Viking Therapeutics Inc (VKTX) Q4 2019 Earnings Call Transcript – Motley Fool

Posted: March 1, 2020 at 4:48 am

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Viking Therapeutics Inc(NASDAQ:VKTX)Q42019 Earnings CallFeb 26, 2020, 4:30 p.m. ET

Operator

Good day, and welcome to the Viking Therapeutics Fourth Quarter 2019 and Year-End Conference Call. [Operator Instructions]

I would now like to turn the conference over to Stephanie Diaz, Investor Relations. Please go ahead.

Stephanie C. Diaz -- President and Chief Executive Officer

Hello, and thank you all for participating in today's call. Joining me today is Brian Lian, Viking's President and CEO; and Greg Zante, Senior Vice President of Finance.

Before we begin, I'd like to caution that comments made during this conference call today, February 26, 2020, will contain forward-looking statements within the meaning of the Securities Act of 1933 concerning the current beliefs of the Company, which involves a number of assumptions, risks and uncertainties. Actual results could differ from these statements, and the Company undertakes no obligation to revise or update any statement made today. I encourage you to review all of the Company's filings with the Securities and Exchange Commission concerning these and other matters.

I'll now turn the call over to Brian Lian for his initial comments. Brian?

Brian Lian -- President and Chief Executive Officer

Thanks, Stephanie, and thanks to everyone listening on the webcast or by phone. Today we'll provide an overview of our fourth quarter and year-end 2019 financial results as well as an update on recent progress and developments related to our pipeline programs and operations. 2019 was a year of tremendous progress at Viking, building on the momentum that follows the successful outcomes of our completed clinical studies.

With respect to our lead program VK2809, our novel thyroid receptor beta agonist, we completed the important work required to support a Phase 2b study in patients with biopsy-confirmed NASH. And we are pleased to announce in November, the initiation of this important study. With respect to VK0214, our second thyroid receptor beta agonist, our efforts during 2019 focused on continuing the IND enabling work required to commence clinical studies of this molecule and we expect to file an IND for this program in the first half of this year.

I will provide additional detail on our development activities in a few minutes. But first, we'd like to review our fourth quarter and year end financial results. For that, I'll turn the call over to Greg Zante, Viking's Senior Vice President of Finance. Greg?

Greg Zante -- Senior Vice President of Finance.

Thanks, Brian. In conjunction with my comments, I'd like to recommend that participants refer to Viking's Form 10-K filing with the Securities and Exchange Commission, which we filed after the market close today for additional detail.

I'll first go over our financial results for the fourth quarter ended December 31, 2019. Our research and development expenses for the three-months ended December 31, 2019 were $6.5 million compared to $5.1 million for the same period in 2018. The increase was primarily due to increased expenses related to clinical studies with the initiation of the Phase 2b VOYAGE study during the quarter and manufacturing for our drug candidates, partially offset by decreased expenses related to our pre-clinical studies and services provided by third-party consultants. Our general and administrative expenses for the three months ended December 31, 2019 were $2.4 million compared to $1.9 million for the same period in 2018. The increase was primarily due to increased expenses related to stock-based compensation and professional fees.

For the three months ended December 31, 2019, Viking reported a net loss of $7.5 million, or $0.10 per share, compared to a net loss of $5.2 million, or $0.07 per share, in the corresponding period in 2018. The increase in net loss and net loss per share for the three months ended December 31, 2019 was primarily due to increased research and development and general and administrative expenses noted previously, as well as decreased interest income due to the decline in interest rates throughout 2019 as compared to prevailing interest rates during the fourth quarter of 2018.

Research and development expenses for the 12-months ended December 31, 2019 were $23.6 million compared to $19 million for the same period in 2018. The increase was primarily due to increased expenses related to manufacturing for our drug candidates, clinical studies, services provided by third-party consultants and salaries and benefits, partially offset by decreased expenses related to pre-clinical studies.

General and administrative expenses for the 12-months ended December 31, 2019 were $9.1 million compared to $7.1 million for the same period in 2018. The increase was primarily due to increased expenses related to stock-based compensation, services provided by third-party consultants, corporate insurance, legal and patent expenses and professional fees.

For the 12-months ended December 31, 2019, Viking reported a net loss of $25.8 million, or $0.36 per share compared to a net loss of $22.1 million, or $0.38 per share in the corresponding period in 2018. The increase in net loss for the 12-months ended December 31, 2019 was primarily due to increased research and development and general and administrative expenses as noted previously, partially offset by increased interest income as well as the elimination of expenses related to the change in fair value of the debt conversion feature liability due to the repayment of the Ligand, noted May 2018. The decrease in net loss per share for the 12-months ended December 31, 2019 was primarily driven by the additional weighted average shares outstanding at December 31, 2019 versus those outstanding at December 31, 2018, given the public equity financings that occurred during 2018.

Turning to the balance sheet. At December 31, 2019, Viking held cash, cash equivalents and short-term investments totaling $275.6 million and had 72,413,602 shares of common stock outstanding.

This concludes my financial review and I'll now turn the call back over to Brian.

Brian Lian -- President and Chief Executive Officer

Thanks, Greg. I'll now provide an update on recent progress and activity with our lead program VK2809. As a reminder, VK2809 is an orally available small molecule agonist of the thyroid hormone receptor that possesses selectivity for liver tissue as well as the beta receptor subtype suggesting promising therapeutic potential in a range of metabolic disorders including NASH. In September, 2018, we announced positive results from a 12-week Phase 2 trial of VK2809 in patients with hypercholesterolemia and non-alcoholic fatty liver disease. As we previously discussed, this trial successfully achieved both its primary and secondary endpoints, demonstrating potent reductions in liver fat content as well as improvements in plasma lipid measures. As a brief reminder patients receiving VK2809 experienced median relative reduction in liver fat ranging from 54% to approximately 60%, compared with approximately 9% for placebo.

The proportion of patients experiencing at least a 30% relative reduction in liver fat range from 77% to 100% with the overall average of 88%, compared with 17% for placebo patients. In addition, 70% of patients receiving VK2809 experienced at least a 50% relative reduction in liver fat content compared to baseline. VK2809 also produced significant reductions in plasma lipids, including LDL-cholesterol, triglycerides and atherogenic proteins such as apolipoprotein B and lipoprotein (a). This lipid lowering profile is a novel feature of thyroid receptor beta activation, and is a particular interest in the setting of NASH as it may suggest long-term cardiovascular benefit.

In addition to the impressive efficacy observed, VK2809 has also demonstrated an encouraging safety and tolerability profile. In the Phase 2 study, no serious adverse events were reported among patients receiving VK2809 or placebo and the overall numbers of adverse events were relatively evenly distributed across treatment arms. We believe VK2809's potent liver specific effects combined with the safety, tolerability and potential cardiovascular benefits, that is a part from competitive programs targeting NASH. And we are very pleased to advance this compound into a Phase 2b study in patients with biopsy-confirmed NASH. In preparation for this study, in 2019, we completed several additional clinical and pre-clinical evaluations of VK2809 to enable us to file a new IND with the FDA's Division of Gastroenterology and Inborn Errors Products. As a reminder, a new IND required because the prior IND was directed toward hyperlipidemia and was active in the division of metabolic and endocrine products. However, the GI division is where most NASH IND applications are reviewed.

In preparation for the NASH IND, during 2019, we completed several new studies in addition to the 12-week Phase 2 study I described a moment ago. These included a Phase 1 study to evaluate the safety, tolerability and pharmacokinetics of VK2809 when co-administered with atorvastatin. The results of this study confirmed previously reported data, demonstrating no meaningful interaction between VK2809 and with atorvastatin. We also conducted the Phase 1 study to evaluate the safety, tolerability and pharmacokinetics of VK2809 dosed in an every other day regimen. These data confirmed previously reported results, demonstrating that VK2809 possesses a predictable and consistent PK profile.

We also conducted a Phase 1 study to evaluate the safety, tolerability pharmacokinetics and pharmacodynamics of VK2809 under various dosing regimens. These data demonstrated that alternative dosing regimens may also produced improvements in measures of plasma lipids. And finally, we completed toxicity studies of 26 and 52 weeks in duration to support chronic dosing in humans. The results of this and prior work formed the basis of the new IND that was filed with the GI division. Following the IND filing in November, we announced the initiation of a Phase 2b study of VK2809 in patients with NASH. We've named this study as the VOYAGE study and we're excited to have it under way.

The VOYAGE study is a randomized, double-blind, placebo-controlled, multicenter trial designed to efficacy, safety and tolerability of VK2809 in patients with biopsy-confirmed NASH and fibrosis. The study will target enrollment of approximately 340 patients across five treatment arms, including 1 milligram daily; 2.5 milligrams daily; 5 milligrams every other day; 10 milligram every other day; and placebo. The target population includes patients with F2 and F3 fibrosis as well as up to 25% with F1 fibrosis. F1 patients must also possess additional risk factors to be eligible for enrollment. The primary endpoint of the study will evaluate the relative change in liver fat content, as assessed by magnetic resonance imaging, proton density fat fraction from baseline to week 12 in subjects treated with VK2809, as compared to placebo. Secondary objectives include evaluation of histologic changes assessed by hepatic biopsy after 52 weeks of dosing. We are currently dosing patients at clinical sites in the U.S. and expect to open additional sites outside the U.S. later this year.

In addition to commencing the VOYAGE study, in the fourth quarter, we submitted an abstract describing additional data from the prior 12 -week Phase 2 study of VK2809 for presentation at the annual meeting of the European Association for the Study of the Liver, or EASL. We were recently informed that this abstract has been selected for an oral presentation on April 17. We look forward to sharing these additional data at that time. Given the positive results from the previous Phase 2 trial and the supplemental data generated in multiple studies during 2019, we continue to believe that VK2809 demonstrates a compelling efficacy and safety profile with the potential to provide benefit to the millions of patients worldwide suffering from NASH. We look forward to sharing additional updates on VK2809 and the voyage study as the trial progresses.

I'll now provide an update on our VK0214 program. VK0214 is being evaluated as a potential treatment for X-linked adrenoleukodystrophy, or X-ALD. X-ALD is a devastating disease for which there is no approved treatment. The disease is caused by a defect in a peroxisomal transporter called ABCD1. This defect can result in an accumulation of very long-chain fatty acids in plasma and tissue and it is these elevated very long-chain fatty acid levels that are believed to contribute to the severe cerebral and motor neuron toxicities that are characteristic of the disease. The thyroid beta receptor is an important potential target for therapeutic intervention in X-ALD because it is believed to play a role in very long-chain fatty acid metabolism.

Like VK2809, VK0214 is an orally available small molecule bioreceptor agonist that possesses selectivity for the beta receptor subtype. To-date, results from in vitro and in vivo studies have demonstrated that administration of VK0214 results in a significant increase in the expression of the compensatory transporter, which is believed to result in a reduction of very long-chain fatty acids in both plasma and tissue. Given these promising results we believe VK0214 may provide benefit to patients with X-ALD and we are eager to move this program into the clinic. We are currently conducting IND enabling work for VK0214 and we expect to file the IND in the first half of this year, followed by initiation of a proof-of-concept study in humans.

With our two lead programs advancing in clinical development, we continue to carefully manage our balance sheet. As Greg reported earlier, we ended 2019 with approximately $275 million in cash and equivalents. We believe these resources provide ample runway to reach multiple clinical inflection points with both VK2809 and VK0214.

In closing, I'd like to reiterate that the important work completed in 2019 was critical to pave the way for realizing the potential of both VK2809 and VK0214. For VK2809, the compelling data generated in both 2018 and 2019 validate our belief that it is one of the most promising candidates in development today for the treatment of NASH. And we are excited to be advancing it through the clinic. We look forward to continue the enrollment in our Phase 2b VOYAGE study. With respect to VK0214, we continue working toward completion of the IND enabling studies that will allow us to initiate a proof-of-concept study in humans. It is our goal to file this IND during the first half of the year. Finally, our balance sheet remains strong, providing the resources to execute through multiple value-creating events.

This concludes our prepared comments for today. Thanks again for joining us. And I'd now like to open the call for questions. Operator.

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Joon Lee of SunTrust. Please go ahead.

Joon Lee -- SunTrust -- Analyst

Hi. Thanks for taking my questions, and congrats on getting the podium presentation for 2809 at EASL. In addition to the additional data from the Phase 2 novel study, will you also be sharing additional pre-clinical tox data as well? And can you tell us where you are in submitting the full tox data to cover the entire 12 months? Is that imminent or has it already been submitted? And I have one more follow-up. Thank you.

Brian Lian -- President and Chief Executive Officer

Hey, Joon. Yes, thanks for the questions. No, as part of the presentation at EASL, we won't be disclosing any of the the toxicity studies that were completed in animals. The submission of the full 12 month dataset is imminent and yes, it's very near term, I'd say, all the reports are completed there are just -- undergoing final QC proofing.

Joon Lee -- SunTrust -- Analyst

Great. And can you tell us a little bit about the design of the X-ALD proof-of-concept study? What that would look like and what you would hope to learn from that initial study? Thank you.

Brian Lian -- President and Chief Executive Officer

Yes, no, great question. So the -- it's sort of a two-tiered clinical study, the first portion will target healthy volunteers in this is called the stacked design where you begin single ascending dose study in healthy volunteers and during that you begin dosing multiple saying dose study also in healthy volunteers in during that, then you begin enrolling patients with X-ALD. We would target a 28-day treatment window and look at very long-chain fatty acid changes after 28 days. And with those data then, if they are encouraging, we would then speak with the FDA about what the next steps might look like. But that would be the proof-of-concept.

Joon Lee -- SunTrust -- Analyst

And when do we hope to get the top line? If at all, on the initial study?

Brian Lian -- President and Chief Executive Officer

Yes, I would say, the most likely window for that is probably going to be first half of '21. I mean it's not impossible that it would be available later this year, but I would say first half of '21 is a safe bet.

Joon Lee -- SunTrust -- Analyst

Great. Thank you very much.

Brian Lian -- President and Chief Executive Officer

Okay, thanks.

Operator

Our next question will come from Steve Seedhouse of Raymond James. Please go ahead.

Steve Seedhouse -- Raymond James -- Analyst

Hi, good afternoon. My question is on one theme that's come up in the NASH deals in a couple recent Phase 2 studies and also at some of the recent meetings. And that is, I was hoping you could clarify generally what the biopsy reading protocol is for the Phase 2b study for example, how are biopsy is blinded or scrambled to the reading pathologist? How many pathologist are there? And are you going to be rereading baseline biopsies at the end of the study? Or does the screening biopsy kind of serve as the time zero comparator? Thanks.

Brian Lian -- President and Chief Executive Officer

Yes. Thanks, Steve. It's a great and complex question. I don't have the answer for all of the parts of it. We are using one pathologist, that person will be reviewing the baseline and end of treatment biopsy. We will not be reshuffling and reassessing the baseline at a later date. And I think that's about all I know on the logistics of the biopsy read procedure, but we're not going to send it out multiple people or reshuffle and do that sort of thing.

Steve Seedhouse -- Raymond James -- Analyst

Okay. Those details are already helpful actually, given the variant service between studies. So thank you for that. The other thing I just wanted to ask in terms of the enrollment for the Phase 2b study. Are you willing to say, kind of what inning you're in there or roughly how long you think it will take you to fully enroll the study?

Brian Lian -- President and Chief Executive Officer

Yes, I think it's early to say, it's the early innings via one way to answer that. But that's -- we're still in the in the ramp-up process opening sites and we are -- I think moving along according to schedule there. We will be adding 12 to 15 sites outside the U.S. and those are expected to come online in the second quarter. And it's a little early to give guidance on completion of enrollment. I certainly expect it to be in 2020 but tightening from there, I don't -- it's hard to do right now.

Steve Seedhouse -- Raymond James -- Analyst

Okay. I appreciate it. Thanks for taking the questions. I look forward to see any additional data at EASL.

Brian Lian -- President and Chief Executive Officer

Thanks, Steve.

Operator

Our next question will come from Derek Archila of Stifel. Please go ahead.

Bill Grau -- Stifel -- Analyst

Hi. Bill, on for Derek. Congrats on the progress in 2019. So first from us, can you just speak to, sort of what other biomarkers you're evaluating in the study? And then what -- which of those biomarkers you'll read out at the same time as the MRI-PDFF?

Brian Lian -- President and Chief Executive Officer

Yes. So we're looking at the health panel, we're looking at Proceed 3, we're looking at TIMP 1 and several others, I don't have that full list in front of me. And I'm not sure yet, it will read out all of that with the 12-week data, sometimes those take a little longer to -- different labs are doing those evaluations that might take a little bit longer to receive, but we'll play it by a year there. But there is a whole panel of other biomarkers, we're looking at.

Bill Grau -- Stifel -- Analyst

Great. And then can you brief -- just really briefly describe the differences between 0214 and 2809?

Brian Lian -- President and Chief Executive Officer

Yes. Yes, different structures. So, 0214 has a slightly different substitution pattern on one of the aromatic rings and as a result, it has a slightly better beta selectivity and the PD profile was just a little bit different. We always look at those guys in parallel in all of our animal studies and on some metrics, it's superior on other metrics 2809 is superior. So I think they're both tremendously effective in the in vivo models for NASH. But when you look at the X-ALD profile, VK0214 seems to be effective in X-ALD and VK2809 is not very effective there. So that was a key difference in the actual in vivo data.

Bill Grau -- Stifel -- Analyst

Does that have to do with the liver sensitivity of 2809?

Brian Lian -- President and Chief Executive Officer

Maybe. I don't know, it was a surprise to us to see that the delta there since they are similar in virtually every other assay. But it could, it could have that, I mean that could play a role there.

Bill Grau -- Stifel -- Analyst

Great. Thanks a lot.

Brian Lian -- President and Chief Executive Officer

Thanks for the questions.

Operator

Our next question will come from Scott Henry of Roth Capital. Please go ahead.

Scott Henry -- Roth Capital -- Analyst

Thank you, and good afternoon. Just a couple of questions. First, on the modeling for 2020. How should we think about R&D spend throughout the year? Should we ramp it steadily? And then as far as magnitude, perhaps relative to 2019, are we thinking double of 2019 spending? Just trying to get a sense on R&D for the year.

Brian Lian -- President and Chief Executive Officer

Yes, it's a good question. Thanks, Scott. It's going to be certainly higher than in 2019. And I would say overall, the spend will be about 50% higher, skewed a little bit. Well, it's going to be a gradual ramp. So 4Q is going to be higher than 1Q and 1Q is going to be higher than 4Q ''19. But when you think about overall R&D and overall opex, it's about 50%. Right now, we think it's going to be about 50% higher. Greg, do you have anything?

Greg Zante -- Senior Vice President of Finance.

Yes. No, that's right on target, I think yes.

Scott Henry -- Roth Capital -- Analyst

Okay, great. Thank you for that color. And just one question on the trial. I realize it's not new, but we haven't had a chance to talk about it. When you look at the five doses, I was a little surprised not to see a 5 milligram daily since it was relatively robust dose in the earlier trial. Any thoughts on deciding which ones to go with? And why always 5 milligrams every other day versus daily?

Brian Lian -- President and Chief Executive Officer

Yes. We definitely -- it's a great question. So we definitely wanted to have some overlap with the Phase 2a study for comparative purposes. We thought that going with the higher sort of a pulsatile dose might be advantageous. I mean, I think you could argue, 5 mg [Phonetic] study would be advantageous based on the data. But we chose to go 10 mg just to have that -- be the overlap dose and then step down from there. We went to 5 mg every other day because we know that, when we look the last three doses in the Phase 2a, they all pretty much stacked on top of each other. As far as efficacy. So we were -- we felt right on the far right hand side of the dose response curve. So we think that coming down as we are. We should still see efficacy and we have that overlap with the very effective 10 mg every other day from the Phase 2a study.

Scott Henry -- Roth Capital -- Analyst

Okay, great. Thank you for the additional color. And thank you for taking the question.

Brian Lian -- President and Chief Executive Officer

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Viking Therapeutics Inc (VKTX) Q4 2019 Earnings Call Transcript - Motley Fool

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