Shares in Danish biotech Zealand Pharma plunged recently after detailed data on its weight-loss drug survodutide showed much higher patient dropout rates than leading treatments, prompting analysts to cut peak sales forecasts and rethink the company's anti-obesity strategy.
But while market enthusiasm for the drug has cooled significantly, investors are shifting their attention to Zealand's amylin-based drug petrelintide as the stock's next potential driver, setting it up for a big year ahead.
The Copenhagen-listed shares fell 23% earlier this month after survodutide, which Zealand has licensed to Boeringer Ingelheim, showed side effects severe enough for 19% of patients to end treatment. However, it showed an average weight loss of 16.6%, meeting its main objective.
It came after shares fell 36% in March following lower-than-expected efficacy of just under 11% for its lead asset, petrelintide, in a mid-stage trial, which CEO Adam Steensberg said had not been optimized for weight loss. These mark the two worst days on record for the stock since the company went public in 2010.
Still, many stay with the shares.
Analysts at UBS this week reduced their price target on the stock to 540 Danish crowns from 730 crowns, reducing survodutide's peak sales by almost 80%.
“Tolerability data appear very disappointing and will likely significantly limit its use,” they wrote in a research note.
“Although the data on survodutide disappoints us, we remain positive on petrelintide, the most important asset,” they added, maintaining a Buy rating on the stock.
The stock has recovered some of its losses, but is still down 38% so far this year.
The promise of amylin
Petrelintide will need to succeed where survodutide struggled, and tolerability will be key to its commercial success. But it also faces competition from heavyweights like Eli Lilly.
At the American Diabetes Association (ADA) Scientific Sessions in New Orleans in early June, the industry came together to share clinical updates, with amylin as a focal point for both medical professionals and investors.
“One theme emerging from the ADA is the growing recognition of the need for a drug with modest weight loss but impeccable tolerability, which is exactly the profile of amylin drugs such as petrelintide,” UBS said.
Zealand operates 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. It also fits well with medical professionals' call for a good tolerability profile, particularly for weight maintenance after GLP-1 use.
“I really believe that when these amylin [drugs] launch, we can have that, what I've described as an iPhone moment, because patients are very aware of the experience they have with GLP-1, and once a new modality is launched that gives them a better experience, people will line up to have access to that new weight loss drug instead of continuing to take the more cumbersome medications,” he said.
Amylin, like GLP-1, is a natural hormone that regulates blood sugar and appetite, but it is produced in the pancreas and not the intestine.
While many companies are developing amylin-based drugs, including Eli Lilly With eloralintide, the size of the obesity consumer market will likely allow for multiple players, according to UBS.
Petrelintide, which Zealand is developing in collaboration with Switzerland RocheIt is planned to begin final phase testing in the second half of the year. Intermediate results of petrelintide should also be reported in diabetic patients, who typically have more difficulty losing weight.
Despite the setbacks, Jyske Bank analyst Henrik Hallengreen Laustsen sees a future for survodutide as a treatment for fatty liver disease and petrelintide for obesity.
“What I generally learned from ADA in all of the company's presentations was the increased focus on side effects and differentiation from the best current products,” Laustsen told CNBC.
“Zealand needs to tell the market what it does [petrelintide] different from the other Amylin products,” he said, adding that big players Lilly and Nordisk They are strongly positioned both in the current market and in the future.
With survodutide, discontinuation rates were dramatically higher than those of marketed obesity medications, with a placebo-adjusted discontinuation rate due to adverse events of 18.8%, versus approximately 4% for leading therapies Wegovy and Zepbound.
This is important because investors are increasingly comparing anti-obesity drugs not only in terms of their effectiveness but also in terms of how many patients can actually continue the therapy. It also puts additional pressure and downside risk on the stock, raising the importance of future trials evaluating the benefit for liver patients, according to Jefferies.
Several analysts, including Jefferies and UBS, note that a turning point for Zeeland is not likely to occur until 2027.
Zealand's presentation on survodutide also took place at the same time that Eli Lilly presented the results of its retatrutide, the so-called “triple G” that combines three gut hormones for maximum weight loss. RBC analysts described it as potentially the most effective anti-obesity therapy in development, with no plateau of efficacy over 104 weeks.
That created a brutal backdrop in which Zealand was not only judged by its own data but also viewed in light of the increasingly dominant Lilly franchise.
Post-ADA, investors appear to be valuing survodutide primarily as an asset for obesity-related liver disease, while petrelintide increasingly carries the obesity growth narrative.
