Viking Therapeutics stock toppled Tuesday after the biotech company inked a $150 million manufacturing deal for its weight-loss drug, VK2735.
The deal likely signals Viking isn't open to entertaining a takeover deal in the near future.
William Blair analyst Andy Hsieh was "enthusiastic" about the deal. CordenPharma, a contract development and manufacturing organization, will be able to fill and pack up to 100 million autoinjectors, 100 million vials and syringes and make more than 1 billion oral tablets. The deal covers both the active pharmaceutical ingredient behind VK2735 and the final product.
In turn, Viking will make prepayments amounting to $150 million over the next three years.
"We acknowledge that investors could view the deal as a negative development with respect to Viking's takeout prospects; however, we do not share this view," Hsieh said in a report. "Given the importance of procuring (active pharmaceutical ingredient) and the associated devices and accessories, we argue it would be imprudent to delay such discussions even if Viking was theoretically in late-stage discussions with an acquirer."
But Viking Therapeutics stock slipped 5.2%, closing at 26.52.
$39 Billion In Potential Sales
Investors and analysts have long looked to Viking Therapeutics as a potential takeover target. The small biotech company has a promising weight-loss drug, VK2735, but is going up against giants Novo Nordisk and Eli Lilly. Both have big, and expanding, manufacturing capacity.
The deal with CordenPharma reduces the supply chain risk, which has been an overhang for Viking Therapeutics stock, William Blair's Hsieh said.
Viking's prepayments to CordenPharma will be credited toward future orders. And those could be absolutely massive.
"Assuming weekly dosing, 100 million autoinjectors and 100 million vials/syringes would equate to 3.8 million patient doses per year," Hsieh said. "In addition, 1 billion oral tablets (assuming daily dosing) translate into 2.7 million patients treated annually."
VK2735 is most like Lilly's Zepbound. Both drugs mimic the activity of hormones called GLP-1 and GIPR to reduce hunger and improve markers of blood sugar. Eli Lilly just cut the out-of-pocket cost for Zepbound to $499 a month. If Viking uses the same cost, the potential 6.5 million doses of VK2735 — under the CordenPharma deal — would come out to $39 billion in sales, Hsieh said.
He kept his outperform rating on Viking Therapeutics.
Analysts expect Viking to start selling its weight-loss drug in 2027. They expect it to reach blockbuster status in 2030 with $2.15 billion in sales.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
