SEC Filing – Ventyx Biosciences, Inc.

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10-Q

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, 2023


☐	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.

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 8, 2023, the registrant had 58,556,952 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	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	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	88
Item 3.	Defaults Upon Senior Securities	88
Item 4.	Mine Safety Disclosures	88
Item 5.	Other Information	88
Item 6.	Exhibits	89
Signatures		90

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;

▪

disruptions in the supply chain, including raw materials needed for manufacturing, animals used in research, delays in site activations and enrollment of clinical trials;

▪

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 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;

▪

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; and

▪

regulatory developments in the United States and foreign countries.

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,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	63,669		$	64,819
Marketable securities		313,246			253,122
Prepaid expenses and other assets (includes related party amounts of $49 and $47, respectively)		10,136			12,747
Total current assets		387,051			330,688
Property and equipment, net		586			407
Operating lease right-of-use assets		1,436			1,537
Marketable securities		—			38,672
Other long-term assets		96			96
Total assets	$	389,169		$	371,400
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	6,552		$	6,433
Accrued expenses (includes related party amounts of $240 and $64, respectively)		9,537			9,514
Current portion of operating lease liabilities		426			412
Total current liabilities		16,515			16,359
Operating lease liabilities, net of current portion		1,036			1,146
Total liabilities		17,551			17,505
Commitments and contingencies (Note 5)
Stockholders' equity:
Common stock, $0.0001 par value; 900,000,000 shares authorized at March 31, 2023 and December 31, 2022; 58,385,787 and 57,025,847 shares issued at March 31, 2023 and December 31, 2022, respectively; 58,348,727 and 56,980,845 shares outstanding at March 31, 2023 and December 31, 2022, respectively		6			6
Additional paid-in capital		637,329			581,237
Accumulated other comprehensive loss		(561	)		(1,123	)
Accumulated deficit		(265,156	)		(226,225	)
Total stockholders' equity		371,618			353,895
Total liabilities and stockholders' equity	$	389,169		$	371,400

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

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,
	2023			2022
Operating expenses:
Research and development (includes related party amounts of $250 and $203, respectively)	$	35,437		$	17,409
General and administrative		7,115			5,338
Total operating expenses		42,552			22,747
Loss from operations		(42,552	)		(22,747	)
Other (income) expense:
Interest income		(3,622	)		(132	)
Other expense		1			117
Total other (income) expense		(3,621	)		(15	)
Net loss	$	(38,931	)	$	(22,732	)
Unrealized gain (loss) on marketable securities		539			(942	)
Foreign currency translation		23			42
Comprehensive loss	$	(38,369	)	$	(23,632	)
Net loss per share, basic and diluted	$	(0.68	)	$	(0.45	)
Weighted average common shares outstanding, basic and diluted		57,638,923			50,585,255

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

Ventyx Biosciences, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)


							Accumulated
					Additional		Other						Total
	Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital		Loss			Deficit			Equity
Balance at December 31, 2022		56,980,845	$	6	$	581,237	$	(1,123	)	$	(226,225	)	$	353,895
Issuance of common stock from at-the-market offering, net of commissions and offering expenses		1,176,470		—		48,408		—			—			48,408
Issuance of common stock upon exercise of stock options		183,470		—		1,117		—			—			1,117
Issuance of common stock upon vesting of restricted common stock		7,942		—		—		—			—			—
Stock-based compensation expense		—		—		6,567		—			—			6,567
Unrealized gain on marketable securities		—		—		—		539			—			539
Foreign currency translation		—		—		—		23			—			23
Net loss		—		—		—		—			(38,931	)		(38,931	)
Balance at March 31, 2023		58,348,727	$	6	$	637,329	$	(561	)	$	(265,156	)	$	371,618


							Accumulated
					Additional		Other						Total
	Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders'
	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
Issuance of common stock upon 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

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

Ventyx Biosciences, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three months ended
	March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(38,931	)	$	(22,732	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		31			21
Amortization of right-of-use assets - operating		103			69
Stock-based compensation		6,567			3,444
Accretion of marketable securities, net		(2,078	)		—
Changes in operating assets and liabilities:
Prepaid expenses and other assets (includes related party amounts of ($2) and ($5), respectively		3,758			5,099
Operating lease liabilities		(97	)		(64	)
Accounts payable (includes related party amounts of $0 and $305, respectively)		(91	)		(1,782	)
Accrued expenses (includes related party amounts of $176 and ($101), respectively)		(183	)		3,219
Net cash used in operating activities		(30,921	)		(12,726	)
Cash flows from investing activities:
Purchases of marketable securities, available-for-sale		(108,835	)		(68,675	)
Proceeds from maturities of marketable securities, available-for-sale		90,000			52,210
Purchases of property and equipment		(60	)		(38	)
Net cash used in investing activities		(18,895	)		(16,503	)
Cash flows from financing activities:
Proceeds from issuance of common stock from at-the-market offering, net of commissions and offering expenses		48,455			—
Proceeds from exercise of stock options		216			86
Deferred offering costs		(25	)		—
Net cash provided by financing activities		48,646			86
Effect of exchange rates on cash and cash equivalents		20			42
Net decrease in cash and cash equivalents		(1,150	)		(29,101	)
Cash and cash equivalents, beginning of period		64,819			70,791
Cash and cash equivalents, end of period	$	63,669		$	41,690

Supplemental disclosure for investing and financing non-cash activities:
Exercise of stock options	$	1,043		$	—
Purchases of property and equipment included in accounts payable and accrued expenses	$	149		$	—
Unpaid deferred offering costs	$	78		$	—
Unpaid costs associated with the issuance of common stock from at-the-market offering	$	46		$	—

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

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.

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, 2023 and 2022 reflect the financial results of Ventyx Biosciences, Inc. and its two wholly-owned subsidiaries, Oppilan Pharma Ltd (“Oppilan”) and Zomagen Biosciences Ltd. (“Zomagen”), on a consolidated basis. 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, 2022 was derived from the Company’s audited financial statements. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S. 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, 2022 and the notes thereto included in the Company’s annual report on Form 10-K filed with the SEC on March 23, 2023.

The Company's significant accounting policies are detailed in “Note 2: Summary of Significant Accounting Policies” of the Company's Annual Report on Form 10-K for the year ended December 31, 2022. Except as set forth below, there have been no changes to the Company's significant accounting policies from those disclosed in the annual report.

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, 2023 are not necessarily indicative of the results expected for the full year ending December 31, 2023 or any future period.

Risks and Uncertainties

Economic uncertainty in various global markets, including the U.S. and Europe, caused by political instability and conflict, such as the ongoing conflict in Ukraine, and economic challenges caused by the COVID-19 pandemic, have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused volatile changes to inflation globally. The Company’s business, financial condition and results of operations could be materially and adversely affected by further negative impact on the global economy and capital markets resulting from these global economic conditions, particularly if such conditions are prolonged or worsen.

Although, to date, the Company has not been materially impacted by these global economic and geopolitical conditions, it is impossible to predict the extent to which operations will be impacted in the short and long term, or the ways in which such instability could impact business and results of operations. The extent and duration of these market disruptions, whether as a result of the military conflict between Russia and Ukraine and effects of the Russian sanctions, geopolitical tensions, volatile changes to inflation or otherwise, are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this report.

Investments in Marketable Securities, Available-for-Sale

The Company maintains a portfolio of investments which have included U.S. Treasury securities, U.S. government agency securities, corporate debt securities, commercial paper and asset-backed securities (“ABS”). The Company’s investments in marketable securities are available-for-sale securities and the marketable securities are reported at fair value. Investments in marketable securities with contractual maturities less than 12 months at the balance sheet date are considered short-term investments. Those investments in marketable securities with contractual maturities of 12 months or greater at the balance sheet date are considered long-term investments. Unrealized gains and losses are included in accumulated other comprehensive loss, net of tax. The cost of securities sold is determined on a specific identification basis, and realized gains and losses, if any, are included in other (income) expense within the condensed consolidated statements of operations and comprehensive loss.

The Company regularly reviews its investment portfolio to determine if any security is impaired, which would require the Company to record an impairment charge in the period that any such determination is made. Calculating an impairment charge requires judgment. In making this judgment, the Company evaluates, among other items, the time frame and extent to which the fair market value of a security is less than its amortized cost and the Company’s intent and ability to sell, or whether the Company will more likely than not be required to sell the security before recovery of its amortized cost basis.

Deferred Offering Costs

The Company has deferred offering costs consisting of accounting and legal fees directly attributable to the Open Market Sales AgreementSM (“Sales Agreement”) with Jefferies LLC (“Jefferies”). Costs are deferred until shares are sold under the Sales Agreement, at which time they are reclassified to additional paid-in capital as a reduction against the proceeds received.

Fair Value of Financial Instruments

The Company follows Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”), issued by the Financial Accounting Standards Board (“FASB”) with respect to fair value reporting for financial assets and liabilities. The carrying amounts of the Company’s current financial assets and current financial liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments. Financial assets measured at fair value on a recurring basis include cash equivalents and marketable securities. None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in Entity’s Own Equity (“ASU 2020-06”), which, among other things, provides guidance on how to account for contracts on an entity’s own equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the ASU eliminated the need for the Company to assess whether a contract on the entity’s own equity (1) permits settlement in unregistered shares, (2) whether counterparty rights rank higher shareholder’s rights, and (3) whether collateral is required. In addition, this ASU requires incremental disclosure related to contracts on the entity’s own equity and clarifies the treatment of certain financial instruments accounted for under this ASU on earnings per share. This ASU may be applied on a full retrospective or modified retrospective basis. The amendments within this ASU are effective for the Company’s fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption of the ASU is permitted to fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the potential impact that this standard may have on its condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities. The Company adopted this standard on January 1, 2023 and as the Company does not have material trade or financing receivables or held to maturity debt securities, and as management does not expect to incur credit losses on available-for-sale marketable

debt securities held by the Company, the adoption of this standard did not have a material impact to the condensed consolidated financial statements at the adoption date.

3. Fair Value Measurements

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs, other than the quoted prices included in Level 1 that are either directly or indirectly observable.

Level 3: Unobservable inputs in which there is little or no market activity, which require the reporting entity to develop its own assumptions.

The following tables present information about the fair value measurements of the Company’s financial assets and liabilities which are measured at fair value on a recurring basis, and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):


	March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Money market fund	$	52,622	$	—	$	—	$	52,622
Total cash equivalents		52,622		—		—		52,622
Marketable securities
U.S. Treasury securities		21,853		—		—		21,853
U.S. government agency securities		—		84,717		—		84,717
Commercial paper		—		204,260		—		204,260
Asset backed securities		—		2,416		—		2,416
Total marketable securities		21,853		291,393		—		313,246
Total assets	$	74,475	$	291,393	$	—	$	365,868


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Money market fund	$	22,721	$	—	$	—	$	22,721
Total cash equivalents		22,721		—		—		22,721
Marketable securities
U.S. Treasury securities		39,567		—		—		39,567
U.S. government agency securities		—