Viking Therapeutics (NASDAQ: VKTX) has emerged as a beacon of hope in an otherwise lackluster year for healthcare stocks. The buzz around its mid-stage weight loss candidate, VK2735, has propelled the biotech’s stock to a staggering 714% surge since the completion of the drug’s Phase 1 trial on March 28, 2023.
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Investor Excitement Sparks
Two key factors have fueled investor enthusiasm. Firstly, Wall Street analysts have unveiled jaw-dropping sales projections for VK2735. Secondly, buyout speculations have been gaining momentum with each clinical update over the past 13 months.
The VK2735 Potential
Viking’s current $8.1 billion market valuation might seem extravagant for an unprofitable biotech company without approved products. However, VK2735 represents a potential pharmaceutical industry mega-blockbuster, as highlighted by industry projections.
Goldman Sachs and Leerink Partners foresee the weight loss drug market ballooning to $100 billion by 2030 and potentially $158 billion by 2032, respectively. William Blair analyst Andy Hsieh predicts VK2735 could achieve peak sales of $14.4 billion in the U.S. and an additional $7.2 billion in Europe, a remarkable feat for a company with an $8.1 billion market cap.
The Deceptive Valuation Gap
Viking’s valuation gap might seem misleading. Competitors like Eli Lilly and Novo Nordisk hold a first-mover advantage in the weight loss drug market with Zepbound and Wegovy, respectively. Furthermore, both companies are actively developing next-generation weight loss drugs that pose additional hurdles for potential competitors like Viking.
Is Viking an Incredible Bargain?
Market skepticism towards Viking Therapeutics is likely justified. Overcoming a first-mover advantage in the pharmaceutical market is historically challenging. VK2735’s true value depends on a well-funded big pharma player to effectively compete, profoundly changing the calculus for prospective investors.
Evaluating the Bottom Line
Investors considering Viking Therapeutics at its current levels must evaluate the competitive landscape and VK2735’s appeal as a potential deal catalyst. While a solo launch for VK2735 might not be advantageous, the possibility of acquisition interest from big pharma players could provide hope, although Viking’s shares do not immediately scream “incredible bargain” due to its evolving risk profile.
Investing in Viking Therapeutics
Before investing in Viking Therapeutics, consider the broader landscape. While exciting, the business has challenges to overcome. Take a closer look at how VK2735 stacks against competitors like Zepbound and Wegovy before making a move in this volatile market.
