Shares in weight-loss drug maker Zealand Pharma plunged as much as 26% on Monday after new data on its experimental drug raised concerns about its potential side effects.
The Danish drugmaker said that while its drug survodutide, which it has licensed to private company Boehringer Ingelheim, met its key goals in a late-stage study, 19% of patients dropped out of the study due to gastrointestinal events, compared with 2.9% of those who received placebo.
“Overall, we consider the safety/tolerability to be disappointing for [Zealand]although the data confirms some interesting signals about body composition and the liver,” Barclays analysts said in a note on Monday.
The high discontinuation rate, with more than 40% of patients reporting vomiting, could limit the drug's commercial potential as a treatment for obesity or for those suffering from fatty liver disease, the analysts added.
Zealand Pharma shares were last down 25%, firmly at the bottom of the pan-European index. Stoxx 600 index. It adds up to a drop of almost 50% so far this year.
Survodutide was tested in overweight or obese adults without type 2 diabetes for 76 weeks. Topline data announced in April showed an average weight loss of up to 16.6% versus 3.2% with placebo.
Citi analysts wrote in a note on Monday: “A 19% treatment discontinuation rate due to… adverse events… is not a rounding error, and the incidence of nausea, vomiting, diarrhea and constipation at the levels reported here is well above what we consider commercially viable against [rival drugs] tirzepatide and semaglutide”.
The full sobrevodutide data comes about three months after Zealand shares suffered their worst day on record when a trial of another of its experimental obesity drugs, petrelintide, disappointed investors with lower-than-expected weight loss statistics.
Other data on petrelintide released on Friday provided “incremental details on [its] clinical profile, but little to change our opinion from the first line in March,” Barclays said.
Petrelintide, which Zealand is developing together with Roche, looks attractive in terms of tolerability, but its efficacy does not appear as strong as amylin, eloralintide or other incretin-based obesity treatments already available from Eli Lilly, they added.
Weight loss drug market expands
The weight loss drug market is currently dominated by Nordiskwhich sells semaglutide under the brand names Wegovy and Ozempic, and Eli Lillywhich sells tirzepatide as Zepbound and Mounjaro.
But a flurry of hopeful market entrants are testing their own anti-obesity drugs, including Zealand Pharma, which is teaming up with larger drugmakers. Roche and Boehringer Ingelheim, and heavyweights like amgen and AstraZeneca.
Increased competition has increased pressure on companies to differentiate their products. Preservation of muscle mass, oral options, obesity-related diseases and weight management are some of the areas companies are targeting to increase their share of the lucrative market.
While Novo's Wegovy pills and Lilly's Foundayo have dominated, more players are about to enter the market, Investec analyst Jimmy Muchechetere told CNBC's “Squawk Box Europe” on Monday.
As for Zealand Pharma, it has long called for an end to what it calls the “weight loss Olympics” and says there is a huge focus on the percentage of weight loss achieved.
CEO Adam Steensberg told CNBC in March that he was “extremely confident” there would be a shift in the industry “towards tolerability,” referring to how well patients can cope with the side effects of medications.
“I think very, very soon, people will start to realize that it's not about that weight loss number, it's about how to achieve that weight loss number.”
