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Biotech company Viking Therapeutics has emerged as a strong potential entrant — or takeover target — in the budding weight loss drug market. 

Viking is just one of several companies racing to join the growing space. Some analysts say the market could be worth $100 billion by the end of the decade.

Viking aims to compete with injectable drugs from Eli Lilly and Novo Nordisk. Their treatments sparked the weight loss drug industry gold rush over the past year despite their hefty price tags and barriers to insurance coverage. 

Some Wall Street analysts said Viking’s experimental obesity treatment may be “best-in-class.” In a midstage trial, an injectable version of Viking’s drug appeared to promote even greater weight loss than Eli Lilly’s Zepbound.

Viking gave a first glimpse at data from that study on Tuesday, and its shares soared 120%. The promising results make the company an impressive potential player in a market that will likely have room for more entrants in the coming years. 

Goldman Sachs projects that between 10 million and 70 million Americans will be taking weight loss drugs by 2028. Eli Lilly and Novo Nordisk have also struggled to offer enough supply of their treatments, giving other companies a chance to win market share.  

The new data also makes Viking a more attractive deal target for larger companies trying to break into the space or expand their obesity treatment offerings.

It’s too early to say whether Viking’s drug could have an edge over existing or developing weight loss treatments. It’s difficult to compare therapies without pitting them head to head in the same clinical trial. 

Viking also needs to conduct a late-stage study on its drug, and likely won’t launch the injection until the later part of the decade. The small company faces hurdles to entering the market, such as manufacturing enough of the drug to meet booming demand. But an acquisition by a larger company could help solve some of those issues.

Data suggests Viking’s drug may have an edge

Viking’s phase two trial followed more than 170 patients who are overweight or obese. They received different dose sizes of the injectable drug or a placebo.

The trial did not directly compare Viking’s treatment to other drugs. Still, many analysts compared Viking’s injection to Eli Lilly’s Zepbound, largely because they work the same way. 

An injection pen of Zepbound, Eli Lilly’s weight loss drug, is displayed in New York City on Dec. 11, 2023.

Brendan Mcdermid | Reuters

Both drugs imitate two naturally produced gut hormones called GLP-1 and GIP. GLP helps reduce food intake and appetite. GIP, which also suppresses appetite, may also improve how the body breaks down sugar and fat.

Meanwhile, Novo Nordisk’s weight loss injection Wegovy only targets GLP-1. 

Analysts were particularly impressed by the weight patients lost after they took the highest dose of Viking’s drug. Those who received a weekly 15 milligram dose of the treatment lost 13.1% of their body weight on average after 13 weeks compared to those who took the placebo. 

Notably, there was no evidence of a plateau in weight reduction at week 13 for any dose of the drug. That suggests that “further weight loss might be achieved” by keeping patients on the treatment longer, Viking CEO Brian Lian said during a call with investors on Tuesday.

Viking’s drug data shows a “best-in-class profile” among both approved and experimental weight loss drugs with phase two trials, William Blair analyst Andy Hsieh wrote in a note Tuesday. Eli Lilly’s Zepbound generated roughly 7% weight loss relative to a placebo after 12 weeks in a phase three clinical trial, Hsieh noted.

Viking’s drug also appears to top Novo Nordisk’s weight loss injection Wegovy, according to a separate Tuesday note from BTIG analysts.

Based on chart data from a phase three trial, the analysts estimated that Wegovy caused around 5% weight loss at 13 weeks compared to a placebo.

Meanwhile, several analysts estimated that some doses of Eli Lilly’s experimental injection, retatrutide, caused between 9% and 13% weight loss relative to a placebo at 13 weeks based on chart data from a midstage trial.

The majority of adverse side effects that patients experienced after starting Viking’s drug were mild or moderate. Many of those instances were gastrointestinal, which is common across all weight loss and diabetes treatments.

Around 20% of patients who took the 15 milligram version of Viking’s drug discontinued treatment early in the study. That compares with around 14% of those taking the placebo who stopped early in the trial. 

But Jefferies analyst Akash Tewari wrote in a note Tuesday that Viking’s trial used faster “titration” in patients. That refers to increasing the dose size a patient takes over time until they reach a target dosage level. 

He said Viking may be able to make its drug easier for patients to tolerate in a future trial with slower titration, which could potentially lower the treatment’s efficacy. 

Viking still has a long way to go

Despite the compelling data, Viking has far more work to do before it can compete in the weight loss drug market. 

The company plans to meet with the U.S. Food and Drug Administration later this year to discuss a clinical development plan for the treatment. 

Viking CEO Brian Lian told investors on a call Tuesday that the company will likely conduct another phase two trial that could last six to nine months.

Jefferies’ Tewari estimates that Viking’s treatment won’t reach the market until 2029 or later. A late-stage trial on the drug could be lengthy. Eli Lilly’s phase three study on Zepbound lasted two and a half to three years.

The late entrance of Viking’s drug is one reason why Tewari doesn’t believe the company will meaningfully cut into Eli Lilly’s market.

The pharmaceutical giant could also launch a slate of other weight loss treatments over the next few years that may have advantages over Zepbound, whether they offer more weight loss or convenience. They include Eli Lilly’s experimental pill orforglipron and the widely watched retatrutide, which mimics three gut hormones instead of two. 

An Eli Lilly and Company pharmaceutical manufacturing plant is pictured in Branchburg, New Jersey, on March 5, 2021.

Mike Segar | Reuters

Analysts from Deutsche Bank added in a note Tuesday that manufacturing the treatments “at scale to meet outsized demand has proven to be no easy feat.” They said that gives Eli Lilly and Novo Nordisk a “defensive moat” against rivals.

Viking acknowledged this hurdle on the call Tuesday. Lian said the company has enough supply of the drug to support its clinical trials, but its manufacturing capacity is insufficient for a commercial rollout. 

But Lian noted that the company is “spending a lot of time” evaluating multiple manufacturing processes to understand “what’s fastest, what’s highest yielding, what’s cheapest and what’s most scalable.” 

Partnerships, buyouts are on the table 

Viking’s impressive data could make it an attractive target for a takeover or partnership with a large pharmaceutical company. That could give Viking the commercial and manufacturing capabilities needed to compete in the weight loss drug market. 

William Blair’s Hsieh added that large pharmaceutical companies could maximize the value of Viking’s treatment because they could better navigate the rebate and reimbursement landscape for weight loss drugs.

Some analysts expect other companies to have high interest in Viking.

“This very well could be on the shopping list for any large-cap pharma or biotech company that wants to be in the obesity market but currently doesn’t have a drug. There are plenty of them out there,” Oppenheimer analyst Jay Olson told CNBC. 

He added that a company could “pay a pretty significant premium for Viking and pick this up … for a relatively low price compared to the potential that exists for a drug like this.” As of Friday, Viking had a market cap of more than $8.5 billion.

Injection pens of Novo Nordisk’s weight loss drug Wegovy are shown in this photo in Oslo, Norway, on Nov. 21, 2023.

Victoria Klesty | Reuters

Viking is an appealing deal target because of more than just the new data. Wall Street is eager for the company to release early-stage trial results on an oral version of its weight loss treatment this quarter. 

The BTIG analysts noted that the intellectual property coverage for both versions of the drug extends beyond 2040, “boding well” for potential partnership discussions. 

Viking also has other drugs in development, including a promising oral treatment for a certain form of liver disease. Eli Lilly, Novo Nordisk and other drugmakers are also racing to see whether their drugs can treat that same condition. 

Viking hasn’t disclosed any details about its discussions with potential partners. But the company has “always been open to partner discussions since day one, so we’re always opportunistically evaluating whatever is presented to us,” Lian said during Viking’s fourth-quarter earnings call last month. 

Other drugmakers have pursued deals over the past year to carve out a space in the weight loss drug market. 

Swiss company Roche said it would buy the privately held U.S. obesity drugmaker Carmot Therapeutics for $2.7 billion. AstraZeneca signed a licensing agreement with Chinese biotech company Eccogene to develop an obesity pill. 

Even Novo Nordisk and Eli Lilly have snapped up smaller obesity drug companies this year to maintain their dominance in the market.

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Shares of Novavax closed more than 20% lower on Wednesday after the vaccine maker reported fourth-quarter revenue and earnings that missed Wall Street’s estimates and said it expects full-year 2024 sales to come in flat or lower than last year.

Still, Novavax narrowed its losses in the quarter from the same period a year ago, even as demand for the biotech company’s Covid vaccine – its only marketable product – and other shots and treatments that combat the virus continue to plummet worldwide. 

Here’s what Novavax reported for the fourth quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:

• Loss per share: $1.44 vs. a loss of 45 cents expected 
• Revenue: $291.3 million vs. $322 million expected

The company posted a net loss of $178.4 million, or $1.44 per share, for the quarter. That compares with a net loss of $182.2 million, or $2.28 per share, in the year-earlier quarter. 

Novavax generated fourth-quarter sales of $291.3 million, down from the $357.4 million in the year-earlier period. 

Novavax CEO John Jacobs told CNBC that the company had some revenue move from 2023 into 2024 due to the timing of some advance purchase agreements for doses of its Covid shot. But Jacobs also said on an earnings call with investors Wednesday that Novavax is “disappointed” with its performance in the U.S. Covid vaccine market last season.

Several factors, such as the later entry of Novavax’s updated Covid shot last fall, affected the company’s ability to gain Covid vaccine market share in the U.S., Novavax Chief Operating Officer John Trizzino said on the call.

But he said factors “outside of our control,” including a smaller-than-expected Covid market size and an overwhelming number of vaccinations that took place in retail pharmacies, led Novavax to perform below expectations.

Trizzino said the company will work to increase its market share this year through efforts such as rolling out its next Covid shot in early September and streamlining its customer engagement teams to focus on retail pharmacies, which accounted for more than 95% of vaccinations this past season. Next season, Novavax also hopes to offer its vaccine in a pre-filled syringe, which would be more convenient than the shot’s current five-dose vial form.

Novavax expects full-year 2024 revenue to come in between $800 million and $1 billion. That forecast reflects an expected $500 million to $600 million in revenue from advanced purchase agreements and $300 million to $400 million from commercial market product sales, royalties and other revenue from the company’s “partner-related activity.” 

Analysts surveyed by LSEG expect 2024 revenue of $969.6 million. 

Novavax anticipates first-quarter revenue to come in at $100 million, which reflects the tail end of the current Covid vaccination season. The company previously expected $300 million in sales for the period.

Novavax reiterated its program to slash more expenses this year as part of the global cost-cutting plan it launched last year. 

The company plans to lower its combined research and development as well as selling, general and administrative expenses to a range of $700 million to $800 million in 2024. 

Novavax already shaved down those combined expenses to $1.21 billion last year. That’s $150 million more than the company’s initial target for those expenses, Jacobs noted. Those combined expenses came in at $1.69 billion in 2022. 

The company also reduced its operating expenses in 2023 by $1.1 billion, or 41%, compared with 2022. It also cut its workforce by 30% compared with the first quarter of 2023. 

The cuts will help Novavax focus on further developing its combination vaccine targeting Covid and the flu, which it plans to launch in 2026. The company expects to start a late-stage trial on that shot in the second half of the year.

Jacobs said that combination jab will open up a market that ranges between 120 million and 140 million doses a year. The company’s data suggests that a large portion of people who receive separate Covid and flu shots will convert to combination options, he added.

The results come a year after the biotech company first raised concerns about its ability to stay in business. Shares of Novavax fell more than 50% last year. 

But the stock got a huge boost last week after it eliminated what some analysts considered one of the biggest uncertainties around the company. 

On Thursday, Novavax said it will settle a bitter arbitration dispute with Gavi, a nongovernmental global vaccine organization, over a canceled Covid vaccine purchase agreement. Novavax could pay around $300 million to $400 million to the organization, but the total amount may be less if Gavi decides to order more shots from the company over the next five years.

If Novavax gets to settle part of the arbitration through vaccine orders, the company will be able to set a price for those doses, Jacobs said.

“We get to set that price and it allows us to control the economics of that,” he said, adding that “it would be a quite favorable way to settle that agreement through doses and again, that helps fulfill the mission” of distributing shots more equitably in lower-income countries.   

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