This Is What I Really Like About Viking Therapeutics
I'm watching this biotech, obesity drug stock carefully, especially after the recent move in Amgen. Meanwhile, I've also started a position in a new name.
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The rally, which began with a big reversal on Thursday, continues on Monday. Breadth is very good at more than four to one positive, and the new 12-month highs are building, but momentum is fairly sedate. There does not appear to be a high level of FOMO at this point, and there is probably not much short-squeeze fuel either.
Big-cap semiconductor stocks, including Nvidia NVDA, Advanced Micro Devices AMD, and Micron Technology MU, are leading. Other Magnificent Seven names, such as Alphabet (GOOGL) and Apple AAPL, aren’t doing much, however.
I’m happy to see the Russell 2000 IWM leading. I have a long list of small-cap stocks that will issue earnings reports this week, and I’m looking to trade them aggressively after the news is out. Typically, it is not a great idea to bet on a favorable response to a small-cap earnings report, even if you are very optimistic about it.
One bigger name that I’m watching very carefully in the biotechnology sector is Viking Therapeutics VKTX. Viking is racing to launch an obesity drug that competes against populr offerings from Eli 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.
Last week, Amgen AMGN commented on its earnings conference call that it was pleased with its GLP-1 drug and was moving to Phase III. There were no details given, and the early reports were that there were substantial side effects, but Amgen stock went up by an amount equal to about three times the market cap of VKTX.
VKTX dipped on the news at first, but the strong reaction of Amgen stock to these very vague comments illustrates the huge value of an effective GLP-1 drug.
There are other indications for VK277, some data for which should be updated in the near future, and there are talks with the FDA for the next phase of the VK275 study. Viking is also speculated to be a potential takeover target for a large drug company that wants to join the obesity market.
Analysts are very bullish on the stock. There are nine "buy" ratings with an average target of $113.50, which is about 50% higher from the current level. The lowest target is $90 versus the current price under $80.
What I really like here is the great chart setup. Following the initial results for VK2735 the stock gapped up and has been in a narrowing trading range. There has been a little volatility on various news events, but the narrow range and the test of the trend line is a great setup for a breakout move that attracts momentum buyers. A move through $80 will bring in momentum and speculative traders.
I’ll keep you updated on this name.
Another higher-priced name that I have started a position in is Chart Industries GTLS. I’ll have more on this name soon.
At the time of publication, Rev Shark was long NVDA, VKTX and GTLS.
