Wall Street investment banks keep pounding the table on Viking Therapeutics (VKTX +0.03%) and its weight loss drug candidate. Predictions vary, but the average analyst who follows the stock thinks it can rise 98% from recent prices.
Investment bank analysts aren't the only folks on Wall Street who think the clinical-stage biopharma has a bright future. In the second quarter, billionaire money manager Jeff Yass increased the stake that his Susquehanna International Group has in Viking by about 1.1 million shares. Another billionaire fund manager, Israel Englander, bought about 326,000 shares for his Millennium Management fund.
Is now a good time to follow these billionaires and buy some Viking Therapeutics stock? Let's weigh the opportunities in front of the company against some of the risks it presents to investors.
A Why Wall Street is bullish for Viking Therapeutics
In February, Viking Therapeutics reported successful clinical trial results for VK2735, a dual GLP-1 and GIP receptor agonist. After just 13 weeks of treatment, patients on average had shed 14.7% of their weight, and they were still dropping pounds leading up to their 13-week weigh-in.
If you aren't one of the millions of Americans already taking a weight loss drug, you probably know someone who is. Sales of semaglutide, a GLP-1 drug Novo Nordisk (NVO 2.62%) markets under the names Ozempic, Wegovy, and Rybelsus, soared to an annualized $27.6 billion in the second quarter of 2024.
Novo Nordisk's treatment is far and away the most popular of the drugs that act on GLP-1 receptors in the pancreas, but it's losing market share to tirzepatide, the more recently launched drug that Eli Lilly (LLY 0.87%) markets as Mounjaro for diabetes and Zepbound for weight loss.
Like Viking's VK2735, Eli Lilly's drug acts on both the GLP-1 and GIP receptors, which is making a difference in terms of both efficacy and sales. In the second quarter, sales of tirzepatide rose by 86% compared to the first quarter. Semaglutide sales rose by just 10% over the same time frame.
An easy-to-swallow tablet version of VK2735 isn't very far behind the injectible version that is now headed for phase 3 trials. In March, Viking reported that patients in a phase 1 study of the oral formulation exhibited significant weight loss after just 28 days of treatment.
More than weight management drugs
Viking Therapeutics' focus on metabolic disorders didn't start with weight management. The most advanced-stage candidate in its pipeline, VK2809 recently succeeded in a phase 2b study with patients affected by metabolic dysfunction-associated steatohepatitis (MASH).
Patients with MASH, which used to be called non-alcoholic steatohepatitis (NASH), have too much fat in their liver, which leads to inflammation and fibrosis. The condition affects millions of Americans, but it looks like VK2809 can help. After 52 weeks, up to 75% of patients treated with the drug achieved MASH resolution without any signs of worsening fibrosis compared to just 29% of the placebo group.
Upcoming catalysts for Viking Therapeutics
A phase 3 trial for VK2735 as an obesity treatment is upcoming, but Viking Therapeutics still needs to meet with the FDA and hash out the details. That meeting is scheduled for later this year, and the stock could rise sharply if the agency doesn't ask the company for an especially lengthy or large study.
In the fourth quarter, Viking Therapeutics will begin a phase 2 study of oral VK2735. Rybelsus from Novo Nordisk is an oral GLP-1 drug, but there aren't any dual-action GLP-1/GIP treatments with an approved oral formulation.
It's still early, but so far, oral VK2735 looks like a winner. On average, study participants' weight declined by more than 5% after 28 days of treatment, and the drug displayed a positive safety profile.
Gastrointestinal side effects are relatively common for today's weight management drugs. It's encouraging that only 14% of patients given VK2735 said they experienced mild nausea, and none reported serious side effects.
Viking will begin a 13-week phase 2 trial of oral VK2735 later this year. Another successful result in a longer study could send the stock rocketing higher in 2025.
A buy now?
Viking Therapeutics looks like a good stock to buy for investors with a high tolerance for risk. However, if you're a long way from achieving financial independence, this stock isn't right for you. The company sports a $6.3 billion market cap, but it's going to be more than a year at best before it has any approved products to sell.
There aren't any reasons to expect a bad outcome for VK2735, but there is still a lot that could go wrong in the years ahead. If Viking Therapeutics announces an unfavorable clinical trial result or the FDA delays VK2735's progress, the bottom could fall out from under this volatile stock.
