This Weight-Loss Stock Sank After Earnings. It’s Still a Risk for Eli Lilly, Novo Nordisk.

Viking Therapeutics has a weight-loss pill in the pipeline. Trial results show patients have lost 8% of their body weight after four weeks. ((Dreamstime))

Viking Therapeutics stock fell Thursday after it reported a widening quarterly earnings loss—but that doesn’t mean it won’t eventually pose a threat to Eli Lilly and Novo Nordisk in the weight-loss drug market.

While the company has several weight-loss drugs in different stages of development, a particularly important factor for the stock will be the clinica -trial results for its closely watched oral weight-loss drug, VK2735. William Blair analyst Andy Hsieh expects the data to come in August.

The biotech also has an amylin-based weight-loss treatment in preclinical studies. It said it would submit a request to the Food and Drug Administration to begin clinical studies in the fourth quarter.

Eli Lilly and Novo Nordisk are currently the only drugmakers with FDA approved weight-loss medicines on the U.S. market. However, many pharma companies are developing their own versions, including Viking, which indicates that the market is about to become significantly more crowded.

Viking might also be an attractive acquisition target for other pharmaceutical companies wanting in on the lucrative weight-loss drug business. The next hot ticket in the industry is pills. Medicine taken orally, as opposed to the current injected versions, are largely expected to be more popular with consumers and would be easier to distribute.

Based on studies so far, Viking’s oral candidate is one of the most effective ones out there in terms of shedding pounds, with patients losing 8.2% of their body weight in just four weeks.

In comparison, Eli Lilly’s injectable Zepbound has shown an average weight loss of 20.2% over 72 weeks, while its experimental pill Orforglipron resulted in a 7.9% weight loss over 40 weeks.

Viking reported a second-quarter loss of 58 cents a share, wider than expectations for a 45 cents a share among analysts surveyed by FactSet.

That loss was driven by higher spending on research and development, including clinical studies. It increased about 150% to $60.2 million for the quarter ended in June compared with a year earlier.

Shares were down 2.3% to $32.51 in early trading Thursday as investors appeared to focus on the short-term increase in spending.

Jefferies analyst Roger Song said that Viking has one of the most de-risked safety profile among the class of drugs called peptide incretins, and considers the biotech leading among small- and mid-cap drugmakers. Song rates the stock Buy, but lowered his price target to $101 from $110 late Wednesday to reflect the increased R&D expenses in the near term.

Since Viking is a clinical-stage biotech, it doesn’t generate any revenue and doesn’t have any drugs currently on the market. According to William Blair’s Hsieh, the company has enough cash to sustain its operations for more than three years, with $808 million on the balance sheet at the end of the second quarter. He rates the stock Outperform with a price target of $80.

Write to Elsa Ohlen at elsa.ohlen@barrons.com