Madrigal Pharmaceuticals snagged a breakthrough therapy designation for its liver disease treatment on Tuesday and MDGL stock surged closer to a buy point.
The company also confirmed it's on track to file a request for approval in the second quarter. This puts Madrigal just behind Intercept Pharmaceuticals in treating nonalcoholic steatohepatitis, or NASH. In this condition, fat replaces healthy tissue on the liver in people who consume little to no alcohol. Both companies hope to treat patients with liver scarring called fibrosis due to NASH.
The Food and Drug Administration's designation will expedite the development and review of Madrigal's resmetirom. SVB Securities analyst Thomas Smith sees the designation as an important milestone for the biotech company as it plans to file for FDA approval of resmetirom this quarter. Its approval could hinge upon an ongoing study called Maestro-NASH.
"Overall, we see breakthrough therapy designation as an important milestone that provides further confidence in both the quality of the Maestro-NASH clinical data and Madrigal's regulatory alignment ahead of resmetirom (new drug application) anticipated in the second quarter," he said in a report to clients.
On today's stock market, MDGL stock jumped 12.8% to close at 289.32. Intercept stock also rose 5.3% and ended the regular session at 19.29.
MDGL Stock: Concerns Eased
Madrigal announced its plan to seek a breakthrough therapy designation in February, Smith said. With granting the designation, the FDA has likely seen some of the Maestro-NASH data, he said.
"In our view, this should directly address some bear concerns around Madrigal's regulatory alignment regarding how the Maestro-NASH (study goals) were defined and reported, and whether FDA considers the benefit on these (goals) to be clinically meaningful," he said.
Smith kept his outperform rating on MDGL stock.
The news puts Madrigal just behind Intercept which has already asked the FDA to approve its drug, Ocaliva, in patients with fibrosis due to NASH.
On Tuesday, Madrigal shares soared above their 50-day moving average, according to MarketSmith.com. Shares are now consolidating with a buy point at 315.55.
Bullishly, MDGL stock has a best-possible IBD Digital Relative Strength Rating of 99. This means the stock's 12-month performance ranks in the top 1% of all stocks.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
