U.S. Markets closed

Edited Transcript of VKTX earnings conference call or presentation 2-May-19 8:30pm GMT

Q1 2019 Viking Therapeutics Inc Earnings Call

San Diego May 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Viking Therapeutics Inc earnings conference call or presentation Thursday, May 2, 2019 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Brian Lian

Viking Therapeutics, Inc. - President, CEO & Director

* Michael Morneau

Viking Therapeutics, Inc. - VP of Finance & Administration

================================================================================

Conference Call Participants

================================================================================

* David Bautz

Zacks Investment Research, Inc. - Senior Biotechnology Analyst

* Fang-Ke Huang

SunTrust Robinson Humphrey, Inc., Research Division - Associate

* I-Eh Jen

Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst

* Mayank Mamtani

B. Riley FBR, Inc., Research Division - Research Analyst

* Timur Ivannikov

Raymond James & Associates, Inc., Research Division - Senior Research Associate

* Tsan-Yu Hsieh

William Blair & Company L.L.C., Research Division - Senior Research Analyst

* Stephanie Diaz

Vida Strategic Partners Inc. - President & CEO

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the Viking Therapeutics First Quarter 2019 Earnings Conference Call and Webcast. (Operator Instructions)

Please note, this event is being recorded. I would like to now turn the conference over to Stephanie Diaz, Investor Relations. Please go ahead.

--------------------------------------------------------------------------------

Stephanie Diaz, Vida Strategic Partners Inc. - President & CEO [2]

--------------------------------------------------------------------------------

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, May 2, 2019, 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 statements 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?

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Thanks, Stephanie, and thanks to everyone listening on the webcast or by phone. Today, we'll provide an overview of our first quarter financial results as well as an update on recent progress and developments related to our pipeline programs and operations.

During 2018, Viking reported best-in-class data from 2 clinical programs: VK2809 for hypercholesterolemia and fatty liver disease and VK5211 for the simulation of muscle and bone following hip fracture. The success and momentum of 2018 has continued in 2019 as we reported new data from our Phase II trial of VK2809, which further validated the molecule's promising potency and safety.

Specifically, recently presented data in valuating VK2809 doses of 5 milligrams per day showed that this lower exposure results in efficacy that is similar to that observed at the higher 10-milligram dosing arms reported previously. We presented these latest results last month in a late-breaking poster at the EASL Conference in Vienna. We are currently preparing for our next study with VK2809, which will be a Phase IIb clinical trial in patients with biopsy-confirmed NASH. I will provide further detail in a few minutes, but first, we'd like to review our first quarter financial results.

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

--------------------------------------------------------------------------------

Michael Morneau, Viking Therapeutics, Inc. - VP of Finance & Administration [4]

--------------------------------------------------------------------------------

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'll now go over the financial results for the first quarter ended March 31, 2019.

Our research and development expenses for the 3 months ended March 31, 2019, were $4.5 million compared to $3 million for the same period in 2018. The increase was primarily due to increased manufacturing expenses related to our drug candidates, preclinical study efforts, use of third-party consultants, stock-based compensation and salaries and benefits, partially offset by a decrease in clinical study expenses.

Our general and administrative expenses for the 3 months ended March 31, 2019, were $2.3 million compared to $1.8 million for the same period in 2018. The increase was primarily due to increased expenses related to stock-based compensation, salaries and benefits and use of third-party consultants.

For the 3 months ended March 31, 2019, Viking reported a net loss of $4.9 million and a basic net loss per share of $0.07 compared to a net loss of $3.6 million and a basic net loss per share of $0.08 in the corresponding period in 2018. The increase in net loss for the 3 months ended March 31, 2019, was primarily due to the increase in research and development and general and administrative expenses noted previously, offset by an increase in interest income and the elimination of the change in the fair value of debt conversion feature liability as well as amortization of debt discount due to the company's repayment of debt in May 2018. The decrease in net loss per share for the 3 months ended March 31, 2019, was primarily due to the additional shares outstanding at March 31, 2019, versus those outstanding at March 31, 2018, given the additional shares issued by the company in June and September 2018 through public equity offerings.

Our balance sheet at March 31, 2019, showed cash, cash equivalents and investments totaling $298.7 million. As of April 30, 2019, Viking had 72,047,657 shares of common stock outstanding.

This concludes my financial review, and I'll now turn the call back over to Brian.

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [5]

--------------------------------------------------------------------------------

Thanks, Mike. In the first quarter, we continued to build upon the momentum gained in 2018, which was the result of positive Phase II data from our 2 clinical-stage programs, VK2809 for liver disease and VK5211 for muscle growth. As a reminder, VK2809 is an orally available, small-molecule agonist of the thyroid hormone receptor that possesses selectivity for liver tissue as well as the beta receptor subtype, suggesting promising therapeutic potential in a range of lipid disorders, including non-alcoholic steatohepatitis, or NASH.

In September of last year, we announced positive results from a Phase II trial of VK2809 in patients with hypercholesterolemia and fatty liver disease. The trial achieved both its primary and secondary endpoints, demonstrating potent reductions in liver fat content and improvements in plasma lipid measures. These results were presented in November during the oral late-breaker session at the AASLD conference.

Additional updated results were presented last month in a late-breaking poster at the annual meeting of the European Association for the Study of the Liver, or EASL. This Phase II trial randomized patients to receive VK2809 doses of 5 milligrams daily, 10 milligrams daily, 10 milligrams every other day or placebo for 12 weeks. The trial's primary endpoint evaluated the effect of VK2809 on LDL cholesterol after 12 weeks of dosing compared to placebo.

The secondary endpoint evaluated change in liver fat as assessed by MRI proton density fat fraction, or MRI-PDFF. As we reported at both the AASLD and EASL conferences, with respect to the trial's primary endpoint, VK2809-treated patients achieved statistically significant reductions in LDL compared with placebo-treated patients. In addition, VK2809-treated patients experienced statistically significant improvements in other lipids, including triglycerides and the atherogenic proteins apolipoprotein B and lipoprotein (a).

With respect to the key secondary endpoint, VK2809-treated patients experienced significant reductions of liver fat as assessed by MRI-PDFF. The magnitude of this response remains unprecedented among oral agents in development today. Specifically, patients receiving VK2809 dosed at 5 milligrams daily for 12 weeks experienced a median relative reduction in liver fat content of approximately 54% from baseline. Patients receiving VK2809 doses of 10 milligrams every other day experienced a median relative reduction in liver fat content of approximately 57% from baseline. And patients receiving VK2809 doses of 10 milligrams daily experienced a median relative liver fat reduction of approximately 60% from baseline.

Across all VK2809 cohorts, the median relative reduction in liver fat was approximately 57%.

By comparison, patients receiving placebo experienced a median relative reduction in liver fat of approximately 9%.

The trial also included a responder analysis, which was intended to assess whether the observed reduction in liver fat may predict broader clinical benefit. Patients were characterized as responders if they experienced at least a 30% reduction in liver fat content. This threshold is of interest as multiple studies have demonstrated that when liver fat is reduced by 30% or more, a corresponding increase in the odds of improved overall histology is also observed. In this study, all patients treated with VK2809 dosed at 5 milligrams daily experienced at least a 30% reduction in liver fat content. Approximately 77% of patients receiving VK2809 dosed at 10 milligrams every other day demonstrated at least a 30% reduction in liver fat content. And among patients treated with VK2809 dosed at 10 milligrams per day, approximately 91% experienced at least a 30% reduction in liver fat content.

The responder rate across all VK2809 cohorts in this study was approximately 88%.

By comparison, approximately 17% of patients receiving placebo demonstrated a response.

VK2809 also demonstrated an encouraging safety and tolerability profile in this study. No serious adverse events were reported among patients receiving VK2809 or placebo, and the overall numbers of adverse events were relatively evenly distributed across treatment arms.

Mean ALT and AST levels among patients receiving VK2809 were also reduced relative to those of patients receiving placebo. And there were no clinically or numerically meaningful differences in other liver function tests between patients treated with VK2809 or placebo.

VK2809 also demonstrated encouraging cardiovascular safety in this study. No changes to vital signs or cardiovascular toxicity markers, such as troponin, CK-MB or NT proBNP, were observed among VK2809-treated patients compared with placebo, and CV-related AEs were similar between treated and placebo cohorts.

Finally, VK2809 was shown to be well tolerated in this study, and there were no differences in gastrointestinal-related adverse events compared with placebo.

Overall, we are very pleased with the profile of VK2809 demonstrated in this study, and in particular, we're excited that such robust efficacy was maintained at the 5-milligram daily dose, which was the lowest-dose study. Perhaps, one of the most distinguishing characteristics of VK2809 is its potential to improve overall liver health while providing global cardiovascular benefits through reductions of systemic lipids, such as LDL and atherogenic proteins.

Given these encouraging results, we are currently preparing to initiate a Phase IIb study of VK2809 in patients with biopsy-confirmed NASH.

In the first quarter, we requested a pre-IND meeting with the FDA and were granted a meeting date in the midsummer time frame. Following this meeting, we plan to file an IND to initiate the study. While details regarding study design have not been finalized, we anticipate the trial will target patients with F2 and F3 fibrosis as well as limited a number with F1 fibrosis. We expect this phase to evaluate more than one dose of VK2809 for up to 12 months of dosing. We will provide further information about the study as we move closer to initiation.

I'll now provide an update on our VK0214 program. VK0214 is a small molecule thyroid receptor agonist that we are evaluating as a potential treatment for X-linked adrenoleukodystrophy, or X-ALD. X-ALD is a devastating disease caused by a defect in the peroxisomal transporter called ABCD1. As a result of this defect, patients experience sustained elevations of very long-chain fatty acids in plasma and tissue, which are believed to contribute to the severe cerebral and motor neuron toxicities that are hallmarks of the disease.

Like VK2809, VK0214 is an orally available small molecule thyroid receptor agonist that possesses selectivity for the beta receptor subtype.

Early data had demonstrated that activation of the thyroid beta receptor may stimulate the metabolism of very long-chain fatty acids, potentially leading to a therapeutic benefit in this setting.

In late 2017, we 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 markers of disease, notably an improvement in very long-chain fatty acid levels in both plasma and tissue.

We are currently conducting IND-enabling work for this program and plan to file an IND later this year to initiate a proof-of-concept study in humans. We are very excited to be advancing this program into the clinic as data to date has demonstrated that VK0214 may offer the first pharmacologic treatment for this debilitating disease. We look forward to filing our IND later this year.

Finally, on the corporate side, as Mike described earlier, we have been fortunate to maintain a robust balance sheet, which coupled with our judicious use of capital provides sufficient runway to see us through multiple clinical inflection points. We are grateful for the support from our investors and look forward to keeping you updated as our pipeline progresses.

In conclusion, we are pleased that our success and momentum from 2018 has continued into the first quarter of 2019. New data from our Phase II trial of VK2809, which were reported at EASL last month, demonstrated that the exceptional potency and safety profile previously observed in both 10-milligram doses were essentially maintained when cutting the dose in half to 5 milligrams. This finding supports our belief that VK2809's unique liver-targeting mechanism provides robust tissue-specific effects, with a potentially improved benefit to risk profile relative to historical programs targeting this receptor. Importantly, VK2809-treated patients also experience statistically significant reductions in LDL cholesterol, triglycerides and the atherogenic proteins apolipoprotein B and lipoprotein (a), which indicates potential long-term cardiovascular benefit. We remain on track to file an IND for VK2809 and initiate a Phase IIb study in biopsy-confirmed NASH later this year.

We also continue to make progress with the pre-IND work required to move our VK0214 program into the clinic for the treatment of X-ALD. We plan to file an IND for this program in the second half of 2019.

This concludes our prepared comments for today. Thanks again for joining us, and I'd now like to open the call for questions. Operator?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question today comes from Edward Nash with SunTrust Robinson Humphrey.

--------------------------------------------------------------------------------

Fang-Ke Huang, SunTrust Robinson Humphrey, Inc., Research Division - Associate [2]

--------------------------------------------------------------------------------

This is Fang-Ke on for Edward Nash. The first question is so in the 2809 Phase I/II trial, in NAFLD trial, we see the discontinuation rate for the placebo arm is relatively high. And just want to understand what's the reason for discontinuation. And how you going to control that for the Phase IIb? And I have a follow-up.

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Yes, yes, thanks, Fang-Ke, for the question. Yes, the trial -- the Phase IIa study was, I would say, a fairly burdensome study for patients. They had to come in for multiple Holter monitors as well as extended stays at clinic visits for 6-hour telemetry for -- just to measure for cardiovascular safety. So that resulted in some people just sort of getting fatigued with the scheduled events and the time commitment that was required. We do not expect those burdens to be imposed on the upcoming study. So we would hope that the discontinuation rate is lower in the upcoming study. I think the more important component of discontinuations is to consider that that the highest rate of discontinuations was actually, I think, in the placebo relative to the treatment arms. And so I think that should help address any misperceptions about the safety and tolerability associated with receiving VK2809.

--------------------------------------------------------------------------------

Fang-Ke Huang, SunTrust Robinson Humphrey, Inc., Research Division - Associate [4]

--------------------------------------------------------------------------------

Great. That's very helpful. And the second one is on 214. So in your April corporate presentation, you measure different long-chain fatty acids in forms C20 to C22. Just wanted to understand is there any differences in terms of toxicity between these different long-chain fatty acids. And which one is more important than the other? And then secondly, when we are trying to understand what's the potential benefit, do we have like in patients, what percent of reduction of these different long-chain fatty acids is going to be therapeutically important? Do we have any data on that?

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [5]

--------------------------------------------------------------------------------

Yes, yes, thanks, these are key questions. So the most toxic of the very long-chain fatty acids or the most important when it comes to toxicity is the C26 long-chain fatty acid. The C28 and C30 are also toxic, but they're not produced in as great an amount as the C26. The reason that the shorter chains are of interest and it's important to note that we have a very robust effect on the shorter-chain fatty acids is that the chains are elongated through a 2-carbon elongation process. So C20 is converted to C22, it's converted to C24, it's converted to C26. So over time, when you deplete that pool of the shorter-chain, long-chain fatty acids, presumably, you reduce the overall production and systemic exposure of the C26 long-chain fatty acid as well as the C28 and C30.

It's not known how great a reduction is required to provide clinical benefit. That's one of the key questions I think everybody's interested in for this disease. We've heard various estimates, anywhere from 5% to 25%. And it's also not known how important the plasma versus tissue reductions are. Fortunately, we show effects in plasma and tissue and in the CNS. So -- but again, we won't be able to determine real clinical benefit until we get a little further along, but thanks for the questions.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

Our next question comes from Steve Seedhouse with Raymond James.

--------------------------------------------------------------------------------

Timur Ivannikov, Raymond James & Associates, Inc., Research Division - Senior Research Associate [7]

--------------------------------------------------------------------------------

This is Timur Ivannikov on for Steve Seedhouse today. And our question today is about the doses being tested in the ongoing GLP toxicity studies. What coverage does the top rodent an HP dose give you over, let's say, 5 milligram or 2.5 milligrams once daily for VK2809 in humans?

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [8]

--------------------------------------------------------------------------------

Yes. So we haven't disclosed the details on dosing in the GLP tox studies. I would say the exposure margins should be sufficient, but we haven't disclosed those details.

--------------------------------------------------------------------------------

Timur Ivannikov, Raymond James & Associates, Inc., Research Division - Senior Research Associate [9]

--------------------------------------------------------------------------------

Okay, okay. And we have another question regarding the Phase IIa study. And this question is about the initial bump in ALT. And maybe could you talk about the magnitude of that bump in the 5-milligram versus the 10-milligram arms? And does that magnitude of the bump correlate with the dose?

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [10]

--------------------------------------------------------------------------------

Yes. I think -- so the bump doesn't occur in everybody. It tends to -- when it does happen, it tends to be early, and it tends to resolve without any interruption of dosing. It is dose related so that when you look at means as you increase the dose, the mean tends to be a little bit higher. Interestingly, when you look at the 12-week data though, the largest reduction relative to placebo is actually observed in the highest dose. And so that's consistent with this benefit that you see from a robust reduction in lipid content.

--------------------------------------------------------------------------------

Timur Ivannikov, Raymond James & Associates, Inc., Research Division - Senior Research Associate [11]

--------------------------------------------------------------------------------

Okay. Got it. And then I guess, our final question. I'm not sure if you can answer it, but I don't know if you could talk about the selection of -- dose selection in the next study. Maybe, what is the current thinking in the 5-milligram dose since that data is pretty new? I'm not sure whether you've come to a decision of whether to include this 5-milligram dose in the Phase IIb study.

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [12]

--------------------------------------------------------------------------------

Yes. It's a good question. We're not going to disclose the details of the study design until we get a little bit closer, but I would say there will be a representation from the Phase IIa study in the upcoming study as well as some additional doses. And I think what we've seen pretty clearly from the data is that you can likely reduce the dose and still achieve meaningful clinical benefit. And so I think we got a great flexibility here in choosing doses for the next study.

--------------------------------------------------------------------------------

Operator [13]

--------------------------------------------------------------------------------

Our next question today comes from David Bautz with Zacks Investment Research.

--------------------------------------------------------------------------------

David Bautz, Zacks Investment Research, Inc. - Senior Biotechnology Analyst [14]

--------------------------------------------------------------------------------

The first question I have is: Are you seeing any partnership interest in 2809? And if so, what do those potential partners think of the TR beta class in general? Basically, wondering -- I mean, there's been a lot of disinformation out there about 2809, and I'm wondering if that's having any potential impact on partnerships.

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [15]

--------------------------------------------------------------------------------

Yes. So I don't want to give too much color on any discussions we may or may not be having. But I would say people recognize the potency and safety profile, and really there aren't many questions about the safety profile from any interested third parties. I think there's a fair amount of comfort there.

--------------------------------------------------------------------------------

David Bautz, Zacks Investment Research, Inc. - Senior Biotechnology Analyst [16]

--------------------------------------------------------------------------------

Okay. And as far as the upcoming trial, how concerned are you about patient enrollment with so many other NASH trials going on right now?

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [17]

--------------------------------------------------------------------------------

Yes. It's a key question. We're very concerned. I think at all of those other studies, sponsors would say something similar. But knowing that there is a lot of competition for patients out there, you plan accordingly. And I think everybody will be making every effort to try to mitigate any competitive issues that might limit enrollment. It's just a factor of the space. It's very high interest in the industry and a lot of studies underway. We don't think it will be -- certainly, it wouldn't be worse than the Phase IIa study. We think it would be quite a bit easier to enroll the upcoming study than the prior study, though.

--------------------------------------------------------------------------------

Operator [18]

--------------------------------------------------------------------------------

The next question comes from Andy Hsieh with William Blair.

--------------------------------------------------------------------------------

Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [19]

--------------------------------------------------------------------------------

Congrats on the progress. So I have a question about the eDISH analysis that you have done on the EASL poster. So it's like none of the patients were considered matching the Hy's Law. There were some patients, including some placebo patients, in the quadrant, the Temple's Corollary quadrant. So just curious about your interpretation of this, I guess, FDA-designed eDISH analysis.

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [20]

--------------------------------------------------------------------------------

Yes. It's a really interesting analysis, and I think the pure eDISH is a plot that looks at total bilirubin and -- I'm sorry, maximum total bilirubin and maximum ALT in any given exposure window. We did 2 plots. We looked at the maximum bili and ALT as well as the end-of-study bilirubin and ALT. And the reason for that was to demonstrate further that even when you see a transient pop in ALT, it tends to regress with continued exposure, and that's very clearly what the eDISH shows.

Interestingly, you don't see, over time, more -- greater population in what's called the Temple's Corollary quadrant, which indicates a greater risk of moving into Hy's Law. We didn't see -- not only did we not see anybody coming close to Hy's Law quadrant, but over time, you see a regression from Temple's Corollary into the more normal quadrant, which is the lower-left quadrant in that graph. And at the end of the studies -- and this is a combination plot, looking at Phase I and Phase II since there's been so much historical interest in that Phase I study. At the end of that analysis, there are actually higher percentage of placebo patients in the Temple's Corollary quadrant relative to treated patients, which is just -- is not consistent with something that would be harmful to liver, and it's totally consistent with something would be improving liver health.

--------------------------------------------------------------------------------

Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [21]

--------------------------------------------------------------------------------

Great. Yes. Thanks for that detailed explanation. Also curious about just any updated (technical difficulty).

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [22]

--------------------------------------------------------------------------------

I'm sorry, you cut out there, Andy.

--------------------------------------------------------------------------------

Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [23]

--------------------------------------------------------------------------------

Oh, sorry about that. Can you hear me now?

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [24]

--------------------------------------------------------------------------------

Yes, I can hear you, and I didn't get the last part of the question.

--------------------------------------------------------------------------------

Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [25]

--------------------------------------------------------------------------------

Oh, sorry. Okay. So during the last quarterly call, you talked about that single-payer systems potentially are very interested in VK5211. Just curious if there's any update on that and any potential path forward.

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [26]

--------------------------------------------------------------------------------

I don't recall discussing the single-payer systems with respect to VK5211. I'm looking around the room here. I don't -- maybe I'm misremembering the question.

--------------------------------------------------------------------------------

Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [27]

--------------------------------------------------------------------------------

Or maybe you talked about Japan, maybe not, forgive me, not specifically on single-payer system. Maybe I (inaudible) but like it could in Japan or maybe in Europe.

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [28]

--------------------------------------------------------------------------------

Yes, yes. Sorry, yes, so in Japan, what we learned through numerous interactions since the study reported was that the patients tend to stay in the hospital for a longer time period relative to western markets. And as a result, since the Japanese insurance structure is to bundle hospital payments, there was little room for pricing flexibility there. And so that was surprising to us. And actually, not only was it surprising to us, it was surprising to the parties that conducted that -- those market research exercises. We don't think that's necessarily the case in the western markets. Most of the time, hip-fracture patients are discharged much more rapidly in the west relative to Japan. So we don't think that would feed into any decisions in western markets.

I think more problematically for hip fracture is the registration endpoints. What we've learned from discussions with FDA is that the anticipated registration path would involve a Phase III trial that combines function and quality of life. And those are each individually difficult endpoints, but when you combine them, it makes it exceptionally difficult to complete successfully without a large, very long study. And it's something that we're not going to pursue alone.

--------------------------------------------------------------------------------

Operator [29]

--------------------------------------------------------------------------------

The next question comes from Yale Jen with Laidlaw & Company.

--------------------------------------------------------------------------------

I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [30]

--------------------------------------------------------------------------------

You mentioned earlier in the script -- presentation that for the Phase IIb study, you will focus on F2 and F3 fibrosis and with a more limited number of F1 patients. Would you mind elaborate a little bit more and then maybe the rationale behind it?

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [31]

--------------------------------------------------------------------------------

Yes. Thanks, Yale. So the F2, F3 population, it's around 1/3 of the overall NASH market. We anticipate that, that will be the most likely reimbursed segment of the markets, at least initially. Those are the patients who have the greatest risk of progressing to further complications with the liver cirrhosis and the decompensated cirrhosis, liver failure. And so that's why we'll be looking at that end of the spectrum. We will include F1s though, just to understand any differences in those 2 patient groups and understand what the drug's relative efficacy is across those, and so we'll stratify in the statistical analysis plan for efficacy in these various populations.

--------------------------------------------------------------------------------

I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [32]

--------------------------------------------------------------------------------

Okay. Great. That's very helpful. And maybe just a housekeeping question. We just realized that for the quarter, first quarter of this year, you guys, on the cash front, you just periodically spend probably less -- or maybe $2 million in cash. I know the cash flow statement probably will be reported in the Qs. But just curious what make you guys have such a tight expenses for the quarter.

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [33]

--------------------------------------------------------------------------------

Yes, so the budget -- I appreciate the question because I'm always surprised that the cash balance as well, it feels like we spend more money than we do. And some of this though is -- the spending is offset a little bit by interest income. So we do realize over $0.5 million a month in interest income, and so that provides an offset. If you look at the overall OpEx, it's -- I think it's about 50% higher this year than last year, if I'm not mistaken.

--------------------------------------------------------------------------------

Michael Morneau, Viking Therapeutics, Inc. - VP of Finance & Administration [34]

--------------------------------------------------------------------------------

That's correct. All right, yes.

--------------------------------------------------------------------------------

I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [35]

--------------------------------------------------------------------------------

And maybe the last final question here that in terms of the study of -- the first Phase I study you will have probably early next year in 0214, could you give a little bit of a overview or overall (inaudible) projection of how the study will be designed? And I know you'll probably give more details later on when you complete IND filing, but any colors on that for time being?

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [36]

--------------------------------------------------------------------------------

Yes, and so -- thanks, Yale. And so we haven't given a lot of detail here but I think you could think of this study to be a fairly unique design. We would have a single-ascending dose component that rolls into a multiple-ascending dose component that rolls into a 2- or 3-dose 28-day study in patients with X-ALD and most likely patients with the AMN form of disease. And we would evaluate in that component of the study very long-chain fatty acid level changes at 28 days.

--------------------------------------------------------------------------------

Operator [37]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question comes from Mayank Mamtani with B. Riley FBR.

--------------------------------------------------------------------------------

Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [38]

--------------------------------------------------------------------------------

Congrats on the progress. I have a couple on 2809 and then one on 41 -- 214. On 2809, I mean, you have a very high-quality problem of having improved responses with lower doses. So just taking a step back, how do you think about like finding that lowest-effective dose now, obviously, that you've done that study? Like how low you could go? It's a bit opposite to traditional drug development. So if you can just comment on the framework. How you are thinking about that? And then the patient population like you said you have -- you had NAFLD, you didn't have biopsies, so you don't know the F fibrosis status of what patients you had in Phase I. But now that you go into F1, F2, F3, how do you think about the effect size on MRI-PDFF? I think that would be just helpful to understand how you are thinking about -- again, I know you are not going into the specifics, but just on fat reduction, on ALD reduction, some of those things that you'd be looking to measure before you have the histology data in a few -- in a couple of years? It would just be helpful how you are thinking about that. And then I have a very brief question on 214.

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [39]

--------------------------------------------------------------------------------

Yes. Thanks, Mayank. And so as far as exploration of that minimal effective dose, we will include some lower-dose cohorts in the upcoming study, at least one anyway. And when you look at the 14-day data, it looks like around 1 milligram is where you start to see some activity. And so I think going below that may not be a wise exercise but at 1 milligram based on a 14-day data, you might see something. And since the drug is liver targeted, over a longer period, you might see a really nice effect down there. And the FDA always wants to understand where the minimally effective doses are. So I think coming down from 5 makes sense given that we see identical efficacy essentially at 5 and 10 mgs. With respect to the efficacy across severity, so there's -- it's I think often misconstrued that we didn't have NASH patients in this study. Absolutely, there were NASH patients in this study. We cannot prove that because we were not allowed to biopsy, but I think it's incorrect to assume there was not significant representation of NASH in the study. When we look at other programs that have targeted the liver fats and metabolic parameters, it seems to show -- the data seem to show similar efficacy across different baseline severities. And so we think that this mechanism should demonstrate benefits as you increase in severity. But we'll certainly find that out, but that seems to be what the data show at this point. And we know it shows that certainly on other measures of efficacy, if you look at plasma lipids and if you look at liver fats, baseline does not seem to have a major impact. So it's hard to see why -- if there's an effect on fibrosis, it's hard to see why it would be there with F1 and not necessarily F2. So I hope that makes sense, but good question.

--------------------------------------------------------------------------------

Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [40]

--------------------------------------------------------------------------------

Yes, that does. And maybe if I can ask a follow-up on NASH itself. So obviously, along the Phase II stage, we are seeing more companies, especially the bigger ones, getting into partnering-and-pursuing combinations. Like do you intend to do that maybe at some point while you do -- while you go through your Phase II? Or do you intend to do that maybe at a future time point once you have data from the histology?

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [41]

--------------------------------------------------------------------------------

Yes, it's a good question. There's a lot of interest in combinations. I think we want to be open-minded and flexible. And certainly, we're receptive to conversations that would allow us to move forward and explore combinations. There would have to be arrangements that would make sense for Viking as well as the other party. And so as those arise, we'll evaluate them individually. But certainly, we don't need to complete the next study to begin thinking about combinations.

--------------------------------------------------------------------------------

Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [42]

--------------------------------------------------------------------------------

Sounds great. And then very briefly on 214. Is there any natural history study that is already published or is work in progress at maybe the institute you are partnering with that shows this correlation of long fatty chain acids with some functional outcome that maybe is being looked at as a reference point? Again, I understand not a lot of work has happened with this study's population.

--------------------------------------------------------------------------------

Brian Lian, Viking Therapeutics, Inc. - President, CEO & Director [43]

--------------------------------------------------------------------------------

Yes, yes. So there are natural history studies in the ALD population and in the AMN population. The correlations with very long-chain fatty acids have not been parts of those studies. We do know that when you reduce very long-chain fatty acids, it seems to reduce inflammatory signaling. And in animals, it seems to delay the onset of the phenotype. But it's just one of the challenges with orphan diseases. It's often hard to really get a good handle on the translatability to humans until you actually get into the human studies. So not really a great answer, but just it's a reflection of the lack of data there.

--------------------------------------------------------------------------------

Operator [44]

--------------------------------------------------------------------------------

This concludes our question-and-answer session. I would like to turn the conference back over to Stephanie Diaz for any closing remarks.

--------------------------------------------------------------------------------

Stephanie Diaz, Vida Strategic Partners Inc. - President & CEO [45]

--------------------------------------------------------------------------------

Thank you, again, for your participation and continued support of Viking Therapeutics. We look forward to updating you again in the coming months. Have a great afternoon. You can all disconnect now. Thanks.

--------------------------------------------------------------------------------

Operator [46]

--------------------------------------------------------------------------------

The conference has now concluded. Thank you for attending today's presentation.