Last week, Eli Lilly and Company (NYSE:LLY) made headlines with another win for their GLP-1 type 2 diabetes and weight loss drug, tirzepatide (also known as Mounjaro and Zepbound), showcasing its efficacy in treating a liver disease known as NASH (nonalcoholic steatohepatitis). NASH is a common chronic liver disease, particularly prevalent among individuals with obesity or type 2 diabetes, in which the accumulation of liver fat leads to inflammation and eventually fibrosis. It is linked to serious conditions such as cirrhosis and hepatocellular carcinoma, making it one of the leading causes for liver transplantation. Currently, there are no approved drug treatments for NASH, underscoring a significant unmet medical need.
LLY’s clinical trial demonstrated compelling results, with 74% of participants achieving NASH resolution compared to just 13% in the placebo group. As a result, leading companies developing NASH treatments, including MDGL, AKRO, and ETNB, experienced a substantial drop of over 20% in their market value, posing the question: where do NASH drugs fit within the broader medical landscape? Does it all start and end with weight loss?
For a long time, NASH has been synonymous with disappointment in drug development, often considered a graveyard due to numerous failures, including the most recent by Intercept Pharmaceuticals, which received a complete response letter from the FDA in May 2023. Recent breakthroughs have led to a shift in narrative, specifically with the success of direct liver targeting agents. Among these, resmetirom by MDGL stands out as the sole agent to date able to demonstrate fibrosis reversal, a hallmark of NASH, in a large phase 3 trial. MDGL is expected to obtain first-to-market status in the US, with a PDUFA action date of March 14, 2024.
The excitement for these direct liver targeting agents was driven by consensus estimate that while GLP1 drugs aid in weight loss, their efficacy in treating NASH may be limited. Even NVO’s GLP-1 Wegovy/Semaglutide, has thus far failed to consistently demonstrate clinical efficacy in NASH treatment. While it showed some effectiveness in reducing liver fat and resolving NASH, it lacked consistency and it failed to exhibit typical dose responses. Importantly, Wegovy/Semaglutide was unable to demonstrate a key endpoint of fibrosis reversal, particularly in severe cases. Against this backdrop, the stage was set for LLY’s recent topline readout from their SYNERGY-NASH trial evaluating tirzepatide for NASH patients.
As mentioned above, LLY disclosed a successful trial outcome with tirzepatide resulting in 52-74% NASH resolution. While positive results were expected, the magnitude of the effect was surprising. As for fibrosis, the full data was not disclosed, but we got a hint that the effect was clinically meaningful.
So, was the +20% depreciation in valuation of leading companies developing direct liver targeting agents warranted? LLY’s NASH trial results strongly suggest that tirzepatide can drive clinically meaningful effects on fibrosis, and with larger trials and extended treatment durations, we believe that it is likely we will see significant fibrosis reversal. The implications may lead to a diminishing market for direct liver targeting agents that do not contribute to any weight loss.
This latest data point adds another crucial piece to the emerging picture of the significant potential of the GLP-1 drug class. These drugs appear to offer health benefits across an expanding range of indications, from NVO’s data showing reduced risk of cardiac events to LLY’s recent NASH data, and potentially to LLY’s upcoming readout in obstructive-sleep-apnea. The question therefore remains — does it all boil down to weight loss? While we believe the GLP-1 drug class is revolutionizing healthcare, the story is undeniably more complex.
Despite the promising effects of GLP-1 drugs, there are notable challenges. The relatively low long-term adherence to these drugs, coupled with concerns about the loss of lean muscle mass and rapid weight regain upon stopping usage, emphasizes the need for more sustainable, long-term solutions. It thus seems that there will indeed be room for NASH-specific drugs, especially for more severe patients, as well as for more general combination therapies and behavioral interventions.
—
Sources
https://investor.lilly.com/static-files/ecfe166b-dd40-45df-afd7-ddb81fe2cb33
https://www.fda.gov/media/168217/download
https://www.nejm.org/doi/pdf/10.1056/NEJMoa2309000
https://www.thelancet.com/journals/langas/article/PIIS2468-1253(23)00068-7/fulltext
https://www.nejm.org/doi/full/10.1056/NEJMoa2307563?query=featured_home
