Viking Therapeutics posts positive results for oral weight-loss drug. Analysts remain unanimous the stock's a buy.

By Ciara Linnane

Data from a Phase 1 trial is the latest bullish news from the biotech that may offer cheap entry to weight-loss mania

Viking Therapeutics Inc.'s stock rose 1.9% early Wednesday to add to its prior-day gains, as analysts welcomed positive data from the company's early trial of an oral weight-loss treatment - the latest bullish announcement from the biotech.

The data showed the company's VK2735 oral therapy achieved a 3.3% placebo-adjusted weight loss at day 28 based on a 40 mg dose and proved safe and well tolerated, raising hopes that higher doses will prove even more effective.

Viking (VKTX) is viewed as a cheaper entry to the weight-loss mania than market leaders Eli Lilly & Co. (LLY) and Denmark's Novo Nordisk (NVO) (DK:NOVO.B), even after its more than 334% gain in the year to date. Analysts expect a pill version of the treatment will be a game-changer as it would be far more easily administered than the current injectable versions. All 11 analysts offering coverage on FactSet have a buy rating or equivalent on the stock.

"Bottom-line, we think VK2735 franchise looks best-in-class as both subcutaneous and oral formulation and reiterate our buy rating," Truist analysts wrote Wednesday. "Oral VK2735 is currently not a part of our sum=of-the-parts valuation of Viking Therapeutics and our model assumptions are under review."

VK2735 is a GLP-1 drug, where GLP stands for glucagon-like peptide. It works by mimicking the effect of a gut hormone that can help control blood-sugar levels and reduce appetite.

Novo Nordisk's Ozempic drug for diabetes and Wegovy for weight loss have become so popular the company is struggling to meet demand, and its main shareholder is buying a contract manufacturer to help it ramp up supply.

Not surprisingly, the issue of scaling up manufacturing has led to speculation that Viking may become a takeover target.

For more: Viking Therapeutics' promising weight-loss drug data makes the company a takeover target

Truist said management admitted in talks that there are industry-wide constraints for now, but it remains sanguine on the issue.

"We view scalability concerns as a high-class problem and ultimately something that a potential pharma partner would be more than happy to take on in order to not only break-into but also take meaningful share of what could possibly be the largest therapeutic category in history, obesity," analysts led by Joon Lee wrote.

William Blair analysts noted the 3.3% result was ahead of the Wall Street expectations of between 2% and 3%. A recent readout from Novo Nordisk on its amycretin oral drug had a 4% weight-loss reduction after 28 days. Viking plans to advance the trial to a Phase 2 study later this year.

"Overall, we view the encouraging data generated from the oral tablet formulation as affording Viking commercial optionality and expansion into the "maintenance" market," analysts Andy T. Hsieh and Alexandra V. Ramsey wrote in a note to clients.

The analysts were also impressed by the safety profile, with most, or 79%, of adverse events described as mild. There were no reported cases of vomiting and just one case of diarrhea.

They were also "intrigued" by the pharmacokinetic profile that showed slower accumulation than the injectable therapy, which could have the potential to negate the need for titration, which would better acclimate patients to the drug.

Oppenheimer analysts raised their price target to $138 from $116, suggesting an upside of roughly 63% compared to its current price. Analysts led by Jay Olson noted that there seemed to be some degree of sustained weight loss after the treatment was stopped, which is not the case with the existing approved treatments.

"We believe the emerging efficacy/safety profile of VK2735 supports a best-in-class potential, and more importantly we think there's room for VKTX to further improve the profile," they wrote.

The company could combine or switch the oral version with the injectable one for different patient groups, or it could combine oral VK2735 with its small molecule thyroid hormone receptor agonist VK2809 for additional benefits, they wrote.

More than two in five Americans are deemed to be obese, according to the National Institute of Diabetes and Digestive and Kidney Diseases.

Viking's stock has gained 18.3% in the week to date, while the S&P 500 SPX was flat.

Also read: Eli Lilly launches home delivery of obesity drug Zepbound - but warns against its use for cosmetic weight loss.

-Ciara Linnane

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03-28-24 0709ET

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