Shares of Viking Therapeutics VKTX lost 18% yesterday after pharma giant Merck MRK announced its foray into the obesity space.
On Wednesday, Merck announced that it has secured a licensing deal for China-based Hansoh Pharma’s investigational weight-loss drug.
More on MRK’s Drug Deal
Per the terms of the deal, Merck will obtain exclusive rights to develop and market HS-10535, a preclinical oral small-molecule GLP-1 receptor agonist targeting metabolic disorders, including obesity.
Hansoh will receive an upfront payment of $112 million in exchange for these rights. It is also eligible to receive up to $1.9 billion in milestone payments as well as royalties on the drug’s future sales from MRK.
Merck’s agreement also allows Hansoh Pharma to co-promote or even solely market the drug in China, subject to certain conditions.
Why Did VKTX Stock Fall on MRK’s Drug Deal?
Viking is one of the few biotech stocks that has shown immense potential in the obesity space. The company is developing VK2735, an investigational novel dual GLP-1 and GIP receptor agonist, in different clinical studies as oral and subcutaneous (SC) formulations for treating obesity.
The sell-off in Viking Therapeutics’ shares indicates that investors identify Merck’s entry into the obesity space as a new competitor with substantial resources, expertise and market influence. This could make it harder for smaller biotechs like VKTX to maintain or grow their market share.
Before Merck’s announcement, some investors considered Merck as a potential buyer for smaller companies like Viking to expand its portfolio in the obesity space. Now that MRK is actively developing its obesity treatments, the likelihood of it acquiring a company like Viking decreases. This reduces the speculative value of Viking as a takeover target, which can also negatively impact its stock price.
Overall, a stronger competitor and diminished acquisition prospects by a pharma giant are the probable reasons behind the sell-off in VKTX stock. Shares of Structure Therapeutics, another company developing a potential obesity drug, also plummeted 11% post Merck’s announcement.
Year to date, Viking Therapeutics’ shares have more than doubled in market value against the industry’s 10.5% decline.
Image Source: Zacks Investment Research
Encouraging Development of VKTX’s Obesity Program
VK2735 has shown blockbuster potential, demonstrating superior weight reduction capabilities in clinical studies. Last month, Viking presented updated results from the phase I study on the oral version of VK2735 at ObesityWeek. This showed that patients who received the highest drug dose lost up to 8.2% in body weight after 28 days of daily dosing compared with 1.4% in the placebo group. In February, management reported that the phase II VENTURE study, which evaluated the SC formulation of VK2735, achieved its primary and all secondary endpoints with statistical significance.
Before 2024-end, management plans to meet the FDA to discuss the late-stage study design for the SC formulation of VK2735 and start a mid-stage study on the oral formulation. It also plans to evaluate once-monthly dosing of VK2735 SC in a future clinical study.
Viking is not just limiting itself to one obesity drug. Management plans to file an investigational new drug (IND) application with the FDA next year to advance an internally developed dual amylin and calcitonin receptor agonist candidate to clinical studies for treating obesity.
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 obesity drugs Zepbound and Wegovy. Per a research conducted by Goldman Sachs, the obesity market in the United States is expected to reach $100 billion by 2030. This is also evident from the fact that Lilly and Novo are investing heavily to optimize their production capacities and have started evaluating multiple other novel obesity candidates.
Anticipating the huge demand for obesity drugs, several companies like Amgen and Roche are also developing their respective obesity drugs and making rapid progress in the space.
Last month, Amgen announced 52-week top-line data from a phase II study on MariTide, its GLP-1 therapy for obesity. The data showed that the Amgen drug led to approximately 20% average weight loss over 52 weeks without reaching a weight loss plateau.
Roche recently forayed into the obesity market after it acquired privately owned Carmot Therapeutics for $2.7 billion in January. The acquisition gave Roche access to Carmot’s differentiated portfolio of incretins, including its lead assets — CT-388, CT-996 and CT-868. CT-388, a dual GLP-1/GIP receptor agonist, is being evaluated for the treatment of obesity in patients with and without type 2 diabetes, injected subcutaneously once a week.
Viking Therapeutics, Inc. Price
Viking Therapeutics, Inc. price | Viking Therapeutics, Inc. Quote
VKTX’s Zacks Rank
Viking Therapeutics currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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