few years you're seeing genetic medicine make an impact in this disease area, replenishing COL7. Ours is the -- you've had topical applications where the gene is supplied as a temporary basis where, as an episomal vector, which is, has to be reapplied, and that such therapies have existed. ZEVASKYN is the first autologous cell-based sheet therapy where we're actually converting a patient's own cells into collagen manufacturing factories and putting it back on the patient as a one-time application for these wounds that provide multi-year wound healing and pain reduction. And we have data that go as far as 12 years now that was presented at the SID conference from a single application. So this is really game changing for these patients because once you've grafted and they take, it's a multi-year effect. So that's really the value proposition that's unique with ZEVASKYN.

Great. And the other product on market is marketed by something called Krystal. They're about an $11 billion company. Now, in terms of their application and the therapy, what are some of the, I guess to say, what is your, ZEVASKYN's differentiation?

Yeah, we, as well as the KOL community and patients, right, everybody that's in this disease space, pretty much unanimously will agree that the two therapies serve different types of purposes. It's not ZEVASKYN or VYJUVEK. We need these two as well as even more therapies to come into space because you have wounds that are of different nature. So once you have, this is a weekly application, what you have with VYJUVEK, right? You have to, week after week, you have to apply. Over time, you may be able to heal wounds, but then after you heal a wound, you can go to the next wound and treat that. And so it's a different way of looking at the problem where you have large chronic wounded areas, you cannot cover, you need a lot of coverage, then you need to go for something like ours where we can every round of manufacturing, each sheet of ZEVASKYN gives you about 40 centimeter squared area and our batch size is up to 12 sheets.

So you can imagine that you can cover a vast area in a one-time treatment, and it's not a weekly application. After you're done, you're looking at all the data we've generated from our clinical studies are from a one-time application for any given particular wound. So that's a very different type of value proposition. So you can imagine that you're going to need both types of therapies for different types of wounds, but a lot of patients who have recessive dystrophic EB have contiguous and large areas of wound to be healed. So it's not going to be one versus another, you need both therapies.

Yes. It sounds like just based on the intuitively, what the different applications, I would imagine that you have the edge, as you mentioned, on the durability side of the equation.

Absolutely. And if you look at even our commercially treated patients, they're all pretty much prior treated with VYJUVEK. I don't even know if we have a VYJUVEK naive patient in our commercial setting. So that unmet need basically is underscored by just that fact.

Yes, great. I think that's a point that people probably don't fully appreciate. Thank you for walking us through that. Now heading -- shifting gears a little bit into the commercialization. Now what have you learned from the launch? And what will it take to really commercialize an individualized cell-based gene therapy, not just scientifically but operationally?

Yes, I think this is a very important question because we are learning from the launch. I think the unique features that I mentioned, the qualified treatment centers that we need for a therapy like this. It's not only an autologous cell therapy in an ultra-rare disease, but it's also something that has an 84-hour shelf life. And qualified treatment centers, it's a finite universe of centers where multidisciplinary talents come together to form a team which did not preexist.

So we have had to create that team that has the surgeons, the anesthesiologists, the EB physicians, all knowing how to care for EB patients. And when you put those two requirements together, basically what it necessitates is a very coordinated, ultra-coordinated patient treatment journey where before even you undertake a patient and take a manufacturing slot, you need all these different actors to commit their times at certain time points and lock that in before you can take -- it's almost like a solar eclipse needs to be aligned before we can take a manufacturing slot, and everybody understands.

So that's the one unique aspect of this launch that we all have to understand. The second aspect of it is, our Phase III study of 11 patients in one site, great results, Stanford. Every qualified treatment site that we activate basically wants to replicate that success in their site. So it's almost like the clinical evidence or burden thereof is only partially addressed by a Phase III study. You have to replicate it in a different scale here. And that is part of laying the foundations, which is what we're going through right now. And the third aspect is the patient-to-patient communication, because these patients have a very strong network.

And patients rely on patient testimonials to see if this is the right therapy. So I think that is also another unique aspect of our launch, where we have a Strong Together Network of patient ambassadors who've been through our therapy, either in the clinical studies or from a commercial setting, and they're sharing their experiences with other patients. When you look at all these types of factors, what it means is this launch is going to be atypical in that you need a pretty good timeframe for foundation setting. It's not like an off-the-shelf therapy where you open the floodgates and everything is going to flow gushing out. It's going to be set the right foundation, activate as many sites as we need to, let every site accrue that experience, and let that be shared across. When you do that, you're really launching at that time, right? So that has to be appreciated.

Got it. Now, you had a great announcement today. It looks like you have added a new treatment center, so congratulations on that. Maybe that -- can you talk about how many qualified treatment centers now you have onboarded? And now, as the network expands, where's the principal bottleneck shifting? Is it patient identification? Is it referrals, onboarding, hospital onboarding, scheduling, reimbursement, or manufacturing?

Yes, definitely it's great news for these patients, especially in the Florida area and the entire Southeastern United States, to have another center, University of Florida. It's a good institution they have an EB clinic and well-coordinated. It's important to get these centers on board because these patients, as we talked earlier, Vish mentioned, they are living with so many comorbidities, they are looking for centers that they can trust to get a surgical application. And so that's really been on our ramp. And in terms of sort of the bottlenecks, that you -- as you talk about. It's not a bottleneck. We wanted to get seven centers onboarded this year. Now we have more centers that are coming onboard.

And to us, we look at that as a long-term sort of a leading indicator. The more centers you have, naturally, you'll have a greater access to treatment. But for us right now, we are focused on getting the existing centers that are already activated to start treating more patients. It's always a little bit of a learning curve, institutional learning curve, to treat the very first patient in a setting. Once you have treated a first patient and once you've gone through the motions of who's doing what, what kind of contracts do you need with insurance companies and the payer and process work, you're going to get better at it. In the first quarter we talked predominantly most of our patients we have reported so far three quarters of revenue growth, right? And bulk of those patients came from Chicago Lurie Children's and from Stanford. In the second quarter we said we have Texas that has biopsied a patient and CHOP has biopsied and treated a patient.

So that's exactly what we are focused on is getting more centers to understand where the bottlenecks lie. And the bottlenecks lie in different places with different institutions due to just different payer mix that they have. And our role is we are trying to help cross-pollinate them and share the learnings so that we can do things differently and better. And let's see, our goal is to have some of these treatment centers that haven't treated yet treat as soon as feasible.

Okay, great. Thank you. So, as you mentioned, it's an iterative process. You're constantly learning. What have you learned from the first commercially treated patients and their caregivers that has caused you to change or refine the launch strategy, if at all?

What we have learned, what we have reinforced really is the type of impact that this therapy has made, not to repeat what we have said consistently, but sometimes it's important to remember the impact that this therapy has had. Recently we've had patients from our clinical trials come to our company and share at the town hall multiple years later as to how the wounds have healed. So we are arranging multiple sessions with these patient communities so that they can learn from each other, especially the initial set of patients that have gone through the process, having them talk to additional patients who may be wanting to learn more about what the process entails, who may be anxious about what does biopsy really mean and what does the procedural component involves. So that is one part of the learning. The other part of learning where we are realizing is that this is certainly a cellular therapy makeup. It's not a prescription and a pharmacy product that you can go and take the product. I think we realize that very well. But where, what is new here is that it's an ultra-rare disease condition.

So there are only a finite number of treatment centers, and you're trying to bring an EB medical dermatologist together with a surgical dermatologist, along with a cell and gene therapy expertise within an institution. You're trying to mobilize three different parties along with the patients and the families. So that particular learning curve as we talked more in detail at the previous earnings call, it requires time, especially since the expiration is only 84 hours. So as the centers start treating more and more, they know as to, okay, what can we do differently and better? We've also learned that some of these patients are fragile in nature, and so we just need to have more patients actively identified on top of the funnel so that even if there is any attrition that happens in the in the weeks due to factors beyond our control, we are able to keep the patient flow and the cadence going. So those are really the more important ones and we are pretty confident that this is just getting better, especially as more centers come on board, that patients will begin to flow through.

Great, thank you. How should we think about what the potential best leading indicators of launch momentum may be? Can you just try to give us a sense?

Yes, leading indicators for launch momentum, first and foremost, is just the interest that we are seeing from the community for this therapy, and the high unmet need that is existing. We've talked about the comorbidities. We've talked about the extents of wound area. About 30% of the body's wound, body is wounded. Each percentage is roughly the size of the palm of the patient. So 30% is massive regions of the body, and the gels are just not physically enough to be able to cover that. We've said we have about 100-plus patients that have been, that physicians out in the community and at the qualified centers believe are good candidates for ZEVASKYN. But now the challenge is it's a multi-step process to bring them on and the indicators can be different because there are so many stages that the patients have to go through. The best or the most definitive indicator is naturally a patient being treated, because when a patient gets treated is when we recognize revenue for that patient.

And that's exactly what we have been reporting in the previous quarters. We've stopped reporting in the prior quarter about how many biopsies are planned or how many are in the manufacturing process just because of certain things that are beyond our control. So we have not really guided with regard to what's happening in the immediate, sort of, upcoming quarter. But, again, as more centers get on the map, that's going to be the, sort of, the long-term pull that's going to come from ZEVASKYN. With the current footprint of seven centers that we had, we have captured about 40% of the addressable market is now living in the states where the qualified center is located, so that's also going to help expedite the access for these patients.

Thank you. How should we think about repeat treatment episodes over a patient's lifetime? And also, could patients return to treat additional wounds? And how might that influence the overall long-term utilization?

I think for the foreseeable months to quarters, we should have new patients building up. Most of the patients are new patients that are going to get treated. And then I know this is usually a question we keep getting from investors, so when should we expect a repeat treatment to come in? If you look to our clinical trials, right, which is, if anything, that's a precursor we have, it was about a year, year and a half of gap when a patient came back again for subsequent clinical trials, but that also was a lag because of the clinical trial protocols, et cetera, that we had to write.

When we talked to our doctors, they believe that six months is the least amount of time, maybe a year after the first treatment episode that if the patient wants to come back that they that we expect that recurrence to happen. So our initial is going to be the new patients treated, and then the recurrence should happen at some cadence. We anticipate about two treatments per patient in the lifetime of the patient, and just because of the extent of coverage area and what ZEVASKYN can provide with each treatment, and each of the treatment is a billing unit because we need to biopsy the patient every time they come back. In addition to these, we've talked about other areas of unmet needs, such as hand contractures is one area which is a pretty high unmet need for these patients because their fingers are fused. And we are looking into applications as to how we can potentially put ZEVASKYN over in these hands.

And there's precedence from our clinical trial experience. For the repeat treatment as well.

Got it. Now, in terms of patient access and reimbursement, starting with access question first, what are some of the challenges or barriers for a family currently considering ZEVASKYN?

So, the access, from an access standpoint, we're seeing most of these patients, a little over 50% of patients are commercially insured patients. There are a lot of Medicaid patients also that we have. And about 10% are Medicare patients. We have coverage. We have more than 95% of lives, commercial lives, are covered by ZEVASKYN. We have baseline coverage for Medicaid states. For patients and caregivers, there is hardly much of a copay or any kind of financial obligations for them. It's primarily the centers that have to go through the process of clearance and authorization, and that's really depends on the patient, the plan, and the contracting that needs to take place to arrange on a payment rate basis.

That's nothing new about ZEVASKYN. It typically happens with every center. But once have a particular plan, having a contract rate arrangement with the center, then the subsequent patients things get better for those patients. And in terms of the access itself, physical access, we have travel support programs, we have copay support programs for these patients, Abeona Assist, that we are going at great lengths, and we're getting good feedback from patients who have used these programs.

Now, on manufacturing and execution, autologous therapies, obviously, start with material from the individual patient. So I would imagine that manufacturing reliability and consistency is probably pretty consequential. What have you learned about scaling this process commercially?

So a lot of our manufacturing processes and controls that we have in place have been learned and informed based on our clinical studies, right? So we had 11 patients we treated in the VIITAL study, which was really the training set to develop a lot of that, and that's what led to the BLA. The challenges that you face in scaling are less to do with the parameters that we have well studied. I think they are more to do with tests and controls that have been introduced during commercial launch, where we had no prior experience. And despite that, right, I think our teams have been very nimble in learning.

For example, I'll give you, there are sterility tests that were introduced by the FDA during approval, which we did not have in clinical trials, right? And similarly with the identity test, the Pan-CK test that we talk about in the quarter 2 earnings call. So these are, there are things that are new in terms of how it's how the product is released in the commercial setting, which is a little bit of more of a steeper learning curve.

I think the parameters that we had a lot of experience have behaved rather very well. And I would say even that the predictability of turnaround time is quite impressive. The range is about 23 to 26 days, standard deviation less than 2 days there. So that's something that we'll continue to monitor, but that helps us with the planning and logistics in a very predictable way. I would also say that with that one exception of the lot that had a low yield that wasn't billable, pretty much the overall experience with the robustness in yield output has also been quite encouraging. So I think it's a continuous learning process. We have to be nimble, but the manufacturing science and technology that looks at trends and reacts quickly, I think that's really what distinguishes a successful manufacturing organization, and we're fully committed to continuing that.

What improvement -- you mentioned the yield -- what improvements or initiatives do you have internally on how to enhance or improve the yield side of the equation, and how should stakeholders assess manufacturing consistency as the launch continues to mature?

Yes, there are two categories really that relate to supply robustness, right? One is binary events, which can actually qualify or disqualify a lot. So you have nothing or everything a thing. That is, if you put that aside, if you look at purely the quantity of sheets or how many sheets can you make from a lot, in the VIITAL study, in the clinical study, we were only manufacturing six sheets maximum that can be applied to a patient. Since there, I think doubling from there to a commercial output of 12 sheets is a pretty big jump, and there are multiple parameters that influence how many sheets you can make in a lot because there's attrition of cells. So there's variability in how many cells you can get from a biopsied sample, multiple factors, age of the patient or location of biopsy and all these things or even the quality of biopsy. And then once you have the cells, there's going to be attrition through the manufacturing process up to the last day and at various stages.

So the more cells we can have upstream, the better the chances we'll have the end product. What our teams have done rather well is for a product like this, which has primary cells, it's not even suspension cells, cells that have to form gap junctions and make sheets. What they've done well is that you cannot have a process that is too rigid: on day number 2 you have to go to that step, day number 8 you have to go to that step. Cells don't fit in a box. So we have let the cells tell us what is the right appropriate timing to move from one step to another. And I think there's a lot of that optimization that happened in late-stage clinical development, even leading to the BLA submission because that's where you have to lock in parameters. What's the flexibility that you're affording there? And then beyond that, we have maximized many other steps like how many cells or sheets that we lose in the process.

What are the reasons why we may lose them, and are there trends that tell us that any small tweaks can actually improve that? And that's a continuous process. And I would say having an average of nine sheets per lot despite those outlier lots where you had the three sheets, I think it's a very good metric, and we're going to strive to only keep beating that.

Great. As most folks here are equity investors, now, as they're thinking about Abeona as part of a potential investment, what are two to three proof points for your execution that investors should pay particular attention to over the next couple of years?

Yes. I think if you take the very near term, I'll start with 2026, a robust QTC network is the number one thing, and then as many QTCs as we can have treated a patient and gained that...

Qualified...

Qualified treatment center. Having treated a patient and starting that experience. I think that's the first base to achieve. The second is the outcomes from those treatments being shared in a peer-to-peer way, has that happened? How many centers have had that positive experience? I think that's the second big base. After that, you can look at, okay, are we growing quarter-to-quarter and getting to a cadence to some of these sites, right? Because at least the early launch sites should get to a steady cadence, which we can expect in some point 2027 and beyond.

So I think when you look at the 2-year window, what we should try to achieve by then is a free cash flow have we breached that three, I think anything greater than 3 patients a month is going to be free cash flow positive, right? So that's something that we should look for. And it's very hard to predict when exactly we will hit that, but that's going to be an important inflection.

What do you think the market still misunderstands about Abeona?

The first thing is underappreciation of the opportunity we have with ZEVASKYN. I think the speed of the launch does not define the peak opportunity. That is number one. This is foundation laying for -- it's almost like an extended clinical trial phase through launch -- that we have to establish what we did with one site has to happen with 10 or whatever the number of sites that we will eventually have. So that's for recognition of that. The second is this is not a product that has an endpoint of loss of exclusivity or things like that because we don't see a generic entrant in -- this is something that we're going to own for a very long time.

That is underappreciated. We're also not seeing emerging therapeutics that can achieve the type of product profile that we are seeing with ZEVASKYN. These are features of ZEVASKYN that are very underappreciated. And then I think people have to also look at, we don't appreciate fully the programs that we've partnered. There is one PDUFA date that is within the next few days, and we have royalty streams coming from partnered programs with Ultragenyx and Taysha. I don't think we have appreciated the value that's locked there, and some of our early programs, that is understandable because we have to reach clinical proof of concept, but when that happens, I think you're going to see a very different kind of company here.

Great. Well, thank you very much for your time today, and good luck with the rest of the day and your meetings. And, yes, are there any questions from the audience? All right. Well, thank you.

Thank you very much for hanging out.

Yes, of course.

Good morning, everyone, and welcome to Abeona Therapeutics 2Q 2026 Conference Call. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to your host, Gregory Gin, Vice President, Investor Relations and Corporate Development. Greg, the floor is yours.

Thank you, Jenny. Good morning, and thank you, everyone, for joining us on our second quarter 2026 results conference call. During this call, we will refer to the press release issued this morning announcing the financial results. It's 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; and Dr. Brian Kevany, Chief Technical Officer. We anticipate 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 Securities and Exchange Commission. 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 please start. Vish?

Thank you, Greg, and good morning, everyone. I'll begin today with an overview of our commercial progress before turning the call over to Madhav for operational details. Our commercial experience to date reinforces our confidence in ZEVASKYN's substantial commercial opportunity. During the second quarter, we advanced our rollout by expanding our qualified treatment center network and progressing more patients through the treatment pathway. With the recent addition of Cincinnati Children's, which is one of the largest epidermolysis bullosa treatment centers in the country, we now have 7 activated QTCs nationwide. Importantly, CHOP and UTMB are biopsying patients and CHOP has completed its first treatment.

We have treated 12 patients since launch, including 5 in the second quarter of 2026 and 3 additional patients in the third quarter to date. As Madhav will discuss further, a couple of these treatments did not generate revenue. As our commercial footprint expands, we're refining how we report progress to the investment community. Over the past quarter, we have seen that leading indicators such as scheduled biopsies or biopsies in manufacturing are subject to external variables outside our control and have limited utility in predicting revenue-generating treatments.

Later on the call, Joe will outline the specific reporting updates we're making to eliminate this uncertainty and to align with standard practices of commercial stage companies.

With that, I'll turn the call over to Madhav Vasanthavada, our Chief Commercial Officer, to detail our commercial execution and network expansion. Madhav?

Thank you, Vish, and good morning, everyone. We are making progress in executing the launch with clear priorities, advancing identified patients through the treatment journey, strategically expanding the QTC footprint by onboarding leading EB centers and raising ZEVASKYN awareness across the EB community. Let me start with EB community engagement since we just attended back-to-back meetings, the Debra Care Conference, which is a flagship meeting for EB patients hosted by Debra of America, a patient advocacy group, and the Society of Pediatric Dermatology, SPD, Annual Meeting, where we interacted with dozens of highly engaged patients, caregivers and physicians.

Patient ambassadors from our Strong Together Network which is a group of patients who received ZEVASKYN in clinical trials, engaged with families and physicians throughout these events, fostering meaningful dialogue, sharing the impact ZEVASKYN has had on their lives and helping connect patients and caregivers with ZEVASKYN resources and support. Following these interactions and the many that we have been having in the recent months, we are energized by the opportunity and the fundamental role ZEVASKYN can play in healing RDEB wounds today and for the years to come.

Based on our interactions with patients and caregivers, we continue to believe that the distinct value of ZEVASKYN is deeply resonating with the RDEB community. We see clinical conviction building across our QTC network and the community practices of other RDEB physicians. While we are thrilled with the patient community's interest in ZEVASKYN, our recent experience has revealed bottlenecks that we are working through in the journey from patient identification to ZEVASKYN treatment. Because ZEVASKYN is the first surgically applied autologous cell therapy in dermatology and is operationally very different from traditional topical therapies, QTCs have a steep learning curve to client. As a result, the time from patient identification to patient treatment can vary considerably site to site and be influenced by a broad range of factors that are beyond the control of individual stakeholders.

Executing the launch has provided us with several real-world learnings, of which I'd like to highlight 3 important ones. First, administering ZEVASKYN, which has an 84-hour shelf life, requires a QTC to execute seamless real-time coordination across multiple stakeholders. Well before requesting a biopsy slot, dermatologists, surgical specialists, anesthesiologists and hospital staff must lock in precise dates for biopsy appointments for operating room reservations and for surgeon and medical teams. These unique operational dynamics require even greater planning, particularly when patient and physician availability can be limited with holidays and back-to-school planning, and we have seen this lead to scheduling disruptions for biopsy and treatment dates.

Second learning, on the clinical side, we have observed that the health of harder patients can sometimes change unexpectedly, which can lead to unavoidable biopsy delays or cancellations. In the second quarter, patient health deterioration resulted in 2 last-minute cancellations of scheduled biopsies. Because of the amount of coordination required at the QTC with payer and patient schedules well before booking the treatment slot, a last-minute cancellation means that the slot cannot be filled by another patient.

Lastly, on the supply side, as our patient sample size has continued to grow, we have learned that manufacturing yields can be influenced by variability in the incoming biopsy material. These factors resulted in 1 low-yield batch in Q2 and 1 out of specification batch in Q3, for which no revenue was recognized. Despite these challenges, we are gratified that both patients received treatment.

While the launch has highlighted these complexities, they have provided valuable operational and commercial learnings that continue to strengthen execution by both Abeona and its QTC partners. Importantly, despite these complexities, we have maintained a steady quarterly growth and 12 patients have now been treated with ZEVASKYN since launch. As we apply these launch learnings, our focus remains on ensuring more patients enter the top of the funnel to help offset patient attrition that can occur for reasons beyond our control.

A key component of that strategy is continued expansion of our qualified treatment center network, continued engagement with the EB community and improving patient access. Towards that end, during the second quarter, we activated 2 leading institutions, New York-Presbyterian, Columbia University Irving Medical Center and Children's Hospital of Philadelphia, CHOP. More recently, Cincinnati Children's Hospital, one of the largest ED centers in the U.S. has come on board. Activating treatment sites has taken significant time and commitment from QTCs and Abeona teams, and I want to thank everyone involved who helped achieve our stated goal of activating 7 QTCs by the end of this year.

With our expanded QTC network, about 40% of our addressable market now has in-state access to a QTC based on claims analysis. In addition, our QTCs also provide specialized care for a sizable portion of patients traveling from out of state, which enables even broader patient access. That said, we are getting requests from additional EB centers to onboard ZEVASKYN, and we plan to work with those centers to further our expansion of the QTC network. While site activation is a critical milestone, it is only a first step that allows a QTC to initiate ZEVASKYN treatment process, including consultation, patient workup and payer engagement.

Our commercial and medical teams continue to communicate regularly with each activated center as they build treatment readiness and administrative planning, including pharmacy and therapeutics committee review, prior authorization and payer agreement processes and planning for surgery and logistics. As an example of exceptional operational efficiency, CHOP completed its first ZEVASKYN treatment in July, shortly after its activation in May. UTMB recently completed its first patient biopsy, representing another important step towards future treatments and overall, reflecting growth in the number of QTCs that are treating patients.

Next, as we think about the long-term adoption curve for ZEVASKYN, we know that physician confidence and learning builds over time. Our QTC physicians rely heavily on multicenter real-world experience shared through peer-to-peer dialogue before transitioning a new therapy like ZEVASKYN into standard practice. As we actively facilitate best practice sharing amongst QTCs and the early treaters observe positive post-treatment outcomes and share them with their peers, we believe that this growing clinical conviction will trigger the tipping point that bridges initial experience to broad clinical adoption and routine prescribing across our entire QTC network.

Based on recent discussions with RDEB physicians, we expect that enthusiasm for ZEVASKYN will continue to build as RDEB physicians see and share even more examples of positive treatment outcomes. Equally important for adoption is ensuring economic alignment and reimbursement for our treatment centers across all payer channels. To that end, we achieved a significant milestone from CMS, granting new technology add-on payment or NTAP status for ZEVASKYN effective October 1, 2026, for fiscal year 2027.

NTAP is a CMS program that provides hospitals with supplemental reimbursement for eligible new high-cost and innovative therapies during inpatient stays, helping to cover the costs beyond standard DRG payments. For fiscal year 2027, CMS had received 15 new applications under the traditional pathway, and ZEVASKYN was 1 of only 3 to achieve NTAP status. The other 12 either did not meet the requirements or withdrew their applications or were denied. We are pleased that CMS has granted ZEVASKYN a new technology add-on payment. This is a significant recognition that comes after months of clinical -- rigorous clinical review and public commentary. And it is an external validation of the newness, cost criterion and substantial clinical improvement that ZEVASKYN offers over existing treatment options for RDEB.

While Medicare represents about 10% of RDEB payer mix, NTAP now provides a mechanism for hospitals to seek a substantial add-on reimbursement and facilitate patient access. In closing, we remain encouraged by the demand we see and are focused on ensuring eligible patients can receive ZEVASKYN. Our approach is to achieve this by building robust access, expanding our QTC networks and further improving patient and QTC treatment experiences, which is exactly what we are doing.

With that, I'll now pass the call to our Chief Financial Officer, Joe Vazzano, to discuss our financial results.

Thanks, Madhav. Let me start by reviewing the reporting changes we're making to provide maximum transparency and align with standard commercial stage practices. We will anchor future quarterly disclosures around completed operational achievements, specifically patients treated during the quarter and net revenue recognized. Consequently, going forward, we will report treatment activity solely within the designated quarter.

Before reviewing the financial results, I would like to remind everyone that you can find additional details for the quarter ended June 30, 2026, in our most recent Form 10-Q. Starting with the statements of operations. For the quarter ended June 30, 2026, Abeona reported net ZEVASKYN revenue of $11.4 million, representing a quarter-over-quarter increase of 31% or $2.7 million compared to $8.7 million in the first quarter of 2026. While 5 patients were treated with ZEVASKYN during the second quarter of 2026, we recognized revenue for 4 treatments as 1 batch had cell yield that was below the thresholds for revenue recognition.

Research and development expenses were $5 million for the second quarter of 2026 compared to $9.6 million in the first quarter of 2026. R&D expenses in the first quarter of 2026 included a one-time upfront cost of $7 million for in-licensing ABO-701. Selling, general and administrative expenses were $15.8 million for the second quarter of 2026 compared to $19.5 million for the first quarter of 2026. The decrease primarily reflects fewer engineering runs and less manufacturing training costs in the second quarter of 2026.

We reported a net loss of $20.2 million or a loss of $0.35 per basic and diluted common share for the quarter ended June 30, 2026. Net loss for the first quarter of 2026 was $17.1 million or $0.30 per basic and diluted common share. As of June 30, 2026, we maintained a strong balance sheet with cash, cash equivalents and short-term investments totaling $146.8 million. Our focus remains on disciplined capital allocation as we drive toward a sustainable cash flow positive business model, which we believe is achievable by maintaining a consistent cadence of patient treatments.

And with that, I will pass the call back to Vish for additional remarks before opening the call for Q&A.

Thank you, Joe. In closing, we're proud of the dedication shown by our commercial, medical, manufacturing and quality teams, and we look forward to bringing ZEVASKYN to many more families. While we continue to learn to overcome the unique launch challenges associated with the logistically complex product delivery, each learning helps us lay a strong foundation to deliver sustained long-term value to both the RDEB community and our shareholders.

With that, I will hand the call back to the operator to open the line for your questions.

[Operator Instructions] Our first question is coming from Maury Raycroft of Jefferies.

This is [ Amin ] on for Maury. A couple of questions from us. First on -- you previously mentioned 1 patient per month per QTC is a reasonable near-term cadence. Just wanted to know when do you expect your existing QTCs, more specifically the leading ones like Lurie and Stanford to get there? And then I have a follow-up.

Thank you, Amin, for that question. Yes, I think Madhav is best positioned to answer this question.

Thanks, Amin. I think, yes, we continue to hear about 1 patient per month from QTCs on average. And this is something that we will have once all of these centers are reaching a steady state. As we now know, earlier, Lurie and Stanford were the ones treating. Now we have biopsy from UTMB and CHOP has treated a patient. So, we're just waiting for other centers also to open up to be able to say when we reach a steady state. But once we are in the steady state is when we believe that 1 patient per month cadence is something that we continue to hear from the QTCs.

Okay. And given you've now seen both a low-yield batch and an out-of-spec batch, how should we think about the long-term success rate for manufacturing? Do you view this as like isolated incidents? Or do you think this could be something that we will see in future as well?

Thank you for that question. I mean, it's a little early. As you recall, our manufacturing experience in the clinical trials was a total of 11 patients treated, right? It's a very small data set. The -- and between the clinical trial as well as the subsequent clinical studies of Phase IIIb and our manufacturing experience to date, the low-yield batch is the first time we've encountered. So, up until this point, it looks like a low probability event. And there are several variables that cause such events that are related to variations in the incoming biopsy material. It could be related to the anatomic locations where biopsies are taken or a particular patient status or just the cellular yield that the growth characteristics that we derive out of any given biopsy. And given the limited experience, this is a rare kind of event that we've seen that the cell yield was low. And fortunately, for us, whatever sheets were manufactured were used for patient treatment. It's just that it's below the threshold of billable unit.

Having said that, we continue to -- we're running a lot of process science on every manufacturing run that we conduct. And hopefully, with enough experience, we'll be able to point towards positive reasons why this may happen and how we can improve upon that. But it's very hard to predict what such ratios could be. And since you asked about the out of spec, just wanted to take the opportunity to also mention what it was about. You may recall that there was one test that we never had in clinical development, which is the identity test which relates to the Pan-CK marker expression on keratinocytes. And we -- since there was no clinical experience, the way in which thresholds or specifications were set for this test was based on 6 samples of 5 being healthy volunteers and 1 frozen RDEB samples that we had at the time of BLA review. This was not based on true GMP manufacturing run experience to set such specifications. And that was the test that failed. This has nothing to do with either the safety of the product or the potency of the product.

So, we are working with the agency to revisit whether the specifications that were set during the BLA review were appropriate or should we even relook at that, right? So, some of these things will take some time and more experience to get concrete numbers to put on what should be our assumed rate of nonbillable units. But if you look at overall numbers to date, for any autologous therapy that has been launched in the past, you will see such examples. And we'll continue to keep refining numbers and probabilities as we gain more experience there.

Our next question is coming from Stephen Willey of Stifel.

Can you remind us of the manufacturing yields that you're seeing in the commercial setting? I know you have the capacity for 12 sheets on a per patient basis, but what's the average number of sheets you've been able to manufacture for the patients you've treated thus far? And I guess, how does this differ, if at all, from the prior clinical trial experience? And I just have a follow-up.

Steve, the manufacturing yields from our commercial experience are actually -- they are very favorable when you compare it to what the clinical trial experience was. You may recall that for VIITAL, our Phase III trial, the maximum number of sheets that were allowed to be put on patients was 6 per patient. And in reality, it was about 5 sheets across the trial. And right now, we are around 9 sheets average per lot, which is a pretty healthy rate compared to what our clinical trial experience was. And therefore, which is why we're calling this an anomalous or a rare event that you had a low yield. And of course, 12 is the maximum that we can supply, but we're learning from every batch and making sure that any indicators that tell us that you could have a certain type of yield, we're learning from that to adopt our process and put best practices in real time.

So, we're actually pleased by averaging 9 sheets, which is a pretty substantial body area coverage.

And then can you say what that low-yield number is that triggers your inability to not recognize revenue?

Yes. Anything that is lesser than 4 sheets in a batch is a low-yield batch. So, that's really our threshold. So 3, 2 or 1 as per NDC is still on label, but it's -- for billing purposes, we will not recognize revenue for those batches.

Okay. And then just with respect to the pan-CK marker assay that you mentioned on the keratinocyte side, where are you now in terms of engaging the agency around, I guess, either changing that number with a larger sample size or widening the confidence intervals?

Yes. We have had some interactions with the agency. The first thing was -- the first step was to make sure that we could treat the patient, which is why we had to go through some communications with the agency, and we were successful in treating the patient. And I think from -- we should have more updates on where we are with the revision of the spec by the next quarterly update because we're still gathering the type of data. We're confident that the data that we have from our manufacturing runs in the GMP setting now justifies a lower specification from real-world experience versus something that was arbitrarily set based on limited experience during BLA review. So, it's a TBD how quickly this can be implemented because there are some mechanisms that are beyond our control and have with the FDA. So that's all I have for you at this point in time, but we will update you as in our subsequent quarters on this particular topic.

And our next question is coming from Ram Selvaraju of H.C. Wainwright.

Congrats on all the progress made this quarter. I wanted to ask about kind of last-minute cancellations, arbitrary withdrawals of patients from the process of ZEVASKYN treatment and how often you see that specifically occurring? So this has nothing to do with failures in manufacturing or inability to qualify of that. This specifically has to do with patients being unwilling to ultimately go through the treatment process, what we might call the arbitrary attrition rate. Just maybe you could give us some sense of how often that occurs based on current experience.

Thanks for the question. Madhav?

Yes. Well, so far, we have had 2 such events, right, as we mentioned, that has happened in terms of our record. So, it's hard to predict, but if you look at the willingness for these patients to undergo the procedures, there's definitely a very strong willingness. But it's -- some of these things are -- if they are not able to make it because of illness or some health deterioration reasons, then we are talking about moving the biopsy date to some other date. It's not that the patients don't want to or are just backing off of the procedure itself. So, I just want to be very sort of clear with that, especially coming out from this Debra conference and SPD that I mentioned, we were just so energized. Literally seeing the number of patients that we've engaged with who were at our booth who are talking about ZEVASKYN. Some of them had the concern about what does the biopsy look like and what does the procedure look like.

But we've had our people from the Strong Together Network who went through this procedure in clinical trials, sharing their own experiences, right? The product theater that we presented was also packed. We had room for more than 160 people, and there was a lot of interest in these product theaters to learn about the procedures and the outcome. So, even if patients are dropping out for health deterioration reasons, we have not seen that these patients saying, "Oh, I don't want ZEVASKYN." It's a matter of rescheduling the biopsy to another date. And when that happens, especially in a quarterly report like this, when we talk about the number of slots with the number of patients, we are going to have different numbers for that particular finite period of time. And that's really how this current model is.

So, we are not saying that there is a patient attrition kind of forever. We haven't seen that even with these 2 health reasons that we've talked about. And it's, therefore, what we reiterated our strategy. The more centers we have active, the more patients that are going through this process, the greater shots we will have a goal to be able to have these more number of patients treated in a given period of time. So, I just hope that offers a bit more clarity. I know you were asking about our ability to predict such movements, but it's hard to tell so far we've had 2.

And then with respect to maximizing patient accessibility and convenience. You said during your prepared remarks that at this point, I believe you said almost half of the addressable patient population has in-state access to a qualified treatment center. So, I was wondering if you could elaborate on this from 2 perspectives. Firstly, how necessary you feel it needs to be for a patient to have in-state access to a qualified treatment center? And secondly, in order for the company to be able to provide this to the majority of patients or, say, 80% of the addressable patient population, how large would the qualified treatment center network theoretically have to be?

Yes. Yes, great question. So, the first question, importance of having a QTC in state. Earlier, we were talking about the payer mix, right? So, one of the things here is when you have Medicaid, especially and when you have an in-state Medicaid patient, the access there is much faster relative to a patient traveling from an out of state and a physician needs to be enrolled in the host Medicaid state. So, it actually helps to have a patient in the same state where you have a QTC just from an access standpoint.

The way we are saying that you have about 40% of our addressable patients are in state is based on our claims data when you count the number of claims that we have seen for patients in these states divided by the total number of claims across the country. It's not necessary to have a QTC in all of the states, and we will never have such kind of scenario. We'll have so many QTCs because this is such a sided community, and we know patients travel from out of state. In fact, about, again, 40% roughly of the patient mix that a QTC has for some of our QTCs are coming from out of state. They are traveling 300, 400 miles away. And hence, we are dealing with leading EB centers.

So, to get to that like 80% kind of a number that you mentioned, we will still be able to get that. It's a matter of prioritization. Some of these in-state patients might get faster access as the centers are working to have clearance for out-of-state travels. So, far in the patients we have treated, as we mentioned on our prior quarterly call, we've actually had quite a few patients traveling from out of state already. So, that mechanism already exists for people to travel and get treated.

And then lastly, I was just wondering if you could just give us a sense of when you anticipate NTAP status to be reflected on 2 levels. Firstly, the revenue cadence and secondly, if you expect it to show up on the margin front? And if so, how?

On the revenue cadence, it really will depend on the payer of the patient. I mean, I think for Medicare beneficiaries because NTAP is going to really apply to Medicare beneficiaries, whether they are pure Medicare or dual eligible, sometimes you have patients that are Medicaid, Medicare. So, for those patients is where revenue actually is going to come in through. And in the absence of NTAP, these patients would have had really very limited access, if any. And now NTAP actually opens up that vital reimbursement for the centers. And then Vish, you have to.

Yes. So, one more thing I wanted to add, Ram, about the NTAP status is it has 2 effects, right? The direct effect is, of course, for the 10% of our patient mix that is dependent on the Medicare reimbursement. So it's a small sliver of our TAM, so to speak. However, the fact that we've built through this clinical rigor and gotten that NTAP status for those patients is also going to have a halo effect with other types of payers on how they view the technology because you kind of have a validation here. So that is definitely going to make it easier for centers, even for other types of patients to get the paperwork done. So, we're hoping that, that will aid their payer negotiations and things like that.

In terms of -- you asked about the margin front. For us, it's not so much of a margin place more for the QTCs on are they going to be whole -- made whole. And that's where the NTAP plays a big role because currently for Medicare patients, as you know from the CAR-T world, without NTAP, it's a big P&L loss for a treating institution. And NTAP fills a big hole there. So that's what we hope will debottleneck treatment for some of these patients in these centers.

Our next question is coming from Kristen Kluska of Cantor Fitzgerald.

So, you mentioned in your prepared remarks that you want to have more patients enter the top of the funnel in case some of these situations arrive. I guess, which parts or issues could having more patients at the top of the tunnel potentially mitigate? And then which ones would this disruption still continue?

Yes, I mean, I think it's top of the funnel. So, things that are outside of our control, Kristen, is where we anticipate that, that's going to help mitigate, right? So, for example, all of the topics we mentioned, if there is a movement of a biopsy date that needs to happen, if you have multiple patients across multiple centers that are aiming to have a biopsy, then that will help to offset and have more patients come through. And it's essentially, it's having more shots at filling those manufacturing slots, which are finite in number. So, that's really the whole purpose, plus also having more qualified treatment centers helps with the patient access, the travel, the amount of distance that they have to travel, these patients trust certain institutions, right, more than others. So, we, therefore, want to increase that footprint. We also want physicians and actually, we're already seeing that. We recently engaged at the SPD through advisory meetings and the cross-pollination of best practices.

The number of treatments, as we have more treatment centers come on board to bring the physicians together and have that cross-pollination is just helping greater dissemination of information. And that also helps with overall raising awareness and clinical conviction in ZEVASKYN. So, it helps on multiple fronts, and that's exactly what we are currently in the process of doing.

Okay. Appreciate that. And given that some of these windows are very limited, is there -- like does it make any sense to do like patient screening when they come in for biopsies or anything, make sure that they're healthy? I know you can't prevent 100% of the time them from getting sick and potentially meaning to cancel, but can this mitigate it at all?

Potentially, right, these examples that we gave for the 2 patients that had to cancel their biopsies happen very close to their biopsy. In fact, one was on the day of biopsy that they said, I can't travel to the site and very sick. And the other example was like a day or 2. You have that kind of close to the biopsy date last minute, it's very hard to make adjustments. Whereas if you have this information like 2, 3 weeks in advance, that's definitely something else and that's where to your first question, if you have more patients on the top of the funnel, you have more flexibility or shots on goal that you may be able to move some patients and adjust date. If you only have 1 or 2, those idiosyncratic examples will just take over, we don't have reaction time to make amend.

So, that's really where it is, and we'll continue to monitor and hopefully, they are all not last-minute cancellations, and we learned some ways to mitigate it as we go through more such examples.

Our next question is coming from David Bautz of Zacks Small-Cap Research.

So, my first one is just about kind of clearing up the revenue recognition. So, if I understand correctly, you said that 2 of the patients you didn't record revenue for, but I believe those 2 patients were still treated. So, is this a case where the company is just going to kind of incur the full treatment of manufacturing costs? Or is there going to be a chance to recognize revenue for those 2 patients at a later date, the former.

We will not be recognizing revenue for those 2 treatments because that is our agreement, right? I mean whether it's a low yield or if it's an out of spec, we basically eat up the COGS.

Okay. So, the Q2 gross margins look like they were about 63%. So, as the manufacturing process becomes a bit more predictable, where do you see the normalized gross margin settling?

Yes. So, our gross margins are heavily dependent on the number of patients that get treated in a given quarter, mainly because most of our manufacturing costs are fixed. So, with higher volumes, then our margins will improve. And we think standard state would be probably about 85% to 90% once we reach full operating capacity.

Okay. Great. And then lastly, can you give any additional details on the patient funnel kind of where it stands today? How many patients use ID or even biopsy or treat in to QTCs? Any of those type of numbers would be really helpful.

Yes. David, I mean, definitely, patients are interested. We know that there are identified patients on our prior calls, we had mentioned about more than 100 patients that have been identified by their community physicians and QTCs that are considered clinically eligible. There are certainly multiple other steps, right, downstream steps about consultation and funneling these patients. So, that's all happening. I think for us, like we mentioned on this call, the -- really the rate-limiting step is at the qualified treatment center and advancing these patients through the treatment process. So, as that continues to happen, we continue to believe there are patients that are going to move through, especially in light of some of the more recent interactions we've had with patients and physicians. So, I'm not able to provide any particular numbers, but we see that movement happening.

[Operator Instructions] And our next question is coming from Fanyi Zhong of Oppenheimer.

This is Fanyi for Jeff Jones from Oppenheimer. Maybe a clarification question. When you indicated you had a low yield, so revenue was not recognized for 2 patients. Does that mean the patient is unable to receive any treatment or there is sufficient material for partial treatment? So, what happens in that scenario? And the second question is, do you have a view for how long for new QTCs to begin treating patients?

Just wanted to clarify that the 2 cases where we did not recognize revenue were 2 different cases. One was a low-yield issue and the other one was an out of spec. They're slightly different in nature. But in -- just to be clear, revenue was not recognized for either of those, but the patient was treated. Whatever sheets we produced and provided to the treatment center, the patients were treated. So, they received treatment, and we're hoping that the patients receive the clinical benefit and that experience will grow with these treatments. But revenue has not been recognized and will not be recognized for those 2 particular treatments.

Your second question was about how much time does it take to activate a QTC and get to patient treatment. And we had previously indicated this is about an average 4 to 6 months, but then the problem is with averages are not useful when the variance is so high. And you have examples we just gave you today where CHOP was activated in May, and they treated a patient in July. So, that was a very quick turnaround, whereas we have had other sites that have 12 months since activation and not treated a single patient. So, just because of this variability, it's very hard to predict. And the reasons are manyfold. It has got to do with the types of payer mixes in certain states and the paperwork that patients have to go through and various such factors. So, it will take us a little bit more time to try to thematize and put any numbers to what is a reasonable time that you can expect that a site will take between getting active and treating a patient. However, we are learning from these experiences and the more recent activations that we're seeing, sites are already talking to patients and trying to line up every part of the process that can be pre-lined up before even activation. So, that is something that we're seeing sites starting to do, but we'll have to wait and see how much that accelerates this time period.

I hope that answers your question?

Thank you very much. Well, we appear to have reached the end of our question-and-answer session. I will now turn the call back over to Vish for any closing comments.

Thank you, Jenny. I'd like to thank everyone for joining us for today's business update, and we'll talk to you again soon.

Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.

Good day, ladies and gentlemen, and welcome to the Abeona Therapeutics First Quarter 2026 Earnings Conference Call.

[Operator instructions].

And please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Joe Vazzano, Chief Financial Officer of Abeona Therapeutics. Sir, the floor is yours.

Thank you, operator. Good morning, and thank you for joining us on our first quarter 2026 results and business update conference call.

During this call, we will refer to the press release issued this morning announcing the financial results, which is available on our corporate website at www.abeonatherapeutics.com.

We anticipate 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 Securities and Exchange Commission.

These documents are available on our website at www.avonathapeutics.com. 

Joining me on today's call with prepared remarks are Dr. Vishwas Seshadri, Chief Executive Officer; and Dr.Madhav Vasanthavada , Chief Commercial Officer.

With that, I will now turn the call over to Dr. Seshadri to kick us off. Vish?

Thank you, Joe, and good morning, everyone. First, we are excited to share updates on leading indicators of ZEVASKYN adoption that signals strong momentum since treating our first commercial patients in December.

We have now activated 6 qualified treatment centers or QTCs, treated our fifth commercial patient with manufacturing underway for the sixth and scheduled additional patients throughout the current quarter.

The recent acceleration of onboarding efforts of QTCs further underscores their conviction about the role that ZEVASKYN will play in addressing the unmet needs of patients suffering from recessive dystrophic epidmolysis bullosa or RDEB.

Three of the ZEVASKYN treatments reported to date took place in Q1 2026 and translated into net revenue of $8.7 million for that quarter.

Second, we're sharing meaningful updates to our R&D pipeline, featuring a potentially game-changing radically novel engineered T cell technology for advanced prostate cancer.

By leveraging our proven expertise in advancing complex cell and gene therapies from academia through commercialization, we are well positioned to advance this exciting technology.

But before going there, I'll first turn the call over to Dr. Madhav Vasanthavada  to elaborate on the ZEVASKYN launch, which is our foundational and primary focus for Abeona. Madhav?

Thank you, Vish, and good morning, everyone. Launch momentum for ZEVASKYN and our commercial story continues to build, and we are beginning to see results on multiple fronts.

I'd like to start off by providing you with visibility not only to patients treated so far, but also biopsies expected this quarter.

As previously shared, one patient, our very first commercial patient was treated in the fourth quarter of 2025 and 3 patients were treated in the first quarter of this year. 

Additionally, 1 patient has been treated so far this quarter for a total of 5 patients treated to date with ZEVASKYN since launch.

The forward-looking momentum of patients in queue is also picking up with 1 patient biopsy and manufacturing for that patient currently underway and 6 additional patients expected to be biopsied this quarter, 3 of whom actually just as of this morning, 4 of whom have scheduled biopsies. 

I'd like to add that all patients treated to date and those scheduled for biopsies are from our first 2 activated QTCs. The other QTCs have identified patients and are not far behind in scheduling for biopsy, which will further add to ZEVASKYN treatments in the coming quarters.

While we are pleased to see patients beginning to clear the upstream procurement process and receiving ZEVASKYN treatment, we are equally encouraged by the strong demand reflected in the near-term identified pool of more than 100 patients across our QTCs and the community-based physicians. 

Our field teams are executing well, building deep relationships, expanding awareness and driving broad reach across dermatology, pediatric dermatology and subspecialties involved in the care of EB patients.

We continue to engage with referral physician community and have active conversations ongoing with 45 physicians.

These are not just one-off touch points, but action-oriented back-and-forth interactions, which shows real clinical interest and their intent to refer patients for ZEVASKYN. 

Beyond the numbers, early qualitative launch insights are also encouraging and reinforce our conviction.

Importantly, we are hearing positive feedback from QTCs that have treated patients and their experience with the end-to-end process is getting better with every patient treated.

To elaborate further on the types of initial patients that have been treated and those in the queue, we are happy to note that the initial uptake of ZEVASKYN is not confined to a narrowly defined patient or payer type, but has spanned across both adults and children with one patient as young as 5 years of age. 

Our payer mix consists of both commercial and Medicaid insurers in getting the breadth of ZEVASKYN coverage.

We are seeing that geographic proximity to QTC has not been a barrier because patients have traveled significant distances, including across state lines to receive treatment and our Abeona Assist patient and caregiver support programs have received positive feedback. 

Among the patients treated is our very first patient in the commercial setting who was biopsied in August of 2025, but as you may recall, could not receive ZEVASKYN due to a false positive result from a stability assay.

This patient came back to be re-biopsied early this year, and we are pleased to tell you that this patient was treated successfully. Such determination of patients, families and physicians to pursue ZEVASKYN speaks volumes about what this therapy means to them. 

On the market access front, payer coverage continues to strengthen with the percentage of commercially covered lives with published ZEVASKYN policies now reaching 95%.

This is a significant accomplishment in the first year post ZEVASKYN approval. That said, we are navigating a lengthy insurance approval process, which is typical of any high-cost gene therapy at launch, particularly for out-of-state Medicaid patients. 

Even so, we have seen no patient attrition and no final payer denials to date, further underscoring the strength of ZEVASKYN's value proposition to RDEB patients and their families. 

As we continue to follow patients from our Phase I/IIa and Phase III trials, we are excited to share that new data will be presented later this week at the Society for Investigative Dermatology, SID, featuring 5-year follow-up of our VIITAL Phase III trial as well as a single patient 12 years of follow-up from Phase I/IIa study, all of which reinforce durable wound healing and favorable safety profile after a onetime product application.

On the patient side, our Strong Together Network continues to be a powerful voice with patients and caregivers sharing their experiences from clinical trials and helping to generate patient self-referrals.

As our initial ZEVASKYN commercial patients share their experiences over time, we expect these stories to become one of the most powerful demand drivers available to us in this rare disease setting.

Lastly, we continue to onboard more ZEVASKYN treatment centers. As announced, we activated NewYork-Presbyterian/Columbia University last month. And Monday of this week, we announced the activation of Children's Hospital of Philadelphia, CHOP, as our sixth QTC.

I want to sincerely thank all my team members involved in the onboarding of these centers and to recognize our QTC physician champions and their team's conviction in ZEVASKYN as they successfully navigated a several month long onboarding process.

As you can gather from the map, we importantly have QTCs spanning the nation across geographically distinct regions: California, Colorado, Texas and the Gulf Coast, Chicago and now the East Coast.

We continue to have active discussions with additional centers and remain well on track to achieving our goal of having a total of seven QTCs onboarded this year and ensuring even greater access for patients and families across the country.

To close, we are progressing through the launch, accruing positive early feedback from treating physicians, a growing referral base, expanding QTC network and achieving broad payer acceptance.

Every successful biopsy, every treatment and every positive patient story is reinforcing our conviction in ZEVASKYN.

With that, I'll turn the call back to Dr. Seshadri for an update on our R&D pipeline. Vish?

Thank you, Madhav. Now, I'll share some important pipeline updates that highlight our focus on assets that align with our core competencies and what we believe would deliver the greatest long-term value.

As part of this focused effort, we have deprioritized our in-house ophthalmology preclinical programs.

Abeona has demonstrated capabilities with ZEVASKYN over the past years in end-to-end development and commercialization of personalized high-value cell therapies with durable clinical benefits for patients with debilitating diseases.

Today, we announced the in-licensing of a radically novel cell therapy asset that targets PSMA or prostate-specific membrane antigen, a validated target for the treatment of advanced prostate cancer, a leading cause of cancer mortality with more than 30,000 deaths annually in the U.S.

The CAR T-technology was pioneered by Dr. Preet Chaudhary, Founder of Angelist Therapeutics and Professor of Medicine at the University of Southern California.

He has more than 200 granted or pending patents worldwide in the field of cell therapy. We have included a link to a recent talk by Dr. Chaudhary in today's slides, elaborating on the uniqueness and promise of this technology in oncology.

PSMA-SIR-T or ABO-701 is an autologous engineered T-cell therapy that carries a PSMA-directed synthetic immune receptor purposefully structured to overcome the limitations of CARs or chimeric antigen receptors and TCRs, which is T-cell receptors.

The SIR-T technology is unique in that it can directly recognize and bind a target membrane antigen like a CAR does without the need for antigen presentation.

However, it retains the physiologic signaling and regulatory features of a native T-cell receptor, which enables more controlled, durable immune-mediated cell death.

In preclinical studies, PSMA-SIR-T demonstrated the ability to achieve deep and durable PSMA-specific antitumor responses in mouse models and display exceptionally modest levels of cytokine release in vitro, a profile that has been elusive for other engineered cell therapies in solid tumors.

The elimination of tumors in most mice treated with PSMA-SIR-T and its superior performance versus corresponding PSMA CAR-T comparator controls suggests a more controlled and durable immune activation in treated mice.

We believe these data support a compelling hypothesis that SIR-T technology may overcome key limitations that have historically constrained engineered T-cell therapies in solid tumors.

We anticipate IND filing and first-in-human studies to commence in the second half of 2027.

In the near-term, we will gain regulatory alignment beginning with a pre-IND meeting with the FDA on June 3, 2026, and engage a CDMO for supply readiness, while our internal teams maintain operational focus on ZEVASKYN commercialization.

With that, I'll now pass the call to our Chief Financial Officer, Joe Vazzano, to discuss our first quarter financial results. Joe?

Thank you, Vish. I would like to remind everyone that you could find additional details on our financial results for the first quarter ending March 31, 2026, in our most recent 10-Q.

We reported total net product revenue of $8.7 million for the first quarter of 2026. All three patients treated in the quarter were commercially insured patients.

This reflects a strong quarter-over-quarter increase of $6.3 million compared to $2.4 million in the fourth quarter of 2025. The growth was driven by early commercial traction following the launch of ZEVASKYN.

Cost of sales for the quarter was $2.7 million compared to $1 million in the prior quarter. The increase was primarily driven by the scaling of commercial ZEVASKYN with three patient treatments in Q1 versus one treatment in Q4.

Turning to operating expenses. R&D expenses were $9.6 million compared to $9.9 million in the first quarter of 2025. Notably, Q1 2026 includes a $7 million upfront payment related to the in-licensing of our PSMA-SIR-T asset.

Excluding this transaction, R&D expenses declined meaningfully, reflecting the transition of certain manufacturing costs capitalized to inventory and engineering runs that are no longer considered R&D following the FDA approval of ZEVASKYN.

Selling, general and administrative expenses were $19.5 million, representing an increase of $9.7 million year-over-year first quarter. This increase was expected and reflects our continued investment in commercial infrastructure post approval.

Key drivers include $5.4 million in personnel and stock-based compensation, $1.9 million of costs related to engineering runs with the remainder due to other commercialization costs.

Net loss for the quarter was $17.1 million or $0.30 per basic and diluted common share compared to a net loss of $12 million or $0.24 per basic and diluted common share in the first quarter of 2025.

The year-over-year change primarily reflects increased commercial investment and the PSMA-SIR-T licensing transaction.

We ended the quarter with $168.3 million in cash, cash equivalents and short-term investments compared to $191.4 million at the end of 2025.

Our balance sheet remains strong and positions us well to support continued commercial execution and pipeline advancement. We anticipate minimal R&D expenditures for the PSMA program, limited to low single-digit million dollars for the remainder of this year.

Overall, we are encouraged by the early commercial progress of ZEVASKYN and remain disciplined in our capital allocation as we scale the business.

With that, I'll pass the call back to Vish for closing remarks before opening the call for Q&A. Vish?

To summarize, we are encouraged by favorable trends in leading indicators of ZEVASKYN launch performance.

That is the foundation on which we have taken a bold step in advancing PSMA SIR-T development. Every milestone we discussed ultimately connects back to patients with serious diseases who are waiting for better, more innovative medicines.

Our mission is not just a statement, but a commitment that guides how we allocate capital, how we prioritize our pipeline and how we measure success.

With that, I request the operator to open the floor for questions.

[Operator Instructions]

Our first question today is coming from Kristen Kluska with Cantor Fitzgerald.

Congrats on all the progress here around ZEVASKYN. So now that you have 5 patients treated and quite a few in the biopsy pipeline, can you give us a sense of what the typical patient profile has looked like across treatment?

Are these more severe patients? Are any of that who have come back from the clinical trial to get another cycle? And for those that have undergone the procedure already, have they commented on whether they would be interested in potentially coming back in the future for another cycle?

Hi, Kristen, thanks for that question. Yes. So, with regard to your first question about the patient profile, what we hear from physicians are these are severe patients as we had expected.

And many of those patients treated would require more than 12 sheets of ZEVASKYN.

So, there is still an unmet need even in these treated patients. Of course, it's early to say how many of these patients will come back and at what point in time will they come back for a second treatment, but there is definitely a clinical need from that standpoint.

The second part, clinical trial patients, they are interested, and we know that patient consults are happening. It's just a matter of for those patients, when would be the right time for them to come in for a retreatment with ZEVASKYN.

And so, we'll keep you updated if we have that kind of information.

From the patients who have received ZEVASKYN already, yes, I think I already addressed that part, which is we don't know exactly when they'll come in, but there is certainly a need for.

And then, just as we think about how to model this out for 2Q, we know one patient has officially been treated. And all this color is really helpful around the biopsy schedule.

But just what can you tell us about your sense of how many patients you ultimately believe will have the procedure, meaning you get paid for it in 2Q versus how we should be thinking about maybe some of these trickling into next quarter?

Thanks for that question, Kristen. It's hard to precisely place how many of the -- I think we gave visibility to at least eight patients today in the call, one treated, one in manufacturing process and six that are in the biopsy scheduling process.

So, we could anticipate that maybe one or two of those patients who may receive who may be biopsied in June, anything after the first week of June would fall into July treatment.

Is it one? Is it two? Is it three? It's very hard to predict because some may be in the border line and the manufacturing turnaround time is not a very precise number, even though we have it approximately 23 or 24 days.

That is something that we have to see. But a good chunk of the patients that we have described today should fall under quarter 2 treatment.

Our next question is coming from Maury Raycroft with Jefferies.

Congrats on the progress. Maybe as a follow-up to Kristen's last question. For the patients treated so far, from my understanding, they've been treated at Laury and Stanford. Can you clarify what other QTCs are fully activated?

And it may be too early for this, but can you provide some bookending for what patient volume could look like per QTC or across the QTCs for 2026 and maybe what steady state could look like eventually as well?

Yes, Maurice. So, in addition to Lurie Children's and Stanford Children's, we have Colorado Children's Hospital that's active and UTMB University of Texas and Galveston, which is also active. And of course, the most recent ones were Columbia and CHOP.

We do know that Colorado and UTMB have patients actively identified and they are working through the administrative process to put them on, and we expect that we should receive biopsy schedule requests for their patients imminently.

And in terms of the volume, these are centers. Colorado is actually a very well-known institution for EB care. And in terms of the cadence, what we have been hearing from QTC is treating one patient a month at a steady state is quite doable.

So, it's just a matter of getting these patients initiated with biopsy and the treatment cadence.

Based on the comments in the prepared remarks around the length of the insurance approval process, it seems like ultimately, this is not limiting usage, but is this something that you have line of sight on that you can improve?

And how can improving this factor into your ability to fine-tune projections? And then do you anticipate there could be greater pushback or friction when it comes to retreating patients?

Yes. Definitely, the process will improve. Oftentimes, with gene therapy, especially high-cost gene therapy, the initial process of payer clearance, especially if a patient is traveling from out of state, there is additional layers of paperwork that need to be secured, starting with physicians also need to be enrolled. It's a onetime enrollment.

For example, if a patient is coming from traveling from a different state to receive treatment in one of these QTC states, then the physician from the qualified center, whether it's a surgeon, anesthesiologist or the EB physician need to be enrolled in sort of the out-of-state patient state.

So that is a one-time process as well as just providing a fee schedule.

Sometimes when you have an established product, there is a fee schedule that's already in place. So, you don't need additional letters of agreement or a single case agreement for those patients.

So, because we are navigating these initial payer processes, it takes a little additional time. But once that is secured, then it gets better over time. So that's been our experience, and that's how it's panning out.

Our next question is coming from Stephen Willey with Stifel.

Maybe just a little bit of a follow-up. What is the average scheduling lead time for biopsies right now? Just curious how far out these procedures are being scheduled.

Yes. Thank you, Steve. If you look at the time that a patient is identified as a ZEVASKYN patient and then the time that it takes for them to actually get biopsied, that is the timeline that you're talking about.

It's very variable. I think the factors that determine that are the type of payer, how recent the QTC is to the process. For example, now Lurie's, as you all know, has treated some patients and maybe they've gotten into rhythm and there's a lot of precedent that's been set, whereas the other sites that are just about starting, this is the first time.

So it's very hard to generalize an average time because we have examples of patients where, when we activated Lurie's, I think the first patient was biopsied in August. This is pretty early.

It was 2 months or something since activation, whereas we have seen certain sites that have been active for 6 or 7 months and they're just coming up for their first patient biopsy, preparing for that.

So it's a very variable thing. And with only 5 to 6 sites, it's very hard to say this is a trend. But I think a good estimate is 4 to 5 months is what it's taking for any site that gets active to get their first patient on a biopsy schedule there. I hope that answered your question.

No, it did. And then I guess the PSMA SIR-T looks conceptually pretty interesting. I think you spoke to the $7 million licensing fee. Can you speak to any additional economics that might be owed on the progression of that product?

Then I know you're in the process of tech transfer now, but what are the implications for manufacturing in terms of the need to build out additional suites to potentially accommodate the clinical development of this product?

Sure. In terms of deal economics, it's the upfront payment that we shared of $7 million. And Abeona is going to develop this asset until end of Phase I.

So there's going to be dose escalation and dose expansion. And those first-in-human studies do not start until second half of 2027, as I mentioned.

There is just about $1 million of milestone payments up to that time point through the end of Phase I. That happens with the first patient dosed and the last patient maybe. So if you look at that, the upfront payment is really the main substantial payment that's done right now.

In terms of deal structure, at the end of Phase I data, we have 2 potential paths. And one could be a 50-50 development with Angelas, so we share the cost and we share the proceeds later, or it could be an outright licensing deal where we'll have some buyouts and royalties and Abeona will fully own the program but provide royalties to Angelas.

So which of these paths is going to actually prevail, it's going to be a long journey to even discovering that because the data will determine those. So it's early to comment on that.

But in terms of cost implications, I wanted to make sure this is very well understood. So until first-in-human studies begin, there's not a big cost load on Abeona because once the upfront payment has been done, it's low single-digit millions of a CDMO developing the process.

As you know, engineered T-cells, it's not as complex as ZEVASKYN, fortunately, but it's going to be mostly a cut-and-paste kind of process. We already have GMP-grade vector that has been produced. And it's a matter of locking down process. And these processes are fairly standard.

So it's going to be done by an external CDMO, and we're not going to disturb our internal teams in Cleveland. We're laser-focused on the ZEVASKYN commercialization. So there's a very small team that's just going to drive the project out of a CDMO.

And when the time comes and the regulatory team is also involved in getting clarity and alignment with the regulatory agencies on what our trial design looks like and how we go about that.

So other than that, from a personnel standpoint, Abeona is laser-focused on ZEVASKYN commercialization and any significant costs will not hit us until we get into human clinical studies, which happens in the second half of 2027.

I hope that gives a little bit of some color on what we are undertaking for the near term with PSMA SIR-T.

Yes. No, that's helpful. The external CDMO kind of addresses the question on the manufacturing front. Can you just say whether or not the 50-50 co-promote, I'm presuming that decision is made by Angelas based upon a review of Phase I data?

Correct. Yes. Actually, the option for us to pursue the program is after the Phase I. Angelas has the option to either do the 50-50 co-development or a license agreement with what Vish had mentioned with predefined financial terms for an agreement that will be agreed upon later.

Our next question is coming from Raghuram Selvaraju with H.C. Wainwright.

Congrats on the quarter and on activating the new QTCs. This is Ahmed on for Ram. I just had a few questions.

One was what have been the key challenges associated with setting up additional qualified treatment centers? And how do you think those will play out in the future?

My second question was on the patients receiving ZEVASKYN. How often does cell harvesting from RDEB patients fail due to insufficiency? Thank you.

So the first question you asked was the key challenges with activating QTC centers. I think more than challenges, I'll just say, what are all the various milestones in the journey that have to check a box.

I mean this is a huge undertaking by a QTC. An EB physician has to gather a multidisciplinary team first, and they need to have anesthesiologists and plastic surgeons who are familiar with the RDEB patients and what types of care they need.

Once such a team forms and they feel that feasibility from a center's perspective and the ability to deliver this exists, they have to make a business case for their management.

That itself is a few months' journey because every buy-and-build that they have to put some financial risk on their P&L is going to be scrutinized carefully.

So all that is in itself a months-long process, and then we have the onboarding once that has been checked off and everybody in that QTC has agreed that they're going to go with this journey.

Then you're going to have onboarding, medical onboarding as well as clinical training and quality training and all those types of events.

Then there's numerous legal policies, trade policies, the master service agreements. Those are all, again, legal steps that take several months.

So that's the reason why the journey of actually the first handshake with the QTC to when they're ready to treat a patient has been several months, sometimes even more than a year long. And we started that process with our first set of QTCs very early.

And it's what you alluded to, is there an unlimited number of QTCs that we can activate? And the answer is no because the multidisciplinary team is the key for which QTCs can actually activate, and that's something that we always carefully weigh in because that's important from a patient experience and patient care and outcome perspective.

And of the 23 centers where there are EB patients cared for today, a good 5 to 10 centers already have these multidisciplinary teams in place, and those are our focus areas.

And as we had stated earlier, our goal was to have about 7 centers active because when 7 centers are active and produce at least 1 biopsy a month.

So we want to ramp up as we ramp up our capacity as well. So those are all factors that speak to the overall QTC numbers.

Anything else, Madhav?

Yes. I'll just add that you summed it up well, Vish. I mean just in terms of challenges, every QTC has a different risk tolerance. We observed that some institutions started right after ZEVASKYN approval.

There were other institutions that wanted to wait for the actual FDA approval to happen last year before they began to invest their time and energy. Yet there were some other institutions that wanted to see reimbursement pathways established.

So now we are beginning to see greater engagement with the tail of these other centers, EB centers, and the traction is picking up. I mean, with the recent announcement and additional centers, as we said, we are well on track. We believe we'll be able to get another QTC also activated.

The second question that you asked about patients getting the harvest. Can you please elaborate on your question? Is this the biopsy-to-delivering-the-sheet manufacturing success rate? Or was it something else that you were referring to here?

Yes, exactly. Basically after the biopsy, is there kind of a failure rate between the biopsy and the patient receiving the treatment?

Yes. Our experience so far in the commercial setting is that every time that we have received a valid biopsy, we have been able to produce sheets, the numbers could be variable, but in majority of cases, we are actually producing a double-digit number of sheets.

So we're happy with what we're seeing in terms of success rate.

But beyond that, I think the timing of how long it takes from skin to skin, as you know, is a variable time. It can be anywhere as early as 23 days in some cases, and it can be as lengthy as 26 days.

So I think that's still a very tight window, but that's kind of our range of turnaround time we've seen so far.

If I may just have one quick follow-up is, I guess, what is Abeona's plan to optimize ZEVASKYN value outside of the U.S.?

Yes, that's something that's been on top of our mind. We're already looking at what are the markets that we can first supply from our Cleveland site because that is the lowest-hanging fruit in terms of timing. If you're looking at markets like Europe and Japan.

The logistical challenges in delivering from Cleveland, more than product delivery, could be related to bringing the biopsies of the patients and cold chain and things like that. And that's something that we're working out, but we should have such updates in the following quarterly calls.

Right now, our teams are already spread thin in making sure that every aspect of the U.S. launch is maximized. There's a sub-team that is looking at these external opportunities. So hopefully, in later quarterly calls, we'll give some better color to what that path looks like.

Our next question is coming from Jeff Jones with Oppenheimer.

Congrats on a great quarter. Maybe following up on QTC activation, with 6 onboard and a target of 7 by end of year, it seems a pretty low bar for you to get one more in by year-end.

Just how are you thinking about building out additional QTCs as we look ahead into additional quarters and into next year? As you mentioned, how that aligns with capacity?

Then maybe on pipeline, you've deprioritized the ophthalmology programs and you brought onboard an oncology program. How are you thinking about pipeline moving forward? Are you thinking about oncology specifically? Or maybe outline for us, how you're thinking about that strategically?

Great. So first, I'll ask Madhav to respond to the QTC question.

So Jeff, yes, I mean, we continue to work with a few more centers.

Based on the knowledge we have, a total of 10 EB centers have this infrastructure that Vish alluded to earlier, cross-functional discipline of multidisciplinary teams as well as EB patients that frequent those centers.

So we are working with these institutions and are at various stages of onboarding. I think if we get to that kind of a number, 9 or 10 centers, we are in pretty good shape because we continue to hear from centers about 1 patient a month being a good cadence that we can expect for these centers to treat. And if we maintain that, that would be really our steady state.

So let's see, this year, next year, we should be able to get all these other centers also active.

Yes. And also, you asked this question, how are we building our internal capacity, We're very diligent in building up, and we had announced 6 at launch and 6 this year, and we're already in ramp-up mode to bring it up to 10 by end of the year.

So the numbers that Madhav shared in terms of QTC numbers goes hand-in-hand with how we are building our internal capacity. So we'll be able to match the demand.

And from a longer-term perspective, definitely, we have work that has progressed on getting additional suites designed and we haven't started construction yet, but a lot of the design work has already happened, and we're ready to go.

So it's the right trigger, and that's not very far away. We can again speak about that in the upcoming quarterly updates.

But rest assured, we are not going to artificially restrict ourselves to 7 sites. As Madhav mentioned, if there are more sites that show that multidisciplinary teams are pulled together and they have EB experience, that's an added advantage as well.

So we are well on our way to get a healthy number of QTCs activated even just in 2026.

And your second question was about our move from ophthalmology to oncology. I just wanted to reiterate one thing.

I think where our strengths are and where we have done well learning from the ZEVASKYN experience is really how do we develop complex biologics that have the types of profiles of long-term durable clinically meaningful benefit for patients with serious diseases.

We're not defining ourselves as a rare disease or an ophthalmology or an oncology company, but where our strength can actually, if you look at the CMC aspect of it, you will see a perfect fit.

I mean, in fact, some of these engineered T-cell therapies are a little bit even more advanced and defined than the types of autologous cells we are working with.

And it feels a little easier, even a little bit of a breath of air in that sense.

But if you look at our commercial teams, we're all from the CAR-T world. We've done launches of Breyanzi and Abecma. And in fact, Dr. Preet Choudhary, with whom we have done this deal, was one of our customers when we were in the hematology CAR-T launching expedition at that time.

And we've continued to discuss what are the unmet needs and how do we really get breakthroughs there. And as an innovator, we've held that dialogue from those days.

So you see that the strength in the oncology field really is not something that we have to start from ground zero here. And so every little angle that you're looking from, we have that.

Of course, clinical development, we will build it over the clinical trial experience. But the move from ophthalmology to oncology was really, I would call it semi-opportunistic, but with a lot of synergies with the CMC path that we've learned and how to work with the FDA and what they expect in this kind of technology, and also knowing what the unmet needs are in the solid tumor space generally. 

And prostate specifically, of course, some of us have launched products in this prostate space in our past lives. So that's also bringing us the relationship.

Also the KOLs that have interacted with in ad boards even before we licensed this asset have taken a look at a lot of the data, and these are the top international 6 or 8 KOLs who are opine and they're very eager and interested in participating in these trials, even putting their patients on this type of technology. 

When you have everything from a capability standpoint lining up to take us to a disease where, of course, the market potential is a log order bigger from where we are in the rare disease space, why not? And we were waiting for the right moment, which was ZAVASKYN is in a good place with its launch.

We're already seeing early indicators that this is taking off. And that's what we had kept this. I mean, this has been a diligence that we've been doing for quite a while. And so this was the right time. 

So that's really where we've shifted. This doesn't mean to say we're not putting a stake in the ground, saying we're going to be an oncology company.

If our technologies, for example, CD19 as a CAR-T field, found great application beyond hematology, where we started. And now everybody who has a CD19 asset is in the autoimmune space. That is, I mean, still leveraging their strength in a completely different disease area.

We're going to follow such a path where we have good science that takes us to solving big problems, and there is huge long-term value in that. So that's how this asset really checked all the boxes that we're describing here.

Our next question is coming from Jim Molloy with Alliance Global Partners.

Just a couple of quick questions on pricing and so gross to net. Mechanistically, looking at the revenue number you guys printed in the quarter at $3.1 million per, it looks like a much more favorable gross to net discount for you guys on the quarter.

Can you talk a little bit about how you're seeing the payer mix come through on that? And is the pricing holding there? And then I guess a follow-up would be on the OpEx, ex the $7 million one-timer, these are the R&D and G&A numbers we should expect, sort of going forward through the rest of '26?

Thanks, Jim. Yes. So, regarding the gross to net for Q1, all 3 patients treated in the quarter were commercial compared to Q4, where it was a Medicaid patient.

So, on the commercial patients, there are far less rebates and discounts than the government 23.1% rebate that was for the Medicaid patient.

So going forward, again, when things normalize with more patients, we think the gross to net will be in the mid- to upper teens when we have more patients treated. 

And then for your second question, yes, so if you exclude the $7 million upfront payment for R&D and SG&A, the total spend will be pretty much the same for the rest of the year.

Again, as we treat more patients and get more volume in there, some of the costs will come out of SG&A, the engineering runs, and they will go to cost of goods sold. But the overall run rate, again, throwing out the $7 million expense, is reflective of the rest of the year.

A quick follow-up, if I could, please. Any guidance on the 6 to 7 people potentially to shoot for the second quarter, what that mix looks like on commercial versus Medicare, Medicaid?

A similar kind of mix that we have. 

And overall, we can expect, based on our claims data and what we've understood of the market, about 60% commercial, about 30% to 33%, or something like that, is Medicaid. So that is the split we're looking at.

And have you guys put any guidance on when you anticipate being profitable? I know last year, you put some guidance.

Obviously, things have changed since then.

We maintain the assumption that we had in the last call, that we believe, depending on how these biopsies come out, that Vish and Madhav had spoken about earlier, we believe we can achieve monthly profitability starting potentially in June, so next month.

Our final question today is coming from David Bautz with Zacks Small-Cap Research.

Given the fact that most solid tumor CAR-T programs have struggled in the past, I'm just curious what was it specifically about 701 that gives you confidence that it could be successful?

Thanks, David, for that question. First of all, we have to underscore that CRS is not a CAR-T. The synthetic immune receptors are fundamentally differently structured.

So A lot of the innovation in the CAR-T field has been about better signaling domains or the domains, and they're built on an existing CAR structure. I mean, it's physiologically very different from the natural TCRs that you have.

And then, of course, the TCR technologies themselves have failed due to other reasons, which are to do with MSC restriction and various population-based constraints. 

What the SIR-T technology does is actually take the best of both worlds. It will probably take me 2 days to describe all the components of the technology that make us believe that it's different.

But if you look at the money slide, the preclinical data that we shared, we've used a CAR control with the same kind of binding domain, which is the receptor, which recognizes and binds to PSMA, but the rest of the structure is all like a CAR versus the SIR. And you can see that in a preclinical model in mice, you already see that difference. 

How can you generate persistent serial killer T cells that go after a tumor-specific membrane antigen? That's what we are encouraged with. And these experiments have been repeated many, many times with variations in the manufacturing process and everything. 

So we're excited. Our KOL community is excited that this is a new hope. So we're not doing exactly the same thing that has been done in the past.

There is true novelty structurally as well as functionally in this approach. So that's what really gives us, and we have included a link that takes you to a talk by the inventor himself, and that has a lot of technical details.

If you're interested, I would encourage anyone to go and listen to that. So I hope I answered your question.

Thank you. Ladies and gentlemen, this does conclude today's Q&A session and also today's call. You may disconnect your lines at this time, and we thank you for your participation.

Good morning, everyone, and welcome to the Abeona Therapeutics Full Year 2025 Results Conference Call.

[Operator Instructions]

Please note, this conference is being recorded.

During this call, we will refer to the press release issued this morning announcing the financial results, which is available on our corporate website at www.abeonatherapeutics.com. We anticipate making projections and forward-looking statements during today's call, which are made pursuant to the safe harbor provisions of the federal securities law. 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 Securities and Exchange Commission.

These documents are available on our website at www.abeonatherapeutics.com.

Joining us on today's call with prepared remarks are Dr. Vish Seshadri, Chief Executive Officer; and Dr. Madhav Vesantavada, Chief Commercial Officer; Joe Vazzano, Chief Financial Officer; and Brian Keveny, Chief Technical Officer.

So with that, I will now turn the call over to Vish Seshadri to lead us off. Vish, over to you.

Thank you, Jenny, and good morning, everyone. We continue to see growing patient demand for ZEVASKYN, the first and only autologous cell-based gene therapy for the treatment of adult and pediatric patients with recessive dystrophic epidermolysis bullosa or RDEB. As a reminder, ZEVASKYN was approved in April 2025, but our launch was delayed to quarter 4, 2025 as we optimized a sterility test that was required for product release. Treating our first commercial patient this past December was a significant milestone for Abeona, but 2026 is where the launch execution ramps up -- we aren't just looking at one-off successes anymore. We're focused on building a consistent cadence of biopsies, product delivery and treatments. Since resuming manufacturing in late January after our annual shutdown, we've treated 1 patient this quarter, biopsied 3 additional patients with treatment scheduled over the coming weeks and expect to perform additional biopsies this month. All patient treatments and biopsies performed to date have come from the first 2 of our 4 qualified treatment centers, Lewy Children's Hospital in Chicago and LewthalPackard Children's Hospital at Stanford. As our third and fourth QTCs, which are Children's Hospital of Colorado and UTMB at Galveston, Texas, also begin to schedule their patients into upcoming biopsy slots, we anticipate a healthy cadence of patient biopsies in the coming months. This momentum provides Abeona the opportunity to demonstrate that the operational machine behind ZEVASKYN works at scale from initial biopsy through final delivery. At the same time, we are hyper-focused on ensuring a seamless experience for every patient in the ZEVASKYN treatment journey, and we are building a foundation of operational excellence that resonates with this closed-nit RDEB community. We recognize that in this patient-driven market, providing a smooth journey is the most effective way to catalyze the organic demand needed to scale ZEVASKYN in 2026 and beyond. To further elaborate on how our launch is gathering momentum, I'll now hand the call to our Chief Commercial Officer, Dr. Madhav Basantavada, to review the commercial update. Madhav?

Thank you, Vish, and hello, everyone. Demand for ZEVASKYN continues to grow. We previously had reported that nearly 50 potentially eligible patients were identified across our initial qualified treatment centers and community-based physicians. Starting this year, we have deployed a field team that has been engaging with community physicians and the number of identified eligible ZEVASKYN patients has now grown to more than 100. While demand continues to grow, the speed at which identified patients receive ZEVASKYN treatment has significantly varied during these initial months of launch, but the momentum is picking up. Since our launch in Q4 2025, 2 patients have been treated with ZEVASKYN. 3 additional patients have been biopsied for treatment over the coming weeks, and we expect to biopsy additional patients this month. Currently, we also know of at least 10 more patients who are advancing through the administrative process and targeting a second quarter 2026 biopsy. As Vish mentioned, the patient treatments and biopsies until now have all come from the first 2 QTCs that were activated in the middle of last year. While it has taken a long time to move the very first patients through the funnel to treatment, we have not seen patient attrition during this process and no payers so far have denied insurance coverage for ZEVASKYN, reflecting the strong value ZEVASKYN offers to this patient community. As QTCs and payers treat more patients and gain experience with the overall process, we expect the speed of patient treatment to go faster. Additionally, as the remaining 2 QTCs treat patients, we anticipate that the number of ZEVASKYN treatments will grow in the coming quarters. Now regarding activating additional QTCs for ZEVASKYN, becoming a QTC is a multistep process that starts with a dermatologist who is an EB specialist, championing ZEVASKYN at their institution and requires a buy-in and sign-off from various functions and committees all the way to the level of CEO or CFO of that institution. Once the decision is made to become a QTC, several moving parts, including a master service agreement, trade policy, clinical training for biopsy and treatment and registry protocols with IRB approvals must be put into place. That makes QTC onboarding a several month process. Once the site is activated, it may then begin patient consultations for ZEVASKYN, work with insurers to secure clinical authorizations and financial commitment for that individual patient and then schedule patients for biopsy. As mentioned earlier, we have 4 QTCs activated, 2 have started treating patients and the other 2 have patients that are moving through the administrative process to schedule a biopsy. In addition to the 4 current QTCs, we are actively working toward onboarding 5 additional centers and are in various stages of the site onboarding process. To ensure a geographically expansive footprint, our goal is to have at least 7 QTCs active by the end of 2026. Lastly, on the market access front, I would like to reiterate that all major commercial payers, including UnitedHealthcare, Cigna, Aetna, Anthem and most Blue Cross Blue Shield plans have published coverage policies for ZEVASKYN, representing roughly 80% of commercially covered lives. ZEVASKYN also has baseline coverage across all Medicaid programs for all 50 states. In addition, CMS has established a permanent HCPCS J-code for ZEVASKYN effective January 1, 2026. We expect the J-code to be an important enabler for streamlined billing and reimbursement for QTCs. Ultimately, every step forward, every biopsy, every treatment, every positive patient story strengthens our confidence in the impact ZEVASKYN can have. We are energized by the early momentum and remain committed to delivering a seamless ZEVASKYN experience. With that, I'll now pass the call to our Chief Financial Officer, Joe Vazzano, to discuss our financial results. Joe?

I would like to remind everyone that you can find additional details on our financial results for the year ended December 31, 2025, in our most recent Form 10-K. Starting with statements of operations. Total revenue for the year ending December 31, 2025, was $5.8 million. Total revenue includes $3.4 million in license and other revenues and $2.4 million in net product revenue. License and other revenues were primarily driven by a clinical milestone of $3 million achieved in the fourth quarter of 2025 under our sublicense agreement for Rett syndrome with Taysha Gene Therapies. Net product revenue reflects the patient treatment in December. The patient treated was a Medicaid patient. We expect our average net revenues to normalize over time as the payer mix expands to include commercially insured patients. We received payment for this treatment in the first quarter of 2026. Cost of sales for 2025 was $1.5 million, primarily driven by the first commercial ZEVASKYN treatment in December. Cost of sales also includes the cost from the August production batch that was not released due to technical challenges related to an FDA-mandated rapid sterility lot release assay. As more patients are treated, we expect our gross margins to increase significantly with better economies of scale related to production costs. Total research and development or R&D spending for 2025 decreased $7.6 million to $26.8 million compared to $34.4 million in 2024. This reduction was primarily driven by the April 2025 FDA approval of ZEVASKYN, which resulted in certain production costs being capitalized into inventory and engineering runs that are no longer classified as R&D expense. Selling, general and administrative or SG&A expenses for 2025 were $65 million, an increase of $35.1 million over 2024. This increase primarily reflects Abeona's commercial transition following the April 2025 FDA approval of ZEVASKYN, including $18.6 million in personnel and stock-based compensation and $2.3 million in direct commercialization costs. Additionally, certain engineering and training expenses previously classified as R&D were transitioned to SG&A post approval. In May of 2025, we sold our rare pediatric disease priority review voucher awarded following the FDA approval of ZEVASKYN. The company recorded a $152.4 million gain on sale from this transaction after receiving payment in June of 2025. Net income was $71.2 million for the year ended December 31, 2025, or $1.34 per basic and $1.01 per diluted common share. Net loss in 2024 was $63.7 million or $1.55 loss per basic and diluted common share. As of December 31, 2025, cash, cash equivalents and short-term investments totaled $191.4 million. With that, I will pass the call back to Vish for additional remarks before opening the call for Q&A.

Thank you, Joe. In closing, I want to reiterate that while 2025 gave us our first commercial proof of concept, 2026 is about solidifying our commercial blueprint. I'm incredibly proud of the entire Abeona team from our manufacturing and quality groups, ensuring every lot meets our highest standards to our commercial and clinical teams supporting our treatment centers. Every person in this company is focused on ensuring that RDEB community's experience with ZEVASKYN is nothing short of excellent. We are doing the heavy lifting now to get these foundations right, and I'm confident that this collective focus on execution today is what will allow us to scale aggressively and deliver meaningful value in the quarters and years to come. We look forward to providing updates on our continued progress on our first quarter 2026 conference call. With that, I'll turn the call over to Jenny to open it up for Q&A. Thanks, Jenny.

[Operator Instructions] Our first question is coming from Ram Selvaraju of H.C. Wainwright.

Congratulations on all the recent progress. I was wondering if you could comment on the cadence with which qualified treatment centers are likely to be stood up in the coming months? And any specific factors that might influence the speed with which that occurs, if you expect that pace to increase? And if so, what might be the specific contributing factors to that? Secondly, I was wondering if you could comment on the specific drivers of R&D spending over the course of 2026 and beyond. And if we should expect R&D spend to modulate somewhat over the course of the coming quarters or if, in fact, you expect any noteworthy increases over the remainder of 2026?

Thank you for the questions. Regarding the cadence with the QTCs and the speed of ramp-up, right? I think there are a lot of factors that go in. We have some preliminary viewpoint just beginning this quarter. I'll turn it over to Madhav to articulate and knowing that our projections are based on the first 2 sites just about ramping up, right? So Madhav, why don't you take that one?

Yes. Thanks, Ram, for the question. So with regard to QTCs, as I mentioned, we are working with 5 centers, one of whom is imminent, and we expect to hopefully announce it in this coming quarter. And then centers are in varying stages of their onboarding process. Our goal is to have 7 in total active by the end of the year. In terms of the aspects that drive the speed with which the centers come on board, there are various ones. Some centers wanted to obviously wait for ZEVASKYN approval to take place before they invested additional resources. Some started looking at their payer mix like of the individual sort of patients that are in their treatment sort of pool to see what kind of payer mix exist, how many are commercially insured patients and if Medicaid, what sort of is the out-of-state Medicaid nuances there. And they essentially were also waiting to see coverage established. But now we have covered significant ground with regard to market access, having established coverage and these payer policies are also in place. So that has given great confidence for these sites to initiate their process and speed that up. And then there are other factors with regard to institutional bureaucracies that exist with every institution, people getting to understand the cell and gene therapy units because in the dermatology space, this is the first engineered cell therapy that we are moving to treatment space. And so that requires greater cross-functional interaction. But we have learned a lot in onboarding the previous 4 centers, and our teams are doing a tremendous job in helping the upcoming centers to navigate that pathway and bring them to speed. So we think we are confident about having 7 in total. And if additional centers move faster, then yes, of course, we will be able to help them stand up sooner. I hope that gives some flavor.

Yes. And just to add to that, right, Ram, you said at steady state, what we anticipate is sites have communicated to us that 1 patient a month is kind of a cadence that we can definitely do. Some sites are saying perhaps 2 patients a month. So I think it's just a matter of -- we're projecting based on what we are hearing from the sites in terms of their plans and their patient visibility. We need to see that come through, right? I think we'll be able to give more evidence-based cadence and the speed of getting there once we start seeing that steady state. We need to see 3 consecutive months of delivering that consistently. I think that's really what we're looking to get to by midyear. But as also we articulated, 2 of our 4 sites are yet to reach the point where they start layering their patients because the upfront setup time is what they're taking right now. Hopefully, that comes through in the second quarter, and we're able to show with data that, okay, sites are reaching their kind of cruise control level of speed, and therefore, this is more predictable. So I hope that helps there. Regarding your second question about R&D spending, right? Let me open it up to Joe first to just give a little bit because we're so focused on ZEVASKYN launch right now that our R&D spend is almost insignificant. But Joe, why don't you go ahead?

Sure. Thanks, Vish. Yes, Ram, I believe the question was just drivers of R&D spend for 2026 and going forward. As you may recall, we have to do the registry study that was part of the FDA approval so that they the registry study costs go into R&D and then also the pipeline development costs will go into R&D. And again, there's -- as I mentioned on the prepared remarks, there's a shift from R&D to SG&A just with the evolution of transitioning to a commercial company. But those 2 items that I mentioned are going to be the main drivers of spend -- R&D spend for 2026 and outer years.

Sorry, go ahead, Ram.

Go. No, no, go ahead please.

I was just going to say, as you know, we do have some preclinical programs that we're not spending a lot of energy and resources on those. It's kind of running in the background. We do not see preclinical programs to stack up R&D expenses in a significant way, at least in 2026. 2027 is a different story. And I think a lot of it is going to depend on the ramp-up speed of ZEVASKYN and what we can bite into, right? So I think that's going to be a story that will evolve through the rest of the year.

Just with respect to the qualified treatment centers, I was wondering if you could comment on the relative coalescing or concentration of patients around those centers. And if you expect on a go-forward basis, the bulk of new patients coming in to go through the first 2 treatment centers to be stood up or if you expect some of the other treatment centers to be just as significant contributors to the overall number of patients coming on to ZEVASKYN.

Yes, that's...

Go ahead, Madav.

Yes. We expect them to have a decent pool of patients similar to the currently stood up centers. And our strategy right now, just to expand on your question, is very clear. It's a 3-pronged approach that we are taking. One is to have patients that are in these qualified treatment centers. We want to place them on ZEVASKYN therapy as soon as possible. The second is to focus on the community physicians who already have indicated they have patients that are motivated and would be eligible for ZEVASKYN treatment. We want those referrals to be the second tranche. And in parallel, as we look to stand up these additional centers, that is going to pancake on top of the first 2-pronged approach to have their own pool of patients. Our approach is to make sure that these centers are as geographically spread as possible because that also obviously will help with the travel, et cetera, for the patients and their families, let alone the payer barriers that we will be easier to overcome once you have more centers that are geographically spread. So we do anticipate some of these centers who have the infrastructure, who have the EB centers of excellence, et cetera, to bring their own set of patients as they get activated.

Our next question is coming from Maury Raycroft of Jefferies.

Congrats on the progress. I had a question on the QTCs as well. So it sounds like currently, the QTCs are able to manage about 1 or 2 patients per month. Just wanted to clarify that. And what do you expect the cruise control state to look like? I guess, how many patients per QTC do you think you're going to be able to get at a sort of a maximum capacity at these initial sites? And I'll start with that one.

Go ahead, Madhav.

That's correct, Maury. 1 or 2 patients a month. We think that their ability to ramp up, it's really dependent on the sites. Certain institutions have done their pro formas. -- to be able to have a greater number, even go up to 3 patients a month, which will really depend on what their experience has been like with regard to their resource allocation and the nursing staff that have to care for the patient post operating procedures. But for the most part, we expect 1 or 2 patients a month in the foreseeable future. We'll have to see how that ramps up as the experience -- what their overall process experience looks like. But even with 5 centers, 1 or 2 patients a month, we are looking at a really good rate.

Okay. And can you also just comment on the current time line from receipt of start form to treatment initiation? Just what does that time line look like? And then could that become more efficient over time as well?

Right. The current time lines are very variable. It depends on various factors. But if I were to just kind of average ballpark, it's more like 4- to 5-month process, of which 25 days is manufacturing time. That's very much a hard fix there. So 4 to 5 months, that includes 1 month, roughly 1 month of manufacturing. And we expect that to improve over time.

Yes, I'm glad you asked this question, Maury, because another factor here is you mentioned start form. I would say from the point of identifying a patient to when they receive treatment because the start form is something that we are seeing has a lot of variation in when a site that form to us. Some sites do it soon after an identified patient has either referred or they have had a consult and some sites wait until the entire payer process takes place and then put a start form. So it's a very variable input as to what point in the patient's journey we receive that. So I think it adds one more layer of confounding variables to calculate that time. But what Madhav is describing here as this approximate 5 months is when there is a consult that happens and patient intends to get Ziva skin and that conversation has happened, then the first few patients took about 5 months all the way to get to the treatment, whereas we are seeing that process is going to shorten over time because the administrative part of this is getting more efficient as a given site has been through 2 or 3 patients. I hope that makes sense.

Yes, that makes sense, and that's helpful. Maybe last quick question, and then I'll hop back in the queue. Just if you can comment on -- based on the demand ramp that you're seeing, how confident are you in achieving profitability first half this year?

We believe that we have a pretty good chance of achieving profitability. I think profitability, if you define it as an entire company level profitability, I think there's numerous factors, as you already know, we've mentioned that anything north of 3 patients a month takes us to the profitable zone, which is $100 million, give or take, is about the company burn in a given year, right? So if you use your gross to net calculations, 3.5 or more per month is taking us to the profitable zone. I think this is a very achievable target. It's more -- there are some uncertain factors as to how the third and the fourth sites are going to achieve their speed and reach the cruise control and also how quickly we're bringing additional sites even on board and up and running. So I think these are a couple of variables, but we feel this is a pretty reasonable goal.

Our next question is coming from Stephen Willey of Stifel.

On the progress. Has the target number of QTCs that you want to bring online over the longer term, has that increased at all? I know you have some early experience on the referral front. I'm just curious if you're finding that it might be logistically easier to activate more of these centers as opposed to trying to increase the band of referrals.

Go ahead, Mike.

Right. Our target QTC number, Steve, has been 5 to 7, and we do think that 7 this year is a realistic goal. That does help with certainly the bandwidth within the qualified treatment centers as well as just increasing the footprint overall. We think we'll have more outlets for patients to get treated. So we're going to be working towards bringing these centers on board. But in the meantime, also, of course, as the various community physicians have patients, we want that healthy awareness and healthy enthusiasm from all of the other physicians also so that in the longer term, that's really where we will rely on these community physicians to funnel their patients into the qualified centers. So that's really our approach. So our target centers right now is 7. And as I said, we have more centers that are working with us and would like to be activated. So if we have more treatment centers, then certainly that only adds more to the process and even the logistics.

Ahead...

Just one clarification is also, as Madhav explained, the QTC onboarding process itself can take several months. So while we talked about 5 additional centers beyond the 4 that we're working -- which are already activated, gives you a bigger number. We anticipate that some of those may spill over to even next year, right, because it's a lengthy process. But we are definitely looking to have 7 activated sites this year.

Okay. So when you say you're actively onboarding 5 additional centers, that does not include the 2 that have recently signed up, Colorado Children's and UTMB.

Correct.

Unknown Speaker

Correct.

Understood. And then is there just anything you can talk about on the reimbursement side, specifically as it pertains to preauthorization just curious if payers are kind of pegging themselves to inclusion/exclusion criteria from the Phase III? Is it pegged to the label? Just any color there would be helpful.

Yes. We are seeing a mix definitely to inclusion/exclusion criteria given the high-cost nature of the product. They want to make sure that their initial set of patients are guided to the inclusion/ exclusion. But then we also have major plan like UnitedHealthcare and many of the Medicaid states also looking to have coverage that are favorable to the label criteria. So it really depends on the plans. But regardless of the criteria, what we are seeing is with letters of medical necessities, physicians have been able to overturn sort of the requirements. So for instance, if there is an age, age is one major aspect that you're seeing in the sense 6 years and above was our inclusion criteria. But for patients that are less than 6, physicians have been able to overturn that. Also with regard to squamous cell carcinoma and their presence in the body location, that is also one other factor that physicians have been able to overturn and get the patients onto the product. So as more patients go through the process in terms of the overall timing, that's also improving because letters of medical necessities and the templates that are required, those templates are getting populated, right? So for future and subsequent patients, for processes that are unique to ZEVASKYN, we are seeing that time also to improving at the QTCs that are already treating patients. So that's really the reimbursement process. The bottom line, though, is that these inclusion/exclusion criteria do not prevent a patient from getting reimbursed eventually with all these additional steps that we're taking. So even if the plan has that kind of restriction, we're able to work through that and get patients reimbursed.

Okay. And then just lastly, I think you mentioned that there's, I believe, another 10 patients or so that are targeting biopsies for next quarter. Can you just speak to how those patients are distributed against the 2 QTCs that are already treating patients versus Colorado and UTMB that you'll be activating here shortly?

It's across all of the 4 QTCs.

Our next question is coming from Kristen Kluska of Cantor Fitzgerald.

I wanted to ask about the dialogue or the relationship between the QTCs themselves. It sounds like Stanford and Chicago being the first 2 are kind of paving the way here, having a little bit of additional time to get things on board. Are they working with the additional 2 QTCs just to kind of be a sounding board help as everybody familiarizes themselves with this process?

They -- not that we are directly aware of. We certainly -- it's a tight physician community. So they do talk to each other in terms of the sharing of the best practice as well as administrative steps. Plus our teams are also actively working with them in helping them cross-pollinate the best practices.

Okay. And then just as we think about the fact that some additional biopsies are already scheduled and we have 2 weeks left in 1Q, should we be conservatively modeling that these are more likely to come in 2Q versus the current quarter?

We expect one -- yes, no, for this month, Christine. But of course, until the biopsy is done, it's not -- we don't know. We don't see a reason why there should be any attrition or a drop off, but it is for this month that we expect additional biopsy.

Okay. And then it sounds like we'll get one more QCC pretty quickly and another 2 maybe before the end of the year. How are you thinking just about dispersing throughout the geography in the country? And how has that played an impact so far about getting patients on board, ability to travel to these sites, et cetera?

We -- our goal is to have a geographically dispersed. I mean, clearly, you can see that Eastern Seaboard is an important area for us. So if we have a center in that region, I think that will certainly help with patient access. And these patients for other reasons with their other comorbidities, they do have travel. They do travel significant distances to get therapies. So we don't really think that even 5 or 7 is going to be -- is going to impede their ability to travel really for ZEVASKYN. But of course, as more centers come on board, that's definitely going to be a positive thing.

And also the flexibility that it offers right now, certain patients, I'm not saying this is true for every patient, some patients crossing state borders have extra paperwork to go through Medicaid, right? There's more bureaucratic steps. Those things will also be streamlined a little bit by offering more choice and flexibility on where they can get treated. So that's really what we are also excited about.

Our next question is coming from Jeff Jones of Oppenheimer.

Maybe the first one on manufacturing. How comfortable are you at this point that the sterility testing is well behind you now? And just a reminder, if you would, on current production capacity and the expansion plan of that capacity through the year. And then the second one, maybe on patient and physician feedback now that you've treated patients in the commercial setting. What is the feedback you've been getting from physicians and patients on the overall experience?

Thank you, Jeff. So your first question is about manufacturing the sterility test. Is that behind us and how we're ramping up capacity. We do have our CTO, Dr. Brian Keveny on the call. Brian, can you take that one, please?

Yes. We -- as a reminder, we had a very healthy dialogue with the agency around the sterility assay issue. And that was a very productive conversation with the agency, and we do feel very confident that the resolution that came out of that is a solution going forward. We'll continue to always look to ways to improve our manufacturing and testing process, but we do feel very confident that the resolution that came out of those discussions is going to support us going forward. And as it relates to production capacity, currently, we're running at a cadence of 6 patients per month within the facility and continue to develop the space to be capable of reaching that 10 patient per month capacity that we have previously discussed. throughout the rest of this year. And all of those activities are on track to meet that goal. And it's actually lining up very well with the onboarding the additional QTCs to maintain a steady level of supply for those sites as they come on board.

Yes. And I just wanted to also add on the sterility thing, right, Jeff, which is we've done a lot of work trying to minimize the probability that, that problem occurs again. Whether we can go, say, 40 runs or 50 runs and never saw this problem happen again, that's only going to be empirically proven. But all our feasibility studies point out that the probability is significantly reduced by at least a log order or more. So that's what gives us the strength, but we're not stopping at that. Whatever we've implemented as an improvement to reduce those false positives, we're not stopping at that. We're also doing the next-generation rapid sterility development alongside this so that we can get to an even better level. So this is part of -- when you say R&D, we're always thinking about pipeline. There's a lot of life cycle management R&D that goes into optimizing ZevaSkin. That's really where some of our teams and the quality function are focused on. And as Brian said, we're already operating at 6 manufacturing runs a month cadence. So this is -- right now, with the current demand, it's keeping up, and that's going to be ramped up to about 10 a month by second half of the year. So that's also coming. The second question that you asked was about the patient and HCP feedback on the current treatment. I'll just preface this by saying that there's only 2 patients that have been treated and there's not enough time that has passed along because if you remember, even our endpoints and assessments and things like that happen in 6 months. This is a therapy with a durability play, right? So I don't know if we have enough feedback, but I'll just open it up to Madhav to see what he has on that.

Nothing more to add, Vish, to what you have said at this point.

Overall, yes, because when we talk to doctors, they say, "Oh, that patient is doing well. What does that really mean? I mean, does it -- are you talking about wound healing? Or are you talking about general health of the patient? These are things that we don't really know. So it's too premature to comment on that.

And our next question is coming from David Bout of Zacks Small Cap Research.

Speaker 12

So I got a couple of questions about the patients that you've already treated. First off, are you aware if they were also simultaneously being treated with VYJUVEK, say, maybe for their smaller wounds if they had any. Do you anticipate the need to retreat either of those patients later in 2026? And then are you aware if there are any exclusions for retreatment, say, if any of the payers have restrictions on the ability to get retreated?

Go ahead, Madhav.

Yes. So we don't know the VYJUVEK related question. What we do know is that these patients were not simultaneously on VYJUVEK. That's the information we have. But with regard to their prior history of VYJUVEK, we think that most of these patients have received VYJUVEK at some point in their journey. Your second question with regard to retreatment. -- based on the physician feedback, these patients have significantly large wound areas and that they have said that, yes, these patients would require a second round of Zvacan treatment. We don't know if that is going to be this year or if this is going to be next year or some other point. because these initial set of patients and to the foreseeable future, these patients have large areas of their body that require several areas to be treated. The third one with regard to exclusion, no, we don't see exclusion criteria with regard to a retreatment of a patient, which is really something we are very pleased to see that payers are not blocking like ZEVASKYN for once in their lifetime. So that is encouraging. If we do have a patient that requires a retreatment of a previously treated ZEVASKYN area, then it really depends on what the payer policies there would look like, but we are not seeing any kind of a blockade or anything of that sort based on the policies that have been published.

Well, we have now reached the end of our question-and-answer session. I will now turn the call back over to Vish for his closing remarks.

Thank you, Jenny, and thank you, everyone, for joining us today for the earnings call. We'll talk to you again soon.

Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.

Good morning, everyone, and welcome to the Abeona Therapeutics Third Quarter 2025 Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Gregory Gin, VP of Investor Relations and Corporate Communications at Abeona. Greg, the floor is yours.

Thank you, Jenny. Good morning, and thank you for joining us on our third quarter 2025 results conference call. During this call, we will refer to the press release issued this morning announcing the financial results, which is available on our core website at www.abeonatherapeutics.com. We anticipate 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 Securities and Exchange Commission. These documents are available on our website at www.abeonatherapeutics.com.

Now joining me today with prepared remarks are Dr. Vish Seshadri, Chief Executive Officer; Dr. Brian Kevany, Chief Technical Officer; Dr. Madhav Vasanthavada, Chief Commercial Officer; and Joe Vazzano, Chief Financial Officer. After the prepared remarks, we will conduct a Q&A session.

With that, I will now turn the call over to Vish Seshadri to lead us off. Vish?

Thank you, Greg. The third quarter of 2025 was marked by significant operational progress as we continue to scale the ZEVASKYN commercial launch to meet growing patient demand while our first patient treated has shifted to the fourth quarter of 2025 due to optimization of a product release assay, our conviction and our ability to achieve our 2026 launch goals remains steadfast based on trends in patient demand, treatment center expansion and market access. We're seeing growing patient demand for ZEVASKYN skin, the first and only autologous cell-based gene therapy for the treatment of adult and pediatric patients with recessive dystrophic EB or RDEB.

We also continue to strategically expand our Qualified Treatment Center, our QTC network. The activation of a highly recognized EB Center, Children's Hospital Colorado, brings our total activated centers to 3. Furthermore, we have established a strong foundation with broad market access, which is essential for sustained commercial success. In summary, despite the temporary delay in the first patient treatment, we are well positioned for long success in 2026. Before we dive deeper into our commercial launch progress and momentum, I now hand the call to our Chief Technical and Scientific Officer, Dr. Brian Kevany to briefly highlight the release assay optimization. Brian?

Thanks, Vish, and hello, everyone. As we continue the visclaunch, we remain dedicated to maintaining the highest standards of quality in the manufacturing of personalized drug products for each patient. During the third quarter, a full batch of drug product was manufactured following a ship biopsy but could not be released due to a performance issue in 1 of our release assays. Specifically, a rapid sterility assay delivered false positive results, which required us to reject a lot. The rapid sterility assay is not part of our clinical trial and was an FDA requirement that was added during the BLA review.

Retesting using established gold standard USP sterility methods confirm the sterility of the product, but unfortunately, those test results were not available until after the last expiration date, so they could not be used to rely that. As a proactive measure to ensure product quality temporarily pause collecting additional patient biopsies so that we could conduct a thorough investigation, run additional tests and further optimize the new release assay.

Following successful completion of optimization, validation and the necessary regulatory submit, we resumed biopsy collection in November 2025. We now anticipate patient treatment starting in the fourth quarter of 2025.

We I will now hand the call over to Chief Commercial Officer, Madhav Vasanthavada to discuss our commercial launch progress. Madhav?

Thanks, Brian. Hello, everyone. Our launch momentum continues to accelerate on multiple fronts. Patient demand continues to build our relationships and trust with qualified treatment centers have grown stronger and patient access to ZEVASKYN across all payer types has continued to broaden. On our second quarter call, we mentioned more than a dozen initial patients were identified at the first 2 qualified treatment centers. Of the patients we have already received ZEVASKYN skin product order forms or ZPOFs for 12 patients. ZPOF is an informed consent generated by the QTC physician after the patient has been consulted, a treatment decision has been made and the patients and their families have decided to move forward.

Insurance prior authorizations have been obtained for several patients already, and we expect these patients to be biopsied over the coming months as and when full financial clearance is in place. We are happy to also report that demand for ZEVASKYN continues to grow. The number of identified eligible patients at our QTCs who are motivated to initiate the treatment process has now more than doubled to approximately 30 patients up from the 12 plus mentioned on the second quarter call. At the same time, the broader pool of potential ZEVASKYN candidates at non-QTC referral sites continues to increase as our field force and promotional activities generate more ZEVASKYN awareness in the marketplace and many of these referral sites have initiated patient referrals to the qualified treatment centers, which is exactly what we were hoping for.

Regarding QTC activations. We are delighted that Children's Hospital Colorado is our newest ZEVASKYN qualified treatment center. Children's Hospital Colorado has an expert, multidisciplinary team with years of EV experience and their commitment to onboarding ZEVASKYN speaks to their belief in the benefits this therapy bring to RDEB patients. Activation of children's Colorado brings the number of ZEVASKYN qualified treatment centers to 3 alongside Lurie Children's Hospital of Chicago and Lucile Packard Children's Hospital Stanford.

We are also in active discussions with several EB centers across the U.S. to strategically expand geographic footprint of ZEVASKYN even further. These centers are advancing through the various stages of site onboarding and we'll continue to announce new centers as they are activated. Finally, regarding market access. We have seen a steady cadence of positive coverage decisions from both national and regional commercial health plans in the 6 months since approval. Importantly, policies covering ZEVASKYN have been published by all major commercial payers, including UnitedHealthcare, Cigna, Aetna, and the majority of Blue Cross Blue Shield plans all collectively covering more than 80% of all commercially insured lives.

Now on the government payer front for Medicaid, we are happy to report that ZEVASKYN now has received baseline coverage across all 51 state Medicaid program in Puerto Rico effective October 1, 2025. Moreover, multiple fit Medicaid programs have already published policies covering ZEVASKYN, signaling that payers recognize the value ZEVASKYN brings to their patient's health care system. As a major highlight, CMS has established a permanent product decor for ZEVASKYN that will go into effect on January 1, 2026. We believe that this product code will simplify claims and reimbursement processing between our QTCs and all payer types and will further support hospital adoption for ZEVASKYN.

In summary, we are very encouraged by growing patient demand. patients actively progressing toward treatment, continued growth of the QTC site network and a favorable market access landscape for ZEVASKYN, and we are looking forward to a strong start in 2026.

With that, I'll now pass the call over to our Chief Financial Officer, Joe Vazzano, to discuss our financial results. Joe?

Thanks, Madhav. I would like to remind everyone that you could find additional details on our financial results for the 3 and 9 months ended September 30, 2025, and in our most recent Form 10-Q. Starting with our financial resources. We had cash, cash equivalents, restricted cash and short-term investments totaling $207.5 million as of September 30, 2025. This robust cash position provides us with significant financial flexibility as we execute on the ZEVASKYN commercial launch. The current cash position without accounting for anticipated revenue from ZEVASKYN is expected to be sufficient to fund the current ample operations for over 2 years.

Turning to the statement of operations. Research and development, R&D spending for the 3 months ended September 30, 2025, was $4.2 million compared to $8.9 million for the same period of 2024. The -- this reduction was primarily due to costs capitalized into inventory and the reclassification of selected costs such as engineering runs and other crushing costs to selling, general and administrative expense, or SG&A, following ZEVASKYN FDA approval. SG&A expense were $19.3 million for the 3 months ended September 30, 2025, compared to $6.4 million for the same period of 2024.

This increase reflects a reclassification of R&D expenses as noted along with increased headcount and professional costs associated with the commercial launch of ZEVASKYN. Our net loss was $5.2 million for the third quarter of 2025 or negative $0.10 per basic and diluted common share compared to a net loss of $30.3 million in the third quarter of 2024 or negative $0.63 per basic and diluted common share. In terms of upcoming investor relations activities, we plan to participate in the Stifel 2025 Healthcare Conference tomorrow.

With that, I'll pass the call back to Vish for additional remarks before opening the call for Q&A.

Thank you, Joe. Turning briefly to our pipeline. We have 2 key updates First, our gene therapy program for X-linked retinoschisis, AD0503, has been selected to participate in the FDA rare lease endpoint advancement RDEA, pilot program. This selection will provide opportunities for enhanced communication with the FDA to accelerate the development and validation of product-specific novel efficacy end points for the program.

Second, we have strengthened our management team with appointment of Dr. James A. Gow as the Senior Vice President, Head of Clinical Development and Medical Affairs. Dr. Gow brings over 20 years of industry experience and is a recognized expert in gene therapy, especially in ophthalmology, which will be valuable as we advance our pipeline. In closing, when the first patient treatment has shifted to the fourth quarter of 2025, we are encouraged by the doubling of identified [indiscernible], 10 product -- 12 product autoforms the expansion to a third QTC and the broad and rapid payer coverage across commercial and government plans. This progress underscores the high value proposition of ZEVASKYN for the RDEB community.

With that, I will now open the call for Q&A. Jenny, please open the Q&A session.

[Operator Instructions]

Our first question is coming from Maurice Raycroft of Jefferies.

This is Amin on for Maury. A couple of questions from us. You mentioned receiving the resin product order from product other forms for 12 patients, what's the expected time line for these patients to receive treatment at this point? And I have a follow-up.

Yes. Thank you for that question, Amin. I'll request Madhav to take that one.

Thanks, Amin, for the question. So these patients, as I mentioned, the product order form is the first step. And after that, there are insurance discussions that have been ongoing between the qualified centers and the payers for many of these patients already. We have a prior art. Some of them have already been scheduled for biopsy in November this year as well as in early part of 2026. So we expect that if all paperwork goes through administrative process in the coming months to these patients.

Thanks Madhav. The only point I want to add there, I mean, is that as Madhav mentioned, these 12 patients are at various points in their journey to generalize how much time it will take for these 12 patients to come all the way through the funnel into a treatment. It's a hard thing to do at this point in time. But what we believe is as we start to treat patients, this is going to normalize. So metrics in terms of time taken from a ZPOF to various standpoints in the journey, we'll have better idea having been through that process for a bunch of patients, which we should have in the first quarter of 2026.

Okay. And of the 12 ZEVASKYN product order forms, how many are from patients who refer to QTCs versus patients already being treated in these sites? And what's your time line estimate for achieving profitability at this point? Is that bumped by quarter based on the current delay?

For the first question, the vast majority are at the QTCs, I mean, and there are patient referrals that already have been initiated, and those patients will go through the console process as well. But for the 12 patients that we've talked about, the vast majority are home, the patients had the QTCs. Yes. And also, I mean, to your second part question, which is how does it impact the time to profitability? We don't see a significant impact. I think in the past, we have guided that in the first half of 2026, we should be a profitable business, and that continues to be our projection. So we do not see the first patient treatment shifting to quarter 4, significantly impacting that time frame.

Our next question is coming from Kristen Kluska of Cantor Fitzgerald.

This is Rick on for Kristen. To start out, are you still planning on shutting the plant down in December for the routine maintenance? And if so, what's the time line around reopening there?

Yes, thanks for that question, and it's a great question. Yes, we do have a shutdown, which starts approximately second week or mid-December and takes about a month. Brian, you can add some color, if I missed the timing or -- anything else to add there?

No, that's accurate, yes. And this is really a mandated the FDA requirement to have this type of shutdown at the end of the year for general maintenance and recalibrations of equipment. But yes, mid-December to early January is the current schedule for the shutdown.

Okay. And on the temporary cause while you were working on the optimization, were there any biopsies that were collected but not yet to manufacturing before the temporary pause and reoptimization. And if so, will you be able to just sort of move into manufacturing with these? Or will you need to rebiopsy any patients?

Yes. The answer is no. We paused on collecting any further biopsies when this happened, not from any regulatory action or anything, but our own abundance of caution to avoid patients giving their biopsies and especially until we solved this probably were not -- we didn't know what exactly the problem was, how long it will take for us to resolve it. So we didn't take any chances there.

Our next question is coming from Ram Apologies. Our next question is coming from Stephen Willey of Stifel.

This is Josh on for Steve. Is there maybe any color you can share related to the current lead time between receiving these ZEVASKYN product order forms following initial patient identification efforts? And do you anticipate this to maybe come down over time as patient demand continues to increase?

Yes. I can take that, Josh. So yes, we do expect this will reduce -- decrease over a period of time. like I mentioned earlier, some of these patients, even though the ZPOFs, we received a couple of months ago, they are already scheduled for biopsy collection starting next year, and we have resumed biopsies already. So as more and more patients come through and the processes at the qualified centers and the payer policies with payer policies coming through nicely.

We expect this overall time to reduce. At this point, when we mentioned on our second quarter call, it's about a 3-month process is what it takes from the time that you have a patient identified, consulted prior from a clinical standpoint and any agreements that take place. And as more and more patients go through the queue, we should expect that process to come down, and we'll guide more in terms of what we are seeing over a period of next quarter or so.

Yes. And the only other thing I would add there, Josh, is that the very first few patients at the time when their prior art and letters of agreements we're going through the policies were not published by some of these payers. They have come in more recently. So that's the basis why we believe that for the future patients coming through the funnel, that time should reduce because the policy is already in place, and we don't need exceptions for the patients.

Right.

I'll just say that this is not new about ZEVASKYN. I mean, right, I mean, any cell and gene therapy that has launched goes through these kinds of process. and the centers that we are working with are super experienced about working with cell and gene therapies. So we've got a good team in place. We've got a good market access team on our side in place. and the receptivity that we're getting from insurance companies and the willingness for the payers to work with centers to expedite this process is there. So as more and more patients go through for a given payer that time for agreements will also -- we expect that to come down.

Our next question is coming from Ram Selvaraju of H.C. Wainwright.

Firstly, I was wondering if you could give us some additional granularity on what you expect the attrition rate, if any, to be among those patients for whom ZEPOs have been received before you go through the entire biopsy cell graft engineer and subsequently, administration of the graph. Just give us a sense of, of those initial 12 patients, just taking that number as an example, how many do you anticipate are going to go successfully through the entire treatment process?

I would say it's a pretty high level of conversion, Ram, for these patients because these are the patients that the physicians Obviously, these are motivated patients. They want to move forward, which is why we have the ZPOF already come through and insurance clearances and those processes we are working through those. So we expect now with this release assay optimization also behind us expect as biopsies come through to be able to treat these patients.

Of course, these are engineered cell therapies, right, that we are talking about, but our success rate has been from a clinical trials perspective has been pretty high. So for those reasons, we expect that these patients pretty high level of conversion rate now that we have these ZPOFs already in place for these patients. And the fact that when we mentioned a little over 1 dozen patients identified in these QTCs for us to get 12 ZPOFs already shows that none of the patients that were identified, almost none of the patients that were identified early on actually said that, no, I'm not interested in getting ZPOF.

I think that, to me, a pretty strong metric. And as more patients get into this funnel, and as patients get treated, you can already see the word of mouth and the data percolating which only motivates additional patients to come through the process.

And I just wanted to add 1 more color to that, Ram. If you look at the number of patients that have been identified just organically within the QC that Madhav mentioned has more than doubled to about 30 patients or so. We're not even adding the referred patients. So if you add that, the last call, we had mentioned close to 50. And that number has gone way not and we are not even talking about that right now.

And in some ways, from that big pool of identified patients, the QTCs are acting as kind of gatekeepers and giving us a pop because they also want to regulate how much they can treat and they need the first 12 patients are earmarked as the the highest priority. And so we do not anticipate attrition because it's -- for them, it's not easy to get the floor either. So this is going to be just a matter of conversion.

Okay. That's very helpful. And then with respect to the prior authorization process or prior authorization protocol that you are seeing with respect to payers, can you maybe describe for us what that looks like. And I'm in particular interested in situations involving RDEB patients with large chronic open wounds that have persisted for an extended period of time. What is the prior authorization requirement, if any, specifically in those types of patients that's being mandated by periods at this time?

Yes. So the prior process around, essentially, it's -- I can bring them into 2 steps. One is a clinical prior authorization and then the other is the financial discussion that takes place after a patient is clinically given a green signal from the insurance company. The prior most payers, especially for these types of therapies tend to follow the inclusion and exclusion criteria of the clinical trials.

And then there are some payers who also cover it to the label, right? So in terms of the requirements, it's often pretty straightforward, make sure that the patient has a recessive dystrophic EB, which means the genetic testing our confirmation of the musin of the collagen 7A1 gene that they have recessive the wounds. In our clinical trial, there were certain wound size requirements, but we are seeing most of the insurance companies now, for example, UnitedHealthcare covering the label, meaning no real requirement on the size of the wound formations.

Some payers have aged 6 years and above, but our FDA label is broader right from birth. So certain payers have those policies in place, but when you do have a payer that, let's say, it's a 5-year patient that requires a treatment, we are seeing that with the letter of medical visit, you're able to overturn that. because you are able to explain as to what the impact ZEVASKYN is bringing, and we are successfully overturned those initial PA denials that typically happen. So that's the process that takes place. And once you have that clearance, then the next step is the final agreement between the payer and the qualified center.

And no meaningful step edits, correct?

No, we have not seen any step edits.

[Operator Instructions] Our next question is from Jeff Jones of Oppenheimer.

Can you comment on of the 12 patients in process how many have had their biopsies done today? And how many of those doses passed the revised sterility release criteria or with the new assay rather?

Vish, do you want me to take that?

Sure. Yes. I think as of this point, we announced that we have resumed biopsy, right? We have biopsied a patient where we're not guiding how many are going to be biopsied within the time window for this year versus how many will pull over because that's an ongoing process hasn't settled down. So it's too early. We're going to be talking about that in our next quarterly call.

Okay. Can you remind us then in terms of revenue recognition from the time that you dose these patients how long until revenue recognition?

The revenue is recognized when the product is applied on the patient from an accounting standpoint. And obviously, the cash flow has based to accounts payable that's involved. That's different for different -- it's governed more by trade policies with each site. But for reporting purposes, the revenue is recognized the day of administration.

Our next question is coming from James Molloy of Alliance Global Partners.

Matt on for Jim today. Just 1 from us. Of the 30 patients that are slated to receive ZEVASKYN, how many are on [indiscernible] that you get currently or have failed [indiscernible]?

We don't have visibility into that, Matt. I don't -- we would never have visibility into that, but we expect the vast majority would be on [indiscernible] because that's what we hear from the patient community that these patients require -- there's an unmet need for multiple treatment options. We hear that from patients as well as from physicians across the board. So we would expect those patients. And from an access standpoint, that only helps us right because these patients have their copies of genetic records and other letters and background already in place so that physicians can provide that information to the payer because they have received prior other gene therapies. But we don't know the actual exact count.

And our next question is coming from David Bautz of Zacks Small-Cap Research.

Just 1 for me this morning. So ZEVASKYN was a center in the Phase III study and of course, notice that they are not signed up as a QTC yet. I'm curious if there's any hold up there or why they are not listed as a QTC or driving side on yet?

Yes, I can take that question, David. Different sites have different reasons. I don't want to call out specific reasons specific sites. Sometimes sites would intend to onboard and activate with us, but there could be financial constraints on how the site is faring. Sometimes the types of trade policies that we are willing to accept may not be fitting within their framework, right? So there's multiple different reasons why a given site may not be onboarded yet with us as a ZEVASKYN site. But we're not going to be discussing specific sites hurdle on why they haven't been activated despite the fact that they've got experience with handling ZEVASKYN. I hope that gives some color to the types of reasons.

Well, we appear to have reached the end of our question-and-answer session. So I will now like to turn the call back over to Vish for closing comments.

Thank you very much, Jenny, and I really appreciate everyone joining us today for the call, and we look forward to talking to you soon. Bye-bye.

Thank you very much. This does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation.