There are potential share price gains, and then there are potential share price gains. In the view of one analyst, Viking Therapeutics (VKTX 7.92%) currently stands in front of the latter variety.
The clinical-stage biotech recently came into sharp prominence thanks to one of its pipeline drugs. Does that increased attention necessarily mean its stock price is going to rocket higher?
Developing for a white-hot market
The reason Viking is getting so much added attention is VK2735, an investigational drug with a mundane name (for the moment) that has real potential to propel the stock into the stratosphere. That's because VK2735 treats obesity, and obesity treatments are the hot pharmaceutical item of the moment. Evidence of that can be seen in the glittering success of Novo Nordisk's pace-setting Wegovy (plus its brother medication, Ozempic, which targets diabetes).
Last year alone, the relatively young market for obesity drugs totaled almost $90 billion in this country.
In early March, Jefferies analyst Roger Song initiated coverage on the increasingly popular Viking. Like many investors, Song is very bullish on the biotech company's prospects and he tagged it with a buy recommendation at a price target of $110 per share. That's a robust 55% higher than the current share price.
Song set the target price high because, if VK2735 completes all its trials and wins regulatory approval, its sales could peak top $12 billion annually. Song added that there's a "palpable strategic interest in the metabolic space from big pharma." That implies that Viking could be a high-priced buyout target.
Weight loss equals share price gain
I should stress that Viking won't be the first company selling an obesity drug if VK2735 emerges from the pipeline. Yet this is still a young market and it has few players, so there's plenty of room for those competing. A big price bounce is entirely possible should the company get its drug on pharmacy shelves.
Be aware though: Drug developers, and especially biotech stocks, tend to be extremely volatile and should be approached only by investors with a higher-than-average appetite for risk.
