Obesity is a global health crisis and is a direct or indirect cause of various health conditions. The emergence of GLP-1 agonists over the past several years has ignited one of the most significant market opportunities in the modern history of healthcare.
Research from Morgan Stanley estimates that the global obesity drug market could reach $150 billion by 2035, up from $15 billion in 2024.
Novo Nordisk and Eli Lilly are the heavyweights that control the industry right now, but don't sleep on Viking Therapeutics (VKTX 1.89%). This $3.3 billion stock still has much to prove, but buying it now while it trades around $30 a share could make investors look like geniuses later.
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Some investors may avoid Viking Therapeutics because the company doesn't generate any sales yet
It's still developing its first drugs, headlined by VK2735, a dual GLP-1 and GIP agonist drug similar to Eli Lilly's Zepbound. Viking Therapeutics is developing both a subcutaneous (injected) version and an oral (pill) version.
The subcutaneous version is in phase 3 trials, with an estimated completion date of August 2027. The oral pill, which recently completed a phase 2a study, is further behind.
The bad news? Viking Therapeutics may not bring a product to market, assuming regulatory approval, until at least 2028. The good news? Novo Nordisk and Eli Lilly are validating the long-term market opportunity. Both have enjoyed strong growth from their subcutaneous products, and Novo Nordisk recently launched the first oral GLP-1 agonist, which looks like a home run.
While VK2735 may be a ways off, clinical trials have signaled it could be very competitive.
NASDAQ: VKTX
Key Data Points
A $3.5 billion market valuation means high risk, high potential reward
It's worth noting that drug development is risky business. Drugs are never guaranteed to reach the market, making Viking Therapeutics a highly speculative stock until a drug receives formal approval. That said, the stock could have a sky-high ceiling if both versions of VK2735 ultimately reach the market.
Suppose the obesity drug market reaches $100 billion by 2035, well short of Morgan Stanley's estimates, and Viking Therapeutics has just 5% market share. Novo Nordisk trades at 5 times its sales today. A similar valuation would give Viking Therapeutics a market cap of $25 billion, a return of more than 7 times the stock's current value over the next nine years.
Investors may not even need to wait that long. Perhaps a company such as Pfizer, which abandoned its own obesity drug due to safety concerns, buys out Viking Therapeutics sooner, a potential windfall for shareholders. Acquisitions happen all the time in this field.
Either way, it's smart to buy and stash the stock, simply as a small component of a diverse portfolio. The upside on this $30-a-share stock could be too high to resist here.
