The stars are aligning for several biotech stocks. Thirty-five billion stars in fact. That huge number in dollars represents the potential annual spending needed to treat one of the biggest and growing problems facing the healthcare sector today. We’re talking about NASH.
Most often occurring in obese or glucose-intolerant people, Nonalcoholic Steatohepatitis or NASH is quickly increasing in prevalence. The progressive liver disease can destroy the organ and is projected to become the leading cause of all liver transplants by 2020. For those nations with fatty diets, the prevalence of NASH are estimated to be as much as 20% of the total population. Here in the U.S., roughly 15 million are estimated to be in the various stages of the disease. This is a massive and quickly growing problem. And right now, there are no approved treatments for NASH.
But several biotech stocks are trying to crack the NASH code. If just one is successful, it could result in blockbuster-sized revenues. It’s as tantalizing of a trend as there is in healthcare.
For investors looking at biotech stocks, NASH is simply where it’s at. Which pharma stocks are taking a serious look at NASH? Here are five biotech stocks tackling the problem head-on.
Intercept Pharmaceuticals (ICPT)
Of the biotech stocks looking at NASH, Intercept Pharmaceuticals (NASDAQ:ICPT) is already in the lead. That’s because the ICPT is applying one of its other drugs towards the disease.
Intercept’s drug Ocaliva is used to treat a rare, chronic liver disease known as primary biliary cholangitis (PBC). Over time, PBC causes your liver to shut down and you could need a transplant. Sound familiar? The hope is that ICPT Ocaliva is also effect at treating NASH, which would open up a new market for the established medicine.
And the outlook is promising.
After promising early results in treating NASH, Intercept announced a large-scale Phase 3 study to evaluate the use of Ocaliva to treat NASH. This study should finish in early 2019. Another study targeting a later stage of NASH is currently enrolling. If these studies prove to be good, ICPT has real chance to be the first biotech with an approved treatment for the disease.
Even without NASH, ICPT could be a buy. Sales of Ocaliva continue to ramp-up already providing Intercept with a steady stream of revenues. That provides plenty of cash to keep the NASH and other trials going.
In the end, Intercept could be one of the best biotech stocks to buy period.
Gilead Sciences (GILD)
NASH could be the answer to biotech stalwart Gilead Science’s (NASDAQ:GILD) prayers. It’s true that GILD has suffered over the last few years as investors have fretted over the firms pending patent cliff and several misses on the clinical trial front. But NASH is a very strong arrow in Gilead’s quiver.
Parleying what it knows about the liver from its huge hepatitis drug portfolio, Gilead currently has three different therapies in various stages of trials. This includes Selonsertib — which has the potential to be a blockbuster in NASH. Early results have been beyond impressive and Gilead is wrapping up several late-trail studies on two different NASH stages by the beginning of 2019. If those results are positive, the company should be on track to file for regulatory approval later next year. Moreover, GILD is elevating a combination therapy approach to NASH with its other two compounds and Selonsertib.
The benefit to buying GILD is that the firm is biotech royalty. Despite patent cliff woes, Gilead features a huge portfolio of drugs that currently rake in billions in cash. That provides a lot of wiggle room when it comes to developing new drugs. Even if Selonsertib flops, GILD isn’t going anywhere. That makes it more a conservative play on the disease.
But that doesn’t mean that GILD is low growth. If its NASH portfolio hits, shares could be off to the races and regain its former biotech glory.
Madrigal Pharmaceuticals Inc (MDGL)
Jarred lighting could be the only way to describe biotech stock Madrigal Pharmaceuticals (NASDAQ:MDGL). After two successful initial trials for its MGL-3196 drug, shares of MGDL have been off to the races — jumping over 128% since the beginning of the year. And that jump is pretty justified.
That key drug is a hormone inhibitor that is absorbed in the liver and early trials it performed beautifully. Patients receiving MGL-3196 exhibited a highly significant reduction in liver fat versus those on placebo. But what was really was impressive is that roughly 50% of the patients also saw their liver fibrosis resolved. That’s massive because fibrosis resolution would be considered an FDA-approvable endpoint for a study. It one quick shot, MDGL went from an unknown to one of the biggest NASH players. The biotech is currently planning a late-stage study for MGL-3196 soon.
But retail investors aren’t the only ones looking at MDGL in spades. It’s starting to get attention from other suitors as well. Rumors have begun to swirl that Bristol-Myers Squibb (NYSE:BMY) is looking into buying the firm. Management seems pretty receptive to the buyout as well.
The only problem is that Madrigal’s pipeline is literally just this drug. Investors have already placed a lot of faith into it and a buyout. If those don’t happen, MDGL will come crashing back to earth ASAP. On the flipside, the gains could be endless if it manages to get the dug to market. When it comes to the biotech stocks on this list, it has the highest risk/reward.
Viking Therapeutics (VKTX)
For smaller biotech stocks, a big pipeline is crucial to survival. After all, more “shots on goal” means that you’re more likely to get a drug approved and into the market. For Viking Therapeutics (NASDAQ:VKTX) that’s exactly what investors get.
VKTX has currently five drugs in its development pipeline. Those drugs are targeting a variety of diseases including diabetes, metabolic diseases, and anemia. However, NASH is driving the show. Like previously mentioned Madrigal Pharmaceuticals, VKTX NASH drug is a hormone receptor/inhibitor. And also, like MDGL, early results are a bit impressive. Analysts are betting that when VKTX reports stage two trail data for the drug it will show very similar results over the next few months.
Naturally, this estimates and Madrigal’s success has sent shares of Viking soaring.
But what’s really exciting about Viking is that its market cap — about $1.3 billion — is still a lot less than MDGL’s at about $3.5 billion and there are more drugs in the pipeline. That makes VKTX a very compelling buyout candidate for a larger pharma looking to jump into he NASH game and pick-up some extra bits for free.
Now Viking is risky. The firm features a high cash burn and is technically behind many of the other players on this list. But given the potential for great results — and a buyout sooner than later — it’s worth the risk.
Galectin Therapeutics (GALT)
Sometimes the biggest medical advances come from happy accidents. For those investors looking for a classic lotto ticket among the NASH biotech stocks, Galectin Therapeutics (NASDAQ:GALT) could be on your list.
GALT’s first set of trials for NASH actually failed and couldn’t produce a real end-point. However, in that trial, the biotech stock did see some crazy data related to a NASH complication. Cirrhosis-damaged livers can cause intense pressure in veins that manifests itself as painful blisters in your throat. During testing, GALT’s formula actually helped significantly prevent these blisters from occurring. It wasn’t what it was looking for, but is a happy accident. To that end, Galectin spoke to the FDA and was able to change the trial/project design to now search for that method.
Now, that doesn’t set GALT back to square one, but it does push it behind other players on this list, which it explains why it trades for under $7 per share. If anyone on this list does come up with a NASH cure/treatment first, there may be no need for GALT’s medication in the first place. But if GALT is able to get out first and treat a symptom, shares will pop higher.
It’s a risky bet on the disease, but for investors looking for a gamble, Galectin could one of the best biotech stocks to own for NASH treatments.
As of this writing, Aaron Levitt was long GILD, ICPT, and VXTK stock.