Billionaires Are Buying Up Viking Therapeutics Stock Left, Right. Should You Follow Their Lead?

Wall Street’s investment banks keep pounding the table Viking Therapeutics (VKTX -2.27%) and its weight-loss drug candidate. Forecasts vary, but the average analyst covering the stock thinks it could rise 98% from recent prices.

Investment bank analysts aren’t the only ones on Wall Street who think clinical-stage biopharma has a bright future. In the second quarter, billionaire money manager Jeff Yass increased his 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 the company presents 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 body weight, and they continued to lose pounds up to 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 New Nordisk (NVO 0.19%) Sales in markets under the Ozempic, Wegovy and Rybelsus names increased to an annual amount of USD 27.6 billion in the second quarter of 2024.

Novo Nordisk’s treatment is by far the most popular drug that acts on GLP-1 receptors in the pancreas, but it is losing market share to tirzepatide, the recently launched drug that Eli Lilly (LLY -1.10%) marketed as Mounjaro for diabetes and Zepbound for weight loss.

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

An easy-to-swallow tablet version of VK2735 isn’t far behind the injectable version that’s now headed into phase 3 trials. In March, Viking reported that patients in a phase 1 study of the oral formulation showed significant weight loss after just 28 days of treatment.

More than just weight management drugs

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

Patients with MASH, formerly called nonalcoholic steatohepatitis (NASH), have too much fat in their livers, leading to inflammation and fibrosis. The condition affects millions of Americans, but it appears VK2809 may help. After 52 weeks, up to 75% of patients treated with the drug achieved MASH resolution without signs of worsening fibrosis, compared to just 29% of those in the placebo group.

Upcoming Catalysts for Viking Therapeutics

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

In the fourth quarter, Viking Therapeutics will initiate a Phase 2 study of oral VK2735. Novo Nordisk’s Rybelsus is an oral GLP-1 drug, but there are no dual 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, study participants lost more than 5% of their weight after 28 days of treatment, and the drug showed a positive safety profile.

Gastrointestinal side effects are relatively common with current weight management medications. Encouragingly, only 14% of patients receiving VK2735 reported experiencing mild nausea, and none reported serious side effects.

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

Buy now?

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

There is no reason to expect a bad outcome for VK2735, but a lot can still go wrong in the coming years. If Viking Therapeutics announces an unfavorable clinical trial outcome or the FDA slows down VK2735’s progress, the bottom could fall out from under this volatile stock.