Motley Fool: Novo could strengthen obesity pipeline by acquiring Kailera or Viking

Pharmaceutical giant Novo Nordisk should look at acquiring two small obesity-drug developers, Kailera Therapeutics and Viking Therapeutics, Motley Fool contributing analyst Prosper Junior Bakiny argues in a new post. Acquiring either company would help Novo Nordisk address its biggest problem: intensifying competition, he believes.

The Danish pharma giant generates most of its revenue from diabetes and obesity drugs, but U.S.-based Eli Lilly’s entry into that market has caused a major disruption. Making matters worse, other drugmakers could challenge the duopoly over the next few years with brand-new products of their own.

Kailera, which has a market cap of $1.48 billion after an April IPO, has attracted investor attention. When it went public, it was the largest biotech IPO ever, which Bakiny says is hardly surprising. Kailera’s pipeline includes several weight-loss candidates licensed from its Chinese partner, Jiangsu Hengrui Pharmaceuticals.

Kailera’s lead candidate, ribupatide, works through the same mechanism of action as Eli Lilly’s Zepbound and is being developed in both injectable and oral formulations. Injectable ribupatide is currently undergoing phase III trials, the final stage of clinical testing, with results expected in 2028. The company has other candidates in this area, including KAI-4729, which mimics the action of three hormones simultaneously, like Eli Lilly’s experimental retatrutide, and could potentially produce substantial weight loss.

Bakiny therefore considers Kailera an attractive acquisition target for any company seeking to strengthen its position in the market. According to MarketWatch data, all five Wall Street analysts covering Kailera rate the stock a “buy.” The average target price is $42.80 per share, implying 275% upside from Wednesday’s close.

Viking, which has a market cap of $4.11 billion, is another notable obesity-drug developer. Its injectable VK2735 delivered excellent results in phase II trials and is now in phase III, Bakiny notes. The company is also developing an oral formulation of VK2735, with late-stage trials scheduled to begin this year.

Viking has also begun clinical trials of a new weight-loss drug, VK3019, which mimics the hormones amylin and calcitonin. This distinguishes it from therapies developed by Novo Nordisk and Eli Lilly. In theory, Viking could combine the two candidates, VK3019 and VK2735, to target four hormone pathways simultaneously. Although that remains a long way off, the possibility increases the biotech's attractiveness as an acquisition target, Bakiny argues.

According to MarketWatch data, Viking stock has 18 “buy” calls from Wall Street analysts versus two “hold” recommendations. The average target price is $95.70 per share, implying 194% upside from Wednesday’s close.