Hedge funds and institutions all over the world love a good weight-loss drug story almost as much as they love insider tips.

So, when Swiss pharma giant Roche announced it was throwing down up to $5.3 billion to partner with Danish biotech Zealand Pharma on its obesity drug candidate, petrelintide, investors gave Zealand’s stock a standing ovation. Shares of the small Danish firm exploded 40%, while Roche’s stock saw a solid 5.3% jump.

As we all know, Novo Nordisk and Eli Lilly have pretty much been running the weight-loss drug market like exclusive members of the Augusta National Country Club, thanks to their megahits Wegovy and Zepbound. But Roche just pulled up to the gates with a VIP pass, betting that petrelintide… an amylin analog that helps people feel fuller, faster… could shake things up. Unlike GLP-1 drugs, which suppress appetite, amylin analogs mimic a naturally occurring hormone that essentially tricks your brain into thinking you're full after a few bites.

Roche isn’t coming in cold, either. They’re pairing petrelintide with their own GLP-1/GIP receptor agonist, CT-388, in hopes of creating a double-barreled fat-burning machine. If it works, this could be a powerful new weapon in the growing $163 Billion weight-loss market.

This gives Zealand Pharma a massive payday. Roche is handing them a $1.65 billion upfront payment, with a potential total of $5.3 billion if the drug clears Phase 3 trials and performs well in sales. In return, Roche gets a 50/50 profit split in the U.S. and Europe, while keeping exclusive sales rights for the rest of the world.

But here’s where the story takes a weird turn. After Roche made its big move, the stock prices of Novo Nordisk and Eli Lilly both took a little dip. Novo dropped nearly 4%, still struggling from a 9% slide earlier in the week, after its experimental weight-loss drug, CagriSema, couldn’t quite outshine Eli Lilly’s Zepbound in Phase 3 trials. Even Lilly’s stock slipped by 1.5%, as investors started to feel the pressure from this new player entering the market.

Petrelintide is still in Phase 2 trials, meaning it won’t hit the market until around 2030. But analysts already believe it could be “best in class”, with potential weight loss targets of 15-20%... numbers that could make it a serious rival to the current GLP-1 drugs. If the trials go well, Roche and Zealand might just crash Novo and Lilly’s monopoly party, bringing new competition to a market that’s been dominated by just two players.

So, don’t buy into all the pharma doomsday talk. Sure, RFK is in Washington, but he’s more preoccupied with vaccines and what’s on your plate. The weight-loss drug market is still on fire. And Roche just threw another few billion gallons of fuel onto the flames.

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Stocks.News has positions in Zealand Pharma, Eli Lilly, and Novo Nordisk mentioned in article.