If you're looking at up-and-coming healthcare stocks with significant potential in the anti-obesity market, one company you've likely come across is Viking Therapeutics (VKTX -0.15%). Although the business isn't generating any revenue yet, there's loads of opportunity for the company in the long run.
Below, I'll look at what the future may hold for Viking and whether it could be a good stock to buy and hold for at least the next five years.
Will Viking have an approved GLP-1 drug in five years?
The big question surrounding Viking Therapeutics today centers around its promising glucagon-like peptide 1 (GLP-1) drug, VK2735. Within the next five years, investors will likely have learned the fate of the drug and whether it obtains approval from regulators or not.
Right now, hopes are high that it will be granted approval. In phase 2 trials, VK2735 has shown that it is safe and well-tolerated among participants while achieving impressive results. After just 13 weeks of taking the injectable treatment, patients lost approximately 15% of their body weight.
Based on these encouraging data, it seems plausible that VK2735 will obtain approval within the next five years. While it's not guaranteed, as long as there aren't unexpected hiccups along the way or adverse side effects that are uncovered in a later trial, it seems highly probable that it will obtain approval. And investors appear to be buying the healthcare stock based on that assumption: Shares of Viking are up more than 260% this year.
Investors also shouldn't rule out the possibility that Viking has a second drug approved within five years. In March, the company released promising results for an oral version of VK2735 in a phase 1 trial, in which participants lost more than 5% of their weight after only 28 days.
Those are early results, but the key thing is that the pill is safe and well-tolerated as well. The company plans to launch a phase 2 trial in the latter half of this year. So there's an outside chance that Viking may have not just one but two approved GLP-1 treatments within five years, making it a potentially big player in the anti-obesity market.
Will the business become profitable?
If Viking Therapeutics has at least one approved product in its portfolio, there is a strong possibility that the company may become profitable as well. The company's operating expenses during the first three months of the year have totaled $34.1 million. Those costs will increase as the company advances its drug candidates into later stages and also as it commercializes them (assuming they obtain approval).
But given how lucrative the market for weight-loss drugs could be, an approved treatment could quickly become a blockbuster drug for Viking. Ultimately, it will depend on how rapidly the company can scale its operations and roll out its treatment to patients. Assuming one or both of the drugs obtain approval, Viking could potentially be a profitable company in five years.
Could Viking Therapeutics get acquired?
There is also the possibility that Viking could become a potential acquisition target, especially if VK2735 attracts the attention of other healthcare companies. Many big names in the industry are developing their own GLP-1 drugs and if they are unsuccessful, they may simply opt for an acquisition instead of further in-house development.
With its liabilities totaling $33.6 million as of the end of March, Viking doesn't have a ton of obligations or debt on its books and its has close to $1 billion in cash and short-term investments. Its strong financial position could sweeten the deal for a prospective acquirer looking to add a promising GLP-1 drug to its portfolio.
At Viking's valuation of around $7.5 billion, it wouldn't surprise me if a larger healthcare company tries to acquire it within the next five years. If that happens, that could result in some great returns for investors, because the stock could command a high premium.
Is Viking Therapeutics stock worth investing in today?
Viking Therapeutics does look like it's on a promising path forward. But investors should remember that this still isn't an entirely safe investment to add to your portfolio. The company could obtain approval for multiple GLP-1 drugs, but it also might not.
And there's no guarantee of profitability or an acquisition, either. Its prospects for the future will hinge on whether it can bring at least one drug to market. If it does, the stock could take off. If it fails, a sell-off could ensue.
Viking Therapeutics could be a good stock to buy, but you should consider the risk and uncertainty that comes with it, because this isn't an investment that will be suitable for all types of investors.
