Viking Therapeutics, Inc. — FY2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017; filed March 7, 2018. This is an annual report, not a standalone fourth-quarter report. Viking is a clinical-stage biopharmaceutical company developing therapies for metabolic and endocrine disorders and had no approved products or revenue.
Financial performance and liquidity
| Metric | FY2017 | FY2016 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $13.74 million | $9.00 million |
| General and administrative expense | $5.33 million | $4.85 million |
| Total operating expenses / operating loss | $19.07 million | $13.85 million |
| Net loss | $20.58 million | $14.73 million |
| Basic and diluted loss per share | $0.79 | $0.90 |
| Cash used in operating activities | $14.76 million | $11.07 million |
| Cash, cash equivalents and short-term investments at year-end | $20.58 million | $13.15 million |
- R&D expense increased 52.7%, mainly from VK5211 and VK2809 clinical activity, VK0214 preclinical work, and drug manufacturing. G&A expense increased 9.9%.
- Net loss increased approximately 39.7%; operating cash use increased approximately 33.3%. Loss per share narrowed despite the higher net loss, principally reflecting a larger weighted-average share count.
- At December 31, 2017, current assets were $21.85 million and current liabilities were $8.66 million. There was no meaningful revenue-based margin to assess.
- Year-end liabilities included $3.45 million of convertible notes payable, net of discount, and a separately recognized $1.40 million debt-conversion-feature liability. The Ligand note was secured by company assets and had been extended to May 21, 2018.
- Financing activities provided $22.40 million in 2017. The December 2017 public offering generated $13.45 million net proceeds. Subsequent to year-end, the February 2018 offering raised $63.25 million gross; management said available funds, including those proceeds, were expected to fund operations through at least the first quarter of 2019.
Business developments and outlook
- VK5211: In a 108-patient, 12-week Phase 2 hip-fracture recovery trial, all tested doses met the primary endpoint, with dose-dependent, statistically significant increases in lean body mass versus placebo. No drug-related serious adverse events were reported. Exploratory functional measures showed numerical improvements but were not powered for significance. Follow-up data and FDA discussions were expected in the first half of 2018.
- VK2809: A Phase 2 trial in approximately 60 patients with hypercholesterolemia and fatty liver disease was ongoing, with initial results expected in the second half of 2018. An eight-week animal-model study reported improvements in measures of liver fat and fibrosis; these are preclinical findings, not clinical efficacy results. A proof-of-concept study in a GSD Ia animal model also reported reductions in metabolic markers; a human Phase 1 study was planned for the first half of 2018.
- VK0214: Preclinical candidate for X-linked adrenoleukodystrophy. The company planned to submit an IND in the second half of 2018, subject to completion of toxicology studies. It had received FDA orphan drug designation.
- Other programs: VK0612 was described as Phase 2b-ready for type 2 diabetes, with further trials dependent on funding. EPOR and DGAT-1 programs remained preclinical.
- Management expected continued losses and higher development spending. No product revenue, profitability guidance, or specific revenue forecast was provided. The company reported an accumulated deficit of $80.85 million.
Risks, contingencies and unusual items
- All candidates remained investigational; clinical results to date do not establish approval or commercial success. Further trials, regulatory review, financing and commercialization are required.
- Viking relies substantially on Ligand-licensed technology. The license includes potential development, regulatory and sales milestone payments of up to approximately $1.54 billion in aggregate, plus royalties, and could be terminated under specified conditions.
- The Ligand note carries significant repayment and dilution provisions. If not repaid and demanded after maturity, the filing describes a repayment amount equal to 200% of outstanding principal and accrued unpaid interest; payment may involve cash or shares under the agreement. The note was secured by company assets.
- The February 2018 equity offering and outstanding warrants provided financing but increased potential shareholder dilution. At year-end, the company disclosed 11.20 million warrants outstanding; additional shares were issued on warrant exercises after year-end.
- The company depends on third-party manufacturers and clinical research organizations, has no internal manufacturing capacity, and disclosed risks involving trial delays, safety, competition, intellectual property, reimbursement and further capital needs.
- No material pending legal proceedings were reported. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not attest to internal control, consistent with the company’s emerging-growth-company exemption.
Investor verification priorities
- Check subsequent disclosures for VK5211 follow-up data, functional outcomes, safety details and FDA feedback on the next development stage.
- Verify VK2809 Phase 2 clinical results and distinguish human trial findings from animal-model results; track the planned GSD Ia and VK0214 studies and IND milestones.
- Reconcile current cash, investment balances, operating cash burn and the runway after the February 2018 offering, including actual offering costs and subsequent warrant exercises.
- Review the Ligand note’s maturity, repayment terms, conversion feature, collateral and any amendments or repayment made after filing.
- Assess dilution from outstanding warrants, equity plans and any further use of the Lincoln Park purchase facility, and review the license’s milestones, royalties and termination provisions.