Opportunity cost is a huge filter in life. If you've got two suitors who are really eager to have you and one is way the hell better than the other, you do not have to spend much time with the other. And that's the way we filter out buying opportunities. - Charlie Munger
Welcome to the edition of Integrated BioSci Rounds Report for June 13, 2018. As usual, we'll elucidate notable trading analytics for the day, recent insider transactions, and interesting market developments. Without further ado, let's take an overall assessment of the bioscience space. As follows, the iShares of NASDAQ Biotechnology Index (NASDAQ:IBB) traded down $0.42 (-0.38%) at $110.49. Moreover, the SPDR S&P Biotech (NYSE:XBI) exchanged hands $0.27 higher at $97.20 (for +0.28% gains). It's likely that investors were trading with a mixed sentiment for the day. Regardless of the daily inclination, there are substantial prospects in the bioscience sector: one that delivers hope for patients while rewarding supporters with substantial wealth in the long haul.
Figure 1: Notable BioSci movers (Source: Yahoo Finance)
Moving to specific equities, Madrigal Pharmaceuticals (NASDAQ:MDGL) won the highlight spot of the day. Accordingly, the stock appreciated by $30.53 to close the session at $313.24 for over 10.7% profits. Madrigal is the merger between Synta Pharmaceuticals and a private firm - one that focuses on the therapeutic development to service cardiovascular diseases and NASH. As shown below, the company is brewing two stellar molecules (MGL-3196 and MGL-3745).
Figure 2: Therapeutic pipeline. (Source: Madrigal)
As the first truly beta-thyroid hormone receptor agonist, notably MGL-3196 works by ramping up the basal metabolic rate and reversing fibrosis associated with NASH. Available in the convenient oral formulation, the drug delivers a plethora of therapeutic benefits for metabolic syndrome. In specific, it improves insulin sensitivity, dyslipidemia, fatty liver disease, including both lipotoxicity and inflammation. We noted in the prior research:
The beta-selectivity of THR enhances the safety profile of MGL-3196 compared to non-selective therapeutics. As follows, there is no suppression of the central thyroid axis, no THR-alpha effects on the heart or bone, and no liver enzymes abnormality. Due to this ingenious mechanism of action, MGL-3196 is one of the most promising molecules that we've seen to date (that has the best chances of posting robust future trial outcomes). And, we recommend readers to refer back to the prior article to appreciate the substantial unlocked value in this molecule.
On May 31, 2018, Madrigal published the stellar 36-week data for the phase 2 trial studying MGL-3196 in NASH. As follows, there was the statistical significance in both primary and multiple endpoints. A ≥30% fat reduction (MRI-PDFF) in MGL-3196 treated patients at Week 12 predicted an improved NASH histologic response at Week 36 including 39% NASH resolution, which was statistically significant relative to placebo. Moreover, there were statistically significantly more patients treated with MGL-3196 compared with placebo-treated patients achieved resolution of NASH on biopsy.
Since we recommended Madrigal to subscribers, it has gained over 280%. The elephant in the room is whether there are further upsides in this grower? What usually occurs after a robust runup is that the stock tends to give up some gains, as traders take profits. Be that as it may, if the fundamentals are strong, shares usually rally higher which is what we've witnessed for Madrigal. In light of that, the NASH market is estimated at $25B while the valuation of Madrigal is still only $4.6B; hence, there are further upsides. Interestingly, sources at Bloomberg stated there is the potential acquisition of Madrigal. Based on our analysis, it's not far from truth that if a buyout were to occur, the price target will be at least at a 40% premium. According to Manuel Baigorri:
The company is working with investment bank Centerview Partners Holdings on the potential sale, the people said, declining to be identified as the matter is private. The deliberations are at an early stage and Madrigal may opt to continue operations on its own, they said. Representatives for Madrigal declined to comment, while Centerview didn't immediately respond to calls.
On June 12, 2018, the FDA Commissioner (Dr. Scott Gottlieb) announced the publication of a guide to therapeutic innovators in incorporating the patient's voice into the development process. The agency is working with various companies, stakeholders, and patients to capture the patient's inputs into making safer and more meaningful medicine. According to Dr. Gottlieb:
To date, the FDA has held Patient Focused Drug Development ("PFDD") meetings in more than 20 disease areas where we've heard directly from those impacted by diseases, including opioid use disorder, autism, HIV, Parkinson's disease and various conditions involving pain. These meetings have given the FDA's professional staff a deeper understanding of patient and caregiver experiences. We have gained from this experience. Also important to this effort is educating companies about rigorous approaches to obtaining and incorporating this important and unique input into product development. We must also explain how the FDA will incorporate this information into our regulatory decision-making.
There are several ramifications to the aforesaid catalyst. First, it signifies the FDA's tireless due diligence to deliver more therapeutics that are patient-centered. Consequently, this will lead to improved clinical outcomes. Second, the increased working relationship between bioscience innovators and the agency to foster more approvals will come. Ultimately, these efforts deliver hopes to patients while unlocking values for therapeutic innovators.
In all, the bioscience market traded with a mixed sentiment for the day. Nevertheless, many companies under our coverage continued to post more profits. The most notable winner of the day was Madrigal. The stock enjoyed substantial gains so investors are likely to take some profits going forward. The combinations of profit-taking and a strong appreciation might deter new investors. Be that as it may, the market for NASH is gargantuan. In addition, there is an ongoing discussion about a potential buyout. Last but not least, the stellar FDA due diligence to deliver hopes to investors while serving as the industry tailwind for bioscience innovators.
Author's Notes: We're honored that you took the time to read our market intelligence. Founded by Dr. Hung Tran, MD, MS, CNPR, (in collaborations with Analyst Vu, and other PhDs), Integrated BioSci Investing ("IBI") is delivering stellar returns. To name a few, Nektar, Spectrum, Atara, Madrigal and Kite procured over 184%, 160%, 222%, 280%, and 83% profits, respectively. Our secret sauce is extreme due diligence with expert data analysis. The service features a once-weekly exclusive Alpha-Intelligence article, daily analysis/consulting, and model portfolios. Of note, there is an IBI version of this article that is a higher-level intelligence with extensive details, in which we published in advanced and exclusively for our subscribers. And, we invite you to subscribe to our marketplace now to lock in the current price and save money for the future.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Our research articles are best used as starting points in your own due diligence. We are not registered investment advisors and our articles are not construed as professional investment advice.