Viking Therapeutics Plunges 44% - Time to Buy the Dip?

Viking Therapeutics stock just got hammered - down a brutal 44% in recent trading. The question every investor is asking: is this a buying opportunity or a falling knife?

The Bloodbath Breakdown

That 44% plunge isn't just a number - it's a statement. Markets are clearly reacting to something major, whether it's clinical trial results, regulatory hurdles, or broader sector sentiment turning sour.

Dip-Buying Psychology

Everyone loves a bargain until they're catching a falling safe. The 'buy the dip' mentality works until it doesn't - just ask anyone who tried to bottom-fish during the crypto winter.

Risk Versus Reward

At these levels, the potential upside is undeniable. But so is the risk of further declines if the underlying issues aren't resolved quickly. Biotech stocks don't bleed slowly - they either recover dramatically or continue collapsing.

Wall Street's Selective Memory

Funny how traditional finance types will preach diversification while simultaneously telling you to 'buy the dip' on single stocks that just got cut in half. Because nothing says prudent investing like gambling on biotech volatility.

Bottom line: That 44% discount could be the steal of the decade or tomorrow's 88% loss. Choose wisely.

Image source: Getty Images.

GLP-1 drugs

Viking's candidates are part of classes of drugs that have everyone talking these days -- GLP-1 agonists and dual GIP/GLP-1 receptor agonists. These drugs interact with hormonal pathways involved in the control of appetite and the management of blood sugar levels.

Today's commercialized products, from Novo Nordisk's semaglutide to Lilly's tirzepatide, originally were developed for type 2 diabetes but since have shown themselves to excel -- in clinical trials and then in the real world -- as a weight loss treatment too. So, these current drugs are approved under one name for type 2 diabetes and another name for weight management -- in the case of Lilly, these are Mounjaro and Zepbound, respectively.

Viking is developing VK2735, its dual GIP/GLP-1 receptor agonist, in injectable FORM -- like current marketed weight treatments -- and it's also working on an oral version. The former is involved in a phase 3 trial right now and the latter is in phase 2.

It's difficult to directly compare VK2735's performance to today's commercialized products since trial parameters and the real-world context don't offer us an "apples to apples" sort of view. But the candidate's performance so far has been promising: In the phase 2 study, participants achieved average weight loss of as much as 14.7% after 13 weeks of dosing. And in the phase 2 dosing trial of the oral candidate, weight loss averaged up to 12.2% after 13 weeks.

Potential rivals for today's weight loss drugs

If the candidates continue to maintain similar numbers in their current trials, they could represent potential rivals for today's market leaders. And considering the injectable candidate is involved in a phase 3 trial right now, it could reach the finish line within the next few years. Meanwhile, another reason to be optimistic about Viking is the potential for this company to receive an interesting acquisition offer or partnership. Bigger pharma players, eager to get in on the booming weight loss space, could snap up smaller players -- and this has happened recently. For example,last month announced its intention to buy biotech Metsera for its pipeline of investigational obesity products.

Of course, Viking does come with some risks. Like all biotech players that haven't yet commercialized a drug, any disappointment in the clinical trial stage could severely hurt stock performance. Also, if and when Viking's weight loss candidate reaches the market, it will face competition -- and today's big pharma competitors have the first-to-market advantage as well as resources like production and sales experience and a recently expanded manufacturing footprint.

Room for more than one winner

That said, I'm not too worried about competition due to the high demand in this market -- there is enough need for these treatments to support growth at more than one or two drugmakers. Novo Nordisk and Lilly last year both saw their products on drug shortage lists until they significantly ramped up production.

Now, let's get back to our question: Is Viking a buy on the dip? As mentioned, Viking faces some risks, so it may not be the best choice for a cautious investor -- in this case, a solid pharma company might make a better buy. But for investors who can tolerate some risk, now, with the shares down more than 40%, is a great time to get in on Viking and hold -- in just a few years from now, it could become a successful player in the billion-dollar weight loss market, and the stock price could soar.