Is Viking Therapeutics Stock a Better Buy Than Eli Lilly and Novo Nordisk After the Latest Weight-Loss Drug News?

Just when the weight-loss drug market was heating up, the temperature rose even more. Eli Lilly (LLY 1.19%) is already giving Novo Nordisk (NVO 0.84%) a run for its money with the approval in the fourth quarter of 2023 of Zepbound. Now another rival could be on the way.

Viking Therapeutics (VKTX 7.92%) announced results last week from a phase 2 clinical study of VK2735 in helping patients lose weight. Its share price promptly skyrocketed more than 130%. Is Viking Therapeutics stock a better buy than Eli Lilly or Novo Nordisk after its latest weight-loss drug news?

Why investors are excited about Viking Therapeutics

Some Wall Street analysts project that the market for weight loss drugs could reach or even top $100 billion by 2030. This expectation has helped fuel massive gains for Lilly and Novo Nordisk. Both pharma stocks are up more than 250% over the last three years.

Viking Therapeutics is now one big step closer to joining Lilly and Novo Nordisk in competing for this huge potential market. Like Lilly's Zepbound, Viking's VK2735 is a combination GLP-1 and GIP agonist. Also like Zepbound, the experimental drug appears to be both safe and effective in helping people lose weight.

In the phase 2 Venture study, VK2735 achieved its primary endpoint and all secondary endpoints. Patients taking the drug experienced up to 13.1% placebo-adjusted mean weight loss after 13 weeks of treatment. Importantly, statistically significant weight loss was observed with all doses administered. Up to 88% of patients receiving VK2735 achieved weight loss of at last 10%.

The safety profile for the drug also looked encouraging. While 13% of patients receiving VK2735 discontinued the study, that was roughly the same as the 14% of patients receiving placebo who discontinued. Most of the side effects reported were mild or moderate in severity.

How Viking Therapeutics, Eli Lilly, and Novo Nordisk compare

In most respects, Viking Therapeutics doesn't measure up well against Lilly and Novo Nordisk. The company doesn't have any approved products on the market and therefore isn't generating any sales. It posted a net loss of nearly $86 million last year.

Meanwhile, Lilly and Novo Nordisk are giant drugmakers with multiple blockbuster products on the market. Lilly's revenue topped $28.5 billion in 2023. Novo Nordisk raked in nearly 232.3 kroner (roughly $22 billion) last year. Both companies are highly profitable as well.

Does Viking have any advantages over Lilly and Novo Nordisk? I think so. Simply put, the company has much greater growth potential because of its smaller size and pipeline prospects.

Lilly and Novo Nordisk should enjoy solid growth over the next several years thanks largely to their type 2 diabetes and weight-loss drugs. However, with the two companies' market caps at over $750 billion and $436 billion, respectively, the success of these drugs will move the needle less than success for VK2735 could for Viking with its market cap of below $10 billion.

Importantly, VK2735 isn't the only promising pipeline program for Viking. The company is also evaluating VK2809 in a phase 2 study targeting nonalcoholic steatohepatitis (NASH), an indication with a huge potential market also. In addition, Viking has an early stage candidate, VK0214, which targets rare genetic disorder X-linked adrenoleukodystrophy (X-ALD).

Is Viking Therapeutics stock a better buy?

Risk-averse investors probably will still find Lilly and Novo Nordisk more attractive picks than Viking. Despite its potential, Viking still must jump several hurdles to bring a drug to market -- hurdles that Lilly and Novo don't face.

Income investors will definitely prefer Lilly and Novo Nordisk. While both companies offer relatively low dividend yields (0.7% for Lilly and 1.07% for Novo), they at least pay dividends. The two big drugmakers have also increased their dividends significantly in recent years.

I think, though, that Viking Therapeutics looks like the better choice for aggressive investors. Sure, the company's candidates could still stumble in clinical studies. However, the impressive phase 2 results for VK2735 bode well for Viking's chances in late-stage testing. I also wouldn't be surprised if Viking becomes a top acquisition target for big pharma companies seeking to compete in the weight-loss and NASH markets.

Viking Therapeutics is riskier than Lilly and Novo Nordisk. But it also arguably offers a greater upside potential.