Why This Weight Loss Drug Company's Stock Surged Today

Shares in biopharmaceutical company Viking Therapeutics (NASDAQ: VKTX) were up by 6.3% at 12:30 a.m. ET today. The move likely stems from the market digesting the previous day's news that Viking had initiated a phase 3 trial of its most promising program in its pipeline, namely VK2375, a treatment for metabolic disorders, including obesity.

Why VK2375 is exciting investors

There are probably two key reasons why the market likes the initiation of a phase 3 trial:

• VK2375 is a dual GLP-1/GIP receptor agonist similar to Eli Lilly's blockbuster weight loss drug Zepbound.
• Viking is developing VK2375 in both subcutaneous (under the skin) and oral formulations. The subcutaneous phase 3 trial is currently underway, while the phase 2 oral dosing trial results are expected to be released later this year.

For reference, Novo Nordisk also offers a highly successful weight loss drug, Wegovy, a GLP-1 receptor agonist.

What it means to investors

While Viking Therapeutics, with a $3.2 billion market capitalization, will face challenges in competing with Eli Lilly's Zepbound unless it can demonstrate superior efficacy in the phase 3 trial, the real value in the business may lie in the oral formulation.

There are obvious convenience and accessibility advantages to an oral formulation over a subcutaneous one, and a successful phase 2 trial may encourage a much larger pharmaceutical company to consider acquiring the company to take it through phase 3.

Image source: Getty Images.

As such, look out for the phase 2 results later in the year. In addition, note that Novo Nordisk has submitted to the FDA for approval of an oral formulation of Wegovy , and Eli Lilly recently reported positive results in a phase 3 trial for an oral GLP-1 agonist, orforglipron.

All this means that the field is getting crowded.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk and Viking Therapeutics. The Motley Fool has a disclosure policy.