Zealand Pharma Stock Falls After Jefferies Downgrade, 37% Price Target Cut

Zealand Pharma A/S shares fell on Tuesday after analysts at Jefferies downgraded the stock and sharply reduced their price target, citing a lack of near-term catalysts following recent setbacks in the company's obesity drug development pipeline.

The Downgrade Details

Jefferies lowered its rating on the Danish biotechnology firm to Hold from a previous Buy recommendation. The brokerage also slashed its price target by nearly 37% to DKK 320 from DKK 505.

Following the report, Zealand Pharma's shares were down 2.7% at DKK 273.40 in Copenhagen trading, underperforming the local OMXC25 benchmark index, which declined 0.5%, according to the source.

Rationale Behind the Cut

The downgrade reflects a more cautious outlook after what Jefferies called "disappointing Phase III data" for the company's obesity drug candidate, survodutide. The brokerage said this prompted it to lower the drug's probability of success to 40% from a previous estimate of 60%.

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Jefferies analysts noted that key value-creating catalysts are now unlikely to emerge in the next six to 12 months. They believe investors may have to wait until 2027 and 2028 for more meaningful clinical readouts on survodutide and another obesity candidate, petrelintide, that could materially improve sentiment.

Competitive Landscape and Outlook

While Jefferies stated it still views Zealand's long-term valuation as attractive, it warned of near-term headwinds. The report highlighted that upcoming data from competitor obesity drugs could make it harder for Zealand's pipeline to stand out until more advanced trial results are available.

Despite the downgrade, Jefferies argued the stock's valuation is supported by the company's net cash position, its rare disease portfolio, and the risk-adjusted value of its assets in the obesity space.