Is Viking Therepautics a Buy Now?

Cory Renauer, The Motley Fool

Tue, Nov 5, 2024, 1:23 AM 4 min read

Shares of Viking Therapeutics (NASDAQ: VKTX) fell on Monday, Nov. 4, despite some encouraging new data. Over the weekend, the company showed the medical community and investors results that suggest its experimental anti-obesity tablet, tentatively named VK2735, could go on to generate blockbuster sales.

Viking's previous positive results for the experimental treatments in its pipeline haven't gone unnoticed by the overall stock market. The stock has risen about 256% in 2024.

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Let's look at the latest trial results from Viking Therapeutics to see if it's a smart buy now despite already soaring this year.

Why Viking Therapeutics stock is soaring

It's hard to overstate the demand for effective weight management treatments. Most Americans are already familiar with semaglutide, a glucagon-like peptide-1 (GLP-1) receptor agonist that Novo Nordisk markets as Ozempic and Rybelsus for diabetes, and Wegovy for weight management.

Total semaglutide sales rose to a whopping $6.9 billion in the second quarter, but it's losing market share to a next-generation drug from Eli Lilly called tirzepatide. Approved as Mounjaro for diabetes in 2022 and as Zepbound for obesity in 2023, tirzepatide sales already shot up to $4.4 billion in the third quarter.

Tirzepatide acts on GLP-1 plus glucose-dependent insulinotropic polypeptide (GIP) receptors, and the dual mode of action seems to improve efficacy and sales. Wall Street's been pounding the table on Viking Therapeutics because VK2735 could become the next and best dual GLP-1/GIP agonist on the market.

On Sunday, Nov. 3, Viking showed that patients treated with the highest dose tested in the phase 2 Venture study reduced their weight by 14.7% on average after 13 weeks of injections with VK2375.

Patients in the Venture study received weekly injections up until week 13. Perhaps the most encouraging thing we've seen from VK2735 so far was the news that all patients maintained a majority of their weight loss four weeks after receiving their final dose. This implies monthly maintenance doses, which would give it a big leg up on tirzepatide and semaglutide, which require weekly injections.

The company also presented some results from a separate phase 1 trial with oral VK2735. All nine patients given the highest dose tested reduced their weight by more than 5% after four weeks, compared to zero members of the placebo group.

Among patients treated with oral VK2735, those given the highest dosage tested lost a placebo-adjusted 6.8% of their body weight after 28 days. That's a better result than we've seen from oral anti-obesity candidates in development by Roche, Lilly, Novo Nordisk, and Structure Therapeutics.

Expectations are already high

Sales of GLP-1 drugs are expected to soar from close to $50 billion in sales in 2024, to more than $100 billion annually by 2029. Viking's candidate could be a top seller, but it's a long way from the finish line. The injectable version still needs to complete a phase 3 trial that will last over a year, and probably won't begin until early 2025.

Despite being perhaps two years away from a commercial launch with injectable VK2735, Viking Therapeutics stock boasts a huge $7.5 billion market cap. That's an extremely high valuation for a clinical-stage drugmaker that doesn't even have a recurring source of revenue yet.

Viking Therapeutics' market valuation is extremely high, but not if you think it has a good chance of gaining a leading share of the anti-obesity drug space. If anti-obesity drug sales more than double to reach $100 billion annually in five short years and Viking's candidate becomes a market leader, investors who buy this stock at recent prices could realize enormous gains.

With the start date for VK2735's first phase 3 trial still uncertain, there's a lot that could go wrong for Viking Therapeutics before it launches its first drug. Buying some shares of this risky stock and adding them to a diverse portfolio could be a smart move, but only for folks with a huge risk tolerance.

Should you invest $1,000 in Viking Therapeutics right now?

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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk and Roche Holding AG. The Motley Fool has a disclosure policy.

Is Viking Therepautics a Buy Now? was originally published by The Motley Fool

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