Revisiting Viking Therapeutics (NASDAQ:VKTX) | Seeking Alpha

Diseased liver on abstract medical background. 3d illustration

Mohammed Haneefa Nizamudeen/iStock via Getty Images

Consistency is the playground of dull minds”― Yuval Noah Harari

We last took an in-depth look at Viking Therapeutics (NASDAQ:VKTX) back in February of 2021. We concluded that article with this conclusion,

Given the lack of significant catalysts in 2021 and the slow pace of development in Viking’s pipeline, it is hard to see what could propel the stock significantly higher over the next year. The most likely scenario seems to be the stock will remain range bound at best. Therefore, we are passing on any investment recommendation on Viking at this time.”

Given 14 months have elapsed since that piece and I get a question or two on the name every month it seems, it is time to revisit this developmental concern. An updated analysis follows below.

Company Overview

Viking Therapeutics is a clinical-stage biopharmaceutical company headquartered in San Diego. The company’s pipeline is focused on developing novel therapies for metabolic and endocrine disorders. The stock currently trades around $2.50 a share and sports an approximate market capitalization of $220 million.

Recent Developments:

Viking Therapeutics - Pipeline

Pipeline (March Company Presentation)

The company has several compounds in its developmental pipeline. One of the most advanced and the most important is VK2809. This is novel and oral small molecule thyroid hormone receptor agonist that possesses selectivity for liver tissue. It has promise as a treatment for metabolic disorders, including most importantly Nonalcoholic steatohepatitis or NASH. This affliction affects millions. The major feature in NASH is fat in the liver, along with inflammation and damage.

VK2809 Overview

March Company Presentation

A Phase 2a study showed VK2809 reduced liver fat by 45% compared with 19% in the placebo group. The compound is now being evaluated in a Phase 2b trial called ‘VOYAGE’. The primary endpoint of this 12 month study is the change in liver fat at the three month point with a secondary endpoint being the change in histology at the 12 month point. Leadership expects to complete enrollment and report initial data on the primary endpoint from VOYAGE by the end of 2022.

NASH Progression

March Company Presentation

In addition, Viking is also developing VK0214 which it believes could be a potent small molecule thyroid receptor agonist.

VK0214 Summary Profile

March Company Presentation

This compound is targeting X-Linked adrenoleukodystrophy or X-ALD in a Phase 1b study and has received Orphan Drug status from the FDA. This rare affliction has no current approved therapy and is a neurodegenerative disorder which is present at birth and affects just under 20,000 individuals in the United States. The company was recently informed that this study has been placed on clinical hold by the FDA. Management believes the request was not due to any findings from ongoing or previously completed studies, and they expect to submit the information in a timely fashion to get the study restarted. An earlier study successfully achieved its primary and secondary objectives, with VK0214 shown to be safe and well-tolerated at all doses evaluated.

VK0214

March Company Presentation

Those are the two key assets in Viking’s pipeline and the ones that are germane to this analysis, although the company has several other compounds in various stages of development within its pipeline.

Analyst Commentary & Balance Sheet

Analysts are as bullish on this name as about any small cap development concern I know based on how far above price targets are compared to the current trading level of the stock. Since Mid-February, five analyst firms including Leerink Partners and BTIG have reissued Buy ratings with price targets proffered ranging from $10 to $28 a share.

The company ended FY2021 with just over $200 million on its balance sheet (almost its entire market capitalization) after posting a loss of $12.4 million in the fourth quarter. Viking has no long-term debt. Approximately six percent of the overall float in the shares are currently sold short.

Verdict

VK2809 - Key Attributes

March Company Presentation

The company’s primary asset VK2809 is targeting a huge disease opportunity in NASH. It is hardly alone pursuing this target. However, Viking believes its compound has some unique traits that would make it extremely competitive in this area, provided studies are successful and the compound is eventually approved by the FDA.

The company burned through just over $45 million of cash during FY2021 for all operations, so Viking is well funded and shareholders should have little worries around dilution on the horizon. The company is also well-liked by the analyst community.

However, the problem for Viking shareholders is twofold despite some positive attributes described above. First, the sentiment on the biotech sector has been quite negative for at least three quarters now. In addition, the company has only a couple of milestones on the horizon in 2022. These being the restart of the Phase 1b study for VK0214 and enrollment completion and initial data around VOYAGE.

I do believe Viking merits a small ‘watch item‘ holding given the pipeline is not selling much above cash value at this time. Therefore, I have initiated such via some covered call orders this week. Options around the equity are quite liquid and lucrative for this strategy and provide solid downside protection.

The only risk is the one never taken.”― Lizbeth Davis

Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum

Be the first to comment

Leave a Reply

Your email address will not be published.


*