VKTX - Madrigal: With Successful NASH Study Possible Accelerated Approval Is Next

2023-07-13 17:30:00 ET

Summary

• Madrigal Pharmaceuticals, Inc. dual surrogate Primary endpoint being met in phase 3 MAESTRO-NASH study allowed for the rolling NDA submission of resmetirom for the treatment of patients with NASH.
• Potential for rolling NDA submission of resmetirom to be granted Priority Review Status, which would cut review time from 10 months to 6 months.
• The phase 3 MAESTRO-NASH-OUTCOMES study would not only grant Accelerated Approval of resmetirom to full approval, but may also allow the possibility of obtaining full approval of well-compensated NASH cirrhosis.
• Madrigal Pharmaceuticals had $329.5 million in cash as of March 31, 2023; Enough to fund its operations for a little bit over 1-year, but might have to think about raising cash to prepare for possible commercialization of resmetirom.

In a prior Seeking Alpha article I wrote , titled " Madrigal: End Of 2022 NASH Data For Multi-Billion Dollar Market, " for Madrigal Pharmaceuticals, Inc. ( MDGL ), I talked about how it was gearing up to report results from its phase 3 study. Since then, not only has it reported positive results from the phase 3 MAESTRO NASH biopsy study, but just a few weeks ago it also initiated a rolling New Drug Application [NDA] submission to the FDA of resmetirom for the treatment of patients with non-alcoholic steatohepatitis [NASH]. The filing of the rolling NDA of resmetirom was possible because of positive results obtained from the MAESTRO-NASH study, whereby there was a significant reduction of liver fibrosis and resolution of NASH in patients over a 52-week study period. The reason why I believe that investors might be able to benefit further here in the short term is because the rolling NDA of resmetirom for NASH was filed with the possibility of the FDA granting Priority Review.

If this status is granted by the FDA, then this would cut down the review time down to 6 months from 10 months. There is also a way for it to expand the possible NASH market that the company could target. This would be through the use of an already initiated phase 3 study known as MAESTRO-NASH-OUTCOMES, which is evaluating the use of resmetirom for the treatment of patients with well-compensated NASH cirrhosis. Should this study eventually succeed, then it would support full approval for both noncirrhotic and cirrhotic NASH patients.

Phase 3 MAESTRO-NASH Biopsy Study Leads To Possible Accelerated Approval

As I stated above, Madrigal Pharmaceuticals was able to achieve positive results from its phase 3 MAESTRO-NASH biopsy study. NASH stands for non-alcoholic steatohepatitis and it is an aggressive form of fatty liver disease. As the name suggests this is not caused by alcohol, but occurs as a result of a buildup of fat in the liver. It normally doesn't cause any issues for people, but if it becomes severe enough then it can eventually become severe. How so? What happens is that too much fat build up in the liver causes inflammation and damage to the cells of the liver. With constant damage occurring, this then leads to severe scarring [fibrosis] of the liver. With severe scarring of the liver eventually happening, patients then can progress to something known as cirrhosis.

There are a few risks factors that might cause a person to get non-alcoholic steatohepatitis such as: High cholesterol, obesity, Type 2 Diabetes [T2D] and gastric bypass surgery. Typically, symptoms are not seen until the late-stage of NASH, but some symptoms that might be present for these patients are the following:

• Pain.
• Fatigue.
• Severely scarred liver.
• Weight loss.

It is definitely going to be a large market opportunity for any biotech that is able to eventually receive regulatory approval for NASH. It is expected that the global non-alcoholic steatohepatitis market could reach $21.47 billion by 2025 . With no currently approved treatments, this would give Madrigal first-to-market advantage, if it is ultimately able to convince the FDA to grant Accelerated Approval of resmetirom for the treatment of patients with NASH.

This was a late-stage study which randomized patients 1:1:1 to receive one of the following doses: Placebo once-daily, 80 mg of resmetirom, or 100 mg of resmetirom. All of these NASH patients received one of these treatments for a total of 52-weeks. The primary endpoint was a bit different compared to other studies, in that it was a dual endpoint. Meaning that in order for this phase 3 MASESTRO-NASH study to be successful it had to achieve both primary surrogate endpoints. The first surrogate endpoint was "NASH resolution with ?2-point reduction in NASH" [NAFLD Activity Score].

The second part of this surrogate endpoint dealt with seeing "no worsening of fibrosis or a 1-point decrease in fibrosis with no worsening of NASH. The final outcome, with respect to the release of results from this late-stage study, is that the primary dual surrogate endpoint was met using both daily oral doses of resmetirom [80 mg and 100 mg]. That is, both doses of resmetirom had achieved the dual surrogate primary endpoint compared to placebo. The data noted from the study is as follows:

• Endpoint of "NASH resolution and ?2-point NAS reduction with no worsening of fibrosis - Statistical significance met with this endpoint with a p-value of p<0.0001 with both doses
• Endpoint of "Fibrosis improvement by at least one stage with no worsening of NAS - Statistical significance met with this endpoint with a p-value of p=0.0002 [80 mg resmetirom] and p<0.0001 [100 mg resmeitrom].

Not only was it shown that this drug was effective for these patients, but it was safe and tolerable for them to take as well.

Madrigal is in great shape with respect to this NASH program with resmeitrom, because back in April of 2023, the FDA granted it Breakthrough Therapy Designation . This designation expedites the FDA's commitment to expedite the development and review of drugs for serious of life-threatening conditions. As I stated above, the company also announced that it initiated a rolling NDA submission of resmetirom for NASH to the FDA. One important thing to note about this submission, which I believe has the potential to provide stock price upside value, is that it was submitted with the intention of seeking Priority Review of this drug for the treatment of this patient population. Thus, if this is granted by the FDA it would results in quicker review time.

Another item I mentioned in this article is long-term value for investors and what is to be expected. Well, Madrigal has already taken steps to ensure a possible expansion opportunity of resmetirom for the treatment of patients with NASH. That is, it has initiated a phase 3 study known as MAESTRO-NASH-OUTCOMES, which is a randomized, double-blind placebo-controlled study that intends to enroll up to 700 patients with early NASH cirrhosis. This OUTCOMES study was initiated in August of 2022.

Why is this study crucial for the long-term outlook for this biotech? It is mainly because of what it will accomplish, should it ultimately be successful. The primary endpoint of the study being met would not only convert Accelerated Approval of resmetirom to Full approval, but it would also possibly allow for the full approval of well-compensated NASH cirrhosis.

Financials

According to the 10-Q SEC Filing , Madrigal Pharmaceuticals had cash, cash equivalents and marketable securities of $329.5 million as of March 31, 2023. The reason for the cash on hand is because back in December of 2022, the company raised around $309 million at that time . It did so first with the completion of a $159 million gross sales of its common stock under its ATM program. Separately, it had entered into a $100 million definitive securities purchase agreement with two of its existing institutional investors for the purchase of $90 million in shares of its Series B Convertible Preferred Stock [Series B] and then $10 million in shares of the company's common stock [Registered Direct Sales].

In addition, in connection with the announcement of positive results from the phase 3 MAESTRO-NASH study, it was able to draw $50 million as part of a milestone from the Hercules Capital, Inc. (HTGC) Credit Facility.

I believe that it will need to raise cash again in the coming months, at least before the end of 2023. The reason why I state that is because it states that it has enough cash to fund its operations past 1-year from the issuance of the 10-Q SEC filing. With such an estimate, I believe it will likely enact a cash raise in the coming months. Especially, since it may have to start to consider commercialization efforts of resmetirom, should the FDA grant Accelerated Approval for it.

Risks To Business

There are several risks that investors should be aware of before investing in this biotech. The first risk to consider is with respect to the possibility of Priority Review being given of resmetirom for the treatment of patients with NASH. There was a request for this designation to be granted to shorten the review period, but there is no guarantee that the FDA will allow for this designation.

A second risk to consider might be a flat-out rejection after the review period for Accelerated Approval based on a surrogate endpoint. Why do I state that? Well, things looked good for Intercept Pharmaceuticals ( ICPT ), whereby the FDA had accepted its NDA of obeticholic acid for Accelerated Approval for NASH treatment. However, despite accepting the application, Accelerated Approval was not granted.

Ultimately, it had to conclude the phase 3 REGENERATE study, so that it could then file for approval again. However, despite all its efforts it ultimately wasn't able to receive FDA Accelerated Approval of obeticholic acid in the end. It chose to terminate its NASH program, because the FDA at a minimum was requiring successful completion of the long-term outcomes phase of the REGENERATE study. Thus, it is possible that Madrigal may also not be able to receive Accelerated Approval of resmetirom for NASH. In that case, the FDA may also end up requiring the completion of the OUTCOMES study in order for Madrigal to eventually receive FDA approval of this drug for this patient population.

A third risk to consider would be with respect to competition. Viking Therapeutics ( VKTX ) is also advancing its own drug for NASH, known as VK2809, which has a similar mechanism of action to that of Madrigal's resmetirom. The good news for Madrigal though is that Viking is still a bit behind. That's because Viking Therapeutics won't release 52-week biopsy data from its phase 2b study until the 1st half of 2024 . From there, it might need to run a phase 3 study afterwards.

The fourth and final risk to consider would be with respect to the cash position. With a little more than 1-year worth of funds, it is highly probable that Madrigal might enact a cash raise. As such, this would further dilute its shareholders.

Conclusion

Madrigal Pharmaceuticals has done well to advance resmetirom, especially with the meeting of the dual primary surrogate endpoint from the phase 3 MAESTRO-NASH study. Again, I believe there is a chance for possible benefit in the short term if the FDA accepts the rolling NDA submission on the basis of Accelerated Approval. Such an event might cause the stock price to trade higher.

In addition, it had already initiated the phase 3 MAESTRO-NASH-OUTCOMES study as well back in August of 2022. This study does not only have the possibility of converting Accelerated Approval of resmetirom to full approval [If Accelerated approval for marketing is granted], but also the possibility of obtaining full approval of well-compensated NASH cirrhosis patients as well.

With potential for it to receive Accelerated Approval of resmetirom for the treatment of patients with NASH fibrosis, plus the possibility of eventually being able to expand to full approval for two portions of the NASH population, I believe that Madrigal Pharmaceuticals, Inc. investors might be able to benefit from any potential gains made here.

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