Madrigal Stock: NASH Data In Q4 Is The Key (NASDAQ:MDGL)

Liver X-Ray Torso View

Benito Vega/iStock via Getty Images

Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is a leading developer of liver disease medicines. In 2018, their biopsy-proven non-alcoholic steatohepatitis (NASH) phase 2 trial produced solid results and catapulted the company to the forward position in the NASH lineup. Thereafter, the stock traded downwards and sideways. The last four years have been a long wait for confirmatory phase 3 data. That wait is now ending.

Madrigal ran two phase 3 trials, MAESTRO-NAFLD and MAESTRO-NASH. The first one was a 700-patient low-conviction study with a conservative and careful design. Firstly, it was a biomarker study, and patient diagnosis was not confirmed through a biopsy. The good thing is that this is non-invasive; the con is that biopsy is the ultimate diagnostic tool. Secondly, its primary endpoint was safety. Most importantly, these were NAFLD (non-alcoholic fatty liver disease) patients, not NASH (non-alcoholic steatohepatitis); so, these patients had liver fat, but no inflammation or hepatitis, no fibrosis or scarring, and certainly no cirrhosis, which is an advanced, irreversible and permanent form of fibrosis. NAFLD patients often do not progress to NASH, but some do.

MAESTRO-NASH is a huge, 2000-patient study in biopsy-proven NASH patients with fibrosis stage below 3. Fibrosis stages are as follows:

fibrosis stage 0 = no fibrosis; stage 1 = centrilobular pericellular fibrosis (or periportal fibrosis in children); stage 2 = centrilobular and periportal fibrosis; stage 3 = bridging fibrosis; and stage 4 = cirrhosis

Primary endpoints of the trial are NASH resolution under liver histology and all-cause mortality. However, a secondary endpoint had NASH resolution by biopsy as well. The difference between these two endpoints was that in the first one we had

achieving NASH resolution (NASH Activity Score (NAS), ballooning =0; lobular inflammation =0,1) with at least a 2 point reduction in NAS and no worsening of fibrosis.

while in the second one we had

achieving at least a 1-point improvement in fibrosis (NASH Clinical Research Network system) by liver biopsy with no worsening of NAS.

So these two endpoints are complementary to each other.

So, investors waited for 4 years for topline results from these two trials. In mid-2021, at AASLD, the company provided data from about 175 patients from the open label arm of the NAFLD trial. I discussed this data earlier. There was sustained reduction in liver fat, liver volume, and fibrosis as seen through MRI-PDFF. There was also sustained reduction in biomarkers, lipids and enzymes. The drug was generally well-tolerated. So this was from the open label arm of the NAFLD study.

In January, Madrigal announced topline data from the entire NAFLD study. From my notes at that time:

Strong data in “presumed NASH” patients in ph 3 trial, good safety, which was the primary endpoint in this placebo controlled NAFLD trial. Met secondary endpoints in participants with presumed NASH, which were reductions in liver fat and in atherogenic lipids, such as LDL-C which can clog arteries. Here’s the data:

Resmetirom

100 mg OL

Resmetirom

80 mg

p-value

Resmetirom

100 mg

p-value

Placebo

LDLc %CFB (SE) (Week 24)

-21 (1.9)

-12.7 (2.1)

<.0001

-14.4 (2.1)

<.0001

-1.7 (2.0)

ApoB %CFB (SE) (Week 24)

-22 (1.5)

-14.6 (1.5)

<.0001

-16.6 (1.6)

<.0001

-0.1 (1.5)

MRI-PDFF %CFB (Week 16)

-49

%

-41

%

<.0001

-48

%

<.0001

-6

%

Liver volume PDFF correction %CFB

-60

%

MRI-PDFF %CFB (Week 52)

-53

%

-43

%

<.0001

-48

%

<.0001

8

%

Liver volume PDFF correction

%CFB

-61

%

Triglycerides

baseline >150 mg/dL, CFB (SE)

-65 (8.3)

-55.6 (8.6)

NA

-59 (6.5)

NA

-6.9 (16.1)

Triglycerides baseline >150 mg/dL

(geomean) %CFB (95% CI)

-25 (3.1)

-19.5 (-27.0 to

-11.1)

=.0005

-21.5 (-28.0 to

-14.3)

<.0001

-2.1 (-10.6 to

7.4)

CFB (change from baseline); SE (standard error); APOB (Apolipoprotein B); MRI-PDFF (magnetic resonance imaging proton density fat-fraction); CI (confidence interval); OL, open label non-cirrhotic arm randomized concurrently with double-blind arms

Liver fat, as measured using magnetic resonance imaging, fell 48% after 16 weeks of treatment with the study drug, compared to a 6% fall in the placebo group. By Week 52, liver fat in the high-dose resmetirom cohort was still down 48%, while it was up 8% in the placebo group.

Big thing is liver biopsy confirmed NASH p3 trial, readout in 2022. No prediction can be made from the January data, which did not provide details of effect on fibrosis, etc., in patients. “topline results are now expected in Q4 2022.”

What I absolutely like about this data is the outstanding safety:

Resmetirom

80 mg

Resmetirom

100 mg

Placebo

Safety population

(N=327)

(N=324)

(N=318)

At least one TEAE

289 (88.4)

279 (86.1)

260 (81.8)

At least one Serious TEAE

20 (6.1)

24 (7.4)

20 (6.3)

TEAE ≥ Grade 3 Severity

26 (8.0)

29 (9.0)

29 (9.1)

AE discontinuations from study

All treatments combined, n=21; (2.17%)

Maximum NCI CTCAE Severity Grade

Grade 1

99 (30.3)

99 (30.6)

92 (28.9)

Grade 2

164 (50.2)

151 (46.6)

139 (43.7)

AEs over 10%

Diarrhea

76 (23.2)

101 (31.2)

44 (13.8)

Nausea

38 (11.6)

59 (18.2)

25 (7.9)

AE (adverse event); TEAE (treatment emergent adverse event); NCI (National Cancer Institute); CTCAE (Common Terminology Criteria for Adverse Events)

“These positive results from the first of our two Phase 3 MAESTRO trials support our conviction that resmetirom has the potential to be the first medication approved for the treatment of patients with NASH and liver fibrosis. The blinded, placebo-controlled data from MAESTRO-NAFLD-1 reinforce previous positive Phase 2 and open-label Phase 3 safety findings in a much larger population of patients followed for 56 weeks. Rigorous safety evaluation is critical in NASH drug development because of the large numbers of patients with NASH that could be treated with a new medication once FDA approved. The large safety database we are generating through the MAESTRO trials supports our regulatory strategy under Subpart H and reflects our commitment to providing the data necessary for overall benefit-risk assessment,” stated Paul Friedman, M.D., Chief Executive Officer of Madrigal.

The list of failures in liver disease is legion. Nobody has yet reached where Madrigal has come: a successful phase 3 trial, while in NAFLD, but still showing liver fat reduction, even if fibrosis data was not mature. Companies like Gilead, Genfit, Cymabay, have failed in liver disease trials. If Madrigal can continue its winning streak and crack the NASH trial, its stock will go ballistic.

Financials

MDGL has a market cap of $1.36bn and a cash balance of $270mn. The company spent around $242mn last year, which includes R&D and G&A. Given that, they have one year’s worth of cash. That’s a bit of a problem because this is the first quarter, and we have 3 more quarters to go before they release topline data. If the data is really good, the stock will shoot up so high there’s no amount of cash they can ask from the market that will dilute today’s shareholders. However, they will be at the end of their cash tether by the time data is released. So, unfortunately, I am worried about a dilutive offering before data release.

Bottom Line

Topline NASH data will make or break this company. They have nothing else in the works; this is it. If the molecule can reverse or halt fibrosis in biopsy-proven NASH patients, it will have the first approved drug in a huge, multi billion dollar market. If they fail, there’s no backup, and the stock will crash. There’s a higher chance of success given the phase 2 data from 2018, as also some confidence from the NAFLD data. However, given the risk, I will keep holding my shares but not buy any more.

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