On Monday, Evercore ISI adjusted its outlook on Madrigal Pharmaceuticals (NASDAQ:MDGL), increasing the price target to $392 from the previous $360, while maintaining an Outperform rating on the stock. The revision follows Madrigal's strong fourth quarter performance, with Rezdiffra revenue preannounced to be between $100 million and $103 million.
This figure surpasses both the consensus and Evercore ISI's estimate by approximately $10 million. According to InvestingPro data, the company, currently valued at $6.41 billion, is trading slightly above its Fair Value, with analyst targets ranging from $155 to $530.
Madrigal Pharmaceuticals did not provide guidance for the current year, but Evercore ISI projects revenues to reach $590 million, which is higher than the consensus estimate of $555 million. The projection includes a 4% price hike implemented at the start of the year. However, Evercore ISI's revenue estimates for subsequent years are more conservative due to the potential impact of price negotiations under the Inflation Reduction Act, noting that Madrigal does not qualify for the small biotech business exception.
InvestingPro analysis reveals strong financial health indicators, with a current ratio of 5.98 and more cash than debt on its balance sheet, though analysts don't expect profitability this year.
Despite the positive revenue preannouncement, Madrigal's stock opened trading with a 13% decline. This drop is attributed to fading merger and acquisition speculation and an increase in cash utilization, which saw a quarterly rise of about 17%. Nevertheless, Evercore ISI views the current lower stock price as an opportunity for investors.
Notably, InvestingPro data shows the stock typically moves counter to the market with a beta of -0.37, and has delivered strong returns over both three-month and five-year periods. For deeper insights into Madrigal's financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
The firm's updated model reflects a lower discount rate and increased revenue projections based on the strong quarter and the price increase. Additionally, higher spending is anticipated.
Evercore ISI also highlighted Madrigal's progress towards European Union market entry, targeting approval and launch in the second half of 2025, beginning with Germany. Madrigal has already appointed a head of EU operations and anticipates a smoother process with payors in the EU due to the single-payer system.
In other recent news, Madrigal Pharmaceuticals has been making significant strides in its development of treatments for Non-Alcoholic Steatohepatitis (NASH). The company has completed patient enrollment for the MAESTRO-NASH OUTCOMES trial, which evaluates resmetirom as a potential treatment for NASH cirrhosis. Following the announcement of topline data, detailed results from Part 1 of the ESSENCE study were shared, a notable event for Madrigal's research trajectory.
Analysts from Oppenheimer, TD Cowen, and Piper Sandler have all maintained their positive ratings on Madrigal. Oppenheimer has increased the price target for Madrigal Pharmaceuticals to $400, reflecting their confidence in the company's ongoing clinical studies and development programs. TD Cowen reaffirmed their price target of $390, while Piper Sandler maintained an Overweight rating on the company.
The drug Rezdiffra is expected to generate revenue of $31.3 million for the third quarter of 2024, according to consensus estimates. Madrigal has also announced the appointment of Dr. Michael R. Charlton, a renowned expert in NASH, as Senior Vice President of Clinical Development. Furthermore, the company is preparing for a potential European launch of Rezdiffra in mid-2025.
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