Gilead Acquisition of CymaBay Rekindles Interest in Liver Disease

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After a few years of disinterest in the MASH biotech subsector, 2024 has started off with a bang, reigniting investor interest in treating liver disease. In early February, Gilead Sciences (NASDAQ: GILD) announced that it would be acquiring the then-publicly traded MASH company, CymaBay, for $4.3 billion, a 27% premium to its price the day prior. Given shares fell to a low of under $2 in 2022, CBAY investors have reaped large rewards in the past 2 years. CBAY was advancing seladelpar, a selective PPAR agonist, for MASH before they terminated the program in 2019 due to adverse events. Despite the setback, management pressed on and demonstrated the drug’s worth in primary biliary cholangitis (PBC), a rare disease that nonetheless demanded a big price tag. Investors know more M&A is coming and this article identifies some target companies of interest.

Madrigal’s FDA Approval

Madrigal Pharmaceutical’s (NASDAQ: MDGL) is too big to be an acquisition target and their drug’s efficacy is underwhelming, but their approval is what ultimately defines the MASH market and something that investors need to pay attention to.  The FDA finally approved the first drug for MASH in March 2024. It was Madrigal Pharmaceutical’s drug, Rezdiffra, which is a thyroid hormone receptor beta agonist designed to increase fat metabolism in the liver. Madrigal’s market cap is sitting at $4.5 billion as it spearheads the MASH landscape, at least for the early stages of disease. Although the company is leading in the MASH race, big pharma and investors are starting to realize the importance of treating late-stage disease, or MASH cirrhosis. Patients with MASH and even MASH with fibrosis carry few to no symptoms until patients reach the severe scarring of the liver stage, or MASH cirrhosis, where most of the morbidity, mortality, and healthcare costs are incurred. From a reimbursement standpoint, drugs that treat this condition are more valuable.  This means a treatment for MASH cirrhosis, to prevent the patients who have progressed furthest in disease from requiring liver transplant or having liver decompensation complications such as bursting esophageal varices is more valuable to an insurer. Only a few of the MASH companies have focused on MASH cirrhosis over the last decade. And Madrigal, which leads the industry for now, is unlikely to make a dent in cirrhosis given how Rezdiffra works.

Madrigal’s drug is a metabolic drug which helps reduce fat in the liver. While this indirectly improves the fat-based stress on the liver which is what can drive fibrosis, once fibrosis has started it is continued with an inflammatory feedback loop and is best stopped or reversed with a dedicated antifibrotic drug. Madrigal is testing Rezdifra in an outcomes trial for MASH and MASH cirrhosis, but its drug only works a bit better than placebo when biopsying liver tissue.

Focus on Fibrosis

Companies already focused on three things are positioned to perform better than MASH companies trying to reverse liver fibrosis with diet pills like Madrigal:

  • Drugs with direct antifibrotic mechanisms
  • Already focusing on MASH cirrhosis
  • Already focusing on clinical outcomes (not noninvasive measures, or biopsies)

In addition, patients with cirrhosis need very safe drugs, or else they can damage their already-compromised livers. Several companies are testing their drugs in MASH cirrhosis (late-stage disease), and only two companies whose approaches to MASH truly focus on fibrosis.

Aspiring Cirrhosis Companies

Akero (NASDAQ: AKRO) and 89 Bio (NASDAQ: ETNB) are developing MASH treatments that are a bit more than just metabolic-acting drugs designed to cut fat. Both of their drugs mimic the human-made FGF21 protein which is produced naturally by the human body and modulates many effects. They are focusing on mid-stages of MASH with liver fibrosis, and are extending their studies into cirrhosis. Both these companies are leading the pack with FGF21 analogues, which can turn white fat into brown fat, as well as improve lipid profiles, metabolism, and inflammation across not just the liver but the fat, the heart, the pancreas, as well as muscle and blood vessels. Clinical testing has been very successful for fibrosis but not cirrhosis. Patients have seen a reduction of fibrosis and improved fat and metabolism.

https://www.nature.com/articles/s41574-020-0386-0

The issue with their approach is that FGF21 is just not enough to move the needle in cirrhosis. Akero’s drug recently failed to work in cirrhosis patients compared with placebo. The drug had a positive effect but it was very limited and not statistically significant. FGF21 analogues could likely play a future role in cirrhosis treatment, but they would most likely have to be combined with a true antifibrotic medicine.

Leaders in Antifibrotic Medicine

Galectin Therapeutics (NASDAQ: GALT) is the leading company developing a dedicated cirrhosis drug and measuring those results with tangible clinical outcomes. The company found that in its phase 2b trial it’s leading drug, belapectin, reduced the incidence of cirrhosis complications in MASH cirrhosis patients.

Belapectin is a fairly large molecule galectin-3 inhibitor. Galectin-3 is a critical protein for pathogenic and progressive scarring, so belapectin’s mechanism to inhibit galectin-3 is a direct antifibrotic effect for the liver. In Galectin’s phase 2 trial, at the best dosing level, no patients without esophageal varices formed new varices, which are a sign of further liver scarring due to pressure buildup, so it is an additional step on the way to requiring a liver transplant which can cost hundreds of thousands of dollars.

https://investor.galectintherapeutics.com/events-and-presentations

Variceal bleeding also requires emergency department visits and costs a lot of money to treat. Therefore, preventing esophageal varices is a major step forward in treating MASH cirrhosis (and potentially other forms of cirrhosis). In addition, Galectin’s drug has an excellent safety profile. The company’s phase 2b/3 trial has an interim readout later this year and is likely to be successful based on the clinical endpoint, mechanism of action, and longer trial duration.

Good news for Galectin will also be good news for Bioxytran Inc (OTCMKTS: BIXT), which is developing next-generation galectin inhibitors. The company’s lead asset has shown promise in neutralizing COVID-19, but liver cirrhosis is in its sights, and a successful trial for Galectin will likely spark interest in Bioxytran, since there are very few companies who have successfully brought galectin-3 inhibitors into the clinic. Designing an effective galectin inhibitor is not an easy task. Bioxytran and Galectin are the best companies for the cirrhosis space, and this is a chance for investors to invest in Galectin before they are approved and to invest in Bioxytran early at the ground floor.

The MASH space is likely to be filled with many companies developing marginally effective diet pills to cut liver fat, but few companies are equipped to address the extremely costly and true unmet need of MASH cirrhosis. The lack of competition and competence in this area means that GALT and BIXT are likely to perform very well as they work to bring their drugs to market.

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