It's hard to overstate how much demand could be out there for effective weight management drugs. The global anti-obesity drug market is expected to generate $12.8 billion in sales this year, and according to a new report from Research and Markets, sales could swell to $104.9 billion by 2035.
Novo Nordisk (NVO 1.27%) markets the top-selling GLP-1 drug at the moment, but it has been losing market share to tirzepatide, a drug that Eli Lilly (LLY +0.72%) started marketing for weight management in 2023 under the brand name Zepbound.
Sales of Zepbound, administered via a weekly injection, are soaring, but a potential competitor from Viking Therapeutics (VKTX +4.70%) has been gaining a lot of attention. Mid-stage clinical trial data suggests Viking's candidate could outperform Lilly's blockbuster and become a new top-selling anti-obesity drug.
Which of these stocks is the better buy now? Here's what investors should know before adding either one to their portfolios.
The case for Viking Therapeutics
Viking Therapeutics shares rocketed to an all-time high last February after the company announced positive clinical trial results for its weight-management candidate, VK2735. This is a dual GLP-1 and GIP receptor agonist similar to Lilly's Zepbound.
NASDAQ: VKTX
Key Data Points
In a phase 2 trial, patients receiving VK2735 lost an average of 13.1% of their weight compared to those taking a placebo (and 14.7% from their baseline weights) after 13 weeks of treatment. That's a pretty good start, but the pivotal phase 3 studies that convinced the Food and Drug Administration (FDA) to approve Zepbound ran for 72 weeks.
That 13.1% placebo-adjusted weight reduction at 13 weeks suggests VK2735 could outperform Lilly's drug. The best result from pivotal studies supporting Zepbound's approval was a placebo-adjusted reduction of 17.8% after 72 weeks.
GLP-1 drugs are peptide hormones that get sliced up into individual amino acids the moment they reach your stomach. They're small enough, though, to be administerable orally with some tinkering. In March 2024, investors were highly encouraged by a 3.3% placebo-adjusted average weight loss result after 28 days for patients in a phase 1 trial of an oral version of VK2735.
Shares of Viking Therapeutics have dropped by about 70% from the peak they reached last year because the company has been dragging its feet. It still hasn't started a phase 3 trial for VK2735 despite reporting successful phase 2 results more than a year ago. And VK2735 isn't the only candidate moving through Viking's pipeline much more slowly than it probably should.
In November 2023, the company reported successful phase 2 results for VK2809, its candidate treatment for metabolic dysfunction-associated steatohepatitis (MASH). The candidate successfully reduced patients' liver fat content, but the company still hasn't begun the phase 3 trial it needs to run before the FDA will consider approving it.
The case for Eli Lilly
Zepbound is Eli Lilly's biggest growth driver at the moment, but it isn't the only drug pushing total sales higher for this well-established pharmaceutical giant. Its fourth-quarter revenue not related to GLP-1 drugs grew by 20% year over year. Sales of Verzenio, a targeted breast-cancer therapy grew 36% year over year to an annualized $6.2 billion.
NYSE: LLY
Key Data Points
Including sales of both tirzepatide brands -- Zepbound for obesity, and Mounjaro for diabetes -- fourth-quarter revenue soared 45% year over year to $13.5 billion.
Yet even as overall sales have been growing at a torrid pace, Eli Lilly stock has fallen by about 11% from its peak. At recent prices, you can scoop it up for about 36.5 times the midpoint of management's guided range for adjusted earnings this year. That's a fair valuation for any company that you can expect to grow sales by around 10% annually in the coming decade. Eli Lilly expects total sales to grow by 32% in 2025.
In addition to both tirzepatide brands, Lilly expects increasing contributions from four recently launched therapies: Jaypirca, Ebglyss, Omvoh, and Kisunla. It also looks like this big pharma giant will own the top obesity drug for the foreseeable future.
If Viking Therapeutics starts a phase 3 trial for VK2735 tomorrow, it will still be more than a year behind retatrutide, an experimental triple hormone receptor agonist that Lilly is developing for weight management. In 2023, we learned that retatrutide reduced patients' average weight by up to 24.2% after 48 weeks. The well-run pharma giant began four phase 3 trials for retatrutide in 2023 before announcing its phase 2 success. A big one studying it as an obesity treatment (Triumph-4) is expected to produce top-line results before the end of 2025.
The better stock to buy now
Pre-commercial drugmakers like Viking Therapeutics are only appropriate investments for folks who have a high-risk tolerance. Even if you have a sky-high risk tolerance, it would probably be best to avoid buying shares of Viking Therapeutics until it quits dragging its feet and starts behaving like a drugmaker that has confidence in its pipeline. Waiting for more than a year to begin a pivotal study after delivering excellent phase 2 data is unacceptable.
Eli Lilly is trading at a high valuation for a big pharma company, but it's in a position to grow much faster than its peers. As a well-established pharmaceutical giant with diverse revenue streams, it's highly likely to produce a positive return over the long run. If it stays on top of the market for weight-management drugs, though, patient investors could realize market-beating gains. That makes it the better stock to buy now by a mile.
