Viking Therapeutics (VKTX +1.07%) now ranks among the hottest biotech stocks on the market. The company's announcement in February of positive results from its phase 2 study of experimental weight loss drug VK2735 provided a huge catalyst.
The future for Viking appears to be bright. But where will this high-flying stock be in 10 years? Here are three potential scenarios.
NASDAQ: VKTX
Key Data Points
Scenario No. 1: Thriving
Viking Therapeutics could be worth much more than its current market cap in 2034. It's not hard to envision a scenario where the company and its stock are thriving.
After it announced great phase 2 results for VK2735, Viking said it planned to talk with the U.S. Food and Drug Administration (FDA) about the next steps for the drug's development. I suspect those discussions will lead to a relatively quick advancement of VK2735 into phase 3 testing.
If we assume that a phase 3 study of VK2735 takes around two years to complete, Viking could be in a position to file for FDA approval of the drug by late 2026. VK2735 would then possibly be on the market in 2027 if all goes well.
William Blair analyst Andy Hsieh thinks the drug could achieve peak annual sales in the ballpark of $14.4 billion in the U.S. and $7.2 billion in Europe. Based on a price-to-sales ratio of 6 times (which is a little lower than the current average multiple for biotech companies), Viking's market cap could be around $130 billion -- more than 17 times higher than the current level.
We can't forget Viking's other pipeline candidates, though. The company is evaluating VK2809 in treating nonalcoholic steatohepatitis (NASH). I think the drug could be another megablockbuster for Viking if it's ultimately approved.
Scenario No. 2: Struggling
The second scenario isn't so rosy. It's possible that Viking Therapeutics could be struggling 10 years from now, with its stock reflecting the company's challenges. How could this happen, considering the huge opportunities we previously discussed for VK2735 and VK2809? In a word, competition.
As promising as Viking's drugs appear to be right now, rivals could develop much better therapies. There's certainly no shortage of companies vying to grab as much share of the obesity and NASH markets as possible.
Current weight-loss leaders Eli Lilly and Novo Nordisk especially stand out. Madrigal Pharmaceuticals recently won FDA approval for the first NASH drug. Several other drugmakers are developing obesity and/or NASH drugs as well.
Scenario No. 3: Non-existent
There's also another scenario where Viking Therapeutics stock no longer exists. I don't think the company will fail and go out of business. However, it could be gobbled up by a bigger drugmaker.
Many large biopharmaceutical companies are eyeing the massive market opportunities in obesity and NASH. If they aren't, they should be. Viking could be an attractive acquisition target for any companies that are either behind the pack in clinical development for these indications or don't currently have a pipeline program targeting obesity or NASH.
My prediction
The most likely scenario to happen is the third one, in my opinion. I predict Viking Therapeutics will be acquired over the next two years. I wouldn't be surprised if a takeover deal is announced later in 2024.
Which big drugmaker might acquire Viking? There are lots of possibilities. Whichever large biopharma company sets its sights on Viking will need a hefty sum to complete the buyout. The scenario where Viking is thriving 10 years from now is more likely than the scenario where it's struggling. Viking's management and shareholders know this. And I suspect all of Viking's potential suitors know it, too.
