Weight loss drug maker sinks 25% after new safety data spooks investors

Shares of weight loss drug maker Zealand Pharma plummeted as much as 26% on Monday after new data on its experimental medicine raised concerns over its potential side effects.

The Danish drugmaker said that while its drug survodutide met its key targets in a late-stage study, 19% of patients dropped out of the study due to gastrointestinal events, compared to 2.9% on placebo.

"Safety/tolerability remains the key issue," said Barclays analysts in a note on Monday.

The high discontinuation rate, with more than 40% of patients reporting vomiting, might limit the drug's commercial potential as a treatment for obesity or those suffering from fatty liver disease, the analysts added.

Shares of Zealand Pharma were last seen down 24%, adding to nearly 50% drop year-to-date.

The full survodutide data comes about three months after Zealand stock suffered its worst day on record when a trial of another of its experimental anti-obesity drugs disappointed investors with lower-than-expected weight loss statistics.

Analysts at Citi wrote in a note on Monday: "A 19% treatment discontinuation rate due to... adverse events... is not a rounding error, and nausea, vomiting, diarrhea, and constipation incidence at the levels reported here sit well above what we consider commercially viable against [rival drugs] tirzepatide and semaglutide."