Shares of Viking Therapeutics (NASDAQ:VKTX) jumped nearly 14% today after Gilead Sciences (NASDAQ:GILD) announced that a closely watched drug candidate failed a phase 3 trial. The drug candidate, selonsertib, was being developed as a potential treatment for nonalcoholic steatohepatitis (NASH).
The disease is characterized by inflammation and scarring of the liver stemming from fat buildup. The relatively poorly-served patient population has led to over one dozen experimental drugs chasing the market's blockbuster potential. That includes Viking Therapeutics, which no longer has to worry about Gilead Sciences beating it to the punch.
As of 1:51 p.m. EST on Tuesday, Viking's stock had settled to a 10.8% gain.
Gilead Sciences decided to continue developing selonsertib for NASH even after a questionable phase 2 trial failed to show if the drug candidate was actually effective. The highly competitive industry pipeline likely tipped management to make its hasty decision, not to mention mounting pressure following the company's 2016 failure of simtuzumab in clinical trials for the liver disease.
The failure removes Gilead Sciences from contention, which has analysts eyeing the other drug candidates in the field. Viking Therapeutics is developing VK2809, which relies on a different mechanism of action than selonsertib and other drugs.
It delivered impressive results in a phase 2 trial for treating nonalcoholic fatty liver disease (NAFLD), a less-severe form of NASH. After 12 weeks of treatment, fully 67% of patients taking the drug candidate achieved at least a 50% reduction in liver fat. Roughly 83% of patients realized a reduction of at least 30%. Only 18% of patients receiving a placebo saw reductions of either magnitude.
The company thinks that reducing liver fat by at least 30% will be the clinical threshold for treating NASH, so the results in NAFLD suggest the company has a promising treatment in development.
Viking Therapeutics expects to initiate a trial for VK2809 in NASH sometime this year. Given the impressive results from the midstage trial in NAFLD and the recent failure of Gilead Sciences, the $630 million company is no doubt one of the most promising NASH stocks to watch in 2019. While there are still other deep-pocketed companies developing drug candidates for the liver disease, this small-cap pharma might offer the most reward -- and a healthy amount of risk, too.