1 Corporate Presentation FEBRUARY 2021 ©2020 ASSEMBLY BIOSCIENCES, INC. Cautionary Note Regarding Forward-Looking Statements The information in this presentation contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to materially differ. These risks and uncertainties include: Assembly Bio's ability to initiate and complete clinical studies involving its HBV therapeutic product candidates, including studies contemplated by Assembly Bio's clini ...

Assembly Biosciences, Inc. Hepatitis B Program Update Conference Call Summary Company Overview - **Company**: Assembly Biosciences, Inc. (NASDAQ: ASMB) - **Focus**: Development of therapies for Hepatitis B Key Points and Arguments Strategic Shift - The company has decided to focus solely on finite and curative therapies for Hepatitis B, abandoning the chronic suppressive therapy approach due to regulatory feedback and market needs [6][10][39] - Approximately 270 million people worldwide are affected by Hepatitis B, with only 5 million currently receiving treatment, indicating a significant unmet medical need [7] Research and Development Pipeline - The pipeline includes advanced core inhibitors, with vebicorvir showing promising results in Phase II trials when combined with Nuke therapy [8][12] - The company plans to initiate triple combination studies involving vebicorvir, Nuke, and interferon, aiming to enhance treatment efficacy [14][13] - A fourth-generation core inhibitor is expected to be nominated in the first half of the year, targeting improved potency and safety [17] Clinical Trials and Studies - Two Phase III registrational studies in China for chronic suppressive therapy were planned but are now on hold due to regulatory challenges [9][10] - The company is advancing a Phase II trial for 2158, a next-generation core inhibitor, with interim data expected later this year [16][31] Regulatory Insights - The FDA's feedback indicated that the majority of Hepatitis B patients are adequately served by existing therapies, leading to the decision to pivot towards curative therapies [10][39] - Discussions with BeiGene regarding the China territory also influenced the strategic shift away from chronic suppressive therapy [39][52] Future Directions - The focus will be on developing combination therapies that can achieve deeper viral suppression and potentially cure Hepatitis B [11][55] - The company is exploring additional combination studies, including RNAi therapeutics and checkpoint inhibitors, to enhance treatment efficacy [36][38] Additional Important Content - The company emphasizes the importance of inhibiting cccDNA formation as a critical mechanism for achieving a cure [42][45] - The team has extensive experience in Hepatitis B research, which is seen as a key asset in pursuing these ambitious goals [21] - The decision to focus on finite and curative therapies is viewed as a long-term effort that will require incremental progress [55] This summary encapsulates the critical updates and strategic decisions made by Assembly Biosciences regarding their Hepatitis B program, highlighting their commitment to addressing the unmet medical needs of patients through innovative therapies.

PART I [Business](index=4&type=section&id=Item%201.%20Business) A clinical-stage biotech company developing oral HBV therapies and prioritizing its core inhibitor pipeline - The company is a clinical-stage biotechnology firm focused on developing oral therapies for chronic hepatitis B virus (HBV) infection, targeting an estimated 270 million people worldwide[8](index=8&type=chunk) - In January 2021, the company **wound down its Microbiome program** to prioritize resources on discovering and developing curative therapies for HBV[9](index=9&type=chunk)[43](index=43&type=chunk) - The business strategy focuses on advancing its core inhibitor pipeline (VBR, 2158, 3733), assessing them in multi-drug combination studies, and discovering new compounds[13](index=13&type=chunk) - The company relies on third-party manufacturers for its product candidates and currently has no plans to establish its own manufacturing facilities[96](index=96&type=chunk) [HBV Program and Strategy](index=4&type=section&id=HBV%20Program%20and%20Strategy) The company focuses on developing a cure for HBV by advancing its pipeline of core inhibitors in combination therapies - **Vebicorvir (VBR)**: Phase 2 studies are complete; VBR plus NrtI therapy alone is **not sufficient to cure HBV**, and it will be used in future combination therapies[20](index=20&type=chunk)[21](index=21&type=chunk)[24](index=24&type=chunk) - **ABI-H2158 (2nd Gen)**: A Phase 2 clinical study was initiated in June 2020, with interim data expected in the second half of 2021[25](index=25&type=chunk) - **ABI-H3733 (3rd Gen)**: A Phase 1a study was completed in Q4 2020, showing the candidate was generally well-tolerated with favorable pharmacokinetics[26](index=26&type=chunk)[28](index=28&type=chunk) - Entered a collaboration with BeiGene in July 2020, granting exclusive rights in China for a **$40.0 million upfront payment** and up to **$500.0 million in potential milestones**[32](index=32&type=chunk)[33](index=33&type=chunk) - Initiated a collaboration with Door Pharmaceuticals in November 2020 to develop a novel class of HBV inhibitors targeting cccDNA[38](index=38&type=chunk)[39](index=39&type=chunk) [Government Regulation and Reimbursement](index=9&type=section&id=Government%20Regulation%20and%20Reimbursement) Operations are subject to extensive FDA regulation, a lengthy approval process, and uncertain third-party reimbursement - The FDA drug approval process is extensive, requiring nonclinical studies and Phase 1, 2, and 3 clinical trials to establish safety and efficacy[46](index=46&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - The FDA granted **Fast Track designation** to Vebicorvir (VBR) in 2018 and ABI-H2158 in 2020, which may facilitate development and expedite review[61](index=61&type=chunk) - Sales of approved products will depend on coverage and reimbursement from third-party payors, who are increasingly focused on cost-effectiveness[77](index=77&type=chunk)[79](index=79&type=chunk) - The company is subject to various healthcare laws, including the federal Anti-Kickback Statute and False Claims Act, with significant penalties for violations[88](index=88&type=chunk)[93](index=93&type=chunk) [Competition and Human Capital](index=19&type=section&id=Competition%20and%20Human%20Capital) The company faces intense competition from major pharmaceutical firms and reduced its workforce to focus on HBV - Competitors in the HBV space include major pharmaceutical companies like **Johnson & Johnson, Roche, and Gilead Sciences**, as well as other biotech firms[95](index=95&type=chunk) - As of December 31, 2020, the company had 139 employees, which was **reduced to 95** following the wind-down of the Microbiome program[97](index=97&type=chunk) - The company established a COVID-19 Task Force and implemented measures including remote work and travel prohibitions to ensure employee safety[102](index=102&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from its dependence on its HBV program, clinical trial outcomes, and the COVID-19 pandemic - The company has **no approved products** and is entirely dependent on the future success of its HBV program, with no certainty of regulatory approval[110](index=110&type=chunk) - The **COVID-19 pandemic** poses a risk of delaying or disrupting clinical trials, patient enrollment, regulatory interactions, and supply chains[114](index=114&type=chunk)[115](index=115&type=chunk) - The company has a **history of losses** and will require additional financing; failure to raise capital could force program delays or discontinuation[119](index=119&type=chunk) - **Reliance on third-party CROs and CMOs** increases risks related to quality, timeliness, and control over clinical testing and manufacturing[124](index=124&type=chunk)[130](index=130&type=chunk) - The business depends on protecting its intellectual property, but patents may be challenged, invalidated, or circumvented by competitors[177](index=177&type=chunk)[181](index=181&type=chunk) [Properties](index=35&type=section&id=Item%202.%20Properties) The company leases its primary office and lab space in California and is exiting leases for discontinued programs - The company leases its main office and lab space in South San Francisco, CA, under a sub-sublease expiring in December 2023[204](index=204&type=chunk) - The lease for the Groton, CT facility, which supported the Microbiome program, expires in March 2021[204](index=204&type=chunk) [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - The company is **not currently a party to any material legal proceedings**[206](index=206&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq ('ASMB'), it has never paid dividends, and the report details equity plans - Common stock is traded on The Nasdaq Global Select Market under the symbol **'ASMB'**[209](index=209&type=chunk) - The company has **never declared or paid dividends** and does not plan to in the foreseeable future[211](index=211&type=chunk) Equity Compensation Plan Information as of December 31, 2020 | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by securityholders | 5,515,752 | $14.39 | 2,355,332 | | Equity compensation plans not approved by securityholders | 2,067,708 | $18.86 | 24,020 | | **Total** | **7,583,460** | | **2,379,352** | [Selected Financial Data](index=39&type=section&id=Item%206.%20Selected%20Financial%20Data) Five-year financial data shows a narrowed net loss in 2020 due to increased collaboration revenue Selected Financial Data (in thousands, except per share amounts) | | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Balance Sheet Data:** | | | | | | | Total assets | $283,254 | $339,907 | $268,045 | $169,303 | $98,119 | | Total stockholders' equity | $240,578 | $273,217 | $210,653 | $113,120 | $79,878 | | **Statement of Operations Data:** | | | | | | | Collaboration revenue | $79,105 | $15,963 | $14,804 | $9,019 | $— | | Operating expenses | $143,881 | $118,676 | $107,539 | $61,246 | $45,278 | | Loss from operations | $(64,776) | $(102,713) | $(92,735) | $(52,227) | $(45,278) | | Net loss | $(62,152) | $(97,634) | $(90,751) | $(42,809) | $(44,261) | | Basic and dilutive loss per share | $(1.75) | $(3.72) | $(3.98) | $(2.41) | $(2.57) | [Management's Discussion and Analysis of Financial Condition and Results of Operation](index=40&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operation) The 2020 net loss narrowed due to higher collaboration revenue, despite increased R&D spending [Results of Operations](index=49&type=section&id=Results%20of%20Operations) Collaboration revenue surged 396% in 2020, while R&D and G&A expenses also increased, reducing the net loss Comparison of Results for Years Ended Dec 31, 2020 and 2019 (in thousands) | Financial Item | 2020 | 2019 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Collaboration Revenue | $79,105 | $15,963 | $63,142 | 396% | | Research and Development Expenses | $106,823 | $85,757 | $21,066 | 25% | | General and Administrative Expenses | $37,058 | $32,919 | $4,139 | 13% | | Net Loss | $(62,152) | $(97,634) | $35,482 | -36% | - The increase in 2020 collaboration revenue was driven by the recognition of **$37.0 million** from the terminated Allergan agreement and **$31.0 million** from the new BeiGene agreement[299](index=299&type=chunk) - 2020 R&D expenses included **$5.5 million in restructuring costs** related to the wind-down of the Microbiome program[302](index=302&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) The company has sufficient cash for the next year but will require substantial future funding to cover operations Summary of Cash Flows (in thousands) | Activity | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(62,957) | $(84,067) | $(64,958) | | Net cash provided by (used in) investing activities | $68,070 | $(50,318) | $(135,397) | | Net cash provided by financing activities | $7,599 | $139,646 | $159,793 | - As of December 31, 2020, the company had an **accumulated deficit of $501.6 million**[245](index=245&type=chunk)[298](index=298&type=chunk) - In 2020, the company raised **$5.5 million in net proceeds** from an 'at-the-market' (ATM) offering[321](index=321&type=chunk)[330](index=330&type=chunk) - Management believes current funds are sufficient for at least the next twelve months, but **substantial additional funding will be required** for long-term operations[336](index=336&type=chunk) [Critical Accounting Policies and Estimates](index=43&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting estimates involve revenue recognition, goodwill impairment, and R&D expense accruals - **Revenue Recognition**: The company analyzes collaboration agreements to identify performance obligations and allocate transaction prices, constraining variable consideration[259](index=259&type=chunk)[262](index=262&type=chunk)[271](index=271&type=chunk) - **Goodwill and Intangible Asset Impairment**: Goodwill and IPR&D are tested for impairment annually using market capitalization and discounted cash flow analyses[276](index=276&type=chunk)[282](index=282&type=chunk) - **R&D Accruals**: The company estimates R&D expenses incurred but not yet invoiced, especially for CROs and CMOs, based on estimates of services received[286](index=286&type=chunk)[289](index=289&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=57&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate sensitivity affecting its cash and investment portfolio - The primary market risk is **interest rate sensitivity** affecting income from cash and marketable securities[344](index=344&type=chunk) - The company invests in high-quality securities and diversifies to minimize risk, but maintains cash balances at financial institutions that **exceed federally insured limits**[345](index=345&type=chunk)[346](index=346&type=chunk) [Controls and Procedures](index=57&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and the independent auditor concluded that disclosure controls and internal controls were effective - Management, including the CEO and CFO, concluded that **disclosure controls and procedures were effective** as of December 31, 2020[348](index=348&type=chunk) - Management concluded that **internal control over financial reporting was effective** as of December 31, 2020, based on the COSO 2013 framework[350](index=350&type=chunk) - The independent auditor, Ernst & Young LLP, issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting[351](index=351&type=chunk) PART III [Directors, Executive Compensation, and Corporate Governance](index=59&type=section&id=Items%2010-14) Details on directors, compensation, and governance are incorporated by reference from the company's proxy statement - Information for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the company's 2021 proxy statement[354](index=354&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk) - The company has adopted a Code of Ethics and a Code of Conduct, which are available on its website[355](index=355&type=chunk) Financial Statements [Reports of Independent Registered Public Accounting Firm](index=64&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor issued unqualified opinions on financial statements and internal controls, citing two critical audit matters - The auditor, Ernst & Young LLP, issued an **unqualified opinion**, stating the financial statements are presented fairly in all material respects[372](index=372&type=chunk) - The auditor also issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting as of December 31, 2020[373](index=373&type=chunk)[389](index=389&type=chunk) - A **critical audit matter** was the estimation of accrued clinical trial expenses, which is complex due to judgments on work completion and unbilled services[378](index=378&type=chunk)[379](index=379&type=chunk) - A second **critical audit matter** was revenue recognition for the BeiGene agreement due to its complex terms and allocation of the transaction price[383](index=383&type=chunk)[384](index=384&type=chunk) [Consolidated Financial Statements](index=69&type=section&id=Consolidated%20Financial%20Statements) Financial statements show decreased assets and liabilities in 2020, with a reduced net loss from the prior year Consolidated Balance Sheets (in thousands) | | As of Dec 31, 2020 | As of Dec 31, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | **$224,493** | **$282,780** | | Cash and cash equivalents | $59,444 | $46,732 | | Marketable securities | $156,969 | $227,311 | | **Total Assets** | **$283,254** | **$339,907** | | **Total Current Liabilities** | **$24,433** | **$24,440** | | Deferred revenue - long-term | $8,987 | $30,637 | | **Total Liabilities** | **$42,676** | **$66,690** | | **Total Stockholders' Equity** | **$240,578** | **$273,217** | Consolidated Statements of Operations (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | | :--- | :--- | :--- | :--- | | Collaboration revenue | $79,105 | $15,963 | $14,804 | | Research and development | $106,823 | $85,757 | $72,741 | | General and administrative | $37,058 | $32,919 | $34,798 | | **Loss from operations** | **$(64,776)** | **$(102,713)** | **$(92,735)** | | **Net loss** | **$(62,152)** | **$(97,634)** | **$(90,751)** | | **Net loss per share** | **$(1.75)** | **$(3.72)** | **$(3.98)** | [Notes to Consolidated Financial Statements](index=73&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting for collaborations, restructuring charges, stock compensation, and subsequent events - **Note 9 (Collaboration Agreements)**: In 2020, the company recognized the remaining **$36.0 million** from the terminated Allergan agreement and **$31.0 million** from the new BeiGene agreement[547](index=547&type=chunk)[567](index=567&type=chunk) - **Note 6 (Restructurings)**: The company incurred **$5.7 million in restructuring costs** in 2020, primarily for employee severance and asset impairments related to the Microbiome program wind-down[512](index=512&type=chunk)[514](index=514&type=chunk) - **Note 8 (Stock-Based Compensation)**: Total stock-based compensation expense was **$21.9 million in 2020**, compared to $20.6 million in 2019[543](index=543&type=chunk) - **Note 11 (Income Taxes)**: As of Dec 31, 2020, the company had federal net operating loss carryforwards of **$378.8 million** and maintains a full valuation allowance[585](index=585&type=chunk)[586](index=586&type=chunk) - **Note 15 (Subsequent Events)**: After year-end, the company sold 4,177,080 shares through its ATM program, resulting in **net proceeds of $25.5 million**[604](index=604&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________to___________. Commission file number: 001-35005 ASSEMBLY BIOSCIENCES, INC. (Exact name of Registrant as specified in its charter) Delaware 20-8729264 (St ...