Assembly Biosciences, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. Assembly is a clinical-stage biotechnology company developing oral therapies for chronic hepatitis B (HBV); it had no approved products and no product-sales revenue.
Financial performance and liquidity
- Collaboration revenue: $79.1 million, up from $16.0 million in 2019. Revenue included recognition associated with termination of the Allergan agreement and transfer of the VBR license under the BeiGene agreement; it is not product-sales revenue.
- Expenses and losses: R&D expense was $106.8 million (up 25%); general and administrative expense was $37.1 million (up 13%). Operating loss was $64.8 million, compared with $102.7 million in 2019. Net loss was $62.2 million, versus $97.6 million; basic and diluted loss per share was $1.75, versus $3.72.
- Cash flow: Cash used in operations was $63.0 million, compared with $84.1 million in 2019. Year-end cash and cash equivalents were $59.4 million, and marketable securities were $157.0 million, for combined cash and investments of approximately $216.4 million.
- Balance sheet: Total assets were $283.3 million and stockholders’ equity was $240.6 million. The filing reports no borrowings; liabilities were $42.7 million, including operating lease liabilities and deferred revenue. Current assets were $224.5 million versus current liabilities of $24.4 million.
- Cash runway and capital: Management said existing cash, cash equivalents and marketable securities were expected to fund operations for at least 12 months after the financial statements were issued. The company raised $5.5 million net through its ATM in 2020 and reported an additional $25.5 million net from ATM sales after year-end.
Margins are not a useful measure of operating performance for this development-stage company: expenses substantially exceeded collaboration revenue, and there were no commercial product sales.
Fourth-quarter snapshot
- Q4 collaboration revenue was $1.0 million; operating expenses were $40.7 million and net loss was $39.4 million, or $1.11 per share.
- The year included a $7.3 million net income in Q2, largely reflecting collaboration revenue recognition; Q4 returned to a substantial loss. Annual results are therefore affected by timing and recognition of collaboration revenue.
Material changes and notable items
- HBV strategy: In Study 211, 39 of 41 patients relapsed after stopping VBR plus nucleoside analog reverse transcriptase inhibitor therapy. The company concluded this two-drug regimen alone was insufficient to cure HBV, terminated the study early and decided not to pursue global registrational studies of VBR as chronic suppressive treatment. It also expected to terminate Study 205.
- Pipeline: ABI-H2158 entered Phase 2 in June 2020; interim data were expected in the second half of 2021. ABI-H3733 completed a Phase 1 study, with preliminary results indicating it was generally well tolerated and had favorable pharmacokinetics. The company expected to select a fourth-generation core inhibitor in the first half of 2021.
- Collaborations: BeiGene paid $40.0 million upfront for China-territory rights to VBR, ABI-H2158 and ABI-H3733. Assembly recognized $31.0 million of revenue for the VBR license and recorded $9.0 million as long-term deferred revenue. Potential milestones total approximately $500 million, plus tiered royalties; these are contingent and not assured.
- Program wind-down: Assembly decided to wind down its Microbiome program, completing the transition in early 2021 and reallocating resources to HBV. 2020 restructuring charges were $5.7 million, including employee costs and asset impairment; the company reported $4.2 million of accrued restructuring charges at year-end.
- Other collaboration revenue: AbbVie, following its acquisition of Allergan, terminated the microbiome agreement effective October 2020. Assembly recognized the remaining deferred revenue associated with its obligations; reimbursement revenue ceased upon termination.
Outlook, risks and contingencies
- Management expected HBV program expenses to be roughly flat in 2021, while stating costs would generally rise over time as research and clinical development progressed. The company expects continued losses and requires substantial additional funding; no committed external funding source was disclosed.
- Clinical efficacy and safety, regulatory approval, trial timing and enrollment, manufacturing and supply, and the ability to raise capital are major uncertainties. The company relies on third-party manufacturers and CROs and has no approved products.
- COVID-19 had not significantly affected planned clinical or preclinical work as of the filing, but could disrupt trials, sites, vendors, supply chains and regulatory timelines.
- BeiGene may terminate for convenience on 90 days’ notice; rights to individual compounds may revert under specified circumstances. Additional milestone and royalty obligations under licenses and collaborations depend on future events.
- No material legal proceedings were reported. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Key facts investors should verify
- Subsequent clinical updates for ABI-H2158 and ABI-H3733, and whether the anticipated fourth-generation candidate was selected.
- Final Study 211 data and the development plan for VBR in multi-drug, finite-treatment combinations after the low off-treatment response.
- Current cash, investment balances, operating cash burn and financing needs, including the impact of post-year-end ATM share issuance and dilution.
- BeiGene collaboration progress, remaining license-transfer obligations, cost-sharing terms and any milestone or royalty developments.
- Actual costs and completion of the Microbiome wind-down, including restructuring payments and facility exits.