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Eli Lilly (NYSE: LLY) continues to beat expectations, partly thanks to its leadership in the weight loss market. In the third quarter, the company's revenue increased by 39% year over year to $24.4 billion, driven by a 49% increase in Zepbound's sales to $5.4 billion. Thanks to this now-famous weight-loss therapy, Eli Lilly increased its sales guidance. It now expects revenue between $91 billion and $92 billion, up from its previous guidance of between $85 billion and $87 billion.
Eli Lilly could continue riding the weight-loss tailwind over the medium term, but could competition from another drugmaker, Viking Therapeutics (NASDAQ: VKTX), stop the pharmaceutical giant in its tracks?
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Viking Therapeutics is following in Eli Lilly's footsteps. The clinical-stage biotech's leading candidate, VK2735, mimics the actions of the gut hormones GLP-1 and GIP. The only such approved weight-loss treatment is Eli Lilly's Zepbound. And Zepbound's dual-hormone pathway approach is thought to contribute to its greater efficacy. Can VK2735 prove as effective? So far, clinical trial results have been encouraging. In a 13-week Phase 2 study for the subcutaneous (SC) version of VK2735, the medicine led to a mean weight loss of up to 14.7%.
SC VK2735 is now undergoing Phase 3 studies, with results expected within 12 to 18 months. Mean weight-loss results in the mid-20% range, along with strong tolerability data in these trials, could send Viking Therapeutics' shares soaring, as they would put the company in a strong position to carve out a niche in the weight-loss market.
Viking Therapeutics is also developing an oral formulation of VK2735 that posted encouraging results in mid-stage studies. However, it also raised tolerability-related concerns given the high discontinuation rates, particularly among patients receiving the highest dose. Still, oral VK2735 could help Viking tap into the weight-loss pill market, which has grown rapidly this year and attracted brand-new patients who had been sitting on the sidelines.
Further, Viking is exploring ways to help patients maintain their weight after initial weight loss. That's a problem for many people. Once they discontinue treatment, they regain a significant portion of the weight. In an early stage study, Viking showed that patients who had lost weight on SC VK2735 during a 21-week induction phase, and then switched to taking it bi-weekly or monthly (it is normally administered weekly), maintained up to 97% of their initial weight loss in a 12-week maintenance phase, compared to an average of 61% for patients who switched to a placebo.
Viking Therapeutics is now testing maintenance dosing regimens that incorporate oral VK2735. The company's multi-pronged approach in this market could make it one of the biggest winners in the rapidly growing weight-loss market over the next five to 10 years.
But does Viking Therapeutics really have what it takes to dethrone Eli Lilly? The pharmaceutical giant is already facing some pricing pressure. Average realized prices for Zepbound dropped in the third quarter, but the decline was more than offset by volume growth. But as more medicines enter the market, including some that may be more effective than Eli Lilly's, there will be even more pricing pressure, and volume growth may stall, leading to lower revenue growth for the company.
That's a meaningful risk, but Eli Lilly should be able to overcome it. Here are just two reasons why. First, it's hard to find a company with a stronger weight loss lineup and pipeline than Eli Lilly. Its most important late-stage asset, retatrutide, which mimics the action of three gut hormones, has proven highly effective across diabetes, obesity, and various other obesity-related conditions.
The company has also tested maintenance regimens, including those for its oral weight-loss therapy, Foundayo, with some success. Second, Eli Lilly has been seeking to diversify its lineup and has made significant progress. Newer medicines, like Kisunla for Alzheimer's disease and the cancer drug Jaypirca, are posting strong sales growth.
The company also has a deep and diversified pipeline. That's another reason Eli Lilly's shareholders shouldn't be too worried about competition from Viking Therapeutics or other companies entering the weight-loss market. But what about Viking Therapeutics? Is the biotech company worth investing in right now?
It depends on your risk tolerance. Viking certainly has an attractive mid- and late-stage pipeline in weight loss, but clinical or regulatory setbacks could sink the stock. So, the upside is huge, but so is the downside potential. Invest accordingly.
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Prosper Junior Bakiny has positions in Eli Lilly and Viking Therapeutics. The Motley Fool has positions in and recommends Eli Lilly and Viking Therapeutics. The Motley Fool has a disclosure policy.
Eli Lilly Just Raised Its 2026 Sales Forecast to as Much as $92 Billion. But Is Viking Therapeutics the Next Big Obesity Winner? was originally published by The Motley Fool
