Prediction: $1,000 Invested in Viking Therapeutics Today Will Be Worth This Much in 5 Years

Viking Therapeutics (NASDAQ: VKTX) has grown in prominence over the past five years. If you had invested $1,000 in the stock in mid-October 2021, you'd have about $4,185 today, given the company's average 33.15% annual return over this period. The biotech is now entering an important period during which it could make significant clinical and regulatory progress with its most advanced pipeline candidates. How will the stock perform over the next five years? Let's try to determine how much $1,000 invested in Viking Therapeutics today could be worth by 2031.

Viking could become a leader in the weight loss market

Viking Therapeutics is looking to dip its toes into what is perhaps the hottest area in the biotech industry right now: chronic weight-management medicines. The leading drugs in this field are posting strong sales, and analysts expect the market to grow significantly over the next five years. Viking Therapeutics' leading candidate, subcutaneous (SC) VK2735, is undergoing a pair of Phase 3 studies.

SC VK2735 is a dual GLP-1 and GIP receptor agonist, meaning it mimics the action of both gut hormones to help control satiety and blood sugar. SC VK2735 posted excellent Phase 2 clinical trial results, achieving a mean weight loss of up to 14.7% in 13 weeks. We should have data from its ongoing Phase 3 studies within a year or so. Viking Therapeutics is also developing an oral version of VK2735, which recently started Phase 3 clinical trials. Why is this important?

Oral medicines are more convenient than injectable ones for many patients. That's why approved oral weight loss drugs that hit the market this year have helped attract brand-new patients who had never taken GLP-1s before. Viking Therapeutics is also looking to address another problem. Many patients, after losing weight with GLP-1 medicines, end up regaining much of it.

A few weeks ago, the company reported positive results from a weight loss maintenance trial. Patients initially lost up to 18.7% of their body weight after a 21-week induction phase with SC VK2735. They then switched to taking the medicine every other week or monthly for 12 weeks (it is normally taken weekly). Patients in the every-other-week group maintained up to 97% of their weight loss, compared with up to 90% in the monthly group and only 61% in those who switched to a placebo. Viking will also test various maintenance regimens with the oral version of VK2735.

In addition, the biotech began Phase 1 clinical trials for another weight-loss medicine, VK3019, earlier this year. VK3019 mimics the actions of amylin (which reduces appetite) and calcitonin (which helps lower blood calcium levels). The hypothesis is that combining these two hormones into a single drug could suppress appetite and induce strong weight loss. Perhaps Viking Therapeutics will also experiment with combining VK2735 and VK3019 into a medicine targeting four distinct metabolic pathways.

We don't know that for sure, but Viking's clinical progress has been impressive, and if all goes well, the company could become a leader in weight loss in the next five years and outperform broader equities.

A wide range of possible outcomes

Viking Therapeutics' performance over the next few years will largely depend on its leading candidate's clinical progress. The market will likely expect SC VK2735 to post a mean weight-loss efficacy of at least 20%, if not closer to 25%. If SC VK2735 can pull off, say, a 24% mean weight loss in its ongoing Phase 3 studies while also showing reasonable tolerability, Viking Therapeutics' shares will soar. And given how fast the weight-loss market is growing, SC VK2735's sales could reach blockbuster status.

Assume Viking Therapeutics earns approval for this product by early 2029, generates $1 billion in revenue by 2031, and is expected to rack up $1.5 billion in 2032. If the company is valued at 4x forward sales by then, its current market cap of $3.2 billion will rise to $6 billion by 2031, amounting to annualized returns of 13.4%.

So, $1,000 invested in the stock would be worth about $1,875. Those are great returns, but there is plenty of uncertainty and lots of complications. Viking's leading candidates may flop in Phase 3 studies -- or they may fall a bit short of expectations. The competitive landscape could become more crowded as more pharmaceutical leaders enter the market, or it might not grow as fast as expected.

Some of those potential headwinds would send the stock price down significantly; others might not, but they would limit its upside. Further, even if Viking avoids most of them, the company is currently burning through cash and will likely need additional funding. It may resort to dilutive means of financing. That's something else investors should consider. All that to say, Viking looks like a promising stock, but there is plenty of risk involved. Investors should keep that in mind before initiating a position.

Prosper Junior Bakiny has positions in Viking Therapeutics. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.