Roche obesity-pill trial results weigh on shares of Eli Lilly, Novo Nordisk

By Eleanor Laise

A selloff for Structure Therapeutics and other weight-loss drugmakers' stocks is overdone, analysts say

Shares of weight-loss drugmakers including Eli Lilly & Co., Novo Nordisk A/S and Structure Therapeutics Inc. fell on Wednesday after Roche Holding AG announced positive early-stage trial data for its experimental obesity pill.

Patients taking the investigational treatment, CT-996, achieved average weight loss of 7.3% after four weeks, Roche said in a release, adding that trial data support once-daily dosing of the pill. Like Novo's injectable medications Ozempic and Wegovy, CT-996 is a GLP-1 receptor agonist. Side effects included mostly mild or moderate gastrointestinal issues, similar to other GLP-1 drugs, Roche said in the release.

Roche's American depositary receipts (RHHBY) jumped more than 7% Wednesday, while Lilly's stock (LLY) fell 2.5% and Novo's ADRs (NVO) dropped 4%.

Shares of other weight-loss drug developers suffered even steeper declines. Viking Therapeutics Inc's stock (VKTX) fell more than 13%, while Structure Therapeutics Inc.'s ADRs (GPCR) and Altimmune Inc.'s stock (ALT) dropped about 8% and shares of Danish weight-loss drug developer Zealand Pharma (DK:ZEAL) fell sharply in European trading.

Those selloffs may be overdone, analysts said. Although Roche's drug showed a high level of weight loss for an oral medication, it's still early in its trials, and the study involved a relatively small number of patients, William Blair analysts said in a research note Wednesday. Of the two arms of the trial completed so far, one had 40 participants and the other had 25, according to Roche. It's "premature to call a winner at this moment," the William Blair analysts wrote, as the final judgment of such drugs will be based on when and where the weight loss plateaus, side effects, and any potential liver toxicity, which has been an issue for some other experimental drugs in the class.

Roche's oral GLP-1 results look "robust," but still need "further validation," including efficacy results in larger and longer-duration studies, Leerink Partners analysts said in a research note. Any outsized stock-market reaction is "premature," BMO Capital Markets analysts said in a note.

The CT-996 data so far appear to be roughly in line with competing GLP-1s, including Structure Therapeutics' experimental pill, and Structure is roughly a year ahead of CT-996 in developing that treatment, Cantor Fitzgerald analysts said in a note Wednesday. The Cantor analysts reiterated their overweight rating on Structure shares and said they "recommend buying on any dip."

As for Zealand Pharma, the implications of the Roche trial data are "very limited," the Cantor Fitzgerald analysts wrote, because Zealand's drug targets the amylin hormone rather than GLP-1.

Drugmakers are vying to develop pills that can compete with Wegovy and other popular weight-loss injections, hoping that oral versions of these drugs may be cheaper and more accessible for patients. "Oral assets will unlock the potential of this market, growing supply and expanding patient access with room for multiple winners," the BMO analysts wrote Wednesday.

Roche's trial results are the latest in a string of recent upbeat announcements on obesity pills. Pfizer Inc. (PFE) said earlier this month that it has chosen a preferred modified-release formulation of its experimental GLP-1 pill danuglipron, while Structure said last month that its investigational weight-loss pill achieved its aims in a clinical trial.

-Eleanor Laise

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07-17-24 1254ET

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