Key Points
Viking Therapeutics is nearly done developing and testing a potential GLP-1 weight loss drug.
While the company is still losing money, the underlying business appears solid.
As is usual for biopharma stocks, this one is high-risk, high-reward and should be treated accordingly.
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Most veteran investors can attest that, although they're also often a complete bust, every now and then a biopharma stock dishes out a windfall gain.
That's what the analyst community seems to expect from Viking Therapeutics (NASDAQ: VKTX) in the foreseeable future. The stock's current consensus price target of $92.94 is more than 200% above the ticker's present price, while one analyst -- BTIG's Justin Zelin -- says this stock's worth $125. That's more than 300% above its current value.
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The question is, what do so many stock-picking pros see in this extremely unprofitable pharmaceutical start-up?
A one-drug pony (but what a pony!)
The answer to the question is VK2735. That's the company's lead drug candidate, currently in phase 3 trials as a treatment to help people lose weight. Viking's got some other drugs also currently in clinical trials, but investors' hopes are largely pinned on this particular prospect. And it's promising, to be sure.
It's a glucagon-like peptide 1 (GLP-1) drug in the same vein as Eli Lilly's Orforglipron or Novo Nordisk's Wegovy. So at the very least, the underlying science should be palatable to the FDA when these phase 3 trials are complete and Viking Therapeutics is ready to ask for the FDA's ultimate approval.
Viking's VK2735 has something of a competitive edge over similar options, however. That's its tolerability. As it turns out, even though it performs no better than more familiar weight loss therapies, this particular obesity treatment's users are sticking with it for far longer than users are with other GLP-1-based weight loss options. That's not an insignificant detail.
Then there's the other thing. That is, while the phase 3 trial of the drug is measuring the efficacy of subcutaneous injections, there's also an oral-dosing trial currently in phase 2, adding potential flexibility to how the weight loss drug is administered and marketed.
BTIG's Zelin has also suggested in the past that Viking is a potential acquisition target for any pharmaceutical name looking to buy its way into the weight loss drug business with a well-developed candidate.
It's still a young biopharma name with a long way to go
Most of the criticisms of Viking Therapeutics are fair. Chief among them is the simple fact that Novo Nordisk and Eli Lilly both already have something on the market that's very comparable to VK2735. A slight difference among similar options may not mean much to prospective users.
Image source: Getty Images.
Viking's approved products don't necessarily need to be markedly better than competing options in order to reward shareholders, though. They only need to win over a respectable fraction of the global GLP-1 weight loss drug market that Precedence Research expects to grow from last year's $8.2 billion to more than $66 billion by 2035.
For perspective, Viking Therapeutics' current market capitalization is less than $4 billion. Even capturing a tiny piece of this market's future revenue could justify a much higher stock price. Given enough time, in fact, there's an argument to be made that it could end up reaching BTIG's target of $125.
Just bear in mind this is a young pharma name, and volatile swings are the norm here. Plenty of companies in the business are working on lots of other weight loss drugs as well. This ticker could easily fail to advance that much, or even lose ground from here. Indeed, this industry's up-and-comers' stocks tend to be all-or-nothing trades. Act accordingly.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk and Viking Therapeutics. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
