Madrigal Pharmaceuticals Receives Approval for Groundbreaking Drug Targeting Lucrative NASH Market. Is the Stock a Strong Buy?

Madrigal Pharmaceuticals Receives Approval for Groundbreaking Drug Targeting Lucrative NASH Market. Is the Stock a Strong Buy?

Some events are so crucial for a business that they change everything. The business world instantly becomes brighter – or darker.

Madrigal Pharmaceuticals (NASDAQ:MDGL) I have just experienced such an event. Last Thursday, the company won approval from the U.S. Food and Drug Administration (FDA) for the first drug targeting the multibillion-dollar nonalcoholic steatohepatitis (NASH) market. Is Madrigal stock now a screaming buy?

Madrigal’s landmark endorsement

Investors have known for months that an FDA approval decision was coming for Madrigal’s resmetirom as a treatment for NASH. In September, the agency set a PDUFA Date for March 14. Madrigal was optimistic that it would gain approval, preparing for an early commercial launch.

But until the FDA’s decision was announced, anxiety was high. All concerns evaporated last week as resmetirom became the first, and so far only, drug approved to treat NASH patients with moderate to advanced liver fibrosis. Bill Sibold, CEO of Madrigal Pharmaceuticals, said: “This is a historic moment for the field of NASH and represents the best of what our industry is capable of. »

The approval was especially sweet for Becky Taub, founder and chief medical officer of Madrigal. Taub and a small team of scientists began working on a treatment for NASH more than 15 years ago. She thanked the patients who participated in the resmetirom clinical trials for making the accelerated FDA approval possible.

A massive market

Madrigal will market its newly approved drug in the United States under the brand name Rezdiffra. The company expects the drug to be available to patients in April. The FDA will not require a liver biopsy for diagnosis before prescribing the drug, which is expected to increase its adoption.

NASH, also known as metabolic dysfunction-associated steatohepatitis, is an advanced type of nonalcoholic fatty liver disease. It is one of the leading causes of liver-related deaths. Treating NASH patients has become increasingly costly for healthcare systems around the world. The number of NASH cases in the United States and seven other major countries is expected to reach 98 million by 2030.

As you can imagine, there is a huge potential market for the treatment of NASH. How big the potential is, however, depends on who you ask. Estimates of global market size range from tens of billions of dollars to $100 billion or more, depending on IQVIA.

One reason these estimates vary so much is that NASH can be difficult to diagnose. It is often described as having few or no symptoms. Because NASH is frequently accompanied by other conditions such as cardiovascular disease, obesity and type 2 diabetes, diagnosing the disease can be even more difficult.

Is Madrigal Pharmaceuticals Stock a Loud Buy?

Given that Madrigal’s Rezdiffra will have this huge market all to himself, you might think the stock would be a screaming buy. However, there are certain factors that complicate the situation.

The aforementioned issues with NASH diagnosis could cause some time in Rezdiffra’s sales ramp-up. Guaranteeing payer reimbursement and educating doctors won’t happen overnight either.

Additionally, Rezdiffra may not be the only NASH drug approved for long. Novo Nordisk is evaluating semaglutide, the drug marketed under the brand names Ozempic and Rybelsus for type 2 diabetes and Wegovy for weight loss, in a late-stage study targeting NASH. Ingenuity, Galmed Pharmaceuticals, and PharmaKing also have experimental NASH drugs in late-stage testing. Several companies have NASH programs in phase 2 clinical studies, including 89bio, Therapeutic galectin, Sagimet Biosciences, Pharmaceutical ternsAnd Viking Therapeutics.

Still, Madrigal should have a big winner on his hands. Evercore ISI projects that Rezdiffra could achieve record annual revenue of $5.5 billion globally, with approximately $2.6 billion expected by 2030. market capitalization currently stands at nearly $5.7 billion, reflecting a low multiple of future sales.

I think biotech stocks have a lot of room to run. Whether or not you want to shout about Madrigal, the stock seems like a good stock to buy for aggressive investors.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool ranks and recommends Iqvia Holdings. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

Madrigal Pharmaceuticals Obtains Approval of First Drug Targeting Multi-Billion NASH Market. Is the stock a screaming buy? was originally published by The Motley Fool

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