The bear market has taken a huge toll on growth stocks in 2022. Even so, a fair number of stocks have still roared higher this year. In the beaten-down healthcare sector, for instance, Alaunos Therapeutics has shot up by a jaw-dropping 211%, Rhythm Pharmaceuticals' stock price has jumped by an equally impressive 209%, and Veru shares have risen by an astounding 169% year to date.
Which other healthcare equities might join this list of top performers soon? Well, Wall Street analysts predict that Madrigal Pharmaceuticals (MDGL -2.66%) and Viking Therapeutics (VKTX -2.71%) could appreciate by 120% and 447%, respectively, within the next 12 months, thanks to a few promising upcoming catalysts.
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Madrigal: This clinical catalyst could be a gamechanger
Madrigal's shares have lost nearly a third of their value this year. The good news is that this sizable dip had nothing to do with the company's core value proposition. The stock has simply fallen victim to the market's growing aversion to risk this year. Risk-tolerant investors, though, may want to take advantage of this pullback.
What makes Madrigal stock an intriguing speculative buy? The company is developing a possible foundational therapy for the common liver ailment known as nonalcoholic steatohepatitis, or NASH for short. There are, as yet, no drugs or therapies approved to treat NASH, and Wall Street thinks this untapped market could be worth anywhere from $30 billion to $50 billion in future sales annually by the end of the decade. First-mover advantage in this indication could be worth tens of billions in sales.
Madrigal's NASH candidate, resmetirom, is a once-daily oral thyroid hormone receptor beta-selective agonist designed to treat the underlying causes of this often-fatal liver disease. The drug is currently in a pivotal late-stage trial for NASH; that study is on track for a top-line data readout in the fourth quarter. If the data are positive, Madrigal's shares ought to have little trouble hitting Wall Street's ambitious price target.
On the flip side, a negative readout -- which is certainly possible in this tough-to-treat indication -- would likely be disastrous for the biotech's share price. Most of Madrigal's current valuation is based on its promising NASH candidate.
Viking Therapeutics: A massive valuation gap
Viking is also a NASH play. Its NASH candidate, VK2809, showed impressive levels of liver fat and plasma lipid reductions in patients with hypercholesterolemia and nonalcoholic fatty liver disease (NAFLD) in an earlier mid-stage clinical trial.
Based on those encouraging results, Viking advanced VK2809 into a Phase 2b trial for patients with biopsy-confirmed NASH. Per the company's last update, it expects enrollment in this critical trial to be complete by the end of the year, and for top-line data from the study to be available in early 2023.
What's the big deal? VK2809 has the potential to be a best-in-class therapy for NASH. The jury is definitely still out on this possible outcome. But strong clinical data for VK2809 would undoubtedly light a fire underneath the biotech's share price.
Underscoring this point, by market cap, Viking is presently one-tenth the size of rival Madrigal. If Viking's NASH candidate hits pay dirt in this clinical trial, however, that massive valuation gap will likely close in the blink of an eye.
That being said, Viking is also a high-risk play due to the nature of this tough-to-treat indication, and the fact that Madrigal might beat it to market with a NASH treatment by quite some time. Investors therefore may want to keep any positions in the stock on the small side as we wait to see the results of the latest VK2809 trial.
