Viking Therapeutics Loses 20% in a Month: How to Play the Stock

Shares of Viking Therapeutics VKTX have lost over 20% in the past month, significantly underperforming the industry’s 1% growth. The stock has also underperformed the sector and the S&P 500 during the same period, as shown in the chart below. VKTX’s shares are trading below the 50 and 200-day moving averages.

VKTX Stock Underperforms Industry, Sector & S&P 500

Viking Therapeutics' stock declined after it announced mixed top-line results from a mid-stage study evaluating the safety and efficacy of the oral formulation of its experimental obesity drug, VK2735. Though patients on the highest drug dose lost up to 12.2% of their body weight after 13 weeks of daily dosing compared with 1.3% in the placebo group, a significant number of patients dropped out of the study.

Though VKTX did assure investors that it might be able to mitigate the side effects of oral VK2735 by gradually moving patients from lower doses to higher ones, the results have raised questions about the drug’s tolerability and safety profile.

However, we cannot make an investment decision based on just a one-off news event. Let’s analyze the company’s strengths and weaknesses to understand how to play the stock amid the recent share price decline.

VKTX’s Pipeline Progress Encouraging

Viking is one of the few biotech stocks that has shown immense potential in the obesity space. It is developing VK2735, an investigational novel dual GLP-1 and GIP receptor agonist, in multiple clinical studies as oral and subcutaneous (SC) formulations for treating obesity. This drug has demonstrated superior weight reduction capabilities across both oral and SC formulations.

Last year, Viking reported that the phase II VENTURE study, which evaluated VK2735 SC, achieved its primary and all secondary endpoints with statistical significance over 13 weeks. Based on these results, the company recently initiated two late-stage studies on the drug over a 78-week period. An update on this study is not expected until the end of 2026 or early 2027.

Even though the mid-stage study results on the oral version were underwhelming, it still successfully achieved its primary and secondary endpoints.

Apart from VK2735, Viking is also developing drugs targeting non-alcoholic steatohepatitis (NASH) and X-linked adrenoleukodystrophy (X-ALD) indications. Both candidates have demonstrated encouraging results in clinical studies, based on which the company is pursuing collaboration opportunities for advancing the development of both drugs.

VKTX Faces Stiff Competition in the Obesity Space

The obesity market has garnered much interest lately, with two companies, Eli Lilly LLY and Novo Nordisk NVO, dominating this space with their respective injectable obesity drugs Zepbound and Wegovy. According to research conducted by Goldman Sachs, the obesity market in the United States is expected to reach $100 billion by 2030.

In order to capitalize on the rapidly expanding obesity market, Eli Lilly, Novo Nordisk and Viking Therapeutics are racing to introduce oral weight-loss pills. While there are currently no approved pills for weight-loss management, Novo’s regulatory filing seeking approval for an oral version of Wegovy is currently under review by the FDA. A final decision is expected before the end of 2025.

Last month, Lilly reported results from two late-stage studies evaluating orforglipron, its GLP-1 once-daily oral pill for obesity. Both studies met their primary and all key secondary endpoints. Post the announcement of these results, Lilly now has the full clinical dataset needed to begin global regulatory filings for orforglipron. A regulatory filing with the FDA is expected before this year’s end.

Lack of Stable Revenue Stream: A Woe for VKTX

While we acknowledge that Viking Therapeutics’ pipeline holds potential, it still lacks a stable stream of income generation. The company has to shoulder significant cash burn due to ongoing clinical studies. Any developmental or regulatory setback to the ongoing studies could significantly hurt the stock. Its pipeline candidates, which are still undergoing clinical development, are at least a couple of years away from potential commercialization.

VKTX Stock Valuation & Estimates

The company is trading at a premium to the industry. Going by the price/book ratio, the stock currently trades at 3.82 times trailing 12-month book value, higher than 3.09 times for the industry.

Estimates for Viking Therapeutics’ 2025 and 2026 loss per share have widened significantly in the past 60 days.

Short-Term Investors Should Sell VKTX Stock

Although a strong cash position of $808 million (as of June 2025-end) and zero debt ensure that Viking can sufficiently fund its day-to-day operations, the lack of a stable revenue stream and the presence of pharma giants like Lilly and Novo in its target market spaces remain a concern.

This Zacks Rank #4 (Sell) stock’s premium valuation and downward revisions to earnings estimates also make it difficult to justify building or increasing positions at this stage.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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