Assembly Biosciences, Inc. — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing also provides unaudited fourth-quarter results. Assembly is a clinical-stage biotechnology company with HBV and microbiome programs; it had no approved products and no product-sales revenue.
Financial performance and liquidity
| Metric | FY 2019 | FY 2018 |
|---|---|---|
| Collaboration revenue | $16.0 million | $14.8 million |
| Research and development expense | $85.8 million | $72.7 million |
| General and administrative expense | $32.9 million | $34.8 million |
| Total operating expenses | $118.7 million | $107.5 million |
| Loss from operations | $102.7 million | $92.7 million |
| Net loss | $97.6 million | $90.8 million |
| Basic and diluted loss per share | $3.72 | $3.98 |
| Net cash used in operating activities | $84.1 million | $65.0 million |
FY 2019 collaboration revenue rose about 8%, while operating expenses increased about 10% and net loss widened about 8%. R&D spending increased in both programs, led by HBV; lower G&A stock-based compensation partly offset higher underlying G&A costs. Collaboration revenue comprised license-related revenue and Allergan cost reimbursements, not product sales. Gross margins are not meaningful for this development-stage business, and the filing does not report a product gross margin.
For Q4 2019, collaboration revenue was $4.8 million, operating expenses $33.5 million and net loss $27.1 million, compared with $3.7 million, $30.1 million and $26.2 million, respectively, in Q4 2018.
At year-end, cash and cash equivalents were $46.7 million and marketable securities were $227.3 million, for combined cash and securities of approximately $274.0 million. Current assets were $282.8 million versus current liabilities of $24.4 million. Total assets were $339.9 million, total liabilities $66.7 million and stockholders’ equity $273.2 million. No debt balance is reported in the presented balance sheet. Operating cash use increased year over year. Management stated existing resources were expected to fund operations and capital requirements for at least 12 months from the filing/financial-statement issuance date; continued funding will be needed thereafter. The company raised $134.7 million net in a December 2019 offering of common stock and pre-funded warrants.
Programs, outlook and notable items
- HBV: ABI-H0731 (731) was in Phase 2 combination studies. At Week 24, 22 of 27 evaluable patients with detectable baseline HBV DNA receiving 731 plus nucleos(t)ide therapy reached target-not-detected, versus 0 of 12 on nucleos(t)ide therapy alone. These are clinical findings, not evidence of an approved cure; longer-term extension data were interim. The FDA had granted 731 Fast Track designation.
- ABI-H2158: The initial Phase 1b 100 mg cohort showed mean HBV DNA and pgRNA declines of 2.3 and 2.1 log10, respectively, by Day 15. The company expected to begin Phase 2 in Q2 2020 after completing dose-ranging.
- ABI-H3733: IND-enabling studies were complete; Phase 1a initiation was expected in Q1 2020.
- Microbiome: ABI-M201 was in a Phase 1b ulcerative-colitis study. Allergan collaboration revenue and potential milestone/royalty payments are contingent on development and commercialization. Allergan could terminate the agreement; its announced acquisition by AbbVie was expected to close in early 2020, and the company said the impact on the collaboration was unknown.
- Risks and unusual items: The company expects continued operating losses and may need additional financing; further equity financing could dilute shareholders. Clinical, regulatory, manufacturing, intellectual-property and collaboration outcomes are uncertain. A $2.1 million relocation-related severance and employee-cost accrual was recorded in 2019, expected to be paid in 2020. The filing noted the emerging COVID-19 outbreak but reported no significant disruption to manufacturing or clinical studies to date and said it would continue monitoring effects.
Most important facts for investors to verify
- Whether reported cash runway assumptions hold as operating cash use rises and development programs advance.
- Final and longer-term clinical results, safety, and dose-ranging outcomes for 731 and 2158, and whether biomarker changes translate into clinical benefit.
- Progress and results for H3733 and M201, including the timing and execution of planned trials.
- Continuity, funding obligations and economics of the Allergan collaboration following the proposed AbbVie acquisition.
- Future financing needs and dilution, including the effect of the 2019 common-stock and pre-funded-warrant offering.