Assembly Biosciences, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Assembly is a clinical-stage biotechnology company developing oral therapies for chronic hepatitis B (HBV); it had no approved products and no product sales. Amounts below are in U.S. dollars.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Collaboration revenue | $6.3 million | $34.6 million | $6.3 million | $78.1 million |
| Research and development expense | $18.5 million | $26.9 million | $53.8 million | $73.3 million |
| General and administrative expense | $6.7 million | $11.7 million | $22.3 million | $29.9 million |
| Operating loss | $18.9 million | $4.0 million | $69.8 million | $25.1 million |
| Net loss | $18.8 million | $3.3 million | $69.6 million | $22.7 million |
| Basic and diluted loss per share | $0.41 | $0.09 | $1.63 | $0.64 |
- At September 30, 2021, cash and cash equivalents were $70.8 million and marketable securities were $119.3 million, totaling approximately $190.1 million in cash and investments. Total current assets were $188.2 million; total liabilities were $24.3 million.
- Operating cash used in the first nine months was $74.0 million, compared with $37.7 million in 2020. Investing activities provided $35.0 million and financing activities provided $50.4 million, including $50.2 million net proceeds from ATM stock sales.
- The company reported no debt. Operating lease liabilities totaled $7.2 million. Accumulated deficit was $571.2 million.
- Management said existing cash, cash equivalents and marketable securities were expected to fund operations for at least 12 months from issuance of the financial statements. The company expects continued operating losses and will need substantial additional funding.
Material changes versus the prior comparable periods
- Nine-month collaboration revenue fell 92% year over year, primarily because 2020 included revenue from the terminated Allergan agreement and the initial BeiGene license transfer. 2021 revenue was $6.3 million recognized for ABI-H2158 after its development was discontinued.
- Q3 net loss increased to $18.8 million from $3.3 million, despite lower operating expenses, because collaboration revenue was substantially lower. For the nine-month period, net loss increased to $69.6 million from $22.7 million.
- Nine-month R&D expense declined 27%, mainly reflecting the wind-down of the Microbiome program, partly offset by higher HBV development costs. G&A expense declined 25%.
- Common shares outstanding increased from 34.0 million at December 31, 2020 to 47.1 million at September 30, 2021, mainly due to ATM sales and cashless warrant exercises. The ATM raised $50.2 million net from sales of 10.4 million shares during the first nine months.
Pipeline, outlook, risks and unusual items
- ABI-H2158: Development was discontinued in September after elevated ALT levels in a Phase 2 study consistent with drug-induced hepatotoxicity. Assembly recognized $6.3 million of BeiGene-related deferred revenue when its technology-transfer obligation was considered complete; $2.7 million allocated to ABI-H3733 remained deferred.
- Vebicorvir (VBR): Assembly said all 41 patients who stopped treatment in Study 211 ultimately relapsed, and it concluded VBR plus an NrtI alone was insufficient to achieve a cure in the studied population. The company decided not to pursue global registrational studies of VBR as chronic suppressive treatment, and is focusing on finite, curative combination approaches.
- Other candidates: Assembly planned to begin a Phase 1b study of ABI-H3733 with an improved formulation in 2022, and aimed to complete regulatory filings and initiate clinical studies of ABI-4334 in 2022. These are plans, not assurances.
- Combination studies: Two VBR triple-combination studies began in Q1 2021. In October, the Antios joint committee agreed to initiate a VBR-based trial cohort; the filing expected it to start in the first half of 2022.
- BeiGene collaboration: BeiGene agreed to fund up to $45 million of specified territory development and regulatory costs. Assembly may qualify for up to approximately $500 million in milestones and tiered royalties, but milestone consideration was constrained and not included in revenue as of September 30, 2021. BeiGene may terminate for convenience on 90 days’ notice.
- Assembly reported no material legal proceedings, no off-balance-sheet arrangements, and no material changes in contractual obligations or market-risk disclosures. Disclosure controls were judged effective.
- Principal risks include clinical safety or efficacy failures, delays, dependence on collaborators and third-party manufacturers, access to capital, competition, regulatory and intellectual-property uncertainty, and possible COVID-19-related disruptions. Management reported no significant study impact from COVID-19 to date, while noting future effects remained uncertain.
Important facts for investors to verify
- Whether the planned ABI-H3733 and ABI-4334 clinical milestones were achieved, and what subsequent safety, efficacy and formulation data show.
- How the ABI-H2158 hepatotoxicity finding affects the broader core-inhibitor program and any combination studies.
- Whether VBR combination studies produce evidence of sustained viral response, given the relapse of all 41 Study 211 patients after treatment discontinuation.
- Actual cash burn, financing needs and available runway; the stated runway is management’s estimate, and further equity financing could dilute shareholders.
- BeiGene collaboration progress, including remaining deferred revenue, cost-sharing obligations, termination rights and whether any milestones or royalties become achievable.
- Share-count changes and future ATM or other financing activity, alongside the company’s dependence on collaboration revenue and lack of product sales.