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Item 1A. Risk Factors

2024-04-25 compared with 2023-10-25 · 155 added, 190 removed, 877 unchanged (28% of the section changed)

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This summary does not address all of the risks that we face.

Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors”

and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC before making an investment decision regarding our common stock.

Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC before making an investment decision regarding our common stock.

Risk Factor Summary

• We are a clinical-stage company, have a very limited operating history and are expected to incur significant operating losses during the next stages of our corporate development.

We are substantially dependent on technologies we licensed from Ligand, and if we lose the license to such technologies or our master license agreement with Ligand, or the Master License Agreement, is terminated for any reason, our ability to develop existing and new drug candidates would be harmed, and our business, financial condition and results of operations would be materially and adversely affected.

• We are substantially dependent on technologies we licensed from Ligand Pharmaceuticals Incorporated, or Ligand, and if we lose the license to such technologies or our master license agreement with Ligand, or the Master License Agreement, is terminated for any reason, our ability to develop existing and new drug candidates would be harmed, and our business, financial condition and results of operations would be materially and adversely affected.

• We are dependent on the success of one or more of our current drug candidates and we cannot be certain that any of them will receive regulatory approval or be commercialized.

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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, 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.

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, for which we recently completed 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 September 30, 2023, we had an accumulated deficit of $353.3 million.

As of March 31, 2024, we had an accumulated deficit of $405.3 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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If we fail to achieve or maintain profitability, it would adversely affect the value of our common stock.

We are substantially dependent on technologies we licensed from Ligand Pharmaceuticals Incorporated, or Ligand, and if we lose the license to such technologies or our master license agreement with Ligand, or the Master License Agreement, is terminated for any reason, our ability to develop existing and new drug candidates would be harmed, and our business, financial condition and results of operations would be materially and adversely affected.

Our business is substantially dependent upon technology licensed from Ligand.

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Positive results obtained during early development do not necessarily mean later development will succeed or that regulatory clearances will be obtained.

Our drug development efforts may not lead to commercial drugs, either because our drug candidates fail to be safe and effective or because we have inadequate financial or other resources to advance our drug candidates through the clinical development and approval processes.

and approval processes.

If any of our drug candidates fail to demonstrate safety or efficacy at any time or during any phase of development, we would experience potentially significant delays in, or be required to abandon, development of the drug candidate.

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Success in early development does not mean that later development will be successful because, for example, drug candidates in later-stage clinical trials may fail to demonstrate sufficient safety and efficacy despite having progressed through initial clinical trials.

We licensed most of the intellectual property related to our current drug candidates from Ligand pursuant to the Master License Agreement.

In September 2018, we reported positive top-line results from a Phase 2 clinical trial for VK2809.

In February 2024, we reported positive top-line results from the VENTURE Phase 2 clinical trial for VK2735 in patients with obesity.

In May 2023, we reported positive top-line results from the VOYAGE Phase 2b clinical trial for VK2809.

In late 2017, we reported positive top-line results from a Phase 2 clinical trial for VK5211.

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Therefore, in the future, we or any potential future collaborative partner will be responsible for establishing the targeted endpoints and goals for development of our drug candidates.

These targeted endpoints and goals may be inadequate to demonstrate the safety and efficacy levels required for regulatory approvals.

These targeted endpoints and goals may be inadequate to demonstrate the safety and efficacy

levels required for regulatory approvals.

Even if we believe data collected during the development of our drug candidates are promising, such data may not be sufficient to support marketing approval by the FDA, EMA or comparable foreign authorities.

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 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.

As of March 31, 2024, we had cash, cash equivalents and investments totaling $963.0 million.

Although we received net proceeds of $597.1 million in the March 2024 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 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.

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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 specific terms of any offering under the 2023 Shelf Registration Statement will be established at the time of such offering under a separate prospectus supplement, which will be filed with the SEC at the time of any offering.

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

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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.

Any shares offering and sold in ATM Offering will be issued 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.

As of March 31, 2024, we may sell shares of our common stock for remaining gross proceeds of up to $151.9 million from time to time pursuant to the ATM Prospectus.

On March 4, 2024, we completed an underwritten public offering of our common stock, or the March 2024 Offering, pursuant to the 2023 Shelf Registration Statement.

In the March 2024 Offering, we sold an aggregate of 7,441,650 shares of our common stock at a public offering price of $85.00 per share, which included the exercise in full by the underwriters of their option to purchase 970,650 additional shares of common stock.

Upon the closing of the March 2024 Offering, we received net proceeds of $597.1 million, after deducting underwriting discounts, commissions and other offering expenses.

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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• regulatory authorities may withdraw their approval of the product, or we or our partners may decide to cease marketing and sale of the product voluntarily;

we may be required to change the way the product is administered, conduct additional clinical trials or preclinical studies regarding the product, change the labeling of the product, or change the product’s manufacturing facilities;

• we may be required to change the way the product is administered, conduct additional clinical trials or preclinical studies regarding the product, change the labeling of the product, or change the product’s manufacturing facilities;

• our reputation may suffer.

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Our efforts to discover drug candidates beyond our current drug candidates may not succeed, and any drug candidates we recommend for clinical development may not actually begin clinical trials.

We intend to continue to use our technology, including our licensed technology, knowledge and expertise to develop novel drugs to address some of the world’s most widespread and costly chronic diseases.

We intend to expand our existing pipeline of core assets by advancing drug compounds from current ongoing discovery programs into clinical development.

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This drug candidate development risk is heightened by any changes in the planned clinical trials compared to the completed clinical trials.

As product candidates are developed through preclinical to early to late stage clinical trials towards approval and commercialization, it is customary that various aspects of the development program, such as manufacturing and methods of administration, are altered along the way in an effort to optimize processes and results.

As product candidates are developed through preclinical to early to late stage clinical trials towards approval and

commercialization, it is customary that various aspects of the development program, such as manufacturing and methods of administration, are altered along the way in an effort to optimize processes and results.

While these types of changes are common and are intended to optimize the product candidates for late stage clinical trials, approval and commercialization, such changes carry the risk that they will not achieve these intended objectives.

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We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or other regulatory authorities.

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.

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.

Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ 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.

For example, the COVID-19 pandemic previously negatively impacted 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.

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As a result, our business, financial condition, results of operations and the commercial prospects for our drug candidates could be materially and adversely affected, our costs could increase and our ability to generate revenue could be delayed.

Switching or adding additional CROs, medical institutions, clinical investigators or contract laboratories involves additional cost and requires management’s time and focus.

In addition, there is a natural transition period when a new CRO commences work replacing a previous CRO.

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• agency officials of the FDA, EMA or comparable foreign authorities may not find the data from non-clinical or preclinical studies and clinical trials generated during development to be sufficient;

the FDA, EMA or comparable foreign authorities may not approve our third-party manufacturers’

processes or facilities;

• the FDA, EMA or comparable foreign authorities may not approve our third-party manufacturers’ processes or facilities;

• the FDA, EMA or a comparable foreign authority may change its approval policies or adopt new regulations.

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Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others.

Failure to obtain regulatory approval in other countries or any delay seeking or obtaining such approval would impair our ability to develop foreign markets for our drug candidates.

to obtain regulatory approval in other countries or any delay seeking or obtaining such approval would impair our ability to develop foreign markets for our drug candidates.

Even if any of our drug candidates receive regulatory approval, our drug candidates may still face future development and regulatory difficulties.

If any of our drug candidates receive regulatory approval, the FDA, EMA or comparable foreign authorities may still impose significant restrictions on the indicated uses or marketing of the drug candidates or impose ongoing requirements for potentially costly post-approval studies and trials.

In addition, regulatory agencies subject a product, its manufacturer and the manufacturer’s facilities to continual review and periodic inspections.

If a regulatory agency discovers previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, our collaborators or us, including requiring withdrawal of the product from the market.

Our drug candidates will also be subject to ongoing FDA, EMA or comparable foreign authorities’

requirements for the labeling, packaging, storage, advertising, promotion, record-keeping and submission of safety and other post-market information on the drug.

Our drug candidates will also be subject to ongoing FDA, EMA or comparable foreign authorities’ requirements for the labeling, packaging, storage, advertising, promotion, record-keeping and submission of safety and other post-market information on the drug.

If our drug candidates fail to comply with applicable regulatory requirements, a regulatory agency may:

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The FDA, EMA and comparable foreign authorities strictly regulate the promotional claims that may be made about prescription products, such as our drug candidates, if approved.

In particular, a product may not be promoted for uses that are not approved by the FDA, EMA or comparable foreign authorities as reflected in the product’s approved labeling.

If we receive marketing approval for our drug candidates for our proposed indications, physicians may nevertheless use our products for their patients in a manner that is inconsistent with the approved label, if the physicians personally believe in their professional medical judgment that our products could be used in such manner.

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If we cannot successfully manage the promotion of our drug candidates, if approved, we could become subject to significant liability, which would materially adversely affect our business, financial condition and results of operations.

*If our competitors have drug candidates that are approved faster, marketed more effectively, are better tolerated, have a more favorable safety profile or are demonstrated to be more effective than ours, our commercial opportunity may be reduced or eliminated.

*If our competitors have drug candidates that are approved faster, are marketed more effectively, are better tolerated, have a more favorable safety profile or are demonstrated to be more effective than ours, our commercial opportunity may be reduced or eliminated.

The biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.

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Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical studies, clinical trials, regulatory approvals and marketing approved products than we do.

Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

Smaller or early-stage companies

may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

Our competitors may succeed in developing technologies and therapies that are more effective, better tolerated or less costly than any which we are developing, or that would render our drug candidates obsolete and noncompetitive.

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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 from Madrigal Pharmaceuticals, Inc., arachidyl amido cholanoic acid from Galmed Pharmaceuticals Ltd., belapectin 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., 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.

Resmetirom (Rezdiffra), another agonist of the thyroid hormone receptor beta, or TRß, from Madrigal Pharmaceuticals, Inc., is the only therapy currently approved in the U.S.

for the treatment of non-alcoholic steatohepatitis.

In addition, we are aware of numerous development-stage programs targeting this disease, including arachidyl amido cholanoic acid from Galmed Pharmaceuticals Ltd., belapectin from Galectin Therapeutics Inc., lanifibranor from Inventiva S.A., semaglutide from Novo Nordisk A/S, efruxifermin (AKR-001) from Akero Therapeutics, Inc., 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., 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., Hepagene Therapeutics, Inc., Kowa Company, Ltd., MediciNova Inc., NorthSea Therapeutics BV, Pliant Therapeutics, Inc., Poxel SA, Seal Rock Therapeutics, 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).

VK2735, if approved, will compete against therapies that are already approved and marketed for obesity, including Semaglutide (Wegovy®) and liraglutide (Saxenda®) from Novo Nordisk A/S, and tirzepatide (Zepbound) from Eli Lilly and Company.

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.

However, VK5211, if approved, will face competition from experimental therapies that are in various stages of clinical development for conditions characterized by muscle wasting by companies including Biophytis SA, Helsinn Group, and Pluri Inc.

(formerly Pluristem Therapeutics Inc.).

In addition, nutritional and growth hormone-based therapies are sometimes used in patients experiencing muscle wasting.

In the U.S., there are currently no marketed therapies for the treatment of X-linked adrenoleukodystrophy, or X-ALD.

In addition, we are aware of active programs at Altimmune, Inc., Amgen Inc., AstraZeneca, BioAge Labs, Inc., Biophytis SA, D&D Pharmatech, Inc., ERX Pharmaceuticals Inc., F.

Hoffmann-La Roche Ltd, Hanmi Pharmaceutical Co., Ltd., Kallyope Inc., Pfizer Inc., Regeneron Pharmaceuticals Inc., Rivus Pharmaceuticals Inc., Scholar Rock, Inc., Structure Therapeutics Inc., Terns Pharmaceuticals, Inc., Ventyx Biosciences, Inc., and Zealand Pharma A/S.

In the U.S., there are currently no marketed therapies for the treatment of X-ALD.

Hematopoietic stem cell therapy has been used to treat the most severe form of X-ALD, cerebral adrenoleukodystrophy, or CALD.

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There are several experimental therapies that are in various stages of clinical development for X-ALD by companies, including Minoryx Therapeutics S.L., Neuraxpharm Group, Poxel SA, and SwanBio Therapeutics, Inc., which may be competitive with VK0214, if approved.

However, VK5211, if approved, will face competition from experimental therapies that are in various stages of clinical development for conditions characterized by muscle wasting by

companies including Biophytis SA, Helsinn Group, MyMD Pharmaceuticals, Inc., and Pluri Inc.

(formerly Pluristem Therapeutics Inc.).

In addition, nutritional and growth hormone-based therapies are sometimes used in patients experiencing muscle wasting.

We, or any future collaborators, may not be able to obtain orphan drug designation or orphan drug exclusivity for our product candidates.

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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.

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

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Even if we, or any future collaborators, obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because FDA has taken the position that, under certain circumstances, another drug with the same active moiety can be approved for the same condition.

Specifically, the FDA’s regulations provide that it can approve another drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.

We are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our drug candidates.

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We do not have any control over the process or timing of the acquisition of these raw materials by our manufacturers.

Although we generally do not begin a clinical trial unless we believe we have a sufficient supply of a drug candidate to complete such clinical trial, any significant delay or discontinuity in the supply of a drug candidate, or the raw material components thereof, for an ongoing clinical trial due to the need to replace a third-party manufacturer could considerably delay completion of our clinical trials, product testing and potential regulatory approval of our drug candidates, which could harm our business, financial condition and results of operations.

trial due to the need to replace a third-party manufacturer could considerably delay completion of our clinical trials, product testing and potential regulatory approval of our drug candidates, which could harm our business, financial condition and results of operations.

We and our contract manufacturers are subject to significant regulation with respect to manufacturing our drug candidates.

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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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• pricing and cost-effectiveness assuming either competitive or potential premium pricing requirements, based on the profile of our drug candidates and target markets;

effectiveness of our or our partners’

sales and marketing strategy;

• effectiveness of our or our partners’ sales and marketing strategy;

• our ability to obtain sufficient third-party coverage or reimbursement;

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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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In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively the PPACA, was enacted.

The PPACA was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.

The PPACA increased manufacturers’

rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate amount for both branded and generic drugs and revised the definition of “average manufacturer price,”

or AMP, which may also increase the amount of Medicaid drug rebates manufacturers are required to pay to states.

healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.

The PPACA increased manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate amount for both branded and generic drugs and revised the definition of “average manufacturer price,” or AMP, which may also increase the amount of Medicaid drug rebates manufacturers are required to pay to states.

The legislation also expanded Medicaid drug rebates and created an alternative rebate formula for certain new formulations of certain existing products that is intended to increase the rebates due on those drugs.

The Centers for Medicare & Medicaid Services, or CMS, which administers the Medicaid Drug Rebate Program, also has proposed to expand Medicaid rebates to the utilization that occurs in the territories of the U.S., such as Puerto Rico and the Virgin Islands.

Legislative and regulatory proposals have been introduced at both the state and federal level to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.

Further, beginning in 2011, the PPACA imposed a significant annual fee on companies that manufacture or import branded prescription drug products and required manufacturers to provide a discount, equal to 70% off, effective as of 2019, the negotiated price of prescriptions filled by beneficiaries in the Medicare Part D coverage gap, referred to as the “donut hole.” Legislative and regulatory proposals have been introduced at both the state and federal level to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.

Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives.

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A significant portion of the previous regulatory framework in the United Kingdom was derived from the regulations of the European Union.

In 2021, the United Kingdom’s Medicines and Healthcare products Regulatory Agency, or MHRA, and the European Medicines Agency, or EMA, released guidance explaining the new regulatory framework.

We cannot predict the consequences or impact that the new regulatory framework will have on our future operations, if any, in these jurisdictions.

In addition, on August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which, among other things, includes policies that are designed to have a direct impact on drug prices and reduce drug spending by the federal government, which shall take effect in 2023.

Under the Inflation Reduction Act, Congress authorized Medicare beginning in 2026 to negotiate lower prices for certain costly single-source drug and biologic products that do not have competing generics or biosimilars.

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Disruptions at the FDA and other agencies may also slow the time necessary for our product candidates to be reviewed or approved by necessary government agencies, which could adversely affect our business, financial condition and results of operations.

We are subject to “fraud and abuse”

and similar laws and regulations, and a failure to comply with such regulations or prevail in any litigation related to noncompliance could harm our business, financial condition and results of operations.

In the U.S., we are subject to various federal and state healthcare “fraud and abuse”

laws, including anti-kickback laws, false claims laws and other laws intended, among other things, to reduce fraud and abuse in federal and state healthcare programs.

We are subject to “fraud and abuse” and similar laws and regulations, and a failure to comply with such regulations or prevail in any litigation related to noncompliance could harm our business, financial condition and results of operations.

In the U.S., we are subject to various federal and state healthcare “fraud and abuse” laws, including anti-kickback laws, false claims laws and other laws intended, among other things, to reduce fraud and abuse in federal and state healthcare programs.

The federal Anti-Kickback Statute makes it illegal for any person, including a prescription drug manufacturer, or a party acting on its behalf, to knowingly and willfully solicit, receive, offer or pay any remuneration that is intended to induce the referral of business, including the purchase, order or prescription of a particular drug, or other good or service for which payment in whole or in part may be made under a federal healthcare program, such as Medicare or Medicaid.

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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.

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.

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.

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.

In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers or the Pharmaceutical Research and Manufacturers of America’s Code on Interactions with Healthcare Professionals.

Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state.

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Globally, virtually every jurisdiction in which we operate has established its own data security and privacy frameworks with which we must comply.

For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the European Union, the EU, including personal health data, is subject to the EU General Data Protection Regulation, or the GDPR, which took effect across all member states of the European Economic Area, or the EEA, in May 2018.

For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the European Union, the EU, including personal

health data, is subject to the EU General Data Protection Regulation, or the GDPR, which took effect across all member states of the European Economic Area, or the EEA, in May 2018.

The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors.

In addition, the GDPR also imposes strict rules on the transfer of personal data to countries outside the EU, which includes the United States and, as a result, increases the scrutiny that clinical trial sites located in the EEA should apply to transfers of personal data from such sites to countries that are considered to lack an adequate level of data protection, such as the United States.

The GDPR also permits data protection authorities to require destruction of improperly gathered or used personal information and/or impose substantial fines for violations of the GDPR, which can be up to 4% of global revenues or €20 million, whichever is greater, and it also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.

In addition, the GDPR provides that EU member states may make their own additional laws and regulations limiting the processing of personal data, including genetic, biometric or health data.

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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, 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 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.

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.

Similar laws passed in Virginia, Colorado, Connecticut, and Utah took effect in 2023.

Additionally, Delaware, Indiana, Iowa, Montana, Oregon, Tennessee and Texas have adopted privacy laws, which take effect from July 1, 2024 through 2026.

Further, Washington’s My Health My Data Act, taking effect July 1, 2024, imposes similar requirements specific to consumer health data.

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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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.

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

exchanges for violations of the FCPA’s accounting provisions.

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 SEC also may suspend or bar issuers from trading securities on U.S.

exchanges for violations of the FCPA’s accounting provisions.

Any investigation of any potential violations of the FCPA, the Bribery Act, other anti-corruption laws or Trade Control Laws by United States, United Kingdom or other authorities could also have an adverse impact on our reputation, our business, results of operations and financial condition.

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

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.

As of March 31, 2024, we had twenty-eight full-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.

These personnel are “at-will”

employees and may terminate their employment with us at any time;

however, our current executive officer has agreed to provide us with at least 60 days’

advance notice of resignation pursuant to his employment agreement with us.

These personnel are “at-will” employees and may terminate their employment with us at any time;

however, our current executive officer has agreed to provide us with at least 60 days’ advance notice of resignation pursuant to his employment agreement with us.

The replacement of key personnel likely would involve significant time and costs, and may significantly delay or prevent the achievement of our business objectives.

We do not maintain “key person”

insurance on any of our employees.

We do not maintain “key person” insurance on any of our employees.

From time to time, our management seeks the advice and guidance of certain scientific advisors and consultants regarding clinical and regulatory development programs and other customary matters.

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While our employees are required to sign standard agreements concerning confidentiality and ownership of inventions, we generally do not have employment contracts or non-competition agreements with any of our personnel.

In addition, we may experience employee turnover as a result of the ongoing “great resignation”

occurring throughout the U.S.

In addition, we may experience employee turnover as a result of the ongoing “great resignation” occurring throughout the U.S.

economy, which has impacted job market dynamics.

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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.

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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The loss of drug development or clinical trial data could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

We have experienced cybersecurity incidents in the past and expect that we will experience cybersecurity incidents in the future.

If we were to experience a significant cybersecurity

breach of our information systems or data, the costs associated with the investigation, remediation and potential notification of the breach to counter-parties and data subjects could be material.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and our development programs and the development of our drug candidates could be delayed.

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• exposure to unknown liabilities;

disruption of our business and diversion of our management’s time and attention in order to develop acquired products, drug candidates or technologies;

• disruption of our business and diversion of our management’s time and attention in order to develop acquired products, drug candidates or technologies;

• incurrence of substantial debt or dilutive issuances of equity securities to pay for any of these transactions;

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In addition, these potential severance payments may discourage or prevent third parties from seeking a business combination with us.

Investors’

expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.

*Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.

There is an increasing focus from certain investors, employees, regulators and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance, or ESG, factors.

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Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation and on our business, share price, financial condition, or results of operations, including the sustainability of our business over time.

In addition, the SEC has announced proposed rules that, among other matters, will establish a framework for reporting of climate-related risks.

To the extent the proposed rules impose additional reporting obligations, we could face increased costs.

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.

In addition, on March 6, 2024, the SEC finalized new rules for public companies that will require extensive climate-related disclosures and significant analysis of the impact of climate-related issues on our business strategy, results of operations, and financial condition, or the SEC Climate Disclosure Rules, and extensive attestation requirements.

The new rules require disclosure of, among other things and to the extent material, our climate-related risks and opportunities, greenhouse gas emissions inventory, climate-related targets and goals, and financial impacts of physical and transition risks.

Subsequently, in April 2024, the SEC issued an order staying implementation of the SEC Climate Disclosure Rules pending the resolution of certain challenges.

Nonetheless, our legal, accounting, and other compliance expenses may increase significantly, and compliance efforts may divert management time and attention as we prepare for the potential implementation of the SEC Climate Disclosure Rules, and such expenses, efforts and diversions of management time and attention may be even greater if the SEC Climate Disclosure Rules ultimately go into effect.

We may also be exposed to legal or regulatory action or claims as a result of these new regulations.

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.

All of these risks could have a material adverse effect on our business, financial position, and/or stock price.

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.

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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.

The 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.

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

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

As of March 31, 2024, we owned or co-owned 110 patent applications and 26 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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and foreign academic institutions to accelerate development of our current or future preclinical drug candidates.

Typically, these agreements include an option for us to negotiate a license to the institution’s intellectual property rights resulting from the collaboration.

Even with such an option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us.

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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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We rely on trade secret, patent, copyright and trademark laws, and confidentiality, licensing and other agreements with employees and third parties, all of which offer only limited protection.

Our success depends in large part on our ability, Ligand’s and any future licensor’s or licensee’s ability to obtain and maintain patent protection in the U.S.

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

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Changes in either the patent laws or interpretations of patent laws in the U.S.

and other countries may diminish the value of our licensed or owned intellectual property or create uncertainty.

and other countries may diminish the value of our

licensed or owned intellectual property or create uncertainty.

In addition, publication of information related to our current drug candidates and potential products may prevent us from obtaining or enforcing patents relating to these drug candidates and potential products, including without limitation composition-of-matter patents, which are generally believed to offer the strongest patent protection.

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 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.

As of March 31, 2024, 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 three U.S.

patents, 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 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 September 30, 2023.

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

patent and one Japanese patent directed to VK0214, and owned two additional U.S.

patents, two PCT applications, and several patent applications in the U.S.

and certain foreign jurisdictions directed to VK2809 as of March 31, 2024.

For VK5211, as of March 31, 2024, 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 September 30, 2023.

As of March 31, 2024, for our GLP-1 program, we own one U.S.

patent, three PCT applications, and several patent applications in the U.S.

and certain foreign jurisdictions.

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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• there might be a significant change in the law that governs patentability, validity and infringement of our licensed patents or any future patents we may own that adversely affects the scope of our patent rights;

a court could determine that a competitor’s technology or product does not infringe our licensed patents or any future patents we may own;

• a court could determine that a competitor’s technology or product does not infringe our licensed patents or any future patents we may own;

• the patents could irretrievably lapse due to failure to pay fees or otherwise comply with regulations or could be subject to compulsory licensing.

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Our competitors may seek to market generic versions of any approved products by submitting abbreviated new drug applications to the FDA in which our competitors claim that our licensed patents or any future patents we may own are invalid, unenforceable or not infringed.

Alternatively, our competitors may seek approval to market their own products similar to or otherwise competitive with our products.

Alternatively, our competitors may seek approval to market their own

products similar to or otherwise competitive with our products.

In these circumstances, we may need to defend or assert our licensed patents or any future patents we may own, including by filing lawsuits alleging patent infringement.

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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.

In addition, in any such proceeding or litigation, we could be found liable for monetary damages, including treble damages and attorneys’

fees, if we are found to have willfully infringed a patent.

In addition, in any such proceeding or litigation, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent.

A finding of infringement could prevent us from commercializing our drug candidates or force us to cease some of our business operations, which could materially and adversely affect our business, financial condition and results of operations.

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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,”

which is the name previously used by Ligand to refer to VK5211, without authority from either us or Ligand, and we may experience other potential intellectual property infringement in the future.

bearing the name “LGD-4033,” which is the name previously used by Ligand to refer to VK5211, without authority from either us or Ligand, and we may experience other

potential intellectual property infringement in the future.

In addition, in December 2022, we filed suit against Ascletis Bioscience Co., Ltd., Gannex Pharma Co., Ltd., Ascletis Pharmaceuticals Co., Ltd., Ascletis Pharma Inc., and Jinzi Jason Wu, or the Ascletics Defendants, in the Southern District of California, San Diego division, alleging, among other things:

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Any of these challenges, if successful, could result in the invalidation of, or in a narrowing of the scope of, any of our licensed patents and patent applications and patents and patent applications that we may apply for, own or license in the future.

Any of these challenges, regardless of their success, would likely be time-consuming and expensive to defend and resolve and would divert our management and scientific personnel’s time and attention.

In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the market price of our common stock.

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patent law, including provisions that affect the way patent applications will be prosecuted and that may also affect patent litigation.

In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first to file”

system in which the first inventor to file a patent application is typically entitled to the patent.

In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first to file” system in which the first inventor to file a patent application is typically entitled to the patent.

Third parties are allowed to submit prior art before the issuance of a patent by the USPTO, and may become involved in post-grant proceedings, including opposition, derivation, reexamination, inter partes review or interference proceedings challenging our patent rights or the patent rights of others.

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As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation.

Patents granted before the implementation of the UPC will have the option of opting out of the jurisdiction of the UPC and remaining as national patents in the UPC countries.

Patents granted before the

implementation of the UPC will have the option of opting out of the jurisdiction of the UPC and remaining as national patents in the UPC countries.

Patents that remain under the jurisdiction of the UPC may be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries who are signatories to the UPC.

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As a result, we may encounter significant problems in protecting and defending our licensed and owned intellectual property both in the U.S.

For example, China, where we currently have a number of licensed patents and licensed and owned patent applications, currently affords less protection to a company’s intellectual property than some other jurisdictions.

As such, the lack of strong patent and other intellectual property protection in China may significantly increase our vulnerability regarding unauthorized disclosure or use of our intellectual property and undermine our competitive position.

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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 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.

In those countries, as of March 31, 2024, 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.

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We employ individuals who were previously employed at other biopharmaceutical companies.

Although we have no knowledge of any such claims against us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’

former employers or other third parties.

Litigation may be necessary to defend against these claims.

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We may be subject to claims challenging the inventorship of our licensed patents, any future patents we may own and other intellectual property.

Although we are not currently experiencing any claims challenging the inventorship of our licensed patents or our licensed or owned intellectual property, we may in the future be subject to claims that former employees, collaborators or other third parties have an interest in our licensed patents or other licensed or owned intellectual property as an inventor or co-inventor.

interest in our licensed patents or other licensed or owned intellectual property as an inventor or co-inventor.

For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our drug candidates.

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Our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:

any delay in filing an NDA for any of our drug candidates and any adverse development or perceived adverse development with respect to the FDA’s review of that NDA;

• any delay in filing an NDA for any of our drug candidates and any adverse development or perceived adverse development with respect to the FDA’s review of that NDA;

• adverse results or delays in clinical trials, if any;

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

As of March 31, 2024, our executive officers, directors and 5% or greater stockholders beneficially owned 39.7% 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.

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”

within the meaning of the Securities Act of 1933, as amended, and if we decide to take advantage of certain exemptions from various reporting requirements applicable to smaller reporting companies, our common stock could be less attractive to investors.

For so long as we qualify as a “smaller reporting company,”

we will have the option to take advantage of certain exemptions from various reporting and other requirements that are applicable to other public companies that are not “smaller reporting companies,”

including, but not limited to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

In addition, for as long as we are deemed neither a large accelerated filer nor accelerated filer, we will continue to use the exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act.

We will remain a smaller reporting company and non-accelerated filer until December 31, 2023, after which time we will become a large accelerated filer.

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.

We are no longer a “smaller reporting company” within the meaning of the Securities Act of 1933, as amended, and as a result we are subject to certain enhanced disclosure requirements which will require us to incur significant expenses and expend time and resources.

We are no longer a “smaller reporting company,” as of January 1, 2024 and, as a result, we are or will be required to comply with various disclosure and compliance requirements that did not previously apply, such as the auditor attestation requirements of Section

404(b) of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, the requirement that we hold a nonbinding advisory vote on executive compensation and obtain shareholder approval of any golden parachute payments not previously approved, the requirement to provide full and more detailed executive compensation disclosure and the reduction in the amount of time for filing our periodic and annual reports.

Compliance with these additional requirements increases our legal and financial compliance costs and causes management and other personnel to divert attention from operational and other business matters to these additional public company reporting requirements.

In addition, if we are not able to comply with changing requirements in a timely manner, the market price of our stock could decline and we could be subject to delisting proceedings by the stock exchange on which our common shares are listed, or sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

We will need to reassess, as of June 30, 2024, whether we will continue to qualify as a large accelerated filer for filings beyond the fiscal year ending December 31, 2024.

In the event we are eligible to rely on the exemptions available to smaller reporting companies, we cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Our internal control over financial reporting may not meet the standards required by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, could have a material adverse effect on our business and share price.

Our management is currently required to report on the effectiveness of our internal control over financial reporting.

Commencing with the fiscal year ending December 31, 2023, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404.

The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

During the fiscal year 2023, our management was required to report, on a quarterly basis, on the effectiveness of our internal control over financial reporting.

Commencing with the fiscal year ending December 31, 2023, in addition to our management’s report on the effectiveness of our internal controls over financial reporting, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404.

The rules governing the standards that must be met for our management and our independent registered public accounting firm to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies or material weaknesses that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404.

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As a result of operating as a public company, we may incur significantly increased costs and our management and other personnel will be required to devote substantial time to new compliance initiatives.

As a public company and particularly after we cease to be a “smaller reporting company”

and “non-accelerated filer,”

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

As a public company and particularly after December 31, 2023, when we ceased to be a “smaller reporting company” and “non-accelerated filer,” and became a “large accelerated filer”, we expect to incur additional 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.

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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.

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.

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, Sarbanes-Oxley Act compliance, finance and accounting and corporate governance requirements have been increasing in recent years as a result of changes in, and the adoption of, new rules and regulations applicable to public companies.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline.

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This risk is especially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years.

If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business, financial condition and results of operations.

Our ability to use our net operating loss carryforwards may be subject to certain limitations.

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Our ability to utilize our federal net operating loss carryforwards may be limited under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code.

In the event of an “ownership change,”

Section 382 imposes an annual limitation on the amount of post-ownership change taxable income that may be offset with pre-ownership change net operating losses of the loss corporation experiencing the ownership change.

An “ownership change”

is defined by Section 382 as a cumulative change in ownership of our company of more than 50% within a three-year period.

Additionally, we have determined that our underwritten public offering of common stock completed in February 2018 resulted in an “ownership change”

In the event of an “ownership change,” Section 382 imposes an annual limitation on the amount of post-ownership change taxable income that may be offset with pre-ownership change net operating losses of the loss corporation experiencing the ownership change.

An “ownership change” is defined by Section 382 as a cumulative change in ownership of our company of more than 50% within a three-year period.

Additionally, we have determined that our underwritten public offering of common stock completed in February 2018 resulted in an “ownership change” of us.

However, as of December 31, 2023, there is no limitation on the federal and state net operating losses.

In addition, current or future changes in our stock ownership may trigger an “ownership change,”

some of which may be outside our control.

In addition, current or future changes in our stock ownership may trigger an “ownership change,” some of which may be outside our control.

Accordingly, our ability to utilize our net operating loss carryforwards to offset federal taxable income, if any, will likely be limited by Section 382, which could potentially result in increased future tax liability to us.

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These provisions include:

authorizing the issuance of “blank check”

preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

• authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

• limiting the removal of directors by the stockholders;

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Further, other provisions of Delaware law may also discourage, delay or prevent someone from acquiring us or merging with us.

The timing and amount of any repurchases under our stock repurchase program are subject to a number of uncertainties.

On March 10, 2022, our board of directors authorized a stock repurchase program effective March 18, 2022, whereby we may purchase up to $50.0 million in shares of our common stock over a period of up to two years, or the Repurchase Program.

The Repurchase Program may be carried out at the discretion of a committee of our board of directors through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately negotiated transactions.

The Repurchase Program may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount of our common stock under the Repurchase Program.

The Inflation Reduction Act of 2022, enacted on August 16, 2022, imposes a 1% excise tax on net repurchases of shares by U.S.

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 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.

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.

Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

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.

This choice-of-forum provision may limit our stockholders’

ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits.

This choice-of-forum provision may limit our stockholders’ ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits.

In addition, a stockholder that is unable to bring a claim in the judicial forum of its choosing may be required to incur additional costs in the pursuit of actions that are subject to these exclusive forum provisions, particularly if the stockholder does not reside in or near Delaware.

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.

additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations.

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