Assembly Biosciences, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; unaudited. Assembly is a clinical-stage biotechnology company developing hepatitis B virus (HBV) and microbiome therapies. It has no approved products and no product-sales revenue.
Financial position and results
| Metric | Q1 2019 / March 31, 2019 | Comparable period / prior year-end |
|---|---|---|
| Collaboration revenue | $3.885 million | $3.565 million in Q1 2018 |
| Research and development expense | $22.704 million | $14.541 million in Q1 2018 |
| General and administrative expense | $9.517 million | $5.696 million in Q1 2018 |
| Operating loss | $28.336 million | $16.672 million in Q1 2018 |
| Net loss | $27.052 million; $1.05 per share | $16.249 million; $0.80 per share in Q1 2018 |
| Operating cash flow | $(23.939) million | $(15.500) million in Q1 2018 |
| Cash and cash equivalents | $29.107 million | $41.471 million at Dec. 31, 2018 |
| Marketable securities | $164.429 million | $176.609 million at Dec. 31, 2018 |
| Total assets / total liabilities | $259.247 million / $68.846 million | $268.045 million / $57.392 million at Dec. 31, 2018 |
Revenue increased about 9% year over year, while R&D and G&A expenses rose about 56% and 67%, respectively. Management attributed higher R&D spending primarily to increased HBV and microbiome program costs; higher G&A excluding stock compensation reflected professional fees, employee costs and rent. Cash plus marketable securities totaled $193.536 million at quarter-end. The filing reports no material change in contractual obligations and no off-balance-sheet arrangements. No debt balance is reported in the presented balance sheet.
Management said existing cash, cash equivalents and marketable securities should fund operations and capital expenditures for at least 12 months following issuance of the statements. The company expects substantial continuing losses and may need additional financing; funding is not committed, and unavailable or unfavorable financing could require program delays, reductions or discontinuation.
Business, pipeline and outlook
- ABI-H0731: The lead HBV core inhibitor is in two Phase 2a combination studies. Preliminary data presented in April 2019 indicated antiviral activity and an initial tolerability profile; management expected final six-month data in Q4 2019. The filing cautions that initial data may change after complete review.
- ABI-H2158: Phase 1a data in healthy volunteers were described as generally well tolerated. The Phase 1b patient portion began in April 2019, with data expected in Q1 2020.
- ABI-H3733: In IND-enabling work; the company expected to begin Phase 1a in Q1 2020.
- ABI-M201: A Phase 1b study in patients with mildly to moderately active ulcerative colitis began in February 2019.
- Allergan collaboration: Q1 collaboration revenue was recognized under the agreement. Potential development and commercial milestones and royalties are substantial but contingent; the company had not included milestone consideration in the transaction price because achievement remained uncertain. Allergan may terminate the agreement subject to notice provisions.
Risks, contingencies and notable items
- The business depends on clinical, regulatory and commercial success of early-stage candidates. Trial outcomes, safety, recruitment, manufacturing, regulatory review and competitive developments could delay or prevent approval.
- Assembly has no product revenue and expects ongoing losses. It relies on external funding and collaboration economics; equity financing could dilute shareholders, while debt or partnerships could impose restrictions or require rights to be relinquished.
- Other exposures include reliance on licensors and third parties, intellectual-property protection and disputes, and regulatory, manufacturing, data-security and international-operation risks. The filing reports no material legal proceedings.
- Adoption of the lease accounting standard resulted in recognition of $13.8 million of right-of-use assets and $14.0 million of lease liabilities on Jan. 1, 2019; the company said adoption did not affect operating results or cash flows. At March 31, lease liabilities were $13.225 million.
- After quarter-end, Chief Medical Officer Uri Lopatin transitioned to an advisory role. The disclosed separation benefits included a $410,000 lump-sum payment, specified equity vesting and exercise-period provisions, and potential COBRA premiums; consulting fees were also specified through Dec. 31, 2020.
Important facts for investors to verify
- Progress and final results for ABI-H0731 Phase 2a studies, and whether subsequent findings confirm the preliminary April 2019 data.
- Actual cash burn, financing needs and runway relative to management’s at-least-12-month estimate.
- Timing and outcomes for ABI-H2158, ABI-H3733 and ABI-M201 clinical milestones.
- The filing’s MD&A describes collaboration revenue as having decreased, although the financial statements show $3.885 million versus $3.565 million a year earlier; clarify the apparent inconsistency. Also reconcile the MD&A accumulated-deficit figure of approximately $367.3 million with the balance-sheet figure of $368.839 million at March 31, 2019.