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Is Viking Therapeutics Stock a Buy?

The company is in the spotlight for one of its programs, but it also has others that hold promise.

One of the current stars of the biotechnology world is Viking therapeutics (VKTX -1.11%)and for good reasons. The clinical-stage company is advancing to the later stages of development of a drug that, if approved, would compete in the hot market for weight loss drugs.

While this isn’t the company’s only product in the pipeline, it’s the one many investors have pinned their hopes on. Typically for a biotech that has gone mainstream, Viking’s stock price has hit several peaks recently. Let’s see if we can gauge if they are new.

Under development for the hottest segment on the market

This product is VK2735, an obesity treatment that has been tested very well in the laboratory so far. In a phase 2 study of an injectable form of the drug, it demonstrated reduction in body weight from baseline after 13 weeks of use. It has also demonstrated encouraging safety and tolerability.

With that wind in its tail, Viking’s next step is to put the drug to work in a Phase 3 trial, which it hopes to begin after holding a Phase 2 end-of-life meeting with the Food and Drug Administration ( FDA). That meeting should take place by the end of the year.

Americans just can’t get enough of GLP-1 weight loss drugs these days, not least because there are only a handful of them approved for this indication. The leader is Wegovy from the Danish developer Novo Nordiska higher-dose version of Ozempic’s diabetes treatment. Earlier this year, a new kid in town arrived in the form of an American pharmaceutical titan Eli Lillywhose Zepbound is essentially Mounjaro’s own weight-shedding diabetes drug.

Wegovy got FDA approval for obesity in 2021, so it is the first to act and still the brand most associated with pharmaceutical weight loss treatment. Strong and persistent demand for the drug pushed its sales up 37% year-over-year in the most recent quarter reported by its maker, so that advantage continues to drive production growth. Eli Lilly will be tough competition with Zepbound, however, as it has far greater resources, not to mention significant marketing muscle, to get the Zepbound name out there.

But a smart company like Viking won’t go through the grueling process of developing a drug if there’s no market place. Last year, global sales of obesity drugs totaled about $24 billion, according to data compiled by the health research and services company. Iqvia Holdings and quoted by Reuters. In those long-ago days, the most optimistic analysts believed the segment would grow to $100 billion by the early 2030s. Just a few months later, predictions of $150 billion hit the headlines.

More where that came from

That’s why all eyes in the biotech sphere will be on Viking’s upcoming meeting with the FDA, and especially the results of that Phase 3 study of VK2735.

Another potentially explosive development is the company’s progress with an oral form of the drug that would be much more appealing to the average patient than the injectable version. Like its sibling, oral VK2735 fared well in a phase 1 study; Viking aims to advance to Phase 2 testing by the time the new year rolls around. It still has a long way to go through the pipeline, but if Viking can eventually commercialize it, the drug’s format could push it ahead of injectables Wegovy and Zepbound.

With all the hype and excitement surrounding the VK2735, it’s easy to lose sight of the fact that Viking has other development programs as well. VK2809 is aimed at treating non-alcoholic steatohepatitis (a liver disease) and met both its primary and secondary endpoints in a phase 2b study. VK0214 targets a rare neurodegenerative disease called X-linked adrenoleukodystrophy (X-ALD). This program is in an early phase, having recently completed enrollment in a Phase 1 study.

I love that Viking isn’t a one-trick pony and has not one, but two other treatments in development, the most advanced of which has performed admirably in its trials so far. Still, VK2735 has clear potential for success, especially if the company can effectively develop and market the oral format.

Clinical-stage biotechs are always a boom-or-bust play; I think, more than many, this one leans heavily towards the former. I would be a buyer of this stock.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Iqvia Holdings. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

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