Viking Therapeutics (VKTX): New IPO going public Thursday, September 18, 2014.
Overview
VKTX is a clinical-stage biopharmaceutical company focused on the development of novel, first-in-class or best-in-class therapies for metabolic and endocrine disorders. Clinical trials have shown that VK0612 is safe, well-tolerated and leads to significant glucose-lowering effects in patients with type 2 diabetes. The P/E ratio is -3.6, which indicates a very high cash burn rate relative to the market cap.
Based in San Diego, CA, Viking Therapeutics (VKTX) scheduled a $55 million IPO on the NASDAQ with a market capitalization of $167 million at a price range midpoint of $11 for Thursday September 18, 2014.
- SEC Documents Manager, Co-Managers: Oppenheimer & Co., Roth Capital
- Joint Managers: Craig-Hallum Capital Group, MLV & Co, Summer Street Research Partners
Conclusion
The rating is neutral. Clinical trials have shown that VK0612 is safe, well-tolerated and leads to significant glucose-lowering effects in patients with type 2 diabetes. VKTX is an intellectual property carve-out/spin-off of Ligand Pharmaceuticals (NASDAQ:LGND), $1 billion market cap, which owns 25% pre-IPO. Ligand, the 'parent' indicated an interest in purchasing $5 million on the IPO. To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.
Valuation
Glossary
Business
VKTX is a clinical-stage biopharmaceutical company focused on the development of novel, first-in-class or best-in-class therapies for metabolic and endocrine disorders.
VKTX has exclusive worldwide rights to a portfolio of five drug candidates in clinical trials or preclinical studies, which are based on small molecules licensed from Ligand Pharmaceuticals, $1 billion market cap.
Clinical programs
VKTX’s lead clinical program is VK0612, a first-in-class, orally available drug candidate entering a Phase 2b clinical trial for type 2 diabetes, one of the largest global healthcare challenges today. Preliminary clinical data suggest VK0612 has the potential to provide substantial glucose-lowering effects, with an attractive safety and convenience profile compared with existing type 2 diabetes therapies.
VKTX’s second clinical program is VK5211, an orally available drug candidate entering a Phase 2 clinical trial for the treatment of cancer cachexia, a complex disease characterized by an uncontrolled decline in muscle mass.
VK5211 is a non-steroidal selective androgen receptor modulator, or SARM. A SARM is designed to selectively interact with a subset of receptors that have a normal physiologic role of interacting with naturally-occurring hormones called androgens.
Broad activation of androgen receptors with drugs, such as exogenous testosterone, can stimulate muscle growth but often results in unwanted side effects, such as prostate growth, hair growth and acne.
VK5211 is expected to selectively produce the therapeutic benefits of testosterone in muscle tissue, with improved safety, tolerability and patient acceptance. VKTX expects to commence Phase 2 clinical trials for both VK0612 and VK5211 in early 2015 and to complete the clinical trials in 2016.
Three pre-clinical programs
VKTX is also developing three preclinical programs targeting metabolic diseases and anemia. VKTX’s most advanced preclinical program is VK0214, a novel liver-selective thyroid hormone receptor beta, or TRß, agonist for lipid disorders such as dyslipidemia and nonalcoholic steatohepatitis, or NASH. VKTX expects to file an investigational new drug application, or IND, and commence clinical trials for this program in 2015.
VK0612 is a potent, selective inhibitor of fructose-1,6-bisphosphatase, or FBPase, an enzyme that plays an important role in endogenous glucose production, or the synthesis of glucose by the body. VKTX believes the inhibition of FBPase provides an attractive approach to controlling blood glucose levels in patients with diabetes. VK0612 has demonstrated potent glucose lowering effects in diabetic animal models.
Clinical trials have shown that VK0612 is safe, well-tolerated and leads to significant glucose-lowering effects in patients with type 2 diabetes. VKTX intends to commence a Phase 2b clinical trial of VK0612 in approximately 500 patients with poorly-controlled type 2 diabetes, defined as having baseline fasting plasma glucose, or FPG, levels greater than or equal to 180 mg/dL. VKTX expects to commence the clinical trial in early 2015 and to complete the clinical trial in 2016.
Dividend Policy
No dividends are planned.
Intellectual Property
VKTX’s portfolio of drug candidates is protected by a number of U.S. composition-of-matter patents, foreign patents and U.S. and foreign patent applications, all of which VKTX in-licenses from Ligand.
VKTX plans to file additional patent applications in the U.S., E.U. and other foreign jurisdictions on its clinical and preclinical programs.
Competition
The key competitive factors affecting the success of VK0612, if approved, are likely to be its efficacy, safety, tolerability, frequency and route of administration, convenience and price, and the level of branded and generic competition and the availability of coverage and reimbursement from government and other third-party payors.
In the U.S., there are a variety of currently marketed oral type 2 diabetes therapies, including metformin (generic), pioglitazone (generic), glimepiride (generic), sitagliptin (Merck & Company Inc (NYSE:MRK) and canagliflozin (Johnson & Johnson (NYSE:JNJ)).
These therapies are well-established and are widely accepted by physicians, patients, caregivers and third-party payors as the standard of care for the treatment of type 2 diabetes.
Physicians, patients and third-party payors may not accept the addition of VK0612 to their current treatment regimens for a variety of potential reasons, including:
• if they do not wish to incur any potential additional costs related to VK0612; or
• if they perceive the use of VK0612 to be of limited additional benefit to patients.
In addition to the currently approved and marketed type 2 diabetes therapies, there are a number of experimental drugs that are in various stages of clinical development by companies such as Eli Lilly and Company, Takeda Pharmaceutical Company Limited and TransTech Pharma, Inc.
VK5211
The key competitive factors affecting the success of VK5211, if approved, are likely to be its efficacy, safety, tolerability, frequency and route of administration, convenience and price, the level of branded and generic competition and the availability of coverage and reimbursement from government and other third-party payors.
In the U.S., there are currently no marketed therapies for the treatment of cancer cachexia, though steroids such as nandrolone (generic), oxandrolone (generic) and testosterone (generic) are sometimes prescribed for the treatment of weight loss in cancer patients.
There are several experimental therapies that are in various stages of clinical development by companies including GTx, Inc., Helsinn Group and Morphosys AG. In addition, nutritional and growth hormone-based therapies are sometimes used in patients experiencing muscle wasting.
5% stockholders
Ligand Pharmaceuticals Incorporated 24.8%
Brian Lian, Ph.D. 24.8%
Michael Dinerman, M.D. 11.1%
Use of proceeds
VKTX intends to use the $49 million in proceeds from its IPO as follows:
$23.0 million to fund the continued clinical development of its lead drug candidate, VK0612, including a randomized, double-blind, placebo-controlled, multicenter Phase 2b clinical trial to evaluate various doses of VK0612, as well as a Phase 1 drug-drug interaction clinical trial and a Phase 1 clinical trial to evaluate the effect of renal impairment on VK0612 pharmacokinetics and lactate clearance;
$10 million to fund the continued clinical development of VK5211, including a randomized, double-blind, placebo-controlled, multicenter Phase 2 proof-of-concept clinical trial in patients with cancer cachexia;
$8.0 million to fund the continued development of its three preclinical drug candidates, including VK0214, a novel liver-selective thyroid hormone receptor beta agonist for lipid disorders such as dyslipidemia and NASH; and
The remainder for working capital and other general corporate purposes.
Disclaimer: This VKTX IPO report is based on a reading and analysis of VKTX’s S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.