With shares of Novo Nordisk (NYSE: NVO) skyrocketing by more than 200% over the last three years thanks to the outrageous success of its type 2 diabetes drug called Ozempic, investors are eager to determine what other companies in biopharma might be capable of following the same trajectory.
But, as wise investors know, the next success stories are unlikely to be created with the exact same strategies as today's winners. That means looking for potential in a slightly different market than the one Novo Nordisk is in the process of cornering.
With that in mind, let's explore two biotechs that might have what it takes to become the next Novo Nordisk, via their efforts to develop breakthrough medicines. There's no guarantee that either will succeed, but at a minimum, each has a favorable setup.
1. Madrigal Pharmaceuticals
Madrigal Pharmaceuticals (MDGL -0.54%) might become the next Novo Nordisk by becoming the first company to compete in what is likely a highly lucrative market. It's developing therapies for non-alcoholic steatohepatitis (NASH), also known as metabolic dysfunction-associated steatohepatitis (MASH), a serious liver disease that has so far resisted attempts at treatment.
There are currently around 1.5 million people living with NASH in the U.S.; Madrigal considers 315,000 of them its target subset of the population. The target population suffers from significant scarring (known as fibrosis) of the liver, which means that the disease has progressed substantially, and that patients are at risk of developing cirrhosis and subsequently needing a liver transplant.
For the record, Novo Nordisk is also working on NASH medicines, with several of its programs in various stages of development, but it hasn't commercialized anything yet.
Madrigal's candidate to treat NASH is called resmetirom, and it's close to being commercialized. According to one of its recently concluded phase 3 clinical trials, resmetirom was capable of fully addressing NASH in around 30% of study participants, while also helping them reduce their levels of liver scarring and their cholesterol levels.
As NASH is often associated with comorbidities like type 2 diabetes, obesity, and other cardiometabolic disorders, further research is likely to elucidate how treatment with its candidate might simultaneously lighten the burden of those other conditions. So there's a huge potential for the drug to be useful in a handful of different contexts.
The company has already submitted its materials requesting permission for commercialization, and should hear back from regulators at the Food and Drug Administration (FDA) regarding resmetirom's approval on or before March 14.
It'll take more than one drug launch for Madrigal to become the next Novo Nordisk, but succeeding where other players have failed will be a strong sign that it could one day make the NASH market its focus area. Madrigal has a fairly clear road map to do that; all it needs to do after getting its first therapy approved is to work on expanding that therapy's indications into the many different niches of NASH.
Just be aware that this biotech may need to raise more funds soon to pay for the launch of its medicine, assuming it gets approved, not to mention further research and development (R&D) work. Its cash and equivalents of $232 million won't cover its trailing-12-month operating expenses of $349 million.
2. Viking Therapeutics
Viking Therapeutics (VKTX 7.92%) is a direct competitor to Madrigal, but its program for NASH is a bit further behind, in phase 2b trials. It's also developing medicines to treat obesity and other metabolic disorders, so it could also potentially directly compete against Novo Nordisk as well as other heavyweights like Eli Lilly one day. Its ambitions are for some of the biggest markets around, and that bodes well for its chances of rising to meet the occasion.
Viking will be reporting some data from its NASH program as well as its obesity program sometime in the first half of this year. The results so far are encouraging. Its candidate, called VK2809 for now, caused as many as 85% of patients in the mid-stage clinical trial to experience a reduction of 30% or more in the fat content of their livers.
It also helped many patients reduce their cholesterol levels, as well as the levels of other molecules that are related to higher chances of adverse cardiovascular outcomes. The icing on the cake is that VK2809's efficacy doesn't appear to be hindered by patients having liver fibrosis or type 2 diabetes, so it likely has a better shot at competing in those niches if it reaches commercialization.
Viking has plenty of runway to work on its pipeline before it'll need to find a collaborator or raise more money. Its trailing-12-month operating expenses are only $92 million, and it has $376 million in cash, equivalents, and short-term investments. That's a big point in its favor, as it means that it has enough of a cushion to survive and pivot if it hits a setback with its lead program.
But, much like Madrigal Pharmaceuticals, Viking Therapeutics is a risky pre-revenue biotech stock, so it has a very long way to go before it becomes anything approximating a giant like Novo Nordisk. Don't take out a second mortgage on your house to invest in either of these companies, and if you do choose to invest, be sure not to put all your eggs in one basket.
