Assembly Biosciences, Inc. (GILD) Earnings Call Transcript & Summary

Good morning. I'm Jason Okazaki, President and CEO of Assembly Bio, and I'm thrilled to welcome you to our webcast to discuss our announcement today of a long-term partnership with Gilead to advance and accelerate the discovery and development of novel antiviral therapies with the potential to address significant unmet medical needs in herpes viruses, hepatitis and beyond. I'm here with Dr. Bill Delaney, our Chief Scientific Officer. And together, we'd like to provide more color and answer questions on what we believe to be a monumental alliance for Assembly Bio and a collaboration that will allow us to help patients globally with a tremendous partner. But first, a few housekeeping items. To submit a question to the queue, you may enter it into the Q&A chat box below the video player at any time. [Operator Instructions] Before we begin, I'd also like to remind you that we will be making forward-looking statements, so please refer to our SEC filings for a full list of disclosures. Also, today's press release is available on the Assembly Bio website, and this event will be available there for replay shortly after the live webcast has concluded. The slide presentation will also be available for download. As you know, Gilead is a pioneer in antiviral medicines with an incredible track record in developing transformative medicines, cures and access strategies. Their innovative medicines have transformed the lives of those living with viral hepatitis, including a cure for hepatitis C virus while continuing to develop new treatments for chronic hepatitis B and D. In addition, they have been at the forefront of strategic partnering transactions, which has further expanded their pipeline. Meanwhile, over the past 3 years, Assembly Bio has leveraged its deep R&D expertise to discover and develop a portfolio of promising antiviral compounds designed to address unmet needs of herpes viruses as well as hepatitis B and D. The quality and speed of our discovery and development efforts over such a short period of time is a testament to the talented team we have working here with us here at Assembly. With Gilead's shared recognition of the breadth and depth of our portfolio and research engine, the collaboration between our organizations was a natural fit. This long-term collaboration with Gilead allows each of us to leverage the strength of our respective organizations with the singular goal of bringing differentiated antiviral treatments to patients. Together, our R&D team ensure trust and vision, which is essential as we work to bring innovative candidates forward that could change the treatment landscape for herpes virus, hepatitis B and D and beyond. Assembly Bio brings to the collaboration, our scientific acumen, advanced virology research capabilities and an exciting clinical and preclinical pipeline. Likewise, Gilead's deep expertise and success as a global development and commercial organization makes them an ideal partner for realizing the value of these programs and ensuring they reach patients worldwide. On top of this, Gilead is also contributing 2 of its own herpes virus programs through the collaboration, further expanding our pipeline. Importantly, this alliance allows Assembly Bio to bring forward a broader portfolio of herpes virus programs while maintaining our scientific independence and flexibility. Speaking of that portfolio, I'd like to have Bill walk through the novel programs included in this partnership with the potential for more to come in the future under this long-term collaboration.

Thank you, Jason. I'll start by reiterating that this collaboration stems from a shared vision of transforming care for patients living with chronic viral infections around the world. Together, Assembly and Gilead now have an opportunity to advance a significantly expanded portfolio of promising programs that have the potential to bring new treatment options to diseases that have lacked innovation for many years. Our initial areas of focus in hepatitis B and D as well as in recurrent genital herpes, which is caused by HSV-1 and 2 and transplant-associated herpes viruses are natural areas of collaboration for the strengths of our 2 organizations. In the case of recurrent genital herpes, both companies believe strongly that there is huge room for improvement in the efficacy of the drugs that were approved decades ago, and we're confident that we can make those advances through this collaboration. With respect to hepatitis delta, Gilead's Bulevirtide remains the only approved treatment for chronic hepatitis B infection being approved in the EU and their expertise in this important patient population will be invaluable as we advance ABI-6250 as the potential first oral treatment to be approved for chronic HDV infection. Our 2 companies have a shared scientific mission that goes deep into our respective organizations. Assembly Bio was founded on the goal of discovering and developing a cure for the 300 million patients living with HBV worldwide who are at risk of severe liver disease, including hepatocellular carcinoma. Over the past 3 years, we've continued this mission, while also leveraging our scientific expertise to discover and nominate a number of new compounds designed to address other significant viruses. Gilead has decades of success in developing and marketing antiviral therapies in HPV, HCV and HIV that have improved the lives of millions of patients globally. This collaboration encompasses the program shown here on this slide. You'll notice that in addition to our existing pipeline, Gilead will contribute 2 herpes virus programs to Assembly Bio as part of the collaboration, retaining an opt-in right on these programs under the same terms. With this expanded pipeline, we now anticipate having 4 development candidates in the clinic by the end of next year. I'll briefly highlight these programs. Starting with the herpes virus portfolio. Our existing portfolio includes ABI-5366, our long-acting helicase-primase inhibitor targeting treatment of high recurrent genital herpes, and this program is expected to be in the clinic in the first half of 2024. It also includes our pan-herpes non-nucleoside polymerase inhibitor, which is in lead optimization, and it's aimed at transplant-associated herpes viruses. Now each of these target indications will be strengthened and expanded by the contribution of 2 Gilead programs. Gilead's HSV development candidate, which we aim to bring into the clinic in the second half of 2024 and Gilead's transplant-associated herpes virus program, which is also in lead optimization. Importantly, both of these herpes virus programs will now benefit from the shared expertise and efforts of 2 world-class antiviral research organizations. Moving to our hepatitis B and D portfolio. It includes our next-generation capsid assembly modulator, ABI-4334, which has completed Phase Ia development and can quickly move into Phase Ib. It also includes ABI-6250, our recently announced HDV viral entry inhibitor candidate that we have nominated for development and expect to enter the clinic by the end of 2024. And finally, our small molecule interferon alpha receptor agonist program, which is currently in lead optimization. Assembly Bio will be primarily responsible for discovery and development efforts in these collaborative programs prior to Gilead's potential opt-in points following certain Phase I, typically Phase Ib or Phase II studies. Of course, also during this period, we'll have regular joint committee meetings with Gilead and leverage their expertise to help us drive the programs forward, and I really look forward to the scientific interaction. Following their opt-in, Gilead will control the development and commercialization on the option programs. I'll now turn it back over to Jason to review more details on the terms of the partnership.

Thanks, Bill. As we announced in the joint press release earlier today under the terms of the agreement, Assembly Bio will receive $100 million, consisting of an $84.8 million upfront payment and a $15.2 million equity investment from Gilead. Gilead's initial equity investment at a premium represents 19.9% of the outstanding voting stock of Assembly Bio as of the date of closing. In addition, subject to certain conditions, Gilead has agreed to purchase up to 29.9% of Assembly Bio's outstanding voting stock at a premium. We are also eligible to receive potential opt-in milestone and collaboration extension payments for existing clinical and pre-clinical programs in HBV, hepatitis delta and herpes viruses as well as any future programs we discover and develop, but more on that in a moment. During the 12-year collaboration, Gilead may opt in to obtain exclusive rights for each of Assembly Bio's current and future programs, including 2 pre-clinical programs targeting HSV and transplant-associated herpes virus that Gilead is licensing to Assembly Bio. This option we triggered upon payment of an opt-in fee of at least $45 million per program either at the end of Phase I or Phase II. For any program that Gilead opts into under the collaboration, Assembly Bio is eligible to receive up to $330 million per program in potential regulatory and commercial milestones in addition to royalties ranging from the high single digits to the high teens depending on the clinical stage of program at the time of opt-in. Assembly Bio will also be eligible to receive 3 separate $75 million collaboration extension payments at the third, fifth and seventh anniversary of a collaboration to help fund future research and development as we build upon our promising pipeline of antiviral drug candidates and explore new targets. Following Gilead's exercise of its option for an Assembly Bio program, Assembly will have the right to opt in to share profits and costs in the United States on a 60% Gilead, 40% Assembly Bio split in lieu of royalties. For future new programs, Assembly Bio will also have the option to co-promote those products in the United States. As we think about these terms in our totality, this collaboration provides us with an ideal partner for the late-stage development and commercialization of these anti-viral programs, and it also preserves our ability to develop into an independent, fully integrated biopharma company. With the profit and cost share and co-promotion rights described above, we keep the opportunity to participate financially and operationally in programs that Gilead opts into beyond the royalty stream. And if Gilead does not opt into a program, we retain the right to further develop or repartner that program. We view this collaboration as a win-win for both Assembly Bio and Gilead and one that will provide the organizations with a fantastic opportunity to provide life-changing therapeutics to patients. Not only does this collaboration provide important financial resources to fund our pipeline, but it also provides an ideal partner with a proven track record that will only help us in our path to accelerate development and commercialization of our strong portfolio of novel compounds. Beyond the pipeline program terms, the collaboration also provides for future equity investments by Gilead into Assembly Bio. Subject to assembly stockholder approval, Gilead has a right to purchase additional shares and has agreed to purchase these shares at Assembly's election to reach a holding of 29.9% of the outstanding voting stock of assembly bio at a premium to the 30-day volume weighted average price at the time of purchase. After reaching 29.9%, Gilead, at its option may increase its ownership to 35% through open market purchases or direct purchases from Assembly at market price. We believe the significant equity stake further supports the continued alignment of vision and interest between the 2 companies in the success of this collaboration and these programs. Together with its equity stake, Gilead will also have the right to appoint 2 individuals to serve as directors or observers on Assembly Bio's Board of Directors. We believe this participation will further benefit assembly through the experience and expertise that we provided by these Gilead participants on our Board. Our collective teams are enthusiastic about beginning this partnership. And with our combined resources, hope to advance these promising programs as rapidly as possible. We nominated 2 new development candidates this year, 5366 and 6250, and we'll be working toward a number of important inflection points in 2024. We plan to further provide updates in the future on these inflection points on what we anticipate for the combined portfolio as we begin to implement this collaboration. Finally, with financial resources provided through this transaction, we currently project our cash run rate to extend into the second half of 2025, and we'll further refine this in future quarterly updates. With that, we'd like to open the Q&A session. I see a number of questions that have already been submitted by participants. [Operator Instructions]Okay. Our first question comes from Dennis Ding at Jefferies. The question is when do you expect proof-of-concept data for HSV, what do you hope to see there? So, Bill, I'll let you kick that one off.

Yes, Jason, so we're on track for a regulatory filing and initiating our clinical studies on 5366 in the first half of next year. So, obviously, that's a Phase Ia study. And the key data that this study will show us is the half-life of the compound, which is extremely important as a compound, we're targeting for long-acting and we'll be looking initially at oral dosing. So, getting the PK on that compound in healthy volunteers is extremely important. And obviously, the safety data is critical as well. So, I think we'll look towards having interim data reads on this study in the coming year, and we'll be moving into Phase Ib as quickly as possible after we collect the PK data. And the Phase Ib study is where we'll have proof of concept in HSV patients. So, we'll guide towards when we have data to provide later.

Thanks, Bill. Next question is from Salim Syed at Mizuho. So, given you have 4 assets in the clinic, by year-end 2024, what is the strategic direction of the company, i.e., how are you prioritizing the various assets, which do you consider as lead and also your highest [ probability ] success assets? Thanks, Salim, great question. So, I'll start with the strategy. So, the strategy doesn't change, right? I think the benefit of this collaboration, obviously -- it provides a strategic partner that's fully aligned with us, raise financial resources to accomplish our goals, and it actually bolsters our collective pipeline with the addition of Gilead's HSV and pan-herpes assets. So, the plan remains unchanged for what we projected, which is get 5366 into the clinic by beginning of next -- first half of next year and then have 3 other compounds in the clinic by end of the year. Those compounds we'd expect to be right now, the delta entry inhibitor, like we've talked about and just nominated. It would be Gilead's HSV-2 compound. And then the last would be our core inhibitor, which we'll be reactivating, that's 4334, and we previously mentioned we were searching for a partner for that. So, we're really excited to progress all those 4 assets. As far as proof of concept, I think we've talked about this too. One of the reasons we went into herpes viruses and delta is, there is a shorter path to proof of concept, right? And that we mean we can get to a proof of concept, we think, by Phase Ib. So, the fact that we have such an accelerated pathway to get into clinic on those assets is really what excites us. And to your question, would lead us to the first proof of concept. Bill, anything you want to add.

No, I think that sums it up well, Jason. We're excited to move both the herpes programs, both our program and Gilead's program forward, and that's a large patient population where we know we can get proof of concept in Phase Ib. And likewise, for the delta program, we can get an early proof of concept in Phase Ib, and we're excited to renew the effort on 4334, which is an extremely potent compound with a great safety profile and PK profile in Phase Ia. So, they're all important, and we're excited about moving this forward.