Life Beyond GLP-1s: Piper Sandler’s top stock picks amid shifting biotech landscape

© Reuters. Life Beyond GLP-1s: Piper Sandler’s top stock picks amid shifting biotech landscape

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In a Friday note to clients, Piper Sandler analysts focused on “life beyond GLP-1s,” short for Glucagon-like Peptide-1 agonists – a class of medications primarily used in the treatment of type 2 diabetes and obesity.

These treatments are at the early stages of what many believe will be a significant growth trajectory.

However, there’s growing apprehension that GPL-1s, despite reliably promoting a 15-20% weight reduction within a year, may lead to a considerable loss of lean muscle mass—about 20-40% of the total weight lost, Piper Sandler pointed out in its note.

In addition, emerging evidence suggests that weight tends to be rapidly regained once treatment ceases. In response to these concerns, the industry is increasingly turning towards a polypharmacy approach, aiming to address both weight loss and the preservation of lean muscle.

“While some have debated that this can be addressed by exercise and diet, we think a pharmacological approach would address this emerging unmet need as well,” analysts wrote.

Against this backdrop, the analysts highlighted Biohaven Pharmaceutical Holding Co Ltd (NYSE:BHVN), Regeneron Pharmaceuticals (NASDAQ:REGN), and Scholar Rock Holding (NASDAQ:SRRK) among the few companies focused on this emerging unmet need.

Their approaches generally target the signaling of key regulators of muscle growth: myostatin and activin, Piper Sandler explained.

“On our lists, BHVN’s T-alfa binds mature myostatin and prevents ActRIIB receptor binding, REGN is developing two antibodies targeting activin A and myostatin, respectively, and SRRK is developing an antibody that binds pro- and latent myostatin.”

The broker holds an Overweight rating on this trio.

Meanwhile, Eli Lilly and Company (NYSE:LLY), one of the frontrunners in the ongoing weight-loss drug revolution, is also on this list, with anticipated phase 2b data for bimagrumab expected around mid-2024.

Moreover, Roche (SIX:ROG) and Keros Therapeutics Inc (NASDAQ:KROS) are advancing their respective programs in this space, which are also being monitored.

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