Pharmaceutical Shifts: Pfizer’s Setback Boosts Viking Therapeutics’ Prospects

Big pharmaceutical companies and smaller biotech firms are vying for success in the rapidly expanding weight loss sector. Analysts project that this market will experience a compound annual growth rate in the double digits, potentially reaching between $100 billion and $130 billion by the early 2030s.

Currently, Eli Lilly and Novo Nordisk lead the market with popular treatments. Eli Lilly’s tirzepatide is marketed as Mounjaro for type 2 diabetes and Zepbound for weight loss, while Novo Nordisk’s semaglutide is sold as Ozempic for diabetes management and Wegovy for weight control. These pharmaceuticals generate billions of dollars annually for their respective companies.

Given this booming demand, more companies are eager to enter the market which, just last year, saw supply not keep pace with demand for existing treatments. Noteworthy potential new entrants include the pharmaceutical giant Pfizer (NYSE: PFE) and biotech firm Viking Therapeutics (NASDAQ: VKTX). While investors have been closely monitoring updates from both, Pfizer recently faced disappointing news. This scenario could favor Viking Therapeutics.

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Pfizer Halts Development of Weight Loss Candidate

Pfizer announced it will stop developing its oral weight loss candidate danuglipron. This decision came after a patient in a clinical trial experienced liver injury, which resolved once the medication was discontinued. This setback is not Pfizer’s first; back in 2023, the company also halted development of a twice-daily version, as over half of the participants withdrew from the trial due to side effects like nausea and vomiting, affecting 70% and 40% of participants, respectively.

Viking’s Positive Developments

In contrast, Viking is progressing with its own oral weight loss treatment. The company recently completed enrollment of its phase 2 trial, labeling the process as “rapid,” indicating significant interest in VK2735. Additionally, this candidate is also being developed in a subcutaneous format, with plans to enter phase 3 trials in the second quarter of this year.

VK2735 operates as a dual GIP/GLP-1 receptor agonist, similar to Lilly’s marketed drugs. This mechanism affects hormonal pathways related to digestion, thereby helping control blood sugar levels and appetite. Viking’s initial clinical trial results have fostered optimism among investors. Following the announcement of phase 2 results from VK2735, the company’s stock surged into triple-digit territory during one trading session. Although it has since retraced some gains, the stock remains a focused interest as Viking approaches the next phases of clinical testing.

Potential Scenarios Ahead for Pfizer and Viking

While Pfizer will continue exploring early stage weight loss candidates, the setback with danuglipron puts them at a disadvantage. Some analysts speculate that Pfizer might consider acquiring Viking or forming a partnership around VK2735, which could represent a beneficial scenario for Viking. Such a collaboration would provide Viking with Pfizer’s extensive commercial infrastructure, a competitive advantage evidenced by Pfizer’s partnership with BioNTech during the development of the top-selling coronavirus vaccine.

While it is purely speculative, these possibilities are important to consider. Furthermore, Pfizer’s setback may delay the entry of a competitor into the market. Although demand is high enough for multiple players, Viking would be better positioned to launch ahead of larger rivals known for their blockbuster drugs.

Investment Implications

Pfizer’s recent decision regarding danuglipron could ultimately favor Viking, even if it simply delays Pfizer from entering the market. Coupled with Viking’s promising clinical trial results and the sector’s growth potential, this makes it an intriguing investment opportunity. However, investors should consider that Viking does not yet have products on the market, meaning some may prefer a cautious approach. Yet, for risk-tolerant investors seeking to enter a high-potential biotech, Viking could be worth considering.

Should You Invest in Viking Therapeutics Now?

Before making any investment in Viking Therapeutics, it’s prudent to evaluate the company’s current status and prospects.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool also recommends BioNTech SE, Novo Nordisk, and Viking Therapeutics. Refer to the Motley Fool’s disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.