Viking Therapeutics (NASDAQ: VKTX) is currently on many investors' radars after gaining 137% in one day on Feb. 27 after positive phase 2 clinical trial findings. The firm may soon produce a weight loss treatment to compete with Novo Nordisk's (NYSE: NVO) blockbuster Wegovy. Thus, investors who believe they learnt about Novo Nordisk's fast rising obesity care section too late to benefit from an investment now have another option to enter that attractive and competitive industry.
Viking, like many pre-revenue biotech stocks, is risky. However, assumptions about missing out on Novo Nordisk may be wrong. Analyzing the circumstance will help us understand the competitiveness between these two businesses and one of their counterparts. Viking Therapeutics has a significant asset that's driving up its stock price despite its lack of products.
Wegovy's mechanism of action overlaps with VK2735, its main program to treat obesity. Eli Lilly's successful weight loss medicine Zepbound uses the similar method. VK2735's phase 2 trial findings, published on Feb. 27, may make it more effective than competitors.
After 13 weeks of therapy with the candidate, clinical trial participants dropped 13.1% of their body weight, compared to 1.7% for placebo. Additionally, more placebo individuals terminated treatment due to side effects than treatment participants. The side effect burden appears to be manageable. Thus, VK2735 may be safe and effective after phase 3 clinical trials.
Management also assures investors that the candidate's efficacy didn't plateau or slow down during the research. Thus, it is likely that patients who take it longer than the late-stage studies for the other two medications will lose more weight. Some data on the topic is due in the second quarter.
Huge addressable market Viking Therapeutics won't sell its drug tomorrow. Before receiving FDA permission, it must complete phase 3 trials and prepare application paperwork.
We believe it will survive long enough to achieve those aims. It had $362 million in cash, equivalents, and short-term investments and $100.8 million in trailing-12-month operating expenses at the end of the fourth quarter. Even if it takes years, it has the means to market VK2735, so the stock is worth buying based on recent data.
Novo Nordisk and Eli Lilly will each make billions from their market-leading weight loss drugs in those years. Neither company is signaling a market bottom, so they may not need to fight for market share for a while. Both firms are focusing on R&D to produce new and improved obesity medications to expand their addressable markets and target niches like cardiovascular disease. Investor catalysts will come from financial returns and pipeline plays.
The biotech will be a latecomer to the market if it can get its therapy authorized in the next three years, but it hasn't even finished gathering data to show how successful its entrant is. Next improvements from the corporation could fuel substantial returns, if phase 2 results are to be trusted. Its data may disappoint, but for now, it seems good.
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