Madrigal Pharmaceuticals Inc. is waiting on further data to provide firm guidance about a potential phase III trial, but shares (NASDAQ:MDGL) meanwhile soared 88.3 percent, or $40.88, to close Wednesday at $87.18 on word of positive top-line findings from a phase II experiment in nonalcoholic steatohepatitis (NASH) with MGL-3196, a first-in-class, oral, once-daily, liver-directed, thyroid hormone receptor beta-selective agonist.

"We had a high level of confidence, based on what we've seen before and the safety profile, that these kinds of results were not unlikely, but it's good to have them," CEO Paul Friedman said. "We have been working in parallel on all fronts to prepare for an end-of-phase-II meeting with the FDA. Of course, until we have that meeting, I think it would be premature to talk about what a study design would look like. You have to figure it would look something like the one we're currently doing, with bells and whistles that aren't currently in this one."

He added that the company is "in a position, if our timelines don't slip – and so far we've pretty much kept the timelines that we've publicly said we would – to start phase III in the final third of 2018, something in that time range."

MGL-3196 turned up statistically significant results on the primary endpoint in NASH: the percent change in hepatic fat vs. placebo as measured by magnetic resonance imaging-estimated proton density fat fraction (MRI-PDFF). Published liver biopsy data have shown a high correlation to NASH improvement when liver fat is reduced 30 percent or more as by the MRI-PDFF measure, Conshohocken, Pa.-based Madrigal noted.

Chief Medical Officer (CMO) Rebecca Taub said during a conference call with investors that liver biopsy data from the current experiment should be available "near the end of April" next year, so the results could roll out at the American Association for the Study of Liver Diseases meeting in November in San Francisco. Twelve-week data may be detailed in April at the International Liver Congress, or EASL, meeting, CEO Friedman said. "I think [they are] interesting enough that we ought to get to present them, but we don't know until we turn over the card."

The company was formed last year via the stock merger of Lexington, Mass.-based Synta Pharmaceuticals Corp. with Madrigal. Synta's heat-shock protein 90 inhibitor, ganetespib, blew up in a phase III lung cancer trial the year before. (See BioWorld Today, Oct. 22, 2015, and April 15, 2016.)

H.C. Wainwright analyst Ed Arce was pleased with the top-line 12-week findings, which he called "robust," hitting primary and secondary endpoints in patients with biopsy-confirmed NASH. Among 78 patients on study drug, the relative median change in liver fat as assessed by MRI-PDFF was -36.3 percent (p<0.0001) from a baseline of about 20 percent liver fat. The strong magnitude of effect across all patients on MGL-3196 means that 60.3 percent (p<0.0001) attained at least a 30 percent drop in liver fat. Per the adaptive-dosing design of the study, a pre-specified subgroup of 44 patients who had dose adjustments from the starting dose of 80 mg once per day – the range was about 60 mg to 100 mg per day – showed a stronger, 42 percent (p<0.0001) reduction in the PDFF score, with what Arce called an "impressive" 75 percent of such patients attaining at least a 30 percent knockdown in liver fat.

Combo possible, but maybe not necessary

MGL-3196 also achieved statistically significant improvements in low-density lipoprotein cholesterol (LDL-C), triglycerides and the highly atherogenic particles apolipoprotein B and lipoprotein (a), Arce wrote in a report, "which we note is in contrast to the profile of some competing NASH development compounds" such as those that target the farnesoid X receptor (FXR) or acetyl-CoA carboxylase (ACC). "We view [these] as compelling data at 12 weeks of treatment and have high confidence that these effects on both steatosis and cardiometabolic parameters may correlate to significant improvements in the NAFLD Activity Score (NAS) at the full 36-week liver biopsy measurement." Arce raised his price target from $54 to $105 and reiterated his "buy" rating on the shares.

Roth Capital Partners analyst Yasmeen Rahimi said the cardiometabolic benefits brought by MGL-3196 are "immensely important" since the number-one cause of death in NASH patients is cardiovascular (CV) disease, and NASH patients are afflicted with a number of problems associated with metabolic syndrome, including not only CV disease but also diabetes. The company said further that the liver enzymes ALT and AST were significantly reduced by MGL-3196, she noted, with those who received higher doses of MGL-3196 achieving greater reductions. In a report, Rahimi called the safety profile of the drug "super clean."

Jefferies analyst Michael Yee conceded that the Madrigal dataset is "promising," but said the 36-week outcomes will better tell the tale. Wall Street's reaction to the phase II results "begs the question" of whether the current price of Intercept Pharmaceuticals Inc. makes sense. The New York-based firm is trading at an enterprise value similar to Madrigal, "despite being years ahead with a phase III NASH program that is expected to read out pivotal data in the first half of 2019 and an already approved drug in Ocaliva [obeticholic acid] for primary biliary cholangitis that is currently generating over $120 million (annualized run rate) with the potential of achieving about $300 million" in peak sales, he wrote in a report.

The interim analysis of Intercept's phase III experiment called Regenerate will provide a peek at results intended to support the filing of a supplemental NDA for accelerated approval of Ocaliva, an FXR agonist, in NASH patients with fibrosis.

In mid-November, the Roth's Rahimi hosted a call with Scott Friedman from the Icahn School of Medicine at Mount Sinai in New York, who is considered the leading fibrosis specialist in the NASH space, she said. Friedman said he believes that any mode of action, whether antisteatotic, anti-inflammatory or antifibrotic, should benefit early stage NASH patients, while patients with advanced fibrosis require a drug that delivers direct or indirect antifibrotic activity. Friedman said that a purely antisteatotic drug would move the disease in the right direction, but said it "remains to be seen whether the disease's natural history would be altered," Rahimi wrote. "Since not all hepatic fat is the same, he pointed out that different types of fat could mediate different downstream effects on inflammation and fibrosis, and additional studies are needed to filter out different fat phenotypes. Generally, in his view, liver fat-reducing molecules need to be combined with antifibrotic and anti-inflammatory treatments."

The prospect of combo therapy came up during the conference call with Madrigal officials. CMO Taub said that "FXR and ACC are good mechanisms [with which] to compare to our drug. What you see with FXR, primarily we believe because of its effect on cholesterol metabolism, [is that it] actually raises LDL-C," whereas inhibiting ACC "results in a more minor reduction in liver fat," while upping triglycerides.

All told, MGL-3196 "could be a standalone therapy in NASH, but may be combinable with other mechanisms as well, particularly those that are nonmetabolic and could address other aspects of the NASH phenotype," she said. In any case, "at this point, we don't see any need to offer this only as a combination therapeutic."

CEO Friedman said it's too early to make predictions. Results so far suggest that "you could treat a lot of people with just this one pill once a day, but the drug could be combined with any of the other mechanisms. Some, on paper, make more sense than others. We have to get to 36-week data, we have to see the biopsies," before speculating further, he said.