Madrigal Pharmaceuticals (MDGL -0.30%) is in a position that most other biotechs envy. Its first medicine just hit the market, sales are due to start rolling in, and there aren't any other companies that can slow it down -- for now, that is.
By mid-2027, its shareholders will probably be richer than they are today. But beyond that time point, all bets are off, and in fact, it's very possible for things to start getting more difficult for Madrigal a bit sooner. Here's what could happen and why.
It'll be growing, and likely quickly
As of today, there's one big reason why Madrigal should be seeing revenue flow to its top line -- and eventually earnings -- over the coming three years. Its medicine, Rezdiffra, is the only approved treatment for the liver disease called metabolic-associated steatohepatitis (MASH, formerly known as NASH).
While Rezdiffra is only indicated to treat patients with moderate-to-severe fibrosis (scarring) of the liver, the company plans to continue with its research and development (R&D) activities to test its helpfulness in the context of more severe presentations of the disease, including for patients with cirrhosis.
The company's major clinical trial testing the drug in the context of cirrhosis should be wrapped up sometime between 2026 and the close of 2027, so it's feasible that it could get regulators to approve its request for an expanded indication within the next three years.
Rezdiffra has only been on the market since mid-March of 2024, so it isn't yet clear how much revenue it'll bring in at its peak. But management estimates that at a minimum, by 2030 roughly half of all patients with MASH might be eligible for treatment. That means for the U.S., the treatment could eventually have an addressable market of around 750,000 patients or so, though for now the focus will be on a group of just 315,000 patients.
Estimates about the ultimate size of the market for MASH therapies vary widely, with some commentators anticipating its value to be in the ballpark of $20 billion or more in annual sales by 2030 and others contending that it'll only reach a size of $12 billion.
No matter how large the market becomes, Madrigal has the resources on hand to serve the market as it exists today. In the first quarter, the biotech raised $690 million from a new stock offering, and at the close of the quarter, it had more than $1.1 billion in cash, equivalents, and saleable investments. Once Rezdiffra's sales growth starts with gusto, it'll have even more, and it'll likely become profitable within the next two years or so as a result.
Rivals are already acting hungry
By mid-2027, it is very likely that Madrigal will no longer be the only player in the market for MASH medicines. Because of its first-mover advantage, it will still probably be growing, and its market share will still be large. But given the powerful competitors that are looming closer by the day, the biotech may well start to experience pressure on its margins sooner than investors might suspect.
In particular, Novo Nordisk (NVO -0.32%) is currently working on one phase 3 program, one phase 2 program, and a handful of phase 1 programs. Its phase 3 program is especially threatening to Madrigal as it's investigating whether one of the company's already-approved molecules, specifically the molecule behind its drugs Ozempic and Wegovy, might also be useful for treating MASH.
So it could potentially get out the door and onto the market very quickly, and capture a large market share rapidly due to the pre-existing manufacturing resources and commercial infrastructure that Novo Nordisk already has in place for Ozempic.
Eli Lilly, another pharma giant, has a MASH program in late-stage trials and other earlier-stage efforts. Smaller players like Viking Therapeutics have promising programs in mid-stage clinical trials too.
Investors should be aware that if late-stage trial data from competitors looks better than the data Madrigal got an approval with, it will almost certainly dent the stock price, perhaps significantly. The dimensions to pay attention to the closest are whether the competing candidates can address fibrosis and cirrhosis more effectively than Rezdiffra, and whether they can prevent progression of the disease as effectively.
Overall, in three years Madrigal Pharmaceuticals will thus be in a somewhat more precarious position than it's in today. While it's a decent option to buy for exposure to its likely quick growth in the meantime, the chances are good that it will be a harder sell to investors in 2027.
Nonetheless, it's also very possible that competitors won't be able to produce a medicine that's as effective as Rezdiffra, so don't write this biotech stock off if its peers start to compete in its market.
