When a company’s shares rise 82% in 12 months, investors clearly think it’s a good time to become a shareholder – and that’s exactly what happened to the company’s shares. Madrigal Pharmaceuticals (MDGL 5.53%). Earlier this year, the promising biotechnology received approval for a pioneering treatment for liver disease. And based on the current state of affairs, there’s not much reason to expect this budding actor’s growth to fizzle out any time soon.

In fact, the bullish thesis to buy it still looks pretty good. Here are three reasons why it makes sense to buy stocks.

1. Its first drug is deployed quite effectively

When approved in March 2024, Rezdiffra became the only drug approved by the Food and Drug Administration (FDA) to treat metabolism-associated steatohepatitis (MASH), a disease characterized by fatty deposits on the liver, hardening and stiffening of liver tissues. (fibrosis) and possibly scarring of the liver (cirrhosis).

Since then, Madrigal has been working to get more patients on treatment so he can generate sales. In the third quarter, more than 6,800 patients took Rezdiffra, generating revenue of $62.2 million. As the company had no revenue before the drug’s launch, this figure is expected to continue to grow at a rapid pace for at least the next two years.

By the middle of next year, the company is expected to receive a response from EU regulators about the possibility of selling the drug there. The company is also actively networking with medical specialists who management believes will play a disproportionate role in terms of prescription volume; She is currently in contact with 40% of the doctors she is targeting during the Rezdiffra launch period.

This number will likely continue to climb, and the continued success of Rezdiffra’s rollout is a good reason to consider buying the stock.

2. Efforts are underway to expand its addressable market

At launch, Madrigal set Rezdiffra’s target market at the approximately 315,000 patients in the United States who were previously diagnosed with MASH, working with a specialist clinician, and had moderate to advanced liver fibrosis. This makes sense, as this is the disease context in which the drug has been shown to be effective in its clinical trials. But the total population of MASH patients is much larger, perhaps as many as 1.5 million people. And, with a few extras research and development (R&D) in the form of complementary clinical trials, the biotech wishes to expand its addressable market to also capture a portion of this broader group of patients.

In particular, there is a population of patients with more advanced liver scarring called compensated cirrhosis, which accounts for up to 15% of all patients affected by MASH. In October, the company completed the recruitment process for a new clinical trial to determine whether Rezdiffra could help these patients. If it ultimately gains regulatory approval to treat the disease, it would become the first drug to do so. This would give Madrigal access to a previously untouched segment of the market, not to mention allow patients to avoid needing a liver transplant.

And the possibility of being the only operator capable of treating MASH’s cirrhosis is another reason to buy the stock.

3. It could be about developing a competitive advantage that is difficult to replicate

As mentioned earlier, Madrigal does its best to collaborate with liver specialists so that they can prescribe Rezdiffra to their patients, many of whom suffer from MASH with varying stages of liver fibrosis or cirrhosis. It’s unclear how much these efforts are worth financially today, but since there are no other drugs approved to treat MASH yet, in the long term the company’s network of providers could become a competitive advantage.

Having close relationships with medical specialists opens a few doors. First, recruitment for clinical trials would become easier, as clinicians would likely be informed in detail about upcoming trials and would appreciate which of their patients might be eligible, making referral obvious.

Second, although Madrigal will not be able to devote as many resources to physician outreach as larger competitors likely to enter its market soon enough, such as Novo Nordiskit has the advantage of being focused on drug development for MASH rather than just having a few ongoing programs aimed at treating it among many other target candidates and indications.

Its ability to collaborate effectively with individual suppliers will likely remain higher, which could incentivize them to be loyal and thus defend the biotech’s market share in the face of the entry of other products.

Finally, if doctors in his network want to conduct MASH research themselves, and many will, they may be able to enter into a sponsorship or collaboration agreement with Madrigal. This could potentially directly benefit the company in the form of access to new programs for the pipeline, but it could also directly spur increased demand for its drugs if investigators find useful off-label uses or useful combinations with other medications.

And the possibility of competitive advantages is certainly another reason why it’s worth considering buying this stock.