Wall Street Sees a Huge Rebound for Viking Therapeutics. Here's Why Analysts Are So Optimistic.

Viking Therapeutics (NASDAQ: VKTX) is a much-loved stock on Wall Street. It's trading at around $30 a share at the time of this writing, but the analyst consensus target price on Visible Alpha is $90.89, with nine brokers rating it the equivalent of a buy and only one with a neutral rating on the stock.

The case for buying Viking Therapeutics stock

Investors are hoping Viking's dual GLP-1 and GIP agonist, VK2735, can break into the effective duopoly on weight loss drugs held by Eli Lilly's (NYSE: LLY) Zepbound (tirzepatide) and Novo Nordisk's (NYSE: NVO) Wegovy (semaglutide). VK2735 and tirzepatide are dual agonists, while semaglutide is a mono-agonist targeting the GLP-1 receptor. I'll return to this point in a moment.

Two key factors suggest VK2735 could carve out a very profitable share of the market. The first is that it's being developed as a dual formulation therapy, opening up the possibility of initial weight loss from taking subcutaneous (injectable) VK2735 before switching to a more convenient oral VK2735 dose for maintenance. In addition, as an Oppenheimer analyst recently noted, oral VK2735 could also be taken after initial dosing with injectable tirzepatide and semaglutide. The second factor is the potential for a steeper onset of weight loss from VK2735.

These potential benefits encourage Wall Street analysts to model a consensus of $141 million in revenue in 2028, rising to $1.3 billion in 2030, with the vast majority coming from VK2735, according to S&P Global Market Intelligence. It's a large figure when compared to the current market cap of $3.5 billion.

Image source: Getty Images.

A steeper onset of weight loss?

Comparing the tirzepatide phase 3 results with those of VK2735 in phase 2 suggests it may have an advantage in delivering weight loss quicker than its already approved and marketed rival.

Data source: Company presentations.

Before getting too excited by the data, readers should note that these are significantly different trials. The VK2735 trial had more aggressive titration and a much smaller population (176 vs. 2,539) than the Eli Lilly trial. Still, the VK2735 results are impressive, and the ongoing 78-week phase 3 trial (VANQUISH-1) may reveal a higher weight loss ceiling for VK2735 than for tirzepatide over a similar duration. For reference, the phase 3 VANQUISH-1 maximum dose will be 17.5mg, compared to the 15mg maximum dose in the phase 2 VENTURE trial in the table, which could result in even greater peak weight loss.

VK2735 dual formulation strategy

As noted above, subcutaneous VK2735 is already in phase 3 trials with results due in late 2027, and Viking plans to commence an oral VK2735 phase 3 trial in the fourth quarter. The latter is crucial to the case for a dual formulation strategy.

Viking needs to demonstrate efficacy and, crucially for an orally administered treatment, safety and tolerability. Unfortunately, the tolerability of oral VK2735 is in question following disappointing data from the phase 2 oral VK2735 (VENTURE-Oral) trial, which 20% of participants discontinued due to an adverse event.

Image source: Getty Images.

The bulls will argue that the 13-week trial's titration was probably too aggressive. Furthermore, note that 13% of participants receiving a placebo also dropped out due to an adverse event, suggesting there may have been other factors at play.

Indeed, CEO Brian Lian spoke at a recent Morgan Stanley Healthcare conference and said, "We're coming down a little bit in dose in the phase 3 study." He also said the company was "focused on reducing the tablet size, reducing the tablet count, and really kind of on the middle of that dose response curve."

While the exact design of the trial hasn't been disclosed yet, these comments indicate that Viking's management is making adjustments to the phase 3 trial in light of the tolerability data from phase 2.

What's next for Viking Therapeutics?

Investors will get more data with the imminent release of results from a small phase 1 maintenance trial, but the really key data is in the phase 3 trials, which will give results in late 2027 (subcutaneous) and possibly 2028 (oral). In particular, oral VK2735 needs to overcome the tolerability issues that dogged the phase 2 trial.

It's a crowded market with new drugs in development, but it's also a massive market, and as Lian noted, Viking can have a "much smaller portion of the market" and still be hugely successful. And with the company funded until 2028, Viking and VK2735 are a bet that Wall Street is willing to back.

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