Shares of Viking Therapeutics (NASDAQ: VKTX), a clinical-stage drugmaker engaged on metabolic therapies, have tripled in worth this 12 months. Regardless of the large run-up, analysts who comply with the corporate suppose it has heaps extra upside.
The typical analyst who follows Viking Therapeutics thinks it could rise to $113.55 per share. Reaching the consensus expectation would lead to a acquire of about 76% from the inventory’s current closing value.
Earlier than opening your brokerage utility to make the most of the mismatch between Wall Avenue’s expectations and the inventory’s current value, we must always study a factor or two concerning the experimental medicine within the firm’s late-stage pipeline.
Why Wall Avenue is bullish for Viking Therapeutics
Viking Therapeutics does not have any permitted medicine it could promote now, however an experimental therapy it not too long ago superior to part 3 trials might turn out to be an unlimited blockbuster. VK2735 is a weekly injection that acts on GLP-1 and GIP receptors within the pancreas to scale back sufferers’ appetites.
There are many GLP-1 medicine on the market, however in the intervening time, tirzepatide from Eli Lilly (NYSE: LLY) is the one therapy for diabetes or weight administration that acts on GLP-1 and GIP receptors. Lilly’s GLP-1 plus GIP agonist was first permitted to deal with diabetes below the model identify Mounjaro in 2022 and once more for weight administration final November below the model identify Zepbound.
Tirzepatide is gaining market share from semaglutide, a GLP-1 agonist that Novo Nordisk markets as Ozempic, Wegovy, and Rybelsus. Eli Lilly’s therapy produced second-quarter gross sales that rocketed up by 86% in comparison with the primary quarter to achieve an annualized $17.2 billion.
Viking intends to start a part 3 weight problems trial with VK2735 after a gathering with the Meals and Drug Administration (FDA) scheduled for later this 12 months. This is not the one twin GLP-1 and GIP agonist in growth, nevertheless it’s arguably nearer to incomes approval from the FDA than its friends.
Viking Therapeutics sports activities a $7.2 billion market cap at current costs, however commercial-stage biotech shares are likely to commerce at mid-single-digit multiples of annual gross sales. Meaning its inventory value might rise severalfold if VK2735 can carve out only a fraction of the marketplace for GLP-1/GIP medicine. Along with an injectible model of VK2735 that would start part 3 trials quickly, Viking expects to start out a part 2 trial with an oral model later this 12 months.
Viking can be creating VK2809 as a therapy for metabolic dysfunction-associated steatohepatitis (MASH). Previously often known as nonalcoholic steatohepatitis, this progressive situation impacts the liver perform of hundreds of thousands of American adults. Madrigal Prescribed drugs launched the primary FDA-approved MASH therapy, referred to as Rezdiffra, in April, and VK2809 might comply with earlier than too lengthy.
VK2809 succeeded in an extended part 2 trial, however Viking will wait till after an upcoming assembly with the FDA to announce what’s subsequent for this candidate. If all goes properly, the company might comply with evaluate an utility for this candidate earlier than the corporate completes a part 3 program. In different phrases, the corporate might start producing gross sales from two commercial-stage medicine by the tip of 2025.
Causes to stay cautious
Viking Therapeutics has a $7.2 billion market cap at current costs, though it misplaced $50 million within the first half of 2024. Its valuation depends upon the swift approval of VK2735 and a profitable launch. VK2809 may very well be important, however its future gross sales potential is not even near what we have already seen for weight administration therapies.
Earlier than you danger a nickel on this inventory, it is best to know that the majority unbiased drug launches don’t meet expectations. Plus, there isn’t any assure that VK2735’s upcoming part 3 trial outcomes will present the FDA what it must see.
The corporate completed June with $942 million in money. This looks as if rather a lot, however working massive part 3 trials for VK2735 and VK2809 will increase working bills by leaps and bounds. If the corporate cannot launch these medicine earlier than its money cushion flattens out, traders who purchase the inventory at current costs might undergo a heavy loss.
People with a low to average danger tolerance need to keep away from this and nearly every other clinical-stage biotech inventory. When you have a powerful tolerance for danger, although, including some shares of Viking Therapeutics to a various portfolio seems to be like a sensible transfer.
Cory Renauer has no place in any of the shares talked about. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure coverage.
Viking Therapeutics Inventory May Rocket 76% Larger In line with Wall Avenue. Is It a Purchase Now? was initially revealed by The Motley Idiot