Abeona Therapeutics (NASDAQ:ABEO) Q3 2026 Earnings Call

0:00 Good morning, everyone, and welcome to Abiona Therapeutics 3Q2026 conference call. At this time, all participants have been placed on a listen-only mode, and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, 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.

0:44 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're available on our corporate website at www.abmtherapeutics.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 our subject's change. Actual results may differ materially from those expressed or implied in the 401 statements due to various factors, including but not limited to those outlined in our Form 10-K and periodic reports filed with the SEC.

1:39 These documents are available on our website at www.cabionatherapeutics.com. And with that, I will now turn the call over to Vish Seshadri to lead us all. Vish? Thank you, Greg. And good morning, everyone. This quarter represents an important point and Abiona's growth story as we continue to build the commercial foundation for ZivaSkin by 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 ABO801, from Elody Pharmaceuticals. ABO801 is a Phase III product candidate for eosinophilic esophagitis, or EOE, with both FDA Orphan Drug and FastTrack designations.

2:30 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 ZevaSkin launch, which remains the foundation of our business and our immediate operating priority. Madhav?

2:46 Thank you, Vish, and good morning, everyone. In the third quarter, we delivered ZevaSkin growth with a net revenue of $13.5 million Thank you for joining us today. Revenue was not recognized for one treatment because the associated batch was out of specifications for the Pan-CK Identity Assay.

3:33 Also in the quarter, two of the activated QTCs, CHOP and UTMB, treated their first patients, bringing the total number of QTCs with ZivaSkin treatment experience to four. 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 multi-step process end-to-end across different stakeholders and speeds up their learning curve for future treatments. During the quarter, we activated two additional qualified treatment centers, Cincinnati Children's and University of Florida Health, bringing the ZivaSkin network to eight sites and further expanding geographic access for eligible patients.

4:25 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 age centers are actively moving through the process. Although QTCs are working to advance their patients towards ZivaSkin, as mentioned in prior calls, treatment timing can vary based on QTC and patient-related factors.

5:11 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 swabs. Speaking of 2027, we will have entered the year from a fundamentally different position than we did at the start of this year.

5:59 In looking at this map, RDEP patients will have access to eight well-recognized qualified treatment centers, four of them having gained first-hand experience treating with liver skin. Payer coverage available for more than 95% of commercial life, 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 firsthand experience with DivaSkin and patient wound healing outcomes continue to accrue, we expect real-world experience to support broader patient activity and uptake across the QVC network.

6:48 We are confident in the important role ZivaSkin can play for patients with ARDEP, and we remain focused on the execution to realize that opportunity. With that, let me turn the call back over to Vish. Vish?

7:03 Thanks, Madhav. With ZivaSkin providing our commercial foundation, we have also been considering how to build on our capabilities and broaden our opportunities for value inflection. Through ZivaSkin and our prior advancement of the program, which resulted in the approval of Feiyuvi, 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. ABO801 is well aligned with that strategy. 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 the 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 Zebeskin launch focus.

8:10 Eosinophilic esophagitis, or EOE, is a growing disease with increasing unmet need with approximately 360,000 diagnosed patients in the US 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. ABO801 is a once-daily oral disintegrating tablet, or ODT, formulation of fluticasone rafionate taken at bedtime.

9:03 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, Eohelia, and an injectable biologic, Depixent. While there are several injectable biologics in development, there is dearth of effective, safe, and convenient oral therapies. We believe that a 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.

9:58 Importantly, ABO801 has already been evaluated in two 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 three study. The two completed phase three studies evaluated more than 350 patients combined. Due to low systemic absorption of less than 1% for ABO801, 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.

10:48 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. The studies also showed improvements in patient-reported symptoms. We believe the totality of these findings provides important evidence that ABO801 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. ABO801 showed significant improvements and overall ERFs response at week 12 in FLUTE2 and week 24 in FLUTE3 studies.

11:41 These findings indicate that ABO801 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 ABO801 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.

12:27 Importantly, the completed studies also gave us insight into why despite the strong histologic and ERAS 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 Elodie at the time of the studies. So Elodie developed a proprietary pro tool called PROS, which was used in Fluke 2 and Fluke 3. PROS did not distinguish between solid, soft, or liquid foods. Instead, patients rated their swallowing difficulty on a zero 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 consumed solid food. If the answer is no, The assessment does not proceed for that session.

13:33 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 8K 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 three study. These learnings are informing our plans for the phase three study. We currently envision enrolling approximately 400 patients to evaluate three mgs of ABO801 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.

14:36 We plan to discuss the study design of 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 turn the call over to Joe to review our third quarter financial results. and provide additional detail on the transaction and financing. Joe?

15:03 Thank you, Vish. For the third quarter, ABO reported net ZivaSkin revenue of $13.5 million, an 18% increase from $11.4 million in the second quarter. As Madhav noted, revenue was recognized for five ZivaSkin 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.

15:50 For the third quarter, we reported a net loss of $4.8 million and many more. We ended the third quarter with $134.9 million in cash, cash equivalents and short-term investments, compared with $146.8 million at June 30th. Turning to the transaction, at closing, ABO and I issued to Elodie $20 million of ABO and a common stock with no upfront cash payment. Elodie 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.

16:44 In addition, Elodie 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 Ziviskin. And importantly, our September 30th 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?

17:17 Thank you, Joe. Before closing, I also want to highlight another important development that reflects Aviona's history in advancing rare disease programs. In September, Ultragenyx received FDA approval of Fayuzi for Sanfilippo syndrome type A. Aviona 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 ZivaSkin launch and realizing its potential for patients with R-Den. At the same time, we plan to advance ADO801 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.

18:21 With that, I'll turn the call back to the operator to open the line for questions. Thank you. Thank you. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press star 1 on your telephone keypad. We do ask if listening on speakerphone this morning that you pick up your handset while asking your question to provide optimal sound quality. Once again, to join the queue to ask a question at this time, you may press star 1 on your telephone keypad. Please hold a moment while we poll for questions. And the first question this morning is coming from Maury Raycroft from Jefferies. Maury, your line is live. Please go ahead.

19:07 Hi. Thank you for taking our questions. This is Aminat for Maury. A couple of questions from us. Can you maybe quantify the current patient funnel by number of patients identified, approved for reimbursement, biopsied, or 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?

19:49 Thank you for that question.

19:51 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 eight QTCs. Some QTCs having more than one 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 positions, There are patients that have been identified and coming into the process and into the QTCs.

20:40 With regard to the manufacturing process itself, the number of out-of-specs that we have indicated so far is one lot, right, out of the 15 that we have treated. So there has been sort of a success rate. It's rather high if you generally look compared to general autologous cell therapy process. and at this point it's tough to say what exactly the percentage of out-of-spec will look like for future upcoming batches. Helpful, thank you. And if I can ask one follow-up. With the planned site maintenance, when will you stop collecting biopsies in 4Q and will you restart in Q1?

21:25 Yeah, we'll be stopping collecting biopsies starting around mid-November, and we'll resume again in mid-January. So first quarter also is going to get impacted, right, because you will have truncated quarter in first quarter of next year, about six weeks of performance to collect biopsies and have those treatments realized in one queue. So really, half of January and the month of Feb, biopsies will convert into treatments, potentially convert into treatments in first quarter. Okay, helpful. Thank you. Thank you. Your next question is coming from Ram Selvaraju from HC Wainwright. Ram, your line is live. Please go ahead.

22:12 Thanks so much for taking our questions. I just wanted to see if there had been any noteworthy process development or manufacturing improvements in the process for ZivaSkin 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. Thank you very much. relative to, for example, the approach being pursued by Eupraxia. Thank you.

23:19 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 the first thing is having a consistent yield, right? We discussed there was one low-yield 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.

24:17 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, it's 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.

25:05 Your question about capacity expansion. We are already at a capacity of six 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 what data we need for that. You know, 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.

26:01 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 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.

26:50 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's oral drugs. And I think the oral drug market has very little innovation going on at this point in time. There is, you know, after Eohelia, there's not been any oral drug approved. All innovation right now is in the injectable biologic space. 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 dirt 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.

28:17 Of course, as more data come out from Eupraxia, which has some innovation on You know, 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. Thank you. Thank you. Your next question is coming from Stephen Willey from Stifel. Stephen, your line is live. Please go ahead. Hey, good morning, team. This is Josh on for Steve. Thanks for taking the question and 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.

29:04 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 four experienced centers and maybe the experience from those two previous centers that have treated more patients, what the kinetics are from gaining that experience translating into additional patients screened on treatment. And then I just have a follow-up.

29:31 Sure, Josh. I can handle the gross margin. So, you know, 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.

30:26 And Josh, with regard to the treatment experience at these initial QTCs, yeah, there are patients, I think, so some of these patients 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 lining those patients for treatments. 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 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, the post-op care, and the coordination of the treatment, but also seeing what the wound healing outcomes look like.

31:12 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 ZivaSkin. So we are seeing that experience and the real-world outcome accruing. Some of the patients, actually one patient in our commercial setting had seen healing at the day of interest, shown expressed interest in joining our Strong Together Network. As you know that we 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 ZivaSkin process. So it's a good sign that at least one of our commercial patients has shown interest in joining this group.

32:04 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 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. More to come on that. Hopefully it gives a little bit of a context with regard to where we are.

32:47 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're 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. Thank you. 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?

33:36 Sure. I think, you know, 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, you know, we're a rare derm-approved product with ZivaSkin. This is going to be a different set of physicians, a gastroenterologist. to specialize 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 ZivaSkin because that is our fundamental priority. So that team is going to be focused on ZivaSkin 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 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 We have some time. I think the basic commercial framework that we have for marketing,

35:11 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, T-24 or T-18, these are those time points where we will be looking to and so on, you know, build some subject matter experts in those teams. And then as you get closer, six months to eight 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.

36:02 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 ZivaSkin. So that's the advantage of having not too much synergy in some ways. Okay. Thanks again for taking the questions. Appreciate it. Thank you. Your next question is coming from Jeff Jones from Oppenheimer. Jeff, your line is live. Please go ahead. Thank you and good morning, guys. Thanks for taking the question. Two from us.

36:39 On 801, can you speak to your confidence in this being a single phase three trial and then the estimated cost of that trial? And any chance you can comment for ZivaSkin on the number of biopsies collected for 4Q given your closing out biopsy collection for the quarter? Thank you.

37:07 Yeah, I'll first let Madhav address the ZivaSkin question. We always want to start with ZivaSkin, and then we'll discuss 801. So, Madhav, about the ZivaSkin.

37:16 Jeff, this will be a short one. You know, 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 eight 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. So therefore, some of the patients are going to move into the first quarter, which is also going to be a truncated quarter for us.

37:53 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 two phase three 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 Elodie 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.

38:43 We understand, our understanding is that a Phase III trial that addresses some of the gaps and misses from the previous two 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 hands that this should be and the precedents set with other and approvals that this should be a sufficient study requirement.

39:31 And then in terms of the cost, I'll let Joe speak to that.

39:36 Yeah, thanks, Vish. Yeah, so the clinical development cost to get 801 to FDA approval is about $50 to $60 million. So together with our cash balance of $135 million, the pipe proceeds and future Ziviskin sales and Fayuve royalties We have more than sufficient capital to get 801 to approval. Greatly appreciated. Thank you, guys. Thank you. Thank you. Your next question is coming from Jim Molloy from Alliance Global. Jim, your line is live. Please go ahead.

40:12 Hello, this is Laura Ahn for Jim Molloy. Thank you for taking our questions. So just two from us. So with the next phase three trial for 801 plan 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 three trial in comparison to the two previous phase three flute trials that were already completed? And also on ZivaSkin, 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? Thank you.

40:54 So the $30 million, so yeah, I could start with the $30 million. Yeah, the $30 million, excuse me one sec, sorry. 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 ZivaSkin. 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 ZivaSkin as well.

41:36 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 if you look at the past Fluke II and Fluke III 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.

42:28 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 points is what we see. I described the DSQ tool versus the PROS tool. The PROS tool was general to any type of food that patients take when 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 foods 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.

43:35 So 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 zero to ten scale. And we believe that is one improvement that we will definitely implement and this is very familiar to the FDA because the two 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 FLUT3 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.

44:20 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.

45:08 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, while we will have patients with a wide spectrum of disease severity. We're gonna 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 minor patient types, but the proportions are gonna be important there. So I just outlined four different variations that we're going to be implementing to optimize the upcoming phase three study.

45:47 Great, thank you for taking the questions. Thank you. Your next question is coming from Bubalan Pachayapan from Roth Capital. Bubalan, your line is live. Please go ahead. Good morning, guys. Thanks for taking the questions. This is Aaron on for Bubalan. So first on Ziva Skin, 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 avionics economics. and how we might distinguish a revenue recognition issue from a manufacturing or clinical performance issue?

46:26 Yeah, so I could just touch a little bit on the revenue recognition, Aaron. You know, so our agreements with the QTCs have a set quantity of sheets, so anything four or more. is able to be billed to the QTC. If it's less than four, like this one case that we had back in Q2, where only three sheets got delivered, we're not able to recognize revenue on that. Likewise, when the out-of-spec issue arose earlier this quarter in Q3, it was not able to be billed to the QTC because it didn't pass our quality release Again, part of the agreements with each QTC is a quality agreement, so we're not able to build on that.

47:16 And then Madhav can go a little bit more into... Yeah, 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 PAM-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.

48:26 And from a regulatory standpoint, every case is currently going through a single patient I&D, because the moment you miss specification, it's an investigational drug. And that's why we cannot bill for that. But we need, at the 11th hour, we have to get an FDA approval for the single patient I&D. And the processes for that are now well learned with one experience that we had. So our teams have been very proactive in working with other sites that should this kind of an event happen, then you don't really want 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.

49:20 I hope that answered your question. Yeah, that's great. Thank you. And one more real quick on ABO801. Could you talk about where in the patient journey ABO801 would fit? Would this be post-injectables or people that failed injectables or Dupixent?

49:40 Yeah, given that this is a ODT, we are going to position this as a step-in before biologic. That is how we are positioning it. Of course, in our trial, the phase three trial, we will include patients who have had prior Dupixent, but there'll 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, you know, given the pricing and the convenience and all those factors there. Thank you. Thank you. This does conclude today's question and answer session.

50:27 I would now like to pass the floor back to Vish Seshadri for closing remarks. Vish, back to you.

50:34 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.