Shares of Viking Therapeutics(NASDAQ: VKTX) and Summit Therapeutics(NASDAQ: SMMT) are crushing the market this year. Prices for both stocks have more than tripled in 2024 thanks to positive news flow for Viking's oral weight loss candidate and surprising results for Summit's cancer therapy hopeful.
What goes up often comes down, but the investment bankers who follow these stocks expect further gains. Oppenheimer analyst Jay Olson Ulz thinks Viking Therapeutics can reach $138 per share for a gain of about 112% over recent prices. Yigal Nochomovitz at Citi says Summit Therapeutics stock can rise about 120% to $42 per share in the year ahead.
The potential gains these stocks present investors are hard to ignore. Before getting carried away with their potential, it's important to remember lofty price targets set by Wall Street analysts are not guarantees. Here's a closer look at what needs to happen before these stocks meet Wall Street's bullish expectations.
Viking Therapeutics
Overall sales of weight management drugs have soared past $45 billion annually, and they have much further to run. Over the next several years, annual sales of anti-obesity medications are expected to top $150 billion.
A still-experimental treatment from Viking Therapeutics called VK2735 is widely expected to command a significant share of the anti-obesity space. An injectable version of the dual GLP-1 and GIP receptor agonist is beginning a phase 3 trial.
In phase 2, VK2735 reduced patients' weight by about 15% after 13 weeks of treatment and maintained a clean safety profile. Wall Street is especially bullish for an oral tablet version of VK2735 that reduced patients' weight by 5.3% after just 28 days of dosing in a phase 1 study.
Oral VK2735 is expected to begin a phase 2 study by the end of the year. Encouraged by its impressive safety record to date, Olson thinks it could eventually become the first over-the-counter weight management drug to target GLP-1 and GIP receptors.
Summit Therapeutics
Anti-obesity drug sales are currently overshadowed by the market for cancer therapies that act on the PD-1 pathway. Soon GLP-1 drugs will take the top spot, but by 2031, combined sales of PD-1 drugs are still expected to generate $110 billion annually.
Summit Therapeutics could gain a significant share of the PD-1 market with a new twist on the successful drug class called ivonescimab. It's a bispecific antibody that targets the PD-1 pathway plus vascular endothelial growth factor (VEGF) at the same time. Surprisingly positive results for the drug, which is already approved for marketing in China, pushed Summit's stock price up to a gain of more than 600% in 2024.
Wall Street's bullish for Summit and ivonescimab because the drug beat the pants off Keytruda in the head-to-head Harmoni-2 trial. At a planned check-in, newly diagnosed lung cancer patients who received ivonescimab were 49% less likely to relapse or worsen compared with patients given Keytruda monotherapy.
Keytruda from Merck is the top-selling PD-1 drug, with sales that rose to $25 billion last year. Before ivonescimab gets a chance in the U.S., the Food and Drug Administration wants to see a pivotal study with American patients. The company recently completed enrollment in an international phase 3 trial with second-line lung cancer patients. Another international phase 3 study with first-line patients is expected to begin in early 2025.
Time to buy?
Summit licensed rights to ivonescimab from Akeso for sales outside the enormous Chinese market. Akeso remains eligible to receive a double-digit percentage of ex-China sales from Summit if it earns approval.
Unfortunately, shares of Summit Therapeutics are trading as if the company owns ivonescimab outright. Its market cap at recent prices is a whopping $14 billion, which means it could fall a long way if subsequent trial readouts aren't a rousing success. It's probably a good idea to wait for Summit's market cap to dwindle to a more sensible valuation before buying any shares of the stock.
Expectations for Viking Therapeutics seem relatively low for a company that could have a leading anti-obesity treatment in its development pipeline. The company's relatively modest market cap of $7.2 billion could rocket higher if VK2735 continues succeeding in clinical trials. For investors with a large risk tolerance, adding some shares to a diversified portfolio looks like a smart decision.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck and Summit Therapeutics. The Motley Fool has a disclosure policy.
