Why This Weight Loss Drug Company's Stock Surged Today

Shares in biopharmaceutical company Viking Therapeutics (NASDAQ: VKTX) were up by 6.3% at 12:30 a.m. ET today. The move likely stems from the market digesting the previous day's news that Viking had initiated a phase 3 trial of its most promising program in its pipeline, namely VK2375, a treatment for metabolic disorders, including obesity.

Why VK2375 is exciting investors

There are probably two key reasons why the market likes the initiation of a phase 3 trial:

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• VK2375 is a dual GLP-1/GIP receptor agonist similar to Eli Lilly's blockbuster weight loss drug Zepbound.
• Viking is developing VK2375 in both subcutaneous (under the skin) and oral formulations. The subcutaneous phase 3 trial is currently underway, while the phase 2 oral dosing trial results are expected to be released later this year.

For reference, Novo Nordisk also offers a highly successful weight loss drug, Wegovy, a GLP-1 receptor agonist.

What it means to investors

While Viking Therapeutics, with a $3.2 billion market capitalization, will face challenges in competing with Eli Lilly's Zepbound unless it can demonstrate superior efficacy in the phase 3 trial, the real value in the business may lie in the oral formulation.

There are obvious convenience and accessibility advantages to an oral formulation over a subcutaneous one, and a successful phase 2 trial may encourage a much larger pharmaceutical company to consider acquiring the company to take it through phase 3.

As such, look out for the phase 2 results later in the year. In addition, note that Novo Nordisk has submitted to the FDA for approval of an oral formulation of Wegovy , and Eli Lilly recently reported positive results in a phase 3 trial for an oral GLP-1 agonist, orforglipron.

All this means that the field is getting crowded.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk and Viking Therapeutics. The Motley Fool has a disclosure policy.