Assembly Biosciences, Inc. — Q3 2015 Form 10-Q
Reporting period: Three and nine months ended September 30, 2015. Unaudited financial statements. Assembly is a development-stage biopharmaceutical company focused on oral therapies for hepatitis B (HBV) and C. difficile-associated diarrhea (CDAD). It has no approved products and has generated no product revenue.
Financial results and liquidity
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $4.63 million | $3.67 million | $13.13 million | $7.74 million |
| General and administrative expense | $2.49 million | $7.38 million | $8.35 million | $9.93 million |
| Net loss | $6.62 million | $11.02 million | $20.71 million | $17.56 million |
| Net loss per share, basic and diluted | $0.38 | $1.33 | $1.36 | $3.02 |
At September 30, cash and cash equivalents were $36.4 million and marketable securities were $60.6 million, totaling approximately $97.0 million. Total assets were $139.7 million; total liabilities were $14.3 million, including $11.6 million of deferred tax liabilities. The filing reports no interest-bearing debt balance. Nine-month operating cash use was $13.2 million. Investing activities used $61.0 million, primarily for marketable securities, while financing provided $81.6 million, mainly from equity issuance. Gross margin and operating margin are not meaningful because the company had no revenue.
Changes versus prior comparable periods
- Q3 net loss narrowed by $4.4 million year over year, despite higher R&D expense. Total operating expenses fell 36%, largely because stock-based compensation declined substantially from Q3 2014.
- For the first nine months, net loss increased by $3.1 million and R&D expense rose 70%, reflecting expanded HBV and microbiome research. G&A expense declined, primarily due to lower stock-based compensation, partly offset by higher employee, consulting, legal and accounting costs.
- In March and April 2015, the company completed an equity offering and underwriters’ option exercise, raising approximately $81.0 million net. Shares outstanding increased to 17.23 million from 10.67 million at year-end 2014.
- Available-for-sale securities had a $387,878 unrealized loss recorded in other comprehensive loss; the filing reported no impairment loss.
Outlook, risks and other matters
- Management expects continued substantial losses for at least several years as development advances and says cash and cash equivalents are sufficient to fund operating and capital needs for at least 12 months from the filing’s assessment. The company expects rising R&D costs and may need additional funding; it had no financing commitments.
- Management cautions that funding may not be available on acceptable terms. Additional equity could dilute shareholders; debt could increase fixed obligations and impose covenants. A funding shortfall could force delays, reductions or termination of programs, or require the company to relinquish product rights.
- Key uncertainties include preclinical and clinical development, regulatory approval, market acceptance, intellectual property rights and costs, and the possibility of impairment of goodwill or intangible assets. Annual impairment tests were planned for Q4 2015; no impairment losses had been recognized.
- Management reported no material change in previously disclosed risk factors, no material legal proceedings, and no material changes to market-risk disclosures. Disclosure controls were assessed as effective at a reasonable-assurance level.
- Management changes in February 2015 included Derek Small becoming CEO and William Ringo becoming non-executive chairman; former CEO Russell Ellison transitioned to a senior-advisor role. Accrued expenses included $234,908 of severance for the former CEO.
Important facts for investors to verify
- Whether program progress and spending remain consistent with the expected 12-month cash runway, and when additional capital may be required.
- Development milestones, costs and risks for the HBV and CDAD programs, including clinical and regulatory status.
- Potential dilution from equity compensation and future financing; 3.24 million options and 56,349 warrants were outstanding at September 30, 2015.
- Results of the planned Q4 2015 goodwill and intangible-asset impairment tests.
- Terms and obligations under facility and equipment leases, and any subsequent changes in financing, operations or management outlook.