Could Viking Therapeutics Stock Be a Millionaire Maker?

There aren't many hotter stocks on the market right now than Viking Therapeutics (VKTX 0.42%). Shares of the biopharmaceutical company have skyrocketed around 340% so far this year.

However, those impressive gains might be just a start for Viking. The company should have plenty of potential catalysts over the next few years. Could Viking Therapeutics stock be a millionaire-maker?

Viking's promising pipeline

Investors' excitement about Viking Therapeutics reached a fever pitch on Feb. 27, 2024, when the company announced the results from a phase 2 clinical study evaluating VK2735 in patients with obesity. Viking reported its experimental drug helped patients achieve a placebo-adjusted mean weight loss of up to 13.1% after 13 weeks of treatment. This reflected faster weight loss than Novo Nordisk's Wegovy and Ei Lilly's Zepbound achieved in their clinical trials.

Importantly, VK2735 also demonstrated a good safety and tolerability profile. Only 13% of patients receiving the drug discontinued treatment in the phase 2 study compared to 14% receiving placebo. Most of the reported side effects were mild or moderate in severity.

Viking followed up a few days ago with positive results from a phase 1 study of an oral formulation of VK2735. Patients receiving the pill experienced up to 3.3% placebo-adjusted mean weight loss after 28 days. The company thinks a higher dosage administered over a longer period could lead to greater weight loss.

VK2735 isn't Viking's only promising pipeline candidate. The biotech is also evaluating VK2809 in a phase 2b study as a treatment of nonalcoholic steatohepatitis (NASH), also known as metabolic dysfunction-associated steatohepatitis (MASH). Viking announced in 2023 that the study achieved its primary endpoint of a statistically significant reduction in liver fat. It expects to report additional results from the study in the first half of 2024.

In addition, the company is testing VK0214 in a phase 1b study targeting the rare neurodegenerative disease X-linked adrenoleukodystrophy (X-ALD). Viking is on track to report results from this study by mid-2024.

A millionaire-maker stock?

There's no doubt that Viking could be a millionaire-maker stock with enough money invested upfront. After all, an $800,000 investment would turn into $1 million with only a 25% gain. But is it possible for the biotech stock to grow a smaller initial investment of $25,000 into $1 million? Maybe.

Goldman Sachs projects that the obesity drug market could top $100 billion by 2030. Likewise, some analysts think the global NASH/MASH market could be larger than $100 billion by 2030. The X-ALD market is likely to be much smaller, though, because the rare disease affects relatively few patients.

If we assume Viking could eventually capture a 25% market share in obesity and NASH/MASH, the company would potentially generate annual revenue in the ballpark of $50 billion. Using an average price-to-sales ratio of 6 (near the current level for biotech stocks) would give Viking a market cap of $300 billion in this scenario. With Viking's market cap currently hovering around $8.5 billion, this translates to a gain of nearly 35.3x.

An upfront investment of $25,000 with this level of return would grow to more than $880,000. That's not quite enough to make you a millionaire. However, an initial investment of around $28,300 would turn into $1 million if it increased by 35.3x.

Some big assumptions

As we've seen, it's not out of the question that Viking Therapeutics stock could be a millionaire-maker. However, there are some big assumptions involved that might not pan out.

Analysts could be overly optimistic about the projected sizes of the obesity drug and NASH/MASH markets. I think that's especially true with the NASH/MASH market because of the challenges involved in diagnosing the disease.

Viking faces several obstacles in capturing 25% of either market. For one thing, its drugs haven't won regulatory approvals yet. Multiple well-funded competitors are eyeing the obesity and NASH/MASH markets too. These rivals could develop drugs that are better than Viking's.

I wouldn't bank on an initial investment of $28,300 turning into $1 million. However, I like the risk-reward proposition that this biotech stock offers. Even if it isn't a millionaire-maker, it could still make aggressive investors a lot of money if all goes well in the remaining clinical trials for VK2735 and VK2809.