With Eli Lilly up by a stunning 47% so far this year, many investors are likely prone to feeling they’re stuck on the sidelines after this bull run. Even if there’s plenty of upside left — and in Eli Lilly’s case, there almost certainly is — it can still feel safer to find another company that looks to have good times ahead rather than buying shares of yesterday’s winner.
There’s no foolproof way of determining which businesses are going to see their shares soar, but, at least in biotech, clinical catalysts are a good indicator as to when there might be a big move. And, as watchers of Eli Lilly know, companies attempting to develop new weight loss drugs are in vogue right now.
So with that framing, let’s examine a pair of healthcare stocks that look ready to run thanks to the catalysts they have lined up.
1. Viking Therapeutics
Viking Therapeutics (NASDAQ: VKTX) has a number of data readouts coming up that will almost certainly lead to major movements in its share price. Over the next couple of years, it’ll be reporting the results of at least two of its four pipeline programs, but before that, it’ll be delivering updates to keep investors abreast of its progress.
The most impactful events will be when it reports data from its obesity-related clinical trials, both of which are testing formulations of its candidate VK2735. The more mature program, for an injectable version of the compound, just wrapped up its phase 2 trial successfully, and the company is now waiting for regulators at the Food and Drug Administration (FDA) to assess its plans for a phase 3 trial.
Hopes are high for this program, because on the basis of the data so far, VK2735 likely promotes weight loss faster and overall more effectively than the current kings of the anti-obesity market today: Eli Lilly’s Mounjaro and Novo Nordisk‘s Wegovy. After just 13 weeks of treatment, patients in its trial lost an average of approximately 13% of their body mass on a placebo-adjusted basis. Per their respective clinical trials, which are not directly comparable to each other nor to Viking’s investigation, participants taking Mounjaro and Wegovy took well over a year to reach the same degree of weight loss.
Confirming and expanding on these results in a phase 3 trial would go a long way toward convincing the market that Viking could grab a significant market share in the indication, despite the presence of increasingly entrenched power players. But for now, there’s not much clarity about when to expect the catalyst of the phase 3 trial’s conclusion — just an estimate that it won’t be longer than a couple of years out at the most.
The oral formulation of VK2735 has the same issue. Viking has completed its phase 1 trial, but the phase 2 trial won’t initiate until later this year, so there’s no firm timeline yet for when it will publish data from the study. Still, getting another set of phase 2 data about VK2735, especially in the context of a more convenient formulation, is bound to be a driver of the stock’s movement, and it’s likely to arrive relatively soon in the grand scheme of things.
Is Viking Therapeutics stock a buy? On the basis of its data today, yes. There’s always a risk that those future catalysts could be negative rather than positive if results aren’t consistent with its prior findings, but at this point, that would be quite surprising.
2. Structure Therapeutics
Much like Viking Therapeutics, Structure Therapeutics (NASDAQ: GPCR) is angling for a share of the market for cardiometabolic therapies. Its candidate, GSBR-1290, is intended to help with weight loss, and it’s formulated as a pill.
GSBR-1290’s phase 2a trials wrapped up with promising results, and its phase 2b trials are anticipated to begin in the fourth quarter. Per the data, patients experienced a placebo-adjusted average weight loss of just over 6% over the course of 12 weeks. That isn’t as impressive as the results Viking shared about VK2735, but GSBR-1290 is still probably more powerful than the medicines on the market right now.
Per the plan, once participants for the 2b trial are recruited, they’ll be treated for 36 weeks. That means the data will be released at various points in 2025. The stakes for the phase 2b trial are much higher for Structure Therapeutics than the prior phase, as this next study will last three times as long.
Soon enough, the full power of the candidate’s potential to promote weight loss over time will be revealed, as will other important variables like how well patients tolerate the therapy and its average side-effect profile with longer-term use. But with the opportunity for Structure’s stock to experience significant upside comes an equal amount of risk.
If investors discern that the larger data set does not compare favorably to the products on the market right now made by Eli Lilly and Novo Nordisk, it’ll be a big problem for the stock even if the clinical trials are “successful” by the standard of proving that their candidate works as intended. And, as the phase 2a data were not necessarily a home run on that basis due to only gathering 12 weeks’ worth of information, there may not be much in the way of wiggle room for management to claim that its candidate is competitive.
So, appreciate the additional risk here before committing to buying the stock.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
Missed Out on Eli Lilly? These 2 Healthcare Stocks Have Big Catalysts on the Horizon. was originally published by The Motley Fool
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