Standard market action is of little interest to stocks operating in the biotech space that happen to post good news. Say, the market is taking a beating – a regular occurrence these days – and a biotech announces results that show a clinical trial has gone very well, indicating its drug could help patients suffering from a hard-to-treat condition, then what do you get? A stock that completely sidesteps the overall pullback – and some.
Case in point: Madrigal Pharmaceuticals (MDGL) shares blasted 268% higher in Monday’s session after resmetirom, the company’s treatment for nonalcoholic steatohepatitis (NASH), a potentially lethal liver condition, excelled in a late-stage study.
More specifically, the drug met the primary endpoints in the Phase 3 MAESTRO-NASH trial. 30% of patients who were given a higher dose of the drug displayed resolution of NASH, while 26% of patients who were given the lower dose showed resolution. Liver fibrosis improvement was seen by 26% of patients at the higher dose group, and 24% from the lower dose cohort.
With no standard treatments currently available for NASH patients, JMP analyst Jonathan Wolleben says the results amount to the “grand slam scenario.” “Resmetirom looks approvable based on the Phase 3 MAESTRO-NASH data with a clinical profile supporting a blockbuster opportunity,” the analyst went on to add.
Even taking into account the fact the shares more than tripled in a single session, Wolleben recommends investors keep on loading up because: “1) the current valuation underappreciates the blockbuster opportunity afforded by the strength of the MAESTRO-NASH data (we model U.S. sales of ~$5B at peak penetration); and 2) MDGL now becomes a top M&A target and there is no shortage of large players with NASH exposure (Novo Nordisk, Novartis, Pfizer, Lilly, Merck, AstraZeneca, Gilead to name a few) that could drive up a takeout premium.”
Nikic doesn’t just lay out an upbeat path for the company, he backs it with an Outperform (i.e. Buy) rating and $312 price target. Going by this target, there’s room for an…