Viking Therapeutics (NASDAQ: VKTX) was one of the hottest biotech stocks of 2024; its shares soared last year following excellent clinical progress. However, things have been very different in 2025, at least so far: Its stock is down by 35% year to date due to a combination of factors.
Should you steer clear of Viking Therapeutics? My view is that despite its struggles this year, there's still significant upside. Let's find out why it could be a top stock to hold for the long term.
Why Viking Therapeutics' shares are dropping
The biotech industry can be volatile, especially for small- or mid-cap drugmakers that don't have a single product on the market, a description that fits Viking Therapeutics. The company's shares soared last year on promising clinical progress for its leading candidate, VK2735, an investigational GLP-1 weight loss therapy. Not much has gone wrong since then, but many longtime shareholders likely took the opportunity to cash in on their gains after the significant jump last year.
Since 2025 began, Viking has had to deal with marketwide issues like everyone else. In the shaky and uncertain environment we face, many investors will prefer to withdraw their money from somewhat speculative and unprofitable companies and instead purchase shares of better-established corporations -- or keep the cash, as it may be needed in case a recession is coming. It's an understandable strategy.
It's also good for investors looking to buy shares of attractive stocks on the dip. Viking Therapeutics is worth serious consideration in that regard.
Looking at the bigger picture
Viking's candidate VK2735 posted excellent phase 2 results and is expected to move to phase 3 studies soon. It's also working on an oral version of this medicine, which is currently undergoing mid-stage trials.
Viking might not seriously challenge the likes of Eli Lilly and Novo Nordisk in this field, but it doesn't need to. And for what it's worth, no company seems able to disrupt this seeming duopoly -- and almost none besides these two has posted mid-stage clinical trial results that look better than Viking's for VK2735.
Meanwhile, the weight loss market is booming. Sales of medicines like Novo Nordisk's Wegovy and Lilly's Zepbound have increased at an almost dizzying pace in recent years. Analysts project that this area will maintain a northbound trajectory at least until the early 2030s.
There's been an explosion of investigational weight loss therapies, but, once again, most have posted pretty tame results (the ones that have moved far enough in clinical trials to do so, anyway). In all likelihood, most of these will never make it to the market -- that's the nature of developing novel drugs. Viking Therapeutics, despite its market cap of about $3 billion, continues to look like one of the more promising bets in this area.
That's what makes its stock attractive, especially considering the rest of its pipeline. Viking's VK2809, a potential therapy for metabolic dysfunction-associated steatohepatitis (MASH), also aced phase 2 studies. MASH, a disease linked to obesity, is yet another area with excellent prospects. The U.S. Food and Drug Administration approved the very first therapy for it just last year, and there's ample room for more.
Viking is also developing VK0214, a potential therapy for X-linked adrenoleukodystrophy, a rare condition affecting the nervous system. VK0214 has completed phase 1 studies.
Furthermore, Viking shouldn't face funding issues anytime soon. It ended the first quarter with $852 million in cash and equivalents, a decrease from the $903 million it had at the end of 2024. Though expenses will increase as it kicks off late-stage studies, the cash it has on hand should be enough to sustain it for at least a little while. And given the clinical progress it's made, it shouldn't be too difficult for Viking Therapeutics to access even more funding.
All of that paints a reasonably bright picture of the biotech's future compared to those of its similarly-sized peers. The stock will remain somewhat risky as long as Viking is a clinical-stage company. But at these levels, those comfortable with some volatility should seriously consider investing in Viking Therapeutics. They could earn outsized returns in the next decade, provided the company achieves its goals.
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Prosper Junior Bakiny has positions in Eli Lilly, Novo Nordisk, and Viking Therapeutics. The Motley Fool recommends Novo Nordisk and Viking Therapeutics. The Motley Fool has a disclosure policy.
