Billionaire Ken Griffin Invested $93 Million of Citadel's Portfolio in a Stock That Could Rocket 105% Higher, According to a Wall Street Analyst

Ken Griffin started the Citadel hedge fund in 1990. It's become so successful that his net worth has risen to a stunning $46 billion.

In the third quarter, Griffin and Citadel more than tripled its stake in Viking Therapeutics (NASDAQ: VKTX). Griffin isn't the only one enthusiastic about this clinical-stage drugmaker. Wall Street analysts are sticking their necks out and predicting big gains around the corner.

Recently, B. Riley analyst Mayank Mamtani initiated coverage of Viking Therapeutics with a buy rating. He gave the stock a $109 price target that implies a gain of about 105% from recent prices.

The anti-obesity goldrush and Viking Therapeutics

It's hard to overstate the level of demand out there for drugs that reduce appetites and blood sugar by activating glucagon-like peptide-1 (GLP-1) receptors. Sales of semaglutide, which Novo Nordisk markets as Wegovy for weight loss and as Ozempic for diabetes, reached $19.7 billion during the first nine months of 2024.

Semaglutide has been on the market since 2018, and it could soon be overtaken by Eli Lilly's (NYSE: LLY) tirzepatide. This is a next-generation treatment first approved in 2022. Marketed as Mounjaro for diabetes and as Zepbound for obesity, tirzepatide acts on GLP-1 and GIP receptors. Clinical trial results suggest the dual mode of action makes it more effective, and sales are shooting through the roof.

Eli Lilly reported total tirzepatide sales that rocketed 272% year over year to $11 billion during the first nine months of 2024. Billionaire investors like Griffin are piling into Viking Therapeutics because it's developing a dual GLP-1/GIP receptor agonist, tentatively named VK2735, that could become even more successful than tirzepatide.

Why Wall Street's so bullish for Viking Therapeutics

In the phase 2 Venture trial, treatment with injectible VK2735 helped patients lose a placebo-adjusted 13.1% of their weight after just 13 weeks of treatment. In one of two studies underpinning Zepbound's approval, Lilly's drug produced a placebo-adjusted 17.8% weight loss after 72 weeks of treatment. In the second trial, though, placebo-adjusted weight loss was just 11.6% or lower than the result VK2735 produced in a fraction of the time.

Sales of injectible GLP-1 drugs for weight management are soaring, and oral versions could be even more popular. Encouraging early data for an oral formulation of VK2735 is a big reason Wall Street analysts are pounding the table on Viking Therapeutics. In a phase 1 trial with oral VK2735, treatment with the highest dosage tested led to a 6.8% placebo-adjusted weight reduction after 28 days of dosing.

In addition to a GLP-1/GIP drug that could be best in class, Viking Therapeutics has an experimental treatment for metabolic dysfunction-associated steatohepatitis (MASH) ready for phase 3 testing. Estimates vary, but this debilitating condition affects the livers of approximately 22 million Americans.

The Food and Drug Administration (FDA) approved Rezdiffra from Madrigal Pharmaceuticals to treat MASH in March. Phase 2b data for Viking's MASH candidate suggests it can compete well with Rezdiffra. Demand for MASH treatment isn't as high as for weight management, but VK2809 could become a blockbuster drug. Sales of Madrigal's new MASH treatment already reached an annualized $250 million during the quarter that ended Sept. 30.

A buy now?

At least one, and probably both, of the candidates that Viking Therapeutics is developing could go on to generate billions in annual sales. Expectations of future sales pushed the stock's market cap up to a whopping $5.9 billion at recent prices, but future sales of VK2809 and VK2735 are a long way from guaranteed.

Viking Therapeutics hasn't started phase 3 trials for its mid-clinical-stage programs yet. Those studies will more than likely run for over a year after the last patient to enroll receives the first dose. If those trials succeed, and the FDA decides to review a subsequent application, the review process generally lasts for 10 months.

It's going to be at least a couple of years before this company has recurring revenue from any commercial-stage products. While it makes sense for a billionaire like Ken Griffin to buy Viking Therapeutics stock at such a high valuation, most investors don't have his enormous risk tolerance.

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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.