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 March 31, 2024

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.)

12790 El Camino Real, Suite 200

San Diego, CA

92130

(Address of principal executive offices)

(Zip Code)

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

 

(Former name, former address, and former fiscal year, if changed since last report)

 

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 6, 2024, the registrant had 70,499,332 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

24

 

 

 

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

89

Item 3.

Defaults Upon Senior Securities

89

Item 4.

Mine Safety Disclosures

89

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;
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 military conflicts in Ukraine or the Middle East or the imposition of sanctions against certain countries as a result thereof;
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;

ii


 

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,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

141,898

 

 

$

51,579

 

Marketable securities

 

 

160,684

 

 

 

200,641

 

Prepaid expenses and other assets

 

 

17,177

 

 

 

12,125

 

Total current assets

 

 

319,759

 

 

 

264,345

 

Property and equipment, net

 

 

828

 

 

 

762

 

Operating lease right-of-use assets

 

 

10,414

 

 

 

11,509

 

Restricted cash

 

 

975

 

 

 

975

 

Other long-term assets

 

 

102

 

 

 

102

 

Total assets

 

$

332,078

 

 

$

277,693

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,583

 

 

$

5,756

 

Accrued expenses

 

 

8,005

 

 

 

15,508

 

Current portion of operating lease liabilities

 

 

946

 

 

 

1,001

 

Total current liabilities

 

 

14,534

 

 

 

22,265

 

Operating lease liabilities, net of current portion

 

 

10,548

 

 

 

11,505

 

Total liabilities

 

 

25,082

 

 

 

33,770

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, $0.0001 par value; 900,000,000 shares authorized at March 31,
   2024 and December 31, 2023;
70,499,201 and 59,252,349 shares issued at
   March 31, 2024 and December 31, 2023, respectively;
70,493,906 and
   
59,239,113  shares outstanding at March 31, 2024 and December 31, 2023,
   respectively

 

 

7

 

 

 

6

 

Additional paid-in capital

 

 

764,869

 

 

 

663,154

 

Accumulated other comprehensive loss

 

 

(121

)

 

 

(50

)

Accumulated deficit

 

 

(457,759

)

 

 

(419,187

)

Total stockholders' equity

 

 

306,996

 

 

 

243,923

 

Total liabilities and stockholders' equity

 

$

332,078

 

 

$

277,693

 

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,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development (includes related party amounts of
   $
254 and $250, respectively)

 

$

33,747

 

 

$

35,437

 

General and administrative

 

 

8,021

 

 

 

7,115

 

Total operating expenses

 

 

41,768

 

 

 

42,552

 

Loss from operations

 

 

(41,768

)

 

 

(42,552

)

Other (income) expense:

 

 

 

 

 

 

Interest income

 

 

(3,227

)

 

 

(3,622

)

Other expense

 

 

31

 

 

 

1

 

Total other (income) expense

 

 

(3,196

)

 

 

(3,621

)

Net loss

 

$

(38,572

)

 

$

(38,931

)

Unrealized gain (loss) on marketable securities

 

 

(62

)

 

 

539

 

Foreign currency translation

 

 

(9

)

 

 

23

 

Comprehensive loss

 

$

(38,643

)

 

$

(38,369

)

Net loss per share, basic and diluted

 

$

(0.62

)

 

$

(0.68

)

Weighted average common shares outstanding, basic and diluted

 

 

61,829,976

 

 

 

57,638,923

 

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

2


 

Ventyx Biosciences, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2024 and 2023

(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, 2023

 

 

59,239,113

 

 

$

6

 

 

$

663,154

 

 

$

(50

)

 

$

(419,187

)

 

$

243,923

 

Issuance of common stock from private placement, net of issuance costs

 

 

11,174,000

 

 

 

1

 

 

 

95,080

 

 

 

 

 

 

 

 

 

95,081

 

Issuance of common stock upon exercise of stock options

 

 

28,136

 

 

 

 

 

 

92

 

 

 

 

 

 

 

 

 

92

 

Issuance of common stock upon vesting of restricted common stock

 

 

52,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,543

 

 

 

 

 

 

 

 

 

6,543

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(62

)

 

 

 

 

 

(62

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

(9

)

 

 

 

 

 

(9

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38,572

)

 

 

(38,572

)

Balance at March 31, 2024

 

 

70,493,906

 

 

$

7

 

 

$

764,869

 

 

$

(121

)

 

$

(457,759

)

 

$

306,996

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

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,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(38,572

)

 

$

(38,931

)

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

 

 

 

 

 

 

Depreciation

 

 

70

 

 

 

31

 

Loss on disposal of fixed assets

 

 

98

 

 

 

 

Gain on lease termination

 

 

(88

)

 

 

 

Amortization of right-of-use assets - operating

 

 

338

 

 

 

103

 

Stock-based compensation

 

 

6,543

 

 

 

6,567

 

Accretion of marketable securities, net

 

 

(2,044

)

 

 

(2,078

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(5,075

)

 

 

3,758

 

Operating lease liabilities

 

 

(148

)

 

 

(97

)

Accounts payable

 

 

(1,190

)

 

 

(91

)

Accrued expenses

 

 

(7,557

)

 

 

(183

)

Net cash used in operating activities

 

 

(47,625

)

 

 

(30,921

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities, available-for-sale

 

 

(25,450

)

 

 

(108,835

)

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

 

 

67,390

 

 

 

90,000

 

Purchases of property and equipment

 

 

(175

)

 

 

(60

)

Net cash provided by (used in) investing activities

 

 

41,765

 

 

 

(18,895

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock from private
   placement, net of offering costs

 

 

96,092

 

 

 

 

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

 

 

92

 

 

 

216

 

Deferred offering costs

 

 

 

 

 

(25

)

Net cash provided by financing activities

 

 

96,184

 

 

 

48,646

 

Effect of exchange rates on cash, cash equivalents and restricted cash

 

 

(5

)

 

 

20

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

90,319

 

 

 

(1,150

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

52,554

 

 

 

64,819

 

Cash, cash equivalents and restricted cash, end of period

 

$

142,873

 

 

$

63,669

 

 

 

 

 

 

 

 

Supplemental disclosure for investing and financing non-cash activities:

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable and
   accrued expenses

 

$

60

 

 

$

149

 

Unpaid private placement offering costs

 

$

1,011

 

 

$

 

Exercise of stock options

 

$

 

 

$

1,043

 

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.

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.

March 2024 Private Placement

On March 11, 2024, the Company issued and sold 11,174,000 shares of common stock through a private placement. The common stock had a purchase price of $8.95 per share for aggregate gross proceeds of approximately $100.0 million. The Company received approximately $95.1 million in net proceeds after deducting fees to the placement agents and offering expenses payable by the Company.

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, 2024 and 2023 reflect the financial results of Ventyx Biosciences, Inc. 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, 2023 were 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, 2023 and the notes thereto included in the Company’s annual report on Form 10-K filed with the SEC on February 27, 2024.

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, 2023. 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, 2024 are not necessarily indicative of the results expected for the full year ending December 31, 2024 or any future period.

Cash, Cash Equivalents and Restricted Cash

A reconciliation of the cash, cash equivalents and restricted cash reported in our condensed consolidated balance that sum to the total of the amounts shown in the condensed consolidated statements of cash flows is as follows (in thousands):

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Cash and cash equivalents

 

$

141,898

 

 

$

63,669

 

Restricted cash

 

 

975

 

 

 

 

Total cash, cash equivalents and restricted cash

 

$

142,873

 

 

$

63,669

 

 

5


 

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU also allows, in addition to the measure that is most consistent with U.S. GAAP, the disclosure of additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis, with early adoption permitted. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The update requires a public business entity to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. Adoption of the ASU allows for either the prospective or retrospective application of the amendment and is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company has not yet completed its assessment of the impact of ASU 2023-09 on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements 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 than 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 adopted this standard on January 1, 2024 and as the Company does not have convertible debt and contracts in the Company’s own equity, the adoption of this standard did not have a material impact to the consolidated financial statements at the adoption date.

3. Fair Value Measurements

Fair Value Measurements-Recurring Basis

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.

6


 

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, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

138,499

 

 

$

 

 

$

 

 

$

138,499

 

Total cash equivalents

 

 

138,499

 

 

 

 

 

 

 

 

 

138,499

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

 

 

 

 

9,987

 

 

 

 

 

 

9,987

 

Commercial paper

 

 

 

 

 

133,114

 

 

 

 

 

 

133,114

 

Asset backed securities

 

 

 

 

 

17,583

 

 

 

 

 

 

17,583

 

Total marketable securities

 

 

 

 

 

160,684

 

 

 

 

 

 

160,684

 

Total assets

 

$

138,499

 

 

$

160,684

 

 

$

 

 

$

299,183

 

 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

40,241

 

 

$

 

 

$

 

 

$

40,241

 

Commercial paper

 

 

 

 

 

7,468

 

 

 

 

 

 

7,468

 

Total cash equivalents

 

 

40,241

 

 

 

7,468

 

 

 

 

 

 

47,709

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

 

 

 

 

67,208

 

 

 

 

 

 

67,208

 

Commercial paper

 

 

 

 

 

118,465

 

 

 

 

 

 

118,465

 

Asset backed securities

 

 

 

 

 

14,968

 

 

 

 

 

 

14,968

 

Total marketable securities

 

 

 

 

 

200,641

 

 

 

 

 

 

200,641

 

Total assets

 

$

40,241

 

 

$

208,109

 

 

$

 

 

$

248,350

 

In determining the fair value of its Level 2 investments, the Company relied on the most recent observable inputs for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable. These quoted prices were obtained by the Company with the assistance of a third-party pricing service based on available trade, bid and other observable market data for identical or similar securities. During the three months ended March 31, 2024 and 2023, there were no transfers between Level 1, Level 2 and Level 3.

As of March 31, 2024 and December 31, 2023, the fair value of the Company’s available-for-sale marketable securities by type of security was as follows (in thousands):

 

 

 

March 31, 2024

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gain

 

 

Loss

 

 

Value

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

$

10,006

 

 

$

 

 

$

(19

)

 

$

9,987

 

Commercial paper

 

 

133,114

 

 

 

37

 

 

 

(37

)

 

 

133,114

 

Asset backed securities

 

 

17,596

 

 

 

 

 

 

(13

)

 

 

17,583

 

Total marketable securities

 

$

160,716

 

 

$

37

 

 

$

(69

)

 

$

160,684

 

 

7


 

 

 

December 31, 2023

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gain

 

 

Loss

 

 

Value

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

$

67,310

 

 

$

 

 

$

(102

)

 

$

67,208

 

Commercial paper

 

 

118,323

 

 

 

143

 

 

 

(1

)

 

 

118,465

 

Asset backed securities

 

 

14,979

 

 

 

2

 

 

 

(13

)

 

 

14,968

 

Total marketable securities

 

$

200,612

 

 

$

145

 

 

$

(116

)

 

$

200,641

 

All of the Company’s marketable securities as of March 31, 2024 have maturity dates of less than one year.

The Company reviews its marketable securities at each reporting date to determine if any security is impaired, which would require the Company to record an allowance for credit losses in that respective period. In making this judgment, the Company considers the intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value and the duration and extent that the market value has been less than cost.

As of March 31, 2024, 10 available-for-sale marketable securities were in an unrealized loss position. Of the 10 available-for-sale marketing securities in an unrealized loss position, all had been in an unrealized loss position for less than 12 months. As of December 31, 2023, 10 available-for-sale marketable securities were in an unrealized loss position. Of the 10 available-for-sale marketable securities in an unrealized loss position, 8 had been in an unrealized loss position for less than 12 months and 2 had been in an unrealized loss position for greater than 12 months.

The following table presents available-for-sale marketable securities that were in an unrealized loss position as of March 31, 2024, aggregated by major security type and length of time in a continuous loss position (in thousands):

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

Fair Value

 

 

Unrealized Loss

 

 

Fair Value

 

 

Unrealized Loss

 

 

Fair Value

 

 

Unrealized Loss

 

U.S. government agency securities

 

$

9,987

 

 

$

(19

)

 

$

 

 

$

 

 

$

9,987

 

 

$

(19

)

Commercial paper

 

$

30,574

 

 

$

(37

)

 

$

 

 

$

 

 

$

30,574

 

 

$

(37

)

Asset backed securities

 

$

17,583

 

 

$

(13

)

 

$

 

 

$

 

 

$

17,583

 

 

$

(13

)

The following table presents available-for-sale marketable securities that were in an unrealized loss position as of December 31, 2023, aggregated by major security type and length of time in a continuous loss position (in thousands):

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

Fair Value

 

 

Unrealized Loss

 

 

Fair Value

 

 

Unrealized Loss

 

 

Fair Value

 

 

Unrealized Loss

 

U.S. government agency securities

 

$

47,242

 

 

$

(79

)

 

$

19,966

 

 

$

(23

)

 

$

67,208

 

 

$

(102

)

Commercial paper

 

$

9,965

 

 

$

(1

)

 

$

 

 

$

 

 

$

9,965

 

 

$

(1

)

Asset backed securities

 

$

9,854

 

 

$

(13

)

 

$

 

 

$

 

 

$

9,854

 

 

$

(13

)

The Company evaluated the securities individually for impairment and considered factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that the Company would be required to sell the security before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. Based on the Company’s review of these marketable securities, the Company believes none of the unrealized losses are the result of a credit loss as of March 31, 2024 because the Company does not intend to sell these securities prior to maturity and it is not more-likely-than-not that the Company will be required to sell these securities before the recovery of their amortized cost basis. As such, the Company did not record an allowance for credit losses as of March 31, 2024. The decline in market value in the Company’s marketable securities was primarily attributable to an increase in interest rates during the three months ended March 31, 2024 and the year ended December 31, 2023.

Accrued interest receivable on available-for-sale marketable securities, included in prepaid expenses and other assets on the Company’s condensed consolidated balance sheets, was $0.6 million and $0.8 million at March 31, 2024 and December 31, 2023, respectively. The Company does not measure an allowance for credit losses for accrued interest receivables. For the purposes of identifying and measuring an impairment, accrued interest is excluded from both the fair value and amortized cost basis of the available-for-sale marketable

8


 

security. Uncollectible accrued interest receivables associated with an impaired available-for-sale marketable security are reversed against interest income upon identification of the impairment. No accrued interest receivables were written off during the three months ended March 31, 2024 or 2023.

4. Consolidated Balance Sheet Details

Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Internal-use software

 

$

491

 

 

$

491

 

Leasehold improvements

 

 

283

 

 

 

 

Laboratory equipment

 

 

174

 

 

 

178

 

Furniture and fixtures

 

 

92

 

 

 

137

 

Computer hardware and software

 

 

58

 

 

 

58

 

Construction in progress

 

 

36

 

 

 

157

 

Property and equipment, gross

 

 

1,134

 

 

 

1,021

 

Less: accumulated depreciation

 

 

(306

)

 

 

(259

)

Property and equipment, net

 

$

828

 

 

$

762

 

During the three months ended March 31, 2024 and 2023, depreciation expense was immaterial.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Accrued research and development costs

 

$

1,557

 

 

$

1,868

 

Accrued clinical trial costs

 

 

2,055

 

 

 

4,831

 

Accrued payroll liabilities

 

 

2,924

 

 

 

7,742

 

Other accrued liabilities

 

 

1,215

 

 

 

984

 

Accrued related party liabilities

 

 

254

 

 

 

83

 

Total accrued expenses

 

$

8,005

 

 

$

15,508

 

On December 5, 2023, the Company committed to and implemented a reduction in force (“RIF”) and incurred one-time termination benefits associated with severance payment obligations and continued healthcare benefits for employees terminated under the RIF of $2.2 million during the year ended December 31, 2023. Accrued severance costs associated with the RIF are included in accrued expenses on the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023. A summary of accrued severance costs associated with the RIF as of March 31, 2024 is shown in the table below (in thousands):

 

 

 

March 31,

 

 

 

2024

 

Accrued severance costs as of December 31, 2023

 

$

2,178

 

Reduction in estimate for continued healthcare benefits

 

 

(89

)

Cash payments

 

 

(1,541

)

Accrued severance costs as of March 31, 2024

 

$

548

 

 

5. Commitments and Contingencies

Litigation

On March 1, 2024, a putative securities class action complaint, captioned Yuksel v. Ventyx Biosciences, Inc. et al., No. 24CV0415 AGS DDL, was filed in the U.S. District Court for the Southern District of California against the Company and certain of its current and former officers and directors, asserting violations of Section 11 and 15 of the Securities Act and Sections 10(b) and 20(a) of the Exchange Act. Stemming from the Company’s disclosure on November 6, 2023 of the results of its Phase 2 SERENITY trial of VTX958 and its

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decision to terminate ongoing activities and clinical trials for the development of VTX958 for the treatment of plaque psoriasis and psoriatic arthritis, the complaint alleges that the defendants made materially false and misleading statements and/or omitted material adverse facts in connection with its October 21, 2021 initial public offering and in public statements from October 21, 2021 through November 6, 2023 regarding the effectiveness and clinical and commercial prospects of VTX958, the Company’s ability to develop and commercialize product candidates, and its business prospects. The Company intends to defend the case vigorously. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this action. If an unfavorable outcome were to occur, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

Additionally, in the ordinary course of its business, the Company may be involved in various legal proceedings involving contractual and employment relationships, patent or other intellectual property rights, and a variety of other matters. The Company is not aware of any pending legal proceedings that would reasonably be expected to have a material impact on the Company’s financial position or results of operations.

6. Stockholders' Equity

March 2024 Private Placement

See Note 1, “Organization and Business,” for more information regarding the March 2024 private placement.

ATM Sales Agreement

In December 2022, the Company entered into a Sales Agreement with Jefferies, as sales agent, pursuant to which the Company may offer and sell in an at-the-market offering, from time to time through Jefferies, shares of common stock providing for aggregate sales proceeds of up to $150.0 million. The Company has no obligation to sell any shares under the Sales Agreement, and could at any time suspend solicitations and offers under the Sales Agreement. During the year ended December 31, 2023, the Company issued and sold 1,176,470 shares of common stock for aggregate gross proceeds of $50.0 million through the Sales Agreement. No shares of common stock were issued under the Sales Agreement during the three months ended March 31, 2024.

Common Stock

The Company is authorized to issue up to 900,000,000 shares of common stock having a par value of $0.0001 par value as of March 31, 2024 and December 31, 2023. Holders of outstanding shares of common stock are entitled to one vote for each share of common stock held at all meetings of stockholders. Subject to the rights of the holders of any class of the Company’s capital stock having any preference or priority over common stock, the holders of common stock are entitled to receive dividends that are declared by the Company’s board of directors out of legally available funds.

Common stock reserved for future issuance is as follows (in common stock equivalent shares) as of March 31, 2024:

 

 

 

March 31,

 

 

 

2024

 

Issued and outstanding:

 

 

 

Stock options

 

 

11,204,140

 

Restricted stock awards

 

 

5,295

 

Restricted stock units

 

 

474,297

 

Authorized for future issuance:

 

 

 

2021 Equity Incentive Plan

 

 

2,397,779

 

2021 Employee Stock Purchase Plan

 

 

1,624,184

 

Total

 

 

15,705,695

 

 

7. Leases

In July 2023, the Company entered into a Sublease with Neurocrine for office space in San Diego, California which became the Company’s headquarters in August 2023. Under the terms of the Sublease, the Company leased the second floor of the building, including certain furniture and fixtures, located at 12790 El Camino Real in San Diego, California consisting of approximately 35,016 rentable square feet of office space. The term of this non-cancellable lease commenced on July 21, 2023, and will end on July 31, 2031. The Company is subleasing the premises for $1.0 million in the first year with 3% annual increases in each subsequent year. The

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Sublease included rent abatement for the second through the seventh full calendar months of the lease term. In lieu of a cash security deposit under the Sublease, Bank of America issued on the Company’s behalf an irrevocable standby letter of credit in the amount of $0.5 million. The letter of credit is secured by a deposit of $0.5 million with the same bank and included in restricted cash on the Company’s condensed consolidated balance sheet at March 31, 2024. The Company used its incremental borrowing rate available at commencement date in determining the present value of lease payments and recognized an operating lease liability of $11.0 million and a corresponding operating lease right-of-use (“ROU”) asset of approximately $11.0 million on the condensed consolidated balance sheet during the year ended December 31, 2023.

In March 2021, the Company signed a three-year operating lease for a multi-function ventilated research laboratory and office space in Ghent, Belgium. The non-cancellable lease expires on June 30, 2024. This laboratory and office space lease includes two, two-year renewal options.

Lease Terminations

In February 2024, the Company entered into two separate lease termination agreements related to non-cancellable leases entered into in February 2021, September 2021 and May 2022, each expiring on June 30, 2026. These leases are for office facilities in Encinitas, California and the associated furniture and fixtures (the “Encinitas Asset Group”). The Company wrote off the ROU assets and operating lease liabilities associated with the Encinitas Asset Group of $0.8 million and $0.9 million, respectively, during the first quarter of 2024.

The Company’s leases have remaining terms ranging between three months to eight years. The leases contain various termination options. The Company’s leases do not contain any residual value guarantees or material restrictive covenants.

The weighted average remaining lease term and discount rate for the Company’s operating leases were approximately 7.3 years and 10.0%, respectively, at March 31, 2024.

During the three months ended March 31, 2024, the Company recognized operating lease costs of $0.6 million and variable lease costs of $0.1 million. During the three months ended March 31, 2023, the Company recognized operating lease costs of $0.1 million and an immaterial amount of variable lease costs. In addition, the Company made cash payments of $0.4 million and $0.1 million for operating leases during the three months ended March 31, 2024 and 2023, respectively, which are included in cash flows from operating activities in the condensed consolidated statements of cash flows.

Future minimum payments under non-cancellable leases as of March 31, 2024 were as follows (in thousands):

 

 

 

 

 

2024 (9 months remaining)

 

$

1,529

 

2025

 

 

2,073

 

2026

 

 

2,135

 

2027

 

 

2,199

 

2028

 

 

2,265

 

Thereafter

 

 

6,162

 

Total future minimum lease payments

 

 

16,363

 

Less: imputed interest

 

 

(4,869

)

Present value of lease liabilities

 

 

11,494

 

Less: lease liabilities, current

 

 

(946

)

Lease liabilities, net of current portion