Eli Lilly (LLY 0.50%) and Novo Nordisk (NVO 0.02%) have seen their revenue soar in recent times thanks to their weight loss drugs. The companies sell products that target key hormones involved in the regulation of blood sugar levels and appetite, and they've proven their efficacy in clinical trials and the real world.
All of this has helped the companies' shares soar to record highs, and considering demand for these products, the gains may be far from over. But one thing could upset the apple cart for these market giants, and that's potential competition. A young biotech, Viking Therapeutics (VKTX 1.49%), recently released positive trial data on its weight loss candidate, and it's very similar to the Lilly and Novo Nordisk drugs except for one difference. Could that detail help it top these leaders?
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Four commercialized drugs
First, a bit of detail about these products and potential products. Lilly's drugs -- Mounjaro and Zepbound -- involve the molecule tirzepatide, which acts on glucagon-like peptide-1 (GLP-1) and glucose-dependent insulinotropic polypeptide (GIP). These hormones play important roles in the digestion process, as mentioned above. Viking's candidates also stimulate GLP-1 and GIP. Novo Nordisk's drugs -- Ozempic and Wegovy -- involve the molecule semaglutide and interact uniquely with the GLP-1 pathway.
The four commercialized drugs I've just talked about all are injectables, packaged in a pre-filled injection pen format generally to be administered weekly. Now here's where Viking's difference comes in. Viking's phase 1 study is evaluating an oral tablet formulation of VK-2735, taken once daily. Clearly, a daily pill could be a popular option for many reasons, including the idea that it's easier to take on the go and could win over patients who don't like injections.
Viking's candidate resulted in as much as 3.3% mean weight loss after only 28 days in this early-stage study -- the company aims to launch a phase 2 study in the second half of the year. (This data follows positive results from the injectable version of this candidate a few weeks earlier. In that phase 2 trial, the injectable once-weekly formulation helped patients achieve as much as 13.1% mean weight loss in a period of 13 weeks.)
The next step for Lilly and Novo Nordisk
So, could this oral formulation help Viking to challenge and even top its bigger rivals? Not necessarily. It's important to remember that Lilly and Novo Nordisk aren't resting on their laurels even if their obesity drugs are generating blockbuster revenue today. Both of these big pharma companies also are developing oral weight loss formulations, and their programs actually are more advanced than that of Viking.
Lilly reported positive phase 2 data from its oral candidate, orforglipron, last year, and now is studying it in phase 3. And last year, Novo Nordisk reported encouraging news from an early stage of its phase 3 trial of its oral semaglutide. If all goes smoothly for Lilly and Novo Nordisk, they should have oral weight loss drugs on the market before Viking.
As for the actual performance of each potential product, it's too early to determine where Viking stands in relation to its bigger rivals. It will be important to consider later-stage trial data.
What does this mean for investors?
So, what does all of this mean for investors? Viking stock has soared 100% over the past six weeks on optimism about its trial news. If Viking continues along this positive path, the company eventually could carve out share in the weight loss drug market considering the need for these products -- demand for Lilly and Novo Nordisk products has surpassed supply in recent times. So, there's room for several players to be successful in this market, considering this and growth forecasts. Goldman Sachs Research predicts the market will reach $100 billion by 2030.
Investors also may speculate that a larger player might invest in Viking or even acquire the company -- moves that could significantly boost the stock.
Still, while aggressive investors may want to pick up a few shares today, cautious investors probably should wait for Viking to progress into later-stage trials before making a move, especially considering the recent run-up in the share price.
