There aren’t many biotechs that are more exciting than Viking Therapeutics (VKTX -7.45%) right now. Thanks to its clinical-stage candidate for weight loss, there’s a real chance that this competitor could see its shares soar for years.
But that doesn’t mean you should rush to buy the stock without understanding what else is going on with this stock and why it’s making the changes it’s making. Let’s examine three things you’ll need to factor into your decision if you plan on investing in Viking Therapeutics today.
1. Viking Therapeutics has at least two (maybe four?) major catalysts ahead
Biotech stocks tend to be catalyst-driven. When there’s an event that provides new information about the company’s chances of making profits down the line, like clinical trial data readouts, the market tends to reprice shares accordingly. And for Viking, there are a couple of big catalysts that are likely to occur within the next year, both of which pertain to its clinical readouts.
All eyes will be on the clinical trials of VK2735, its candidate for treating obesity. VK2735 is being tested in two formulations: one that’s injected, which will probably start its phase 3 trials in very late 2024 or early 2025, and one formulation that’s a pill. The pill form of VK2735 will initiate its phase 2 trials sometime in the fourth quarter; based on a recent presentation of its performance, it could help people lose as much as 8.2% of their body weight within 28 days of starting treatment.
Both programs are expected to report interim data updates sometime in 2025, as well as the final results. So, there could actually be four catalysts for the stock in total, assuming the company opts to release preliminary data. The pill form’s clinical trial is slated to last just 13 weeks, though the injected form’s trial will likely take a bit longer so that it can confirm whether there is a plateau in the rate of weight loss with sustained treatment.
Prior data indicate that there probably isn’t, but a confirmation would be especially good news: It would help to differentiate VK2735 from medicines made by Eli Lilly and Novo Nordisk which are already approved for sale.
2. Cash isn’t a concern for Viking right now
Among biotechs, Viking is notable because of how flush its balance sheet is relative to its need for capital.
As of the third quarter, it had $930 million in cash, equivalents, and short-term investments. For all of 2023, its operating expenses, which include its research and development (R&D) costs, totaled just $100.8 million. That means it has plenty of resources for the next few years, even considering the substantial fees it will incur via late-stage clinical trials and the costs of spinning up manufacturing facilities to prepare for the potential commercialization of its lead programs.
Furthermore, it has less than $1 million in noncurrent liabilities, meaning that it has a tremendous amount of leeway to borrow money if necessary. And with a share price that’s inflated right now, issuing new equity to raise capital wouldn’t even cause much harm to shareholders.
So financially, this biotech is rock-solid.
3. Obesity isn’t Viking’s only target indication
While Viking’s programs for treating obesity are responsible for the massive gains in its stock price recently, the biotech does have two other programs in its pipeline that are worth knowing about.
Its candidate to treat metabolic dysfunction-associated steatohepatitis (MASH, formerly known as NASH) just wrapped up its phase 2b clinical trials. Management thinks that the therapy could be the best in its class due to its ability to help repair fibrosis in the liver. While the next steps haven’t been announced yet, the company will be reporting some data from the program on Nov. 19, at the annual meeting of the American Association for the Study of Liver Diseases, so stay tuned.
Its other candidate aims to treat X-linked adrenoleukodystrophy (X-ALD), a rare and degenerative neurological illness that’s currently untreatable. This program is earlier-stage, having just finished its phase 1b trials. Though the trials suggest that the intervention is likely to be safe enough, management is still trying to evaluate its data and determine what the best move is.
