Analysts Say This Biotech Startup Could Make A Big Splash In The Obesity Drug Market

A new class of medications has been gaining a lot of attention lately, but there is one major drawback to these treatments which is that they require regular injections every week, which can be quite inconvenient for people.

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Structure Therapeutics is a biotech start-up that hopes to change the treatment regimen for obesity and Type 2 diabetes through the development of oral GLP-1 formulations that can be taken orally.

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There was $161 million raised in an upsized initial public offering of the structure earlier this month, resulting in the structure going public. After its debut, the stock rallied 73% on its first day of trading but has since pulled back in the weeks that have followed it. However, on Tuesday, several firms initiated coverage of the stock with buy and outperform ratings for the company. Shares of the stock rose by over 6% intraday after the positive analyst commentary revived interest in the stock.

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With its stock symbol, GPCR, the company makes a nod to the fact that it focuses on G protein-coupled receptors, which are important for the functioning of cells. The company is developing a number of drug candidates that are aimed at both pulmonary and metabolic conditions, but the bulk of its attention is directed at GSBR-1290, an oral agonist of the glucagon-like-peptide-1 receptor, or GLP-1, which is being tested in clinical trials.

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A key set of data from the drug's clinical trials is expected in the fourth quarter, which could be a catalyst for the stock price.

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It is expected that the product will launch by 2027 if everything goes as planned, which is still competitive, according to Evan David Seigerman, an analyst with BMO Capital Markets. In the current market, two of Novo Nordisk's products, Wegovy and Ozempic, have been approved by the FDA for the treatment of obesity and type 2 diabetes. The Mounjaro drug from Eli Lilly is approved to treat Type 2 diabetes, and the company expects to gain clearance for the treatment of obesity by the end of the year.

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Seigerman wrote in a research note Tuesday that GSBR-1290 could address a significant portion of patients who don't want injectable therapy or who have limited access. Based on his rating, he believes the stock is an outperformer and he has set his target price at $40, which implies a return of 67% from Monday's closing price.

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As a joint book-runner for Structure's IPO, BMO was one of the investment banks that participated in the group of investment banks.

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The stock has been initiated with a buy rating by Jefferies analyst Chris Howerton. He has set a price target of $34 - a 42% increase over Monday's close.

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“The sale of GLP1 peptides is expected to reach $50 billion in diabetes/obesity by 2028,” according to Howerton. "While it is true that there is room for any new GLP1 to fill, the lead GLP1 asset, GSBR-1290, appears to be uniquely positioned to satisfy unmet demand because it is cheaper to supply, while current data suggest that it has a superior chemical profile over competitor small molecules."

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The existing obesity medications have been plagued by shortages, and the costs of these medications have been prohibitive for many potential patients. It has been suggested that the formulation of Structure would enable it to provide "greater manufacturing scalability, faster effective dose-finding, and potentially fewer side effects," Howerton said.

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There was also praise for the company's experienced management team and the potential it has to identify other small molecule therapeutics quickly with its drug-discovery platform, both of which have been lauded by analysts.

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“Additional clinical candidates are expected to emerge from the platform,” Seigerman said.

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