On Thursday, H.C. Wainwright initiated coverage on Sagimet Biosciences Inc (NASDAQ:SGMT) with a Buy rating and set a stock price target of $32.00. The firm's analyst highlighted the potential of Sagimet's lead drug candidate, denifanstat, to become a foundational therapy for metabolic dysfunction-associated steatohepatitis (MASH), previously known as NASH.
Sagimet Biosciences, which went public in July 2023, is a clinical-stage biopharmaceutical company focused on developing fatty acid synthase (FASN) inhibitors. These inhibitors are designed to correct dysfunctional metabolic pathways caused by the overproduction of palmitate. Denifanstat, an oral, once-daily selective FASN inhibitor, is currently in development for MASH treatment.
Denifanstat's mechanism of action is distinct in that it targets a key enzyme in the de novo lipogenesis (DNL) pathway. This action is believed to address three major factors of MASH by inhibiting DNL in hepatocytes to block steatosis, preventing immune cell activation to reduce inflammation, and blunting fibrosis by inhibiting stellate cell activation.
In January, 52-week biopsy results from Sagimet showed significant reductions in NASH resolution and fibrosis improvement, surpassing industry standards for the 52-week response period.
The safety and tolerability profile of denifanstat has also been favorable, with no serious adverse events (SAEs) related to the drug reported. The only noted adverse events (AEs) were dry eye and dry skin, which were reversible and treatable. Moreover, Sagimet is employing the biomarker tripalmitin to measure target engagement and as an early indicator of clinical response.
Looking ahead, Sagimet has several key milestones approaching. These include an End of Phase 2 (EOP2) meeting with the FDA in mid-May, a plenary late-breaker presentation and a concurrent manuscript release at the European Association for the Study of the Liver (EASL) in early June, and the anticipated initiation of Phase 3 trials by the end of 2024.
Management anticipates at least a 25% improvement in fibrosis in Phase 3 trials. Beyond MASH, Sagimet's pipeline includes programs targeting acne and oncology, which are seen as having significant potential for success.
InvestingPro Insights
As Sagimet Biosciences Inc (NASDAQ:SGMT) progresses through critical phases in developing treatments for metabolic dysfunction-associated steatohepatitis (MASH), financial metrics and market sentiment can provide a broader context for investors.
According to InvestingPro data, Sagimet holds a market capitalization of $131.17 million, reflecting the market's current valuation of the company. Despite the challenges, the gross profit margin stands at an impressive 100% for the last twelve months as of Q4 2023, indicating that the company retains all its revenue as gross profit.
InvestingPro Tips suggest that while analysts are expecting sales growth this year, they are not optimistic about the company's profitability within the same timeframe. The stock has experienced significant volatility, with a price decrease of over 21% in the last month and a staggering 74% drop over the past year, which could present a cautionary tale or a potential opportunity for investors considering the long-term prospects of Sagimet's drug pipeline.
For those looking to delve deeper into Sagimet's financial health and future prospects, InvestingPro offers additional insights. There are 9 more InvestingPro Tips available that could provide further guidance on investment decisions. Interested readers can explore these tips and take advantage of a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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