These two stocks could be rivals in the intense GLP-1 space in the future.
Investing into companies involved with new weight loss medications can be overwhelming. There is a lot of competition in the space given the potential for the anti-obesity market to grow to a size of $100 billion or more, as per estimates from Goldman Sachs.
The challenge becomes the following: Do you invest in an established healthcare company that is expanding into this new category of glucagon-like peptide-1 (GLP-1) medications, or are you better off perhaps investing in a smaller player that may have more potential upside, but also carries much more risk?
Two stocks at opposite ends of the spectrum are Amgen (AMGN -0.53%), the healthcare behemoth, and Viking Therapeutics (VKTX -7.75%), which doesn’t have an approved drug but hopes a new GLP-1 drug could put it on the map. If you want to invest in the GLP-1 space, which of these stocks is the better option? Let’s take a look.
The case for Amgen
Amgen is a hugely successful healthcare company already, and the big case for investing in the business today is that with a market cap of $180 billion, you’re already getting exposure to a top name in healthcare. Over the past four quarters, the company has generated more than $30 billion in revenue.
Its big moneymakers today are Enbrel (for rheumatoid arthritis) and Prolia (osteoporosis), but in the future, that could change. One promising drug in the works is MariTide, a GLP-1 medication that has been giving investors high hopes due to its recent clinical trials. Early-stage results indicate that it can help people lose around 15% of their body weight after 12 weeks.
But a couple of key differentiators for the drug could set it apart from other GLP-1s. It may only need to be taken on a monthly basis (many GLP-1s require weekly injections) and even if people stop using MariTide, they may not gain the weight back (a common concern with many GLP-1 drugs). The drug is still in the early stages of its development but this could be an incredibly promising one for Amgen down the road.
Amgen’s stock isn’t pricing in extremely high hopes for MariTide, at least not yet. Based on analyst projections of future earnings, the stock is trading at a forward price-to-earnings multiple of just 16, which makes it a fairly compelling value buy for growth investors.
The case for Viking Therapeutics
When a biotech stock gets an approved drug and hits it out of the park, its shares could go parabolic. That’s the big thrill about owning Viking Therapeutics. If the company’s GLP-1 treatment, referred to as just VK2735 for now, obtains approval, this already hot stock could become an even more coveted investment to own.
What’s promising is that VK2735 is already advancing into phase 3 trials as it has continued to show it is effective in helping clinical trial participants lose weight. It has helped people lose an average 15% of their weight over a period of 13 weeks. However, with the drug entering late-stage trials, it also means Viking is getting close to the finish line. Should it continue to deliver strong results in phase 3, approval could be highly likely for VK2735.
Plus, Viking is also working on a pill version of the treatment, which could unlock yet another growth opportunity for the company.
There’s some risk in waiting around for Viking to see if VK2735 obtains approval because the company is burning through cash while doing so. The good news is that with around $946 million in current assets as of the end of June, its operations are well-funded; there’s no overwhelming need for the business to raise money right now.
At a market capitalization of less than $8 billion, Viking might still look like a cheap stock for many investors despite it rallying more than 250% this year.
Which stock is the better buy for GLP-1 investors?
If you’re a risk-averse investor looking for GLP-1 exposure, then Amgen is definitely the better option at this point. It’s not just a safer bet, either. MariTide’s promising results in early-stage trials means this could be a legitimate contender in the GLP-1 race, and investors should keep a close eye on it.
MariTide, however, could still take years to develop before it obtains approval (which isn’t a guarantee). For investors who have a larger risk tolerance but who may not be as patient, Viking could be the better option at this point. The big risk is that if for some reason VK2735 fails, the stock’s price could quickly come crashing down, as that’s the main reason for investing in Viking.
An important note to remember is that while Viking could have a lot more upside if it obtains approval, investors shouldn’t assume that because its drug is in phase 3 trials, it’s near a certainty of getting over the finish line — many drugs have failed at this point. Investors should tread carefully with Viking. It’s an intriguing buy and could prove to be a great one, but it may not be suitable for all investors.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.
