Viking Therapeutics (NASDAQ: VKTX) suffered a brutal market sell-off on Tuesday, with shares plunging over 40% in one of the biotech firm's steepest single-day drops since its initial public offering in 2015.
The rout followed the release of Phase 2 VENTURE-Oral trial results for its much-hyped weight-loss drug VK2735, an oral GLP-1/GIP receptor agonist. While the pill achieved double-digit weight loss, investor confidence was rocked by safety concerns and dropout rates approaching 30%. The sell-off wiped out an estimated $1.8 billion in market value, cutting Viking's market capitalisation to just under $2.8 billion.
Market Reaction: A Brutal Sell-Off
Viking Therapeutics faced a sharp market backlash following the release of data from its Phase 2 VENTURE-Oral trial of VK2735. Although the drug met its primary endpoint, achieving up to 12.2% mean weight loss over 13 weeks in overweight or obese adults compared to 1.3% in the placebo group, investors were spooked by safety concerns.
Notably, 28% of participants receiving VK2735 discontinued treatment, primarily due to gastrointestinal side effects such as nausea and vomiting. These adverse events raised questions about the drug's tolerability and long-term viability.
The result: a dramatic sell-off that erased approximately $1.8 billion in market capitalisation, dragging Viking's valuation down to just under $2.8 billion.
The Drug Behind the Drama
VK2735 is Viking's flagship candidate in the race to develop an oral weight-loss medication. Unlike injectable treatments such as Novo Nordisk's Wegovy or Eli Lilly's Zepbound, VK2735 is designed for once-daily oral administration—a format considered more convenient and accessible for patients.
Despite achieving statistically significant weight loss, the side effect profile raised red flags. According to Viking, 58% of patients reported nausea and 26% experienced vomiting, compared to 48% and 10% respectively, in the placebo arm. While the company emphasised that 99% of gastrointestinal events were mild or moderate, analysts were unconvinced.
Comparisons with Competitors
The timing of Viking's data release was miserable, coming just weeks after Eli Lilly published results from its own oral GLP-1 candidate, Orforglipron. Lilly's drug achieved a 12.4% weight loss over 72 weeks, with a dropout rate of around 25% lower than expected. Novo Nordisk's oral version of Wegovy also posted strong results, with average weight loss of 15% in late-stage trials.
Mizuho analyst Jared Holz flagged serious competitive concerns for Viking Therapeutics following the VK2735 trial results. He noted that the data 'look inferior to LLY on almost all metrics,' referencing Eli Lilly's oral obesity drug, which showed stronger performance in a longer-duration trial.
Holz pointed out that Viking's trial saw a high discontinuation rate of 28% over just 13 weeks, compared to Lilly's mid-20% dropout rate over a much longer 72-week study. 'LLY looks far better head-to-head,' he said, adding that the tolerability issues likely 'shutter hope for VKTX to be a big-time player in the oral obesity market over the near to medium term.'
JPMorgan analyst Hardik Parikh offered a more measured take on Viking's trial results, emphasising the drug's efficacy. He pointed out that in the 13-week study, the highest dosing groups (60mg, 90mg, and 120mg) achieved placebo-adjusted weight loss of roughly 7.5%, 10%, and 11%, respectively. Parikh added that these outcomes compared very favorably with other oral obesity drugs currently in development, describing the results as 'very strong'.
However, he acknowledged that tolerability was 'worse than expected' when compared to Phase 1 results, though still 'manageable overall.' While the adverse event profile wasn't as clean as earlier trials, Parikh maintained that oral VK2735 still shows strong efficacy with a tolerability profile that could be workable in future studies.
What's Next for Viking?
Despite the setback, Viking remains committed to advancing VK2735. The company has indicated plans to initiate Phase 3 trials with slower dose escalation, which could improve tolerability and reduce dropout rates. Piper Sandler analysts maintained an 'overweight' rating on Viking, citing potential blockbuster sales of up to $2.1 billion if the drug clears regulatory hurdles.
Viking also pointed to exploratory data suggesting that weight loss could be maintained at lower doses, offering a possible path forward for long-term treatment.
Investor Sentiment: From M&A Hope to Uncertainty
Until recently, Viking was considered a potential acquisition target, with speculation swirling around interest from larger pharmaceutical firms such as Eli Lilly. However, the disappointing trial results may have dampened enthusiasm.
The broader obesity drug market remains fiercely competitive, with Novo Nordisk and Eli Lilly dominating the landscape. Viking's ability to carve out market share will depend on its capacity to refine VK2735's formulation and demonstrate improved safety in future trials.
A Defining Moment For Viking
The collapse of Viking's stock underlines both the enormous promise and peril of the weight-loss drug market.
With efficacy proven but tolerability in question, VK2735 sits at a crossroads.
For investors, the coming months will hinge on whether Viking can refine its candidate enough to compete — or whether Tuesday's bloodbath marks the beginning of a retreat from the obesity race.
