Better Weight Loss Drug Stock Buy: Eli Lilly vs Viking Therapeutics

Generally, when investors are looking for growth, they turn to industries such as technology. Here, revenue may be rising in the double or even triple digits, leading to explosive stock performance. But in recent years, one specific area of the pharmaceutical market has offered a similar opportunity. And that is in the weight loss drug space.

Right now, Eli Lilly (NYSE: LLY) leads this market, with Novo Nordisk in second position, but many pharma and biotech players are knocking on the door -- and one of the first to enter may be Viking Therapeutics (NASDAQ: VKTX). The company is studying its candidate in two different forms in phase 2 and phase 3 trials, and so far, the results have been strong.

So, right now, if you can only buy one weight loss drug stock, which one should you choose: Lilly or Viking? Let's find out.

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The case for Eli Lilly

Eli Lilly actually wasn't the first to the GLP-1 drug market; Novo Nordisk paved the way, gaining approval for Ozempic for type 2 diabetes in 2017. Doctors prescribed the injectable off-label for weight loss, and that set off the rush by patients into GLP-1 drugs -- and the rush by investors to get into GLP-1 stocks.

Lilly entered the market with tirzepatide, commercialized at Mounjaro for type 2 diabetes and Zepbound for weight loss, shortly after Novo, and began gaining market share. The newcomer focused on investing in manufacturing capacity to address demand, and a head-to-head study showed that Lilly's drug resulted in greater weight loss than Novo's. These elements have helped Lilly push ahead in the U.S. market -- it now holds a 60% share.

Though Novo was the first to launch a weight loss drug in pill form late last year, Lilly's oral candidate may soon enter the market -- it's under regulatory review right now.

The case for Viking Therapeutics

Viking Therapeutics is ready to advance its candidate VK2735 in oral form into a phase 3 trial in the third quarter, and the phase 3 study of the candidate in injectable form is ongoing. The drug works in the same way as the Lilly and Novo drugs, stimulating hormonal pathways involved in appetite control and the management of blood sugar levels.

It's often difficult to directly compare the performance of one against another, unless a head-to-head study is done, because trial designs differ. But Viking's performance in trials has been strong, suggesting it could easily compete with the Lilly and Novo drugs.

It's also important to keep in mind that demand for weight loss drugs is high, and at certain points, it even exceeded supply, so there is plenty of room for Viking to carve out a share if its candidate successfully completes trials and wins regulatory approval.

The biotech company also has another intriguing candidate in the pipeline, one that acts on amylin and calcitonin receptors. (These play an important role in metabolism.)

Which is the better buy?

Both Lilly and Viking are great buys today and could have bright futures in the weight loss drug market. Though Viking hasn't yet commercialized a product, Lilly already is generating significant growth from tirzepatide; Mounjaro and Zepbound each saw revenue soar in the triple digits in the latest quarter.

Lilly's stock has dropped about 8% so far this year, and it now trades at 28x forward earnings estimates, down from more than 31x just a few weeks ago.

We can't look at Viking using that metric since the company doesn't yet have products on the market. But the stock has climbed about 2% this year and is up about 16% over the past year.

So, Lilly offers a window of opportunity right now. It's also important to keep in mind that regulators may decide whether to approve Lilly's oral weight loss drug in the coming weeks, and that could act as a catalyst for the stock. All of this means right now might be a great time to pick up shares of this weight loss drug leader.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk and Viking Therapeutics. The Motley Fool has a disclosure policy.