Viking Therapeutics, Inc. — Q2 2017 Form 10-Q
Reporting period: Three and six months ended June 30, 2017; filed August 9, 2017. Viking is a clinical-stage biopharmaceutical company developing therapies for metabolic and endocrine disorders. It reported no revenue.
Financial results
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $3.72 million | $2.37 million | $7.24 million | $4.25 million |
| General and administrative | $1.27 million | $1.21 million | $2.71 million | $2.60 million |
| Net loss | $5.17 million | $3.69 million | $10.39 million | $7.28 million |
| Basic and diluted loss per share | $0.21 | $0.22 | $0.45 | $0.56 |
| Cash used in operating activities | Not provided quarterly | Not provided quarterly | $7.48 million | $5.95 million |
Operating expenses rose 39% in Q2 and 45% for the first half year over year, driven chiefly by clinical-trial and preclinical activity, clinical manufacturing, and related services. First-half net loss increased 43%. Loss per share was lower than the prior-year period despite higher losses, alongside a larger weighted-average share count.
At June 30, cash and cash equivalents were $3.39 million and short-term investments were $8.69 million, for combined cash and investments of $12.08 million. Total current assets were $14.26 million; current liabilities were $7.73 million. Total assets were $14.32 million and stockholders’ equity was $6.59 million. The company had an accumulated deficit of $70.67 million. Gross margin is not applicable because there was no revenue.
First-half investing activities provided $1.27 million net, reflecting investment maturities and sales exceeding purchases. Financing activities provided $6.53 million, primarily from common-stock issuances. Cash and cash equivalents increased by $0.32 million over the six months.
Financing, debt, and material changes
- In June, Viking sold 3,749,783 common shares with warrants to purchase up to 2,812,337 shares. The combined purchase price was $1.15 per share-and-warrant package; estimated net proceeds were approximately $3.9 million. The warrants have a $1.30 exercise price and are exercisable from December 19, 2017 through December 19, 2022.
- Common shares outstanding increased to 27,697,284 at June 30, from 20,823,873 at December 31, 2016. The June financing and other issuances increased dilution exposure.
- Viking amended its Ligand loan in May, extending maturity to May 21, 2018 and requiring a $200,000 cash repayment in Q3 2017. Viking disclosed that it made this repayment on July 13, 2017. The balance sheet reported current convertible notes payable, net of discount, of $3.05 million and a $0.89 million debt-conversion-feature liability.
- The company terminated its Aspire Capital stock purchase agreement effective June 19, 2017. It also received $1.8 million in study-cost funding from PoC Capital associated with issuance of 1,286,173 shares; $1.40 million remained recorded as prepaid clinical costs at quarter-end.
Outlook, risks, and unusual items
- Management said available capital was insufficient to fund operating and capital requirements for the next 12 months under its current plan unless additional capital is raised. Failure to secure funding could require delaying, reducing, or discontinuing development programs or granting development and commercialization rights to others.
- Management expects continued losses and increased R&D spending as it advances programs. No financial guidance for revenue, earnings, or cash runway beyond the stated funding shortfall was provided.
- VK5211 was in Phase 2 for rehabilitation following hip-fracture surgery; initial results were expected in Q4 2017. VK2809 was in Phase 2 for hypercholesterolemia and fatty liver disease; initial results were expected in the first half of 2018. VK2809 proof-of-concept work for GSD Ia was also underway. VK0214 was being studied preclinically for X-linked adrenoleukodystrophy, with IND-enabling plans dependent on study progress.
- Key risks include clinical-trial failure or delay, regulatory uncertainty, reliance on Ligand-licensed intellectual property and third-party manufacturers, future financing and dilution, and potential inability to meet Ligand debt obligations. The loan is secured by company assets; full repayment under specified circumstances could be substantially greater than outstanding principal and interest.
- Other expense included non-cash amortization of debt discount and financing costs, partly offset by income from changes in the fair value of the Ligand conversion feature. The fair-value estimate uses Level 3 inputs, including volatility assumptions.
- The filing reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls as of quarter-end. Management noted that the 2016 auditor’s report had expressed substantial doubt about the company’s ability to continue as a going concern; the current filing likewise describes a need for additional capital.
Important facts for investors to verify
- Current cash runway and the timing, size, and terms of any additional financing.
- Progress and results of the VK5211 and VK2809 Phase 2 trials, including the disclosed expected result dates, and GSD Ia proof-of-concept work.
- Ligand loan balance, repayment terms, collateral and potential share issuance or other consequences at maturity or on default.
- Fully diluted share count, including outstanding warrants, options, and shares issuable upon debt conversion.
- Whether clinical spending, prepaid study funding, and trial accruals develop as planned.