The arrival of a potential new rival in an important product category dinged the share prices of pharmaceutical companies Novo Nordisk (NVO 0.84%) and Eli Lilly (LLY 1.19%) on Tuesday. Both slumped by around 1% on the day, contrasting unfavorably with the slight (0.2%) gain of the benchmark S&P 500 index.
Viking invasion
The pharmaceutical star of the day was neither of those two companies. Instead, the spotlight shone on the lesser-known Viking Therapeutics (VKTX 7.92%). On Tuesday, Viking announced that the weight-loss drug it is currently developing performed well in a phase 2 clinical trial.
According to the company, VK2735 achieved its primary endpoint and all of its secondary endpoints. Patients who received the drug demonstrated statistically significant declines in weight compared to those who received a placebo. Viking added that the treatment was generally safe and well tolerated in the study.
The company's share price, not surprisingly, more than doubled on the good news. Weight-loss drugs are the hot pharmaceutical category of the moment particularly in the U.S., which has a long-standing problem with obesity.
Not a threat...yet
If VK2735 does well in late-stage testing and ultimately wins Food and Drug Administration (FDA) approval, it will pose a direct threat to Novo Nordisk. The Danish company is the entity behind the ultrapopular Wegovy obesity drug, while Eli Lilly is also aggressively pushing into the space with Zepbound -- its Mounjaro diabetes treatment recently FDA-approved for weight loss under the new brand name.
The segment is quickly becoming crowded, but there's little reason for Novo Nordisk or Eli Lilly shareholders to push the panic button yet. The former has successfully exploited its early-mover advantage with Wegovy. Meanwhile Eli Lilly is a pharmaceutical industry powerhouse that can bring a lot of financial and marketing muscle to bear to make Zepbound a hot item on the market.
