Viking Therapeutics' VK2735 Trial: A Cautionary Tale for Small Biotechs in the Obesity Drug Gold Rush

The obesity drug market is a gold rush, but not all prospectors will strike it rich. Viking Therapeutics (NASDAQ: VKTX) recently unveiled Phase 2 trial results for its oral dual GLP-1/GIP agonist, VK2735, that are both impressive and underwhelming. The drug achieved a 12.2% mean weight loss at the highest dose—a figure that rivals the best-in-class injectables like Eli Lilly's Zepbound and Novo Nordisk's Wegovy. Yet, the trial's tolerability issues and a 42% stock plunge post-announcement raise critical questions about the long-term viability of small biotechs in a sector increasingly dominated by pharma giants.

The Double-Edged Sword of Efficacy

VK2735's 12.2% weight loss at 13 weeks is nothing short of remarkable. For context, Zepbound and Wegovy typically achieve 15–20% weight loss in 20-week trials, but Viking's oral formulation offers the convenience of daily pills over weekly injections. This could be a game-changer for patients averse to needles. However, the trial's 28% discontinuation rate due to gastrointestinal side effects—nausea (58%), vomiting (26%), and constipation (43%)—casts a shadow over its commercial potential. While these side effects are common in GLP-1/GIP agonists, Viking's higher discontinuation rate compared to placebo (18%) suggests a steeper hill to climb in terms of patient adherence.

The market's reaction was swift and severe. Shares of VKTX plummeted 42% after the trial's release, reflecting investor skepticism about balancing efficacy with tolerability. This volatility underscores a broader trend: small biotechs in the obesity space are under intense scrutiny. With Novo Nordisk and Eli Lilly already commanding 70% of the GLP-1 market, Viking must prove its drug can deliver consistent results without the side effects that drive patients to discontinue treatment.

The Oral GLP-1RA Market: Convenience vs. Competition

Oral GLP-1/GIP agonists like VK2735 are positioned to disrupt the obesity drug landscape. The convenience of pills over injections is a major selling point, but it's not enough to guarantee success. Novo Nordisk's oral semaglutide (Rybelsus) has struggled with poor tolerability, and Viking's trial results suggest similar challenges. The key differentiator will be Viking's ability to optimize dosing strategies to reduce side effects while maintaining efficacy.

Moreover, Viking's injectable formulation, currently in Phase 3 trials (VANQUISH-1 and VANQUISH-2), could offer a more favorable safety profile with once-monthly dosing. If successful, this could position Viking to compete directly with Wegovy and Zepbound. However, the company's reliance on a single asset and its $808 million cash reserves (as of June 2025) mean any delay or setback in Phase 3 could be catastrophic.

The Small Biotech Dilemma: Innovation vs. Consolidation

The obesity drug sector is rapidly consolidating. Novo Nordisk and Eli Lilly have the scale, manufacturing capacity, and brand recognition to dominate. Small biotechs like Viking must either partner with these giants or risk being acquired. Viking's $150 million manufacturing agreement with CordenPharma is a step in the right direction, but it's unclear whether this will be enough to scale production if VK2735 gains approval.

Investors should also consider Viking's pipeline depth. While VK2735 is its flagship asset, the company has limited other programs. This lack of diversification increases risk, especially in a sector where regulatory hurdles and clinical setbacks are common. In contrast, Novo Nordisk and Eli Lilly have robust pipelines of next-gen GLP-1/GIP agonists and GLP-1/GIP/T2R agonists, giving them a multi-year edge.

Investment Implications: A High-Risk, High-Reward Play

For long-term investors, Viking Therapeutics presents a high-risk, high-reward opportunity. The company's oral formulation has the potential to capture a niche in the obesity market, particularly among patients who prefer pills over injections. However, tolerability issues and the dominance of injectable therapies from pharma giants mean Viking must execute flawlessly.

Key catalysts to watch include:
1. Phase 3 results for the injectable formulation (expected in 2026). A 14.7% weight loss with improved tolerability could reignite investor confidence.
2. Optimization of the oral formulation to reduce gastrointestinal side effects. Success here could differentiate VK2735 from Rybelsus and other oral GLP-1/GIP agonists.
3. Partnership or acquisition activity. Viking's strong cash position and dual formulation strategy make it an attractive target for pharma giants seeking to expand their oral offerings.

In conclusion, Viking Therapeutics' VK2735 trial highlights the challenges and opportunities facing small biotechs in the obesity drug sector. While the drug's efficacy is compelling, tolerability issues and intense competition from pharma giants create a high bar for success. Investors should approach Viking with caution, prioritizing risk management and diversification. For those willing to take the plunge, the company's potential to disrupt the oral GLP-1RA market—if it can overcome its hurdles—could yield outsized returns. But in a sector where consolidation is king, the road to profitability is anything but smooth.