An up-and-coming stock with lots of potential is Viking Therapeutics (VKTX -6.14%). Investors have been piling money into the biotech stock this year, as it has surged 150% since January. And at a valuation of just $2.3 billion, it still isn’t terribly big.
Can investing in the business today help make you a millionaire?
Potential blockbusters in the making
One of the key reasons investors are bullish on Viking’s prospects is that it has a promising asset in VK2809. It’s a treatment for non-alcoholic steatohepatitis (NASH) — liver inflammation. At its peak, analysts believe it may generate up to $3.6 billion in annual revenue, easily making it a blockbuster drug.
It could, however, be years before it brings in any revenue for Viking, as VK2809 is still in phase 2b trials, and that peak wouldn’t be hit until 2038. What’s encouraging is that the drug has been showing signs of effectiveness, with the vast majority of patients (85%) achieving at least a 30% relative reduction in liver fat. If it continues to show effectiveness in late-stage trials, the stock could continue to rally and reach new heights.
Further down the road, the company also has another potential blockbuster in VK2735, which is a treatment for obesity that is entering phase 2 trials this year. That’s not nearly as far along as VK2809, so there’s a bit more uncertainty with that drug.
But given the excitement for weight-loss treatments over the past year, this is another drug that could have a boatload of potential. According to Grand View Research, the global market for weight management was worth $142.6 billion last year and could soar to $298.7 billion by 2030.
Is getting to $1 million realistic?
With a small company like Viking, a big return in the long run is possible if it can obtain approval for one or more drugs. Here’s a look at the returns you would need at various levels in order for your investment to grow to $1 million:
| Investment | Multiple | 10-Year CAGR | 20-Year CAGR | 30-Year CAGR |
|---|---|---|---|---|
| $5,000 | 200 | 69.9% | 30.3% | 19.3% |
| $10,000 | 100 | 58.5% | 25.9% | 16.6% |
| $15,000 | 67 | 52.2% | 23.4% | 15% |
| $20,000 | 50 | 47.9% | 21.6% | 13.9% |
| $25,000 | 40 | 44.6% | 20.3% | 13.1% |
| $30,000 | 33 | 42% | 19.2% | 12.4% |
CAGR = compounded annual growth rate. Table by author.
Forecasting out a growth rate is next to impossible for a stock such as Viking, but the table is helpful in illustrating just the returns that would be necessary to have a realistic hope of turning an investment into $1 million. At $5,000, for instance, you would need to average roughly a 19% annual return for 30 years — that’s Warren Buffett territory.
And while $30,000 would require more modest gains, it may be too big of an ask for investors to put that large of an investment down into what’s still an unproven and unprofitable business such as Viking.
Viking’s stock could be a worthwhile investment — if you’re OK with the risk
I don’t expect Viking Therapeutics to be a millionaire-making stock — not without a big, risky investment, which could be hard to justify at this stage.
If you’re willing to invest money in the healthcare stock that you can afford to not look at for years and are OK with potentially losing, Viking could be worth making a modest investment in, given the massive upside it might possess. But for most investors, particularly those who are risk averse, this probably won’t make sense as an investment right now.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.