Shares of Viking Therapeutics VKTX gained more than 11% on Wednesday after the company announced that it had signed a broad multi-year manufacturing agreement with CordenPharma for both the oral and subcutaneous (SC) formulations of its obesity drug.

Viking Therapeutics is one of the few biotech stocks that has shown immense potential in the obesity space. It is developing VK2735, an investigational novel dual GLP-1 and GIP receptor agonist, in different clinical studies as oral and SC versions for treating obesity.

Per the terms, CordenPharma will provide 100 million autoinjectors, 100 million vial and syringe products, and more than 1 billion oral VK2735 tablets annually through dedicated manufacturing lines. In addition, VKTX will retain an option to expand these capacities. In return, the company will make prepayments totaling $150 million over the next three years, which will be adjusted against future orders.

This deal with CordenPharma reduces the supply chain risk on VKTX stock, which is a likely reason for this upside in stock price. Let’s delve into the company’s strengths and weaknesses to better analyze how to play the stock amid this recent price increase.

VKTX’s Progress With its Obesity Program Encouraging

The obesity market has garnered much interest lately, with two companies, Eli Lilly LLY and Novo Nordisk NVO, dominating this space with their respective obesity drugs Zepbound and Wegovy. Per research conducted by Goldman Sachs, the obesity market in the United States is expected to reach $100 billion by 2030. This is also evident from the fact that LLY and NVO have not only optimized their production capacities but are also developing multiple other novel obesity candidates at a rapid pace.

VK2735 has shown blockbuster potential, demonstrating superior weight reduction capabilities across both formulations. In November, VKTX presented updated results from the phase I study on oral VK2735 at the annual meeting of ObesityWeek, which showed that patients who received the highest drug dose lost up to 8.2% in body weight after 28 days of daily dosing compared with 1.4% in the placebo group. Last year, Viking reported that the phase II VENTURE study, which evaluated VK2735 SC, achieved its primary and all secondary endpoints with statistical significance.

Based on the above results, the company initiated the phase II VENTURE-Oral Dosing study to evaluate the safety and efficacy of oral VK2735 over a 13-week treatment period. Data from this study is expected before this year’s end. VKTX intends to start a late-stage study on the SC version in the second quarter of 2025.

Taking a page from Lilly/Novo’s book, Viking Therapeutics is not limiting itself to one obesity drug. The company plans to file an investigational new drug application with the FDA later this year to advance an internally developed dual amylin and calcitonin receptor agonist candidate to clinical development for treating obesity.

VikingTherapeutics’ Other Pipeline Drugs Show Promise

Apart from VK2735, Viking Therapeutics is also developing drugs targeting non-alcoholic steatohepatitis (NASH) and X-linked adrenoleukodystrophy (X-ALD) indications.

Last year, Viking Therapeutics completed the phase IIb VOYAGE study on VK2809 in patients with biopsy-confirmed NASH. Overall data from the study showed that 40-50% of patients who received VK2809 achieved NASH resolution and at least a one-stage improvement in fibrosis compared to 20% in the placebo group.

In October, Viking Therapeutics reported positive results from a phase Ib study evaluating VK0214 in patients with adrenomyeloneuropathy, a form of X-ALD for which there are currently no pharmacologic treatment options. This study met its primary endpoint — a once-daily dose of VK0214 over 28 days was safe and well-tolerated by study participants. Treatment with the drug also significantly reduced plasma levels of very long-chain fatty acids and other lipids compared to placebo.

Management is exploring collaboration prospects for both candidates.

Stiff Competition in VKTX’s Targeted Markets

Though Viking Therapeutics’ pipeline candidates have demonstrated encouraging results in clinical studies, it faces stiff competition in the targeted markets. The company’s obesity candidate will compete directly with pharma bigwigs like Eli Lilly and Novo Nordisk, who have either marketed drugs in this space or are developing their respective candidates in clinical studies. All large-cap pharma/biotech companies, including AstraZeneca, AbbVie, Merck and Roche are developing their drugs in the obesity space. These companies have a well-established distribution and supply-chain infrastructure.

VKTX Stock Performance, Valuation & Estimates

In the past year, VKTX stock has plunged 59% compared with the industry’s 10% decline. The stock has also underperformed the broader Medical sector and the S&P 500 during this timeframe, as shown in the chart below. VKTX shares are currently trading below the 50 and 200-day moving averages.

VKTX Stock Underperforms Industry, Sector & S&P 500

Image Source: Zacks Investment Research

The company is trading at a premium to the industry. Going by the price/book ratio, the stock currently trades at 3.74, trailing 12-month book value, higher than 3.27 for the industry.

Image Source: Zacks Investment Research

Estimates for Viking Therapeutics’ 2025 loss per share have widened from $1.41 to $1.56 in the past 60 days. Over the same timeframe, loss per share estimates for 2026 have widened from $1.86 to $2.07.

Image Source: Zacks Investment Research

How to Play VKTX Stock

In our opinion, the deal with CordenPharma resolves investors’ issues with the company’s lack of commercial manufacturing capability. The option to extend supply capacity should assure investors that Viking Therapeutics is taking steps to ensure an optimum supply of its obesity drug (ahead of a potential commercial launch) and avoid the FDA’s shortage list, something which LLY and NVO’s obesity products recently got out from.

Some might argue that Viking Therapeutics has its fair share of problems, including the lack of a stable income stream and the presence of pharma giants like Eli Lilly and Novo Nordisk in its target market spaces. However, the accumulated cash balance of around $903 million (as of 2024-end) and zero debt ensure that the company can sufficiently fund its day-to-day operations, including late-stage pipeline programs, without triggering bankruptcy for at least the next few years.

For those who have already invested in this Zacks Rank #3 (Hold) company, we would suggest holding on to the same as it has growth potential. The growing demand for obesity drugs is an opportunity for new entrants despite the rising competition. We believe that there is room for smaller biotechs like VKTX to grab a share of this booming market.

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