If you're like most people, you've never heard of non-alcoholic steatohepatitis (NASH), even though the epidemic threatens the lives of perhaps 20 million Americans right now. There aren't any available treatments that stop immune systems from damaging fatty livers, but Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) and Viking Therapeutics, Inc. (NASDAQ:VKTX) are both developing potential new NASH drugs, and investors are wondering which is the better stock to pick right now.
Madrigal and Viking recently provided some updates to clinical trial programs that could make a difference for millions of NASH patients in need of a treatment option. Let's stack them side by side to see which one comes out on top.
The results so far
Earlier this year, Viking Therapeutics stock rocketed higher when the company showed off results for its thyroid hormone receptor-beta (TRB) agonist, VK2809. Patients who swallowed 10 mg of the potential first-in-class therapy every day showed a 59.7% liver fat reduction after 12 weeks of treatment.
Madrigal's TRB agonist, MGL-3196, led to an average relative fat reduction of 37% after 36 weeks of treatment, which makes it look inferior to Viking's treatment on the surface. Before we go making trial comparisons, though, investors need to understand that these similar new drug candidates were tested on different patient groups.
Viking's results come from a study that enrolled just 35 people with non-alcoholic fatty liver disease (NAFLD) and high cholesterol. Madrigal's results come from former NAFLD patients that progressed to NASH, which basically means their livers were already inflamed and sustaining damage.
While MGL-3196 didn't lower average liver fat content as much as VK2809 did when measured by an MRI, Madrigal has some impressive biopsy data that strongly suggests it will make a real difference for NASH patients. Upon liver biopsy inspections, a surprising 27% of patients treated with MGL-3196 achieved NASH resolution compared to just 6% of those given a placebo.
Viking Therapeutics thinks the impressive liver fat reductions VK2809 produced for NAFLD patients give it a solid chance to succeed during a future biopsy-based trial with more severely affected NASH patients, which the company doesn't intend to begin until 2019. Until those results are in, we really can't say one candidate is any better than the other.
Who's drug is this drug?
Investors should know that these biotechs are making waves in the present with drugs that they didn't discover themselves. That means they're on the hook for relatively minor payments as their respective candidates pass predetermined milestones and a percentage of any sales.
Viking licensed VK2809 and the rest of its pipeline from Ligand Pharmaceuticals (NASDAQ:LGND), which is still entitled to low-to-middle single-digit royalties on any sales that VK2809 might generate. Although it looks like we finally found a distinct advantage for Madrigal, we probably didn't. Roche (NASDAQOTH:RHHBY) discovered MGL-3196, and the pharmaceutical heavyweight remains entitled to a single-digit royalty percentage of any sales it might generate.
Investors should also know that Ligand's entire game plan revolves around letting other companies pay for the development of drugs it owns a piece of. In stark contrast, Roche often boasts the most lavish research and development budget in the business. This wouldn't be the first time a big pharma company discovered a blockbuster drug only to let it go, but that certainly wasn't the plan from the beginning.
Madrigal is also testing MGL-3196 as a treatment for people with an inherited condition that leads to abnormally high cholesterol. While it was impressive to see the drug lower these patients' cholesterol 21% when added to their current regimen, the patient population is small, and the market for new cholesterol treatments is getting crowded.
Viking Therapeutics licensed a handful of new drug candidates from Ligand under similar terms, including VK5211, an easy-to-swallow muscle and bone growth stimulator that isn't a steroid. This October, the company showed us mid-stage data from people who had recently suffered hip fractures that were more than encouraging. Patients showed statistically significant improvements regarding lean body mass and the distance they can walk in six minutes.
A safe non-steroidal drug that provides the benefits of testosterone in an easy-to-swallow pill has "blockbuster" written all over it. Viking will need to run a pivotal study with VK5211 before sending an application to the FDA, but so far, the program's on the right track.
The better NASH stock
Although Viking's NASH candidate isn't as far along the development timeline as Madrigal's, a recent share offering that raised Viking's cash balance to $304 million will help it catch up.
With $489 million in cash and securities at the end of September, Madrigal isn't short on funds, but its lack of pipeline beyond MGL-3196 is frightening. Madrigal shares could get completely wiped out if MDGL-3196 isn't a success.
If Viking's NAFLD success doesn't carry over to the NASH population, its pipeline could act as a safety net. To top it off, Viking's recent $828 million market cap is a much shorter perch from which to fall than Madrigal's whopping $2.4 billion market cap at recent prices (despite putting all of its chips on a single candidate). If you're going to take a risk on one of these NASH stocks, right now, Viking looks like the better option.