(Bloomberg) -- Zealand Pharma A/S briefly reclaimed its position as this year’s best performer in the Stoxx 600 Health Care Index on Friday, after analysts at JPMorgan Chase & Co. predicted the Danish biotech firm’s experimental weight-loss drug petrelintide could generate $10 billion in peak sales.
JPMorgan analysts initiated coverage on the stock with an overweight recommendation, calling amylin-class medicines such as petrelintide “the next wave in obesity.” The drug targets obesity by mimicking amylin, a hormone released by the pancreas together with insulin.
Zealand Pharma shares rose as much as 8.5% intraday, taking its year-to-date gain to about 130% and momentarily exceeding the performance of Belgian biotech UCB SA.
Zealand Pharma this week said moderate doses of petrelintide helped patients pare pounds with less nausea than some other next-generation contenders.
There’s a “good chance” that Zealand Pharma will find a partner for petrelintide by the end of next year, JPMorgan analysts including James Gordon wrote in a note on Friday. “Validation from a large-cap pharma company” would then support late-stage development, commercialization and manufacturing, they said.
Obesity Market
Novo Nordisk A/S and Eli Lilly & Co. currently dominate the obesity market with their blockbuster drugs that mimic the GLP-1 hormone, which is released after eating. But JPMorgan analysts see an opportunity for amylin-based compounds to expand the market, given some patients aren’t able to tolerate the GLP-1 medicines.
The analysts estimate amylin monotherapies could expand the $140 billion obesity and diabetes market by $35 billion. About one-third of this sub-market could go to Zealand Pharma’s petrelintide, equating to an estimated $10 billion in peak sales potential, they said.
Discussions about the need for alternatives to GLP-1 drugs “take up an incredible amount of space,” Zealand Pharma Chief Executive Officer Adam Steensberg said in an interview on Thursday. “Our amylin just stands out as what seems to be one of the strongest options right now.”
Meanwhile, analysts at Danske Bank are turning more optimistic on Zealand Pharma. They upgraded the stock to hold from sell, citing “limited further downside risk,” according to a note dated Thursday.
Among analysts tracked by Bloomberg, 10 have a buy rating or equivalent, 3 recommend holding the stock and none say sell. Even after this year’s rally, the analysts on average see potential for the stock to rise a further 20% over the next 12 months, according to price targets compiled by Bloomberg.
--With assistance from Joel Leon, James Cone and Sara Sjolin.
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