Abeona Therapeutics Inc.: Form 10-Q for the period ended Jun 30, 2026

You should read the following discussion and analysis together with our unaudited condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”). This discussion and analysis contains forward-looking statements, which involve risks and uncertainties. As a result of many factors, such as those described under “Forward-Looking Statements,” “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements.

OVERVIEW

We are a commercial-stage biopharmaceutical company developing cell and gene therapies for serious diseases. Abeona’s ZEVASKYN® (“prademagene zamikeracel”) is the first and only autologous cell-based gene therapy for the treatment of wounds in adults and pediatric patients with recessive dystrophic epidermolysis bullosa (“RDEB”). Our fully integrated cell and gene therapy cGMP manufacturing facility in Cleveland, Ohio serves as the manufacturing site for ZEVASKYN commercial production. Our development portfolio features ABO-701 (“PSMA-SIR-T™”), a potentially first-in-class engineered T-cell therapy targeting PSMA, engineered to overcome the core failures of cell therapies in solid tumors.

Recent Developments

Qualified Treatment Center Activations

On July 21, 2026, we announced activation of Cincinnati Children’s as the newest qualified treatment center for the administration of ZEVASKYN. This represents the seventh available qualified treatment center for the administration of ZEVASKYN.

RESULTS OF OPERATIONS

Comparison of Three Months Ended June 30, 2026 and June 30, 2025

($ in thousands)

Product revenue, net

Product revenue, net, resulting from the sale of ZEVASKYN, for the three months ended June 30, 2026 was $11.4 million. There was no product revenue for the three months ended June 30, 2025 as the approval by the FDA for ZEVASKYN occurred in April of 2025 and we recorded our first sale in December of 2025.

License and other revenues

License and other revenues for the three months ended June 30, 2026 was nil as compared to $0.4 million for the same period of 2025. The revenue in 2025 of $0.4 million consists of revenue resulting from a third party exercising its option to license certain of our AAV capsids.

Cost of sales

Cost of sales during the three months ended June 30, 2026 was $4.2 million and primarily includes costs associated with the commercial sale of ZEVASKYN including royalties due to our licensor, Stanford. There was no cost of sales in the same period of 2025, as ZEVASKYN was approved by the FDA in April 2025 and we recorded our first sale in December of 2025.

Research and development

Research and development expenses include, but are not limited to, payroll and personnel expenses, preclinical lab supplies, preclinical and development costs, clinical trial costs, preclinical manufacturing and manufacturing facility costs, costs associated with regulatory approvals, preclinical depreciation on lab supplies and manufacturing facilities, and preclinical consultant-related expenses.

Total research and development spending for the three months ended June 30, 2026 was $5.0 million, as compared to $5.9 million for the same period of 2025, a decrease of $0.9 million. The reduction in expenses was primarily due to costs capitalized into inventory and other production costs that are no longer considered research and development due to FDA approval of ZEVASKYN in April of 2025.

We expect our research and development activities to increase as we work towards advancing our other product candidate towards potential regulatory approval, reflecting costs associated with the following:

• employee and consultant-related expenses;
• preclinical and developmental costs;
• clinical trial costs;
• development and regulatory milestones associated with licensing agreements;
• the cost of acquiring and manufacturing clinical trial materials; and
• costs associated with regulatory approvals.

Selling, general and administrative

Selling, general and administrative expenses primarily consist of payroll and personnel costs, office facility costs, public company reporting related costs, professional fees (e.g., legal expenses), selling and commercialization costs and other general operating expenses not otherwise included in research and development expenses. We expect our selling, general, and administrative costs to continue to increase as we expand our commercialization of ZEVASKYN.

Total selling, general and administrative expenses were $15.8 million for the three months ended June 30, 2026, as compared to $17.1 million for the same period of 2025, a decrease of $1.3 million. The decrease in expenses was primarily due to $0.9 million of costs that were allocated to costs of sales related to overhead costs and a reduction in recruiting costs of $0.4 million as we had fewer increases in new employees.

Interest income

Interest income was $1.4 million for the three months ended June 30, 2026, as compared to $1.0 million in the same period of 2025. The increase resulted from increased average short-term investment balances.

Interest expense

Interest expense was $0.7 million for the three months ended June 30, 2026 compared to $1.0 million in the same period of 2025. Interest expense was due to the credit facility entered into by the Company in January 2024 and decreased as a result of the July 2025 Loan Agreement Amendment plus a reduction of the principal loan amount due to principal payments made in 2026.

Change in fair value of warrant liabilities

The change in fair value of warrant liabilities was a loss of $7.2 million for the three months ended June 30, 2026. We issued stock purchase warrants that are required to be classified as a liability and valued at fair market value at each reporting period. The loss in the fair value of warrant liabilities was primarily due to the increase in our stock price over the quarter offset by a shorter term of the outstanding warrants.

The change in fair value of warrant liabilities was a loss of $5.4 million for the three months ended June 30, 2025. The loss in the fair value of warrant liabilities was primarily due to the increase in our stock price year over year offset by a shorter term of the outstanding warrants.

Gain from sale of priority review voucher, net

In May 2025, we sold our PRV awarded to us following the FDA approval of ZEVASKYN™. We received gross proceeds of $155.0 million during the three months ended June 30, 2025 and recognized a gain from the PRV sale of $152.4 million, net of transaction costs of $2.6 million, as it did not have a carrying value at the time of sale.

Other (loss) income, net

Other (loss) income, net consisted of a loss of $6,000 for the three months ended June 30, 2026, as compared to income of $89,000 in the same period of 2025. The decrease was primarily a result of not having sublease income in 2026. The sublease of our New York office ended in September of 2025.

Income tax expense

We did not record an income tax expense for the three months ended June 30, 2026 as we generated sufficient tax losses, after consideration of discrete items.

We recorded a current income tax expense of $15.5 million for the three months ended June 30, 2025. The current income tax expense for the three months ended June 30, 2025 was driven by pre-tax income from the gain on sale of priority review voucher, resulting in $14.6 million of federal income tax expense and $0.9 million of state income tax expense. This was subsequently reduced in the third quarter of 2025 as a result of the favorable impact of the One Big Beautiful Bill Act, enacted on July 4, 2025. The legislation restored immediate expensing of domestic R&D expenditures, reinstated 100% bonus depreciation, and provided more favorable rules for determining the limitation on business interest expense, which collectively reduced the Company’s taxable income and resulting income tax expense for the year ended December 31, 2025.

Comparison of Six Months Ended June 30, 2026 and June 30, 2025

($ in thousands)

Product revenue, net

Product revenue, net, resulting from the sale of ZEVASKYN, for the six months ended June 30, 2026 was $20.1 million. There was no product revenue for the six months ended June 30, 2025 as the approval by the FDA for ZEVASKYN occurred in April of 2025 and we recorded our first sale in December of 2025.

License and other revenues

License and other revenues for the six months ended June 30, 2026 was nil as compared to $0.4 million for the same period of 2025. The revenue in 2025 of $0.4 million consists of revenue resulting from a third party exercising its option to license certain of our AAV capsids.

Cost of sales

Cost of sales during the six months ended June 30, 2026 was $6.9 million and primarily includes costs associated with the commercial sale of ZEVASKYN including royalties due to our licensor, Stanford. There was no cost of sales in the same period of 2025, as ZEVASKYN was approved by the FDA in April 2025 and we recorded our first sale in December of 2025.

Royalties

Total royalty expense for the six months ended June 30, 2026 was nil as compared to $0.1 million for the same period of 2025. Royalties in 2025 consisted of amounts owed to the University of North Carolina at Chapel Hill resulting from the milestones due from the exercise of an option by a third party to license certain of our AAV capsids.

Research and development

Total research and development spending for the six months ended June 30, 2026 was $14.6 million, as compared to $15.9 million for the same period of 2025, a decrease of $1.3 million. In March 2026, we entered a license and joint development agreement related to PSMA SIR-T™ which included an upfront payment of $7.0 million that was included in research and development expenses. Excluding this transaction, research and development spending decreased $8.3 million. The reduction in expenses was primarily due to costs capitalized into inventory and, engineering runs and other production costs that are no longer considered research and development due to FDA approval of ZEVASKYN in April of 2025.

Selling, general and administrative

Total selling, general and administrative expenses were $35.3 million for the six months ended June 30, 2026, as compared to $26.9 million for the same period of 2025, an increase of $8.4 million. The increase in expenses was primarily due to increases in salaries and stock-based compensation of $5.7 million due to new hires, $1.9 million of costs related to engineering runs with the remainder due to other commercial costs related to our continued commercialization efforts upon FDA approval in April of 2025.

Interest income

Interest income was $2.7 million for the six months ended June 30, 2026, as compared to $2.3 million in the same period of 2025. The increase resulted from increased average short-term investment balances.

Interest expense

Interest expense was $1.5 million for the six months ended June 30, 2026 compared to $2.0 million in the same period of 2025. Interest expense was due to the credit facility entered into by the Company in January 2024 and decreased as a result of the July 2025 Loan Agreement Amendment plus a reduction of the principal loan amount due to principal payments made in 2026.

Change in fair value of warrant and derivative liabilities

The change in fair value of warrant liabilities was a loss of $1.8 million for the six months ended June 30, 2026. We issued stock purchase warrants that are required to be classified as a liability and valued at fair market value at each reporting period. The loss in the fair value of warrant liabilities was primarily due to the increase in our stock price over the year offset by a shorter term of the outstanding warrants.

The change in fair value of warrant liabilities was a gain of $1.9 million for the six months ended June 30, 2025. We issued stock purchase warrants that are required to be classified as a liability and valued at fair market value at each reporting period. The gain in the fair value of warrant liabilities was primarily due to the shorter term period over period.

Gain from sale of priority review voucher, net

In May 2025, we sold our PRV awarded to us following the FDA approval of ZEVASKYN™. We received gross proceeds of $155.0 million during the six months ended June 30, 2025 and recognized a gain from the PRV sale of $152.4 million, net of transaction costs of $2.6 million, as it did not have a carrying value at the time of sale.

Other income, net

Other income, net consisted of $44,000 for the six months ended June 30, 2026, as compared to $0.2 million in the same period of 2025. The decrease was primarily a result of not having sublease income in 2026. The sublease of our NY office ended in September of 2025.

Income tax expense

We recorded a current income tax expense of $2,000 for the six months ended June 30, 2026 which included the impact of our generation of sufficient tax losses, after consideration of discrete items, to reduce our income tax expense for the period.

We recorded a current income tax expense of $15.5 million for the six months ended June 30, 2025. The current income tax expense for the six months ended June 30, 2025 was driven by pre-tax income from the gain on sale of priority review voucher, resulting in $14.6 million of federal income tax expense and $0.9 million of state income tax expense. This was subsequently reduced in the third quarter of 2025 as a result of the favorable impact of the One Big Beautiful Bill Act, enacted on July 4, 2025. The legislation restored immediate expensing of domestic R&D expenditures, reinstated 100% bonus depreciation, and provided more favorable rules for determining the limitation on business interest expense, which collectively reduced the Company’s taxable income and resulting income tax expense for the year ended December 31, 2025.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows for the Six Months Ended June 30, 2026 and 2025

($ in thousands)

Operating activities

Net cash used in operating activities was $37.3 million for the six months ended June 30, 2026, primarily comprised of our net loss of $37.3 million, decreases in operating assets and liabilities of $10.5 million and net non-cash charges of $10.4 million. Non-cash charges consisted primarily of $1.8 million of loss as a result of the change in fair value of warrant liabilities, $6.3 million of stock-based compensation and $1.4 million of depreciation and amortization.

Net cash used in operating activities was $37.2 million for the six months ended June 30, 2025, primarily comprised of our net income of $96.8 million and increases in operating assets and liabilities of $12.4 million offset by net non-cash charges of $146.2 million. Non-cash charges consisted primarily of $152.4 million gain on sale of priority review voucher for which the cash proceeds are recorded in investing activities, $1.9 million of gain as a result of the change in fair value of warrant and derivative liabilities, $5.5 million of stock-based compensation and $1.1 million of depreciation and amortization.

Investing activities

Net cash provided by investing activities was $20.6 million for the six months ended June 30, 2026, primarily comprised of proceeds from maturities of short-term investments of $65.8 million, offset by purchases of short-term investments of $43.7 million and capital expenditures of $1.4 million.

Net cash provided by investing activities was $160.1 million for the six months ended June 30, 2025, primarily comprised of net proceeds from sale of priority review voucher of $152.4 million, proceeds from maturities of short-term investments of $80.5 million, offset by purchases of short-term investments of $68.5 million and capital expenditures of $4.3 million.

Financing activities

Net cash used in financing activities was $5.6 million for the six months ended June 30, 2026, comprised of $5.6 million in payments on our long-term debt.

Net cash provided by financing activities was $17.3 million for the six months ended June 30, 2025, primarily comprised of proceeds of $17.3 million from open market sales of common stock pursuant to the ATM Agreement (as defined below).

We have historically funded our operations primarily through our sale of equity securities, our most recent gain on sale of our PRV, and strategic collaboration arrangements.

Our principal source of liquidity is cash, cash equivalents and short-term investments, collectively referred to as our cash resources. As of June 30, 2026, our cash resources were $146.8 million. We believe that our current cash and cash equivalents and short-term investments are sufficient to fund operations through at least the next 12 months from the date of this report on Form 10-Q. We may need to secure additional funding to carry out all of our planned research and development and potential commercialization activities. If we are unable to obtain additional financing or generate license or product revenue, the lack of liquidity and sufficient capital resources could have a material adverse effect on our future prospects.

We have an open market sale agreement with Jefferies LLC (as amended, the “ATM Agreement”) pursuant to which, we may sell from time to time, through Jefferies LLC, shares of our common stock for an aggregate sales price of up to $75.0 million. Any sales of shares pursuant to this agreement are made under our effective “shelf” registration statement on Form S-3 that is on file with and has been declared effective by the SEC. We sold 3,510,889 shares of our common stock under the ATM Agreement and received $17.3 million of net proceeds during the six months ended June 30, 2025. There were no sales of our common stock under the ATM agreement during the six months ended June 30, 2026. Under the ATM Agreement and as of June 30, 2026, we have remaining shares of our common stock for an aggregate sales price of up to $51.5 million.

Since our inception and excluding the gain on sale of our priority review voucher, we have incurred negative cash flows from operations and have expended, and expect to continue to expend, substantial funds to complete our planned product development and commercialization efforts. Excluding the gain on sale of our priority review voucher, we have not been profitable since inception and to date have received limited revenues from the sale of products or licenses. As a result, we have incurred significant operating losses and negative cash flows from operations since our inception and anticipate such losses and negative cash flows will continue until ZEVASKYN can provide sufficient revenue for us to be profitable and cash flow generating.

We may incur losses for the next several years as we continue to invest in commercialization, product research and development, preclinical studies, clinical trials, and regulatory compliance and cannot assure that we will ever be able to generate sufficient product sales or royalty revenue to achieve profitability on a sustained basis, or at all.

If we raise additional funds by selling additional equity securities, the relative equity ownership of our existing investors will be diluted, and the new investors could obtain terms more favorable than previous investors. If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates to third parties that we would otherwise prefer to develop and market ourselves.

Our future capital requirements and adequacy of available funds depend on many factors, including:

• the successful commercialization of ZEVASKYN;
• the successful development, regulatory approval and commercialization of our cell and gene therapy and other product candidates, including ABO-701;
• the ability to establish and maintain collaborative arrangements with corporate partners for the research, development, and commercialization of products;
• continued scientific progress in our research and development programs;
• the magnitude, scope and results of preclinical testing and clinical trials;
• the costs involved in filing, prosecuting, and enforcing patent claims;
• the costs involved in conducting clinical trials;
• competing technological developments;
• the cost of manufacturing and scale-up;
• the ability to establish and maintain effective commercialization arrangements and activities; and
• the successful outcome of our regulatory filings.

Due to uncertainties and certain of the risks described above, under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report, it is not possible to reliably predict future spending or time to completion by project or product category or the period in which material net cash inflows from significant projects are expected to commence. If we are unable to timely complete a particular project, our research and development efforts could be delayed or reduced, our business could suffer depending on the significance of the project and we might need to raise additional capital to fund operations, as discussed in the risks above.

We plan to continue our policy of investing any available funds in suitable certificates of deposit, money market funds, government securities and investment-grade, interest-bearing securities. We do not invest in derivative financial instruments.

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:

• it requires assumptions to be made that were uncertain at the time the estimate was made, and
• changes in the estimate or different estimates that could have been selected could have a material impact in our results of operations or financial condition.

While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results could differ from those estimates, and the differences could be material. For a discussion of the critical accounting estimates that affect the unaudited condensed consolidated financial statements, see “Critical Accounting Estimates” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

See Note 2 to our unaudited condensed consolidated financial statements for a discussion of our significant accounting policies.

Recently Issued Accounting Standards Not Yet Effective or Adopted

See Note 2 to our unaudited condensed consolidated financial statements for a discussion of recently issued accounting standards not yet effective or adopted.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls and Procedures”), as of June 30, 2026, as such term is defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Conclusion of Evaluation — Based on this Disclosure Controls and Procedures evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our Disclosure Controls and Procedures as of the end of the period covered by this report were effective.

Changes in Internal Control Over Financial Reporting – There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our business and financial results are subject to numerous risks and uncertainties. There have been no material changes to the risk factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025, except as set forth below.

The manufacturing, testing and delivery of ZEVASKYN® present significant challenges for us, and we may not be able to produce ZEVASKYN® at the quality, quantities, or timing needed to support commercialization.

The manufacturing of ZEVASKYN® is complex and requires significant expertise. Even with the relevant experience and expertise, manufacturing cell therapy products often leads to difficulties in production, particularly in scaling out and validating initial production, managing the transition from clinical manufacturing to commercial manufacturing, and ensuring that the product meets required specifications. These problems include difficulties with production costs and yields, quality control, quality assurance testing, operator error, scarcity of qualified manufacturing and quality control testing personnel, shortages of any production raw materials as well as compliance with strictly enforced federal, state and foreign regulations.

We are susceptible to production interruptions that may impede our ability to manufacture cell and gene therapy products and produce an adequate product supply to support commercialization of ZEVASKYN®. Several factors could cause production interruptions, including equipment malfunctions, facility contamination, raw material shortages or contamination, natural disasters, public health emergencies, disruption in utility services, human error, or disruptions in the operations of our suppliers. ZEVASKYN® and product candidates are biologic drugs requiring processing steps that are more complex than those required for most chemical pharmaceuticals. We characterize our processes and products, and perform testing to ensure the safety, quality and efficacy of each product produced. While we take significant measures to fully understand and characterize each product, the steps we take may not be sufficient to ensure that a given lot will perform in the intended manner.

For example, we manufactured a full batch of ZEVASKYN® following patient biopsy collection in August 2025 that, despite being bonafide drug product, could not be released because a rapid sterility assay, mandated by the FDA as a release assay during the final stage of the BLA review, initially yielded a false positive result for sterility. Although we resumed biopsy collection in November 2025 upon completion of assay optimization and the necessary regulatory submission for its implementation, this false positive caused a manufacturing rejection, which caused a delay in our launch of ZEVASKYN®.

We also manufactured a batch of ZEVASKYN® following patient biopsy collection in July 2026 that, despite being bonafide drug product, could not be released because a cellular identity test, mandated by the FDA as a release assay during the final stage of BLA review, was out of specification. The FDA authorized release of this batch of ZEVASKYN® to the treatment site under a single-patient IND, but would not authorize release of this batch as commercial product. We are currently working with the FDA toward revising the specification for this test, but we cannot guarantee that the FDA will accept our proposed revision. Additional or similar issues associated with manufacturing and testing can have an adverse impact on our business, financial condition, cash flow, and results of operations.

There are several risks specific to the manufacturing process for ZEVASKYN® that require close attention. As an autologous product there are challenges associated with viability of biopsies as an incoming material. Due to variables such as the fragility of RDEB skin and site of the biopsy, initiation of autologous keratinocyte growth and expansion can be challenging or may be extended beyond the scheduled timing. Another concern during manufacturing is the slowing of cell proliferation, resulting in extended manufacturing time. If pre-release criteria are not met, the production process must be stopped, and a new biopsy must be obtained. If release criteria are out of range, epidermal sheets must be discarded and the manufacturing process must be repeated.