Although Viking Therapeutics(NASDAQ: VKTX) is a busy company, on Monday its stock moved because of external news. A pundit reiterated his bullish take on the clinical-stage biotech, boosting sentiment on its shares and sending them nearly 3% higher in price. That was more than good enough to top the rising S&P 500 index, which closed the trading session up by 0.4%.
An instant competitor
Like many investors, Morgan Stanley analyst Michael Ulz sees vast potential for Viking's VK2735, an investigational weight-loss drug. Due largely to this, in his opinion, the biotech is an overweight (read: buy) at a price target of $105 per share.
VK2735 has performed admirably in early- and mid-stage clinical testing, and should soon advance to a crucial and extensive phase 3 trial. If that goes well and the medication ends up winning Food and Drug Administration (FDA) approval, it would immediately be competitive with the hotly popular GLP-1 drugs Wegovy from Novo Nordisk and Eli Lilly's recently approved Zepbound.
In his latest research note, speaking of share price improvement, Ulz wrote: "Our scenario analysis suggests a favorable risk/reward (+30%/+15%/-20%). We see potential for meaningful upside."
Three visions for the future
In his report, Ulz laid out three potential futures for VK2735. In the first -- which he considers most likely -- if the drug were to prove efficacious in even modestly increasing weight loss and post a safety profile similar to that of earlier testing, its share price could experience that mentioned 30% bounce.
The two other scenarios imagine less impressive results from the lab, with decent performance providing only 15% upside, and a lack of additional weight loss at higher doses leading to "meaningful downside" of 20%.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
