This biotech startup has a chance to grab a piece of the lucrative obesity drug market, analysts say

Published Tue, Feb 28 20231:09 PM ESTUpdated Tue, Feb 28 20232:33 PM EST

Christina Cheddar Berk @in/christina-cheddar-berk-b864404/

It's been hard to miss the buzz around a new class of obesity medications , but one big drawback to these therapies is that they require a weekly injection. Enter biotech startup Structure Therapeutics , which is hoping to change that regimen with oral GLP-1 formulations for obesity and Type 2 diabetes treatment. Structure went public earlier this month, raising $161 million in an upsized initial public offering. The stock rallied 73% in its first day of trading, but has pulled back in the weeks since its debut. On Tuesday, however, several firms initiated coverage of the stock with buy and outperform ratings. The positive analyst commentary rekindled interest in the stock, driving shares up more than 6% intraday. The company's stock symbol, GPCR, is a nod to its focus on G protein-coupled receptors, which help cells function. It has a number of drug candidates in the pipeline targeting both pulmonary and metabolic conditions, but much of the interest is focused on GSBR-1290, an oral receptor agonist of glucagon-like-peptide-1, or GLP-1. Key data from the drug's clinical trials is expected in the fourth quarter, which could be a catalyst for the stock. If all goes well, it could launch by 2027, which is still competitive, said BMO Capital Markets analyst Evan David Seigerman. Novo Nordisk's Wegovy and Ozempic are currently on the market and approved to treat obesity and Type 2 diabetes. Eli Lilly's Mounjaro is approved to treat Type 2 diabetes and Lilly expects to gain clearance for obesity treatment later this year. GPCR 1M mountain Shares have pulled back since the stock debuted earlier this month. "GSBR-1290 could help address a significant portion of patients (up to 50%) who do not want injectable therapy or have limited access, given the oral route of administration," Seigerman wrote in a research note Tuesday. He rates the stock outperform and has a $40 price target on it, which implies a 67% return from Monday's close. BMO was among the group of investment banks acting as joint book runners for Structure's IPO. Jefferies analyst Chris Howerton initiated the stock with a buy rating and a $34 price target — representing 42% upside to Monday's close. (Jefferies was the lead book runner in Structure's IPO.) "GLP1 peptides are projected to sell $50B in diabetes/obesity by 2028," Howerton said. "While there's space for any new GLP1 to fill, lead asset GSBR-1290 appears uniquely positioned to satisfy unmet demand because it's cheaper to supply, while current data suggests a superior chemical profile over competitor small molecules." Shortages have plagued the existing obesity medications, and their costs has been prohibitive for many potential patients. Structure's formulation could allow it "greater manufacturing scalability, faster effective dose finding, and potentially fewer side effects," Howerton said. Both analysts also touted the company's experienced management team and the potential for its drug-discovery platform to rapidly identify other small molecule therapeutics. "We expect additional clinical candidates to emerge from the platform," BMO's Seigerman said. — CNBC's Michael Bloom contributed to this report.