Here's Why Viking Therapeutics Shares Slumped Today
Key Points
Viking Therapeutics' stock dropped after a capital raise, not due to trial results.
The company raised more capital than initially planned, indicating strong demand.
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Viking Therapeutics (NASDAQ: VKTX) stock declined by 14.5% in early morning trading today, a week after the company reported top-line results from a maintenance study of its key weight-loss drug, VK2735. However, don't panic. Today's move is not directly related to the results released a couple of days ago.
Viking Therapeutics raises capital
In fact, the results were positive enough to prompt management to announce an offering of common stock and convertible senior notes to capitalize on the share price surge and raise capital to fund its ongoing development pipeline, including VK2735 in Phase 3 trials.
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Management announced a $200 million offering of common stock and $200 million in convertible senior notes due in 2023 on Wednesday. These offerings were clearly well received because today management announced it had upsized the offering to 7,857,143 shares of common stock at $35 (equivalent to about $275 million) and $225 million in convertible senior notes.
Given that the stock traded above $41 before the announcement of the $35 stock offering, it's not surprising that it corrected today.
Image source: Getty Images.
Where next for Viking Therapeutics
The maintenance study results were positive, but investors should note that it's merely the first part of the study and that it trialed an initial subcutaneous (injectable) dose (21 weeks), followed by a range of subcutaneous doses in a 12-week maintenance dosing period. The second part of the study will trial the oral maintenance dosing regimen. That's arguably more important for the company's aim of demonstrating a dual formulation strategy for VK2735.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.
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