2 Stocks That Could Soar in Q4

Investors looking for a couple of growth stocks with upside potential in the fourth quarter in the healthcare sector might want to take a look at Viking Therapeutics (NASDAQ: VKTX) and Arcutis Biotherapeutics (NASDAQ: ARQT), as both have upcoming catalysts that could drive stock price appreciation.

1. Viking Therapeutics is set to launch a major trial

Regular readers will already know that the company had a successful first part of a maintenance trial for its weight loss drug, VK2735. It's being developed as a dual-formulation therapy that could enable rapid weight loss with an initial subcutaneous (injectable) dose, followed by regular maintenance dosing in either subcutaneous or oral form.

As noted, the recent maintenance trial focused only on a subcutaneous maintenance dose, with the second, and arguably more important, part of the trial involving an oral maintenance dose having just started, with results due in 2027.

Before those results come out, Viking is set to commence a phase 3 trial of VK2735, an oral therapy targeting obesity and type 2 diabetes, in patients with obesity in the fourth quarter.

The trial design is critical, especially considering the phase 2 (VENTURE-Oral) showed disappointing safety & tolerability data, with 20% of treated participants discontinuing due to an adverse event.

However, the phase 2 trial lasted only three weeks and may have involved overly aggressive titration that caused gastrointestinal issues. issues. The phase 3 trials will be much longer, and CEO Brian Lian has already said it will come "down a little bit in dose in the phase 3 study," and acknowledged that in the phase 2, "we had dosed people with four tablets, and they were a little bit larger tablets. That wasn't a great experience for some people. So we focused on reducing the tablet size, reducing the tablet count."

A successful commencement of the phase 3 VK2735 oral trials will be a catalyst for the stock, and investors should keep an eye on what management agrees with the Food and Drug Administration (FDA) regarding the trial.

2. Arcutis Biotherapeutics looks to expand its total addressable market

The dermatology drug company already has Zoryve (roflumilast), a phosphodiesterase 4 (PDE4) inhibitor that reduces inflammation, approved in cream form to treat plaque psoriasis, and atopic dermatitis for 2- to 5-year-olds and above, and in foam form to treat Seborrheic Dermatitis in above-9-year-olds and Scalp and Body Psoriasis in above-12-year-olds.

The company's business strategy is simple: Grow Zoryve sales in existing approved markets and expand into new markets, while building its long-term pipeline. The FDA has accepted a New Drug Application (NDA) for Zoryve cream for Atopic Dermatitis in 3- to 24-month-olds, with an FDA decision possible in February 2027.

However, the more immediate catalyst will be the release of phase 2 data for Zoryve foam in vitiligo, as well as a decision on whether to advance it to phase 3. Management thinks the vitiligo opportunity is worth about a third of its psoriasis opportunity, and given that the only drug approved to treat the condition is Incyte's opzelura, a positive readout from Arcutis's phase 2 trial would be a positive catalyst for the stock and would affirm its business strategy.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Incyte. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.