Billionaires are buying Viking Therapeutics stock left and right. Should you follow their lead?

Wall Street investment banks continue to pound the table Viking therapeutics (VKTX -2.27%) and its drug candidate for weight loss. Predictions vary, but the average analyst following the stock thinks it can rise 98% from recent prices.

Investment bank analysts aren’t the only people on Wall Street who think clinical-stage biopharma has a bright future. In the second quarter, billionaire money manager Jeff Yass boosted Susquehanna International Group’s stake in Viking by about 1.1 million shares. Another billionaire fund manager, Israel Englander, bought about 326,000 shares for his Millennium Management fund.

Is now a good time to follow these billionaires and buy some Viking Therapeutics stock? Let’s weigh the opportunities in front of the company against some of the risks it poses to investors.

Why Wall Street is bullish on Viking Therapeutics

In February, Viking Therapeutics reported successful clinical trial results for VK2735, a dual GLP-1 and GIP receptor agonist. After just 13 weeks of treatment, patients lost an average of 14.7% of their weight and were still shedding pounds by their 13-week weigh-in.

If you’re not one of the millions of Americans already taking a weight-loss drug, you probably know someone who is. Sales of semaglutide, a GLP-1 drug Novo Nordisk (NGO 0.19%) the markets under Ozempic, Wegovy and Rybelsus grew to an annual value of $27.6 billion in the second quarter of 2024.

Novo Nordisk’s treatment is by far the most popular of the drugs that act on GLP-1 receptors in the pancreas, but is losing market share to tirzepatid, the more recently launched drug that Eli Lilly (LLY -1.10%) marketplaces like Mounjaro for diabetes and Zepbound for weight loss.

Like Viking’s VK2735, Eli Lilly’s drug acts on both GLP-1 and GIP receptors, making a difference in both efficacy and sales. In the second quarter, sales of tirzepatide increased by 86% compared to the first quarter. Sales of semaglutide increased by only 10% during the same time frame.

An easy-to-swallow tablet version of VK2735 is not far off from the injectable version, which is now moving into Phase 3 trials. In March, Viking reported that patients in a Phase 1 study of the oral formulation experienced a loss of significant weight gain after only 28 days of treatment.

More than just weight control drugs

Viking Therapeutics’ focus on metabolic disorders didn’t start with weight management. The most advanced candidate in its series, VK2809 recently completed a phase 2b trial in patients with metabolic dysfunction-associated steatohepatitis (MASH).

Patients with MASH, which used to be called non-alcoholic steatohepatitis (NASH), have too much fat in their liver, which leads to inflammation and fibrosis. The condition affects millions of Americans, but VK2809 appears to be able to help. After 52 weeks, up to 75 percent of patients treated with the drug achieved resolution of MASH without signs of worsening fibrosis, compared with only 29 percent of the placebo group.

Future catalysts for Viking Therapeutics

A Phase 3 study of VK2735 as an obesity treatment is coming up, but Viking Therapeutics still needs to meet with the FDA and iron out the details. That meeting is scheduled for later this year, and the stock could rise sharply if the agency doesn’t ask the company for a particularly long or extensive study.

In the fourth quarter, Viking Therapeutics will begin a Phase 2 study of oral VK2735. Novo Nordisk’s Rybelsus is an oral GLP-1 drug, but there are no dual-acting GLP-1/GIP treatments with an approved oral formulation.

It’s still early days, but so far, oral VK2735 looks like a winner. On average, the weight of study participants decreased by more than 5% after 28 days of treatment, and the drug displayed a positive safety profile.

Gastrointestinal side effects are relatively common for current weight management medications. Encouragingly, only 14% of patients given VK2735 said they had mild nausea, and none reported serious side effects.

Viking will begin a 13-week Phase 2 study of oral VK2735 later this year. Another successful outcome in a longer study could see the stock rise in 2025.

A buy now?

Viking Therapeutics looks like a good stock to buy for investors with a high risk tolerance. However, if you are far from achieving financial independence, this stock is not for you. The company has a market capitalization of $6.3 billion, but it will take more than a year at best to have approved products to sell.

There’s no reason to expect a bad result for the VK2735, but there’s still a lot that could go wrong in the years to come. If Viking Therapeutics announces an unfavorable clinical trial result or the FDA delays progress on VK2735, the bottom could fall out from under this volatile stock.