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Obesity-Made Fatty Liver Drives Midcap Race For Wonder Drug

The race is on to identify the wonder drug that will treat an increasingly common consequence of obesity: The fatty liver disease known as nonalcoholic steatohepatitis, or NASH.

Obesity-Made Fatty Liver Drives Midcap Race For Wonder Drug

Now investors await biopsy results from patients treated for over eight months.

HIGHLIGHTS

  1. Madrigal Pharmaceuticals is trying to get drug MGL-3196 to the market
  2. Madrigal's drug has so far not raised any red flags on safety
  3. Madrigal's drug may succeed in late-stage testing in NASH

The race is on to identify the wonder drug that will treat an increasingly common consequence of obesity: The fatty liver disease known as nonalcoholic steatohepatitis, or NASH. Madrigal Pharmaceuticals is expected to report results from a mid-stage study in NASH by Thursday. The drug developer is racing against peers like Intercept Pharmaceuticals to get its experimental therapy known as MGL-3196 to the market. Once closely-held, Madrigal became a public company after combining forces with oncology company Synta Pharmaceuticals Corp. in 2016, following the failure of Synta's lead cancer-fighting drug. Madrigal has more than doubled since Dec. 5 when the company reported initial results from the MGL-3196 study.

The study met its main goals in results recorded using magnetic resonance imaging-estimated proton density fat fraction, or MRI-PDFF, at the the three-month mark. Now investors await biopsy results from patients treated for over eight months.

If Madrigal's results are good, the small-cap company could get snapped up by a large-cap pharmaceutical peer like Gilead Sciences, the Street has suggested. While Intercept is in the lead among NASH peers as its Ocaliva is already in late-stage testing, safety concerns have tamped down shares as investors await those results - they aren't expected until next year. Madrigal's drug has so far not raised any red flags on safety.


Just what are investors looking for? Cowen analyst Ritu Baral says a two-point change in what is known as a NAS score, as well as a "strong trend" in NASH resolution and a "directional improvement" in fibrosis may be a good outcome. If all three criteria are met, this may imply Madrigal's drug can succeed in late-stage testing in NASH.

Recent results from closely-held peer NGM Bio "might have encouraged misplaced expectations For '3196 in fibrosis," Baral wrote in a note to clients. She doesn't see 36 weeks as a long enough time for Madrigal's treatment to show a statistically significant improvement.

Madrigal has a 50/50 shot at showing a significant change in fibrosis, according to RBC analyst Brian Abrahams. If that happens, he expects Intercept shares may slip about five percent; if Madrigal's drug fails on fibrosis, Intercept shares may jump 10 percent.

Aside from Intercept, Viking Therapeutics is another peer that may move off of Madrigal's data: Its VK-2809 works similarly to MGL-3196 and investors may see implications for Viking's development path. 

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