The GLP weight-loss space has become increasingly competitive as new players have entered what many believe is a game-changing new market that’s still in the early innings.
But getting in the game is easier said than done.
Shares of the Danish biotech company Zealand Pharma (ZLDPF 0.95%) had crashed nearly 23%, as of 12:10 p.m. ET today, after a late-stage study of one of its new weight-loss drugs showed disappointing results.
The drug being tested, Servodutide, is a GLP-1 dual-receptor agonist used to treat obesity and associated conditions.
The late-stage study showed that a high percentage of participants dropped out due to adverse effects.
This is good news for companies like Eli Lilly and Novo Nordisk, who currently dominate the GLP-1 space. Here’s why.
Image source: Getty Images.
What the study showed
On the positive front, the phase III trial of Servodutide showed that over 84% of participants in the 76-week study achieved at least a 30% relative reduction in liver fat.
Furthermore, participants showed sustained weight loss of up to 16.6%.
However, 19% of participants dropped out due to gastrointestinal side effects, including nausea, vomiting, diarrhea, and constipation.
Over 40% of people in the study reported vomiting, according to analysts from Barclays.
“Overall, we view the safety/tolerability as disappointing for [Zealand], despite data confirming some interesting body-composition/liver signals,” Barclays analyst Yihan Li wrote in a research note today.
“A 19% treatment discontinuation rate due to... adverse events... is not a rounding error, and nausea, vomiting, diarrhea, and constipation incidence at the levels reported here sit well above what we consider commercially viable against [rival drugs] tirzepatide and semaglutide,” Citigroup analysts wrote in a research note, according to CNBC.
Why it’s good news for Eli Lilly and Novo Nordisk
The simple answer is that Zealand’s study shows that both dominant players likely still have a significant lead in the space and can retain market share.
In fact, shares of Eli Lilly, which now has a market cap of over $1 trillion, traded roughly 2.5% higher as of this writing due to company-specific news.
NYSE: LLY
Key Data Points
At the American Diabetes Association meeting in New Orleans, Eli Lilly presented data from two trials of its new weight-loss drug, Retatrutide.
Unlike Eli Lilly’s first two generations of GLPs, Retatrutide is a weekly low-dose, 4 mg GLP-1 injection that is a triple-receptor agonist attempting to suppress one’s appetite, improve metabolism, and burn fat.
Only about 4% of participants in the Retatrutide studies dropped out. Participants also achieved an average weight loss of roughly 19%, similar to Eli Lilly’s older GLP, Zepbound.
Analysts were broadly positive on the new data and said they could see Eli Lilly extending its lead in the obesity space.
Zealand’s struggles are certainly good news for both Eli Lilly and Novo Nordisk, as less competition reduces pricing pressure.
However, the two companies have seen their stocks move in opposite directions over the past year, with Eli Lilly’s surging and Novo Nordisk’s plunging.
NYSE: NVO
Key Data Points
Novo Nordisk has been dealing with increasing competition, and its recent pipeline of weight-loss drugs has not impressed the market.
Meanwhile, Eli Lilly has rocketed higher over the past year, driven by a more diversified pipeline and success with new GLP-1 receptors.
The recent success with Retatrutide is yet another reason to make Eli Lilly the stock to own in the GLP space.
