Pondering Over the Timeliness of Purchasing Viking Therapeutics Shares?
Pondering Over the Timeliness of Purchasing Viking Therapeutics Shares?
Equity markets have performed decently in 2024, but they're overshadowed by the stellar performance of Viking Therapeutics (VKTX 0.43%), a mid-cap biotech that's gained significant recognition this year. The drugmaker's shares have skyrocketed by nearly 200% since January.
While many investors are thrilled about Viking's future, others are concerned they've already missed the boat. How much more room for growth does a clinical-stage biotech with a market cap of $6.3 billion have? Is it too late to invest in Viking Therapeutics, or is the company still an attractive investment?
Not all mid-cap biotechs are the same
There could be substantial potential for Viking Therapeutics. If its promising phase 2 assets secure approval without any hiccups, its stock price is likely to surge even further. However, it's crucial to weigh the upside potential against the risk. One way to gauge whether Viking Therapeutics is overvalued is to compare it to other mid-cap pharmaceutical companies.
CRISPR Therapeutics is a company that already has a product on the market, yet its market capitalization is only $4.2 billion, which is roughly $2 billion lower than Viking's. Axsome Therapeutics, another mid-cap pharmaceutical company with two commercialized products and at least one more that should receive approval within a year, is valued at $4.7 billion.
These basic comparisons imply that Viking might be overvalued since it doesn't have a single product in phase 3 trials. On the other hand, it has a higher market cap than drug companies that have launched therapies.
However, there's more to the story. Viking's leading product, VK2735, is a potential dual GLP-1/GIP weight loss treatment that excelled in phase 2 trials. The obesity treatment market is booming, and according to one analyst, Viking's candidate could generate around $21.6 billion in peak sales.
Axsome's medications aren't in the same league when it comes to these projections. Few pharmaceutical companies can. A company's value primarily depends on its medications' 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 takes for a product's revenue to increase and reach its peak is also important.
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, time-consuming, and high-cost endeavor. As an example, despite being approved for over a year, Casgevy hasn't generated any revenue for the company.
Viking Therapeutics won't have this issue if its VK2735 is approved. It's administered as a subcutaneous injection once a week. Additionally, the company is developing an oral version of the medicine, which could be even more convenient for patients. That's another point in Viking Therapeutics' favor.
Viking continues to make strides
Viking's leading product isn't the only reason to consider investing in the company. Viking's VK2809 is a promising potential treatment for metabolic dysfunction-associated steatohepatitis, a liver disease associated with obesity that has 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 significant potential.
Lastly, Viking Therapeutics' scientists are constantly working on developing 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 live up to these expectations? Maybe, but there's an even more important factor to consider.
Viking Therapeutics is committed to continuing its innovation. 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 everything on this stock. It's still a clinical-stage biotech with plenty of risk. Its candidates could fail in phase 3 trials. However, in the sea of pre-commercial pharmaceutical companies, Viking Therapeutics stands out. I would strongly advise investors to closely scrutinize this company and consider starting a small position.
Although CRISPR Therapeutics and Axsome Therapeutics are mid-cap pharmaceutical companies with lower market values than Viking Therapeutics, they have products on the market or approved therapies, whereas Viking's leading product, VK2735, is still in phase 2 trials with high peak sales potential. Investors should also consider Viking's commitment to innovation and its promising pipeline, including VK2809 for metabolic dysfunction-associated steatohepatitis and VK0214 for X-ALD, both with significant unmet needs.
In the context of financing and investing, evaluating a company's potential long-term profitability and risk is crucial before making an investment decision. Viking's commitment to continuous innovation, promising pipeline, and potential market dominance in weight loss treatments might make it a worthwhile investment despite its higher market value than some comparable companies.