It's Time to Buy Viking Therapeutics as it Races to Launch New Drug
As we drift among mediocre action, I'm looking to add the bigger-cap biotech name.
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We have some dreary action to start the week. Nvidia NVDA is one bright green island in an ocean of red, but it looks more like disinterest out there rather than a fearful rush for the indices. Breadth is running about 3,900 gainers to 5,000 decliners. There are more new 12-month lows than highs, and the Russell 2000 IWM is lagging behind with a loss of 0.4%.
Big cap names are leading, which is illustrated by the Nasdaq 100 QQQ, which is up about 0.6%, while there are about three losers for every two gainers. Big cap leads when investors are looking for greater safety. Small caps lead when there is stronger speculative interest.
I don't see many charts of interest right now, and I am doing very little. One of my top picks, Humacyte HUMA, HUMAW, is trading down about 15% after the FDA delayed its decision on its artificial vein product. The FDA apologized for the delay, but there is little additional information available at this time. The company is quite confident that it will obtain approval, but there is no clarity on the time frame. Management is issuing second-quarter earnings on Tuesday morning, when a conference call will be held, and further information will be provided. I remain quite positive on the stock in the long term and am aggressively trading the volatility.
Most of the names I like right now are drifting around in this mediocre action, and there is no rush to jump in and buy. One bigger cap biotechnology name that I am planning to add is Viking Therapeutics VKTX. Viking is racing to launch an obesity drug that competes against Lilly LLY and Novo Nordisk NVO. Preliminary results for its VK2735 drug showed excellent results with substantial weight reduction and fewer side effects than other GLP-1 drugs.
Substantial competition exists in this huge market, and stocks have been bouncing around on news of other companies entering the fray. Amgen AMGN, for example, recently commented on its conference call that it was pleased with its GLP-1 drug and was moving to Phase III, but there are concerns about side effects. So far, there isn't much information on some of the competition, but VKTX continues to have some of the best data and the fewest side effects.
Recently, Raymond James raised its price target on Viking Therapeutics to $118 from $116 and maintained its strong-buy rating on the shares. The analysts stated that the second quarter earnings update was broadly positive, given that VK2735 is advancing directly to Phase III, which could take just two and a half years from start to finish. The Phase I study of oral VK2735 advanced through 60 milligrams (mg) and 80 mg cohorts seemingly without any safety/tolerability issues, and the 100 mg cohort is now enrolling. Viking's Phase I oral VK2735 data abstract will be presented during ObesityWeek from November 3, 2024 to November 6, 2024.
Other indications for VK275 besides obesity are extremely important, and some data should be updated soon. Viking is also speculated to be a potential takeover target for a large drug company that wants to enter the obesity market.
Technically, the stock has recently found some support in the $40s and is holding above its simple 200-day moving average. It is currently bumping up against overhead resistance at the downtrend line and may need a little pullback to consolidate gains. I am looking for trading range action between the 50-day and 200-day SMAs.
At the time of publication, DePorre was long HUMA, HUMAW and VKTX.
