Even if you might not fully understand what it means in a technical sense, you've probably heard of Novo Nordisk's (NYSE: NVO) medicines like Ozempic and Wegovy. These drugs have been tremendously helpful for people struggling with obesity and type 2 diabetes, respectively.
The underlying compound, called semaglutide, work by targeting the GLP-1 receptor in the human body. And while GLP-1-targeted therapies are relatively new, their success has been tremendous, which is why these drugs help generate billions of dollars for Novo Nordisk and peers like Eli Lilly every quarter.
That's why a handful of biotech companies are hard at work developing new GLP-1 drugs to get a slice of the action. If any of their candidates prove to be safer, more tolerable, or more effective than the existing options, they might just steal market share from the big dogs, supercharging their share price along the way.
Though it isn't alone in being very promising in that regard, there's one biotech in particular that investors should be aware of, so let's take a look and determine if it's a smart investment.
This player has a few tricks up its sleeve
Zealand Pharma (OTC: ZLDP.F) has something most of the other weight-loss biotechs don't: A platform that contributed to drugs that were eventually approved for sale.
Via its past collaborations with Novo Nordisk and Sanofi, two medicines made using its capabilities have been commercialized, one of which targets GLP-1. In the first half of 2024, it brought in around $7.3 million in revenue; its business model calls for passing off all of its proven candidates to big pharma collaborators that can take on the hefty costs of manufacturing and distribution in exchange for a trickle of royalties and milestone payments.
Thus, its revenue today is nowhere near enough to make it profitable or even to cover its research and development (R&D) costs. But as of Q2, it has approximately $1.4 billion in cash, cash equivalents, and marketable investments on hand, and a pipeline that's chock-full of clinical-stage candidates that use GLP-1 and other mechanisms to treat obesity. And some of its programs that don't even target GLP-1 are shaping up to be more capable than anything Novo Nordisk has on the market or in its own pipeline.
Per the initial results of a phase 1b clinical trial published in late June, its program called petrelintide is one of those programs that could one-up Novo Nordisk. In the trial, over the course of 16 weeks, patients lost an average of 8.6% of their body weight. Only one patient out of the 48 in the trial, representing just 2.1% of the cohort, opted to discontinue participation as a result of gastrointestinal side effects, and no patients reported serious adverse events. Phase 2b trials are already planned for later in 2024.
For the sake of comparison, 7% of 1,961 patients in one of Novo Nordisk's phase 3 clinical trials testing the active ingredient of Wegovy discontinued treatment due to the same type of side effects, and 9.8% of patients reported a serious adverse event. Plus, over 68 weeks of treatment, study participants lost an average of 14.9% of their weight, suggesting that Novo's molecule is probably not as effective as Zealand's. What's more, preliminary findings suggest that petrelintide may lead to less loss of muscle mass as a proportion of the pounds shed compared to other interventions.
This matchup isn't looking like it's very close, even if the biotech still has late-stage trials to run.
The amount of Novo's pain won't be equal to Zealand's gain
Petrelintide is just one program in Zealand's pipeline, and it isn't even its most mature. Nor does it even target GLP-1, though it has other programs which do.
In short, this means that the biotech could have several opportunities to take a bite out of Novo Nordisk's market share within the next few years. There's not much reason to expect patients to continue taking medicines that are uncomfortable to use, and potentially less effective too.
It'll also have a few chances to one-up the other biotechs in the weight-loss and GLP-1 space. The more its next set of clinical trials confirms the unique capabilities of its candidates compared to the other products on the market, the easier time it'll have in finding a collaborator to commercialize whichever programs it proves to be worthwhile.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
