Assembly Biosciences, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Amounts below are in U.S. dollars; financial figures are in millions unless noted.
Business context
Assembly is a clinical-stage biotechnology company developing oral therapies for chronic hepatitis B (HBV). It has no approved products and has not generated product-sales revenue. In January 2021, it wound down its Microbiome program and refocused resources on HBV.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Collaboration revenue | $0 | $39.4 | $0 | $43.5 |
| Research and development expense | $16.7 | $23.3 | $35.3 | $46.4 |
| General and administrative expense | $6.9 | $9.5 | $15.6 | $18.2 |
| Net income (loss) | $(23.6) | $7.3 | $(50.8) | $(19.4) |
| Basic and diluted EPS | $(0.55) | $0.21 basic; $0.19 diluted | $(1.23) | $(0.55) |
- Q2 2020 collaboration revenue reflected recognition under the terminated Allergan agreement; no collaboration revenue was recorded in 2021. Consequently, revenue-based margins are not meaningful.
- Cash and cash equivalents were $59.5 million and marketable securities were $139.6 million at June 30, 2021, totaling approximately $199.1 million. Total assets were $262.1 million and stockholders’ equity was $231.8 million.
- Operating cash use was $55.2 million for the first half, compared with $48.3 million in the first half of 2020. Investing activities provided $14.9 million and financing provided $40.3 million, mainly from ATM share sales.
- Total liabilities were $30.3 million, including $8.0 million of operating lease liabilities. The filing reports no debt borrowings.
- Assembly raised $40.2 million net from issuing 7.45 million shares through its at-the-market program in the first half. Common shares outstanding were 43.78 million at June 30 and 44.97 million at August 2.
Material changes and notable items
- Revenue fell to zero after the Allergan agreement’s termination became effective in October 2020. The agreement generated $43.5 million of revenue in the first half of 2020.
- First-half operating expenses declined 21% to $50.9 million, mainly because of the Microbiome wind-down; HBV R&D expense increased 15% to $36.3 million as clinical and manufacturing activities expanded.
- First-half net loss widened to $50.8 million from $19.4 million, largely reflecting the absence of prior-year collaboration revenue. The 2021 R&D expense included a net reversal of stock-based compensation associated with forfeited awards; restructuring costs also included reversals and asset-related charges.
- The BeiGene collaboration covers development and commercialization in China and related territories. The $40 million upfront payment was substantially recognized in 2020; $9 million remains deferred pending specified technology-transfer obligations. Up to approximately $500 million in milestone payments and tiered royalties are possible, but milestones were excluded from the transaction price because they remained contingent.
Outlook, management commentary and risks
- Management stated that existing cash, cash equivalents and marketable securities were expected to fund operations for at least 12 months after issuance of the financial statements. The company expects substantial future losses and will need additional funding; financing may not be available on acceptable terms.
- After all 41 patients who stopped treatment in VBR Study 211 relapsed, Assembly concluded VBR plus an NRTI alone was insufficient to cure HBV, terminated the study, and stopped plans for global registrational studies of VBR as chronic suppressive therapy. It is prioritizing finite, potentially curative combinations.
- The company expected interim Phase 2 data for ABI-H2158 in the second half of 2021. It reported preliminary Phase 1a results for ABI-H3733 as generally well-tolerated with favorable pharmacokinetics. Two VBR-based triple-combination studies began in Q1 2021.
- Management said COVID-19 had not significantly affected ongoing studies to date, though it had caused limited enrollment delays and laboratory supply issues. Further effects on trials, vendors, timelines and access to capital remained uncertain.
- Key risks include clinical safety or efficacy shortfalls, trial and regulatory delays, reliance on collaborators and contract manufacturers, competition, intellectual-property challenges, and the need for further financing. The filing reported no material legal proceedings and no off-balance-sheet arrangements.
Important facts for investors to verify
- Subsequent clinical data and timing for ABI-H2158, ABI-H3733, and the ongoing combination studies.
- Whether the stated cash runway remains adequate as trial spending and other funding needs evolve.
- Progress on BeiGene-related development obligations, potential milestones, and the $9 million deferred balance.
- The effect of ATM equity issuance and other potential financing on share count and dilution.
- Whether COVID-19, trial execution, or regulatory developments change the company’s clinical timelines or spending plans.