Business context and reporting period
Viking Therapeutics, Inc. is a clinical-stage biopharmaceutical company developing therapies for metabolic and endocrine disorders. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2019; comparisons are with the corresponding 2018 periods.
The company reported no revenue. Its principal programs include VK2809, a thyroid hormone receptor beta agonist; VK0214, in development for X-linked adrenoleukodystrophy (X-ALD); and VK5211, a selective androgen receptor modulator. Viking reported positive top-line Phase 2 results for VK2809 in 2018 and planned a trial in biopsy-confirmed NASH in 2019. It expected to file an IND for VK0214 in 2019, subject to completion of toxicology studies, and intended to pursue partnering or licensing for VK5211 before further studies.
Financial results and liquidity
Amounts below are in millions, except per-share data. Operating margins are not meaningful because the company had no revenue.
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $7.333 | $5.221 | $11.828 | $8.264 |
| General and administrative expense | $2.236 | $1.704 | $4.547 | $3.466 |
| Operating loss | $(9.569) | $(6.925) | $(16.375) | $(11.730) |
| Net loss | $(7.674) | $(6.672) | $(12.598) | $(10.223) |
| Basic and diluted loss per share | $(0.11) | $(0.13) | $(0.18) | $(0.21) |
| Cash used in operating activities | Not presented quarterly | Not presented quarterly | $(9.611) | $(10.573) |
Interest income was $1.925 million in Q2 2019 and $3.839 million for the first half of 2019, versus $0.392 million and $0.573 million, respectively, in 2018. The company attributed higher 2019 other income primarily to interest earned on cash and investments; 2018 results also included items related to the Ligand convertible note, which was repaid in May 2018.
At June 30, 2019, cash and cash equivalents were $19.123 million and short-term investments were $273.513 million, totaling approximately $292.6 million. Total assets were $294.493 million, total liabilities $6.139 million, and stockholders’ equity $288.354 million. The filing reports no outstanding debt at period end; liabilities included $0.801 million in operating lease obligations. Management said available cash and investments were expected to fund operations through at least the third quarter of 2020 and stated it had sufficient capital for at least the next 12 months.
Material changes versus prior periods
- Q2 R&D expense rose 40.5% year over year; first-half R&D rose 43.1%. Management cited increased drug-candidate manufacturing, preclinical work, consultants, stock compensation and personnel costs, partly offset by lower clinical-study costs.
- Q2 and first-half G&A expense each rose 31.2%, mainly reflecting higher stock compensation, salaries and benefits, consulting, professional fees and, for the first half, liability insurance.
- First-half operating cash use improved to $9.611 million from $10.573 million. Investing cash flow was positive $3.370 million, reflecting investment maturities exceeding purchases. Financing provided $0.585 million, versus $132.447 million in 2018, when the company completed public stock offerings.
- Accumulated deficit increased to $115.516 million from $102.918 million at year-end 2018. Common shares outstanding were 72,173,489 at June 30, 2019, compared with 71,742,043 at December 31, 2018.
- The company adopted lease accounting in January 2019, recognizing a right-of-use asset and lease liabilities; it reported no material effect on operations or cash flows.
Outlook, commentary and risks
Management expects losses to continue and increase as development advances, with research and development and general and administrative costs expected to rise. The company may need additional capital to complete planned trials; financing may not be available on acceptable terms, and equity financing could dilute shareholders. A universal shelf registration statement permits future securities offerings, but the filing does not announce a new offering.
Key risks include clinical-trial failure or delay, uncertain regulatory outcomes, safety and manufacturing risks, reliance on third-party research and manufacturing organizations, and dependence on licensed technology from Ligand. The filing describes potential Ligand development, regulatory and sales milestones of up to approximately $1.54 billion in aggregate and single-digit royalties on future worldwide net product sales. The company also cited competition, intellectual-property challenges, reimbursement uncertainty and the possibility that collaborations may not be secured on acceptable terms.
No material legal proceedings or subsequent events requiring financial-statement adjustment or disclosure were reported. Disclosure controls were considered effective, and no material change in internal control over financial reporting was reported for the quarter. After quarter-end, Chief Development Officer Hiroko Masamune resigned from all company positions effective July 31, 2019.
Important facts for investors to verify
- Whether Viking initiated the planned VK2809 NASH trial in 2019, and whether the study design, enrollment, timeline or costs changed.
- Whether the required toxicology work and planned IND filing for VK0214 proceeded, and whether any new clinical data were reported.
- Whether cash burn, investment maturities and development spending remain consistent with management’s stated runway through at least Q3 2020.
- Whether additional financing or partnering is needed, and the potential dilution or economic terms, including obligations under the Ligand license.
- Whether manufacturing, trial-enrollment, safety, regulatory or intellectual-property developments materially affect any candidate’s timeline or prospects.