Viking Therapeutics Soars: Can VK2735 Create a New High in Metabolic Treatments?

Viking Therapeutics (NASDAQ: VKTX), a clinical-stage biopharmaceutical company focusing on metabolic treatments, has seen its stock price soar impressively, tripling in value this year alone. Yet, despite this significant jump, analysts continue to express bullish sentiments about the company's future, projecting an average price target of $113.55 per share. Achieving this estimate would translate to a hefty 76% increase from the stock's latest closing price.

Before you scramble to open your trading app, it's essential to delve deeper into Viking's promising late-stage pipeline and what it could mean for investors. Optimism surrounding Viking Therapeutics primarily stems from its experimental drug, VK2735, which recently progressed to phase 3 trials. This innovative weekly injection targets GLP-1 and GIP receptors in the pancreas, aiming to suppress appetite in patients—a feature that could position it as a game-changer in a crowded arena of weight management solutions.

While many GLP-1-based therapies exist, only one competitor truly mirrors VK2735’s dual action: tirzepatide from Eli Lilly (NYSE: LLY), which received FDA approval in 2022 as Mounjaro for diabetes and later under the name Zepbound for weight management. Tirzepatide has been a commercial success, racking up second-quarter sales that climbed an astounding 86% from the previous quarter, hitting an annualized rate of $17.2 billion. Viking is on the cusp of initiating a phase 3 trial for VK2735 following a scheduled meeting with the FDA, a crucial step toward commercialization.

The company currently boasts a market capitalization of about $7.2 billion, but the biotech sector, particularly firms in the commercial stage, typically trade at mid-single-digit revenue multiples. Should VK2735 secure just a small share of the GLP-1/GIP market, Viking Therapeutics’ stock price could potentially multiply significantly.

In addition to VK2735, the company is also working on VK2809, aimed at treating metabolic dysfunction-associated steatohepatitis (MASH). As the first drug for this condition, Madrigal Pharmaceuticals’ Rezdiffra gained FDA approval earlier this year. Viking plans to unveil what’s next for VK2809 after another crucial meeting with the FDA, with the possibility of beginning sales from two approved products as early as the end of 2025 if everything aligns perfectly.

However, it’s not all sunshine and rainbows. Despite its promising trajectory, Viking Therapeutics has experienced losses, registering $50 million in the first half of 2024. The company’s valuation heavily leans on the successful rollout of VK2735 and its potential market performance. Moreover, the anticipated sales from VK2809 are likely not on par with those expected from popular weight management drugs, making cautiousness advisable for potential investors.

As of June, Viking Therapeutics maintained a cash reserve of $942 million. While this sum appears substantial, the operational costs associated with large-scale phase 3 trials for both VK2735 and VK2809 could drain these resources swiftly. Investors contemplating a stake should be mindful that many independent drug launches fall short of expectations, and there are no assurances that VK2735 will deliver the FDA the results it seeks in its upcoming trials.