axla-20230331

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, 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 001-38501

______________________________________________________________________________

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.)

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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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 April 28, 2023, the registrant had 73,686,948 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	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3. Quantitative and Qualitative Disclosure About Market Risk		28
Item 4. Controls and Procedures		29

PART II. OTHER INFORMATION
Item 1. Legal Proceedings		31
Item 1A. Risk Factors		31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 3. Defaults Upon Senior Securities		33
Item 4. Mine Safety Disclosures		33
Item 5. Other Information		33
Item 6. Exhibits		34
SIGNATURES		35


	As of
	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	12,540	$	17,147

Prepaid expenses and other current assets	200		876
Total current assets	12,740		18,023

Property and equipment, net	25		693

Other assets	—		211
Total assets	$	12,765	$	18,927
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	8,150	$	4,707
Accrued expenses and other current liabilities	2,103		7,849

Current portion of operating lease liability	1,641		1,592
Total current liabilities	11,894		14,148
Operating lease liability	144		569
Other non-current liabilities	—		46
Total liabilities	12,038		14,763
Commitments and contingencies (Note 8)	—		—

Stockholders' equity:
Common stock, $0.001 par value; 150,000,000 shares authorized, 74,102,008 and 74,074,201 shares issued and 73,683,027 and 73,655,220 shares outstanding at March 31, 2023 and December 31, 2022, respectively	74		74
Additional paid-in capital	423,056		422,517
Treasury stock, 418,981 shares at cost	—		—

Accumulated deficit	(422,403)		(418,427)
Total stockholders' equity	727		4,164
Total liabilities and stockholders' equity	$	12,765	$	18,927


	Three Months Ended March 31,
	2023		2022
Operating expenses:
Research and development	$	1,433	$	13,544
General and administrative	2,750		4,786
Total operating expenses	4,183		18,330
Loss from operations	(4,183)		(18,330)
Other (expense) income:
Interest income	140		22
Interest expense	—		(704)
Other income (expense), net	67		(27)
Total other income (expense), net	207		(709)
Net loss	$	(3,976)	$	(19,039)
Net loss per share, basic and diluted	$	(0.05)	$	(0.46)
Weighted average common shares outstanding, basic and diluted	73,669,096		41,426,107
Comprehensive loss:
Net loss	$	(3,976)	$	(19,039)
Other comprehensive income (loss):
Unrealized losses on marketable securities	—		(18)
Comprehensive loss	$	(3,976)	$	(19,057)


	Three Months Ended March 31, 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


	Three Months Ended March 31, 2023
	Common stock			Additional paid-in capital		Accumulated deficit		Total stockholders’ equity
	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


	Fair Value Measurements at March 31, 2023 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	12,290	$	—	$	—	$	12,290





Total	$	12,290	$	—	$	—	$	12,290


	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


	March 31, 2023		December 31, 2022
Laboratory equipment	$	—	$	3,506
Leasehold improvements	—		564
Office and computer equipment	86		303
Furniture and fixtures	—		122
Property and equipment	86		4,495
Less: accumulated depreciation and amortization	(61)		(3,802)
Property and equipment, net	$	25	$	693


	March 31, 2023		December 31, 2022
Accrued employee compensation and benefits	$	612	$	808
Accrued external research and development expenses	913		4,791
Accrued professional fees	578		824
Accrued employee termination benefits	—		1,221
Other	—		205
Total accrued expenses and other current liabilities	$	2,103	$	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	(1,048,753)	5.11
Outstanding as of March 31, 2023	6,099,724	$	4.60	6.64	$	—
Exercisable as of March 31, 2023	4,081,667	$	5.66	5.48	$	—
Vested or expected to vest as of March 31, 2023	6,099,724	$	4.60	6.64	$	—


	Three Months Ended March 31,
	2023		2022
Risk-free interest rate	3.95	%	1.87	%
Expected option life (in years)	6.11		6.13
Expected dividend yield	—	%	—	%
Expected volatility	90.1	%	91.4	%





*						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: May 4, 2023	By:	/s/ William R. Hinshaw, Jr.
		William R. Hinshaw, Jr. President, Chief Executive Officer and Director

	AXCELLA HEALTH INC.

Date: May 4, 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	(27,807)	4.41
Forfeited	—	—
Outstanding as of March 31, 2023	47,426	$	5.40


	Three Months Ended March 31,
Operating leases	2023			2022
Lease cost
Operating lease cost	$	46		$	401
Variable lease cost	196			193
Total lease cost	$	242		$	594

Other information
Operating cash flows used for operating leases	$	192		$	603
Weighted average remaining lease term (years)	1.10			2.10
Weighted average discount rate (percentage)	9.0		%	9.0		%


	As of
Maturity of lease liabilities	March 31, 2023		December 31, 2022
2023	$	1,300	$	1,722
2024	580		580
Total future minimum lease payments	$	1,880	$	2,302
Less: imputed interest	(95)		(141)
Total lease liability	$	1,785	$	2,161

Reported as:
Current portion of operating lease liability	$	1,641	$	1,592
Operating lease liability	144		569
Total lease liability	$	1,785	$	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).
10.1#						Retention Agreement, dated February 14, 2023, by and between Axcella Health Inc. and William Hinshaw (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 17, 2023).
10.2#						Retention Agreement, dated February 14, 2023, by and between Axcella Health Inc. and Margaret Koziel (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 17, 2023).
10.3#						Retention Agreement, dated February 14, 2023, by and between Axcella Health Inc. and Paul Fehlner (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 17, 2023).
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.