The biotechnology industry features many prominent companies that attract a lot of market attention. And since the start of the year, few biotech companies have made more noise than Viking Therapy (NASDAQ: VKTX)a mid-cap pharmaceutical company.
Viking focuses on developing medicines for metabolic diseases. Shares have more than tripled since the beginning of January thanks to a highly promising clinical development. And in that regard, it has just announced more good news. Let’s look at what this could mean for shareholders.
Looking for another exciting market
In February, Viking impressed investors by releasing positive phase 2 data on VK2735, a potential anti-obesity drug. It’s not hard to see why the market was so excited that doubled the price of biotechnology shares in one day.
Weight loss therapies like Wegovy and Zepbound are generating massive sales. If Viking, a relatively unknown player in the sector, can succeed in this market, it could generate extraordinary returns for its shareholders.
It is also developing another promising drug called VK2809 as a treatment for non-alcoholic steatohepatitis (NASH). There is enormous potential here too.
NASH is caused by a buildup of fat in the liver, causing scarring (fibrosis) and can be fatal. Obesity is one of the main risk factors for the disease. Until a few months ago, there were no approved therapies for NASH. There remains a significant unmet need here, which Viking Therapeutics is looking to fill.
The pharmaceutical company has just announced updated positive data from a phase 2 study for VK2809, after already reaching its primary objective of reducing liver fat after 12 weeks of treatment last year. According to recently released data, 75% of patients treated with the highest dose of VK2809 achieved resolution of NASH without worsening fibrosis, compared to only 29.3% of patients in the placebo group after 52 weeks of study.
The drug also appeared relatively safe, with the overwhelming majority of reported adverse events being mild or moderate.
What’s next for Viking Therapeutics?
Interestingly, Viking shares fell on the day it reported these positive developments. Perhaps investors are still concerned about stiff competition in the NASH market: several pharmaceutical giants are targeting this, including the makers of Wegovy (New Nordic) and Zepbound (Eli Lilly). Or perhaps management’s failure to outline VK2809’s next steps played a role.
Whatever the case, this is mostly noise. The most crucial point is this: Viking is once again proving that it is a highly innovative company. Investors would have to look hard to find a clinical-stage mid-cap biotech with two promising assets of the caliber of VK2809 and VK2735.
It’s true that the company still needs to complete phase 3 studies before it can launch these products. In this sense, the action remains risky. You will also need to generate some funds.
Late-phase clinical trials are much larger (i.e., more expensive) than early-phase trials. Viking generates no revenue, is consistently unprofitable, and has no deep-pocketed partners. Therefore, the path forward will not be easy. It is almost certain that the company will have to resort to dilutive financing means, as it did recently. This is normal for pre-commercial biotechnologies.
That being said, the pharmaceutical company seems to be one of the best options for biotechnology investors with an appetite for risk. For those in this category, it may be worth initiating a small position in the stock following its recent decline.
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Prospero Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The motley fool has a disclosure policy.
This hot stock just announced more good news: time to buy? was originally published by The Motley Fool
