Viking Therapeutics (VKTX) Launches SUNRISE As Investors Ask If The Stock Is Already Pricey
Phase 3 SUNRISE launch puts oral VK2735 in focus
Viking Therapeutics (VKTX) has kicked off its SUNRISE Phase 3 clinical program for oral VK2735 in obesity and type 2 diabetes, putting late stage trial risk and opportunity in clear view for investors.
The SUNRISE program centers on two large, randomized and placebo controlled studies that together plan to enroll more than 1,100 adults across obesity and overweight populations, with and without type 2 diabetes.
Recent trading tells a different story to the pipeline headlines. Viking Therapeutics’ shares closed at US$24.40 after a 1-day share price decline of 5.54%, capping a 30-day share price drop of 31.38% even though the 5-year total shareholder return is up roughly 3x.
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The SUNRISE launch, coming after a share price decline of more than 30% over 30 days, sets up a simple tension for Viking Therapeutics. Is this move saying more about sentiment than about the underlying pipeline and valuation setup that follows next?
Preferred Price-to-Book of 7x for Viking Therapeutics: Is it justified?
Valuation has turned into a key question for Viking Therapeutics after a share price slide, because the stock still trades at a P/B ratio of 7x against a falling tape.
Price to book compares what the market is paying for each dollar of net assets to the value recorded on the balance sheet. For a clinical stage biotech with minimal revenue, investors often lean on this yardstick because earnings and sales are not yet a reliable guide.
In this case, Viking Therapeutics carries a P/B of 7x while the broader US biotechs industry sits at 1.8x and the peer group average is 3.7x. That is a steep premium in either comparison, which suggests the market has been assigning a much richer tag to the pipeline and future optionality than it does for typical sector players.
Whether that elevated P/B can hold over time will likely depend on how SUNRISE and the rest of the clinical portfolio evolve, together with how investors reassess risk in an unprofitable business that currently reports a loss of $534.8m and makes less than $1m in annual revenue. With analysts' target price far above the last close at $24.40 yet lacking tight agreement, external opinions on value also appear wide ranging.
See what the numbers say about this price — find out in our valuation breakdown.
Result: Price-to-book of 7x (OVERVALUED)
Still, the clinical pipeline remains early stage and Viking Therapeutics currently reports a US$534.8m loss with no recorded revenue, so trial setbacks or funding needs could quickly challenge today’s valuation story.
Find out about the key risks to this Viking Therapeutics narrative.
Another view on Viking Therapeutics’ value
Price to book paints Viking Therapeutics as expensive, yet the SWS DCF model tells a different story. On that cash flow lens, VKTX at $24.40 is trading well above an estimated future cash flow value of $7.89, which flags a rich setup rather than a bargain. That kind of gap raises a blunt question for investors: Is the current quote being driven more by excitement around the pipeline than by what the cash flows are expected to justify over time?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Viking Therapeutics for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 28 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Curious whether this mostly cautious read on Viking Therapeutics matches your own instincts about risk and reward in the months ahead? Take a few minutes to review the underlying metrics and disclosures yourself, then pressure test your thesis against the 4 important warning signs.
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