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Viking Therapeutics(NASDAQ:VKTX)Q32020 Earnings CallOct 28, 2020, 4:30 p.m. ET

Operator

Welcome to the Viking Therapeutics 2020 third-quarter financial results conference call. [Operator instructions] As a reminder, this call is being recorded today, October 28, 2020. I would now like to turn the conference over to Viking's Manager of Investor Relations Stephanie Diaz. Please go ahead, Stephanie.

Stephanie Diaz -- Investor Relations 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, October 28, 2020, 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'll now turn the call over to Brian Lian for his initial comments.

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 third-quarter financial results, as well as an update on recent progress and developments with our pipeline programs and operations. I will begin with an update on our lead thyroid hormone beta receptor agonist program, VK2809. During the third quarter, we continued enrollment of patients in our Phase 2b VOYAGE study in biopsy-confirmed nonalcoholic steatohepatitis and fibrosis.

As of the end of the quarter, the majority of our U.S. clinical sites were open for patient enrollment, though coronavirus-related disruptions continued to impact site operations. We are currently in the process of expanding the number of clinical sites in the U.S. and internationally, and we continue to expect completion of enrollment in the first half of 2021.

With respect to our second thyroid hormone beta receptor agonist, VK0214, during the third quarter, we achieved a significant milestone by advancing this compound into clinical development. In September, we announced the initiation of a Phase 1 trial to evaluate the safety, tolerability and pharmacokinetic profile of VK0214 in healthy subjects. Following completion of this study, we plan to initiate a Phase 1b study in patients with X-link adrenoleukodystrophy. We are excited to be advancing this important program as patients suffering with X-ALD currently have no approved therapeutic options.

I'll provide additional detail on our development activities after we review our third-quarter financial results. With that, I'll turn the call over to Greg Zante, Viking's senior vice president of finance.

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-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 third quarter and first nine months ended September 30, 2020, beginning with the results for the quarter. Our research and development expenses for the three months ended September 30, 2020, were $7.1 million, compared to $5.3 million for the same period in 2019.

The increase was primarily due to increased expenses related to our clinical studies, salaries and benefits and stock-based compensation, partially offset by decreased expenses related to preclinical studies and services provided by third-party consultants. Our general and administrative expenses for the three months ended September 30, 2020, were $2.7 million, compared to $2.2 million for the same period in 2019. The increase was primarily due to increased expenses related to stock-based compensation, salaries and benefits and insurance expenses, partially offset by decreased expenses related to legal services and travel. For the three months ended September 30, 2020, Viking reported a net loss of $9.3 million or $0.13 per share, compared to a net loss of $5.7 million or $0.08 per share in the corresponding period in 2019.

The increase in net loss and net loss per share for the three months ended September 30, 2020, was primarily due to increases in research and development and general and administrative expenses noted previously, as well as decreased interest income due to the decline in interest rates throughout the third quarter of 2020 as compared to prevailing interest rates during the third quarter of 2019. I'll now go over the results for the first nine months of 2020. Our research and development expenses for the nine months ended September 30, 2020, were $22.9 million, compared to $17.1 million for the same period in 2019. The increase was primarily due to increased expenses related to our clinical studies, manufacturing for our drug candidates, salaries and benefits and stock-based compensation, partially offset by decreased expenses related to services provided by third-party consultants and preclinical studies.

Our general and administrative expenses for the nine months ended September 30, 2020, were $8.5 million, compared to $6.7 million for the same period in 2019. The increase was primarily due to increased expenses related to stock-based compensation, salaries and benefits and insurance expenses, partially offset by decreased expenses related to services provided by third-party consultants, professional fees and travel. For the nine months ended September 30, 2020, Viking reported a net loss of $28.5 million or $0.39 per share, compared to a net loss of $18.3 million or $0.25 per share in the corresponding period in 2019. The increase in net loss and net loss per share for the nine months ended September 30, 2020, was primarily due to the increases in research and development and general and administrative expenses noted previously, as well as decreased interest income due to the decline in interest rates throughout the first nine months of 2020 as compared to prevailing interest rates during the first nine months of 2019.

Turning to the balance sheet. At September 30, 2020, Viking held cash, cash equivalents and short-term investments totaling $255.3 million, compared to $275.6 million as of December 31, 2019. 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 our recent development activities, beginning with our lead program, VK2809 for the treatment of NASH and fibrosis. VK2809 is an orally available small molecule agonist of the thyroid homeowner receptor that possesses selectivity for liver tissue, as well as the beta receptor subtype. Clinical data to date have demonstrated that VK2809 has compelling potency, selectivity, safety and tolerability profile that may provide benefit in a range of metabolic disorders, including NASH.

Our enthusiasm for this program stems in part from the results of our previously completed 12-week Phase 2 trial in nonalcoholic fatty liver disease and hypercholesterolemia. These data demonstrated that patients receiving VK2809 experienced statistically significant reductions in liver fat content, as well as improvements in LDL cholesterol, achieving the study's main efficacy objectives. On exploratory measures, evaluating other plasma lipids, such as triglycerides, apolipoprotein B and lipoprotein (a), treatment with VK2809 also resulted in significant reductions. Importantly, these results were achieved without any serious adverse events being reported among patients receiving VK2809 or placebo.

In the third quarter, additional follow-up data from this trial were presented in an oral presentation at the international liver conference, or EASL. The newly reported data demonstrated that patients treated with VK2809 experienced durable, statistically significant reductions in liver fat content that were maintained at week 16, four weeks after completion of the 12-week treatment period in the study. Specifically, VK2809 treated patients maintained a statistically significant 45% median reduction in liver fat content at week 16, compared to a 19% reduction among patients receiving placebo. Additionally, at week 16, 70% of VK2809-treated patients maintained a response, defined as experiencing a greater than or equal to 30% relative reduction of liver fat content from baseline.

Notably, 100% of patients receiving 5 milligrams of VK2809 dose daily maintained a response at week 16. In addition to these durability results, new analyses of week 12 study results demonstrated significant reductions in liver fat content among patients receiving VK2809 as compared to placebo regardless of the presence of common NASH risk factors, including baseline levels of ALT above the upper limit of normal, a body mass index greater than or equal to 30, hypertension or Hispanic ethnicity. The overall data from this study, including these new findings of durability and efficacy in high-risk subgroups, support the underlying promise of VK2809 for the treatment of NASH and fibrosis. In addition, we believe the broad efficacy observed on key lipid measures may indicate cardiometabolic benefits in this setting, an important advantage as compared to mechanisms that may lead to elevations in lipids known to increase cardiovascular risk.

Based on these positive Phase 2 results, last year, we initiated the Phase 2b trial to assess VK2809 in the setting of NASH. This study called VOYAGE is a randomized, double-blind, placebo-controlled multicenter trial designed to assess the efficacy, safety and tolerability of VK2809 in patients with biopsy-confirmed NASH and fibrosis. The study is targeting enrollment of approximately 340 patients across five treatment arms. The target population includes patients with F2 and F3 fibrosis, as well as up to 25% with F1 fibrosis.

Primary end point of the study will evaluate the 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 subjects receiving placebo. Secondary objectives include evaluation of histologic changes assessed by hepatic biopsy after 52 weeks of treatment. During the quarter, we continued to enroll patients in the U.S. despite the headwinds created by the COVID pandemic.

The majority of our U.S. sites are open for enrollment, and we expect to open ex U.S. sites imminently. In addition, we plan to add further sites for enrollment with a plan to ultimately list over 90 sites globally.

We expect to complete enrollment in VOYAGE during the first half of 2021. I will now turn to our second clinical program, VK0214, for the potential treatment of X-linked adrenoleukodystrophy, or X-ALD. VK0214, like VK2809 is an orally available small molecule thyroid hormone receptor agonist that possesses selectivity for the beta receptor subtype. In preclinical studies, VK0214 was shown to potently activate thyroid hormone beta receptor, leading to improvement in several in vitro measures that suggest potential benefit in X-ALD.

Additional data from in vivo studies have demonstrated that administration of VK0214 produces a significant and durable reduction of very long-chain fatty acids in both plasma and tissue. In part as a result of these important findings, VK0214 has been granted orphan drug designation by the FDA for the treatment of X-ALD. In the third quarter, we announced the initiation of a Phase 1 first-in-human study of VK0214. This trial is a randomized, double-blind, placebo-controlled, single ascending and multiple ascending dose study in healthy volunteers.

The primary objectives of the study include evaluation of the safety and tolerability of single and multiple oral doses of VK0214, as well as the identification of doses for further clinical development in the setting of X-ALD. Investigators will also assess the pharmacokinetics of VK0214, following single and multiple oral doses. Upon successful completion of the ascending dose trial, we plan to initiate a Phase 1b study of VK0214 in patients with X-ALD. We currently expect this study to begin in the first half of 2021.

With two ongoing clinical programs, it is important to maintain a strong financial position, and we continue to carefully manage our cash resources. As Greg stated during the financial discussion, we ended the third quarter with approximately $255 million in cash, and we believe this balance provides the runway required to complete both ongoing trials, as well as a number of additional clinical milestones. In conclusion, our primary focus in the third quarter was on the continued execution of our two clinical programs. In our 52-week Phase 2b VOYAGE trial evaluating VK2809 in patients with NASH and fibrosis, the majority of our planned clinical sites are open for enrollment, and we plan to open additional sites in the coming months.

We expect to complete enrollment in the first half of 2021. With respect to VK0214 for X-linked adrenoleukodystrophy, we were very pleased in the third quarter to move this important program into the clinic. We are currently executing a Phase 1 single ascending and multiple ascending dose study and plan to initiate a Phase 1b study in patients with X-ALD in the first half of 2021. To support these trials, as well as a number of other key objectives, we continue to judiciously manage our cash balance, which remains strong at $255 million as of the end of the third quarter.

This concludes our prepared comments for today. Thanks again for joining us, and we'll now open the call for questions. Operator?

Operator

Thank you. [Operator instructions] Our first question comes from Joon Lee from Truist Securities. Please go ahead.

Joon Lee -- Truist Securities -- Analyst

Hi, Brian. Thanks for taking -- thanks for the update and taking my question. I have a question on the additional data you presented at EASL, which I think is notable for a more robust liver fat reduction in patients with higher baseline ALT, where the placebo effects were suppressed in the higher ALT group. I'm going to guess that the elevated baseline ALT is more in line with the demographics that you're enrolling in the Phase 2b VOYAGE.

Was the powering of VOYAGE factoring in this data stratification specifically? Or was it based on all the patients -- that effects you saw in all the patients in the earlier study? And the second question is the durability that you saw, 16 weeks, does that change how you might strategize around your Phase 3 development plans, given this durability in terms of the frequency of dosing.

Brian Lian -- President and Chief Executive Officer

Joon, thanks for the questions. As far as the subgroups that we looked at in the 12-week study, that didn't change our powering assumptions for the 52-week study. We were looking at overall assessments on histologic changes for the powering assumptions. We just thought it was really interesting when you look at pretty much every subset that we could identify that might represent higher risk or typical NASH phenotype that there wasn't any difference in efficacy.

And I think we had another slide in there about baseline liver fat as well. And it just seemed to be pretty consistent across ALT, BMI, baseline liver fat, hypertension, all of those factors, baseline glucose as well. But we didn't use that for powering anything. And as far as your second question, what was the second question? Durability.

Yes. No, we just think that that's pretty interesting. It's useful scientific data for understanding the kinetics of liver fat changes. It doesn't feed into our Phase 3 or future development plans, but it is a really interesting finding.

It indicates that you don't necessarily need sustained dosing. You might be able to pursue an intermittent strategy, that type of thing. But it didn't really change anything. We had expected there to be good durability based on the mechanism and the robustness of the initial signal.

Joon Lee -- Truist Securities -- Analyst

Thank you.

Brian Lian -- President and Chief Executive Officer

Thanks, Joon.

Operator

The next question comes from Derek Archila from Stifel. Please go ahead.

Derek Archila -- Stifel Financial Corp. -- Analyst

Hey, guys. And congrats on the progress. Just two from us. Just kind of thoughts on the recruitment right now.

I know you're saying and still guiding to completing enrollment by the first half of 2021. I think having some conversations with some of your competitors, they seem to have more challenges with enrollment. So I just want to get a sense of how much does your time line take into effect for kind of COVID and where we are and some of the kind of worsening conditions in the EU, where I think you're going to potentially open sites. So I just want to get your comments on that.

And then second, just give us a sense of the regulatory pathway in X-linked adrenoleukodystrophy and what that looks like? And could we see data from that Phase 1b study sometime toward the end of 2021? Thanks.

Brian Lian -- President and Chief Executive Officer

Yeah. Thanks, Derek. As far as the enrollment in the Phase 2b study, I don't want to understate the challenges. And so it didn't mean to make it sound like we're having a super easy time with it.

It's really, really difficult. I think it's difficult to cross the board for everybody. But when we look at the site operations, the screening pipeline, that sort of thing, we still think we can do this in the first half of 2021. And that could change if there are statewide lockdowns like we saw earlier this year, but we don't see that right now.

What's really interesting in looking at the individual sites, they're maintaining pretty open operations despite the surges in certain parts of the country. And I think that weighs more on patient psychology than site operations now compared to back in March and April. But it's very, very difficult. And we're still expecting to complete enrollment in the first half of '21, but very, very difficult.

As far as the registration path and X-ALD, we hope to get into patients in the first half of the year that provided we get through the multiple ascending dose portion of the ongoing study. And if things go well, it's possible we'd have data next year. I don't know. It's possible we could be certainly later in the year.

And then we plan to talk to the FDA about what the next steps look like. We would expect the end points and registration to be more functionally oriented, not biomarker oriented, but we won't know for sure until we have those conversations.

Derek Archila -- Stifel Financial Corp. -- Analyst

Terrific. Thanks, and congrats again on the progress.

Brian Lian -- President and Chief Executive Officer

Thanks, Derek.

Operator

The next question comes from Steve Seedhouse from Raymond James. Please go ahead.

Ryan Deschner -- Raymond James -- Analyst

This is Ryan on for Steve Seedhouse. Brian, I'm just wondering if you have a timeline for presenting any additional data from the Phase 2a study. Obviously, after the 16-week study or potentially a publication. And are you guys planning on having -- presenting any data at AASLD this year?

Brian Lian -- President and Chief Executive Officer

Thanks, Ryan. No, we're not going to have anything at AASLD. We do have a manuscript in preparation on the 12-week study. Most of the bigger journals are prioritizing COVID right now.

So it has maybe slowed that process down a little bit, but we do intend to submit that in the relatively near term. As far as additional data, no plans today to have additional data from that study. I think we've presented pretty much everything useful that we could present there, but maybe there could be some more in the publication.

Ryan Deschner -- Raymond James -- Analyst

Thanks, Brian.

Brian Lian -- President and Chief Executive Officer

Thanks.

Operator

The next question comes from Matthew Luchini from BMO. Please go ahead.

Matthew Luchini -- BMO Capital Markets -- Analyst

Hi, guys. Thanks for taking the question, and congrats on the progress. So just a couple from me. I guess, first, on the ex U.S.

sites that are going to be opening up, I think when we last connected on the last quarter update, it sounded like those were perhaps a little bit more near term than just kind of opening up this quarter. So just wondering if there were any bottlenecks there that prevented those sites from actually coming online until it seems like the end of the year? And then secondarily, on 0214, for the SAD/MAD data, should we expect that to -- how should we expect that data to be communicated when it comes out? Would that be just press release? Would -- are you holding that for a medical conference of some sort? Yeah, please, on those two.

Brian Lian -- President and Chief Executive Officer

Sure. Thanks, Matt. So on the ex U.S. side, yes, those have been slower than we had hoped to come online primarily due to administrative items.

We had to submit a couple of documents. We had to correct a couple of typos in one document that required a more substantial resubmission of those documents than we had originally planned. It's just -- but nothing major. It was really pretty minor administrative stuff.

And I don't know, it's hard for us to judge how much of that is just COVID-related with delayed communication time lines between our regulatory liaison and the European regulatory agencies. But that could also play a little bit to those -- the kind of slow time line there. But I would say we'll be opening some European sites here imminently. So I think we're on track there.

As far as the VK0214 SAD and MAD data, we would hope to have some of those results in the first half of the year. And good question on the disclosure strategy, I mean, minimally, a press release, but depending on what the day look like, we might try to submit something to a later conference in 2021. But I think that will be driven on what we see. If there's anything really exciting or interesting, we might want to save that for a conference.

But I would say, minimally a press release though.

Matthew Luchini -- BMO Capital Markets -- Analyst

OK. And then just one last one, if I could, on the numbers. Both operating expenses have been quite flat now through three quarters this year. And I guess we've been expecting perhaps a little bit more of a step-up as things had picked up with the Phase 2b.

So just wondering how should we -- we should be thinking about at least maybe the last quarter of the year? And anything you can say loose or otherwise as we start thinking forward to '21. With that, I'll get back in the queue. Thanks so much.

Greg Zante -- Senior Vice President of Finance

Matt, Greg here. Yes, I think -- yes, they have been a little bit flat, but we do expect them to continue to increase from here as the trial continues along. So I think nothing to read into the flatness through this point. I think it will continue to pick up going forward here.

We always try to be conservative on the estimates, but I think it is certainly going to tick up.

Matthew Luchini -- BMO Capital Markets -- Analyst

OK. Great. Congrats on the progress.

OK. Great. Thanks, guys, for the questions, and congrats on the progress.

Brian Lian -- President and Chief Executive Officer

Thanks, Matt.

Operator

The next question comes from Michael Morabito from Chardan Capital Markets. Please go ahead.

Michael Morabito -- Chardan Capital Markets -- Analyst

Hi, guys. I just had a question here. I wanted to know if there was anything put into place for the VOYAGE trial to track patients who at any point during the trial test positive for a COVID during the trial. And if there's any kind of a protocol that you put in place for what would constitute rationale for excluding patients that have been affected by COVID, do you have anything like that in place?

Brian Lian -- President and Chief Executive Officer

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