The risk of investing in Viking Therapeutics Inc. (VKTX, Financial) may not be worth the potential rewards, according to a December article in Equities News. Investors who failed to heed this warning and bought shares of the San Diego-based biotechnology company haven’t been helped, but they haven’t been hurt either.
That’s because Viking is trading just about where it was in mid-December: $7.50. The company has made a nice recovery from mid-March, when it traded at a 52-week low of $3.26.
Viking’s future is closely tied to the success of one of only three drugs in its pipeline, VK2809. The company is hoping clinical trials demonstrate the drug’s effectiveness in treating two types of liver disease for which there is no therapy--non-alcoholic fatty liver disease (NAFLD) and its more severe variant non-alcoholic steatohepatitis (NASH.)
According to the American Liver Foundation, 100 million Americans have NAFLD, which in severe cases can cause liver inflammation and scarring. The size of the opportunity is huge: Pharmaceutical Technologies claims the NASH market could have a compounded annual growth rate of 63% by 2026 to reach a market size of $18.3 billion.
VK2809 is in phase 2B testing. During the company’s first-quarter earnings call on May 5, President and CEO Brian Lian said patient enrollment in the study has continued during the first four months of the year and is ongoing, though some sites have been affected by the pandemic.
Of course, the size of the market for these liver diseases has attracted a number of competitors, including Intercept Pharmaceuticals Inc. (ICPT, Financial), Genfit (GNFT, Financial) and Madrigal Pharmaceuticals Inc. (MDGL, Financial).
If Viking gets to the party late—or doesn’t arrive at all—it could spell disaster for the company and its shareholders. And the obstacles are formidable. As Pharmaceutical consulting company Nuventra points out, drugs that get to phase 3 still have only a 60% chance of getting the U.S. Food and Drug Administration's approval.
That Viking hasn’t attracted a bigger industry partner is an ominous sign, given that the company has stated in its 10-Q report that “we do not currently possess the resources necessary to independently develop and commercialize our drug candidates.”
Despite the challenges, Smarter Analyst reported on May 5 that Michael Morabito from Chardan Capital initiated coverage with a buy rating on Viking and a price target of $15. The current analyst consensus on the company is a strong buy with an average price target of $14.88.
For the three months ended March 31, Viking reported a net loss of $9.7 million or 13 cents per share, compared to a net loss of $4.9 million or 7 cents per share in the corresponding period in 2019. Lian attributed the increase in the loss to higher research and development and general and administrative expenses, as well as decreased interest income.
Disclosure: The author holds no positions in any of the stocks mentioned in this article.
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