Madrigal's MGL-3196: Not Ideal, But Currently The Best

Summary

• Although possessing huge market opportunities, there is currently no ideal NASH candidate in the late clinical stage.
• MGL-3196, based on its comprehensive measurements, large Phase II enrollment and clear signs of improvement in NASH symptoms, is currently out-competing its competitors.
• Criticisms driven by MGL-3196’s outcome in fibrosis stage improvement as well as “NAS point reduction” are over-stated.
• As the current leader and apotential strong candidate for solo / combination therapy, we think MDGL deserves a premium in price.

Madrigal Pharmaceuticals (NASDAQ:MDGL) is a US biotech company that currently has only one drug, MGL-3196, under clinical investigation stage. Being Madrigal’s key asset, MGL-3196 has proven its strong potential in Non-Alcoholic Steatohepatitis (NASH) and is currently advancing to Phase III.

Non-Alcoholic Steatohepatitis (NASH) is a disease that affects a lot of people worldwide yet no FDA approved drug ever exists. It currently affects about 8% of the entire US population and is estimated to exceed a $20~30B market size in 2026 globally. It’s a more aggressive form of Non-Alcoholic Fatty Liver Disease (NAFLD) that exhibits liver inflammation and cell injury with fibrosis. NASH’s serious impact is usually underestimated by its asymptomatic nature. Without proper treatment, NASH is more likely to progress to cirrhosis and hepatocellular carcinoma which greatly increases mortality of the patients. According to the record from United Network for Organ Sharing (UNOS), NASH has overtaken HCV as the leading cause of liver transplantation in US.

Despite heavy investments and continuous efforts from the industry, none of the NASH trials has shown indisputable result. The difficulty of the development of NASH medication is probably due to:

a) Numerous physiological indicators and nonuniform definition.

NASH’s physiological indicators include liver steatosis, lipotoxicity, insulin resistance, inflammation, fibrosis, etc. The diversity of the indicators makes trial design more complex. One may see unusually long endpoint description like “at least 2 point reduction in NAS score while non-worsening in fibrosis for patients with fibrosis stage 3 or larger”. This is a good example to show that companies are trying their best to make the endpoint reasonably achievable under such a multi-indicator environment.

Another example comes from the fact that different trials use different definitions of “NASH resolution”. This makes direct comparison between trials hard for investors.

Trial

Drug

Target

Company

Definition of Resolution of

Analyst’s Disclosure:I am/we are long MDGL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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