Could This Healthcare Stock Help You Build a Real Fortune Over the Next 20 Years?

The short, but glib, answer to the headline question posed for Viking Therapeutics (NASDAQ: VKTX) investors is "no," because the likelihood is that the $4.6 billion market cap company will be bought up by a larger pharmaceutical company if it has success in its clinical trials, and particularly with its lead drug candidate VK2735. Still, that doesn't mean the company can't deliver substantial value to investors. Here's why.

A competitive market for VK2735

VK2735 is a dual GLP-1/GIP agonist in development for weight loss and diabetes management. It's part of a growing and popular class of drugs that already dominate the weight loss market, thanks to blockbuster drugs like Eli Lilly's (NYSE: LLY) Zepbound (tirzepatide) and Novo Nordisk's (NYSE: NVO) Wegovy (semaglutide).

Image source: Getty Images.

At which point, investors are entitled to ask how Viking can hope to grab market share in a competitive market. It's a market where Eli Lilly and Novo Nordisk already have blockbusters, have oral weight loss pills approved, and continue to develop new drugs in the GLP-1 class.

What makes VK2735 different

Viking's VK2735 has a couple of qualities that set it apart from the competition.

First, it's in development as a dual-formulation therapy. This raises the potential for it to be initially administered as an injectable to rapidly lose weight, then shifted to a less intrusive, more convenient oral dose for maintenance.

Second, VK2735 has demonstrated, in both injectable and oral form, an ability to significantly reduce weight loss. Note that the mid-teens percentage baseline weight loss in the two phase 2 VK2735 trials occurred at 13 weeks, compared to much longer periods for the Eli Lilly and Novo Nordisk oral offerings.

This raises the prospect of rapid weight loss over, say, a few months using the injectable form, before switching to the oral form for maintenance or to continue weight loss. This sort of option might be more attractive for many over taking oral pills for a year and a half to produce similar results.

Data source: Company presentations.

To that end, Viking is conducting a phase 1 maintenance study in which participants will take injectable VK2735 for 19 weeks before moving to a maintenance dose, including weekly, biweekly, and monthly injectable dosing, as well as daily and weekly oral dosing. The results from the subcutaneous dosing are due for release in the third quarter of this year, but investors will have to wait until early 2027 for the oral dosing data.

The bears' viewpoint

The glass-half-empty view holds that, aside from the phase 1 maintenance data, it won't be until late 2027 that Viking starts reporting phase 3 results for subcutaneous VK2735, and until 2028 for oral VK2735. Investors will need to be patient, and a lot can happen in that time.

In addition, the phase 2 oral trial has questionable safety and tolerability data, with a 20% discontinuation rate due to adverse events in the treated group, compared with 13% in the placebo group.

A stock to buy?

The bullish case argues that the titration in the phase 2 oral trial was too aggressive (note the 13-week dosing period) and that the phase 3 data will likely improve on it after management adjusts the titration. In addition, the phase 1 maintenance trial is expected to be successful and demonstrate the potential of the dual-formulation approach.

All told, there's a lot to like about Viking Therapeutics, and it wouldn't be surprising to see a larger company move in if the phase 1 maintenance trial data are good.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly and Novo Nordisk. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.