It is a robust act to observe.
Few biotech corporations have made extra noise than Viking Therapeutics (VKTX 4.41%) this yr, and that is saying one thing. The drugmaker had been a comparatively small and unknown participant within the business. Nonetheless, Viking’s prominence and inventory worth soared due to glorious medical progress. The biotech’s shares are up by 154% since early January.
Can Viking Therapeutics carry out almost as properly throughout the second half of the yr? Is it already too late to purchase the inventory? Let’s discover out.
Why Viking Therapeutics has been on hearth
Viking’s lead asset is VK2735, a possible weight reduction remedy. Given how profitable anti-obesity medicines like Wegovy (developed by Novo Nordisk) and Zepbound (marketed by Eli Lilly) have develop into, many corporations are pouring funds into this space, making an attempt to develop candidates that may compete with the leaders within the area.
Amongst this herd of drugmakers — exterior of Eli Lilly and Novo Nordisk — Viking Therapeutics has, to date, been essentially the most spectacular. In a section 2 examine, VK2735 proved extremely efficient at decreasing physique weight, a end result which despatched Viking Therapeutics’ shares skyrocketing.
The corporate later revealed that an oral model of VK2735 additionally appeared promising in section 1 research. Wegovy and Zepbound are administered subcutaneously as soon as weekly; an oral weight reduction drugs that works simply as properly might entice many sufferers.
Nonetheless, Viking nonetheless wasn’t achieved. The corporate delivered extra constructive section 2 information for an additional key asset, VK2809, a possible therapy for nonalcoholic steatohepatitis. Although VK2735 has been the primary driver behind Viking Therapeutics’ surge this yr, VK2809 can be important to the corporate’s prospects.
What’s subsequent for the biotech?
Medical trial outcomes of the sort Viking Therapeutics has delivered this yr do not come day by day. It is unlikely that the biotech will expertise such constructive developments within the second half of the yr. Viking Therapeutics might announce the beginning of section 3 research, however that will not jolt the inventory worth almost as a lot, particularly contemplating the implausible run it has already had. Constructive section 3 outcomes would do the trick, however buyers must await these; they will not come down this yr.
Can the rest ship Viking’s shares hovering by year-end? It is all the time potential that the corporate will get acquired. With many biotech giants making an attempt — and, to date, largely failing — to develop promising anti-obesity property, Viking appears to be like like a particularly engaging acquisition goal. Growing brand-new medicine in-house is typically far more difficult than merging with an organization with thrilling mid-stage property.
In fact, there isn’t any assure that Viking Therapeutics might be acquired. An alternative choice is to companion with a bigger firm with extra funds, one thing else to which the market might react positively. Nevertheless it’s exhausting to foretell such developments.
Here is a extra crucial query for buyers: Placing apart the chance that Viking Therapeutics will get acquired, can the inventory ship above-average returns over the long term?
On the one hand, the biotech appears to have a extremely revolutionary group beneath its umbrella. Funding should not be a lot of a problem both. Viking just lately ran a secondary providing, elevating gross proceeds of $632.5 million. It ended the primary quarter with a money and equivalents steadiness of $963 million. The success of its packages to date will enable it to boost extra capital as wanted, although it should nonetheless should resort to dilutive strategies, a obligatory evil for smaller corporations within the business.
Alternatively, Viking Therapeutics stays a clinical-stage biotech that has but to begin a section 3 examine. That makes the inventory dangerous although the potential upside is big. Will Viking Therapeutics double once more by year-end? In all probability not. Do you have to purchase the inventory anyway? Solely when you’ve got an urge for food for threat and volatility.
