Viking Therapeutics, Inc. (VKTX) Q1 2017 Earnings Report, Transcript and Summary

Welcome to the Viking Therapeutics 2017 First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session [Operator Instructions] As a remainder, this conference call is being recorded, today, May 10, 2017. I would now like to turn the conference call over to Viking's Manager of Investor Relations, Stephanie Diaz. Please go ahead, Stephanie.

Hello, and thank you, all for participating, in today's call. Joining me today is Brian Lian, Viking's President and CEO and Michael Morneau, our Chief Financial Officer. Before we begin, I'd like to caution that comments made during this conference call, today, May 10, 2017, will contain forward-looking statements within the meaning of the Securities Act of 1933 concerning the current beliefs of the company, which involve 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 statements 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?

Thanks, Stephanie. And thanks to everyone participating on the call and on the webcast. Today I'll be providing an update on recent progress and developments related to our pipeline programs and operations. We continue to move forward with multiple programs here at Viking and anticipate an exciting stream of news flow in 2017. I'd like to begin today's call with a review of our first quarter 2017 financial results. After which, I will provide an update on our latest corporate developments. I'll now turn the call over to Mike Morneau, Viking's Chief Financial Officer. Mike?

Thanks, Brian. In conjunction with my comments, I'd like to recommend that participants refer to Viking's Form 10-Q filing with the Securities and Exchange Commission, which we expect to file later today for additional details. I'll now go over our financial results for the first quarter of 2017. Our research and development expenses for the three months ended March 31, 2017 were $3.5 million compared to $1.9 million for the same period in 2016. This increase was primarily due to increased activities related to our clinical trials for our VK5211 and VK2809 programs, third-party manufacturing for our clinical phase drug candidates and preclinical efforts for our VK0214 program. Our first quarter, general and administrative expenses were $1.4 million consistent with $1.4 million for the same period in 2016. For the three months ended March 31, 2017, Viking reported a net loss of $5.2 million or $0.23 per share compared to a net loss of $3.6 million or $0.40 per share in the corresponding period in 2016. The increase in net loss for the three months ended March 31, 2017 was primarily due to the increase in research and development expenses that we had previously. Our balance sheet at March 31, 2017 shows cash, cash equivalents and investments totaling $12.3 million as compared to $13.2 million at December 31, 2016. As of April 30, 2017, Viking had 23,925,425 shares of common stock outstanding. This concludes our financial review. And I'll now turn the call back over to Brian.

Thanks Mike. 2017 is an important year for Viking as we work toward completing our ongoing Phase 2 clinical trials for VK5211 in the hip fracture setting and VK2809 in the fatty liver disease and hypercholesterolemia setting. In addition, we are advancing two development stage programs, both of which have the potential to be first-in-class treatments for serious orphan diseases. We made continued progress with each of these four programs during the first quarter while at the same time, efficiently managing the associated cash outlays. I'll start by giving an update on VK5211, our selective androgen receptor modulator in development for patients recovering from hip fracture. VK5211 is a potentially best-in-class orally available non-steroidal small molecule SARM. In early studies, VK5211 demonstrated a stimulatory effect on lean body mass and bone mineral density that we believe may offer significant benefits to patients recovering from hip fracture surgery. More than 300,000 people in the U.S. are hospitalized each year following hip fracture. This patient population faces a serious unmet medical need as they experienced losses of muscle and bone at accelerated rates, placing them at increased risk of further morbidity, refracture and prolong disability. And there are currently no proved therapies to assist these patients in the recovery. Based on this current unmet need and VK5211's preliminary profile, in 2015, we initiated a Phase 2 clinical trial and patients who have recently suffered hip fracture. This trial is a randomized, double-blind, placebo-controlled, parallel group international study designed to evaluate the efficacy, safety and tolerability of VK5211 and up to 120 patients. Patients in the study are randomized to receive VK5211 doses of 0.5 milligrams, 1 milligram, 2 milligrams or placebo once-daily for 12 weeks. The study's primary endpoint will evaluate the effects of VK5211 on lean body mass after 12 weeks of treatment. Secondary and exploratory objectives include assessments of functional performance, quality-of-life and activities of daily living, as well as safety, tolerability and pharmacokinetics. As of today, we are nearing complete enrollment and currently expect to report top-line data from this study in late summer. I'll now provide an update on Viking's second Phase 2 clinical program which is evaluating VK2809 for the treatment of fatty liver disease and hypercholesterolemia. VK2809 is a novel orally available small molecule thyroid receptor agonist that possesses selectivity for liver tissue, as well as the beta receptor subtype. Prior data have shown that treatment with VK2809 leads to rapid histologic improvements in animal models of hepatic steatosis, as well as significant reductions in LDL-cholesterol, triglycerides and atherogenic proteins in humans. Last November, we presented data at the American Heart Association Scientific Sessions, highlighting the effects of VK2809 on key atherogenic proteins from a Phase 1b study and patients with mild hypercholesterolemia. The results showed that treatment with VK2809 led to significant reductions in lipoprotein A and apolipoprotein B, two proteins associated with increased risks of cardiovascular disease. We believe VK2809's unique liver targeted mechanism of action provides differentiated benefits by simultaneously reducing hepatic steatosis which is an important component of non-alcoholic steatohepatitis or NASH, and improving plasma lipid levels. In addition, recently published data has suggested that stimulation of the thyroid beta receptor can inhibit fibrogenic signaling pathways in liver tissue. Therefore, we believe this pathway holds the potential to address several key elements affecting the development and progression of NASH. In 2016, we initiated a Phase 2 trial to evaluate VK2809 in patients with non-alcoholic fatty liver disease and primary hypercholesterolemia. This trial is a randomized double-blind placebo controlled parallel group study designed to evaluate the efficacy, safety, and tolerability of VK2809 in patients with non-alcoholic fatty liver disease and elevated LDL-cholesterol. Patients are being randomized to receive once-daily oral doses of VK2809 or placebo for 12 weeks followed by a four-week off-drug period. The trial's primary endpoint will evaluate the effect of VK2809 on LDL cholesterol after 12 weeks compared to placebo. Secondary and exploratory endpoints include assessments of changes in liver fat content, triglycerides, inflammatory markers and liver stiffness. This trial was currently enrolling new patients and we continue to open additional clinical sites. We expect to report initial results in late 2017. In addition to the ongoing Phase 2 trial of VK2809, we also recently completed the study of this compound in an animal model of NASH. We expect to report the results from this study later this year. As we advanced our two clinical programs, we also continue to expand our development pipeline. As reported during the first quarter, we initiated a new program evaluating VK2809 in glycogen storage disease type Ia or GSD 1A. GSD 1A is an orphan genetic disease that results in an excess accumulation of glycogen and lipids in liver, potentially leading to hepatic steatosis, hepatic adenomas, and hepatocellular carcinoma. There is currently pharmacologic treatment available for patients suffering from this disease. Given its novel liver targeted activities, we believe VK2809 may represent a potential approach to reducing triglycerides, steatosis and mitigating certain metabolic complications of GSD 1A. And given our expertise with this molecule and metabolic diseases, we believe we are uniquely positioned to develop VK2809 for GSD 1A. Earlier this year, we reported initial results from an in-vivo proof-of-concept study in GSD 1A that showed that treatment with VK2809 produced rapid and substantial reductions in liver triglyceride content, liver weight, and liver weight as a percentage of body weight, compared with vehicle treated controls. Main liver triglyceride content was reduced by more than 60% in VK2809 treated animals relative to control treated animals, while average liver weight was reduced by more than 30% versus controls. Complete results from this study which is being conducted under a sponsored research agreement between Duke University and Viking are being prepared for presentation at a future scientific meeting. We currently plan to file an investigational new drug application for VK2809 for the treatment of patients with GSD 1A and initiate a human proof-of-concept study in the second half of 2017. In the first quarter, we also continue to advance our second development stage program, VK0214. VK0214 is novel orally available small molecule thyroid receptor agonist that possesses selectivity for the beta receptor subtype. In late 2016, we initiated a preclinical study evaluating VK0214 in an animal model of X-linked adrenoleukodystrophy or X-ALD. X-ALD is at the debilitating orphan disease characterized by the accumulation of very long chain fatty acids. Encouraging initial results from an in-vivo proof-of-concept study of VK0214 in the ABCD 1 knockout model of X-linked adrenoleukodystrophy were presented at the American Thyroid Association meeting in September of last year. This study successfully achieved its primary objective demonstrating the ability of VK0214 to lower plasma very long chain fatty acid levels after six weeks of treatments. We believe this observed reduction is meaningful because the accumulation of very long chain fatty acids is believe to contribute to the underlying pathology of X-linked adrenoleukodystrophy. Following this initial study, in the fourth quarter of 2016 in collaboration with the Kennedy Krieger Institute, we initiated a longer term study to evaluate the effects of VK0214 in this model. Initial results from this study are expected to be available in the second quarter of 2017. These results will provide important information related to durability, tolerability and effects on key biomarkers relevant to the disease. Lastly in corporate matters, Viking and our partner Ligand pharmaceuticals recently amended our existing loan and security agreement. Under the terms of the amendment, Viking will make a modest payment against principle and interest during the second half of 2017 and Ligand will extend the maturity of the loan to May 2018. Ligand continues to be a valuable partner to Viking and we are very happy to have their confidence and support. To summarize, the first quarter 2017 was a productive quarter for Viking. We are now looking ahead to the important events expected to take place later in the year. Specifically, the initial reacts from our Phase 2 trials or VK5211 and VK2809. Each of these programs targets a significant unmet need that represents an attractive potential commercial opportunity. In the case of hip fracture, the U.S. market opportunity potentially exceeds $1 billion annually and is expected to grow in step with our aging population. There are currently no proved therapies to assist patient's recovering from this serious injury and there are no other SARMs in development in this area. The data from previous trials of VK5211 have been encouraging and we are optimistic regarding the results from our ongoing Phase 2 study. In the case of VK2809 for fatty liver disease and hypercholesterolemia, we believe our approach offers differentiated targeting of key metabolic pathways important to these indications. Each of which represents a potentially blockbuster commercial opportunity. Given VK2809's demonstrated therapeutic benefit combined with it's liver selectivity and minimized risk of systemic exposure, we believe it is a best-in-class molecule for certain liver related indications and we're looking forward to the results of the Phase 2 trial later this year. The same dose for our orphan development programs targeting glycogen storage disease and X-linked adrenoleukodystrophy. Both of these are potentially life threatening diseases for which there are no current pharmacologic treatments. We believe VK2809 and VK0214 respectively offer novel and promising approaches to these indications and we are excited to continue the development of each. We believe positive results from either of these programs could represent significant additional value drivers for the company. This concludes our prepared statements for today. Thanks for joining us, and I would now like to open the call for any questions.

We'll now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jason McCarthy of Maxim Group.

Hi, Brian, thanks for taking the questions. I had two questions for 5211, can you review with us the changes in lean body mass that were observed in the prior studies and what the powering assumptions are for this study if you are power to 80%, to say 1 kilogram difference, is that at a particular dose, the 0.5 milligram, 1 milligram or 2 milligram or is that just overall, are you looking for a 1 kilogram change. And the second question related to 5211, if the trial is nearing completion of enrollments with 12 weeks of therapy that puts the timeline to completing the trial at the end of the summer or late August. How long after that to turnaround the data and announce data?

Yes. Thanks, Jason. Great questions. So with the powering assumptions, we have not disclosed what the powering assumptions are. From the Phase 1 data which were published, the 1 milligram dose in 21 days in healthy young man demonstrated about a 1.2 kilogram improvement in lean body mass. For the ongoing trial, we're dosing for quadruple the length of time and up to double the dose and so we would expect to see a nice benefit on lean body mass. The powering in the individual arms increases with each dose and we haven't disclosed, but I'd say the 1 milligram dose is more than 80% powered to show a more than 1 kilogram change in lean body mass and the 2 milligram arm is at 30 patients per arm more than 90% powered to show a 1.5 kilogram or approximately 1.5 kilogram or greater increase in lean body mass. As far as the timelines to data -- from the time that we conclude the last patients dose and last patients visit for the 12-week treatment period. It should be anywhere from two to four weeks. And this is a very variable number depending on how much clean up has to be done with the data. But, we're trying to clean things as the data come in, so we would minimize that window. But, I would say two to four weeks might be one expectation for when the data could be available, again pretty large [indiscernible] on that, but that's potentially available.

Okay, great. And thank you. Can you just review or give us some guidance on the expected drawn between now and the end of the year? Thank you.

Yes, sure. So we have in the first quarter, we've been pretty consistent about a $1 million a month has been maybe slightly higher than that in the first quarter. That shouldn't change too much over the next few quarters as the 5211 study begins to wind down. I think in 2809 continues to enroll -- I would predict, it'd stay relatively steady with some modest changes, but nothing major over the couple of quarters.

Okay, great. Thanks for taking the questions.

Thanks.

The next question comes from Yale Jen of Laidlaw & Company.

Good afternoon and thanks for taking the questions. Again, just a little bit on the 5211 that given that reporting of this Phase 2 data is approaching. If it is positive what will be the next step, will that be some sort of end of Phase 2 meetings you potentially to have with the agencies or anyone can give a little bit more color in terms of what might be the approvable endpoint in this indication for potential Phase 3 study.

Hi, Yale. Thanks. Yes, good question. So, we -- I think it's similar to both, we expect to collect the data, evaluate all of the results. And then, speak with the FDA about what we should expect for approvable endpoints in hip fracture setting. There is nothing approved here and nobody is going ahead of us in Phase 3 with assisting patients in hip fracture. So, we don't -- there is no guidance obviously, so we don't know, but we've designed the trial, it's like a pretty extensive set of data on objective measures with lean body mass, bone marrow density, functional measures, six minute walk test, handgrip strength and short physical performance battery, and then, a number of quality of life metrics. So, we'll have -- I think a pretty extensive collection of data on patient for the outcomes, objectives and subject driven in functional measures to talk with the FDA about and that would be the plan, and then, following their feedback began to plan the registration program.

Maybe two quick questions to follow-on this. The first one is that in terms of 2809 U.S. continues of adding new sites for recruiting patient improvement. Do you feel there is too much competition at this point because there is a very regressively half field for clinical studies or you feel that at this point you are getting more -- potentially more comfortable that you could get reached a finished line in terms of patient recruitment toward the end of this year.

Yes. So I don't know think whoever really comfortable with conducting difficult trials like this. There is an extraordinary amount of competition out there and I think you've seen in the past few weeks other companies adjust timelines based on the competition for patients. I think we have been creative in identifying clinical sites that I think helps us to get around some of those competitive pressures. But nonetheless, it's a very challenging population to enroll because everybody wants to get the right patient and so that's a more difficult hurdle to get people that fits the certain criteria that you'd like to access and I think that combined with the number of patients active in this space makes everybody little bit stressed out about their enrollment rates.

Okay, great. And the last question here is a little bit of housekeeping one that I noticed that your cash positions since end of December, actually I think pretty well probably just only a million differences and you say that you're probably over $3 million, probably a -- monthly probably each have expense of $3 million in cash or more. So I wonder was that additional capital resources that helped you guys during this period or maybe would that be something you anticipate continue going forward. And again, thanks for taking the questions.

Yes, sure. So I'm not sure I understood the question.

You have about $12 million end of this year -- end of this quarter, I think for end of the year -- last year you have about roughly $13 million. So roughly it's on a cash perspective, you left in a million for the whole three months period, but you mentioned that -- so I assume that you have additional capital resources to help you guys feel -- to feel you guys for continue to be able to use cash -- your resources very prudently.

Yes, sorry about that. Sorry about my confusion. Yes, we have an ATM available that has I would estimate over a $5 million on it. And then we have an equity line of credit available to us similar to an ATM that has around $10 million available to it. And so we have been pretty judicious about using those and sensitive to the share performance, but where we to tap those in combined would probably represent another nine months plus of cash.

Okay, great. Thanks a lot and thanks for taking the questions.

Thanks.

And the next question comes from David Bautz of Zacks Investment Research.

Hi, Brian. How are you doing?

Hi, David.

My first question is about the 2809 with the NASH animal model data coming out, I'm wondering do you have any thoughts on how predictive that data is for how the drug may perform in the patients.

Yes. It's a great question. And one of the reasons that we have been a little bit slow to evaluate, so many of the animal models have been very contrived they're chemically induced store in someway very artificial to generate some of the histologic features of NASH. We think that in the past 9 months to 12 months, there has been a lot of improvement in truly diet induced NASH in some of the animal models. And so that's what we're looking at in some rodents that really truly have NASH with significant collagen accumulation and evaluating what the drug does on the NAFLD activity score as well as components that would be really relevant to fibrosis. And it seems like when we look at some of the data from some of these models, but there is some translation from these types of models to what has been reported in human studies. And so there is -- I mean, they are animals, they are quite a bit different, but when you get more aligned with the way the disease progresses in humans, when you can apply that to the animal models, those data do seem to reflect what's observed later in human study at least that's what we're seeing.

Okay. And for 2809 and GSD 1A, what do envision for the design of that clinical trial and is that kind to be an adult or a pediatric population?

Yes, great question. So, we're targeting the adult population initially and we are currently working through the design of that study. And really the two biggest questions are, should we do a shorter study to target plasma changes in triglycerides or maybe a slightly longer study to look at changes in liver fat content. And I think you can argue either way and we are in the very near-term convening a KOL meeting to talk about trial design. So that we can do right for the call and generate data that are really meaningful and we're still on target to file the IND and initiate that study in the second half.

Okay. Appreciate you taking the questions.

Thanks a lot.

The next question will come from [Manish Bhal] [ph] of MHP Capital.

Thank you for taking my question. Hi, Brian, just a couple of quick questions, I know you will give guidance with regard to enrollment of the SARM trial, but can you give us an idea of how close you are to billing that enrollment and whether you're happy with the distribution of the candidates from a geographic distribution perspective as well as from an age demographics as well as from the sex perspective.

Yes. So, it has been -- as far as the distribution I would say Europe has been overweight and the U.S. has been maybe a little underweight. The demographics of the population, I don't think anything unusual there. We do marks plots at all of the patients who are enrolled. So there is no real -- nothing, nothing really abnormal in either the gender or any of the characteristics of the populations. It's a tough trial to enroll and there have been a lot of kind of ups and downs with enrollment rates and so on the last call we had just come through a period of very nice enrollment and look like things were moving quite well. And then, there is a little pause after that. So, it has slowdown the enrollment and now, hard to predict, it looks like things maybe picking up a little bit. So that has been behind some of the difficulty in predicting the precise timeline. But, I think we are very close now and again to go back to the first question on the call, we are extremely well powered on the endpoints. And so I think that 120 patients or thereabout will be sufficient to generate a signal.

Okay, great. And with regard to your NASH enrollment, is a follow-up from the early question, given the fact that you're not doing a biopsy on the liver, is that helping your enrollment relative to your competition?

Yes. I think it probably is, but we are also requiring patients to have at least 10% liver fat content and that has excluded a lot of people and we are requiring people to have at least 130 mgs per deciliter on LDL that has excluded some people. And so what we're doing here actually, we are in process of doing is submitting a protocol amendment to the FDA to maybe losing some of the enrollment criteria that might allow us to enroll more rapidly. For example, we may drop the LDL criteria a little bit lower than 130 mgs per deciliter because our interest and we think most of the other parties we speak with is really focused on liver side of things. And so the quick we get to an answer there is a better and LDL is really probably a secondary interest to us.

Okay. When do you think, you will hear back from the FDA on that question?

Yes. They normally -- it's very highly variable, we would expect within the next eight weeks or so we would know.

Okay, great. And then, just lastly having your four programs plus your diabetes program, not turning where you are at from a progress perspective, but more from an opportunity perspective, which product is most partnerable out of all your products?

Well, we would like to think that there are all very desirable to potential partners as the Phase 2 data approach for the hip fracture program and for the VK2809 program in fatty liver disease. I think it's fair to say there is some external interest there. And hard to say which program is getting the greater share of that interest, but there are a number of external parties looking at when is the data available, what can you show us today and what are the expectations on next steps. There is probably a little less activity around the earliest program X-linked adrenoleukodystrophy although, we have had some interest there and we will occasionally, I'd say it's pretty regular to get inbound interest on the diabetes program, less often though than the ongoing Phase 2 trials. I thought I answered your question to rank them, but I think there is a lot of -- I say there is consistent interest really in all of them, but the most on the active Phase 2 programs.

Okay, great. Well, thanks so much and good luck. Take care.

Thanks.

The next question comes from Nick Farwell of Arbor Group.

Good afternoon, Brian. I just have a clarification question, did I interpret you correctly, you already filed with the FDA for a protocol amendment for 2809 or you're going to?

We submitted that amendment probably two weeks ago.

Okay.

In the last month.

And you expected to take six to eight weeks to get feedback from the FDA, do they give you like PDUFA date or some specific date by which they will respond?

No, no. There isn't anything like that on the protocol amendments and some amendments are administrative and allow you to just kind of go ahead, but amendments like this where we're changing some of the inclusion and exclusion criteria, at least proposing some of the inclusion, exclusion criteria. Those take a little bit longer, but there isn't -- to my knowledge, and then, we haven't seen anything that would indicate this, a specific define window within which they would respond.

So, if you got a change, how do you bifurcate the clinical, so that when you assess the data after when everything is closed between the -- I'll call it the first portion in which the protocols weren't changed between the second portion will that change or what is that do in terms of your data interpretation?

Yes. It's a great question. I don't think that the amendments being proposed will necessarily have a large impact on the patient characteristics. And so we don't think that there would be the necessity to bifurcate like that patients before or after the -- any sort of an amendment. And again we don't know what amendments will be amendable or acceptable or not. But I think we're being reasonable with all of the request. But, I don't think that there is any requirement to bifurcate because the patient should have roughly similar characteristics on the important endpoints.

Okay. And then, for your assumption to get readout by the fourth quarter 2017, are you assuming you don't get a change in protocol or some modest change or some kind of change in protocol allowing you to achieve the fourth quarter 2017 conclusion for the trial.

Yes. I think we can get to a data readout in the fourth quarter with some pretty modest changes to the protocol and if we didn't get any, I think is unlikely, but we didn't get any -- I think we could still get there fully enrolled anyway this year.

Okay. So that pushes out perhaps the -- once you analyze the data and you're going to announce the results, does that pushes into well, either late 2017, early 2018, is that you are sort of general timeline.

Yes. Well, our target is late 2017.

To announce the clinical trial results.

You're right.

Okay. Second question is, I think another gentleman asked this earlier in the Q&A and that is the cash from the fourth quarter of 13.2 declined 900,000 to 12.3 and yet your burning, you said a little over a million a month, what makes up the delta if you only -- if your cash only goes down 900,000, you spend 3.5, where do you get the difference because that…

Yes. We have -- right, we have the equity lines in place, we got an ATM available. And we have another similar facility available with the large institutional investor.

Yes. So the different is the fact that you utilize the ATM and/or aspire to raise the delta. If you burn 3.5 and you only -- your cash went down 900,000, roughly 2.5 of it came from those two sources of capital.

Yes. That's not an unreasonable assumption, right.

Thank you.

Thanks Nick.

[Operator Instructions] Our next question is a follow-up from Yale Jen of Laidlaw & Company.

Thanks for taking the follow-up question. Actually some -- most of them have Nick asked. Just one more question here, which is for the 2809 for the glycogen storage preclinical data and the model, you presented at the medical meeting -- scientific meeting, would you be more specific on that which meeting if that might be?

Yes. So we're submitting an abstract for the international conference on Inborn errors of metabolism and that is in Rio, I think it is the week of Labor Day or the week after, it's right around Labor Day.

I think that's all. And thanks a lot.

And just to follow-up on that. We are also likely to submit an abstract on the VK0214 data for X-linked adrenoleukodystrophy to a conference in the second half as well as the animal data from the VK2809 study in the model of NASH, we will submit that as well to a conference in the second half of the year. So as we look at the second half of the year, we should have some interesting incremental news around the programs that should support the proof-of-concept and the mechanism of action in these indications.

Okay, great. Thanks. I appreciate it.

Thanks Yale.

And this concludes our question-and-answer session. I would like to turn the conference back over to Stephanie Diaz for any closing remarks.

Thank you, again, for your participation and continued support of Viking Therapeutics. We look forward to updating you again in the coming months. Thank you. Have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.