Is it too late to buy Viking Therapeutics stock?

viking cure (VKTX -1.61%) This year, it emerged as a strong contender in the increasingly popular anti-obesity market. Although there are no approved drugs yet fighting for market share, investors are incredibly optimistic about the prospects of VK2735, which has shown encouraging results in clinical trials.

But the excitement has pushed the stock price to record highs this year. And in the case of Viking, which now has a market cap of more than $9 billion, investors are still paying a hefty premium for a business that isn’t generating any revenue. Is it too late to invest in Viking Therapeutics stock? Or could it still be a good buy now?

Why the Vikings Could Still Be More Valuable

For healthcare companies that can’t rely on profits or strong financials, inevitably much of the hype and excitement surrounding the stock will be based on how encouraging the company’s pipeline is or how strong its clinical trial numbers are.

For example, the stock rose last week when clinical trial data for the pill version of VK2735, which has been shown to be effective as an injectable drug, showed that patients taking the drug at the highest dose saw losses of up to 3.3% (placebo-drug). Adjusted ratio) body weight after 28 days.

Because this was an early Phase 1 trial, it is still too early to read too much into these results. As clinical trials progress to later stages and involve more participants, investors will have a better idea of ​​how much potential the drug may have. But even the encouraging early-stage trial results were enough to send the stock up more than 20% the day the news was announced.

This is a prime example of how optimism can work in the Vikings’ favor. It may be years before revenue starts flowing into the business, but optimism about clinical trials could push the stock price much higher.

While some investors expect these results to ultimately lay the foundation for long-term growth for the business, others may wonder whether these encouraging trial results could lead to a possible future acquisition.

Why Viking Therapeutics’ Stock Is Struggling

Still, Viking’s future presents a number of challenges that could limit the stock’s potential upside, especially at its expensive valuation. The first is that although drug candidates are producing encouraging results, it is still too early to read too much into the results unless Phase 3 trials show efficacy and safety. As clinical trials grow larger and involve more people, many things can change.

Large-scale trials also cost more. And with the Vikings unable to generate revenue, dilution is inevitable. Companies can try to keep costs down, but the priority at this stage is to get the approved drug to market and then, assuming it’s successful, roll it out to other markets. Getting to the point where a company doesn’t need to issue stock to fund its operations can be a long and arduous road. And in the meantime, investors can see share counts growing and stock prices falling.

Then there is the issue of competition. Many companies are developing weight loss drugs, and considering the anti-obesity market could be worth as much as $100 billion by the end of 2010, it would be foolish not to do so. And there are so many celebrities out there. As well as ellie lily and novo nordisk. Amgen, PfizerIt’s even a small Danish biotech company you’ve probably never heard of. new zealand pharmaceuticalThere could be a whole host of weight loss drugs in the future that could compete with Viking.

Viking’s trial results are encouraging, but investors should be prepared for what could be a highly competitive market in the weight-loss drug space. This means that while the latest news of Viking’s strong clinical results drove the stock higher, the opposite could happen if Zealand, Amgen or Pfizer release positive clinical data of their own.

Should you buy Viking Therapeutics stock?

Viking Therapeutics is a promising healthcare stock, and it could have a lot of upside, especially if a large pharmaceutical company decides to buy it for its pipeline. However, given the stock’s high valuation, we think it may be too late to invest in the business right now. Future growth is so overvalued that it may not take much for the stock to fall from these heights.

Vikings could still prove to be a good long-term buy, but it’s also a high-risk investment. For most investors, it’s best to take a wait-and-see approach to stocks.