The NASH Market has been heavily shorted and why not, there have been many failed attempts (often found in late stage trials) and big pharma has wasted billions with nothing to show for it. The market cap of NASH drugs has been declining for some time due to the popularity of weight loss drugs and the theory that they may reduce the NASH market. In one failed attempt in particular Novo Norodisk conducted a failed phase 2 study for its Wegovy/Ozempic Semaglutide (GLP-1) Here were the findings given the findings: https://www.thelancet.com/journals/langas/article/PIIS2468-1253(23)00068-7/fulltext
71 patients were enrolled between June 18, 2019, and April 22, 2021; 49 (69%) patients were female and 22 (31%) were male. Patients had a mean age of 59·5 years (SD 8·0) and mean BMI of 34·9 kg/m2 (SD 5·9); 53 (75%) patients had diabetes. 47 patients were randomly assigned to the semaglutide group and 24 to the placebo group. After 48 weeks, there was no statistically significant difference between the two groups in the proportion of patients with an improvement in liver fibrosis of one stage or more without worsening of NASH (five [11%] of 47 patients in the semaglutide group vs seven [29%] of 24 in the placebo group; odds ratio 0·28 [95% CI 0·06–1·24; p=0·087). There was also no significant difference between groups in the proportion of patients who achieved NASH resolution (p=0·29).
Here is a partial list of NASH trial failures taken from #msg-171933941 with semaglutide failure highlighted:
Historically, shorting a company with a NASH candidate has been a good bet because of the problems diagnosing the disease and its resolution leading to failed trials. Going forward, I believe shorts continue to believe shorting NASH stocks is a good bet because of the GLP1 class of drugs potential to reduce the market, the possibility of continued trial failures and finally even if the market materializes with drugs approved, they won't be successful as payers won't fund them. Reasons are:
Nash is a hard condition to diagnose because it may often present with no symptoms until it progresses to stage F4. (However, if you are overweight or have T2D, it is a good bet that you are at risk for some form of NASH and associated complications)
there aren't any good non-invasive tests/bio markers for NASH making trial failures commonplace. (MRE or magnetic resonance elastography promises to change that but it is not widely available and expensive.) see #msg-171975486
payers are going to be reluctant to fund treatment even if a drug is approved for NASH as again there aren't any good non-invasive tests/bio markers for NASH
payers are going to be reluctant to fund treatment because people can live with F2/F3 NASH for a long time and can even possibly manage it with diet so that it doesn't progress to F4 (Fibrosis/Cirrhosis/liver cancer) at which point other health issues may present
In spite of the above issues, companies press forward with the pursuit of the NASH market on the theory the market is large with no approved therapy. Recently MDGL had a successful $500 million raise (after data about retatrutide was known I might add). Secondly, I do believe reliable/inexpensive/widely available non-invasive testing/biomarker analysis for high risk groups will lead to accurate diagnosis/payers covering treatment in the next few years. see #msg-171942686.
Below are the short positions on a list of companies that I think have a realistic shot of bringing a commercially successful NASH drug candidate to market along with some short position data:
Shrs short 6/30 Shrs Short 9/29 Change Inc. in # of Shrs Short Shrs Short % of float 9/29 MDGL 1,758,245 2,645,340 887,095 0% 17.5% AKRO 4,785,377 5,776,668 991,291 21% 10.7% ENTB 9,501,604 6,326,628 -3,174,976 -33% 9.9% VKTX 12,029,640 13,894,349 1,864,709 16% 16.0%
It's clear that all these stocks are heavily shorted. (ENTB corrected somewhat (profit taking?) after the mixed AKRO data was released but is still heavily shorted meaning any unexpected positive data may send one or more of these stocks upward at high velocity.
The price action on AKRO/ENTB shares after AKRO released mixed data where AKRO/ENTB dived once it was no longer believed their FGF21 analogue MOA offered superior efficacy in treating the fibrosis aspect of NASH. This price action indicates that the market and the FDA really wants a NASH drug that can deal with fibrosis. MDGL has demonstrated in phase 3 that their thyroid hormone receptor-ß agonist does work to lessen fibrosis. I would argue that there has been a lot of unproven noise about MDGL trial data issues that has been spread by shorts. I would expect their drug resmetirom will get approved and have a first mover advantage. I don't however know if it will be a commercial success because of Diagnostic/payer issues. Maybe so and maybe not.
VKTX 's VK2809 is due to finish reporting their phase 2b data early next year which will include a Fibrosis assessment at 12 months using liver biopsy. Previously Raymond James comments can lead one to believe the Viking drug which share the same MOA as resmetirom may be more potent than the MDGL Drug (#msg-171946767)
..on VK2809 vs Madrigal resmetirom....saying the Viking drug showed a comparative "2-fold reduction in liver fat" with the "fat reduction being >60%." Theyalso commented that VK2809 safety being better than resmetirom saying "Rate of TEAE's leading to study discontinuation was in-line with placebo compared to >2x the pbo discontinuation due to AE rate for 100mg resmetirom". Really like the conclusion "Liver fat reduction looks best in class, even at less frequent dosing"
In the past, heavily shorted NASH stocks have experienced meteoric rises in share price with good data. This could happen for VKTX if they show good Fibrosis efficacy with VK2809 vs resmetirom.
"People are best convinced by reasons they discover themselves"
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