A blockbuster weight-loss drug has turned Novo Nordisk A/S right into a popular culture phenomenon in addition to Europe’s most precious firm, however on its dwelling turf the inventory has been outgained by a a lot smaller rival.
Zealand Pharma A/S has thus far risen 63% in market worth on the Copenhagen inventory alternate this 12 months in contrast with 40% for its bigger and way more well-known peer. Analyst estimates point out the inventory may outperform Novo once more in 2024.
Zealand is “a key beneficiary of the obesity thematic within health care both from an investor and industry perspective,” Rajan Sharma, an analyst at Goldman Sachs Group Inc., stated in a Dec. 6 be aware. Sharma stated he sees loads of components that would transfer the shares subsequent 12 months.
Whereas the businesses sit only a few miles from one another and each work on tackling weight problems, Zealand differs in that one in every of its medicine employs a distinct mechanism. One other issue for the Zealand inventory’s success could also be that it caters to a distinct investor profile: these with small- and mid-cap mandates who can’t spend money on Novo and Eli Lilly & Co.
“One of the reasons why Zealand has done so well is that it’s unique because it’s probably the only small/mid-cap investment case in Europe if you want to get in on obesity,” Suzanne van Voorthuizen, an analyst at Van Lanschot Kempen NV who has lined the inventory for about 5 years, stated in an interview.
Zealand modified its technique in early 2022, slimming down its group and specializing in the event of its weight problems medicine. It has 4 such candidates in its pipeline, with the one furthest within the scientific section, Survodutide, developed in partnership with Boehringer Ingelheim GmbH.
Even when Novo and Lilly as first movers take the lion’s share of the weight problems market, the crumbs left for others getting into later, like Zealand, should still be important. Michael Shah of Bloomberg Intelligence estimates the weight-loss market could soar 32-fold to $80 billion by the subsequent decade.
Most weight-loss medicine, together with Novo’s Wegovy, are based mostly on the GLP-1 intestine hormone. Whereas two of Zealand’s merchandise goal that hormone, it’s also creating a therapy based mostly on an amylin analog. That’s been one in every of its drivers on the inventory market though the product is at an early stage.
“The amylin analog could become a big thing for Zealand because it’s a differentiated asset for obesity and they still own all the economics,” van Voorthuizen stated. “It’s promising that you do get weight loss, but potentially better safety or at least a very different profile from using a different mechanism.”
Zealand’s additionally working arduous to elucidate the science behind its drug candidates to buyers. It hosted an R&D occasion on Dec. 5, calling weight problems the “greatest health-care challenge of our time” and bringing in a few of the world’s foremost endocrinologists and metabolic researchers to take questions from analysts. Daniel Drucker, one of many co-discoverers of GLP-1, famous 40 years of analysis underpinning the biology.
“Key data readouts across our three clinical programs this year have increased confidence in our pipeline and positioned Zealand to become a significant player in addressing the evolving global obesity health crisis,” Zealand Chief Govt Officer Adam Steensberg stated by electronic mail, in response to a query in regards to the firm’s progress on the inventory alternate.
In line with information tracked by Bloomberg, eight of 9 analysts have purchase rankings on Zealand and the typical 12-month worth goal implies a 17% acquire. Analysts overlaying Novo see solely a ten% acquire, on common, over the subsequent 12 months.
Zealand’s shares have additionally been helped by the announcement that it later this month will be part of the Stoxx Europe 600 index. The inventory will even enter the OMX Copenhagen 25 index for the primary time on Dec. 18.
Hyperlinks between the businesses are robust. A number of of Zealand previous and current managers have an employment historical past at Novo, together with CEO Steensberg. The 2 corporations additionally final 12 months signed a license and growth deal on a therapy for extreme hypoglycemia in individuals with diabetes.
Whereas Zealand has outpaced Novo and most pharmaceutical shares this 12 months, it nonetheless has an extended method to go earlier than it will attain the dimensions of its Danish peer. Zealand’s market worth of 19.2 billion kroner ($2.8 billion), at lower than 1% of Novo’s, can be eclipsed by the enormous’s quarterly revenue of twenty-two.5 billion kroner.
