Best Obesity Drug Stock: Eli Lilly, Novo Nordisk, or Viking Therapeutics?
Some investors might remember the obesity drugs developed by Arena Pharmaceuticals and Vivus Pharmaceuticals several years ago. They'll probably also recall that the initial euphoria over those drugs quickly faded.
This time it's different. The commercial success of Novo Nordisk's (NYSE: NVO) and Eli Lilly's (NYSE: LLY) new weight-loss drugs prove it. These two big biopharma companies probably won't have the market to themselves for too much longer, though. Viking Therapeutics (NASDAQ: VKTX) could be another big winner in the future after announcing great results for its obesity drug, VK2735.
While investors couldn't make long-lived profits from the stocks of companies with weight-loss drugs years ago, they might today. Which is the best obesity drug stock: Eli Lilly, Novo Nordisk, or Viking Therapeutics?
The case for Eli Lilly
Lilly's weight loss drug Zepbound is the main reason to consider buying the pharma stock. Many analysts expect it to become one of the best-selling drugs ever with some estimated peak annual sales in the ballpark of $37 billion.
Mounjaro is the same drug as Zepbound but with a different brand name and approved indication (type 2 diabetes). It's currently Lilly's strongest growth driver, raking in sales of nearly $5.2 billion last year. Analysts think Mounjaro could achieve peak annual sales of $22 billion.
Lilly's product lineup features other growth drivers, too. For example, sales for cancer drug Verzenio soared 56% year over year in 2023 to $2.5 billion. Type 2 diabetes drug Jardiance continues to perform well also, with annual sales jumping 33% nearly $2.1 billion.
The company's pipeline looks especially exciting. Lilly awaits U.S. Food and Drug Administration (FDA) approval for donanemab in treating early Alzheimer's disease. Its 21 late-stage programs include several potential new indications for tirzepatide (the generic name for Mounjaro and Zepbound) and another promising diabetes and obesity drug called orforglipron.
The case for Novo Nordisk
The main draws for Novo Nordisk right now are its semaglutide products -- Ozempic for type 2 diabetes, Wegovy for weight loss and cardiovascular risk reduction, and Rybelsus for weight loss. Patient demand for Ozempic and Wegovy has been practically off the charts.
Novo Nordisk hopes to target additional markets with semaglutide. The company recently reported that the drug reduced the risk of kidney-disease related events by 24% in people with type 2 diabetes and chronic kidney disease. Novo is also evaluating the drug in late-stage studies for treating Alzheimer's disease and metabolic dysfunction-associated steatohepatitis (MASH), which is also known as nonalcoholic steatohepatitis (NASH).
The company is using the cash generated largely by Ozempic and Wegovy to fund business development. For example, Novo Nordisk recently announced plans to acquire Catalent and Cardior Pharmaceuticals.
Investors have reason to be enthusiastic about Novo Nordisk's pipeline prospects. The company has 12 late-stage programs, including an oral version of semaglutide targeting type 2 diabetes and new drug called CagriSema targeting type 2 diabetes and obesity.
The case for Viking Therapeutics
Viking Therapeutics doesn't have the strong product lineups and fast-growing profits that Lilly and Novo Nordisk have. However, what the biotech does have is one of the most promising weight loss drugs in clinical testing.
In February, Viking announced overwhelmingly positive results from a phase 2 study evaluating VK2735 in weight loss. Patients receiving the experimental drug experienced a placebo-adjusted mean weight loss of up to 13.1% after 13 weeks of treatment. This weight loss occurred faster than seen with Ozempic and Wegovy in their clinical trials.
Viking is testing an oral version of VK2735 in a phase 1 study. The company expects to announce data from that study soon.
Investors also eagerly await results from a phase 2 study of Viking's VK2809 in treating NASH. Interim results from this clinical study looked promising with patients experiencing significant liver fat reduction.
Best obesity drug stock?
Which of these is the best obesity drug stock? I think the answer depends on what kind of investor you are.
If you're an aggressive investor, Viking looks like the best pick. The company's market cap of around $7.6 billion doesn't fully reflect its growth prospects if VK2735 and VK2809 achieve the success that some think they will. The downside to Viking is its risk. The biotech's clinical programs could experience setbacks and face steep competition even if approved.
If you're a more conservative investor, you probably won't go wrong buying either Lilly or Novo Nordisk. Between the two, though, I think that Lilly is the better choice. It has more late-stage programs than Novo Nordisk and arguably stronger growth prospects.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
Best Obesity Drug Stock: Eli Lilly, Novo Nordisk, or Viking Therapeutics? was originally published by The Motley Fool
