Eli Lilly (LLY +3.00%) produced exceptional returns over the long run and is now the largest pharmaceutical company in the world by market cap, largely thanks to its work in diabetes drugs and, more recently, weight management. The company's shares are currently trading at about $860, but what if we could invest in the next Eli Lilly now at a fraction of that price?
One strong candidate for future pharmaceutical greatness is Viking Therapeutics (VKTX 5.30%), a mid-cap biotech with large-cap ambitions.
Trying to emulate a giant
Viking Therapeutics doesn't have any products on the market yet, but its leading drug candidate, VK2735, looks promising. This investigational weight loss medicine mimics the actions of the GLP-1 and GIP hormones, both of which help control blood sugar levels. So far, the only dual GLP-1/GIP agonist approved by the Food and Drug Administration is Eli Lilly's tirzepatide, a therapy that is smashing pharmaceutical industry sales records, marketed as Mounjaro and Zepbound.
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Will VK2735 follow a similar path? It's still a bit early to say, but targeting two hormonal pathways (instead of just one) is clearly a promising approach. The biotech is running a phase 3 study for a subcutaneous version of VK2735, and recently completed phase 2 trials for an oral formulation of the therapy. The data was mixed -- at least that's the impression one might get from the market's reaction after it was published.
The efficacy of oral VK2735 was strong, but investors worried about the relatively high rates of adverse reactions, which led to significant rates of dropouts from the study. The medicine still looks promising, though. Lower doses of oral VK2735 led to fewer adverse reactions while still demonstrating attractive levels of efficacy at 13 weeks, and patients could, in theory, gradually increase their dosages to help mitigate side effects. In short, both the oral and subcutaneous versions of VK2735 are exciting candidates that could earn regulatory approval within a few years and take a slice of the fast-growing weight management therapy market.
Meanwhile, Viking Therapeutics is developing other therapies, too. It has another weight loss candidate in preclinical studies that targets two other hormones: amylin, which helps control blood sugar and satiety, and calcitonin, which regulates calcium levels in the blood. The biotech plans to request regulatory approval to start clinical trials for it in early 2026.
NASDAQ: VKTX
Key Data Points
The biotech could, eventually, try to combine VK2735 with this newer medicine to target four different hormones. This approach could significantly boost the overall efficacy of these weight loss treatments.
Viking Therapeutics is also working on another therapy, VK2809, which performed well in phase 2 studies as a treatment for metabolic dysfunction-associated steatohepatitis, a liver disease.
A promising future, but a risky investment
Eli Lilly and Novo Nordisk are the leaders in the weight management drug market. Few rivals have thus far delivered mid-stage clinical trial results that seem to put their candidate drugs on a path to challenge that dominance. However, Viking Therapeutics is one of them. And over the coming quarters, the company's shares could rise significantly as it makes progress and eventually earns approval for VK2735, if it gets that far.
However, investing in clinical-stage biotech companies almost always carries significant risk. That's true in Viking Therapeutics' case as well, although it has a better profile than similarly sized peers.
For example, VK2735 could fail to show any statistically significant improvements in patients' weight in phase 3 studies, despite its strong performance in mid-stage trials. Or, that data could show clinically meaningful results, but not results that are strong enough to make VK2735 a commercially viable option compared to the widely used tirzepatide and semaglutide. And that's to say nothing of Viking Therapeutics' candidate that is still in preclinical trials.
The biotech has shown great innovative qualities for a company of its size so far, and if everything goes according to plan, it could become a leading biotech in the next decade. But things could go wrong, and if they do, Viking Therapeutics might not even exist in 10 years. So, investors should keep that in mind before buying the company's shares, which trade at about $38 apiece at the time of this writing. Only investors who are comfortable with risk should consider initiating a position in Viking Therapeutics.
