Viking Therapeutics (NASDAQ: VKTX) just gave shareholders a few more reasons to be excited for the future. With its shares soaring by a stunning 34% on July 25 thanks to second-quarter earnings, the bull thesis for its continued outperformance is stronger than ever.
It's clear now that the biotech has what it'll need to take on powerful competitors like Eli Lilly and Novo Nordisk. Here's why.
Strong clinical data and minimal expenditures make a very bullish combo
Viking's investment thesis just got stronger because it's demonstrating the value of its pipeline programs with good clinical data, while also spending very little relative to its reserves to make those results happen.
One big piece of news is that Viking's lead program for treating obesity, VK2735, will proceed to phase 3 clinical trials rather than needing to complete phase 2b trials first. Those late-stage trials will be testing the candidate's injected formulation, which could one day compete with products like Wegovy by Novo Nordisk, and Zepbound by Eli Lilly. So far, the data indicate that Viking's program could lead to faster rates of weight loss than those products.
The even bigger story is that the company is investigating a once-per-month injected formulation of VK2735. That would be far more convenient than the drugs on the market, which require weekly dosing. There's also a chance that it would be cheaper to manufacture and distribute.
Another important update is that VK2735's oral pill formulation, which is slightly behind the injected formulation in its clinical trials, will advance to phase 2 and start trials sometime in the fourth quarter of this year. Per some of the data from phase 1, the pill form helped patients to lose 5.3% of their body weight within 28 days of the first dose -- an impressive proportion.
Viking also disclosed that it will advance a next-gen weight loss candidate into early-stage clinical trials sometime in 2025 after a pre-clinical study concluded successfully. While very preliminary and not directly generalizable to humans, the effects of that candidate were particularly powerful. Within just 72 hours of treatment, animal models shed 8% of their body mass. If comparable results can be replicated in humans -- and there is no guarantee whatsoever that they will -- it'll mark a quantum leap forward in obesity therapies.
As if that weren't enough, its therapy for metabolic dysfunction-associated steatohepatitis (MASH, formerly known as NASH) is also shaping up to be a winner after the success of a phase 2b trial. The company will meet with regulators at the Food and Drug Administration (FDA) sometime in Q4 to see how it should proceed, but at the moment, it's hard to see how the candidate wouldn't advance to phase 3.
To accomplish all of that in one quarter, Viking only spent $23.8 million on research and development (R&D). Given the number of clinical trials it's running, the gargantuan market for weight loss drugs that it's working to enter, and its cash and investments of $942 million, that's practically free.
Success isn't guaranteed, but the future is still bright
It's obvious why the market is so ebullient -- this company is going places. Even if it hits a snag with late-stage clinical trials or in discussions with regulators, Viking has more than enough resources to recover and chart a new course. It won't need to raise capital by issuing shares or taking out a loan anytime soon. And all of this is very bullish for the stock.
However, as always with biotech stocks, there are still risks of sharp downturns lurking. While patients have largely tolerated Viking's weight loss candidates at higher rates than its competitors can claim with their medicines, that may not be the case once all of the clinical trials are complete.
Likewise, the impressive weight loss results from earlier trials may be harder to replicate in the larger cohorts of late-stage investigations. Finally, it's possible that one of Viking's competitors could one-up its impressive results.
Don't let those risks dissuade you from investing in this stock. Right now, it looks like Viking has the safest and most powerful weight loss assets of any biopharma. That may change. But on the basis of its performance thus far, it makes sense to bet on Viking Therapeutics continuing to win.
Should you invest $1,000 in Viking Therapeutics right now?
Before you buy stock in Viking Therapeutics, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Viking Therapeutics wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $692,784!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns as of July 22, 2024
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 Bull Case for Viking Therapeutics Just Got Even Stronger. Here's Why You Should Buy It. was originally published by The Motley Fool