This morning, Raymond James analyst Steven Seedhouse downgraded Madrigal Pharmaceuticals (MDGL) to Underperform saying that while he was not surprised that the sentiment around MGL-3196 has “significantly worsened,” he had not anticipated how bad it would get “so quickly.” This comes just days after Evercore ISI analyst Josh Schimmer upgraded the stock to Outperform, stating that he sees recent share price pressure as unjustified and continues to view MGL-3196 as a leading program in the NASH area. Raymond James’ Seedhouse also upgraded Viking Therapeutics (VKTX) to Strong Buy, while his peer at Oppenheimer raised Intercept Pharmaceuticals’ (ICPT) rating to Outperform. Nonalcoholic steatohepatitis, or NASH, is a condition in which patients suffer from inflammation and liver cell damage along with a build up of fat in the liver.
ANALYSTS DIVERGE ON MADRIGAL’S NASH OPPORTUNITY: On Friday, Evercore ISI’s Schimmer upgraded Madrigal Pharmaceuticals to Outperform from In Line, stating that he sees recent share price pressure as unjustified and continues to view MGL-3196 as a leading program in the NASH, or Nonalcoholic steatohepatitis, area with a strong overall efficacy profile and relatively clean safety. The analyst told investors that he believes the stock's recent weakness is due to confusion on the endpoints presented by the company at the American Association for the Study of Liver Diseases meeting, a lack of near-term catalysts and the "compelling" results presented by Viking Therapeutics at the liver meeting. While Schimmer came away from AASLD with confidence in 3196, he also came away realizing there is a “tsunami of obesity-related liver complications on the horizon” and that there is “absolutely no sign” that society is anywhere close to ready to deal with the weight problem. The analyst raised his price target on Madrigal’s shares to $250 from $222. Bearish on the stock, Raymond James’ Seedhouse downgraded Madrigal Pharmaceuticals to Underperform from Market Perform, noting that while he expected MGL-3196 Phase 2 data sentiment to worsen exiting AASLD, the NASH resolution definition informing that the seemingly large effect size of 27% versus 6% was not what he thought it was. The analyst no longer thinks MGL-3196 is better than Intercept’s Ocaliva, Galmed Pharmaceuticas’ (GLMD) Aramchol, or Genfit’s (GNFTF) Elafibranor, let along Viking Therapeutics’ VK2809, and is cutting the probability of success to 50% from 80% and his patient penetration estimates in half.
RAYMOND JAMES UPS VIKING TO STRONG BUY: In a separate note, Raymond James’ Seedhouse upgraded Viking Therapeutics to Strong Buy from Outperform, with a $43 price target. Based on the data VK2809 and MGL-3196 presented at AASLD and conversations with investors and physicians, the analyst thinks TR-B remains one of the most promising mechanisms with proof-of-concept in NASH. Noting that his conviction has increased post AASLD, Seedhouse said he believes VK2809 is the most potent and tolerable TR-B agonist, and better than MGL-3196. The analyst expects increased comfort with Viking's path to market given several catalysts ahead, including a long-term animal toxicology study completion, IND filing/acceptance, and Phase 2b start. Additionally, he expects the M&A premium in Madrigal Pharmaceuticals to shift to Viking, which has a more attractive valuation if there is a rush on NASH assets.
OPPENHEIMER SAYS BUY INTERCEPT: This morning, Oppenheimer analyst Jay Olson lowered his price target for Madrigal Pharmaceuticals to $200 from $300 after the shares were penalized last week by a definition of NASH resolution for MGL-3196 in Phase 2 that is slightly different from that used in ongoing Phase 3 trials, but upgraded Intercept Pharmaceuticals to Outperform from Perform on greater confidence in NASH. The analyst argued that Intercept is increasingly likely to have a first-in-class and potentially best-in-class FXR agonist for non-alcoholic steatohepatitis, Olson left this year's AASLD meeting with the perceptions that Intercept's obeticholic acid is likely to achieve statistical significant on both primary endpoints in the Regnerate trial. As such, the analyst increased his probability of success for obeticholic acid from 50% to 75% in NASH. Olson also raised his price target on Intercept’s shares to $140 from $100.
PRICE ACTION: In morning trading, shares of Madrigal have risen about 4% to $134.70, while Viking’s stock has gained 4% to $12.12. Shares of Intercept are fractionally down to $102.63.
Madrigal Pharmaceuticals
+3.49 (+2.70%)
Viking Therapeutics
+0.4 (+3.43%)
Intercept
+0.17 (+0.17%)
Galmed
-0.21 (-2.41%)
Genfit
+ (+0.00%)