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Item 1A. Risk Factors

2023-10-25 compared with 2023-07-26 · 104 added, 78 removed, 963 unchanged (16% of the section changed)

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We are a clinical-stage company.

Since our incorporation in September 2012, our operations have been limited to raising capital, building infrastructure, obtaining the worldwide rights to certain technology from Ligand Pharmaceuticals Incorporated, or Ligand, and planning, preparing and conducting preclinical studies and clinical trials of our drug candidates, including VK2809, VK5211 and VK0612, which are currently in Phase 2 clinical development, VK2735, for which we concluded a subcutaneous Phase 1 SAD/MAD clinical trial and have commenced an oral Phase 1 SAD/MAD clinical trial, and VK0214, currently in a Phase 1b clinical trial, as well as the diacylglycerol acyltransferase-1, or DGAT-1 and erythropoietin receptor, or EPOR, programs, which are each currently in preclinical development.

Since our incorporation in September 2012, our operations have been limited to raising capital, building infrastructure, obtaining the worldwide rights to certain technology from Ligand Pharmaceuticals Incorporated, or Ligand, and planning, preparing and conducting preclinical studies and clinical trials of our drug candidates, including VK2809, VK2735 subcutaneous, VK5211 and VK0612, which are currently in Phase 2 clinical development, VK2735, currently in an oral Phase 1 SAD/MAD clinical trial, and VK0214, currently in a Phase 1b clinical trial, as well as the diacylglycerol acyltransferase-1, or DGAT-1 and erythropoietin receptor, or EPOR, programs, which are each currently in preclinical development.

We have not yet demonstrated an ability to obtain marketing approval for any of our drug candidates or successfully overcome the risks and uncertainties frequently encountered by companies in the biopharmaceutical industry.

We also have not generated any revenue to date, and we continue to incur significant research and development and other expenses.

As of June 30, 2023, we had an accumulated deficit of $330.8 million.

As of September 30, 2023, we had an accumulated deficit of $353.3 million.

For the foreseeable future, we expect to continue to incur losses, which will increase significantly from historical levels as we expand our drug development activities, seek potential partnering opportunities and/or regulatory approvals for our drug candidates and begin to commercialize them if they are approved by the U.S.

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Further, data generated during development can be interpreted in different ways, and the FDA, EMA or comparable foreign authorities may interpret such data in different ways than us or our collaborators.

Our failure to adequately demonstrate the safety and efficacy of our drug candidates would prevent our receipt of regulatory approval, and ultimately the potential commercialization of these drug candidates.

Our failure to adequately demonstrate the safety and efficacy of

our drug candidates would prevent our receipt of regulatory approval, and ultimately the potential commercialization of these drug candidates.

Since we do not currently possess the resources necessary to independently develop and commercialize the majority of our drug candidates, we may seek to enter into collaborative agreements to assist in the development and potential future commercialization of some or all of these assets as a component of our strategic plan.

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Since we will be unable to generate sufficient, if any, cash inflows to fund our operations for the foreseeable future, we may need to seek additional equity or debt financing to provide the capital required to maintain or expand our operations.

As of June 30, 2023, we had cash, cash equivalents and investments totaling $392.9 million.

Although we received gross proceeds of $287.5 million from the April 2023 Offering (discussed below), there can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all.

As of September 30, 2023, we had cash, cash equivalents and investments totaling $376.2 million.

Although we received net proceeds of $270.0 million, after deducting underwriting discounts, commissions and other offering expenses from the April 2023 Offering (discussed below), there can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all.

If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, we may be required to delay, limit or eliminate the development of business opportunities and our ability to achieve our business objectives, our competitiveness, and our business, financial condition and results of operations may be materially adversely affected.

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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing possible patent claims, including litigation costs and the outcome of any such litigation.

On July 28, 2021, we filed with the SEC a universal Shelf Registration Statement on Form S-3 (File No.

333-258231), or the Shelf Registration Statement.

The Shelf Registration Statement initially provides us with the ability to offer up to $600.0 million of securities, including equity, debt and other securities as described in the Shelf Registration Statement.

The Shelf Registration Statement was declared effective by the SEC on August 11, 2021 and will expire on August 11, 2024.

Pursuant to the Shelf Registration Statement, we may offer additional securities from time to time and through one or more methods of distribution, subject to market conditions and our capital needs.

On July 28, 2021, we entered into an At-The-Market Equity Offering Sales Agreement with Stifel, Nicolaus & Company, Incorporated, Truist Securities, Inc.

Wainwright & Co.

LLC, collectively, the Agents, pursuant to which we may offer and sell, from time to time, through or to the Agents, as sales agent or principal, or the ATM Offering, shares of our common stock having an aggregate offering price of up to $125.0 million, or the ATM Shares.

Any ATM Shares offered and sold in the ATM Offering are to be issued pursuant to the Shelf Registration Statement and the 424(b) prospectus supplement relating to the ATM Offering, dated August 11, 2021.

As of June 30, 2023, we may sell shares of our common stock for remaining gross proceeds of up to $110.9 million from time to time pursuant to the ATM Offering.

On April 3, 2023, we completed an underwritten public offering of our common stock, or the April 2023 Offering, pursuant to the 2021 Shelf Registration Statement.

On April 3, 2023, we completed an underwritten public offering of our common stock, or the April 2023 Offering.

In the April 2023 Offering, we sold an aggregate of 19,828,300 shares of our common stock at a public offering price of $14.50 per share, which included the exercise in full by the underwriters of their option to purchase 2,586,300 additional shares of common stock.

Upon the closing of the April 2023 Offering, we received net proceeds of $270.0 million, after deducting underwriting discounts, commissions and other offering expenses.

On July 26, 2023, we filed an automatic universal shelf registration statement on Form S-3 (File No.

333-273460) with the SEC as a well-known seasoned issuer as defined in Rule 405 under the Securities Act of 1933, as amended, which became effective upon filing, or the 2023 Shelf Registration Statement.

The 2023 Shelf Registration Statement allows us to offer an indeterminate amount of securities, including equity securities, debt securities, warrants, rights, units and depositary shares, from time to time as described in the 2023 Shelf Registration Statement.

The specific terms of any offering under the 2023 Shelf Registration Statement will be established at the time of such offering.

The 2023 Shelf Registration Statement will expire on July 26, 2026.

The 2023 Shelf Registration Statement includes a prospectus, or the ATM Prospectus, pursuant to which we may offer and sell, from time to time, through or to Stifel, Nicolaus & Company, Incorporated, Truist Securities, Inc., H.C.

Wainwright & Co.

LLC and BTIG, LLC, or, collectively, the ATM Agents, as sales agent(s) or principal(s), shares of our common stock having an aggregate offering price of up to $200.0 million, or the ATM Offering.

The ATM Offering will be conducted pursuant to the ATM Prospectus and the At-The-Market Equity Offering Sales Agreement, dated July 28, 2021, as amended on July 26, 2023, among us and the ATM Agents.

If we raise additional capital by issuing equity securities, the percentage ownership of our existing stockholders may be reduced, and accordingly these stockholders may experience substantial dilution.

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and patients’

perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.

perceptions as to the potential advantages of the drug being studied in relation to other available therapies,

including any new drugs that may be approved for the indications we are investigating.

In addition, the COVID-19 pandemic previously negatively impacted, and may continue to negatively impact, our ability to recruit and enroll patients for our clinical trials, as they may be reluctant or unable to visit clinical sites, or may delay seeking treatment for chronic conditions.

If we fail to enroll and maintain the number of patients for which the clinical trial was designed, the statistical power of that clinical trial may be reduced, which would make it harder to demonstrate that the product candidate being tested in such clinical trial is safe

and effective.

Additionally, enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.

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Approval policies or regulations may change and may be influenced by the results of other similar or competitive products, making it more difficult for us to achieve such approval in a timely manner or at all.

For example, the FDA has released draft guidance regarding clinical trials for drug candidates treating diabetes that may result in more stringent

requirements for the clinical trials and regulatory approval of such drug candidates.

For example, the FDA has released draft guidance regarding clinical trials for drug candidates treating diabetes that may result in more stringent requirements for the clinical trials and regulatory approval of such drug candidates.

This and any future guidance that may result from recent FDA advisory panel discussions on the topic of diabetes, non-alcoholic steatohepatitis, or NASH, and other metabolic indications, may make it more expensive to develop and commercialize such drug candidates for such indications.

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The key competitive factors affecting the success of each of our drug candidates, if approved, are likely to be its efficacy, safety, tolerability, frequency and route of administration, convenience and price, the level of branded and generic competition and the availability of coverage and reimbursement from government and other third-party payors.

While no therapies are currently approved for the treatment of non-alcoholic steatohepatitis, we are aware of numerous development-stage programs targeting this disease, including resmetirom (MGL-3196) from Madrigal Pharmaceuticals, Inc., arachidyl amido cholanoic acid from Galmed Pharmaceuticals Ltd., belapectin (GR-MD-02) from Galectin Therapeutics Inc., lanifibranor from Inventiva S.A., semaglutide from Novo Nordisk A/S, firsocostat (GS-0976) and cilofexor (GS-9674) from Gilead Sciences, Inc., tirzepatide from Eli Lilly and Company, ervogastat (PF-06865571) and clesacostat (PF-05221304) from Pfizer Inc., MK-6024 (efinopegdutide) from Merck & Co., Inc., efruxifermin (AKR-001) from Akero Therapeutics, Inc., pegozafermin (BIO89-100) from 89bio, Inc., denifanstat (TVB-2640) from Sagimet Biosciences Inc., and GSK4532990 (ARO-HSD) from GlaxoSmithKline plc.

In addition, we are aware of active programs at Aligos Therapeutics, Inc., Alnylam Pharmaceuticals, Inc., Altimmune, Inc., Arrowhead Pharmaceuticals, Inc., Ascletis Biopharmaceutical, AstraZeneca PLC, Boehringer Ingelheim International GmbH, Boston Pharmaceuticals Inc., Bristol Myers Squibb, Can-Fite BioPharma Ltd., ChemomAb Ltd., CohBar, Inc., Corcept Therapeutics Inc., CytoDyn Inc., D&D Pharmatech, Inc., Durect Corporation, Enyo Pharma SA, Inc., Future Medicine Co., Ltd., Galecto, Inc., Gelesis Holdings Inc., Hanmi Pharmaceutical Co., Ltd., Hepagene Therapeutics, Inc., Hepion Pharmaceuticals, Inc., HighTide Therapeutics Inc., Ionis Pharmaceuticals, Inc., Kowa Company, Ltd., MediciNova Inc., NGM Biopharmaceuticals, Inc., NorthSea Therapeutics BV, Pliant Therapeutics, Inc., Poxel SA, Regeneron Pharmaceuticals Inc., Seal Rock Therapeutics, Inc ., Terns Pharmaceuticals, Inc., Theratechnologies Inc., Yuhan Corporation, and Cadila Healthcare Limited (a.k.a.

Novo Nordisk A/S, firsocostat (GS-0976) and cilofexor (GS-9674) from Gilead Sciences, Inc., tirzepatide from Eli Lilly and Company, ervogastat (PF-06865571) and clesacostat (PF-05221304) from Pfizer Inc., efruxifermin (AKR-001) from Akero Therapeutics, Inc., pegozafermin (BIO89-100) from 89bio, Inc., denifanstat (TVB-2640) from Sagimet Biosciences Inc., efocipegtrutide (HM15211) from Hanmi Pharmaceutical Co., Ltd., survodutide (BI 456906) from Boehringer Ingelheim International GmbH, ION224 from Ionis Pharmaceuticals, Inc., rencofilstat (CRV431) from Hepion Pharmaceuticals, Inc., HTD1801 from HighTide Therapeutics Inc., GSK4532990 (ARO-HSD) from GlaxoSmithKline plc., ALN-HSD from Alnylam Pharmaceuticals, Inc./ Regeneron Pharmaceuticals Inc., efinopegdutide (MK-6024) from Merck & Co., Inc., and pemvidutide (ALT-801) from Altimmune, Inc.

In addition, we are aware of active programs at Aligos Therapeutics, Inc., Arrowhead Pharmaceuticals, Inc., Ascletis Biopharmaceutical, AstraZeneca PLC, Boston Pharmaceuticals Inc., Can-Fite BioPharma Ltd., ChemomAb Ltd., CohBar, Inc., Corcept Therapeutics Inc., CytoDyn Inc., D&D Pharmatech, Inc., Durect Corporation, Enyo Pharma SA, Inc., Future Medicine Co., Ltd., Galecto, Inc., Gelesis Holdings Inc., Hepagene Therapeutics, Inc., Kowa Company, Ltd., MediciNova Inc., NGM Biopharmaceuticals, Inc., NorthSea Therapeutics BV, Pliant Therapeutics, Inc., Poxel SA, Seal Rock Therapeutics, Inc ., Terns Pharmaceuticals, Inc., Theratechnologies Inc., Yuhan Corporation, and Cadila Healthcare Limited (a.k.a.

Zydus Cadila).

VK2735, if approved, will compete against two therapies that are already approved and marketed for obesity, both from Novo Nordisk A/S:

Semaglutide (Wegovy®) and liraglutide (Saxenda®).

Tirzepatide from Eli Lilly and Company is currently under regulatory review for obesity in both the US and the EU (tirzepatide is already approved as Mounjaro® for the treatment of type 2 diabetes).

We are also aware of several programs targeting obesity that are in the late development stage that will compete against VK2735, if approved, including CagriSema from Novo Nordisk A/S, orforglipron and retatrutide from Eli Lilly and Company, and survodutide (BI 456906) from Boehringer Ingelheim International GmbH.

In addition, we are aware of active programs at Altimmune, Inc., Amgen Inc., AstraZeneca, Carmot Therapeutics Inc., Hanmi Pharmaceutical Co., Ltd., Pfizer Inc., Structure Therapeutics Inc., Terns Pharmaceuticals, Inc., and Zealand Pharma A/S.

In the U.S., there are currently no marketed therapies for the maintenance or improvement of lean body mass, bone mineral density or physical function in patients recovering from non-elective hip fracture surgery.

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Even if we, or any future collaborators, obtain orphan drug designation for a product candidate, we, or they, may not be able to obtain orphan drug exclusivity for that product candidate.

Generally, a product with orphan drug designation only becomes entitled to orphan drug exclusivity if it receives the first marketing approval for the indication for which it has such designation, in which case the FDA or the EMA will be precluded from approving another marketing application for the same drug for that indication for the applicable exclusivity period.

exclusivity period.

The applicable exclusivity period is seven years in the United States and ten years in Europe.

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In addition, the manufacturing facilities in which our drug candidates are made could be adversely affected by equipment failures, labor shortages, natural disasters, epidemics, pandemics, power failures and numerous other factors.

In addition, any adverse developments affecting manufacturing operations for our drug candidates may result in shipment delays, inventory shortages, lot failures, withdrawals or recalls, or other interruptions in the supply of our drug candidates.

In addition, any adverse developments affecting manufacturing operations of our drug candidates may result in shipment delays, inventory shortages, lot failures, withdrawals or recalls, or other interruptions in the supply of our drug candidates.

We also may need to take inventory write-offs and incur other charges and expenses for drug candidates that fail to meet specifications, undertake costly remediation efforts, or seek costlier manufacturing alternatives.

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The facilities and quality systems of some or all of our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our drug candidates or any of our other potential products.

In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our drug candidates or any of our other potential products or the associated quality systems for compliance with the regulations applicable to the activities being conducted.

In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our

drug candidates or any of our other potential products or the associated quality systems for compliance with the regulations applicable to the activities being conducted.

Although we oversee the contract manufacturers, we cannot control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with the regulatory requirements.

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We believe our drugs will be priced significantly higher than existing generic drugs and consistent with current branded drugs.

If we are unable to show a significant benefit relative to existing generic drugs, Medicare, Medicaid and private payors may not be willing to provide reimbursement for our drugs, which would significantly reduce the likelihood of our products gaining market acceptance.

If we are unable to show a significant benefit relative to existing generic drugs, Medicare,

Medicaid and private payors may not be willing to provide reimbursement for our drugs, which would significantly reduce the likelihood of our products gaining market acceptance.

We expect that private insurers will consider the efficacy, cost-effectiveness, safety and tolerability of our potential products in determining whether to approve reimbursement for such products and at what level.

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This legislation is designed to advance medical innovation and empower the FDA with the authority to directly hire positions related to drug and device development and review.

government proposals to reduce or eliminate budgetary deficits may include reduced allocations to the FDA and other related government agencies.

However, government proposals to reduce or eliminate budgetary deficits may include reduced allocations to the FDA and other related government agencies.

These budgetary pressures may result in a reduced ability by the FDA to perform its roles, including the related impact to academic institutions and research laboratories whose funding is fully or partially dependent on both the level and timing of funding from government sources.

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Violations of fraud and abuse laws may be punishable by criminal or civil sanctions, including penalties, fines or exclusion or suspension from federal and state healthcare programs such as Medicare and Medicaid and debarment from contracting with the U.S.

In addition, private individuals have the ability to bring actions on behalf of the government under the federal False Claims Act as well as under the false claims laws of several states.

private individuals have the ability to bring actions on behalf of the government under the federal False Claims Act as well as under the false claims laws of several states.

Many states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental payors.

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The Federal Trade Commission and state Attorneys General all are aggressive in reviewing privacy and data security protections for consumers.

New laws also are being considered at both the state and federal levels.

New laws also are being considered at both the state and federal levels and several states have passed comprehensive privacy laws.

For example, the California Consumer Privacy Act, or the CCPA, which went into effect on January 1, 2020, is creating similar risks and obligations as those created by the GDPR, though the CCPA does exempt certain clinical trial data.

The California Privacy Rights Act, or the CPRA, which went into effect on January 1, 2023, significantly modified the CCPA, and also created a new state agency that is vested with authority to implement and enforce the CCPA and the CRPA.

The California Privacy Rights Act, or the CPRA, which went into effect on January 1, 2023, amended and expanded the CCPA, and also created a new state agency that is vested with authority to

implement and enforce the CCPA and the CRPA.

The CCPA and the CRPA may increase our compliance costs and potential liability, and we cannot yet predict the impact of the CCPA or the CRPA on our business.

Additionally, state legislation continues to be a driving force behind the changing privacy law landscape in the United States.

For example, Virginia passed the Consumer Data Protection Act, which took effect on January 1, 2023, Colorado passed the Colorado Privacy Act and Connecticut passed the Connecticut Data Privacy Act, each of which became effective on July 1, 2023, and Utah passed the Consumer Privacy Act, which will become effective on December 31, 2023.

A broad range of legislative measures also have been introduced at the federal level.

Other states have also enacted data privacy laws, including the Virginia Consumer Data Protection Act, the Colorado Privacy Act and the Connecticut Data Privacy Act, all of which became effective in 2023.

Utah’s Consumer Privacy Act will go into effect on December 31, 2023 and the Iowa Consumer Data Protection Act will go into effect on January 1, 2025.

On May 1, 2023, Indiana became the seventh state to pass similar data privacy legislation, the Indiana Data Privacy Law, which will become effective January 1, 2026.

The Tennessee Information Protection Act, enacted on May 11, 2023, will go into effect on July 1, 2024.

On May 19, 2023, Montana became the ninth state to enact a comprehensive consumer privacy law, the Montana Consumer Data Privacy Act, which goes into effect October 1, 2024.Additionally, a broad range of legislative measures also have been introduced at the federal level.

Accordingly, failure to comply with federal and state laws (both those currently in effect and future legislation) regarding privacy and security of personal information could expose us to fines and penalties under such laws.

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Bribery Act 2010, or the Bribery Act, and other anti-corruption laws that apply in countries where we do business and may do business in the future.

The FCPA, the Bribery Act and these other laws generally prohibit us, our officers, and our employees and intermediaries from

bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage.

The FCPA, the Bribery Act and these other laws generally prohibit us, our officers, and our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage.

Compliance with the FCPA, in particular, is expensive and difficult, particularly in countries in which corruption is a recognized problem.

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There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the FCPA, the Bribery Act or other legal requirements, including Trade Control Laws.

If we are not in compliance with the FCPA, the Bribery Act and other anti-corruption laws or Trade Control Laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity.

If we are not in compliance with the

FCPA, the Bribery Act and other anti-corruption laws or Trade Control Laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity.

The Securities and Exchange Commission, or the SEC, also may suspend or bar issuers from trading securities on U.S.

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Our success depends on our continued ability to attract, retain and motivate highly qualified management and scientific personnel.

As of June 30, 2023, we had 22 full-time employees, two part-time employees and a small number of consultants, which may make us more reliant on our individual employees than companies with a greater number of employees.

As of September 30, 2023, we had 23 full-time employees, three part-time employees and a small number of consultants, which may make us more reliant on our individual employees than companies with a greater number of employees.

The loss of any of our key personnel could delay or prevent the development of our drug candidates.

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Hiring a significant number of additional employees, particularly those at the management level, would increase our expenses significantly.

Moreover, if we fail to expand and enhance our operational, financial and management systems in conjunction with our potential future growth, it could have a material adverse effect on our business, financial condition and results of operations.

Our management’s relative lack of public company experience could put us at greater risk of incurring fines or regulatory actions for failure to comply with federal securities laws and could put us at a competitive disadvantage, and could require our management to devote additional time and resources to ensure compliance with applicable corporate governance requirements.

Our management team has limited experience in managing and operating a public company, which could have an adverse effect on their ability to quickly respond to problems or adequately address issues and matters applicable to public companies.

Any failure to comply with federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, financial condition and results of operations.

Further, since our management team has limited public company experience, we may have to dedicate additional time and resources to comply with legally mandated corporate governance policies relative to our competitors whose management teams have more public company experience.

Moreover, if we fail to expand and enhance our operational,

financial and management systems in conjunction with our potential future growth, it could have a material adverse effect on our business, financial condition and results of operations.

We are exposed to product liability, non-clinical and clinical liability risks which could place a substantial financial burden upon us, should lawsuits be filed against us.

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If an accident occurs, we could be held liable for resulting damages, which could be substantial.

We are also subject to numerous

environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials.

We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials.

Additional federal, state and local laws and regulations affecting our operations may be adopted in the future.

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A significant natural or man-made disaster, such as an earthquake, prolonged or repeated power outage, hurricane, flood, fire, drought or other extreme weather events and changing weather patterns, which are increasing in frequency due to the impacts of climate change, could severely damage or destroy our headquarters or facilities or the facilities of our manufacturers or suppliers, which could have a material and adverse effect on our business, financial condition and results of operations.

In addition, terrorist acts or acts of war targeted at the U.S., and specifically the greater San Diego, California region, as well as the ongoing conflict between Ukraine and Russia and the global impact of restrictions and sanctions imposed on Russia, could cause damage or disruption to us, our employees, facilities, partners and suppliers, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, terrorist acts or acts of war targeted at the U.S., and specifically the greater San Diego, California region, as well as the ongoing conflict between Ukraine and Russia and the global impact of restrictions and sanctions imposed on Russia and the Israel-Hamas war, could cause damage or disruption to us, our employees, facilities, partners and suppliers, which could have a material adverse effect on our business, financial condition and results of operations.

We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.

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Separately, the SEC has also announced that it is scrutinizing existing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege our existing climate disclosures are misleading or deficient.

The impact of the Russian invasion of Ukraine on the global economy, energy supplies and raw materials is uncertain, but may prove to negatively impact our business and operations.

The short and long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time.

We continue to monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the United States and several European and Asian countries may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and other third parties with which we conduct business.

For example, a prolonged conflict may result in increased inflation, escalating energy prices and constrained availability, and thus increasing costs, of raw materials.

*The impact of the Russian invasion of Ukraine and the Israel-Hamas war on the global economy, energy supplies and raw materials is uncertain, but may prove to negatively impact our business and operations.

The short and long-term implications of Russia’s invasion of Ukraine and the Israel-Hamas war are difficult to predict at this time.

We continue to monitor any adverse impact that the outbreak of war in Ukraine, the subsequent institution of sanctions against Russia by the United States and several European and Asian countries, and the Israel-Hamas war may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and other third parties with which we conduct business.

For example, a prolonged conflict in Ukraine or Israel may result in increased inflation, escalating energy prices and constrained availability, and thus increasing costs, of raw materials.

We will continue to monitor this fluid situation and develop contingency plans as necessary to address any disruptions to our business operations as they develop.

To the extent the war in Ukraine may adversely affect our business as discussed above, it may also have the effect of heightening many of the other risks described herein.

To the extent the wars in Ukraine or Israel may adversely affect our business as discussed above, it may also have the effect of heightening many of the other risks described herein.

Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation;

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A weak or declining economy could also strain our suppliers, service providers, manufacturers or other partners and there is a risk that one or more would not survive or be able to meet their commitments to us under such circumstances.

Weakened or declining economic conditions could be caused by a number of factors, including high interest rates, rising inflation, the government closure of Silicon Valley Bank and liquidity concerns at other financial institutions, and the potential for local and/or global economic recession.

As widely reported, global credit and financial markets have experienced volatility and disruptions in the past several years and especially in 2020, 2021 and 2022 due to the impacts of the COVID-19 pandemic, and, more recently, the ongoing conflict between Ukraine and Russia and the global impact of restrictions and sanctions imposed on Russia, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability.

Moreover, the global impacts of the Israel-Hamas war are still unknown.

There can be no assurances that further deterioration in credit and financial markets and confidence in economic conditions will not occur.

For example, U.S.

debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns, or a recession in the United States.

Although U.S.

lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, including a suspension of the federal debt ceiling in June 2023, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States.

impact of this or any further downgrades to the U.S.

government’s sovereign credit rating or its perceived creditworthiness could adversely affect the U.S.

and global financial markets and economic conditions.

Absent further quantitative easing by the Federal Reserve, these developments could cause interest rates and borrowing costs to rise, which may negatively impact our results of operations or financial condition.

Moreover, disagreement over the federal budget has caused the U.S.

federal government to shut down for periods of time.

Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

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We currently have intellectual property rights to develop our drug candidates through a license from Ligand.

As of June 30, 2023, we owned or co-owned 83 patent applications and 13 patents.

As of September 30, 2023, we owned or co-owned 96 patent applications and 17 patents.

Because our programs require the use of proprietary rights held by Ligand, the growth of our business will likely depend in part on our ability to maintain and exploit these proprietary rights.

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The Master License Agreement imposes, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other obligations on us.

may have the right to terminate the license, in which event we would not be able to develop or market products covered by the license.

If we fail to comply with our obligations under these agreements, or if we file for bankruptcy, we may be required to make certain payments to the licensor, we may lose the exclusivity of our license, or the licensor may have the right to terminate the license, in which event we would not be able to develop or market products covered by the license.

Additionally, the milestone and other payments associated with these licenses could materially and adversely affect our business, financial condition and results of operations.

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In some cases, patent prosecution of our licensed technology may be controlled solely by the licensor.

If our licensor fails to obtain and maintain patent or other protection for the proprietary intellectual property we in-license, then we could lose our rights to the intellectual property or our exclusivity with respect to those rights, and our competitors could market competing products using the intellectual property.

If our licensor fails to obtain and maintain patent or other protection for the proprietary intellectual property we in-license, then we could lose our rights to the

intellectual property or our exclusivity with respect to those rights, and our competitors could market competing products using the intellectual property.

In certain cases, we may control the prosecution of patents resulting from licensed technology.

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and other countries with respect to our proprietary or licensed technology and products.

We currently in-license most of our intellectual property rights to develop our drug candidates and may in-license additional intellectual property rights in the

We currently in-license most of our intellectual property rights to develop our drug candidates and may in-license additional intellectual property rights in the future.

Under the terms of the Master License Agreement, Ligand has the first right to file, prosecute and maintain the patents subject to the Master License Agreement in its name.

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Our intellectual property includes licenses covering issued patents and pending patent applications for composition of matter, method of use and method of manufacture.

As of June 30, 2023, for each of VK2809 and VK0214, we in-licensed three patents in the U.S.

and additional patents in certain foreign jurisdictions, and owned or co-owned and in-licensed one U.S.

patent, and six U.S.

As of September 30, 2023, for each of VK2809 and VK0214, we in-licensed three patents in the U.S.

and additional patents in certain foreign jurisdictions, and owned or co-owned and in-licensed two U.S.

patents, and six U.S.

patent applications, and additional patents and patent applications in certain foreign jurisdictions.

We also in-licensed one additional U.S.

patent and a patent and patent application in Japan directed to VK0214;

and owned one additional patent and one patent application in the U.S., one Patent Cooperation Treaty, or PCT, application, and several patent applications in certain foreign jurisdictions directed to VK2809 as of June 30, 2023.

For VK5211, as of June 30, 2023, we in-licensed ten patents and one patent application in the U.S.

patent and a patent in Japan directed to VK0214;

For VK5211, as of September 30, 2023, we in-licensed ten patents and one patent application in the U.S.

and several other patents and patent applications in certain foreign jurisdictions.

For VK2735, we own four U.S.

patent applications, two PCT applications, and patent applications in certain foreign jurisdictions as of June 30, 2023.

patent applications, two PCT applications, and patent applications in certain foreign jurisdictions as of September 30, 2023.

With respect to our other current drug candidates, we have a license covering several issued patents both in the U.S.

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Any inability to secure licenses or alternative technology could result in delays in the introduction of our products or lead to prohibition of the manufacture or sale of products by us.

Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.

Even if we are able to obtain a license, it may be non-exclusive, thereby giving our

competitors access to the same technologies licensed to us.

We could be forced, including by court order, to cease commercializing the infringing technology or product.

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We may be required to initiate litigation to enforce or defend our licensed and owned intellectual property.

For example, we are currently aware of at least two third-party companies that are selling products in the U.S.

For example, we were previously aware of at least two third-party companies that were selling products in the U.S.

bearing the name “LGD-4033,”

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Many countries, including European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner may be compelled under certain circumstances to grant licenses to third parties.

In those countries, as of June 30, 2023, we had several licensed and owned patents and several licensed and owned patent applications and may have limited remedies if such patents are infringed or if we are compelled to grant a license to a third party, which could materially diminish the value of such patents.

could limit our potential revenue opportunities.

In those countries, as of September 30, 2023, we had several licensed and owned patents and several licensed and owned patent applications and may have limited remedies if such patents are infringed or if we are compelled to grant a license to a third party, which could materially diminish the value of such patents.

This could limit our potential revenue opportunities.

Accordingly, our efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we own or license.

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If no active trading market for our common stock is sustained, you may be unable to sell your shares when you wish to sell them or at a price that you consider attractive or satisfactory.

The lack of an active market may also adversely affect our ability to raise capital by

selling securities in the future, or impair our ability to acquire or in-license other drug candidates, businesses or technologies using our shares as consideration.

The lack of an active market may also adversely affect our ability to raise capital by selling securities in the future, or impair our ability to acquire or in-license other drug candidates, businesses or technologies using our shares as consideration.

*Our management owns a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

As of June 30, 2023, our executive officers, directors and 5% or greater stockholders beneficially owned 15.1% of our common stock.

As of September 30, 2023, our executive officers, directors and 5% or greater stockholders beneficially owned 15.1% of our common stock.

Therefore, our executive officers, directors and 5% or greater stockholders have the ability to influence us through this ownership position.

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The interests of these stockholders may not always coincide with our interests or the interests of other stockholders.

This may also prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders and they may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.

stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.

*We are a “smaller reporting company”

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after December 31, 2023, we will incur significant legal, accounting and other expenses.

In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, as well as rules subsequently implemented by the SEC

and The Nasdaq Stock Market LLC have imposed various requirements on public companies.

In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, as well as rules subsequently implemented by the SEC and The Nasdaq Stock Market LLC have imposed various requirements on public companies.

There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas.

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As a publicly traded company, we have incurred and will incur legal, accounting and other expenses associated with the SEC reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as corporate governance requirements, including those under the Sarbanes-Oxley Act, the Dodd-Frank Act and other rules implemented by the SEC and The Nasdaq Stock Market LLC.

In addition, we expect that we will need to hire additional personnel in our finance department to help us comply with the various requirements applicable to public companies.

In addition, we expect that we will need to hire additional personnel in our finance department to help us

comply with the various requirements applicable to public companies.

The expenses incurred by public companies generally to meet SEC reporting, finance and accounting and corporate governance requirements have been increasing in recent years as a result of changes in rules and regulations and the adoption of new rules and regulations applicable to public companies.

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corporations whose stock is traded on an established securities market.

The excise tax will be imposed on repurchases that occur after

December 31, 2022.

The excise tax will be imposed on repurchases that occur after December 31, 2022.

The imposition of the excise tax on repurchases of our shares will increase the cost to us of making repurchases and may cause us to reduce the number of shares repurchased pursuant to the Repurchase Program.

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ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our amended and restated bylaws provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (3) any action asserting a claim against us or our directors, officers or employees arising pursuant to any provision of our amended and restated bylaws, our amended and restated certificate of incorporation or the DGCL, (4) any action asserting a claim against us or our directors, officers or employees that is governed by the internal affairs doctrine, or (5) any action to interpret, apply, enforce or determine the validity of our amended and restated bylaws or our amended and restated certificate of incorporation.

directors, officers or employees that is governed by the internal affairs doctrine, or (5) any action to interpret, apply, enforce or determine the validity of our amended and restated bylaws or our amended and restated certificate of incorporation.

Any person purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to this provision of our amended and restated bylaws.

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Alternatively, if a court were to find this provision of our amended and restated bylaws inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations.

Unregistered Sales of Equi ty Securities and Use of Proceeds

Not applicable.

Defaults Upo n Senior Securities

Not applicable.

Mine Saf ety Disclosures

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors