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Here’s Why Viking Therapeutics Might Be A Discount Opportunity Stock

Here's a look at why markets are under reacting to the latest Viking data.


Viking Therapeutics, Inc. (VKTX) is a small cap biotechnology stock that first hit the NASDAQ back in May 2015 and has spent the subsequent close to three years trying to bring a mid stage investigation of its lead development asset to completion.

This week, the company has managed to do just that and, on the back of the completion, has put out topline data from the study in question.

When a company of this size reports data rooted in the asset on which the vast majority of its valuation rests, it can be a major binary event in terms of market reaction. If the news is positive, we generally see these sorts of companies run to the tune of double-digit percentage points at a minimum. The same is true to the downside if the news is negative.

In this instance, however, the response has been much more muted.

Here is a look at what happened, why the response might not have been as amplified as expected and, in turn, what this says about the company and this program going forward.

So, the drug is called VK5211 and Viking was trying to show that it could be an effective treatment in patients that had recently suffered a hip fracture. These patients are generally elderly and, subsequent to treatment for the fracture, remain immobile for a considerable amount of time. This translates to some real issues associated with mobility and muscle mass and, as a result, most physicians will prescribe some sort of steroidal treatment (generally testosterone) for the patient to take subsequent to treatment and during their downtime.

These treatments work to combat muscle mass loss but, at the same time, can be pretty unpleasant for the patients, bringing about severe side effects and tolerability issues. VK5211 is nonsteroidal and it’s what’s called a selective androgen receptor modulator, meaning it stimulates muscle and bone formation (just as does testosterone) but with reduced activity in peripheral tissues such as skin and prostate (which are both tissues in which testosterone can do damage).

So what did the data show?

As per the latest release, the drug demonstrated a statistically significant, dose dependent increase in lean body mass, less head, following treatment with VK5211 as compared to placebo. That was the primary endpoint, meaning the trial was technically a success. The drug also demonstrated statistically significant increases in appendicular lean body mass and total lean body mass (a couple of key secondary endpoints), again as compares to placebo.

At the same time, safety and tolerability doesn’t seem to be a concern, with no drug-related serious adverse events (SAEs) reported.

Despite this, however, Viking only trades up around 3 or 4 percentage points higher than it did before the announcement hit press.

So why this flat response?

Well, the committee now is to take this drug into a phase 3 trial and, while it has performed well mid-stage, the primary endpoint used in the above outlined trial likely won’t be allowed to be carried over to a pivotal investigation.

Measurements like the six-minute walk test, short physical performance battery and other functional measures accepted by the FDA in other pivotal studies are what Viking will likely have to show that VK5211 can perform against and, while the company did bring these metrics into play in the phase 2 (and favorably), none were powered for statistical significance, meaning we just don’t know at this point whether the drug can hit on them.

This uncertainty, however, might be a nice opportunity to pick up an exposure to Viking at a discount. We know the drug works (at least, that is, to a degree) and we know these patients need a new treatment option so as to help them avoid potential side effects.

Even if the FDA says it wants a mobility based primary endpoint, therefore, there’s still a chance the drug can get a green light based on a secondary hit in a less functional metric.

Disclosure: The author holds no positions in any of the stocks mentioned in this piece.