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Item 1. Business

2021-02-25 compared with 2020-03-04 · 230 added, 293 removed, 235 unchanged (69% of the section changed)

We are a clinical-stage biotechnology company advancing two innovative programs:

a novel class of oral therapeutic candidates for the treatment of chronic hepatitis B virus (HBV) infection and a novel class of oral live microbial biotherapeutic candidates, which are designed to treat disorders associated with the microbiome.

Over 250 million people worldwide are chronically infected with HBV.

Our HBV Cure program is pursuing multiple drug candidates designed to inhibit the HBV lifecycle and block the generation of covalently closed circular DNA (cccDNA), with the aim of increasing the current low cure rate for patients with HBV.

We have discovered several novel core inhibitors, which are small molecules that directly target and allosterically modulate the HBV core (HBc) protein.

In recent years, there has been increasing scientific evidence suggesting the therapeutic potential of the human microbiome—the billions of microbes living in and on people-to impact health and disease.

Our Microbiome program builds upon experience reported in the literature of successfully treating various disease indications with fecal microbiota transplants (FMT) and seeks to provide a pharmacologically relevant therapy using a “drug like” approach that delivers targeted and specific microbiome therapies in an oral capsule.

Business Strategy

We are focused on enhancing the health and well-being of patients with chronic HBV infection and diseases associated with the microbiome.

This commitment drives our efforts to forge a new and differentiated path to treating these conditions, inspired by the needs of millions of affected patients.

We are pursuing a portfolio of novel core inhibitors with potential to substantially increase the cure rates of treated HBV patients and a novel class of oral live biotherapeutics designed to provide therapeutic benefit through local and systemic effects.

We intend to progress our HBV Cure and Microbiome programs internally or using a variety of strategic arrangements, which may include collaborations, licenses, partnerships and other types of business arrangements.

In January 2017, we entered into a Research, Development, Collaboration and License Agreement (the Collaboration Agreement) with Allergan Pharmaceuticals International Limited (Allergan) to develop and commercialize select microbiome gastrointestinal disease therapies.

Pursuant to the terms of the Collaboration Agreement, we received from Allergan an upfront payment of $50.0 million in February 2017.

Additionally, we are eligible to receive up to approximately $631.0 million in development milestone payments and up to approximately $2.14 billion in commercial development and sales milestone payments contingent upon the successful development and commercialization of licensed compounds for up to six different indications in the gastrointestinal (GI) therapeutic field.

We are also eligible to receive tiered royalties at rates ranging from the mid-single digits to the mid-teens based on net sales.

HBV Cure Program

The goal of our HBV Cure program is to substantially increase cure rates for those chronically infected with HBV.

We are a clinical-stage biotechnology company advancing a novel class of oral therapeutic candidates for the treatment of chronic hepatitis B virus (HBV) infection.

According to the World Health Organization (WHO), approximately 270 million people worldwide are chronically infected with HBV.

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

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

The ongoing COVID-19 pandemic has affected certain aspects of our business.

As further detailed below, those effects have been primarily limited to where and how our employees work in our labs and offices.

To date, our current and future planned clinical trials and pre-clinical studies have not been subject to significant impact as a result of the COVID-19 pandemic.

As previously announced, in January 2021, we wound down our Microbiome program to prioritize and focus our resources on discovering and developing finite and curative therapies for HBV.

Our Microbiome program had been developing a novel class of oral live microbial biotherapeutics candidates designed to treat disorders associated with the microbiome.

HBV Background

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

The Centers for Disease Control (CDC) estimates that over 250 million people worldwide are infected with HBV.

According to the World Health Organization (WHO), 887,000 people died in 2015 as a result of HBV, mostly from complications, including cirrhosis and hepatocellular carcinoma.

The WHO estimates that approximately 270 million people worldwide are infected with HBV and 887,000 people died in 2015 as a result of HBV, mostly from complications, including cirrhosis and hepatocellular carcinoma.

HBV is a global epidemic and infects more than twice the number of people infected with hepatitis C virus and HIV infections combined, according to the WHO as of the end of 2019.

According to the WHO, as of 2016, of the over 250 million people living with HBV infection, only 27 million were aware of their infection, and only 4.5 million of those diagnosed received treatment.

Of the approximately 270 million people living with HBV infection, only approximately 30 million were aware of their infection, and only approximately 5 million of those diagnosed received treatment.

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

Despite the low rates of treatment and cure, the current market for nucleos(t)ide reverse transcriptase inhibitors (NrtIs) to treat HBV in the United States, Europe, China, Japan and South Korea was estimated to be approximately $2 billion in 2018.

If new therapies can improve cure rates, we believe the market could grow substantially due to an increase in the number of HBV patients expected to seek the new therapies.

Current Treatments

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

Current therapeutic options for HBV include:

Direct Acting Antiviral medications (Nucelos(t)ide analogs).

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

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

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

Pegylated Interferon alfa (PegIFN-a).

Pegylated Interferon alfa (Peg-IFNα or interferon).

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

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

Our HBV Cure Program Focus:

Targeting HBV Core Protein to Achieve a Cure using Core Inhibitors

Our HBV research team is working on discovering and developing core inhibitors with the potential to inhibit the functional activities of HBV at multiple points in the viral lifecycle.

Core protein is involved in several steps of the HBV lifecycle and is essential for HBV’s continued regeneration and prolonged survival.

In addition to inhibiting viral replication in clinical studies, core inhibitors have been shown to inhibit the generation of closed circular covalent DNA (cccDNA) in preclinical assays.

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

No current oral therapies target cccDNA activity directly, which makes molecules that can modulate cccDNA generation highly sought in the HBV field.

A key focus of our HBV Cure program is targeting the core protein, a highly conserved viral structural protein that has no human homologue and is involved in numerous aspects of the HBV lifecycle, including the generation of the viral cccDNA.

We have discovered several chemically distinct series of core inhibitors, which are small molecules that directly target and allosterically inhibit core protein functions.

Our HBV pipeline therefore offers the potential for both first in class and best in class opportunities for developing agents that target critical steps involved in cccDNA generation and the viral lifecycle.

We believe that our approach of targeting viral core protein and its related functions provides a promising foundation for substantially improving cure rates for HBV infection.

Business Strategy

Our goal is to discover and develop finite and curative therapies for those chronically infected with HBV.

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

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

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

Developing and advancing VBR, ABI-H2158 (2158) and ABI-H3733 (3733), our current clinical-stage core inhibitor product candidates, and identifying and selecting a fourth-generation core inhibitor product candidate with a profile superior to 2158 and 3733;

Assessing core inhibitors in multi-drug combination studies, adding non-overlapping mechanisms of action to the core inhibitor + NrtI backbone;

Discovering and developing additional compounds beyond core inhibitors, including a cccDNA disruptor and a number of other recently initiated novel pre-clinical programs.

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

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

Our Primary Focus:

Targeting HBV Core Protein to Achieve a Cure

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

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

As a result, most of our research and development efforts to date have focused on discovering and developing compounds targeting the core protein, a highly conserved viral structural protein that has no human homologue and is involved in numerous aspects of the HBV replication cycle, including the generation of HBV cccDNA.

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

Our pipeline therefore offers the potential for both first-in-class and best-in-class compounds that target critical steps involved in cccDNA generation and the HBV viral replication cycle.

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

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

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

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

Long-term clinical data from some patients treated with our lead HBV core inhibitor product candidate, ABI-H0731 (731), and NrtI therapy for 16 to 60 weeks has demonstrated a correlation between greater than 3 log reductions in HBV pgRNA levels with multi-log reductions in HBeAg, HBcrAg and HBsAg in patients with HBeAg-positive chronic HBV.

While the goal of our HBV Cure program is to substantially increase cure rates for patients with chronic HBV infection, patients are our first priority.

If our product candidates result in improvements to the current standard of care with potential benefit for patients, we would expect to continue to progress them through clinical development and the regulatory approval process for a chronic suppressive indication while continuing to pursue a finite treatment indication with higher cure rates for patients with chronic HBV infection.

Our Product Candidates

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

In November 2019, at the American Association for the Study of Liver Diseases Annual Meeting (The Liver Meeting®), we presented final 24-week data from HBeAg-positive patients enrolled in our Phase 2 studies of 731, our lead HBV core inhibitor product candidate—ABI-H0731-201 (Study 201 in NrtI-suppressed patients) and ABI-H0731-202 (Study 202 NrtI-naïve patients).

In addition, we presented interim data from an ongoing open-label extension study ABI-H0731-211 (Study 211), where all patients received a combination of 731 and NrtI therapy.

In this analysis, of the 97 patients completing Study 201 or Study 202, 87 were currently receiving a combination of 731 and NrtI therapy and had been treated for at least 16 weeks in Study 211 (cumulative duration of treatment with 731 and NrtI therapy of 16 to more than 40 weeks).

731 was well-tolerated when administered in combination with NrtI therapy with no patients discontinuing treatment due to adverse events (AEs).

As previously reported in the literature, the vast majority of long-term NrtI treated HBeAg-positive patients continue to have low level infectious virus, which was confirmed in Study 201 patients at the time of their enrollment.

Final Week 24 results from the HBeAg-positive patients (n=47) demonstrated that, among those with detectable HBV DNA at baseline, 22 out of 27 (81%) of patients treated with 731 and NrtI therapy achieved target not detected (TND) by Week 24 compared to zero out of 12 (0%) patients treated with NrtI therapy only (p<0.001), as measured with a highly sensitive PCR assay (LLOQ 5 = IU/mL).

These results indicate that the addition of 731 to ongoing NrtI therapy reduced viral burden to levels not achieved by NrtI therapy alone.

Final Week 24 results from treatment-naïve HBeAg-positive patients in Study 202 (n=25) demonstrated faster and deeper HBV DNA declines in patients receiving 731 and entecavir (ETV) than those receiving ETV alone.

Statistically significant reductions of pgRNA were observed by Week 2 with 731 and ETV (p<0.001).

Longer-term treatment with 731 and NrtI therapy resulted in deeper reductions in HBV DNA and pgRNA.

In the analysis, 21 out of 25 patients from Study 202 who were in treatment in Study 211 demonstrated mean HBV DNA and pgRNA declines from baseline of 6.3 logs and 3.0 logs, respectively, at Week 48.

Of the 27 NrtI-suppressed HBeAg-positive patients who had received 731 and NrtI therapy for at least 40 weeks in Study 201 and were on treatment in Study 211, 18 (67%) achieved HBV DNA TND + pgRNA less than 35 U/mL, along with significant declines in HBeAg and HBcrAg levels in some of these patients.

An important finding based on interim data from Study 211 is the observed correlation between pgRNA and viral antigens.

Eleven out of 21 (52%) patients from Study 202 that are now on Study 211 who have been treated with 731 and NrtI therapy for 16 to 60 weeks have achieved decreases in pgRNA of greater than 3 logs.

The results in the table below demonstrate that these larger declines in pgRNA were associated with observed reductions in viral antigens.

As cccDNA is the only known source of pgRNA, significant declines in pgRNA, coupled with multi-log declines in viral antigens in some patients, suggests that cccDNA pool levels may be decreasing.

Log 10 Decrease

Mean Log Reductions at Last Time Point (range)

Patients Exhibiting ≥0.5 Log Decline (%)

1.03 (0.0-2.5)

1.42 (0.0-3.1)

0.86 (0.0-3.6)

0.34 (0.1-0.7)

0.45 (0.1-1.0)

0.14 (0.0-0.5)

0.15 (0.9-1.8)

0.29 (0.3-0.3)

0.17 (0.0-0.3)

From the final summary of safety findings in Study 201 and Study 202, 731 when administered with a NrtI therapy for 24 weeks was well-tolerated in both HBeAg-positive and -negative patients with no AEs leading to discontinuation, no Grade 3 or 4 AEs and no serious AEs reported.

Five patients receiving 731 and NrtI reported a rash (four Grade 1 and one Grade 2).

No associated systemic signs or laboratory abnormalities were observed, and all patients continued treatment through Week 24.

Overall, laboratory abnormalities observed were of Grade 1 or 2 severity and occurred in similar proportions of patients across the two treatment groups.

With longer-term ongoing treatment in Study 211, interim data indicated that the nature, frequency and severity of AEs and laboratory abnormalities observed were similar to those observed during the initial 24-week treatment period.

Study 211 is ongoing, and we expect to continue to report interim, as well as final, data from this study.

Final data from our completed Phase 1a (ABI-H0731-102) PK, safety and tolerability study and Phase 1b (ABI-H0731-101b) study presented at the Annual Meeting of the European Association for the Study of the Liver (EASL) in April 2018 showed antiviral activity observed across all patient cohorts.

In the 300 mg dose cohort, the mean maximal declines from baseline were reported as ≥2.8* log 10 IU/mL after 28 days, with ≥2.9 and 2.5* log 10 IU/mL mean declines in HBeAg positive and negative patients, respectively.

Maximal viral load declines of 3.6 to 4.0 log 10 IU/mL were observed in HBeAg negative patients treated at all dose levels (100 mg to 400 mg).

Mean pgRNA reductions observed in the 300 mg dose cohort were 2.3 log 10 IU/mL over 28 days.

We believe the observed reductions in pgRNA levels are a distinguishing feature of this class of inhibitors compared to standard of care NrtI therapy.

Across all cohorts in the Phase 1a and Phase 1b studies, 731 was generally well-tolerated.

No serious adverse effects or dose-limiting toxicities were identified, and there was no pattern of treatment emergent clinical or laboratory abnormalities observed.

With the exception of an isolated Grade 3 rash at the 400 mg dose that resolved with no intervention required other than treatment discontinuation, there were no other Grade 3 or Grade 4 AEs, and no other drug discontinuations have occurred in these studies.

ABI-H2158 (2158), our second product candidate in the HBV Cure program, is internally discovered and developed and is chemically distinct from 731.

In preclinical studies, 2158 has demonstrated increased potency compared to 731, particularly related to prevention of cccDNA generation.

In November 2018, we initiated a Phase 1a/1b dose-ranging clinical study of 2158 to assess the safety, tolerability and PK of 2158 in healthy volunteers and then subsequently assess the safety, tolerability, PK and initial antiviral potency in non-cirrhotic patients with chronic HBV infection.

We presented final data from the Phase 1a portion of the Phase 1a/1b dose-ranging clinical study at the Annual Meeting of the EASL in April 2019.

The Phase 1a study assessed safety, tolerability and PK in 48 healthy volunteers.

2158 was well tolerated following single and multiple ascending doses.

There were no dose dependent treatment-emergent AEs and no pattern of clinical safety or laboratory abnormalities observed within or across any cohorts.

Once daily administration is projected to result in trough liver concentrations in excess of the in vitro EC50 of 334 nM at which cccDNA establishment is inhibited by 50%.

We initiated the Phase 1b dose-ranging portion of this study in April 2019 to assess the safety, PK and antiviral activity of 2158 in patients with chronic HBV infection.

In November 2019, at The Liver Meeting®, we reported interim data from the first, low-dose cohort of the Phase 1b portion of the Phase 1a/1b dose-ranging clinical study, which is currently enrolling HBeAg-positive patients in sequential dose cohorts of nine patients, with each cohort randomized to receive oral 2158 or placebo (7:2) once daily for 14 days.

The interim data from the initial cohort receiving the lowest dose of 2158 at 100 mg demonstrated potent antiviral activity at this initial dose level, reflected by mean declines from baseline to day 15 of 2.3 log 10 [range 1.7 – 3.0] and 2.1 log 10 [range 1.5 – 2.7] in HBV DNA and pgRNA, respectively.

No serious AEs, dose limiting toxicities or premature discontinuations have been reported to date.

All AEs were Grade 1.

One patient assigned to placebo and three patients on 2158 reported AEs that resolved without intervention (dizziness, fatigue, rash, headache and upper abdominal pain).

Observed steady-state exposures were in excess of the EC90 for in vitro antiviral and cccDNA assays.

We believe that the safety and PK data and parameters from this interim analysis support once daily administration and the continued evaluation of 2158 across the planned dose cohorts in patients with chronic HBV infection.

Following completion of the Phase 1b dose-ranging study, we expect to initiate a Phase 2 clinical study in the second quarter of 2020.

ABI-H3733 (3733), our third product candidate in the HBV Cure program, has completed Investigational New Drug (IND) enabling studies.

3733 has a novel chemical scaffold separate from both 731 and 2158.

We presented a preclinical profile of this candidate at EASL in April 2019.

In preclinical studies, 3733 demonstrated potent inhibitory activity against multiple steps in the HBV infection cycle, particularly those relating to cccDNA generation.

3733 has shown favorable physical properties and PK profile in multiple species, along with a low drug-drug interaction potential.

In preclinical mechanism of action studies, 3733 has shown enhanced potency in blocking encapsidation of pgRNA and disruption of pre-formed capsids as compared to our other product candidates, and in premature disassembly during trafficking of relaxed circular (rc) DNA containing capsids to the nucleus during infection.

3733 inhibited cccDNA formation with an EC50 of 125 nM.

3733’s enhanced potency and favorable preclinical results support advancement into Phase 1a studies, which we expect to initiate in the first quarter of 2020.

* Excludes one subject found to have pre-existing core inhibitor resistance substitutions at baseline.

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

In pursuit of our goal of developing finite and curative therapies for patients with chronic HBV infection, we plan on advancing the optimal core inhibitor in our portfolio for use as an anti-viral backbone with NrtI.

While we have three candidates in clinical studies and are working towards identifying a fourth-generation candidate later this year, we will follow a disciplined, data-driven approach to identify the optimal candidate(s) to produce potentially higher cure rates than are currently obtainable for patients with chronic HBV infection under the current standard of care.

Our Core Inhibitor Product Candidates

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

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

The conduct of the Phase 2 studies, Study 201 and 202 and our open-label extension study, Study 211, are all complete.

We presented interim updates on our clinical studies at a variety of conferences, including at the European Association for the Study of the Liver’s (EASL) Digital International Liver Congress TM in August 2020 and the American Association for the Study of Liver Diseases (AASLD) Annual Meeting in November 2020.

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

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

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

In November 2020, it became clear that patients who stopped therapy in Study 211 had not achieved meaningful SVR rates as 39 of 41 patients relapsed, meaning they had detectable HBV.

We continue to analyze Study 211 data and intend to submit more detailed findings to a future medical meeting;

however, it is clear that combination therapy of VBR plus NrtI alone is not sufficient to cure HBV.

Based on these results, we terminated Study 211 prior to its completion.

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

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

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

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

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

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

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

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

(BeiGene), we recently decided to not move forward with the global registrational studies for VBR as a chronic suppressive treatment (CST) with NrtI.

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

As a result, we also expect to terminate Study 205, as we focus our efforts with VBR moving forward in combination with NrtI and additional mechanisms targeting finite and curative combination therapy.

Our second-generation core inhibitor product candidate, 2158, was internally discovered and developed and is chemically distinct from VBR.

We reported the final data from dose-ranging cohorts of the Phase 1b portion of the Phase 1a/1b dose-ranging clinical study at EASL in August 2020.

Based on data from the Phase 1b dose-ranging study, we initiated a Phase 2 clinical study in June 2020 using a 300 mg daily dose of 2158.

This study is being conducted in approximately ten countries in Asia, North America and Europe.

We expect interim data from this study in the second half of 2021.

While we will continue to monitor the situation closely, at this time, we do not expect our timelines for this study to be significantly impacted by the COVID-19 pandemic.

Our third core inhibitor product candidate, 3733, has completed Investigational New Drug (IND) enabling studies.

3733 has a novel chemical scaffold separate from both VBR and 2158.

We presented a preclinical profile of this candidate in the first quarter of 2019.

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

Conduct for the study was completed in the fourth quarter of 2020 and preliminary data indicate that 3733 was generally well-tolerated and had favorable PK.

Additional Product Candidates

We plan to conduct additional research and development to identify additional product candidates for our HBV Cure program.

License Agreement and Intellectual Property

In addition to our three clinical-stage product candidates, our research discovery team is actively focused on identifying and selecting a fourth-generation core inhibitor candidate, which we anticipate in the first half of 2021.

Core Inhibitor Collaboration and License Agreements

Indiana University Research and Technology Corporation

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The IURTC License Agreement may be terminated by us, with or without cause, upon 90 days advance written notice, by IURTC upon our material breach with 60 days advance written notice or by IURTC, in certain cases, upon our insolvency or bankruptcy immediately upon written notice.

BeiGene, Ltd.

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

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

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

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

BeiGene has also agreed to pay all development and regulatory costs up to an aggregate of $45.0 million in the Territory for VBR, 2158 and 3733.

Following this initial investment, we and BeiGene will share development costs for the Territory equally.

The BeiGene Agreement also contains provisions such as representations and warranties of the parties, terms as to governance of the collaboration, commercialization and regulatory responsibilities of the parties, and manufacturing and supply, including potential adjustments in the event supply costs exceed certain levels.

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

If, after 2158 and 3733 reach the end of Phase 2 clinical trials, we and BeiGene are unable to mutually agree on the terms of a Phase 3 global study, BeiGene may elect to terminate the BeiGene Agreement solely as it relates to that compound, as applicable.

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

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

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

Multi-Drug Combination Studies

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

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

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

As the 300 mg daily dose of VBR has been observed to be well-tolerated in all studies conducted to date, with no serious adverse effects or dose-limiting toxicities identified and no pattern of treatment-emergent clinical or laboratory abnormalities observed and has progressed beyond dual combination studies, we currently have two triple combination studies planned to study VBR in combination with NrtI and a third mechanism of action.

In August 2020, we entered into a Clinical Trial Agreement with Arbutus Biopharma Corporation (Arbutus), pursuant to which we and Arbutus will conduct a randomized, multi-center, open-label Phase 2 clinical trial to explore the safety, PK and antiviral activity of the triple combination of VBR, NrtI and AB-729 compared to the double combinations of VBR plus NrtI and AB-729 plus NrtI in virologically suppressed patients.

This clinical study is projected to initiate in the first half of 2021.

Our second triple combination study evaluates VBR and NrtI in combination with interferon in treatment-naïve HBeAg positive subjects and was initiated in the first quarter of 2021.

In addition to the above studies, we expect to continue to pursue additional multi-drug combinations that include other or additional non-overlapping mechanisms of action to the core inhibitor + NrtI antiviral backbone.

Beyond Core Inhibitors

In addition to the development and advancement of our core inhibitor portfolio and our current and future multi-drug combination studies, our research and development team is working on discovering and developing a potent fourth-generation core inhibitor, cccDNA disruptors and small molecules targeting novel undisclosed targets to add to the core inhibitor + NrtI antiviral backbone to achieve cure.

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

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

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

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

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

Intellectual Property

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

patents and related foreign patents and patent applications that relate to compositions of matter and methods of using 731.

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

The issued U.S.

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In addition, we own a pending U.S.

patent application and related foreign applications directed to a process for preparing 731;

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

any patents issuing therefrom are expected to expire in 2038.

We also own a provisional patent application directed to formulations of 731.

Finally, we co-own and exclusively license additional pending U.S.

patent applications and related foreign patent applications directed to analogs of 731.

Finally, we own an international (PCT) patent application directed to formulations of VBR;

any patents issuing therefrom are expected to expire in 2040.

We own a pending U.S.

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any patents issuing therefrom are expected to expire in 2038.

We also own two additional PCT patent applications directed to analogs of 2158.

We own an international (PCT) patent application that relates to compositions of matter and methods of using 3733.

We own a PCT patent application that relates to compositions of matter and methods of using 3733;

any patents issuing therefrom are expected to expire in 2039.

Microbiome Program

Our Microbiome program consists of a fully integrated platform that includes a strain isolation, identification, characterization and function based selection process, methods for strain purification and growth under conditions compliant with Good Manufacturing Practice (cGMP) requirements, and a licensed patented delivery system that we call GEMICEL®, which is designed to allow for targeted oral delivery of live biologic and conventional therapies to the lower GI tract.

Our Product Candidates

We have completed nonclinical studies on our Microbiome program’s lead candidate, ABI-M201 (M-201).

We filed an IND application in December 2018 for M201, and in February 2019, we initiated a Phase 1b human clinical study of M201 to evaluate the safety of M201 and its effects on disease activity measures in patients with mildly to moderately active ulcerative colitis (UC) and ongoing treatment with mesalamine.

The study’s primary objective is safety and tolerability, and its secondary objectives focus on the effect of M201 treatment in patients with UC.

The study will consist of two sequential, non-overlapping cohorts of patients, separated by intervening interim analysis.

Both cohorts will involve eight weeks of study drug treatment.

Interim data from the initial treatment cohort (Cohort A), consisting of 20 patents, will inform the decision to advance to the second cohort (Cohort B), consisting of 24 patients, and its dose selection.

The patients in Cohort A will be randomized 1:1 to receive either one daily capsule of M201 or placebo in addition to their treatment with mesalamine.

The patients in Cohort B will be randomized 3:1 to receive between one to five daily capsules of M201 or placebo in addition to their treatment with mesalamine.

I n June 2019, we initiated dosing of the first patient in this clinical study.

Additional Product Candidates

Using our microbiome platform capabilities, we are also exploring additional product candidates for other disease indications, including Crohn’s disease (CD) and irritable bowel syndrome (IBS) in connection with the Collaboration Agreement, as well as immune-mediated and metabolic disorders and oncology, which indications we will pursue either internally or in collaboration with other third parties.

Collaboration Agreement

On January 6, 2017, we entered into the Collaboration Agreement to develop and commercialize select microbiome gastrointestinal programs.

Pursuant to the Collaboration Agreement, we granted Allergan an exclusive worldwide license for rights to preclinical compounds M201 and ABI-M301, targeting UC and CD, respectively, as well as two additional compounds to be identified by us for IBS.

Under the Collaboration Agreement, we and Allergan will collaborate on research and development activities with respect to the licensed compounds in accordance with a mutually agreed upon research and development plan.

Pursuant to the terms of the Collaboration Agreement, we received from Allergan an upfront payment of $50.0 million in February 2017.

Additionally, we are eligible to receive up to approximately $631.0 million in development milestone payments and up to approximately $2.14 billion in commercial milestone payments contingent upon the successful development and commercialization of licensed compounds for up to six different indications.

We are also eligible to receive tiered royalties at rates ranging from the mid-single digits to the mid-teens based on net sales.

We and Allergan have agreed to share development costs up to an aggregate of $75.0 million through proof-of-concept (POC) studies on a ⅓, ⅔ basis, respectively, and Allergan has agreed to assume all post-POC development costs.

In the event any pre-POC development costs exceed $75.0 million in the aggregate, we may elect either (a) to fund one-third of such costs in excess of $75.0 million or (b) to allow Allergan to deduct from future development milestone payments one-third of the development costs funded by Allergan in excess of $75.0 million plus a premium of 25%.

We have an option to co-promote the licensed programs in the United States and China, subject to certain conditions set forth in the Collaboration Agreement.

Allergan may terminate the Collaboration Agreement at any time upon either 90 days’ (prior to the initiation of the first POC trial of a licensed product) or 120 days’ (after the initiation of the first POC trial of a licensed product), as applicable, advance written notice to us.

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

License Agreement and Intellectual Property

In November 2013, we entered into a License and Collaboration Agreement with Therabiome, LLC (Therabiome) for all intellectual property and know-how owned or controlled by Therabiome relating to the oral delivery of pharmaceutical drugs to specific sites in the intestine, using a pH-sensitive controlled release capsule-in-capsule technology.

Under the agreement, Therabiome granted us the exclusive worldwide license, with rights to sublicense, to develop the intellectual property for commercialization of the use of bacteria, viruses, proteins, and small molecules by oral delivery using the licensed intellectual property in (i) gastrointestinal dysbiosis, including but not limited to irritable bowel syndrome-constipation, irritable bowel syndrome-diarrhea, inflammatory bowel disease, metabolic syndrome, type 2 diabetes, obesity and hypertension, (ii) auto-immune disorders and autism, including but not limited to as controlled by bacteria or virus, and (iii) orally delivered vaccines, including viral and bacterial, and (b) any oral delivery of small molecules using the licensed intellectual property.

We are solely responsible for all research and development activities with respect to any product we develop under the license.

For each product or therapy utilizing the licensed technology for which we file a new drug application (NDA), we would be obligated to pay Therabiome aggregate clinical and U.S.

regulatory milestone payments ranging from $2.6 million to $3.4 million, depending on whether the milestone occurs before we file our first NDA for a product or after our first, second or third NDA filings.

Additional milestone payments of $3.0 million and $1.0 million would be due upon receipt of marketing approval by the FDA and upon approval of a supplemental NDA for a new indication in the United States, respectively.

We also must pay Therabiome lesser amounts for certain foreign regulatory milestones, which vary by country and region.

We also must pay Therabiome royalties on annual net product sales in the low to mid-single digit percentages plus, once annual net sales exceed two specified thresholds, a one-time cash payment upon reaching each threshold.

This agreement may be terminated by us, with or without cause, upon 90 days prior written notice, by either party upon the other party’s material breach with 180 days prior written notice or by either party upon the other party’s challenge of the validity or enforceability or any issued patent within the licensed intellectual property with 90 days prior written notice.

Additionally, either party may terminate the agreement upon an event of bankruptcy with respect to the other party.

Intellectual property

In regard to our microbiome patent estate, we exclusively license from Therabiome, two issued U.S.

patents, two pending U.S.

patent applications, ten patents granted in foreign jurisdictions including Europe, China, Hong Kong, Japan, Australia, and Canada, and related foreign patent applications that relate to a lower gastrointestinal tract-targeted oral delivery system and methods of use thereof.

The issued U.S.

patents are expected to expire in 2034.

The pending U.S.

patent applications, if or when issued, are expected to expire between 2033 and 2034.

The foreign patents and any patents issuing from the foreign patent applications are expected to expire between 2033 and 2034.

In addition, we own one pending U.S.

non-provisional patent application and one pending PCT patent application that relates to M201.

We also own six provisional patent applications that relate to additional microbiome-related compositions of matter and methods of use thereof.

In addition, we own the GEMICEL® trademark used in conjunction with our licensed targeted oral delivery system.

Following the termination of the Research, Development, Collaboration and License Agreement between the Company and Allergan Pharmaceuticals International Limited, which was acquired by AbbVie, Inc.

in May 2020, we began an extensive process to identify strategic alternatives to continue the development of the Microbiome program upon the return of the related intellectual property rights.

This process did not result in us receiving any bids on any portion of the Microbiome program, including our facility in Groton, Connecticut.

As a result, in December 2020, we and our Board of Directors (the Board) decided to wind down our Microbiome program as of January 31, 2021, including our facility in Groton, Connecticut, to prioritize and focus our resources on our HBV programs.

Government Regulation

Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture, including any manufacturing changes, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, import and export of pharmaceutical and biological products, such as those we are developing.

drug approval process

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (FDCA) and implementing regulations, and biological products under both the FDCA and the Public Health Service Act (PHSA) and implementing regulations.

The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources.

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (FDCA) and implementing regulations.

The process of obtaining regulatory approvals and subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources.

Failure to comply with the applicable U.S.

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

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

completion of nonclinical laboratory tests and animal studies in compliance with the FDA’s good laboratory practice (GLP) regulations, as required;

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

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

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

approval by an independent institutional review board (IRB) at each clinical site before each trial may be initiated;

performance of adequate and well-controlled human clinical studies in accordance with good clinical practices (GCP) to establish the safety and efficacy of the proposed drug or biological product for each indication;

submission to the FDA of a new drug application (NDA) or a biologics license application (BLA);

approval by an independent institutional review board (IRB) or ethics committee at each clinical site before each trial may be initiated;

performance of adequate and well-controlled human clinical studies in accordance with good clinical practices (GCP), and any additional requirements for the protection of human research patients and their health information, to establish the safety and efficacy of the proposed drug for each indication;

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

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

FDA review and approval of the NDA or BLA.

FDA review and approval of the NDA.

Nonclinical studies and IND

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Clinical studies

Clinical studies involve the administration of the investigational new drug or biological product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical study.

Clinical studies involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical study.

Clinical studies are conducted under written study protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated.

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

The drug or biological product is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.

The drug or biological product is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

The drug or biological product is administered to an expanded patient population in adequate and well-controlled clinical studies to generate sufficient data to statistically confirm the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product.

The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.

The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

The drug is administered to an expanded patient population in adequate and well-controlled clinical studies to generate sufficient data to statistically confirm the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product.

Progress reports detailing the results of the clinical studies must be submitted at least annually to the FDA.

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

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

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

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

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Marketing approval

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

Under federal law, the submission of most NDAs and BLAs is additionally subject to a substantial application user fee, currently approximately $2.9 million and the sponsor of an approved NDA or BLA is also subject to an annual program fee currently set at approximately $0.3 million through September 30, 2020.

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

Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, currently $2.9 million and the sponsor of an approved NDA is also subject to an annual program fee currently set at $0.3 million through September 30, 2021.

These fees are typically adjusted on October 1 each year.

The FDA conducts a preliminary review of all NDAs and BLAs within the first 60 days after submission before accepting them for filing to determine whether they are sufficiently complete to permit substantive review.

The FDA may request additional information rather than accept an NDA or BLA for filing.

The FDA conducts a preliminary review of all NDAs within the first 60 days after submission before accepting them for filing to determine whether they are sufficiently complete to permit substantive review.

The FDA may request additional information rather than accept an NDA for filing.

In this event, the application must be resubmitted with the additional information.

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Once the submission is accepted for filing, the FDA begins an in-depth substantive review.

The FDA has agreed to specified performance goals in the review of NDAs and BLAs.

Under these goals, the FDA has committed to review most original applications for non-priority products within ten months, and most original applications for priority review products, that is, drugs and biological products for a serious or life-threatening condition that the FDA determines represent a significant improvement over existing therapy, within six months.

For NDAs for novel products and all BLAs, the ten- and six-month time periods runs from the filing date;

The FDA has agreed to specified performance goals in the review of NDAs.

Under these goals, the FDA has committed to review most original applications for non-priority products within ten months, and most original applications for priority review products, that is, drugs for a serious or life-threatening condition that the FDA determines represent a significant improvement over existing therapy, within six months.

For NDAs for novel products, the ten- and six-month time periods runs from the filing date;

for all other original applications, the ten- and six-month time periods run from the submission date.

The review process may be extended by the FDA for three additional months to consider certain information or clarification regarding information already provided in the submission.

Despite these review goals, it is not uncommon for FDA review of an NDA or BLA to extend beyond the goal date.

Despite these review goals, it is not uncommon for FDA review of an NDA to extend beyond the goal date.

The FDA may also refer applications for novel drugs or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved.

The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving an NDA or BLA, the FDA typically will inspect the facility or facilities where the product is manufactured.

Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured.

The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.

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

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

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

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

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

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

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

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

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

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

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

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

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

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Fast track designation

The FDA is required to facilitate and expedite the development and review of drugs and biological products that are intended for the treatment of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the disease or condition.

The FDA is required to facilitate and expedite the development and review of drugs that are intended for the treatment of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the disease or condition.

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

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

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

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

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

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

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

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

In 2018, the FDA granted fast track designation to 731 for the treatment of patients with chronic HBV infection.

In 2018 and 2020, the FDA granted fast track designation to VBR and 2158, respectively, for the treatment of patients with chronic HBV infection.

Priority review

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Accelerated approval

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

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

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

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Breakthrough therapy designation

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

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

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

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

The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthrough therapy.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

Under the Orphan Drug Act, as amended, the FDA may grant orphan drug designation to drugs or biological products intended to treat a rare disease or condition, which is generally defined as a disease or condition that affects fewer than 200,000 individuals in the United States or that affects more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available the drug or biologic for the disease or condition will be recovered from sales of the product in the United States.

Under the Orphan Drug Act, as amended, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally defined as a disease or condition that affects fewer than 200,000 individuals in the United States or that affects more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available the drug for the disease or condition will be recovered from sales of the product in the United States.

Orphan drug designation must be requested before submitting an NDA or BLA.

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The first NDA or BLA applicant to receive FDA approval for a particular active moiety to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that product and indication.

During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug or biological product for the same orphan indication, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity.

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

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

During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same orphan indication, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity.

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

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

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

Pediatric information

Under the Pediatric Research Equity Act of 2003, as amended, an NDA, BLA or supplement to an NDA or BLA for drug or biological products with certain novel features (e.g., new active ingredient, new indication) must contain data that are adequate to assess the safety and effectiveness of the drug or biological product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.

Under the Pediatric Research Equity Act of 2003, as amended, an NDA or supplement to an NDA for drug with certain novel features (e.g., new active ingredient, new indication) must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.

The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.

A sponsor of a new drug or biological product subject to the above pediatric testing requirements also is required to submit to the FDA a pediatric study plan generally 60 days after an end-of-Phase 2 meeting with the agency.

A sponsor of a new drug subject to the above pediatric testing requirements also is required to submit to the FDA a pediatric study plan generally 60 days after an end-of-Phase 2 meeting with the agency.

Generally, the pediatric data requirements do not apply to products with orphan drug designation.

Combination products

The FDA regulates combinations of products that cross FDA centers, such as drug, biologic or medical device components that are physically, chemically or otherwise combined into a single entity, as a combination product.

The FDA center with primary jurisdiction for the combination product will take the lead in the premarket review of the product, with the other center consulting or collaborating with the lead center.

The FDA’s Office of Combination Products (OCP) determines which center will have primary jurisdiction for the combination product based on the combination product’s “primary mode of action.” A mode of action is the means by which a product achieves an intended therapeutic effect or action.

The primary mode of action is the mode of action that provides the most important therapeutic action of the combination product, or the mode of action expected to make the greatest contribution to the overall intended therapeutic effects of the combination product.

Often it is difficult for the OCP to determine with reasonable certainty the most important therapeutic action of the combination product.

In those difficult cases, the OCP will consider consistency with other combination products raising similar types of safety and effectiveness questions, or which center has the most expertise to evaluate the most significant safety and effectiveness questions raised by the combination product.

A sponsor may use a voluntary formal process, known as a Request for Designation, when the product classification is unclear or in dispute, to obtain a binding decision as to which center will regulate the combination product.

If the sponsor objects to that decision, it may request that the agency reconsider that decision.

Other regulatory requirements

Any drug or biological product manufactured or distributed by us pursuant to FDA approvals will be subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product.

Any drug manufactured or distributed by us pursuant to FDA approvals will be subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product.

After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval.

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

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

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

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

Additional provisions

In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years.

These laws include anti-kickback statutes and false claims statutes.

The federal anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs.

This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other.

Violations of the anti-kickback statute are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal healthcare programs.

In addition, the Affordable Care Act provides that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purpose of the federal False Claims Act.

Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid.

Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product.

In addition, certain marketing practices, including off-label promotion, may also violate false claims laws.

The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

Physician Drug Samples

As part of the sales and marketing process, pharmaceutical companies frequently provide samples of approved drugs to physicians.

The Prescription Drug Marketing Act (PDMA) imposes requirements and limitations upon the provision of drug samples to physicians, as well as prohibits states from licensing distributors of prescription drugs unless the state licensing program meets certain federal guidelines that include minimum standards for storage, handling and record keeping.

The Prescription Drug Marketing Act (PDMA) regulates the distribution of drug samples at the federal level and sets minimum standards for the registration and regulation of drug distributors by the states.

Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.

In addition, the PDMA sets forth civil and criminal penalties for violations.

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

Even if favorable coverage and reimbursement status is attained for one or more products for which a company or its collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

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

Pricing and reimbursement schemes vary widely from country to country.

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

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

In particular, in the United States, the Affordable Care Act (ACA) and its amendment, the Health Care and Education Reconciliation Act, contains provisions that may reduce the profitability of drug products, including, for example,

increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care programs.

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

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

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

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

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

a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices (which was increased to 70% as of January 1, 2019 under the Bipartisan Budget Act of 2018 (BBA));

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

extension of manufacturers’ Medicaid rebate liability;

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

On January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.

On October 13, 2017, President Trump signed an Executive Order terminating the cost-sharing subsidies that reimburse insurers under the ACA.

Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017.

The loss of the cost share reduction payments is expected to increase premiums on certain policies issued by qualified health plans under the ACA.

Further, on June 14, 2018, the U.S.

Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued the payments were owed to them.

On December 10, 2019, the U.S.

Supreme Court heard arguments in Moda Health Plan, Inc.

United States , which will determine whether the government must make risk corridor payments.

Supreme Court’s decision will be released in the coming months, but we cannot predict how the U.S.

Supreme Court will rule.

The effects of this gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known.

In December 2018, the Centers for Medicare & Medicaid Services (CMS) published a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of the federal district court litigation regarding the method CMS uses to determine this risk adjustment.

In addition, CMS published a final rule that would give states greater flexibility, starting in 2020, in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.

In addition, CMS has finalized regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.

The Tax Cuts and Jobs Act of 2017 (the Tax Act) includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On December 14, 2018, a U.S.

District Court Judge in the Northern District of Texas, or the Texas District Court Judge, ruled that the individual mandate is a critical and inseverable feature of the Affordable Care Act, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well.

On December 18, 2019, the Fifth Circuit U.S.

Court of Appeals held that the individual mandate is unconstitutional and remanded the case to the lower court to reconsider its earlier invalidation of the full ACA.

Pending review, the ACA remains in effect, but it is unclear at this time what effect the latest ruling will have on the status of the ACA and the individual mandate .

Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA mandated fees, including the so called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device exercise tax on nonexempt medical devices;

however, on December 20, 2019, President Trump signed into law the Further Consolidated Appropriations Act (H.R.

1865), which repeals the Cadillac tax, the health insurance provider tax, and the medical device excise tax .

On October 9, 2019, the Department of Health and Human Services (HHS) Office of Inspector General proposed modifications to federal Anti-Kickback Statute safe harbors which, among other things, may affect rebates paid by manufacturers to Medicare Part D plans, the purpose of which is to further reduce the cost of drug products to consumers.

Further, the BBA, among other things, amended the ACA, effective January 1, 2019, to reduce the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” In July 2018, CMS announced that it is suspending further collections and payments to and from certain ACA-qualified health plans and health insurance issuers under the ACA risk adjustment program pending the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment.

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

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

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

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

Supreme Court recently heard oral arguments regarding the constitutionality of the ACA and the individual mandate, with a decision expected during the current term in 2021.

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

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

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

These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, and, due to subsequent legislative amendments, will remain in effect through 2029 unless additional Congressional action is taken.

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

These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, and, due to subsequent legislative amendments, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 2021, unless additional Congressional action is taken.

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

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

There has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.

Specifically, there have been several recent U.S.

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

For example, on September 25, 2019, the Senate Finance Committee introduced a bill intended to reduce Medicare and Medicaid prescription drug prices.

Named the Prescription Drug Pricing Reduction Action of 2019, the proposed legislation would restructure the Part D benefit, modify payment methodologies for certain drugs, and impose an inflation cap on drug price increases.

An even more restrictive bill was introduced in the House of Representatives on September 19, 2019, the Lower Drug Costs Now Act of 2019, which would require HHS to directly negotiate drug prices with manufacturers.

The Lower Drugs Costs Now Act of 2019 has passed out of the House and was delivered to the Senate on December 16, 2019.

It is unclear whether either of these bills will make it through both chambers and be signed into law, and if either is enacted, what effect it would have on our business.

Anti-Kickback, False Claims, Fraud and Abuse, and Health Information Privacy and Security Laws and Regulations

If we obtain FDA approval for any of our drug candidates and begin commercializing those drugs in the United States, our operations may be subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician payment sunshine laws and regulations.

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

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

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

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

For example, at the federal level, the Trump Administration issued several executive orders related to prescription drug pricing and sent “principles” for drug pricing to Congress.

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

In November 2020, the Trump Administration and the U.S.

Department of Health and Human Services (HHS) announced regulations tying certain Medicare Part B drug prices to international drug prices, modifying certain federal Anti-Kickback Statute (AKS) safe harbors, including removing safe harbor protection for rebates negotiated between drug manufacturers and pharmacy benefit managers (PBMs) or health plan sponsors in Medicare Part D, and making further changes to the rules implementing the Stark Law, other AKS safe harbors and the beneficiary inducements provision in the civil monetary penalties law.

On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries.

However, on December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule, and CMS announced that the Most Favored Nation Model will not be implemented without further rulemaking.

There also have been legal challenges to the modified AKS safe harbor for drug rebates, which delayed implementation of the modified safe harbor until January 1, 2023, pending HHS’s review, and gave the Biden Administration until April 1, 2021 to decide whether to defend the rebate rule in court.

The Biden Administration also has issued a final rule to delay the effective date of other provisions of the rebate rule that were scheduled to take effect on January 29, 2021 to March 22, 2021.

The likelihood of implementation of any of the other Trump Administration reform initiatives is uncertain, particularly in light of the change in presidential administrations.

Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures.

Accordingly, the ultimate content, timing or effect of healthcare reform legislation on the United States healthcare industry is unclear.

Other Healthcare Laws

In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, CMS, other divisions of the U.S.

Department of Health and Human Services (e.g., the Office of Inspector General), the U.S.

Department of Justice (DOJ), and individual U.S.

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

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

The laws that may affect our ability to operate include:

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knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent;

making a false statement or record material to a false or fraudulent claim or obligation to pay or transmit money or property to the federal government;

making a false statement or record material to a false or fraudulent claim or obligation to pay or transmit money or property to the federal

or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government.

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

federal Food, Drug and Cosmetic Act (FDCA), which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices, and the Public Health Service Act (PHSA), which prohibits, among other things, the introduction into interstate commerce of a biological product unless a biologics license is in effect for that product;

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

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

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

The CCPA went into effect on January 1, 2020, and the California Attorney General will commence enforcement actions against violators beginning July 1, 2020.

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

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

The California Attorney General has proposed draft regulations, which have not been finalized to date, that may further impact our business activities if they are adopted.

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

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

We face competition from several companies developing and commercializing products that will be competitive with our drug candidates, including large pharmaceutical and smaller biotechnology companies.

Additionally, new entrants may potentially enter the market.

For our HBV Cure program, potential competitors include Johnson & Johnson, Roche, Gilead Sciences Inc., GlaxoSmithKline plc, Enanta Pharmaceuticals, Inc., HEC Pharma, Arbutus Biopharma Corp.

and Aligos Therapeutics, among others.

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

For our Microbiome program, our competitors include Johnson & Johnson, Takeda Pharmaceutical Company Ltd, Bristol Myers Squibb Co., Seres Therapeutics, Inc., Vedanta Biosciences, Inc., Finch Therapeutics, Inc., Enterome Bioscience S.A.

and Second Genome, Inc.

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

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

Some of the competitive development programs from these companies may be based on scientific approaches that are similar to our approach, and others may be based on entirely different approaches.

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Manufacturing

We currently rely on third-party manufacturers to supply the quantities of ABI-H0731, ABI-H2158 and ABI-H3733 used in our clinical and nonclinical studies.

We currently have no plans to establish any manufacturing facilities for products for our HBV Cure program.

In our Microbiome program, we currently utilize internal and third-party manufacturing to supply quantities of drug substance and drug product for use in ongoing and planned nonclinical studies.

Third-party manufacturers are used to supply drug substance for early-stage clinical studies in our Microbiome program.

We have transitioned third-party manufacturing of drug product to a small-scale internal manufacturing facility for early-stage clinical studies.

As we advance these programs through clinical development and potential commercialization, we expect to expand our internal manufacturing capabilities for drug substance and drug product for our Microbiome program.

As of December 31, 2019, we had 115 employees and contracts with a number of temporary contractors, consultants and contract research organizations.

We currently rely on third-party manufacturers to supply the quantities of VBR, 2158 and 3733 used in our clinical and nonclinical studies.

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

Human Capital Management

As of December 31, 2020, we had 139 total employees and contracts with a number of temporary contractors, consultants and contract research organizations.

Our employees are spread across facilities in South San Francisco, California, Groton, Connecticut and a small facility in China.

We also have a small number of remote employees spread across the United States.

During 2020, we increased our headcount by adding 51 new employees.

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

Following the wind-down of our Microbiome program on January 31, 2021, we had 95 total employees, with one employee remaining in Groton, Connecticut to manage the shutdown of that facility.

While we wound down our Microbiome program in early 2021, we expect to continue to add employees to support our HBV programs in 2021, with a focus on continuing to build out our clinical team to support ongoing and planned clinical development studies and building out our preclinical research and development team under our new Chief Scientific Officer, who joined us in May 2020.

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

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

We compete with both large and small companies in our industry for a limited number of qualified applicants to fill highly specialized needs.

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

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

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

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

100% Company-covered medical, dental and vision coverage for employees and their families;

a 401k program with a Company match;

an employee stock purchase plan;

and paid family leave.

A large majority of our employees have advanced degrees, and we also offer an educational assistance program that reimburses employees up to a maximum amount per year for courses that directly enhance his or her area of professional work or contribute to his or her immediate career growth.

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

COVID-19 Response

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

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

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

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

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

Increasing cleaning protocols at U.S.

office and lab facilities;

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

Prohibiting all work-related domestic and international travel;

Requiring masks to be worn at all Company locations.

The Task Force will continue to hold regular meetings to discuss and update internal guidance and protocols until we determine that meetings are no longer necessary.

Corporate History

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What changed 10-K

Item 1. Business