Oral weight-loss drugmaker Viking reports widening loss in 2Q, guides for higher R&D

Viking Therapeutics, a clinical-stage biotech developing, among other things, an oral weight-loss drug, has reported a net loss a third bigger than the market expected and is set to further increase R&D spending. That said, the company is still considered a leading small-/mid-sized player in the weight-loss drug market and could pose a threat to Novo Nordisk and Eli Lilly with their injected therapies, Wall Street believes. 

Viking Therapeutics reported a net loss in the second quarter that was 32% larger than expected by the Zack's consensus, at minus $65.6 million, according to the financials released on Wednesday. 

The loss grew due to higher R&D expenses, including clinical trials. For the second quarter, these expenses came to $60.2 million, up about 150% year over year.

General and administrative expenses ballooned 40% year over year to $14.4 million, primarily due to higher employee-related expenses. 

Right now, Viking Therapeutics does not have an FDA-approved drug in its portfolio, meaning it is not generating any revenue. Meanwhile, R&D expenses are expected to rise sequentially by approximately a quarter to a third in the third and fourth quarters relative to the second quarter, the management said during the earnings call. 

Still, the biotech has enough cash to sustain its operations for more than three years, says William Blair analyst Andy Hsieh. The company had $808 million on its balance sheet at the end of the second quarter.

In addition, according to Jefferies analyst Roger Song, Viking has one of the most de-risked safety profiles among peptide incretin drugs, and he considers the biotech leading among small- and mid-cap drugmakers. 

Weight-loss pills, which Viking is developing, are expected to be more popular with consumers than current weight-loss injections like Ozempic and Wegovy from Novo Nordisk. According to studies so far, Viking’s oral candidate is one of the most effective ones out there, with patients losing 8.2% of their body weight in just four weeks. By comparison, Eli Lilly’s injectable Zepbound has shown an average weight loss of 20.2% over 72 weeks, while its experimental pill Orforglipron resulted in a 7.9% weight loss over 40 weeks. 

Viking might also be an attractive acquisition target for other pharmaceutical companies wanting to get in on the lucrative weight-loss drug business, Barron's writes.

Viking sank 10% on Wednesday, when the earnings were released, but regained its composure already yesterday, when the stock closed up 0.3%. Since the beginning of the year, Viking has lost almost 17% of market value.

Despite the earnings, HC Wainwright reiterated its "buy" recommendation and target price of $102 per share, reports Investing.com. Cantor Fitzgerald also maintained its "overweight" rating at a $104 per share target price. William Blair kept its "buy" too, but its target price is much lower at $80 per share.

Of the 19 Wall Street analysts who track the company, 17 recommend buying the stock, versus two who are for holding them, according to MarketWatch. Their average target price is $89.95 per share, implying potential to triple relative to current quotes. 

Viking Therapeutics is focused on metabolic and endocrine disorders and is advancing its lead asset, VK2735, for obesity. The drug recently completed a successful phase II clinical trial.

According to Freedom Broker, VK2735 has so far demonstrated greater efficacy than Novo Nordisk’s semaglutide-based Wegovy and Eli Lilly’s tirzepatide-based Zepbound. These two dominant players currently control approximately 95% of the GLP-1 market, Freedom Finance Global has estimated.

While a 2024 Morningstar report identified as many as 16 obesity drug candidates in development at companies ranging from Roche and Amgen to Pfizer and AstraZeneca, Freedom Broker believes Viking stands out as the only serious near-term challenger to disrupt the Novo-Lilly duopoly in the GLP-1 space.

The AI translation of this story was reviewed by a human editor.