Eli Lilly and Novo Nordisk have been among the hottest healthcare stocks to own over the past few years. Since 2021, shares of the two companies are up more than 260%, with Eli Lilly now becoming the most valuable publicly traded healthcare company in the world.
Eli Lilly's and Novo Nordisk's diabetes and weight loss treatments have grown in popularity as they have helped patients achieve significant weight loss, and that has made investors bullish on the long-term prospects for these stocks.
But the anti-obesity market could be worth more than $100 billion by 2030, according to estimates from Goldman Sachs. There's room for more than just a couple of effective weight loss treatments, and while Eli Lilly and Novo Nordisk may be the early winners, that doesn't mean it's too late to invest in the industry.
One stock with huge potential in the industry is Viking Therapeutics (VKTX +0.55%), which also has a potentially promising weight loss drug in its portfolio.
NASDAQ: VKTX
Key Data Points
Viking achieved strong results in a recent trial
Viking has an obesity medication, VK2735, that is currently in phase 2 trials. That means it could still be years away from entering the market and generating significant revenue for the business. But investors are already growing bullish on the drug, given the results it has been demonstrating in trials thus far.
On Feb. 27, the healthcare company reported positive top-line results for VK2735's phase 2 trial as it achieved all primary and secondary endpoints. In addition to being safe and well-tolerated among trial participants, the average weight loss over a 13-week period was 14.7%. That's comparable to the 15% weight loss that people taking Novo Nordisk's Wegovy average -- and that's over a period of 68 weeks.
If VK2735's results hold up over a long period, it could certainly make the case for the drug being a formidable option as an obesity treatment. One of the big problems in the industry is that there is simply not enough supply to meet demand. That's why people have been using Ozempic, a diabetes drug, for weight loss purposes. Another potential drug in the mix could help ensure supply meets demand.
Has Viking's stock already surged too quickly?
In light of the promising trial results, shares of Viking Therapeutics have been skyrocketing. Year to date, the stock is up more than 370% -- far higher than the returns Eli Lilly (36%) and Novo Nordisk (24%) have achieved thus far in 2024.
But even with the increase in share price, Viking's market capitalization remains at around $9 billion, which is nowhere near the value of those other stocks (both have market caps in excess of $500 billion). One drug isn't going to make Viking rival them in valuation, but it could certainly help drive up its price.
It may even lead to Viking potentially being a takeover target, as many larger healthcare companies are eyeing the weight loss industry. Simply acquiring Viking Therapeutics could be a more cost-effective option for a company than developing its own weight loss treatment.
Should you invest in Viking Therapeutics stock?
Viking Therapeutics doesn't have an approved product, and until that changes, this will remain a high-risk stock to own. For all the promise that VK2735 possesses, there's still the potential that the drug will falter and be unable to obtain approval from regulators. While that seems unlikely today, given its strong results, it's a possibility that investors shouldn't overlook.
Meanwhile, the company is going to need to raise money to keep on developing the drug and working on trials. Viking recently announced a $550 million common stock offering, and further offerings are likely.
There is a lot of potential upside that comes with Viking Therapeutics' stock, but there's also risk. As long as you're comfortable with the risk and are aware that it could be a bumpy ride until VK2735 obtains regulatory approval (assuming that it can), it may still not be too late to invest in the stock.
