Dj Paulson & Corporate Increases Stake In Madrigal Pharmaceuticals By 192000 To 2042,000 Shares

For Immediate Release

Chicago, IL – November 11, 2024 – Today, Zacks Equity Research like Madrigal Pharmaceuticals MDGL, Corcept Therapeutics CORT, Catalyst Pharmaceuticals CPRX, Larimar Therapeutics LRMR and Theravance Biopharma TBPH.

Industry: Small Pharma

Link: https://www.zacks.com/commentary/2367138/5-small-drug-stocks-to-buy-as-trump-gets-re-elected?art_rec=quote-stock_overview-zacks_news-ID01-txt-2367138

The drug industry witnessed major policy changes during Joe Biden's four-year term as U.S. President, including the historic Inflation Reduction Act (“IRA”). With Donald Trump’s reelection, the biotech industry hopes to witness more innovation and mergers and acquisitions (M&A) activity. Efforts to repeal the IRA look likely.

However, it all depends on who is appointed to key roles at federal health agencies. Drug pricing reforms are expected to remain a key priority for the new government. Trump, in his previous term, had put stress on control of drug prices, though it was not highlighted in his election campaign this time around. Regular pipeline setbacks, slow ramp-up of newer drugs, Federal Trade Commission’s (FTC) scrutiny of M&A deals and broader macroeconomic uncertainty are some of the other headwinds for the sector.

Nonetheless, the Zacks Medical-Drugs industry is showing promising trends in 2024 amid increased M&A and positive pipeline news. Innovation is at its peak for the industry, with key spaces like diabetes/obesity, inflammation and neuroscience attracting attention. Investors are particularly interested in developments related to GLP-1 receptor agonists, radiopharmaceuticals and antibody-drug conjugates (ADCs).

These positive factors should keep driving stocks like Madrigal Pharmaceuticals, Corcept Therapeutics, Catalyst Pharmaceuticals, Larimar Therapeutics and Theravance Biopharma.

Industry Description

The Zacks Medical-Drugs industry comprises small and some medium-sized drug companies that make medicines for both human and veterinary use. We have a separate industry outlook discussion on big drugmakers. Small drugmakers have a limited portfolio of marketed drugs or no commercial-stage drugs at all. Some drugmakers are dependent on just one marketed drug or pipeline candidate. For such companies, upfront or milestone payments from collaboration partners — in most cases, their larger counterparts — are the main sources of revenues. These companies need ample free cash flow to fund their R&D activities.

Factors Shaping the Future of the Medical-Drugs Industry

Pipeline Success: The success or failure of key pipeline candidates in clinical studies can significantly drive the stock price of industry players. Successful innovation and product line extensions in important therapeutic areas and strong clinical study results may act as important catalysts for the stocks.

Strong Collaboration Partners: These companies regularly seek external partners and collaborators for complementary strengths. A partnership deal with a popular drugmaker is a good sign about the potential of small pharma companies, especially when an equity investment is included in the deal. M&A deals are in full swing in the sector, signaling growth.

Investment in Technology for Innovation: For these smaller companies, succeeding in a shifting global market and an evolving healthcare landscape requires adopting innovative business models, investing in new technologies and increasing investments in personalized medicines. Over the past few years, scientific and technological advancements have made it possible to develop personalized therapies.

Other than that, adoption and information exchange through the meaningful use of health IT, development of therapies that improve overall patient outcomes and investment in developing and emerging markets are some of the key priorities for drug companies. Artificial intelligence and machine learning techniques are being used for the rapid advancement of drug discovery and target identification processes.

Pipeline Setbacks: The smaller companies have their share of risk in the form of unstable cash flows. Also, the failure of key pipeline candidates in pivotal studies and regulatory and pipeline delays can be huge setbacks for these smaller companies and significantly hurt their share prices.

Zacks Industry Rank Indicates Bright Prospects

The group’s Zacks Industry Rank is basically the average of the Zacks Rank of all the member stocks.

The Zacks Medical-Drugs industry currently carries a Zacks Industry Rank #75, which places it in the top 30% of 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Before we present you with a few top-ranked stocks to capitalize on the thriving prospects of the small and medium-sized drugmakers’ space, let’s take a look at the industry’s recent stock-market performance and the valuation picture.

Industry Lags S&P 500 and Sector

The Zacks Medical-Drugs industry is a huge 171-stock group within the broader Medical sector. The industry has underperformed the S&P 500 as well as the Zacks Medical sector so far this year.

Stocks in this industry have collectively declined 3.4% year to date against the Zacks S&P 500 composite’s rise of 24.7% and the Zacks Medical sector’s increase of 2.1%.

Industry's Current Valuation

Based on the trailing 12 months price-to-sales ratio (P/S TTM), which is a commonly used multiple for valuing these small drugmakers, the industry is currently trading at 2.24, compared with the S&P 500’s 6.19 and the Zacks Medical sector's 3.44.

Over the last five years, the industry has traded as high as 4.21X, as low as 1.74X and at the median of 2.33X.

5 Drug Stocks to Bet On

Corcept Therapeutics: Redwood City, CA-based Corcept’s sole marketed drug, Korlym, which is approved for treating Cushing's syndrome, has been performing well. Corcept increased its annual revenue guidance for Korlym on the third-quarter conference call owing to strong demand. Corcept has discovered a large portfolio of proprietary compounds, including relacorilant, dazucorilant, exicorilant and miricorilant, which selectively modulate the effects of cortisol but not progesterone. A new drug application for its lead pipeline candidate, relacorilant, for Cushing’s syndrome is expected to be submitted in the fourth quarter of 2024.

The stock of Corcept Therapeutics has risen 67.2% so far this year. The consensus estimate for 2024 earnings has risen from $1.12 to $1.31 per share over the past 30 days. The company has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. .

Madrigal Pharmaceuticals: Based in West Conshohocken, PA, Madrigal Pharmaceuticals’ drug Rezdiffra was approved in March and became the first and only therapy approved by the FDA for the treatment of adult patients with noncirrhotic NASH with moderate-to-advanced liver fibrosis. The drug’s commercial launch is off to a strong start, driven by early patient demand, growing adoption by prescribers and broader payer coverage. The drug has generated around $77 million in sales so far since launch in April, which is better than management’s expectations.

A regulatory application seeking the approval of Rezdiffra is also under review in the EU. A final decision is expected in mid-2025. Several late-stage studies are ongoing, evaluating the expanded use of Rezdiffra for NASH, including one for compensated NASH/MASH cirrhosis.

Madrigal’s stock is up 53.4% so far this year. Loss estimates for 2024 have improved from $29.49 per share to $24.08 per share over the past 30 days. The company has a Zacks Rank #2 (Buy).

Catalyst Pharmaceuticals: Coral Gables, FL-based Catalyst Pharmaceuticals’ lead drug is Firdapse, which is approved for treating Lambert-Eaton Myasthenic Syndrome (LEMS), an ultra-rare disease. The drug has been witnessing strong demand amid increasing prescription rates and new patient starts. In 2023, CPRX acquired the U.S. rights for Fycompa (perampanel) CIII from Eisai, which diversified the company’s portfolio by adding a commercial-stage epilepsy asset.

Agamree, its newest acquired muscle disorder drug, was launched in the U.S. market in the first quarter of 2024. With Agamree’s approval and launch, Catalyst has further diversified its commercial portfolio. On its third-quarter conference call this week, Catalyst raised its total revenue guidance.

The stock of Catalyst Pharmaceuticals has risen 38.3% so far this year. The consensus estimate for 2024 earnings is stable at $1.92 per share over the past 30 days. The company has a Zacks Rank #2.

Theravance Biopharma: Cayman Islands-based Theravance Biopharma generates revenues in the United States from its collaboration with Viatris related to the sales of Yupelri, a nebulized therapy for chronic obstructive pulmonary disease. The product has been witnessing a strong sales uptake owing to increased customer demand, resulting in increased collaboration revenues for Theravance.

The company’s ongoing restructuring initiatives are saving costs. Theravance is currently focusing on developing its pipeline candidate, ampreloxetine, a norepinephrine reuptake inhibitor for the treatment of symptomatic neurogenic orthostatic hypotension in patients with multiple system atrophy in the phase III CYPRESS study.

The stock of Theravance Biopharma has declined 22.1% so far this year. The consensus estimate for 2024 loss has remained stable at 45 cents share over the past 30 days. The company has a Zacks Rank #2.

Larimar Therapeutics: CA-based Larimar Therapeutics is a clinical-stage company making medicines for rare diseases. Its lead pipeline candidate is nomlabofusp (CTI-1601), being developed as a potential treatment for Friedreich's ataxia (FA). In May, the FDA removed the partial clinical hold on nomlabofusp program following a review of the phase II dose exploration study data.

The company will provide an update from the nomlabofusp development program in mid-December 2024 that will include available safety, pharmacokinetic and frataxin data from an ongoing open label extension study. This should be an important catalyst for the stock.

Larimar Therapeutics plans to file a biologics license application seeking approval of nomlabofusp for FA in the second half of 2025. The company believes that nomlabofusp has the potential to be the first frataxin protein replacement therapy for patients with FA.

The stock of Larimar Therapeutics has risen 100.5% in the past year. The consensus estimate for 2024 loss has narrowed from $1.39 per share to $1.16 per share over the past 30 days. The company has a Zacks Rank #2.

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Zacks Investment Research

The drug industry witnessed major policy changes during Joe Biden's four-year term as U.S. President, including the historic Inflation Reduction Act (“IRA”). With Donald Trump’s reelection, the biotech industry hopes to witness more innovation and mergers and acquisitions (M&A) activity. Efforts to repeal the IRA look likely. However, it all depends on who is appointed to key roles at federal health agencies. Drug pricing reforms are expected to remain a key priority for the new government. Trump, in his previous term, had put stress on control of drug prices, though it was not highlighted in his election campaign this time around. Regular pipeline setbacks, slow ramp-up of newer drugs, Federal Trade Commission’s (FTC) scrutiny of M&A deals and broader macroeconomic uncertainty are some of the other headwinds for the sector.

Nonetheless, the Zacks Medical-Drugs industry is showing promising trends in 2024 amid increased M&A and positive pipeline news. Innovation is at its peak for the industry, with key spaces like diabetes/obesity, inflammation and neuroscience attracting attention. Investors are particularly interested in developments related to GLP-1 receptor agonists, radiopharmaceuticals and antibody-drug conjugates (ADCs).

These positive factors should keep driving stocks like Madrigal Pharmaceuticals MDGL, Corcept Therapeutics CORT, Catalyst Pharmaceuticals CPRX, Larimar Therapeutics LRMR and Theravance Biopharma TBPH.

Industry Description

The Zacks Medical-Drugs industry comprises small and some medium-sized drug companies that make medicines for both human and veterinary use. We have a separate industry outlook discussion on big drugmakers. Small drugmakers have a limited portfolio of marketed drugs or no commercial-stage drugs at all. Some drugmakers are dependent on just one marketed drug or pipeline candidate. For such companies, upfront or milestone payments from collaboration partners — in most cases, their larger counterparts — are the main sources of revenues. These companies need ample free cash flow to fund their R&D activities.

Factors Shaping the Future of the Medical-Drugs Industry

Pipeline Success: The success or failure of key pipeline candidates in clinical studies can significantly drive the stock price of industry players. Successful innovation and product line extensions in important therapeutic areas and strong clinical study results may act as important catalysts for the stocks.

Strong Collaboration Partners: These companies regularly seek external partners and collaborators for complementary strengths. A partnership deal with a popular drugmaker is a good sign about the potential of small pharma companies, especially when an equity investment is included in the deal. M&A deals are in full swing in the sector, signaling growth.

Investment in Technology for Innovation: For these smaller companies, succeeding in a shifting global market and an evolving healthcare landscape requires adopting innovative business models, investing in new technologies and increasing investments in personalized medicines. Over the past few years, scientific and technological advancements have made it possible to develop personalized therapies. Other than that, adoption and information exchange through the meaningful use of health IT, development of therapies that improve overall patient outcomes and investment in developing and emerging markets are some of the key priorities for drug companies. Artificial intelligence and machine learning techniques are being used for the rapid advancement of drug discovery and target identification processes.

Pipeline Setbacks: The smaller companies have their share of risk in the form of unstable cash flows. Also, the failure of key pipeline candidates in pivotal studies and regulatory and pipeline delays can be huge setbacks for these smaller companies and significantly hurt their share prices.

Zacks Industry Rank Indicates Bright Prospects

The group’s Zacks Industry Rank is basically the average of the Zacks Rank of all the member stocks.

The Zacks Medical-Drugs industry currently carries a Zacks Industry Rank #75, which places it in the top 30% of 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Before we present you with a few top-ranked stocks to capitalize on the thriving prospects of the small and medium-sized drugmakers’ space, let’s take a look at the industry’s recent stock-market performance and the valuation picture.

Industry Lags S&P 500 and Sector

The Zacks Medical-Drugs industry is a huge 171-stock group within the broader Medical sector. The industry has underperformed the S&P 500 as well as the Zacks Medical sector so far this year.

Stocks in this industry have collectively declined 3.4% year to date against the Zacks S&P 500 composite’s rise of 24.7% and the Zacks Medical sector’s increase of 2.1%.

YTD Price Performance

Momentum investing revolves around the idea of following a stock's recent trend in either direction. In the 'long' context, investors will be essentially be "buying high, but hoping to sell even higher." With this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving that way. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.

Even though momentum is a popular stock characteristic, it can be tough to define. Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.

Below, we take a look at Madrigal (MDGL), a company that currently holds a Momentum Style Score of A. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.

It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Madrigal currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.

You can see the current list of Zacks #1 Rank Stocks here

Set to Beat the Market?

Let's discuss some of the components of the Momentum Style Score for MDGL that show why this biopharmaceutical company shows promise as a solid momentum pick.

A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It is also useful to compare a security to its industry, as this can help investors pinpoint the top companies in a particular area.

For MDGL, shares are up 51.7% over the past week while the Zacks Medical - Drugs industry is down 0.38% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 60.38% compares favorably with the industry's 1.44% performance as well.

While any stock can see a spike in price, it takes a real winner to consistently outperform the market. Shares of Madrigal have increased 39.03% over the past quarter, and have gained 135.91% in the last year. In comparison, the S&P 500 has only moved 13.52% and 37.4%, respectively.

Investors should also pay attention to MDGL's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. MDGL is currently averaging 542,906 shares for the last 20 days.

Earnings Outlook

The Zacks Momentum Style Score also takes into account trends in estimate revisions, in addition to price changes. Please note that estimate revision trends remain at the core of Zacks Rank as well. A nice path here can help show promise, and we have recently been seeing that with MDGL.

Over the past two months, 9 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost MDGL's consensus estimate, increasing from -$29.49 to -$24.08 in the past 60 days. Looking at the next fiscal year, 7 estimates have moved upwards while there have been 1 downward revision in the same time period.

Bottom Line

Given these factors, it shouldn't be surprising that MDGL is a #2 (Buy) stock and boasts a Momentum Score of A. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Madrigal on your short list.

Zacks Investment Research