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Should You Buy Viking Therapeutics After Gilead Drug Failure?

Bret Kenwell

Shares of Viking Therapeutics (NASDAQ:VKTX) are making headlines this week after an announcement from Gilead Sciences (NASDAQ:GILD), that one of its drugs did not meet the primary endpoints of its Phase 3 clinical trial. This gave a possible opening to Viking Therapeutics, which gave a boost to VKTX stock.

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Source: Shutterstock Does that make it a buy?

Let’s examine the stock a bit more closely. If you haven’t heard of VKTX stock before, don’t feel guilty. With a market cap of just $650 million, it’s not a well-known company. It’s not a Bristol-Myers Squibb (NYSE:BMY), Celgene (NASDAQ:CELG), Biogen (NASDAQ:BIIB) or another large cap biotech company.

Breaking Down VKTX Stock

Viking Therapeutics is a self-described “clinical-stage biopharmaceutical company focused on the development of novel therapies for metabolic and endocrine disorders.” The company is working on several treatments, one of which includes enrolling VK2809, which is aimed at fatty liver and hypercholesterolemia, in a Phase 2 study. Gilead’s Selonsertib liver treatment failed its Phase 3 clinical trial earlier this week, thus giving some hope to VKTX stock.

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The company also has VK5211, “an orally available, non-steroidal SARM designed to selectively stimulate muscle and bone formation.”

At the end of the day, Viking Therapeutics has some intriguing developments in its pipeline. But at the same time, this is also a speculative biotech company. Investors are, to some degree, betting on a binary event. Either VKTX stock is a multi-bagger with big-time potential if it gains regulatory approval and/or is acquired by a larger company, or neither of those things happen and it’s a total dud. That’s the nature of the beast with young biotech stocks.

Case in point? Viking Therapeutics stock doesn’t have any revenue. Its pipeline is promising, but that’s all investors are betting on at this point. There’s no real way to evaluate the business because there is no business! At least in the traditional sense. VKTX has enough money in the bank to fund its operations for the time being, but its future hinges solely on its treatments.


Trading VKTX Stock

chart of VKTX stock

Hopefully the chart above doesn’t seem too complex. I only wanted to lay out a few different levels and prior trends that played a role in VKTX stock over the last 12 months.

Like most of the market, VKTX came into Q4 near its highs, although admittedly under some pressure already. Still, the stock was pummeled along with the S&P 500 and other major market indices as Q4  got under way. VKTX stock price bottomed near $7 on Christmas Eve and has been working higher since.

VKTX stock is now over the 50-day and 21-day moving averages. For traders and investors that are going in on this, perhaps consider using a $7 as a key reference level. Below this mark and Viking Therapeutics stock could be in trouble.

As much as I want to say that the stock is okay over uptrend support (purple line) and moving average support — and really, it is — know that this is a speculative position that is subject to extreme moves in both directions. These moves can appear overnight and there’s little investors can do about it other than planning ahead with proper position sizing.

For those that don’t want such a speculative position, consider choosing between two companies like Celgene and Gilead.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long CELG. 

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