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Item 1. Business

2023-03-22 compared with 2022-03-11 · 604 added, 261 removed, 258 unchanged (77% of the section changed)

We are a clinical-stage biotechnology company focused on discovery and development of innovative therapeutics targeting hepatitis B virus (HBV) and other viral diseases.

The World Health Organization (WHO) estimates that 296 million people worldwide are chronically infected with HBV as of 2019.

Our research and development organizations are pursuing multiple drug candidates designed to inhibit the HBV replication cycle and block the generation of covalently closed circular DNA (cccDNA), with the aim of discovering and developing finite and curative therapies for patients with chronic HBV infection.

We have discovered several novel core inhibitors, which are small molecules that directly target and allosterically modulate the HBV core protein in a way that affects assembly and stability of HBV nucleocapsids.

In addition, our research organization is working on discovering and developing cccDNA disruptors and small molecules targeting two novel undisclosed HBV targets.

While we continue our efforts to develop finite and curative therapies for patients with chronic HBV infection, our research organization recently launched an exploratory virology discovery program for compounds directed at a number of non-HBV viral targets.

These targets, currently expected to be disclosed in mid-2022, were selected to leverage the deep antiviral expertise and experience of our research and development organizations against diseases with significant unmet medical need.

The ongoing COVID-19 pandemic and its broad, global impacts, including supply chain disruptions, have impacted certain aspects of our business, including where and how our employees work in our labs and offices and how and when our nonclinical and clinical studies are conducted.

Early in the pandemic, our current and future planned clinical trials and preclinical studies were largely unaffected, but as the pandemic has continued, we have experienced enrollment delays for our current clinical studies, particularly our two ongoing multi-drug combination studies.

For more information, see “—Multi-Drug Combination Studies.”

As previously announced, in January 2021, we wound down our Microbiome program to prioritize and focus our resources on our virology programs.

HBV Background

HBV is a leading global cause of chronic liver disease and liver transplants.

The WHO estimates that, as of 2019, 296 million people worldwide were infected with HBV, with 1.5 million new infections occurring each year.

The WHO also estimates that 820,000 people died in 2019 because of HBV, mostly from complications, including cirrhosis and hepatocellular carcinoma.

HBV is a global epidemic and infects more than three times the number of people infected with hepatitis C virus and HIV infections combined, according to the WHO.

Of the 296 million people living with chronic HBV infection, only approximately 30 million were aware of their infection, and only approximately 6.6 million of those diagnosed received treatment.

Few treated patients exhibit cure, defined herein as sustained viral suppression (more than six months) of HBV DNA (less than the lower limit of quantification (LLOQ)) after a finite duration of therapy.

Current Treatments

There have been no new mechanisms used to treat chronic HBV infection approved in over 25 years.

Current therapeutic options for HBV include:

Direct Acting Antiviral medications (Nucelos(t)ide analog reverse transcriptase inhibitors (NrtIs)).

Several antiviral medications—including lamivudine (Epivir®), adefovir (Hepsera®), telbivudine (Tyzeka®), tenofovir alafenamide (Vemlidy®), tenofovir disoproxil fumarate (Viread®) and entecavir (Baraclude®)—effectively reduce circulating virus levels by inhibiting reverse transcription.

Chronic therapy with these agents can result in reduced liver inflammation and fibrosis.

Unfortunately, NrtIs are rarely curative, even after years of therapy, and viral replication resumes when therapy is stopped.

Pegylated Interferon alfa (Peg - IFN α or interferon ).

This synthetic version of a substance produced by the body to fight infection is used mainly for people infected with HBV who do not want to undergo long-term treatment (e.g., patients who might want to become pregnant within a few years).

It is administered by injection.

Cure rates are relatively low and side effects may be severe, including flu-like symptoms and depression.

The goal of our HBV program is to discover and develop finite and curative therapies for those chronically infected with HBV.

Our efforts to forge a new and differentiated path to develop finite and curative therapies for chronic HBV infection are inspired by the hundreds of millions of people living with this condition worldwide.

While we have learned that combination therapy of our first-generation core inhibitor product candidate, vebicorvir (VBR), with NrtIs alone will not result in a finite and curative treatment, we believe that a regimen of core inhibitors in combination with NrtI therapy will be the antiviral backbone of future finite and curative therapies.

As a result, our current business strategy is focused on three parallel paths:

Developing and advancing our next-generation core inhibitors, ABI-H3733 (3733) and ABI-4334 (4334), which we believe has a best-in-class preclinical profile;

Assessing core inhibitors in multi-drug combination studies, adding nonoverlapping mechanisms of action to the core inhibitor + NrtI antiviral backbone by utilizing our first-generation core inhibitor VBR;

Discovering and developing additional compounds beyond core inhibitors, including a cccDNA disruptor and two other novel preclinical programs.

With respect to our core inhibitor pipeline, we have concise, data-driven development plans that we believe will enable selection of the optimal core inhibitor to advance for finite and curative combination therapies for HBV.

We intend to further complement our core inhibitor programs with additional new mechanisms of action discovered and developed internally as well as externally through collaborations, licenses, partnerships and other types of business arrangements.

Our Primary Focus:

Targeting HBV Core Protein to Achieve a Cure

HBV is a DNA virus that infects hepatocytes and establishes a reservoir of cccDNA, a unique viral DNA moiety that resides in the cell nucleus of HBV-infected hepatocytes and is associated with viral persistence and chronic infection.

We are a biopharmaceutical company advancing clinical candidates with the potential to improve the lives of millions of people living with chronic hepatitis B virus (HBV) infection around the world, an early-stage development program targeting high-recurrence genital herpes associated with herpes simplex virus type 2 (HSV-2) infection and research programs focused on the discovery of novel antivirals to treat devastating viral diseases, including hepatitis delta virus (HDV) and transplant-related herpesviruses.

In July 2022, we implemented a strategic restructuring plan to:

(1) discontinue development of our first-generation core inhibitor (CI), vebicorvir (VBR), based on review of interim on-treatment efficacy data from then ongoing triple combination studies that did not support continuation;

(2) advance our next-generation CIs, ABI-H3733 (3733) and ABI-4334 (4334), in clinical studies;

and (3) prioritize research activities, including our:

HBV/HDV entry inhibitor;

orally bioavailable, liver-focused interferon-α

(IFN-α) receptor (IFNAR) agonist;

long-acting HSV-2 helicase inhibitor targeting high-recurrence genital herpes;

and programs targeting pan-herpes non-nucleoside polymerase inhibitors (NNPIs) for transplant-associated infections.

The strategic plan included a reduction of our workforce by 30 employees, resulting in a total of approximately 70 remaining employees.

In connection with the plan, our Chief Medical Officer and Chief Financial Officer stepped down from their roles.

Our Strategic Approaches

Our current business strategy is focused on three parallel paths:

Highly Potent Next-Generation HBV Core Inhibitors –

Advancing our novel next-generation CIs in clinical studies, with 4334 (currently prioritized) and 3733 (currently paused) in ongoing Phase 1a and Phase 1b studies, respectively.

Novel Small Molecule Approaches for HBV and HDV –

Advancing research programs targeting (1) an orally bioavailable HBV/HDV entry inhibitor and (2) an orally bioavailable, liver-focused IFNAR agonist.

Novel Antivirals Targeting Herpesviruses –

Advancing (1) ABI-5366 (5366), a long-acting HSV-2 helicase inhibitor targeting high-recurrence genital herpes to clinical trials, and (2) a research program for pan-herpes NNPIs to treat transplant-associated infections.

Inspired by the hundreds of millions of people worldwide living with chronic HBV infection, the goal of our HBV program is to discover and develop finite and curative therapies for these patients.

While we have learned that combination therapy with our first-generation CI product candidate, VBR, plus the standard of care, nucleos(t)ide analog reverse transcriptase inhibitor (NrtI), did not result in a finite and curative treatment, we have designed and developed our next-generation CIs for significantly increased potency and ability to engage an additional mechanism of action, targeting the viral reservoir, that VBR could not.

We believe that a regimen of our next-generation CIs in combination with NrtI therapy will be the antiviral backbone of future finite and curative therapies.

To reach a finite and curative therapy, it may also be necessary to include additional mechanisms of action, whether discovered and developed internally or externally through collaborations, licenses, partnerships and other types of business arrangements.

Development Pipeline Strategy

To complement our CI programs seeking finite and curative chronic HBV therapies, we have leveraged the depth and breadth of our virology expertise to expand our pipeline with a focus on novel mechanisms acting on clinically validated targets in therapeutic areas of high unmet medical need.

Since beginning this portfolio expansion in late 2021, we have announced several new programs, both in- and outside of HBV:

our HDV/HBV entry inhibitor program, our IFNAR agonist program, our pan-herpes NNPI programs for transplant-associated infections and the long-acting HSV-2 helicase inhibitor for high-recurrence genital herpes.

We recently nominated 5366 as a development candidate for our HSV-2 program and look forward to future candidate nominations from our discovery virology pipeline.

We believe that these new programs are compelling complements to our CIs, as each program focuses on a clinically validated target in a virologic disease where innovation is critical to improving patients’

In addition, because certain of our new programs are focused on treatments for chronic diseases, rather than curative therapies, the path to proof-of-concept and registrational studies may be significantly shorter than that for our finite and curative HBV therapeutics.

Our HBV and HDV Programs

The World Health Organization (WHO) estimates that 296 million people worldwide are chronically infected with HBV as of 2019, and 1.5 million new infections occur each year.

HBV is a leading global cause of chronic liver disease and liver transplants, and the WHO estimates that 820,000 people died in 2019 from HBV, mostly due to cirrhosis and hepatocellular carcinoma.

Of the 296 million people living with chronic HBV infection as of 2019, only approximately 30 million were aware of their infection, and only approximately 6.6 million of those diagnosed received treatment.

HBV is a highly prevalent disease that infects more than three times the number of people infected with hepatitis C virus and HIV infections combined, according to the WHO, and has a higher morbidity and mortality rate.

The current standard of care for chronic HBV infection, NrtIs, are taken life-long and reduce, but do not eliminate, the virus and result in very low cure rates, leaving an enormous unmet need.

No new mechanisms of action (MOA) have been approved for chronic HBV infection in over 25 years.

The focus of our HBV program is to improve outcomes and increase the number of patients diagnosed and treated through the development of finite and curative therapies.

We are also progressing two programs with potential application against HDV.

HDV is a “satellite virus,”

because it can only infect people (1) who are already infected with HBV or (2) at the same time as a person is infected with HBV.

HDV impacts a subset of approximately 12 million HBV patients.

These patients, which only comprise an estimated 4.5% of hepatitis B surface antigen (HBsAg) positive patients, experience a substantially increased disease burden, as they account for 18% of cirrhosis and 20% of hepatocellular carcinoma associated with HBV.

In parallel with our efforts to develop finite therapies and functional cures for HBV, we are also advancing programs targeting HDV given the immediate disease burden facing these patients.

The current standard of care treatment for HDV is off-label pegylated IFN-α

injected weekly or, in some regions, a large, complex molecule that requires daily injections.

We believe a safe and effective oral small molecule entry inhibitor would be a significant innovation for patients living with HDV.

Core Inhibitors

HBV is a DNA virus that infects hepatocytes and establishes a reservoir of covalently closed circular DNA (cccDNA), a unique viral DNA moiety that resides in the cell nucleus of HBV-infected hepatocytes and is associated with viral persistence and chronic infection.

No currently approved oral therapies target cccDNA activity directly, which makes molecules that can modulate cccDNA generation or disrupt its function highly sought in the HBV field.

As a result, most of our research and development efforts to date have focused on discovering and developing compounds targeting the core protein, a viral protein involved in numerous aspects of the HBV replication cycle, including the generation of HBV cccDNA.

Through our research efforts, we have discovered several chemically distinct series of small molecule core inhibitors that directly target and allosterically inhibit core protein functions.

As a result, our pipeline offers the potential for both first-in-class and best-in-class compounds that target critical steps involved in cccDNA generation and the HBV viral replication cycle.

We believe that our approach of targeting viral core protein and its related functions provides a promising foundation for finite and curative HBV treatment regimens.

As a result, we have worked to discover and develop compounds targeting the core protein, a viral protein involved in numerous aspects of the HBV replication cycle, including the generation of HBV cccDNA.

Through our research efforts, we have discovered several chemically distinct series of small molecule CIs that directly target and allosterically inhibit core protein functions.

As a result, we believe that our pipeline offers the potential for both first-in-class and best-in-class compounds that target critical steps involved in cccDNA generation and the HBV viral replication cycle.

A benchmark for therapeutic agents aiming to decrease cccDNA levels is the use of several key viral antigens as surrogate biomarkers of active cccDNA.

The same biomarkers can be used in both primary human hepatocyte cells and patients.

On this basis, our core inhibitors have shown preclinical proof of principle.

In a variety of cell culture models, core inhibitors have demonstrated the ability to reduce production of viral HBV DNA levels as well as the surrogate markers for cccDNA establishment:

On this basis, our CIs have shown preclinical proof of principle.

In a variety of cell culture models, CIs have demonstrated the ability to reduce production of viral HBV DNA levels as well as the surrogate markers for cccDNA establishment:

HBV e antigen (HBeAg), HBV core-related antigen (HBcrAg) and viral pre-genomic RNA (pgRNA).

Our Core Inhibitor Product Candidates

Our clinical strategy encompasses testing core inhibitors first as a monotherapy in Phase 1, as required by regulatory agencies, to demonstrate their intrinsic antiviral activity and safety and subsequently in Phase 2 in combination with NrtI and potentially other classes of HBV therapies.

VBR, our lead core inhibitor product candidate, is licensed from Indiana University.

The conduct of our initial Phase 2 studies, Study 201 and 202, is complete.

In these studies, VBR administered with NrtI therapy demonstrated a favorable safety profile and led to greater viral suppression of both HBV DNA and viral pgRNA than NrtI therapy alone.

Finite Therapy Development

Our most recently completed study for VBR, Study 211, involved transitioning patients who met the requisite stopping criteria, as determined in collaboration with our lead investigators and the U.S.

Food and Drug Administration (FDA), off of therapy to test for sustained virologic response (SVR).

SVR refers to sustained viral suppression (more than six months) of HBV DNA below LLOQ and would be consistent with a successful finite treatment for chronic HBV infection.

During the trial, it became clear that patients who stopped therapy in Study 211 had not achieved SVR, as all patients relapsed, meaning they had detectable HBV and the dual combination therapy of VBR + NrtI was insufficient to cure chronic HBV infection in the studied population.

Based on these results, we terminated Study 211 in the fourth quarter of 2020.

We presented follow-up data from Study 211 related to virologic response, safety and resistance following treatment discontinuation, at the European Association for the Study of the Liver’s (EASL) International Liver Congress TM in June 2021 (EASL 2021).

At the American Association for the Study of Liver Diseases (AASLD) Annual Meeting in November 2021 (AASLD 2021), we presented additional follow-up data from Study 211 demonstrating that patients had increases of HBV DNA and pgRNA after discontinuation of VBR despite continued NrtI treatment, further supporting that core inhibitors deepen viral suppression in combination with NrtIs.

We currently have two Phase 2 triple combination studies involving VBR ongoing, with a third expected to be initiated in the first half of 2022.

These studies are detailed below.

See “—Multi-Drug Combination Studies.”

Chronic Suppressive Therapy Development

Despite the off-treatment results in Study 211, the Phase 2 studies demonstrated on-treatment that subjects receiving VBR + NrtI achieved faster and deeper suppression of viral replication as compared to placebo.

Based on these data, we believed that the addition of VBR to NrtI therapy could potentially help two patient populations as a chronic suppressive treatment (CST):

(1) treatment-naïve patients, for whom addition of VBR to NrtI could lead to faster and deeper viral suppression and (2) partially virologically suppressed patients who continue to have viral levels above LLOQ by commercial assays, for whom the addition of VBR to NrtI could suppress viral levels below what could be achieved by NrtI alone.

In connection with preparation for registrational studies for VBR in CST in 2020, we held a number of discussions with leading viral hepatitis experts regarding use of VBR as a CST.

In addition, we initiated an additional Phase 2 study of VBR, Study 205, to evaluate treatment intensification with VBR in patients with chronic HBV infection who are only partially virologically suppressed on NrtI.

In the second half of 2020, we also held an End-of-Phase 2 meeting with the National Medical Products Administration, Center for Drug Evaluation, China, and reached agreement on a Phase 3 registrational program for CST use of VBR plus NrtI.

We also had discussions with the FDA regarding the same Phase 3 registrational program.

Based on discussions with leading viral hepatitis experts, global regulatory discussions and feedback, and, with respect to the China territory, discussions and agreement with our collaboration partner, BeiGene, Ltd.

(BeiGene), in early 2021, we decided to not move forward with the global registrational studies for VBR as a CST with NrtI.

The decision was made to focus on the greatest unmet medical need of patients, which lies predominantly in cure, rather than CST.

As a result, we terminated Study 205 and began to focus our efforts with VBR in combination with NrtI and additional mechanisms targeting finite and curative combination therapy.

Next-Generation Core Inhibitors

In pursuit of our goal of developing finite and curative therapies for patients with chronic HBV infection, we plan to advance the optimal core inhibitor in our portfolio for use as the antiviral backbone with NrtI.

While we currently have VBR, our first-generation core inhibitor product candidate, and 3733, a next-generation product candidate, in clinical studies, we expect to initiate Phase 1a studies of 4334, our most potent next-generation product candidate in the second half of 2022.

Based on the clinical progress of these candidates, we will apply disciplined, data-driven analyses to identify the optimal candidate to advance into late-stage clinical trials to produce potentially higher cure rates than are currently obtainable for patients with chronic HBV infection under the current standard of care.

Our first of two next-generation core inhibitor product candidates, 3733, was internally discovered and developed.

The chemical scaffold of 3733 is novel and distinct from each of VBR, 4334 and our discontinued core inhibitor product candidate, ABI-H2158 (2158).

Our research and development organizations are advancing next-generation CIs through clinical development.

These candidates, which exhibit multiple MOAs, have been optimized to potently disrupt both viral replication (MOA #1) and, importantly, prevent the establishment and replenishment of new cccDNA (MOA #2).

cccDNA is the viral reservoir that drives HBV’s life-long persistence in patients.

First-generation CIs have not demonstrated adequate potency to sufficiently block its formation.

Further, the current standard of care, NrtIs, can only inhibit production of new virus—and do so incompletely.

We leveraged our prior experience with our first-generation CI, VBR, which did not have sufficient potency against MOA #2, in the development of our next-generation CIs.

VBR was evaluated in a Phase 2 program with treatment for up to 1.5 years across patient populations and exhibited a favorable safety profile.

VBR was observed to be potent against MOA #1 but not MOA #2, and, while it demonstrated greater viral suppression in combination with standard-of-care NrtIs than NrtIs alone, it did not achieve functional cure or finite treatment in our clinical studies.

As a result, we discontinued development of VBR.

Our two next-generation CIs, 3733 and 4334, were developed to optimize activity against both MOAs and show significantly enhanced potency against both mechanisms preclinically.

3733 was internally discovered and developed.

The chemical scaffold of 3733 is novel and distinct from 4334 and both of our discontinued first-generation CI product candidates, VBR and ABI-H2158 (2158).

In preclinical studies, 3733 has demonstrated pan-genotypic activity and an improved resistance profile, as well as significantly increased potency against both MOAs and target coverage as compared to both VBR and 2158.

In 2020, we initiated and completed a Phase 1a clinical study of 3733 to evaluate safety, tolerability and pharmacokinetics (PK) following single ascending dose and multiple ascending dose administration in healthy subjects in New Zealand.

Preliminary data indicate that 3733 was generally well-tolerated and had favorable PK.

Results detailing 3733’s safety and PK from this study were presented in a poster presentation at AASLD 2021.

In addition, at EASL 2021, we presented observations on 3733’s enhanced potency and target coverage for both antiviral activity and inhibition of cccDNA generation as compared to VBR and 2158.

We expect to initiate a Phase 1b study with an improved formulation of 3733 in patients with chronic HBV infection in the first half of 2022.

In mid-2021, we announced the selection of 4334, our other next-generation core inhibitor product candidate.

As with all of our core inhibitor product candidates nominated after VBR, 4334 was internally discovered and developed.

In addition, the chemical scaffold of 4334 is also novel and distinct from each of VBR, 3733 and 2158.

We nominated 4334 based on a preclinical target drug profile that indicates enhanced target coverage and potency to prevent both formation of new virus and cccDNA, which is responsible for maintaining the HBV viral reservoir.

Data indicated that 3733 was generally well-tolerated and had favorable PK.

Results detailing 3733’s safety and PK from this study were presented in a poster presentation at the American Association for the Study of Liver Diseases (AASLD) The Liver Meeting® in November 2021 (AASLD 2021).

In 2021, following the completion of the Phase 1a trial, our chemistry, manufacturing and controls (CMC) organization developed a new tablet formulation to support Phase 1b for 3733.

At the European Association for the Study of the Liver's (EASL) International Liver Congress TM in June 2022 (EASL 2022), we presented 3733’s improved PK profile resulting from the new formulation activities mentioned above.

In addition, at EASL's International Liver Congress TM in June 2021 (EASL 2021), we presented observations on 3733’s enhanced potency and target coverage for both antiviral activity and inhibition of cccDNA generation as compared to VBR and 2158.

In June 2022, we initiated a randomized, multi-center, double-blind and placebo-controlled Phase 1b trial of 3733 evaluating the safety, PK and antiviral activity of 3733 in adults with cHBV infection, including changes in HBV DNA and other viral parameters associated with 3733 treatment in adults with chronic HBV infection who are treatment naïve or off treatment.

Patients were randomized 8:2 between the new tablet formulation of 3733 and placebo for a period of 28 days.

In December 2022, we released interim data from the Phase 1b trial, which consisted primarily of HBeAg negative patients.

The dose selected for the first cohort was 50 mg.

Given the potent antiviral activity observed at 50 mg, a 25 mg dose was selected for the second cohort to further explore the dose response curve of 3733.

A dose of 100 mg was selected for the third cohort.

As of mid-December 2022, dosing in the 3733 Phase 1b trial had been completed for all ten patients in the 50 mg first cohort.

Nine of ten patients enrolled were HBeAg negative, so efficacy data was provided for these patients.

efficacy results from this cohort as of mid-December included HBV DNA, HBV RNA and antigen measurements for all patients for the full 28-day dosing period.

In the 50 mg cohort, six of eight patients receiving 3733 achieved HBV DNA less than the lower limit of quantification (<LLOQ) within 21 days, with a mean decline in HBV DNA over the treatment period of approximately 3.1 logs.

Data on HBV RNA declines were limited due to low baseline levels in predominantly e-antigen negative patients.

The second cohort, evaluating a dose of 25 mg, was fully enrolled by December 2022.

Nine of ten patients enrolled were HBeAg negative.

In the five patients that had completed 28 days of treatment as of mid-December 2022, the mean reduction in HBV DNA was approximately 1.9 logs.

Data on HBV RNA levels were not available as of mid-December 2022.

The third cohort, evaluating a dose of 100 mg, was fully enrolled by February 2023.

Ten of 11 patients enrolled were HBeAg negative so efficacy data were not provided for the single HBeAg positive patient.

Interim efficacy results from this cohort as of mid-March included HBV DNA, HBV RNA and antigen measurements for the seven HBeAg negative patients receiving 3733 that had completed 28 days of treatment.

All seven patients achieved HBV DNA <LLOQ within 21 days.

As all of these patients reached <LLOQ, the mean declines in HBV DNA over the treatment period of approximately 3.0 logs reflect baseline DNA levels and the lower limit of the quantifiable range in this cohort.

Data on HBV RNA declines were limited due to low baseline levels in HBeAg negative patients.

As expected given the 28-day dosing period, limited changes in viral antigens were observed.

In the 25 mg, 50 mg and 100 mg cohorts through mid-March 2023, all treatment-emergent adverse events (AEs) and laboratory abnormalities reported were Grade 1 or Grade 2.

Further, no AEs led to treatment discontinuation, and no clinically significant ECG abnormalities or patterns of AEs or lab abnormalities were noted.

The observed PK for the new tablet formulation of 3733 was consistent with predictions from preclinical studies, providing exposure equivalent to the liquid formulation evaluated in the Phase 1a study for 3733.

Available PK data through mid-March 2023 indicated that exposures exhibited dose-proportional increases in the dose range from 25 mg to 100 mg.

As expected, given the 28-day dosing period, limited changes in viral antigens were observed.

A 26-week non-clinical chronic toxicology study of 3733 has been ongoing in parallel with the Phase 1b study.

This study revealed a time-dependent toxicity in one species that was not observed in the previous 28-day toxicology study.

We continue to evaluate the data;

however, proceeding with longer-term dosing of 3733 in a Phase 2 study would require further assessment and likely an additional chronic toxicology study in another species, which would add cost and time to the development timeline for 3733.

In March 2023, based on data to date from the ongoing clinical Phase 1 studies of both 3733 and 4334 and a nonclinical chronic toxicology study of 3733, we have paused core inhibitor candidate 3733 and prioritized core inhibitor candidate 4334.

In mid-2021, we announced the selection of 4334, the second of our next-generation CI product candidates.

As with all our CI product candidates nominated after VBR, 4334 was internally discovered and developed.

In addition, the chemical scaffold of 4334 is also novel and distinct from VBR, which is licensed from Indiana University, 3733 and 2158.

We nominated 4334 based on a preclinical target drug profile that indicates enhanced target coverage and potency against both MOAs.

We believe that 4334 has a best-in-class preclinical profile, with single-digit nanomolar potency against the production of new virus and the formation of cccDNA.

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Preclinical characterization of 4334 was shared in a poster presentation at AASLD in November 2021.

Our preclinical work on 4334 is ongoing, with the aim of completing Investigational New Drug (IND) enabling studies and initiating a Phase 1a clinical study in the second half of 2022.

At EASL 2022, we presented preclinical data demonstrating that 4334 promotes formation of empty capsids and prevents cccDNA formation by disrupting incoming capsids.

At AASLD in November 2022 (AASLD 2022), we presented preclinical data demonstrating that 4334 also accelerates capsid assembly and inhibits cccDNA formation through multiple pathways and showed that

4334 can prematurely disrupt capsids containing dendrimer-like-DNA, which has the potential to impact HBV integration.

In October 2022, we initiated a Phase 1a clinical study of 4334 to evaluate safety, tolerability and PK following single ascending dose and multiple ascending dose administration in healthy subjects in New Zealand.

We shared interim data from this Phase 1a trial at two time points, as of mid-December 2022 for the initial 30 mg single dose cohort and as of mid-March 2023 for all remaining single dose cohorts (100 mg, 200 mg and 400 mg) and the first 100 mg multiple-dose cohort.

Dosing has completed for the second and final multiple dose cohort of 200 mg and a food effect cohort at 200 mg is also ongoing.

We expect to share safety and PK data from this final multiple dose cohort when available in April 2023.

Based on data available for the single-dose and 100 mg multiple-dose cohorts as of mid-March 2023, 4334 had a mean half-life supporting once-a-day dosing.

Based on the PK data from these cohorts and preclinical studies, daily minimum plasma trough concentrations (C min ) were projected to achieve double-digit multiples of the protein-adjusted EC 50 for both MOAs within the dose ranges studied in the Phase 1a study.

Through mid-March 2023, treatment-emergent AEs and laboratory abnormalities were mild to moderate and there were no patterns of AEs or laboratory abnormalities noted and no clinically significant ECG abnormalities were reported.

In March 2023, based on data to date from the ongoing clinical Phase 1 studies of both 3733 and 4334 and a nonclinical chronic toxicology study of 3733, we have prioritized core inhibitor candidate 4334 and paused core inhibitor candidate 3733.

At the time of our decision to discontinue development of VBR, we had three triple combination studies involving VBR ongoing, two of which were terminated early in 2022.

The third triple combination study, Study 204, was subsequently terminated in February 2023.

Study 204 was being conducted pursuant to a Clinical Trial Collaboration Agreement with Arbutus Biopharma Corporation (Arbutus Biopharma) and consisted of a randomized, multi-center, open-label Phase 2 clinical study to explore the safety, PK and antiviral activity of the triple combination of VBR, NrtI and AB-729 (Arbutus Biopharma’s investigational RNAi candidate) compared to the double combinations of VBR + NrtI and AB-729 + NrtI in virologically suppressed patients.

This clinical study was initiated in the first quarter of 2021 and completed enrollment in February 2022.

At the time of discontinuation of further VBR clinical development, in consultation with Arbutus Biopharma, we agreed to continue Study 204 and evaluate the primary endpoints of safety and tolerability of the combination regimen.

At AASLD 2022, we and Arbutus Biopharma presented an interim analysis of on-treatment data from Study 204.

In February 2023, in consultation with Arbutus Biopharma, the companies decided to terminate Study 204 early, at the end of the 48-week on-treatment period, and we are in the process of closing the study.

2158 was a first-generation CI with a chemical scaffold novel and distinct from VBR and both of our next-generation CI product candidates, 3733 and 4334.

In September 2021, we discontinued development of 2158 following the observation of elevated alanine transaminase (ALT) levels in the Phase 2 clinical study consistent with drug-induced hepatotoxicity.

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As part of this agreement, we are obligated to make milestone payments based upon the successful accomplishment of clinical and regulatory milestones.

The aggregate amount of all performance milestone payments under the IURTC License Agreement, should all performance milestones through development be met, is $0.8 million, with a portion related to the first performance milestone having been paid.

The aggregate amount of all

performance milestone payments under the IURTC License Agreement, should all performance milestones through development be met, is $0.8 million, with a portion having been paid.

Under the IURTC License Agreement, we are also obligated to pay IURTC royalties based on net sales of the licensed technology ranging from 0.5% to 1.75%.

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BeiGene, Ltd.

In July 2020, we entered into a Collaboration Agreement with BeiGene, granting BeiGene an exclusive, royalty-bearing license to develop and commercialize products containing VBR, 2158 and 3733 (the BeiGene Agreement) in the People’s Republic of China, Hong Kong, Taiwan and Macau (the Territory).

Under the BeiGene Agreement, we and BeiGene will collaborate on development activities with respect to the licensed products in accordance with a mutually agreed upon development plan.

Pursuant to the terms of the BeiGene Agreement, BeiGene paid us an upfront amount of $40.0 million, and we were eligible to receive up to approximately $500.0 million in milestone payments, comprised of up to $113.8 million in development and regulatory and $385.0 million in net sales milestone payments.

In September 2021, we discontinued development of 2158 following the observation of elevated ALT levels in the Phase 2 clinical study consistent with drug-induced hepatotoxicity.

Due to the discontinuation of development of 2158, the maximum cash milestone payments we are eligible to receive for VBR and 3733 are $427.5 million, comprised of up to $97.5 million for development and regulatory milestones and up to $330.0 million in net sales milestones.

In September 2021, we discontinued development of 2158 following the observation of elevated ALT levels in the Phase 2 clinical study consistent with drug-induced hepatotoxicity, and in July 2022, we discontinued VBR because it did not achieve functional cure or finite treatment in our two- and three-drug combination studies.

Due to the discontinuation of development of VBR and 2158, the maximum cash milestone payments we are eligible to receive for 3733 are $285.0 million, comprised of up to $65.0 million for development and regulatory milestones and up to $220.0 million in net sales milestones.

In addition, we are eligible to receive tiered royalties at percentages ranging from the mid-teens to the low 30s of net sales.

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Such a termination would result in us regaining all rights to the applicable compound in the Territory.

In addition, BeiGene may terminate the BeiGene Agreement for convenience at any time upon 90 days’ advance written notice to us.

In addition, BeiGene may terminate the BeiGene Agreement for convenience at any time upon 90 days’

advance written notice to us.

The BeiGene Agreement also contains customary provisions for termination by either party, including in the event of breach of the BeiGene Agreement, subject to cure.

Multi-Drug Combination Studies

We believe that core inhibitors and NrtI will be central to finite and curative therapies for chronic HBV infection.

Therefore, as we continue to develop and advance our current and future core inhibitors through clinical studies, we plan to conduct multi-drug combination studies in parallel that add additional drugs (or compounds) with nonoverlapping mechanisms of action to the core inhibitor + NrtI antiviral backbone.

Specifically, we plan on only incorporating our current and future core inhibitors that have demonstrated they are well-tolerated and effective in clinical studies in dual combination with NrtI.

The 300 mg daily dose of VBR has been observed to be well-tolerated in all studies conducted to date, with no serious adverse effects or dose-limiting toxicities identified and no pattern of treatment-emergent clinical or laboratory abnormalities observed.

We currently have two ongoing triple combination studies and a third triple combination study expected to start in the first half of 2022 to study VBR in combination with NrtI and a third mechanism of action.

Our first triple combination study is being conducted pursuant to a Clinical Trial Agreement with Arbutus Biopharma Corporation (Arbutus Biopharma) and consists of a randomized, multi-center, open-label Phase 2 clinical study to explore the safety, PK and antiviral activity of the triple combination of VBR, NrtI and AB-729 (Arbutus Biopharma’s investigational RNAi candidate) compared to the double combinations of VBR + NrtI and AB-729 + NrtI in virologically suppressed patients.

This clinical study initiated in the first quarter of 2021 and completed enrollment in February 2022.

We expect to share interim on-treatment results from this study in the second half of 2022.

Our second triple combination study evaluates VBR and NrtI in combination with interferon in treatment-naïve HBeAg positive subjects.

This study was also initiated in the first quarter of 2021, and we expect enrollment to be complete in March 2022.

We expect to share interim on-treatment results from this study in the second half of 2022.

Our third triple combination study will be conducted pursuant to a Clinical Trial Collaboration Agreement with Antios Therapeutics, Inc.

(Antios) and will evaluate ATI-2173, Antios’s investigational proprietary active site polymerase inhibitor nucleotide (ASPIN), VBR and tenofovir disoproxil fumarate, an NrtI.

This multi-center, double-blinded, placebo-controlled study will evaluate the safety, PK and antiviral activity of this all-oral triple combination.

We expect to initiate this study, which will enroll ten treatment-naïve or off-treatment HBeAg negative or positive patients in a 12-week treatment study, in the first half of 2022.

The study plan initially included a site in Ukraine, but we will no

longer be conducting the study there due to the instability resulting from Russia’s recent invasion of Ukraine.

We expect these changes to our study plan to result in a delayed data readout.

In addition to the above studies, we expect to pursue additional multi-drug combinations that include other or additional nonoverlapping mechanisms of action to the core inhibitor + NrtI antiviral backbone, using our current and future core inhibitors as they advance in clinical development.

Both our first and second triple combination studies have experienced enrollment delays due to the ongoing COVID-19 pandemic.

The pandemic has impacted patients and study sites through patient screening delays, travel restrictions and hesitancy to travel to study sites.

The pandemic has also impacted our vendors, as our central laboratories have been unable to meet their contractual obligations, and our vendors have experienced staffing constraints and supply chain-related challenges as they seek to obtain lab kits, reagents and other items necessary to enroll patients in our studies.

As a result, we were unable to fully enroll our first and second triple combination studies in 2021 as initially planned;

however, based on enrollment to date, we do not believe these delays will impact interim data readouts for these studies, which remains on schedule in 2022.

Beyond Core Inhibitors

In addition to the development and advancement of our core inhibitor portfolio and our current and future multi-drug combination studies, our research and development team is working on discovering and developing cccDNA disruptors and small molecules targeting two novel undisclosed HBV targets, which we expect to announce in the first half of 2022, to complement our HBV cure strategy.

In November 2020, we entered into an exclusive, two-year collaboration and option agreement with Door Pharmaceuticals , LLC (Door Pharma) focused on the development of a novel class of HBV inhibitors.

Door Pharma’s discovery platform targets functions of core protein distinct from viral assembly and have the potential to interfere with viral nucleic acid including intra-nuclear cccDNA, providing a strong complement to our current portfolio.

Together with Door Pharma, we are working on identifying cccDNA disruptors, which will be aimed at inhibiting different intra-nuclear steps in the viral replication cycle that complement the activity of our core inhibitors.

Under the terms of the agreement, Door Pharma will build upon its previous efforts to lead and conduct new discovery research, which we will fund.

In return for an up-front payment and success-based milestones and royalties, we will be granted an exclusive option to license compounds arising from the collaboration and will be responsible for the continued development and commercialization of optioned compounds.

Additional Antiviral Opportunities

In addition to our work toward developing finite and curative therapies for patients with chronic HBV infection, we have expanded our research and development organizations’ reach by pursuing exploratory research on novel compounds targeting other viruses.

Our expanded focus leverages the depth and breadth of virology expertise of our research and development organization to diversify our pipeline into areas of high unmet medical need.

We expect to disclose more information regarding these discovery programs on additional viral targets in mid-2022.

HBV/HDV Entry Inhibitor

In March 2022, we announced our research program focused on a novel, orally bioavailable small molecule approach to inhibit entry of HBV and HDV.

While HDV is less prevalent in the United States, it is a significant and serious health problem with inadequate treatment in many parts of Europe, Africa, the Middle East, East Asia and parts of South America.

HDV is known to accelerate disease progression and increase the incidence of liver cirrhosis and liver cancer, which results in higher morbidity and mortality rates than HBV alone.

The current standard of care treatment for HDV is off-label pegylated IFN-α

injected weekly or, in some regions, a large, complex molecule that requires daily injections.

We believe a safe and effective oral small molecule entry inhibitor would be a significant innovation for patients living with HDV.

Our research team has identified a potential opportunity to develop a safe and effective oral small molecule viral entry inhibitor, which could significantly improve convenience and potentially enhance treatment uptake and diagnosis rates.

Based on current progress, our aim is to nominate a product candidate for

development in 2023.

At AASLD 2022, we presented the preclinical characterization of our novel class of highly potent small molecule HBV/HDV entry inhibitors.

IFNAR Agonist

In July 2022, we introduced our new research program advancing a novel, small molecule IFNAR agonist designed to selectively activate the IFN-α

pathway within the liver and offer the convenience of oral dosing.

is a subcutaneous injectable immune modularity therapy approved for HBV that has demonstrated functional cure in some HBV patients, but its poor tolerability profile significantly limits its use.

Substantial side effects include flu-like symptoms, cytopenias, serious depression and psychiatric effects.

In addition, multiple contraindications limit its use, and it requires weekly injections that result in systemic exposure for up to a year.

By focusing exposure on the liver, our investigational IFNAR agonist program aims to engage interferon-α’s validated antiviral and immune modulatory mechanisms, retaining the efficacy of IFN-α

while reducing systemic exposure to improve tolerability.

Lead optimization of multiple agonists is progress.

At AASLD 2022, we presented the preclinical characterization of our novel liver-focused small molecule agonists efficiently inhibiting HBV by activating type 1 interferon signaling.

Our Herpesvirus Programs

In August 2022, in addition to announcing our HBV/HDV inhibitor and IFNAR agonist programs, we introduced our first programs outside of hepatitis, which target HSV-2 and transplant-associated herpesviruses.

Up to 40% of patients with genital herpes associated with HSV-2 infection suffer from high-recurrence genital herpes, which results in painful lesions occurring six or more times per year, transmission risk (including neonatal transmission) and increased risk of HIV infection, as well as associated psychological stress.

Helicase-primase inhibitors are antiviral agents with a novel mechanism of action.

They inhibit the viral protein complex consisting of helicase, primase, and cofactor subunits, which have functions that are essential for viral DNA replication.

These agents are not nucleoside analogues and do not require phosphorylation by the HSV thymidine kinase (TK) to become active drugs;

therefore, helicase-primase inhibitors are active immediately upon reactivation of latent HSV.

Furthermore, helicase-primase inhibitors are active against TK-deficient HSV, which is a major mechanism of resistance to nucleoside analogues.

Although there are approved antiviral therapies targeting HSV-2, these current therapies are only partially effective in preventing recurrence in patients experiencing high-recurrence genital herpes and require taking one or more pills daily.

Due to the limitations of current therapies, we identified an opportunity to develop a potent, long-acting injectable helicase inhibitor with the potential to improve efficacy, convenience and patient compliance.

We are targeting long-acting for at least monthly dosing and will continue to evaluate longer dosing intervals as development and formulation progress.

In February 2023, we nominated a development candidate for our HSV-2 long-acting helicase inhibitor program, 5366, for progression into IND-enabling studies.

Transplant-Associated Herpesviruses

In a transplant setting, when patients are experiencing immunosuppression, they are at high risk of uncontrolled viral replication and severe disease brought on by one or more members of the herpesvirus family of viruses including cytomegalovirus (CMV), herpes simplex virus type 1, HSV-2 and varicella zoster virus (VZV).

Each of these herpesviruses are highly prevalent, as approximately (1) 60% of the population is CMV-positive;

(2) 60% of the population is HSV-positive;

and (3) 80% of the population is VZV-positive.

These viruses establish lifelong latent infections and frequently reactivate in transplant patients due to immune suppression.

These uncontrolled viral infections increase risk of serious complications, including organ rejection and death.

As with HSV-2, there are approved antivirals that are administered in a transplant setting, but they are limited by a narrow spectrum (no approved drug is effective against all of the herpesviruses indicated above), potentially serious

side effects and significant drug-drug interactions.

As a result of these limitations, we identified an opportunity to develop an oral pan-herpes NNPI for these transplant-associated herpesvirus infections, which would greatly simplify treatment.

Our research team has discovered multiple series of potent, broad-spectrum herpesvirus polymerase inhibitors.

Intellectual Property

In regard to our HBV patent estate, we co-own with and exclusively license from Indiana University two issued U.S.

patents and related foreign patents and patent applications that relate to compositions of matter and methods of using VBR.

The issued U.S.

patents are expected to expire in 2035 and 2036.

In addition, we own a U.S.

patent and related foreign applications directed to a process for preparing VBR.

The issued U.S.

patent is expected to expire in 2038.

Finally, we own a U.S.

patent application and related foreign applications directed to formulations of VBR;

any patents issuing therefrom are expected to expire in 2040.

We own a U.S.

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any patents issuing therefrom are expected to expire in 2041.

Finally, we own a U.S.

patent and related foreign patents and patent applications that relate to compositions of matter and methods of using 2158.

The issued U.S.

patent is expected to expire in 2038.

We also own provisional patent applications relating to compositions of matter, method of using and pharmaceutical formulations of 5366, and provisional patent applications relating to compositions of matter and method of using our HBV/HDV entry inhibitors, IFNAR agonists and pan-herpes NNPIs.

Government Regulation

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Failure to comply with the applicable U.S.

requirements at any time during the product development process, approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, withdrawal of an approval, license revocation, imposition of a clinical hold, issuance of warning letters and untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits or civil or criminal penalties.

requirements at any time during the product development process, approval process or after approval may subject an applicant or sponsor to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, withdrawal of an approval, license revocation, imposition of a clinical hold, issuance of warning letters and untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits or civil or criminal penalties.

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

completion of nonclinical laboratory tests and animal studies in compliance with the FDA’s good laboratory practice (GLP) regulations and applicable requirements for the humane use of laboratory animals or other applicable requirements;

submission to the FDA of an IND which must become effective before human clinical studies may begin;

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submission to the FDA of a new drug application (NDA);

satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practices (cGMP) requirements and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity;

FDA review and approval of the NDA.

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An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical studies and places the trial on clinical hold.

If an IND or clinical study is placed on clinical hold, the IND sponsor and

the FDA must resolve any outstanding concerns before the clinical study can begin.

If an IND or clinical study is placed on clinical hold, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin.

As a result, submission of an IND may not result in the FDA allowing clinical studies to commence.

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Information about certain clinical studies must be submitted within specific timeframes to the National Institutes of Health for public dissemination at www.clinicaltrials.gov.

The Food and Drug Omnibus Reform Act (FDORA), which was signed into law on December 29, 2022, made numerous amendments to the FDCA including provisions intended to, among other things, decentralize and modernize clinical trials and enhance diversity in clinical trial populations.

Human clinical studies are typically conducted in three sequential phases, which may overlap or be combined:

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Phase 1, Phase 2 and Phase 3 clinical studies may not be completed successfully within any specified period, or at all.

Furthermore, the FDA or the sponsor may suspend or terminate a clinical study at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk.

Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

the FDA or the sponsor may suspend or terminate a clinical study at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk.

A manufacturer of an investigational drug for a serious disease or condition is required to make available, such as by posting on its website, its policy regarding evaluating and responding to requests for individual patient access to such investigational drug.

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Marketing approval

After the completion of required clinical testing, the results of the nonclinical studies and clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications.

Under federal law, the submission of most NDAs is additionally subject to a substantial application user

fee, currently $3.1 million and the sponsor of an approved NDA is also subject to an annual program fee currently set at $0.4 million through September 30, 2022.

Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, currently $3.2 million and the sponsor of an approved NDA is also subject to an annual program fee currently set at $0.4 million through September 30, 2023.

These fees are typically adjusted on October 1 each year.

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In addition, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP and integrity of the clinical data submitted.

After the FDA’s evaluation of the NDA and inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter.

With passage of the FDORA, Congress clarified the FDA’s authority to conduct inspections by expressly permitting inspection of facilities involved in the preparation, conduct, or analysis of clinical and non-clinical studies submitted to FDA as well as other persons holding study records or involved in the study process.

After the FDA’s evaluation of the NDA and inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter.

An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application.

If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter.

The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included.

Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval and refuse to approve the NDA.

Even if the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical studies, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms, including Risk Evaluation and Mitigation Strategies (REMS), which can materially affect the potential market and profitability of the product or impose new labeling, testing or distribution and use requirements.

including Phase 4 clinical studies, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms, including Risk Evaluation and Mitigation Strategies (REMS), which can materially affect the potential market and profitability of the product or impose new labeling, testing or distribution and use requirements.

The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs.

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Under the Fast Track program, the sponsor of a new product candidate may request the FDA to designate the product for a specific indication as a Fast Track product concurrent with or after the filing of the IND for the product candidate.

The FDA must determine if the product candidate qualifies for fast track designation within 60 calendar days after receipt of the sponsor’s request.

In addition to other benefits, such as the ability to have greater interactions with the FDA, the FDA may initiate review of sections of a Fast Track product’s NDA before the application is complete.

This rolling review is available if the

applicant provides and the FDA approves a schedule for the submission of the remaining information and the applicant pays applicable user fees.

However, the FDA’s time period goal for reviewing a Fast Track application does not begin until the last section of the NDA is submitted.

The FDA must determine if the product candidate qualifies for fast track designation within 60 calendar days after receipt of the sponsor’s request.

This rolling review is available if the applicant provides and the FDA approves a schedule for the submission of the remaining information and the applicant pays applicable user fees.

However, the FDA’s time period goal for reviewing a Fast Track application does not begin until the last section of the NDA is submitted.

In addition, the Fast Track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical study process.

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Products generally are eligible for priority review if they are intended for treatment of a serious or life-threatening disease or condition and provide a significant improvement in safety or effectiveness compared to marketed products in the treatment, diagnosis or prevention of a serious disease or condition.

A fast track designated product candidate would ordinarily meet the FDA’s criteria for priority review.

Accelerated approval

Under the FDA’s accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality (IMM).

In clinical studies, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions or survives.

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All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.

With the passage of the FDORA, the FDA is authorized to require a post-approval study to be underway prior to approval or within a specified time period following approval.

FDORA also requires the FDA to specify conditions of any required post-approval study and requires sponsors to submit progress reports for required post-approval studies and any conditions required by the FDA until completion or termination of the study.

FDORA further enables the FDA to initiate criminal prosecutions for the failure to conduct with due diligence a required post-approval study, including a failure to meet any required conditions specified by the FDA or to submit timely reports.

Breakthrough therapy designation

A sponsor can request designation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

A sponsor can request designation of a product candidate as a “breakthrough therapy.”

A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

Drugs designated as breakthrough therapies also may be eligible for priority review.

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A drug will be considered clinically superior if it is shown to be safer, more effective or makes a major contribution to patient care.

Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same orphan disease or condition, or the

same drug for a different disease or condition.

Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same orphan disease or condition, or the same drug for a different disease or condition.

Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA/BLA application user fee.

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The FDA may impose a number of post-approval requirements, including REMS, as a condition of approval of an NDA or BLA.

For example, the FDA may require post-marketing testing, including Phase 4 clinical studies, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements.

inspections by the FDA and these state agencies for compliance with cGMP requirements.

Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented.

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The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market.

Drugs generally may be promoted only for the approved indications and in accordance with the provisions of the

approved labeling.

Drugs generally may be promoted only for the approved indications and in accordance with the provisions of the approved labeling.

The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses, and a company that is found to have improperly promoted off label uses may be subject to significant liability.

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Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.

New Legislation and Regulations

From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the testing, approval, manufacturing and marketing of products regulated by the FDA.

In addition to new legislation, FDA regulations and policies are often revised or interpreted by the agency in ways that may significantly affect our business and our products.

It is impossible to predict whether further legislative changes will be enacted or whether FDA regulations, guidance, policies or interpretations will be changed or what the effect of such changes, if any, may be.

Pharmaceutical Coverage, Pricing and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we may obtain regulatory approval.

Sales of any of our product candidates, if approved, will depend, in part, on the extent to which the costs of the products will be covered by third-party payors, including government health programs such as Medicare and Medicaid, commercial health insurers and managed care organizations.

Medicare and Medicaid, commercial health insurers and managed care organizations.

The process for determining whether a payor will provide coverage for a drug product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the drug product once coverage is approved.

Third-party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the approved drugs for a particular indication.

In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the trials required to obtain FDA or other comparable regulatory approvals.

Our product candidates may not be considered medically necessary or cost-effective.

A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved.

Companies may also need to provide discounts to purchasers, private health plans or government healthcare programs.

Third-party reimbursement may not be sufficient to enable us to maintain price levels high enough to realize an appropriate return on our investment in product development.

Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor.

The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of drugs have been a focus in this effort.

Third-party payors are increasingly challenging the prices charged for medical

products and services and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy.

If these third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products at a profit.

government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs.

Adoption of such controls and measures and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and could adversely affect our net revenue and results.

Even if favorable coverage and reimbursement status is attained for one or more products for which we may r eceive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Third-party payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy.

Accordingly, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our product candidates, in addition to the trials required to obtain FDA or other comparable regulatory approvals.

Further, one payor’s determination to provide coverage for a product, if approved, does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor.

Pricing and reimbursement schemes vary widely from country to country.

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Coverage policies, third-party reimbursement rates and drug pricing regulation may change at any time.

In particular, in the United States, the Affordable Care Act (ACA) and its amendment, the Health Care and Education Reconciliation Act, contains provisions that may reduce the profitability of drug products, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care programs.

Among the provisions of the ACA of importance to our potential drug candidates are the following:

an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs;

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;

a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs under the Bipartisan Budget Act of 2018 (BBA);

extension of manufacturers’ Medicaid rebate liability;

expansion of eligibility criteria for Medicaid programs;

expansion of the entities eligible for discounts under the Public Health Service Act pharmaceutical pricing program;

requirements to report financial arrangements with physicians and teaching hospitals;

a requirement to annually report drug samples that manufacturers and distributors provide to physicians;

a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

Since its enactment, there have been many judicial, Presidential, and Congressional challenges to numerous aspects of the ACA.

For example, former President Trump issued several executive orders and other directives designed to delay, circumvent, or loosen certain requirements or implementation of certain requirements mandated by the ACA.

Concurrently, Congress has considered legislation that would repeal, or repeal and replace all or part of the ACA.

For example the Affordable Care Act of 2010, as amended by, the Health Care and Education Reconciliation Act (collectively, ACA), among other things, imposed an annual fee on any entity that manufactures or imports certain branded prescription drugs, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, under the Medicare Part D coverage gap discount program.

In addition to these provisions, the ACA established a number of bodies whose work may have a future impact on the market for certain pharmaceutical products, including the Patient-Centered Outcomes Research Institute, established to oversee, identify priorities in, and conduct comparative clinical effectiveness research, and the Center for Medicare and Medicaid Innovation within the Centers for Medicare and Medicaid Services, established to test innovative payment and service delivery models to lower Medicare and Medicaid spending.

Since its enactment, there have been executive, judicial, and Congressional challenges to certain aspects of the ACA.

For example, former President Trump issued directives designed to delay the implementation of certain PPACA provisions or otherwise circumvent requirements for health insurance mandated by the PPACA, and Congress has considered legislation that would repeal, or repeal and replace all or part of the ACA.

While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the ACA have been signed into law.

For example, the Tax Cuts and Jobs Act, signed into law in 2017, effectively repealed the individual health insurance mandate, which is considered a key component of the ACA.

For example, the Tax Cuts and Jobs Act, effectively repealed the individual health insurance mandate, which is considered a key component of the ACA.

On December 14, 2018, a U.S.

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Court of Appeals for the Fifth Circuit upheld the lower court decision, which was then appealed to the U.S.

Supreme Court.

On June 17, 2021, the U.S.

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in so holding, the Supreme Court did not consider larger constitutional questions about the validity of this provision or the validity of the ACA in its entirety.

Further, the Trump Administration’s 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on certain high-cost employer-sponsored insurance plans and, on January 1, 2021, eliminated the health insurer tax.

Moreover, the BBA, among other things, amended the ACA to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”.

Another case challenging the PPACA’s requirement that insurers cover certain preventative services is currently pending before the same U.S.

District Court Judge in the Northern District of Texas who ruled against the individual mandate in 2018.

In September 2022, the judge held that certain preventative services violated the U.S.

Constitution and set a schedule for additional briefing that continued into January 2023.

It is unclear how this or any potential future litigation and other efforts to repeal and replace the PPACA will impact the PPACA.

Further, the Trump Administration’s 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac”

tax on certain high-cost employer-sponsored insurance plans and, on January 1, 2021, eliminated the health insurer tax.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted.

These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, and, due to subsequent legislative amendments, will remain in effect through 2031, with the exception of a temporary suspension from May 1, 2020 through March 2021, due to the COVID-19 pandemic.

Following the temporary suspension, a 1% payment reduction will occur beginning April 1, 2022 through June 30, 2022, and the 2% payment reduction will resume on July 1, 2022.

Further, in January 2013, then President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

These laws may result in additional reductions in Medicare and other healthcare funding.

These laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

Additionally, there has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices.

Specifically, there have been several recent United States Congressional inquiries and proposed and enacted federal legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

For example, at the federal level, President Biden signed an Executive Order on July 9, 2021 affirming the administration’s policy to (1) support legislative reforms that would lower the prices of prescription drug and biologics, including by allowing Medicare to negotiate drug prices, by imposing inflation caps, and, by supporting the development and market entry of lower-cost generic drugs and biosimilars;

and (2) support the enactment of a public health insurance option.

Among other things, the Executive Order also directs HHS to provide a report on actions to combat excessive pricing of prescription drugs, enhance the domestic drug supply chain, reduce the price that the Federal government pays for drugs, and address price gouging in the industry;

and directs the FDA to work with states and Indian Tribes that propose to develop section 804 Importation Programs in accordance with the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and the FDA’s implementing regulations.

For example, the Inflation Reduction Act of 2022, or IRA, enacted on August 16, 2022, seeks to reduce prescription drug costs by, among other provisions, allowing Medicare to negotiate prices for certain high-cost prescription drugs in Medicare Parts B and D, imposing an excise tax on pharmaceutical manufacturers that refuse to negotiate pricing with Medicare, and requiring inflation rebates to limit annual drug price increases in Medicare.

Beginning in 2025, the IRA also eliminates the coverage gap under Medicare Part D by significantly lowering the enrollee maximum out-of-pocket cost and imposing on new manufacturer discount program.

In addition, in September 2020, the FDA issued a final rule that sets up a legal framework for allowing the importation of certain prescription drugs from Canada, and the Centers for Medicare & Medicaid Services (CMS) issued guidance that addresses the treatment of certain imported drugs under the Medicaid Drug Rebate Program.

On December 27, 2021, CMS rescinded an interim final rule that would have implemented former President Trump’s Most Favored Nation executive order tying Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries.

A dditionally, on November 30, 2020, HHS published a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.

Pursuant to court order, the removal and addition of the aforementioned safe harbors were delayed and recent legislation imposed a moratorium on implementation of the rule until January 1, 2026.

Although a number of these and other proposed measures may require authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, both the Biden administration and Congress have indicated that they will continue to seek new legislative measures to control drug costs.

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures.

These measures could reduce the ultimate demand for our products, if approved, or put pressure on our product pricing.

We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Other Healthcare Laws

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Attorney offices within the DOJ, and state and local governments.

For example, the Company’s business practices, including its research and sales, marketing and scientific/ educational grant programs may be required to comply with federal and state fraud and abuse laws, false claims laws, the data privacy and security provisions of the Health Insurance Portability and Accountability Act (HIPAA), federal transparency requirements and similar state laws, each as amended.

Insurance Portability and Accountability Act (HIPAA), federal transparency requirements and similar state laws, each as amended.

The laws that may affect our ability to operate include:

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In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

Manufacturers can be held liable under the False Claims Act even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims;

Manufacturers can be held liable under the False Claims Act even when they do not submit claims directly to government payors if they are deemed to “cause”

the submission of false or fraudulent claims;

HIPAA, which created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.

Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA without actual knowledge of the statute or specific intent to violate it;

HIPAA, as amended by HITECH, and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually

identifiable health information.

HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions;

fees and costs associated with pursuing federal civil actions;

the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;

federal Food, Drug and Cosmetic Act (FDCA), which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices;

the federal transparency requirements under the ACA, including the provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S.

Department of Health and Human Services information related to payments or other transfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.

Effective January 1, 2022, these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners;

Effective January 1, 2022,

these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners;

federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers.

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states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental payors, including private insurers.

In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of America’s Code on Interactions with Healthcare Professionals.

Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state.

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The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements and onerous new obligations on services providers.

Noncompliance with the GDPR may result in monetary penalties of up to €20 million or 4% of worldwide revenue, whichever is higher.

The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations.

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The CCPA will require covered companies to provide certain disclosures to consumers about its data collection, use and sharing practices, and to provide affected California residents with ways to opt-out of certain sales or transfers of personal information.

The CCPA went into effect on January 1, 2020, and the California Attorney General began taking enforcement action against violators beginning July 1, 2020.

While there is currently an exception for protected health information that is subject to HIPAA and clinical trial regulations, as

currently written, the CCPA may impact our business activities.

Additionally, the California Privacy Rights Act (CPRA) was passed in November 2020 and will become effective on January 1, 202 3.

Among other things, t he CPRA imposes additional obligations on companies covered by the legislation and expands consumers’ rights with respect to certain sensitive personal information.

While there is currently an exception for protected health information that is subject to HIPAA and clinical trial regulations, as currently written, the CCPA may impact our business activities.

Additionally, the California Privacy Rights Act (CPRA), which went into effect on January 1, 2023, imposes additional obligations on companies covered by the legislation and expands consumers’

rights with respect to certain sensitive personal information, among other things.

The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA.

Virginia and Colorado similarly passed data privacy laws that will go into effect in January 2023 and will regulate how businesses collect and share personal information.

Other states, including Virginia and Colorado have similarly passed data privacy laws that will regulate how businesses collect and share personal information.

New Legislation and Regulations

In addition to new legislation, FDA regulations and policies are often revised or interpreted by the agency in ways that may significantly affect our business and our products.

The pharmaceutical and biotechnology industry is very competitive, and the development and commercialization of new drugs is influenced by rapid technological developments and innovation.

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Additionally, new entrants may potentially enter the market.

Potential competitors include Johnson & Johnson, Roche, Gilead Sciences Inc., GlaxoSmithKline plc, Enanta Pharmaceuticals, Inc., HEC Pharma, Arbutus Biopharma, Vir Bio, Aligos Therapeutics, Antios and Qilu Pharmaceutical, among others.

Additionally, we may face competition from currently available HBV treatments.

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Manufacturing

We currently rely on third-party manufacturers to supply the quantities of VBR, 3733 and 4334 used in our clinical and nonclinical studies.

We currently rely on third-party manufacturers to supply the quantities of our investigational product candidates used in our clinical and nonclinical studies.

We currently have no plans to establish any manufacturing facilities for our product candidates.

Human Capital Management

As of December 31, 2021, we had 102 total employees and contracts with a number of temporary contractors, consultants and contract research organizations.

As of December 31, 2022, we had 68 total employees and contracts with a number of temporary contractors, consultants and contract research organizations (CROs).

The majority of our employees work out of our facility in South San Francisco, California.

We also have a small number of remote employees spread across the United States, two remote employees in China and one remote employee in the United Kingdom.

Following the wind-down of our Microbiome program on January 31, 2021, we increased our headcount by adding eight additional employees.

The new employees were hired to support, extend and grow our clinical and preclinical pipeline, with new hires in clinical development and operations, research, manufacturing and general and administrative functions.

We expect to continue to add employees to support our virology programs in 2022, with a focus on continued expansion of our preclinical research team.

We continually evaluate our needs and make strategic choices regarding whether to hire internal teams or outsource certain functions to contract research organizations (CROs) or contract manufacturing organizations (CMOs), as appropriate.

We also have a small number of remote employees spread across the United States and one remote employee in the United Kingdom.

We continually evaluate our needs and make strategic choices regarding whether to hire internal teams or outsource certain functions to CROs or contract manufacturing organizations (CMOs), as appropriate.

We currently outsource our clinical study management to various CROs and utilize certain CMOs to manufacture both the drug substance and the drug product used in our ongoing and planned clinical studies.

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We generally target our base salaries and annual performance-based cash bonuses at the 50 th percentile of our peers and our long-term equity incentive compensation, which all employees receive, between the 50 th and 75 th percentiles of our peers.

In certain circumstances, we offer compensation above these levels, based on a candidate’s experience, criticality, amount of responsibility and either individual or Company-wide performance.

We routinely review our employees’ base salaries to ensure that they remain market competitive.

Both annual performance-based cash bonuses and long-term equity compensation increase as a percentage of total compensation based on employees’ levels of responsibility.

In certain circumstances, we offer compensation above these levels, based on a candidate’s experience, criticality, amount of responsibility and either individual or Company-wide performance.

We routinely review our employees’

base salaries to ensure that they remain market competitive.

Both annual performance-based cash bonuses and long-term equity compensation increase as a percentage of total compensation based on employees’

levels of responsibility.

We also offer comprehensive benefits packages to all of our employees, including:

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This program demonstrates our commitment to analytical growth, enhanced knowledge and professional development.

COVID-19 Response

Shortly after the counties in the San Francisco Bay Area implemented a shelter-in-place order, followed quickly by California’s similar statewide order, we established a COVID-19 Task Force (the Task Force) that held regular meetings through mid-2021.

The Task Force, in conjunction with our Human Resources department, took the following actions in our effort to curb the pandemic:

Drafting and distributing comprehensive COVID-19 office and exposure policies, and lab and safety protocols, each of which have been modified as federal, state and local governments have updated their guidance;

Implementing a vaccine mandate for all employees as well as any third-party individuals entering our facility;

Permitting all employees who are able to do so to work remotely;

Holding Company-wide virtual Town Hall meetings at least monthly to foster a sense of community given that the majority of our employees worked remotely;

Increasing cleaning protocols at U.S.

office and lab facilities;

Providing all employees with cloth face coverings and filter inserts along with increasing availability of personal protective equipment to lab employees;

Prohibiting all work-related domestic and international travel;

Following local requirements regarding mask wearing at our facility.

Since the cessation of Task Force meetings in mid-2021 due to the widespread availability of vaccines and then-declining COVID case numbers, our human resources group and executive leadership team continued to regularly monitor all local and national guidelines and discuss and update internal guidance and protocols.

Corporate History

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Our website address is www.assemblybio.com.

We routinely post, or have posted, important information for investors on our website in the “Investors” section.

We routinely post, or have posted, important information for investors on our website in the “Investors”

We use this website as a means of disclosing material information in compliance with our disclosure obligations under Regulation FD.

Accordingly, investors should monitor the “Investors” section of our website, in addition to following our press releases, Securities and Exchange Commission (SEC) filings, presentations and webcasts.

Accordingly, investors should monitor the “Investors”

section of our website, in addition to following our press releases, Securities and Exchange Commission (SEC) filings, presentations and webcasts.

We make available free of charge through our website our press releases, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after electronically filed with or furnished to the SEC.

The information contained on our website is not a part of, and should not be construed as being incorporated by reference, into this report.

The reports filed with the SEC by us and by our officers, directors and significant shareholders are available for review on the SEC’s website at www.sec.gov.

The reports filed with the SEC by us and by our officers, directors and significant stockholders are available for review on the SEC’s website at www.sec.gov.

R isk Factors

You should carefully consider the following risk factors, together with all other information in this report, including our consolidated financial statements and notes thereto, and in our other filings with the SEC.

If any of the following risks, or other risks not presently known to us or that we currently believe to not be material, develop into actual events, then our business, financial condition, results of operations or prospects could be materially adversely affected.

If that happens, the market price of our common stock could decline, and stockholders may lose all or part of their investment.

Risks Related to Our Business

We have no approved products and depend on the future success of the product candidates in our research and development pipeline.

We cannot be certain that we or our collaborators will be able to obtain regulatory approval for, or successfully commercialize, product candidates from our current pipeline or any other product candidates that we may subsequently identify, license or otherwise acquire.

We and our collaborators are not permitted to market or promote any products in the United States, Europe, China or other countries before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for our current product candidates.

We have not submitted a new drug application (NDA) to the FDA or comparable applications to other regulatory authorities and do not expect to be in a position to do so in the near future.

All of our product candidates are in clinical development or in varying stages of nonclinical development.

Data supporting our drug discovery and nonclinical and clinical development programs are derived from laboratory studies, nonclinical studies and Phase 1 and Phase 2 clinical studies.

It may be years before the larger, pivotal studies necessary to support regulatory approval of our current product candidates are completed, if ever.

In addition to our current product pipeline, we may identify, license or otherwise acquire rights to other technologies or product candidates.

Any such transactions would involve numerous risks, and we may be unsuccessful in entering into any such transactions or developing any such technologies or product candidates.

For these reasons, our drug discovery and development may not be successful, and we may be unable to continue clinical development of our product candidates and may not generate product approvals or product revenue, any of which could have a material adverse impact on our business, results of operations and financial condition.

We are not currently profitable and might never become profitable, and we will need additional financing to complete the development of any product candidates and fund our activities into the future.

We do not have any approved products, and we have a history of losses.

We expect to continue to incur substantial operating and capital expenditures to advance our current product candidates through clinical development, continue research and discovery efforts to identify potential additional product candidates and seek regulatory approvals for our current and future product candidates.

All operations and capital expenditures will be funded from cash on hand, securities offerings, debt financings and payments we may receive from out-licenses, collaborations or other strategic arrangements.

Elevated worldwide inflation rates that began in mid-2021 and continue to persist may also exacerbate the substantial operating and capital expenditures that we face to advance our current and future product candidates.

There is no assurance that we will be successful in raising any necessary additional capital on terms that are acceptable to us, or at all, particularly due the well-documented, ongoing sector-wide weakness in the biotech markets that began in early 2021.

If we are unable to develop and commercialize any product candidates and generate sufficient revenue or raise capital, we could be forced to delay, scale back or discontinue product development and clinical studies, sacrifice attractive business opportunities, cease operations entirely and sell, or otherwise transfer, all or substantially all of our remaining assets, which would likely have a material adverse impact on our business, results of operations, financial condition and share price.

Nonclinical and clinical studies required for our product candidates are expensive and time-consuming and may fail to demonstrate the level of safety and efficacy necessary for product approval.

Before we or any commercial partners can obtain FDA approval (or other foreign approvals) necessary to sell any of our product candidates, we must show that each potential product is safe and effective.

To meet these requirements, we must conduct extensive nonclinical and sufficient, well-controlled clinical studies.

The results of nonclinical studies may not be representative of disease behavior in a clinical setting and may not be predictive of the outcomes of our clinical studies.

In addition, the results of early clinical studies of product candidates may not be predictive of the results of later-stage clinical studies.

Conducting nonclinical and clinical studies is a lengthy, time consuming and expensive process.

The length of time varies substantially according to the type, complexity, novelty, and intended use of the product candidate, and often can be several years or more.

In addition, failure or delays can occur at any time during the nonclinical and clinical study process, resulting in additional operating expenses or harm to our business.

The commencement and rate of completion of clinical studies might be delayed by many factors, including, for example:

delays in reaching agreement with regulatory authorities on study design;

delays in reaching agreement on acceptable terms with prospective CROs and clinical study sites;

failure to demonstrate efficacy or the emergence of unforeseen safety issues;

insufficient quantities of qualified materials under current good manufacturing practice (cGMP) for use in clinical studies due to manufacturing challenges, delays or interruptions in the supply chain;

slower than expected rates of patient recruitment or failure to recruit a sufficient number of eligible patients, which may be due to a number of reasons, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the study, the design of the clinical study, and other potential drug candidates being studied;

delays in patients completing participation in a study or return for post-treatment follow-up for any reason, including, product side effects or disease progression;

modification of clinical study protocols;

delays, suspension, or termination of clinical studies by the institutional review board or ethics committee responsible for overseeing the study at a particular study site;

government or other regulatory agency delays or clinical holds requiring suspension or termination of our clinical studies due to safety, tolerability or other issues related to our product candidates.

The failure of nonclinical and clinical studies to demonstrate safety and effectiveness of a product candidate for the desired indications, whether conducted by us or by a CRO, would harm the development of that product candidate and potentially other product candidates.

This failure could cause us to abandon a product candidate and could delay development of other product candidates.

Any delay in, or failure of, our nonclinical studies or clinical studies could delay, or preclude, the filing of our NDAs and comparable applications with the FDA and foreign regulatory agencies, as applicable, and materially harm our business, prospects, financial condition and results of operations.

We rely on CROs to conduct some of our nonclinical and clinical studies due to our lack of suitable facilities and resources.

In addition, parts of our business are reliant on CROs, vendors, suppliers and other service providers that are located outside of the United States.

We do not have sufficient facilities or resources to conduct all of our anticipated nonclinical and clinical studies internally.

As a result, we contract with CROs to conduct a significant portion of the nonclinical and clinical studies required for regulatory approval for our product candidates.

Our reliance on CROs reduces our control over these activities but does not relieve us of our responsibilities.

For example, we are responsible for ensuring that each of our

studies is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, including, in the case of clinical studies, good clinical practices, even if the study is conducted by a CRO.

In the event CROs fail to perform their duties in such a fashion or we are unable to retain or continue with CROs on acceptable terms, we may be unable to complete our clinical studies and may fail to obtain regulatory approval for our product candidates.

In addition, these CROs may also have relationships with other entities, some of which may be our competitors.

CRO personnel are not our employees, and except for remedies available to us under our agreements with such third parties, we cannot control whether they devote sufficient time and resources to our clinical and nonclinical studies.

If these CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our research, nonclinical or clinical studies may be extended, delayed or terminated and we may not be able to obtain, or may be delayed in obtaining, regulatory approvals for our product candidates, any of which could materially harm our business, prospects, financial condition and results of operations.

Furthermore, we are exposed to a number of risks related to our CROs, vendors, suppliers and other service providers that are located outside of the United States, many of which may be beyond our control.

These risks include:

business interruptions resulting from geopolitical actions such as Russia’s invasion of Ukraine and the resulting war, as well as tariffs, other wars, acts of terrorism, natural disasters or outbreaks of disease;

different regulatory requirements for drug approvals in foreign countries;

different standards of care in various countries that could complicate the evaluation of our product candidates;

different U.S.

and foreign drug import and export rules;

different reimbursement systems and different competitive drugs indicated to treat the indication for which our product candidates are being developed;

reduced protection for intellectual property rights in certain countries;

unexpected changes in tariffs, trade barriers and regulatory requirements;

compliance with the United States Foreign Corrupt Practices Act (the FCPA) and other anti-corruption and anti-bribery laws;

compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

foreign taxes, including withholding of payroll taxes;

foreign currency fluctuations and compliance with foreign currency exchange rules, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country.

Top-line or preliminary data may not accurately reflect the final results of a particular study.

We may publicly disclose top-line or preliminary data based on analysis of then-available efficacy, tolerability, PK and safety data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study.

We also make assumptions, estimates, calculations and conclusions as part of our data analyses, and we may not have received or had the opportunity to fully and carefully evaluate all data prior to release.

As a result, the top-line or preliminary results that we report may differ from final results of the same studies or different conclusions or considerations may qualify such results once additional data have been received and fully evaluated.

Top-line data also remains subject to audit and verification procedures that may result in the final data differing materially from previously published preliminary data.

As a result, top-line and preliminary data should be viewed with caution until the final data are available.

In addition to top-line or preliminary results, the information that we may publicly disclose regarding a particular nonclinical or clinical study is based on extensive information, and you or others may not agree with what we

determine is the material or otherwise appropriate information to include in our disclosure.

In addition, any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug, drug candidate or our business.

If the top-line or preliminary data that we report differ from final results, or if others, including regulatory authorities, disagree with, or do not accept, the data or conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed or delayed, which could harm our business, financial condition, operating results or prospects.

We rely on third parties to formulate and manufacture our product candidates and products that we study in combination with our product candidates.

Our use of third parties may increase the risk that we will not have sufficient quantities of our product candidates or other products on time or at an acceptable cost.

We rely on third-party manufacturers to supply the quantities of our investigational product candidates used in our clinical and nonclinical studies.

If any product candidate we develop or acquire in the future receives FDA or other regulatory approval, we expect to continue our reliance on one or more third-party contractors to manufacture our products.

If, for any reason, we are unable to rely on any third-party sources we have identified to manufacture our product candidates, we would need to identify and contract with additional or replacement third-party manufacturers to manufacture drug substance and drug product for nonclinical, clinical and commercial purposes.

We may be unsuccessful in identifying additional or replacement third-party manufacturers, or in negotiating acceptable terms with any that we do identify.

If we are unable to establish and maintain manufacturing capacity, the development and sales of our products and our financial performance may be materially and adversely affected.

We are exposed to the following risks with respect to the manufacture of our product candidates:

We will need to identify manufacturers for commercial supply on acceptable terms, which we may be unable to do because the number of potential manufacturers is limited, and the FDA must evaluate and approve any new or replacement contractor.

Any third-party manufacturers with whom we contract might be unable to formulate and manufacture our product candidates in the volume and quality required to meet our clinical and, if approved, commercial needs in a timely manner.

Any third-party manufacturers with whom we contract might not perform as agreed or might not remain in the contract manufacturing business for the time required to supply our products.

One or more of any third-party manufacturers with whom we contract could be foreign, which increases the risk of shipping delays and adds the risk of import restrictions.

We do not have complete control over, and cannot ensure, any third-party manufacturers’

compliance with cGMP and other government regulations and corresponding foreign requirements, including periodic FDA and state regulatory inspections.

We may be required to obtain intellectual property rights from third parties to manufacture our product candidates, and if any third-party manufacturer makes improvements in the manufacturing process for our product candidates, we may not own, or may have to share, the intellectual property rights to the innovation.

We may be required to share our trade secrets and know-how with third parties, increasing risk of misappropriation or disclosure of our intellectual property by or to third parties.

When contracting with third-party manufacturers, we might compete with other companies for access to these manufacturers’

facilities and might be subject to manufacturing delays if the manufacturers give other clients higher priority than we are given.

Each of these risks could delay our development efforts, nonclinical studies and clinical studies or the approval, if any, of our product candidates by the FDA or applicable non-U.S.

regulatory authorities and the commercialization of our product candidates.

This could result in higher costs or deprive us of potential product revenues and materially harm our business, financial condition and results of operations.

If we lose key management personnel and cannot recruit and retain similarly qualified replacements, our business may materially suffer.

We are highly dependent on the services of our executive officers.

Our employment agreements with our executive officers do not ensure their retention.

We do not currently maintain, nor do we intend to obtain in the future, “key person”

life insurance that would compensate us in the event of the death or disability of any of the members of our management team.

Our executive officers are critical to our success, and unanticipated loss of any of these key employees could have a material adverse impact on our business, financial condition and results of operations.

Our collaboration partners might delay, prevent or undermine the success of our product candidates.

Our operating and financial strategy for the development, nonclinical and clinical testing, manufacture and commercialization of drug candidates heavily depends on collaborating with corporations, academic institutions, licensors, licensees, and other parties.

However, there can be no assurance that we will successfully establish or maintain these collaborations.

If a collaboration is terminated, replacement collaborators might not be available on attractive terms, or at all.

The activities of any collaborator will not be within our control and might not be within our power to influence.

There can be no assurance that any collaborator will perform its obligations to our satisfaction or at all, that we will derive any revenue or profits from these collaborations, or that any collaborator will not compete with us.

If any collaboration is unsuccessful, we might require substantially greater capital to undertake development and marketing of our proposed products and might not be able to develop and market these products effectively, if at all.

In addition, a lack of development and marketing collaborations might lead to significant delays in introducing proposed products into certain markets and/or reduced sales of proposed products in such markets.

We rely on data provided by third parties that has not been independently verified and could prove to be false, misleading, or incomplete.

We rely on third-party vendors, scientists, investigators and collaborators to provide us with significant data and other information related to our projects, nonclinical studies and clinical studies, and our business.

If these third parties provide inaccurate, misleading, or incomplete data, our business, prospects, and results of operations could be materially adversely affected.

Significant disruptions of information technology systems or breaches of data security could materially and adversely affect our business, results of operations and financial condition.

We collect and maintain information in digital form and are increasingly dependent on information technology systems and infrastructure to operate our business.

In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information and personal information.

It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information.

We have outsourced elements of our information technology infrastructure and, as a result, a number of third-party vendors may or could have access to our confidential information.

Our internal information technology systems and infrastructure, and those of our current and any future collaborators, contractors and consultants and other third parties on which we rely, are vulnerable to damage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyberattacks or cyber intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization.

The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, has escalated as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

In addition, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information or other intellectual property.

The costs to us to mitigate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful.

If unsuccessful, these problems could cause interruptions, delays, cessation of service and other harm to our business and our competitive position, including material disruption of our product development programs.

For example, any loss of clinical study data from completed or ongoing or planned clinical studies could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

If a computer security breach affects our systems or results in the unauthorized release of personally identifiable information, our reputation could be materially damaged.

In addition, such a breach may require notification to governmental agencies, the media or individuals pursuant to various federal, state and non-U.S.

privacy and security laws, if applicable, including the Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Health Information Technology for Clinical Health Act of 2009, and its implementing rules and regulations, as well as regulations promulgated by the Federal Trade Commission, state breach notification law and the General Data Protection Regulation (GDPR) in the European Union (EU).

We would also be exposed to a risk of loss or litigation and potential liability, which could materially adversely affect our business, results of operations and financial condition.

Research, development and commercialization goals may not be achieved in the timeframes that we publicly estimate, which could have an adverse impact on our business and could cause our stock price to decline.

We set goals, and make public statements regarding our expectations, regarding the timing of certain accomplishments, developments and milestones under our research and development programs.

The actual timing of these events can vary significantly due to a number of factors, including, the amount of time, effort and resources committed to our programs by us and any collaborators and the uncertainties inherent in the clinical development and regulatory approval process.

As a result, there can be no assurance that we or any collaborators will initiate or complete clinical development activities, make regulatory submissions or receive regulatory approvals as planned or that we or any collaborators will be able to adhere to our current schedule for the achievement of key milestones under any of our programs.

If we or any collaborators fail to achieve one or more of the milestones as planned, our business could be materially adversely affected, and the price of our common stock could decline.

Developments by competitors might render our product candidates or technologies obsolete or non-competitive.

The pharmaceutical and biotechnology industries are intensely competitive.

In addition, the clinical and commercial landscapes for HBV, HDV, high-recurrence genital herpes and transplant-related herpesviruses are rapidly changing;

we expect new data from commercial and clinical-stage products to continue to emerge.

We compete with organizations, some with significantly more resources, who are developing competitive product candidates.

If our competitors develop effective treatments for HBV, HDV, high-recurrence genital herpes and transplant-related herpesviruses or any other indication or field we might pursue, and successfully commercialize those treatments, our business and prospects could be materially harmed.

Other companies with products using the same or similar mechanisms of action as ours may produce negative clinical data, which would adversely affect public and clinical communities’

perceptions of our product candidates, and may negatively impact regulatory approval of, or demand for, our potential products.

Negative data from clinical studies using a competitor’s product candidates with the same or similar mechanisms of action as ours could adversely impact the perception of the therapeutic use of our product candidates and our ability to enroll patients in clinical studies.

The clinical and commercial success of our potential products will depend in part on the public and clinical communities’

acceptance of CIs, a novel class of product candidates.

Moreover, our success depends upon physicians prescribing, and their patients being willing to receive, treatments that involve the use of our product candidates we may develop in lieu of, or in addition to, existing treatments with which they are already familiar and for which more clinical data may be available.

Adverse events in our nonclinical or clinical studies or those of our competitors or of academic researchers utilizing the same mechanisms of action as our product candidates, even if not ultimately attributable to our product candidates, and any resulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our product candidates, stricter labeling requirements for our product candidates that are approved, if any, and a decrease in demand for any such products.

Risks Related to Our Regulatory and Legal Environment

We are and will be subject to extensive and costly government regulation and the failure to comply with these regulations may have a material adverse effect on our operations and business.

Our product candidates are subject to extensive and rigorous domestic government regulation including regulation by the FDA, the Centers for Medicare and Medicaid Services, other divisions of the U.S.

Department of Health and

Human Services, the U.S.

Department of Justice, state and local governments, and their respective foreign equivalents.

Both before and after approval of any product, we and our collaborators, suppliers, contract manufacturers and clinical investigators are subject to extensive regulation by governmental authorities in the United States and other countries, covering, among other things, testing, manufacturing, quality control, clinical studies, post-marketing studies, labeling, advertising, promotion, distribution, import and export, governmental pricing, price reporting and rebate requirements.

Failure to comply with applicable requirements could result in one or more of the following actions:

warning or untitled letters;

unanticipated expenditures;

delays in approval or refusal to approve a product candidate;

voluntary or mandatory product recall;

product seizure;

interruption of manufacturing or clinical studies;

operating or marketing restrictions;

criminal prosecution and civil or criminal penalties including fines and other monetary penalties;

exclusion from federal health care programs such as Medicare and Medicaid;

adverse publicity;

and disruptions to our business.

If we or our collaborators obtain regulatory approval for a particular product, the approval might limit the intended medical uses for the product, limit our ability to promote, sell, and distribute the product, require that we conduct costly post-marketing surveillance, and/or require that we conduct ongoing post-marketing studies.

Once obtained, any approvals might be withdrawn, including, for example, if there is a later discovery of previously unknown problems with the product, such as a previously unknown safety issue.

If we, our collaborators, or our contract manufacturers fail to comply with applicable regulatory requirements at any stage during the regulatory process, such noncompliance could result in delays in the approval of applications or supplements to approved applications, refusal by a regulatory authority (including the FDA) to review pending market approval applications or supplements to approved applications, untitled letters or warning letters, fines, import and export restrictions, product recalls or seizures, injunctions, total or partial suspension of production, civil penalties, withdrawals of previously approved marketing applications, recommendations by the FDA or other regulatory authorities against governmental contracts, and/or criminal prosecutions.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we or our collaborators are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

We, or any current or future collaborators, cannot assure you that we will receive the approvals necessary to commercialize for sale any of our product candidates, or any product candidate we acquire or develop in the future.

We will need FDA approval to commercialize our product candidates in the United States and approvals from applicable regulatory authorities in foreign jurisdictions to commercialize our product candidates in those jurisdictions.

To obtain FDA approval of any product candidate, we must submit to the FDA an NDA demonstrating that the product candidate is safe and effective for its intended use.

This requires significant research, nonclinical studies, and clinical studies.

Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing.

We cannot predict whether our research and clinical approaches will result in drugs that the FDA considers safe and effective for their indicated uses.

The FDA has substantial discretion in the approval process and might require us to conduct additional nonclinical and clinical testing, perform post-marketing studies or otherwise limit or impose conditions on any approval we obtain.

The approval process might also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during our regulatory review.

Delays in obtaining regulatory approvals might:

delay commercialization of, and our ability to derive product revenues from, our product candidates;

impose costly procedures on us;

and diminish any competitive advantages that we might otherwise enjoy.

Even if we comply with all FDA requests, the FDA might ultimately reject one or more of our NDAs.

We cannot be sure that we will ever obtain regulatory approval and commercialize any of our current or future product candidates.

In foreign jurisdictions, we are subject to regulatory approval processes and risks similar to those associated with the FDA described above.

We cannot assure you that we will receive the approvals necessary to commercialize our product candidates for sale outside the United States.

We and our collaborators may be subject, directly or indirectly, to applicable U.S.

federal and state anti-kickback, false claims laws, physician payment transparency laws, fraud and abuse laws or similar healthcare and security

laws and regulations, and health information privacy and security laws, which could expose us or them to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any products for which we obtain regulatory approval.

If we obtain FDA approval for any of our drug candidates and begin commercializing those drugs in the United States, our operations may be subject to various federal and state fraud and abuse laws, including the federal Anti-Kickback Statute, the federal False Claims Act, and physician payment sunshine laws and regulations.

Additionally, we are subject to state and non-U.S.

equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply regardless of the payor.

These laws may impact, among other things, our proposed sales, marketing and education programs.

In addition, we may be subject to patient privacy regulation by both the federal government and the states and foreign jurisdictions in which we conduct our business.

If we fail to comply with any applicable federal, state or foreign legal requirement, we could be subject to penalties.

Regulators globally are imposing greater monetary fines for privacy violations.

The GDPR applies to any company established in the EU as well as to those outside the EU if they collect and use personal data in connection with the offering goods or services to individuals in the EU or the monitoring of their behavior.

Noncompliance with the GDPR may result in monetary penalties of up to €20 million or 4% of worldwide revenue, whichever is higher.

The GDPR may increase our responsibility and liability in relation to personal data that we process and we may be required to put in place additional mechanisms to ensure compliance with the GDPR, including as implemented by individual countries.

Compliance with the GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of personal data, such as healthcare data or other sensitive information, could greatly increase our cost of developing our products or even prevent us from offering certain products in jurisdictions that we may operate in.

The California Consumer Privacy Act (CCPA) also created new individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households.

The CCPA requires covered companies to provide certain disclosures to consumers about its data collection, use and sharing practices, and to provide affected California residents with ways to opt-out of certain sales or transfers of personal information.

While there is currently an exception for protected health information that is subject to HIPAA and clinical study regulations, as currently written, the CCPA may impact our business activities.

The uncertainty surrounding the implementation of the CCPA exemplifies the vulnerability of our business to the evolving regulatory environment related to personal data and protected health information.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.

Violations of these laws may be punishable by criminal and/or civil sanctions, including penalties, fines and/or exclusion or suspension from federal and state healthcare programs such as Medicare and Medicaid and debarment from contracting with the U.S.

In addition, private individuals have the ability to bring actions on behalf of the U.S.

government under the federal False Claims Act as well as under the false claims laws of several states.

If any of the physicians or other providers or entities with whom we expect to do business with are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs, which may also adversely affect our business.

We face the risk of product liability claims and might not be able to obtain insurance.

Our business exposes us to the risk of product liability claims that are inherent in drug development.

If the use of one or more of our product candidates or approved drugs, if any, harms people, we might be subject to costly and damaging product liability claims brought against us by clinical study participants, consumers, health care providers, pharmaceutical companies or others selling our products.

Our inability to obtain sufficient product liability/clinical study insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of pharmaceutical products we develop.

We cannot predict all of the possible harms or side effects that might result and, therefore, the amount of insurance coverage we maintain might not be adequate to cover all

liabilities we might incur.

If we are unable to obtain insurance at an acceptable cost or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which might materially and adversely affect our business and financial position.

If we are sued for any injury allegedly caused by our products, our liability could exceed our total assets and our ability to pay.

Any successful product liability claims brought against us would decrease our cash and may adversely affect our business, stock price and financial condition.

We might be exposed to liability claims associated with the use of hazardous materials and chemicals.

Our research, development and manufacturing activities and/or those of our third-party contractors might involve the controlled use of hazardous materials and chemicals.

Although we will strive to have our safety procedures, and those of our contractors, comply with federal, state and local laws and regulations for using, storing, handling and disposing of these materials, we cannot completely eliminate the risk of accidental injury or contamination from these materials.

In the event of such an accident, we could be held liable for any resulting damages, and any liability could materially and adversely affect our business, financial condition and results of operations.

In addition, the federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive materials and waste products might require us to incur substantial compliance costs that could materially and adversely affect our business, financial condition and results of operations.

We do not carry hazardous materials liability insurance.

We intend to obtain such insurance in the future, if necessary, but cannot give assurance that we will obtain such coverage.

Our employees, independent contractors, consultants, collaborators and CROs may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could result in significant liability for us and harm our reputation.

We are exposed to the risk of fraud or other misconduct, including failure to:

comply with applicable regulations of, and provide accurate information to, the FDA or comparable foreign regulatory authorities;

comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities;

comply with the FCPA, the U.K.

Bribery Act 2010, the PRC Criminal Law, the PRC Anti-unfair Competition Law and other anti-bribery and trade laws;

report financial information and data accurately;

disclose unauthorized activities.

Misconduct could also involve the improper use or misrepresentation of information obtained during clinical studies, creating fraudulent data in our nonclinical studies or clinical studies or illegal misappropriation of product materials, which could result in regulatory sanctions, delays in clinical studies, or serious harm to our reputation.

It is not always possible to identify and deter misconduct.

The precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations.

Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred.

If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could harm our business, results of operations, financial condition and cash flows, including through the imposition of significant fines or other sanctions.

Risks Related to Our Intellectual Property

Our business depends on protecting our intellectual property.

If we and our licensors do not obtain protection for our respective intellectual property rights, our competitors might be able to take advantage of our research and development efforts to develop competing drugs.

Our success, competitive position and future revenues, if any, depend in part on our ability and the abilities of our licensors to obtain and maintain patent protection for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties.

We rely upon a combination of patents, trade secret protection and contractual arrangements to protect the intellectual property related to our technologies.

We will only be able to protect our products and proprietary information and technology by preventing unauthorized use by third parties to the extent that our patents, trade secrets, and contractual position allow us to do so.

We cannot be certain that we will secure any rights to any issued patents with claims that cover any of our proprietary product candidates and technologies.

The patent prosecution process is expensive and time-consuming, and we may be unable to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

We could fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection or before our competitors secure patents covering such discoveries.

The patent process also is subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting our products by obtaining and defending patents.

Composition-of-matter patents relating to the active pharmaceutical ingredient are generally considered to be the strongest form of intellectual property protection for pharmaceutical products.

Such patents provide protection not limited to any one method of use.

Method-of-use patents protect the use of a product for the specified method(s) and do not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method.

We rely on a combination of these and other types of patents to protect our product candidates, and there can be no assurance that our intellectual property will create and sustain the competitive position of our product candidates.

Biotechnology and pharmaceutical product patents involve highly complex legal and scientific questions.

Any patent applications that we own or license may fail to result in issued patents.

In addition, the U.S.

Patent and Trademark Office (USPTO) and patent offices in other jurisdictions often require that patent applications concerning pharmaceutical and/or biotechnology-related inventions are limited or narrowed substantially to cover only the specific innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges.

As a result, even if we or our licensors obtain patents, the patents might be substantially narrower than anticipated.

If patents do successfully issue from our applications, third parties may challenge their validity or enforceability, which may result in such patents being narrowed, invalidated, or held unenforceable.

Even if our patents and patent applications are not challenged by third parties, those patents and patent applications may not prevent others from designing around our claims and may not otherwise adequately protect our product candidates.

Patent and other intellectual property protection is crucial to the success of our business and prospects, and there is a substantial risk that such protections, if obtained, will prove inadequate.

The legal systems of certain countries, including China, do not always favor the enforcement of patents, trade secrets, and other intellectual property rights, particularly those relating to pharmaceutical and biotechnology products, which could make it difficult for us to stop infringement of our patents, misappropriation of our trade secrets, or marketing of competing products in violation of our proprietary rights.

Beyond the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how, information, or technology that is not covered by our patents.

Although our agreements require all of our employees to assign their inventions to us, and we require all of our employees, consultants, advisors, collaborators, contractors and any third parties who have access to our trade secrets, proprietary know-how and other confidential information and technology to enter into appropriate confidentiality agreements, we cannot be certain that our trade secrets, proprietary know-how and other confidential information and technology will not be subject to unauthorized disclosure or that our competitors will not otherwise gain access to or independently

develop substantially equivalent trade secrets, proprietary know-how and other information and technology.

If we are unable to prevent unauthorized disclosure of our intellectual property related to our product candidates and technology to third parties, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business and operations.

We may incur substantial costs as a result of litigation or other proceedings relating to our patents and other intellectual property rights.

We may in the future be involved in legal or administrative proceedings involving our intellectual property, including infringement of our intellectual property by third parties.

These lawsuits or proceedings likely would be expensive, consume time and resources and divert the attention of managerial and scientific personnel, even if we were successful in stopping the infringement of such patents.

There is a risk that these proceedings will decide that such patents or other intellectual property rights are not valid and that we do not have the right to stop the other party from using our inventions.

There is also the risk that, even if the validity of such patents is upheld, the court or administrative agency will refuse to stop the other party on the ground that such other party’s activities do not infringe our rights to such patents.

If we were not successful in defending our intellectual property, our competitors could develop and market products based on our discoveries, which may reduce demand for our products.

We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing our product candidates.

Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties.

Our competitors may have filed, and may in the future file, patent applications covering products and technologies similar to ours.

Any such patent application may have priority over our patent applications, which could further require us to obtain rights from third parties to issued patents covering such products and technologies.

We cannot guarantee that the manufacture, use or marketing of any product candidates that we develop will not infringe third-party patents.

If a patent infringement suit were brought against us, we may be forced to stop or delay developing, manufacturing, or selling potential products that are claimed to infringe a third party’s intellectual property, unless that third party grants us rights to use its intellectual property.

In such cases, we may be required to obtain licenses to patents or proprietary rights of others to continue development, manufacture or sale of our products.

If we are unable to obtain a license or develop or obtain non-infringing technology, or if we fail to defend an infringement action successfully, or if we are found to have infringed a valid patent, we may incur substantial costs and monetary damages, encounter significant delays in bringing our product candidates to market and be precluded from manufacturing or selling our product candidates, any of which could harm our business significantly.

The cost of maintaining our patent protection globally is high and requires continuous review and compliance.

We may not be able to effectively maintain our intellectual property position throughout the major markets of the world.

The USPTO and foreign patent authorities require maintenance fees, payments and continued compliance with a number of procedural and documentary requirements.

Noncompliance may result in abandonment or lapse of patents or patent applications and a partial or complete loss of patent rights in the relevant jurisdiction.

Such a loss could reduce royalty payments for lack of patent coverage from our collaboration partners or may result in competition, either of which could have a material adverse effect on our business.

We have made, and will continue to make, certain strategic decisions in balancing the costs and the potential protections afforded by the patent laws of certain countries.

As a result, we may not be able to prevent third parties from practicing our inventions in all countries, or from selling or importing products made using our inventions in and into the United States or other countries.

Third parties may use our technologies in territories in which we have not obtained patent protection to develop their own products and may infringe our patents in territories which provide inadequate enforcement mechanisms.

Such third-party products may compete with our product candidates, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Such competition could materially and adversely affect our business and financial condition.

Intellectual property rights do not address all potential threats to any competitive advantage we may have.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and intellectual property rights may not adequately protect our business or permit us to maintain our competitive advantage.

The following examples are illustrative:

Others may be able to make compounds that are the same as, or similar to, our current or future product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed.

We or any of our licensors or strategic partners might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or have exclusively licensed.

We or any of our licensors or strategic partners might not have been the first to file patent applications covering certain of our inventions.

Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights.

The prosecution of our pending patent applications may not result in granted patents.

Granted patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable, because of legal challenges by our competitors.

Patent protection on our product candidates may expire before we are able to develop and commercialize the product, or before we are able to recover our investment in the product.

Our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for such activities, as well as in countries in which we do not have patent rights and may then use the information learned from such activities to develop competitive products for sale in markets where we intend to market our product candidates.

The existence of counterfeit pharmaceutical products in pharmaceutical markets may damage our brand and reputation and have a material adverse effect on our business, operations and prospects.

Counterfeit products, including counterfeit pharmaceutical products, are a significant problem, particularly in China.

Counterfeit pharmaceuticals are products sold or used for research under the same or similar names, or similar mechanism of action or product class, but which are sold without proper licenses or approvals.

The proliferation of counterfeit pharmaceuticals has grown in recent years and may continue to grow in the future.

Such products may be used for indications or purposes that are not recommended or approved or for which there is no data or inadequate data with regard to safety or efficacy.

Such products divert sales from genuine products, often are of lower cost and lower quality (having different ingredients or formulations, for example), and have the potential to damage the reputation for quality and effectiveness of the genuine product.

If counterfeit pharmaceuticals illegally sold or used for research result in adverse events or side effects to consumers, we may be associated with any negative publicity resulting from such incidents.

In addition, counterfeit products could be used in nonclinical studies or clinical studies or could otherwise produce undesirable side effects or adverse events that may be attributed to our products as well, which could cause us or regulatory authorities to interrupt, delay or halt clinical studies and could result in the delay or denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims.

In China, although the government has increased the lower and upper limits on penalties on producers of counterfeit and substandard pharmaceuticals, these penalties have not eliminated counterfeit pharmaceuticals.

As a result, we may be unable to prevent third parties from selling or purporting to sell our products in China.

The existence of, and any increase in, the sales and production of counterfeit pharmaceuticals, or the technological capabilities of counterfeiters, could negatively impact our revenues, brand reputation, business and results of operations.

Risks Related to Our Common Stock

Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’

ability to bring a claim in a judicial forum they find favorable for disputes with us or our directors, officers or other employees.

Our amended and restated bylaws provide that, with certain limited exceptions, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf;

(2) any action asserting a claim of breach of fiduciary duty owed by any of our current or former directors, officers or other employees to us or to our stockholders;

(3) any action asserting a claim arising pursuant to the Delaware General Corporation Law, or our certificate of incorporation or bylaws (as each may be amended from time to time);

or (4) any action asserting a claim governed by the internal affairs doctrine.

Alternatively, if such court does not have jurisdiction, the Superior Court of Delaware, or, if such other court does not have jurisdiction, the United States District Court for the District of Delaware, will be the sole and exclusive forum for such actions and proceedings.

The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees.

Alternatively, if a court were to find the choice of forum provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a material adverse impact on our business.

The choice of forum provision in our amended and restated bylaws will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws, including the Exchange Act or the Securities Act, or the respective rules and regulations promulgated thereunder.

The price of our common stock might fluctuate significantly, and you could lose all or part of your investment.

The price of our common stock fluctuates widely.

Continued volatility in the market price of our common stock might prevent a stockholder from being able to sell shares of our common stock at or above the price paid for such shares.

The trading price of our common stock may continue to be volatile and subject to wide price fluctuations in response to various factors, many of which are beyond our control, such as the progress, results and timing of our clinical and nonclinical studies and other studies involving our product candidates, the success or failure of our product candidates, the receipt or loss of required regulatory approvals for our product candidates, the availability of capital or the other risks discussed in this “Risk Factors”

Unresolve d Staff Comments

We lease office space for corporate and administrative functions and laboratory space in South San Francisco, California under a sub-sublease that expires in December 2023.

We also lease office space that was used for administrative functions in Carmel, Indiana under a lease agreement that expires in August 2023.

In February 2021, we subleased substantially all of the office space under the lease in Carmel, Indiana for the remainder of its term.

Our China subsidiary leases registrational offices in Shanghai and Beijing.

Our lease in Shanghai expires in November 2023, and our Beijing lease expired in October 2022 and has been extended on a month-to-month term.

We believe these leased facilities are adequate for our current needs and that additional space will be available in the future on commercially reasonable terms as needed.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business