A chronic disease still waiting for a drug

As biotech companies take new shots on goal for the liver disease known as NASH, or nonalcoholic steatohepatitis, investors are understandably reluctant after being burned repeatedly. Take Intercept Pharmaceuticals, which at the height of the Wall Street excitement over NASH treatments fetched as much as $462 a share. The stock has since plunged, trading now at just over $17, erasing $6 billion in market value. The biotech’s drug for NASH was rejected by the U.S. Food and Drug Administration in 2020 because of safety concerns, but Intercept is trying again. Companies including Gilead Sciences, Genfit and NGM Biopharma are among the many others that have faced setbacks.

The next big readout will come later this year from a late-stage trial by Madrigal Pharmaceuticals for an experimental oral drug that reduces liver fat. Another promising company, Akero, saw its share price double last week after reporting that its drug improved liver scarring. The study results helped recapture some of the lost excitement for NASH therapies, lifting other companies in the space, like 89bio, which is up 15% over the past month.

These are just a few names among many companies conducting clinical trials with the hope of finding a drug that can reduce liver inflammation as well as fibrosis, a type of scarring that can lead to liver complications like cirrhosis. Eventually, some of these drugs will hit the mark, though figuring out which ones will sail through the clinic and get the FDA nod is hazardous.

The newer drugs under development do have some advantages. Akash Tewari, an analyst at Jefferies, says he is cautiously optimistic about Madrigal’s chances because, unlike some failed therapies targeting very advanced stages of the disease, Madrigal’s pill seeks to intervene at earlier stages of liver scarring, which could prove more effective.

Investor risk-aversion means companies like Madrigal and Akero aren’t exactly pricing in a very high probability of success, so investing now could lead to a massive payoff. Madrigal and Akero both trade at about $1 billion market capitalizations, even though an approved drug would probably yield a multibillion-dollar opportunity over the life of the drug. If either company succeeds, a sale to a major pharmaceutical firm would be likely (Pfizer already owns a piece of Akero).

There also is reason to believe that, with every failure, the industry is getting closer to figuring out how to treat NASH, says Dr. Veronica Miller, a professor of public health at the University of California, Berkeley. She says the development of drugs is partly dependent on improving the tools to analyze disease progression. As things like more precise digital analysis of biopsies and noninvasive biomarkers are incorporated into trials, both regulators and the scientific community will have a more solid understanding of the medications’ effects.

Of course, the best way to tackle fatty liver disease, just like other illnesses caused by obesity, will always be to make lifestyle adjustments such as cutting down on unhealthy foods. A 2019 study conducted by Emory University Professor Miriam Vos showed that reducing added sugars in daily consumption went a long way toward improving fatty liver disease in children.

But Dr. Vos says diet, sadly, isn’t enough for many patients, and the need for medication is acute given the rise of cirrhosis and liver cancer as a result of NASH. She says that the treatment of the disease will eventually expand greatly as medications encourage more doctors and patients to seek a diagnosis.

With so much pharma and biotech money still flowing into NASH studies, the development of a successful medication is likely a question of “when" and not “if." There is a big payoff in picking the first to cross the line.