Deutsche Bank has initiated coverage on Zealand Pharma (NASDAQ:ZEAL) A/S, traded on both the Copenhagen stock exchange (ZEAL: DC) and NASDAQ (NASDAQ: ZEAL), with a Hold rating and a price target of DKK815.00.
The firm's assessment pointed to Zealand Pharma's position as a new player in the metabolic disease sector, highlighting its advanced niche programs in rare diseases and its pivotal stage asset, survodutide, which is progressing into Phase 3 trials for metabolic-associated steatohepatitis (MASH) and obesity in partnership with Boehringer Ingelheim.
Although there is notable investor excitement around Zealand Pharma's obesity asset, petrelinide, which is earlier in the development pipeline and demonstrated promising initial data, Deutsche Bank believes the current market valuation of approximately $9 billion market cap and $8 billion enterprise value already accounts for much of the optimism regarding the asset's potential.
The bank also expressed caution regarding survodutide, despite the coverage of its data updates in recent years. Additionally, the anticipation of updates from multiple potential amylin competitors shortly was noted as a factor in the conservative rating.
In other recent news, Zealand Pharma reported positive results from a 13-week Phase 1b trial of dapiglutide, a dual GLP-1/GLP-2 receptor agonist designed for weight management, demonstrating up to an 8.3% reduction in body weight compared to placebo after 13 weekly doses.
Zealand Pharma has also expanded its equity offering to $1 billion, reflecting strong investor interest in supporting its research, development activities, and commercialization efforts for their marketed products.
Goldman Sachs maintained a Conviction Buy rating for Zealand Pharma, emphasizing the progress in their product pipeline. The company's obesity treatment petrelintide showed promising results, with an anticipated initiation of Phase 2b trials in the second half of 2024. Furthermore, Zealand Pharma's drug candidate survodutide showed efficacy in improving liver health in a Phase 2 trial, earning Fast Track Designation from the U.S. Food and Drug Administration for MASH and fibrosis treatment.
InvestingPro Insights
Zealand Pharma's financial metrics from InvestingPro offer additional context to Deutsche Bank's recent Hold rating. The company's market capitalization stands at $8.58 billion, aligning closely with Deutsche Bank's valuation estimate. Despite a strong revenue growth of 301.39% over the last twelve months as of Q2 2024, Zealand Pharma is currently operating at a loss, with a negative gross profit margin of -94.16% and an operating income margin of -195.86%.
These figures underscore the company's status as a development-stage biopharmaceutical firm, where substantial investments in research and development often precede profitability. The negative P/E ratio of -79.19 further reflects this pre-profit phase, which is not uncommon for companies with promising but yet-to-be-commercialized assets in the pharmaceutical sector.
InvestingPro Tips highlight that Zealand Pharma's stock price has shown remarkable performance, with a 167.5% total return over the past year. This aligns with Deutsche Bank's observation of investor excitement around the company's pipeline, particularly the obesity asset petrelinide. Another InvestingPro Tip notes that analysts have revised their earnings expectations upward, suggesting growing confidence in the company's future prospects.
For investors seeking a deeper understanding of Zealand Pharma's potential, InvestingPro offers 13 additional tips that could provide valuable insights into the company's financial health and market position.
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