On Friday, JMP Securities increased the shares price target for Madrigal Pharmaceuticals (NASDAQ:MDGL) to $397.00, up from the previous $351.00, while keeping a Market Outperform rating. This adjustment follows the U.S. Food and Drug Administration's (FDA) approval of Madrigal's drug, resmetirom, with a clean label, which is expected to facilitate physician-led treatment decisions without the need for a boxed warning or contraindications.
The analyst at JMP Securities expressed satisfaction with the FDA's decision, noting that the Warnings and Precautions for resmetirom are minimal, requiring only standard monitoring for liver function tests and gallbladder-related adverse reactions. The incidence rate for such reactions in clinical trials was less than 1 per 100 patient years across all treatment arms. After the market closed on the previous day, Madrigal's shares saw an approximate 22% increase.
The pricing of resmetirom, branded as Rezdiffra, has been set within the cost-effectiveness range determined by the Institute for Clinical and Economic Review (ICER), at $47,400. This is slightly higher than JMP Securities' initial estimate of $40,000.
A recent survey indicated that doctors plan to prescribe Rezdiffra to a significant portion of patients with stage 2 and stage 3 fibrosis due to nonalcoholic steatohepatitis (NASH), with the expectation that usage will grow over time.
The analyst highlighted that the anticipation of Rezdiffra's use is greater than that for tirzepatide, addressing concerns some investors had. With Madrigal's market capitalization reaching approximately $6.6 billion following the post-market surge, the analyst believes that the market is still undervaluing the peak sales potential of Rezdiffra, which is estimated to be around $6.8 billion in the U.S. market alone.
Furthermore, JMP Securities anticipates that Madrigal Pharmaceuticals may become a focal point for merger and acquisition speculation. The firm expects that the launch of Rezdiffra for NASH will be successful and that the drug's first-to-market advantage will be significant in the competitive landscape.
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