When it comes to pre-revenue biotechs, it’s often difficult to construct an investment thesis beyond “if the drug works, the stock will rise.” And although this proposition is certainly true with Viking Therapeutics, (VKTX 4.52%) there’s more than one reason why the stock is worth buying.

In fact, there are at least four arguments for investing, so let’s examine each of them.

1. He’s getting closer to generating revenue for the first time

Viking is still in the process of releasing its first drug. From the looks of it, things are going according to plan, and within a few years at most, it will see sales, which is a reason to buy its shares.

Its lead candidate, VK2735, will begin Phase 3 clinical trials shortly after the company meets with Food and Drug Administration regulators to discuss some details; assuming standard practices, trials will most likely begin early in the first quarter of 2025. According to the biotech’s presentation at the ObesityWeek 2024 conference, held earlier this month, expanding on results from its previously phase 2 clinical trials reported, there isn’t much for investors to worry about.

During the 13-week trial, patients who received a weekly injection of the highest tested dose of VK2735 lost 13.1% of their body weight on average, on a placebo-adjusted basis. Weight loss generally continued for at least four weeks after treatment ended, and side effects were almost entirely mild.

These results position VK2735 as likely more effective and less uncomfortable for patients compared to weight loss market leaders, Novo Nordisk And Elie Lilly. Although the Phase 3 data further clarifies this issue, for now it appears that Viking will have no problem capturing market share if its nominee is approved, making shareholders a little richer in the process.

2. It plans to launch a powerful and disruptive new clinical program

Sometime in 2025, Viking will file an application with regulators to initiate preliminary clinical trials of a new weight loss therapy. This program uses two mechanisms of action, targeting amylin and calcitonin receptors, which are not represented elsewhere in its pipeline so far. This means that it is not just a repeat of his other programs.

The other benefit is that the program may be able to directly trigger rapid weight loss, as well as indirectly promote weight loss by increasing food-related feelings of fullness. Such an intervention could be better for weight maintenance than the current set of therapies on the market. While AstraZeneca and Novo Nordisk are developing similar candidates, but their programs are not yet close to approval.

Little information is yet available on this program and preclinical data derived from animal models are too fragmentary to be treated with confidence. Nevertheless, it is clear that Viking is already planning the next big breakthrough after the approval for sale of its first round of therapies, which will contribute to its long-term competitiveness.

3. It has great financial flexibility

Viking is not a biotech company that will have to take on a lot of debt or issue a lot of new stock to bring its therapies to market. Therefore, buying its shares will not expose you to as high a risk of your shares being diluted by new issues as buying many others. biotech stocks would be.

At the end of the third quarter, it had more than $930 million in cash, equivalents and short-term investments, while its trailing 12-month (TTM) research and development (R&D) expenses were only $91 million. Additionally, its cash outflows during TTM were just over $74 million.

There is no indication that she is under any financial pressure. It also has no long-term debt, although it has negligible capital lease obligations. And, with a lead candidate continuing to report good data and progress through clinical trials, it could likely borrow a lot of money at a reasonable interest rate if it needed more funding for commercialization costs or other expenses.

Its financial flexibility is therefore another good reason to buy the stock.

4. He could easily call on outside help in several forms

As if it were strong balance sheet That wasn’t enough, Viking has choices when it comes to entering into collaboration agreements, partnerships and licensing agreements with other biopharmaceutical companies, especially for anything related to VK2735. The reason is that when a biotech has a candidate that appears to be an ideal candidate to get approved and then capture a large share of a large market, other players in the industry would much rather have a piece of the pie, even as an underage player, you risk missing out on winnings altogether.

At this time, Viking does not need the additional resources that a collaborator would bring. Depending on its commercialization strategy, as VK2735 gets closer to approval, this could change. It wouldn’t hurt to team up with a manufacturer, and it could be beneficial to form a joint venture with foreign biopharmaceutical companies to accelerate entry into these markets.

For now, just consider it optimistic that this biotechnology will work on its own, because that means there’s still plenty of upside in the form of potential collaborations over the coming years.