Zeeland stock falls 35% after trial setback, CEO remains optimistic

The chief executive of drugmaker Zeeland Pharma tried to calm investors over the results of a recent trial that showed patients lost less weight than expected, prompting the stock to tumble more than 35%.

Speaking to CNBC, CEO Adam Steinsburg criticized what he called the “weight loss Olympics,” where markets and companies focus more on the amount of weight lost than factors such as longevity of the drug and dealing with side effects.

The world doesn’t need these products, which are high volume for weight loss, he said, referring to the existing drugs in the market that have already been developed. Novo Nordisk And Eli Lilly. The latest trial was not optimized for maximal weight loss, he said.

“I have to focus on what patients want, not what the current market likes to see,” Steinsberg said. “We have long called for an end to the Weight Loss Olympics.”

Zealand is developing the drug petrelintide in partnership with a Swiss pharma heavyweight Roche. Mid-phase trial results released after the closing bell on Thursday showed the drug led to an average weight loss of 10.7% over 42 weeks. Analysts had mostly expected a weight loss of between 13% and 20%.

Zealand’s shares were last seen trading 35% lower, on track for their lowest close since August 2023. Roche fell by 3%.

Addressing weight management, rather than rapid weight loss, has emerged as a way for companies to differentiate themselves as they try to tap into the lucrative weight-loss drug market, which is estimated to be worth $150 billion by 2030.

Steinberg said he is “very certain” there will be a shift “towards tolerance” in the industry, referring to how well patients can cope with the drugs’ side effects.

“I think very soon, people will start to realize that it’s not about the weight loss number, it’s about how you achieve the weight loss number.”

“If you then look at the real world, you’ll find that most patients being treated today with current products will never get the numbers we see in clinical studies, because “in the real-world setting, people don’t tolerate it,” he said, referring to drugs already on the market from Novo Nordisk and Eli Lilly.

Petrelintide is an amylin analog that targets a hormone produced in the pancreas that affects appetite and slows gastric emptying, rather than the GLP-1 or GIP gut hormones targeted by weight-loss treatments currently on the market, such as Novo’s Wegovy and Lilly’s Zepbound.

Most patients with Novo’s Wegovy experience some type of side effect, usually gastrointestinal, nausea, diarrhea and vomiting. Most are mild to moderate and transient. The trend is similar to Lilly’s Jepbound. Novo and Lilly did not immediately respond to CNBC’s request for comment.

Of the trial results, at the maximum dose of petrelintide, “there were no cases of vomiting and no discontinuations due to gastrointestinal adverse events,” Zeeland said. The trial involved 493 overweight and obese people.

It is in development that combines petrelintide with the Roche-developed CT-388, a GLP-1/GIP receptor, which Zeeland says is a better option for patients who want to lose a large amount of weight.

One study of more than 125,000 patients indicated that about 50% of people with obesity stopped taking appetite-modulating GLP-1 drugs within one year. High costs and side effects are common reasons for discontinuation.

A study published in the British Medical Journal in January found that people who lost weight with the help of GLP-1 drugs regained the weight significantly faster after stopping than those who lost weight through diet and exercise.

The study found that obese patients who stopped GLP-1 medication were estimated to return to their starting weight after 1.7 years, compared to 3.9 years for those who lost weight with behavior change alone.

The rate at which patients lose weight on the drugs has been a key factor driving Novo and Lilly’s stock prices in recent years.

Shares of Novo are trading 75% below their peak in mid-2024, while Lilly’s shares have risen over the same period as its drug has been shown to offer greater weight loss.

On Friday, Jefferies analysts said petrelintide has the potential for Wegovi-like efficacy and tolerability equal to placebo, which “suggests that this is a viable drug.”

But it could be considered second best to the amylin treatment Lilly is developing, he said.

“For us, as a small company, to be among the leading products in a new category… it’s a very happy place,” Steinsberg said, adding that it’s too early to make such calls.

“If you look at the markets historically, if you are the first of the three to launch into a new category with an attractive profile, you become a very significant player in that category.”

The latest trial was not optimized to maximize weight loss, she said, because it had a roughly 50/50 gender distribution and women lost more weight than men.

“Most companies approach 70% of women,” he said, adding that petrelintide causes weight loss in the mid-teens after “optimizing initial conditions.”

The trial results, published Thursday, “are dose-finding and then demonstrate safety and solid efficacy,” he said.

Zeeland said it expects to start a Phase 3 study later this year. But Barclays analysts said the market was unlikely to credit a Phase 3 “fix” to petrelintide in two years.