jwesth @jwesth: "𝙄𝙨 𝙕𝙚𝙖𝙡𝙖𝙣𝙙 𝙋𝙝𝙖𝙧𝙢𝙖 𝙩𝙝𝙚 𝙣𝙚𝙭𝙩..."

United Kingdom

Edited

𝙄𝙨 𝙕𝙚𝙖𝙡𝙖𝙣𝙙 𝙋𝙝𝙖𝙧𝙢𝙖 𝙩𝙝𝙚 𝙣𝙚𝙭𝙩 𝙉𝙤𝙫𝙤 𝙉𝙤𝙧𝙙𝙞𝙨𝙠? 🔬 Danish biotech company $ZEAL.CO (Zealand Pharma A/S) has recently presented its results for the first quarter of 2024. As an 'R&D shop' focused on developing new drugs, Zealand Pharma differs from most other companies where earnings take centre stage. At Zealand Pharma, the focus is instead on progress in their clinical R&D pipeline. 💸 The company has almost no revenue and has been loss-making for the majority of its existence. Although they generate modest revenue from licence agreements, R&D costs are significant. In the first half of the year, Zealand Pharma generated a loss of 521 million kr., of which approximately 400 million kr. is related to R&D costs. However, for a company like Zealand Pharma, increasing R&D costs can be a positive indicator that progress is being made in the later and more costly phases of the R&D pipeline. 🫃 Investors are particularly interested in the development of the company's obesity drug. This is in light of the massive success of $NOVO-B.CO (Novo Nordisk B A/S)'s Wegovy and $LLY (Eli Lilly & Co)'s Zepbound. Zealand Pharma's most advanced obesity drug, Survodutide, developed in partnership with German Boehringer Ingelheim , targets the GLP-1 receptor like Wegovy. 💊 Although Survodutide is in Phase 3 and on the fast track for approval, it is not expected to be launched on the market until 2027 at the earliest. This depends on continued positive trial data, and there is some risk that it may not achieve final approval even in Phase 3. 🧪 However, Zealand Pharma's success does not rest on this one obesity drug alone. They have a total of 10 projects in the clinical R&D pipeline, including three more obesity drugs in development in phases 1 and 2. In particular, Petrelintide, which is entering phase 2 and is an alternative to GLP-1 therapy, has shown promising results. It has the potential to be the next generation of more effective obesity drugs. However, it requires patience from investors as the wait and uncertainty for these earlier-stage projects are even greater. 📊 With a recent capital increase raising almost 7 billion kr. and a cash balance of nearly 10 billion kr., Zealand Pharma's current cash-burn rate could see it operating at a loss for many more years until its R&D portfolio starts generating revenue. 📈 Although there are no guarantees that Zealand Pharma's obesity drug will be a success, investors are showing great interest. The share price has risen c. 160% this year alone. The potential could also be huge if Zealand Pharma receives final approval and can compete with Wegovy and Zepbound. Wegovy currently has annual sales of over 40 billion kr. and investment bank Goldman Sachs expects the obesity market to reach 900 billion kr. by 2030. In this light, the current market capitalisation of around 65 billion for Zealand Pharma doesn't seem that dramatic. 💡 As an investor, it's important to be aware of the risks of investing in an R&D shop. The company's value is not based on current earnings but rather on the potential future revenues, which depend on the success of individual R&D projects. Investing in the next blockbuster drug can be an exciting opportunity, but as a retail investor, we can also be cautious about over-allocating to a stock that has this inherent risk. $NVO (Novo-Nordisk A/S SPONS ADR) $GSK (GlaxoSmithKline plc ADR) $GSK.L (GlaxoSmithKline) $ROG.ZU (Roche Holding Ltd) $AMGN (Amgen Inc) $SAN.PA (Sanofi) $SNY (Sanofi-ADR)

8 Mentioned Show all