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Here's Why Viking Therapeutics Tumbled 20.9% in March

By Maxx Chatsko - Apr 9, 2020 at 8:15AM

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The small-cap pharma stock didn't stand a chance in the broader market volatility.

What happened

Shares of Viking Therapeutics (VKTX 5.87%) fell nearly 21% last month, according to data provided by S&P Global Market Intelligence. The coronavirus pandemic shocked stock markets around the globe, with the S&P 500 falling 12.5% in March. 

While few companies were spared from a correction, small-cap stocks were among the worst performers. That's because smaller companies are generally not well positioned to endure prolonged periods of economic volatility. That might not be true for Viking Therapeutics, but the pharma stock faces near-term uncertainty nonetheless.

A finger pointing at a declining stock chart on a screen.

Image source: Getty Images.

So what

Viking Therapeutics is developing a pipeline of drug candidates taking aim at metabolic and endocrine disorders. The development-stage pharma company's lead drug candidate, VK2809, is being studied as a treatment for non-alcoholic steatohepatitis (NASH). A phase 2b study was initiated in the fourth quarter of 2019, although investors can probably expect the study to be impacted by current events. 

Many pharmaceutical companies have delayed the start of new clinical trials or paused enrollment of ongoing clinical trials due to the coronavirus pandemic. Patients enrolled in studies might have health conditions that make them more vulnerable to a severe case of COVID-19. Doctors across the country are focused on preparing for or responding to surges in cases where they work. And many hospitals are pausing non-essential activities, such as running clinical trials. 

The industrywide slowdown is likely to impact the ongoing development of VK2809 and the plan to advance the company's second drug candidate, VK0214, into clinical trials for a rare disease.

Now what

Viking Therapeutics is relatively well positioned to weather the financial impact of a prolonged disruption to clinical trials. The business began 2020 with $275 million in cash and reported a full-year 2019 operating loss of only $33 million. However, in the event competitors don't have to pause their own studies, perhaps because a study is already fully enrolled, Viking Therapeutics could be at a distinct disadvantage in the highly competitive race for a NASH drug. 

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Viking Therapeutics, Inc. Stock Quote
Viking Therapeutics, Inc.
VKTX
$3.61 (5.87%) $0.20

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