Viking Therapeutics: Bad result for Roche’s weight control pill is great news for Oral VK2735

Weight management treatments are all the rage these days. Conformable Morgan Stanleycombined sales of injections that reduce appetite and promote weight loss could reach about $105 billion by 2030.

Viking therapeutics (VKTX 3.25%) is still a clinical-stage drugmaker developing an anti-obesity candidate called VK2735 that appears competitive with a similar drug approved by the US Food and Drug Administration (FDA) in 2022 called tirzepatide. Marketed by Eli Lilly like Mounjaro for diabetes and Zepbound for weight management, sales of tirzepatide have already topped $17.3 billion annually.

Many would-be users of weight management drugs hold back because they don’t want to stick themselves with a needle every week. Providing an easy-to-swallow solution for these patients could lead to billions in annual revenue, but clinical development of oral obesity drugs has been more than a little difficult.

Why Roche’s oral weight-control drug probably isn’t going anywhere

In July, Roche (RHHBY 3.70%)a global pharmaceutical giant, reported positive efficacy results from a placebo-controlled phase 1 trial of its oral weight management candidate CT-996. After four weeks of treatment, patients randomized to receive the highest dose of CT-996 reduced their weight by 6.1% compared to a placebo.

In March, Viking Therapeutics showed us that an oral version of its weight management candidate VK2735 resulted in an average weight loss of 3.3% compared to a placebo after one month. This does not compare well with CT-996, but getting patients to lose weight is not the biggest challenge with oral weight management candidates. Until now, safety issues have been a much bigger concern.

When it comes to tolerability, CT-996 seems to have a problem. The phase 1 study randomized 19 patients to receive three different doses of CT-996, and 16 reported nausea. Of 13 patients given the highest doses, seven reported vomiting and seven reported indigestion.

None of the treatment-emergent events caused by CT-996 were serious enough to require hospitalization, but anti-obesity treatments are intended for relatively healthy people. Even though it is not as effective, oral VK2735 seems much easier to tolerate, which bodes well for its future. Phase 1 results show that only 4 of 16 patients treated with the two highest doses reported mild nausea after one month of treatment, and none vomited.

What’s next for Viking Therapeutics

So far, we have only seen CT-996 and VK2735 tested in very small groups of patients. More study could improve CT-996’s outlook, but for now it looks like Viking’s candidate is the best in class.

We may soon learn a lot more about oral VK2735. Viking Therapeutics is expected to present phase 1 data for higher doses at a conference in November. If a higher dose can close the efficacy gap with CT-996 without increasing the frequency of reported side effects, the stock could rise.

Investors new to Viking Therapeutics will be happy to know that oral VK2735 isn’t the only new drug candidate progressing through development. The injectable version could begin a Phase 3 trial designed to support an application by the end of 2024. The FDA will most likely insist on at least one year of follow-up data, meaning the pivotal study won’t produce meaningful data until to at least mid-2026.

In early 2025, Viking Therapeutics will likely begin a Phase 3 trial of VK2809, an experimental treatment for metabolic dysfunction-associated steatohepatitis (MASH). The condition affects the liver function of millions of Americans, but the FDA didn’t approve the first MASH treatment Rezdiffra until March.

Sales of Rezdiffra from Madrigal Pharmaceuticals still growing With millions of potential patients and only one treatment option available, VK2809 still has a strong chance of achieving more than $1 billion in annual sales if ultimately approved.

Is Viking Therapeutics stock a buy now?

Roche’s debacle with CT-996 improves the outlook for oral VK2735, but doesn’t make Viking Therapeutics a safe stock to buy. For starters, it will be over a year before Viking can submit an application for its first drug to the FDA. The company is far from having a drug to sell, but the stock has a sky-high $7.1 billion market cap at recent prices.

Viking Therapeutics ended June with a healthy $942 million in cash after burning through $51.5 million in the first half of 2024. Running large Phase 3 trials for two candidates will boost spending operation next year.

Viking Therapeutics likely has enough cash in its coffers to continue operations until its lead candidates produce Phase 3 data. If the Phase 3 results for VK2735 are anything but a resounding success, investors buying at recent prices could be wiped out.

While I expect success from VK2735, clinical trial results are never as predictable as investors want them to be. This stock is a buy for people with a high risk tolerance, but others should watch from a safe distance.