Few biotech companies have made more noise than Viking Therapeutics (NASDAQ: VKTX) this year, and that's saying something. The drugmaker had been a relatively small and unknown player in the industry. However, Viking's prominence and stock price soared thanks to excellent clinical progress. The biotech's shares are up by 154% since early January.
Can Viking Therapeutics perform nearly as well during the second half of the year? Is it already too late to buy the stock? Let's find out.
Why Viking Therapeutics has been on fire
Viking's lead asset is VK2735, a potential weight loss therapy. Given how successful anti-obesity medicines like Wegovy (developed by Novo Nordisk ) and Zepbound (marketed by Eli Lilly ) have become, many companies are pouring funds into this area, trying to develop candidates that can compete with the leaders in the field.
Among this herd of drugmakers -- outside of Eli Lilly and Novo Nordisk -- Viking Therapeutics has, so far, been the most impressive. In a phase 2 study, VK2735 proved highly effective at reducing body weight, a result which sent Viking Therapeutics' shares skyrocketing .
The company later revealed that an oral version of VK2735 also looked promising in phase 1 studies. Wegovy and Zepbound are administered subcutaneously once weekly; an oral weight loss medicine that works just as well could attract many patients.
However, Viking still wasn't done. The company delivered more positive phase 2 data for another key asset, VK2809, a potential treatment for nonalcoholic steatohepatitis. Though VK2735 has been the main driver behind Viking Therapeutics' surge this year, VK2809 is also vital to the company's prospects.
What's next for the biotech?
Clinical trial results of the kind Viking Therapeutics has delivered this year don't come every day. It's unlikely that the biotech will experience such positive developments in the second half of the year. Viking Therapeutics could announce the start of phase 3 studies, but that won't jolt the stock price nearly as much, especially considering the fantastic run it has already had. Positive phase 3 results would do the trick, but investors will have to wait for those; they won't come down this year.
Can anything else send Viking's shares soaring by year-end? It's always possible that the company will get acquired. With many biotech giants trying -- and, so far, largely failing -- to develop promising anti-obesity assets, Viking looks like an extremely attractive acquisition target. Developing brand-new drugs in-house is sometimes much more complicated than merging with a company with exciting mid-stage assets.
Of course, there is no guarantee that Viking Therapeutics will be acquired. Another option is to partner with a larger company with more funds, something else to which the market could react positively. But it's hard to predict such developments.
Here's a more critical question for investors: Putting aside the possibility that Viking Therapeutics gets acquired, can the stock deliver above-average returns over the long run?
On the one hand, the biotech seems to have a highly innovative team under its umbrella. Funding shouldn't be much of an issue either. Viking recently ran a secondary offering, raising gross proceeds of $632.5 million. It ended the first quarter with a cash and equivalents balance of $963 million. The success of its programs so far will allow it to raise more capital as needed, though it will still have to resort to dilutive methods, a necessary evil for smaller companies in the industry.
On the other hand, Viking Therapeutics remains a clinical-stage biotech that has yet to start a phase 3 study. That makes the stock risky even though the potential upside is enormous. Will Viking Therapeutics double again by year-end? Probably not. Should you buy the stock anyway? Only if you have an appetite for risk and volatility.
Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy .
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