Shares of Danish biotech Zealand Pharma recently plunged after detailed data on its weight loss drug survodutide showed far higher patient dropout rates than leading treatments, prompting analysts to slash peak sales forecasts and rethink the company’s obesity strategy.
But while the market’s enthusiasm for the drug has meaningfully cooled, investors are shifting focus to Zealand’s amylin-based medicine, petrelintide, as the next potential driver of the stock, setting it up for an important year ahead.
The Copenhagen-listed stock tumbled 23% earlier this month after survodutide, which Zealand has licensed to Boeringer Ingelheim, showed side effects grave enough for 19% of patients to end the treatment. It did, however, show a 16.6% weight loss on average, meeting its primary target.
It came after shares dropped 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 hadn’t been optimized for weight loss. These mark the stock’s two worst days on record since the company went public in 2010.
Even so, many are sticking with the stock.
UBS analysts this week slashed their price target on the stock to 540 Danish kroner from 730 kroner as they cut survodutide peak sales by nearly 80%.
“The tolerability data looks highly disappointing and will likely significantly limit its usage,” they wrote in a research note.
“While survodutide data is disappointing to us, we are still positive on petrelintide, the most important asset,” they added, maintaining a Buy recommendation on the stock.
The stock has recovered some of its losses, but remains down 38% year-to-date.
The promise of amylin
Petrelintide will need to succeed where survodutide struggled, with tolerability being key for 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.
“One theme emerging from the ADA is the growing acknowledgement of the need of a drug with modest weight loss but pristine tolerability, which is exactly the profile of amylin drugs such as petrelintide,” UBS said.
“I truly believe that when these amylin [drugs] launch, we can have that, what I’ve described as an iPhone moment, because patients are so aware of the experience they have on the GLP-1s, and once you launch a new modality that gives you a better experience, people will queue up to get access to that new weight loss medication rather than staying on the more cumbersome medicines,” he said.
Amylin, like GLP-1, is a natural hormone that regulates blood sugar and appetite, but is produced in the pancreas as opposed to the gut.
While many companies are developing amylin-based drugs, including Eli Lilly with eloralintide, the size of the consumer obesity market will likely allow multiple players, according to UBS.
Petrelintide, which Zealand is developing in partnership with Swiss Roche, is due to initiate late-stage trials in the second half of the year. It is also due to report mid-stage results of petrelintide in diabetes patients, who typically struggle more with losing weight.
Despite the setbacks, Jyske Bank analyst Henrik Hallengreen Laustsen sees a future for survodutide as a treatment for fatty liver disease, and for petrelintide for obesity.
“My overall take away from ADA across the company presentations was the increased focus on side-effects and differentiation from current best-in-class products,” Laustsen told CNBC.
“Zealand needs to tell the market what makes [petrelintide] different from the other Amylin-products,” he said, adding that big players Lilly and Novo Nordisk are strongly positioned in both the current and future market.
On survodutide, discontinuation rates were dramatically higher than marketed obesity drugs with a placebo-adjusted discontinuation rate due to adverse events of 18.8%, versus roughly 4% for leading therapies Wegovy and Zepbound.
That matters because investors increasingly compare obesity drugs not just on efficacy but on how many patients can actually stay on therapy. It also puts additional pressure and downside risk for shares, raising the importance of future trials assessing the benefit for liver patients, according to Jefferies.
Several analysts, including Jefferies and UBS, point to the fact that an inflection point for Zealand will likely not come until 2027.
Zealand’s presentation on survodutide also landed at the same time as Eli Lilly presented results of its retatrutide, a so-called “triple-G” which combines three gut hormones for maximum weight loss. RBC analysts described it as potentially the most efficacious obesity therapy in development, with no efficacy plateau through 104 weeks.
That created a brutal backdrop where Zealand wasn’t only judged on its own data but also seen in the light of Lilly’s increasingly dominant franchise.
Post-ADA, investors appear to be valuing survodutide primarily as an asset to obesity-related liver disease, while petrelintide increasingly carries the obesity-growth narrative.
