What changed in this filing

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Item 9A. Controls and Procedures

2024-03-28 compared with 2023-03-22 · 360 added, 413 removed, 722 unchanged (52% of the section changed)

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We maintain a system of disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended (the Exchange Act), that is designed to provide reasonable assurance that information, which is required to be disclosed in our reports filed pursuant to the Exchange Act, is accumulated and communicated to management in a timely manner.

At the end of fiscal year ending December 31, 2022, we carried out an evaluation, under the supervision, and with the participation of, our management, including our Chief Executive Officer, who serves as our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b).

Based upon that evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures for the fiscal year ending as of December 31, 2022 were effective at reasonable assurance levels.

Management’s Annual Report on Internal Control over Financial Reporting

At the end of fiscal year ending December 31, 2023, we carried out an evaluation, under the supervision, and with the participation of, our management, including our Chief Executive Officer and President, who serves as our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b).

Based upon that evaluation, our Chief Executive Officer and President concluded that our disclosure controls and procedures for the fiscal year ending as of December 31, 2023 were effective at reasonable assurance levels.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).

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Because of these inherent limitations, management does not expect that our internal controls over financial reporting will prevent all error and all fraud.

Under the supervision and with the participation of our management, including our Chief Executive Officer, who serves as our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission.

Under the supervision and with the participation of our management, including our Chief Executive Officer and President, who serves as our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under the framework in Internal Control-Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.

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Our Board has adopted a Code of Ethics for our principal executive officer and all senior financial officers and a Code of Conduct applicable to all of our employees and our directors.

Both Codes are available under the “Investors—Corporate Governance”

section of our website at www.assemblybio.com.

Both Codes are available under the “Investors—Corporate Governance” section of our website at www.assemblybio.com.

If we make any substantive amendments to, or grant any waivers from, the Code of Ethics for our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions, or any officer or director, we will disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8-K.

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available for

Equity compensation plans approved by securityholders

Equity compensation plans not approved by securityholders

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

(1) 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.

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211,244 shares subject to outstanding awards granted under the Assembly Biosciences, Inc.

Amended and Restated 2014 Stock Incentive Plan (2014 Plan), of which 1,541,237 were subject to outstanding stock options and 2,500 were subject to outstanding RSUs;

Amended and Restated 2014 Stock Incentive Plan (2014 Plan), of which 209,591 were subject

to outstanding stock options and 1,653 were subject to outstanding RSUs;

520,707 shares subject to outstanding awards granted under the Assembly Biosciences, Inc.

2018 Stock Incentive Plan, as amended (2018 Plan), of which 5,214,008 were subject to outstanding stock options, 1,646,014 were subject to outstanding RSUs and 4,610 are underlying stock appreciation rights (which are not included in column (a) but are reflected in column (c));

2018 Stock Incentive Plan, as amended (2018 Plan), of which 429,157 were subject to outstanding stock options and 91,550 were subject to outstanding RSUs;

and 38,853 options assumed by us in connection with our merger with Assembly Pharmaceuticals.

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As of March 22, 2024, assuming each participant purchases the maximum number of shares in the current offering period, no more than 12,896 shares are subject to purchase in the current offering, which ends on May 14, 2024.

(4) This number includes 575,640 shares subject to outstanding awards granted under the 2017 Inducement Award Plan (2017 Inducement Plan), of which 571,890 were subject to outstanding stock options and 3,750 were subject to outstanding RSUs;

(4) This number includes 65,035 shares subject to stock options granted under the 2017 Inducement Award Plan (2017 Inducement Plan);

41,666 shares subject to stock options granted under the 2019 Inducement Award Plan (2019 Inducement Plan);

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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.

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 it was amended and restated in May 2021.

The 2018 ESPP provides for the purchase by employees of up to an aggregate of 108,333 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.

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The only persons eligible to receive grants of awards under 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.

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.

Certain Relationships and Related P arty Transactions, and Director Independence

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Description of Document

Registrant’s

Sixth Amended and Restated Certificate of Incorporation dated May 25, 2022.

Certificate of Amendment to Sixth Amended and Restated Certificate of Incorporation of Assembly Biosciences, Inc., dated February 9, 2024 .

Amended and Restated Bylaws as amended through December 7, 2022.

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Description of Securities.

Sub-Sublease, dated as of July 18, 2018, between Prothena Biosciences, Inc., as Sub-Sublandlord, and Assembly Biosciences, Inc., as Sub-Subtenant.

Sublease, dated July 26, 2023, by and between Arsenal Biosciences, Inc., as Sublandlord, and Assembly Biosciences, Inc., as Subtenant.

Option, License and Collaboration Agreement, dated October 15, 2023, by and between Assembly Biosciences, Inc.

and Gilead Sciences, Inc.

Common Stock Purchase Agreement, dated October 15, 2023, by and between Assembly Biosciences, Inc.

and Gilead Sciences, Inc.

Investor Rights Agreement, dated October 15, 2023, by and between Assembly Biosciences, Inc.

and Gilead Sciences, Inc.

Exclusive License Agreement dated September 3, 2013 by and between The Indiana University Research and Technology Corporation and Assembly Pharmaceuticals, Inc.

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Delaney IV, Ph.D., effective as of May 27, 2020.

Employment Agreement, dated November 8, 2023, between Assembly Biosciences, Inc.

and Anuj Gaggar, M.D., Ph.D.

Employment Agreement, dated February 10, 2022, between Assembly Biosciences, Inc.

and Nicole S.

White, Ph.D., effective as of February 16, 2022.

2010 Equity Incentive Plan.

Description of Document

Assembly Biosciences, Inc.

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Stock Incentive Plans.

Form of Notice of Stock Option Grant and Stock Option Agreement under Amended and Restated 2014 Stock Incentive Plan.

Form of Notice of Stock Option Grant and Stock Option Agreement under the Amended and Restated 2014 Stock Incentive Plan.

Form of Restricted Stock Unit Award Notice and Restricted Stock Unit Award Agreement under the Amended and Restated 2014 Stock Incentive Plan.

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2018 Stock Incentive Plan.

Description of Document

Registrant’s

Amendment No.

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2018 Stock Incentive Plan.

Amendment No.

6 to Assembly Biosciences, Inc.

2018 Stock Incentive Plan.

Form of Notice of Stock Option Grant and Stock Option Agreement under the 2018 Stock Incentive Plan.

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Form of Restricted Stock Unit Award Notice and Restricted Stock Unit Award Agreement under the 2020 Inducement Award Plan.

Assembly Biosciences, Inc.

2022 Corporate Bonus Plan.

Open Market Sale Agreement by and between Assembly Biosciences, Inc.

and Jefferies LLC.

Description of Document

Assembly Biosciences, Inc.

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Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Clawback Policy.

Inline XBRL Instance Document.

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Inline XBRL Taxonomy Extension Definitions Linkbase Document.

Description of Document

Registrant’s

Inline XBRL Taxonomy Extension Label Linkbase Document.

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# Represents management contracts or compensatory plans or arrangements.

** The certification attached as Exhibit 32.1 that accompanies this Annual Report on Form 10-K is to be deemed furnished and shall not be deemed “filed”

with the SEC and is not to be incorporated by reference into any filing of Assembly Biosciences, Inc.

** The certification attached as Exhibit 32.1 that accompanies this Annual Report on Form 10-K is to be deemed furnished and shall not be deemed “filed” with the SEC and is not to be incorporated by reference into any filing of Assembly Biosciences, Inc.

under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.

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March 28, 2024

/s/ Tomas Cihlar, Ph.D.

March 28, 2024

Tomas Cihlar, Ph.D.

/s/ Gina Consylman

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Gina Consylman

/s/ Richard D.

DiMarchi, Ph.D.

/s/ Robert D.

March 28, 2024

DiMarchi, Ph.D.

/s/ Sir Michael Houghton, Ph.D.

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Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2023 and 2022

Consolidated Statements of Changes in Stockholders’

Equity for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2023 and 2022

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022

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We have audited the accompanying consolidated balance sheets of Assembly Biosciences, Inc.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in stockholders’

equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S.

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Basis for Opinion

These financial statements are the responsibility of the Company‘s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These financial statements are the responsibility of the Company‘s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued research and development expenses

Collaboration Agreement with Gilead Sciences, Inc.

Description of the Matter

For the year ended December 31, 2022, the Company incurred $70.0 million of research and development expenses and recorded $3.1 million of accrued research and development expenses at December 31, 2022.

As described in Note 2 to the consolidated financial statements, the Company’s accrued research and development expenses are based on estimates of the services received and efforts expended pursuant to contracts with multiple contract research organizations and manufacturing vendors that conduct and manage these activities on its behalf.

When billing terms under such contracts do not coincide with the timing of when the work is performed, management is required to make estimates of outstanding obligations to those third parties as of period end.

The accrual is based on a number of factors, including the time period over which services will be performed, enrollment of subjects, number of sites activated, and the level of effort expended in each period.

At period end, accrued research and development expenses are recorded based upon estimates of the proportion of work completed over the term of the individual clinical trial and manufacturing activities in accordance with signed agreements with the third parties.

The Company obtains information directly from these service providers and performs procedures to challenge these estimates based on their internal understanding of the services provided to date.

However, the Company may also be required to estimate these services based on information available to its internal clinical or administrative staff if such information is not able to be obtained timely from its services providers.

Auditing accrued research and development expenses is complex because of the judgments applied by management to determine the commencement and completion date of vendor tasks and the cost and extent of work performed during the reporting period for services not yet billed by contracted third-party vendors.

The testing of the Company’s accrued research and development expense models also involves a high level of effort to test the high volume of data used to determine the estimated accrual.

As described in Note 10 to the consolidated financial statements, the Company entered into an Option, License and Collaboration Agreement (the Gilead Collaboration Agreement) and Common Stock Purchase Agreement and an Investor Rights Agreement (the Gilead Equity Agreements) with Gilead Sciences, Inc.

during the year ended December 31, 2023.

The Company concluded Gilead is a customer and accordingly, the Gilead Collaboration Agreement is within the scope of the revenue from contracts with customers guidance.

In determining the appropriate accounting treatment, the Company identified a single combined performance obligation for the discovery, research and development services during the collaboration term, and will recognize revenue over time using a cost-based input method.

The Company determined that the total transaction price under the Gilead Collaboration Agreement was $90.7 million, which consisted of an upfront payment of $84.8 million and a $5.9 million premium on the purchase of the Company’s common stock that was allocated to the single combined performance obligation under the Gilead Collaboration Agreement.

Auditing the Company’s revenue recognition for the Gilead Collaboration Agreement is complex and required the Company to apply significant judgment to determine whether any promises or services described in the Gilead Collaboration Agreement meet the criteria of being distinct and capable of being distinct within the context of the contract or represent a material right.

How We Addressed the Matter in Our Audit

To test the completeness of accrued research and development expenses, we performed audit procedures that included, among others, direct confirmation of contract terms and conditions with a sample of the Company’s third-party vendors.

We also confirmed the progress of contracted clinical activities with these third-party vendors and compared such data to the Company’s estimates of progress as reflected in their accrual models.

We further tested the accuracy of the calculations, the completeness of the data utilized, and the reasonableness of the inputs used in management’s accrual models by testing actual invoices paid to date, agreeing inputs back to contractual terms and holding discussions with clinical or administrative staff outside of the finance function.

Procedures were performed to evaluate the reliability, completeness and relevance of management’s data by testing actual invoices paid and holding discussions with clinical or administrative staff outside of the finance function to corroborate progress and estimated level of expended effort incurred by the Company’s third-party vendors.

Further, we inspected material invoices received from third parties after the balance sheet date and evaluated whether services performed prior to the consolidated balance sheet date had been properly included in the accrual.

To test the conclusion that the various promises under the contract collectively constituted a single combined performance obligation, our audit procedures included, among others, reviewing the Gilead Collaboration Agreement, discussing the potential performance obligations with management, and evaluating whether management's accounting position considered all relevant facts and terms included in the agreement.

We further evaluated management's technical analysis and assessed management's conclusions to determine whether they had appropriately considered and applied the guidance and interpretations associated with performance obligations within the scope of the revenue from contracts with customers guidance.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2015.

San Jose, California

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(In thousands except for share amounts and par value)

As of December 31,

Current assets

Cash and cash equivalents

Marketable securities - short-term

Marketable securities

Accounts receivable from collaboration

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Total current assets

Marketable securities - long-term

Property and equipment, net

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Other accrued expenses

Deferred revenue - short-term ($ 30,915 and $− to a related party)

Operating lease liabilities - short-term

Total current liabilities

Deferred revenue

Deferred revenue - long-term ($ 55,379 and $− to a related party)

Operating lease liabilities - long-term

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Common stock, $ 0.001 par value;

150,000,000 and 100,000,000 shares authorized as of December 31, 2022 and December 31, 2021, respectively;

150,000,000 shares authorized as of December 31, 2023 and December 31, 2022;

5,482,752 and 4,074,552 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

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Year Ended December 31,

Collaboration revenue

Collaboration revenue ($ 4,430 and $ − from a related party)

Operating expenses

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General and administrative

Impairment of goodwill and indefinite-lived intangible asset

Total operating expenses

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Loss before income taxes

Income tax benefit

Income tax expense

Other comprehensive loss

Unrealized loss on marketable securities

Unrealized gain (loss) on marketable securities

Comprehensive loss

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ASSEMBLY BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF CHA NGES IN STOCKHOLDERS’

CONSOLIDATED STATEMENTS OF CHA NGES IN STOCKHOLDERS’ EQUITY

(In thousands except for share amounts)

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Issuance of common stock for settlement of restricted stock units (RSUs)

Issuance of common stock upon cashless exercise of pre-funded warrants

Unrealized loss on marketable debt securities

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Issuance of common stock for settlement of RSUs

Unrealized loss on marketable debt securities

Issuance of common stock to a related party, net of issuance costs

Unrealized gain on marketable debt securities

Stock-based compensation

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Adjustments to reconcile net loss to net cash used in operating activities:

Impairment of goodwill and indefinite-lived intangible asset

Depreciation and amortization

Stock-based compensation

Net amortization of investments in marketable debt securities

Net (accretion) amortization of investments in marketable debt securities

Non-cash rent expense

Deferred income tax benefit

Loss on disposal of property and equipment

Gain on the sale of Microbiome assets

Changes in operating assets and liabilities:

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Operating lease liabilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities

Proceeds from maturities of marketable securities

Proceeds from sale of marketable securities

Proceeds from the sale of Microbiome assets

Proceeds from sale of property and equipment

Purchases of property and equipment

Purchases of marketable securities

Proceeds from sale of property and equipment

Net cash provided by investing activities

Proceeds from sale of marketable securities

Proceeds from the sale of Microbiome assets

Net cash (used in) provided by investing activities

Cash flows from financing activities

Proceeds from the issuance of common stock to a related party, net of issuance costs

Proceeds from the issuance of common stock under ATM equity offering program, net of issuance costs

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Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

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Operating lease liabilities arising from obtaining ROU assets

Remeasurement of lease liabilities arising from modification of ROU assets

Receivable from sale of Microbiome assets included in prepaid expenses and other current assets

See Accompanying Notes to the Consolidated Financial Statements

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Note 1 - Nature of Business

Assembly Biosciences, Inc., together with its subsidiaries (Assembly or the Company), incorporated in Delaware in October 2005, is a biopharmaceutical company advancing clinical candidates for the treatment of chronic hepatitis B virus (HBV) infection, an early-stage development program targeting high-recurrence genital herpes and research programs focused on the discovery of novel antivirals to treat viral diseases, including hepatitis delta virus (HDV), herpes simplex virus type 2 (HSV-2) and transplant related herpesviruses.

Assembly Biosciences, Inc.

(together with its subsidiaries, Assembly or the Company), incorporated in Delaware in October 2005, is a biotechnology company developing innovative therapeutics.

The Company's pipeline includes two helicase-primase inhibitors (HPI) targeting recurrent genital herpes, an orally bioavailable hepatitis delta virus (HDV) entry inhibitor, a clinical stage capsid assembly inhibitor (CAM) candidate designed to disrupt the replication cycle of hepatitis B virus (HBV) at several key points with the aim of achieving finite treatment and functional cures and research programs focused on the discovery of therapeutics to treat devastating viral diseases, including a non-nucleoside polymerase inhibitor (NNPI) targeting transplant-related herpesviruses and a small molecule interferon-α (IFN-α) receptor (IFNAR) agonist targeting HBV and HDV.

The Company operates in one segment and is headquartered in South San Francisco, California.

Prior to the Company’s wind-down of its Microbiome program in January 2021, the Company also had operations in Connecticut.

The Company has not derived any revenue from product sales to date and currently has no approved products.

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Food and Drug Administration (FDA) or an applicable foreign regulatory agency.

Since inception, the Company’s operations have been financed primarily through the sale of equity securities, the proceeds from the exercise of warrants and stock options, the issuance of debt, and upfront payments related to collaboration agreements.

Since inception, the Company’s operations have been financed through the sale of equity securities, the proceeds from the exercise of warrants and stock options, the issuance of debt, and upfront payments related to collaboration agreements.

The Company has incurred losses from operations since inception and expects to continue to incur substantial losses for the next several years as it continues its product development efforts.

Management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months following the date that these consolidated financial statements are issued.

If the Company cannot generate significant cash from its operations, it intends to obtain any additional funding it requires through strategic relationships, public or private equity or debt financings, grants or other arrangements.

The Company cannot assure such funding will be available on reasonable terms, if at all.

Market volatility, inflation or other factors could also adversely impact the Company’s ability to access capital when and as needed.

If the Company is unable to secure additional sources of funding, generate revenue from collaborations, or receive full and timely collections of amounts due, it may be necessary to significantly reduce the current rate of spending through reductions in staff and delaying, scaling back, or stopping certain research and development programs, including more costly clinical trials.

In October 2023, the Company received $ 100.0 million upon entering into the Option, License and Collaboration Agreement (the Gilead Collaboration Agreement) and the Common Stock Purchase Agreement and an Investor Rights Agreement (collectively, the Gilead Equity Agreements) with Gilead Sciences, Inc.

Management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months following the date these consolidated financial statements are issued.

Note 2 - Summary of Significant Accounting Policies and Recent Accounting Pronouncements

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All intercompany balances and transactions have been eliminated in consolidation.

On January 31, 2024, following approval by the Company's stockholders, the Company's board of directors approved the implementation of a reverse stock split at a ratio of 1-for-12 shares of the Company's common stock (the Reverse Stock Split).

The Reverse Stock Split was effective as of February 9, 2024 (see Note 15).

All share and per share amounts of the Company's common stock presented have been retroactively adjusted to r eflect the 1-for-12 R everse Stock Split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S.

The preparation of the consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates inherent in the preparation of the accompanying consolidated financial statements include estimates of costs incurred but not yet invoiced for research and development accruals as well as the estimated fair value of the Company's indefinite-lived intangible asset and the estimated fair value of the Company's reporting unit for purposes of evaluating goodwill impairment, both of which were fully impaired in 2021.

The Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions.

It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates and assumptions.

Significant estimates inherent in the preparation of the accompanying consolidated financial statements include estimates for revenue recognition, including the standalone selling price (SSP) for the allocation of transaction price to performance obligations and cost-based inputs, as well as estimates of costs incurred but not yet invoiced for research and development accruals.

The Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions.

It is reasonably possible these external factors could have an effect on the Company’s estimates and could cause actual results to differ materially from those estimates and assumptions.

Other Risks and Uncertainties

The Company relies on contract research organizations (CROs), including one located in Ukraine which shut down operations due to Russia’s invasion.

Though this CRO has resumed operations, the Company has reallocated certain work to other global CROs in case the CRO shuts down operations again.

and global financial markets have experienced volatility and disruption due to other macroeconomic and geopolitical events such as rising inflation, the risk of a recession, the ongoing conflict between Russia and Ukraine, as well as the ongoing impact of the COVID-19 pandemic.

The Company relies on contract research organizations (CROs), including one located in Ukraine that temporarily shut down operations due to Russia’s invasion.

Though this CRO has resumed operations and the Company continues to utilize this CRO, the Company has reallocated certain work to other global CROs in case the CRO shuts down operations again.

and global financial markets have experienced volatility and disruption due to other macroeconomic and geopolitical events such as rising inflation, rising interest rates to combat inflation, the risk of a recession, the war between Russia and Ukraine and the Israel-Hamas war.

The Company cannot predict at this time to what extent, if at all, it and its employees, CROs, vendors and/or collaborators could potentially be negatively impacted by these events.

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All highly liquid investments, including money market funds, with original maturities of three months or less at the time of purchase are considered to be cash equivalents.

All of the Company’s cash equivalents have liquid markets and high credit ratings.

The Company maintains its cash in bank deposits and other accounts, the balances of which, at times as of and during the years ended December 31, 2022 and 2021 , exceed federally insured limits.

All of the Company’s cash equivalents have liquid markets and high credit ratings.

The Company maintains its cash in bank deposits and other accounts, the balances of which, at times as of and during the years ended December 31, 2023 and 2022 , exceeded federally insured limits.

Investments in Marketable Securities

The Company invests its excess cash in debt securities with high credit ratings including but not limited to money market funds classified as cash equivalents, asset backed securities, securities issued by the U.S.

The Company invests its excess cash in debt securities with high credit ratings, including, but not limited to, money market funds classified as cash equivalents, securities issued by the U.S.

government and its agencies, corporate debt securities and commercial paper.

The Company has designated its investments in marketable securities as available-for-sale and measures these securities at their respective fair values.

The Company reviews all available-for-sale securities at each period end to determine if they remain available-for-sale based on their current intent and ability to sell the security if it is required to do so.

Marketable securities are classified as short-term or long-term based on the maturity date and their availability to meet current operating requirements.

Marketable securities that mature in one year or less from the consolidated balance sheet date are classified as short-term available-for-sale securities, while marketable securities with maturities in one year or beyond one year from the consolidated balance sheet date are classified as long-term.

Securities that are classified as available-for-sale are measured at fair value with temporary unrealized gains and losses reported in other comprehensive loss, and as a component of stockholders' equity until their disposition.

The Company periodically reviews its marketable securities for declines in fair value below the amortized cost basis to determine whether the impairment, if any, is due to credit-related or other factors.

This review includes the credit worthiness of the security issuers, the severity of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than not the Company will be required to sell the securities before the recovery of the amortized cost basis.

Unrealized gains and losses on available-for-sale securities are reported in other comprehensive loss, and as a component of stockholders' equity until their disposition, with the exception of unrealized losses believed to be related to credit losses which are recognized as an allowance for credit losses on the consolidated balance sheet with the corresponding charge in other income in the period the impairment occurs.

Impairment assessments are made at the individual security level each reporting period.

The Company elected to exclude accrued interest receivable from the amortized cost basis of its available-for-sale debt securities and to not measure an allowance for credit losses for accrued interest receivable.

To date, there have been no credit-related declines in value or other impairments of the Company’s investments in marketable securities.

Realized gains and losses from the sale of marketable securities, if any, are calculated using the specific-identification method.

Marketable securities are subject to a periodic impairment review.

The Company may recognize an impairment charge when a decline in the fair value of investments below the cost basis is determined to be other-than-temporary.

In determining whether a decline in market value is other-than-temporary, various factors are considered, including the cause, duration of time and severity of the impairment, any adverse changes in the investees’

financial condition, and the Company’s intent and ability to hold the security for a period of time sufficient to allow for an anticipated recovery in market value.

To date, there have been no declines in value deemed to be other than temporary for any of the Company’s investments in marketable securities.

Goodwill and Indefinite-Lived Intangible Asset

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

The difference between the purchase price and the fair value of assets acquired and liabilities assumed in a business combination is allocated to goodwill.

Goodwill was evaluated for impairment on an annual basis as of October 1, and more frequently if indicators were present or changes in circumstances suggested impairment may have existed.

In performing each annual impairment assessment and any interim impairment assessment, the Company determined if it 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).

If the Company 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.

The Company’s annual or interim quantitative impairment testing was performed by comparing the estimated fair value of the reporting unit to its carrying value.

An impairment charge was recognized for the amount by which the carrying amount exceeded the reporting unit’s fair value, not to exceed the carrying value of goodwill.

Indefinite-Lived Intangible Asset

The Company’s indefinite-lived intangible asset consisted of in-process research and development (IPR&D) associated with small molecule core inhibitors that directly target and allosterically inhibit core protein functions associated with HBV which were acquired with the acquisition of Assembly Pharmaceutics, Inc.

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

The Company 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, the Company would perform a final test for impairment and would determine the useful life of the technology and would begin amortizing the assets to reflect their use over their remaining lives.

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

Indefinite-lived intangible assets were not amortized, but instead were reviewed for impairment at least annually, or more frequently if events occurred or circumstances changed that would indicate the carrying amount may be impaired.

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

If the Company concluded that was the case, or elected not to use the qualitative impairment test, the Company would proceed with quantitatively determining the fair value of the IPR&D asset and compared 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, the Company 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 identified were consistent with the assumptions used in the quantitative estimate of the IPR&D asset.

Using these drivers of fair value, the Company identified events and circumstances which 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.

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

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

When performing the quantitative impairment test, the Company used the income approach to determine the fair value of its IPR&D asset.

This approach calculates fair value by estimating the after-tax 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 judgmental assumptions regarding the estimates that 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 size of the patient population and cure rate, the Company's competitive position in the marketplace, and appropriate discount and tax rates.

impairment to be recorded was calculated as the difference between the estimated fair value and the carrying value of the IPR&D asset on the Company’s consolidated balance sheet.

All of the Company’s leases are operating leases for facilities and equipment.

The Company recognizes a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation.

The Company determines whether an arrangement is or contains a lease at contract inception.

Operating leases with a duration greater than one year are included in operating lease ROU assets, operating lease liabilities - short-term, and operating lease liabilities - long-term in the Company’s consolidated balance sheets.

The Company elected

the short-term lease exception policy, permitting it to not apply the recognition requirements to leases with terms of less than one year (short-term leases) for all classes of assets.

Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

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Impairment of Long-Lived Assets

The Company monitors the carrying value of long-lived assets, including ROU operating lease assets, for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows.

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If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value.

There were no indicators of impairment of long-lived assets during the years ended December 31, 2022 and 2021 .

There was no impairment of long-lived assets during the years ended December 31, 2023 and 2022 .

Property and Equipment, Net

Property and equipment are stated at cost and consist of lab and office equipment and leasehold improvements.

The Company records depreciation under the straight-line method over the estimated useful lives of its property and equipment ranging from three to seven years .

The Company records depreciation under the straight-line method over the estimated useful lives of its property and equipment ranging from two to seven years .

Leasehold improvements are amortized over the remaining terms of the respective leases or the estimated useful life of the leasehold improvements, whichever is less.

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Quoted prices for similar instruments that are directly or indirectly observable in the marketplace.

techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

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The carrying amounts of cash equivalents and marketable securities approximate their fair value based upon quoted market prices.

Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts which approximate their fair value due to their liquid or short-term nature, such as cash, accounts receivable, accounts payable and accrued expenses.

The following tables present the fair value of the Company’s financial assets measured at fair value on a recurring basis using the above input categories (in thousands):

December 31, 2023

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and foreign corporate debt securities

Asset-backed securities

treasury securities

and foreign commercial paper

Total short-term marketable securities

Long-term marketable securities

and foreign corporate debt securities

treasury securities

Total long-term marketable securities

Total assets measured at fair value

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The Company estimates the fair value of its U.S.

and foreign corporate debt securities, asset backed securities, U.S.

and foreign corporate debt securities, U.S.

treasury securities and U.S.

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and other observable inputs.

The Company recognized an impairment charge of $ 41.6 million for its goodwill and indefinite-lived asset in 2021.

The Company considered the fair value used to determine the impairment charge to be a Level 3 measurement.

See additional discussion relating to the Company’s impairment of goodwill and indefinite-lived asset in Note 6.

There have been no transfers between Level 1, Level 2 or Level 3 for any of the periods presented.

See Note 3 for further information regarding the carrying value of the Company’s investments in marketable securities.

See Note 4 for further information regarding the carrying value of the Company’s investments in marketable securities.

Revenue Recognition and Accounts Receivable from Collaboration

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For elements of collaboration arrangements that are not accounted for pursuant to the revenue from contracts with customers accounting standard, an appropriate recognition method is determined and applied consistently, generally by analogy to the revenue from contracts with customers accounting standard.

Amounts related to transactions with a counterparty in a collaborative arrangement that is not a customer are presented as collaboration revenue and on a separate line item from revenue recognized from contracts with customers, if any, in the Company’s consolidated statements of operations and comprehensive loss.

Amounts related to transactions with a

counterparty in a collaborative arrangement that is not a customer are presented on a separate line item from revenue recognized from contracts with customers, if any, in the Company’s consolidated statements of operations and comprehensive loss.

Under certain collaborative arrangements, the Company has been reimbursed for a portion of its research and development expenses or participates in the cost-sharing of such research and development expenses.

Such reimbursements and cost-sharing arrangements are reflected as a reduction of research and development expense in the Company’s consolidated statements of operations and comprehensive loss, as the Company does not consider performing these activities for reimbursement to be a part of its ongoing major or central operations.

Such reimbursements and cost-sharing arrangements are reflected as a reduction of research and development expense in the Company’s consolidated statements of operations and comprehensive loss.

For arrangements or transactions between arrangement participants determined to be within the scope of the contracts with customers accounting standard, the Company evaluates the term of the arrangement and recognizes revenue when the customer obtains control of promised goods or services in a contract for an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.

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and (5) recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company has provided standard indemnification and protection of licensed intellectual property for its customer.

These provisions are part of assurance that the licenses meet the agreements, representations and are not obligations to provide goods or services.

The Company has provided standard indemnification and protection of licensed intellectual property for its customers.

These provisions are part of assurance the licenses meet the agreements, representations and are not obligations to provide goods or services.

The Company only applies the five-step model to contracts when it is probable the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

As part of the accounting for contracts with customers, the Company must develop assumptions that require judgment to determine the estimated relative standalone selling price (SSP) of each performance obligation identified in the contract.

As part of the accounting for contracts with customers, the Company must develop assumptions that require judgment to determine the estimated relative SSP of each performance obligation identified in the contract.

The Company then allocates the total transaction price to each performance obligation based on the SSP of each performance obligation.

The Company recognizes the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied as revenue.

Upfront License Fees

If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, upfront license fees based on the relative value prescribed to the license compared to the total value of the arrangement.

The revenue is recognized when the license is transferred to the collaborator and the collaborator is able to use and benefit from the license.

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The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Research and Development Services

The promises under the Company’s agreements may include research and development services to be performed by the Company on behalf of the counterparty.

If these services are determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes the transaction price allocated to these services as revenue over time based on an appropriate measure of progress when the performance by the Company does not create an asset with an alternative use and the Company either has received or has an enforceable right to payment for the performance completed to date.

If these services are determined not to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes the transaction price allocated to the combined performance obligation as the related performance obligations are satisfied.

Customer Options

If an arrangement contains customer options, the Company evaluates whether the options are material rights because they allow the customer to acquire additional goods or services for free or at a discount.

If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement.

The identification of a material right, and if identified as a material right, the allocation of the transaction price to it, is based on the SSP, which is determined using assumptions regarding estimated costs,

discount rates, post-option development timeline, the probability of technical and regulatory success and the probability the customer will exercise the option.

Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised or expires.

If the options are deemed not to be a material right, they are considered marketing offers which are excluded as performance obligations at the outset of the arrangement.

Development and Regulatory Milestone Payments

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Sales-based Milestone and Royalty Payments

The Company’s customer may be required to pay the Company sales-based milestone payments or royalties on future sales of commercial products.

The Company recognizes revenues related to sales-based milestone and royalty payments upon the later to occur of (i) achievement of the collaborator’s underlying sales or (ii) satisfaction of any performance obligation(s) related to these sales, in each case assuming the Company’s licensed intellectual property is deemed to be the predominant item to which the sales-based milestones and/or royalties relate.

The Company receives payments from its customer based on billing schedules established in the contract.

The Company’s customers may be required to pay the Company sales-based milestone payments or royalties on future sales of commercial products.

The Company receives payments from its customers based on billing schedules established in the contract.

Upfront payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under the arrangement.

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The Company recognizes a contract asset relating to its conditional right to consideration that is not subject to a constraint.

Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

A net contract asset or liability is presented for each contract with a customer.

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Contract Liabilities

The following tables present changes in the Company’s contract liabilities (in thousands):

Year Ended December 31, 2023

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The Company measures stock-based compensation to employees, consultants, board members, and non-employees at fair value on the grant date of the award.

The fair value of RSUs is determined based on the number of shares granted and the quoted market price of the Company’s common stock on the date of grant.

If stock-based awards are granted in contemplation of or shortly before a planned release of material nonpublic information, and such information is expected to result in a material increase in the Company’s share price, the Company considers whether an adjustment to the observable market price is required when estimating fair values.

The fair value of RSUs is determined based on the number of shares granted and the quoted market price of the Company’s common stock on the date of grant.

Compensation cost is recognized as expense on a straight-line basis over the requisite service period of the award.

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The Company estimates the fair value of stock option grants that do not contain market-based vesting conditions using the Black-Scholes option pricing model.

The assumptions used in estimating the fair value of these awards, such as expected term, expected dividend yield, volatility and risk-free interest rate, represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

The Company uses the Monte-Carlo model to calculate the fair value on the date of grant of awards which contain market-based vesting conditions.

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The Company is also required to make estimates as to the probability of achieving the specific performance conditions.

If actual results are not consistent with the Company’s assumptions and judgments used in making these estimates, the Company may be required to increase or decrease compensation expense, which could be material to the Company’s consolidated results of operations.

Research and Development Expense and Accruals

approval, professional services, travel costs, dues and subscriptions, depreciation and materials used in clinical trials and research and development and costs incurred under the Company’s collaboration agreements.

Research and development costs include personnel-related costs, outside contracted services including clinical study costs, facilities costs, fees paid to consultants, milestone payments prior to FDA approval, license fees prior to FDA approval, professional services, travel costs, dues and subscriptions, depreciation and materials used in clinical trials and research and development and costs incurred under the Company’s collaboration agreements.

Research and development costs are expensed as incurred unless there is an alternative future use in other research and development projects.

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

The Company records expenses related to clinical studies and manufacturing development activities based on its estimates of the services received and efforts expended pursuant to contracts with multiple contract research organizations and manufacturing vendors that conduct and manage these activities on its behalf.

The Company records expenses related to clinical studies and manufacturing development activities based on its estimates of the services received and efforts expended pursuant to contracts with multiple CROs and manufacturing vendors that conduct and manage these activities on its behalf.

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

There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of the expense.

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

In amortizing or accruing service fees, the Company estimates the time period over which services will be performed, enrollment of subjects, number of sites activated and the level of effort expended in each period.

If the actual timing of the performance of services or the level of effort varies from the Company’s estimate, the Company will adjust the accrued or prepaid expense balance accordingly.

To date, there have been no material differences from the Company’s estimates to the amounts actually incurred.

If the actual timing of the performance of services or the level of effort varies from the Company’s estimate, the Company will adjust the accrued or prepaid expense balance accordingly.

To date, there have been no material differences from the Company’s estimates to the amounts actually incurred.

The Company has entered and may continue to enter into license agreements to access and utilize certain technology.

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

To date, none of the Company’s 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.

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The recognition of restructuring charges requires the Company to make certain judgments and estimates regarding the nature, timing and amount of costs associated with the reorganization plan.

To the extent the Company’s actual results differ from its estimates and assumptions, the Company may be required to revise the estimates of future accrued restructuring liabilities, requiring the recognition of additional restructuring charges or the reduction of accrued restructuring liabilities already recognized.

Such changes to previously estimated amounts may be material to the consolidated financial statements.

Changes in the estimates of the restructuring charges are recorded in the period the change is determined.

During the years ended December 31, 2022 and 2021, changes to previous estimates for restructuring charges were not material.

There were no restructuring charges incurred during the year ended December 31, 2023.

Changes to previous estimates for restructuring charges were not material during the year ended December 31, 2022.

At the end of each reporting period, the Company evaluates the remaining accrued restructuring balances to ensure that no excess accruals are retained, and the utilization of t he provisions are for their intended purpose in accordance with developed restructuring plans.

For gains and losses on the derecognition of nonfinancial assets the Company determines if a contract exists, identifies the distinct non-financial assets, and determines when control transfers and, therefore, when to derecognize the asset.

Additionally, the Company applies the measurement principles of revenue from contracts with customers within U.S.

GAAP to determine the amount of consideration to include in the calculation of the gain or loss for the non-financial asset.

Any gains or losses have been included within research and development expenses.

Variable Interest Entities

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If the Company were to determine it is the primary beneficiary of a VIE, the Company would consolidate the statements of operations and financial condition of the VIE into its consolidated financial statements.

The Company’s determination about whether it should consolidate such VIEs is made continuously as changes to existing relationships or future transactions may result in a consolidation event.

The Company records income taxes using the asset and liability method.

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The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company establishes a valuation allowance if it is more likely than not that the deferred tax assets will not be realized based on an evaluation of objective verifiable evidence.

The Company establishes a valuation allowance if it is more likely than not the deferred tax assets will not be realized based on an evaluation of objective verifiable evidence.

For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized.

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The Company recognizes and measures uncertain tax positions using a two-step approach set forth in authoritative guidance.

The first step is to evaluate the tax position taken or expected to be taken by determining whether the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes.

The first step is to evaluate the tax position taken or expected to be taken by determining whether the weight of available evidence indicates it is more likely than not the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes.

The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.

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The provision for income taxes includes the effects of any accruals which the Company believes are appropriate.

It is the Company’s policy to recognize interest and penalties related to income tax matters in income tax expense.

No interest or penalties related to uncertain tax positions has been incurred or accrued for any periods presented.

In June 2020, Assembly Bill 85 (A.B.

85) was signed into California law.

85 provides for a three-year suspension of the use of net operating losses for medium and large businesses and a three-year cap on the use of business incentive tax credits to offset no more than $5.0 million of tax per year.

85 suspends the use of net operating losses for taxable years 2020, 2021 and 2022 for certain taxpayers with taxable income of $1.0 million or more.

The carryover period for any net operating losses that are suspended under this provision will be extended.

85 also requires that business incentive tax credits including carryovers may not reduce the applicable tax by more than $5.0 million for taxable years 2020, 2021 and 2022.

On February 9, 2022, Senate Bill No.

113 was enacted that removed the limitations on the use of NOLs and the cap on the business incentive tax credits that were suspended in accordance with AB 85 effective for tax year 2022.

In March 2021, the American Rescue Plan (H.R.

1319) was signed into law.

This legislation extends and enhances a number of current-law tax incentives for businesses, but also expands the definition of a “covered employee”

as defined by Section 162(m)(1) of the Internal Revenue Code.

Effective January 1, 2022, a provision of the Tax Cuts and Jobs Act (TCJA) took effect creating a significant change to the treatment of research and experimental expenditures under Section 174 of the Internal Revenue Code (Sec.

174 expenses).

Historically, businesses have had the option of deducting Sec.

174 expenses in the year incurred or capitalizing and amortizing the costs over five years .

The new TCJA provision, however, eliminates this option and will require Sec.

174 expenses associated with research conducted in the United States to be capitalized and amortized over a five-year period.

Pursuant to Section 174 of the Internal Revenue Code (Sec.

174), expenses associated with research conducted in the United States are capitalized and amortized over a five-year period.

For expenses associated with research outside of the United States, Sec.

174 expenses are required to be capitalized and amortized over a 15 -year period.

1319 and TCJA provision did not have a material impact on the Company’s consolidated financial statements.

In August 2022, the Inflation Reduction Act (IRA) was enacted into law.

The IRA establishes a 15 % corporate alternative minimum tax on corporations whose average annual adjusted financial statement income during the most recently completed three-year period exceeds $1 billion and a 1% excise tax on stock repurchases made by certain publicly traded U.S.

corporations.

These provisions are effective for tax years beginning after December 31, 2022.

The Company does not currently qualify for the corporate alternative minimum tax, and these provisions are not expected to have a material impact to the Company's consolidated financial statements.

174 expenses are capitalized and amortized over a 15 -year period.

Net Loss per Share

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Diluted net loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity unless inclusion of such shares would be anti-dilutive.

Since the Company has only incurred losses, basic and diluted net loss per share is the same.

A reconciliation of the numerators and the denominators of the basic and diluted net loss per common share computations is as follows (in thousands, except per share amounts):

Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented.

A reconciliation of the numerators and the denominators of the basic and diluted net loss per common share computations is as follows (in thousands, except for share and per share amounts):

Year Ended December 31,

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Net loss per share - basic and diluted

Securities excluded from the computation of diluted loss from per share because including them would have been antidilutive are as follows:

Securities excluded from the computation of diluted net loss per share because including them would have been antidilutive are as follows:

Options to purchase common stock

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Since the suppliers of key components and materials must be named in a New Drug Application (NDA) filed with the FDA for a product, significant delays can occur if the qualification of a new supplier is required.

If delivery of material from the Company’s suppliers were interrupted for any reason, the Company may be unable to supply any of its product candidates for clinical trials.

Accounting Pronouncements to Be Adopted

In June 2016, the Financial Accounting Standards Board (the FASB) issued ASU 2016-13, Financial Instruments –

Credit Losses:

Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses.

If delivery of material from the Company’s suppliers were interrupted for any reason, the Company may be unable to supply any of its product candidates for clinical trials.

Customer Risk

During the year ended December 31, 2023, 62 % of the Company's collaboration revenue was recognized from a related party, Gilead, under the Gilead Collaboration Agreement (see Note 10 ).

If the collaboration with Gilead does not result in the successful development and commercialization of products or if Gilead terminates the Gilead Collaboration Agreement, the Company may not receive any future payments under the collaboration.

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) No.

2016-13, Instruments – Credit Losses:

Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses.

ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases.

In April, May and November 2019, the FASB issued additional amendments to the new guidance related to transition and clarification.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments –

Credit Losses (Topic 326) , Derivatives and Hedging (Topic 815) , and Leases (Topic 842):

Effective Dates , which deferred the effective date of this standard for all entities except SEC filers that are not smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted.

The Company does not expect ASU 2016-13 to have a material impact on its consolidated financial statements and related disclosures.

The FASB issued additional amendments to the new guidance related to transition and clarification and deferred the effective date of this standard for all entities except SEC filers that are not smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Company adopted ASU 2016-13 effective January 1, 2023 on a modified retrospective basis.

The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements.

Accounting Pronouncements to Be Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which is intended to provide enhanced segment disclosures.

The standard will require disclosures about significant segment expenses and other segment items and identifying the Chief Operating Decision Maker and how they use the reported segment profitability measures to assess segment performance and allocate resources.

These enhanced disclosures are required for all entities on an interim and annual basis, even if they have only a single reportable segment.

The standard is effective for years beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is evaluating this standard to determine the impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The update requires a public business entity to disclose, on an annual basis, a tabular rate reconciliation

using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold.

In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received.

Adoption of the ASU allows for either the prospective or retrospective application of the amendment and is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company does not expect ASU 2023-09 to have a material impact on the Company’s consolidated financial statements.

Note 3 - Related Party

In October 2023, Gilead purchased 1,089,472 shares of the Company’s common stock at a purchase price of $ 13.92 per share for total proceeds of $ 15.2 million under the Gilead Equity Agreements (see Note 8).

As of December 31, 2023 , Gilead held 19.9 % of the Company's outstanding voting common stock.

In addition to the Gilead Equity Agreements, the Company entered into the Gilead Collaboration Agreement pursuant to which the Company received total proceeds of $ 84.8 million as an upfront payment (see Note 10).

The Company recognized revenue of $ 4.4 million under the Gilead Collaboration Agreement during the year ended December 31, 2023.

Additionally, Gilead may, at the Company’s or Gilead's option, subject to certain conditions, purchase additional shares to increase its holdings up to a maximum of 29.9 % of the Company's then-outstanding voting common stock.

Under the Investor Rights Agreement, Gilead has the right to designate two directors to the Company's board of directors.

The Company appointed each of Gilead's designees to its board of directors in December 2023 and February 2024.

Note 4 - Investments in Marketable Securities

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and foreign corporate debt securities

Asset-backed securities

treasury securities

and foreign commercial paper

Total short-term marketable securities

Long-term marketable securities

and foreign corporate debt securities

treasury securities

Total long-term marketable securities

Total cash equivalents and marketable securities

Short-term marketable securities held as of December 31, 2023 and 2022 had contractual maturities of less than one year .

Long-term marketable securities held as of December 31, 2021 had contractual maturities of at least one year but less than two years .

Realized gains and losses for the years ended December 31, 2022 and 2021 were not material.

As of December 31, 2022, investments which were in a continuous unrealized loss position for more than 12 months were determined to be temporary.

None of the Company’s investments had been in a continuous unrealized loss position for more than 12 months as of December 31, 2021.

The Company determined it has the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity of recovery and that the gross unrealized losses above were caused by changes in interest rates.

There were no realized gains and losses for the years ended December 31, 2023 and 2022.

As of December 31, 2023 and 2022, investments which were in an unrealized loss position were not material and generally due to interest rate fluctuations, as opposed to declines in credit quality.

The Company determined it has the intent and ability to hold all marketable securities that have been in a continuous loss position until recovery of their amortized cost basis, which may be until maturity.

As a result, the Company did not recognize any credit losses related to its investments and all unrealized gains and losses on available-for-sale securities are recorded in accumulated other comprehensive loss on the consolidated balance sheets during the years ended December 31, 2023 and 2022.

Accrued interest receivable was $ 0.3 million as of December 31, 2023 and 2022 and was recorded in prepaid expenses and other current assets on the consolidated balance sheets.

The Company did not write off any accrued interest receivable during the years ended December 31, 2023 and 2022.

See Note 2 for further information regarding the fair value of the Company's investments in marketable securities.

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Property and equipment, net

Depreciation expense was $ 0.5 million for each of the years ended December 31, 2022 and 2021 and was recorded in both research and development expense and general and administrative expense in the consolidated statements of operations and comprehensive loss.

Note 5 –

Other Accrued Expenses

Depreciation expense for both the years ended December 31, 2023 and 2022 was $ 0.5 million and was recorded in both research and development expense and general and administrative expense in the consolidated statements of operations and comprehensive loss.

Note 6 – Other Accrued Expenses

Other accrued expenses consist of the following (in thousands):

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Total accrued expenses

Note 6 –

Goodwill and Indefinite-Lived Intangible Asset Impairment

In 2021, the Company recognized a full impairment of goodwill after performing a quantitative impairment assessment for its single reporting unit in 2021 due to a sustained decline in its 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.

The Company estimated and reconciled the fair value of its reporting unit using both a market approach, utilizing the Company’s 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.

Based on this analysis, and after completing an impairment assessment of its indefinite-lived and long-lived assets, the Company concluded the fair value of its single reporting unit was less than its carrying value and therefore recognized a goodwill impairment charge of $ 12.6 million during the year ended December 31, 2021.

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

In 2021, the Company recognized a full impairment of its indefinite-lived intangible asset after completing a quantitative impairment test for its IPR&D asset associated with the Assembly Pharmaceuticals, Inc.

acquisition prior to the goodwill impairment test.

The Company utilized the discounted cash flow model of the income approach and determined the carrying value of its IPR&D asset was fully impaired resulting in an impairment charge of $ 29.0 million during the year ended December 31, 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.

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.

Note 7 –

Restructurings

In December 2020, the Company and its Board of Directors approved the wind-down of its Microbiome program, which was completed in 2021.

The Company incurred cumulative restructuring costs of $ 4.3 million in connection with the wind-down of its Microbiome program, $ 3.2 million of which relate to asset impairment and other costs and $ 1.1 million of which relate to employee severance and related benefits.

In July 2022, the Company and its Board of Directors approved a strategic plan to align with its refocused pipeline on its next generation core inhibitors and research programs and reduced its workforce by approximately 30 %.

The Company expects to incur total restructuring charges of $ 1.1 million.

Restructuring charges consist solely of employee severance and related benefits which include $ 1.0 million in severance payments to executive officers impacted by the restructuring, $ 0.8 million in one-time termination severance payments and other employee-related costs associated with the restructuring and a reversal of $ 0.7 million for previously recognized stock-based compensation

expense related to forfeited awards based on the Company's policy of recognizing stock-based awards with graded vesting schedules using an accelerated attribution method on a straight-line basis over the requisite service period for each separately vesting portion of the award and to recognize forfeitures when they occur.

The following table presents where the restructuring charges were recognized on the Company's consolidated statements of operations and comprehensive loss (in thousands):

Year Ended December 31,

Research and development

General and administrative

Note 7 – Restructurings

In July 2022, the Company and its board of directors approved a strategic plan to align with its refocused pipeline on its next generation capsid assembly modulators (CAMs) and research programs and reduced its workforce by approximately 30 %.

The Company incurred cumulative restructuring charges of $ 1.1 million representing all costs to be incurred.

These restructuring charges consisted solely of employee severance and related benefits, including $ 1.0 million in severance payments to executive officers impacted by the restructuring, $ 0.8 million in one-time termination severance payments and other employee-related costs associated with the restructuring and a reversal of $ 0.7 million for previously recognized stock-based compensation expense related to forfeited awards based on the Company's policy of recognizing stock-based awards with graded vesting schedules using an accelerated attribution method on a straight-line basis over the requisite service period for each separately vesting portion of the award and to recognize forfeitures when they occur.

There were no restructuring charges incurred during the year ended December 31, 2023 .

The Company incurred $ 1.1 million in restructuring charges during the year ended December 31, 2022 , $ 0.9 million of which were included in research and development expenses and $ 0.2 million in general and administrative expenses.

The following table presents the activity in accrued restructuring charges, included as a component of other accrued expenses on the Company's consolidated balance sheet, during the period (in thousands):

Total Accrued Restructuring Charges

Accrued balance as of December 31, 2021

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Accrued balance as of December 31, 2022

Costs incurred

Reductions for cash payments

Accrued balance as of December 31, 2023

The Company expects the accrued restructuring charges to be fully paid by mid-2023.

Microbiome Purchase Agreement

In December 2021, the Company entered into an asset purchase agreement (the Microbiome Purchase Agreement) with a third party pursuant to which the Company sold know-how, patents, materials and regulatory filings for the Company’s Microbiome program.

The sale included ABI-M201 (M201), which had been the Company’s lead candidate in its Microbiome program.

As consideration for the sale, the Company was entitled to receive $ 3.0 million, of which $ 1.5 million was received in 2021 and the remaining $ 1.5 million was received in 2022.

The Company is also entitled to receive a $ 10.0 million milestone payment upon the achievement of a regulatory approval milestone as defined in the purchase agreement.

The Microbiome Purchase Agreement is within the scope of gains and losses from the derecognition of nonfinancial assets guidance since the Company had previously wound-down the Microbiome program, M201 was no longer a part of the Company’s ongoing major or central operations.

The Company determined all assets sold under the Microbiome Purchase Agreement represent one distinct nonfinancial asset as individually, they do not have standalone value.

The transaction price at the inception of the agreement was limited to the $ 3.0 million upfront payments.

The variable consideration relating to the $ 10.0 million milestone has not been included in the transaction price as it was fully constrained as of December 31, 2022 and 2021 .

As part of the Company’s evaluation of the development milestone constraint, it determined the achievement of the milestone is contingent upon success in future clinical studies and regulatory approvals which are not within its control and uncertain at this stage.

The assets sold had no carrying value and the full $ 3.0 million transaction price resulted in the recognition of a gain upon the transfer of control of the assets sold in the year ended December 31, 2021 .

The $ 3.0 million gain is included as a reduction of research and development expenses in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.

The $ 1.5 million due as of December 31, 2021 was included in prepaid expenses and other current assets on the Company’s consolidated balance sheet.

Note 8 - Stockholders’

Note 8 - Stockholders’ Equity

The Company is authorized to issue 5,000,000 shares of preferred stock as of December 31, 2023 and 2022.

As of December 31, 2023 and 2022 , no shares of preferred stock were issued and outstanding.

In May 2022, the Company's stockholders approved the Sixth Amended and Restated Certificate of Incorporation, which increased the authorized number of shares of common stock from 100,000,000 to 150,000,000 .

In May 2022, the Company's stockholders approved the Sixth Amended and Restated Certificate of Incorporation, which increased the authorized number of shares of common stock to 150,000,000 .

The Company is authorized to issue 150,000,000 shares of common stock as of December 31, 2023 and 2022.

Reverse Stock Split

In February 2024, the Reverse Stock Split became effective.

All share and per share amounts of the Company's common stock presented have been retroactively adjusted to reflect the 1-for-12 Reverse Stock Split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital (see Note 15 ).

The Company's authorized shares of common stock remain at 150,000,000 and its authorized shares of preferred stock remain at 5,000,000 .

Sale of Common Stock

In August 2020, the Company filed a shelf registration statement on Form S-3 with the SEC, File No.

333-248469, that became effective on September 4, 2020 (the 2020 Registration Statement).

The Company may from time to time sell any combination of the securities described in the 2020 Registration Statement in one or more offerings up to an aggregate offering price of $ 300.0 million.

In connection with the filing of the 2020 Registration Statement, the Company entered into a sales agreement under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 100.0 million through “at-the-market”

offerings (2020 ATM), which shares are included in the $ 300.0 million of securities registered pursuant to the 2020 Registration Statement.

In August 2020, the Company entered into a sales agreement under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 100.0 million through “at-the-market” offerings (2020 ATM), pursuant to its shelf registration statement on Form S-3 on file with the SEC.

During the year ended December 31, 2023, the Company issued and sold 261,170 shares of common stock under the 2020 ATM, for which the Company received net proceeds of $ 4.5 million , after deducting commissions, fees and expenses.

During the year ended December 31, 2022, the Company issued and sold 25,068 shares of common stock under the 2020 ATM, for which the Company received net proceeds of $ 0.3 million , after deducting commissions, fees and expenses.

Common Stock Warrants

In December 2019, the Company sold to various investors an aggregate of 6,287,878 shares of common stock as well as pre-funded warrants to purchase 2,424,242 shares of common stock.

The pre-funded warrants were immediately exercisable upon issuance at an exercise price of $ 0.001 per share and were recorded at the issuance date using a relative fair value allocation method as a component of permanent stockholders' equity within additional paid-in capital.

During the year ended December 31, 2021, all 2,424,242 pre-funded warrants were exercised through a cashless exercise, resulting in the issuance of 2,423,634 shares of the Company’s common stock.

In October 2023, the Company entered into the Gilead Equity Agreements pursuant to which Gilead purchased 1,089,472 shares of the Company’s common stock at a purchase price of $ 13.92 per share for total proceeds of $ 15.2 million.

Of the $ 15.2 million in proceeds received under the Gilead Equity Agreements, $ 5.9 million was determined to be a premium on the purchase of the Company’s common stock and allocated to the single combined performance obligation under the Gilead Collaboration Agreement (see Note 10).

The fair value of Gilead's common stock purchase was $ 9.3 million and total proceeds from the issuance of common stock under the Gilead Equity Agreements was $ 9.1 million , net of $ 0.2 million in issuance costs.

Pursuant to the terms of the Gilead Equity Agreements, if the Company completes equity financing by July 15, 2024 , which results in at least $ 30.0 million of proceeds to the Company, then, subject to approval by the Company’s stockholders (which was obtained on January 31, 2024), the Company may require Gilead to purchase additional shares of common stock from the Company in an amount that results in Gilead owning 29.9 % of the Company’s then-outstanding voting capital stock.

If the Company does not complete the equity financing or does not require Gilead to purchase the additional shares, Gilead may elect to purchase additional shares of common stock from the Company in an amount that results in Gilead owning 29.9 % of the Company’s then-outstanding voting capital stock.

The purchase price per share for additional shares purchased by Gilead will be equal to the lesser of a 35 % premium to the 30 -day volume weighted average price immediately prior to the date of purchase or a 35 % premium to the 30 -day volume weighted average price immediately prior to delivery by Gilead of notice of the anticipated closing date.

The Gilead Equity Agreements also include a three-year standstill provision and two-year lockup provision, with customary exceptions, and provide Gilead with certain other stock purchase rights and

registration rights, as well as the right to designate two directors to the Company’s board of directors.

The Company appointed each of Gilead's designees to its board of directors in December 2023 and February 2024.

Note 9 - Stock-Based Compensation

Equity Incentive Plans

In May 2021, the Company’s stockholders approved an amendment to the 2018 Stock Incentive Plan (the 2018 Plan) that increased the aggregate number of shares of common stock reserved under the 2018 Plan to 6,600,000 and to the Assembly Biosciences, Inc.

Employee Stock Purchase Plan (the 2018 ESPP) that, among other things, increased the number of shares of common stock reserved to an aggregate of 1,300,000 .

In May 2022, the Company’s stockholders approved an amendment to the 2018 Plan that increased the aggregate number of shares of common stock reserved under the 2018 Plan to 8,600,000 .

In May 2022, the Company’s stockholders approved an amendment to the 2018 Stock Incentive Plan (the 2018 Plan), which increased the aggregate number of shares of common stock reserved under the 2018 Plan to 716,666 .

In May 2023, the Company's stockholders approved an amendment to the 2018 Plan, which increased the aggregate number of shares of common stock reserved under the 2018 Plan to 883,333 .

As of December 31, 2023, the Company had awards outstanding under the following shareholder approved plans:

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2020 Inducement Award Plan.

As of December 31, 2023, the Company also had outstanding options it assumed in connection with its merger with Assembly Pharmaceuticals.

The Company issues new shares of common stock to settle options exercised or vested RSUs.

The Company also issues new shares of common stock in connection with purchases of shares of common stock by eligible employees under the Company’s 2018 ESPP.

The Company also issues new shares of common stock in connection with purchases of shares of common stock by eligible employees under the Assembly Biosciences, Inc.

Employee Stock Purchase Plan (the 2018 ESPP).

In February 2024, the Reverse Stock Split became effective.

All outstanding stock options and restricted stock units, as well as the Company's equity incentive plans presented have been retroactively adjusted to reflect the 1-for-12 Reverse Stock Split (see Note 15).

Stock Plan Activity

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The total fair value of RSUs vested and settled during 2023 and 2022 was $ 2.8 million and $ 2.2 million , respectively.

The total intrinsic value of RSUs vested and settled during 2022 and 2021 was $ 0.5 million and $ 1.4 million , respectively.

In September 2019, the Company granted 100,000 RSUs with performance-based vesting conditions to its then-chief executive officer.

In 2021, 50,000 of these awards were forfeited back to the Company due to the expiration of the time period to complete certain performance conditions.

In 2022, the remaining 50,000 awards were forfeited back to the Company due to the expiration of the time period to complete the remaining performance conditions.

No stock based compensation expense was ever recognized for these awards as achievement of the performance conditions was never deemed probable.

In July 2021, the Company granted a total of 324,214 RSUs with performance-based vesting conditions upon the achievement of clinical milestones to the majority of employees, including executive officers.

The awards had a grant date fair value of $ 1.2 million and vest upon performance conditions which were deemed probable of being met as of December 31, 2022.

Accordingly, the Company recognized a cumulative catch-up adjustment to stock-based compensation expense of $ 0.7 million for the year ended December 31, 2022 .

There was no stock-based compensation expense recognized for these RSUs during the year ended December 31, 2021.

The total intrinsic value of RSUs vested and settled during both 2023 and 2022 was $ 0.5 million .

In July 2021, the Company granted 26,981 RSUs with performance-based vesting conditions upon the achievement of clinical milestones to the majority of employees, including executive officers.

The awards had a grant date fair value of $ 1.2 million and vest upon performance conditions which were deemed probable of being met as of D ecember 31, 2022.

The Company recognized stock-based compensation expense of $ 0.3 million and $ 0.7 million for these RSUs during the years ended December 31, 2023 and 2022, respectively.

In March 2022, the Company granted 21,248 RSUs with market-based vesting conditions to members of management, including its executive officers.

The awards had a grant date fair value of $ 0.4 million and are being recognized over the derived service period of 1.5 years and vest upon the achievement of certain market-based conditions which have not been achieved as of December 31, 2023.

The Company recognized stock-based compensation expense of $ 0.2 million for these RSUs for the year ended December 31, 2022.

The Company recognized stock-based compensation expense of $ 0.1 million and $ 0.2 million for these RSUs during the years ended December 31, 2023 and 2022, respectively.

In August 2022, the Company granted 43,748 RSUs with performance-based vesting conditions upon the achievement of clinical milestones to its executive officers.

The awards had a grant date fair value of $ 1.1 million.

Some of the performance conditions were deemed probable of being met as of December 31, 2022, and the Company recognized stock-based compensation expense of $ 0.1 million for these awards for the year ended December 31, 2022 .

No stock based-compensation expense was recognized for the awards with performance conditions not yet deemed probable of being met as of December 31, 2022.

Some of the performance conditions were deemed probable of being met as of December 31, 2022, with the remaining performance conditions deemed probable of being met as of December 31, 2023.

The Company recognized stock-based compensation expense of $ 0.6 million and $ 0.1 million for these RSUs during the years ended December 31, 2023 and 2022, respectively.

Employee Stock Purchase Plan

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 at a discount to the market price.

Eligible employee may participate through payroll deductions of up to 15 % of such employee’s compensation for each pay period subject to annual statutory limits and the 2018 ESPP’s limit, which the Company’s stockholders approved in May 2021 to increase from 1,000 to 2,500 shares of common stock per offering.

Eligible employees can purchase the Company’s 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.

The 2018 ESPP provides for the purchase by employees of up to an aggregate of 108,333 shares of the Company’s common stock at a discount to the market price.

Eligible employees may participate through payroll deductions of up to 15 % of such employee’s compensation for each pay period subject to annual statutory limits and the 2018 ESPP’s limit of 208 shares of common stock per offering.

Under the 2018 ESPP, the offering periods end on the last business day occurring on or before May 14 or November 14.

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In May and November 2022, employees purchased 11,240 and 7,579 shares of common stock, respectively, under the 2018 ESPP.

As of December 31, 2022, 817,683 shares of common stock are available for future sale under the Company’s 2018 ESPP.

As of December 31, 2023, 53,687 shares of common stock are available for future sale under the Company’s 2018 ESPP.

Stock-based compensation expense recorded in connection with the 2018 ESPP was $ 0.1 million for both the years ended December 31, 2023 and 2022.

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The expected dividend yield was zero as the Company currently does not intend to pay dividends in the foreseeable future.

The weighted average expected term of options was calculated using the simplified method as prescribed by accounting guidance for stock-based compensation due to the Company’s limited history of relevant stock option exercise activity.

The expected volatility was calculated based on the Company’s historical stock prices.

The fair value of ESPP purchase rights and stock appreciation rights were not material for any period presented.

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Total stock-based compensation expense

(1) Includes the reversal of previously recognized stock-based compensation expense of $ 4.8 million related to forfeited awards of terminated employees, $ 2.7 million of which resulted from the wind-down of the Company’s Microbiome program in January 2021.

As of December 31, 2023 , there was $ 2.9 million of total unrecognized stock-based compensation related to outstanding equity awards which is expected to be recognized over a weighted average remaining amortization period of 1.5 years.

Note 10 - Collaboration Agreements

The following table summarizes the collaboration revenue recognized from the Company's collaboration agreements in the consolidated statement of operations and comprehensive loss for the years presented (in thousands):

Year Ended December 31,

BeiGene, Ltd.

Total collaboration revenue

Gilead Agreement

In October 2023, the Company entered into the Gilead Collaboration Agreement pursuant to which Gilead will exclusively license to the Company its HPI program and NNPI program, while retaining opt-in rights to these programs and have an option to take an exclusive license, on a program-by-program basis, to all of the Company’s other current and future pipeline programs for a 12-year collaboration term.

In addition to the Gilead Collaboration Agreement, the Company and Gilead entered into the Gilead Equity Agreements, pursuant to which Gilead purchased 1,089,472 shares of the Company’s common stock at a purchase price of $ 13.92 per share (see Note 8).

received total proceeds of $ 100.0 million , consisting of $ 84.8 million as an upfront payment under the Gilead Collaboration Agreement and $ 15.2 million under the Gilead Equity Agreements.

Pursuant to the terms of the Gilead Collaboration Agreement, during the term and for a specified period thereafter, Gilead may exercise its opt-in rights, on a program-by-program basis, at one of two timepoints – completion of a certain Phase 1 study or completion of a certain Phase 2 study for the first product within the program – and upon payment of an opt-in fee ranging from $ 45.0 million to $ 125.0 million per program depending on the type of program and when the option is exercised.

If Gilead exercises its opt-in right to any current or future program under the collaboration, the Company is eligible to receive up to $ 330.0 million in potential regulatory and commercial milestones on that program, in addition to royalties ranging from the high single-digits to high teens, depending on the clinical stage of the program at the time of the opt-in.

Following Gilead’s exercise of its option for each Company program, the Company may opt in to cover 40 % of the research and development costs in the United States and share 40 % of the profits and operating loss in the United States for products within the program in lieu of receiving milestones and royalties for that program in the United States, unless the Company later opts out of the cost/profit share for the program.

Prior to Gilead’s potential exercise of its opt-in, the Company will be primarily responsible for all discovery, research and development on both the Company’s programs and the two Gilead-contributed programs.

Gilead may conduct certain development activities related to the Gilead Collaboration Agreement which will be reimbursed by the Company.

Following Gilead’s opt-in, Gilead will control the further discovery, research, development, and commercialization on any optioned programs.

During the term, Gilead will continue to support the collaboration through extension fees of $ 75.0 million in each of the third, fifth and seventh years of the collaboration.

The Gilead Collaboration Agreement is subject to termination by either party for the other party’s uncured, material breach or insolvency.

Subject to certain limitations, the Company and Gilead both have certain termination for convenience rights, upon sufficient prior written notice, with respect to programs that one party in-licenses from the other (subject to Gilead’s option rights), and with respect to Gilead, for programs it has option rights to subject to certain time limitations with respect to existing Company programs).

Gilead also has a right to terminate the collaborative activities under the Gilead Collaboration Agreement at certain specified points during the collaboration term.

The Company concluded Gilead is a customer and accordingly, the Gilead Collaboration Agreement is within the scope of the revenue from contracts with customers guidance.

The Company identified a single combined performance obligation for the discovery, research and development services during the collaboration term (the R&D Services).

The Company concluded the R&D Services are distinct from Gilead's right to obtain an exclusive license to any of the Company's programs as Gilead benefits from the knowledge and expertise gained from the R&D Services and the Company's know-how is not highly specialized in nature.

Gilead could perform the R&D Services themselves, particularly considering Gilead contributed its HPI and NNPI programs and Gilead may continue to conduct development activities on programs being developed under the Gilead Collaboration Agreement.

None of the options in the contract were deemed to be separate performance obligations as the options did not provide any discounts or other rights which would be considered a material right in the arrangement.

The Company determined the Gilead Collaboration Agreement and Gilead Equity Agreements should be assessed as a single combined transaction because the agreements were negotiated and entered into together, with a single commercial objective.

The Company accounted for the agreements based on the fair values of the assets and services exchanged.

As of the effective date of the Gilead Collaboration Agreement, the total transaction price was determined to be $ 90.7 million .

The value the Company received from the licenses Gilead contributed are not material within the context of the contract and accordingly, the Company made no adjustments to the transaction price for them.

The variable consideration related to the regulatory and commercial milestones has not been included in the transaction price as of December 31, 2023, since Gilead has not opted in to take a license to any of the Company's programs.

Any variable consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur pursuant to the Gilead Collaboration Agreement.

The Company will reevaluate the transaction price in each reporting period as uncertain events are resolved or other changes in circumstances occur.

The transaction price, including the upfront payment from Gilead, is reflected as collaboration revenue when realized in the Company’s consolidated statements of operations.

The Company will recognize revenue over time using a cost-based input method, based on internal and external labor cost effort to perform the services, over the initial non-cancellable term of three years since this method best reflects the transfer of services to Gilead.

In applying a cost-based input method of revenue recognition, the Company uses actual costs incurred relative to estimated total costs to fulfill each performance obligation.

A cost-based input method of revenue recognition requires the Company to make estimates of costs to complete the performance obligation.

The cumulative effect of any revisions to estimated costs to complete the performance obligation and associated variable consideration will be recorded in the period in which changes are identified and amounts can be reasonably estimated.

A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

The Company recognized collaboration revenue of $ 4.4 million during the year ended December 31, 2023.

The transaction price for future collaborative activities was recorded as deferred revenue on the consolidated balance sheet as of December 31, 2023, of which $ 30.9 million was included in deferred revenue - short-term and $ 55.4 million was included in deferred revenue - long-term.

During the year ended December 31, 2023, the Company did not make any payments to Gilead.

Antios Agreement

In July 2021, the Company and Antios Therapeutics, Inc.

(Antios) entered into a Clinical Trial Collaboration Agreement (the Antios Agreement) to collaborate on a triple combination therapy using VBR and Antios’s active site polymerase inhibitor nucleotide ATI-2173 for the treatment of HBV.

Assembly and Antios were individually responsible for the study’s manufacturing costs but equally shared the remaining costs of the study.

Antios was responsible for conducting the clinical trial with Assembly reimbursing Antios its share of expenses.

In May 2022, the Company was notified by Antios that ATI-2173 had been placed on clinical hold by the FDA following submission of a safety report involving a patient who received a triple combination of VBR, ATI-2173 and a nucleos(t)ide analog reverse transcriptase inhibitor (NrtI).

Due to the clinical hold, the Company terminated the Antios Agreement effective May 2022.

There were no costs incurred during the year ended December 31, 2023.

During the year ended December 31, 2022 , the Company incurred $ 0.4 million in research and development expenses under the Antios Agreement.

Arbutus Biopharma Agreement

In August 2020, the Company and Arbutus Biopharma Corporation (Arbutus Biopharma) entered into a Clinical Trial Collaboration Agreement (Arbutus Biopharma Agreement) to conduct a randomized, multi-center, open-label Phase 2 clinical trial to explore the safety, pharmacokinetics and antiviral activity of the triple combination of VBR, AB-729 and an NrtI compared to the double combinations of VBR with a NrtI and AB-729 with a NrtI.

Under the Arbutus Biopharma Agreement, Assembly and Arbutus Biopharma share responsibility for the costs of the trial equally, excluding manufacturing supply which are the burden of each company to supply their respective drugs, VBR and AB-729.

Assembly is responsible for conducting this clinical trial with Arbutus Biopharma reimbursing Assembly its share of expenses.

In February 2023, Assembly and Arbutus Biopharma decided to terminate the Phase 2 clinical trial early, at the end of the 48-week on-treatment period, and are in the process of closing the study.

The Arbutus Biopharma Agreement is within the scope of the collaborative arrangements guidance as both parties are active participants and are exposed to significant risks and rewards dependent on the success of the collaborative activity.

The Company recognized a reduction of research and development expense of $ 1.6 million and $ 2.7 million under the Arbutus Biopharma Agreement during the years ended December 31, 2023 and 2022, respectively.

BeiGene Agreement

In July 2020, the Company and BeiGene, Ltd.

(BeiGene) entered into a Collaboration Agreement (the BeiGene Agreement) to develop and commercialize the Company’s novel core inhibitor product candidates vebicorvir (VBR), ABI-H2158 (2158) and ABI-H3733 (3733) for chronic HBV infection (the Licensed Product Candidates) in the People’s Republic of China, Hong Kong, Taiwan and Macau (the Territory).

In July 2020, the Company and BeiGene entered into a Collaboration Agreement (the BeiGene Agreement) to develop and commercialize the Company’s novel core inhibitor product candidates vebicorvir (VBR), ABI-H2158 (2158) and ABI-H3733 (3733) for chronic HBV infection (the Licensed Product Candidates) in the People’s Republic of China, Hong Kong, Taiwan and Macau (the Territory).

Under the agreement, the Company and BeiGene are collaborating on certain global clinical studies and both the Company and BeiGene will independently conduct other clinical studies in their own respective territories.

BeiGene agreed to pay all development and regulatory costs for the Licensed Product Candidates in the Territory up to an aggregate of $ 45.0 million.

Development and regulatory costs for the Licensed Product Candidates for the Territory in excess of $ 45.0 million will be shared equally by the Company and BeiGene.

If the Company conducts

certain ancillary trials outside of the plan to develop these candidates in the Territory, BeiGene may elect to obtain access to the know-how and clinical data resulting for such ancillary trials and shall reimburse the Company proportionally for the Territory of the costs of such trials.

Activities under the BeiGene Agreement will be governed by a joint steering committee (JSC) consisting of equal representatives from each party to the agreement.

All decisions of the JSC are to be made by consensus with final decision-making authority granted to each party based on key areas of the collaboration for which they are responsible.

During the term of the BeiGene Agreement, neither party will commercialize any competing products in the Territory.

The Company will be responsible for manufacturing and supply of the candidates to be used in and outside of the Territory, although the parties may approve BeiGene to take on some or all of the commercial supply activities of the applicable Licensed Products in the Territory.

The Company is not obligated to perform pre-phase 3 clinical trial development work outside the Territory but must provide BeiGene pre-Phase 3 clinical trial know-how and development results on the Licensed Product Candidates if and when such development efforts are completed.

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

advance written notice to Assembly.

Such a termination would result in the Company regaining all rights to the Licensed Product Candidates in the Territory.

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.

Pursuant to the terms of the BeiGene Agreement, the Company received an upfront cash payment of $ 40.0 million from BeiGene for the delivery of exclusive, royalty-bearing licenses to develop and commercialize the Licensed Product Candidates in the Territory, and the Company was eligible to receive up to approximately $ 500.0 million in cash milestone payments, comprised of up to $ 113.8 million for development and regulatory milestones and up to $ 385.0 million in net sales milestones.

In addition, the Company is eligible to receive tiered royalties at percentages ranging from the mid-teens to the low thirties of net sales.

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

Due to the discontinuation of development of VBR and 2158, the maximum cash milestone payments the Company is eligible to receive for 3733 is $ 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 conjunction with the Company entering into the Gilead Collaboration Agreement with Gilead in October 2023, the Company discontinued further development and will no longer seek partnering of 3733.

As of the Company's discontinuation of 3733 development, there are no remaining products in development which have been licensed to BeiGene.

In addition, the Company was eligible to receive tiered royalties at percentages ranging from the mid-teens to the low thirties of net sales.

Due to the discontinuation of development of VBR, 2158 and 3733, the Company is not eligible to receive any development and regulatory milestones or net sales milestones.

The BeiGene Agreement is within the scope of the collaborative arrangements guidance as both parties are active participants and are exposed to significant risks and rewards dependent on the success of commercializing the Licensed Product Candidates in the Territory but that the unit of account related to the delivery of Licensed Product Candidates is within the scope of the contract with customers guidance.

The remaining units of account related to participation on the JSC and subcommittees, clinical supply and other in Territory and global development activities (the Collaboration Activities) are within the scope of the collaborative arrangements guidance.

Commercial supply will be evaluated as a separate contract when the agreement is executed and a purchase order is received from BeiGene.

The Company identified the following material promises related to the contract with customers unit of account under the BeiGene Agreement:

1) the transfer of the VBR License, 2) the transfer of the 2158 License, and 3) the transfer of the 3733 License.

The Company concluded each of these licenses to be functional as they have significant standalone functionality and grants BeiGene the right to use the Company’s intellectual property as it exists on the effective date of the license.

The 2158 and 3733 Licenses have a continuing technology transfer obligation that is considered to be an attribute of these licenses.

The agreed upon prices for the clinical and commercial supply of the Licensed Product Candidates to BeiGene do not represent material rights, and therefore are not performance obligations, and such pricing on an aggregate basis represents the SSP an entity would typically pay for such a product in that region or market.

There are also no minimum purchase commitments.

The Company estimated the SSP of the licenses using an income-based valuation approach for the estimated value a licensor of the compounds would receive considering the stage of the compound’s development.

The Company believes a change in the assumptions used to determine its best estimate of SSP would not have a significant value or significant impact on the allocation of consideration received.

The Company concluded each of these licenses to be functional as they have significant standalone functionality and grant BeiGene the right to use the Company’s intellectual property as it exists on the effective date of the license.

The transaction price at the inception of the agreement was limited to the $ 40.0 million upfront payment.

The variable consideration related to the remaining development and commercialization milestone payments has not been included in the transaction price as these were fully constrained as of December 31, 2023 and 2022 .

As part of the Company’s

evaluation of the development and commercialization milestones constraint, the Company determined the achievement of such milestones are contingent upon success in future clinical trials and regulatory approvals which are not within its control and uncertain at this stage.

Any variable consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the Licensed Product Candidates granted to BeiGene.

The Company will reevaluate the transaction price in each reporting period as uncertain events are resolved or other changes in circumstances occur.

Following the discontinuation of development of 2158 in September 2021, the obligation related to the technology transfer associated with the license of 2158 was considered to be complete.

Following the discontinuation of development and decision to no longer seek partnering of 3733, the obligation related to the technology transfer associated with the license of 3733 was considered to be complete.

Accordingly, the Company recognized $ 2.7 million as collaboration revenue for the amount allocated to 3733 during the year ended December 31, 2023 .

No revenue was recognized during the year ended December 31, 2022.

As of December 31, 2022 and 2021, the only remaining performance obligation under the BeiGene Agreement not considered to be complete is the transfer of the 3733 License.

The transaction price allocated to 3733 of $ 2.7 million was recorded as a long-term deferred revenue contract liability on the consolidated balance sheet as of December 31, 2022 and 2021.

Revenue for the remaining performance obligation will be recognized when the Company provides pre-Phase 3 clinical study know-how and development results for 3733 to BeiGene or a termination of the BeiGene Agreement for 3733.

Payments to, or reimbursements from, BeiGene related to the Collaboration Activities will be accounted for as an increase to or reduction of research and development expenses when incurred or realized, respectively.

As of December 31, 2023 and 2022 , there were no remaining performance obligations under the BeiGene Agreement.

The transaction price allocated to 3733 of $ 2.7 million was recorded as a long-term deferred revenue contract liability on the consolidated balance sheet as of December 31, 2022.

During the years ended December 31, 2023 and 2022 , the Company did no t recognize any increase or reduction of research and development expense under the BeiGene Agreement.

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These contract costs have been capitalized and are being recognized consistent with the pattern of recognition of revenue associated with the Licensed Product Candidates.

As of both December 31, 2022 and 2021, the remaining unamortized contract costs are $ 0.2 million and are included in other assets on the consolidated balance sheet.

Arbutus Biopharma Agreement

Assembly is responsible for conducting this clinical trial with Arbutus reimbursing Assembly its share of expenses.

Arbutus is not a customer as it does not obtain an output from the collaborative activities as they were not provided an exclusive license to VBR or the ability to manufacture VBR, and the Company does not consider performing such collaborative activities to be a part of its ongoing activities.

The revenue from contracts with customers guidance was considered by analogy in determining the unit of account, and the recognition and measurement of such unit of account for collaborative activities under the Arbutus Biopharma Agreement.

The Company concluded there is one activity, to run an open-label Phase 2 clinical trial, which is akin to a performance obligation related to collaborative activities.

Reimbursements and cost-sharing portions from Arbutus Biopharma are reflected as a reduction of research and development expense when realized in the Company’s consolidated statements of operations, as the Company does not consider performing research and development services for reimbursement to be a part of its ongoing major or central operations.

The Company recognized a reduction of research and development expense of $ 2.7 million and $ 2.0 million under the Arbutus Biopharma Agreement during the years ended December 31, 2022 and 2021, respectively.

In February 2023, in consultation with Arbutus Biopharma, the companies decided to terminate the Phase 2 clinical trial early, at the end of the 48-week on-treatment period, and are in the process of closing the study.

Antios Agreement

In July 2021, the Company and Antios Therapeutics, Inc.

Assembly and Antios were individually responsible for the study’s manufacturing costs but equally shared the remaining costs of the study.

Antios was responsible for conducting the clinical trial with Assembly reimbursing Antios its share of expenses.

In May 2022, the Company was notified by Antios that ATI-2173 had been placed on clinical hold by the U.S.

Food and Drug Administration following submission of a safety report involving a patient who received a triple combination of VBR, ATI-2173 and a nucleos(t)ide analog reverse transcriptase inhibitor.

Due to the clinical hold, the Company terminated the Antios Agreement effective May 2022.

During the year ended December 31, 2022, the Company incurred $ 0.4 million in research and development expenses under the Antios Agreement.

There were no costs incurred during the year ended December 31, 2021.

Note 11 –

Milestones and Research Agreements

As of December 31, 2023 , no unamortized contract costs remained.

As of December 31, 2022 , the remaining unamortized contract costs were $ 0.2 million and were included in other assets on the consolidated balance sheet.

Note 11 – Strategic License Agreements

HBV Research Agreement with Indiana University

Since September 2013, the Company has been party to an exclusive License Agreement dated September 3, 2013 with Indiana University Research and Technology Corporation (IURTC) from whom it has licensed aspects of the Company’s HBV program held by IURTC.

The license agreement requires the Company to make milestone payments based upon the successful accomplishment of clinical and regulatory milestones.

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The Company is also required to pay diligence maintenance fees each year to the extent that the royalty, sublicensing, and milestone payments to IURTC are less than such fees for that year.

The Company paid IURTC $ 0.1 million in diligence maintenance fees during the year ended December 31, 2022 which are included in research and development expenses in the consolidated statements of operations and comprehensive loss.

No amounts were paid during the year ended December 31, 2021.

In February 2024, following its decision to discontinue further development or partnering for 3733, the Company terminated the IURTC license agreement, which will become effective April 2024.

The Company paid IURTC $ 0.1 million in diligence maintenance fees during both the years ended December 31, 2023 and 2022, which are included in research and development expenses in the consolidated statements of operations and comprehensive loss.

Door Pharma Agreement

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Under the terms of the Door Pharma Agreement, the Company was obligated to continue to reimburse Door Pharma for certain research and development costs through September 2022 following which such reimbursements ceased.

Under the consolidation accounting standard, the Company determined that Door Pharma was a VIE.

Under the consolidation accounting standard, the Company determined Door Pharma was a VIE.

The Company did not have the power to direct the activities that most significantly affected the economic performance of Door Pharma and as such the Company was not the primary beneficiary and consolidation was not required prior to the termination of the agreement in May 2022.

During the years ended December 31, 2022 and 2021, the Company incurred research and development funding of $ 1.6 million and $ 1.8 million , respectively.

Additionally, a performance milestone totaling $ 0.2 million was determined to have occurred under this agreement and was paid during the year ended December 31, 2021.

The Company did no t incur any research and development funding during the year ended December 31, 2023.

The Company incurred research and development funding of $ 1.6 million during the year ended December 31, 2022.

Microbiome Purchase Agreement

The sale included ABI-M201 (M201), which had been the Company’s lead candidate in its Microbiome program.

As consideration for the sale, the Company was entitled to receive $ 3.0 million, of which $ 1.5 million was received in 2021 and the remaining $ 1.5 million was received in 2022.

The Company is also entitled to receive a $ 10.0 million milestone payment upon the achievement of a regulatory approval milestone as defined in the purchase agreement.

The variable consideration relating to the $ 10.0 million milestone has not been included in the transaction price as it was fully constrained as of December 31, 2023 and 2022 .

Note 12 - Income Taxes

Income tax benefit is as follows (in thousands):

As of December 31,

Income tax benefit

During the year ended December 31, 2021, the Company recognized a $ 2.5 million income tax benefit, with a corresponding reduction to the Company’s valuation allowance, due to the reversal of the IPR&D deferred tax liability recorded in connection with the merger with Assembly Pharmaceuticals, Inc.

The impairment of the Company's IPR&D in 2021 resulted in the deferred tax liability related to this indefinite-lived intangible asset no longer being considered a source of income when assessing the realizability of the Company’s deferred tax assets.

Income tax expense

The effective tax rate of the Company's provision for income taxes differs from the federal statutory rate as follows:

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Uncertain tax positions

Impairment of goodwill

Stock-based compensation

Change in valuation allowance

Income taxes benefit

Significant components of the Company’s deferred taxes are as follows (in thousands):

Income taxes provision (benefit)

Significant components of the Company’s deferred taxes are as follows (in thousands):

As of December 31,

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The Company maintains a valuation allowance on deferred tax assets due to the uncertainty regarding the ability to utilize these deferred tax assets in the future.

The valuation allowance increased by $ 26.9 million and $ 25.8 million for the years ended December 31, 2022 and 2021, respectively, primarily due to an increase in the Company’s federal and state-operating loss carryforwards.

The valuation allowance increased by $ 18.4 million and $ 26.9 million

for the years ended December 31, 2023 and 2022, respectively, primarily due to an increase in the Company’s federal and state-operating loss carryforwards.

Net operating loss and tax credit carryforwards as of December 31, 2023 are as follows (in thousands):

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Research and development tax credits, state

Pursuant to Internal Revenue Code (IRC), Section 382 and 383, use of the Company’s U.S.

Pursuant to Internal Revenue Code (IRC), Sections 382 and 383, use of the Company’s U.S.

federal and state net operating loss and research and development income tax credit carryforwards may be limited in the event of a cumulative change in ownership of more than 50.0% within a three-year period.

The Company has performed an ownership change study through December 31, 2021 and has determined that a “change in ownership”

as defined by IRC Section 382 and the rules and regulations promulgated thereunder, did occur in December 2010, January 2013 and October 2014.

The Company has performed an ownership change study through December 31, 2022 and has determined a “change in ownership” as defined by IRC Section 382 and the rules and regulations promulgated thereunder, did occur in December 2010, January 2013 and October 2014.

The Company has adjusted its net operating loss carryovers to appropriately reflect any attributes which will expire due to the limitation.

The Company has not performed any additional analysis for IRC Sections 382 and 383 and there is a risk that additional changes in ownership could have occurred since December 31, 2021.

The Company has not completed any additional analysis for IRC Sections 382 and 383 and there is a risk additional changes in ownership could have occurred since December 31, 2022.

If a change in ownership were to have occurred, additional net operating loss and tax credit carryforwards could be eliminated or restricted.

If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance.

The following table summarizes activity related to the Company’s gross unrecognized tax benefits (in thousands):

As of December 31,

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Balances as of end of year

The unrecognized tax benefits, if recognized, would not have an impact on the Company’s effective tax rate assuming the Company continues to maintain a full valuation allowance position.

Based on prior year’s operations and experience, the Company does not expect a significant change to its unrecognized tax benefits over the next twelve months.

The unrecognized tax benefits may increase or change during the next year for unexpected or unusual items for items that arise in the ordinary course of business.

The unrecognized tax benefits, if recognized, would not have an impact on the Company’s effective tax rate assuming the Company continues to maintain a full valuation allowance position.

Based on the prior year’s operations and experience, the Company does not expect a significant change to its unrecognized tax benefits over the next twelve months.

The unrecognized tax benefits may increase or change during the next year for unexpected or unusual items that arise in the ordinary course of business.

In subsequent periods, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.

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Operating Leases

The Company leases office and laboratory space in South San Francisco, California under a sub-sublease that expires in December 2023.

The sub-sublease contains scheduled rent increases over the lease term.

The Company also leases office space in Carmel, Indiana under a lease agreement that expires in August 2023.

In August 2023, the Company entered into a sublease agreement for office and laboratory space in South San Francisco, California to serve as the Company's new corporate headquarters.

The sublease contains scheduled annual rent increases over the lease term and expires in October 2025 .

The Company has the option to extend the sublease through September 30, 2029 .

The option to extend the Company's corporate headquarters sublease through 2029 is not included in the Company's ROU assets or lease liabilities.

The Company's previous corporate headquarters sub-sublease in South San Francisco, California expired in December 2023.

The Company also leased office space in Carmel, Indiana under a lease agreement, which expired in August 2023.

In February 2021, the Company subleased substantially all of the office space under lease in Carmel, Indiana for the remainder of its term.

The Company also leased office and laboratory space in Groton, Connecticut that supported the Microbiome program under a lease that expired in June 2021.

Due to the wind-down of the Microbiome program, the lease was not renewed.

The Company’s China subsidiary leased office space in Shanghai, which the Company let expire in March 2021.

The Company also leased office space in Beijing under a lease agreement which the Company let expire in December 2021.

The Company’s China subsidiary leases registrational offices in Shanghai under a lease which expires in May 2023 and in Beijing which is month-to-month.

Certain lease contracts contain renewal clauses that the Company assesses on a case-by-case basis.

The Company’s China subsidiary leases a registrational office in Shanghai, which expires in March 2024.

The Company's registrational office in Beijing, which was month-to-month, ended in 2023.

The Company also leases certain laboratory equipment accounted for as operating leases expiring at various dates, with the final lease expiring in 2025.

In February 2021, the Company purchased substantially all of the leased equipment used for the Microbiome program from its leasing agency and sold this equipment to third parties.

When the Company cannot determine the implicit rate in its leasing arrangements, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities.

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At December 31, 2023, the Company had operating lease liabilities of $ 2.3 million and ROU assets of $ 2.3 million .

The following summarizes quantitative information about the Company’s operating leases (in thousands):

Year Ended December 31,

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Total lease cost, net

Year Ended December 31,

Operating cash flows from operating leases

ROU assets exchanged for new operating lease liabilities

As of December 31, 2023, the weighted-average remaining lease term for operating leases was 2.5 years and the weighted-average discount rate for operating leases was 10.0 % .

As of December 31, 2022, the maturities of the Company’s operating lease liabilities were as follows (in thousands):

As of December 31, 2023, the maturities of the Company’s operating lease liabilities were as follows (in thousands):

present value discount

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Note 15 - Subsequent Event

Subsequent to December 31, 2022, the Company sold 3,050,446 shares of common stock through its 2020 ATM resulting in net proceeds of $ 4.5 million.

The Company maintains its U.S.

cash in deposit accounts with Silicon Valley Bank (SVB).

On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.

On March 12, 2023, the U.S.

Department of the Treasury, Federal Reserve and FDIC announced SVB depositors will have access to all of their money starting March 13, 2023 through a newly created, full-service FDIC-operated ‘bridge bank’

in an action designed to fully protect all depositors of SVB.

Additionally, all of the Company’s cash equivalents and marketable securities are held by a separate custodian bank.

Accordingly, the Company does not anticipate the closure of SVB to have a material impact on its financial condition or operations.

Reverse Stock Split

In September 2023, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market notifying the Company, as the bid price for its common stock had closed below $ 1.00 per share for the last 30 consecutive business days, it was not in compliance with Nasdaq Listing Rule 5450(a)(1), which is the minimum bid price requirement for continued listing on the Nasdaq Global Select Market.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided a 180-calendar day period, or until March 25, 2024, to regain compliance with the minimum bid price requirement.

The continued listing standard would be met once the closing bid price of the Company’s common stock was at least $ 1.00 per share for a minimum of ten consecutive business days during the 180-calendar day period.

In January 2024, the Company's stockholders approved a reverse stock split of its common stock at a range of ratios between 1-for-7 to 1-for-17 , and the Company's board of directors approved the implementation of the Reverse Stock Split at a ratio of 1-for-12 .

The Reverse Stock Split was effective as of February 9, 2024 and the Company regained compliance with the minimum bid price requirement in February 2024.

As of the effective time of the Reverse Stock Split, every 12 issued and outstanding shares of the Company’s common stock was automatically reclassified into one issued and outstanding share of the Company’s common stock.

This reduced the number of shares outstanding from 65.8 million shares to 5.5 million shares.

The Reverse Stock Split does not affect the number of authorized shares of common stock or the par value of the common stock.

No fractional shares of common stock were issued in connection with the Reverse Stock Split and all fractional shares were rounded down to the nearest whole share with respect to outstanding shares of common stock.

Any holders of common stock who would have otherwise received a fractional share of common stock pursuant to the Reverse Stock Split, received cash in lieu of the fractional share.

All share and per share amounts of the Company's common stock presented have been retroactively adjusted to reflect the 1-for-12 Reverse Stock Split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.

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 9A. Controls and Procedures