Viking Therapeutics Just Raised $575 Million. Here's What It Means for the Obesity Stock's Next Chapter.
Key Points
Multiple phase 3 trials for VK2735 are ongoing, with key results expected in 2027 to 2028.
The company's future depends on VK2735's clinical success and ongoing pipeline development.
Viking Therapeutics (NASDAQ: VKTX) wasted no time raising cash after the release of a successful maintenance trial, which strengthened the investment case for the stock. Viking raised more than $316 million in a stock offering at $35 per share and $258.75 million in convertible senior notes for gross proceeds of $575 million.
Why Viking Therapeutics needs the cash
Clinical trials don't come cheap, and definitely not for the kind of large phase 3 trials that Viking is currently undertaking for its GLP-1 and GIP agonist, VK2735. The company is already undertaking 78-week phase 3 trials for VK2735 in subcutaneous (injectable) form in obesity (Vanquish-1) and adults with type 2 diabetes and obesity (Vanquish-2). In addition, management recently announced the initiation of 68-week phase 3 trials for VK2735 oral in obesity (Sunrise-1) and in "adults with type 2 diabetes who are obese or overweight" (Sunrise-2).
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In addition, Viking is currently undertaking the second part of the maintenance trial in which an initial 21-week subcutaneous dose of VK2735 will be followed by 12 weeks of a range of oral VK2735 maintenance doses.
The duration and size of these trials, as well as the company's lack of revenue, mean Viking is likely to burn cash until at least 2030, according to the Wall Street consensus from S&P Global Market Intelligence.
Clearly, Viking needs the cash not only to fund all the VK2735 trials but also to ensure the ongoing development of the rest of its pipeline, including an amylin agonist, VK3019 -- a class of weight-loss drugs that can be taken by patients who can't tolerate GLP-1 agonists or in combination with them. Eli Lilly and Novo Nordisk are also developing amylin agonists.
Image source: Getty Images.
A stock to buy?
In the near future, investors are waiting for the second part of the maintenance trial. Given that it includes VK2735 oral as a maintenance dose, it's arguably much more important to the company's dual formulation strategy than the first part of the trial. Those results will hit in 2027, as will the Vanquish-1 and Vanquish-2 trials, although much later in the year, with Sunrise-1 and Sunrise-2 likely in 2028.
Given that CFO Greg Zante told investors in July that "our guidance remains intact that we have cash into 2028," the $575 million in cash will also support any commercial development of VK2735 and the company's ongoing pipeline development. In reality, the company's future pivots on the clinical success of VK2735. Still, the recent cash raise derisks the stock and enables management to continue to try to generate value for investors.
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly and Novo Nordisk. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.