Nearly a year ago, Viking Therapeutics (NASDAQ: VKTX) shares exploded higher after the clinical-stage drugmaker announced successful results from a clinical trial with an experimental weight loss drug.
Viking Therapeutics' weight management candidate could produce blockbuster sales down the road, but this isn't enough to hold the attention of a stock market obsessed with artificial intelligence (AI). When the market closed on Feb. 5, shares of Viking Therapeutics were down about 65% from the peak they reached in 2024.
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Is Viking Therapeutics stock a bargain at its beaten-down price? Let's weigh some reasons to buy right now against the risks it faces to find out.
Reasons to buy Viking Therapeutics now
It's hard to overstate the commercial success of drugs that reduce appetites by acting on glucagon-like peptide-1 (GLP-1) receptors. Sales of semaglutide, the injection Novo Nordisk markets as Ozempic and Rybelsus for diabetes and as Wegovy for weight management, reached $19.4 billion during the first nine months of 2024.
Novo Nordisk's semaglutide sales are enormous, but it's losing ground to tirzepatide, a more recently launched drug from Eli Lilly (NYSE: LLY) that acts on GLP-1 and GIP receptors. The dual agonist approach appears to improve efficacy and sales growth. Lilly began marketing tirzepatide as Mounjaro for diabetes patients in 2022, then as Zepbound for weight management in 2023. Despite being relatively new to the market, total tirzepatide sales came in at a little over $11 billion during the first nine months of 2024.
Viking Therapeutics stock jumped higher last year because it looks like a dual GLP-1/GIP agonist it's developing could outperform tirzepatide. The injectable version of the candidate, tentatively named VK2735, reduced obesity patients' weight by 14.7% after 13 weeks in a relatively small phase 2 trial.
Viking continued to impress investors with surprising results from an oral formulation of VK2735 last March. In a phase 1 study, the seven patients given the highest dose tested reduced their weight by 5.3% on average after just 28 days of daily dosing.
In addition to VK2735, Viking has a candidate for metabolic dysfunction associated steatohepatitis (MASH) called VK2809, which is ready to begin phase 3 testing. Treatment with the experimental thyroid hormone receptor agonist in a phase 2 trial significantly reduced patients' liver fat levels. People randomized to receive VK2809 were more than twice as likely to resolve symptoms related to liver inflammation.
Key risks for Viking Therapeutics stock
It looks like VK2735 from Viking could compete fiercely with Eli Lilly's tirzepatide. Unfortunately, it's so far behind that it could be somewhat obsolete by the time Viking Therapeutics has a chance to begin marketing it.
The Food and Drug Administration (FDA) isn't likely to approve any version of VK2735 before it completes a large phase 3 trial that monitors patients for at least a year. Viking hasn't started enrolling patients into a phase 3 study for VK2375 yet. In other words, it will be at least two years before Viking can begin marketing an injectable version of VK2735, and an oral version is even further from the finish line.
By the time an injectable version of VK2735 becomes available, there could also be a new anti-obesity treatment from Eli Lilly on the market. Lilly's next-generation anti-obesity candidate is called retatrutide, and it acts on GLP-1, GIP, and glucagon receptors. In June 2023, Lilly reported phase 2 trial results that showed retatrutide reduced body weight by 24.2% after 48 weeks.
As a well-established pharmaceutical giant, Lilly can use its immense resources to bring retatrutide to market as quickly as possible. It's already in a 1,800-patient phase 3 trial that is expected to read out top-line data in less than a year.
A bargain now?
At recent prices, Viking Therapeutics has a $3.7 billion market cap. This is a low valuation for a company that could have a blockbuster obesity treatment, and a MASH treatment ready to launch in a couple of years. That said, Viking Therapeutics' stock price could fall much lower if it delays the late-stage development of its candidates any longer. It could also tank further down the road if long-awaited results are less than outstanding.
If VK2735 and VK2809 go on to become blockbuster drugs, patient investors who buy Viking Therapeutics at its beaten-down price now could realize enormous gains. Considering the slow pace of development we've seen over the past couple of years, though, it's clear that this stock isn't appropriate for anyone who doesn't have a sky-high risk tolerance.
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Cory Renauer 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.
