Did Viking Therapeutics Just Say "Checkmate" to Eli Lilly?

Eli Lilly (NYSE: LLY) is the largest pharmaceutical (and healthcare) company in the world by market capitalization. It boasts more than 49,000 employees and currently leads the fast-growing market for weight management medicines.

However, this veritable Goliath might face some competition from a much smaller challenger: Viking Therapeutics (NASDAQ: VKTX), a mid-cap biotech with a mere 48 full-time employees on its payroll. Viking is working on a therapy that could be a game-changer in weight management.

Here's what investors need to know.

One-upping Eli Lilly?

Eli Lilly's most important product, tirzepatide, became the first dual GLP-1/GIP agonist approved by the U.S. Food and Drug Administration (FDA). Since it acts on two different hormones, tirzepatide has proved more effective than other GLP-1 medicines. The pharmaceutical giant is now working on a triple agonist: Retatrutide, an investigational medicine that mimics the action of GLP-1, GIP, and glucagon. This therapy is showing significant promise in clinical trials. Can anyone top that?

Image source: Getty Images.

Viking Therapeutics is working on it. The company's leading candidate, VK2735, is also a dual GLP-1 and GIP medicine. It is being developed in both subcutaneous and oral formulations. So far, so good. Viking is working on another drug that mimics the action of two separate hormones: Amylin, which plays a role in regulating blood sugar levels and satiety, and calcitonin, which helps regulate calcium levels. It's still in the early stages of development. In fact, it hasn't even started human clinical trials yet.

The biotech company plans to submit an Investigational New Drug Application to the FDA by year-end, which would grant it the license to begin experimenting on humans. But Viking Therapeutics already has plans to combine VK2735 with its early stage dual amylin and calcitonin therapy in development. A quadruple agonist would be an entirely novel approach to weight management that mimics the action of four hormones. In theory, this strategy could boost efficacy even further.

Hedge your bets

Viking Therapeutics' leading candidate is promising all on its own. The company's VK2735 performed well in phase 2 studies in its subcutaneous formulation and is now undergoing phase 3 studies.

The oral version had somewhat mixed mid-stage results, but they weren't nearly as bad as the market's reaction suggested. Oral VK2735 led to a mean weight loss of 12.2% at the highest dose in a mere 13 weeks. The high rates of study discontinuations due to adverse reactions were a concern, but at this level of efficacy, there are many ways to address the tolerability challenge.

For instance, Viking Therapeutics could gradually increase the dosage before getting patients to the highest one, a strategy that may lead to fewer adverse reactions. Even lower doses of the medicine could prove commercially viable over a phase 3 study lasting 64 to 72 weeks, or a similar duration.

Then, there are Viking's strong phase 2 results for VK2809, an investigational therapy for metabolic dysfunction-associated steatohepatitis (MASH). There is a significant need for more therapy for MASH. The disease, which is linked to obesity, affects millions of people in the U.S. alone, and there are only two FDA-approved medicines for it.

So, Viking Therapeutics' mid- and late-stage pipeline looks attractive. Its efforts to develop another weight management medicine to combine with its leading one look exciting as well. However, investors should remember that there are significant risks involved here. Viking Therapeutics' shares will fall off a cliff if its most advanced programs don't pan out.

The company would have trouble recovering from that if it happened. That's not a problem Eli Lilly has. It is a well-established leader with a deep lineup and pipeline, generating consistent revenue and profits. That said, Viking Therapeutics could have even more upside potential, provided everything goes according to plan. So, those comfortable with above-average risk should consider initiating a small position in the stock.

Prosper Junior Bakiny has positions in Eli Lilly and Viking Therapeutics. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.