What happened
Clinical-stage biotech Viking Therapeutics (VKTX 7.92%) is having another tough trading session. As of 1:40 p.m. ET Tuesday, Viking's stock was down by 19.8% on higher-than-normal volume, continuing a decline that started Monday.
Yesterday, the biotech's shares initially sank in response to Pfizer's decision to advance a mid-stage weight loss drug into phase 3 testing. Today, Viking's stock is under pressure from impressive phase 2 results for Eli Lilly's (LLY 1.19%) next-generation obesity treatment retatrutide.
So what
In a mid-stage trial, retatrutide produced a best-in-class mean weight loss of 24.2% at 48 weeks. This result caused Viking's shares to sink due to the competitive implications for its weight loss candidate VK2735.
Analysts had previously estimated VK2735's peak sales potential at over $6 billion due to its outlook as a best-in-class weight loss therapy. While Lilly's latest weight loss data does not rule out this possibility, VK2735 could face an even tougher commercial landscape by the time it's ready for launch, which could reduce Viking's appeal as a buyout target.
Both drugs must still undergo a pivotal phase 3 trial to determine their efficacy and safety profiles. This will be the ultimate test for both. Until then, it is not advisable to make any definite conclusions about the future of the obesity drug market.
Now what
Is Viking's stock a bad-news buy? Unfortunately, clinical trials are inherently unpredictable. As such, this developmental biotech stock is probably best suited for investors with a high appetite for risk.
