Down 65%, Is Viking Therapeutics Stock a Buy on the Dip?

Viking Therapeutics, Inc. (NASDAQ: VKTX) has seen its stock price plummet by 65% from its peak in 2024, raising questions about the company's future prospects and whether it's a buy on the dip. The company, a clinical-stage biopharmaceutical focused on metabolic and endocrine disorders, has a promising pipeline of drug candidates, including VK2735 and VK2809, which have shown encouraging results in clinical trials. However, several factors have contributed to the stock's decline, and investors must weigh the risks and potential rewards before making a decision.



Key Factors Contributing to the Stock Price Decline

1. Market Obsession with AI: The market has been heavily focused on artificial intelligence (AI) and other tech sectors, leading to a shift in investor attention away from biopharmaceutical companies like Viking Therapeutics.
2. Delayed Development: Viking Therapeutics' clinical development process has been slower than expected, with the company taking longer to advance its drug candidates through late-stage trials. This delay has led to uncertainty and decreased investor confidence.
3. Competition in the Obesity Market: The obesity market is highly competitive, with established players like Novo Nordisk and Eli Lilly dominating the landscape. Viking Therapeutics' VK2735 faces stiff competition from these companies' existing and pipeline drugs, such as semaglutide (Ozempic, Rybelsus, Wegovy) and tirzepatide (Mounjaro, Zepbound).
4. Concerns about VK2735's Efficacy and Safety: Although VK2735 has shown promising results in early-stage trials, there are still concerns about its long-term efficacy and safety. Investors may be hesitant to pour money into the company until more data is available from later-stage trials.



Clinical Trial Results and Market Opportunities

Viking Therapeutics' clinical trial results for VK2735 and VK2809 show promising potential in the obesity and NASH/MASH treatment spaces, respectively. In a Phase 1 multiple ascending dose (MAD) clinical trial, oral VK2735 demonstrated dose-dependent reductions in mean body weight from baseline, ranging up to 8.2% after 28 days of dosing. In the Phase 2 VENTURE study of subcutaneous VK2735, patients receiving the drug demonstrated statistically significant reductions in mean body weight from baseline, ranging up to 14.7% after 13 weeks. For VK2809, a Phase 2 clinical trial showed significant reductions in patients' liver fat levels and improved liver inflammation symptoms.

The global weight loss drugs market size was valued at USD 77.9 billion in 2020 and is expected to grow at a CAGR of 4.5% from 2021 to 2028. The global NASH market size is expected to reach USD 23.6 billion by 2027, growing at a CAGR of 10.2% during the forecast period. With VK2735's dual GLP-1/GIP agonism and well-tolerated formulations, and VK2809's thyroid hormone receptor beta (TRβ) agonism and positive clinical results, Viking Therapeutics could capture a significant share of these growing markets.

Securing Additional Funding or Partnerships

Viking Therapeutics has a market capitalization of $3.7 billion, which is a relatively low valuation for a company with a potential blockbuster obesity treatment and a MASH treatment ready to launch in a couple of years. However, the company's stock price decline could make it more challenging to secure additional funding or partnerships. Viking Therapeutics must address investor concerns about the company's clinical development timeline and competition in the obesity market to regain investor confidence and reverse the stock price decline.

In conclusion, Viking Therapeutics' stock price decline is a result of several key factors, including market obsession with AI, delayed development, competition in the obesity market, and concerns about VK2735's efficacy and safety. Despite these challenges, the company's clinical trial results for VK2735 and VK2809 show promising potential in the obesity and NASH/MASH treatment spaces, respectively. To determine if Viking Therapeutics is a buy on the dip, investors must weigh the risks and potential rewards, considering the company's pipeline, market opportunities, and ability to secure additional funding or partnerships.