How High Will Viking Therapeutics Stock Go?

The latest clinical trials reported by Viking Therapeutics sparked huge interest amid the growing hype around anti-obesity drugs, but how high can the stock actually go before it approaches overvaluation territory?

Viking Therapeutics, Inc. (NASDAQ:VKTX) is a biotech company conducting clinical trials of several promising potential therapeutics.

In the anti-obesity market, Viking has been gathering significant momentum and emerging as a contender to giants like Eli Lilly and Company (NYSE:LLY) and Novo Nordisk A/S (NYSE:NVO) in this space.

Despite having no approved drugs to capitalize on the burgeoning obesity market, investors have rewarded Viking based on the optimistic findings from VK2735’s clinical studies.

The ongoing optimism around Viking’s prospects has led to the stock hitting a 52-week high of $99.41 on February 28. This meteoric rise led the company to an approximately $8 billion market capitalization.

It is up by more than 300% this year, surpassing gains recorded by many prominent AI and crypto players that made headlines earlier this year.

Some investors consider this price too steep for a business that has yet to generate revenues but Viking exhibits solid potential in the booming weight loss drug market and may very well be worth the premium pricing.

What Drove the Stock’s Astronomical Rally

For a biotech company with zero revenue generation, stock price performance mainly relies on the potential of its pipeline candidates based on the efficiency demonstrated in trials.

Viking’s shares experienced a sharp rise following the announcement of positive results from the Phase 2 clinical trial of its VK2735, an obesity treatment candidate, on February 27.

In the Phase 2 VENTURE study, patients perceived the treatment as tolerable and showed body weight reduction. Around 88% of the dedicated cohort experienced at least 10% weight loss.

Some studies show Viking’s injectable drug has led to even higher weight loss compared to Eli Lilly’s Zepbound. The company had completed the phase 1 trial in early 2023.

Furthermore, Viking had initiated a Phase 1 trial of the oral tablet formulation of the same drug, the results of which were encouraging, as disclosed last month. It is planning to start the next phase of development later this year.

The positive results from the weight loss pill trial further excited investors and boosted Viking’s share price.

Viking Has a Revenue Problem

While it may be years before Viking starts generating revenues, investors’ rising confidence in the prospect of its candidates and their ability to compete with market behemoths is fueling a price rally.

Goldman Sachs expects the global anti-obesity medications to reach $100 billion by 2030, growing by more than 16 times the present $6 billion level.

More than half of the global population is projected to be overweight by 2035, which indicates potential growth in demand for anti-obesity therapies. Viking is on track to grab shares in this booming market.

If Viking’s upcoming trials show robustness and the company can get regulatory approvals for commercializing VK2735, it can generate significant revenues.

In addition to the promising obesity control drug that attracted investors toward Viking, it is also advancing other pipeline candidates, including VK2809 for lipid and metabolic disorders and VK0214 for treating X-linked adrenoleukodystrophy.

With all that positive news considered, it must be highlighted that none have completed the phase 3 trials. In November 2023, Viking released results from the Phase 2b clinical trial of VK2809 that showed liver fat reduction in the tested groups.

While the company is generating losses, cash, cash equivalents, and short-term investments stood at $362.1 million at the end of 2023. The company believes its financials are sufficient to fund operations through the first quarter of the next year.

Does Viking Have a Smooth Journey Ahead?

While the company has attracted significant attention from analysts and investors, it faces challenges similar to most clinical-stage biopharmaceutical companies. 

Firstly, the company needs to drive top line sales to continue operating and launch products. At a pre-revenue stage, dilution will be an inevitable funding option if revenues don’t come soon.

Last month, it closed a public offering with gross proceeds of approximately $632.5 million, which it plans to use for under-trial programs, working capital, and general corporate purposes.

Moreover, the weight loss drug space is becoming increasingly competitive, and it may well become challenging for Viking to grab market share when its pipeline candidate is ready for commercialization.

Industry giants with already strengthened footings are constantly innovating and developing enhanced versions of their marketed products, which already boast consumer conviction.

How High Will Viking Therapeutics Stock Go?

Analysts forecast Viking Therapeutics stock will rise to as high as $108.44 per share, suggesting the stock could rally by about 40% from the current price level. All seven covering analysts unanimously recommend buying the stock. As such, the price decline is expected to be short-lived, as indicated by analysts’ bullishness about the stock.

Viking’s share price did experience some downward pressure last month as Novo Nordisk released favorable results from the Phase 1 clinical trial of its experimental oral weight-loss drug, amycretin and the stock fell into a downtrend over the past month, losing more than 12% of its value but it’s likely to be short-lived.

Additionally, there is a chance that Viking will be acquired by a pharmaceutical giant, which could potentially bolster its share price. Viking is currently a star performer due to its back-to-back cheery updates regarding its clinical trials that show promise, especially the anti-obesity drug.

Whether or not Viking becomes a major market player, the hype around anti-obesity drugs are likely to propel the stock higher with each positive development in its clinical trials. As a result, it would be risky to bet against the bullish momentum continuing.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.