Prediction: Pfizer's Loss May Be Viking Therapeutics' Gain

Big pharmaceutical companies as well as smaller biotechs have been hoping to score a win in one of today's highest-growth treatment areas: and that's weight loss. Analysts forecast a compound annual growth rate in the double digits from today over the next several years, with the market reaching $100 billion to $130 billion in the early 2030s.

Today, Eli Lilly and Novo Nordisk dominate with their well-known treatments: Lilly makes tirzepatide, commercialized as Mounjaro for type 2 diabetes and as Zepbound for weight loss. And Novo Nordisk makes semaglutide, sold under the name Ozempic for diabetes and Wegovy for weight control. These drugs bring in billions of dollars annually for the pharma giants.

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So, it's no surprise that other companies are aiming to get in on this market where demand has been so high that, last year, it surpassed supply of existing drugs. And two names that have come up as potential players in the years to come are pharma powerhouse Pfizer (NYSE: PFE) and biotech Viking Therapeutics (NASDAQ: VKTX). Investors have waited eagerly for updates from each of their programs. And recently Pfizer's update wasn't a positive one. Now, my prediction is the pharma player's loss may be Viking's gain.

Image source: Getty Images.

Pfizer drops a weight loss candidate

Pfizer recently said it wouldn't continue development of its weight loss candidate danuglipron, a once-daily pill, after a patient in a clinical trial experienced liver injury -- the problem resolved after the patient stopped taking the investigational drug. This wasn't the first setback. Pfizer back in 2023 discontinued development of a twice-daily version after more than half of the patients in a clinical trial stopped taking the treatment. In that trial, about 70% of participants experienced nausea and 40% experienced vomiting.

Now, let's consider Viking's situation. The biotech also is working on an oral weight loss treatment and recently fully enrolled its phase 2 trial. Viking said enrollment was "rapid," signaling a lot of interest in the company's potential product. The candidate, VK2735, also is being developed in a subcutaneous (injection) format, and that version is set to enter phase 3 trials during the second quarter of this year.

VK2735, like Lilly's commercialized drugs, is a dual GIP/GLP-1 receptor agonist. (GIP = gastric inhibitory polypeptide. GLP-1 = glucagon-like peptide-1.) These drugs work by acting on hormonal pathways involved in digestion and as a result help control blood sugar levels and appetite. Viking's clinical trial results so far have been strong, spurring excitement in the investment community. For example, last year, when Viking first announced phase 2 results from the subcutaneous VK2735, the stock soared in the triple-digits in one trading session. The stock since has given up those gains but remains on investors' radar screens as VK2735 approaches the finish line.

Potential scenarios for Pfizer and Viking

How Pfizer's loss may be Viking's gain? First, it's important to note that Pfizer, saying it will continue to develop early stage weight loss candidates, hasn't given up on the weight loss market. But the loss of danuglipron sets it further back from its goal. In the past, investors and analysts have speculated that Pfizer might consider acquiring Viking. This or even a partnership covering VK2735 could be a potential scenario that I'd class a win for Viking. A partnership would be particularly positive news for Viking considering Pfizer's extensive commercial infrastructure. Pfizer in the past showed its prowess here by partnering with BioNTech to develop and commercialize what ended up becoming the world's top-selling coronavirus vaccine.

Of course, all of that is speculation and may never materialize, but it's important to consider these sorts of possibilities. And there also is another way Pfizer's latest news represents a win for Viking: It has delayed the market entrance of a potential competitor. Though there is enough demand in the market for several players, Viking still will be better off if it can enter the market ahead of rivals, especially big pharma rivals that have proven their ability to launch blockbuster drugs.

What does this mean for investors? I predict Pfizer's danuglipron news, will benefit Viking, even if this is just by slowing Pfizer's market entrance. On top of this, Viking's strong clinical trial results so far -- and in a treatment area of high growth -- make it a particularly interesting stock. Of course, since the company doesn't yet have products on the market, cautious investors may prefer waiting on the sidelines for now. But for investors who don't mind some risk and aim to invest in a high-potential biotech, Viking could make a terrific buy today.

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