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Item 7. Management’s Discussion and Analysis

2021-02-25 compared with 2020-02-26 · 47 added, 57 removed, 196 unchanged (35% of the section changed)

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and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together.

In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act.

Operating results are not necessarily indicative of results that may occur for the full fiscal year or any other future period.

In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act of 1934, as amended, or the Exchange Act, that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions.

As disclosed in this report, our actual results could differ materially from those discussed in these forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Cautionary Note Regarding Forward-Looking Statements” and in the “Risk Factors” sections contained in Part I, Item 1A in this Annual Report on Form 10-K.

Our operating results are not necessarily indicative of results that may occur for the full fiscal year or any other future period.

The term “Synta” refers to Synta Pharmaceuticals Corp.

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We are a clinical-stage biopharmaceutical company focused on the development and commercialization of innovative therapeutic candidates for the treatment of cardiovascular, metabolic, and liver diseases.

Our lead product candidate, resmetirom (resmetirom), is a proprietary, liver-directed, selective thyroid hormone receptor-ß, or THR-

Our lead product candidate, MGL-3196

(resmetirom), is a proprietary, liver-directed, selective thyroid hormone receptor-ß, or THR-ß,

agonist being developed as a once-daily oral pill that can potentially be used to treat a number of disease states with high unmet medical need, including non-alcoholic

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On March 28, 2019, the Company announced that it had initiated MAESTRO-NASH, a Phase 3 trial in NASH with its once daily, oral thyroid hormone receptor beta selective agonist, resmetirom.

This double-blind, placebo-controlled study will be conducted at more than 150 sites in the United States and the rest of the world.

Patients with liver biopsy confirmed NASH with stage 2 or 3 fibrosis will

be randomized 1:1:1 to receive a single oral daily dose of placebo, resmetirom 80 mg or resmetirom 100 mg.

This double-blind, placebo-controlled study is being conducted at more than 200 sites in the United States and the rest of the world.

Patients with liver biopsy confirmed NASH with stage 2 or 3 fibrosis will be randomized 1:1:1 to receive a single oral daily dose of placebo, resmetirom 80 mg or resmetirom 100 mg.

A second liver biopsy at week 52 in the first 900 patients will be the basis of filing for subpart H-accelerated

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associated with at least a 2-point

reduction in NAS, and no worsening of fibrosis stage.

reduction in NAS (NAFLD Activity Score), and no worsening of fibrosis stage.

Two key secondary endpoints are reduction in LDL-cholesterol

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or more improvement in fibrosis stage on the week 52 biopsy with no worsening of NASH.

Patients will continue in the study for a total of approximately 54 months, and will be evaluated for a composite clinical outcome including cirrhosis on liver biopsy, or a liver related event such a hepatic decompensation.

Patients will continue in the study for a total of approximately 54

months, and will be evaluated for a composite clinical outcome including cirrhosis on liver biopsy, or a liver related event such as hepatic decompensation.

The total anticipated enrollment is approximately 2,000 patients, and will include up to 15% high risk F1 fibrosis stage NASH patients whose efficacy responses will be evaluated as exploratory endpoints.

On December 18, 2019 the Company announced it had opened for enrollment MAESTRO-NAFLD-1,

double-blind, placebo controlled Phase 3 clinical study in 700 patients with biopsy-confirmed or presumed NASH recruited from sites in the U.S.

double-blind, placebo controlled Phase 3 clinical study originally targeting enrollment of 700 patients with biopsy-confirmed or presumed NASH recruited from sites in the U.S.

Key endpoints are safety, including safety biomarkers, LDL cholesterol, lipid biomarkers, and fibrosis biomarkers.

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and NASH biomarker endpoints.

In addition, MAESTRO-NAFLD-1

includes an open label arm in which up to 100 patients will be dosed with 100 mg resmetirom.

Enrollment objectives for this study have been exceeded, with approximately 1,200 patients enrolled overall.

In October 2020 we completed enrollment of the double-blind, placebo controlled arms of the study.

The MAESTRO-NAFLD-1

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Recent Developments

Initiation of MAESTRO-NASH Phase 3 clinical trial

Ongoing MAESTRO-NASH Phase 3 clinical trial

In March of 2019 we initiated a Phase 3 trial in NASH, described in detail above under “About Madrigal;

Our Ongoing and Planned Studies.” In the second quarter, the Phase 3 NASH trial triggered a $2 million milestone payment under our Research, Development and Commercialization Agreement with Hoffmann-La

Roche (“Roche”).

Our Ongoing and Planned Studies.”

Ongoing MAESTRO-NAFLD-1

Phase 3 clinical trial and completion of enrollment of the double-blind, placebo controlled arm

In December 2019 we initiated a Phase 3 trial in presumed NASH, described in detail above under “About Madrigal;

Our Ongoing and Planned Studies.” In October 2020 we completed enrollment of the double-blind, placebo controlled arms of the study.

FDA grants Fast Track designation for resmetirom in NASH

In October 2019, FDA granted Fast Track designation to resmetirom for NASH.

Initiation of MAESTRO-NAFLD-1

Phase 3 clinical trial

In December 2019 we initiated a Phase 3 trial in presumed NASH, described in detail above under “About Madrigal;

Our Ongoing and Planned Studies.”

Pandemic Effects on Madrigal

In April 2020 we announced that in response to guidance from regulatory agencies, measures for COVID-19

at impacted sites have been put in place for its Phase 3 MAESTRO-NASH and MAESTRO-NAFLD-1

studies, allowing both studies to continue without changes to the protocol.

At a recently conducted Data Monitoring Committee (DMC) meeting it was recommended that Phase 3 studies proceed without modification.

pandemic had no material adverse impact on our operating results, MAESTRO-NAFLD-1

study or liquidity for the period ended December 31, 2020, but it did introduce clinical trial and operational risks and uncertainties that are both general in nature and relate specifically to our MAESTRO-NASH study.

These risks and uncertainties, which are beyond our control, are summarized in the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report.

Other Key Developments

Clinical Trials

In October 2016, we initiated a Phase 2 clinical trial in NASH ([NCT02912260] at www.ClinicalTrials.gov).

The randomized, double-blind, placebo-controlled, multi-center Phase 2 study enrolled 125 patients 18 years of age and older with biopsy-confirmed NASH.

Patients were randomized to receive either placebo or resmetirom, twice as many receiving resmetirom as placebo.

Efficacy was confirmed at the end of the trial (36 weeks) by repeat Magnetic Resonance Imaging—Proton Density Fat Fraction, or MRI-PDFF,

and conventional liver biopsy to examine histological evidence for the resolution of NASH.

Recent published data show a high correlation of reduction of liver fat measured by MRI-PDFF

to NASH scoring on liver biopsy.

Other secondary endpoints included changes in clinically relevant biomarkers at 12 and 36 weeks, improvement in fibrosis by at least one

stage with no worsening of steatohepatitis, and safety and tolerability.

We reached our top-line

analysis of the primary endpoint in December 2017, and we reached our top-line

analysis of multiple 36-week

endpoints, including key secondary endpoints, reduction and resolution of NASH on liver biopsy, in May 2018.

In February 2017, we initiated a Phase 2 clinical trial in HeFH ([NCT03038022] at www.ClinicalTrials.gov).

randomized, double-blind, placebo-controlled, multi-center Phase 2 clinical trial enrolled 116 patients with HeFH in several European countries.

Patients were randomized in a 2:1 ratio to receive either resmetirom or placebo, in addition to their current drug regimen (including high dose statins and/or ezetimibe).

The primary endpoint of the study was reduction of LDL cholesterol, with secondary endpoints including reductions in TGs, Lp(a), and ApoB, as well as safety.

Lp(a) is a severely atherogenic lipid particle, commonly elevated in familial hypercholesterolemia patients, the levels of which are not adequately reduced by existing lipid lowering therapies.

THR-ß agonism is one of the few therapeutic approaches that can substantially lower Lp(a).

In February 2018, we announced positive results from the 12 week Phase 2 clinical trial in HeFH.

Reverse Merger

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Research and development costs are expensed as incurred.

Research and development costs are comprised of costs incurred in performing research and development activities, including internal costs (including stock-

based compensation), costs for consultants, milestone payments under licensing agreements, and other costs associated with the Company’s preclinical and clinical programs.

Research and development costs are comprised of costs incurred in performing research and development activities, including internal costs (including stock-based compensation), costs for consultants, milestone payments under licensing agreements, and other costs associated with the Company’s preclinical and clinical programs.

In particular, the Company has conducted safety studies in animals, optimized and implemented the manufacturing of our drug, and conducted Phase 1-3

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Year ended December 31,

Increase / (Decrease)

Research and Development Expenses

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Our research and development expenses were $184.8 million for the year ended December 31, 2020 compared to $72.3 million for the year ended December 31, 2019.

Research and development expenses increased by $46.9 million in the 2019 period due primarily to the additional activities related to the initiation of the Phase 3 clinical trial in NASH, including a payment due related to a milestone achieved under our agreement with Roche, an increase in head count, and an increase in non-cash

stock compensation from stock option awards.

We expect our research and development expenses to increase over the next several years as we advance our clinical and preclinical development programs for resmetirom and as we increase our research and development efforts in connection therewith.

Research and development expenses increased by $112.5 million in the 2020 period due primarily to the additional activities related to the Phase 3 clinical trials initiated in 2019, an increase in manufacturing costs to support ongoing clinical trials and to prepare for commercialization, and an increase in head count and related expenses.

We expect our research and development expenses to increase over the next couple years as we advance our clinical and preclinical development programs for resmetirom and as we increase our research and development efforts in connection therewith.

General and Administrative Expense

Our general and administrative expenses were $21.9 million for the year ended December 31, 2020 compared to $22.6 million for the year ended December 31, 2019.

General and administrative expenses increased by $7.4 million in the 2019 period due primarily to an increase in non-cash

stock compensation from stock option awards.

We expect our general and administrative expenses to increase over the next several years as we advance our clinical and preclinical development programs for resmetirom and continue operating as a public company, both of which will likely result in an increase in our headcount, consulting services, and certain overhead needed to support those efforts.

General and administrative expenses decreased by $0.7 million in the 2020 period due primarily to a decrease in non-cash

stock compensation from stock option awards, partially offset by increases in other general and administrative expenses.

We expect our general and administrative expenses may increase over time as we advance our clinical and preclinical development programs for resmetirom and expand our operating activities, which will likely result in an increase in our headcount, consulting services, and related overhead needed to support those efforts.

Interest Income

Our interest income was $4.3 million for the year ended December 31, 2020 compared to $11.0 million for the year ended December 31, 2019.

The increase in interest income was due primarily to a higher average principal balance in our investment account in 2019.

The decrease in interest income was due primarily to a lower average principal balance in our investment account in 2020 and decreased interest rates.

Comparison of the Years Ended December 31, 2019 and 2018

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Our research and development expenses were $72.3 million for the year ended December 31, 2019 compared to $25.4 million for the year ended December 31, 2018.

Research and development expenses increased by $1.0 million in the 2018 period due primarily to an increase in non-cash

stock compensation from stock option awards partially offset by a decrease related to our Phase 2 clinical trials due to the completion of treatment in 2018.

stock compensation from stock option awards.

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Our interest income was $11.0 million for the year ended December 31, 2019 compared to $7.7 million for the year ended December 31, 2018.

The increase in interest income was due primarily to a higher average principal balance in our investment account in 2018 and increased interest rates.

The increase in interest income was due primarily to a higher average principal balance in our investment account in 2019.

Liquidity and Capital Resources

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We anticipate continuing to incur operating losses for the foreseeable future.

While our rate of cash usage will likely increase in the future, in particular to support our product development and clinical trial efforts, we believe our available cash resources as of December 31, 2019 will be sufficient to fund our operations past one year from the issuance of the financial statements contained herein.

Future capital requirements will be substantial and will depend on many factors.

To meet future capital requirements, we will need to raise additional capital to fund our operations through equity or debt financing.

While our rate of cash usage will likely increase in the future, in particular to support our product development and clinical trial efforts, we believe our available cash resources as of December 31, 2020 will be sufficient to fund our operations past one year from the issuance of the financial statements contained herein, and this outlook takes into account circumstances that are currently reasonably foreseeable in connection with the COVID-19

For a description of COVID-19

pandemic risks, including risks and uncertainties beyond our control, see Part II, Item 1A, “Risk Factors” of this Annual Report.

Our future long-term liquidity requirements will be substantial and will depend on many factors.

To meet future long-term liquidity requirements, we will need to raise additional capital to fund our operations through equity or debt financing.

We regularly consider fundraising opportunities and may decide, from time to time, to raise capital based on various factors, including market conditions and our plans of operation.

This includes, but is not limited to, the use of a $200 million at-the-market

sales agreement entered into in November of 2020, with Cowen and Company, LLC (the “2020 Sales Agreement”), pursuant to which we may, from time to time, issue and sell shares of our common stock up to established limits.

Additional capital may not be available on terms acceptable to us, or at all.

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Net cash provided by investing activities was $159.8 million for the year ended December 31, 2020 and consisted primarily of $489.5 million from sales and maturities of marketable securities, partially offset by $329.3 million of purchases of marketable securities for our investment portfolio.

Net cash used in investing activities was $380.1 million for the year ended December 31, 2018 and consisted primarily of $614.4 million of purchases of marketable securities for our investment portfolio, partially offset by $234.3 million from sales and maturities of marketable securities.

Net cash provided by investing activities was $30.7 million for the year ended December 31, 2019 and consisted primarily of $650.2 million from sales and maturities of marketable securities, partially offset by $619.3 million of purchases of marketable securities for our investment portfolio.

Financing Activities

Net cash provided by financing activities was $5.1 million for the year ended December 31, 2020 and consisted primarily of sales of our common stock under the 2020 Sales Agreement with Cowen and Company, LLC and the exercise of stock options.

Net cash provided by financing activities was $0.2 million for the year ended December 31, 2019 and consisted primarily of proceeds from the exercise of stock options.

Net cash provided by financing activities was $314.3 million for the year ended December 31, 2018 and consisted primarily of sales of our common stock in the June 2018 Registered Offering and the exercise of stock options.

Net cash provided by financing activities was $173.8 million for the year ended December 31, 2017 and consisted primarily of net proceeds from sales of our common stock under the October 2015 Sales Agreement, sales of our common stock and our preferred stock in the June 2017 Offering, and sales of our common stock in the December 2017 Registered Offering.

Contractual Obligations and Commercial Commitments

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis