axla-20210930

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, 2021


☐			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 001-38501

______________________________________________________________________________

AXCELLA HEALTH INC.

(Exact name of registrant as specified in its charter)

______________________________________________________________________________


Delaware			26-3321056
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

840 Memorial Drive Cambridge, Massachusetts (Address of principal executive offices)			02139 (Zip Code)

(857) 320-2200 (Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value per share	AXLA	The Nasdaq Global 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 and post 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 5, 2021, the registrant had 38,916,570 shares of common stock, $0.001 par value per share, outstanding.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

In this Quarterly Report on Form 10-Q, or Quarterly Report, we use the following defined terms:

"product candidate" to refer to one of our investigational product candidates.

"development platform" to refer to our proprietary human-focused development platform.

"dose" to refer to the exposure amount of a product candidate in Clinical Studies or ongoing and planned Clinical Trials.

"non-drug" to refer to a non-therapeutic use of a product candidate. Such use may be as a medical food, food product or dietary supplement.

"Clinical Trial" to refer to a human clinical study of a drug product candidate subject to the requirements for an effective Investigational New Drug application, or an IND, or equivalent in a non-U.S. jurisdiction.

"Clinical Study" to refer to Institutional Review Board-Approved, or IRB-Approved, clinical studies conducted in humans with our product candidates under U.S. Food and Drug Administration, or the FDA, regulations and guidance supporting research with food outside of an IND (prior to any decision to develop a product candidate as a drug product candidate under an IND or non-U.S. equivalent or a non-drug product candidate). In these food studies, based on our understanding of FDA regulations and guidance, we evaluate in humans, including individuals with disease, a product candidate for safety, tolerability and effects on the normal structures and functions of the body. These studies are not designed or intended to evaluate a product candidate’s ability to diagnose, cure, mitigate, treat or prevent a disease as these would be evaluated in Clinical Trials if we decide to develop a product candidate as a drug or therapeutic.

This Quarterly Report contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•the benefits of our product candidates to health and/or disease and their commercial potential;

•the success, cost and timing of our product development activities, including statements regarding the timing of initiation and completion of preclinical studies, Clinical Studies or Clinical Trials and related preparatory work, and the timing of the availability of the results of these preclinical studies, Clinical Studies and Clinical Trials, including our ongoing and planned Clinical Trials for AXA1665 and AXA1125;

•our ability to use our research platform to design new product candidates with desirable biological activity;

•our ability to obtain and maintain regulatory approval or find alternate regulatory commercialization pathways from the FDA, the European Medicines Agency, or the EMA, and other comparable regulatory authorities for our product candidates, and any related restrictions, limitations or warnings in the label of an approved product candidate;

•our financing needs and the sufficiency of our funds to support company operations and business plans through certain periods of time, including funding necessary to complete further development of our product candidates, and, if successful, commercialization of these candidates as drug or non-drug products;

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•our ability to continue as a going concern, our future capital needs and our need to raise additional funds;

•our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates, development platform and the type of such protection;

•our ability to successfully manufacture our product candidates for preclinical studies, Clinical Studies and Clinical Trials and for commercial use, if approved;

•the size and growth potential of the markets for our product candidates and our ability to serve those markets, either alone or in combination with others;

•the rate and degree of market acceptance of our product candidates, if approved;

•regulatory developments in the United States and foreign countries;

•our ability to enter into a collaboration, partnership, or other agreement with a third party on reasonable terms or at all to develop one or more product candidates or commercialize any of our product candidates, if approved;

•our ability to secure sufficient manufacturing and supply chain capacity;

•the success of competing products or therapies that are or may become available;

•our ability to attract and retain key scientific, management or other necessary personnel;

•our estimates regarding expenses for both product development and as a public company, future revenue, capital requirements and needs for additional financing;

•the potential for faults in our internal controls;

•the effect of the COVID-19 pandemic on any of the foregoing; and

•other risks and uncertainties, including those discussed in Part II, Item 1A, Risk Factors in this Quarterly Report.

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events and with respect to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under Part II, Item 1A, Risk Factors and elsewhere in this Quarterly Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

We may from time to time provide estimates, projections and other information concerning our industry, the general business environment, and the markets for certain diseases, including estimates regarding the potential size of those markets and the estimated incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events, circumstances or numbers, including actual disease prevalence rates and market size, may differ materially from the information reflected in this Quarterly Report. Unless otherwise expressly stated, we obtained this industry, business information, market data, prevalence information and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources, in some cases applying our own assumptions and analysis that may, in the future, prove not to have been accurate.

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AXCELLA HEALTH INC.

FORM 10-Q

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		Page
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)		5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of Stockholders’ Equity	8
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Quantitative and Qualitative Disclosure About Market Risk		31
Item 4. Controls and Procedures		32

PART II. OTHER INFORMATION
Item 1. Legal Proceedings		33
Item 1A. Risk Factors		33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		99
Item 3. Defaults Upon Senior Securities		99
Item 4. Mine Safety Disclosures		99
Item 5. Other Information		99
Item 6. Exhibits		100
SIGNATURES		101

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PART I - FINANCIAL INFORMATION

Item I. Condensed Consolidated Financial Statements (Unaudited)

AXCELLA HEALTH INC.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)


	As of
	September 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	26,091	$	71,590
Marketable securities	40,055		35,739
Prepaid expenses and other current assets	1,521		1,692
Total current assets	67,667		109,021

Property and equipment, net	943		360
Other assets	211		211
Total assets	$	68,821	$	109,592
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,985	$	2,290
Accrued expenses and other current liabilities	4,772		5,494

Total current liabilities	7,757		7,784
Long-term debt, net of discount	25,021		25,222
Other liabilities	482		1,205
Total liabilities	33,260		34,211
Commitments and contingencies (Note 10)	—		—

Stockholders' equity:
Common stock, $0.001 par value; 150,000,000 shares authorized, 38,688,955 and 38,022,273 shares issued and 38,269,974 and 37,603,292 shares outstanding at September 30, 2021 and December 31, 2020, respectively	39		38
Additional paid-in capital	354,879		347,990
Treasury stock, 418,981 shares at cost	—		—
Accumulated other comprehensive loss	(7)		(34)
Accumulated deficit	(319,350)		(272,613)
Total stockholders' equity	35,561		75,381
Total liabilities and stockholders' equity	$	68,821	$	109,592

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AXCELLA HEALTH INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except share and per share data)


	Three Months Ended September 30,			Nine Months Ended September 30,
	2021		2020	2021	2020
Operating expenses:
Research and development	$	10,130	$

SEC Form 10-Q filed by Axcella Health Inc.