ASSEMBLY BIOSCIENCES, INC. annual report, FY2012

Business context and reporting period

Issuer mismatch: The supplied filing is Ventrus Biosciences, Inc. (Nasdaq: VTUS), not Assembly Biosciences, Inc. It is a Form 10-K for the fiscal year ended December 31, 2012, not a quarterly filing. The figures below summarize the Ventrus filing.

Ventrus was a development-stage specialty pharmaceutical company with no marketed products or product-sales revenue. Its lead candidate, VEN 307, was topical diltiazem for anal-fissure pain. VEN 308, topical phenylephrine for fecal incontinence associated with IPAA, was not actively being advanced. The company had discontinued development of VEN 309 after its Phase III trial failed to meet endpoints.

Financial results and liquidity

Fourth-quarter 2012 net loss was $3.8 million, or $0.29 per share, compared with a fourth-quarter 2011 net loss of $18.9 million, or $1.52 per share. No revenue or profit margins were reported; margins are not meaningful without sales.

At December 31, 2012, total assets were $20.6 million, total liabilities $2.7 million, and stockholders’ equity $17.8 million. The filing reports no outstanding loans at year-end. Current assets were $20.5 million versus current liabilities of $2.7 million. Cash declined by $16.5 million during 2012; financing activities provided $4.9 million, primarily from at-the-market stock sales and exercises of warrants and options.

Material changes versus the prior comparable period

• Annual net loss narrowed by approximately $9.6 million. R&D expense fell by $5.8 million, primarily because 2011 included the $12.5 million VEN 309 asset purchase; 2012 included costs to prepare for and start the U.S. VEN 307 Phase III trial.
• G&A expense declined by $3.4 million, principally due to lower stock-based compensation.
• Operating cash use decreased by approximately $3.7 million, while year-end cash fell by $16.5 million.
• VEN 307’s European Phase III trial reported positive topline results in May 2012; a second pivotal Phase III trial began in the U.S. in the fourth quarter.
• VEN 309’s Phase III trial failed to meet endpoints; Ventrus stopped further development apart from winding down the program.

Outlook, commentary, risks and unusual items

• Management expected the U.S. VEN 307 Phase III trial to report topline data in the fourth quarter of 2013 and anticipated an NDA filing in the fourth quarter of 2013 or first quarter of 2014, assuming positive results. The filing described possible FDA approval and launch no earlier than late 2014 or early 2015.
• The FDA had advised that an NDA should include two Phase III trials, two provocative skin-safety trials, and a formal pharmacokinetic comparison. Management said it would not pursue the FDA’s suggested standardized healing endpoint and therefore did not expect to claim improved healing on the label.
• Management estimated approximately $15 million to complete VEN 307’s clinical program and believed available resources would fund operations through approval and initial launch. That estimate and runway were subject to trial, regulatory, cost, and timing risks.
• In February 2013, after year-end, the company raised approximately $20.7 million net through a public offering of common stock and convertible preferred stock. The preferred shares were convertible into common shares; the filing noted potential dilution.
• Key risks included trial failure or delay, regulatory rejection or additional study requirements, continued losses and future financing needs, dependence on S.L.A. Pharma and contract manufacturers, uncertain commercialization and reimbursement, and limited patent life. The VEN 307 U.S. patent was due to expire in February 2018, subject to potential exclusivity extensions.
• The company had an accumulated development-stage deficit of $92.3 million and expected substantial losses for at least the next two years. It reported no off-balance-sheet arrangements and no pending legal proceedings. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting.

Most important facts for investors to verify

1. Confirm the issuer identity: this filing is for Ventrus Biosciences, not Assembly Biosciences.
2. Check subsequent results and regulatory history for the U.S. VEN 307 Phase III program, required safety and pharmacokinetic studies, and any NDA filing or approval.
3. Reconcile the stated February 2013 financing proceeds: the filing variously describes approximately $20.7 million and itemizes net proceeds of approximately $18.71 million plus $2.04 million from the underwriter over-allotment.
4. Assess post-offering dilution, including conversion terms for preferred stock, outstanding options and warrants, and the resulting share count.
5. Evaluate actual cash burn and funding needs against management’s projected runway and the estimated $15 million remaining development cost.