asmb-def14a_20210520.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

 

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

 

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a‑6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to § 240.14a‑12

Assembly Biosciences, Inc.

(Name of Registrant as Specified In Its Charter)

 

 

Payment of Filing Fee (Check the appropriate box)

 

No fee required.

Fee computed on table below per Exchange Act Rules 14a‑6(i)(4) and 0‑11.

 

1.

Title of each class of securities to which transaction applies:

 

 

 

 

 

 

 

2.

Aggregate number of securities to which transaction applies:

 

 

 

 

 

 

 

3.

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0‑11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

 

 

 

4.

Proposed maximum aggregate value of transaction:

 

 

 

 

 

 

 

5.

Total fee paid:

 

 

 

 

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0‑11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

 

 

1.

Amount Previously Paid:

 

 

 

 

 

 

 

2.

Form, Schedule or Registration Statement No.:

 

 

 

 

 

 

 

3.

Filing Party:

 

 

 

 

 

 

 

4.

Date Filed:

 

 

 

 

 

 

 


 

 

ASSEMBLY BIOSCIENCES, INC.
331 Oyster Point Blvd., Fourth Floor
South San Francisco, California 94080

NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS
To Be Held Thursday, May 20, 2021

April 7, 2021

Dear Stockholders:

You are cordially invited to attend the 2021 Annual Meeting of Stockholders (the Annual Meeting) of Assembly Biosciences, Inc., a Delaware corporation (we, us, Assembly or the Company). The Annual Meeting will be held on Thursday, May 20, 2021 at 8:00 a.m. Pacific Daylight Time (PDT) solely by remote communication (i.e., a virtual-only stockholder meeting) at www.virtualshareholdermeeting.com/ASMB2021 to protect the safety, health and well-being of our stockholders, directors, employees and the public during the ongoing COVID-19 pandemic. The meeting will be held for the following purposes:

 

1.

To elect the eight nominees named in the attached proxy statement to our Board of Directors (the Board);

 

2.

To approve, on a non-binding advisory basis, our named executive officers’ compensation, as disclosed in the proxy statement accompanying this notice;

 

3.

To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021;

 

4.

To approve an amendment to the Assembly Biosciences, Inc. 2018 Stock Incentive Plan to increase the number of shares reserved for issuance thereunder by 2,000,000 shares;

 

5.

To amend and restate the 2018 Employee Stock Purchase Plan to increase the number of shares reserved for issuance thereunder by 900,000 shares and increase the maximum number of shares purchasable under the plan to 2,500 per offering period; and

 

6.

To vote on such other matters that may properly come before the meeting and any adjournment or postponement thereof.

These matters are more fully described in the proxy statement accompanying this notice.

Our Board of Directors has fixed the close of business on March 23, 2021 as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof. See the attached proxy statement for information on how to attend the virtual Annual Meeting and vote during the meeting.

To ensure your representation at the Annual Meeting, you are requested to submit your vote as instructed in the Notice of Internet Availability of Proxy Materials that will be sent to you. You may also request a paper proxy card at any time on or before May 6, 2021 to submit your vote by mail. If you attend and vote at the Annual Meeting your proxy will not be used.


 


 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held solely by remote communication at www.virtualshareholdermeeting.com/ASMB2021 on Thursday, May 20, 2021
at 8:00 a.m. PDT.

The proxy statement and the Annual Report for the fiscal year ended December 31, 2020
are available at:  www.proxyvote.com.

We hope that you will attend the virtual Annual Meeting, and we very much appreciate your continuing interest in our Company.

By Order of the Board of Directors,

 

 

John G. McHutchison, A.O., M.D.
Chief Executive Officer and President

 

You are cordially invited to attend the Annual Meeting by remote communication. Whether or not you expect to attend the Annual Meeting, please vote over the Internet using your 16-digit control number as instructed in your Notice of Internet Availability of Proxy Materials or proxy card or vote by mail by requesting a printed copy of the proxy card. Even if you have voted by proxy, you may still vote at the Annual Meeting if you attend by remote communication. Please note, however, that if you hold your shares through a broker or nominee and you wish to vote at the Annual Meeting, you must obtain your control number from your broker or nominee to vote.

 

 


 

 

ASSEMBLY BIOSCIENCES, INC.
331 Oyster Point Blvd., Fourth Floor
South San Francisco, California 94080

PROXY STATEMENT
FOR THE 2021 ANNUAL MEETING OF STOCKHOLDERS

MAY 20, 2021

INFORMATION CONCERNING SOLICITATION AND VOTING

The Board of Directors (the Board) of Assembly Biosciences, Inc., a Delaware corporation (we, us, Assembly or the Company), is soliciting your proxy to vote at the 2021 Annual Meeting of Stockholders (the Annual Meeting) to be held on Thursday, May 20, 2021 at 8:00 a.m. Pacific Daylight Time (PDT) solely by remote communication (i.e., a virtual-only stockholder meeting) at www.virtualshareholdermeeting.com/ASMB2021 to protect the safety, health and well-being of our stockholders, directors, employees and the public during the ongoing COVID-19 pandemic. Any adjournments or postponements of the meeting also will be held by remote communication at the same location.

You are invited to attend the Annual Meeting to vote on the proposals described in this proxy statement. However, you do not need to attend the meeting to vote your shares. Instead, you may follow the instructions in the Notice of Internet Availability of Proxy Materials (the Proxy Availability Notice) described below to submit your proxy through the Internet, or you may vote by mail by using the proxy card provided or requesting a printed copy of the proxy card.

We sent the Proxy Availability Notice on or about April 7, 2021 to our stockholders of record and beneficial owners as of March 23, 2021, the record date for the Annual Meeting. The proxy materials, including this proxy statement, proxy card or voting instruction card and our Annual Report for the fiscal year ended December 31, 2020 are being distributed and made available on or about April 7, 2021. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the Annual Meeting. Please read it carefully.

This proxy statement and the Proxy Availability Notice contain instructions for accessing and reviewing our proxy materials on the Internet and for voting by proxy over the Internet, by phone or by mail. The Proxy Availability Notice and the proxy card also will provide instructions on how you can elect to receive future proxy materials electronically or in printed form by mail. If you choose to receive future proxy materials electronically, you will receive an email next year with instructions containing a link to the proxy materials and a link to the proxy voting site. Your election to receive proxy materials electronically or in printed form by mail will remain in effect until you terminate such election. You will need to obtain your own Internet access if you choose to access the proxy materials and/or vote over the Internet. If you prefer to receive printed copies of our proxy materials, the Proxy Availability Notice contains instructions on how to request the materials by mail. For stockholders who have elected to receive proxy materials electronically, you will not receive printed copies of the proxy materials unless you request them. If you elect to receive the materials by mail, you may also vote by proxy on the proxy card or voter instruction card that you will receive in response to your request.

Choosing to receive future proxy materials electronically will allow us to provide you with the information you need more rapidly, will save us the cost of printing and mailing documents to you and will conserve natural resources.

 

 


 

TABLE OF CONTENTS

 

 

 

Page

Proxy Statement Summary

 

1

Questions and Answers About These Proxy Materials and Voting

 

4

Cautionary Statement Regarding Forward‑Looking Statements

 

10

Proposal No. 1: Election of Directors

 

11

General

 

11

Nominees for Director

 

11

Required Vote

 

17

Recommendation of the Board of Directors

 

17

The Board of Directors and Corporate Governance

 

18

Meetings of the Board

 

18

Board Composition

 

18

Independence of Directors

 

19

Board Leadership Structure

 

20

Risk Oversight

 

20

Board Committees

 

20

Audit Committee

 

21

Compensation Committee

 

21

Nominating and Governance Committee

 

23

Science and Technology Committee

 

23

Code of Ethics and Code of Conduct

 

24

Director Compensation

 

24

Stockholder Communications

 

25

Stockholder Engagement

 

26

Environmental, Social and Governance Focus

 

26

Proposal No. 2: Advisory Vote to Approve Our Named Executive Officers’ Compensation

 

27

General

 

27

Required Vote

 

28

Recommendation of the Board of Directors

 

28

Matters Relating to Our Independent Registered Public Accounting Firm

 

29

Pre-Approval Policies and Procedures

 

29

Fees and Services

 

29

Report of the Audit Committee of the Board of Directors

 

29

Proposal No. 3: Ratification of the Selection of the Independent Registered Public Accounting Firm

 

31

General

 

31

Required Vote

 

31

Recommendation of the Board of Directors

 

31

Proposal No. 4: Approval of an Amendment to the Assembly Biosciences, Inc. 2018 Stock Incentive Plan

 

32

Background

 

32

Purpose

 

32

Rationale

 

33

Material Terms of the Amended Plan

 

35

Eligibility

 

40

New Plan Benefits

 

40

Equity Plans

 

41

Required Vote

 

42

Recommendation of the Board of Directors

 

42

Proposal No. 5: Approval of the Assembly Biosciences, Inc. Amended and Restated 2018 Employee Stock Purchase Plan

 

43

Background

 

43

Purpose

 

43

i


 

 

Material Terms of the Amended ESPP

 

43

New Plan Benefits

 

44

Summary of Federal Income Tax Consequences

 

44

Vote Required

 

45

Recommendation of the Board of Directors

 

45

Executive Officers

 

46

Executive Compensation

 

47

Compensation Discussion and Analysis

 

47

Executive Summary

 

47

How We Determine Executive Compensation

 

50

Elements of Executive Compensation

 

53

Other Executive Compensation Policies

 

59

Compensation Committee Report

 

60

Summary Compensation Table

 

60

Grants of Plan-Based Awards

 

61

Outstanding Equity Awards at December 31, 2020

 

63

Option Exercises and Stock Vested

 

64

Pension Benefits

 

64

Nonqualified Deferred Compensation

 

64

Employment Arrangements

 

64

Potential Payments Upon Employment Termination or Change of Control

 

67

CEO Pay Ratio

 

68

Compensation Committee Interlocks and Insider Participation

 

69

Certain Relationships and Related Party Transactions

 

70

Security Ownership of Certain Beneficial Owners and Management

 

71

Deadline for Stockholder Proposals for the 2022 Annual Meeting of Stockholders

 

73

Delivery of Documents to Stockholders Sharing an Address

 

73

Other Matters

 

73

Appendix A: Proposed Amendment No. 4 to Assembly Biosciences, Inc. 2018 Stock Incentive Plan

 

A-1

Appendix B: Assembly Biosciences, Inc. 2018 Stock Incentive Plan, Incorporating Proposed Amendment

 

B-1

Appendix C: Proposed Assembly Biosciences, Inc. Amended and Restated 2018 Employee Stock Purchase Plan

 

C-1

 

 

 

ii


 

PROXY STATEMENT SUMMARY

This proxy summary highlights information that may be contained elsewhere in this proxy statement. This summary does not contain all information that you should consider, and you should read the entire proxy statement carefully before voting. Page references are supplied to help you find further information in this proxy statement.

Proxy Voting Matters

 

 

 

Our Board’s Recommendation

Proposal No. 1 – Election of Directors (page 11)

The Board and its Nominating and Governance Committee believe that the eight director nominees possess the necessary qualifications to provide effective oversight of our business.

 

FOR each Director Nominee

Proposal No. 2 – Executive Compensation (page 27)

The Board recommends that stockholders approve, on a non-binding advisory basis, our named executive officers’ compensation.

 

FOR

Proposal No. 3 – Ratification of the Selection of Ernst & Young LLP as Independent Auditors (page 31)

The Board and its Audit Committee believe that the continued retention of Ernst & Young LLP to serve as the Independent Auditors for the fiscal year ending December 31, 2021 is in the best interests of the Company and its stockholders. As a matter of good corporate governance, stockholders are being asked to ratify the Audit Committee’s selection of the Independent Auditors.

 

FOR

Proposal No. 4 – Amendment to 2018 Stock Incentive Plan to Increase Number of Reserved Shares by 2,000,000 Shares (page 32)

The Board believes that it is in the best interest of the Company to increase the number of shares reserved under our 2018 Stock Incentive Plan by 2,000,000 shares.

 

FOR

Proposal No. 5 – Amendment and Restatement of the 2018 Employee Stock Purchase Plan to Increase Number of Reserved Shares by 900,000 shares and Increase the Maximum Number of Shares Purchasable Under the Plan to 2,500 Per Offering (page 43)

The Board believes that it is in the best interest of the Company to amend and restate the 2018 Employee Stock Purchase Plan.

 

FOR


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Governance Highlights

We are committed to good corporate governance, which promotes the long-term interests of stockholders, strengthens Board and management accountability and helps build public trust in the Company. The Board of Directors and Corporate Governance section beginning on page 18 describes our governance framework, which includes the following highlights:

 

Board Independence

 

     Seven of our eight Board nominees are independent.

 

 

     Dr. McHutchison, our Chief Executive Officer and President, is the only management nominee to the Board.

 

 

     The independent directors hold regular executive sessions, and any independent director may raise matters for discussion at these executive sessions.

 

 

 

Independent Chair

 

     The Chair of the Board is independent.

 

 

 

Board Composition

 

     The Board fixed the number of directors at eight prior to the Annual Meeting.

     We regularly assess our Board performance and can adjust the number of directors according to our needs.

     Our directors possess a diverse mix of skills, experience and backgrounds.

 

 

 

Accountability to Stockholders

 

     Proxy Access. Our Bylaws provide proxy access, allowing a stockholder or group of up to 20 stockholders continuously owning an aggregate of 3% or more of our outstanding common stock for at least three years to nominate and include in our proxy materials director nominees constituting up to the greater of 20% of the number of directors then in office or two nominees, provided the stockholders and nominees otherwise satisfy the requirements of our Bylaws.

     Stockholders’ Right to Call Special Meetings. Our Fifth Amended and Restated Certificate of Incorporation (the Certificate of Incorporation) and Bylaws allow stockholders who hold in the aggregate at least 25% of our outstanding common stock to request special stockholders’ meetings, provided they otherwise satisfy the requirements of our Bylaws.

     Annual Election of Directors. Our Certificate of Incorporation provides for the annual election of all directors.

     Majority Voting Standard in Uncontested Director Elections. Directors must receive more “for” votes than “against” votes to be elected in uncontested director elections.

     No Poison Pill. We do not have a poison pill.

 

 

 

Independent Board Committees

 

     The Audit, Compensation and Nominating and Governance committees are composed entirely of independent directors, and each of the standing committees has a charter that is reviewed reassessed annually and posted on our website.

     Our Board and each committee may engage independent advisors at its sole discretion.

 

 

 

Risk Oversight

 

     Our full Board is responsible for risk oversight and has designated committees to have particular oversight of certain key risks. Our Board oversees management as it fulfills its responsibilities for the assessment and mitigation of risks and for taking appropriate risk.

 

 

 

Board/Committee Self-evaluation

 

     We have an annual self-evaluation process for the Board.

     We have an annual self-evaluation process for each standing committee of the Board.

 

 

 

Ethics/Corporate Responsibility

 

     All of our directors and executive officers are required to abide by our Code of Conduct.

     Our Board has adopted Corporate Governance Guidelines to assist in the exercise of its responsibilities.

2


 

Executive Compensation

Our Compensation Philosophy is “Provide Competitive Overall Compensation That Attracts, Retains and Motivates Superior Performers.” We believe that executive compensation should be designed to closely align the interests of our named executive officers (NEOs) and stockholders and to attract, motivate, reward and retain superior management talent. Our executive compensation is comprised of the following components:

 

 

 

Plan/Compensation

 

Purpose

 

Relevant Performance Metric

 

Fixed or Variable?

 

 

 

 

 

 

 

 

 

Annual/Short Term Incentives

 

Base Salary

 

Provide competitive compensation for individual performance and level of responsibility associated with position

 

N/A

 

Fixed

 

 

 

 

 

 

 

 

 

Annual Performance-based Cash Bonus

 

Provide a short-term annual performance-based cash incentive opportunity through a bonus plan that is based upon achievement of established performance goals

 

Both Company-wide and individual goals

 

Variable

 

 

 

 

 

 

 

 

 

Long-Term Incentive

 

Long-term Equity Incentive Awards

 

Provide long-term incentive opportunities in the form of equity awards in order to retain those individuals with the leadership abilities necessary for increasing long-term stockholder value while aligning their interests with our stockholders’ interests

 

Equity awards vest over a three- or four-year period and incentivize performance, because stock options have value only to the extent the market value of our common stock increases and restricted stock units only have value if the executive continues to provide services through the vesting period

 

Variable

 

3


 

Questions and Answers About These Proxy Materials and Voting

Why did I receive the Notice of Internet Availability of Proxy Materials instead of a full set of proxy materials?

In accordance with the rules and regulations adopted by the U.S. Securities and Exchange Commission (SEC), we have elected to provide access to our proxy materials over the Internet instead of mailing a printed copy of our proxy materials to each stockholder. Accordingly, we sent a Proxy Availability Notice on or about April 7, 2021 to most stockholders of record entitled to vote at the Annual Meeting. Stockholders may access the proxy materials on a website referred to in the Proxy Availability Notice commencing on or about April 7, 2021 or may request a printed set of the proxy materials be sent to them by following the instructions in the Proxy Availability Notice.

Why did I receive a full set of proxy materials and the Proxy Availability Notice?

We are providing paper copies of the proxy materials to stockholders who have previously requested to receive them in paper form or for whom an election to receive proxy materials electronically by email or over the Internet are not on file. If you would like to reduce the environmental impact and the costs incurred by us in mailing proxy materials, you may elect to receive all future proxy materials electronically by email or over the Internet. To sign up for electronic delivery, please follow the instructions provided with your proxy materials and on your proxy card or voting instruction card for using the Internet and, when prompted, indicate that you agree to receive or access future stockholder communications electronically. Alternatively, you can go to www.proxyvote.com and enroll for online delivery of Annual Meeting and proxy materials.

What does it mean if I receive more than one Proxy Availability Notice?

If you receive more than one Proxy Availability Notice, your shares may be registered in more than one name or in different accounts. Please follow the voting instructions on each Proxy Availability Notice to ensure that all of your shares are voted. All of your shares may be voted at www.proxyvote.com regardless of which account they are registered or held in.

How do I attend the Annual Meeting?

You will not be able to attend the Annual Meeting in person at a physical location because it is being held in a virtual only format due to the COVID-19 pandemic. However, the Annual Meeting will provide stockholders of record as of the close of business on March 23, 2021, the ability to participate, vote their shares and ask questions during the meeting by audio webcast. To be admitted to the virtual-only Annual Meeting, you should visit www.virtualshareholdermeeting.com/ASMB2021 and enter the 16-digit control number found on your Proxy Availability Notice.

Additional details on attending and participating in the virtual-only Annual Meeting:

 

Access the meeting platform beginning at 7:45 a.m. PDT on May 20, 2021.

 

Vote during the Annual Meeting by following the instructions available on the meeting website during the meeting.

 

Submit a question during the meeting by visiting www.virtualshareholder.com/ASMB2021, entering your 16-digit control number and submitting the question in the “Ask a Question” field.

 

If you encounter any difficulties while accessing the virtual-only meeting, contact the technical support number that will be posted on the Virtual Shareholder Meeting log-in page. Technical support will be available beginning at 7:30 a.m. PDT on May 20, 2021 and will remain available until the Annual Meeting has ended.

 

A list of stockholders entitled to vote will be available for inspection by stockholders of record for any legally valid purpose related to the Annual Meeting during the Annual Meeting by following the link provided when you log in to www.virtualshareholdermeeting.com/ASMB2021 and for a period of ten days prior to the Annual Meeting by sending a request to corpsecretary@assemblybio.com.

4


 

Whether or not you attend the Annual Meeting, we urge you to vote and submit your proxy in advance of the meeting by one of the methods described in this proxy statement.

Who can vote at the Annual Meeting?

Only stockholders of record at the close of business on March 23, 2021 will be entitled to vote at the Annual Meeting. On the record date, there were 40,059,122 shares of common stock outstanding and entitled to vote.

Stockholder of Record:  Shares Registered in Your Name

If on March 23, 2021, your shares were registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, then you are a stockholder of record. As a stockholder of record, you may vote while attending the meeting or vote by proxy. Whether or not you plan to attend the meeting, we urge you to fill out and return your proxy card or vote by proxy over the telephone or Internet as instructed below to ensure your vote is counted.

Beneficial Owner:  Shares Registered in the Name of a Broker or Bank

If on March 23, 2021, your shares were held not in your name, but rather in an account at a broker, bank or other similar organization, then you are the beneficial owner of shares held in “street name” and the Proxy Availability Notice is being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account and should follow the instructions provided by your broker, bank or other agent to vote your shares. You are also invited to attend the Annual Meeting.

What am I voting on?

There are five matters scheduled for a vote:

 

1.

Election of eight directors;

 

2.

Approval, on a non-binding advisory basis, of our named executive officers’ compensation, as disclosed in this proxy statement in accordance with SEC rules;

 

3.

Ratification of the selection by the Audit Committee of the Board of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021;

 

4.

Approval of an amendment to the Assembly Biosciences, Inc. 2018 Stock Incentive Plan (the 2018 Plan) to increase the number of shares reserved for issuance thereunder by 2,000,000 shares; and

 

5.

Approval of an amended and restated 2018 Employee Stock Purchase Plan (the 2018 ESPP) to increase the number of shares reserved for issuance thereunder by 900,000 shares and increase the maximum number of shares purchasable under the plan to 2,500 per offering period.

What if another matter is properly brought before the meeting?

The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance with their best judgment.

How do I vote?

For each of the matters, including each of our nominees to the Board, to be voted on, you may vote “FOR” or “AGAINST,” or you may abstain from voting.

The procedures for voting depend upon whether your shares are registered in your name or are held by a bank, broker or other nominee:

5


 

Stockholder of Record: Shares Registered in Your Name

If you are a stockholder of record, you may vote at the Annual Meeting, vote by proxy over the Internet, vote by proxy over the telephone or vote by proxy using a proxy card that we have provided or will provide upon request. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend and vote at the meeting even if you have already voted by proxy.

 

To vote at the meeting, attend the Annual Meeting, and follow the instructions available on the meeting website during the meeting.

 

To vote over the Internet, go to www.proxyvote.com to complete an electronic proxy card. You will be asked to provide the company control number from your proxy card or Proxy Availability Notice. Your vote must be received by 11:59 p.m. Eastern Daylight Time (EDT) on May 19, 2021 to be counted.

 

To vote over the telephone, dial toll‑free +1.800.690.6903 using a touch‑tone phone and follow the recorded instructions. You will be asked to provide the company control number from your proxy card or Proxy Availability Notice. Your vote must be received by 11:59 p.m. EDT on May 19, 2021 to be counted.

 

To vote using a proxy card, complete, sign and date the proxy card and return it pursuant to the instructions provided. Your vote must be received by May 19, 2021 to be counted.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If you are a beneficial owner of shares registered in the name of your broker, bank, or other nominee, you should have received a Proxy Availability Notice containing a voting instruction form from that organization rather than from us. In order to provide voting instructions to the holder of record of your shares, please refer to the materials forwarded by your broker, bank, or other nominee.

 

To vote at the Annual Meeting, contact your broker, bank or other nominee to obtain your control number and follow the instructions on the meeting website.

 

To vote over the Internet, go to www.proxyvote.com to complete an electronic proxy. You will be asked to provide your sixteen-digit control number from your voting instruction form. Your vote must be received by 11:59 p.m. EDT on May 19, 2021 to be counted.

 

To vote over the telephone, dial toll‑free +1.800.454.8683 using a touch‑tone phone and follow the recorded instructions. You will be asked to provide the company control number from your voting instruction form or Proxy Availability Notice. Your vote must be received by 11:59 p.m. EDT on May 19, 2021 to be counted.

 

To vote using the voting instruction form accompanying the Proxy Availability Notice, complete, sign and date the voting instruction form and return it pursuant to the instructions provided. Your vote must be received by May 19, 2021 to be counted.

 

Internet proxy voting is provided to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.

How many votes do I have?

You have one vote for each share of common stock you owned as of March 23, 2021 for each matter that is voted upon at the Annual Meeting.

6


 

Who is paying for this proxy solicitation?

We will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other nominees for their reasonable out‑of‑pocket expenses for forwarding proxy materials to beneficial owners and seeking instruction with respect thereto.

Can I vote my shares by filling out and returning the Proxy Availability Notice?

No. The Proxy Availability Notice does, however, provide instructions on how to vote by Internet, mail (by requesting a paper proxy card or voting instruction card), and during the Annual Meeting.

If you receive a proxy statement and a paper proxy card together with the Proxy Availability Notice, the paper proxy card may be used to vote your shares.

Can I change my vote or revoke my proxy after submitting my proxy?

Stockholder of Record: Shares Registered in Your Name

Yes. You can change your vote or revoke your proxy at any time before the deadline to vote. If you are the record holder of your shares, you may change your vote or revoke your proxy in any one of the following ways:

 

You may grant a subsequent proxy by telephone or over the Internet.

 

You may submit another properly completed proxy card with a later date.

 

You may send a timely written notice that you are revoking your proxy to our Corporate Secretary at 331 Oyster Point Blvd., Fourth Floor, South San Francisco, California 94080.

 

You may attend and vote at the Annual Meeting. Simply attending the meeting will not, by itself, revoke your proxy.

Your most recent vote (prior to the deadline) by Internet, telephone or proxy card or vote at the Annual Meeting will be the one that is counted.

Beneficial Owner: Shares Registered in the Name of Broker, Bank

Yes. You can change your vote or revoke your voting instruction form at any time before the deadline to vote. If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker, bank or other nominee. Note that you may also revoke your proxy in any one of the following ways:

 

You may grant a subsequent voting instruction over the Internet or by telephone.

 

You may attend and vote at the Annual Meeting by obtaining your control number from your broker, bank or other nominee. Simply attending the meeting will not, by itself, revoke your voting instruction form.

Your most current vote (prior to the deadline) by voting instruction form, telephone or Internet proxy or vote at the Annual Meeting will be the one that is counted.

What are “broker non‑votes”?

Broker non‑votes occur when a beneficial owner of shares held in “street name” does not give voting instructions to the broker, bank or other nominee holding the shares as to how to vote on matters deemed “non‑routine.” Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker, bank or other nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker, bank or other nominee can still vote the shares with respect to matters that are considered to be “routine,” but not with respect to “non‑routine” matters.

7


 

The only “routine” matter on the agenda for the Annual Meeting is Proposal No. 3Ratification of the Selection of the Independent Registered Public Accounting Firm. Accordingly, the “non‑routine” matters on the agenda for the Annual Meeting are Proposal No. 1—Election of Directors, Proposal No. 2—Advisory Vote to Approve Our Named Executive Officers’ Compensation, Proposal No. 4—Approval of an Amendment to the Assembly Biosciences, Inc. 2018 Stock Incentive Plan and Proposal No. 5—Approval of an amendment and restatement of the 2018 Employee Stock Purchase Plan. Therefore, it is critical that you indicate your vote on these proposals if you want your vote to be counted.

How are votes counted?

Votes will be counted by the inspector of elections appointed for the meeting.

With respect to the election of directors, you may vote “FOR” or “AGAINST” each of the nominees, or you may abstain from voting for one or more nominees. Neither abstentions nor broker non-votes will have any effect on the election of the nominees, but broker non-votes will be counted to determine whether a quorum is present at the Annual Meeting.

With respect to the other proposals, you may vote “FOR” or “AGAINST” or you may abstain from voting. Neither abstentions nor broker non-votes will have any effect on the votes for these proposals but broker non-votes will be counted to determine whether a quorum is present at the Annual Meeting.

What if I return a proxy card or otherwise vote but do not make specific choices?

If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted:

 

“FOR” the election of the eight director nominees identified in this proxy statement;

 

“FOR” the approval, on a non-binding advisory basis, of our named executive officers’ compensation;

 

“FOR” the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021;

 

“FOR” the approval of an amendment to the 2018 Plan to increase the number of shares reserved for issuance thereunder by 2,000,000 shares;

 

“FOR” approval of an amendment and restatement of the 2018 ESPP to increase the number of shares reserved for issuance thereunder by 900,000 shares and increase the maximum number of shares purchasable under the plan to 2,500 per offering; and

 

To transact such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof as determined in the discretion of your proxyholder.

What is the quorum requirement?

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding a majority of the outstanding shares entitled to vote as of the Record Date are present at the virtual Annual Meeting or represented by proxy. On the record date, there were 40,059,122 shares of common stock outstanding and entitled to vote. As a result, the holders of 20,029,562 shares must be present in person or represented by proxy at the Annual Meeting for there to be a quorum.

Your shares will be counted toward a quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) by May 19, 2021 or if you vote at the Annual Meeting. Abstentions and broker non‑votes will be counted toward the quorum requirement. If there is no quorum, the holders of a majority of shares present at the Annual Meeting or represented by proxy may adjourn the Annual Meeting to another date.

Once a share is represented for any purpose at the Annual Meeting, it is deemed present for quorum purposes for the remainder of the meeting and any adjournment thereof unless a new record date is set for the adjournment.

8


 

How many votes are needed to approve each proposal?

Assuming the presence of a quorum at the Annual Meeting, the following sets forth the votes necessary for each of the proposals being submitted to the stockholders:

 

Proposal

 

Description

 

Vote Required

 

Discretionary

Voting

Allowed

 

No. 1

 

Election of Directors

 

Majority of Votes Cast

 

No

 

No. 2

 

Advisory Vote on Named Executive Officers’ Compensation

 

Majority of Votes Cast

 

No

 

No. 3

 

Ratification of the Selection of Ernst & Young LLP as Independent Registered Public Accounting Firm for 2021

 

Majority of Votes Cast

 

Yes

 

No. 4

 

Amendment of the 2018 Plan to Increase the Number of Shares Reserved for Issuance Thereunder by 2,000,000 Shares

 

Majority of Votes Cast

 

No

 

No. 5

 

Amendment and Restatement of the 2018 ESPP to increase the number of shares reserved for issuance thereunder by 900,000 shares and increase the maximum number of shares purchasable under the plan to 2,500 per offering period

 

Majority of Votes Cast

 

No

 

 

Election of Directors

Directors will be elected by the affirmative vote of the majority of the votes cast (meaning the number of shares voted “FOR” a nominee must exceed the number of shares voted “AGAIST” that nominee). If any nominee for director receives a greater number of votes “AGAINST” his or her election than votes “FOR” such election, our Corporate Governance Guidelines require that person to promptly tender his or her written resignation to the Chair of the Board within five days following the certification of the vote. Abstentions and broker non-votes are not considered votes cast for the election of directors and will have no effect on the election of nominees.

Other Proposals

Adoption of Proposal No. 2, Proposal No. 3, Proposal No. 4 and Proposal No. 5 requires the affirmative vote of the majority of votes cast. Abstentions and broker non-votes are not considered votes cast and will have no effect on the vote for these proposals.

How can I find out the results of the voting at the Annual Meeting?

Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be reported in a Current Report on Form 8‑K that we expect to file within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Form 8‑K within four business days after the Annual Meeting, we intend to file a Form 8‑K to report preliminary results and, within four business days after the final results are known to us, file an additional Form 8‑K to report the final results.

What proxy materials are available on the Internet?

The proxy statement and our Annual Report for the fiscal year ended December 31, 2020 are available free of charge at www.proxyvote.com. You can request a copy of our Annual Report free of charge by calling +1.833.509.4583 or by sending an email to our Corporate Secretary at CorpSecretary@assemblybio.com. Please include your contact information with the request.

Our Annual Report on Form 10‑K for the fiscal year ended December 31, 2020 as filed with the SEC is accessible free of charge on our website. It contains audited consolidated financial statements for our fiscal years ended December 31, 2018, 2019 and 2020. The Annual Report on Form 10‑K, without exhibits, is included in the 2020 Annual Report to Stockholders that is available with this proxy statement.

9


 

CAUTIONARY STATEMENT REGARDING FORWARDLOOKING STATEMENTS

This proxy statement contains forward‑looking statements relating to future events that involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward‑looking statements.

Statements that include the words may, will, would, could, should, might, believes, hopes, estimates, projects, potential, expects, plans, anticipates, intends, continues, forecast, designed, goal or the negative of those words or other comparable words, that express uncertainty, are forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Except as required by law, we assume no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

10


 

Proposal No1: Election of Directors

General

Our Amended and Restated Bylaws provide that the number of our directors is to be within a range of three to ten, with the exact number set by the Board. Our Board has set the number of directors at eight.

Our Board currently consists of seven directors and is expected to consist of eight directors following the election of Lisa R. Johnson-Pratt, M.D. There are eight nominees for election to the Board this year. Each director to be elected and qualified will hold office until the next annual meeting of the stockholders and until his or her successor is duly elected and qualified, or, if sooner, until the director’s death, resignation or removal. Each of the nominees listed below, other than Dr. Johnson-Pratt, is currently a director. Each of the director nominees was previously elected by the stockholders, other than Dr. Johnson-Pratt. Directors are elected by a majority of the votes cast in the election of such director, requiring that the number of votes cast “for” a director nominee exceed the number of votes cast “against” that director nominee.

Nominees for Director

The Nominating and Governance Committee has recommended, and the Board has approved, the nomination of each of Anthony E. Altig, Gina Consylman, Richard D. DiMarchi, Ph.D., Myron Z. Holubiak, Lisa R. Johnson-Pratt, M.D., Susan Mahony, Ph.D., John G. McHutchison, A.O., M.D. and William R. Ringo, Jr. to serve as a director of our Company. The Board has determined that all of these nominees for director, except for Dr. McHutchison, are independent as determined in accordance with the rules of the Nasdaq Stock Market. There are no family relationships among any of our nominees for director or executive officers. The respective names, ages, lengths of service on our Board and brief biographical summaries of our nominees for director are as follows. For more information regarding the experience, qualifications, attributes and skills of the director nominees, see the matrix on page 19.

 

Name

 

Age

 

Director

Since

 

Business Experience

11


 

Name

 

Age

 

Director

Since

 

Business Experience

Anthony E. Altig

 

65

 

2012

 

Mr. Altig joined our Board in January 2012. From 2008 to December 2017, Mr. Altig was the Chief Financial Officer of Biotix Holdings, Inc., a company that manufactures microbiological consumables, which was acquired by Mettler Toledo in September 2017. From 2004 to 2007, Mr. Altig served as the Chief Financial Officer of Diversa Corporation (subsequently Verenium Corporation), a public company developing specialized industrial enzymes. Prior to joining Diversa, Mr. Altig served as the Chief Financial Officer of Maxim Pharmaceuticals, Inc., a public biopharmaceutical company. Mr. Altig formerly served as a director and chairman of the audit committee of TearLab Corporation (formerly OccuLogix, Inc.), an eyecare technology company that was a public company until it was taken private in July 2020, and as a director of MultiCell Technologies, Inc. and Optimer Pharmaceuticals, Inc., a pharmaceutical company that was a public company until its acquisition by Cubist Pharmaceuticals, Inc. in October 2013. Mr. Altig received his B.B.A. in business from the University of Hawaii at Manoa and is a Certified Public Accountant (inactive).

 

Because of these and other professional experiences, Mr. Altig possesses particular knowledge and experience in finance and accounting, financial audit, public company board service and corporate governance and corporate operations that strengthen the Board’s collective qualifications, skills and experience. Among other experiences, qualifications, attributes and skills, Mr. Altig’s extensive management experience and financial expertise, as well as his experience serving on the boards of directors of several public pharmaceutical and healthcare companies, led to the

conclusion of our Board that he should serve as a director due to our business and structure.

Gina Consylman

 

49

 

2020

 

Ms. Consylman joined our Board in October 2020. Since November 2017, Ms. Consylman has served as Senior Vice President, Chief Financial Officer of Ironwood Pharmaceuticals, Inc. (Ironwood). From September 2017 until November 2017, Ms. Consylman was Ironwood’s interim Chief Financial Officer, from August 2015 until November 2017, she served as Ironwood’s Vice President of Finance and Chief Accounting Officer and from June 2014 until July 2015, she served as Ironwood’s Vice President, Corporate Controller and Chief Accounting Officer. Prior to joining Ironwood, Ms. Consylman served as Vice President, Corporate Controller and Principal Accounting Officer of Analogic Corporation from February 2012 until June 2014. Prior to that, Ms. Consylman served in various roles of increasing responsibility at Biogen Inc. from November 2009 until February 2012, culminating in her role as Senior Director, Corporate Accounting. Prior to that, Ms. Consylman served as Corporate Controller at Varian Semiconductor Equipment Associates, Inc. Ms. Consylman serves on the board of directors and chair of the audit committee of Verastem, Inc. Ms. Consylman received her B.S. in accounting from Johnson & Wales University and a M.S. in taxation from Bentley University. Ms. Consylman is a Certified Public Accountant.

 

Because of these and other professional experiences, Ms. Consylman possesses particular knowledge and experience in finance and accounting, financial audit, public company board service and corporate governance and corporate operations that strengthen the Board’s collective qualifications, skills and experience. Among other experiences, qualifications, attributes and skills, Ms. Consylman’s extensive management experience and financial expertise, as well as her experience serving on the board of directors of Verastem, Inc., led to the conclusion of our Board that she should serve as a director due to our business and structure.

 

12


 

Name

 

Age

 

Director

Since

 

Business Experience

Richard D. DiMarchi, Ph.D.

 

68

 

2014

 

Dr. DiMarchi joined our Board in July 2014 upon the closing of the Assembly Pharmaceuticals, Inc. acquisition through its merger with a wholly owned subsidiary of Assembly (the Merger). Dr. DiMarchi is a co-founder of Assembly Pharmaceuticals, Inc. and served on its board from its inception in 2012 through the Merger. Dr. DiMarchi is a Distinguished Professor of Chemical Biology and Gill Chair in Biomolecular Sciences at Indiana University and Chief Scientific Officer of MBX Biosciences, Inc. From February 2016 until March 2020, Dr. DiMarchi served as Vice President of Research at Novo Nordisk Research Labs. Dr. DiMarchi was a co-founder and board member of biotechnology companies Ambrx, Inc. (until it was acquired by a consortium of entities affiliated with Shanghai Fosun Pharmaceutical Group, HOPU Investments, China Everbright Limited’s healthcare fund and WuXi PharmaTech) and Marcadia Biotech Inc. (until it was acquired by Roche in 2010). Dr. DiMarchi was a founder of Calibrium LLC, which was acquired by Novo Nordisk in 2015 and advisor to Twilight Ventures. Dr. DiMarchi retired as Group Vice President at Eli Lilly & Company (Lilly), where he provided leadership for more than two

decades in biotechnology, endocrine research, and product development. Dr. DiMarchi previously served as a board member of the biotechnology trade group BIO, Ionis Pharmaceuticals, Inc. (f/k/a Isis Pharmaceuticals, Inc.) and Millennium BioTherapeutics, Inc. His current research is focused on developing macromolecules with enhanced therapeutic properties through biochemical and chemical optimization, an approach he has termed chemical biotechnology. Dr. DiMarchi contributed significantly to the discovery of Humalog® and to the commercial development of pharmaceutical products Humulin®, Humatrope®, Glucagon®, Xigris®, Forteo®, and Evista®. Dr. DiMarchi is the recipient of numerous prestigious awards and in 2014 was inducted to the National Inventors Hall of Fame and in 2015 to the National Academy of Medicine. Dr. DiMarchi received a B.S. with honors from Florida Atlantic University and his Ph.D. in Biochemistry from Indiana University, and completed his postdoctoral studies at the Rockefeller University.

 

Because of these and other professional experiences, Dr. DiMarchi possesses particular knowledge and experience with our business and industry, innovation and academia. Among other experiences, qualifications, attributes and skills, Dr. DiMarchi’s scientific training, extensive experience in the pharmaceutical industry, as well as his experience serving on the board of directors of several private pharmaceutical companies, led to the conclusion of our Board that he should serve as a director due to our business and structure.

13


 

Name

 

Age

 

Director

Since

 

Business Experience

Myron Z. Holubiak

 

74

 

2010

 

Mr. Holubiak joined our Board in July 2010. Since March 2016, Mr. Holubiak has served as President, Chief Executive Officer and a director of Citius Pharmaceuticals, Inc., a late stage drug development company focused on critical care drug products. From September 2014 until March 2016, Mr. Holubiak was the founder and Chief Executive Officer and President of Leonard-Meron Biosciences, Inc., which merged with Citius Pharmaceuticals, Inc. in March 2016. Mr. Holubiak is the former President of Roche Laboratories, Inc., USA, a major research-based pharmaceutical company, a position he held from December 1998 to August 2001. Prior to that, he held many sales and marketing positions at Roche Laboratories during his 19-year tenure there. From September 2002 until June 2016, Mr. Holubiak served on the board of directors of BioScrip, Inc., a publicly traded company and a leading home infusion provider with nationwide pharmacy and nursing capabilities and was chairman of the board of BioScrip, Inc. from April 2012 until June 2016. Mr. Holubiak was president of 1-800-DOCTORS, Inc., a private physician finder company, from May 2007 to January 2014 and a member of its board of directors until September 2017. Since July 2015, Mr. Holubiak also has been a member of the board of directors of bioAffinity Technologies, Inc., a private cancer screening and diagnostics company. From April 2013 to April 2015, Mr. Holubiak was also a trustee of the Academy of Managed Care Pharmacy Foundation. Mr. Holubiak received his B.S. in Molecular Biology and Biophysics from the University of Pittsburgh. Mr. Holubiak has received advanced business training from the Harvard Business School, the London

School of Economics and the Centre for Health Economics at the University of York.

 

Because of these and other professional experiences, Mr. Holubiak possess particular knowledge and experience in senior leadership, public company board service, corporate governance and corporate operations. Among other experiences, qualifications, attributes and skills, Mr. Holubiak’s extensive experience managing pharmaceutical and healthcare companies, together with his experience serving on the board of directors of public and private companies, led to the conclusion of our Board that he should serve as a director due to our business and structure.

Lisa R. Johnson-Pratt, M.D.

 

57

 

New Director Nominee

 

Dr. Johnson-Pratt is not currently a member of our Board. Since November 2020, Dr. Johnson-Pratt has served as Senior Vice President, Commercial of Ionis Pharmaceuticals, Inc. (Ionis). Prior to that, Dr. Johnson-Pratt served as Senior Vice President of Akcea Therapeutics, Inc. (Akcea) from March 2020 until Ionis’s acquisition of Akcea, which was consummated in October 2020. Prior to that, Dr. Johnson-Pratt served as Vice President of Global Franchise Operations at GlaxoSmithKline plc (GSK) from January 2018 until July 2019, and from June 2015 until July 2019, she served as GSK’s Head, Pipeline and Oncology Commercial Strategy. From 2013 until 2015, Dr. Johnson-Pratt was the Global Marketing Director at Stiefel Laboratories, Inc. Dr. Johnson-Pratt worked for Merck & Co., Inc. from 2004 until 2013, in a series of positions of increasing responsibility, culminating in her role as Business Unit Director (Mature Brands). Dr. Johnson-Pratt earned a B.S. in science from Howard University, a Diploma of Pharmaceutical Medicine from the Royal College of Physicians, and an M.D. from Howard University.

 

Because of these and other professional experiences, Dr. Johnson-Pratt possesses particular knowledge and in experience with the medical and the pharmaceutical industries. Among other experiences, qualifications, attributes and skills, Dr. Johnson-Pratt’s medical training and her extensive commercial experience in the pharmaceutical industry led to the conclusion of our Board that she should be nominated to serve as a director due to our business and structure.

 

14


 

Name

 

Age

 

Director

Since

 

Business Experience

Susan Mahony, Ph.D.

 

56

 

2017

 

Dr. Mahony joined our Board in December 2017. From 2011 until her retirement in August 2018, Dr. Mahony served as Senior Vice President and President of Lilly Oncology and was a member of the executive committee at Lilly. Prior to that, from 2000 until 2011, Dr. Mahony served in a variety of leadership roles at Lilly, including Senior Vice President Human Resources and Diversity, President and General Manager Lilly Canada, and Executive Director Global Development. Dr. Mahony worked in sales and marketing at Bristol-Myers Squibb Company from 1995 to 2000, at Amgen Limited from 1991 to 1995, and at Schering Plough from 1989 to 1991. Dr. Mahony is on the board of directors

of Vifor Pharma, Zymeworks Inc. and Horizon Therapeutics plc, which are all public companies, and Cereius Inc., a private company. Dr. Mahony earned a B.Sc. and Ph.D. in pharmacy and

was awarded an Honorary Doctorate from Aston University, and she earned an M.B.A. from London Business School.

 

Because of these and other professional experiences, Dr. Mahony possesses particular knowledge and experience in all aspects of corporate functions and company operations that strengthen the Board’s collective qualifications, skills and experience. Among other experiences, qualifications, attributes and skills, Dr. Mahony’s extensive experience in management at public pharmaceutical companies, together with her experience serving on the board of directors of public and private companies, led to the conclusion of our Board that she should serve as a director due to our business and structure.

 

John G. McHutchison, A.O., M.D.

 

63

 

2019

 

Dr. McHutchison has served as our Chief Executive Officer and President and as a director since August 2019. Prior to joining us, Dr. McHutchison was the Chief Scientific Officer and Head of Research and Development of Gilead Sciences, Inc. (Gilead). Prior to joining Gilead in 2010, Dr. McHutchison worked at Duke University Medical Center, where he served as Associate Director of the Duke Clinical Research Institute. He also held the positions of Professor of Medicine in the Division of Gastroenterology at Duke University Medical Center, Associate Director at Duke Clinical Research Institute and Co-Director of the Duke Clinical and Translational Science Award. Prior to his positions at Duke University, Dr. McHutchison spent nearly ten years at Scripps Clinic, most recently as Medical Director, Liver Transplantation. He also previously held an Assistant Professorship in Medicine at the University of Southern California. In June 2018, Dr. McHutchison was appointed an Officer of the Order of Australia in recognition of his distinguished service to medical research in gastroenterology and hepatology. Dr. McHutchison has undergraduate degrees in medicine and surgery from the University of Melbourne in Australia and completed his residency in internal medicine and fellowship in gastroenterology at the Royal Melbourne Hospital. He is a member of the Royal Australasian College of Physicians. Dr. McHutchison currently serves on the board of directors of Metacrine, Inc., a public company, and Evox Therapeutics, a private company.

 

Because of these and other professional experiences, Dr. McHutchison possesses extensive knowledge of our business and industry and experience in senior leadership, clinical development, innovation and technology development, corporate operations and academia. Among other experiences, qualifications, attributes and skills, Dr. McHutchison’s status as an internationally recognized leader in infectious diseases, liver diseases, and gastrointestinal diseases and the leadership he demonstrated at Gilead as he led the organization in the successful filing of numerous New Drug Applications across multiple therapeutic areas, including the curative treatment regimens for chronic hepatitis C and treatment of chronic hepatitis B, led to the conclusion of our Board that he should serve as a director due to our business and structure.

 

15


 

Name

 

Age

 

Director

Since

 

Business Experience

William R. Ringo, Jr.

 

75

 

2014

 

Mr. Ringo became a director upon the closing of the Merger in July 2014 and became non-executive Chairman of the Board in February 2015. Mr. Ringo served as Interim Chief Executive Officer of Five Prime Therapeutics, Inc. (Five Prime) from September 2019 until April 2020. From July 2010 until December 2015, Mr. Ringo was a senior advisor with Barclays Capital, the global investment banking division of Barclays Bank PLC. From July 2010 until December 2015, Mr. Ringo served as a strategic advisor with Sofinnova Ventures, a life sciences-focused investment firm. Prior to his advisory roles with Barclays Capital and Sofinnova Ventures, Mr. Ringo served as Senior Vice President of Strategy and Business Development for Pfizer Inc., a biopharmaceutical company, from April 2008 until his retirement in April 2010. From 2004 to 2006, Mr. Ringo served as President and Chief Executive Officer of Abgenix, Inc., a biotechnology company acquired by Amgen, Inc. From 2001 to 2007, he served on various boards of directors, including the following public companies: Encysive Pharmaceuticals, Inc.; Inspire Pharmaceuticals, Inc.; and InterMune, Inc., where he was the non-executive chairman of the board of directors after serving as interim Chief Executive Officer from June 2003 to September 2003. His experience in the global pharmaceutical sector also includes nearly 30 years with Lilly. Over the course of his career with Lilly, Mr. Ringo served in numerous executive roles, including Product Group President for oncology and critical care, President of internal medicine products, President of the infectious diseases business unit, and Vice President of sales and marketing for U.S. pharmaceuticals. He also was a member of Lilly’s operating committee. Mr. Ringo is the chairman of the board of Five Prime. From 1994 to 2002, he served as a director and chairman of the board for Community Health Systems, Inc. and from February 2011 until the October 2013 acquisition by Amgen, Inc., on the Onyx Pharmaceuticals, Inc. board of directors. In the last five years, Mr. Ringo was formerly a director of Immune Design Corp., Sangamo Biosciences, Inc., Mirati Technologies, Inc. and, prior to its being acquired by Lilly, Dermira, Inc. Mr. Ringo received a B.S. in business administration and an M.B.A. from the University of Dayton.

 

Because of these and other professional experiences, Mr. Ringo possesses extensive knowledge of our business and industry and experience in senior leadership, financial audit, business development, public company board service, governance, financing and capital markets and corporate operations. Among other experience, qualifications, attributes and skills, Mr. Ringo’s extensive management experience in the pharmaceutical industry and experience in the capital markets, as well as his experience serving on the boards of directors of public pharmaceutical companies and on the boards of directors of several private pharmaceutical companies, led to the conclusion of our Board that he should serve as a director due to our business and structure.

16


 

Required Vote

Assuming a quorum is present, directors will be elected by the affirmative vote of the majority of the votes cast (meaning the number of shares voted “FOR” a nominee must exceed the number of shares voted “AGAIST” that nominee). All elected nominees will serve until the 2022 Annual Meeting of Stockholders and until their successors have been duly elected and qualified or, if sooner, until the director’s death, resignation or removal. If any current director receives a greater number of votes “AGAINST” his or her election than votes “FOR” such election, our Corporate Governance Guidelines require that person to promptly tender his or her written resignation to the Chairman of the Board within five days following the certification of the vote. Abstentions and broker non-votes are not considered votes cast for the election of directors and will have no effect on the election of nominees.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH NAMED NOMINEE FOR DIRECTOR.

17


 

The Board of Directors and Corporate Governance

This section describes key corporate governance guidelines and practices that we have adopted. Complete copies of the charters of our committees of the Board and our Corporate Governance Guidelines, Code of Conduct and Code of Ethics described below may be found in the Investors section of our website at investor.asssemblybio.com. Alternatively, you can request a copy of any of these documents free of charge by writing to Assembly Biosciences, Inc., attn: Corporate Secretary, 331 Oyster Point Blvd., Fourth Floor, South San Francisco, California 94080. Information on our website is not incorporated by reference into this proxy statement.

Meetings of the Board

Our Company is managed under the general oversight of the Board as provided by the laws of Delaware and our Amended and Restated Bylaws. During the fiscal year ended December 31, 2020, the Board held six meetings and acted by unanimous written consent five times. Our independent directors met in executive sessions at which only independent directors were present at the end of all Board meetings in 2020.

The Board adopted a formal policy that a Board meeting be held on the same date as the annual stockholders meeting and all directors of the Company are encouraged to attend our annual meetings of stockholders. Every 2020 director nominee that served as a director at the time of the 2020 annual meeting of stockholders was in attendance in person other than Alan J. Lewis, Ph.D., who could not attend due to personal reasons. Ms. Consylman and Dr. Johnson-Pratt were neither nominees nor members of our Board at the time of the 2020 annual meeting of stockholders.

Board Composition

Our Nominating and Governance Committee aims to assemble a Board that brings to us a variety of perspectives and skills derived from high‑quality business and professional experience. Directors should possess high personal and professional ethics, integrity and values and be committed to representing the best interests of our stockholders. The Board is composed of individuals that enhance the gender, age and ethnic diversity of the Board.

In fulfilling its responsibilities to select and recommend director nominees to serve on our Board, our Nominating and Governance Committee annually evaluates our incumbent Board members and other candidates, if any, against the following criteria in determining whether to recommend these directors for nomination:

 

the appropriate size of our Board and its committees;

 

the perceived needs of our Board for particular skills, background and business experience;

 

the skills, background, reputation and depth and breadth of business experience of nominees;

 

nominees’ independence from management;

 

diversity, including of experience, competency in relevant fields, gender, race, ethnicity and age; and

 

applicable regulatory and listing requirements, including independence requirements and legal considerations.

Our Corporate Governance Guidelines provide that the Nominating and Governance Committee must be satisfied that each recommended nominee to the Board meets the following minimum qualifications:

 

nominee shall have experience at a strategic or policymaking level in a business, government, non-profit or academic organization of high standing;

 

nominee shall be highly accomplished in his or her respective field, with superior credentials and recognition;

18


 

 

nominee shall be well regarded in the community and shall have a long-term reputation for high ethical and moral standards;

 

nominee shall have sufficient time and availability to devote to the affairs of the Company, particularly accounting for the number of boards of directors on which he or she may serve; and

 

to the extent he or she serves or has previously served on other boards of directors, the nominee shall have a demonstrated history of actively contributing at board meetings.

Other than the foregoing, there are no stated minimum criteria for director nominees, although our Nominating and Governance Committee also may consider such other factors as it may deem, from time to time, to be in the best interests of our Company and our stockholders.

We seek a variety of types and degrees of knowledge, skills and experiences among our Board members. The following matrix provides information regarding our Board nominees, including select knowledge, skills, experiences and attributes possessed by our members that the Board believes are relevant to our business. The matrix is not intended to encompass all of the knowledge, skills, experiences or attributes of the nominees, and the fact that a particular knowledge, skill, experience or attribute is not listed does not mean that a nominee does not possess it. In addition, the absence of a particular knowledge, skill, experience or attribute does not mean that that particular nominee is unable to contribute to decision-making in that area.

 

 

Altig

Consylman

DiMarchi

Holubiak

Johnson-Pratt

Mahony

McHutchison

Ringo

Experience

 

Public Board Experience

 

Finance

 

 

 

 

Accounting

 

 

 

 

 

Corporate Governance

 

 

 

Compensation

 

 

 

 

Executive Experience

Operations

 

Strategic Planning

Pharmaceutical Industry

Academia

 

 

 

 

 

 

Demographics

 

Race/Ethnicity

 

 

 

 

 

 

 

 

African American

 

 

 

 

 

 

 

Hispanic

 

 

 

 

 

 

 

 

Latino/a

 

 

 

 

 

 

 

 

Asian

 

 

 

 

 

 

 

 

White/Caucasian

 

Gender

 

Male

 

 

 

Female

 

 

 

 

 

Board Tenure

 

Years

9

1

7

11

New Nominee

4

2

7

Other Public Boards

 

Number

0

1

0

1

0

3

1

1

Independence of Directors

Our Board assesses the independence of each of our directors under the Nasdaq Stock Market Rules (the Nasdaq listing rules), because our common stock is listed on The Nasdaq Global Select Market. Using the test provided in Rule 5605(a)(2) of the Nasdaq listing rules, the Board has determined that, except for John G. McHutchison, A.O., M.D., our Chief Executive Officer and President, all current directors and director nominees (Anthony E. Altig,

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Gina Consylman, Richard D. DiMarchi, Ph.D., Myron Z. Holubiak, Lisa R. Johnson-Pratt, M.D., Susan Mahony, Ph.D. and William R. Ringo, Jr.) are independent. As part of this determination of independence, our Board considered the relationships that each non-employee director or director nominee has with us and all other facts and circumstances that the Board deemed relevant in determining independence, including the beneficial ownership of our capital stock by such individual and the association of certain of our directors with third parties, including Indiana University, from whom we license certain intellectual property. After considering these factors, our Board has affirmatively determined that each of Mr. Altig, Ms. Consylman, Dr. DiMarchi, Mr. Holubiak, Dr. Johnson-Pratt, Dr. Mahony and Mr. Ringo does not have a relationship with us that would interfere with the exercise of independent judgment in carrying out his or her responsibilities as a director. Our Board also affirmatively determined that former directors Mark Auerbach, Helen S. Kim and Alan J. Lewis, Ph.D. did not have any relationships that would interfere with the exercise of independent judgment in carrying out their responsibilities.

Board Leadership Structure

Our Board does not have a specific policy regarding the separation of the roles of the Chairman of the Board and the Chief Executive Officer and believes it is in the best interests of our Company and our stockholders to be able to exercise discretion in combining or separating these positions as we deem appropriate in light of prevailing circumstances. The roles are currently separated, with Mr. Ringo serving as independent Chairman. The Board believes that this structure currently best serves the interests of our stockholders because it allows our Chief Executive Officer to focus primarily on our business strategy and operations and most effectively leverages the experience of the Chairman. It also enhances the Board’s independent oversight of our senior management team and enables better communication and relations between the Board, the Chief Executive Officer and other members of our senior management team. In that regard, our independent Chairman presides over Board meetings and the executive sessions of the non-management and independent directors of the Board. Our approach provides flexibility to allow our Board to modify our leadership structure in the future as appropriate. We believe that we, like many U.S. companies, are well served by this flexible leadership structure.

Risk Oversight

The Board is actively involved in the oversight of risks that could affect us. This oversight is conducted primarily through committees of the Board, particularly the Audit Committee, the Compensation Committee and the Nominating and Governance Committee, but the full Board has retained responsibility for general oversight of risks. The Board satisfies this responsibility through regular reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks.

The Audit Committee is responsible for information security, with a particular focus on cybersecurity. Management provides regular briefings to the Audit Committee in the event that there are any information security breaches. The Audit Committee commissioned Ernst & Young LLP to conduct a cybersecurity assessment in 2018. The assessment led to the implementation of a variety of initiatives, including enhancement of our email security, evaluation of data protection capabilities of our information technology systems and implementation of a new cybersecurity incident response policy. Following the assessment, we also undertook a cybersecurity awareness initiative to enable our employees to identify and mitigate information security risks. The initiative is comprised of employee trainings on phishing and other malicious attacks, smart habit creation and best practices regarding file sharing, host security and email security, and we have incorporated cybersecurity training into our employee onboarding process to ensure that all new employees have the necessary skills to identify and mitigate information security risks. In addition, we recently purchased cybersecurity insurance that would defray the costs of an information security breach. We have not experienced any information security breaches since August 2018, when our email system was hacked. We became aware of the breach and closed access prior to incurring any expenses related to the attack.

Board Committees

The Board has four standing committees. Each committee operates under a charter that has been adopted by the Board, which can be found in the Corporate Governance section of the Investors section of our website at www.assemblybio.com. Information on our website is not incorporated by reference into this proxy statement. Each of the committees has authority to engage legal counsel or other experts or consultants as it deems appropriate to

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carry out its responsibilities. The table below sets forth the current membership of each of the standing committees and the number of meetings each committee held in 2020, excluding actions taken by unanimous written consent. All incumbent directors attended 75% or more of the aggregate number of meetings of the Board and meetings of the committees on which he or she served during the period for which he or she was a director or committee member, as applicable, in 2020. The Board expects to review 2021 committee assignments at its meeting immediately following the Annual Meeting.

 

 

 

Independent

 

Audit

Committee

 

Compensation

Committee

 

Nominating and

Governance

Committee

 

Science and

Technology

Committee

2020 Meetings

 

 

 

7

 

9

 

5

 

2

Anthony E. Altig+

 

 

●**

 

 

 

 

 

Gina Consylman+

 

 

 

 

 

 

 

 

Richard D. DiMarchi, Ph.D.

 

 

 

 

 

 

 

 

●**

Myron Z. Holubiak

 

 

 

 

●**

 

 

 

Susan Mahony, Ph.D.

 

 

 

 

 

 

 

John G. McHutchison, A.O., M.D.

 

 

 

 

 

 

 

 

 

William R. Ringo, Jr.*

 

 

 

 

●**

 

 

*

Chairman of the Board

**

Committee Chair

+

“Audit Committee Financial Expert” as defined in Item 407(d) of Regulation S-K

Audit Committee

The Audit Committee oversees our accounting and financial reporting processes, the audit process, our process for monitoring compliance with laws, regulations and our Code of Conduct and Code of Ethics, and the quality and integrity of our consolidated financial statements and reports. In addition, the Audit Committee oversees the qualification, selection, independence and performance of our independent registered public accounting firm and recommends to the Board the appointment of our independent registered public accounting firm. Our Audit Committee also is responsible for reviewing and approving all related person transactions, including transactions with executive officers and directors, for potential conflicts of interests.

At the direction of the Nominating and Governance Committee, the Audit Committee conducts an annual performance evaluation of the Audit Committee and reports to the Board on the results of such evaluation.

The charter for our Audit Committee requires that the Audit Committee have at least three independent directors.  Our Audit Committee currently consists of Mr. Altig (Chair), Ms. Consylman, Dr. Mahony and Mr. Ringo. The Board annually reviews the Nasdaq listing rules’ definition of independence for Audit Committee members and has determined that Mr. Altig, Ms. Consylman, Dr. Mahony and Mr. Ringo are each independent (as independence is currently defined in Rule 5605(a)(2) of the Nasdaq listing rules and within the meaning of Section 10A-3(b)(1) of the Exchange Act). The Board has determined that Mr. Altig and Ms. Consylman each qualify as an “audit committee financial expert” as that term is defined in Item 407(d) of Regulation S‑K promulgated by the SEC. In making that determination, the Board relied on the past experience of Mr. Altig and Ms. Consylman. The Board made a qualitative assessment of Mr. Altig’s level of knowledge and experience based on several factors, including his experience as the chief financial officer of several public companies and having been a certified public accountant. The Board made a qualitative assessment of Ms. Consylman’s level of knowledge and experience based on a number of factors, including her current role as Chief Financial Officer of Ironwood Pharmaceuticals and the series of accounting and finance roles of increasing responsibility at Ironwood Pharmaceuticals, Analogic, Biogen and Varian Semiconductor Equipment Associates, her role as the Audit Committee chair at Verastem, Inc. and her experience as a certified public accountant at Ernst & Young LLP.

Compensation Committee

The charter for our Compensation Committee requires the committee to have not less than three independent members, subject to the Nasdaq listing rules. Our Compensation Committee currently consists of Mr. Holubiak (Chair), Dr. Mahony and Mr. Ringo. Our Board has determined that Mr. Holubiak, Dr. Mahony and Mr. Ringo are each independent under the Nasdaq listing rules, each is a “non‑employee director” as defined in Rule 16b‑3 promulgated under the Exchange Act.

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The purpose of our Compensation Committee is to discharge our Boards responsibilities relating to compensation of our directors, executive officers and employees and to administer our equity compensation and other benefit plans. In carrying out these responsibilities, our Compensation Committee reviews all components of executive officer compensation for consistency with our Compensation Committees primary objectives of attracting and retaining key management personnel, driving long-term strategic values and enhancing stockholder value. The Compensation Committee charter specifies that the Compensation Committee will, among other things:

 

review the recommendations of management with respect to our annual corporate goals and objectives and advise the Board regarding such annual corporate goals and objectives;

 

taking into consideration the Board-approved corporate goals and objectives, review and approve the annual goals and objectives applicable to our principal executive officer and other executive officers;

 

evaluate the principal executive officer’s and the other executive officers’ performance in light of approved goals and objectives;

 

determine and approve the compensation levels and other terms of employment of the principal executive officer and other executive officers based on this evaluation, including with respect to each executive officer, his or her base salary, cash and equity-based compensation, annual performance-based cash bonus, special benefits, perquisites and incidental benefits and other incentive compensation, benefits and terms of employment;

 

review and approve the compensation of our other employees that the Compensation Committee may specify from time to time, and delegate authority to specified executive officer(s) to review and approve the compensation of other non‑executive officer employees;

 

review and approve any employment agreements, severance plans (including any benefits to be provided in connection with a change in control) and any other compensatory agreements for the principal executive officer and other executive officers, including adopting, amending and terminating such agreements, plans or arrangements;

 

review with the principal executive officer and any other appropriate officers the material criteria used by the principal executive officer and management in evaluating employee performance throughout the Company and in establishing appropriate compensation, retention, incentive, severance and benefit policies and programs;

 

review and recommend to the Board changes to the compensation of our directors;

 

oversee the administration of, and periodically review and make changes to, our incentive compensation plans, equity‑based compensation plans, and any material employee benefit, bonus, retirement, severance and other compensation plans;

 

prepare the Compensation Committee report and recommend the inclusion of the report in our proxy statement or Annual Report on Form 10‑K as required;

 

retain and approve the compensation of any compensation consultants; and

 

evaluate the independence of any such compensation consultants.

Under the Compensation Committee charter, the Compensation Committee may, in its discretion, delegate its duties to a subcommittee consisting of one or more of its members and delegate authority to specified executive officers to review and approve the compensation of non-executive officer employees. At the direction of the Nominating and Governance Committee, the Compensation Committee conducts an annual performance evaluation and reports to the Board on its results.

The charter of the Compensation Committee grants the Compensation Committee full authority to obtain, at our expense, advice and assistance from compensation consulting firms, legal counsel and other advisors as it deems appropriate to assist it in the evaluation of the compensation of directors, the principal executive officer or the other executive and non‑executive officers of the Company, and the fulfillment of its other duties.

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Nominating and Governance Committee  

The charter for the Nominating and Governance Committee requires the committee to consist of not less than two independent directors, subject to the Nasdaq listing rules. Our Nominating and Governance Committee currently consists of three directors, Mr. Ringo (Chair), Mr. Altig and Mr. Holubiak. The Board has determined that each of Mr. Ringo, Mr. Altig and Mr. Holubiak are independent under the Nasdaq listing rules.

The primary purpose of our Nominating and Governance Committee is to select, and recommend to our Board, director nominees for each election of directors and recommend any corporate governance guidelines it deems appropriate. Additionally, the Committee has general oversight of our compliance with legal and regulatory requirements of our business operations, other than compliance with securities laws and regulations, including our financial reporting and disclosure obligations, or anti-bribery laws, which in each case is the responsibility of the Audit Committee.  

Candidates for nomination as director may come to the attention of our Nominating and Governance Committee from time to time through incumbent directors, management, stockholders or third parties. Our Amended and Restated Bylaws contain provisions for stockholders to recommend persons for nomination as a director and, subject to certain conditions, to nominate director candidates for inclusion in our proxy statement, as set forth in this proxy statement under “Deadline for Stockholder Proposals for 2022 Annual Meeting of Stockholders.” Candidates for potential nomination may be considered at meetings of our Nominating and Governance Committee at any point during the year. Such candidates will be evaluated against the criteria set forth above, and the Nominating and Governance Committee’s policy will be to evaluate any recommendation for director nominees proposed by stockholders using the same criteria. If our Nominating and Governance Committee believes at any time that it is desirable that our Board consider additional candidates for nomination, the Committee may poll directors and management for suggestions or conduct research to identify possible candidates and may, if our Nominating and Governance Committee believes it is appropriate, engage a third‑party search firm to assist in identifying qualified candidates.

Once director candidates are identified, the Nominating and Governance Committee conducts a review and evaluation of the qualifications of any proposed director candidate as it deems appropriate. There is no difference in the evaluation process of a candidate recommended by a stockholder as compared to the evaluation process of a candidate identified by any of the other means described above.

If the Nominating and Governance Committee determines that a candidate should be nominated for election to the Board, the candidate’s nomination is then recommended to the Board, and the directors may in turn conduct their own review to the extent they deem appropriate. When the Board has agreed upon a candidate, such candidate is recommended to the stockholders for election at an annual meeting of stockholders or appointed as a director by a vote of the Board as appropriate.

The Nominating and Governance Committee engaged a third-party search firm 2020 in identifying and evaluating Ms. Consylman, and utilized the services of the same search firm in 2021 in identifying and evaluating Dr. Johnson-Pratt.

All of the director nominees (Anthony E. Altig, Gina Consylman, Richard D. DiMarchi, Ph.D., Myron Z. Holubiak, Lisa R. Johnson-Pratt, M.D., Susan Mahony, Ph.D., John G. McHutchison, A.O., M.D. and William R. Ringo, Jr.) have been recommended by the Nominating and Governance Committee to the Board for re‑election or election, as applicable, as our directors at the Annual Meeting, and the Board has approved such recommendations.

The Nominating and Governance Committee also develops and oversees an annual self-evaluation process for the Board and each of its standing committees and ensures that the results of such evaluations are reported to the Board.

Science and Technology Committee

Our Science and Technology Committee currently consists of Dr. DiMarchi (Chair) and Dr. McHutchison. The primary purpose of our Science and Technology Committee is to assist the Board with oversight of our research and development activities, including to advise the Board with respect to strategic and tactical scientific matters. In furtherance of its purpose, the Science and Technology Committee reviews, among other things:

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our overall scientific and research and development strategy;

 

our research and development programs;

 

our regulatory compliance/quality programs, as applicable;

 

related external scientific research, discoveries and commercial developments, as appropriate;

 

our overall intellectual property strategies and our portfolio of patents;

 

management’s decisions regarding the allocation, deployment, utilization of and investment in our scientific assets; and

 

management’s decisions regarding acquiring or divesting scientific technology or otherwise investing in research or development programs.

The Science and Technology Committee charter requires that the Science and Technology Committee meet at least twice per year. The Chair of the Science and Technology Committee, in consultation with the other members and management, may set meeting agendas. The Science and Technology Committee will review and assess the adequacy of its charter at least once annually and recommend changes to the Board for approval.

Code of Ethics and Code of Conduct

Our Board has adopted a Code of Ethics for our principal executive officer and all senior financial officers and a Code of Conduct applicable to all of our employees and our directors. Both codes can be found in the Corporate Governance section of the Investors section of our website at www.assemblybio.com. If we make any substantive amendments to, or grant any waivers from, the Code of Ethics or Code of Conduct, as applicable, for our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions, or any officer or director, we will disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8‑K.

Director Compensation

Our directors play a critical role in guiding our strategic direction and overseeing the management of our Company. The many responsibilities and risks and the substantial time commitment of being a director require that we provide adequate compensation commensurate with our directors’ workload and opportunity costs. Non‑employee directors receive a combination of annual cash retainers and equity awards in amounts that correlate to their responsibilities and levels of Board participation, including service on Board committees. Dr. McHutchison does not receive separate compensation for service as a director because he is a Company employee.

The following table sets forth the annualized cash compensation payable to our non‑employee directors in 2020.

 

Director Position

 

Annual Cash

Compensation(1)

 

All Non-Employee Directors

 

$

40,000

 

Chair of the Board

 

$

80,000

 

Audit Committee Chair

 

$

20,000

 

Audit Committee Members (other than Chair)

 

$

10,000

 

Chair of Compensation Committee

 

$

15,000

 

Compensation Committee Members (other than Chair)

 

$

7,500

 

Chair of Nominating & Governance or Science and Technology

   Committees

 

$

10,000

 

Nominating & Governance or Science and Technology

   Committee Members (other than Chair)

 

$

5,000

 

 

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(1)

The annual cash compensation that we paid to Board members, other than Dr. McHutchison, was based on their positions on the Board or the committees of the Board, and we do not compensate the Board members on a per meeting basis. The amounts reflected in the table were in effect for 2020 unless otherwise noted.

Upon appointment to the Board, each new non-employee director appointed or elected is granted an option to purchase 20,000 shares of our common stock, which vests over three years in three approximately equal installments on each anniversary of the date of grant. In March 2021, the Board set the option grant for new directors as 30,000 shares of common stock. Each year, on the date of our annual meeting of stockholders, each non-employee director that is elected receives a grant of an equity award that will vest in full upon the earlier of the first anniversary of the grant date and the next annual meeting of stockholders. The exercise price per share of equity awards that constitute options is the fair market value of a share of our common stock on the date of the grant of the option. All options have a term of ten years. Non-employee directors elected to serve on the Board at the 2020 annual meeting of stockholders were granted an option to purchase 10,000 shares of common stock. In March 2021, the Board set the option grant for non-employee directors elected to serve on the Board at 15,000 shares of common stock to align this grant with the 50th percentile of our peer group.

The following table sets forth information regarding cash and non‑cash compensation earned by or paid to each of our non‑employee directors serving as directors during 2020.

 

Name

 

Fees

Earned

or Paid

in Cash

($)

 

 

Option

Awards

($)(1)(2)

 

 

Total

($)

 

Anthony E. Altig

 

 

60,833

 

 

 

149,181

 

 

 

210,014

 

Mark Auerbach

 

 

30,938

 

 

 

 

 

 

30,938

 

Gina Consylman

 

 

10,417

 

 

 

224,642

 

 

 

235,059

 

Richard D. DiMarchi, Ph.D.

 

 

50,000

 

 

 

149,181

 

 

 

199,181

 

Myron Z. Holubiak

 

 

60,000

 

 

 

149,181

 

 

 

209,181

 

Helen S. Kim

 

 

45,000

 

 

 

149,181

 

 

 

194,181

 

Alan J. Lewis, Ph.D.

 

 

55,000

 

 

 

149,181

 

 

 

204,181

 

Susan Mahony, Ph.D.

 

 

55,417

 

 

 

149,181

 

 

 

204,598

 

William R. Ringo, Jr.

 

 

97,500

 

 

 

149,181

 

 

 

246,681

 

(1)

As of December 31, 2020, our non‑employee directors held the following unexercised options to purchase shares of our common stock: Mr. Altig, 119,000 shares; Mr. Auerbach, 109,000 shares; Ms. Consylman, 20,000 shares; Dr. DiMarchi, 119,000 shares; Mr. Holubiak, 119,000 shares; Ms. Kim, 37,500 shares; Dr. Lewis, 65,000 shares; Dr. Mahony, 47,500 shares; and Mr. Ringo, 104,000 shares. Our non-employee directors did not hold any other equity awards as of such date.

(2)

The reported amounts in the table above represent the aggregate grant date fair value of the options granted in 2020 computed in accordance with Financial Accounting Standards Boards (FASB) Accounting Standards Codification Topic 718, Compensation—Stock Compensation (ASC Topic 718). Assumptions used in the calculation of these amounts are included in Note 8 of the consolidated financial statements included in our Annual Report on Form 10‑K for the year ended December 31, 2020.

Stockholder Communications

Stockholders and other interested parties may communicate with the Board by writing to Jason A. Okazaki, our Chief Legal and Business Officer and Corporate Secretary, at Assembly Biosciences, Inc., 331 Oyster Point Blvd., Fourth Floor, South San Francisco, California 94080. Upon receipt of a stockholder communication indicating a desire to communicate with the Board, Mr. Okazaki will review the communication and determine whether the communication should be directed to the Board or any individual director. All communications will be forwarded in this manner; provided, however, that Mr. Okazaki reserves the right not to forward to the Board or any individual director any materials that he deems in his reasonable discretion to be unduly frivolous, hostile, threatening or similarly inappropriate for communication to the Board or any individual director.

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Stockholder Engagement

Senior management regularly engages with our stockholders at industry conferences and investor meetings. In response to feedback gained through our engagement program, we remain focused on delivering on our research and clinical development strategies, and we continue to enhance the transparency and disclosure of our financial, operational and environmental and governance performance.

Our investor relations team keeps the Board regularly updated on the views of stockholders and provides reports from financial and other advisers concerning institutional stockholder feedback.

Environmental, Social and Governance Focus

Management and the Board recognize that, as we continue to grow and advance our pipeline of product candidates, it is important to also focus our corporate responsibility programs on issues that support long-term sustainability of our operations and manage relevant environmental, social and governance (ESG) risks. In 2020, we highlighted our programs, achievements and future plans on ESG issues by adding a sustainability section to our corporate website, which can be found at www.assemblybio.com/sustainability. The information posted on our website is not intended to be incorporated into this proxy statement.

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Proposal No2: Advisory Vote to Approve Our Named Executive Officers’ Compensation

General

Under the Dodd‑Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd‑Frank Act) and Section 14A of the Exchange Act, our stockholders are entitled to vote to approve, on a non-binding advisory basis, the compensation of our named executive officers (Named Executive Officers or NEOs) as disclosed in this proxy statement in accordance with SEC rules. This vote is commonly known as the “Say on Pay” vote. This vote is not intended to address any specific item of compensation, but rather our NEOs’ overall compensation and the philosophy, policies and practices described in this proxy statement.

We provide our stockholders with the opportunity to cast an advisory vote on our NEOs’ compensation every year. Approximately 99% of the votes cast on our “Say on Pay” vote were voted in favor of the proposal in 2020.

Our NEOs’ compensation subject to this vote is disclosed in the “Executive Compensation” section of this proxy statement and the compensation tables and the related narrative disclosure contained in this proxy statement. As discussed in these disclosures, our compensation philosophy is to provide competitive overall compensation that attracts and retains top performers. To achieve these goals, our compensation program is structured to:

 

provide total compensation, compensation elements and other benefits that are competitive with those companies that are competing for available employees;

 

provide a mix of compensation that offers (1) a market-competitive base salary, with targeted annual performance-based cash bonus opportunities based on individual achievement and Company performance against corporate goals, measured over a 12-month performance period, and (2) the opportunity to share in the long‑term growth of our Company through equity compensation; and

 

reward exceptional performance by individual employees.

Accordingly, the Board is asking stockholders to indicate their support for the compensation of our NEOs as described in this proxy statement by casting a non‑binding advisory vote “FOR” the following resolution:

“RESOLVED, that the Company’s stockholders hereby approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers, as disclosed in the proxy statement for the 2021 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation tables and narrative discussion in the proxy statement for the 2021 Annual Meeting of Stockholders.”

The “Executive Compensation” section of this proxy statement contains more details on our NEOs’ compensation, and we urge you to read it carefully before casting your vote on this proposal. Because the vote is advisory, it is not binding on us, the Board or the Compensation Committee. Nevertheless, the views expressed by our stockholders, whether through this vote or otherwise, are important to our management, the Board and the Compensation Committee. Our management, the Board and Compensation Committee intend to consider the results of this vote in making recommendations and determinations in the future regarding executive compensation arrangements and our executive compensation principles, policies and procedures.

We submit the compensation of our NEOs to our stockholders for a non-binding advisory vote on an annual basis. Accordingly, the next stockholder advisory vote on the compensation of our NEOs after the Annual Meeting is expected to take place at the 2022 Annual Meeting of Stockholders. The next non-binding advisory vote on the frequency of such non-binding advisory votes will occur no later than our 2024 annual meeting of stockholders.

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Required Vote

Assuming a quorum is present, to be approved, the affirmative vote of the majority of the votes cast on Proposal No. 2 must be voted “FOR” the approval, on a non-binding advisory basis, of our NEOs’ compensation as disclosed in this proxy statement. Abstentions and broker non-votes will not be considered towards vote totals on Proposal No. 2 and will have no effect on the outcome of the vote.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF OUR NAMED EXECUTIVE OFFICERS’ COMPENSATION.

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Matters Relating to Our Independent Registered Public Accounting Firm

Pre-Approval Policies and Procedures

The charter of the Audit Committee provides for Audit Committee pre‑approval of all auditing services and the terms thereof (which may include providing comfort letters in connection with underwritten securities offerings) and non‑audit services (other than non‑audit services prohibited under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the Public Company Accounting Oversight Board) to be provided to us by our independent registered public accounting firm. The pre‑approval requirement is waived with respect to the provision of non‑audit services for us if the “de minimis” provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied. There were no non-audit services provided by our independent public accounting firm for the fiscal years ended December 31, 2020 and 2019. This authority to pre‑approve non‑audit services may be delegated to one or more members of the Audit Committee, who shall present all decisions to pre‑approve an activity to the full Audit Committee at its first meeting following such decision. The Audit Committee pre‑approved all services provided by Ernst & Young LLP, our independent registered public accounting firm for the fiscal years ended December 31, 2020 and 2019.

Fees and Services

The following table represents aggregate fees billed to us for services related to the fiscal years ended December 31, 2020 and 2019 by Ernst & Young LLP, our independent registered public accounting firm:

 

Fees

 

2020

 

 

2019

 

Audit Fees(1)

 

$

1,702,583

 

 

$

1,586,312

 

Audit-Related Fees

 

 

 

 

 

 

Tax Fees(2)

 

 

143,582

 

 

 

223,376

 

All Other Fees(3)

 

 

2,340

 

 

 

3,485

 

Total

 

$

1,848,505

 

 

$

1,813,173

 

(1)

Audit Fees consisted of fees and expenses covering the integrated audit of our consolidated financial statements, our internal control over financial reporting, review of the interim condensed consolidated financial statements, statutory audits, accounting and financial reporting consultations, and the issuance of consents in connection with registration statement filings with the SEC and comfort letters in connection with registered securities offerings.

(2)

Tax Fees consisted of fees and expenses for corporate tax compliance, routine on-call tax services, international tax advisory services, indirect (non-income) tax advisory and tax incentives and domestic tax advisory services.

(3)

All Other Fees consisted of fees billed in the indicated year for an annual subscription to Ernst & Young LLP’s online resource library.

All of the services described above were pre-approved by our Audit Committee. The Audit Committee concluded that the provision of these services by Ernst & Young LLP would not affect their independence.

Report of the Audit Committee of the Board of Directors

The Audit Committee reviews our financial reporting process on behalf of the Board. Management has the primary responsibility for the preparation and integrity of the consolidated financial statements and the reporting process, including establishing and monitoring the system of internal financial controls. In this context, the Audit Committee hereby reports as follows:

 

1.

The Audit Committee has reviewed and discussed our audited consolidated financial statements and internal control over financial reporting for the year ended December 31, 2020 with management.

 

2.

The Audit Committee has discussed with Ernst & Young LLP, our independent registered public accounting firm, who is responsible for expressing an opinion on the conformity of our consolidated financial statements with generally accepted accounting principles in the United States and as to the effectiveness of our internal control over financial reporting, its judgments as to the quality, not just the acceptability, of our accounting principles and such other matters required to be discussed by the

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applicable requirements of Auditing Standards No. 1301, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board (PCAOB).

 

3.

The Audit Committee has received the written disclosures and the letter from Ernst & Young LLP required by PCAOB Ethics and Independence Rule 3526, “Communication with Audit Committees Concerning Independence,” regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with Ernst & Young LLP its independence from the Company and management.

 

4.

Based on the review and discussions described above, among other things, the Audit Committee has recommended to the Board that the audited consolidated financial statements and management’s assessment of the effectiveness of our internal control over financial reporting be included in our Annual Report on Form 10‑K for fiscal year ended December 31, 2020.

 

Submitted by:

 

The Audit Committee
Anthony E. Altig, Chairman
Gina Consylman
Susan Mahony, Ph.D.
William R. Ringo, Jr.

 

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Proposal No3: Ratification of the Selection of the Independent Registered Public Accounting Firm

General

The Audit Committee has selected Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021. Ernst & Young LLP has served as our independent registered public accounting firm since 2015.

Neither our Amended and Restated Bylaws nor other governing documents or law require stockholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm. However, the Board is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether to retain Ernst & Young LLP. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interest of the Company and its stockholders. Representatives of Ernst & Young LLP are expected to attend the Annual Meeting, where they will have an opportunity to make a statement and be available to respond to appropriate questions.

Required Vote

Assuming a quorum is present, to be approved, the affirmative vote of the majority of the votes cast on Proposal No. 3 must be voted “FOR” the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021. Abstentions and broker non‑votes will not be considered towards vote totals on Proposal No. 3; however, the ratification of the selection of Ernst & Young LLP is a matter on which a broker, bank or other nominee has discretionary voting authority, so we do not expect any broker non‑votes with respect to Proposal No. 3.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

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Proposal No. 4: Approval of an Amendment to the Assembly Biosciences, Inc. 2018 Stock Incentive Plan

Background

On May 30, 2018, we adopted the Assembly Biosciences, Inc. 2018 Stock Incentive Plan, which was amended by Amendment No. 1 to Assembly Biosciences, Inc. 2018 Stock Incentive Plan effective as of May 17, 2019, Omnibus Amendment to Assembly Biosciences, Inc. Stock Plans effective as of March 11, 2020 and Amendment No. 3 to Assembly Biosciences, Inc. 2018 Stock Incentive Plan, effective as of June 11, 2020 (as amended from time to time, the 2018 Plan). The 2018 Plan provides for the grant of equity awards to our employees, non-employee directors and consultants and is necessary to ensure that we can continue to grant equity awards to eligible recipients at levels determined to be appropriate by the Board, the Compensation Committee and/or the Chief Executive Officer pursuant to his Board delegated authority.

As of March 23, 2021, there were stock options to acquire 6,364,800 shares of common stock and 36,485 cash settled stock appreciation rights (SARs) outstanding under our equity compensation plans. In addition, there were 495,098 shares subject to unvested restricted stock units (RSUs) with time-based vesting, 140,000 shares subject to vested RSUs that have not settled and 100,000 shares subject to unvested RSUs with performance-based vesting outstanding under our equity compensation plans. As of March 23, 2021, there were approximately 2,610,518 shares of common stock available and unallocated under our equity compensation plans, of which 45,255 shares are only issuable as inducement awards to new employees under our 2017 Inducement Award Plan, our 2019 Inducement Award Plan and our 2020 Inducement Award Plan collectively. As a result, as of March 23, 2020, there were approximately 2,565,263 shares of common stock available under our shareholder approved plans, of which 2,451,680 shares of common stock remain available and unallocated for issuance under the 2018 Plan.

After the record date for the Annual Meeting, on March 29, 2021, we issued an aggregate of annual performance equity awards to our employees totaling 1,267,075 shares or common stock, which consisted of stock options to acquire 1,048,250 shares of or common stock, 199,875 RSUs and 18,950 cash settled SARs under our 2018 Plan. As a result, as of March 29, 2021, there are 1,184,605 shares of common stock available and unallocated for issuance under the 2018 Plan.

We also expect to issue an additional 120,000 stock options under the 2018 Plan at the Board meeting immediately following the Annual Meeting in connection with the election of seven non-employee directors, including one new Board member.

On March 18, 2021, the Board, upon the recommendation of the Compensation Committee and subject to the approval of our stockholders at the Annual Meeting, approved Amendment No. 4 to the 2018 Plan (the Amendment) to increase the number of shares reserved under the 2018 Plan from 4,600,000 to 6,600,000 (as further amended, the Amended Plan). The proposed increase of 2,000,000 shares equals approximately 5.0% of the Company’s outstanding shares and equals approximately 4.7% of our outstanding shares inclusive of the outstanding 2,424,242 prefunded warrants that were issued in December 2019.

Purpose

The purpose of the Amended Plan is to encourage ownership in the Company by our employees, directors and consultants and our affiliates whose long-term employment by, or involvement with, us is considered essential to our continued progress. This aligns the interests of the award recipients and stockholders and also permits the award recipients to share in our success. The Amended Plan provides an essential component of the total compensation package offered to our employees and other 2018 Plan participants. It reflects the importance that we place on motivating employees and other 2018 Plan participants to achieve superior results over the long term and paying employees and other 2018 Plan participants based on such achievements. We strongly believe that our equity compensation programs and emphasis on employee and non-employee director stock ownership have been integral to our progress and that emphasis on, and continuation of, those programs is necessary for us to achieve superior performance in the future. All of our, and our affiliates’, employees, directors and our consultants are eligible to participate in the Amended Plan.

The purpose of the Amendment is to increase the number of shares reserved for issuance under the 2018 Plan by 2,000,000 shares. We believe the ability to grant competitive equity awards is a necessary and powerful recruiting and retention tool for us to attract and retain the quality and number of personnel we need to continue the forward momentum of our business. Our employees are critical to the continued development of our lead core inhibitor

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product candidate in our hepatitis B virus (HBV) program, vebicorvir (VBR), in ongoing Phase 2 clinical studies evaluating VBR in combination with other HBV therapeutics with different mechanisms of action, the continuation of Phase 2 clinical studies for our HBV program’s second core inhibitor product candidate, ABI-H2158, the continuation of Phase 1a/1b clinical studies for our HBV program’s third core inhibitor product candidate ABI-H3733, as well as the continued research and development efforts to nominate a fourth core inhibitor candidate and additional product candidates, including molecules that disrupt covalently closed circular DNA (cccDNA) and other small molecules targeting novel, currently undisclosed targets to add to combination treatments with our core inhibitor product candidates. We believe this is a modest increase that will be sufficient to meet our retention and anticipated new hire needs until the next annual meeting of stockholders and will underpin one of our core compensation philosophies, pay for performance, by giving our employees and other 2018 Plan participants the opportunity to share in our long-term and motivate the creation of long-term stockholder value through equity compensation.  

Rationale

We believe you should vote to approve the Amendment for the following reasons:

 

We are committed to sound equity compensation practices. We recognize that equity compensation awards dilute stockholder equity and so must be used judiciously. Although our employee headcount is rapidly increasing as our business grows, we have generally aligned our compensation practices with industry norms among our peer group described in this proxy statement under “Executive Compensation—How We Determine Executive Compensation—Role of the Compensation Committee; Oversight of Executive Compensation—Peer Group Process.” We believe our use of equity has been responsible and mindful of stockholder interests.

 

Equity awards align the interests of management with those of stockholders. We believe the grant of equity awards, particularly stock options and performance-based vesting RSUs, are effective tools to align management and stockholder interests, as management only realizes value from these awards if our stock price appreciates and meaningful performance metrics are achieved. For example, approximately 82% and 83% of the new hire equity awards granted to our Chief Legal and Business Officer and Chief Scientific Officer, Virology, respectively, are at-risk and will only increase in value if our stock price appreciates.

 

The Amended Plan contains provisions that protect stockholder interests. The Amended Plan contains features that we believe further align the interests of our employees and directors with those of our stockholders, including a minimum vesting requirement of one year for all time-vesting awards that are made to employees, subject to acceleration in the event of death, disability, retirement, separation of service or a Corporate Transaction (as defined below), and a minimum vesting requirement of the earlier of (1) one year and (2) the next annual meeting of the stockholders for time-based vesting awards that are made to directors, subject to acceleration in the event of death, disability or a Corporate Transaction (as discussed below). The Amended Plan also has no automatic acceleration of vesting provisions upon a Corporate Transaction unless the equity awards are not assumed in connection with the Corporate Transaction.

 

Equity compensation helps us to attract and retain talent. A talented, motivated and effective management team and workforce are essential to our continued progress. Equity compensation is an important component of our total compensation because we believe it will incentivize managers and employees to think and act like owners. Our employees are our most valuable assets, and the awards permitted under the Amended Plan are vital to our ability to attract and retain outstanding and highly skilled individuals. If the Amendment is not approved by stockholders, retaining the best talent will be increasingly difficult as the number of shares available and unallocated under the 2018 Plan is projected to fall below the number of shares of common stock that we will need to grant annual performance equity awards to employees in 2022 at levels comparable to our peers.

 

Continued access to broad-based equity compensation will help enable rapid growth. To align the interests of our new hires with those of our current stockholders, our practice is to provide new hires with meaningful initial equity awards upon hiring. Of the 2,185,504 shares of common stock underlying equity awards granted in 2020, approximately 50% were issued to new hires, 1% were issued as retention awards

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to existing employees and 4% were issued to non-employee directors. We expect our headcount to increase from 95 as of January 31, 2021 to approximately 120 by the end of 2021 as we advance our product candidates into further clinical trials and increase our discovery efforts for new product candidates. In connection with these new hires, we expect to continue our practice of providing meaningful initial equity awards, as well as making annual performance awards and retention award grants to existing employees to ensure continued alignment with our stockholders. We believe that our stockholders’ long-term interests are best served by equity compensation awards designed to achieve these goals.

 

In 2020, approximately 28% of the equity awards we issued were associated with enhancements in our senior leadership team, including the hiring of a new Chief Legal and Business Officer and Chief Scientific Officer, Virology. In 2020, we significantly enhanced and strengthened our leadership with the appointments of Jason A. Okazaki as Chief Legal and Business Officer; William E. Delaney IV, Ph.D. as Chief Scientific Officer, Virology; Carl H. Enell, as SVP, Corporate Development; and Nicole S. White, Ph.D., as SVP, Pharmaceutical Development and Manufacturing. These key hires were critical as we progress three clinical candidates across our HBV program and work to develop and advance our core inhibitor portfolio and expand our portfolio beyond core inhibitors to include cccDNA disruptors and other small molecules targeting novel undisclosed targets.

 

We recruit employees in highly competitive labor markets and need to provide competitive compensation arrangements to attract and retain talent. The San Francisco Bay Area, where we are headquartered and where 84% of our employees are located, is among the most challenging markets in the world for hiring, particularly for life sciences and biotechnology companies. To attract and retain an experienced and highly educated workforce with the skills necessary to advance our programs, we need to offer competitive compensation packages consisting of attractive cash and equity components. Our Compensation Committee has retained Radford, a part of Aon plc, to serve as an independent outside compensation consultant. In this capacity, Radford collects and analyzes compensation information from a comparative group of biotechnology companies and provides us with recommendations regarding these compensation packages.

 

Our current equity-pay mix aligns employee incentives with stockholder gains. Our employee compensation consists of base salary payable in cash, annual performance-based cash bonuses and long-term incentives in the form of equity awards. Our annual long-term performance equity incentive award grants are a combination of stock option and RSUs; however, in certain circumstances, the Compensation Committee may consider other equity awards under the Amended Plan, including restricted stock, SARs and dividend equivalent rights. Equity awards provide effective incentives for our employees to work toward achieving business results and scientific advances that will increase the long-term value of our stock as employees only realize value from stock options and SARs if the shares of common stock appreciate and the value of other equity awards depends on the price of our common stock.

 

Equity compensation helps us avoid business disruption due to compensation programs. If the Amendment is not approved, we will have to restructure existing compensation programs for reasons not directly related to the achievement of our business objectives. Such restructuring will likely necessitate the replacement of components of compensation to be awarded in equity with cash, or with other instruments that may not necessarily align employee interests with those of stockholders as effectively. If we were to replace equity awards with cash, this would divert our cash reserves away from our research and development activities and our clinical trials, which could negatively impact the progress of our product candidates and research and development activities, and in turn, impair stockholder value. We believe that such actions would be highly disruptive to us and our employees.

 

We believe our equity awards create strong, long-term incentives for our employees. We believe that our employees and other plan participants holding equity is beneficial for our stockholders as equity represents a shared long-term interest of our employees, other plan participants and stockholders in the value of our common stock.

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Material Terms of the Amended Plan

The following is a summary of the principal provisions of the Amended Plan and its operation, including the proposed Amendment. A copy of the proposed Amendment is attached as Appendix A to this proxy statement. A copy of the full 2018 Plan (as amended to date), with proposed deletions indicated by strike-out and proposed revisions to be made by the Amendment indicated by bold and underline, is attached as Appendix B to this proxy statement and is incorporated herein by reference. The following description of the Amended Plan does not purport to be complete and is qualified in its entirety by reference to Appendix B. Capitalized terms used in this summary and not otherwise defined will have the meanings ascribed to such terms in the Amended Plan.

Purpose of the Amended Plan. The purpose of the Amended Plan is to encourage ownership in the Company by employees, directors and consultants of the Company and its affiliates whose long-term employment by or involvement with the Company is considered essential to our continued progress and, thereby, aligning the interests of the award recipients and stockholders and permitting the award recipients to share in our success. The Amended Plan provides an essential component of the total compensation package offered to our employees and other plan participants. It reflects the importance we place on motivating employees and other plan participants to achieve superior results over the long-term and paying employees and other plan participants based on such achievements. We strongly believe that our equity compensation programs and emphasis on employee and non-employee director stock ownership have been integral to our progress and that a continuation of, and emphasis on, those programs is necessary for us to achieve superior performance in the future. All of our employees, directors and consultants and those of our affiliates are eligible to participate in the Amended Plan.

Types of Awards.  The Amended Plan provides for the grant of non-qualified and incentive stock options (Options), SARs, dividend equivalent rights, unrestricted stock, restricted stock, RSUs or other rights or benefits under the Amended Plan (collectively, Awards).

Shares Subject to the Amended Plan.  No more than 6,600,000 shares of common stock may be issued pursuant to Awards under the Amended Plan. The number of shares available for Awards, as well as the terms of outstanding Awards, are subject to adjustment as provided in the Amended Plan for stock splits, stock dividends, recapitalizations and other similar events.

Each share of common stock subject to an Award granted pursuant to the Amended Plan will reduce the aggregate number of shares available under the Amended Plan by one share of common stock. Any shares of common stock that again become available for issuance under the Amended Plan due to a forfeiture, expiration or cancellation of an Award (or if the Award otherwise becomes unexercisable) will generally be added back to the aggregate plan limit of the Amended Plan in this same manner and such shares will again be available for subsequent Awards, except as prohibited by law. In the event any Option or other Award granted under the Amended Plan is exercised through the tendering of shares of common stock (either actually or through attestation) or withholding shares of common stock, or in the event tax withholding obligations are satisfied by tendering or withholding shares of common stock, any shares of common stock so tendered or withheld shall not again be available for awards under the Amended Plan. Shares of Common Stock subject to a SAR granted pursuant to Section 6(k) of the Amended Plan that are not issued in connection with cash or stock settlement of the exercise of the SAR shall not again be available for award under the Amended Plan. Shares of common stock reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Options shall not be available for awards under the Amended Plan.

Director Compensation Limit. The Amended Plan provides that the value of all Awards awarded under the Amended Plan and all other cash compensation paid by the Company to any non-employee director in any calendar year shall not exceed $1,000,000.

Administration. The Amended Plan will be administered by the Board or a committee designated by the Board (the Committee), which committee is constituted in such a manner as to satisfy the applicable laws and to permit such grants and related transactions under the Amended Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. Currently, the Compensation Committee generally serves as the Committee specified in the Amended Plan and acts as the administrator thereunder; however, the Board delegated authority to our Chief Executive Officer acting as a committee of one to serve as the administrator in the context of granting awards under the Amended Plan to newly hired employees or in connection with promotions to individuals that are

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not Section 16 officers, direct reports of the Chief Executive Officer or above the level of Vice President. Awards granted by the Chief Executive Officer are limited to a preset range prepared in consultation with our Compensation Consultant and consistent with our compensation philosophy. We refer to the entity or individual administering the Amended Plan as the Administrator.

Subject to the terms of the Amended Plan, the Administrator has express authority to determine the employees, directors or consultants who will receive Awards, the number of shares of common stock or other consideration to be covered by each Award, and the terms and conditions of Awards. The administrator has broad discretion to prescribe, amend and rescind rules relating to the Amended Plan and its administration, to interpret and construe the Amended Plan and the terms of all Award agreements, and to take all actions necessary or advisable to administer the Amended Plan or to effectuate its purposes. Subject to the terms of the Amended Plan, the administrator may accelerate the vesting of any Award, allow the exercise of unvested Awards, and may modify, replace, cancel or renew any Award.

Indemnification. We will indemnify and defend members of the Committee and their delegates to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Amended Plan, or any Award granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within 30 days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to us, in writing, the opportunity at our expense to defend the same.

Minimum Vesting. Time-based awards granted to employees under the Amended Plan are subject to a one-year minimum vesting requirement other than in the case of death, disability, retirement, separation of service or a Corporate Transaction. Time-based awards granted to directors under the Amended Plan may not vest until the earlier of one year from the grant date and the next annual meeting of the stockholders, other than in the case of death, disability or a Corporate Transaction.

Eligibility. The Administrator may grant Options that are intended to qualify as incentive stock options (ISOs) only to employees of the Company or an affiliate that is a “parent corporation” or “subsidiary corporation” within the meaning of Section 424 of the Code, and may grant all other Awards to any employee, director or consultant. The Amended Plan and the discussion below use the term “Grantee” to refer to the holder of an Award, or the shares of common stock issuable or issued upon exercise, vesting or settlement of an Award, under the Amended Plan.

Options. Options granted under the Amended Plan provide Grantees with the right to purchase shares of common stock at a predetermined exercise price. The Administrator may grant Options that are intended to qualify as ISOs or Options that do not so qualify (Non-Qualified Stock Options). To qualify as ISOs, Options must meet additional federal tax requirements, including a $100,000 limit on the value of shares subject to ISOs that first become exercisable by a Grantee in any one calendar year.

Exercise Price of Options. The exercise price of ISOs granted to Grantees who own more than ten percent of the common stock of the Company or an affiliate on the grant date of the ISO may not be less than 110% of the fair market value of the shares of common stock subject to the ISO on the grant date. The exercise price of all other Options may not be less than 100% of the fair market value of the shares of common stock subject to the Option on the grant date.

Exercise of Options. To the extent exercisable in accordance with the applicable Award agreement, each Option may be exercised in whole or in part, and from time to time during its term, subject to earlier termination relating to a Grantee’s termination of continuous service. With respect to Options, the Administrator has the discretion to accept payment of the exercise price by any of the following methods (or any combination of them): cash or check in U.S. dollars, promissory note with such recourse, interest, security and redemption provisions as the Administrator determines, surrender of shares of common stock, broker assisted exercise, with respect to Options that are not ISOs,

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by net exercise or by past or future services rendered to the Company or an affiliate. No more than 4,600,000 shares of common stock may be granted in the form of incentive stock options.

Prohibition on Repricing. Except in connection with certain corporate adjustment events, we may not, without stockholder approval, amend an Award granted under the Amended Plan to reduce the Award’s exercise price per share, cancel and regrant new Awards with lower prices per share than the original price per share of the cancelled Awards, or cancel any Awards in exchange for cash or the grant of replacement Awards with an exercise price that is less than the exercise price of the original Awards, essentially having the effect of a repricing.

Restricted Stock and Restricted Stock Units. The Administrator may grant (1) shares of restricted stock that are forfeitable until certain vesting requirements are met and (2) RSUs that represent the right to receive payment, in cash or in shares of common stock or other securities or a combination thereof, subject to the passage of time and continuous service or the attainment of performance criteria as established by the Administrator. The Administrator has discretion to determine the terms and conditions under which a Grantee’s interests in restricted stock and RSUs become vested and non-forfeitable.

Unrestricted Stock. The Administrator may grant unrestricted stock in lieu of paying cash compensation.

Dividend Equivalent Rights. The Administrator may grant awards of dividend equivalent rights, which entitle the Grantee to compensation measured by dividends paid with respect to shares of common stock.

Income Tax Withholding. As a condition for the issuance of shares of common stock pursuant to Awards, the Amended Plan requires the Grantee to make such arrangements as we may require for satisfaction of any applicable federal, state, local or foreign withholding tax obligations that may arise in connection with the Award or the issuance of shares of common stock. Subject to approval by the Administrator, Grantees may elect to have their tax withholding obligations satisfied by tendering previously owned shares of common stock or authorizing the Company to withhold shares of common stock to be issued pursuant to exercise or vesting. Any shares held back to satisfy such tax withholding will not be available for future issuance under the Amended Plan.

Transferability. Unless the Administrator provides otherwise, in its sole discretion, no Award may be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee. Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.

Certain Corporate Transactions. Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Amended Plan shall terminate unless they are assumed or replaced in connection with the Corporate Transaction. To the extent all outstanding Awards granted under the Amended Plan shall terminate, except as may be otherwise expressly provided in the relevant Award Agreement, all Awards with solely time-based vesting that are not vested and/or exercisable immediately prior to the effective time of the Corporate Transaction shall become fully vested and exercisable as of immediately prior to the effective time of the Corporate Transaction and all Awards with conditions and restrictions relating to the attainment of performance goals shall be deemed to vest and become nonforfeitable as of the Corporate Transaction as provided in the relevant Award Agreement or if not provided for in the relevant Award Agreement shall be deemed to vest and become nonforfeitable as of the Corporate Transaction assuming the higher of (a) achievement of all relevant performance goals at the “target” level (prorated based upon the length of time within the performance period that has elapsed prior the Corporate Transaction or partial achievement of the performance goals), or (b) actual achievement of all relevant performance goals as of the date of such Corporate Transaction. In the event of such termination of the Awards, the Company shall have the option (in its sole discretion) to (1) make or provide for a payment, in cash or in kind, to the Grantees holding Options and SARs, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the Sale Price multiplied by the number of Shares subject to outstanding Options and SARs and (B) the aggregate exercise price of all such outstanding Options and SARs (provided that, in the case of an Option or SAR with an exercise price equal to or more than the Sale Price, such Option or SAR shall be cancelled for no consideration); or (2) permit each Grantee, within a specified period of time prior to the consummation of the Corporate Transaction as determined by the Administrator, to exercise all outstanding Options and SARs (to the extent then exercisable including due to acceleration as contemplated by Section 13(a) of the Amended Plan if the Awards are not assumed or replaced) held by such Grantee as of immediately prior to the effective time of the Corporate Transaction. In the event of a termination of Awards pursuant to Section 13(a) of the Amended Plan, the Company shall also have the option (in its sole discretion) to make or provide for a payment, in cash or in kind, to the Grantees holding other Awards in an amount equal to the Sale Price multiplied by the number of vested Shares

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under such Awards.  For purposes of Section 13(a) of the Amended Plan, “Sale Price” means the value as determined by the Administrator of the consideration payable, or otherwise to be received by stockholders, per share pursuant to a Corporate Transaction.

The Administrator has the authority, exercisable either in advance of any actual or anticipated Corporate Transaction or at the time of an actual Corporate Transaction and exercisable at the time of the grant of an Award under the Amended Plan or any time while an Award remains outstanding, to provide for the full or partial automatic vesting and exercisability of one or more outstanding unvested Awards under the Amended Plan and the release from restrictions on transfer and repurchase or forfeiture rights of such Awards in connection with a Corporate Transaction on such terms and conditions as the Administrator may specify. The Administrator also shall have the authority to condition any such Award vesting and exercisability or release from such limitations upon the subsequent termination of the continuous service of the Grantee within a specified period following the effective date of the Corporate Transaction. The Administrator may provide that any Awards so vested or released from such limitations in connection with a Corporate Transaction shall remain fully exercisable until the expiration or sooner termination of the Award. Any ISOs accelerated in connection with a Corporate Transaction shall remain exercisable as an ISO under the Code only to the extent the $100,000 limitation of Section 422(d) of the Code is not exceeded.

“Corporate Transaction” means any of the following transactions, provided, however, that the Administrator shall determine under (4) and (5) whether multiple transactions are related, and its determination shall be final, binding and conclusive: (1) a merger or consolidation in which we are not the surviving entity, except for a transaction the principal purpose of which is to change the state in which we are incorporated; (2) the sale, transfer or other disposition of all or substantially all of our assets; (3) the complete liquidation or dissolution of the Company; (4) any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which we are the surviving entity but (A) the shares of common stock outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than 50% of the total combined voting power of our outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger; or (5) acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than 50% of the total combined voting power of our outstanding securities.

Term of the Amended Plan; Amendments and Termination.  The term of the Amended Plan is ten years from May 30, 2018, except that no ISOs may be granted after April 5, 2028. The Board may, from time to time, amend, alter, suspend, discontinue or terminate the Amended Plan; provided, that any amendment to increase the number of shares of common stock available for Awards under the Amended Plan and certain other amendments will be subject to stockholder approval. Additionally, no amendment, suspension or termination of the Amended Plan shall materially and adversely affect Awards already granted unless it relates to an adjustment pursuant to certain transactions that change our capitalization or it is otherwise mutually agreed between the Grantee and the Administrator.

Notwithstanding the foregoing, the Administrator may adopt such amendments to the Amended Plan and the applicable award agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (1) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (2) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

Expected U.S. Federal Income Tax Consequences. The following is a brief summary of certain U.S. federal tax consequences of certain transactions under the Amended Plan. This summary is not intended to be complete and does not describe state or local tax consequences. Grantees in the Amended Plan should review the current tax treatment with their individual tax advisors at the time of grant, exercise, vesting or any other transaction relating to an Award or the underlying shares.

Under the Code, we will generally be entitled to a deduction for federal income tax purposes at the same time and in the same amount as the ordinary income that Grantees recognize pursuant to Awards. For Grantees, the expected U.S. federal income tax consequences of Awards are as follows:

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Non-Qualified Stock Options. A Grantee will not recognize income at the time a Non-Qualified Stock Option is granted. At the time a Non-Qualified Stock Option is exercised, the Grantee will recognize ordinary income in an amount equal to the excess of (a) the fair market value of the shares of common stock issued to the Grantee on the exercise date over (b) the exercise price paid for the shares. At the time of sale of shares acquired pursuant to the exercise of a Non-Qualified Stock Option, the appreciation (or depreciation) in value of the shares after the date of exercise will be treated either as short-term or long-term capital gain (or loss) depending on how long the shares have been held.

 

ISOs. A Grantee will not recognize income upon the grant of an ISO. There are generally no tax consequences to the Grantee upon exercise of an ISO (except that the amount by which the fair market value of the shares at the time of exercise exceeds the option exercise price is a tax preference item possibly giving rise to an alternative minimum tax). If the shares of common stock are not disposed of within two years from the date the ISO was granted or within one year after the ISO was exercised, any gain realized upon the subsequent disposition of the shares will be characterized as long-term capital gain and any loss will be characterized as long-term capital loss. If either of these holding period requirements are not met, then a “disqualifying disposition” occurs and (a) the Grantee recognizes ordinary income in the amount by which the fair market value of the shares at the time of exercise exceeded the exercise price for the ISO and (b) any remaining amount realized on disposition (except for certain “wash” sales, gifts or sales to related persons) will be characterized as capital gain or loss.

 

Stock Appreciation Rights. A Grantee will not recognize income at the time a SAR is granted. At the time a SAR is exercised, the Grantee will recognize ordinary income in an amount equal to the excess of (a) the fair market value of the shares of common stock issued or the amount of cash paid, to the Grantee on the exercise date over (b) the exercise price paid for the shares. At the time of sale of shares acquired pursuant to the exercise of a SAR, the appreciation (or depreciation) in value of the shares after the date of exercise will be treated either as short-term or long-term capital gain (or loss) depending on how long the shares have been held.

 

Restricted Stock and Restricted Stock Units. In general, a Grantee will not recognize income at the time of grant of restricted stock or RSUs, unless the Grantee elects with respect to restricted shares to accelerate income taxation to the date of the Award by making a timely Section 83(b) election. If the Grantee makes such an election, such Grantee would recognize ordinary compensation income equal to the excess of the fair market value of the restricted shares on the grant date over any amount the Grantee pays for them (in which case subsequent gain or loss would be capital in nature). In the absence of an election to accelerate income taxation to the date of an Award, a Grantee will recognize taxable compensation income at the time the Award vests in an amount equal to the excess of the fair market value of any property that the Grantee receives over the amount paid for such property by the Grantee, or, in the case of RSUs, upon receipt of cash or shares of common stock.

 

Unrestricted Stock. In general, a Grantee will recognize income at the time of grant of unrestricted stock.

 

Parachute Payments. Under certain circumstances, the accelerated vesting, cash-out or accelerated lapse of restrictions on Awards in connection with a change in control of the Company might be deemed an “excess parachute payment” for purposes of the golden parachute tax provisions of Code Section 280G, and the Grantee may be subject to a 20% excise tax and we may be denied a tax deduction.

 

Income Taxes and Deferred Compensation. The Amended Plan provides that Grantees are solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with Awards (including any taxes arising under Section 409A of the Code). Nevertheless, the Amended Plan permits the Administrator to establish one or more programs under the Amended Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise or vesting of an Award or other event that absent the election would entitle the Grantee to payment or receipt of shares of common stock or other consideration under an Award. The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, shares of common stock or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

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Eligibility

Persons eligible to participate in the Amended Plan are our employees, directors and other consultants and those of our affiliates as selected from time to time by the Administrator in its discretion. As of March 23, 2021, approximately 98 individuals are currently eligible to participate in the Amended Plan, which includes five executive officers, 87 full-time employees who are not executive officers and six non-employee directors. At this time, we do not have any plans to make future grants to any consultants.

New Plan Benefits

Because the grant of Awards under the Amended Plan is within the discretion of the Administrator, we cannot determine the dollar value or number of shares of common stock that will in the future be received by or allocated to any participant in the Amended Plan. Accordingly, in lieu of providing information regarding benefits that will be received under the Amended Plan, the following table provides information concerning the benefits that were received by the following persons and groups during 2020 under the 2018 Plan: (a) each named executive officer; (b) all current executive officers, as a group; (c) all current directors who are not executive officers, as a group; and (d) all employees who are not executive officers as a group.

 

 

Options

 

 

Stock Awards

 

Name and Position

 

Weighted

Average

Exercise

Price

($)

 

 

Number of

Awards

(#)

 

 

Dollar Value

($)(1)

 

 

 

Number of

Awards

(#)

 

John G. McHutchison, A.O., M.D.

   Chief Executive Officer and President

 

 

14.45

 

 

 

100,000

 

 

 

722,500

 

 

 

 

50,000

 

Thomas J. Russo, CFA(2)

   Chief Financial Officer

 

N/A

 

 

 

 

 

 

626,884

 

 

 

 

43,383

 

Jason A. Okazaki(3)

   Chief Legal and Business Officer

 

N/A

 

 

 

 

 

N/A

 

 

 

 

 

William E. Delaney IV, Ph.D.(3)

   Chief Scientific Officer, Virology

 

N/A

 

 

 

 

 

N/A

 

 

 

 

 

Jacqueline S. Papkoff, Ph.D.

   Former Chief Scientific Officer, Microbiome

 

 

14.45

 

 

 

34,000

 

 

 

245,650

 

 

 

 

17,000

 

All current executive officers, as a group(4)

 

 

14.45

 

 

 

100,000

 

 

 

1,349,384

 

(5)

 

 

93,383

 

All current directors who are not executive officers, as a

   group(6)

 

20.47

 

 

 

70,000

 

 

N/A

 

 

 

 

 

All current employees who are not executive officers, as

   a group(7)

 

 

14.78

 

 

 

339,625

 

 

 

1,720,882

 

(5)

 

 

118,941

 

 

(1)

The valuation of stock awards is based on the grant date fair value computed in accordance with FASB ASC Topic 718. For a discussion of the assumptions used in calculating these values, see Note 8 to of the consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

(2)

Dr. McHutchison and Mr. Russo joined us in August and October 2019, respectively. As such, their annual equity grants in 2020 were prorated.

(3)

Mr. Okazaki and Dr. Delaney joined us in March and May 2020, respectively. As such, they did not receive 2020 annual equity grants.

(4)

Does not include grants otherwise presented in the table to Dr. Papkoff, because notwithstanding her inclusion as a named executive officer, due to the termination of her employment on January 31, 2021 in connection with the wind-down of our Microbiome program, Dr. Papkoff is not a current executive officer.

(5)

Represents the aggregate grant date fair value for the group.

(6)

Each non-employee director was granted options to purchase 10,000 shares of common stock at the Board meeting following the 2020 Annual Meeting.

(7)

Additionally, we granted 21,385 SARs under the 2018 Plan to current employees that are not executive officers during 2020.

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Equity Plans

The following table sets forth information as of December 31, 2020 regarding shares of common stock that may be issued under our equity compensation plans:

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(1)

(b)

 

 

Number of

securities

remaining

available for

future

issuance

under equity

compensation

plans

(excluding

securities

reflected in

column (a))

(c)

 

 

Equity compensation plans approved by our stockholders

 

 

5,515,752

 

(2)

 

$

14.39

 

 

 

2,355,332

 

(3)

Equity compensation plans not approved by our stockholders

 

 

2,067,708

 

(4)

 

$

18.86

 

 

 

24,020

 

(5)

Total

 

 

7,583,460

 

 

 

 

 

 

 

 

2,379,352

 

 

 

(1)

The weighted average exercise price is calculated solely based on the exercise prices of the outstanding stock options and does not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs, which have no exercise price.

(2)

This number includes the following: 363,161 shares subject to stock options granted under the 2010 Equity Incentive Plan (2010 Plan); 2,453,335 shares subject to outstanding awards granted under the Assembly Biosciences, Inc. Amended and Restated 2014 Stock Incentive Plan (2014 Plan), of which 2,296,823 were subject to outstanding stock options and 156,512 were subject to outstanding RSUs; 2,269,503 shares subject to outstanding awards granted under the 2018 Plan, of which 1,608,912 were subject to outstanding stock options, 624,106 were subject to outstanding RSUs and 36,485 are underlying SARS, which are not included in column (a), but are reflected in column (c); and 466,238 options assumed by us in connection with our merger with Assembly Pharmaceuticals. This number excludes purchase rights currently accruing under the Assembly Biosciences, Inc. 2018 Employee Stock Purchase Plan (2018 ESPP).

(3)

This number includes: no shares under the 2010 Plan, which has been frozen; 85,968 shares available for issuance under the 2014 Plan; 2,037,029 shares available for issuance under the 2018 Plan; and 232,335 shares reserved for issuance under the 2018 ESPP. As of February 22, 2021, assuming each participant purchases the maximum number of shares in the current offering period, no more than 51,000 shares are subject to purchase in the current offering, which ends on May 14, 2021.

(4)

This number includes 791,028 shares subject to outstanding awards granted under the 2017 Inducement Award Plan (2017 Inducement Plan), of which 779,778 were subject to outstanding stock options and 11,250 were subject to outstanding RSUs; 500,000 shares subject to stock options granted under the 2019 Inducement Award Plan (2019 Inducement Plan).

(5)

This number includes 700 shares available for issuance under the 2017 Inducement Plan and no shares under the 2019 Inducement Plan.

The following table sets forth aggregated information as of March 29, 2021 regarding outstanding equity awards and aggregate availability under our equity compensation plans:

Total Number of Outstanding Full-Value Awards

Total Number of Outstanding Appreciation Awards

Weighted Average Exercise Price of Outstanding Appreciation Awards

Weighted Average Term of the Outstanding Appreciation Awards

Total Number of Shares Available for Grant

691,869

7,468,485

$13.73

7.13 years

1,343,803

After the record date for the Annual Meeting, on March 29, 2021, we issued an aggregate of annual performance equity awards to our employees totaling 1,267,075 shares or common stock, which consisted of stock options to

41


 

acquire 1,048,250 shares of or common stock, 199,875 RSUs and 18,950 cash settled SARs under our 2018 Plan. As a result, as of March 29, 2021, there are 1,184,605 shares of common stock available and unallocated for issuance under the 2018 Plan.

We also expect to issue an additional 120,000 stock options under the 2018 Plan at the Board meeting immediately following the Annual Meeting in connection with the election of seven non-employee directors, including one new Board member.

Required Vote

Assuming a quorum is present, to be approved, the affirmative vote of the majority of the votes cast on Proposal No. 4 must be voted “FOR” approval of the Amendment. Abstentions and broker non‑votes will not be considered towards vote totals on Proposal No. 4.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT TO THE ASSEMBLY BIOSCIENCES, INC. 2018 STOCK INCENTIVE PLAN.

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PROPOSAL NO. 5: APPROVAL OF THE ASSEMBLY BIOSCIENCES, INC. AMENDED AND RESTATED 2018 EMPLOYEE STOCK PURCHASE PLAN

Background

On May 30, 2018, we adopted the Assembly Biosciences, Inc. 2018 Employee Stock Purchase Plan (the ESPP). As of March 23, 2021, there were 232,355 shares reserved for issuance under the ESPP. On March 18, 2021, the Board, upon the recommendation of the Compensation Committee and subject to the approval of our stockholders at the Annual Meeting, approved the Assembly Biosciences, Inc. Amended and Restated 2018 Employee Purchase Plan (the Amended ESPP) to increase the number of shares reserved under the ESPP from 400,000 to 1,300,000 and to increase the maximum number of shares of common stock that may be issued to any employee under the ESPP from 1,000 to 2,500 per offering period or such lesser number of shares as determined by the Administrator of the Amended ESPP from time to time. Based solely on the closing price of our common stock reported on The Nasdaq Global Select Market on March 23, 2021, the maximum aggregate market value of the 1,132,335 shares of common stock that could potentially be issued under the Amended ESPP is approximately $5,038,891.

Purpose

We believe that the adoption of the Amended ESPP will benefit us by providing employees with an expanded opportunity to acquire shares of our common stock as compared to the current terms of the ESPP. The Amended ESPP would provide employees with the opportunity to acquire a larger stake in the Company’s growth, and will enable us to attract, retain and motivate valued employees.

Material Terms of the Amended ESPP

The following is a brief summary of certain provisions of the Amended ESPP. A copy of the full Amended ESPP, with proposed deletions indicated by strike-out and proposed revisions to be made in the Amended ESPP indicated by bold and underline, is attached as Appendix C to this proxy statement and is incorporated herein by reference. The following description of the Amended ESPP does not purport to be complete and is qualified in its entirety by reference to Appendix C. It is our intention that the Amended ESPP qualify as an “employee stock purchase plan” under Section 423 of the Code.

Shares Subject to the Plan.   An aggregate of 1,300,000 shares, including shares that have been issued under the ESPP as of March 23, 2021, will be reserved and available for issuance under the Amended ESPP. If our capital structure changes because of a stock dividend, stock split or similar event, the number of shares that can be issued under the Amended ESPP will be appropriately adjusted.

Plan Administration.   The Amended ESPP will be administered by the Compensation Committee, which will have full authority to make, administer and interpret such rules and regulations regarding the Amended ESPP as it deems advisable.

Eligibility.   All individuals classified as employees on the payroll records of the Company or its designated subsidiaries are eligible to participate in the Amended ESPP so long as the employee has been employed for at least 30 days on the first day of the applicable offering period. No person who owns or holds, or as a result of participation in the Amended ESPP would own or hold, common stock or options to purchase common stock, that together equal to 5% or more of total outstanding common stock is entitled to participate in the Amended ESPP. No employee may exercise an option granted under the Amended ESPP that permits the employee to purchase common stock having a value of more than $25,000 (determined using the fair market value of the stock at the time such option is granted) in any calendar year.

Participation; Payroll Deductions.   Participation in the Amended ESPP is limited to eligible employees who authorize payroll deductions equal to a whole percentage of base pay to be applied to the Amended ESPP. Employees may authorize payroll deductions, with a minimum of 1% of base pay and a maximum of 15% of base pay. As of March 23, 2021, there are approximately 89 employees who will be eligible to participate in the Amended ESPP. Once an employee becomes a participant in the Amended ESPP, that employee will automatically participate in successive offering periods, as described below, until such time as that employee withdraws from the Amended ESPP, becomes ineligible to participate in the Amended ESPP, or his or her employment ceases.

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Offering Periods.   Unless otherwise determined by the Administrator of the Amended ESPP, each offering of common stock under the Amended ESPP will be for a period of six months, which we refer to as an “offering period.” The current offering period under the ESPP ends on May 14, 2021. Subsequent offerings under the Amended ESPP will generally begin on the first business day occurring on or after each November 15 and May 15 and will end on the last business day occurring on or before the following May 14 and November 14, respectively. Shares are purchased on the last business day of each offering period, with that day being referred to as an “exercise date.” The Administrator of the Amended ESPP may establish different offering periods or exercise dates under the Amended ESPP.

Exercise Price.   On the first day of an offering period, employees participating in that offering period will receive an option to purchase shares of our common stock. On the exercise date of each offering period, the employee is deemed to have exercised the option, at the exercise price, to the extent of accumulated payroll deductions. The option exercise price is equal to the lesser of  (1) 85% the fair market value per share of our common stock on the first day of the offering period or (2) 85% of the fair market value per share of our common stock on the exercise date. The maximum number of shares of common stock that may be issued to any employee under the Amended ESPP in any offering period is 2,500 or such other lesser number of shares as determined by the Administrator of the Amended ESPP from time to time.

Subject to certain limitations, the number of shares of our common stock a participant purchases in each offering period is determined by dividing the total amount of payroll deductions withheld from the participant’s compensation during the offering period by the option exercise price. In general, if an employee is no longer a participant on an exercise date, the employee’s option will be automatically terminated, and the amount of the employee’s accumulated payroll deductions will be refunded.

Terms of Participation.   Except as may be permitted by the Administrator of the Amended ESPP in advance of an offering, a participant may not increase or decrease the amount of his or her payroll deductions during any offering period but may increase or decrease his or her payroll deduction with respect to the next offering period by filing a new enrollment form within the period beginning 15 business days before the first day of such offering period and ending on the day prior to the first day of such offering period. A participant may withdraw from an offering period at any time without affecting his or her eligibility to participate in future offering periods. If a participant withdraws from an offering period, that participant may not again participate in the same offering period, but may enroll in subsequent offering periods. An employee’s withdrawal will be effective as of the business day following the employee’s delivery of written notice of withdrawal under the Amended ESPP.

Term; Amendments and Termination.   The Amended ESPP will continue until terminated by the Board. The Board may, in its discretion, at any time, terminate or amend the Amended ESPP. Upon termination of the Amended ESPP, all amounts in the accounts of participating employees will be refunded.

New Plan Benefits

Because participation in the Amended ESPP is voluntary, the benefits or amounts that will be received by or allocated to any individual or group of individuals under the Amended ESPP in the future are not determinable.

Summary of Federal Income Tax Consequences

The following is only a summary of the effect of the U.S. income tax laws and regulations upon an employee and us with respect to an employee’s participation in the Amended ESPP. This summary does not purport to be a complete description of all federal tax implications of participation in the Amended ESPP, nor does it discuss the income tax laws of any municipality, state or foreign country in which a participant may reside or otherwise be subject to tax.

A participant in the Amended ESPP recognizes no taxable income either as a result of participation in the Amended ESPP or upon exercise of an option to purchase shares of our common stock under the terms of the Amended ESPP.

If a participant disposes of shares purchased upon exercise of an option granted under the Amended ESPP within two years from the first day of the applicable offering period or within one year from the exercise date, which we refer to as a “disqualifying disposition,” the participant will realize ordinary income in the year of that disposition equal to the amount by which the fair market value of the shares on the date the shares were purchased exceeds the

44


 

purchase price. The amount of ordinary income will be added to the participant’s basis in the shares, and any additional gain or resulting loss recognized on the disposition of the shares will be a capital gain or loss. A capital gain or loss will be long-term if the participant’s holding period is more than 12 months, or short-term if the participant’s holding period is 12 months or less.

If the participant disposes of shares purchased upon exercise of an option granted under the Amended ESPP at least two years after the first day of the applicable offering period and at least one year after the exercise date, the participant will realize ordinary income in the year of disposition equal to the lesser of  (1) 15% of the fair market value of the common stock on the first day of the offering period in which the shares were purchased and (2) the excess of the amount actually received for the common stock over the amount paid. The amount of any ordinary income will be added to the participant’s basis in the shares, and any additional gain recognized upon the disposition after that basis adjustment will be a long-term capital gain. If the fair market value of the shares on the date of disposition is less than the exercise price, there will be no ordinary income and any loss recognized will be a long-term capital loss.

We are generally entitled to a tax deduction in the year of a disqualifying disposition equal to the amount of ordinary income recognized by the participant as a result of that disposition. In all other cases, we are not allowed a deduction.

Vote Required

Assuming a quorum is present, to be approved, the affirmative vote of the majority of the votes cast on Proposal No. 5 must be voted “FOR” the approval of the Amended ESPP. Abstentions and broker non-votes will not be considered towards vote totals on Proposal No. 5.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE ASSEMBLY BIOSCIENCES, INC. AMENDED AND RESTATED 2018 EMPLOYEE STOCK PURCHASE PLAN.

 

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Executive Officers

As of March 23, 2021, our executive officers are: John G. McHutchison, A.O., M.D., our Chief Executive Officer and President; Thomas J. Russo, CFA, our Chief Financial Officer; Jason A. Okazaki, our Chief Legal and Business Officer; Luisa M. Stamm, M.D., Ph.D., our Chief Medical Officer; and William E. Delaney IV, Ph.D, our Chief Scientific Officer. Information regarding each of Mr. Russo, Mr. Okazaki, Dr. Stamm and Dr. Delaney is below. For information on Dr. McHutchison, see “Proposal No. 1—Election of Directors—Nominees for Director.”

 

Name

 

Age

 

Business Experience

Thomas J. Russo, CFA

 

49

 

Mr. Russo has served as our Chief Financial Officer since October 2019. Prior to joining us, Mr. Russo was the Vice President, Head of Commercial Finance of Gilead from July 2016 until October 2019. From October 2014 through June 2016, Mr. Russo was Gilead’s Senior Director–Commercial Operations Finance Center of Excellence, and from October 2012 until September 2014, Mr. Russo held other positions of increasing responsibility at Gilead, including Senior Director– HCV Commercial Operations and Senior Director–Commercial Planning. From 2004 through September 2012, Mr. Russo was an Equity Research Analyst–Biotechnology at Robert W. Baird & Co., Inc., where he advised institutional investors on biotechnology stocks. Mr. Russo holds a B.S. in Biological Sciences from the University of Notre Dame and an M.B.A. from The University of Chicago Booth School of Business. Mr. Russo is also a CFA charterholder.

 

 

 

 

 

Jason A. Okazaki

 

45

 

Mr. Okazaki has served as our Chief Legal and Business Officer since March 2020. Prior to joining us, Mr. Okazaki served in a series of positions of increasing responsibility in Gilead’s legal department from 2006 until March 2020, culminating in his role as Senior Vice President, Legal, and Assistant Secretary. While at Gilead, Mr. Okazaki advised on strategic transactions, corporate governance, SEC matters and operational contracts. He also led the Asia and Latin America legal organizations. Prior to joining Gilead, Mr. Okazaki was a senior associate at Skadden, Arps, Slate, Meagher & Flom LLP, where he represented companies in connection with mergers, acquisitions and corporate finance matters. Mr. Okazaki received a B.A. in Economics from Stanford University and a J.D. from U.C. Hastings College of the Law.

 

 

 

 

 

Luisa M. Stamm, M.D., Ph.D.

 

45

 

Dr. Stamm has served as our Chief Medical Officer since November 2019. Prior to joining us, Dr. Stamm served in a series of positions of increasing responsibility in Gilead’s clinical research group July 2013 until November 2019, culminating in her role as Executive Director, Clinical Research. Prior to joining Gilead, Dr. Stamm was an instructor at Harvard Medical School from January 2013 until July 2013. From 2009 until July 2013, Dr. Stamm was a clinical and research fellow in infectious disease at Massachusetts General Hospital. Dr. Stamm received a B.A. in Biochemistry from Harvard University and an M.D. and a Ph.D. in Biomedical Sciences from the University of California, San Francisco.

 

 

 

 

 

William E. Delaney IV, Ph.D.

 

49

 

Dr. Delaney has served as our Chief Scientific Officer since May 2020. Prior to joining us, Dr. Delaney served in a series of positions of increasing responsibility in Gilead’s clinical virology and biology research groups from 2000 until May 2020, culminating in his role as Executive Director, Biology. Prior to joining Gilead, Dr. Delaney was a research and molecular development fellow at Victorian Infectious Diseases Reference Laboratory from 1999 until 2000. Dr. Delaney received a B.S. in Biotechnology from the University of Delaware and a Ph.D. in Cell and Molecular Biology from Penn State University, College of Medicine.

 

46


 

Executive Compensation

Compensation Discussion and Analysis

The purpose of this Compensation Discussion and Analysis is to provide our stockholders with a robust explanation of the material elements of 2020 compensation paid to our named executive officers (NEOs), including an outline how we determine executive compensation, the elements of compensation, and why we use these elements in our compensation programs. Our NEOs for the fiscal year ended December 31, 2020 are:

 

Name

 

Roles During 2020

John G. McHutchison, A.O., M.D.

 

Chief Executive Officer and President

Thomas J. Russo, CFA

 

Chief Financial Officer

Jason A. Okazaki(1)

 

Chief Legal and Business Officer

William E. Delaney IV, Ph.D. (2)

 

Chief Scientific Officer, Virology

Jacqueline S. Papkoff, Ph.D.(3)

 

Senior Vice President, Chief Scientific Officer, Microbiome

 

(1)

Mr. Okazaki’s employment commenced on March 26, 2020.

(2)

Dr. Delaney’s employment commenced on May 27, 2020.

(3)

Dr. Papkoff’s employment was terminated on January 31, 2021 in connection with the wind-down of our Microbiome program.

Executive Summary

COVID-19 Pandemic

The COVID-19 pandemic created significant uncertainty with respect to how the company would protect the health and welfare of its employees while also continuing to achieve 2020 goals and reach performance targets that were set prior to the pandemic. Management and the Compensation Committee determined that the annual performance goals may be more challenging to attain than anticipated due to circumstances outside of our control, yet nevertheless elected not to adjust the original goals. Instead, management took a “wait and see” approach and identified creative solutions to the challenges presented by the pandemic both to achieve the organization’s goals and to remain aligned with our stockholders’ interests. Our Company-wide performance remained high despite challenges faced in 2020, resulting in no COVID-19-related compensation adjustments. In addition, we were able to successfully attract, incentivize and retain critical talent despite the pandemic.

Update on Leadership Transition

In late 2019, we transitioned leadership from our remaining founders to an executive team led by Dr. McHutchison as Chief Executive Officer and President; Mr. Russo as Chief Financial Officer; and Luisa M. Stamm, M.D., Ph.D. as Chief Medical Officer. As part of that transition, we moved our corporate headquarters to South San Francisco, California and began the process of closing our prior headquarters in Carmel, Indiana. As a result of this move, all remaining functions based in Indiana, including our Legal and Corporate Development functions, relocated to South San Francisco in early 2020.

New Chief Legal and Business Officer

In March 2020, Mr. Okazaki joined as Chief Legal and Business Officer to lead both our Legal and Corporate Development organizations. Mr. Okazaki joined us from Gilead, where he spent 14 years in a series of positions of increasing responsibility in Gilead’s legal department, including Senior Vice President, Legal, and Assistant Secretary. In that role, he led Gilead’s corporate legal function, advising on corporate governance and SEC compliance matters, as well as the Asia and Latin America legal organizations. In addition, Mr. Okazaki was a critical part of Gilead’s strategic transactions between 2006 and 2020, including mergers and acquisitions, collaboration agreements and licensing transactions.

As a result of Mr. Okazaki’s deep knowledge of the biotechnology industry and long tenure at Gilead, as well as his extensive experience both leading large legal organizations and negotiating and executing on corporate development

47


 

transactions, our Board believed that Mr. Okazaki was capable of elevating both our Legal and Corporate Development teams and would be a key addition to the leadership team. In particular, as our core inhibitors moved into later stage clinical development for the treatment of HBV, the Board believed that he would be able to advance and execute on research, clinical trial and commercial collaborations to accelerate our clinical development programs. Mr. Okazaki’s impact was immediate, as he was instrumental to our successful execution of three separate collaboration agreements in 2020: (1) regional collaboration in China, including Hong Kong, Macau and Taiwan with BeiGene, Ltd (BeiGene), which provided us with $40 million of nondilutive financing and expanded our commercial reach upon regulatory approval of our core inhibitor product candidates; (2) research collaboration with Door Pharmaceuticals, LLC (Door) to expand our early-stage pipeline with Door’s core protein disruptor discovery efforts; and (3) clinical trial collaboration with Arbutus Biopharma Corporation (Arbutus) to evaluate vebicorvir (VBR) in triple combination studies with nucleos(t)ide analog reverse transcriptase inhibitors (NrtIs) and Arbutus’s proprietary GalNAc delivered RNAi compound, AB-729.

New Chief Scientific Officer, Virology

In May 2020, Dr. Delaney joined as Chief Scientific Officer, Virology, to replace Richard Colonno, Ph.D., following Dr. Colonno’s decision to retire from his executive role as Executive Vice President and Chief Scientific Officer, Virology and to scale back his responsibilities and serve as a part-time employee in an advisory role. Dr. Delaney also joined us from Gilead, where he served in a series of positions of increasing responsibility in Gilead’s clinical virology, biology and discovery research groups since 2000, including Executive Director, Biology and head of Gilead’s HBV & Herpes Discovery Biology group, leading a team of 34 biologists working on HBV, hepatitis D virus (HDV) and herpes virus. During his time at Gilead, Dr. Delaney worked on Investigational New Drug (IND) applications, new drug applications (NDAs) or post-market support for three HBV drugs and four hepatitis C virus (HCV) drugs or products.

Our Board believed that Dr. Delaney’s extensive experience and track record leading scientific discovery groups, particularly his experience with HBV, HCV and HDV, made him ideally suited to lead our virology research and development team.

For more information regarding 2020 compensation paid to Mr. Okazaki and Dr. Delaney, see “Elements of Executive Compensation—Compensation Terms of New NEOs and One-Time Compensation Elements Related to Leadership Changes.”

2020 Accomplishments

Senior Leadership Team

 

Completed leadership transition with appointments of Mr. Okazaki; Dr. Delaney; Carl H. Enell as SVP, Corporate Development; and Nicole S. White, Ph.D., as SVP, Pharmaceutical Development and Manufacturing.

HBV Program

 

Determined stopping criteria for transition of subjects off therapy in our open-label extension study that was the first of its kind, ABI-H0731-211 (Study 211), after discussions with lead investigators and review and agreement with the U.S. Food and Drug Administration (FDA).

 

Reported additional interim analyses from Study 211 at the European Association for the Study of the Liver’s (EASL) Digital International Liver CongressTM in an oral presentation (HBeAg negative subjects) and late-breaker poster presentation (HBeAg positive subjects).

 

Transitioned Study 211 subjects who achieved the agreed-upon stopping criteria off therapy and monitored these subjects for sustained virology response (SVR).

 

o

Patients who stopped therapy in Study 211 did not achieve meaningful SVR rates as 39 of 41 patients had relapsed as of November 5, 2020.

48


 

 

Completed an End-of-Phase 2 Meeting with National Medical Products Administration, Center for Drug Evaluation, China, in July 2020 with agreement on Phase 3 registrational program for chronic suppressive therapy (CST).

 

Initiated a clinical study, ABI-0731-205, evaluating treatment intensification with VBR in patients with chronic HBV infection who are only partially virologically suppressed on NrtI therapy alone after at least a year of treatment to support a registrational program for CST.

 

Delivered four presentations at the American Association for the Study of Liver Diseases (AASLD) Annual Meeting (The Liver Meeting®).

 

Completed and reported detailed data on the final dose-ranging cohorts of the Phase 1b portion of the Phase 1a/1b clinical study of ABI-H2158 (2158) at EASL 2020 in a late-breaker poster presentation.

 

Initiated a Phase 2 clinical study using the 300 mg dose of 2158.

 

Received Fast Track Designation from the U.S. Food and Drug Administration for 2158.

 

Completed Phase 1a trial of ABI-H3733 (3733) in healthy subjects.

Microbiome Program

 

Presented preclinical data from our immune-oncology microbiome program for presentation as an e-poster at the American Association for Cancer Research 2020 Virtual Annual Meeting II

 

Advanced research programs for immune-mediated and oncology indications

 

Conducted a robust process to identify strategic alternatives to continue development of the Microbiome programs following the return of rights to such programs from Allergan Pharmaceuticals International Limited (Allergan) upon termination of the Research, Development, Collaboration and License Agreement (Allergan Agreement)

 

o

Began wind-down of Microbiome program to focus our resources and efforts on our HBV programs.

Corporate Development and Alliances

 

Entered into a collaboration agreement with BeiGene to develop, manufacture and commercialize VBR, 2158 and 3733 in the People’s Republic of China, Hong Kong, Taiwan and Macau.

 

Entered into a clinical trial collaboration agreement with Arbutus to evaluate VBR in combination with AB-729 and NrtI therapy for the treatment of patients with chronic HBV infection.

 

Entered into collaboration and option agreement with Door, focused on the development of a novel class of cccDNA disruptors that complement our current portfolio.

Fundraising and Operational Excellence

 

Registered $300 million of securities using a “shelf” registration statement, including a $100 million sublimit of common stock to be issued through a series of “at-the-market” (ATM) offerings.

 

Increased headcount by hiring over 50 new employees to support, extend and grow our clinical and preclinical pipeline product candidates.

 

Continued improving corporate culture through the enhancement of corporate communication and improvement of Company alignment through regularly scheduled Company-wide townhalls and other team events and initiatives.

 

Reduced employee turnover to below average market rates

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Say-on-Pay Vote

At our 2020 annual meeting of stockholders, over 99% of the shares voted by our stockholders were “FOR” the approval of the compensation paid to our then-NEOs in 2019. In each of our annual say-on-pay votes since 2014, our NEOs’ compensation has received the support of over 90% of the shares voted by our stockholders.

Compensation Philosophy and Best Practices

Our Compensation Philosophy is, “Provide Competitive Overall Compensation That Attracts, Retains and Motivates Superior Performers.” In addition to striving to adhere to this philosophy, we have instituted the following executive compensation best practices:

What We Do

 

What We Don’t Do

   Conduct an annual “Say-on-Pay” vote

 

   No guaranteed performance-based cash bonuses

   Annual performance-based cash bonus opportunities tied to individual and Company-wide performance

 

   No excise tax gross ups

   Equity grants with multi-year vesting requirements

 

   No pension, deferred compensation or special retirement plans for executives

   Time-based equity grants with minimum vesting period of one year

 

   No special health or welfare benefits

   Entirely independent Compensation Committee

 

   No hedging or pledging of our stock

   Use an independent compensation consultant

 

   No significant perquisites provided to our NEOs

   Double-trigger severance and equity acceleration rights

 

   No stock option repricing without stockholder pre-approval

How We Determine Executive Compensation

Overview

The Compensation Committee believes that executive compensation should be designed to promote both our short-term and long-term goals, because pharmaceutical research and development require sustained and focused effort over many years. Accordingly, it is important that the Committee’s executive compensation program both motivate our executives to meet short- and long-term goals and align the financial interests of our executive officers with those of our stockholders. To achieve these goals, our compensation program is structured to:

 

Pay for Performance: We offer (1) targeted annual performance-based cash bonus opportunities based on individual achievement and Company-wide performance against corporate goals measured over a 12-month period, and (2) the opportunity to share in our long-term success through equity compensation, including, in certain circumstances, performance-based equity awards;

 

Attract and Retain Superior Performers: We provide market-competitive base salary, performance-based cash bonus opportunities, long-term equity awards and other compensation components and benefits that are competitive with those companies that compete with us for available high caliber employees; and

 

Pay Equitably: We believe that it is important to apply generally consistent guidelines for all of our employees. To deliver equitable pay for our NEOs, the Compensation Committee considers each NEO’s title, role, breadth and complexity of responsibility, criticality of the role to the organization, experience, qualifications and performance, in both an individual and team context.

At-Risk and Long-Term Pay

To implement our compensation philosophy, the Compensation Committee has determined that the primary elements of our employees’, including our NEOs’, compensation should consist of base salary, annual performance-based cash bonuses and long-term equity incentive awards, which the Compensation Committee uses to create a pay mix designed to meet the goals of our compensation philosophy. The pay mix emphasizes “at-risk” compensation in the form of (1) long-term equity awards and (2) annual performance-based cash bonuses based on the achievement of (a) Board-approved Company-wide objectives weighted to reflect their relative importance to the achievement of our goals and (b) individual performance objectives, which include certain department, group and/or team objectives applicable to the participants, tailored to responsibilities of each of our employees, including our NEOs.

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As discussed above, building upon 2019, 2020 was likewise a transition year for our senior leadership, with Mr. Okazaki and Dr. Delaney joining the team. As a result, most of the compensation paid to our newly hired NEOs—82% and 83% for Mr. Okazaki and Dr. Delaney, respectively—consisted of “at-risk,” long-term equity awards that served the dual purposes of both aligning our newly hired NEOs interests with those of our stockholders and serving as “make whole” compensation to replace equity compensation from their prior employers that was forfeited when they joined us in 2020.

Role of the Compensation Committee; Oversight of Executive Compensation

The Compensation Committee supervises the implementation of our compensation philosophy. The Compensation Committee also has direct responsibility for reviewing and approving the compensation of our CEO and each of our other executive officers. To assist the Compensation Committee in determining compensation of our other executive officers, the CEO makes recommendations to the Compensation Committee as to the specific elements (i.e., base salary, annual performance-based cash bonus and long-term equity incentive awards) of compensation. The CEO does not make recommendations with respect to his own compensation. Management, under the guidelines and policies established by the Compensation Committee, makes decisions on all aspects of compensation for non‑executive officer employees.

We generally review our compensation practices on an annual basis over the course of several meetings of the Compensation Committee and the Board. The first step in the process is for the Compensation Committee, with the support of management and Radford, a part of the Rewards Solutions practice of Aon plc and the Compensation Committee’s independent outside compensation consultant (Compensation Consultant), to review trends in biotechnology compensation practices and to recommend the list of peer companies to be used in this compensation review process. The peer group determination process is detailed below in “—Peer Group Process.”

Our CEO, Chief Legal and Business Officer and SVP, Human Resources and Organization Development, in addition to the Compensation Consultant, regularly attend portions of the Compensation Committee meetings to provide analysis, information and management’s recommendations on various human resources and compensation matters. Members of management generally do not participate in the Compensation Committee’s executive sessions unless invited by the Compensation Committee to provide specific information during these closed sessions. The CEO is not present for any discussion of, deliberation on, or votes related to, his compensation.

The Compensation Consultant

The Compensation Committee initially retained Radford in 2015. The Compensation Consultant’s fees are paid by the Company but approved by the Compensation Committee. In connection with its retention for the 2020 compensation cycle, the Compensation Consultant analyzed and provided advice on, among other things, the appropriate peer group, annual performance-based cash bonuses, long-term equity incentive awards, severance arrangements, executive officers’ new hire compensation packages, annual compensation for the executive officers and compensation trends in the biotechnology industry.

The Compensation Consultant reports directly to the Compensation Committee, which retains sole authority to direct the work and employ the Compensation Consultant. The Compensation Committee regularly reviews the services provided by the Compensation Consultant.

The Compensation Committee has assessed the independence of the Compensation Consultant and determined that the Compensation Consultant’s work did not raise any conflicts of interest in 2020. In making this assessment, the Compensation Committee considered the independence factors enumerated in Rule 10C-1(b) under the Exchange Act, including the following factors: (1) the Compensation Consultant does not provide any other services to us; (2) the level of fees received from us as a percentage of the Compensation Consultant’s total revenue is less than 1%; (3) the Compensation Consultant has internal policies and procedures to prevent conflicts of interest and protect independence; (4) the individual Compensation Consultant advisers to the Compensation Committee neither own any of our stock nor have any business or personal relationships with members of the Compensation Committee or our executive officers; and (5) the Compensation Committee is unaware of any relationship that may exist between executive officers and the Compensation Consultant. The Compensation Committee continues to monitor the independence of the Compensation Consultant on a periodic basis.

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Peer Group Process

As part of its analysis for 2020, the Compensation Consultant collected and analyzed compensation information from a comparative group of biotechnology companies, or peer group, approved by the Compensation Committee.

The list of peer companies is evaluated and approved annually by the Compensation Committee based upon input from the Compensation Consultant and management to ensure that our peer group (1) includes companies that are similar in terms of stages of development, headcount and market capitalization, (2) appropriately represents the type of companies competing with us to attract and retain talent and (3) reflects our current and future business objectives and strategy. In September 2019, with assistance from the Compensation Consultant and management, the Compensation Committee re-evaluated the peer group used for 2019 compensation and approved a peer group consisting of biopharmaceutical companies with the following characteristics:

 

Varying stages of development ranging from Phase 1 through Phase 3 clinical development, which was consistent with the prior year;

 

0.3 to 3.0x our headcount, with generally fewer than 300 employees, based upon our then-current headcount; and

 

0.3 to 3.0x our market capitalization, with market capitalizations generally between $100 million and $1.0 billion, based upon our then-current market capitalization of approximately $300 million.

Due to the above criteria, a number of companies were either added to or removed from the peer group during the 2020 revisions due to M&A activity, out of scope market capitalization, headcount or stage of development. Based on these criteria, the Compensation Committee approved the revised peer group (the 2020 Peer Group) set forth below and used the 2020 Peer Group as one of multiple datapoints used in determining 2020 compensation.

 

Achillion Pharmaceuticals, Inc.

 

Dicerna Pharmaceuticals, Inc.

 

REGENXBIO Inc.

Aimunne Therapeutics, Inc.

 

Editas Medicine, Inc.

 

Rhythm Pharmaceuticals, Inc.*

Calithera Biosciences, Inc.*

 

Epizyme, Inc.

 

Sangamo Therapeutics, Inc.

ChemoCentryx, Inc.*

 

Five Prime Therapeutics, Inc.

 

Seres Therapeutics, Inc.

Chimerix, Inc.*

 

Inovio Pharmaceuticals, Inc.*

 

Spero Therapeutics, Inc.*

Concert Pharmaceuticals, Inc.*

 

Principia Biopharma Inc.*

 

Syros Pharmaceuticals*

CymaBay Therapeutics, Inc.

 

Protagonist Therapeutics, Inc.*

 

Wave Live Sciences

CytomX Therapeutics, Inc.

 

Prothena Corporation plc*

 

 

 

*

Added to 2020 Peer Group.

Arbutus Biopharma Corporation, Arrowhead Pharmaceuticals, Inc., Audentes Therapeutics, Inc., Bellicum Pharmaceuticals, Inc., Enanta Pharmaceuticals, Inc., Iovance Biotherapeutics, Inc., Mirati Therapeutics, Inc., MyoKardia, Inc., Selecta Biosciences, Inc. and Zogenix, Inc. were each members of our 2019 Peer Group, but were removed from the 2020 Peer Group either due to the new size parameters or acquisition.

As of September 2019, when the Compensation Consultant completed its work developing recommendations for the 2020 Peer Group, the 50th percentile of market capitalization and headcount of the 2020 Peer Group were $411.2 million and 79 employees, respectively. Meanwhile, our market capitalization and headcount were approximately $299.7 million (based upon a 30-day average market capitalization) and 106 employees, respectively.

After the Compensation Committee approves the list of peer companies, management and the Compensation Consultant present the Compensation Committee with recommendations regarding proposed adjustments to compensation elements and a variety of supporting data, including comparative compensation information from the approved peer group. The Compensation Committee generally believes that to achieve our overall compensation-related goals our compensation elements of base salary, annual performance-based bonus opportunities and long-term equity incentive compensation should target the median of our peers. However, the Compensation Committee may, in its discretion, set an individual NEO’s compensation above or below this level, based on that individual’s

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experience, criticality, amount of responsibility and either individual or Company-wide performance. Such recommendations are presented individually for each NEO. These recommendations are discussed with and without management present and are also discussed with the Compensation Consultant. The Compensation Committee then determines what, if any, adjustments to the compensation elements are appropriate for executive officers other than the CEO. For 2020 compensation, in part because two of the NEOs were newly hired employees, in determining the new hire compensation package, the Compensation Committee used multiple reference points in determining the NEOs’ compensation, including, among others, each individual’s criticality and scope of responsibilities, prior experience and training, prior compensation packages for such individuals, other competitive market-based compensation data for similar positions in our industry and the 2020 Peer Group to inform its decision-making regarding both the elements of compensation (i.e., base salary, annual performance-based cash bonuses and long-term equity incentive awards) and total compensation.

Elements of Executive Compensation

The three principal components of our executive compensation program are base salary, annual performance-based cash bonus and long‑term equity incentive awards. Our Compensation Committee believes that each component of executive compensation must be evaluated and determined with reference to competitive market data, individual and Company-wide performance, our recruiting and retention goals, internal equity and consistency, and other information it deems relevant. The Compensation Committee believes that in the biopharmaceutical/biotechnology industry, stock option and/or other equity awards are a primary motivator in attracting and retaining executives, in addition to salary and cash incentive bonuses.

In addition, significant portions of Mr. Okazaki and Dr. Delaney’s 2020 compensation were the result of one-time sign-on bonuses and inducement equity grants as partial “make whole” compensation in connection with the leadership transitions that took place.

The primary components of our compensation packages and the one-time compensation elements received by our newly hired NEOs are described in more detail below.

Base Salary

Base salaries provide financial stability and security to our NEOs by providing a fixed amount of cash for performing their job responsibilities. Our NEOs’ base salaries are established based on each NEO’s position, criticality and scope of responsibilities, prior experience and training, then-current compensation levels and competitive market-based compensation data we review for similar positions in our industry. Base salaries are reviewed periodically and may be increased for merit reasons based on the executive’s performance, for retention reasons or if the base salary is not competitive with salaries paid by comparative companies for similar positions. Additionally, we may adjust base salaries throughout the year for promotions or other changes in the scope or breadth of an executive’s role or responsibilities. The NEOs’ annualized base salaries for 2019 and 2020, effective as of February 16 of each year or the date of hire of the NEO, as applicable, were as follows:

 

NEO

 

2019

 

 

2020

 

 

Percentage

Increase

 

John G. McHutchison, A.O., M.D.

 

$

800,000

 

 

$

820,000

 

 

 

2.5

%

Thomas J. Russo, CFA

 

 

425,000

 

 

 

430,000

 

 

 

1.2

%

Jason A. Okazaki(1)

 

 

 

 

 

515,000

 

 

 

 

William E. Delaney IV, Ph.D.(2)

 

 

 

 

 

415,000

 

 

 

 

Jacqueline S. Papkoff, Ph.D.

 

 

400,000

 

 

 

420,000

 

 

 

5.0

%