Motley Fool sees big risks and big upside in anti-obesity drugmakers Viking, Kailera

Investors should consider Viking Therapeutics and Kailera Therapeutics, two smaller developers of GLP-1-based obesity drugs, argues Motley Fool contributor Prosper Junior Bakiny in a new post. At the same time, he flags substantial risks, noting that their shares could soar on positive clinical trial results for their drug candidates, but clinical setbacks could cause them to “lose significant market value."

The next 18 months will be critical for Viking, as the company will release data from several clinical trials, the Motley Fool analyst writes.

Its lead candidate, VK2735, targets the same receptors as Eli Lilly’s Zepbound and is being developed in injection and tablet forms. Viking is expected to complete phase III clinical trials, the final stage of testing, for the injectable version in 2027. Earlier trial results showed that it appears competitive with Zepbound and Danish drugmaker Novo Nordisk’s Wegovy.

Studies of the oral version of VK2735 are at an earlier stage, with phase III trials scheduled to begin this year. If both versions deliver excellent phase III results, Viking could carve out a niche in the obesity-drug market and post market-beating returns through 2031, Bakiny argues.

The stock has 18 “buy” calls from Wall Street analysts versus two “hold” ratings. The average target price is $93.10 per share, implying 180% upside from the Friday close.

Kailera, which went public only in April, licensed a portfolio of experimental obesity drugs from its Chinese partner, Jiangsu Hengrui Pharmaceuticals.

Kailera’s lead candidate, the injectable ribupatide, targets the same receptors as Zepbound and is currently in phase III trials. Higher doses of the same drug are also being tested in phase II trials. In addition, Kailera is developing an oral formulation of ribupatide, Bakiny notes.

The company has other promising obesity-drug candidates, including KAI-4729, which mimics the action of three separate hormones. Eli Lilly’s experimental drug retatrutide works in the same way, and Bakiny described its phase III trial results as “exceptional.”

There is no guarantee that the mid-cap biotech’s candidate will produce the same results as Eli Lilly’s drug, the Motley Fool analyst cautions. But for a company with a market capitalization of just $2.3 billion, Kailera has a “fairly attractive, differentiated pipeline” of anti-obesity drug candidates, he notes.

All six Wall Street analysts who cover Kailera rate the stock a “buy.” The average target price is $42.80 per share, implying 138% upside from the last close.