On Wall Street, growth stocks have been on a remarkable run over the past year, with the Nasdaq Composite Index surging 39% during that span. But according to analysts who follow the biopharmaceutical industry, two clinical-stage biotech companies may have even more room to climb.
Viking Therapeutics: A Potential Blockbuster Anti-Obesity Drug
Shares of Viking Therapeutics have skyrocketed nearly 275% so far in 2023 alone. But Wall Street analysts believe the stock could rally another 47% over the next 12 months.
The massive surge for the small biotech company came after it announced surprisingly positive results in February from a phase 2 clinical trial of its anti-obesity drug candidate VK2735.
In the study, patients who received the highest dose of VK2735 lost an average of 14.7% of their body weight after just 13 weeks of treatment. That was a stark contrast to the placebo group, which only shed 1.7% on average.
VK2735 is part of the same drug class as tirzepatide, the active ingredient in Eli Lilly’s popular anti-obesity medications Mounjaro and Zepbound. With sales projections for tirzepatide topping $50 billion annually at its peak, the commercial opportunity for Viking’s drug candidate is immense if it can replicate that level of efficacy.
“These early clinical results are extremely promising and demonstrate VK2735’s potential to be a best-in-class weight loss therapy,” said Brian Lian, Viking’s CEO. “We look forward to advancing it into pivotal phase 3 trials as rapidly as possible.”
While excitement is undoubtedly high around VK2735, there are still risks that investors need to consider. Viking has no approved products on the market yet, so it will likely be over a year before the company can potentially launch its anti-obesity drug, assuming it is ultimately greenlighted by regulators.
With a market valuation already approaching $7 billion based solely on the promise of an experimental drug, any hiccups in future clinical trials could lead to a plunge in Viking’s stock price. Investors considering a position should make it just a small part of a well-diversified portfolio.
Iovance Biotherapeutics: Innovation in Cancer Immunotherapy
Another clinical-stage biotech company drawing significant attention from analysts is Iovance Biotherapeutics. Its stock has more than tripled over the past six months, and the consensus price target suggests potential upside of 73% over the next year.
The recent surge came after the FDA approved Iovance’s first product in February – a skin cancer immunotherapy called Amtagvi (aficortigin).
Amtagvi is part of a new class of personalized cancer treatments made from a patient’s own tumor-infiltrating lymphocytes (TILs), which are immune cells that can naturally recognize and attack tumors. In clinical trials, Amtagvi shrank tumors in 23 out of 73 evaluable patients with advanced melanoma who had relapsed after trying other immunotherapies like Keytruda.
The FDA granted Amtagvi accelerated approval based on its ability to induce tumor responses in this difficult-to-treat patient population. However, Iovance will need to conduct additional confirmatory trials to demonstrate that the therapy can extend overall survival compared to existing options.
“While the response rates are encouraging, the key will be whether Amtagvi can keep cancer at bay over the long term,” said Dr. Evan Seigerman, an oncologist at Memorial Sloan Kettering Cancer Center. “Immunotherapies like this are ushering in a new era of personalized cancer treatment, but we’re still in the early innings.”
Beyond Amtagvi, Iovance is also developing a similar TIL therapy called LN-145 as a potential treatment for lung cancer. Like its predecessor, LN-145 starts with harvesting TILs from a patient’s tumor, which are then modified to better recognize proteins found on the surface of their specific cancer cells.
While the commercial opportunity in immuno-oncology is massive, Iovance faces high regulatory and commercialization hurdles. With a $4.3 billion valuation before even launching its first product, the company may struggle to live up to elevated expectations if payers balk at the high price tags that cellular therapies often command.
The Road Ahead for Biotech Innovation
As breakthrough therapies like the ones from Viking and Iovance demonstrate, the future of drug development is rapidly evolving. From cutting-edge cellular therapies that turbocharge the body’s own immune defenses, to new frontiers in metabolic disease, biotech companies are pushing the boundaries of what was once thought possible.
But with such incredible scientific innovation comes substantial risk for investors. Setbacks are common, especially in the high-stakes realm of clinical trials where promising drug candidates often falter. Both Viking and Iovance are currently trading at frothy valuations based on preliminary results and projections of future success.
While the massive potential rewards may be tantalizing, investors should exercise prudence. For most, these high-flying biotech stocks are best kept to a small, speculative portion of a diversified portfolio until their long-term viability becomes clearer through further clinical data and commercial execution.
The relentless march of medical progress guarantees that more scientific breakthroughs will capture the imagination of the investing public. But as has been the case throughout the industry’s history, the ability to navigate the inherent volatility will determine which biotechs ultimately flourish as winners – and which ones succumb to the sector’s inherent risks.
