John McCamant, The Medical Technology Stock Letter
Rising 519%, our top pick for 2017, Madrigal Pharmaceuticals emerged as one of the leaders in drug development for the extremely large and untapped NASH market, a $35 billion opportunity.
NASH is one of the hottest sectors in drug development as large biopharma companies have inked a slew of huge licensing deals and acquisitions over the past few years.
Madrigal has a first-in-class thyroid hormone receptor-β agonist, MGL-3196, which recently reported proof-of-concept (POC) data showing it can safely and significantly reduce liver fat in NASH patients.
The 3196 unique mechanism of action and safety profile give it the potential to be a standalone NASH therapy, but should also be complementary to most other NASH mechanisms of action.
Our confidence is very high in CEO Paul Friedman who has an excellent track record of leveraging positive Phase II data into shareholder value. In our view, 3196 is the most attractive drug candidate for the treatment of NASH and has the potential to be a best-in-class molecule. Madrigal is a Buy under $100 with a target price of $140.
Our top pick for 2018 is Sangamo Therapeutics. Over the past year, we witnessed the incredible transformation of the company from a Wall Street has-been to a widely respected powerhouse in both gene therapy and gene editing. In fact, this year it became the first company ever to treat a patient with gene editing technology.
Despite all the hype for other gene editing technologies like CRISPR and TALNS, the firm’s tightly held, widely patented zinc finger technology (ZFN) has emerged as a major player in the exciting fields of gene therapy and gene editing.
Meanwhile, there are two partnerships to come that represent significant catalysts for the company. While not giving specific dates or deadlines, Sangamo is in talks to form new collaborations with large pharma/biotech companies for both its cellular immuno-oncology (CAR-T) and tau protein/Alzheimer’s disease programs.
In our view, these external programs are not on any investors’ radar screens yet, but the size of the deal(s) will, in our view, be large enough and the partners high-end enough for investors to begin to take notice and add substantially to the stock’s valuation.
Importantly, Sangamo is poised to deliver proof-of-concept data in 2018 from their four clinical-stage programs, hemophilia A, MPS I & II, and Beta Thal. Positive data from any of these four programs will also serve as positive stock catalysts as it would help de-risk the other programs.
As a reflection of our growing confidence in both the firm’s technology platform and management’s ability to execute and create significant shareholder value, we recently raised our Buy price from $15 to $19.