ASSEMBLY BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLID ATED FINANCIAL STATEMENTS

Note 1 - Nature of Business

Overview

Assembly Biosciences, Inc. (together with its subsidiaries, Assembly or the Company), incorporated in Delaware in October 2005, is a biotechnology company developing innovative therapeutics targeting serious viral diseases with the potential to improve the lives of patients worldwide. The Company's pipeline includes multiple clinical-stage investigational therapies, including: (1) two helicase-primase inhibitors (HPIs) targeting recurrent genital herpes; (2) an orally bioavailable hepatitis delta virus entry inhibitor; and (3) a highly potent next-generation capsid assembly modulator designed to disrupt the replication cycle of hepatitis B virus at several key points. The Company's pipeline also includes a novel, oral broad-spectrum non-nucleoside polymerase inhibitor (NNPI) targeting transplant-related herpesviruses, which is currently undergoing studies to enable a regulatory filing, and it has additional research programs against multiple antiviral targets. The Company operates inone segment and is headquartered in South San Francisco, California (see Note 9 - Segment Reporting).

Liquidity and Going Concern

The Company has not derived any revenue from product sales to date and currently hasno approved products. Once a product has been developed, it will need to be approved for sale by the U.S. Food and Drug Administration or an applicable foreign regulatory agency. Since the Company’s initial public offering, operations have been financed through the sale of equity securities and payments related to collaboration agreements. The Company has incurred losses from operations since inception and expects to continue to incur substantial losses for the next several years as it continues its product development efforts.

As of June 30, 2025, the Company held cash, cash equivalents and marketable securities of$75.0 million. Based on its current operating plans, the Company believes its existing cash and cash equivalents and marketable securities are not sufficient to fund operations beyond one year from the date these unaudited condensed consolidated financial statements are issued, and therefore, the Company has concluded there is substantial doubt about its ability to continue as a going concern.

Management's plans to mitigate the conditions that raise substantial doubt about the Company's ability to continue as a going concern include seeking additional funding through public or private equity financings and potential payments from Gilead Sciences, Inc. (Gilead) under the Option, License and Collaboration Agreement (the Gilead Collaboration Agreement) (see Note 8 - Collaboration Agreement). However, the Company cannot assure funding will be available on reasonable terms, if at all. Market volatility, inflation or other factors, such as tariffs, trade wars, barriers or restrictions, or threats of such actions and the related uncertainty thereof, could also adversely impact the Company’s ability to access capital when and as needed. Additionally, the Company may not be successful in the Gilead Collaboration Agreement due to various other factors, including the Company's ability to demonstrate proof of concept in one or more clinical studies so that Gilead will exercise its option to these programs. In addition, even if the Company demonstrates clinical proof of concept of its candidates, Gilead may choose not to exercise its options. The Company may obtain additional funding it requires through debt financing; however, the availability and amount of such funding is not certain. Additionally, if debt financing is available, it may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If the Company is unable to secure additional sources of funding, it could be forced to reduce staff, delay, scale back or discontinue product development and clinical studies, forego business opportunities, cease operations entirely and sell, or otherwise transfer, all or substantially all of its remaining assets, which would likely have a material adverse impact on its business, results of operations, financial condition and share price.

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The condensed consolidated financial statements do not include any adjustments that would be necessary should the Company be unable to continue as a going concern, and therefore, be required to liquidate its assets and discharge its liabilities in other than the normal course of business and at amounts that may differ from those reflected in the accompanying condensed consolidated financial statements.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and pursuant to the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the SEC. In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and include normal recurring adjustments necessary for the fair presentation of the Company’s financial position and its results of operations and comprehensive loss and its cash flows for the periods presented. These statements do not include all disclosures required by U.S. GAAP and should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the fiscal year ended December 31, 2024, which are contained in the 2024 Annual Report. The results for the three and six months ended June 30, 2025 are not necessarily indicative of results to be expected for the entire year ending December 31, 2025 or future operating periods.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates inherent in the preparation of the accompanying unaudited condensed consolidated financial statements include estimates for revenue recognition and costs incurred but not yet invoiced for research and development accruals.

The Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible these external factors could have an effect on the Company’s estimates and could cause actual results to differ materially from those estimates and assumptions.

Other Risks and Uncertainties

U.S. and global financial markets have experienced and may continue to experience volatility and disruption due to macroeconomic and geopolitical events such as rising inflation, changes in interest rates to combat inflation, the war between Russia and Ukraine, the conflicts in the Middle East, tensions between China and Taiwan, as well as tariffs or the imposition of modified or additional tariffs, trade wars, barriers or restrictions, or threats of such actions and the related uncertainty thereof. The Company cannot predict at this time to what extent, if at all, it and its employees, contract research organizations, vendors and/or collaborators could potentially be negatively impacted by these events.

Net Loss per Share

Basic net loss per share of common stock excludes dilution and is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity unless inclusion of such shares would be anti-dilutive. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented.

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

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

Note 3 – Related Party

In October 2023, the Company entered into the Gilead Collaboration Agreement, and a Common Stock Purchase Agreement and an Investor Rights Agreement (collectively, the Gilead Equity Agreements) with Gilead. The Gilead Equity Agreements were amended in June 2024, and the parties entered into the First Amendment to the Gilead Collaboration Agreement in December 2024.

Following the Company entering into the Gilead Equity Agreements, and as of June 30, 2025, Gilead is considered a related party based on its ownership of the Company's common stock.

The Company recognized$9.6 million and$8.5 million of collaboration revenue under the Gilead Collaboration Agreement during the three months ended June 30, 2025 and 2024, respectively. The Company recognized$19.0 million and$14.3 million of collaboration revenue under the Gilead Collaboration Agreement during the six months ended June 30, 2025 and 2024, respectively. See Note 8 - Collaboration Agreement for additional details.

In July 2025, the Company entered into a letter agreement with Gilead under which Gilead has agreed to reimburse the Company up to $1.5 million for certain nonclinical study activities, subject to the terms and conditions set forth in the agreement. The letter agreement does not amend any terms of the Gilead Collaboration Agreement.

Note 4 – Fair Value Measurements and Investments in Marketable Securities

The carrying amounts of cash equivalents and marketable securities approximate their fair value based upon quoted market prices. Certain of the Company’s financial instruments are not measured at fair value on a recurring basis, but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as cash, accounts receivable, accounts payable and accrued expenses.

The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments:

Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments.

Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace.

Level 3: Significant unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Investments in marketable securities consisted of the following (in thousands):

There wereno realized gains and losses for thethree and six months ended June 30, 2025 and 2024. As of June 30, 2025 and December 31, 2024, investments which were in an unrealized loss position were not material and generally due to interest rate fluctuations, as opposed to declines in credit quality. The Company determined it has the intent and ability to hold all marketable securities that have been in a continuous loss position until recovery of their amortized cost basis, which may be until maturity. As a result, the Company did not recognize any credit losses related to its investments and all unrealized gains and losses on available-for-sale marketable securities are recorded in accumulated other comprehensive loss on the condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024.

Accrued interest receivable was$0.3 million and$0.4 million as of June 30, 2025 and December 31, 2024, respectively, and was recorded in prepaid expenses and other current assets on the condensed consolidated balance sheets. The Company did not write off any accrued interest receivable during the three and six months ended June 30, 2025 and 2024.

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

The Company estimates the fair value of its investments in marketable securities by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data, and other observable inputs.

There wereno transfers between Level 1, Level 2 or Level 3 investments during the periods presented.

Note 5 – Other Accrued Expenses

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

Note 6 – Stockholders’ Equity

At-The-Market Offering

In November 2024, the Company entered into a sales agreement under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $75.0 million through "at-the-market" offerings (2024 ATM), pursuant to its shelf registration statement on Form S-3 (File No. 333-270760), which became effective in April 2023. The Company didnot sell any shares of common stock during thethree months ended June 30, 2025. During the six months ended June 30, 2025, the Company sold 161,645 sharesof common stock under the 2024 ATM, forwhich the Company received net proceeds of$1.9 million, after deducting commissions, fees and expenses. The Company didnot sell any shares of common stock during thethree and six months ended June 30, 2024.

Warrants

The following warrants to purchase shares of the Company's common stock were issued and outstanding:

The warrants were classified as a component of permanent stockholders’ equity within additional paid-in-capital and were recorded at the issuance date. The warrants are equity classified because they are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, permit the holders to receive a fixed number of common shares upon exercise, are indexed to the Company’s common stock and meet the equity classification criteria. In addition, such warrants do not provide any guarantee of value or return.

There wereno warrants exercised during thethree and six months ended June 30, 2025 and 2024.

Note 7 – Stock-Based Compensation

The following table summarizes the components of total stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive loss (in thousands):

In June 2025, the Company granted 225,000 performance stock units (PSUs) to its employees, which have a grant date fair value of $3.9 million. The awards vest upon the achievement of a clinical milestone not yet deemed probable, and accordingly, no stock-based compensation expense has been recognized for these PSUs as of June 30, 2025.

As of June 30, 2025, there was $7.5 million of total unrecognized stock-based compensation related to all outstanding equity awards, which is expected to be recognized over a weighted average remaining amortization period of 1.6 years.

The fair value of stock options granted during the periods indicated was estimated using the Black-Scholes option pricing model, based on the following assumptions:

Note 8 - Collaboration Agreement

The following tables present changes in the Company’s contract liabilities and revenue recognized under the Gilead Collaboration Agreement (in thousands):

In October 2023, the Company entered into the Gilead Collaboration Agreement and the Gilead Equity Agreements under which it received total proceeds of$100.0 million. Under the Gilead Collaboration Agreement, Gilead exclusively licensed to the Company its HPI program and NNPI program, while retaining opt-in rights to these programs and has an option to take an exclusive license, on a program-by-program basis, to all of the Company’s other current and future pipeline programs. During the 12-year collaboration term (subject to payment of certain extension fees) and for a specified period thereafter, Gilead may exercise its opt-in rights, on a program-by-program basis, at one oftwo timepoints—completion of a certain Phase 1 study or completion of a certain Phase 2 study for the first product within the program—upon payment of an opt-in fee ranging from $45.0 million to $125.0 million per program depending on the type of program and when the option is exercised.

In December 2024, the Company and Gilead entered into the First Amendment to the Gilead Collaboration Agreement, which restructured the timing of specific options exercisable in the agreement and the fees payable to the Company to support an accelerated development plan for ABI-6250 (6250). To facilitate this development plan, the Company received a non-refundable payment of $10.0 million from Gilead and the opt-in fee payable by Gilead in connection with 6250 was restructured, though it remains in the range of opt-in fees detailed above. The $10.0 million payment received in connection with the First Amendment to the Gilead Collaboration Agreement is creditable towards future collaboration-related payments payable by Gilead.

If Gilead exercises its opt-in right to any current or future program under the collaboration, the Company is eligible to receive up to $330.0 million in potential regulatory and commercial milestones on that program, in addition to royalties ranging from the high single-digits to high teens, depending on the clinical stage of the program at the time of the opt-in. Following Gilead’s exercise of its option for each program, the Company may opt in to cover 40% of the research and development costs in the United States and share 40% of the profits and operating loss in the United States for products within the program in lieu of receiving milestones and royalties for that program in the United States, unless the Company later opts out of the cost/profit share for the program. Prior to Gilead’s potential exercise of its opt-in, the Company will be primarily responsible for all discovery, research and development on its programs and thetwo Gilead-contributed programs. Following Gilead’s opt-in, Gilead will control the further discovery, research, development, and commercialization on any optioned programs. During the term, Gilead will continue to support the collaboration through extension fees of $75.0 million in each of the third, fifth and seventh years of the collaboration.

The Gilead Collaboration Agreement is subject to termination by either party for the other party’s uncured, material breach or insolvency. Subject to certain limitations, the Company and Gilead both have certain termination for convenience rights, upon sufficient prior written notice, with respect to programs that one party in-licenses from the other (subject to Gilead’s option rights), and with respect to Gilead, for programs it has option rights to (subject to certain time limitations with respect to existing Company programs). Gilead also has a right to terminate the collaborative activities under the Gilead Collaboration Agreement at certain specified points during the collaboration term. Other customary termination rights are further provided in the Gilead Collaboration Agreement.

At the commencement of the arrangement, the Company concluded Gilead was a customer and accordingly, the Gilead Collaboration Agreement was within the scope of the revenue from contracts with customers guidance. The Company initially identified a single combined performance obligation for the discovery, research and development services (the R&D Services) consisting of a series of distinct services that are substantially the same and have the same pattern of transfer. The Company concluded the R&D Services were distinct from Gilead's right to obtain an exclusive license to any of the Company's programs as Gilead benefits from the knowledge and expertise gained from the R&D Services and the Company's know-how is not highly specialized in nature. Gilead could perform the R&D Services themselves, particularly considering Gilead contributed its HPI and NNPI programs and Gilead may continue to conduct development activities on programs being developed under the Gilead Collaboration Agreement. None of the options in the contract were deemed to be separate performance obligations as the options did not provide any discounts or other rights which would be considered a material right in the arrangement.

The Company determined the Gilead Collaboration Agreement and Gilead Equity Agreements should be assessed as a single combined transaction because the agreements were negotiated and entered into together with a single commercial objective. The Company accounted for the agreements based on the fair values of the assets and services exchanged. Of the $15.2 million in proceeds received under the Gilead Equity Agreements in October 2023, $5.9 million was determined to be a premium on the purchase of the Company’s common stock and allocated to the single combined performance obligation under the Gilead Collaboration Agreement. The value the Company received from the licenses Gilead contributed were not material within the context of the contract and accordingly, the Company made no adjustments to the transaction price for them at the commencement of the arrangement. In December 2024, Gilead exercised its right under the Gilead Equity Agreements to purchase additional shares of the Company's common stock for aggregate proceeds of $20.1 million, of which $5.2 million was determined to be a premium on the purchase of the Company’s common stock and allocated to the single combined performance obligation under the Gilead Collaboration Agreement.

The Company determined the First Amendment to the Gilead Collaboration Agreement represents a contract modification within the scope of the revenue from contracts with customers guidance. The Company concluded there continues to be a single combined performance obligation consisting of a series of distinct R&D Services, and therefore, the remaining services under the First Amendment to the Gilead Collaboration Agreement are distinct from the R&D Services already provided. Accordingly, the Company accounted for the First Amendment to the Gilead Collaboration Agreement as a termination of the existing contract and the creation of a new contract and is recognizing the revenue prospectively by reassessing the transaction price and allocating it to the remaining R&D Services.

The amended transaction price as a result of the modification and as of June 30, 2025, was determined to be$74.2 million, consisting of the unrecognized portion of the transaction price under the original contract, the premium of $5.2 million on Gilead's purchase of the Company's common stock in December 2024 and $10.0 million received from Gilead pursuant to the First Amendment to the Gilead Collaboration Agreement.

The variable consideration related to the regulatory and commercial milestones has not been included in the transaction price as of June 30, 2025, since Gilead has not opted in to take a license to any of the Company's programs. Any variable consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur pursuant to the Gilead Collaboration Agreement. The Company will reevaluate the transaction price in each reporting period as uncertain events are resolved or other changes in circumstances occur.

The transaction price is reflected as collaboration revenue when realized in the Company’s condensed consolidated statements of operations. The Company recognizes revenue over time using a cost-based input method, based on internal and external labor cost effort to perform the services, over the initial non-cancellable term ofthree years since this method best reflects the transfer of services to Gilead. In applying a cost-based input method of revenue recognition, the Company uses actual costs incurred relative to estimated total costs to fulfill each performance obligation. A cost-based input method of revenue recognition requires the Company to make estimates of costs to complete the performance obligation. The cumulative effect of any revisions to estimated costs to complete the performance obligation and associated variable consideration will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

The Company recognized$9.6 million and$8.5 million of collaboration revenue under the Gilead Collaboration Agreement during the three months ended June 30, 2025 and 2024, respectively. The Company recognized$19.0 million and$14.3 million of collaboration revenue under the Gilead Collaboration Agreement during the six months ended June 30, 2025 and 2024, respectively. The transaction price for remaining collaborative activities was recorded as deferred revenue on the condensed consolidated balance sheet as of June 30, 2025, of which$40.9 million was short-term and$13.0 million was long-term. The reimbursable expenses incurred by the Company during the three months ended June 30, 2025 and 2024 were insignificant. The Company incurred$0.1 million and$0.2 million in reimbursable expenses due to Gilead during the six months ended June 30, 2025 and 2024, respectively.

Note 9 - Segment Reporting

The Company operates as asingle operating segment focusing on developing innovative therapeutics targeting serious viral diseases. The measure of segment profit or loss used by the Company'schief operating decision maker (CODM) to evaluate performance and allocate resources is consolidated net loss as reported in the Company's condensed consolidated statements of operations. This measure is used by the CODM to assess the Company's cash runway and make strategic decisions about resource allocation. The CODM does not use asset measures to evaluate segment performance or make resource allocation decisions.

The following table presents the significant segment expenses and other segment items regularly reviewed by the Company's CODM:

(1)

Includes stock-based compensation expense, see Note 7 - Stock-Based Compensation for further details.