Are we witnessing the rise of a new biotech giant? A few weeks ago, Viking Therapeutics (VKTX -0.30%) grabbed headlines when it reported positive results from a phase 2 clinical trial for VK2735, a potential anti-obesity medicine. That was quite an accomplishment. Many drugmakers, including most of the largest and most prominent, are trying to challenge Eli Lilly and Novo Nordisk in the weight loss market.
So far, none has been able to produce the kind of results as Viking Therapeutics. The mid-cap biotech is still on a roll, recently reporting more positive results from its lead candidate. Below, I'll take a deeper look into that data and determine what they might mean for Viking Therapeutics' future.
Different formulation, same results
Viking Therapeutics' phase 2 results that sent its share price soaring were for a subcutaneous formulation of VK2735, which is a dual GLP-1/GIP medicine. Both classes of therapies help patients promote satiety and control hunger.
Only one dual GLP-1/GIP medicine has ever been approved by the U.S. Food and Drug Administration. It was Eli Lilly's Zepbound, which should be one of the leading anti-obesity medicines for many years to come. Zepbound and Novo Nordisk's famous Wegovy are also administered subcutaneously.
However, Viking Therapeutics is developing an oral version of its candidate. In a phase 1 study that lasted 28 days, oral VK2735 recorded a mean body weight reduction of up to 3.3%, compared to a placebo. The daily oral tablet was given in four different doses, with the higher ones resulting in more weight reductions. Viking Therapeutics also noted that oral VK2735's safety profile was encouraging.
The biotech plans on experimenting with higher doses in an upcoming trial. Note that in a phase 1 study, one of Novo Nordisk's oral anti-obesity candidates, amycretin, led to a (non-placebo-adjusted) 13.1% mean decrease in body weight after 12 weeks of treatment. Though it's always hard to compare medicines tested in different clinical trials, there's no question that the oral formulation of VK2735 looks encouraging.
A monster stock in the making?
It's important to emphasize that Viking Therapeutics still has no product on the market, has not officially started any phase 3 studies, generates no revenue, and is consistently unprofitable. The stock remains risky. The market will expect exceptional clinical and regulatory progress in the coming years. Failure to deliver will send Viking Therapeutics' shares off a cliff.
With that said, the biotech is showing incredible potential, and the strong results it has produced so far could open up doors for the company. It could enter into licensing agreements with larger biotechs for other products it's working on. Or Viking Therapeutics could become an acquisition target -- a transaction during which it should command a hefty premium.
Potential acquirers won't be looking at just VK2735. Viking Therapeutics has another promising candidate in phase 2 studies called VK2809, an investigational therapy for non-alcoholic steatohepatitis (NASH). Experts say that obesity is a risk factor for this metabolic disease -- which is Viking Therapeutics' area of focus.
Given the potential it has already shown, the biotech looks like an easier route to these fast-growing markets -- both NASH and anti-obesity -- for larger drugmakers looking to dip their toes in this space. It's anyone's guess whether Viking Therapeutics will get acquired.
However, the company's clear innovative potential is a major strength, although there is significant downside potential if it doesn't confirm its recent positive clinical progress. So Viking Therapeutics is a good option for risk-tolerant investors looking for potential explosive returns. But risk-averse investors will probably want to stay away -- for now, anyway.
