Eli Lilly vs. Viking Therapeutics

By | March 5, 2024

To compare Eli Lilly (NYSE: LLY) And Viking therapies (NASDAQ: VKTX) may seem strange at first. The two drug makers don’t appear to have much in common. Eli Lilly is more than 50 times the size of Viking in terms of market capitalization and boasts a long list of approved drugs and an impressive track record of success. Viking Therapeutics, on the other hand, is a clinical-stage biotech stock whose most advanced candidate isn’t even in late-stage studies yet. But for investment purposes, is there any reason to choose Viking Therapeutics over Eli Lilly? Let’s find out.

The case for Eli Lilly

Eli Lilly has delivered market-crushing returns in recent years, and it’s not hard to see why. The drugmaker has made impressive regulatory progress, none more significant than tirzepatide, a clinical agent marketed as Mounjaro that targets type 2 diabetes, and Zepbound for the treatment of obesity. Tirzepatide is the first and only dual GLP-1/GIP drug to receive approval from the US Food and Drug Administration (FDA).

Basically, these two classes of medications work by stimulating certain hormones in the body, helping patients feel full longer and promoting satiety. Thus, they help patients lose weight. Some analysts predict that Eli Lilly’s Tirzepatide could reach peak sales of $25 billion and become the best-selling therapy in the history of the pharmaceutical industry. However, Eli Lilly’s lineup goes far beyond this single product.

The company has various products whose turnover is still growing rapidly. That includes the immunosuppressant Taltz, the diabetes drug Jardiance and the cancer drug Verzenio. Last year, Eli Lilly secured major approvals including Omvoh, a therapy for ulcerative colitis, and cancer therapy Jaypirca. Eli Lilly expects another major regulatory nod this year for donanemab, a potential drug for Alzheimer’s disease.

Eli Lilly has achieved excellent financial results. Last year, total revenue of $34.1 billion increased 20% year over year. The company’s net profit fell 16% year over year to $5.2 billion, mainly due to expenses related to some acquisitions it made last year. Analysts expect Eli Lilly’s earnings per share to rise by as much as 50% per year over the next five years.

In short, the case for Eli Lilly is rock solid.

The case for Viking Therapeutics

Viking Therapeutics does not generate any income and is therefore not yet profitable. Still, clinical-stage biotech companies can deliver incredible stock returns, provided they make solid clinical progress. Case in point: Shares of Viking Therapeutics recently doubled in just one day after the company announced positive Phase 2 results for its lead candidate, VK2735, a potential dual GLP-1/GIP drug, in the weight loss space.

The biotech says VK2735 showed a statistically significant reduction in body weight compared to placebo in the study, while being generally well tolerated. There’s still a long way to go before VK2735 gets approval, but if it does go that far, Viking shares could go through the roof with data readouts like this. The biotech has another promising therapy in the pipeline called VK2809, a potential treatment for non-alcoholic steatohepatitis (NASH). It should provide some data in the first half of the year.

This market seems to have a bright future. There is currently no FDA-approved therapy for NASH (although the first one could appear soon), while analysts expect spending in this area to reach as much as $110 billion by 2030. Viking Therapeutics doesn’t need to become a leader in NASH or obesity to achieve outsized returns. It just needs to create a little niche for itself. If the biotech can maintain solid clinical updates and launch VK2735 and VK2809 within a few years, it could even outperform the mighty Eli Lilly.

What is your investment style?

Viking Therapeutics announced a proposed public offering of common stock after shares soared following the data readout, a move that will likely drag the stock price back down. Finding sources of financing is essential for smaller biotech companies that do not have products on the market. It is often unavoidable to use dilutive forms of financing. Investors should keep that in mind. Here’s another problem: If Viking Therapeutics’ clinical results don’t meet investor standards — or if it hits regulatory roadblocks — the stock could fall off a cliff.

The end result is clear: Viking Therapeutics’ potential is enormous, but so is its downside. Investors should choose Eli Lilly unless they have a high tolerance for risk and volatility.

Should You Invest $1,000 in Eli Lilly Right Now?

Consider the following before purchasing shares in Eli Lilly:

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Better Buy: Eli Lilly vs. Viking Therapeutics was originally published by The Motley Fool

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