Viking Therapeutics stock crumbled Tuesday despite seemingly positive test results for a drug that treats a serious liver disease.
The company tested its drug, dubbed VK2809, in patients with nonalcoholic steatohepatitis, or NASH. In this disease, fatty tissue builds up on the liver, causing scar tissue called fibrosis. Left untreated, patients will eventually develop cirrhosis and require a transplant.
Fibrosis is measured in five stages, with five being the worst. After a year, 63% to 75% of patients reached NASH resolution — meaning the inflammatory symptoms of the disease disappeared — while experiencing no worsening in fibrosis. In comparison, just 29% of the placebo group reached the same bar.
Further, 44% to 57% of patients had at least a one-stage improvement in fibrosis, while experiencing no worsening in NASH symptoms. Just 34% of placebo recipients experienced the same.
This was unexpected, William Blair analyst Andy Hsieh said in a client note.
Viking Therapeutics stock tumbled 10% to 56.07. Shares hit their lowest point since late February. Hsieh noted there aren't any near-term catalysts to drive Viking stock higher. The company will also have to contend with the lofty cost and time investment of a Phase 3 study, all while keeping an eye on potential competitors.
Still, "we view today's update as a material upside to our previous expectations and do believe the sell-off is fundamentally driven," he said.
But Viking Therapeutics stock tumbled 9.7%, closing at 56.23. Shares hit their lowest point since late February.
Top 1% Viking Therapeutics Stock
Viking is going up against Madrigal Pharmaceuticals, which gained Food and Drug Administration approval earlier this year for the first-ever treatment for metabolic dysfunction-associated steatohepatitis, or MASH. MASH is the new name for NASH.
In its Phase 3 study, 30% of patients who received Madrigal's drug, called Rezdiffra, reached NASH resolution after a year without any worsening in fibrosis. And 26% of patients had at least a one-stage improvement in fibrosis, with no worsening in NASH symptoms.
Viking says its midstage test results support the company's theory that VK2809 could have a "best-in-class profile for the treatment of NASH." But Viking Therapeutics stock dropped far below its 50-day moving average, MarketSurge shows. Madrigal stock dipped 0.5% to 244.35.
A Takeover Candidate?
William Blair's Hsieh says the data could bolster investors' expectations that Viking is a buyout candidate. The company is also working on weight-loss drugs.
"Given the unprecedented market opportunity in obesity, we believe the value of (weight-loss drug) VK2735 will ultimately be maximized in the hands of a big pharma, which could best navigate the rebate/discount-driven reimbursement landscape," he said.
Hsieh has an outperform rating on Viking Therapeutics stock, saying "we are therefore aggressive buyers on pullback."
Viking shares have a best-possible IBD Digital Relative Strength Rating of 99. This puts Viking Therapeutics stock in the top 1% of all stocks in terms of 12-month performance.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
