Until a few months ago, Viking Therapeutics was a stock that was probably only known to biotechnology experts. The specialty stock, which has been listed on the NASDAQ since 2015, led a shadowy existence. But that changed abruptly in 2024. At the end of February, Viking's market capitalization shot up by a factor of more than 2.5 within three days. The share had already taken off beforehand. However, it took off like a rocket after the Californians published research results on "VK2735". This abbreviation stands for a new type of preparation for the treatment of obesity. A statistically relevant reduction in weight was observed in patients who received weekly doses of the active ingredient as part of a phase II clinical trial. The booming market for weight loss drugs is currently dominated by the pharmaceutical companies Novo Nordisk and Eli Lilly. Given this growth market, the run on the Viking share is not surprising.
Viking Therapeutics would like to discuss the latest study results with the experts from the US Food and Drug Administration (FDA) before the end of this year and also discuss the next steps, including the earliest possible start of Phase III. According to the company, Phase I of the study on the oral administration of "VK2725" has got off to a positive start. The first patients have lost a significant amount of weight. Accordingly, the transition to phase II is expected to take place before the end of the year. Viking achieved top results with another promising drug, "VK2809". This thyroid hormone agonist is intended to treat fatty liver not caused by alcohol consumption. In addition to the candidates in clinical research (see table), there are other active substances in the pipeline. For example, Viking Therapeutics is working on drugs for the treatment of type II diabetes or anemia.
The intensive research work costs money. For the first half of 2024, the revenue-less Viking posted an operating loss of around USD 68 million, 54% more than in the same period of the previous year. Research and development expenses rose by 92% to USD 47.9 million in the first six months of 2024. It is therefore fitting that Viking was able to use the share price rally for a capital increase. At the beginning of March, the company placed more than 7.4 million shares at a price of USD 85 per share, raising almost USD 600 million. The biotech stock is now trading at around USD 20 below the issue price. If the majority of analysts have their way, Viking Therapeutics will soon reach new highs. According to Bloomberg, 12 research firms are currently covering the company. They all recommend buying, with an average 12-month target price of USD 113.55.
Of course, this scenario is associated with risks. Setbacks are possible at any time on the path to commercialization of the research pipeline. In this respect, Barrier Reverse Convertibles (BRCs) offer themselves as an investment alternative. This is all the more true as Viking Therapeutics is extremely volatile. In the past 12 months, the price fluctuation range was almost 100%. Only 40 of the almost 3,300 stocks included in the NASDAQ Composite Index have seen greater fluctuations. The high volatility makes Viking a real "coupon giant", which is why Leonteq is launching a Barrier Reverse Convertible (BRC) on the biotech stock. In the product currency CHF, the guaranteed distribution is 15% p.a. The counterpart in USD pays out 19% p.a. of the denomination on a quarterly basis. The barrier is a low 49% of the initial level. There is no soft callable feature for this issue. There is therefore no reinvestment risk in the event of premature termination. Nevertheless, the BRC is not free of risks: If Viking disappears into oblivion again or crashes to the barrier or lower, there is a risk of heavy losses.
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