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Should Viking (VKTX) Stock be in Your Portfolio Pre-Q2 Earnings?
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Viking Therapeutics (VKTX - Free Report) will report its second-quarter earnings on Jul 24, after market closes. Since the company lacks a marketed drug in its portfolio, we do not expect any revenues. The Zacks Consensus Estimate for earnings is pegged at a loss of 26 cents per share.
Viking’s loss estimates have increased from $1.08 per share to $1.11 for 2024 and from $1.42 to $1.45 for 2025 in the past 60 days.
Image Source: Zacks Investment Research
Earnings Surprise History
The biotech firm’s performance has been mixed over the trailing four quarters. The company’s earnings beat estimates in two of the last four quarters, missed the mark once and met the same on another. On average, VKTX registered an earnings surprise of 2.17% in the last four quarters.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not predict an earnings beat for Viking this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not thecase here, as you will see below. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Without an approved/marketed product in its portfolio, the focus is expected to be on updates related to Viking's pipeline consisting of three candidates — VK2735 (for obesity), VK2809 (for non-alcoholic steatohepatitis [NASH]) and VK0214 (for X-linked adrenoleukodystrophy (X-ALD)].
Last month, management reported positive 52-week histologic data from the phase IIb VOYAGE study that evaluated its lead pipeline drug VK2809 in patients with biopsy-confirmed NASH. This study evaluated four different doses of VK2809 — 1 mg, 2.5 mg, 5 mg and 10mg.
The study achieved its secondary endpoints of histologic changes assessed by hepatic biopsy after 52 weeks of treatmentwith VK2809 compared with placebo. Overall, 40-50% of patients who received VK2809 achieved NASH resolution(meaning the disease symptoms disappeared) and at least a one-stage improvement in fibrosis. In contrast, only 20% of patients who received a placebo achieved similar results. The study previously achieved its primary endpoint — patients who received VK2809 achieved a statistically significant reduction in liver fat content following 12 weeks of treatment.
VKTX intends to meet with the FDA to discuss the VOYAGE study results, before making further decisions on the program. Itis also seeking a partner to further develop and market the drug. Investors could expect an update from management on its plans for the late-stage development of the drug and a potential pathway for regulatory approval.
VK2735 is being evaluated as a subcutaneous injection and as an oral pill in a mid-stage study and an early-stage study, respectively. The drug has shown blockbuster potential, having demonstrated superior weight reduction capabilities in both clinical studies.
In February, management reported that the phase II VENTURE study, which evaluated the SC formulation of VK2735, achieved its primary and all secondary endpoints with statistical significance. Patients treated with the SC formulation achieved a mean weight reduction of 14.7% after 13 weeks compared with 1.7% in the placebo group. In March, Viking reported data from the early-stage study on the oral formulation of the drug, which demonstrated promising dose-dependent reductions in mean body weight after 28 days of daily dosing.
Management plans to meet with the FDA to discuss the above results to determine the next steps in VK2735 development. It expects to advance both formulations of the drug into further development before this year’s end.
The company is also likely to provide an update on the phase Ib study evaluating VK0214 in X-ALD. Management had previously announced that it plans to report data from this study in mid-2024.
A single quarter’s results are not so important for long-term investors. Let us delve deeper to understand whether to buy, sell, or hold this stock.
Price Performance & Valuation
Year to date, the stock has surged 169.2% against a decline of 1.4% for the industry. The stock also outperformed the sector and the S&P 500. Shares of the company are also currently trading above its 200-day moving average.
VKTX Stock Outperforms Industry, Sector & S&P 500
Image Source: Zacks Investment Research
Viking is trading at a premium to the industry. Going by the price/book ratio, the company’s shares currently trade at 5.92, trailing 12-month book value, higher than 4.68 for the industry.
Image Source: Zacks Investment Research
Investment Thesis
The stock is expected to surge further if Viking secures a potential approval for VK2735 or VK2809. Though the company lacks a stable stream of revenues, management has accumulated a strong cash balance of around $963 million (as of March 2024-end), which is helping it fund its day-to-day operations. Given the success obtained by Viking in pipeline development, it could also be eyed as an attractive acquisition target by big pharma.
However, we are concerned about the company’s lack of commercial supply chain and the competitive landscape. While the NASH space is relatively new, with Madrigal Pharmaceuticals’ (MDGL - Free Report) Rezdiffra being the first to receive the FDA’s approval for this indication in March, the obesity space is highly competitive. The present obesity market is a duopoly between two pharma giants — Eli Lilly (LLY - Free Report) and Novo Nordisk (NVO - Free Report) — which are the only ones with FDA-approved obesity drugs in their portfolio. Several other companies like Amgen, Pfizer, and Roche are also developing their obesity drug candidates.
Conclusion
Despite having its share of problems like a lack of a stable revenue stream and increased competitive pressure in the obesity space, we expect the stock to have growth potential thanks to the strong cash balance and robust pipeline development.
Though pharma big-wigs are currently dominating the obesity market, it is also one of the most lucrative spaces in the overall healthcare sector. While both Lilly and Novo are the market leaders in this space and are experiencing exponential sales growth of their obesity drugs, they are still unable to cope with existing demand. Per research conducted by Goldman Sachs, the obesity market in the United States could reach $130 billion by 2030-end. This is evident from the fact that both Lilly and Novo are investing heavily to optimize their production capacities and have even started evaluating multiple other novel obesity candidates in their pipeline. Viking aims to grab a share of this pie as well.
While shares of VKTX are trading at a premium to the industry, we believe it is reasonably valued considering the stock’s growth potential. Those who already own this stock should continue to retain it. Any major drop in the stock’s price can be an opportunity for long-term investors to buy it.
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Should Viking (VKTX) Stock be in Your Portfolio Pre-Q2 Earnings?
Viking Therapeutics (VKTX - Free Report) will report its second-quarter earnings on Jul 24, after market closes. Since the company lacks a marketed drug in its portfolio, we do not expect any revenues. The Zacks Consensus Estimate for earnings is pegged at a loss of 26 cents per share.
Viking’s loss estimates have increased from $1.08 per share to $1.11 for 2024 and from $1.42 to $1.45 for 2025 in the past 60 days.
Earnings Surprise History
The biotech firm’s performance has been mixed over the trailing four quarters. The company’s earnings beat estimates in two of the last four quarters, missed the mark once and met the same on another. On average, VKTX registered an earnings surprise of 2.17% in the last four quarters.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not predict an earnings beat for Viking this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not thecase here, as you will see below. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Viking has an Earnings ESP of -26.38% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Factors Shaping Upcoming Results
Without an approved/marketed product in its portfolio, the focus is expected to be on updates related to Viking's pipeline consisting of three candidates — VK2735 (for obesity), VK2809 (for non-alcoholic steatohepatitis [NASH]) and VK0214 (for X-linked adrenoleukodystrophy (X-ALD)].
Last month, management reported positive 52-week histologic data from the phase IIb VOYAGE study that evaluated its lead pipeline drug VK2809 in patients with biopsy-confirmed NASH. This study evaluated four different doses of VK2809 — 1 mg, 2.5 mg, 5 mg and 10mg.
The study achieved its secondary endpoints of histologic changes assessed by hepatic biopsy after 52 weeks of treatmentwith VK2809 compared with placebo. Overall, 40-50% of patients who received VK2809 achieved NASH resolution(meaning the disease symptoms disappeared) and at least a one-stage improvement in fibrosis. In contrast, only 20% of patients who received a placebo achieved similar results. The study previously achieved its primary endpoint — patients who received VK2809 achieved a statistically significant reduction in liver fat content following 12 weeks of treatment.
VKTX intends to meet with the FDA to discuss the VOYAGE study results, before making further decisions on the program. Itis also seeking a partner to further develop and market the drug. Investors could expect an update from management on its plans for the late-stage development of the drug and a potential pathway for regulatory approval.
VK2735 is being evaluated as a subcutaneous injection and as an oral pill in a mid-stage study and an early-stage study, respectively. The drug has shown blockbuster potential, having demonstrated superior weight reduction capabilities in both clinical studies.
In February, management reported that the phase II VENTURE study, which evaluated the SC formulation of VK2735, achieved its primary and all secondary endpoints with statistical significance. Patients treated with the SC formulation achieved a mean weight reduction of 14.7% after 13 weeks compared with 1.7% in the placebo group. In March, Viking reported data from the early-stage study on the oral formulation of the drug, which demonstrated promising dose-dependent reductions in mean body weight after 28 days of daily dosing.
Management plans to meet with the FDA to discuss the above results to determine the next steps in VK2735 development. It expects to advance both formulations of the drug into further development before this year’s end.
The company is also likely to provide an update on the phase Ib study evaluating VK0214 in X-ALD. Management had previously announced that it plans to report data from this study in mid-2024.
A single quarter’s results are not so important for long-term investors. Let us delve deeper to understand whether to buy, sell, or hold this stock.
Price Performance & Valuation
Year to date, the stock has surged 169.2% against a decline of 1.4% for the industry. The stock also outperformed the sector and the S&P 500. Shares of the company are also currently trading above its 200-day moving average.
VKTX Stock Outperforms Industry, Sector & S&P 500
Viking is trading at a premium to the industry. Going by the price/book ratio, the company’s shares currently trade at 5.92, trailing 12-month book value, higher than 4.68 for the industry.
Investment Thesis
The stock is expected to surge further if Viking secures a potential approval for VK2735 or VK2809. Though the company lacks a stable stream of revenues, management has accumulated a strong cash balance of around $963 million (as of March 2024-end), which is helping it fund its day-to-day operations. Given the success obtained by Viking in pipeline development, it could also be eyed as an attractive acquisition target by big pharma.
However, we are concerned about the company’s lack of commercial supply chain and the competitive landscape. While the NASH space is relatively new, with Madrigal Pharmaceuticals’ (MDGL - Free Report) Rezdiffra being the first to receive the FDA’s approval for this indication in March, the obesity space is highly competitive. The present obesity market is a duopoly between two pharma giants — Eli Lilly (LLY - Free Report) and Novo Nordisk (NVO - Free Report) — which are the only ones with FDA-approved obesity drugs in their portfolio. Several other companies like Amgen, Pfizer, and Roche are also developing their obesity drug candidates.
Conclusion
Despite having its share of problems like a lack of a stable revenue stream and increased competitive pressure in the obesity space, we expect the stock to have growth potential thanks to the strong cash balance and robust pipeline development.
Though pharma big-wigs are currently dominating the obesity market, it is also one of the most lucrative spaces in the overall healthcare sector. While both Lilly and Novo are the market leaders in this space and are experiencing exponential sales growth of their obesity drugs, they are still unable to cope with existing demand. Per research conducted by Goldman Sachs, the obesity market in the United States could reach $130 billion by 2030-end. This is evident from the fact that both Lilly and Novo are investing heavily to optimize their production capacities and have even started evaluating multiple other novel obesity candidates in their pipeline. Viking aims to grab a share of this pie as well.
While shares of VKTX are trading at a premium to the industry, we believe it is reasonably valued considering the stock’s growth potential. Those who already own this stock should continue to retain it. Any major drop in the stock’s price can be an opportunity for long-term investors to buy it.