axla-20230630

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 June 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: 001-38901

______________________________________________________________________________

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.)

P.O. Box 1270 Littleton, Massachusetts (Address of principal executive offices)			01460 (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 ý 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 ý 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 ý

As of July 28, 2023, the registrant had 73,692,745 shares of common stock, $0.001 par value per share, outstanding.


		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 (Deficit)	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		30
Item 4. Controls and Procedures		31

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		35
Item 3. Defaults Upon Senior Securities		35
Item 4. Mine Safety Disclosures		35
Item 5. Other Information		35
Item 6. Exhibits		36
SIGNATURES		37


	As of
	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	8,884	$	17,147

Prepaid expenses and other current assets	383		876
Total current assets	9,267		18,023

Property and equipment, net	15		693

Other assets	—		211
Total assets	$	9,282	$	18,927
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	8,395	$	4,707
Accrued expenses and other current liabilities	1,754		7,849

Current portion of operating lease liability	1,391		1,592
Total current liabilities	11,540		14,148
Operating lease liability	—		569
Other non-current liabilities	—		46
Total liabilities	11,540		14,763
Commitments and contingencies (Note 8)	—		—

Stockholders' equity (deficit):
Common stock, $0.001 par value; 150,000,000 shares authorized, 74,111,726 and 74,074,201 shares issued and 73,692,745 and 73,655,220 shares outstanding at June 30, 2023 and December 31, 2022, respectively	74		74
Additional paid-in capital	423,484		422,517
Treasury stock, 418,981 shares at cost	—		—

Accumulated deficit	(425,816)		(418,427)
Total stockholders' equity (deficit)	(2,258)		4,164
Total liabilities and stockholders' equity (deficit)	$	9,282	$	18,927


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating expenses:
Research and development	$	1,224	$	16,866	$	2,657	$	30,410
General and administrative	2,319		3,753		5,069		8,539
Total operating expenses	3,543		20,619		7,726		38,949
Loss from operations	(3,543)		(20,619)		(7,726)		(38,949)
Other (expense) income:
Interest income	132		65		272		87
Interest expense	—		(752)		—		(1,456)
Other income (expense), net	(2)		—		65		(27)
Total other income (expense), net	130		(687)		337		(1,396)
Net loss	$	(3,413)	$	(21,306)	$	(7,389)	$	(40,345)
Net loss per share, basic and diluted	$	(0.05)	$	(0.40)	$	(0.10)	$	(0.86)
Weighted average common shares outstanding, basic and diluted	73,688,558		52,616,279		73,678,881		47,052,105
Comprehensive loss:
Net loss	$	(3,413)	$	(21,306)	$	(7,389)	$	(40,345)
Other comprehensive income (loss):
Unrealized losses on marketable securities	—		4		—		(14)
Comprehensive loss	$	(3,413)	$	(21,302)	$	(7,389)	$	(40,359)


	Three and Six Months Ended June 30, 2022
	Common stock			Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Total stockholders’ equity
	Shares	Par value
BALANCE - January 1, 2022	39,605,701	$	40	$	359,261	$	(52)	$	(337,241)	$	22,008
Issuance of common stock, net of issuance costs of $223	13,321,602	13		25,413						25,426
Exercise of common stock options	8,499			6						6
Vesting of restricted stock units	59,019									—
Share-based compensation				1,509						1,509
Unrealized loss on marketable securities						(18)				(18)
Net loss								(19,039)		(19,039)
BALANCE - March 31, 2022	52,994,821	$	53	$	386,189	$	(70)	$	(356,280)	$	29,892
Costs incurred for the issuance of common stock	—	—		30						30
Vesting of restricted stock units	5,797	—		—						—
Issuance of common stock related to ESPP	57,751	—		84						84
Share-based compensation				594						594
Unrealized gain on marketable securities						4				4
Net loss								(21,306)		(21,306)
BALANCE - June 30, 2022	53,058,369	$	53	$	386,897	$	(66)	$	(377,586)	$	9,298


	Three and Six Months Ended June 30, 2023
	Common stock			Additional paid-in capital		Accumulated deficit		Total stockholders’ equity (deficit)
	Shares	Par value
BALANCE - January 1, 2023	74,074,201	$	74	$	422,517	$	(418,427)	$	4,164
Vesting of restricted stock units	27,807							—
Share-based compensation				539				539
Net loss						(3,976)		(3,976)
BALANCE - March 31, 2023	74,102,008	$	74	$	423,056	$	(422,403)	$	727
Vesting of restricted stock units	9,718							—
Stock-based compensation				428				428
Net loss						(3,413)		(3,413)
BALANCE - June 30, 2023	74,111,726	$	74	$	423,484	$	(425,816)	$	(2,258)


	Fair Value Measurements at June 30, 2023 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	8,726	$	—	$	—	$	8,726





Total	$	8,726	$	—	$	—	$	8,726


	Fair Value Measurements at December 31, 2022 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	14,649	$	—	$	—	$	14,649





Total	$	14,649	$	—	$	—	$	14,649


	June 30, 2023		December 31, 2022
Laboratory equipment	$	—	$	3,506
Leasehold improvements	—		564
Office and computer equipment	87		303
Furniture and fixtures	—		122
Property and equipment	87		4,495
Less: accumulated depreciation and amortization	(72)		(3,802)
Property and equipment, net	$	15	$	693


	June 30, 2023		December 31, 2022
Accrued employee compensation and benefits	$	470	$	808
Accrued external research and development expenses	843		4,791
Accrued professional fees	441		824
Accrued employee termination benefits	—		1,221
Other	—		205
Total accrued expenses and other current liabilities	$	1,754	$	7,849


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Life (in Years)	Intrinsic Value (in thousands)
Outstanding as of January 1, 2023	6,536,977	$	5.05
Granted	611,500	0.68
Exercised	—	—
Canceled	(1,746,381)	4.22
Outstanding as of June 30, 2023	5,402,096	$	4.82	6.44	$	—
Exercisable as of June 30, 2023	3,995,701	$	5.66	5.61	$	—
Vested or expected to vest as of June 30, 2023	5,402,096	$	4.82	6.44	$	—





*						Filed herewith.
#						Indicates a management contract or any compensatory plan, contract or arrangement.
†						The certification furnished in Exhibit 32.1 hereto is deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.


	AXCELLA HEALTH INC.

Date: August 3, 2023	By:	/s/ William R. Hinshaw, Jr.
		William R. Hinshaw, Jr. President, Chief Executive Officer and Director (Principal Executive Officer)

	AXCELLA HEALTH INC.

Date: August 3, 2023	By:	/s/ Marie Washburn
		Marie Washburn Vice President, Finance and Corporate Controller (Principal Financial Officer and Principal Accounting Officer)


	Number of Shares	Weighted Average Grant Date Fair Value per Share
Outstanding as of January 1, 2023	75,233	$	5.04
Granted	—	—
Vested	(37,525)	3.88
Forfeited	(9,375)	5.00
Outstanding as of June 30, 2023	28,333	$	6.59


	Three Months Ended June 30,						Six Months Ended June 30,
Operating leases	2023			2022			2023			2022
Lease cost
Operating lease cost	$	37		$	401		$	84		$	803
Variable lease cost	173			160			369			353
Total lease cost	$	210		$	561		$	453		$	1,156

Other information
Operating cash flows used for operating leases	$	—		$	578		$	192		$	1,181
Weighted average remaining lease term (years)	0.8			1.8			0.8			1.8
Weighted average discount rate (percentage)	9.0		%	9.0		%	9.0		%	9.0		%


	As of
Maturity of lease liabilities	June 30, 2023		December 31, 2022
2023	$	870	$	1,722
2024	580		580
Total future minimum lease payments	$	1,450	$	2,302
Less: imputed interest	(59)		(141)
Total lease liability	$	1,391	$	2,161

Reported as:
Current portion of operating lease liability	$	1,391	$	1,592
Operating lease liability	—		569
Total lease liability	$	1,391	$	2,161


Exhibit No.						Exhibit Index
3.1						Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K (File No. 001-38901) filed with the Securities and Exchange Commission on May 13, 2019).
3.2						Amended and Restated Bylaws of Registrant (Incorporated by reference to Exhibit 3.4 to the Registrant’s Current Report on Form 8-K (File No. 001-38901) filed with the Securities and Exchange Commission on May 17, 2019).
3.3						Amendment to the Amended and Restated Bylaws of Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38901) filed with the Securities and Exchange Commission on May 8, 2020).
4.1						Specimen Stock Certificate evidencing shares of common stock (Incorporated by reference to Exhibit 4.1 to the Registrant’s Amendment No. 1 to the Registration Statement on Form S-1/A (File No. 333-230822) filed with the Securities and Exchange Commission on April 30, 2019).
4.2						Fifth Amended and Restated Investors' Rights Agreement among the Registrant and certain of its stockholders, dated November 30, 2018 (Incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230822) filed with the Securities and Exchange Commission on April 12, 2019).
4.3						Description of the Registrant’s Securities (incorporated by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 23, 2020).
31.1*						Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*†						Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101INS*						Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101SCH*						Inline XBRL Taxonomy Extension Schema Document.
101CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101LAB*						Inline XBRL Taxonomy Extension Labels Linkbase Document.
101PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
104*						Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.)

SEC Form 10-Q filed by Axcella Health Inc.