Title: NASH Bubble?
Author: Peter G. Traber, MD

Non-alcoholic fatty liver disease (NAFLD) and Non-alcoholic steatohepatitis (NASH) have been the subject of intense interest in the biotech/pharma industry, academia, the public, and particularly in the financial markets. Valuations of companies in this space have been volatile and analyst opinions conflicting. Some have argued we may be on a NASH bubble with greatly overvalued positions. Others argue that companies are undervalued considering the very large potential NASH market. I believe the roots of uncertainty in the market, in part, is embodied in the unique medical features of NASH. One feature is related to one’s overall perception of NASH as a disease which defines the lens through which potential therapeutics are assessed. Another feature is the definition and classification of the disease, because the simple term NASH does not adequately describe the full spectrum of the clinical course and patient outcomes. Perception and classification greatly influence the NASH debate.

The earliest disorder in the NAFLD spectrum is simple fatty liver which is the accumulation of fat in hepatocytes and is observed in up to a third of adults in the US. It results from metabolic and hormonal imbalances associated with obesity, diet, genetic factors, and probably other unidentified environmental factors. In a significant percentage of people with fatty liver (for clarity, I am not going to muddy the discussion with specific numbers), fat-laden hepatocytes trigger, or are associated with, hepatocellular death (ballooning hepatocytes) and inflammatory cell infiltration, which defines the pathologic description of NASH, and is associated with progressive amounts of fibrotic tissue deposition which in some patients progresses through stages until it reaches the highest stage 4, which is termed cirrhosis. Progression of cirrhosis with continued fibrotic tissue deposition can lead to complications of cirrhosis - often the first symptoms in patients -, as well as liver transplant or death. There are no approved drug therapies for NASH so there is no long-term experience of the impact of therapy.

NASH Perception

One’s perception of NASH as a target for medical therapy is often shaded by certain clinical aspects of the disease, making the NASH space ripe for controversy.

  • NASH is asymptomatic until later stages of cirrhosis ensue, the progression to cirrhosis is unpredictable, and takes decades. In the early years of investigating this disease, experts were unsure of whether it was even a serious condition or just an associated finding of obesity and metabolic syndrome. As NASH approaches the number one reason for liver transplant in the US and a growing cause of hepatocellular carcinoma, there is no longer any doubt that it is very serious indeed. However, there remain pockets of skepticism which has colored opinions on the potential market.
  • In pre-cirrhotic NASH and even in early cirrhosis in some patients, weight loss or bariatric surgery can have dramatic effects on reversing NASH and even improving fibrosis. In studies of patients with NASH with minimal fibrosis, weight loss of >10% body weight led to resolution of NASH in most patients. Some argue that lifestyle changes are where effort should be placed and not on costly long-term drug treatment with potential side effects.
  • Despite the potential for progression to cirrhosis, the leading causes of death in NASH patients are cardiovascular disease and various cancers. A therapeutic myopic view on the pathology in the liver, without consideration of the entire metabolic problem may make some therapeutic approaches problematic for the complete health of the patient. There is, however, an emerging view that NASH is an independent predictor of cardiovascular disease and, therefore, is important to address in addition to other cardiac risk factors.
  • Health care costs are often at issue when considering NASH. Those focused on public health consider NASH problematic because it is an asymptomatic disease, which unpredictably progress to symptomatic cirrhosis over decades, with potentially hundreds of millions of afflicted individuals around the world. The fact that obesity is a primary underlying cause has made some say the disease is “self-inflicted”, which I believe is an erroneous assumption. Such a statement might encompass most of the medical illness in the developed world. Nevertheless, drug treatment of NASH with an expensive new medicine might be a great burden to health systems depending on the eligible patient population.

NASH Classification

The classification of NASH patients is the second major issue that is fundamental to the discussion about the importance of the disease. In my view, NASH may be segmented in four different clinical categories of patients where therapies might be targeted, depending on drug mechanism of action. It is important to consider therapeutic approaches in terms of which category of NASH is being targeted.

  1. Early NASH where there is no fibrosis or stage 1 fibrosis
  2. Advanced NASH where fibrosis has progressed to stage 2 or 3 placing the patient at higher risk for progression to cirrhosis
  3. NASH that has advanced to cirrhosis (stage 4 fibrosis), but there are no complications of cirrhosis, called compensated cirrhosis
  4. NASH cirrhosis with complications, or decompensated cirrhosis

One often hears comments about the importance (or lack thereof) of clinical data from various studies in NASH. Others will disagree with those comments and give an example of another company’s data. However, they are often not talking about the same thing because the studies they cite target different NASH clinical classifications. Even when talking about the same NASH disease classification, there are nuances regarding drug MOA, route of delivery, adverse effects, or patient sub-populations that have implications for study interpretation. In fact, in a disease with no therapy and the likelihood that combination therapy will be required to cover the complex pathophysiology, data from each study fills important pieces of the eventual therapeutic puzzle.

NASH Therapeutic Valuations

It is also common to hear individuals opine on the commercial potential of individual NASH drugs, often in comparison to others also in development. Some emphasize the great size of the potential market and conclude that the revenue from a single NASH agent will be very large. Others emphasize the challenges that define their perception of NASH and opine that the potential value of drugs in the space is way overblown. It is clear that perception and classification greatly influence the NASH debate. 

NASH is the most prevalent liver disease in the US and is impactful on human health, justifying the current concentrated search for therapeutics. The state of company valuations in the NASH space may not be a bubble, but reality is somewhere between hyperbolic enthusiasm and therapeutic nihilism. It is possible that hyperbole has gained a stronger foothold as partisan views are championed. An avalanche of new data will be reported over the next 18 months that will greatly clarify how novel therapeutics will play out. More accurate comparative analysis will result if fundamental perceptions are critically challenged and the classification of disease is rigorous.

Disclosure: From March 2011 through June 2018 the author was CEO and CMO of Galectin Therapeutics (NASDAQ: GALT), a company with a NASH development asset, and continues to hold equity in the company.

More information

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