Is It Too Late to Buy Viking Therapeutics Stock?

Equity markets have performed well in 2024, but their showing pales next to that of Viking Therapeutics (VKTX -7.45%), a mid-cap biotech that rose in prominence this year. The drugmaker’s shares are up by nearly 200% since January.

However, while many investors are excited about Viking’s prospects, others worry they have already missed the boat. How much upside does a clinical-stage biotech with a market cap of $6.3 billion have? Is it too late to invest in Viking Therapeutics, or do the company’s shares remain attractive?

All mid-cap biotechs are not created equal

There could be plenty of upside for Viking Therapeutics. If the drugmaker’s promising phase 2 assets earn approval without a hitch, its stock price will likely soar even more. The issue is whether the upside potential outweighs the risk. One (very) imperfect way to determine whether Viking Therapeutics is overvalued is to compare it with other mid-cap drugmakers.

CRISPR Therapeutics is a company that already has a product on the market, yet its market capitalization is only $4.2 billion, about $2 billion lower than Viking’s. Axsome Therapeutics, another mid-cap drugmaker with two commercialized products and at least one more that should earn approval within a year, is worth $4.7 billion.

These simple comparisons suggest that Viking is overvalued since it doesn’t have a single product in phase 3 studies. Yet it is worth more than drugmakers that have already launched therapies.

But there is more to the story. Viking’s leading candidate, VK2735, is a potential dual GLP-1/GIP weight loss treatment that aced it in phase 2 studies. The anti-obesity market is soaring, and according to one analyst, Viking’s candidate could generate about $21.6 billion in peak sales.

Axsome’s medicines can’t match these projections — few in the biotech industry can. A drugmaker’s value largely depends on its medicines’ sales potential. A company with 100 approved therapies, none of which will generate much revenue, could be worth less than another with just one phase 3 therapy that has multibillion-dollar sales potential. The time it will take for a product’s revenue to ramp up and reach its peak also matters.

That’s where CRISPR Therapeutics falls short. The company’s approved product, Casgevy, is an ex vivo gene editing treatment. Administering these therapies is a complex, lengthy, and expensive project. Case in point: Despite having been approved about a year ago, Casgevy has not contributed a single dollar in sales to the biotech.

Viking Therapeutics won’t have that problem if its VK2735 is approved. It is administered as a subcutaneous injection every week. Further, the company has an oral version of the medicine in the works that could be even easier for patients to handle. That’s another point in Viking Therapeutics’ favor.

Viking’s good work continues

Viking’s leading candidate isn’t the only reason to consider the stock. The company’s VK2809 is a promising potential treatment for metabolic dysfunction-associated steatohepatitis, a liver disease linked to obesity for which there is a high unmet need. And its VK0214 is a promising candidate for a rare, progressive condition called X-ALD that affects patients’ nervous systems. There are no approved treatments for it, so this market has plenty of potential.

Lastly, Viking Therapeutics’ scientists continue to work diligently to create new products. The company has been testing an amylin and calcitonin agonist for weight loss in mice, with promising results. Amylin and calcitonin are hormones that help regulate sugar and calcium levels, respectively. Therapies that target two different hormones, like Viking’s VK2735 and Eli Lilly‘s Zepbound, seem very effective. Will Viking’s new preclinical asset meet these expectations? Maybe, but there is an even more important point.

Viking Therapeutics intends to keep its innovative wheel rolling. And based on the company’s track record so far and the several candidates it has in clinical trials, especially VK2735, things look promising. I wouldn’t bet the farm on this stock. It’s still a clinical-stage biotech with plenty of risk. Its candidates could fail in phase 3 studies. But in the sea of pre-commercial drugmakers, Viking Therapeutics stands out. I’d strongly recommend investors closely examine this company and consider initiating a small position.