Viking Therapeutics Stock Plummets 42% on Clinical Trial Setback

Viking Therapeutics Inc. (VKTX.US) experienced a historic 42% single-day stock price decline on Tuesday, resulting in significant gains for short sellers who had bet against the company. The dramatic drop allowed short sellers to realize a substantial profit of 521 million dollars in a single day, erasing the company's losses for the year, which had amounted to approximately 140 million dollars as of Monday's close.

The precipitous decline in stock price was triggered by the release of interim results from a clinical trial of the company's experimental oral weight loss drug. The results revealed that approximately 28% of participants discontinued the trial within three months due to adverse side effects. This outcome shattered market expectations that the oral medication could compete with popular injectable weight loss products from Eli Lilly and Novo Nordisk.

The adverse side effects, which included a high incidence of nausea and vomiting across all treatment groups, overshadowed the efficacy data of the drug. This was highlighted in a research report, which noted that the tolerability issues were a significant concern. This incident marks the second recent setback for an oral weight loss drug in clinical trials. Earlier this month, Eli Lilly's experimental weight loss drug failed to meet expectations in its late-stage clinical trial, resulting in a 14% single-day stock price decline.

Despite these challenges, analysts remain optimistic about Viking Therapeutics' stock. Nearly 90% of analysts have given the stock a rating equivalent to "buy," with an average target price of around 90 dollars. This target price suggests that the stock has the potential to more than triple from its current trading price. In a report, an analyst described the recent stock price weakness as a buying opportunity, suggesting that market concerns over tolerability issues may be overblown. The analyst reiterated a "outperform" rating and a target price of 100 dollars for the stock.