These 2 biotech stocks are set to grow

Investing in biotech companies, especially relatively small ones, can be a double-edged sword. Their shares often rise based on strong clinical trials or regulatory news, but can lose much of their value overnight if a study’s results don’t go their way. This makes many biotech stocks somewhat risky investments, but some could provide excellent returns for those who can bear the risk.

Two biotech companies whose shares could gain significant traction in the coming months and years Viking therapeutics (VKTX 3.25%) and Sarepta Therapeutics (SRPT -2.38%).

1. Viking therapeutics

Viking Therapeutics is a clinical-stage biotech whose stock has risen significantly this year. The drugmaker owes its lead candidate, VK2735, a potential GLP-1-lowering therapy, to strong results in a Phase 2 study. At least two scenarios could send Viking shares higher in the coming months and the following years.

The first scenario involves Viking Therapeutics advancing VK2735 to late-stage trials and the drug proving safe and effective. The biotech could then gain a foothold in the fast-growing weight loss market. It’s hard to come up with exact estimates years before a drug hits the market, but William Blair analyst Andy Hsieh projected that VK2735 could generate about $21.6 billion in annual sales at its peak. If this prediction is close to true, Viking stock could maintain its momentum for a while. The stock could also skyrocket if the company becomes a takeover target.

Many prominent drug manufacturers are racing to join the lucrative market for new effective weight loss treatments. However, few have produced the kinds of clinical trial results that this mid-cap company has. Buying Viking Therapeutics would be a quick way for one of them to acquire a promising candidate in this niche and the team that developed it.

Viking is also working on an oral version of VK2735. And elsewhere, a phase 2 clinical trial of VK2809 produced positive results as a potential therapy for metabolic dysfunction-associated steatohepatitis (MASH), another condition with a high unmet need. The Food and Drug Administration (FDA) approved the first MASH therapy earlier this year, but there is room in the market for more.

If Viking Therapeutics can make steady progress with its top candidates, the stock could produce higher returns. However, this biotech stock is somewhat risky: If VK2735’s clinical results fail to impress, its share price could fall off a cliff. Invest accordingly.

2. Sarepta Therapeutics

Sarepta Therapeutics specializes in drug development for Duchenne muscular dystrophy, a rare, progressive, pediatric neuromuscular disorder.

The company’s most important product is Elevidys, a gene therapy for Duchenne muscular dystrophy. Elevidys recently received traditional FDA approval for outpatients and accelerated approval for non-ambulatory patients. That means Sarepta Therapeutics will need to prove its effectiveness in non-ambulatory patients in a post-marketing study to get the full blessing of regulators.

So far, Elevidys is performing well and helping Sarepta deliver strong results. In the second quarter, its total revenue rose 39% year over year to $362.9 million. Earnings per share of $0.07 were much better than the loss per share of $0.27 in the year-ago period. The company’s stock has outperformed the broader market so far in 2024, but things could get even better if it gets full approval for Elevidys for patients with non-ambulatory Duchenne muscular dystrophy. Elevidys is already contributing significantly to strong financial results.

But this regulatory victory could make things better. It is also worth noting that Sarepta is looking to diversify its range. All four approved therapies treat Duchenne muscular dystrophy, but a phase 3 trial for a potential therapy for Limb-Girdle muscular dystrophy began in January. Overall, Sarepta Therapeutics has more than 40 candidates for conditions across the rare disease spectrum — not bad for a biotech valued at just under $13 billion.

The company’s stock could deliver above-average returns if it continues to develop innovative therapies for diseases with high unmet needs.