Biotech Values

[Mufaso]

VKTX- Viking reported solid progress at yesterday’s 4q and year end results with a large number of noteworthy positive new disclosures for such a small company. There was new material information on all FOUR of Vikings programs which will all have readouts in the next 4.5 months.

I thought the 4th q release had a good summary of progress for the year and highlighted near term expectations very well. Here is a link if interested:

https://ir.vikingtherapeutics.com/2024-02-07-Viking-Therapeutics-Reports-Fourth-Quarter-and-Year-End-2023-Financial-Results-and-Provides-Corporate-Update

The main points were:

• Results for Phase 2 VENTURE Trial of GLP-1/GIP Agonist VK2735 in Obesity now earlier than expected (Now in 1Q24 rather than 1st half24)
  
• Results for Phase 1 Trial of Oral VK2735 Expected in 1Q24
  
• Histology Results for Phase 2b VOYAGE Study Evaluating VK2809 for the Treatment of NASH and Fibrosis Expected in 1H24
  
• Results for Phase 1b Study of VK0214 in X-ALD Expected in 1H24.
  
• Strong Year-End Cash Position of $362 Million

Here are my comments and key notes form the 4thq, release, 10k and CC:

• Timing of the data readout release of the phase 2 VENTURE study of VK2735 for obesity in its injectable form has been advanced to the 1st quarter. Management stated in the cc that the reason for this was “It was just the trial was enrolled more quickly than expected and were no hiccups during the course of the study”. The fact that there were “no hiccups” is significant IMO and is bullish for this data readout.
  
  
  • The Venture study of VK2735 (GLP1/GIP Agonist) in its SubQ form is the most consequential upcoming data release for the company given LLY’s success with Mounjaro/Zepbound Obesity/T2D with its now presumed benefits it Cardio and NASH areas.
    
  • Management reiterated the prior phase 1 study only went to a 10 mg dose, while the Venture ph2 is increasing the top dose by 50% to 15mg. They also reinforced several other items including; that study was upsized, that subjects in the 28 day Phase 1 trial reported liver fat reductions of up to 47% from baseline while producing encouraging reductions from baseline in total cholesterol of up to 21%, reductions in LDL-cholesterol of up to 23% and plasma levels of apolipoprotein B were reduced by up to 21%.
    
  • Management recounted that the safety/tolerability data from the prior phase 1 was very good and supported a very aggressive titration schedule for VK2735 (in addition to increasing the dose). In the highest dose of 15 mg, it was going to start at 5mg for 3 weeks, 7.5MG for the next 3, 10 mg for next 3 and 15 mg for the final 3. Contrast that with the trizepatide titration schema of starting with 2.5 milligrams titrated every 3 weeks and the “no hiccups in the study” comment takes on more meaning to me. They also noted that there was a 6-week follow-up period and that data from that period would be known at the time the data readout occurs. For reference- in the phase 1 study, the therapeutic effect of VK2735 was durable in the follow-up period and improved vs placebo. (VK2735 demonstrated a half-life of approximately 170 to 250 hours in ph1)
  
  
• Timing of the data release of phase 1 data for the ORAL form of VK2735 will still be 1st q. Data on the oral form will be released at a different time from the SubQ form and they wouldn’t say which release would occur first.
  
  
• On the oral VK2735 Management was tight lipped and wouldn’t comment on many study details. They side stepped questions on whether any cohorts were added as the study allowed for that. For reference, in the 3rd Q cc, the CEO Brian Liam disclosed “The first cohort is 2.5 mg and that’s flat. And then from there, they dose up. I mean first week will be 2.5 and then the remaining 3 weeks would be a higher dose. And then as you go on through the cohorts, you kind of titrate up per week… the plan is to go to 20 milligrams with the oral.” Given they initiated this Part C addition to the Phase 1 study back on Mar 28th I think it is a good bet that they added at least two arms if not more. I may be reading too much into this but given the dose escalation/added arms needed to go though a safety committee, I’d say the drug will likely have shown very good tolerability in the oral setting or it would have already concluded some time ago. Efficacy is another matter and Management seemed to set low expectations for a 1% to 2% weight loss target for the oral over 28 days while noting they had reason to believe this larger peptide molecule would get to blood plasma in therapeutic quantities. Management seemed to be sandbagging just a bit in some of their comments here but is is a peptide so who knows. No it won't have the same efficacy as the injectable form but who really knows how far the dosing was increased and what the survivable concentration for VK2735 in blood plasma might be, (The drug is thought to have a 170+ hr half life and could build nicely over a long period)
  
  
• On the Nash program for VK 2809, management just reiterated that they expected data in the first half and all the reasons VK2809 is better than MDGL’s resmetirom. Nothing new was disclosed here but this the drug seems to have been de-emphasized to some degree. The specific comment they made in response to their reaction to LLY’s trizepatide synergy NASH trial was “... It doesn't really change our view of the role of a targeted agent. We do think there's going to be a lot of different therapies used in this population. The population is very heterogeneous to begin with and different patients will be better suited for different therapies. So we do see the targeted agents is remaining relevant for sure. That said, I think it would be naive to think that GLP-1 type therapeutics won't be important in the treatment paradigm, potentially as a sort of a backbone in the overweight or the diabetic patient. But we still see there's nice opportunity for a targeted agent.” Also- They made one telling comment that they wanted to have a Type C meeting with the FDA on the obesity program while just having an end of phase 2 meeting on the NASH results for VK2809. VK2809 is still likely a very viable compound as is MDGL’s resmetirom however the market will likely be smaller for these NASH targeted NME’s as trizepatide (and VK2735?) will address a large part of the market.
  
  
• On the rare disease program for X- ALD, Viking disclosed for the first time that they expected a data read out to occur in the first half of this year. They recounted the Results from a prior Phase 1 study of VK0214 in healthy volunteers successfully achieved its primary and secondary endpoints for safety and tolerability. IMO this program is undervalued by the street and could net a pediatric PRV as this disease in particularly bad in the pediatric setting. In the adult onset scenario, no good therapy exists otherwise. (X-ALD affects about 50,000 people in the US and would support “specialty pricing” so close to blockbuster sales potential exists for the drug annually as this condition would be chronic requiring long term medication)
  
  
• As a separate item - In the 10-K, VKTX disclosed for the first time that they have 1 issued patent on GLP1 agonists and 33 pending with a nominal patent term of 2042 to 2043.
  
  
• Other Miscellaneous comments relating to a possible buyout is that the CEO basically hung out a huge for sale sign. Things that support that include:
  
  
  • While being careful to respond to analyst questions without disclosing anything the CEO can’t say that might violate an NDA - he stated that “ We can't comment too much on that. I would just say, you're correct in saying that it's (obesity) an active area and an area of high awareness, I'd say, across the industry, based on the magnitude of the success we're seeing and the clinical benefit that these therapies provide. So makes sense that there would be interest from potential partners, and we would be happy to engage in those discussions.” And later he said “We've always been open ho partnering discussions since day 1. So we're always opportunistically evaluating whatever is presented to us. So I can't really characterize any discussions.”
    
    
  • The company has not gone on a hiring spree despite having 3 NME’s attacking four major markets. The 10Q filed for 2023 says “As of December 31, 2023, we had twenty-seven full-time employees, seven of whom hold a Ph.D. or M.D. degree.” (for comparison at the end 2022, they had twenty-one full-time employees, seven of whom held a Ph.D. or M.D. degree.).
    
    
  • CEO Brian Lian still has 2.2 million shares after selling 85,000 Jan 31 as part of a 104b plan. He is a former investment banker bio analyst. He is highly motivated and has the worldly knowledge sense to sell the company IMO.
    
    
  • The company is resource and cash limited at this time. A big pharma buyout would presumably enable value to be unlocked via adding additional trials such as VK2735 in T2D, a combo all oral VK2735/VK2809 for Nash and solve potential manufacturing capacity issues.
    
    
  • LLY's Mounjaro/Zepbound is proving to be a mega blockbuster that will break all records for sales. In the long run tolerability plus efficacy will determine which obesity drugs (note plural) will enable widespread adoption by the general population. I don't think LLY's triple G with it's high discontinuation/arrythmia questions is the answer for that reason. A lot is riding in VKTX's Venture study but it has the potential to show it is equal or better Zepbound on both fronts.