2 Biotech Stocks That Could Soar 21% and 245% According to Wall Street's Top Analysts

Key Points

• Viking Therapeutics' shares recently plunged, but digging deeper reveals that the sell-off might have gone too far.

• Regeneron Pharmaceuticals is showing resilience as its top line returns to growth amid stiff competition.

• 10 stocks we like better than Viking Therapeutics ›

Viking Therapeutics (NASDAQ: VKTX) and Regeneron Pharmaceuticals (NASDAQ: REGN) have faced challenges this year that have sunk their stock prices. The former is down by 37% this year, while the latter has declined 17%.

Could this be an excellent opportunity for investors to scoop up shares of these companies on the dip? That's the case if they're likely to rebound. And some Wall Street analysts think that could be in the cards. Viking's average price target of $88.78 implies an upside of 245% from its current levels, while Regeneron's $716.18 implies it could jump by 21%.

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Let's see whether Viking and Regeneron really could deliver solid returns in the next year or so.

Image source: Getty Images.

1. Viking Therapeutics

Viking Therapeutics is in the news, and not for the right reasons. The company's shares recently fell off a cliff after it released disappointing -- by the market's standards -- phase 2 results for its oral GLP-1 weight loss candidate, VK2735. Investors, in particular, focused on safety data. According to Viking, 20% of the study's participants taking VK2735 dropped out due to adverse side effects, the most common of which were gastrointestinal (GI) issues, compared to just 13% in the placebo group.

However, Wall Street analysts remain bullish on the stock even after this setback, with several reiterating their buy ratings. What gives? I'm inclined to agree that the market's reaction to Viking Therapeutics' phase 2 data for oral VK2735 was excessive. As management pointed out, 98% of adverse events in the trial were mild to moderate; 99% of GI-related ones also were either mild or moderate.

Meanwhile, the medicine resulted in an average weight loss of 12.2% at the highest dose after 13 weeks, with no weight-loss plateau observed. Management shared in a separate call with analysts that even more weight was lost at 16 weeks.

By comparison, Eli Lilly's oral GLP-1 candidate, orforglipron, posted a mean weight loss of 12.4% at the highest dose in a phase 3 study -- but that was over a 72-week period. Oral VK2735 appears exceptional in comparison, as it achieved pretty much the same result in less than a quarter of the time. Safety might be a concern, but there are ways to mitigate it. The highest dose of the medicine had the most adverse effects; other doses had fewer, with still-reasonable efficacy.

It's also important to look at the rest of Viking Therapeutics' pipeline. The company's subcutaneous version of VK2735 is currently in phase 3 studies, and based on data from phase 2, it looks promising. Viking has other candidates it's working on, including an investigational therapy for metabolic dysfunction-associated steatohepatitis (MASH), VK2809; it should advance this medicine to phase 3 studies soon.

Viking's recent setback underscores the risks associated with investing in clinical-stage biotech stocks. The company is somewhat risky. I also don't expect the stock to soar by 245% in the next 12 months.

However, the data from the phase 2 study for oral VK2735 wasn't as bad as the stock's meltdown might have you believe, and Viking Therapeutics has other exciting candidates. In my opinion, now is an ideal entry point for risk-tolerant investors.

2. Regeneron Pharmaceuticals

Regeneron has been facing competition, including biosimilars, for Eylea, a medication used to treat wet age-related macular degeneration. However, the company's more recently approved (and still patent-protected) high-dose (HD) formulation of the medicine is helping to smooth out the losses somewhat.

That, combined with Regeneron's most significant growth driver, eczema treatment Dupixent, which continues to perform exceptionally well, helped the company grow its top line in the second quarter. Revenue increased by 4% year over year to $3.68 billion. Worldwide sales for Dupixent recorded by Sanofi -- with which Regeneron shares the rights to the medicine -- increased by 22% year over year to $4.34 billion.

Regeneron should earn label expansions for Eylea HD in the U.S., including in treating macular edema. The company has also recently earned approval for Lynozyfic, a new cancer medicine.

Its robust pipeline should yield additional regulatory wins over the next couple of years. The company is working on trevogrumab, a medicine that could address muscle loss in patients taking famous GLP-1 weight management medicines like semaglutide (the active ingredient in Wegovy). Trevogrumab showed encouraging results in this regard in a phase 2 study.

Additionally, Regeneron has other candidates, including a gene therapy for one type of genetic deafness.

Regeneron Pharmaceuticals is demonstrating its ability to cope with competition for one of its former main growth drivers, yet the stock continues to decline. The company might not meet Wall Street's price target in the next year, but it could deliver superior returns to patient investors over the long run.

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Prosper Junior Bakiny has positions in Eli Lilly and Viking Therapeutics. The Motley Fool has positions in and recommends Regeneron Pharmaceuticals. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.