Viking Therapeutics, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. Viking is a clinical-stage biopharmaceutical company developing therapies for metabolic and endocrine disorders. It reported no product revenue and remains dependent on external financing.
Financial results and position
| Metric | Q1 2017 | Q1 2016 / prior year-end |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $3.53 million | $1.88 million |
| General and administrative expense | $1.44 million | $1.39 million |
| Operating loss | $4.97 million | $3.27 million |
| Net loss | $5.22 million | $3.59 million |
| Basic and diluted loss per share | $0.23 | $0.40 |
| Cash and cash equivalents | $4.36 million | $3.08 million at Dec. 31, 2016 |
| Short-term investments | $7.95 million | $10.08 million at Dec. 31, 2016 |
| Total assets / liabilities | $15.15 million / $7.61 million | $14.54 million / $6.49 million at Dec. 31, 2016 |
Operating cash use was $3.28 million, compared with $2.73 million in Q1 2016. Investing activities provided $2.04 million, principally from net investment maturities and sales; financing activities provided $2.52 million, principally from common-stock issuance. Cash and short-term investments totaled $12.31 million at quarter-end. Gross margin is not meaningful because the company had no revenue.
Research and development expense rose 87.9%, mainly due to greater clinical-trial and preclinical activity, clinical manufacturing, and regulatory and consulting costs. General and administrative expense increased 3.6%. Loss per share was lower than in the prior-year quarter despite a larger net loss, primarily reflecting a higher weighted-average share count.
Ligand convertible notes were reported at $3.71 million net of discount, with $47,113 accrued non-current interest and a separate $453,350 debt-conversion-feature liability at March 31. The debt carrying amount and classification changed from year-end; the filing describes the note’s then-current maturity as May 21, 2017.
Programs, outlook and material developments
- VK5211 was in Phase 2 for recovery after non-elective hip-fracture surgery. Management expected initial results later in summer 2017.
- VK2809 was in Phase 2 for hypercholesterolemia and fatty liver disease, with completion expected in the second half of 2017. Viking was also pursuing proof-of-concept work for glycogen storage disease type Ia (GSD Ia); subject to positive results, it expected to seek an IND for a Phase 1 study in the second half of 2017.
- VK0214 was being studied preclinically for X-linked adrenoleukodystrophy; further development and an IND filing depended on completion of ongoing work.
- Management expected continued losses and higher development costs. It stated that available capital was insufficient to fund operating and capital needs for the next 12 months without additional financing. If financing is unavailable on acceptable terms, Viking may delay, reduce, or discontinue development programs.
- During Q1, Viking issued 1,286,173 shares to PoC Capital for $1.8 million in committed study funding, recorded as a prepaid expense; costs above the committed amount are Viking’s responsibility. It also raised equity through its Maxim sales agreement and Aspire Capital purchase agreement, contributing to dilution.
- Subsequent event: On May 8, 2017, Viking amended its Ligand loan, extending maturity to May 21, 2018 and requiring a $200,000 cash repayment in Q3 2017. Viking expected the amendment to increase the fair value of the debt-conversion liability by approximately $1 million, primarily due to the longer expected term.
- Key risks include clinical failure or delay, reliance on third-party manufacturers and CROs, dependence on Ligand-licensed intellectual property, financing and dilution risk, and uncertainty over regulatory approval and commercialization. No material legal proceedings were reported. Management concluded disclosure controls were effective; no material change in internal control was reported.
Important facts for investors to verify
- Whether additional capital can be raised in time and on acceptable terms to fund at least the next 12 months.
- Trial enrollment, timing and results for VK5211 and VK2809, plus progress and evidence supporting the GSD Ia and VK0214 programs.
- The full economic terms of the Ligand note, including the Q3 2017 cash repayment, extended maturity, conversion provisions and potential repayment obligations.
- Remaining availability and conditions under the Maxim and Aspire financing arrangements, and the potential dilution from future issuances, warrants and resale-eligible shares.
- Whether PoC-funded studies remain within the $1.8 million commitment and the amount of any costs Viking must fund itself.