On Tuesday, Madrigal Pharmaceuticals shares slid more than 5% following a morning recommendation change by Wolfe Research’s Andy Chen. Chen shifted Madrigal from an outperform rating to peer perform, citing concerns that the recent rally has driven valuation to unsustainable levels. The selloff erased a significant portion of the stock’s gains since Rezdiffra’s FDA approval in 2024, and volume surged to more than double the three-month average as institutional holders rebalanced exposure.

Chen’s revised price target of $572 per share reflects skepticism that Madrigal can achieve the $6 billion in annual revenue some bulls forecast. At the current market cap of $13 billion and a gross margin north of 95%, Madrigal trades at a multiple well above most commercial-stage biotech peers. Wolfe Research notes that even under a best-case sales scenario, valuation compression is likely if the company merely meets, rather than exceeds, market expectations.

Since the FDA’s accelerated approval of Rezdiffra for metabolic dysfunction-associated steatohepatitis (MASH) in 2024, Madrigal has delivered consistent top-line growth. In the third quarter, Rezdiffra generated $287.3 million in net product sales, marking a 45% increase sequentially. Prescription volume trends remain robust, with over 15,000 new patient starts recorded in the latest reporting period. Analysts highlight that limited competition and the high unmet need in MASH support continued uptake.

Looking ahead, Madrigal faces a confirmatory trial requirement under its accelerated approval pathway. Positive phase III results will be critical to maintaining market exclusivity, and any delays or negative data could trigger downward revisions. At the same time, management forecasts blockbuster status by next year, projecting Rezdiffra sales to exceed $1 billion in 2026. Investors will be watching closely for interim trial readouts and U.S. prescription trends as key catalysts for the next leg of the stock’s performance.