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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 March 31, 2022

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: 001-40928

 

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 May 9, 2022, the registrant had 50,850,297 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 Stockholders’ Equity (Deficit)

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

90

Item 3.

Defaults Upon Senior Securities

90

Item 4.

Mine Safety Disclosures

90

Item 5.

Other Information

90

Item 6.

Exhibits

91

Signatures

92

 

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 their related benefits;
our beliefs regarding the perceived benefits and 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 anticipated timing of releasing data for any current or future clinical trials;
the anticipated timing of commencement, enrollment, and completion of any current or future clinical trials for our product candidates;
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;
any impact of the ongoing conflict in Ukraine and the imposition of sanctions against Russia and Belarus;
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, if any;
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;

ii


 

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;
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)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

41,690

 

 

$

70,791

 

Marketable securities

 

 

212,656

 

 

 

187,785

 

Prepaid expenses and other assets (includes related party amounts of $34 and $29,
   respectively)

 

 

3,159

 

 

 

4,444

 

Total current assets

 

 

257,505

 

 

 

263,020

 

Property and equipment, net

 

 

275

 

 

 

254

 

Operating lease right-of-use assets

 

 

1,312

 

 

 

 

Marketable securities

 

 

18,801

 

 

 

28,148

 

Other long-term assets

 

 

60

 

 

 

60

 

Total assets

 

$

277,953

 

 

$

291,482

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable (includes related party amounts of $305 and $0, respectively)

 

$

7,114

 

 

$

4,661

 

Accrued expenses (includes related party amounts of $73 and $175, respectively)

 

 

10,399

 

 

 

7,622

 

Current portion of operating lease liabilities

 

 

278

 

 

 

 

Total current liabilities

 

 

17,791

 

 

 

12,283

 

Operating lease liabilities, net of current portion

 

 

1,039

 

 

 

 

Total liabilities

 

 

18,830

 

 

 

12,283

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, $0.0001 par value; 900,000,000 shares authorized at March 31, 2022
   and December 31, 2021;
50,825,116 and 50,526,702 shares issued at March 31, 2022
   and December 31, 2021, respectively;
50,729,820 and 50,408,830 shares outstanding
   at March 31, 2022 and December 31, 2021, respectively

 

 

5

 

 

 

5

 

Additional paid-in capital

 

 

400,607

 

 

 

397,051

 

Accumulated other comprehensive loss

 

 

(958

)

 

 

(58

)

Accumulated deficit

 

 

(140,531

)

 

 

(117,799

)

Total stockholders' equity

 

 

259,123

 

 

 

279,199

 

Total liabilities and stockholders' equity

 

$

277,953

 

 

$

291,482

 

 

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

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

Research and development (includes related party amounts of $203 and $208,
   respectively)

 

$

17,409

 

 

$

24,601

 

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

 

 

5,338

 

 

 

747

 

Total operating expenses

 

 

22,747

 

 

 

25,348

 

Loss from operations

 

 

(22,747

)

 

 

(25,348

)

Other (income) expense:

 

 

 

 

 

 

Other income

 

 

(15

)

 

 

 

Interest expense - related party

 

 

 

 

 

99

 

Change in fair value of notes and derivative - related party

 

 

 

 

 

11,051

 

Change in fair value of Series A tranche liability

 

 

 

 

 

1,147

 

Total other (income) expense

 

 

(15

)

 

 

12,297

 

Net loss

 

 

(22,732

)

 

 

(37,645

)

Deemed dividend

 

 

 

 

 

(1,552

)

Net loss attributable to common shareholders

 

$

(22,732

)

 

$

(39,197

)

Net loss

 

$

(22,732

)

 

$

(37,645

)

Unrealized loss on marketable securities

 

 

(942

)

 

 

 

Foreign currency translation

 

 

42

 

 

 

2

 

Comprehensive loss

 

$

(23,632

)

 

$

(37,643

)

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

 

$

(0.45

)

 

$

(15.22

)

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

 

 

50,585,255

 

 

 

2,575,619

 

 

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

2


 

Ventyx Biosciences, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

For the Three Months Ended March 31, 2022 and 2021

(in thousands, except share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Series A Convertible

 

 

Series A-1 Convertible

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

50,408,830

 

 

$

5

 

 

$

397,051

 

 

$

(58

)

 

$

(117,799

)

 

$

279,199

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

298,414

 

 

 

 

 

 

86

 

 

 

 

 

 

 

 

 

86

 

Vesting of restricted common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustment to offering expenses in the initial public offering

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26

 

 

 

 

 

 

 

 

 

26

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,444

 

 

 

 

 

 

 

 

 

3,444

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(942

)

 

 

 

 

 

(942

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42

 

 

 

 

 

 

42

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,732

)

 

 

(22,732

)

Balance at March 31, 2022

 

 

 

 

$

 

 

 

 

 

$

 

 

 

50,729,820

 

 

$

5

 

 

$

400,607

 

 

$

(958

)

 

$

(140,531

)

 

$

259,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Series A Convertible

 

 

Series A-1 Convertible

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

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

 

 

 

 

 

 

 

 

 

1,735

 

 

 

 

 

 

 

 

 

1,735

 

Acquisition of Oppilan and Zomagen

 

 

 

 

 

 

 

 

6,052,911

 

 

 

18,526

 

 

 

818,798

 

 

 

 

 

 

2,820

 

 

 

 

 

 

 

 

 

2,820

 

Issuance of preferred stock and common stock, net of legal fees

 

 

6,283,401

 

 

 

55,301

 

 

 

 

 

 

 

 

 

507,133

 

 

 

 

 

 

1,552

 

 

 

 

 

 

(1,552

)

 

 

 

Vesting of restricted common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,606

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80

 

 

 

 

 

 

 

 

 

80

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37,645

)

 

 

(37,645

)

Balance at March 31, 2021

 

 

6,283,401

 

 

$

55,301

 

 

 

18,766,496

 

 

$

57,437

 

 

 

3,410,694

 

 

$

 

 

$

8,034

 

 

$

2

 

 

$

(71,698

)

 

$

(63,662

)

 

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

3


 

Ventyx Biosciences, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(22,732

)

 

$

(37,645

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

Depreciation

 

 

21

 

 

 

1

 

Amortization of right-of-use assets - operating

 

 

69

 

 

 

 

Stock-based compensation

 

 

3,444

 

 

 

80

 

Non-cash interest - related party

 

 

 

 

 

99

 

Change in fair value of notes and derivative - related party

 

 

 

 

 

11,051

 

Change in fair value of Series A tranche liability

 

 

 

 

 

1,147

 

Acquired in-process research and development

 

 

 

 

 

21,781

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets (includes related party amounts of ($5) and
   ($
356), respectively)

 

 

5,099

 

 

 

(685

)

Operating lease liabilities

 

 

(64

)

 

 

 

Accounts payable (includes related party amounts of $305 and ($134), respectively)

 

 

(1,782

)

 

 

103

 

Accrued expenses (includes related party amounts of ($101) and ($3), respectively)

 

 

3,219

 

 

 

1,049

 

Net cash used in operating activities

 

 

(12,726

)

 

 

(3,019

)

Cash flows from investing activities:

 

 

 

 

 

 

Acquisition of Oppilan and Zomagen, net of cash

 

 

 

 

 

1,899

 

Purchases of marketable securities, available-for-sale

 

 

(68,675

)

 

 

 

Proceeds from maturities of marketable securities, available-for-sale

 

 

52,210

 

 

 

 

Purchases of property and equipment

 

 

(38

)

 

 

 

Net cash (used in) provided by investing activities

 

 

(16,503

)

 

 

1,899

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of Series A convertible preferred stock,
   net of offering costs

 

 

 

 

 

56,415

 

Proceeds from exercise of stock options

 

 

86

 

 

 

 

Proceeds from issuance of SAFE notes, net

 

 

 

 

 

450

 

Net cash provided by financing activities

 

 

86

 

 

 

56,865

 

Effect of exchange rates on cash and cash equivalents

 

 

42

 

 

 

2

 

Net increase (decrease) in cash and cash equivalents

 

 

(29,101

)

 

 

55,747

 

Cash and cash equivalents, beginning of period

 

 

70,791

 

 

 

244

 

Cash and cash equivalents, end of period

 

$

41,690

 

 

$

55,991

 

 

 

 

 

 

 

 

Supplemental disclosure for non-cash activities

 

 

 

 

 

 

Conversion of promissory and SAFE notes - related party

 

$

 

 

$

38,911

 

Stock issued for the acquisition of Oppilan and Zomagen

 

$

 

 

$

21,345

 

Unrealized loss on marketable securities

 

$

(942

)

 

$

 

 

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

4


 

Ventyx Biosciences, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

1. Organization and Business

 

Organization

 

Ventyx Biosciences, Inc. (“Ventyx” or “the Company”) is a clinical-stage pharmaceutical company developing a pipeline of novel small molecule product candidates to address a range of inflammatory diseases with significant unmet medical need. The Company was incorporated in the State of Delaware in November 2018, with its principal operations in California. The Company leverages its drug discovery and development expertise to develop novel and differentiated therapeutics that target both the innate and adaptive immune system.

 

Initial Public Offering

 

The Company's registration statement on Form S-1 ("Registration Statement") related to its initial public offering ("IPO") was declared effective on October 20, 2021, and the Company's common stock began trading on the Nasdaq Global Select Market ("Nasdaq") on October 21, 2021. In its initial public offering, the Company sold an aggregate of 10,893,554 shares of its common stock, including 1,420,898 shares sold pursuant to the underwriters' over-allotment option, at a public offering price of $16.00 per share. The Company received net proceeds of approximately $158.8 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company, from sales of its shares in the IPO.

 

In connection with the closing of the initial public offering, all 12.5 million outstanding shares of Series A Convertible Preferred Stock ("Series A Preferred Stock"), 18.8 million outstanding shares of Series A-1 Convertible Preferred Stock ("Series A-1 Preferred Stock") and 4.0 million shares of Series B Convertible Preferred Stock ("Series B Preferred Stock") converted into an aggregate of 35.3 million shares of common stock.

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The presentation of the Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2022 and 2021 reflect the financial results of Ventyx Biosciences, Inc. and its two acquired wholly owned subsidiaries, Oppilan Pharma Ltd ("Oppilan") and Zomagen Biosciences Ltd. ("Zomagen"), on a consolidated basis, as of the acquisition date of February 26, 2021 (Note 5). All intercompany transactions and balances have been eliminated in consolidation.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial information. The condensed consolidated balance sheet data as of December 31, 2021 was derived from the Company’s audited financial statements. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2021 and the notes thereto included in the Company’s annual report on Form 10-K filed with the SEC on March 23, 2022.

 

The unaudited financial information for the interim periods presented herein reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial condition and results of operation for the periods presented, with such adjustments consisting only of normal recurring adjustments. The results for the three months ended March 31, 2022 are not necessarily indicative of the results expected for the full year ending December 31, 2022 or any future period.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.

 

5