A mid-cap biotech with the first approved therapy in a large, long-underfunded liver disease category is not supposed to look this inexpensive after delivering one of the strongest launches in recent memory. Yet that is where this setup sits today. The stock has rallied sharply in recent weeks, including gains of 14.2% over the last week and 17.9% over the last month, but it is still down 12.6% year to date even after returning 53.8% over the last year. That mix of volatility and operational progress is precisely what creates the opportunity.
This business exited 2025 with nearly $1 billion in annual net sales, more than 36,000 patients on therapy, patent protection stretching to 2045, and a balance sheet carrying almost $989 million of cash and marketable securities. At the same time, its valuation has compressed meaningfully. The stock now trades at about 7.6x NTM EV/revenue and 8.0x NTM sales, versus roughly 13.2x and 15.2x, respectively, at the end of 2024.
Over a 12–24 month horizon, the asymmetry looks favorable because the market is still framing this as a single-product launch story with gross-to-net pressure and competition risk. That framing understates both the durability of the core franchise and the strategic value of owning the category leader in a disease area that could evolve into a very large specialty market.
The Thesis In Plain English
The market is undervaluing a company that has already done the hardest part: it created the market, launched the first approved product, and established itself as the foundational therapy while competitors are still trying to define their role. Full-year 2025 net sales reached $958 million, fourth-quarter sales were $321 million, and the treated patient base rose to more than 36,250 from over 29,500 in the prior quarter. Those are not early proof-of-concept numbers. They are category-shaping numbers.
The second mispricing is around scale. Management now describes a U.S. specialist-addressable F2/F3 population of roughly 315,000, up nearly 50% in two years, and sees double-digit market growth for the foreseeable future. On top of that sits a potential F4 compensated cirrhosis opportunity of around 245,000 patients. The market is acting as if the launch is maturing just as the disease ecosystem is beginning to open up.
The third mispricing is strategic. Category leaders with strong patent life, an expanding label path, and a pipeline built around combination regimens often attract attention from larger acquirers when the commercial risk has already been partially retired. In this case, the stock is still being valued as if that optionality is secondary rather than central.
The Company: Madrigal Pharmaceuticals (NASDAQ: MDGL)
Madrigal Pharmaceuticals is the company in question, and the strategic angle that investors should not dismiss is the recurring Eli Lilly buyout speculation that resurfaced after a Betaville “uncooked” alert circulated and after earlier reporting in January 2025 that Madrigal had hired advisers for talks with a potential buyer. None of that is a deal announcement, and market gossip should never be treated as fact. But it does matter because buyout rumors tend to persist only when the underlying asset is strategically sensible.
That strategic logic is straightforward. Madrigal controls Rezdiffra, the first approved therapy for MASH with moderate to advanced fibrosis, and management has already turned that first-mover position into a commercial reality. The company ended its first full year on the market with $958.4 million in net sales, and management described Rezdiffra as the foundational therapy in MASH. If a larger pharmaceutical company wanted immediate leadership in the space rather than a longer and riskier internal build, Madrigal is the obvious asset.
Why The Market Is Mispricing It
The market appears to be embedding a narrow set of concerns: higher gross-to-net in 2026, the entry of other therapies into the field, and the reality that this is still a biotech with negative trailing earnings and cash burn. Those issues are real, but they are being weighed too heavily relative to the company’s category position and revenue trajectory.
Valuation already reflects a lot of caution. At 11.8x LTM EV/revenue and 12.4x LTM sales, the stock is far below the levels investors were willing to pay earlier in the commercialization curve, when those same multiples were roughly 76x and 88x at the end of 2024. Even on forward numbers, the compression is obvious: 7.6x NTM EV/revenue today versus 11.1x in March 2025 and 13.2x at the end of 2024. The business has become larger, more de-risked, and more strategically relevant while the valuation framework has become more conservative.
That mismatch matters because the company is no longer just a launch story. It is a market maker with a strengthening moat. Rezdiffra’s patent exclusivity has been extended to 2045, the treated population continues to expand, and management believes the U.S. MASH market is still in the early stages of a multiyear build-out. When the market gives a category leader a lower forward revenue multiple even as its revenue base and strategic scarcity improve, that usually signals an expectations gap, not full valuation.
The short interest of about 16% reinforces that point. Shorts are effectively leaning on competition, gross-to-net pressure, and the normal volatility of a biotech equity. But a large short base against a first-in-class asset with strategic optionality can become unstable if execution remains strong or if takeover chatter intensifies.
The Growth & Margin Driver
The key driver is not just sales growth in the abstract. It is the combination of category expansion, deepening specialist adoption, and future indication expansion. Management said the specialist-addressable F2/F3 population has expanded nearly 50% since the end of 2023 to about 315,000 patients, and expects double-digit growth for the foreseeable future. That is a crucial point. The company is not fighting over a fixed pool of patients. It is helping grow the pool.
Commercial traction supports that view. Net patient counts increased to more than 36,250 at the end of the fourth quarter from over 29,500 in the third quarter, and management noted that Rezdiffra continues to add patients steadily despite the launch of Wegovy in the market. Prescribing remains concentrated in hepatology and gastroenterology, which is exactly where a specialist-driven disease should be built first. The implication is that penetration can still move materially higher even before the market broadens further.
The margin structure is also better than many investors may appreciate. With $902 million of LTM gross profit on $958 million of LTM revenue, gross margin is running at roughly 94%, which is what investors would expect from a highly attractive specialty pharmaceutical product. The current pressure point is not product economics. It is gross-to-net, which management expects to move into the high 30% range in 2026 after deliberate contracting. That matters for near-term reported net sales, but it does not undermine the quality of the underlying demand.
The next 12–24 months also carry a meaningful catalyst beyond the existing label. Management sees compensated MASH cirrhosis, or F4c, as an opportunity that could double Rezdiffra’s commercial opportunity, with roughly 245,000 patients and no approved therapies today. The MAESTRO outcomes study remains on track for data in 2027, with event rates tracking in line with expectations. The market is likely underestimating how much strategic value accrues simply from being first and most advanced in that next segment.
Balance Sheet & Capital Allocation
The balance sheet is strong enough to support both the launch and the pipeline build. Madrigal ended 2025 with $988.6 million in cash, cash equivalents, restricted cash, and marketable securities. That matters because the company is actively broadening its MASH franchise through business development while still supporting a fast-growing commercial product.
Free cash flow is not yet the support beam of the thesis, but it is improving from a weaker base. LTM levered free cash flow stands at about negative $115 million, a substantial improvement from nearly negative $263 million at the end of 2024. LTM EBITDA is still negative at roughly $299 million, but that too has improved materially from around negative $547 million a year earlier. In other words, this is not a story of current profitability being overlooked. It is a story of a company scaling rapidly enough that the financial profile is already moving in the right direction.
Capital allocation has also been coherent. Management added an oral GLP-1, the late-stage DGAT-2 inhibitor ervogastat, and six preclinical siRNA targets, all anchored around combination use with Rezdiffra. The point is not to create a bloated pipeline. Management explicitly said the strategy is to take more shots on goal and kill or advance programs quickly based on meaningful patient benefit. That is the right posture for a category leader trying to turn one asset into a durable franchise.
What Breaks The Thesis
The first risk is commercial. Management expects 2026 gross-to-net in the high 30% range, compared with a 2025 average at the low end of its prior 20% to 30% range. That step-up will create friction in reported net sales, especially in the first quarter when normal insurance reverification dynamics are layered on top of new contracting. If patient additions remain steady but net sales progression looks less linear, the market may react negatively.
The second risk is competitive. MASH is becoming a larger and more visible category, and management itself acknowledges that the market can support multiple therapies. That is positive for category formation, but it also means investors should not assume monopoly economics. If competing regimens alter physician behavior faster than expected, or if combination strategies fail to differentiate meaningfully, the current leadership position could become less valuable than bulls expect.
The third risk is pipeline execution. The broader franchise argument now matters more to valuation than it did six months ago. The company has more than ten programs, including an oral GLP-1, a DGAT-2 program, and siRNA assets, but none of those combination bets is yet proven. If they do not translate into clinically meaningful advantages, the company may remain more dependent on a single core asset for longer than the market wants.
The final risk is obvious but worth stating plainly: buyout rumors are not a thesis by themselves. The Betaville alert and prior adviser talk are useful signals of strategic interest, not evidence of an imminent transaction. If investors begin paying for a deal that never materializes, sentiment can reset quickly.
Risk-Reward Asymmetry
The downside case is moderated by the fact that this is no longer a concept stock. The company has nearly $1 billion in annual net sales, high gross margins, almost $989 million of cash, patent protection to 2045, and a growing specialist-addressable market. That base does not eliminate volatility, but it does provide a more durable operating floor than most mid-cap biotech names enjoy.
The upside comes from multiple avenues rather than a single heroic assumption. Continued patient additions can support further revenue scale even with a higher gross-to-net structure. The F4c program can deepen the franchise and expand the treatable population. Pipeline combinations can increase strategic relevance. And the strategic scarcity value of owning the first and foundational MASH franchise could matter more over time, particularly if large-cap pharma remains interested in accelerating its presence in the space.
That is why the asymmetry looks attractive. Investors are still debating near-term commercial mechanics while the company is building the sort of asset base that often earns a higher valuation multiple, stronger strategic attention, or both.
Final Thoughts
The bullish case on Madrigal does not require perfection. It requires recognition that the company has already crossed several of the hardest thresholds in biotech: it proved the science, launched successfully, created a market, and began broadening the franchise before the first product had even fully matured. That is a rare sequence.
Over a 12–24 month horizon, the metrics that matter most are steady patient additions, the durability of specialist adoption, the gross-to-net transition through 2026, progress toward the F4c outcomes readout, and disciplined execution on combination programs. If those indicators continue to move in the right direction, the current valuation can still look too conservative.
The buyout angle, especially around Eli Lilly, should be treated as strategic optionality rather than the foundation of the thesis. But it is meaningful optionality. And when it sits on top of a de-risked commercial asset, a strong balance sheet, and a rapidly expanding category, it becomes hard to argue that the current setup is fully priced.
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