UPDATE 1-Madrigal Pharma surges on FDA nod to first drug for fatty liver disease NASH

(Updates stock move and background throughout, adds analysts quotes in paragraph 4)

By Pratik Jain and Sriparna Roy

March 15 (Reuters) – Madrigal Pharmaceuticals shares jumped over 22% on Friday after its oral drug won the U.S. health regulator’s approval as the first treatment ever for a fatty liver disease known as non-alcoholic steatohepatitis (NASH).

Analysts cheered the much-awaited approval of the drug, Rezdiffra, the label of which does not require a liver biopsy for diagnosis, paving the way for the acceptance of the drug in an untapped market and creating a blockbuster opportunity.

The global market for NASH treatments is expected to surpass $16 billion by 2030, according to market research firm Vision Research Reports. At least 2 analysts said they expect Madrigal alone to generate about $5 billion in peak annual sales.

“There is nothing in this approval or in the label that could have come out better than it did,” said Piper Sandler analyst Yasmeen Rahimi.

NASH, which was recently renamed metabolic dysfunction-associated steatohepatitis (MASH), causes an excess build-up of fat in the liver, leading to inflammation and fibrosis, or scarring, of the organ.

The drug has been approved for patients who have MASH with fibrosis, or scarring, that has progressed to stage 2 or 3 in severity.

“The absence of liver biopsy requirement in Rezdiffra’s label should buoy biotech stocks with exposure to MASH,” said William Blair analyst Andy Hsieh.

At least two analysts said that the investor concerns about the GLP-1 class of drugs, especially after strong data from Eli Lilly’s drug tirzepatide

last month

, impacting the NASH space have been somewhat placated, but it is still too early to make a definitive assessment.

If gains hold, Madrigal’s stock is set to gain $971 million in value since its close on Thursday.

Madrigal’s price-to-tangible-book-value ratio, a common benchmark for valuing stocks, stood at 11.94 on Friday – more than five times that of rival 89bio, according to LSEG data.

(Reporting by Sriparna Roy and Pratik Jain in Bengaluru; Editing by Tasim Zahid)

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