When you think of GLP-1s and investing, the two large pharmaceutical companies benefiting most from this trend may first come to mind. First, there's Novo Nordisk, the first to bring GLP-1 weight loss drugs to market, with Ozempic and Wegovy. Second, there's Eli Lilly, beating Novo Nordisk at its own game, with its Zepbound GLP-1 treatment.
Several other big pharma companies, like Pfizer, have their own injectable and oral-based GLP-1 candidates. The market incumbents are also working on orally administered candidates. But what if a lesser-known candidate, from a smaller biotech company, ultimately gives both Novo Nordisk and Lilly a run for their money?
NASDAQ: VKTX
Key Data Points
Let's take a closer look at Viking Therapeutics (VKTX +3.13%), a dark horse contender among GLP-1 stocks, and why this factor could be the stock's key to a threefold surge.
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Viking, VK2735, and the $100 billion opportunity
It's not just hype that has led pharmaceutical stocks like Novo Nordisk and Eli Lilly to add hundreds of billions to their market caps due to the rise of GLP-1s. Estimates call for the GLP-1 weight loss market to reach annual sales of $100 billion by the start of the next decade, especially if orally administered GLP-1s come to market.
This is what gives Viking Therapeutics and its VK2735 candidate so much potential. The injectable version of this drug is currently in phase 3 clinical trials. A phase 2 clinical trial of an orally administered version completed last year. Initial trial results have been highly promising. However, it is phase 3 trials, including a phase 3 trial for the oral version VK2735 scheduled to begin later this year, that could make or break the stock.
If subsequent clinical trial results disappoint, the commercial prospects of VK2735, and in turn Viking stock, could plummet. On the flip side, if subsequent trials yield promising results, Viking Therapeutics' share price may skyrocket. If VK2735 is commercially viable, Viking could become an instant takeover target among biotech stocks. Given the market opportunity relative to Viking's small $4 billion market cap, acquisition offers of as much as 3 times Viking's current valuation are not out of the question. In the past, Viking, trading for around $32 per share today, at one point traded at prices nearing $100 per share.
A binary bet, so size your position accordingly
Make no mistake. The situation with Viking Pharmaceuticals is binary. Either VK2735 moves ahead, or it doesn't. The downside risk is considerably high with this stock. Prior to the emergence of this GLP-1 catalyst, shares traded in the low single digits.
Yet while downside potential is massive, so is upside potential. Not only that, the time horizon for Viking's "moment of truth" could be as little as a matter of months. Compare that to other biotech stocks, which are years away from finding out whether they have struck oil or merely drilled a dry well.
By no means should you bet the ranch on this stock if you decide to buy. Position-size accordingly. However, if you've done your homework and also see an opportunity here, consider Viking Therapeutics worthy of a speculative buy.
