The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in Part I, Item 1A, "Risk Factors" and elsewhere in this Annual Report on Form 10-K. See "Special Note Regarding Forward-Looking Statements."

Overview

We are a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing antiviral therapeutics to improve the lives of patients suffering from difficult to treat, life-threatening viral infections. Our current focus is on the development of product candidates to treat COVID-19, hepatitis C virus ("HCV"), dengue and respiratory syncytial virus ("RSV").

COVID 19 - Bemnifosubvir Combination Regimen

Our most advanced product candidate for the treatment of COVID-19 is bemnifosbuvir, an investigational, novel, orally administered guanosine nucleotide analog polymerase inhibitor which we believe could be a preferred backbone for an oral combination regimen. Bemnifosbuvir has a unique dual mechanism of action at both the RNA-dependent RNA polymerase (RdRp) and NiRAN active sites on the highly conserved SARS-CoV-2 RNA polymerase. As we anticipate continued rapid emergence and evolution of viral variants together with the potential for viral drug resistance to single agent therapies which could render previously effective monotherapy obsolete, we have prioritized the development of bemnifosbuvir as combination therapy for the treatment of COVID-19.

We do not know whether this combination of bemnifosbuvir with a protease inhibitor will produce a synergistic benefit or otherwise lead to positive outcomes for the patients we are seeking to treat. We have not yet developed a protease inhibitor to evaluate in combination with bemnifosbuvir. Although we have begun efforts to discover a protease inhibitor utilizing our internal discovery capabilities, these efforts are at a very early stage and we do not know if such efforts will be successful, or if successful, when a protease inhibitor product candidate generated from our discovery efforts would be allowed to enter clinical trials. Alternatively, we may in-license or acquire the rights to develop and commercialize a protease inhibitor drug candidate from a third party.

HCV - Bemnifosbuvir in combination with ruzasvir

For the treatment of chronic HCV infection, we are advancing a novel combination of bemnifosbuvir and ruzasvir, an investigational nonstructural protein 5A ("NS5A") inhibitor that we exclusively in-licensed from Merck in December 2021. As single agents, both bemnifosbuvir and ruzasvir have demonstrated potent pan-genotypic antiviral activity against HCV. As ruzasvir is a Phase 2-ready NS5A inhibitor that has already been evaluated by Merck in over 1,200 HCV-infected patients, we have prioritized clinical development of the ruzasvir/bemnifosbuvir combination program over the AT-777/AT-787 programs (AT-777 being our prior lead NS5A inhibitor program which was paused at the outset of the COVID-19 pandemic given industry-wide challenges in conducting clinical studies at that time).

Dengue - AT-752

Dengue is a mosquito-borne viral infection that infects up to 400 million people worldwide a year, causing substantial public health and economic burden. Currently there are no antiviral therapies approved by either the U.S. Food and Drug Administration ("FDA") or the European Commission. To address this unmet medical need, we are developing AT-752, an oral, purine nucleotide prodrug for the treatment of dengue. AT-752 targets the inhibition of the dengue viral polymerase and, in preclinical studies, the drug



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candidate showed potent in vitro activity against all dengue serotypes tested, as well as potent in vivo antiviral activity in small animal models.

Roche collaboration

In October 2020, we entered into a License Agreement (the "Roche License Agreement") with F. Hoffmann-LaRoche Ltd. and Genentech, Inc. (together, "Roche") under which we granted an exclusive license for certain development and commercialization rights related to AT-527 outside of the United States (other than for certain HCV uses) to Roche. As partial consideration, Roche paid us an upfront payment of $350.0 million which was received in November 2020. Additionally, upon realization of a development milestone in June 2021, we received an additional $50 million from Roche.

In November 2021, we received notice from Roche that they had elected to terminate the Roche License Agreement in its entirety on a worldwide basis including Japan, with an effective date of February 10, 2022. In December 2021, we delivered to Roche notice that we intended to continue the development of bemnifosbuvir and we have been working with Roche to effect an orderly wind down of activities in accordance with the terms of the Roche License Agreement. The obligations of Roche to equally share the costs associated with development activities terminated on February 10, 2022. We are now responsible for, and alone will bear the costs associated with the development of bemnifosbuvir. Additionally, we remain liable to Roche for certain expenses associated with transition related activities occurring after the effective date of the termination of the Roche License Agreement. As a result of the termination of the Roche License Agreement, we have regained worldwide exclusive rights from Roche to research, develop, manufacture and commercialize bemnifosbuvir in all fields of use.

IPO

On November 3, 2020, we completed the initial public offering of our common stock (the "IPO"). In connection with the IPO, we issued 14,375,000 shares of common stock at $24.00 per share for net proceeds of $317.6 million after deducting underwriting discounts and commissions and offering expenses. Upon closing of the IPO, all then-outstanding shares of our former convertible preferred stock converted into 57,932,090 shares of common stock.

COVID 19 Update

While we believe there is currently an urgent need for treatments for COVID-19, the longevity and extent of the ongoing COVID-19 pandemic is uncertain and it is unclear whether SARS-CoV-2 will become an endemic human coronavirus that may circulate in the human population after the current pandemic has subsided. If the pandemic were to dissipate and the endemic does not result, whether due to a significant decrease in new infections, the effectiveness of vaccines, the effectiveness of other treatment options, or otherwise, the need for treatments could decrease significantly. If the need for a treatment decreases before or soon after commercialization of a bemnifosbuvir COV19 combination, if successfully developed and approved, our business could be adversely impacted.

Financial Operations Overview

As of December 31, 2021, we had cash and cash equivalents of $764.4 million. Net cash used in operating activities was $87.0 million for the year ended December 31, 2021. We expect that our net cash used in operating activities will increase significantly as we advance our product candidates through preclinical and clinical development, seek regulatory approval, and prepare for and, if approved, proceed to commercialization; acquire, discover, validate and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. In addition, we expect to incur additional costs as we continue to operate as a public company, particularly now that we have become a large accelerated filer as of December 31, 2021. We believe that our available cash and cash equivalents will be sufficient to fund our planned operations through at least 2025.

We do not have any products approved for sale and have not generated any product revenue since inception. We do not anticipate generating any revenue from product sales for the foreseeable future. Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through



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other sources of financing. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates.

We plan to continue to use third-party service providers, including contract research organizations ("CROs") and contract manufacturing organizations ("CMOs"), to carry out our preclinical and clinical development and to manufacture and supply the materials to be used during the development and commercialization of our product candidates.

We expect to continue to incur significantly higher expenses over the next several years. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we: • continue clinical development of bemnifosbuvir for the treatment of COVID-19;

• continue clinical development of AT-752 for the treatment of dengue;

• initiate clinical development of bemnifosbuvir and ruzasvir for the treatment

of HCV;

• continue IND-enabling activities and commence clinical development activities

for product candidates for the treatment of RSV;

• maintain, expand, protect and enforce our intellectual property portfolio;

• hire additional research, development and general and administrative

personnel;

• establish commercialization capabilities; and

• incur additional costs as we continue to operate as a public company,

particularly now that we are a large accelerated filer as of December 31,

2021.

Components of Results of Operations

Revenue

We do not have any products approved for sale and to date, we have not generated any revenue from product sales.

Our revenue has been collaboration revenue solely derived from the Roche License Agreement, which became effective in October 2020 and terminated on February 10, 2022. If our development efforts for our product candidates are successful and result in commercialization, we may generate additional revenue in the future from a combination of product sales or payments from collaboration or license agreements that we may enter into with third parties.

Operating Expenses

Research and Development Expenses

Substantially all of our research and development expenses consist of expenses incurred in connection with the development of our product candidates. These expenses include fees paid to third parties to conduct certain research and development activities on our behalf, consulting costs, certain payroll and personnel-related expenses, including salaries and bonuses, employee benefit costs and stock-based compensation expenses for our research and product development employees and allocated overhead, including rent, equipment, depreciation, information technology costs and utilities attributable to research and development personnel. We expense both internal and external research and development expenses as they are incurred. In circumstances where amounts have been paid in advance or in excess of costs incurred, we record a prepaid expense, which is expensed as services are performed or goods are delivered.

A significant portion of our research and development costs have been external costs, which we track by therapeutic area. Our internal research and development costs are primarily personnel-related costs, facility costs, including depreciation. We have not historically tracked our internal research and development expenses by therapeutic area as they are deployed across multiple programs.



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As discussed in Note 3 to our consolidated financial statements included elsewhere in this annual report on Form 10-K, during the term of the Roche License Agreement from October 2020 through its termination, effective February 2022, we and Roche shared certain manufacturing and clinical development costs on a 50/50 basis. Billings to us by Roche for our percentage share of such expenses are recorded in research and development expenses. These costs represent a material portion of our total expenses. Subsequent to the termination, we will be liable to Roche for the cost of activities associated with Roche's transfer of certain information to us.

The following table summarizes our external research and development expenses by indication and internal research and development expenses:



                                                     Years Ended December 31,
                                               2021         2020         2019
                                                    (in thousands)
COVID-19 external costs                   $  93,508     $ 23,043     $      -
Dengue external costs                         9,396        2,167          768
HCV external costs                           27,514        1,831        5,837
RSV external costs                            1,887        1,127        1,379

Internal research and development costs 34,900 9,855 2,186 Total research and development expenses $ 167,205 $ 38,023 $ 10,170

We are focusing substantially all of our resources on the development of our product candidates, particularly bemnifosbuvir. We expect our research and development expenses to increase substantially for at least the next few years, as we seek to initiate additional clinical trials for our product candidates, complete our clinical programs, pursue regulatory approval of our product candidates and prepare for the possible commercialization of these product candidates. Predicting the timing or cost to complete our clinical programs or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict when or if our product candidates will receive regulatory approval with any certainty.

General and Administrative Expenses

General and administrative expenses consist principally of payroll and personnel expenses, including salaries and bonuses, benefits and stock-based compensation expenses, professional fees for legal, consulting, accounting and tax services, allocated overhead, including rent, equipment, depreciation, information technology costs and utilities, and other general operating expenses not otherwise classified as research and development expenses.

We anticipate that our general and administrative expenses may increase as a result of increased personnel costs, expanded infrastructure and higher consulting, legal and accounting services costs associated with complying with Nasdaq and SEC requirements, investor relations costs and director and officer insurance premiums associated with being a public company.

Interest Income and Other, Net

Interest income and other, net, consists primarily of interest income earned on our cash and cash equivalents.

Income Taxes

Income taxes consists primarily of federal and state current income taxes.



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Results of Operations

Comparison of the Years Ended December 31, 2021 and 2020



The following table summarizes our results of operations for the periods
indicated:

                                                          Years Ended December 31,
                                                             2021             2020         Change
                                                                   (in thousands)
Collaboration revenue                               $     351,367       $   48,633     $  302,734
Operating expenses:
Research and development                                  167,205           38,023        129,182
General and administrative                                 45,785           21,640         24,145
Total operating expenses                                  212,990           59,663        153,327
Income (loss) from operations                             138,377          (11,030 )      149,407
Interest income and other, net                                213               83            130
Income (loss) before income taxes                         138,590          (10,947 )      149,537
Income taxes                                               17,400                -         17,400

Net income (loss) and comprehensive income (loss) $ 121,190 $ (10,947 ) $ 132,137

Revenue

Collaboration revenue for the years ended December 31, 2021 and 2020 was derived from the Roche License Agreement that was executed in October 2020. See Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of the accounting treatment of the Roche License Agreement, including recognition of all remaining deferred revenue following receipt of the termination notice from Roche.

Research and Development Expenses

Research and development expenses increased by $129.2 million from $38.0 million for the year ended December 31, 2020 to $167.2 million for the year ended December 31, 2021. The increase in research and development expenses was primarily due to a $104.1 million increase in external expenses incurred related to CRO and CMO services in connection with the advancement of product candidates for the treatment of COVID-19, HCV and dengue, including $76.6 million related to our share of costs incurred by Roche and a $25.0 million charge related to the upfront payment for the license agreement with Merck. In addition, there was an increase of $25.0 million in internal spend primarily due to an increase in personnel-related expenses, including salaries and bonuses, benefits and stock-based compensation expense of $14.6 million for our research and product development employees and consulting fees, and $2.4 million in other research and development expenses. Research and development expenses include a reduction of $7.3 million representing a reimbursement of Roche's share of certain expenses incurred that are subject to ASC 808 as discussed in Note 3 to our audited consolidated financial statements included elsewhere in this annual report on Form 10-K.

General and Administrative Expenses

General and administrative expenses increased by $24.1 million from $21.6 million for the year ended December 31, 2020 to $45.8 million for the year ended December 31, 2021. The increase in general and administrative expenses was primarily due to the expansion of our organization and reflected an increase of $20.6 million in payroll and personnel-related expenses, including salaries, benefits and stock-based compensation expense of $17.6 million; an increase in professional fees of $2.6 million; and an increase in other general and administrative expenses of $0.9 million.

Interest Income and Other, Net

Interest income and other, net, increased by $0.1 million for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily due to higher balances of cash equivalents.



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Income Taxes

Income taxes were $17.4 million and $0 million for the years ended December 31, 2021 and 2020, respectively. The effective tax rate for the years ended December 31, 2021 and 2020 was 12.5% and 0%, respectively. The increase in income tax expense was primarily due to revenue recognized in 2021 from our former collaboration with Roche.

Comparison of the Years Ended December 31, 2020 and 2019



The following table summarizes our results of operations for the periods
indicated:

                                      Years Ended December 31,
                                          2020            2019       Change
                                               (in thousands)
Collaboration revenue            $      48,633       $       -     $ 48,633
Operating expenses:
Research and development                38,023          10,170       27,853
General and administrative              21,640           4,438       17,202
Total operating expenses                59,663          14,608       45,055
Loss from operations                   (11,030 )       (14,608 )      3,578
Interest income and other, net              83             574         (491 )
Net loss                         $     (10,947 )     $ (14,034 )   $  3,087



Revenue

Collaboration revenue for the year ended December 31, 2020 was derived from the Roche License Agreement that was executed in October 2020. See Note 3 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of the accounting treatment of the Roche License Agreement.

Research and Development Expenses

Research and development expenses increased by $27.8 million from $10.2 million for the year ended December 31, 2019 to $38.0 million for the year ended December 31, 2020. The increase in research and development expenses was primarily due to a $20.2 million increase in external expenses incurred related to CRO and CMO services in connection with the advancement of product candidates for the treatment of COVID-19 and dengue, partially offset by a decrease in external spend related to our HCV and RSV programs and an increase of $6.5 million in internal spend primarily due to an increase in personnel-related expenses, including salaries and bonuses, benefits and stock-based compensation expense of $3.3 million for our research and product development employees and consulting fees, and $1.1 million in other research and development expenses. Research and development expenses include a reduction of $7.9 million representing Roche's share of certain expenses incurred that are subject to ASC 808 as discussed in Note 3 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We also recorded research and development expense of $2.1 million relating to our share of costs incurred by Roche.

General and Administrative Expenses

General and administrative expenses increased by $17.2 million from $4.4 million for the year ended December 31, 2019 to $21.6 million for the year ended December 31, 2020. The increase in general and administrative expenses was primarily due to the expansion of our organization and reflected an increase of $5.8 million in payroll and personnel-related expenses, including salaries, benefits and stock-based compensation expense of $3.5 million; professional fees of $10.0 million including $7.0 million paid in connection with Roche License Agreement; and an increase in other general and administrative expenses of $1.4 million.

Interest Income and Other, Net

Interest income and other, net, decreased by $0.5 million for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to lower interest rates.



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Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2021, we had cash and cash equivalents of $764.4 million. We believe that our available cash and cash equivalents will be sufficient to fund our planned operations through at least 2025.

Future Funding Requirements

To date, we have not generated any product revenue. We do not expect to generate any product revenue unless and until we obtain regulatory approval for and commercialize any of our product candidates and we do not know when, or if, this will occur. We expect that our net cash used in operating activities will increase significantly as we advance our product candidates through preclinical and clinical development, seek regulatory approval, and prepare for and, if approved, proceed to commercialization; acquire, discover, validate and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, we expect to incur additional general and administrative costs as we continue to operate as a public company, particularly now that we are a large accelerated filer as of December 31, 2021.

We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We may seek to raise capital through public or private equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. We anticipate that we may need to raise substantial additional capital, the requirements for which will depend on many factors, including: • the scope, timing, rate of progress and costs of our drug discovery efforts,

preclinical development activities, laboratory testing and clinical trials for

our product candidates;

• the number and scope of clinical programs we decide to pursue;

• the cost, timing and outcome of preparing for and undergoing regulatory review

of our product candidates;

• the scope and costs of development and commercial manufacturing activities;

• the cost and timing associated with commercializing our product candidates, if

they receive marketing approval;

• the extent to which we acquire or in-license other product candidates and

technologies;

• the costs of preparing, filing and prosecuting patent applications,

maintaining and enforcing our intellectual property rights and defending

intellectual property-related claims;

• our ability to establish and maintain collaborations on favorable terms, if at

all;

• our efforts to enhance operational systems and our ability to attract, hire


   and retain qualified personnel, including personnel to support the development
   of our product candidates and, ultimately, the sale of our products, following
   regulatory approval;

• our implementation of operational, financial and management systems; and

• the costs associated with being a public company.

A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends,



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repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

Adequate funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials or we may also be required to sell or license to others rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves. If we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business and financial condition.

In November 2021, we entered into a sales agreement (the "Sales Agreement") with Jefferies LLC ("Jefferies"), pursuant to which we may from time to time offer and sell shares of our common stock for an aggregate offering price of up to $200.0 million, through or to Jeffries, acting as sales agent or principal. As of December 31, 2021, no shares have been issued under the Sales Agreement.

See Part I, Item 1A,"Risk Factors" for additional risks associated with our substantial capital requirements.

Summary Statement of Cash Flows

The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for each of the periods presented below:



                                                                Years Ended December 31,
                                                      2021           2020           2019
                                                             (in thousands)
Net cash provided by (used in) operating
activities                                      $  (87,005 )   $  296,734     $  (12,829 )
Net cash used in investing activities                   (4 )          (26 )           (2 )
Net cash provided by financing activities            1,465        531,748              -
Net increase (decrease) in cash, cash
equivalents and
  restricted cash                               $  (85,544 )   $  828,456     $  (12,831 )

Cash Flows from Operating Activities

Net cash used in operating activities for the year ended December 31, 2021 was $87.0 million. Cash used in operating activities was primarily due to net income of $121.2 million increased by stock-based compensation of $39.6 million, an increase in accounts payable and accrued expenses of $54.2 million, an increase in prepaid expenses and other assets of $0.6 million all offset by a decrease in deferred revenue of $301.4 million.

Net cash provided by operating activities was $296.7 million for the year ended December 31, 2020. Cash provided by operating activities was primarily due to an increase in deferred revenue of $301.4 million related to the Roche License Agreement, an increase in accounts payable and accrued expenses of $11.9 million and stock based compensation of $7.5 million, partly offset by the use of funds in our operations to develop our product candidates, resulting in a net loss of $10.9 million. Additional uses of cash during the period included an increase in prepaid expenses and other current assets $7.3 million and unbilled accounts receivable of $5.8 million. The net increase in deferred revenue of $301.4 was the result of the $350.0 million upfront payment offset by revenue recognized of $48.6 million.

Net cash used in operating activities was $12.8 million for the year ended December 31, 2019. Cash used in operating activities was primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of $14.0 million, offset by stock based compensation of $0.6 million and increases in accounts payable and accrued expenses of $0.6 million.

Cash Flows from Investing Activities



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Net cash used in investing activities was less than $0.1 million and consisted of purchases of property and equipment for each of the years ended December 31, 2021, 2020 and 2019.

Cash Flows from Financing Activities

Net cash provided by financing activities was $1.4 million for the year ended December 31, 2021 and consisted of proceeds from issuance of common stock as a result of the exercise of stock options.

Net cash provided by financing activities was $531.8 million for the year ended December 31, 2020, which consisted primarily of $106.6 million of net proceeds from the sale of Series D convertible preferred stock, $107.5 million of net proceeds from the sale of Series D-1 convertible preferred stock and $317.6 million of net proceeds from the initial public offering.

Net cash used in financing activities during the year ended December 31, 2019 was less than $0.1 million and consisted of payments of deferred financing costs.

Contractual Obligations and Commitments

We lease our office space under a non-cancelable operating lease in Boston, Massachusetts, that expires in July 2022. On July 19, 2021, we entered into a sublease agreement pursuant to which we will lease additional office space in Boston, Massachusetts. The term of the sublease commenced on January 1, 2022 and will expire on December 31, 2026.



The following table summarizes our contractual obligations as of December 31,
2021:

                                                                         Payments Due by Period
                                Less than         1 to         3 to       More than
                                   1 year      3 years      5 years         5 years       Total
                                                       (in thousands)
Operating lease obligations   $       989     $  1,626     $  1,693     $         -     $ 4,308

We enter into contracts in the normal course of business with third-party contract organizations for preclinical and clinical studies and testing, manufacture and supply of our preclinical materials and other services and products used for operating purposes. These contracts do not contain any minimum purchase commitments and generally provide for termination following a certain period after notice, and therefore we believe that our non-cancelable obligations under these agreements are not material. Payments due upon cancelation consist only of payments for services provided and expenses incurred up to the date of cancelation.

In December 2021, we entered into a license agreement with Merck (the "Merck License Agreement") for the development, manufacture and commercialization of ruzasvir. Ruzasvir is the NS5A inhibitor we are developing in combination with bemnifosbuvir for the treatment of HCV.

Pursuant to the terms of the Merck License Agreement, we obtained from Merck an exclusive (subject to certain reserved rights to conduct internal research), sublicensable, and worldwide license under certain Merck patents and know-how to research, develop, manufacture, have manufactured, use, import, export, sell, offer for sale, and otherwise commercialize ruzasvir (the "Compound"), or products containing the Compound (each a "Product") for all therapeutic or prophylactic uses in humans (the "Field").

In consideration for the rights we acquired under the Merck License Agreement, we paid Merck a non-refundable upfront payment in the amount of $25,000 in February 2022 and will be required to pay Merck milestone payments up to $135,000 in the aggregate upon its achievement of certain development and regulatory milestones and up to $300,000 in the aggregate upon its achievement of certain sales-based milestones. Additionally, we will pay Merck tiered royalties based on annual net sales of Products ranging from high single digits to mid-teens percentages. Our royalty payment obligations will continue until the later of (i) the expiration of the last to expire valid claim of a licensed Merck patent claiming such Product (or a Compound contained in such Product) and (ii) a period of years after the first commercial sale of such Product in such country. We may terminate the Merck License Agreement for convenience upon prior written notice. The first potential milestone would be payable upon the commencement of a Phase 3 clinical trial.



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The table above also does not include potential milestone and success fees that we may be required to pay under agreements we have entered into with certain consultants. We have an agreement with a consultant that requires payment of a success fee calculated as a percentage of certain product sales, subject to a cumulative maximum payout of $5.0 million. This success payment is contingent upon the occurrence of future events and the timing and likelihood of such payment is neither probable nor estimable.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The effects of material revisions in estimates, if any, will be reflected in the consolidated financial statements prospectively from the date of change in estimates.

Our critical accounting policies are those policies that require the most significant judgements and estimates in the preparation of the financial statements. Management has determined that our most critical accounting policies are those relating to revenue recognition, accrued research and development expenses and stock based compensation.

Revenue Recognition

As of December 31, 2021, all of our revenue to date had been collaboration revenue generated under the Roche License Agreement.

We analyze our collaboration arrangements to assess whether they are within the scope of Accounting Standards Codification ASC Topic 808, Collaborative Arrangements ("ASC 808"), to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities. If we conclude that some or all aspects of the arrangement are within the scope of ASC 808 and do not represent a transaction with a customer, we recognize our allocation of the shared costs incurred with respect to the jointly conducted activities as a component of the related expense in the period incurred. If we conclude that some or all aspects of the arrangement represent a transaction with a customer, we account for those aspects of the arrangement within the scope of ASC 606, Revenue from Contracts with Customers ("ASC 606").

To determine the appropriate amount of revenue to be recognized for arrangements that we determine are within the scope of ASC 606, we perform the following steps: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) each performance obligation is satisfied. ASC 606 requires significant judgment and estimates and results in changes to, but not limited to: (i) the determination of the transaction price, including estimates of variable consideration, (ii) the allocation of the transaction price, including the determination of estimated selling price, and (iii) the pattern of recognition, including the application of proportional performance as a measure of progress on service-related promises and application of point-in-time recognition for supply-related promises.

The transaction price is generally comprised of an upfront payment due at contract inception and variable consideration in the form of payments for our services and materials and milestone payments due upon the achievement of specified events. Other payments we could be entitled to include tiered royalties earned when customers recognize net sales of licensed products. We consider the existence of any significant financing component within our arrangements and have determined that a significant financing component does not exist in our arrangements as substantive business purposes exist to support the payment structure other than to provide a significant benefit of financing. We measure the transaction price based on the amount of consideration to which we expect to be entitled in exchange for transferring the promised goods and/or services to the customer. We utilize either the expected value method or the



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most likely amount method to estimate the amount of variable consideration, depending on which method is expected to better predict the amount of consideration to which we will be entitled. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. With respect to arrangements that include payments for a development or regulatory milestone payment, we evaluate whether the associated event is considered probable of achievement and estimate the amount to be included in the transaction price using the most likely amount method. Milestone payments that are not within our control or the licensee, such as those dependent upon receipt of regulatory approval, are not considered to be probable of achievement until the triggering event occurs. At the end of each reporting period, we re-evaluate the probability of achievement of each milestone and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment. For arrangements that include sales-based royalties, including milestone payments based upon the achievement of a certain level of product sales, wherein the license is deemed to be the sole or predominant item to which the payments relate, we recognize revenue upon the later of: (i) when the related sales occur or (ii) when the performance obligation to which some or all of the payment has been allocated has been satisfied (or partially satisfied). Consideration that would be received for optional goods and/or services is excluded from the transaction price at contract inception.

We generally allocate the transaction price to each performance obligation based on a relative standalone selling price basis. We develop assumptions that require judgment to determine the standalone selling price for each performance obligation in consideration of applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated research and development costs. However, in certain instances, we allocate variable consideration entirely to one or more performance obligation if the terms of the variable consideration relate to the satisfaction of the respective performance obligation and the amount allocated is consistent with the amount we would expect to receive for the satisfaction of the respective performance obligation.

We recognize revenue based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good or service to the customer. For performance obligations that are satisfied at a point in time, we recognize revenue when control of the goods and/or services is transferred to the customer. For performance obligations that are satisfied over time, we recognize revenue by measuring the progress toward complete satisfaction of the performance obligation using a single method of measuring progress which depicts the performance in transferring control of the associated goods and/or services to the customer. We generally use input methods to measure the progress toward the complete satisfaction of performance obligations satisfied over time. With respect to arrangements containing a license to our intellectual property that is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from amounts allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. Significant management judgment is required in determining the level of effort and costs required under an arrangement and the period over which we are expected to complete our performance obligations under an arrangement. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment. Until receipt in November 2021 of the notice from Roche that Roche was terminating the Roche License Agreement effective February 2022, we recognized collaboration revenue over the expected performance period based on its measure of progress towards the completion of certain activities referred to as its Combined Performance Obligation. We concluded that the notice of termination represents a contract modification for accounting purposes. We further concluded that upon receipt of the notice of termination, the Combined Performance Obligation has been completely satisfied. As a result, we recognized all remaining deferred revenue as collaboration revenue within the consolidated statements of operations and



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comprehensive income for the year ended December 31, 2021 (see Note 3, Collaboration Revenue, for a detailed discussion).

Contract costs

We recognize as an asset the incremental costs of obtaining a contract with a customer if the costs are expected to be recovered. We have elected a practical expedient wherein we recognize the incremental costs of obtaining a contract as an expense when incurred if, at inception, the expected amortization period of the asset that we otherwise would have recognized is one year or less. In connection with the Roche License Agreement, we incurred an incremental cost of $7.0 million, which was included in general and administrative costs in the statement of operations and comprehensive loss for the year ended December 31, 2021 included elsewhere in this Annual Report on Form 10-K.

Accrued Research and Development

We have entered into various agreements with CMOs and CROs. Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly. Payments made to CMOs and CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.

Stock-Based Compensation

We use a fair value-based method to account for all stock-based compensation arrangements with employees and non-employees, including stock options and stock awards. The fair value of the option granted is recognized on a straight-line basis over the period during which an optionee is required to provide services in exchange for the option award, known as the requisite service period, which usually is the vesting period. In determining fair value of the stock options granted, we use the Black-Scholes model, which requires the input of subjective assumptions. These assumptions include: estimating the fair market value of the common stock, estimating the length of time employees will retain their vested stock options before exercising them (expected term), the estimated volatility of our common stock price over the expected term (expected volatility), risk-free interest rate and expected dividends. See Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted during the years ended December 31, 2021, 2020 and 2019, respectively. Estimating the fair value of our common stock prior to the completion of our initial public offering involved significant judgement and the use of estimates.

Estimating the Fair Value of Common Stock

Prior to our IPO, we were required to estimate the fair value of the common stock underlying our share-based awards when performing the fair value calculations using the Black-Scholes option pricing model. Prior to our IPO, the fair value of the common stock underlying our stock options has been determined on each grant date by our board of directors, with input from management, considering the most recently available third-party valuation of our common shares. All options to purchase shares of our common stock are intended to be granted with an exercise price per share no less than the estimated fair value per share of our common stock underlying those options on the date of grant, based on the information known to us on the date of grant.

In the absence of a public trading market for our common stock prior to our IPO, on each grant date, we developed an estimate of the fair value of our common stock based on valuations from an independent third-party valuation firm using information known to us on the date of grant, a review of any recent events and their potential impact on the estimated fair value per share of the common stock.



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The third-party valuations of our common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the "Practice Aid").

The assumptions used to determine the estimated fair value of our common stock are based on numerous objective and subjective factors, combined with management judgment, including: • external market conditions affecting the pharmaceutical and biotechnology

industry and trends within the industry;

• our stage of development and business strategy;

• the rights, preferences and privileges of our redeemable convertible preferred

stock relative to those of our common stock;

• the prices at which we sold shares of our redeemable convertible preferred

stock;

• our financial condition and operating results, including our levels of

available capital resources;

• the progress of our research and development efforts;

• equity market conditions affecting comparable public companies; and

• general U.S. market conditions and the lack of marketability of our common

stock.

The Practice Aid identifies various available methods for allocating enterprise value across classes and series of capital stock to determine the estimated fair value of common stock at each valuation date. In accordance with the Practice Aid, we considered the following methods: • Option Pricing Method. Under the option pricing method, or OPM, shares are


   valued by creating a series of call options with exercise prices based on the
   liquidation preferences and conversion terms of each equity class. The
   estimated fair values of the preferred and common stock are inferred by
   analyzing these options.

• Probability-Weighted Expected Return Method. The probability-weighted expected


   return method, or PWERM, is a scenario-based analysis that estimates value per
   share based on the probability-weighted present value of expected future
   investment returns, considering each of the possible outcomes available to us,
   as well as the economic and control rights of each share class.

Based on our early stage of development and other relevant factors, we determined that OPM method as well as a hybrid approach of the OPM and the PWERM methods were the most appropriate methods for allocating our enterprise value to determine the estimated fair value of our common stock. In determining the estimated fair value of our common stock, our board of directors also considered the fact that our stockholders could not freely trade our common stock in the public markets. Accordingly, we applied discounts to reflect the lack of marketability of our common stock based on the weighted-average expected time to liquidity. The estimated fair value of our common stock at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a future liquidity event.

Upon the completion of our initial public offering, the fair value of our common stock is based on the daily closing quoted market price of our common stock.

We also account for any modifications to share based payments in accordance with ASC Topic 718, Compensation - Stock Compensation (ASC 718).

Indemnification Agreements

We enter into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, we indemnify, hold harmless and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, including in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments we could be required to make under these arrangements is not determinable. We have never incurred costs to defend lawsuits or



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settle claims related to these indemnification agreements. As a result, we believe the fair value of these agreements is minimal.

We have also agreed to indemnify our directors and officers for certain events or occurrences while the director or officer is, or was serving, at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the director's or officer's service. The maximum potential amount of future payments we could be required to make under these indemnification agreements is not specified in the agreements; however, we have director and officer insurance coverage that reduces our exposure and enables us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.

SEC Filing Status

Based on our public float as of June 30, 2021, we became a large accelerated filer, and lost emerging growth company status as of December 31, 2021. As of December 31, 2021, we are required to adopt new or revised accounting standards when they are applicable to public companies that are not emerging growth companies and are required to comply with the auditor attestation requirements Section 404(b) of the Sarbanes-Oxley Act.

Recently Issued Accounting Pronouncements

See the section titled "Summary of Significant Accounting Policies-Recently Issued Accounting Pronouncements" in Note 2 to our consolidated financial statements included elsewhere in this Annual Report for additional information.

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