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 herpes simplex virus (HSV) for the treatment of 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

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, its 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. The Company intends to obtain any additional funding it requires through strategic relationships, public or private equity or debt financings, grants or other arrangements. The Company cannot assure such funding will be available on reasonable terms, if at all.

In August 2025, the Company raised aggregate gross proceeds of $175.0 million from the sale of shares of common stock, pre-funded warrants and warrants (see Note 6 - Stockholders' Equity). As of September 30, 2025, the Company held cash, cash equivalents and marketable securities of$232.6 million. Management believes the Company currently has sufficient funds to meet its operating requirements beyond one year from the date these unaudited condensed consolidated financial statements are issued. As a result, the Company concluded the conditions which previously raised substantial doubt about its ability to continue as a going concern have been resolved.

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 nine months ended September 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.

Warrants and Pre-Funded Warrants

The Company determines the accounting classification of warrants it issues as either liability or equity-classified based on an assessment of the warrant’s specific terms. The assessment considers whether the warrants are freestanding financial instruments, whether the warrants meet the definition of a liability and whether the warrants meet all the requirements for equity classification. Equity classified warrants are accounted for using a relative fair value allocation method, with fair values determined at issuance using a Black-Scholes model.

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:

In August 2025, the Company soldpre-funded warrants to purchase up to 1,040,820 shares of common stock (see Note 6 - Stockholders' Equity). The pre-funded warrants are exercisable at $0.001 per share. The shares of common stock into which the pre-funded warrants may be exercised are considered outstanding for the purposes of computing earnings per share because the shares may be issued for little or no consideration, they are fully vested, and are exercisable after the original issuance date.

Note 3 – Related Party

In October 2023, the Company entered into the Option, License and Collaboration Agreement (Gilead Collaboration Agreement), and a Common Stock Purchase Agreement and an Investor Rights Agreement (collectively, the Gilead Equity Agreements) with Gilead Sciences, Inc. (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. 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.

In August 2025, the Company entered into a Securities Purchase Agreement with Gilead for the issuance and sale of 2,295,920 shares of common stock and accompanying Class A and Class B warrants to purchase up to an aggregate of 2,295,920 shares of common stock in a private placement (collectively, the August 2025 Private Placement). This transaction, which generated aggregate gross proceeds of $45.0 million, was executed concurrently with the August 2025 Underwritten Offering. See Note 6 - Stockholders' Equity for additional details.

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

As of September 30, 2025, the Company recorded$0.9 million in accounts receivable from collaboration on the condensed consolidated balance sheet for reimbursable costs incurred under the Gilead Collaboration Agreement.

The Company recognized$10.8 million and$6.8 million of collaboration revenue under the Gilead Collaboration Agreement during the three months ended September 30, 2025 and 2024, respectively. The Company recognized$29.8 million and$21.2 million of collaboration revenue under the Gilead Collaboration Agreement during the nine months ended September 30, 2025 and 2024, respectively. See Note 8 - Collaboration Agreement for additional details.

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 nine months ended September 30, 2025 and 2024. As of September 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 September 30, 2025 and December 31, 2024.

Accrued interest receivable was$1.0 million and$0.4 million as of September 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 nine months ended September 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 September 30, 2025. During the nine months ended September 30, 2025, the Company sold 161,645 shares of common stock under the 2024 ATM, for which 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 nine months ended September 30, 2024.

Underwritten Offering

In August 2025, the Company sold an aggregate of 5,591,840 shares of common stock and pre-funded warrants to purchase up to 1,040,820 shares of common stock, together with accompanying 3,316,330 Class A and 3,316,330 Class B warrants to purchase up to an aggregated total of 6,632,660 shares of common stock in an underwritten offering (the August 2025 Underwritten Offering). The combined price per share of common stock with the accompanying Class A and Class B warrants was $19.60, while the combined price per pre-funded warrant with accompanying Class A and Class B warrants was $19.599. The offering generated aggregate gross proceeds to the Company of $130.0 million. After deducting issuance costs, net proceeds totaled $123.6 million.

Private Placement

In August 2025, the Company entered into the August 2025 Private Placement with Gilead, which involved the issuance and sale of 2,295,920 shares of common stock and accompanying 1,147,960 Class A and 1,147,960 Class B warrants to purchase up to an aggregate of 2,295,920 shares of common stock in a private placement. This transaction was executed concurrently with the August 2025 Underwritten Offering. The combined price per share of common stock with the accompanying Class A and Class B warrants was $19.60, generating aggregate gross proceeds of $45.0 million. After deducting issuance costs, net proceeds totaled $42.8 million. These warrants have the same exercise price and terms as the warrants sold in the August 2025 Underwritten Offering.

Warrants

Each pre-funded warrant sold in the August 2025 Underwritten Offering carries a nominal exercise price of $0.001 per share, is immediately exercisable and does not expire.

Each Class A warrant sold in the August 2025 Underwritten Offering and August 2025 Private Placement has an exercise price of $21.60 per share, is immediately exercisable and will expire on the earlier of (i)August 11, 2030 (five years from the date of issuance) or (ii) the date that is 30 days after the public announcement that the Company has completed enrollment (of at least 200 patients total) for its Phase 2 clinical study evaluating ABI-5366 versus valacyclovir.

Each Class B warrant sold in the August 2025 Underwritten Offering and August 2025 Private Placement has an exercise price of $21.60 per share, will become exercisable on or after November 15, 2026 and expire on December 31, 2026. However, Class B warrants will automatically terminate and become non-exercisable if the Company publicly announces, prior to November 15, 2026, it has received at least $75.0 million in aggregate non-dilutive capital in connection with a collaboration agreement.

Neither party may exercise any portion of the warrants and pre-funded warrants to the extent it would beneficially own more than the limits defined in the respective agreements. The exercise price and number of shares of common stock issuable upon the exercise of the warrants and pre-funded warrants are subject to adjustment in the event of any stock dividends and distributions, stock splits, stock combinations or stock reclassifications, as described in the respective agreements.

The Company valued the pre-funded warrants and warrants at issuance and allocated net proceeds from their sale based on their relative fair values. Of the total proceeds, $16.4 million was allocated to pre-funded warrants, $24.6 million to Class A warrants and $1.2 million to Class B warrants. These amounts were classified as a component of permanent stockholders’ equity within additional paid-in-capital.

During the three and nine months ended September 30, 2025 and 2024,255,103 Class A warrants were exercised.

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

(1)

These Class A warrants will expire 30 days following the public announcement that the Company completed enrollment (of at least 200 patients total) in the ABI-5366 Phase 2 clinical study if prior to August 11, 2030.

(2)

These Class B warrants will be cancelled if the Company publicly announces the receipt of at least $75.0 million in the aggregate of non-dilutive capital in connection with a collaboration agreement prior to November 15, 2026.

The Company’s warrants and pre-funded warrants are classified as a component of permanent stockholders’ equity within additional paid-in capital and were recorded at their respective issuance date using a relative fair value allocation method. The warrants and pre-funded warrants are equity classified because they are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, 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 and pre-funded warrants do not provide any guarantee of value or return.

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, which was deemed probable of being met as of September 30, 2025. The Company recognized stock-based compensation expense of$0.9 million for these PSUs during the three and nine months ended September 30, 2025.

As of September 30, 2025, there was $5.9 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 1.5 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.

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.

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 anniversaries 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 were substantially the same and had 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.

In July 2025, the Company determined the letter agreement represents a contract modification within the scope of the revenue from contracts with customers guidance upon its execution. The Company concluded no new distinct performance obligations were introduced in the letter agreement and 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 modified Gilead Collaboration Agreement are distinct from the R&D Services already provided. Accordingly, the Company accounted for the letter 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 September 30, 2025, was determined to be$54.1 million, consisting of the unrecognized portion of the transaction price under the contract immediately before the modification and $1.1 million of variable consideration for reimbursable costs expected to be incurred pursuant to the letter agreement.

The variable consideration related to the regulatory and commercial milestones has not been included in the transaction price as of September 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$10.8 million and$6.8 million of collaboration revenue under the Gilead Collaboration Agreement during the three months ended September 30, 2025 and 2024, respectively. The Company recognized$29.8 million and$21.2 million of collaboration revenue under the Gilead Collaboration Agreement during the nine months ended September 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 September 30, 2025, of which$42.4 million was short-term and$1.7 million was long-term. As of September 30, 2025, the Company recorded accounts receivable from collaboration of$0.9 million for reimbursable costs incurred under the Gilead Collaboration Agreement.

The reimbursable expenses incurred by the Company during the three months ended September 30, 2025 and 2024 were insignificant. The Company incurred$0.1 million and$0.3 million in reimbursable expenses due to Gilead during the nine months ended September 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)

In October 2025, the Company transitioned its discovery and development from ABI-7423 to its parent molecule, ABI-7272, which is currently in regulatory filing-enabling preclinical studies.

(2)

Reflects net amounts refundable to the Company after the final reconciliation of clinical trial costs received in October 2024 under the Clinical Trial Collaboration Agreement with Arbutus Biopharma Corporation, which was terminated in February 2023.

(3)

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