Viking Therapeutics Inc (VKTX) 2018 Q2 法說會逐字稿

Good day, and welcome to the Viking Therapeutics Second Quarter 2018 Earnings Conference Call.

(Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Stephanie Diaz, Manager of Investor Relations.

Please go ahead.

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, Vice President of Finance and Administration.

Before we begin, I'd like to caution that comments made during this conference call today, August 9, 2018, 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 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 will now turn the call over to Brian Lian for his initial comments.

Brian?

Thanks, Stephanie, and thanks to everyone dialing in and listening on the webcast.

Today I'll be providing an update on recent progress and developments related to our pipeline programs and operations.

Since our last quarterly update in May, we've made excellent progress with several of our pipeline programs.

In early June, we announced completion of enrollment in a Phase II clinical trial evaluating our small molecule thyroid receptor beta agonist, VK2809 for liver disease.

We are looking forward to announcing the results of this study in the fall.

With respect to our small molecule selective androgen receptor modulator VK5211 for hip fracture, we submitted a meeting request and briefing package to the regulatory authorities that will allow us to learn more about the potential regulatory requirements for further development of this important molecule in the hip fracture setting.

In addition, we recently announced that results from our Phase II study of VK5211 in patients recovering from hip fracture have been selected for presentation as part of the oral plenary session of the American Society for Bone and Mineral Research 2018 Annual Meeting.

We are excited to have an opportunity to present the data at this prestigious forum.

Moving to our earlier-stage programs, We have also made good progress in our efforts targeting glycogen storage disease and X-linked adrenoleukodystrophy.

I'd like to begin today's call with a review of our second quarter financial results, after which I will provide an update on our most recent corporate developments.

I'll now turn the call over to Mike Morneau, Viking's Vice President of Finance and Administration, to discuss our financial results.

Mike?

Thanks, Brian.

In conjunction with my comments, I'd like to recommend that participants refer to Viking's 10-Q filing with the Securities and Exchange Commission, which we expect to file later today, for additional details.

I will now go over the financial results for the second quarter of 2018.

Our research and development expenses for the 3 months ended June 30, 2018 were $5.2 million compared to $3.7 million for the same period in 2017.

The increase was primarily due to increases in expenses related to certain preclinical study efforts, use of third-party consultants, and stock-based compensation expense, partially offset by decreased manufacturing activities for certain of our drug candidates.

Our second quarter general and administrative expenses were $1.7 million compared to $1.3 million for the same period in 2017.

The increase was primarily due to increases in expenses related to stock-based compensation, salaries and benefits, and franchise taxes.

For the 3 months ended June 30, 2018, Viking reported a net loss of $6.7 million, or $0.13 per share, compared to a net loss of $5.2 million, or $0.21 per share, in the corresponding period in 2017.

The increase in net loss for the 3 months ended June 30, 2018 was primarily due to the increase in research and development expenses noted previously.

Our research and development expenses for the 6 months ended June 30, 2018 were $8.3 million compared to $7.2 million for the same period in 2017.

The increase is primarily due to increases in expenses related to certain preclinical study efforts, use of third-party consultants, and stock-based compensation, partially offset by a decrease in manufacturing of certain drug candidates and clinical trial activities related to our VK5211 program.

Our general and administrative expenses for the 6 months ended June 30, 2018 were $3.5 million compared to $2.7 million for the same period in 2017.

The increase was primarily due to increased expenses related to stock-based compensation, salaries and benefits, legal, and franchise taxes.

For the 6 months ended June 30, 2018, Viking reported a net loss of $10.2 million, or $0.21 per share, compared to a net loss of $10.4 million, or $0.45 per share, in the corresponding period in 2017.

The net loss for the 6 months ended June 30, 2018 was consistent with the net loss in the corresponding period in 2017, primarily due to an increase in research and development expenses noted previously, offset by an increase in other income related to the decrease in the fair value of the debt conversion feature liability.

Our balance sheet at June 20, 2018 showed cash, cash equivalents and investments totaling $142.2 million.

As of July 31, 2018, Viking had 60,657,794 shares of common stock outstanding.

This concludes my financial review.

And I will now turn the call back over to Brian.

Thanks, Mike.

During the second quarter, we at Viking continued to advance each of our 4 programs toward important inflection points.

With respect to VK5211, our novel selective androgen receptor modulator for musculoskeletal disorders, as I mentioned in my introductory comments, we recently announced that the results from our Phase II study in patients recovering from hip fracture have been selected for presentation as part of the oral plenary session of the American Society for Bone and Mineral Research, or ASBMR, 2018 Annual Meeting.

In addition, we have been notified that our abstract received the 2018 Most Outstanding Clinical Abstract award by the ASBMR conference organizers.

It is a real pleasure and an honor to be selected for this high-profile presentation and receive this award, and we believe it speaks to the quality of the data as well as the potential importance of VK5211 in this indication.

As a reminder, VK5211 is designed to selectively stimulate muscle and bone formation with reduced activity in peripheral tissues such as skin and prostate.

Following surgery to repair hip fracture, many patients experience a loss of bone and muscle at accelerated rates, placing them at increased risk of further morbidity, refracture, and prolonged disability.

For these reasons, hip fracture is a serious medical condition and as our population continues to age, we believe the incidence of hip and other fracture injuries will continue to increase.

It is our belief that VK5211 may represent an important treatment option for these patients by stimulating the formation of bone and muscle, thereby improving musculoskeletal health and facilitating recovery from the injury.

Top-line data from our Phase II study were announced last November.

The results showed that the trial successfully achieved its primary endpoint, demonstrating statistically-significant, dose-dependent increases in lean body mass less head, following treatment with VK5211 as compared with placebo.

The study also achieved important secondary endpoints, demonstrating statistically-significant increases in appendicular lean mass, which is muscle in the limbs, and total lean body mass for all doses of VK5211 compared with placebo.

In addition, though not powered for significance, endpoints assessing physical function showed numerical trends favoring treatment arms.

Importantly, VK5211 also demonstrated encouraging safety and tolerability in this study, with no drug-related serious adverse events reported.

During the first half of this year, our team has been preparing for a meeting with the FDA to review options for the future development of the VK5211 program in hip fracture.

In the second quarter, we submitted a request to the FDA for a Type C meeting, to discuss the potential regulatory path forward in this setting.

We are pleased to report that the FDA has accepted our request, and we expect the meeting to take place in the third quarter.

As we've discussed previously, in our view any subsequent studies of VK5211 in orthopedic indications would be best executed by a partner, particularly one with an existing bone or musculoskeletal franchise.

We are currently exploring partnering opportunities that will allow us to optimize the value of VK5211 and move the program forward in the most efficient manner possible.

We will provide updates on these activities as warranted.

I will now provide an update on progress with our small molecule thyroid beta receptor agonist, VK2809, which is currently being evaluated in a Phase II trial in patients with nonalcoholic fatty liver disease and hypercholesterolemia.

In the second quarter, we announced that enrollment had been completed in our Phase II trial and that we expect the data to be available in the second half of the year.

The study is continuing, and we remain on track to report results later this year.

In addition, the trial's data safety monitoring board continues to receive regular updates from the study, and has continued to allow the trial to proceed as planned.

As a reminder, VK2809 is a novel, orally-available, small molecule thyroid receptor agonist that possesses selectivity for liver tissue as well as the beta receptor subtype.

Preclinical studies have demonstrated that treatment with VK2809 leads to rapid histologic improvement in animal models of liver disease, including a model of diet-induced and biopsy-confirmed NASH in which VK2809-treated animals demonstrated statistically-significant improvements in steatosis, fibrosis, and the NAFLD activity score.

In a prior Phase Ib study in subjects with mild hypercholesterolemia, VK2809 was shown to significantly reduce not only LDL cholesterol and triglycerides, but also lipoprotein A, and apolipoprotein B, 2 proteins associated with increased risks of cardiovascular disease.

These data suggest potential long-term cardiovascular benefits that may extend beyond those provided by LDL reduction alone.

For these reasons, VK2809's profile to date suggests promise in diseases that result from lipid dysregulation as well as those related to liver fat, such as NASH.

The ongoing Phase II trial is a randomized, double-blind, placebo-controlled, parallel group study designed to assess the efficacy, safety and tolerability of VK2809 in patients with elevated LDL cholesterol and non-alcoholic fatty liver disease.

Patients are being randomized to receive once-daily oral doses of VK2809 or placebo for 12 weeks, followed by a 4-week off-drug phase.

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, plasma lipids, and inflammatory markers.

We look forward to sharing the results from this study later this year.

In addition to these 2 clinical programs, Viking is advancing 2 orphan disease programs.

The first is evaluating VK2809 in glycogen storage disease type 1a, or GSD 1a.

The second is evaluating VK0214 in the setting of X-linked adrenoleukodystrophy, or X-ALD.

Both GSD 1a and X-ALD are devastating, rare diseases with no available treatments.

We have made significant progress with each of these programs over the past year.

In our glycogen storage disease program, we are evaluating VK2809 as a potential treatment to reduce liver fat and improve a patient's overall metabolic profile.

GSD 1a is an orphan genetic disease caused by a deficiency of glucose 6-phosphatase, an enzyme responsible for the liver's production of glucose from glycogen and gluconeogenesis.

The disease results in increased triglyceride production and elevated hepatic triglyceride content.

This can potentially lead to hepatic steatosis, the development of hepatic adenomas, and hepatocellular carcinoma.

We have previously shown that VK2809 reduces liver fat in an animal model of GSD 1, known as the glucose 6 phosphatase knockout.

These data were presented last year at the International Congress of Inborn Errors of Metabolism.

More recently, additional work has been completed showing improvements in liver histology and positive effects on gene expression relevant to the disease.

These results have been submitted for presentation at the upcoming annual meeting of the American Thyroid Association, scheduled for October 3 through 7 in Washington, D.C.

Earlier this year, we filed an IND to initiate a proof-of-concept study in patients with GSD 1a, and we expect to begin dosing in this trial later this quarter.

Our second orphan disease program is evaluating our small molecule thyroid receptor agonist VK0214 as a treatment for X-linked adrenoleukodystrophy, or X-ALD.

X-ALD is a devastating disease caused by a defect in a peroxisomal transporter called ABCD1.

These patients are often characterized by the accumulation of very-long-chain fatty acids in plasma and tissue.

Sustained elevations in very-long-chain fatty acids are believed to contribute to the severe cerebral and motor neuron toxicities commonly observed in the disease.

Activation of the thyroid beta receptor is believed to stimulate the metabolism of very-long-chain fatty acids, providing a potential therapeutic benefit.

VK0214 is an orally-available small molecule thyroid receptor agonist that possesses selectivity for the beta receptor subtype and may therefore represent a potential pharmacologic approach to the disease.

In 2017, Viking and our collaborators at the Kennedy Krieger Institute completed a 25-week study evaluating VK0214 in an animal model of X-ALD.

The results of this study showed promising effects on plasma and tissue markers of disease, notably an improvement in very-long-chain fatty acid levels.

We are currently conducting IND-enabling work for this program, and plan to file an IND to conduct a proof-of-concept study in X-ALD in 2019.

Moving on to recent corporate milestones.

During the second quarter, we completed the successful offering of common stock which resulted in gross proceeds of $77.6 million.

This financing provides us with the funds needed to further advance our pipeline assets and provides a financial runway that we expect will extend into 2020.

We are very grateful to the investors who participated in this offering, and we absolutely appreciate the continued support of all of our investors, institutional and retail, as we move toward important value inflection points.

In conclusion, I would like to reiterate that Viking is making great progress on multiple fronts at a rapid pace, while remaining focused and thorough.

With respect to VK5211 for hip fracture, we believe the ASBMR's selection of our Phase II results for presentation at the upcoming oral plenary session as well as the recent receipt of the Most Outstanding Clinical Abstract award, speaks to the quality and importance of this program and these data.

With respect to VK2809 for liver disease and hypercholesterolemia, we're excited to have enrolled our Phase II trial and look forward to announcing the results later this fall.

And finally, both of our rare disease programs continue to advance.

With respect to our GSD 1a program, we expect to initiate dosing in a proof-of-concept study later this quarter, and with respect to our X-ALD program, we are conducting the pre-IND work that we expect will allow us to initiate a proof-of-concept trial in 2019.

This concludes our prepared statements for today.

Thanks again for your support and for joining us, and I'd now like to open the call for questions.

Operator?

(Operator Instructions) Our first question will come from Steven Seedhouse of Raymond James.

A few on the upcoming NAFLD data, I just wanted to clarify what doses we'll see data on?

And also, some other abstract titles are already being announced for AASLD, so just curious if you wanted to share, if you had submitted an abstract or if one had been accepted, or if you'll press release those data?

The doses that are being evaluated and that we'll have data from will be the placebo 10 mg every other day, and 10 mg daily.

And the trial is still ongoing.

We have not submitted an abstract to the AASLD conference.

And just stepping back, just maybe 1 or 2 more on the NAFLD data.

I was curious if you had any specific inclusion criteria for ALT or AST being stable prior to study entry?

And the reason I ask is just, the listed inclusion criteria for Madrigal's Phase II NASH trial, their TR beta agonist, suggests documented ALT and AST levels for a couple weeks, or up to 6 months prior to study entry, need to be consistent with the screening levels.

So I was wondering if you could just speak a bit to if there are any criteria in your NAFLD study for baseline ALT or AST, and if not I guess, in general, what variation you see in this patient population prior to study entry?

Yes, it's a good question.

On the criteria for ALT, I don't believe there was a very strict criteria in there.

I don't have the protocol in front of me, but I think normally, you want some degree of stability between the screening visit and the randomization visit, but now that I'm thinking, I don't think there was an exclusion based on some dramatic change between those 2 values.

I mean, obviously you couldn't come in with an ALT greater than 8 times, or something like that, but I don't recall any specific criterion tied to stability of ALT.

I'll have to come back to you on that, because I don't have the protocol in front of me.

And just another detail, on the trial design I guess, you mention inflammatory markers.

I know you've touched on this in the past, the biomarkers you're looking at, and I think on the last call you listed off a few.

One that you didn't include was reverse T3, and again, I just ask this because in the easel presentation for the other TR beta agonist being developed in NASH, this is the inflammatory marker they looked at and it was decreased.

And I just found that interesting because this reverse T3 is obviously in the thyroid hormone metabolic pathway.

You have a thyroid hormone beta agonist as well.

I'm just curious if you've measured that, and if you do, if you have any thoughts on that biomarker?

Is it a useful inflammatory marker in NAFLD, or NASH, versus say, CRP?

So we're doing a full thyroid panel.

I can't tell you for certain if reverse T3 is in there.

I would sort of guess that it would be, but I don't know the answer to that.

But it's a great question, yes.

But we had -- thyroid panel is definitely being assessed.

Okay, well that's helpful.

And just thinking ahead, last question, to next steps, if the data from that study are positive, can you just update us on where you are with the long-term animal tox studies for VK2809 and the timing, and sort of what you need to have completed prior to moving ahead to let's say, a Phase IIb NASH trial?

Yes, yes.

So the chronic tox studies were initiated in the second quarter, so the rodent data should be available, the rodent study should be completed, toward the end of the year.

The primate study is ongoing, and the 6-month read there would be late this year, early next year.

So I think we'd be in the position to move into a longer study sometime in 2019, mid-2019 I would say.

But I don't want to give guidance on that, that's when the data should be available to allow us to dose up to that duration in 2019.

Our next question will come from Joe Pantginis of H.C. Wainwright.

Brian, a couple questions on 5211, please.

First, obviously without giving away any of the data that are upcoming in September, what are we looking to glean from the 24-week data, and what is the level of importance example for potential maintenance of some clinical benefit despite dosing having stopped a while ago?

I think the main thing you'd want to look at in the 24-week data is the muscle still at a level above the placebo.

As far as function, I think it's such a small N, that it's -- just like we saw in the data that have been reported, I would look for a signal.

But it's just difficult to achieve statistical significance in a study that was nowhere near powered to show statistical significance, and that was -- when we designed the study the success criteria really were a statistically-significant benefit on muscle and some numeric advantage to treated subjects, and that's what we saw at 12 weeks.

But once you get a little farther out, if you stop therapy, I think you'd want to still see that.

But it might get a little bit noisier.

And then since you mention these 2 facets in your prepared comments, what do you expect the interaction with the FDA to look like, and I guess importantly linking to that, how will it potentially impact your business development goals?

Yes, so we would like to know what the acceptable endpoints might be for registration trials.

And it's always hard to get specific guidance from the FDA, or detailed guidance, but that's what we're hoping to glean is some comment, some sort of body language comments, on what our registration path would look like in hip fracture.

I would expect it to be function-based, but we won't know until we speak with them.

And for partners, we've had multiple parties indicate an interest in understanding what the FDA's position is on registration trials, and some of that's due to their interest in U.S. markets, but some of it's due to potentially other markets where the regulatory authorities might key off of FDA guidance.

So I think that it should be helpful for some of the parties that have been looking at the program.

Our next question will come from Andy Hsieh from William Blair.

Congratulations on the enrollment completion.

I know it's a pretty tough trial to recruit patients.

I just have a question on 5211, for the natural history study I believe the 1-year mortality for patients suffering from hip fracture is about 15%, 20%, or 10%-15%.

Just wondering, that percentage in that Phase II trial and potentially lower on the 5211 arm?

Yes, so the mortality rates in the literature are all over the place.

They're generally, I've seen 18% to 30%.

So it's a very wide range of mortality rates, and it's not like they get lower with more current studies.

In this study, the study went out to 24 weeks and there were no differences in mortality at 24 weeks.

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

Just a couple questions.

First, on the GSD 1a program, the Phase Ib trial, it sounds like it should be underway shortly.

When should we expect to see data readouts for that program?

From the GSD 1 program?

Correct.

Yes, so the initial readout we would hope to have 28-day data on triglycerides.

And the timing there, we had looked to start this study in second quarter, and it's pushed back a little bit due to no major issues, just pushed back on the first dosing a little bit.

We would hope to have data, I would guess sometime in the first quarter on that 28-day endpoint.

And just kind of staying on that theme of data readout, obviously the 2809 data is going to be watched closely.

I think you said later in the fall.

Should we be thinking September-October, or should we be thinking Q4 for that readout?

Yes, so I think the sell side comments tend to be in the October-November time frame, and I don't think that's unreasonable.

If we can get it earlier, we'll certainly report it as early as we can.

But I think that's a safe window for now.

Final question, I know in the past you've always thought about partnering either program, 2809 or 5211, before advanced clinical trials.

Given that you have more capital resources, is that still your preference?

Or are you more open, I guess, to seeking the best opportunity for yourself?

I think we would have to be open to the best opportunities.

We're certainly open to talking to partners on any program.

We do have a much firmer financial position that allows us to go further, and I think increase the value with each of the programs.

But we would certainly not preclude conversations with interested parties at any time.

We just want to do what's best for shareholders, and get the greatest value for the programs.

And if that means keeping them for ourselves, I think we should do that.

Our next question will come from Yale Jen of Laidlaw & Company.

First of all, maybe a little bit of a housekeeping one, that for this quarter -- or last quarter I should say, the R&D expenditure is about $5 million, which is quite a bit higher than the prior quarter.

So should we consider this number at least for this year, could be annualized, for each quarter, or there is a reduction of R&D expenditure for the second half of this year?

I think it's probably going to stay pretty flat from here.

We did spend a little more in the second quarter, when you start some of those chronic tox studies they come with up-front payments.

But there shouldn't be any dramatic upticks in R&D expense through the second half of the year.

Mike is here shaking his head, so.

Shaking his head in agreement.

Yes.

Okay.

That's a nice way to express it.

Maybe a little bit of follow-up on the -- actually, based on the resources right now you have, in terms of 5211 I know it has been all along to say this could be a partnered -- should be a partnered program, that would best maximize its value.

But giving -- once you have feedback, for instance, from the FDA, and if you feel -- should you thinking, possibly thinking about maybe a smaller-scale, let's say, call it Phase IIb study, maybe drill in a little bit on these possible endpoints that you think if you may consider some more approvable things?

And ultimately maybe hand it out to somebody later, maybe with a greater value, economic value?

Or you think this is something that you'd really want to hand it out early, as early as possible to a partner?

I think at this point, our preference in the orthopedic setting is to partner this program out.

Our expectation is that -- this is just without talking to the FDA yet, our expectation is that a functional-based Phase III trial is probably going to be more expensive and larger, and more complicated than we're willing to pursue at this time.

But we'll see what the FDA has to say.

But at this point, our preference is to seek a partner for the orthopedic settings.

Our next question will come from Caroline Palomeque of Maxim Group.

Speaking of VK5211, so around the time that you'll be presenting the data at the end of September, another company called GTX will be presenting SARM data in a different indication, stress urinary incontinence.

I'm just wondering if -- and that's a large indication.

So I was wondering if you have any existing data in that indication, and if so, could that alter your partnering discussions?

There will be some interesting data from another SARM program this fall in stress urinary incontinence.

I think it's a data set that we're certainly going to take a look at.

That's a significant market.

We have a SARM that we think has shown terrific efficacy.

When you look at the muscle that's involved in stress urinary incontinence, VK5211 has shown very robust efficacy in an extremely low dose.

So we would have every reason to believe that there's an encouraging early signal there.

But I think it's too early to provide any sort of definitive comment, there.

We'll have to see what the data look like in that indication, and then decide what to do from there.

But it's a very interesting indication.

Ladies and gentlemen, this will conclude our question-and-answer session.

At this time, I'd like to turn the conference back over to Stephanie Diaz for any closing remarks.

Thank you, Alison.

Thank you all again for your participation and continued support of Viking Therapeutics.

We look forward to updating you again in the coming months.

Have a good afternoon.

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