Is it Too Late to Buy Viking Therapeutics Stock?


Viking Therapeutics stock is on fire following a successful phase 2 trial for its obesity care candidate.

One of the hottest areas of the pharmaceutical industry right now is the weight loss treatment space. Novo Nordisk and Eli Lilly have been the primary innovators. Their groundbreaking glucagon-like peptide-1 (GLP-1) agonists are in high demand for both diabetes and weight loss, marketed under names including Ozempic, Rybelsus, Wegovy, Mounjaro, and Zepbound.

But while they have dominated that niche in recent years, those two companies may finally have some real competition. In late February, clinical-stage biopharma Viking Therapeutics (VKTX 3.76%) made waves when it released impressive phase 2 trial data for its obesity drug candidate, VK2735. In the wake of that news, shares surged, and they are now up more than 300% year to date.

With that big share price move in the rear-view mirror, have investors missed their chance to get in on the next big player in weight loss?

Viking Therapeutics stock is on a roll, but…

While there are a host of pharmaceutical companies trying to make inroads in the weight loss space, Viking’s prospects may appear to be most the promising.

In the phase 2 trial, patients taking the highest dosage of VK2735 achieved an average 13.1% placebo-adjusted mean weight loss after 13 weeks. Moreover, the drug candidate’s safety and tolerability were also encouraging. According to the company, 13% of patients taking VK2735 discontinued treatment in the study. By comparison, 14% of patients taking placebos dropped out of the trial.

On top of this, Viking just released positive results from a phase 1 trial for an oral version of VK2735. This is a pretty savvy move, considering Novo Nordisk is also looking to bring an oral weight loss drug to market. But even in the midst of this momentum, investors should be aware of some risk factors before scooping up shares of Viking.

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…the company has a long way to go

Viking Therapeutics is still a clinical-stage company — none of its products has been approved by regulators for commercialization and sale. Because it’s a pre-revenue business that is investing heavily in research and development, liquidity could be a real issue.

VKTX Net Income (Quarterly) Chart

VKTX Net Income (Quarterly) data by YCharts.

The chart above illustrates that Viking generates operating losses on a consistent basis. As such, the company’s long-term cash profile is questionable and should be monitored.

Should you invest in Viking Therapeutics?

While Viking Therapeutics certainly appears to be headed in the right direction, it’s important to understand the ins and outs of the clinical trial process. It takes years of studies to bring medications to market, and a lot can go wrong along the way. Most drug candidates don’t end up getting approved. Although Viking could swiftly begin a phase 3 trial for VK2735, there’s no guarantee it will earn Food and Drug Administration (FDA) approval.

Moreover, even if Viking’s candidate gets a thumbs-up from the FDA, established leader Novo Nordisk currently controls nearly 60% of the GLP-1 market, and Eli Lilly’s Mounjaro and Zepbound are already experiencing great success. Viking will have its work cut out for it to win market share.

While Viking could one day make a splash in the weight loss space, I view its stock as too speculative an investment prospect right now. Furthermore, Wegovy was just approved for an expanded indication for heart disease, while Eli Lilly bolstered its distribution network via a partnership with Amazon. These moves should only help them keep ahead of any would-be rivals.

Despite its meteoric share price rise, I do not think it’s too late to buy Viking Therapeutics stock. In fact, I think it’s too early. The newfound attention on Viking has resulted in the stock carrying a valuation premium that’s disconnected from the company’s fundamentals. For these reasons, I’d stay clear of Viking stock for now and look for more suitable positions in established players such as Novo Nordisk and Eli Lilly.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Amazon, Eli Lilly, and Novo Nordisk. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.



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