If you've invested in biopharma anytime recently, you've probably heard the acronym NASH. It stands for nonalcoholic steatohepatitis, a liver disease characterized by fat accumulating on the liver. While it doesn't always progress, it can lead to cirrhosis and liver cancer, and eventually, liver failure, so treating it is key to preventing much worse conditions from forming. But there aren't any approved medicines for it yet.
Numerous drug developers, including AstraZeneca and Gilead Sciences, have tried their hand at developing therapies for the condition, only to fail in late-stage clinical trials, or when they've petitioned regulators for approval. But with a handful of programs in phase 3 trials, and a slew of others in earlier-stage investigations, it's only a matter of time before one of the players crosses the finish line. So let's take a look at the landscape for NASH medicines to see how big a market it'll be, and which competitors are the closest to making money.
A quick intro to NASH
NASH affects around 35 million people in the U.S., and as many as 37% of people globally could have a precursor condition that eventually becomes NASH in some cases. It generally affects people with other illnesses like type 2 diabetes, obesity, and hypertension, with age and genetics being additional risk factors. Importantly, it may be underdiagnosed, as it's typically difficult to make a diagnosis without an invasive test.
Per clinicaltrials.gov, there are at least 102 ongoing or soon-to-begin trials investigating interventions for NASH which are in phase 2 or phase 3. That's more than a hundred different attempts to commercialize a medicine, which makes NASH one of the hottest areas of drug development at the moment. By 2028, according to Insight Partners, the market for drugs that treat it could be worth more than $24 billion.
But because there's uncertainty around how many people actually develop NASH, there's disagreement about how big the market will be. Research and Markets contends that by 2029, the market will be worth at least $84 billion annually, and other commentators see it being worth more than $100 billion by 2030.
Even if the lowest estimate turns out to be the most accurate, it's clear that there will be more than enough room for multiple drug developers to share the market. In other words, several companies could strike gold within the next couple of years. And that means a good strategy could be buying shares of some of the strongest competitors.
The final thing to know about NASH is that there is some disagreement about its name and it won't actually be called NASH for much longer. Per a new scientific consensus on nomenclature in late June of this year, NASH is to be more accurately referred to as metabolic dysfunction-associated steatohepatitis (MASH) moving forward. But for now, nearly all biopharma companies are still calling the condition NASH, and shifting everyone to using the new terminology will probably take some time.
Who's in the race?
There's no shortage of compelling options to invest in if you want to capture some of the rapid growth anticipated in the NASH market.
One of the leading big pharma businesses in the space is Novo Nordisk (NVO 0.84%). It's investigating in a phase 3 trial to see whether its smash-hit molecule semaglutide (which you've probably heard of by its trade name, Ozempic) is useful to treat NASH. It also has another program in phase 2, and a pair of candidates in phase 1. That means it has more than one chance to compete if its most-developed attempt strikes out. If you're desperate to get exposure to this market and you're not sure which stock is the best, Novo Nordisk is a solid choice that's not terribly risky either, as it makes plenty of high-earning medicines like Ozempic.
Another low-risk option is Eli Lilly (LLY 1.19%), which is testing one candidate in phase 2, and another in phase 1. Its commitment to reaching the market is not exactly rock solid, but it has an ample number of commercialized medicines to keep it afloat regardless of what happens. In 2018, it sold off three of its pipeline assets for the disease to the small biotech Terns Pharmaceuticals (TERN 5.82%), which now expects to initiate a lone phase 2b/3 trial in 2024.
A third late-stage biotech developing NASH therapies is Viking Therapeutics (VKTX 7.92%), which has a program in phase 2b.
But the drugmaker at the head of the line for a chance at approval in the near term is Madrigal Pharmaceuticals (MDGL -0.54%). On July 17, it announced it had completed submission for its candidate's approval to the Food and Drug Administration (FDA). So its drug could be the first to reach the market if regulators give it the green light. Or it could see its stock dented severely if they decline. Don't buy its shares unless you're comfortable with taking on a lot of risk.
If you want to invest in this nascent market, remember that the biotech stocks will be riskier plays than the pharma juggernauts, as they tend to have less money on hand and more of their future success riding on an approval. Given how hard it's been to commercialize a medicine for NASH so far, there's a good chance that at least a few of the current crop of contenders will stumble. Plan accordingly, and consider diversification to be your ally.
