What happened

After results from clinical trials sparked investors' hope that the company's approach to tackling nonalcoholic steatohepatitis (NASH) will pan out, shares in Viking Therapeutics (NASDAQ:VKTX) soared 88.4% in 2018, according to S&P Global Market Intelligence.

So what

Shareholders' good fortune began in earnest in May when Madrigal Pharmaceuticals (NASDAQ:MDGL) reported updated, positive results from a midstage trial evaluating a drug that works similarly to Viking Therapeutics' lead drug candidate, VK2809.

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Madrigal's data showed that at the 36-week mark, liver fat was reduced by an average of 37%. Also, 39% of patients who had responded to MGL-3196 at 12 weeks achieved NASH resolution at 36 weeks, leading to speculation that up to 40% of patients receiving this type of therapy could see NASH resolution within nine months.

The results prompted rallies in both Madrigal and Viking Therapeutics' shares, because MGL-3196 and VK2809 both boost thyroid hormone activity by selectively targeting thyroid beta receptors to increase metabolism and fat clearance. Investors who took the chance of buying Viking Therapeutics on hopes VK2809 would put up similarly strong results in its trial were rewarded in September, when Viking unveiled its own positive data.

Specifically, 90.9% of patients receiving VK2809 saw a 30% or greater reduction in liver fat at 12 weeks; overall, the average reduction was 59.7%. The data shouldn't be compared to Madrigal's directly, because each company studied its drug in different patients, but nonetheless, it was an encouraging finding; it prompted Viking Therapeutics CEO Brian Lian to say, "VK2809's effect on liver fat at 12 weeks appears to exceed all other oral agents currently in development for NASH."

Now what

NASH is quickly becoming the most common reason for liver transplant. A silent disease, it's often underdiagnosed. But estimates are that there are 3 million cases of nonalcoholic fatty liver disease in the U.S. annually, and roughly 20% of those cases are NASH.

The sheer size of the addressable market has industry analysts projecting that spending on NASH medications could swell, especially as the incidence of fatty liver disease increases due to sedentary lifestyles and high-fat diets. The possibility of this becoming a megablockbuster indication, and the fact that Viking Therapeutics' market cap is only $613 million, suggest that if the company continues to post strong results for VK2809, the run-up in its share price may not be over.

Check out the latest Viking Therapeutics earnings call transcript.

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