Missed Out on Novo Nordisk Stock? Buy This 1 Biotech Stock Right Now.

After rising by 137% in one day upon the publication of favorable phase 2 clinical trial results on Feb. 27, Viking Therapeutics (VKTX 7.92%) is now doubtlessly on many investors' radars. Soon enough, the biotech will likely try to launch a new weight loss medication capable of rivaling Novo Nordisk's (NVO 0.84%) blockbuster obesity drug, Wegovy. That means people who feel that they learned about Novo Nordisk's rapidly growing obesity care segment too late to see any upside from an investment now have another juicy chance to gain exposure to that exciting and increasingly competitive market.

But, as with all pre-revenue biotech stocks, Viking is a somewhat risky play. At the same time, assumptions about having missed out on Novo Nordisk may be off-base. So let's put the competition between these two businesses (and one of their peers) into context by analyzing the situation a bit more closely.

This contender could have a major advantage

Viking Therapeutics doesn't yet have any products on the market, but it does have a valuable asset that's driving investors to bid up its stock price.

Its lead program, VK2735, is intended to treat obesity using a mechanism of action that overlaps with Wegovy's. It's also the same approach used by Zepbound, Eli Lilly's highly successful weight loss drug. But per results from VK2735's phase 2 trial published on Feb. 27, it could be more effective than the competition.

After 13 weeks of treatment with the candidate, participants in the clinical trial lost an average of 13.1% of their body weight, whereas patients receiving a placebo lost only 1.7%. What's more, a slightly larger proportion of participants in the placebo group discontinued treatment as a result of side effects than those in the treatment group. That suggests the side effect load is very tolerable in practice. In other words, there is now a strong reason to believe that VK2735 could be proven safe and effective after it completes its phase 3 clinical trials.

Check out this comparison of those results to Wegovy and Zepbound.

Source: Novo Nordisk, Eli Lilly, and Viking Therapeutics.

As you can see, VK2735 appears to help people shed excess weight considerably faster than Zepbound or Wegovy.

What's more, management is quick to tell investors that there wasn't any plateau or slowdown in the candidate's efficacy throughout the study period. So it is probably the case that people who are treated with it for as long as what was tested in the late-stage trials for the other two drugs will experience an even greater degree of weight loss. More data on that issue is expected sometime in the second quarter.

At the moment, the picture is thus extremely bullish.

The total addressable market is vast

Viking Therapeutics isn't about to commercialize its medicine tomorrow. It still needs to conduct phase 3 trials successfully and compile its submission materials for regulators at the Food and Drug Administration (FDA) in advance of any granting of approval.

There is reason to believe that it will have no trouble surviving long enough to accomplish those goals. At the end of the fourth quarter, it had $362 million of cash, equivalents, and short-term investments, and its trailing-12-month operating expenses were $100.8 million. Even if it takes a few years, it has the resources it needs to move VK2735 to the market, so the stock is worth purchasing on the basis of the recently published data.

During those few years, Novo Nordisk and Eli Lilly will both be raking in billions and billions of sales from their market-leading weight loss medicines. Neither business is signaling that the bottom of the market is anywhere in sight, so they will probably not even need to be fighting for market share for a while. Likewise, both companies are going full bore with further research and development (R&D) to come up with new and improved drugs for obesity, seeking to widen their addressable markets and create therapies that are tailored to niches like cardiovascular disease. Those financial returns and pipeline plays will set up plenty of catalysts for shareholders.

So don't think that it's too late to invest in Novo Nordisk or Eli Lilly, as there is likely still plenty of opportunity for those who invest now. Similarly, don't be scared off from Viking's massive share price movement.

The biotech will be a latecomer to the market if it can get its therapy approved in the next few years, but it still hasn't even finished gathering the data that'll inform the market about how effective its entrant is. And if its phase 2 data are to be believed, the next updates from the company could power large returns, too. There is always a risk that its data fails to impress, but for now, the outlook is sunny.