Viking Therapeutics (VKTX 0.09%) has been one of the hottest healthcare stocks of 2024. Shares of the company have risen by 285% thus far, and that's even factoring in a recent pullback in price. Investors have become excited about the company's long-term prospects, as it has a promising weight-loss drug in its portfolio. And in a time when weight-loss drugs are all the rage in healthcare, investors are more than just a little optimistic about how much higher the stock can go.
Given all this attention on Viking and the company having a significant asset in its portfolio, it's worth considering whether an acquisition may be looming. A larger pharma company, for instance, may see significant value in Viking; an acquisition may make more sense than spending time and money on developing its own weight-loss drug in-house.
Is Viking Therapeutics a stock that's likely to get bought out in the near future, and if that happens, what does that mean for investors?
NASDAQ: VKTX
Key Data Points
It ultimately comes down to the attractiveness of VK2735
Viking Therapeutics doesn't have a consistent source of revenue, and thus, the likelihood of an acquisition will hinge on the attractiveness of the assets it has in its pipeline. And the one that has the most appeal is VK2735, a glucagon-like peptide 1 (GLP-1) agonist.
Last month, Viking released results from a phase 2 trial where people using VK2735 over a 13-week period lost 14.7% of their body weight (on average). Wegovy, which is Novo Nordisk's top weight-loss drug, helps people lose on average about 15% of their body weight. This suggests VK2735 is potentially in the same league as one of the top GLP-1 drugs in the world.
And if that's the case, there's sure to be a lot of interest from big pharma in acquiring Viking. Many big names, such as Pfizer and AstraZeneca, have been looking at developing weight-loss treatments of their own to have a way to penetrate the growing anti-obesity market, which Goldman Sachs projects could be worth $100 billion by the end of the decade.
Viking's balance sheet looks strong
While Viking has an exciting asset in its portfolio, the numbers still have to work for a prospective buyer. And beyond just sheer valuation, a buyer will also want to consider the company's balance sheet. In Viking's case, that may play to its favor.
As of the end of last year, Viking had more than $362 million in cash and short-term investments on its books. And its total liabilities were just $20 million. For a possible buyer, they would not only benefit from acquiring an exciting asset in VK2735, but they would get plenty of cash and not much in the way of debt or liabilities.
How would an acquisition affect shareholders?
An acquisition could give Viking's shareholders a quick and sudden boost to their investment. An acquiring company usually pays a premium for the business, and just how high the price would be often depends on how much interest and competition there is. In Viking's case, there could be a lot, given the promising trial results of VK2735 and the company's strong balance sheet.
The bad news, however, could be that if an acquisition takes place, shareholders could effectively see their gains in the business capped. Depending on the deal, they might obtain shares of the acquiring business and, thus, remain invested in Viking's long-term future. But those gains would likely pale in comparison to the gains the stock might generate on its own.
Should you buy Viking Therapeutics stock right now?
Viking Therapeutics is a healthcare company I would expect should receive plenty of interest from big pharma. Whether an acquisition ends up taking place in the near future could simply depend on the price, and if it's high enough.
But regardless of whether that happens or not, investors who are willing to take on some risk may want to buy Viking Therapeutics stock today, as there could be plenty of upsides for the company over the long haul. It's not a risk-free investment by any stretch, as VK2735 is nowhere near generating any revenue, but the upside could be massive for the stock if the drug does ultimately obtain regulatory approval.
