Could Viking Therapeutics Disrupt the Weight-Loss Space?
Wegovy. Zepbound. Ozempic. Unheard of just a few years ago, these weight loss drugs are now household names.
Is there room for a challenger in this seemingly crowded space? There is always room for an innovative spin on a successful, established product.
Novo Nordisk on the Ropes
Failure to keep up with innovation can be costly, as shown by the round trip taken by Denmark-based drug maker Novo Nordisk ($NVO).
In the early part of this decade, this company enjoyed a spectacular rally, thanks to the success of its Wegovy and Ozempic weight loss drugs. However, Novo Nordisk shares have fallen by over 70% since mid-2024, as shown here on the monthly chart:
The company is facing relentless competition, as Eli Lilly’s ($ELY) Zepbound eats into its market share. Novo Nordisk is also under increasing pressure from generic competitors, and faces patent expirations for semaglutide in the U.S. and Europe within the next five years.
Enter the Viking
This brings us to Viking Therapeutics ($VKTX), a San Diego-based pharmaceutical company with just a $5 billion market capitalization. Shares of Viking vaulted 35% on Tuesday after the company announced positive results from a Phase II trial of VK2735.
VK2735 is a dual GLP-1/GIP agonist. This compound approach is considered more effective for weight loss when compared to a standalone GLP-1 receptor antagonist like Novo Nordisk’s semaglutide.
Take it Off, Keep it Off
In the Phase II trial, participants maintained 90% of their weight loss when switching from a weekly shot to a monthly dose of VK2735. They maintained 97% weight loss when switching from weekly to one shot every two weeks.
Meanwhile, the vast majority of Ozempic and Wegovy users must continue to take a weekly shot. By offering a product that requires fewer shots, could Viking Therapeutics disrupt this space?
Charts Tell a Story
While the news on Viking sounds exciting, there are risks involved in owning this stock. Even after Tuesday’s rally, Viking Therapeutics is trading nearly 60% below its 2024 highs.
Zooming in on the daily chart, Tuesday’s rally places shares of Viking in a difficult position. Over the past 13 months, the stock has been rejected on three separate occasions (arrows) from the low $40s, where it currently resides.
Bottom Line
I’m a buyer of Viking Therapeutics shares here, but because the stock is currently in a precarious position, I’m not going all-in. Instead, I’m entering a half-sized position.
That way, if the stock is rejected for a fourth time, I can increase the size of the position at a lower price. On the other hand, if the stock moves higher from here and climbs above $43.15, Viking Therapeutics will trade at a 52-week high. Either scenario is acceptable.
At the time of publication, Ponsi was long VKTX.
