Investors are running into Viking Therapeutics (NASDAQ: VKTX) this week after an incident of drug-induced liver injury pushed Pfizer (NYSE: PFE) into terminating the development of its weight-loss pill.
Viking’s share price has gained % in recent sessions on speculation that PFE will now resort to an acquisition to expand its footprint in the weight-loss space.
Viking Therapeutics is currently testing an oral as well as an injectable GLP-1 drug.
Plus, its stock has tanked nearly 50% this year, which makes it even more attractive as a potential takeover target.
However, there are several reasons why Pfizer may still decide against a VKTX buyout.
Pfizer has other assets to penetrate the weight loss market
Danuglipron’s failure has derailed Pfizer’s immediate entry into the competitive weight-loss market.
However, the company still has two other candidates in clinical development.
One of them, PF-07976016, is another daily anti-obesity drug, though it operates via a markedly different mechanism than danuglipron.
Danuglipron mimicked the GLP-1 hormone to help trial participants lose their excess body weight. However, the firm’s PF-07976016 blocks the GIP receptor instead to deliver the same outcome.
So, it’s believable that Pfizer will prefer focusing on testing and development of its own assets to penetrate the anti-obesity market rather than spending billions on an acquisition.
Pfizer doesn’t have enough dry powder to buy VKTX
Pfizer could decide against buying Viking Therapeutics for instant exposure to the fast-growing market for weight-loss drugs, also because of financial constraints.
The multinational has been on a buying spree since the COVID pandemic.
While its multi-billion-dollar acquisitions in recent years have broadened its portfolio, they’ve also saddled the company with substantial debt.
PFE currently has merger and acquisitions (M&A) firepower of an estimated $10-$15 billion only, which makes it incrementally more difficult for it to consider a large-scale buyout like VKTX in 2025.
Finally, Viking’s weight-loss drugs are currently in Phase 2 trials, meaning clinical risks remain.
If Pfizer were to spend billions on an acquisition, it would likely prefer later-stage assets or alternative obesity drug strategies instead of taking on VKTX’s development uncertainties.
Is Pfizer stock worth buying in 2025?
While the danuglipron fiasco is a major setback for Pfizer’s commitment to entering the weight-loss market, Wall Street still recommends loading up on it at current levels.
The consensus rating on PFE shares currently sits at “overweight”.
Analysts have an average price target of $29.41 on the pharmaceutical stock, which translates to about a 35% upside from current levels.
Additionally, Pfizer stock offers a notably high dividend yield of 7.78%, making it an appealing option for investors seeking passive income, particularly with recession risks on the horizon.
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