Viking Therapeutics
Annual Report 2015

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KViking Therapeutics, Inc. - VKTXFiled: March 08, 2016 (period: December 31, 2015)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)xxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2015ORooTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITIONPERIOD FROM TO Commission File Number 001-37355 Viking Therapeutics, Inc.(Exact name of Registrant as specified in its Charter) Delaware 46-1073877( State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)12340 El Camino Real, Suite 250San Diego, California 92130(Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (858) 704-4660 Securities registered pursuant to Section 12(b) of the Act Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, par value $0.00001 per share The Nasdaq Capital Market Securities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No xIndicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No xIndicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No oIndicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit andpost such files). Yes x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best ofRegistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. xIndicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “largeaccelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a small reporting company) Smaller reporting company x Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No xThe aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on theNasdaq Capital Market on June 30, 2015 (the last trading day of the registrant’s second fiscal quarter of 2015), was $18,289,869. Shares of voting stock held by directors, officersand stockholders or stockholder groups whose beneficial ownership exceeds 5% of the registrant’s common stock outstanding have been excluded in that such persons may bedeemed to be affiliates. The number of shares owned by stockholders whose beneficial ownership exceeds 5% was determined based upon information supplied by such personsand upon Schedules 13D and Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 13G, if any, filed with the Securities and Exchange Commission. This assumption regarding affiliate status is not necessarily a conclusive determination for other purposes.The number of shares of the Registrant’s Common Stock outstanding as of February 29, 2016 was 9,683,741. DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s Definitive Proxy Statement for its 2016 Annual Meeting of Stockholders or an amendment to this Annual Report on Form 10-K to be filed with theSecurities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2015 are incorporated by reference into Part III of this Annual Report onForm 10-K. Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents PagePART I Item 1. Business 1Item 1A. Risk Factors 31Item 1B. Unresolved Staff Comments 60Item 2. Properties 60Item 3. Legal Proceedings 60Item 4. Mine Safety Disclosures 61 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 62Item 6. Selected Financial Data 63Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 64Item 7A. Quantitative and Qualitative Disclosures About Market Risk 72Item 8. Financial Statements and Supplementary Data 73Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 73Item 9A. Controls and Procedures 73Item 9B. Other Information 73 PART III Item 10. Directors, Executive Officers and Corporate Governance 74Item 11. Executive Compensation 74Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 74Item 13. Certain Relationships and Related Transactions, and Director Independence 74Item 14. Principal Accounting Fees and Services 74 PART IV Item 15. Exhibits, Financial Statement Schedules 75 iSource: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. This Annual Report on Form 10-K contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section21E of the Securities Exchange Act of 1934, as amended, in connection with the Private Securities Litigation Reform Act of 1995 that involve risks anduncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from thoseexpressed or implied by such forward-looking statements. Such forward-looking statements include estimates of our expenses, future revenue, capitalrequirements and our needs for additional financing; statements regarding our ability to develop, acquire and advance drug candidates into, andsuccessfully complete, clinical trials and preclinical studies; statements concerning new product candidates; risks and uncertainties associated with ourresearch and development activities, including our clinical trials and preclinical studies; our expectations regarding the potential market size and the sizeof the patient populations for our drug candidates, if approved for commercial use, and our ability to serve such markets; statements regarding our abilityto maintain and establish collaborations or obtain additional funding; statements regarding developments and projections relating to our competitors andour industry and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. These statementsare often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may” or “will,” the negativeversions of these terms and similar expressions or variations. These statements are based on the beliefs and assumptions of our management based oninformation currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could causeactual results and the timing of certain events to differ materially and adversely from future results expressed or implied by such forward-lookingstatements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in thesection titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K and in our other Securities and Exchange Commission filings.Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-lookingstatements to reflect events or circumstances occurring after the date of such statement. Throughout this Annual Report on Form 10-K, unless the context otherwise requires, the terms “Viking,” “we,” “us” and “our” in this Annual Report onForm 10-K refer to Viking Therapeutics, Inc. PART I Item 1. Business.OverviewWe are a clinical-stage biopharmaceutical company focused on the development of novel, first-in-class or best-in-class therapies for metabolic and endocrinedisorders. We have exclusive worldwide rights to a portfolio of five drug candidates in clinical trials or preclinical studies, which are based on smallmolecules licensed from Ligand Pharmaceuticals Incorporated, or Ligand. Details regarding our license agreement with Ligand are discussed under theheading “Agreements with Ligand” under Part I, “Item 1. Business” of this Annual Report on Form 10-K.Our lead clinical program is VK5211, an orally available drug candidate, currently in a Phase 2 clinical trial for acute rehabilitation following non-electivehip fracture surgery. Hip fracture is a common injury among persons aged 60 and older. The acute recovery period post-injury is characterized by significantand rapid declines in bone mineral density, or BMD, and lean body mass, or LBM, which contributes to substantial morbidity and mortality in these patients.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 anormal physiologic role of interacting with naturally-occurring hormones called androgens. Broad activation of androgen receptors with drugs, such asexogenous testosterone, can stimulate muscle growth and improve BMD, but often results in unwanted side effects such as prostate growth, hair growth andacne. VK5211 is expected to selectively produce the therapeutic benefits of testosterone in muscle and bone tissue, potentially accelerating rehabilitationand improving patient outcomes.We expect VK5211 to produce the therapeutic benefits of testosterone, including increased LBM and BMD, with improved safety, tolerability and patientacceptance due to a tissue-selective mechanism of action and an oral route of administration. Tissue selectivity is particularly important in treating patientsrecovering from non-elective hip fracture surgery, as these patients experience abnormally elevated losses of muscle tissue and BMD. This results in a loss ofmuscle strength, an increased risk of additional fractures and increased mortality. We believe the selective stimulation of androgen receptors in muscle andbone provides an attractive therapeutic approach for patients recovering from hip fractures. In Phase 1 clinical trials, VK5211 demonstrated statisticallysignificant increases in LBM among treated subjects following 21 days of treatment. Statistically significant refers to a low probability, generally regarded asless than or equal to 5%, of obtaining the observed result under a hypothesis that assumes no difference between treatment groups. We also observed positivedose-dependent trends in functional exercise and strength measures consistent with anabolic activity. In addition, no drug-related serious adverse events werereported. In an established animal model of osteoporosis, treatment with VK5211 resulted in significant increases in BMD and bone strength. InOctober 2015, we commenced enrollment for a Phase 2 proof-of-concept clinical trial in patients recovering from non-elective hip fracture surgery, and weexpect to enroll a total of 120 patients1Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. and complete enrollment in this clinical trial in the second half of 2016. We also plan to discuss with the U.S. Food and Drug Administration, or the FDA,potential clinical development of VK5211 in other acute use settings, such as cancer cachexia.Hip fractures occur in over 300,000 persons in the U.S. annually. Most hip fractures occur in the elderly, often resulting from minimal trauma, such as a fallfrom standing height. Unfortunately, elderly individuals are at higher risk of substantial morbidity and mortality due to these fractures as a result of higherrates of frailty and undernourishment. Furthermore, the rate of hip fracture is known to increase with age, doubling every 5-6 years after age 60. Hip fracturescan lead to devastating consequences. Disability frequently results from persistent pain and limited physical mobility. Hip fractures are associated withsubstantial morbidity and mortality, with approximately 15%-20% of patients dying within one year of fracture. There are currently no approved therapies inthe U.S. for restoration or preservation of LBM, BMD or physical function in patients who have suffered a hip fracture. Pharmacological interventions,including with steroids, have demonstrated limited clinical benefit or expose patients to the risk of undesirable side-effects, such as virilization in women andprostate growth in men. We believe the potential size of the worldwide hip fracture treatment market for a SARM exceeds $1.0 billion annually.Our second program is focused on the development of orally available small molecule thyroid hormone receptor beta, or TRß, agonists. Our two leadmolecules are VK2809 and VK0214. We believe selective thyroid receptor agonists have the potential to treat a variety of lipid disorders. Thyroid hormonereceptors are found in several tissues throughout the body. The TRß isoform is the major receptor subtype expressed in the liver and the TRa isoform is themajor subtype expressed in the heart. Selective activation of the TRß receptor in liver tissue is believed to favorably affect cholesterol and lipoprotein levelsvia multiple mechanisms, including increasing the expression of low-density lipoprotein receptors, or LDL, receptors and increasing mitochondrial fatty acidoxidation. These characteristics in turn lead to reductions of LDL cholesterol, or LDL-C, plasma and liver triglycerides. We are developing VK2809 for thepotential treatment of hypercholesterolemia and fatty liver disease. We are developing VK0214 for the potential treatment of X-linkedadrenoleukodystrophy, or X-ALD. We believe our selective TRß agonists are capable of achieving this unique lipid lowering profile without elicitingunwanted effects on the heart and thyroid hormone axis.VK2809 is an orally available, tissue and receptor-subtype selective agonist of the thyroid beta receptor that is entering Phase 2 development for thetreatment of patients with hypercholesterolemia and fatty liver disease. VK2809 belongs to a family of novel prodrugs which are cleaved in vivo to releasepotent thyromimetics.In a Phase 1 multiple ascending dose clinical trial, patients with mild hypercholesterolemia who were treated with VK2809 at doses of 5 mg and aboveexperienced significant placebo-adjusted LDL-C reductions from baseline, ranging from approximately 15%-41%. In addition, placebo-adjusted triglyceridelevels were reduced by more than 30% at doses of 2.5 mg and above. There were no serious adverse events observed in this trial, and no differences in heartrate, heart rhythm or blood pressure were observed between VK2809 and placebo-treated patients. In addition, VK2809 has demonstrated significantreductions in liver fat content in multiple animal models of fatty liver disease, suggesting potential efficacy in the setting of nonalcoholic steatohepatitis, orNASH. We plan to commence a Phase 2 clinical trial of VK2809 in approximately 100 patients with hypercholesterolemia and fatty liver disease in the firsthalf of 2016 and to complete this clinical trial in the fourth quarter of 2016 or the first quarter of 2017.In the U.S., the number of patients with dyslipidemia was estimated to be greater than 100 million in 2013. In the U.S., 33.5% of adults, or 71.0 millionpeople, have high LDL-C. NASH is a growing epidemic in the U.S., and is quickly becoming a leading cause of cirrhosis and liver failure. It is estimated thatNASH affects 2% to 5% of Americans, or 6.0 to 15.0 million people. As a result, we believe the global market opportunity for VK2809 inhypercholesterolemia or NASH exceeds $1.0 billion.We are also developing VK0214 for X-ALD, a rare X-linked, inherited neurological disorder characterized by a breakdown in the protective barrierssurrounding brain and nerve cells. The disease is caused by mutations in a peroxisomal transporter of very long chain fatty acids, or VLCFA, known as theadenosine triphosphate binding cassette transporter D1, or ABCD1. As a result, transporter function is impaired and patients are unable to efficientlymetabolize VLCFA. The TRß receptor is known to regulate expression of an alternative VLCFA transporter, known as ABCD2. Various preclinical modelshave demonstrated that increased expression of ABCD2 can lead to normalization of VLCFA metabolism. Preliminary in vitro data suggest that VK0214stimulates ABCD2 expression. We are conducting studies of VK0214 in an in vivo model of disease. Pending completion of this work, we expect in 2016 tocommence work directed toward filing an Investigational New Drug Application, or IND.X-ALD is a rare, often fatal condition believed to occur with an incidence of approximately one in 17,000 births. X-ALD is caused by mutations in the geneencoding for ABCD1, which is located on the X chromosome. Men have one X chromosome, while women have two copies. Because of this, an inheritedmutation in the ABCD1 gene is more likely to manifest in males relative to females. The ABCD1 protein plays a critical role in the transport of VLCFA into acellular organelle called the peroxisome, where VLCFA metabolism and disposal occur. Without functional ABCD1, VLCFA accumulate in cells, includingneural cells, where they can lead to membrane disruption and damage to the myelin sheath, a protective and insulating membrane that surrounds nerve cellsin the brain. This damage can result in decreased motor coordination and function, visual and hearing disturbances, the loss of cognitive2Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. function, dementia, seizures, adrenal dysfunction and other complications, including death. There are currently no approved therapies for X-ALD andpharmacologic interventions have demonstrated limited clinical benefit. As a result, we believe the worldwide X-ALD market exceeds $1.0 billion.We have a pipeline with three additional programs targeting metabolic diseases and anemia. Our most advanced pipeline program is VK0612, a first-in-class,orally available Phase 2b-ready drug candidate for type 2 diabetes. Preliminary clinical data suggest VK0612 has the potential to provide substantialglucose-lowering effects, with an attractive safety and convenience profile compared with existing type 2 diabetes therapies. Our preclinical programs arefocused on identifying orally available erythropoietin receptor, or EPOR, agonists, for the potential treatment of anemia, and on the development of tissue-selective inhibitors of diacylglycerol acyltransferase-1, or DGAT-1, for the potential treatment of obesity and dyslipidemia.Our Product PipelineThe following table highlights our product pipeline: Key: SARM, selective androgen receptor modulator; TRß, thyroid receptor beta; NASH, nonalcoholic steatohepatitis.Our StrategyWe intend to become a leading biopharmaceutical company focused on the development of novel, first-in-class or best-in-class therapies for metabolic andendocrine disorders. The key elements of our strategy include: ·Advance the development of VK5211 for hip fracture and other muscle wasting disorders. We have commenced enrollment for a Phase 2 proof-of-concept clinical trial in patients recovering from non-elective hip fracture surgery, and we expect to enroll a total of 120 patients andcomplete enrollment in this clinical trial in the second half of 2016 and complete the trial in the first quarter of 2017. Pending positive datafrom this clinical trial, we plan to advance VK5211 in further clinical trials. ·Advance the development of VK2809 for hypercholesterolemia and fatty liver disease. We plan to commence a Phase 2 clinical trial inapproximately 100 patients with hypercholesterolemia and fatty liver disease in the first half of 2016 and expect to complete this clinical trialin the fourth quarter of 2016 or the first quarter of 2017. ·Advance the development of VK0214 for X-ALD. We are evaluating VK0214 in an animal model of X-ALD and expect to complete the study in2016. ·Advance the development of VK0612 for type 2 diabetes. Pending receipt of sufficient funding, we intend to commence clinical developmentof VK0612 to evaluate once-daily doses of VK0612 in patients with poorly-controlled type 2 diabetes. ·Advance the development of our preclinical programs. We currently have two additional preclinical programs in development. Pending receiptof sufficient funding, we also plan to further advance our EPOR agonist and DGAT-1 inhibitor programs. ·Evaluate strategic partnership and collaboration opportunities. We plan to selectively evaluate partnership and collaboration opportunitiesthroughout the duration of our development programs. In addition, we may opportunistically pursue in-licensing opportunities.3Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. VK5211: A Selective Androgen Receptor Modulator (SARM) for Hip FractureProduct SummaryOur lead clinical program, VK5211, is an orally available, non-steroidal SARM in development for the treatment of patients recovering from non-elective hipfracture surgery. VK5211 is designed to selectively produce the therapeutic benefits of testosterone in muscle and bone tissue with improved safety andtolerability. Tissue selectivity is critical in treating patients recovering from hip fracture. These patients experience elevated rates of metabolic breakdown ofmuscle tissue and loss of BMD. This results in a loss of muscle strength, an increased risk of additional fractures and increased mortality. Androgens, such astestosterone, are hormones that stimulate a variety of physiologic processes, including muscle, bone, hair and prostate growth. However, testosterone’s lack ofselectivity can produce undesirable side effects such as prostate growth in men, and hair growth and masculinization in women.VK5211 has been evaluated in three Phase 1 clinical trials. Based on these clinical and additional preclinical data, we believe VK5211 has the followingimportant characteristics that may suggest therapeutic benefits in patients recovering from hip fracture surgery: ·Improvement in lean body mass: Preliminary Phase 1 data suggest VK5211 rapidly stimulates the formation of LBM, an important property forthe hip fracture recovery setting, where patients can lose up to 6% of lean body mass in the two months following injury. ·Improvement in bone growth and density: VK5211 has demonstrated encouraging efficacy in a standard animal model of osteoporosis,demonstrating improved bone mineral content, density and strength. This may benefit patients following hip surgery, where loss of bonemineral density can exceed 12 times the background rate for patients with osteoporosis. ·Encouraging tolerability: VK5211 has been well-tolerated at and above doses that we are currently administering in our Phase 2 clinical trial. ·Novel mechanism of action: Based on the anabolic characteristics imparted by selective activation of the androgen receptor, we believeVK5211 may stimulate bone and muscle growth, without demonstrating adverse bone remodeling properties that are a potential concern forosteoporosis drugs such as bisphosphonates. We expect VK5211’s novel mechanism of action to provide critical bone and muscle growthpromoting advantages. ·Once-daily, oral convenience: Clinical data suggest that VK5211 has the potential to provide therapeutic benefits via once-daily oral dosing.This may represent an important advantage among elderly patients, relative to injectable protein or bisphosphonate therapies.The initial IND filing for VK5211 was submitted in December 2008 by Ligand. The subject of the IND was an application to begin clinical investigations ofthe drug substance in healthy volunteers. In a Phase 1 clinical trial, VK5211 was shown to be safe and well-tolerated following daily oral administration for21 days. In this clinical trial, statistically significant increases in lean muscle mass were observed in drug-treated subjects compared to subjects treated withplacebo (p=0.047), and positive dose-dependent trends in functional exercise and strength measures were consistent with anabolic activity. Statisticallysignificant refers to a low probability, generally regarded as less than or equal to 5%, of obtaining the observed result under a hypothesis that assumes nodifference between treatment groups. No clinically significant drug-related adverse events were reported. In animal models, VK5211 has demonstratedanabolic activity in muscles, anti-resorptive and anabolic activity in bones, and robust selectivity for muscle and bone versus prostate and sebaceous glands.In October 2015, we commenced enrollment for a Phase 2 proof-of-concept clinical trial in patients recovering from non-elective hip fracture surgery, and weexpect to enroll a total of 120 patients and complete enrollment in this clinical trial in the second half of 2016. Pending positive data from this clinical trial,we plan to advance VK5211 in further clinical trials. We also plan to discuss with the FDA potential clinical development of VK5211 in other settings, suchas cancer cachexia.Androgens and Androgen ReceptorsAndrogens are important for the proper regulation of the reproductive system, and play critical roles in the homeostasis of the muscular, skeletal,cardiovascular, metabolic and central nervous systems. The most predominant androgen hormone is testosterone. Testosterone is predominately produced inthe testes in men and in the adrenal glands and ovaries in women, albeit at lower levels than in men. Testosterone stimulates the growth of muscle and bone,also known as anabolic effects, as well as the growth of the prostate and sebaceous gland, also known as androgenic effects and, as such, testosterone isconsidered a non-tissue-selective androgen.4Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. While testosterone preparations are widely used for the treatment of male hypogonadism, the androgenic activity of testosterone limits its use in women andin elderly men who have a higher risk of developing benign prostatic hyperplasia, or BPH, a benign increase in prostate size, and prostate cancer. In men, thelack of selectivity of anabolic steroids may result in side effects such as acne, hair loss and progression of BPH and/or prostate cancer. In women, exposure toexogenous testosterone can be associated with hair growth, acne and masculinization. Furthermore, testosterone must be administered by intramuscularinjections, transdermal patches or gels. These routes of administration can be inconvenient or associated with potential safety issues. We believe VK5211’sselectivity, limited off-target effects and convenient route of administration may make it superior to off-label testosterone for treating hip fracture and othermuscle wasting disorders.SARMs are a class of small molecules designed to elicit the benefits of androgens on tissues such as muscle and bone, without the undesirable effects onprostate and sebaceous glands, by selectively activating androgen receptors in certain tissues. We believe that, based on their robust activity on muscle andbone, SARMs can be used for the potential treatment of a number of diseases or disorders, including hip fracture, muscle wasting, osteoporosis, frailty andhormone deficiency in both men and women in cases where testosterone supplements or anabolic steroid treatments are ineffective or where the side effectprofile is inappropriate.Hip Fracture and Other Muscle Wasting Market OpportunitiesWe are currently conducting a Phase 2 clinical trial for acute rehabilitation following non-elective hip fracture surgery. More than 300,000 patients in theU.S. experience hip fractures each year, and approximately 50% lose the ability to live independently following the injury. The number of hip fractures isexpected to grow in the U.S. as the population ages. Due to required limitations in mobility following hip fracture, patients experience muscle atrophy, ordeterioration from lack of use, which impacts the time required for rehabilitation to restore physical function. We believe VK5211’s potential stimulatoryeffect on lean body mass could result in benefits to patients recovering from hip fracture or other conditions requiring orthopedic intervention, such as hip orknee replacement surgery. Currently, there are no approved therapies to assist in the maintenance or restoration of LBM, BMD or restoration of functionalperformance for these patients.Hip fracture in the elderly is a serious and debilitating condition with a high mortality rate. One year mortality in this group is estimated to range from 20% to30% and an estimated 50% of patients lose the ability to walk independently. As a result of the loss of mobility, and additional morbidities caused by the hipfracture, 20% of patients will require stays at long-term care facilities. Studies show that following hip fracture, patients experience a severe and rapid declinein LBM and BMD. These reported rates of decline are 12 to 75 times the rates observed in persons of similar age and demographics who have not sustained ahip fracture. Loss of LBM is believed to contribute to morbidity, disability and risk of re-fracture in hip fracture patients. Loss of BMD is associated with anincreased risk of mortality and re-fracture. The following graphs illustrate the representative losses in LBM and BMD in the 60 days following hip fracture, asmeasured in the total hip and at the femoral neck. No therapies are currently approved to treat patients experiencing loss of LBM and BMD in the acute setting following non-elective hip fracture surgery. Inaddition, there are no approved therapies to facilitate improved functional performance following surgery.VK5211: A Potent, Non-Steroidal SARMVK5211 is an orally available, non-steroidal SARM. VK5211 is a third generation SARM with greatly improved tissue-selectivity and other characteristicsrelative to earlier-generation SARM-targeting drug candidates. VK5211 selectively activates androgen receptors5Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. in muscle and bone, stimulating muscle and bone growth, while avoiding undesirable side effects, such as unwanted hair growth, acne or stimulation ofsebaceous glands and prostate growth. We believe VK5211 is a potential best-in-class compound due to its selectivity, potency and ability to show positiveeffects within a short treatment duration.Clinical Data for VK5211In three Phase 1 clinical trials, VK5211 was shown to be safe and well-tolerated at all doses following daily oral administration for up to 21 days. There wereno reported serious adverse events determined to be related to treatment, and no clinically significant changes in liver function tests, prostate-specificantigen, hematocrit or electrocardiogram readings were observed. Moreover, subjects treated with VK5211 for 21 days experienced statistically significantincreases in lean muscle mass, and positive dose-dependent trends in functional exercise and strength measures were consistent with anabolic activity.The first Phase 1 clinical trial was a randomized, double-blind, placebo-controlled trial in 48 healthy male volunteers conducted in 2009. In this clinical trial,six cohorts received an escalating single dose of VK5211 ranging from 0.1 mg to 22 mg. The primary objective of this clinical trial was to evaluate the safetyand tolerability of escalating single doses of VK5211 in healthy male subjects. Secondary objectives of the first Phase 1 clinical trial included adetermination of the pharmacokinetics, or PK, and pharmacodynamics, or PD, of single escalating doses of VK5211 in healthy male subjects. The resultsshowed that single doses at the levels administered were well-tolerated and no serious or severe adverse events were observed among subjects receivingVK5211. The PD results showed dose-related decreases in total testosterone and sex-hormone binding protein, consistent with the mechanism of action ofselective androgen receptor modulation. A dose-related decrease in fasting serum HDL was also observed. VK5211 was well-tolerated and demonstratedpredictable dose-proportional increases in systemic exposure.In a subsequent Phase 1 multiple ascending dose clinical trial, which commenced in 2010 and was completed in 2011, 76 healthy men in three cohorts weredosed daily with placebo, 0.1 mg, 0.3 mg or 1 mg of VK5211 for 21 days. The primary objective of the second Phase 1 clinical trial for VK5211 was to assessthe safety and tolerability of escalating doses of VK5211 following repeated once-daily oral administration for 21 days in healthy men. Secondary objectivesincluded a determination of the PK and PD of VK5211 following repeated once-daily oral administration for 21 days. Exploratory objectives included adetermination of the effects of 21 days of treatment with VK5211 on lean body mass measured by dual energy X-ray absorptiometry scan, maximal voluntarystrength measured by the one repetition maximum method, and stair climbing power. The average body mass index in all cohorts ranged from 24.6 kg/m2 to27.0 kg/m2 . In this clinical trial, subjects receiving 1 mg doses of VK5211 demonstrated a statistically significant 1.21 kilogram average increase in leanbody mass. Positive, dose-dependent trends in strength and performance measurements were also observed. There were no significant changes or trends in fatmass across cohorts. VK5211 was shown to be safe and well tolerated, with a similar frequency of adverse events between the treated and placebogroups. There were no drug-related serious adverse events. In addition, there were no significant changes in hemoglobin, prostate-specific antigen, liverfunction tests or QT interval at any dose. VK5211 also displayed a favorable pharmacokinetic profile, without any changes in prostate-specific antigen. In September 2015, we completed a Phase 1 clinical trial of VK5211 in 24 healthy male and female subjects aged 65 and over. Subjects received once-dailyoral doses of VK5211 for seven days. The results of this study showed VK5211 to be safe and well-tolerated, with predictable pharmacokinetic properties.6Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Preclinical DataVK5211 has also demonstrated anabolic activity in muscles, anti-resorptive and anabolic activity in bone, and robust selectivity for muscle and bone versusprostate and sebaceous glands in animal models. The effects of VK5211 on bone strength, bone mineral content and BMD were evaluated in ovariectomizedfemale rats, which are rats that have undergone surgical removal of the ovaries. The ovariectomized rat model is a standard animal model for evaluating theeffect of pharmaceutical agents in osteoporosis, because removal of ovaries stimulates high bone turnover and subsequent bone loss, creating a simulatedpost-menopausal state that models the metabolic changes in post-menopausal osteoporosis patients. As shown below, in ovariectomized rats, at the twohighest doses, VK5211 produced significant increases in femur bone mineral content and bone strength relative to ovariectomized rats treated with vehicle.In addition, VK5211 demonstrated anabolic effects in bone formation rates, bone density, bone volume and trabecular thickness. Effects of VK5211 on Bone in Ovariectomized Rats The tissue-selectivity of VK5211 was examined in a castrated rat model. The castrated rat model is a standard animal model for examining tissue selectivityfor SARMs due to the rapid nature of muscle atrophy in castrated animals and the high sensitivity to muscle growth upon androgen-based treatment. Musclemass can be restored with a potent androgen-receptor agonist, such as testosterone. Initially, rats are castrated or receive sham surgery. Sham rats are rats thatreceive surgical procedures that do not remove the ovaries or have other physiologic purposes. Upon recovering from the surgery, castrated and sham rats areadministered either an active therapy such as VK5211 or testosterone. The effects of therapy in this model are assessed by measuring muscle and prostatetissue mass. Muscle mass in castrated animals treated with vehicle is assigned 0% relative efficacy, while muscle mass in non-castrated animals thatunderwent sham surgery is assigned 100% relative efficacy. For example, a castrated rat treated with a drug that demonstrates 100% relative efficacy wouldhave equivalent tissue mass to a non-castrated rat.In this model, VK5211 demonstrated greater than 500-fold selectivity for maintaining muscle weight at non-castrate levels relative to the effects on prostateweight. By comparison, testosterone shows similar effects on both muscle and prostate tissue. These data suggest that VK5211 is highly tissue-selective formuscle, potentially leading to an improved therapeutic profile relative to testosterone.7Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Effects of VK5211 in Muscle and Prostate Tissue in Castrated Rats In studies of VK5211 in non-human primates, treatment periods of 14 days and 13 weeks resulted in significant increases in body mass relative tobaseline. For example, in a 13 week good laboratory practice-safety study, treated animals experienced progressive body weight gain of 20% to 47% frombaseline. Most of this increase in body weight was retained after a four-week recovery period.Development PlansWe expect to develop VK5211 for potential treatment of a wide range of diseases and disorders in both men and women. In October 2015, we commencedenrollment for a randomized, double-blind, placebo-controlled, multicenter Phase 2 proof-of-concept trial in patients who recently underwent non-electivehip fracture surgery. We expect to enroll approximately 120 patients in this clinical trial. We will evaluate three doses of VK5211 and plan to assess changesin LBM, BMD, functional status and quality of life among treated versus untreated patients after 12 weeks of therapy. We expect enrollment in this clinicaltrial to be completed in the second half of 2016, and the trial to be completed in the first quarter of 2017. Pending positive data from this study, we plan toadvance VK5211 in further clinical trials. We also plan to discuss with the FDA potential clinical development of VK5211 in other settings, such as cancercachexia.Future Opportunity in Cancer CachexiaCachexia is a complex disease characterized by an uncontrolled decline in muscle mass. Patients suffering from cachexia experience increased rates ofmetabolic breakdown of muscle tissue, resulting in a loss of muscle strength and reduced body weight. The condition is often found secondary to anunderlying disease, such as cancer, chronic obstructive pulmonary disease, heart failure and HIV/AIDS. It is estimated that a combined total of approximately9.0 million people suffer from cachexia in the U.S., Europe and Japan. A combination of factors tied to the underlying disease, including reduced growthfactor production and overproduction of inflammatory and apoptosis, or cell-death, mediators, create an imbalance in muscle formation and degradation. Theresulting dysregulation and associated weight loss leads to increased mortality rates in affected patients. Common clinical symptoms include decline inphysical function and impaired immune function, which contribute to increased disability, fatigue, diminished quality of life and reduced rate of survival.Although muscle wasting associated with cancer can be partially attributed to nutritional deficiencies, the use of appetite stimulants and nutritionalinterventions are generally ineffective. This is likely due to the failure of these approaches to address the underlying catabolic processes contributing tomuscle wasting. Additionally, cancer patients with severe weight loss, poor performance status and metastatic disease who no longer respond to therapy maybe less likely to respond to single therapies designed to increase muscle mass and improve physical function. Because muscle wasting, which often leads torefractory cachexia, has significant negative8Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. impacts on patients and their families, early intervention with therapeutic agents aimed at stimulating muscle mass is critically important.Approximately 2.0 million cancer patients in North America and Europe suffer from cachexia, and it is estimated that up to 20% of all cancer deaths are adirect result of cachexia. It is particularly common among patients with lung, gastric, colorectal or pancreatic cancers, with up to 80% of patients with gastricor pancreatic cancers, and approximately 50% of patients with lung or colorectal cancers, suffering from the syndrome. There are currently no approvedtherapies in the U.S. for cancer cachexia, and pharmacological interventions have demonstrated limited clinical benefit or expose patients to the risk ofundesirable side-effects such as virilization in women and prostate growth in men. As a result, we believe the potential size of the worldwide cancer cachexiamarket exceeds $1.0 billion.Pending approval of VK5211 in the acute hip fracture setting, we may seek to pursue label expansion for VK5211 in non-small cell lung cancer, or NSCLC,patients with cachexia. According to the American Cancer Society, an estimated 224,000 patients in the U.S. are projected to be diagnosed with lung cancerin 2014, of which approximately 85% of these cases are expected to be NSCLC. At diagnosis, approximately half of NSCLC patients present with some formof muscle wasting syndrome. Muscle wasting in this population is associated with reduced strength, increased fatigue and a decrease in overall quality of life.In addition, data indicate that lean body mass may correlate with overall survival, suggesting a potential link between improvement in lean body mass andsurvival. We believe VK5211 may benefit a large segment of the NSCLC patient population, due to the drug’s potential therapeutic benefits on muscle massand associated functional gains.In the U.S., the number of patients with dyslipidemia was estimated to be greater than 100 million in 2013. In the U.S., 33.5% of adults, or 71.0 millionpeople, have high LDL-C. NASH is a growing epidemic in the U.S., and is quickly becoming a leading cause of cirrhosis and liver failure. It is estimated thatNASH affects 2% to 5% of Americans, or 6.0 to 15.0 million people. As a result, we believe the global market opportunity for VK2809 inhypercholesterolemia or NASH exceeds $1.0 billion.VK2809 and VK0214: Novel Selective Thyroid Hormone Receptor-ß, or TRß, Agonists for Lipid Disorders and AdrenoleukodystrophyProduct SummaryVK2809 and VK0214 are novel, orally available, selective TRß agonists in development for lipid disorders and X-ALD. Thyroid hormone receptors are foundin various tissues throughout the body. TRß is the major receptor isoform expressed in the liver and TRa is the major isoform expressed in the heart. Theunique properties of our TRß agonists are designed to reduce or eliminate the deleterious effects of extra-hepatic thyroid receptor activation. In particular,high tissue and TRß selectivity may lead to reduced activity at the TRa receptor, which can be associated with increased respiration and cardiac tissuehypertrophy. Selective activation of the TRß receptor in liver tissue is believed to favorably affect cholesterol and lipoprotein levels via multiplemechanisms, including increasing the expression of low-density lipoprotein receptors and increasing mitochondrial fatty acid oxidation. Thesecharacteristics in turn lead to reductions of LDL-C, plasma and liver triglycerides. In addition, our chemical structures are not substrates for certaintransporters involved in the uptake of thyroid hormone. Various animal models have shown that our molecules, as a result of their unique profiles, may havereduced cardiovascular effects versus thyroid hormone and other thyromimetics.As a result of these characteristics, we believe our selective TRß agonists are capable of eliciting a unique lipid lowering profile without eliciting unwantedeffects on the heart and thyroid hormone axis. In Phase 1 clinical trials, subjects treated with VK2809 at doses of 5 mg and above experienced significantplacebo-adjusted LDL-C reductions from baseline, ranging from approximately 15-41%. In addition, placebo-adjusted triglyceride levels were reduced bymore than 30% at doses of 2.5 mg and above. There were no serious adverse events observed in this trial, and no differences in heart rate, heart rhythm orblood pressure were observed between VK2809 and placebo-treated patients. In addition, VK2809 has demonstrated significant reductions in liver fatcontent in multiple animal models of fatty liver disease, suggesting potential efficacy in the NASH setting.We are developing VK2809 for the potential treatment of cholesterolemia and fatty liver disease. Because prior studies have shown excellent data in both thelipid-lowering setting and in models of fatty liver disease, we plan to conduct a Phase 2 clinical trial to evaluate both potential indications. We will targetpatients who have elevated cholesterol, fatty liver disease, and at least three risk factors for metabolic syndrome. Metabolic syndrome is considered a majordriver for the onset of NASH. The primary endpoint of this trial will assess changes in LDL-C, with exploratory endpoints evaluating changes in liver fatcontent, inflammatory markers, and histological changes. We expect to commence the study in the first half of 2016 and complete the study in the fourthquarter of 2016 or the first quarter of 2017. Upon conclusion, we expect to be in a position to move forward in either hypercholesterolemia or NASH.9Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. VK2809 SummaryVK2809 has been evaluated in two Phase 1 clinical trials. Based on these clinical and additional preclinical data, we believe VK2809 has the followingimportant characteristics that may benefit patients with metabolic or lipid disorders: ·Broader efficacy: Preliminary Phase 1 data suggest VK2809 could reduce plasma LDL-C, triglyceride and atherogenic protein levels by greateramounts than existing oral therapies. Such broad and potent lipid lowering-activity may be particularly desirable for poorly-controlled patientswith hypercholesterolemia or mixed dyslipidemia, or among patients with risk factors such as chronic kidney disease. ·Encouraging safety profile: VK2809 has demonstrated encouraging safety to date in over 110 subjects. No drug related serious adverse eventswere observed. In addition, no cardiovascular abnormalities were reported, in-line with the expected high tissue and receptor selectivity forVK2809. ·Encouraging tolerability: VK2809 has been well-tolerated at and above doses that we plan to administer in future clinical trials. ·Novel mechanism of action: Based on its selective thyroid receptor targeting mechanism of action, we believe VK2809 has the potential tolower plasma and liver lipid levels in a manner complementary to existing agents such as statins. In particular, we expect the unique liver-targeting properties of VK2809 will impart a robust lipid lowering effect within hepatic tissue, with potential therapeutic applications in fattyliver diseases such as NASH. ·Combinability: VK2809’s novel mechanism of action is expected to allow combinability with many existing therapies, leading to enhancedefficacy and potentially delaying transition to subsequent therapies. ·Once-daily convenience: Clinical data suggest that VK2809 has the potential to lower plasma lipid levels in hypercholesterolemia patients as aonce-daily oral therapy.Clinical Data for VK2809VK2809 has been evaluated in two Phase 1 clinical trials. The initial Phase 1 safety, tolerability and pharmacokinetic study of VK2809 was conducted in2006. This was followed by a 14-day Phase 1b clinical trial in 56 patients with mild hypercholesterolemia, defined as baseline plasma LDL-C of at least 100mg/dL. This study was initiated in 2007 and completed in 2008. VK2809 was shown to be safe and well-tolerated across doses ranging from 0.25 mg to 40mg per day. There were no serious adverse events, and the frequency of adverse events in VK2809-treated subjects was similar to placebo-treated subjects. Nodifferences in heart rate, heart rhythm or blood pressure were observed between VK2809 and placebo-treated patients. Mild increases in liver enzymes wereobserved at the higher doses of VK2809 along with dose-related mean shifts in thyroid hormone levels. The clinical trial results also showed dose-relatedreductions in fasting LDL-C and fasting triglyceride, or TG, levels at day 14. Significant placebo-adjusted LDL-C reductions from baseline were observed atdoses of 5 mg and above and ranged from approximately 15%-41%, while placebo-adjusted TG levels were reduced by more than 30% at doses of 2.5 mg andabove. In addition, statistically significant reductions of lipoprotein a (Lp(a)) and apolipoprotein (Apo(B)), which are believed to be positively associatedwith a patient’s risk of developing cardiovascular disease, were observed in certain cohorts. We believe these preliminary results compare favorably with thelipid lowering activities of existing oral agents for hyperlipidemia. A comparison of the Phase 1b efficacy results of VK2809 and data from existinghyperlipidemia agents is shown in the table below.10Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Preclinical DataVK2809, which is our most advanced TRß agonist, is a potent small molecule that is selective for the TRß receptor compared with the alpha receptor.VK2809 has an equilibrium dissociation constant Ki, which refers to the concentration of drug required to occupy 50% of available TRß receptors, ofapproximately 2 nanomoles per liter, and has approximately 16:1 selectivity for the beta receptor over the alpha receptor. VK2809 has demonstratedcholesterol-lowering activity in five animal species. In addition, VK2809 has demonstrated additive cholesterol lowering activity when combined withatorvastatin, an approved and widely prescribed medication for lowering cholesterol. Treatment of rodents with VK2809 also led to a beneficial reduction inliver fat content. For example, histologic evaluation of liver tissue, as well as quantitative data showing liver triglyceride content was reduced by more than40% in some rodent models of hepatic steatosis, demonstrated encouraging preliminary signs of efficacy in the reduction of liver fat. We believe thereduction of liver fat content results suggest a potential benefit in diseases characterized by excessive accumulation of lipids in liver tissue, such as NASH.We believe the totality of results from our TRß agonist program suggest that VK2809 possesses an attractive profile for potential future development in avariety of lipid disorders, including dyslipidemia, hypercholesterolemia and NASH. VK2809 Development PlansWe are developing VK2809 for potential treatment of cholesterolemia and fatty liver disease. Because prior studies have shown excellent data in both thelipid-lowering setting and in models of fatty liver disease, we plan to conduct a Phase 2 clinical trial to evaluate both potential indications. We will targetpatients who have elevated cholesterol, fatty liver disease, and at least three of the five criteria developed by the National Cholesterol Education ProgramAdult Treatment Panel (NCEP ATP, 2005 revision) that are used to diagnose patients with metabolic syndrome. Metabolic syndrome is considered a majordriver for the onset of NASH. The primary endpoint of this trial will assess changes in LDL-C, with exploratory endpoints evaluating changes in liver fatcontent, inflammatory markers and histological changes. We expect to commence the clinical trial in the first half of 2016 and complete the clinical trial inthe fourth quarter of 2016 or the first quarter of 2017. Upon conclusion, we expect to be in a position to move forward in either hypercholesterolemia orNASH.Opportunity in X-ALDWe are developing VK0214 for X-ALD, a rare X-linked, inherited neurological disorder characterized by a breakdown in the protective barriers surroundingbrain and nerve cells. The disease, for which there is no approved treatment, is caused by mutations in a peroxisomal transporter of very long chain fattyacids, or VLCFA, known as ABCD1. As a result, transporter function is impaired and patients are unable to efficiently metabolize VLCFA. VK0214 is a novelselective TRß agonist. TRß is known to regulate expression of an alternative VLCFA transporter, known as ABCD2. Various preclinical models havedemonstrated that increased expression of ABCD2 can lead to normalization of VLCFA metabolism. Preliminary in vitro data suggest that VK0214stimulates11Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ABCD2 expression. We are conducting studies of VK0214 in an in vivo model of disease. Pending completion of this work, we expect in 2016 to commencework directed toward filing an IND.X-ALD is a rare, often fatal condition believed to occur with an incidence of approximately one in 17,000 births. X-ALD is caused by mutations in the geneencoding for ABCD1, which is located on the X chromosome. Men have one X chromosome, while women have two copies. Because of this, an inheritedmutation in the ABCD1 gene is more likely to manifest in males relative to females. The ABCD1 protein plays a critical role in the transport of VLCFA into acellular organelle called the peroxisome, where VLCFA metabolism and disposal occur. Without functional ABCD1, VLCFA accumulate in cells, includingneural cells, where they can lead to membrane disruption and damage to the myelin sheath, a protective and insulating membrane that surrounds nerve cellsin the brain. This damage can result in decreased motor coordination and function, visual and hearing disturbances, the loss of cognitive function, dementia,seizures, adrenal dysfunction and other complications, including death. X-ALD is divided into various sub-segments, which are broadly characterized by thepresence or absence of brain inflammation: ·Cerebral adrenoleukodystrophy, or CALD: The most severe form of X-ALD is CALD. CALD is characterized by a progressive inflammatorydestruction of myelin, leading to severe loss of neurological function and eventual death. Approximately 35% to 40% of male X-ALD patientspresent with cerebral involvement at a younger age, between the ages of 5 and 12 years. However, up to 20% of male X-ALD patients developcerebral involvement later in life, between the ages of 20 and 35 years. In male children affected by CALD, learning and behavioral problemsare often the first clinical manifestations of disease. In the absence of intervention, patients affected by CALD typically experience rapiddegeneration into vegetative state within 3 to 5 years, often resulting in death within 10 years of diagnosis. ·Adrenomyeloneuropathy, or AMN: AMN is the more common form of X-ALD and is considered the default form of the disease in patientssurviving beyond childhood. AMN is expected to affect all adult males with ABCD1 mutations, and approximately 65% of females. In males,the diagnosis is usually made between the ages of 20 and 50 and in females after the age of 65. AMN accounts for approximately half of allpatients diagnosed with X-ALD. Patients with AMN generally present with slowly progressive symptoms resulting from (non-inflammatory)disruption of the axons, which are a fundamental component of the central nervous system (which allows nerve signals to be transmitted), in thespinal cord. Patients experience a variety of symptoms, including weakness in the legs, impaired vibration sense, incontinence and impotence.Severe motor disability, requiring the use of a wheelchair or cane, develops over a 3 to 15 year period. Many patients experience lower limbparalysis. While AMN is generally considered to develop more gradually relative to CALD, approximately 35% of AMN patients experience arapid progression of myelopathy over a three to five year period. In addition, approximately 40% of AMN patients have or will develop CALD,with varying degrees of associated inflammation.No Treatment Options for Majority of X-ALD ManifestationsThere is a clear unmet medical need for patients suffering from X-ALD. CALD has been more commonly targeted for treatment due to its devastating effects,which are often manifested at a young age. For these patients, the only currently effective treatment option is allogeneic hematopoietic stem cell, or HSC,transplant. In this procedure, the patient is treated with HSCs containing the properly functioning copy of the ABCD1 gene, contributed by a donor otherthan the patient. Additionally, a method of ex vivo insertion of a functional copy of the ABCD1 gene via an HIV-1 based lentiviral vector into the patient’sown HSCs to correct the aberrant expression of ABCD1 in patients with CALD is also in development. Over time with either method, as the transplanted cellsgrow and repopulate, a partial restoration of ABCD1 function can be achieved, leading many patients to resolution of progression in the cerebral form of thedisease. While these forms of genetic correction have also shown potential clinical benefits, there is currently no approved therapy for X-ALD. In addition,recent data suggest that, even among successfully transplanted patients, AMN can develop. We believe our thyroid receptor agonists, which have thepotential to normalize metabolism of VLCFAs peripherally, and potentially centrally, may positively impact all forms of X-ALD, including the currentlyuntreatable AMN form.VK0214 Development PlansWe also plan to complete ongoing preclinical experiments with VK0214 in cell and animal models of X-ALD. We plan to complete an in vivo study in anestablished model of disease and report preliminary data in 2016. Pending completion of this work, we expect in 2016 to commence work directed towardfiling an IND.Three Pipeline Programs Target Metabolic Disease with Large Unmet Medical NeedWe have a pipeline with three additional programs targeting metabolic diseases and anemia. Our pipeline programs include VK0612, a first-in-class, orallyavailable Phase 2b-ready drug candidate for type 2 diabetes. 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. Our preclinical programs are focused onidentifying orally available erythropoietin receptor, or EPOR,12Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. agonists, for the potential treatment of anemia, and on the development of tissue-selective inhibitors of diacylglycerol acyltransferase-1, or DGAT-1, for thepotential treatment of obesity and dyslipidemia.Fructose-1,6-bisphosphatase (FBPase) Inhibitor ProgramVK0612 is a first-in-class, orally available drug candidate for type 2 diabetes, one of the largest global healthcare challenges today. Preliminary clinical datasuggest VK0612 has the potential to provide substantial glucose-lowering effects, with an attractive safety and convenience profile compared with existingtype 2 diabetes therapies.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. We believe the inhibition of FBPase provides an attractive approach to controlling blood glucose levels in patientswith 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. Pending receipt of sufficient funding, we intend to commenceadditional clinical trials of VK0612 in patients with type 2 diabetes.VK0612 has been evaluated in seven clinical trials, including one Phase 2a and six Phase 1 clinical trials. The first five Phase 1 clinical trials were conductedbetween 2006 and 2007. These were followed by the Phase 2a clinical trial, which was initiated in 2007 and completed in 2008, and the Phase 1b clinicaltrial, which was conducted in 2008. Based on these clinical and additional preclinical data, we believe VK0612 has the following important advantages overmany existing type 2 diabetes therapies: ·Greater efficacy: Preliminary Phase 1 and 2 data suggest VK0612 could reduce plasma glycated hemoglobin A1c, or HbA1c, an importantmeasure of long-term blood glucose levels, by 1% or more, potentially exceeding the typical anti-glycemic effects of newer drug classes. ·Encouraging safety profile: VK0612 has demonstrated encouraging safety to date in over 250 subjects. No cases of hypoglycemia, or lowblood glucose levels, lacticemia, or sustained lactic acid in the blood, or other drug-related safety issues were observed in these subjects. ·Improved tolerability: VK0612 has been well-tolerated at and above doses that we plan to administer in our Phase 2b clinical trial, which weexpect to be at or below 300 mg, with specific doses to be chosen based on the outcome of planned pharmacokinetic and pharmacodynamiccalculations. ·Novel mechanism of action: Based on its insulin-independent mechanism of action, we believe VK0612 lowers blood glucose levelsindependently of pancreatic function. We expect VK0612’s novel mechanism of action to provide critical durability and combinabilityadvantages. –Durability: Diabetes is characterized by deteriorating pancreatic beta cell function. Given VK0612’s insulin-independent mechanism ofaction, the drug could provide a more durable therapeutic effect than many currently available type 2 diabetes therapies. –Combinability: VK0612’s novel mechanism of action is expected to allow combinability with many existing type 2 diabetes therapies,leading to enhanced efficacy and potentially delaying transition to subsequent therapies. ·Weight and lipid neutral profile: Clinical and preclinical data suggest VK0612 has the potential to provide robust anti-glycemic effects whilemaintaining a weight and lipid neutral profile. ·Once-daily convenience: Clinical data suggest that VK0612 has the potential to lower blood glucose levels in type 2 diabetes patients as aonce-daily oral therapy.We plan to commence a Phase 2b clinical trial with VK0612 in type 2 diabetes patients at a future date. Pending clinical data from this clinical trial, we mayrequest an end-of-Phase 2 meeting with the FDA or may seek to commence Phase 3 clinical trials in type 2 diabetes patients either on our own or with a thirdparty. The purpose of an end-of-Phase 2 meeting with the FDA would be to review our data with the FDA, discuss appropriate potential Phase 3 clinical trialdesigns and obtain agreement between us and the FDA on Phase 3 efficacy and safety objectives.EPO Receptor (EPOR) Agonist ProgramWe are developing small molecule agonists of the erythropoietin, or EPO, receptor, or EPOR, for the potential treatment of anemia. Anemia results from adecrease in red blood cells and is typically experienced by patients with renal complications, cancer patients and HIV/AIDS patients. These patients currentlyreceive recombinant human EPO and other erythropoiesis-stimulating agents, or ESAs. Total worldwide sales of these agents exceeded $6.0 billion in 2014.However, these agents have a number of limitations, including cost of drug manufacturing, cost of treatment, a non-oral route of administration, and potentialfor immunogenicity, or possibility of inducing an immune response. Furthermore, ESA treatment is associated with an increased risk of adverse13Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. cardiovascular complications in patients with kidney disease when used to increase hemoglobin levels above 13.0 g/dL, and may be related to an increase inmortality in cancer patients. We believe that our drug candidates have the potential to treat anemia with improved safety, tolerability and route ofadministration. We plan to conduct further preclinical studies and file an IND with the FDA at a future date.Diacylglycerol Acyltransferase-1 (DGAT-1) Inhibitor ProgramWe are developing small molecule inhibitors of the enzyme DGAT-1 for the potential treatment of lipid disorders such as obesity and dyslipidemia.According to the CDC, approximately 36% of the adult U.S. population is obese, with the prevalence expected to exceed 40% by 2018. The World HealthOrganization estimates at least 500.0 million people are currently obese worldwide. DGAT-1 is a potential therapeutic target for reduction of triglyceridelevels in the circulation and fat accumulation in adipose tissues. DGAT-1 null mice exhibit both reduced post-meal plasma triglyceride levels and increasedenergy expenditure, but have normal levels of circulating free fatty acids. Conversely, transgenic mice that overexpress DGAT-1 in adipose tissue arepredisposed to obesity when fed a high-fat diet and have elevated levels of circulating free fatty acids. We have developed a series of novel compounds withtissue- targeting properties intended to mitigate potential side effects by selectively targeting the enterocyte, or intestinal absorptive cells, in the intestine, toinhibit dietary triglyceride uptake, or the liver, to inhibit de novo triglyceride synthesis. We plan to conduct further preclinical studies and file an IND withthe FDA at a future date.CompetitionThe biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.While we believe that our technology, knowledge, experience and scientific resources provide us with competitive advantages, we face potential competitionfrom many different sources, including commercial biopharmaceutical enterprises, academic institutions, government agencies and private and publicresearch institutions. Any drug candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that maybecome available in the future.Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical studies, clinicaltrials, regulatory approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant competitors,particularly through collaborative arrangements with large and established companies. Our competitors may succeed in developing technologies andtherapies that are more effective, better tolerated or less costly than any which we are developing, or that would render our drug candidates obsolete andnoncompetitive. Even if we obtain regulatory approval of any of our drug candidates, our competitors may succeed in obtaining regulatory approvals fortheir products earlier than we do. We will also face competition from these third parties in recruiting and retaining qualified scientific and managementpersonnel, establishing clinical trial sites and patient registration for clinical trials, and in acquiring and in-licensing technologies and productscomplementary to our programs or advantageous to our business.The key competitive factors affecting the success of each of our drug candidates, if approved, are likely to be its efficacy, safety, tolerability, frequency androute of administration, convenience and price, the level of branded and generic competition and the availability of coverage and reimbursement fromgovernment and other third-party payors.VK5211In the U.S., there are currently no marketed therapies for the maintenance or improvement of LBM, BMD or physical function in patients recovering fromnon-elective hip fracture surgery. However, VK5211, if approved, will face competition from several experimental therapies that are in various stages ofdevelopment for acute rehabilitation following hip fracture surgery, including programs in development at Novartis AG and Morphosys AG. There are alsoseveral experimental therapies that are in various stages of clinical development for conditions characterized by muscle wasting by companies includingGTx, Inc., Helsinn Group and Morphosys AG. In addition, nutritional and growth hormone-based therapies are sometimes used in patients experiencingmuscle wasting.VK2809There are many therapies currently available and numerous others being developed for the treatment of hypercholesterolemia and dyslipidemia. If approved,VK2809 will face competition from therapies that are currently available and from therapies that may become available in the future. Generic statin therapiessuch as atorvastatin are widely prescribed for the initial treatment of hypercholesterolemia. Cholesterol absorption inhibitors such as Merck & Co., Inc.’sZetia (ezetimibe), generic bile acid sequestrants such as coleselevam and generic fibrates such as fenofibrate are also prescribed for the treatment ofhypercholesterolemia. Various combinations of these therapies are often prescribed for patients suffering from dyslipidemia. In addition, recently-approvedantibody14Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. therapies targeting the proprotein convertase subtilisin/kexin type 9 (PCSK9) gene are expected to be prescribed for patients whose LDL remains elevateddespite treatment with existing cholesterol-lowering agents. While no therapies are currently approved for the treatment of NASH, we are aware of severaldevelopment-stage programs targeting this disease, including obeticholic acid from Intercept Pharmaceuticals, Inc., GFT505 from Genfit SA, aramchol fromGalmed Pharmaceuticals Ltd., simtuzumab from Gilead Sciences, Inc., and emricisan from Conatus Pharmaceuticals Inc.VK0214In the U.S., there are currently no marketed therapies for the treatment of X-ALD. Hematopoietic stem cell therapy has been used to treat the most severe formof X-ALD, CALD. More recently, gene therapy has been shown to be effective in CALD as well. However, both treatments are invasive, requiring surgicalintervention, and these do not appear to have an effect on the most pervasive form of X-ALD, AMN. High-dose biotin is under investigation for treatment ofAMN. There are several experimental therapies that are in various stages of clinical development for X-ALD by companies, including MedDayPharmaceuticals SAS and bluebird bio, Inc., which may be competitive with VK0214, if approved.VK0612In the U.S., VK0612, if approved, will face competition from a variety of currently marketed oral type 2 diabetes therapies, including metformin (generic),pioglitazone (generic), glimepiride (generic), sitagliptin (Merck & Co., Inc.) and canagliflozin (Johnson & Johnson). These therapies are well-established andare widely accepted by physicians, patients, caregivers and third-party payors as the standard of care for the treatment of type 2 diabetes. Physicians, patientsand 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 clinicaldevelopment by companies such as Eli Lilly and Company, Takeda Pharmaceutical Company Limited and TransTech Pharma, Inc.Preclinical Programs Focused on EPOR Agonists and DGAT-1 InhibitorsIf any of our preclinical programs are ultimately determined safe and effective and approved for marketing, they may compete for market share withestablished therapies from a number of competitors, including large biopharmaceutical companies. Many therapies are currently available and numerousothers are being developed for the treatment of anemia and obesity. Any products that we may develop from our preclinical programs may not be able tocompete effectively with existing or future therapies.Manufacturing and SupplyWe do not have any manufacturing facilities and do not intend to develop any manufacturing capabilities. We believe that we currently possess sufficientVK5211 and VK2809 drug substance to allow for completion of our planned VK5211 and VK2809 Phase 2 clinical trials. Bulk active pharmaceuticalingredient, or API, and certain dosage forms are currently in storage in compliance with cGMP requirements. We believe that a majority of the existing APIwill be suitable for formulation into clinical trial material. We also have identified multiple contract manufacturers to provide commercial supplies of theformulated drug candidates if they are approved for marketing. We intend to secure contract manufacturers with established track records of quality productsupply and significant experience with the regulatory requirements of the FDA and EMA.Our HistoryWe were incorporated under the laws of the State of Delaware on September 24, 2012. Since our incorporation, we have devoted substantially all of ourefforts to raising capital, building infrastructure, obtaining the worldwide rights to certain technology from Ligand, including VK5211, VK2809 andVK0612, and more recently following the IPO to planning, preparing for and commencing certain preclinical studies and clinical trials of our drugcandidates. Each of our programs is based on small molecules licensed from Ligand pursuant to our Master License Agreement with Ligand, which weentered into on May 21, 2014.15Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Agreements with LigandMaster License AgreementOn May 21, 2014, we entered into a Master License Agreement, as amended on each of September 6, 2014 and April 8, 2015, or the Master LicenseAgreement, with Ligand pursuant to which, among other things, Ligand granted to us and our affiliates an exclusive, perpetual, irrevocable, worldwide,royalty-bearing right and license under (1) patents related to (a) our VK5211 program and any other compounds comprised by specified SARM patents andderivatives of such compounds, or SARM Compounds, (b) our VK2809 and VK0214 programs and any other compounds comprised by specified TRß patentsand any derivatives of such compounds, or TRß Compounds, (c) our VK0612 program and any other compounds comprised by specified FBPase patents andderivatives of such compounds, or FBPase Compounds, (d) our EPOR program and any other compounds comprised by specified EPOR patents andderivatives of such compounds, or EPOR Compounds, and (e) our DGAT-1 program and any other compounds comprised by specified DGAT-1 patents andderivatives of such compounds, or DGAT-1 Compounds; (2) related know-how controlled by Ligand; and (3) physical quantities of SARM, TRß, FBPase,EPOR and DGAT-1 Compounds, or, collectively, the Licensed Technology, to research, develop, manufacture, have manufactured, use and commercializethe Licensed Technology in and for all therapeutic and diagnostic uses in humans or animals. We have the right to sublicense these rights in certaincircumstances. Pursuant to the terms of the Master License Agreement, we have the exclusive right and sole responsibility and decision-making authority forresearching and developing any pharmaceutical products that contain or comprise one or any combination of a SARM Compound, TRß Compound, FBPaseCompound, EPOR Compound or DGAT-1 Compound, or, collectively, the Licensed Products. We also have the exclusive right and sole responsibility anddecision-making authority to conduct all clinical trials and preclinical studies that we believe are appropriate to obtain the regulatory approvals necessary forcommercialization of the Licensed Products, and we will own and maintain all regulatory filings and all regulatory approvals for the Licensed Products.Additionally, pursuant to the terms of the Master License Agreement, we have the sole decision-making authority and responsibility and the exclusive rightto commercialize any of the Licensed Products, either by ourselves or, in certain circumstances, through sublicensees selected by us. We also have theexclusive right to manufacture or have manufactured any Licensed Product ourselves or, in certain circumstances, through sublicensees or third partiesselected by us. We will own any intellectual property that we develop in connection with the license granted under the Master License Agreement.As partial consideration for the grant of the rights and licenses to us under the Master License Agreement, we issued to Ligand at the closing of the IPO3,655,964 shares of our common stock having an estimated aggregate value of $29.2 million. Furthermore, as partial consideration for the grant of the rightsand licenses to us under the Master License Agreement, we entered into the Loan and Security Agreement with Ligand (as discussed below).As further partial consideration for the grant of the rights and licenses to us by Ligand under the Master License Agreement, we have agreed to pay to Ligandcertain one-time, non-refundable milestone payments in connection with licensed products containing (1) VK5211 or any other SARM Compound, in anaggregate amount of up to $85.0 million per indication (for up to a total of two indications) upon the achievement of certain development and regulatorymilestones and up to $100.0 million upon the achievement of certain sales milestones; (2) VK2809, VK0214 or any other TRß Compound, in an aggregateamount of up to $75.0 million per indication (for up to a total of three indications) upon the achievement of certain development and regulatory milestonesand up to $150.0 million upon the achievement of certain sales milestones; (3) VK0612 or any other FBPase Compound, in an aggregate amount of up to$60.0 million per indication (for up to a total of four indications) upon the achievement of certain development and regulatory milestones and up to$150.0 million upon the achievement of certain sales milestones; (4) any EPOR Compound, in an aggregate amount of up to $48.0 million per indication (forup to a total of three indications) upon the achievement of certain development and regulatory milestones and up to $50.0 million upon the achievement ofcertain sales milestones; and (5) any DGAT-1 Compound, in an aggregate amount of up to $78.0 million per indication (for up to a total of two indications)upon the achievement of certain development and regulatory milestones and up to $150.0 million upon the achievement of certain sales milestones.Additionally, we will pay to Ligand a one-time, non-refundable milestone payment of $2.5 million upon the occurrence of the first commercial sale ofVK0612 or any other FBPase Compound by one of our sublicensees. We will also pay to Ligand royalties on aggregate annual worldwide net sales ofLicensed Products by us, our affiliates and our sublicensees at tiered percentage rates in the following ranges based upon net sales: (a) upper single digitroyalties upon sales of VK5211 or any other SARM Compound, (b) low-to-middle single digit royalties upon sales of VK2809, VK0214 or any other TRßCompound, (c) upper single digit royalties upon sales of VK0612 or any other FBPase Compound, (d) middle-to-upper single digit royalties upon sales ofany EPOR Compound, and (e) low-to-middle single digit royalties upon sales of any DGAT-1 Compound; in each case subject to reduction in certaincircumstances.The term of the Master License Agreement will continue unless the agreement is terminated by us or Ligand. Ligand has the right to terminate the MasterLicense Agreement under certain circumstances, including, but not limited to: (1) in the event of our insolvency or bankruptcy; (2) if we do not pay anundisputed amount owing under the Master License Agreement when due and fail to cure such default within a specified period of time; or (3) if we defaulton certain of our material and substantial obligations and fail to cure the default within a specified period of time. We have the right to terminate the MasterLicense Agreement under certain circumstances,16Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. including, but not limited to: (i) if Ligand does not pay an undisputed amount owing under the Master License Agreement when due and fails to cure suchdefault within a specified period of time, or (ii) if Ligand defaults on certain of its material and substantial obligations and fails to cure the default within aspecified period of time. In addition, provisions of the Master License Agreement can be terminated on a licensed program-by-program basis under certaincircumstances. In the event that the Master License Agreement is terminated in its entirety or with respect to a specific licensed program for any reason:(A) all licenses granted to us under the Master License Agreement (or with respect to the specific licensed program) will terminate and we will, upon Ligand’srequest (subject to Ligand assuming legal responsibility for any clinical trials of the Licensed Products then ongoing), assign and transfer to Ligand (or tosuch transferee as Ligand may direct), at no cost to Ligand, all regulatory documentation and all regulatory approvals prepared or obtained by us or on ourbehalf related to the Licensed Products (or those related to the specific licensed program), or, if Ligand does not make such a request, we will wind down anyongoing clinical trials with respect to the Licensed Products (or those related to the specific licensed program) at no cost to Ligand; (B) we will, uponLigand’s request, sell and transfer to Ligand (or to such transferee as Ligand may direct), at a price equal to 125% of our costs of goods, any and all chemical,biological or physical materials relating to or comprising the Licensed Products (or those related to the specific licensed program); (C) we will have, for aperiod of six months following termination, the right to sell on the normal business terms in existence before such termination any finished commercialinventory of Licensed Products (or those related to the specific licensed program) which remains on hand, so long as we pay to Ligand the applicableroyalties and sales milestones; (D) Ligand has the right to require us to assign to Ligand the trademarks owned by us relating to the Licensed Products (orthose related to the specific licensed program); and (E) we will grant to Ligand a non-exclusive, worldwide, royalty-bearing sublicensable license under anypatent rights and know-how controlled by us to the extent necessary to make, have made, import, use, offer to sell and sell the Licensed Products (or thoserelated to the specific licensed program) anywhere in the world at a royalty rate in the low single digits.Under the Master License Agreement, we have agreed to indemnify Ligand for claims relating to the performance of our obligations under the Master LicenseAgreement, any breach of the representations and warranties made by us under the Master License Agreement, clinical trials conducted by us and theresearch, development and commercialization of the Licensed Products by us and our affiliates, sublicensees, distributors and agents. In addition, Ligand hasagreed to indemnify us for claims relating to the performance of its obligations under the Master License Agreement, its breach of representations andwarranties under the agreement and its research and development of the licensed compounds before the effective date of the Master License Agreement. Eachparty’s indemnification obligations will not apply to the extent the claims result from the negligence or willful misconduct of the indemnified party or any ofits employees, agents, officers or directors or from the indemnified party’s breach of its representations or warranties set forth in the Master LicenseAgreement.Loan and Security AgreementIn connection with entering into the Master License Agreement, we entered into a Loan and Security Agreement with Ligand, dated May 21, 2014, asamended on April 8, 2015 and January 22, 2016, or the Loan and Security Agreement, pursuant to which, among other things, Ligand agreed to provide uswith loans in the aggregate amount of up to $2.5 million. Pursuant to the Loan and Security Agreement, Ligand loaned us $2.5 million through December 31,2014. From May 21, 2014 to January 21, 2016, the principal amount outstanding under the loans accrued interest at a fixed per annum rate equal to the lesserof 5.0% and the maximum interest rate permitted by law. Effective as of January 22, 2016, the principal amount outstanding under the loans accrue interest ata fixed per annum rate equal to the lesser of 2.5% and the maximum interest rate permitted by law. In the event we default under the loans, the loans willaccrue interest at a fixed per annum rate equal to the lesser of 8% and the maximum interest rate permitted by law.Each of the loans is evidenced by a Secured Convertible Promissory Note, or the Ligand Note. Pursuant to the terms of the Loan and Security Agreement andthe Ligand Note, the loans will become due and payable upon the written demand of Ligand at any time after the earlier to occur of an event of default underthe Loan and Security Agreement or the Note, or May 21, 2017, or the Maturity Date, unless the loans are repaid in cash or converted into equity prior to suchtime. Upon the consummation of our first bona fide capital financing transaction occurring after January 22, 2016, but prior to the Maturity Date, withaggregate net proceeds to us of at least $2,000,000, or the Next Financing, we will be required to repay $1,500,000 of the Ligand Note obligation to Ligand,with at least $300,000 of such payment to be paid in cash (with any greater cash amount determined by us in our sole and absolute discretion), and thebalance of the $1,500,000 payment, or the Balance, to be paid in the form of such number of shares of our equity securities that are issued in the NextFinancing equal to the quotient obtained by dividing the Balance by the lesser of (1) the lowest price per share paid by investors in the Next Financing, orthe Financing Price, and (2) $8.00 (subject to adjustment for stock dividends, splits, combinations or similar transactions). Notwithstanding the foregoing, thenumber of shares that we may issue to Ligand will be reduced to the extent that the issuance of such shares would increase Ligand’s beneficial ownership ofour common stock to greater than 49.9%, and any remaining amount of the Balance would have to be paid in cash. Each $1.00 of the $1,500,000 paymentwill reduce the amount of accrued and unpaid interest and then unpaid principal amount of the loans under the Ligand Note by $0.50.17Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In addition, following the consummation of the Next Financing, we may repay any portion of the outstanding principal amount of the loans under the LigandNote, plus accrued and previously unpaid interest thereon, by delivering a notice to Ligand, or the Additional Repayment Notice, specifying the amount thatwe wish to repay, or the Additional Payment Amount. Ligand will have five days to elect to receive the Additional Payment Amount in cash, shares of ourcommon stock or a combination of cash and shares of our common stock. If Ligand does not make an election within such five-day period, the form of theAdditional Payment Amount will be at our sole election and discretion, subject to the number of shares of common stock being reduced to the extent that theissuance of shares would increase Ligand’s beneficial ownership of our common stock to greater than 49.9%. To the extent that any portion of an AdditionalPayment Amount will be paid in the form of shares of our common stock, the number of shares issuable will be equal to the quotient obtained by dividing theportion of the Additional Payment Amount that will be paid in shares by the lesser of (1) (a) if we deliver the Additional Repayment Notice within 180 daysof the closing of the Next Financing, the Financing Price, or (b) if we deliver the Additional Repayment Notice 180 days or more after the closing of the NextFinancing, the volume weighted average closing price of our common stock for the 30 days prior to the date we deliver the Additional Repayment Notice,and (2) $8.00 (subject to adjustment for stock dividends, splits, combinations or similar transactions). Each $1.00 of any Additional Repayment Amount willreduce the amount of accrued and unpaid interest and then unpaid principal amount under the Ligand Note by $0.50. Additionally, pursuant to the Loan andSecurity Agreement, Ligand has agreed that it will not, until January 23, 2017, sell or otherwise transfer or dispose of any of our securities, including sharesissuable upon conversion of the Ligand Note.Following the Maturity Date, Ligand may demand repayment of the loans under the Ligand Note in full. If (1) the Ligand Note is not repaid in full prior tothe Maturity Date and Ligand demands repayment, or (2) we wish to repay the full amount owed under the Ligand Note prior to the Maturity Date, we will beobligated to repay to Ligand an amount equal to 200% of the aggregate of the outstanding principal amount of the loans under the Ligand Note and of allaccrued and unpaid interest thereon, or the Remaining Balance.In either case, we may, at our sole election and discretion, elect to pay the Remaining Balance solely in cash. If we do not elect to repay the RemainingBalance in cash, the form of payment and mix of cash and shares of our common stock will be at Ligand’s sole election and discretion. To the extent that anyportion of the Remaining Balance will be paid in the form of shares of our common stock, the number of shares issuable will be equal to the quotientobtained by dividing the portion of the Remaining Balance that will be paid in shares by the lesser of (1) the volume weighted average closing price of ourcommon stock for the 30 days prior to the date of Ligand’s demand for repayment or the date of our prepayment of the Remaining Balance in full, and(2) $8.00 (subject to adjustment for stock dividends, splits, combinations or similar transactions).We also granted Ligand a continuing security interest in all of our right, title and interest in and to our assets as collateral for the full, prompt, complete andfinal payment and performance when due of all obligations under the Loan and Security Agreement and the Ligand Note.Under the Loan and Security Agreement and the Ligand Note, we are subject to affirmative and negative covenants. We agreed to, among other things,deliver financial statements, forecasts and budget information to Ligand. In addition, we agreed to use the proceeds from the loans solely as working capitaland to fund our general business requirements in accordance with our forecast and budget. Under the Loan and Security Agreement and the Ligand Note, wemay not take certain actions without Ligand’s consent, such as declare or pay dividends, incur or repay certain indebtedness or engage in certain related partytransactions. Ligand has the right to transfer the Ligand Note at any time without our permission.An event of default under the Loan and Security Agreement will be deemed to occur or exist upon the termination of the Master License Agreement; in theevent we fail to make principal or interest payments under the Ligand Note when due; if we become insolvent or breach and fail to cure within a specifiedperiod of time any representation, warranty, covenant or agreement in the Loan and Security Agreement, the Master License Agreement, the OptionAgreement, dated September 27, 2012, by and between us and Ligand, as amended, the Voting Agreement (as defined below) or the Management RightsLetter (as defined below); or upon the occurrence of certain other events. Additionally, pursuant to the Loan and Security Agreement, Ligand has agreed thatit will not, until January 23, 2017, sell or otherwise transfer or dispose of any of our securities, including shares issuable upon conversion of the Ligand Note.Management Rights LetterAs a condition to entering into the Master License Agreement, the Loan and Security Agreement and the Ligand Note, we entered into a Management RightsLetter with Ligand, dated as of May 21, 2014, or the Management Rights Letter. Pursuant to the Management Rights Letter, we agreed to: (1) expand the sizeof our board of directors so as to create one new directorship on our board of directors, and (2) appoint an individual named by Ligand, or the LigandDirector, to fill the newly-created directorship. Pursuant to the terms of the Management Rights Letter, the Ligand Director is entitled to receive the samecompensation, including cash payments and equity incentive grants, as is provided to our other directors; however, the Ligand Director is not entitled toreceive the compensation18Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. provided to our directors in their capacity as members of a committee of our board of directors. Furthermore, we agreed to provide Ligand with advancewritten notice of the date of the annual meeting of our stockholders for each year in which the Ligand Director is up for election so as to permit Ligand todesignate the Ligand Director for election at such annual meeting, and to nominate the Ligand Director to our board of directors at each such annual meetingof our stockholders. In addition, under the Management Rights Letter, we granted Ligand certain contractual management rights in the event Ligand is notrepresented on our board of directors, including the right to consult with us and offer advice to our management on significant business issues and the right toreceive copies of all notices, minutes, consents and other material that we provide to our directors, subject to certain exceptions. We also agreed that, uponthe consummation of the IPO, we would appoint a Chairperson of our board of directors who is “independent” under applicable SEC rules and the rules andlistings standards of The Nasdaq Stock Market LLC. In accordance with the terms of the Management Rights Letter, Matthew W. Foehr was appointed to ourboard of directors as the Ligand Director and Lawson Macartney, DVM, Ph.D. was appointed Chairperson of our board of directors. The Management RightsLetter will terminate upon the earliest to occur of: (a) the liquidation, dissolution or indefinite cessation of our business operations; (b) the execution by us ofa general assignment for the benefit of creditors or the appointment of a receiver or trustee to take possession of our property and assets; (c) an acquisition ofus by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation) if ourstockholders of record as constituted immediately prior to such transaction hold less than 50% of the voting power of the surviving or acquiring entity;(d) the date that Ligand and its affiliates collectively cease to beneficially own at least 7.5% of our outstanding voting stock; or (e) May 21, 2024.Voting AgreementIn connection with the terms of the Management Rights Letter, we, Ligand, Brian Lian, Ph.D., and Michael Dinerman, M.D., our former Chief OperatingOfficer, entered into a Voting Agreement dated as of May 21, 2014, or the Voting Agreement, pursuant to which each of Ligand, Dr. Lian and Dr. Dinermanagreed to vote all of his or its shares of our voting securities so as to elect the Ligand Director as a member of our board of directors, and, if requested byLigand, to vote in favor of any removal of the Ligand Director or selection of a new Ligand Director. The Voting Agreement will terminate under the samecircumstances in which the Management Rights Letter will terminate.Registration Rights AgreementAs a condition to the parties entering into the Master License Agreement and the Loan and Security Agreement, we entered into a Registration RightsAgreement, dated May 21, 2014, as amended on January 22, 2016, with Ligand, or the Registration Rights Agreement, pursuant to which we granted certainregistration rights to Ligand with respect to (1) the securities issued by us to Ligand pursuant to the Master License Agreement and the securities issuable byus to Ligand pursuant to the Ligand Note, or, collectively, the Viking Securities, (2) the shares of our common stock issued or issuable upon conversion ofthe Viking Securities, if applicable, and (3) the shares of our common stock issued as a dividend or other distribution with respect to, in exchange for or inreplacement of the Viking Securities, or, collectively, the Registrable Securities.Mandatory Resale Registration RightsPursuant to the Registration Rights Agreement, we have agreed that we will file with the Securities and Exchange Commission, or the SEC, by no later thanJanuary 23, 2017, a Registration Statement on Form S-1 under the Securities Act of 1933, as amended, or the Securities Act, that covers the resale of the fullamount of the Registrable Securities. We are obligated to use commercially reasonable efforts to have the Registration Statement declared effective by theSEC as soon as practicable after it is filed with the SEC, but in no event later than (1) in the event the SEC Staff does not review the Registration Statement,March 24, 2017 or (2) in the event the SEC Staff reviews the Registration Statement, May 23, 2017. If we do not file a Registration Statement for the resale ofthe Registrable Securities within the requisite time period, if such Registration Statement is not declared effective by the SEC Staff by a certain date, or if, onany day after the Registration Statement is declared effective by the SEC Staff, sales of all of the Registrable Securities required to be included in theRegistration Statement cannot be made pursuant to the Registration Statement, then we will, subject to certain exceptions, be obligated to pay to Ligand anamount in cash equal to 1% of the aggregate value of the Registrable Securities, measured as of the date of their issuance, on the day of such failure orineffectiveness of, or inability to use, the Registration Statement and on every thirtieth day thereafter (pro-rated for partial periods) until such failure orineffectiveness of, or inability to use, the Registration Statement is cured; up to a maximum of 5% of the aggregate value of the Registrable Securities,measured as of the date of their issuance.Pursuant to the Registration Rights Agreement, in the event the SEC Staff takes the position that the registration of some or all of the Registrable Securities isnot eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the Securities Act, or would require Ligand to be named asan “underwriter” in the Registration Statement, we have agreed to use our commercially reasonable efforts to persuade the SEC Staff that the offeringcontemplated by the Registration Statement is a valid secondary offering, is not made “by or on behalf of the issuer” (as defined in Rule 415 under theSecurities Act) and that Ligand is not an19Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. “underwriter” for purposes of the registration. If the SEC Staff does not agree with our proposal, we will remove from the Registration Statement the portion ofthe Registrable Securities, and/or we and Ligand will agree to certain restrictions and limitations on the registration and resale of the Registrable Securities,as the SEC Staff may require to ensure the registration complies with Rule 415 under the Securities Act. In the event the SEC Staff imposes restrictions orlimitations on the registration and resale of the Registrable Securities, then any amounts that we would be obligated to pay to Ligand as a result of the failureor ineffectiveness of, or inability to use, the Registration Statement, will not accrue until a certain period of time after the date that we determine we are ableto effect the registration of such Registrable Securities in accordance with SEC rules and regulations.Pursuant to the terms of the Registration Rights Agreement, we also agreed to use our commercially reasonable efforts to keep each Registration Statementfiled pursuant to the agreement effective with respect to all Registrable Securities until the earlier of (1) the date on which all shares of Registrable Securitiesmay immediately be sold under Rule 144, as promulgated by the SEC under the Securities Act, or Rule 144, during any 90-day period, or (2) the date onwhich all of the Registrable Securities covered by the Registration Statement that are held by Ligand are sold.Additionally, we have the right during certain periods after the effective date of the Registration Statement covering the resale of the Registrable Securities,to delay the disclosure of material, non-public information if, in the good faith opinion of our board of directors, it is not in our best interests to disclose theinformation. In addition, we have the ability to prohibit sales under the Registration Statement during certain periods, subject to certain limitations.Form S-3 Registration RightsThe Registration Rights Agreement also provides that after the IPO, we will use our commercially reasonable efforts to qualify for the use of Form S-3 forpurposes of registering the issuance and/or resale of the Registrable Securities. Once we have qualified for the use of Form S-3, we have agreed to convert theRegistration Statement on Form S-1 that is initially to be filed to register the resale of the Registrable Securities into a Registration Statement on Form S-3.Limitation on Registration RightsPursuant to the terms of the Registration Rights Agreement, we have agreed that we will not, except with Ligand’s prior written consent, from and after thedate of the Registration Rights Agreement and prior to the date the Registration Statement covering the resale of the full amount of the Registrable Securitiesis declared effective by the SEC, enter into an agreement with another holder or prospective holder of our securities which provides demand registrationrights that are more favorable than the registration rights provided to Ligand under the Registration Rights Agreement.Termination of Registration RightsLigand’s registration rights terminate upon the earlier of (1) the date on which all shares of Registrable Securities may immediately be sold under Rule 144during any 90-day period, or (2) the date on which all of the Registrable Securities covered by the Registration Statement that are held by Ligand are sold.ExpensesWe will bear all registration expenses in connection with the mandatory resale registration rights granted pursuant to the Registration Rights Agreement,including but not limited to all registration, qualification and filing fees, except that we will not be required to pay selling expenses, fees and disbursementsof counsel for the holders of our capital stock other than the fees and disbursements of one special counsel in an amount of up to $20,000.Representative’s Warrant Registration RightsUpon the closing of the IPO, on May 4, 2015, we issued to the representative of the underwriters in the IPO as additional compensation a warrant to purchasean aggregate of 82,500 shares of our common stock, or the Representative’s Warrant.20Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Demand Registration RightsPursuant to the terms of the Representative’s Warrant, we are obligated, upon the written demand of the holders of at least 51% of the shares issuable uponexercise of the Representative’s Warrant, or the Registrable Warrant Shares, to register all or a portion of the Registrable Warrant Shares, on one occasion.Upon our receipt of a written demand notice, we must file a registration statement with the SEC covering the Registrable Warrant Shares within 60 days anduse our commercially reasonable efforts to have the registration statement declared effective promptly thereafter. The holder of the Representative’s Warrantmay exercise this demand registration right at any time from April 28, 2016 until April 28, 2020. However, we will not be required to register any RegistrableWarrant Shares that are the subject of a then-effective registration statement. Additionally, we will not be obligated to file a registration statement inconnection with a demand notice if the holder of the Registrable Warrant Shares is entitled to certain piggyback registration rights.To the extent we file a registration statement in connection with the demand registration rights granted under the Representative’s Warrant, we have agreed tokeep the registration statement effective until the earlier of (1) the one year anniversary of the effective date of the registration statement or (2) the date whenall Registrable Warrant Shares covered by the registration statement have been sold.Piggyback Registration RightsPursuant to the terms of the Representative’s Warrant, we have also agreed to provide the holder of the Registrable Warrant Shares with certain piggybackregistration rights. Until April 28, 2022, the holder of the Registrable Warrant Shares has a right to include all or any portion of the Registrable WarrantShares in a registration statement filed by us, subject to certain exceptions. However, we will not be required to register any Registrable Warrant Shares thatare the subject of a then-effective registration statement.ExpensesWe will pay all fees and expenses incurred in registering the Registrable Warrant Shares, but the holder of the Registrable Warrant Shares will pay any and allunderwriting commissions and the expenses of any legal counsel selected by the holder of the Registrable Warrant Shares to represent it in connection withthe sale of the Registrable Warrant Shares.Research Services Agreement with the Academic Medical Center at the University of AmsterdamEffective January 27, 2015, we entered into a Research Services Agreement with the Academic Medical Center at the University of Amsterdam, or theAcademic Medical Center, pursuant to which the Academic Medical Center agreed to perform from time to time certain research projects for us on a series ofone or more compounds. The agreement provided that, following completion of its research under the agreement, the Academic Medical Center wouldprovide us with a report of the results of each study performed, and that we would solely own all right, title and interest in the results of the research services.The Research Services Agreement further provided that, as compensation for its services, and after our acceptance of the applicable services, we would beobligated to pay to the Academic Medical Center the amount set forth in the Statement of Work relating to the specific research project.The Research Services Agreement also provided that it would remain in effect until the end date provided for in the last Statement of Work to be executedunder the agreement. We entered into one Statement of Work under the Research Services Agreement, pursuant to which the Academic Medical Centerevaluated the ability of our proprietary TRß agonists, including VK2809 and VK0214, to induce ABCD2 expression in both control cell lines and in cellsfrom X-ALD patients. This Statement of Work was completed in July 2015, at which time the Research Services Agreement terminated in accordance with itsterms. Government RegulationFDA Regulation and Marketing ApprovalIn the U.S., the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act of 1938, as amended, or FDCA, and related regulations. Drugs are alsosubject to other federal, state and local statutes and regulations. Failure to comply with the applicable U.S. regulatory requirements at any time during thedrug development process, approval process or after approval may subject an applicant to administrative or judicial sanctions and non-approval of drugcandidates. These sanctions could include the imposition by the FDA or an Institutional Review Board, or IRB, of a clinical hold on clinical trials, the FDA’srefusal to approve pending applications or related supplements, withdrawal of an approval, untitled or warning letters, product recalls, product seizures, totalor partial suspension of production or distribution, injunctions, fines, restitution, disgorgement, civil penalties or criminal prosecution. Such actions bygovernment agencies could also require us to expend a large amount of resources to respond to the actions. Any agency or judicial enforcement action couldhave a material adverse effect on us.21Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinicaldevelopment, manufacture and marketing of pharmaceutical products.These agencies and other federal, state and local entities regulate research and development activities and the testing, manufacture, quality control, safety,effectiveness, labeling, packaging, storage, distribution, record-keeping, approval, post-approval monitoring, advertising, promotion, sampling and importand export of our products. Our drugs must be approved by the FDA through the new drug application, or NDA, process before they may be legally marketedin the U.S. See “The NDA Approval Process” under Part I, “Item 1. Business” of this Annual Report on Form 10-K.The process required by the FDA before drugs may be marketed in the U.S. generally involves the following: ·completion of non-clinical laboratory tests, animal studies and formulation studies conducted according to good laboratory practice or otherapplicable regulations; ·submission of an IND, which allows clinical trials to begin unless the FDA objects within 30 days; ·adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use or usesconducted in accordance with FDA regulations, good clinical practices, or GCP, which are international ethical and scientific quality standardsmeant to assure that the rights, safety and well-being of trial participants are protected, and to define the roles of clinical trial sponsors,administrators and monitors and to assure clinical trial data integrity; ·pre-approval inspection of manufacturing facilities and clinical trial sites; and ·FDA approval of an NDA, which must occur before a drug can be marketed or sold.IND and Clinical TrialsPrior to commencing the first clinical trial, an IND, which contains the results of preclinical studies along with other information, such as information aboutproduct chemistry, manufacturing and controls and a proposed protocol, must be submitted to the FDA. The IND automatically becomes effective 30 daysafter receipt by the FDA unless the FDA within the 30-day time period raises concerns or questions about the conduct of the clinical trial. In such a case, theIND sponsor must resolve any outstanding concerns with the FDA before the clinical trial may begin. A separate submission to the existing IND must be madefor each successive clinical trial to be conducted during drug development. Further, an independent IRB for each site proposing to conduct the clinical trialmust review and approve the investigational plan for any clinical trial before it commences at that site. Informed written consent must also be obtained fromeach trial subject. Regulatory authorities, including the FDA, an IRB, a data safety monitoring board or the sponsor, may suspend or terminate a clinical trialat any time on various grounds, including a finding that the participants are being exposed to an unacceptable health risk or that the clinical trial is not beingconducted in accordance with FDA requirements.For purposes of NDA approval, human clinical trials are typically conducted in sequential phases that may overlap: ·Phase 1 – the drug is initially given to healthy human subjects or patients in order to determine metabolism and pharmacologic actions of thedrug in humans, side effects and, if possible, to gain early evidence on effectiveness. During Phase 1 clinical trials, sufficient information aboutthe investigational drug’s pharmacokinetics and pharmacologic effects may be obtained to permit the design of well-controlled andscientifically valid Phase 2 clinical trials. ·Phase 2 – clinical trials are conducted to evaluate the effectiveness of the drug for a particular indication or in a limited number of patients inthe target population to identify possible adverse effects and safety risks, to determine the efficacy of the product for specific targeted diseasesand to determine dosage tolerance and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain informationprior to beginning larger and more expensive Phase 3 clinical trials. Throughout this Annual Report on Form 10-K, we refer to our initial Phase2 clinical trials as “Phase 2a clinical trials” and our subsequent Phase 2 clinical trials as “Phase 2b clinical trials.” ·Phase 3 – when Phase 2 clinical trials demonstrate that a dosage range of the product appears effective and has an acceptable safety profile, andprovide sufficient information for the design of Phase 3 clinical trials, Phase 3 clinical trials in an expanded patient population at multipleclinical sites may be undertaken. They are performed after preliminary evidence suggesting effectiveness of the drug has been obtained, and areintended to further evaluate dosage, effectiveness and safety, to establish the overall benefit-risk relationship of the investigational drug and toprovide an adequate basis for product labeling and approval by the FDA. In most cases, the FDA requires two adequate and well-controlledPhase 3 clinical trials to demonstrate the efficacy of the drug in an expanded patient population at multiple clinical trial sites.All clinical trials must be conducted in accordance with FDA regulations, GCP requirements and their protocols in order for the data to be considered reliablefor regulatory purposes.22Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. An investigational drug product that is a combination of two different drugs in the same dosage form must comply with an additional rule that requires thateach component make a contribution to the claimed effects of the drug product. This typically requires larger studies that test the drug against each of itscomponents. In addition, typically, if a drug product is intended to treat a chronic disease, as is the case with our products, safety and efficacy data must begathered over an extended period of time, which can range from six months to three years or more. Government regulation may delay or prevent marketing ofdrug candidates or new drugs for a considerable period of time and impose costly procedures upon our activities.Disclosure of Clinical Trial InformationSponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information. Informationrelated to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial, is then made public aspart of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these trials can bedelayed until the new product or new indication being studied has been approved. Competitors may use this publicly available information to gainknowledge regarding the progress of development programs.The NDA Approval ProcessIn order to obtain approval to market a drug in the U.S., a marketing application must be submitted to the FDA that provides data establishing to the FDA’ssatisfaction the safety and effectiveness of the investigational drug for the proposed indication. Each NDA submission requires a substantial user fee payment(currently exceeding $2.3 million for fiscal year 2016) unless a waiver or exemption applies. The application includes all relevant data available frompertinent non-clinical studies, or preclinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together withdetailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from company-sponsored clinical trials intended to test the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiatedby investigators that meet GCP requirements.During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission ofan IND, at the end of Phase 2 clinical trials, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide anopportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice and for the sponsor and the FDA to reachagreement on the next phase of development. Sponsors typically use the end-of-Phase 2 clinical trials meetings to discuss their Phase 2 clinical trials resultsand present their plans for the pivotal Phase 3 registration trial that they believe will support approval of the new drug.Concurrent with clinical trials, companies usually complete additional preclinical safety studies and must also develop additional information about thechemistry and physical characteristics of the drug and finalize a process for the NDA sponsor’s manufacturing the product in accordance with cGMPrequirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and the manufacturer mustdevelop methods for testing the identity, strength, quality and purity of the final drugs. Additionally, appropriate packaging must be selected and tested andstability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf-life.The results of drug development, non-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted onthe chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market theproduct. The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. It mayrequest additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. Theresubmitted application also is subject to review before the FDA accepts it for filing. The FDA has 60 days from its receipt of an NDA to conduct an initialreview to determine whether the application will be accepted for filing based on the FDA’s threshold determination that the application is sufficientlycomplete to permit substantive review. If the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether theproposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preservethe product’s identity, strength, quality and purity. The FDA has agreed to specific performance goals on the review of NDAs and seeks to review standardNDAs within 12 months from submission of the NDA. The review process may be extended by the FDA for three additional months to consider certain latesubmitted information or information intended to clarify information already provided in the submission. After the FDA completes its initial review of anNDA, it will communicate to the sponsor that the drug will either be approved, or it will issue a complete response letter to communicate that the NDA willnot be approved in its current form and inform the sponsor of changes that must be made or additional clinical, non-clinical or manufacturing data that mustbe received before the application can be approved, with no implication regarding the ultimate approvability of the application or the timing of any suchapproval, if ever. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approvalletter. The FDA has committed to reviewing such23Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. resubmissions in two to six months depending on the type of information included. The FDA may refer applications for novel drug products or drug productsthat present difficult questions of safety or effectiveness to an advisory committee, typically a panel that includes clinicians and other experts, for review,evaluation and a recommendation as to whether the application should be approved and, if so, under what conditions. The FDA is not bound by therecommendations of an advisory committee, but it considers such recommendations carefully when making decisions.Before approving an NDA, the FDA typically will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless itdetermines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical sites to assure compliance withGCP regulations. If the FDA determines the application, manufacturing process or manufacturing facilities are not acceptable, it typically will outline thedeficiencies and often will request additional testing or information. This may significantly delay further review of the application. If the FDA finds that aclinical site did not conduct the clinical trial in accordance with GCP regulations, the FDA may determine the data generated by the clinical site should beexcluded from the primary efficacy analyses provided in the NDA. Additionally, notwithstanding the submission of any requested additional information, theFDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase 4 or post-approval clinical trialsmay be made a condition to be satisfied for continuing drug approval. The results of Phase 4 clinical trials can confirm the effectiveness of a drug candidateand can provide important safety information. In addition, the FDA now has express statutory authority to require sponsors to conduct post-marketing trialsto specifically address safety issues identified by the agency. See “Post-Marketing Requirements” under Part I, “Item 1. Business” of this Annual Report onForm 10-K.The FDA also has authority to require a Risk Evaluation and Mitigation Strategy, or a REMS, from manufacturers to ensure that the benefits of a drugoutweigh its risks. A sponsor may also voluntarily propose a REMS as part of the NDA submission. The need for a REMS is determined as part of the reviewof the NDA. Based on statutory standards, elements of a REMS may include “dear doctor letters,” a medication guide, more elaborate targeted educationalprograms, and in some cases elements to assure safe use, or ETASU, which is the most restrictive REMS. ETASU can include, but are not limited to, specialtraining or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. Theseelements are negotiated as part of the NDA approval, and in some cases if consensus is not obtained until after the Prescription Drug User Fee Act of 1992, asamended, review cycle, the approval date may be delayed. Once adopted, REMS are subject to periodic assessment and modification.Changes to some of the conditions established in an approved application, including changes in indications, labeling, manufacturing processes or facilities,require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indicationtypically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplementsas it does in reviewing NDAs.Even if a drug candidate receives regulatory approval, the approval may be limited to specific disease states, patient populations and dosages, or mightcontain significant limitations on use in the form of warnings, precautions or contraindications, or in the form of onerous risk management plans, restrictionson distribution or post-marketing trial requirements. Further, even after regulatory approval is obtained, later discovery of previously unknown problems witha product may result in restrictions on the product or even complete withdrawal of the product from the market. Delay in obtaining, or failure to obtain,regulatory approval for our products, or obtaining approval but for significantly limited use, would harm our business. In addition, we cannot predict whatadverse governmental regulations may arise from future U.S. or foreign governmental action.The Hatch-Waxman AmendmentsUnder the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, commonly known as the Hatch-Waxman Amendments, a portion ofa product’s U.S. patent term that was lost during clinical development and regulatory review by the FDA may be restored. The Hatch-Waxman Amendmentsalso provide a process for listing patents pertaining to approved products in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations(commonly known as the Orange Book) and for a competitor seeking approval of an application that references a product with listed patents to makecertifications pertaining to such patents. In addition, the Hatch-Waxman Amendments provide for a statutory protection, known as non-patent exclusivity,against the FDA’s acceptance or approval of certain competitor applications.24Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Patent Term RestorationPatent term restoration can compensate for time lost during drug development and the regulatory review process by returning up to five years of patent life fora patent that covers a new product or its use. This period is generally one-half the time between the effective date of an IND (falling after issuance of thepatent) and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application, provided the sponsoracted with diligence. Patent term restorations, however, cannot extend the remaining term of a patent beyond a total of 14 years from the date of productapproval and only one patent applicable to an approved drug may be extended and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, or the USPTO, in consultation with the FDA, reviews and approves the application for any patent term extensionor restoration.Orange Book ListingIn seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent whose claims cover the applicant’s product. Uponapproval of a drug, each of the patents listed by the NDA holder listed in the drug’s application or otherwise are then published in the FDA’s Orange Book.Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an abbreviated new drug application, orANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug andhas been shown through bioequivalence testing to be therapeutically equivalent to the listed drug. Other than the requirement for bioequivalence testing,ANDA applicants are not required to conduct, or submit results of, preclinical studies or clinical trials to prove the safety or effectiveness of their drugproduct. Drugs approved in this way are commonly referred to as “generic equivalents” to the listed drug, and can often be substituted by pharmacists underprescriptions written for the original listed drug.The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book. Specifically, theapplicant must certify that: (1) the required patent information has not been filed; (2) the listed patent has expired; (3) the listed patent has not expired, butwill expire on a particular date and approval is sought after patent expiration; or (4) the listed patent is invalid or will not be infringed by the new product.The ANDA applicant may also elect to submit a Section VIII statement certifying that its proposed ANDA label does not contain (or carves out) any languageregarding the patented method-of-use rather than certify to a listed method-of-use patent. If the applicant does not challenge the listed patents, the ANDAapplication will not be approved until all the listed patents claiming the referenced product have expired.A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IVcertification. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IVcertification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patentinfringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of aParagraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of thelawsuit or a decision in the infringement case that is favorable to the ANDA applicant.An applicant submitting an NDA under Section 505(b)(2) of the FDCA, which permits the filing of an NDA where at least some of the information required forapproval comes from studies not conducted by, or for, the applicant and for which the applicant has not obtained a right of reference, is required to certify tothe FDA regarding any patents listed in the Orange Book for the approved product it references to the same extent that an ANDA applicant would.Market ExclusivityMarket exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year periodof non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemicalentity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the actionof the drug substance. During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another company foranother version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an applicationmay be submitted after four years if it contains a Paragraph IV certification. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by theapplicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing drug.This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAsfor drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, anapplicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the non-clinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.25Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Post-Marketing RequirementsFollowing approval of a new product, a pharmaceutical company and the approved product are subject to continuing regulation by the FDA, including,among other things, monitoring and record-keeping activities, reporting to the applicable regulatory authorities of adverse experiences with the product,providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and complying withpromotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting drugs for usesor in patient populations that are not described in the drug’s approved labeling (known as “off-label use”), limitations on industry-sponsored scientific andeducational activities and requirements for promotional activities involving the internet, including social media. Although physicians may prescribe legallyavailable drugs for off-label uses, manufacturers may not market or promote such off-label uses. Modifications or enhancements to the product or its labelingor changes of the site of manufacture are often subject to the approval of the FDA and other regulators, who may or may not grant approval, or may include ina lengthy review process.Prescription drug advertising is subject to federal, state and foreign regulations. In the U.S., the FDA regulates prescription drug promotion, including direct-to-consumer advertising. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. Any distribution ofprescription drug products and pharmaceutical samples must comply with the U.S. Prescription Drug Marketing Act of 1987, as amended, or the PDMA, a partof the FDCA.In the U.S., once a product is approved, its manufacture is subject to comprehensive and continuing regulation by the FDA. The FDA regulations require thatproducts be manufactured in specific, approved facilities and in accordance with cGMP. We rely, and expect to continue to rely, on third parties for theproduction of clinical and commercial quantities of our products in accordance with cGMP regulations. cGMP regulations require, among other things,quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correctany deviations from cGMP. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to registertheir establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies forcompliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and qualitycontrol to maintain cGMP compliance. These regulations also impose certain organizational, procedural and documentation requirements with respect tomanufacturing and quality assurance activities. NDA holders using contract manufacturers, laboratories or packagers are responsible for the selection andmonitoring of qualified firms and, in certain circumstances, qualified suppliers to these firms. These firms and, where applicable, their suppliers are subject toinspections by the FDA at any time, and the discovery of violative conditions, including failure to conform to cGMP, could result in enforcement actions thatinterrupt the operation of any such product or may result in restrictions on a product, manufacturer, or holder of an approved NDA, including, among otherthings, recall or withdrawal of the product from the market.In addition, the manufacturer or sponsor under an approved NDA is subject to annual product and establishment fees, currently exceeding $114,450 perproduct and $585,200 per establishment for fiscal year 2016. These fees are typically increased annually.The FDA also may require post-marketing testing, also known as Phase 4 testing, REMS to monitor the effects of an approved product or place conditions onan approval that could restrict the distribution or use of the product. Discovery of previously unknown problems with a product or the failure to comply withapplicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, untitled or warningletters from the FDA, mandated corrective advertising or communications with doctors, withdrawal of approval, and civil or criminal penalties, among others.Newly-discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warningsand contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including thoseresulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products indevelopment.Reimbursement, Anti-Kickback and False Claims Laws and Other Regulatory MattersIn the U.S., the research, manufacturing, distribution, sale and promotion of drug products and medical devices are potentially subject to regulation byvarious federal, state and local authorities in addition to the FDA, including the Centers for Medicare & Medicaid Services, or CMS, other divisions of theU.S. Department of Health and Human Services (e.g. , the Office of Inspector General), the Drug Enforcement Administration, the Consumer Product SafetyCommission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency, state AttorneysGeneral and other state and local government agencies. For example, sales, marketing and scientific/educational grant programs must comply with the federalAnti-Kickback Statute, the federal False Claims Act of 1986, as amended, or the federal False Claims Act, the privacy regulations promulgated under theHealth Insurance Portability and Accountability Act of 1996, as amended, or HIPAA, and similar state laws. Pricing and rebate programs must comply withthe Medicaid Drug Rebate Program requirements of the Omnibus Budget Reconciliation Act of 1990, as amended, and the Veterans Health Care Act of 1992,as amended. If products are made available to authorized users of the Federal26Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Supply Schedule of the General Services Administration, additional laws and requirements apply. The handling of any controlled substances must complywith the U.S. Controlled Substances Act and Controlled Substances Import and Export Act. Products must meet applicable child-resistant packagingrequirements under the U.S. Poison Prevention Packaging Act. All of these activities are also potentially subject to federal and state consumer protection andunfair competition laws.The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, established the Medicare Part D program to provide a voluntaryprescription drug benefit to Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entitieswhich will provide coverage of outpatient prescription drugs. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D prescription drugplan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it willcover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part Ddrugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewedby a pharmacy and therapeutic committee. Government payment for some of the costs of prescription drugs may increase demand for products for which wereceive regulatory approval. However, any negotiated prices for our products covered by a Part D prescription drug plan will likely be lower than the priceswe might otherwise obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicarecoverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similarreduction in payments from non-government payors.The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage andsecurity requirements intended to prevent the unauthorized sale of pharmaceutical products.The American Recovery and Reinvestment Act of 2009 provides funding for the federal government to compare the effectiveness of different treatments forthe same illness. A plan for the research will be developed by the Department of Health and Human Services, the Agency for Healthcare Research and Qualityand the National Institutes for Health, and periodic reports on the status of the research and related expenditures will be made to Congress. Although theresults of the comparative effectiveness studies are not intended to mandate coverage policies for public or private payors, it is not clear what effect, if any,the research will have on the sales of our drug candidate, if any such product or the condition that it is intended to treat is the subject of a clinical trial. It isalso possible that comparative effectiveness research demonstrating benefits in a competitor’s product could adversely affect the sales of our drug candidate.If third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products after approvalas a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governingdrug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict the range of medicinalproducts for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A memberstate may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the companyplacing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations forpharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in theEuropean Union do not follow price structures of the U.S. and generally tend to be priced significantly lower than in the U.S.As noted above, in the U.S., we are subject to complex laws and regulations pertaining to healthcare “fraud and abuse,” including, but not limited to, thefederal Anti-Kickback Statute, the federal False Claims Act, and other state and federal laws and regulations. The federal Anti-Kickback Statute makes itillegal for any person, including a prescription drug manufacturer, or a party acting on its behalf, to knowingly and willfully solicit, receive, offer, or pay anyremuneration that is intended to induce the referral of business, including the purchase, order or prescription of a particular drug, or other good or service forwhich payment in whole or in part may be made under a federal healthcare program, such as Medicare or Medicaid. Violations of this law are punishable byup to five years in prison, criminal fines, administrative civil money penalties, and exclusion from participation in federal healthcare programs. In addition,many states have adopted laws similar to the federal Anti-Kickback Statute. Some of these state prohibitions apply to the referral of patients for healthcareservices reimbursed by any insurer, not just federal healthcare programs such as Medicare and Medicaid. Due to the breadth of these federal and state anti-kickback laws, the absence of guidance in the form of regulations or court decisions, and the potential for additional legal or regulatory change in this area, itis possible that our future sales and marketing practices or our future relationships with medical professionals might be challenged under anti-kickback laws,which could harm us. Because we intend to commercialize products that could be reimbursed under a federal healthcare program and other governmentalhealthcare programs, we plan to develop a comprehensive compliance program that establishes internal controls to facilitate adherence to the rules andprogram requirements to which we will or may become subject.27Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The federal False Claims Act prohibits anyone from knowingly presenting, or causing to be presented, for payment to federal programs (including Medicareand Medicaid) claims for items or services, including drugs, that are false or fraudulent, claims for items or services not provided as claimed, or claims formedically unnecessary items or services. Although we would not submit claims directly to payors, manufacturers can be held liable under these laws if theyare deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers orpromoting a product off-label. In addition, our future activities relating to the reporting of wholesaler or estimated retail prices for our products, the reportingof prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement for our products, and thesale and marketing of our products, are subject to scrutiny under this law. For example, pharmaceutical companies have been found liable under the federalFalse Claims Act in connection with their off-label promotion of drugs. Penalties for a federal False Claims Act violation include three times the actualdamages sustained by the government, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim, the potential forexclusion from participation in federal healthcare programs and, although the federal False Claims Act is a civil statute, conduct that results in a federal FalseClaims Act violation may also implicate various federal criminal statutes. If the government were to allege that we were, or convict us of, violating these falseclaims laws, we could be subject to a substantial fine and may suffer a decline in our stock price. In addition, private individuals have the ability to bringactions under the federal False Claims Act and certain states have enacted laws modeled after the federal False Claims Act.There are also an increasing number of state laws that require manufacturers to make reports to states on pricing and marketing information. Many of theselaws contain ambiguities as to what is required to comply with the laws. In addition, as discussed below, beginning in 2013, a similar federal requirementrequires manufacturers to track and report to the federal government certain payments made to physicians and teaching hospitals in the previous calendaryear. These laws may affect our sales, marketing and other promotional activities by imposing administrative and compliance burdens on us. In addition,given the lack of clarity with respect to these laws and their implementation, our reporting actions could be subject to the penalty provisions of the pertinentstate, and soon federal, authorities.The failure to comply with regulatory requirements subjects companies to possible legal or regulatory action. Depending on the circumstances, failure tomeet applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, recall or seizure of products, total or partialsuspension of production, denial or withdrawal of product approvals, or refusal to allow a company to enter into supply contracts, including governmentcontracts.Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (1) changes toour manufacturing arrangements; (2) additions or modifications to product labeling; (3) the recall or discontinuation of our products; or (4) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.Patient Protection and Affordable Care ActIn March 2010, the Patient Protection and Affordable Care Act, or the PPACA, was enacted, which includes measures that have or will significantly changethe way healthcare is financed by both governmental and private insurers. Among the provisions of the PPACA of greatest importance to the pharmaceuticalindustry are the following: ·The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with theSecretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the manufacturer’scovered outpatient drugs furnished to Medicaid patients. Effective in 2010, the PPACA made several changes to the Medicaid Drug RebateProgram, including increasing pharmaceutical manufacturers’ rebate liability by raising the minimum basic Medicaid rebate on most brandedprescription drugs and biologic agents to 23.1% of the average manufacturer price, or AMP, and adding a new rebate calculation for “lineextensions” ( i.e. , new formulations, such as extended release formulations) of solid oral dosage forms of branded products, as well aspotentially impacting their rebate liability by modifying the statutory definition of AMP. The PPACA also expanded the universe of Medicaidutilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care utilization as of 2010and by expanding the population potentially eligible for Medicaid drug benefits, to be phased-in by 2014. The CMS have proposed to expandMedicaid rebate liability to the territories of the U.S. as well. In addition, the PPACA provides for the public availability of retail survey pricesand certain weighted average AMPs under the Medicaid program. The implementation of this requirement by the CMS may also provide for thepublic availability of pharmacy acquisition of cost data, which could negatively impact our sales. ·In order for a pharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold directlyto U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. Therequired 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer.Effective in 2010, the PPACA expanded the types of28Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. entities eligible to receive discounted 340B pricing, although, under the current state of the law, with the exception of children’s hospitals,these newly-eligible entities will not be eligible to receive discounted 340B pricing on orphan drugs when used for the orphan indication. Inaddition, as 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid rebate formula and AMPdefinition described above could cause the required 340B discount to increase. ·Effective in 2011, the PPACA imposed a requirement on manufacturers of branded drugs and biologic agents to provide a 50% discount off thenegotiated price of branded drugs dispensed to Medicare Part D patients in the coverage gap (i.e., “donut hole”). ·Effective in 2011, the PPACA imposed an annual, nondeductible fee on any entity that manufactures or imports certain branded prescriptiondrugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs,although this fee would not apply to sales of certain products approved exclusively for orphan indications. ·Effective in 2012, the PPACA required pharmaceutical manufacturers to track certain financial arrangements with physicians and teachinghospitals, including any “transfer of value” made or distributed to such entities, as well as any investment interests held by physicians and theirimmediate family members. Manufacturers are required to track this information and were required to make their first reports in March 2014.The information reported is publicly available on a searchable website. ·As of 2010, a new Patient-Centered Outcomes Research Institute was established pursuant to the PPACA to oversee, identify priorities in andconduct comparative clinical effectiveness research, along with funding for such research. The research conducted by the Patient-CenteredOutcomes Research Institute may affect the market for certain pharmaceutical products. ·The PPACA created the Independent Payment Advisory Board, which has the authority to recommend certain changes to the Medicare programto reduce expenditures by the program that could result in reduced payments for prescription drugs. Under certain circumstances, theserecommendations will become law unless Congress enacts legislation that will achieve the same or greater Medicare cost savings. ·The PPACA established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery modelsto lower Medicare and Medicaid spending, potentially including prescription drug spending. Funding has been allocated to support themission of the Center for Medicare and Medicaid Innovation from 2011 to 2019.Many of the details regarding the implementation of the PPACA are yet to be determined, and, at this time, the full effect of the PPACA on our businessremains unclear.Pediatric Exclusivity and Pediatric UseUnder the Best Pharmaceuticals for Children Act, or the BPCA, certain drugs may obtain an additional six months of exclusivity if the sponsor submitsinformation requested in writing by the FDA, or a Written Request, relating to the use of the active moiety of the drug in children. Conditions for exclusivityinclude the FDA’s determination that information relating to the use of a new drug in the pediatric population may produce health benefits in thatpopulation, the FDA making a written request for pediatric studies and the applicant agreeing to perform, and reporting on, the requested studies within thestatutory timeframe. The FDA may not issue a Written Request for studies on unapproved or approved indications or where it determines that informationrelating to the use of a drug in a pediatric population, or part of the pediatric population, may not produce health benefits in that population. Applicationsunder the BPCA are treated as priority applications, with all of the benefits that designation confers.We have not received a Written Request for such pediatric studies, although we may ask the FDA to issue a Written Request for such studies in the future. Toreceive the six-month pediatric market exclusivity, we would need to receive a Written Request from the FDA, conduct the requested studies in accordancewith a written agreement with the FDA or, if there is no written agreement, in accordance with commonly accepted scientific principles, and submit reports ofthe studies. A Written Request may include studies for indications that are not currently in the labeling if the FDA determines that such information willbenefit the public health. The FDA will accept the reports upon its determination that the studies were conducted in accordance with, and are responsive to,the original Written Request or commonly accepted scientific principles, as appropriate, and that the reports comply with the FDA’s filing requirements.Under the Pediatric Research Equity Act of 2003, or the PREA, an NDA or supplement thereto must contain data that are adequate to assess the safety andeffectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to29Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The PREA also authorizes the FDA to requireholders of approved NDAs for marketed drugs to conduct pediatric studies under certain circumstances. With the enactment of the Food and DrugAdministration Safety and Innovation Act, or the FDASIA, in 2012, sponsors must also submit pediatric study plans prior to the assessment data. Those plansmust contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral orwaiver requests, and other information required by regulation. The applicant, the FDA and the FDA’s internal review committee must then review theinformation submitted, consult with each other and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of theproduct for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferral requestsand requests for extension of deferrals are contained in the FDASIA. Unless otherwise required by regulation, the pediatric data requirements do not apply toproducts with orphan designation.Intellectual PropertyWe have in-licensed from Ligand patents and patent applications that contain claims that recite our compounds, as set forth below. We plan to file additionalpatent applications in the U.S., E.U. and other foreign jurisdictions on our clinical and preclinical programs. Information regarding the issued patents andpending patent applications, as of January 31, 2016, are as follows: Subject Matter/Compounds # PendingApplications # IssuedPatents Geographical Scope NominalPatent TermVK5211 (SARM) 10 11 U.S., Europe, Chile, Argentina, Brazil, Canada, China, India, Japan, Korea, Mexico, Taiwan, and Venezuela 2025-2028Other SARM 9 32 U.S., Canada, India, Japan, Korea, Mexico, Australia, China, New Zealand, Argentina, Brazil, Europe, and Israel 2017-2026VK0214 (TRß) 0 1 U.S. 2024Other TRß agonist 2 1 Australia and Canada 2026VK0612 (FBPase inhibitor) 0 14 U.S., China, Hong Kong, Israel, Korea, Mexico, India, Indonesia, New Zealand 2019-2020FBPase Inhibitor Combinations 0 12 U.S., China, Korea, Israel, Mexico, Portugal, New Zealand, and Russia 2019-2021DGAT-1 Inhibitors 1 2 U.S. and Europe 2030EPOR Inhibitors 12 3 U.S., Australia, Canada, China, Europe, India, Japan, and Korea 2030-2031 Corporate InformationWe were incorporated under the laws of the State of Delaware on September 24, 2012. Our principal executive offices are located at 12340 El Camino Real,San Diego, CA 92130, and our telephone number is (858) 704-4660. Our website address is www.vikingtherapeutics.com. We do not incorporate theinformation on, or accessible through, our website into this Annual Report on Form 10-K, and you should not consider any information on, or accessiblethrough, our website as part of this Annual Report on Form 10-K. We have included our website address in this Annual Report on Form 10-K solely as aninactive textual reference.Research and Development ExpensesOur research and development expenses were $6,966,842 and $22,223,073 for the years ended December 31, 2015 and 2014, respectively.EmployeesAs of February 29, 2016, we had nine full-time employees and one part-time employee, four of whom hold a Ph.D. or M.D. degree. All employees are engagedin research and development, project management, business development and finance. None of our employees is subject to a collective bargainingagreement. We have never experienced a material work stoppage or disruption to our business relating to employee matters. We consider our relationshipwith our employees to be good. 30Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 1A. Risk Factors.You should consider carefully the following information about the risks described below, together with the other information contained in this AnnualReport on Form 10-K and in our other public filings in evaluating our business. If any of the following risks actually occurs, our business, financialcondition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price ofour common stock would likely decline. Risks Relating to Our BusinessWe are a clinical-stage company, have a very limited operating history and are expected to incur significant operating losses during the early stage ofour corporate development.We are a clinical-stage company. We were incorporated in, and have only been conducting operations since, September 2012. Our operations to date havebeen limited to raising capital, building infrastructure, obtaining the worldwide rights to certain technology from Ligand Pharmaceuticals Incorporated, orLigand, and planning, preparing and conducting preclinical studies and clinical trials of our drug candidates, including VK5211 and VK0612, which arecurrently in Phase 2 clinical development, VK2809, which has completed Phase 1 clinical development and VK0214 and the EPOR and DGAT-1 programs,which are each currently in preclinical development. As a result, we have no meaningful historical operations upon which to evaluate our business andprospects and have not yet demonstrated an ability to obtain marketing approval for any of our drug candidates or successfully overcome the risks anduncertainties frequently encountered by companies in the biopharmaceutical industry. We also have not generated any revenue to date, and we continue toincur significant research and development and other expenses. Our net loss for the years ended December 31, 2015 and 2014 was $23,403,988 and$21,884,183, respectively. As of December 31, 2015, we had an accumulated deficit of $45,545,445. For the foreseeable future, we expect to continue toincur losses, which will increase significantly from historical levels as we expand our drug development activities, seek regulatory approvals for our drugcandidates and begin to commercialize them if they are approved by the U.S. Food and Drug Administration, or the FDA, the European Medicines Agency, orEMA, or comparable foreign authorities. Even if we succeed in developing and commercializing one or more drug candidates, we may never becomeprofitable. If we fail to achieve or maintain profitability, it would adversely affect the value of our common stock.We are substantially dependent on technologies we licensed from Ligand, and if we lose the license to such technologies or the Master LicenseAgreement is terminated for any reason, our ability to develop existing and new drug candidates would be harmed, and our business, financialcondition and results of operations would be materially and adversely affected.Our business is substantially dependent upon technology licensed from Ligand. Pursuant to the Master License Agreement, we have been granted exclusiveworldwide rights to VK5211, VK2809, VK0214, VK0612 and preclinical programs for anemia and lipid disorders. SARMS, such as our lead programVK5211, are key compounds used by us in the development and commercialization of our drug candidates. All of the intellectual property related to our drugcandidates is currently owned by Ligand, and we have the rights to use such intellectual property pursuant to the Master License Agreement. Therefore, ourability to develop and commercialize our drug candidates depends entirely on the effectiveness and continuation of the Master License Agreement. If we losethe right to license any of these key compounds, our ability to develop existing and new drug candidates would be harmed.Ligand has the right to terminate the Master License Agreement under certain circumstances, including, but not limited to: (1) in the event of our insolvencyor bankruptcy, (2) if we do not pay an undisputed amount owing under the Master License Agreement when due and fail to cure such default within aspecified period of time, or (3) if we default on certain of our material obligations and fail to cure the default within a specified period of time.We are dependent on the success of one or more of our current drug candidates and we cannot be certain that any of them will receive regulatoryapproval or be commercialized.We have spent significant time, money and effort on the licensing and development of our core metabolic and endocrine disease assets, VK5211, VK2809,VK0214, VK0612 and our earlier-stage assets, the EPOR and DGAT-1 programs. To date, no pivotal clinical trials designed to provide clinically andstatistically significant proof of efficacy, or to provide sufficient evidence of safety to justify approval, have been completed with any of our drug candidates.All of our drug candidates will require additional development, including clinical trials as well as further preclinical studies to evaluate their toxicology,carcinogenicity and pharmacokinetics and optimize their formulation, and regulatory clearances before they can be commercialized. Positive results obtainedduring early development do not necessarily mean later development will succeed or that regulatory clearances will be obtained. Our drug developmentefforts may not lead to commercial drugs, either because our drug candidates fail to be safe and effective or because we have inadequate financial or otherresources to advance our drug candidates through the clinical development and approval processes.31Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If any of our drug candidates fail to demonstrate safety or efficacy at any time or during any phase of development, we would experience potentiallysignificant delays in, or be required to abandon, development of the drug candidate.We do not anticipate that any of our current drug candidates will be eligible to receive regulatory approval from the FDA, EMA or comparable foreignauthorities and begin commercialization for a number of years, if ever. Even if we ultimately receive regulatory approval for any of these drug candidates, weor our potential future partners, if any, may be unable to commercialize them successfully for a variety of reasons. These include, for example, the availabilityof alternative treatments, lack of cost-effectiveness, the cost of manufacturing the product on a commercial scale and competition with other drugs. Thesuccess of our drug candidates may also be limited by the prevalence and severity of any adverse side effects. If we fail to commercialize one or more of ourcurrent drug candidates, we may be unable to generate sufficient revenues to attain or maintain profitability, and our financial condition and stock price maydecline.If development of our drug candidates does not produce favorable results, we and our collaborators, if any, may be unable to commercialize theseproducts.To receive regulatory approval for the commercialization of our core metabolic and endocrine disease assets, VK5211, VK2809, VK0214, VK0612 and ourearlier-stage assets, the EPOR and DGAT-1 programs, or any other drug candidates that we may develop, adequate and well-controlled clinical trials must beconducted to demonstrate safety and efficacy in humans to the satisfaction of the FDA, EMA and comparable foreign authorities. In order to supportmarketing approval, these agencies typically require successful results in one or more Phase 3 clinical trials, which our current drug candidates have not yetreached and may never reach. The development process is expensive, can take many years and has an uncertain outcome. Failure can occur at any stage of theprocess. We may experience numerous unforeseen events during, or as a result of, the development process that could delay or prevent commercialization ofour current or future drug candidates, including the following: ·clinical trials may produce negative or inconclusive results; ·preclinical studies conducted with drug candidates during clinical development to, among other things, evaluate their toxicology,carcinogenicity and pharmacokinetics and optimize their formulation may produce unfavorable results; ·patient recruitment and enrollment in clinical trials may be slower than we anticipate; ·costs of development may be greater than we anticipate; ·our drug candidates may cause undesirable side effects that delay or preclude regulatory approval or limit their commercial use or marketacceptance, if approved; ·collaborators who may be responsible for the development of our drug candidates may not devote sufficient resources to these clinical trials orother preclinical studies of these candidates or conduct them in a timely manner; or ·we may face delays in obtaining regulatory approvals to commence one or more clinical trials.Success in early development does not mean that later development will be successful because, for example, drug candidates in later-stage clinical trials mayfail to demonstrate sufficient safety and efficacy despite having progressed through initial clinical trials.We licensed all of the intellectual property related to our drug candidates from Ligand pursuant to the Master License Agreement. We recently completed aPhase 1 clinical trial and initiated a Phase 2 clinical trial for VK5211. All other clinical trials, preclinical studies and other analyses performed to date withrespect to our drug candidates have been conducted by Ligand. Therefore, as a company, we have limited experience in conducting clinical trials for our drugcandidates. Since our experience with our drug candidates is limited, we will need to train our existing personnel and hire additional personnel in order tosuccessfully administer and manage our clinical trials and other studies as planned, which may result in delays in completing such planned clinical trials andpreclinical studies. Moreover, to date our drug candidates have been tested in less than the number of patients that will likely need to be studied to obtainregulatory approval. The data collected from clinical trials with larger patient populations may not demonstrate sufficient safety and efficacy to supportregulatory approval of these drug candidates.We currently do not have strategic collaborations in place for clinical development of any of our current drug candidates. Therefore, in the future, we or anypotential future collaborative partner will be responsible for establishing the targeted endpoints and goals for development of our drug candidates. Thesetargeted endpoints and goals may be inadequate to demonstrate the safety and efficacy levels required for regulatory approvals. Even if we believe datacollected during the development of our drug candidates are promising, such data may not be sufficient to support marketing approval by the FDA, EMA orcomparable foreign authorities. Further, data generated during development can be interpreted in different ways, and the FDA, EMA or comparable foreignauthorities may interpret such data in different ways than us or our collaborators. Our failure to adequately demonstrate the safety and efficacy of32Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. our drug candidates would prevent our receipt of regulatory approval, and ultimately the potential commercialization of these drug candidates.Since we do not currently possess the resources necessary to independently develop and commercialize our drug candidates, including our core metabolicand endocrine disease assets, VK5211, VK2809, VK0214, VK0612 and our earlier-stage assets, the EPOR and DGAT-1 programs, or any other drugcandidates that we may develop, we may seek to enter into collaborative agreements to assist in the development and potential future commercialization ofsome or all of these assets as a component of our strategic plan. However, our discussions with potential collaborators may not lead to the establishment ofcollaborations on acceptable terms, if at all, or it may take longer than expected to establish new collaborations, leading to development and potentialcommercialization delays, which would adversely affect our business, financial condition and results of operations.We expect to continue to incur significant research and development expenses, which may make it difficult for us to attain profitability.We expect to expend substantial funds in research and development, including preclinical studies and clinical trials of our drug candidates, and tomanufacture and market any drug candidates in the event they are approved for commercial sale. We also may need additional funding to develop or acquirecomplementary companies, technologies and assets, as well as for working capital requirements and other operating and general corporate purposes.Moreover, our planned increases in staffing will dramatically increase our costs in the near and long-term.However, our spending on current and future research and development programs and drug candidates for specific indications may not yield anycommercially viable products. Due to our limited financial and managerial resources, we must focus on a limited number of research programs and drugcandidates and on specific indications. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitablemarket opportunities.Because the successful development of our drug candidates is uncertain, we are unable to precisely estimate the actual funds we will require to develop andpotentially commercialize them. In addition, we may not be able to generate sufficient revenue, even if we are able to commercialize any of our drugcandidates, to become profitable.Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.We are a clinical-stage company, and the development and commercialization of our drug candidates is uncertain and expected to require substantialexpenditures. We have not yet generated any revenues from our operations to fund our activities, and are therefore dependent upon external sources forfinancing our operations. The audit report issued by our independent registered public accounting firm for our financial statements for the fiscal year endedDecember 31, 2015 states that our independent registered public accounting firm has expressed substantial doubt in our ability to continue as a goingconcern due to the risk that we may not have sufficient cash and liquid assets at December 31, 2015 to cover our operating and capital requirements for thenext 12 months; and in the event that sufficient cash cannot be obtained, we would have to substantially alter, or possibly even discontinue, operations.Although it is difficult to predict our liquidity requirements, as of December 31, 2015, and based upon our current operating plan, we do not believe that wewill have sufficient cash to meet our projected operating requirements for at least the next 12 months unless we raise additional capital. Our financialstatements and related notes thereto included elsewhere in this Annual Report on Form 10-K do not include any adjustments that might result from theoutcome of this uncertainty.Given our lack of current cash flow, we will need to raise additional capital; however, it may be unavailable to us or, even if capital is obtained, maycause dilution or place significant restrictions on our ability to operate our business.Since we will be unable to generate sufficient, if any, cash flow to fund our operations for the foreseeable future, we will need to seek additional equity ordebt financing to provide the capital required to maintain or expand our operations. As of December 31, 2015, we had cash and cash equivalents andinvestments totaling $14,104,049.There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all. If such additional financing is not availableon satisfactory terms, or is not available in sufficient amounts, we may be required to delay, limit or eliminate the development of business opportunities andour ability to achieve our business objectives, our competitiveness, and our business, financial condition and results of operations may be materiallyadversely affected. In addition, we may be required to grant rights to develop and market drug candidates that we would otherwise prefer to develop andmarket ourselves. Our inability to fund our business could lead to the loss of your investment.Our future capital requirements will depend on many factors, including, but not limited to:33Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ·the scope, rate of progress, results and cost of our clinical trials, preclinical studies and other related activities; ·the timing of, and the costs involved in, obtaining regulatory approvals for any of our current or future drug candidates; ·the number and characteristics of the drug candidates we seek to develop or commercialize; ·the cost of manufacturing clinical supplies, and establishing commercial supplies, of our drug candidates; ·the cost of commercialization activities if any of our current or future drug candidates are approved for sale, including marketing, sales anddistribution costs; ·the expenses needed to attract and retain skilled personnel; ·the costs associated with being a public company; ·our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such arrangements; ·the amount of revenue, if any, received from commercial sales of our drug candidates, should any of our drug candidates receive marketingapproval; and ·the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing possible patent claims, including litigation costs andthe outcome of any such litigation.If we raise additional capital by issuing equity securities, the percentage ownership of our existing stockholders may be reduced, and accordingly thesestockholders may experience substantial dilution. We may also issue equity securities that provide for rights, preferences and privileges senior to those of ourcommon stock. Given our need for cash and that equity issuances are the most common type of fundraising for companies like ours, the risk of dilution isparticularly significant for stockholders of our company.Our drug candidates may cause undesirable side effects that could delay or prevent their regulatory approval or commercialization or have othersignificant adverse implications on our business, financial condition and results of operations.Undesirable side effects observed in clinical trials or in supportive preclinical studies with our drug candidates could interrupt, delay or halt theirdevelopment and could result in the denial of regulatory approval by the FDA, EMA or comparable foreign authorities for any or all targeted indications oradversely affect the marketability of any such drug candidates that receive regulatory approval. In turn, this could eliminate or limit our ability tocommercialize our drug candidates.Our drug candidates may exhibit adverse effects in preclinical toxicology studies and adverse interactions with other drugs. There are also risks associatedwith additional requirements the FDA, EMA or comparable foreign authorities may impose for marketing approval with regard to a particular disease.Our drug candidates may require a risk management program that could include patient and healthcare provider education, usage guidelines, appropriatepromotional activities, a post-marketing observational study, and ongoing safety and reporting mechanisms, among other requirements. Prescribing could belimited to physician specialists or physicians trained in the use of the drug, or could be limited to a more restricted patient population. Any risk managementprogram required for approval of our drug candidates could potentially have an adverse effect on our business, financial condition and results of operations.Undesirable side effects involving our drug candidates may have other significant adverse implications on our business, financial condition and results ofoperations. For example: ·we may be unable to obtain additional financing on acceptable terms, if at all; ·our collaborators may terminate any development agreements covering these drug candidates; ·if any development agreements are terminated, we may determine not to further develop the affected drug candidates due to resourceconstraints and may not be able to establish additional collaborations for their further development on acceptable terms, if at all; ·if we were to later continue the development of these drug candidates and receive regulatory approval, earlier findings may significantly limittheir marketability and thus significantly lower our potential future revenues from their commercialization; ·we may be subject to product liability or stockholder litigation; and ·we may be unable to attract and retain key employees.34Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In addition, if any of our drug candidates receive marketing approval and we or others later identify undesirable side effects caused by the product: ·regulatory authorities may withdraw their approval of the product, or we or our partners may decide to cease marketing and sale of the productvoluntarily; ·we may be required to change the way the product is administered, conduct additional clinical trials or preclinical studies regarding theproduct, change the labeling of the product, or change the product’s manufacturing facilities; and ·our reputation may suffer.Any of these events could prevent us from achieving or maintaining market acceptance of the affected product and could substantially increase the costs andexpenses of commercializing the product, which in turn could delay or prevent us from generating significant revenues from the sale of the product.Our efforts to discover drug candidates beyond our current drug candidates may not succeed, and any drug candidates we recommend for clinicaldevelopment may not actually begin clinical trials.We intend to use our technology, including our licensed technology, knowledge and expertise to develop novel drugs to address some of the world’s mostwidespread and costly chronic diseases. We intend to expand our existing pipeline of core assets by advancing drug compounds from current ongoingdiscovery programs into clinical development. However, the process of researching and discovering drug compounds is expensive, time-consuming andunpredictable. Data from our current preclinical programs may not support the clinical development of our lead compounds or other compounds from theseprograms, and we may not identify any additional drug compounds suitable for recommendation for clinical development. Moreover, any drug compoundswe recommend for clinical development may not demonstrate, through preclinical studies, indications of safety and potential efficacy that would supportadvancement into clinical trials. Such findings would potentially impede our ability to maintain or expand our clinical development pipeline. Our ability toidentify new drug compounds and advance them into clinical development also depends upon our ability to fund our research and development operations,and we cannot be certain that additional funding will be available on acceptable terms, or at all.Delays in the commencement or completion of clinical trials could result in increased costs to us and delay our ability to establish strategiccollaborations.Delays in the commencement or completion of clinical trials could significantly impact our drug development costs. For example, in December 2015 theFDA requested from us information related to the toxicity of certain metabolites of VK2809, prior to initiation of our planned Phase 2 clinical trial inhypercholesterolemia and fatty liver disease. We are in the process of providing this information and currently expect to initiate this study in the secondquarter of 2016, representing a delay from our previous plan to initiate the clinical trial in the fourth quarter of 2015. We do not know whether plannedclinical trials will begin on time or be completed on schedule, if at all. The commencement of clinical trials can be delayed for a variety of reasons, including,but not limited to, delays related to: ·obtaining regulatory approval to commence one or more clinical trials; ·reaching agreement on acceptable terms with prospective third-party contract research organizations, or CROs, and clinical trial sites; ·manufacturing sufficient quantities of a drug candidate or other materials necessary to conduct clinical trials; ·obtaining institutional review board approval to conduct one or more clinical trials at a prospective site; ·recruiting and enrolling patients to participate in one or more clinical trials; and ·the failure of our collaborators to adequately resource our drug candidates due to their focus on other programs or as a result of general marketconditions.In addition, once a clinical trial has begun, it may be suspended or terminated by us, our collaborators, the institutional review boards or data safetymonitoring boards charged with overseeing our clinical trials, the FDA, EMA or comparable foreign authorities due to a number of factors, including: ·failure to conduct the clinical trial in accordance with regulatory requirements or clinical protocols; ·inspection of the clinical trial operations or clinical trial site by the FDA, EMA or comparable foreign authorities resulting in the imposition ofa clinical hold;35Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ·unforeseen safety issues; or ·lack of adequate funding to continue the clinical trial.If we experience delays in the completion or termination of any clinical trial of our product candidates, the commercial prospects of our product candidateswill be harmed, and our ability to commence product sales and generate product revenues from any of our product candidates will be delayed. In addition,any delays in completing our clinical trials will increase our costs and slow down our product candidate development and approval process. Delays incompleting our clinical trials could also allow our competitors to obtain marketing approval before we do or shorten the patent protection period duringwhich we may have the exclusive right to commercialize our product candidates. Any of these occurrences may harm our business, financial condition andprospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may alsoultimately lead to the denial of regulatory approval of our product candidates.Results of earlier clinical trials may not be predictive of the results of later-stage clinical trials.The results of preclinical studies and early clinical trials of product candidates may not be predictive of the results of later-stage clinical trials. Productcandidates in later stages of clinical trials may fail to show the desired safety and efficacy results despite having progressed through preclinical studies andinitial clinical trials. Many companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to adverse safetyprofiles or lack of efficacy, notwithstanding promising results in earlier studies. Similarly, our future clinical trial results may not be successful for these orother reasons.This drug candidate development risk is heightened by any changes in the planned clinical trials compared to the completed clinical trials. As productcandidates are developed through preclinical to early to late stage clinical trials towards approval and commercialization, it is customary that various aspectsof the development program, such as manufacturing and methods of administration, are altered along the way in an effort to optimize processes and results.While these types of changes are common and are intended to optimize the product candidates for late stage clinical trials, approval and commercialization,such changes carry the risk that they will not achieve these intended objectives.Any of these changes could make the results of our planned clinical trials or other future clinical trials we may initiate less predictable and could cause ourproduct candidates to perform differently, including causing toxicities, which could delay completion of our clinical trials, delay approval of our productcandidates, and/or jeopardize our ability to commence product sales and generate revenues.If we experience delays in the enrollment of patients in our clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligiblepatients to participate in these trials as required by the FDA or other regulatory authorities. Patient enrollment, a significant factor in the timing of clinicaltrials, is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria forthe trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug beingstudied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.If we fail to enroll and maintain the number of patients for which the clinical trial was designed, the statistical power of that clinical trial may be reduced,which would make it harder to demonstrate that the product candidate being tested in such clinical trial is safe and effective. Additionally, enrollment delaysin our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limitour ability to obtain additional financing. Our inability to enroll a sufficient number of patients for any of our current or future clinical trials would result insignificant delays or may require us to abandon one or more clinical trials altogether.We intend to rely on third parties to conduct our preclinical studies and clinical trials and perform other tasks for us. If these third parties do notsuccessfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtainregulatory approval for or commercialize our drug candidates and our business, financial condition and results of operations could be substantiallyharmed.Ligand, the licensor of our development programs, has relied upon and plans to continue to rely upon third-party CROs, medical institutions, clinicalinvestigators and contract laboratories to monitor and manage data for our licensed ongoing preclinical and clinical programs. We have relied and expect tocontinue to rely on these parties for execution of our preclinical studies and clinical trials, and we control only certain aspects of their activities.Nevertheless, we maintain responsibility for ensuring that each of our36Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. clinical trials and preclinical studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and our reliance onthese third parties does not relieve us of our regulatory responsibilities. We and our CROs and other vendors are required to comply with current requirementson good manufacturing practices, or cGMP, good clinical practices, or GCP, and good laboratory practice, or GLP, which are a collection of laws andregulations enforced by the FDA, EMA or comparable foreign authorities for all of our drug candidates in clinical development. Regulatory authoritiesenforce these regulations through periodic inspections of preclinical study and clinical trial sponsors, principal investigators, preclinical study and clinicaltrial sites, and other contractors. If we or any of our CROs or vendors fails to comply with applicable regulations, the data generated in our preclinical studiesand clinical trials may be deemed unreliable and the FDA, EMA or comparable foreign authorities may require us to perform additional preclinical studiesand clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatoryauthority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with products producedconsistent with cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the developmentand regulatory approval processes.If any of our relationships with these third-party CROs, medical institutions, clinical investigators or contract laboratories terminate, we may not be able toenter into arrangements with alternative CROs on commercially reasonable terms, or at all. In addition, our CROs are not our employees, and except forremedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our ongoingpreclinical and clinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to bereplaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols, regulatory requirements, or for otherreasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercializeour drug candidates. CROs may also generate higher costs than anticipated. As a result, our business, financial condition and results of operations and thecommercial prospects for our drug candidates could be materially and adversely affected, our costs could increase, and our ability to generate revenue couldbe delayed.Switching or adding additional CROs, medical institutions, clinical investigators or contract laboratories involves additional cost and requires managementtime and focus. In addition, there is a natural transition period when a new CRO commences work replacing a previous CRO. As a result, delays occur, whichcan materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there canbe no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse effecton our business, financial condition or results of operations.Our drug candidates are subject to extensive regulation under the FDA, EMA or comparable foreign authorities, which can be costly and timeconsuming, cause unanticipated delays or prevent the receipt of the required approvals to commercialize our drug candidates.The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, export, marketing and distribution of our drugcandidates are subject to extensive regulation by the FDA and other U.S. regulatory agencies, EMA or comparable authorities in foreign markets. In the U.S.,neither we nor our collaborators are permitted to market our drug candidates until we or our collaborators receive approval of a new drug application, or anNDA, from the FDA or receive similar approvals abroad. The process of obtaining these approvals is expensive, often takes many years, and can varysubstantially based upon the type, complexity and novelty of the drug candidates involved. Approval policies or regulations may change and may beinfluenced by the results of other similar or competitive products, making it more difficult for us to achieve such approval in a timely manner or at all. Forexample, the FDA has released draft guidance regarding clinical trials for drug candidates treating diabetes that may result in more stringent requirements forthe clinical trials and regulatory approval of such drug candidates. This and any future guidance that may result from recent FDA advisory panel discussionsmay make it more expensive to develop and commercialize such drug candidates. Such increased expense could make it more difficult to obtain favorableterms in the collaborative arrangements we require to maximize the value of our programs seeking to develop new drug candidates for diabetes. In addition,as a company, we have not previously filed NDAs with the FDA or filed similar applications with other foreign regulatory agencies. This lack of experiencemay impede our ability to obtain FDA or other foreign regulatory agency approval in a timely manner, if at all, for our drug candidates for whichdevelopment and commercialization is our responsibility.Despite the time and expense invested, regulatory approval is never guaranteed. The FDA, EMA or comparable foreign authorities can delay, limit or denyapproval of a drug candidate for many reasons, including: ·a drug candidate may not be deemed safe or effective; ·agency officials of the FDA, EMA or comparable foreign authorities may not find the data from non-clinical or preclinical studies and clinicaltrials generated during development to be sufficient;37Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ·the FDA, EMA or comparable foreign authorities may not approve our third-party manufacturers’ processes or facilities; or ·the FDA, EMA or a comparable foreign authority may change its approval policies or adopt new regulations.Our inability to obtain these approvals would prevent us from commercializing our drug candidates.Even if our drug candidates receive regulatory approval in the U.S., we may never receive approval or commercialize our products outside of the U.S.In order to market any products outside of the U.S., we must establish and comply with numerous and varying regulatory requirements of other countriesregarding safety and efficacy. Approval procedures vary among countries and can involve additional product testing and additional administrative reviewperiods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process inother countries may include all of the risks detailed above regarding FDA approval in the U.S. as well as other risks. Regulatory approval in one country doesnot ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatoryprocess in others. Failure to obtain regulatory approval in other countries or any delay seeking or obtaining such approval would impair our ability todevelop foreign markets for our drug candidates.Even if any of our drug candidates receive regulatory approval, our drug candidates may still face future development and regulatory difficulties.If any of our drug candidates receive regulatory approval, the FDA, EMA or comparable foreign authorities may still impose significant restrictions on theindicated uses or marketing of the drug candidates or impose ongoing requirements for potentially costly post-approval studies and trials. In addition,regulatory agencies subject a product, its manufacturer and the manufacturer’s facilities to continual review and periodic inspections. If a regulatory agencydiscovers previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or problems with the facility wherethe product is manufactured, a regulatory agency may impose restrictions on that product, our collaborators or us, including requiring withdrawal of theproduct from the market. Our drug candidates will also be subject to ongoing FDA, EMA or comparable foreign authorities’ requirements for the labeling,packaging, storage, advertising, promotion, record-keeping and submission of safety and other post-market information on the drug. If our drug candidatesfail to comply with applicable regulatory requirements, a regulatory agency may: ·issue warning letters or other notices of possible violations; ·impose civil or criminal penalties or fines or seek disgorgement of revenue or profits; ·suspend any ongoing clinical trials; ·refuse to approve pending applications or supplements to approved applications filed by us or our collaborators; ·withdraw any regulatory approvals; ·impose restrictions on operations, including costly new manufacturing requirements, or shut down our manufacturing operations; or ·seize or detain products or require a product recall.The FDA, EMA and comparable foreign authorities actively enforce the laws and regulations prohibiting the promotion of off-label uses.The FDA, EMA and comparable foreign authorities strictly regulate the promotional claims that may be made about prescription products, such as our drugcandidates, if approved. In particular, a product may not be promoted for uses that are not approved by the FDA, EMA or comparable foreign authorities asreflected in the product’s approved labeling. If we receive marketing approval for our drug candidates for our proposed indications, physicians maynevertheless use our products for their patients in a manner that is inconsistent with the approved label, if the physicians personally believe in theirprofessional medical judgment that our products could be used in such manner. However, if we are found to have promoted our products for any off-labeluses, the federal government could levy civil, criminal or administrative penalties, and seek fines against us. Such enforcement has become more common inthe industry. The FDA, EMA or comparable foreign authorities could also request that we enter into a consent decree or a corporate integrity agreement, orseek a permanent injunction against us under which specified promotional conduct is monitored, changed or curtailed. If we cannot successfully manage thepromotion of our drug candidates, if approved, we could become subject to significant liability, which would materially adversely affect our business,financial condition and results of operations.38Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If our competitors have drug candidates that are approved faster, marketed more effectively or demonstrated to be more effective than ours, ourcommercial opportunity may be reduced or eliminated.The biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.While we believe that our technology, knowledge, experience and scientific resources provide us with competitive advantages, we face potential competitionfrom many different sources, including commercial biopharmaceutical enterprises, academic institutions, government agencies and private and publicresearch institutions. Any drug candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that maybecome available in the future.Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical studies, clinicaltrials, regulatory approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant competitors,particularly through collaborative arrangements with large and established companies. Our competitors may succeed in developing technologies andtherapies that are more effective, better tolerated or less costly than any which we are developing, or that would render our drug candidates obsolete andnoncompetitive. Even if we obtain regulatory approval of any of our drug candidates, our competitors may succeed in obtaining regulatory approvals fortheir products earlier than we do. We will also face competition from these third parties in recruiting and retaining qualified scientific and managementpersonnel, establishing clinical trial sites and patient registration for clinical trials, and in acquiring and in-licensing technologies and productscomplementary to our programs or advantageous to our business.The key competitive factors affecting the success of each of our drug candidates, if approved, are likely to be its efficacy, safety, tolerability, frequency androute of administration, convenience and price, the level of branded and generic competition and the availability of coverage and reimbursement fromgovernment and other third-party payors.VK5211In the U.S., there are currently no marketed therapies for the maintenance or improvement of lean body mass, or LBM, bone mineral density, or BMD, orphysical function in patients recovering from non-elective hip fracture surgery. However, VK5211, if approved, will face competition from severalexperimental therapies that are in various stages of development for acute rehabilitation following hip fracture surgery, including programs in developmentat Novartis AG and Morphosys AG. There are also several experimental therapies that are in various stages of clinical development for conditionscharacterized by muscle wasting by companies including GTx, Inc., Helsinn Group and Morphosys AG. In addition, nutritional and growth hormone-basedtherapies are sometimes used in patients experiencing muscle wasting.VK2809There are many therapies currently available and numerous others being developed for the treatment of hypercholesterolemia and dyslipidemia. If approved,VK2809 will face competition from therapies that are currently available and from therapies that may become available in the future. Generic statin therapiessuch as atorvastatin are widely prescribed for the initial treatment of hypercholesterolemia. Cholesterol absorption inhibitors such as Merck & Co., Inc.’sZetia (ezetimibe), generic bile acid sequestrants such as coleselevam and generic fibrates such as fenofibrate are also prescribed for the treatment ofhypercholesterolemia. Various combinations of these therapies are often prescribed for patients suffering from dyslipidemia. In addition, recently-approvedantibody therapies targeting the proprotein convertase subtilisin/kexin type 9 (PCSK9) gene are expected to be prescribed for patients whose low-densitylipoprotein (LDL) remains elevated despite treatment with existing cholesterol-lowering agents. While no therapies are currently approved for the treatmentof non-alcoholic steatohepatitis, we are aware of several development-stage programs targeting this disease, including obeticholic acid from InterceptPharmaceuticals, Inc., GFT505 from Genfit SA, aramchol from Galmed Pharmaceuticals Ltd., simtuzumab from Gilead Sciences, Inc., and emricisan fromConatus Pharmaceuticals Inc.VK0214In the U.S., there are currently no marketed therapies for the treatment of X-ALD. Hematopoietic stem cell therapy has been used to treat the most severe formof X-ALD, CALD. More recently, gene therapy has been shown to be effective in CALD as well. However, both treatments are invasive, requiring surgicalintervention, and these do not appear to have an effect on the most pervasive form of X-ALD, AMN. High-dose biotin is under investigation for treatment ofAMN. There are several experimental therapies that are in various stages of clinical development for X-ALD by companies, including MedDayPharmaceuticals SAS and bluebird bio, Inc., which may be competitive with VK0214, if approved.39Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. VK0612In the U.S., VK0612, if approved, will face competition from a variety of currently marketed oral type 2 diabetes therapies, including metformin (generic),pioglitazone (generic), glimepiride (generic), sitagliptin (Merck & Co., Inc.) and canagliflozin (Johnson & Johnson). These therapies are well-established andare widely accepted by physicians, patients, caregivers and third-party payors as the standard of care for the treatment of type 2 diabetes. Physicians, patientsand 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 clinicaldevelopment by companies such as Eli Lilly and Company, Takeda Pharmaceutical Company Limited and TransTech Pharma, Inc.Preclinical Programs Focused on EPOR Agonists and DGAT-1 InhibitorsIf any of our preclinical programs are ultimately determined safe and effective and approved for marketing, they may compete for market share withestablished therapies from a number of competitors, including large biopharmaceutical companies. Many therapies are currently available and numerousothers are being developed for the treatment of anemia and obesity. Any products that we may develop from our preclinical programs may not be able tocompete effectively with existing or future therapies.We are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our drug candidates.The process of manufacturing our drug candidates is complex, highly regulated, and subject to several risks. For example, the process of manufacturing ourdrug candidates is extremely susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, orvendor or operator error. Even minor deviations from normal manufacturing processes for any of our drug candidates could result in reduced productionyields, product defects, and other supply disruptions. If microbial, viral, or other contaminations are discovered in our drug candidates or in themanufacturing facilities in which our drug candidates are made, such manufacturing facilities may need to be closed for an extended period of time toinvestigate and remedy the contamination. In addition, the manufacturing facilities in which our drug candidates are made could be adversely affected byequipment failures, labor shortages, natural disasters, power failures and numerous other factors.In addition, any adverse developments affecting manufacturing operations for our drug candidates may result in shipment delays, inventory shortages, lotfailures, withdrawals or recalls, or other interruptions in the supply of our drug candidates. We also may need to take inventory write-offs and incur othercharges and expenses for drug candidates that fail to meet specifications, undertake costly remediation efforts, or seek costlier manufacturing alternatives.We rely completely on third parties to manufacture our preclinical and clinical drug supplies, and our business, financial condition and results ofoperations could be harmed if those third parties fail to provide us with sufficient quantities of drug product, or fail to do so at acceptable quality levelsor prices.We do not currently have, nor do we plan to acquire, the infrastructure or capability internally to manufacture our preclinical and clinical drug supplies foruse in our clinical trials, and we lack the resources and the capability to manufacture any of our drug candidates on a clinical or commercial scale. We rely onour manufacturers to purchase from third-party suppliers the materials necessary to produce our drug candidates for our clinical trials. There are a limitednumber of suppliers for raw materials that we use to manufacture our drugs, and there may be a need to identify alternate suppliers to prevent a possibledisruption of the manufacture of the materials necessary to produce our drug candidates for our clinical trials, and, if approved, ultimately for commercialsale. We do not have any control over the process or timing of the acquisition of these raw materials by our manufacturers. Although we generally do notbegin a clinical trial unless we believe we have a sufficient supply of a drug candidate to complete such clinical trial, any significant delay or discontinuityin the supply of a drug candidate, or the raw material components thereof, for an ongoing clinical trial due to the need to replace a third-party manufacturercould considerably delay completion of our clinical trials, product testing and potential regulatory approval of our drug candidates, which could harm ourbusiness, financial condition and results of operations.40Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We and our contract manufacturers are subject to significant regulation with respect to manufacturing our drug candidates. The manufacturingfacilities on which we rely may not continue to meet regulatory requirements.All entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our existing contract manufacturers for our drugcandidates, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in late-stage clinicaltrials must be manufactured in accordance with cGMP. These regulations govern manufacturing processes and procedures and the implementation andoperation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of productionprocesses can lead to the introduction of contaminants or to inadvertent changes in the properties or stability of our drug candidates that may not bedetectable in final product testing. We or our contract manufacturers must supply all necessary documentation in support of an NDA or marketingauthorization application, or MAA, on a timely basis and must adhere to good laboratory practice and cGMP regulations enforced by the FDA, EMA orcomparable foreign authorities through their facilities inspection program. Some of our contract manufacturers may not have produced a commerciallyapproved pharmaceutical product and therefore may not have obtained the requisite regulatory authority approvals to do so. The facilities and qualitysystems of some or all of our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition ofregulatory approval of our drug candidates or any of our other potential products. In addition, the regulatory authorities may, at any time, audit or inspect amanufacturing facility involved with the preparation of our drug candidates or any of our other potential products or the associated quality systems forcompliance with the regulations applicable to the activities being conducted. Although we oversee the contract manufacturers, we cannot control themanufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with the regulatory requirements. If thesefacilities do not pass a pre-approval plant inspection, regulatory approval of the products may not be granted or may be substantially delayed until anyviolations are corrected to the satisfaction of the regulatory authority, if ever.The regulatory authorities also may, at any time following approval of a product for sale, audit the manufacturing facilities of our third-party contractors. Ifany such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulationsoccurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly or timeconsuming for us or a third party to implement, and that may include the temporary or permanent suspension of a clinical trial or commercial sales or thetemporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm ourbusiness, financial condition and results of operations.If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA, EMA or comparable foreign authorities can impose regulatorysanctions including, among other things, refusal to approve a pending application for a drug candidate, withdrawal of an approval, or suspension ofproduction. As a result, our business, financial condition and results of operations may be materially and adversely affected.Additionally, if supply from one manufacturer is interrupted, an alternative manufacturer would need to be qualified through an NDA supplement or MAAvariation, or equivalent foreign regulatory filing, which could result in further delay. The regulatory agencies may also require additional studies or trials if anew manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in ourdesired clinical and commercial timelines.These factors could cause us to incur higher costs and could cause the delay or termination of clinical trials, regulatory submissions, required approvals, orcommercialization of our drug candidates. Furthermore, if our suppliers fail to meet contractual requirements and we are unable to secure one or morereplacement suppliers capable of production at a substantially equivalent cost, our clinical trials may be delayed or we could lose potential revenue.Any collaboration arrangement that we may enter into in the future may not be successful, which could adversely affect our ability to develop andcommercialize our current and potential future drug candidates.We may seek collaboration arrangements with biopharmaceutical companies for the development or commercialization of our current and potential futuredrug candidates. To the extent that we decide to enter into collaboration agreements, we will face significant competition in seeking appropriatecollaborators. Moreover, collaboration arrangements are complex and time consuming to negotiate, execute and implement. We may not be successful in ourefforts to establish and implement collaborations or other alternative arrangements should we choose to enter into such arrangements, and the terms of thearrangements may not be favorable to us. If and when we collaborate with a third party for development and commercialization of a drug candidate, we canexpect to relinquish some or all of the control over the future success of that drug candidate to the third party. The success of our collaboration arrangementswill depend heavily on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts andresources that they will apply to these collaborations.41Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Disagreements between parties to a collaboration arrangement can lead to delays in developing or commercializing the applicable drug candidate and can bedifficult to resolve in a mutually beneficial manner. In some cases, collaborations with biopharmaceutical companies and other third parties are terminated orallowed to expire by the other party. Any such termination or expiration would adversely affect our business, financial condition and results of operations.If we are unable to develop our own commercial organization or enter into agreements with third parties to sell and market our drug candidates, wemay be unable to generate significant revenues.We do not have a sales and marketing organization, and we have no experience as a company in the sales, marketing and distribution of pharmaceuticalproducts. If any of our drug candidates are approved for commercialization, we may be required to develop our sales, marketing and distribution capabilities,or make arrangements with a third party to perform sales and marketing services. Developing a sales force for any resulting product or any product resultingfrom any of our other drug candidates is expensive and time consuming and could delay any product launch. We may be unable to establish and manage aneffective sales force in a timely or cost-effective manner, if at all, and any sales force we do establish may not be capable of generating sufficient demand forour drug candidates. To the extent that we enter into arrangements with collaborators or other third parties to perform sales and marketing services, ourproduct revenues are likely to be lower than if we marketed and sold our drug candidates independently. If we are unable to establish adequate sales andmarketing capabilities, independently or with others, we may not be able to generate significant revenues and may not become profitable.The commercial success of our drug candidates depends upon their market acceptance among physicians, patients, healthcare payors and the medicalcommunity.Even if our drug candidates obtain regulatory approval, our products, if any, may not gain market acceptance among physicians, patients, healthcare payorsand the medical community. The degree of market acceptance of any of our approved drug candidates will depend on a number of factors, including: ·the effectiveness of our approved drug candidates as compared to currently available products; ·patient willingness to adopt our approved drug candidates in place of current therapies; ·our ability to provide acceptable evidence of safety and efficacy; ·relative convenience and ease of administration; ·the prevalence and severity of any adverse side effects; ·restrictions on use in combination with other products; ·availability of alternative treatments; ·pricing and cost-effectiveness assuming either competitive or potential premium pricing requirements, based on the profile of our drugcandidates and target markets; ·effectiveness of our or our partners’ sales and marketing strategy; ·our ability to obtain sufficient third-party coverage or reimbursement; and ·potential product liability claims.In addition, the potential market opportunity for our drug candidates is difficult to precisely estimate. Our estimates of the potential market opportunity forour drug candidates include several key assumptions based on our industry knowledge, industry publications, third-party research reports and other surveys.Independent sources have not verified all of our assumptions. If any of these assumptions proves to be inaccurate, then the actual market for our drugcandidates could be smaller than our estimates of our potential market opportunity. If the actual market for our drug candidates is smaller than we expect, ourproduct revenue may be limited, it may be harder than expected to raise funds and it may be more difficult for us to achieve or maintain profitability. If wefail to achieve market acceptance of our drug candidates in the U.S. and abroad, our revenue will be limited and it will be more difficult to achieveprofitability.42Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If we fail to obtain and sustain an adequate level of reimbursement for our potential products by third-party payors, potential future sales would bematerially adversely affected.There will be no viable commercial market for our drug candidates, if approved, without reimbursement from third-party payors. Reimbursement policies maybe affected by future healthcare reform measures. We cannot be certain that reimbursement will be available for our current drug candidates or any other drugcandidate we may develop. Additionally, even if there is a viable commercial market, if the level of reimbursement is below our expectations, our anticipatedrevenue and gross margins will be adversely affected.Third-party payors, such as government or private healthcare insurers, carefully review and increasingly question and challenge the coverage of and theprices charged for drugs. Reimbursement rates from private health insurance companies vary depending on the company, the insurance plan and other factors.Reimbursement rates may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for otherservices. There is a current trend in the U.S. healthcare industry toward cost containment.Large public and private payors, managed care organizations, group purchasing organizations and similar organizations are exerting increasing influence ondecisions regarding the use of, and reimbursement levels for, particular treatments. Such third-party payors, including Medicare, may question the coverageof, and challenge the prices charged for, medical products and services, and many third-party payors limit coverage of or reimbursement for newly approvedhealthcare products. In particular, third-party payors may limit the covered indications. Cost-control initiatives could decrease the price we might establishfor products, which could result in product revenues being lower than anticipated. We believe our drugs will be priced significantly higher than existinggeneric drugs and consistent with current branded drugs. If we are unable to show a significant benefit relative to existing generic drugs, Medicare, Medicaidand private payors may not be willing to provide reimbursement for our drugs, which would significantly reduce the likelihood of our products gainingmarket acceptance.We expect that private insurers will consider the efficacy, cost-effectiveness, safety and tolerability of our potential products in determining whether toapprove reimbursement for such products and at what level. Obtaining these approvals can be a time consuming and expensive process. Our business,financial condition and results of operations would be materially adversely affected if we do not receive approval for reimbursement of our potential productsfrom private insurers on a timely or satisfactory basis. Limitations on coverage could also be imposed at the local Medicare carrier level or by fiscalintermediaries. Medicare Part D, which provides a pharmacy benefit to Medicare patients as discussed below, does not require participating prescription drugplans to cover all drugs within a class of products. Our business, financial condition and results of operations could be materially adversely affected if Part Dprescription drug plans were to limit access to, or deny or limit reimbursement of, our drug candidates or other potential products.Reimbursement systems in international markets vary significantly by country and by region, and reimbursement approvals must be obtained on a country-by-country basis. In many countries, the product cannot be commercially launched until reimbursement is approved. In some foreign markets, prescriptionpharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. The negotiation process in some countriescan exceed 12 months. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our products to other available therapies.If the prices for our potential products are reduced or if governmental and other third-party payors do not provide adequate coverage and reimbursement ofour drugs, our future revenue, cash flows and prospects for profitability will suffer.Recently enacted and future legislation may increase the difficulty and cost of commercializing our drug candidates and may affect the prices we mayobtain if our drug candidates are approved for commercialization.In the U.S. and some foreign jurisdictions, there have been a number of adopted and proposed legislative and regulatory changes regarding the healthcaresystem that could prevent or delay regulatory approval of our drug candidates, restrict or regulate post-marketing activities and affect our ability to profitablysell any of our drug candidates for which we obtain regulatory approval.In the U.S., the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, changed the way Medicare covers and pays forpharmaceutical products. Cost reduction initiatives and other provisions of this legislation could limit the coverage and reimbursement rate that we receivefor any of our approved products. While the MMA only applies to drug benefits for Medicare beneficiaries, private payors often follow Medicare coveragepolicy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the MMA may result ina similar reduction in payments from private payors.43Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and EducationReconciliation Act of 2010, collectively the PPACA, intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending,enhance remedies against healthcare fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxesand fees on the health industry and impose additional health policy reforms. The PPACA increased manufacturers’ rebate liability under the Medicaid DrugRebate Program by increasing the minimum rebate amount for both branded and generic drugs and revised the definition of “average manufacturer price,” orAMP, which may also increase the amount of Medicaid drug rebates manufacturers are required to pay to states. The legislation also expanded Medicaid drugrebates and created an alternative rebate formula for certain new formulations of certain existing products that is intended to increase the rebates due on thosedrugs. The Centers for Medicare & Medicaid Services, which administers the Medicaid Drug Rebate Program, also has proposed to expand Medicaid rebatesto the utilization that occurs in the territories of the U.S., such as Puerto Rico and the Virgin Islands. Further, beginning in 2011, the PPACA imposed asignificant annual fee on companies that manufacture or import branded prescription drug products and required manufacturers to provide a 50% discount offthe negotiated price of prescriptions filled by beneficiaries in the Medicare Part D coverage gap, referred to as the “donut hole.” Although it is too early todetermine the full effects of the PPACA, the law appears likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicareprogram, and may also increase our regulatory burdens and operating costs.Legislative and regulatory proposals have been introduced at both the state and federal level to expand post-approval requirements and restrict sales andpromotional activities for pharmaceutical products. We are not sure whether additional legislative changes will be enacted, or whether the FDA regulations,guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our drug candidates, if any, may be. Inaddition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject usto more stringent product labeling and post-marketing approval testing and other requirements.We are subject to “fraud and abuse” and similar laws and regulations, and a failure to comply with such regulations or prevail in any litigation relatedto noncompliance could harm our business, financial condition and results of operations.In the U.S., we are subject to various federal and state healthcare “fraud and abuse” laws, including anti-kickback laws, false claims laws and other lawsintended, among other things, to reduce fraud and abuse in federal and state healthcare programs. The federal Anti-Kickback Statute makes it illegal for anyperson, including a prescription drug manufacturer, or a party acting on its behalf, to knowingly and willfully solicit, receive, offer or pay any remunerationthat is intended to induce the referral of business, including the purchase, order or prescription of a particular drug, or other good or service for whichpayment in whole or in part may be made under a federal healthcare program, such as Medicare or Medicaid. Although we seek to structure our businessarrangements in compliance with all applicable requirements, these laws are broadly written, and it is often difficult to determine precisely how the law willbe applied in specific circumstances. Accordingly, it is possible that our practices may be challenged under the federal Anti-Kickback Statute.The federal False Claims Act prohibits anyone from, among other things, knowingly presenting or causing to be presented for payment to the government,including the federal healthcare programs, claims for reimbursed drugs or services that are false or fraudulent, claims for items or services that were notprovided as claimed, or claims for medically unnecessary items or services. Under the Health Insurance Portability and Accountability Act of 1996, we areprohibited from knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors, or knowingly and willfullyfalsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of orpayment for healthcare benefits, items or services to obtain money or property of any healthcare benefit program. Violations of fraud and abuse laws may bepunishable by criminal or civil sanctions, including penalties, fines or exclusion or suspension from federal and state healthcare programs such as Medicareand Medicaid and debarment from contracting with the U.S. government. In addition, private individuals have the ability to bring actions on behalf of thegovernment under the federal False Claims Act as well as under the false claims laws of several states.Many states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursedby any source, not just governmental payors. In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers or the Pharmaceutical Research and Manufacturers of America’sCode on Interactions with Healthcare Professionals. Several states also impose other marketing restrictions or require pharmaceutical companies to makemarketing or price disclosures to the state. There are ambiguities as to what is required to comply with these state requirements and if we fail to comply withan applicable state law requirement we could be subject to penalties.44Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Neither the government nor the courts have provided definitive guidance on the application of fraud and abuse laws to our business. Law enforcementauthorities are increasingly focused on enforcing these laws, and it is possible that some of our practices may be challenged under these laws. Efforts toensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. If we arefound in violation of one of these laws, we could be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion fromgovernmental funded federal or state healthcare programs and the curtailment or restructuring of our operations. If this occurs, our business, financialcondition and results of operations may be materially adversely affected.If we face allegations of noncompliance with the law and encounter sanctions, our reputation, revenues and liquidity may suffer, and any of our drugcandidates that are ultimately approved for commercialization could be subject to restrictions or withdrawal from the market.Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generatenegative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to generate revenues fromany of our drug candidates that are ultimately approved for commercialization. If regulatory sanctions are applied or if regulatory approval is withdrawn, ourbusiness, financial condition and results of operations will be adversely affected. Additionally, if we are unable to generate revenues from product sales, ourpotential for achieving profitability will be diminished and our need to raise capital to fund our operations will increase.If we fail to retain current members of our senior management and scientific personnel, or to attract and keep additional key personnel, we may beunable to successfully develop or commercialize our drug candidates.Our success depends on our continued ability to attract, retain and motivate highly qualified management and scientific personnel. As of February 29, 2016,we had nine full-time employees, one part-time employee and a small number of consultants, which may make us more reliant on our individual employeesthan companies with a greater number of employees. The loss of any of our key personnel could delay or prevent the development of our drug candidates.These personnel are “at-will” employees and may terminate their employment with us at any time; however, our current executive officers have agreed toprovide us with at least 60 days’ advance notice of resignation pursuant to their employment agreements with us. The replacement of key personnel likelywould involve significant time and costs, and may significantly delay or prevent the achievement of our business objectives. We do not maintain “keyperson” insurance on any of our employees.From time to time, our management seeks the advice and guidance of certain scientific advisors and consultants regarding clinical and regulatorydevelopment programs and other customary matters. These scientific advisors and consultants are not our employees and may have commitments to, orconsulting or advisory contracts with, other entities that may limit their availability to us. In addition, our scientific advisors may have arrangements withother companies to assist those companies in developing products or technologies that may compete with ours.Competition for qualified personnel is intense, especially in the greater San Diego, California area where we have a substantial presence and need for highlyskilled personnel. We may not be successful in attracting qualified personnel to fulfill our current or future needs. Competitors and others have in the pastattempted, and are likely in the future to attempt, to recruit our employees. While our employees are required to sign standard agreements concerningconfidentiality and ownership of inventions, we generally do not have employment contracts or non-competition agreements with any of our personnel. Theloss of the services of any of our key personnel, the inability to attract or retain highly qualified personnel in the future or delays in hiring such personnel,particularly senior management and other technical personnel, could materially and adversely affect our business, financial condition and results ofoperations.We will need to increase the size of our organization and may not successfully manage our growth.We are a clinical-stage biopharmaceutical company with a small number of employees, and our management systems currently in place are not likely to beadequate to support our future growth plans. Our ability to grow and to manage our growth effectively will require us to hire, train, retain, manage andmotivate additional employees and to implement and improve our operational, financial and management systems. These demands also may require thehiring of additional senior management personnel or the development of additional expertise by our senior management personnel. Hiring a significantnumber of additional employees, particularly those at the management level, would increase our expenses significantly. Moreover, if we fail to expand andenhance our operational, financial and management systems in conjunction with our potential future growth, it could have a material adverse effect on ourbusiness, financial condition and results of operations.We are party to a loan and security agreement that contains operating and financial covenants that may restrict our business and financing activities.45Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. On May 21 2014, we entered into a Loan and Security Agreement with Ligand, as amended on April 8, 2015 and January 22, 2016, or the Loan and SecurityAgreement, pursuant to which, among other things, Ligand agreed to provide us with loans in the aggregate amount of up to $2.5 million. Each of the loansunder the Loan and Security Agreement is evidenced by a Secured Convertible Promissory Note, or the Ligand Note. Under the Loan and Security Agreementand the Ligand Note, we are subject to affirmative and negative covenants. We agreed to, among other things, deliver financial statements, forecasts andbudget information to Ligand. In addition, we agreed to use the proceeds from the loans solely as working capital and to fund our general businessrequirements in accordance with our forecast and budget, and not to take certain actions without Ligand’s consent, including, but not limited to, declaring orpaying dividends, incurring or repaying certain indebtedness or engaging in certain related party transactions. The operating covenants, restrictions andobligations in our Loan and Security Agreement, as well as any future financing arrangements that we may enter into, may restrict our ability to finance ouroperations, engage in business activities or expand or fully pursue our business strategies. Our ability to comply with these covenants may be affected byevents beyond our control, and we may not be able to meet all of our covenants under the Loan and Security Agreement.Additionally, we may be required to repay the outstanding indebtedness under the Loan and Security Agreement and the Ligand Note if an event of defaultoccurs. An event of default under the Loan and Security Agreement will be deemed to occur or exist upon the termination of the Master License Agreement;in the event we fail to make principal or interest payments under the Ligand Note when due; if we become insolvent or breach and fail to cure within aspecified period of time any representation, warranty, covenant or agreement in the Loan and Security Agreement, the Master License Agreement, the OptionAgreement, dated September 27, 2012, by and between us and Ligand, as amended, the Voting Agreement, dated May 21, 2014, by and among us, Ligand,Brian Lian, Ph.D., and Michael Dinerman, M.D., our former Chief Operating Officer, or our Management Rights Letter with Ligand, dated May 21, 2014; orupon the occurrence of certain other events. We may not have enough available cash or be able to raise additional funds through equity or debt financings torepay such indebtedness at the time any such event of default occurs. In this case, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant to others rights to develop and market product candidates that we would otherwise prefer to develop andmarket ourselves. If any of these events occur, our business, financial condition and results of operations may be materially adversely affected.Our management’s relative lack of public company experience could put us at greater risk of incurring fines or regulatory actions for failure to complywith federal securities laws and could put us at a competitive disadvantage, and could require our management to devote additional time and resourcesto ensure compliance with applicable corporate governance requirements.Some of our executive officers have limited experience in managing and operating a public company, which could have an adverse effect on their ability toquickly respond to problems or adequately address issues and matters applicable to public companies. Any failure to comply with federal securities laws,rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, financial condition and results ofoperations. Further, since some of our executive officers have minimal public company experience, we may have to dedicate additional time and resources tocomply with legally mandated corporate governance policies relative to our competitors whose management teams have more public company experience.We are exposed to product liability, non-clinical and clinical liability risks which could place a substantial financial burden upon us, should lawsuits befiled against us.Our business exposes us to potential product liability and other liability risks that are inherent in the testing, manufacturing and marketing of pharmaceuticalformulations and products. In addition, the use in our clinical trials of pharmaceutical products and the subsequent sale of these products by us or ourpotential collaborators may cause us to bear a portion of or all product liability risks. A successful liability claim or series of claims brought against us couldhave a material adverse effect on our business, financial condition and results of operations.We currently maintain product liability insurance; however, there can be no assurance that we will be able to continue to maintain such insurance, and wemay be unable to obtain replacement product liability insurance on commercially reasonable terms or in adequate amounts. On occasion, large judgmentshave been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. A successful product liability claim or series of claimsbrought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operationsand business.Our research and development activities involve the use of hazardous materials, which subject us to regulation, related costs and delays and potentialliabilities.Our research and development activities involve the controlled use of hazardous materials, chemicals and various radioactive compounds, and we will needto develop additional safety procedures for the handling and disposing of hazardous materials. If an accident occurs, we could be held liable for resultingdamages, which could be substantial. We are also subject to numerous46Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens andthe handling of biohazardous materials. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. Wemay incur substantial costs to comply with, and substantial fines or penalties if we violate any of these laws or regulations.We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including anycybersecurity incidents, could harm our ability to operate our business effectively.Despite the implementation of security measures, our internal computer systems and those of third parties with which we contract are vulnerable to damagefrom cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. System failures,accidents or security breaches could cause interruptions in our operations, and could result in a material disruption of our drug development and clinicalactivities and business operations, in addition to possibly requiring substantial expenditures of resources to remedy. The loss of drug development or clinicaltrial data could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that anydisruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietaryinformation, we could incur liability and our development programs and the development of our drug candidates could be delayed.Our employees and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards andrequirements.We are exposed to the risk of employee or consultant fraud or other misconduct. Misconduct by our employees or consultants could include intentionalfailures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards, comply with federal and statehealthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales,marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, salescommissions, customer incentive programs and other business arrangements. Employee and consultant misconduct also could involve the improper use ofinformation obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible toidentify and deter such misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance withsuch laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actionscould have a material adverse effect on our business, financial condition and results of operations, and result in the imposition of significant fines or othersanctions against us.Business disruptions such as natural disasters could seriously harm our future revenues and financial condition and increase our costs and expenses.Our corporate headquarters are located in greater San Diego, California, a region known for seismic activity. In addition, our third party manufacturers arelocated in the southeastern part of the United States, an area subject to hurricanes and related natural disasters. Our suppliers may also experience a disruptionin their business as a result of natural disasters. A significant natural disaster, such as an earthquake, hurricane, flood or fire, could severely damage or destroyour headquarters or facilities or the facilities of our manufacturers or suppliers, which could have a material and adverse effect on our business, financialcondition and results of operations. In addition, terrorist acts or acts of war targeted at the U.S., and specifically the greater San Diego, California region,could cause damage or disruption to us, our employees, facilities, partners and suppliers, which could have a material adverse effect on our business, financialcondition and results of operations.We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.From time to time, we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of products,drug candidates or technologies. Additional potential transactions that we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction may require us to incurnon-recurring or other charges, may increase our near- and long-term expenditures and may pose significant integration challenges or disrupt ourmanagement or business, which could adversely affect our business, financial condition and results of operations. For example, these transactions may entailnumerous operational and financial risks, including: ·exposure to unknown liabilities;47Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ·disruption of our business and diversion of our management’s time and attention in order to develop acquired products, drug candidates ortechnologies; ·incurrence of substantial debt or dilutive issuances of equity securities to pay for any of these transactions; ·higher-than-expected transaction and integration costs; ·write-downs of assets or goodwill or impairment charges; ·increased amortization expenses; ·difficulty and cost in combining the operations and personnel of any acquired businesses or product lines with our operations and personnel; ·impairment of relationships with key suppliers or customers of any acquired businesses or product lines due to changes in management andownership; and ·inability to retain key employees of any acquired businesses.Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, anytransactions that we do complete may be subject to the foregoing or other risks, and could have a material adverse effect on our business, financial conditionand results of operations.Our employment agreements with each of our executive officers may require us to pay severance benefits to any of those persons who are terminated inconnection with a change in control of our company, which could harm our financial condition or results.All of our executive officers are parties to employment agreements that contain change in control and severance provisions in the event of a termination ofemployment in connection with a change in control of our company providing for cash payments for severance and other benefits and acceleration of vestingof stock options and shares of restricted stock. The accelerated vesting of options and shares of restricted stock could result in dilution to our existingstockholders and lower the market price of our common stock. The payment of these severance benefits could harm our financial condition and results. Inaddition, these potential severance payments may discourage or prevent third parties from seeking a business combination with us.Risks Relating to Our Intellectual PropertyWe may not be successful in obtaining or maintaining necessary rights to our drug candidates through acquisitions and in-licenses.We currently have intellectual property rights to develop our drug candidates through a license from Ligand. As of December 31, 2015, we did not own anypatents or have any patent applications pending. Because our programs require the use of proprietary rights held by Ligand, the growth of our business willlikely depend in part on our ability to maintain and exploit these proprietary rights. In addition, we may need to acquire or in-license additional intellectualproperty in the future. We may be unable to acquire or in-license any compositions, methods of use, processes or other intellectual property rights from thirdparties that we identify as necessary for our drug candidates. We face competition with regard to acquiring and in-licensing third-party intellectual propertyrights, including from a number of more established companies. These established companies may have a competitive advantage over us due to their size,cash resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may beunwilling to assign or license intellectual property rights to us. We also may be unable to acquire or in-license third-party intellectual property rights onterms that would allow us to make an appropriate return on our investment.We may enter into collaboration agreements with U.S. and foreign academic institutions to accelerate development of our current or future preclinical drugcandidates. Typically, these agreements include an option for the company to negotiate a license to the institution’s intellectual property rights resultingfrom the collaboration. Even with such an option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptableto us. If we are unable to license rights from a collaborating institution, the institution may offer the intellectual property rights to other parties, potentiallyblocking our ability to pursue our desired program.If we are unable to successfully obtain required third-party intellectual property rights or maintain our existing intellectual property rights, we may need toabandon development of the related program and our business, financial condition and results of operations could be materially and adversely affected.48Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If we fail to comply with our obligations in the agreements under which we in-license intellectual property and other rights from third parties orotherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to ourbusiness.The Master License Agreement is important to our business and we expect to enter into additional license agreements in the future. The Master LicenseAgreement imposes, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other obligations on us. Ifwe fail to comply with our obligations under these agreements, or if we file for bankruptcy, we may be required to make certain payments to the licensor, wemay lose the exclusivity of our license, or the licensor may have the right to terminate the license, in which event we would not be able to develop or marketproducts covered by the license. Additionally, the milestone and other payments associated with these licenses could materially and adversely affect ourbusiness, financial condition and results of operations.Pursuant to the terms of the Master License Agreement, Ligand may terminate the Master License Agreement under certain circumstances, including, but notlimited to: (1) in the event of our insolvency or bankruptcy, (2) if we do not pay an undisputed amount owing under the Master License Agreement when dueand fail to cure such default within a specified period of time, or (3) if we default on certain of our material obligations and fail to cure the default within aspecified period of time. If the Master License Agreement is terminated in its entirety or with respect to a specific licensed program for any reason, amongother consequences, all licenses granted to us under the Master License Agreement (or with respect to the specific licensed program) will terminate and wemay be requested to assign and transfer to Ligand certain regulatory documentation and regulatory approvals related to the licensed programs (or thoserelated to the specific licensed program), and we may be required to wind down any ongoing clinical trials with respect to the licensed programs (or thoserelated to the specific licensed program). Additionally, Ligand may require us to assign to Ligand the trademarks owned by us relating to the licensedprograms (or those related to the specific licensed program), and we would be obligated to grant to Ligand a license under any patent rights and know-howcontrolled by us to the extent necessary to make, have made, import, use, offer to sell and sell the licensed programs (or those related to the specific licensedprogram) anywhere in the world at a royalty rate in the low single digits.In some cases, patent prosecution of our licensed technology may be controlled solely by the licensor. If our licensor fails to obtain and maintain patent orother protection for the proprietary intellectual property we in-license, then we could lose our rights to the intellectual property or our exclusivity withrespect to those rights, and our competitors could market competing products using the intellectual property. In certain cases, we may control the prosecutionof patents resulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur significant liability toour licensing partners. Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues.Disputes may arise regarding intellectual property subject to a licensing agreement, including, but not limited to: ·the scope of rights granted under the license agreement and other interpretation-related issues; ·the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; ·the sublicensing of patent and other rights; ·our diligence obligations under the license agreement and what activities satisfy those diligence obligations; ·the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and ourcollaborators; and ·the priority of invention of patented technology.If disputes over intellectual property and other rights that we have in-licensed prevent or impair our ability to maintain our current licensing arrangements onacceptable terms, we may be unable to successfully develop and commercialize the affected drug candidates. If we fail to comply with any such obligationsto our licensor, such licensor may terminate their licenses to us, in which case we would not be able to market products covered by these licenses. The loss ofour license with Ligand, and potentially other licenses that we enter into in the future, would have a material adverse effect on our business.We may be required to pay milestones and royalties to Ligand in connection with our use of the licensed technology under the Master LicenseAgreement, which could adversely affect the overall profitability for us of any products that we may seek to commercialize.Under the terms of the Master License Agreement, we may be obligated to pay Ligand up to an aggregate of approximately $1.54 billion in development,regulatory and sales milestones. We will also be required to pay Ligand single-digit royalties on future worldwide net product sales. These royalty paymentscould adversely affect the overall profitability for us of any products that we may seek to commercialize.49Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We may not be able to protect our proprietary or licensed technology in the marketplace.We depend on our ability to protect our proprietary or licensed technology. We rely on trade secret, patent, copyright and trademark laws, andconfidentiality, licensing and other agreements with employees and third parties, all of which offer only limited protection. Our success depends in large parton our ability, Ligand’s and any future licensor’s or licensee’s ability to obtain and maintain patent protection in the U.S. and other countries with respect toour proprietary or licensed technology and products. We currently in-license all of our intellectual property rights to develop our drug candidates and mayin-license additional intellectual property rights in the future. Under the terms of the Master License Agreement, Ligand has the first right to file, prosecuteand maintain the patents subject to the Master License Agreement in its name. We cannot be certain that patent enforcement activities by our current or futurelicensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents or otherintellectual property rights. We also cannot be certain that our current or future licensors will allocate sufficient resources or prioritize their or ourenforcement of such patents. Even if we are not a party to these legal actions, an adverse outcome could prevent us from continuing to license intellectualproperty that we may need to operate our business, which would have a material adverse effect on our business, financial condition and results of operations. We believe we will be able to obtain, through prosecution of patent applications covering technology licensed from others, adequate patent protection forour proprietary drug technology, including those related to our in-licensed intellectual property. If we are compelled to spend significant time and moneyprotecting or enforcing our licensed patents and future patents we may own, designing around patents held by others or licensing or acquiring, potentially forlarge fees, patents or other proprietary rights held by others, our business, financial condition and results of operations may be materially and adverselyaffected. If we are unable to effectively protect the intellectual property that we own or in-license, other companies may be able to offer the same or similarproducts for sale, which could materially adversely affect our business, financial condition and results of operations. The patents of others from whom we maylicense technology, and any future patents we may own, may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stopcompetitors from marketing the same or similar products or limit the length of term of patent protection that we may have for our products. Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment andother requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements. Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or patent applications will be due to bepaid to the U.S. Patent and Trademark Office, or the USPTO, and various governmental patent agencies outside of the U.S. in several stages over thelifetime of the applicable patent and/or patent application. The USPTO and various non-U.S. governmental patent agencies require compliance witha number of procedural, documentary, fee payment and other similar provisions during the patent application process. In many cases, aninadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situationsin which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rightsin the relevant jurisdiction. If this occurs with respect to our in-licensed patents or patent applications we may file in the future, our competitorsmight be able to use our technologies, which would have a material adverse effect on our business, financial condition and results of operations. The patent positions of pharmaceutical products are often complex and uncertain. The breadth of claims allowed in pharmaceutical patents in the U.S. andmany jurisdictions outside of the U.S. is not consistent. For example, in many jurisdictions, the support standards for pharmaceutical patents are becomingincreasingly strict. Some countries prohibit method of treatment claims in patents. Changes in either the patent laws or interpretations of patent laws in theU.S. and other countries may diminish the value of our licensed or owned intellectual property or create uncertainty. In addition, publication of informationrelated to our current drug candidates and potential products may prevent us from obtaining or enforcing patents relating to these drug candidates andpotential products, including without limitation composition-of-matter patents, which are generally believed to offer the strongest patent protection.Our intellectual property includes licenses covering issued patents and pending patent applications for composition of matter and method of use. ForVK5211, we in-license five patents in the U.S. and several other patents in certain foreign jurisdictions. For each of VK2809 and VK0214, we in-license apatent in the U.S. and, for VK2809, additional patents in certain foreign jurisdictions. For VK0612, we in-license two patents in the U.S. and several otherpatents in certain foreign jurisdictions. With respect to our other current drug candidates, we have a license covering several issued patents and pendingpatent applications both in the U.S. and in certain foreign jurisdictions. See “Intellectual Property” under Part I, “Item 1. Business” of this Annual Report onForm 10-K. Patents that we currently license and patents that we may own or license in the future do not necessarily ensure the protection of our licensed or ownedintellectual property for a number of reasons, including, without limitation, the following:50Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ·the patents may not be broad or strong enough to prevent competition from other products that are identical or similar to our drug candidates; ·there can be no assurance that the term of a patent can be extended under the provisions of patent term extension afforded by U.S. law or similarprovisions in foreign countries, where available; ·the issued patents and patents that we may obtain or license in the future may not prevent generic entry into the U.S. market for our drugcandidates; ·we do not at this time license or own a granted European patent or national phase patents in any European jurisdictions that would preventgeneric entry into the European market for one of our primary drug candidates, VK2809; ·we, or third parties from who we in-license or may license patents, may be required to disclaim part of the term of one or more patents; ·there may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim; ·there may be prior art of which we are aware, which we do not believe affects the validity or enforceability of a patent claim, but which,nonetheless, ultimately may be found to affect the validity or enforceability of a patent claim; ·there may be other patents issued to others that will affect our freedom to operate; ·if the patents are challenged, a court could determine that they are invalid or unenforceable; ·there might be a significant change in the law that governs patentability, validity and infringement of our licensed patents or any future patentswe may own that adversely affects the scope of our patent rights; ·a court could determine that a competitor’s technology or product does not infringe our licensed patents or any future patents we may own; and ·the patents could irretrievably lapse due to failure to pay fees or otherwise comply with regulations or could be subject to compulsorylicensing.If we encounter delays in our development or clinical trials, the period of time during which we could market our potential products under patent protectionwould be reduced.Our competitors may be able to circumvent our licensed patents or future patents we may own by developing similar or alternative technologies or productsin a non-infringing manner. Our competitors may seek to market generic versions of any approved products by submitting abbreviated new drug applicationsto the FDA in which our competitors claim that our licensed patents or any future patents we may own are invalid, unenforceable or not infringed.Alternatively, our competitors may seek approval to market their own products similar to or otherwise competitive with our products. In these circumstances,we may need to defend or assert our licensed patents or any future patents we may own, including by filing lawsuits alleging patent infringement. In any ofthese types of proceedings, a court or other agency with jurisdiction may find our licensed patents or any future patents we may own invalid orunenforceable. We may also fail to identify patentable aspects of our research and development before it is too late to obtain patent protection. Even if weown or in-license valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieveour business objectives.The issuance of a patent is not conclusive as to its inventorship, scope, ownership, priority, validity or enforceability. In this regard, third parties maychallenge our licensed patents or any future patents we may own in the courts or patent offices in the U.S. and abroad. Such challenges may result in loss ofexclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability tostop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology andpotential products. In addition, given the amount of time required for the development, testing and regulatory review of new drug candidates, patentsprotecting such drug candidates might expire before or shortly after such drug candidates are commercialized.We may infringe the intellectual property rights of others, which may prevent or delay our drug development efforts and prevent us fromcommercializing or increase the costs of commercializing our products.Our commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights of third parties.For example, there could be issued patents of which we are not aware that our current or potential future drug candidates infringe. There also could be patentsthat we believe we do not infringe, but that we may ultimately be found to infringe.51Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patentliterature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Becausepatents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that ourdrug candidates or potential products infringe. For example, pending applications may exist that claim or can be amended to claim subject matter that ourdrug candidates or potential products infringe. Competitors may file continuing patent applications claiming priority to already issued patents in the form ofcontinuation, divisional, or continuation-in-part applications, in order to maintain the pendency of a patent family and attempt to cover our drug candidates.Third parties may assert that we are employing their proprietary technology without authorization and may sue us for patent or other intellectual propertyinfringement. These lawsuits are costly and could adversely affect our business, financial condition and results of operations and divert the attention ofmanagerial and scientific personnel. If we are sued for patent infringement, we would need to demonstrate that our drug candidates, potential products ormethods either do not infringe the claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this. Proving invalidity isdifficult. For example, in the U.S., proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyedby issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientificpersonnel could be diverted in pursuing these proceedings, which could have a material adverse effect on us. In addition, we may not have sufficientresources to bring these actions to a successful conclusion. If a court holds that any third-party patents are valid, enforceable and cover our products or theiruse, the holders of any of these patents may be able to block our ability to commercialize our products unless we acquire or obtain a license under theapplicable patents or until the patents expire.We may not be able to enter into licensing arrangements or make other arrangements at a reasonable cost or on reasonable terms. Any inability to securelicenses or alternative technology could result in delays in the introduction of our products or lead to prohibition of the manufacture or sale of products byus. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We couldbe forced, including by court order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or litigation, wecould be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. A finding ofinfringement could prevent us from commercializing our drug candidates or force us to cease some of our business operations, which could materially andadversely affect our business, financial condition and results of operations. Any claims by third parties that we have misappropriated their confidentialinformation or trade secrets could have a similar material and adverse effect on our business, financial condition and results of operations. In addition, anyuncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary tocontinue our operations.Any claims or lawsuits relating to infringement of intellectual property rights brought by or against us will be costly and time consuming and mayadversely affect our business, financial condition and results of operations.We may be required to initiate litigation to enforce or defend our licensed and owned intellectual property. For example, we are currently aware of at leasttwo third-party companies that are selling products in the U.S. bearing the name “LGD-4033”, which is the name previously used by Ligand to refer toVK5211, without authority from either us or Ligand, and we may experience other potential intellectual property infringement in the future. Lawsuits toprotect our intellectual property rights can be very time consuming and costly. There is a substantial amount of litigation involving patent and otherintellectual property rights in the biopharmaceutical industry generally. Such litigation or proceedings could substantially increase our operating expensesand reduce the resources available for development activities or any future sales, marketing or distribution activities.In any infringement litigation, any award of monetary damages we receive may not be commercially valuable. Furthermore, because of the substantialamount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could becompromised by disclosure during litigation. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursuesuch infringement claims, which typically last for years before they are resolved. Further, any claims we assert against a perceived infringer could provokethese parties to assert counterclaims against us alleging that we have infringed their patents. Some of our competitors may be able to sustain the costs of suchlitigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation andcontinuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.In addition, our licensed patents and patent applications, and patents and patent applications that we may own or license in the future, could face otherchallenges, such as interference proceedings, opposition proceedings, re-examination proceedings and other forms of post-grant review. Any of thesechallenges, if successful, could result in the invalidation of, or in a narrowing of the scope of, any of our licensed patents and patent applications and patentsand patent applications that we may own or license in the future subject to challenge. Any of these challenges, regardless of their success, would likely betime consuming and expensive to defend and resolve and would divert our management and scientific personnel’s time and attention.52Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analystsor investors perceive these results to be negative, it could have a material adverse effect on the market price of our common stock.Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining andenforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is costly, time-consuming and inherentlyuncertain. For example, the U.S. has recently enacted and is currently implementing wide-ranging patent reform legislation. Specifically, on September 16,2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law and included a number of significant changes to U.S. patent law.These included changes in the way patent applications will be prosecuted, including a transition to a “first-to-file” system for deciding which party should begranted a patent when two or more patent applications are filed by different parties claiming the same invention, and may also affect patent litigation. Undera “first-to-file” system, a third party that files a patent application with the USPTO before us could be awarded a patent covering an invention of ours even ifwe made the invention before it was made by the third party. The USPTO has developed new and untested regulations and procedures to govern the fullimplementation of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the “first-to-file” provisions, became effective in March 2013. The Leahy-Smith Act has also introduced procedures that may make it easier for third parties tochallenge issued patents, as well as to intervene in the prosecution of patent applications. Finally, the Leahy-Smith Act contains new statutory provisionsthat still require the USPTO to issue new regulations for their implementation, and it may take the courts years to interpret the provisions of the new statute.Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on our business, the cost of prosecuting our licensed and future patentapplications, our ability to obtain patents based on our licensed and future patent applications and our ability to enforce or defend our licensed or futureissued patents. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our licensedand future patent applications and the enforcement or defense of our licensed and future patents, all of which could have a material adverse effect on ourbusiness, financial condition and results of operations.In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certaincircumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patentsin the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S.Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability toobtain new patents or to enforce patents that we might obtain in the future.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on drug candidates throughout the world would be prohibitively expensive. Competitors may use our licensed andowned technologies in jurisdictions where we have not licensed or obtained patent protection to develop their own products and, further, may exportotherwise infringing products to territories where we may obtain or license patent protection, but where patent enforcement is not as strong as that in the U.S.These products may compete with our products in jurisdictions where we do not have any issued or licensed patents and any future patent claims or otherintellectual property rights may not be effective or sufficient to prevent them from so competing.Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systemsof certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularlythose relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our licensed patents and future patents we may own, ormarketing of competing products in violation of our proprietary rights generally. Further, the laws of some foreign countries do not protect proprietary rightsto the same extent or in the same manner as the laws of the U.S. As a result, we may encounter significant problems in protecting and defending our licensedand owned intellectual property both in the U.S. and abroad. For example, China, where we currently have seven licensed patents and three licensed patentapplications, currently affords less protection to a company’s intellectual property than some other jurisdictions. As such, the lack of strong patent and otherintellectual property protection in China may significantly increase our vulnerability as regards unauthorized disclosure or use of our intellectual propertyand undermine our competitive position. Proceedings to enforce our future patent rights, if any, in foreign jurisdictions could result in substantial cost anddivert our efforts and attention from other aspects of our business.Many countries, including European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner may becompelled under certain circumstances to grant licenses to third parties. In those countries, we currently have an aggregate of 19 licensed patents and13 licensed patent applications and may have limited remedies if patents are infringed or if we are53Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities.Accordingly, our efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from theintellectual property that we own or license.We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.In order to protect our proprietary and licensed technology and processes, we rely in part on confidentiality agreements with our corporate partners,employees, consultants, manufacturers, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectivelyprevent disclosure of our confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidentialinformation. In addition, others may independently discover our trade secrets and proprietary information. Failure to obtain or maintain trade secretprotection could adversely affect our competitive business position.We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information ofthird parties.We employ individuals who were previously employed at other biopharmaceutical companies. Although we have no knowledge of any such claims againstus, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosedconfidential information of our employees’ former employers or other third parties. Litigation may be necessary to defend against these claims. There is noguarantee of success in defending these claims, and even if we are successful, litigation could result in substantial cost and be a distraction to ourmanagement and other employees. To date, none of our employees have been subject to such claims.We may be subject to claims challenging the inventorship of our licensed patents, any future patents we may own and other intellectual property.Although we are not currently experiencing any claims challenging the inventorship of our licensed patents or our licensed or owned intellectual property,we may in the future be subject to claims that former employees, collaborators or other third parties have an interest in our licensed patents or other licensedor owned intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations ofconsultants or others who are involved in developing our drug candidates. Litigation may be necessary to defend against these and other claims challenginginventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such asexclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business, financialcondition and results of operations. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distractionto management and other employees.If we do not obtain additional protection under the Hatch-Waxman Amendments and similar foreign legislation extending the terms of our licensedpatents and any future patents we may own, our business, financial condition and results of operations may be materially and adversely affected.Depending upon the timing, duration and specifics of FDA regulatory approval for our drug candidates, one or more of our licensed U.S. patents or future U.S.patents that we may license or own may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensationfor patent term lost during drug development and the FDA regulatory review process. This period is generally one-half the time between the effective date ofan investigational new drug application, or IND (falling after issuance of the patent), and the submission date of an NDA, plus the time between thesubmission date of an NDA and the approval of that application. Patent term restorations, however, cannot extend the remaining term of a patent beyond atotal of 14 years from the date of product approval by the FDA.The application for patent term extension is subject to approval by the USPTO, in conjunction with the FDA. It takes at least six months to obtain approval ofthe application for patent term extension. We may not be granted an extension because of, for example, failing to apply within applicable deadlines, failingto apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope ofpatent protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration or the term of any such extension isless than we request, the period during which we will have the right to exclusively market our product will be shortened and our competitors may obtainearlier approval of competing products, and our ability to generate revenues could be materially adversely affected.54Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Risks Relating to Ownership of Our Common StockThe market price of our common stock may be highly volatile.The trading price of our common stock is likely to be volatile. Our stock price could be subject to wide fluctuations in response to a variety of factors,including the following: ·any delay in filing an NDA for any of our drug candidates and any adverse development or perceived adverse development with respect to theFDA’s review of that NDA; ·adverse results or delays in clinical trials, if any; ·significant lawsuits, including patent or stockholder litigation; ·inability to obtain additional funding; ·failure to successfully develop and commercialize our drug candidates; ·changes in laws or regulations applicable to our drug candidates; ·inability to obtain adequate product supply for our drug candidates, or the inability to do so at acceptable prices; ·unanticipated serious safety concerns related to any of our drug candidates; ·adverse regulatory decisions; ·introduction of new products or technologies by our competitors; ·failure to meet or exceed drug development or financial projections we provide to the public; ·failure to meet or exceed the estimates and projections of the investment community; ·the perception of the biopharmaceutical industry by the public, legislatures, regulators and the investment community; ·announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; ·disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection forour licensed and owned technologies; ·additions or departures of key scientific or management personnel; ·changes in the market valuations of similar companies; ·general economic and market conditions and overall fluctuations in the U.S. equity market; ·sales of our common stock by us or our stockholders, including Ligand, in the future; and ·trading volume of our common stock.In addition, the stock market, in general, and small biopharmaceutical companies, in particular, have experienced extreme price and volume fluctuations thathave often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect themarket price of our common stock, regardless of our actual operating performance. Further, a decline in the financial markets and related factors beyond ourcontrol may cause our stock price to decline rapidly and unexpectedly.An active trading market for our common stock may not be sustained, and you may not be able to resell your common stock at a desired market price.Our shares of common stock began trading on the Nasdaq Capital Market on April 29, 2015. If no active trading market for our common stock develops or issustained, you may be unable to sell your shares when you wish to sell them or at a price that you consider attractive or satisfactory. The lack of an activemarket may also adversely affect our ability to raise capital by selling securities in the future, or impair our ability to acquire or in-license other drugcandidates, businesses or technologies using our shares as consideration.55Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our management owns a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.As of December 31, 2015, our executive officers, directors and 5% or greater stockholders beneficially owned 73.2% of our common stock. Therefore, ourexecutive officers, directors and 5% or greater stockholders have the ability to influence us through this ownership position.This significant concentration of stock ownership may adversely affect the trading price for our common stock because investors often perceivedisadvantages in owning stock in companies with controlling stockholders. As a result, these stockholders, if they acted together, could significantlyinfluence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combinationtransactions. These stockholders may be able to determine all matters requiring stockholder approval. The interests of these stockholders may not alwayscoincide with our interests or the interests of other stockholders. This may also prevent or discourage unsolicited acquisition proposals or offers for ourcommon stock that you may feel are in your best interest as one of our stockholders and they may act in a manner that advances their best interests and notnecessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for ourcommon stock.Ligand is our largest stockholder, which may limit the ability of our stockholders to influence corporate matters and may give rise to conflicts ofinterest.As of December 31, 2015, Ligand and its affiliates beneficially owned approximately 49.4% of our outstanding common stock. In addition to the aboveownership, upon the consummation of our first bona fide capital financing transaction occurring after January 22, 2016, but prior to May 21, 2017, withaggregate net proceeds to us of at least $2,000,000, we will be obligated to repay $1,500,000 to Ligand under that certain Secured Convertible PromissoryNote held by Ligand, or the Ligand Note, with at least $300,000 of such payment to be paid in cash and the balance to be paid in shares of our commonstock. Furthermore, we may in the future elect or be obligated to repay amounts outstanding under the Ligand Note to Ligand in shares of our commonstock. Accordingly, Ligand may be able to exert significant influence over us and any action requiring the approval of the holders of our common stock,including the election of directors and the approval of mergers or other business combination transactions. This concentration of voting power may make itless likely that any other holder of our common stock or our board of directors will be able to affect the way we are managed and could delay or prevent anacquisition of us on terms that other stockholders may desire.Furthermore, the interests of Ligand may not be aligned with our other stockholders and this could lead to actions that may not be in the best interests of ourother stockholders. For example, Ligand may have different tax positions or strategic plans for us, which could influence its decisions regarding whether andwhen we should dispose of assets or incur new or refinance existing indebtedness. In addition, Ligand’s significant ownership in us may discourage someonefrom making a significant equity investment in us, or could discourage transactions involving a change in control, including transactions in which ourstockholders might otherwise receive a premium for their shares over the then-current market price.Pursuant to the management rights letter between us and Ligand, dated May 21, 2014, Ligand has the right to nominate one individual for election to ourboard of directors. Matthew W. Foehr, Ligand’s President and Chief Operating Officer, is the current member of our board of directors nominated by Ligand.As a result of our relationship with Ligand, there may be transactions between us and Ligand that could present an actual or perceived conflict of interest.These conflicts of interest may lead Mr. Foehr to recuse himself from deliberation and voting as a member of our board of directors with respect to anytransactions involving Ligand or its affiliates.In addition, if Ligand obtains a majority of our common stock, Ligand would be able to control a number of matters submitted to our stockholders forapproval, as well as our management and affairs. For example, Ligand would be able to control the election of directors, and may be able to controlamendments to our organizational documents and approvals of any merger, consolidation, sale of all or substantially all of our assets or other businesscombination or reorganization. In addition, if Ligand obtains a majority of our common stock, we would be deemed a “controlled company” within themeaning of the rules and listing standards of The Nasdaq Stock Market LLC. Under the rules and listing standards of The Nasdaq Stock Market LLC, acompany of which more than 50% of the voting power is held by another person or group of persons acting together is a “controlled company” and may electnot to comply with certain rules and listing standards of The Nasdaq Stock Market LLC regarding corporate governance, including: (1) the requirement that amajority of our board of directors consist of independent directors, (2) the requirement that the compensation of our officers be determined or recommendedto our board of directors by a compensation committee that is composed entirely of independent directors, and (3) the requirement that director nominees beselected or recommended to our board of directors by a majority of independent directors or a nominating committee that is composed entirely ofindependent directors.56Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We are an “emerging growth company” within the meaning of the Securities Act of 1933, as amended, or the Securities Act, and if we decide to takeadvantage of certain exemptions from various reporting requirements applicable to emerging growth companies, our common stock could be lessattractive to investors.For as long as we remain an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we will have theoption to take advantage of certain exemptions from various reporting and other requirements that are applicable to other public companies that are not“emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of theSarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, and exemptions from the requirements of holding a nonbinding advisory vote onexecutive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these and otherexemptions until we are no longer an “emerging growth company”.The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of theSecurities Act for complying with new or revised accounting standards. However, we have chosen to “opt out” of such extended transition period, and as aresult, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerginggrowth companies. Our decision to “opt out” of the extended transition period is irrevocable.We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year during which we have total annual gross revenues of$1.0 billion or more, (2) December 31, 2020 (the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering),(3) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt, and (4) the date on which we aredeemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the Exchange Act (i.e., the first day of the fiscal year afterwe have (a) more than $700,000,000 in outstanding common equity held by our non-affiliates, measured each year on the last day of our second fiscalquarter, and (b) been public for at least 12 months).Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to takeadvantage of many of the same exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements ofSection 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stockless attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.Our internal control over financial reporting does not currently meet the standards required by Section 404 of the Sarbanes-Oxley Act, and we havepreviously identified a material weakness, and failure to achieve and maintain effective internal control over financial reporting in accordance withSection 404 of the Sarbanes-Oxley Act, could have a material adverse effect on our business and share price.As a privately held company, we were not required to evaluate our internal control over financial reporting in a manner that meets the standards of publiclytraded companies required by Section 404 of the Sarbanes-Oxley Act, or Section 404. In the course of auditing our financial statements as of and for the yearended December 31, 2013, our independent registered public accounting firm identified a material weakness in our internal control over financial reportingrelating to our failure to perform periodic reconciliations on various accounts. We remediated this material weakness in the year ended December 31, 2014. Commencing with our Annual Report on Form 10-K for the fiscal year ending December 31, 2016, our management will be required to report on theeffectiveness of our internal control over financial reporting. Additionally, under the JOBS Act, our independent registered public accounting firm will not berequired to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growthcompany.” The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex andrequire significant documentation, testing and possible remediation.In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identifydeficiencies or material weaknesses that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliancewith the requirements of Section 404. In addition, we may encounter problems or delays in completing the implementation of any requested improvementsand receiving a favorable attestation in connection with the attestation provided by our independent registered public accounting firm. Failure to achieveand maintain an effective internal control environment could have a material adverse effect on our business, financial condition and results of operations andcould limit our ability to report our financial results accurately and in a timely manner.57Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We will incur significant increased costs as a result of operating as a public company, our management has limited experience managing a publiccompany, and our management will be required to devote substantial time to new compliance initiatives.As a public company and particularly after we cease to be an “emerging growth company,” we will incur significant legal, accounting and other expenses thatwe did not incur as a private company. In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or theDodd-Frank Act, as well as rules subsequently implemented by the Securities and Exchange Commission, or the SEC, and The Nasdaq Stock Market LLChave imposed various requirements on public companies. There are significant corporate governance and executive compensation related provisions in theDodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas. Stockholder activism, the current political environment and thecurrent high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead toadditional compliance costs and impact (in ways we cannot currently anticipate) the manner in which we operate our business. Our management and otherpersonnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal andfinancial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make itmore difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain ourcurrent levels of such insurance coverage.As a publicly traded company, we have incurred and will incur legal, accounting and other expenses associated with the SEC reporting requirementsapplicable to a company whose securities are registered under the Exchange Act, as well as corporate governance requirements, including those under theSarbanes-Oxley Act, the Dodd-Frank Act and other rules implemented by the SEC and The Nasdaq Stock Market LLC. In addition, we expect that we willneed to hire additional personnel in our finance department to help us comply with the various requirements applicable to public companies. The expensesincurred by public companies generally to meet SEC reporting, finance and accounting and corporate governance requirements have been increasing inrecent years as a result of changes in rules and regulations and the adoption of new rules and regulations applicable to public companies.If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and tradingvolume could decline.The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. Ifone or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likelydecline. In addition, if our operating results fail to meet the forecast of analysts, our stock price would likely decline. If one or more of these analysts ceasecoverage of our company or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price andtrading volume to decline.Sales of a substantial number of shares of our common stock in the public market by our existing stockholders, or future issuances of our common stockor rights to purchase our common stock, could cause our stock price to fall.Sales of a substantial number of shares of our common stock by our existing stockholders in the public market, or the perception that these sales might occur,could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We areunable to predict the effect that such sales may have on the prevailing market price of our common stock.Ligand is subject to a lock-up agreement with us that restricts its ability to transfer shares of our common stock until January 23, 2017. Beginning onOctober 25, 2015, shares held by our executive officers, directors, 5% or greater stockholders (other than Ligand) and their affiliates and family members werereleased from lock-up agreements with the underwriters of our initial public offering and, subject to certain limitations, including sales volume limitations,became eligible for sale in the public market. Sales of stock by these stockholders, or the perception that these sales may occur, could have a material adverseeffect on the trading price of our common stock.Certain holders of our securities are entitled to rights with respect to the registration of their shares under the Securities Act, subject to the lock-uparrangement described above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restrictionunder the Securities Act. Any sales of securities by these stockholders, or the perception that these sales may occur, could have a material adverse effect onthe trading price of our common stock.Pursuant to our 2014 Equity Incentive Plan, or the 2014 Plan, a total of 1,214,773 shares of our common stock were reserved as of December 31, 2015 forissuance to our employees, directors and consultants. Under the terms of the 2014 Plan, the number of shares available for issuance under the 2014 Plan is,unless otherwise determined by our Board of Directors or the Compensation Committee of our Board of Directors, automatically increased on January 1st ofeach year in an amount equal to 3.5% of the total number of shares of our common stock outstanding on December 31st of the preceding calendar year. Tothe extent new equity awards are58Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. granted and exercised or we issue additional shares of common stock in the future, our stockholders may experience additional dilution, which could causeour stock price to fall.Our management will continue to have broad discretion over the use of the proceeds we received in our initial public offering and from the Loan andSecurity Agreement and might not apply the proceeds in ways that increase the value of your investment.Our management will continue to have broad discretion to use the net proceeds from our initial public offering and the proceeds from the Loan and SecurityAgreement and you will be relying on the judgment of our management regarding the application of these proceeds. Our management might not apply theproceeds in ways that ultimately increase the value of your investment and the failure by our management to apply these proceeds effectively could harm ourbusiness. Because of the number and variability of factors that will determine our use of the remaining net proceeds from our initial public offering and theproceeds from the Loan and Security Agreement, their ultimate use may vary substantially from their currently intended use. If we do not invest or apply thenet proceeds from our initial public offering or the proceeds from the Loan and Security Agreement in ways that enhance stockholder value, we may fail toachieve the expected financial results, which could cause our stock price to decline.We are at risk of securities class action litigation.In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk isespecially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation,it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business, financial condition and results ofoperations.Our ability to use our net operating loss carryforwards may be subject to certain limitations.At December 31, 2015, we had net operating loss carryforwards of approximately $5,890,000 for federal and $6,629,000 for state tax purposes, both of whichwill begin to expire in 2032. Our ability to utilize our federal net operating loss carryforwards may be limited under Section 382 of the Internal RevenueCode of 1986, as amended, or the Code. In the event of an “ownership change,” Section 382 imposes an annual limitation on the amount of post-ownershipchange taxable income that may be offset with pre-ownership change net operating losses of the loss corporation experiencing the ownership change. An“ownership change” is defined by Section 382 as a cumulative change in ownership of our company of more than 50% within a three-year period. Our initialpublic offering in May 2015 resulted in an “ownership change” of us. We performed an analysis and determined that $4,258,000 of the federal and$5,155,000 of the state tax net operating loss carryforwards are available for utilization as of December 31, 2015. The full amounts of the $5,890,000 federaland $6,629,000 state tax net operating loss carryforwards will be available for utilization as of December 31, 2016. In addition, current or future changes inour stock ownership may trigger an “ownership change,” some of which may be outside our control. Accordingly, our ability to utilize our net operating losscarryforwards to offset federal taxable income, if any, will likely be limited by Section 382, which could potentially result in increased future tax liability tous.We may never pay dividends on our common stock so any returns would be limited to the appreciation of our stock.We have never declared or paid any cash dividend on our common stock. We currently anticipate that we will retain future earnings for the development,operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, under the Loanand Security Agreement with Ligand, we may not declare or pay dividends in respect of our common stock without Ligand’s prior written consent. Anyreturn to stockholders will therefore be limited to the appreciation of their stock.Provisions in our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult orexpensive for a third party to acquire us or change our board of directors or current management.Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if anacquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management. Theseprovisions include: ·authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued withoutstockholder approval; ·limiting the removal of directors by the stockholders; ·creating a classified board of directors;59Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ·providing that no stockholder is permitted to cumulate votes at any election of directors; ·allowing the authorized number of our directors to be changed only by resolution of our board of directors; ·prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders; ·requiring the approval of the holders of at least 66 2/3% of the votes that all our stockholders would be entitled to cast to amend or repealspecified provisions of our charter documents; ·eliminating the ability of stockholders to call a special meeting of stockholders; and ·establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted uponat stockholder meetings.These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult forstockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are subject toSection 203 of the General Corporation Law of the State of Delaware, or the DGCL, which generally prohibits a Delaware corporation from engaging in anyof a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became aninterested stockholder, unless such transactions are approved in advance by our board of directors or ratified by our board of directors and certain of ourstockholders. This provision could have the effect of delaying or preventing a change in control, whether or not it is desired by or beneficial to ourstockholders. Further, other provisions of Delaware law may also discourage, delay or prevent someone from acquiring us or merging with us.Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actionsand proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputeswith us or our directors, officers or other employees.Our amended and restated bylaws provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will bethe sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary dutyowed by any director, officer or other employee to us or our stockholders, (3) any action asserting a claim against us or our directors, officers or employeesarising pursuant to any provision of our amended and restated bylaws, our amended and restated certificate of incorporation or the DGCL, (4) any actionasserting a claim against us or our directors, officers or employees that is governed by the internal affairs doctrine, or (5) any action to interpret, apply, enforceor determine the validity of our amended and restated bylaws or our amended and restated certificate of incorporation. Any person purchasing or otherwiseacquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to this provision of our amended andrestated bylaws. This choice-of-forum provision may limit our stockholders’ ability to bring a claim in a judicial forum that it finds favorable for disputeswith us or our directors, officers or other employees, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our amendedand restated bylaws inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costsassociated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results ofoperations. Item 1B. Unresolved Staff Comments.None.Item 2. Properties.Our facilities consist of office space in San Diego, California. We lease approximately 7,049 square feet of space for our headquarters in San Diego,California under an agreement that expires on September 30, 2018. We believe that our existing facilities are adequate to meet our current needs, and thatsuitable additional alternative spaces will be available in the future on commercially reasonable terms. Item 3. Legal Proceedings.From time to time, we may be party to lawsuits in the ordinary course of business. We are not presently a party to any legal proceedings, the outcome ofwhich, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business,operating results or financial condition. 60Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 4. Mine Safety Disclosures.Not applicable. 61Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.Market InformationOur common stock began trading on the Nasdaq Capital Market on April 28, 2015 and trades under the symbol “VKTX”. Prior to April 28, 2015, there was nopublic market for our common stock. The following table sets forth the high and low sales prices per share of our common stock as reported on the NasdaqCapital Market for the period indicated. Price Range High Low Year Ended December 31, 2015 Second Quarter (from April 29, 2015) $10.23 $6.69 Third Quarter $7.75 $5.00 Fourth Quarter $7.14 $1.89 Holders of RecordAs of February 29, 2016, there were approximately 11 stockholders of record of our common stock. Certain shares are held in “street” name and, accordingly,the number of beneficial owners of such shares is not known or included in the foregoing number.Dividend PolicyWe have never declared or paid any dividends on our common stock, and we currently intend to retain all available funds and any future earnings, if any, foruse in our business. We do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be made at thediscretion of our board of directors or any authorized committee thereof after considering our financial condition, results of operations, capital requirements,business prospects and other factors our board of directors or such committee deems relevant, and will be subject to the restrictions contained in our current orfuture financing instruments. In addition, under our Loan and Security Agreement with Ligand Pharmaceuticals Incorporated, or Ligand, we may not declareor pay dividends in respect of our common stock without Ligand’s prior written consent.Issuer Repurchases of Equity SecuritiesNone.Recent Sales of Unregistered SecuritiesNone.Performance GraphWe are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide aperformance graph.Use of ProceedsOn May 4, 2015, we sold 3,000,000 shares of our common stock in our initial public offering at a public offering price of $8.00 per share and on May 28,2015, we sold 450,000 shares of our common stock at a public offering price of $8.00 per share pursuant to the full exercise of the underwriters’ option topurchase additional shares for aggregate gross proceeds of $27,600,000, before deducting underwriting discounts, commissions and other offering expenses.The offer and sale of all of the shares in the offering were registered under the Securities Act of 1933, as amended, or the Securities Act, pursuant to aregistration statement on Form S-1 (File No. 333-197182), which was declared effective by the Securities and Exchange Commission, or the SEC, on April 28,2015, and a registration statement on Form S-1MEF (File No. 333-203702) filed pursuant to Rule 462(b) of the Securities Act. The offering commenced as ofApril 29, 2015 and did not terminate before all of the securities registered in the registration statements were sold. Laidlaw & Company (UK) Ltd. acted as thesole book-running manager for the offering. Feltl and Company, Inc. served as co-manager for the offering. After deducting underwriting discounts,commissions and other offering expenses paid by us of $5,273,634, the net proceeds62Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. from the offering were $22,326,366. No offering expenses were paid or are payable, directly or indirectly, to our directors or officers, to persons owning 10%or more of any class of our equity securities, or to any of our affiliates.The net proceeds from our initial public offering were originally deposited into money market funds. Since then, most of the proceeds have been invested incertificates of deposit as well as certain corporate debt securities with the balance of the net proceeds invested in money market funds. These investments arein accordance with our investment policy. As of December 31, 2015, we have used $8,244,958 of the net proceeds from our initial public offering. There hasbeen no material change in the expected use of the net proceeds from our initial public offering as described in the final prospectus, relating to our initialpublic offering, dated April 28, 2015, filed by us with the SEC on April 29, 2015.Item 6. Selected Financial Data.We are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide theinformation required under this item. 63Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.You should read the following discussion and analysis in conjunction with Part II, “Item 8. Financial Statements and Supplementary Data” included belowin this Annual Report on Form 10-K. Operating results are not necessarily indicative of results that may occur in future periods.The following discussion and analysis of our financial condition and results of operations contains forward-looking statements that involve a number ofrisks, uncertainties and assumptions. Actual events or results may differ materially from our expectations. Important factors that could cause actual resultsto differ materially from those stated or implied by our forward-looking statements include, but are not limited to, those set forth in Part I, “Item 1A. RiskFactors” in this Annual Report on Form 10-K. All forward-looking statements included in this Annual Report on Form 10-K are based on informationavailable to us as of the time we file this Annual Report on Form 10-K and, except as required by law, we undertake no obligation to update publicly orrevise any forward-looking statements.OverviewWe are a clinical-stage biopharmaceutical company focused on the development of novel, first-in-class or best-in-class therapies for metabolic and endocrinedisorders. We have exclusive worldwide rights to a portfolio of five drug candidates in clinical trials or preclinical studies, which are based on smallmolecules licensed from Ligand Pharmaceuticals Incorporated, or Ligand. Our lead clinical program is VK5211, an orally available drug candidate, currentlyin a Phase 2 clinical trial for acute rehabilitation following non-elective hip fracture surgery. Hip fracture is a common injury among persons aged 60 andolder. The acute recovery period post-injury is characterized by significant and rapid declines in bone mineral density, or BMD, and lean body mass, or LBM,which contributes to substantial morbidity and mortality in these patients. VK5211 is a non-steroidal selective androgen receptor modulator, or SARM. ASARM is designed to selectively interact with a subset of receptors that have a normal physiologic role of interacting with naturally-occurring hormonescalled androgens. Broad activation of androgen receptors with drugs, such as exogenous testosterone, can stimulate muscle growth and improve BMD, butoften results in unwanted side effects such as prostate growth, hair growth and acne. VK5211 is expected to selectively produce the therapeutic benefits oftestosterone in muscle and bone tissue, potentially accelerating rehabilitation and improving patient outcomes. VK5211 is also expected to have improvedsafety, tolerability and patient acceptance relative to testosterone. We commenced the Phase 2 clinical trial of VK5211 in October 2015 and expect tocomplete enrollment in the trial in the second half of 2016 and complete the trial in the first quarter of 2017.Our second clinical program is VK2809, an orally available, tissue and receptor-subtype selective agonist of the thyroid hormone receptor beta, or TRß, thatis entering Phase 2 development for the treatment of patients with hypercholesterolemia and fatty liver disease. VK2809 belongs to a family of novelprodrugs which are cleaved in vivo to release potent thyromimetics. Selective activation of the TRß receptor in liver tissue is believed to favorably affectcholesterol and lipoprotein levels via multiple mechanisms, including increasing the expression of low-density lipoprotein receptors and increasingmitochondrial fatty acid oxidation. We expect to commence the Phase 2 clinical trial of VK2809 in the first half of 2016 and to complete the trial in thefourth quarter of 2016 or the first quarter of 2017.We are also developing VK0214 for X-linked adrenoleukodystrophy, or X-ALD, a rare X-linked, inherited neurological disorder characterized by abreakdown in the protective barriers surrounding brain and nerve cells. The disease, for which there is no approved treatment, is caused by mutations in aperoxisomal transporter of very long chain fatty acids, or VLCFA, known as ABCD1. As a result, transporter function is impaired and patients are unable toefficiently metabolize VLCFA. The TRß receptor is known to regulate expression of an alternative VLCFA transporter, known as ABCD2. Various preclinicalmodels have demonstrated that increased expression of ABCD2 can lead to normalization of VLCFA metabolism. Preliminary in vitro data suggest thatVK0214 stimulates ABCD2 expression. We are conducting studies of VK0214 in an in vivo model of disease. Pending completion of this work, we expect in2016 to commence work directed toward filing an Investigational New Drug Application, or IND.We were incorporated under the laws of the State of Delaware on September 24, 2012. Since our incorporation, we have devoted substantially all of ourefforts to raising capital, building infrastructure and obtaining the worldwide rights to certain technology, including VK5211, VK2809 and VK0214,pursuant to an exclusive license agreement with Ligand Pharmaceuticals Incorporated, or Ligand. The terms of this license agreement are detailed in theMaster License Agreement, or the Master License Agreement, with Ligand, which we entered into on May 21, 2014 and amended on each of September 6,2014 and April 8, 2015. A summary of the Master License Agreement, as amended, can be found under the heading “Agreements with Ligand—MasterLicense Agreement” under Part I, “Item 1. Business” of this Annual Report on Form 10-K.64Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. On May 4, 2015, we completed our initial public offering of our common stock, or the IPO, pursuant to a Registration Statement on Form S-1 that wasdeclared effective on April 28, 2015. In the IPO, we sold 3,000,000 shares of our common stock at an initial public offering price of $8.00 per share. Theunderwriters for the IPO had 30 days to exercise an over-allotment option to purchase up to an additional 450,000 shares at the initial public offering price,less the underwriting discount. Upon the closing of the IPO, on May 4, 2015, we raised a total of $19,100,500 in net proceeds after deducting underwritingdiscounts, commissions and other offering expenses of $4,899,500.On May 26, 2015, the underwriters of the IPO exercised their full over-allotment option to purchase an additional 450,000 shares of our common stock. OnMay 28, 2015, we sold the 450,000 shares to the underwriters pursuant to the over-allotment option and received additional net proceeds of $3,225,866 afterdeducting underwriting discounts, commissions and other offering expenses of $374,134.Although it is difficult to predict our liquidity requirements, as of December 31, 2015, and based upon our current operating plan, we do not believe that wewill have sufficient cash to meet our projected operating requirements for at least the next 12 months unless we raise additional capital. As of December 31,2015, we had an accumulated deficit of $45,545,445. These losses have resulted principally from research and development costs incurred in connection withacquiring the exclusive worldwide rights to the portfolio of five drug candidates discussed above and the related non-cash interest expense recorded forincreases in the deemed fair market value for the license fees payable to Ligand, research and development expenses related to the manufacturing of clinicaldrug product and clinical development of VK5211, VK2809 and VK0214, consulting fees and general and administrative expenses. We anticipate that wewill continue to incur net losses for the foreseeable future as we continue the development of our clinical drug candidates and preclinical programs and incuradditional costs associated with being a public company.Financial Operations OverviewRevenuesTo date, we have not generated any revenue. We do not expect to receive any revenue from any drug candidates that we develop unless and until we obtainregulatory approval for, and commercialize, our drug candidates or enter into collaborative agreements with third parties.Research and Development ExpensesWe had limited operating expenses related to research and development activities prior to May 2014. In May 2014, we acquired certain rights to a number ofresearch and development programs from Ligand and charged $21,687,576 to research and development expense during the year ended December 31, 2014as a cost of acquiring these assets. During the year ended December 31, 2015, we charged $6,966,842 to research and development expense as following theIPO, we began manufacturing certain drug supply and initiated efforts related to conducting Phase 2 clinical trials for VK5211 and VK2809 and in vivostudies for VK0214. We expect that our ongoing research and development expenses will consist of costs incurred for the development of our drugcandidates, including, but not limited to: ·employee and consultant-related expenses, which will include salaries, benefits and stock-based compensation, and certain consultant fees andtravel expenses; ·expenses incurred under agreements with investigative sites and contract research organizations, or CROs, which will conduct a substantialportion of our research and development activities on our behalf; ·payments to third-party manufacturers, which will produce our active pharmaceutical ingredients and finished products; ·license fees paid to third parties for use of their intellectual property; and ·facilities, depreciation and other allocated expenses, which will include direct and allocated expenses for rent and maintenance of facilities andequipment, depreciation of leasehold improvements, equipment and laboratory and other supplies.We expense all research and development costs as incurred.65Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming and the successful development of ourdrug candidates is highly uncertain. Our future research and development expenses will depend on the clinical success of each of our drug candidates, as wellas ongoing assessments of the commercial potential of such drug candidates. In addition, we cannot forecast with any degree of certainty which drugcandidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect ourdevelopment plans and capital requirements. We expect to incur increased research and development expenses in the future as we continue our Phase 2clinical trial for VK5211, commence our Phase 2 clinical trial for VK2809 and seek to advance our additional programs.General and Administrative ExpensesPrior to the consummation of the IPO, our general and administrative expenses consisted primarily of salaries and related benefits paid to our employees inexecutive, operational and finance functions, including stock-based compensation and fees paid to certain consultants to help commence and continue ouroperations. Following the consummation of the IPO, our general and administrative expenses have increased as we have hired additional employees, issuedadditional equity awards, which has resulted in increased stock-based compensation expense, moved to a larger office to accommodate the increase inheadcount, implemented certain systems to increase efficiency, and incurred additional costs for insurance, legal and accounting related to operating as apublic company. We expect that our general and administrative expenses will continue to increase in the future in order to support our expected increase inresearch and development activities, including increased salaries and other related costs, stock-based compensation and consulting fees for executive,finance, accounting and business development functions. We also expect general and administrative expenses to increase as a result of additional costsassociated with being a public company, including expenses related to compliance with the rules and regulations of the SEC and The Nasdaq Stock MarketLLC, additional insurance expenses, investor relations activities and other administration and professional services. Other significant costs are expected toinclude legal fees relating to patent and corporate matters, facility costs not otherwise included in research and development expenses, and fees foraccounting and other consulting services.Other ExpenseOther expense, following the IPO, includes the change in fair value of the debt conversion feature liability contained in the Secured Convertible PromissoryNote issued to Ligand on May 21, 2014, or the Ligand Note, and its related interest expense, as well as the non-cash amortization of debt discount costassociated with the Ligand Note, offset by interest income earned from our cash and short-term investments. Prior to the consummation of the IPO, otherexpense also included the change in fair value of the debt conversion feature liability contained in our outstanding convertible promissory notes issued fromSeptember 2012 through June 2013, or the Convertible Notes, and the interest expense and non-cash amortization of debt discount cost associated with theConvertible Notes, and the change in fair value at each reporting period of the accrued license fees payable to Ligand under the Master License Agreementwith Ligand, as amended, or the Master License Agreement. Upon the consummation of the IPO, the Convertible Notes, and the accrued interest and relateddebt conversion feature liability under the Convertible Notes, and the accrued license fees payable to Ligand under the Master License Agreement wereconverted to equity and, therefore, changes in their fair values are no longer recorded as expense.JOBS ActWe are an “emerging growth company” within the meaning of the rules under the Securities Act of 1933, as amended, or the Securities Act, and we utilizecertain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies. For example, as anemerging growth company, we are not required to provide an auditor’s attestation report on our internal control over financial reporting in this and futureannual reports on Form 10-K as otherwise required by Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended. In addition, Section 107 of theJumpstart Our Business Startups Act of 2012, or the JOBS Act, provides that an emerging growth company can utilize the extended transition periodprovided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delaythe adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” ofthe extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. As a result, we arecomplying with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growthcompanies.66Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Critical Accounting Policies and EstimatesOur management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared inaccordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimatesand assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financialstatements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments relatedto the fair value of the debt conversion liability, preclinical, nonclinical and clinical development costs and drug manufacturing costs. We base our estimateson historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for makingjudgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in Note 1 to our financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies will be critical to understanding our historical and future performance, asthese policies relate to the significant areas involving management’s judgments and estimates in the preparation of our financial statements.Revenue RecognitionWe have not recorded any revenues since our inception. However, in the future we may enter into collaborative research and licensing agreements, underwhich we could be eligible for payments made in the form of upfront license fees, research funding, cost reimbursement, contingent event-based paymentsand royalties.Revenue from upfront, nonrefundable license fees is recognized over the period that any related services are to be provided by us. Amounts received forresearch funding are recognized as revenue as the research services that are the subject of such funding are performed. Revenue derived from reimbursementof research and development costs in transactions where we act as a principal are recorded as revenue for the gross amount of the reimbursement, and the costsassociated with these reimbursements are reflected as a component of research and development expense in our statements of operations.Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 605-28, Revenue Recognition – Milestone Method, orASC 605-28, established the milestone method as an acceptable method of revenue recognition for certain contingent event-based payments under researchand development arrangements. Under the milestone method, a payment that is contingent upon the achievement of a substantive milestone is recognized inits entirety in the period in which the milestone is achieved. A milestone is an event (1) that can be achieved based in whole or in part on either ourperformance or on the occurrence of a specific outcome resulting from our performance, (2) for which there is substantive uncertainty at the date thearrangement is entered into that the event will be achieved, and (3) that would result in additional payments being due to us. The determination that amilestone is substantive is subject to management’s judgment and is made at the inception of the arrangement. Milestones are considered substantive whenthe consideration earned from the achievement of the milestone (a) is commensurate with either our performance to achieve the milestone or the enhancementof value of the item delivered as a result of a specific outcome resulting from our performance to achieve the milestone, (b) relates solely to past performance,and (c) is reasonable relative to all deliverables and payment terms in the arrangement.Other contingent event-based payments received for which payment is either contingent solely upon the passage of time or the results of a collaborativepartner’s performance are not considered milestones under ASC 605-28. In accordance with ASC Topic 605-25, Revenue Recognition – Multiple-ElementArrangements, or ASC 605-25, such payments will be recognized as revenue when all of the following criteria are met: (1) persuasive evidence of anarrangement exists, (2) delivery has occurred or services have been rendered, (3) price is fixed or determinable, and (4) collectability is reasonably assured.Revenues recognized for royalty payments, if any, are based upon actual net sales of the licensed compounds, as provided by the collaboration arrangement,in the period the sales occur. Any amounts received prior to satisfying our revenue recognition criteria are recorded as deferred revenue on our balance sheets.Research and DevelopmentAll costs of research and development are expensed in the period incurred. Research and development costs primarily consist of fees paid to CROs andclinical trial sites; employee and consultant related expenses, which include salaries, benefits and stock-based compensation for research and developmentpersonnel; external research and development expenses incurred pursuant to agreements with third-party manufacturing organizations; license fees paid tothird parties for use of their intellectual property; facilities costs; travel costs; dues and subscriptions; depreciation; and materials used in preclinical studies,clinical trials and research and development.67Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We estimate our preclinical study and clinical trial expenses based on the services we received pursuant to contracts with research institutions and CROs thatconduct and manage preclinical studies and clinical trials on our behalf. Clinical trial-related contracts vary significantly in length and may be for a fixedamount, based on milestones or deliverables, a variable amount based on actual costs incurred, capped at a certain limit, or for a combination of theseelements. We accrue service fees based on work performed, which relies on estimates of total costs incurred based on milestones achieved, patient enrollmentand other events. The majority of our service providers invoice us in arrears and, to the extent that amounts invoiced differ from our estimates of expensesincurred, we accrue for additional costs. The financial terms of these agreements vary from contract to contract and may result in uneven expenses andpayment flows. Preclinical study and clinical trial expenses include: ·fees paid to CROs, laboratories and consultants in connection with preclinical studies; ·fees paid to CROs, clinical trial sites, investigators and consultants in connection with clinical trials; and ·fees paid to contract manufacturers and service providers in connection with the production, testing and packaging of active pharmaceuticalingredients and drug materials for preclinical studies and clinical trials.Payments under some of these agreements depend on factors such as the milestones accomplished, including enrollment of certain numbers of patients, siteinitiation and the completion of clinical trial milestones. To date, we have not experienced any events requiring us to make material adjustments to ouraccruals for service fees. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or thecosts of these services, our actual expenses could differ from our estimates, which could materially affect our results of operations. Adjustments to ouraccruals are recorded as changes in estimates become evident. Furthermore, based on amounts invoiced to us by our service providers, we may also recordpayments made to those providers as prepaid expenses that will be recognized as expense in future periods as services are rendered.Our historical research and development expenses have primarily related to obtaining certain licensed compounds and related intellectual property rightsfrom Ligand. In May 2014, we acquired certain rights to a number of research and development programs from Ligand. In doing so, we updated our policy onresearch and development to include the purchase of rights to intangible assets. In accordance with ASC Topic 730, Research and Development, intangibleassets that are acquired and have an alternative future use, as defined, should be capitalized and reported as an intangible asset; however, the cost of acquiredintangible assets that do not have alternative future uses should be reported as research and development expense as incurred. We note that intangible assetsacquired that are in the preclinical or clinical stages of development when acquired, and that are not approved by the U.S. Food and Drug Administration, orthe FDA, are deemed to have not satisfied the definition of having an alternative future use, as defined. Accordingly, assets acquired in the preclinical andclinical stages of development should be expensed as incurred in our statement of operations.Patent CostsCosts related to filing and pursuing patent applications are expensed as incurred to general and administrative expense, as recoverability of suchexpenditures is uncertain.Stock-Based CompensationWe generally use the straight-line or graded vesting method to allocate compensation cost to reporting periods over each optionee’s requisite service period,which is generally the vesting period, and estimate the fair value of stock-based awards or restricted stock units to employees and directors using the Black-Scholes option-valuation model. For options with a graded vesting schedule, we use the graded vesting schedule to allocate compensation cost to reportingperiods. The Black-Scholes model requires the input of subjective assumptions, including volatility, the expected term and the fair value of the underlyingcommon stock on the date of grant, among other inputs. Stock options granted to non-employees are accounted for using the fair value approach. Stockoptions granted to non-employees are subject to periodic revaluation over their vesting terms. For restricted stock and restricted stock unit awards, wegenerally use the straight-line or graded vesting method to allocate compensation cost to reporting periods over the holder’s requisite service period, which isgenerally the vesting period, and use the fair value at grant date to value the awards.Prior to the consummation of the IPO, we accounted for stock-based compensation by measuring and recognizing compensation expense for all stock-basedpayments made to employees and directors based on estimated award date fair values, which estimates were highly complex and subjective in nature. Weused the straight-line or graded vesting method to allocate compensation cost to reporting periods over each restricted award’s requisite service period, whichwas generally the vesting period, and estimated the fair value of restricted stock-based awards to employees and consultants using a Monte Carlo marketapproach simulation method and performed an allocation of value to common stock based on the estimated time to a liquidity event. In addition, weaccounted for performance-based restricted stock awards to employees by determining the fair value of the restricted stock award at the date of issuance byusing the Probability Weighted Expected Return Method, or PWERM, and then assessing at each balance sheet date the68Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. probability of the performance criteria being met. If the probability of achieving the criteria was deemed less-than-probable, then no expense was recorded. Atthe point where the criteria are deemed probable of being met, we will begin recording stock-based compensation with a cumulative catch-up expense in theperiod first recognized and then on a straight-line basis over the remaining period for which the performance criteria are expected to be completed.Income TaxesWe account for our income taxes using the liability method whereby deferred tax assets and liabilities are determined based on temporary differencesbetween the basis used for financial reporting and income tax reporting purposes. Deferred income taxes are provided based on the enacted tax rates in effectat the time such temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it is more likely than not that wewill not realize those tax assets through future operations.ASC Topic 740-10, Income Taxes, clarifies the accounting for uncertainty in income taxes recognized in our financial statements in accordance withgenerally accepted accounting principles. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. Income taxpositions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which thatthreshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first subsequentfinancial reporting period in which that threshold is no longer met.Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.Net Loss per Common ShareBasic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common sharesoutstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing the net loss attributableto common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stockmethod. For purposes of this calculation, we currently do not have any deemed common share equivalents; therefore, our basic and diluted net loss per sharecalculations are the same. SegmentsWe operate in only one segment. Management uses cash flows as the primary measure to manage our business and does not segment our business for internalreporting or decision making purposes.Results of OperationsComparison of the Years Ended December 31, 2015 and 2014Research and Development ExpensesThe following table summarizes our research and development expenses for the years ended December 31, 2015 and 2014. Year Ended December 31, $Change %Change 2015 2014 Research and development expenses $6,966,842 $22,223,073 $(15,256,231) (68.7)% The decrease in research and development expenses during the year ended December 31, 2015 as compared to the year ended December 31, 2014 wasprimarily due to a decrease in license fees of $21,687,576 in the year ended December 31, 2015. These fees were recorded during the year ended December31, 2014 and related to the estimated license fee liability payable to Ligand under the Master License Agreement. This decrease was offset by increasesduring the year ended December 31, 2015 in research and development expenses of $2,016,994 related to clinical manufacturing for our drug candidates,$1,016,469 related to salaries and benefits, $849,557 related to stock-based compensation expense, $1,768,162 related to clinical trial activity for ourVK5211 and VK2809 programs and $565,356 related to services provided by certain third party consultants.69Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. General and Administrative ExpensesThe following table summarizes our general and administrative expenses for the years ended December 31, 2015 and 2014. Year Ended December 31, $Change %Change 2015 2014 General and administrative expenses $5,029,636 $1,244,910 $3,784,726 304.0% The increase in general and administrative expenses during the year ended December 31, 2015 as compared to the year ended December 31, 2014 wasprimarily due to increases in stock-based compensation expense of $1,745,633, salaries and related benefits of $1,012,486, insurance premiums expense of$336,658, board of director fees of $154,807, legal and patent expenses of $178,252, investor relations expenses of $83,526 and consulting expenses of$26,683.Other Income (Expense)The following table summarizes our other income (expense) for the years ended December 31, 2015 and 2014. Year Ended December 31, $Change %Change 2015 2014 Other income (expense) $(11,407,510) $1,583,800 $(12,991,310) (820.3)% Other income (expense) increased during the year ended December 31, 2015 primarily due to the establishment in May 2014 of a license fee liability inaccordance with the Master License Agreement, which requires the license fee liability to be marked to market at each reporting period. The increase in otherincome (expense) for the year ended December 31, 2015 as compared to the year ended December 31, 2014 is primarily due to the recording of an increase inthe value of the license fee liability of $9,381,848 during the year ended December 31, 2015, as compared to a decrease in the value of the license feeliability of $1,821,713 during the year ended December 31, 2014. In addition, during the year ended December 31, 2015, we recorded additional amounts toother expense related to the Ligand Note, including an incremental expense of $354,993 related to the amortization of the Ligand Note discount and anexpense of $1,358,284 related to the incremental change in fair value of the Ligand Note’s conversion feature.Liquidity and Capital ResourcesWe have incurred losses and negative cash flows from operations and have not generated any revenues since our inception. The audit report issued by ourindependent registered public accounting firm for our financial statements for the fiscal year ended December 31, 2015 included in this Annual Report onForm 10-K states that our independent registered public accounting firm has substantial doubt in our ability to continue as a going concern due to the riskthat we may not have sufficient cash and liquid assets at December 31, 2015 to cover our operating and capital requirements for the next 12 months. In theevent we cannot obtain sufficient funding, we may have to substantially alter, or possibly even discontinue, operations. Our financial statements and relatednotes thereto included elsewhere in this Annual Report on Form 10-K do not include any adjustments that might result from the outcome of this uncertainty.Our primary use of cash is to fund operating expenses, which to date have consisted of the cost to obtain the license of intellectual property from Ligand,certain research and development expenses related to furthering the development of VK5211, VK2089 and VK0214 efforts and general and administrativeexpenses. Since we have not generated any revenues to date, we have incurred operating losses since our inception. Cash used to fund operating expenses isimpacted by the timing of payment of these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.On May 4, 2015, prior to the completion of the IPO, we repurchased an aggregate of 3,802,859 shares of our common stock from our stockholders at a price of$0.00001 per share for an aggregate purchase price of $38. Pursuant to the Master License Agreement, upon the closing of the IPO, on May 4, 2015, we issuedan aggregate of 3,427,859 shares of our common stock to Ligand and Metabasis Therapeutics, Inc., a wholly-owned subsidiary of Ligand, or Metabasis.On May 4, 2015, we consummated the IPO, pursuant to which we sold 3,000,000 shares of our common stock at an initial public offering price of $8.00 pershare. The underwriters for the IPO had 30 days to exercise an over-allotment option to purchase up to an additional 450,000 shares at the initial publicoffering price, less the underwriting discount. Upon the closing of the IPO, on May 4, 2015, we raised a total of $19,100,500 in net proceeds after deductingunderwriting discounts, commissions and other offering expenses of $4,899,500. Costs directly associated with the IPO were capitalized and recorded asdeferred IPO costs prior to the closing of the IPO. These costs have been recorded as a reduction of the proceeds received in arriving at the amount to berecorded in additional paid-in capital.70Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. On May 26, 2015, the underwriters of the IPO exercised their full over-allotment option to purchase an additional 450,000 shares of our common stock at theinitial public offering price of $8.00 per share, less the underwriting discount. On May 28, 2015, we sold the 450,000 shares to the underwriters pursuant tothe over-allotment option and received additional net proceeds of $3,225,866 after deducting underwriting discounts, commissions and other offeringexpenses of $374,134. In connection with the underwriters’ exercise of the over-allotment option, on May 28, 2015, we issued an aggregate of 228,105additional shares of our common stock to Ligand and Metabasis in accordance with the terms of the Master License Agreement.The following table summarizes our cash flows for the periods indicated below: Year Ended December 31, 2015 2014 Cash used in operating activities $(8,731,494) $(1,591,423)Cash used in investing activities $(13,470,042) $— Cash provided by financing activities $22,214,229 $2,167,661 Cash Used in Operating ActivitiesDuring the year ended December 31, 2015, cash used in operating activities of $8,731,494 primarily reflected our net losses for the period, offset by non-cashcharges such as an increase in the fair value of accrued license fees and debt conversion feature liability, amortization of discount charged to interest expenseon the Convertible Notes and the Ligand Note, stock-based compensation and changes in our working capital accounts, primarily consisting of an increase inprepaid expenses, accounts payable and accrued expenses.During the year ended December 31, 2014, cash used in operating activities was $1,591,423. Cash used in operating activities primarily reflected our netlosses for the period, offset by non-cash charges such as stock-based compensation, amortization of discount charged to interest expense on the ConvertibleNotes and changes in fair value of debt conversion feature liability and accrued license fees, as well as changes in our working capital accounts, primarilyconsisting of an increase in accounts payable, accrued expenses, accrued license fees, debt conversion feature liability and deferred initial public offeringfinancing costs.Cash Used in Investing ActivitiesDuring the year ended December 31, 2015, cash used in investing activities of $13,470,042 resulted from the investment of the proceeds from the IPO intoshort term investments that are available for sale. We did not engage in any investing activities during the year ended December 31, 2014.Cash Provided by Financing ActivitiesDuring the year ended December 31, 2015, cash provided by financing activities of $22,214,229 was primarily due to the net proceeds from the IPO of$25,392,500 (after deducting underwriting discounts and commissions) offset by payment of certain other offering expenses of $2,782,462.During the year ended December 31, 2014, cash provided by financing activities was $2,167,661, which consisted primarily of proceeds from the issuance ofthe Ligand Note in the amount of $2,500,000, offset by the payment of certain deferred offering costs of $332,337 and the repurchase of shares of restrictedcommon stock from a former service provider at par value.Future Funding RequirementsAs of December 31, 2015, and based upon our current operating plan, we do not believe that we will have sufficient cash to meet our projected operatingrequirements for at least the next 12 months unless we raise additional capital. We anticipate that we will continue to generate losses for the foreseeablefuture, and we expect the losses to increase materially as we continue the development of, and seek regulatory approvals for, our drug candidates, and seek tocommercialize any drugs for which we receive regulatory approval. We will need to raise additional capital to fund our operations and complete our ongoingand planned clinical trials. Although we expect to finance future cash needs through public or private equity or debt offerings, funding may not be availableto us on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may be required to delay,limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market drug candidates that we wouldotherwise prefer to develop and market ourselves.71Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our future capital requirements will depend on many factors, including, but not limited to: ·the scope, rate of progress, results and costs of our clinical trials, preclinical studies and other related activities; ·the timing of, and the costs involved in, obtaining regulatory approvals for any of our current or future drug candidates; ·the number and characteristics of the drug candidates we seek to develop or commercialize; ·the cost of manufacturing clinical supplies, and establishing commercial supplies, of our drug candidates; ·the cost of commercialization activities if any of our current or future drug candidates are approved for sale, including marketing, sales anddistribution costs; ·the expenses needed to attract and retain skilled personnel; ·the costs associated with being a public company; ·our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements; ·the amount of revenue, if any, received from commercial sales of our drug candidates, should any of our drug candidates receive marketingapproval; and ·the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing possible patent claims, including litigation costs andthe outcome of any such litigation.Contractual Obligations and CommitmentsWe are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide theinformation required under this item. Off-Balance Sheet ArrangementsWe do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC.Recent Accounting PronouncementsIn August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a GoingConcern, or ASU 2014-15. ASU 2014-15 provides guidance on presentation of management’s plans, when conditions or events, considered in the aggregate,raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Thisguidance is intended to mitigate those conditions or events that will alleviate substantial doubt about the entity’s ability to continue as a going concern.ASU 2014-15 is effective for fiscal years ending after December 15, 2016. The adoption of ASU 2014-15 is not expected to have a material impact on ourfinancial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-9, Revenue from Contracts with Customers, or ASU 2014-9, which provides guidancefor revenue recognition. The core principle of ASU 2014-9 is that a company will recognize revenue when it transfers promised goods or services tocustomers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The newguidance initially was effective for us beginning January 1, 2017, but on July 9, 2015 the FASB deferred the effective date and, as a result, the new guidanceis effective for us beginning January 1, 2018. Companies may adopt the new revenue standard as of the original effective date. We are currently evaluatingthe method of adoption and the potential impact this standard will have on our financial statements. In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,or ASU 2015-17. To simplify the presentation of deferred income taxes, the amendments in ASU 2015-17 require that deferred income tax liabilities andassets be classified as noncurrent in a classified statement of financial position. The amendment is effective for fiscal years, and interim periods within thosefiscal years, beginning after December 15, 2016. The adoption of ASU 2015-17 is not expected to have a material impact on our financial statements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk.We are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide theinformation required under this item. 72Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 8. Financial Statements and Supplementary Data.The information required by this Item 8 is contained on the pages indicated in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.Our board of directors appointed Marcum LLP as our independent registered public accounting firm effective April 7, 2014. There were no disagreements orreportable events related to the change in accountants requiring disclosure under Item 304(b) of Regulation S-K. Item 9A. Controls and Procedures.Evaluation of Disclosure Controls and Procedures.We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or theExchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us inthe reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rulesand forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to bedisclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principalexecutive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designedand operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment inevaluating the cost-benefit relationship of possible controls and procedures. As required by Rule 13a-15(b) or Rule 15d-15(b) promulgated by the SEC underthe Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executiveofficer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the periodcovered by this Annual Report on Form 10-K. Based on the foregoing, our principal executive officer and principal financial officer concluded that ourdisclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K at the reasonable assurance level.Management’s Report on Internal Control over Financial Reporting.This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestationreport of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.Changes in Internal Control over Financial Reporting.There were no changes in our internal control over financial reporting during the quarter ended December 31, 2015 that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information.None. 73Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART III Item 10. Directors, Executive Officers and Corporate Governance. The information required by this item will be set forth in the sections entitled “Board of Directors”, “Executive Officers”, “Section 16(a) BeneficialOwnership Reporting Compliance” and “Corporate Governance and Board Matters” in our Definitive Proxy Statement for our 2016 Annual Meeting ofStockholders, or our 2016 Proxy Statement, to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2015, and isincorporated herein by reference. Item 11. Executive Compensation.The information required by this item will be set forth in the section entitled “Executive Compensation” in our 2016 Proxy Statement and is incorporatedherein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this item will be set forth in the sections entitled “Securities Authorized for Issuance Under Equity Compensation Plans” and“Security Ownership of Certain Beneficial Owners and Management” in our 2016 Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this item will be set forth in the sections entitled “Transactions with Related Persons, Promoters and Certain Control Persons”and “Corporate Governance and Board Matters” in our 2016 Proxy Statement and is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. The information required by this item will be set forth in the section entitled “Audit Related Matters” in our 2016 Proxy Statement and is incorporated hereinby reference.74Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART IV Item 15. Exhibits, Financial Statement Schedules.(a)(1) The Financial Statements required to be filed by Items 8 and 15(c) of this Annual Report on Form 10-K, and filed herewith, are as follows: Page Number inthis Annual Reporton Form 10-KReport of Independent Registered Public Accounting Firm F-2Balance Sheets F-3Statement of Operations F-4Statements of Stockholders’ Equity (Deficit) F-5Statement of Cash Flows F-6Notes to Financial Statements F-7 (a)(2) Financial Statement Schedules have been omitted because they are either not applicable or the required information is included in the consolidatedfinancial statements or notes thereto listed in (a)(1) above.(a)(3) Exhibits.The following exhibits are filed herewith or incorporated herein by reference: ExhibitNumber Description Registrant’sForm Date Filedwith theSEC ExhibitNumber 3.1 Amended and Restated Certificate of Incorporation. S-1 7/1/2014 3.3 3.2 Amendment to Certificate of Incorporation. S-1/A 9/2/2014 3.5 3.3 Amended and Restated Bylaws. S-1 7/1/2014 3.4 4.1 Form of Common Stock Certificate. S-1 7/1/2014 4.1 4.2 Form of Common Stock Purchase Warrant issued by Viking Therapeutics, Inc. toLaidlaw & Company (UK) Ltd. S-1/A 4/10/2015 4.2 10.1# Form of Indemnification Agreement between Viking Therapeutics, Inc. and itsdirectors and executive officers. S-1 7/1/2014 10.1 10.2# 2014 Equity Incentive Plan. S-1/A 3/2/2015 10.2 10.3# Form of Stock Option Award Agreement (2014 Equity Incentive Plan). S-1 7/1/2014 10.3 10.4# Form of Restricted Stock Unit Award Agreement (2014 Equity Incentive Plan). S-1 7/1/2014 10.4 10.5# Form of Restricted Stock Award Agreement (2014 Equity Incentive Plan). S-1/A 9/2/2014 10.23 10.6# Form of Stock Appreciation Rights Award Agreement (2014 Equity Incentive Plan). S-1 7/1/2014 10.5 10.7# 2014 Employee Stock Purchase Plan. S-1/A 3/2/2015 10.22 10.8# Amendment No. 1 to 2014 Employee Stock Purchase Plan. S-1 11/24/2015 10.8 10.9# Employment Agreement, effective as of June 2, 2014, by and between VikingTherapeutics, Inc. and Brian Lian, Ph.D. S-1/A 9/2/2014 10.6 75Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ExhibitNumber Description Registrant’sForm Date Filedwith theSEC ExhibitNumber 10.10# Employment Agreement, effective as of May 21, 2014, by and between VikingTherapeutics, Inc. and Michael Morneau. S-1/A 9/2/2014 10.7 10.11# Amendment to Employment Agreement, effective as of September 30, 2014, by andbetween Viking Therapeutics, Inc. and Michael Morneau. S-1/A 3/2/2015 10.26 10.12# Employment Agreement, effective as of June 2, 2014, by and between VikingTherapeutics, Inc. and Michael Dinerman, M.D. S-1/A 9/2/2014 10.8 10.13# Amendment to Employment Agreement, effective as of September 30, 2014, by andbetween Viking Therapeutics, Inc. and Michael Dinerman, M.D. S-1/A 3/2/2015 10.27 10.14# Employment Agreement, effective as of June 2, 2014, by and between VikingTherapeutics, Inc. and Rochelle Hanley, M.D. S-/1A 9/2/2014 10.9 10.15# Amendment to Employment Agreement, effective as of September 30, 2014, by andbetween Viking Therapeutics, Inc. and Rochelle Hanley, M.D. S-1/A 3/2/2015 10.28 10.16# Non-Employee Director Compensation Policy. S-1 11/24/2015 10.16 10.17† Master License Agreement, dated May 21, 2014, by and among Viking Therapeutics,Inc., Ligand Pharmaceuticals Incorporated and Metabasis Therapeutics, Inc. S-1 7/1/2014 10.12 10.18† First Amendment to Master License Agreement, dated September 6, 2014, by andamong Viking Therapeutics, Inc., Ligand Pharmaceuticals Incorporated and MetabasisTherapeutics, Inc. S-1/A 9/8/2014 10.24 10.19† Second Amendment to Master License Agreement, dated April 8, 2015, by and amongViking Therapeutics, Inc., Ligand Pharmaceuticals Incorporated and MetabasisTherapeutics, Inc. S-1/A 4/10/2015 10.30 10.20† Loan and Security Agreement, dated May 21, 2014, by and between VikingTherapeutics, Inc. and Ligand Pharmaceuticals Incorporated. S-1 7/1/2014 10.13 10.21† First Amendment to Loan and Security Agreement, dated April 8, 2015, by andbetween Viking Therapeutics, Inc. and Ligand Pharmaceuticals Incorporated. S-1/A 4/10/2015 10.31 10.22 Convertible Note, dated May 27, 2014, issued by Viking Therapeutics, Inc. to LigandPharmaceuticals Incorporated. S-1 7/1/2014 10.14 10.23 Letter Agreement regarding board composition and management rights, dated May 21,2014, by and between Viking Therapeutics, Inc. and Ligand PharmaceuticalsIncorporated. S-1 7/1/2014 10.15 10.24 Registration Rights Agreement, dated May 21, 2014, by and among VikingTherapeutics, Inc., Metabasis Therapeutics, Inc. and Ligand PharmaceuticalsIncorporated. S-1 7/1/2014 10.16 10.25 Voting Agreement, dated May 21, 2014, by and among Viking Therapeutics, Inc.,Ligand Pharmaceuticals Incorporated, Metabasis Therapeutics, Inc., Brian Lian, Ph.D.and Michael Dinerman, M.D. S-1 7/1/2014 10.17 10.26# Founder Common Stock Purchase Agreement, dated September 26, 2012, by andbetween Viking Therapeutics, Inc. and Brian Lian, Ph.D. S-1 7/1/2014 10.18 76Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ExhibitNumber Description Registrant’sForm Date Filedwith theSEC ExhibitNumber 10.27# Amendment No. 1 to Founder Common Stock Purchase Agreement, dated May 4,2015, by and between Viking Therapeutics, Inc. and Brian Lian, Ph.D. 10-Q 6/12/2015 10.2 10.28# Founder Common Stock Purchase Agreement, dated September 26, 2012, by andbetween Viking Therapeutics, Inc. and Michael Dinerman, M.D. S-1 7/1/2014 10.19 10.29# Amendment No. 1 to Founder Common Stock Purchase Agreement, dated May 4,2015, by and between Viking Therapeutics, Inc. and Michael Dinerman, M.D. 10-Q 6/12/2015 10.3 10.30# Common Stock Purchase Agreement, dated April 15, 2013, by and between VikingTherapeutics, Inc. and Rochelle Hanley, M.D. S-1 7/1/2014 10.20 10.31# Amendment No. 1 to Common Stock Purchase Agreement, dated May 4, 2015, by andbetween Viking Therapeutics, Inc. and Rochelle Hanley, M.D. 10-Q 6/12/2015 10.4 10.32#† Common Stock Purchase Agreement, dated February 20, 2014, by and between VikingTherapeutics, Inc. and Brian Lian, Ph.D. S-1 7/1/2014 10.21 10.33# Amendment No. 1 to Common Stock Purchase Agreement, dated May 4, 2015, by andbetween Viking Therapeutics, Inc. and Brian Lian, Ph.D. 10-Q 6/12/2015 10.5 10.34# Amended and Restated Stock Repurchase Agreement, dated April 28, 2015, by andamong Viking Therapeutics, Inc., Brian Lian, Ph.D., Michael Dinerman, M.D., IsabelleDinerman and Rochelle Hanley, M.D. 10-Q 6/12/2015 10.1 10.35 Research Services Agreement, dated January 27, 2015, by and between VikingTherapeutics, Inc. and Academisch Medisch Centrum. S-1/A 4/10/2015 10.29 10.36 Sublease between Fish & Richardson P.C. and Viking Therapeutics, Inc. dated July 7,2015. 10-Q 11/5/2015 10.1 10.37 Second Amendment to Loan and Security Agreement, dated January 22, 2016, by andbetween Viking Therapeutics, Inc. and Ligand Pharmaceuticals Incorporated. 8-K 1/25/2016 10.1 10.38 First Amendment to Registration Rights Agreement, dated January 22, 2016, by andbetween Viking Therapeutics, Inc. and Ligand Pharmaceuticals Incorporated. 8-K 1/25/2016 10.2 23.1 Consent of Marcum LLP, Independent Registered Public Accounting Firm. 24.1 Power of Attorney (included on the signature page to this Annual Report on Form 10-K). 31.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934. 31.2 Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)of the Securities Exchange Act of 1934. 32.1 Certification of the Principal Executive Officer and Principal Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002. 101.INS XBRL Instance Document. 101.SCH XBRL Taxonomy Extension Schema Document. 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. 77Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ExhibitNumber Description Registrant’sForm Date Filedwith theSEC ExhibitNumber 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB XBRL Taxonomy Extension Label Linkbase Document. 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheets as of December 31,2015 and December 31, 2014, (ii) Statements of Operations for the years ended December 31, 2015 and 2014, (iii) Statements of Stockholders’ Equity(Deficit) for the period from December 31, 2013 to December 31, 2015, (iv) Statements of Cash Flows for the years ended December 31, 2015 and 2014, and(v) Notes to Financial Statements. #Indicates compensatory plan or arrangement.†Confidential treatment has been granted with respect to certain portions of this exhibit, which portions have been omitted and filed separately with theSecurities and Exchange Commission.78Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. Viking Therapeutics, Inc. Date: March 8, 2016 By:/s/ Brian Lian, Ph.D. Brian Lian, Ph. D. President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints, jointly and severally, BrianLian, Ph.D. and Michael Morneau, and each of them acting individually, as his attorney-in-fact, each with full power of substitution and resubstitution, forhim in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and otherdocuments in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact full power and authority to do andperform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he might or could doin person, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may lawfully do or cause to be done by virtuehereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrantand in the capacities and on the dates indicated. Name Title Date /s/ Brian Lian, Ph.D. President, Chief Executive Officer and Director(Principal Executive Officer) March 8, 2016Brian Lian, Ph.D. /s/ Michael Morneau Chief Financial Officer(Principal Accounting and Financial Officer) March 8, 2016Michael Morneau /s/ Lawson Macartney, DVM, Ph.D. Director March 8, 2016Lawson Macartney, DVM, Ph.D. /s/ Matthew W. Foehr Director March 8, 2016Matthew W. Foehr /s/ Matthew Singleton Director March 8, 2016Matthew Singleton /s/ Stephen W. Webster Director March 8, 2016Stephen W. Webster 79Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm F-2 Balance Sheets as of December 31, 2015 and 2014 F-3 Statements of Operations for the Years ended December 31, 2015 and 2014 F-4 Statements of Stockholders’ Equity (Deficit) for the Years ended December 31, 2015 and 2014 F-5 Statements of Cash Flows for the Years ended December 31, 2015 and 2014 F-6 Notes to Consolidated Financial Statements F-7 F-1Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Report of Independent Registered Public Accounting Firm Board of Directors and Stockholdersof Viking Therapeutics, Inc. We have audited the accompanying balance sheets of Viking Therapeutics, Inc. (the “Company”) as of December 31, 2015 and 2014, and the relatedstatements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internalcontrol over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Viking Therapeutics, Inc., as ofDecember 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generallyaccepted in the United States of America. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financialstatements, the Company has had recurring net losses and negative cash flows from operations that raise substantial doubt about the Company’s ability tocontinue as a going concern. Management’s plans regarding these matters also are described in Note 1. The financial statements do not include anyadjustments that might result from the outcome of this uncertainty. /s/ Marcum LLPIrvine, CaliforniaMarch 8, 2016 F-2Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Viking Therapeutics, Inc.Balance Sheets December 31,2015 December 31,2014 Assets Current assets: Cash and cash equivalents $768,550 $755,857 Short-term investments – available for sale 13,335,499 — Prepaid expenses and other current assets 1,097,599 17,827 Total current assets 15,201,648 773,684 Deferred public offering financing costs 157,455 2,268,675 Deposits 80,000 775 Total assets $15,439,103 $3,043,134 Liabilities, convertible notes and stockholders’ equity (deficit) Current liabilities: Accounts payable $592,414 $1,830,724 Accrued license fees — 19,865,863 Other accrued liabilities 1,384,398 380,257 Accrued interest — 77,222 Convertible notes payable, current portion (net of discount of $0 and $6,076 at December 31, 2015and 2014, respectively) — 304,274 Debt conversion feature liability — 58,742 Total current liabilities 1,976,812 22,517,082 Accrued interest, non-current 183,611 — Convertible notes payable (net of discount of $348,460 and $1,235,886 at December 31, 2015 and 2014, respectively) 2,151,540 1,264,114 Debt conversion feature liability 2,370,903 1,390,469 Deferred rent 31,239 — Total long-term liabilities 4,737,293 2,654,583 Total liabilities 6,714,105 25,171,665 Commitments and contingencies (Note 12) Stockholders’ equity (deficit): Preferred stock, $0.00001 par value: 10,000,000 shares authorized at December 31, 2015 and no shares authorized at December 31, 2014; no shares issued and outstanding at December 31, 2015 and 2014 — — Common stock, $0.00001 par value: 300,000,000 shares authorized at December 31, 2015 and 25,000,000 shares authorized at December 31, 2014; 9,683,741 shares issued and outstanding at December 31, 2015 and 6,000,000 shares issued and outstanding at December 31, 2014 97 60 Additional paid-in capital 54,277,716 12,866 Accumulated deficit (45,545,445) (22,141,457)Accumulated other comprehensive loss (7,370) — Total stockholders’ equity (deficit) 8,724,998 (22,128,531)Total liabilities and stockholders’ equity (deficit) $15,439,103 $3,043,134 The accompanying notes are an integral part of these financial statements. F-3Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Viking Therapeutics, Inc.Statements of Operations and Comprehensive Loss Year EndedDecember 31, 2015 2014 Revenues $— $— Operating expenses: Research and development 6,966,842 22,223,073 General and administrative 5,029,636 1,244,910 Total operating expenses 11,996,478 23,467,983 Loss from operations (11,996,478) (23,467,983)Other income (expense): Change in fair value of accrued license fees (9,381,848) 1,821,713 Change in fair value of debt conversion feature liability (1,043,478) 390,763 Amortization of debt discount (893,502) (557,961)Interest expense, net (88,682) (70,715)Total other income (expense) (11,407,510) 1,583,800 Net loss (23,403,988) (21,884,183)Other comprehensive loss, net of tax: Unrealized gain (loss) on securities (7,370) — Comprehensive loss $(23,411,358) $(21,884,183)Basic and diluted net loss per share $(3.68) $(5.23)Weighted-average shares used to compute basic and diluted net loss per share 6,355,869 4,187,415 The accompanying notes are an integral part of these financial statements. F-4Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Viking Therapeutics, Inc.Statements of Stockholders’ Equity (Deficit) Common Stock AdditionalPaid-In NotesReceivablefrom AccumulatedOtherComprehensive Accumulated Shares Amount Capital Stockholders Loss Deficit Total Balance at December 31, 2013 5,200,000 $52 $11,114 $(4,496) $— $(257,274) $(250,604)Repurchase of common stock (200,000) (2) (1,998) 1,998 — — (2)Issuance of performance-based common stock 1,000,000 10 (10) — — — — Employee stock-based compensation — — 3,760 — — — 3,760 Forgiveness of note receivable in consideration of services rendered — — — 2,498 — — 2,498 Net loss — — — — — (21,884,183) (21,884,183)Balance at December 31, 2014 6,000,000 60 12,866 — — (22,141,457) (22,128,531)Repurchase of common stock (3,802,859) (38) — — — — (38)Employee stock-based compensation 318,708 3 2,205,673 — — — 2,205,676 Issuance of common stock to consultant 4,882 — 28,760 — — — 28,760 Conversion of debt to equity 57,046 1 456,411 — — — 456,412 Issuances of common stock to related party 3,655,964 36 29,247,675 — — — 29,247,711 Initial public offering, net of issuance costs 3,450,000 35 22,326,331 — — — 22,326,366 Unrealized gain (loss) on investments — — — — (7,370) — (7,370)Net loss — — — — — (23,403,988) (23,403,988)Balance at December 31, 2015 9,683,741 $97 $54,277,716 $— $(7,370) $(45,545,445) $8,724,998 The accompanying notes are an integral part of these financial statements. F-5Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Viking Therapeutics, Inc.Statements of Cash Flows Year EndedDecember 31, 2015 2014 Cash flows from operating activities Net loss $(23,403,988) $(21,884,183)Adjustments to reconcile net loss to net cash used in operating activities Amortization of debt discount on notes payable 893,502 557,961 Amortization of investment premiums 131,899 — Change in fair value of accrued license fees 9,381,848 (1,821,713)Change in fair value of debt conversion feature liability 1,043,478 (390,763)Stock-based compensation 2,601,448 6,258 Changes in operating assets and liabilities: Prepaid expenses and other current assets (1,079,772) (17,827)Deposits (79,225) — Accounts payable 219,237 191,008 Accounts payable - related party — (712)Accrued license fees — 21,687,576 Accrued expenses 1,560,079 80,972 Net cash used in operating activities (8,731,494) (1,591,423)Cash flows from investing activities Purchases of investments (16,033,042) — Proceeds from sales and maturities of investments 2,563,000 — Net cash used in investing activities (13,470,042) — Cash flows from financing activities Proceeds from issuances of common stock, net of underwriting discounts and commissions 25,392,500 — Public offering costs (2,782,462) (332,337)Value of shares withheld related to employee tax withholding (418,412) — Repurchases of common stock (38) (2)Proceeds from convertible notes payable — 2,500,000 Proceeds from stock issuance under employee stock purchase plan 22,641 — Net cash provided by financing activities 22,214,229 2,167,661 Net increase in cash and cash equivalents 12,693 576,238 Cash and cash equivalents beginning of period 755,857 179,619 Cash and cash equivalents end of period $768,550 $755,857 Supplemental disclosure of non-cash investing and financing transactions Shares issued in lieu of license fee payment $29,247,711 $— Unpaid deferred public offering costs $108,791 $1,936,338 Conversion of notes payable $456,412 $— Issuance of common stock to consultant $28,760 $— Issuance of common stock in exchange for notes receivable $— $— Repurchases of common stock $— $(1,998) The accompanying notes are an integral part of these financial statements. F-6Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Viking Therapeutics, Inc.Notes to Financial Statements 1.Organization, Liquidity and Management’s Plan, and Summary of Significant Accounting PoliciesThe CompanyViking Therapeutics, Inc., a Delaware corporation (the “Company”), 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.The Company was incorporated under the laws of the State of Delaware on September 24, 2012 and its principal executive offices are located in San Diego,CA.Basis of PresentationThe accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America(“GAAP”).Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported inthe accompanying financial statements. Significant estimates made in preparing these financial statements relate to determining the fair value of the debtconversion liability and accounting for certain commitments. Actual results could differ from those estimates.Cash and Cash EquivalentsThe Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents.Investments Available-for-SaleAvailable-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss). Theamortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. The amortization of premiums and accretionof discounts is included in interest income. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-salesecurities are included in other income (expense). The cost of securities sold is based on the specific identification method. Interest and dividends onsecurities classified as available-for-sale are included in interest income.Concentration of Credit RiskFinancial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents and marketablesecurities. The Company maintains deposits in federally insured depository institutions in excess of federally insured limits. Management believes that theCompany is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. Additionally,the Company has established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.Liquidity and Management’s PlanIn May 2015, the Company completed an initial public offering (“IPO”), issuing 3,450,000 shares of its common stock and raising net proceeds of$22,326,366, including the full exercise of the over-allotment option, and after deducting underwriting discounts, commissions and other offering expensesof $5,273,634. (See Note 7 regarding proceeds from the Company’s initial public offering received in May 2015.)F-7Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Although it is difficult to predict the Company’s liquidity requirements, as of December 31, 2015, and based upon the Company’s current operating plan, theCompany does not believe that it will have sufficient cash to meet its projected operating requirements for at least the next 12 months unless it raisesadditional capital. As of December 31, 2015, the Company had an accumulated deficit of $45,545,445. These losses have resulted principally from researchand development costs incurred in connection with acquiring the exclusive worldwide rights to the portfolio of five drug candidates from LigandPharmaceuticals Incorporated (“Ligand”) and the related non-cash interest expense recorded for increases in the deemed fair market value for the license feespayable to Ligand, research and development expenses related to the manufacturing of clinical drug product and clinical development of VK5211, VK2809and VK0214, consulting fees and general and administrative expenses. The Company anticipates that it will continue to incur net losses for the foreseeablefuture as it continues the development of its clinical drug candidates and preclinical programs and incurs additional costs associated with being a publiccompany.Deferred Financing CostsDeferred financing costs represent legal, accounting and other direct costs related to the Company’s efforts to raise capital through a public sale of theCompany’s common stock. Costs related to the public sale of the Company’s common stock will be deferred until its completion, at which time they will bereclassified to additional paid-in-capital as a reduction of the proceeds.Revenue RecognitionThe Company has not recorded any revenues since its inception. However, in the future the Company may enter into collaborative research and licensingagreements, under which the Company could be eligible for payments made in the form of upfront license fees, research funding, cost reimbursement,contingent event-based payments and royalties.Revenue from upfront, nonrefundable license fees is recognized over the period that any related services are to be provided by the Company. Amountsreceived for research funding are recognized as revenue as the research services that are the subject of such funding are performed. Revenue derived fromreimbursement of research and development costs in transactions where the Company acts as a principal are recorded as revenue for the gross amount of thereimbursement, and the costs associated with these reimbursements are reflected as a component of research and development expense in the statements ofoperations.The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605-28, Revenue Recognition – Milestone Method(“ASC 605-28”), established the milestone method as an acceptable method of revenue recognition for certain contingent event-based payments underresearch and development arrangements. Under the milestone method, a payment that is contingent upon the achievement of a substantive milestone isrecognized in its entirety in the period in which the milestone is achieved. A milestone is an event (1) that can be achieved based in whole or in part on eitherthe Company’s performance or on the occurrence of a specific outcome resulting from the Company’s performance, (2) for which there is substantiveuncertainty at the date the arrangement is entered into that the event will be achieved, and (3) that would result in additional payments being due to theCompany. The determination that a milestone is substantive is subject to management’s judgment and is made at the inception of the arrangement.Milestones are considered substantive when the consideration earned from the achievement of the milestone is (a) commensurate with either the Company’sperformance to achieve the milestone or the enhancement of value of the item delivered as a result of a specific outcome resulting from the Company’sperformance to achieve the milestone, (b) relates solely to past performance, and (c) is reasonable relative to all deliverables and payment terms in thearrangement.Other contingent event-based payments received for which payment is either contingent solely upon the passage of time or the results of a collaborativepartner’s performance are not considered milestones under ASC 605-28. In accordance with ASC Topic 605-25, Revenue Recognition – Multiple-ElementArrangements (“ASC 605-25”), such payments will be recognized as revenue when all of the following criteria are met: persuasive evidence of anarrangement exists, delivery has occurred or services have been rendered, price is fixed or determinable and collectability is reasonably assured. Revenuesrecognized for royalty payments, if any, are based upon actual net sales of the licensed compounds, as provided by the collaboration arrangement, in theperiod the sales occur. Any amounts received prior to satisfying the Company’s revenue recognition criteria are recorded as deferred revenue on its balancesheets.Research and Development ExpensesAll costs of research and development are expensed in the period incurred. Research and development costs primarily consist of fees paid to clinical researchorganizations (“CROs”) and clinical trial sites, employee and consultant related expenses, which include salaries, benefits and stock-based compensation forresearch and development personnel, external research and development expenses incurred pursuant to agreements with third-party manufacturingorganizations, facilities costs, travel costs, dues and subscriptions, depreciation and materials used in preclinical studies, clinical trials and research anddevelopment.F-8Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Company estimates its preclinical study and clinical trial expenses based on the services it received pursuant to contracts with research institutions andCROs that conduct and manage preclinical studies and clinical trials on the Company’s behalf. Clinical trial-related contracts vary significantly in length,and may be for a fixed amount, based on milestones or deliverables, a variable amount based on actual costs incurred, capped at a certain limit, or for acombination of these elements. The Company accrues service fees based on work performed, which relies on estimates of total costs incurred based onmilestones achieved, patient enrollment and other events. The majority of the Company’s service providers invoice the Company in arrears, and to the extentthat amounts invoiced differ from its estimates of expenses incurred, the Company accrues for additional costs. The financial terms of these agreements varyfrom contract to contract and may result in uneven expenses and payment flows. Preclinical study and clinical trial expenses include: ·fees paid to CROs, consultants and laboratories in connection with preclinical studies; ·fees paid to CROs, clinical trial sites, investigators and consultants in connection with clinical trials; and ·fees paid to contract manufacturers and service providers in connection with the production, testing and packaging of active pharmaceuticalingredients and drug materials for preclinical studies and clinical trials.Payments under some of these agreements depend on factors such as the milestones accomplished, including enrollment of certain numbers of patients, siteinitiation and the completion of clinical trial milestones. To date, the Company has not experienced any events requiring it to make material adjustments toits accruals for service fees. If the Company does not identify costs that it has begun to incur or if it underestimates or overestimates the level of servicesperformed or the costs of these services, its actual expenses could differ from its estimates which could materially affect its results of operations. Adjustmentsto the Company’s accruals are recorded as changes in estimates become evident. Furthermore, based on amounts invoiced to the Company by its serviceproviders, the Company may also record payments made to those providers as prepaid expenses that will be recognized as expense in future periods asservices are rendered.The Company’s historical research and development expenses primarily related to obtaining the option to license compounds and related intellectualproperty rights from Ligand. In May 2014, the Company entered into a master license agreement with Ligand, as amended (the “Master License Agreement”),pursuant to which it acquired certain rights to a number of research and development programs from Ligand. In doing so, the Company updated its policy onresearch and development to include the purchase of rights to intangible assets. In accordance with ASC Topic 730, Research and Development, intangibleassets that are acquired and have an alternative future use, as defined, should be capitalized and reported as an intangible asset; however, the cost of acquiredintangible assets that do not have alternative future uses should be reported as research and development expense as incurred. The Company notes thatintangible assets acquired that are in the preclinical or clinical stages of development when acquired, and not approved by the U.S. Food and DrugAdministration, are deemed to have not satisfied the definition of having an alternative future use, as defined. Accordingly, assets acquired in the preclinicaland clinical stages of development were expensed as incurred in the Company’s statement of operations.Patent CostsCosts related to filing and pursuing patent applications are expensed as incurred to general and administrative expense, as recoverability of suchexpenditures is uncertain.Stock-Based CompensationThe Company generally uses the straight-line or graded vesting method to allocate compensation cost to reporting periods over each optionee’s requisiteservice period, which is generally the vesting period, and estimates the fair value of stock-based awards or restricted stock units to employees and directorsusing the Black-Scholes option-valuation model. For options with a graded vesting schedule, the Company uses the graded vesting schedule to allocatecompensation cost to reporting periods. The Black-Scholes model requires the input of subjective assumptions, including volatility, the expected term andthe fair value of the underlying common stock on the date of grant, among other inputs. Stock options granted to non-employees are accounted for using thefair value approach. Stock options granted to non-employees are subject to periodic revaluation over their vesting terms. For restricted stock and restrictedstock unit awards, the Company generally uses the straight-line or graded vesting method to allocate compensation cost to reporting periods over theholder’s requisite service period, which is generally the vesting period, and uses the fair value at grant date to value the awards. For restricted stock that vestsupon the satisfaction of certain performance conditions, the Company recognizes stock-based compensation expense when it becomes probable that theperformance conditions will be met. At the point that it becomes probable that the performance conditions will be met, the Company will record a cumulativecatchup of the expense from the grant date to the current date, and the Company will then amortize the remainder of the expense over the remaining serviceperiod.F-9Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Prior to the IPO, the Company accounted for stock-based compensation by measuring and recognizing compensation expense for all stock-based paymentsmade to employees and directors based on estimated award date fair values, which estimates were highly complex and subjective in nature. The Companyused the straight-line or graded vesting method to allocate compensation cost to reporting periods over each restricted award’s requisite service period, whichwas generally the vesting period, and estimated the fair value of restricted stock-based awards to employees and consultants using a Monte Carlo marketapproach simulation method and performed an allocation of value to common stock based on the estimated time to a liquidity event. In addition, theCompany accounted for performance-based restricted stock awards to employees by determining the fair value of the restricted stock award at the date ofissuance by using the Probability Weighted Expected Return Method (“PWERM”) and then assessing at each balance sheet date the probability of theperformance criteria being met. If the probability of achieving the criteria was deemed less-than-probable, then no expense was recorded. At the point wherethe criteria were deemed probable of being met, then the Company began recording stock-based compensation with a cumulative catch-up expense in theperiod first recognized and then on a straight-line basis over the remaining period for which the performance criteria were expected to be completed.Income TaxesThe Company accounts for its income taxes using the liability method whereby deferred tax assets and liabilities are determined based on temporarydifferences between the basis used for financial reporting and income tax reporting purposes. Deferred income taxes are provided based on the enacted taxrates in effect at the time such temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it is more likely thannot that the Company will not realize those tax assets through future operations.ASC Topic 740-10, Income Taxes, clarifies the accounting for uncertainty in income taxes recognized in the Company’s financial statements in accordancewith generally accepted accounting principles. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. Income taxpositions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which thatthreshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first subsequentfinancial reporting period in which that threshold is no longer met.The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.Net Loss per Common ShareBasic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common sharesoutstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing the net loss attributableto common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stockmethod. For purposes of this calculation, the Company currently does not have any deemed common share equivalents; therefore, its basic and diluted netloss per share calculations are the same.The following table presents the computation of basic and diluted net loss per common share: Year Ended December 31, 2015 2014 Historical net loss per share Numerator Net loss attributable to common stockholders $(23,403,988) $(21,884,183)Denominator Weighted-average common shares outstanding 8,514,155 5,860,274 Less: Weighted-average shares subject to repurchase (2,158,286) (1,672,859)Denominator for basic and diluted net loss per share 6,355,869 4,187,415 Basic and diluted net loss per share $(3.68) $(5.23) F-10Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Potentially dilutive securities that are not included in the calculation of diluted net loss per share because their effect is anti-dilutive are as follows (incommon equivalent shares): Year Ended December 31, 2015 2014 Common stock warrants 82,500 — Restricted stock units 75,750 — Common stock subject to repurchase 667,963 2,018,754 Common stock options 365,394 — Shares issuable upon conversion of debt 670,902 695,733 1,862,509 2,714,487 SegmentsThe Company operates in only one segment. Management uses cash flows as the primary measure to manage its business and does not segment its businessfor internal reporting or decision making purposes.Recent Accounting PronouncementsIn August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a GoingConcern (“ASU 2014-15”). ASU 2014-15 provides guidance on presentation of management’s plans, when conditions or events, considered in the aggregate,raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Thisguidance is intended to mitigate those conditions or events that will alleviate substantial doubt about the entity’s ability to continue as a going concern.ASU 2014-15 is effective for fiscal years ending after December 15, 2016. The adoption of ASU 2014-15 is not expected to have a material impact on theCompany’s financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-9, Revenue from Contracts with Customers (“ASU 2014-9”), which provides guidancefor revenue recognition. The core principle of ASU 2014-9 is that a company will recognize revenue when it transfers promised goods or services tocustomers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The newguidance initially was effective for the Company beginning January 1, 2017, but on July 9, 2015 the FASB deferred the effective date and, as a result, thenew guidance is effective for the Company beginning January 1, 2018. Companies may adopt the new revenue standard as of the original effective date. TheCompany is currently evaluating the method of adoption and the potential impact this standard will have on its financial statements. In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes(“ASU 2015-17”). To simplify the presentation of deferred income taxes, the amendments in ASU 2015-17 require that deferred income tax liabilities andassets be classified as noncurrent in a classified statement of financial position. The amendment is effective for fiscal years, and interim periods within thosefiscal years, beginning after December 15, 2016. The adoption of ASU 2015-17 is not expected to have a material impact on the Company’s financialstatements. 2.Investments in Marketable SecuritiesThe Company’s investment strategy is focused on capital preservation. The Company invests in instruments that meet the credit quality standards outlined inthe Company’s investment policy. This policy also limits the amount of credit exposure to any one issue or type of instrument. The Company did not haveany investments classified as available-for-sale as of December 31, 2014. As of December 31, 2015, the Company’s investments were in money market funds,certificates of deposit and corporate debt securities. There were no sales of available-for-sale securities during the year ended December 31, 2015.F-11Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Investments classified as available-for-sale as of December 31, 2015 consisted of the following: AmortizedCost GrossUnrealizedGains (1) GrossUnrealizedLosses (1) AggregateEstimatedFair Value Certificates of deposit (2) $5,851,343 $— $— $5,851,343 Corporate debt securities (2) 7,491,526 — (7,370) 7,484,156 $13,342,869 $— $(7,370) $13,335,499 (1)Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss. At December 31, 2015, there were 14securities in an unrealized loss position. These unrealized losses were less than $2,000 individually and $8,000 in the aggregate. These securities havenot been in a continuous unrealized loss position for more than 12 months. The Company does not intend to sell these investments and it is not morelikely than not that the Company will be required to sell these investments before recovery of their amortized cost basis which may be at maturity. TheCompany reviews its investments to identify and evaluate investments that have an indication of possible other-than-temporary impairment. Factorsconsidered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the costbasis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold the investment for a period of timesufficient to allow for any anticipated recovery in market value.(2)At December 31, 2015, none of these securities were classified as cash and cash equivalents on the Company’s balance sheet and none of thesesecurities were scheduled to mature outside of one year. 3.Fair Value of Financial InstrumentsThe Company’s financial instruments consist of cash and cash equivalents, investments, accounts payable, accrued license fees, debt and its related debtconversion feature liability. The carrying amounts reported in the accompanying balance sheets for cash and cash equivalents and accounts payableapproximate fair value because of the short-term maturity of those instruments. Fair value measurements are classified and disclosed in one of the followingthree categories:Level 1 —Quoted prices in active markets for identical assets or liabilities.Level 2 —Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities;quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially thefull term of the assets or liabilities.Level 3 —Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets orliabilities.As of December 31, 2015, all of the Company’s financial assets that were subject to fair value measurements were valued using observable inputs. TheCompany’s financial assets valued based on Level 1 inputs consist of money market funds and certificates of deposit. The Company’s financial assets valuedbased on Level 2 inputs consist of corporate debt securities, which consist of investments in highly-rated investment-grade corporations. The Company didnot have any assets or liabilities categorized as Level 1 or Level 2 in the fair value hierarchy as of December 31, 2014.The Company’s financial liabilities that were subject to fair value measurements consist of accrued license fees and debt conversion features that have beenrecorded as liabilities based on Level 3 unobservable inputs.The fair value of the debt conversion feature, long-term as of December 31, 2015 required management to estimate fair value based on assumed timing ofconversion and an assumed annual discount rate. Alternate probabilities would have resulted in increases or decreases in the fair value of the debt conversionfeature liabilities.As of December 31, 2014, the Company’s accrued license fees have been recorded based on “Level 3” fair value inputs, which consist of unobservable inputsand generally reflect management’s estimate of assumptions that market participants would use in pricing the assets. The fair value of the debt conversionfeature liability, current at December 31, 2014 required management to make assumptions about the occurrence of an equity financing resulting in netproceeds of at least $5,000,000 and the outstanding convertible promissory notes issued by the Company from September 2012 through June 2013 (the“Convertible Notes”) converting based on the applicable conversion terms.F-12Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The fair value of the debt conversion feature, long-term at December 31, 2014 required management to make assumptions about the probability of theoccurrence of the earlier of a private equity financing with aggregate net proceeds to the Company of at least $20,000,000 or the Company’s initial publicoffering, and the Ligand Note being converted based on the applicable conversion terms.The fair values of the Company’s financial instruments are presented below: Fair Value Measurements at December 31, 2015 Total Level 1 Level 2 Level 3 Financial assets carried at fair value: Cash equivalents: Money market funds $548,872 $548,872 $— $— Short-term investments Certificates of deposit 5,851,343 5,851,343 — — Corporate debt securities, available-for-sale 7,484,156 — 7,484,156 — Total financial assets $13,884,371 $6,400,215 $7,484,156 $— Financial liabilities carried at fair value: Debt conversion feature - long-term $2,370,903 $— $— $2,370,903 Total financial liabilities $2,370,903 $— $— $2,370,903 Fair Value Measurements at December 31, 2014 Total Level 1 Level 2 Level 3 Financial liabilities carried at fair value: Accrued license fees $19,865,863 $— $— $19,865,863 Debt conversion feature – current 58,742 — — 58,742 Debt conversion feature – long-term 1,390,469 — — 1,390,469 Total financial liabilities $21,315,074 $— $— $21,315,074 The table below presents a summary of changes in the Company’s accrued license fees and debt conversion feature liability measured at fair value on arecurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2015 and 2014: Year Ended December 31, 2015 2014 Accrued license fees: Beginning balance $19,865,863 $— Additions — 21,687,576 Adjustments resulting from changes in fair value recognized in earnings 9,381,848 (1,821,713)Issuance of shares of common stock (29,247,711) — Ending balance $— $19,865,863 Debt conversion feature: Beginning balance $1,449,211 $71,655 Additions — 1,768,319 Adjustments resulting from changes in fair value recognized in earnings 1,043,478 (390,763)Issuance of shares of common stock (121,786) — Ending balance $2,370,903 $1,449,211 The following table sets forth the Company’s valuation techniques and significant unobservable inputs used to determine fair value for significant Level 3liabilities: F-13Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Fair Value Significant Assets Liabilities Valuation Technique(s) Unobservable Input RangeAccrued license fees: December 31, 2014 $— $19,865,863 Probability weightedexpected return model Probability weightings assigned toeach scenario 30% to 40% Time assumptions to liquidationevents 4/30/2015-3/31/2017 Discount rates 12% to 60%Debt conversion feature liability December 31, 2015 $— $2,370,903 Discounted cashflow model Timing of the events 5/21/2016 Probabilities of Occurrence 100% Discount rate 37.5%December 31, 2014 $— $1,449,211 Discounted cashflow model Timing of the events 3/31/2015 to6/30/2015 Probabilities of Occurrence 30% to 40% Discount rate 37.5% Level 3 Fair Value SensitivityAccrued license feesFor accrued license fees, generally increases (decreases) in the probability weightings assigned to each scenario would result in increases (decreases) to thefair value. In general, an increase (decrease) in discount rate tends to result in (decreases) increases to fair value.Debt conversion featuresThe fair value of the debt conversion feature liabilities includes the estimated timing of the events as well as the related probabilities of occurrence. Theshorter/longer the period estimated to the events, the higher/lower the value of the debt conversion feature liabilities. The higher/lower the probability ofoccurrence, the higher/lower the value of the debt conversion feature liability. 4.Agreements with Ligand Pharmaceuticals IncorporatedIn May 2014, the Company entered into a master license agreement with Ligand (the “Master License Agreement”), pursuant to which, among other things,the Company acquired the rights to a number of research and development programs under patents related to the Company’s VK5211, VK2809, VK0214,VK0612, EPOR and DGAT-1 programs, related know-how controlled by Ligand and physical quantities of VK5211, VK2809, VK0214, VK0612, EPOR andDGAT-1 compounds.Pursuant to the terms of the Master License Agreement, the Company has the exclusive right and sole responsibility and decision-making authority forresearching and developing any pharmaceutical products that contain or comprise one or any combination of the technology and compounds licensed fromLigand pursuant to the Master License Agreement (the “Licensed Products”). The Company also has the exclusive right and sole responsibility and decision-making authority to conduct all clinical trials and preclinical studies that the Company believes are appropriate to obtain the regulatory approvals necessaryfor commercialization of the Licensed Products, and the Company will own and maintain all regulatory filings and all regulatory approvals for the LicensedProducts. Additionally, pursuant to the terms of the Master License Agreement, the Company has the sole decision-making authority and responsibility andthe exclusive right to commercialize any of the Licensed Products, either by itself or, in certain circumstances, through sublicensees selected by theCompany. The Company also has the exclusive right to manufacture or have manufactured any Licensed Product itself or, in certain circumstances, throughsublicensees or third parties selected by the Company. The Company will own any intellectual property that it develops in connection with the licensegranted under the Master License Agreement.As partial consideration for the grant of the rights and licenses to the Company under the Master License Agreement, the Company issued to Ligand at theclosing of the IPO 3,655,964 shares of its common stock having an estimated aggregate value of $29.2 million. Furthermore, as partial consideration for thegrant of the rights and licenses to the Company under the Master License Agreement the Company entered into the Loan and Security Agreement withLigand (as discussed below).F-14Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. As further partial consideration for the grant of the rights and licenses to the Company by Ligand under the Master License Agreement, the Company hasagreed to pay to Ligand certain one-time, non-refundable milestone payments in connection with the Licensed Products of up to $1.54 billion in theaggregate upon the achievement of certain development, regulatory and sales milestones. The Company will also pay to Ligand royalties on aggregateannual worldwide net sales of Licensed Products by the Company, its affiliates and its sublicensees at tiered percentage rates from the low-to-upper singledigits based upon net sales.The term of the Master License Agreement will continue unless the agreement is terminated by the Company or Ligand, and each of the Company andLigand have the right to terminate the Master License Agreement in certain circumstances, including, without limitation, if the other party defaults on certainof its obligations under the Master License Agreement.Ligand has the right to terminate the Master License Agreement under certain circumstances, including, but not limited to: (1) in the event of the Company’sinsolvency or bankruptcy, (2) if the Company does not pay an undisputed amount owing under the Master License Agreement when due and fails to curesuch default within a specified period of time, or (3) if the Company defaults on certain of its material and substantial obligations and fails to cure the defaultwithin a specified period of time. The Company has the right to terminate the Master License Agreement under certain circumstances, including, but notlimited to: (i) if Ligand does not pay an undisputed amount owing under the Master License Agreement when due and fails to cure such default within aspecified period of time, or (ii) if Ligand defaults on certain of its material and substantial obligations and fails to cure the default within a specified period oftime. In addition, provisions of the Master License Agreement can be terminated on a licensed program-by-program basis under certain circumstances. In theevent that the Master License Agreement is terminated in its entirety or with respect to a specific licensed program for any reason: (A) all licenses granted tothe Company under the Master License Agreement (or with respect to the specific licensed program) will terminate and the Company will, upon Ligand’srequest (subject to Ligand assuming legal responsibility for any clinical trials of the Licensed Products then ongoing), assign and transfer to Ligand (or tosuch transferee as Ligand may direct), at no cost to Ligand, all regulatory documentation and all regulatory approvals prepared or obtained by the Companyor on its behalf related to the Licensed Products (or those related to the specific licensed program), or, if Ligand does not make such a request, the Companywill wind down any ongoing clinical trials with respect to the Licensed Products (or those related to the specific licensed program) at no cost to Ligand;(B) the Company will, upon Ligand’s request, sell and transfer to Ligand (or to such transferee as Ligand may direct), at a price equal to 125% of theCompany’s costs of goods, any and all chemical, biological or physical materials relating to or comprising the Licensed Products (or those related to thespecific licensed program); (C) the Company will have, for a period of six months following termination, the right to sell on the normal business terms inexistence before such termination any finished commercial inventory of Licensed Products (or those related to the specific licensed program) which remainson hand, so long as the Company pays to Ligand the applicable royalties and sales milestones; (D) Ligand has the right to require the Company to assign toLigand the trademarks owned by the Company relating to the Licensed Products (or those related to the specific licensed program); and (E) the Company willgrant to Ligand a non-exclusive, worldwide, royalty-bearing sublicensable license under any patent rights and know-how controlled by the Company to theextent necessary to make, have made, import, use, offer to sell and sell the Licensed Products (or those related to the specific licensed program) anywhere inthe world at a royalty rate in the low single digits.Under the Master License Agreement, the Company has agreed to indemnify Ligand for claims relating to the performance of the Company’s obligationsunder the Master License Agreement, any breach of the representations and warranties made by the Company under the Master License Agreement, clinicaltrials conducted by the Company and the research, development and commercialization of the Licensed Products by the Company and its affiliates,sublicensees, distributors and agents. In addition, Ligand has agreed to indemnify the Company for claims relating to the performance of its obligationsunder the Master License Agreement, its breach of representations and warranties under the agreement and its research and development of the licensedcompounds before the effective date of the Master License Agreement. Each party’s indemnification obligations will not apply to the extent the claims resultfrom the negligence or willful misconduct of the indemnified party or any of its employees, agents, officers or directors or from the indemnified party’s breachof its representations or warranties set forth in the Master License Agreement.On September 6, 2014, the Company and Ligand entered into an amendment to the Master License Agreement pursuant to which the parties agreed to certainmodifications to the calculations used to determine the number of shares issuable to Ligand pursuant to the Master License Agreement. As a result of themodification, the Company incurred an incremental charge to research and development expense of $517,960 and a corresponding increase in the accruedlicense fees. In connection with entering into the Master License Agreement with Ligand, the Company entered into a loan and security agreement withLigand, dated May 21, 2014 (the “Loan and Security Agreement”), pursuant to which, among other things, Ligand agreed to provide the Company with loansin the aggregate amount of up to $2.5 million.In May 2014, the Company also entered into a Management Rights Letter with Ligand that requires the Company to expand the size of the Company’s boardof directors to create an additional directorship on the Company’s board of directors and to allow Ligand to appoint an individual to fill the new directorship.The Management Rights Letter will terminate upon the earliest to occur of the liquidation or indefinite cessation of the Company’s business operations, theexecution by the Company of a general assignment forF-15Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. the benefit of creditors or the appointment of a receiver or trustee to take possession of the Company’s property and assets, an acquisition of the Company bymeans of any transaction (including, without limitation, any reorganization, merger or consolidation) if the Company’s stockholders of record as constitutedimmediately prior to the transaction hold less than 50% of the voting power of the surviving or acquiring entity, or following the issuance of the Company’ssecurities pursuant to the Master License Agreement, the date that Ligand ceases to beneficially own at least 7.5% of the Company’s outstanding votingstock, or the date of May 21, 2024.The Company also entered into a Registration Rights Agreement with Ligand in May 2014 for which the Company granted certain registration rights toLigand with respect to the securities of the Company issued to Ligand pursuant to the Master License Agreement and the Ligand Note (collectively, the“Viking Securities”), the shares of the Company’s common stock issued or issuable upon conversion of the Viking Securities, if applicable, the shares of theCompany’s common stock issued as a dividend or other distribution with respect to, in exchange for or in replacement of the Viking Securities and the sharesof the Company’s capital stock issued upon conversion of the Ligand Note, or collectively, the Registrable Securities.Under the Registration Rights Agreement, the Company has agreed to file with the SEC, by no later than the first date on which the lock-up requested by theunderwriters for the Company’s initial public offering expires or lapses with respect to Ligand (or the first business day thereafter), a registration statement onForm S-1 under the Securities Act that covers the resale of the full amount of the Registrable Securities. The Company has agreed to use commerciallyreasonable efforts to have the Registration Statement declared effective by the SEC as soon as practically possible after it is filed with the SEC. There arecertain cash payment penalties that the Company may need to pay to Ligand if the Company does not meet certain timelines with the SEC. The Company hasalso agreed to use commercially reasonable efforts to keep each Registration Statement filed pursuant to the Registration Rights Agreement effective forcertain periods of time.The Registration Rights Agreement was amended on January 22, 2016 (see Note 13 for a description of the amendments to the agreement).In May 2014, the Company entered into a Sublease Agreement with Ligand, as sublandlord, for approximately 5,851 square feet of individual and sharedspace within the building located at 11119 North Torrey Pines, San Diego, California 92037. Under the Sublease Agreement, the Company was required,among other things, to pay base rent in the amount of approximately $13,500 per month through December 31, 2014. The sublease commenced on May 21,2014 and expired on December 31, 2014. 5.Accrued License Fees and License Fees ExpenseAs partial consideration for the grant of the rights and licenses to the Company under the Master License Agreement, the Company issued to Ligand at theclosing of the Company’s IPO 3,655,964 shares of its common stock having an estimated aggregate value of $29.2 million. Prior to this event, the Companyhad to determine how to account for the potential issuance of these shares to Ligand in accordance with the Master License Agreement. Under the MasterLicense Agreement, in the event the Company consummated a firmly underwritten public offering pursuant to a Registration Statement on Form S-1 or anysuccessor form (an “Initial Public Offering”), the Company would issue to Ligand at the closing of the Initial Public Offering a number of shares of itscommon stock having an estimated aggregate value of $29.0 million, subject to adjustment based on the deemed value of the Company as of immediatelyprior to the Initial Public Offering and the per share price at which shares of its common stock are sold in the Initial Public Offering. In the event the Companyconsummated a private financing of its equity securities (a “Private Financing”) prior to an Initial Public Offering, Ligand had the option to receive a numberof shares of the same class and type of securities issued and sold by the Company in the Private Financing having an estimated aggregate value of$29.0 million, subject to adjustment based on the deemed value of the Company as of immediately prior to the Private Financing and the per share price atwhich shares of the Company’s common stock are sold in the Private Financing, or, in lieu of receiving the same class and type of shares issued in the PrivateFinancing, to defer its right to receive equity in the Company until an Initial Public Offering or subsequent private financing of the Company.Prior to the IPO, the Company reported the expected issuance of stock to Ligand under the Master License Agreement as a liability in accordance with ASCTopic 480, Distinguishing Liabilities from Equity, as it represents a conditional obligation that the Company must settle by issuing a variable number ofshares of its common stock. The Company measured, at each reporting date until settled, the estimated amount of cash that would be paid if settlementoccurred on the reporting date, with any changes in that fair market value reported as other expense during the period of change. In accordance with thisguidance, the Company determined its enterprise values as of May 21, 2014, the date the Master License Agreement was entered into, December 31, 2014, itsmost recent fiscal year end, and as of May 4, 2015, the closing date of the Company’s IPO.The fair value of the assets was determined using a PWERM, which incorporated relevant events and expected exit scenarios for the Company. The exitscenarios included an initial public offering, a merger or acquisition, which included an assumption of a PrivateF-16Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Financing, and a scenario in which neither an initial public offering nor the merger or acquisition occurred. The enterprise value was based primarily on themarket approach and probability-weighted expected exit values for the Company under each scenario. As of the execution of the Master License Agreement,the Company ascribed a percentage likelihood to each expected exit scenario, and each was less than 50%. However, since Ligand was entitled to receiveshares under the Master License Agreement if either of these IPO or merger or acquisition scenarios were to occur, and the sum of the percentage likelihoodsfor the two exceeded 50%, the Company determined that a payout of shares was probable. Further, since the valuations would determine a value, theCompany determined that the liability under the Master License Agreement should be reported as of the execution of the Master License Agreement. Similarpublicly traded companies and merger or acquisition transactions were utilized as part of the market approach, and appropriate metrics were applied to theCompany’s numbers along with qualitative comparable assessments. The Company utilized a Monte Carlo simulation method to determine the weightedaverage per share value as of the acquisition date and in accordance with the Master License Agreement, utilized that per share value to calculate theestimated license fee liability as of May 21, 2014 to be $21,169,616. In addition, the Company incurred an incremental charge of $517,960 on September 6,2014 related to the license fee liability pursuant to the amendment to the Master License Agreement.Having determined the amount of the liability to be reported, the Company then evaluated whether to report the offset as an asset or as an expense. Inaccordance with ASC Topic 730, Research and Development, intangible assets that are acquired and have an alternative future use, as defined, should becapitalized and reported as an intangible asset; however, the cost of acquired intangible assets that do not have alternative future uses should be reported asresearch and development expense as incurred. The Company noted that the assets, the rights for which were acquired pursuant to the Master LicenseAgreement, are in the preclinical and clinical stages, and not FDA approved. The Company has therefore interpreted the guidance to say that since theseassets are not commercially readily saleable, i.e., they are still in preclinical and clinical trials, that they do not satisfy the definition of having an alternativefuture use, as defined. Accordingly, the Company recorded the offset to the license fee liability as research and development expense in May 2014.The Company revalued the license fee liability as of December 31, 2014 using consistent methodology to that used for the May valuation; however, giventhe Company’s recent refocus to certain other programs as well as some deemed market risks as of December 31, 2014, it revalued the license fee liabilitybased upon these new programs; VK5211 to be used in hip fractures and VK0214 to be used in X-ALD; and, based upon their updated fair value, reported adecrease in the license fee liability and other expense for the year ended December 31, 2014 in the amount of $1,821,713, to reduce the license fee liability to$19,865,863 as of December 31, 2014. During 2015, the Company continued to revalue the license fee liability under these new assumptions with anyincreases in that liability being recorded as other expense. On May 4, 2015, upon the closing of the Company’s IPO, the license fee liability was determinedto be valued at $29,247,711 and the incremental amount of $9,381,848 was recorded as additional Other expense in the Company’s Statement of Operationsfor the period from January 1, 2015 through May 4, 2015. In accordance with the Master License Agreement, the Company issued 3,655,964 shares of itscommon stock having an estimated aggregate value equivalent to the May 4, 2015 license fee liability of $29,247,711 and offset this liability against itscommon stock and additional paid-in-capital. 6.Convertible Notes PayableConvertible notes payable consisted of the following at: December 31, 2015 2014 Current maturities: Various convertible notes payable issued during 2013 with interest rates ranging from 2.16% to 4.68% annually, due during 2015 $— $310,350 Discount on notes payable, current — (6,076)Convertible notes payable, current portion (net of discount) $— $304,274 Long-term maturities: Convertible note payable issued during 2014 to Ligand as part of the Master License Agreement with a 5% annual interest rate, due during 2016 (subsequently amended to 2017) $2,500,000 $2,500,000 Discount on notes payable, long-term (348,460) (1,235,886)Convertible notes payable, long-term (net of discount) $2,151,540 $1,264,114F-17Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In September 2012, the Company’s board of directors authorized the Company to issue and sell up to an aggregate of $1.0 million in convertible promissorynotes (the “Notes”) to accredited investors in one or more closings through September 2014 (the “Note Authorization”). The notes bore interest at a rate equalto the lesser of the short-term monthly applicable federal rate as published by the Internal Revenue Service or the maximum rate permissible by law. Interestunder the Notes is due and payable at maturity. Unless repaid in full, amended or converted in full, each Note matured two years from its date of purchase. Inthe event that any principal amount due under the Notes was not paid in full by the maturity date, such unpaid principal amount would bear interest at thelesser of 2% or the maximum rate permissible by law.If, prior to maturity of the Notes, the Company issues capital stock resulting in net proceeds of at least $5.0 million (a “Qualifying Financing”), the Notes willconvert into shares of the capital stock issued in the Qualifying Financing. The number of shares issued upon conversion will be equal to the quotientobtained by dividing the then-outstanding loan balance by either 70% or 75%, as applicable, of the lowest purchase price paid per share paid by anotherinvestor in the Qualifying Financing. If, prior to the maturity of the Notes, the Company issues preferred stock in a financing that does not qualify as aQualifying Financing (a “Non-Qualifying Financing”), the holders of the Notes will have the option of converting their Notes into shares of the preferredstock issued in the Non-Qualifying Financing on the same terms as the investors in the Non-Qualifying Financing. In the event the Company undergoes achange in control, as defined in the Notes, prior to the maturity date and repayment of the Notes, the holders of the Notes will have the option to either(1) convert the loan balance into shares of the Company’s common stock in an amount equal to the ratio of (a) the then-outstanding loan balance over (b) theratio of $7,500,000 divided by the number of shares of capital stock of the Company outstanding immediately prior to the change in control, or (2) demandimmediate repayment of an amount equal to 125% of the then-outstanding loan balance. If the Notes are still outstanding at their maturity date, the holders ofthe Notes have the option to either demand immediate repayment of all outstanding principal and interest or to convert the loan balance into shares of theCompany’s common stock in an amount equal to the ratio of the then-outstanding loan balance over the ratio of $7,500,000 divided by the number of sharesof capital stock of the Company outstanding immediately prior to the maturity date.The debt conversion feature embedded in the Notes is accounted for under ASC Topic 815 – Derivatives and Hedging. At issuance, the fair value of the debtconversion feature totaled $8,286 on the Notes issued during 2012 and $42,747 on the Notes issued during 2013. The fair value of the debt conversionfeature was allocated from the gross proceeds of the Notes with the respective discount amortized to interest expense over the original term of the Notes usingthe effective interest method. The valuation of the bifurcated debt conversion feature was performed using Level 3 inputs, requiring the Company to makeassumptions about the probability of the occurrence of a Qualifying Financing and the Notes being converted based on the applicable conversion terms.Alternative probabilities would have resulted in increases or decreases in the value of the debt conversion feature. The Company is required to mark tomarket the value of the conversion feature liability. Therefore, as of December 31, 2014, the Company revalued the fair value of the debt conversion featurefor each tranche and determined the conversion feature liability to be $58,742. The Company amortized $25,529 of the discount in 2014.Pursuant to the terms of the Note Authorization, from September 2012 through June 2013, the Company issued a total aggregate principal amount of$310,350 in Notes and recorded interest expense at interest rates ranging from 3.00% to 4.68% on an annual basis of $12,104 for the year endedDecember 31, 2014. The cumulative accrued interest payable on the Notes as of December 31, 2014 was $18,611.In accordance with the provisions of the convertible notes, on May 4, 2015, at the closing of the Company’s IPO, the Company converted $310,350 ofprincipal amounts owed plus $24,276 of accrued but unpaid interest as of that date on the Notes into 57,046 shares of the Company’s common stock. TheCompany eliminated the notes payable and recorded the offsets to common stock and additional paid-in-capital.The Company entered into a Loan and Security Agreement with Ligand on May 21, 2014, pursuant to which, among other things, Ligand agreed to providethe Company with loans in the aggregate amount of up to $2.5 million. Pursuant to the Loan and Security Agreement, Ligand initially loaned $1.0 million tothe Company on May 27, 2014, and additional amounts of $250,000 to the Company each month from June 2014 through and including November 2014 fora total of $2.5 million. The principal amount outstanding under the loans accrue interest at a fixed per annum rate equal to the lesser of 5% and the maximuminterest rate permitted by law. In the event the Company defaults under the loans, the loans will accrue interest at a fixed per annum rate equal to the lesser of8% and the maximum interest rate permitted by law. The loans are and will be evidenced by a Secured Convertible Promissory Note (the “Ligand Note”).Pursuant to the terms of the Loan and Security Agreement and the Ligand Note, the loans will become due and payable upon the written demand of Ligand atany time after the earlier to occur of an event of default under the Loan and Security Agreement or the Ligand Note, and May 21, 2016, unless the loans areconverted into equity prior to such time. In addition, under the Loan and Security Agreement, the Company may not declare or pay dividends in respect of itscommon stock without Ligand’s prior written consent. Pursuant to the terms of the Loan and Security Agreement, the Company recorded interest expense of$58,611 during the year ended December 31, 2014, which remained payable as of December 31, 2014.F-18Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The debt conversion feature embedded in each tranche of the Ligand Note is accounted for under ASC Topic 815 – Derivatives and Hedging. At eachissuance date, the fair value of the debt conversion feature was determined. The fair value of the debt conversion feature was allocated from the grossproceeds of the Ligand Note with the respective discount amortized to interest expense over the original term of the Ligand Note using the effective interestmethod. The valuation of the bifurcated debt conversion feature was performed using Level 3 inputs, requiring the Company to make assumptions about theprobability of the occurrence of a private equity financing with aggregate net proceeds to the Company of at least $20,000,000 or the Company’s initialpublic offering and the Ligand Note being converted based on the applicable conversion terms. Alternative probabilities would have resulted in increases ordecreases in the value of the debt conversion feature. The Company is required to mark to market the value of the conversion feature liability. Therefore, as ofDecember 31, 2014, the Company revalued the fair value of the debt conversion feature for each tranche of the Note outstanding as of December 31, 2014,and determined the conversion feature liability to be $1,390,469. The Company amortized $532,433 of the discount during the year ended December 31,2014.On April 8, 2015, the Company and Ligand entered into a First Amendment to Loan and Security Agreement with Ligand (the “Loan Amendment”), pursuantto which the parties agreed to amend, among other things, the timing of Ligand’s conversion rights under the Secured Convertible Promissory Note issued toLigand on May 21, 2014 (the “Ligand Note”) following certain Company transactions. Under the terms of the Loan Amendment, following theconsummation of the earlier to occur of (1) a bona fide capital financing transaction or series of financing transactions with one or more financial non-strategic investors resulting in aggregate net proceeds to the Company of at least $20,000,000 and pursuant to which the Company issues shares of its equitysecurities, (2) a firmly underwritten public offering pursuant to the Securities Act of 1933, as amended, on Form S-1 or Form S-3, or any successor forms, or(3) May 4, 2016 (the one year anniversary of the closing of the IPO), Ligand may elect to convert the Ligand Note into shares of the Company’s commonstock and/or cash in an amount equal to 200% of the principal amount of the loan plus all accrued and previously unpaid interest thereon. Additionally,pursuant to the Loan Amendment, Ligand has agreed that it will not, until the earlier of (A) 270 days from the date of conversion of the Ligand Note or(B) April 28, 2016 (one year following the date of the prospectus filed with the SEC relating to the IPO), sell or otherwise transfer or dispose of the shares ofcommon stock issuable upon conversion of the Ligand Note.As of December 31, 2015, the Ligand Note was recorded at $2,500,000, and interest in the amount of $183,611 was payable on the Ligand Note. During theyear ended December 31, 2015, the Company also recorded $125,000 of interest expense, $887,426 of amortization of debt discount and $980,434 as otherexpense related to increases in the fair value of the debt conversion feature liability.In connection with the Loan and Security Agreement, the Company also granted Ligand a continuing security interest in all of its right, title and interest inand to its assets as collateral for the full, prompt, complete and final payment and performance when due of all obligations under the Loan and SecurityAgreement and the Ligand Note.A second amendment to the Loan and Security Agreement was entered into on January 22, 2016 (see Note 13). 7.Stockholders’ Equity (Deficit) Preferred Stock The Company is authorized to issue up to 10,000,000 shares of $0.00001 par value preferred stock, with no shares outstanding as of December 31, 2015 and2014. The Board of Directors is authorized to designate the terms and conditions of any preferred stock the company issues without further action by thecommon stockholders. Common Stock The Company is authorized to issue up to 300,000,000 shares of common stock, $0.00001 par value per share. On September 26, 2012, the Company issued4,750,000 shares of common stock to its founders for the contribution of certain intellectual property and assets having a deemed fair value of $0.01 pershare. The shares of common stock issued to the founders are subject to a repurchase feature whereby the Company can repurchase the stock if the applicablefounder’s arrangements with the Company are terminated. The repurchase feature lapses over time and the repurchase option immediately ceases upon theoccurrence of certain triggering events. The related expense is being charged over the requisite service period. At December 31, 2015, none of these shareswere subject to the repurchase option. See below regarding the repurchase of certain of these shares.During fiscal year 2013, the Company sold an additional 700,000 shares of its common stock to consultants. The purchase price of the shares of commonstock was $0.01, which approximated fair value. The Company received a total of $7 in cash and $6,993 in notes receivable as consideration for the issuanceof the 700,000 shares of common stock. The shares of common stock were subject toF-19Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. repurchase features whereby the Company can repurchase the shares from the consultants if their arrangements with the Company are terminated. Therepurchase features lapse over time. In June 2013, the Company exercised its right to repurchase 250,000 shares of its common stock issued earlier in 2013 inconnection with the termination of one of the consulting arrangements. The Company paid $3 in cash to refund the cash contributed by the consultant andeliminated the $2,497 note receivable issued by the consultant to the Company. In March 2014, the Company terminated another one of the consultingagreements. In conjunction with the termination of the consulting agreement, the Company exercised its right to repurchase 200,000 shares by repaying the$2 in cash contributed by the consultant and eliminating the $1,998 note receivable issued by the consultant to the Company. In May 2014, the Companyforgave the remaining notes receivable balance of $2,581, which included $2,498 of principal and $83 of interest from one of its consultants in considerationfor services rendered by the consultant. At December 31, 2015, there was $290 of total unrecognized compensation costs related to these shares, which areexpected to be recognized over a weighted-average period of 1.25 years. During the year ended December 31, 2015, the Company recorded stock-basedcompensation of $145 related to these share issuances.In connection with the preparation of the financial statements necessary for inclusion in a registration statement, in May 2014 the Company reassessed theestimated fair value of its common stock for financial reporting purposes. The Company reassessed the estimated fair value of its common stock for eachquarterly period from its inception on September 24, 2012 through December 31, 2013. Valuation analyses were performed as of September 26, 2012,April 15, 2013 and July 15, 2013 (the respective dates of stock activity noted above). The Company concluded that its shares of common stock as of eachsuch date had a fair value less than or equal to the then estimated fair value of common stock at the date of issuance. Therefore, no additional stock expensewas required to be expensed by the Company.In February 2014, the Company entered into a stock purchase agreement with one of its founders. The agreement provides for the purchase of 1,000,000shares of the Company’s common stock at a price per share of $0.01 in exchange for future services to be rendered to the Company as measured by certainperformance criteria. The shares are subject to a repurchase option and vest in two tranches of 500,000 shares each, upon achievement of the performancetarget or upon a triggering event as defined.To appropriately account for this stock purchase, the Company determined the fair value of the common stock on the date of purchase as well as thelikelihood of achievement of each of the performance conditions included in the agreement. The valuation methodology utilized in determining fair valuerelied on the PWERM, which incorporates relevant events and expected future exit scenarios for the Company. The exit scenarios included merger andacquisition and initial public offering scenarios. The enterprise value under each scenario was based primarily on the market approach and probability-weighted expected exit values for the Company under each scenario. Similar merger and acquisition transactions and publicly traded companies wereutilized within the market approach and appropriate metrics were applied to the Company along with qualitative comparable assessments. The indicatedvalue under the market approach was used as the starting aggregate value for the valuation of these performance-based shares. The Company utilized a MonteCarlo simulation method to determine the fair value of the performance-based shares as of the issuance date. The Monte Carlo simulation method takes intoconsideration the expected timing of the performance milestones, probability of achieving the milestones and estimated per share common stock prices atexpected vesting dates.The Company determined that the issuance in February 2014 had a deemed fair value lower than the reassessed fair value of the common stock on the date ofissuance based upon the PWERM. Since the stock issuance to the founder is tied to certain performance criteria, the Company reviewed the probability ofachieving such criteria at February 20, 2014 and December 31, 2014 and determined that it was not probable that the criteria would be met. Therefore, nocompensation expense was recorded for this issuance through December 31, 2014. The Company will continue to reassess at each reporting period whether itis probable that either of the two performance criteria will be met, and if and when either are deemed probable, the Company will begin to recordcompensation expense using the fair value to determine stock-based compensation expense in its financial statements over the period the Company estimatesthe performance criteria will actually be met. The Company determined that the fair value of the unrecognized expense was approximately $168,000 atFebruary 20, 2014, the grant date. In May 2015, the Company repurchased 633,810 of these shares at a purchase price of $0.00001 per share. In connectionwith the repurchase, the Company entered into an amendment to the stock purchase agreement to provide that the remaining 366,190 shares will continue tovest in two tranches of 183,095 shares each, upon achievement of the performance target or upon a triggering event as defined, with the pro rata fair value ofthe expense of $61,566 to be recognized. In October 2015, one of the two triggering events became probable of occurrence; therefore, for the year endedDecember 31, 2015, the Company recorded $18,407 of stock-based compensation expense, with the remaining expense relating to this event estimated to berecognized through April 2017.In June 2014, the Company entered into employment agreements with each of its five employees pursuant to which, among other things, each employeeagreed to be paid a lower salary during the period of time between the signing of his or her employment agreement and the date of the closing of theCompany’s IPO. In exchange for this agreement to receive a lower salary, the Company agreed to issue, on the date of the closing of the IPO, to each of theseemployees a certain amount of fully vested restricted stock equal to the quotient of (1) the product of 150% of the difference between the employee’s post-IPO salary and his or her pre-IPO salary multiplied by the number of days between the date of the closing of the IPO and the date of execution of theemployee’s employmentF-20Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. agreement, divided by (2) the product of 365 multiplied by the closing sales price of the Company’s common stock on the date of the closing of the IPO.Since the likelihood of an IPO was deemed to be less than probable as of December 31, 2014, the Company determined that it was not required to record theliability, which, as of December 31, 2014, would have been $520,476, with respect to the potential issuance of these shares of fully vested restricted stock asof December 31, 2014, as it was less than probable that the Company would be required to issue such shares of fully vested restricted stock. Upon the closingof the IPO in May 2015, the Company issued 56,997 shares, net of shares withheld for taxes, in accordance with these agreements.In September 2014, the Company entered into a stock repurchase agreement (the “Stock Repurchase Agreement”) with each of its existing stockholders.Pursuant to the Stock Repurchase Agreement, the Company agreed to repurchase prior to the completion of the IPO, on a pro rata basis from each of theholders of its outstanding common stock, shares of the Company’s common stock from these stockholders at a purchase price of $0.00001 per share. Thenumber of shares of common stock that the Company will repurchase pursuant to the Stock Repurchase Agreement and prior to the completion of the IPO isbased on a formula in accordance with the Stock Repurchase Agreement. In accordance with this agreement, on May 4, 2015, the Company repurchased anaggregate of 3,802,859 shares of its common stock from its stockholders at a price of $0.00001 per share for an aggregate purchase price of $38.On April 8, 2015, the Company entered into a Second Amendment to Master License Agreement with Ligand, pursuant to which the parties agreed to revise(1) the calculations used to determine the number of securities to be issued to Ligand upon the closing of the IPO, and (2) certain of the royalty percentagespayable by the Company to Ligand based on worldwide annual net sales of the products licensed under the Master License Agreement.Further, on April 8, 2015, the Company and Ligand entered into a First Amendment to Loan and Security Agreement with Ligand (the “Loan Amendment”),pursuant to which the parties agreed to amend, among other things, the timing of Ligand’s conversion rights under the Secured Convertible Promissory Noteissued to Ligand on May 21, 2014 (the “Ligand Note”) following certain Company transactions. Under the terms of the Loan Amendment, following theconsummation of the earlier to occur of (1) a bona fide capital financing transaction or series of financing transactions with one or more financial non-strategic investors resulting in aggregate net proceeds to the Company of at least $20,000,000 and pursuant to which the Company issues shares of its equitysecurities, (2) a firmly underwritten public offering pursuant to the Securities Act of 1933, as amended, on Form S-1 or Form S-3, or any successor forms, or(3) May 4, 2016 (the one year anniversary of the closing of the IPO), Ligand may elect to convert the Ligand Note into shares of the Company’s commonstock and/or cash in an amount equal to 200% of the principal amount of the loan plus all accrued and previously unpaid interest thereon. Additionally,pursuant to the Loan Amendment, Ligand has agreed that it will not, until the earlier of (A) 270 days from the date of conversion of the Ligand Note or(B) April 28, 2016 (one year following the date of the prospectus filed with the SEC relating to the IPO), sell or otherwise transfer or dispose of the shares ofcommon stock issuable upon conversion of the Ligand Note.On May 4, 2015, the Company completed the IPO pursuant to a Registration Statement on Form S-1 that was declared effective on April 28, 2015. In the IPO,the Company sold 3,000,000 shares of its common stock at an initial public offering price of $8.00 per share. The underwriters for the IPO had 30 days toexercise an over-allotment option to purchase up to an additional 450,000 shares at the initial public offering price, less the underwriting discount. Upon theclosing of the IPO, on May 4, 2015, the Company raised a total of $19,100,500 in net proceeds after deducting underwriting discounts, commissions andother offering expenses of $4,899,500. These costs have been recorded as a reduction of the proceeds received in arriving at the amount to be recorded inadditional paid-in capital upon completion of the IPO.On April 28, 2015, the date of the execution and delivery of the underwriting agreement for the IPO, the Company granted stock options to purchase anaggregate of 83,144 shares of the Company’s common stock to the non-employee directors of the Company.Upon the closing of the IPO in May 2015, the Company (1) converted $27,422,872 of accrued license fees as of May 4, 2015 into an aggregate of 3,427,859shares of the Company’s common stock issued to Ligand and Metabasis Therapeutics, Inc., a wholly-owned subsidiary of Ligand (“Metabasis”) pursuant tothe Master License Agreement; (2) incurred a non-cash interest charge of $4,421,338 at the time of conversion of the accrued license fees, relating to thedifference between the carrying amounts of the $24,826,374 of accrued license fees and the fair market value of the shares issued in the IPO; (3) converted$310,350 of the Company’s convertible notes payable plus interest of $24,276 as of May 4, 2015 into 57,046 shares of the Company’s common stock;(4) incurred a beneficial conversion charge of $121,786; and (5) issued an aggregate of 422,879 shares of the Company’s common stock and granted optionsto purchase an aggregate of 206,000 shares of the Company’s common stock to its employees, directors and a consultant of the Company pursuant toemployment agreements, offer letters and a consulting agreement.On May 26, 2015, the underwriters for the IPO exercised their full over-allotment option to purchase an additional 450,000 shares of the Company’s commonstock at $8.00 per share, less the underwriting discount. On May 28, 2015, the Company sold the 450,000 shares to the underwriters pursuant to the over-allotment option and received additional net proceeds of $3,225,866 after deducting underwriting discounts, commissions and other offering expenses of$374,134. Upon the closing of the over-allotment option,F-21Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. pursuant to the Master License Agreement, on May 28, 2015, the Company issued an additional aggregate of 228,105 shares of its common stock to Ligandand Metabasis.During the year ended December 31, 2015, and in accordance with the Company’s 2014 Employee Stock Purchase Plan (the “ESPP”), the Company issued anaggregate of 5,711 shares of its common stock to certain employees. 8.Stock-Based CompensationIn connection with the IPO, the Company’s 2014 Equity Incentive Plan (the “2014 Plan”) and the ESPP became effective on April 28, 2015, the date of theexecution and delivery of the underwriting agreement for the IPO. A total of 1,527,770 shares of the Company’s common stock were initially reserved forissuance under the 2014 Plan, and 458,331 shares of the Company’s common stock were initially reserved for issuance under the ESPP.The Company generally uses the straight-line or graded vesting method to allocate compensation cost to reporting periods over each optionee’s requisiteservice period, which is generally the vesting period, and estimates the fair value of stock-based awards or restricted stock units to employees and directorsusing the Black-Scholes option-valuation model. For options with a graded vesting schedule, the Company uses the graded vesting schedule to allocatecompensation cost to reporting periods. The Black-Scholes model requires the input of subjective assumptions, including volatility, the expected term andthe fair value of the underlying common stock on the date of grant, among other inputs. Stock options granted to non-employees are accounted for using thefair value approach. Stock options granted to non-employees are subject to periodic revaluation over their vesting terms.2014 Plan. The 2014 Plan provides that the compensation committee of the Company’s Board of Directors (the “Compensation Committee”) may grant orissue stock options, stock appreciation rights, restricted shares, restricted stock units and unrestricted shares, deferred share units, performance and cash-settled awards and dividend equivalent rights to participants under the 2014 Plan. Initially, a total of 1,527,770 shares of the Company’s common stock werereserved for issuance pursuant to the 2014 Plan, which number is also the limit on shares of common stock available for awards of incentive stock options.The number of shares available for issuance under the 2014 Plan will, unless otherwise determined by the Company’s Board of Directors or the CompensationCommittee, be automatically increased on January 1st of each year commencing on January 1, 2016 and ending on (and including) January 1, 2024, in anamount equal to 3.5% of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year. Theshares of common stock deliverable pursuant to awards under the 2014 Plan are authorized but unissued shares of the Company’s common stock, or shares ofthe Company’s common stock that the Company otherwise holds in treasury or in trust. Any shares of the Company’s common stock underlying awards thatare settled in cash or otherwise expire, or are forfeited, terminated or cancelled (including pursuant to an exchange program established by the CompensationCommittee) prior to the issuance of stock will again be available for issuance under the 2014 Plan. In addition, shares of the Company’s common stock thatare withheld (or not issued) in payment of the exercise price or taxes relating to an award, and shares of the Company’s common stock equal to the numbersurrendered in payment of any exercise price or withholding taxes relating to an award, will again be available for issuance under the 2014 Plan.ESPP. Initially, a total of 458,331 shares of the Company’s common stock were reserved for issuance pursuant to the ESPP. The number of shares availablefor issuance under the ESPP will, unless otherwise determined by the Company’s Board of Directors or the Compensation Committee, be automaticallyincreased on January 1st of each year commencing on January 1, 2016 and ending on (and including) January 1, 2024, in an amount equal to 1% of the totalnumber of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year. The shares of common stock available forpurchase pursuant to the ESPP are authorized but unissued shares of the Company’s common stock, shares of the Company’s common stock that theCompany otherwise holds in treasury or shares of the Company’s common stock that were purchased on the open market in arms’ length transactions inaccordance with applicable securities laws. Shares of the Company’s common stock will be offered for purchase under the ESPP as determined by theCompensation Committee through a series of successive offerings that each have a term of 24 months and consist of four consecutive purchase periods of sixmonths each. Prior to the commencement of any future offering under the ESPP, the Compensation Committee may determine that the current offering shallend, may commence a new offering on the first day after the end of such terminal purchase period (or any desired later date), and may decide that futureofferings will consist of one or more consecutive purchase periods, each to be of such duration as determined by the Compensation Committee; however, nooffering will exceed 27 months and no purchase period will exceed one year. Each employee of the Company who (1) is an employee on the first date of anyoffering under the ESPP, (2) is customarily scheduled to work for more than 20 hours per week and more than five months per calendar year, and (3) meetssuch other criteria as may be determined by the Compensation Committee (consistent with Section 423 of the Internal Revenue Code of 1986, as amended),is eligible to participate in the ESPP for each purchase period within such offering. The purchase price per share of the Company’s common stock under theESPP may not be less than, and will initially be equal to, the lesser of: (1) 85% of the fair market value per share of the Company’s common stock on the firstday of the offering, or (2) 85% of the fair market value per share of the Company’s common stock on the date the purchase right is exercised, which will bethe last day of the applicable purchase period.F-22Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. During the years ended December 31, 2015 and 2014, the Company recognized the following stock-based compensation expense: Year Ended December 31, 2015 2014 Stock-based compensation expense by type of award: Stock options $949,955 $— Restricted stock and restricted stock units 1,608,049 6,258 Employee stock purchase plan 43,444 — Total stock-based compensation expense included in expenses $2,601,448 $6,258 Stock-based compensation expense by line item: Research and development expenses $852,200 $2,643 General and administrative expenses 1,749,248 3,615 Total stock-based compensation expense included in expenses $2,601,448 $6,258 The following table sets forth the Company’s unrecognized stock-based compensation expense, net of estimated forfeitures, by type of award and theweighted-average period over which that expense is expected to be recognized: As of December 31, 2015 UnrecognizedExpense,Net ofEstimatedForfeitures Weighted-averageRecognitionPeriod(in years) Type of award: Stock options $1,409,808 2.61 Restricted stock and restricted stock units $2,442,289 2.58 The following table is a summary of restricted shares granted during the year ended December 31, 2015: Shares Weighted-AverageGrant DateFair Value Unvested at December 31, 2014 2,018,752 $0.08 Granted 462,090 $9.49 Vested (702,165) $1.37 Forfeited (105,000) $9.49 Repurchased (1,005,714) $0.03 Unvested at December 31, 2015 667,963 $3.68 The following table summarizes restricted stock units activity during the year ended December 31, 2015: Shares Weighted-AverageGrant DateValue Unvested at December 31, 2014 — $— Granted 84,000 $8.18 Vested — $— Forfeited (8,250) $7.27 Repurchased — $— Unvested December 31, 2015 75,750 $8.27 F-23Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The following table summarizes stock option activity during the year ended December 31, 2015: Shares Weighted-AverageExercisePrice Weighted-AverageRemainingContractualTerm (in years) Options outstanding at December 31, 2014 — $— — Granted 443,894 $8.49 — Exercised — $— — Cancelled (78,500) $8.54 — Options outstanding at December 31, 2015 365,394 $8.48 9.39 Options exercisable at December 31, 2015 40,250 $9.49 9.35 Compensation expense for stock options granted to employees is based on the estimated grant date fair value and is recognized ratably over the vestingperiod of the applicable option. The estimated per share weighted average fair value of stock options granted to employees during the year ended December31, 2015 was $6.26. The options outstanding and exercisable at December 31, 2015 had no intrinsic value in the aggregate.As stock-based compensation expense recognized is based on options ultimately expected to vest, the fair value of each employee option grant during theyear ended December 31, 2015 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted averageassumptions: Year Ended December 31, 2015 Expected volatility 85.2%Expected term (in years) 6.49 Risk-free interest rate 1.81%Expected dividend yield 0% Expected Volatility. The expected volatility rate used to value stock option grants is based on volatilities of a peer group of similar companies whose shareprices are publicly available. The peer group was developed based on companies in the pharmaceutical and biotechnology industry in a similar stage ofdevelopment to the Company.Expected Term. The Company elected to utilize the “simplified” method for “plain vanilla” options to value stock option grants. Under this approach, theweighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option.Risk-free Interest Rate. The risk-free interest rate assumption was based on zero-coupon U.S. Treasury instruments that had terms consistent with the expectedterm of the Company’s stock option grants.Expected Dividend Yield. The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeablefuture.Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates. The Company estimatesforfeitures based on its historical experience. Groups of employees that have similar historical forfeiture behavior are considered separately for expenserecognition.Since the Company had a net operating loss carryforward as of December 31, 2015, no excess tax benefits for the tax deductions related to stock-based awardswere recognized in the Statements of Operations.F-24Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Common Stock Reserved for Future IssuanceCommon stock reserved for future issuance as of December 31, 2015 and 2014 is as follows: Common Stock Reserved for Future Issuance December 31, 2015 2014 Common stock warrants 82,500 — Restricted stock units 75,750 — Common stock options 365,394 — Available for grant under the 2014 Plan 773,629 — Available for issuance under Employee Stock Purchase Plan 452,620 — Shares issuable upon conversion of Ligand debt 670,902 695,733 2,420,795 695,733 9.Representative’s WarrantUpon the closing of the IPO, on May 4, 2015, the Company issued to the representative of the underwriters as additional compensation a warrant to purchasethe aggregate of 82,500 shares of the Company’s common stock. The warrant is exercisable for cash or on a cashless basis at a per share exercise price equal to$10.00 commencing on April 28, 2016, one year following the date of the prospectus filed with the SEC relating to the IPO, and expiring on April 28, 2020.In addition, the warrant provides for registration rights upon request, under certain circumstances. The piggyback registration right provided in connectionwith the warrant will terminate on April 28, 2022. 10.Income TaxesThe reconciliations of the U.S. federal statutory tax rate to the effective income tax rate for the years ended December 31, 2015 and 2014 are as follows: December 31, 2015 2014 Tax provision at U.S. Federal statutory rates 34% 34%State income taxes net of federal benefit 8% 8%Non-deductible permanent items (2)% (1)%Stock options — — Other — — Change in valuation allowance (40)% (41)%Effective income tax rate — — Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposesand the amounts used for income tax purposes. Significant components of the Company’s deferred taxes as of December 31, 2015 and 2014 are as follows:F-25Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. December 31, 2015 2014 Deferred tax assets: Accrued liabilities $48,982 $— Intangible assets 14,009,497 7,993,293 Net operating loss carryforwards 2,430,249 548,247 Share-based compensation 986,534 6,306 Share conversion feature 243,759 — Other 3,510 530 Total deferred tax assets 17,722,531 8,548,376 Valuation Allowance (17,722,531) (8,403,620)Net deferred tax assets $— $144,756 Deferred tax liabilities: Debt conversion feature $— $(144,756)Total: $— $— A valuation allowance of $17,722,531 and $8,403,620 at December 31, 2015 and December 31, 2014, respectively, has been recorded to offset net deferredtax assets, as the Company is unable to conclude that it is more likely than not that such deferred tax assets will be realized.At December 31, 2015, the Company had federal and state net operating loss carryforwards of approximately $5,890,000 and $6,629,000, respectively. Thefederal and state net operating loss carryforwards will begin to expire in 2032. The Company’s ability to utilize its federal net operating loss carryforwardsmay be limited under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). Specifically, this limitation may arise in the event of an“ownership change,” which is defined by Section 382 of the Code as a cumulative change in ownership of the Company of more than 50% within a three-year period. If the Company undergoes one or more ownership changes in connection with any future transactions in its stock, the Company’s ability toutilize net operating loss carryforwards to offset federal taxable income, if any, could potentially result in increased future tax liability to the Company. Anownership change under Section 382 of the Code occurred during the year ended December 31, 2015 in connection with the Company’s initial publicoffering. A portion of the net operating loss carryforwards are subject to an annual limitation.The Company is subject to U.S. federal income tax as well as income tax in various state jurisdictions. The Company is currently open to audit under thestatute of limitations by the Internal Revenue Service and various state agencies for the years ended December 31, 2012 through December 31, 2015.The differences between the Company’s effective income tax rate and the statutory federal rate for the year ended December 31, 2015 and the year endedDecember 31, 2014 relate primarily to losses incurred for which no tax benefit was recognized, due to the uncertainty of realization. The ultimate realizationof deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible.The Company considers projected future taxable income and tax planning strategies in making this assessment. At each of December 31, 2015 andDecember 31, 2014, the Company provided a full valuation allowance against its deferred tax assets due to uncertainty surrounding the realization of thoseassets as a result of historical taxable net losses.The Company has reviewed its operations and has not identified any material uncertain tax positions. As a result, there is no liability for uncertain taxpositions in the income tax provision as of December 31, 2015 or December 31, 2014. 11.Related Party TransactionsIn May 2014, the Company entered into the Master License Agreement with Ligand, pursuant to which, among other things, Ligand granted the Company anexclusive worldwide license to certain clinical and preclinical programs. See Note 4 for more information related to this agreement. In connection withentering into the Master License Agreement, the Company also entered into a Loan and Security Agreement (see Note 6 and Note 13) and a sublease andservices agreement (See Note 4). As Ligand owns 49.4% of the Company’s outstanding shares as of December 31, 2015, the Company considers Ligand to bea related party. F-26Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 12.Commitments and Contingencies In May 2014, the Company entered into a master license agreement with the licensor that included a license to the products covered by the option. See Note4 for a description of the terms of the Master License Agreement. As noted in Note 4, in connection with the Master License Agreement, the Company alsoentered into a Sublease Agreement with Ligand, pursuant to which the Company leased approximately 5,851 square feet of office space from Ligand for theperiod from May 21, 2014 through December 31, 2014. Under the terms of the Sublease Agreement, the Company was required to make minimum leasepayments of approximately $167,000.On July 7, 2015, the Company entered into a Sublease (the “Sublease”) for approximately 7,049 rentable square feet of space located at 12340 El CaminoReal, Suite 250, San Diego, California 92130. Monthly base rent payments due under the Sublease are $19,737, subject to annual increases of 3.0% duringthe term of the Sublease.Rent expense was $142,288 and $186,774 for the years ended December 31, 2015 and 2014, respectively.The Company is subject to charges for common area maintenance and other costs pursuant to the Sublease, and the Sublease provides for abatement of rentduring certain periods and escalating rent payments throughout the term of the Sublease. Rent expense is being recorded on straight line basis over the life ofthe Sublease and the difference between the rent expense and rent paid is being recorded as deferred rent.Future minimum payments pursuant to the Sublease are as follows: Year Ending December 31: 2016 180,004 2017 247,611 2018 190,337 Total minimum lease payments $617,952 13.Subsequent EventsThe Company evaluated subsequent events through March 8, 2016, the date of the filing of this Annual Report on Form 10-K with the SEC, to ensure thatthis filing includes appropriate disclosure of events both recognized in the financial statements as of December 31, 2015, and events which occurredsubsequent to December 31, 2015 but were not recognized in the financial statements. The Company has determined that there were no subsequent eventswhich required recognition, adjustment to or disclosure in the financial statements, except as follows:On January 22, 2016, the Company entered into a Second Amendment to Loan and Security Agreement (the “Second Loan Amendment”) with Ligand, whichamends the Loan and Security Agreement, as amended by the Loan Amendment (the “Original Loan Agreement”). The Second Loan Amendment amendedthe Original Loan Agreement (as so amended by the Second Loan Amendment, the “Amended Loan Agreement”) to, among other things, (1) extend thematurity date of the loans under the Ligand Note from May 21, 2016 to May 21, 2017 (the “Maturity Date”), (2) reduce the annual interest rate on theprincipal amount outstanding under the Ligand Note from 5.0% to 2.5%, and (3) extend Ligand’s lock-up period by one year such that Ligand may not,directly or indirectly, sell or otherwise transfer or dispose of any Company securities prior to January 23, 2017. The amount payable by the Company underthe Amended Loan Agreement remains equal to 200% of the original principal amount of the loans under the Ligand Note and of all accrued and previouslyunpaid interest thereon.Additionally, the Amended Loan Agreement provides that, upon the consummation of the Company’s first bona fide capital financing transaction occurringsubsequent to January 22, 2016, but prior to the Maturity Date, with aggregate net proceeds to the Company of at least $2.0 million (the “Next Financing”),the Company will be required to repay $1.5 million of the Ligand Note obligation to Ligand (the “Next Financing Payment”), with at least $0.3 million ofthe Next Financing Payment to be paid in cash, subject to the Company’s sole and absolute discretion to pay a greater amount in cash, and the remainingamount of the Next Financing Payment that will not be paid in cash (the “Balance”) to be paid in the form of such number of shares of the Company’s equitysecurities that are issued in the Next Financing as is equal to the quotient obtained by dividing the Balance by the lesser of (1) the lowest price per share paidby investors in the Next Financing (the “Financing Price”), and (2) $8.00 (subject to adjustment for stock dividends, splits, combinations or similartransactions). Notwithstanding the foregoing, the number of shares that the Company may issue to Ligand will be reduced to the extent the issuance of shareswould increase Ligand’s beneficial ownership of the Company’s common stock to greater than 49.9%, and any remaining amount of the Balance would haveto be paid by the Company in cash (the “Share Cap”).F-27Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Under the terms of the Amended Loan Agreement, following the consummation of the Next Financing, the Company may elect to repay any portion of theoutstanding principal under the Ligand Note, plus accrued and unpaid interest thereon, by delivering a notice to Ligand (the “Additional RepaymentNotice”), specifying the amount that the Company wishes to repay (the “Additional Payment Amount”). Ligand will then have five days to elect to receivethe Additional Payment Amount in cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock. IfLigand does not make an election within such five-day period, the Company will have the right, at its sole election and discretion, to elect the form of theAdditional Payment Amount, subject to the Share Cap. To the extent that any portion of an Additional Payment Amount will be paid in shares of theCompany’s common stock, the Amended Loan Agreement provides that the number of shares issuable will be equal to the quotient obtained by dividing theportion of the Additional Payment Amount that will be paid in shares by the lesser of (1) (a) if the Company delivers the Additional Repayment Notice within180 days of the closing of the Next Financing, the Financing Price, or (b) if the Company delivers the Additional Repayment Notice 180 days or more afterthe closing of the Next Financing, the volume weighted average closing price of the Company’s common stock for the 30 days prior to the date the Companydelivers the Additional Repayment Notice, and (2) $8.00 (subject to adjustment for stock dividends, splits, combinations or similar transactions).The Amended Loan Agreement also provides that, on or after the Maturity Date, Ligand may demand payment of the remaining amount payable under theLigand Note (the “Remaining Balance”). In addition, the Company is permitted to, at its sole election and discretion, repay to Ligand the Remaining Balancesolely in cash. However, if the Company does not elect to repay the Remaining Balance solely in cash, Ligand can set the form of payment as cash, shares ofthe Company’s common stock or both. To the extent that any portion of the Remaining Balance will be paid in shares of the Company’s common stock, thenumber of shares issuable will be equal to the quotient obtained by dividing the portion of the Remaining Balance that will be paid in shares by the lesser of(a) the volume weighted average closing price of the Company’s common stock for the 30 days prior to the date of Ligand’s demand for repayment or thedate of the Company’s prepayment of the Remaining Balance in full, as applicable, and (b) $8.00 (subject to adjustment for stock dividends, splits,combinations or similar transactions).On January 22, 2016, the Company also entered into a First Amendment to Registration Rights Agreement (the “Registration Rights AgreementAmendment”) with Ligand, which amends the Registration Rights Agreement. The Registration Rights Agreement Amendment extends the deadline bywhich the Company must file with the SEC a Registration Statement on Form S-1 (the “Registration Statement”) covering the resale of certain Companysecurities held by Ligand, including the shares of the Company’s common stock issuable to Ligand under the Amended Loan Agreement, by one year fromJanuary 23, 2016 to January 23, 2017, and extends the applicable deadline for seeking to have such Registration Statement declared effective by the SEC byone year. F-28Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 23.1Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statement of Viking Therapeutics, Inc. on Form S-8 File No. 333-203810 of our report,which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, dated March 8, 2016 with respect to our audits of thefinancial statements of Viking Therapeutics, Inc. as of December 31, 2015 and 2014 and for the years then ended, which report is included in this AnnualReport on Form 10-K of Viking Therapeutics, Inc. for the year ended December 31, 2015. /s/ Marcum LLPIrvine, CaliforniaMarch 8, 2016Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.1CERTIFICATION PURSUANT TORULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Brian Lian, Ph.D., certify that: 1.I have reviewed this Annual Report on Form 10-K of Viking Therapeutics, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveredby this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared; b.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: March 8, 2016 By:/s/ Brian Lian, Ph.D. Brian Lian, Ph.D. Chief Executive Officer Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.2CERTIFICATION PURSUANT TORULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Michael Morneau, certify that: 1.I have reviewed this Annual Report on Form 10-K of Viking Therapeutics, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveredby this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared; b.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: March 8, 2016 By:/s/ Michael Morneau Michael Morneau Chief Financial Officer Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 32.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of Viking Therapeutics, Inc. (the “Company”) for the period ended December 31, 2015 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to their knowledge that: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. By:/s/ Brian Lian, Ph.D. By:/s/ Michael Morneau Brian Lian, Ph.D. Michael Morneau Chief Executive Officer Chief Financial Officer March 8, 2016 March 8, 2016 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company andfurnished to the Securities and Exchange Commission or its staff upon request.This certification accompanies the Report, is not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (theExchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of1933, as amended, or the Exchange Act (whether made before or after the date of the Report), irrespective of any general incorporation language contained insuch filing. Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Viking Therapeutics, Inc., 10-K, March 08, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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