Form 10-Q ASSEMBLY BIOSCIENCES, For: Mar 31

Article Stock Quotes (1)

FREE Breaking News Alerts from StreetInsider.com!

StreetInsider.com Top Tickers, 1/28/2023

1. INTC
2. TSLA
3. SPY
4. V
5. LCID

6. HAS
7. CVX
8. FE
9. MA
10. AXP

Top News Most Read Special Reports

May 12, 2022 4:21 PM EDT

E-mail

Get instant alerts when news breaks on your stocks. Claim your 1-week free trial to StreetInsider Premium here.

asmb-10q_20220331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________to___________.

Commission file number: 001-35005

ASSEMBLY BIOSCIENCES, INC.

(Exact name of Registrant as specified in its charter)

Delaware	20-8729264
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

331 Oyster Point Blvd., Fourth Floor
South San Francisco, California	94080
(Address of principal executive offices)	(zip code)

(833) 509-4583

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	ASMB	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-accelerated Filer	☒	Smaller Reporting Company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 9, 2022, there were 48,216,473 shares of the registrant’s common stock outstanding.

Index

		Page Number

PART I:	FINANCIAL INFORMATION	2

Item 1.	Financial Statements	2

	Condensed Consolidated Balance Sheets at March 31, 2022 (unaudited) and December 31, 2021	2

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021 (unaudited)	3

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (unaudited)	5

	Notes to the Condensed Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22

Item 4.	Controls and Procedures	22

PART II:	OTHER INFORMATION	23

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults Upon Senior Securities	36

Item 4.	Mine Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	37

SIGNATURES		38

References to Assembly Biosciences, Inc.

Throughout this Quarterly Report on Form 10-Q, the “Company,” “Assembly,” “we,” “us,” and “our,” except where the context requires otherwise, refer to Assembly Biosciences, Inc. and its consolidated subsidiaries, and “our board of directors” or “the Board” refers to the board of directors of Assembly Biosciences, Inc.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” that are subject to certain risks and uncertainties, including, without limitation, those set forth in Part I, Item 1A of our Annual Report on Form 10-K filed with the U.S. Securities and Exchanges Commission (SEC) on March 11, 2022 (2021 Annual Report) and Part II, Item 1A of this Quarterly Report on Form 10-Q under the heading “Risk Factors,” that could cause actual results to materially differ. Such risks and uncertainties include, among other things:

•

our ability to initiate and complete clinical trials involving our therapeutic product candidates, including studies contemplated by our clinical collaboration agreements, in the currently anticipated timeframes;

•

safety and efficacy data from clinical studies may not warrant further development of our product candidates;

•

clinical and nonclinical data presented at conferences may not differentiate our product candidates from other companies’ candidates;

•

results of nonclinical studies may not be representative of disease behavior in a clinical setting and may not be predictive of the outcomes of clinical studies;

•

continued development and commercialization of our hepatitis B virus (HBV) product candidates, if successful, in the China territory will be dependent on, and subject to, our collaboration agreement governing our HBV-related activity in the China territory;

•

our ability to maintain financial resources necessary to continue our clinical studies and fund business operations; and

•

any impact that the COVID-19 pandemic may have on our business and operations, including initiation, enrollment and continuation of our clinical studies or timing of discussions with regulatory authorities.

You are urged to consider statements that include the words may, will, would, could, should, might, believes, hopes, estimates, projects, potential, expects, plans, anticipates, intends, continues, forecast, designed, goal or the negative of those words or other comparable words to be uncertain and forward-looking. In particular, forward-looking statements include, but are not limited to, statements regarding the timing of commencement of future clinical studies involving our therapeutic product candidates; our ability to successfully complete, and receive favorable results in, clinical trials for our product candidates; and the expected impact of the COVID-19 pandemic on our business and operations. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Except as required by law, we assume no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ASSEMBLY BIOSCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands except for share amounts and par value)

	March 31,			December 31,
	2022			2021
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	51,174		$	45,627
Marketable securities - short-term		71,826			101,000
Accounts receivable from collaborations		524			336
Prepaid expenses and other current assets		7,253			7,241
Total current assets		130,777			154,204

Marketable securities - long-term		23,459			27,972
Property and equipment, net		1,019			1,139
Operating lease right-of-use (ROU) assets		5,300			6,042
Other assets		2,175			1,703
Total assets	$	162,730		$	191,060

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	1,407		$	2,659
Accrued research and development expenses		3,596			3,400
Other accrued expenses		2,499			6,863
Operating lease liabilities - short-term		3,207			3,151
Total current liabilities		10,709			16,073

Deferred revenue		2,733			2,733
Operating lease liabilities - long-term		2,497			3,325
Total liabilities		15,939			22,131

Commitments and contingencies

Stockholders' equity
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 48,132,937 and 48,120,437 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		48			48
Additional paid-in capital		802,170			800,728
Accumulated other comprehensive loss		(908	)		(419	)
Accumulated deficit		(654,519	)		(631,428	)
Total stockholders' equity		146,791			168,929
Total liabilities and stockholders' equity	$	162,730		$	191,060

See Accompanying Notes to Condensed Consolidated Financial Statements

ASSEMBLY BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands except for share and per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2022			2021
Operating expenses
Research and development	$	17,205		$	18,554
General and administrative		5,957			8,704
Total operating expenses		23,162			27,258
Loss from operations		(23,162	)		(27,258	)

Other income
Interest and other income, net		71			58
Total other income		71			58
Net loss	$	(23,091	)	$	(27,200	)

Other comprehensive loss
Unrealized loss on marketable securities		(489	)		(1	)
Comprehensive loss	$	(23,580	)	$	(27,201	)

Net loss per share, basic and diluted	$	(0.48	)	$	(0.69	)
Weighted average common shares outstanding, basic and diluted		48,123,930			39,679,734

See Accompanying Notes to Condensed Consolidated Financial Statements

ASSEMBLY BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands except for share amounts)

(Unaudited)

	Common Stock				Additional		Accumulated Other						Total
	Shares		Amount		Paid-in Capital		Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balance as of December 31, 2021		48,120,437	$	48	$	800,728	$	(419	)	$	(631,428	)	$	168,929
Issuance of common stock for settlement of restricted stock units (RSUs)		12,500		—		—		—			—			—
Unrealized loss on marketable debt securities		—		—		—		(489	)		—			(489	)
Stock-based compensation		—		—		1,442		—			—			1,442
Net loss		—		—		—		—			(23,091	)		(23,091	)
Balance as of March 31, 2022		48,132,937	$	48	$	802,170	$	(908	)	$	(654,519	)	$	146,791

	Common Stock				Additional			Accumulated Other						Total
	Shares		Amount		Paid-in Capital			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balance as of December 31, 2020		34,026,680	$	34	$	742,387		$	(270	)	$	(501,573	)	$	240,578
Issuance of common stock under at-the-market (ATM) equity offering program, net of issuance costs		5,991,858		6		34,131			—			—			34,137
Issuance of common stock for settlement of RSUs		86,146		—		—			—			—			—
Unrealized loss on marketable debt securities		—		—		—			(1	)		—			(1	)
Stock-based compensation		—		—		(270	)		—			—			(270	)
Net loss		—		—		—			—			(27,200	)		(27,200	)
Balance as of March 31, 2021		40,104,684	$	40	$	776,248		$	(271	)	$	(528,773	)	$	247,244

See Accompanying Notes to Condensed Consolidated Financial Statements

ASSEMBLY BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2022			2021
Cash flows from operating activities
Net loss	$	(23,091	)	$	(27,200	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		120			107
Stock-based compensation		1,443			(286	)
Net amortization of investments in marketable debt securities		149			92
Non-cash rent expense		893			1,135
Loss on disposal of property and equipment		—			1,611
Changes in operating assets and liabilities:
Accounts receivable from collaboration		(188	)		1,027
Prepaid expenses and other current assets		(12	)		303
Other assets		(472	)		358
Accounts payable		(1,252	)		(1,036	)
Accrued research and development expenses		196			(102	)
Other accrued expenses		(4,365	)		(8,312	)
Operating lease liabilities		(923	)		(1,041	)
Net cash used in operating activities		(27,502	)		(33,344	)

Cash flows from investing activities
Purchases of property and equipment		—			(3,078	)
Proceeds from sale of property and equipment		—			857
Purchases of marketable securities		(3,951	)		(49,213	)
Proceeds from maturities of marketable securities		30,000			66,450
Proceeds from sale of marketable securities		7,000			3,000
Net cash provided by investing activities		33,049			18,016

Cash flows from financing activities
Proceeds from the issuance of common stock under ATM equity offering program, net of issuance costs		—			34,137
Net cash provided by financing activities		—			34,137

Net increase in cash and cash equivalents		5,547			18,809
Cash and cash equivalents at the beginning of the period		45,627			59,444
Cash and cash equivalents at the end of the period	$	51,174		$	78,253
Supplemental non-cash investing and financing activities
Operating lease liabilities arising from obtaining ROU assets	$	—		$	42
Remeasurement of lease liabilities arising from modification of ROU assets	$	—		$	(788	)

See Accompanying Notes to Condensed Consolidated Financial Statements

ASSEMBLY BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Nature of Business

Overview

Assembly Biosciences, Inc. (together with its subsidiaries, Assembly or the Company), incorporated in Delaware in October 2005, is a clinical-stage biotechnology company advancing a novel class of oral therapeutic candidates for the treatment of chronic hepatitis B virus (HBV) infection and other viral diseases. The Company operates in one segment and is headquartered in South San Francisco, California, with operations in California and China. Prior to the Company’s wind-down of its Microbiome program in January 2021, the Company also had operations in Connecticut.

The Company’s research and development programs are pursuing multiple drug candidates that inhibit the HBV replication cycle and block the generation of covalently closed circular DNA (cccDNA), with the aim of discovering and developing finite and curative therapies for patients with HBV. The Company has discovered several novel core inhibitors, which are small molecules that directly target and allosterically modify the HBV core (HBc) protein in a way that affects assembly and stability of HBV nucleocapsids and is currently advancing an early-stage program evaluating a novel small molecule approach to inhibit entry for both HBV and hepatitis delta viruses.

Liquidity

The Company has not derived any revenue from product sales to date and currently has no approved products. Once a product has been developed, it will need to be approved for sale by the U.S. Food and Drug Administration or an applicable foreign regulatory agency. Since inception, the Company’s operations have been financed primarily through the sale of equity securities, proceeds from the exercise of warrants and stock options, issuance of debt, and upfront payments related to collaboration agreements. The Company has incurred losses from operations since inception and expects to continue to incur substantial losses for the next several years as it continues its product development efforts. Management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months following the date these unaudited condensed consolidated financial statements are issued. If the Company cannot generate significant cash from its operations, it intends to obtain any additional funding it requires through strategic relationships, public or private equity or debt financings, grants or other arrangements. The Company cannot assure such funding will be available on reasonable terms, if at all. Market volatility resulting from the global novel coronavirus disease (COVID-19) pandemic or other factors could also adversely impact the Company’s ability to access capital when and as needed.

If the Company is unable to generate enough revenue from its collaborations, secure additional sources of funding or receive full and timely collections of amounts due, it may be necessary to significantly reduce the current rate of spending through reductions in staff and delaying, scaling back, or stopping certain research and development programs, including more costly clinical trials.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and pursuant to the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the SEC. In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and include normal recurring adjustments necessary for the fair presentation of the Company’s financial position and its results of operations and comprehensive loss and its cash flows for the periods presented. These statements do not include all disclosures required by U.S. GAAP and should be read in conjunction with the Company’s audited consolidated financial statements and accompanying

notes for the fiscal year ended December 31, 2021, which are contained in the 2021 Annual Report. The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the entire year ending December 31, 2022 or future operating periods.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Estimates inherent in the preparation of the accompanying unaudited condensed consolidated financial statements include estimates of costs incurred but not yet invoiced for research and development accruals, recoverability and useful lives of our long-lived assets, amounts receivable under collaboration agreements, measurement of operating lease liabilities, and the fair value of stock options, stock appreciation rights, and RSUs granted to employees, directors, and consultants.

The Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible these external factors could have an effect on the Company’s estimates and could cause actual results to differ materially from those estimates and assumptions.

Other Risks and Uncertainties

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The ongoing COVID-19 pandemic and its broad, global impacts, including supply chain disruptions, have impacted certain aspects of the Company’s business, including where and how the Company’s employees work in its labs and offices and how and when the Company’s nonclinical and clinical studies are conducted. Early in the pandemic, the Company’s clinical and preclinical studies were largely unaffected, but as the pandemic has continued, the Company has experienced enrollment delays for two of its multi-drug combination clinical studies, delayed animal studies and delayed shipping of compounds necessary for the Company’s research programs. Although the clinical studies that experienced enrollment delays are now fully enrolled, the lockdowns resulting from China’s strict “zero covid” policy are also impacting execution of one of these multi-drug clinical studies. The Company relies on contract research organizations (CROs), some of which are in China and India. While these CROs have experienced pandemic-related impacts from time to time, the latest shutdowns in China have impacted the Company more than earlier in the pandemic. The Company cannot at this time predict the specific extent, duration, or full impact the COVID-19 pandemic will have on its business, operations, strategy, prospects and financial condition and results. The impact of the COVID-19 pandemic on the Company’s financial performance will depend on future developments, including the duration and spread of the outbreak and related governmental advisories and restrictions. These developments and the impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results may be adversely affected.

In addition, the study plan of the Company’s triple combination study with Antios Therapeutics, Inc. (Antios) initially included a site in Ukraine, but the study will no longer be conducted there due to the instability resulting from Russia’s invasion. These changes to the Company’s study plan will result in a delayed data readout.

Income Taxes

Effective January 1, 2022, a provision of the Tax Cuts and Jobs Act (TCJA) has taken effect creating a significant change to the treatment of research and experimental expenditures under Section 174 of the IRC (Sec. 174 expenses). Historically, businesses have had the option of deducting Sec. 174 expenses in the year incurred or capitalizing and amortizing the costs over five years. The new TCJA provision, however, eliminates this option and will require Sec. 174 expenses associated with research conducted in the U.S to be capitalized and amortized over a five-year period. For expenses associated with research outside of the United States, Sec. 174 expenses will be capitalized and amortized over a 15-year period. The Company prepared an analysis of the tax impact of capitalizing and amortizing these costs over the required periods and for calendar year 2022, it is expecting to be in a loss position after the estimated addback.

Net Loss per Share

Basic net loss per share of common stock excludes dilution and is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity unless inclusion of such shares would be anti-dilutive.

A reconciliation of the numerators and the denominators of the basic and diluted net loss per common share computations is as follows (in thousands, except per share amounts):

	Three Months Ended March 31,
	2022			2021
Numerator:
Net loss	$	(23,091	)	$	(27,200	)
Denominator:
Weighted average common shares and pre-funded warrants outstanding - basic and diluted		48,123,930			39,679,734
Net loss per share - basic and diluted	$	(0.48	)	$	(0.69	)

Securities excluded from the computation of diluted net loss per share because including them would have been antidilutive are as follows:

	March 31,
	2022		2021
Options to purchase common stock		7,475,876		7,382,515
Common stock subject to purchase under our Employee Stock Purchase Plan (ESPP)		129,107		44,870
Unvested RSUs		1,553,755		666,574
Total		9,158,738		8,093,959

Note 3 – Fair Value Measurements and Investments in Marketable Securities

The carrying amounts of cash equivalents and marketable securities approximate their fair value based upon quoted market prices. Certain of the Company’s financial instruments are not measured at fair value on a recurring basis, but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as cash, accounts receivable, accounts payable and accrued expenses.

The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments:

Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments.

Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace.

Level 3: Significant unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Investments in marketable securities consisted of the following (in thousands):

	March 31, 2022
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Cash equivalents
Money market fund	$	48,361	$	—	$	—		$	48,361
Total cash equivalents		48,361		—		—			48,361
Short-term marketable securities
U.S. and foreign corporate debt securities		4,097		—		(63	)		4,034
Asset-backed securities		21,978		—		(97	)		21,881
U.S. and foreign commercial paper		45,913		—		(2	)		45,911
Total short-term marketable securities		71,988		—		(162	)		71,826
Long-term marketable securities
U.S. and foreign corporate debt securities		14,966		—		(280	)		14,686
U.S. treasury securities		8,966		—		(193	)		8,773
Total long-term marketable securities		23,932		—		(473	)		23,459
Total cash equivalents and marketable securities	$	144,281	$	—	$	(635	)	$	143,646

	December 31, 2021
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Cash equivalents
Money market fund	$	42,507	$	—	$	—		$	42,507
Total cash equivalents		42,507		—		—			42,507
Short-term marketable securities
U.S. and foreign corporate debt securities		7,015		—		(2	)		7,013
Asset-backed securities		29,097		—		(38	)		29,059
U.S. and foreign commercial paper		64,929		—		(1	)		64,928
Total short-term marketable securities		101,041		—