Shares of Viking Therapeutics (NASDAQ:VKTX) soared after the biotech announced solid results for its lead candidate. That's because it's aimed at treating non-alcoholic steatohepatitis (NASH), or liver damage caused by excess fat buildup. NASH threatens the lives of around 20 million Americans, and there aren't any effective treatment options yet.

Viking Therapeutics probably won't be the first biotech to market a NASH treatment, but it looks like its lead candidate could be best at stopping NASH from occurring in the first place. Let's look at what results for VK2809 could mean for Viking shareholders down the road to see if this is the best NASH stock investors can buy right now.

Three very happy scientists.

Image source: Getty Images.

The best yet?

Viking recently showed investors that 10 mg of VK2809 taken daily lowered the fat content of livers in patients with non-alcoholic fatty liver disease (NAFLD), which is a precursor to NASH. After 12 weeks of treatment with 10 mg of VK2809 daily, a majority of patients achieved liver fat reductions of 59.7%, compared to just 8.9% for those given a placebo. Investigators also reported that 90.9% of those treated daily achieved a 30% reduction or better versus just 18.2% of those given a placebo.

Viking's potential new NASH drug works in the same way as a candidate from Madrigal Pharmaceuticals (NASDAQ:MDGL) called MGL-3196. In late 2017, Madrigal stock shot up when the company announced a 36.3% liver fat reduction for patients treated with an 80 mg starting dose of MGL-3196 that was adjusted up or down according to patients' ability to tolerate it. Madrigal's drug helped 60.3% of patients who took it to achieve a 30% or better liver fat reduction, versus just 18.4% of those in the placebo group.

Although it looks like Viking just wiped the floor with the competition, investors should know that Madrigal only enrolled patients that had biopsy-proven NASH, while Viking didn't require any signs of liver damage, just the same 10% minimum liver fat content as Madrigal's trial. Until we see these drugs go head to head, or at least enroll similar patients, we really can't claim victory for either one.

Scientists working in a lab.

Image source: Getty Images.

One more on the way

Between 30% and 40% of U.S. adults have NAFLD, which develops into NASH perhaps 20% of the time. Most patients don't notice NASH or know what the problem is until the inflammation has already damaged their livers. 

Few Americans are familiar with NASH, but it's already the leading cause of liver transplants among U.S. women. That means demand should be strong enough for VK2809 plus a competitor or two to generate blockbuster sales.

Neither Madrigal or Viking is ready to start pivotal studies with their NASH candidates, which means there's a good chance neither will launch the first available treatment. Luckily, VK2809 sailed through phase 2 without causing any serious adverse events.

Ocaliva, from Intercept Pharmaceuticals (NASDAQ:ICPT) will probably be the first NASH treatment to earn an FDA approval, but safety concerns so far mean it will remain limited to those in advanced stages of the disease. Results from an ongoing phase 3 trial will be ready next year, but they're intended to support an expansion to treat severe NASH patients with fibrosis already.

Beyond NASH

Viking Therapeutics has another candidate in late-stage testing that could be a big winner as well. VK5211 is supposed to deliver the benefits that testosterone provides to muscle and bone without the unwanted side effects. 

Earlier this year, Viking showed us that patients given VK5211 while recovering from hip fractures showed significant increases in lean body mass. Around 300,000 Americans break a hip each year, and VK5211 could become the first drug specifically approved to help older adults improve bone density in a way that gives them a better chance of walking again.

Smiling scientist with a clipboard.

Image source: Getty Images.

Viking hasn't laid out plans for a pivotal study even though a meeting with the FDA to discuss a path forward was scheduled for the third quarter. Viking wants a deep-pocketed partner to pay for VK5211's late-stage clinical development expenses in return for milestone payments and royalties on sales if it succeeds.

Although VK5211 leads to statistically significant improvements to patients' lean body mass, so does testosterone. Every week that goes by without news of a partnership for the potential blockbuster raises the fear that drugmakers don't think insurers will pay for an expensive new drug to avoid the side effects of traditional androgen therapy. 

Finding a partner for VK5211 or VK2809 will be a bit more challenging than usual because Viking doesn't own the drugs outright. Viking licensed them from Ligand Pharmaceuticals (NASDAQ:LGND) a few years ago and owes Ligand single-digit royalties on any sales either drug might generate. Coincidentally, Madrigal entered a similar agreement with Roche to get its hands on MGL-3196 back in 2008.

The best NASH stock?

At recent prices, Viking Therapeutics boasts a $1.3 billion market cap that could rise much further if VK2809 or VK5211 attracts a deep-pocketed partner in the near term. If the industry's larger players choose to remain disinterested, though, things could get awfully dicey. 

I'd say that Viking Therapeutics is a good stock for investors who want to invest in the growing NASH space, but I'm not going to place it ahead of Intercept or Madrigal yet. If a bigger drugmaker with the means to develop and launch one of Viking's drugs comes to the deal table, though, it could quickly rise to the top.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.