Nvidia, with its impressive 0.94% gain, remains a formidable contender in share-price performance. Over the past five years, its stock has skyrocketed by 2,500%, and it’s poised for a 118% rise this year alone.
The reason behind this remarkable surge is quite clear. Nvidia has a commanding presence in the rapidly expanding artificial intelligence (AI) chip sector, boasting an 80% market share. Consequently, Nvidia’s earnings have consistently surged by triple digits, setting new records quarter after quarter.
While Nvidia is undoubtedly a strong buy, it isn’t the sole potential standout for your portfolio in the latter half of 2024. I foresee a biotech stock, operating in an exceptionally dynamic field, outperforming the tech giant during this period. It has already surpassed Nvidia’s performance in the first half of the year.
Although this biotech stock has lagged over the past six months, significant advancements in its pipeline may provide the necessary boost to propel it ahead once more. Continue reading to learn more.
The Billion-Dollar Obesity Drug Market
Which biotech company are we referring to? Viking Therapeutics, which has experienced a 4.66% decline, is making substantial strides in the obesity drug market. According to Goldman Sachs Research, this market could reach $100 billion by the decade’s end. Viking is developing dual GIP/GLP-1 receptor agonists, similar to the commercialized drugs from Eli Lilly and Novo Nordisk.
These drugs function by targeting hormones involved in digestion, helping to regulate blood sugar levels and appetite. Their popularity has led to market shortages, prompting Lilly and Novo Nordisk to expand production.
Viking’s candidates have shown promising results in clinical trials. For instance, the phase 2 trial of the injectable candidate VK2735 achieved its primary endpoint and all secondary endpoints, with patients experiencing up to a 15% reduction in body weight after 13 weeks. In the phase 1 trial of the tablet version, patients saw up to a 5.3% weight reduction in just 28 days. The announcement of these results earlier this year excited investors, leading to a surge in the stock price.
In the second half of 2024, Viking plans to hold an end-of-phase 2 meeting with the U.S. Food and Drug Administration for VK2735 and intends to initiate a phase 3 trial. Additionally, the company expects to commence a phase 2 trial for the oral version later this year. This progress may provide the stock with the momentum to soar in the coming months.
A Potential Takeover Target?
Speculation abounds that a larger biotech or pharmaceutical company might consider acquiring Viking to enter the burgeoning weight loss drug market. Any developments or further speculation in this area could keep Viking’s stock on an upward trajectory later this year.
Meanwhile, Nvidia could also see growth, particularly with the upcoming launch of its new architecture, Blackwell, its most powerful chip to date. However, Viking’s stock performance in response to pipeline developments has consistently outshone Nvidia’s following positive news. For instance, when Viking announced favorable VK2735 data earlier this year, the stock surged over 120% in a single trading session, while Nvidia’s stock climbed approximately 9% following a stock split announcement—a generally welcomed news for investors.
Any positive news from Viking could result in significant gains, and with programs advancing in the coming months, more announcements may be forthcoming.
Long-Term Investing
It’s important to remember that short-term performance is just one aspect to consider. Before investing in a stock, evaluating its long-term potential is crucial because holding onto strong companies for at least five years is key to truly enhancing your portfolio.
I anticipate Eli Lilly will maintain its dominance in the weight loss drug market due to its current position and pipeline candidates. However, given the high demand in this market, Viking could secure a share in the future or potentially collaborate with another company.
Viking does carry some risk as an emerging player, unlike established entities like Eli Lilly. Nevertheless, it offers substantial growth potential if its pipeline programs continue to progress successfully. This is why I predict Viking will outperform Nvidia in the second half and may also prove to be a long-term winner for investors.
