1 Biotech Stock Down 52% That Could Soar by 233%, According to Wall Street

Last year, Viking Therapeutics (NASDAQ: VKTX), a mid-cap biotech, attracted the market's attention thanks to excellent midstage clinical trial results. The company's shares soared in late February 2024, but, unfortunately, they have been southbound since then. Viking Therapeutics stock is down 52% over the trailing-12-month period. However, many Wall Street analysts remain unashamedly bullish on the company.

Viking's average price target of $99.29 (according to analysts tracked by Yahoo! Finance) implies an upside of about 233% from its current level. Is the Street right to place such high hopes on this company.

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A potential catalyst out the window

Viking Therapeutics' leading candidate, VK2735, is a weight loss medicine. Many pharmaceutical giants are looking to enter this market after the success of leading anti-obesity drugs like Wegovy and Zepbound. One way for them to do so is to acquire a smaller company with promising assets in this area. Viking Therapeutics is a prime candidate, and if it does get acquired in the next year, it will be at a significant premium, likely more than double its current share price. However, recent developments make this scenario unlikely.

On March 11, Viking Therapeutics announced it had signed a $150 million manufacturing agreement with CordenPharma for both versions (oral and subcutaneous) of VK2735. This agreement grants Viking a manufacturing capacity of more than a billion oral tablets and 100 million autoinjectors for VK2735. This isn't what a corporation hoping or expecting to get bought out does.

Viking Therapeutics seems to be doubling down on its hopes of making waves in the weight management market as a stand-alone company. So, the biotech likely won't get acquired in the next year. If its shares soar, it won't be for that reason. Could other catalysts send Viking Therapeutics' stock through the roof?

Looking beyond Wall Street's estimates

Whether Viking Therapeutics' shares will skyrocket in the next 12 months isn't entirely dependent on the company. The market is currently highly volatile and may drag down the biotech even if it makes steady progress with its programs. However, Viking's performance in the next five years and beyond is much more likely to come down to the company's own efforts.

In my view, the stock is unlikely to match analysts' projections by this time next year, but it still looks like a terrific long-term investment. Here is why. Viking's VK2735 produced phase 2 results that few drugmakers in the industry have matched. Eli Lilly and Novo Nordisk have done better, but these two pharmaceutical giants are the undisputed leaders and pioneers in this field, with far more funds and resources than the much smaller Viking Therapeutics.

The mid-cap biotech's clinical trial results have been impressive considering all these factors, especially once we also look at the company's other candidates. Viking's VK2809, a potential therapy for metabolic dysfunction-associated steatohepatitis, also performed well in a phase 2 study. The biotech's oral formulation of VK2735 passed phase 1 studies with flying colors, too.

Meanwhile, it is developing VK0214 as a potential medicine for X-linked adrenoleukodystrophy, a rare genetic nervous system condition. Further, Viking Therapeutics has been working on another investigational weight loss treatment in preclinical studies, which, it says, has shown impressive reductions in body weight in preclinical models. Viking Therapeutics will move forward with phase 3 studies for the subcutaneous formulation of VK2735 in the second quarter.

It could earn approval in the next three years or so and generate well over $1 billion in annual sales. Some of Viking Therapeutics' other products, including VK2809, could follow the same path. As long as it does not have a product on the market, there will be somewhat significant risk associated with Viking Therapeutics. However, finding a mid-cap, clinical stage biotech company that looks more promising than Viking is difficult.

Long-term investors should strongly consider initiating a small position in the company, regardless of whether it can match Wall Street's price target in the next year.

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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.