Viking Therapeutics (NASDAQ: VKTX) is on a tear this year, with shares catapulting upward by 340% thanks to good data (and high expectations) from one of its mid-stage clinical trials testing a weight loss drug. The data readouts from that program alone were enough to convince quite a few investors to buy the stock.
And now there's a brand-new reason to invest -- perhaps an even better one than before. Let's investigate what's new and why it matters.
An even larger payday down the line
For the uninitiated, Viking's program -- called VK2735 -- is a highly promising therapy for obesity. It's being evaluated in two formulations in clinical trials, one that is injected on a weekly basis and the other being a once-daily pill.
In late February, the phase 2 clinical trials testing the injected formulation produced knockout data, indicating that patients could lose as much as 14.7% of their body weight after just 13 weeks of treatment. That suggests the injected form of VK2735 could potentially be even more effective than Zepbound, Eli Lilly's blockbuster weight loss drug, as well as Wegovy, Novo Nordisk's product. Its side effect profile also appears to be comparable on the basis of the published data so far.
But injections aren't the ideal format, even if they're only needed once per week. Nobody looks forward to getting jabbed. So it's probable that the largest market opportunity available to the biotech is the oral formulation rather than the injectable version of VK2735.
And that's why Viking shares went wild on March 26, when it published the results of the phase 1 trial investigating the oral formulation. In that study, patients receiving the highest daily dose of the candidate lost 5.3% of their weight after just 28 days of treatment.
Critically, the side effect profile appears to be extremely mild, likely even more so than with the injected format as well as the commercialized weight loss medicines mentioned. Just 14% of the 37 patients who took the drug instead of a placebo experienced mild nausea, which was the most common side effect.
Let's put these results into context. Excess weight is a ubiquitous yet serious health risk, and many of us have picked up a few more pounds (or quite a few more) than we might prefer over the course of our lives. By some measures, like the Centers for Disease Control's (CDC) National Center for Health Statistics, almost 42% of people over age 20 technically qualify as being obese.
Now Viking Therapeutics appears to have a candidate that's easy to self-administer, (very preliminarily) effective at promoting weight loss over a relatively quick time period, and, by the looks of the data today, typically only requires tolerating a bit of mild nausea once in a while for it to work its magic.
To say that VK2735 might become a blockbuster drug, earning more than $1 billion in revenue annually, is to massively undersell its potential. It is not an exaggeration to say that it has a decent shot at becoming the best-selling drug to ever exist.
Risks to be aware of
This all is assuming VK2735's pill format eventually gets approved for sale. As with all biotechnology projects, there is no guarantee whatsoever that the upcoming phase 2 and eventually phase 3 clinical trials will continue to produce positive data.
Regulators could easily become concerned with rare safety signals if they become apparent down the line, and other issues may present themselves with the benefit of more data. Presently, there is no evidence supporting that such an outcome will occur, but it's important to be aware of it as a possibility.
Furthermore, if Viking manages to commercialize its anti-obesity pill, it won't be showing up to an empty market. Novo Nordisk and Eli Lilly have been penetrating the market as aggressively as they are able, given their manufacturing constraints preventing them from serving all the available demand. But they are spinning up more supply capacity, and Viking might still be working through clinical trials at that point.
Still, having such a superior candidate is likely to be a decisive advantage. As the biotech just closed a stock offering worth $632.5 million, it is almost a sure thing that it can afford to finish executing its plans for VK2735.
So don't let the presence of competitors or the possibility of a clinical trial strikeout scare you into selling or avoiding a purchase of this stock. There's no such thing as a slam-dunk in biotech, and investing in biotech stocks is always quite risky, but as of right now, this company merits your consideration.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
