Shares in Danish biotech Zeeland Pharma recently tumbled after detailed data on its weight-loss drug savodutide showed patient drop-out rates were much higher than the lead therapy, prompting analysts to lower their peak sales forecasts and reconsider the company’s obesity strategy.
But while market enthusiasm for the drug has cooled significantly, investors have shifted their focus to New Zealand’s amylin-based drug petrelintide as the next potential driver for the stock price in the crucial year ahead.
The Copenhagen-listed stock fell 23% earlier this month after sulbodutide, which Zealand licenses to Boehringer Ingelheim, showed side effects so severe that 19% of patients stopped treatment. However, the main goal was achieved, with an average weight loss of 16.6%.
This comes after the stock price fell 36% in March after the company’s main asset, petrelintide, showed slightly less than expected efficacy at just under 11% in a mid-term trial, but CEO Adam Steensberg said the product was not optimized for weight loss. This was the worst two days in stock history since the company went public in 2010.
Still, many people are holding on to stocks.
Analysts at UBS this week cut their price target for the company from 730 kroner to 540 kroner, cutting the stock’s peak sales by nearly 80%.
“The tolerability data are very disappointing and will likely significantly limit its use,” they wrote in a research note.
“While the savodutide data is disappointing for us, we remain positive on our most important asset, petrelintide,” he added, maintaining a buy recommendation on the stock.
The stock has recouped some of its losses, but is still down 38% year-to-date.
Amyrin’s Promise
Petrelintide needs to succeed where sulbodutide has struggled, and tolerability will be key to its commercial success. But it also faces competition from powerful companies like Eli Lilly.
Amylin was a focus for medical professionals and investors at the American Diabetes Association Scientific Sessions (ADA) held in New Orleans in early June, bringing the industry together to share clinical updates.
“One of the themes emerging from the ADA is the growing recognition of the need for well-tolerated drugs that cause modest weight loss, which is exactly the characteristic of amylin drugs such as petrelintide,” UBS said.
Zealand operates in a “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’ demands for a good tolerability profile, especially for weight maintenance after GLP-1 use.
“I truly believe that when these amylin[drugs]come out, we’re going to have what I describe as an iPhone moment, because patients are familiar with the experience we had with GLP-1, and when you launch a new treatment that provides a better experience, people will line up to get that new weight loss drug rather than continue taking a more cumbersome drug,” he said.
Amylin, like GLP-1, is a natural hormone that regulates blood sugar and appetite, but it is produced in the pancreas rather than the intestine.
Many companies are developing amylin-based drugs; Eli Lilly In the case of eloralintide, the size of the consumer obesity market will likely allow multiple players to enter, UBS said.
Petrelintide is being developed by New Zealand in partnership with Switzerland Rocheplans to begin late-stage testing in the second half of this year. The company also plans to report mid-term results for petrelintide in diabetic patients, who commonly have difficulty losing weight.
Despite the setbacks, Henrik Hallengreen Laustsen, an analyst at Juske Bank, sees sulbodutide as a potential treatment for fatty liver disease and petrelintide as a treatment for obesity.
“The overall impression I got from the ADA through the company’s presentation was an increased focus on side effects and differentiation from current best-in-class products,” Roestsen told CNBC.
“Zealand needs to tell the market what makes (petrelintide different from other amylin products),” he said, adding that it is working with major companies Lilly and novo nordisk We have a strong position in both current and future markets.
The discontinuation rate for sulvodutide was dramatically higher than for commercially available obesity drugs, with a placebo-adjusted discontinuation rate due to adverse events of 18.8%, compared to about 4% for the lead treatments Wegovy and Zepbound.
This is important because investors are increasingly comparing obesity drugs not just in terms of their effectiveness, but also in terms of how many patients actually stick with the treatments. This puts additional pressure and downside risk on the stock and raises the importance of future trials to assess the benefit to liver patients, Jefferies said.
Several analysts, including Jefferies and UBS, have pointed to the fact that Zealand’s tipping point is unlikely to arrive until 2027.
Geelan’s presentation on sulbodutide was also released at the same time that Eli Lilly announced results for letaltortide, a so-called “triple G” that combines three intestinal hormones for maximum weight loss. RBC analysts said it may be the most effective obesity drug in development, with efficacy not plateauing until 104 weeks.
It created a brutal backdrop in which Zealand was not only evaluated based on its own data, but also in terms of Lily’s increasingly dominant franchise.
Since the ADA, investors appear to be valuing sulbodutide primarily as an asset against obesity-related liver disease, but petrelintide is increasingly playing a role in the obesity narrative.
