Assembly Biosciences, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016. Unaudited financial statements; comparative period is Q1 2015 unless otherwise noted.
Business context
Assembly is a pre-revenue biotechnology company developing oral therapies for hepatitis B virus (HBV) and a microbiome platform. Its lead microbiome candidate, ABI-M101, is being developed for recurrent C. difficile infection; its HBV program includes core protein allosteric modulators. The company reported no approved products or product-sales revenue. Management said it anticipated initiating clinical trials in the second half of 2016 for its recurrent-CDI therapy and lead HBV antiviral.
Financial results and liquidity
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Revenue | None from product sales | None from product sales |
| Research and development expense | $8.12 million | $3.83 million; up 112% |
| General and administrative expense | $3.16 million | $3.37 million; down 6% |
| Total operating expenses | $11.28 million | $7.20 million; up 57% |
| Net loss | $10.99 million | $7.14 million |
| Net loss per share, basic and diluted | $0.64 | $0.64 |
| Cash used in operating activities | $9.21 million | $3.67 million |
There was no product revenue, so a product gross margin is not applicable. The company reported interest and other income of $490,000 and a $202,000 realized loss on marketable securities; total other income was $289,000. An unrealized gain on marketable securities of $72,000 was recorded in other comprehensive income.
At March 31, 2016, cash and cash equivalents were $20.40 million and marketable securities totaled $61.32 million, for combined cash and investments of approximately $81.71 million. Current assets were $59.09 million and current liabilities were $3.57 million. Total liabilities were $15.17 million, including $11.60 million of deferred tax liabilities; the balance sheet lists no borrowings. Accumulated deficit was $174.95 million. No cash was provided by financing activities in Q1 2016.
Material changes versus the prior period
- R&D expense rose as spending increased by approximately $3.0 million for HBV and $1.6 million for the microbiome program, excluding stock-based compensation.
- Net operating cash use increased to $9.21 million from $3.67 million. The 2015 quarter included $70.5 million of net proceeds from a public stock offering; Q1 2016 had no financing proceeds.
- Weighted-average shares outstanding increased to 17.23 million from 11.18 million, while reported loss per share remained $0.64.
- Cash and cash equivalents declined from $27.11 million at December 31, 2015; marketable securities were $61.32 million at March 31, 2016, versus $63.95 million at year-end.
Outlook, risks, and other disclosures
- Management expected existing cash, cash equivalents, and marketable securities to fund operating and capital requirements for at least 12 months. A risk-factor disclosure separately said resources were expected to fund operations into the fourth quarter of 2017; actual runway could be shorter if costs, delays, or other needs exceed expectations.
- The company expected expenses to increase as research, development, and clinical work advance, and stated that substantial additional funding would be needed. Future financing may involve dilution, debt restrictions, or collaboration terms that require giving up rights. Additional funding may not be available on acceptable terms or at all.
- Both programs were early-stage and dependent on successful preclinical and clinical development, regulatory approval, manufacturing, and eventual market acceptance. The filing highlighted clinical, safety, recruitment, contract-research and manufacturing, intellectual-property, licensing, competition, and reimbursement risks.
- Potential future milestone payments to Indiana University Research and Technology Corporation were stated as totaling $825,000; license agreements also include diligence, royalty, and other milestone obligations.
- No material legal proceedings, off-balance-sheet arrangements, or material changes in market-risk disclosures were reported. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether clinical-trial starts occurred on the stated second-half 2016 timetable, and the status and results of both lead programs.
- The company’s current cash and securities balance, operating cash burn, and the assumptions behind its stated funding runway.
- Actual R&D spending and any changes in development, clinical, manufacturing, or regulatory plans.
- Availability and terms of future financing, including potential dilution or licensing and collaboration obligations.
- Progress on licensed technology and intellectual-property protection, including milestone, diligence, and royalty commitments.