What happened
Shares of the clinical-stage biotech Viking Therapeutics (VKTX 0.24%) jumped by 7% almost right out of the gate Thursday morning. The biotech's shares, however, have cooled off as today's session has progressed.
As of 2:19 p.m. ET Thursday afternoon, Viking's stock was only up by 0.72%. The biotech's shares briefly popped this morning in response to investing firm H.C. Wainwright raising its 12-month price target on the stock from $21 to $33 per share. This revised price target implies a 68% upside potential from current levels.
So what
Viking's shares have been racing higher over the past 12 months. In fact, the biotech's shares have climbed by an astounding 759% over this period. Viking's stock caught fire in response to renewed interest in its midstage nonalcoholic steatohepatitis (NASH) candidate VK2809, as well as strong early-stage results for its weight loss candidate VK2735.
NASDAQ: VKTX
Key Data Points
H.C. Wainwright's revised price target appears to reflect the growing optimism surrounding Viking's two most important value drivers. Fortunately, this optimism does have a basis in reality. The global NASH market may eventually generate over $30 billion a year in annual sales, whereas anti-obesity treatments are believed to be on track to rake in over $50 billion a year by the middle of the next decade.
Now what
Is Viking stock still a strong buy? It depends on your tolerance for risk. On the plus side, Viking is markedly undervalued relative to other top-tier metabolic disease specialists. So there is a chance that a massive valuation gap still exists with this red-hot equity. On the negative side, Viking is well behind the leaders in both NASH and obesity from a development standpoint. As such, the company will probably have to report stellar clinical trial data in these high-value settings in order to have a realistic shot at wrestling market share away from drugs already on the market.
