Viking Therapeutics Plunges 42%, Can This Biotech Giant Rebound?

Summary
• Viking Therapeutics (VKTX) crashes 42.24% intraday, trading at $24.31 amid mixed Phase 2 trial data for its obesity drug VK2735.
• Trial shows 12.2% weight loss but 28% discontinuation rate due to GI side effects, contrasting with Eli Lilly’s 25% discontinuation in longer-term trials.
• Sector peers like Eli Lilly (LLY) rally 0.16% as investors shift to established GLP-1 players.
• Technicals show RSI at 75.16 (overbought), MACD 2.75 above signal line, and Bollinger Bands squeezing near $28.85 support.

Viking Therapeutics’ stock imploded on Tuesday after its Phase 2 obesity trial data revealed a 12.2% weight loss but high discontinuation rates. The 42% drop highlights investor skepticism over its oral GLP-1/GIP dual agonist, VK2735, amid fierce competition from Eli Lilly and Novo Nordisk. With technicals flashing overbought conditions and options volatility spiking, the market is now betting on a sector consolidation.

Mixed Trial Data Sparks Investor Exodus
Viking’s 42% plunge stems from a stark disconnect between its Phase 2 results and market expectations. While the trial achieved statistically significant 12.2% weight loss (vs. 1.3% for placebo), the 28% discontinuation rate—driven by 58% nausea and 26% vomiting—alarmed investors. This contrasts with Eli Lilly’s orforglipron, which saw 25% discontinuation in a 72-week trial. Analysts like Mizuho’s Jared Holz noted Viking’s data ‘shutter hope’ for near-term oral obesity market dominance, as Novo Nordisk’s Wegovy and Lilly’s Zepbound already lead with injectable formulations. The high GI side effects and shorter trial duration (13 weeks vs. 72 weeks for competitors) further eroded confidence.

Biotech Sector Volatility as Eli Lilly Gains Ground
The biotech sector’s mixed performance underscores Viking’s struggles. Eli Lilly (LLY) rose 0.16% as its oral GLP-1 drug orforglipron, with 12.4% weight loss in 72 weeks, outpaces Viking’s 13-week data. Novo Nordisk’s Wegovy, targeting GLP-1 alone, also benefits from regulatory momentum. Viking’s dual-agonist approach, while innovative, faces scrutiny over tolerability and commercialization timelines. The sector’s $2.69B market cap contraction for Viking highlights a broader shift toward established players with longer-term safety profiles.

Options Playbook: Capitalizing on Volatility and Technicals
• Technical Indicators:
- RSI: 75.16 (overbought), suggesting potential short-term reversal.
- MACD: 2.75 (bullish) vs. Signal Line 2.16, with Histogram 0.59 (momentum waning).
- Bollinger Bands: Price at $24.31 near Lower Band ($28.85), indicating oversold territory.
- 200D MA: $34.99 (price below, bearish).

Trading Setup: Key support at $28.85 (Bollinger Lower Band) and resistance at $35.68 (Middle Band). Short-term bearish bias, but RSI overbought conditions hint at a possible bounce. Aggressive traders may consider shorting above $28.85, while longs could target $23.21 (intraday low) as a stop.

Top Options:
- VKTX20250829P25 (Put):
• Strike: $25, Expiry: 2025-08-29, IV: 94.95%, Leverage: 11.92%, Delta: -0.54, Theta: -0.012, Gamma: 0.099.
• High IV and leverage amplify downside potential; gamma ensures sensitivity to price swings.
• Payoff: If price drops 5% to $23.10, profit = $1.90/share (max $25 - $23.10).
- VKTX20250829C25 (Call):
• Strike: $25, Expiry: 2025-08-29, IV: 103.49%, Leverage: 17.28%, Delta: 0.46, Theta: -0.118, Gamma: 0.091.
• High leverage and moderate delta for bullish bets; theta decay manageable for short-term.
• Payoff: If price rebounds to $28.85, profit = $3.85/share (max $28.85 - $25).

Action: Aggressive bears target VKTX20250829P25 for 5% downside; bulls use VKTX20250829C25 if $28.85 support holds.

Backtest Viking Therapeutics Stock Performance
The backtest of VKTX's performance after a -42% intraday plunge shows favorable short-to-medium-term gains. The 3-Day win rate is 46.59%, the 10-Day win rate is 49.83%, and the 30-Day win rate is 49.83%, indicating a higher probability of positive returns in the immediate aftermath of the plunge. The maximum return during the backtest period was 13.43%, which occurred on day 59, suggesting that there is potential for recovery and even exceed previous levels following such a significant downturn.

Rebound or Reckoning? Watch for $28.85 Support
Viking’s 42% drop reflects a market betting on its inability to compete with Eli Lilly’s longer-term data and Novo Nordisk’s injectable dominance. While the 12.2% weight loss is promising, the high discontinuation rate and shorter trial duration weaken its commercial appeal. Technicals suggest a potential bounce near $28.85, but a breakdown below $23.21 could trigger further selling. Investors should monitor the 200D MA at $34.99 and Eli Lilly’s (LLY +0.16%) momentum as sector indicators. For now, short-term volatility favors options plays, but long-term optimism hinges on Viking’s ability to demonstrate durable weight maintenance in future trials.