Viking Therapeutics Trades Well Below Its Wall Street Targets. Here's the Skeptics' Case.
Key Points
Viking Therapeutics has significant upside potential based on Wall Street targets.
VK2735's dual-formulation strategy could differentiate it in a crowded obesity drug market, but it faces major risks, including strong competition and safety concerns with the oral formulation.
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According to Yahoo! Finance, the consensus price target from analysts for Viking Therapeutics (NASDAQ: VKTX) is about $92, which indicates potential upside of 162% from its current stock price. It's a significant opportunity, but is it justified? Here's the lowdown from the skeptics' perspective.
Viking Therapeutics' prospects
The investment case for the stock rests on its lead drug candidate, VK2735, a dual GLP-1 and GIP agonist in development for obesity and type 2 diabetes. The two key advantages VK2735 may have over its rivals are a steeper rate of weight loss and the promise of a dual-formulation therapy (oral and subcutaneous). The combination of these two advantages would mean that patients could achieve significant weight loss with a subcutaneous (injectable) dose, followed by a more convenient oral maintenance dose.
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These properties mean VK2735 could win market share in a crowded field, and investors are looking forward to the results of its phase 3 trials of VK2735 in subcutaneous formulation (likely in the second half of 2027) and VK2735 in oral formulation (set to commence later this year with results likely in 2028/2029). In addition, investors are awaiting the imminent results of a small (180 adults) phase 1 maintenance trial designed to evaluate dosing regimens.
The skeptics' case for Viking Therapeutics
As with clinical-stage biopharmaceutical companies, there are two key considerations for investors to ponder, both of which pose risks for Viking Therapeutics. The first is competition from rival drugmakers and its possible impact on the market potential of Viking's pharmaceuticals. The second is Viking's success in its clinical trials, as that will also determine the value of its pipeline.
The obesity and type 2 diabetes treatment market is highly competitive, with drugs already within VK2735's class of drugs, including oral formulations. Moreover, much larger peers like Eli Lilly (NYSE: LLY), Novo Nordisk (NYSE: NVO), and Amgen are already developing next-generation or differentiated treatments.
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Focusing on the more lucrative obesity market, the list of already approved drugs includes Eli Lilly's Zepbound (tirzepatide), which has the same mechanism as VK2735, and an oral tablet, Foundayo (orforglipron). Novo Nordisk has semaglutide approved as an injectable (Wegovy) for obesity and as an oral tablet (Rybelsus) for diabetes, with additional oral formulations for obesity in development.
Looking ahead, Eli Lilly plans to file for FDA approval of its GLP-1, GIP, and glucagon agonist, retatrutide, in early 2027, following several successful phase 3 trials. Novo Nordisk has CagriSema (which combines semaglutide and another drug) and an experimental drug, Amycretin, in phase 3 trials.
This is a highly competitive market, and it could be even more competitive by the time Viking completes its phase 3 trials for VK2735.
Clinical trial data
There is no end to reasons for trial failures. In the case of VK2735, it could come down to the safety and tolerability of the drug in oral form.
Image source: Getty Images.
The stock crashed last summer after phase 2 results for VK2735 (oral) revealed a 20% discontinuation rate due to adverse events in the treated group. Oral formulations always have to answer the questions around potential gastrointestinal issues.
Any issue with the tolerability of VK2735 (oral) will threaten not only the market potential of the oral formulation itself but also its use as a maintenance dose in Viking's dual-formulation approach.
Where next for Viking Therapeutics
There's no doubt the company faces significant competitive and clinical trial risks, and investors are hoping Viking calibrates any titration issues with the oral formulation in the phase 3 trial. In the near term, the results from the phase 1 maintenance trial will provide indicative data on the potential dual-formulation strategy. A successful result may cause some skeptics to reconsider their position.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amgen, Eli Lilly, and Novo Nordisk. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.
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