Don't Buy Viking Therapeutics Stock Until You Read This

From late 2023 to early 2024, Viking Therapeutics (NASDAQ: VKTX) took off like a rocket, as it seemed that the clinical-stage biotech company would become the dark-horse candidate among GLP-1 stocks.

Flash-forward two years, and significantly fewer investors hold a bullish view. Viking, which once traded for nearly $100 per share, now trades at just under $30. Before considering a purchase of this once-popular and now apparently undervalued stock, keep in mind that the company faces many hurdles in taking on competitors like Novo Nordisk and Eli Lilly.

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Viking Therapeutics' rise and fall

In the GLP-1 wars, Novo Nordisk was the early mover, obtaining approval for Wegovy from the U.S. Food and Drug Administration in June 2021. Then Eli Lilly received FDA approval to market Zepbound in November 2023. But shortly thereafter, speculative frenzy emerged about Viking Therapeutics and its VK2735 weight-loss drug candidate.

While similar to Zepbound -- both are dual agonists that bind to both GLP-1 and GIP receptors -- VK2735 demonstrated even stronger clinical trial results at the time. Betting that another pharmaceutical company would buy Viking, investors aggressively bid up its shares early in 2024. After that, however, data from subsequent trials, including reports of worse-than-expected side effects, soured public perception.

Why it's wise to stay skeptical

Viking has remained a contender, but over the past two years, skepticism and uncertainty have stayed high. Its injection-based and pill-based VK2735 candidates remain at the clinical-trial stage. Meanwhile, Viking's larger competitors are making progress on new, more powerful treatments, such as Novo Nordisk's investigational dual agonist CagriSema, and Eli Lilly's triple-agonist candidate retatrutide.

By the time Viking is able to bring a weight-loss drug to market, competition could prove far more steep. That's not all. Viking has around $603 million in cash on hand, but is burning through about $114 million per quarter. To bring its drug candidates all the way to market, the company may need to eventually raise more cash, leading to share dilution.

Much suggests that Viking Therapeutics stock is "too little, too late." You may want to skip it in favor of larger but less risky GLP-1 plays.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly. The Motley Fool recommends Novo Nordisk and Viking Therapeutics. The Motley Fool has a disclosure policy.