Viking Therapeutics Stock Plummets 42% on Weight Loss Drug Setback

Viking Therapeutics Inc. (VKTX.US) experienced a historic single-day stock price decline of 42% 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 $5.21 billion in a single day, erasing the company's losses for the year, which had amounted to approximately $1.4 billion as of Monday's close.

The precipitous decline in Viking Therapeutics' stock price was triggered by the disappointing interim results of its experimental oral weight loss drug. The study 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 effects, including a high incidence of nausea and vomiting across all treatment groups, overshadowed the drug's efficacy data, according to a research report. This setback marks the second recent failure of an oral weight loss drug trial. Earlier this month, Eli Lilly's experimental weight loss drug failed to meet expectations in its late-stage trial, causing the company's stock to plummet by 14% in a single day, the largest decline since 2000.

Despite the setback, analysts remain optimistic about Viking Therapeutics' long-term prospects. Nearly 90% of analysts maintain a "buy" rating on the stock, with an average target price of around $90. This target price suggests that the stock has the potential to more than triple from its current trading level.

Oppenheimer & Co. analyst described the current stock price weakness as a buying opportunity. The analyst believes that market concerns over the drug's tolerability issues may be overstated and reiterated an "outperform" rating and $100 target price for the stock.