Is the weight loss drug sector about to change? Viking Therapeutics soared nearly 40% intraday, while Eli Lilly's market value shrank by $120 billion

On Thursday, July 25th, Viking Therapeutics, a clinical-stage biopharmaceutical company based in San Diego, saw its stock price soar by a maximum of 38.7%, marking its best performance in five months. The stock rose by approximately 33% at the close, reaching a two-month high since May 20th.

Meanwhile, both "weight-loss drug giants" Eli Lilly and Novo Nordisk from Denmark experienced declines. Eli Lilly plunged the deepest by 6.3%, dropping over 5% to its lowest point since the end of May, resulting in a market capitalization decrease of over $120 billion from its historical high on July 15th. Novo Nordisk's US stock fell by 4% and then by 2.5%, while its European stock dropped by 3.5% and closed down by 2.3%, both hitting their lowest points in two and a half months since May 8th.

The recent trend comparison of Viking Therapeutics' stock price with Eli Lilly and Novo Nordisk shows a clear divergence.

This is mainly due to the accelerated development progress of the weight-loss drug injection VK2735 by Viking Therapeutics, following a written response from the US Food and Drug Administration (FDA), which led to the decision to advance it to the third and final stage of clinical trials.

Previously, the company had been relatively conservative, stating that after a positive result in a Phase 2 trial at the end of February, they were preparing to initiate another Phase 2b or mid-term study.

Analyst Justin Zelin from BTIG pointed out that the decision to advance to Phase 3 clinical trials ahead of schedule could shorten the development time of Viking Therapeutics' injectable weight-loss drug by a year. Previously, the market had generally estimated that the drug would be launched in 2029.

In other words, the drug development by Viking Therapeutics is now one step closer to being officially launched, competing directly with Novo Nordisk's weight-loss "miracle drugs" Ozempic and Wegovy, as well as Eli Lilly's Zepbound.

More importantly, Viking Therapeutics' new drug plan will adjust the medication burden to once a month injection, making it the first company in the weight-loss drug field to do so, which is more attractive than the current weekly injection drugs of the "weight-loss giants."

Analyst Naz Rahman from Maxim Group mentioned that VK2735 may be the best injectable drug of its kind, with a monthly injection being a more convenient option and potentially a significant competitive advantage, as it is well known that patients cannot perfectly adhere to a once-weekly treatment.

In fact, after the market closed on Wednesday, Viking Therapeutics released its second-quarter financial report, which already caused its stock price to jump by 10%, laying a solid foundation for the explosive rise in stock price on Thursday. Despite the company having no revenue in the second quarter and a net loss of $22.3 million, higher than the $19.2 million loss in the same period last year, the EPS was a loss of 20 cents per share, better than Wall Street's expected loss of 27 cents per share The CEO of the company, Dr. Brian Lian, stated that the Phase II VENTURE study of VK2735 for treating obesity showed that after 13 weeks of medication, patients' weight decreased by about 15% from the baseline, with good safety and tolerability. Before advancing to the Phase III clinical trial of the drug, a Phase II study wrap-up meeting will be held with the FDA in the fourth quarter of this year to discuss the design and timing of the Phase III trial.

Another important piece of information he mentioned is that the oral version of the VK2735 weight loss drug also showed "encouraging safety and tolerability, as well as positive clinical activity signs" in a Phase I study. A Phase II trial will be initiated in the fourth quarter of this year, with subjects reporting an average weight loss of 5.3% from the baseline after oral administration for 28 days, with dose escalation continuing.

VK2735, similar to "miracle weight loss drugs" like Eli Lilly, acts through a dual agonist of a novel glucagon-like peptide-1 (GLP-1) and glucose-dependent insulinotropic polypeptide (GIP) receptor to treat metabolic diseases such as diabetes, producing significant weight loss effects by improving satiety and blood sugar levels. Analysts such as Morgan Stanley predict that by 2030, the global market size for drugs known as GLP-1 treatments could reach $150 billion.

Some analysts believe that the accelerated development of the weight loss injection by Viking Therapeutics has dealt a heavy blow to competitors Eli Lilly and Novo Nordisk's stock prices. On one hand, this is because Viking is developing both injectable and oral versions of the drug, with the injectable administration being more convenient and closer to "launching a potentially groundbreaking drug." Additionally, Eli Lilly and Novo Nordisk's weight loss miracle drugs face supply shortages, "which means competitors have room to enter the market."

Currently, analysts are optimistic about the prospects of VK2735's Phase III clinical trial, with investment bank William Blair estimating that the Phase III trial will start in early 2025, at a remarkable speed given the drug's ability to progress to Phase III trials three years after the first phase trial. Furthermore, there is optimism about other promising candidate drugs from Viking Therapeutics, especially VK2809 for non-alcoholic steatohepatitis (NASH).

Competition in the oral weight loss drug market where Viking Therapeutics operates is also heating up. Pfizer recently announced plans to further test its daily weight loss drug danuglipron. Swiss pharmaceutical company Roche stated earlier this month that patients using its oral weight loss drug CT-996 lost 6.1% more weight in one month than patients taking a placebo.

In addition, it was found that several recent news in the weight loss drug field had a relatively significant impact on Eli Lilly's stock price. Over the past eight trading days, the stock has fallen by 14%, marking the worst eight-day performance since 2020:

In the past week, the weight loss drug news released by Viking Therapeutics and Roche Holdings has triggered a sell-off of Eli Lilly's stock. This sharp decline indicates that as competitors' alternative drugs approach the market, investors believe that Eli Lilly and Novo Nordisk's dominant position in the weight loss drug market may come to an end Jared Holz, a healthcare expert at Mizuho, said that the weight loss drug sector will not always be dominated by "two giants".

Last Wednesday, Swiss pharmaceutical giant Roche announced that its acquisition company Carmot Therapeutics' second weight loss drug candidate showed positive results in early trials. Following the announcement, Roche's stock price surged by 6%. Meanwhile, the stock prices of weight loss "giants" Novo Nordisk and Eli Lilly fell by 3.77% and 2.7% respectively