Shares of Structure Therapeutics (GPCR +6.60%) shot up more than 50% during the first week of June. The stock market is responding to a positive readout for an experimental weight-management drug the company is working on.
Structure Therapeutics is a clinical-stage drugmaker developing an orally available therapy, called GSBR-1290. Structure's lead candidate works like semaglutide, the active ingredient in Ozempic from Novo Nordisk (NVO +1.23%), to manage food cravings, but it could be much easier to manufacture and distribute.
NASDAQ: GPCR
Key Data Points
Encouraging phase 2 results convinced Evan Seigerman at BMO Capital Markets to raise his price target on the stock to $100 per share. The new target implies an 87% gain from recent prices.
Is Structure Therapeutics right for your portfolio? Let's compare its lead candidate's results to the blockbuster weight management drugs from Novo Nordisk and Eli Lilly (LLY 1.96%) that it could eventually compete with to find out.
Reasons to buy Structure Therapeutics stock now
The market for drugs that mimic glucagon-like peptide 1 or GLP-1 is hard to overstate. Tirzepatide, which Eli Lilly markets as Mounjaro for patients with diabetes, and Zepbound for patients seeking weight loss solutions, launched in May 2022. Sales of Lilly's tirzepatide and Novo Nordisk's semaglutide have been growing at a pace that will make your head spin.
Combined first-quarter sales of both tirzepatide brands reached an annualized $9.3 billion in the first quarter of 2024, less than two years following its first approval date. Semaglutide, a drug that Novo Nordisk markets as Wegovy for weight loss and Ozempic and Rybelsus for diabetes, has been on the market since 2017. First-quarter semaglutide sales reached an annualized $24.4 billion.
Altogether, global sales of GLP-1 drugs are expected to reach $71 billion annually by 2035, according to Citi, and this is a relatively conservative estimate. Citing benefits for GLP-1 drugs beyond just weight loss and blood sugar management, Guggenheim turned heads last year with an estimate between $150 billion and $200 billion annually.
Tirzepatide and semaglutide are biological drugs manufactured by living cells. Structure Therapeutics' goal is to create more easily manufactured small-molecule drugs like GSBR-1290 that can do the same job, and the results have been promising.
In a phase 2 trial with 64 nondiabetic participants, 12 weeks of treatment with GSBR-1290 reduced patients' weight by 6.2% compared to those who were randomized to receive a placebo. More than two-thirds of patients treated with GSBR-1290 achieved a weight reduction of 6% or greater, and 33% reduced their weight by 10% or greater. None of the patients randomized to receive a placebo achieved a weight reduction of 5% or better.
Cross-trial comparisons can be misleading, but oral GSBR-1290 appears capable of competing with injected semaglutide in efficacy. In 2022, a review of health records showed that 175 patients treated with semaglutide at the Mayo Clinic achieved an average weight reduction of 5.9% after three months. In this group, 14.9% reduced their weight by 10% or more.
Recent results for GSBR-1290 also appear competitive with a promising oral GLP-1 candidate from Eli Lilly called orforglipron. Once-daily treatment with orforglipron reduced obese patients' weight by 6.5% at the 12-week observation point of a 36-week study.
Structure's results for GSBR-1290 were encouraging enough that it was able to raise a heap of cash in a secondary offering. The company finished March with $436 million in cash and recently raised $547.4 million before fees in a successful secondary offering.
Reasons to remain cautious
Structure thinks it will take another year and a half to begin a phase 3 trial that can support a new drug application for Structure's lead candidate. This means the company's cash balance could shrink to nearly nothing by the time we know if GSBR-1290 has a chance at earning approval from the Food and Drug Administration (FDA).
Rybelsus is an oral version of semaglutide that Novo Nordisk launched in 2019 for the treatment of diabetes. The company already wrapped up a successful phase 3 weight management trial with oral semaglutide in 2023. In other words, an oral GLP-1 drug will likely become entrenched before we even have phase 3 data for Structure's candidate.
Structure's candidate isn't a peptide like semaglutide, but it still causes more side effects than physicians want to see from a drug they give to generally healthy patients. Vomiting was reported among 62% of patients who received GSBR-1290, and 89% reported nausea.
A buy now?
If upcoming clinical trial readouts continue to suggest GSBR-1290 can perform as well as orforglipron from Eli Lilly, Structure's market value and stock price could more than double in the year ahead. That said, there's still a lot that can go wrong. Investors with modest-to-low risk tolerances don't want this risky stock anywhere near their portfolio.
Structure's recent market cap of $2.5 billion at recent prices is large for a precommercial drugmaker, but not once you consider the enormous sales it could rack up as an easy-to-swallow weight management drug. Given the market size for GLP-1 drugs, this stock looks like a bargain for investors who can tolerate a lot of risk.
