Viking Therapeutics, Inc. — Q3 2017 Form 10-Q
Reporting period: Three and nine months ended September 30, 2017. Financial statements are unaudited. Amounts are in U.S. dollars.
Business context and reporting period
Viking is a clinical-stage biopharmaceutical company developing therapies for metabolic and endocrine disorders. Its portfolio includes five licensed drug candidates; its lead programs are VK5211 and VK2809, both in Phase 2 trials. The company had not generated revenue.
Financial results and liquidity
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $3.46 million | $2.10 million | $10.71 million | $6.35 million |
| General and administrative | $1.23 million | $1.16 million | $3.93 million | $3.76 million |
| Net loss | $6.10 million | $3.81 million | $16.49 million | $11.09 million |
| Basic and diluted loss per share | $0.22 | $0.20 | $0.67 | $0.74 |
- Gross margin and operating margin are not meaningful because the company reported no revenue.
- For the nine months, operating cash outflow was $10.81 million, compared with $8.61 million in 2016. Investing activities provided $2.67 million; financing activities provided $7.64 million.
- At September 30, cash and cash equivalents were $2.57 million and short-term investments were $7.27 million, totaling $9.84 million. Total current assets were $11.53 million; total current liabilities were $9.61 million.
- Total liabilities were $9.61 million, including $3.18 million of current convertible notes payable, net of discount, and a $2.03 million current debt-conversion-feature liability. The Ligand note maturity was extended to May 21, 2018; a required $200,000 cash repayment was made in July.
- Accumulated deficit was $76.77 million. Common shares outstanding were 28,498,847 as of October 31, 2017.
Material changes versus the prior comparable period
- Q3 R&D expense rose 64.6%; nine-month R&D expense rose 68.6%, mainly reflecting clinical-trial activity for VK5211 and VK2809, preclinical work for VK0214, and increased clinical manufacturing and regulatory costs.
- Net loss increased year over year in both Q3 and the nine-month period. Q3 included $1.14 million of expense from remeasurement of the Ligand note conversion feature, versus $64,514 in Q3 2016. This fair-value item is non-cash and can fluctuate.
- Nine-month loss per share improved to $0.67 from $0.74 despite the higher net loss; weighted-average shares increased substantially following equity issuances.
Outlook, risks, contingencies, and unusual items
- Management said available capital was insufficient to fund operating and capital requirements for the next 12 months without additional financing. It warned that insufficient funding could require delaying, reducing, or discontinuing development or operations.
- Management expected initial VK5211 Phase 2 results in Q4 2017 and initial VK2809 Phase 2 results in the first half of 2018. It expected to file an IND for VK2809 in GSD Ia and, subject to toxicology work, advance VK0214 toward an IND. These are forward-looking expectations, not reported outcomes.
- In June, Viking raised $3.87 million net in a registered direct offering and issued warrants for up to 2.81 million shares at $1.30 per share, exercisable beginning December 19, 2017. In September, it received $1.25 million from a sale of 701,282 shares to Lincoln Park Capital (LPC) and agreed to a potential $15 million equity purchase facility, subject to conditions and limits. The LPC registration became effective and the facility commenced October 26, 2017.
- The company issued 1,286,173 shares to PoC Capital in connection with $1.8 million of committed study-cost funding; costs above that amount are Viking’s responsibility. The remaining prepaid balance was $1.15 million at quarter end.
- Key risks include clinical, regulatory, manufacturing, intellectual-property and financing uncertainty; dependence on Ligand-licensed assets; potential dilution from future equity sales and outstanding warrants; and obligations under the Ligand secured convertible note. No material legal proceedings or off-balance-sheet arrangements were reported. Management concluded disclosure controls were effective and reported no material change in internal control during the quarter.
Most important facts for investors to verify
- Whether subsequent financing, including actual LPC facility sales, provides sufficient runway and on what dilution terms.
- VK5211 and VK2809 trial results, timelines, and any changes to development plans, including VK2809’s GSD Ia program and VK0214’s progress toward an IND.
- The outstanding Ligand note balance, conversion-feature valuation, repayment terms, and May 2018 maturity obligations.
- Potential dilution from the June 2017 warrants, other outstanding warrants, equity incentives, and LPC purchases.