UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 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 001-37355
Viking Therapeutics, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware
46-1073877
( State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
9920 Pacific Heights Blvd, Suite 350
San Diego, California
92121
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (858) 704-4660
Securities registered pursuant to Section 12(b) of the Act
Title of Each Class
Trading Symbol
Name of Each Exchange on Which Registered
Common Stock, par value $0.00001 per share
VKTX
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
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, a smaller reporting company or an emerging growth
company. See the definition 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock
on the Nasdaq Capital Market on June 30, 2024 (the last trading day of the registrant’s second fiscal quarter of 2024), was $4,004,347,676. Shares of voting stock held by
directors, officers and stockholders or stockholder groups whose beneficial ownership exceeds 5% of the registrant’s common stock outstanding have been excluded in that
such persons may be deemed to be affiliates. The number of shares owned by stockholders whose beneficial ownership exceeds 5% was determined based upon information
supplied by such persons and upon Schedules 13D and 13G, if any, filed with the Securities and Exchange Commission. This assumption regarding affiliate status is not
necessarily a conclusive determination for other purposes.
The number of shares of the Registrant’s Common Stock outstanding as of January 31, 2025 was 112,247,809.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement for its 2025 Annual Meeting of Stockholders or an amendment to this Annual Report on Form 10-K to be filed with
the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2024 are incorporated by reference into Part III of this Annual
Report on Form 10-K.
i
Table of Contents
Page
PART I
Item 1.
Business
1
Item 1A.
Risk Factors
23
Item 1B.
Unresolved Staff Comments
57
Item 1C.
Cybersecurity
58
Item 2.
Properties
59
Item 3.
Legal Proceedings
59
Item 4.
Mine Safety Disclosures
59
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
60
Item 6.
[Reserved]
60
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
61
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
69
Item 8.
Financial Statements and Supplementary Data
70
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
70
Item 9A.
Controls and Procedures
70
Item 9B.
Other Information
73
Item 9C
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
73
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
74
Item 11.
Executive Compensation
74
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
74
Item 13.
Certain Relationships and Related Transactions, and Director Independence
74
Item 14.
Principal Accounting Fees and Services
74
PART IV
Item 15.
Exhibits, Financial Statement Schedules
75
Item 16.
Form 10-K Summary
77
1
This Annual Report on Form 10-K contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and
uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those
expressed or implied by such forward-looking statements. Such forward-looking statements include estimates of our expenses, future revenue, capital
requirements and our needs for additional financing; statements regarding our ability to develop, acquire and advance drug candidates into, and
successfully complete, clinical trials and preclinical studies; statements concerning new product candidates; risks and uncertainties associated with our
research and development activities, including our clinical trials and preclinical studies; our expectations regarding the potential market size and the size
of the patient populations for our drug candidates, if approved for commercial use, and our ability to serve such markets; statements regarding our ability
to maintain and establish collaborations or obtain additional funding; statements regarding developments and projections relating to our competitors and
our industry and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. These statements
are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may” or “will,” the
negative versions of these terms and similar expressions or variations. These statements are based on the beliefs and assumptions of our management
based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could
cause actual results and the timing of certain events to differ materially and adversely from future results expressed or implied by such forward-looking
statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the
section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K and in our other Securities and Exchange Commission filings.
Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking
statements to reflect events or circumstances occurring after the date of such statement.
Throughout this Annual Report on Form 10-K, unless the context otherwise requires, the terms “Viking,” “we,” “us” and “our” in this Annual Report on
Form 10-K refer to Viking Therapeutics, Inc. and its subsidiaries.
PART I
Item 1. Business.
Overview
We are a clinical-stage biopharmaceutical company focused on the development of novel, first-in-class or best-in-class therapies for metabolic and
endocrine disorders.
In January 2022, we announced the initiation of a Phase 1 single ascending dose, or SAD, and multiple ascending dose, or MAD, clinical trial of VK2735,
a novel dual agonist of the glucagon-like peptide 1, or GLP-1, and glucose-dependent insulinotropic polypeptide, or GIP, receptors. VK2735 is being
developed in both oral and subcutaneous formulations for the potential treatment of various metabolic disorders such as obesity.
On March 28, 2023, we announced the completion of the Phase 1 trial. The study was a randomized, double-blind, placebo-controlled, SAD and MAD
study in healthy adults. The primary objectives of the study included evaluation of the safety and tolerability of single and multiple doses of VK2735
delivered subcutaneously and the identification of VK2735 doses suitable for further clinical development. Study investigators also evaluated the
pharmacokinetics of single and multiple doses of VK2735. Based upon the results from this Phase 1 study, in September 2023, we initiated the VENTURE
study, a Phase 2 clinical trial of VK2735 in patients with obesity.
The Phase 2 VENTURE study was a randomized, double-blind placebo-controlled study to evaluate the safety, tolerability, pharmacokinetics and weight
loss efficacy of VK2735, administered subcutaneously, once weekly. The 13-week study enrolled adults who were obese (BMI >= 30 kg/m2) or adults who
were overweight (BMI >= 27kg/m2) with at least one weight-related co-morbidity condition. The primary endpoint of the study was the percent change in
body weight from baseline to week 13, with secondary and exploratory endpoints evaluating a range of additional safety and efficacy measures. In October
2023, we announced completion of patient enrollment in the Phase 2 VENTURE study and on February 27, 2024, we announced that patients receiving
weekly doses of VK2735 demonstrated statistically significant reductions in mean body weight after 13 weeks, ranging up to 14.7% from baseline. Patients
receiving VK2735 also demonstrated statistically significant reductions in mean body weight relative to placebo, ranging up to 13.1%. Based on written
feedback received from the U.S. Food and Drug Administration, or the FDA, we expect to initiate Phase 3 clinical studies of the subcutaneous formulation
of VK2735 in the first half of 2025.
2
On March 28, 2023, we announced the initiation of a Phase 1 clinical study to evaluate a novel oral formulation of VK2735. The study, which was an
extension of our recently completed Phase 1 evaluation of subcutaneously administered VK2735, evaluated daily oral doses for 28 days. On March 26,
2024, we announced that the 28-day MAD study results highlighted positive signs of clinical activity following treatment with oral VK2735. Cohorts
receiving VK2735 demonstrated dose-dependent reductions in mean body weight from baseline, ranging up to approximately 5.3%.
On January 8, 2025, we announced the initiation of a Phase 2 clinical trial of the oral tablet formulation of VK2735. We expect to complete this study and
report initial results in the second half of 2025. VK2375 is being developed in both oral and subcutaneous formulations for the potential treatment of
various metabolic disorders such as obesity.
We are also developing VK2809, which is an orally available, tissue and receptor-subtype selective agonist of the thyroid hormone receptor beta, or TRß.
In November 2019, we initiated the VOYAGE study, a Phase 2b clinical trial of VK2809 in patients with biopsy-confirmed non-alcoholic steatohepatitis,
or NASH, or metabolic dysfunction-associated steatohepatitis, or MASH.
The VOYAGE study was a randomized, double-blind, placebo-controlled, multicenter trial designed to assess the efficacy, safety and tolerability of
VK2809 in patients with biopsy-confirmed NASH/MASH and fibrosis ranging from stages F1 to F3. The primary endpoint of the study evaluated the
relative change in liver fat content, as assessed by magnetic resonance imaging, proton density fat fraction, or MRI-PDFF, from baseline to week 12 in
subjects treated with VK2809 as compared to placebo. Secondary objectives included evaluation of histologic changes assessed by hepatic biopsy after 52
weeks of dosing.
In January 2023, we announced completion of patient enrollment in the VOYAGE study and in May 2023 we reported that the VOYAGE study
successfully achieved its primary endpoint, with patients receiving VK2809 experiencing statistically significant reductions in liver fat content from
baseline to Week 12 as compared to placebo.
In June 2024, we announced positive 52-week histologic data from the VOYAGE study with up to 75% of patients treated with VK2809 achieving
NASH/MASH resolution with no worsening of fibrosis as compared to 29% for placebo (p=0.0001), up to 57% of VK2809-treated patients achieving ≥1-
stage improvement in fibrosis with no worsening of NASH/MASH as compared to 34% for placebo (p<0.05) and up to 48% of VK2809-treated patients
achieving both resolution of NASH/MASH and a ≥1-stage improvement in fibrosis as compared to 20% for placebo (p=0.01). Adverse events, including
GI-related adverse events, were similar among VK2809-treated patients vs. placebo at week 52 and consistent with prior data reported at week 12. VK2809
has been evaluated in eight completed clinical studies, which enrolled more than 400 subjects.
We are also developing VK0214, which is also an orally available, tissue and receptor-subtype selective agonist of TRß for X-linked
adrenoleukodystrophy, or X-ALD, a rare X-linked, inherited neurological disorder characterized by a breakdown in the protective barriers surrounding
brain and nerve cells. The disease, for which there is no approved treatment, is caused by mutations in a peroxisomal transporter of very long chain fatty
acids, or VLCFA, known as ABCD1. As a result, transporter function is impaired and patients are unable to efficiently metabolize VLCFA. The TRß
receptor is known to regulate expression of an alternative VLCFA transporter, known as ABCD2. Various preclinical models have demonstrated that
increased expression of ABCD2 can lead to normalization of VLCFA metabolism. Preliminary data suggest that VK0214 stimulates ABCD2 expression in
an in vitro model and reduces VLCFA levels in an in vivo model of X-ALD.
In June 2021, we initiated a Phase 1b clinical trial of VK0214 in patients with X-ALD. This trial was a multi-center, randomized, double-blind, placebo-
controlled study in adult male patients with the adrenomyeloneuropathy, or AMN, form of X-ALD. The study enrolled patients across three cohorts:
placebo, VK0214 20 mg daily, and VK0214 40 mg daily.
The primary objectives of the study were to evaluate the safety and tolerability of VK0214 administered once-daily over a 28-day dosing period. Secondary
objectives included an evaluation of the pharmacokinetics of VK0214 following 28 days of dosing in this population. An exploratory objective was to
evaluate the effects of VK0214 on plasma levels of very long-chain fatty acids, or VLCFAs, in subjects with AMN. In October 2024, we announced results
from the Phase 1b clinical trial, which showed VK0214 to be safe and well-tolerated following once-daily dosing over the 28-day study period. In addition,
significant reductions were observed in plasma levels of VLCFAs and other lipids, as compared to placebo. Our intent is to pursue partnering or licensing
opportunities for VK0214 prior to conducting additional clinical studies.
Other clinical programs include VK5211, an orally available, non-steroidal selective androgen receptor modulator, or SARM. In November 2017, we
announced positive top-line results from a Phase 2 proof-of-concept clinical trial in 108 patients recovering from non-elective hip fracture surgery. Top-line
data showed that the trial achieved its primary endpoint, demonstrating statistically
3
significant, dose dependent increases in lean body mass, less head, following treatment with VK5211 as compared to placebo. The study also achieved
certain secondary endpoints, demonstrating statistically significant increases in appendicular lean body mass and total lean body mass for all doses of
VK5211, compared to placebo. VK5211 demonstrated encouraging safety and tolerability in this study, with no drug-related SAEs reported. Our intent is
to continue to pursue partnering or licensing opportunities for VK5211 prior to conducting additional clinical studies.
Our Development Pipeline
The following table highlights our current development pipeline:
Key: TRß, thyroid receptor beta; NASH/MASH; GLP-1, glucagon-like peptide 1, GIP, glucose-dependent insulinotropic polypeptide; X-ALD, X-linked
adrenoleukodystrophy.
We also have a preclinical program focused on developing dual amylin and calcitonin receptor agonists, or DACRA, for the potential treatment of obesity.
VK2735
Activation of the GLP-1 receptor has been shown to decrease glucose, reduce appetite, lower body weight and improve insulin sensitivity in patients with
type 2 diabetes, obesity, or both. More recently, research efforts have explored the potential co-activation of the GIP receptor as a means of enhancing the
therapeutic benefits of GLP-1 receptor activation. VK2735 is a dual agonist of the GLP-1 and GIP receptors that we are developing for the potential
treatment for various metabolic disorders. VK2375 is being developed in both subcutaneous and oral formulations for the potential treatment of various
metabolic disorders such as obesity.
VK2735 Subcutaneous
Based upon the results of the Phase 2 VENTURE study and the previous Phase 1 subcutaneous study, we are currently preparing for the initiation of Phase
3 clinical studies for VK2735 subcutaneous in the first half of 2025.
Phase 2 Clinical Data for VK2735 Subcutaneous
In September 2023, we initiated the VENTURE study, a Phase 2 clinical trial of VK2735 in patients with obesity. The Phase 2 VENTURE study was a
randomized, double-blind placebo-controlled study that evaluated the safety, tolerability, pharmacokinetics and weight loss efficacy of VK2735,
administered subcutaneously, once weekly. The 13-week study enrolled adults who were obese (BMI >= 30 kg/m2), or adults who were overweight (BMI
>= 27kg/m2) with at least one weight-related co-morbidity condition. The primary endpoint of the study was the percent change in body weight from
baseline to week 13, with secondary and exploratory endpoints evaluating a range of additional safety and efficacy measures. In October 2023, we
announced completion of patient enrollment and in February 2024 we reported that the Phase 2 VENTURE study successfully achieved its primary
endpoint and all secondary endpoints, with patients receiving VK2735 demonstrating statistically significant reductions in body weight compared with
placebo. Additionally, the study showed VK2735 treatment to be safe and well tolerated with the majority of treatment emergent adverse events, or
TEAEs, being categorized as mild or moderate.
Body Weight Reductions
4
Patients receiving weekly doses of VK2735 demonstrated statistically significant reductions in mean body weight after 13 weeks, ranging up to 14.7%
from baseline. Patients receiving VK2735 also demonstrated statistically significant reductions in mean body weight relative to placebo, ranging up to
13.1%. Statistically significant differences compared to both baseline and placebo were observed for all doses starting at week one and continuing
throughout the 13-week treatment period. Reductions in body weight were progressive through the course of the study, with no plateau observed for weight
loss at 13 weeks. All doses of VK2735 also demonstrated statistically significant differences relative to placebo on the key secondary endpoint assessing
the proportion of patients demonstrating at least 10% weight loss. Up to 88% of patients in VK2735 treatment groups achieved ≥10% weight loss,
compared with 4% for placebo.
Safety and Tolerability
VK2735 demonstrated encouraging safety and tolerability following 13 weeks of once-weekly dosing. Discontinuation rates in the VENTURE study were
low and well-balanced among patients treated with VK2735 compared with placebo. A total of 23 patients (13%) discontinued treatment in the study, 5
(14%) in the placebo cohort and 18 (13%) among VK2735-treated cohorts.
Among patients receiving VK2735, the majority (92%) reported drug related TEAEs as mild or moderate in severity. The majority of TEAEs that were
gastrointestinal, or GI, in nature (95%) were also reported as mild or moderate. Nausea was reported among patients receiving both VK2735 (43%) and
placebo (20%). Among subjects receiving VK2735, the majority of reported nausea (68%) was characterized as mild (32% moderate, none severe).
Vomiting was reported in 25/140 (18%) VK2735-treated patients compared with none reported among patients receiving placebo. GI-related adverse
events were generally observed early in treatment, with decreasing frequency upon repeat dosing. Across the combined VENTURE study arms, the weekly
rate of nausea did not exceed 5% at any point after the first week of treatment. One patient receiving VK2735 experienced an SAE of dehydration that was
characterized as related to study drug.
Phase 1 Clinical Data for VK2735 Subcutaneous
In January 2022, we announced the initiation of a Phase 1 SAD and MAD clinical trial of VK2735. The Phase 1 trial was a randomized, double-blind,
placebo-controlled SAD and MAD study in healthy adults. The SAD portion of the study evaluated VK2735 in healthy adults, while the MAD portion of
the study enrolled healthy adults with a minimum body mass index of 30 kilograms per meter squared. The primary objectives of the study were to evaluate
the safety and tolerability of single and multiple doses of VK2735 administered subcutaneously and identify suitable doses for further clinical development.
The secondary objective was to evaluate the pharmacokinetics of VK2735 in healthy subjects. The SAD portion of the study evaluated escalating single
doses of VK2735. In the MAD portion of the study subjects received VK2735 once weekly for 28 days.
In March 2023, we announced the completion of the Phase 1 trial and the related results from this Phase 1 study.
In the SAD portion of the study, VK2735 demonstrated promising safety and tolerability, as well as a predictable pharmacokinetic profile. Following single
subcutaneous doses, VK2735 demonstrated a half-life of approximately 170 to 250 hours, a Tmax (time to reach maximum plasma concentration) ranging
from approximately 75 to 90 hours, and excellent therapeutic exposures.
In the 28-day MAD portion of the study, VK2735 demonstrated encouraging tolerability and positive signs of clinical activity. All cohorts receiving
VK2735 demonstrated reductions in mean body weight from baseline, ranging up to 7.8%. Cohorts receiving VK2735 also demonstrated reductions in
mean body weight relative to placebo, ranging up to 6.0%. Statistically significant differences compared to placebo were maintained or improved at the day
43 follow-up time point, 21 days after the last dose of VK2735 was administered.
VK2735 demonstrated encouraging safety and tolerability following repeated dosing. The majority of observed adverse events (98%) were reported as mild
or moderate. The majority of GI related adverse events (99%) were also reported as mild or moderate. One SAE was reported in a subject receiving
VK2735. A subject with a history of cholelithiasis (gallstones) experienced an SAE of acute choledocholithiasis (gallstone obstruction). Nausea was
reported among subjects receiving both VK2735 (58%) and placebo (50%). Among subjects receiving VK2735, the majority of reported nausea (89%) was
characterized as mild (11% moderate). Vomiting was reported in 6/31 (19%) VK2735 treated subjects and 1/10 (10%) subjects receiving placebo. No
subjects were discontinued for nausea, vomiting or GI adverse events. Despite robust activation of the incretin receptor pathways, no hypoglycemia was
reported.
5
VK2735 Oral
Based upon the positive Phase 1 oral results from the 28-day MAD study summarized below, in January 2025, we announced initiation of a Phase 2
VENTURE-Oral Dosing Trial of VK2735 tablet formulation in patients with obesity. The Phase 2 VENTURE-Oral Dosing Trial is a randomized, double-
blind, placebo-controlled multicenter study designed to evaluate the safety, tolerability, pharmacokinetics and weight loss efficacy of VK2735 dosed as an
oral tablet once daily for 13 weeks. The trial will enroll approximately 280 adults who are obese (BMI ≥30 kg/m2), or adults who are overweight (BMI ≥27
kg/m2) with at least one weight-related co-morbid condition. Patients will be evenly randomized to one of six dosing arms or placebo. The primary
endpoint of the study is the percent change in body weight from baseline after 13 weeks of treatment. Secondary and exploratory endpoints will evaluate a
range of additional safety and efficacy measures. We expect to complete this study and report initial results in the second half of 2025.
We previously reported positive results from the 28-day Phase 1 MAD clinical trial of the tablet formulation of VK2735 in healthy volunteers with a BMI
≥30. Cohorts receiving VK2735 demonstrated dose-dependent reductions in mean body weight from baseline, ranging up to 8.2%. Cohorts receiving
VK2735 also demonstrated reductions in mean body weight relative to placebo, ranging up to 6.8%. Persistent weight loss effects were observed at follow-
up visits through day 57, ranging up to 8.3% from baseline, four weeks after the last dose of VK2735 was administered. An exploratory assessment of the
proportion of subjects achieving at least 5% weight loss after 28 days demonstrated that up to 100% of VK2735-treated subjects achieved ≥5% weight loss,
compared with 0% for placebo.
Oral VK2735 continued to demonstrate encouraging safety and tolerability following 28 days of once-daily dosing at doses up to and including 100 mg.
The majority (99%) of TEAEs reported to date have been mild or moderate, with the majority (90%) reported as mild. Similarly, all observed GI adverse
events have been reported as mild or moderate, with the majority (84%) reported as mild. Mild nausea was reported in 23 (32%) VK2735-treated subjects
compared with 11% among placebo subjects. No moderate or severe nausea was reported. Vomiting was reported in three (4%) VK2735-treated subjects.
Diarrhea was reported in five subjects (7%) receiving VK2735 compared with four subjects (21%) receiving placebo.
An exploratory cohort of subjects was also evaluated to assess changes to dose regimen. Subjects in this cohort were titrated to 80 mg daily doses and
subsequently transitioned to a lower exposure regimen (80 mg QoD) from Day 15 – 28. Despite reduction in VK2735 exposure, significant reductions in
body weight were observed, with subjects reporting mean body weight change of -4.0% from baseline at Day 28 (p<0.0001). Weight loss trajectory from
Day 15 to Day 28 in this cohort was similar to that observed in the cohort of subjects receiving 80 mg daily doses and may suggest the potential for lower
dose maintenance regimens.
Novel Selective TRß Agonists for Metabolic Disorders and Adrenoleukodystrophy
Summary Overview
VK2809 and VK0214 are novel, orally available, selective TRß agonists in development for metabolic disorders and X-ALD. Thyroid hormone receptors
are found in various tissues throughout the body. TRß is the major receptor isoform expressed in the liver and thyroid hormone receptor alpha, or TR is
the major isoform expressed in the heart. The unique properties of our TRß agonists are designed to reduce or eliminate the deleterious effects of extra-
hepatic thyroid receptor activation. In particular, high tissue and TRß selectivity may lead to reduced activity at the TR receptor, which can be associated
with increased respiration and cardiac tissue hypertrophy. Selective activation of the TRß receptor in liver tissue is believed to favorably affect cholesterol
and lipoprotein levels via multiple mechanisms, including increasing the expression of low-density lipoprotein receptors and increasing mitochondrial fatty
acid oxidation. These characteristics in turn lead to reductions of low-density lipoprotein cholesterol, or LDL-C, plasma and liver triglycerides. In addition,
our chemical structures are not substrates for certain transporters involved in the uptake of thyroid hormone. Various animal models have shown that our
molecules, as a result of their unique profiles, may have reduced cardiovascular effects versus thyroid hormone and other thyromimetics. As a result of
these characteristics, we believe our selective TRß agonists are capable of eliciting a unique lipid lowering profile without eliciting unwanted effects on the
heart and thyroid hormone axis.
VK2809 in NASH/MASH
In November 2019, we initiated the VOYAGE study, a Phase 2b clinical trial of VK2809 in patients with biopsy-confirmed NASH/MASH.
The VOYAGE study was a randomized, double-blind, placebo-controlled, multicenter trial designed to assess the efficacy, safety and tolerability of
VK2809 in patients with biopsy-confirmed NASH/MASH and fibrosis ranging from stages F1 to F3. The study targeted enrollment of approximately 340
patients across five treatment arms. The primary endpoint of the study evaluated the relative change in liver fat content, as assessed by MRI-PDFF, from
baseline to week 12 in subjects treated with VK2809 as compared to placebo. Secondary objectives included evaluation of histologic changes assessed by
hepatic biopsy after 52 weeks of dosing.
6
In January 2023, we announced completion of patient enrollment in the VOYAGE study and in May 2023 we reported that patients receiving VK2809
demonstrated statistically significant reductions in liver fat at week 12, which was the primary endpoint in VOYAGE. Importantly, patients receiving
VK2809 continued to demonstrate statistically significant reductions in liver fat content at week 52, with the mean relative change from baseline ranging
from 37% to 55%. The response rate in this study, defined as the proportion of patients experiencing reduction in liver fat ≥30%, ranged from 64% to 88%,
with all treatment arms demonstrating statistically significant improvement compared to placebo.
In June 2024, we announced positive 52-week histologic data from the VOYAGE study. On the secondary endpoint of NASH/MASH resolution with no
worsening of fibrosis, VK2809-treated patients demonstrated NASH/MASH resolution ranging from 63% to 75%, compared with 29% for placebo (p<0.05
for each VK2809 treatment group). Across the combined VK2809 treatment groups, 69% achieved NASH/MASH resolution (p<0.0001 vs. placebo).
Resolution of NASH/MASH was defined as a non-alcoholic fatty liver disease activity score, or NAS, of 0 or 1 for inflammation and 0 for ballooning.
On the secondary endpoint evaluating improvement in fibrosis with no worsening of NASH/MASH, VK2809-treated patients demonstrated improvement
in fibrosis ranging from 44% to 57%, compared with 34% for placebo (p<0.05 for the 5 mg and 10 mg QOD cohorts). Across the combined VK2809
treatment groups, 51% achieved improvement in fibrosis with no worsening of NASH/MASH (p=0.03 vs. placebo). Improvement in fibrosis without
worsening of NASH/MASH was defined as a ≥1-stage improvement in fibrosis and no increase in NAS for ballooning, inflammation, or steatosis.
On the secondary endpoint evaluating the proportion of patients experiencing both resolution of NASH/MASH and improvement in fibrosis, VK2809-
treated patients demonstrated improvement ranging from 40% to 50%, compared with 20% for placebo (p<0.05 for the 5 mg and 10 mg QOD cohorts).
Across the combined VK2809 treatment groups, 44% achieved this endpoint (p=0.003 vs. placebo). Resolution of NASH/MASH and improvement in
fibrosis were defined as described above.
Study results were consistent under various sensitivity analyses. A more conservative sensitivity analysis, which categorized subjects with missing data as
non-responders, produced similar statistical outcomes. These analyses demonstrate the robustness of the efficacy signal observed in this study.
VK2809 in NAFLD
In September 2018, we announced top-line results from our 12-week, Phase 2 clinical trial of our lead clinical program’s drug candidate, VK2809, in
patients with NAFLD and elevated LDL-C. The study successfully achieved its primary endpoint, with patients receiving VK2809 demonstrating
statistically significant reductions in LDL-C compared with placebo. In addition, the trial’s secondary endpoint was achieved, with VK2809-treated
patients experiencing statistically significant reductions in liver fat content compared with placebo. VK2809 demonstrated encouraging safety and
tolerability in this study, with no SAEs reported.
Reduction in LDL-C
Patients receiving VK2809 demonstrated statistically significant reductions in LDL-C of 20% or more, compared with placebo-treated patients. In addition,
VK2809-treated patients demonstrated statistically significant improvements in other lipids, including atherogenic proteins apolipoprotein B and
lipoprotein (a).
Reduction in Liver Fat Content
Patients receiving VK2809 experienced statistically significant reductions in liver fat content, as assessed by MRI-PDFF, relative to placebo after 12 weeks
of treatment.
Safety and Tolerability
No SAEs were reported among patients receiving VK2809 or placebo. Mean alanine aminotransferase, or ALT, levels among patients receiving VK2809
were reduced relative to those of patients receiving placebo. Among patients with elevated baseline ALT levels, those receiving VK2809 also demonstrated
reduction relative to placebo. There were no clinically or numerically meaningful differences in direct bilirubin, indirect bilirubin, alkaline phosphatase or
international normalized ratio between patients treated with VK2809 or placebo. In addition, no meaningful changes to the thyroid hormone axis were
observed among VK2809-treated patients compared with placebo-treated patients.
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VK2809 Summary Characteristics
VK2809 has been evaluated in two Phase 2 clinical trials and seven Phase 1 clinical trials. Based on these clinical and additional preclinical data, we
believe VK2809 has the following important characteristics that may benefit patients with metabolic or lipid disorders:
•
Broader efficacy: Phase 2 and Phase 1 data suggest VK2809 could reduce liver fat, plasma LDL-C, triglyceride and atherogenic
protein levels by greater amounts than existing oral therapies. Such broad and potent lipid lowering-activity may be particularly
desirable for NASH/MASH patients with hypercholesterolemia or dyslipidemia, or among patients with risk factors such as chronic
kidney disease.
•
Encouraging safety profile: VK2809 has demonstrated encouraging safety to date in over 400 subjects from completed studies. No
drug related serious adverse events were observed. In addition, no cardiovascular abnormalities were reported, in-line with the
expected high tissue and receptor selectivity for VK2809.
•
Encouraging tolerability: VK2809 has been well-tolerated at and above doses that we are currently administrating and plan to
administer in future clinical trials.
•
Novel mechanism of action: Based on its selective thyroid receptor targeting mechanism of action, we believe VK2809 has the
potential to lower plasma and liver lipid levels in a manner complementary to existing agents such as statins. In particular, based upon
the Phase 2 trial results, we believe the unique liver-targeting properties of VK2809 impart a robust lipid lowering effect within
hepatic tissue, with potential therapeutic applications in fatty liver diseases such as NASH/MASH.
•
Combinability: VK2809’s novel mechanism of action is expected to allow combinability with many existing therapies, leading to
enhanced efficacy and potentially delaying transition to subsequent therapies.
•
Once-daily oral dosing: Clinical data suggest that VK2809 has the potential to lower plasma lipid levels in NASH/MASH or
hypercholesterolemia patients as a once-daily oral therapy.
Phase 1 Clinical Data for VK2809
VK2809 has also been evaluated in seven Phase 1 clinical trials. The initial Phase 1 safety, tolerability and pharmacokinetic study of VK2809 was
conducted in 2006. This was followed by a 14-day Phase 1b clinical trial in 56 patients with mild hypercholesterolemia, defined as baseline plasma LDL-C
of at least 100 mg/dL. This study was initiated in 2007 and completed in 2008. VK2809 was shown to be safe and well-tolerated across doses ranging from
0.25 mg to 40 mg per day. There were no serious adverse events, and the frequency of adverse events in VK2809-treated patients was similar to placebo-
treated patients. The clinical trial results also showed dose-related reductions in fasting LDL-C and fasting triglyceride levels at day 14. Significant
placebo-adjusted LDL-C reductions from baseline were observed at doses of 5 mg and above and ranged from approximately 15%-41%, while placebo-
adjusted triglyceride levels were reduced by more than 30% at doses of 2.5 mg and above. In addition, statistically significant reductions of lipoprotein a,
or Lp(a), and apolipoprotein, or Apo(B), which are believed to be positively associated with a patient’s risk of developing cardiovascular disease, were
observed in certain cohorts. In addition, VK2809 was evaluated in five additional Phase 1 trials, evaluating the pharmacokinetics, pharmacodynamics,
potential drug-drug interaction of VK2809 when co-administered with a statin, alternative dosing regimens and hepatic impairment, respectively.
VK0214 in X-linked Adrenoleukodystrophy (X-ALD)
We are developing VK0214 for X-ALD, a rare X-linked, inherited neurological disorder characterized by a breakdown in the protective barriers
surrounding brain and nerve cells. X-ALD is caused by mutations in a peroxisomal transporter of VLCFA known as ABCD1. As a result, transporter
function is impaired and patients are unable to efficiently metabolize VLCFA. TRß is known to regulate expression of an alternative VLCFA transporter,
known as ABCD2. Various preclinical models have demonstrated that increased expression of ABCD2 can lead to normalization of VLCFA metabolism.
Preliminary data suggest that VK0214 stimulates ABCD2 expression in an in vitro model and reduces VLCFA levels in an in vivo model of X-ALD.
Based upon the positive results from the VK0214 Phase 1 SAD and MAD study, in June 2021, we initiated a Phase 1b clinical trial of VK0214 in patients
with X-ALD. The Phase 1b trial was a multi-center, randomized, double-blind, placebo-controlled study in adult male patients with the AMN form of X-
ALD. The study enrolled patients across three cohorts: placebo, VK0214 20 mg daily, and VK0214 40 mg daily. The primary objectives were to evaluate
the safety and tolerability of VK0214 in subjects with AMN, when administered once-daily over a 28-day dosing period. Secondary objectives included an
evaluation of the pharmacokinetics of VK0214 following 28 days of dosing in this population. An exploratory objective was to evaluate the effects of
VK0214 on plasma levels of VLCFAs in subjects with AMN.
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In October 2024, we announced the results from this study, noting that VK0214 was shown to be safe and well-tolerated following once-daily dosing over
the 28-day study period. In addition, significant reductions were observed in plasma levels of VLCFAs and other lipids, as compared to placebo.
Highlights from the study results include:
Reductions in VLCFAs
In addition to safety and tolerability, the study included an exploratory assessment of changes in plasma levels of VLCFAs after 28 days of dosing.
VLCFAs are considered biomarkers of disease in patients with X-ALD. Treatment with VK0214 resulted in significant reductions in mean VLCFA levels
at both doses evaluated, 20 mg/day and 40 mg/day, compared to placebo. Importantly, cohorts receiving VK0214 demonstrated reductions in mean plasma
levels of the 26 carbon lysophosphatidyl choline (C26:0-LPC) derivative, a key diagnostic marker.
Reductions in Plasma Lipids
In addition to VLCFA changes, subjects who received VK0214 demonstrated reductions in other plasma lipids. Mean reductions relative to baseline and
placebo were observed for LDL-C, apolipoprotein B, or ApoB, and lipoprotein (a), or Lp(a), following 28 days of treatment.
Safety and Tolerability
VK0214 demonstrated encouraging safety and tolerability following 28 days of once-daily dosing. Treatment emergent adverse events were reported as
mild to moderate; one subject in the placebo cohort experienced a wrist fracture that was characterized as a severe adverse event. GI adverse events were
slightly higher among placebo subjects (33%) compared with VK0214-treated subjects (11%). Our intent is to pursue partnering or licensing opportunities
for VK0214 prior to conducting additional clinical studies.
Phase 1 SAD and MAD clinical trial of VK0214
In September 2020, we initiated a randomized, double-blind, placebo controlled Phase 1 SAD and MAD clinical trial of VK0214 in healthy patients. The
primary objective of the study was to evaluate the safety and tolerability of VK0214 administered orally for up to 14 days. The secondary objective was to
evaluate the pharmacokinetics of VK0214 following single and multiple oral doses. The first portion of the study evaluated single doses of VK0214; in the
second portion of the study, subjects received VK0214 once daily for 14 days. Subsequent cohorts in both portions of the study received successively
higher VK0214 doses.
In June 2021, we announced the results of the study. VK0214 was shown to be safe and well-tolerated at all doses evaluated in this study. No serious
adverse events were reported, and no treatment or dose-related trends were observed for vital signs, GI effects, cardiovascular measures or physical
examinations. VK0214 demonstrated dose-dependent exposures, no evidence of accumulation following multiple doses, and a half-life consistent with
anticipated once-daily dosing regimens. While the study’s primary objective was to evaluate safety and tolerability, laboratory assessments included a lipid
panel to determine potential pharmacodynamic effects following exposure to VK0214. The results showed that subjects who received VK0214 experienced
reductions in low-density lipoprotein cholesterol, or LDL-C, triglycerides and apolipoprotein B following 14 days of treatment at all VK0214 doses. Many
of the observed lipid reductions achieved statistical significance, though the study was not powered to demonstrate statistical significance on laboratory
assessments.
X-ALD is a rare, often fatal condition believed to occur with an incidence of approximately one in 17,000 births. X-ALD is caused by mutations in the
gene encoding for ABCD1, which is located on the X chromosome. Men have one X chromosome, while women have two. Because of this, an inherited
mutation in the ABCD1 gene is more likely to manifest in males relative to females. The ABCD1 protein plays a critical role in the transport of VLCFA
into a cellular organelle called the peroxisome, where VLCFA metabolism and disposal occur. Without functional ABCD1, VLCFA accumulate in cells,
including neural cells, where they can lead to membrane disruption and damage to the myelin sheath, a protective and insulating membrane that surrounds
nerve cells in the brain. This damage can result in decreased motor coordination and function, visual and hearing disturbances, the loss of cognitive
function, dementia, seizures, adrenal dysfunction and other complications, including death. X-ALD is divided into various sub-segments, which are broadly
characterized by the presence or absence of brain inflammation:
•
Cerebral adrenoleukodystrophy, or CALD: The most severe form of X-ALD is CALD. CALD is characterized by a progressive
inflammatory destruction of myelin, leading to severe loss of neurological function and eventual death. Approximately 35% to 40% of
male X-ALD patients present with cerebral involvement at a younger age, between the ages of 5 and 12 years. However, up to 20% of
male X-ALD patients develop cerebral involvement later in life,
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between the ages of 20 and 35 years. In male children affected by CALD, learning and behavioral problems are often the first clinical
manifestations of disease. In the absence of intervention, patients affected by CALD typically experience rapid degeneration into
vegetative state within 3 to 5 years, often resulting in death within 10 years of diagnosis.
•
Adrenomyeloneuropathy, or AMN: AMN is the more common form of X-ALD and is considered the default form of the disease in
patients surviving beyond childhood. AMN is expected to affect all adult males with ABCD1 mutations, and approximately 65% of
females. In males, the diagnosis is usually made between the ages of 20 and 50 and in females after the age of 65. AMN accounts for
approximately half of all patients diagnosed with X-ALD. Patients with AMN generally present with slowly progressive symptoms
resulting from (non-inflammatory) disruption of the axons, which are a fundamental component of the central nervous system (which
allows nerve signals to be transmitted), in the spinal cord. Patients experience a variety of symptoms, including weakness in the legs,
impaired vibration sense, incontinence and impotence. Severe motor disability, requiring the use of a wheelchair or cane, develops
over a three to 15-year period. Many patients experience lower limb paralysis. While AMN is generally considered to develop more
gradually relative to CALD, approximately 35% of AMN patients experience a rapid progression of myelopathy over a three to five-
year period. In addition, approximately 40% of AMN patients have or will develop CALD, with varying degrees of associated
inflammation.
There is a clear unmet medical need for patients suffering from X-ALD. CALD has been more commonly targeted for treatment due to its devastating
effects, which are often manifested at a young age. For these patients, an effective treatment option is allogeneic hematopoietic stem cell, or HSC,
transplant. In this procedure, the patient is treated with HSCs containing the properly functioning copy of the ABCD1 gene, contributed by a donor other
than the patient. Additionally, a method of ex vivo insertion of a functional copy of the ABCD1 gene via a lentiviral vector into the patient’s own HSCs to
correct the aberrant expression of ABCD1 in patients with CALD has recently been approved. Over time with either method, as the transplanted cells grow
and repopulate, a partial restoration of ABCD1 function can be achieved, leading many patients to resolution of progression in the cerebral form of the
disease. However, recent data suggest that, even among successfully transplanted patients, AMN can develop. We believe our thyroid receptor agonists,
which have the potential to normalize metabolism of VLCFAs peripherally, and potentially centrally, may positively impact all forms of X-ALD, including
the currently untreatable AMN form.
VK5211: A SARM for Hip Fracture
VK5211 is an orally available, non-steroidal SARM in development for the treatment of patients recovering from non-elective hip fracture surgery.
VK5211 is designed to selectively produce the therapeutic benefits of testosterone in muscle and bone tissue with improved safety and tolerability. Tissue
selectivity is critical in treating patients recovering from hip fracture. These patients experience elevated rates of metabolic breakdown of muscle tissue and
loss of bone mineral density. This results in a loss of muscle strength, an increased risk of additional fractures and increased mortality.
Clinical Data for VK5211
In November 2017, we announced positive top-line results from our 12-week, Phase 2 clinical trial of VK5211 in patients who recently suffered a hip
fracture. Top-line data showed that the trial achieved its primary endpoint, demonstrating statistically significant, dose dependent increases in lean body
mass, less head, following treatment with VK5211 as compared to placebo. The study also achieved certain secondary endpoints, demonstrating
statistically significant increases in appendicular lean body mass and total lean body mass for all doses of VK5211, compared to placebo. VK5211
demonstrated encouraging safety and tolerability in this study, with no drug-related SAEs reported.
The Phase 2 clinical trial was a randomized, double-blind, placebo-controlled, parallel group, international study designed to evaluate the efficacy, safety
and tolerability of VK5211 in patients recovering from hip fracture surgery. A total of 108 patients were randomized to receive once-daily VK5211 doses
of 0.5 mg, 1.0 mg, 2.0 mg, or placebo for 12 weeks. Top-line results include:
•
All doses of VK5211 demonstrated statistically significant increases in total lean body mass, less head, the study’s primary endpoint. Placebo-
adjusted increases in lean body mass were 4.8% at 0.5 mg (p < 0.005), 7.2% at 1.0 mg (p < 0.001), and 9.1% at 2.0 mg (p < 0.001). These
corresponded to placebo-adjusted increases of 1.6 kg at 0.5 mg (p < 0.005), 2.5 kg at 1.0 mg (p < 0.001), and 3.1 kg at 2.0 mg (p < 0.001).
•
The proportion of patients experiencing at least a 5% increase in total lean body mass, less head, were 19% with placebo, 61% at 0.5 mg, 65% at
1.0 mg, and 75% at 2.0 mg (p < 0.01 for each). The proportion of patients demonstrating at least a 2.0 kg gain in total lean body mass, less head,
were 14% with placebo, 57% at 0.5 mg, 65% at 1.0 mg, and 81% at 2.0 mg (p < 0.01 for each).
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•
All doses of VK5211 produced statistically significant increases in appendicular lean body mass, a secondary efficacy endpoint. Placebo-
adjusted increases in appendicular lean body mass were 6.1% at 0.5 mg (p < 0.01), 9.0% at 1.0 mg (p < 0.001), and 10.2% at 2.0 mg (p < 0.001).
These corresponded to placebo-adjusted increases of 0.8 kg at 0.5 mg (p < 0.05), 1.3 kg at 1.0 mg (p < 0.001), and 1.4 kg at 2.0 mg (p < 0.001).
•
All doses of VK5211 produced statistically significant increases in total lean body mass, including head, a secondary efficacy endpoint. Increases
in total lean body mass were 6.3% (p < 0.005), 8.2% (p < 0.001), and 9.9% (p < 0.001) from baseline, corresponding to placebo-adjusted
increases of 4.7% at 0.5 mg (p < 0.005), 6.8% at 1.0 mg (p < 0.001), and 8.3% at 2.0 mg (p < 0.001). These corresponded to placebo-adjusted
increases of 1.7 kg at 0.5 mg (p < 0.005), 2.6 kg at 1.0 mg (p < 0.001), and 3.1 kg at 2.0 mg (p < 0.001).
•
Patients receiving VK5211 demonstrated numerical improvements in certain exploratory assessments of functional performance, including the 6-
minute walk test and short physical performance battery, compared with placebo. These endpoints were not powered for significance. Further
evaluation of exploratory functional endpoints is underway.
•
There were no significant differences in the rates of adverse events reported among patients receiving VK5211 compared with placebo. There
were no dose-related differences in reported adverse events among various VK5211 treatment groups. No drug-related SAEs were observed in
patients receiving VK5211.
Our intent is to continue to pursue partnering or licensing opportunities for VK5211 prior to conducting additional clinical studies.
Pipeline Program Targeting Metabolic Disease with Large Unmet Medical Need
Dual Amylin and Calcitonin Receptor Agonist (DACRA) Program
We have a preclinical program focused on developing dual amylin and calcitonin receptor agonists, or DACRA, for the potential treatment of obesity.
Amylin has important effects on glucose management, glucagon production, gastric emptying time and satiety. Amylin analogs have been shown to
significantly reduce body weight and dosage of insulin. Dual amylin and calcitonin receptor agonists are the most potent amylin receptor agonists.
Cagrilintide is a dual amylin/calcitonin receptor agonist that is currently in clinical development. Preclinical studies to date have demonstrated potent
activity of a series of novel, internally developed, amylin and calcitonin dual agonists. The results of these preclinical studies provide the rationale for
Viking's continued advancement of its internal dual amylin and calcitonin receptor agonist development program.
Competition
The biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.
While we believe that our technology, knowledge, experience and scientific resources provide us with competitive advantages, we face potential
competition from many different sources, including commercial biopharmaceutical enterprises, academic institutions, government agencies and private
and public research institutions. Any drug candidates that we successfully develop and commercialize will compete with existing therapies and new
therapies that may become available in the future.
Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical studies,
clinical trials, regulatory approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant
competitors, particularly through collaborative arrangements with large and established companies. Our competitors may succeed in developing
technologies and therapies that are more effective, better tolerated or less costly than any which we are developing, or that would render our drug
candidates obsolete and noncompetitive. Even if we obtain regulatory approval for any of our drug candidates, our competitors may succeed in obtaining
regulatory approvals for their products earlier than we do. We will also face competition from these third parties in recruiting and retaining qualified
scientific and management personnel, in establishing clinical trial sites and patient registration for clinical trials, and in acquiring and in-licensing
technologies and products complementary to our programs or advantageous to our business.
The key competitive factors affecting the success of each of our drug candidates, if approved, are likely to be its efficacy, safety, tolerability, frequency
and route of administration, convenience and price, the level of branded and generic competition and the availability of coverage and reimbursement from
government and other third-party payors.
VK2735
VK2735, if approved, will compete against therapies that are already approved and marketed for obesity, including Semaglutide (Wegovy®) and
liraglutide (Saxenda®) from Novo Nordisk A/S, and tirzepatide (Zepbound™) from Eli Lilly and Company. We are also aware of several programs
targeting obesity that are in the late development stage that will compete against VK2735, if approved,
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including CagriSema from Novo Nordisk A/S, orforglipron and retatrutide from Eli Lilly and Company, and survodutide (BI 456906) from Boehringer
Ingelheim International GmbH. In addition, we are aware of active programs at Altimmune, Inc., Amgen Inc., Ascletis Pharma Inc., AstraZeneca, BioAge
Labs, Corxel, D&D Pharmatech, Inc., ERX Pharmaceuticals Inc., F. Hoffmann-La Roche Ltd, Gubra, Hanmi Pharmaceutical Co., Ltd., Kailera
Therapeutics, Kallyope Inc., Metsera, NeuroBo, NodThera, Pfizer Inc., QL Pharma Co., Regeneron Pharmaceuticals Inc., Rivus Pharmaceuticals Inc.,
Sciwind Biosciences Co., Ltd., Scholar Rock, Structure Therapeutics Inc., Terns Pharmaceuticals, Inc., Veru Inc., and Zealand Pharma A/S.
VK2809
Resmetirom (Rezdiffra™), another agonist of the thyroid hormone receptor beta, or TRß, from Madrigal Pharmaceuticals, Inc., is the only therapy
currently approved in the U.S. for the treatment of NASH/MASH. In addition, we are aware of numerous development-stage programs targeting this
disease, including arachidyl amido cholanoic acid from Galmed Pharmaceuticals Ltd., belapectin from Galectin Therapeutics Inc., lanifibranor from
Inventiva S.A., semaglutide from Novo Nordisk A/S, firsocostat (GS-0976) and cilofexor (GS-9674) from Gilead Sciences, Inc., tirzepatide from Eli Lilly
and Company, ervogastat (PF-06865571) and clesacostat (PF-05221304) from Pfizer Inc., efruxifermin (AKR-001) from Akero Therapeutics, Inc.,
pegozafermin (BIO89-100) from 89bio, Inc., denifanstat (TVB-2640) from Sagimet Biosciences Inc., efocipegtrutide (HM15211) from Hanmi
Pharmaceutical Co., Ltd., survodutide (BI 456906) from Boehringer Ingelheim International GmbH, ION224 and ION839 from Ionis Pharmaceuticals,
Inc., rencofilstat (CRV431) from Hepion Pharmaceuticals, Inc., HTD1801 from HighTide Therapeutics Inc., GSK4532990 (ARO-HSD) from
GlaxoSmithKline plc., ALN-HSD from Alnylam Pharmaceuticals, Inc./ Regeneron Pharmaceuticals Inc., efinopegdutide (MK-6024) from Merck & Co.,
Inc., and pemvidutide (ALT-801) from Altimmune, Inc. In addition, we are aware of active programs at Aligos Therapeutics, Inc., Arrowhead
Pharmaceuticals, Inc., Ascletis Biopharmaceutical, AstraZeneca PLC, Boston Pharmaceuticals Inc., Can-Fite BioPharma Ltd., ChemomAb Ltd., CohBar,
Inc., Corcept Therapeutics Inc., CytoDyn Inc., D&D Pharmatech, Inc., Durect Corporation, Enyo Pharma SA, Inc., Future Medicine Co., Ltd., Galecto,
Inc., Gelesis Holdings Inc., Hepagene Therapeutics, Inc., Kowa Company, Ltd., MediciNova Inc., Seal Rock Therapeutics, Inc., Theratechnologies Inc.,
Yuhan Corporation, and Cadila Healthcare Limited (a.k.a. Zydus Cadila).
VK0214
In the U.S., there are currently no marketed therapies for the treatment of X-ALD. HSC therapy has been used to treat the most severe form of X-ALD,
CALD. More recently, gene therapy has been shown to be effective in CALD, and elivaldogene autotemcel from bluebird bio, Inc., has received
accelerated approval by the FDA (to slow the progression of neurologic dysfunction in boys 4-17 years of age with early, active CALD), and approval by
the European Commission (for patients less than 18 years of age with early CALD without a matched sibling donor). However, both treatments are
invasive, requiring surgical intervention, and these do not appear to have an effect on the most pervasive form of X-ALD, adrenomyeloneuropathy, or
AMN. There are several experimental therapies that are in various stages of clinical development for X-ALD by companies, including Minoryx
Therapeutics S.L., Neuraxpharm Group, Poxel SA, and Spur Therapeutics, Inc. (formerly SwanBio Therapeutics Inc.), which may be competitive with
VK0214, if approved.
VK5211
In the U.S., there are currently no marketed therapies for the maintenance or improvement of lean body mass, bone mineral density or physical function in
patients recovering from non-elective hip fracture surgery. However, VK5211, if approved, will face competition from experimental therapies that are in
various stages of clinical development for conditions characterized by muscle wasting by companies including Biophytis SA, and Helsinn Group. In
addition, nutritional and growth hormone-based therapies are sometimes used in patients experiencing muscle wasting.
Manufacturing and Supply
We do not have any manufacturing facilities and do not intend to develop any manufacturing capabilities. We believe that we have sufficient supplies of
drug substance to allow for completion of our planned clinical studies. Bulk active pharmaceutical ingredient, or API, and certain dosage forms are
currently in storage in compliance with good manufacturing practices, or cGMP, requirements. We believe that a majority of the existing API will be
suitable for formulation into clinical trial material. We also have identified multiple contract manufacturers to provide commercial supplies of the
formulated drug candidates if they are approved for marketing. We intend to secure contract manufacturers with established track records of quality product
supply and significant experience with the regulatory requirements of the FDA and the European Medicines Agency, or EMA.
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Our History
We were incorporated under the laws of the State of Delaware on September 24, 2012. Since our incorporation, we have devoted most of our efforts
towards conducting certain clinical trials and preclinical studies related to our VK2735, VK2809, VK0214 and VK5211 programs and dual amylin and
calcitonin receptor agonist programs and towards raising capital and building infrastructure. We obtained exclusive worldwide rights to VK2809, VK0214
and VK5211 and certain other assets pursuant to an exclusive license agreement with Ligand Pharmaceuticals Incorporated, or Ligand.
Master License Agreement with Ligand
On May 21, 2014, we entered into a Master License Agreement, as amended on each of September 6, 2014, April 8, 2015 and March 21, 2016, or the
Master License Agreement, with Ligand pursuant to which, among other things, Ligand granted to us and our affiliates an exclusive, perpetual, irrevocable,
worldwide, royalty-bearing right and license under (1) patents related to (a) our VK2809 and VK0214 programs and any other compounds comprised by
specified TRß patents and any derivatives of such compounds, or TRß Compounds, (b) our VK5211 program and any other compounds comprised by
specified SARM patents and derivatives of such compounds, or SARM Compounds, (c) our VK0612 program and any other compounds comprised by
specified FBPase patents and derivatives of such compounds, or FBPase Compounds, (d) our DGAT-1 program and any other compounds comprised by
specified DGAT-1 patents and derivatives of such compounds, or DGAT-1 Compounds, and (e) our EPOR program and any other compounds comprised
by specified EPOR patents and derivatives of such compounds, or EPOR Compounds, and; (2) related know-how controlled by Ligand; and (3) physical
quantities of TRß Compounds, SARM Compounds, FBPase Compounds, DGAT-1 Compounds and EPOR Compounds or, collectively, the Licensed
Technology, to research, develop, manufacture, have manufactured, use and commercialize the Licensed Technology in and for all therapeutic and
diagnostic uses in humans or animals. We have the right to sublicense these rights in certain circumstances. Pursuant to the terms of the Master License
Agreement, we have the exclusive right and sole responsibility and decision-making authority for researching and developing any pharmaceutical products
that contain or comprise one or any combination of a TRß Compound, SARM Compound, FBPase Compound, DGAT-1 Compound or EPOR Compound,
or, collectively, the Licensed Products. We also have the exclusive right and sole responsibility and decision-making authority to conduct all clinical trials
and preclinical studies that we believe are appropriate to obtain the regulatory approvals necessary for commercialization of the Licensed Products, and we
will own and maintain all regulatory filings and all regulatory approvals for the Licensed Products. Additionally, pursuant to the terms of the Master
License Agreement, we have the sole decision-making authority and responsibility and the exclusive right to commercialize any of the Licensed Products,
either by ourselves or, in certain circumstances, through sublicensees selected by us. We also have the exclusive right to manufacture or have manufactured
any Licensed Product ourselves or, in certain circumstances, through sublicensees or third parties selected by us. We will own any intellectual property that
we develop in connection with the license granted under the Master License Agreement.
As partial consideration for the grant of the rights and licenses to us under the Master License Agreement, we issued to Ligand at the closing of our initial
public offering of our common stock, or the IPO, 3,655,964 shares of our common stock having an estimated aggregate value of $29.2 million.
As further partial consideration for the grant of the rights and licenses to us by Ligand under the Master License Agreement, we have agreed to pay to
Ligand certain one-time, non-refundable milestone payments in connection with Licensed Products containing (1) VK2809, VK0214 or any other TRß
Compound, in an aggregate amount of up to $75.0 million per indication (for up to a total of three indications) upon the achievement of certain
development and regulatory milestones and up to $150.0 million upon the achievement of certain sales milestones; (2) VK5211 or any other SARM
Compound, in an aggregate amount of up to $85.0 million per indication (for up to a total of two indications) upon the achievement of certain development
and regulatory milestones and up to $100.0 million upon the achievement of certain sales milestones; (3) VK0612 or any other FBPase Compound, in an
aggregate amount of up to $60.0 million per indication (for up to a total of four indications) upon the achievement of certain development and regulatory
milestones and up to $150.0 million upon the achievement of certain sales milestones; (4) any EPOR Compound, in an aggregate amount of up to $48.0
million per indication (for up to a total of three indications) upon the achievement of certain development and regulatory milestones and up to $50.0 million
upon the achievement of certain sales milestones; and (5) any DGAT-1 Compound, in an aggregate amount of up to $78.0 million per indication (for up to
a total of two indications) upon the achievement of certain development and regulatory milestones and up to $150.0 million upon the achievement of
certain sales milestones. Additionally, we will pay to Ligand a one-time, non-refundable milestone payment of $2.5 million upon the occurrence of the first
commercial sale of VK0612 or any other FBPase Compound by one of our sublicensees. We will also pay to Ligand royalties on aggregate annual
worldwide net sales of Licensed Products by us, our affiliates and our sublicensees at tiered percentage rates in the following ranges based upon net sales:
(a) low-to-middle single digit royalties upon sales of VK2809, VK0214 or any other TRß Compound, (b) upper single digit royalties upon sales of VK5211
or any other SARM Compound, (c) upper single digit royalties upon sales of VK0612 or any other FBPase Compound, (d) low-to-middle single digit
royalties upon sales of any DGAT-1 Compound, and (e) middle-to-upper single digit royalties upon sales of any EPOR Compound; in each case subject to
reduction in certain circumstances.
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The term of the Master License Agreement will continue unless the agreement is terminated by us or Ligand. Ligand has the right to terminate the Master
License Agreement under certain circumstances, including, but not limited to: (1) in the event of our insolvency or bankruptcy; (2) if we do not pay an
undisputed amount owing under the Master License Agreement when due and fail to cure such default within a specified period of time; or (3) if we default
on certain of our material and substantial obligations and fail to cure the default within a specified period of time. We have the right to terminate the Master
License Agreement under certain circumstances, including, but not limited to: (i) if Ligand does not pay an undisputed amount owing under the Master
License Agreement when due and fails to cure such default within a specified period of time, or (ii) if Ligand defaults on certain of its material and
substantial obligations and fails to cure the default within a specified period of time. In addition, provisions of the Master License Agreement can be
terminated on a licensed program-by-program basis under certain circumstances. In the event that the Master License Agreement is terminated in its
entirety or with respect to a specific licensed program for any reason: (A) all licenses granted to us under the Master License Agreement (or with respect to
the specific licensed program) will terminate and we will, upon Ligand’s request (subject to Ligand assuming legal responsibility for any clinical trials of
the Licensed Products then ongoing), assign and transfer to Ligand (or to such transferee as Ligand may direct), at no cost to Ligand, all regulatory
documentation and all regulatory approvals prepared or obtained by us or on our behalf related to the Licensed Products (or those related to the specific
licensed program), or, if Ligand does not make such a request, we will wind down any ongoing clinical trials with respect to the Licensed Products (or
those related to the specific licensed program) at no cost to Ligand; (B) we will, upon Ligand’s request, sell and transfer to Ligand (or to such transferee as
Ligand may direct), at a price equal to 125% of our costs of goods, any and all chemical, biological or physical materials relating to or comprising the
Licensed Products (or those related to the specific licensed program); (C) we will have, for a period of six months following termination, the right to sell on
the normal business terms in existence before such termination any finished commercial inventory of Licensed Products (or those related to the specific
licensed program) which remains on hand, so long as we pay to Ligand the applicable royalties and sales milestones; (D) Ligand has the right to require us
to assign to Ligand the trademarks owned by us relating to the Licensed Products (or those related to the specific licensed program); and (E) we will grant
to Ligand a non-exclusive, worldwide, royalty-bearing sublicensable license under any patent rights and know-how controlled by us to the extent necessary
to make, have made, import, use, offer to sell and sell the Licensed Products (or those related to the specific licensed program) anywhere in the world at a
royalty rate in the low single digits.
Under the Master License Agreement, we have agreed to indemnify Ligand for claims relating to the performance of our obligations under the Master
License Agreement, any breach of the representations and warranties made by us under the Master License Agreement, clinical trials conducted by us and
the research, development and commercialization of the Licensed Products by us and our affiliates, sublicensees, distributors and agents. In addition,
Ligand has agreed to indemnify us for claims relating to the performance of its obligations under the Master License Agreement, its breach of
representations and warranties under the agreement and its research and development of the licensed compounds before the effective date of the Master
License Agreement. Each party’s indemnification obligations will not apply to the extent the claims result from the negligence or willful misconduct of the
indemnified party or any of its employees, agents, officers or directors or from the indemnified party’s breach of its representations or warranties set forth
in the Master License Agreement.
Government Regulation
FDA Regulation and Marketing Approval
In the U.S., the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act of 1938, as amended, or FDCA, and related regulations. Drugs are
also subject to other federal, state and local statutes and regulations. Failure to comply with the applicable U.S. regulatory requirements at any time during
the drug development process, approval process or after approval may subject an applicant to administrative or judicial sanctions and non-approval of drug
candidates. These sanctions could include the imposition by the FDA or an Institutional Review Board, or IRB, of a clinical hold on clinical trials, the
FDA’s refusal to approve pending applications or related supplements, withdrawal of an approval, untitled or warning letters, product recalls, product
seizures, total or partial suspension of production or distribution, injunctions, fines, restitution, disgorgement, civil penalties or criminal prosecution. Such
actions by government agencies could also require us to expend a large amount of resources to respond to the actions. Any agency or judicial enforcement
action could have a material adverse effect on us.
The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical
development, manufacture and marketing of pharmaceutical products.
These agencies and other federal, state and local entities regulate research and development activities and the testing, manufacture, quality control, safety,
effectiveness, labeling, packaging, storage, distribution, record-keeping, approval, post-approval monitoring, advertising, promotion, sampling and import
and export of our products. Our drugs must be approved by the FDA through the new drug application, or NDA, process before they may be legally
marketed in the U.S. See “The NDA Approval Process” under Part I, “Item 1. Business” of this Annual Report on Form 10-K.
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The process required by the FDA before drugs may be marketed in the U.S. generally involves the following:
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completion of non-clinical laboratory tests, animal studies and formulation studies conducted according to good laboratory practice or
other applicable regulations;
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submission of an IND, which allows clinical trials to begin unless the FDA objects within 30 days;
•
adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use or uses
conducted in accordance with FDA regulations, good clinical practices, or GCP, which are international ethical and scientific quality
standards meant to assure that the rights, safety and well-being of trial participants are protected, and to define the roles of clinical trial
sponsors, administrators and monitors and to assure clinical trial data integrity;
•
pre-approval inspection of manufacturing facilities and clinical trial sites; and
•
FDA approval of an NDA, which must occur before a drug can be marketed or sold.
IND and Clinical Trials
Prior to commencing the first clinical trial, an IND, which contains the results of preclinical studies along with other information, such as information about
product chemistry, manufacturing and controls and a proposed protocol, must be submitted to the FDA. The IND automatically becomes effective 30 days
after receipt by the FDA unless the FDA within the 30-day time period raises concerns or questions about the conduct of the clinical trial. In such a case,
the IND sponsor must resolve any outstanding concerns with the FDA before the clinical trial may begin. A separate submission to the existing IND must
be made for each successive clinical trial to be conducted during drug development. Further, an independent IRB for each site proposing to conduct the
clinical trial must review and approve the investigational plan for any clinical trial before it commences at that site. Informed written consent must also be
obtained from each trial subject. Regulatory authorities, including the FDA, an IRB, a data safety monitoring board or the sponsor, may suspend or
terminate a clinical trial at any time on various grounds, including a finding that the participants are being exposed to an unacceptable health risk or that the
clinical trial is not being conducted in accordance with FDA requirements.
For purposes of NDA approval, human clinical trials are typically conducted in sequential phases that may overlap:
•
Phase 1 – the drug is initially given to healthy human subjects or patients in order to determine metabolism and pharmacologic actions of
the drug in humans, side effects and, if possible, to gain early evidence on effectiveness. During Phase 1 clinical trials, sufficient
information about the investigational drug’s pharmacokinetics and pharmacologic effects may be obtained to permit the design of well-
controlled and scientifically valid Phase 2 clinical trials.
•
Phase 2 – clinical trials are conducted to evaluate the effectiveness of the drug for a particular indication or in a limited number of
patients in the target population to identify possible adverse effects and safety risks, to determine the efficacy of the product for specific
targeted diseases and to determine dosage tolerance and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor
to obtain information prior to beginning larger and more expensive Phase 3 clinical trials. Throughout this Annual Report on Form 10-K,
we refer to our initial Phase 2 clinical trials as “Phase 2a clinical trials” and our subsequent Phase 2 clinical trials as “Phase 2b clinical
trials.”
•
Phase 3 – when Phase 2 clinical trials demonstrate that a dosage range of the product appears effective and has an acceptable safety
profile, and provide sufficient information for the design of Phase 3 clinical trials, Phase 3 clinical trials in an expanded patient population
at multiple clinical sites may be undertaken. They are performed after preliminary evidence suggesting effectiveness of the drug has been
obtained, and are intended to further evaluate dosage, effectiveness and safety, to establish the overall benefit-risk relationship of the
investigational drug and to provide an adequate basis for product labeling and approval by the FDA. In most cases, the FDA requires two
adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug in an expanded patient population at multiple
clinical trial sites.
All clinical trials must be conducted in accordance with FDA regulations, GCP requirements and their protocols in order for the data to be considered
reliable for regulatory purposes.
Under amendments to the FDCA, sponsors of a Phase 3 clinical trial, or other “pivotal study” of a new drug to support marketing authorization, are
required to design and submit a diversity action plan for such clinical trial. The action plan must include the sponsor’s
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diversity goals for enrollment, as well as a rationale for the goals and a description of how the sponsor will meet them. The FDA may grant a waiver for
some or all of the requirements for a diversity action plan. It is unknown at this time how the diversity action plan may affect Phase 3 trial planning and
timing, but if the FDA objects to a sponsor’s diversity action plan or otherwise requires significant changes to be made, it could delay initiation of the
relevant clinical trial.
An investigational drug product that is a combination of two different drugs in the same dosage form must comply with an additional rule that requires that
each component make a contribution to the claimed effects of the drug product. This typically requires larger studies that test the drug against each of its
components. In addition, typically, if a drug product is intended to treat a chronic disease, as is the case with some of our products, safety and efficacy data
must be gathered over an extended period of time, which can range from six months to three years or more. Government regulation may delay or prevent
marketing of drug candidates or new drugs for a considerable period of time and impose costly procedures upon our activities.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information. Information
related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial, is then made public as
part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these trials can
be delayed until the new product or new indication being studied has been approved. Competitors may use this publicly available information to gain
knowledge regarding the progress of development programs.
The NDA Approval Process
In order to obtain approval to market a drug in the U.S., a marketing application must be submitted to the FDA that provides data establishing to the FDA’s
satisfaction the safety and effectiveness of the investigational drug for the proposed indication. Each NDA submission requires a substantial user fee
payment (currently exceeding $4.3 million for fiscal year 2025) unless a waiver or exemption applies. The application includes all relevant data available
from pertinent non-clinical studies, or preclinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together
with detailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from
company-sponsored clinical trials intended to test the safety and effectiveness of a use of a product, or from a number of alternative sources, including
studies initiated by investigators that meet GCP requirements.
During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of
an IND, at the end of Phase 2 clinical trials, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an
opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice and for the sponsor and the FDA to reach
agreement on the next phase of development. Sponsors typically use the end-of-Phase 2 clinical trials meetings to discuss their Phase 2 clinical trials results
and present their plans for the pivotal Phase 3 registration trial that they believe will support approval of the new drug.
Concurrent with clinical trials, companies usually complete additional preclinical safety studies and must also develop additional information about the
chemistry and physical characteristics of the drug and finalize a process for the NDA sponsor’s manufacturing the product in accordance with cGMP
requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and the manufacturer must
develop methods for testing the identity, strength, quality and purity of the final drugs. Additionally, appropriate packaging must be selected and tested, and
stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf-life.
The results of drug development, non-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on
the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the
product. The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. It may
request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The
resubmitted application is also subject to review before the FDA accepts it for filing. The FDA has 60 days from its receipt of an NDA to conduct an initial
review to determine whether the application will be accepted for filing based on the FDA’s threshold determination that the application is sufficiently
complete to permit substantive review. If the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether
the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and
preserve the product’s identity, strength, quality and purity. The FDA has agreed to specific performance goals on the review of NDAs and seeks to review
standard NDAs within 12 months from submission of the NDA. The review process may be extended by the FDA for three additional months to consider
certain late submitted information or information intended to clarify information already provided in the submission. After the FDA completes its initial
review of an NDA, it will communicate to the sponsor that the drug will either be approved, or it will issue a complete response letter to communicate that
the NDA will not be
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approved in its current form and inform the sponsor of changes that must be made or additional clinical, non-clinical or manufacturing data that must be
received before the application can be approved, with no implication regarding the ultimate approvability of the application or the timing of any such
approval, if ever. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an
approval letter. The FDA has committed to reviewing such resubmissions in two to six months depending on the type of information included. The FDA
may refer applications for novel drug products or drug products that present difficult questions of safety or effectiveness to an advisory committee,
typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved
and, if so, under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations
carefully when making decisions.
Before approving an NDA, the FDA typically will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless
it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the
product within required specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical sites to assure compliance with
GCP regulations. If the FDA determines the application, manufacturing process or manufacturing facilities are not acceptable, it typically will outline the
deficiencies and often will request additional testing or information. This may significantly delay further review of the application. If the FDA finds that a
clinical site did not conduct the clinical trial in accordance with GCP regulations, the FDA may determine the data generated by the clinical site should be
excluded from the primary efficacy analyses provided in the NDA. Additionally, notwithstanding the submission of any requested additional information,
the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase 4 or post-approval clinical
trials may be made a condition to be satisfied for continuing drug approval. The results of Phase 4 clinical trials can confirm the effectiveness of a drug
candidate and can provide important safety information. In addition, the FDA now has express statutory authority to require sponsors to conduct post-
marketing trials to specifically address safety issues identified by the agency. See “Post-Marketing Requirements” under Part I, “Item 1. Business” of this
Annual Report on Form 10-K.
The FDA also has authority to require a Risk Evaluation and Mitigation Strategy, or a REMS, from manufacturers to ensure that the benefits of a drug
outweigh its risks. A sponsor may also voluntarily propose a REMS as part of the NDA submission. The need for a REMS is determined as part of the
review of the NDA. Based on statutory standards, elements of a REMS may include “dear doctor letters,” a medication guide, more elaborate targeted
educational programs, and in some cases elements to assure safe use, or ETASU, which is the most restrictive REMS. ETASU can include, but are not
limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of
patient registries. These elements are negotiated as part of the NDA approval, and in some cases if consensus is not obtained until after the Prescription
Drug User Fee Act of 1992, as amended, review cycle, the approval date may be delayed. Once adopted, REMS are subject to periodic assessment and
modification.
Changes to some of the conditions established in an approved application, including changes in indications, labeling, manufacturing processes or facilities,
require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new
indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA
supplements as it does in reviewing NDAs.
Even if a drug candidate receives regulatory approval, the approval may be limited to specific disease states, patient populations and dosages, or might
contain significant limitations on use in the form of warnings, precautions or contraindications, or in the form of onerous risk management plans,
restrictions on distribution or post-marketing trial requirements. Further, even after regulatory approval is obtained, later discovery of previously unknown
problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. Delay in obtaining, or
failure to obtain, regulatory approval for our products, or obtaining approval but for significantly limited use, would harm our business. In addition, we
cannot predict what adverse governmental regulations may arise from future U.S. or foreign governmental action.
Orphan Designation and Exclusivity
The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United
States, or if it affects more than 200,000 individuals in the United States and there is no reasonable expectation that the cost of developing and making the
drug for this type of disease or condition will be recovered from sales in the United States.
Orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs, tax advantages, and
user-fee waivers. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. In
addition, the first NDA or Biologics License Application, or BLA, applicant to receive orphan drug designation for a particular drug is entitled to orphan
drug exclusivity, which means the FDA may not approve any other application to
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market the same drug for the same indication for a period of seven years in the United States, except in limited circumstances. Orphan drug exclusivity
does not generally prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition.
In Catalyst Pharms., Inc. v. Becerra, 14 F.4th 1299 (11th Cir. 2021), the court disagreed with the FDA’s longstanding position that the orphan drug
exclusivity only applies to the approved use or indication within the relevant orphan drug designation. This decision created uncertainty in the application
of the orphan drug exclusivity. In January 2023, the FDA published a notice in the Federal Register to clarify that while the FDA complies with the court’s
order in Catalyst, the FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the Catalyst
order – that is, the agency will continue tying the scope of orphan drug exclusivity to the uses or indications for which a drug is approved, which permits
other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that have not yet been
approved. It is unclear how future litigation, legislation, FDA decisions, and administrative actions will impact the scope of the orphan drug exclusivity.
The Hatch-Waxman Amendments
Under the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, commonly known as the Hatch-Waxman Amendments, a portion
of a product’s U.S. patent term that was lost during clinical development and regulatory review by the FDA may be restored. The Hatch-Waxman
Amendments also provide a process for listing patents pertaining to approved products in the FDA’s Approved Drug Products with Therapeutic
Equivalence Evaluations (commonly known as the Orange Book) and for a competitor seeking approval of an application that references a product with
listed patents to make certifications pertaining to such patents. In addition, the Hatch-Waxman Amendments provide for a statutory protection, known as
non-patent exclusivity, against the FDA’s acceptance or approval of certain competitor applications.
Patent Term Restoration
Patent term restoration can compensate for time lost during drug development and the regulatory review process by returning up to five years of patent life
for a patent that covers a new product or its use. This period is generally one-half the time between the effective date of an IND (falling after issuance of
the patent) and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application, provided the
sponsor acted with diligence. Patent term restorations, however, cannot extend the remaining term of a patent beyond a total of 14 years from the date of
product approval and only one patent applicable to an approved drug may be extended and the extension must be applied for prior to expiration of the
patent. The United States Patent and Trademark Office, or the USPTO, in consultation with the FDA, reviews and approves the application for any patent
term extension or restoration.
Orange Book Listing
In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent whose claims cover the applicant’s product. Upon
approval of a drug, each of the patents listed by the NDA holder listed in the drug’s application or otherwise is then published in the FDA’s Orange Book.
Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an abbreviated new drug application, or
ANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug
and has been shown through bioequivalence testing to be therapeutically equivalent to the listed drug. Other than the requirement for bioequivalence
testing, ANDA applicants are not required to conduct, or submit results of, preclinical studies or clinical trials to prove the safety or effectiveness of their
drug product. Drugs approved in this way are commonly referred to as “generic equivalents” to the listed drug and can often be substituted by pharmacists
under prescriptions written for the original listed drug.
The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book. Specifically, the
applicant must certify that: (1) the required patent information has not been filed; (2) the listed patent has expired; (3) the listed patent has not expired but
will expire on a particular date and approval is sought after patent expiration; or (4) the listed patent is invalid or will not be infringed by the new product.
The ANDA applicant may also elect to submit a Section VIII statement certifying that its proposed ANDA label does not contain (or carves out) any
language regarding the patented method-of-use rather than certify to a listed method-of-use patent. If the applicant does not challenge the listed patents, the
ANDA application will not be approved until all the listed patents claiming the referenced product have expired.
A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV
certification. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV
certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a
patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the
receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent,
settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant.
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An applicant submitting an NDA under Section 505(b)(2) of the FDCA, which permits the filing of an NDA where at least some of the information
required for approval comes from studies not conducted by, or for, the applicant and for which the applicant has not obtained a right of reference, is
required to certify to the FDA regarding any patents listed in the Orange Book for the approved product it references to the same extent that an ANDA
applicant would.
Market Exclusivity
Market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year
period of non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new
chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for
the action of the drug substance. During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another
company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval.
However, an application may be submitted after four years if it contains a Paragraph IV certification. The FDCA also provides three years of marketing
exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were
conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications,
dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not
prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission
or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the non-
clinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
Post-Marketing Requirements
Following approval of a new product, a pharmaceutical company and the approved product are subject to continuing regulation by the FDA, including,
among other things, monitoring and record-keeping activities, reporting to the applicable regulatory authorities of adverse experiences with the product,
providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and complying with
promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting drugs for
uses or in patient populations that are not described in the drug’s approved labeling (known as “off-label use”), limitations on industry-sponsored scientific
and educational activities and requirements for promotional activities involving the internet, including social media. Although physicians may prescribe
legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses. Modifications or enhancements to the product or
its labeling or changes of the site of manufacture are often subject to the approval of the FDA and other regulators, who may or may not grant approval, or
may include in a lengthy review process.
Prescription drug advertising is subject to federal, state and foreign regulations. In the U.S., the FDA regulates prescription drug promotion, including
direct-to-consumer advertising. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. Any distribution
of prescription drug products and pharmaceutical samples must comply with the U.S. Prescription Drug Marketing Act of 1987, as amended, or the PDMA,
a part of the FDCA.
In the U.S., once a product is approved, its manufacture is subject to comprehensive and continuing regulation by the FDA. The FDA regulations require
that products be manufactured in specific, approved facilities and in accordance with cGMP. We rely, and expect to continue to rely, on third parties for the
production of clinical and commercial quantities of our products in accordance with cGMP regulations. cGMP regulations require, among other things,
quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct
any deviations from cGMP. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register
their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for
compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality
control to maintain cGMP compliance. These regulations also impose certain organizational, procedural and documentation requirements with respect to
manufacturing and quality assurance activities. NDA holders using contract manufacturers, laboratories or packagers are responsible for the selection and
monitoring of qualified firms and, in certain circumstances, qualified suppliers to these firms. These firms and, where applicable, their suppliers are subject
to inspections by the FDA at any time, and the discovery of violative conditions, including failure to conform to cGMP, could result in enforcement actions
that interrupt the operation of any such product or may result in restrictions on a product, manufacturer, or holder of an approved NDA, including, among
other things, recall or withdrawal of the product from the market. In order to distribute products commercially, manufacturers must also comply with
federal and state laws relating to drug supply chain traceability, including registration of manufacturers and wholesale distributors of drug products in
certain states. Federal laws require the implementation of systems to provide, capture, and maintain information about transactions involving drug products
distributed within the United States and the trading partners who engaged in such transactions.
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The FDA also may require post-marketing testing, also known as Phase 4 testing, REMS to monitor the effects of an approved product or place conditions
on an approval that could restrict the distribution or use of the product. Discovery of previously unknown problems with a product or the failure to comply
with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, untitled or warning
letters from the FDA, mandated corrective advertising or communications with doctors, withdrawal of approval, and civil or criminal penalties, among
others. Newly-discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new
warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements,
including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of
our products in development.
Reimbursement, Anti-Kickback and False Claims Laws and Other Regulatory Matters
In the U.S., the research, manufacturing, distribution, sale and promotion of drug products and medical devices are potentially subject to regulation by
various federal, state and local authorities in addition to the FDA, including the Centers for Medicare & Medicaid Services, or CMS, other divisions of the
U.S. Department of Health and Human Services (e.g., the Office of Inspector General), the Drug Enforcement Administration, the Consumer Product
Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency, state
Attorneys General and other state and local government agencies. For example, sales, marketing and scientific/educational grant programs must comply
with the federal Anti-Kickback Statute, the federal False Claims Act of 1986, as amended, or the federal False Claims Act, the privacy regulations
promulgated under the Health Insurance Portability and Accountability Act of 1996, as amended, or HIPAA, and similar state laws. Pricing and rebate
programs must comply with the Medicaid Drug Rebate Program requirements of the Omnibus Budget Reconciliation Act of 1990, as amended, and the
Veterans Health Care Act of 1992, as amended. If products are made available to authorized users of the Federal Supply Schedule of the General Services
Administration, additional laws and requirements apply. The handling of any controlled substances must comply with the U.S. Controlled Substances Act
and Controlled Substances Import and Export Act. Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention
Packaging Act. All of these activities are also potentially subject to federal and state consumer protection and unfair competition laws.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, established the Medicare Part D program to provide a
voluntary prescription drug benefit to Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private
entities which will provide coverage of outpatient prescription drugs. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D
prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies
which drugs it will cover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and
class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be
developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of prescription drugs may increase demand
for products for which we receive regulatory approval. However, any negotiated prices for our products covered by a Part D prescription drug plan will
likely be lower than the prices we might otherwise obtain through non-government payors. Moreover, while the MMA applies only to drug benefits for
Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in
payment that results from the MMA may result in a similar reduction in payments from non-government payors.
The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage
and security requirements intended to prevent the unauthorized sale of pharmaceutical products.
The American Recovery and Reinvestment Act of 2009 provided funding for the federal government to compare the effectiveness of different treatments
for the same illness. A plan for the research will be developed by the Department of Health and Human Services, the Agency for Healthcare Research and
Quality and the National Institutes for Health, and periodic reports on the status of the research and related expenditures will be made to Congress.
Although the results of the comparative effectiveness studies are not intended to mandate coverage policies for public or private payors, it is not clear what
effect, if any, the research will have on the sales of our drug candidate, if any such product or the condition that it is intended to treat is the subject of a
clinical trial. It is also possible that comparative effectiveness research demonstrating benefits in a competitor’s product could adversely affect the sales of
our drug candidate. If third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our
products after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a
profitable basis.
In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing
drug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict the range of
medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.
A member state may approve a specific price for the medicinal product or it
20
may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no
assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing
arrangements for any of our products. Historically, products launched in the European Union do not follow price structures of the U.S. and generally tend
to be priced significantly lower than in the U.S.
As noted above, in the U.S., we are subject to complex laws and regulations pertaining to healthcare “fraud and abuse,” including, but not limited to, the
federal Anti-Kickback Statute, the federal False Claims Act, and other state and federal laws and regulations. The federal Anti-Kickback Statute makes it
illegal for any person, including a prescription drug manufacturer, or a party acting on its behalf, to knowingly and willfully solicit, receive, offer or pay
any remuneration that is intended to induce the referral of business, including the purchase, order or prescription of a particular drug, or other good or
service for which payment in whole or in part may be made under a federal healthcare program, such as Medicare or Medicaid. Violations of this law are
punishable by up to ten years in prison, criminal fines, administrative civil money penalties and exclusion from participation in federal healthcare
programs. In addition, many states have adopted laws similar to the federal Anti-Kickback Statute. Some of these state prohibitions apply to the referral of
patients for healthcare services reimbursed by any insurer, not just federal healthcare programs such as Medicare and Medicaid. Due to the breadth of these
federal and state anti-kickback laws, the absence of guidance in the form of regulations or court decisions and the potential for additional legal or
regulatory change in this area, it is possible that our future sales and marketing practices or our future relationships with medical professionals might be
challenged under anti-kickback laws, which could harm us. Because we intend to commercialize products that could be reimbursed under a federal
healthcare program and other governmental healthcare programs, we plan to develop a comprehensive compliance program that establishes internal
controls to facilitate adherence to the rules and program requirements to which we will or may become subject.
The federal False Claims Act prohibits anyone from knowingly presenting, or causing to be presented, for payment to federal programs (including
Medicare and Medicaid) claims for items or services, including drugs, that are false or fraudulent, claims for items or services not provided as claimed or
claims for medically unnecessary items or services. Although we would not submit claims directly to payors, manufacturers can be held liable under these
laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to
customers or promoting a product off-label. In addition, our future activities relating to the reporting of wholesaler or estimated retail prices for our
products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement
for our products, and the sale and marketing of our products, are subject to scrutiny under this law. For example, pharmaceutical companies have been
found liable under the federal False Claims Act in connection with their off-label promotion of drugs. Penalties for a federal False Claims Act violation
include three times the actual damages sustained by the government, plus mandatory civil penalties effective as of January 15, 2025 of between $14,308
and $28,619 for each separate false claim (each of which is subject to adjustment for inflation), the potential for exclusion from participation in federal
healthcare programs and, although the federal False Claims Act is a civil statute, conduct that results in a federal False Claims Act violation may also
implicate various federal criminal statutes. If the government were to allege that we were, or convict us of, violating these false claims laws, we could be
subject to a substantial fine and may suffer a decline in our stock price. In addition, private individuals have the ability to bring actions under the federal
False Claims Act and certain states have enacted laws modeled after the federal False Claims Act.
There are also an increasing number of state laws that require manufacturers to make reports to states on pricing and marketing information. Many of these
laws contain ambiguities as to what is required to comply with the laws. In addition, as discussed below, beginning in 2013, a similar federal requirement
requires manufacturers to track and report to the federal government certain payments made to physicians and teaching hospitals in the previous calendar
year. These laws may affect our sales, marketing and other promotional activities by imposing administrative and compliance burdens on us. In addition,
given the lack of clarity with respect to these laws and their implementation, our reporting actions could be subject to the penalty provisions of the pertinent
state and federal authorities.
The failure to comply with regulatory requirements subjects companies to possible legal or regulatory action. Depending on the circumstances, failure to
meet applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, recall or seizure of products, total or partial
suspension of production, denial or withdrawal of product approvals or refusal to allow a company to enter into supply contracts, including government
contracts.
Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (1) changes
to our manufacturing arrangements; (2) additions or modifications to product labeling; (3) the recall or discontinuation of our products; or (4) additional
record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.
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Patient Protection and Affordable Care Act
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively the
PPACA, was enacted, which includes measures that have or will significantly change the way healthcare is financed by both governmental and private
insurers. Among the provisions of the PPACA of greatest importance to the pharmaceutical industry are the following:
•
The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the
Secretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the manufacturer’s
covered outpatient drugs furnished to Medicaid patients. Effective in 2010, the PPACA made several changes to the Medicaid Drug Rebate
Program, including increasing pharmaceutical manufacturers’ rebate liability by raising the minimum basic Medicaid rebate on most branded
prescription drugs and biologic agents to 23.1% of the average manufacturer price, or AMP, and adding a new rebate calculation for “line
extensions” (i.e., new formulations, such as extended release formulations) of solid oral dosage forms of branded products, as well as potentially
impacting their rebate liability by modifying the statutory definition of AMP. The PPACA also expanded the universe of Medicaid utilization
subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care utilization as of 2010 and by
expanding the population potentially eligible for Medicaid drug benefits, phased-in by 2014. The CMS have proposed to expand Medicaid rebate
liability to the territories of the U.S. as well. In addition, the PPACA provides for the public availability of retail survey prices and certain
weighted average AMPs under the Medicaid program. The implementation of this requirement by the CMS may also provide for the public
availability of pharmacy acquisition of cost data, which could negatively impact our sales.
•
In order for a pharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold directly
to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The
required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer. Effective
in 2010, the PPACA expanded the types of entities eligible to receive discounted 340B pricing, although, under the current state of the law, with
the exception of children’s hospitals, these newly-eligible entities will not be eligible to receive discounted 340B pricing on orphan drugs when
used for the orphan indication. In addition, as 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the
Medicaid rebate formula and AMP definition described above could cause the required 340B discount to increase.
•
Effective in 2011, the PPACA imposed a requirement on manufacturers of branded drugs and biologic agents to provide a 50% discount off the
negotiated price of branded drugs dispensed to Medicare Part D patients in the coverage gap (i.e., “donut hole”).
•
Effective in 2011, the PPACA imposed an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription
drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although
this fee would not apply to sales of certain products approved exclusively for orphan indications.
•
Effective in 2012, the PPACA required pharmaceutical manufacturers to track certain financial arrangements with physicians and teaching
hospitals, including any “transfer of value” made or distributed to such entities, as well as any investment interests held by physicians and their
immediate family members. Manufacturers are required to track this information and were required to make their first reports in March 2014.
The information reported is publicly available on a searchable website.
•
As of 2010, a new Patient-Centered Outcomes Research Institute was established pursuant to the PPACA to oversee, identify priorities in and
conduct comparative clinical effectiveness research, along with funding for such research. The research conducted by the Patient-Centered
Outcomes Research Institute may affect the market for certain pharmaceutical products.
•
The PPACA created the Independent Payment Advisory Board, which has the authority to recommend certain changes to the Medicare program
to reduce expenditures by the program that could result in reduced payments for prescription drugs. Under certain circumstances, these
recommendations will become law unless Congress enacts legislation that will achieve the same or greater Medicare cost savings.
•
The PPACA established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models
to lower Medicare and Medicaid spending, potentially including prescription drug spending.
There have been continued public announcements by members of the U.S. Congress regarding plans to repeal and replace the PPACA. For example, on
December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law, which, among other things, eliminated
22
the individual mandate requiring most Americans (other than those who qualify for a hardship exemption) to carry a minimum level of health coverage,
effective January 1, 2019. We cannot predict the ultimate form or timing of any repeal, replacement, amendment, expansion or other modification of the
PPACA or the effect such a repeal, replacement, amendment, expansion or other modification would have on our business.
Pediatric Exclusivity and Pediatric Use
Under the Best Pharmaceuticals for Children Act, or the BPCA, certain drugs may obtain an additional six months of exclusivity if the sponsor submits
information requested in writing by the FDA, or a Written Request, relating to the use of the active moiety of the drug in children. Conditions for
exclusivity include the FDA’s determination that information relating to the use of a new drug in the pediatric population may produce health benefits in
that population, the FDA making a written request for pediatric studies and the applicant agreeing to perform, and reporting on, the requested studies within
the statutory timeframe. The FDA may not issue a Written Request for studies on unapproved or approved indications or where it determines that
information relating to the use of a drug in a pediatric population, or part of the pediatric population, may not produce health benefits in that population.
Applications under the BPCA are treated as priority applications, with all of the benefits that designation confers.
We have not received a Written Request for such pediatric studies, although we may ask the FDA to issue a Written Request for such studies in the future.
To receive the six-month pediatric market exclusivity, we would need to receive a Written Request from the FDA, conduct the requested studies in
accordance with a written agreement with the FDA or, if there is no written agreement, in accordance with commonly accepted scientific principles, and
submit reports of the studies. A Written Request may include studies for indications that are not currently in the labeling if the FDA determines that such
information will benefit the public health. The FDA will accept the reports upon its determination that the studies were conducted in accordance with, and
are responsive to, the original Written Request or commonly accepted scientific principles, as appropriate, and that the reports comply with the FDA’s
filing requirements.
Under the Pediatric Research Equity Act of 2003, or the PREA, an NDA or supplement thereto must contain data that is adequate to assess the safety and
effectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each
pediatric subpopulation for which the product is safe and effective. The PREA also authorizes the FDA to require holders of approved NDAs for marketed
drugs to conduct pediatric studies under certain circumstances. With the enactment of the Food and Drug Administration Safety and Innovation Act, or the
FDASIA, in 2012, sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed
pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests, and other information
required by regulation. The applicant, the FDA and the FDA’s internal review committee must then review the information submitted, consult with each
other and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.
The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the
product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferral
requests and requests for extension of deferrals are contained in the FDASIA. Unless otherwise required by regulation, the pediatric data requirements do
not apply to products with orphan designation.
Intellectual Property
We have in-licensed from Ligand patents and patent applications that contain claims that recite our compounds, as set forth below. We have filed additional
patent applications in the U.S., E.U. and other foreign jurisdictions on our clinical and preclinical programs. Information regarding the issued patents and
pending patent applications, as of December 31, 2024, is as follows:
Subject Matter/Compounds
# Pending
Applications
# Issued
Patents
Geographical Scope
Nominal
Patent Term
TRß agonists
81
39
U.S., Australia, Canada, China, Japan, Korea, Hong Kong, Mexico,
Brazil, Russia, New Zealand, South Africa, Europe and PCT
2025-2043
VK5211 (SARM)
13
21
U.S., Australia, Europe, Chile, Brazil, Canada, China, India, Japan,
Korea, Mexico, New Zealand, South Africa, Taiwan and Venezuela
2025-2040
Other SARM
0
4
U.S., Japan, Korea, and Israel
2026
DGAT-1 Inhibitors
0
4
U.S. and Hong Kong
2030
EPOR Inhibitors
0
11
U.S., Australia, Canada, China, Europe, India, Japan, and Korea
2030
GLP-1 agonists
59
4
U.S., Argentina, Australia, Brazil, Canada, China, Europe, Hong
Kong, Indonesia, Israel, India, Japan, Korea, Mexico,
2042-2044
23
Subject Matter/Compounds
# Pending
Applications
# Issued
Patents
Geographical Scope
Nominal
Patent Term
New Zealand, Philippines, Russia, Saudi Arabia, South Africa,
Taiwan and PCT
Corporate Information
We were incorporated under the laws of the State of Delaware on September 24, 2012. Our principal executive offices are located at 9920 Pacific Heights
Blvd, Suite 350, San Diego, CA 92121, and our telephone number is (858) 704-4660. Our website address is www.vikingtherapeutics.com. We do not
incorporate the information on, or accessible through, our website into this Annual Report on Form 10-K, and you should not consider any information on,
or accessible through, our website as part of this Annual Report on Form 10-K. We have included our website address in this Annual Report on Form 10-K
solely as an inactive textual reference.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge at our website,
www.vikingtherapeutics.com, as soon as reasonably practicable after electronically filing such reports with the SEC. Any information contained on, or that
can be accessed through, our website is not incorporated by reference into, nor is it in any way a part of, this Annual Report on Form 10-K. The SEC also
maintains a website that contains our filings with the SEC. The address of the website is www.sec.gov.
Employees & Human Capital
As of December 31, 2024, we had thirty-six full-time employees, eight of whom hold a Ph.D. or M.D. degree. Our employees are engaged in research and
development, business development or finance. None of our employees are subject to a collective bargaining agreement. We have never experienced a
material work stoppage or disruption to our business relating to employee matters. We consider our relationship with our employees to be good.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new
employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the
granting of stock-based compensation awards.
Item 1A. Risk Factors.
You should consider carefully the following information about the risks described below, together with the other information contained in this Annual
Report on Form 10-K and in our other public filings in evaluating our business. If any of the following risks actually occurs, our business, financial
condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of
our common stock would likely decline.
Risk Factor Summary
Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the
risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the
heading “Risk Factors” and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with
the Securities and Exchange Commission, or the SEC, before making an investment decision regarding our common stock.
•
We are a clinical-stage company, have a limited operating history and are expected to incur significant operating losses during the next stages of
our corporate development.
•
We are substantially dependent on technologies we licensed from Ligand Pharmaceuticals Incorporated, or Ligand, and if we lose the license to
such technologies or our master license agreement with Ligand, or the Master License Agreement, is terminated for any reason, our ability to
develop existing and new drug candidates would be harmed, and our business, financial condition and results of operations would be materially
and adversely affected.
•
We are dependent on the success of one or more of our current drug candidates and we cannot be certain that any of them will receive regulatory
approval or be commercialized.
•
If development of our drug candidates does not produce favorable results, we and our collaborators, if any, may be unable to commercialize
these products.
24
•
Delays in the commencement or completion of clinical trials could result in increased costs to us and delay our ability to establish strategic
collaborations.
•
We intend to rely on third parties to conduct our preclinical studies and clinical trials and perform other tasks for us. If these third parties do not
successfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain
regulatory approval for or commercialize our drug candidates and our business, financial condition and results of operations could be
substantially harmed.
•
If our competitors have drug candidates that are approved faster, are marketed more effectively, are better tolerated, have a more favorable safety
profile or are demonstrated to be more effective than ours, our commercial opportunity may be reduced or eliminated.
•
Unstable market and economic conditions may have serious adverse consequences on our business and financial condition.
•
We may not be successful in obtaining or maintaining necessary rights to our drug candidates through acquisitions and in-licenses.
•
If we fail to comply with our obligations in the agreements under which we in-license intellectual property and other rights from third parties or
otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to
our business.
Risks Relating to Our Business
We are a clinical-stage company, have a limited operating history and are expected to incur significant operating losses during the next stages of
our corporate development.
We are a clinical-stage company. Since our incorporation in September 2012, our operations have been limited to raising capital, building infrastructure,
obtaining the worldwide rights to certain technology from Ligand Pharmaceuticals Incorporated, or Ligand, and planning, preparing and conducting
preclinical studies and clinical trials of our drug candidates, including VK2735 subcutaneous, VK2735 oral, VK2809, VK5211 and VK0612, which are
currently in Phase 2 clinical development, VK0214, for which we recently completed a Phase 1b clinical trial, as well as the dual amylin and calcitonin
receptor agonist, or DACRA, diacylglycerol acyltransferase-1, or DGAT-1 and erythropoietin receptor, or EPOR, programs, which are each currently in
preclinical development. We have not yet demonstrated an ability to obtain marketing approval for any of our drug candidates or successfully overcome the
risks and uncertainties frequently encountered by companies in the biopharmaceutical industry. We also have not generated any revenue to date, and we
continue to incur significant research and development and other expenses. As of December 31, 2024, we had an accumulated deficit of $487.9 million. For
the foreseeable future, we expect to continue to incur losses, which will increase significantly from historical levels as we expand our drug development
activities, seek potential partnering opportunities and/or regulatory approvals for our drug candidates and begin to commercialize them if they are approved
by the U.S. Food and Drug Administration, or the FDA, the European Medicines Agency, or EMA, or comparable foreign authorities. Even if we succeed
in partnering or developing and commercializing one or more drug candidates, we may never become profitable. If we fail to achieve or maintain
profitability, it would adversely affect the value of our common stock.
We are substantially dependent on technologies we licensed from Ligand Pharmaceuticals Incorporated, or Ligand, and if we lose the license to
such technologies or our master license agreement with Ligand, or the Master License Agreement, is terminated for any reason, our ability to
develop existing and new drug candidates would be harmed, and our business, financial condition and results of operations would be materially
and adversely affected.
Our business is substantially dependent upon technology licensed from Ligand. Pursuant to the Master License Agreement, we have been granted exclusive
worldwide rights to VK2809, VK0214, VK5211, VK0612 and preclinical programs for metabolic disorders and anemia. Selective androgen receptor
modulators, such as the one used in our VK5211 program, are key compounds used by us in the development and commercialization of our drug
candidates. Most of the intellectual property related to our drug candidates is currently owned by Ligand, and we have the rights to use such intellectual
property pursuant to the Master License Agreement. Therefore, our ability to develop and commercialize certain of our drug candidates depends entirely on
the effectiveness and continuation of the Master License Agreement. If we lose the right to license any of these key compounds, our ability to develop
existing and new drug candidates would be harmed.
Ligand has the right to terminate the Master License Agreement under certain circumstances, including, but not limited to: (1) in the event of our
insolvency or bankruptcy, (2) if we do not pay an undisputed amount owing under the Master License Agreement when due and fail to cure such default
within a specified period of time, or (3) if we default on certain of our material obligations and fail to cure the default within a specified period of time.
25
We are dependent on the success of one or more of our current drug candidates and we cannot be certain that any of them will receive regulatory
approval or be commercialized.
We have spent significant time, money and effort on the licensing and development of our core metabolic and endocrine disease assets, VK2735
subcutaneous, VK2735 oral, VK2809, VK0214, VK5211, VK0612 and our earlier-stage assets, our DACRA, DGAT-1 and EPOR programs. To date, no
pivotal clinical trials designed to provide clinically and statistically significant proof of efficacy, or to provide sufficient evidence of safety to justify
approval, have been completed with any of our drug candidates. All of our drug candidates will require additional development, including clinical trials as
well as further preclinical studies to evaluate their toxicology, carcinogenicity and pharmacokinetics and optimize their formulation, and regulatory
clearances before they can be commercialized. Positive results obtained during early development do not necessarily mean later development will succeed
or that regulatory clearances will be obtained. Our drug development efforts may not lead to commercial drugs, either because our drug candidates fail to
be safe and effective or because we have inadequate financial or other resources to advance our drug candidates through the clinical development and
approval processes. If any of our drug candidates fail to demonstrate safety or efficacy at any time or during any phase of development, we would
experience potentially significant delays in, or be required to abandon, development of the drug candidate.
We do not anticipate that any of our current drug candidates will be eligible to receive regulatory approval from the FDA, EMA or comparable foreign
authorities and begin commercialization for a number of years, if ever. Even if we ultimately receive regulatory approval for any of these drug candidates,
we or our potential future partners, if any, may be unable to commercialize them successfully for a variety of reasons. These include, for example, the
availability of alternative treatments, lack of cost-effectiveness, the cost of manufacturing the product on a commercial scale and competition with other
drugs. The success of our drug candidates may also be limited by the prevalence and severity of any adverse side effects. If we fail to commercialize one or
more of our current drug candidates, we may be unable to generate sufficient revenues to attain or maintain profitability, and our financial condition and
stock price may decline.
If development of our drug candidates does not produce favorable results, we and our collaborators, if any, may be unable to commercialize these
products.
To receive regulatory approval for the commercialization of our core metabolic and endocrine disease assets, VK2735 subcutaneous, VK2735 oral,
VK2809, VK0214, VK5211, VK0612 and our earlier-stage assets, our DACRA, DGAT-1 and EPOR programs, or any other drug candidates that we may
develop, adequate and well-controlled clinical trials must be conducted to demonstrate safety and efficacy in humans to the satisfaction of the FDA, EMA
and comparable foreign authorities. In order to support marketing approval, these agencies typically require successful results in one or more Phase 3
clinical trials, which our current drug candidates have not yet reached and may never reach. The development process is expensive, can take many years
and has an uncertain outcome. Failure can occur at any stage of the process. We may experience numerous unforeseen events during, or as a result of, the
development process that could delay or prevent commercialization of our current or future drug candidates, including the following:
•
clinical trials may produce negative or inconclusive results;
•
preclinical studies conducted with drug candidates during clinical development to, among other things, evaluate their toxicology,
carcinogenicity and pharmacokinetics and optimize their formulation may produce unfavorable results;
•
patient recruitment and enrollment in clinical trials may be slower than we anticipate;
•
costs of development may be greater than we anticipate;
•
our drug candidates may cause undesirable side effects that delay or preclude regulatory approval or limit their commercial use or market
acceptance, if approved;
•
collaborators who may be responsible for the development of our drug candidates may not devote sufficient resources to these clinical trials
or other preclinical studies of these candidates or conduct them in a timely manner; or
•
we may face delays in obtaining regulatory approvals to commence one or more clinical trials.
Success in early development does not mean that later development will be successful because, for example, drug candidates in later-stage clinical trials
may fail to demonstrate sufficient safety and efficacy despite having progressed through initial clinical trials.
In February 2024, we reported positive top-line results from the VENTURE Phase 2 clinical trial for VK2735 in patients with obesity, and we plan to
advance the subcutaneous formulation of VK2735 into Phase 3 development. In May 2023, we reported positive top-line results from the VOYAGE Phase
2b clinical trial for VK2809 and in June 2024, we announced positive 52-week histologic data from the VOYAGE study. In late 2017, we reported positive
top-line results from a Phase 2 clinical trial for VK5211. In October 2024, we reported positive data from our Phase 1b clinical trial of VK0214 in patients
with X-ALD. However, there is no guarantee that the results of our Phase 2 clinical trials for VK2735 subcutaneous or VK2809 or our Phase 1b clinical
trial for VK2014 will be
26
repeated for our other drug candidates or lead to other positive outcomes, including any Phase 3 trials. As a company, we have conducted only a limited
number of clinical trials and preclinical studies for our drug candidates. Therefore, we have limited experience in conducting clinical trials for our drug
candidates. Since our experience with our drug candidates is limited, we will need to train our existing personnel and hire additional personnel in order to
successfully administer and manage our clinical trials and other studies as planned, which may result in delays in completing such planned clinical trials
and preclinical studies. Moreover, to date, our drug candidates have been tested in less than the number of patients that will likely need to be studied to
obtain regulatory approval. The data collected from clinical trials with larger patient populations may not demonstrate sufficient safety and efficacy to
support regulatory approval of these drug candidates.
We currently do not have strategic collaborations in place for clinical development of any of our current drug candidates. Therefore, in the future, we or
any potential future collaborative partner will be responsible for establishing the targeted endpoints and goals for development of our drug candidates.
These targeted endpoints and goals may be inadequate to demonstrate the safety and efficacy levels required for regulatory approvals. Even if we believe
data collected during the development of our drug candidates are promising, such data may not be sufficient to support marketing approval by the FDA,
EMA or comparable foreign authorities. Further, data generated during development can be interpreted in different ways, and the FDA, EMA or
comparable foreign authorities may interpret such data in different ways than us or our collaborators. Our failure to adequately demonstrate the safety and
efficacy of our drug candidates would prevent our receipt of regulatory approval, and ultimately the potential commercialization of these drug candidates.
Since we do not currently possess the resources necessary to independently develop and commercialize the majority of our drug candidates, we may seek to
enter into collaborative agreements to assist in the development and potential future commercialization of some or all of these assets as a component of our
strategic plan. However, our discussions with potential collaborators may not lead to the establishment of collaborations on acceptable terms, if at all, or it
may take longer than expected to establish new collaborations, leading to development and potential commercialization delays, which would adversely
affect our business, financial condition and results of operations.
We expect to continue to incur significant research and development expenses, which may make it difficult for us to attain profitability.
We expect to expend substantial funds in research and development, including preclinical studies and clinical trials of our drug candidates, and to
manufacture and market any drug candidates in the event they are approved for commercial sale. We also may need additional funding to develop or
acquire complementary companies, technologies and assets, as well as for working capital requirements and other operating and general corporate
purposes. Moreover, our planned increases in staffing will dramatically increase our costs in the near and long-term.
However, our spending on current and future research and development programs and drug candidates for specific indications may not yield any
commercially viable products. Due to our limited financial and managerial resources, we must focus on a limited number of research programs and drug
candidates and on specific indications. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable
market opportunities.
Because the successful development of our drug candidates is uncertain, we are unable to precisely estimate the actual funds we will require to develop and
potentially commercialize them. In addition, we may not be able to generate sufficient revenue, even if we are able to commercialize any of our drug
candidates, to become profitable.
Given our lack of current cash inflows, it is expected that we may need to raise additional capital; however, it may be unavailable to us or, even if
capital is obtained, may cause dilution or place significant restrictions on our ability to operate our business.
Since we will be unable to generate sufficient, if any, cash inflows to fund our operations for the foreseeable future, we may need to seek additional equity
or debt financing to provide the capital required to maintain or expand our operations. As of December 31, 2024, we had cash, cash equivalents and
investments totaling $902.6 million. There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all. If
such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, we may be required to delay, limit or eliminate the
development of business opportunities and our ability to achieve our business objectives, our competitiveness, and our business, financial condition and
results of operations may be materially adversely affected. In addition, we may be required to grant rights to develop and market drug candidates that we
would otherwise prefer to develop and market ourselves. Our inability to fund our business could lead to the loss of your investment. Our future capital
requirements will depend on many factors, including, but not limited to:
•
the scope, rate of progress, results and cost of our clinical trials, preclinical studies and other related activities;
27
•
our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such arrangements;
•
the timing of, and the costs involved in, obtaining regulatory approvals for any of our current or future drug candidates;
•
the number and characteristics of the drug candidates we seek to develop or commercialize;
•
the cost of manufacturing clinical supplies, and establishing commercial supplies, of our drug candidates;
•
the cost of commercialization activities if any of our current or future drug candidates are approved for sale, including marketing, sales and
distribution costs;
•
the expenses needed to attract and retain skilled personnel;
•
the costs associated with being a public company;
•
the amount of revenue, if any, received from commercial sales of our drug candidates, should any of our drug candidates receive marketing
approval; and
•
the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing possible patent claims, including litigation costs
and the outcome of any such litigation.
On July 26, 2023, we filed an automatic universal shelf registration statement on Form S-3 (File No. 333-273460) with the SEC as a well-known seasoned
issuer as defined in Rule 405 under the Securities Act of 1933, as amended, which became effective upon filing, or the 2023 Shelf Registration Statement.
The 2023 Shelf Registration Statement allows us to offer an indeterminate amount of securities, including equity securities, debt securities, warrants, rights,
units and depositary shares, from time to time as described in the 2023 Shelf Registration Statement. The specific terms of any offering under the 2023
Shelf Registration Statement will be established at the time of such offering under a separate prospectus supplement, which will be filed with the SEC at
the time of any offering. The 2023 Shelf Registration Statement will expire on July 26, 2026.
The 2023 Shelf Registration Statement includes a prospectus, or the ATM Prospectus, pursuant to which we may offer and sell, from time to time, through
or to Stifel, Nicolaus & Company, Incorporated, Truist Securities, Inc., H.C. Wainwright & Co. LLC and BTIG, LLC, or, collectively, the ATM Agents, as
sales agent(s) or principal(s), shares of our common stock having an aggregate offering price of up to $200.0 million, or the ATM Offering. Any shares
offering and sold in ATM Offering will be issued pursuant to the ATM Prospectus and the At-The-Market Equity Offering Sales Agreement, dated July 28,
2021, as amended on July 26, 2023, among us and the ATM Agents. As of December 31, 2024, we may sell shares of our common stock for remaining
gross proceeds of up to $151.9 million from time to time pursuant to the ATM Prospectus.
On March 4, 2024, we completed an underwritten public offering of our common stock, or the March 2024 Offering, pursuant to the 2023 Shelf
Registration Statement. In the March 2024 Offering, we sold an aggregate of 7,441,650 shares of our common stock at a public offering price of $85.00 per
share, which included the exercise in full by the underwriters of their option to purchase 970,650 additional shares of common stock. Of the shares sold,
2,193,251 were issued out of our treasury shares. Upon the closing of the March 2024 Offering, we received net proceeds of $597.1 million, after deducting
underwriting discounts, commissions and other offering expenses.
If we raise additional capital by issuing equity securities, the percentage ownership of our existing stockholders may be reduced, and accordingly these
stockholders may experience substantial dilution. We may also issue equity securities that provide for rights, preferences and privileges senior to those of
our common stock. Given our need for cash and that equity issuances are the most common type of fundraising for companies like ours, the risk of dilution
is particularly significant for stockholders of our company.
Our drug candidates may cause undesirable side effects that could delay or prevent their regulatory approval or commercialization or have other
significant adverse implications on our business, financial condition and results of operations.
Undesirable side effects observed in clinical trials or in supportive preclinical studies with our drug candidates could interrupt, delay or halt their
development and could result in the denial of regulatory approval by the FDA, EMA or comparable foreign authorities for any or all targeted indications or
adversely affect the marketability of any such drug candidates that receive regulatory approval. In turn, this could eliminate or limit our ability to
commercialize our drug candidates.
Our drug candidates may exhibit adverse effects in preclinical toxicology studies and adverse interactions with other drugs. There are also risks associated
with additional requirements the FDA, EMA or comparable foreign authorities may impose for marketing approval with regard to a particular disease.
28
Our drug candidates may require a risk management program that could include patient and healthcare provider education, usage guidelines, appropriate
promotional activities, a post-marketing observational study, and ongoing safety and reporting mechanisms, among other requirements. Prescribing could
be limited to physician specialists or physicians trained in the use of the drug, or could be limited to a more restricted patient population. Any risk
management program required for approval of our drug candidates could potentially have an adverse effect on our business, financial condition and results
of operations.
Undesirable side effects involving our drug candidates may have other significant adverse implications on our business, financial condition and results of
operations. For example:
•
we may be unable to obtain additional financing on acceptable terms, if at all;
•
our collaborators may terminate any development agreements covering these drug candidates;
•
if any development agreements are terminated, we may determine not to further develop the affected drug candidates due to resource
constraints and may not be able to establish additional collaborations for their further development on acceptable terms, if at all;
•
if we were to later continue the development of these drug candidates and receive regulatory approval, earlier findings may significantly limit
their marketability and thus significantly lower our potential future revenues from their commercialization;
•
we may be subject to product liability or stockholder litigation; and
•
we may be unable to attract and retain key employees.
In addition, if any of our drug candidates receive marketing approval and we or others later identify undesirable side effects caused by the product:
•
regulatory authorities may withdraw their approval of the product, or we or our partners may decide to cease marketing and sale of the
product voluntarily;
•
we may be required to change the way the product is administered, conduct additional clinical trials or preclinical studies regarding the
product, change the labeling of the product, or change the product’s manufacturing facilities; and
•
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the affected product and could substantially increase the costs
and expenses of commercializing the product, which in turn could delay or prevent us from generating significant revenues from the sale of the product.
Our efforts to discover drug candidates beyond our current drug candidates may not succeed, and any drug candidates we recommend for clinical
development may not actually begin clinical trials.
We intend to continue to use our technology, including our licensed technology, knowledge and expertise to develop novel drugs to address some of the
world’s most widespread and costly chronic diseases. We intend to expand our existing pipeline of core assets by advancing drug compounds from current
ongoing discovery programs into clinical development. However, the process of researching and discovering drug compounds is expensive, time-
consuming and unpredictable. Data from our current preclinical programs may not support the clinical development of our lead compounds or other
compounds from these programs, and we may not identify any additional drug compounds suitable for recommendation for clinical development.
Moreover, any drug compounds we recommend for clinical development may not demonstrate, through preclinical studies, indications of safety and
potential efficacy that would support advancement into clinical trials. Such findings would potentially impede our ability to maintain or expand our clinical
development pipeline. Our ability to identify new drug compounds and advance them into clinical development also depends upon our ability to fund our
research and development operations, and we cannot be certain that additional funding will be available on acceptable terms, or at all.
We may expend our limited resources to pursue a specific product candidate or indication and fail to capitalize on product candidates or
indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we must focus on a limited number of research programs and product candidates and on
specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to
have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market
opportunities. Our spending on current and future discovery and preclinical development programs and product candidates for specific indications may not
yield any commercially viable products. In addition, our projections of both the number of people who have the targeted indications, as well as the subset
of people with these
29
disorders who have the potential to benefit from treatment with our product candidates, are based on estimates. If any of our estimates are inaccurate, the
market opportunities for any of our product candidates could be significantly diminished and have an adverse material impact on our business.
Additionally, the potentially addressable patient population for our product candidates may be limited, or may not be amenable to treatment with our
product candidates.
Delays in the commencement or completion of clinical trials could result in increased costs to us and delay our ability to establish strategic
collaborations.
Delays in the commencement or completion of clinical trials could significantly impact our drug development costs. We do not know whether planned
clinical trials will begin on time or be completed on schedule, if at all. The commencement of clinical trials can be delayed for a variety of reasons,
including, but not limited to, delays related to:
•
obtaining regulatory approval to commence one or more clinical trials;
•
reaching agreement on acceptable terms with prospective CROs and clinical trial sites;
•
manufacturing sufficient quantities of a drug candidate or other materials necessary to conduct clinical trials, as well as receiving the supplies
and materials needed to conduct our clinical trials, including interruptions in global shipping that may affect the transport of clinical
materials;
•
obtaining institutional review board approval to conduct one or more clinical trials at a prospective site;
•
recruiting and enrolling patients to participate in one or more clinical trials, especially as patients may be reluctant or unable to visit clinical
sites, or may delay seeking treatment for chronic conditions;
•
the failure of our collaborators to adequately resource our drug candidates due to their focus on other programs or as a result of general
market conditions;
•
recruiting clinical site investigators, clinical site staff and potential closure of clinical facilities; and
•
changes in regulations, which may require us to change the ways in which our clinical trials are conducted.
In addition, once a clinical trial has begun, it may be suspended or terminated by us, our collaborators, the institutional review boards or data safety
monitoring boards charged with overseeing our clinical trials, the FDA, EMA or comparable foreign authorities due to a number of factors, including:
•
failure to conduct the clinical trial in accordance with regulatory requirements or clinical protocols;
•
inspection of the clinical trial operations or clinical trial site by the FDA, EMA or comparable foreign authorities resulting in the imposition
of a clinical hold;
•
unforeseen safety issues; or
•
lack of adequate funding to continue the clinical trial.
If we experience delays in the completion or termination of any clinical trial of our product candidates, the commercial prospects of our product candidates
will be harmed, and our ability to commence product sales and generate product revenues from any of our product candidates will be delayed. In addition,
any delays in completing our clinical trials will increase our costs and slow down our product candidate development and approval process. Delays in
completing our clinical trials could also allow our competitors to obtain marketing approval before we do or shorten the patent protection period during
which we may have the exclusive right to commercialize our product candidates. Any of these occurrences may harm our business, financial condition and
prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also
ultimately lead to the denial of regulatory approval of our product candidates.
Results of earlier clinical trials may not be predictive of the results of later-stage clinical trials.
The results of preclinical studies and early clinical trials of product candidates may not be predictive of the results of later-stage clinical trials. Product
candidates in later stages of clinical trials may fail to show the desired safety and efficacy results despite having progressed through preclinical studies and
initial clinical trials. Many companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to adverse safety
profiles or lack of efficacy, notwithstanding promising results in earlier studies. Similarly, our future clinical trial results may not be successful for these or
other reasons.
This drug candidate development risk is heightened by any changes in the planned clinical trials compared to the completed clinical trials. As product
candidates are developed through preclinical to early to late stage clinical trials towards approval and commercialization, it is customary that various
aspects of the development program, such as manufacturing and methods of
30
administration, are altered along the way in an effort to optimize processes and results. While these types of changes are common and are intended to
optimize the product candidates for late stage clinical trials, approval and commercialization, such changes carry the risk that they will not achieve these
intended objectives.
Any of these changes could make the results of our planned clinical trials or other future clinical trials we may initiate less predictable and could cause our
product candidates to perform differently, including causing toxicities, which could delay completion of our clinical trials, delay approval of our product
candidates and/or jeopardize our ability to commence product sales and generate revenues.
If we experience delays in the enrollment of patients in our clinical trials, our receipt of necessary regulatory approvals could be delayed or
prevented.
We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible
patients to participate in these trials as required by the FDA or other regulatory authorities. Patient enrollment, a significant factor in the timing of clinical
trials, is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for
the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being
studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating. For example, the
COVID-19 pandemic previously negatively impacted our ability to recruit and enroll patients for our clinical trials, as they may have been reluctant or
unable to visit clinical sites, or may have delayed seeking treatment for chronic conditions.
If we fail to enroll and maintain the number of patients for which the clinical trial was designed, the statistical power of that clinical trial may be reduced,
which would make it harder to demonstrate that the product candidate being tested in such clinical trial is safe and effective. Additionally, enrollment
delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline
and limit our ability to obtain additional financing. Our inability to enroll a sufficient number of patients for any of our current or future clinical trials
would result in significant delays or may require us to abandon one or more clinical trials altogether.
We intend to rely on third parties to conduct our preclinical studies and clinical trials and perform other tasks for us. If these third parties do not
successfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain
regulatory approval for or commercialize our drug candidates and our business, financial condition and results of operations could be
substantially harmed.
We have relied upon and plan to continue to rely upon third-party CROs, medical institutions, clinical investigators and contract laboratories to monitor
and manage data for our licensed ongoing preclinical and clinical programs. Nevertheless, we maintain responsibility for ensuring that each of our clinical
trials and preclinical studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and our reliance on these
third parties does not relieve us of our regulatory responsibilities. We and our CROs and other vendors are required to comply with current requirements on
good manufacturing practices, or cGMP, good clinical practices, or GCP, and good laboratory practice, or GLP, which are a collection of laws and
regulations enforced by the FDA, EMA or comparable foreign authorities for all of our drug candidates in clinical development. Regulatory authorities
enforce these regulations through periodic inspections of preclinical study and clinical trial sponsors, principal investigators, preclinical study and clinical
trial sites, and other contractors. If we or any of our CROs or vendors fail to comply with applicable regulations, the data generated in our preclinical
studies and clinical trials may be deemed unreliable and the FDA, EMA or comparable foreign authorities may require us to perform additional preclinical
studies and clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such
regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with
products produced consistent with cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would
delay the development and regulatory approval processes.
If any of our relationships with these third-party CROs, medical institutions, clinical investigators or contract laboratories terminate, we may not be able to
enter into arrangements with alternative CROs on commercially reasonable terms, or at all. In addition, our CROs are not our employees, and except for
remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our ongoing
preclinical and clinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to
be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols, regulatory requirements, or for
other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully
commercialize our drug candidates. CROs may also generate higher costs than anticipated. As a result, our business, financial condition, results of
operations and the commercial prospects for our drug candidates could be materially and adversely affected, our costs could increase and our ability to
generate revenue could be delayed.
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Switching or adding additional CROs, medical institutions, clinical investigators or contract laboratories involves additional cost and requires
management’s time and focus. In addition, there is a natural transition period when a new CRO commences work replacing a previous CRO. As a result,
delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships
with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not
have a material adverse effect on our business, financial condition or results of operations.
In addition, our CROs may need to make certain adjustments to the operation of our trials in an effort to ensure the monitoring and safety of patients and
minimize risks to trial integrity during the pandemic in accordance with the guidance issued by the FDA on March 18, 2020 and generally, and may need to
make further adjustments in the future. Many of these adjustments are new and untested, may not be effective, and may have unforeseen effects on the
enrollment, progress and completion of these trials and the findings from these trials.
Our drug candidates are subject to extensive regulation under the FDA, EMA or comparable foreign authorities, which can be costly and time
consuming, cause unanticipated delays or prevent the receipt of the required approvals to commercialize our drug candidates.
The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, export, marketing and distribution of our drug
candidates are subject to extensive regulation by the FDA and other U.S. regulatory agencies, EMA or comparable authorities in foreign markets. In the
U.S., neither we nor our collaborators are permitted to market our drug candidates until we or our collaborators receive approval of a new drug application,
or an NDA, from the FDA or receive similar approvals abroad. The process of obtaining these approvals is expensive, often takes many years, and can vary
substantially based upon the type, complexity and novelty of the drug candidates involved. Approval policies or regulations may change and may be
influenced by the results of other similar or competitive products, making it more difficult for us to achieve such approval in a timely manner or at all. For
example, the FDA has released draft guidance regarding clinical trials for drug candidates treating diabetes that may result in more stringent requirements
for the clinical trials and regulatory approval of such drug candidates. This and any future guidance that may result from recent FDA advisory panel
discussions on the topic of diabetes, non-alcoholic steatohepatitis, or NASH/MASH, and other metabolic indications, may make it more expensive to
develop and commercialize such drug candidates for such indications. Such increased expense could make it more difficult to obtain favorable terms in the
collaborative arrangements we require to maximize the value of our programs seeking to develop new drug candidates for diabetes. In addition, as a
company, we have not previously filed NDAs with the FDA or filed similar applications with other foreign regulatory agencies. This lack of experience
may impede our ability to obtain FDA or other foreign regulatory agency approval in a timely manner, if at all, for our drug candidates for which
development and commercialization is our responsibility.
Despite the time and expense invested, regulatory approval is never guaranteed. The FDA, EMA or comparable foreign authorities can delay, limit or deny
approval of a drug candidate for many reasons, including:
•
a drug candidate may not be deemed safe or effective;
•
agency officials of the FDA, EMA or comparable foreign authorities may not find the data from non-clinical or preclinical studies and
clinical trials generated during development to be sufficient;
•
the FDA, EMA or comparable foreign authorities may not approve our third-party manufacturers’ processes or facilities; or
•
the FDA, EMA or a comparable foreign authority may change its approval policies or adopt new regulations.
Our inability to obtain these approvals would prevent us from commercializing our drug candidates.
Even if our drug candidates receive regulatory approval in the U.S., we may never receive approval or commercialize our products outside of the
U.S.
In order to market any products outside of the U.S., we must establish and comply with numerous and varying regulatory requirements of other countries
regarding safety and efficacy. Approval procedures vary among countries and can involve additional product testing and additional administrative review
periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in
other countries may include all of the risks detailed above regarding FDA approval in the U.S. as well as other risks. Regulatory approval in one country
does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the
regulatory process in others. Failure to obtain regulatory approval in other countries or any delay seeking or obtaining such approval would impair our
ability to develop foreign markets for our drug candidates.
32
Even if any of our drug candidates receive regulatory approval, our drug candidates may still face future development and regulatory difficulties.
If any of our drug candidates receive regulatory approval, the FDA, EMA or comparable foreign authorities may still impose significant restrictions on the
indicated uses or marketing of the drug candidates or impose ongoing requirements for potentially costly post-approval studies and trials. In addition,
regulatory agencies subject a product, its manufacturer and the manufacturer’s facilities to continual review and periodic inspections. If a regulatory agency
discovers previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or problems with the facility
where the product is manufactured, a regulatory agency may impose restrictions on that product, our collaborators or us, including requiring withdrawal of
the product from the market. Our drug candidates will also be subject to ongoing FDA, EMA or comparable foreign authorities’ requirements for the
labeling, packaging, storage, advertising, promotion, record-keeping and submission of safety and other post-market information on the drug. If our drug
candidates fail to comply with applicable regulatory requirements, a regulatory agency may:
•
issue warning letters or other notices of possible violations;
•
impose civil or criminal penalties or fines or seek disgorgement of revenue or profits;
•
suspend any ongoing clinical trials;
•
refuse to approve pending applications or supplements to approved applications filed by us or our collaborators;
•
withdraw any regulatory approvals;
•
impose restrictions on operations, including costly new manufacturing requirements, or shut down our manufacturing operations; or
•
seize or detain products or require a product recall.
The FDA, EMA and comparable foreign authorities actively enforce the laws and regulations prohibiting the promotion of off-label uses.
The FDA, EMA and comparable foreign authorities strictly regulate the promotional claims that may be made about prescription products, such as our drug
candidates, if approved. In particular, a product may not be promoted for uses that are not approved by the FDA, EMA or comparable foreign authorities as
reflected in the product’s approved labeling. If we receive marketing approval for our drug candidates for our proposed indications, physicians may
nevertheless use our products for their patients in a manner that is inconsistent with the approved label, if the physicians personally believe in their
professional medical judgment that our products could be used in such manner. However, if we are found to have promoted our products for any off-label
uses, the federal government could levy civil, criminal or administrative penalties, and seek fines against us. Such enforcement has become more common
in the industry. The FDA, EMA or comparable foreign authorities could also request that we enter into a consent decree or a corporate integrity agreement
or seek a permanent injunction against us under which specified promotional conduct is monitored, changed or curtailed. If we cannot successfully manage
the promotion of our drug candidates, if approved, we could become subject to significant liability, which would materially adversely affect our business,
financial condition and results of operations.
If our competitors have drug candidates that are approved faster, are marketed more effectively, are better tolerated, have a more favorable
safety profile or are demonstrated to be more effective than ours, our commercial opportunity may be reduced or eliminated.
The biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.
While we believe that our technology, knowledge, experience and scientific resources provide us with competitive advantages, we face potential
competition from many different sources, including commercial biopharmaceutical enterprises, academic institutions, government agencies and private and
public research institutions. Any drug candidates that we successfully develop and commercialize will compete with existing therapies and new therapies
that may become available in the future.
Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical studies,
clinical trials, regulatory approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant
competitors, particularly through collaborative arrangements with large and established companies. Our competitors may succeed in developing
technologies and therapies that are more effective, better tolerated or less costly than any which we are developing, or that would render our drug
candidates obsolete and noncompetitive. Even if we obtain regulatory approval for any of our drug candidates, our competitors may succeed in obtaining
regulatory approvals for their products earlier than we do. We will also face competition from these third parties in recruiting and retaining qualified
scientific and management
33
personnel, in establishing clinical trial sites and patient registration for clinical trials, and in acquiring and in-licensing technologies and products
complementary to our programs or advantageous to our business.
The key competitive factors affecting the success of each of our drug candidates, if approved, are likely to be its efficacy, safety, tolerability, frequency and
route of administration, convenience and price, the level of branded and generic competition and the availability of coverage and reimbursement from
government and other third-party payors.
VK2735
VK2735, if approved, will compete against therapies that are already approved and marketed for obesity, including Semaglutide (Wegovy®) and
liraglutide (Saxenda®) from Novo Nordisk A/S, and tirzepatide (Zepbound™) from Eli Lilly and Company. We are also aware of several programs
targeting obesity that are in the late development stage that will compete against VK2735, if approved, including CagriSema from Novo Nordisk A/S,
orforglipron and retatrutide from Eli Lilly and Company, and survodutide (BI 456906) from Boehringer Ingelheim International GmbH. In addition, we
are aware of active programs at Altimmune, Inc., Amgen Inc., Ascletis Pharma Inc., AstraZeneca, BioAge Labs, Corxel, D&D Pharmatech, Inc., ERX
Pharmaceuticals Inc., F. Hoffmann-La Roche Ltd, Gubra, Hanmi Pharmaceutical Co., Ltd., Kailera Therapeutics, Kallyope Inc., Metsera, NeuroBo,
NodThera, Pfizer Inc., QL Pharma Co., Regeneron Pharmaceuticals Inc., Rivus Pharmaceuticals Inc., Sciwind Biosciences Co., Ltd., Scholar Rock,
Structure Therapeutics Inc., Terns Pharmaceuticals, Inc., Veru Inc., and Zealand Pharma A/S.
VK2809
Resmetirom (Rezdiffra™), another agonist of the thyroid hormone receptor beta, or TRß, from Madrigal Pharmaceuticals, Inc., is the only therapy
currently approved in the U.S. for the treatment of NASH/MASH. In addition, we are aware of numerous development-stage programs targeting this
disease, including arachidyl amido cholanoic acid from Galmed Pharmaceuticals Ltd., belapectin from Galectin Therapeutics Inc., lanifibranor from
Inventiva S.A., semaglutide from Novo Nordisk A/S, firsocostat (GS-0976) and cilofexor (GS-9674) from Gilead Sciences, Inc., tirzepatide from Eli Lilly
and Company, ervogastat (PF-06865571) and clesacostat (PF-05221304) from Pfizer Inc., efruxifermin (AKR-001) from Akero Therapeutics, Inc.,
pegozafermin (BIO89-100) from 89bio, Inc., denifanstat (TVB-2640) from Sagimet Biosciences Inc., efocipegtrutide (HM15211) from Hanmi
Pharmaceutical Co., Ltd., survodutide (BI 456906) from Boehringer Ingelheim International GmbH, ION224 and ION839 from Ionis Pharmaceuticals,
Inc., rencofilstat (CRV431) from Hepion Pharmaceuticals, Inc., HTD1801 from HighTide Therapeutics Inc., GSK4532990 (ARO-HSD) from
GlaxoSmithKline plc., ALN-HSD from Alnylam Pharmaceuticals, Inc./ Regeneron Pharmaceuticals Inc., efinopegdutide (MK-6024) from Merck & Co.,
Inc., and pemvidutide (ALT-801) from Altimmune, Inc. In addition, we are aware of active programs at Aligos Therapeutics, Inc., Arrowhead
Pharmaceuticals, Inc., Ascletis Biopharmaceutical, AstraZeneca PLC, Boston Pharmaceuticals Inc., Can-Fite BioPharma Ltd., ChemomAb Ltd., CohBar,
Inc., Corcept Therapeutics Inc., CytoDyn Inc., D&D Pharmatech, Inc., Durect Corporation, Enyo Pharma SA, Inc., Future Medicine Co., Ltd., Galecto,
Inc., Gelesis Holdings Inc., Hepagene Therapeutics, Inc., Kowa Company, Ltd., MediciNova Inc., Seal Rock Therapeutics, Inc., Theratechnologies Inc.,
Yuhan Corporation, and Cadila Healthcare Limited (a.k.a. Zydus Cadila).
VK0214
In the U.S., there are currently no marketed therapies for the treatment of X-ALD. Hematopoietic stem cell therapy has been used to treat the most severe
form of X-ALD, cerebral adrenoleukodystrophy, or CALD. More recently, gene therapy has been shown to be effective in CALD, and elivaldogene
autotemcel from bluebird bio, Inc., has received accelerated approval by the FDA (to slow the progression of neurologic dysfunction in boys 4-17 years of
age with early, active CALD), and approval by the European Commission (for patients less than 18 years of age with early CALD without a matched
sibling donor). However, both treatments are invasive, requiring surgical intervention, and these do not appear to have an effect on the most pervasive
form of X-ALD, adrenomyeloneuropathy, or AMN. There are several experimental therapies that are in various stages of clinical development for X-ALD
by companies, including Minoryx Therapeutics S.L., Neuraxpharm Group, Poxel SA, and Spur Therapeutics, Inc. (formerly SwanBio Therapeutics Inc.),
which may be competitive with VK0214, if approved.
VK5211
In the U.S., there are currently no marketed therapies for the maintenance or improvement of lean body mass, bone mineral density or physical function in
patients recovering from non-elective hip fracture surgery. However, VK5211, if approved, will face competition from experimental therapies that are in
various stages of clinical development for conditions characterized by muscle wasting by companies including Biophytis SA, and Helsinn Group. In
addition, nutritional and growth hormone-based therapies are sometimes used in patients experiencing muscle wasting.
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We, or any future collaborators, may not be able to obtain orphan drug designation or orphan drug exclusivity for our product candidates.
Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan
drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is
generally defined as a patient population of fewer than 200,000 individuals annually in the United States. While we received orphan drug designation from
the FDA for VK0214 for the treatment X-ALD in December 2016, we, or any future collaborators, may not be granted orphan drug designations for our
product candidates in the U.S. or in other jurisdictions.
Even if we, or any future collaborators, obtain orphan drug designation for a product candidate, we, or they, may not be able to obtain orphan drug
exclusivity for that product candidate. Generally, a product with orphan drug designation only becomes entitled to orphan drug exclusivity if it receives the
first marketing approval for the indication for which it has such designation, in which case the FDA or the EMA will be precluded from approving another
marketing application for the same drug for that indication for the applicable exclusivity period. The applicable exclusivity period is seven years in the
United States and ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug
designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or the
EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet
the needs of patients with the rare disease or condition.
Additionally, in Catalyst Pharms., Inc. v. Becerra, 14 F.4th 1299 (11th Cir. 2021), the court disagreed with the FDA’s longstanding position that the
orphan drug exclusivity only applies to the approved use or indication within the relevant orphan drug designation. This decision created uncertainty in the
application of the orphan drug exclusivity. In January 2023, the FDA published a notice in the Federal Register to clarify that while the FDA complies with
the court’s order in Catalyst, the FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the
Catalyst order – that is, the agency will continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved, which
permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that have not yet
been approved. It is unclear how future litigation, legislation, FDA decisions, and administrative actions will impact the scope of the orphan drug
exclusivity.
Even if we, or any future collaborators, obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from
competition because FDA has taken the position that, under certain circumstances, another drug with the same active moiety can be approved for the same
condition. Specifically, the FDA’s regulations provide that it can approve another drug with the same active moiety for the same condition if the FDA
concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.
We are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our drug candidates.
The process of manufacturing our drug candidates is complex, highly regulated and subject to several risks. For example, the process of manufacturing our
drug candidates is extremely susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, or
vendor or operator error. Even minor deviations from normal manufacturing processes for any of our drug candidates could result in reduced production
yields, product defects and other supply disruptions. If microbial, viral, or other contaminations are discovered in our drug candidates or in the
manufacturing facilities in which our drug candidates are made, such manufacturing facilities may need to be closed for an extended period of time to
investigate and remedy the contamination. In addition, the manufacturing facilities in which our drug candidates are made could be adversely affected by
equipment failures, labor shortages, natural disasters, epidemics, pandemics, power failures and numerous other factors.
In addition, any adverse developments affecting manufacturing operations of our drug candidates may result in shipment delays, inventory shortages, lot
failures, withdrawals or recalls, or other interruptions in the supply of our drug candidates. We also may need to take inventory write-offs and incur other
charges and expenses for drug candidates that fail to meet specifications, undertake costly remediation efforts, or seek costlier manufacturing alternatives.
We rely completely on third parties to manufacture our preclinical and clinical drug supplies, and our business, financial condition and results of
operations could be harmed if those third parties fail to provide us with sufficient quantities of drug product, or fail to do so at acceptable quality
levels or prices.
We do not currently have, nor do we plan to acquire, the infrastructure or capability internally to manufacture our preclinical and clinical drug supplies for
use in our clinical trials, and we lack the current resources and the capability to manufacture any of our drug candidates on a clinical or commercial scale.
We rely on our manufacturers to purchase from third-party suppliers the materials
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necessary to produce our drug candidates for our clinical trials. There are a limited number of suppliers for raw materials that we use to manufacture our
drugs, and there may be a need to identify alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our
drug candidates for our clinical trials, and, if approved, ultimately for commercial sale. We do not have any control over the process or timing of the
acquisition of these raw materials by our manufacturers. Although we generally do not begin a clinical trial unless we believe we have a sufficient supply
of a drug candidate to complete such clinical trial, any significant delay or discontinuity in the supply of a drug candidate, or the raw material components
thereof, for an ongoing clinical trial due to the need to replace a third-party manufacturer could considerably delay completion of our clinical trials, product
testing and potential regulatory approval of our drug candidates, which could harm our business, financial condition and results of operations.
We and our contract manufacturers are subject to significant regulation with respect to manufacturing our drug candidates. The manufacturing
facilities on which we rely may not continue to meet regulatory requirements.
All entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our existing contract manufacturers for our drug
candidates, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in late-stage clinical
trials must be manufactured in accordance with cGMP. These regulations govern manufacturing processes and procedures and the implementation and
operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production
processes can lead to the introduction of contaminants or to inadvertent changes in the properties or stability of our drug candidates that may not be
detectable in final product testing. We or our contract manufacturers must supply all necessary documentation in support of an NDA or marketing
authorization application, or MAA, on a timely basis and must adhere to GLP and cGMP regulations enforced by the FDA, EMA or comparable foreign
authorities through their facilities inspection program. Some of our contract manufacturers may not have produced a commercially approved
pharmaceutical product and therefore may not have obtained the requisite regulatory authority approvals to do so. The facilities and quality systems of
some or all of our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory
approval of our drug candidates or any of our other potential products. In addition, the regulatory authorities may, at any time, audit or inspect a
manufacturing facility involved with the preparation of our drug candidates or any of our other potential products or the associated quality systems for
compliance with the regulations applicable to the activities being conducted. Although we oversee the contract manufacturers, we cannot control the
manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with the regulatory requirements. If these
facilities do not pass a pre-approval plant inspection, regulatory approval of the products may not be granted or may be substantially delayed until any
violations are corrected to the satisfaction of the regulatory authority, if ever.
The regulatory authorities also may, at any time following approval of a product for sale, audit the manufacturing facilities of our third-party contractors. If
any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations
occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly or time
consuming for us or a third party to implement, and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the
temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm
our business, financial condition and results of operations.
If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA, EMA or comparable foreign authorities can impose
regulatory sanctions including, among other things, refusal to approve a pending application for a drug candidate, withdrawal of an approval, or suspension
of production. As a result, our business, financial condition and results of operations may be materially and adversely affected.
Additionally, if supply from one manufacturer is interrupted, an alternative manufacturer would need to be qualified through an NDA supplement or MAA
variation, or equivalent foreign regulatory filing, which could result in further delay. The regulatory agencies may also require additional studies or trials if
a new manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in
our desired clinical and commercial timelines.
These factors could cause us to incur higher costs and could cause the delay or termination of clinical trials, regulatory submissions, required approvals, or
commercialization of our drug candidates. Furthermore, if our suppliers fail to meet contractual requirements and we are unable to secure one or more
replacement suppliers capable of production at a substantially equivalent cost, our clinical trials may be delayed, or we could lose potential revenue.
Any collaboration arrangement that we may enter into in the future may not be successful, which could adversely affect our ability to develop and
commercialize our current and potential future drug candidates.
We may seek collaboration arrangements with biopharmaceutical companies for the development or commercialization of our current and potential future
drug candidates. To the extent that we decide to enter into collaboration agreements, we will face significant competition in seeking appropriate
collaborators. Moreover, collaboration arrangements are complex and time-consuming to
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negotiate, execute and implement. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements
should we choose to enter into such arrangements, and the terms of the arrangements may not be favorable to us. If, and when, we collaborate with a third
party for development and commercialization of a drug candidate, we can expect to relinquish some or all of the control over the future success of that drug
candidate to the third party. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators.
Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations.
Disagreements between parties to a collaboration arrangement can lead to delays in developing or commercializing the applicable drug candidate and can
be difficult to resolve in a mutually beneficial manner. In some cases, collaborations with biopharmaceutical companies and other third parties are
terminated or allowed to expire by the other party. Any such termination or expiration would adversely affect our business, financial condition and results
of operations.
If we are unable to develop our own commercial organization or enter into agreements with third parties to sell and market our drug candidates,
we may be unable to generate significant revenues.
We do not have a sales and marketing organization, and we have no experience as a company in the sales, marketing and distribution of pharmaceutical
products. If any of our drug candidates are approved for commercialization, we may be required to develop our sales, marketing and distribution
capabilities, or make arrangements with a third party to perform sales and marketing services. Developing a sales force for any resulting product or any
product resulting from any of our other drug candidates is expensive and time-consuming and could delay any product launch. We may be unable to
establish and manage an effective sales force in a timely or cost-effective manner, if at all, and any sales force we do establish may not be capable of
generating sufficient demand for our drug candidates. To the extent that we enter into arrangements with collaborators or other third parties to perform
sales and marketing services, our product revenues are likely to be lower than if we marketed and sold our drug candidates independently. If we are unable
to establish adequate sales and marketing capabilities, independently or with others, we may not be able to generate significant revenues and may not
become profitable.
The commercial success of our drug candidates depends upon their market acceptance among physicians, patients, healthcare payors and the
medical community.
Even if our drug candidates obtain regulatory approval, our products, if any, may not gain market acceptance among physicians, patients, healthcare payors
and the medical community. The degree of market acceptance of any of our approved drug candidates will depend on a number of factors, including:
•
the effectiveness of our approved drug candidates as compared to currently available products;
•
patient willingness to adopt our approved drug candidates in place of current therapies;
•
our ability to provide acceptable evidence of safety and efficacy;
•
relative convenience and ease of administration;
•
the prevalence and severity of any adverse side effects;
•
restrictions on use in combination with other products;
•
availability of alternative treatments;
•
pricing and cost-effectiveness assuming either competitive or potential premium pricing requirements, based on the profile of our drug
candidates and target markets;
•
effectiveness of our or our partners’ sales and marketing strategy;
•
our ability to obtain sufficient third-party coverage or reimbursement; and
•
potential product liability claims.
In addition, the potential market opportunity for our drug candidates is difficult to precisely estimate. Our estimates of the potential market opportunity for
our drug candidates include several key assumptions based on our industry knowledge, industry publications, third-party research reports and other
surveys. Independent sources have not verified all of our assumptions. If any of these assumptions proves to be inaccurate, then the actual market for our
drug candidates could be smaller than our estimates of our potential market opportunity. If the actual market for our drug candidates is smaller than we
expect, our product revenue may be limited, it may be harder than expected to raise funds and it may be more difficult for us to achieve or maintain
profitability. If we fail to achieve market acceptance of our drug candidates in the U.S. and abroad, our revenue will be limited and it will be more difficult
to achieve profitability.
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If we fail to obtain and sustain an adequate level of reimbursement for our potential products by third-party payors, potential future sales would
be materially adversely affected.
There will be no viable commercial market for our drug candidates, if approved, without reimbursement from third-party payors. Reimbursement policies
may be affected by future healthcare reform measures. We cannot be certain that reimbursement will be available for our current drug candidates or any
other drug candidate we may develop. Additionally, even if there is a viable commercial market, if the level of reimbursement is below our expectations,
our anticipated revenue and gross margins will be adversely affected.
Third-party payors, such as government or private healthcare insurers, carefully review and increasingly question and challenge the coverage of and the
prices charged for drugs. Reimbursement rates from private health insurance companies vary depending on the company, the insurance plan and other
factors. Reimbursement rates may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for
other services. There is a current trend in the U.S. healthcare industry toward cost containment.
Large public and private payors, managed care organizations, group purchasing organizations and similar organizations are exerting increasing influence on
decisions regarding the use of, and reimbursement levels for, particular treatments. Such third-party payors, including Medicare, may question the coverage
of, and challenge the prices charged for, medical products and services, and many third-party payors limit coverage of or reimbursement for newly
approved healthcare products. In particular, third-party payors may limit the covered indications. Cost-control initiatives could decrease the price we might
establish for products, which could result in product revenues being lower than anticipated. We believe our drugs will be priced significantly higher than
existing generic drugs and consistent with current branded drugs. If we are unable to show a significant benefit relative to existing generic drugs, Medicare,
Medicaid and private payors may not be willing to provide reimbursement for our drugs, which would significantly reduce the likelihood of our products
gaining market acceptance.
We expect that private insurers will consider the efficacy, cost-effectiveness, safety and tolerability of our potential products in determining whether to
approve reimbursement for such products and at what level. Obtaining these approvals can be a time consuming and expensive process. Our business,
financial condition and results of operations would be materially adversely affected if we do not receive approval for reimbursement of our potential
products from private insurers on a timely or satisfactory basis. Limitations on coverage could also be imposed at the local Medicare carrier level or by
fiscal intermediaries. Medicare Part D, which provides a pharmacy benefit to Medicare patients as discussed below, does not require participating
prescription drug plans to cover all drugs within a class of products. Our business, financial condition and results of operations could be materially
adversely affected if Part D prescription drug plans were to limit access to, or deny or limit reimbursement of, our drug candidates or other potential
products.
Reimbursement systems in international markets vary significantly by country and by region, and reimbursement approvals must be obtained on a country-
by-country basis. In many countries, the product cannot be commercially launched until reimbursement is approved. In some foreign markets, prescription
pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. The negotiation process in some countries
can exceed 12 months. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the
cost-effectiveness of our products to other available therapies. If the prices for our potential products are reduced or if governmental and other third-party
payors do not provide adequate coverage and reimbursement of our drugs, our future revenue, cash flows and prospects for profitability will suffer.
Current and future legislation may increase the difficulty and cost of commercializing our drug candidates and may affect the prices we may
obtain if our drug candidates are approved for commercialization.
In the U.S. and some foreign jurisdictions, there have been a number of adopted and proposed legislative and regulatory changes regarding the healthcare
system that could prevent or delay regulatory approval of our drug candidates, restrict or regulate post-marketing activities and affect our ability to
profitably sell any of our drug candidates for which we obtain regulatory approval.
In the U.S., the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, changed the way Medicare covers and pays for
pharmaceutical products. Cost reduction initiatives and other provisions of this legislation could limit the coverage and reimbursement rate that we receive
for any of our approved products. While the MMA only applies to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage
policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the MMA may result
in a similar reduction in payments from private payors.
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively the
PPACA, was enacted. The PPACA was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance
remedies against healthcare fraud and abuse, add new transparency requirements for
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healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The PPACA
increased manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate amount for both branded and generic
drugs and revised the definition of “average manufacturer price,” or AMP, which may also increase the amount of Medicaid drug rebates manufacturers are
required to pay to states. The legislation also expanded Medicaid drug rebates and created an alternative rebate formula for certain new formulations of
certain existing products that is intended to increase the rebates due on those drugs. The Centers for Medicare & Medicaid Services, or CMS, which
administers the Medicaid Drug Rebate Program, also has proposed to expand Medicaid rebates to the utilization that occurs in the territories of the U.S.,
such as Puerto Rico and the Virgin Islands. Further, beginning in 2011, the PPACA imposed a significant annual fee on companies that manufacture or
import branded prescription drug products and required manufacturers to provide a discount, equal to 70% off, effective as of 2019, the negotiated price of
prescriptions filled by beneficiaries in the Medicare Part D coverage gap, referred to as the “donut hole.” Legislative and regulatory proposals have been
introduced at both the state and federal level to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical
products.
Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new
payment and delivery models, such as bundled payment models. In addition, recently there has been heightened governmental scrutiny over the manner in
which manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and proposed and enacted federal
and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under government
payor programs, and review the relationship between pricing and manufacturer patient programs. We also expect that additional U.S. federal healthcare
reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and
services, which could result in reduced demand for our drug candidates, if approved for commercialization.
In Europe, the United Kingdom withdrew from the European Union on January 31, 2020, and entered into a transition period that expired on December 31,
2020. A significant portion of the previous regulatory framework in the United Kingdom was derived from the regulations of the European Union. In 2021,
the United Kingdom’s Medicines and Healthcare products Regulatory Agency, or MHRA, and the European Medicines Agency, or EMA, released
guidance explaining the new regulatory framework. We cannot predict the consequences or impact that the new regulatory framework will have on our
future operations, if any, in these jurisdictions.
In addition, on August 16, 2022, the Inflation Reduction Act of 2022 was signed into law which, among other things, includes policies that are designed to
have a direct impact on drug prices and reduce drug spending by the federal government, which took effect in 2023. Under the Inflation Reduction Act,
Congress authorized Medicare beginning in 2026 to negotiate lower prices for certain costly single-source drug and biologic products that do not have
competing generics or biosimilars. This provision is limited in terms of the number of pharmaceuticals whose prices can be negotiated in any given year
and it only applies to drug products that have been approved for at least 9 years and biologics that have been licensed for 13 years. Drugs and biologics that
have been approved for a single rare disease or condition are categorically excluded from price negotiation. Further, the new legislation provides that if
pharmaceutical companies raise prices in Medicare faster than the rate of inflation, they must pay rebates back to the government for the difference. The
new law also caps Medicare out-of-pocket drug costs at an estimated $2,000 a year.
Changes in government funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other
personnel, properly administer drug innovation, or prevent our product candidates from being developed or commercialized, which could
negatively impact our business, financial condition and results of operations.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including budget and funding levels, ability to hire and
retain key personnel, and statutory, regulatory and policy changes. In addition, there may be delays in necessary interactions with regulators, ethics
committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government or contractor
personnel. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other agencies that fund
research and development activities is subject to the political process, which is inherently fluid and unpredictable.
In December 2016, the 21st Century Cures Act was signed into law. This legislation is designed to advance medical innovation and empower the FDA with
the authority to directly hire positions related to drug and device development and review. However, government proposals to reduce or eliminate
budgetary deficits may include reduced allocations to the FDA and other related government agencies. These budgetary pressures may result in a reduced
ability by the FDA to perform its roles, including the related impact to academic institutions and research laboratories whose funding is fully or partially
dependent on both the level and timing of funding from government sources.
Disruptions at the FDA and other agencies may also slow the time necessary for our product candidates to be reviewed or approved by necessary
government agencies, which could adversely affect our business, financial condition and results of operations.
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We are subject to “fraud and abuse” and similar laws and regulations, and a failure to comply with such regulations or prevail in any litigation
related to noncompliance could harm our business, financial condition and results of operations.
In the U.S., we are subject to various federal and state healthcare “fraud and abuse” laws, including anti-kickback laws, false claims laws and other laws
intended, among other things, to reduce fraud and abuse in federal and state healthcare programs. The federal Anti-Kickback Statute makes it illegal for any
person, including a prescription drug manufacturer, or a party acting on its behalf, to knowingly and willfully solicit, receive, offer or pay any remuneration
that is intended to induce the referral of business, including the purchase, order or prescription of a particular drug, or other good or service for which
payment in whole or in part may be made under a federal healthcare program, such as Medicare or Medicaid. Although we seek to structure our business
arrangements in compliance with all applicable requirements, these laws are broadly written, and it is often difficult to determine precisely how the law will
be applied in specific circumstances. Accordingly, it is possible that our practices may be challenged under the federal Anti-Kickback Statute.
The federal False Claims Act prohibits anyone from, among other things, knowingly presenting or causing to be presented for payment to the government,
including the federal healthcare programs, claims for reimbursed drugs or services that are false or fraudulent, claims for items or services that were not
provided as claimed, or claims for medically unnecessary items or services. Under the Health Insurance Portability and Accountability Act of 1996, we are
prohibited from knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors, or knowingly and
willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the
delivery of or payment for healthcare benefits, items or services to obtain money or property of any healthcare benefit program. Violations of fraud and
abuse laws may be punishable by criminal or civil sanctions, including penalties, fines or exclusion or suspension from federal and state healthcare
programs such as Medicare and Medicaid and debarment from contracting with the U.S. government. In addition, private individuals have the ability to
bring actions on behalf of the government under the federal False Claims Act as well as under the false claims laws of several states.
Many states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services
reimbursed by any source, not just governmental payors. In addition, some states have passed laws that require pharmaceutical companies to comply with
the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers or the Pharmaceutical Research and
Manufacturers of America’s Code on Interactions with Healthcare Professionals. Several states also impose other marketing restrictions or require
pharmaceutical companies to make marketing or price disclosures to the state. There are ambiguities as to what is required to comply with these state
requirements and if we fail to comply with an applicable state law requirement we could be subject to penalties.
Neither the government nor the courts have provided definitive guidance on the application of fraud and abuse laws to our business. Law enforcement
authorities are increasingly focused on enforcing these laws, and it is possible that some of our practices may be challenged under these laws. Efforts to
ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. If we
are found in violation of one of these laws, we could be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from
governmental funded federal or state healthcare programs and the curtailment or restructuring of our operations. If this occurs, our business, financial
condition and results of operations may be materially adversely affected.
If we face allegations of noncompliance with the law and encounter sanctions, our reputation, revenues and liquidity may suffer, and any of our
drug candidates that are ultimately approved for commercialization could be subject to restrictions or withdrawal from the market.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate
negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to generate revenues
from any of our drug candidates that are ultimately approved for commercialization. If regulatory sanctions are applied or if regulatory approval is
withdrawn, our business, financial condition and results of operations will be adversely affected. Additionally, if we are unable to generate revenues from
product sales, our potential for achieving profitability will be diminished and our need to raise capital to fund our operations will increase.
Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect
and process data globally, and the failure to comply with such requirements could subject us to significant fines and penalties, which may have a
material adverse effect on our business, financial condition or results of operations.
The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of information worldwide is rapidly evolving and is
likely to remain uncertain for the foreseeable future. Globally, virtually every jurisdiction in which we operate has established its own data security and
privacy frameworks with which we must comply. For example, the collection, use, disclosure, transfer, or other processing of personal data regarding
individuals in the European Union, the EU, including personal
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health data, is subject to the EU General Data Protection Regulation, or the GDPR, which took effect across all member states of the European Economic
Area, or the EEA, in May 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data,
including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates,
providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal
data, providing notification of data breaches, and taking certain measures when engaging third-party processors. In addition, the GDPR also imposes strict
rules on the transfer of personal data to countries outside the EU, which includes the United States and, as a result, increases the scrutiny that clinical trial
sites located in the EEA should apply to transfers of personal data from such sites to countries that are considered to lack an adequate level of data
protection, such as the United States. The GDPR also permits data protection authorities to require destruction of improperly gathered or used personal data
and/or impose substantial fines for violations of the GDPR, which can be up to 4% of global revenues or €20 million, whichever is greater, and it also
confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and
obtain compensation for damages resulting from violations of the GDPR. In addition, the GDPR provides that EU member states may make their own
additional laws and regulations limiting the processing of personal data, including genetic, biometric or health data.
The European Data Protection Board continues to release guidelines for industries and impose fines related to the GDPR, some of which have been very
significant. To improve coordination among EU supervisory authorities, the European Commission has proposed a new regulation that would help to
streamline enforcement of the GDPR in cross-border cases. Meanwhile, there continues to be persistent uncertainty relating to the transfer of personal data
from Europe to the U.S., or other non-adequate countries, following the Schrems II decision. On July 10, 2023, the European Commission adopted its
adequacy decision on the EU-U.S. Data Privacy Framework, or DPF. The decision, which took effect on the day of its adoption, concludes that the United
States ensures an adequate level of protection for personal data transferred from the EEA to companies certified to DPF. However, it remains too soon to
tell how the future of DPF will evolve and what impact it will have on our international activities. At least one challenge to the DPF is pending before the
Court of Justice of the European Union.
Further, Brexit has led and could also lead to legislative and regulatory changes that may increase our compliance costs. As of January 1, 2021 and the
expiry of transitional arrangements agreed to between the UK and the EU, data processing in the UK is governed by a UK version of the GDPR (combining
the GDPR and the Data Protection Act 2018), exposing us to two parallel regimes, each of which authorizes similar fines and other potentially divergent
enforcement actions for certain violations. On June 28, 2021, the European Commission adopted an Adequacy Decision for the UK, allowing for the
relatively free exchange of personal data between the EU and the UK (as the UK correspondingly allows transfers back to the EU). However, the European
Commission may suspend the Adequacy Decision if it considers that the UK no longer provides for an adequate level of data protection. A bill to amend
the existing UK framework has been reintroduced (in a different form) by the new UK Government and was announced as a bill which will be introduced
into Parliament at the King’s Speech on July 17, 2024. At this time, there is no specific clarity on the provisions of the bill, or the extent to which it will
amend the UK framework, beyond general descriptions on its intended purpose.
Similar actions are either in place or under way in the United States. There are a broad variety of data protection and breach notification laws that are
applicable to our activities, and a wide range of enforcement agencies at both the state and federal levels that can review companies for privacy and data
security concerns based on general consumer protection laws. Each of these laws is subject to varying interpretations and the legislative landscape is
constantly evolving and the Federal Trade Commission and state Attorneys General all are aggressive in reviewing privacy and data security protections for
consumers. At the federal level, for example, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, which establishes privacy and
security standards that limit the use and disclosure of individually identifiable health information, or protected health information, and require the
implementation of administrative, physical and technological safeguards to protect the privacy of protected health information and ensure the
confidentiality, integrity and availability of electronic protected health information. We may obtain health information from third parties (including
research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA. Depending on the facts
and circumstances, we could be subject to civil, criminal, and administrative penalties if we knowingly obtain, use, or disclose individually identifiable
health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. Requirements for compliance under
HIPAA are also subject to change, as the U.S. Department of Health and Human Services Office of Civil Rights issued a proposed rule that would amend
certain security compliance requirements for covered entities and business associates.
Additionally, new laws also are being considered at both the state and federal levels and several states have passed comprehensive privacy laws. For
example, the California Consumer Privacy Act, or the CCPA, which went into effect on January 1, 2020, is creating similar risks and obligations as those
created by the GDPR, though the CCPA does exempt certain clinical trial data. The California Privacy Rights Act, or the CPRA, which went into effect on
January 1, 2023, amended and expanded the CCPA, and also created a new state agency that is vested with authority to implement and enforce the CCPA
and the CRPA. The CCPA and the CRPA may increase our compliance costs and potential liability, and we cannot yet predict the impact of the CCPA or
the CRPA on our business. Similar laws passed in Virginia, Colorado, Connecticut, and Utah took effect in 2023 while laws in Oregon, Montana and Texas
went into effect in 2024. Additionally, Delaware, Florida, Indiana, Iowa, Kentucky, Maryland, Minnesota, Nebraska, New Hampshire, New
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Jersey, Rhode Island, and Tennessee have adopted privacy laws, which took or will take effect from January 1, 2025 through 2026. Some state laws also
minimize what data can be collected from consumers and how businesses may use and disclose it. These state privacy laws also require businesses to make
disclosures to consumers about data collection, use and sharing practices. In addition, some of these laws (including the CPRA), along with other
standalone health privacy laws, subject health-related information to additional safeguards and disclosures and some specifically regulate consumer health
data, such as the Washington My Health My Data Act, which became effective in 2023 and 2024, Nevada’s Consumer Health Data Privacy Law, which
became effective in 2024, and Connecticut’s amendments to its privacy law to address health data, which became effective in 2023. Additionally, a broad
range of legislative measures also have been introduced at the federal level. Accordingly, failure to comply with federal and state laws (both those currently
in effect and future legislation) regarding privacy and security of personal data could expose us to fines and penalties under such laws. There also is the
threat of consumer class actions related to these laws and the overall protection of personal data.
Given the breadth and depth of changes in data protection obligations, preparing for and complying with these requirements is rigorous and time intensive
and requires significant resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service
providers, CROs, contractors or consultants that process or transfer personal data collected in the EU. The GDPR and other changes in laws or regulations
associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal data from our clinical trials, and access
to certain data such as the European Health Data Space Regulation, could require us to change our business practices and put in place additional
compliance mechanisms, may interrupt or delay our development, regulatory and commercialization activities and increase our cost of doing business, and
could lead to government enforcement actions, private litigation and significant fines and penalties against us and could have a material adverse effect on
our business, financial condition or results of operations. Similarly, failure to comply with federal and state laws regarding privacy and security of personal
data could expose us to fines and penalties under such laws. Even if we are not determined to have violated these laws, government investigations into
these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our reputation and our business.
We are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and
regulations. If we fail to comply with these laws, we could be subject to civil or criminal liabilities, other remedial measures and legal expenses, be
precluded from developing, manufacturing and selling certain products outside the United States or be required to develop and implement costly
compliance programs, which could adversely affect our business, results of operations and financial condition.
Our operations are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, or the FCPA, the U.K. Bribery Act 2010, or the
Bribery Act, and other anti-corruption laws that apply in countries where we do business and may do business in the future. The FCPA, the Bribery Act and
these other laws generally prohibit us, our officers, and our employees and intermediaries from bribing, being bribed or making other prohibited payments
to government officials or other persons to obtain or retain business or gain some other business advantage. Compliance with the FCPA, in particular, is
expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the
pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered
foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government
officials and have led to FCPA enforcement actions.
We may in the future operate in jurisdictions that pose a high risk of potential FCPA or Bribery Act violations, and we may participate in collaborations
and relationships with third parties whose actions could potentially subject us to liability under the FCPA, the Bribery Act or local anti-corruption laws. In
addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the
manner in which existing laws might be administered or interpreted. If we expand our operations outside of the United States, we will need to dedicate
additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate.
We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the
United States, the United Kingdom and authorities in the EU, including applicable export control regulations, economic sanctions on countries and persons,
customs requirements and currency exchange regulations, collectively referred to as Trade Control Laws. In addition, various laws, regulations and
executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified
for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United
States, we will be required to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or
selling certain products and product candidates outside of the United States, which could limit our growth potential and increase our development costs.
There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the FCPA, the
Bribery Act or other legal requirements, including Trade Control Laws. If we are not in compliance with the FCPA, the Bribery Act and other anti-
corruption laws or Trade Control Laws, we may be subject to criminal and civil penalties,
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disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition,
results of operations and liquidity. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s
accounting provisions. Any investigation of any potential violations of the FCPA, the Bribery Act, other anti-corruption laws or Trade Control Laws by
United States, United Kingdom or other authorities could also have an adverse impact on our reputation, our business, results of operations and financial
condition.
Governments outside the United States tend to impose strict price controls, which may adversely affect our revenue, if any.
In some countries, particularly member states of the EU, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries,
pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. In addition, there can be
considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political,
economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been
obtained. Reference pricing used by various EU member states and parallel distribution, or arbitrage between low-priced and high-priced member states,
can further reduce prices. In some countries, we, or our future collaborators, may be required to conduct a clinical trial or other studies that compare the
cost-effectiveness of our product candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of
discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other
countries. If reimbursement of any product candidate approved for marketing is unavailable or limited in scope or amount, or if pricing is set at
unsatisfactory levels, our business could be materially harmed.
If we fail to retain current members of our senior management and scientific personnel, or to attract and keep additional key personnel, we may
be unable to successfully develop or commercialize our drug candidates.
Our success depends on our continued ability to attract, retain and motivate highly qualified management and scientific personnel. As of December 31,
2024, we had thirty-six full-time employees, one part-time employee and a small number of consultants, which may make us more reliant on our individual
employees than companies with a greater number of employees. The loss of any of our key personnel could delay or prevent the development of our drug
candidates. These personnel are “at-will” employees and may terminate their employment with us at any time; however, each of our current chief executive
officer and current chief financial officer has agreed to provide us with at least 60 days’ advance notice of his respective resignation pursuant to his
employment agreement with us. The replacement of key personnel likely would involve significant time and costs, and may significantly delay or prevent
the achievement of our business objectives. We do not maintain “key person” insurance on any of our employees.
From time to time, our management seeks the advice and guidance of certain scientific advisors and consultants regarding clinical and regulatory
development programs and other customary matters. These scientific advisors and consultants are not our employees and may have commitments to, or
consulting or advisory contracts with, other entities that may limit their availability to us. In addition, our scientific advisors may have arrangements with
other companies to assist those companies in developing products or technologies that may compete with ours.
Competition for qualified personnel is intense, especially in the greater San Diego, California area where we have a substantial presence and need for
highly skilled personnel. We may not be successful in attracting qualified personnel to fulfill our current or future needs. Competitors and others have in
the past attempted, and are likely in the future to attempt, to recruit our employees. While our employees are required to sign standard agreements
concerning confidentiality and ownership of inventions, we generally do not have employment contracts or non-competition agreements with any of our
personnel. In addition, we may experience employee turnover as a result of the ongoing “great resignation” occurring throughout the U.S. economy, which
has impacted job market dynamics. New hires require training and take time before they achieve full productivity. New employees may not become as
productive as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals. The loss of the services of any of our key
personnel, the inability to attract or retain highly qualified personnel in the future or delays in hiring such personnel, particularly senior management and
other technical personnel, could materially and adversely affect our business, financial condition and results of operations.
We will need to increase the size of our organization and may not successfully manage our growth.
We are a clinical-stage biopharmaceutical company with a small number of employees, and our management systems currently in place are not likely to be
adequate to support our future growth plans. Our ability to grow and to manage our growth effectively will require us to hire, train, retain, manage and
motivate additional employees and to implement and improve our operational, financial and management systems. These demands also may require the
hiring of additional senior management personnel or the development of additional expertise by our senior management personnel. Hiring a significant
number of additional employees, particularly those at the management level, would increase our expenses significantly. Moreover, if we fail to expand and
enhance our operational,
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financial and management systems in conjunction with our potential future growth, it could have a material adverse effect on our business, financial
condition and results of operations.
We are exposed to product liability, non-clinical and clinical liability risks which could place a substantial financial burden upon us, should
lawsuits be filed against us.
Our business exposes us to potential product liability and other liability risks that are inherent in the testing, manufacturing and marketing of
pharmaceutical formulations and products. In addition, the use in our clinical trials of pharmaceutical products and the subsequent sale of these products by
us or our potential collaborators may cause us to bear a portion of or all product liability risks. A successful liability claim or series of claims brought
against us could have a material adverse effect on our business, financial condition and results of operations.
We currently maintain product liability insurance; however, there can be no assurance that we will be able to continue to maintain such insurance, and we
may be unable to obtain replacement product liability insurance on commercially reasonable terms or in adequate amounts. On occasion, large judgments
have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. A successful product liability claim or series of claims
brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations
and business.
Our research and development activities involve the use of hazardous materials, which subject us to regulation, related costs and delays and
potential liabilities.
Our research and development activities involve the controlled use of hazardous materials, chemicals and various radioactive compounds, and we will need
to develop additional safety procedures for the handling and disposing of hazardous materials. If an accident occurs, we could be held liable for resulting
damages, which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those
governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials. Additional federal, state and local laws
and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if
we violate any of these laws or regulations.
We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any
cybersecurity incidents, could harm our ability to operate our business effectively.
Despite the implementation of security measures, our internal computer systems and those of third parties with which we contract, including our CROs and
other business partners, are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. System failures, accidents or security breaches could cause interruptions in our operations or the operations of
our CROs and other business partners, and could result in a material disruption of our drug development and clinical activities and business operations, in
addition to possibly requiring substantial expenditures of resources to remedy. The loss of drug development or clinical trial data could result in delays in
our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. We have experienced cybersecurity incidents in the
past and expect that we will experience cybersecurity incidents in the future. If we were to experience a significant cybersecurity breach of our information
systems or data, the costs associated with the investigation, remediation and potential notification of the breach to counter-parties and data subjects could
be material. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate
disclosure of confidential or proprietary information, we could incur liability and our development programs and the development of our drug candidates
could be delayed.
Artificial intelligence presents risks and challenges that can impact our business, including by posing security risks to our confidential
information, proprietary information and personal data.
Issues in the development and use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability,
or other adverse consequences to our business operations. As with many technological innovations, artificial intelligence presents risks and challenges that
could impact our business. We may adopt and integrate generative artificial intelligence tools into our systems for specific use cases reviewed by legal and
information security. Our vendors may incorporate generative artificial intelligence tools into their offerings without disclosing this use to us, and the
providers of these generative artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy
and data protection and may inhibit our or our vendors’ ability to maintain an adequate level of service and experience. If we, our vendors, or our third-
party partners experience an actual or perceived breach or privacy or security incident because of the use of generative artificial intelligence, we may lose
valuable intellectual property and confidential information and our reputation and the public perception of the effectiveness of our security measures could
be harmed. Further, bad actors around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage in illegal
activities involving the theft and misuse of personal information, confidential information, and intellectual property. Any of these outcomes could damage
our reputation, result
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in the loss of valuable property and information, and have a material adverse effect on our business, financial condition and results of operations.
Our employees and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards and
requirements.
We are exposed to the risk of employee or consultant fraud or other misconduct. Misconduct by our employees or consultants could include intentional
failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards, comply with federal and state
healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales,
marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-
dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion,
sales commissions, customer incentive programs and other business arrangements. Employee and consultant misconduct also could involve the improper
use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always
possible to identify and deter such misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown
or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance
with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those
actions could have a material adverse effect on our business, financial condition and results of operations, and result in the imposition of significant fines or
other sanctions against us.
Business disruptions such as natural disasters could seriously harm our future revenues and financial condition and increase our costs and
expenses.
Our corporate headquarters are located in greater San Diego, California, a region known for seismic activity. In addition, one of our third-party
manufacturers is located in the southeastern part of the United States, an area subject to hurricanes and related natural disasters. Our suppliers may also
experience a disruption in their business as a result of natural or man-made disasters. A significant natural or man-made disaster, such as an earthquake,
prolonged or repeated power outage, hurricane, flood, fire, drought or other extreme weather events and changing weather patterns, which are increasing in
frequency due to the impacts of climate change, could severely damage or destroy our headquarters or facilities or the facilities of our manufacturers or
suppliers, which could have a material and adverse effect on our business, financial condition and results of operations. In addition, terrorist acts or acts of
war targeted at the U.S., and specifically the greater San Diego, California region, as well as the ongoing conflict between Ukraine and Russia and the
global impact of restrictions and sanctions imposed on Russia and the Israel-Hamas war, could cause damage or disruption to us, our employees, facilities,
partners and suppliers, which could have a material adverse effect on our business, financial condition and results of operations.
We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our
management.
From time to time, we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of products,
drug candidates or technologies. Additional potential transactions that we may consider include a variety of different business arrangements, including
spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction may require us to
incur non-recurring or other charges, may increase our near- and long-term expenditures and may pose significant integration challenges or disrupt our
management or business, which could adversely affect our business, financial condition and results of operations. For example, these transactions may
entail numerous operational and financial risks, including:
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exposure to unknown liabilities;
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disruption of our business and diversion of our management’s time and attention in order to develop acquired products, drug candidates or
technologies;
•
incurrence of substantial debt or dilutive issuances of equity securities to pay for any of these transactions;
•
higher-than-expected transaction and integration costs;
•
write-downs of assets or goodwill or impairment charges;
•
increased amortization expenses;
•
difficulty and cost in combining the operations and personnel of any acquired businesses or product lines with our operations and personnel;
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•
impairment of relationships with key suppliers or customers of any acquired businesses or product lines due to changes in management and
ownership; and
•
inability to retain key employees of any acquired businesses.
Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any
transactions that we do complete may be subject to the foregoing or other risks, and could have a material adverse effect on our business, financial
condition and results of operations.
Our employment agreements with our officers and certain other employees may require us to pay severance benefits to any of those persons who
are terminated in connection with a change in control of our company, which could harm our financial condition or results.
Our officers and certain employees are parties to employment agreements that contain change in control and severance provisions in the event of a
termination of employment in connection with a change in control of our company providing for cash payments for severance and other benefits and
acceleration of vesting of stock options and shares of restricted stock. The accelerated vesting of options and shares of restricted stock could result in
dilution to our existing stockholders and lower the market price of our common stock. The payment of these severance benefits could harm our financial
condition and results. In addition, these potential severance payments may discourage or prevent third parties from seeking a business combination with us.
Our ability to effectively monitor and respond to the rapid and evolving developments and expectations relating to sustainability, including
environmental, social and governance matters, may impose unexpected costs or results in reputational or other harm that could have a material
adverse effect on our business.
There is an increasing focus from certain investors, employees, regulators, listing exchanges and other stakeholders concerning corporate responsibility and
sustainability matters, including with regarding environmental, social and governance factors. Some investors and investor groups may use these factors—
either positively or negatively—to guide their investment strategies and, in some cases, investors may choose not to invest in our company if they believe
our policies or practices relating to corporate responsibility and sustainability do not align with their expectations. Currently, a number of third-party
providers of corporate responsibility and sustainability ratings measure the performance of companies on such ESG topics, and the results of these
assessments are widely publicized. Investors, particularly institutional investors, use these ratings to benchmark companies against their peers, and some
major institutional investors have publicly emphasized the importance of these measures to their investment decisions. Topics taken into account in such
assessments include, among others, companies’ efforts and impacts on climate change, human rights, business ethics and compliance, diversity, equity and
inclusion and the role of companies’ board of directors in overseeing various sustainability-related issues. In light of investors’ increased focus on these
matters, if we are, for example, perceived as lagging in taking steps with respect to these initiatives, certain investors may seek to engage with us on
improving our corporate responsibility and sustainability disclosures or performance. They may also make voting decisions or take other actions to hold us
and our board of directors accountable.
In addition, there are rapidly evolving developments and changing expectations relating to sustainability matters. As a result, the criteria by which our
corporate responsibility and sustainability practices are assessed may change, which could cause us to undertake costly initiatives or actions to satisfy new
demands. If we elect not to or are unable to adequately recognize and respond to such developments and changing governmental, societal, investor and/or
consumer expectations relating to sustainability matters, we may miss corporate opportunities, become subject to additional scrutiny or incur unexpected
costs. We may face risk of litigation or reputational damage in the event that our sustainability policies or practices do not meet the standards set by various
constituencies.
We may also face reputational damage if we are unable to achieve an acceptable rating from third-party rating services. A low rating by a third-party rating
service could also result in the exclusion of our common stock from consideration by certain investors who may elect to invest with our competitors
instead. Ongoing focus on corporate responsibility and sustainability matters by investors and other stakeholders as described above may impose additional
costs or expose us to new risks. Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation and on our
business, financial condition, or results of operations, including the sustainability of our business over time, and could cause the market value of our
common stock to decline.
Further, our emphasis on sustainability issues may not maximize short-term financial results and may yield financial results that conflict with the market’s
expectations. We may in the future make business decisions consistent with our sustainability goals that we believe, based on considered analysis, will
create value and improve our financial performance over the long-term. These decisions, however, may not be consistent with the short-term expectations
of our stockholders and may not produce the long-term benefits that we expect, in which case our business, financial condition and results of operations
could be harmed.
In addition, on March 6, 2024, the SEC finalized new rules for public companies that will require extensive climate-related disclosures and significant
analysis of the impact of climate-related issues on our business strategy, results of operations, and financial condition,
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or the SEC Climate Disclosure Rules, and extensive attestation requirements. The new rules require disclosure of, among other things and to the extent
material, our climate-related risks and opportunities, greenhouse gas emissions inventory, climate-related targets and goals, and financial impacts of
physical and transition risks. Subsequently, in April 2024, the SEC issued an order staying implementation of the SEC Climate Disclosure Rules pending
the resolution of certain challenges. Nonetheless, our legal, accounting, and other compliance expenses may increase significantly, and compliance efforts
may divert management time and attention as we prepare for the potential implementation of the SEC Climate Disclosure Rules, and such expenses, efforts
and diversions of management time and attention may be even greater if the SEC Climate Disclosure Rules ultimately go into effect. We may also be
exposed to legal or regulatory action or claims as a result of these new regulations. Separately, the SEC has also announced that it is scrutinizing existing
climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege our existing climate disclosures are
misleading or deficient. All of these risks could have a material adverse effect on our business, financial position, and/or stock price.
The impact of the Russian invasion of Ukraine and the Israel-Hamas war on the global economy, energy supplies and raw materials is uncertain,
but may prove to negatively impact our business and operations.
The short and long-term implications of Russia’s invasion of Ukraine and the Israel-Hamas war are difficult to predict at this time. We continue to monitor
any adverse impact that the outbreak of war in Ukraine, the subsequent institution of sanctions against Russia by the United States and several European
and Asian countries, and the Israel-Hamas war may have on the global economy in general, on our business and operations and on the businesses and
operations of our suppliers and other third parties with which we conduct business. For example, a prolonged conflict in Ukraine or Israel may result in
increased inflation, escalating energy prices and constrained availability, and thus increasing costs, of raw materials. We will continue to monitor this fluid
situation and develop contingency plans as necessary to address any disruptions to our business operations as they develop. To the extent the wars in
Ukraine or Israel may adversely affect our business as discussed above, it may also have the effect of heightening many of the other risks described herein.
Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation; disruptions to our global technology
infrastructure, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; disruptions in
global supply chains; and constraints, volatility, or disruption in the capital markets, any of which could negatively affect our business and financial
condition.
Unstable market and economic conditions may have serious adverse consequences on our business and financial condition.
Our business, financial condition and results of operations could be adversely affected by general conditions in the global economy and in the global
financial markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including our ability to raise additional
capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, service providers, manufacturers or other
partners and there is a risk that one or more would not survive or be able to meet their commitments to us under such circumstances. There can be no
assurances that deterioration in the credit and financial markets and confidence in economic conditions will not occur. For example, U.S. debt ceiling and
budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns, or a recession in the United States.
Although U.S. lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, including a suspension of the federal debt ceiling in
June 2023, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States. The impact of this or any
further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial
markets and economic conditions. Absent further quantitative easing by the Federal Reserve, these developments could cause interest rates and borrowing
costs to rise, which may negatively impact our results of operations or financial condition. Moreover, disagreement over the federal budget has caused the
U.S. federal government to shut down for periods of time. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which
the current economic climate and financial market conditions could adversely impact our business.
Risks Relating to Our Intellectual Property
We may not be successful in obtaining or maintaining necessary rights to our drug candidates through acquisitions and in-licenses.
We currently have intellectual property rights to develop our drug candidates through a license from Ligand. As of December 31, 2024, we owned or co-
owned 144 patent applications and 35 patents. Because our programs require the use of proprietary rights held by Ligand, the growth of our business will
likely depend in part on our ability to maintain and exploit these proprietary rights. In addition, we may need to acquire or in-license additional intellectual
property in the future. We may be unable to acquire or in-license any compositions, methods of use, processes or other intellectual property rights from
third parties that we identify as necessary for our drug candidates. We face competition with regard to acquiring and in-licensing third-party intellectual
property rights, including from a number of more established companies. These established companies may have a competitive advantage over us due to
their size, cash resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be
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a competitor may be unwilling to assign or license intellectual property rights to us. We also may be unable to acquire or in-license third-party intellectual
property rights on terms that would allow us to make an appropriate return on our investment.
We may enter into collaboration agreements with U.S. and foreign academic institutions to accelerate development of our current or future preclinical drug
candidates. Typically, these agreements include an option for us to negotiate a license to the institution’s intellectual property rights resulting from the
collaboration. Even with such an option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If
we are unable to license rights from a collaborating institution, the institution may offer the intellectual property rights to other parties, potentially blocking
our ability to pursue our desired program.
If we are unable to successfully obtain required third-party intellectual property rights or maintain our existing intellectual property rights, including if our
patent applications do not result in the issuance of patents, we may need to abandon development of the related program and our business, financial
condition and results of operations could be materially and adversely affected.
If we fail to comply with our obligations in the agreements under which we in-license intellectual property and other rights from third parties or
otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to
our business.
The Master License Agreement is important to our business and we expect to enter into additional license agreements in the future. The Master License
Agreement imposes, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other obligations on us. If
we fail to comply with our obligations under these agreements, or if we file for bankruptcy, we may be required to make certain payments to the licensor,
we may lose the exclusivity of our license, or the licensor may have the right to terminate the license, in which event we would not be able to develop or
market products covered by the license. Additionally, the milestone and other payments associated with these licenses could materially and adversely affect
our business, financial condition and results of operations.
Pursuant to the terms of the Master License Agreement, Ligand may terminate the Master License Agreement under certain circumstances, including, but
not limited to: (1) in the event of our insolvency or bankruptcy, (2) if we do not pay an undisputed amount owing under the Master License Agreement
when due and fail to cure such default within a specified period of time, or (3) if we default on certain of our material obligations and fail to cure the
default within a specified period of time. If the Master License Agreement is terminated in its entirety or with respect to a specific licensed program for any
reason, among other consequences, all licenses granted to us under the Master License Agreement (or with respect to the specific licensed program) will
terminate and we may be requested to assign and transfer to Ligand certain regulatory documentation and regulatory approvals related to the licensed
programs (or those related to the specific licensed program), and we may be required to wind down any ongoing clinical trials with respect to the licensed
programs (or those related to the specific licensed program). Additionally, Ligand may require us to assign to Ligand the trademarks owned by us relating
to the licensed programs (or those related to the specific licensed program), and we would be obligated to grant to Ligand a license under any patent rights
and know-how controlled by us to the extent necessary to make, have made, import, use, offer to sell and sell the licensed programs (or those related to the
specific licensed program) anywhere in the world at a royalty rate in the low single digits.
In some cases, patent prosecution of our licensed technology may be controlled solely by the licensor. If our licensor fails to obtain and maintain patent or
other protection for the proprietary intellectual property we in-license, then we could lose our rights to the intellectual property or our exclusivity with
respect to those rights, and our competitors could market competing products using the intellectual property. In certain cases, we may control the
prosecution of patents resulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur
significant liability to our licensing partners. Licensing of intellectual property is of critical importance to our business and involves complex legal,
business and scientific issues. Disputes may arise regarding intellectual property subject to a licensing agreement, including, but not limited to:
•
the scope of rights granted under the license agreement and other interpretation-related issues;
•
the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing
agreement;
•
the sublicensing of patent and other rights;
•
our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
•
the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our
collaborators; and
•
the priority of invention of patented technology.
48
If disputes over intellectual property and other rights that we have in-licensed prevent or impair our ability to maintain our current licensing arrangements
on acceptable terms, we may be unable to successfully develop and commercialize the affected drug candidates. If we fail to comply with any such
obligations to our licensor, such licensor may terminate their licenses to us, in which case we would not be able to market products covered by these
licenses. The loss of our license with Ligand, and potentially other licenses that we enter into in the future, would have a material adverse effect on our
business.
We may be required to pay milestones and royalties to Ligand in connection with our use of the licensed technology under the Master License
Agreement, which could adversely affect the overall profitability for us of any products that we may seek to commercialize.
Under the terms of the Master License Agreement, we may be obligated to pay Ligand up to an aggregate of approximately $1.54 billion in development,
regulatory and sales milestones. We will also be required to pay Ligand single-digit royalties on future worldwide net product sales. These royalty
payments could adversely affect the overall profitability for us of any products that we may seek to commercialize.
We may not be able to protect our proprietary or licensed technology in the marketplace.
We depend on our ability to protect our proprietary or licensed technology. We rely on trade secret, patent, copyright and trademark laws, and
confidentiality, licensing and other agreements with employees and third parties, all of which offer only limited protection. Our success depends in large
part on our ability, Ligand’s and any future licensor’s or licensee’s ability to obtain and maintain patent protection in the U.S. and other countries with
respect to our proprietary or licensed technology and products. We currently in-license most of our intellectual property rights to develop our drug
candidates and may in-license additional intellectual property rights in the future. Under the terms of the Master License Agreement, Ligand has the first
right to file, prosecute and maintain the patents subject to the Master License Agreement in its name. We cannot be certain that patent enforcement
activities by our current or future licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and
enforceable patents or other intellectual property rights. We also cannot be certain that our current or future licensors will allocate sufficient resources or
prioritize their or our enforcement of such patents. Even if we are not a party to these legal actions, an adverse outcome could prevent us from continuing to
license intellectual property that we may need to operate our business, which would have a material adverse effect on our business, financial condition and
results of operations.
We believe we will be able to obtain, through prosecution of patent applications covering technology licensed from others, adequate patent protection for
our proprietary drug technology, including those related to our in-licensed intellectual property. If we are compelled to spend significant time and money
protecting or enforcing our licensed patents and future patents we may own, designing around patents held by others or licensing or acquiring, potentially
for large fees, patents or other proprietary rights held by others, our business, financial condition and results of operations may be materially and adversely
affected. If we are unable to effectively protect the intellectual property that we own or in-license, other companies may be able to offer the same or similar
products for sale, which could materially adversely affect our business, financial condition and results of operations. The patents of others from whom we
may license technology, and any future patents we may own, may be challenged, narrowed, invalidated or circumvented, which could limit our ability to
stop competitors from marketing the same or similar products or limit the length of term of patent protection that we may have for our products.
Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection for licensed patents, pending patent applications and potential
future patent applications and patents could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or patent applications will be due to be paid to
the U.S. Patent and Trademark Office, or the USPTO, and various governmental patent agencies outside of the U.S. in several stages over the lifetime of
the applicable patent and/or patent application. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of
procedural, documentary, fee payment and other similar provisions during the patent application process. In many cases, an inadvertent lapse can be cured
by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in
abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If this occurs with
respect to our in-licensed patents or patent applications we may file in the future, our competitors might be able to use our technologies, which would have
a material adverse effect on our business, financial condition and results of operations.
The patent positions of pharmaceutical products are often complex and uncertain. The breadth of claims allowed in pharmaceutical patents in the U.S. and
many jurisdictions outside of the U.S. is not consistent. For example, in many jurisdictions, the support standards for pharmaceutical patents are becoming
increasingly strict. Some countries prohibit method of treatment claims in patents. Changes in either the patent laws or interpretations of patent laws in the
U.S. and other countries may diminish the value of our
49
licensed or owned intellectual property or create uncertainty. In addition, publication of information related to our current drug candidates and potential
products may prevent us from obtaining or enforcing patents relating to these drug candidates and potential products, including without limitation
composition-of-matter patents, which are generally believed to offer the strongest patent protection.
Our intellectual property includes licenses covering issued patents and pending patent applications for composition of matter, method of use and method of
manufacture. As of December 31, 2024, for each of VK2809 and VK0214, we in-licensed three patents in the U.S. and additional patents in certain foreign
jurisdictions, and owned or co-owned and in-licensed three U.S. patents, four U.S. patent applications, and additional patents and patent applications in
certain foreign jurisdictions. We also in-licensed one additional U.S. patent and one Japanese patent directed to VK0214, and owned two additional U.S.
patents, one PCT application, and several patent applications in the U.S. and certain foreign jurisdictions directed to VK2809 as of December 31, 2024. For
VK5211, as of December 31, 2024, we in-licensed ten patents and one patent application in the U.S. and several other patents and patent applications in
certain foreign jurisdictions. As of December 31, 2024, for our GLP-1 program, we own one U.S. patent, additional patents in certain foreign jurisdictions,
two PCT applications, and several patent applications in the U.S. and certain foreign jurisdictions. With respect to our other current drug candidates, we
have a license covering several issued patents both in the U.S. and in certain foreign jurisdictions.
Patents that we currently license and patents that we may own or license in the future do not necessarily ensure the protection of our licensed or owned
intellectual property for a number of reasons, including, without limitation, the following:
•
the patents may not be broad or strong enough to prevent competition from other products that are identical or similar to our drug candidates;
•
there can be no assurance that the term of a patent can be extended under the provisions of patent term extension afforded by U.S. law or
similar provisions in foreign countries, where available;
•
the issued patents and patents that we may obtain or license in the future may not prevent generic entry into the U.S. market for our drug
candidates;
•
we do not at this time license or own a granted European patent or national phase patents in any European jurisdictions that would prevent
generic entry into the European market for one of our primary drug candidates, VK2809;
•
we, or third parties from who we in-license or may license patents, may be required to disclaim part of the term of one or more patents;
•
there may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim;
•
there may be prior art of which we are aware, which we do not believe affects the validity or enforceability of a patent claim, but which,
nonetheless, ultimately may be found to affect the validity or enforceability of a patent claim;
•
there may be other patents issued to others that will affect our freedom to operate;
•
if the patents are challenged, a court could determine that they are invalid or unenforceable;
•
there might be a significant change in the law that governs patentability, validity and infringement of our licensed patents or any future
patents we may own that adversely affects the scope of our patent rights;
•
a court could determine that a competitor’s technology or product does not infringe our licensed patents or any future patents we may own;
and
•
the patents could irretrievably lapse due to failure to pay fees or otherwise comply with regulations or could be subject to compulsory
licensing.
If we encounter delays in our development or clinical trials, the period of time during which we could market our potential products under patent protection
would be reduced.
Our competitors may be able to circumvent our licensed patents or future patents we may own by developing similar or alternative technologies or products
in a non-infringing manner. Our competitors may seek to market generic versions of any approved products by submitting abbreviated new drug
applications to the FDA in which our competitors claim that our licensed patents or any future patents we may own are invalid, unenforceable or not
infringed. Alternatively, our competitors may seek approval to market their own products similar to or otherwise competitive with our products. In these
circumstances, we may need to defend or assert our licensed patents or any future patents we may own, including by filing lawsuits alleging patent
infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our licensed patents or any future patents we may
own invalid or unenforceable. We may also fail to identify patentable aspects of our research and development before it is too late to obtain patent
protection. Even if we own or in-license valid and enforceable patents, these patents still may not provide protection against competing products or
processes sufficient to achieve our business objectives.
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The issuance of a patent is not conclusive as to its inventorship, scope, ownership, priority, validity or enforceability. In this regard, third parties may
challenge our licensed patents or any future patents we may own in the courts or patent offices in the U.S. and abroad. Such challenges may result in loss of
exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to
stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and
potential products. In addition, given the amount of time required for the development, testing and regulatory review of new drug candidates, patents
protecting such drug candidates might expire before or shortly after such drug candidates are commercialized.
We may infringe the intellectual property rights of others, which may prevent or delay our drug development efforts and prevent us from
commercializing or increase the costs of commercializing our products.
Our commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights of third parties.
For example, there could be issued patents of which we are not aware that our current or potential future drug candidates infringe. There also could be
patents that we believe we do not infringe, but that we may ultimately be found to infringe.
Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent
literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Because
patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our
drug candidates or potential products infringe. For example, pending applications may exist that claim or can be amended to claim subject matter that our
drug candidates or potential products infringe. Competitors may file continuing patent applications claiming priority to already issued patents in the form of
continuation, divisional, or continuation-in-part applications, in order to maintain the pendency of a patent family and attempt to cover our drug candidates.
Third parties may assert that we are employing their proprietary technology without authorization and may sue us for patent or other intellectual property
infringement. These lawsuits are costly and could adversely affect our business, financial condition and results of operations and divert the attention of
managerial and scientific personnel. If we are sued for patent infringement, we would need to demonstrate that our drug candidates, potential products or
methods either do not infringe the claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this. Proving invalidity is
difficult. For example, in the U.S., proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed
by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and
scientific personnel could be diverted in pursuing these proceedings, which could have a material adverse effect on us. In addition, we may not have
sufficient resources to bring these actions to a successful conclusion. If a court holds that any third-party patents are valid, enforceable and cover our
products or their use, the holders of any of these patents may be able to block our ability to commercialize our products unless we acquire or obtain a
license under the applicable patents or until the patents expire.
We may not be able to enter into licensing arrangements or make other arrangements at a reasonable cost or on reasonable terms. Any inability to secure
licenses or alternative technology could result in delays in the introduction of our products or lead to prohibition of the manufacture or sale of products by
us. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We
could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or litigation,
we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. A
finding of infringement could prevent us from commercializing our drug candidates or force us to cease some of our business operations, which could
materially and adversely affect our business, financial condition and results of operations. Any claims by third parties that we have misappropriated their
confidential information or trade secrets could have a similar material and adverse effect on our business, financial condition and results of operations. In
addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the
funds necessary to continue our operations.
Any claims or lawsuits relating to infringement of intellectual property rights brought by or against us will be costly and time consuming and may
adversely affect our business, financial condition and results of operations.
We may be required to initiate litigation to enforce or defend our licensed and owned intellectual property. For example, we were previously aware of at
least two third-party companies that were selling products in the U.S. bearing the name “LGD-4033,” which is the name previously used by Ligand to refer
to VK5211, without authority from either us or Ligand, and we may experience other potential intellectual property infringement in the future. In addition,
in December 2022, we filed suit against Ascletis Bioscience Co., Ltd., Gannex Pharma Co., Ltd., Ascletis Pharmaceuticals Co., Ltd., Ascletis Pharma Inc.,
and Jinzi Jason Wu, or the Ascletics Defendants, in the Southern District of California, San Diego division, alleging, among other things: (1) violation of
the Defend Trade Secrets Act; (2) violation of the California Uniform Trade Secrets Act; (3) breach of contract; (4) breach of the implied covenant of good
faith and fair dealing; and (5) tortious interference with contract. In a related action, we also filed suit against the same Ascletis Defendants in the
International Trade Commission, or the ITC, for unlawful and unfair methods of competition. On October 3, 2024, the ITC’s Chief Administrative Law
Judge issued a Notice of his determination that the Ascletis Defendants misappropriated our trade
51
secrets and engaged in discovery misconduct, warranting monetary and non-monetary sanctions. Lawsuits to protect our intellectual property rights can be
time consuming and costly. There is a substantial amount of litigation involving patent and other intellectual property rights in the biopharmaceutical
industry generally. Such litigation or proceedings could increase our operating expenses and reduce the resources available for development activities or
any future sales, marketing or distribution activities.
In any infringement litigation, any award of monetary damages we receive may not be commercially valuable. Furthermore, because of the substantial
amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be
compromised by disclosure during litigation. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue
such infringement claims, which typically last for years before they are resolved. Further, any claims we assert against a perceived infringer could provoke
these parties to assert counterclaims against us alleging that we have infringed their patents. Some of our competitors may be able to sustain the costs of
such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and
continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
In addition, our licensed patents and patent applications, and patents and patent applications that we may apply for, own or license in the future, could face
other challenges, such as interference proceedings, opposition proceedings, re-examination proceedings and other forms of post-grant review. Any of these
challenges, if successful, could result in the invalidation of, or in a narrowing of the scope of, any of our licensed patents and patent applications and
patents and patent applications that we may apply for, own or license in the future. Any of these challenges, regardless of their success, would likely be
time-consuming and expensive to defend and resolve and would divert our management and scientific personnel’s time and attention.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts
or investors perceive these results to be negative, it could have a material adverse effect on the market price of our common stock.
Changes in U.S. patent law or the patent law of other countries or jurisdictions could diminish the value of patents in general, thereby impairing
our ability to protect our products.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and
enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is costly, time-consuming and inherently
uncertain. For example, on September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act
included a number of significant changes to U.S. patent law, including provisions that affect the way patent applications will be prosecuted and that may
also affect patent litigation. In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first to file” system in which the
first inventor to file a patent application is typically entitled to the patent. Third parties are allowed to submit prior art before the issuance of a patent by the
USPTO, and may become involved in post-grant proceedings, including opposition, derivation, reexamination, inter partes review or interference
proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could
reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position.
In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain
circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain
patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the
U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our
ability to obtain new patents or to enforce patents that we might obtain in the future.
Similarly, changes in patent law and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes in
how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we
have licensed or that we may obtain in the future. For example, the complexity and uncertainty of European patent laws have also increased in recent years.
In Europe, in June 2023, a new unitary patent system was introduced, which will significantly impact European patents, including those granted before the
introduction of the system. Under the unitary patent system, after a European patent is granted, the patent proprietor can request unitary effect, thereby
getting a European patent with unitary Effect, or a Unitary Patent. Each Unitary Patent is subject to the jurisdiction of the Unitary Patent Court, or the UPC.
As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation. Patents granted before the
implementation of the UPC will have the option of opting out of the jurisdiction of the UPC and remaining as national patents in the UPC countries. Patents
that remain under the jurisdiction of the UPC may be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate
the patent in all countries who are signatories to the UPC. We cannot predict with certainty the long-term effects of the new unitary patent system.
52
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on drug candidates throughout the world would be prohibitively expensive. Competitors may use our licensed
and owned technologies in jurisdictions where we have not licensed or obtained patent protection to develop their own products and, further, may export
otherwise infringing products to territories where we may obtain or license patent protection, but where patent enforcement is not as strong as that in the
U.S. These products may compete with our products in jurisdictions where we do not have any issued or licensed patents and any future patent claims or
other intellectual property rights may not be effective or sufficient to prevent them from so competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems
of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly
those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our licensed patents and future patents we may own, or
marketing of competing products in violation of our proprietary rights generally. Further, the laws of some foreign countries do not protect proprietary
rights to the same extent or in the same manner as the laws of the U.S. As a result, we may encounter significant problems in protecting and defending our
licensed and owned intellectual property both in the U.S. and abroad. For example, China, where we currently have a number of licensed patents and
licensed and owned patent applications, currently affords less protection to a company’s intellectual property than some other jurisdictions. As such, the
lack of strong patent and other intellectual property protection in China may significantly increase our vulnerability regarding unauthorized disclosure or
use of our intellectual property and undermine our competitive position. Proceedings to enforce our future patent rights, if any, in foreign jurisdictions
could result in substantial cost and divert our efforts and attention from other aspects of our business.
Many countries, including European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner may be
compelled under certain circumstances to grant licenses to third parties. In those countries, as of December 31, 2024, we had several licensed and owned
patents and several licensed and owned patent applications and may have limited remedies if such patents are infringed or if we are compelled to grant a
license to a third party, which could materially diminish the value of such patents. This could limit our potential revenue opportunities. Accordingly, our
efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual
property that we own or license.
We may be unable to adequately prevent unauthorized disclosure of trade secrets and other proprietary information.
In order to protect our proprietary and licensed technology and processes, we rely in part on confidentiality agreements with our corporate partners,
employees, consultants, manufacturers, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectively
prevent unauthorized disclosure of our confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of
confidential information. For example, in our suit against the Ascletis Defendants that we filed in the Southern District of California, San Diego division, in
December 2022, we brought claims related to breach of confidential disclosure agreements. There can be no assurance that we will be successful in this
suit. In addition, others may independently discover our trade secrets and proprietary information. Failure to obtain or maintain trade secret protection
could adversely affect our competitive business position.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential
information of third parties.
We employ individuals who were previously employed at other biopharmaceutical companies. Although we have no knowledge of any such claims against
us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed
confidential information of our employees’ former employers or other third parties. Litigation may be necessary to defend against these claims. There is no
guarantee of success in defending these claims, and even if we are successful, litigation could result in substantial cost and be a distraction to our
management and other employees. To date, none of our employees have been subject to such claims.
We may be subject to claims challenging the inventorship of our licensed patents, any future patents we may own and other intellectual property.
Although we are not currently experiencing any claims challenging the inventorship of our licensed patents or our licensed or owned intellectual property,
we may in the future be subject to claims that former employees, collaborators or other third parties have an interest in our licensed patents or other
licensed or owned intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of
consultants or others who are involved in developing our drug candidates. Litigation may be necessary to defend against these and other claims challenging
inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as
exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business, financial
53
condition and results of operations. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a
distraction to management and other employees.
If we do not obtain additional protection under the Hatch-Waxman Amendments and similar foreign legislation extending the terms of our
licensed patents and any future patents we may own, our business, financial condition and results of operations may be materially and adversely
affected.
Depending upon the timing, duration and specifics of FDA regulatory approval for our drug candidates, one or more of our licensed U.S. patents or future
U.S. patents that we may license or own may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration
Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as
compensation for patent term lost during drug development and the FDA regulatory review process. This period is generally one-half the time between the
effective date of an investigational new drug application (falling after issuance of the patent), and the submission date of an NDA, plus the time between
the submission date of an NDA and the approval of that application. Patent term restorations, however, cannot extend the remaining term of a patent
beyond a total of 14 years from the date of product approval by the FDA.
The application for patent term extension is subject to approval by the USPTO, in conjunction with the FDA. It takes at least six months to obtain approval
of the application for patent term extension. We may not be granted an extension because of, for example, failing to apply within applicable deadlines,
failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the
scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration or the term of any such
extension is less than we request, the period during which we will have the right to exclusively market our product will be shortened and our competitors
may obtain earlier approval of competing products, and our ability to generate revenues could be materially adversely affected.
Risks Relating to Ownership of Our Common Stock
The market price of our common stock may be highly volatile.
The trading price of our common stock is likely to be volatile. Our stock price could be subject to wide fluctuations in response to a variety of factors,
including the following:
•
any delay in filing an NDA for any of our drug candidates and any adverse development or perceived adverse development with respect to
the FDA’s review of that NDA;
•
adverse results or delays in clinical trials, if any;
•
significant lawsuits, including patent or stockholder litigation;
•
inability to obtain additional funding;
•
failure to successfully develop and commercialize our drug candidates;
•
changes in laws or regulations applicable to our drug candidates;
•
inability to obtain adequate product supply for our drug candidates, or the inability to do so at acceptable prices;
•
unanticipated serious safety concerns related to any of our drug candidates;
•
adverse regulatory decisions;
•
introduction of new products or technologies by our competitors;
•
failure to meet or exceed drug development or financial projections we provide to the public;
•
failure to meet or exceed the estimates and projections of the investment community;
•
the perception of the biopharmaceutical industry by the public, legislatures, regulators and the investment community;
•
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;
•
disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection
for our licensed and owned technologies;
•
additions or departures of key scientific or management personnel;
•
changes in the market valuations of similar companies;
54
•
general economic and market conditions and overall fluctuations in the U.S. equity market;
•
public health emergencies such as the COVID-19 pandemic;
•
sales of our common stock by us or our stockholders in the future; and
•
trading volume of our common stock.
In addition, the stock market, in general, and small biopharmaceutical companies, in particular, have experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively
affect the market price of our common stock, regardless of our actual operating performance. Further, a decline in the financial markets and related factors
beyond our control may cause our stock price to decline rapidly and unexpectedly.
An active trading market for our common stock may not be sustained, and you may not be able to resell your common stock at a desired market
price.
If no active trading market for our common stock is sustained, you may be unable to sell your shares when you wish to sell them or at a price that you
consider attractive or satisfactory. The lack of an active market may also adversely affect our ability to raise capital by selling securities in the future, or
impair our ability to acquire or in-license other drug candidates, businesses or technologies using our shares as consideration.
Our management owns a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder
approval.
As of December 31, 2024, our executive officers, directors and 5% or greater stockholders beneficially owned 28.3% of our common stock. Therefore, our
executive officers, directors and 5% or greater stockholders have the ability to influence us through this ownership position.
This concentration of stock ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in
owning stock in companies with controlling stockholders. As a result, these stockholders, if they acted together, could materially influence all matters
requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. These
stockholders may be able to determine all matters requiring stockholder approval. The interests of these stockholders may not always coincide with our
interests or the interests of other stockholders. This may also prevent or discourage unsolicited acquisition proposals or offers for our common stock that
you may feel are in your best interest as one of our stockholders and they may act in a manner that advances their best interests and not necessarily those of
other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.
Our internal control over financial reporting may not meet the standards required by Section 404 of the Sarbanes-Oxley Act, and failure to
achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, could have a
material adverse effect on our business and share price.
Commencing with the fiscal year ended December 31, 2023, in addition to our management’s report on the effectiveness of our internal controls over
financial reporting, our independent registered public accounting firm became required to attest to the effectiveness of our internal control over financial
reporting pursuant to Section 404. In addition, commencing with the fiscal year 2024, our management became required to report, on a quarterly basis, on
the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for our management and our
independent registered public accounting firm to assess our internal control over financial reporting are complex and require significant documentation,
testing and possible remediation.
In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify
deficiencies or material weaknesses that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance
with the requirements of Section 404. In addition, we may encounter problems or delays in completing the implementation of any requested improvements
and receiving a favorable attestation in connection with the attestation provided by our independent registered public accounting firm. Failure to achieve
and maintain an effective internal control environment could have a material adverse effect on our business, financial condition and results of operations
and could limit our ability to report our financial results accurately and in a timely manner.
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As a result of operating as a public company, we may incur significantly increased costs and our management and other personnel will be
required to devote substantial time to new compliance initiatives.
As a public company and particularly since becoming a “large accelerated filer” as of December 31, 2023, we have incurred and expect to continue to incur
additional significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010, or the Dodd-Frank Act, as well as rules subsequently implemented by the SEC and The Nasdaq Stock Market LLC have imposed
various requirements on public companies. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank
Act that require the SEC to adopt additional rules and regulations in these areas. Stockholder activism, the current political environment and the current
high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to
additional compliance costs and impact (in ways we cannot currently anticipate) the manner in which we operate our business. We have a small
management team that, along with other personnel, will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules
and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we
expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be
required to incur substantial costs to maintain our current levels of such insurance coverage.
As a publicly traded company, we have incurred and will incur legal, accounting and other expenses associated with the SEC reporting requirements
applicable to a company whose securities are registered under the Exchange Act, as well as corporate governance requirements, including those under the
Sarbanes-Oxley Act, the Dodd-Frank Act and other rules implemented by the SEC and The Nasdaq Stock Market LLC. In addition, we expect that we will
need to hire additional personnel in our finance department to help us comply with the various requirements applicable to public companies. The expenses
incurred by public companies generally to meet SEC reporting, Sarbanes-Oxley Act compliance, finance and accounting and corporate governance
requirements have been increasing in recent years as a result of changes in, and the adoption of, new rules and regulations applicable to public companies.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and
trading volume could decline.
The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business.
If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would
likely decline. In addition, if our operating results fail to meet the forecast of analysts, our stock price would likely decline. If one or more of these analysts
cease coverage of our company or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price
and trading volume to decline.
Sales of a substantial number of shares of our common stock in the public market by our existing stockholders or future issuances of our common
stock or rights to purchase our common stock, could cause our stock price to fall.
Sales of a substantial number of shares of our common stock by our existing stockholders in the public market, or the perception that these sales might
occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We
are unable to predict the effect that such sales may have on the prevailing market price of our common stock.
Our management will continue to have broad discretion over the use of the proceeds we received from our prior financings and available cash,
and might not apply the proceeds in ways that increase the value of your investment.
Our management will continue to have broad discretion to use the net proceeds from our prior financings and available cash and you will be relying on the
judgment of our management regarding the application of these proceeds. Our management might not apply the proceeds in ways that ultimately increase
the value of your investment and the failure by our management to apply these proceeds effectively could harm our business. Because of the number and
variability of factors that will determine our use of these remaining net proceeds, their ultimate use may vary substantially from their currently intended
use. If we do not invest or apply these net proceeds in ways that enhance stockholder value, we may fail to achieve the expected financial results, which
could cause our stock price to decline.
We are at risk of securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is
especially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face such
litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business, financial condition
and results of operations.
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Our ability to use our net operating loss carryforwards may be subject to certain limitations.
At December 31, 2024, we had approximately $157.8 million of federal net operating loss carryforwards, of which $17.8 million will begin to expire in
2032 and the remaining $140.0 million of which can be carried forward indefinitely. We have $109.6 million of state net operating loss carryforwards that
will begin to expire in 2034.
Our ability to utilize our federal net operating loss carryforwards may be limited under Section 382 of the Internal Revenue Code of 1986, as amended, or
the Code. In the event of an “ownership change,” Section 382 imposes an annual limitation on the amount of post-ownership change taxable income that
may be offset with pre-ownership change net operating losses of the loss corporation experiencing the ownership change. An “ownership change” is
defined by Section 382 as a cumulative change in ownership of our company of more than 50% within a three-year period. Additionally, we have
determined that our underwritten public offering of common stock completed in February 2018 resulted in an “ownership change” of us. However, as of
December 31, 2024, there is no limitation on the federal and state net operating losses. In addition, current or future changes in our stock ownership may
trigger an “ownership change,” some of which may be outside our control. Accordingly, our ability to utilize our net operating loss carryforwards to offset
federal taxable income, if any, will likely be limited by Section 382, which could potentially result in increased future tax liability to us.
Changes in tax laws could adversely affect our business and financial condition.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business
operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or
applied adversely to us. For example, the Trump administration has proposed various U.S. federal tax law changes, which if enacted could have a material
impact on our business, cash flows, financial condition or results of operations. In addition, it is uncertain if and to what extent various states will conform
to federal tax laws. Future tax reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time
charges, and could increase our future U.S. tax expense.
We may never pay dividends on our common stock so any returns would be limited to the appreciation of our stock.
We have never declared or paid any cash dividend on our common stock. We currently anticipate that we will retain future earnings for the development,
operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders
will therefore be limited to the appreciation of their stock.
Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws, as well as provisions of Delaware law,
could make it more difficult or expensive for a third party to acquire us or change our board of directors or current management.
Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an
acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management. These
provisions include:
•
authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without
stockholder approval;
•
limiting the removal of directors by the stockholders;
•
creating a classified board of directors;
•
providing that no stockholder is permitted to cumulate votes at any election of directors;
•
allowing the authorized number of our directors to be changed only by resolution of our board of directors;
•
prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;
•
requiring the approval of the holders of at least 66 2/3% of the votes that all our stockholders would be entitled to cast to amend or repeal
specified provisions of our charter documents;
•
eliminating the ability of stockholders to call a special meeting of stockholders; and
•
establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted
upon at stockholder meetings.
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These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for
stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are subject
to Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, which generally prohibits a Delaware corporation from engaging in
any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder
became an interested stockholder, unless such transactions are approved in advance by our board of directors or ratified by our board of directors and
certain of our stockholders. This provision could have the effect of delaying or preventing a change in control, whether or not it is desired by or beneficial
to our stockholders. Further, other provisions of Delaware law may also discourage, delay or prevent someone from acquiring us or merging with us.
Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of
actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum
for disputes with us or our directors, officers or other employees.
Our amended and restated bylaws provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be
the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty
owed by any director, officer or other employee to us or our stockholders, (3) any action asserting a claim against us or our directors, officers or employees
arising pursuant to any provision of our amended and restated bylaws, our amended and restated certificate of incorporation or the DGCL, (4) any action
asserting a claim against us or our directors, officers or employees that is governed by the internal affairs doctrine, or (5) any action to interpret, apply,
enforce or determine the validity of our amended and restated bylaws or our amended and restated certificate of incorporation. Any person purchasing or
otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to this provision of our amended
and restated bylaws. This choice-of-forum provision may limit our stockholders’ ability to bring a claim in a judicial forum that it finds favorable for
disputes with us or our directors, officers or other employees, which may discourage such lawsuits. In addition, a stockholder that is unable to bring a claim
in the judicial forum of its choosing may be required to incur additional costs in the pursuit of actions that are subject to these exclusive forum provisions,
particularly if the stockholder does not reside in or near Delaware. Alternatively, if a court were to find this provision of our amended and restated bylaws
inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with
resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations.
The timing and amount of any repurchases under our stock repurchase program are subject to a number of uncertainties.
In February 2025, our board of directors authorized a stock repurchase program effective February 27, 2025, whereby we may purchase up to $250.0
million in shares of our common stock over a period of up to two years, or the Repurchase Program. The Repurchase Program may be carried out at the
discretion of a committee of our board of directors through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately
negotiated transactions. The Repurchase Program may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any
amount of our common stock under the Repurchase Program.
Item 1B. Unresolved Staff Comments.
None.
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Item 1C. Cybersecurity
Our board of directors is responsible for overseeing our risk management program and cybersecurity is a critical element of this program. Management is
responsible for the day-to-day administration of our risk management program and our cybersecurity policies, processes, and practices. Our cybersecurity
policies, standards, processes, and practices are based on recognized frameworks established by the National Institute of Standards and Technology, the
International Organization for Standardization and other applicable industry standards and are fully integrated into our overall risk management system and
processes as part of our IT security incident response plan.
Cybersecurity Risk Management and Strategy
Our cybersecurity risk management strategy focuses on several areas:
•
Identification and Reporting: We have implemented a cross-functional approach to assessing, identifying and managing material
cybersecurity threats and incidents. Our program includes controls and procedures to identify, classify and escalate certain cybersecurity
incidents to provide management visibility and obtain direction from management as to the public disclosure and reporting of material
incidents in a timely manner.
•
Technical Safeguards: We implement technical safeguards that are designed to protect our information systems from cybersecurity threats,
including firewalls, intrusion prevention and detection systems, anti-malware functionality, and access controls, which are evaluated and
improved through vulnerability assessments and cybersecurity threat intelligence, as well as outside audits and certifications.
•
Incident Response and Recovery Planning: We have established and maintain comprehensive incident response, business continuity, and
disaster recovery plans designed to address our response to a cybersecurity incident. We conduct regular tabletop exercises to test these plans
and ensure personnel are familiar with their roles in a response scenario.
•
Third-Party Risk Management: We maintain a risk-based approach to identifying and overseeing material cybersecurity threats presented by
third parties, including vendors, service providers, and other external users of our systems, as well as the systems of third parties that could
adversely impact our business in the event of a material cybersecurity incident affecting those third-party systems, including any outside
auditors or consultants who advise on our cybersecurity systems.
•
Education and Awareness: We provide regular, mandatory training for all employees regarding cybersecurity threats as a means to equip our
employees with tools to make employees aware of and to address cybersecurity threats, and to communicate our evolving information
security policies, standards, processes, and practices.
We conduct periodic assessments and testing of our policies, standards, processes, and practices in a manner intended to address cybersecurity threats and
events. The results of such assessments, audits, and reviews are evaluated by management and reported to our Audit Committee and our board of directors,
and we adjust our cybersecurity policies, standards, processes, and practices as necessary based on the information provided by these assessments, audits,
and reviews. Risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected and are not
reasonably likely to materially affect our company, including our business strategy, results of operations, or financial condition.
Governance
Our board of directors, in coordination with our Audit Committee, oversees our risk management program, including the management of cybersecurity
threats. Our board of directors and our Audit Committee each receive regular presentations and reports on developments in the cybersecurity space,
including risk management practices, recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat
environment, technological trends, and information security issues encountered by our peers and third parties. Our board of directors and our Audit
Committee also receive prompt and timely information regarding any cybersecurity risk that meets pre-established reporting thresholds, as well as ongoing
updates regarding any such risk. On an annual basis, our board of directors and the Audit Committee discuss our approach to overseeing cybersecurity
threats with our Information Systems Representative and other members of senior management.
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The Information Systems Representative, in coordination with senior management including our Chief Executive Officer and Chief Financial Officer,
works collaboratively across our company to implement a program designed to protect our information systems from cybersecurity threats and to promptly
respond to any material cybersecurity incidents in accordance with our incident response and recovery plans. To facilitate the success of our cybersecurity
program, a cross-functional team throughout our company addresses cybersecurity threats and responds to cybersecurity incidents. Through ongoing
communications with this team, the Information Systems Representative and senior management are informed about and monitor the prevention, detection,
mitigation and remediation of cybersecurity threats and incidents in real time and report such threats and incidents to the Audit Committee when
appropriate. The Information Systems Representative has served in various roles in information technology and information security for over 25 years,
including serving as the Director of Information Technology of another public company.
Item 2. Properties.
Our facilities consist of office space in San Diego, California. We lease approximately 7,940 square feet of space and sublease approximately 6,307 square
feet of space for our headquarters in San Diego, California under agreements that expire on July 31, 2027 and March 31, 2026, respectively. We believe
that our existing facilities are adequate to meet our current needs, and that suitable additional alternative spaces will be available in the future on
commercially reasonable terms.
Item 3. Legal Proceedings.
From time to time, we may be party to lawsuits in the ordinary course of business. We are not presently a party to any legal proceedings, the outcome of
which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business,
operating results or financial condition.
In December 2022, we filed suit against Ascletis Bioscience Co., Ltd., Gannex Pharma Co., Ltd., Ascletis Pharmaceuticals Co., Ltd., Ascletis Pharma Inc.,
and Jinzi Jason Wu, or the Ascletis Defendants, in the Southern District of California, San Diego division, alleging, among other things: (1) violation of the
Defend Trade Secrets Act; (2) violation of the California Uniform Trade Secrets Act; (3) breach of contract; (4) breach of the implied covenant of good
faith and fair dealing; and (5) tortious interference with contract. In a related action, we also filed suit against the same Ascletis Defendants in the
International Trade Commission for unlawful and unfair methods of competition. These legal proceedings arise at least in part from the misappropriation of
our trade secrets.
On October 3, 2024, the ITC’s Chief Administrative Law Judge issued a Notice of his determination in favor of Viking. The ruling states that Ascletis
Defendants misappropriated our trade secrets while under a Confidential Disclosure Agreement and engaged in discovery misconduct, warranting monetary
and non-monetary sanctions. We plan to continue to vigorously pursue, as necessary, all of our legal remedies in these litigations, including through any
appeals processes that the Ascletis Defendants may initiate, but there is no guarantee that we will be successful in these efforts.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock began trading on the Nasdaq Capital Market on April 28, 2015 and trades under the symbol “VKTX”. Prior to April 28, 2015, there was
no public market for our common stock.
Holders of Record
As of December 31, 2024, there were approximately eight stockholders of record of our common stock. Certain shares are held in “street” name and,
accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.
Performance Graph
The following stock performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such
information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that we specifically incorporate it by reference into such filing.
The following performance graph compares total stockholder returns for our common stock from December 31, 2019 through December 31, 2024 against
the NASDAQ Composite Index and NASDAQ Biotechnology Index, each of which we believe is a comparable index consisting of companies with similar
industry classifications, and which we plan to use in our future performance graphs. Each of the two comparative measures of cumulative total return
assumes reinvestment of dividends. The stock performance shown in the graph below is not necessarily indicative of future price performance.
Comparison of 5 Year Cumulative Total Return
Among Viking Therapeutics, Inc., the NASDAQ Composite and the NASDAQ Biotechnology Index
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
None.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis in conjunction with Part II, “Item 8. Financial Statements and Supplementary Data” included below
in this Annual Report on Form 10-K. Operating results are not necessarily indicative of results that may occur in future periods.
The following discussion and analysis of our financial condition and results of operations contains forward-looking statements that involve a number of
risks, uncertainties and assumptions. Actual events or results may differ materially from our expectations. Important factors that could cause actual results
to differ materially from those stated or implied by our forward-looking statements include, but are not limited to, those set forth in Part I, “Item 1A. Risk
Factors” in this Annual Report on Form 10-K. All forward-looking statements included in this Annual Report on Form 10-K are based on information
available to us as of the time we file this Annual Report on Form 10-K and, except as required by law, we undertake no obligation to update publicly or
revise any forward-looking statements.
Overview
We are a clinical-stage biopharmaceutical company focused on the development of novel, first-in-class or best-in-class therapies for metabolic and
endocrine disorders.
In January 2022, we announced the initiation of a Phase 1 single ascending dose, or SAD, and multiple ascending dose, or MAD, clinical trial of VK2735,
a novel dual agonist of the glucagon-like peptide 1, or GLP-1, and glucose-dependent insulinotropic polypeptide, or GIP, receptors. VK2375 is being
developed in both oral and subcutaneous formulations for the potential treatment of various metabolic disorders such as obesity.
On March 28, 2023, we announced the completion of the Phase 1 trial. The study was a randomized, double-blind, placebo-controlled, SAD and MAD
study in healthy adults. The primary objectives of the study included evaluation of the safety and tolerability of single and multiple doses of VK2735
delivered subcutaneously and the identification of VK2735 doses suitable for further clinical development. Study investigators also evaluated the
pharmacokinetics of single and multiple doses of VK2735. Based upon the results from this Phase 1 study, in September 2023, we initiated the VENTURE
study, a Phase 2 clinical trial of VK2735 in patients with obesity.
The Phase 2 VENTURE study was a randomized, double-blind placebo-controlled study to evaluate the safety, tolerability, pharmacokinetics and weight
loss efficacy of VK2735, administered subcutaneously, once weekly. The 13-week study enrolled adults who were obese (BMI >= 30 kg/m2) or adults who
were overweight (BMI >= 27kg/m2) with at least one weight-related co-morbidity condition. The primary endpoint of the study was the percent change in
body weight from baseline to week 13, with secondary and exploratory endpoints evaluating a range of additional safety and efficacy measures. In October
2023, we announced completion of patient enrollment in the Phase 2 VENTURE study and on February 27, 2024, we announced that patients receiving
weekly doses of VK2735 demonstrated statistically significant reductions in mean body weight after 13 weeks, ranging up to 14.7% from baseline. Patients
receiving VK2735 also demonstrated statistically significant reductions in mean body weight relative to placebo, ranging up to 13.1%. Based on written
feedback received from the U.S. Food and Drug Administration, or the FDA, we expect to initiate Phase 3 clinical studies of the subcutaneous formulation
of VK2735 in the first half of 2025.
On March 28, 2023, we announced the initiation of a Phase 1 clinical study to evaluate a novel oral formulation of VK2735. The study, which was an
extension of our recently completed Phase 1 evaluation of subcutaneously administered VK2735, evaluated daily oral doses for 28 days. On March 26,
2024, we announced that the 28-day MAD study results highlighted positive signs of clinical activity following treatment with oral VK2735. Cohorts
receiving VK2735 demonstrated dose-dependent reductions in mean body weight from baseline, ranging up to approximately 5.3%.
On January 8, 2025, we announced the initiation of a Phase 2 clinical trial of the oral tablet formulation of VK2735, our dual agonist of the GLP-1 and GIP
receptors. We expect to complete this study and report initial results in the second half of 2025.
We are also developing VK2809, which is an orally available, tissue and receptor-subtype selective agonist of the thyroid hormone receptor beta, or TRß.
In November 2019, we initiated the VOYAGE study, a Phase 2b clinical trial of VK2809 in patients with biopsy-confirmed non-alcoholic steatohepatitis,
or NASH/MASH.
The VOYAGE study was a randomized, double-blind, placebo-controlled, multicenter trial designed to assess the efficacy, safety and tolerability of
VK2809 in patients with biopsy-confirmed NASH/MASH and fibrosis ranging from stages F1 to F3. The primary endpoint of the study evaluated the
relative change in liver fat content, as assessed by magnetic resonance imaging, proton density fat
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fraction, or MRI-PDFF, from baseline to week 12 in subjects treated with VK2809 as compared to placebo. Secondary objectives included evaluation of
histologic changes assessed by hepatic biopsy after 52 weeks of dosing.
In January 2023, we announced completion of patient enrollment in the VOYAGE study and in May 2023 we reported that the VOYAGE study
successfully achieved its primary endpoint, with patients receiving VK2809 experiencing statistically significant reductions in liver fat content from
baseline to Week 12 as compared to placebo.
In June 2024, we announced positive 52-week histologic data from the VOYAGE study with up to 75% of patients treated with VK2809 achieving
NASH/MASH resolution with no worsening of fibrosis as compared to 29% for placebo (p=0.0001), up to 57% of VK2809-treated patients achieving ≥1-
stage improvement in fibrosis with no worsening of NASH/MASH as compared to 34% for placebo (p<0.05) and up to 48% of VK2809-treated patients
achieving both resolution of NASH/MASH and a ≥1-stage improvement in fibrosis as compared to 20% for placebo (p=0.01). Adverse events, including
GI-related adverse events were similar among VK2809-treated patients vs. placebo at week 52 and consistent with prior data reported at week 12. VK2809
has been evaluated in eight completed clinical studies, which enrolled more than 400 subjects.
We are also developing VK0214, which is also an orally available, tissue and receptor-subtype selective agonist of TRß for X-linked
adrenoleukodystrophy, or X-ALD, a rare X-linked, inherited neurological disorder characterized by a breakdown in the protective barriers surrounding
brain and nerve cells. The disease, for which there is no approved treatment, is caused by mutations in a peroxisomal transporter of very long chain fatty
acids, or VLCFA, known as ABCD1. As a result, transporter function is impaired and patients are unable to efficiently metabolize VLCFA. The TRß
receptor is known to regulate expression of an alternative VLCFA transporter, known as ABCD2. Various preclinical models have demonstrated that
increased expression of ABCD2 can lead to normalization of VLCFA metabolism. Preliminary data suggest that VK0214 stimulates ABCD2 expression in
an in vitro model and reduces VLCFA levels in an in vivo model of X-ALD.
In June 2021, we initiated a Phase 1b clinical trial of VK0214 in patients with X-ALD. This trial was a multi-center, randomized, double-blind, placebo-
controlled study in adult male patients with the adrenomyeloneuropathy, or AMN, form of X-ALD. The study enrolled patients across three cohorts:
placebo, VK0214 20 mg daily, and VK0214 40 mg daily.
The primary objectives of the study were to evaluate the safety and tolerability of VK0214 administered once-daily over a 28-day dosing period. Secondary
objectives included an evaluation of the pharmacokinetics of VK0214 following 28 days of dosing in this population. An exploratory objective was to
evaluate the effects of VK0214 on plasma levels of very long-chain fatty acids, or VLCFAs, in subjects with AMN. In October 2024, we announced results
from the Phase 1b clinical trial, which showed VK0214 to be safe and well-tolerated following once-daily dosing over the 28-day study period. In addition,
significant reductions were observed in plasma levels of VLCFAs and other lipids, as compared to placebo. Our intent is to pursue partnering or licensing
opportunities for VK0214 prior to conducting additional clinical studies.
Other clinical programs include VK5211, an orally available, non-steroidal selective androgen receptor modulator, or SARM. In November 2017, we
announced positive top-line results from a Phase 2 proof-of-concept clinical trial in 108 patients recovering from non-elective hip fracture surgery. Top-line
data showed that the trial achieved its primary endpoint, demonstrating statistically significant, dose dependent increases in lean body mass, less head,
following treatment with VK5211 as compared to placebo. The study also achieved certain secondary endpoints, demonstrating statistically significant
increases in appendicular lean body mass and total lean body mass for all doses of VK5211, compared to placebo. VK5211 demonstrated encouraging
safety and tolerability in this study, with no drug-related SAEs reported. Our intent is to continue to pursue partnering or licensing opportunities for
VK5211 prior to conducting additional clinical studies.
We were incorporated under the laws of the State of Delaware on September 24, 2012. Since our incorporation, we have devoted most of our efforts
towards conducting certain clinical trials and preclinical studies related to our VK2735 subcutaneous, VK2735 oral, VK2809, VK0214, VK5211 and dual
amylin and calcitonin receptor agonist programs and towards raising capital and building infrastructure. We obtained exclusive worldwide rights to
VK2809, VK0214 and VK5211 and certain other assets pursuant to an exclusive license agreement with Ligand Pharmaceuticals Incorporated, or Ligand.
The terms of this license agreement are detailed in the Master License Agreement with Ligand, which we entered into on May 21, 2014, as amended, or the
Master License Agreement. A summary of the Master License Agreement can be found under the heading “Master License Agreement with Ligand” under
Part I, “Item 1. Business” of this Annual Report on Form 10-K.
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Financial Operations Overview
Revenues
To date, we have not generated any revenue. We do not expect to receive any revenue from any drug candidates that we develop unless and until we obtain
regulatory approval for, and commercialize, our drug candidates or enter into collaborative agreements with third parties.
Research and Development Expenses
During the year ended December 31, 2024, we incurred $101.6 million in research and development expenses primarily related to our efforts in conducting
the VK2735 Phase 2 VENTURE clinical trial, the VK2735 Phase 1 subcutaneous clinical trial, the VK2735 Phase 1 oral clinical trial, VK2809 Phase 2b
VOYAGE clinical trial and the VK0214 Phase 1b clinical trial. During the year ended December 31, 2023, we incurred $63.8 million in research and
development expenses primarily related to our efforts in conducting the VK2735 Phase 2 VENTURE clinical trial, the VK2735 Phase 1 subcutaneous
clinical trial, VK2809 Phase 2b VOYAGE clinical trial and the VK0214 Phase 1b clinical trial. We expect that our ongoing research and development
expenses will consist of costs incurred for the development of our drug candidates, including, but not limited to:
•
employee and consultant-related expenses, which will include salaries, benefits and stock-based compensation, and certain consultant fees
and travel expenses;
•
expenses incurred under agreements with investigative sites and CROs, which will conduct a substantial portion of our research and
development activities, including studies in NASH/MASH, on our behalf;
•
payments to third-party manufacturers, which will produce our active pharmaceutical ingredients and finished products;
•
license fees paid to third parties for use of their intellectual property; and
•
facilities, depreciation and other allocated expenses, which will include direct and allocated expenses for rent and maintenance of facilities
and equipment, depreciation of leasehold improvements, equipment and laboratory and other supplies.
We expense all research and development costs as incurred.
The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming and the successful development of our
drug candidates is highly uncertain. Our future research and development expenses will depend on the clinical success of each of our drug candidates, as
well as ongoing assessments of the commercial potential of such drug candidates. In addition, we cannot forecast with any degree of certainty which drug
candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect
our development plans and capital requirements. We expect to incur increased research and development expenses in the future as we continue our efforts
towards advancing our VK2735 subcutaneous, VK2735 oral, VK2809 and VK0214 programs and seek to advance our additional programs.
General and Administrative Expenses
Our general and administrative expenses have generally increased year-over-year as we have hired additional employees, issued additional equity awards,
which has resulted in increased stock-based compensation expense, implemented certain systems to increase efficiency, and incurred additional costs for
insurance, legal and accounting related to operating as a public company. We expect that our general and administrative expenses will continue to increase
in the future in order to support our expected increase in research and development activities, including increased salaries and other related costs, stock-
based compensation and consulting fees for executive, finance, accounting and business development functions. We also expect general and administrative
expenses to increase as a result of additional costs associated with being a public company, including expenses related to compliance with the rules and
regulations of the SEC and The Nasdaq Stock Market LLC, additional insurance expenses, investor relations activities and other administration and
professional services. Other significant costs are expected to include legal fees relating to patent and corporate matters, facility costs not otherwise included
in research and development expenses, and fees for accounting and other consulting services.
Other Income (Expense)
Other income (expense) includes interest income earned from our cash, cash equivalents and short-term investments.
64
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the
financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and
judgments related to our preclinical, nonclinical and clinical development costs and drug manufacturing costs. We base our estimates on historical
experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
While our significant accounting policies are more fully described in Note 1 to our financial statements included elsewhere in this Annual Report on Form
10-K, we believe that the following accounting policies will be critical to understanding our historical and future performance, as these policies relate to the
significant areas involving management’s judgments and estimates in the preparation of our financial statements.
Research and Development
All costs of research and development are expensed in the period incurred. Research and development costs primarily consist of fees paid to contract
research organizations, or CROs, and clinical trial sites, employee and consultant related expenses, which include salaries, benefits and stock-based
compensation for research and development personnel, external research and development expenses incurred pursuant to agreements with third-party
manufacturing organizations, facilities costs, travel costs, dues and subscriptions, depreciation and materials used in preclinical studies, clinical trials and
research and development.
We estimate our preclinical study and clinical trial expenses based on the services we received pursuant to contracts with research institutions and CROs
that conduct and manage preclinical studies and clinical trials on our behalf. Clinical trial-related contracts vary significantly in length, and may be for a
fixed amount, based on milestones or deliverables, a variable amount based on actual costs incurred, capped at a certain limit, or for a combination of these
elements. We accrue service fees based on work performed, which relies on estimates of total costs incurred based on milestones achieved, patient
enrollment and other events. The majority of our service providers invoice us in arrears, and to the extent that amounts invoiced differ from our estimates
of expenses incurred, we accrue for additional costs. The financial terms of these agreements vary from contract to contract and may result in uneven
expenses and payment flows. Preclinical study and clinical trial expenses include:
•
fees paid to CROs, consultants and laboratories in connection with preclinical studies;
•
fees paid to CROs, clinical trial sites, investigators and consultants in connection with clinical trials; and
•
fees paid to contract manufacturers and service providers in connection with the production, testing and packaging of active
pharmaceutical ingredients and drug materials for preclinical studies and clinical trials.
Payments under some of these agreements depend on factors such as the milestones accomplished, including enrollment of certain numbers of patients, site
initiation and the completion of clinical trial milestones. To date, we have not experienced any events requiring us to make material adjustments to our
accruals for service fees. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or
the costs of these services, our actual expenses could differ from our estimates, which could materially affect our results of operations. Adjustments to our
accruals are recorded as changes in estimates become evident. Furthermore, based on amounts invoiced to us by our service providers, we may also record
payments made to those providers as prepaid expenses that will be recognized as expense in future periods as services are rendered.
In May 2014, we entered into the Master License Agreement, pursuant to which we acquired certain rights to a number of research and development
programs from Ligand. In doing so, we updated our policy on research and development to include the purchase of rights to intangible assets. In
accordance with Accounting Standards Codification, or ASC, Topic 730, Research and Development, intangible assets that are acquired and have an
alternative future use, as defined, should be capitalized and reported as an intangible asset; however, the cost of acquired intangible assets that do not have
alternative future uses should be reported as research and development expense as incurred. We note that intangible assets acquired that are in the
preclinical or clinical stages of development when acquired, and not approved by the U.S. Food and Drug Administration, are deemed to have not satisfied
the definition of having an alternative future use, as defined. Accordingly, assets acquired in the preclinical and clinical stages of development are expensed
as incurred in our statement of operations.
65
Stock-Based Compensation
We generally use the straight-line method to allocate compensation cost to reporting periods over each optionee’s requisite service period, which is
generally the vesting period, and estimate the fair value of stock-based awards or restricted stock units to employees and directors using the Black-Scholes
option-valuation model. The Black-Scholes model requires the input of subjective assumptions, including volatility, the expected term and the fair value of
the underlying common stock on the date of grant, among other inputs. For restricted stock and restricted stock unit awards, we generally use the straight-
line method to allocate compensation cost to reporting periods over the holder’s requisite service period, which is generally the vesting period, and use the
fair value at grant date to value the awards. For restricted stock that vests upon the satisfaction of certain performance conditions, we recognize stock-based
compensation expense when it becomes probable that the performance conditions will be met. At the grant date, we determine the grant date fair value, as a
publicly traded company, using the intrinsic value, or the closing price of our stock on the date of grant. At the point where the criteria are deemed probable
of being met, we record stock-based compensation with a cumulative catch-up expense in the period first recognized and then on a straight-line basis over
the remaining period for which the performance criteria are expected to be completed.
For our Employee Stock Purchase Plan, or ESPP, we generally recognize compensation expense for the fair value of the purchase options, as measured on
the grant date, and use the graded vesting method to allocate this compensation cost to each purchase period within the related two-year offering period. As
our ESPP also allows for up to one increase in contributions during each purchase period, if an employee elects to increase their contributions, we treat this
as an accounting modification. The pre- and post-modification values are calculated on the date of the modification, and the incremental expense is then
amortized over the remaining purchase periods.
Income Taxes
We account for our income taxes using the liability method whereby deferred tax assets and liabilities are determined based on temporary differences
between the basis used for financial reporting and income tax reporting purposes. Deferred income taxes are provided based on the enacted tax rates in
effect at the time such temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it is more likely than not
that we will not realize those tax assets through future operations.
ASC Topic 740-10, Income Taxes, clarifies the accounting for uncertainty in income taxes recognized in our financial statements in accordance with
accounting principles generally accepted in the United States of America, or GAAP. Income tax positions must meet a more-likely-than-not recognition
threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent
financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are
derecognized in the first subsequent financial reporting period in which that threshold is no longer met.
Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
Research and Development Expenses
The following table summarizes our research and development expenses for the years ended December 31, 2024 and 2023 (in thousands, except %
change).
Year Ended December 31,
$
Change
%
Change
2024
2023
Research and development expenses
$
101,644 $
63,806 $
37,838
59.3 %
The increase in research and development expenses during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was
primarily due to increased expenses related to manufacturing for our drug candidates, stock-based compensation and salaries and benefits, partially offset
by a decrease in expenses related to clinical studies and preclincal studies.
66
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the years ended December 31, 2024 and 2023 (in thousands, except %
change).
Year Ended December 31,
$
Change
%
Change
2024
2023
General and administrative expenses
$
49,277 $
37,021 $
12,256
33.1 %
The increase in general and administrative expenses during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was
primarily due to increased expenses related to stock-based compensation, salaries and benefits, professional fees, insurance and services provided by third-
party consultants, partially offset by decreased legal and patent services.
Other Income, net
The following table summarizes our other income, net for the years ended December 31, 2024 and 2023 (in thousands, except % change).
Year Ended December 31,
$
Change
%
Change
2024
2023
Other income, net
$
40,958 $
14,932 $
26,026
174.3 %
Other income, net recognized during the years ended December 31, 2024 and 2023 consisted primarily of interest income, partially offset by expense
relating to the amortization of certain financing costs.
Comparison of the Years Ended December 31, 2023 and 2022
For a discussion regarding our financial condition and results of operations for the year ended December 31, 2023 as compared to the year ended December
31, 2022, please refer to the discussion under the heading “Results of Operations—Comparison of the Years Ended December 31, 2023 and 2022” in Item
7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 7, 2024.
Liquidity and Capital Resources
We have incurred losses and negative cash flows from operations and have not generated any revenues since our inception. As of December 31, 2024, we
had cash, cash equivalents and short-term investments of $902.6 million. As such, we believe our cash, cash equivalents and short-term investments will be
sufficient to fund our operations through at least the first quarter of 2026, which is more than one year after the date our December 31, 2024 financial
statements were issued.
Our primary use of cash is to fund operating expenses, which to date have consisted of the cost to obtain the license of intellectual property from Ligand,
certain research and development expenses related to furthering the development of VK2735 subcutaneous, VK2735 oral, VK2809, VK0214 and VK5211,
and general and administrative expenses. Since we have not generated any revenues to date, we have incurred operating losses since our inception. Cash
used to fund operating expenses is impacted by the timing of payment of these expenses, as reflected in the change in our outstanding accounts payable and
accrued expenses.
On July 28, 2021, we entered into an At-The-Market Equity Offering Sales Agreement, or the ATM Agreement, with Stifel, Nicolaus & Company,
Incorporated, Truist Securities, Inc. and H.C. Wainwright & Co. LLC, collectively, the Agents, pursuant to which we could offer and sell, from time to
time, through or to the Agents, as sales agent or principal, or the ATM Offering, shares of our common stock having an aggregate offering price of up to
$125.0 million, or the ATM Shares. Any ATM Shares offered and sold in the ATM Offering were to be issued pursuant to a universal Shelf Registration
Statement on Form S-3 (File No. 333-258231), or the 2021 Shelf Registration Statement, and the 424(b) prospectus supplement relating to the ATM
Offering dated August 11, 2021. From its inception through the expiration of the 2021 Shelf Registration Statement in July 2023, 1,587,404 shares of our
common stock were sold pursuant to the ATM Offering for aggregate net proceeds to us of approximately $13.6 million.
On March 17, 2020, our board of directors authorized a stock repurchase program, or the Prior Repurchase Program, whereby we could purchase up to
$50.0 million in shares of our common stock and outstanding warrants to purchase our common stock, over a period of up to two years. The Prior
Repurchase Program was carried out at the discretion of a committee of our board of directors through open market purchases, one or more Rule 10b5-1
trading plans, block trades or privately negotiated transactions. Through March 17, 2022, the termination date of the Prior Repurchase Program, we
repurchased an aggregate of 1,464,217 shares of our common stock under the
67
Prior Repurchase Program. These shares repurchased by us under the Prior Repurchase Program were held in treasury and reissued by us as part of the
March 2024 Offering (as defined below).
On March 10, 2022, our board of directors authorized a stock repurchase program, or the Repurchase Program, effective March 18, 2022, whereby we
could purchase up to $50.0 million in shares of our common stock over a period of up to two years. The Repurchase Program was carried out at the
discretion of a committee of our board of directors through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately
negotiated transactions. Through March 18, 2024, the termination date of the Repurchase Program, we repurchased an aggregate of 729,034 shares of our
common stock under the Repurchase Program. Shares repurchased by us under the Repurchase Program were held in treasury and reissued by us as part of
the March 2024 Offering.
On April 3, 2023, we completed an underwritten public offering of our common stock, or the April 2023 Offering, pursuant to the 2021 Shelf Registration
Statement. In the April 2023 Offering, we sold an aggregate of 19,828,300 shares of our common stock at a public offering price of $14.50 per share,
which included the exercise in full by the underwriters of their option to purchase 2,586,300 additional shares of common stock. Upon the closing of the
April 2023 Offering, we received gross proceeds of $287.5 million.
On July 26, 2023, we filed an automatic universal shelf registration statement on Form S-3 (File No. 333-273460) as a well-known seasoned issuer as
defined in Rule 405 under the Securities Act of 1933, as amended, which became effective upon filing, or the 2023 Shelf Registration Statement. The 2023
Shelf Registration Statement allows us to offer an indeterminate amount of securities, including equity securities, debt securities, warrants, rights, units and
depositary shares, from time to time as described in the 2023 Shelf Registration Statement. The specific terms of any offering under the 2023 Shelf
Registration Statement will be established at the time of such offering. The 2023 Shelf Registration Statement will expire on July 26, 2026.
On July 26, 2023, we entered into an Amendment No. 1 to At-The-Market Equity Offering Sales Agreement, or the ATM Agreement Amendment, with
Stifel, Nicolaus & Company, Incorporated, Truist Securities, Inc., H.C. Wainwright & Co. LLC and BTIG, LLC. Pursuant to the ATM Agreement
Amendment, BTIG, LLC was added as a sales agent for the ATM Offering and the ATM Agreement was amended to provide that the ATM Offering could
be conducted off of registration statements on Form S-3 subsequently filed by us. Any ATM Shares offered and sold in the ATM Offering will now be
issued pursuant to the 2023 Shelf Registration Statement and the prospectus, dated July 26, 2023, relating to the sale of up to $200.0 million of shares of
our common stock pursuant to the ATM Offering that was included in the 2023 Shelf Registration Statement, or the ATM Prospectus. The 2023 Shelf
Registration Statement will expire on July 26, 2026. From the date of the ATM Prospectus through December 31, 2024, 1,426,303 shares of our common
stock were sold pursuant to the ATM Offering and, as of December 31, 2024, we may sell shares of our common stock for remaining gross proceeds of up
to $151.9 million from time to time pursuant to the ATM Prospectus.
On March 4, 2024, we completed an underwritten public offering of our common stock, or the March 2024 Offering, pursuant to the 2023 Shelf
Registration Statement. In the March 2024 Offering, we sold an aggregate of 7,441,650 shares of our common stock at a public offering price of $85.00 per
share, which included the exercise in full by the underwriters of their option to purchase 970,650 additional shares of common stock. Upon the closing of
the March 2024 Offering, we received net proceeds of $597.1 million.
In February 2025, subsequent to the fiscal year end, our board of directors authorized a stock repurchase program effective February 27, 2025, whereby we
may purchase up to $250.0 million in shares of our common stock over a period of up to two years. See “Stock Repurchase Program” under Part II, Item
9B of this Annual Report on Form 10-K for additional information.
68
The following table summarizes our cash flows for the periods indicated below (in thousands):
2024
2023
2022
Net cash used in operating activities
$
(87,790 ) $
(73,376 ) $
(48,397 )
Net cash (used in) provided by investing activities
$
(553,366 ) $
(179,086 ) $
54,753
Net cash provided by financing activities
$
612,464 $
271,376 $
4,163
Net Cash Used in Operating Activities
During the year ended December 31, 2024, net cash used in operating activities of $87.8 million primarily reflected our net losses for the period, adjusted
by non-cash charges such as stock-based compensation, amortization of investment premiums, amortization of right-of-use assets, realized gain on
investment, amortization of financing costs, and interest expense related to operating lease liabilities as well as changes in our working capital accounts,
primarily consisting of an increase in accrued expenses, accounts payable and accrued interest, net of interest received on maturity of investments, partially
offset by decreases in prepaid expenses and other assets and lease liability.
During the year ended December 31, 2023, net cash used in operating activities of $73.4 million primarily reflected our net losses for the period, adjusted
by non-cash charges such as stock-based compensation, amortization of investment premiums, amortization of right-of-use assets, amortization of
financing costs, and interest expense related to operating lease liabilities as well as changes in our working capital accounts, primarily consisting of an
increase in accrued interest, net of interest received on maturity of investments, partially offset by a decrease in prepaid expenses and other assets and
decreases in accounts payable, accrued expenses and lease liability.
Net Cash Provided by Investing Activities
During the year ended December 31, 2024, net cash used in investing activities of $553.4 million resulted from the purchase of investments of $1.1 billion,
offset by the proceeds of maturities of investments of $560.0 million.
During the year ended December 31, 2023, net cash used in investing activities of $179.1 million resulted from the purchase of investments of $478.3
million, offset by the proceeds of maturities of investments of $299.2 million.
Net Cash Provided by Financing Activities
During the year ended December 31, 2024, net cash provided by financing activities was $612.5 million, which consisted primarily of proceeds from the
issuance of common stock, net of discount, of $597.1 million in the March 2024 Offering, proceeds from certain option exercises and 2014 Employee
Stock Purchase Plan common stock issuance of $10.8 million and proceeds from the ATM Offering, net of fees, of $46.7 million, partially offset by value
of shares withheld to cover taxes of $42.1 million.
During the year ended December 31, 2023, net cash provided by financing activities was $271.4 million, which consisted primarily of proceeds from the
issuance of common stock, net of discount, of $269.8 million in the April 2023 Offering, proceeds from certain option exercises of $6.8 million and
proceeds from the ATM Offering, net of fees, of $2.0 million, partially offset by value of shares withheld to cover taxes of $7.1 million.
Future Funding Requirements
As of December 31, 2024, and based upon our current operating plan, we believe that we will have sufficient cash to meet our projected operating
requirements for at least the next 12 months following the issuance of the financial statements. We anticipate, however, that we will continue to generate
losses for the foreseeable future, and we expect the losses to increase materially as we continue the development of, and seek regulatory approvals for, our
drug candidates, and seek to commercialize any drugs for which we receive regulatory approval. We will need to raise additional capital to fund our
operations and complete our ongoing and planned clinical trials. Although we expect to finance future cash needs through public or private equity or debt
offerings, funding may not be available to us on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms
acceptable to us, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to
develop and market drug candidates that we would otherwise prefer to develop and market ourselves.
Our future capital requirements will depend on many factors, including, but not limited to:
•
the scope, rate of progress, results and costs of our clinical trials, preclinical studies and other related activities;
69
•
our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such
agreements;
•
the timing of, and the costs involved in, obtaining regulatory approvals for any of our current or future drug candidates;
•
the number and characteristics of the drug candidates we seek to develop or commercialize;
•
the cost of manufacturing clinical supplies, and establishing commercial supplies, of our drug candidates;
•
the cost of commercialization activities if any of our current or future drug candidates are approved for sale, including marketing,
sales and distribution costs;
•
the expenses needed to attract and retain skilled personnel;
•
the costs associated with being a public company;
•
the amount of revenue, if any, received from commercial sales of our drug candidates, should any of our drug candidates receive
marketing approval; and
•
the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing possible patent claims, including
litigation costs and the outcome of any such litigation.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
Financial Instruments
As part of our investment portfolio, we own financial instruments that are sensitive to market risks. The investment portfolio is used to preserve our capital,
provide adequate liquidity and earn returns commensurate with our risk appetite. We invest in instruments that meet the credit quality standards outlined in
our investment policy, which also limits the amount of credit exposure to any one issue or type of instrument. These instruments principally include
securities issued by the U.S. government and its agencies, investment-grade corporate bonds and commercial paper, and money market funds. These
investments are denominated in U.S. Dollars and none are held for trading purposes.
All of our interest-bearing securities are subject to interest rate risk and could change in value if interest rates fluctuate. Substantially all of our investment
portfolio consists of marketable securities with active secondary or resale markets to help ensure portfolio liquidity, and we have implemented guidelines
limiting the term-to-maturity of our investment instruments. Since we account for these securities as available-for-sale, no gains or losses are realized due
to changes in the fair value of our investments unless we sell our investments prior to maturity or incur a credit loss. Due to the conservative nature of these
instruments, we do not believe that the fair value of our investments has a material exposure to interest rate risk.
While we are exposed to global interest rate fluctuations, our investment portfolio is most affected by fluctuations in U.S. interest rates, which affect the
interest earned on our cash, cash equivalents and marketable securities. Interest income generated from our cash, cash equivalents, and short-term
investments – available-for-sale will vary with the general level of interest rates. A hypothetical 100 basis point change in interest rates along the entire
interest rate yield curve in 2024 and 2023 would increase or decrease our interest rate yields on our investments by approximately $0.9 million and $0.3
million, respectively.
(in thousands)
December 31, 2024
December 31, 2023
Cash and cash equivalents
$
26,676
$
55,516
Short-term investments – available-for-sale
$
875,936
$
306,563
Total
$
902,612
$
362,079
70
Item 8. Financial Statements and Supplementary Data.
The information required by this Item 8 is contained on the pages indicated in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or
the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including
our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated,
can provide only reasonable and not absolute assurance of achieving the desired control objectives, and management necessarily applies its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
Based on our management’s evaluation (with the participation of the individuals serving as our principal executive officer and principal financial officer) of
our disclosure controls and procedures as required by Rules 13a-15 and 15d-15 under the Exchange Act, each of the individuals serving as our principal
executive officer and principal financial officer has concluded that our disclosure controls and procedures were effective at the reasonable assurance level
as of December 31, 2024, the end of the period covered by this report.
Management’s Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-
15(f) of the Exchange Act). Internal control over financial reporting is a process designed under the supervision and with the participation of our
management, including the individuals serving as our principal executive officer and principal financial officer, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally
accepted in the United States of America. Management conducted an assessment of the effectiveness of our internal control over financial reporting based
on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013
Framework). Based on this
71
assessment, our management concluded that, as of December 31, 2024, our internal control over financial reporting was effective based on those criteria.
Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2024 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
Attestation Report on Internal Control over Financial Reporting.
Our independent registered public accounting firm, Marcum LLP, issued an attestation report on our internal control over financial reporting, as noted
below.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Shareholders and Board of Directors of Viking Therapeutics, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Viking Therapeutics, Inc.'s (the “Company”) internal control over financial reporting as of December 31, 2024, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based
on criteria established in COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated
balance sheets as of December 31, 2024 and December 31, 2023, and the related consolidated statements of operations and comprehensive loss,
shareholders’ equity, and cash flows and the related notes for each of the three years in the period ended December 31, 2024, and our report dated February
26, 2025 expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying “Management Annual Report on Internal Control over Financial Reporting”. Our
responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention
72
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance
with the policies or procedures may deteriorate.
/s/ Marcum LLP
Marcum LLP
Costa Mesa, California
February 26, 2025
73
Item 9B. Other Information.
Insider Adoption or Termination of Trading Arrangements:
During the fiscal quarter ended December 31, 2024, none of our directors or officers (as defined in Section 16 of the Securities Exchange Act of 1934, as
amended) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the
affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K, except as
described in the table below:
Name & Title
Date Adopted
Type of Plan
Aggregate Number of
Shares of Common stock to
be Sold Pursuant to Trading
Arrangement
Duration
Lawson Macartney, Director
December 24, 2024
Rule 10b5-1 trading
arrangement
38,000
September 30, 2025
(1)
The trading arrangement permits transactions through and including the earlier to occur of (a) the date that all shares subject to the trading
arrangement have been sold and (b) the date listed in the table.
Stock Repurchase Program
In February 2025, our board of directors authorized a stock repurchase program, or the Repurchase Program, effective February 27, 2025, whereby we may
purchase up to $250.0 million in shares of our common stock over a period of up to two years. The Repurchase Program may be carried out at the
discretion of a committee of our board of directors through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately
negotiated transactions.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
(1)
74
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item will be contained in our definitive proxy statement on Schedule 14A to be filed with the SEC in connection with our
2025 annual meeting of stockholders, or the Proxy Statement, which we expect to file not later than 120 days after the end of our year ended December 31,
2024, and is incorporated in this report by reference.
Item 11. Executive Compensation.
The information required by this item will be contained in the Proxy Statement, which we expect to file not later than 120 days after the end of our year
ended December 31, 2024, and is incorporated in this report by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item will be contained in the Proxy Statement, which we expect to file not later than 120 days after the end of our year
ended December 31, 2024, and is incorporated in this report by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item will be contained in the Proxy Statement, which we expect to file not later than 120 days after the end of our year
ended December 31, 2024, and is incorporated in this report by reference.
Item 14. Principal Accounting Fees and Services.
The information required by this item will be contained in the Proxy Statement, which we expect to file not later than 120 days after the end of our year
ended December 31, 2024, and is incorporated in this report by reference.
75
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)(1) The Financial Statements required to be filed by Items 8 and 15(c) of this Annual Report on Form 10-K, and filed herewith, are as follows:
Page Number in
this Annual Report
on Form 10-K
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets
F-4
Consolidated Statements of Operations and Comprehensive Loss
F-5
Consolidated Statements of Stockholders’ Equity
F-6
Consolidated Statements of Cash Flows
F-7
Notes to Consolidated Financial Statements
F-8
(a)(2) Financial Statement Schedules have been omitted because they are either not applicable or the required information is included in the financial
statements or notes thereto listed in (a)(1) above.
(a)(3) Exhibits.
The following exhibits are filed herewith or incorporated herein by reference:
Exhibit
Number
Description
Registrant’s
Form
Date Filed
with the
SEC
Exhibit
Number
3.1
Amended and Restated Certificate of Incorporation.
S-1
7/1/2014
3.3
3.2
Amended and Restated Bylaws of Viking Therapeutics, Inc., effective as of May 9,
2023.
8-K
5/11/2023
3.1
4.1
Form of Common Stock Certificate.
S-1
7/1/2014
4.1
4.2
Description of Registrant’s Securities.
10-K
2/1/2023
4.2
10.1#
Form of Indemnification Agreement between Viking Therapeutics, Inc. and its
directors and executive officers.
S-1
7/1/2014
10.1
10.2#
2014 Equity Incentive Plan.
S-1/A
3/2/2015
10.2
10.3#
2024 Equity Incentive Plan.
S-8
5/22/2024
4.2
10.4#
Form of Stock Option Award Agreement (2024 Equity Incentive Plan).
S-8
5/22/2024
4.3
10.5#
Form of Restricted Stock Unit Award Agreement (2024 Equity Incentive Plan).
S-8
5/22/2024
4.4
10.6#
Form of Restricted Stock Award Agreement (2024 Equity Incentive Plan).
S-8
5/22/2024
4.5
10.7#
2024 Employee Stock Purchase Plan.
S-8
5/22/2024
4.6
10.8#
Employment Agreement, effective as of June 2, 2014, by and between Viking
Therapeutics, Inc. and Brian Lian, Ph.D.
S-1/A
9/2/2014
10.6
10.9#
First Amendment to Employment Agreement, effective as of March 14, 2016, by and
between Viking Therapeutics, Inc. and Brian Lian, Ph.D.
8-K
3/15/2016
10.1
10.10#*
Employment Agreement, effective as of May 21, 2025, by and between Viking
Therapeutics, Inc. and Marianne Mancini.
76
Exhibit
Number
Description
Registrant’s
Form
Date Filed
with the
SEC
Exhibit
Number
10.11#*
Employment Agreement, effective as of May 21, 2025, by and between Viking
Therapeutics, Inc. and Greg Zante.
10.12#*
Non-Employee Director Compensation Policy.
10.13†
Master License Agreement, dated May 21, 2014, by and among Viking
Therapeutics, Inc., Ligand Pharmaceuticals Incorporated and Metabasis
Therapeutics, Inc.
10-Q
7/24/2024
10.1
10.14†
First Amendment to Master License Agreement, dated September 6, 2014, by and
among Viking Therapeutics, Inc., Ligand Pharmaceuticals Incorporated and
Metabasis Therapeutics, Inc.
10-Q
7/24/2024
10.2
10.15†
Second Amendment to Master License Agreement, dated April 8, 2015, by and
among Viking Therapeutics, Inc., Ligand Pharmaceuticals Incorporated and
Metabasis Therapeutics, Inc.
10-Q
7/24/2024
10.3
10.16#†*
Common Stock Purchase Agreement, dated February 20, 2014, by and between
Viking Therapeutics, Inc. and Brian Lian, Ph.D.
10.17#
Amendment No. 1 to Common Stock Purchase Agreement, dated May 4, 2015, by
and between Viking Therapeutics, Inc. and Brian Lian, Ph.D.
10-Q
6/12/2015
10.5
10.18
At-The-Market Equity Offering Sales Agreement, dated as of July 28, 2021, by and
among Viking Therapeutics, Inc., Stifel, Nicolaus & Company, Incorporated Truist
Securities, Inc. and H.C. Wainwright & Co., LLC.
S-3
7/28/2021
1.2
10.19
Amendment No. 1 to At-the-Market Equity Offering Sales Agreement, dated as of
July 26, 2023, by and among Viking Therapeutics, Inc., Stifel, Nicolaus &
Company, Incorporated, Truist Securities, Inc., H.C. Wainwright & Co., LLC and
BTIG, LLC.
10-Q
7/26/2023
10.1
19*
Insider Trading Policy
21.1*
List of Subsidiaries of Viking Therapeutics, Inc.
23.1*
Consent of Marcum LLP, Independent Registered Public Accounting Firm.
24.1*
Power of Attorney (included on the signature page to this Annual Report on Form
10-K).
31.1*
Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)
of the Securities Exchange Act of 1934.
31.2*
Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of
the Securities Exchange Act of 1934.
32.1*
Certification of the Principal Executive Officer and Principal Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
97
Viking Therapeutics, Inc. Clawback Policy
10-K
2/7/2024
97
101.INS
Inline XBRL Instance Document–the instance document does not appear in the
Interactive Data File as its XBRL tags are embedded within the Inline XBRL
document
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104
Cover page formatted as Inline XBRL and contained in Exhibit 101
77
Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as
of December 31, 2024 and December 31, 2023, (ii) Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31,
2024, 2023 and 2022, (iii) Consolidated Statements of Stockholders’ Equity for the period from December 31, 2022 to December 31, 2024, (iv)
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022, and (v) Notes to Consolidated Financial Statements.
* Filed herewith.
# Indicates compensatory plan or arrangement.
† Certain identified information has been omitted pursuant to Item 601(b)(10) of Regulation S-K because such information is both (i) not material and (ii)
information that the Registrant treats as private or confidential. The Registrant hereby undertakes to furnish supplemental copies of the unredacted exhibit
upon request by the SEC.
Item 16. Form 10-K Summary.
None.
78
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Viking Therapeutics, Inc.
Date: February 26, 2025
By:
/s/ Brian Lian, Ph.D.
Brian Lian, Ph. D.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints, jointly and severally,
Brian Lian, Ph.D. and Greg Zante, and each of them acting individually, as his attorney-in-fact, each with full power of substitution and resubstitution, for
him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact full power and authority to do and
perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Name
Title
Date
/s/ Brian Lian, Ph.D.
President, Chief Executive Officer and Director
(Principal Executive Officer)
February 26, 2025
Brian Lian, Ph.D.
/s/ Greg Zante
Chief Financial Officer
(Principal Accounting and Financial Officer)
February 26, 2025
Greg Zante
/s/ Lawson Macartney, B.V.M.S., Ph.D.
Director
February 26, 2025
Lawson Macartney, B.V.M.S., Ph.D.
/s/ Matthew W. Foehr
Director
February 26, 2025
Matthew W. Foehr
/s/ Sarah Kathryn Rouan
Director
February 26, 2025
Sarah Kathryn Rouan
/s/ Charles A. Rowland Jr.
Director
February 26, 2025
Charles A. Rowland Jr.
/s/ J. Matthew Singleton
Director
February 26, 2025
J. Matthew Singleton
F-1
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID:688)
F-2
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-4
Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2024, 2023 and 2022
F-5
Consolidated Statements of Stockholders’ Equity for the Years ended December 31, 2024, 2023 and 2022
F-6
Consolidated Statements of Cash Flows for the Years ended December 31, 2024, 2023 and 2022
F-7
Notes to Consolidated Financial Statements
F-8
F-2
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
Viking Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Viking Therapeutics, Inc. (the “Company”) as of December 31, 2024 and 2023 the
related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended
December 31, 2024 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2024, and 2023, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's
internal control over financial reporting as of December 31, 2024, based on the criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated February 26, 2025 expressed an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical
audit matters or on the accounts or disclosures to which they relate.
Accrual for preclinical study and clinical trial costs
As described in Note 1 to the financial statements, the Company estimates its preclinical study and clinical trial expenses based on the services it received
pursuant to contracts with research institutions and contract research organizations (“CROs”) that conduct and manage preclinical studies and clinical trials
on the Company’s behalf. Clinical trial-related contracts vary significantly in length, and may be for a fixed amount based on milestones or deliverables, a
variable amount based on actual costs incurred, capped at a certain limit, or a combination of these elements. The Company accrues service fees based on
work performed, which relies on estimates of total costs incurred based on milestones achieved, patient enrollment and other events. The majority of the
Company’s service providers invoice the Company in arrears, and to the extent that amounts invoiced differ from its estimates of expenses incurred, the
Company accrues for additional costs. The financial terms of these agreements vary from contract to contract and may result in uneven expenses and
payment flows.
F-3
The principal consideration for our determination that performing procedures related to the preclinical study and clinical trial expenses, specifically related
to the year-end accrual for preclinical study and clinical trial costs, is a critical audit matter is that there was judgment by management in determining the
achievement of milestones, patient enrollments and occurrence of other events that creates a present obligation for the Company to pay the research
institutions and CROs for their services.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included, among others, (i) obtaining an understanding of the Company’s estimation process relating to accrual for
preclinical study and clinical trial costs; (ii) testing management’s identification of milestones, patient enrollment requirements and other events in its
contracts with the research institutions and CROs; (iii) testing management’s determination of the accrual for preclinical study and clinical trial costs for a
sample of such milestones, patient enrollments and other events; and (iv) testing the mathematical accuracy of the schedule of accrual for preclinical study
and clinical trial costs prepared by management.
/s/ Marcum LLP
We have served as the Company’s auditor since 2014.
Marcum LLP
Costa Mesa, California
February 26, 2025
F-4
Viking Therapeutics, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
December 31, 2024 December 31, 2023
Assets
Current assets:
Cash and cash equivalents
$
26,676
$
55,516
Short-term investments – available-for-sale
875,936
306,563
Prepaid clinical trial and preclinical study costs
3,476
2,624
Prepaid expenses and other current assets
1,128
2,522
Total current assets
907,216
367,225
Right-of-use assets
1,003
1,126
Deferred financing costs
56
106
Deposits
46
33
Total assets
$
908,321
$
368,490
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
9,813
$
7,512
Other accrued liabilities
17,111
11,299
Lease liability, current
489
324
Total current liabilities
27,413
19,135
Lease liability, net of current portion
630
936
Total long-term liabilities
630
936
Total liabilities
28,043
20,071
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.00001 par value: 10,000,000 shares authorized at December 31, 2024 and 2023;
no shares issued and outstanding at December 31, 2024 and 2023
—
—
Common stock, $0.00001 par value: 300,000,000 shares authorized at December 31, 2024 and 2023;
111,573,519 shares issued and outstanding at December 31, 2024 and 100,113,770 shares issued and
outstanding at December 31, 2023
1
1
Treasury stock at cost, no shares at December 31, 2024 and 2,193,251 shares at December 31, 2023
—
(6,795 )
Additional paid-in capital
1,368,972
733,546
Accumulated deficit
(487,907 )
(377,944 )
Accumulated other comprehensive loss
(788 )
(389 )
Total stockholders’ equity
880,278
348,419
Total liabilities and stockholders’ equity
$
908,321
$
368,490
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Viking Therapeutics, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share amounts)
Year Ended December 31,
2024
2023
2022
Revenues
$
— $
— $
—
Operating expenses:
Research and development
101,644
63,806
54,234
General and administrative
49,277
37,021
16,121
Total operating expenses
150,921
100,827
70,355
Loss from operations
(150,921 )
(100,827 )
(70,355 )
Other income (expense):
Amortization of financing costs
(94 )
(88 )
(59 )
Interest income, net
40,940
15,020
1,589
Realized gain (loss) on investments, net
112
—
(42 )
Total other income, net
40,958
14,932
1,488
Net loss
(109,963 )
(85,895 )
(68,867 )
Other comprehensive loss, net of tax:
Unrealized (loss) gain on securities
(173 )
742
(295 )
Foreign currency translation loss
(226 )
(29 )
(258 )
Comprehensive loss
$
(110,362 ) $
(85,182 ) $
(69,420 )
Basic and diluted net loss per share
$
(1.01 ) $
(0.91 ) $
(0.90 )
Weighted-average shares used to compute basic
and diluted net loss per share
109,037
94,347
76,834
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Viking Therapeutics, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share amounts)
Common Stock
Addition
al
Paid-In
Accumul
ated
Accumul
ated
Other
Compreh
ensive
Treasury
Stock
Shares
Amount
Capital
Deficit
Loss
Amount
Total
Balance at December 31, 2021
78,248,4
01 $
1 $ 425,614 $
(223,18
2 ) $
(549 ) $
— $ 201,884
Employee stock-based compensation, net
—
—
8,673
—
—
—
8,673
Shares withheld related to employee tax withholding
(215,498 )
—
(1,533 )
—
—
—
(1,533 )
Issuance of common stock under employee stock plans
521,319
—
215
—
—
—
215
Issuance of common stock from warrant exercises
487,087
—
633
—
—
—
633
Repurchase of common stock
(2,193,25
1 )
—
—
—
—
(6,795 )
(6,795 )
Sale of common stock, net of issuance costs
1,409,20
0
—
11,665
—
—
—
11,665
Unrealized loss on investments
—
—
—
—
(295 )
—
(295 )
Unrealized currency translation loss
—
—
—
—
(258 )
—
(258 )
Net loss
—
—
—
(68,867 )
—
—
(68,867 )
Balance at December 31, 2022
78,257,2
58 $
1 $ 445,267 $
(292,04
9 ) $
(1,102 ) $
(6,795 ) $ 145,322
Employee stock-based compensation, net
—
—
16,750
—
—
—
16,750
Shares withheld related to employee tax withholding
(509,686 )
—
(7,121 )
—
—
—
(7,121 )
Issuance of common stock under employee stock plans
2,359,69
4
—
6,768
—
—
—
6,768
Sale of common stock, net of issuance costs
20,006,5
04
— 271,882
—
—
— 271,882
Unrealized gain on investments
—
—
—
—
742
—
742
Unrealized currency translation loss
—
—
—
—
(29 )
—
(29 )
Net Loss
—
—
—
(85,895 )
—
—
(85,895 )
Balance at December 31, 2023
100,113,
770 $
1 $ 733,546 $
(377,94
4 ) $
(389 ) $
(6,795 ) $ 348,419
Employee stock-based compensation, net
—
—
29,712
—
—
—
29,712
Shares withheld related to employee tax withholding
(541,876 )
—
(42,101 )
—
—
—
(42,101 )
Issuance of common stock under employee stock plans
3,133,67
2
—
10,813
—
—
—
10,813
Sale of common stock, net of issuance costs
8,867,95
3
— 637,002
—
—
6,795 643,797
Unrealized loss on investments
—
—
—
—
(173 )
—
(173 )
Unrealized currency translation loss
—
—
—
—
(226 )
—
(226 )
Net Loss
—
—
—
(109,96
3 )
—
—
(109,96
3 )
Balance at December 31, 2024
111,573,
519 $
1 $
1,368,9
72 $
(487,90
7 ) $
(788 ) $
— $ 880,278
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Viking Therapeutics, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
2024
2023
2022
Cash flows from operating activities
Net loss
$
(109,963 ) $
(85,895 ) $
(68,867 )
Adjustments to reconcile net loss to net cash used in operating
activities
(Accretion) amortization of investment premiums
(17,267 )
(8,202 )
1,217
Amortization of financing costs
94
88
59
Stock-based compensation
29,712
16,750
8,673
Amortization of right-of-use assets
346
292
291
Realized gain on investment
(112 )
—
—
Interest expense related to operating lease liability
38
43
41
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
446
6,408
(3,130 )
Accrued interest, net of interest receivable on maturity of investments
1,199
321
614
Accounts payable
2,303
(1,018 )
7,085
Accrued expenses
5,816
(1,816 )
5,809
Lease liability
(402 )
(347 )
(189 )
Net cash used in operating activities
(87,790 )
(73,376 )
(48,397 )
Cash flows from investing activities
Purchases of investments
(1,113,368 )
(478,303 )
(121,431 )
Proceeds from sales and maturities of investments
560,002
299,217
176,184
Net cash (used in) provided by investing activities
(553,366 )
(179,086 )
54,753
Cash flows from financing activities
Public offering, net of offering costs
597,094
269,760
(22 )
Value of shares withheld related to employee tax withholding
(42,101 )
(7,121 )
(1,533 )
Repurchase of common stock
—
—
(6,795 )
Proceeds from warrant and option exercises and stock issuances under employee stock
purchase plan
10,813
6,768
848
ATM offering, net of fees
46,658
1,969
11,665
Net cash provided by financing activities
612,464
271,376
4,163
Net (decrease) increase in cash and cash equivalents
(28,692 )
18,914
10,519
Cash and cash equivalents beginning of period
55,516
36,632
26,371
Effect of exchange rate changes on cash
(148 )
(30 )
(258 )
Cash and cash equivalents end of period
$
26,676 $
55,516 $
36,632
Supplemental disclosure of non-cash investing and financing
transactions
Unpaid deferred public offering and other financing costs
$
50 $
50 $
31
Right-of-use asset obtained in exchange for lease obligation
$
223 $
— $
1,664
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Viking Therapeutics, Inc.
Notes to Consolidated Financial Statements
1.
Organization, Liquidity and Management’s Plan, and Summary of Significant Accounting Policies
The Company
Viking Therapeutics, Inc., a Delaware corporation, together with its subsidiary (the “Company”), is a clinical-stage biopharmaceutical company focused on
the development of novel therapies for metabolic and endocrine disorders. In June of 2021, the company formed an Australian subsidiary, Viking
Therapeutics, PTY LTD, so as to be able to take advantage of certain research and development reimbursements available to local Australian based
research and development companies that choose to do research in Australia.
The Company was incorporated under the laws of the State of Delaware on September 24, 2012 and its principal executive offices are located in San
Diego, CA, with a subsidiary located in Adelaide, Australia.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“GAAP”).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts
reported in the accompanying financial statements. Significant estimates made in preparing these financial statements relate to accounting for accruals for
our clinical and preclinical efforts and stock-based compensation. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiary, Viking Therapeutics, PTY LTD, incorporated in Australia.
To date, the aggregate operations of this subsidiary have not been significant and all intercompany transactions and balances have been eliminated in
consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents.
Investments Available-for-Sale
Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive loss. The amortized
cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. The amortization of premiums and accretion of
discounts is included in interest income. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale
securities are included in other income (expense). The cost of securities sold is based on the specific identification method. Interest and dividends on
securities classified as available-for-sale are included in interest income.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents and marketable
securities. The Company maintains deposits in federally insured depository institutions in excess of federally insured limits. Management believes that the
Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. Additionally,
the Company has established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.
F-9
Prepaid Clinical Trial and Preclinical Study Costs
Prepaid clinical trial and preclinical study costs represent advance payments by the Company for future clinical trial and preclinical study services to be
performed by the clinical research organization and other research organizations. Such amounts are recognized as research and development expense as the
related clinical trial and preclinical study services are performed.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use (“ROU”) assets, and lease liability
obligations are included in the Company’s balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease
liability obligations represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement
date based on the present value of lease payments over the lease term. As the Company’s leases typically do not provide an implicit rate, the Company
estimates its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The
Company uses the implicit rate when readily determinable. The ROU asset also includes any lease payments made and excludes lease incentives and lease
direct costs. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise
that option. Lease expense is recognized on a straight-line basis over the lease term. Please refer to Note 5 for additional information.
Deferred Financing Costs
Deferred financing costs represent legal, accounting and other direct costs related to the Company’s efforts to raise capital through a public or private sale
of the Company’s common stock. Costs related to the public sale of the Company’s common stock are deferred until the completion of the applicable
offering, at which time such costs are reclassified to additional paid-in-capital as a reduction of the proceeds. Costs related to the private sale of the
Company’s common stock are deferred until the completion of the applicable offering, at which time such costs are amortized over the term of the
applicable purchase agreement.
Revenue Recognition
The Company has not recorded any revenues since its inception. However, in the future, the Company may enter into collaborative research and licensing
agreements, under which the Company could be eligible for payments made in the form of upfront license fees, research funding, cost reimbursement,
contingent event-based payments and/or royalties.
On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, and all related
amendments (“ASC 606” or “the revenue standard”). ASC 606 is a single comprehensive model for entities to use in accounting for revenue arising from
contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The revenue standard is based
on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 provides that an entity should
apply the following steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction
price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a
performance obligation. The revenue standard also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash
flows arising from customer contracts, and costs to obtain or fulfill contracts. The Company will apply ASC 606 prospectively to all contracts.
Research and Development Expenses
All costs of research and development are expensed in the period incurred. Research and development costs primarily consist of fees paid to CROs and
clinical trial sites, employee and consultant related expenses, which include salaries, benefits and stock-based compensation for research and development
personnel, external research and development expenses incurred pursuant to agreements with third-party manufacturing organizations, facilities costs,
travel costs, dues and subscriptions, depreciation and materials used in preclinical studies, clinical trials and research and development.
F-10
The Company estimates its preclinical study and clinical trial expenses based on the services it received pursuant to contracts with research institutions and
CROs that conduct and manage preclinical studies and clinical trials on the Company’s behalf. Clinical trial-related contracts vary significantly in length,
and may be for a fixed amount based on milestones or deliverables, a variable amount based on actual costs incurred, capped at a certain limit, or a
combination of these elements. The Company accrues service fees based on work performed, which relies on estimates of total costs incurred based on
milestones achieved, patient enrollment and other events. The majority of the Company’s service providers invoice the Company in arrears, and to the
extent that amounts invoiced differ from its estimates of expenses incurred, the Company accrues for additional costs. The financial terms of these
agreements vary from contract to contract and may result in uneven expenses and payment flows. Preclinical study and clinical trial expenses include:
•
fees paid to CROs, consultants and laboratories in connection with preclinical studies;
•
fees paid to CROs, clinical trial sites, investigators and consultants in connection with clinical trials; and
•
fees paid to contract manufacturers and service providers in connection with the production, testing and packaging of active
pharmaceutical ingredients and drug materials for preclinical studies and clinical trials.
Payments under some of these agreements depend on factors such as the milestones accomplished, including enrollment of certain numbers of patients, site
initiation and the completion of clinical trial milestones. To date, the Company has not experienced any events requiring it to make material adjustments to
its accruals for service fees. If the Company does not identify costs that it has begun to incur or if it underestimates or overestimates the level of services
performed or the costs of these services, its actual expenses could differ from its estimates which could materially affect its results of operations.
Adjustments to the Company’s accruals are recorded as changes in estimates become evident. Furthermore, based on amounts invoiced to the Company by
its service providers, the Company may also record payments made to those providers as prepaid expenses that will be recognized as expense in future
periods as services are rendered.
Related to the Company’s Australian subsidiary, Viking Therapeutics, PTY LTD, the Company is eligible to receive under the AusIndustry Research and
Tax Development Tax Incentive Program, an amount of cash from the Australian Taxation Office (ATO). The annual tax incentive is available to the
Company on the basis of specific criteria with which the Company must comply related to research and development expenditures in Australia. As there is
no specific GAAP guidance related to how to record this research and development tax incentive, the Company looked to International Accounting
Standard (IAS) 20 and determined that it will recognize these research and development tax incentives as contra research and development expense once
received. The amounts are determined based on a cost-reimbursement basis, and the incentive is related to the Company’s research and development
expenditures and is due regardless of whether any Australian tax is owed.
Patent Costs
Costs related to filing and pursuing patent applications are expensed as incurred to general and administrative expense, as recoverability of such
expenditures is uncertain.
Stock-Based Compensation
The Company generally uses the straight-line method to allocate compensation cost to reporting periods over each optionee’s requisite service period,
which is generally the vesting period, and estimates the fair value of stock-based awards or restricted stock units to employees and directors using the
Black-Scholes option-valuation model (the “Black-Scholes model”). The Black-Scholes model requires the input of subjective assumptions, including
volatility, the expected term and the fair value of the underlying common stock on the date of grant, among other inputs. For restricted stock and restricted
stock unit awards, the Company generally uses the straight-line method to allocate compensation cost to reporting periods over the holder’s requisite
service period, which is generally the vesting period, and uses the fair value at grant date to value the awards. For restricted stock that vests upon the
satisfaction of certain performance conditions, the Company recognizes stock-based compensation expense when it becomes probable that the performance
conditions will be met. At the grant date, the Company determines the grant date fair value, as a publicly traded company, using the intrinsic value, or the
closing price of the Company’s common stock on the date of grant. At the point where the criteria are deemed probable of being met, the Company records
stock-based compensation with a cumulative catch-up expense in the period first recognized and then on a straight-line basis over the remaining period for
which the performance criteria are expected to be completed.
For the Company’s 2014 Employee Stock Purchase Plan (the “2014 ESPP”) and 2024 Employee Stock Purchase Plan which replaced the 2014 ESPP (the
“2024 ESPP” and, together with the 2014 ESPP, the “ESPPs”), the Company generally recognizes compensation expense for the fair value of the purchase
options, as measured on the grant date, and uses the graded vesting method to allocate this compensation cost to each purchase period within the related
two-year offering period. As the 2014 ESPP allowed and the 2024 ESPP
F-11
allows for up to one increase in contributions during each purchase period, as an employee elects to increase his or her contributions, the Company treats
this as an accounting modification. The pre- and post-modification values are calculated on the date of the modification, and the incremental expense is
then amortized over the remaining purchase periods.
Income Taxes
The Company accounts for its income taxes using the liability method whereby deferred tax assets and liabilities are determined based on temporary
differences between the basis used for financial reporting and income tax reporting purposes. Deferred income taxes are provided based on the enacted tax
rates in effect at the time such temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it is more likely
than not that the Company will not realize those tax assets through future operations.
Accounting Standards Codification Topic 740-10, Income Taxes, clarifies the accounting for uncertainty in income taxes recognized in the Company’s
financial statements in accordance with GAAP. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. Income tax
positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that
threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first subsequent
financial reporting period in which that threshold is no longer met.
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
Foreign Currency
The financial statements of the Company’s foreign subsidiary whose functional currency is the local currency is translated into U.S. dollars for
consolidation as follows: assets and liabilities at the exchange rate as of the balance sheet date, stockholders’ equity at the historical rates of exchange, and
income and expense amounts at the average exchange rate for the period. Translation adjustments resulting from the translation of the subsidiaries’
accounts are included in “Accumulated other comprehensive loss” as equity in the consolidated balance sheet. Transactions denominated in currencies
other than the applicable functional currency are converted to the functional currency at the exchange rate on the transaction date. At period end, monetary
assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities
are remeasured at historical exchange rates.
Comprehensive Loss
The Company’s comprehensive loss consists of net loss and foreign currency translation adjustments arising from the consolidation of the Company’s
foreign subsidiary.
Net Loss per Common Share
Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares
outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing the net loss attributable
to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock
method. For purposes of this calculation, the Company currently does not have any deemed common share equivalents; therefore, its basic and diluted net
loss per share calculations are the same.
The following table presents the computation of basic and diluted net loss per common share (in thousands, except share and per share data):
Year Ended December 31,
2024
2023
2022
Historical net loss per share
Numerator
Net loss
$
(109,963 ) $
(85,895 ) $
(68,867 )
Denominator
Weighted-average common shares outstanding
109,220,217
94,530,086
77,016,725
Less: Weighted-average shares subject to repurchase
(183,095 )
(183,095 )
(183,095 )
Denominator for basic and diluted net loss per share
109,037,122
94,346,991
76,833,630
Basic and diluted net loss per share
$
(1.01 ) $
(0.91 ) $
(0.90 )
F-12
Potentially dilutive securities that are not included in the calculation of diluted net loss per share because their effect is anti-dilutive are as follows (in
common equivalent shares):
Year Ended December 31,
2024
2023
2022
Restricted stock units
2,537,352
2,855,656
1,868,518
Common stock subject to repurchase
183,095
183,095
183,095
Common stock options
4,734,460
5,248,682
5,157,857
7,454,907
8,287,433
7,209,470
Recently Adopted Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting
(Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires all public entities, including public entities with a single
reportable segment, to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to
allocate resources and assess performance. Additionally, the standard requires disclosures of significant segment expenses and other segment items as well
as incremental qualitative disclosures.
The Company adopted ASU 2023-07 effective December 31, 2024, on a retrospective basis. The adoption of ASU 2023-07 did not change the way that the
Company identifies its reportable segments and, as a result, did not have a material impact on the Company’s segment-related disclosures. Refer to Note 12
for further information on the Company’s reportable segment.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated
information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and
decision usefulness of income tax disclosures. This ASU will be effective for the annual period ending December 31, 2025. The Company is currently
evaluating the timing and impact of adoption of this ASU.
2.
Investments in Marketable Securities
The Company’s investment strategy is focused on capital preservation. The Company invests in instruments that meet the credit quality standards outlined
in the Company’s investment policy. This policy also limits the amount of credit exposure to any one issue or type of instrument. As of December 31, 2024
and 2023, the Company’s investments were in money market funds, commercial paper, corporate debt securities and government debt securities. There
were no sales of available-for-sale securities during the years ended December 31, 2024 and 2023.
Investments classified as available-for-sale as of December 31, 2024 consisted of the following (in thousands):
As of December 31, 2024
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregate
Estimated
Fair Value
Commercial paper
$
10,520 $
— $
— $
10,520
Corporate debt securities
719,469
708
(860 )
719,317
Government debt securities
146,222
94
(217 )
146,099
$
876,211 $
802 $
(1,077 ) $
875,936
(1)
Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss. At December 31, 2024, there were
197 securities in an unrealized gain position and 132 securities in an unrealized loss position. The unrealized gains were less than $32,000
individually and $802,000 in the aggregate. The unrealized losses were less than $66,000 individually and $1,077,000 in the aggregate. None of
these securities have been in a continuous unrealized loss or unrealized gain position for more than 12 months. The Company does not intend to sell
these investments and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized
cost basis, which may be at maturity. The
(1)
(1)
(2)
(2)
(2)
F-13
Company reviews its investments to identify and evaluate investments that have an indication of possible other-than-temporary impairment. Factors
considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost
basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold the investment for a period of
time sufficient to allow for any anticipated recovery in market value.
(2)
At December 31, 2024, none of these securities were classified as cash and cash equivalents on the Company’s balance sheet and none of the
corporate debt securities were scheduled to mature outside of one year at the time of purchase.
Investments classified as available-for-sale as of December 31, 2023 consisted of the following (in thousands):
As of December 31, 2023
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregate
Estimated
Fair Value
Commercial paper
$
24,226 $
— $
— $
24,226
Corporate debt securities
168,564
148
(128 )
168,584
Government debt securities
113,871
8
(126 )
113,753
$
306,661 $
156 $
(254 ) $
306,563
(1)
Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss. At December 31, 2023, there were
49 securities in an unrealized gain position and 115 securities in an unrealized loss position. The unrealized gains were less than $37,000
individually and $158,000 in the aggregate. The unrealized losses were less than $23,000 individually and $258,000 in the aggregate. None of these
securities have been in a continuous unrealized loss or unrealized gain position for more than 12 months. The Company does not intend to sell these
investments and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost
basis, which may be at maturity. The Company reviews its investments to identify and evaluate investments that have an indication of possible
other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to
which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and
ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.
(2)
At December 31, 2023, none of these securities were classified as cash and cash equivalents on the Company’s balance sheet and none of the
corporate debt securities were scheduled to mature outside of one year at the time of purchase.
3.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, investments and accounts payable. The carrying amounts reported in the
accompanying consolidated balance sheets for cash and cash equivalents and accounts payable approximate fair value because of the short-term maturity of
those instruments. Fair value measurements are classified and disclosed in one of the following three categories:
Level 1 —Quoted prices in active markets for identical assets or liabilities.
Level 2 —Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
Level 3 —Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or
liabilities.
As of December 31, 2024 and 2023, all of the Company’s financial assets that were subject to fair value measurements were valued using observable
inputs. The Company’s financial assets valued based on Level 1 inputs consist of money market funds and certificates of deposit. The Company’s financial
assets valued based on Level 2 inputs consist of corporate debt securities, which consist of investments in highly-rated investment-grade corporations, and
government debt securities.
The Company’s investment strategy is focused on capital preservation. The Company invests in instruments that meet the credit quality standards outlined
in the Company’s investment policy. This policy also limits the amount of credit exposure to any one issue or type of instrument. As of December 31,
2024, the Company’s investments were in government money market funds, commercial paper, corporate debt securities and government debt securities.
(1)
(1)
(2)
(2)
(2)
F-14
The fair values of the Company’s financial instruments are presented below (in thousands):
Fair Value Measurements at December 31,
2024
Total
Level 1
Level 2
Level 3
Financial assets carried at fair value:
Cash equivalents:
$
18,592 $
17,554 $
1,038
Short-term investments
Commercial paper, available for sale
10,520
—
10,520
—
Corporate debt securities, available-for-sale
719,317
—
719,317
—
Government debt securities, available-for-sale
146,099
—
146,099
—
Total financial assets
$
894,528 $
17,554 $
876,974 $
—
Fair Value Measurements at December 31,
2023
Total
Level 1
Level 2
Level 3
Financial assets carried at fair value:
Cash equivalents:
$
40,479 $
16,411 $
24,068 $
—
Short-term investments
Commercial paper, available for sale
24,226
—
24,226
—
Corporate debt securities, available-for-sale
168,584
—
168,584
—
Government debt securities, available-for-sale
113,753
—
113,753
—
Total financial assets
$
347,042 $
16,411 $
330,631 $
—
4.
Agreements with Ligand Pharmaceuticals Incorporated
In May 2014, the Company entered into a master license agreement with Ligand Pharmaceuticals, Inc. (“Ligand”), as amended (the “Master License
Agreement”), pursuant to which, among other things, the Company acquired the rights to a number of research and development programs under patents
related to the Company’s VK2809, VK0214, VK5211, VK0612, erythropoietin receptor (“EPOR”) and diacylglycerol acyltransferase-1 (“DGAT-1”)
programs, related know-how controlled by Ligand and physical quantities of VK2809, VK0214, VK5211, VK0612, EPOR and DGAT-1 compounds.
Pursuant to the terms of the Master License Agreement, the Company has the exclusive right and sole responsibility and decision-making authority for
researching and developing any pharmaceutical products that contain or comprise one or any combination of the technology and compounds licensed from
Ligand pursuant to the Master License Agreement (the “Licensed Products”). The Company also has the exclusive right and sole responsibility and
decision-making authority to conduct all clinical trials and preclinical studies that the Company believes are appropriate to obtain the regulatory approvals
necessary for commercialization of the Licensed Products, and the Company will own and maintain all regulatory filings and all regulatory approvals for
the Licensed Products. Additionally, pursuant to the terms of the Master License Agreement, the Company has the sole decision-making authority and
responsibility and the exclusive right to commercialize any of the Licensed Products, either by itself or, in certain circumstances, through sublicensees
selected by the Company. The Company also has the exclusive right to manufacture or have manufactured any Licensed Product itself or, in certain
circumstances, through sublicensees or third parties selected by the Company. The Company will own any intellectual property that it develops in
connection with the license granted under the Master License Agreement.
As partial consideration for the grant of the rights and licenses to the Company under the Master License Agreement, the Company issued to Ligand at the
closing of the Company’s initial public offering (“IPO”) 3,655,964 shares of its common stock having an estimated aggregate value of $29.2 million.
As further partial consideration for the grant of the rights and licenses to the Company by Ligand under the Master License Agreement, the Company has
agreed to pay to Ligand certain one-time, non-refundable milestone payments in connection with the Licensed Products of up to $1.54 billion in the
aggregate upon the achievement of certain development, regulatory and sales milestones. The Company will also pay to Ligand royalties on aggregate
annual worldwide net sales of Licensed Products by the Company, its affiliates and its sublicensees at tiered percentage rates from the low-to-upper single
digits based upon net sales.
The term of the Master License Agreement will continue unless the agreement is terminated by the Company or Ligand, and each of the Company and
Ligand have the right to terminate the Master License Agreement in certain circumstances, including, without limitation, if the other party defaults on
certain of its obligations under the Master License Agreement.
F-15
Ligand has the right to terminate the Master License Agreement under certain circumstances, including, but not limited to: (1) in the event of the
Company’s insolvency or bankruptcy, (2) if the Company does not pay an undisputed amount owing under the Master License Agreement when due and
fails to cure such default within a specified period of time, or (3) if the Company defaults on certain of its material and substantial obligations and fails to
cure the default within a specified period of time. The Company has the right to terminate the Master License Agreement under certain circumstances,
including, but not limited to: (i) if Ligand does not pay an undisputed amount owing under the Master License Agreement when due and fails to cure such
default within a specified period of time, or (ii) if Ligand defaults on certain of its material and substantial obligations and fails to cure the default within a
specified period of time. In addition, provisions of the Master License Agreement can be terminated on a licensed program-by-program basis under certain
circumstances. In the event that the Master License Agreement is terminated in its entirety or with respect to a specific licensed program for any reason:
(A) all licenses granted to the Company under the Master License Agreement (or with respect to the specific licensed program) will terminate and the
Company will, upon Ligand’s request (subject to Ligand assuming legal responsibility for any clinical trials of the Licensed Products then ongoing), assign
and transfer to Ligand (or to such transferee as Ligand may direct), at no cost to Ligand, all regulatory documentation and all regulatory approvals prepared
or obtained by the Company or on its behalf related to the Licensed Products (or those related to the specific licensed program), or, if Ligand does not make
such a request, the Company will wind down any ongoing clinical trials with respect to the Licensed Products (or those related to the specific licensed
program) at no cost to Ligand; (B) the Company will, upon Ligand’s request, sell and transfer to Ligand (or to such transferee as Ligand may direct), at a
price equal to 125% of the Company’s costs of goods, any and all chemical, biological or physical materials relating to or comprising the Licensed
Products (or those related to the specific licensed program); (C) the Company will have, for a period of six months following termination, the right to sell
on the normal business terms in existence before such termination any finished commercial inventory of Licensed Products (or those related to the specific
licensed program) which remains on hand, so long as the Company pays to Ligand the applicable royalties and sales milestones; (D) Ligand has the right to
require the Company to assign to Ligand the trademarks owned by the Company relating to the Licensed Products (or those related to the specific licensed
program); and (E) the Company will grant to Ligand a non-exclusive, worldwide, royalty-bearing sublicensable license under any patent rights and know-
how controlled by the Company to the extent necessary to make, have made, import, use, offer to sell and sell the Licensed Products (or those related to the
specific licensed program) anywhere in the world at a royalty rate in the low single digits.
Under the Master License Agreement, the Company has agreed to indemnify Ligand for claims relating to the performance of the Company’s obligations
under the Master License Agreement, any breach of the representations and warranties made by the Company under the Master License Agreement,
clinical trials conducted by the Company and the research, development and commercialization of the Licensed Products by the Company and its affiliates,
sublicensees, distributors and agents. In addition, Ligand has agreed to indemnify the Company for claims relating to the performance of its obligations
under the Master License Agreement, its breach of representations and warranties under the agreement and its research and development of the licensed
compounds before the effective date of the Master License Agreement. Each party’s indemnification obligations will not apply to the extent the claims
result from the negligence or willful misconduct of the indemnified party or any of its employees, agents, officers or directors or from the indemnified
party’s breach of its representations or warranties set forth in the Master License Agreement.
In May 2014, the Company also entered into a Management Rights Letter (the “Management Rights Letter”) with Ligand that required the Company to
expand the size of the Company’s Board of Directors to create an additional directorship on the Company’s Board of Directors and to allow Ligand to
appoint an individual to fill the new directorship. On March 28, 2023, the Management Rights Letter terminated upon the date that Ligand ceased to
beneficially own at least 7.5% of the Company’s outstanding voting stock.
5.
Operating Leases – Right-of-Use Assets and Lease Liability Obligations
As of December 31, 2024, the Company has one operating lease (the “Office Lease”) and one operating sublease (the "Office Sublease"). The Office Lease
is for office space under a lease that commenced on March 1, 2022 and expires on July 31, 2027 (the “Term”). The Office Sublease is for office space
under a sublease that commenced on September 16, 2024 and expires on March 31, 2026 (the
F-16
"Sublease Term"). Below is a summary of the Company’s ROU assets and lease liabilities as of December 31, 2024 and December 31, 2023 (in thousands,
except for years and %):
December 31,
2024
December 31,
2023
Right of use assets
$
1,003
$
1,126
Lease liability obligations, current
$
489
$
324
Lease liability obligations, less current portion
630
936
Total lease liability obligations
$
1,119
$
1,260
Weighted-average remaining lease term
2.57 years
3.58 years
Weighted-average discount rate
3.65 %
3.00 %
During the years ended December 31, 2024, 2023 and 2022, the Company recognized $404,000, $339,000 and $340,000, respectively, in operating lease
expenses, which are included in operating expenses in the Company’s statements of operations.
Approximate future minimum lease payments for the Company’s right-of-use assets over the remaining lease period as of December 31, 2024 are as
follows (in thousands):
2025
521
2026
418
2027
227
Total minimum lease payments
$
1,166
Less: amount representing interest
$
(47 )
Total lease liability obligations
$
1,119
The Office Lease provides the Company with an option to extend the term of the Office Lease for a period of five years beyond the Term. If the option is
exercised, the renewal term will be upon the same terms and conditions as the original Office Lease, except that the base rent will be equal to the prevailing
market rate as determined pursuant to the terms of the Office Lease. The option to extend the term of the Office Lease was recognized as part of the
Company’s lease liability and right-of-use assets.
6.
Stockholders’ Equity
Preferred Stock
The Company is authorized to issue up to 10,000,000 shares of $0.00001 par value preferred stock, with no shares of preferred stock outstanding as of
December 31, 2024 and 2023. The Company’s Board of Directors is authorized to designate the terms and conditions of any preferred stock the Company
issues without further action by the common stockholders.
Common Stock
The Company is authorized to issue up to 300,000,000 shares of common stock, $0.00001 par value per share.
In February 2014, the Company entered into a stock purchase agreement with one of its founders. The agreement provided for the purchase of 1,000,000
shares of the Company’s common stock at a price per share of $0.01 in exchange for future services to be rendered to the Company as measured by certain
performance criteria. The shares were subject to a repurchase option and were to vest in two tranches of 500,000 shares each, upon achievement of the
performance target or upon a triggering event as defined.
F-17
The Company determined that the fair value of the unrecognized expense was $168,000 at February 20, 2014, the grant date. In May 2015, the Company
repurchased 633,810 of these shares at a purchase price of $0.00001 per share. In connection with the repurchase, the Company entered into an amendment
to the stock purchase agreement to provide that the remaining 366,190 shares will continue to vest in two tranches of 183,095 shares each, upon
achievement of the performance target or upon a triggering event as defined. The pro rata grant date fair value of the unrecognized expense is $62,000. In
October 2015, a triggering event became probable of occurrence and was deemed achieved in October 2016; therefore, the Company recorded $31,000 of
stock-based compensation expense through December 31, 2016. No similar expense was recognized during the years ended December 31, 2024, 2023 and
2022. The Company will continue to reassess at each reporting period whether it is probable that the performance target will be achieved, and if and when
it is deemed probable, the Company will begin to record compensation expense using the fair value to determine stock-based compensation expense in its
financial statements over the period the Company estimates the performance target will actually be achieved.
On July 28, 2021, the Company entered into an At-The-Market Equity Offering Sales Agreement (the “ATM Agreement”), with Stifel, Nicolaus &
Company, Incorporated, Truist Securities, Inc. and H.C. Wainwright & Co. LLC (collectively, the “Agents”), pursuant to which the Company may offer
and sell, from time to time, through or to the Agents, as sales agent or principal (the “ATM Offering”), shares of the Company’s common stock (the “ATM
Shares”). Any ATM Shares offered and sold in the ATM Offering were to be issued pursuant to the Company’s universal Shelf Registration Statement on
Form S-3 (File No. 333-258231) (the “2021 Shelf Registration Statement”) and the 424(b) prospectus supplement relating to the ATM Offering dated
August 11, 2021. The 2021 Shelf Registration Statement terminated on July 26, 2023. From its inception through the termination of the 2021 Shelf
Registration Statement, 1,587,404 shares of the Company’s common stock were sold pursuant to the ATM Offering for aggregate net proceeds to the
Company of approximately $13.6 million.
On March 10, 2022, the Company’s Board of Directors authorized a stock repurchase program effective March 18, 2022, whereby the Company could
purchase up to $50.0 million in shares of its common stock over a period of up to two years (the “Repurchase Program”). The Repurchase Program was to
be carried out at the discretion of a committee of the Company’s Board of Directors through open market purchases, one or more Rule 10b5-1 trading
plans, block trades and in privately negotiated transactions. Through March 18, 2024, the termination date of the Repurchase Program, an aggregate of
729,034 shares of the Company’s common stock were repurchased by the Company under the Repurchase Program. Shares repurchased by the Company
under the Repurchase Program were held in treasury and reissued by the Company as part of the March 2024 Offering (as defined below).
On April 3, 2023, the Company completed an underwritten public offering of its common stock (the “April 2023 Offering”) pursuant to the 2021 Shelf
Registration Statement. In the April 2023 Offering, the Company sold an aggregate of 19,828,300 shares of its common stock at a public offering price of
$14.50 per share, which included the exercise in full by the underwriters of their option to purchase 2,586,300 additional shares of common stock. Upon the
closing of the April 2023 Offering, the Company received net proceeds of $270.0 million, after deducting underwriting discounts, commissions and other
offering expenses.
On July 26, 2023, the Company filed an automatic universal shelf registration statement on Form S-3 (File No. 333-273460) as a well-known seasoned
issuer as defined in Rule 405 under the Securities Act of 1933, as amended, which became effective upon filing (the “2023 Shelf Registration Statement”).
The 2023 Shelf Registration Statement allows the Company to offer an indeterminate amount of securities, including equity securities, debt securities,
warrants, rights, units and depositary shares, from time to time as described in the 2023 Shelf Registration Statement. The specific terms of any offering
under the 2023 Shelf Registration Statement will be established at the time of such offering. The 2023 Shelf Registration Statement will expire on July 26,
2026.
On July 26, 2023, the Company entered into an Amendment No. 1 to At-The-Market Equity Offering Sales Agreement (the “ATM Agreement
Amendment”) with Stifel, Nicolaus & Company, Incorporated, Truist Securities, Inc., H.C. Wainwright & Co. LLC and BTIG, LLC. Pursuant to the ATM
Agreement Amendment, BTIG, LLC was added as a sales agent for the ATM Offering and the ATM Agreement was amended to provide that the ATM
Offering could be conducted off of registration statements on Form S-3 subsequently filed by the Company. Any ATM Shares offered and sold in the ATM
Offering will now be issued pursuant to the 2023 Shelf Registration Statement and the prospectus, dated July 26, 2023, relating to the sale of up to $200.0
million of shares of our common stock pursuant to the ATM Offering, that was included in the 2023 Shelf Registration Statement (the “ATM Prospectus”).
The 2023 Shelf Registration Statement will expire on July 26, 2026. From the date of the ATM Prospectus through December 31, 2024, 1,426,303 shares
of the Company’s common stock were sold pursuant to the ATM Offering and, as of December 31, 2024, the Company may sell shares of its common
stock for remaining gross proceeds of up to $151.9 million from time to time pursuant to the ATM Prospectus.
On March 4, 2024, the Company completed an underwritten public offering of its common stock (the “March 2024 Offering”) pursuant to the 2023 Shelf
Registration Statement. In the March 2024 Offering, the Company sold an aggregate of 7,441,650 shares of its common stock at a public offering price of
$85.00 per share, which included the exercise in full by the underwriters of their option to purchase 970,650 additional shares of common stock. Of the
shares sold, 2,193,251 were issued out of the Company’s treasury shares. Upon the closing of the March 2024 Offering, the Company received net
proceeds of $597.1 million, after deducting underwriting discounts, commissions and other offering expenses.
F-18
During the years ended December 31, 2024, 2023 and 2022, and in accordance with the 2014 ESPP and 2024 ESPP, the Company issued an aggregate of
168,332, 180,174 and 111,750 shares of its common stock to certain employees, respectively.
7.
Stock-Based Compensation
In connection with the IPO, the Company’s 2014 Equity Incentive Plan (the “2014 Plan”) and the 2014 ESPP became effective on April 28, 2015, the date
of the execution and delivery of the underwriting agreement for the IPO. A total of 1,527,770 shares of the Company’s common stock were initially
reserved for issuance under the 2014 Plan, and 458,331 shares of the Company’s common stock were initially reserved for issuance under the 2014 ESPP.
From January 1, 2016 and through December 31, 2024, in accordance with the terms of the 2014 Plan, an additional 15,407,065 shares of the Company’s
common stock were added to the number of shares reserved for issuance under the 2014 Plan, and, in accordance with the terms of the 2014 ESPP, an
additional 4,402,017 shares of the Company’s common stock were added to the number of shares reserved for issuance under the 2014 ESPP.
The Company generally uses the straight-line method to allocate compensation cost to reporting periods over each optionee’s requisite service period,
which is generally the vesting period, and estimates the fair value of stock-based awards or restricted stock units to employees and directors using the
Black-Scholes option-valuation model. The Black-Scholes model requires the input of subjective assumptions, including volatility, the expected term and
the fair value of the underlying common stock on the date of grant, among other inputs. For restricted stock and restricted stock unit awards, the Company
generally uses the straight-line method to allocate compensation cost to reporting periods over the holder’s requisite service period, which is generally the
vesting period, and uses the fair value at grant date to value the awards. For restricted stock that vests upon the satisfaction of certain performance
conditions, the Company recognizes stock-based compensation expense when it becomes probable that the performance conditions will be met. At the
grant date, the Company determines the grant date fair value, as a publicly traded company, using the intrinsic value, or the closing price of its common
stock on the date of grant. At the point where the criteria are deemed probable of being met, the Company records stock-based compensation with a
cumulative catch-up expense in the period first recognized and then on a straight-line basis over the remaining period for which the performance criteria are
expected to be completed.
For the 2014 ESPP and 2024 ESPP, the Company generally recognizes compensation expense for the fair value of the purchase options, as measured on the
grant date, and uses the graded vesting method to allocate this compensation cost to each purchase period within the related two-year offering period. As
the 2014 ESPP previously allowed, and the 2024 ESPP currently allows, for up to one increase in contributions during each purchase period, then as an
employee elects to increase their contributions, the Company treats this as an accounting modification. The pre- and post-modification values are calculated
on the date of the modification, and the incremental expense is then amortized over the remaining purchase periods.
2014 Plan. The Company’s 2014 Equity Incentive Plan (the “2014 Plan”) provided that the compensation committee of the Company’s Board of Directors
(the “Compensation Committee”) could grant or issue stock options, stock appreciation rights, restricted shares, restricted stock units and unrestricted
shares, deferred share units, performance and cash-settled awards and dividend equivalent rights to participants under the 2014 Plan. Initially, a total of
1,527,770 shares of the Company’s common stock were reserved for issuance pursuant to the 2014 Plan. The 2014 Plan provided that the number of shares
available for issuance under the 2014 Plan would, unless otherwise determined by the Company’s Board of Directors or the Compensation Committee, be
automatically increased on January 1 of each year commencing on January 1, 2016 and ended on (and including) January 1, 2024, in an amount equal to
3.5% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year. The shares of common
stock deliverable pursuant to awards under the 2014 Plan are authorized but unissued shares of the Company’s common stock, or shares of the Company’s
common stock that the Company otherwise holds in treasury or in trust. The 2014 Plan provided that any shares of the Company’s common stock
underlying awards that are settled in cash or otherwise expire, or are forfeited, terminated or cancelled (including pursuant to an exchange program
established by the Compensation Committee) prior to the issuance of stock would again be available for issuance under the 2014 Plan. In addition, shares
of the Company’s common stock that are withheld (or not issued) in payment of the exercise price or taxes relating to an award, and shares of the
Company’s common stock equal to the number surrendered in payment of any exercise price or withholding taxes relating to an award, would again be
available for issuance under the 2014 Plan. As of December 31, 2023, there were 5,939,750 shares of the Company’s common stock available for issuance
and, effective January 1, 2024, an additional 3,503,981 shares of the Company’s common stock were added to the number of shares reserved for issuance
under the 2014 Plan in accordance with the terms of the 2014 Plan.
2024 Plan. On May 21, 2024, the Company’s stockholders approved the Viking Therapeutics, Inc. 2024 Equity Incentive Plan (the “2024 Plan”), which
replaces the 2014 Plan. No further awards have been or will be made under the 2014 Plan since May 21, 2024. The number of shares of common stock
initially authorized for issuance pursuant to the 2024 Plan is equal to (a) 12,000,000 shares of common stock, plus (b) up to a maximum of 7,674,614
shares of common stock subject to outstanding stock options or other equity awards previously granted under the 2014 Plan that will become available for
future issuance under the 2024 Plan to the extent that, after May 21, 2024, any such equity award terminates or expires prior to exercise or settlement, is not
issued because the award is settled
F-19
in cash, is forfeited because of the failure to vest or is reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or
exercise price.
2014 ESPP. Initially, a total of 458,331 shares of the Company’s common stock were reserved for issuance pursuant to the 2014 ESPP. The 2014 ESPP
provided that the number of shares available for issuance under the 2014 ESPP would, unless otherwise determined by the Company’s Board of Directors
or the Compensation Committee, be automatically increased on January 1 of each year commencing on January 1, 2016 and ended on (and including)
January 1, 2024, in an amount equal to 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding
calendar year. The shares of common stock available for purchase pursuant to the 2014 ESPP were authorized but unissued shares of the Company’s
common stock, shares of the Company’s common stock that the Company otherwise held in treasury or shares of the Company’s common stock that were
purchased on the open market in arms’ length transactions in accordance with applicable securities laws. Shares of the Company’s common stock were
offered for purchase under the 2014 ESPP as determined by the Compensation Committee through a series of successive offerings that each had a term of
24 months and consisted of four consecutive purchase periods of six months each. As of December 31, 2023, there were 4,251,444 shares of the
Company’s common stock available for issuance and, effective January 1, 2024, an additional 1,001,137 shares of the Company’s common stock were
added to the number of shares reserved for issuance under the 2014 ESPP in accordance with the terms of the 2014 ESPP. On May 20, 2024, 166,816
shares of the Company’s common stock were purchased by participants of the 2014 ESPP.
2024 ESPP. On May 21, 2024, the Company’s stockholders approved the Viking Therapeutics, Inc. 2024 Employee Stock Purchase Plan (the “2024
ESPP”), which replaced the 2014 ESPP. No further shares have been, or will be, issued to participants under the 2014 ESPP since May 21, 2024. The
maximum number of shares of the Company’s common stock that may be issued under the 2024 ESPP will not exceed 5,500,000 shares for issuance
pursuant to purchases under the 2024 ESPP. The shares of common stock available for purchase pursuant to the 2024 ESPP are authorized but unissued
shares of the Company’s common stock, shares of the Company’s common stock that the Company otherwise held in treasury or shares of the Company’s
common stock that are purchased on the open market in arms’ length transactions in accordance with applicable securities laws. Shares of the Company’s
common stock will be offered for purchase under the 2024 ESPP as determined by the Compensation Committee through a series of successive offerings
that each have a term of 24 months and consist of four consecutive purchase periods of six months each. Prior to the commencement of any future offering
under the 2024 ESPP, the Compensation Committee may determine that the current offering shall end, may commence a new offering on the first day after
the end of such terminal purchase period (or any desired later date), and may decide that future offerings will consist of one or more consecutive purchase
periods, each to be of such duration as determined by the Compensation Committee; however, no offering will exceed 27 months and no purchase period
will exceed one year. Each employee of the Company who (1) is an employee on the first date of any offering under the 2024 ESPP, (2) is customarily
scheduled to work for more than 20 hours per week and more than five months per calendar year, and (3) meets such other criteria as may be determined by
the Compensation Committee (consistent with Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”)), is eligible to participate in the
2024 ESPP for each purchase period within such offering. The purchase price per share of the Company’s common stock under the 2024 ESPP may not be
less than, and will initially be equal to, the lesser of: (1) 85% of the fair market value per share of the Company’s common stock on the first day of the
offering, or (2) 85% of the fair market value per share of the Company’s common stock on the date the purchase right is exercised, which will be the last
day of the applicable purchase period.
During the years ended December 31, 2024, 2023 and 2022, the Company recognized the following stock-based compensation expense (in thousands):
Year Ended December 31,
2024
2023
2021
Stock-based compensation expense by type of award:
Stock options
11,017
5,768
3,842
Restricted stock and restricted stock units
17,601
9,420
4,598
Employee stock purchase plan
1,094
1,562
233
Total stock-based compensation expense included
in expenses
$
29,712 $
16,750 $
8,673
Stock-based compensation expense by line item:
Research and development expenses
8,921
4,732
2,313
General and administrative expenses
20,791
12,018
6,360
Total stock-based compensation expense included
in expenses
$
29,712 $
16,750 $
8,673
F-20
The following table sets forth the Company’s unrecognized stock-based compensation expense, net of estimated forfeitures, by type of award and the
weighted-average period over which that expense is expected to be recognized (in thousands, except for years):
As of December 31, 2024
Unrecognized
Expense
Weighted-
average
Recognition
Period
(in years)
Type of award:
Stock options
$
18,592
2.58
Restricted stock and restricted stock units
$
13,473
1.73
The following table is a summary of restricted shares granted during the years ended December 31, 2024, 2023 and 2022:
Shares
Weighted-
Average
Grant Date
Fair Value
Unvested at December 31, 2021
183,095 $
0.17
Granted
— $
—
Vested
— $
—
Forfeited
— $
—
Repurchased
— $
—
Unvested at December 31, 2022
183,095 $
0.17
Granted
— $
—
Vested
— $
—
Forfeited
— $
—
Repurchased
— $
—
Unvested at December 31, 2023
183,095 $
0.17
Granted
— $
—
Vested
— $
—
Forfeited
— $
—
Repurchased
— $
—
Unvested at December 31, 2024
183,095 $
0.17
The following table summarizes restricted stock unit activity during the years ended December 31, 2024, 2023 and 2022:
Shares
Weighted-
Average
Grant Date
Value
Unvested at December 31, 2021
1,028,299 $
6.57
Granted
1,249,788 $
4.88
Vested
(409,569 ) $
6.88
Forfeited
— $
—
Unvested at December 31, 2022
1,868,518 $
5.37
Granted
1,772,243 $
8.52
Vested
(785,105 ) $
5.40
Forfeited
— $
—
Unvested at December 31, 2023
2,855,656 $
7.32
Granted
1,310,533 $
17.40
Vested
(1,551,003 ) $
8.68
Forfeited
— $
—
Cancelled
(77,834 ) $
7.77
Unvested December 31, 2024
2,537,352 $
11.68
The Company issues performance-based restricted stock units (“PRSU awards”). These awards are issued to certain of its employees and the shares subject
to these PRSU awards will vest upon the Company achieving certain milestones over a four-year period, with any
F-21
then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the applicable grant date. At the grant date, the Company
determines the grant date fair value, as a publicly traded company, using the intrinsic value, or the closing price of the Company’s common stock on the
date of grant. At the point where the criteria are deemed probable of being met, the Company records stock-based compensation with a cumulative catch-up
expense in the period first recognized and then on a straight-line basis over the remaining period for which the performance criteria are expected to be
completed.
In January 2020, the Company issued 244,000 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted
stock unit activity. The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100% of the shares subject to
the PRSU awards vesting upon the achievement of three of the milestones over a four-year period, with any then-unvested portion of the PRSU awards to
be cancelled on the four-year anniversary of the grant dates. As of December 31, 2024, 10,500 PRSU awards were forfeited, two of the three milestones
had been met and the remaining one was deemed improbable of achievement, resulting in the Company recording cumulative stock-based compensation
expense of $1.2 million through December 31, 2024 and stock-based compensation expense of $(454,000) during the year ended December 31, 2024.
In January 2021, the Company issued 205,500 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted
stock unit activity. The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100% of the shares subject to
the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3% of the shares subject to the PRSU awards
vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the
four-year anniversary of the grant dates. As of December 31, 2024, 10,000 PRSU awards were forfeited, two of the four milestones had been met and two
of the four milestones were deemed improbable of achievement, resulting in the Company recording cumulative stock-based compensation expense of
$766,000 million through December 31, 2024 and stock-based compensation expense of $(191,000) during the year ended December 31, 2024.
In January 2022, the Company issued 657,000 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted
stock unit activity. The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100% of the shares subject to
the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3% of the shares subject to the PRSU awards
vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the
four-year anniversary of the grant dates. As of December 31, 2024, no PRSU awards were forfeited, three of the four milestones had been met and the
remaining one was deemed improbable of achievement, resulting in the Company recording cumulative stock-based compensation expense of $3.2 million
through December 31, 2024 and stock-based compensation expense of $(709,000) during the year ended December 31, 2024.
In January 2023, the Company issued 920,000 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted
stock unit activity. The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100% of the shares subject to
the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3% of the shares subject to the PRSU awards
vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the
four-year anniversary of the grant dates. As of December 31, 2024, no PRSU awards were forfeited, two of the four milestones had been met, one
milestone was deemed probable of achievement and one milestone was deemed improbable of achievement, resulting in the Company recording
cumulative stock-based compensation expense of $8.3 million through December 31, 2024 and stock-based compensation expense of $3.3 million during
the year ended December 31, 2024.
In January 2024, the Company issued 677,500 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted
stock unit activity. The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100% of the shares subject to
the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3% of the shares subject to the PRSU awards
vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the
four-year anniversary of the grant date. As of December 31, 2024, no PRSU awards had been forfeited, two of the four milestones had been met, one
milestone was deemed probable
F-22
of achievement and one milestone was deemed improbable of achievement, resulting in the Company recording cumulative stock-based compensation
expense of $10.7 million through December 31, 2024.
The following table summarizes stock option activity during the years ended December 31, 2024, 2023 and 2022:
Shares
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (in
years)
Aggregate
Intrinsic
Value
Options outstanding at December 31, 2021
4,088,084 $
5.63
7.02 $
2,885,000
Granted
1,109,773 $
4.79
Exercised
— $
—
Forfeited
(30,000 ) $
5.16
Cancelled
(10,000 ) $
5.16
Options outstanding at December 31, 2022
5,157,857 $
5.45
6.66 $ 20,515,000
Granted
1,488,990 $
9.34
Exercised
(1,394,415 ) $
4.59
Forfeited
— $
—
Cancelled
(3,750 ) $
4.05
Options outstanding at December 31, 2023
5,248,682 $
6.79
7.10 $ 62,210,000
Granted
1,219,200 $
23.25
Exercised
(1,706,172 ) $
6.07
Forfeited
(27,250 ) $
39.31
Cancelled
—
Options outstanding at December 31, 2024
4,734,460 $
11.10
7.28 $
141,297,00
0
Options exercisable at December 31, 2024
1,865,685 $
7.77
5.91 $ 61,419,000
The Company received $10.4 million, $6.4 million and $0 in cash proceeds from exercises of stock options during the years ended December 31, 2024,
2023 and 2022, respectively.
The total fair value of stock options that vested during the years ended December 31, 2024, 2023 and 2022 was $7.3 million, $4.0 million and $3.2 million,
respectively.
Compensation expense for stock options granted to employees is based on the estimated grant date fair value and is recognized ratably over the vesting
period of the applicable option. The estimated per share weighted average fair value of stock options granted to employees during the years ended
December 31, 2024, 2023 and 2022 was $16.83, $6.76 and $3.50, respectively.
As stock-based compensation expense recognized is based on options ultimately expected to vest, the fair value of each employee option grant during the
years ended December 31, 2024, 2023 and 2022 was estimated on the date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions:
Year ended December 31,
2024
2023
2022
Expected volatility
82.9 %
81.3 %
86.6 %
Expected term (in years)
6.09
6.17
6.13
Risk-free interest rate
3.87 %
3.88 %
1.67 %
Expected dividend yield
0 %
0 %
0 %
Expected Volatility. The expected volatility rate used to value stock option grants is based on the volatility of the Company’s historical share prices.
F-23
Expected Term. The Company elected to utilize the “simplified” method for “plain vanilla” options to value stock option grants. Under this approach, the
weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option.
Risk-free Interest Rate. The risk-free interest rate assumption was based on zero-coupon U.S. Treasury instruments that had terms consistent with the
expected term of the Company’s stock option grants.
Expected Dividend Yield. The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable
future.
Forfeitures are accounted for as actual forfeitures occur.
Since the Company had a net operating loss carryforward as of December 31, 2024, no excess tax benefits for the tax deductions related to stock-based
awards were recognized in the Consolidated Statements of Operations.
Common Stock Reserved for Future Issuance
Common stock reserved for future issuance as of December 31, 2024 is as follows:
Restricted stock units
2,537,352
Common stock options
4,734,460
Available for grant under the 2024 Plan
11,897,250
Available for issuance under Employee Stock Purchase Plan
5,498,484
24,667,546
8.
Warrants
On June 14, 2017, the Company entered into a securities purchase agreement, with certain accredited investors (the “Purchasers”), pursuant to which the
Company sold an aggregate of 3,749,783 shares (the “Shares”) of its common stock, and the warrants to purchase up to an aggregate 2,812,337 shares of its
common stock to the Purchasers (the “Warrants”). The combined purchase price for one Share and one Warrant to purchase 0.75 shares of common stock
was $1.15. The closing of the issuance of the Shares and the Warrants occurred on June 19, 2017. The Warrants had an exercise price of $1.30 per share,
subject to adjustment as provided therein, and became exercisable beginning on December 19, 2017 through December 19, 2022. The Warrants were
exercised in full as of December 31, 2022.
9.
Income Taxes
Income tax expense from continuing operations consists of the following for the years ended December 31, 2024, 2023 and 2022 (in thousands):
December 31,
2024
2023
2022
Current:
Federal
$
— $
— $
—
State
1
1
1
$
1 $
1 $
1
Deferred:
Federal
$
(33,180 ) $
(22,303 ) $
(16,075 )
State
(11,926 )
(6,785 )
(6,016 )
$
(45,106 ) $
(29,088 ) $
(22,091 )
Change in valuation allowance
45,106
29,088
22,091
Total income tax expense
$
1 $
1 $
1
F-24
The reconciliations of the U.S. federal statutory tax rate to the effective income tax rate for the years ended December 31, 2024, 2023 and 2022 are as
follows:
December 31,
2024
2023
2022
Tax provision at U.S. Federal statutory rates
21 %
21 %
21 %
State income taxes net of federal benefit
9 %
7 %
7 %
Non-deductible permanent items
—
(1 )%
(1 )%
Stock options
3 %
3 %
—
Research and development credits
10 %
4 %
6 %
Change in valuation allowance
(43 )%
(34 )%
(33 )%
Effective income tax rate
—
—
—
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred taxes as of December 31, 2024, 2023 and 2022
are as follows (in thousands):
December 31,
2024
2023
2022
Deferred tax assets:
Accrued liabilities
$
403 $
437 $
508
Intangible assets
93,056
68,792
56,180
Net operating loss carryforwards
40,799
26,303
15,292
Share-based compensation
2,796
6,595
4,691
Credit Carryforwards
27,199
17,101
13,353
Other
91
44
242
Total deferred tax assets
164,344
119,272
90,266
Valuation Allowance
(164,063 )
(118,957 )
(89,869 )
Total deferred tax assets, net of allowance
$
281 $
315 $
397
Deferred tax liabilities:
Right of use assets
$
(281 ) $
(315 ) $
(397 )
Other
—
—
—
Total deferred tax liabilities:
$
(281 ) $
(315 ) $
(397 )
Net deferred tax assets (liabilities):
$
— $
— $
—
A valuation allowance of $164.1 million and $119.0 million at December 31, 2024 and December 31, 2023, respectively, has been recorded to offset net
deferred tax assets, as the Company is unable to conclude that it is more likely than not that such deferred tax assets will be realized.
At December 31, 2024, the Company had approximately $157.8 million of federal net operating loss carryforwards, of which $17.8 million will begin to
expire in 2032 and the remaining $140.0 million of which can be carried forward indefinitely. The Company has $109.6 million of state net operating loss
carryforwards that will begin to expire in 2034.
The Company's ability to utilize its federal net operating loss carryforwards may be limited under Section 382 of the Code. Specifically, this limitation
may arise in the event of an "ownership change," which is defined by Section 382 of the Code as a cumulative change in ownership of the Company of
more than 50% within a three-year period. If the Company undergoes one or more ownership changes in connection with any future transactions in its
stock, the Company's ability to utilize net operating loss carryforwards to offset federal taxable income, if any, could potentially result in increased future
tax liability to the Company. An ownership change under Section 382 of the Code occurred during the year ended December 31, 2018. However, as of
December 31, 2024, there is no limitation on the federal and state net operating losses.
The Company is subject to U.S. federal income tax as well as income tax in various state jurisdictions. The Company is currently open to audit under the
statute of limitations by the Internal Revenue Service and various state agencies for the years ended December 31, 2020 through December 31, 2024.
F-25
At December 31, 2024, the Company has federal and state research and development tax credit carry-forwards of approximately $19.0 million and $8.2
million, respectively. The federal credits begin to expire in 2036. The state credits do not expire.
The differences between the Company's effective income tax rate and the statutory federal rate for the year ended December 31, 2024 and the year ended
December 31, 2023 relate primarily to losses incurred for which no tax benefit was recognized, due to uncertainty of realization. The ultimate realization
of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible.
The Company considers projected future taxable income and tax planning strategies in making this assessment. At each of December 31, 2024 and
December 31, 2023, the Company provided a full valuation allowance against its deferred tax assets due to uncertainty surrounding the realization of those
assets as a result of historical taxable net losses.
The Company has reviewed its operations and has not identified any material uncertain tax positions. As a result, there is no liability for uncertain tax
positions in the income tax provision as of December 31, 2024 or December 31, 2023.
10.
Related-Party Transactions
In May 2014, the Company entered into the Master License Agreement with Ligand, pursuant to which, among other things, Ligand granted the Company
an exclusive worldwide license to certain clinical and preclinical programs. See Note 4 for more information related to this agreement. In connection with
the Master License Agreement, the Company considered Ligand to be a related party.
11.
Commitments and Contingencies
On May 25, 2018, the Company entered into an Office Lease (the “Lease”) with Kilroy Realty, L.P. The Lease was for approximately 7,149 rentable
square feet of space located at 12340 El Camino Real, Suite 250, San Diego, California 92130 (the “2018 Premises”). The 2018 Premises was the
Company’s corporate headquarters.
The Lease commenced on November 1, 2018 and expired on January 31, 2022. Monthly base rent payments due under the Lease for the 2018 Premises
were $27,000, subject to annual increases of 3.0% during the Lease term. Under the Lease, the Company was responsible for certain charges for common
area maintenance and other costs, including electricity and utility expenses and the Lease provided for abatement of rent during certain periods and
escalating rent payments throughout the Lease term. Rent expense was recorded on a straight-line basis over the life of the Lease and the difference
between the rent expense and rent paid was recorded as deferred rent.
On November 15, 2021, the Company entered into an Office Lease (the “Office Lease”) with One Pacific Heights. LLC. The Office Lease is for
approximately 7,940 rentable square feet of space located at 9920 Pacific Heights Blvd, Suite 350, San Diego, California 92121 (the “Premises”). The
Premises are now the Company’s corporate headquarters.
Monthly base rent payments due under the Office Lease for the Premises are $28,187, subject to annual increases of 3.0% during the Term. Under the
Office Lease, the Company is responsible for certain charges for common area maintenance and other costs, including utility expenses and the Office Lease
provides for abatement of rent during certain periods and escalating rent payments throughout the Term.
The Office Lease provides the Company with an option to extend the term of the Office Lease for a period of five years beyond the Term. If the option is
exercised, the renewal term will be upon the same terms and conditions as the original Term, except that the base rent will be equal to the prevailing market
rate as determined pursuant to the terms of the Office Lease.
On September 16, 2024 the Company entered into the Office Sublease with TÜV SÜD America Inc. The Office Sublease is for approximately 6,307
rentable square feet of space located at 9920 Pacific Heights Blvd, Suite 325, San Diego, California 92121 (the “Subleased Premises”).
Monthly base rent payments due under the Office Sublease for the Subleased Premises are $12,614, subject to annual increases of 3.0% during the
Sublease Term. Under the Office Sublease, the Company is responsible for certain other costs, including utility expenses.
12.
Segment Reporting
The Company is a clinical-stage biopharmaceutical company focused on the development of novel first-in-class or best-in-class therapies for the treatment
of metabolic and endocrine disorders, with three compounds currently in clinical trials. The Company manages its business activities on a consolidated
basis and operates in one reportable segment.
F-26
The Company’s Chief Executive Officer is the Chief Operating Decision Maker (“CODM”). The CODM utilizes the Company’s long-range plan, which
includes drug pipeline roadmaps and long-range financial models, as key inputs to resource allocation decisions. In order to ensure that these long-range
financial models are reliable, the CODM will perform look-back comparisons and budget versus actual analyses. The CODM makes decisions on resource
allocation and monitors budget versus actual results using losses from operations and its effect on the Company’s cash balance.
Significant expenses within loss from operations include research and development, and general and administrative expenses, which are each separately
presented on the Company’s Consolidated Statements of Operations and Comprehensive Loss. Other segment items within net loss include interest income,
net and amortization of financing costs.
13.
Subsequent Events
The Company evaluated subsequent events through the date of the filing of this Annual Report on Form 10-K with the SEC, to ensure that this filing
includes appropriate disclosure of events both recognized in the financial statements as of December 31, 2024, and events which occurred subsequent to
December 31, 2024 but were not recognized in the financial statements. The Company has determined that there were no subsequent events which required
recognition, adjustment to or disclosure in the financial statements.
Exhibit 10.10
EMPLOYMENT AGREEMENT
Employee agrees to the terms and conditions of employment with Viking Therapeutics, Inc. ("Company") set
forth in this Employment Agreement ("Agreement"), effective as of May 21, 2015 ("Effective Date").
1. Employment Terms.
(a)
Employment Period. The Company shall employ Employee, and Employee hereby accepts employment
with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Effective Date and
ending on the one (1) year anniversary of the Effective Date (the "Initial Employment Period"); provided that the Agreement
shall automatically renew on the same terms and conditions set forth herein for additional one (1) year periods unless the
Company or Employee gives the other party written notice of its election not to renew the Employment Period ("Non-Renewal
Notice") at least sixty (60) days prior to the renewal date (the "Renewal Period"). The "Employment Period" shall end at the end
of the Initial Employment Period (or the end of any Renewal Period) if a Non-Renewal Notice is timely provided, or on such
earlier date as Employee's employment terminates under Section 3. The date of Employee's termination of employment is the
"Termination Date".
(b)
Nature of Duties. Employee shall be the Vice President of Clinical Operations. Employee shall work
exclusively for the Company and its Subsidiaries and Affiliates (collectively, "Company Group"), to the extent so directed by the
Chief Executive Officer of the Company ("CEO"), and shall have all of the customary powers and duties associated with the
position of Vice President of Clinical Operations. Employee shall report to the Chief Medical Officer (CMO). Employee shall
devote Employee's full business time and effort to the performance of Employee's duties for the Company Group, which
Employee shall perform faithfully and to the best of Employee's ability. Employee will be permitted to engage in non-
commercial outside business activities (e.g., non-profit boards), with the consent of the Board of Directors of the Company
("Board"). Employee shall be subject to the Company Group's policies and procedures, as generally in effect from time-to-time,
including any and all policies and procedures implemented after the Effective Date. Employee shall be an at-will employee who
may resign or be terminated at any time, with or without Cause. Employee's at-will status only can be altered by a written
document approved by the Board or a committee thereof and signed by the CEO, on behalf of the Company, and Employee, in
her personal capacity.
(c)
Place of Performance. Employee shall work from the Company's offices in California, except for
required travel on Company Group business.
(d)
Subsidiaries and Affiliates. For purposes of this Agreement, (i) "Subsidiaries" means any corporation
or other entity of which the securities or other ownership interests having the voting power to elect a majority of the board of
directors or other governing body are, at the time of determination, owned by the Company, directly or through one or more
subsidiaries or parents and (ii) "Affiliate" means any person or entity, directly or indirectly controlling, controlled by or under
common control with the Company, including any parent company of the Company.
2
2. Compensation and Benefits.
(a)
Base Salary. The Company shall pay Employee a base salary ("Base Salary") at an annual rate of
$225,000. Employee's Base Salary shall be reviewed annually by the Board or the Compensation Committee of the Board
("Compensation Committee"), after consultation with the CEO, and, if appropriate, increased (but not decreased, except in the
event of a proportional reduction in salaries of Company senior (non-executive) employees generally). Employee's Base Salary
shall be paid in conformity with the Company's salary payment practices generally applicable to the Company's senior (non-
executive) employees. Employee shall not earn any Base Salary during periods of non-performance of her job duties, other than
vacations and permitted sick leave.
(b)
Annual Bonus. Employee shall be eligible to receive an annual bonus (the "Annual Bonus") for each
full year of employment. Employee's target Annual Bonus, to the extent earned, will be twenty five percent (25%) of Employee's
Base Salary in effect on June 30th of such calendar year (or in effect on the first day of Employee's employment with the
Company if Employee was not employed with the Company on June 30th of such calendar year). The Annual Bonus shall be
based on Company financial performance and Employee's performance, each measure as determined by the Board or the
Compensation Committee after consultation with the CEO for the applicable year. The actual Annual Bonus amount, if any, will
be determined in the discretion of the Board or the Compensation Committee, and generally will be paid within the first quarter
of the following calendar year. The Annual Bonus is not earned until paid. Employee understands that Employee shall not be
entitled to the Annual Bonus unless Employee is employed by the Company at the time the Annual Bonus is paid.
(c)
Equity Compensation. The Board will recommend to the Compensation Committee that Employee
receive: (a) a stock option to purchase 15,000 shares of common stock of the Company (the "Common Stock") (as adjusted for
stock splits, stock dividends, recapitalizations and the like) (the "Option"); (b) an award of 30,000 shares of restricted Common
Stock Units (as adjusted for stock splits, stock dividends, recapitalizations and the like) (the "Initial RSU"); provided that the
Company shall be permitted, in its discretion, to withhold shares of Common Stock pursuant to this award in order to pay tax
withholding obligations arising upon the vesting of such shares. Each of the Initial RSA and Option shall vest according to the
following terms: 25% of the Award will vest on each one-year anniversary of the date of issuance for the next four years, so long
as Employee continues to provide continuous services to the Company through each applicable vesting date, inclusive. Each of
the Awards will be subject to the terms and conditions of the forthcoming Viking Therapeutics, Inc. 2014 Equity Incentive Plan
(as may be amended or restated from time to time, "Equity Incentive Plan"), including any required agreements and/or grant
documentation, and shall vest over the vesting schedule set forth in such Equity Incentive Plan or the applicable grant documents;
provided that the vesting commencement date for the Awards shall be the Effective Date. Following the grants of the Awards,
Employee shall be eligible to participate in the Equity Incentive Plan, any successor to such plan, and any other Company equity
compensation plan established from time to time and generally made available by the Company in its sole discretion to the
Company's employees.
(d)
Benefits. During Employee's employment, Employee shall be entitled to accrue up to three (3) weeks of
vacation annually (pro-rated for partial years), subject to Company
3
policies as modified from time to time. Employee also shall be entitled to participate in all Company employee welfare benefit
plans and programs, to the same extent generally available to the Company's senior (non-executive) employees, in accordance
with the terms of those plans and programs. The Company shall have the right to terminate or change any such plan or program at
any time.
(e)
Expenses. Employee shall be entitled to reimbursement for all reasonable and necessary business
expenses that Employee incurs, in accordance with Company policy. Employee also shall have use of an entertainment and
business development budget, the amount and terms of which shall be set by the Board or the Compensation Committee in its
discretion each year. Employee must account for all business, entertainment, and business development expenses, in accordance
with Company policy.
3. Termination.
(a)
Death. If Employee dies while employed under this Agreement, Employee's employment shall terminate
immediately.
(b)
By Company.
(i) Non-Renewal of Agreement. The Company may terminate Employee's employment by providing
a timely Non-Renewal Notice, pursuant to Section 1(a).
(ii) Termination for Cause. The Company may terminate Employee's employment for Cause.
"Cause" shall include, but not be limited to a good faith determination by the Company that it has Cause to terminate Employee
including for any of the following reasons: (a) conviction of a felony or other crime involving moral turpitude; (b) the
commission of any act against any member of the Company Group, constituting willful misconduct, dishonesty, fraud, theft, or
embezzlement; (c) intentional or grossly negligent failure to follow the directions of the CEO or the Board with respect to the
material services, duties, or responsibilities required of Employee by the Company, which is not cured within thirty (30) days
after written notice thereof to Employee; (d) breach of a material employment policy of the Company Group applicable to senior
(non-executive) employees, which is material, which causes any member of the Company Group material harm, and which is not
cured within thirty (30) days after written notice thereof to Employee; or (e) any other breach of this Agreement that is material
and that is not cured within thirty (30) days after written notice thereof to Employee. If Employee's employment ends for any
reason other than discharge by the Company for Cause, but at a time when the Company, in its good faith belief, had Cause to
terminate Employee (or would have had Cause if it knew all relevant facts), then Employee's termination shall be treated as a
termination by the Company for Cause.
(iii)Disability. Except as prohibited by applicable law, the Company may terminate Employee's
employment on account of Disability, or may transfer Employee to inactive employment status, which shall have the same effect
under this Agreement as a termination for Disability. "Disability" means a physical or mental illness, injury, or condition that
prevents Employee from performing substantially all of Employee's duties under this Agreement for at least 90 consecutive
calendar days or for at least 120 calendar days, whether or
4
not consecutive, in any 365 calendar day period, or is likely to do so, as certified by a physician selected by the Board or the
Compensation Committee.
(iv)Termination Other Than for Non-Renewal, Cause, Disability or Death. Because Employee is
an at-will employee, the Company may terminate Employee's employment at any time for any reason, and without advance
notice.
(c)
By Employee.
(i) Non-Renewal of Agreement. Employee may terminate Employee's employment by providing a
timely Non-Renewal Notice, pursuant to Section 1(a).
(ii) Resignation for Good Reason. Employee may resign Employee's employment at any time if
"Good Reason" exists. "Good Reason" shall mean that, without Employee's written consent, (i) there is a material diminution of
Employee's Base Salary (except in the event of a proportional reduction in salaries of Company's senior (non-executive)
employees generally); or (ii) there is a material diminution in Employee's authority, duties or responsibilities. Employee
acknowledges and agrees that completion of the IPO shall not constitute Good Reason. Notwithstanding the foregoing, no
resignation shall be considered to have been for Good Reason unless Employee first gives the Company written notice of
Employee's intention to resign employment and specifies the grounds for such resignation with reasonable particularity within
ninety (90) days of the date such event occurs, the Company has not cured such event within thirty (30) days of its receipt of such
notice, and Employee actually resigns Employee's employment for such reason within thirty (30) days after the end of the thirty
(30) day cure period. The Company may cure at any time prior to Employee's termination, and Employee may not resign for
Good Reason on the noticed ground or grounds once the Company has so cured.
(iii)Resignation other than for Good Reason. Because Employee is an at-will employee, Employee
may resign from employment with the Company at any time for any reason, and without advance notice; provided, however, that
Employee covenants that he will provide at least 60 days' written notice of resignation.
(iv)Date of Non-Renewal / Resignation. If Employee provides a Non-Renewal Notice or advance
notice of resignation to the Company, the Company may terminate Employee's employment prior to the applicable expiration
date and/or noticed resignation date, and/or place Employee on an unpaid leave of absence during such time period. Such
termination and or leave of absence shall remain a non-renewal or resignation by Employee for purposes of this Agreement.
4. Termination Payments.
(a)
Payments on Termination. Regardless of the reason Employee's employment terminates, and except as
expressly provided below in this Section 4, Employee shall receive only (i) any unpaid Base Salary, business expense
reimbursements, and accrued but unused vacation, through the Termination Date; and (ii) any other unpaid amounts due under
Company benefit plans, in accordance with the terms and conditions of such plans.
5
(b)
Other Potential Payments On Termination. For avoidance of doubt, if Employee is entitled to
amounts under Section 5(c), Employee shall not be entitled to any amounts under this Section 4(b).
(i) Termination for Cause. Employee shall receive only the amounts set forth in Section 4(a).
(ii) Disability. Employee shall receive the following amounts (the "3 Month Severance"), subject to
satisfaction of the Release Requirement:
1.
Contingent on Employee's compliance with Employee's obligations under Sections 6-
10, the Company shall continue to pay Employee her Base Salary as of the Termination Date, for a period of three (3) months
after the Termination Date, in accordance with the Company's normal payroll schedule in effect on the Termination Date;
2.
Contingent on Employee's compliance with Employee's obligations under Sections 6-
10, the Company shall pay Employee three (3) monthly payments, each equal to 1/12 of the amount obtained by multiplying
Employee's target Annual Bonus percentage as of the Termination Date times Employee's Base Salary as of the Termination
Date, on the last day of each of the three (3) months, commencing in the month following the Termination Date;
3.
Subject to Employee's timely election of COBRA, the Company shall pay Employee an
amount equal to the COBRA premiums, as of the Termination Date, for Employee and any dependents enrolled in the Company-
sponsored non-FSA group health plans, for the lesser of (a) three (3) months, or (b) until Employee first becomes eligible to
enroll in another employer-sponsored group health plan; and
4.
Notwithstanding anything to the contrary in the Equity Incentive Plan or any equity
award documentation, with respect to the Awards: (a) outstanding equity awards that would have vested within three (3) months
following the Termination Date, if any, shall vest and become fully exercisable, if applicable, as of the Termination Date, and (b)
Employee shall have three (3) months from the Termination Date to exercise vested options (unless they terminate sooner
according to their terms), at which point such options shall terminate if unexercised without compensation therefore (unless
already terminated). Any portion of the Awards that were not vested on the Termination Date, after giving effect to the
preceding sentence, shall terminate without compensation therefore on the Termination Date.
(iii)Death. Employee's estate ("Estate") shall receive the 3 Month Severance; provided that the legal
representative of the Estate satisfies the Release Requirement on behalf of the Estate.
(iv)Non-Renewal by Employee. Employee shall receive only the amounts set forth in Section 4(a).
(v) Resignation by Employee. Employee shall receive only the amounts set forth in Section 4(a).
6
(c)
Amounts Owed to the Company. Any amounts payable to Employee under Section 4(b) shall first be
applied to repay any amounts Employee owes the Company to the maximum extent permitted by law.
(d)
Release Requirement. Employee will only receive the payments due to Employee under Section 4(b) if
Employee signs a general release (in the form furnished to Employee by the Company) within 45 days after the Termination
Date, Employee does not thereafter properly revoke the release, and that release has become effective and irrevocable in its
entirety by the 60th day following the Termination Date (the "Release Requirement").
(e)
Payment Timeframe. No payments under Section 4(b) shall commence until the 60th day after the
Termination Date. Any amounts that would have been paid during such 60-day period shall be paid with the first payment.
5. Change in Control.
(a)
Definition. A "Change in Control" of the Company shall have the meaning assigned to such term in the
Equity Incentive Plan (as the Equity Incentive Plan may be amended or restated from time to time).
(b)
Equity Treatment On Change In Control. Upon a Change in Control during the Employment Period,
notwithstanding anything to the contrary in the Equity Incentive Plan or any associated equity award documentation, one hundred
percent (100%) of Employee's outstanding Awards that are unvested as of the Change in Control, if any, shall vest, and, if
applicable, become fully exercisable immediately prior to the Change in Control. To the extent any vested equity awards held by
Employee are not assumed and/or substituted in the Change in Control transaction on a basis that does not diminish the in-the-
money value of the award (if in the money at the time of the Change in Control) or the maximum exercise period, if applicable,
the Company shall provide to Employee cash on the Change in Control in exchange for the satisfaction and cancellation of such
outstanding equity awards (based on the fair market value of shares underlying such awards on the date of the Change in
Control).
(c)
Termination Payments In Connection With Change In Control. For avoidance of doubt, if Employee
is entitled to amounts under Section 4(b), Employee shall not be entitled to any amounts under this Section 5(c).
(i) Payments. If, within twenty four (24) months following a Change in Control, the Company
terminates Employee's employment other than pursuant to a Non-Renewal Notice, or for Cause, Disability, or Death, or
Employee resigns for Good Reason, then in lieu of any amounts otherwise due under Section 4(b), notwithstanding anything to
the contrary in the Equity Incentive Plan or any equity award documentation, with respect to the Awards: (a) outstanding equity
awards that would have vested within twelve (12) months following the Termination Date, if any, shall vest and become fully
exercisable, if applicable, as of the Termination Date, and (b) Employee shall have twelve (12) months from the Termination
Date to exercise vested options (unless they terminate sooner according to their terms), at which point such options shall
terminate if unexercised without compensation therefore (unless already terminated).
7
Any portion of the Awards that were not vested on the Termination Date, after giving effect to the preceding sentence, shall
terminate without compensation therefore on the Termination Date.
(ii) Amounts Owed to the Company. Any amounts payable to Employee under Section 5(c) shall first
be applied to repay any amounts Employee owes the Company to the maximum extent permitted by law.
(iii)Release Requirement. Employee will only receive the payments due to Employee under Section
5(c) if Employee satisfies the Release Requirement.
(iv)Payment Timeframe. No payments under Section 5(c) shall commence until the 60th day after the
Termination Date. Any amounts that would have been paid during such 60-day period shall be paid with the first payment
installment.
6. Protection of Confidential Information. Employee acknowledges that Employee currently possesses or will
acquire secret, confidential, or proprietary information or trade secrets concerning the products, operations, future plans, or
business methods of the Company Group ("Confidential Information"). That certain Employee Proprietary Information and
Inventions Assignment Agreement, dated as of even date herewith, by and between the Company and Employee (as may be
amended or restated from time to time) is incorporated into this Agreement by reference.
7. Non-Disparagement by Employee. Employee agrees not to criticize, denigrate, or otherwise disparage the
Company, any member of the Company Group, or any of their officers, directors, employees, service providers, distributors,
clients, products, processes, experiments, policies, practices, standards of business conduct, or areas or techniques of research.
However, nothing in this Section shall prohibit Employee from complying with any lawful subpoena or court order or taking any
other actions affirmatively authorized by law.
8. Efforts; Duty Not to Compete. Employee understands that her employment with the Company requires Employee's
undivided attention and effort. As a result, during Employee's employment, Employee will not, without the Company's express
written consent, engage in any other employment or business that (i) directly competes with the current or future business of the
Company Group; (ii) uses any Company Group information, equipment, supplies, facilities or materials; or (iii) otherwise
conflicts with the Company Group's business interest and causes a disruption of its operations.
9. Non-Solicitation of Employees/Consultants. During Employee's employment with the Company and for a period
of one (1) year thereafter, Employee will not directly or indirectly solicit employees or consultants of the Company Group to
terminate their relationship with the Company Group for Employee's own benefit or for the benefit of any other person or entity.
10.Non-Solicitation of Suppliers/Customers. During and after the termination of Employee's employment with the
Company, Employee will not directly or indirectly solicit or otherwise take away customers or suppliers of the Company Group
if, in so doing, Employee accesses, uses or discloses any trade secrets or proprietary or Confidential Information of the Company
Group. Employee acknowledges and agrees that the Company Group's lists of
8
customers and suppliers, including their buying and selling habits and special needs, whether created or obtained by, or disclosed
to me during Employee's employment, constitute Confidential Information of the Company Group.
11.Disputes
(a)
Governing Law and Venue. The validity, interpretation, construction, and performance of this
Agreement shall be governed by the laws of the State of California (excluding any that mandates the use of another jurisdiction's
laws). The enforcement of an arbitration award, or any other action in connection with this Agreement, only may be brought in
the courts of the County of San Diego, State of California or federal courts situated within the County of San Diego, State of
California.
(b)
Arbitration of Disputes. Except as otherwise provided in this Agreement, and excluding those disputes
that cannot be arbitrated as a matter of law (including, but not limited to, workers' compensation claims and any claim relating to
a benefit plan subject to ERISA), all disputes between the Company or any member of the Company Group electing to arbitrate
and Employee, are to be resolved by final and binding arbitration in San Diego County, California, pursuant to the employment
arbitration rules then in effect for JAMS (a copy of which will be provided to Employee by the Company, at Employee's request),
in accordance with the separate Mutual Agreement to Arbitrate Claims, dated as of even date herewith, by and between the
Company and Employee, which is incorporated into this Agreement by reference.
(c)
Legal Fees. To the extent permitted by applicable law, and except as otherwise provided herein, each
party is responsible for its own legal fees in connection with this Agreement and any enforcement thereof.
12.Taxes. The Company shall withhold taxes and other amounts from payments it makes pursuant to this Agreement as
it determines to be required by applicable law.
13.Excise Tax. Notwithstanding any other provisions in this Agreement, in the event that any payment or benefit
received or to be received by Employee (including any payment or benefit received in connection with a change in control of the
Company or the termination of Employee's employment, whether pursuant to the terms of this Agreement or any other plan,
program, arrangement or agreement) (all such payments and benefits, together, the "Total Payments") would be subject (in whole
or part), to any excise tax imposed under Section 4999 of the Code, or any successor provision thereto (the "Excise Tax"), then,
after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan,
program, arrangement or agreement, the Company will reduce the Total Payments to the extent necessary so that no portion of
the Total Payments is subject to the Excise Tax (but in no event to less than zero); provided, however, that the Total Payments
will only be reduced if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal,
state, municipal and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized
deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount
of such Total Payments without such reduction (but after subtracting the net amount of federal, state, municipal and local income
taxes on such Total Payments and the amount of Excise Tax to which Employee would be subject
9
in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal
exemptions attributable to such unreduced Total Payments).
(a)
In the case of a reduction in the Total Payments, the Total Payments will be reduced in the following
order (unless reduction in another order is required to avoid adverse consequences under Section 409A, in which case, reduction
will be in such other order): (i) payments that are payable in cash that are valued at full value under Treasury Regulation Section
1.280G-1, Q&A 24(a) will be reduced (if necessary, to zero), with amounts that are payable last reduced first; (ii) payments and
benefits due in respect of any equity valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a), with the
highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24) will next be
reduced; (iii) payments that are payable in cash that are valued at less than full value under Treasury Regulation Section 1.280G-
1, Q&A 24, with amounts that are payable last reduced first, will next be reduced; (iv) payments and benefits due in respect of
any equity valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24, with the highest values reduced
first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24) will next be reduced; and (v) all
other non-cash benefits not otherwise described in clauses (ii) or (iv) will be next reduced pro-rata. Any reductions made
pursuant to each of clauses (i)-(v) above will be made in the following manner: first, a pro-rata reduction of cash payment and
payments and benefits due in respect of any equity not subject to Section 409A, and second, a pro-rata reduction of cash
payments and payments and benefits due in respect of any equity subject to Section 409A as deferred compensation.
(b)
For purposes of determining whether and the extent to which the Total Payments will be subject to the
Excise Tax: (i) no portion of the Total Payments the receipt or enjoyment of which Employee shall have waived at such time and
in such manner as not to constitute a "payment" within the meaning of Section 280G(b) of the Code will be taken into account;
(ii) no portion of the Total Payments will be taken into account which, in the opinion of tax counsel ("Tax Counsel") reasonably
acceptable to Employee and selected by the accounting firm which was, immediately prior to the change in control, the
Company's independent auditor (the "Auditor"), does not constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no
portion of such Total Payments will be taken into account which, in the opinion of Tax Counsel, constitutes reasonable
compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the "base
amount" (as set forth in Section 280G(b)(3) of the Code) that is allocable to such reasonable compensation; and (iii) the value of
any non-cash benefit or any deferred payment or benefit included in the Total Payments will be determined by the Auditor in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
14.Section 409A.
(a)
To the extent applicable, it is intended that the Agreement comply with the provisions of Section 409A of
the Internal Revenue Code of 1986, as amended ("Section 409A"). The Agreement will be administered and interpreted in a
manner consistent with this intent, and any provision that would cause the Agreement to fail to satisfy Section 409A will have no
force and effect until amended to comply therewith (which amendment may be retroactive to the extent
10
permitted by Section 409A). Notwithstanding anything contained herein to the contrary, Employee shall not be considered to
have terminated employment with the Company for purposes of the Agreement and no payments shall be due to Employee under
the Agreement which are payable upon Employee's termination of employment unless Employee would be considered to have
incurred a "separation from service" from the Company within the meaning of Section 409A and the phrase "termination of
employment" or similar phrases shall be construed to mean a "separation from service." To the extent required in order to avoid
accelerated taxation and/or tax penalties under Section 409A, during any time in which stock of the Company is publicly-traded
on any established securities market or otherwise (and pursuant to which Section 409A(a)(2)(B)(i) applies and not excepted
under applicable Treasury Regulations), amounts that would otherwise be payable and benefits that would otherwise be provided
pursuant to the Agreement during the six-month period immediately following Employee's termination of employment shall
instead be paid on the first business day after the date that is six months following Employee's termination of employment (or
upon Employee's death, if earlier). In addition, for purposes of the Agreement, each amount to be paid or benefit to be provided
to Employee pursuant to the Agreement shall be construed as a separate identified payment for purposes of Section 409A. With
respect to expenses eligible for reimbursement under the terms of the Agreement, (i) the amount of such expenses eligible for
reimbursement in any taxable year shall not affect the expenses eligible for reimbursement in another taxable year and (ii) any
reimbursements of such expenses shall be made no later than the end of the calendar year following the calendar year in which
the related expenses were incurred, except, in each case, to the extent that the right to reimbursement does not provide for a
"deferral of compensation" within the meaning of Section 409A.
(b)
The Company does not hereby or otherwise represent or warrant that any payments hereunder are or will
be in compliance with Section 409A, and Employee shall be responsible for obtaining Employee's own tax advice with regard to
such matters. In no event shall the Company have any liability related to any payment or benefit under this Agreement failing to
comply with, or be exempt from, the requirements of Section 409A of the Internal Revenue Code.
15.Clawback. Notwithstanding anything herein to the contrary, Employee may be required to forfeit or repay any or all
compensation received by Employee under this Agreement pursuant to the terms of any compensation recovery or clawback
requirement, or policy that may be adopted by or applicable to the Company, under the Sarbanes-Oxley Act of 2002 or the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010.
16.Other Terms.
(a)
Notice. Any notice, demand, claim or other communication under this Agreement will be in writing and
will be deemed to have been given (a) on delivery if delivered personally; (b) on the date on which delivery thereof is guaranteed
by the carrier if delivered by a national courier guaranteeing delivery within a fixed number of days of sending; or (c) on the date
of transmission thereof if delivery is confirmed, but, in each case, only if addressed to the Parties in the following manner at the
following addresses (or at the other address as a Party may specify by notice to the other): to the Company, to the attention of the
Chairperson of the Board and the CEO at its principal executive offices, and to Employee, at Employee's principal residence as
set forth in the employment records of the Company.
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(b)
Amendment. Except as provided herein or as required to remain compliant with applicable law, no
provisions of this Agreement may be modified, waived, or discharged except by a written document signed on the Company's
behalf by the CEO, and by Employee in her personal capacity.
(c)
Waiver. A waiver of any conditions or provisions of this Agreement or any breach by any party hereto in
a given instance shall not be deemed a waiver of such conditions or provisions at any other time.
(d)
Assignment. This Agreement shall be binding upon, and shall inure to the benefit of, Employee the
Estate, but Employee may not assign or pledge this Agreement or any rights arising under it, except to the extent permitted under
the terms of the Company plans in which Employee participates. Without Employee's consent, the Company may assign this
Agreement to any successor-in-interest to the Company (a "Successor") or Affiliate that agrees in writing to be bound by this
Agreement, after which any reference to the "Company" in this Agreement shall be deemed to be a reference to such Successor
or Affiliate, and the Company thereafter shall have no further responsibility or liability under this Agreement of any kind.
(e)
Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
(f)
Headings. The headings set forth herein are included solely for the purpose of identification and shall not
be used for the purpose of construing the meaning of the provisions of this Agreement.
(g)
Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original but all of which together shall constitute the same instrument.
(h)
Resignation from All Positions. Upon the termination of Employee's employment with the Company
for any reason, unless otherwise requested by the Company, Employee shall resign, as of the date of such termination, from all
positions he then holds as an officer, director, employee and member of the Board (and any committee thereof) of the Company
and its Affiliates. Employee agrees to execute and deliver to the Company such writings as are required to effectuate the
foregoing.
(i)
Entire Agreement. All oral or written agreements or representations, express or implied, with respect to
the subject matter of this Agreement are set forth in this Agreement. However, this Agreement does not override other written
agreements Employee has executed relating to specific aspects of Employee's employment, such as conflicts of interest.
(j)
Former Employers. Employee is not subject to any employment, confidentiality, or other agreement or
restriction that would prevent Employee from fully satisfying Employee's duties under this Agreement or that would be violated
if Employee did so. Without the Company's prior written approval, Employee covenants that Employee will not: (i) disclose
proprietary information belonging to a former employer or other entity without its written permission; (ii) contact any former
employer's customers or employees to solicit their business or
12
employment on behalf of the Company, in either case if such contact or solicitation would violate any agreement between
Employee and any prior employer of Employee; or (iii) distribute announcements about or otherwise publicize Employee's
employment with the Company. Employee will indemnify and hold the Company harmless from any liabilities or costs,
including attorneys' fees it may incur because Employee is alleged to have broken any of these promises or improperly revealed
or used such proprietary information or to have threatened to do so, or if a former employer challenges Employee's entering into
this Agreement or rendering services pursuant to it.
(k)
Survivability. The provisions of Sections 4-16 shall survive the termination or expiration of this
Agreement.
(l)
Communication with Government Agencies. Nothing in this Agreement precludes Employee from
filing an administrative charge or otherwise communicating with any federal, state, or local government office, official, or
agency.
(m)
Section References. Unless otherwise provided, references to a "Section" or to "Sections" in this
Agreement shall refer to the Section or Sections, respectively, of this Agreement.
(n)
Right to Negotiation. Employee acknowledges that Employee has been given the opportunity to consult
with legal counsel or any other advisor of Employee's own choosing regarding this Agreement. Employee understands and
agrees that any attorney retained by the Company or any member of management who has discussed any term or condition of this
Agreement with Employee or Employee's advisor is only acting on behalf of the Company and not on Employee's behalf.
Employee hereby acknowledges that Employee has been given the opportunity to participate in the negotiation of the terms of
this Agreement.
(o)
Employee's Understanding of Agreement. Employee acknowledges and confirms that Employee has
read this Agreement and fully understands its terms and contents. Employee further acknowledges that all understandings and
agreements between the Company and Employee relating to the subjects covered in this Agreement are contained in it and that
Employee has entered into this Agreement voluntarily and not in reliance on any promises or representations by the Company
other than those contained in this Agreement itself. Employee understands that by signing this Agreement Employee is giving up
Employee's right to a jury trial.
Date: June 6, 2015 VIKING THERAPEUTICS, INC
By: /s/ Brian Lian, Ph.D.
Name: Brian Lian, Ph.D.
Title: President and Chief Executive Officer
Date: June 6, 2015 /s/ Marianne Mancini
Marianne Mancini
Viking Therapeutics, Inc.
12340 El Camino Real, Suite 250
San Diego, CA 92130
858-704-4660
November 10, 2020
Marianne Mancini
Re: Promotion to Chief Operating Officer
Dear Marianne,
It is my pleasure to inform you that you have been promoted to Chief Operating Officer, effective January 4,
2021. This is in recognition of your work managing and advancing our pipeline programs, as well as your contributions to the
company’s overall strategy, direction and progress.
As a part of your promotion, your annual salary will be increased as of January 4, 2021. Your new annual salary
will be $405,000, paid according to the company’s current compensation schedule. The change in salary will be reflected in your
January 15 paycheck. In addition, your new target bonus level will increase to 40%, effective beginning with the 2021
compensation cycle.
You will also receive an award of 150,000 options to purchase Viking common stock. The option award will
vest at a rate of 33% annually, beginning January 4, 2022. The strike price of the option will be based upon the closing price of
Viking’s common stock on January 4, 2021. In addition, you will receive an award of 33,000 Restricted Stock Units (RSUs). The
RSUs will vest according to the same schedule as the option award.
Please note that as an officer of the company, your salary, equity holdings, and certain other personal
information will be disclosed in certain of our regulatory filings. Further, your transactions in Viking securities will be required
to conform to Exchange Act Section 16 of the Securities and Exchange Commission. As such, any purchases or sales of Viking
securities must be publicly disclosed, in addition to conforming to the Company’s existing insider trading policy. There can be
great external sensitivity to these disclosures.
Congratulations and thanks very much for your work. You deserve this position and I look forward working
together in the years ahead.
/s/ Brian Lian
Brian
Exhibit 10.11
EMPLOYMENT AGREEMENT
Employee agrees to the terms and conditions of employment with Viking Therapeutics, Inc. ("Company") set
forth in this Employment Agreement ("Agreement"), effective as of December 30, 2016 ("Effective Date").
1. Employment Terms.
(a)
Employment Period. The Company shall employ Employee, and Employee hereby accepts employment
with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Effective Date and
ending on the one (1) year anniversary of the Effective Date (the "Initial Employment Period"); provided that the Agreement
shall automatically renew on the same terms and conditions set forth herein for additional one (1) year periods unless the
Company or Employee gives the other party written notice of its election not to renew the Employment Period ("Non-Renewal
Notice") at least forty-five (45) days prior to the renewal date (the "Renewal Period"). The "Employment Period" shall end at
the end of the Initial Employment Period (or the end of any Renewal Period) if a Non-Renewal Notice is timely provided, or on
such earlier date as Employee's employment terminates under Section 3. The date of Employee's termination of employment is
the "Termination Date".
(b)
Nature of Duties. Employee shall be the Vice President of Finance and Operations. Employee shall
work exclusively for the Company and its Subsidiaries and Affiliates (collectively, "Company Group"), to the extent so directed
by the Chief Executive Officer of the Company ("CEO"), and shall have all of the customary powers and duties associated with
the position of Vice President of Finance and Operations. Employee shall report to the Chief Executive Officer (CEO).
Employee shall devote Employee's full business time and effort to the performance of Employee's duties for the Company Group,
which Employee shall perform faithfully and to the best of Employee's ability. Employee will be permitted to engage in non-
commercial outside business activities (e.g., non-profit boards), with the consent of the CEO. Employee shall be subject to the
Company Group's policies and procedures, as generally in effect from time-to-time, including any and all policies and procedures
implemented after the Effective Date. Employee shall be an at-will employee who may resign or be terminated at any time, with
or without Cause. Employee's at-will status only can be altered by a written document approved and signed by the CEO, on
behalf of the Company, and Employee, in his personal capacity.
(c)
Place of Performance. Employee shall work from the Company's offices in California, except for
required travel on Company Group business.
(d)
Subsidiaries and Affiliates. For purposes of this Agreement, (i) "Subsidiaries" means any corporation
or other entity of which the securities or other ownership interests having the voting power to elect a majority of the board of
directors or other governing body are, at the time of determination, owned by the Company, directly or through one or more
subsidiaries or parents and (ii) "Affiliate" means any person or entity, directly or indirectly controlling, controlled by or under
common control with the Company, including any parent company of the Company.
2
2. Compensation and Benefits.
(a)
Base Salary. The Company shall pay Employee a base salary ("Base Salary") at an annual rate of
$275,000. Employee's Base Salary shall be reviewed annually by the CEO or the Compensation Committee of the Board
("Compensation Committee"), after consultation with the CEO, and, if appropriate, increased (but not decreased, except in the
event of a proportional reduction in salaries of Company senior (non-executive) employees generally). Employee's Base Salary
shall be paid in conformity with the Company's salary payment practices generally applicable to the Company's senior (non-
executive) employees. Employee shall not earn any Base Salary during periods of non-performance of his job duties, other than
vacations and permitted sick leave.
(b)
Annual Bonus. Employee shall be eligible to receive an annual bonus (the "Annual Bonus") for each
full year of employment. Employee's target Annual Bonus, to the extent earned, will be twenty-five percent (25%) of Employee's
Base Salary in effect on June 30th of such calendar year (or in effect on the first day of Employee's employment with the
Company if Employee was not employed with the Company on June 30th of such calendar year). The Annual Bonus shall be
based on Company financial performance and Employee's performance, each measure as determined by the CEO or the
Compensation Committee after consultation with the CEO for the applicable year. The actual Annual Bonus amount, if any, will
be determined in the discretion of the CEO or the Compensation Committee after consultation with the CEO, and generally will
be paid within the first quarter of the following calendar year. The Annual Bonus is not earned until paid. Employee understands
that Employee shall not be entitled to the Annual Bonus unless Employee is employed by the Company at the time the Annual
Bonus is paid.
(c)
Equity Compensation. The CEO will recommend to the Compensation Committee that Employee
receive: (a) a stock option to purchase 40,000 shares of common stock of the Company (the "Common Stock") (as adjusted for
stock splits, stock dividends, recapitalizations and the like) (the "Option"); (b) an award of 20,000 shares of restricted Common
Stock Units (as adjusted for stock splits, stock dividends, recapitalizations and the like) (the "Initial RSU"); provided that the
Company shall be permitted, in its discretion, to withhold shares of Common Stock pursuant to this award in order to pay tax
withholding obligations arising upon the vesting of such shares. Each of the Initial RSU and Option shall vest according to the
following terms: 25% of the Award will vest immediately, and 25% shall vest on each one-year anniversary of the date of
issuance for the next three years, so long as Employee continues to provide continuous services to the Company through each
applicable vesting date, inclusive. Each of the Awards will be subject to the terms and conditions of the Viking Therapeutics,
Inc. 2014 Equity Incentive Plan (as may be amended or restated from time to time, "Equity Incentive Plan"), including any
required agreements and/or grant documentation, and shall vest over the vesting schedule set forth in such Equity Incentive Plan
or the applicable grant documents; provided that the vesting commencement date for the Awards shall be the Effective Date.
Following the grants of the Awards, Employee shall be eligible to participate in the Equity Incentive Plan, any successor to such
plan, and any other Company equity compensation plan established from time to time and generally made available by the
Company in its sole discretion to the Company's employees.
(d)
Benefits. During Employee's employment, Employee shall be entitled to accrue up to four (4) weeks of
vacation annually (pro-rated for partial years), subject to Company
3
policies as modified from time to time. Employee also shall be entitled to participate in all Company employee welfare benefit
plans and programs, to the same extent generally available to the Company's senior (non-executive) employees, in accordance
with the terms of those plans and programs. The Company shall have the right to terminate or change any such plan or program
at any time.
(e)
Expenses. Employee shall be entitled to reimbursement for all reasonable and necessary business
expenses that Employee incurs, in accordance with Company policy. Employee also shall have use of an entertainment and
business development budget, the amount and terms of which shall be set by the CEO or the Compensation Committee after
consultation with the CEO in its discretion each year. Employee must account for all business, entertainment, and business
development expenses, in accordance with Company policy.
3. Termination.
(a)
Death. If Employee dies while employed under this Agreement, Employee's employment shall terminate
immediately.
(b)
By Company.
(i) Non-Renewal of Agreement. The Company may terminate Employee's employment by providing
a timely Non-Renewal Notice, pursuant to Section l(a).
(ii) Termination for Cause. The Company may terminate Employee's employment for Cause.
"Cause" shall include, but not be limited to a good faith determination by the Company that it has Cause to terminate Employee
including for any of the following reasons: (a) conviction of a felony or other crime involving moral turpitude; (b) the
commission of any act against any member of the Company Group, constituting willful misconduct, dishonesty, fraud, theft, or
embezzlement; (c) intentional or grossly negligent failure to follow the directions of the CEO or the Board with respect to the
material services, duties, or responsibilities required of Employee by the Company; (d) breach of a material employment policy
of the Company Group applicable to senior (non-executive) employees, which is material, which causes any member of the
Company Group material harm; or (e) any other breach of this Agreement that is material. If Employee's employment ends for
any reason other than discharge by the Company for Cause, but at a time when the Company, in its good faith belief, had Cause
to terminate Employee (or would have had Cause if it knew all relevant facts), then Employee's termination shall be treated as a
termination by the Company for Cause.
(iii)Disability. Except as prohibited by applicable law, the Company may terminate Employee's
employment on account of Disability, or may transfer Employee to inactive employment status, which shall have the same effect
under this Agreement as a termination for Disability. "Disability" means a physical or mental illness, injury, or condition that
prevents Employee from performing substantially all of Employee's duties under this Agreement for at least 90 consecutive
calendar days or for at least 120 calendar days, whether or not consecutive, in any 365 calendar day period, or is likely to do so,
as certified by a physician selected by the Board or the Compensation Committee.
4
(iv)Termination Other Than for Non-Renewal, Cause, Disability or Death. Because Employee is
an at-will employee, the Company may terminate Employee's employment at any time for any reason, and without advance
notice.
(c)
By Employee.
(i) Non-Renewal of Agreement. Employee may terminate Employee's employment by providing a
timely Non-Renewal Notice, pursuant to Section l(a).
(ii) Resignation for Good Reason. Employee may resign Employee's employment at any time if
"Good Reason" exists. "Good Reason" shall mean that, without Employee's written consent, (i) there is a material diminution of
Employee's Base Salary (except in the event of a proportional reduction in salaries of Company's senior (non-executive)
employees generally); or (ii) there is a material diminution in Employee's authority, duties or responsibilities. Notwithstanding
the foregoing, no resignation shall be considered to have been for Good Reason unless Employee first gives the Company written
notice of Employee's intention to resign employment and specifies the grounds for such resignation with reasonable particularity
within ninety (90) days of the date such event occurs, the Company has not cured such event within thirty (30) days of its receipt
of such notice, and Employee actually resigns Employee's employment for such reason within thirty (30) days after the end of the
thirty (30) day cure period. The Company may cure at any time prior to Employee's termination, and Employee may not resign
for Good Reason on the noticed ground or grounds once the Company has so cured.
(iii)Resignation other than for Good Reason. Because Employee is an at-will employee, Employee
may resign from employment with the Company at any time for any reason, and without advance notice; provided, however, that
Employee covenants that he will provide at least 60 days' written notice of resignation.
(iv)Date of Non-Renewal / Resignation. If Employee provides a Non-Renewal Notice or advance
notice of resignation to the Company, the Company may terminate Employee's employment prior to the applicable expiration
date and/or noticed resignation date, and/or place Employee on an unpaid leave of absence during such time period. Such
termination and or leave of absence shall remain a nonrenewal or resignation by Employee for purposes of this Agreement.
4. Termination Payments.
(a)
Payments on Termination. Regardless of the reason Employee's employment terminates, and except as
expressly provided below in this Section 4, Employee shall receive only (i) any unpaid Base Salary, business expense
reimbursements, and accrued but unused vacation, through the Termination Date; and (ii) any other unpaid amounts due under
Company benefit plans, in accordance with the terms and conditions of such plans.
(b)
Other Potential Payments On Termination. For avoidance of doubt, if Employee is entitled to
amounts under Section 5(c), Employee shall not be entitled to any amounts under this Section 4(b).
5
(i) Non-Renewal by the Company. In the event that the Company terminates Employee's
employment by providing a timely Non-Renewal Notice, pursuant to Section l(a), and provided that Employee thereafter resigns
employment within thirty (30) days after such notice, with an effective date of the end of the Initial Employment Period or the
end of the Renewal Period, as applicable, Employee shall receive the following amounts (the "Base 3 Month Severance"),
subject to satisfaction of the Release Requirement.
1.
Contingent on Employee's compliance with Employee's obligations under Sections 6-
10, the Company shall continue to pay Employee his Base Salary as of the Termination Date, for a period of three (3) months
after the Termination Date, in accordance with the Company's normal payroll schedule in effect on the Termination Date;
2.
Contingent on Employee's compliance with Employee's obligations under Sections 6-
10, the Company shall pay Employee three (3) monthly payments, each equal to 1/12 of the amount obtained by multiplying
Employee's target Annual Bonus percentage as of the Termination Date times Employee's Base Salary as of the Termination
Date, on the last day of each of the three (3) months, commencing in the month following the Termination Date;
3.
Subject to Employee's timely election of COBRA, the Company shall pay Employee an
amount equal to the COBRA premiums, as of the Termination Date, for Employee and any dependents enrolled in the Company-
sponsored non-FSA group health plans, for the lesser of (a) three (3) months, or (b) until Employee first becomes eligible to
enroll in another employer-sponsored group health plan; and
4.
Notwithstanding anything to the contrary in the Equity Incentive Plan or any equity
award documentation, with respect to the Awards: (a) outstanding equity awards that would have vested within three (3) months
following the Termination Date, if any, shall vest and become fully exercisable, if applicable, as of the Termination Date, and (b)
Employee shall have three (3) months from the Termination Date to exercise vested options (unless they terminate sooner
according to their terms), at which point such options shall terminate if unexercised without compensation therefore (unless
already terminated). Any portion of the Awards that were not vested on the Termination Date, after giving effect to the
preceding sentence, shall terminate without compensation therefore on the Termination Date.
(ii) Termination for Cause. Employee shall receive only the amounts set forth in Section 4(a).
(iii)Disability. Employee shall receive the Base 3 Month Severance, subject to satisfaction of the
Release Requirement.
(iv)Death. Employee's estate ("Estate") shall receive the Base 3 Month Severance; provided that the
legal representative of the Estate satisfies the Release Requirement on behalf of the Estate.
(v) Termination other than for Non-Renewal, Cause, Disability, or Death. Employee shall receive
the following amounts (the "Alternate 3 Month Severance"), subject to satisfaction of the Release Requirement:
6
1.
Contingent on Employee's compliance with Employee's obligations under Sections 6-
10, the Company shall continue to pay Employee his/her Base Salary as of the Termination Date, for a period of three (3) months
after the Termination Date, in accordance with the Company's normal payroll schedule in effect on the Termination Date;
2.
Contingent on Employee's compliance with Employee's obligations under Sections 6-
10, the Company shall pay Employee three (3) monthly payments, each equal to 1/12 of the amount obtained by multiplying
Employee's target Annual Bonus percentage as of the Termination Date times Employee's Base Salary as of the Termination
Date, on the last day of each of the three (3) months, commencing in the month following the Termination Date;
3.
Subject to Employee's timely election of COBRA, the Company shall pay Employee an
amount equal to the COBRA premiums, as of the Termination Date, for Employee and any dependents enrolled in the Company-
sponsored non-FSA group health plans, for the lesser of (a) three (3) months, or (b) until Employee first becomes eligible to
enroll in another employer-sponsored group health plan; and
4.
Notwithstanding anything to the contrary in the Equity Incentive Plan or any equity
award documentation, with respect to the Awards: (a) outstanding equity awards that would have vested within three (3) months
following the Termination Date, if any, shall vest and become fully exercisable, if applicable, as of the Termination Date, and (b)
Employee shall have three (3) months from the Termination Date to exercise vested options (unless they terminate sooner
according to their terms), at which point such options shall terminate if unexercised without compensation therefore (unless
already terminated). Any portion of the Awards that were not vested on the Termination Date, after giving effect to the
preceding sentence, shall terminate without compensation therefore on the Termination Date.
(vi)Non-Renewal by Employee. Employee shall receive only the amounts set forth in Section 4(a).
(vii)Resignation for Good Reason. Employee shall receive the Alternate 3 Month Severance, subject
to satisfaction of the Release Requirement.
(viii)Resignation other than for Good Reason. Employee shall receive only the amounts set forth in
Section 4(a).
(c)
Amounts Owed to the Company. Any amounts payable to Employee under Section 4(b) shall first be
applied to repay any amounts Employee owes the Company to the maximum extent permitted by law.
(d)
Release Requirement. Employee will only receive the payments due to Employee under Section 4(b) if
Employee signs a general release (in the form furnished to Employee by the Company) within 45 days after the Termination
Date, Employee does not thereafter properly revoke the release, and that release has become effective and irrevocable in its
entirety by the 60th day following the Termination Date (the "Release Requirement").
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(e)
Payment Timeframe. No payments under Section 4(b) shall commence until the 60th day after the
Termination Date. Any amounts that would have been paid during such 60-day period shall be paid with the first payment.
5. Change in Control.
(a)
Definition. A "Change in Control" of the Company shall have the meaning assigned to such term in the
Equity Incentive Plan (as the Equity Incentive Plan may be amended or restated from time to time).
(b)
Equity Treatment On Change In Control. Upon a Change in Control during the Employment Period,
notwithstanding anything to the contrary in the Equity Incentive Plan or any associated equity award documentation, one hundred
percent (100%) of Employee's outstanding Awards that are unvested as of the Change in Control, if any, shall vest, and, if
applicable, become fully exercisable immediately prior to the Change in Control. To the extent any vested equity awards held by
Employee are not assumed and/or substituted in the Change in Control transaction on a basis that does not diminish the in-the-
money value of the award (if in the money at the time of the Change in Control) or the maximum exercise period, if applicable,
the Company shall provide to Employee cash on the Change in Control in exchange for the satisfaction and cancellation of such
outstanding equity awards (based on the fair market value of shares underlying such awards on the date of the Change in
Control).
(c)
Termination Payments In Connection With Change In Control. For avoidance of doubt, if Employee
is entitled to amounts under Section 4(b), Employee shall not be entitled to any amounts under this Section 5(c).
(i) Payments. If, within twenty four (24) months following a Change in Control, the Company
terminates Employee's employment other than pursuant to a Non-Renewal Notice, or for Cause, Disability, or Death, or
Employee resigns for Good Reason, then in lieu of any amounts otherwise due under Section 4(b), Employee shall be entitled to
the following payments, subject to the Release Requirement:
1.
Contingent on Employee's compliance with Employee's obligations under Sections 6-
10, the Company shall continue to pay Employee the Base Salary as of the Termination Date, for a period of twelve (12) months
after the Termination Date, in accordance with the Company's normal payroll schedule in effect on the Termination Date;
2.
Contingent on Employee's compliance with Employee's obligations under Sections 6-
10, the Company shall pay Employee twelve (12) monthly payments, each equal to 1/12 of the amount obtained by multiplying
Employee's target Annual Bonus percentage as of the Termination Date times Employee's Base Salary as of the Termination
Date, on the last day of each of the twelve (12) months, commencing in the month following the Termination Date;
3.
Subject to Employee's timely election of COBRA, the Company shall pay Employee an
amount equal to the COBRA premiums, as of the Termination Date, for Employee and any dependents enrolled in the Company-
sponsored non-FSA group health
8
plans, for the lesser of (a) twelve (12) months, or (b) until Employee first becomes eligible to enroll in another employer-
sponsored group health plan; and
4.
Notwithstanding anything to the contrary in the Equity Incentive Plan or any equity
award documentation, with respect to the Awards: (a) outstanding equity awards that would have vested within twelve (12)
months following the Termination Date, if any, shall vest and become fully exercisable, if applicable, as of the Termination Date,
and (b) Employee shall have twelve (12) months from the Termination Date to exercise vested options (unless they terminate
sooner according to their terms), at which point such options shall terminate if unexercised without compensation therefore
(unless already terminated). Any portion of the Awards that were not vested on the Termination Date, after giving effect to the
preceding sentence, shall terminate without compensation therefore on the Termination Date.
(ii) Amounts Owed to the Company. Any amounts payable to Employee under Section 5(c) shall first
be applied to repay any amounts Employee owes the Company to the maximum extent permitted by law.
(iii)Release Requirement. Employee will only receive the payments due to Employee under Section
5(c) if Employee satisfies the Release Requirement.
(iv)Payment Timeframe. No payments under Section 5(c) shall commence until the 60th day after the
Termination Date. Any amounts that would have been paid during such 60-day period shall be paid with the first payment
installment.
6. Protection of Confidential Information. Employee acknowledges that Employee currently possesses or will
acquire secret, confidential, or proprietary information or trade secrets concerning the products, operations, future plans, or
business methods of the Company Group ("Confidential Information"). That certain Employee Proprietary Information and
Inventions Assignment Agreement, dated as of even date herewith, by and between the Company and Employee (as may be
amended or restated from time to time) is incorporated into this Agreement by reference.
7. Non-Disparagement by Employee. Employee agrees not to criticize, denigrate, or otherwise disparage the
Company, any member of the Company Group, or any of their officers, directors, employees, service providers, distributors,
clients, products, processes, experiments, policies, practices, standards of business conduct, or areas or techniques of research.
However, nothing in this Section shall prohibit Employee from complying with any lawful subpoena or court order or taking any
other actions affirmatively authorized by law.
8. Efforts; Duty Not to Compete. Employee understands that his employment with the Company requires Employee's
undivided attention and effort. As a result, during Employee's employment, Employee will not, without the Company's express
written consent, engage in any other employment or business that (i) directly competes with the current or future business of the
Company Group; (ii) uses any Company Group information, equipment, supplies, facilities or materials; or (iii) otherwise
conflicts with the Company Group's business interest and causes a disruption of its operations.
9
9. Non-Solicitation of Employees/Consultants. During Employee's employment with the Company and for a period
of one (1) year thereafter, Employee will not directly or indirectly solicit employees or consultants of the Company Group to
terminate their relationship with the Company Group for Employee's own benefit or for the benefit of any other person or entity.
10.Non-Solicitation of Suppliers/Customers. During and after the termination of Employee's employment with the
Company, Employee will not directly or indirectly solicit or otherwise take away customers or suppliers of the Company Group
if, in so doing, Employee accesses, uses or discloses any trade secrets or proprietary or Confidential Information of the Company
Group. Employee acknowledges and agrees that the Company Group's lists of customers and suppliers, including their buying
and selling habits and special needs, whether created or obtained by, or disclosed to me during Employee's employment,
constitute Confidential Information of the Company Group.
11.Disputes
(a)
Governing Law and Venue. The validity, interpretation, construction, and performance of this
Agreement shall be governed by the laws of the State of California (excluding any that mandates the use of another jurisdiction's
laws). The enforcement of an arbitration award, or any other action in connection with this Agreement, only may be brought in
the courts of the County of San Diego, State of California or federal courts situated within the County of San Diego, State of
California.
(b)
Arbitration of Disputes. Except as otherwise provided in this Agreement, and excluding those disputes
that cannot be arbitrated as a matter of law (including, but not limited to, workers' compensation claims and any claim relating to
a benefit plan subject to ERISA), all disputes between the Company or any member of the Company Group electing to arbitrate
and Employee, are to be resolved by final and binding arbitration in San Diego County, California, pursuant to the employment
arbitration rules then in effect for JAMS (a copy of which will be provided to Employee by the Company, at Employee's request),
in accordance with the separate Mutual Agreement to Arbitrate Claims, dated as of even date herewith, by and between the
Company and Employee, which is incorporated into this Agreement by reference.
(c)
Legal Fees. To the extent permitted by applicable law, and except as otherwise provided herein, each
party is responsible for its own legal fees in connection with this Agreement and any enforcement thereof.
12.Taxes. The Company shall withhold taxes and other amounts from payments it makes pursuant to this Agreement as
it determines to be required by applicable law.
13.Excise Tax. Notwithstanding any other provisions in this Agreement, in the event that any payment or benefit
received or to be received by Employee (including any payment or benefit received in connection with a change in control of the
Company or the termination of Employee's employment, whether pursuant to the terms of this Agreement or any other plan,
program, arrangement or agreement) (all such payments and benefits, together, the "Total Payments") would be subject (in whole
or part), to any excise tax imposed under Section 4999 of
10
the Code, or any successor provision thereto (the "Excise Tax"), then, after taking into account any reduction in the Total
Payments provided by reason of Section 280G of the Code in such other plan, program, arrangement or agreement, the Company
will reduce the Total Payments to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax (but
in no event to less than zero); provided, however, that the Total Payments will only be reduced if (i) the net amount of such Total
Payments, as so reduced (and after subtracting the net amount of federal, state, municipal and local income taxes on such reduced
Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such
reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after
subtracting the net amount of federal, state, municipal and local income taxes on such Total Payments and the amount of Excise
Tax to which Employee would be subject in respect of such unreduced Total Payments and after taking into account the phase
out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).
(a)
In the case of a reduction in the Total Payments, the Total Payments will be reduced in the following
order (unless reduction in another order is required to avoid adverse consequences under Section 409A, in which case, reduction
will be in such other order): (i) payments that are payable in cash that are valued at full value under Treasury Regulation Section
l.280G-1, Q&A 24(a) will be reduced (if necessary, to zero), with amounts that are payable last reduced first; (ii) payments and
benefits due in respect of any equity valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a), with the
highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-l, Q&A 24) will next be
reduced; (iii) payments that are payable in cash that are valued at less than full value under Treasury Regulation Section 1.280G-
1, Q&A 24, with amounts that are payable last reduced first, will next be reduced; (iv) payments and benefits due in respect of
any equity valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24, with the highest values reduced
first (as such values are determined under Treasury Regulation Section l.280G-1, Q&A 24) will next be reduced; and (v) all other
non-cash benefits not otherwise described in clauses (ii) or (iv) will be next reduced pro-rata. Any reductions made pursuant to
each of clauses (i)-(v) above will be made in the following manner: first, a pro-rata reduction of cash payment and payments and
benefits due in respect of any equity not subject to Section 409A, and second, a pro-rata reduction of cash payments and
payments and benefits due in respect of any equity subject to Section 409A as deferred compensation.
(b)
For purposes of determining whether and the extent to which the Total Payments will be subject to the
Excise Tax: (i) no portion of the Total Payments the receipt or enjoyment of which Employee shall have waived at such time and
in such manner as not to constitute a "payment" within the meaning of Section 280G(b) of the Code will be taken into account;
(ii) no portion of the Total Payments will be taken into account which, in the opinion of tax counsel ("Tax Counsel") reasonably
acceptable to Employee and selected by the accounting firm which was, immediately prior to the change in control, the
Company's independent auditor (the "Auditor"), does not constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no
portion of such Total Payments will be taken into account which, in the opinion of Tax Counsel, constitutes reasonable
compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the "base
amount" (as set forth in Section 280G(b)(3) of the Code) that is allocable to such reasonable compensation; and
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(iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments will be determined by
the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
14.Section 409A.
(a)
To the extent applicable, it is intended that the Agreement comply with the provisions of Section 409A of
the Internal Revenue Code of 1986, as amended ("Section 409A"). The Agreement will be administered and interpreted in a
manner consistent with this intent, and any provision that would cause the Agreement to fail to satisfy Section 409A will have no
force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Section
409A). Notwithstanding anything contained herein to the contrary, Employee shall not be considered to have terminated
employment with the Company for purposes of the Agreement and no payments shall be due to Employee under the Agreement
which are payable upon Employee's termination of employment unless Employee would be considered to have incurred a
"separation from service" from the Company within the meaning of Section 409A and the phrase "termination of employment" or
similar phrases shall be construed to mean a "separation from service." To the extent required in order to avoid accelerated
taxation and/or tax penalties under Section 409A, during any time in which stock of the Company is publicly-traded on any
established securities market or otherwise (and pursuant to which Section 409A(a)(2)(B)(i) applies and not excepted under
applicable Treasury Regulations), amounts that would otherwise be payable and benefits that would otherwise be provided
pursuant to the Agreement during the sixmonth period immediately following Employee's termination of employment shall
instead be paid on the first business day after the date that is six months following Employee's termination of employment (or
upon Employee's death, if earlier). In addition, for purposes of the Agreement, each amount to be paid or benefit to be provided
to Employee pursuant to the Agreement shall be construed as a separate identified payment for purposes of Section 409A. With
respect to expenses eligible for reimbursement under the terms of the Agreement, (i) the amount of such expenses eligible for
reimbursement in any taxable year shall not affect the expenses eligible for reimbursement in another taxable year and (ii) any
reimbursements of such expenses shall be made no later than the end of the calendar year following the calendar year in which
the related expenses were incurred, except, in each case, to the extent that the right to reimbursement does not provide for a
"deferral of compensation" within the meaning of Section 409A.
(b)
The Company does not hereby or otherwise represent or warrant that any payments hereunder are or will
be in compliance with Section 409A, and Employee shall be responsible for obtaining Employee's own tax advice with regard to
such matters. In no event shall the Company have any liability related to any payment or benefit under this Agreement failing to
comply with, or be exempt from, the requirements of Section 409A of the Internal Revenue Code.
15.Clawback. Notwithstanding anything herein to the contrary, Employee may be required to forfeit or repay any or all
compensation received by Employee under this Agreement pursuant to the terms of any compensation recovery or clawback
requirement, or policy that may be adopted by or applicable to the Company, under the Sarbanes-Oxley Act of 2002 or the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010.
12
16.Other Terms.
(a)
Notice. Any notice, demand, claim or other communication under this Agreement will be in writing and
will be deemed to have been given (a) on delivery if delivered personally; (b) on the date on which delivery thereof is guaranteed
by the carrier if delivered by a national courier guaranteeing delivery within a fixed number of days of sending; or (c) on the date
of transmission thereof if delivery is confirmed, but, in each case, only if addressed to the Parties in the following manner at the
following addresses (or at the other address as a Party may specify by notice to the other): to the Company, to the attention of the
Chairperson of the Board and the CEO at its principal executive offices, and to Employee, at Employee's principal residence as
set forth in the employment records of the Company.
(b)
Amendment. Except as provided herein or as required to remain compliant with applicable law, no
provisions of this Agreement may be modified, waived, or discharged except by a written document signed on the Company's
behalf by the CEO, and by Employee in her personal capacity.
(c)
Waiver. A waiver of any conditions or provisions of this Agreement or any breach by any party hereto in
a given instance shall not be deemed a waiver of such conditions or provisions at any other time.
(d)
Assignment. This Agreement shall be binding upon, and shall inure to the benefit of, Employee the
Estate, but Employee may not assign or pledge this Agreement or any rights arising under it, except to the extent permitted under
the terms of the Company plans in which Employee participates. Without Employee's consent, the Company may assign this
Agreement to any successor-in-interest to the Company (a "Successor") or Affiliate that agrees in writing to be bound by this
Agreement, after which any reference to the "Company" in this Agreement shall be deemed to be a reference to such Successor
or Affiliate, and the Company thereafter shall have no further responsibility or liability under this Agreement of any kind.
(e)
Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
(f)
Headings. The headings set forth herein are included solely for the purpose of identification and shall not
be used for the purpose of construing the meaning of the provisions of this Agreement.
(g)
Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original but all of which together shall constitute the same instrument.
(h)
Resignation from All Positions. Upon the termination of Employee's employment with the Company
for any reason, unless otherwise requested by the Company, Employee shall resign, as of the date of such termination, from all
positions he then holds as an officer, director, employee and member of the Board (and any committee thereof) of the Company
and its Affiliates. Employee agrees to execute and deliver to the Company such writings as are required to effectuate the
foregoing.
13
(i)
Entire Agreement. All oral or written agreements or representations, express or implied, with respect to
the subject matter of this Agreement are set forth in this Agreement. However, this Agreement does not override other written
agreements Employee has executed relating to specific aspects of Employee's employment, such as conflicts of interest.
(j)
Former Employers. Employee is not subject to any employment, confidentiality, or other agreement or
restriction that would prevent Employee from fully satisfying Employee's duties under this Agreement or that would be violated
if Employee did so. Without the Company's prior written approval, Employee covenants that Employee will not: (i) disclose
proprietary information belonging to a former employer or other entity without its written permission; (ii) contact any former
employer's customers or employees to solicit their business or employment on behalf of the Company, in either case if such
contact or solicitation would violate any agreement between Employee and any prior employer of Employee; or (iii) distribute
announcements about or otherwise publicize Employee's employment with the Company. Employee will indemnify and hold the
Company harmless from any liabilities or costs, including attorneys' fees it may incur because Employee is alleged to have
broken any of these promises or improperly revealed or used such proprietary information or to have threatened to do so, or if a
former employer challenges Employee's entering into this Agreement or rendering services pursuant to it.
(k)
Survivability. The provisions of Sections 4-16 shall survive the termination or expiration of this
Agreement.
(l)
Communication with Government Agencies. Nothing in this Agreement precludes Employee from
filing an administrative charge or otherwise communicating with any federal, state, or local government office, official, or
agency.
(m)
Section References. Unless otherwise provided, references to a "Section" or to "Sections" in this
Agreement shall refer to the Section or Sections, respectively, of this Agreement.
(n)
Right to Negotiation. Employee acknowledges that Employee has been given the opportunity to consult
with legal counsel or any other advisor of Employee's own choosing regarding this Agreement. Employee understands and
agrees that any attorney retained by the Company or any member of management who has discussed any term or condition of this
Agreement with Employee or Employee's advisor is only acting on behalf of the Company and not on Employee's behalf.
Employee hereby acknowledges that Employee has been given the opportunity to participate in the negotiation of the terms of
this Agreement.
(o)
Employee's Understanding of Agreement. Employee acknowledges and confirms that Employee has
read this Agreement and fully understands its terms and contents. Employee further acknowledges that all understandings and
agreements between the Company and Employee relating to the subjects covered in this Agreement are contained in it and that
Employee has entered into this Agreement voluntarily and not in reliance on any promises or representations by the Company
other than those contained in this Agreement itself. Employee understands that by signing this Agreement Employee is giving up
Employee's right to a jury trial.
14
Date: December 21, 2016
VIKING THERAPEUTICS, INC.
By: /s/ Brian Lian, Ph.D.
Name: Brian Lian, Ph.D.
Title: President and Chief Executive Officer
Date: December 21, 2016
/s/ Greg Zante
Greg Zante
Viking Therapeutics, Inc.
12340 El Camino Real, Suite 250
San Diego, CA 92130
858-704-4660
December 15, 2020
Greg Zante
Re: Promotion to Chief Financial Officer
Dear Greg,
It is my pleasure to inform you that you have been promoted to Chief Financial Officer, effective January 4, 2021. This is in
recognition of your work contributing to the management of our financial activities, our external interactions, as well as your
contributions to the company’s overall strategy, direction and progress.
As a part of your promotion, your annual salary will be increased as of January 4, 2021. Your new annual salary will be
$400,000, paid according to the company’s current compensation schedule. The change in salary will be reflected in your
January 15 paycheck. In addition, your new target bonus level will increase to 40%, effective beginning with the 2021
compensation cycle.
You will also receive an award of 130,000 options to purchase Viking common stock. The option award will vest at a rate of
33% annually, beginning January 4, 2022. The strike price of the option will be based upon the closing price of Viking’s
common stock on January 4, 2021. In addition, you will receive an award of 30,000 Restricted Stock Units (RSUs). The RSUs
will vest according to the same schedule as the option award.
Please note that as an officer of the company, your salary, equity holdings, and certain other personal information will be
disclosed in certain of our regulatory filings. Further, your transactions in Viking securities will be required to conform to
Exchange Act Section 16 of the Securities and Exchange Commission. As such, any purchases or sales of Viking securities must
be publicly disclosed, in addition to conforming to the Company’s existing insider trading policy. There can be great external
sensitivity to these disclosures.
Congratulations and thanks very much for your work. I look forward working together in the years ahead.
/s/ Brian Lian
Brian
Exhibit 10.12
VIKING THERAPEUTICS, INC.
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
Each non-employee member of the board of directors (the “Board”) of Viking Therapeutics, Inc. (the “Company”) shall
be eligible to receive cash and equity compensation for his or her service on the Board as set forth in this Non-Employee Director
Compensation Policy (this “Policy”). The cash and equity compensation described in this Policy shall be paid or be made, as
applicable, automatically and without further action of the Board (or any committee thereof), to each member of the Board who is
not an employee of the Company or any parent or subsidiary of the Company (each, a “Non-Employee Director”) who is eligible
to receive such cash or equity compensation, unless such Non-Employee Director declines the receipt of such cash or equity
compensation by advance written notice to the Company. This Policy shall remain in effect until it is revised or rescinded by
further action of the Board or the Compensation Committee of the Board (the “Compensation Committee”). This Policy and the
compensation to be provided hereunder may be amended, modified or terminated by the Board or the Compensation Committee
at any time in its sole discretion. The terms and conditions of this Policy shall supersede any prior cash and/or equity
compensation arrangements between the Company and any of its Non-Employee Directors with respect to such Non-Employee
Director’s service on (or on behalf of) the Board or any committee thereof. No Non-Employee Director shall have any rights
hereunder, except with respect to the cash compensation and stock options granted pursuant to this Policy. Non-Employee
Directors may be eligible to receive discretionary awards granted outside this Policy.
1.
Cash Compensation.
(a)Annual Cash Retainers. Each Non-Employee Director shall be eligible to receive an annual cash retainer of $50,000
for service on the Board.
(b)Additional Annual Cash Retainers. In addition, a Non-Employee Director shall receive the following annual cash
retainers, if applicable:
(i)
Chairperson of the Board. A Non-Employee Director serving as Chairperson of the Board shall receive
an additional annual cash retainer of $35,000 for such service.
(ii)
Audit Committee. A Non-Employee Director serving as Chairperson of the Audit Committee of the
Board (the “Audit Committee”) shall receive an additional annual cash retainer of $20,000 for such service. A Non-Employee
Director serving as a member of the Audit Committee (other than the Chairperson) shall receive an additional annual cash
retainer of $10,000 for such service.
(iii)
Compensation Committee. A Non-Employee Director serving as Chairperson of the Compensation
Committee shall receive an additional annual cash retainer of $15,000 for such service. A Non-Employee Director serving as a
member of the Compensation Committee (other than the Chairperson) shall receive an additional annual cash retainer of $7,500
for such service.
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(iv)
Nominating and Corporate Governance Committee. A Non-Employee Director serving as Chairperson of
the Nominating and Corporate Governance Committee of the Board (the “Nominating and Corporate Governance Committee”)
shall receive an additional annual cash retainer of $10,000 for such service. A Non-Employee Director serving as a member of
the Nominating and Corporate Governance Committee (other than the Chairperson) shall receive an additional annual cash
retainer of $5,000 for such service.
(c)Payment of Retainers. The annual cash retainers described in Sections 1(a) and 1(b) shall be earned on a quarterly
basis based on a calendar quarter and shall be paid by the Company in arrears not later than the 30th day following the end of
each calendar quarter. In the event a Non-Employee Director does not serve as a Non-Employee Director, or in the applicable
positions described in Section 1(b), for an entire calendar quarter, the retainer paid to such Non-Employee Director shall be
prorated for the portion of such calendar quarter actually served as a Non-Employee Director, or in such position, as applicable.
For avoidance of doubt, if a Non-Employee Director serves on the Board or a committee thereof for less than a full calendar
quarter, the annual cash retainers described in Sections 1(a) and 1(b) shall be prorated for the portion of the calendar quarter in
which the Non-Employee Director began serving on the Board or a committee thereof, as applicable, such that each Non-
Employee Director shall receive annual cash retainers under this Policy only for the periods during which such Non-Employee
Director actually serves on the Board or a committee thereof, as applicable. There are no per meeting attendance fees for
attending meetings of the Board or any committee thereof.
(d)Revisions. Each of the Board and the Compensation Committee, in its discretion, may change and otherwise revise
the terms of the cash compensation granted under this Policy, including, without limitation, the amount of cash compensation to
be paid, on or after the date the Board or the Compensation Committee determines to make any such change or revision.
2.
Equity Compensation. Non-Employee Directors shall be granted the equity awards described below. The awards described
below shall be granted under and shall be subject to the terms and provisions of the Company’s 2014 Equity Incentive Plan, as
may be amended or restated from time to time, or any other applicable Company equity incentive plan then-maintained by the
Company (as applicable, the “Equity Plan”) and shall be granted subject to the execution and delivery of award agreements,
including attached exhibits, in substantially the forms previously approved by the Board or the Compensation Committee, setting
forth the vesting schedule applicable to such awards and such other terms as may be required by the Equity Plan (as may be
amended or restated from time to time, collectively, the “Additional Terms”). All applicable terms of the Equity Plan apply to
this Policy as if fully set forth herein, and all stock options granted pursuant to this Policy are subject in all respects to the terms
of the Equity Plan and the Additional Terms.
(a)Annual Awards. On the first business day of each calendar year, each Non-Employee Director shall be automatically,
and without further action of the Board or the Compensation Committee, granted a non-statutory stock option to purchase 18,800
shares of common stock of the Company (the “Common Stock”) (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like). The awards described in this Section 2(a) shall be referred to as “Annual Awards.”
3
(b)Equity Awards for New Non-Employee Directors. Upon the date an individual first becomes appointed or elected as a
Non-Employee Director, such individual shall be automatically, and without further action of the Board or the Compensation
Committee, be granted: (i) a non-statutory stock option to purchase 37,600 shares of Common Stock (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like) (a “New Director Award”); and (ii) a non-statutory stock option to
purchase 18,800 shares of Common Stock (as adjusted for any stock splits, stock dividends and the like), reduced pro rata for
each day prior to the date of grant (out of 365 days) that has elapsed since January 1st of the year in which the individual first
becomes a Non-Employee Director, rounded down to the nearest whole share (a “Prorated Initial Annual Award”).
(c)Terms of Awards Granted to Non-Employee Directors.
(i)
Purchase Price. The per share exercise price of each option granted to a Non-Employee Director shall
equal the Fair Market Value (as defined in the Equity Plan) of a share of Common Stock on the date the option is granted.
(ii)
Vesting. Each Annual Award and each Prorated Initial Annual Award shall vest and become exercisable
on the one-year anniversary of the date of grant, in each case subject to the Non-Employee Director continuing in service on the
Board through and including such vesting date. One-third of the shares subject to each New Director Award shall vest and
become exercisable on each one-year anniversary of the date of grant, in each case subject to the Non-Employee Director
continuing in service on the Board through and including such vesting date. No portion of an Annual Award, New Director
Award or Prorated Initial Annual Award that is unvested or unexercisable at the time of a Non-Employee Director’s termination
of service on the Board shall become vested or exercisable thereafter. All of a Non-Employee Director’s outstanding option
grants made on April 28, 2014, if any, and all Annual Awards, New Director Awards and Prorated Initial Annual Awards shall
vest in full as of immediately prior to, and contingent upon, the occurrence of a Change in Control (as defined in the Equity
Plan).
(iii)
Term. The term of each stock option granted to a Non-Employee Director shall be ten years from the date
the option is granted. Upon a Non-Employee Director’s termination of service on the Board for any reason, his or her then-
vested stock options to purchase shares of Common Stock granted pursuant to this Policy shall remain exercisable for 30 days
following the termination of his or her service on the Board (or such longer period as the Board may determine in its discretion
on or after the date of grant of such stock options).
(iv)
Option Award Agreements. Notwithstanding anything to the contrary in this Policy, each Annual
Award, New Director Award and Prorated Initial Annual Award shall be subject to the terms and conditions of the Equity Plan
and the Additional Terms.
(d)Revisions. Each of the Board and the Compensation Committee, in its discretion, may change and otherwise revise
the terms of awards granted under this Policy, including, without limitation, the types of awards, the number of shares, the
exercise prices, and vesting schedules, for awards granted on or after the date the Board or the Compensation Committee
determines to make any such change or revision.
4
3.
Expense Reimbursement. Upon presentation of documentation of such expenses reasonably satisfactory to the Company,
each Non-Employee Director shall be reimbursed for his or her reasonable out-of-pocket business expenses incurred in
connection with attending meetings of the Board and its committees or in connection with other business related to service on the
Board or its committees. Each Non-Employee Director also shall be reimbursed for his or her reasonable out-of-pocket business
expenses authorized by the Board or one of its committees that are incurred in connection with attendance at meetings with the
Company’s management. All reimbursements under this Section 3 shall be made in accordance with the Company’s applicable
expense reimbursement policies and procedures as in effect from time to time.
4.
Section 409A. In no event shall cash compensation payable pursuant to this Policy be paid later than March 15th of the
calendar year following the calendar year in which the applicable quarter ends (or if the individual did not serve as a Non-
Employee Director for the full quarter as a result of termination of service, then the March 15th of the calendar year following the
calendar year in which the Non-Employee Director’s service terminated with the Company), in compliance with the “short-term
deferral” exception to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”). In no event shall an
expense reimbursement be made later than the end of the taxable year of the Non-Employee Director immediately following the
taxable year in which the expense was incurred. The amount of expenses eligible for reimbursement during a Non-Employee
Director’s taxable year will not affect the expenses eligible for reimbursement in any other taxable year. Reimbursement rights
are not subject to liquidation or exchange for any other benefit. This Policy is intended to comply with the requirements of
Section 409A so that none of the compensation to be provided hereunder shall be subject to the additional tax imposed under
Section 409A, and any ambiguities herein shall be interpreted to so exempt or comply. No Non-Employee Director shall have
any legal right to receive payment of any amount or benefit that otherwise would fail to comply with the requirements of Section
409A. Notwithstanding the foregoing, all Non-Employee Directors shall be solely responsible for any tax or other obligations
they incur as a result of the cash payments and equity awards received pursuant to this Policy.
Last amended effective January 1, 2025.
Exhibit 10.16
1
***Certain identified information has been excluded from the exhibit because it both (i) is not material and (ii) is the type that the
company treats as private or confidential. Such omitted information is indicated by brackets (“[...***...]”) in this exhibit.***
VIKING THERAPEUTICS, INC.
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (the “Agreement”) is made as of February 20, 2014 by and between Viking
Therapeutics, Inc., a Delaware corporation (including any successor to its business and/or assets that assumes this Agreement or
which becomes bound by the terms of this Agreement by operation of law, the “Company”), and Brian Lian (“Purchaser”).
1. Issuance of Stock. Subject to the terms and conditions of this Agreement, on the Purchase Date (as defined under
Section 2 hereof) the Company will issue to Purchaser, and Purchaser will acquire from the Company, 1,000,000 shares of the
Company’s common stock, par value $0.00001 per share (the “Issued Shares”). The Issued Shares have a deemed value of $0.01
per share (the “Price”). The term “Shares” refers to the Issued Shares and all securities received in replacement of or in
connection with the Shares pursuant to stock dividends or splits, all securities received in replacement of the Issued Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other properties
to which Purchaser is entitled by reason of Purchaser’s ownership of the Issued Shares.
2. Issuance. The issuance of the Issued Shares under this Agreement shall occur at the principal office of the Company,
or at such other place as shall be designated by the Company, simultaneously with the execution and delivery of this Agreement
by the parties or on such other date as the Company and Purchaser shall agree (the “Purchase Date”). On the Purchase Date, the
Company will deliver to Purchaser a copy of the certificate representing the Issued Shares to be acquired by Purchaser (which
shall be issued in Purchaser’s name) that are deemed to be Vesting Shares upon issuance in accordance with Section 4(c), in each
case in consideration for services rendered by Purchaser to the Company. In the event the Purchaser is married as of the date of
this Agreement, Purchaser shall deliver to the Company on the date of this Agreement an Acknowledgement and Agreement of
Spouse, in the form of Exhibit B attached to this Agreement (the “Spousal Consent”), duly completed and executed by
Purchaser’s spouse. In the event Purchaser marries or remarries after the date of this Agreement, Purchaser shall deliver to the
Company, within fifteen (15) business days following the date of such marriage or remarriage, a Spousal Consent duly completed
and executed by Purchaser’s spouse.
3. Limitations on Transfer. Holder shall not assign, hypothecate, donate, encumber or dispose of any interest in Shares
that constitute Vesting Shares (as defined under Section 4(c) hereof) and Holder shall not assign, hypothecate, donate, encumber
or dispose of any interest in any other securities of the Company except in compliance with the provisions of this Agreement, the
Company’s Bylaws (as may be amended or restated from time to time) and applicable securities laws.
2
(a)
Right of First Refusal. Before any Shares held by Purchaser or any permitted transferee of Purchaser
(either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and
conditions set forth in this Section 3(a) (the “Right of First Refusal”).
(i) Notice of Proposed Transfer. The Holder shall deliver to the Company a written notice (the
“Notice”) stating: (A) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (B) the name of each proposed
purchaser or other transferee of such Shares (each a “Proposed Transferee”); (C) the number of Shares to be transferred to each
Proposed Transferee; and (D) the terms and conditions of each proposed sale or transfer. The Holder shall offer the Shares at the
same price (the “Offered Price”) and upon the same terms (or terms as similar as reasonably possible) to the Company or its
assignee(s).
(ii) Exercise of Right of First Refusal. At any time within 30 days after receipt of the Notice, the
Company and/or its assignee(s) may, by giving written notice to the Holder (the “Election Notice”), elect to purchase all, but not
less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the Purchase Price
determined in accordance with subsection (iii) below.
(iii)Price. The purchase price (the “Purchase Price”) for the Shares purchased by the Company or its
assignee(s) under this Section 3(a) shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash
equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company (the “Board”)
(excluding the Holder and its affiliates, if applicable) in good faith.
(iv)Payment. Payment of the Purchase Price shall be made, at the option of the Company or its
assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness or by any combination thereof
on or before the later of (i) 30 days after the Company’s receipt of the Notice and (ii) 15 days after the Company delivers the
Election Notice to the Holder.
(v) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given
Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section 3(a), then the Holder
may sell or otherwise transfer such Shares to each Proposed Transferee at the Offered Price or at a higher price, provided that (i)
such sale or other transfer is consummated within 60 days after the date the Notice is delivered to the Company, (ii) any such sale
or other transfer is effected in accordance with any applicable securities laws and (iii) each Proposed Transferee agrees in a
writing delivered to the Company that the provisions of this Section 3 shall continue to apply to the Shares purchased by or
otherwise transferred to such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed
Transferee within such period, or if the Holder proposes to change the price or other terms to make them more favorable to the
Proposed Transferee (in any respect), a new Notice shall be given to the Company, and the Company and/or its assignees shall
again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
3
(vi)Exception for Certain Family Transfers. Notwithstanding anything contained in this Section 3(a)
to the contrary, the transfer of any or all of the Shares during Purchaser’s lifetime or on Purchaser’s death by will or intestacy to
Purchaser’s Immediate Family or a trust for the benefit of Purchaser or Purchaser’s Immediate Family shall be exempt from the
provisions of this Section 3(a). “Immediate Family” as used herein shall mean any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, uncle, aunt, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, or any person sharing Purchaser’s household
(other than a tenant or an employee). In such case, the transferee or other recipient shall receive and hold the Shares so
transferred subject to the provisions of this Section 3, and there shall be no further transfer of such Shares except in accordance
with the terms of this Section 3. Notwithstanding anything in this Agreement, without the prior written consent of the Company,
which may be withheld in the sole discretion of the Company, no more than three (3) transfers may be made pursuant to this
Section 3(a)(vi), including all transfers by the Holder and all transfers by any transferee.
(b)
Company’s Right to Purchase upon Involuntary Transfer. In the event, at any time after the date of this
Agreement, of any transfer by operation of law or other involuntary transfer (including divorce or death, but excluding in the
event of death a transfer to Purchaser’s Immediate Family as set forth in Section 3(a)(vi) hereof) of all or a portion of the Shares
by the record holder thereof (each, an “Involuntary Transfer”), the Company shall have the right to purchase all of the Shares
transferred at the greater of (i) the Price paid by Purchaser pursuant to this Agreement and (ii) the fair market value of the Shares
on the date of transfer (as determined in good faith by the Board) (excluding the Holder and its affiliates, if applicable). Upon
such a transfer, the person acquiring the Shares shall promptly notify the Secretary of the Company of such transfer. The
Company shall have the right to purchase such Shares for a period of 30 days following receipt by the Company of written notice
by the person acquiring the Shares pursuant to such Involuntary Transfer.
(c)
Assignment. The right of the Company to purchase any part of the Shares, pursuant to the Right of First
Refusal or as a result of an Involuntary Transfer, may be assigned in whole or in part by the Company to any holder or holders of
capital stock of the Company or other person(s) or organization(s), in the Company’s sole discretion.
(d)
Restrictions Binding on Transferees. All transferees of Shares or any interest therein will receive and
hold such Shares or interest subject to the provisions of this Agreement. Any sale or transfer of the Shares shall be void unless the
provisions of this Agreement are satisfied.
(e)
Termination of Rights. The Right of First Refusal and the Company’s right to repurchase the Shares in
the event of an Involuntary Transfer pursuant to Section 3(b) hereof shall terminate upon the first sale of common stock of the
Company (the “Common Stock”) to the general public pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”).
4
(f)
Lock-up Agreement. In connection with the initial public offering of any capital stock of the Company
and upon request of the Company or the underwriters managing such offering of the Company’s capital stock, Holder hereby
agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the
Company (other than those included in the registration, if any) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180 days) from the closing of such offering, as may be
requested by the Company or such managing underwriters, and to execute an agreement reflecting the foregoing as may be
requested by the managing underwriters prior to the Company’s initial public offering. In addition, upon request of the Company
or the underwriters managing a public offering of the Company’s securities (other than the initial public offering), Holder hereby
agrees to be bound by similar restrictions, and to sign a similar agreement, in connection with no more than one additional
registration statement filed within 12 months after the closing date of the initial public offering, provided that the duration of the
lock-up period with respect to such additional registration shall not exceed 90 days from the closing of such additional offering.
Notwithstanding the foregoing, the Company shall use its commercially reasonable efforts to cause any such agreement to
contain a phased release from the lock-up period contained in the agreement based on the Company’s achievement of certain
performance milestones. Any waiver or termination of the restrictions of any or all of such agreements by the Company or the
managing underwriters shall apply to all securityholders subject to such agreements pro rata based on the number of shares
subject to such agreements. The underwriters of the Company’s stock are intended third-party beneficiaries of this Section 3(f)
and shall have the right, power and authority to enforce the provisions of this Section 3(f) as though they were parties to this
Agreement.
4. Repurchase Option.
(a)
In the event Purchaser’s Continuous Service Status (as defined in Section 9(d) hereof) is terminated, for
any reason or no reason, including, without limitation, by reason of Purchaser’s death or disability (as defined under Section
22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), by the Company for any reason or by Purchaser for
any reason, the Company shall upon the date of such termination (the “Termination Date”) have an irrevocable, exclusive option
(the “Repurchase Option”) for a period of three months from such Termination Date to repurchase all or any portion of the
Vesting Shares (as defined under Section 4(c) hereof) held by each Holder as of the Termination Date that have not yet been
released from the Repurchase Option, at the price equal to $0.01 per Vesting Share (adjusted for any stock splits, stock dividends
and the like) (the “Termination Price”). Notwithstanding the provisions of this Section 4, Holder hereby acknowledges that the
Company has no obligation, either now or in the future, to repurchase any of the Vesting Shares at any time. Further, Holder
acknowledges and understands that, in the event that the Company elects to exercise its Repurchase Option, the Termination
Price may be less than the value of the Vesting Shares being repurchased by the Company, and that Holder bears any risk
associated with the potential loss in value.
(b)
The Repurchase Option shall be exercised by the Company by written notice at any time within three
months following the Termination Date to Holder or, in the event of Purchaser’s death, Purchaser’s executor, and, at the
Company’s option: (i) by delivery to Purchaser or Purchaser’s executor of a check in the amount of the Termination Price for the
Vesting Shares being repurchased; (ii) by cancellation by the Company of indebtedness equal to
5
the Termination Price for the Vesting Shares being repurchased; or (iii) by a combination of (i) and (ii) so that the combined
payment and cancellation of indebtedness equals such Termination Price. Upon delivery of such notice and payment of the
Termination Price in any of the ways described above, the Company shall become the legal and beneficial owner of the Vesting
Shares being repurchased and all rights and interest therein or related thereto, and the Company shall have the right to transfer to
its own name the number of Vesting Shares being repurchased by the Company, without further action by any Holder.
(c)
On the date hereof, none of the Shares shall be vested, and all 1,000,000 of the Shares (the “Vesting
Shares”) shall be subject to the Repurchase Option. Of the Vesting Shares, 500,000 Shares shall vest on the Award Date I and
500,000 Shares shall vest on the Award Date II. For purposes of this Agreement, “Award Date I” shall mean the achievement of
the milestone set forth on Schedule I attached hereto. The decision by the Company for purposes of the Award Date I will be
signified by the initiation of dosing in clinical studies employing the new formulation in patients with type 2 diabetes or other
metabolic disorders involving uncontrolled plasma glucose levels. For purposes of this Agreement, “Award Date II” shall mean
the decision by the Company to file any non-provisional patent on the New Formulation. Award Date I and Award Date II can
occur in any order and neither is contingent upon the other. Notwithstanding the foregoing, in each case such scheduled release
from the Repurchase Option shall immediately cease as of the Termination Date. Notwithstanding the foregoing, if a Triggering
Event (as defined in Section 9(i) hereof) occurs, 100% of the total number of Vesting Shares held by Holder that have not yet
been released from the Repurchase Option shall be released from the Repurchase Option as of immediately prior to, and
contingent upon, the occurrence of such Triggering Event; provided that in the event of a Triggering Event under Section 9(i)(i)
or 9(i)(ii), Purchaser’s Continuous Service Status has not terminated prior to such Triggering Event. Notwithstanding the
foregoing, or anything else to the contrary set forth in this Agreement, the parties acknowledge and agree that the Board
(excluding the Holder and its affiliates, if applicable) shall at all times have the full right and authority (but without any
corresponding obligation) to provide for accelerated vesting of the Vesting Shares on any terms the Board (excluding the Holder
and its affiliates, if applicable) deems appropriate.
5. Escrow of Vesting Shares.
(a)
As security for the faithful performance of this Agreement, Purchaser agrees to deliver the certificate(s)
evidencing the Vesting Shares, together with three stock assignments, each in the form of Exhibit C attached to this Agreement
(the “Stock Assignment Forms”) with respect to each such stock certificate, executed by Purchaser (with the date and number of
Vesting Shares left blank), to the Company’s Corporate Secretary or its designee (the “Escrow Agent”) prior to the issuance of
the Shares to Purchaser. The stock certificate(s) representing the Vesting Shares, together with the executed Stock Assignment
Forms, shall be held by the Escrow Agent pursuant to the Joint Escrow Instructions of the Company and Purchaser set forth in
Exhibit D attached to this Agreement, which instructions are incorporated into this Agreement by this reference, and which
instructions shall also be delivered to the Escrow Agent after the date hereof.
(b)
Subject to the terms hereof, Holder shall have all the rights of a holder of shares of Common Stock with
respect to such Vesting Shares while they are held in escrow,
6
including, without limitation, the right to vote the Vesting Shares; provided, however, that any Vesting Shares held in escrow
shall not be transferrable without the approval of the Board (excluding the Holder and its affiliates, if applicable). If, from time to
time during the term of the Repurchase Option, there is (i) any stock dividend, stock split or other change in the Shares, or (ii)
any dividend of cash or other property on the Shares, then any and all new, substituted or additional securities or cash or other
consideration to which Holder is entitled by reason of Holder’s ownership of the Shares shall immediately and automatically
become subject to the escrow, deposited with the Escrow Agent and included thereafter as “Vesting Shares” for purposes of this
Agreement and the Repurchase Option.
6. Investment and Taxation Representations. In connection with the purchase of the Shares, Purchaser represents to
the Company the following:
(a)
Purchaser understands that the Company’s sale of the Shares to Purchaser has not been registered under
the Securities Act because the Company believes, relying in part on Purchaser’s representations in this document, that an
exemption from such registration requirement is available for such sale. Purchaser understands that the availability of this
exemption depends upon the representations Purchaser is making to the Company in this document being true and correct.
(b)
Purchaser is purchasing the Shares solely for investment purposes, and not for further distribution.
Purchaser’s entire legal and beneficial ownership interest in the Shares is being purchased and shall be held solely for Purchaser’s
account, except to the extent Purchaser intend to hold the Shares jointly with Purchaser’s spouse. Purchaser is not a party to, and
does not presently intend to enter into, any contract or other arrangement with any other person or entity involving the resale,
transfer, grant of participation with respect to or other distribution of any of the Shares. Purchaser’s investment intent is not
limited to Purchaser’s present intention to hold the Shares for the minimum capital gains period specified under any applicable
tax law, for a deferred sale, for a specified increase or decrease in the market price of the Shares, or for any other fixed period in
the future.
(c)
Purchaser represents that Purchaser is an “accredited investor” as that term is defined in Rule 501 of
Regulation D promulgated under the Securities Act.
(d)
Purchaser can properly evaluate the merits and risks of an investment in the Shares and can protect
Purchaser’s own interests in this regard, whether by reason of Purchaser’s own business and financial expertise, the business and
financial expertise of certain professional advisors unaffiliated with the Company with whom Purchaser has consulted, or
Purchaser’s preexisting business or personal relationship with the Company or any of its officers, directors or controlling persons.
(e)
Purchaser is sufficiently aware of the Company’s business affairs and financial condition to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser have had opportunity to discuss the plans, operations and
financial condition of the Company with its officers, directors or controlling persons, and have received all information Purchaser
deems appropriate for assessing the risk of an investment in the shares.
7
(f)
Purchaser realizes that the purchase of the Shares involves a high degree of risk, and that the Company’s
future prospects are uncertain. Purchaser is able to hold the Shares indefinitely if required, and Purchaser is able to bear the loss
of Purchaser’s entire investment in the Shares.
(g)
Purchaser knows that the Shares are restricted securities. Purchaser understands that the Shares are
“restricted securities” in that the Company’s sale of the Shares to the Purchaser has not been registered under the Securities Act
in reliance upon an exemption for non-public offerings. In this regard, Purchaser also understands and agrees that:
(i) Purchaser must hold the shares indefinitely, unless any subsequent proposed resale by Purchaser is
registered under the Securities Act, or unless an exemption from registration is otherwise available (such as Rule 144 under the
Securities Act (“Rule 144”));
(ii) the Company is under no obligation to register any subsequent proposed resale of the Shares by
Purchaser; and
(iii)the certificate(s) evidencing the Shares will be imprinted with a legend which prohibits the transfer
of the Shares unless such transfer is registered or such registration is not required in the opinion of counsel for the Company.
(h)
Purchaser is familiar with Rule 144, which in some circumstances permits limited public resales of
“restricted securities” like the shares acquired from an issuer in a non-public offering. Purchaser understands that Purchaser’s
ability to sell the Shares under Rule 144 in the future is uncertain, and will depend upon, among other things: (i) the availability
of certain current public information about the Company; (ii) the resale occurring more than one year after Purchaser’s purchase
and full payment (within the meaning of Rule 144) for the Shares; and (iii) if Purchaser is an affiliate of the Company, or a non-
affiliate who has held the Shares less than two years after Purchaser’s purchase and full payment: (A) the sale being made
through a broker in an unsolicited “broker’s transaction” or in transactions directly with a market maker, as said term is defined
under the Securities Exchange Act of 1934, as amended, (B) the amount of Shares being sold during any three-month period not
exceeding the specified limitations stated in Rule 144, and (C) timely filing of a notice of proposed sale on Form 144, if
applicable.
(i)
Purchaser understands that the requirements of Rule 144 may never be met, and that the Shares may never
be saleable. Purchaser further understands that at the time Purchaser wishes to sell the Shares, there may be no public market for
the Company’s stock upon which to make such a sale, or the current public information requirements of Rule 144 may not be
satisfied, either of which would preclude Purchaser from selling the Shares under Rule 144 even if the one-year minimum
holding period had been satisfied.
(j)
Purchaser understands that in the event Rule 144 is not available to Purchaser, any future proposed sale of
any of the Shares by Purchaser will not be possible without prior registration under the Securities Act, compliance with some
other registration exemption (which may or may not be available), or each of the following: (i) Purchaser’s written notice to the
Company containing detailed information regarding the proposed sale, (ii) Purchaser’s providing an opinion of Purchaser’s
counsel to the effect that such sale will not require registration,
8
and (iii) the Company notifying Purchaser in writing that its counsel concurs in such opinion. Purchaser understands that neither
the Company nor its counsel is obligated to provide Purchaser with any such opinion. Purchaser understands that although Rule
144 is not exclusive, the Staff of the Securities and Exchange Commission has stated that persons proposing to sell private
placement securities other than in a registered offering or pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective
brokers who participate in such transactions do so at their own risk.
(k)
Purchaser understands that the Board believes its valuation of the Issued Shares represents a fair appraisal
of their worth, but that it remains possible that, with the benefit of hindsight, the Internal Revenue Service (the “IRS”) may
successfully assert that the value of the Issued Shares on the date of Purchaser’s purchase is substantially greater than the Board’s
appraisal. Purchaser understands that any additional value ascribed to the Issued Shares by such an IRS determination will
constitute ordinary income to Purchaser as of the purchase date, and that any additional taxes and interest due as a result will be
Purchaser’s sole responsibility payable only by Purchaser, and that the Company need not and will not reimburse Purchaser for
that tax liability. Purchaser understands that if such additional value represents more than 25% of Purchaser’s gross income for
the year in which the value of the Issued Shares is taxable, the IRS will have six years from the due date for filing the return (or
the actual filing date of the return if filed thereafter) within which to assess Purchaser the additional tax and interest due.
(l)
Purchaser acknowledges and agrees that, in making the decision to purchase the Issued Shares, Purchaser
has not relied on any statement, whether written or oral, regarding the subject matter hereof, except as expressly provided in this
Agreement. Furthermore, Purchaser acknowledges that Purchaser has had an opportunity to consult Purchaser’s own tax, legal
and financial advisors regarding the purchase of the Purchased Stock.
(m)
The address of Purchaser’s principal residence is set forth on the signature page below.
7. Restrictive Legends and Stop-Transfer Orders.
(a)
Legends. The certificate or certificates representing the Shares shall bear the following legends (as well as
any legends required by applicable state and federal corporate and securities laws):
(i)
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
COMPANY
9
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.”
(ii)
“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH AND
MAY BE OBTAINED FROM THE SECRETARY OF THE COMPANY.”
(iii) Subject to Section 4 hereof: “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A REPURCHASE OPTION HELD BY THE COMPANY IN ACCORDANCE
WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH AND MAY BE OBTAINED
FROM THE SECRETARY OF THE COMPANY.”
(iv)
“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT
OF FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY AND/OR ITS
ASSIGNEE(S) AS PROVIDED IN THE BYLAWS OF THE COMPANY.”
(v)
Any legend required to be placed thereon by the New York Attorney General or under New
York securities laws
(b)
Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with the restrictions referred
to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c)
Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have
been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as the owner of such
Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been
purported to have been so transferred.
(d)
Removal of Repurchase Option Legend. Upon the release of any portion of the Vesting Shares from the
Repurchase Option, such Vesting Shares then held by Holder will no longer be subject to the legend referred to in Section 7(a)
(iii) hereof. After such time, and upon Holder’s request, a new certificate or certificates representing the Vesting Shares that have
been released from the Repurchase Option shall be issued to Holder without the legend referred to in Section 7(a)(iii) hereof.
(e)
Removal of Transfer Legend. When each of the following events have occurred, the Shares then held by
Holder will no longer be subject to the legend referred to in Section 7(a)(ii) hereof: (i) the termination of the Right of First
Refusal; and (ii) the expiration or termination of the market standoff provisions of Section 3(f) hereof (and of any agreement
entered
10
pursuant to Section 3(f) hereof). After such time, and upon Holder’s request, a new certificate or certificates representing the
Shares not repurchased by the Company shall be issued to Holder without the legend referred to in Section 7(a)(ii) hereof.
8. No Employment Rights. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the
Company, or a Parent or Subsidiary, to terminate Purchaser’s employment, directorial or consulting relationship, for any reason
or no reason, with or without cause or notice, subject to the terms of any other written agreement between the Company, a Parent
or a Subsidiary, on the one hand, and the Purchaser, on the other hand.
9. Certain Defined Terms.
(a)
“Affiliate” means an entity other than a Parent or a Subsidiary which, together with the Company, is
under common control of a third person or entity.
(b)
“Cause” means Holder’s: (i) unauthorized use or disclosure of the Company’s confidential information or
trade secrets; (ii) material breach of any material agreement between Holder and the Company, which breach is not cured by
Holder within fifteen (15) days of Holder’s receipt of notice of such breach; (iii) gross negligence or willful misconduct in the
performance of Holder’s duties to the Company; or (iv) Holder’s conviction of a felony in connection with the performance of
Holder’s obligations to the Company. The Board (excluding the Holder and its affiliates, if applicable) shall be entitled to
determine Cause in the event of the termination of Holder’s Continuous Service Status. No event described in this Section 9(c)
shall constitute Cause unless the Company has given Holder written notice of termination specifying the condition(s) or event(s)
relied upon for such notice within ninety (90) days from the occurrence of such event (or, if later, from the earliest date the Board
(excluding the Holder and its affiliates, if applicable) became aware of such event) and Holder has failed to cure the condition or
event asserted to constitute Cause within thirty (30) day period following receipt of the such notice. A termination of Holder’s
service in any other circumstance or for any other reason will be a termination “without Cause.”
(c)
“Consultant” means any person, including an advisor but not an Employee, who is engaged by the
Company, or any Parent, Subsidiary or Affiliate, to render services (other than capital-raising services) and is compensated for
such services, and any member of the Board, whether compensated for such services or not.
(d)
“Continuous Service Status” means the absence of any interruption or termination of service as an
Employee or Consultant. Continuous Service Status as an Employee or Consultant shall not be considered interrupted or
terminated in the case of: (i) Company-approved sick leave; (ii) military leave; or (iii) any other bona fide leave of absence
approved by the Board (excluding the Holder and its affiliates, if applicable), provided that such leave is for a period of not more
than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to a written Company policy. Also, Continuous Service Status as an Employee or Consultant shall
not be considered interrupted or terminated in the case of a transfer between locations of the Company or between the Company,
any Parent, any Subsidiary and/or any Affiliate, or any of their respective
11
successors, or a change in status from an Employee to a Consultant or from a Consultant to an Employee.
(e)
“Employee” means any person employed by the Company, or any Parent, Subsidiary or Affiliate, with the
status of employment determined pursuant to such factors as are deemed appropriate by the Board (excluding the Holder and its
affiliates, if applicable), subject to any requirements of applicable laws, including the Code. The payment by the Company of a
director’s fee shall not be sufficient to constitute “employment” of such director by the Company or any Parent, Subsidiary or
Affiliate.
(f)
“Good Reason” means the occurrence of one or more of the following events without Holder’s prior
written consent: (i) a change in Holder’s position with the Company which materially reduces Holder’s level of responsibilities
and duties; (ii) any action by the Company that results in a diminution in Holder’s authority, duties and responsibilities, including
a change in title or reporting relationships; (iii) a reduction in Holder’s level of compensation from the Company, including base
salary and benefits, unless there is a corresponding reduction in the level of compensation of all executive officers of the
Company; (iv) any requirement, as a condition to continuing Holder’s Continuous Service Status, that Holder enter into any
agreement with the Company regarding confidentiality, non-competition, non-solicitation or other similar restrictive covenant
that is materially more restrictive than Holder’s written obligations with the Company in effect as of the date of this Agreement,
unless all executive officers of the Company are required to enter into any such agreement; (v) the Company’s failure to pay
Holder any earned base salary, expense reimbursement or bonus payment that has become due and payable, provided that the
Company received written notice from Holder of the deficient payment and was given fifteen (15) days to cure such failure; (vi)
any action or inaction by the Company that constitutes a material breach of any employment or similar agreement between
Holder and the Company; or (vii) a relocation of Holder’s principal place of employment with the Company outside of San Diego
County and more than 50 miles from Holder’s principal place of employment with the Company as of the date of this Agreement.
(g)
“Parent” means any corporation or other entity (other than the Company) in an unbroken chain of
corporations or entities ending with the Company if each of the corporations or entities other than the Company owns stock or
interests possessing 50% or more of the total combined voting power of all classes of stock or interests in one of the other
corporations or entities in such chain.
(h)
“Subsidiary” means any corporation or other entity (other than the Company) in an unbroken chain of
corporations or entities beginning with the Company if each of the corporations or entities other than the last corporation or entity
in the unbroken chain owns stock or interests possessing 50% or more of the total combined voting power of all classes of stock
or interests in one of the other corporations or entities in such chain.
(i)
“Triggering Event” means:
(i) a sale, transfer or disposition of all or substantially all of the Company’s assets other than to: (A) a
corporation or other entity of which at least a majority of its combined voting power is owned directly or indirectly by the
Company; (B) a corporation or other
12
entity owned directly or indirectly by the holders of shares of the Company in substantially the same proportions as their
ownership of shares of capital stock of the Company as of immediately prior to the sale, transfer or disposition; or (C) an
Excluded Entity (as defined under subsection (ii) below); or
(ii) any merger, consolidation or other business combination transaction of the Company with or into
another corporation, entity or person, other than a transaction with or into another corporation, entity or person in which the
holders of at least a majority of the voting stock of the Company outstanding immediately prior to such transaction continue to
hold (either by such shares of stock remaining outstanding in the continuing entity or by their being converted into shares of
voting capital stock or voting units of the surviving entity) a majority of the total voting power represented by the shares of
voting capital stock or voting units of the Company (or the surviving entity) outstanding immediately after such transaction (an
“Excluded Entity”). Notwithstanding anything stated herein, a transaction shall not constitute a “Triggering Event” if its sole
purpose is to change the state of the Company’s incorporation, or to create a holding company that will be owned in substantially
the same proportions by the persons who hold the Company’s outstanding voting stock as of immediately prior to such
transaction. For clarity, the term “Triggering Event” as defined herein shall not include stock sale transactions whether by the
Company or by the holders of capital stock of the Company; or
(iii)the termination of Holder’s Continuous Service Status: (A) by the Company without Cause; or (B)
by Holder for Good Reason.
10.Section 83(b) Election. Purchaser understands that Section 83(a) of the Code normally taxes as ordinary income the
difference between the amount paid for the Purchased Stock and the fair market value of the Purchased Stock as of the date any
restrictions on the Purchased Stock lapse. In this context, “restriction” includes the right of the Company to repurchase the
Purchased Stock pursuant to the Repurchase Option. Purchaser further understands that Purchaser may elect to be taxed at the
time the Purchased Stock is purchased, rather than when and as the Repurchase Option expires, by filing an election under
Section 83(b) of the Code (an “83(b) Election”) with the Internal Revenue Service within thirty (30) days from the Purchase
Date. Purchaser understands that failure to file such an 83(b) Election in a timely manner may result in significant adverse tax
consequences for Purchaser. Purchaser further understands that an additional copy of any such 83(b) Election is required to be
filed with Purchaser’s federal income tax return for the calendar year in which Purchase Date falls. Purchaser further
acknowledges and understands that it is Purchaser’s sole obligation and responsibility to timely file such an 83(b) Election, and
neither the Company nor the Company’s legal or financial advisors shall have any obligation or responsibility with respect to
such filing. Purchaser acknowledges that the foregoing is only a summary of the effect of United States federal income taxation
with respect to purchase of the Purchase Stock hereunder and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the applicable provisions of the Code, the income
tax laws of any municipality, state or foreign country in which Purchaser may reside, and the tax consequences of Purchaser’s
death. Purchaser assumes all responsibility for filing the 83(b) Election and paying all taxes resulting from such election or the
lapse of the Repurchase Option.
11.Miscellaneous.
13
(a)
Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and
obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b)
Arbitration and Equitable Relief.
(i) Arbitration. IN CONSIDERATION OF THE PROMISES IN THIS AGREEMENT, HOLDER
AGREES THAT ANY AND ALL CONTROVERSIES, CLAIMS, OR DISPUTES WITH ANYONE (INCLUDING THE
COMPANY AND ANY EMPLOYEE, OFFICER, DIRECTOR, STOCKHOLDER OR BENEFIT PLAN OF THE COMPANY
IN THEIR CAPACITY AS SUCH OR OTHERWISE) ARISING OUT OF, RELATING TO, OR RESULTING FROM THIS
AGREEMENT, SHALL BE SUBJECT TO BINDING ARBITRATION UNDER THE ARBITRATION RULES SET FORTH
IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1280 THROUGH 1294.2, INCLUDING SECTION 1283.05
(THE “RULES”) AND PURSUANT TO CALIFORNIA LAW. DISPUTES WHICH HOLDER AGREES TO ARBITRATE,
AND THEREBY AGREES TO WAIVE ANY RIGHT TO A TRIAL BY JURY, INCLUDE ANY STATUTORY CLAIMS
UNDER STATE OR FEDERAL LAW, INCLUDING, BUT NOT LIMITED TO, CLAIMS UNDER TITLE VII OF THE CIVIL
RIGHTS ACT OF 1964, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE AGE DISCRIMINATION IN
EMPLOYMENT ACT OF 1967, THE OLDER WORKERS BENEFIT PROTECTION ACT, THE WORKER ADJUSTMENT
AND RETRAINING NOTIFICATION ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, THE
FAMILY AND MEDICAL LEAVE ACT, THE CALIFORNIA FAMILY RIGHTS ACT, THE CALIFORNIA LABOR CODE,
CLAIMS OF HARASSMENT, DISCRIMINATION OR WRONGFUL TERMINATION AND ANY STATUTORY CLAIMS.
HOLDER FURTHER UNDERSTANDS THAT THIS AGREEMENT TO ARBITRATE ALSO APPLIES TO ANY DISPUTES
THAT THE COMPANY MAY HAVE WITH HOLDER.
(ii) Procedure. HOLDER AGREES THAT ANY ARBITRATION WILL BE ADMINISTERED BY
THE AMERICAN ARBITRATION ASSOCIATION (“AAA”) AND THAT THE NEUTRAL ARBITRATOR WILL BE
SELECTED IN A MANNER CONSISTENT WITH ITS NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT
DISPUTES. HOLDER AGREES THAT THE ARBITRATOR SHALL HAVE THE POWER TO DECIDE ANY MOTIONS
BROUGHT BY ANY PARTY TO THE ARBITRATION, INCLUDING MOTIONS FOR SUMMARY JUDGMENT AND/OR
ADJUDICATION AND MOTIONS TO DISMISS AND DEMURRERS, PRIOR TO ANY ARBITRATION HEARING.
HOLDER ALSO AGREES THAT THE ARBITRATOR SHALL HAVE THE POWER TO AWARD ANY REMEDIES,
INCLUDING ATTORNEYS’ FEES AND COSTS, AVAILABLE UNDER APPLICABLE LAW. HOLDER UNDERSTANDS
THAT THE COMPANY WILL PAY FOR ANY ADMINISTRATIVE OR HEARING FEES CHARGED BY THE
ARBITRATOR OR AAA EXCEPT THAT HOLDER SHALL PAY THE FIRST $125.00 OF ANY FILING FEES
ASSOCIATED WITH ANY ARBITRATION HOLDER INITIATES. HOLDER AGREES THAT THE ARBITRATOR SHALL
ADMINISTER AND CONDUCT ANY ARBITRATION IN A MANNER CONSISTENT WITH THE RULES AND THAT TO
THE EXTENT THAT THE AAA’S NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES
CONFLICT WITH THE RULES, THE RULES SHALL TAKE
14
PRECEDENCE. HOLDER AGREES THAT THE DECISION OF THE ARBITRATOR SHALL BE IN WRITING.
(iii)Remedy. EXCEPT AS PROVIDED BY THE RULES AND THIS AGREEMENT,
ARBITRATION SHALL BE THE SOLE, EXCLUSIVE AND FINAL REMEDY FOR ANY DISPUTE BETWEEN HOLDER
AND THE COMPANY. ACCORDINGLY, EXCEPT AS PROVIDED FOR BY THE RULES AND THIS AGREEMENT,
NEITHER HOLDER NOR THE COMPANY WILL BE PERMITTED TO PURSUE COURT ACTION REGARDING
CLAIMS THAT ARE SUBJECT TO ARBITRATION. NOTWITHSTANDING, THE ARBITRATOR WILL NOT HAVE THE
AUTHORITY TO DISREGARD OR REFUSE TO ENFORCE ANY LAWFUL COMPANY POLICY, AND THE
ARBITRATOR SHALL NOT ORDER OR REQUIRE THE COMPANY TO ADOPT A POLICY NOT OTHERWISE
REQUIRED BY LAW WHICH THE COMPANY HAS NOT ADOPTED.
(iv)Availability of Injunctive Relief. THE PARTIES AGREE THAT ANY PARTY MAY PETITION A
COURT FOR INJUNCTIVE RELIEF AS PERMITTED BY THE RULES INCLUDING, BUT NOT LIMITED TO, WHERE
EITHER PARTY ALLEGES OR CLAIMS A VIOLATION OF ANY CONFIDENTIAL INFORMATION OR INVENTION
ASSIGNMENT AGREEMENT BETWEEN HOLDER AND THE COMPANY OR ANY OTHER AGREEMENT
REGARDING TRADE SECRETS, CONFIDENTIAL INFORMATION, NONSOLICITATION OR LABOR CODE §2870.
THE PARTIES UNDERSTAND THAT ANY BREACH OR THREATENED BREACH OF SUCH AN AGREEMENT WILL
CAUSE IRREPARABLE INJURY AND THAT MONEY DAMAGES WILL NOT PROVIDE AN ADEQUATE REMEDY
THEREFOR AND THE PARTIES HEREBY CONSENT TO THE ISSUANCE OF AN INJUNCTION. IN THE EVENT ANY
PARTY SEEKS INJUNCTIVE RELIEF, THE PREVAILING PARTY SHALL BE ENTITLED TO RECOVER REASONABLE
COSTS AND ATTORNEYS’ FEES.
(v) Administrative Relief. HOLDER UNDERSTANDS THAT THIS AGREEMENT DOES NOT
PROHIBIT HOLDER FROM PURSUING AN ADMINISTRATIVE CLAIM WITH A LOCAL, STATE OR FEDERAL
ADMINISTRATIVE BODY SUCH AS THE DEPARTMENT OF FAIR EMPLOYMENT AND HOUSING, THE EQUAL
EMPLOYMENT OPPORTUNITY COMMISSION OR THE WORKERS’ COMPENSATION BOARD. THIS AGREEMENT
DOES, HOWEVER, PRECLUDE HOLDER FROM PURSUING COURT ACTION REGARDING ANY SUCH CLAIM.
(c)
Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof and merges all prior discussions between them. No modification
of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing
signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be
construed as a waiver of any rights of such party.
(d)
Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable
law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then: (i) such provision shall be excluded from this Agreement; (ii) the balance
of
15
the Agreement shall be interpreted as if such provision were so excluded; and (iii) the balance of the Agreement shall be
enforceable in accordance with its terms.
(e)
Construction. This Agreement is the result of negotiations between the parties and has been reviewed by
each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of
each of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.
(f)
Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed
sufficient: (i) upon delivery, when delivered personally or by overnight courier or sent by email or fax (upon customary
confirmation of receipt), or (ii) three (3) business days after being deposited in the U.S. mail as certified or registered mail with
postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page or as subsequently
modified by ten (10) days advance written notice to the other party hereto.
(g)
Further Execution. The parties agree to take all such further action(s) as may reasonably be necessary to
carry out and consummate this Agreement as soon as practicable, and to take whatever steps may be necessary to obtain any
governmental approval in connection with or otherwise qualify the issuance of the securities that are the subject of this
Agreement.
(h)
Independent Counsel. Purchaser acknowledges that this Agreement has been prepared on behalf of the
Company by Paul Hastings LLP, counsel to the Company, and that Paul Hastings LLP does not represent, and is not acting on
behalf of, Purchaser. Purchaser has been provided with an opportunity to consult with Purchaser’s own counsel with respect to
this Agreement.
(i)
Counterparts. This Agreement may be executed in one or two counterparts, including counterparts
transmitted by facsimile or other electronic transmission, each of which shall be deemed an original and all of which together
shall constitute one instrument.
(j)
Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of, and be
enforceable by the Company and its successors and assigns. The rights and obligations of Holder under this Agreement shall not
be assigned, transferred, delegated or sublicensed without the prior written consent of the Company.
[Signature Page Follows]
[Signature Page to Common Stock Purchase Agreement]
In Witness Whereof, the parties have executed this Common Stock Purchase Agreement as of the date first set forth
above.
THE COMPANY:
VIKING THERAPEUTICS, INC.:
By: /s/ Michael Dinerman
(Signature)
Name:
Michael Dinerman
Title:
Chief Operating Officer
PURCHASER:
By: /s/ Brian Lian
(Signature)
Name:
Brian Lian
A-1
Exhibit A
Acknowledgement and Agreement of Spouse
I, ______________, spouse of Brian Lian (“Purchaser”), have read and hereby approve the foregoing Common Stock
Purchase Agreement, dated February 20, 2014, by and between Viking Therapeutics, Inc. (the “Company”) and Purchaser (as
may be amended or restated from time to time, the “Agreement”). In consideration for the Company granting Purchaser the right
to purchase the shares of Common Stock of the Company as set forth in the Agreement, the undersigned hereby agrees to be
irrevocably bound by the Agreement and further agrees that any community property or similar interest that the undersigned may
have in such shares shall be similarly bound by the Agreement. The undersigned hereby appoints Purchaser as the undersigned’s
attorney-in-fact with respect to any amendment or exercise of any rights under the Agreement.
By:
Signature of Spouse of Purchaser
Name:
B-1
Exhibit B
Stock Assignment Separate from Certificate
For Value Received, Brian Lian hereby sells, assigns and transfers unto Viking Therapeutics, Inc., a Delaware
corporation (the “Company”), pursuant to the Repurchase Option under that certain Common Stock Purchase Agreement,
dated as of February 20, 2014, by and between the undersigned and the Company (as may be amended or restated from time to
time, the “Agreement”), _______________ (_______________) shares of Common Stock of the Company standing in the
undersigned’s name on the books of the Company represented by Certificate No(s). _______________ and does hereby
irrevocably constitute and appoint the Company’s Secretary as the undersigned’s attorney-in-fact to transfer such shares of
Common Stock on the books of the Company with full power of substitution in the premises.
Dated: February 20, 2014
(Signature)
Brian Lian
(Print Name)
Instruction: Please do not fill in any blanks other than the “Signature” line and the “Print
Name” line.
C-1
Exhibit C
Joint Escrow Instructions
February 20, 2014
Dear Corporate Secretary:
As escrow agent (“Escrow Agent”) for both Viking Therapeutics, Inc., a Delaware corporation (together with its successors or
assigns, the “Company”), and Brian Lian (“Purchaser”), you are hereby authorized and directed to hold the documents delivered
to you pursuant to the terms of that certain Viking Therapeutics, Inc. Common Stock Purchase Agreement, by and between the
Company and Brian Lian, dated as of the date hereof (the “Agreement”), to which a copy of these Joint Escrow Instructions is
attached, in accordance with the following instructions (capitalized terms used but not defined in these Joint Escrow Instructions
shall have the meanings assigned thereto in the Agreement):
1. In the event that the Company exercises the Repurchase Option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of common stock of the Company, par value $0.00001 per
share to be purchased (together with any shares into which such shares are converted or exchanged, “Shares”), the purchase
price and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignment(s) necessary for the transfer in question, (b) to fill in
the number of Shares being transferred, and (c) to deliver the same, together with the certificate evidencing the Shares to be
transferred, to the Company against the simultaneous delivery to you of the purchase price (by check, by cancellation of
indebtedness or by a combination thereof) for the number of Shares being purchased pursuant to the exercise of the Repurchase
Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing Shares to be held by
you hereunder and any additions and substitutions to said Shares as defined in the Agreement. Purchaser does hereby irrevocably
constitute and appoint you as her attorney-in-fact and agent for the term of this escrow to execute with respect to such securities
all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated.
Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a holder of shares of common
stock of the Company while the Shares are held by you.
4. Upon written request of Purchaser, on the one-year anniversary of the date of the Agreement and on each one-year
anniversary thereafter, unless the Repurchase Option has been exercised, you will cause to be delivered to Purchaser a certificate
or certificates representing the number of Shares released from the Repurchase Option during such prior period. One (1) month
and one (1) day after the voluntary or involuntary termination of Purchaser’s Continuous Service
C-2
Status, you will, at the written request of Purchaser, deliver to Purchaser a certificate or certificates representing the aggregate
number of Shares sold and issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to
exercise of the Repurchase Option and for which no certificate has previously been issued.
5. If, at the time of termination of this escrow, you should have in your possession any documents, securities or other
property belonging to Purchaser, you shall deliver all of same to Purchaser and shall be discharged of all further obligations
hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties
hereto.
7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and
shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have
been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith and in the exercise of your own good
judgment, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such
good faith.
8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any
other person or corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply
with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree,
you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found
to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or
delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.
10.You shall not be liable for the outlawing of any rights under any applicable statute of limitations with respect to these
Joint Escrow Instructions or any documents deposited with you.
11.You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise
you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel
reasonable compensation therefor.
12.Your responsibilities as Escrow Agent hereunder shall terminate if you shall resign by written notice to each party. In
the event of any such termination, the Company shall appoint a successor Escrow Agent.
C-3
13.If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or
obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.
14.It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of
possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability
to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired
and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.
15.All notices and other communications required or permitted hereunder shall be given in accordance with Section
11(f) of the Agreement. All such notices or other communications shall be directed (a) in the case of the Company or Purchaser,
to the address, facsimile number or electronic mail address indicated for such person on the signature page of the Agreement, or
at such other address, facsimile number or electronic mail address as such party may designate by ten (10) days’ advance written
notice to the other parties hereto and (b) in the case of the Escrow Agent, shall be directed to the address or facsimile number first
indicated above on these Joint Escrow Instructions or at such other address or facsimile number as such party may designate by
ten (10) days’ advance written notice to the other parties hereto.
16.By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow
Instructions; you do not become a party to the Agreement.
17.This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors
and permitted assigns.
Very truly yours,
VIKING THERAPEUTICS, INC.
By:
Name:
Michael Dinerman
Title:
COO
“PURCHASER”
Name: Brian Lian
“ESCROW AGENT”
Name:
Michael Dinerman
Title:
Secretary
D-1
Exhibit D
Company Receipt
Viking Therapeutics, Inc., a Delaware corporation (the “Company”), hereby acknowledges receipt of (check
each of the following that apply):
A check in the amount of $__________
The cancellation of indebtedness owing by the Company in the amount of $__________
A Promissory Note issued by the Company in the amount of $__________
Services rendered to the Company having a value equal to $10,000
The assignment of certain intellectual property and/or other assets to the Company having an aggregate
value equal to $10,000,
as consideration for Certificate No. CS-____ for _______ shares of Common Stock, par value $0.00001 per share, of the
Company issued to Brian Lian.
Dated: February 20, 2014
THE COMPANY:
Viking Therapeutics, Inc.
By:
(Signature)
Name: Michael Dinerman
Title: COO
E-1
Exhibit E
Purchaser and Spousal Receipt
The undersigned hereby acknowledges receipt of Certificate No. CS-_____ for _______ shares of Common
Stock of Viking Therapeutics, Inc., a Delaware corporation.
Dated: February 20, 2014
PURCHASER:
Brian Lian
(Name)
By:
(Signature)
Signature of Spouse of Purchaser
Name of Spouse of Purchaser:
Schedule I
Milestone
[…***…]
Exhibit 19
VIKING THERAPEUTICS, INC.
INSIDER TRADING POLICY
And Guidelines with Respect to
Certain Transactions in Company Securities
_________________
This Insider Trading Policy (this “Policy”) provides guidelines to employees, officers and directors of Viking
Therapeutics, Inc. and each of its subsidiaries, branches, representative offices and similar entities (collectively, the
“Company”) with respect to transactions in the Company’s securities. The Company has adopted this Policy and the procedures
set forth herein to help prevent insider trading and to assist the Company’s employees, officers and directors in complying with
their obligations under the federal securities laws. Employees, officers and directors are individually responsible for
understanding and complying with this Policy.
A.
Applicability of Policy.
This Policy applies to all transactions in the Company’s securities, including common stock, restricted stock, restricted
stock units, stock appreciation rights, performance units, deferred share units, options and warrants to purchase common stock
and any other debt or equity securities the Company may issue from time to time, such as bonds, preferred stock and convertible
notes and debentures, as well as to derivative securities relating to the Company’s securities, whether or not issued by the
Company, such as exchange-traded options. This Policy applies to all directors, officers and employees (including part-time and
temporary employees) of the Company and members of their immediate families who reside with them or anyone else who lives
in their household, and family members who live elsewhere but whose transactions in the Company’s securities are directed by
them or subject to their influence and control (collectively referred to herein as “Family Members”). This Policy also applies to
any entities controlled by individuals subject to this Policy, including any corporations, partnerships or trusts, and transactions by
such entities should be treated for purposes of this Policy and applicable securities laws as if they were for the individual’s own
account. The Company may also determine that other persons should be subject to this Policy, such as contractors or consultants
who receive or have access to Material Nonpublic Information (as defined below). Furthermore, this Policy imposes specific
blackout period and pre-clearance procedures on directors, officers and certain other designated employees of the Company who
receive or have access to Material Nonpublic Information and/or are subject to the reporting provisions and trading restrictions of
Section 16 (“Section 16”) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The current “Insider Trading Compliance Officer” referred to herein is the Chief Operating Officer of the Company;
provided that, in the Chief Operating Officer’s absence or with
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respect to a proposed transaction in the Company’s securities by the Chief Operating Officer, the Insider Trading Compliance
Officer is the Chief Executive Officer of the Company.
B.
Definition of Material Nonpublic Information.
It is not possible to define all categories of material information. However, information should be regarded as material if
there is a substantial likelihood that it would be considered important to a reasonable investor in making a voting decision or an
investment decision to buy, hold or sell securities. Any information that could be expected to affect the market price of the
Company’s securities, whether such information is positive or negative, should be considered material. Because trading that
receives scrutiny will be evaluated after the fact with the benefit of hindsight, questions as to the materiality of particular
information should be resolved in favor of materiality, and trading should be avoided. Directors, officers and certain other
employees of the Company are subject to the Blackout Period provisions described in Section F.1 of this Policy.
While it may be difficult under this standard to determine whether particular information is material, there are various
categories of information that are particularly sensitive and, as a general rule, should always be considered material. Examples of
such information may include:
•
Financial results and forecasts;
•
Projections of future earnings or losses;
•
Changes to previously announced earnings guidance, or the decision to suspend earnings guidance;
•
Communications with government agencies, such as the Securities and Exchange Commission (the “SEC”);
•
Notice of issuance of patents or the acquisition or disposition of other material intellectual property rights;
•
News of, or developments in, a pending or proposed merger, acquisition or tender offer;
•
News of, or developments in, a pending or proposed acquisition or disposition of significant assets;
•
News of, or developments in, strategic partnerships, joint ventures, collaborations or other relationships;
•
Major discoveries or significant changes or developments in products or product lines, research or technologies;
•
Important business developments such as trial and study results or developments regarding strategic
collaborators;
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•
Regulatory actions, approvals or rejections or material correspondence from regulatory bodies;
•
Impending bankruptcy or financial liquidity problems;
•
Defaults on borrowings;
•
Gain or loss of a significant customer or supplier;
•
Significant expansion or curtailment of operations;
•
Significant pricing changes;
•
Significant write-downs in assets or increases or decreases in revenues;
•
Stock splits and stock repurchase programs;
•
New equity or debt offerings;
•
Actual or threatened major litigation, or the resolution of such litigation;
•
Significant related party transactions;
•
A change in auditors or notification that an auditor’s report may no longer be relied upon; and
•
Changes in directors or senior management.
“Material Nonpublic Information” is material information about the Company that (1) has not been previously
disclosed to the general public through the Dow Jones “broad tape,” newswire services, a broadcast on widely-available radio or
television programs, publication in a widely-available newspaper, magazine or news website, or in a document filed with the
SEC that is available on the SEC’s website or (2) has not been available to the general public for at least two (2) Trading Days.
As used in this Policy, the term “Trading Day” shall mean a day on which The Nasdaq Stock Market LLC (“Nasdaq”), or the
primary quotation system or national securities exchange on which the Company’s common stock is then traded or listed, is open
for trading. For purposes of this Policy, if such public disclosure occurs on a Trading Day before the markets close, then that day
shall be considered the first Trading Day. If such public disclosure occurs after the markets close on a Trading Day, then the date
of public disclosure shall not be considered the first Trading Day following the date of public disclosure.
Statement of Policy
C.
General Policy.
It is the policy of the Company to oppose the unauthorized disclosure of any nonpublic information acquired in the
workplace, the use of Material Nonpublic Information in securities trading and any other violation of applicable securities laws.
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D.
Specific Policies.
1. Trading on Material Nonpublic Information. No employee, officer or director of the Company and no Family
Member of any such person (or any other person designated by this Policy or by the Insider Trading Compliance Officer as
subject to this Policy), shall engage in any transaction involving a purchase or sale of the Company’s securities, including any
offer to purchase or offer to sell (other than pursuant to a trading plan that complies with SEC Rule 10b5-1 and is implemented in
accordance with Section G of this Policy), during any period commencing with the date that he or she possesses Material
Nonpublic Information and ending at the close of business on the second Trading Day following the date of public disclosure of
that information, or at such time as such nonpublic information is no longer material. If, for example, the Company were to make
an announcement of previously Material Nonpublic Information on a Monday, employees, officers and directors who had access
to such information prior to such time shall not trade in the Company’s securities prior to that Thursday. “Purchase” and “sale”
are defined broadly under the federal securities laws. “Purchase” includes not only the actual purchase of a security, but any
contract to purchase or otherwise acquire a security. “Sale” includes not only the actual sale of a security, but also any contract
to sell or otherwise dispose of a security. These definitions extend to a broad range of transactions, including conventional cash-
for-stock transactions, conversions, the exercise of stock options and acquisitions and exercises of warrants or puts, calls or other
derivative securities.
2. Tipping. No employee, officer or director of the Company shall disclose or pass on (“tip”) Material Nonpublic
Information to any other person, including a Family Member or friend, nor shall such person make recommendations or express
opinions on the basis of Material Nonpublic Information with respect to trading in the Company’s securities.
3. Confidentiality of Nonpublic Information. Nonpublic information relating to the Company is the property of the
Company and, to the extent that it qualifies as Company Confidential Information, such as described in the Company’s
Confidential Information and Inventions Assignment Agreement, the unauthorized disclosure of such information is forbidden.
E.
Potential Criminal and Civil Liability and/or Disciplinary Action.
1. Liability for Insider Trading. Any employee, officer or director of the Company who engages in a transaction in
the Company’s securities at a time when he or she has knowledge of Material Nonpublic Information may be subject to an SEC
civil investigation, cease and desist order or other administrative action, and incur federal and state law penalties and sanctions,
including but not limited to:
•
up to 20 years in jail;
•
a criminal fine of up to $5,000,000;
•
a civil penalty of up to three (3) times the profit gained or loss avoided as a result of the insider trading;
•
SEC civil enforcement injunctions; and
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•
Permanent bar from serving as an officer or director of a public company.
There is no de minimis exception to the rule against insider trading. Use of inside information to gain personal benefit is
as illegal with respect to one share of stock as it is with respect to a large number of shares.
2. Liability for Tipping. Any employee, officer or director of the Company who tips (“tippers”) a third party
(commonly referred to as a “tippee”) may also be liable for improper transactions by tippees to whom they have tipped Material
Nonpublic Information regarding the Company or to whom they have made recommendations or expressed opinions on the basis
of such information as to trading in the Company’s securities. Tippers and tippees would be subject to the same penalties and
sanctions as described above, and the SEC has imposed large penalties even when the tipper or tippee did not profit from the
trading. The SEC and the national securities exchanges use sophisticated electronic surveillance techniques to assess and
uncover insider trading.
3. Control Persons. The Company and its supervisory personnel, if they fail to take appropriate steps to prevent illegal
insider trading, may in certain circumstances be subject to the following penalties, among others:
•
a civil penalty of up to the greater of $1,525,000 (subject to adjustment) or three (3) times the profit gained or
loss avoided as a result of the employee’s violation; and
•
a criminal penalty for individuals of up to $5,000,000 and for entities of up to $25,000,000.
4. Possible Company-Imposed Disciplinary Actions. Violations of this Policy will not be tolerated. Any employee
who violates the standards in this Policy may be subject to disciplinary action, which, depending on the nature of the violation
and the history of the employee, may range from a warning or reprimand up to and including ineligibility for future participation
in the Company’s equity incentive plans, termination of the employment relationship and, in appropriate cases, civil legal action
or referral for regulatory or criminal prosecution.
F.
Mandatory Guidelines.
1. Trading Blackout Period. To ensure compliance with this Policy and applicable securities laws, and to avoid even
the appearance of trading on the basis of inside information, the Company requires that its directors and executive officers, each
of whom is set forth on APPENDIX A attached hereto, any other employees in the finance department of the Company set forth
on APPENDIX B attached hereto and any other employees designated by the Insider Trading Compliance Officer as subject to
the Blackout Period (as defined below) prohibitions because of their access to the Company’s internal financial statements or
other Material Nonpublic Information regarding the Company’s performance during annual and quarterly fiscal periods, which
employees are set forth on APPENDIX C attached hereto (each of the individuals identified in APPENDICES A through C are
collectively referred to herein as the “Designated Insiders”), and Family Members of the foregoing, refrain from conducting
transactions involving the purchase
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or sale of the Company’s securities during the Blackout Periods established below. Each of the following periods will constitute
a “Blackout Period”:
The period commencing (i) with respect to each fourth quarter and fiscal year end, February 16th of the
immediately following year, (ii) with respect to each quarter ending March 31st, the following April 16th,
(iii) with respect to each quarter ending June 30th, the following July 16th and (iv) with respect to each
quarter ending September 30th, the following October 16th, and, in each case ending at the close of
business on the second Trading Day following the date of public disclosure of the Company’s financial
results for that quarter or year, respectively. If such public disclosure occurs on a Trading Day before the
markets close, then that day shall be considered the first Trading Day. If such public disclosure occurs after
the markets close on a Trading Day, then the date of public disclosure shall not be considered the first
Trading Day following the date of public disclosure.
In addition to the Blackout Periods described above, the Company may announce “special” Blackout Periods from time
to time if, in the judgment of the Company’s Chief Executive Officer or the Insider Trading Compliance Officer, there are
nonpublic developments that would be considered material for insider trading law purposes, such as, among other things,
developments relating to regulatory matters, litigation or a major corporate transaction. Depending on the circumstances, a
“special” Blackout Period may apply to all Designated Insiders or only to a specific group of Designated Insiders. The Insider
Trading Compliance Officer will provide written notice to Designated Insiders subject to a “special” Blackout Period. Any
person made aware of the existence of a “special” Blackout Period should not disclose the existence of the “special” Blackout
Period to any other person. The failure of the Company to designate a person as being subject to a “special” Blackout Period will
not relieve that person of the obligation not to trade while he or she is aware of Material Nonpublic Information. As used in this
Policy, the term “Blackout Period” shall mean all periodic Blackout Periods and all “special” Blackout Periods announced by the
Company.
The purpose behind the Blackout Period is to help establish a diligent effort to avoid any improper transactions. Trading
in the Company’s securities outside a Blackout Period should not be considered a “safe harbor,” and all employees, officers and
directors of the Company and other persons subject to this Policy should use good judgment at all times. Even outside a
Blackout Period, any person possessing Material Nonpublic Information concerning the Company should not engage in any
transactions in the Company’s securities until such information has been known publicly for at least two Trading Days after the
date of announcement. Although the Company may from time to time impose “special” Blackout Periods, because of
developments known to the Company and not yet disclosed to the public, each person is individually responsible at all times for
compliance with the prohibitions against insider trading.
Transactions effected pursuant to a SEC Rule 10b5-1 trading plan implemented in accordance with Section G of this Policy are
not subject to Blackout Periods.
2. Pre-clearance of Trades. The Company has determined that all directors and executive officers and their Family
Members must refrain from transacting in the Company’s
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securities without first complying with the Company’s “pre-clearance” process. Each director or executive officer must contact
the Insider Trading Compliance Officer not less than two (2) Trading Days prior to commencing any such transaction, or before
any of their Family Members commences any transaction, in the Company’s securities. This pre-clearance requirement applies
to any transaction or transfer involving the Company’s securities, including a gift, transfer to a trust or any other transfer.
The Company may also find it necessary, from time to time, to require compliance with the pre-clearance process from
other employees designated as Designated Insiders. In such event, the Company will provide notice to such employees of their
need to comply with the Company’s pre-clearance process.
No Designated Insider may engage in any transaction in the Company’s securities unless the transaction is pre-cleared
by the Insider Trading Compliance Officer (provided that transactions in the Company’s securities by the Insider Trading
Compliance Officer are subject to approval by the Company’s Chief Executive Officer). The Insider Trading Compliance
Officer and the Company’s Chief Executive Officer are not under any obligation to approve a transaction submitted for pre-
clearance, and each may determine not to permit a transaction.
To facilitate the process, the Company has prepared a Pre-Clearance Request Form, attached hereto as EXHIBIT B, to
be completed and provided to the Insider Trading Compliance Officer. The Insider Trading Compliance Officer will assist with
the approval process. No transaction may be effected until the requesting director, executive officer, Family Member of a
director or executive officer or, as required under this Policy, other employee of the Company, has received the approved Pre-
Clearance Request Form, even if two (2) Trading Days have passed since the Pre-Clearance Request Form was submitted to the
Insider Trading Compliance Officer. If, upon requesting pre-clearance or otherwise, a director or executive officer or a Family
Member of a director or executive officer is advised that Company securities may not be traded or transferred, such director,
executive officer or Family Member may not buy, sell or otherwise trade or transfer any Company securities under any
circumstance, and may not inform anyone of such restriction. This trading and transfer restriction will apply until the director,
officer or Family Member receives a subsequent pre-clearance to trade or transfer his or her Company securities.
Transactions effected pursuant to a SEC Rule 10b5-1 trading plan implemented in accordance with Section G of this
Policy will not require further pre-clearance at the time of each such transaction.
3. Hardship Exceptions. Any Designated Insider or Family Member of such insider who has an unexpected and urgent
need to sell Company securities in order to generate cash may, in appropriate circumstances, be permitted to sell Company
securities even during a Blackout Period. Hardship exceptions may be granted only by the Insider Trading Compliance Officer
and must be requested at least two (2) days in advance of the proposed trade. A hardship exception may be granted only if the
Insider Trading Compliance Officer concludes that the Company’s earnings information for the applicable quarter does not
constitute Material Nonpublic Information. Under no circumstances will a hardship exception be granted during a “special”
Blackout Period or to a director or executive officer of the Company.
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4. Individual Responsibility. Every director, officer and employee of the Company has the individual responsibility
(and must take appropriate measures to cause such person’s Family Members) to comply with this Policy regardless of whether a
transaction is executed outside a Blackout Period or is pre-cleared by the Insider Trading Compliance Officer. The restrictions
and procedures are intended to help avoid inadvertent instances of improper insider trading, but appropriate judgment should
always be exercised by each director, officer and employee of the Company in connection with any transaction in the Company’s
securities.
A director, officer or employee of the Company, or a Family Member of any such individual, may, from time to time,
need to forego a proposed transaction in the Company’s securities even if he or she planned to make the transaction before
learning of Material Nonpublic Information and even though the individual believes he or she may suffer an economic loss or
forego anticipated profit by waiting. Employees, officers and directors of the Company are responsible for ensuring
compliance with this Policy by their Family Members.
G.
Rule 10b5-1 Trading Plans.
SEC Rule 10b5-1 provides an affirmative defense from insider trading liability under the federal securities laws for
trading plans that meet certain requirements. It does not prevent someone from bringing a lawsuit. This Policy permits
individuals to adopt SEC Rule 10b5-1 trading plans with brokers that outline a pre-set plan for transacting in the Company’s
securities, including the exercise of equity awards.
As required by SEC Rule 10b5-1, a director, executive officer or other employee of the Company identified as a
Designated Insider may implement a trading plan under SEC Rule 10b5-1 only when he or she is not in possession of Material
Nonpublic Information. In addition, a trading plan may not be entered into during a Blackout Period. Any officer or other
employee of the Company identified as a Designated Insider who wishes to implement a trading plan under SEC Rule 10b5-1
must first pre-clear the plan with the Insider Trading Compliance Officer at least five (5) days prior to the entry into the plan, and
also must pre-clear any amendment to such plan and any termination of a plan in advance of its expiration date, with the Insider
Trading Compliance Officer. Except as set forth above, no further pre-approval of transactions conducted pursuant to trading
plan under SEC Rule 10b5-1will be required.
Establishing a trading plan under SEC Rule 10b5-1 does not exempt transactions from the short-swing profit provisions
of Section 16.
H.
Certain Exceptions.
1. Equity Award Exercises. For purposes of this Policy, the Company considers the exercise of equity awards under
the Company’s equity incentive plans, including any net exercise of an equity award pursuant to which you have elected to have
the Company withhold shares of stock to satisfy tax withholding requirements or the exercise price of the equity award, to be
exempt from this Policy. This Policy does apply, however, to any sale of stock as part of a broker-assisted “cashless” exercise of
an equity award, any market sale for the purpose of generating the cash needed to pay the exercise price of an equity award and
any other sale of the underlying stock received upon exercise of any equity award.
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2. Restricted Stock Awards. This Policy does not apply to the vesting of restricted stock, or the exercise of a tax
withholding right pursuant to which an individual elects to have the Company withhold shares of stock to satisfy tax withholding
requirements upon the vesting of any restricted stock. The Policy does apply, however, to any market sale of restricted stock.
3. 401(k) Plan. This Policy does not apply to purchases of Company stock in the Company’s 401(k) plan resulting
from periodic contributions of money to the plan pursuant to payroll deduction elections. This Policy does apply, however, to
certain elections that may be made under the 401(k) plan, including: (i) an election to increase or decrease the percentage of
periodic contributions that will be allocated to the Company stock fund, if any; (ii) an election to make an intra-plan transfer of
an existing account balance into or out of the Company stock fund; (iii) an election to borrow money against a 401(k) plan
account if the loan will result in a liquidation of some or all of a participant’s Company stock fund balance; and (iv) an election to
pre-pay a plan loan if the pre-payment will result in allocation of loan proceeds to the Company stock fund.
4. Employee Stock Purchase Plan. This Policy does not apply to purchases of Company stock in any employee stock
purchase plan of the Company resulting from periodic contributions of money to the plan pursuant to the elections made at the
time of enrollment in the plan. This Policy also does not apply to purchases of Company stock resulting from lump sum
contributions to the plan; provided that the participant elected to participate by lump-sum payment at the beginning of the
applicable enrollment period. This Policy does apply to a participant’s election to participate, or increase his or her participation,
in the plan, and to a participant’s sales of Company stock purchased pursuant to the plan.
5. Dividend Reinvestment Plan. This Policy does not apply to purchases of Company stock under any dividend
reinvestment plan of the Company resulting from reinvestment of dividends paid on Company securities. This Policy does apply,
however, to voluntary purchases of Company stock that result from additional contributions a participant chooses to make to the
plan, and to a participant’s election to participate in the plan or increase his or her level of participation in the plan. This Policy
also applies to his or her sale of any Company stock purchased pursuant to the plan.
I.
Applicability of Policy to Inside Information Regarding Other Companies.
This Policy and the guidelines described herein also apply to material nonpublic information relating to other companies,
including the Company’s customers, vendors or suppliers (collectively, “business partners”), when that information is obtained
in the course of employment with, or other services performed on behalf of, the Company. Civil and criminal penalties, and
termination of employment or removal from our Board of Directors, may result from trading on inside information regarding the
Company’s business partners. All Company employees should treat material nonpublic information about the Company’s
business partners with the same care required with respect to information related directly to the Company.
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J.
Section 16 Liability - Directors and Officers.
Directors and certain officers of the Company must also comply with the reporting obligations and limitations on short-
swing profit transactions set forth in Section 16. The practical effect of these provisions is that these officers and directors who
purchase and sell the Company’s securities within a six-month period must disgorge all profits to the Company whether or not
they had knowledge of any Material Nonpublic Information. Under these provisions, and so long as certain other criteria are met,
neither the receipt of stock or stock options under the Company’s stock plans, nor the exercise of options nor the receipt of stock
under a Company dividend reinvestment plan or the Company’s 401(k) retirement plan is deemed a purchase that can be matched
against a sale for Section 16(b) short-swing profit disgorgement purposes; however, the sale of any such shares so obtained is a
sale for these purposes. The Company will provide separate memoranda and other appropriate materials to the affected officers
and directors regarding compliance with Section 16 and its related rules upon request.
The rules on recovery of short-swing profits are absolute and do not depend on whether a person has Material
Nonpublic Information.
K.
Short Sales.
No director, officer, other employee or consultant of the Company may engage in short sales of the Company’s
securities, including a “sale against the box,” at any time. Short sales of the Company’s securities evidence an expectation on the
part of the seller that the securities will decline in value, and therefore signal to the market that the seller has no confidence in the
Company or its short-term prospects. In addition, short sales may reduce the seller’s incentive to improve the Company’s
performance. Furthermore, Section 16(c) of the Exchange Act expressly prohibits directors and certain officers of the Company
from making short sales of the Company’s securities.
L.
Publicly-Traded Options.
A transaction in a publicly-traded option is, in effect, a bet on the short-term movement of the Company’s stock and
therefore creates the appearance that the director or employee is trading based on inside information. Transactions in options also
may focus the trader’s attention on short-term performance at the expense of the Company’s long-term objectives. Accordingly,
transactions in puts, calls or other derivative securities, on an exchange or in any other organized market, are prohibited. Option
positions arising from certain types of hedging transactions are governed by Section M of this Policy.
M.
Hedging or Monetization Transactions.
Certain forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts, allow a
director, officer or employee to lock in much of the value of their holdings, often in exchange for all or part of the potential for
upside appreciation in the stock. These transactions would allow them to continue to own the covered securities, but without the
full risks and rewards of ownership. When that occurs, their interests and the interests of the Company and its stockholders may
be misaligned and may signal a message to the trading market when disclosed in Section 16 reports that may not be in the best
interests of the Company and its
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stockholders at the time it is conveyed. Accordingly, transactions in hedging or monetization transactions involving Company
securities are prohibited.
N.
Margin Accounts and Pledges.
Securities held in a margin account may be sold by the broker without the customer’s consent if the customer fails to
meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the
borrower defaults on the loan. A margin sale or foreclosure sale may occur at a time when the pledgor is aware of Material
Nonpublic Information or otherwise is not permitted to trade in Company securities pursuant to a Blackout Period restriction.
Thus, unless pre-cleared by the Insider Trading Compliance Officer, directors, officers and employees are prohibited from
pledging Company securities as collateral for a loan. Any director, officer or employee of the Company preparing to pledge his
or her Company securities must clearly demonstrate his or her financial capacity to repay the loan without resort to the pledged
securities. Any person proposing to pledge Company securities as collateral for a loan must submit a request for approval to the
Insider Trading Compliance Officer at least two (2) weeks prior to the proposed execution of documents evidencing the proposed
pledge.
O.
Standing Orders.
Standing orders should be used only for a very brief period of time. A standing order placed with a broker or other
nominee to sell or purchase stock at a specified price leaves an employee, officer or director of the Company with no control over
the timing of the transaction. A standing order transaction executed by the broker or other nominee when such employee, officer
or director of the Company is aware of Material Nonpublic Information may result in unlawful insider trading.
P.
Gifts.
Because charitable and other nonprofit organizations may sell securities given to them very soon after receiving them,
and because there is also the potential for manipulation (or perceived manipulation) by the donor to gain a larger tax deduction by
donating securities before the release of material negative news, charitable gifts may not be made at a time when the donor is
aware of Material Nonpublic Information.
Q.
Post-Termination Transactions.
In the event a director, officer or employee of the Company resigns or terminates employment or service with the
Company, this Policy shall continue to apply to transactions in Company securities by such individual for so long as he or she
remains in possession of any Material Nonpublic Information possessed by such director, officer or employee as of his or her
resignation or termination. Notwithstanding the foregoing, all former directors, officers and employees shall remain subject to
the prohibitions against insider trading set forth under federal and state securities laws any time they engage in transactions in
Company securities following their resignation or termination.
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R.
Communications with the Public.
The Company is subject to the SEC’s Regulation FD (Fair Disclosure) and must avoid selective disclosure of Material
Nonpublic Information. The Company has established procedures for releasing material information in a manner that is designed
to achieve broad public dissemination of the information immediately upon its release. Pursuant to Company policy, only the
executive officers who have been authorized to engage in communications with the public may disclose information to the public
regarding the Company and its business activities and financial affairs. The public includes, without limitation, research analysts,
portfolio managers, financial and business reporters, news media and investors. In addition, because of the risks associated with
the exchange of information through such communications media, Company employees must adhere to the Company’s Social
Media Policy in posting or responding to messages containing information regarding the Company on Internet “bulletin boards,”
Internet “chat rooms,” “blogs”, finance message boards and chat rooms or in similar online forums. Employees who
inadvertently disclose any Material Nonpublic Information must immediately advise the Insider Trading Compliance Officer so
the Company can assess its obligations under Regulation FD and other applicable securities laws.
S.
Inquiries.
Please direct questions as to any of the matters discussed in this Policy to the Insider Trading Compliance Officer:
Chief Executive Officer
Viking Therapeutics, Inc.
12340 El Camino Real, Suite 250
San Diego, CA 92130
Telephone: (858) 704-4699
E-mail: blian@vikingtherapeutics.com
T.
Suspected Violations.
Any director, officer, other employee or consultant of the Company who knows of or suspects a violation of this Policy
should report the violation immediately to the Insider Trading Compliance Officer or through the procedures for reporting
outlined in the Company’s Code of Conduct and Ethics. The Company will comply with all requests from the SEC, The
Financial Industry Regulatory Authority, Inc., Nasdaq and any other quotation system or national securities exchange on which
the Company’s common stock is then traded or listed, and other agencies for information related to insider trading investigations.
U.
Certification.
All directors, officers and employees of the Company must certify their understanding of, and intent to comply with, this
Policy by executing the Certification form attached hereto as EXHIBIT A and returning it to the Insider Trading Compliance
Officer. By executing the Certification form, each director, officer and employee indicates that he or she received, read,
understands and agrees to comply with this Policy. The Certification form must be returned to the
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Insider Trading Compliance Officer within ten (10) business days of your receipt of this Policy and otherwise as may be required
by the Company.
V.
Additional Information
Nothing in this Policy creates or implies an employment contract or term of employment. Employment at the Company
is employment at-will unless otherwise expressly provided in an employment contract signed by the employee and the
Company’s Chief Executive Officer (or another authorized officer of the Company). Employment at-will may be terminated
with or without cause and with or without notice at any time by the employee or the Company. Nothing in this Policy shall limit
the right to terminate employment at-will. No one other than the Company’s Chief Executive Officer is authorized to change this
at-will employment relationship, or to enter into an agreement to employ employees for a specified period of time. If the
Company’s Chief Executive Officer makes this kind of different agreement with an employee, it will not be effective unless it is
in writing, clearly states that the at-will employment relationship is changed and is signed by the Company’s Chief Executive
Officer.
W.
Amendments.
This Policy will be subject to the periodic review of our Board of Directors. The Company anticipates that
modifications to this Policy will be necessary from time to time as the Company’s needs and circumstances evolve, and as
applicable legal or listing standards change. The Company reserves the right to amend, supplement or discontinue this Policy
and the matters addressed herein, without prior notice, at any time. However, employees are expected to adhere to this Policy,
and the procedures established under it, until they receive any contrary instruction from the Insider Trading Compliance Officer.
Last Amended: December 12, 2023
A-1
EXHIBIT A
VIKING THERAPEUTICS, INC.
INSIDER TRADING POLICY
CERTIFICATION
I have received and read, and I understand, Insider Trading Policy (the “Policy”) of Viking Therapeutics, Inc. (the
“Company”). I understand the standards and policies contained in the Policy and understand that there may be additional policies
or laws specific to me depending on my role with the Company.
I further agree, as a condition of my employment (or continued employment) with the Company or appointment (or
future nomination for election) to the Board of Directors of the Company, to comply with the Policy.
I further understand that I should contact the Insider Trading Compliance Officer if I have any questions about the Policy
generally. I understand that the Policy sets forth, in Section T thereof, specific ways to report an actual or potential violation of
the Policy, or of any rule, law, regulation or other Company policy. I agree that I will ask the Insider Trading Compliance
Officer if I have any questions about how to make such reports, or about any potential conflict of interest. This signed “Insider
Trading Policy Certification” page must be returned to the Insider Trading Compliance Officer, who is also the Company’s Chief
Operating Officer, within ten (10) business days of my receipt of the Policy and otherwise as may be required by the Company.
_______________________________________
[SIGNATURE]
_______________________________________
[PRINT NAME]
_______________________________________
[DATE]
B-1
EXHIBIT B
To: Viking Therapeutics, Inc. (the “Company”)
Insider Trading Compliance Officer
From:
_________________________ (telephone: _________________)
Re: Proposed Transaction in the Company’s Securities
This is to advise you that the undersigned intends to execute a transaction in the Company’s securities (the
“Transaction”) on or before the Transaction Deadline (as defined below), and does hereby request that the Company pre-clear
the proposed Transaction, as required by the Company’s Insider Trading Policy (the “Policy”).
The terms of the proposed Transaction are as follows (the following table and Exhibit I to be completed by the Company
insider requesting pre-clearance):
Nature of Transaction (check one)
Purchase
Sale
Gift
Other (please specify):
________________________________________
Maximum Number of Shares of Common Stock, Units or
Rights
Up to _______________________
Price Limit(s)
If Purchase: at or below $________ per share/unit/right
If Sale: at or above $_________ per share/unit/right
Public or Private Transaction (check one)
Public
Private
Provided List of All Transactions in Company Securities
in Prior 6-Month Period (see Exhibit I)
“Short-Swing” Trading
A list of all transactions in securities of the Company beneficially owned by the undersigned in the prior 6-month period is set
forth on Exhibit I hereto. This includes, without limitation, stock purchases, stock sales, option exercises (including broker-
assisted cashless exercises) and 401(k)
B-2
transactions. The undersigned acknowledges that he/she is deemed to beneficially own Company securities for which the
undersigned holds voting or dispositive power, and that the undersigned may be deemed to beneficially own Company securities
held by the undersigned’s relatives in addition to non-related members of the undersigned’s household.
Insider Trading Considerations
The undersigned is not in possession of material nonpublic information about the Company or its affiliates, including any of its
subsidiaries, and agrees to not enter into the Transaction if the undersigned comes into possession of material nonpublic
information about the Company or its affiliates, including any of its subsidiaries, between the date hereof and the time the
Transaction is effected. The undersigned has read and understands the terms of the Policy and certifies that the proposed
Transaction will not violate the Policy.
Duty to Notify
The undersigned agrees to advise the Insider Trading Compliance Officer immediately if, for any reason, any of the foregoing
information becomes inaccurate or incomplete in any respect. The undersigned further acknowledges and agrees that if the
proposed Transaction is not executed by the Transaction Deadline, the undersigned must submit an additional request for pre-
clearance to, and receive approval from, the Insider Trading Compliance Officer (and any additional officer of the Company as
required under the Policy) in order to execute the proposed Transaction.
Additional Information
The undersigned understands that the Insider Trading Compliance Officer may require additional information about the
Transaction, and agrees to provide such information immediately upon request.
Approval May be Rescinded
The undersigned understands that any approval granted hereby on behalf of the Company may be rescinded prior to the time that
any portion of the Transaction is effected if, in the sole reasonable judgment of the Insider Trading Compliance Officer, the
execution of such Transaction would violate the Policy or otherwise be inadvisable.
Acknowledgment
The undersigned acknowledges and agrees that in the event the undersigned’s request to trade is approved by the Insider Trading
Compliance, such approval (i) does not relieve the undersigned in any way of the undersigned’s legal obligations, (ii) does not
constitute legal advice to the undersigned and (iii) does not and will not serve as a defense to any claim that the undersigned’s
trade fails to comply with the Policy or applicable law.
Dated: _______________, 20___
B-3
Sincerely,
___________________________________
Signature
___________________________________
Printed Name
Approved:
Insider Trading Compliance Officer
By:___________________________________
Name:_________________________________
Exhibit I
All Transactions in Company Securities Beneficially Owned
In Prior 6-Month Period
APPENDIX A
MEMBERS OF THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
APPENDIX B
EMPLOYEES IN THE FINANCE DEPARTMENT
APPENDIX C
OTHER EMPLOYEES
Exhibit 21.1
Subsidiaries of Viking Therapeutics, Inc.
Viking Therapeutics Ireland Limited (Ireland)
Viking Therapeutics, PTY LTD (Australia)
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements of Viking Therapeutics, Inc. on Form S-8 [FILE NO. 333-203810, 333-
211270, 333-216857, 333-223503, 333-230247, 333-236666, 333-253219, 333-262609, 333-269675, 333-276939 and 333-279633] and Form S-3 ASR
[FILE NO. 333-373460] of our report dated February 26, 2025, with respect to our audits of the consolidated financial statements of Viking Therapeutics,
Inc. as of December 31, 2024 and 2023 and for the years ended and our report dated February 26, 2025 with respect to our audit of internal control over
financial reporting of Viking Therapeutics, Inc. as of December 31, 2024, which reports are included in this Annual Report on Form 10-K of Viking
Therapeutics, Inc. for the year ended December 31, 2024.
/s/ Marcum LLP
Marcum LLP
Costa Mesa, California
February 26, 2025
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian Lian, Ph.D., certify that:
1.
I have reviewed this Annual Report on Form 10-K of Viking Therapeutics, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: February 26, 2025
By:
/s/ Brian Lian, Ph.D.
Brian Lian, Ph.D.
Chief Executive Officer
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Greg Zante, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Viking Therapeutics, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: February 26, 2025
By:
/s/ Greg Zante
Greg Zante
Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Viking Therapeutics, Inc. (the “Company”) for the period ended December 31, 2024 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to their knowledge that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
By:
/s/ Brian Lian, Ph.D.
By:
/s/ Greg Zante
Brian Lian, Ph.D.
Greg Zante
Chief Executive Officer
Chief Financial Officer
February 26, 2025
February 26, 2025
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and
furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Report, is not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Report), irrespective of any general incorporation language
contained in such filing.