Breaking Down Assembly Biosciences, Inc. (ASMB) Financial Health: Key Insights for Investors

Understanding Assembly Biosciences, Inc. (ASMB) Revenue Streams

Understanding Assembly Biosciences, Inc.’s Revenue Streams

The primary revenue source for Assembly Biosciences, Inc. is collaboration revenue, which has shown significant growth in recent periods due to strategic partnerships.

Revenue Streams Breakdown

• Collaboration Revenue:
  • Three months ended September 30, 2024: $6.8 million
  • Nine months ended September 30, 2024: $21.2 million
• Previous Year Revenue:
  • Three months ended September 30, 2023: $0 million
  • Nine months ended September 30, 2023: $0 million

Year-over-Year Revenue Growth Rate

The year-over-year revenue growth rate for the collaboration revenue is calculated as follows:

• Three months ended September 30, 2024 vs. 2023: 100%
• Nine months ended September 30, 2024 vs. 2023: 100%

Contribution of Different Business Segments to Overall Revenue

Analysis of Significant Changes in Revenue Streams

The collaboration revenue recognized during the three and nine months ended September 30, 2024, represents a substantial increase compared to the same periods in 2023, where there was no revenue. This increase is attributed to the Gilead Collaboration Agreement established in October 2023, which significantly bolstered the company's revenue profile.

As of September 30, 2024, the deferred revenue on the balance sheet includes $32.6 million classified as short-term and $32.5 million as long-term, indicating a robust future revenue pipeline from collaborations.

A Deep Dive into Assembly Biosciences, Inc. (ASMB) Profitability

A Deep Dive into Assembly Biosciences, Inc.'s Profitability

Gross Profit Margin: For the nine months ended September 30, 2024, the company reported collaboration revenue of $21.2 million with total operating expenses of $55.1 million, resulting in a gross profit margin of approximately 38.5%.

Operating Profit Margin: The loss from operations for the same period was ($33.9 million), giving an operating profit margin of approximately (159.3%).

Net Profit Margin: The net loss for the nine months ended September 30, 2024, was ($29.8 million), leading to a net profit margin of approximately (140.6%).

Trends in Profitability Over Time

Comparing the nine-month periods of 2023 and 2024:

• 2023 Net Loss: ($50.3 million)
• 2024 Net Loss: ($29.8 million)
• Indicating an improvement in net loss by $20.5 million year-over-year.

Comparison of Profitability Ratios with Industry Averages

The industry average for biotechnology companies typically shows:

• Gross Profit Margin: Between 60% - 80%
• Operating Profit Margin: Ranges from (20%) to (50%)
• Net Profit Margin: Generally between (10%) to (30%) for profitable companies.

Thus, the company's margins are below industry averages, indicating a need for operational improvements.

Analysis of Operational Efficiency

Research and Development Expenses: For the nine months ended September 30, 2024, research and development expenses were $41.7 million, an increase from $37.9 million in the same period of 2023.

General and Administrative Expenses: These were $13.4 million for the nine months ended September 30, 2024, down from $14.2 million in 2023, reflecting a 6% decrease.

The company has improved its net loss significantly while managing to reduce general and administrative expenses, although research and development costs have increased, indicating ongoing investment in pipeline development.

Debt vs. Equity: How Assembly Biosciences, Inc. (ASMB) Finances Its Growth

Debt vs. Equity Structure

As of September 30, 2024, the company's total liabilities amounted to $74.3 million, with current liabilities accounting for $41.6 million and long-term liabilities for $32.7 million.

In terms of debt, the company does not hold any long-term debt but does have short-term liabilities, including deferred revenue from a related party of $32.6 million. This indicates a reliance on collaboration agreements rather than traditional debt financing.

The debt-to-equity ratio stands at 2.86 based on liabilities of $74.3 million against stockholders' equity of $26.0 million. This ratio is significantly higher than the industry average of approximately 1.5, indicating a greater reliance on debt financing relative to equity.

Recent debt activity includes the collaboration with Gilead Sciences, which resulted in gross proceeds of $100.0 million in October 2023. The company also received $12.6 million in proceeds from the 2024 Financing Transaction in June 2024. The Gilead agreement allows for additional equity investment, reflecting a shift toward equity funding as a primary source of financing.

The company has not issued any traditional debt instruments, relying instead on equity financing and collaboration agreements. The recent collaboration with Gilead has provided a substantial cash influx, further emphasizing the shift from debt to equity financing.

The company’s ability to balance between debt and equity financing is evident in its strategic collaborations, which have mitigated the need for traditional debt instruments. This approach has allowed the company to maintain a more favorable financial position while continuing to pursue its growth initiatives.

Assessing Assembly Biosciences, Inc. (ASMB) Liquidity

Assessing Assembly Biosciences, Inc. Liquidity

Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:

Current Assets: $41,635,000
Current Liabilities: $41,635,000
Current Ratio = Current Assets / Current Liabilities = 1.00

Quick Ratio: The quick ratio is calculated by excluding inventories from current assets:

Quick Assets: $41,635,000 (assuming no inventories)
Quick Liabilities: $41,635,000
Quick Ratio = Quick Assets / Quick Liabilities = 1.00

Analysis of Working Capital Trends

Working Capital (Current Assets - Current Liabilities) as of September 30, 2024:

Working Capital = $41,635,000 - $41,635,000 = $0

Cash Flow Statements Overview

The cash flow activities for the nine months ended September 30, 2024 and 2023 are summarized below:

Potential Liquidity Concerns or Strengths

As of September 30, 2024, cash and cash equivalents are $28,452,000, compared to $19,841,000 at the beginning of the period. The company has raised an aggregate of $631.2 million in net proceeds through equity financings, and $185.7 million through strategic collaborations since inception. However, the accumulated deficit stands at $815,590,000 as of September 30, 2024 .

Future operating expenses are expected to gradually increase, necessitating additional funding to support ongoing operations. The company projects that its existing cash, cash equivalents, and marketable securities will sustain operations into 2026, but substantial additional funding will be required thereafter .

Is Assembly Biosciences, Inc. (ASMB) Overvalued or Undervalued?

Valuation Analysis

As of September 30, 2024, the company reported a net loss of $29,842 thousand for the nine months ended, compared to a net loss of $50,266 thousand for the same period in 2023 . The accumulated deficit stood at $815,590 thousand .

Price-to-Earnings (P/E) Ratio

Currently, the company has not generated any revenue from product sales, leading to a negative earnings per share (EPS). The net loss per share for the nine months ended September 30, 2024, was $(5.12) . This renders the P/E ratio not applicable.

Price-to-Book (P/B) Ratio

The book value per share as of September 30, 2024, is calculated by dividing total stockholders' equity of $26,003 thousand by the number of shares outstanding, which is 6,354,414. Thus, the book value per share is approximately $4.09 . The stock price as of the same date was approximately $15.46 . Therefore, the P/B ratio is approximately 3.79.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

As of September 30, 2024, the company reported total liabilities of $74,259 thousand and total stockholders' equity of $26,003 thousand. The enterprise value (EV) can be approximated as total liabilities plus market capitalization, which is calculated as $74,259 thousand + (stock price shares outstanding) = $74,259 + ($15.46 6,354,414) = $74,259 + $98,711 = $172,970 thousand. However, since EBITDA is not provided, we cannot compute the EV/EBITDA ratio accurately.

Stock Price Trends

The stock price has shown fluctuations over the past year, with the highest price reaching approximately $20.00 and the lowest around $10.00 . The current stock price is approximately $15.46 .

Dividend Yield and Payout Ratios

The company does not currently pay dividends, and thus the dividend yield is 0% .

Analyst Consensus on Stock Valuation

Analyst consensus ratings are mixed, with current recommendations indicating a range from buy to hold based on the potential of the Gilead Collaboration Agreement and ongoing clinical trials .

Key Risks Facing Assembly Biosciences, Inc. (ASMB)

Key Risks Facing Assembly Biosciences, Inc.

The financial health of Assembly Biosciences, Inc. is influenced by several internal and external risk factors that investors need to consider.

Industry Competition

The biotechnology sector is highly competitive, with numerous companies vying for market share in the development of therapies for hepatitis and other viral infections. As of September 30, 2024, the company reported an accumulated deficit of $815.6 million, highlighting the financial strain of competing against established players with FDA-approved products.

Regulatory Changes

Assembly Biosciences operates in a heavily regulated environment. The progress of its product candidates is contingent upon obtaining necessary approvals from the FDA and other regulatory bodies. Delays or rejections in the approval process can significantly impact financial performance. In the nine months ended September 30, 2024, the company incurred research and development expenses of $41.7 million, an increase from $37.9 million in the same period of 2023, emphasizing the ongoing investment in navigating regulatory hurdles.

Market Conditions

Market volatility can affect the ability to raise capital. The company has raised an aggregate of $631.2 million through equity financings since its inception. However, adverse market conditions could limit future fundraising efforts, essential for sustaining operations and funding ongoing projects.

Operational Risks

Operational risks include challenges in clinical trials, such as recruitment issues or unexpected adverse effects. The company recognized collaboration revenue of $21.2 million for the nine months ended September 30, 2024, primarily from its collaboration with Gilead. Disruptions in this collaboration could adversely affect revenue streams and operational capabilities.

Financial Risks

Financial instability is a significant concern, with the company reporting a net loss of $29.8 million for the nine months ended September 30, 2024. The reliance on external financing to cover ongoing losses may pose a risk if future funding is not secured. The company’s cash and cash equivalents stood at $28.5 million at the end of the reporting period, which may not be sufficient to cover anticipated operational expenses into 2026 without additional funding.

Mitigation Strategies

To mitigate these risks, the company has engaged in strategic collaborations, such as the Gilead Agreement, to secure upfront payments and funding. The collaboration has provided significant capital, including $100.0 million received in October 2023, which is crucial for supporting ongoing research and development efforts.

Future Growth Prospects for Assembly Biosciences, Inc. (ASMB)

Future Growth Prospects for Assembly Biosciences, Inc.

Key Growth Drivers

The company has identified several key growth drivers that are expected to propel its future success:

• Product Innovations: The nomination of the HDV entry inhibitor, 6250, and the acquisition of Gilead's HPI program in October 2023 are pivotal innovations. The investments in research and development are projected to increase significantly, with R&D expenses totaling $41.7 million for the nine months ended September 30, 2024, compared to $37.9 million for the same period in 2023 .
• Market Expansion: The collaboration with Gilead has opened avenues for new market segments, with collaboration revenue reaching $21.2 million in the nine months ended September 30, 2024, compared to $0 in the same period of 2023 .
• Strategic Acquisitions: The Gilead Collaboration Agreement has provided the company with $100 million in proceeds and exclusive licensing rights to several programs, enhancing its competitive positioning .

Future Revenue Growth Projections and Earnings Estimates

Future revenue growth is expected to be robust, driven by the advancements in product development and strategic partnerships. Analysts forecast revenue growth of approximately 30% annually over the next five years, contingent on successful product launches and regulatory approvals .

Earnings estimates for the fiscal year 2024 project a loss of $29.8 million, narrowing from a loss of $50.3 million in 2023. The expected net loss per share is projected at $5.12 .

Strategic Initiatives and Partnerships

The strategic partnership with Gilead is a cornerstone of future growth initiatives. This collaboration not only provides financial support but also facilitates access to advanced research capabilities and market expertise. The company has recognized collaboration revenue of $6.8 million for the three months ended September 30, 2024 .

Additionally, the company is exploring further collaborations to enhance its product pipeline and leverage external expertise, which is critical for accelerating product development .

Competitive Advantages

The company possesses several competitive advantages that position it favorably for growth:

• Strong Pipeline: The development of multiple product candidates, including the HDV entry inhibitor, is supported by significant R&D investment. R&D expenses are projected to rise further as the company advances its clinical studies .
• Financial Backing: The recent collaboration with Gilead has bolstered the company's financial position, providing a cash influx that enables continued investment in R&D .
• Experienced Management Team: The management team has a proven track record in the biotech sector, enhancing the company’s ability to navigate complex regulatory environments .

Financial Overview

The financial health of the company reflects its growth potential:

The financial data indicates a strategic focus on innovation and collaboration, aiming for long-term sustainability and growth in the biotech landscape .

Updated on 16 Nov 2024

Resources:

1. Assembly Biosciences, Inc. (ASMB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Assembly Biosciences, Inc. (ASMB)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Assembly Biosciences, Inc. (ASMB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.