Home Finance Could buying these weight loss stocks be like investing in Novo Nordisk at the dawn of the GLP-1 revolution?

Could buying these weight loss stocks be like investing in Novo Nordisk at the dawn of the GLP-1 revolution?

by trpliquidation
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Could buying these weight loss stocks be like investing in Novo Nordisk at the dawn of the GLP-1 revolution?

One of the biggest sensations fueling the healthcare industry right now is the drug class of glucagon-like peptide-1 (GLP-1) agonists. Even if you’re not familiar with the term “GLP-1,” you’ve probably heard of Ozempic and Wegovy. Both medications are GLP-1 agonists, used to treat diabetes and obesity, respectively.

These treatments have become blockbuster drugs for their maker, Novo Nordiskand have contributed to generous profits for investors in the stock. While Novo Nordisk currently dominates the GLP-1 industry, a number of other players are looking to enter this market.

There is one leading participant Viking therapies (NASDAQ: VKTX). Below I’ll break down where Viking stands in its push into the weight loss market, and assess whether buying the stock could be like investing in Novo Nordisk at the dawn of the Ozempic revolution.

Viking has several drug candidates in the pipeline. But the one that investors seem to be paying the most attention to is VK2735 — a dual GLP-1 and GIP receptor agonist aimed at treating obesity. As a dual agonist, VK2735 could be a more optimal treatment for obesity and diabetes than single-pathway GLP-1 drugs such as Ozempic or Wegovy.

In late October, Viking announced that it will meet with the Food and Drug Administration (FDA) in the fourth quarter about the appropriate steps and protocols to advance VK2735 to a Phase 3 clinical trial.

A graphic image of risk and reward balancing each other
Image source: Getty Images.

Given the information above, you might think that buying Viking stock now – ahead of Phase 3 trials – is a lucrative opportunity. However, in addition to anecdotal updates on VK2735, there is still a lot to consider.

So far in 2024, Viking shares are up a whopping 323%, putting its market cap at about $8.8 billion. Given that the company does not generate revenue, it is difficult to justify this valuation.

On the plus side, I think Viking is in a pretty solid financial position.

At the end of the third quarter, the company had $930 million in cash and equivalents on its balance sheet. Additionally, the company spent approximately $105 million on operating expenses in the first nine months of the year. This implies annual expenditures of approximately $140 million on research and development (R&D) and other administrative expenses, indicating that Viking has sufficient liquidity to continue financing its operations.

I see Viking Therapeutics largely as a speculative opportunity. While the clinical trial data so far is encouraging, there are still many uncertainties surrounding the Phase 3 trial.

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