Trial success is rocketing this NASH stock higher and sinking these peers

Madrigal intends to file a New Drug Application in the first half of 2023 as it seeks accelerated approval for resmetirom

Shares of this drugmaker are soaring on Monday after the company reported positive topline results from the pivotal Phase 3 clinical trial of resmetirom, a liver-directed selective thyroid hormone receptor agonist. The news that is boosting Madrigal Pharmaceuticals’ (MDGL) stock has also sent Viking Therapeutics’ (VKTX) stock higher, with both William Blair and H.C. Wainwright analysts seeing Madrigal’s data as a "great readthrough" for VK2809. On the flip side, several of Madrigal’s competitors saw their stocks dive into negative territory, including Intercept Pharmaceuticals (ICPT), 89bio (ETNB), and Altimmune (ALT).

MAESTRO-NASH TRIAL RESULTS: Madrigal Pharmaceuticals announced positive topline results from the pivotal Phase 3 MAESTRO-NASH biopsy clinical trial of resmetirom. MAESTRO-NASH has achieved both liver histological improvement endpoints that FDA proposed as reasonably likely to predict clinical benefit to support accelerated approval for the treatment NASH with liver fibrosis. MAESTRO-NASH is an ongoing blinded Phase 3 clinical trial, and enrolled patients continue on therapy after the Week 52 liver biopsy for up to a total of 54 months to accrue hepatic clinical outcome events including histologic conversion to cirrhosis and hepatic decompensation events. The compliance to treatment was high and minimally impacted by COVID pandemic restrictions.

Biopsy endpoints were achieved independent of baseline fibrosis stage or diabetes status. Other secondary liver biopsy endpoints that were achieved at both doses include greater than or equal to 2-point reduction in NAS with no worsening of fibrosis, greater than or equal to 2-point reduction in NAS with greater than or equal to 1-stage improvement in fibrosis, NASH resolution with greater than or equal to1-stage improvement in fibrosis, and a 2-stage reduction in fibrosis without worsening of NAS. Multiple secondary endpoints were achieved, including statistically significant reduction from baseline in liver enzymes. Reductions in atherogenic lipids and lipoproteins, fibrosis biomarkers and imaging tests were observed in resmetirom treatment arms as compared with placebo. Resmetirom was safe and well-tolerated at both the 80 mg and 100 mg doses. The rate of study discontinuation for adverse events was low. SAEs occurred at expected rates based on the patient population.

In a research note titled “Christmas came in early for MASTERO-NASH,” Piper Sandler analyst Yasmeen Rahimi said that with this data, Madrigal’s resmetirom is "clear for approval" as the first nonalcoholic steatohepatitis therapy to achieve both endpoints along with strong lipid reductions. She believes the "outstanding" histology efficacy may come as a surprise to many investors by hitting statistical significance on both primary endpoints. Rahimi has an Overweight rating on Madrigal with a $203 price target.

Following the news, Goldman Sachs analyst Andrea Tan raised the firm’s price target on Madrigal Pharmaceuticals to $375 from $178 and kept a Buy rating on the shares. The study outcome represents Tan’s bull case scenario and she sees the stock moving to $300-plus given resmetirom’s robust benefit/risk profile and increasing M&A optionality. H.C. Wainwright analyst Ed Arce also raised the firm’s price target on Madrigal Pharmaceuticals to $225 from $170, keeping a Buy rating on the shares after the company reported "unprecedented" and "strikingly positive" results from its MAESTRO-NASH study of resmetirom. While he believes most investors expected positive results on NASH resolution, Arce contends that "most were skeptical on whether resmetirom could improve fibrosis," and even if it could, he believes the prevailing view was it would "only do so marginally." He believes resmetirom is "poised to be the first foundational therapy approved for NASH, as a safe, once-daily oral therapy."

‘INAPPROPRIATE’ DOWNSIDE: 89bio (ETNB) is one of the stocks trading significantly lower on Monday after competitor Madrigal Pharmaceuticals reported positive Phase 3 MAESTRO-NASH data with resmetirom. RBC Capital analyst Brian Abrahams believes the downside is "inappropriate," and sees a buying opportunity for 89bio shares. Madrigal’s positive data corroborates that both fibrotic and cardiometabolic benefits can be achieved in large Phase 3 NASH studies with "thoughtful trial and endpoint design," Abrahams writes. Further, he notes that 89bio’s pegozafermin targets distinctive mechanism apart from thyroid hormone receptors, so it could potentially be complementary or be geared to treat different NASH patients. In addition, NASH is a large market with numerous other metabolic co-morbidities that can support multiple mechanisms for different patient populations even if not ultimately combined, Abrahams added. Abrahams has an Outperform rating on 89bio with a $29 price target.

INTERCEPT’S OCA NASH PROSPECTS: RBC Capital’s Brian Abrahams said in a separate note that Madrigal’s data looks to him to be at least as good if not better than what Intercept Pharmaceuticals’ OCA has been showing in a longer Phase 3 NASH study – recall OCA showed 12%-13% placebo-adjusted fibrosis improvements from re-analysis and 3%-4% NASH improvements, and without the considerable tolerability/safety liabilities of pruritus, LDL increases, and potential liver toxicity. Abrahams further argues that Madrigal data provides further reasons why deprioritizing NASH and focusing on PBC may be the most viable pathway for value creation for Intercept. He keeps a Sector Perform on Intercept’s shares with a price target of $16.

VIKING STANDS TO BENEFIT: William Blair analyst Andy T. Hsieh views the quality of Madrigal’s data as transformational and paradigm-changing, and believes resmetirom will likely be the first highly effective therapeutic modality for the management of NASH. Given the identical mechanism of action as resmetirom, Hsieh believes Viking’s VK2809 stands to benefit from the tailwinds. He is particularly intrigued by the liver-targeted design of VK2809, which could theoretically provide improved efficacy and safety parameters. The analyst has an Outperform rating on Viking’s shares.

H.C. Wainwright analyst Joseph Pantginis also believes that Madrigal’s data from the ongoing Phase 3 MAESTRO-NASH trial of resmetirom provides further confidence ahead of Viking Therapeutics’ VOYAGE readout in the first half of 2023. The MAESTRO program thus far appears to be a positive catalyst within the broader nonalcoholic steatohepatitis clinical landscape "and certainly benefit Viking with the same therapeutic target," Pantginis adds. The analyst sees Madrigal data as a "great readthrough" for VK2809. He reminds investors that Viking’s VK2809 has not reported any appreciable gastrointestinal related adverse events in its studies. Pantginis reiterates a Buy rating on Viking Therapeutics with a $21 price target.

PRICE ACTION: In Monday morning trading, shares of Madrigal have jumped over 227% to $208.68, while Viking Therapeutics’ stock has gained almost 54% to $6.19. Moving on the opposite direction, Intercept’s stock has dropped more than 20% to $12.22, 89bio has slipped about 14% to $9.10, and Altimmune has slid over 19% to $9.27.