By David Wainer
Remember when Wall Street decided that sleep apnea, diabetes, knee problems and liver disease were all going away? Starting in the summer of 2023, many healthcare stocks took a dive as investors worried that drugs like Ozempic and Zepbound were coming for all of those markets, given their link to obesity.
One company slammed by that anxiety was Madrigal Pharmaceuticals, maker of a treatment for a fatty liver disease known as NASH, which on Thursday got Food and Drug Administration approval.
Madrigal shares soared more than 200% in December 2022 after it released positive late-stage results for its once-daily pill. Investors and the medical community were excited by the results because developing a drug for NASH, or nonalcoholic steatohepatitis, has long been a tortuous and fruitless struggle for the industry. An FDA approval seemed within reach.
But then came a growing body of evidence that a new class of obesity drugs known as GLP-1s lead to significant improvement for NASH patients. If such drugs can reduce the excess fat stored in the liver, the bear thesis went, there might not be as big an opportunity for companies that target liver inflammation and scarring. It also didn't help that the company didn't partner with or get acquired by a larger pharma company last year, as many investors had hoped.
Now, though, Madrigal is back on the upswing after receiving regulatory approval. Madrigal's stock rose 11% on Friday to close above $270. But in the Ozempic era, the excitement is tempered by the knowledge that the field will become competitive. The stock is still well below the $312 high it set in early 2023. In an interview, Madrigal Chief Executive Officer Bill Sibold dismissed concerns that GLP-1s will hurt Madrigal's growth prospects.
"This is the first product in a space with an unmet need that is extremely high," said Sibold. "There will be competitors, but I think we're going to be the foundational therapy for NASH for years to come."
While there might be millions of Americans suffering from NASH, known as a silent killer because many people don't have any symptoms, Madrigal is focusing its commercial efforts on about 300,000 patients who are diagnosed and in treatment. The drug, Rezdiffra, will cost just under $50,000 before rebates per year, amounting to a multibillion-dollar opportunity. Analysts polled by Visible Alpha are forecasting that annual sales will reach $4 billion by 2031.
There is plenty of work ahead. Madrigal has hired more than 150 people to focus on the commercial side, from securing reimbursement from payers to marketing the drug, Sibold said. Significant sales figures aren't likely yet this year.
Rezdiffra seems like a potentially effective drug, but it won't work for everyone. At 12 months, liver biopsies showed that between a quarter to about a third of patients experienced NASH resolution and no worsening of liver scarring compared with 9% to 13% of those who received a placebo and counseling on dieting and exercise. But with no other drugs approved for NASH, it is fair to assume that a good portion of the 14,000 gastroenterologists and hepatologists in the country will take an interest in prescribing the drug. Allowing patients to go untreated can lead to cirrhosis and liver cancer.
There are other potential competitors on the way from companies like Akero Therapeutics and 89bio with drugs that focus on targeting NASH directly through a class of drugs known as FGF21, depending on how their larger studies shake out.
GLP-1s are going to be part of the treatment landscape, too, and they are likely to reduce the long-term pool of patients. But human biology is complex and there are no magic bullets.
Madrigal will have plenty of room to grow.
Write to David Wainer at david.wainer@wsj.com
(END) Dow Jones Newswires
March 18, 2024 07:00 ET (11:00 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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