Viking Therapeutics, Inc. (VKTX) shares rose more than 10% on Tuesday morning after Gilead Sciences, Inc.'s (GILD) STELLAR-4 Phase III clinical trial failed to meet its primary endpoint. William Blair analysts believe that Viking Therapeutics could become a prime buyout target for Gilead if there are positive results from its Phase IIB clinical trial involving biopsy-confirmed non-alcoholic steatohepatitis (NASH) patients. The analyst firm maintained its Outperform rating on the stock.
Viking Therapeutics' VK2809 is one of only two beta-selective thyroid hormone receptor agonists in clinical trials, and it has been successful in reducing liver fat while maintaining a benign tolerability profile thus far in clinical trials. NASH is set to become one of the next epidemic-level chronic diseases facing society over the coming years, already affecting more than 16 million people, and is projected to replace hepatitis as the biggest reason for liver transplants by next year. Drugmakers are rushing to fill the void with treatment options.
From a technical standpoint, the stock has trended sideways since the beginning of the year. The recent price action has created an ascending triangle pattern without upper resistance near R1 resistance at $9.00. The relative strength index (RSI) appears neutral with a 55.77 reading, while the moving average convergence divergence (MACD) has been trending higher. These indicators suggest that the stock could have more room to run.
Traders should watch for a breakout from the ascending triangle pattern with a close above $9.00 on above-average volume. If the stock breaks out, the next major price target is R2 resistance at $9.84 and the 200-day moving average at $10.40. If the stock fails to break out, traders could see a move lower to retest lower trendline support at around $8.00 over the coming sessions. A further breakdown from those levels could lead to new lows near $7.00 or $6.50. However, the bull case appears more likely at the moment.
The author holds no position in the stock(s) mentioned except through passively managed index funds.