What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-09 compared with 2021-02-17 · 55 added, 64 removed, 164 unchanged (42% of the section changed)

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The study is targeting enrollment of approximately 340 patients across five treatment arms.

The primary endpoint of the study will evaluate the relative change in liver fat content, as assessed by magnetic resonance imaging, proton density fat fraction (MRI-PDFF), from baseline to week 12 in subjects treated with VK2809 as compared to placebo.

The primary endpoint of the study will evaluate the relative change in liver fat content, as assessed by magnetic resonance imaging, proton density fat fraction, from baseline to week 12 in subjects treated with VK2809 as compared to placebo.

Secondary objectives include evaluation of histologic changes assessed by hepatic biopsy after 52 weeks of dosing.

VK2809 has been evaluated in seven completed clinical studies, which enrolled more than 300 subjects.

VK2809 has been evaluated in eight completed clinical studies, which enrolled more than 300 subjects.

No serious adverse events, or SAEs, have been observed in subjects receiving VK2809 in these completed studies, and overall tolerability remains encouraging.

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Preliminary data suggest that VK0214 stimulates ABCD2 expression in an in vitro model and reduces VLCFA levels in an in vivo model of X-ALD.

In September of 2020, we initiated a randomized, double-blind, placebo controlled Phase 1 single ascending dose, or SAD, and multiple ascending dose, or MAD, clinical trial of VK0214 in healthy patients.

The primary objectives of the study include evaluation of the safety and tolerability of single and multiple oral doses of VK0214, as well as identification of VK0214 doses for further clinical development in the setting of X-ALD.

In June 2021, we initiated a Phase 1b clinical trial of VK0214 in patients with X-ALD.

The Phase 1b trial is a multi-center, randomized, double-blind, placebo-controlled study in adult male patients with the adrenomyeloneuropathy, or AMN, form of X-ALD.

The study is initially targeting enrollment across three cohorts:

placebo, VK0214 20 mg daily, and VK0214 40 mg daily.

Pending a blinded review of preliminary safety, tolerability, and pharmacokinetic data, additional dosing cohorts may be pursued.

The primary objectives of the study are to evaluate the safety and tolerability of VK0214 administered once-daily over a 28-day dosing period.

Secondary and exploratory objectives include an evaluation of the pharmacokinetics and pharmacodynamics of VK0214 following 28 days of dosing in this population.

In January 2022, we announced that this Phase 1b trial of VK0214 in patients with X-ALD has been placed on clinical hold by the United States Food and Drug Administration, or FDA.

The FDA has requested an additional preclinical study prior to continuing the Phase 1b trial of VK0214 in X-ALD.

The request is not due to any findings from ongoing or previously completed studies.

We expect to provide the information to the FDA in the second quarter of 2022.

In January 2022, we initiated a Phase 1 single ascending dose, or SAD, and multiple ascending dose, or MAD, clinical trial of VK2735, a novel dual agonist of the glucagon-like peptide 1, or GLP-1, and glucose-dependent insulinotropic polypeptide, or GIP, receptors.

VK2735 is in development for the potential treatment of various metabolic disorders.

The Phase 1 trial is a randomized, double-blind, placebo-controlled, SAD and MAD study in healthy adults.

The primary objectives of the study include evaluation of the safety and tolerability of single and multiple doses of VK2735 delivered subcutaneously and the identification of VK2735 doses suitable for further clinical development.

Study investigators will also evaluate the pharmacokinetics of single and multiple doses of VK2735.

Other clinical programs include VK5211, an orally available, non-steroidal selective androgen receptor modulator, or SARM.

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We were incorporated under the laws of the State of Delaware on September 24, 2012.

Since our incorporation, we have devoted most of our efforts towards conducting certain clinical trials and preclinical studies related to our VK2809, VK0214 and VK5211 programs, as well as efforts towards raising capital and building infrastructure.

We obtained exclusive worldwide rights to our VK2809, VK0214 and VK5211 programs and certain other assets pursuant to an exclusive license agreement with Ligand Pharmaceuticals Incorporated, or Ligand.

The terms of this license agreement are detailed in the Master License Agreement with Ligand, which we entered into on

May 21, 2014, as amended, or the Master License Agreement.

A summary of the Master License Agreement can be found under the heading “Agreements with Ligand—Master License Agreement” under Part I, “Item 1.

Since our incorporation, we have devoted most of our efforts towards conducting certain clinical trials and preclinical studies related to our VK2809, VK0214, VK2735 and VK5211 programs and towards raising capital and building infrastructure.

We obtained exclusive worldwide rights to VK2809, VK0214 and VK5211 and certain other assets pursuant to an exclusive license agreement with Ligand Pharmaceuticals Incorporated, or Ligand.

The terms of this license agreement are detailed in the Master License Agreement with Ligand, which we entered into on May 21, 2014, as amended, or the Master License Agreement.

A summary of the Master License Agreement can be found under the heading “Agreements with Ligand” under Part I, “Item 1.

Business” of this Annual Report on Form 10-K.

Impact of COVID-19 Pandemic

We are subject to risks and uncertainties as a result of the COVID-19 pandemic.

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In addition, our 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 prioritization of hospital resources toward the COVID-19 pandemic.

Some patients have not been able and others may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.

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.

Some patients have not been able to, and others may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.

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 our clinical trial operations.

The severity of the impact of the COVID-19 pandemic on our 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 our service providers, suppliers, contract research organizations, or CROs, and our clinical trials, all of which are uncertain and cannot be predicted, as well as the timing and potential rollout of any vaccines and the willingness of the general population to be vaccinated.

The severity of the impact of the COVID-19 pandemic on our 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 our service providers, suppliers, contract research organizations, or CROs, and our 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.

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

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Research and Development Expenses

During the year ended December 31, 2020, we charged $31.9 million to research and development expense primarily related to our efforts in continuing to conduct the VK2809 Phase 2b VOYAGE clinical trial as well as preparing for and initiating the VK0214 Phase 1 SAD and MAD study in healthy patients.

During the year ended December 31, 2019, we charged $23.6 million to research and development expense primarily related to our efforts to prepare for the initiation of the VK2809 Phase 2b VOYAGE clinical trial as well as certain toxicology studies for VK2809 and in vivo studies for VK0214.

During the year ended December 31, 2021, we charged $45.0 million to research and development expense primarily related to our efforts in continuing to conduct the VK2809 Phase 2b VOYAGE clinical trial, completing the VK0214 Phase 1 SAD and MAD study in healthy patients, preparing for and initiating the VK0214 Phase 1b trial and preparing for the initiation of the VK2735 Phase 1 trial.

Phase 1 SAD and MAD study in healthy patients.

We expect that our ongoing research and development expenses will consist of costs incurred for the development of our drug candidates, including, but not limited to:

employee and consultant-related expenses, which will include salaries, benefits and stock-based compensation, and certain consultant fees and travel expenses;

expenses incurred under agreements with investigative sites and contract research organizations, or CROs, which will conduct a substantial portion of our research and development activities, including studies in NASH, on our behalf;

expenses incurred under agreements with investigative sites and CROs, which will conduct a substantial portion of our research and development activities, including studies in NASH, on our behalf;

payments to third-party manufacturers, which will produce our active pharmaceutical ingredients and finished products;

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In addition, we cannot forecast with any degree of certainty which drug candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

We expect to incur increased research and development expenses in the future as we continue our efforts towards advancing our VK2809 and VK0214 programs and seek to advance our additional programs.

We expect to incur increased research and development expenses in the future as we continue our efforts towards advancing our VK2809, VK0214 and VK2735 programs and seek to advance our additional programs.

General and Administrative Expenses

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Smaller Reporting Company and Non-Accelerated Filer

Until December 31, 2020, we were deemed an “emerging growth company” within the meaning of the rules under the Securities Act, and we utilized certain exemptions from various reporting requirements that were applicable to public companies that were not emerging growth companies.

For example, as an emerging growth company, we were not required to provide an auditor’s attestation report on our internal control over financial reporting in our annual reports on Form 10-K as otherwise required by Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended.

Effective December 31, 2020, we are no longer an emerging growth company as December 31, 2020 was the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering.

In March 2020, the SEC released final rules amending the definitions for accelerated and large accelerated filers.

In addition, these final rules also exclude from these definitions of accelerated and large accelerated filers an issuer that is eligible to be a smaller reporting company and non-accelerated filer.

As our public float on June 30, 2020 was less than $700 million and our annual revenues are less than $100 million, we are now deemed a smaller reporting company and a non-accelerated filer.

As a non-accelerated filer and in accordance with these new rules, we will continue to not be required to provide an auditor’s attestation report on our internal control over financial reporting in this and potentially future annual reports on Form 10-K as otherwise required by Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended.

Our public float on June 30, 2021 was less than $700 million and our annual revenues are less than $100 million,and we are therefore deemed a smaller reporting company and a non-accelerated filer.

As a non-accelerated filer and in accordance with these new rules, we continue to not be required to provide an auditor’s attestation report on our internal control over financial reporting in this and potentially future annual reports on Form 10-K as otherwise required by Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended.

In addition, as a smaller reporting company, we have the ability to take advantage of several “scaled disclosure” accommodations in accordance with the smaller reporting company rules.

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Actual results may differ from these estimates under different assumptions or conditions.

future performance, as these policies relate to the significant areas involving management’s judgments and estimates in the preparation of our financial statements.

Revenue Recognition

We have not recorded any revenues since our inception.

However, in the future, we may enter into collaborative research and licensing agreements, under which we could be eligible for payments made in the form of upfront license fees, research funding, cost reimbursement, contingent event-based payments and/or royalties.

On January 1, 2018, we adopted Accounting Standards Update, or ASU, No.

2014-09, Revenue from Contracts with Customers and all related amendments, or ASC 606 or the new 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-specific 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:

(1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

The new revenue standard also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, and costs to obtain or fulfill contracts.

We will apply ASC 606 prospectively to all contracts.

While our significant accounting policies are more fully described in Note 1 to our financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies will be critical to understanding our historical and future performance, as these policies relate to the significant areas involving management’s judgments and estimates in the preparation of our financial statements.

Research and Development

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We note that intangible assets acquired that are in the preclinical or clinical stages of development when acquired, and not approved by the U.S.

Food and Drug Administration, are deemed to have not satisfied the definition of having

an alternative future use, as defined.

Food and Drug Administration, are deemed to have not satisfied the definition of having an alternative future use, as defined.

Accordingly, assets acquired in the preclinical and clinical stages of development are expensed as incurred in our statement of operations.

Costs related to filing and pursuing patent applications are expensed as incurred to general and administrative expense, as recoverability of such expenditures is uncertain.

Stock-Based Compensation

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Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

Net Loss per Common Share

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents.

Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method.

For purposes of this calculation, we currently do not have any deemed common share equivalents;

therefore, our basic and diluted net loss per share calculations are the same.

We operate in only one segment.

Management uses cash flows as the primary measure to manage our business and does not segment our business for internal reporting or decision making purposes.

Results of Operations

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Research and development expenses

The increase in research and development expenses during the year ended December 31, 2020 as compared to the year ended December 31, 2019 was primarily due to increased expenses related to our clinical study efforts of $9.5 million, salaries and benefits of $668,000, stock-based compensation of $405,000 and the manufacturing of our drug candidates of $278,000 partially offset by decreased expenses related to services provided by certain third-party consultants of $1.5 million, pre-clinical study efforts of $908,000 and travel of $40,000 .

The increase in research and development expenses during the year ended December 31, 2021 as compared to the year ended December 31, 2020 was primarily due to increased expenses related to our clinical studies of $7.2 million, pre-clinical studies of $3.3 million, manufacturing for our drug candidates of $2.2 million, third-party consultants of $291,000 and stock-based compensation of $265,000, partially offset by a decrease in salaries and benefits of $180,000 and placement fees of $105,000.

General and Administrative Expenses

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General and administrative expenses

The increase in general and administrative expenses during the year ended December 31, 2020 as compared to the year ended December 31, 2019 was primarily due to increased expenses related to stock-based compensation of $1.7 million, salaries and wages of $295,000 and insurance expense of $173,000 partially offset by decreased expenses related to services provided by certain third-party consultants of $201,000, professional fees of $116,000, legal and patent expenses of $83,000 and travel of $71,000.

The decrease in general and administrative expenses during the year ended December 31, 2021 as compared to the year ended December 31, 2020 was primarily due to decreased expenses related to salaries and benefits of $355,000 and legal services of $75,000, partially offset by increased expenses related to insurance of $149,000, professional fees of $125,000, services provided by third-party consultants of $101,000 and stock-based compensation of $18,000.

Other Income (Expense)

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Other income (expense)

Other income (expense) recognized during the year ended December 31, 2020 consisted primarily of interest income of $3.3 million, offset by expense relating to the amortization of certain financing costs of $106,000.

Other income (expense) recognized during the year ended December 31, 2021 consisted primarily of interest income of $703,000 and foreign exchange gain of $7,000, offset by expense relating to the amortization of certain financing costs of $18,000.

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As such, we believe our cash, cash equivalents and short-term investments will be sufficient to fund our operations through at least the first quarter of 2023, which is more than one year after the date our December 31, 2021 financial statements were issued.

Our primary use of cash is to fund operating expenses, which to date have consisted of the cost to obtain the license of intellectual property from Ligand, certain research and development expenses related to furthering the development of VK2809, VK0214 and VK5211 efforts and general and administrative expenses.

Since we have not generated any revenues to date, we have incurred operating losses since our inception.

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333-258231), or the Shelf Registration Statement.

The Shelf Registration Statement initially provided us with the ability to offer up to $450.0 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 July 19, 2018.

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

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

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

Specific terms and prices will be determined at the time of each offering under a separate prospectus supplement, which will be filed with the SEC at the time of any offering.

On August 1, 2019, we entered into an At-The-Market Equity Offering Sales Agreement, or the ATM Agreement, with Stifel, Nicolaus & Company, Incorporated and Oppenheimer & Co.

, or each, an Agent and, together, the Agents, pursuant to which we may offer and sell, from time to time, through or to the Agents, as sales agent or principal, or the ATM Offering, shares of our common stock having an aggregate offering price of up to $75.0 million, or the Shares.

Any Shares offered and sold in the ATM Offering will be issued pursuant to the Shelf Registration Statement and the 424(b) prospectus supplement relating to the ATM Offering dated August 1, 2019.

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

Wainwright & Co.

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

Any ATM Shares offered and sold in the ATM Offering are to be issued pursuant to the Shelf Registration Statement and the 424(b) prospectus supplement relating to the ATM Offering dated July 28, 2021.

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

No shares of our common stock were sold under the ATM Agreement from its inception through December 31, 2021.

On March 17, 2020, our board of directors authorized a stock repurchase program, whereby we may purchase up to $50.0 million in shares of our common stock and outstanding warrants to purchase 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 or privately negotiated transactions.

Through December 31, 2021, no shares of our common stock or warrants to purchase our common stock were repurchased by us under the Repurchase Program.

The following table summarizes our cash flows for the periods indicated below (in thousands):

Cash used in operating activities

Net cash provided by investing activities

Cash provided by investing activities

Cash provided by financing activities

Cash Used in Operating Activities

During the year ended December 31, 2021, cash used in operating activities of $47.6 million primarily reflected our net losses for the period, adjusted by non-cash charges such as stock-based compensation, amortization of investment premiums, amortization of right of use assets, amortization of financing costs, and interest expense related to operating lease liability as well as changes in our working capital accounts, primarily consisting of an increase in accrued interest, net of interest received on maturity of investments and a decrease in lease liability, partially offset by an increase in prepaids and other current assets and a decrease in accounts payable and accrued expenses.

During the year ended December 31, 2020, cash used in operating activities of $21.8 million primarily reflected our net losses for the period, adjusted by non-cash charges such as stock-based compensation, amortization of investment premiums, amortization of financing costs and amortization of right of use asset as well as changes in our working capital accounts, primarily consisting of an increase in accrued interest, net of interest received on maturity of investments, accounts payable and accrued expenses and a decrease in prepaid expenses and lease liability.

During the year ended December 31, 2019, cash used in operating activities of $24.8 million primarily reflected our net losses for the period, adjusted by non-cash charges such as amortization of investment premiums , amortization of financing costs, amortization of non-cash clinical trial costs, and stock-based compensation as well as changes in our working capital accounts, primarily consisting of an increase in prepaid expenses, accrued interest, net of interest received on maturity of investments, accounts payable and accrued expenses.

Cash Provided by Investing Activities

During the year ended December 31, 2020, cash provided by investing activities of $41.6 million resulted primarily from the proceeds of sales and maturities of investments of $322.2 million, partially offset by the purchase of investments of $280.6 million.

During the year ended December 31, 2021, cash provided by investing activities of $38.0 million resulted primarily from the proceeds of maturities of investments of $206.0 million, partially offset by the purchase of investments of $168.0 million.

Cash Provided by Financing Activities

During the year ended December 31, 2020, cash provided by financing activities was $950,000, which consisted primarily of proceeds from certain warrant exercises of $854,000 and proceeds from certain stock option exercises and employee stock purchase plan purchases of $418,000, partially offset by the value of shares withheld to cover taxes of $296,000 and payments of certain financing costs of $26,000.

During the year ended December 31, 2019, cash provided by financing activities was $887,000, which consisted primarily of proceeds from certain warrant exercises of $783,000 and proceeds from certain stock option exercises and employee stock purchase plan purchases of $328,000, partially offset by the value of shares withheld to cover taxes of $151,000 and payments of certain financing costs of $73,000.

During the year ended December 31, 2021, cash provided by financing activities was $6.9 million, which consisted primarily of proceeds from certain warrant exercises of $7.1 million and proceeds from certain stock option exercises and ESPP purchases of $569,000, partially offset by the value of shares withheld to cover taxes of $707,000.

During the year ended December 31, 2020, cash provided by financing activities was $950,000, which consisted primarily of proceeds from certain warrant exercises of $854,000 and proceeds from certain stock option exercises and ESPP purchases of $418,000, partially offset by the value of shares withheld to cover taxes of $296,000 and payments of certain financing costs of $26,000.

Future Funding Requirements

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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.

Contractual Obligations and Commitments

We are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information required under this item.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC.

Quantitative and Qualitative Disclosures About Market Risk.

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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 7. Management’s Discussion and Analysis