VKTX vs LLY: Is This Mid-Cap GLP-1 Stock a Better Buy?

Viking Therapeutics (VKTX) recently reported positive clinical trial results for its GLP-1 drug, VK2735. Patients on the weekly treatment achieved 16% to 19% weight loss, and those who switched to maintenance dosing maintained 97% of that loss when dosed every other week, and 90% when dosed monthly. The stock jumped on the news, reflecting investor enthusiasm for a potential new entrant in the booming weight-loss market.

Viking is a mid-cap biotech with a market cap of around $4.4 billion and no approved drugs on the market. It is currently burning cash, but VK2735 could change that if approved. The drug is still in clinical trials and faces regulatory hurdles, but its efficacy so far is competitive with existing therapies.

The GLP-1 market is dominated by Eli Lilly (LLY) and Novo Nordisk, but demand is so high that there is room for multiple players. Viking's data suggests its drug could be a viable alternative, and its smaller size means even modest market share could translate into significant revenue.

Investors have been rewarding biotech companies with promising obesity drugs, and Viking is no exception. The stock has risen over 40% in the past year, and the recent trial results added fuel to the rally. However, the company remains a speculative bet, as approval is not guaranteed and competition is fierce.

The GLP-1 market is projected to reach $100 billion or more by the end of the decade, and companies that can capture even a small slice could see substantial growth. Eli Lilly, with a $1 trillion market cap, is already a giant, and its stock has returned over 400% in five years. But at such a high valuation, future gains may be more modest.

Viking, on the other hand, is a much smaller company with a market cap of just $4.4 billion. If VK2735 gains approval, it could generate $1 billion or more in revenue, transforming Viking's financials. Moreover, Viking could become an acquisition target for a larger pharmaceutical company looking to enter the GLP-1 space, which could lead to a buyout premium.

However, the risks are significant. Clinical trials can fail, and the FDA may not approve the drug. Viking has no other approved products, so its entire valuation hinges on VK2735. Investors must weigh the potential for huge returns against the possibility of losing their investment.

For those with a higher risk tolerance, Viking offers a compelling opportunity. For more conservative investors, Eli Lilly remains a safer choice, though with potentially lower returns. The decision ultimately depends on individual investment goals and risk appetite.