After a bumpy road, Madrigal Pharmaceuticals gained Food and Drug Administration approval for the first-ever MASH treatment, Rezdiffra. On Friday, Madrigal stock surged by double digits as analysts raised their price target on the stock.
Rezdiffra, formerly known as resmetirom, is the first approved treatment for metabolic dysfunction-associated steatohepatitis. In this condition, previously called NASH, fatty tissue builds up on the liver causing scarring. Eventually, patients need a liver transplant.
UBS analyst Eliana Merle called the approval a "key de-risking event for shares." She hiked her price target on Madrigal stock to 410 from 337. It will take some time for Madrigal to navigate insurance reimbursement and the commercial launch, she said in a report.
"But (we) think the long-term size of the MASH opportunity is underappreciated," she said. "We reiterate our thesis that MASH is a large and growing market."
On today's stock market, Madrigal stock soared 11% to 270.37. At one point, shares hit their highest point since last June. Madrigal stock has now climbed 62% from a low point in February. Shares recently broke out of a consolidation with buy points at 245.17 and 245.31. The volatile stock then triggered the automatic sell rule, before retaking the buy point.
Shares of other MASH treatment developer 89bio also rose Friday. 89bio stock closed up 7.2% at 13.52.
Earlier, shares of Viking Therapeutics, Akero Therapeutics and Altimmune also rose. But Viking lost 3.8%, closing at 62.56. Altimmune stock slipped 1.7% to 9.86. Akero shares only retained a fractional gain, closing at 27.54.
Madrigal Stock: Eyes On April Launch
Madrigal plans to launch Rezdiffra in April, meaning the company won't log any sales in the first quarter, Merle said. The company notes ongoing approval of Rezdiffra is contingent upon further, confirmatory testing.
Some payers might not reimburse for Rezdiffra until confirmatory testing is complete.
"However, notably, management expects 80% of commercial lives covered by the end of the year and full Medicare coverage in place in 2025," Merle added. She kept her buy rating on Madrigal stock.
William Blair analyst Andy Hsieh noted the FDA won't require patients to undergo liver biopsies to confirm the presence of MASH. Liver biopsies are invasive and expensive, and have long been a roadblock to improving diagnosis rates for MASH.
But there are noninvasive tests that can confirm the disease and the level of fibrosis. Rezdiffra was approved for patients with fibrosis stages two and three, on a scale of zero through four. Four is the worst level of fibrosis, requiring a liver transplant.
"Notably, there is a no liver biopsy requirement in the label, a regulatory decision that removes a potential access barrier for patients and could accelerate patient identification and Rezdiffra adoption," Hsieh said in a report. "Accordingly, we expect biotech companies with MASH exposure to broadly rally today, given that one of the commercial overhangs has been removed."
A Bumpy Road In MASH Treatment
Rezdiffra, a daily pill, will cost $47,400 annually, on a wholesale acquisition price, RBC Capital Markets analyst Brian Abrahams said in a report. This is the price before insurance reimbursement and discounts.
Leerink Partners analyst Thomas Smith says that's on the higher end of what the Institute for Clinical and Economic Review recommended. Also known as ICER, the nonprofit examines the effectiveness of upcoming drugs to determine a fair price tag. But the recommendation isn't binding.
Smith reiterated his outperform rating on Madrigal stock, and bumped his price target to 390 from 315. He forecasts 2024 sales of $76 million growing to $3.5 billion by 2030.
In a separate report, Smith acknowledges the tough road for other MASH treatments. There have been numerous mid- and late-stage clinical failures and one rejection. Intercept Pharmaceuticals, acquired by Italy's Alfasigma, is the only other company to file for approval of a MASH treatment, and the FDA rejected that drug in 2020 and 2023.
To gain approval for a MASH treatment, a drug must improve fibrosis by at least one stage on a scale of zero to four, with four being the worst. But patients must not worsen on another scale measuring MASH symptoms. Or, a drug can improve MASH symptoms but not lead to worsening fibrosis. There have been lots of failures in this space.
In December 2022, Madrigal said two doses of resmetirom achieved both goals. That month, Madrigal stock rocketed nearly 314%, MarketSurge.com shows.
"Rezdiffra's approval de-risks the clinical/regulatory pathway for subsequent (MASH) therapies," Smith said.
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