Madrigal Pharmaceuticals Inc. (MDGL) is our top conservative biotech recommendation for 2025. The company is in the sweet spot and de-risked with the first FDA-approved drug for chronic liver inflammation/NASH, suggests John McCamant, editor of Medical Technology Stock Letter.
MDGL’s recently approved pill is called Rezdiffra and it had a very strong 3Q. It significantly exceeded very high investor expectations, with Rezdiffra revenues of $62 million being a huge beat over the consensus estimate of $35 million.
The bottom line is that management is executing at a very high level. The MDGL CEO launched Dupixent and never missed a consensus estimate for Dupi while at Sanofi. Importantly, all sales and launch metrics are trending positively and ahead of expectations, with the target for Payor coverage of 80% commercial lives covered reached a quarter ahead of guidance.
In our view, Rezdiffra is well on its way to becoming a blockbuster drug, with sales potential as high as $5 billion. That is certainly attracting acquisition overtures from both Big Pharma and Big Bio.
Meanwhile, MDGL’s management team remains confident that GLP-1s are not a threat to Rezdiffra in the NASH market. The belief is that GLP-1s will significantly expand the addressable market for Rezdiffra. The current market of 300K-400K NASH patients don’t move the needle for the blockbuster GLP-1 drugs and Novo Nordisk (NVO) plans on targeting the over 30 million obese patients who may also have NASH.
Importantly, Novo and Eli Lilly and Co. (LLY) will target the millions of NASH patients out there that MDGL cannot reach given their focus on specialists. Thus, GLP-1 approval in NASH is likely to be net positive for Rezdiffra revenue as the GLP-1 sales pitch will attract millions of additional NASH patients to prescription drug use.
Given the GLP-1 side effect issues and the need to inject, in our view, there will be many new GLP-1 NASH patients that will be attracted to the benefits of Rezdiffra. It is a very safe, once-a-day pill that is perfect for chronic diseases like NASH where a patient may remain on a drug for many years and even decades.
We are very impressed with MDGL and management’s stellar launch execution. Having 80% of patient lives covered a quarter early is no small feat and is just one example of what we expect to be an excellent launch going forward. We are confident in MDGL’s ability to deliver Rezdiffra growth.
