What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2023-03-22 compared with 2022-03-11 · 375 added, 43 removed, 8 unchanged (98% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities

Market Information for Common Stock

Our common stock is traded under the symbol “ASMB” and is quoted on The Nasdaq Global Select Market.

Our common stock is traded under the symbol “ASMB”

and is quoted on The Nasdaq Global Select Market.

Holders of Record

As of February 28, 2022, there were 66 stockholders of record, which excludes stockholders whose shares were held in nominee or street name by brokers.

As of March 20, 2023, there were 76 stockholders of record, which excludes stockholders whose shares were held in nominee or street name by brokers.

Dividend Policy

We have never declared or paid any dividends and do not anticipate paying any dividends on our common stock in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth the indicated information as of December 31, 2021 with respect to our equity compensation plans.

Plan Category

available for

Equity compensation plans approved by securityholders

Equity compensation plans not approved by securityholders

The weighted average exercise price is calculated solely based on the exercise prices of the outstanding stock options and does not reflect the shares that will be issued upon the vesting of outstanding awards of restricted stock units (RSUs), which have no exercise price.

This number includes the following:

278,369 shares subject to stock options granted under the 2010 Equity Incentive Plan (2010 Plan);

1,751,322 shares subject to outstanding awards granted under the Assembly Biosciences, Inc.

Amended and Restated 2014 Stock Incentive Plan (2014 Plan), of which 1,743,308 were subject to outstanding stock options and 8,014 were subject to outstanding RSUs;

2,788,966 shares subject to outstanding awards granted under the Assembly Biosciences, Inc.

2018 Stock Incentive Plan, as amended (2018 Plan), of which 1,891,756 were subject to outstanding stock options, 883,575 were subject to outstanding RSUs and 13,635 are underlying stock appreciation rights (which are not included in column (a) but are reflected in column (c));

and 466,238 options assumed by us in connection with our merger with Assembly Pharmaceuticals.

This number excludes purchase rights currently accruing under the Assembly Biosciences, Inc.

Amended and Restated 2018 Employee Stock Purchase Plan (2018 ESPP).

This number includes:

no shares under the 2010 Plan, which has been frozen;

733,295 shares available for issuance under the 2014 Plan;

3,337,448 shares available for issuance under the 2018 Plan ;

and 1,043,515 shares reserved for issuance under the 2018 ESPP .

As of February 2 8 , 20 2 2 , assuming each participant purchases the maximum number of shares in the current offering period, no more than 155,000 shares are subject to purchase in the current offering, which ends on May 1 3 , 20 2 2 .

This number includes 596,690 shares subject to outstanding awards granted under the 2017 Inducement Award Plan (2017 Inducement Plan), of which 589,190 were subject to outstanding stock options and 7,500 were subject to outstanding RSUs;

500,000 shares subject to stock options granted under the 2019 Inducement Award Plan (2019 Inducement Plan);

and 764,290 shares subject to outstanding awards granted under the 2020 Inducement Award Plan (2020 Inducement Plan), of which 693,040 were subject to outstanding stock options and 71,250 were subject to outstanding RSUs.

This number includes:

191,288 shares available for issuance under the 2017 Inducement Plan, no shares under the 2019 Inducement Plan and 11,960 shares available for issuance under the 2020 Inducement Plan.

Our stockholder-approved equity compensation plans consist of the 2018 Plan, 2014 Plan, the 2010 Plan, stock options assumed in our merger with Assembly Pharmaceuticals and the 2018 ESPP.

Effective on June 2, 2016, the 2010 Plan was frozen, and no further grants will be made under the 2010 Plan.

Shares that are forfeited under the 2010 Plan on or after June 2, 2016 will become available for issuance under the 2014 Plan.

An “Award” under the 2018 Plan, 2014 Plan or 2010 Plan is any right to receive our common stock consisting of non-statutory stock options, incentive stock options, stock appreciation rights, RSUs, or any other stock award.

In May 2018, our stockholders approved the 2018 ESPP and was amended and restated in May 2021.

The 2018 ESPP provides for the purchase by employees of up to an aggregate of 1,300,000 shares of the Company’s common stock.

Eligible employees can purchase shares of our common stock at the end of a predetermined offering period at 85% of the lower of the fair market value at the beginning or end of the offering period.

Our outstanding equity compensation arrangements that have not been approved by our stockholders consist of the 2017 Inducement Plan, the 2019 Inducement Plan and the 2020 Inducement Plan.

In April 2017, our board of directors adopted the 2017 Inducement Plan and reserved 800,000 shares of our common stock for issuance under 2017 the Inducement Plan.

In August 2019, our board of directors adopted the 2019 Inducement Plan and reserved 500,000 shares of our common stock for issuance under the 2019 Inducement Plan.

In March 2020, our board of directors adopted the 2020 Inducement Plan and reserved 800,000 shares of our common stock for issuance under the 2020 Inducement Plan.

The only persons eligible to receive grants of awards under the either the 2017 Inducement Plan, the 2019 Inducement Plan or the 2020 Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq Marketplace Rule 5635(c)(4) and the related guidance under Nasdaq IM 5635-1-that is, generally, a person not previously an employee or director of ours, or following a bona fide period of non-employment, as an inducement material to the individual's entering into employment with us.

An “Award” is any right to receive our common stock pursuant to the Inducement Plan, consisting of nonstatutory stock options, stock appreciation rights, restricted stock awards, RSUs, or any other stock award.

Recent Sales of Unregistered Securities

2 unchanged sentences

We did not purchase any of our registered equity securities during the period covered by this Annual Report on Form 10-K.

Management’s Discussion and Analysis o f Financial Condition and Results of Operation

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information appearing elsewhere in this Annual Report on Form 10-K.

The following discussion contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth in this Form 10-K under “Item 1A.

Risk Factors.”

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 and research programs focused on the discovery of novel antivirals to treat devastating viral diseases, including hepatitis delta virus (HDV), herpes simplex virus type 2 (HSV-2) 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 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, 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 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 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.

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.

Interim 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 was provided for these patients.

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 predominately 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, 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 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 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 non-clinical 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.

Preclinically to date, 4334 has also demonstrated pan-genotypic activity, an improved resistance profile and a favorable safety profile.

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

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 non-clinical chronic toxicology study of 3733, we have prioritized core inhibitor candidate 4334 and paused core inhibitor candidate 3733.

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 high-recurrence genital herpes and transplant-associated herpesviruses.

Up to 40% of symptomatic patients with HSV-2 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 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.

We currently have corporate and administrative offices and research laboratory space in South San Francisco, California as well as registrational offices, but no employees, in China.

Since our inception, we have had no revenue from product sales and have funded our operations principally through debt financings prior to our initial public offering in 2010 and through equity financings and collaborations since then.

Our operations to date have been primarily limited to organizing and staffing our company, licensing our product candidates, discovering and developing our product candidates, maintaining and improving our patent portfolio and raising capital.

We have generated significant losses to date, and we expect to continue to generate losses as we develop our product candidates.

As of December 31, 2022, we had an accumulated deficit of $724.5 million.

Because we do not generate revenue from any of our product candidates, our losses will continue as we further develop and seek regulatory approval for, and commercialize, our product candidates.

As a result, our operating losses are likely to be substantial over the next several years as we continue the development of our product candidates and thereafter if none are

approved or successfully launched.

We are unable to predict the extent of any future losses or when we will become profitable, if at all.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods.

Note 2 to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.

We evaluate our estimates and judgments, including those described in greater detail below, on an ongoing basis.

We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

Research and Development Expense and Accruals

As part of the process of preparing our consolidated financial statements, we are required to estimate certain research and development expenses.

This process involves reviewing quotations and contracts, reviewing the terms of our license agreements, communicating with our vendors and applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost.

The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met.

Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

Such payments are evaluated for current or long-term classification based on when they will be realized or consumed.

Examples of estimated amortized or accrued research and development expenses include fees to:

contract research organizations (CROs) and other service providers in connection with clinical studies;

contract manufacturing organizations (CMOs) in connection with the production of clinical trial materials;

vendors in connection with preclinical development activities.

We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical studies on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows and expense recognition.

Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones.

In either amortizing or accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period.

If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the related prepayment or accrual accordingly.

Our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in our reporting changes in estimates in any particular period.

Adjustments to prior period estimates have not been material for the years ended December 31, 2022 and 2021.

We have and may continue to enter into license agreements to access and utilize certain technology.

In each case, we evaluate if the license agreement results in the acquisition of an asset or a business.

To date, none of our license agreements have been considered to be acquisitions of businesses.

For asset acquisitions, the upfront payments to acquire such licenses, as well as any future milestone payments, are immediately recognized as research and development expense when paid, provided there is no alternative future use of the rights in other research and development projects.

These license agreements may also include contingent consideration in the form of cash payments to be made for future milestone events.

We assess whether such contingent consideration meets the definition of a derivative and to date we have determined that such contingent consideration are not derivatives.

Goodwill and Indefinite-Lived Intangible Asset

Prior to their full impairment in 2021, goodwill and our indefinite-lived intangible asset were reviewed for impairment at least annually in the fourth quarter and more frequently if events or other changes in circumstances indicated the carrying amount of the assets may not have been recoverable.

We have one operating segment and reporting unit.

Accordingly, our review of goodwill impairment indicators was performed at the entity-wide level.

In performing each annual impairment assessment and any interim impairment assessment, we determined if we should qualitatively assess whether it was more likely than not the fair value of goodwill was less than its carrying amount (the qualitative impairment test).

Some of the factors considered in the assessment included general macroeconomic conditions, conditions specific to the industry and market, cost factors, the overall financial performance and whether there had been sustained declines in our share price.

If we concluded it was more likely than not the fair value of the reporting unit was less than its carrying amount, or elected not to use the qualitative impairment test, a quantitative impairment test was performed.

We used our market capitalization as an indicator of fair value.

We believe that since our reporting unit is publicly traded, the ability of a controlling stockholder to benefit from synergies and other intangible assets which arise from control might cause the fair value of our reporting unit as a whole to exceed our market capitalization.

However, we believe the fair value measurement need not be based solely on the quoted market price of an individual share of our common stock, but also can consider the impact of a control premium in measuring the fair value of its reporting unit.

The control premium utilized was based on control premiums observed in recent acquisitions of entities similar to us which were made on a non-minority basis.

Should our market capitalization have been less than our total stockholders’

equity as of our annual test date or as of any interim impairment testing date, we also considered market comparables, trends in our stock price over a reasonable period and, if appropriate, used an income approach (discounted cash flow) to determine whether the fair value of our reporting unit was greater than our carrying amount.

When we used an income approach, we established a fair value by estimating the present value of our projected future cash flows, adjusted for probabilities of technical success, expected to be generated from our business.

The discount rate applied to the projected future cash flows to arrive at the present value was intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows.

Our discounted cash flow methodology considered projections of financial performance for a period of several years combined with an estimated residual value.

We elected to perform a quantitative impairment assessment of goodwill for our single reporting unit in 2021 due to a sustained decline in our market capitalization, an increase in negative economic outlook for biotech markets and a fourth quarter unfavorable clinical trial result for a competitor’s curative combination therapy for HBV infection.

We estimated and reconciled the fair value of our reporting unit using both a market approach, utilizing our market capitalization adjusted for an estimated control premium, and the income approach, discounting future cash flows based on management’s expectations of timelines to complete clinical trials, regulatory and commercial probabilities of technical success as well as future earnings forecast.

Before completing our goodwill impairment test, we first tested our indefinite-lived intangible asset then our remaining long-lived assets for impairment.

We concluded our indefinite-lived intangible asset was fully impaired and included that impairment within the net carrying value of our reporting unit for purposes of our goodwill impairment test.

No impairment was identified for our long-lived assets.

We concluded the fair value of our single reporting unit was less than its carrying value and therefore recognized an impairment charge of $12.6 million during 2021 to write off the entire balance of our goodwill.

This was primarily due to an increase in discount rates from the standpoint of a market participant and their views on how such aforementioned events increase the risks associated with the Company.

The fair value measurements were primarily based on Level 3 inputs.

The calculation of the impairment charge included substantial fact-based determinations and estimates including discount rates, future revenues, profitability, cash flows, probabilities of technical success, and fair values of assets and liabilities, and any changes to these assumptions could result in changes to the fair value of our single reporting unit.

The goodwill impairment charge is reflected in impairment of goodwill and indefinite-lived intangible asset in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.

Indefinite-Lived Intangible Asset

Our indefinite-lived intangible asset consisted of in-process research and development (IPR&D) associated with small molecule CIs that directly target and allosterically inhibit core protein functions associated with HBV that were

acquired with the acquisition of Assembly Pharmaceuticals, Inc.

IPR&D represented the fair value assigned to incomplete research projects we acquired through a business combination which, at the time of acquisition, had not reached technological feasibility, regardless of whether they had alternative use.

The primary basis for determining the technological feasibility or completion of these projects was obtaining regulatory approval to market the underlying products in an applicable geographic region.

We classified IPR&D acquired in a business combination as an indefinite-lived intangible asset until the associated research and development efforts were either completed or abandoned.

Upon completion of the associated research and development efforts, we would perform a final test for impairment and would determine the useful life of the technology and begin amortizing the assets to reflect their use over their remaining lives.

Upon permanent abandonment, we would write off the remaining carrying amount of the associated IPR&D intangible asset.

In performing each annual impairment assessment and any interim impairment assessment, we determined if we should qualitatively assess whether it was more likely than not the fair value of our IPR&D asset was less than its carrying amount (the qualitative impairment test).

If we concluded that was the case, or elected not to use the qualitative impairment test, we would proceed with quantitatively determining the fair value of the IPR&D asset and comparing its fair value to its carrying value to determine the amount of impairment, if any (the quantitative impairment test).

In performing the qualitative impairment test, we considered the results of the most recent quantitative impairment test and identified the most relevant drivers of the fair value for the IPR&D asset.

The most relevant drivers of fair value we identified were consistent with the assumptions used in the quantitative estimate of the IPR&D asset discussed below.

Using these drivers, we identified events and circumstances that may have had an effect on the fair value of the IPR&D asset since the last time the IPR&D’s fair value was quantitatively determined.

We then weighed these factors to determine and conclude if it was more likely than not the IPR&D asset was impaired.

If it was more likely than not the IPR&D asset was impaired, we proceeded with quantitatively determining the fair value of the IPR&D asset.

We used the income approach to determine the fair value of our IPR&D asset.

This approach calculates fair value by estimating the after-tax, probability of technical success adjusted, cash flows attributable to an in-process project over its useful life and then discounting these after-tax cash flows back to a present value.

This estimate included significant assumptions regarding the estimates market participants would make in evaluating the IPR&D asset, including the probability of successfully completing clinical trials and obtaining regulatory approval to market the IPR&D asset, the timing of and the expected costs to complete IPR&D projects, future net cash flows from potential drug sales, which were based on estimates of the sales price of the drug, the number of patients who will be diagnosed and treated and our competitive position in the marketplace, and appropriate discount and income tax rates.

The fair value of our IPR&D asset could vary based on the significant assumptions described.

Any impairment to be recorded was calculated as the difference between the fair value of the IPR&D asset as of the date of the assessment with the carrying value of the IPR&D asset on our consolidated balance sheet.

In 2021, we also completed a quantitative impairment test for our IPR&D asset associated with the Assembly Pharmaceuticals, Inc.

acquisition prior to the goodwill impairment test.

We utilized the discounted cash flow model of the income approach and determined the carrying value of our IPR&D asset was fully impaired resulting in an impairment charge of $29.0 million during 2021.

This was primarily driven by a higher discount rate applied to future cash flows based on a market participant’s view of increased risk associated with a negative economic outlook for biotech markets and a fourth quarter unfavorable clinical trial result for a competitor’s curative combination therapy for HBV infection.

The fair value measurements were primarily based on Level 3 inputs.

Some of the more significant assumptions inherent in the development of the model included the estimated annual cash flows, particularly net revenues, the appropriate discount rate to select in order to measure the risk inherent in the future cash flows, cost to complete the IPR&D project as well as other factors.

The impairment charge recorded is reflected in impairment of goodwill and indefinite-lived intangible asset in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.

Results of Operations

At December 31, 2022, we had an accumulated deficit of $724.5 million primarily as a result of research and development expenses and general and administrative expenses.

While we may in the future generate revenue from a variety of sources, including license fees, milestone payments, research and development payments in connection with strategic partnerships and/or product sales, our product candidates are in the clinical stage of development or in varying stages of nonclinical development and may never be successfully developed or commercialized.

Accordingly, we expect to continue to incur substantial losses from operations for the foreseeable future and there can be no assurance we will ever generate significant revenues.

Comparison of the Years Ended December 31, 2022 and 2021

Collaboration Revenue

The following table summarizes the period-over-period changes in our collaboration revenue (in thousands, except for percentages):

Year Ended December 31,

Collaboration revenue

There was no collaboration revenue for the year ended December 31, 2022.

Collaboration revenue for the year ended December 31, 2021 consists of the recognition of deferred revenue allocated to 2158 under our collaboration agreement with BeiGene, Ltd.

(the BeiGene Agreement) upon discontinuing development of 2158.

Research and Development Expense

Research and development expenses consist primarily of employee-related expenses, fees paid to CROs and CMOs, lab supplies and other third party expenses that support our research and discovery, nonclinical and clinical activities.

We use our employee and infrastructure resources, as well as certain third-party costs, across multiple research and development programs, and we do not specifically allocate these costs to our programs.

The following table summarizes the period-over-period changes in our research and development expenses (in thousands, except for percentages):

Year Ended December 31,

External expenses:

Research and discovery

Total external expenses

Employee and contractor-related expenses

Facility and other expenses

Total research and development expenses

(1) Microbiome external expenses in 2021 include a $3.0 million gain on the sale of Microbiome assets.

Research and development expenses were $70.0 million for the year ended December 31, 2022 compared to $68.5 million for the year ended December 31, 2021.

The $1.5 million increase in research and development expenses was primarily driven by increases in employee and contractor-related expenses of $4.6 million due to the reversal in 2021 of $4.8 million of previously recognized stock-based compensation expense related to forfeited awards of terminated employees, of which $2.7 million resulted from the wind-down of our Microbiome program, as well as increases in

salaries and benefits primarily due to severance costs incurred related to the reorganization announced in July 2022.

We also experienced increases in external expenses generated from the advancement of 3733, our research discovery programs, which expand our portfolio beyond CIs, and advancement of 4334 to a Phase 1a trial which was initiated in 2022.

This was partially offset by decreases in external expenses due to our discontinuation of the VBR, 2158 and Microbiome programs, net of a $3.0 million gain on the sale of Microbiome assets recognized during the year ended December 31, 2021, and a decrease in facility and other expenses of $1.5 million primarily attributable to asset impairment and other charges incurred in 2021 in connection with the wind-down of the Microbiome program.

General and Administrative Expense

General and administrative expenses consist primarily of salaries and other related costs for personnel in executive, finance, accounting, business development, information technology, legal and human resources functions.

Other significant costs include facility costs not otherwise included in research and development expenses, insurance costs, legal fees relating to patents and corporate matters and fees for accounting and consulting services.

The following table summarizes the period-over-period change in our general and administrative expenses (in thousands, except for percentages):

Year Ended December 31,

General and administrative expenses

General and administrative expenses were $24.1 million for the year ended December 31, 2022, compared to $28.8 million for the year ended December 31, 2021.

The decrease of $4.6 million in general and administrative expenses was primarily due to a $1.7 million decrease in professional fees attributable to reductions in legal and outside consulting-related expenses and the amortization of incremental contract costs under the BeiGene Agreement upon discontinuing development of 2158 in 2021.

We also experienced decreases of $1.1 million in stock-based compensation expense in 2022 primarily due to a decrease in the grant date fair value of recent option grants, $0.6 million in salaries and benefits as a result of no bonus being due to our former Chief Executive Officer following his retirement, $0.5 million in facility-related expenses primarily due to termination of lease agreements related to the wind-down of the Microbiome program in 2021 and $0.5 million in recruitment expenses due to hiring of fewer employees during the year ended December 31, 2022 compared to the same period in 2021.

The severance costs incurred related to the reorganization announced in July 2022 were offset by a reduction in bonuses for those impacted by the reorganization.

Impairment of Goodwill and Indefinite-Lived Intangible Asset

The following table summarizes the period-over-period change in our impairment of goodwill and indefinite-lived intangible asset (in thousands, except for percentages):

Year Ended December 31,

Impairment of goodwill and indefinite-lived intangible asset

In the fourth quarter of 2021, we concluded our goodwill and IPR&D asset were impaired due to a sustained decline in our stock price as well as industry and market factors which caused an increase in the estimated discount rate applied to future cash flows.

This resulted in the entire write-off of our goodwill and IPR&D asset of $12.6 million and $29.0 million, respectively.

Interest and Other Income, Net

Interest income consists of interest earned on our cash and cash equivalents and available-for-sale securities.

The following table summarizes the period-over-period changes in our interest and other income, net (in thousands, except for percentages):

Year Ended December 31,

Interest and other income, net

Interest and other income, net was $1.0 million for the year ended December 31, 2022, compared to $0.3 million for the year ended December 31, 2021.

The increase of $0.7 million was primarily due to more interest income earned on marketable securities caused by multiple interest rate increases in 2022.

Income Tax Benefit

The following table summarizes the period-over-period changes in our income tax benefit (in thousands, except for percentages):

Year Ended December 31,

Income tax benefit

There was no income tax benefit recognized during the year ended December 31, 2022.

During the year ended December 31, 2021, we recognized an income tax benefit of $2.5 million due to the reversal of deferred tax liabilities associated with our IPR&D which was fully impaired in 2021.

Liquidity and Capital Resources

Sources of Liquidity

As a result of our significant research and development expenditures and the lack of any FDA-approved products to generate product sales revenue, we have not been profitable and have generated operating losses since we were incorporated in October 2005.

We have funded our operations through December 31, 2022 principally with debt prior to our initial public offering, and thereafter with equity financing, raising an aggregate of $605.0 million in net proceeds from public offerings and private placements from inception to December 31, 2022.

In 2021, we sold an aggregate of 11,234,207 shares of common stock under our “at-the-market”

offering program (2020 ATM), resulting in net proceeds of $52.8 million.

In 2022, we sold an aggregate of 300,827 shares of common stock through the 2020 ATM, resulting in net proceeds of $0.3 million.

Future Funding Requirements

We expect our future operating expenses to decrease as we continue to realize cost savings from our strategic reorganization plan we implemented in July 2022.

However, we will need to obtain substantial additional funding in connection with our continuing operations.

If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

We monitor our cash needs and the status of the capital markets on a continuous basis.

From time to time, we opportunistically raise capital and have done so numerous times since our initial public offering by issuing equity securities.

We expect to continue to raise capital when and as needed and at the time and in the manner most advantageous to us.

We expect our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements for at least the next twelve months.

Our contractual obligations include operating lease obligations totaling $3.5 million as of December 31, 2022, of which $3.4 million are short-term.

We also enter into contracts in the normal course of business with CROs for clinical trials and CMOs for clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes, which generally provide for termination within 30 days of notice.

Since our inception, we have not engaged in any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Our future capital requirements will depend on many factors, including:

our ability to raise capital despite macroeconomic and geopolitical events impacting financial markets, such as rising inflation, market volatility and risk of recession;

the scope, progress, results and costs of our ongoing drug discovery, nonclinical development, laboratory testing and clinical studies of our product candidates and any additional clinical studies we may conduct in the future;

our ability to manufacture, and to contract with third parties to manufacture, adequate supplies of our product candidates for our clinical studies and any eventual commercialization;

the costs, timing and outcome of regulatory review of our product candidates;

the costs of preparing, filing and prosecuting patent applications in the United States and abroad, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

our ability to establish and maintain collaborations on favorable terms, if at all.

Identifying potential product candidates and conducting nonclinical testing and clinical studies is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales.

In addition, our product candidates, if approved, may not achieve commercial success.

Our commercial revenues, if any, will be derived from sales of medicines that we do not expect to be commercially available for years, if at all.

Accordingly, we will need to continue to rely on additional financings to achieve our business objectives.

Adequate additional financings may not be available to us on acceptable terms, or at all.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements.

We do not have any committed external source of funds.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders.

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

A summary of our cash flows for the periods presented was as follows (in thousands):

Year Ended December 31,

Operating activities

Investing activities

Financing activities

Net increase (decrease) in cash and cash equivalents

Net Cash Used in Operating Activities

Net cash used in operating activities was $84.5 million for the year ended December 31, 2022.

This was primarily due to our net loss of $93.1 million, adjusted for $6.6 million recognized for stock-based compensation expense.

Net cash used in operating activities was $93.4 million for the year ended December 31, 2021.

This was primarily due to our net loss of $129.9 million, which included the recognition of $41.6 million in non-cash charges for the impairment of our goodwill and indefinite-lived intangible asset and $6.3 million in collaboration revenue from deferred revenue allocated to 2158 under the BeiGene Agreement upon discontinuing development of 2158.

Net Cash Provided by Investing Activities

Net cash provided by investing activities for the year ended December 31, 2022 was $90.6 million due to proceeds of $89.2 million from sales and maturities of marketable securities, net of purchases, and proceeds of $1.5 million received in 2022 from the sale of Microbiome assets in 2021.

Net cash provided by investing activities for the year ended December 31, 2021 was $26.5 million.

This was due to proceeds of $27.3 million from sales and maturities of marketable securities, net of purchases, and proceeds of $1.5 million from the sale of Microbiome assets.

This was partially offset by our purchase of leased equipment for $3.1 million that we then sold for $0.9 million in connection with the wind-down of the Microbiome program.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the year ended December 31, 2022 was $0.6 million resulting from the net proceeds of $0.3 million from the sale of 300,827 shares of our common stock under the 2020 ATM and $0.3 million from the issuance of 225,832 shares of common stock under the Assembly Biosciences Amended and Restated 2018 Employee Stock Purchase Plan (2018 ESPP).

Net cash provided by financing activities for the year ended December 31, 2021 was $53.1 million resulting from the net proceeds of $52.8 million from the sale of 11,234,207 shares of our common stock under the 2020 ATM and $0.3 million from the issuance of 88,820 shares of common stock under the 2018 ESPP.

Quantitative and Qualitat ive Disclosures about Market Risk

Not applicable.

Financial Statemen ts and Supplementary Data

(a) Financial Statements

The financial statements required to be filed pursuant to this Item 8 are appended to this report.

An index of those financial statements is found on page F-1.

(b) Supplementary Data

Not applicable.

Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure

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 5. Market for Registrant’s Common Equity