Biotech firm Viking Therapeutics stands out as a potent contender — or potential acquisition target — in the burgeoning weight loss pharmaceutical sector. Viking is among several entities vying to enter this expanding arena. Analysts predict the market could reach a staggering $100 billion valuation by the decade’s end.
The company aims to rival the injectable drugs offered by Eli Lilly and Novo Nordisk. Despite their high costs and insurance coverage hurdles, these treatments ignited a frenzy in the weight loss drug market over the past year.
According to some analysts on Wall Street, Viking’s experimental obesity treatment shows promise of being “best-in-class.” In a midstage trial, an injectable iteration of Viking’s medication demonstrated the potential for even more significant weight reduction compared to Eli Lilly’s Zepbound. Following Tuesday’s release of initial data from this study, Viking’s stock surged by 120%.
These encouraging findings position the company as a formidable contender in a market poised for further expansion in the years ahead. Goldman Sachs forecasts that between 10 million and 70 million Americans could be using weight loss drugs by 2028. Supply shortages of treatments from Eli Lilly and Novo Nordisk have opened doors for other companies to gain market share.
The latest data also enhances Viking’s allure as an acquisition target for larger firms seeking to enter or bolster their presence in the obesity treatment sector. It remains premature to determine whether Viking’s drug holds an advantage over existing or forthcoming weight loss therapies. Direct comparisons between treatments are challenging without head-to-head clinical trials.
Viking must also conduct late-stage studies on its drug, with a likely launch of the injection slated for the latter part of the decade. The company, despite its promising prospects, faces obstacles in entering the market, including ramping up manufacturing to meet escalating demand. However, an acquisition by a larger entity could help address some of these challenges.
Data suggests Viking’s drug may have an edge
Viking’s phase two trial involved over 170 overweight or obese patients who received various doses of the injectable drug or a placebo.
Although the trial didn’t directly compare Viking’s treatment to others, analysts often drew parallels between Viking’s injection and Eli Lilly’s Zepbound due to their similar mechanisms. Both drugs mimic two gut hormones, GLP-1 and GIP, which help reduce food intake and appetite. GIP, in addition to suppressing appetite, may also enhance sugar and fat metabolism.
In contrast, Novo Nordisk’s weight loss injection, Wegovy, solely targets GLP-1.
Analysts were particularly impressed by the weight loss among patients receiving the highest dose of Viking’s drug. Those administered a weekly 15-milligram dose lost an average of 13.1% of their body weight after 13 weeks compared to the placebo group.
Notably, there was no evidence of weight loss plateauing at week 13 for any dose, suggesting the potential for further weight reduction with prolonged treatment, as highlighted by Viking CEO Brian Lian during an investor call. Viking’s drug data exhibits a “best-in-class profile” compared to both approved and experimental weight loss drugs with phase two trials, noted William Blair analyst Andy Hsieh.
According to Hsieh, Eli Lilly’s Zepbound generated approximately 7% weight loss relative to placebo after 12 weeks in a phase three clinical trial.
Moreover, Viking’s drug appears to surpass Novo Nordisk’s Wegovy, as indicated by BTIG analyst Justin Zelin. Based on chart data from a phase three trial, Wegovy achieved around 5% weight loss at 13 weeks compared to placebo. In contrast, several analysts estimated that certain doses of Eli Lilly’s experimental injection, retatrutide, led to between 9% and 13% weight loss relative to placebo at 13 weeks based on chart data from a midstage trial.
Most adverse side effects experienced by patients after starting Viking’s drug were mild or moderate, with gastrointestinal issues being the most common, consistent with other weight loss and diabetes treatments. Approximately 20% of patients receiving the 15-milligram version of Viking’s drug discontinued treatment early in the study, compared to around 14% in the placebo group.
However, Jefferies analyst Akash Tewari noted that Viking’s trial employed faster “titration” in patients, referring to the gradual increase in dose until reaching a target level. Tewari suggested that in a future trial with slower titration, Viking may enhance the drug’s tolerability for patients, potentially affecting its efficacy.
Viking still has a long way to go
Despite the compelling data, Viking has a significant amount of work ahead before it can effectively compete in the weight loss drug market. The company intends to engage with the U.S. Food and Drug Administration later this year to outline a clinical development plan for the treatment. During an investor call on Tuesday, Viking CEO Brian Lian indicated that the company is likely to embark on another phase two trial, which could extend over six to nine months.
Jefferies’ Tewari predicts that Viking’s treatment won’t hit the market until 2029 or beyond. Conducting a late-stage trial for the drug could be a lengthy process. For instance, Eli Lilly’s phase three study on Zepbound lasted between two and a half to three years. The delayed entry of Viking’s drug is a key factor contributing to Tewari’s skepticism regarding the company’s ability to significantly impact Eli Lilly’s market share.
Moreover, the pharmaceutical giant may introduce a range of other weight loss treatments in the coming years, potentially surpassing Zepbound in terms of effectiveness or convenience. These include Eli Lilly’s experimental pill orforglipron and the highly anticipated retatrutide, which mimics three gut hormones instead of two.
Analysts from Deutsche Bank emphasized in a note on Tuesday that manufacturing weight loss treatments “at scale to meet outsized demand has proven to be no easy feat.” They highlighted that this challenge provides Eli Lilly and Novo Nordisk with a “defensive moat” against competitors.
Viking acknowledged this obstacle during the Tuesday call. Lian stated that while the company has a sufficient supply of the drug to support its clinical trials, its manufacturing capacity falls short of a commercial rollout.
However, Lian mentioned that the company is actively exploring multiple manufacturing processes to determine “what’s fastest, what’s highest yielding, what’s cheapest, and what’s most scalable.”
Partnerships and acquisitions are being considered
Viking’s impressive data could position it as an attractive target for acquisition or partnership with a larger pharmaceutical company, potentially providing Viking with the commercial and manufacturing capabilities necessary to compete in the weight loss drug market.
Hsieh from William Blair suggested that large pharmaceutical companies could enhance the value of Viking’s treatment by navigating the rebate and reimbursement landscape more effectively for weight loss drugs.
Some analysts anticipate high interest in Viking from other companies.
Oppenheimer analyst Jay Olson told CNBC, “This very well could be on the shopping list for any large-cap pharma or biotech company that wants to be in the obesity market but currently doesn’t have a drug. There are plenty of them out there.”
Olson added that a company might “pay a pretty significant premium for Viking and pick this up … for a relatively low price compared to the potential that exists for a drug like this.” As of Friday, Viking had a market cap exceeding $8.5 billion. Viking’s appeal extends beyond the new data. Wall Street eagerly anticipates the release of early-stage trial results on an oral version of its weight loss treatment this quarter.
BTIG analysts highlighted that intellectual property coverage for both versions of the drug extends beyond 2040, which “bodes well” for potential partnership discussions. Viking also has other drugs in development, including a promising oral treatment for a certain form of liver disease. Eli Lilly, Novo Nordisk, and other drugmakers are also racing to explore whether their drugs can treat the same condition.
Although Viking has not disclosed details about its discussions with potential partners, Lian stated during Viking’s fourth-quarter earnings call last month that the company has “always been open to partner discussions since day one, so we’re always opportunistically evaluating whatever is presented to us.”
Over the past year, other drugmakers have pursued deals to establish a presence in the weight loss drug market. Swiss company Roche announced plans to acquire the privately held U.S. obesity drugmaker Carmot Therapeutics for $2.7 billion. AstraZeneca signed a licensing agreement with Chinese biotech company Eccogene to develop an obesity pill.
Even Novo Nordisk and Eli Lilly have acquired smaller obesity drug companies this year to maintain their dominance in the market.
