What changed in this filing

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Item 1. Business

2022-03-11 compared with 2021-02-25 · 171 added, 117 removed, 348 unchanged (45% of the section changed)

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.

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

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

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

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

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

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

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

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

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

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

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

HBV Background

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

The WHO estimates that 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.

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.

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

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

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

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

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

Current Treatments

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

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

Current therapeutic options for HBV include:

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

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

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

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

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

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.

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

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

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

As a result, our 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.

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

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

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

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

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

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

Our Primary Focus:

Targeting HBV Core Protein to Achieve a Cure

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

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

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.

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

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

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.

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

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

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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

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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.

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

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

Finite Therapy Development

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

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

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

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

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

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

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

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

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

These studies are detailed below.

See “—Multi-Drug Combination Studies.”

Chronic Suppressive Therapy Development

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

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

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

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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.

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

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

As a result, we 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

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.

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

Next-Generation Core Inhibitors

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Core Inhibitor Collaboration and License Agreements

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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.

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

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

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

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

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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.

Under the terms of the BeiGene Agreement, if after 3733 reaches 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.

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

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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.

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

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

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Beyond Core Inhibitors

In addition to the development and advancement of our core inhibitor portfolio and our current and future multi-drug combination studies, our research and development team is working on discovering and developing 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.

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

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

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

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

Additional Antiviral Opportunities

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

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

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

Intellectual Property

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patents are expected to expire in 2035 and 2036.

In addition, we own a pending U.S.

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

any patents issuing therefrom are expected to expire in 2038.

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

In addition, we own a U.S.

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

The issued U.S.

patent is expected to expire in 2038.

Finally, we own a U.S.

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

any patents issuing therefrom are expected to expire in 2040.

We own a pending U.S.

patent application and related foreign applications that relate to compositions of matter and methods of using 2158;

We own a U.S.

patent application and related foreign patent applications that relate to compositions of matter and methods of using 3733;

any patents issuing therefrom are expected to expire in 2039.

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

We own an international (PCT) application that relates to compositions of matter and methods of using 4334;

any patents issuing therefrom are expected to expire in 2041.

Microbiome Program

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.

Finally, we own a U.S.

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

The issued U.S.

patent is expected to expire in 2038.

Government Regulation

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

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

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

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

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

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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.

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

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

These fees are typically adjusted on October 1 each year.

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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.

This rolling review is available if the

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

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

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

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

In 2018, the FDA granted Fast Track designation to VBR for the treatment of patients with chronic HBV infection.

Priority review

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

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

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

same drug for a different disease or condition.

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

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

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

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

approved labeling.

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

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

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

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

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

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

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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 we may 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 r eceive 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.

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:

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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.

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.

On December 14, 2018, a U.S.

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

In December 2019, the U.S.

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

Supreme Court.

On June 17, 2021, the U.S.

Supreme Court held that state and individual plaintiffs did not have standing to challenge the individual mandate provision of the ACA;

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

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

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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 2030, with the exception of a temporary suspension from May 1, 2020 through March 2021, unless additional Congressional action is taken.

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

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

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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.

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

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

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

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

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.

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

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

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

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

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

Other Healthcare Laws

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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

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;

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

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

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

identifiable health information.

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

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

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

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

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

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

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

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

currently written, the CCPA may impact our business activities.

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

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

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

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

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

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Additionally, new entrants may potentially enter the market.

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

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

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

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As of December 31, 2021, we had 102 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.

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

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

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

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

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

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

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

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

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

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

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a 401k program with a Company match;

an employee stock purchase plan;

a comprehensive employee assistance program, an employee stock purchase plan;

and paid family leave.

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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:

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

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

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

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

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

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

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office and lab facilities;

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

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

Prohibiting all work-related domestic and international travel;

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.

Following local requirements regarding mask wearing at our facility.

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

Corporate History

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business