Viking Therapeutics, Inc. — Q2 2018 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2018. Filed August 9, 2018. Viking is a clinical-stage biopharmaceutical company developing therapies for metabolic and endocrine disorders; it has not generated revenue.
Financial performance and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $0 in 2018 and 2017 | $0 in 2018 and 2017 |
| Research and development expense | $5.2 million vs. $3.7 million | $8.3 million vs. $7.2 million |
| General and administrative expense | $1.7 million vs. $1.3 million | $3.5 million vs. $2.7 million |
| Net loss | $6.7 million vs. $5.2 million | $10.2 million vs. $10.4 million |
| Net loss per share, basic and diluted | $0.13 vs. $0.21 | $0.21 vs. $0.45 |
| Operating cash used | Not presented for the quarter | $10.6 million vs. $7.5 million |
At June 30, cash and cash equivalents were $34.6 million and short-term investments were $107.6 million, totaling approximately $142.2 million. Total assets were $144.5 million, current liabilities were $4.1 million, and stockholders’ equity was $140.4 million. The company had no debt outstanding after repaying the remaining Ligand note balance of approximately $3.9 million on May 21, 2018. No meaningful operating margin is available because there was no revenue.
Changes versus the prior comparable period
- Q2 R&D expense rose 40.5%, mainly due to preclinical work and consultant costs; lower drug-candidate manufacturing costs partly offset the increase. First-half R&D rose 14.1%, with increased preclinical and consultant costs partly offset by lower manufacturing and VK5211 clinical-trial activity.
- Q2 G&A expense increased 34.5%; first-half G&A increased 28.0%, primarily reflecting higher stock-based compensation, salaries and benefits, and franchise taxes.
- Q2 net loss increased from $5.2 million to $6.7 million, while first-half net loss decreased modestly from $10.4 million to $10.2 million. Per-share losses were lower in both comparisons, alongside a substantial increase in weighted-average shares.
- Financing generated $132.4 million of net cash in the first half, principally from February and June public offerings. The company raised net proceeds of $58.7 million and $72.3 million, respectively. Cash used for investment purchases was $96.3 million net of maturities and proceeds.
Outlook, programs and risks
- Management estimated available cash, cash equivalents and short-term investments would fund operations through at least Q3 2019, based on its then-current plan. It expects ongoing losses and increased R&D spending, and stated that additional capital will be needed to fund operations and planned trials; future financing may be unavailable or on unacceptable terms.
- VK2809 Phase 2 enrollment in approximately 60 patients with hypercholesterolemia and fatty liver disease was complete; initial results were expected in the second half of 2018. The company expected to initiate a Phase 1 proof-of-concept study in GSD Ia patients in 2018.
- VK5211 had reported positive top-line Phase 2 results in hip-fracture recovery; management expected further FDA discussions about potential development. VK0214 remained in preclinical development, with an IND filing expected in the first half of 2019, subject to completion of toxicology studies.
- Key risks include clinical-trial uncertainty, regulatory and manufacturing delays, reliance on third-party manufacturers and CROs, dependence on intellectual property licensed from Ligand, and future financing needs. The company reported no material legal proceedings and no off-balance-sheet arrangements.
- A new shelf registration statement, effective July 19, 2018, permits offerings of up to $450 million in securities; it does not represent committed financing. A new office lease is scheduled to commence November 1, 2018, with disclosed minimum payments totaling approximately $1.0 million.
Important facts for investors to verify
- Confirm subsequent VK2809 Phase 2 results and the status, timing and design of planned VK2809 GSD Ia, VK5211 and VK0214 studies.
- Assess whether the stated cash runway remains achievable as clinical and preclinical spending increases, and whether additional financing or dilution may be required.
- Review the terms and continuing obligations of the Ligand license, including potential development, regulatory and sales milestones and royalties.
- Reconcile share counts: the balance sheet reports 60,652,794 shares at June 30, while the statement of stockholders’ equity reports 60,652,974; the cover page reports 60,657,794 shares as of July 31.
- Consider the substantial equity issuance in 2018 and the potential availability of further securities under the new shelf registration.