Demand for GLP-1 drugs is soaring. Thanks to recent breakthroughs, medicines in this category are expanding their addressable markets and treating conditions such as obstructive sleep apnea (OSA), metabolic dysfunction-associated steatohepatitis, and others, in addition to diabetes and weight management, which are perhaps their most important areas.
Eli Lilly (LLY -0.52%) is a leader in this space, but several companies are looking to take its crown. One of them is Viking Therapeutics (VKTX +2.88%), a smaller biotech with promising GLP-1 candidates. Could Viking Therapeutics successfully challenge Eli Lilly? Let’s find out which of these two stocks is a better buy for investors looking to capitalize on this opportunity.
Image source: The Motley Fool.
Eli Lilly is firing on all cylinders
Eli Lilly’s tirzepatide, which mimics the action of both the GLP-1 and GIP hormones, is approved for diabetes, weight loss, and OSA. It is by far the company’s most important growth driver right now and the best-selling medicine in this niche. In the second quarter, Eli Lilly’s revenue increased by 48% year over year to $23 billion. Sales of Mounjaro — the brand name for tirzepatide in the diabetes market — soared 91% year over year to $9.9 billion. Zepbound’s (tirzepatide’s brand in weight management) revenue was $4.9 billion, up 46% compared to the year-ago period.
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Eli Lilly also markets Foundayo, an oral GLP-1 that is helping expand the market by attracting mostly new patients. It isn’t generating meaningful revenue yet, at least by Eli Lilly’s standards, but once it expands beyond weight loss and into diabetes, OSA, and other indications, it could start making substantial contributions to top-line growth.
Eli Lilly has a deep pipeline beyond these approved products. The most promising is retatrutide, a medicine that posted outstanding phase 3 clinical trial results in diabetes and weight loss. Eli Lilly plans to request approval for retatrutide in the first quarter of 2027. Eli Lilly looks likely to maintain its lead in this market for the foreseeable future, and it also has attractive approved products and pipeline candidates in other areas.
Viking Therapeutics has key catalysts ahead
Viking Therapeutics is a clinical-stage biotech. The company’s leading candidate, VK2735, looks promising. Just like tirzepatide, VK2735 is a dual GLP-1 and GIP agonist. A subcutaneous version of the medicine is undergoing phase 3 studies, while the drugmaker should start late-stage trials for an oral formulation by year-end. Subcutaneous VK2735 posted excellent results in phase 2 studies. It led to a mean weight loss of up to 14.7% in 13 weeks, with no plateau observed.
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The usual caveats about comparing across clinical trials aside, tirzepatide posted an average weight loss of 20.2% in 72 weeks in a phase 3 study. Perhaps subcutaneous VK2735 can match — or even exceed — tirzepatide’s efficacy in the longer clinical trials in which it is being tested. The oral formulation of the medicine also showed highly encouraging phase 2 efficacy, although there were concerns about high rates of discontinuation due to side effects. Still, Viking Therapeutics could see its share soar on solid phase 3 data for both formulations.
Which is the better buy?
There is no contest between these two companies if we focus on fundamentals. Eli Lilly is a well-established pharmaceutical leader with a deep product portfolio that generates consistent revenue and earnings. Viking Therapeutics doesn’t have a single approved product, generates no revenue, is not profitable, and may not be for a while. However, Viking Therapeutics arguably has more upside potential.
If the company’s upcoming data readouts are robust enough and it can carve out a niche in the rapidly growing GLP-1 market, its shares will rise significantly from current levels — they could easily double (or more) in the next couple of years and continue delivering strong returns through the end of the decade.
But that significant upside potential also comes with a hefty dose of risk: Viking Therapeutics’ shares will fall off a cliff if VK2735 disappoints. So, which GLP-1 stock is better? I’d opt for Eli Lilly. The larger drugmaker has a deep portfolio and pipeline in this field and can beat the market as it continues to capitalize on soaring GLP-1 demand, with limited downside risk compared to Viking Therapeutics.
