Considering an Alternative to Eli Lilly and Investing in This Impressive Biotech Company?
Eli Lilly & Company (LLY -1.79%), a prominent pharmaceutical firm, sells a diverse array of medications for various illnesses. However, a specific portfolio has been instrumental in boosting its earnings and stock value recently. This portfolio includes the company's weight loss drugs: Mounjaro, authorized for type 2 diabetes but widely prescribed off-label for weight management, and Zepbound, specifically approved for weight control.
Both Mounjaro and Zepbound are dual GLP-1/GIP receptor agonists that function by influencing hormones involved in the digestive process, thereby aiding in blood sugar level regulation and appetite control. Currently, Lilly and Novo Nordisk are prominent players in the weight loss drug market, but potential competitors are on the horizon.
One such up-and-coming competitor has garnered significant attention due to remarkable clinical trial results. Its initial weight loss drug candidate is on the verge of undergoing phase 3 trials, the final stage before regulatory approval. I'm referring to Viking Therapeutics (VKTX -18.03%).
But should independence from Eli Lilly be prioritized, and this promising biotech company be purchased instead? Let's explore the situation.
Viking's Clinical Trials
Viking Therapeutics' drug candidate, similar to Lilly's offerings, is a dual GLP-1/GIP receptor agonist. Like Mounjaro and Zepbound, VK2735 is administered through injections. In a phase 2 trial, VK2735 fulfilled all primary and secondary objectives and resulted in a mean weight loss of up to 14.7% following a 13-week period.
Viking planned to engage with regulatory bodies this quarter to prepare for a phase 3 trial. During Obesity Week, Viking Therapeutics made headlines with its oral formulation of VK2735. In a phase 1 trial, the candidate demonstrated a reduction in mean body weight of up to 8.2% following 28 days, even at the highest dose of 100 mg daily. The convenience and ease of an oral medication could prove to be a significant advantage for patients.
Now let's examine Viking Therapeutics' potential for success in the weight loss market, considering the strength of the current leaders. Certainly, the larger pharmaceutical companies have a first-to-market advantage and the capacity to fund advertising, manufacturing, and the development of new candidates.
However, it's worth noting that Lilly, too, is working on an oral weight loss drug and is currently in phase 3 trials. Should things proceed smoothly, the drug could enter the market before Viking.
I would not consider Viking or other new players a threat to the current market leaders. Nevertheless, demand in this market and projected growth suggest room for more than a few players to thrive in the space. In recent years, both Lilly and Novo Nordisk's weight loss drugs have been listed as scarce by the U.S. Food and Drug Administration, prompting both companies to increase manufacturing capacity.
The obesity drug market is projected to reach $130 billion by decade's end, according to Goldman Sachs Research. Previously estimated at $100 billion.
Possibilities for Viking
Given these projections, Viking Therapeutics, despite entering the market later than its major competitors, could still secure a market share. A company of Viking's size—with a market capitalization of $6.7 billion compared to Lilly's $777 billion—could achieve significant success with a smaller share of the obesity drug market than the pharmaceutical titans. Additionally, forming partnerships or undergoing a merger could serve as a major win for investors, as many industry players are eager to enter the weight loss drug market. Viking Therapeutics offers a compelling drug pipeline.
Now, back to our original question: Should Lilly be overlooked in favor of this intriguing biotech stock? This decision ultimately relies on investor risk tolerance. If caution is preferred, sticking with Lilly—which boasts a solid earnings track record, a diverse product portfolio, and passive income in the form of dividends—might be the better option.
But if some risk can be managed, and dynamic growth stocks are desired, Viking could be a worthwhile addition to one's portfolio. The stock has seen significant gains following positive data from its weight loss programs, and this narrative has just begun.
Investors considering diversifying their finance portfolio might find value in exploring potential investments in the weight loss drug market, given Goldman Sachs Research's projection of the market reaching $130 billion by the end of the decade, up from an initial estimate of $100 billion.
Viking Therapeutics, with a smaller market capitalization compared to established players like Eli Lilly, could still secure a significant market share due to its promising drug pipeline and potential for partnerships or mergers. This could present an attractive opportunity for those with a higher risk tolerance seeking dynamic growth stocks.
