Viking Therapeutics (NASDAQ: VKTX) is at an exciting point in its history. While it doesn’t have any medicines approved for sale at the moment, it has a couple of mid-stage programs that are shaping up to make a big splash in their target markets, assuming they end up getting approved. And that could happen fairly soon.
On average, the analysts on Wall Street see the biotech’s stock rising by 116% during the next 12 months. That’s a sign it’s an appealing option for investing a relatively small sum, perhaps as small as $1,000, to capture the large amount of growth that could be on the way. Here’s what you need to know.
This setup is better than any other biotech stock at the moment
The investment thesis for buying $1,000 of Viking Therapeutics is based on its plans for entering two big markets, one of which is much more important right now than the other.
Its candidate called VK2735 is being developed as an injection to help people lose weight, and it just wrapped up its phase 2 clinical trials with flying colors.
After a little more than three months, patients lost nearly 15% of their body weight, well in excess of the roughly 2% of weight lost by patients who were treated with a placebo. Overall, side effects were on the mild side, and there weren’t any obvious red flags in terms of safety. The next step will be to run a late-stage clinical trial and prepare paperwork for submitting to regulators to get commercialization approval.
Cracking into the surging market for obesity therapies would give Viking the revenue stream it currently lacks, and free the company from needing to raise money by issuing shares and taking on debt. At the close of the first quarter, it boasted $963 million in cash, cash equivalents, and investments, zero long-term debt, and research and development (R&D) expenditures of just $24.1 million. So even though it needs income at some point, it isn’t under any pressure.
Nor is VK2735 its only iron in the fire.
Viking is also trying to enter the market for metabolic-associated steatohepatitis (MASH, formerly known as NASH) medicines. Its VK2809 program is currently in phase 2b, and the data so far are promising. After 52 weeks of treatment, 75% of patients experienced a resolution of their MASH, and up to 48% of patients experienced that resolution as well as a substantial improvement in their degree of liver fibrosis (scarring).
The timeline to reaching the market with VK2809 is still at least a couple of years long. But if the program continues to yield good data, this biotech could well have two different blockbuster drugs on the market by 2027. That outcome would likely turn an investment of $1,000 into $2,000 or more in short order.
Don’t count on these headwinds to make its shares any cheaper in the near future
As with most stocks, Viking does have a few headwinds that it’s worth knowing about.
In particular, no matter which of its pipeline programs get approved for sale, assuming any of them ever do, it’ll have to fight the current residents of its markets. Some of those residents in the market for obesity medicines, like Novo Nordisk and Eli Lilly, are vastly more powerful, and those two are unlikely to be the only competitors of their size that ultimately want to cash in on the ongoing gold rush. Others, like Madrigal Pharmaceuticals, in the market for MASH drugs, are a more equal matchup for the biotech, but they will still have a fairly large head start.
At least in the market for weight loss medicines, the odds are good that Viking can find enough market share to make its stock a good investment. Think of it as a small fish in a big ocean — it doesn’t matter if the big fish eat most of the food that’s available bcause there are sure to be more than enough scraps to go around, at least for the foreseeable future.
With all this said, it’s also important to remember that this is a pre-revenue biotech stock. Its success is fully dependent on producing favorable clinical trial results that regulators accept as valid. Though VK2735’s prior clinical trials suggest that it has a good shot at sailing through its phase 3 trials and getting an enthusiastic approval from the U.S. Food and Drug Administration (FDA), late-stage mishaps and unexpected outcomes do occur. The same goes for the company’s other programs, including VK2735’s oral formulation that’s in phase 1 trials. It faces slightly higher risks due to the potential for previously unknown gastrointestinal side effects.
Nonetheless, despite that possibility, this stock is worth an investment of $1,000, as the balance of risk and reward is currently skewed toward the latter. Unless there’s a major problem, it’s unlikely that investors will get a shot at buying shares at a discount, so it’s worth moving on this sooner rather than later.
Should you invest $1,000 in Viking Therapeutics right now?
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
The Best Biotech Stock to Invest $1,000 in Right Now was originally published by The Motley Fool
