Assembly Biosciences said it exercised a profit-sharing option for the development of a herpes treatment under its collaboration agreement with Gilead Sciences.

The biotechnology company said it will share 40% of the U.S. development costs and profits for the helicase-primase inhibitor program for recurrent genital herpes. Assembly Bio exercised the option after reviewing Gilead's development plan and budget for the program, it said Tuesday.

"Exercising this option underscores our confidence in the HSV HPI program and the meaningful opportunity it represents for Assembly Bio," Chief Executive Jason Okazaki said.

The company said it expects to receive a $75 million option continuation payment from Gilead in the fourth quarter of this year, which will support a cash runway into 2029.

Under the collaboration agreement, Gilead has sole right and responsibility to further develop and commercialize the program, which includes two treatments. One of those treatments, GS-1179, is expected to advance into a phase 2 trial by the end of the year.

Assembly Bio said it is eligible for up to $280 million in regulatory and commercial milestones and tiered royalties on net sales outside the U.S.

The profit-share program is subject to certain opt-out and conversion rights on both sides, which may lead to the transition of up to $330 million in milestone payments and tiered royalties.

Shares of Assembly Bio rose 2% to $36.00 in after-hours trading on Tuesday.