Amgen vs. Viking Therapeutics: What’s the Best GLP-1 Stock to Buy?

Investing in companies involved with new weight loss drugs 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, according to estimates from Goldman Sachs.

The challenge becomes this: do you invest in an established healthcare company that is expanding into this new class of glucagon-like peptide-1 (GLP-1) drugs, or is it better to invest in a smaller player that might have more potential upside, but does it also have a lot more risk?

Two stocks at opposite ends of the spectrum are Amgen (AMGN 0.43%)the healthcare giant and Viking therapeutics (VKTX 3.39%)which doesn’t have an approved drug but hopes a new GLP-1 drug could put it on the map. If you’re looking 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 already a very successful health care company, and the main reason to invest in the business today is that with a market cap of $180 billion, you already have exposure to a top name in health care. In the past four quarters, the company 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 drug that has given investors high hopes thanks to its recent clinical trials. Initial results indicate that it can help people lose about 15% of their body weight after 12 weeks.

But a few key differentiators for the drug could set it apart from other GLP-1s. It may only need to be taken monthly (many GLP-1s require weekly injections), and even if people stop using MariTide, they may not gain weight (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 stock isn’t pricing in wildly high hopes for MariTide, at least not yet. Based on analyst forecasts for future earnings, the stock is trading at a forward price-earnings multiple of just 16, making it a fairly compelling value buy for growth investors.

The case for Viking Therapeutics

When a biotech stock gets a drug approved and knocks it out of the park, its stock could go parabolic. That’s the great thrill about owning Viking Therapeutics. If the company’s GLP-1 treatment, named just VK2735 for now, wins approval, this already hot stock could become an even more coveted investment to own.

What is promising is that VK2735 is already moving into Phase 3 trials as it has continued to show that it is effective in helping clinical trial participants lose weight. It helped people lose an average of 15% of their weight over a 13-week period. However, with the drug entering late-stage trials, it also means Viking is nearing the finish line. If it continues to deliver strong results in Phase 3, approval could be very likely for VK2735.

In addition, Viking is also working on a pill version of the treatment, which could unlock another growth opportunity for the company.

There is some risk in waiting for Viking to see if the VK2735 gets approval, as the company is burning money while doing so. The good news is that, with about $946 million in current assets at the end of June, its operations are well-funded; there is no need for the business to raise money right now.

At a market cap of less than $8 billion, Viking may still look like a cheap stock to many investors, despite the fact that it’s up more than 250% this year.

Which stock is the best buy for GLP-1 investors?

If you’re a risk-averse investor looking for exposure to GLP-1, then Amgen is definitely the better option right now. It’s not just a safer bet. MariTide’s promising results in early trials mean it could be a legitimate contender in the GLP-1 race, and investors should keep a close eye on it.

However, MariTide could take years to develop before it gets approval (which is not a guarantee). For investors who have a higher risk tolerance but may not be as patient, Viking may be the better option right now. The big risk is that if for some reason VK2735 fails, the share price could fall rapidly, as that is the main reason to invest in Viking.

An important note to keep in mind is that while Viking could have a lot more upside if it gets approval, investors shouldn’t assume that because its drug is in Phase 3 trials, it’s almost certain to cross the finish line — – many medicines have failed at this time. Investors should tread carefully with Viking. It’s an intriguing buy and could turn out to be a great one, but it may not be right for all investors.