U.S. Markets closed

NASH Space in Focus in 2019 as Firms Look to Diversify

Zacks Equity Research
Smart Beta ETF report for EMGF

The NASH or the non-alcoholic steatohepatitis space is back in focus with the start of 2019, as biotech bigwig Gilead Sciences, Inc. GILD entered into a licensing and collaboration agreement with South Korea-based Yuhan Corporation.

Both the companies have entered into a licensing and collaboration agreement to co-develop novel therapeutic candidates for the treatment of patients suffering from advanced fibrosis due to NASH. Per the agreement, Gilead will acquire global rights to develop and commercialize novel small molecules against two undisclosed targets in all countries, except for Republic of Korea where Yuhan will retain certain commercialization rights.

While both companies will jointly conduct preclinical research, Gilead will be responsible for global clinical development. The agreement builds on the companies’ existing commercial collaboration to support the promotion of Gilead’s drugs in Korea.

Notably, Gilead already has a late-stage candidate, selonsertib, and a mid-stage candidate, investigational, selective, non-steroidal farnesoid X receptor (FXR) agonist, GS-9674.

Pharma giant Merck MRK recently exercised its option to license NGM313, an investigational monoclonal antibody agonist of the β-Klotho/FGFR1c receptor complex that is currently being evaluated for the treatment of NASH and type 2 diabetes.

The market for NASH promises potential and is expected to be one of the target areas in 2019 by most large pharma/biotech companies. This market is poised to witness rapid growth unlike other lucrative yet saturated markets like cancer. A chronic liver disease, NASH is caused by excessive fat accumulation in the liver, known as steatosis. Per records, it has affected up to 15 million people in the United Stated and could cause inflammation, hepatocellular injury, progressive fibrosis and cirrhosis.

The ailment is anticipated to be the leading reason behind liver transplantation by 2020. Currently, NASH induces the biggest basis for liver transplants in people under 50 in the United States. Such patients also suffer  from obesity and type II diabetes.

With no treatments currently approved to address this disease, the market opportunity is substantially huge and many companies are investing a major chunk of their R&D spend in the same.

Earlier, Swiss pharma giant Roche Holdings RHHBY too entered into a definitive agreement to acquire biotechnology company Jecure Therapeutics, Inc. Roche’s subsidiary, Genentech will obtain full rights to Jecure’s entire preclinical portfolio of NLRP3 inhibitors.

Jecure Therapeutics is focused on the discovery of novel therapeutics for the treatment of NASH and liver fibrosis. Jecure’s lead program has identified small molecule inhibitors of the NLRP3 inflammasome, a novel target and pro-inflammatory driver of NASH.

Another Swiss pharma company, Novartis AG NVS entered into a clinical development agreement with Pfizer PFE in 2018. The agreement includes a clinical trial to evaluate the combination of tropifexor (LJN452) and one or more Pfizer compounds for the treatment of NASH. The compounds include an Acetyl CoA-Carboxylase (ACC) Inhibitor (PF-05221304), a Diacylglycerol O-Acyltransferase 2 (DGAT2) Inhibitor (PF-06865571), and a Ketohexokinase (KHK) Inhibitor (PF-06835919).

Meanwhile, the biotech sector kick started the year with the announcement of mega-merger deals. Bristol-Myers Squibb Company, one of the largest pharma companies, announced that it will acquire leading biotech company Celgene for a whopping $74 billion. This could be one of the largest acquisitions in recent times.

Following suit, another large-cap pharma company Eli Lilly is all set to acquire Loxo Oncology for $8.0 billion to broaden its oncology portfolio. Evidently, the spotlight is back on mergers & acquisitions in the healthcare space. While oncology and immuno-oncology are key areas of focus, some pharma giants are also eyeing the NASH space and will most likely go after companies developing treatments for the same.

This, in turn, puts the spotlight on small/mid-size biotechs with NASH drugs and candidates. Intercept Pharmaceuticals, ICPT is one of the probable targets. The company is evaluating its lead candidate, obeticholic acid (OCA) for treating NASH. Currently, a phase III study, REGENERATE, among non-cirrhotic NASH patients with liver fibrosis is ongoing.

Top-line results from its interim analysis are expected later in the year. Viking Therapeutics VKTX is another company, which has a promising NASH candidate in its pipeline. The company reported positive results from a phase II study on the candidate in September 2018.

Of the above-mentioned stocks, Novartis, Eli Lilly and Merck all carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bottom Line

Riding high on the vast market potential, other big pharma and biotech companies are also producing pipeline candidates for the treatment of NASH. Hence, we expect a lot of activity in this space, going forward. A potential approval of any drug for NASH will attract more players.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Zacks Investment Research