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Time to be "Overweight" Viking Therapeutics

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A World Craving Instant Gratification

We live in a world where almost all Americans own Apple ((AAPL - Free Report) ) smartphones and where you can instantaneously find almost any information in the world via Alphabet's ((GOOGL - Free Report) ) Google. Humans (& Americans in particular) often seek quick fixes due to a combination of factors such as impatience, convenience, and a desire for immediate gratification. This tendency is deeply ingrained in human nature and is evident across various aspects of life including health. Quick fixes offer the allure of rapid solutions to complex or challenging problems, promising instant relief or improvement without the need for sustained effort.

Obesity is a Growing Problem

The explosion of processed foods containing unhealthy fats or addictive sweeteners has led to a worldwide obesity epidemic. Obesity levels have increased by 300% over the past 50 years according to the World Health Organization (WHO)! Meanwhile, the World Obesity Atlas predicts that the trend will only worsen, with more than half the world’s population overweight in the next decade.

The Fix

There are two presumable fixes to obesity – eat healthier/exercise, or take an injection drug. Obviously, the second option is controversial. However, many overweight people desperate to lose weight are choosing to go in that direction. According to Goldman Sachs ((GS - Free Report) ) Research, “Earlier this year, the global market for anti-obesity medications (AOMs) reached $6 billion on an annualized basis. By 2030, it could grow by more than 16 times to $100 billion.”

Biotech powerhouses Eli Lilly ((LLY - Free Report) ) and Novo Nordisk ((NVO - Free Report) ) are the first massive winners in the space and have sparked the weight loss treatment revolution. However, on February 27th, Viking Therapeutics ((VKTX - Free Report) ) shares morethan doubled in a single session after receiving Phase 2 trial for its new injectable weight loss drug. Though LLY and NVO have proven to be big winners and likely will continue to be, I VKTX has much more upside for the following reasons:

VKTX has the Superior Drug

VKTX showed 13% weight loss over a 13-week treatment (with no plateau), while LLY and NVO took much longer (32-48 weeks) to achieve slightly better results (15-20% fat loss). In addition, VKTX saw fewer side effects than its competitors. According to Phase 2 results, VKTX had only a 17% nausea rate (compared to 30-45% for LLY & NVO)

Relatively Small Size/Takeover Target

Novo Nordisk and Eli Lilly each have a market cap north of $500 billion, while Viking has a market cap of just $7 billion. Because the industry has so much upside, VKTX is an obvious takeout target.

Chart + UOA

After exploding on positive results, VKTX is consolidating uniformly and is testing its gap low – an area likely to find buyers.

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Furthermore, VKTX has unusual options activity, with a flurry of buyers of April 90 calls.

Bottom Line

A rising obesity rate and the desire for a quick fix are driving the burgeoning weight loss industry. VKTX stands to benefit the most.

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