10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number: 001-40298

 

Ventyx Biosciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

83-2996852

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

662 Encinitas Blvd., Suite 250

Encinitas, CA

92024

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (760) 593-4832

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

VTYX

 

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of November 15, 2021, the registrant had 50,296,506 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

3

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

30

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

86

Item 3.

Defaults Upon Senior Securities

86

Item 4.

Mine Safety Disclosures

87

Item 5.

Other Information

87

Item 6.

Exhibits

88

Signatures

89

 

i


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts included in this Quarterly Report are forward-looking statements. In some cases, you can identify forward- looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

 

These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this Quarterly Report include, but are not limited to, statements about:

our expectations regarding our product candidates and related benefits;
our beliefs regarding the benefits and perceived limitations of competing products, and the future of competing products and our industry;
details regarding our strategic vision and product candidate pipeline;
our beliefs regarding the success, cost and timing of our development activities and current and future clinical trials, including study design;
the timing or likelihood of regulatory filings or other actions and related regulatory authority responses;
any impact of the COVID-19 pandemic, or responses to the COVID-19 pandemic, on our business, clinical trials or personnel;
the ability and willingness of third parties to engage in research and development activities on our behalf involving our product candidates, and our ability to leverage those activities;
our expectations regarding the ease of administration associated with our product candidates;
our expectations regarding the patient compatibility associated with our product candidates;
our beliefs regarding the potential markets for our product candidates and our ability to serve those markets;
the ability to obtain and maintain regulatory approval of any of our product candidates, and any related restrictions, limitations and/or warnings in the label of any approved product candidate;
our ability to commercialize any approved products;
the rate and degree of market acceptance of any approved products;
our ability to attract and retain key personnel;
the accuracy of our estimates regarding our future revenue, operating expenses, capital requirements and needs for additional financing;
our ability to obtain funding for our operations, including funding necessary to complete further development and any commercialization of our product candidates;
our ability to obtain, maintain, protect and enforce intellectual property protection for our product candidates and not infringe, misappropriate or otherwise violate the intellectual property of others;

ii


 

regulatory developments in the United States and foreign countries; and
our expectations regarding the period during which we qualify as an “emerging growth company” under the JOBS Act, and a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.

 

You should refer to Part II, Item 1A (Risk Factors) of this Quarterly Report for a discussion of other important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

 

Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Ventyx Biosciences, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share amounts and par value data)

(unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

68,986

 

 

$

244

 

Marketable securities

 

 

72,966

 

 

 

 

Prepaid expenses and other assets (includes related party amounts of $48 and $0, respectively)

 

 

3,707

 

 

 

1

 

Total current assets:

 

 

145,659

 

 

 

245

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

219

 

 

 

 

Other long-term assets

 

 

2,831

 

 

 

 

Total assets

 

$

148,709

 

 

$

245

 

 

 

 

 

 

 

 

Liabilities, convertible preferred stock and stockholders' deficit

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable (includes related party amounts of $0 and $238, respectively)

 

$

4,263

 

 

$

1,102

 

Accrued expenses (includes related party amounts of $237 and $17, respectively)

 

 

7,546

 

 

 

301

 

Total current liabilities

 

 

11,809

 

 

 

1,403

 

 

 

 

 

 

 

 

Change of control derivative liability - related party

 

 

 

 

 

16,849

 

Convertible promissory notes - related party

 

 

 

 

 

2,920

 

Convertible SAFE notes at fair value - related party

 

 

 

 

 

9,727

 

Total liabilities

 

 

11,809

 

 

 

30,899

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible preferred shares:

 

 

 

 

 

 

Series A convertible preferred shares, $0.0001 par value; 119,879,441 and 0 shares
   authorized at September 30, 2021 and December 31, 2020, respectively;
12,533,905
   and
0 shares issued and outstanding at September 30, 2021 and December 31, 2020
   respectively; liquidation preference of $
114,300 at September 30, 2021

 

 

116,275

 

 

 

 

Series A-1 convertible preferred shares, $0.0001 par value; 179,490,370 and 0 shares
   authorized at September 30, 2021 and December 31, 2020, respectively,
18,766,496
   and
0 shares issued and outstanding at September 30, 2021 and December 31, 2020,
   respectively

 

 

57,437

 

 

 

 

Series B convertible preferred shares, $0.0001 par value; 38,537,683 and 0 shares
   authorized at September 30, 2021 and December 31, 2020, respectively;
4,029,275
   and
0 shares issued and outstanding at September 30, 2021 and December 31, 2020,
   respectively

 

 

50,809

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

Common stock, $0.0001 par value; 436,248,586 and 47,603,832 shares authorized at
   September 30, 2021 and December 31, 2020, respectively;
4,198,682 and 2,187,187
   shares issued at September 30, 2021 and December 31, 2020, respectively;
4,058,222
   and
2,059,157 shares outstanding at September 30, 2021 and December 31, 2020, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

12,393

 

 

 

1,847

 

Accumulated other comprehensive loss

 

 

17

 

 

 

 

Accumulated deficit

 

 

(100,031

)

 

 

(32,501

)

Total stockholders' deficit

 

 

(87,621

)

 

 

(30,654

)

Total liabilities, convertible preferred stock and stockholders' deficit

 

$

148,709

 

 

$

245

 

 

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

1


 

Ventyx Biosciences, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (includes related party amounts of
   $
287, $179, $839 and $653, respectively)

 

$

10,545

 

 

$

1,990

 

 

$

44,657

 

 

$

5,059

 

General and administrative (includes related party amounts of
   $
0, $107, $116 and $328, respectively)

 

 

2,242

 

 

 

245

 

 

 

4,664

 

 

 

551

 

Total operating expenses

 

 

12,787

 

 

 

2,235

 

 

 

49,321

 

 

 

5,610

 

Loss from operations

 

 

(12,787

)

 

 

(2,235

)

 

 

(49,321

)

 

 

(5,610

)

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) expense

 

 

(13

)

 

 

1

 

 

 

31

 

 

 

1

 

Interest expense - related party

 

 

 

 

 

94

 

 

 

99

 

 

 

205

 

Change in fair value of notes and derivative - related party

 

 

 

 

 

4,825

 

 

 

11,051

 

 

 

5,656

 

Change in fair value of Series A tranche liability

 

 

 

 

 

 

 

 

5,476

 

 

 

 

Total other (income) expense

 

 

(13

)

 

 

4,920

 

 

 

16,657

 

 

 

5,862

 

Net loss

 

 

(12,774

)

 

 

(7,155

)

 

 

(65,978

)

 

 

(11,472

)

Deemed dividend

 

 

 

 

 

 

 

 

(1,552

)

 

 

 

Net loss attributable to common shareholders

 

$

(12,774

)

 

$

(7,155

)

 

$

(67,530

)

 

$

(11,472

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(12,774

)

 

$

(7,155

)

 

$

(65,978

)

 

$

(11,472

)

Unrealized gain (loss) on marketable securities

 

 

6

 

 

 

 

 

 

6

 

 

 

 

Foreign currency translation

 

 

23

 

 

 

 

 

 

11

 

 

 

 

Comprehensive loss

 

$

(12,745

)

 

$

(7,155

)

 

$

(65,961

)

 

$

(11,472

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common shareholders, basic and
   diluted

 

$

(3.17

)

 

$

(3.58

)

 

$

(19.81

)

 

$

(5.82

)

Shares used to compute basic and diluted net loss per share
   attributable to common shareholders

 

 

4,026,083

 

 

 

1,998,548

 

 

 

3,409,036

 

 

 

1,971,081

 

 

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

2


 

Ventyx Biosciences, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

For the Three Months Ended September 30, 2021 and 2020

(in thousands, except share amounts)

(unaudited)

 

 

 

Series A Convertible

 

 

Series A-1 Convertible

 

 

Series B Convertible

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance at June 30, 2021

 

 

12,533,905

 

 

$

116,279

 

 

 

18,766,496

 

 

$

57,437

 

 

 

 

 

$

 

 

 

3,955,973

 

 

$

 

 

$

11,405

 

 

$

(12

)

 

$

(87,257

)

 

$

(75,864

)

Additional legal fees incurred associated with the
   issuance of preferred stock

 

 

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of preferred stock, net of legal fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,029,275

 

 

 

50,809

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,581

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon exercise of stock
   options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

79,668

 

 

 

 

 

 

19

 

 

 

 

 

 

 

 

 

19

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

969

 

 

 

 

 

 

 

 

 

969

 

Unrealized gain (loss) on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

6

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23

 

 

 

 

 

 

23

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,774

)

 

 

(12,774

)

Balance at September 30, 2021

 

 

12,533,905

 

 

$

116,275

 

 

 

18,766,496

 

 

$

57,437

 

 

$

4,029,275

 

 

$

50,809

 

 

 

4,058,222

 

 

$

 

 

$

12,393

 

 

$

17

 

 

$

(100,031

)

 

$

(87,621

)

 

 

 

Series A Convertible

 

 

Series A-1 Convertible

 

 

Series B Convertible

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance at June 30, 2020

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

1,981,735

 

 

$

 

 

$

216

 

 

$

 

 

$

(8,644

)

 

$

(8,428

)

Modification of debt instruments with
   related party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,601

 

 

 

 

 

 

 

 

 

1,601

 

Vesting of restricted common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,622

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon exercise
   of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

14

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,155

)

 

 

(7,155

)

Balance at September 30, 2020

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

2,009,357

 

 

$

 

 

$

1,831

 

 

$

 

 

$

(15,799

)

 

$

(13,968

)

 

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

3


 

Ventyx Biosciences, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

For the Nine Months Ended September 30, 2021 and 2020

(in thousands, except share amounts)

(unaudited)

 

 

 

Series A Convertible

 

 

Series A-1 Convertible

 

 

Series B Convertible

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2020

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

2,059,157

 

 

$

 

 

$

1,847

 

 

$

 

 

$

(32,501

)

 

$

(30,654

)

Issuance of preferred stock upon modification
   and conversion of notes

 

 

 

 

 

 

 

 

12,713,585

 

 

 

38,911