Wealthy magnate Ken Griffin allotted a substantial $93 million from Citadel's investment pool towards a stock, predicting a potential 105% surge in value, as suggested by a well-regarded Wall Street expert.
Citadel founder Ken Griffin launched his hedge fund back in 1990. His wealth has skyrocketed to an impressive $46 billion due to its success.
In the third quarter, Griffin and Citadel amplified their stake in Viking Therapeutics (VKTX -0.89%). This clinical-stage drug manufacturer has garnered the interest of not just Griffin, but also Wall Street analysts, who foresee significant gains in the near future.
Analyst Mayank Mamtani from B. Riley recently commenced coverage for Viking Therapeutics, labeling it as a buy. He set a target price of $109, which translates to a potential gain of approximately 105% based on recent prices.
The buzz around anti-obesity medications and Viking Therapeutics
The market demand for medications that can decrease appetite and lower blood sugar through the activation of glucagon-like peptide-1 (GLP-1) receptors is staggering. Semaglutide, marketed by Novo Nordisk as Wegovy for weight loss and Ozempic for diabetes, brought in $19.7 billion in sales within the first nine months of 2024. Semaglutide has been on the market since 2018 and might soon be surpassed by Eli Lilly's ((LLY) -2.80%) tirzepatide, which was approved in 2022.
Tirzepatide is a groundbreaking treatment that acts on both GLP-1 and GIP receptors. It's marketed as Mounjaro for diabetes and Zepbound for obesity. Clinical trial results suggest that its dual mode of action makes it highly effective, and sales are soaring rapidly. Eli Lilly reported that tirzepatide's sales grew 272% year-over-year, reaching $11 billion during the first nine months of 2024.
Investors like Griffin are aggressively buying into Viking Therapeutics because it is developing a dual GLP-1/GIP receptor agonist, provisionally named VK2735. Experts believe VK2735 might even surpass tirzepatide's success.
The rationale behind Wall Street's optimism for Viking Therapeutics
The phase 2 Venture trial demonstrated that patients who received injectable VK2735 lost a placebo-adjusted 13.1% of their weight after just 13 weeks of treatment. In one of the two trials that supported Zepbound's approval, Lilly's drug resulted in a placebo-adjusted 17.8% weight loss after 72 weeks of treatment. In the second trial, however, the placebo-adjusted weight loss was only 11.6%, which was less than the result VK2735 achieved in a much shorter period.
Injectable GLP-1 drugs for weight management are seeing a surge in sales, and oral versions may potentially be even more popular. Early, encouraging data for an oral formulation of VK2735 has spurred Wall Street analysts to enthusiastically advocate for Viking Therapeutics. In a phase 1 trial with oral VK2735, the highest dosage tested resulted in a placebo-adjusted 6.8% weight loss after 28 days of treatment.
In addition to a potential best-in-class GLP-1/GIP drug, Viking Therapeutics is pursuing a treatment for metabolic dysfunction-associated steatohepatitis (MASH) that is ready for phase 3 testing. MASH affects the livers of around 22 million Americans, but the market demand for treatment is not as high as for weight management. However, VK2809 could potentially become a blockbuster drug if it performs well during phase 3 trials.
Should you buy now?
Both of the potential drugs that Viking Therapeutics is developing could generate billions in annual sales, but these profits are far from guaranteed. Viking Therapeutics has yet to commence phase 3 trials for its mid-clinical-stage programs and the lengthy process could take more than a year beyond the enrollment of the last patient. If the trials succeed and the FDA approves the subsequent application, the review process typically takes 10 months.
So, while buying Viking Therapeutics stock at such a high valuation might make sense for a high-risk investor like Ken Griffin, most investors may not possess the same risk tolerance.
Griffin's investment strategy with Citadel extends beyond hedge funds, as he also actively invests in promising companies. Recent interest in Viking Therapeutics, a clinical-stage drug manufacturer, stems from its potential development of a dual GLP-1/GIP receptor agonist, VK2735, which has shown promising results in early trials. Given the success of GLP-1 drugs in the market and the potential of VK2735 to surpass current treatments, more investors might consider it a good opportunity for finance and investing.
