Up 285% YTD, Is It Too Late to Buy This Biotech Stock?

Obesity stocks were in focus today, with Eli Lilly (LLY) reporting a surprise Q3 earnings miss as sales for its blockbuster GLP-1 drugs fell short of estimates. While the miss largely seemed to be tied to inventory normalization, the pharma giant's downwardly revised forecast pressured stocks involved in the booming weight-loss market.

That includes San Diego-based Viking Therapeutics (VKTX), a pre-revenue clinical-stage biotech company that specializes in developing therapies for metabolic and endocrine disorders. Its portfolio includes promising treatments in various stages of development, which may offer significant therapeutic benefits upon successful approval and commercialization. High hopes are pinned on VK2735, a GLP-1 weight loss treatment drug that could be a game changer for the company. 

With a market cap of $8.17 billion, shares of this biotech company have surged more than 648% over the past 52 weeks and 285% year-to-date - although the shares are down by about 26% from their February highs around $99.

Viking Therapeutics Pops on Q3 Earnings 

On Oct. 24, VKTX surged by 21% after announcing better-than-expected third-quarter results, including positive updates on its obesity program. The company reported a net loss of $21 million, slightly narrower than last year's $22 million loss. On a per-share basis, VKTX surpassed analysts' estimates with a loss of $0.22.

Moreover, the biotech firm ended the quarter with cash and equivalents reaching $930 million, sharply higher than $362 million at the end of 2023. This cash pile will help the company finance continued R&D, support more trials, and sustain its ongoing clinical development initiatives.

Viking Therapeutics also reported substantial progress in its clinical trials during the third quarter, particularly with the Phase 2 VENTURE trial. This trial evaluated the subcutaneous form of VK2735, a dual GLP-1/GIP receptor agonist similar to Eli Lilly's Zepbound, for treating obesity and delivered impressive results. Significant reductions in body weight were observed. The positive outcomes of this trial, demonstrating major weight loss, will be highlighted at the upcoming ObesityWeek conference in early November, where Viking will also release Phase 1 data for VK2735's oral formulation. 

“As the next step, we plan to initiate a 13-week Phase 2 study in obesity later this year,” CEO Brian Lian noted, adding, “We’ll provide details regarding the study design as we get closer to trial initiation.”

The company is also gearing up for a meeting with the FDA to conclude Phase 2, and is exploring partnerships with major pharmaceutical companies for its NASH program.

Recent News About Viking Therapeutics

On October 9, the company announced results for VK0214, an early-stage trial aimed at reducing plasma levels of very long-chain fatty acids in people with X-linked adrenoleukodystrophy. The trial was successful, demonstrating both efficacy and safety.

Moreover, its treatment for nonalcoholic steatohepatitis (NASH), VK2809, is also in a Phase 2 trial, which is used for reducing liver fat and showed effectiveness in the trial.

Notably, while CFO Greg Zante sold VKTX shares worth over $2.8 million on Oct. 28, it should be noted that the sale was carried out as part of a Rule 10b5-1 plan.

What Do Analysts Think About VKTX Stock?

Analysts are unanimously bullish on VKTX, with 100% “Strong Buy” ratings from the 12 analysts in coverage. The average 12-month price target is an ambitious $111.18, implying expected upside of nearly 55% from today's close.

Viking Therapeutics has achieved impressive progress this year with its pipeline candidates, and the anticipated FDA approval of its GLP-1 treatments could further enhance its market position. While pre-revenue, clinical stage companies carry a higher degree of risk, VKTX is a stock worth considering for investors in search of strong biotech growth opportunities.

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On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.