This business has solid results in hand, lots of cash, and more catalysts coming.
In biotech, sometimes it’s the companies that aren’t making a single dime that end up being the very best investments after a short time. For instance, Viking Therapeutics (VKTX 0.66%) doesn’t yet have any revenue. But thanks to its ongoing clinical investigations and the high-quality data they’re yielding, Viking shares have vaulted 347% in the last 12 months alone.
And that might just be the start. So if you’re looking to make a relatively small investment of $1,000 in one stock that’s on the riskier side, it’s hard to park your cash in a more exciting and upwardly mobile biotech than Viking. Here’s why.
The case for buying Viking Therapeutics
While big-league competitors like Novo Nordisk and Eli Lilly currently dominate the weight loss market, that won’t go on forever, most likely because Viking or one of its peers will break in with candidates of their own.
Viking has the most promising clinical-stage weight loss asset that isn’t derived from Novo Nordisk’s molecule semaglutide (known by the trade names Ozempic and Wegovy) or Eli Lilly’s molecule tirzepatide (sold as Mounjaro and Zepbound). Viking’s candidate, VK2735, is being tested in two formulations. One is an injection, while the other is a pill; the active ingredient is the same molecule in both.
While there aren’t any head-to-head comparisons between VK2735 and the products that are currently on the market, there’s reason to believe it will compare quite favorably. Per the results of a phase 2 clinical trial, it causes weight loss at a significantly faster pace, and with more or less the same profile of side effects; over a 13-week trial, patients lost an average of 13.1% of their body mass on a placebo-adjusted basis. Furthermore, there doesn’t appear to be a plateau in their ability to lose weight after a long period of treatment.
VK2735 will now proceed to phase 3 testing. The odds are very high that Viking will have enough resources to wrap up that program’s development and bring it to market, assuming regulators give it the OK. As of the second quarter, the company had $942 million in cash, equivalents, and short-term investments on hand, but its trailing-12-month operating expenses were only $124.6 million.
Viking is also investigating other cardiometabolic medicines in mid-stage clinical trials. So even if its multiple attempts at entering the market for anti-obesity medicines fall through, it’ll still have a shot at other markets that might be lucrative.
Why some investors might want to park their $1,000 elsewhere
The catch with Viking Therapeutics is that it’s a pre-revenue biotech stock. If your investment capital is such that $1,000 is a big commitment, it should probably go to a safer option. There’s always a risk that late-stage clinical trials will fail to meet their goals, which tends to destroy a lot of value.
Also, this company will face execution risks in manufacturing. As shown by the ongoing struggle of Eli Lilly and Novo Nordisk to produce enough of their best-selling weight loss medicines, getting the right manufacturing resources in sufficient quantities can be very expensive, and prone to problems.
A biotech like Viking has never had experience with manufacturing any medicine, never mind one that’s likely to be a hot commodity, so it’ll likely need to forge partnerships. When it does, it may find that there simply aren’t many partners with spare capacity left over, as the bigger players have already engaged with the best collaborators.
But if you aren’t particularly capital-constrained or risk-averse, this stock is the best pick in biotech at the moment. Keep an eye on its clinical trial data over the coming quarters to see exactly how well it’ll measure up, and remember that it can certainly afford to encounter a setback or two and still go on to succeed.
