Could Viking Therapeutics Be the Next Eli Lilly?

Eli Lilly (NYSE: LLY) wasn't the first to conquer the weight loss drug market. Novo Nordisk started the ball rolling back in 2017, when it won approval for its GLP-1 drug, Ozempic. Though Ozempic gained approval for type 2 diabetes, doctors prescribed it off-label for weight loss, and Novo soon achieved a regulatory nod for the drug under the brand name of Wegovy, specifically for weight loss.

Though Novo continues as a giant in this market, over the past year, newer entrant Lilly has slipped into the top spot. Lilly now holds 60% of the U.S. GLP-1 weight loss drug market. But remaining the leader isn't a sure thing, as other healthcare companies, from biotechs to pharma giants, are working to enter this valuable market and potentially dominate it.

With this in mind, could Viking Therapeutics (NASDAQ: VKTX) be the next Eli Lilly? Let's find out.

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Injectable and oral weight loss candidates

So first, let's consider Viking's story so far. The company is working on a dual GLP-1/GIP receptor agonist in injectable and oral formats. Injectable VK2735 is involved in a phase 3 trial right now, and the oral VK2735 is set to enter phase 3 in the fourth quarter of this year. These candidates work similarly to Lilly's injectable weight loss drugs, which are also dual GLP-1/GIP products, as they interact with two hormonal pathways involved in the digestive process -- they control things like appetite and blood sugar levels. (Novo's GLP-1 drugs stimulate one hormonal pathway, but operate in about the same way.)

Individuals aiming to lose weight and their doctors have rushed to these types of drugs because they've proven themselves to be safe, easy to self-administer, and effective. And for companies, they've proven to be significant growth drivers. Lilly's tirzepatide, sold as Mounjaro for type 2 diabetes and as Zepbound for weight loss, has generated blockbuster revenue -- in the latest quarter, these products together brought in more than $12 billion in revenue.

It's difficult to compare Viking's VK2735 performance to that of commercialized products or their earlier clinical trials -- the trial parameters and real-world situations don't make for an apples-to-apples comparison. But Viking's trials have produced excellent results, at around the same levels as the Novo and Lilly drugs. For example, in Viking's phase 2 obesity trial, reductions in mean body weight ranged up to more than 14% after 13 weeks.

On track to compete with leaders

Viking's performance so far puts it on track to compete with the market leaders. And demand suggests there is plenty of room for a new participant in the space to succeed. Analysts forecast a weight loss drug market of nearly $100 billion by the end of the decade.

On top of this, Viking stands out as it is developing the only dual GLP-1/GIP offering that comes in injectable and oral formulations. Novo's oral Wegovy, approved late last year, is a GLP-1 drug. And though Lilly's injectable is a dual GLP-1/GIP, its oral drug Foundayo, approved last month, is a GLP-1.

Of course, for Viking to make this portfolio one that could potentially take share from Lilly, it will have to continue successfully through the phase 3 stage and win approval -- then, Viking must convince doctors and patients that its drug is the best option for them. It's important to remember that Lilly is a big pharma player that doctors and patients know well and trust. So taking market share may not be easy. It's also key to keep in mind that Lilly has a significant manufacturing presence and has even aggressively ramped this up in recent years. A smaller player like Viking may not have the same resources.

So, considering this full picture, could Viking be the next Eli Lilly, surpassing the market leader with its weight loss drugs? Though I'm optimistic about Viking's chances for success in this market, I'm not convinced the biotech company will unseat the current leader. Lilly has the commercial and manufacturing strengths that are hard for a smaller company to beat, and Lilly's weight-loss pipeline is strong, suggesting it may continue to deliver top-performing products. But, even if Lilly remains in the top spot, if Viking reaches the finish line with VK2735, revenue and the stock price could soar -- and that's fantastic news for shareholders.

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