Among the hottest investments these days are pharma and biotech companies that make weight loss drugs. Demand for these products surpasses supply, and analysts predict that sales growth for the new classes of effective treatments is just getting started. According to a forecast by Goldman Sachs Research, the global weight loss drug market may multiply by a factor of 16 to reach $100 billion by the end of the decade.
Today, Eli Lilly and Novo Nordisk dominate the market, each selling GLP-1 receptor agonist drugs that have brought in billions of dollars in revenue. But other players could share in the wealth as they bring rival drugs to market. One of these is Viking Therapeutics (NASDAQ: VKTX), a biotech company that's preparing to launch phase 3 and phase 2 trials for its weight loss candidates.
Could investing in this up-and-coming weight loss player today help make you a millionaire down the road?
Viking's soaring stock price
Unlike Eli Lilly and Novo Nordisk, Viking is a clinical-stage company. It doesn't have any products on the market, nor does it have an extensive commercial infrastructure. But it does have weight loss candidates that have prompted investors to sit up and take notice. The shares are up by more than 270% so far this year.
Viking is developing weight loss drug candidates that work in a similar manner to those of its bigger, commercial-stage rivals. VK-2735 is an injectable GIP and GLP-1 receptor agonist, acting on hormones that control blood sugar levels and appetite. In a recent phase 2 trial, participants taking it lost, on average, as much as 15% of their body weight after 13 weeks. Now, this formulation is moving into phase 3 studies.
The company also is studying an oral version of VK-2735, and plans to begin phase 2 studies of that later this year. In its phase 1 trial, participants showed a mean weight loss of 5.3% after only 28 days. The weight loss drugs of Eli Lilly and Novo Nordisk currently are given by injection, though these companies are also studying oral versions. Pill versions of these drugs could be game-changers, prompting even more people to give them a try.
Viking may not have a source of revenue yet, but it has plenty of cash on its books -- $942 million as of today. This should help it bring its promising candidates through development and to market. So it won't necessarily have to partner with a bigger player, and that freedom could result in it reaping greater profits down the road.
The possibility of partnerships
That said, a partnership might be a favorable strategic choice. For example, if it can take advantage of a big pharma company's commercial infrastructure, Viking could see higher sales of an eventual product. Or, with its attractive portfolio of weight loss candidates, Viking could be a potential buyout target.
So, the company and investors could win if Viking remains independent or if it eventually signs a partnership or accepts a buyout bid.
But could Viking be a millionaire-maker stock? In the past, it has at times taken off in very short periods of time. For example, in February, after Viking announced positive trial data, shares soared by 120% in just one trading session. And just this week, after the company announced its candidates were advancing into later-stage clinical trials, shares rose more than 30% in one trading session. Such extreme movements could happen again, as it's easier for a small-cap or mid-cap biotech stock to soar by a double-digit or triple-digit percentage than it is for a large-cap stock to do so.
Know your investment style
All that said, it's important to consider your investment style before taking a position in a company like Viking. It remains a risky investment, as none of its candidates have reached the commercialization finish line yet. Anything could happen as the story continues to unfold -- and any disappointing results from clinical studies could seriously hurt the share price. To invest in this player, you need to be comfortable with that level of risk. But even if you are, it still wouldn't be a good idea to put all of your eggs in one basket and make a huge investment in this particular stock.
All of this means it's unlikely an investment in Viking, alone, could eventually make you a millionaire. And Viking probably isn't the best choice for a cautious investor at this point.
But if you're an aggressive investor, it could be a strong addition to your diversified portfolio right now. The biotech is making progress in an area with high potential, and if all goes well, the stock may soar over time -- and help you along the path to a million-dollar portfolio.
Should you invest $1,000 in Viking Therapeutics right now?
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
Is Viking Therapeutics a Millionaire-Maker Stock? was originally published by The Motley Fool