What happened
Shares of the clinical-stage biotech Viking Therapeutics (VKTX 5.82%) jumped by 7% almost right out of the gate Thursday morning. The biotech's shares, however, have cooled off as today's session has progressed.
As of 2:19 p.m. ET Thursday afternoon, Viking's stock was only up by 0.72%. The biotech's shares briefly popped this morning in response to investing firm H.C. Wainwright raising its 12-month price target on the stock from $21 to $33 per share. This revised price target implies a 68% upside potential from current levels.
So what
Viking's shares have been racing higher over the past 12 months. In fact, the biotech's shares have climbed by an astounding 759% over this period. Viking's stock caught fire in response to renewed interest in its midstage nonalcoholic steatohepatitis (NASH) candidate VK2809, as well as strong early-stage results for its weight loss candidate VK2735.
H.C. Wainwright's revised price target appears to reflect the growing optimism surrounding Viking's two most important value drivers. Fortunately, this optimism does have a basis in reality. The global NASH market may eventually generate over $30 billion a year in annual sales, whereas anti-obesity treatments are believed to be on track to rake in over $50 billion a year by the middle of the next decade.
Now what
Is Viking stock still a strong buy? It depends on your tolerance for risk. On the plus side, Viking is markedly undervalued relative to other top-tier metabolic disease specialists. So there is a chance that a massive valuation gap still exists with this red-hot equity. On the negative side, Viking is well behind the leaders in both NASH and obesity from a development standpoint. As such, the company will probably have to report stellar clinical trial data in these high-value settings in order to have a realistic shot at wrestling market share away from drugs already on the market.
