Meet the Biotech stock that is up more than 260% in one day

Standard market action is of little consequence to stocks operating in the biotech space that happen to publish good news. Suppose the market takes a beating – which is a regular occurrence these days – and a biotech company announces results showing that a clinical trial has gone very well, indicating that the drug can help patients suffering from a difficult-to-treat condition, what do you do? you get then? A stock that completely bypasses the overall pullback – and some.

Example: Madrigal Pharmaceuticals (MDGL) Shares rose 268% during Monday’s session after resmetirom, the company’s treatment for non-alcoholic steatohepatitis (NASH), a potentially fatal liver condition, excelled in a late-stage trial.

More specifically, the drug met primary endpoints in the Phase 3 MAESTRO-NASH trial. 30% of patients who received a higher dose of the drug showed recovery from NASH, while 26% of patients who received the lower dose showed recovery. Improvement in liver fibrosis was observed by 26% of patients in the higher dose group and by 24% in the lower dose group.

Because no standard treatments are currently available for NASH patients, JMP analyst Jonathan Wolleben says the results amount to the “grand slam scenario.” “Resmetirom appears to approve based on the Phase 3 MAESTRO-NASH data with a clinical profile supporting a blockbuster opportunity,” the analyst added.

Even factoring in the fact that shares more than tripled in a single session, Wolleben advises investors to keep loading because: “1) the current valuation underestimates the blockbuster opportunity presented by the power of the MAESTRO-NASH- data (we model US sales of ~$5 billion at peak penetration); and 2) MDGL is now becoming a major M&A target and there is no shortage of major players with NASH exposure (Novo Nordisk, Novartis, Pfizer, Lilly, Merck, AstraZeneca, Gilead to name a few) that could drive up a takeout premium.”

Not only is Nikic charting an optimistic path for the company, he backs it up with an Outperform rating (i.e. Buy) and a price target of $312. Following this target, there is room for an additional 33% gain over the current levels. (To view Wolleben’s track record, click here)

Overall, MDGL stocks have a Strong Buy rating by analyst consensus, showing that Wall Street agrees with Wolleben’s assessment. The rating is based on 9 Buys and 2 Holds in the last 3 months. Shares are selling for $250, and the average price target, at $281.5, implies ~13% upside potential. (See MDGL stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the recommended analyst. The content is for informational purposes only. It is very important to do your own analysis before making an investment.

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