In a new industry report on the future of NASH (nonalcoholic steatohepatitis), Stifel launched coverage of six NASH companies, with three “buy” and three “hold” recommendations.
Analyst Derek Archila started NGM Biopharmaceuticals (NASDAQ:NGM), Viking Therapeutics (NASDAQ:VKTX) and CymaBay Therapeutics (NASDAQ:CBAY) at “buy” with price targets of $26, $14 and $14, respectively.
He also initiated coverage of Genfit SA (NASDAQ, Euronext:GNFT), Intercept Pharmaceuticals (NASDAQ:ICPT) and Madrigal Pharmaceuticals (NASDAQ:MDGL) with “hold” ratings and price targets of €21, $89 and $126, respectively.
“While we are bullish on the category long-term, we think for now, investors should approach investing in the space in a more tactical manner, given the numerous regulatory and commercial questions that remain unanswered, making this very much an event-driven, stock picker’s category,” he added.
Among his “buy” picks, Mr. Archila said:
We are positively biased [about NGM Bio] heading into NGM282’s Phase 2a cohort 4 data (probability of success: 55%) in NASH expected in the second half of 2019, which we think will meaningfully de-risk the recently initiated Phase 2b ALPINE 2/3 study. Given the recent pullback in shares, we see this as a good entry point for investors with a favorable risk/reward (+120%/-50%) at current levels.
We believe [Viking] VK2809’s IND will be accepted and investor concerns around its tolerability profile are unwarranted. We see a favorable risk/reward at current levels (+80%/-50%) and after our review of VK2809’s pre-clinical studies, Phase 1/2a data and previous FDA feedback on the tolerability of Viking’s Hep-Direct platform for its previous owner (Metabasis), we are confident that the FDA will allow Viking to initiate a Phase 2b in biopsy-proven NASH patients.
We believe [CymaBay’s] seladelpar will ultimately prove efficacious in its Phase 2b NASH study and see the pullback in shares based on its recently reported 12-week liver fat reduction data (which was not statistically significant) on MRI-PDFF [a biomarker] as a significant buying opportunity.
Among his “hold” picks, Mr. Archila said:
It is difficult for us to have conviction about a positive [Genfit] Phase 3 (RESOLVE-IT) study read out for elafibranor in NASH based on its current data and we question its commercial viability if it only demonstrates a marginal benefit on NASH resolution.
We believe there are too many unknown variables [about Intercept] surrounding an Ocaliva advisory committee and its potential launch in NASH to own the stock here.
We believe [Madrigal] resmetirom’s Phase 2b data are encouraging on NASH resolution and emerging evidence continues to point to the possibility resmetirom could demonstrate a benefit on fibrosis over time. We are positively biased heading into Phase 3, however, [and] we see few company specific catalysts to drive the shares upward in the next 12-to-18 months and think the stock could be volatile around updates from competitors.
