SEC Filing : Assembly Biosciences, Inc.

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10-Q

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 September 30, 2023


☐	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 November 3, 2023, there were 65,709,112 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 September 30, 2023 (unaudited) and December 31, 2022	2

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)	3

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (unaudited)	6

	Notes to the Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24

Item 4.	Controls and Procedures	24

PART II:	OTHER INFORMATION	25

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	40

Item 3.	Defaults Upon Senior Securities	40

Item 4.	Mine Safety Disclosures	40

Item 5.	Other Information	40

Item 6.	Exhibits	41

SIGNATURES		42

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 “board of directors” 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 22, 2023 (2022 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 realize the potential benefits of our collaboration with Gilead Sciences, Inc. (Gilead), including all financial aspects of the collaboration and equity investments;

•

our ability to initiate and complete clinical studies involving our therapeutic product candidates, including studies contemplated by our collaboration with Gilead, in the currently anticipated timeframes or at all;

•

the occurrence of any event, change or other circumstance that could give rise to the termination of our collaboration with Gilead;

•

safety and efficacy data from clinical or nonclinical 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; and

•

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.

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; and our ability to successfully complete, and receive favorable results in, clinical studies for our product candidates. 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)


	September 30,			December 31,
	2023			2022
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	26,656		$	52,418
Marketable securities		19,554			39,192
Accounts receivable from collaboration		—			944
Prepaid expenses and other current assets		3,462			4,413
Total current assets		49,672			96,967

Property and equipment, net		561			743
Operating lease right-of-use (ROU) assets		844			3,195
Other assets		552			889
Total assets	$	51,629		$	101,794

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	758		$	2,493
Accrued research and development expenses		1,619			3,122
Other accrued expenses		3,886			7,317
Operating lease liabilities - short-term		869			3,364
Total current liabilities		7,132			16,296

Deferred revenue		2,733			2,733
Operating lease liabilities - long-term		50			101
Total liabilities		9,915			19,130

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; 150,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 52,614,194 and 48,894,973 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		53			49
Additional paid-in capital		816,722			807,938
Accumulated other comprehensive loss		(275	)		(803	)
Accumulated deficit		(774,786	)		(724,520	)
Total stockholders' equity		41,714			82,664
Total liabilities and stockholders' equity	$	51,629		$	101,794

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 September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Operating expenses
Research and development	$	10,824		$	18,130		$	37,894		$	53,127
General and administrative		4,224			5,271			14,201			18,009
Total operating expenses		15,048			23,401			52,095			71,136
Loss from operations		(15,048	)		(23,401	)		(52,095	)		(71,136	)

Other income
Interest and other income, net		628			256			1,829			439
Total other income		628			256			1,829			439
Net loss	$	(14,420	)	$	(23,145	)	$	(50,266	)	$	(70,697	)

Other comprehensive loss
Unrealized gain (loss) on marketable securities		50			(1	)		528			(580	)
Comprehensive loss	$	(14,370	)	$	(23,146	)	$	(49,738	)	$	(71,277	)

Net loss per share, basic and diluted	$	(0.27	)	$	(0.48	)	$	(0.97	)	$	(1.46	)
Weighted average common shares outstanding, basic and diluted		52,565,333			48,448,399			51,951,123			48,289,501

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)


	For the Three Month Period
	Common Stock				Additional			Accumulated Other						Total
	Shares		Amount		Paid-in Capital			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balance as of June 30, 2023		52,450,731	$	52	$	815,588		$	(325	)	$	(760,366	)	$	54,949
Issuance of common stock for settlement of restricted stock units (RSUs)		163,463		1		(1	)		—			—			—
Unrealized gain on marketable debt securities		—		—		—			50			—			50
Stock-based compensation		—		—		1,135			—			—			1,135
Net loss		—		—		—			—			(14,420	)		(14,420	)
Balance as of September 30, 2023		52,614,194	$	53	$	816,722		$	(275	)	$	(774,786	)	$	41,714


	Common Stock				Additional		Accumulated Other						Total
	Shares		Amount		Paid-in Capital		Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balance as of June 30, 2022		48,362,736	$	48	$	803,910	$	(998	)	$	(678,980	)	$	123,980
Issuance of common stock for settlement of RSUs		118,458		—		—		—			—			—
Unrealized loss on marketable debt securities		—		—		—		(1	)		—			(1	)
Stock-based compensation		—		—		1,570		—			—			1,570
Net loss		—		—		—		—			(23,145	)		(23,145	)
Balance as of September 30, 2022		48,481,194	$	48	$	805,480	$	(999	)	$	(702,125	)	$	102,404


	For the Nine Month Period
	Common Stock				Additional			Accumulated Other						Total
	Shares		Amount		Paid-in Capital			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balance as of December 31, 2022		48,894,973	$	49	$	807,938		$	(803	)	$	(724,520	)	$	82,664
Issuance of common stock under at-the-market (ATM) equity offering program, net of issuance costs		3,134,045		3		4,543			—			—			4,546
Issuance of common stock under Employee Stock Purchase Plan (ESPP)		90,407		—		80			—			—			80
Issuance of common stock for settlement of RSUs		494,769		1		(1	)		—			—			—
Unrealized gain on marketable debt securities		—		—		—			528			—			528
Stock-based compensation		—		—		4,162			—			—			4,162
Net loss		—		—		—			—			(50,266	)		(50,266	)
Balance as of September 30, 2023		52,614,194	$	53	$	816,722		$	(275	)	$	(774,786	)	$	41,714


	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 under ESPP		134,888		—		177		—			—			177
Issuance of common stock for settlement of RSUs		225,869		—		—		—			—			—
Unrealized loss on marketable debt securities		—		—		—		(580	)		—			(580	)
Stock-based compensation		—		—		4,575		—			—			4,575
Net loss		—		—		—		—			(70,697	)		(70,697	)
Balance as of September 30, 2022		48,481,194	$	48	$	805,480	$	(999	)	$	(702,125	)	$	102,404

See Accompanying Notes to Condensed Consolidated Financial Statements

ASSEMBLY BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities
Net loss	$	(50,266	)	$	(70,697	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		366			374
Stock-based compensation		4,160			4,580
Net (accretion) amortization of investments in marketable debt securities		(534	)		234
Non-cash rent expense		2,525			2,644
Changes in operating assets and liabilities:
Accounts receivable from collaboration		944			(910	)
Prepaid expenses and other current assets		951			2,060
Other assets		337			90
Accounts payable		(1,735	)		(717	)
Accrued research and development expenses		(1,503	)		1,062
Other accrued expenses		(3,429	)		(1,182	)
Operating lease liabilities		(2,720	)		(2,747	)
Net cash used in operating activities		(50,904	)		(65,209	)

Cash flows from investing activities
Proceeds from maturities of marketable securities		46,315			66,000
Purchases of property and equipment		(184	)		(102	)
Purchases of marketable securities		(25,615	)		(18,820	)
Proceeds from sale of marketable securities		—			27,000
Net cash provided by investing activities		20,516			74,078

Cash flows from financing activities
Proceeds from the issuance of common stock under ATM equity offering program, net of issuance costs		4,546			—
Proceeds from the issuance of common stock under ESPP		80			177
Net cash provided by financing activities		4,626			177

Net (decrease) increase in cash and cash equivalents		(25,762	)		9,046
Cash and cash equivalents at the beginning of the period		52,418			45,627
Cash and cash equivalents at the end of the period	$	26,656		$	54,673
Supplemental non-cash investing and financing activities
Operating lease liabilities arising from obtaining ROU assets	$	—		$	171

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 biotechnology company developing innovative antiviral therapeutics with the potential to improve the lives of patients worldwide by targeting serious viral diseases, including high-recurrence genital herpes, transplant-related herpesviruses, chronic hepatitis delta virus (HDV) infection and chronic hepatitis B virus (HBV) infection. The Company operates in one segment and is headquartered in South San Francisco, California.

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 (FDA) or an applicable foreign regulatory agency. Since inception, the Company’s operations have been financed through the sale of equity securities, the proceeds from the exercise of warrants and stock options, the 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. In October 2023, the Company received $100.0 million upon entering into the Option, License and Collaboration Agreement (the Gilead Collaboration Agreement) and the Common Stock Purchase Agreement and an Investor Rights Agreement (collectively, the Gilead Equity Agreements) with Gilead Sciences, Inc. (Gilead). 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.

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, 2022, which are contained in the 2022 Annual Report. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of results to be expected for the entire year ending December 31, 2023 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.

Significant 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.

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

The Company relies on contract research organizations (CROs), including one located in Ukraine that temporarily shut down operations due to Russia’s invasion. Though this CRO has resumed operations and the Company continues to utilize this CRO, the Company has reallocated certain work to other global CROs in case the CRO shuts down operations again.

U.S. and global financial markets have experienced volatility and disruption due to other macroeconomic and geopolitical events such as rising inflation, rising interest rates to combat inflation, the risk of a recession, the war between Russia and Ukraine, the Israel-Hamas war, as well as the ongoing impact of the COVID-19 pandemic. The Company cannot predict at this time to what extent, if at all, it and its employees, CROs, vendors and/or collaborators could potentially be negatively impacted by these events.

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 for share and per share amounts):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Numerator:
Net loss	$	(14,420	)	$	(23,145	)	$	(50,266	)	$	(70,697	)
Denominator:
Weighted average common shares outstanding - basic and diluted		52,565,333			48,448,399			51,951,123			48,289,501
Net loss per share - basic and diluted	$	(0.27	)	$	(0.48	)	$	(0.97	)	$	(1.46	)

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


	September 30,
	2023		2022
Options to purchase common stock		9,945,471		9,441,215
Common stock subject to purchase under ESPP		80,543		102,772
Unvested RSUs		1,088,889		1,837,049
Total		11,114,903		11,381,036

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) No. 2016-13, Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. The FASB issued additional amendments to the new guidance related to transition and clarification and deferred the effective date of this standard for all entities except SEC filers that are not smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU 2016-13 effective January 1, 2023 on a modified retrospective basis. The Company elected to exclude accrued interest receivable from the amortized cost basis of its available-for-sale debt securities and to not measure an allowance for credit losses for accrued interest receivable. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements.

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):

September 30, 2023