AKRO - 6 Stocks Positioned to Soar as Investors Focus on MASH
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Investors are makinga lot of money on obesity plays. Obesity is at epidemic proportions,so it's easy to see why obesity drugs including GLP-1 agonistshave exploded in the marketplace. This class of drugs was originallydesigned to manage blood sugar levels in diabetics but was expanded totreat obesity, an even bigger market. JP Morgan analyst Richard Vosserestimated the global obesity drug market will reach $71 billion by 2032.
The first approval of Byetta® was in 2005 but the market hassince grown to include a bunch of diabetes drugs you’ve heard on TVads like Trulicity®, Victoza®, Adlyxin®, Ozempic®, Rybelsus®, andMounjaro®. Blockbuster drugs like Ozempic, now called Wegovy®, andMounjaro, now called Zepbound®, were repurposed as obesity drugs.
This repurposingtrend is a common theme in the biotech space. The only issue is thatobesity has become a common theme, which ultimately makes it a crowdedtrade and harder to pick the winners and losers. Combination drugslike survodutide, retatrutide, and cagrisema are up-and-coming drugsin phase 3 development for obesity, but investing in these names meansyou are simply following the herd. Investing requires leading with anedge and some forethought. This article highlights pure-play drugdevelopers in MASH likely to be the focus of investors looking for thenext big thing in biotech.
Looking Beyond GLP-1 Inhibitors Toward the MASHEpidemic
Drugmakers like Eli Lilly (NYSE: LLY) with their drug Mounjaro(tirzepatide) have already repurposed their drug once and are lookingbeyond diabetes and obesity, with their eyes set on and an even morelucrative market of metabolic dysfunction-associated steatohepatitis(MASH). LLY has promising interim clinical data showing 74% of overweight adults who took the higher dose of tirzepatide clearedMASH versus 12.6% in placebo. The first approval of a MASH drug on March 15, 2024 by Madrigal Pharmaceuticals(NASDAQ: MDGL) has ignited the sector with investors looking forthe next big pure play.
Multiple MASH Targets
Metabolic dysfunction-associated steatohepatitis(MASH) is a complicated disease on the regulatory front. Approvalcriteria are a resolution of MASH symptoms via biopsy without aworsening of fibrosis. The disease formerly known as nonalcoholicsteatohepatitis (NASH) is caused by a buildup of fat in the liver thatleads to complications which include fibrosis (scarring of the liver),cirrhosis (severe scarring of the liver), and liver cancer. Once MASHprogresses this far, liver transplantation is currently the onlyviable option. After MDGL’s approval of Rezdiffera®, investors havebeen flocking to other MASH names looking for a follow-on drug thateither works in combination with Rezdiffera or one that is superior insafety and efficacy.
MASH Drug Targets
MASH has several druggable targets. The GLP-1target is the mainstream approach because it also treats type 2diabetes. Next in terms of a drug target is the fibroblast growthfactor 21 (FGF21) which has a number of players in late-stagedevelopment. Galectin-3 is another target for MASH drugs as researchhas shown it is implicated in fibrotic and inflammatory feedbackloops. There are also promising drugs that target the thyroid hormonereceptor beta (THR?). Breaking from the mainstream approaches is theA3 adenosine receptor (A3AR) which is highly expressed in inflammatoryand cancer cells whereas low expression is found in normal body cells.
FGF21Agonists
89Bio Inc. (NASDAQ: ETNB) is developing a lead moleculecalled pegozafermin which is a specifically engineered glycoPEGylatedanalog of fibroblast growth factor 21 (FGF21). It is similar inmechanism of action to Bristol Myers Squibb’s (NYSE: BMY) drug pegbelfermin which was discontinued despite positive resultswhich showed more than half the patients having NASH resolution at 16weeks. FGF21 analogues are taken via subcutaneous injection. Thetargeting of the FGF21 pathway helps regulate metabolism and cellularprocess, especially in the liver fat tissue. Balancing out thismetabolic pathway helps reduce liver fat, which can result inreduction in liver fibrosis (scarring) over time. The company hasstrong fibrosis data with favorable tolerability and dosingconvenience. The long term data suggests there is a cumulative impacton patients taking background GLP-1 therapy. ETNB’s phase 3 programin MASH could achieve accelerated approval using histology innon-cirrhotic (F2-F3) and cirrhotic (F4) patients although the FDA hasacknowledged greater importance in clinical outcomes and nothistology. They have clinical trials in both fibrosis and cirrhosisand expect to initiate their cirrhosis trial in Q2 2024. The companyhas almost $600 million in cash with a market cap of $875 million. Theslight premium over cash, solid and consistent trial results, alongwith short and long-term catalysts make this an attractive setup forinvestors. This is the first on the top 6 list.
Akero Therapeutics(NASDAQ: AKRO) is also targeting MASH and MASH cirrhosis with anFGF21 agonist. Their drug is called efruxifermin and is commonlyreferred to as EFX. In their phase 2b MASH trial they showed a 65%reduction in liver fat content vs 11% in placebo which places themclose to the front of the pack because it was done in only 12 weeks.Unfortunately, their phase 2b trial in MASH missed the endpoint forimprovement in liver fibrosis at the 12-week time frame but showed 60%had MASH resolution after 36 weeks versus 26% in placebo. The companylost a lot of value on that readout but the statistics show a cleanly designed trial is likely to hit theregulatory endpoints. Guidance from an end-of-trial FDA meeting isforthcoming, but the timing is still uncertain and weighing on thestock price. While there is a lot of potential in this name, theuncertain timing of the regulatory pathway makes this ideal for thepatient investor looking more for a NASH cirrhosis play. The companyis well funded with over $550 million in cash and a $1.5 billionmarket cap.
Galectin-3 Antagonists
Galectin Therapeutics (NASDAQ: GALT) has anadaptive design phase 2/3 study in NASH cirrhosis with an interimreadout before year end 2024. Their intravenously administeredgalectin antagonist called belapectin showed complete prevention ofesophageal varices in a phase 2 trial despite failing to meet their(now defunct) primary endpoints. Their pivotal trial used lessonslearned from the phase 2 trial, utilizing a primary endpoint ofprevention of esophageal varices. If the interim results confirm acomplete or near complete prevention of varices like they did in theirphase 2 trial, they would have a compelling argument for conditionalapproval, likely with another post-market confirmatory phase 3 trial.Almost 50% of patients that develop esophageal varices die within ayear, and the varices are extremely costly to treat. So eliminatingthe significant and imminent threat of death is the compellingbenefit.
Thecompany is in solid financial shape with enough cash runway tocomplete their pivotal trial by 2025. They also have the backing of abillionaire investor who is also their Chairman of the Board.Additionally, their drug demonstrated promising results in cancer,psoriasis, and atopic dermatitis which could lead to a label expansiononce they are approved. The market cap of the company is sittingaround $225 million despite the near certainty of a positive interimtrial readout within the next 8 months, which could translate intobillions within that time frame.
The company is not alone in the space and has 2other competitors with oral galectin-3 antagonists. GalectoBioscience (NASDAQ: GLTO) announced they were scrapping theircancer drug, which had a 60% response rate after three months, tofocus on NASH. GLTO had a failed trial in idiopathic pulmonaryfibrosis because of their drug’s poor tolerability, which has forcedthem to seek strategic alternatives with a focus on liver disease. Asa result, their development timelines for MASH are in flux.Galecto’s small molecule approach to inhibiting intracellulargalectin-3 is the likely culprit for their drug’s poor tolerabilityand its more likely large molecules which target extracellulargalectin-3 will succeed.
Bioxytran Inc. (OTCMKTS: BIXT) has the mosttechnologically advanced oral galectin antagonist that completed phase2 trials in standard risk COVID-19, but the company is underfunded andtherefore moving forward cautiously. Both Bioxytran and GalectinTherapeutics are developing larger molecules compared with Galecto andboth their drugs have been found to be safe as opposed to Galecto.Bioxytran’s additional benefit is that their drug doesn’t requireintravenous administration. Their clinical trials in NASH or cancerare dependent upon them finding a partner or a couple million dollarsto get a shot at a number of multibillion dollar opportunities.Management indicated that the quickest way to approval was a COVID-19regulatory approval and then proceeding with the label expansion.While the company boasts impressive technology and experiencedmanagement, they don’t have the resources to prove their technologyfor all these indications yet. It's for these reasons that thestock should remain high on peoples watch lists—in case they getfunding.
Thyroid Hormone Agonists
Viking Therapeutics(NASDAQ: VKTX) is the largest pure play MASH company measured bymarket capitalization with a number of molecules in phase 2 or 3development. Their leading drug candidate, VK2809, is a THR? agonist.They also have a dual agonist for both the GLP-1 hormone andglucose-dependent insulinotropic polypeptide (GIP), VK2735. Clinicaltrials for VK2735 have been highly successful making it a darling witha market cap of $7.56 which exceeds the market cap of MDGL that has anapproved MASH drug that also targets THR? .
Viking’s VK2809targets non-alcoholic steatohepatitis (NASH) and fatty liver. It aimsto reduce liver fat, preventing inflammation, damage, and potentialprogression to cirrhosis. Clinical trial results for VK2809 includesignificant weight loss (up to 14.7% of baseline body weight) andimprovements in liver fat content. Notably, 85% of VK2809 patientsexperienced a >30% decrease in liver fat by week 12, correlatingwith improved histology. At least 88% of participants lost at least10% weight loss versus 4% for placebo. The company is also innovatingfor their next generation, orally administered NASH drug, which hadpositive phase 1 trial results.
Other Approaches
CanFite Biopharma’s(NYSE: CANF) lead drug candidate, namodenoson, is an A3 adenosinereceptor (A3AR) antagonist , but what makes them stand out fromthe crowd is their platform technology that has the ability to screentargets in both the inflammatory and tumor micro-environment. It isalso the only drug in the MASH space that is taken orally once a day.Both inflammatory and cancerous cells are overexpressed with A3ARwhich makes them an ideal target in MASH and liver cancer. The companycompleted both phase 2 and 3 studies for other indications such asliver cancer, so the favorable safety profile is well established inhundreds of patients. MASH study results showed a linear reduction inweight over time, a reduction in liver fat measured by proton densityfat fraction (PDFF) on magnetic resonance imaging, validation ofblocking the A3AR receptor, and the liver protective effect of thedrug manifested by a reduction in hepatic inflammation. The companyhas a favorable status with both the EMA and FDA which could lead to aconditional approval. Their platform technology includes otherlarge-market disease indications including psoriasis, pancreaticcancer, liver cancer, and erectile dysfunction.
The company also has 6 major drug partnersand the potential to earn $130 million on regulatory and salesmilestones for their 2 pivotal phase 3 assets. With a compressedmarket cap of $10 million which is trading barely over their cash andthe potential of regulatory approval within the next 1.5 years,it's easy to see how this biotech could translate into anextraordinary investment if it achieves regulatory approval. Thecompany has a solid management team with a low burn rate which meansthey are less likely to dilute because their interests are alignedwith shareholders. This rounds out the top 6 MASH companies with thebest risk to reward ratio.
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