Assembly Biosciences, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed March 11, 2022. This is an annual report, not a standalone fourth-quarter report. Assembly is a clinical-stage biotechnology company developing HBV and other antiviral therapies; it had no approved products and no product-sales revenue.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Collaboration revenue | $6.3 million | $79.1 million |
| Research and development expense | $68.5 million | $106.8 million |
| General and administrative expense | $28.8 million | $37.1 million |
| Goodwill and indefinite-lived asset impairment | $41.6 million | None |
| Net loss | $129.9 million | $62.2 million |
| Net loss per share, basic and diluted | $3.00 | $1.75 |
| Cash used in operating activities | $93.4 million | $63.0 million |
Revenue was entirely collaboration-related; no product revenue or gross margin was reported. The company reported no operating profit, so profit margins are not meaningful. The 2021 net loss included a $41.6 million noncash impairment charge: $29.0 million for acquired in-process research and development and $12.6 million for goodwill.
At year-end, cash and cash equivalents were $45.6 million and marketable securities totaled $129.0 million, for combined cash and securities of approximately $174.6 million, down from $216.4 million a year earlier. Current assets were $154.2 million and current liabilities were $16.1 million. Total liabilities were $22.1 million, including $6.5 million of operating lease liabilities; the filing reports no borrowings or debt balance. Management said available funds were expected to cover operating expenses and capital requirements for at least 12 months from the filing’s issuance.
Financing activities provided $53.1 million in 2021, primarily from $52.8 million net proceeds under the at-the-market equity program. Shares outstanding increased from 34.0 million at year-end 2020 to 48.1 million at year-end 2021. Accumulated deficit was $631.4 million.
Material changes and business developments
- Collaboration revenue fell 92%, largely because 2020 included substantial revenue recognized under the BeiGene and Allergan arrangements. Allergan’s agreement had been terminated in 2020; 2021 BeiGene revenue primarily reflected completion of the ABI-H2158 license technology-transfer obligation.
- R&D expense declined 36%, principally following the January 2021 wind-down and subsequent sale of the Microbiome program. HBV R&D expense was broadly stable at $72.6 million versus $72.0 million.
- In September 2021, Assembly discontinued ABI-H2158 after elevated ALT levels in a Phase 2 study were consistent with drug-induced hepatotoxicity.
- Assembly ended the year with two ongoing Phase 2 triple-combination studies using vebicorvir (VBR), with interim on-treatment results expected in the second half of 2022. A third study with Antios was planned for the first half of 2022.
- ABI-H3733 completed Phase 1a testing in healthy subjects; preliminary results indicated generally good tolerability and favorable pharmacokinetics. A patient Phase 1b study was planned for the first half of 2022. Assembly planned to initiate Phase 1a testing of ABI-4334 in the second half of 2022, subject to completing enabling work.
Outlook, commentary and key risks
Management expects HBV program expenses to increase in 2022 and anticipates continued operating losses and a need for substantial additional funding. There is no assurance that financing will be available on acceptable terms. Future equity financing could dilute shareholders; other financing or collaboration arrangements could impose restrictive terms or require rights to be shared or surrendered.
Assembly shifted away from developing VBR plus nucleos(t)ide reverse transcriptase inhibitors as chronic suppressive therapy and toward finite, potentially curative combination regimens. In Study 211, all patients relapsed after stopping VBR plus NrtI therapy, so the dual combination did not produce sustained virologic response in the studied population. Prior studies showed deeper on-treatment viral suppression, which management views as support for evaluating additional mechanisms in combination.
- COVID-19 caused enrollment and vendor-related delays in the two ongoing combination studies, although management expected their 2022 interim readouts to remain on schedule based on enrollment to date.
- The planned Antios study will no longer include a Ukraine site following Russia’s invasion of Ukraine; Assembly said the change would delay the data readout.
- The fourth-quarter impairment reflected a sustained share-price decline, a weaker biotech-market outlook and unfavorable competitor trial news. The valuation relied substantially on Level 3 assumptions, including future revenues, discount rates, costs to complete and probabilities of technical and regulatory success.
- BeiGene paid a $40.0 million upfront amount and may provide development funding and milestone and royalty payments in China and specified territories. Following ABI-H2158’s discontinuation, the maximum remaining potential cash milestones for VBR and ABI-H3733 were $427.5 million; these amounts are contingent and not assured.
- Clinical efficacy and safety remain uncertain, and the company depends on collaborators, CROs and third-party manufacturers. It has no approved products and may never achieve profitability.
The company reported effective disclosure controls and effective management-assessed internal control over financial reporting as of December 31, 2021. Ernst & Young LLP issued an unqualified opinion on the financial statements; the auditor was not engaged to opine on internal control effectiveness.
Important facts for investors to verify
- Cash, marketable securities, quarterly and annual operating cash use, and whether the stated minimum 12-month funding runway remains valid.
- Enrollment, timing and results for the VBR triple-combination studies, and progress of ABI-H3733 and ABI-4334 clinical development.
- Whether subsequent safety or efficacy findings alter the company’s finite-cure strategy, particularly given the Study 211 relapses and ABI-H2158 discontinuation.
- Actual funding, milestone and royalty prospects under the BeiGene collaboration, including the effects of ABI-H2158’s removal and any termination rights.
- Further equity issuance and dilution, plus the assumptions behind the 2021 impairment and any future impairment indicators.