Zealand Pharma's stock fell by 5.32% on Tuesday, following a downgrade from investment bank Jefferies. The firm changed its rating from Buy to Hold, largely due to the absence of immediate growth catalysts.
Jefferies also slashed its price target from DKK505 to DKK320, which equates to a significant 37% reduction. The downgrade comes on the heels of disappointing Phase III trial results for the company's obesity treatment, survodutide, presented at the American Diabetes Association conference.
key Trials and Long-Term Prospects
The analysis emphasizes that the probability of success for survodutide has now dropped from 60% to 40%, a concerning shift for a company whose obesity pipeline is vital for its valuation. Furthermore, critical data related to MASH liver disease trials for survodutide will not be available until late 2027, which adds to the uncertainty surrounding the drug's future.
In addition, Jefferies pointed out that Zealand's other drug candidate, petrelintide, has also faced setbacks. While it has made progress into Phase 3 development in collaboration with Roche, the timeline for its evaluation has been extended, indicating that confidence in this treatment will require considerable time.
Market Response and Future Valuation
Despite the downgrade, Jefferies acknowledged Zealand's long-term valuation remains attractive. The company has a net cash balance and a unique portfolio catering to rare diseases. Currently, Zealand Pharma holds a market cap near $3 billion, with analysts noting its shares are trading at a price-to-earnings ratio of 3.13, hinting at potential undervaluation.
This material is for informational purposes only and does not constitute financial advice.
