Viking recently announced the results of an early-stage clinical trial for VK0214.
Shares of pharmaceutical upstart Viking Therapeutics (VKTX 0.72%) have been soaring this year thanks to high hopes for VK2735, its promising GLP-1 weight loss treatment. Although the company doesn’t have an approved product yet and isn’t generating consistent revenue, the excitement around GLP-1 has been sufficient to send the stock’s valuation north of $7 billion.
Viking, however, is involved in more than just GLP-1 development. And recently, it gave investors an additional reason to be excited about its future growth prospects.
Early trial results for VK0214 are promising
On Oct. 9, Viking released results from an early-stage trial of VK0214. The 28-day trial demonstrated that the treatment was effective in reducing plasma levels of very long-chain fatty acids for people with X-linked adrenoleukodystrophy, a rare genetic disorder that occurs in 1 in 17,000 births. The trial showed that the treatment was also safe and well-tolerated, which is the key aim of a trial at such an early stage.
For Viking investors, this is an example of yet another promising treatment which could play a pivotal role in the company’s future growth. There’s still a long way to go before VK0214 can obtain approval, however, as it could take years to progress through additional clinical trials. But with a diverse growth strategy, having another possible product in Viking’s portfolio helps to lessen some of the overall risk for investors.
In addition to VK2735 and VK0214, Viking’s pipeline has VK2809 — a possible treatment for nonalcoholic steatohepatitis (NASH). It showed effectiveness in a phase 2 trial in reducing liver fat, and is yet another drug which could be key for Viking.
Viking is in a good position to continue funding R&D
A big risk for biotech stocks is that they often lack the resources to invest in clinical trials and drug development, which leads to share offerings and dilution. For investors, that can be a surefire recipe for a struggling stock: limited revenue combined with high cash burn.
For Viking, however, that isn’t as big of a concern anymore. The company has raised cash in the past, but as of the end of June its cash and short-term investments stood at $942 million. That’s more than enough to cover its operating cash burn, which over the trailing 12 months has totaled just under $72 million. Even if its rate of cash burn accelerates, Viking looks to have sufficient funds on hand to sustain that level of spending for several years.
Viking’s well-funded position makes it one of the safer biotech stocks you can invest in right now.
Should you buy Viking Therapeutics stock today?
Viking Therapeutics is having a monstrous year, with its shares up over 240% thus far. If one of its drugs obtains approval, the stock could easily rally even higher, especially since having a revenue-generating product in its portfolio could put it in a position to turn a profit.
It will, however, likely take time. And with biotechs there’s always a risk that an approval doesn’t come through, or that it takes longer than expected. If you’re comfortable with that risk, and are aware it could take years before Viking starts generating any considerable revenue, then this may be a growth stock worth adding to your portfolio right now.
Even with its incredible gains this year, Viking may have a lot more upside if regulators approve one of its drugs.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
