Down 18% in 1 Day, Is Viking Therapeutics Stock in Trouble Due to Merck?

Core Insights - Viking Therapeutics has $930.4 million in cash and equivalents, providing a buffer against current spending rates, while Merck's established revenue from commercialized medicines allows it to endure clinical setbacks longer if necessary [1] - Viking's VK2735 oral candidate may have a competitive edge in the market for about a year before facing Merck's product, with clinical data suggesting VK2735 could be more effective for weight loss compared to competitors from Eli Lilly and Novo Nordisk [2][4] - The market for anti-obesity drugs is still growing and not saturated, making competition less intimidating for Viking [2] Company Developments - Viking's VK2735 is being developed in both injectable and oral formats, with the injectable version advancing to phase 3 trials after successful phase 2 results, while the oral version is in planning for phase 2 [6][7] - Viking's stock fell 18% following Merck's announcement of a licensing deal for a competing weight-loss drug, HS-10535, which includes an upfront payment of $112 million and potential milestone payments of up to $1.9 billion [9][15] - Despite the stock drop, Viking is not in immediate trouble, as the market's reaction is based on assumptions about the outcomes of its upcoming clinical trials [14] Market Context - The anti-obesity drug market is becoming increasingly competitive, with Merck's entry posing a challenge to smaller companies like Viking that have yet to establish a self-sustaining revenue model [16] - If VK2735 is successful, it could generate over $1 billion in sales within its first year, significantly benefiting shareholders [13] - The competitive landscape suggests that while Viking faces a formidable opponent in Merck, it still has opportunities to succeed if it can capitalize on its clinical trial results [18]