Is Viking Therapeutics Ready For Another Surge?

September 27, 2024 at 07:30 AM EDT

Dumbbells, measuring tape, weight loss pill capsules on a light background - stock image

Viking Therapeutics (NASDAQ: VKTX) has captured the attention of investors, with its stock price skyrocketing over 400% in one year. This remarkable performance stems from the company's promising clinical trial results for VK2735, an investigational weight loss drug that has demonstrated promising efficacy in oral and injectable forms.

The company is expected to report its second-quarter earnings in the coming weeks.

While Viking Therapeutics' stock price has recently pulled back from its 52-week high, investors are still optimistic about its potential.

Analysts believe that Viking's oral weight loss drug could claim about 10% of the market upon its release in 2030, and VK2735 could be approved as an over-the-counter (OTC) drug, providing a significant competitive advantage for Viking.

The Powerhouse Behind the Surge: Viking's Drug Pipeline

The company is focused on developing novel therapies for metabolic and endocrine disorders, including non-alcoholic steatohepatitis (NASH), hip fracture recovery, and type 2 diabetes. The company aims to bring life-changing treatments to patients with unmet medical needs.

Viking's lead product candidate, VK2735, is an investigational drug that targets obesity by acting as a dual agonist of the glucagon-like peptide-1 (GLP-1) and glucose-dependent insulinotropic polypeptide (GIP) receptors. The company is evaluating VK2735 as a potential treatment for type 2 diabetes and plans to explore monthly dosing options in addition to its existing weekly dosing program.

The oral formulation of VK2735 is especially noteworthy, as it could become the first oral GLP-1 drug to hit the market. GLP-1 current medicines are available only in injectable forms. With the growing popularity of injectable GLP-1 drugs for weight loss, Viking's oral drug could tap into a large market segment, which could be a significant growth opportunity for the company.

Clinical Trial Successes

Viking Therapeutics has reported positive results from its Phase 2 VENTURE trial for obesity treatment with VK2735. The results showed that VK2735 effectively reduced body weight in obese patients, with a statistically significant difference in body weight compared to the placebo group.

The company has also reported positive results from its Phase 2b VOYAGE trial for NASH and fibrosis with VK2809, a small molecule thyroid hormone receptor agonist. This trial showed that VK2809 effectively reduced liver fat content and improved liver histology in patients with NASH.

These positive clinical trial results have fueled investor enthusiasm and stock price appreciation. The market is anticipating the company's upcoming second-quarter earnings report, which could provide further insights into the progress of these clinical trials.

Viking Therapeutics: Soaring Stock, But Is it Worth the Ride?

Viking Therapeutics has been a hot stock in 2024, with its share price skyrocketing over 240% since the start of the year. While Viking boasts a compelling story and a strong balance sheet with over $942 million in cash and cash equivalents, it's important to consider the company's current lack of profitability and its valuation relative to its peers. Viking's price-to-book ratio of 17.99 suggests that the stock might be currently overvalued. This is further emphasized by the company's relatively modest market capitalization of approximately $6.9 billion, which aligns with other smaller biotech companies. However, Viking's potential is undeniable. If VK2735 is successfully commercialized, the company could experience significant growth, and its valuation might be justified.

Viking Therapeutics' current trajectory reflects the strong potential of its drug pipeline. However, investors should proceed cautiously, as the company's stock price is still volatile. Monitoring key metrics such as revenue growth, cash flow, and analyst coverage is vital. Looking beyond the recent surge in stock price and focusing on the long-term prospects of the company's drug candidates is paramount. Investing in Viking Therapeutics represents a high-risk, high-reward proposition for investors with a long-term investment horizon.

Analyst Insights and Opportunities

Viking Therapeutics analyst community is bullish on the company's prospects, with several analysts initiating coverage with "Overweight" ratings and price targets ranging from $80 to $138 per share. The analyst consensus price target is $108, providing over 70% upside on the stock. This bullish sentiment is driven by the potential for VK2735 to become a major player in the obesity market and the potential for the drug to be approved as an OTC drug.

The possibility of VK2735 transitioning to OTC status is believed to be a key consideration for companies interested in investing in the obesity sector, aiming to yield sustained returns from their investments in clinical development, commercialization, and manufacturing.

Risks and Opportunities

As with any biotech company, Viking Therapeutics faces a number of risks. The company is still in the early stages of development, and its drugs have yet to be approved by the Food and Drug Administration. Viking's success depends on its ability to complete its clinical trials and obtain regulatory approval.

In addition, Viking Therapeutics faces competition from larger pharmaceutical companies that are also developing obesity therapies. The company has yet to turn a profit and relies on raising capital to fund its development efforts. However, its robust cash position gives it some flexibility to pursue its growth strategy.

Viking Therapeutics: Navigating the Volatility

Viking Therapeutics has delivered solid returns in 2024, fueled by the company's potential for blockbuster drug success and a possible shift to an OTC market. The recent pullback in Viking's stock price, down about 10% over the past five days, might offer an attractive entry point for investors with a longer-term investment horizon. While reflecting market volatility and short-term concerns, this dip doesn't necessarily negate the company's fundamental strengths.

Investors must acknowledge the risks inherent in this early-stage biotech company, including regulatory hurdles, intense competition, and a lack of current profitability. The road to commercial success for VK2735 has its challenges. But the potential is undeniable. If VK2735 can clear regulatory hurdles, secure market share, and achieve profitability, Viking Therapeutics could generate significant returns for investors. The recent dip might be a buying opportunity for those with a strong stomach for risk and a belief in the company's long-term potential.

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