As filed with the Securities and Exchange Commission on June 30, 2014.

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

VIAMET PHARMACEUTICALS HOLDINGS, LLC

(to be converted into Viamet Pharmaceuticals, Inc.)

(Exact name of registrant as specified in its charter)

Delaware

2834

45-4059526

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code No.)

(I.R.S. Employer

Identification No.)

4505 Emperor Blvd., Suite 300

Durham, NC 27703

(919) 467-8539

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Robert J. Schotzinger, M.D., Ph.D.

President and Chief Executive Officer

Viamet Pharmaceuticals Holdings, LLC

4505 Emperor Blvd., Suite 300

Durham, NC 27703

(919) 467-8539

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

David E. Redlick, Esq.

Rosemary G. Reilly, Esq.

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, MA 02109

(617) 526-6000

David S. Rosenthal, Esq.

Dechert LLP

1095 Avenue of Americas

New York, New York 10036

(212) 698-3500

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”) please check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

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

CALCULATION OF REGISTRATION FEE



Title of Each Class of Securities To Be Registered	Proposed Maximum Aggregate Offering Price⁽¹⁾	Amount of Registration Fee⁽²⁾
Common Stock, $0.001 par value per share	$75,000,000	$9,660.00

(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)	Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the Securities and Exchange Commission declares our registration statement effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS

Subject to completion, dated June 30, 2014

Shares


VIAMET PHARMACEUTICALS, INC.

Common Stock

$ per share

• Viamet Pharmaceuticals, Inc. is offering shares.

• We anticipate that the initial public offering price will be between $ and $ per share.

• This is our initial public offering and no public market currently exists for our shares.

• Proposed trading symbol: The NASDAQ Global Market — VIAM

This investment involves risk. See “Risk Factors” beginning on page 15.

We are an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012 and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary—Implications of Being an Emerging Growth Company.”


	Per Share	Total
Public offering price	$	$
Underwriting discounts	$	$
Proceeds, before expenses, to Viamet Pharmaceuticals, Inc.	$	$

The underwriters have a 30-day option to purchase up to additional shares of common stock from us to cover over-allotments, if any.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


Piper Jaffray		Stifel		Wells Fargo Securities

The date of this prospectus is , 2014

TABLE OF CONTENTS


	Page

Prospectus Summary		1

Risk Factors		15

Special Note Regarding Forward-Looking Statements		54

Use of Proceeds		55

Dividend Policy		56

Capitalization		57

Dilution		59

Selected Consolidated Financial Data		61

Unaudited Pro Forma Condensed Consolidated Financial Statements		63

Management’s Discussion and Analysis of Financial Condition and Results of Operations		70

Business		91

Management		138

Executive and Director Compensation		145

Certain Relationships and Transactions with Related Persons		157

Principal Stockholders		166

Description of Capital Stock		169

Shares Eligible for Future Sale		173

Material U.S. Federal Tax Considerations for Non-U.S. Holders of Common Stock		175

Underwriting		179

Legal Matters		186

Experts		186

Where You Can Find More Information		186

Index to Consolidated Financial Statements		F-1

Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market share, is based on information from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Special Note Regarding Forward-Looking Statements.”

This prospectus presents market and industry data from IMS Health Information Service, or IMS Health. Such information is an estimate derived from the use of information under license from IMS HEALTH—NPA^TM (National Prescription Audit Family of Services) for the period 2009-2013. IMS expressly reserves all rights, including rights of copying, distribution and republication. Such information is based on the research, analysis and viewpoints of the respective publishers thereof and speaks as of its original publication dates and not as of the date of this prospectus.

We use our registered trademarks, Viamet^® and Metallophile^®, in this prospectus. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this prospectus appear without the ^® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trademarks and tradenames.

We have not authorized anyone to provide you with different information, and we take no responsibility for any information others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

For investors outside the United States: Neither we nor any of the underwriters have taken any action to permit a public offering of the shares of our common stock or the possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the section in this prospectus entitled “Risk Factors” beginning on page 15 and our financial statements and the related notes thereto appearing at the end of this prospectus, before making an investment decision.

As used in this prospectus, unless the context otherwise requires, references to the “company,” “Viamet,” “we,” “us” and “our” refer to (i) following the date of the conversion discussed under the heading “Corporate Reorganization,” Viamet Pharmaceuticals, Inc. and its consolidated subsidiaries, or any one or more of them as the context may require and (ii) prior to the date of the conversion, Viamet Pharmaceuticals Holdings, LLC and its subsidiaries, or any one or more of them as the context may require.

Overview

We are a biopharmaceutical company focused on the discovery, development and commercialization of novel antifungal agents based on our proprietary metalloenzyme medicinal chemistry platform, which we call our Metallophile^® Technology. Metalloenzymes are enzymes that contain a metal, such as iron, zinc or copper, that is linked to the enzyme’s protein component. We are using our platform to design drugs that we expect to have greater selectivity, fewer side effects and improved potency compared to currently available antifungal agents. Our lead product candidate, VT-1161, is an oral agent that we are developing for the treatment of recurrent vulvovaginal candidiasis, or RVVC, a highly prevalent mucosal infection for which there are no approved therapies in the United States, and onychomycosis, a very common fungal infection of the nail for which current treatments are suboptimal with respect to safety, tolerability and efficacy.

We are currently completing two proof of concept Phase 2a clinical trials of VT-1161, one for the treatment of moderate to severe acute vulvovaginal candidiasis, or AVVC, commonly known as vaginal yeast infection, and a second for the treatment of moderate to severe interdigital tinea pedis, a dermatologic infection commonly known as athlete’s foot. In these Phase 2a clinical trials, VT-1161 has demonstrated strong evidence of clinical antifungal activity as well as a favorable safety profile. The fungal pathogens that cause AVVC are typically the same pathogens that cause RVVC, and the fungal pathogens that cause tinea pedis are typically the same pathogens that cause onychomycosis. We expect to begin Phase 2b clinical trials for VT-1161 in RVVC and onychomycosis in the second half of 2014. In Phase 1 clinical trials, VT-1161 demonstrated a favorable safety profile, good oral pharmacokinetics and a prolonged half-life. We believe that these attributes of VT-1161 may make the agent particularly useful in indications such as RVVC, in which recurrence rates with existing therapies are problematic.

Our second product candidate, VT-1129, is an oral agent that we are developing for cryptococcal meningitis, a life-threatening invasive fungal infection of the lining of the brain and spinal cord. VT-1129 has demonstrated in an animal model the ability to reduce to undetectable levels the pathogenic fungal organism that causes cryptococcal meningitis. We anticipate submitting an investigational new drug application, or IND, for VT-1129 to the U.S. Food and Drug Administration, or the FDA, during the first half of 2015 and we recently applied to the FDA for orphan drug designation. Our third program, VT-1598 and related analogues, is in preclinical development with a goal of developing an oral and intravenous therapy for the treatment of invasive fungal infections.

Fungal infections represent a significant medical problem, and include highly prevalent mucosal and dermatologic infections, as well as life-threatening invasive central nervous system and systemic infections. According to a market research study conducted in May 2014 by Campbell Alliance and commissioned by

us, worldwide sales of branded antifungal drugs were approximately $3.5 billion in 2013. While multiple prescription and over-the-counter antifungal agents are available in the United States, we believe a significant opportunity exists to improve upon current treatments. With respect to safety and tolerability, current agents are limited by potential liver toxicity, drug-drug interactions, endocrine toxicity and pregnancy warnings. With respect to efficacy, current agents are limited by poor initial response rates and high relapse rates. In addition, there is increasing incidence of fungal strains that are resistant to currently available antifungal drugs and for which new antifungal treatments are required.

Our Current Pipeline

The focus of our three principal antifungal programs is a metalloenzyme known as fungal CYP51, a clinically validated target that is important in the synthesis of the fungal cell membrane and therefore critical to fungal proliferation and survival. Fungal CYP51 is the target of the triazole class of antifungal drugs, the most commercially successful class of antifungals. Utilizing our know-how and integrated scientific and drug development capabilities, we have established a pipeline of antifungal product candidates. Our pipeline includes one product candidate in clinical development for two highly prevalent fungal diseases as well as preclinical programs that we are developing to treat life-threatening invasive fungal diseases.

VT-1161

VT-1161 is a potent and selective, orally available inhibitor of fungal CYP51. In in vitro and in vivo studies, VT-1161 has demonstrated broad spectrum activity against Candida species, a broad family of fungi that resemble yeasts and frequently cause infections in humans. In in vitro and in vivo studies, VT-1161 has also demonstrated broad spectrum activity against dermatophytes, a broad family of fungi that frequently cause skin, nail and hair infections. Based on our research to date, we believe that VT-1161 is highly active against most species of Candida, the causative agent in RVVC, including Candida glabrata and fluconazole-resistant strains of Candida. Also, based on our research to date, we believe VT-1161 is highly active against Trichophyton rubrum and Trichophyton mentagrophytes, the two most common dermatophyte species that cause onychomycosis. As VT-1161 is highly selective for fungal

CYP51, we believe that it may avoid the side effects that limit the use of commonly prescribed antifungals, including fluconazole, itraconazole, posaconazole, terbinafine and voriconazole.

RVVC

RVVC is defined as the occurrence of four or more acute vulvovaginal infections within a 12-month period. The infection involves the vaginal mucosa as well as the surrounding areas. Although it is estimated that RVVC afflicts 5% to 8% of women of child-bearing age in the United States, there are currently no approved therapies to treat RVVC in the United States. We believe RVVC represents a significant market opportunity.

We are currently conducting a Phase 2a clinical trial of VT-1161 in patients with moderate to severe AVVC. Our intent in conducting this clinical trial is to establish proof of concept that VT-1161 is safe and clinically active in treating vaginal Candida infections, with overall cure rates generally comparable to those of fluconazole. We designed the Phase 2a clinical trial to enroll approximately 48 patients across three VT-1161 dose groups and an active comparator group that receives fluconazole, which is a standard of care for AVVC. We have completed treatment of patients in the low-dose VT-1161, mid-dose VT-1161 and high-dose VT-1161 groups and have analyzed data through the test-of-cure visit on Day 28. While this trial was not prospectively powered to demonstrate efficacy with statistical significance, the low-dose VT-1161, mid-dose VT-1161, high-dose VT-1161 and fluconazole groups demonstrated generally comparable clinical antifungal activity across the four cohorts. Effective therapeutic cure requires both effective clinical cure and mycologic cure, the latter of which, when used as a clinical trial endpoint, indicates a negative culture for fungi at the day specified. Effective therapeutic cure was achieved in 32 of the 40 patients in the VT-1161 groups in the intent to treat population, meaning patients that received one or more doses. Complete therapeutic cure, which requires both complete clinical cure and mycologic cure, was achieved in 29 of these 40 patients. Importantly, 38 of the 40 patients treated with VT-1161 achieved mycologic cure, defined as a negative fungal culture at Day 28. VT-1161 was well-tolerated with no serious adverse events reported and no discontinuations related to an adverse event. Since the fungal pathogens that cause AVVC are typically the same pathogens that cause RVVC, we believe that the results in our Phase 2a AVVC clinical trial will be indicative of the anticipated results of our planned Phase 2b RVVC clinical trial.

In the second half of 2014, we plan to initiate a randomized, double-blind, placebo-controlled, multi-arm Phase 2b clinical trial of VT-1161 in approximately 200 patients with RVVC with the goal of preventing acute episodes through week 48. We also plan to perform an interim analysis that will assess the prevention of acute episodes through week 24. We expect to obtain interim data from this Phase 2b clinical trial by the third quarter of 2015 and to have complete top line data by mid-2016.

Onychomycosis

Onychomycosis is a fungal infection that involves the nail matrix, the nail bed, the nail plate and, in some cases, the skin surrounding the nail plate. Global Data, a market research firm, projected onychomycosis to affect approximately 32 million individuals in the United States in 2012 and as many as 38 million by 2022. According to data provided by IMS Health, approximately 2.85 million prescriptions were written in 2013 for terbinafine, the most commonly used oral drug for this indication. The number of prescriptions written for terbinafine increased at a compound annual growth rate of 5% during the period from 2009 to 2013. The primary prescribing groups included family practice, podiatry, internal medicine and dermatology. We believe onychomycosis represents a significant market opportunity.

VT-1161 is safe and clinically active in treating human infections due to dermatophytes, which typically cause both tinea pedis and onychomycosis. We designed the tinea pedis Phase 2a clinical trial to enroll approximately 48 patients across three VT-1161 dose groups and a placebo group. We have completed treatment of patients in the low-dose VT-1161, mid-dose VT-1161 and high-dose VT-1161 groups and have analyzed data through the test-of-cure visit on Day 42. While this trial was not prospectively powered to demonstrate efficacy with statistical significance, the cure rates in the VT-1161 groups were numerically superior to the placebo group. In the intent to treat population, effective clinical cure was achieved in 26 of the 38 patients in the VT-1161 groups and mycologic cure was achieved in 20 of the 38 patients in the VT-1161 groups. Effective therapeutic cure, which requires both effective clinical cure and mycologic cure, was achieved in 17 of the 38 patients in the VT-1161 groups. While complete therapeutic cure, which requires complete clinical cure and mycologic cure, was achieved in only six of the 38 patients in the VT-1161 groups, it was not achieved in any of the 12 patients in the placebo group. Through the test-of-cure visit on Day 42, VT-1161 was found to be well tolerated with no serious adverse events reported. One patient in the high-dose VT-1161 group discontinued treatment due to a rash. Because the dermatophyte pathogens are typically the same in patients with tinea pedis as in patients with onychomycosis, we believe that the results in our Phase 2a tinea pedis trial will be indicative of likely antifungal activity in our planned Phase 2b onychomycosis clinical trial.

In the second half of 2014, we plan to initiate a randomized, double-blind, placebo-controlled, multi-arm Phase 2b clinical trial of VT-1161 in approximately 200 patients with onychomycosis with the goal of evaluating complete therapeutic cure of the target toenail at week 48. We also plan to perform an interim analysis that will assess the percentage of patients with at least 2 millimeters of clear nail growth at week 24. We expect to obtain interim data from this Phase 2b clinical trial by the third quarter of 2015, and to have complete top line data by mid-2016.

We have studied VT-1161 in a wide range of in vitro and in vivo pre-clinical models. In these studies, VT-1161 has consistently demonstrated substantial potency against many common species of Candida that cause mucosal, dermatologic and invasive infections in humans. These common Candida species include Candida albicans and Candida glabrata. VT-1161 has also demonstrated significant potency against more difficult to treat species such as Candida krusei, Candida parapsilosis, Candida guilliermondii and Candida lusitaniae. In the majority of these tests, the in vitro potency of VT-1161 against Candida species has been greater than that for fluconazole, itraconazole, voriconazole and posaconazole. In addition, in preclinical testing, VT-1161 has consistently demonstrated substantial potency against many common dermatophyte species, such as Trichophyton rubrum, which commonly cause onychomycosis.

VT-1129

VT-1129 has been shown in preclinical studies to be a potent and selective, orally available inhibitor of fungal CYP51. VT-1129 blocks the production of ergosterol, an essential component of the fungal cell membrane, which is critical to fungal proliferation and survival. Additionally, VT-1129 has demonstrated substantial potency against Cryptococcus species and high concentrations within the central nervous system in preclinical studies. As a result of these advantageous properties, we selected VT-1129 for further preclinical development targeting the treatment of cryptococcal meningitis, a life-threatening fungal infection of the lining of the brain and the spinal cord. This infection occurs most often in immunocompromised patients, including those with HIV, transplant recipients and oncology patients. A study published in February 2013 in the scientific journal PLOS ONE estimated that there are 3,400 hospitalizations associated with cryptococcal meningitis annually in the United States. Due to the relatively small number of cryptococcal meningitis cases in the United States and Europe each year, we believe that VT-1129 may be eligible for orphan drug designation by the FDA and the European Medicines Agency, or the EMA, and we recently applied to the FDA for orphan designation. In 2011, VT-1129 was selected to receive funding under the Therapeutics for Rare and Neglected Diseases program, or TRND, at the National Institutes of Health, or NIH.

We have studied VT-1129 in multiple in vitro and in vivo preclinical models. In in vitro studies, VT-1129 was significantly more potent against both Cryptococcus neoformans and Cryptococcus gattii isolates than fluconazole, which is commonly used for maintenance therapy in the United States and as primary therapy in the developing world for the treatment of cryptococcal meningitis. VT-1129 was also studied in a mouse model of cryptococcal meningitis, in which mice were infected intracranially with Cryptococcus neoformans and oral treatment was initiated 24 hours later with either vehicle, VT-1129 or fluconazole. In this model, 90% of mice in the low-dose VT-1129 group survived and 100% of mice in the high dose VT-1129 group survived through Day 30, as compared to 40% of the mice in the low dose fluconazole group and 60% of the mice in the high-dose fluconazole group. Importantly, at the end of the study there was no detectable fungus in the brain of VT-1129 treated animals. We are not aware of any other agent that has demonstrated in an animal model the ability to reduce to undetectable levels the pathogenic fungal organism that causes cryptococcal meningitis.

We are currently conducting IND-enabling studies of VT-1129 in collaboration with the TRND program at the NIH. The NIH is currently providing funding for these studies. Following this offering, we intend to conduct the additional studies necessary for the submission of an IND in the United States without further assistance from TRND in order to accelerate the development process. If these studies are successful, we expect to submit an IND for VT-1129 to the FDA during the first half of 2015 and to commence Phase 1 clinical trials in healthy volunteers shortly thereafter.

VT-1598 and Analogues

VT-1598 and related analogues have been shown in preclinical studies to be highly potent inhibitors of fungal CYP51 with a very broad spectrum of activity in vitro, covering Candida species, Aspergillus species and several other less common mold species. VT-1598 and its analogues are in preclinical development with a goal to identify the optimal candidate to advance in development as an oral and intravenous therapy for treatment of invasive fungal infections. Invasive fungal infections are often life-threatening infections, which can involve the bloodstream, lungs, kidneys, spleen and other internal organs as well as the central nervous system. VT-1598 is orally available, and we are also developing a pro-drug formulation for intravenous administration. We are currently comparing the pharmacology profile and development attributes of VT-1598 to a number of related analogues to identify the best compound to advance in development.

Our Technology Platform

We have conceived and integrated a set of proprietary core chemistry technologies for the discovery and optimization of product candidates that act as inhibitors of metalloenzymes. We have a Metallophile database, which consists of over 200 metal-binding groups. We refer to this database of metal-binding groups and our knowledge of their activities as our Metallophile Technology. We apply our Metallophile Technology to identify small molecule inhibitors of metalloenzymes, which are proteins that catalyze a wide range of biochemical reactions. Metalloenzymes are distinguished from other enzymes in that they contain a metallic atom, such as iron, zinc, or copper, at the core of their active site. The metal in these enzymes has frequently been a target for pharmaceutical intervention, and many marketed drugs act by inhibiting metalloenzymes. We improve on these existing therapies by designing inhibitors of metalloenzymes that contain alternative metal-binding groups that enable a high degree of selectivity for the desired metalloenzyme target, while also maintaining a high degree of potency.

important in the synthesis of the fungal cell membrane and therefore critical to fungal proliferation and survival. Our Metallophile Technology is also potentially applicable to other metalloenzyme targets for the treatment of fungal, bacterial and viral infections.

Our Strategy

Our goal is to become a leader in the discovery, development and commercialization of novel antifungal agents. We plan to continue to focus our efforts on infectious diseases with significant unmet medical need and commercial potential. The key elements of our strategy are to:

•

Develop and commercialize VT-1161 for the treatment of RVVC and onychomycosis;

•

Advance additional product candidates, including VT-1129 and VT-1598 and its analogues, into clinical development;

•

Strengthen and expand our core metalloenzyme drug discovery and development capabilities, including the identification of new product candidates using our Metallophile Technology; and

•

Establish specialized sales and marketing capabilities.

Risks Associated With Our Business

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the “Risk Factors” section of this prospectus immediately following this prospectus summary. These risks include the following:

•

We are early in our development efforts and have only one product candidate in Phase 2a clinical trials. All of our other product candidates are still in preclinical development. If we are unable to commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.

•

If clinical trials of VT-1161 and our future product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA or comparable non-U.S. regulatory authorities or are not otherwise successful, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of VT-1161 and our future product candidates.

•

We will need substantial additional funding to complete the development, and, subject to receiving marketing approval, the commercialization, of VT-1161 for RVVC and onychomycosis, which may not be available on acceptable terms, or at all. If we are unable to raise capital when needed, we may be forced to delay, reduce, terminate or eliminate product development or commercialization programs, including for VT-1161 and our other product candidates.

•

Clinical drug development involves uncertain outcomes, and results of earlier studies and clinical trials may not be predictive of future clinical trial results. In particular, our Phase 2a clinical trials of VT-1161 are not powered to demonstrate efficacy with statistical significance, and our planned Phase 2b clinical trials of VT-1161 have different trial designs and are for different disease indications than our ongoing Phase 2a clinical trials of this product candidate. The results of our planned Phase 2b clinical trials may vary significantly from the results of our Phase 2a clinical trials of VT-1161.

•

The regulatory approval process is expensive, time-consuming and uncertain. If we are unable to obtain, or experience significant delays in obtaining, regulatory approval of our product candidates, our ability to generate revenue will be materially impaired.

•

Our limited operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.

•

Even if VT-1161 or any of our other product candidates receives regulatory approval, it may fail to achieve the degree of market acceptance by physicians, patients, third party payors and others in the medical community necessary for commercial success, and the market opportunity for the product candidate may be smaller than we expect. Additionally, many of the existing products available to treat the diseases for which we are developing our product candidates are available on a generic basis and are offered and sold at low prices.

•

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market our product candidates, we may not be successful in commercializing VT-1161 or any of our future product candidates if they are approved.

•

We have a limited operating history, have incurred significant operating losses since our inception, including an accumulated deficit of $92.1 million as of March 31, 2014, and anticipate that we will continue to incur losses for the foreseeable future.

Corporate Reorganization

We are currently a Delaware limited liability company named Viamet Pharmaceuticals Holdings, LLC, or Viamet Holdings. Prior to December 2011, we operated as Viamet Pharmaceuticals, Inc., or VPI, a Delaware corporation that was incorporated in December 2004 as a research and development company initially focused on the development of compounds for the treatment of fungal diseases and, later, prostate cancer. In December 2011, Viamet Holdings was formed and made the parent of VPI through the exchange of VPI’s capital stock for membership interests in Viamet Holdings. Since December 2011, we have operated two main businesses, the prostate business, which is operated through VPI and primarily focuses its research and development on discovery and development of a product candidate to treat patients with prostate cancer, and the human antifungal business, which is primarily operated through our remaining subsidiaries. See “Certain Relationships and Related Party Transactions—Formation of Viamet Holdings” for a description of the transactions through which Viamet Holdings became the parent of VPI.

In connection with this offering, Viamet Holdings will form a wholly owned limited liability company subsidiary and contribute the stock of VPI to it. We refer to VPI and this parent limited liability company that will be created for it collectively as Legacy VPI. Prior to conducting this offering, we will spin off the prostate business, along with two collaboration programs not associated with the human antifungal business, in the form of a distribution of Legacy VPI to our existing equity holders. Prior to the distribution of Legacy VPI, the Viamet Pharmaceuticals, Inc. name and certain assets related to the antifungal business held by Legacy VPI will be transferred to one or more of the subsidiaries of Viamet Holdings engaged in the antifungal business. Additionally, we expect that 11 of the existing 14 Legacy VPI employees will become our only full-time employees. Thereafter and immediately prior to the effectiveness of the registration statement of which this prospectus forms a part, Viamet Holdings will be converted into a Delaware corporation and renamed Viamet Pharmaceuticals, Inc. In connection with this conversion, holders of common shares of Viamet Holdings will receive shares of our common stock for the common shares of Viamet Holdings held immediately prior to the conversion, and holders of each series of preferred shares of Viamet Holdings will receive shares of a substantially equivalent series of preferred stock for the preferred shares of Viamet Holdings held immediately prior to the conversion. Additionally, as part of this corporate reorganization, warrants to purchase series C1 preferred shares will be automatically net exercised, and the series C1 preferred shares of Viamet Holdings issued upon such exercise will be converted into shares of our series C1 preferred stock.

Following the conversion, we will consummate the initial public offering of our common stock. Upon the closing of our initial public offering, all of the shares of preferred stock issued to our members in the

conversion will convert into shares of our common stock. We refer to the asset transfer, the Legacy VPI distribution, our conversion to a Delaware corporation and the associated recapitalization collectively as the Reorganization.

The following diagrams illustrate our ownership and organizational structure, before and after giving effect to the Reorganization and this offering:

Before Reorganization

LOGO

After Reorganization and the Offering

LOGO

In connection with the Reorganization, we and Legacy VPI expect to enter into certain agreements governing the separation of the antifungal business and the prostate business, including a separation and distribution agreement, license agreements, a transition services agreement and an employee matters agreement. See “Certain Relationships and Transactions with Related Persons” for further information on these agreements.

Unless otherwise indicated, or the context otherwise requires, all information in this prospectus is presented giving effect to the Reorganization.

Corporate Information

Our principal executive offices are located at 4505 Emperor Blvd., Suite 300, Durham, NC 27703, and our telephone number is (919) 467-8539. Our website address is www.viamet.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

Implications of Being an Emerging Growth Company

As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure and other requirements that are applicable to other public companies that are not emerging growth companies. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. We may take advantage of the exemptions provided by the JOBS Act for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1 billion in annual revenue, we have more than $700 million in market value of our stock held by non-affiliates or we issue more than $1 billion of non-convertible debt over a three year period.

THE OFFERING

Common stock offered by us

Common stock to be outstanding after this offering

Underwriters’ over-allotment option

The underwriters have an option for a period of 30 days to purchase up to shares of our common stock.

Use of proceeds

We intend to use the net proceeds of this offering to fund our ongoing clinical development of VT-1161, our research and development efforts to advance our pipeline of additional product candidates and for working capital and other general corporate purposes. See “Use of Proceeds” on page 55 for a description of the intended use of proceeds from this offering.

Risk factors

See “Risk Factors” beginning on page 15 and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our common stock.

Proposed NASDAQ Global Market symbol

VIAM

The number of shares of our common stock to be outstanding after this offering is based on shares of our common stock outstanding as of March 31, 2014, and gives effect to the conversion of all outstanding shares of our preferred stock into shares of common stock that will become effective upon the closing of this offering.

The number of shares of our common stock to be outstanding after this offering excludes shares of our common stock available for future issuance under our 2014 Incentive Plan as of March 31, 2014.

Except as otherwise noted, all information in this prospectus:

•

assumes that the Reorganization has occurred;

•

assumes no exercise by the underwriters of their over-allotment option to purchase up to additional shares of common stock from us;

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gives effect to the automatic conversion of all outstanding shares of our preferred stock into shares of our common stock upon the closing of this offering;

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gives effect to the conversion of all outstanding profits interests into shares of our common stock in connection with the corporate conversion, which is a part of the Reorganization;

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gives effect to the exercise of outstanding series C1 warrants into an aggregate of series C1 preferred shares that will, in turn, convert into our common stock in connection with the corporate conversion, which is a part of the Reorganization, and the closing of this offering; and

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gives effect to the restatement of our certificate of incorporation and adoption of our amended and restated bylaws upon the closing of this offering.

SUMMARY CONSOLIDATED FINANCIAL DATA

The following financial data should be read in conjunction with our audited and unaudited consolidated financial statements and the related notes, and our unaudited pro forma condensed consolidated financial statements and the related notes, included elsewhere in this prospectus.

The following table summarizes our consolidated financial data. We have derived the following summary of our consolidated statements of operations data for the years ended December 31, 2012 and 2013 from our audited consolidated financial statements appearing elsewhere in this prospectus. The consolidated statements of operations data for the three months ended March 31, 2013 and 2014 and the balance sheet data as of March 31, 2014 have been derived from our unaudited consolidated financial statements appearing elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on a basis consistent with our audited consolidated financial statements included in this prospectus and include, in our opinion, all adjustments, consisting only of normal recurring adjustments, necessary to fairly present our financial position as of March 31, 2014 and results of operations for the three months ended March 31, 2013 and 2014. Our historical results are not necessarily indicative of the results that may be expected in the future and the results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the full fiscal year.

Our unaudited pro forma condensed consolidated financial statements have been prepared to reflect adjustments to our historical financial statements, that are (1) directly attributable to the transactions described below; (2) factually supportable; and (3) with respect to the unaudited pro forma condensed consolidated statements of comprehensive loss, expected to have a continuing impact on our results. The unaudited pro forma condensed consolidated financial statements do not include non-recurring items, including offering related legal and advisory fees. The unaudited pro forma condensed consolidated financial information reflects the impact of:

Reorganization and Separation of the Prostate Business

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the contribution by Legacy VPI to us of certain assets that are used in the antifungal business;

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the distribution to Viamet Holdings’ shareholders of Legacy VPI, which at the time of distribution, will contain all of the assets and liabilities directly attributable to the prostate business and associated with the collaboration agreements remaining with Legacy VPI;

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certain transactions contemplated by agreements between us and Legacy VPI described in “Certain Relationships and Transactions with Related Persons;” and

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the issuance of series C1 preferred shares upon the exercise of our Viamet Holdings series C1 warrants, which, pursuant to the terms of the LLC Agreement (as defined below), as amended in connection with the Reorganization, will occur automatically.

Conversion of Viamet Holdings to Viamet Pharmaceuticals, Inc.

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the issuance of shares of our common stock to holders of Viamet Holdings common shares in conjunction with our conversion to a Delaware corporation based on an exchange ratio of share of Viamet Pharmaceuticals, Inc. for each common share of Viamet Holdings;

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the issuance of shares of our preferred stock to holders of Viamet Holdings preferred shares in conjunction with our conversion to a Delaware corporation based on an exchange ratio of share of the corresponding class of Viamet Pharmaceuticals, Inc. preferred stock for each Viamet Holdings preferred share;

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the issuance of shares of our common stock to holders of Viamet Holdings profits interest shares in conjunction with our conversion to a Delaware corporation pursuant to the terms of such profits interest shares (including the applicable threshold valuation) and our plan of conversion; and

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the automatic conversion of preferred stock to common stock upon the closing of this offering.

Collectively, the transactions underlying these adjustments are referred to as the Transactions.

The unaudited pro forma condensed consolidated statements of comprehensive loss give effect to the Transactions as though the Transactions had occurred as of January 1, 2012. The unaudited pro forma condensed consolidated balance sheet gives effect to the Transactions as though the Transactions had occurred as of March 31, 2014.

The unaudited pro forma condensed consolidated financial statements are for illustrative and informational purposes only and are not intended to represent what our results of operations or financial position would have been had we operated as a standalone public company during the periods presented or if the Transactions had actually occurred as of the dates indicated. The unaudited pro forma condensed consolidated financial statements should not be considered indicative of our future results of operations or financial position as a standalone public company.

The summary of our consolidated financial data set forth below should be read together with our consolidated financial statements and the related notes to those statements, as well as “Selected Consolidated Financial Data,” “Unaudited Pro Forma Condensed Consolidated Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Certain Relationships and Transactions with Related Persons,” appearing elsewhere in this prospectus.


	Historical												Pro Forma
	Viamet Holdings												Viamet Pharmaceuticals, Inc.
	Year Ended December 31,						Three Months Ended March 31,						Year Ended December 31,						Three Months Ended March 31,
	2012			2013			2013			2014			2012			2013			2014
							(unaudited)						(unaudited)
	(in thousands, except share per share data)
Consolidated Statement of Operations Data:
Revenue	$	3,484		$	2,873		$	890		$	365		$	881		$	1,077		$	227
Operating expenses:
Research and development		8,760			10,789			2,379			3,808			3,702			5,598			2,134
General and administrative		2,650			2,872			626			1,265			2,615			2,884			1,253

Total expense		11,410			13,661			3,005			5,073			6,317			8,482			3,387

Operating loss		(7,926	)		(10,788	)		(2,115	)		(4,708	)		(5,436	)		(7,405	)		(3,160	)
Change in fair value of financial instruments		(62	)		(387	)		(31	)		(2,574	)		(73	)		(431	)		(565	)
Interest income		3			—			—			—			3			—			—

Net loss	$	(7,985	)	$	(11,175	)	$	(2,146	)	$	(7,282	)	$	(5,506	)	$	(7,836	)	$	(3,725	)
Accretion and deemed dividends:
Preferred shares		(5,328	)		(7,516	)		(631	)		(19,714	)		—			—			—

Net loss attributable to common shareholders:
Basic and diluted	$	(13,313	)	$	(18,691	)	$	(2,777	)	$	(26,996	)	$	(5,506	)	$	(7,836	)	$	(3,725	)
Net loss per share attributable to common shareholders:
Basic and diluted	$	(12.10	)	$	(16.99	)	$	(2.52	)	$	(24.54	)		—			—			—

Weighted average common shares outstanding:
Basic and diluted		1,100,000			1,100,000			1,100,000			1,100,000			—			—			—

Pro forma net loss per share attributable to common shareholders (unaudited):
Basic and diluted


Pro forma weighted average shares used to compute net loss per share attributable to common shareholders (unaudited):
Basic and diluted


	As of December 31,						As of March 31, 2014
	2012			2013			Actual			Pro Forma⁽¹⁾	Pro Forma As Adjusted⁽²⁾⁽³⁾
							(unaudited)
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	1,042		$	1,435		$	7,383
Furniture, fixtures and equipment, net		314			221			201
Working (deficit) capital		(2,366	)		92			(943	)
Total assets		2,068			2,715			9,071
Warrant liability		220			1,017			4,761
Members’ deficit and stockholders’ deficit		(46,592	)		(65,109	)		(92,061	)

⁽¹⁾	The pro forma balance sheet data give effect to the completion of the Reorganization, including the net exercise of warrants to purchase preferred shares, and the conversion of preferred stock and profits interest shares due to the conversion of Viamet Holdings to Viamet Pharmaceuticals, Inc.

⁽²⁾	The pro forma as adjusted balance sheet data give effect to our issuance and sale of shares of common stock in this offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

⁽³⁾

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working (deficit) capital, total assets and stockholders’ equity by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1.0 million shares in the number of shares of common stock offered by us at the assumed initial public offering price would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working (deficit) capital, total assets and and stockholders’ equity by $ million, assuming an initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below or additional risks and uncertainties not presently known to us or that we currently deem immaterial could materially and adversely harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment.

Risks Related to our Financial Position and Need for Additional Capital

We have incurred significant losses since our inception. We expect to incur losses over the next several years and may never achieve or maintain profitability.

We have incurred significant operating losses in every year since inception and expect to incur net operating losses for the foreseeable future. Our net loss was $11.2 million for the year ended December 31, 2013, $8.0 million for the year ended December 31, 2012 and $7.3 million for the three months ended March 31, 2014. As of March 31, 2014, we had an accumulated deficit of $92.1 million. We do not know whether or when we will become profitable. To date, we have not generated any revenues from product sales and have financed our antifungal operations primarily through private placements of our preferred stock and, to a lesser extent, through funding from the National Institutes of Health, or the NIH, and the U.S. Internal Revenue Service, or the IRS. We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and, beginning in 2011, clinical trials. We are still in the early stages of development of our product candidates, and we have not completed development of any product candidate. We expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on our members’ deficit and working capital. We anticipate that our expenses will increase substantially if and as we:

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continue our Phase 2a clinical trials of VT-1161, our lead candidate, for treatment of patients with acute vulvovaginal candidiasis, or AVVC, commonly known as a vaginal yeast infection, and patients with interdigital tinea pedis, also known as athlete’s foot;

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initiate our Phase 2b clinical trials of VT-1161 in patients with recurrent vulvovaginal candidiasis, or RVVC, and patients with onychomycosis, a fungal infection of the nail;

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initiate and continue the research and development of our other product candidates and potential product candidates, including VT-1129 and VT-1598 and its analogues;

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seek to discover and develop additional product candidates;

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seek regulatory approvals for any product candidates that successfully complete clinical trials;

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establish a sales, marketing and distribution infrastructure in the future to commercialize any products for which we may obtain regulatory approval;

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require the manufacture of larger quantities of product candidates for clinical development and potentially commercialization;

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maintain, expand and protect our intellectual property portfolio;

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hire additional clinical, quality control and scientific personnel; and

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add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts and personnel and infrastructure necessary to help us comply with our obligations as a public company.

Our ability to become and remain profitable depends on our ability to generate revenue. We do not expect to generate significant revenue unless and until we are able to obtain marketing approval for, and successfully commercialize, one or more of our product candidates. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates, manufacturing, marketing and selling any products for which we may obtain regulatory approval, satisfying any post-marketing requirements and obtaining reimbursement for our products from private insurance or government payors. We are only in the preliminary stages of most of these activities and have not yet commenced other of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the U.S. Food and Drug Administration, or the FDA, or comparable non-U.S. regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our product candidates, our expenses could increase.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of product candidates or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

In addition, the report of our independent registered public accounting firm with respect to our consolidated financial statements appearing elsewhere in this prospectus contains an explanatory paragraph stating that our recurring losses from operations and our net capital deficiency raise substantial doubt about our ability to continue as a going concern. The inclusion of a going concern explanatory paragraph in the report of our independent registered public accounting firm may make it more difficult for us to secure additional financing or enter into strategic relationships on terms acceptable to us, if at all, and may materially and adversely affect the terms of any financing that we might obtain. If we are unable to obtain sufficient capital in this offering, our business, financial condition and results of operations will be materially and adversely affected and we will need to obtain alternative financing or significantly modify our operational plans to continue as a going concern. Further, even if we successfully complete and receive the net proceeds from this offering, given our planned expenditures for the next several years, including expenditures in connection with our clinical trials of VT-1161, our independent registered public accounting firm may conclude, in connection with the preparation of our financial statements for fiscal year 2014 or any other subsequent period, that there is substantial doubt regarding our ability to continue as a going concern.

We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the Phase 2a clinical trials of VT-1161, initiate Phase 2b clinical trials of VT-1161, advance VT-1129 and VT-1598 and its analogues into clinical development, continue research and development, initiate clinical trials and, if development succeeds, seek regulatory approval of our product candidates. Our

expenses could further increase if we initiate new research and preclinical development efforts for other product candidates. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, upon the closing of this offering, we expect to incur significant additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

We believe that the net proceeds from this offering, together with our existing cash and cash equivalents of $7.4 million as of March 31, 2014, will enable us to fund our operating expenses and capital expenditure requirements for at least the next months. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. Our future capital requirements, both short-term and long-term, will depend on many factors, including:

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the progress, timing, costs and results of our ongoing Phase 2a clinical trials of VT-1161 and our planned Phase 2b clinical trials of VT-1161;

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the scope, progress, timing, costs and results of clinical trials of, and research and preclinical development efforts for, other product candidates, including VT-1129 and VT-1598 and its analogues, and any future product candidates;

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our ability to enter into and the terms and timing of any collaborations, licensing or other arrangements that we may establish;

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the number and development requirements of other product candidates that we pursue;

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the costs, timing and outcome of regulatory review of our product candidates by the FDA and comparable non-U.S. regulatory authorities;

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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

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the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

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our headcount growth and associated costs as we expand our research and development and establish a commercial infrastructure;

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the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

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the extent to which we acquire or in-license other products and technologies;

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the costs of operating as a public company; and

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the effect of competing technological and market developments.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing

to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.

Raising additional capital may cause dilution to our stockholders, including purchasers of our common stock in this offering, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, government or other third party funding, collaborations and licensing arrangements. We do not have any committed external source of funds other than limited grant funding from the NIH and from the Defense Medical Research and Development Program of the U.S. Department of Defense. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, your ownership interest may be materially diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. Securing additional financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

We commenced active operations in 2005, and our operations to date have been limited to organizing and staffing the company, business planning, raising capital, developing our technology, identifying potential product candidates, undertaking preclinical studies and, beginning in 2011, conducting clinical trials. All but one of our product candidates are still in preclinical development. We have not yet demonstrated our ability to successfully obtain regulatory approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

In addition, as a young business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

We expect our financial condition and operating results to continue to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

Risks Related to the Discovery and Development of our Product Candidates

Our research and development of product candidates is focused on the identification of small molecule inhibitors of metalloenzymes for the treatment of human fungal infections. Our approach is unproven and we do not know whether we will be successful in our efforts to use our product platform to build a pipeline of product candidates or if we will be able to develop any products of commercial value.

Our scientific approach focuses on using our proprietary technology to identify small molecule inhibitors of metalloenzymes for the treatment of human fungal infections. Any product candidates that we develop may not effectively inhibit the targeted metalloenzyme or any metalloenzyme, and we may not be successful in using our product platform, called Metallophile^® Technology, to build a pipeline of small molecule inhibitors of metalloenzyme targets and progress these product candidates through clinical development for the treatment of any medical conditions.

Even if we are successful in continuing to build our pipeline, we may not be able to develop product candidates that are safe and effective metalloenzyme inhibitors. Our research programs may initially show promise in creating potential product candidates, yet fail to yield viable product candidates for clinical development for a number of reasons, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. Our research programs to identify new product candidates will require substantial technical, financial and human resources. In addition, we may focus our efforts and resources on one or more potential product candidates that ultimately prove to be unsuccessful. If we are unable to identify suitable additional compounds for preclinical and clinical development, our ability to develop product candidates and obtain product revenues in future periods could be compromised, which could result in significant harm to our financial position and adversely impact our stock price.

We are early in our development efforts and have only one product candidate in Phase 2a clinical trials. All of our other product candidates are still in preclinical development. If we are unable to commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

We are early in our development efforts and have only one product candidate in Phase 2a clinical trials. All of our other product candidates are still in preclinical development. We have invested substantially all of our efforts and financial resources in the identification and preclinical development of metalloenzyme inhibitors. Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our product candidates and the viability of metalloenzyme inhibitors as a source of additional product candidates. The success of our product candidates will depend on several factors, including the following:

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completion of successful preclinical studies and clinical trials;

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submitting investigational new drug applications, or INDs, to the FDA and being allowed to initiate clinical trials of product candidates in addition to VT-1161;

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applying for and receiving marketing approvals from applicable regulatory authorities for our product candidates;

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the extent of any required post-marketing approval commitments to applicable regulatory authorities;

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obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

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establishment of supply arrangements with third party raw materials suppliers and manufacturers;

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making arrangements with third party manufacturers for, or establishing, commercial manufacturing capabilities;

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launching commercial sales of the products, if and when approved, whether alone or in collaboration with others;

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obtaining approval of labeling without unacceptable restrictions;

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acceptance of the products, if and when approved, by patients, the medical community and third party payors;

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effectively competing with other therapies;

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obtaining and maintaining healthcare coverage and adequate reimbursement;

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protecting our rights in our intellectual property portfolio; and

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maintaining a continued acceptable safety profile of the products following approval.

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.

Additionally, certain invasive fungal infection treatment regimens typically involve initial treatments as an intravenous infusion, with a step down to an oral formulation of the same or a similar medication to complete the course of treatment. For example, we currently have in preclinical development an oral form of VT-1598, and we are also developing a pro-drug formulation for intravenous administration. If we are unable to successfully develop and achieve regulatory approval for an intravenous formulation of the product candidates we develop for the treatment of certain invasive fungal infections, or are delayed in developing and obtaining regulatory approval for our intravenous formulation of any of these product candidates, the commercial success of these products could be adversely affected.

Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

One of our product candidates is in clinical development and all of our other product candidates are in preclinical development. The risk of failure of all of our product candidates is high. It is impossible to predict when, or if, any of our product candidates will prove effective or safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome.

The clinical development of our product candidates is susceptible to the risk of failure inherent at any stage of drug development, including failure to demonstrate efficacy in a clinical trial or across a broad population of patients, the occurrence of serious or medically or commercially unacceptable adverse events, failure to comply with protocols or applicable regulatory requirements and determination by the FDA or any comparable non-U.S. regulatory authority that a drug product is not approvable. It is possible that even if one or more of our product candidates has a beneficial effect, that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any. Similarly, in our clinical trials we may fail to detect toxicity of or intolerability caused by our product candidates, or mistakenly believe that our product candidates are toxic or not well tolerated when that is not in fact the case.

The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Our ongoing clinical trials, including both of our Phase 2a clinical trials of VT-1161 were conducted with small patient populations and were not powered to determine efficacy with statistical significance, making it difficult to predict whether the favorable results that we observed in such studies will be repeated in larger and more advanced clinical trials and in our target indications. Additionally, both of our ongoing Phase 2a clinical trials of VT-1161 were for a shorter period of dosing and different indications than our planned Phase 2b clinical trials of this product candidate.

In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical trial participants. For example, the Phase 2b clinical trials of VT-1161 that we expect to initiate have different trial designs and are for different disease indications than our ongoing Phase 2a clinical trials of VT-1161. As a result, if we initiate these planned Phase 2b clinical trials, the results may vary significantly from the results of our Phase 2a clinical trials of VT-1161. Any Phase 2, Phase 3 or other clinical trials that we may conduct may not demonstrate the efficacy and safety necessary to obtain regulatory approval to market our product candidates.

The design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced or completed. We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. Our beliefs that results of our Phase 2a clinical trial of VT-1161 for AVVC may be indicative of results in our planned Phase 2b clinical trial for RVVC and that results of our Phase 2a clinical trial of VT-1161 for interdigital tinea pedis may be indicative of results in our planned Phase 2b clinical trial for onychomycosis may not be correct. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Even if we believe that the results of clinical trials for our product candidates warrant marketing approval, the FDA or comparable non-U.S. regulatory authorities may disagree and may not grant marketing approval of our product candidates. We expect that the primary efficacy endpoint in our onychomycosis Phase 2b clinical trial and, if it is successful, in our pivotal Phase 3 clinical trials for this indication will be complete therapeutic cure. This may be an exacting clinical endpoint to satisfy.

If we experience any of a number of possible unforeseen events in connection with clinical trials of our product candidates, potential marketing approval or commercialization of our product candidates could be delayed or prevented.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:

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regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

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we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial agreements or clinical trial protocols with prospective investigators or trial sites;

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patients that enroll in a clinical trial may misrepresent their eligibility to do so or may otherwise not comply with the clinical trial protocol, resulting in the need to drop the patients from the clinical trial, increase the needed enrollment size for the clinical trial or extend the clinical trial’s duration;

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the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;

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clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;

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our third party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

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we may have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks;

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regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

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the cost of clinical trials of our product candidates may be greater than we anticipate;

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the FDA or comparable non-U.S. regulatory authorities may disagree with our clinical trial design or our interpretation of data from preclinical studies and clinical trials;

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the FDA or comparable non-U.S. regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes or facilities of third party manufacturers with which we enter into agreements for clinical and commercial supplies;

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the approval policies or regulations of the FDA or comparable non-U.S. regulatory authorities may significantly change in a manner rendering our clinical data insufficient to obtain regulatory approval;

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the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and

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our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the trials.

If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA and comparable non-U.S. regulators, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of these product candidates.

We are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining marketing approval from the FDA. Comparable non-U.S. regulatory authorities, such as the European Medicines Agency, or EMA, impose similar restrictions. We may never receive such approvals. We must complete extensive preclinical development and clinical trials to demonstrate the safety and efficacy of our product candidates in humans before we will be able to obtain these approvals.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome. We have not previously completed late stage clinical trials or submitted a new drug application, or an NDA, to the FDA or similar drug approval filings to comparable non-U.S. regulatory authorities for any of our product candidates.

Any inability to successfully complete preclinical and clinical development could result in additional costs to us and impair our ability to generate revenues from product sales, and, if we enter into any

collaboration arrangements, regulatory and commercialization milestones and royalties. In addition, if we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to initiate or successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not favorable or are only modestly favorable or if there are safety concerns, we may:

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be delayed in obtaining or unable to obtain marketing approval for our product candidates;

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obtain approval for indications or patient populations that are not as broad as intended or desired;

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obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;

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be subject to additional post-marketing testing requirements; or

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be required to remove the product from the market after obtaining marketing approval.

Our product development costs will also increase if we experience delays in testing or marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations. In addition, many of the factors that cause, or lead to, clinical trial delays may ultimately lead to the denial of regulatory approval of any of our product candidates.

If we experience delays or difficulties in the enrollment of patients in clinical trials, we may not achieve our clinical development on our anticipated timeline, or at all, and 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 comparable non-U.S. regulatory authorities. In addition, some of our competitors currently have ongoing clinical trials, and in the future may have clinical trials, for product candidates that treat the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. Patient enrollment is affected by other factors including:

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the size and nature of the patient population;

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the severity of the disease under investigation;

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the eligibility criteria for the study in question;

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the perceived risks and benefits of the product candidate under study in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating;

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the efforts to facilitate timely enrollment in clinical trials;

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the patient referral practices of physicians;

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the proximity of patients to clinical sites;

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the ability to monitor patients adequately during and after treatment;

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the proximity and availability of clinical trial sites for prospective patients; and

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the conduct of clinical trials by competitors for product candidates that treat the same indications as our product candidates.

Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether and could delay or prevent our receipt of necessary regulatory approvals. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, delay or halt the development of and approval processes for our product candidates and jeopardize our ability to achieve our clinical development timeline and goals, including the dates by which we will commence, complete and receive results from clinical trials, commence sales of and generate revenues from our product candidates. Any of the foregoing could cause the value of our company to decline and limit our ability to obtain additional financing.

If serious adverse events or undesirable side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of our product candidates.

Serious adverse events or undesirable side effects caused by, or other unexpected properties of, our product candidates could cause an institutional review board or regulatory authorities to interrupt, delay or halt clinical trials of one or more of our product candidates and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable non-U.S. regulatory authorities. If our product candidates are associated with serious adverse effects or undesirable side effects in clinical trials or have characteristics that are unexpected, we may need to abandon their development or limit development to more narrow uses or subpopulations in which the serious adverse effects or undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. For example, the half-life of our product candidate VT-1161 could be a concern in treating women of child-bearing age, as fungal CYP51 inhibitors have the potential to impair prenatal development. Many compounds that initially showed promise in clinical or preclinical testing for treating disease have later been found to cause side effects that prevented or limited further development of the compound.

We may expend our limited resources to pursue a particular 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 focus on research programs and product candidates that we identify for 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 research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

Risks Related to our Dependence on Third Parties

We rely, and expect to continue to rely, on third parties to conduct our preclinical studies and our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials.

We do not have an infrastructure for the conduct of preclinical studies and human clinical trials. We currently rely, and expect to continue to rely on third parties to conduct our preclinical studies. Additionally, we currently rely on a third party clinical research organization, or CRO, to conduct our ongoing Phase 2a clinical trials of VT-1161 and expect to rely on CROs to conduct future clinical trials of our product candidates, including our planned Phase 2b clinical trials of VT-1161. We have entered into and expect to continue to enter into agreements with various third parties, such as CROs, clinical

data management organizations, medical institutions and clinical investigators, to conduct our preclinical studies and our clinical trials, including our planned Phase 2b clinical trials of VT-1161. Any of these agreements might terminate for a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, that would delay our product development activities.

Our reliance on these third parties for research and development activities will reduce our day-to-day control over these activities, but we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly referred to as good clinical practices, or GCPs, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. The FDA enforces these GCPs through periodic inspections of trial sponsors, principal investigators, clinical trial sites and institutional review boards. If we or our third party contractors fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our product candidates, which would delay the marketing approval process. We cannot be certain that, upon inspection, the FDA will determine that any of our clinical trials comply with GCPs.

Furthermore, the third parties conducting preclinical studies and clinical trials on our behalf are not our employees, and except for remedies available to us under our agreements with such contractors, we cannot control whether or not they devote sufficient time, skill and resources to our ongoing development programs. These contractors may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting preclinical studies, clinical trials or other drug development activities, which could impede their ability to devote appropriate time to our preclinical and clinical programs. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, conduct preclinical studies as expected or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates. If that occurs, we will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates. In such an event, our financial results and the commercial prospects for any product candidates that we seek to develop could be harmed, our costs could increase and our ability to generate revenues could be delayed, impaired or foreclosed.

We also rely, and expect to continue to rely, on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.

We contract with third parties for the manufacture of our product candidates for preclinical and clinical testing and expect to continue to do so for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost, or that we will fail to meet applicable regulatory requirements, any of which could delay, prevent or impair our development or commercialization efforts.

We do not have any manufacturing facilities or personnel. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical and clinical testing. We also expect to rely on third party manufacturers or third party collaborators for the manufacture of commercial supply of any product candidates for which we or our collaborators obtain marketing approval. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

We may be unable to establish any agreements with third party manufacturers or to do so on acceptable terms. Even if we are able to establish agreements with third party manufacturers, reliance on third party manufacturers entails additional risks, including:

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manufacturing delays if our third party contractors give greater priority to the supply of other products over our product candidates or otherwise do not satisfactorily perform according to the terms of the agreements between us and them;

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the possible mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied;

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reliance on the third party for regulatory compliance and quality assurance;

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the possible breach of the manufacturing agreement by the third party;

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the possible misappropriation of our proprietary information, including our trade secrets and know-how; and

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the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

Third party manufacturers may not be able to comply with current good manufacturing practices, or cGMP, regulations or similar regulatory requirements outside the United States. Although we do not have control over the day-to-day operations of our third party manufacturers, we are ultimately responsible for ensuring that our product candidates are manufactured in accordance with cGMP. Our failure, or the failure of our third party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products.

We currently rely on a small number of third party contract manufacturers for all of our required raw materials, drug substance and finished product for our preclinical studies and clinical trials. For example, we contract with one third party manufacturer to supply us with VT-1161 drug substance, a second manufacturer to provide VT-1161 drug product, currently tablets, and a third manufacturer to provide packaging and labeling. We obtain our supplies of VT-1161 from these manufacturers on a purchase order basis and do not have any long-term agreements with these third parties. If any of these manufacturers should become unavailable to us for any reason, we may incur some delay in our clinical trials as we identify or qualify replacements.

Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. If our current contract manufacturers cannot perform as agreed, we may be required to replace such manufacturers. Although we believe that there are several potential alternative manufacturers who could manufacture our product candidates, we may incur added costs and delays in identifying and qualifying any such replacement.

Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

We may seek to enter into collaborations with third parties for the development and commercialization of our product candidates. If we fail to enter into such collaborations, or such collaborations are not successful, we may not be able to capitalize on the market potential of our product candidates.

We may seek third party collaborators for development and commercialization of our product candidates. Our likely collaborators for any marketing, distribution, development, licensing or broader collaboration arrangements include large and mid-size pharmaceutical companies and regional and

national biotechnology companies. We are not currently party to any such arrangement that relates to the human antifungal business. However, if we do enter into any such arrangements with any third parties in the future, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.

Collaborations involving our product candidates would pose the following risks to us:

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collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;

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collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities;

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collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

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collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

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collaborators with marketing and distribution rights to one or more of our products may not commit sufficient resources to the marketing and distribution of such product or products;

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collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;

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collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;

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disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our products or product candidates or that result in costly litigation or arbitration that diverts management attention and resources; and

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collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.

Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner, or at all. If a collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated. Our collaboration programs, which are not associated with our human antifungal business, will be retained by Legacy VPI following the Reorganization.

If we are not able to establish collaborations, we may have to alter our development and commercialization plans.

Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fund expenses. For some of our product candidates, we may decide to collaborate with biotechnology and pharmaceutical companies for the development and potential commercialization of those product candidates.

We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or comparable non-U.S. regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than one with us for our product candidates. We may also be restricted under future license agreements from entering into agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization, reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.

Risks Related to our Intellectual Property

We may be unable to obtain and maintain patent protection for our technology and products or the scope of the patent protection obtained may not be sufficiently broad, such that our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.

Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and products. If we do not adequately protect our intellectual property, competitors may be able to erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and product candidates.

The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, we might not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents,

covering any technology that we may license from third parties in the future. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain. No consistent policy regarding the breadth of claims allowed in biotechnology and pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions. In addition, the determination of patent rights with respect to pharmaceutical compounds commonly involves complex legal and factual questions, which have in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than United States law does. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our patent portfolio (including applications) or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued that protect our technology or products, in whole or in part, or that effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

Moreover, we may be subject to a third party preissuance submission of prior art to the U.S. Patent and Trademark Office, or become involved in opposition, derivation, reexamination, inter partes review, post-grant 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 of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us and without payment to us, or result in our inability to manufacture or commercialize products without infringing third party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

Even if the patent applications in our patent portfolio issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. Our competitors may also seek approval to market their own products similar to or otherwise competitive with our products. Alternatively, our competitors may seek to market generic versions of any approved products by submitting abbreviated new drug applications, or ANDAs to the FDA in which they claim that patents owned or licensed by us are invalid, unenforceable or not infringed. In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find that our patents are invalid or unenforceable, or that our competitors are competing in a non-infringing manner. Thus, even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States 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 products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

Competitors may infringe our patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming and divert the time and attention of our management and scientific personnel. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both. In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention. An adverse outcome in a litigation or proceeding involving our patents could limit our ability to assert our patents against those parties or other competitors, and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products. Any of these occurrences could adversely affect our competitive business position, business prospects and financial condition. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.

Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. 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 concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our products candidates, including interference proceedings before the U.S. Patent and Trademark Office. Third parties may assert infringement claims against us based on existing or future intellectual property rights. The outcome of intellectual property litigation is subject to uncertainties that

cannot be adequately quantified in advance. The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our product candidates, products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Proving invalidity is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. We may also assert that a patent claim for a corresponding compound does not cover our product. 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 we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. If the owner of the intellectual property at issue is unwilling or unable to offer a license on commercially reasonable terms or otherwise, or if we contest an allegation of infringement and receive an adverse judgment, we could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, 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 product candidates or force us to cease some of our business operations, which could materially harm our business.

If we are unable to obtain licenses from third parties on commercially reasonable terms or fail to comply with our obligations under such agreements, our business could be harmed.

It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would be required to obtain a license from these third parties. If we are unable to license such technology, or if we are forced to license such technology, on unfavorable terms, our business could be materially harmed. If we fail to comply with our obligations under license agreements, our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or market, or may be forced to cease developing, manufacturing or marketing, any product that is covered by these agreements or may face other penalties under such agreements. Such an occurrence could materially adversely affect the value of the product candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, cause us to lose our rights under these agreements, including our rights to important intellectual property or technology or impede, delay or prohibit the further development of commercialization of one or more product candidates that rely on such agreements.

We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that our employees or we have used or disclosed intellectual property, including trade secrets, know-how or other proprietary information, of any employee’s former employer, which may include biotechnology or pharmaceutical companies that are our competitors. Litigation may be necessary to defend against these claims.

In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we

may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.

If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. 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 substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. 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 intellectual property litigation or other proceedings could compromise our ability to compete in the marketplace and obtain future financing and adversely impact the performance of our common stock.

If we are unable to protect the confidentiality of our trade secrets, including our Metallophile Technology, our business and competitive position could be harmed.

In addition to seeking patents for some of our product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. In particular, we have maintained our Metallophile Technology as a trade secret. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, or if we are unable to establish the enforceability of any of our trade secrets, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position could be harmed.

Risks Related to Regulatory Approval and Marketing of Our Product Candidates and Other Legal Compliance Matters

Even if we initiate and successfully complete the necessary clinical trials, the marketing approval process is expensive, time consuming and uncertain. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our product candidates, and our ability to generate revenue will be materially impaired.

Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA, other regulatory agencies in the United States and by comparable non-U.S. regulatory authorities. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. Our product candidates are in the early stages of development and are subject to the risks of failure inherent in drug development. We have not received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in conducting and managing the clinical trials, and in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third party CROs to assist us in this process. Securing marketing approval requires the submission of extensive nonclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.

The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are required and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional nonclinical, clinical or other studies. In addition, varying interpretations of the data obtained from nonclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable. If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenues will be materially impaired.

We may not be able to obtain or maintain orphan drug designation or exclusivity for our product candidates.

We are seeking orphan drug designation for VT-1129 in the United States for the treatment of cryptococcal meningitis and may seek orphan drug designation for other 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 in the United States.

Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the EMA from approving another marketing application for the same indication for that drug during that time period. The applicable 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.

We cannot assure you that the application for orphan drug designation of VT-1129, or any future application with respect to any other product candidate, will be granted. If we are unable to obtain orphan drug designation in the United States, we will not be eligible to obtain the period of market exclusivity that could result from orphan drug designation or be afforded the financial incentives associated with orphan drug designation. Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug 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.

Any fast track designation or grant of priority review status by the FDA may not actually lead to a faster development or regulatory review or approval process, nor will it assure FDA approval of our product candidates. Additionally, our product candidates may treat indications that do not qualify for priority review vouchers.

We may seek fast track designation for some of our product candidates or priority review of applications for approval of our product candidates. If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for FDA fast track designation. If a product candidate offers major advances in treatment, the FDA may designate it eligible for priority review. The FDA has broad discretion whether or not to grant these designations, so even if we believe a particular product candidate is eligible for these designations, we cannot assure you that the FDA would decide to grant them. Even if we do receive fast track designation or priority review, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program.

Additionally, the FDA is authorized to grant a priority review voucher to sponsors of certain tropical disease applications, which priority review vouchers may be used to obtain priority review for subsequent applications. Although Cryptococcal infections share many of the characteristics of tropical diseases that may qualify for a priority review voucher, cryptococcal meningitis is not currently formally designated as a neglected tropical disease. If the FDA does not include cryptococcal meningitis in a future revision of the list of qualifying diseases, our development of VT-1129 for the treatment of cryptococcal meningitis would not be eligible to qualify for an award of a priority review voucher.

Any breakthrough therapy designation granted by the FDA for our product candidates may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.

We may seek a breakthrough therapy designation for some of our product candidates. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For

drugs and biologics that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA may also be eligible for accelerated approval if the relevant criteria are met.

Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the products no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

Designation of our product candidates as qualified infectious disease products is not assured and, in any event, even if granted, may not actually lead to a faster development or regulatory review, and would not assure FDA approval of our product candidates.

We may be eligible for designation of certain of our product candidates as qualified infectious disease products, or QIDPs. A QIDP is “an antibacterial or antifungal drug intended to treat serious or life-threatening infections, including those caused by an antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens or certain “qualifying pathogens.” A product designated as a QIDP will also be granted priority review by the FDA and can qualify for “fast track” status. Upon the approval of an NDA for a drug product designated by the FDA as a QIDP, the product is granted a period of five years of regulatory exclusivity that is in addition to any other period of regulatory exclusivity for which the product is eligible. The FDA has broad discretion whether or not to grant these designations, so even if we believe a particular product candidate is eligible for such designation or status, the FDA could decide not to grant it. Moreover, even if we do receive such a designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures and there is no assurance that our product candidate, even if determined to be a QIDP, will be approved by the FDA.

Our failure to obtain marketing approval in foreign jurisdictions would prevent our product candidates from being marketed abroad, and any approval we are granted for our product candidates in the United States would not assure approval of product candidates in foreign jurisdictions.

In order to market and sell our products in the European Union and many other jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from non-U.S. regulatory authorities on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one non-U.S. regulatory authority does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others countries. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market.

Even if we obtain marketing approval for our product candidates, the terms of approvals and ongoing regulation of and post-marketing restrictions for our products may limit how we manufacture and market our products and compliance with such requirements may involve substantial resources, which could materially impair our ability to generate revenue.

Even if marketing approval of a product candidate is granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation, including the possible requirement to implement a risk evaluation and mitigation strategy or to conduct costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product. We must also comply with requirements concerning advertising and promotion for any of our product candidates for which we obtain marketing approval. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus, we will not be able to promote any products we develop for indications or uses for which they are not approved. In addition, manufacturers of approved products and those manufacturers’ facilities are required to ensure that quality control and manufacturing procedures conform to cGMPs, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We and our contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs.

Accordingly, assuming we receive marketing approval for one or more of our product candidates, we and our contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control. If we are not able to comply with post-approval regulatory requirements, we could have the marketing approvals for our products withdrawn by regulatory authorities and our ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Thus, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

Any product candidate for which we obtain marketing approval will be subject to strict enforcement of post-marketing requirements and we could be subject to substantial penalties, including withdrawal of our product from the market, if we fail to comply with applicable regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.

Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include restrictions governing promotion of an approved product, submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping.

The FDA and other federal and state agencies, including the Department of Justice, closely regulate compliance with all requirements governing prescription drug products, including requirements pertaining to marketing and promotion of drugs in accordance with the provisions of the approved labeling and manufacturing of products in accordance with cGMP requirements. Violations of such requirements may lead to investigations alleging violations of the FDCA and other statutes, including the False Claims Act and other federal and state health care fraud and abuse laws as well as state consumer protection laws. Our failure to comply with all regulatory requirements, and later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, may yield various results, including:

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litigation involving patients taking our products;

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restrictions on such products, manufacturers or manufacturing processes;

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restrictions on the labeling or marketing of a product;

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restrictions on product distribution or use;

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requirements to conduct post-marketing studies or clinical trials;

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warning or untitled letters;

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withdrawal of the products from the market;

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refusal to approve pending applications or supplements to approved applications that we submit;

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recall of products;

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fines, restitution or disgorgement of profits or revenues;

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suspension or withdrawal of marketing approvals;

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damage to relationships with any potential collaborators;

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unfavorable press coverage and damage to our reputation;

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refusal to permit the import or export of our products;

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product seizure; or

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injunctions or the imposition of civil or criminal penalties.

Non-compliance by us or any future collaborator with regulatory requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with regulatory requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

Our relationships with customers and third party payors will be subject to applicable anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.

Healthcare providers, physicians and third party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with third party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute any products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations, include the following:

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the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;

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the federal False Claims Act, which imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing regulations, which imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

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federal law requires applicable manufacturers of covered drugs to report payments and other transfers of value to physicians and teaching hospitals, with the first reports due in 2014; and

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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers.

Some state and foreign laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign laws may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties including, without limitation, damages, fines, imprisonment, exclusion of products from participation in government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government funded healthcare programs.

Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling certain product candidates and products outside of the United States and require us to develop and implement costly compliance programs.

If we expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate, as well as with the Foreign Corrupt Practices Act, or FCPA. Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the medical device 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. The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

Currently, we do not operate any pharmaceutical research and development or production facilities, such as laboratory, development or manufacturing facilities. However, if we decided to operate our own pharmaceutical research and development and production facilities, we would be subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Such operations may involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations may also produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and wastes, we would not be able to eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use or disposal of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

Although we would increase our level of workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials if we operated any research and development or production facilities, this insurance may not provide adequate coverage against potential liabilities. We do not expect to maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our possible future storage or disposal of biological, hazardous or radioactive materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Risks Related to the Commercialization of our Product Candidates

Even if one of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third party payors and others in the medical community necessary for commercial success and the market opportunity for the product candidate may be smaller than we estimate.

We have never commercialized a product. If any of our product candidates receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third party payors and others in the medical community. Physicians are often reluctant to switch their patients from existing therapies even when new and potentially more effective or convenient treatments enter the market. Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their physicians recommend switching products or they are required to switch therapies due to lack of reimbursement for existing therapies. Efforts to educate the medical community and third party payors on the benefits of our product candidates may require significant resources and may not be successful. Additionally, many of the existing products available to treat the conditions for which we are developing our product candidates are available on a generic basis and are offered and sold at low prices. Many of these generic products have been marketed by third parties for many years and are well accepted by physicians, patients and payors.

If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

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the efficacy, safety and potential advantages compared to alternative treatments;

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the clinical indications for which the product is approved;

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limitations or warnings, including distribution or use restrictions, contained in the product’s approved labeling;

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our ability to offer our products for sale at competitive prices;

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the convenience and ease of administration compared to alternative treatments;

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the willingness of the target patient population to try new therapies;

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the willingness of physicians to prescribe these therapies;

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the strength of marketing and distribution support;

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the approval of other new products for the same indications;

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changes in the standard of care for the targeted indications for the product;

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the timing of market introduction of our approved products as well as competitive products;

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the availability of third party coverage and adequate reimbursement;

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adverse publicity about the product or favorable publicity about competitive products;

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potential product liability claims;

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the prevalence and severity of any side effects; and

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any restrictions on the use of our products together with other medications.

The potential market opportunities for our product candidates are difficult to estimate precisely. Our estimates of the potential market opportunities are predicated on many assumptions including industry knowledge and publications, third party research reports and other surveys. While we believe that our internal assumptions are reasonable, these assumptions involve the exercise of significant judgment on the part of our management, are inherently uncertain and the reasonableness of these assumptions has not been assessed by an independent source. If any of the assumptions proves to be inaccurate, the actual markets for our product candidates could be smaller than our estimates of the potential market opportunities. If the actual market for our products is smaller than we expect, our product revenue may be limited and it may be more difficult for us to achieve or maintain profitability.

If any of our product candidates receives marketing approval and we, or others, later discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified or if strains of fungi become resistant to our products, our ability to market the drug could be compromised.

Clinical trials of our product candidates are conducted in carefully defined subsets of patients who have agreed to enter into clinical trials. Consequently, it is possible that our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, following approval of a product candidate, we, or others, discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, any of the following adverse events could occur:

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regulatory authorities may withdraw their approval of the drug or seize the drug;

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we, or our collaborators, if any, may be required to recall the drug or change the way the drug is administered;

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additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular drug;

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we may be subject to fines, injunctions or the imposition of civil or criminal penalties;

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regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;

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we, or our collaborators, if any, may be required to create a Medication Guide outlining the risks of the previously unidentified side effects for distribution to patients or institute a risk evaluation and mitigation strategy, or REMS;

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we, or our collaborators, could be sued and held liable for harm caused to patients;

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the drug may become less competitive; and

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our reputation may suffer.

Any of these events could have a material and adverse effect on our operations and business and could adversely impact our stock price.

One or more strains of fungi may develop resistance to our product candidates. Since we expect lack of resistance to be an important factor in the commercialization of our product candidates, the development of such resistance could have a material adverse impact on the acceptability and sales of any affected product that we commercialize.

If we are unable to establish and maintain adequate sales, marketing and distribution capabilities, or enter into sales, marketing and distribution arrangements with third parties, we may not be successful in commercializing our product candidates if and when they are approved.

We do not have a sales, marketing or distribution infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any product for which we obtain marketing approval, we will need to either establish a sales, marketing and distribution organization or contract with third parties for the performance of these functions.

In the future, we plan to build a focused sales and marketing infrastructure to market or co-promote some of our product candidates in the United States, if and when they are approved. There are risks involved with establishing our own sales and marketing capabilities. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. We expect we will commence the development of these capabilities prior to receiving approval of any of our product candidates. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

Factors that may inhibit our efforts to commercialize our products on our own include:

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our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

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the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future products;

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the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

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unforeseen costs and expenses associated with creating an independent sales and marketing organization.

Because we do not currently plan to seek regulatory approval for any of our product candidates outside of the United States until after we apply for marketing approval for the applicable product candidate in the United States, we cannot be certain when, if ever, we will recognize revenue from commercialization of our product candidates in any international markets. If we decide to commercialize any approved products outside of the United States, we expect to utilize a variety of types of collaboration, distribution and other marketing arrangements with one or more third parties to commercialize any product of ours that receives marketing approval. These may include independent distributors or pharmaceuticals companies.

If we are unable, or determine not, to establish our own sales, marketing and distribution capabilities and enter into arrangements with third parties to perform these services, our product revenues and our profitability, if any, are likely to be lower than if we were to market, sell and distribute any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.

We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully, than we do.

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face competition from many different sources, including commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies and private and public research institutions. We face competition with respect to our current product candidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future. Our potential competitors include major pharmaceutical companies, including Merck & Co., Inc., Astellas Pharma US, Pfizer, Inc. and Novartis AG and specialty pharmaceutical and biotechnology companies, such as Valeant Pharmaceuticals International and Anacor Pharmaceuticals, Inc. These competitors market existing approved drugs for the diseases and conditions that we are seeking to address with our product candidates and are developing new therapies for those diseases and conditions.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other non-U.S. regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.

In addition, our ability to compete may be affected in many cases by insurers or other third party payors seeking to encourage the use of generic products. One way in which insurers and other payors may encourage the use of generic drugs is by refusing to include more expensive branded drugs on their formularies or the lists of approved drugs for which they will provide reimbursement. Generic products are currently on the market for many of the indications that we are pursuing, and additional products are expected to become available on a generic basis over the coming years. If our product candidates achieve marketing approval, we expect that they will be priced at a significant premium over competitive generic products. Many generic products against which we may compete have been marketed by third parties for many years and are well accepted by physicians, patients and payors. For example, the principal products currently used for the treatment of RVVC and onychomycosis are generics. Price competition from generic products may limit our market opportunity and materially adversely affect our business and results of operations. Other currently branded products are likely to become generic by the time any of our product candidates reach the market.

Many of our competitors and potential competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established

companies. In addition to potential commercial competition, all of these third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies and technology licenses complementary to our programs or advantageous to our business.

If the FDA or comparable non-U.S. regulatory authorities approve generic versions of any of our products that receive marketing approval, or such authorities do not grant our products appropriate periods of exclusivity before approving generic versions of our products, the sales of our products could be adversely affected.

Once an NDA is approved, the product covered thereby becomes a “reference listed drug” in the FDA’s publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” commonly known as the Orange Book. Manufacturers may seek approval of generic versions of reference listed drugs through submission of ANDAs, in the United States. In support of an ANDA, a generic manufacturer need not conduct clinical trials. Rather, the applicant generally must show that its product has the same active ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as the reference listed drug and that the generic version is bioequivalent to the reference listed drug, meaning it is absorbed in the body at the same rate and to the same extent. Generic products may be significantly less costly to bring to market than the reference listed drug and companies that produce generic products are generally able to offer them at lower prices. Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or reference listed drug is typically lost to the generic product.

The FDA may not approve an ANDA for a generic product until any applicable period of non-patent exclusivity for the reference listed drug has expired. The Federal Food, Drug, and Cosmetic Act, or FDCA, provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity. Specifically, in cases where such exclusivity has been granted, an ANDA may not be submitted to the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification that a patent covering the reference listed drug is either invalid or will not be infringed by the generic product, in which case the applicant may submit its application four years following approval of the reference listed drug. While we believe that our product candidates contain active ingredients that would be treated as new chemical entities by the FDA and, therefore, if approved, should be afforded five years of data exclusivity, the FDA may disagree with that conclusion and may approve generic products after a period that is less than five years. Manufacturers may seek to launch these generic products following the expiration of the applicable marketing exclusivity period, even if we still have patent protection for our product.

Competition that our products may face from generic versions of our products could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those product candidates.

Even if we are able to commercialize any product candidates, the products may become subject to unfavorable pricing regulations, third party reimbursement practices or healthcare reform initiatives, which could harm our business.

The commercial success of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investments.

There is significant uncertainty related to third party payor coverage and reimbursement of newly approved drugs. The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

Our ability to commercialize any product candidates successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government healthcare programs, private health insurers, managed care plans and other organizations. Government authorities and third party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for any product that we commercialize and, even if these are available, the level of reimbursement may not be satisfactory. Inadequate reimbursement may adversely affect the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining and maintaining adequate reimbursement for our products may be difficult. We may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. If coverage and adequate reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval. Cost-control initiatives could cause us to decrease the price we might establish for products, which could result in lower than anticipated product revenues. If the prices for our products, if any, decrease or if governmental and other third party payors do not provide adequate coverage or reimbursement, our prospects for revenue and profitability will suffer.

There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or comparable non-U.S. regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or Medicare Modernization Act, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class in certain cases. Cost reduction initiatives and other provisions of this and other more recent legislation could decrease the coverage and reimbursement that is provided for any approved products. While the Medicare Modernization Act applies only 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 Medicare Modernization Act or other more recent legislation may result in a similar reduction in payments from private payors.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, commonly referred to as the Affordable Care Act, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Effective October 1, 2010, the Affordable Care Act revised the definition of “average manufacturer price” for reporting purposes, which could increase the amount of Medicaid drug rebates to states. Further, the law imposes a significant annual fee on companies that manufacture or import branded prescription drug products. Substantial provisions affecting compliance have also been enacted, which may affect our business practices with health care practitioners. We will not know the full effects of the Affordable Care Act until applicable federal and state agencies issue regulations or guidance under the new law. Although it is too early to determine the effect of the Affordable Care Act, the law appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our products candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.

In some countries, particularly the countries of the European Union, 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. 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 product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

We face an inherent risk of product liability claims as a result of the clinical testing of our product candidates despite obtaining appropriate informed consents from our clinical trial participants. We will face an even greater risk if we commercially sell any product that we may develop. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Regardless of the merits or eventual outcome, liability claims may result in:

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decreased demand for any product candidates or products that we may develop;

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injury to our reputation and significant negative media attention;

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withdrawal of clinical trial participants;

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significant costs to defend the related litigation;

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substantial monetary awards to trial participants or patients;

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loss of revenue;

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reduced resources of our management to pursue our business strategy; and

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the inability to commercialize any products that we may develop.

We currently hold $10.0 million in product liability insurance coverage in the aggregate, with a per incident limit of $10.0 million, which may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage as we initiate or expand our clinical trials or if we commence commercialization of our product candidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. If we are unable to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and commercial production and sale of our product candidates or result in future uninsured losses, which could adversely affect our business, financial condition, results of operations and prospects.

Risks Related to Employee Matters and Managing Growth

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on the research and development, clinical and business development expertise of Robert J. Schotzinger, M.D., Ph.D., our President and Chief Executive Officer, and Richard D. Katz, M.D., our Chief Business and Financial Officer, as well as the other principal members of our management, scientific and clinical team. Although we have entered into employment agreements with our executive officers, each of them may terminate their employment with us at any time. We only maintain “key person” insurance for our President and Chief Executive Officer.

Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. We may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous

pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating and executing our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

We expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development, regulatory affairs and, if any of our product candidates receives marketing approval, sales and marketing. Our management may need to divert a significant amount of its attention away from our day-to-day activities to manage these growth activities. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth in its operations, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. Our inability to effectively manage the expansion of our operations may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates. If our management is unable to effectively manage our expected growth, our expenses may increase more than expected, our ability to generate revenues could be reduced and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.

Risks Related to our Common Stock and this Offering

After this offering, our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to control all matters submitted to stockholders for approval.

Upon the closing of this offering, our executive officers and directors, combined with our stockholders who owned more than 5% of our outstanding common stock before this offering will, in the aggregate, beneficially own shares representing approximately % of our common stock ( % if the underwriters exercise in full their option to purchase additional shares). As a result, if these stockholders were to choose to act together, they would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership control may:

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delay, defer or prevent a change in control;

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entrench our management and the board of directors; or

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impede a merger, consolidation, takeover or other business combination involving us that other stockholders may desire.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our certificate of incorporation and our bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, 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. Among other things, these provisions:

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establish a classified board of directors such that only one of three classes of directors is elected each year;

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allow the authorized number of our directors to be changed only by resolution of our board of directors;

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limit the manner in which stockholders can remove directors from our board of directors;

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establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;

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require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;

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limit who may call stockholder meetings;

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authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and

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require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal specified provisions of our certificate of incorporation or bylaws that will become effective upon the closing of this offering.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. This could discourage, delay or prevent someone from acquiring us or merging with us, whether or not it is desired by, or beneficial to, our stockholders.

If you purchase shares of common stock in this offering, you will suffer immediate dilution in the book value of your investment.

The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. Based on an assumed initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, you will experience immediate dilution of $ per share, representing the difference between our pro forma net tangible book value per share, after giving effect to this offering, and the assumed initial public offering price. In addition, purchasers of common stock in this offering will have contributed approximately % of the

aggregate price paid by all purchasers of our stock but will own only approximately % of our common stock outstanding after this offering, excluding any shares of our common stock that they may have acquired prior to this offering. In addition, future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall. For a further description of the dilution that you will experience immediately after this offering, see “Dilution.”

An active trading market for our common stock may not develop.

Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. Although we have applied to have our common stock approved for listing on The NASDAQ Global Market, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop or is not sustained, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for the shares or at all. An inactive trading market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock in this offering.

Our stock price is likely to be volatile. The stock market in general and the market for smaller biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including:

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the success of existing or new competitive products or technologies;

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failure or discontinuation of any of our development programs;

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results of clinical trials of our product candidates or those of our competitors;

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regulatory or legal developments in the United States and other countries;

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developments or disputes concerning patent applications, issued patents or other proprietary rights;

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the recruitment or departure of key personnel;

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the level of expenses related to any of our product candidates or clinical development programs;

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the results of our efforts to discover, develop, acquire or in-license additional product candidates or products;

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actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;

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announcement or expectation of additional financing efforts;

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sales of our common stock by us, our insiders or other stockholders;

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variations in our financial results or those of companies that are perceived to be similar to us;

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changes in estimates or recommendations by securities analysts, if any, that cover our stock;

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changes in the structure of healthcare payment systems;

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market conditions in the pharmaceutical and biotechnology sectors;

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general economic, industry and market conditions; and

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the other factors described in this “Risk Factors” section.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have outstanding shares of common stock based on the number of shares outstanding as of March 31, 2014. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates or existing stockholders. The remaining shares are currently restricted as a result of securities laws or lock-up agreements but will become eligible to be sold at various times after the offering as described in the “Shares Eligible for Future Sale” section of this prospectus. Moreover, after this offering, holders of an aggregate of shares of our common stock will have rights, subject to specified conditions, to require us to file registration statements covering their shares or, along with holders of an additional shares of our common stock, to include their shares in registration statements that we may file for ourselves or other stockholders. We also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the “Underwriting” section of this prospectus.

In connection with the Reorganization, we expect to enter into several agreements with Legacy VPI governing the separation of our businesses, the provision of services during a transition period, responsibility for employee matters related to the separation and the licensing of certain intellectual property assets, including a license of our Metallophile Technology to Legacy VPI. If Legacy VPI is unable to satisfy its obligations under these agreements, engages in the same type of business we conduct, takes advantage of business opportunities that might be attractive to us or conflicts arise between us and Legacy VPI, our ability to operate successfully and expand our business may be hampered.

Prior to the Reorganization, which will occur prior to this offering, VPI handled all financial and administrative aspects of our business. In connection with the Reorganization, Legacy VPI will transfer to us a portion of its assets, including assets associated with financial, administrative and other support services, as well as 11 of the 14 employees currently employed by Legacy VPI. In connection with the Reorganization, we and Legacy VPI expect to enter into various agreements governing the separation of the prostate business and our collaboration programs from the antifungal business, including a separation and distribution agreement, a transition services agreement, an employee matters agreement, a

Metallophile Technology license agreement, which will include a limited license from us to Legacy VPI to our Metallophile Technology, and a license agreement enabling Legacy VPI’s continued performance under its collaboration with Dow AgroSciences LLC.

If Legacy VPI is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. For example, Legacy VPI will retain all liabilities that did not historically arise from the antifungal business and will have limited assets, and third parties may seek to hold us responsible for Legacy VPI’s retained liabilities if Legacy VPI cannot satisfy its liabilities. If those liabilities are significant and we are ultimately determined to be liable for them, we might not be able to recover our resulting losses from Legacy VPI.

Legacy VPI will have a license to our Metallophile Technology, which potentially could result in Legacy VPI engaging in the same type of business we conduct or taking advantage of business opportunities that might be attractive to us, particularly if Legacy VPI does not adhere to the field limitation in the license. If either of those events were to occur, our business could be harmed.

If the assets transferred by Legacy VPI are not sufficient to conduct our business, our business may be harmed. Additionally, under the transition services agreement, we must provide certain services to Legacy VPI for an initial term of one year, with an option to extend for up to two additional six month terms upon mutual consent. During the transition services period, our employees may divert their attention from our business in order to provide services under the transition services agreement, which could adversely affect our business.

All of our directors, including Dr. Schotzinger, our President and Chief Executive Officer, will initially serve on the board of directors of Legacy VPI. Additionally, all of our executive officers and all of our directors, or stockholders affiliated with them, will own equity interests in Legacy VPI. The overlap in the boards of directors and ownership between our company and Legacy VPI may create, or may create the appearance of, conflicts of interest. For example, in a situation in which Legacy VPI is adverse to us, such as if it engages in the same types of business as us or if it breaches one of the agreements with us, a conflict may arise. Additionally, disputes may arise between Legacy VPI and us in a number of areas relating to our past and ongoing relationships, including:

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intellectual property, technology and business matters, including failure to make required technology transfers and failure to comply with confidentiality and non-compete provisions applicable to Legacy VPI and us;

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labor, tax, employee benefit, indemnification and other matters arising from our separation from Legacy VPI; and

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the nature, quality and pricing of transitional services we have agreed to provide to Legacy VPI.

We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with an unaffiliated party.

We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to some investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

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being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

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not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or Section 404, in the assessment of our internal control over financial reporting;

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not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

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reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statement and registration statements; and

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exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

We have taken advantage of reduced reporting burdens in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The NASDAQ Global Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. We expect that we will need to hire additional accounting, finance and other personnel in connection with our becoming, and our efforts to comply with the requirements of being, a public company and our management and other personnel will need to devote a substantial amount of time to these compliance requirements. Moreover, the rules and regulations applicable to us as a public company will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.

We are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over financial reporting beginning with our second filing of an Annual Report on Form 10-K with the Securities and Exchange Commission, or the SEC, after we become a public company. However, while we remain an emerging growth company, we will not be required to include an attestation report

on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of return on your investment.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

The trading market for our common stock will depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. There can be no assurance that analysts will cover us, or provide favorable coverage. If one or more analysts downgrade our stock or change their opinion of our stock, our share price would likely decline. In addition, if one or more analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this prospectus, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

•

our plans to identify, develop and commercialize VT-1161, VT-1129, VT-1598 and its analogues and other product candidates;

•

ongoing and planned clinical trials and preclinical studies for our product candidates, including the timing of initiation of these trials and studies and the anticipated results;

•

our plans to possibly enter into collaborations for the development and commercialization of product candidates and the potential benefits of any future collaboration;

•

the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;

•

the rate and degree of market acceptance and clinical utility of our products;

•

our commercialization, marketing and manufacturing capabilities and strategy;

•

our intellectual property position and strategy;

•

our ability to identify additional products or product candidates with significant commercial potential;

•

our expectations related to the use of proceeds from this offering;

•

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•

developments relating to our competitors and our industry; and

•

the impact of government laws and regulations.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into. Our forward-looking statements assume the completion of the Reorganization unless otherwise indicated or the context otherwise requires.

You should read this prospectus, the documents that we reference in this prospectus and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

USE OF PROCEEDS

We estimate that the net proceeds from our issuance and sale of shares of our common stock in this offering will be approximately $ million, assuming an initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in full, we estimate that the net proceeds from this offering will be approximately $ million.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the net proceeds from this offering by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions.

As of March 31, 2014, we had cash and cash equivalents of $7.4 million. We currently estimate that we will use the net proceeds from this offering, together with our existing cash and cash equivalents, as follows:

•

approximately $ to fund direct program costs of clinical development of VT-1161, our lead product candidate, through Phase 2b;

•

approximately $ to fund direct program costs of research and development of VT-1129 through Phase 1;

•

approximately $ to fund direct program costs of research and development of VT-1598 and its analogues through submission of an IND and the initiation of Phase 1 clinical trials; and

•

the remainder for research and development of additional product candidates and working capital and other general corporate purposes.

The expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress of our development, the status of and results from clinical trials, as well as any collaborations that we may enter into with third parties for our product candidates and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.

Based on our planned use of the net proceeds from this offering and our existing cash and cash equivalents described above, we estimate that such funds will be sufficient to enable us to complete our ongoing Phase 2a clinical trial of VT-1161 for AVVC and our ongoing Phase 2a clinical trial of VT-1161 for tinea pedis, to conduct our planned Phase 2b clinical trials of VT-1161 in RVVC and onychomycosis, to conduct our planned Phase 1 clinical trial of VT-1129 for cryptococcal meningitis, to submit our IND for VT-1598 and to fund our operating expenses and capital expenditure requirements through . We do not expect that the net proceeds from this offering and our existing cash and cash equivalents will be sufficient to enable us to fund the completion of development of any of our product candidates.

Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. We do not intend to pay any cash dividends to the holders of our common stock in the foreseeable future.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2014 on:

•

an actual basis;

•

a pro forma basis giving effect to (1) the Reorganization and, in connection therewith, the contribution by Legacy VPI to us of certain assets that are used in the antifungal business; the spin-off of the prostate business, along with two collaboration programs not associated with the human antifungal business, in the form of a distribution of Legacy VPI to our existing shareholders; the issuance of shares of our common stock to holders of Viamet Holdings common shares in conjunction with our conversion to a Delaware corporation based on an exchange ratio of share of Viamet Pharmaceuticals, Inc. for each common share of Viamet Holdings; the issuance of shares of our preferred stock to holders of Viamet Holdings preferred shares in conjunction with our conversion to a Delaware corporation based on an exchange ratio of share of the corresponding preferred class of Viamet Pharmaceuticals, Inc. for each preferred share of Viamet Holdings; the issuance of shares of our preferred stock to holders of Viamet Holdings series C1 warrants in exchange for shares of series C1 preferred shares issued upon the exercise of such warrants as part of the Reorganization; the issuance of shares of our common stock to holders of Viamet Holdings profits interest shares in conjunction with our conversion to a Delaware corporation pursuant to the terms of such profits interest shares (including the applicable threshold valuation) and our plan of conversion and (2) the automatic conversion of all outstanding shares of our preferred stock into shares of common stock and the effectiveness of our restated certificate of incorporation upon the closing of this offering; and

•

a pro forma as adjusted basis giving additional effect to the sale of shares of our common stock offered in this offering, assuming an initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and the filing and effectiveness of a restated certificate of incorporation upon the closing of this offering.

You should read the following table in conjunction with our consolidated financial statements and related notes, “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.


	As of March 31, 2014
	Actual			Pro Forma	Pro Forma As Adjusted
	(unaudited)
	(in thousands except share data)
Cash and cash equivalents	$	7,383

Series 1 redeemable convertible preferred shares; 299,984 shares authorized issued and outstanding		200
Series 2 redeemable convertible preferred shares; 550,000 shares authorized issued and outstanding		550
Series A redeemable convertible preferred shares; 6,250,000 shares authorized issued and outstanding		6,250
Series B redeemable convertible preferred shares; 21,739,128 shares authorized issued and outstanding		25,000
Series C1 redeemable convertible preferred shares; 30,000,000 shares authorized, 21,739,130 shares issued and outstanding		25,000

Total redeemable preferred shares		57,000
Members’ deficit and stockholders’ equity
Class A common shares, no par value: 59,939,112 shares authorized, 1,100,000 shares issued and outstanding		1
Class B common shares, no par value: 3,599,026 shares authorized, 3,230,177 shares issued and outstanding		—
Class C common shares, no par value: 2,788,975 shares authorized, 506,816 shares issued and outstanding		—
Common Stock, 0.001 par value: 125,000,000 shares authorized pro forma, no shares issued and outstanding, shares issued and outstanding, pro forma and shares issued and outstanding, pro forma as adjusted		—
Preferred Stock, 0.001 par value: 5,000,000 shares authorized pro forma		—
Additional paid-in capital		—
Accumulated deficit		(92,062	)

Total members’ deficit and stockholders’ deficit		(92,061	)

Total capitalization	$	(35,061	)

The table above does not include shares of our common stock available for future issuance under our 2014 Incentive Plan.

DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma tangible book value per share of our common stock after this offering.

Our historical net tangible book value (deficit) as of March 31, 2014 was $(5.5) million, or $(5.03) per common share. Historical net tangible book value deficit per share represents the amount of our total tangible assets less total liabilities, divided by 1,100,000 common shares outstanding as of March 31, 2014.

Our pro forma net tangible book value as of March 31, 2014 was $ million, or $ per share of common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the pro forma number of shares of our common stock outstanding on March 31, 2014, after giving effect to the Reorganization, including the net exercise of warrants to purchase preferred shares and the automatic conversion of all of our outstanding shares of preferred stock into shares of our common stock upon the closing of this offering.

After giving effect to our issuance and sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, the pro forma net tangible book value as of March 31, 2014 would have been $ million, or $ per share. This represents an immediate increase in pro forma net tangible book value to existing stockholders of $ per share. The initial public offering price per share will significantly exceed the pro forma net tangible book value per share. Accordingly, new investors who purchase shares of common stock in this offering will suffer an immediate dilution of their investment of $ per share. The following table illustrates this per share dilution to the new investors purchasing shares of common stock in this offering without giving effect to the over-allotment option granted to the underwriters:


Assumed initial public offering price per share				$
Historical net tangible book value (deficit) per share as of March 31, 2014	$	(5.03	)
Decrease attributable to the Reorganization, the exercise of warrants to purchase preferred shares and the conversion of outstanding preferred stock
Pro forma net tangible book value per share as of March 31, 2014
Increase per share attributable to sale of shares of common stock in this offering

Pro forma net tangible book value per share after this offering				$

Dilution per share to new investors				$

Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the pro forma net tangible book value by $ million, the pro forma net tangible book value per share after this offering by $ per share and the dilution to investors in this offering by $ per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount and offering expenses payable by us.

If the underwriters exercise their over-allotment option in full, the pro forma net tangible book value will increase to $ per share, representing an immediate increase to existing stockholders of $ per share and an immediate dilution of $ per share to new investors. If any shares are issued upon exercise of outstanding options, you will experience further dilution.

The following table summarizes, on a pro forma basis as of March 31, 2014, after giving effect to the Reorganization, including the net exercise of warrants to purchase preferred shares, and the conversion of all of our outstanding preferred stock into common stock, the differences between the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by existing stockholders and by new investors purchasing shares of common stock in this offering. The calculation below is based on an assumed initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, before the deduction of the estimated underwriting discounts and commissions and estimated offering expenses payable by us:


	Shares Purchased				Total Consideration				Average Price Per Share
	Number	Percent			Amount	Percent			Average Price Per Share
Existing stockholders				%				%	$
New investors									$

Total			100	%			100	%	$

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors by $ million and increase (decrease) the percentage of total consideration paid by new investors by approximately %, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

The number of shares purchased from us by existing stockholders is based on shares of our common stock outstanding as of March 31, 2014, after giving effect to the Reorganization, including the net exercise of warrants to purchase preferred shares, and the automatic conversion of all of our outstanding shares of preferred stock into shares of common stock upon the closing of this offering, and excludes shares of our common stock available for future issuance under our 2014 Incentive Plan as of March 31, 2014.

If the underwriters exercise their option to purchase additional shares from us in full, the number of shares held by new investors will increase to , or % of the total number of shares of common stock outstanding after this offering and the percentage of shares held by existing stockholders will decrease to % of the total shares outstanding.

SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected consolidated financial data together with our consolidated financial statements and accompanying notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus. The selected consolidated financial data in this section are not intended to replace our consolidated financial statements and the related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future and do not reflect the effects of the Reorganization.

The selected consolidated statement of operations data for the years ended December 31, 2012 and 2013 and the selected consolidated balance sheet data as of December 31, 2012 and 2013 are derived from our audited consolidated financial statements appearing elsewhere in this prospectus. The selected consolidated statement of operations data for the three months ended March 31, 2013 and 2014, and the selected consolidated balance sheet data as of March 31, 2014 are derived from our unaudited consolidated financial statements appearing elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on a basis consistent with our audited consolidated financial statements included in this prospectus and include, in our opinion, all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial information in those statements.


	Year Ended December 31,			Year Ended December 31,			Three Months Ended March 31,
	2012			2013			2013			2014
							(unaudited)
	(in thousands, except per share data)
Consolidated Statement of Operations Data:
Revenue	$	3,484		$	2,873		$	890		$	365
Operating expenses:
Research and development		8,760			10,789			2,379			3,808
General and administrative		2,650			2,872			626			1,265

Total expenses		11,410			13,661			3,005			5,073

Operating loss		(7,926	)		(10,788	)		(2,115	)		(4,708	)
Change in fair value of financial instruments		(62	)		(387	)		(31	)		(2,574	)
Interest income		3			—			—			—

Net loss	$	(7,985	)	$	(11,175	)	$	(2,146	)	$	(7,282	)
Accretion and deemed dividends:
Preferred shares		(5,328	)		(7,516	)		(631	)		(19,714	)

Net loss attributable to common shareholders:
Basic and diluted	$	(13,313	)	$	(18,691	)	$	(2,777	)	$	(26,996	)

Net loss per share attributable to common shareholders:
Basic and diluted	$	(12.10	)	$	(16.99	)	$	(2.52	)	$	(24.54	)

Weighted average shares used to compute net loss per share attributable to common shareholders:
Basic and diluted		1,100,000			1,100,000			1,100,000			1,100,000

Pro forma net loss per common share—basic and diluted (unaudited)

Weighted average pro forma common shares outstanding—basic and diluted (unaudited)


							As of March 31, 2014
	As of December 31,						Actual			Pro Forma⁽¹⁾	Pro Forma As Adjusted⁽²⁾⁽³⁾
	2012			2013			Actual			Pro Forma⁽¹⁾	Pro Forma As Adjusted⁽²⁾⁽³⁾
							(unaudited)
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	1,042		$	1,435		$	7,383
Furniture, fixtures and equipment, net		314			221			201
Working (deficit) capital		(2,366	)		92			(943	)
Total assets		2,068			2,715			9,071
Warrant liability		220			1,017			4,761
Members’ deficit and stockholders’ deficit		(46,592	)		(65,109	)		(92,061	)

⁽¹⁾

The pro forma balance sheet data give effect to the completion of our corporate reorganization, including the net exercise of warrants to purchase preferred shares, and the conversion of preferred stock and profits interest shares due to the conversion of Viamet Holdings to Viamet Pharmaceuticals, Inc.

⁽²⁾	The pro forma as adjusted balance sheet data give effect to our issuance and sale of shares of common stock in this offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

⁽³⁾

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working (deficit) capital, total assets and stockholders’ equity by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1.0 million shares in the number of shares of common stock offered by us at the assumed initial public offering price would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working (deficit) capital, total assets and stockholders’ equity by $ million, assuming an initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated financial statements should be read in conjunction with the sections entitled “Risk Factors,” “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated annual and unaudited consolidated interim financial statements and accompanying notes included elsewhere in this prospectus.

Our unaudited pro forma condensed consolidated financial statements consist of unaudited pro forma condensed consolidated statements of comprehensive loss for the three months ended March 31, 2014 and for the years ended December 31, 2013 and 2012, and an unaudited pro forma condensed consolidated balance sheet as of March 31, 2014. The unaudited pro forma condensed consolidated financial statements are based on and have been derived by application of pro forma adjustments to our historical consolidated annual and consolidated interim financial statements included elsewhere in this prospectus.

The unaudited pro forma condensed consolidated financial statements give effect to the following Transactions as if they each had occurred on January 1, 2012 for the unaudited pro forma condensed consolidated statements of comprehensive loss and on March 31, 2014 for the unaudited pro forma condensed consolidated balance sheet:

Reorganization and Separation of the Prostate Business

•

the contribution by Legacy VPI to us of certain assets that are used in the antifungal business;

•

certain transactions contemplated by agreements between us and Legacy VPI described in “Certain Relationships and Transactions with Related Persons;” and

•

Conversion of Viamet Holdings to Viamet Pharmaceuticals, Inc.

•

the automatic conversion of preferred stock to common stock upon the closing of this offering.

In management’s opinion, the unaudited pro forma condensed consolidated financial statements reflect certain adjustments that are necessary to present fairly our unaudited pro forma condensed consolidated results of operations and our unaudited pro forma condensed consolidated balance sheet as of and for the periods indicated. The pro forma adjustments give effect to events that are (1) directly attributable to the Transactions, (2) factually supportable, and (3) with respect to the statement of comprehensive loss, expected to have a continuing impact on us. The unaudited pro forma condensed consolidated financial statements do not include non-recurring items, including offering related legal and advisory fees. The pro forma adjustments are based on assumptions that management believes are reasonable given the information currently available.

Our historical condensed consolidated financial statements include expenses for certain support functions that are provided on a centralized basis within Viamet Holdings, such as expenses for business technology, facilities, legal, finance, human resources, and business development, among others. These expenses have been allocated based on the most relevant allocation method to the service provided. In addition, there are no income tax expense effects related to the pro forma adjustments as the subsidiaries of Viamet Holdings have a zero effective tax rate and any impact would be offset by a corresponding change in the deferred tax asset valuation allowance.

We will also incur additional costs related to being a standalone public company. As a standalone public company, our total costs related to such support functions may differ from the costs that were historically incurred by Viamet Holdings. We estimate that these costs may exceed the amounts for full year 2013 by a range of approximately $ to $ in 2014. We have not adjusted the accompanying unaudited pro forma condensed consolidated statements of comprehensive loss for any of these estimated costs as they are projected amounts based on estimates and, therefore, are not factually supportable.

Pro Forma Condensed Consolidated Statement of Comprehensive Loss for the Three Months Ended March 31, 2014


	Historical Viamet Holdings			Reorganization and Separation Adjustments			Notes	Conversion Adjustments		Notes			Viamet Pharmaceuticals, Inc. Pro Forma
	(unaudited)
	(in thousands)
Revenue	$	365		$	(334	)	(c)	$	—				$	31
Related party revenue		—			196		(b)		—					196

Total revenue		365			(138	)			—					227

Research and development		3,808			(1,674	)	(a),(b),(c)		—					2,134
General and administrative		1,265			(12	)	(a)		—					1,253

Total expense		5,073			(1,686	)			—					3,387

Operating loss		(4,708	)		1,548				—					(3,160	)
Change in fair value of financial instruments		(2,574	)		—				2,009		(g)			(565	)

Net loss		(7,282	)		1,548				2,009					(3,725	)

Comprehensive loss	$	(7,282	)	$	1,548			$	2,009				$	(3,725	)

Net loss	$	(7,282	)										$	(3,725	)
Accretion and deemed dividends—preferred shares		(19,714	)						19,714		(e	)

Net loss attributable to common shareholders	$	(26,996	)										$	(3,725	)

Net loss per share attributed to common shareholders—basic and diluted loss per share	$	(24.54	)

Weighted-average number of common shares outstanding—basic and diluted		1,100,000									(f	)

Pro Forma Condensed Consolidated Statement of Comprehensive Loss for the Year Ended December 31, 2013


	Historical Viamet Holdings			Reorganization and Separation Adjustments			Notes	Conversion Adjustments			Notes	Viamet Pharmaceuticals, Inc. Pro Forma
	(unaudited)
	(in thousands)
Revenue	$	2,873		$	(2,696	)	(c)	$	—			$	177
Related party revenue		—			900		(b)		—				900

Total revenue		2,873			(1,796	)			—				1,077

Research and development		10,789			(5,191	)	(a),(b),(c)		—				5,598
General and administrative		2,872			12		(a),(c)		—				2,884

Total expense		13,661			(5,179	)			—				8,482

Operating loss		(10,788	)		3,383				—				(7,405	)
Change in fair value of financial instruments		(387	)		—				(44	)	(g)		(431	)

Net loss		(11,175	)		3,383				(44	)			(7,836	)

Comprehensive loss	$	(11,175	)	$	3,383			$	(44	)		$	(7,836	)

Net loss	$	(11,175	)									$	(7,836	)
Accretion and deemed dividends—preferred shares		(7,516	)						7,516		(e)		—

Net loss attributable to common shareholders	$	(18,691	)									$	(7,836	)

Net loss per share attributed to common shareholders—basic and diluted loss per share	$	(16.99	)

Weighted-average number of common shares outstanding—basic and diluted		1,100,000									(f)

Pro Forma Condensed Consolidated Statement of Comprehensive Loss for the Year Ended December 31, 2012


	Historical Viamet Holdings			Reorganization and Separation Adjustments			Notes	Conversion Adjustments			Notes			Viamet Pharmaceuticals, Inc. Pro Forma
	(unaudited)
	(in thousands)
Revenue	$	3,484		$	(3,434	)	(c)	$	—					$	50
Related party revenue		—			831		(b)		—						831

Total revenue		3,484			(2,603	)			—						881

Research and development		8,760			(5,058	)	(a),(b),(c)		—						3,702
General and administrative		2,650			(35	)	(a),(c)		—						2,615

Total expense		11,410			(5,093	)			—						6,317

Operating loss		(7,926	)		2,490				—						(5,436	)
Change in fair value of financial instruments		(62	)		—				(11	)		(g)			(73	)
Interest income		3			—				—						3

Net loss		(7,985	)		2,490				(11	)					(5,506	)

Comprehensive loss	$	(7,985	)	$	2,490			$	(11	)				$	(5,506	)

Net loss	$	(7,985	)											$	(5,506	)
Accretion and deemed dividends—preferred shares		(5,328	)						5,328			(e)			—

Net loss attributable to common shareholders	$	(13,313	)											$	(5,506	)

Net loss per share attributed to common shareholders—basic and diluted loss per share	$	(12.10	)

Weighted-average number of common shares outstanding—basic and diluted		1,100,000										(f	)

Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2014


	Historical Viamet Holdings			Reorganization and Separation Adjustments	Notes			Conversion Adjustments			Notes			Total Viamet Pharmaceuticals, Inc. Pro Forma
	(unaudited)
	(in thousands)
Current assets
Cash and cash equivalents	$	7,383				(d	)	$	—
Accounts receivable		347				(d	)		—
Prepaid and other		1,029				(d	)		—

Total current assets		8,759							—
Furniture, fixtures and equipment, net		201				(d	)		—
Other assets		111							—

Total assets	$	9,071						$	—

Current liabilities
Accounts payable	$	1,564				(d	)	$	—
Accrued expenses		1,554				(d	)		—
Accrued rent—current		14							—
Deferred revenue		222				(d	)		—
Call option liability		6,348							—

Total current liabilities		9,702							—
Long term liabilities
Accrued rent—long term		139							—
Warrant liability		4,761							(4,761	)		(e	)

Total long term liabilities		4,900							(4,761	)


Total liabilities		14,602							(4,761	)


Redeemable convertible preferred shares		86,530							(86,530	)		(e	)
Members’ deficit and stockholders’ deficit
Capital accounts—common (66,237,113 and shares authorized and 4,836,993 and shares issued and outstanding as of March 31, 2014 on an actual and pro forma basis, respectively)		1							—
Accumulated deficit		(92,062	)			(d	)		91,291

Total members’ deficit and stockholders’ deficit		(92,061	)						91,291

Total liabilities, redeemable convertible preferred shares, members’ deficit and stockholders’ deficit	$	9,071						$	—

Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

(a)	Reflects the elimination of expenses directly related to the prostate business, including employee related expenses, as a result of the distribution of Legacy VPI to our shareholders. The adjustments specific to the distribution of Legacy VPI are as follows:


For the three months ended March 31, 2014:
Research and development	($	1,566,000	)
General and administrative	($	12,000	)
For the year ended December 31, 2013:
Research and development	($	4,147,000	)
General and administrative	($	11,000	)
For the year ended December 31, 2012:
Research and development	($	3,692,000	)
General and administrative	($	6,000	)

(b)

Reflects the impact of the transition services agreement executed between us and Legacy VPI. The adjustments were calculated using actual records of personnel time spent on specific prostate business related research and development projects by us and personnel time spent on specific antifungal business related research and development projects by Legacy VPI as well as time spent directly related to the Dow AgroSciences LLC, or DAS, and Novartis Bioventures Ltd., or Novartis, collaboration agreements, applying a full time equivalent billing rate in accordance with the terms of the transition services agreement. The adjustments are as follows:


For the three months ended March 31, 2014:
Related party revenue	$	196,000
Research and development	$	34,000
For the year ended December 31, 2013:
Related party revenue	$	900,000
Research and development	$	108,000
For the year ended December 31, 2012:
Related party revenue	$	831,000
Research and development	$	78,000

(c)	Reflects the elimination of revenue and expenses (including expense reimbursements) related to the DAS and Novartis collaboration agreements. The adjustments are as follows:


For the three months ended March 31, 2014:
Revenue	($	334,000	)
Research and development	($	142,000	)
For the year ended December 31, 2013:
Revenue	($	2,696,000	)
Research and development	($	1,152,000	)
General and administrative	$	23,000
For the year ended December 31, 2012:
Revenue	($	3,434,000	)
Research and development	($	1,444,000	)
General and administrative	($	29,000	)

(d)

Reflects the adjustments specific to the distribution of Legacy VPI, including net assets associated with the DAS and Novartis collaboration agreements, to Viamet Holdings’ shareholders. It is expected that cash and cash equivalents of $ net of working capital adjustments will be retained by Legacy VPI in accordance with the separation and distribution agreement. This will result in a dividend to Viamet Holdings shareholders of the member units of Legacy VPI with a book value of $ . This excludes stock compensation adjustments, if any, that arise based on the terms of the separation arrangement. The adjustments are as follows:


		Debit / (Credit)
Cash and cash equivalents
Accounts receivable
Prepaid and other assets
Furniture, fixtures and equipment, net
Accounts payable
Accrued expenses
Deferred revenue

Accumulated deficit (dividend)

(e)

Reflects adjustments to reclassify the warrant liability ($4,761,000) and the redeemable convertible preferred shares ($86,530,000) to retained earnings (accumulated deficit) to effect the impact of the Reorganization and corporate conversion in which the redeemable convertible preferred shares will be converted into common stock of Viamet. In addition, the unaudited

statements of comprehensive loss for the three months ended March 31, 2014 and twelve months ended December 31, 2013 and 2012 reflect the reduction of the accretion and deemed dividends ($19,714,000, $7,516,000 and $5,328,000, respectively) associated with the preferred shares of Viamet Holdings which are assumed to have converted to common stock of Viamet as of January 1, 2012.

(f)	Reflects the adjustments to the common shares outstanding to effect the corporate conversion described in the above headnote.

(g)

Reflects the adjustments related to the fair value of the warrant liability of $2,009,000, ($44,000) and ($11,000) for the three months ended March 31, 2014 and the twelve months ended December 31, 2013 and 2012, respectively, which reflect the instruments having been exercised for preferred shares of Viamet Holdings effective as of January 1, 2012.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes, and our unaudited pro forma condensed consolidated financial statements and the related notes, appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, future financial performance, expense levels and liquidity sources, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a biopharmaceutical company focused on the discovery, development and commercialization of novel antifungal agents based on our proprietary metalloenzyme medicinal chemistry platform, which we call our Metallophile^® Technology. We are using our platform to design drugs that we expect to have greater selectivity, fewer side effects and improved potency compared to currently available antifungal agents. Fungal infections represent a significant medical problem, and include highly prevalent mucosal and dermatologic infections, as well as life-threatening invasive central nervous system and systemic infections. We are developing distinct antifungal agents for each of these major categories.

Our lead product candidate, VT-1161, is an oral agent that we are developing for the treatment of recurrent vulvovaginal candidiasis, or RVVC, a highly prevalent mucosal infection for which there are no approved therapies in the United States, and onychomycosis, a very common fungal infection of the nail for which current treatments are suboptimal with respect to safety, tolerability and efficacy.

We are currently completing two proof of concept Phase 2a clinical trials of VT-1161, one for the treatment of moderate to severe acute vulvovaginal candidiasis, or AVVC, commonly known as vaginal yeast infection, and a second for the treatment of moderate to severe interdigital tinea pedis, a dermatologic infection commonly known as athlete’s foot. We expect to begin Phase 2b clinical trials for VT-1161 in RVVC and onychomycosis in the second half of 2014. We are also developing VT-1129 as an oral agent for cryptococcal meningitis, a life-threatening invasive fungal infection of the lining of the brain and spinal cord. We anticipate submitting an investigational new drug application, or IND, for VT-1129 to the U.S. Food and Drug Administration, or the FDA, during the first half of 2015, and we recently applied to the FDA for orphan drug designation. Our third program, VT-1598 and related analogues, is in preclinical development with a goal of developing an oral and intravenous therapy for the treatment of invasive fungal infections.

We are currently a Delaware limited liability company named Viamet Pharmaceuticals Holdings, LLC, or Viamet Holdings. Prior to December 2011, we operated as Viamet Pharmaceuticals, Inc., or VPI, a Delaware corporation that was incorporated in December 2004 as a research and development company initially focused on the development of compounds for the treatment of fungal diseases and, later, prostate cancer. In December 2011, Viamet Holdings was formed and made the parent of VPI through the exchange of VPI’s capital stock for membership interests in Viamet Holdings. Since December 2011, we have operated two main businesses, the prostate business, which is operated through VPI and primarily focuses its research and development on discovery and development of product candidates to treat patients with prostate cancer, and the human antifungal business, which is primarily operated through our remaining subsidiaries. The prostate business has developed a product candidate, VT-464, or the prostate candidate, which is in the early stages of clinical development.

In connection with this offering, Viamet Holdings will form a wholly owned limited liability company subsidiary and contribute the stock of VPI to it. We refer to VPI and this parent limited liability company that will be created for it collectively as Legacy VPI. Prior to conducting this offering, we will spin off the prostate business, along with our collaboration programs, in the form of a distribution of Legacy VPI to our existing equity holders. Prior to the distribution of Legacy VPI, the Viamet Pharmaceuticals, Inc. name and certain assets related to the antifungal business held by Legacy VPI will be transferred to one or more of the subsidiaries of Viamet Holdings engaged in the antifungal business. In connection with this corporate reorganization, warrants to purchase series C1 preferred shares will be automatically net exercised. Additionally, we expect that 11 of the existing 14 Legacy VPI employees will become our only full-time employees. Thereafter and immediately prior to the effectiveness of the registration statement of which this prospectus forms a part, Viamet Holdings will be converted into a Delaware corporation and renamed Viamet Pharmaceuticals, Inc. Upon the closing of our initial public offering, all of the shares of preferred stock issued to our members in the conversion to a corporation will convert into shares of our common stock. We refer to the asset transfer, the Legacy VPI distribution, our conversion to a Delaware corporation and the associated recapitalization collectively as the Reorganization.

The following diagrams illustrate our ownership and organizational structure, before and after giving effect to the Reorganization and this offering:

Before Reorganization

LOGO

After Reorganization and the Offering

LOGO

To date, we have devoted substantially all of our resources to our research and development efforts relating to our product candidates, including activities to develop our Metallophile Technology and our core capabilities in the study of metalloenzyme inhibitors, identify potential product candidates, undertake preclinical studies and clinical trials, manufacture our product candidates to support our preclinical studies and clinical trials, acquire and protect rights to our intellectual property, raise capital to support our research and development efforts and provide general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue from product sales. To date, we have financed our operations primarily through private placements of equity securities. To a lesser extent, we have financed our operations through our collaborations with Dow AgroSciences LLC, or DAS, and Novartis Bioventures Ltd., or Novartis, a grant from the National Institutes of Health, or the NIH, for research on inhibitors for the oral treatment of CNS Coccidioides, the causative organism of valley fever, or the NIH grant, and a Therapeutic Discovery Tax Credit grant from the Internal Revenue Service, or IRS. Since inception, we have raised an aggregate of $70.4 million to fund our operations, of which:

•

$32.0 million was in the form of gross proceeds from the sale of VPI preferred stock;

•

$25.0 million was in the form of gross proceeds from the sale of our series C1 preferred shares;

•

$12.6 million was through payments under our collaborations with DAS and Novartis, both of which will be retained by Legacy VPI after the Reorganization; and

•

$0.7 million was through grants from the NIH and the IRS.

Other than our grants, substantially all of our revenue to date has been collaboration revenue, which we first began to generate in November 2010. We recognized collaboration revenue of approximately $0.3 million for the three months ended March 31, 2014.

Since inception, we have incurred significant operating losses. As of March 31, 2014, we had an accumulated deficit of $92.1 million. Our net loss was $8.0 million for the year ended December 31, 2012, $11.2 million for the year ended December 31, 2013 and $7.3 million for the three months ended

March 31, 2014. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We expect to incur increasing operating losses for at least the next several years. We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we initiate and conduct our planned Phase 2b clinical trials for VT-1161 in RVVC and onychomycosis. If either or both of these trials are successful, we expect that our expenses will increase further as we conduct Phase 3 clinical trials. We also expect our expenses to increase as we initiate and conduct clinical trials of VT-1129 for the treatment of cryptococcal meningitis and advance VT-1598 and its analogues for the treatment of invasive fungal infections through preclinical development and into clinical development.

We do not expect to generate revenue from product sales unless and until we, or our collaborators, if any, successfully complete development and obtain marketing approval for one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. We do not currently have an internal capability to manufacture our product candidates, and, to date, all of our manufacturing activities have been performed by third parties. Additionally, we currently utilize third party clinical research organizations, or CROs, to carry out our preclinical studies and clinical trials and we do not yet have a sales organization. If we obtain, or believe that we are likely to obtain, marketing approval for any of our product candidates for which we retain commercialization rights, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

We expect to fund our operations through a combination of equity offerings, debt financing, government or other third party funding, collaborations and licensing arrangements for at least the next several years. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements may force us to delay, limit, reduce or terminate our research and development programs and could have a material adverse effect on our financial condition and our product development. We will need to generate significant revenues to achieve sustained profitability and we may never do so.

Our recurring operating losses and our net capital deficiency raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2013 with respect to this uncertainty. We have no current source of revenue sufficient to sustain our present activities, and we do not expect to generate product revenue until, and unless, the FDA or other regulatory authorities approve VT-1161 or another one of our product candidates and we successfully commercialize such product candidate. Accordingly, our ability to continue as a going concern will require us to obtain additional financing to fund our operations.

Financial Operations Overview

Revenue

To date, we have not generated any revenues from the sale of products. All of our revenue to date has been derived from payments under our collaborations with DAS and Novartis and grants from the NIH and the IRS. To date, we have not generated any revenues in connection with our antifungal programs other than through the grants from the NIH and the IRS. We may generate revenue in the future from government contracts and grants and payments under future collaborations, however we do not expect to generate revenue from product sales unless and until we obtain marketing approval for, and commercialize, VT-1161 or one of our other product candidates.

Collaborations

Novartis. In June 2009, we entered into an option agreement with Novartis to discover and develop metalloenzyme inhibitors of interest to Novartis. On February 1, 2010, we reached agreement with Novartis on the selection of a therapeutic target, which triggered an upfront payment of $1.5 million to fund the research and development process. We recorded a non-refundable, non-creditable $1.5 million payment as deferred revenue and recognized the revenue on a straight-line basis over a period of 17 months, representing the original estimated performance period associated with the payment. Upon successful completion of certain items specified in the option agreement, we would receive royalty payments, as well as sales and development milestone payments. As of March 31, 2014, no such items have been completed and therefore no royalty or milestone payments have been received.

Under the Novartis agreement, the identification of a metalloenzyme inhibitor that meets certain in vitro criteria triggers a second payment of $1.5 million to fund additional research and development. In May 2012, Novartis made an additional non-refundable, non-creditable $1.5 million payment to continue to fund the research and development process related to an identified metalloenzyme. We deferred the entire payment and recognized the revenue on a straight-line basis over a period of 20 months, representing the estimated performance period associated with the payment. We recognized $0.6 million of the payment as licensing revenue for the year ended December 31, 2012 and $0.9 million of the payment as licensing revenue for the year ended December 31, 2013. The deferred revenue balance related to the upfront license for the Novartis collaboration was $0.9 million at December 31, 2012 and zero at December 31, 2013. We recognized $0.2 million of the payment as licensing revenue for the three months ended March 31, 2013 and zero as licensing revenue for the three months ended March 31, 2014. The Novartis agreement is scheduled to expire in January 2015.

Dow AgroSciences. In November 2010, we entered into an Option, Research, Collaboration and License Agreement with DAS to discover and develop metalloenzyme inhibitors of interest to DAS. The initial term of this agreement was two years, with the option, exercisable by DAS, to extend the agreement in one year increments for up to four years. DAS previously exercised its right to extend the agreement for an additional year on April 27, 2012 and again on June 27, 2013. As such, the current termination date of the agreement is October 31, 2014.

The agreement requires DAS to pay a non-refundable, non-creditable license fee of $4.5 million, payable in three equal payments. The first payment was due upon execution, and the remaining payments were due within 45 days of January 1, 2011 and 2012. We recorded the entire $4.5 million receivable as deferred revenue and recognized the revenue on a straight-line basis over the term of the agreement, initially 24 months. As a result of the April 2012 extension, we revised the estimated performance period to run through October 2013. As a result of the June 2013 extension, we revised the estimated performance period to run through October 2014.

Under the DAS Agreement, we recognized $1.3 million of the upfront fee as licensing revenue for the year ended December 31, 2012 and $0.4 million of the upfront fee as licensing revenue for the year ended December 31, 2013. At December 31, 2012, the deferred revenue was $0.6 million and at December 31, 2013, the deferred revenue was $0.2 million. We recognized $0.2 million of the upfront fee as licensing revenue for the three months ended March 31, 2013 and $0.1 million of the upfront fee as licensing revenue for the three months ended March 31, 2014. At March 31, 2014, the deferred revenue related to the upfront license with the DAS collaboration was $0.2 million. Upon successful completion of certain items specified in the agreement with DAS, we would be eligible to receive royalty payments and development milestone payments of up to $13.3 million in the aggregate for each indication. As of March 31, 2014, no such items have been completed and therefore no royalty or milestone payments have been received.

The agreement also requires DAS to fund collaboration research efforts through the end of the contract term, which has been extended to October 31, 2014. Payments for research and development services under the agreement include our personnel expenses, on a contractual rate, as well as direct research expenses. We recognize research collaboration payments as revenue in the period the research effort occurs.

We recognized a total of $1.6 million as collaboration revenue for the year ended December 31, 2012 and a total of $1.4 million as collaboration revenue for the year ended December 31, 2013. Our total direct program expense was $1.2 million for 2012 and $1.0 million for 2013. We recognized a total of $0.4 million as collaboration revenue for the three months ended March 31, 2013 and $0.3 million as collaboration revenue for the three months ended March 31, 2014. Our total direct program expense was $0.3 million for the three months ended March 31, 2013 and $0.2 million for the three months ended March 31, 2014.

Grants and Other Funding

Therapeutics for Rare and Neglected Disease Program. In September 2011, we entered into a Cooperative Research and Development Agreement, or CRADA, with the NIH’s Therapeutics for Rare and Neglected Disease Program, or TRND, to develop VT-1129 as an antifungal therapy for cryptococcal meningitis. TRND provides financial support for development under the CRADA through direct payment of vendors supporting the development. Under the terms of the agreement, we provide technical support for the project. We do not recognize any revenue in connection with the CRADA.

NIH Grant. In June 2012, we were awarded the NIH grant. The total award of the grant is $0.3 million and covers the period June 2012 through May 2014. We recognized $50,000 as other revenue for the year ended December 31, 2012 and $0.2 million for the year ended December 31, 2013. We recognized $57,000 as other revenue for the three months ended March 31, 2013 and $31,000 as other revenue for the three months ended March 31, 2014.

Defense Medical Research and Development Program. In April 2014, we received notice from the Defense Medical Research and Development Program that our proposed program, Development and Preclinical Evaluation of VT-1598, a Broad-Spectrum and Safe Antifungal to Prevent Fungal (Mold) Infections of Battlefield Wounds, will receive a Military Infectious Diseases Applied Research Award, or the DMRDP grant. We expect the program to have a duration of 31 months and provide approximately $2.0 million in funding.

We will spin off the Novartis and DAS agreements, in addition to the prostate business, with Legacy VPI in the Reorganization. We intend to terminate the CRADA upon completion of this offering. Other than the NIH grant and the DMRDP grant, the assets that we will retain after the Reorganization have not generated any revenue.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:

•

employee-related expenses, including salaries, benefits and travel expense;

•

expenses incurred under agreements with CROs, and investigative sites that conduct our preclinical studies and clinical trials;

•

the cost of acquiring, developing and manufacturing clinical trial materials;

•

expenses related to consultants and advisors; and

•

expenses associated with preclinical and regulatory activities.

We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.

We record direct research and development expenses, consisting principally of external costs, such as fees paid to investigators, consultants and CROs in connection with our clinical trials, and costs related to manufacturing or purchasing clinical trial materials, to specific product programs. Additionally, we record employee related direct research and development expenses to specific product programs. We do not allocate costs associated with our platform and other indirect costs to specific product programs because these costs are deployed across multiple product programs under research and development and, as such, are separately classified. The table below provides research and development expenses incurred for each of our principal programs and other expenses by category.


	Year ended December 31,				Three months ended March 31,
	2012		2013		2013		2014
					(unaudited)
	(in thousands)
Direct program expenses:
VT-1161	$	2,215	$	4,246	$	377	$	1,795
VT-1129⁽¹⁾		161		92		24		29
VT-1598 and analogues		125		105		34		23
Prostate candidate		3,986		4,096		1,331		1,522
Other programs		1,894		1,749		487		272

Indirect expenses:
Employees		332		359		90		134
Other expenses		47		142		36		33

Total research and development expenses	$	8,760	$	10,789	$	2,379	$	3,808

⁽¹⁾	External research and development activities related to VT-1129 have been paid for under our CRADA with TRND. The amounts shown in the table for VT-1129 represent employee related direct research and development expenses.

We expect our research and development expenses to increase substantially as compared to prior periods in connection with conducting our planned Phase 2b clinical trials for VT-1161 in RVVC and onychomycosis, and, if either or both of these trials are successful, advancing VT-1161 into Phase 3 clinical trials. We also expect our expenses to increase as we initiate and conduct clinical trials of VT-1129 for cryptococcal meningitis and advance VT-1598 and its analogues for the treatment of invasive fungal infections through preclinical development. If any of our product candidates successfully complete Phase 3 clinical trials, we intend to seek marketing approval for such product candidate in the United States and, whether alone or in collaboration with third parties, in the European Union and other jurisdictions.

The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:

•

the scope, progress, outcome and costs of our clinical trials and other research and development activities;

•

the efficacy and potential advantages of our product candidates compared to alternative treatments, including any standard of care;

•

our ability to manufacture, market, commercialize and achieve market acceptance for any of our product candidates that we are developing or may develop in the future;

•

our ability to obtain, maintain, defend and enforce patent claims and other intellectual property rights;

•

the performance of our collaborators, if any;

•

significant and changing government regulation; and

•

the timing, receipt and terms of any marketing approvals.

A change in the outcome of any of these variables with respect to the development of VT-1161 or any other product candidate that we may develop could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority requires us to conduct clinical trials or other testing beyond those that we currently contemplate or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for personnel, including equity-based compensation, in executive, operational, finance and accounting resource functions. Other general and administrative expenses include professional fees for legal, patent, consulting and accounting services.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development of our product candidates. We also anticipate increased accounting, audit, legal, regulatory, compliance, insurance and investor and public relations expenses associated with being a public company. Additionally, if and when we believe a regulatory approval of the first product candidate that we intend to commercialize on our own appears likely, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates.

Other Income (Expense), Net

Other income (expense), net consists primarily of the gain or loss associated with the change in the fair value of our call option and warrant liability.

Results of Operations

Comparison of the Three Months Ended March 31, 2013 and 2014

The following unaudited table summarizes the results of our operations for each of the three months ended March 31, 2013 and 2014, together with the changes in those items in dollars and as a percentage:


	Three months ended March 31,						$ Change			% Change
	2013			2014			$ Change			% Change
	(unaudited) (in thousands)
Total revenue	$	890		$	365		$	(525	)		(59.0	%)
Operating expenses:
Research and development		2,379			3,808			1,429			60.1	%
General and administrative		626			1,265			639			102.1	%

Total operating expenses		3,005			5,073			2,068			68.8	%

Operating loss		(2,115	)		(4,708	)		(2,593	)		122.6	%
Other income (expense), net		(31	)		(2,574	)		(2,543	)		NA

Net loss	$	(2,146	)	$	(7,282	)	$	(5,136	)		239.3	%

Revenue. Revenue was $0.4 million for the three months ended March 31, 2014 compared to $0.9 million for the three months ended March 31, 2013. The decrease of $0.5 million was due primarily to decreases in recognition under our collaborations with DAS and Novartis related to license fee and collaboration research revenue. Other than $57,000 for the three months ended March 31, 2013 and $31,000 for the three months ended March 31, 2014 attributable to the NIH grant, the revenue reported in each period was attributable exclusively to collaborations that are not associated with the antifungal business.

Research and development expenses. Research and development expenses were $3.8 million for the three months ended March 31, 2014 compared to $2.4 million for the three months ended March 31, 2013. The increase of $1.4 million was primarily due to increased expenses associated with our clinical development programs, partially offset by decreased expenses associated with our preclinical programs, as follows:

•

expenses associated with VT-1161 increased by $1.4 million due to drug substance and product costs, costs associated with safety and toxicology studies and clinical trial expenses;

•

expenses associated with the prostate candidate increased by $0.2 million due to clinical trial expenses; and

•

expenses associated with VT-1598 and other programs decreased $0.2 million due to decreased activity under our Novartis and DAS collaborations.

General and administrative expenses. General and administrative expenses were approximately $1.3 million for the three months ended March 31, 2014 compared to $0.6 million for the three months ended March 31, 2013. The increase of $0.6 million was primarily due to increased legal and accounting expenses.

Other income (expense), net. Other income (expense), net was $(2.6) million for the three months ended March 31, 2014 compared to $(31,000) for the three months ended March 31, 2013. The increase of $(2.5) million in other income (expense) net resulted from a change in the fair value of warrants and call options issued in connection with our series C1 preferred share financing.

Comparison of the Years Ended December 31, 2012 and 2013

The following table summarizes the results of our operations for each of the years ended December 31, 2012 and 2013, together with the changes in those items in dollars and as a percentage:


	Year ended December 31,						$ Change			% Change
	2012			2013			$ Change			% Change
	(in thousands)
Total revenue	$	3,484		$	2,873		$	(611	)		(17.5	%)
Operating expenses:
Research and development		8,760			10,789			2,029			23.2	%
General and administrative		2,650			2,872			222			8.4	%

Total operating expenses		11,410			13,661			2,251			19.7	%

Operating loss		(7,926	)		(10,788	)		(2,862	)		36.1	%
Other income (expense), net		(59	)		(387	)		(328	)		555.9	%

Net loss	$	(7,985	)	$	(11,175	)	$	(3,190	)		39.9	%

Revenue. Revenue was $2.9 million for the year ended December 31, 2013 compared to $3.5 million for the year ended December 31, 2012. The decrease of $0.6 million was due primarily to decreases in recognition under our collaborations with DAS and Novartis related to license fee and collaboration research revenue. Other than $50,000 for the year ended December 31, 2012 and $0.2 million for the year ended December 31, 2013 attributable to the NIH grant, the revenue reported in each period was attributable exclusively to our collaborations, which are not associated with the antifungal business.

Research and development expenses. Research and development expenses were $10.8 million for the year ended December 31, 2013 compared to $8.8 million for the year ended December 31, 2012. The increase of $2.0 million was primarily due to increased expenses associated with our clinical development programs, partially offset by decreased expenses associated with our preclinical programs, as follows:

•

expenses associated with VT-1161 increased $2.0 million due to drug substance and product costs and costs associated with safety and toxicology studies;

•

expenses associated with the prostate candidate increased $0.2 million due to clinical trial expenses; and

•

expenses associated with VT-1598 and other programs decreased by $0.2 million due to decreased activity under our Novartis and DAS collaborations.

General and administrative expenses. General and administrative expenses were $2.9 million for the year ended December 31, 2013 compared to $2.7 million for the year ended December 31, 2012. The increase of $0.2 million was primarily due to increased legal expenses.

Other income (expense), net. Other income (expense), net was $(0.4) million for the year ended December 31, 2013 compared to $(59,000) for the year ended December 31, 2012. The increase of $(0.3) million in other income (expense) net resulted primarily from a change in the fair value of warrants and call options issued in connection with our series C1 preferred stock financing.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception through March 31, 2014, we have funded our operations principally through the private placement of approximately $57.0 million of equity securities, $12.6 million from payments

under collaboration agreements with DAS and Novartis and $0.8 million from grants and other sources. As of March 31, 2014, we had cash and cash equivalents of approximately $7.4 million. We invest cash in excess of immediate requirements in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Our future capital requirements will depend on many factors, including our results of operations and the expansion of our research and development, sales and marketing and general and administrative functions. If we require additional capital resources to grow our business internally or to acquire complementary technologies and businesses at any time in the future, we may seek to sell additional equity, or raise funds through debt financing or other sources. The sale of additional equity could result in additional dilution to our stockholders. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operating flexibility, and would also require us to incur additional interest expense. We can provide no assurance that additional financing will be available at all or, if available, that we would be able to obtain financing on terms favorable to us. As a result of our continued losses, our independent registered public accounting firm has included an explanatory paragraph in its report on our financial statements expressing substantial doubt as to our ability to continue as a going concern.

Cash Flows

As of March 31, 2014, we had cash and cash equivalents of $7.4 million. The following table sets forth the primary sources and uses of cash for each of the periods set forth below:


	Year ended December 31,						Three months ended March 31,
	2012			2013			2013			2014
							(unaudited)
	(in thousands)
Net cash (used in) provided by:
Operating activities	$	(6,851	)	$	(11,491	)	$	(1,858	)	$	(4,009	)
Investing activities		(82	)		(9	)		(2	)		(3	)
Financing activities		2,928			11,893			1,975			9,960

Net (decrease) increase in cash and cash equivalents	$	(4,005	)	$	393		$	115		$	5,948

Operating Activities

Net cash used in operating activities of $6.9 million during the year ended December 31, 2012, was primarily a result of our $8.0 million net loss, increased by $1.9 million of deferred revenue recognition related to the DAS and Novartis license fees, partially offset by $3.0 million of cash receipts related to these agreements. In February 2012, we received the third and final $1.5 million cash payment for upfront license fees from DAS and, in May 2012, we received a $1.5 million cash payment from Novartis. The payment received from DAS is reflected as a decrease of accounts receivable due to the timing of cash receipt. The Novartis payment is reflected as an increase of deferred revenue. Net cash used in operating activities related to DAS collaboration efforts in 2012 is reflected as an increase of deferred revenue of $0.2 million. Additionally, we incurred approximately $0.3 million of non-cash expenses during 2012.

Net cash used in operating activities of $11.5 million during the year ended December 31, 2013, was primarily a result of our $11.2 million net loss, increased by $1.3 million of deferred revenue recognition related to the DAS and Novartis license fees, and $0.5 million of prepaid and other assets, partially offset

by $0.7 million of non-cash expenses and a $0.5 million increase of accrued expenses. License fee deferred revenue recognition decreased due to an extension option exercised by DAS in June 2013, extending the period of time over which the remaining deferred revenue balance relating to the DAS agreement will be recognized. Increases in prepaid and other assets and accrued expenses are primarily driven by research and development efforts associated with our ongoing clinical trials. The increase in non-cash expenses was primarily driven by $0.4 million of change in fair value recognized on the warrants and call options during 2013.

Net cash used in operating activities of $1.9 million during the three months ended March 31, 2013, was primarily a result of our $2.1 million net loss, increased by $0.4 million of deferred revenue recognition related to the DAS license fee, partially offset by increases of $0.4 million of accrued expenses and $0.1 million of non-cash expenses. Accrued expenses increased as a result of research and development efforts associated with clinical trials.

Net cash used in operating activities of $4.0 million during the three months ended March 31, 2014, was primarily a result of our $7.3 million net loss, an increase of $0.3 million of prepaid and other assets, partially offset by $2.7 million of non-cash expenses and an increases of $0.7 million of accounts payable and $0.6 million of accrued expenses. Non-cash expenses for the three months ended March 31, 2014 was primarily attributable to $2.6 million recognized as a result of the change in fair value of the warrants and call options outstanding as of period end. Increases in accounts payable and accrued expenses were primarily driven by intellectual property related legal fees and additional research and development efforts related to our clinical trials.

Investing Activities

Net cash used in investing activities during all periods presented primarily reflects purchases of furniture, fixtures and equipment.

Financing Activities

Net cash provided by financing activities in the year ended December 31, 2012 primarily consisted of approximately $2.9 million of net proceeds from the sale of the initial tranche of our series C1 redeemable convertible preferred shares, which we received in October 2012.

Net cash provided by financing activities for the year ended December 31, 2013 primarily consisted of approximately $11.9 million of net proceeds from the sale of the second, third and fourth tranches of our series C1 redeemable convertible preferred shares, of which we received $2.0 million, $4.9 million and $5.0 million in February, June and October 2013, respectively.

Net cash provided by financing activities for the three months ended March 31, 2013, primarily consisted of approximately $2.0 million of net proceeds from the sale of the second tranche of our series C1 redeemable convertible preferred shares, which we received in February 2013.

Net cash provided by financing activities for the three months ended March 31, 2014, primarily consisted of approximately $10.0 million of net proceeds from the sale of the fifth tranche of our series C1 redeemable convertible preferred shares, which we received in February 2014.

Funding Requirements

To date, we have not generated any revenues from product sales and have financed our operations primarily through private placements of our preferred stock and, to a lesser extent, through our collaborations, the NIH grant and the IRS grant. We have devoted substantially all of our financial

resources and efforts to research and development, including preclinical studies and, beginning in 2011, clinical trials. We are still in the early stages of development of our product candidates, and we have not completed development of any product candidate. We expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on our members’ deficit and working capital. We anticipate that our expenses will increase substantially if and as we:

•

continue our Phase 2a clinical trials of VT-1161 for AVVC and interdigital tinea pedis;

•

initiate our Phase 2b clinical trials of VT-1161 in patients with RVVC and patients with onychomycosis;

•

initiate and continue the research and development of our other product candidates and potential product candidates, including VT-1129 and VT-1598 and its analogues;

•

seek to discover and develop additional product candidates;

•

seek regulatory approvals for any product candidates that successfully complete clinical trials;

•

establish a sales, marketing and distribution infrastructure in the future to commercialize any products for which we may obtain regulatory approval;

•

require the manufacture of larger quantities of product candidates for clinical development and potentially commercialization;

•

maintain, expand and protect our intellectual property portfolio;

•

hire additional clinical, quality control and scientific personnel; and

•

As of March 31, 2014, we had cash and cash equivalents of $7.4 million. We believe that the net proceeds from this offering will enable us to fund our operating expenses and capital expenditure requirements for at least the next months.

We intend to devote the net proceeds from this offering and our cash and cash equivalents and short term investments to fund clinical development of VT-1161, our lead product candidate, to fund research and development to advance our pipeline of additional product candidates, including VT-1129 and VT-1598 and its analogues and for working capital and other general corporate purposes. We will need to obtain significant financing, in addition to the net proceeds of this offering, prior to the commercialization of any of our product candidates.

We estimate that we will incur external research and development expenses of approximately $ million to complete our planned Phase 2b clinical trials for VT-1161 in RVVC and onychomycosis by mid-2016, approximately $ million to complete our preclinical studies and planned Phase 1 clinical trials for VT-1129 in cryptococcal meningitis, and approximately $ million to complete our preclinical studies, submit our IND for, and initiate Phase 1 clinical trials of, VT-1598 or one of its analogues for the treatment of invasive fungal infections. We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. At this time, we cannot reasonably estimate the remaining costs necessary to conduct Phase 3 clinical trials and commercialize VT-1161 for the treatment of RVVC or onychomycosis, including commercial manufacturing of VT-1161, or the nature, timing or costs of the efforts necessary to complete the development of any other product candidate.

Our future capital requirements, both short-term and long-term, will depend on many factors, including:

•

the progress, timing, costs and results of our ongoing Phase 2a clinical trials of VT-1161 and our planned Phase 2b clinical trials of VT-1161;

•

the scope, progress, timing, costs and results of clinical trials of, and research and preclinical development efforts for, our other product candidates, including VT-1129 and VT-1598 and its analogues, and any future product candidates;

•

our ability to enter into and the terms and timing of any collaborations, licensing or other arrangements that we may establish;

•

the number and development requirements of other product candidates that we pursue;

•

the costs, timing and outcome of regulatory review of our product candidates by the FDA and comparable non-U.S. regulatory authorities;

•

the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

•

our headcount growth and associated costs as we expand our research and development and establish a commercial infrastructure;

•

the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

•

the extent to which we acquire or in-license other products and technologies;

•

the costs of operating as a public company; and

•

the effect of competing technological and market developments.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, government or other third party funding, collaborations and licensing arrangements. Other than our existing collaborations, which will be spun off with Legacy VPI, and the NIH grant and the DRMDP grant, which will provide limited funding, we do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third party funding, collaborations or licensing arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

sustain our present activities, and we do not expect to generate product revenue until, and unless, the FDA or other regulatory authorities approve VT-1161 or another one of our product candidates and we successfully commercialize such product candidate. Accordingly, our ability to continue as a going concern will require us to obtain additional financing to fund our operations.

Critical Accounting Policies and Significant Judgments and Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, accrued research and development expenses, warrant and call option liabilities, equity-based compensation and tax credit carry forwards. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values 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 described in more detail in the notes to our financial statements appearing at the end of this prospectus, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

We use the revenue recognition guidance established by the Financial Accounting Standards Board, or FASB, in Accounting Standards Codification, or ASC, Topic 605, Revenue Recognition, or ASC 605. Our revenues generally consist of licensing revenue and fees for research services from license or collaboration agreements and grant revenue. We recognize revenues when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. For arrangements that include multiple deliverables, we identify separate units of accounting if certain separation criteria are met in accordance with ASC Topic 605-25, Multiple Element Arrangements, or ASC 605-25. This evaluation requires subjective determinations and requires management to make judgments about the fair value of the individual elements and whether such elements are separable from the other aspects of the contractual relationship. If we determine they are separable according to the separation criteria of ASC 605-25, we will recognize revenue separately for each unit.

The consideration for the arrangement is allocated to the separate units of accounting based on their relative fair values. Applicable revenue recognition criteria are considered separately for each unit of accounting. If management determines the arrangement constitutes a single unit of accounting, the revenue recognition policy must be determined for the entire arrangement and the consideration received is recognized over a period of inception through the date on which the last deliverable is expected to be delivered as a combined unit. We typically receive upfront, nonrefundable payments when licensing our intellectual property in conjunction with a research and development agreement. We believe that these payments generally are not separable from the activity of providing research and development services because the license does not have stand-alone value separate from the research and development services that we provide under applicable agreements. Accordingly, we account for these elements as one unit of accounting and recognize upfront, nonrefundable payments as licensing revenue on a straight-line basis over its contractual or estimated performance period, which is typically the term of our research and

development performance obligations. As a result, we are required to make estimates regarding development timelines for compounds being developed pursuant to a strategic collaboration agreement. Amounts received in advance of services performed are recorded as deferred revenue until earned. Revisions to the estimated period of recognition are reflected in revenue prospectively.

Our collaboration agreements may also contain contingent non-refundable payments based on the achievement of milestone events. Revenue related to these non-refundable payments is recognized in accordance with ASC Topic 605-28, Milestone Method, or ASC 605-28. At the inception of each agreement that includes contingent milestone payments, management must evaluate whether the contingencies underlying each milestone are substantive and at risk to both parties, specifically reviewing factors such as the scientific and other risks that must be overcome to achieve the milestone, as well as the level of effort and investment required. Revenues from milestones, if they are nonrefundable, are recognized in licensing revenue upon successful accomplishment of the milestones if all of the following conditions are met: (i) achievement of the milestone event was not reasonably assured at the inception of the arrangement; (ii) substantive effort is involved to achieve the milestone event; and (iii) the amount of the milestone payment appears reasonable in relation to the effort expended, the other milestone payments in the arrangement and the related risk associated with the achievement of the milestone event. A milestone is considered substantive if it meets all of the following criteria: (A) the payment is commensurate with either our performance to achieve the milestone or with the enhancement of the value of the delivered item; (B) the payment relates solely to past performance; and (C) the payment is reasonable relative to all of the deliverables and payment terms within the arrangement. If any of these conditions are not met, the milestone payment is deferred and is recognized on a straight-line basis over the remaining performance obligation. We evaluate factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone and the level of effort and investment required to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether a milestone satisfies all of the criteria required to conclude that a milestone is substantive. We have concluded that certain of the preclinical and clinical development milestone payments pursuant to our collaboration and license arrangements with DAS and Novartis are substantive. Accordingly, in accordance with ASC 605-28, we will recognize revenue in its entirety upon successful accomplishment of these milestones, assuming all other revenue recognition criteria are met. The DAS and Novartis agreements will be spun off with Legacy VPI and such revenue recognition will not affect our financial performance after the Reorganization. Milestones that are not considered substantive are recognized as earned if there are no remaining performance obligations or over the remaining period of performance, assuming all other revenue recognition criteria are met. Payments received or for which collection is reasonably assured after meeting performance obligations are recognized as earned.

Our collaboration agreements may also include payment for research and development services provided by us on a contractual rate and direct expense basis. We record such payments as revenue in accordance with the agreements as activities are incurred when we act as principal in the transaction.

Grant payments received prior to our performance of work required by the terms of the award are recorded as deferred revenue and recognized as grant revenue as we perform the work and incur qualifying costs.

Accrued/Prepaid Development Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses are related to fees paid to CROs and other vendors in connection with research and development activities for which we have not yet been invoiced.

We account for clinical trial expenses according to the progress of the trial as measured by patient enrollment, patient progression and the timing of various aspects of the trial. We determine accrual estimates through discussion with applicable personnel and outside service providers as to the progress of trials, or services completed. During the course of a clinical trial, we adjust our rate of clinical trial expense recognition if actual results differ from our estimates. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known at that time. Our objective is to reflect the appropriate clinical trial expenses in our financial statements by matching those expenses with the period in which services and efforts are expended. Our clinical trial accrual is dependent upon the timely and accurate reporting of contract research organizations and other third party vendors. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low for any particular period. Depending on the timing of payments made to vendors based on the estimate of clinical trial activities, the resulting balance will be reflected as either a prepaid asset (advance payments) or an accrual on the balance sheet.

Valuation of Financial Instruments and Equity Based Compensation

Financial Instruments—Warrant and Call Option Liabilities

We account for our warrants issued to purchase series C1 redeemable convertible preferred shares and call options to purchase additional series C1 redeemable convertible preferred shares in accordance with ASC Topic 480, Distinguishing Liabilities from Equity, which requires that each financial instrument, other than an outstanding share, that, at inception, includes an obligation to repurchase the issuer’s equity shares regardless of the timing or likelihood of redemption, shall be classified as a liability. We measure the fair value of the warrant and call option liabilities based on the fair value to purchase series C1 redeemable convertible preferred shares, which we determine based on the two-step valuation approach as described below under “—Valuation Approach.”

Equity-Based Compensation

Prior to this offering and prior to the Reorganization, we issued equity-based compensation awards to employees, directors and consultants through the granting of profits interests. We measure and recognize compensation expense for all equity-based awards made to employees and directors, under the fair value recognition provisions of ASC Topic 718, Compensation—Stock Compensation, or ASC 718, based on estimated fair values. We estimate the fair value of equity-based awards on the grant date using a two-step valuation approach as noted below. We record the value of the portion of the award expected to vest as expense on a straight-line basis over the requisite service period net of estimated forfeitures. We estimate forfeiture rates by taking into consideration historical experience during the preceding fiscal years. Profits interests awarded to employees typically vest at a rate of 25% after one year and the remaining portion vesting in equal increments over the subsequent 12 to 36 months following the one-year vesting milestone.

We granted our class C profits interests on each of February 14, 2013, April 16, 2013 and December 19, 2013 with threshold valuations on those dates of $53.2 million, $53.2 million and $80.1 million, respectively.

We recognized equity-based compensation expense of $0.2 million during the year ended December 31, 2012 and $0.2 million during the year ended December 31, 2013. The unrecognized compensation expense was $0.2 million as of December 31, 2012 and $0.4 million as of December 31, 2013. We expect unrecognized compensation expense for December 31, 2012 to be recognized over a weighted-average period of 2.1 years and unrecognized compensation expense for December 31, 2013 to be recognized over a weighted-average period of 2.9 years.

We recognized equity-based compensation expense of $38,000 during the three months ended March 31, 2013 and $44,000 during the three months ended March 31, 2014. The unrecognized compensation expense was $0.3 million as of March 31, 2013 and $0.4 million as of March 31, 2014. We expect unrecognized compensation expense for March 31, 2013 to be recognized over a weighted-average period of 2.6 years and unrecognized compensation expense for March 31, 2014 to be recognized over a weighted-average period of 2.8 years.

In connection with the Reorganization, profits interests in Viamet Holdings will be exchanged for common stock and restricted common stock of Viamet Pharmaceuticals, Inc., depending upon the portion of the profits interests award that was vested. The following table summarizes by grant date the pro forma number of shares of common stock underlying profits interest units granted from January 1, 2012 through April 30, 2014 after giving effect to the Reorganization, as well as the associated weighted average grant date fair value per profits interests unit:


Date	Class B Profits Interests			Class C Profits Interests		Weighted Average Fair Value Per Profits Interests Unit		Pro Forma Common Stock Issued in Respect of Profits Interests Units⁽¹⁾
Outstanding—January 1, 2012		3,881,096			—	$	0.17
Granted—February 17, 2012		—			387,200		0.16
Forfeitures—2012		(282,070	)		—		0.17
Outstanding—December 31, 2012		3,599,026			387,200		0.17
Granted—February 14, 2013		—			805,050		0.16
Granted—April 16, 2013		—			15,000		0.16
Granted—December 19, 2013		—			1,489,225		0.18
Outstanding—December 31, 2013		3,599,026			2,696,475		0.17
Converted to Common Stock— , 2014
Outstanding— , 2014						$

⁽¹⁾	Certain of the shares of common stock issued in respect of profits interests units will be subject to vesting in accordance with the vesting schedule applicable to such profits interests units.

Valuation Approach

Viamet Holdings is privately held with no active public market for its equity instruments. Therefore, for financial reporting purposes, management has periodically determined the estimated per share fair value of Viamet Holdings’ equity, including profits interests, and related financial instruments, or the call options and warrant liabilities, using contemporaneous valuations. These contemporaneous valuations are done using methodologies consistent with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, also known as the Practice Aid. These valuations were performed with the assistance of a third party valuation specialist. Management performed these contemporaneous valuations most recently as of February 13, 2013, June 5, 2013, October 9, 2013, November 1, 2013, December 31, 2013, February 26, 2014 and March 31, 2014.

The contemporaneous valuation models utilized reflect a two-stage process. Using a hybrid probability weighted expected return method (PWERM) which incorporates both IPO scenarios and discounted cash flow valuations, the fair value of the total equity is determined as a starting point for allocating value to the individual equity classes. Using these values as a starting point, and incorporating assumptions made regarding the expected returns and volatilities that are consistent with the expectations of market participants, a distribution of equity values is produced which cover the range of events that an informed

market participant might expect. This process creates a range of equity values. Using a contingent claims (Option Pricing Method) and waterfall (Current Value Method) framework, total equity value is allocated to the various components of the capital structure including the warrants and call options using the Options Pricing Model. The fair value measurement is sensitive to changes in the unobservable inputs. Changes in those inputs might result in a higher or lower fair value measurement.

In conducting these contemporaneous valuations, management considered all objective and subjective factors that it believed to be relevant in each valuation conducted, including management’s best estimate of Viamet Holdings’ business condition, prospects and operating performance at each valuation date. Within the contemporaneous valuations performed, a range of factors, assumptions and methodologies were used. The significant factors included external market conditions affecting the pharmaceutical industry, trends within the pharmaceutical industry, the prices at which Viamet Holdings sold preferred and common shares, the superior rights and preferences of the preferred shares relative to common shares at the time of each grant, the results of operations, financial position, status of research and development efforts, stage of development and business strategy, the lack of an active public market for the common and preferred shares and the likelihood of achieving a liquidity event such as an IPO or sale of Viamet Holdings in light of prevailing market conditions.

The key assumptions and resulting output values are as follows as of the most recent valuation dates:


	December 31, 2013			February 26, 2014			March 31, 2014
Key Inputs
Total equity value (in millions)	$	80.1		$	167.5		$	167.5
Volatility		20.00	%		30.00	%		30.00	%
Risk free rate		1.15	%		0.48	%		0.60	%
Time to liquidity (years)		3.8			2.4			2.3

Key Output Values
Series C1 Preferred - per share value	$	1.67		$	2.48		$	2.61
Warrant to purchase series C1 Preferred - per share value	$	0.52		$	1.33		$	1.46
Call option to purchase series C1 Preferred - per share value		n/a		$	1.33		$	1.46

Income Tax Credit Carryforwards

Our ownership structure includes a holding company organized as a limited liability company that has elected pass through tax treatment. As such, we do not recognize any income tax expense or benefit for the income or loss of the entity and have not established any deferred tax assets or liabilities within the holding company. The net operating losses and research and development credits carryforwards discussed below relate to our wholly owned subsidiaries.

We had operating loss tax carryforwards (both federal and state) of approximately $24.0 million at December 31, 2012 and $33.4 million at December 31, 2013 and federal research and development credit carryforwards of approximately $1.5 million as of both dates. Federal and state losses begin to expire in 2025 and 2020, respectively, and the research and development credit carryforwards begin to expire in 2026. For financial reporting purposes, a valuation allowance has been recognized to fully offset the deferred tax assets related to the carryforwards, based on our assessment of the likelihood of using these net deferred tax assets in future periods. The total increase in valuation allowance of $3.4 million was allocable to current operating activities. The utilization of the loss carryforwards to reduce future income taxes will depend on our ability to generate sufficient taxable income prior to the expiration of the loss carryforwards. In addition, the maximum annual use of net operating loss and research credit carryforwards is limited in certain situations in which changes occur in stock ownership.

In general, if we experience a greater than 50% aggregate change in ownership of certain significant shareholders over a three-year period (a Section 382 ownership change), utilization of our pre-change net operating loss carryforwards is subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, or the Code, and similar state laws. The annual limitation generally is determined by multiplying the value of our shares at the time of such ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the net operating loss carryforwards before utilization and may be substantial. We have not completed a study to determine the impact of ownership changes on our net operating loss carryforwards under Section 382 of the Code. Our ability to use our net operating loss carryforwards may be limited or lost if we experience a Section 382 ownership change in connection with this offering or as a result of future changes in our share ownership. Losses from a specific period may be subject to multiple limitations, and would generally be limited by the lowest of those limitations. There was no recognized tax benefit related to net operating loss carryforwards in any prior period.

The research and development credit, which had previously expired on December 31, 2011, was reinstated as part of the American Taxpayer Relief Act of 2012 enacted on January 2, 2013. This legislation retroactively reinstated and extended the credit from the previous expiration date through December 31, 2013. As a result, we adjusted our deferred tax assets in 2013 for the 2012 and 2013 research and development credits, which resulted in an increase to the deferred tax assets and a corresponding increase to the valuation allowance (or uncertain tax positions) of $0.3 million and $0.3 million, respectively.

Contractual Obligations and Commitments

Our principal contractual obligation relates to the leasing of our office space in Durham, North Carolina, under a non-cancelable operating lease that is scheduled to expire in March 2020. The table below summarizes our financial obligations under this lease. We do not have any outstanding indebtedness.


	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
	(in thousands)
Operating lease obligations	$	1,086	$	164	$	341	$	361	$	220

We enter into contracts in the normal course of business with CROs to assist in the performance of our research and development activities and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.

Off Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

Quantitative and Qualitative Disclosures about Market Risks

We are not exposed to market risk related to changes in interest rates. As of March 31, 2014, we had cash and cash equivalents of $7.4 million, with $7.3 million held in checking and $0.1 million held in basic interest bearing accounts.

Emerging Growth Company Status

In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised

accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

BUSINESS

Overview

We are a biopharmaceutical company focused on the discovery, development and commercialization of novel antifungal agents based on our proprietary metalloenzyme medicinal chemistry platform, which we call our Metallophile^® Technology. Metalloenzymes are enzymes that contain a metal, such as iron, zinc or copper, that is linked to the enzyme’s protein component. We are using our platform to design drugs that we expect to have greater selectivity, fewer side effects and improved potency compared to currently available antifungal agents. Fungal infections represent a significant medical problem, and include highly prevalent mucosal and dermatologic infections, as well as life-threatening invasive central nervous system and systemic infections. We are developing distinct antifungal agents for each of these major categories. Our lead product candidate, VT-1161, is an oral agent that we are developing for the treatment of recurrent vulvovaginal candidiasis, or RVVC, a highly prevalent mucosal infection for which there are no approved therapies in the United States, and onychomycosis, a very common fungal infection of the nail for which current treatments are suboptimal with respect to safety, tolerability and efficacy.

In June 2011, we submitted to the U.S. Food and Drug Administration, or FDA, an investigational new drug application, or IND, for VT-1161 for the treatment of patients with invasive, mucosal or superficial fungal infections, and in July 2013, we submitted an IND for VT-1161 for dermatology indications, initially for the treatment of patients with moderate to severe interdigital tinea pedis.

We are also developing VT-1129 as an oral agent for cryptococcal meningitis, a life-threatening invasive fungal infection of the lining of the brain and spinal cord. VT-1129 has demonstrated in an animal model the ability to reduce to undetectable levels the pathogenic fungal organism that causes cryptococcal meningitis. We anticipate submitting an IND for VT-1129 to the FDA during the first half of 2015, and we recently applied to the FDA for orphan drug designation. Our third program, VT-1598 and related analogues, is in preclinical development with a goal of developing an oral and intravenous therapy for the treatment of invasive fungal infections.

According to a market research study conducted in May 2014 by Campbell Alliance and commissioned by us, or the May 2014 Campbell Alliance Study, worldwide sales of branded antifungal drugs were approximately $3.5 billion in 2013. While there are several classes of antifungal agents currently approved in the United States, we believe there is a significant opportunity for the development of new antifungal agents for three primary reasons:

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Current antifungal agents often have significant safety and tolerability shortcomings, such as liver toxicity, drug-drug interactions, endocrine toxicity and pregnancy warnings;

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Current antifungal agents suffer from limited efficacy in treating many fungal infections, including poor initial response rates and high relapse rates; and

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Resistance to currently available antifungal agents is increasingly problematic.

We are using our Metallophile Technology to design antifungal compounds that we believe will be highly differentiated from existing agents and address their shortcomings. The focus of our three principal antifungal programs is a metalloenzyme known as fungal CYP51, a clinically validated target that is important in the synthesis of the fungal cell membrane and therefore critical to fungal proliferation and survival. Our Metallophile Technology is also potentially applicable to other metalloenzyme targets for the treatment of fungal, bacterial and viral infections.

Utilizing our know-how and integrated scientific and drug development capabilities, we have identified multiple product candidates that inhibit fungal CYP51. We have also prioritized other metalloenzyme targets for the initiation of new infectious disease research programs. Our three most advanced programs are as follows:

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VT-1161 for Mucosal and Dermatologic Fungal Infections. During the second half of 2014, we plan to initiate two randomized, double-blind, placebo-controlled, multi-arm Phase 2b clinical trials of VT-1161 at multiple clinical sites within the United States, one in patients with RVVC and one in patients with onychomycosis. We are currently conducting two proof of concept Phase 2a clinical trials of VT-1161. Our first ongoing Phase 2a clinical trial is in patients with moderate to severe AVVC. Our intent in conducting this clinical trial was to establish proof of concept that VT-1161 is safe and clinically active in treating vaginal Candida infections, with overall cure rates generally comparable to those of fluconazole. Candida is a broad family of fungi that resemble yeasts and frequently cause infections in humans. In the low-, mid- and high-dose arms of this trial, VT-1161 demonstrated clinical and mycologic cure rates generally comparable to fluconazole, the current standard of care, with a favorable safety and tolerability profile. When used as a clinical trial endpoint, mycologic cure indicates a negative culture for fungi at the day specified. We believe that demonstrating clinical antifungal activity in this AVVC clinical trial is likely to be indicative of clinical antifungal activity in a subsequent RVVC clinical trial because the fungal pathogens involved in both conditions are typically the same. A study published in December 2012 in the medical journal Obstetrics and Gynecology, estimates that RVVC afflicts 5% to 8% of women of child-bearing age in the United States. There are currently no approved agents in the United States for RVVC. Our second ongoing Phase 2a clinical trial of VT-1161 is in patients with moderate to severe interdigital tinea pedis. Our intent in conducting this Phase 2a tinea pedis clinical trial was to establish proof of concept that VT-1161 is clinically active in treating dermatologic infections caused by dermatophytes, a broad family of fungi that frequently cause skin, nail and hair infections and which commonly cause both tinea pedis and onychomycosis. In the low-, mid- and high-dose arms of this trial, VT-1161 demonstrated strong clinical antifungal activity and a favorable safety and tolerability profile. In Phase 1 clinical trials, VT-1161 demonstrated a

favorable safety profile, good oral pharmacokinetics and a prolonged half-life. We believe that these attributes of VT-1161 may make the agent particularly useful in indications such as RVVC, in which recurrence rates with existing therapies are problematic.

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VT-1129 for Cryptococcal Meningitis. We are conducting preclinical studies of VT-1129, which we are developing for cryptococcal meningitis. We anticipate submitting an IND for VT-1129 to the FDA during the first half of 2015. Cryptococcal meningitis is an acute, life-threatening fungal infection of the lining of the brain and spinal cord. A study published in February 2013 in the scientific journal PLOS ONE estimated that there are 3,400 hospitalizations associated with cryptococcal meningitis annually in the United States. The three-month mortality rate during management of acute cryptococcal meningitis is approximately 20% in medically developed countries. Cryptococcal meningitis is particularly common in immunocompromised patients, such as transplant patients or patients with HIV infection. We believe VT-1129 may be eligible for orphan designation in this indication in both the United States and Europe, and we recently applied to the FDA for orphan designation. VT-1129 has been shown in an animal model to reduce to undetectable levels the pathogenic fungal organism that causes cryptococcal meningitis. We are not aware of any other agent that has demonstrated in an animal model the ability to reduce to undetectable levels the pathogenic fungal organism that causes cryptococcal meningitis.

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VT-1598 and Analogues for Invasive Fungal Infections. We are conducting preclinical research focused on the identification of a compound for the treatment of invasive fungal infections, including those caused by Aspergillus and Candida species, two very common fungal pathogens. We have identified a lead series, which includes VT-1598 and several analogues, which we believe would provide both improved efficacy and safety when compared with the currently available agents. We are currently in the lead optimization phase of this program. A review article published in the journal Trends in Microbiology indicates that the overall mortality for invasive diseases caused by Candida and Aspergillus is 30% to 50%, despite the advent of new diagnostic and therapeutic strategies. These high mortality rates are partially a result of growing resistance to drugs currently available to treat these types of infections. This concern is highlighted by increased reports of resistance in the hospital setting in the United States and Europe. We believe there is therefore an urgent need for agents with broad spectrum antifungal activity, including against resistant fungal organisms.

We own four U.S. patents, including a composition-of-matter patent covering both VT-1161 and VT-1129 that is projected to expire in 2031, without including the potential benefit of patent term extension. We also own 12 pending U.S. patent applications, four pending Patent Cooperation Treaty international applications and numerous foreign counterparts for many of these patents and patent applications. In addition, we jointly own six pending U.S. patent applications with the United States of America, as represented by the Secretary of the Department of Health and Human Services, which cover a process of manufacturing for VT-1161 and VT-1129. We have also applied for composition-of-matter patent protection for VT-1598 and its analogues.

Our Strategy

Develop and commercialize VT-1161 for the treatment of RVVC and onychomycosis. We are focusing a significant portion of our business efforts on the clinical development of VT-1161, our lead product candidate. We plan to initiate two Phase 2b clinical trials of VT-1161 in the second half of 2014, one in patients with RVVC and one in patients with onychomycosis. We believe that there is a significant unmet

medical need and commercial opportunity for a novel, oral fungal CYP51 inhibitor that both improves upon the efficacy of, and avoids the side effects associated with, the currently available agents for various fungal infections, such as RVVC and onychomycosis.

Advance additional product candidates into clinical development. Through our metalloenzyme drug discovery and development expertise, we have created a pipeline of product candidates that addresses a range of mucosal, dermatologic, and invasive fungal infections, including serious infections of the central nervous system. We are developing multiple antifungal agents, including VT-1129 for the treatment of cryptococcal meningitis and for which we expect to submit an IND to the FDA in the first half of 2015, and VT-1598 and its analogues for the treatment of Aspergillosis, Candidiasis, and other serious, invasive fungal infections.

Strengthen and expand our core metalloenzyme drug discovery and development capabilities. All of our product candidates and research programs have resulted from our core metalloenzyme drug discovery technologies. We intend to continue to invest in these core technologies, including our Metallophile Technology, as the key to our future research programs and product candidates. We believe that the breadth of our capabilities in metalloenzyme drug discovery will enable us to continue to identify and develop additional product candidates beyond our initial antifungal target, fungal CYP51, to include other targets for the treatment of fungal, bacterial and viral infections. We also plan to augment our existing development team by adding personnel with experience in drug safety, statistical methods, project management and medical affairs as we advance our product candidates into later-stage clinical development.

Establish specialized sales and marketing capabilities. We plan to retain U.S. marketing and sales rights or co-promotion rights for our product candidates for which we receive marketing approvals, particularly in situations where it is possible to access the market through a focused, specialized sales force. Specifically, for VT-1161 we believe that there are certain physician groups, such as the subset of gynecologists who are the key specialists in treating RVVC, as well as dermatologists who are the key specialists in treating onychomycosis, that are sufficiently concentrated to enable us to effectively promote to these physicians with a focused, specialized internal sales force. For situations in which a large sales force is required to access the market, and with respect to markets outside of the United States, we generally plan to enter into collaborative arrangements with leading pharmaceutical and biotechnology companies to commercialize our product candidates that receive marketing approval.

Overview of Fungal Infections

Fungal infections are typically classified into one of three categories:

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Mucosal infections, which affect the vagina, oropharynx and esophagus;

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Dermatologic infections, which affect the nails, skin and hair; and

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Invasive infections, which affect the central nervous system, bloodstream and internal organs.

Each of these categories is characterized by certain common fungal pathogens. The agents that are used to treat these various infections differ based upon the specific spectrum of activity as well as the safety profile of each agent.

An overview of the major categories of fungal infections is provided in the table below:


	Mucosal	Dermatologic	Invasive
Examples of indications	RVVC AVVC	Onychomycosis Tinea pedis	Cryptococcal meningitis Invasive candidiasis
Common classes of antifungal agents used	Triazoles Echinocandins	Triazoles Allylamines	Triazoles Echinocandins Polyenes Antimetabolites
Viamet product candidates	VT-1161	VT-1161	VT-1129/VT- 1598

Mucosal Fungal Infections

The most common mucosal fungal infection is vulvovaginal candidiasis, which can be either acute (AVVC) or recurrent (RVVC). According to the U.S. Department of Health and Human Services’ Office of Women’s Health’s online vaginal yeast infections fact sheet, an estimated 75% of women have vulvovaginal candidiasis at some time in their life. Typically, mild acute infections are treated by and respond to topical agents that are available over-the-counter. Oral fluconazole, which requires a prescription, may also be used for mild acute infections. However, moderate to severe episodes of acute infection typically respond less well than mild infections to standard regimens of topical agents or oral fluconazole. A study published in December 2012 in the medical journal Obstetrics and Gynecology, estimates that 5% to 8% of women of child-bearing age in the United States have four or more episodes of AVVC per year and are considered to have RVVC, for which topical agents and oral fluconazole are typically ineffective. This is in part due to the fact that some women with RVVC are infected by pathogens such as Candida glabrata that are particularly resistant to topical agents and oral fluconazole. There are no antifungal agents approved for the treatment of RVVC in the United States.

Other mucosal areas that can be infected by fungal pathogens include the oropharynx and esophagus. Infections in these areas occur most frequently in immunocompromised patients, including patients with HIV infection, transplant recipients, oncology patients and patients in the intensive care unit, and are usually caused by various species of Candida. Mild infections of the oral cavity can be successfully treated with topical agents. However, more severe infections of the oropharynx or esophagus require systemic antifungal therapy.

Dermatologic Fungal Infections

Onychomycosis is a very common dermatologic fungal infection. Global Data projected onychomycosis to affect approximately 32 million individuals in the United States in 2012 and as many as 38 million by 2022. According to a study conducted in 2012 by Campbell Alliance and commissioned by us, or the 2012 Campbell Alliance Study, the prevalence of onychomycosis increases with age, with approximately 18% of individuals over the age of 60 affected by the condition. The same study indicated that infection typically involves one or more toenails, although fingernail infections represent about 5% of cases. The most common pathogenic organisms causing onychomycosis are the dermatophytes, such as Trichophyton rubrum, named for the fact that they commonly infect the skin and other superficial tissues. Less commonly, Candida species and some molds can also infect the nail.

Onychomycosis is an insidious condition, often developing over a period of months or even years. The infected nail can become discolored, thickened and disfigured and may result in pain when walking.

Onychomycosis can also be a particularly significant medical issue for diabetics or other patients with compromised immune systems. In these patients, the infected nail can serve as an entry point for bacterial infection, which can in turn lead to serious complications, including amputation. Although treatable, many patients elect not to pursue medical therapy because of the limited efficacy and safety concerns of the currently available agents, which include both topical and oral drugs. Terbinafine is the most commonly used oral drug to treat onychomycosis; however, the labeled complete cure rate for this agent is only 38% and there are also significant safety concerns, including liver toxicity and drug-drug interactions. Oral itraconazole is also approved for the treatment of this condition, but it has an inferior safety profile when compared to that of terbinafine. Penlac (ciclopirox), a topical therapy, is also approved for onychomycosis, but the labeled complete cure rates for this agent in two Phase 3 clinical trials were only 5.5% and 8.5%. Unlike many bacterial infections that may resolve without therapy, onychomycosis will rarely improve without medical treatment.

In addition to infection of the nail, infection of the skin can also occur. Depending upon its location, such infections are termed tinea pedis (foot), tinea capitis (head) and tinea corporis (body), as examples. Fungal infections of the nails and skin are most often caused by dermatophytes. As opposed to fungal infections of the skin, fungal infections of the nails do not generally respond well to topical application of an antifungal compound due to the inability of topical compounds to penetrate the nail. Oral antifungal agents often are used to treat infections that do not respond to topical agents.

Invasive Fungal Infections

Invasive fungal infections are a significant cause of morbidity and mortality, predominantly in hospitalized patients. Based upon an epidemiology study in the scientific journal Clinical Microbiology Reviews, which reported an incidence rate of 31.2 cases of invasive candidiasis and invasive aspergillosis per 100,000 individuals in 2003 in the United States, we estimate that there are approximately 100,000 new cases of invasive fungal infections currently reported in the United States each year. Invasive fungal infections can involve any organ or tissue, but commonly affect the bloodstream, liver, spleen, kidneys and brain. The most common fungal pathogens causing invasive infections are various species of Candida and Aspergillus. Antifungal agents most commonly used in the treatment of invasive fungal infections include the more potent triazole agents, voriconazole and posaconazole, the echinocandins, and various formulations of amphotericin B. Due to the difficulty of eradicating the infection, patients are often maintained on therapy for several months. Mortality rates can range from 30% to 50%.

Beyond Aspergillus and Candida infections, there are other fungal infections that can cause significant morbidity, known as the endemic mycoses. The endemic mycoses are commonly found in specific geographic areas, such as the Southwest United States. These diseases include coccidioidomycosis, commonly known as valley fever. Endemic mycoses typically affect the lungs, but can become disseminated throughout the body in more severe cases. In uncomplicated infections, flu-like symptoms typically last from several weeks to a month. Treatment with fluconazole or other systemic antifungal agents is effective in many cases. In contrast, current antifungal agents are not highly effective in cases of chronic lung infection or when the infection spreads outside the lungs.

Currently Available Antifungal Agents

In contrast to the development of new antibacterial agents, far fewer antifungal agents have been developed over the past several decades. One reason for this difference is that fungi are eukaryotic, as are all human cells. All eukaryotic cells share a common cellular structure and have other common characteristics. This is in contrast to bacteria, which are prokaryotic cells, and therefore have a fundamentally different cellular structure. Thus, relative to bacteria, there are fewer unique molecular targets present in fungal cells that are not also present in human cells, and therefore less opportunity to

develop selective agents that target fungal cells without also interfering with the function of normal human cells. The principal classes of antifungal agents in use today include the following:

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triazoles, including fluconazole (Diflucan), itraconazole (Sporanox), voriconazole (Vfend) and posaconazole (Noxafil);

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allylamines, most notably terbinafine (Lamisil);

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echinocandins, including caspofungin (Cancidas), micafungin (Mycamine) and anidulafungin (Eraxis);

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polyenes, most notably amphotericin B (AmBisome and other trade formulations); and

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antimetabolites, most notably flucytosine.

The Triazole Antifungal Agents

The triazole antifungal agents, named for a common chemical ring structure that contains three nitrogen atoms, are the most commonly used class of antifungal agents. All of the triazoles work by targeting fungal CYP51, also known as lanosterol demethylase, a key enzyme involved in the synthesis of ergosterol, an important component of the fungal cell membrane. The presence of ergosterol in the cell membrane is unique to fungal cells and does not occur in human cells. Thus, inhibition of lanosterol demethylase provides an attractive target for antifungal drug development.

There are four orally available triazoles in use in clinical practice today, which vary from the less potent agents, fluconazole and itraconazole, to the more potent agents, voriconazole and posaconazole. Many of the triazoles are available as generic prescription drugs.

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Fluconazole. First approved in the United States in 1990 in an oral formulation and subsequently available in an intravenous formulation, fluconazole is considered to be the safest and best tolerated of the triazoles, and is, therefore, the most widely used for less serious infections, such as mucosal infections. Because it is orally available, fluconazole is also used in the maintenance phase of the treatment of certain invasive fungal infections, such as cryptococcal meningitis. Fluconazole has a relatively broad spectrum of activity, but there has been increasing incidence of resistance to the agent, particularly in the hospital setting. Fluconazole has been available as a generic since 2004. According to the May 2014 Campbell Alliance Study, prior to genericization, peak sales of Diflucan, the branded version of fluconazole, were approximately $1.2 billion worldwide. According to data provided by IMS Health, 16.1 million prescriptions were written for fluconazole in 2013. The number of prescriptions written for fluconazole was stable through the period of 2009-2013. The primary prescribing groups for fluconazole included OB/GYN, family practice, nurse practitioners and internal medicine.

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Itraconazole. First approved in the United States in 1992 and available in both oral and intravenous formulations, itraconazole has a broader spectrum of activity than fluconazole, including coverage of Aspergillus species. Itraconazole is less commonly prescribed than fluconazole because of fluconazole’s superior safety and tolerability profile. Oral itraconazole is approved for the treatment of onychomycosis and certain endemic mycoses, and may be used as second-line therapy in invasive fungal infections. Itraconazole has been available as a generic since 2004. According to the May 2014 Campbell Alliance Study, prior to genericization, peak sales of itraconazole were approximately $650 million worldwide.

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Voriconazole. First approved in the United States in 2002 and available in both oral and intravenous formulations, voriconazole is indicated for invasive and mucosal fungal infections. While more potent and with a broader spectrum of activity than fluconazole or itraconazole, voriconazole is generally considered less safe. In addition to having a

significantly higher incidence of liver toxicity, visual disturbances occur in approximately 21% of patients treated with this agent. Additionally, voriconazole has poor pharmacokinetic properties, resulting in difficulty maintaining adequate drug levels in the bloodstream in some patients. Voriconazole has been available as a generic since May 2012. According to the May 2014 Campbell Alliance Study, prior to genericization, peak sales of voriconazole were approximately $825 million worldwide.

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Posaconazole. First approved in the United States in 2006, posaconazole was only available as an oral agent for many years, until the March 2014 approval of an intravenous formulation. Like voriconazole, posaconazole is both more potent and has a broader spectrum of activity than either fluconazole or itraconazole, but also suffers from increased liver toxicity and other significant issues, including poor pharmacokinetic properties. Posaconazole is currently available only as the branded agent Noxafil. According to the 2014 Campbell Alliance Study, sales of posaconazole in 2013 were approximately $300 million worldwide.

Despite their widespread use in antifungal therapy, the utility of the triazoles is adversely impacted to varying degrees by a number of significant side effects common to this class of drugs, including liver toxicity, drug-drug interactions, endocrine toxicity and pregnancy warnings, as well as more drug-specific toxicities, such as the visual disturbances sometimes seen with voriconazole. These side effects are believed to be due to the poor selectivity of these agents for their intended target, fungal CYP51, relative to various human CYP enzymes that are important in normal physiology, but may be inappropriately inhibited by the triazoles. Another important limitation of the triazoles is the emergence of resistant pathogens. The principal concerns of these agents are:

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Liver toxicity. The degree of liver toxicity varies by agent, but is common to all triazoles. Fluconazole has the lowest incidence of liver toxicity, which is one of the primary reasons for its widespread use compared with the other agents. The more potent agents, such as voriconazole, carry a substantial risk of liver toxicity. Toxicity is usually first manifested through increases in liver enzyme levels, which are detected through blood tests, so patients on long-term therapy are often monitored with serial blood tests. The incidence of liver enzyme elevations ranges from a few percent with fluconazole up to 20% with voriconazole according to a study published in June 2010 in the medical journal Antimicrobial Agents and Chemotherapy. If a significant increase in liver enzymes occurs, therapy with the agent is usually discontinued. On rare occasions, significant liver toxicity resulting in acute hepatic failure, transplant or death has been reported. Other than monitoring of liver enzyme levels in patients being treated with a triazole agent, there is currently no test available to determine which patients are at greatest risk for liver toxicity.

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Drug-drug interactions. The principal drug metabolizing enzymes in humans, including CYP3A4 and CYP2D6, are members of the CYP family of enzymes found primarily in the liver. Because of their poor selectivity for fungal CYP51 relative to the human CYP enzymes, all triazole antifungals can result in significant alterations in the metabolism of other drugs, many of which are in common use. This propensity for drug-drug interactions represents a significant challenge for physicians and pharmacists since many patients with fungal infections are concurrently being treated with other medications.

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Endocrine toxicity. Endocrine toxicity is also a known side effect of the triazoles and is attributable to their lack of selectivity for fungal CYP51 relative to other important human CYP enzymes. In particular, CYP17 and CYP19 are critical for the synthesis of androgen and estrogen sex hormones. Inhibition of CYP17 and CYP19 can lead to a variety of hormonal imbalances, including androgen and estrogen deficiency, that result in impairment to normal functions. Common side effects seen as a result of this endocrine toxicity include hot flashes and decreased libido.

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Pregnancy warnings. The triazoles carry significant pregnancy warnings, which may also be attributable to their lack of selectivity. In particular, the utility of long-term treatment with fluconazole in women with RVVC, most of whom are of child-bearing age, is adversely affected by fluconazole’s category D pregnancy warning. The FDA has established five pregnancy risk factor classifications to indicate the potential of a drug to cause birth defects if taken during pregnancy: Category A indicates that adequate and well-controlled studies in pregnant women have failed to demonstrate a risk to the fetus in the first trimester of pregnancy (and there is no evidence of a risk in later trimesters); Category B indicates that animal reproduction studies have failed to demonstrate a risk to the fetus and there are no adequate and well-controlled studies in pregnant women; Category C indicates that animal reproduction studies have shown an adverse effect on the fetus, that there are no adequate and well-controlled studies in humans and that the benefits from the use of the drug in pregnant women may be acceptable despite its potential risks; Category D indicates that there is positive evidence of human fetal risk based on adverse reaction data from investigational or marketing experience or studies in humans, but that the potential benefits from the use of the drug in pregnant women may be acceptable despite its potential risks; and Category X indicates that animals or humans have demonstrated fetal abnormalities or that there is positive evidence of fetal risk based on adverse reaction reports from investigational or marketing experience, or both, and that the risk of the use of the drug in pregnant women clearly outweighs any possible benefit.

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Antifungal resistance. Many fluconazole-resistant strains of Candida albicans have been identified, and these account for an increasing percentage of infections, particularly in the hospital setting. There are also several species of Candida, such as Candida glabrata and Candida parapsilosis, against which the triazoles are inherently less potent. Also of concern is the phenomenon of cross-resistance, whereby a strain that develops resistance to one triazole also becomes resistant to the others. Similar to the phenomenon of antibacterial resistance, the incidence of triazole-resistant fungal infections is increasing.

There is an older class of drugs, the imidazoles, that also targets fungal CYP51. However, all of the agents in this class suffer from an even greater degree of toxicity than the triazoles, particularly liver toxicity. As a result of their adverse toxicity profile, the imidazoles, which include such agents as clotrimazole, miconazole and ketoconazole, are almost exclusively used as topical formulations for the treatment of less serious infections of the skin and mucosa.

The Allylamine Antifungal Agents

The allylamine antifungal agents, most notably terbinafine, work by targeting the fungal enzyme squalene epoxidase, which is important in the synthesis of the fungal cell membrane. Unlike the triazoles, the allylamines have a more limited spectrum of activity, and are primarily active against dermatophytes. Terbinafine is the primary oral antifungal agent used in the treatment of onychomycosis. However, terbinafine can cause many of the same side effects as the triazoles, including liver toxicity and drug-drug interactions. While liver toxicity is usually mild and self-limited, cases of acute hepatic failure have been reported. In addition, a rare but particularly concerning side effect is taste or smell disturbance, which is usually, but not always, reversible with discontinuation of therapy. Terbinafine has been available as a generic since 2007. According to the May 2014 Campbell Alliance Study, prior to genericization, Lamisil, the branded version of terbinafine, achieved worldwide peak sales of $1.2 billion in 2004. According to data provided by IMS Health, approximately 2.85 million prescriptions were written in 2013 for terbinafine and the number of prescriptions written for terbinafine increased at a compound annual growth rate of 5% during the period of 2009-2013. The primary prescribing groups for terbinafine included family practice, podiatry, internal medicine and dermatology.

The Echinocandin Antifungal Agents

The echinocandins are large molecules administered intravenously that work by targeting the fungal enzyme 1,3-beta-glucan-synthase, which is important in the synthesis of the fungal cell wall. The echinocandins were developed in the early part of the 2000s for the treatment of invasive fungal infections. These agents, which include caspofungin, micafungin, and anidulafungin, have a broad spectrum of activity, and are particularly potent against Candida species, for which they are often used as first-line therapy. However, they are less potent against Aspergillus species, for which they may be used as second-line therapy. In contrast to the triazoles, the echinocandins are less frequently associated with significant drug-drug interactions. Due to their large molecular size, all currently available echinocandins must be administered intravenously. As a result, their use is limited to the treatment of invasive fungal infections or as prophylaxis in the hospital setting. Additionally, following acute treatment, the physician does not have the ability to switch the patient to an oral formulation of the same drug for longer-term therapy.

The Polyene Antifungal Agents

The polyenes are administered intravenously for the treatment of invasive fungal infections and work by directly disrupting the normal structure of the fungal cell membrane. One of the earliest antifungal agents to be introduced was amphotericin B, which is a large molecule that must be administered intravenously, usually in the hospital setting. For many years, amphotericin B was the primary agent used in the treatment of invasive fungal infections. The initial formulations of amphotericin B were highly toxic to the kidneys, and renal impairment was a common complication of therapy. Newer lipid-based formulations, such as AmBisome, have reduced the degree of toxicity to the kidneys, but this side effect remains a significant concern. Amphotericin B can also cause liver toxicity, anemia and other blood disorders, as well as serious cardiac arrhythmias and cardiac failure. The drug is also often poorly tolerated, with acute reactions characterized by flu-like symptoms immediately following drug administration occurring commonly. Amphotericin B is active against Candida and Aspergillus species, as well as other less common pathogens that cause invasive fungal infections. However, its use is limited by the unfavorable safety and tolerability profile. Although generic versions of amphotericin B are available, the most widely prescribed formulation, AmBisome, is not available as a generic. According to the May 2014 Campbell Alliance Study, sales of AmBisome were approximately $488 million worldwide in 2013.

The Antimetabolite Antifungal Agents

Flucytosine, available only in an oral formulation, was discovered in the 1950s as part of an effort to develop novel anticancer agents. Although it was not effective as a treatment for cancer, it was subsequently found to have antifungal activity and is labeled for the treatment of cryptococcal meningitis. The mechanism of action is through inhibition of DNA and RNA synthesis in fungal cells. Because of its toxicity, however, the use of flucytosine is restricted to invasive fungal infections, primarily cryptococcal meningitis. Side effects include those often associated with antineoplastic agents, including bone marrow toxicity manifested by anemia, decreased white blood cell count and decreased platelet count. Additionally, flucytosine can cause liver and intestinal toxicity. Flucytosine is available as a generic in the United States.

Our Approach to Antifungal and Metalloenzyme Drug Discovery and Development

Over the past several years, we have established an interdisciplinary environment that is designed to meet the challenges and complexity of antifungal and metalloenzyme drug discovery. We have an integrated set of capabilities that we believe enhances our ability to develop product candidates that modulate metalloenzyme targets for the treatment of a range of infectious diseases that represent significant unmet medical needs and commercial opportunities, including fungal infections and, potentially, bacterial and viral infections. Our capabilities and know-how include our Metallophile database, medicinal and computational chemistry, molecular biology and enzymology expertise, a CYP enzyme screening panel,

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access to broad fungal screening collections that include a large number of resistant clinical isolates, access to complex animal models of fungal infection, bioanalytics, pharmacology and clinical development.

We have focused our initial antifungal drug discovery efforts on fungal CYP51, a well-validated metalloenzyme target. Fungal CYP51 is the target of the triazole class of antifungals, the most commercially successful class of antifungals. In selecting this target, we considered the fact that the triazole agents are hampered to varying degrees by a common set of side effects, which we believe can be traced to a common shortcoming in their chemical structure.

To understand this shortcoming, it is helpful to consider that fungal CYP51, like all metalloenzymes, contains a metallic atom, in this case iron, at the core of its active site. The triazole antifungal agents block fungal CYP51, in part, as a result of very tight binding that occurs between the part of the molecule for which the triazole class is named, a ring-based structure containing three nitrogen atoms, and the iron atom at the active site of the fungal CYP51 enzyme. However, there are many CYP enzymes in the human body, which also contain an iron atom at their active site. As a result of their high iron-binding affinity, the triazoles interact not just with the fungal target of interest, but with other unintended human CYP enzymes. We believe that these off-target interactions are responsible for many of the side effects, including drug-drug interactions, and other shortcomings of the triazole agents.

Since the origins of our company are based upon our in-depth understanding of metalloenzyme structure and function, we identified fungal CYP51 as an attractive opportunity to utilize our Metallophile Technology platform in order to address the challenges and complexity of antifungal drug development. In particular, we initiated our research efforts by considering the chemical structure of a currently-marketed antifungal agent, and then substituting less potent metal-binding groups as we explored new chemistries. While this approach may appear counter-intuitive in that our early lead compounds showed reduced antifungal potency, we were able to generate inhibitors which, in comparison with currently available agents, were significantly more selective in vitro for fungal CYP51 than for important human CYP enzymes. During lead optimization, we were able to regain the desired potency for fungal CYP51 by modifying the non-metal binding component of the inhibitor, which we call the backbone of the compound, which interacts with the fungal CYP51 protein itself as opposed to the iron atom. In contrast to the iron atom that is common to all CYP enzymes, these protein components are significantly different in each CYP enzyme. The advantage of engineering the potency of the compound into the backbone rather than the metal-binding group is that the backbone interacts primarily with the unique amino acid sequence of the intended fungal CYP51 target, rather than with the common iron atom at the active site, and thus provides the opportunity to generate novel compounds that are not only extremely potent, but also highly selective.

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Our Programs

The following table summarizes key information about our lead product candidate that is in clinical trials and our principal preclinical and research programs. All of the compounds in these programs are orally-available small molecules that target the metalloenzyme fungal CYP51 and are the result of our internal research efforts. We retain worldwide commercialization rights in all of these programs.

LOGO

VT-1161 for Recurrent Vulvovaginal Candidiasis and Onychomycosis

VT-1161 is a potent and selective, orally available inhibitor of fungal CYP51. VT-1161 blocks the production of ergosterol, an essential component of the fungal cell membrane, which is critical to fungal proliferation and survival. In in vitro and in vivo studies, VT-1161 has demonstrated broad spectrum activity against both Candida species and dermatophytes, including those species that commonly cause RVVC and onychomycosis. Based on our research to date, we believe that VT-1161 is highly active against most species of Candida, the causative agent in RVVC, including Candida glabrata and fluconazole-resistant strains of Candida. Also, based on our research to date, we believe VT-1161 is highly active against Trichophyton rubrum and Trichophyton mentagrophytes, the two most common dermatophyte species that cause onychomycosis.

Because VT-1161 is highly selective for fungal CYP51, we believe that it may avoid the side effects that limit the use of commonly prescribed antifungals, including fluconazole, itraconazole, posaconazole, terbinafine and voriconazole. The triazoles, in contrast to VT-1161, contain a very potent metal-binding group (the triazole), which leads to binding and inhibition of not only fungal CYP51, but also of human CYP enzymes, including those in the liver. Unintended inhibition of human CYP enzymes is believed to contribute to the significant side effects seen with the triazoles, including liver toxicity, frequent drug-drug interactions and endocrine toxicity, as well as pregnancy warnings, which in the case of chronic fluconazole use is a Category D.

RVVC Overview

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no approved agents in the United States for RVVC. A study published in December 2012 in the medical journal Obstetrics and Gynecology, estimates that RVVC afflicts 5% to 8% of women of child-bearing age in the United States. RVVC can be a source of significant discomfort, and leads to loss of work time, estimated at approximately 33 hours per year for a typical patient, among other concerns. RVVC is ranked by patients above migraine and similar to asthma and chronic obstructive pulmonary disease with regard to its impact on quality of life. While risk factors for RVVC are generally not well understood, diabetic patients are particularly prone to this condition.

Vulvovaginal candidiasis is caused by various Candida species, the most common of which is Candida albicans. Candida glabrata and Candida tropicalis are also common causative agents. Unlike Candida albicans, which usually responds to topical agents or oral fluconazole, Candida glabrata and Candida tropicalis are often more resistant to these agents.

Treatment of RVVC often consists of the use of a topical antifungal agent or oral fluconazole to address the acute infection, which may provide symptomatic relief for a few weeks to months, only to have the infection recur. Consequently, additional courses of treatment are frequently required even after initial successful therapy for the acute infection. For some patients, chronic treatment with fluconazole given once-weekly for a period of approximately six months is prescribed, even though fluconazole is not approved in the United States for this use. There is significant concern regarding the long-term use of fluconazole in women of child-bearing age as a result of its Category D pregnancy warning. According to a clinical study of fluconazole conducted by a third party, while 91% of women were infection free after six months of once weekly fluconazole treatment, following this six-month treatment only 43% of women remained infection free at 12 months. We believe that this high rate of relapse is due in part to the relatively short half-life of fluconazole.

As part of a March 2014 survey commissioned by us, Campbell Alliance surveyed 15 physicians who indicated that, in their view, important unmet needs in the treatment of RVVC included agents offering better prevention of recurrence, agents with a broader spectrum of antifungal activity and agents with better activity against resistant organisms. These physicians further indicated that key unmet needs with regard to safety concerns included agents with less liver toxicity and agents with better pregnancy warning categories. The physicians were also provided with a VT-1161 product profile for the treatment of RVVC. The key aspects of the product profile included a six-month once weekly dosing regimen with VT-1161, an 80% prevention of recurrence of AVVC episodes at 48 weeks, no significant adverse events compared to placebo, no drug-drug interactions and a category B pregnancy warning. Based on the product profile provided, the physicians interviewed indicated a mean intent to prescribe of 6.73 on a scale from one to seven, with seven being “extremely likely to prescribe.”

Ongoing Phase 2a Clinical Trial for AVVC

We designed the AVVC clinical trial to enroll approximately 48 patients across three VT-1161 dose groups and an active comparator group that receives fluconazole, which is the standard of care for AVVC. Fluconazole was dosed in accordance with its approved labeling. We selected the doses of

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VT-1161 used in this trial to achieve plasma concentrations of VT-1161 that bracketed the plasma concentrations known to be effective for currently approved agents for the treatment of AVVC, such as fluconazole. Because of differing pharmacokinetic parameters between fluconazole and VT-1161, such as plasma protein binding, VT-1161 requires higher doses to reach similar plasma concentrations as fluconazole. The dose groups in this Phase 2a clinical trial are as follows:

•

Low-dose VT-1161 group (300 mg orally once daily for three days);

•

Mid-dose VT-1161 group (600 mg orally once daily for three days);

•

High-dose VT-1161 group (600 mg orally twice daily for three days); and

•

Fluconazole active control group (150 mg orally as a single dose, then matching placebo for two days).

Women with suspected AVVC were considered for eligibility for the clinical trial based upon an assessment of six clinical signs and symptoms, each of which was graded on a scale from 0 (absent) to 3 (severe). This severity scale is based upon published FDA guidance documents, which identify the clinical signs and symptoms as erythema (redness), edema (swelling), excoriation (scratching), itching, burning and irritation. To be eligible for the clinical trial, women must have had a total clinical severity score of at least 6 out of a maximum score of 18 and a positive fungal stain. On Day 28 of the study, we conducted a test-of-cure visit at which we evaluated both clinical and mycologic endpoints, as described below. The first set of criteria, which the FDA has historically used in assessing the success of clinical trials for this indication, uses an endpoint referred to as the “effective clinical cure.” The second set of criteria, which the FDA has indicated to us would apply prospectively in assessing the approval of future agents for AVVC, uses an endpoint referred to as “complete clinical cure.” The complete clinical cure endpoint is a more stringent measure of efficacy than effective clinical cure. We have completed treatment of patients in the low-dose VT-1161, mid-dose VT-1161 and high-dose VT-1161 groups and have analyzed data through the test-of-cure visit on Day 28. All patients are being followed for a total of 24 weeks to assess longer-term safety and tolerability.

With regard to the effective therapeutic cure criteria, we evaluated our results according to the following definitions:

•

Effective clinical cure, which indicates that the patient has experienced significant improvement in the signs and symptoms of AVVC at Day 28, was evaluated using two common definitions:

•

a total severity score of 0 or 1 at Day 28, or

•

either (1) any individual sign or symptom score that was 1 or 2 at baseline was 0 at Day 28 or (2) any individual sign or symptom score that was 3 at baseline was 0 or 1 at Day 28;

•

Mycologic cure was defined as a negative fungal culture at Day 28; and

•

Effective therapeutic cure was defined as both effective clinical cure and mycologic cure at Day 28.

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The table below shows the results for the low-dose VT-1161, mid-dose VT-1161, high-dose VT-1161 and fluconazole groups with respect to effective therapeutic cure criteria evaluated using the first common definition shown above, namely a total severity score of 0 or 1 at Day 28.

Interim Efficacy Data from VT-1161 AVVC Phase 2a Clinical Trial—Day 28

Effective Therapeutic Cure*

Group

Intent to Treat**

Modified Intent to
Treat***

Per Protocol****

(patients responding/patients in group)

VT-1161 300 mg orally once daily for three days

10/14 (71.4%)

8/11 (72.2%)

7/8 (87.5%)

VT-1161 600 mg orally once daily for three days

10/12 (83.3%)

6/8 (75.0%)

6/7 (85.7%)

VT-1161 600 mg orally twice daily for three days

12/14 (85.7%)

Fluconazole 150 mg orally as a single dose, then matching placebo for two days

11/15 (73.3%)

7/9 (77.8%)

6/8 (75.0%)

*	Defined as total severity score of 0 or 1 and negative fungal culture on Day 28.

**	Intent to Treat: all patients who received ³1 dose of drug.

***	Modified Intent to Treat: all patients who had a positive culture at baseline and received ³1 dose of drug.

****	Per Protocol: all patients who had a positive culture at baseline and followed the study protocol in all key aspects.

Results for the low-dose VT-1161, mid-dose VT-1161, high-dose VT-1161 and fluconazole groups with respect to effective therapeutic cure criteria evaluated using the second common definition shown above (either (1) any individual sign or symptom score that was 1 or 2 at baseline was 0 at Day 28 or (2) any individual sign or symptom score that was 3 at baseline was 0 or 1 at Day 28) were generally consistent with those for effective therapeutic cure criteria evaluated using the first common definition shown above (total severity score of 0 or 1 at Day 28).

With regard to the complete therapeutic cure criteria, we evaluated our results according to the following definitions:

•

Complete clinical cure was defined as a total severity score of 0 at Day 28;

•

Mycologic cure was defined as a negative fungal culture at Day 28; and

•

Complete therapeutic cure was defined as both complete clinical cure and mycologic cure at Day 28.

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Results for the low-dose VT-1161, mid-dose VT-1161, high-dose VT-1161 and fluconazole groups with respect to complete therapeutic cure criteria are provided in the table below:

Interim Efficacy Data from VT-1161 AVVC Phase 2a Clinical Trial—Day 28

Complete Therapeutic Cure*

Group

Intent to Treat**

Modified Intent to
Treat***

Per Protocol****

(patients responding/patients in group)

VT-1161 300 mg orally once daily for three days

9/14 (64.3%)

7/11 (63.6%)

6/8 (75.0%)

VT-1161 600 mg orally once daily for three days

9/12 (75.0%)

6/8 (75.0%)

6/7 (85.7%)

VT-1161 600 mg orally twice daily for three days

11/14 (78.6%)

Fluconazole 150 mg orally as a single dose, then matching placebo for two days

10/15 (66.7%)

6/9 (66.7%)

5/8 (62.5%)

*	Defined as total severity score of 0 and negative fungal culture on Day 28.

**	Intent to Treat: all patients who received ³1 dose of drug.

***	Modified Intent to Treat: all patients who had a positive culture at baseline and received ³1 dose of drug.

****	Per Protocol: all patients who had a positive culture at baseline and followed the study protocol in all key aspects.

As noted, effective therapeutic cure was achieved in 32 of the 40 patients in the VT-1161 groups, and complete therapeutic cure was achieved in 29 of these 40 patients in the intent to treat analysis. These results were generally consistent with those observed in the fluconazole group, the standard of care; however, reported results for fluconazole in published studies tend to be somewhat lower than what we have observed in our Phase 2a AVVC clinical trial.

Through the test-of-cure visit on Day 28, VT-1161 was found to be well tolerated with no serious adverse events reported and no discontinuations related to an adverse event. The percentage of patients reporting adverse events was 71% in the low-dose VT-1161 group, 41% in the mid-dose VT-1161 group, 14% in the high-dose VT-1161 group and 47% in the fluconazole group. Adverse events that were reported included nausea, dizziness, headache and palpitations in the VT-1161 groups and nasopharyngitis, insomnia and back pain in the fluconazole group. The clinical investigators concluded that the majority of adverse events reported were not related to the study drug. All investigators remain blinded as to study drug assignment at this point in the study. There were also no clinically relevant changes noted in vital signs, physical exam findings, electrocardiograms, or chemistry, hematology or urinalysis parameters. We are continuing to follow patients from all dose groups for a period of 24 weeks in order to obtain additional safety and tolerability data.

Planned Phase 2b Clinical Trial for RVVC

Based on the positive data demonstrated in our Phase 2a clinical trial, we are planning to initiate a Phase 2b clinical trial in patients with RVVC in the second half of 2014. We are currently designing the Phase 2b clinical trial, which we expect to be a randomized, double-blind, placebo-controlled, multi-arm clinical trial conducted at multiple clinical sites within the United States. We currently anticipate enrolling approximately 200 patients, in the following dose groups:

•

VT-1161 low dose orally once weekly for 12 weeks, then placebo orally once weekly for 12 weeks;

•

VT-1161 low dose orally once weekly for 24 weeks;

•

VT-1161 high dose orally once weekly for 12 weeks, then placebo orally once weekly for 12 weeks;

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•

VT-1161 high dose orally once weekly for 24 weeks; and

•

Placebo for 24 weeks.

We are finalizing our dose selection for the VT-1161 groups based upon the data from our Phase 2a AVVC clinical trial. Our current plan for this Phase 2b clinical trial is to enroll patients with a history of RVVC who present with an active infection which we will then treat with one or more doses of fluconazole until the infection is resolved. Following resolution of the active infection, patients will be randomized to either one of the VT-1161 dose groups or the placebo group and followed for a period of 48 weeks. We expect that the primary endpoint will be the prevention of AVVC episodes through week 48 of the study, which extends either 24 or 36 weeks beyond the conclusion of dosing with VT-1161 depending on the dose group. We also plan to perform an interim analysis that will assess the prevention of AVVC episodes through week 24 of the study. We expect to initiate our Phase 2b clinical trial during the fourth quarter of 2014, to obtain interim data by the third quarter of 2015, and to have complete top line data by mid-2016. If our Phase 2b clinical trial is successful, we would need to successfully conduct two Phase 3 pivotal clinical trials in order to seek marketing approval.

Onychomycosis Overview

Global Data projected onychomycosis to affect approximately 32 million individuals in the United States in 2012 and as many as 38 million by 2022. According to data provided by IMS Health, approximately 2.85 million prescriptions were written for oral terbinafine in 2013. The number of prescriptions written for terbinafine increased at a compound annual growth rate of 5% during the period from 2009 to 2013. The primary prescribing groups included family practice, podiatry, internal medicine and dermatology.

Onychomycosis is a fungal infection that involves the nail matrix, the nail bed, the nail plate and, in some cases, the skin surrounding the nail plate. Onychomycosis can cause deformation, discoloration, thickening and splitting of the nail, as well as separation of the nail plate from the nail bed. The condition can also result in pain when walking, limiting ambulation. The unsightly appearance of the infected nails and the perception that there is an active and contagious infection is a significant concern for some patients. In diabetic patients, onychomycosis can serve as an entry point for secondary bacterial infections, which can lead to serious complications in susceptible individuals. If untreated, onychomycosis generally will not improve, and may worsen over time. Even following treatment, onychomycosis often recurs in susceptible individuals because the causative pathogens are commonly found in the environment. Consequently, additional courses of treatment are frequently required even after initial successful therapy.

Medical treatment options for onychomycosis include both topical and oral drugs. In clinical trials for onychomycosis, the success of therapy is typically assessed based upon a scoring system which combines a clinical cure score, which considers a standardized set of disease severity criteria, as well as a laboratory-based mycologic cure, which refers to a negative fungal stain and culture of the affected nail. The determination of complete therapeutic cure, which is the FDA-defined primary endpoint in most onychomycosis trials, requires both complete clinical cure as well as mycologic cure.

There are currently three topical treatments for onychomycosis that have either been approved in the United States or have been submitted to the FDA for marketing approval. Penlac (ciclopirox) is approved for use in onychomycosis in conjunction with frequent debridement, or removal of parts of the infected nail. In the two clinical trials cited in Penlac’s approved labeling, even with frequent debridement only 5.5% of patients in one Phase 3 pivotal trial and only 8.5% of patients in a second Phase 3 pivotal trial achieved complete therapeutic cure. More recently, Anacor Pharmaceuticals reported the results of two Phase 3 clinical trials of topical tavaborale for which it has submitted an NDA to the FDA. Tavaborale achieved complete therapeutic cure rates of 6.5% in one Phase 3 pivotal trial and 9.1% in a second Phase 3 pivotal trial. Valeant Pharmaceuticals also recently reported that a topical formulation of efinaconazole, a triazole antifungal agent, for which the NDA recently has been approved by the FDA,

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demonstrated complete therapeutic cure rates of 15.2% in one Phase 3 pivotal trial and 17.8% in a second Phase 3 pivotal trial. We believe that the low complete therapeutic cure rates for these topical agents is a direct result of the fact that the agents do not adequately reach the site of infection, which includes not only the nail plate, but also the deeper structures of the nail bed and nail matrix.

There are two oral medications currently approved in the United States for the treatment of onychomycosis, terbinafine (Lamisil) and itraconazole (Sporanox). Terbinafine, the most widely prescribed onychomycosis drug, is a member of the allylamine drug class. According to the terbinafine approved labeling, 38% of patients treated in Phase 3 pivotal trials of this drug with a 12-week course of once-daily therapy achieved complete therapeutic cure. Despite its relatively high labeled efficacy when compared with topical agents, we believe that the usage of branded and generic terbinafine has been limited due to safety concerns, primarily related to liver toxicity and drug-drug interactions. According to the terbinafine approved label, approximately 3.3% of patients treated with terbinafine experience liver enzyme elevation. Although rare, cases of hepatic failure resulting in transplant or death have been reported. Liver function tests are recommended prior to and during treatment with terbinafine, and the drug is contraindicated in patients with pre-existing liver disease. Terbinafine also carries a warning for alteration or loss of taste and smell. Although rare and usually reversible, these side effects can be irreversible. Itraconazole, a triazole antifungal agent, is not widely used in the treatment of onychomycosis, largely because of its greater risk of liver toxicity. Other concerns with the use of itraconazole include frequent drug-drug interactions, endocrine toxicity and a pregnancy warning.

In the 2012 Campbell Alliance Study, Campbell Alliance surveyed six clinicians who indicated that, in their view, important unmet needs in the treatment of onychomycosis included agents offering both higher clinical and mycologic cure rates, as well as faster clinical and mycologic cure rates. These clinicians further indicated that key unmet needs with regard to safety concerns included agents with fewer drug-drug interactions and agents with less liver toxicity. The physicians were also provided with a VT-1161 product profile for the treatment of onychomycosis. The key aspects of the product profile included a three-month dosing regimen with VT-1161, a 52% complete therapeutic cure rate for toenail at 48 weeks, no significant adverse events compared to placebo, no drug-drug interactions and a category B pregnancy warning. Based on the product profile provided, the physicians interviewed indicated a mean intent to prescribe of 6.8 on a scale from one to seven, with seven being “extremely likely to prescribe.”

Ongoing Phase 2a Clinical Trial for Tinea Pedis

We are currently conducting a Phase 2a clinical trial of VT-1161 in patients with moderate to severe interdigital tinea pedis. Our intent in conducting this clinical trial is to establish proof of concept that VT-1161 is safe and clinically active in treating human infections due to dermatophytes. Because the dermatophyte pathogens are typically the same in patients with tinea pedis as in patients with onychomycosis, we believe that the results in our Phase 2a tinea pedis trial will be indicative of likely antifungal activity in our planned Phase 2b onychomycosis clinical trial. Our Phase 2a clinical trial employs an adaptive design whereby results of the first two VT-1161 dose groups were reviewed prior to enrollment of a third, high-dose group. We designed this trial as an exploratory, dose-ranging, proof of concept trial and, as such, it is not prospectively powered to demonstrate efficacy with statistical significance.

The tinea pedis Phase 2a clinical trial is designed to enroll approximately 48 patients across three VT-1161 dose groups and a placebo group. We selected the doses of VT-1161 used in this trial to achieve plasma concentrations of VT-1161 that bracketed the plasma concentrations known to be effective for currently approved oral agents for the treatment of tinea pedis. Of note, marketed agents are typically dosed for 14 days in this indication. The dose groups in this Phase 2a clinical trial are as follows:

•

Low-dose VT-1161 group (200 mg orally once daily for four days, then 50 mg orally once daily for 10 days);

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•

Mid-dose VT-1161 group (600 mg orally once daily for four days, then 150 mg orally once daily for 10 days);

•

High-dose VT-1161 group (600 mg orally twice daily for four days, then 300 mg orally once daily for 10 days); and

•

Placebo group (matching placebo for 14 days).

Patients with interdigital tinea pedis infection were considered for eligibility for the clinical trial based upon an assessment of six clinical signs and symptoms, each of which was graded on a scale from 0 (absent) to 3 (severe). This scale is based on published FDA guidance documents, which identify the clinical signs and symptoms as fissuring/cracking, erythema (redness), maceration (softening of tissue), scaling, pruritus (itching) and burning/stinging. To be eligible for the clinical trial, patients must have had a cumulative clinical severity score of at least 6 across the six clinical signs and symptoms, out of a maximum score of 18, and a positive fungal stain. We then randomized and treated eligible patients for a period of 14 days. On Day 42, we conducted a test-of-cure visit at which both clinical and mycologic endpoints were evaluated. We evaluated these endpoints based upon two sets of criteria. The first set of criteria, which the FDA has historically used in assessing the success of clinical trials for this indication, uses an endpoint referred to as the “effective clinical cure.” The second set of criteria, which the FDA has indicated to us would apply prospectively in the approval of future agents for tinea pedis, uses an endpoint referred to as “complete clinical cure.” We have completed treatment of patients in the low-dose VT-1161, mid-dose VT-1161 and high-dose VT-1161 groups and have analyzed data through the test-of-cure visit on Day 42. We are also continuing to follow patients from all dose groups for a period of 24 weeks in order to gain additional safety and tolerability data.

With regard to effective therapeutic cure criteria, we evaluated our results according to the following definitions:

•

Effective clinical cure was defined as a total severity score less than or equal to 2 and no single score greater than 1 at Day 42. Effective clinical cure indicates that the patient has experienced significant improvement in the signs and symptoms of tinea pedis;

•

Mycologic cure was defined as a negative fungal stain and culture at Day 42; and

•

Effective therapeutic cure was defined as both effective clinical cure and mycologic cure at Day 42.

Results for the low-dose VT-1161, mid-dose VT-1161, high-dose VT-1161 and placebo groups with respect to effective therapeutic cure criteria are provided in the table below:

Interim Efficacy Data from VT-1161 Tinea Pedis Phase 2a Clinical Trial

Effective Therapeutic Cure*

Group

Intent to Treat**

Modified Intent to
Treat ***

Per Protocol****

(patients responding/patients in group)

VT-1161 200 mg orally once daily for four days, then 50 mg orally once daily for 10 days

5/12 (41.7%)

3/10 (30.0%)

3/9 (33.3%)

VT-1161 600 mg orally once daily for four days, then 150 mg orally once daily for 10 days

5/12 (41.7%)

3/8 (37.5%)

VT-1161 600 mg orally twice daily for four days, then 300 mg once daily for 10 days

7/14 (50.0%)

6/11 (54.5%)

6/10 (60.0%)

Matching placebo regimen

0/12 (0.0%)

0/11 (0.0%)

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*	Defined as total signs and symptoms score of £2 with no individual score >1 and a negative fungal stain and culture on Day 42.

**	Intent to Treat: all patients that received ³1 dose of drug.

***	Modified Intent to Treat: all patients who had a positive culture at baseline and received ³1 dose of drug.

****	Per Protocol: all patients who had a positive culture at baseline and followed the study protocol in all key aspects.

With regard to complete therapeutic cure criteria, we evaluated our results according to the following definitions:

•

Complete clinical cure was defined as a total severity score of 0 at Day 42;

•

Mycologic cure was defined as a negative fungal stain and culture at Day 42; and

•

Complete therapeutic cure was defined as both complete clinical cure and mycologic cure at Day 42.

Results for the low-dose VT-1161, mid-dose VT-1161, high-dose VT-1161 and placebo groups with respect to complete therapeutic cure criteria are provided in the table below:

Interim Efficacy Data from VT-1161 Tinea Pedis Phase 2a Clinical Trial

Complete Therapeutic Cure*

Group

Intent to Treat**

Modified Intent to
Treat***

Per Protocol****

(patients responding/patients in group)

VT-1161 200 mg orally once daily for four days, then 50 mg orally once daily for 10 days

2/12 (16.7%)

1/10 (10.0%)

1/9 (11.1%)

VT-1161 600 mg orally once daily for four days, then 150 mg orally once daily for 10 days

1/12 (8.3%)

0/8 (0.0%)

VT-1161 600 mg orally twice daily for four days, then 300 mg once daily for 10 days

3/14 (21.4%)

3/11 (27.3%)

3/10 (30.0%)

Matching placebo regimen

0/12 (0.0%)

0/11 (0.0%)

*	Defined as total signs and symptoms score of 0 and a negative fungal stain and culture on Day 42.

**	Intent to Treat: all patients that received ³1 dose of drug.

***	Modified Intent to Treat: all patients who had a positive culture at baseline and received ³1 dose of drug.

****	Per Protocol: all patients who had a positive culture at baseline and followed the study protocol in all key aspects.

In the intent to treat analysis, effective clinical cure was achieved in 26 of the 38 patients in the VT-1161 groups, mycologic cure was achieved in 20 of the 38 patients in the VT-1161 groups and effective therapeutic cure was achieved in 17 of the 38 patients in the VT-1161 groups. While complete therapeutic cure was achieved in only six of the 38 patients in the VT-1161 groups, it was not achieved in any of the 12 patients in the placebo group.

Through the test-of-cure visit on Day 42, VT-1161 was found to be well tolerated with no serious adverse events reported. One patient in the high-dose VT-1161 group discontinued treatment due to a rash, which developed shortly after the initiation of VT-1161 dosing. The rash resolved rapidly after the administration of an antihistamine. The percentage of patients reporting adverse events was 17% in the low-dose VT-1161 group, 25% in the mid-dose VT-1161 group, 36% in the high-dose VT-1161 group and 42% in the placebo group. Adverse events that were reported included rash, constipation and sinusitis in the VT-1161 groups and anemia, abdominal discomfort and back pain in the placebo group. The clinical investigators concluded that the majority of adverse events reported were not related to the study drug. All investigators remain blinded as to study drug assignment at this point in the study. There were no clinically relevant changes noted in vital signs, physical exam findings, electrocardiograms, or chemistry, hematology or urinalysis parameters. We are also continuing to follow patients from all dose groups for a period of 24 weeks in order to gain additional safety and tolerability data.

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Planned Phase 2b Clinical Trial for Onychomycosis

Based on the positive data demonstrated in our Phase 2a tinea pedis clinical trial, we are planning to initiate a Phase 2b clinical trial in patients with onychomycosis of the toenail in the second half of 2014. We are currently designing the Phase 2b clinical trial, which we expect to be a randomized, double-blind, placebo-controlled, multi-arm trial conducted at multiple clinical sites within the United States. We currently anticipate enrolling approximately 200 patients with onychomycosis, in the following dose groups:

•

VT-1161 low dose orally once weekly for 12 weeks, then placebo orally once weekly for 12 weeks;

•

VT-1161 low dose orally once weekly for 24 weeks;

•

VT-1161 high dose orally once weekly for 12 weeks, then placebo orally once weekly for 12 weeks;

•

VT-1161 high dose orally once weekly for 24 weeks; and

•

Placebo for 24 weeks.

We are finalizing our dose selection for the VT-1161 groups based upon the data from our Phase 2a tinea pedis clinical trial. We plan to randomize patients with onychomycosis to either one of the VT-1161 dose groups or the placebo group. Treatment duration will be for either 12 or 24 weeks, and patients will be followed for a period of 48 weeks. We expect that the primary endpoint will be complete therapeutic cure of the target toenail at week 48 of the study, which will be either 24 or 36 weeks beyond the completion of dosing, depending on the dose group. We also plan to perform an interim analysis that will assess the percentage of patients with at least 2 millimeters of clear nail growth at week 24 of the study. We expect to initiate our Phase 2b clinical trial during the fourth quarter of 2014, to obtain interim data by the third quarter of 2015, and to have complete top line data by mid-2016. If our Phase 2b clinical trial is successful, we would need to successfully conduct two Phase 3 pivotal clinical trials in order to seek marketing approval. We anticipate that complete therapeutic cure at week 48 will be the primary efficacy endpoint in these Phase 3 pivotal clinical trials.

Phase 1 Clinical Trial Program

We have previously completed single- and multiple-ascending dose Phase 1 clinical trials of oral VT-1161 in a total of 72 healthy volunteers. In these clinical trials, we tested oral doses ranging from a single 5 mg dose to a 320 mg dose administered once daily for a period of seven days. In both clinical trials, VT-1161 was well tolerated and demonstrated a favorable safety profile, with no serious adverse events reported. At the 320 mg dose given once daily for seven days, plasma concentration of approximately 3.8 µg/mL was achieved, which is well above what we expect will be the therapeutic concentration of approximately 1.0 µg/mL based on multiple preclinical models. In addition, toenail clippings and skin biopsies generally revealed excellent penetration of VT-1161 into these tissues.

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The graph below illustrates the mean concentration of VT-1161 in toenail clippings over a seven-week period for six volunteers who received a once-daily oral dose of 320 mg for seven days. The vertical axis shows the concentration of drug, as measured in nanograms per gram of tissue, in toenail clippings at the indicated time point. The VT-1161 data are compared with that reported in published studies for terbinafine and itraconazole, the two approved oral agents for onychomycosis in the United States, as well as for oral posaconazole, which demonstrated clinical antifungal activity in a Phase 2b onychomycosis clinical trial, but was not developed further for this indication due to safety concerns. The doses of terbinafine, itraconazole and posaconazole are consistent with those in our Phase 1 trial, although of somewhat longer dosing durations than VT-1161.

LOGO

The toenail drug level data are derived from the VT-1161 Phase 1 multiple-ascending dose study and from published data from studies in which itraconazole was given at a dose of 200 mg twice daily for one week a month over four cycles, posaconazole was given at a dose of 400 mg daily for 12 weeks and terbinafine was given at a dose of 250 mg daily for four weeks. We extrapolated data from the published studies to match time points assessed in the VT-1161 Phase 1 study.

Drug levels of VT-1161 in the toenail exceed those of the other agents at both the four-week and seven-week time points, despite the fact that dosing for VT-1161 was only for a period of seven days. We believe that the continued accumulation of VT-1161 in the nail beyond the dosing period was in part a result of its long half-life, which is estimated to be greater than 1,000 hours based on currently available data. The half-life of VT-1161 is longer than that of other antifungal agents; however, several other antifungal agents also have a long half-life. For example, terbinafine has a half-life in humans in the range of 300 to 500 hours. Based on the clinical safety profile of VT-1161 demonstrated to date, we believe that the long half-life of VT-1161 will be advantageous in that it may facilitate a once-weekly dosing schedule. We also believe the long half-life of VT-1161 may prove useful in the treatment of infections with high recurrence rates, such as RVVC.

Preclinical Studies

We have studied VT-1161 in a wide range of in vitro and in vivo models. In these studies, VT-1161 has consistently demonstrated robust antifungal activity against Candida species, including strains that are resistant to the triazoles, and dermatophytes, which are the most common cause of onychomycosis. We have also performed extensive in vitro and in vivo safety testing, with a particular focus on assessing the inhibition of human CYP enzymes that we believe may be responsible for many of the side effects commonly seen with the triazole agents.

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The in vitro activity of anti-infective agents is typically assessed by determining the minimum inhibitory concentration, or MIC. This measurement typically refers to the concentration of the drug, in micrograms per milliliter (µg/mL), required to result in inhibition in the growth of a given pathogen to a predetermined level at 24 hours, according to published guidelines. The guidelines most commonly followed in the United States are referred to as the CLSI, or Clinical and Laboratory Standards Institute, guidelines. By virtue of the way MIC studies are typically conducted, the lower the MIC value, the more potent the antifungal agent against that particular fungal species. Across a broad range of in vitro studies, VT-1161 has demonstrated substantial potency against many common species of Candida that cause mucosal, dermatologic and invasive infections in humans. These common Candida species include Candida albicans and Candida glabrata. VT-1161 has also demonstrated significant potency against more difficult to treat species such as Candida krusei, Candida parapsilosis, Candida guilliermondii and Candida lusitaniae. In the majority of these tests, the potency of VT-1161 against Candida species has been greater than that for fluconazole, itraconazole, voriconazole and posaconazole.

VT-1161 also demonstrated substantially greater potency than fluconazole and voriconazole when tested against a broad clinical panel of resistant strains of Candida albicans. The potency of VT-1161 was at least as great as, and in some cases greater than, that of voriconazole, one of the most potent triazole agents. The strains tested in this study cover the most common mechanisms of antifungal resistance, including the following:

•

Mutations of the fungal CYP51 enzyme, which reduce the ability of a drug to inhibit fungal CYP51, thereby conferring resistance to the triazoles;

•

Over expression of efflux pumps, which allow the fungal cell to more readily excrete multiple classes of drugs; and

•

Mutations of the glucan synthase enzyme, known as the FKS1 mutation, which reduce the ability of a drug to inhibit glucan synthase, thereby conferring resistance to the echinocandins.

As shown in the table below, in some cases, the resistance mechanism for the strains tested is not known at the molecular level. MIC values from these various studies are shown in the table below. Lower MIC numbers correspond to greater potency.


MICs (µg/mL) Against Resistant *Candida albicans* Isolates
Resistance Mechanism (by isolate)	VT-1161	Fluconazole	Voriconazole
Wild-type (sequence known)	£0.03	£0.25	£0.03
CYP51 point mutation	0.125	32	0.25
CYP51 point mutation	0.25	>64	0.5
CYP51 point mutation; CYP51, efflux pump over-exp.	£0.03	0.5	£0.03
CYP51 point mutation; efflux pump over-exp.	0.06	8	0.125
CYP51 point mutation; CYP51, efflux pump over-exp.	0.06	32	0.5
CYP51 over-expression	£0.03	8	£0.03
Efflux pump over-expression	£0.03	1	£0.03
Azole-resistance mechanism unknown	0.25	>64	8
Azole-resistance mechanism unknown	0.5	64	8
FKS1 point mutation; azole-resistance mechanism unknown	0.5	>64	16
FKS1 point mutation; azole-resistance mechanism unknown	£0.03	32	0.06
FKS1 point mutation; azole-resistance mechanism unknown	£0.03	32	2

We also tested VT-1161 against a panel of 37 clinical isolates of Trichophyton rubrum, the most common dermatophyte causing onychomycosis. In this study we compared the MIC values for VT-1161

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to the MIC values for terbinafine and itraconazole, the two approved oral agents for the treatment of onychomycosis, and to the MIC values for fluconazole and posaconazole, which have demonstrated clinical antifungal activity in onychomycosis clinical trials. The MIC50 value refers to the concentration of the tested compound that reduces the growth of 50% of the isolates tested, and the MIC90 value refers to the concentration that reduces the growth of 90% of the isolates tested. Lower MIC numbers correspond to greater potency. As can be seen in the table below, VT-1161 demonstrated antifungal activity that was superior to fluconazole and comparable to that of the other agents. Based on MIC testing guidelines from the CLSI for the comparator drugs, terbinafine was the only agent that was tested below the concentration of 0.03 µg/mL.

Minimum Inhibitory Concentration (µg/mL)


	Trichophyton rubrum (37 clinical isolates)
	MIC50		MIC90
VT-1161		£0.03		0.06
Fluconazole		2		16
Itraconazole		0.06		0.06
Posaconazole		0.06		0.125
Terbinafine		0.015		0.03

In in vitro studies, VT-1161 was compared to three of the marketed triazoles with regard to both in vitro potency against Candida albicans and in vitro selectivity relative to the human drug metabolizing enzymes CYP2C9, CYP2C19 and CYP3A4. As can be seen, VT-1161 was substantially more potent against Candida albicans than the triazoles as indicated by a lower MIC value. Also, VT-1161 was generally substantially more selective than the triazoles as indicated by higher IC50 values, which is the concentration of the agent needed to reduce that enzyme’s activity by 50%, against CYP2C9, CYP2C19 and CYP3A4. We believe these data indicate that VT-1161 may have a higher degree of potency with a lower risk of drug-drug interactions and other side effects than the currently available triazoles.

High Potency and Low Drug-Drug Interaction Potential


Agent	C. albicans MIC (µg/mL)		CYP2C9 IC50 (µM)		CYP2C19 IC50 (µM)		CYP3A4 IC50 (µM)
VT-1161		£0.0001		73		34		35
Fluconazole (Diflucan)		0.25		41		20		29
Itraconazole (Sporanox)		0.031		>100		>100		0.07
Voriconazole (Vfend)		0.031		5		6		6

We have also tested VT-1161 in a broad array of in vivo studies at various academic laboratories in the United States. In all of these studies VT-1161 has demonstrated consistently robust antifungal activity that typically meets or exceeds the activity of currently available agents. In vivo studies of VT-1161 that we have conducted include the following:

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Mouse vaginal candidiasis (Candida albicans)

•

Guinea pig dermatophytosis (Trichophyton mentagrophytes)

•

Guinea pig dermatophytosis (Candida albicans)

•

Mouse invasive candidiasis (Candida albicans)

•

Mouse invasive candidiasis (Candida glabrata)

•

Mouse cryptococcal meningitis (Cryptococcus neoformans)

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•

Mouse coccidioides pneumonia (Coccidioides posadasii)

•

Mouse aspergillosis prophylaxis (Aspergillus fumigatus)

In a recently completed study, VT-1161 was compared to fluconazole in a mouse model of AVVC using two strains of Candida albicans with reduced sensitivity to fluconazole. In both strains, VT-1161 was statistically superior to fluconazole in reducing vaginal fungal burden at the end of the study. The data are described in the table below.


Results From Mouse AVVC Model

Treatment *	Isolate and in vitro MIC, µg/ml	Mean Vaginal Fungal Burden at Day 10 ± standard deviation
Vehicle	AR466-06	2227 ± 918
25 mg/kg VT-1161	£0.015	76 ± 26**
25 mg/kg fluconazole	64	2210 ± 934
Vehicle	JJ330-05	15465 ± 14802
25 mg/kg VT-1161	0.12	1354 ± 2092***
25 mg/kg fluconazole	8	23855 ± 29503

*	All agents were dosed orally, once a day on Days 3-6 post-infection.

**	VT-1161 superior to fluconazole (P<0.0001).

***	VT-1161 superior to fluconazole (P=0.0005).

We have studied the safety profile of VT-1161 in a broad range of in vitro and in vivo preclinical models conducted according to Good Laboratory Practices, or GLP. In standard tests to assess for genotoxicity potential, there was no positive signal identified for VT-1161. In standard safety pharmacology studies to assess the acute effects of VT-1161 on the cardiovascular, respiratory and central nervous systems, no effects of VT-1161 were noted up to the highest doses tested. We have conducted pilot reproductive toxicity studies in rats and rabbits to assess for the potential of VT-1161 to cause teratogenicity, also known as birth defects. In these early studies, we have not observed any evidence that VT-1161 causes teratogenic effects. We plan to conduct the definitive reproductive toxicity studies in the second half of 2014.

We also conducted in vitro studies according to FDA guidelines to assess for the potential for VT-1161 to cause drug-drug interactions. In these studies, the potential for VT-1161 to cause drug-drug interactions due to inhibition of CYP2B6, CYP2C8, CYP2C9, CYP2C19 and CYP2D6, which, along with CYP3A4 are enzymes that commonly metabolize drugs in the human liver, was considered negligible. There was a potential, albeit slight, risk of drug-drug interactions due to inhibition of CYP3A4. We plan to directly assess this in a Phase 1 human drug interaction study to be conducted in the first half of 2015.

We also studied the safety of VT-1161 in standard toxicology studies conducted in rats and dogs. In the studies completed to date, daily doses of VT-1161 were given for up to 28 days. By design, the goal of these studies was to identify the potential adverse effects of an agent when given across a range of doses, including doses much higher than those anticipated in clinical trials. VT-1161 was well tolerated in all dog studies and at doses that led to very high plasma exposures. In a 28-day dog study, the primary effects at very high drug exposures were observed during the fourth study week and included body tremors and head shaking, moderately increased cholesterol levels, and signs of inflammation in lymphoid tissues. At the end of a 42-day recovery period following drug withdrawal, these effects were largely reversed. There were no signs of liver toxicity at any dose in dog studies.

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In 14- and 28-day rat studies, VT-1161 primarily affected the liver. Liver organ weight and liver cell size increases were noted and were reversed following VT-1161 withdrawal. Increases in liver weights and liver cell size may be common manifestations of a process termed metabolic adaptation, which is a rat-specific response to a wide range of agents. Only one liver enzyme, alanine transaminase, or ALT, was moderately and reversibly elevated due to very high VT-1161 exposures. ALT is a biomarker of liver metabolic function, and increases in ALT without increases in other liver function biomarkers such as aspartate transaminase or alkaline phosphatase typically do not indicate liver toxicity. An expert panel of toxicologists recently concluded that, as a general rule, changes in the rat liver due to metabolic adaptation do not predict toxicity in humans.

We are currently conducting longer-term toxicology studies, specifically a nine-month study in dogs and a six-month study in rats, required by the FDA prior to conducting longer-term studies of VT-1161 in humans. We expect the final data from these studies to be available in the second half of 2014.

VT-1129 for Cryptococcal Meningitis

VT-1129 has been shown in preclinical studies to be a potent and selective, orally-available inhibitor of fungal CYP51. VT-1129 blocks the production of ergosterol, an essential component of the fungal cell membrane, which is critical to fungal proliferation and survival. As a result of VT-1129’s substantial potency against Cryptococcus species and high concentrations within the central nervous system in preclinical studies, we selected VT-1129 for further preclinical development targeting the treatment of cryptococcal meningitis.

Due to the relatively small number of cryptococcal meningitis cases in the United States and Europe each year, we believe that VT-1129 may be eligible for orphan drug designation by the FDA and the European Medicines Agency, or the EMA. We recently applied to the FDA for orphan drug designation for VT-1129. Additionally, we believe that if we successfully develop VT-1129 for the treatment of cryptococcal meningitis, it may qualify for the regulatory benefits provided by the Generating Antibiotic Incentives Now Act. Cryptococcus species were recently added by the FDA to the list of qualifying pathogens under the Generating Antibiotic Incentives Now Act, which allows a drug product to be designated by the FDA as a Qualified Infectious Disease Product. Such a designation could entail significant advantages, such as reimbursement for certain research and development expenses and an additional five years of regulatory exclusivity. Although it is not currently formally designated as a neglected tropical disease, Cryptococcal infections share many of the characteristics of other diseases that are so specified. If Cryptococcal meningitis were to be included in a future revision of the list of qualifying diseases, the development of VT-1129 could qualify for the potential award of a priority review voucher.

We have been conducting preclinical studies of VT-1129 in collaboration with the Therapeutics for Rare and Neglected Diseases program, or TRND, at the National Institutes of Health, or NIH, under a grant awarded in 2011.

Cryptococcal Meningitis Overview

Cryptococcal meningitis is a life-threatening fungal infection of the lining of the brain and the spinal cord. This infection occurs most often in immunocompromised patients, including those with HIV, transplant recipients and oncology patients. A study published in February 2013 in the scientific journal PLOS ONE estimated that there are 3,400 hospitalizations associated with cryptococcal meningitis annually in the United States. The causative organism is most often Cryptococcus neoformans. Cryptococcal meningitis is characterized by a flu-like syndrome that rapidly progresses to include symptoms indicative of central nervous system involvement, including high fever, neck stiffness, extreme sensitivity to light and seizures. Without treatment, the disease is almost always fatal. Treatment in developed countries consists of intravenous administration of amphotericin B and oral flucytosine for a period of several weeks until the signs and symptoms of acute infection resolve. Following acute treatment, patients are typically maintained on oral fluconazole for six to twelve months to continue antifungal therapy and prevent recurrence. According to the Clinical Practice Guidelines for the

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Management of Cryptococcal Disease: 2010 Update by the Infectious Diseases Society of America, despite access to advanced medical care and the availability of highly active antiretroviral therapy, the three-month mortality rate during management of acute cryptococcal meningitis is approximately 20% in medically developed countries.

While relatively rare in the United States and Europe, cryptococcal meningitis is a very common disease in the developing world due to the high incidence of HIV infection. According to an article published in the journal AIDS in 2009, globally an estimated 957,900 cases of cryptococcal meningitis occur each year, resulting in 624,700 deaths by three months after infection. In regions where intravenous therapy with amphotericin B and oral flucytosine is not commonly available, fluconazole is the most widely used agent because it is orally administered and is relatively inexpensive. However, fluconazole monotherapy is mostly ineffective. According to cryptococcosis statistics maintained on the Centers for Disease Control and Prevention’s website from February 2014, the greatest burden of this disease occurs in sub-Saharan Africa, where mortality due to cryptococcal meningitis is estimated to be between 50% and 70%.

Another serious cryptococcal illness is caused by a related pathogen, Cryptococcus gattii, which usually causes pneumonia rather than meningitis. A small but significant number of infections with this organism have recently been reported in the Pacific Northwest region of the United States. A particular concern is that a large percentage of these infections have occurred in individuals with normal immune systems.

Preclinical Results

We have studied VT-1129 in multiple in vitro and in vivo preclinical models. Based upon the results of these studies, we believe that VT-1129 has the potential to be highly effective in the treatment of cryptococcal meningitis.

The table below shows the results of a study conducted at the Centers for Disease Control and Prevention of the in vitro potency of VT-1129 against various clinical isolates of Cryptococcus neoformans and Cryptococcus gattii. This study compared the potency of VT-1129 to that of fluconazole, which is commonly used for maintenance therapy in the United States and as primary therapy in the developing world for the treatment of cryptococcal meningitis. The MIC50 value refers to the concentration that reduces the growth of 50% of the isolates tested, and the MIC90 value refers to the concentration that reduces the growth of 90% of the isolates tested according to published CLSI guidelines. Lower MIC values, as measured in µg/mL, correspond to greater potency. As can be seen, VT-1129 was significantly more potent than fluconazole against both Cryptococcus neoformans and Cryptococcus gattii isolates in this in vitro study. Note that the other triazoles are not commonly used to treat cryptococcal meningitis, primarily due to their low penetration into the central nervous system.

Minimum Inhibitory Concentration (µg/mL)


	Cryptococcus neoformans (100 isolates)				Cryptococcus gattii (300 isolates)
	MIC50		MIC90		MIC50		MIC90
VT-1129		0.015		0.06		0.125		0.25
Fluconazole		2		8		8		16

We have also studied VT-1129 in multiple in vivo models of cryptococcal meningitis. The table below shows the results of one such study of VT-1129 in a mouse model of cryptococcal meningitis. Mice were infected intracranially with Cryptococcus neoformans and oral treatment was initiated 24 hours later with vehicle, VT-1129 or fluconazole at the doses indicated. There were 10 animals in each dose group. Treatment was continued for a period of 10 days, and survival was then monitored for a period of up to 30 days following infection. As can be seen in the table below, survival of the animals in the VT-1129 treatment groups significantly exceeded that of those in the fluconazole treatment groups.

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In addition to survival data, fungal levels within the brain were also assessed on Day 30 in this mouse model and reported as the number of colony forming units, or CFUs detected on a culture plate per gram of brain tissue. The difference between the results observed in the VT-1129 treatment groups and the fluconazole and vehicle treatment groups were highly statistically significant (p<0.0001). As shown in the table below, VT-1129 was shown to reduce to undetectable levels the pathogenic fungal organism causing cryptococcal meningitis. We are not aware of any other agent that has demonstrated in an animal model the ability to reduce to undetectable levels the pathogenic fungal organism causing cryptococcal meningitis.

Survival and Brain Fungal Burden in 30-Day Mouse Cryptococcal Meningitis Model


Endpoint	Vehicle Control			VT-1129 10 mg/kg daily for 10 Days			VT-1129 20 mg/kg daily for 10 Days			Fluconazole 10 mg/kg twice daily for 10 Days			Fluconazole 20 mg/kg twice daily for 10 Days
Percent Survival at Day 30		40	%		90	%		100	%		40	%		60	%
Brain Fungal Level (Mean log CFU/g)		6.15			0.0			0.0			6.68			5.75

IND-Enabling Studies

We are currently conducting IND-enabling studies of VT-1129 in collaboration with the TRND program at the NIH under a Cooperative Research and Development Agreement, or CRADA. The NIH is currently providing funding for these studies, and the United States has joint ownership rights in any new inventions created under the CRADA during the collaboration period. Following this offering, we intend to conduct the additional studies necessary for the submission of an IND in the United States without further assistance from TRND, in order to accelerate the development process. If these studies are successful, we expect to submit an IND for VT-1129 to the FDA during the first half of 2015 and to commence Phase 1 clinical trials in healthy volunteers shortly thereafter.

VT-1598 and Analogues for Invasive Fungal Infections

VT-1598 and related analogues have been shown in preclinical studies to be potent and selective inhibitors of fungal CYP51. All compounds in the VT-1598 family differ in chemical structure from VT-1161 and VT-1129, and we have filed a U.S. patent application and three foreign counterpart applications covering these compounds. VT-1598 and its analogues demonstrate a very broad spectrum of activity in vitro, covering Candida species, Aspergillus species and several other less common mold species. VT-1598 and its analogues are in preclinical development with a goal to identify the optimal candidate to advance in development as an oral and intravenous therapy for treatment of invasive fungal infections. In preclinical safety studies conducted to date, the compound has demonstrated a favorable profile. VT-1598 is orally available, and we are also developing a pro-drug formulation for intravenous administration.

Invasive Fungal Infections Overview

Invasive fungal infections are often life-threatening infections which can involve the bloodstream, lungs, kidneys, spleen and other internal organs as well as the central nervous system. Based upon an epidemiology study in the scientific journal Clinical Microbiology Reviews, which reported an incidence rate of 31.2 cases per 100,000 individuals in 2003 in the United States, we estimate that there are approximately 100,000 new cases of invasive fungal infections currently reported in the United States each year. Invasive fungal infections occur commonly in immunocompromised patients, including patients with underlying HIV infection, organ transplant recipients and oncology patients. There is also an increasing incidence of invasive fungal infections in individuals with more intact immune systems, such as patients in the intensive care unit or burn victims. The most common causative organisms are various species of Candida and Aspergillus, which together account for the majority of invasive fungal infections.

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The onset of invasive fungal infections can be rapid, and even when diagnosed promptly these infections are often lethal. As a result, patients with a suspected invasive fungal infection are often treated before a definitive diagnosis is made. Additionally, patients at high risk for fungal infections are often treated prophylactically.

Various agents are available for the treatment of invasive fungal infections. In known Candida infections, front-line therapy is commonly an echinocandin, such as micafungin. In infections due to Aspergillus or one of the less common invasive fungi, or infections in which the pathogen has not been identified, voriconazole or posaconazole are commonly used. Due to its adverse toxicity profile, amphotericin B, while highly potent, is usually reserved for infections that are either resistant to the echinocandins or triazoles, or for those infections that do not respond well to initial therapy with these agents. A review article published in the journal Trends in Microbiology indicates that the overall mortality for invasive diseases caused by Candida and Aspergillus is 30% to 50%, despite the advent of new diagnostic and therapeutic strategies.

One of the reasons for this persistently high mortality rate is the emergence of fungal pathogens that are resistant to the triazoles, the echinocandins or both classes of drugs. Similar to the phenomenon of antibiotic resistance that has led to the emergence of such “superbugs” as methicillin-resistant staph aureus, referred to as MRSA, and vancomycin-resistant enterococcus, referred to as VRE, the broad use of triazole drugs has resulted in an increasing incidence of drug-resistant Candida infections. We believe the rising level of triazole-resistance is driven in part by the reduction in prevalence of species susceptible to antifungals such as Candida albicans, and the resultant increase in infections due to species inherently less sensitive to these agents, such as Candida glabrata and Candida krusei. Declining triazole efficacy has prompted some physicians to prefer echinocandins as the drugs of first choice for patients with invasive Candida infections. However, a review of recent studies, published in the scientific journal Trends in Microbiology in March 2010, reported that the incidence of Candida strains resistant to the echinocandins is also increasing. The majority of the echinocandin-resistant strains are also resistant to the triazoles, thus they are described as multi-drug resistant. Although at present less common, strains of Aspergillus that are resistant to the triazoles, echinocandins, or both have also been reported.

Preclinical Results and Current Status

We have tested VT-1598 and its analogues in both in vitro and in vivo preclinical studies. MIC data for VT-1598 and various analogues against Candida albicans, Aspergillus fumigatus and Coccidioides immitis, the causative organism of valley fever, are shown in the table below. Also noted in the table are the IC50 values against the human drug-metabolizing enzymes CYP2C9, CYP2C19 and CYP3A4. For each compound, the IC50 values for the human CYP enzymes are substantially greater than the MIC values for the various fungal species. This difference provides a substantial potential “therapeutic window” of concentrations within which the compound shows strong antifungal activity while only showing minimal inhibition of the human CYP enzymes.

Compound

MIC, µg/mL

IC50, µM

C. albicans

A. fumigatus

C. immitis

CYP2C9

CYP2C19

CYP3A4

VT-1598

0.004

0.25-0.5

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company

Viamet Pharmaceuticals Holdings LLC S-1