The weight loss drug market has been one of the most talked-about investing trends over the past year. One of the leaders in this area is Denmark-based Novo Nordisk (NVO 0.84%), thanks to its type 2 diabetes medicine Ozempic and the Wegovy version approved for weight loss. However, Ozempic and Wegovy are facing stiff competition, notably from Mounjaro and Zepbound, marketed by Novo Nordisk's eternal rival, Eli Lilly. Further, a little-known but highly promising biotech is also looking to challenge Novo Nordisk in this niche.
The company in question is Viking Therapeutics (VKTX 7.92%), a midcap biotech that recently reported highly promising results from a clinical trial for a weight loss candidate. Let's look deeper into Viking's recent data readout and figure out what it could mean for Novo Nordisk and its shareholders.
Viking's candidate knocks it out of the park
Viking Therapeutics' weight loss candidate is called VK2735. It is a dual GLP-1/GIP therapy, meaning it belongs to the same class of medicine as Eli Lilly's Zepbound and Mounjaro. In a phase 2 study, Viking Therapeutics gave patients different doses of VK2735 once a week while others took a placebo. The results were statistically significant reductions in body weight for patients on VK2735 at all dose levels compared to the placebo group.
Those taking the highest dose of the medicine, 15 milligrams, experienced the highest mean reduction in body weight: 14.6 kilograms (32 pounds). Further, the company said there did not seem to be any serious safety issues associated with the medicine. Viking Therapeutics plans on discussing things with regulators before moving forward. While the mid-cap (market cap $8.5 billion) biotech currently has no products on the market, the hope is that it can launch VK2735, which could become a notable medicine in the fast-growing weight loss industry.
That's why Viking Therapeutics' shares soared -- while those of Novo Nordisk dropped -- following this data readout.
Can Novo Nordisk handle the potential competition?
Novo Nordisk's diabetes and obesity segment is by far its most important. In 2023, this unit generated sales of 215.1 billion Danish kroner ($31.3 billion), making up just under 93% of the biotech's total revenue. Over the past year, plenty of drugmakers have tried to dip their toes in these lucrative waters. Pharmaceutical giants such as Pfizer, AstraZeneca, and Amgen all have weight loss therapies in development. However, Novo Nordisk has an advantage.
It has a long track record in developing innovative medicines in this and adjacent areas, notably diabetes care. Novo Nordisk has long been the leader in the insulin and GLP-1 markets. In November, it held a 34% share of the total diabetes care market, an increase from the 32% it had as of November 2022.
Developing novel therapies in any area isn't easy, but having done so before, Novo Nordisk has a leg up. Consider that Pfizer had to discontinue one of its weight loss candidates following disappointing clinical study results. That can happen to any drugmaker, but it is less likely to happen to one with a team that has a proven track record in weight loss therapy. Viking Therapeutics' VK2735 still has some ways to go before earning approval.
Though it is possible to submit an application package to regulatory authorities after completing a highly successful phase 2 study, that's relatively rare. Viking's trial featured just 176 people and lasted only 13 weeks. So, expect a phase 3 study before the biotech requests approval -- which, at best, would come down in two years. In the meantime, Wegovy will continue to make headway in this market while earning key label expansions.
Further, Novo Nordisk plans to diversify its lineup with late-stage programs for hemophilia, chronic kidney disease, and heart failure. The biotech boasts promising nonobesity candidates in phase 2 studies as well. By the time VK2735 makes it to the market -- if it does -- Novo Nordisk will have almost certainly reduced its exposure to the weight loss industry. In short, the company's shareholders have nothing to fear from this new development.
