Zealand Pharma stock slumps as FDA rejects bowel disease treatment

Investing.com -- Zealand Pharma's shares fell sharply after the US Food and Drug Administration (FDA) declined to approve the biotech company’s treatment for bowel disease, requesting an additional trial to establish the drug’s safety and effectiveness.

Zealand Pharma (NASDAQ:ZEAL ) stock plunged more than 10% in European trading Friday following the news.

In its complete response letter, the FDA stated that Zealand's submission lacked sufficient evidence to demonstrate the proposed dose of glepaglutide was both safe and effective. This marks the second recent regulatory setback for the Danish biotech firm, following the FDA’s earlier rejection of its low-blood sugar treatment for infants in October.

Glepaglutide was developed to treat adults with short bowel syndrome (SBS) and intestinal failure who rely on parenteral support—a process where nutrition and fluids are delivered intravenously, bypassing the digestive system.

SBS is a rare, chronic condition that impairs the small intestine’s ability to absorb nutrients, affecting approximately 7,500 adult patients in the U.S., according to company estimates.

In late-stage clinical trials, glepaglutide administered twice weekly significantly reduced patients’ dependence on parenteral support compared to a placebo, the company reported. However, the once-weekly dose, while also reducing parenteral support requirements, did not achieve statistical significance.

Zealand Pharma plans to continue discussions with the FDA to determine the next steps needed for US regulatory approval.

Meanwhile, the company intends to initiate a late-stage clinical trial in 2025, aimed at supporting regulatory submissions for glepaglutide in other markets, including Europe.

Jefferies analysts project global peak sales of $600 million for glepaglutide, with an estimated net present value (NPV) of approximately 90 Danish kroner per share, assuming an 8% discount rate and a 90% probability of success.

According to analysts, this suggests a potential mid-single-digit percentage downside for the stock.

“We continue to see asymmetric risk/reward into CagriSema data and hence would use weakness as a buying opportunity,” they said.

Meanwhile, BTIG analysts trimmed their Zealand stock price target to DKK 1,050 from DKK 1,100 “after conservatively pushing expected US launch of glepaglutide in SBS out to 2029.”

Source: Investing.com