What changed in this filing

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Item 9A. Controls and Procedures

2024-02-07 compared with 2023-02-10 · 161 added, 121 removed, 671 unchanged (30% of the section changed)

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Based on this assessment, our management concluded that, as of December 31, 2023, our internal control over financial reporting was effective based on those criteria.

Attestation Report on Internal Control over Financial Reporting.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to the deferral allowed given we are neither an accelerated nor a large accelerated filer.

Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report on Internal Control over Financial Reporting.

Our independent registered public accounting firm, Marcum, LLP, issued an attestation report on our internal control over financial reporting, as noted below.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Shareholders and Board of Directors of Viking Therapeutics, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Viking Therapeutics, Inc.

's (the “Company”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet as of December 31, 2023 and the related consolidated statements of operations and comprehensive loss,

shareholders’ equity, and cash flows and the related notes for the one year in the period ended December 31, 2023 of the Company, and our report dated February 7, 2024 expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management Annual Report on Internal Control over Financial Reporting”.

Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate.

/s/ Marcum LLP

Costa Mesa, California

February 7, 2024

Other Information.

Not applicable.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

During the fiscal quarter ended December 31, 2023, none of our directors or officers (as defined in Section 16 of the Securities Exchange Act of 1934, as amended) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign J urisdictions that Prevent Inspections.

Not applicable.

Directors, Executive Officers and Corporate Governance.

Directors, Executive Off icers and Corporate Governance.

The information required by this item will be contained in our definitive proxy statement on Schedule 14A to be filed with the SEC in connection with our 2024 annual meeting of stockholders, or the Proxy Statement, which we expect to file not later than 120 days after the end of our year ended December 31, 2023, and is incorporated in this report by reference.

Executive Compensation.

Executi ve Compensation.

The information required by this item will be contained in the Proxy Statement, which we expect to file not later than 120 days after the end of our year ended December 31, 2023, and is incorporated in this report by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Security Ownership of Certain Beneficial Ow ners and Management and Related Stockholder Matters.

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Principal Accounting Fees and Services.

Principal Accou nting Fees and Services.

Exhibits, Financial Statement Schedules.

Exhibits, Financ ial Statement Schedules.

(a)(1) The Financial Statements required to be filed by Items 8 and 15(c) of this Annual Report on Form 10-K, and filed herewith, are as follows:

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Amended and Restated Certificate of Incorporation.

Amended and Restated Bylaws.

Amended and Restated Bylaws of Viking Therapeutics, Inc., effective as of May 9, 2023.

Form of Common Stock Certificate.

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Second Amendment to Master License Agreement, dated April 8, 2015, by and among Viking Therapeutics, Inc., Ligand Pharmaceuticals Incorporated and Metabasis Therapeutics, Inc.

Letter Agreement regarding board composition and management rights, dated May 21, 2014, by and between Viking Therapeutics, Inc.

and Ligand Pharmaceuticals Incorporated.

Voting Agreement, dated May 21, 2014, by and among Viking Therapeutics, Inc., Ligand Pharmaceuticals Incorporated, Metabasis Therapeutics, Inc., Brian Lian, Ph.D.

and Michael Dinerman, M.D.

Common Stock Purchase Agreement, dated February 20, 2014, by and between Viking Therapeutics, Inc.

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Wainwright & Co., LLC.

Amendment No.

1 to At-the-Market Equity Offering Sales Agreement, dated as of July 26, 2023, by and among Viking Therapeutics, Inc., Stifel, Nicolaus & Company, Incorporated, Truist Securities, Inc., H.C.

Wainwright & Co., LLC and BTIG, LLC.

List of Subsidiaries of Viking Therapeutics, Inc.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Viking Therapeutics, Inc.

Clawback Policy

Inline XBRL Instance Document.

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(i) Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022, (ii) Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2023 and 2022, (iii) Consolidated Statements of Stockholders’ Equity for the period from December 31, 2021 to December 31, 2023, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022, and (v) Notes to Consolidated Financial Statements.

* Filed herewith.

# Indicates compensatory plan or arrangement.

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Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Regist ered Public Accounting Firm

To the Stockholders and Board of Directors of

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We have audited the accompanying consolidated balance sheets of Viking Therapeutics, Inc.

and subsidiary (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022, and the results of its consolidated operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2023, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated February 7, 2024, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit s, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit s included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit s also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit s provide a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accrual for preclinical study and clinical trial costs

As described in Note 1 to the consolidated financial statements, the Company estimates its preclinical study and clinical trial expenses based on the services it received pursuant to contracts with research institutions and contract research organizations (“CROs”) that conduct and manage preclinical studies and clinical trials on the Company’s behalf.

As described in Note 1 to the financial statements, the Company estimates its preclinical study and clinical trial expenses based on the services it received pursuant to contracts with research institutions and contract research organizations (“CROs”) that conduct and manage preclinical studies and clinical trials on the Company’s behalf.

Clinical trial-related contracts vary significantly in length, and may be for a fixed amount based on milestones or deliverables, a variable amount based on actual costs incurred, capped at a certain limit, or a combination of these elements.

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The financial terms of these agreements vary from contract to contract and may result in uneven expenses and payment flows.

was judgment by management in determining the achievement of milestones, patient enrollments and occurrence of other events that creates a present obligation for the Company to pay the research institutions and CROs for their services.

The principal consideration for our determination that performing procedures related to the preclinical study and clinical trial expenses, specifically related to the year-end accrual for preclinical study and clinical trial costs, is a critical audit matter is that there was judgment by management in determining the achievement of milestones, patient enrollments and occurrence of other events that creates a present obligation for the Company to pay the research institutions and CROs for their services.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

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100,113,770 shares issued and outstanding at December 31, 2023 and 78,257,258 shares issued and outstanding at December 31, 2022

Treasury stock at cost, 2,193,251 shares at December 31, 2022, no shares at December 31, 2021

Treasury stock at cost, 2,193,251 shares at December 31, 2023 and 2022

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Total stockholders’ equity

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Other comprehensive loss, net of tax:

Unrealized loss on securities

Unrealized gain (loss) on securities

Foreign currency translation loss

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Viking Therapeutics, Inc.

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Stockhol ders’ Equity

(In thousands, except share amounts)

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Comprehensive

Income (Loss)

Treasury Stock

Balance at December 31, 2020

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Issuance of common stock from warrant exercises

Unrealized gain (loss) on investments

Unrealized loss on investments

Balance at December 31, 2021

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Issuance of common stock from warrant exercises

Stock repurchase through Stock Repurchase Program

Repurchase of common stock

Sale of common stock, net of issuance costs

Unrealized gain (loss) on investments

Unrealized currency translation gain (loss)

Unrealized loss on investments

Unrealized currency translation loss

Balance at December 31, 2022

Employee stock-based compensation, net

Shares withheld related to employee tax withholding

Issuance of common stock under employee stock plans

Sale of common stock, net of issuance costs

Unrealized gain on investments

Unrealized currency translation loss

Balance at December 31, 2023

The accompanying notes are an integral part of these consolidated financial statements.

Viking Therapeutics, Inc.

Consolidated Statements of Cash Flows

Consolidated Statements o f Cash Flows

(In thousands)

Year Ended December 31,

Cash flows from operating activities

Adjustments to reconcile net loss to net cash used in operating

Amortization of investment premiums

(Accretion) amortization of investment premiums

Amortization of financing costs

Amortization of non-cash clinical trial costs

Stock-based compensation

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Interest expense related to operating lease liability

Realized gain on investments

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Accrued interest, net of interest received on maturity of investments

Accrued interest, net of interest receivable on maturity of investments

Accounts payable

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Proceeds from sales and maturities of investments

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities

Public offering and financing costs

Public offering, net of offering costs

Value of shares withheld related to employee tax withholding

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Viking Therapeutics, Inc.

Notes to Consolidated Financial Statements

Notes to Consolidated Financ ial Statements

Organization, Liquidity and Management’s Plan, and Summary of Significant Accounting Policies

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The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Risks and Uncertainties

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic.

The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, other businesses and governments are taking continue to evolve.

Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic slowdown or recession.

Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole.

The magnitude and overall effectiveness of these actions remain uncertain.

In addition, the Company’s clinical trials have been affected by, and may continue to be affected by, the COVID-19 pandemic.

Clinical site initiation and patient enrollment have been, and may continue to be, delayed due to the prioritization of hospital resources toward the COVID-19 pandemic.

Similarly, any inability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, may adversely impact the Company’s clinical trial operations.

The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s service providers, suppliers, contract research organizations (“CROs”) and the Company’s clinical trials, all of which are uncertain and cannot be predicted, as well as the timing, rollout and availability of vaccines worldwide and the effectiveness thereof, and the willingness of the general population to be vaccinated, and the potential emergence and spread of any new variants, including Omicron and sub-variants thereof.

As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may materially impact the Company’s financial condition, liquidity or results of operations is uncertain.

Use of Estimates

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Investments Available-for-Sale

Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss).

Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive loss.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity.

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2014-09, Revenue from Contracts with Customers and all related amendments (“ASC 606” or “the revenue standard”).

ASC 606 is a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-s pecific guidance.

The revenue standard is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in

exchange for those goods or services.

To achieve this core principle, ASC 606 provides that an entity should apply the following steps:

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For restricted stock and restricted stock unit awards, the Company generally uses the straight-line method to allocate compensation cost to reporting periods over the holder’s requisite service period, which is generally the vesting period, and uses the fair value at grant date to value the awards.

For restricted stock that vests upon the satisfaction of certain performance conditions, the Company recognizes stock-based compensation expense when it becomes probable that the performance conditions will be met.

For restricted stock that vests upon the satisfaction of certain performance

conditions, the Company recognizes stock-based compensation expense when it becomes probable that the performance conditions will be met.

At the grant date, the Company determines the grant date fair value, as a publicly traded company, using the intrinsic value, or the closing price of the Company’s common stock on the date of grant.

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assets and liabilities at the exchange rate as of the balance sheet date, stockholders’ equity at the historical rates of exchange, and income and expense amounts at the average exchange rate for the period.

Translation adjustments resulting from the translation of the subsidiaries’ accounts are included in “Accumulated other comprehensive income” as equity in the consolidated balance sheet.

Translation adjustments resulting from the translation of the subsidiaries’ accounts are included in “Accumulated other comprehensive loss” as equity in the consolidated balance sheet.

Transactions denominated in currencies other than the applicable functional currency are converted to the functional currency at the exchange rate on the transaction date.

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Non-monetary assets and liabilities are remeasured at historical exchange rates.

Gains and losses resulting from foreign currency transactions are included within “Other income (expense), net” in the consolidated statement of operations.

For the years ended December 31, 2022 and 2021, foreign currency transaction gain amounted to $ 0 and $ 7,000 , respectively .

Comprehensive Loss

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(1) Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss.

At December 31, 2022, there were no securities in an unrealized gain position and 39 securities in an unrealized loss position.

The unrealized losses were less than $ 124,000 individually and $ 842,000 in the aggregate.

Twenty-two of these securities have been in a continuous unrealized loss or unrealized gain position for more than 12 months.

At December 31, 2023, there were 49 securities in an unrealized gain position and 115 securities in an unrealized loss position.

The unrealized gains were less than $ 37,000 individually and $ 158,000 in the aggregate.

The unrealized losses were less than $ 23,000 individually and $ 258,000 in the aggreg ate.

None of these securities have been in a continuous unrealized loss or unrealized gain position for more than 12 months.

The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis, which may be at maturity.

The Company reviews its investments to identify and evaluate investments that have an indication of possible other-than-temporary impairment.

Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

At December 31, 2022, none of these securities were classified as cash and cash equivalents on the Company’s balance sheet and none of the corporate debt securities were scheduled to mature outside of one year at the time of purchase.

Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value

has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

(2) At December 31, 2023, no ne of these securities were classified as cash and cash equivalents on the Company’s balance sheet and no ne of the corporate debt securities were scheduled to mature outside of one year at the time of purchase.

Investments classified as available-for-sale as of December 31, 2022 consisted of the following (in thousands):

As of December 31, 2022

Certificates of deposit (2)

Commercial paper (2)

Corporate debt securities (2)

Government debt securities (2)

(1) Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss.

At December 31, 2021, there were three securities in an unrealized gain position and 75 securities in an unrealized loss position.

The unrealized gains were less than $ 1,000 individually and $ 1,000 in the aggregate.

At December 31, 2022, there were no securities in an unrealized gain position and 39 securities in an unrealized loss position.

The unrealized losses were less than $ 124,000 individually and $ 842,000 in the aggregate.

Twenty-nine of these securities have been in a continuous unrealized loss or unrealized gain position for more than 12 months.

Twenty-two of these securities have been in a continuous unrealized loss or unrealized gain position for more than 12 months.

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At December 31, 2021, none of these securities were classified as cash and cash equivalents on the Company’s balance sheet and $ 56.7 million of the corporate debt securities were scheduled to mature outside of one year at the time of purchase.

(2) At December 31, 2022, no ne of these securities were classified as cash and cash equivalents on the Company’s balance sheet and no ne of the corporate debt securities were scheduled to mature outside of one year at the time of purchase.

Fair Value of Financial Instruments

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Short-term investments

Certificates of deposit

Commercial paper, available for sale

Corporate debt securities, available-for-sale

Government debt securities, available-for-sale

Total financial assets

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As partial consideration for the grant of the rights and licenses to the Company under the Master License Agreement, the Company issued to Ligand at the closing of the Company’s initial public offering (“IPO”) 3,655,964 shares of its common stock having an estimated aggregate value of $ 29.2 million.

Licensed Products of up to $ 1.54 billion in the aggregate upon the achievement of certain development, regulatory and sales milestones.

As further partial consideration for the grant of the rights and licenses to the Company by Ligand under the Master License Agreement, the Company has agreed to pay to Ligand certain one-time, non-refundable milestone payments in connection with the Licensed Products of up to $ 1.54 billion in the aggregate upon the achievement of certain development, regulatory and sales milestones.

The Company will also pay to Ligand royalties on aggregate annual worldwide net sales of Licensed Products by the Company, its affiliates and its sublicensees at tiered percentage rates from the low-to-upper single digits based upon net sales.

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In May 2014, the Company also entered into a Management Rights Letter (the “Management Rights Letter”) with Ligand that required the Company to expand the size of the Company’s Board of Directors to create an additional directorship on the Company’s Board of Directors and to allow Ligand to appoint an individual to fill the new directorship.

The Management Rights Letter will terminate upon the earliest to occur of the liquidation or indefinite cessation of the Company’s business operations, the execution by the Company of a general assignment for the benefit of creditors or the appointment of a receiver or trustee to take possession of the Company’s property and assets, an acquisition of the Company by means of any transaction (including, without limitation, any reorganization, merger or consolidation) if the Company’s stockholders of record as constituted immediately prior to the transaction hold less than 50 % of the voting power of the surviving or acquiring entity, or following the issuance of the Company’s securities pursuant to the Master License Agreement, the date that Ligand ceases to beneficially own at least 7.5 % of the Company’s outstanding voting stock, or May 21, 2024 .

On March 28, 2023 , the Management Rights Letter terminated upon the date that Ligand ceased to beneficially own at least 7.5 % of the Company’s outstanding voting stock.

Operating Leases – Right-of-Use Assets and Lease Liability Obligations

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From inception of the Commitment Purchase Agreement through December 31, 2017, 343,051 shares were issued pursuant to the Commitment Purchase Agreement resulting in aggregate gross proceeds of $ 802,000 in addition to the Initial Shares and the Commitment Shares.

No additional shares were issued under the Commitment Purchase Agreement during the period of January 1, 2018 through December 31, 2022.

In May 2020, the Company extended the termination date of the Commitment Purchase Agreement to May 1, 2023, and the Commitment Purchase Agreement terminated on that date.

No additional shares were issued during the years ended December 31, 2018 through 2022 or during 2023 until the termination date.

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

333-258231) (the “2021 Shelf Registration Statement”).

The Shelf Registration Statement initially provides the Company 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, the Company may offer additional securities from time to time and through one or more methods of distribution, subject to market conditions and the Company’s capital needs.

The 2021 Shelf Registration Statement provided the Company with the ability to offer up to $ 600.0 million of securities, including equity, debt and other securities as described in the 2021 Shelf Registration Statement.

The 2021 Shelf Registration Statement was declared effective by the SEC on August 11, 2021 and the offering of all remaining unsold securities under the 2021 Shelf Registration Statement terminated on July 26, 2023 .

On July 28, 2021, the Company entered into an At-The-Market Equity Offering Sales Agreement (the “ATM Agreement”), with Stifel, Nicolaus & Company, Incorporated, Truist Securities, Inc.

Wainwright & Co.

LLC (together, the “Agents”), pursuant to which the Company may offer and sell, from time to time, through or to the Agents, as sales agent or principal (the “ATM Offering”), shares of the Company’s common stock having an aggregate offering price of up to $ 125.0 million (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.

The Shelf Registration Statement will expire on August 11, 2024 .

From its inception through December 31, 2022, 1.4 million shares of the Company’s common stock were sold under the ATM Agreement for aggregate net proceeds to the Company of approximately $ 11.7 million.

LLC (collectively, the “Agents”), pursuant to which the Company may offer and sell, from time to time, through or to the Agents, as sales agent or principal (the “ATM Offering”), shares of the Company’s common stock (the “ATM Shares”).

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

The 2021 Shelf Registration Statement terminated on July 26, 2023 .

From its inception through the termination of the 2021 Shelf Registration Statement, 1,587,404 shares of the Company’s common stock were sold pursuant to the ATM Offering for aggregate net proceeds to the Company of approximately $ 13.6 million.

On March 17, 2020, the Company’s Board of Directors authorized a stock repurchase program, whereby the Company may purchase up to $ 50.0 million in shares of its common stock and outstanding warrants to purchase its common stock, over a period of up to two years (the “Repurchase Program”).

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Shares repurchased by the Company under the New Repurchase Program are being held in treasury until such time as they are reissued or retired by the Company.

On April 3, 2023, the Company completed an underwritten public offering of its common stock (the “April 2023 Offering”) pursuant to the 2021 Shelf Registration Statement.

In the April 2023 Offering, the Company sold an aggregate of 19,828,300 shares of its 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, the Company received net proceeds of $ 270.0 million, after deducting underwriting discounts, commissions and other offering expenses.

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

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

The 2023 Shelf Registration Statement allows the Company 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.

On July 26, 2023, the Company entered into an Amendment No.

1 to At-The-Market Equity Offering Sales Agreement (the “ATM Agreement Amendment”) with Stifel, Nicolaus & Company, Incorporated, Truist Securities, Inc., H.C.

Wainwright & Co.

LLC and BTIG, LLC.

Pursuant to the ATM Agreement Amendment, BTIG, LLC was added as a sales agent for the ATM Offering and the ATM Agreement was amended to provide that the ATM Offering could be conducted off of registration statements on Form S-3 subsequently filed by the Company.

Any ATM Shares offered and sold in the ATM Offering will now be issued pursuant to the 2023 Shelf Registration Statement and the prospectus relating to the ATM Offering, dated July 26, 2023, that was included in the 2023 Shelf Registration Statement (the “ATM Prospectus”).

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

From the date of the ATM Prospectus through December 31, 2023, no shares of the Company’s common stock were sold pursuant to the ATM Offering and, as of December 31, 2023, the Company may sell shares of its common stock for remaining gross proceeds of up to $ 200.0 million from time to time pursuant to the ATM Prospectus.

During the years ended December 31, 2023, 2022 and 2021, and in accordance with the ESPP, the Company issued an aggregate of 180,174 , 111,750 and 43,408 shares of its common stock to certain employees, respectively.

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Any shares of the Company’s common stock underlying awards that are settled in cash or otherwise expire, or are forfeited, terminated or cancelled (including pursuant to an exchange program established by the Compensation Committee) prior to the issuance of stock will again be available for issuance under the 2014 Plan.

In addition, shares of the Company’s common stock that are withheld (or not issued) in payment of the exercise price or taxes relating to an award, and shares of the Company’s common stock equal to the number surrendered in payment of any exercise price or withholding taxes relating to an award, will again be available for issuance under the 2014 Plan.

In addition, shares of the Company’s common stock that are

withheld (or not issued) in payment of the exercise price or taxes relating to an award, and shares of the Company’s common stock equal to the number surrendered in payment of any exercise price or withholding taxes relating to an award, will again be available for issuance under the 2014 Plan.

Initially, a total of 458,331 shares of the Company’s common stock were reserved for issuance pursuant to the ESPP.

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Prior to the commencement of any future offering under the ESPP, the Compensation Committee may determine that the current offering shall end, may commence a new offering on the first day after the end of such terminal purchase period (or any desired later date), and may decide that future offerings will consist of one or more consecutive purchase periods, each to be of such duration as determined by the Compensation Committee;

however, no offering will

exceed 27 months and no purchase period will exceed one year .

Each employee of the Company who (1) is an employee on the first date of any offering under the ESPP, (2) is customarily scheduled to work for more than 20 hours per week and more than five months per calendar year, and (3) meets such other criteria as may be determined by the Compensation Committee (consistent with Section 423 of the Internal Revenue Code of 1986, as amended), is eligible to participate in the ESPP for each purchase period within such offering.

however, no offering will exceed 27 months and no purchase period will exceed one year .

Each employee of the Company who (1) is an employee on the first date of any offering under the ESPP, (2) is customarily scheduled to work for more than 20 hours per week and more than five months per calendar year, and (3) meets such other criteria as may be determined by the Compensation Committee (consistent with Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”)), is eligible to participate in the ESPP for each purchase period within such offering.

The purchase price per share of the Company’s common stock under the ESPP may not be less than, and will initially be equal to, the lesser of:

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Unvested at December 31, 2022

Unvested at December 31, 2023

The following table summarizes restricted stock unit activity during the years ended December 31, 2023, 2022 and 2021:

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Unvested at December 31, 2021

Unvested at December 31, 2022

Unvested December 31, 2023

In January 2019, the Company issued 221,600 performance-based restricted stock units (“PRSU awards”) to several of its employees, which are reflected in the above table summarizing restricted stock unit activity.

The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100 % of the PRSU awards vesting upon the achievement of three of the milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant dates.

As of December 31, 2022, 40,000 PRSU awards were forfeited and three of the milestones had been met, resulting in the Company recording stock-based compensation expense of $ 1.4 million through December 31, 2022 and $ 0.2 million during the year ended December 31, 2022.

As of December 31, 2021, 40,000 PRSU awards were forfeited, one of the three milestones had been met and the remaining two were deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 1.2 million through December 31, 2021 and $ 86,000 during the year ended December 31, 2021.

The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100 % of the shares subject to the PRSU awards vesting upon the achievement of three of the milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant dates.

In January 2020, the Company issued 244,000 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted stock unit activity.

As of December 31, 2022, 10,500 PRSU awards were forfeited, two of the three milestones had been met and the remaining one was deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 1.7 million through December 31, 2022 and $ 0 during the year ended December 31, 2022.

As of December 31, 2021, 10,500 PRSU awards were forfeited, two of the three milestones had been met and the remaining one was deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 1.7 million through December 31, 2021 and $ 485,000 during the year ended December 31, 2021.

As of December 31, 2023, 10,500 PRSU awards were forfeited, two of the three milestones had been met and the remaining one was deemed improbable of achievement, resulting in the Company recording cumulative stock-based compensation expense of $ 1.2 million through December 31, 2023 and stock-based compensation expense of $( 454,000 ) during the year ended December 31, 2023.

In January 2021, the Company issued 205,500 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted stock unit activity.

The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100 % of the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3 % of the PRSU vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant dates.

As of December 31, 2022, 7,500 PRSU awards were forfeited, one of the four milestones had been met and two of the four milestones were deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 893,000 through December 31, 2022 and $ 358,000 during the year ended December 31, 2022.

As of December 31, 2021, 7,500 PRSU awards were forfeited, none of the four milestones had been met and three of the four milestones were deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 535,000 during the year ended December 31, 2021.

The shares subject to these PRSU awards shall vest upon the Company achieving certain

milestones, with 100 % of the shares subject to the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3 % of the shares subject to the PRSU awards vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant dates.

As of December 31, 2023, 10,000 PRSU awards were forfeited, one of the four milestones had been met and two of the four milestones were deemed probable of achievement, resulting in the Company recording cumulative stock-based compensation expense of $ 1.0 million through December 31, 2023 and stock-based compensation expense of $ 64,000 during the year ended December 31, 2023.

In January 2022, the Company issued 657,000 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted stock unit activity.

The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100 % of the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3 % of the PRSU vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant dates.

As of December 31, 2022, no PRSU awards were forfeited, none of the four milestones had been met and three of the four milestones were deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 2.0 million during the year ended December 31, 2022.

The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100 % of the shares subject to the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3 % of the shares subject to the PRSU awards vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant dates.

As of December 31, 2023, no PRSU awards were forfeited, three of the four milestones had been met and the remaining one was deemed probable of achievement, resulting in the Company recording cumulative stock-based compensation expense of $ 3.9 million through December 31, 2023 and stock-based compensation expense of $ 2.0 million during the year ended December 31, 2023.

In January 2023, the Company issued 920,000 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted stock unit activity.

The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100 % of the shares subject to the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3 % of the shares subject to the PRSU awards vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant dates.

As of December 31, 2023, no PRSU awards were forfeited and all four of the milestones were deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 5.0 million during the year ended December 31, 2023.

The following table summarizes stock option activity during the years ended December 31, 2023, 2022 and 2021:

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Options outstanding at December 31, 2022

Options outstanding at December 31, 2023

Options exercisable at December 31, 2023

The Company received $ 0 and $ 351,000 in cash proceeds from exercises of stock options during the years ended December 31, 2022 and 2021, respectively.

The total fair value of stock options that vested during the years ended December 31, 2022 and 2021 was $ 3.2 million and $ 2.9 million, respectively.

The Company received $ 6.4 million, $ 0 and $ 351,000 in cash proceeds from exercises of stock options during the years ended December 31, 2023, 2022 and 2021, respectively.

The total fair value of stock options that vested during the years ended December 31, 2023, 2022 and 2021 wa s $ 4.0 million, $ 3.2 million and $ 2.9 million, respectively.

Compensation expense for stock options granted to employees is based on the estimated grant date fair value and is recognized ratably over the vesting period of the applicable option.

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Common stock reserved for future issuance as of December 31, 2023 is as follows:

Common stock warrants

Restricted stock units

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The Warrants had an exercise price of $ 1.30 per share, subject to adjustment as provided therein, and became exercisable beginning on December 19, 2017 through December 19, 2022 .

As of December 31, 2022, Warrants to purchase an aggregate of 0 shares were outstanding and 487,087 and 150,000 Warrants were exercised during the years ended December 31, 2022 and 2021, respectively.

Income tax expense (benefit) from continuing operations consists of the following for the years ended December 31, 2022 and 2021 (in thousands):

The Warrants were exercised in full as of December 31, 2022.

Income tax expense from continuing operations consists of the following for the years ended December 31, 2023, 2022 and 2021 (in thousands):

Change in valuation allowance

Total income tax expense (benefit)

Total income tax expense

The reconciliations of the U.S.

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Share-based compensation

Credit Carryforwards

Total deferred tax assets

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Net deferred tax assets (liabilities):

A valuation allowance of $ 89.9 million and $ 67.8 million at December 31, 2022 and December 31, 2021, respectively, has been recorded to offset net deferred tax assets, as the Company is unable to conclude that it is more likely than not that such deferred tax assets will be realized.

A valuation allowance of $ 119.0 million a nd $ 89.9 million at December 31, 2023 and December 31, 2022, respectively, has been recorded to offset net deferred tax assets, as the Company is unable to conclude that it is more likely than not that such deferred tax assets will be realized.

At December 31, 2023, the Company had approximately $ 98.7 million of federal net operating loss carryforwards, of which $ 17.8 million will begin to expire in 2032 and the remaining $ 80.9 million of which can be carried forward indefinitely.

The Company has $ 79.9 million of state net operating loss carryforwards that will begin to expire in 2034 .

The Company’s ability to utilize its federal net operating loss carryforwards may be limited under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).

The Company's ability to utilize its federal net operating loss carryforwards may be limited under Section 382 of the Code.

Specifically, this limitation may arise in the event of an "ownership change," which is defined by Section 382 of the Code as a cumulative change in ownership of the Company of more than 50 % within a three-year period.

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The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and various state agencies for the years ended December 31, 2019 through December 31, 2023.

The differences between the Company’s effective income tax rate and the statutory federal rate for the year ended December 31, 2022 and the year ended December 31, 2021 relate primarily to losses incurred for which no tax benefit was recognized, due to the uncertainty of realization.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible.

The Company considers projected future taxable income and tax planning strategies in making this assessment.

At each of December 31, 2022 and December 31, 2021, the Company provided a full valuation allowance against its deferred tax assets due to uncertainty surrounding the realization of those assets as a result of historical taxable net losses.

At December 31, 2023, the Company has federal and state research and development tax credit carry-forwards of approximately $ 12.2 million and $ 4.9 million, respectively.

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The state credits do not expire.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020.

The differences between the Company's effective income tax rate and the statutory federal rate for the year ended December 31, 2023 and the year ended December 31, 2022 relate primarily to losses incurred for which no tax benefit was recognized, due to uncertainty of realization.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the

period in which those temporary differences become deductible.

The Company considers projected future taxable income and tax planning strategies in making this assessment.

At each of December 31, 2023 and December 31, 2022, the Company provided a full valuation allowance against its deferred tax assets due to uncertainty surrounding the realization of those assets as a result of historical taxable net losses.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted on March 27, 2020.

Among the business provisions, the CARES Act provided for various payroll tax incentives, changes to net operating loss carryback and carryforward rules, business interest expense limitation increases, and bonus depreciation on qualified improvement property.

Additionally, the Consolidated Appropriations Act of 2021 was signed on December 27, 2020 which provided additional COVID relief provisions for businesses.

The Company has evaluated the impact of both Acts and determined that any impact is not material to its financial statements.

The Company has evaluated the impact of both Acts and has determined that any impact is not material to its financial statements.

The Company has reviewed its operations and has not identified any material uncertain tax positions.

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See Note 4 for more information related to this agreement.

In connection with entering into the Master License Agreement, the Company also entered into a Management Rights Letter (see Note 4) and a Registration Rights Agreement (see Note 4).

As Ligand beneficially owns 8.6 % of the Company’s outstanding shares as of December 31, 2022 and has a member of its management team on the Company’s Board of Directors, the Company considers Ligand to be a related party.

In connection with the Master License Agreement, the Company considered Ligand to be a related party.

Commitments and Contingencies

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Rent expense was recorded on a straight-line basis over the life of the Lease and the difference between the rent expense and rent paid was recorded as deferred rent.

The Lease provided the Company with an option to extend the term of the lease for a period of three years beyond the Lease term, which was not exercised.

On November 15, 2021, the Company entered into an Office Lease (the “Office Lease”) with One Pacific Heights.

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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-K

Item 9A. Controls and Procedures