Viking Therapeutics, Inc. — Q3 2018 Form 10-Q
Reporting period: Three and nine months ended September 30, 2018. Financial statements are unaudited. Viking is a clinical-stage biopharmaceutical company developing therapies for metabolic and endocrine disorders; it has not generated revenue.
Key financial metrics
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $5.7 million | $3.5 million | $14.0 million | $10.7 million |
| General and administrative expense | $1.7 million | $1.2 million | $5.2 million | $3.9 million |
| Net loss | $6.6 million | $6.1 million | $16.8 million | $16.5 million |
| Basic and diluted loss per share | $0.11 | $0.22 | $0.32 | $0.67 |
Amounts are in U.S. dollars. The company has no revenue, so operating margins are not meaningful. Q3 operating expenses were $7.4 million, up from $4.7 million. Interest income and the absence of prior-year debt-related expenses contributed to the lower loss per share despite higher operating costs and net loss.
- Liquidity at September 30: Cash and cash equivalents of $169.5 million plus short-term investments of $134.7 million, totaling approximately $304.2 million. Current assets were $306.6 million and current liabilities $4.7 million.
- Cash flow, nine months: $16.1 million used in operations, compared with $10.8 million in 2017; $123.3 million used in investing, primarily net purchases of investments; and $299.9 million provided by financing.
- Financing: Three 2018 public offerings raised net proceeds of $58.7 million in February, $72.3 million in June, and $165.0 million in September. The offerings materially increased cash but also expanded the share count.
- Debt: No debt remained at September 30. Viking paid the remaining approximately $3.9 million balance of its Ligand note in cash on May 21, 2018.
- Equity: Stockholders’ equity was $302.1 million; accumulated deficit was $97.7 million. Shares outstanding were 71.3 million at September 30 and 71.5 million at October 31.
Changes versus the prior comparable periods
- Q3 R&D expense rose 64.1%, primarily due to drug manufacturing, preclinical studies, consultants, and stock-based compensation; clinical-study costs partly offset the increase.
- Q3 G&A expense rose 39.1%, reflecting higher compensation, professional services, insurance, legal and patent costs, and franchise taxes.
- Nine-month operating cash use increased by $5.3 million year over year. Financing cash inflow increased substantially, mainly because of the 2018 public offerings.
- Net loss increased modestly year over year, while loss per share decreased because the weighted-average share count more than doubled.
Outlook, programs, and risks
- VK2809: Viking reported positive top-line results in September from a 12-week Phase 2 study in patients with NAFLD and elevated LDL-C. The study met its primary endpoint, with statistically significant LDL-C reductions versus placebo, and its secondary endpoint, with statistically significant reductions in liver fat. The filing reports no serious adverse events and describes safety and tolerability as encouraging; it does not provide a clear numerical treatment effect in the supplied text.
- Pipeline priorities: Following the VK2809 readout, Viking said it would focus more closely on development for NASH and defer additional clinical work in glycogen storage disease type Ia. It expected to file an IND for VK0214 in X-linked adrenoleukodystrophy in 2019, subject to completing toxicology studies. VK5211 had reported positive Phase 2 top-line results in 2017.
- Funding outlook: Management believed available cash, cash equivalents, and short-term investments would fund operations through at least December 31, 2019. The company expects continued losses, with losses potentially increasing as development advances, and says future capital may be needed; additional financing may not be available on acceptable terms.
- Key risks: Candidates remain in clinical or preclinical development, and success, regulatory approval, and commercialization are uncertain. Viking relies on Ligand-licensed technology, third-party manufacturers and research providers, and may face clinical, safety, regulatory, patent, supply, competition, and financing risks. The Ligand license includes potential development, regulatory, and sales milestones of up to approximately $1.54 billion and single-digit royalties on future net sales.
- Other items: A new headquarters lease began November 1, 2018 and runs through January 2022; disclosed minimum lease payments totaled approximately $1.0 million. The company reported no material legal proceedings or off-balance-sheet arrangements. Management concluded disclosure controls were effective.
Important facts for investors to verify
- Review the full VK2809 Phase 2 data, including effect sizes, dose response, durability, and detailed safety results; top-line statements alone do not establish later-stage success.
- Assess whether the stated runway through December 2019 remains adequate given planned clinical work, rising development costs, and the company’s continuing operating cash use.
- Track development timelines and spending priorities for VK2809, VK5211, and VK0214, including the deferred GSD Ia work and the anticipated VK0214 IND filing.
- Evaluate dilution from the 2018 equity offerings and potential warrant, option, and other share issuances.
- Review the Ligand license obligations, including milestone and royalty terms, and the company’s dependence on licensed intellectual property and third-party manufacturing.