By Josh Nathan-Kazis and Elsa Ohlen

A potential threat to the dominance of Eli Lilly and Novo Nordisk over the market for weight loss drugs appeared to collapse early Tuesday, when new data showed that the side effects of a much-hyped experimental obesity pill from the biotech Viking Therapeutics may be much worse than anticipated.

Shares of Viking were down 40.2% on Tuesday. The company said that in a new Phase 2 study, patients on its daily obesity pill, called VK2735, lost 12.2% of their weight on average after 13 weeks.

It wasn't the efficacy numbers, however, that were spooking investors. Rather, it was the side effect rates -- which look worryingly high.

The new class of GLP-1 weight loss drugs has been dogged by side effect profiles that include nausea and vomiting. The latest results suggest that for Viking's drug, the side effects may be particularly bad.

Viking said that 28% of patients who received VK2735 discontinued treatment, compared to 18% who received a placebo. Among patients who received VK2735, 26% reported vomiting, and 58% reported nausea.

Compare that to the results Lilly reported earlier this month for its own experimental obesity pill. Lilly's trial ran far longer than the Viking study, at 72 weeks compared to Viking's 13. In the longer Lilly trial, overall discontinuation rates were between 21.9% and 24.4%, depending on the dose.

Lilly "looks far better head-to-head," Mizuho healthcare equity strategist Jared Holz wrote in a Tuesday morning email to investors. "This probably shutters hope for VKTX a bigtime player in the oral obesity market over the near to medium term."

On an investor call early Tuesday, Viking executives tried to calm anxieties around the side effect data. They pointed to the high discontinuation rates among patients who received a placebo in their trial, and suggested that patients may be overreporting stomach troubles, because they are a widely-known side effect of this category of medicine.

"I don't know why the placebo was higher and the baseline rates were higher here; it could be, and this is speculation, but it could be that there is such an expectation with this mechanism for GI-related adverse events that it maybe makes people a little bit more sensitive, or expecting them, and could raise the reporting rates," said Brian Lian, the company's CEO, on the Tuesday call.

Investors were not mollified, and the stock was down 40.2% Tuesday morning. Shares of Lilly were up 2%, while Novo was up 2.2%.

Viking has been one of the hottest biotechs chasing Lilly and Novo for a piece of the weight loss market. Structure Therapeutics, another weight loss biotech, was up 1.9% Tuesday on Viking's misfortune.

Viking is also testing an injected version of VK2735, which is currently in a Phase 3 trial. In a Phase 2 study, patients on the injected version of VK2735 lost 14.7% of their weight in 13 weeks.

Not all news from Viking's oral trial was bad. The efficacy results on the oral version reported Tuesday appear to have been better than analysts had expected. In a note on August 12, William Blair analyst Andy Hsieh wrote he was anticipating placebo-adjusted weight loss of "slightly under 7% for the highest doses." On Tuesday, the reported placebo-adjusted weight loss for the highest dose was 10.9%, and for the second-highest dose was 9.8%.

What's more, the company said that an arm of the study that had investigated VK2735 as a low-dose maintenance therapy had been successful, and that patients who started on high doses and then were cut to low doses kept their weight off.

In a note early Tuesday, Cantor analyst Steve Seedhouse, who has an Overweight rating on Viking, appeared puzzled by the selloff. He wrote that the highest doses tested in the study had never been thought to be commercially viable, and that the mid-range 30mg dose looked competitive.

"Altogether, a very solid dataset that allows Viking to keep oral VK2735 in its back pocket to drive strategic value down the road," Seedhouse wrote.

Seedhouse's take did not appear to be widely shared on Tuesday. The side effect profile seeemed to be weighing on investors minds, particularly given the large number of alternatives patients can choose from.

In addition to the injected drugs Wegovy and Zepbound already on the market, Lilly expects to launch its pill orforglipron next year, and Novo is seeking to launch a drug it calls "Wegovy in a pill," which showed 16.6% weight loss in a Phase 3 trial.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com and Elsa Ohlen at elsa.ohlen@barrons.com

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August 19, 2025 10:17 ET (14:17 GMT)

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