89bio’s Pegozafermin Could Be A Game-Changer For Liver Disease

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Written By Dean McHugh
  • 89bio is a clinical-stage biopharmaceutical company that develops therapies for liver and cardiometabolic conditions.
  • Their drug candidate, pegozafermin, has shown positive results in reducing liver fat and insulin resistance and is in phase 3 trials for metabolic dysfunction-associated steatohepatitis (MASH) and severe hypertriglyceridemia (SHTG).
  • Pegozafermin has the potential to tap into a large market and has been granted FDA Breakthrough therapy designation for treating MASH with fibrosis.
  • Due to its metabolic regulation properties, pegozafermin’s broader potential includes applications in Type 2 Diabetes, obesity, and other inflammatory diseases.

Business Overview

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89bio, Inc. (NASDAQ: ETNB) is a clinical-stage biopharmaceutical company based in San Francisco, California. The company focuses on developing therapies for liver and cardiometabolic conditions with its drug candidate, pegozafermin.

This medicine is a fibroblast growth factor 21 (FGF21) analog used to regulate metabolic processes like glucose and lipid metabolism. It is indicated for metabolic dysfunction-associated steatohepatitis (MASH) and severe hypertriglyceridemia (SHTG).

Pegozafermin has shown positive results in reducing liver fat and insulin resistance and alleviating liver fibrosis and inflammation. The drug is in phase 3 for MASH fibrosis, MASH cirrhosis, and SHTG.

MASH is a severe liver disease characterized by inflammation and deterioration caused by excessive fat in the liver. SHTG involves high levels of triglycerides that can lead to pancreatitis, cardiovascular disease, xanthomas, and hepatic steatosis.

Pegozafermin’s action mechanisms increase lipid oxidation, reduce lipogenesis, decrease liver fat, improve insulin sensitivity, and reduce liver inflammation and fibrosis.

The drug also uses glycoPEGylation technology to prolong the half-life of the native FGF21 hormone and increases the production of adiponectin, an insulin-sensitizing hormone with anti-inflammatory and anti-fibrotic properties.

Ongoing Trials and Updates

Pegozafermin is currently undergoing three phase 3 clinical trials. The ENlighten trials focus on fibrosis and cirrhosis due to MASH, and the ENtrust trial targets SHTG.

MASH is expected to impact around 27 million patients in the US by 2030, with significant numbers also in the EU. Patients with fibrosis (F3 stage) and cirrhosis (F4 stage) are forecasted to reach 4.5 million and 3.1 million, respectively.

ETNB estimates that pegozafermin will capture 23% market share in F2 MASH and 29% in F3 treatments. The drug can be prescribed as a monotherapy or in combination with GLP1 therapy. Pegozafermin has been granted FDA Breakthrough Therapy designation for treating MASH with fibrosis.

The US market for SHTG includes up to 4 million patients, with 2.8 million diagnosed and around 1.7 million treated, leaving at least 1.1 million untreated. Pegozafermin’s mechanisms could also benefit patients with Type 2 Diabetes Mellitus, obesity, inflammatory diseases, and cardiovascular conditions.

PRIME Status and Partnership Potential

In March 2024, ETNB received Priority Medicines (PRIME) status from the European Medicines Agency (EMA) for treating MASH with fibrosis and cirrhosis. This designation followed positive results from the phase 2b ENliven trial.

The trial achieved statistical significance on primary endpoints, such as MASH resolution without worsening fibrosis and a decrease in fibrosis stage without worsening MASH. Secondary endpoints included changes in liver fat, enzymes, markers of liver fibrosis, glycemic control, lipoproteins, and body weight.

In April 2024, 89bio partnered with Biopharma Engineering (BiBo), a Chinese company, to build a production facility in Shanghai’s pilot free trade zone for pegozafermin commercialization.

ETNB will pay BiBo $135 million for the facility’s construction, with 45% payable in Q3 2024. This partnership aims to meet the drug’s large market requirements, suggesting anticipated commercial success for pegozafermin.

Valuation Analysis

ETNB is a moderately sized company with a market cap of $880.5 million. The balance sheet holds $217.6 million in cash and $344.7 million in short-term investments, providing total liquidity of $562.3 million.

ETNB has negligible total debt of $25.0 million and minimal operating lease obligations. The latest quarterly cash burn was $39.7 million, implying an annual burn of $158.8 million and a cash runway of roughly 3.5 years.

ETNB’s equity book value as of Q1 2024 was $510.5 million, trading at a P/B ratio of 1.7. This is lower than the sector’s median P/B ratio of 2.5, indicating a promising biotech stock trading at a discount relative to its peers.

Considering ETNB is in the late stages of the FDA approval process for pegozafermin, the stock is an exciting prospect for investors seeking exposure to metabolic-related diseases.

Risk Analysis

The main risk is that ETNB’s drug candidate, pegozafermin, does not yet have the required FDA approvals for commercialization. Investors face headline risk and potential price losses if there are setbacks or FDA rejections.

Despite the “Breakthrough Therapy” designation, there is no guarantee of FDA approval. Pegozafermin might fail in larger phase 3 trials or might not be tolerable enough for FDA requirements.

Market adoption is also uncertain, influenced by insurance policies, pricing, and healthcare provider criteria.

ETNB Compelling Investment in Biotech

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Overall, ETNB is a compelling investment in biotech for investors seeking exposure to metabolic-related diseases. Pegozafermin, currently in clinical trials for MASH and SHTG, has potential applications beyond these indications, potentially unlocking additional revenue streams.

The stock currently trades at a discount relative to its peers and has significant potential for FDA approval and commercialization success. Despite inherent risks, ETNB’s strong balance sheet and promising drug candidate make it well worth a close look from investors.


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