Viking Therapeutics, Inc. — FY2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015; filed March 8, 2016. This is an annual report, not a standalone fourth-quarter report. Viking is a clinical-stage biopharmaceutical company with no product revenue, developing therapies for metabolic and endocrine disorders. Its programs are licensed from Ligand Pharmaceuticals.
Financial performance and position
| Metric | FY2015 / Dec. 31, 2015 | FY2014 / Dec. 31, 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $7.0 million | $22.2 million |
| General and administrative expense | $5.0 million | $1.2 million |
| Operating loss | $12.0 million | $23.5 million |
| Other income (expense) | $(11.4) million | $1.6 million |
| Net loss | $23.4 million | $21.9 million |
| Cash used in operating activities | $8.7 million | $1.6 million |
| Cash and cash equivalents | $0.8 million | $0.8 million |
| Short-term investments | $13.3 million | None reported |
| Total assets | $15.4 million | $3.0 million |
| Total liabilities | $6.7 million | $25.2 million |
Cash and short-term investments totaled $14.1 million at year-end. Current assets were $15.2 million against current liabilities of $2.0 million. The balance sheet reported a $2.5 million Ligand note at face value ($2.15 million net of discount), plus $0.18 million accrued interest and a $2.37 million debt-conversion-feature liability. The filing provides no meaningful product gross margin; the company had no revenue. No dividends were paid.
Changes versus the prior year
- R&D expense fell 68.7%, mainly because 2014 included a $21.7 million noncash license charge to Ligand. In 2015, spending rose on clinical-trial activity, drug manufacturing, personnel and consultants.
- G&A expense increased 304%, reflecting higher stock compensation, salaries, insurance, director, legal and public-company costs.
- Net loss widened despite the lower operating loss, largely because 2015 included a $9.4 million adverse change in the fair value of accrued license fees and additional expense from the Ligand note’s conversion feature and debt discount.
- Operating cash use increased to $8.7 million. The 2015 IPO generated $22.3 million in net proceeds after offering expenses; the company invested much of the proceeds in short-term securities.
Business outlook, risks and unusual items
- VK5211: Phase 2 trial in approximately 120 patients recovering from hip-fracture surgery began enrolling in October 2015. Management expected enrollment completion in the second half of 2016 and trial completion in the first quarter of 2017. Prior Phase 1 results included a statistically significant lean-body-mass increase, but efficacy in the target patient population remains unproven.
- VK2809: Management planned a Phase 2 study of approximately 100 patients with elevated cholesterol and fatty liver disease. Following an FDA request for information on toxicity of certain metabolites, management expected to start the trial in the second quarter of 2016 and complete it in late 2016 or early 2017. Phase 1 findings included placebo-adjusted LDL-C reductions of approximately 15%–41% at doses of 5 mg and above; these are early-stage results, not proof of clinical benefit.
- VK0214: Preclinical work for X-linked adrenoleukodystrophy was ongoing; the company expected to report preliminary in-vivo data and begin work toward an IND filing in 2016.
- Other programs: VK0612 was described as Phase 2b-ready for type 2 diabetes, but further clinical development was contingent on sufficient funding. EPOR agonist and DGAT-1 inhibitor programs remained preclinical.
- Liquidity and going concern: The auditor and management disclosed substantial doubt about the company’s ability to continue as a going concern. Viking stated it did not expect year-end resources to cover at least the next 12 months without additional capital. Failure to raise funds could force delayed, reduced or discontinued development.
- Ligand dependence and financing terms: Ligand held approximately 49.4% of outstanding shares at year-end, supplied the licensed portfolio and held secured convertible debt. A January 2016 amendment extended the note maturity to May 21, 2017 and reduced its stated interest rate from 5% to 2.5%; specified financing or repayment provisions can require cash and/or equity payments, and the agreement includes a potential repayment amount of 200% of principal plus accrued interest.
- Other risks: All candidates remain investigational and face clinical, regulatory, manufacturing, competition, intellectual-property and reimbursement risks. The company reported no material legal proceedings. Its common stock traded between $1.89 and $7.14 in the fourth quarter of 2015.
Most important facts for investors to verify
- Current cash runway, subsequent financing, dilution and the precise obligations and share-conversion mechanics under the amended Ligand note.
- Enrollment, completion and results of the VK5211 Phase 2 trial, including functional outcomes and safety—not only changes in lean body mass or bone density.
- Whether the FDA’s metabolite-toxicity questions for VK2809 were resolved, and the actual trial start date, design and results.
- Progress and data supporting VK0214’s preclinical rationale and IND plans; funding availability for VK0612 and earlier-stage programs.
- Current status of Ligand’s licenses, milestone and royalty obligations, related-party governance, and any updates to going-concern disclosures.