Up 283% YTD, Is It Too Late to Buy Viking Therapeutics Stock?

While Nvidia (NVDA) and its Big Tech peers have driven the S&P 500 Index ($SPX) to new all-time highs this year, several other growth stocks across multiple sectors are flying under the radar. One of these names is biotech stock Viking Therapeutics (VKTX), which has returned 283% so far in 2024, and is up 520% in the last 12 months. 

Valued at a market cap of $7.43 billion, the mid-cap pharmaceutical company also trades 28% below its February all-time highs, after losing close to 19% in a single trading session this Thursday. 

Given its outsized gains in the past year, let’s see if it makes sense to buy shares of Viking Therapeutics at the current valuation. 

An Overview of Viking Therapeutics Stock

Viking Therapeutics (VKTX) is a clinical-stage biopharmaceutical company engaged in the development of therapies for metabolic and endocrine disorders. It is among the few players developing anti-obesity medicines, a market that is growing rapidly. 

According to a research report from Morgan Stanley (MS), the weight-loss drugs market is forecast to expand from $2.4 billion in 2022 to $77 billion by 2030, making related companies like Viking Therapeutics an enticing investment right now. 

Viking's weight-loss drug, VK2735, is still in the trial stage and has yet to be approved. In late February, the company published data for the drug's phase 2 clinical trials, in which patients experienced a 14.7% decline in their body mass over a 13-week period. Comparatively, patients receiving the placebo drug saw a mean weight decline of just 1.7%. There is a good chance for the drug to be approved, especially if the phase 3 trial data is similarly encouraging. 

Following the release of the phase 2 clinical trial data, Truist Securities raised its price target for Viking Therapeutics from $38 to a new Street-high of $120. 

Viking Therapeutics Faces Competition

Viking Therapeutics is entering a market already dominated by healthcare heavyweights such as Eli Lilly (LLY) and Novo Nordisk (NVO). In fact, Viking’s shares fell close to 20% yesterday in response to data from Novo Nordisk's clinical stage weight-loss drug, which looks poised to build on the blockbuster success of its Ozempic and Wegovy. 

Novo Nordisk stated its next-generation drug is an oral formulation, which makes it easier to manufacture and distribute. Moreover, it will be easier for patients to consume the drug, administered orally, relative to Viking's subcutaneous treatment.

Is VKTX Stock Overvalued Right Now?

As the company is still pre-revenue, it's quite difficult to value the stock fundamentally. The weight-loss market is huge and continues to attract multiple players, including Viking Therapeutics. 

VKTX is forecast to increase its losses from $0.91 per share in 2023 to $1.12 per share in 2024, and again to $1.47 per share in 2025. Given its current outstanding share count, its losses in the next two years will range around $220 million. Viking Therapeutics ended 2023 with more than $360 million in cash, providing it with enough room to sustain its cash burn rates for the next three years. 

Out of the nine analysts tracking Viking Therapeutics stock, eight recommend “strong buy,” and one recommends “moderate buy.” The average target price for VKTX is $97.75, indicating expected upside potential of about 39% from current levels.