Recently revealed trial results for Roche’s experimental weight-management drug suggest Viking Therapeutics is on the right track.
Weight-management treatments are all the rage lately. According to Morgan Stanley, combined sales of injections that curb appetites and promote weight loss could reach an estimated $105 billion by 2030.
Viking Therapeutics (VKTX 3.25%) is still a clinical-stage drugmaker that’s developing an anti-obesity candidate called VK2735 that appears competitive with a similar drug the U.S. Food and Drug Administration (FDA) approved in 2022 called tirzepatide. Marketed by Eli Lilly as Mounjaro for diabetes and Zepbound for weight management, tirzepatide sales have already exceeded $17.3 billion annually.
Many potential consumers of weight-management drugs are holding off because they don’t want to jab themselves with a needle each week. Providing an easy-to-swallow solution for these patients could lead to billions in annual revenue, but clinical development of oral anti-obesity drugs has been more than a little challenging.
Why Roche’s oral weight-management 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 study with its oral weight-management candidate CT-996. After four weeks of treatment, patients randomized to receive the highest dosage 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 led to a weight loss of 3.3%, on average, versus a placebo after one month. This doesn’t compare well to CT-996, but getting patients to lose weight isn’t the biggest challenge with oral weight-management candidates. So far, safety issues have been a much bigger concern.
When it comes to tolerability, it looks like CT-996 has a problem. The phase 1 trial randomized 19 patients to receive three different dosages of CT-996, and 16 reported nausea. Among 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 if it isn’t quite as effective, oral VK2735 appears much easier to tolerate, which bodes well for its future. Phase 1 results show just 4 out of 16 patients treated with the two highest doses reported mild nausea after a month of treatment, and none vomited.
What’s next for Viking Therapeutics
So far, we’ve only seen CT-996 and VK2735 tested on very small groups of patients. A larger study could improve CT-996’s outlook, but for now, it looks like Viking’s candidate is best in class.
We could 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 dosage can close the efficacy gap with CT-996 without raising the frequency of reported side effects, the stock could soar.
Investors new to Viking Therapeutics will be glad to learn that oral VK2735 isn’t the only new drug candidate progressing through its development pipeline. The injected 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 a year of follow-up data, which means the pivotal study won’t produce meaningful data until at least the middle of 2026.
In early 2025, Viking Therapeutics will likely begin a phase 3 trial with VK2809, an experimental treatment for metabolic dysfunction-associated steatohepatitis (MASH). This condition impairs the liver function of millions of Americans, but the FDA didn’t approve the first MASH treatment Rezdiffra until this March.
Sales of Rezdiffra from Madrigal Pharmaceuticals are still ramping up. With millions of potential patients and just one treatment option available, VK2809 still has a great chance to achieve more than $1 billion in annual sales if eventually approved.
Is Viking Therapeutics stock a buy now?
Roche’s misfortune with CT-996 improves the outlook for oral VK2735, but it doesn’t make Viking Therapeutics a safe stock to buy. For starters, it’s going to be over a year before Viking can send an application for its first drug to the FDA. The company is a long way from having a drug to sell, but the stock has a sky-high market cap of $7.1 billion at recent prices.
Viking Therapeutics finished June with a healthy $942 million in cash after burning through $51.5 million in the first half of 2024. Running big phase 3 trials for two candidates will push operating expenses a lot higher next year.
Viking Therapeutics probably has enough cash in its coffers to keep operations humming along until its lead candidates produce phase 3 data. If phase 3 results for VK2735 are anything but a rousing success, though, investors who buy at recent prices could get wiped out.
While I do expect success from VK2735, clinical-trial outcomes are never as predictable as investors want them to be. This stock is a buy for folks with a sky-high risk tolerance, but others should watch from a safe distance.
