Viking Therapeutics (VKTX 1.97%) is a healthcare company that possesses a lot of growth potential. And last year, its shares rose by 116%, as investors were bullish on its prospects.
This year, however, has been a much different story, with the markets on shaky ground. Viking has lost more than 40% of its value since January.
While there has been some significant volatility in the short term, there could still be a lot more room for Viking to be a much more valuable business in the long run, especially if it ends up having a top GLP-1 weight loss drug in its portfolio. Could Viking become one of the top healthcare stocks in the world in 10 years?
NASDAQ: VKTX
Key Data Points
Why investors are bullish on the stock
It's not hard to see why this company, which currently has a market cap of around $2.5 billion, can become a lot more valuable in the future. VK2735 is a drug candidate in Viking's portfolio that has been showing some exciting results in clinical trials. It has helped people lose around 15% of their body weight in a phase 2 trial. The company has also been developing an oral version of the drug, which helped people achieve at least 5% weight loss after about a month of being on the pill -- based on a phase 1 trial.
Then there's VK2809, a possible treatment for MASH, a form of nonalcoholic fatty liver disease. In a phase 2 trial, it was able to reduce liver fat after a period of 52 weeks by an average of 37% to 55%.
Between VK2809 and VK2735, there could easily be billions of dollars in revenue for Viking to bring in, as both drugs could be blockbusters. The caveat, however, is that there's still a fair bit of uncertainty ahead, as there's no guarantee they will be approved. It will be costly to continue to develop these drugs and to commercialize them, should they obtain approval.
Even under the best-case scenario, it could be multiple years before the company sees any revenue from these products. But the potential is certainly there.
Are these assets enough to make Viking a top healthcare stock in the future?
If VK2809 and VK2735 obtain approval, there is no doubt in my mind that Viking's valuation will skyrocket and the healthcare stock could double or even triple in value, especially given the exciting potential in GLP-1. But for its upside to be even higher than that, and for the company to be among the most valuable in its industry, I believe it needs to have more assets to build around.
That's because many healthcare companies are investing heavily into GLP-1 drugs in order to not miss out on a market opportunity that may easily be worth more than $100 billion. This includes industry heavyweights such as Pfizer and Roche. And Eli Lilly already has an approved weight loss drug in Zepbound.
Competition is going to be fierce, and having an approved GLP-1 drug may not be enough to make Viking a top healthcare company. Approval of a drug in this space can generate significant returns for investors who buy the stock today, but whether its valuation continues to climb higher will ultimately depend on how diversified and strong its roster of drugs is in the future.
Viking has loads of potential, but investors should temper expectations
Viking's stock skyrocketed last year amid hopes of supercharged growth for the business, due to its promising GLP-1 drug. But the company also incurred a net loss of $110 million in 2024, and losses are likely to continue for the foreseeable future.
Approval of the drugs listed earlier can help with the business in getting to breakeven and boosting its overall valuation, but that may not be enough to make Viking a top healthcare stock in the future. A lot will depend on what other drugs it ends up developing and bringing to market in the years ahead.
However, at its reduced valuation, I see a lot of good value in Viking's stock, given the potentially lucrative, moneymaking assets it has in its portfolio. This is a stock that may be worth investing a modest amount of money into, assuming that you're comfortable with the risk and uncertainty that comes with it.
It's hard to predict which companies will become big players within their industries in a decade, but by putting money into multiple promising growth stocks, you can increase the odds for success that one of your investments may be a big winner over the long term. Viking does have that potential, even though it is by no means a sure thing. It's an exciting stock to watch, and while it may not be suitable for all types of investors, if you can stomach the risk, it may be worth buying right now.
