Viking Therapeutics, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. The company is a clinical-stage biopharmaceutical developer focused on metabolic and endocrine disorders; it has not generated revenue. Financial statements are unaudited. Unless noted otherwise, amounts below are in U.S. dollars.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $3.043 million | $3.528 million; down 13.7% |
| General and administrative expense | $1.762 million | $1.441 million; up 22.3% |
| Total operating expenses | $4.805 million | $4.969 million |
| Net loss | $3.551 million | $5.222 million |
| Net loss per share | Basic $(0.08); diluted $(0.10) | $(0.23) basic and diluted |
| Cash used in operating activities | $5.303 million | $3.280 million |
| Cash, cash equivalents and short-term investments | $77.468 million at March 31 | $20.575 million at December 31, 2017 |
| Total assets / liabilities / stockholders’ equity | $78.971 million / $6.339 million / $72.632 million at March 31 | — |
Operating margins are not meaningful because the company had no revenue. The lower net loss mainly reflects a $1.361 million noncash gain from a decline in the fair value of the Ligand debt-conversion liability; operating cash use increased year over year. Investing activities used $29.627 million, largely reflecting purchases of investments, while financing activities provided $62.298 million.
The February 2018 underwritten stock offering raised approximately $58.7 million net. Warrant and option exercises also generated financing proceeds. Shares outstanding increased to 50,933,195 at March 31, from 35,817,104 at December 31, 2017.
The Ligand convertible note had a net carrying amount of $3.721 million, including the conversion payoff value and unamortized discount, and was due May 21, 2018. The filing describes terms under which full repayment could require an amount equal to 200% of outstanding principal and accrued interest if the note is not repaid by maturity and Ligand demands payment, subject to the stated payment options.
Material changes and business developments
- R&D expense declined primarily due to lower drug-manufacturing and VK5211 clinical-trial costs, partly offset by increased preclinical and consultant costs. G&A rose mainly from stock compensation, salaries and benefits, and legal expenses.
- VK5211: Management reported positive top-line Phase 2 results in patients recovering from hip-fracture surgery, including statistically significant, dose-dependent improvement in the primary lean-body-mass endpoint and encouraging safety and tolerability. Further FDA discussions were expected.
- VK2809: A Phase 2 trial in approximately 60 patients with hypercholesterolemia and fatty liver disease was ongoing; initial results were expected in the second half of 2018. Management also expected to initiate a Phase 1 proof-of-concept study in GSD Ia patients in the first half of 2018.
- VK0214: An IND filing for an X-linked adrenoleukodystrophy proof-of-concept study was expected in the first half of 2019, subject to completion of toxicology studies.
Outlook, risks and other disclosures
Management estimated that cash, cash equivalents and short-term investments would fund operations through at least the second quarter of 2019, based on its then-current plan. The company expected continuing and potentially increasing losses as development advanced and stated that additional capital would be needed to fund operations and planned trials; future financing might not be available on acceptable terms. No formal earnings or revenue guidance was provided.
Key risks include clinical or preclinical failure, regulatory delays, adverse safety findings, reliance on third-party CROs and manufacturers, dependence on intellectual property licensed from Ligand, the approaching Ligand note maturity and its repayment terms, future capital needs and dilution, and competition. The filing also cites dependence on patent protection and the risk that trial costs or timelines could exceed expectations.
The company reported no material legal proceedings, no off-balance-sheet arrangements, and no material change in internal control over financial reporting during the quarter. Management concluded disclosure controls and procedures were effective at the reasonable assurance level. The filing states there were no subsequent events requiring recognition, adjustment or disclosure.
Important facts for investors to verify
- Whether the Ligand note was repaid, converted, extended or otherwise resolved after its May 21, 2018 maturity, and the resulting cash or dilution impact.
- Whether the expected VK2809 trial readout and GSD Ia study initiation occurred on the stated timelines, and what the data show.
- Whether management’s runway estimate remains valid given the $5.303 million quarterly operating cash use and planned development spending.
- The clinical, regulatory and safety evidence supporting VK5211’s next development steps and the scope of further FDA discussions.
- Potential dilution from outstanding warrants, options, equity plans and the company’s financing arrangements, alongside progress in its licensed programs and intellectual-property protection.