Shares in Danish biotech Zealand Pharma recently fell after detailed data on the weight-loss drug survodutide showed higher patient dropout rates than the leading treatment, prompting analysts to cut higher sales forecasts and rethink the company’s obesity strategy.
But while market enthusiasm for the drug has cooled significantly, investors are shifting focus to Zealand’s amylin-based drug, petrelintide, as a potential driver for the stock, setting it up for an important year ahead.
The Copenhagen-listed stock fell 23% earlier this month after survodutide, which Zealand has licensed to Boeringer Ingelheim, showed results that were not good enough for 19% of patients to stop treatment. However, it showed an average weight loss of 16.6%, meeting its primary objective.
It came after shares plunged 36% in March following an 11% underperformance of its lead product, petrelintide, in a mid-stage trial, which CEO Adam Steensberg said was not yet prepared for weight loss. This marks the worst two days for the stock since the company went public in 2010.
However, many are still stuck in the cell.
Analysts at UBS this week cut their price target on the stock to 540 Danish kroner from 730 kroner as they cut survodutide’s top sales by nearly 80%.
“The tolerability data look very disappointing and will greatly limit its use,” they wrote in a research paper.
“Although the survodutide data is disappointing, we are still optimistic about petrelintide, a very important asset,” they added, maintaining a buy recommendation on the stock.
The stock recovered some of its losses, but remains down 38% year to date.
The promise of amylin
Petrelintide will need to succeed where survodutide struggles, with tolerability being the key to its commercial success. But it also faces competition from heavyweights like Eli Lilly.
At the American Diabetes Association’s Scientific Sessions (ADA) in New Orleans in early June, the industry came together to share clinical updates, with amylin as a focal point for medical professionals and investors alike.
“Another theme from the ADA is the growing recognition of the need for a weight-loss drug but with a clean tolerance, which is the profile of amylin drugs such as petrelintide,” said UBS.
Zealand is operating in that “sweet spot” between double-digit weight loss and placebo-like tolerability with petrelintide, CEO Steensberg told CNBC’s Angelica Peebles at the ADA in New Orleans earlier this month. And it fits well with the call of medical experts for a good tolerability profile, especially weight maintenance after the use of GLP-1.
“I really believe that there is this amylin [drugs] launch, we can have that, which I described as the iPhone moment, because patients are very aware of the information they have on GLP-1s, and once you introduce a new method that gives you better information, people will line up to get access to that new weight loss drug rather than staying on more difficult drugs,” he said.
Amylin, like GLP-1, is a natural hormone that regulates blood sugar and appetite, but it is produced in the pancreas as opposed to the intestine.
Although many companies make drugs based on amylin, including Eli Lilly with eloralintide, the size of the consumer obesity market will likely allow more players, according to UBS.
Petrelintide, a developing Zealand in collaboration with Switzerland Rocheit is because it will start late exams in the second half of the year. It is also due to the report of moderate effects of petrelintide in patients with diabetes, who often struggle with weight loss.
Despite the obstacles, Jyske Bank analyst Henrik Hallengreen Laustsen sees a future for survodutide as a treatment for fatty liver disease, and petrelintide for obesity.
“My takeaway from the ADA in all company presentations was an increased focus on the negative effects and differentiation of current high-quality products,” Laustsen told CNBC.
“Zealand needs to tell the market what it’s doing [petrelintide] different from other Amylin-products,” he said, adding that the main players are Lilly and Novo Nordisk are firmly positioned in the current and future market.
For survodutide, discontinuation rates were significantly higher than marketed obesity drugs with a placebo-adjusted discontinuation rate due to adverse events of 18.8%, compared to about 4% for the leading therapies Wegovy and Zepbound.
That’s important because investors are increasingly comparing obesity drugs not only on efficacy but also on how many patients can stay on treatment. It also puts more pressure and lower risk on stocks, which suggests the importance of future trials evaluating the benefit of liver patients, according to Jefferies.
Several analysts, including Jefferies and UBS, point to the fact that Zealand’s inflection point will likely not come until 2027.
The presentation of Zealand about survodutide also came at the same time when Eli Lilly presented the results of its retatrutide, called “triple-G” which combines three hormones of the gut for high weight loss. Analysts at RBC described it as the most promising obesity treatment in development, with no effective plateau within 104 weeks.
That created a brutal backdrop where Zealand was not only judged on its data but also reflected in the light of Lilly’s increasingly dominant franchise.
Post-ADA, investors seem to value survodutide primarily as a product for obesity-related liver disease, while petrelintide continues to hold the narrative for obesity growth.
