Is Viking Therapeutics stock a bargain after this week’s sell-off?

Viking Therapeutics (NASDAQ:VKTX), often touted as an attractive obesity play, shed more than a third of its value this week after mid-stage trial data for its oral obesity candidate VK2735 disappointed Wall Street.

On Tuesday, the San Diego, California-based biotech announced that its GLP-1/GIP dual receptor agonist helped people lose ~12% of body weight on average over 13 weeks, succeeding in its Phase 2 VENTURE-Oral Dosing trial.

However, Viking (NASDAQ:VKTX) plunged ~42% in reaction, marking its biggest-ever intraday drop as investor concerns grew over the efficacy and safety of VK2735, a potential rival to oral obesity candidates orforglipron from Eli Lilly (LLY) and oral semaglutide from Novo Nordisk (NVO).

Despite the selloff, the stock remains a Buy among Seeking Alpha analysts and Wall Street analysts, while SA Quant System, which consistently beats the market, rates VKTX as a Hold.

While many Wall Street analysts held on to their bullish views on Viking (NASDAQ:VKTX) after the readout, Mizuho’s Jared Holz was quick to point out that the drug looked inferior to orforglipron, which has caused up to 11% of weight loss over 72 weeks at the highest dose in LLY's Phase 3 ATTAIN-1 trial.

Phase 2 VENTURE data “probably shutters hope for VKTX as a big-time player in the oral obesity market over the near to medium term,” Holz wrote.

However, Stone Fox Capital, Seeking Alpha Investing Group Leader for Out Fox The Street, noted that the market reaction was over the top as investors “misunderstood” the readout. Regarding the high discontinuation rates and gastrointestinal side effects seen in those who were on VK2735, Stone Fox Capital argued “that these issues are manageable and expected to be addressed in Phase 3 studies.”

“Viking Therapeutics now trades at the lowest level of the last couple of years while the investment thesis is more de-risked on positive Phase 2 results on multiple drugs now,” the analyst wrote, reaffirming the Strong Buy recommendation on VKTX.

SA analyst Ragmar Rikberg issued a Buy recommendation on Viking (VKTX) and argued that the stock’s buyout potential has further increased after the selloff, which he attributed to VK2735’s tolerability concerns.

“A buyout is more likely now, as the oral program's value is clearer; Eli Lilly and others could be interested, but Novo Nordisk likely is not,” Rikberg added.

However, analyst Stephen Ayers downgraded VKTX to Sell from Neutral, citing “insufficient differentiation” in the company's GIP/GLP-1 portfolio and intense competition in the obesity space when its products are ready for launch.

“Without a clear and convincing differentiation from established obesity treatments, it’s difficult to see Viking come out with enough market share to justify its valuation, which remains relatively high at $2.6 billion,” Ayers wrote.