The case for Viking Therapeutics just got stronger. Here’s why it’s worth buying.

Viking Therapy (VKTX 2.01%) just gave shareholders some reason to get excited about the future. The stock is up a stunning 34% on July 25 thanks to second-quarter earnings, and the bullish case for its continued outperformance is stronger than ever.

It is now clear that biotechnology has what it takes to take on powerful competitors such as Eli Lilly AND New Nordisk. This is why.

Strong clinical data and minimal spending create a very bullish combination

Viking’s investment thesis has become even stronger as the company has proven the value of its research programs with good clinical data, while spending very little compared to its reserves to achieve these results.

One of the biggest news is that Viking’s lead obesity treatment program, VK2735, will move into Phase 3 clinical trials instead of having to complete Phase 2b first. These late-stage studies will test an injectable formulation of the candidate, which could one day compete with products like Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound. So far, the data suggests Viking’s program could lead to faster weight loss than those products.

The even bigger story is that the company is investigating a once-monthly injectable form of VK2735. This would be much more convenient than the drugs on the market that require weekly dosing. There’s also a chance it would be cheaper to manufacture and distribute.

Another important update is that the oral tablet formulation of VK2735, which has been lagging slightly behind the injectable formulation in clinical trials, will move into Phase 2 and begin testing in the fourth quarter of this year. According to some Phase 1 data, the tablet form helped patients lose 5.3% of their body weight within 28 days of their first dose — an impressive percentage.

Viking also revealed that it will advance its next-generation weight-loss candidate into early clinical trials in 2025 after successfully completing a preclinical study. While very preliminary and not directly generalizable to humans, the candidate’s effects were particularly strong. In just 72 hours of treatment, animal models lost 8% of their body weight. If comparable results can be replicated in humans—and there’s no guarantee they will—it would represent a huge leap forward in obesity therapies.

As if that weren’t enough, its treatment for metabolic dysfunction-associated steatohepatitis (MASH, formerly NASH) is also shaping up to be a winner after a successful Phase 2b trial. The company will meet with regulators at the Food and Drug Administration (FDA) in Q4 to determine how it should proceed, but at this point it’s hard to imagine the candidate not making it to Phase 3.

To achieve all that in one quarter, Viking spent just $23.8 million on research and development (R&D). Considering the number of clinical trials it has underway, the huge weight-loss drug market it’s trying to break into, and its $942 million in cash and investments, that’s practically nothing.

Success is not guaranteed, but the future is still bright

It’s clear why the market is so excited—this company is headed in the right direction. Even if it runs into trouble with late-stage clinical trials or in talks with regulators, Viking has more than enough resources to revive itself and chart a new course. It won’t need to raise capital through a stock offering or borrowing anytime soon. And all of that is very bullish for the stock.

However, as is always the case with biotech stocks, there is still the risk of steep declines. While patients have largely tolerated Viking’s weight-loss candidates at higher rates than competitors can claim for their drugs, that could change once all clinical trials are complete.

Similarly, the impressive weight loss results from earlier trials may be harder to replicate in larger cohorts of late-phase studies. Finally, it’s possible that one of Viking’s competitors could surpass its impressive results.

Don’t let these risks deter you from investing in this stock. Right now, Viking looks like it has the safest and most powerful weight-loss assets of any biopharma. That could change. But based on past performance, it’s a good bet that Viking Therapeutics will continue to win.