Zealand Pharma stock initiated at Overweight by Barclays on obesity drug potential

Investing.com - Barclays (LON:BARC) initiated coverage on Zealand Pharma A/S (NASDAQ:ZEAL), currently trading at $58.88 with a market capitalization of $4.16 billion, with an Overweight rating and a price target of DKK560.00, representing over 50% upside potential from current levels. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value model.

The Danish biopharmaceutical company’s stock has declined 49% year-to-date, significantly underperforming the -7% return of the STOXX Europe 600 Health Care index (SXDP), according to Barclays. InvestingPro data shows the company maintains a strong financial position with a current ratio of 25.1 and a relatively low beta of 0.54, suggesting lower volatility compared to the market.

The firm attributes the stock’s weakness to several factors, including rising competition, investor uncertainty around the amylin drug class, cooling sentiment in the obesity treatment market, and broader macroeconomic headwinds. Despite these challenges, Zealand Pharma maintains a "Fair" overall Financial Health Score of 2.08 on InvestingPro, which offers 12+ additional insights and a comprehensive Pro Research Report for deeper analysis.

While Zealand’s competitor Eli Lilly (NYSE:LLY) presented encouraging Phase 1 data for its amylin candidate eloralintide at the American Diabetes Association conference, Barclays believes it’s premature to determine a winner in the amylin space and suggests the obesity market can support multiple players.

Barclays expects Zealand shares to remain range-bound in the second half of 2025 due to the absence of major catalysts, but views the company as a high-quality name with significant long-term upside potential, noting the current share price has reverted to pre-petrelintide levels.

In other recent news, Zealand Pharma announced its Q1 2025 financial results, reporting revenue of 8 million DKK, primarily from a licensing agreement with Novo Nordisk (NYSE:NVO). The company anticipates a significant $1.4 billion upfront payment from Roche in Q2 2025, which will bolster its cash position. In clinical developments, Zealand Pharma’s dapiglutide achieved an 11.6% mean body weight reduction in a Phase 1b trial, a promising result for its obesity treatment pipeline. Analyst activity included BNP Paribas (OTC:BNPQY) Exane initiating coverage on Zealand Pharma with an Outperform rating, suggesting a potential upside based on its valuation model. Meanwhile, Cantor Fitzgerald maintained an Overweight rating, citing the potential market success of petrelintide, with projected sales exceeding $5 billion. However, Deutsche Bank (ETR:DBKGn) revised its price target for Zealand Pharma to DKK485, maintaining a Hold rating, while noting anticipated financial results and minor delays in product development. These recent developments highlight Zealand Pharma’s strategic collaborations and clinical progress in the competitive obesity treatment market.

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