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Viking Therapeutics stock has wild week after weight-loss drug results impress Wall Street

Viking Therapeutics stock (VKTX) has been on a tear this week after it announced the phase II clinical trial results for a new experimental drug in the booming weight-loss industry.

On Tuesday, shares of Viking Therapeutics more than doubled, soaring over 120% to $85 as Wall Street cheered the results.

The stock shed some of its massive gains on Thursday, falling by 15% to $80 a share in afternoon trading, after the California-based company announced a $550 million stock offering. Viking issued 6.47 million shares at $85 each and said it will use the cash to fund the development of its weight-loss treatments, including a pill version.

Viking Therapeutics stock was already off to a strong start this year, but this latest win significantly added to its trajectory, with shares up 322% since the beginning of the year.

The injectable drug in question, named VK2735, was credited with helping patients lose up to 15% of their body weight in just 13 weeks — results that analysts say could make Viking a top target for acquisition.

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Wall Street viewed the results as a surprising success, given that Viking only expected weight loss to occur at a range of between 7% and 8%, the current rate for current weight-loss drug standouts such as Novo Nordisk's (NVO) Ozempic and Wegovy and Eli Lilly's (LLY) Mounjaro and Zepbound.

"What's so impressive about this data is this compound actually caused more weight loss than Eli Lilly's [medication]," BTIG analyst Justin Zelin told Yahoo Finance Live. "So [Lilly] saw about a 7% weight loss around this time point. And Viking actually doubled that. They showed 15% around the same time point of 13 weeks. And that's why investors are so impressed here."

28 June 2023, Denmark, Kopenhagen: Various packages of the weight-loss drug
Various packages of the weight-loss drug "Wegovy" from the pharmaceutical company Novo Nordisk lie on the sales counter in a Danish pharmacy. (Steffen Trumpf/picture alliance via Getty Images) (picture alliance via Getty Images)

Zelin said that patients could potentially lose as much as 25% to 30% of their body weight after a year on the drug.

Analysts at William Blair responded to the news by raising their peak sales estimate for Viking to $14.4 billion in the US and $7.2 billion in Europe from previous valuations of $10.1 billion and $3.6 billion, respectively. They also pegged the company’s fair value at $9.9 billion ($98.99 per share), which is up from their previous valuation of $5.5 billion.

"Ultimately, we believe that the value of VK2735 will be maximized in the hands of a big pharma, which could best navigate the rebate/discount-driven reimbursement landscape," the analysts wrote in a note following the results.

Zelin agreed that Viking's results likely renewed interest in a potential takeover.

"There’s been a lot of speculation on M&A and this name," Zelin said. "Obviously, it’s a name that’s of interest to Big Pharma players."

"Look, the GLP franchises are doing over $4 billion a quarter in sales," he continued. "Tirzepatide is doing over $1 billion a quarter; so, this is a high-interest space that pharma’s looking at. You could imagine that players like Pfizer –– who had an asset [they discontinued] — are paying close attention to the space currently."

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