Viking Therapeutics, Inc. — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018; filed March 13, 2019. Viking is a clinical-stage biopharmaceutical company developing treatments for metabolic and endocrine disorders. It had no product revenue and operated as one segment.
Financial performance and liquidity
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $19.0 million | $13.7 million |
| General and administrative expense | $7.1 million | $5.3 million |
| Operating loss | $26.2 million | $19.1 million |
| Net loss | $22.1 million | $20.6 million |
| Basic and diluted loss per share | $0.38 | $0.79 |
| Cash used in operating activities | $18.8 million | $14.8 million |
Gross margin is not applicable because the company had no revenue. At year-end, cash and cash equivalents were $24.8 million and short-term investments were $276.7 million, totaling approximately $301.5 million. Total assets were $302.3 million, total liabilities $4.6 million, and stockholders’ equity $297.8 million. The Ligand convertible note was repaid in full in May 2018; no convertible debt remained at year-end.
Financing provided $300.3 million of net cash in 2018, primarily from three common-stock offerings that generated approximately $296 million combined, plus warrant and other equity exercises. Shares outstanding rose from 35.8 million at year-end 2017 to 71.7 million at year-end 2018. Management said available cash and investments were expected to fund operations through at least the first quarter of 2020.
Material changes and business developments
- R&D expense increased 38.6% year over year, primarily reflecting preclinical work, consulting, stock compensation and drug manufacturing, partly offset by lower clinical-study costs. G&A expense increased 33.6%, including higher compensation, insurance, legal and patent costs.
- VK2809’s 12-week Phase 2 study in NAFLD and elevated LDL-C met its primary LDL-C endpoint and secondary liver-fat endpoint. The company reported statistically significant LDL-C reductions of at least 20% versus placebo. Median relative liver-fat reductions were 56.5% for 10 mg every other day and 59.7% for 10 mg daily, versus 8.9% for placebo. No serious adverse events were reported.
- VK5211 had previously shown dose-dependent gains in lean body mass in a Phase 2 hip-fracture study; no drug-related serious adverse events were reported. Viking intended to seek a partner or licensee before undertaking further clinical studies.
- VK0214 remained preclinical for X-linked adrenoleukodystrophy (X-ALD). VK0612 was described as Phase 2b-ready for type 2 diabetes; DGAT-1 and EPOR programs were preclinical.
- Viking deferred further clinical work on VK2809 for glycogen storage disease type Ia to focus resources on NASH development.
Outlook, risks and unusual items
- Management planned to initiate a VK2809 study in biopsy-confirmed NASH in 2019 and, subject to toxicology completion, expected to file an IND and begin a proof-of-concept study of VK0214 in X-ALD in 2019. These are plans, not guaranteed milestones.
- The company expects continuing losses and higher development spending; it said additional capital will be needed to fund operations and ongoing and planned trials. Financing may be unavailable or dilutive, and reported runway depends on the current operating plan.
- All candidates remain investigational, and none had completed pivotal trials or received marketing approval. Key risks include clinical and regulatory failure, safety findings, trial delays or enrollment challenges, competition, reliance on third-party manufacturers and CROs, and uncertain reimbursement and commercialization prospects.
- Viking relies on exclusive licensed technology from Ligand. The license carries potential development, regulatory and sales milestones of up to approximately $1.54 billion in aggregate, plus royalties; termination could jeopardize licensed programs. Ligand owned approximately 10.3% of Viking at year-end and had a board nomination right.
- Other income of $4.1 million in 2018 included $3.2 million of net interest income and a $1.4 million gain from the change in fair value of the Ligand note conversion feature, partly offset by debt-discount and financing-cost amortization. These items mean net loss was lower than operating loss.
- Available-for-sale investments had $416,000 of unrealized losses at year-end, recorded in other comprehensive loss. The filing said the company did not intend, and was not more likely than not required, to sell them before recovery of amortized cost.
- No material legal proceedings were reported. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not provide an internal-control attestation under the emerging-growth-company exemption.
Investor verification checklist
- Confirm subsequent trial progress, timing and results for the planned VK2809 NASH study and VK0214 X-ALD IND and proof-of-concept study.
- Review the complete financial statements and later filings for cash burn, investment maturities, cash runway assumptions, and any subsequent financing or dilution.
- Check the terms and status of any partnering or licensing discussions for VK5211 and the other pipeline assets.
- Assess the concentration of licensed intellectual property and potential Ligand milestones, royalties, termination provisions and related-party governance arrangements.
- Monitor whether clinical findings are replicated in larger or later-stage trials and whether safety, efficacy and regulatory requirements alter development plans.