Viking Therapeutics (VKTX 7.92%) shares soared more than 120% in one trading session last month as investors bet on its ability to win in the billion-dollar weight-loss drug market -- or attract a buyer. The biotech company announced positive clinical trial results for its weight-loss candidate that works in the same way as a drug sold by pharma giant Eli Lilly (LLY 1.19%).
Patients and investors are excited about this class of drug thanks to impressive results in clinical trials and in the real world. And demand has been so high that supply hasn't been able to keep up. This doesn't look like a short-term trend either, and according to some analyst forecasts, growth is just getting started. The global weight-loss drug market could multiply by 16 to reach $100 billion by 2030, according to Goldman Sachs Research.
It's clear that, considering market size, there's room for more than one player to succeed here. But could Viking Therapeutics carve out major market share and challenge Lilly?
Image source: Getty Images.
The market leaders
So first, a bit of background on the weight-loss drug market. Both Eli Lilly and Novo Nordisk have built leadership in the area, with Lilly selling Mounjaro and Zepbound and Novo Nordisk selling Ozempic and Wegovy. These duos actually are the same molecule -- tirzepatide for the Lilly drugs and semaglutide for the Novo Nordisk ones.
But regulators approved them under the different names for different indications: Zepbound and Wegovy for weight loss, and Mounjaro and Ozempic for type 2 diabetes. Doctors actually have prescribed all four for weight loss, though.
Lilly's drugs, like the Viking candidate, act on two hormone pathways that control blood sugar levels and appetite -- glucagon-like peptide-1 (GLP-1) and glucose-dependent insulinotropic polypeptide (GIP). Novo Nordisk's drugs target one of those pathways.
Both Lilly and Novo Nordisk have generated billions of dollars in revenue thanks to these four drugs, and considering the sustained high demand for these products, it's very likely this trend will continue.
Now, let's consider Viking's position. The biotech recently reported positive phase 2 data, with candidate VK2735 achieving primary and secondary endpoints. Patients reached up to 13.1% mean weight loss after 13 weeks of treatment -- and weight loss was progressive and didn't plateau. The candidate also met safety goals, with most adverse events being mild to moderate.
Zepbound's phase 3 performance
It's difficult to compare one clinical trial to another as trial designs and conditions vary, or to compare an investigational drug to the performance of a drug in the real world. But it is fair to say the Viking candidate looks promising, and Lilly's products are delivering top performance. Zepbound's phase 3 study showed patients achieved a total mean weight loss of 26% over 88 weeks.
So, let's get back to our question: Could Viking challenge Lilly in the weight loss market? It's important to remember Viking still has a way to go before potential commercialization. Companies generally must bring a candidate through phase 3 before applying for regulatory approval -- and Viking hasn't launched a phase 3 study yet.
Meanwhile, Lilly is working on another candidate that may even beat its current drugs. That candidate, retatrutide, is involved in a phase 3 trial right now, but in phase 2 achieved up to 17.5% mean weight loss over 24 weeks.
Like Lilly's current drugs and the Viking candidate, retatrutide acts on GLP-1 and GIP -- but retatrutide also acts on a third hormone involved in regulating blood sugar levels. It's called glucagon, and its addition to the mix may increase weight loss potential. So Lilly might bring a product that's even more powerful than tirzepatide to market in the coming years.
Viking's future prospects
This means that by the time Viking brings its product to market -- if it's successful in clinical trials -- it could face tougher competition.
Now, let's remove retatrutide from the equation and just consider Viking facing Lilly's Zepbound in the commercial market. I think Viking could carve out some market share, but unless the potential product produces results that are greatly better than Lilly's, it's unlikely the biotech will challenge this pharma giant's leadership. It's also important to consider the enormous infrastructure required to keep up with demand. Lilly, thanks to its size and commercial experience, should have an advantage here.
Of course, Viking's potential entry in the market down the road -- or even a buyout -- could result in more gains for the shares. But after the enormous run-up in the share price in just one trading day, I would rather watch this player from the sidelines for now.
