Novo Nordisk and Eli Lilly may finally have real competition

By | March 27, 2024

One of the biggest themes in the pharmaceutical market right now is weight loss treatments. There is no high demand for drugs such as Ozempic, Rybelsus, Saxenda, Wegovy, Mounjaro, Jardiance and Zepbound. That’s a long list of treatments, isn’t it?

However, what you may not know is that just two companies, Novo Nordisk (NYSE: NVO) And Eli Lilly (NYSE: LLY), developed all the above drugs. Both companies have made significant progress in treating diabetes and obesity patients thanks to breakthroughs in compounds known as semaglutide and tirzepatide.

However, an emerging biotech could be nipping at their heels and preparing to disrupt Lilly and Novo Nordisk. Let’s look at the full picture and assess what’s going on.

There’s a new kid on the block

Viking therapies (NASDAQ: VKTX) is a small biotech company seeking to develop treatments for metabolic and endocrine disorders.

Many other pharmaceutical companies have tried to enter the red-hot weight loss market, but can’t seem to get things right. But a few weeks ago, Viking announced positive indications from a Phase 2 clinical trial for its dual GLP-1 and GIP receptor agonist VK2735. The hype surrounding the company’s obesity candidate caused investors to send Viking shares soaring.

Scientists work in a laboratory.

Image source: Getty Images

What are some possible outcomes?

Given the success of the Phase 2 trial, I see some obvious results for Viking. The first is for the company to move quickly into a Phase 3 trial and work closely with the Food and Drug Administration (FDA) to bring its obesity candidate to market.

The second possible outcome is more interesting. Given the positive momentum Viking is experiencing, the company could be a ripe takeover target Pfizer (NYSE:PFE) possibly a suitable candidate to buy out Viking.

On the surface, this seems like a pretty good idea: Pfizer has faced setbacks as it looks to enter the realm of weight-loss drugs. However, if Viking is acquired, I simply don’t see Pfizer as the buyer.

For example, Pfizer recently completed the acquisition of Seagen, an agreement that will likely entail mountains of integration efforts that could take years. Second, with $30 billion of newly issued debt on the balance sheet to help finance the Seagen acquisition, I don’t think Pfizer is currently in the best financial position to buy another company.

Should You Invest in Viking Therapeutics Now?

Can Viking pose a threat to Lilly and Novo Nordisk? Maybe one day. But I think the most likely outcome is that if Viking brings its obesity drug to market, it will help increase competition, which could result in further profits for all three pharmaceutical companies.

According to research by JPMorgan. While Viking’s prospects look encouraging at the moment, it will likely take years for the anti-obesity drug to meet all of the FDA’s requirements to gain approval. And even if that happens, the size of the market says there will likely be multiple winners in the long run.

One of the most important details about Viking is that the company is still a clinical-stage biotech company. Essentially, it spends money on research and development in the hopes of bringing a blockbuster drug to market. But with no tangible revenue, Viking remains speculative at the moment.

Eli Lilly and Novo Nordisk, on the other hand, are already established players in the diabetes and obesity care markets. I see both companies as safer and more compelling options for investors interested in the weight loss market.

Should you invest $1,000 in Viking Therapeutics now?

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Adam Spatacco has positions at Eli Lilly and Novo Nordisk. The Motley Fool has and recommends positions in JPMorgan Chase and Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

Novo Nordisk and Eli Lilly May Finally Have Real Competition Originally published by The Motley Fool

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