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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-05 · 45 added, 45 removed, 153 unchanged (37% 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 with our audited financial statements and accompanying notes for year ended December 31, 2020 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are included in our Annual Report on Form 10-K.

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 Securities 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.

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 Securities 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.

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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, MGL-3196

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

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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of the population having NASH.

Our Completed Studies.

Our Completed

For NASH, we enrolled 125 patients in a Phase 2 clinical trial with resmetirom.

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We also completed a 116 patient Phase 2 clinical trial and announced results in February 2018 for the use of resmetirom in patients with heterozygous familial hypercholesterolemia, or HeFH.

In addition to the NASH and HeFH Phase 2 clinical trials, resmetirom has also been studied in eight completed Phase 1 trials in a total of 219 subjects.

Resmetirom appeared to be safe and was well-tolerated in these trials, which included a single ascending dose trial, a multiple ascending dose trial, two drug interaction trials with statins, a multiple dose mass balance study, a single dose relative bioavailability study of tablet formulation versus capsule formulation, a multiple dose drug interaction study, and a multiple dose drug interaction with food effect study.

In addition to the NASH and HeFH Phase 2 clinical trials, resmetirom has also been studied in multiple completed Phase 1 trials in a total of more than 300 subjects.

Resmetirom appeared to be safe and was well-tolerated in these trials, which included a single ascending dose trial, a multiple ascending dose trial, several drug interaction studies, a multiple dose mass balance study, a single dose relative bioavailability study of tablet formulation versus capsule formulation, a multiple dose drug interaction study, a multiple dose drug interaction with food effect study, and a hepatic impairment study.

Our Ongoing and Planned Studies.

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Patients with liver biopsy confirmed NASH with stage 2 or 3 fibrosis are being 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

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

the primary endpoint will be the percent of patients treated with either dose of resmetirom as compared with placebo who achieve NASH resolution on the week 52 liver biopsy, defined as the absence of hepatocyte ballooning (score=0), and minimal lobular inflammation (score 0-1),

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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 June 30, 2021 we announced achievement of target enrollment of patients to support the planned Subpart H (Accelerated Approval of New Drugs for Serious or Life-Threatening Illnesses) submission to the US Food and Drug Administration (FDA).

On December 18, 2019 the Company

announced it had opened for enrollment MAESTRO-NAFLD-1,

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

On June 30, 2021 we announced our achievement of the requisite enrollment of patients to support the planned Subpart H (Accelerated Approval of New Drugs for Serious or Life-Threatening Illnesses) submission to the US Food and Drug Administration (FDA).

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

non-invasive,

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Except for serial liver biopsies, the study protocol is similar to the MAESTRO-NASH study with resmetirom doses of 80 mg or 100 mg or placebo.

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

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

arms of the study.

Enrollment objectives for this study have been exceeded, with approximately 1,300 patients enrolled overall.

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open label active treatment extension study of MAESTRO-NAFLD-1,

named MAESTRO-NAFLD-Open Label Extension (OLE).

named MAESTRO-NAFLD-Open

Label Extension (OLE).

The OLE study allows patients who complete MAESTRO-NAFLD-1

to consent to 52 weeks of active treatment with resmetirom, making this treatment available to both patients who were assigned to placebo in MAESTRO-NAFLD-1

and patients who were on resmetirom in MAESTRO-NAFLD-1.

to consent to 52 weeks of active treatment with resmetirom, making this treatment available to both patients who were assigned to placebo in MAESTRO-NAFLD-1 and patients who were on resmetirom in MAESTRO-NAFLD-1.

Pandemic Effects on Madrigal

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

study or liquidity for the period ended June 30, 2021 and year 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.

study or liquidity for the period ended September 30, 2021 and year 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 our Annual Report on Form 10-K

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Actual results may differ materially from these estimates under different assumptions or conditions.

There have been no material changes in our critical accounting policies and significant judgments and estimates during the six months ended June 30, 2021, as compared to those disclosed in our Annual Report on Form 10-K

There have been no material changes in our critical accounting policies and significant judgments and estimates during the nine months ended September 30, 2021, as compared to those disclosed in our Annual Report on Form 10-K

for the fiscal year ended December 31, 2020 filed with the SEC on February 25, 2021.

Results of Operations

Three months Ended June 30, 2021 and 2020

The following table provides comparative unaudited results of operations for the three months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30,

Three months Ended September 30, 2021 and 2020

The following table provides comparative unaudited results of operations for the three months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30,

Increase / (Decrease)

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Interest (income)

Other (income)

We had no revenue for the three months ended June 30, 2021 and 2020.

We had no revenue for the three months ended September 30, 2021 and 2020.

Research and Development Expenses

Our research and development expenses were $51.6 million for the three months ended June 30, 2021, compared to $44.7 million in the corresponding period in 2020.

Our research and development expenses were $54.9 million for the three months ended September 30, 2021, compared to $53.3 million in the corresponding period in 2020.

Research and development expenses increased by $1.6 million in the 2021 period due primarily to the additional activities related to the Phase 3 clinical trials, and an increase in head count.

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General and Administrative Expenses

Our general and administrative expenses were $10.1 million for the three months ended June 30, 2021, compared to $5.6 million in the corresponding period in 2020.

Our general and administrative expenses were $8.3 million for the three months ended September 30, 2021, compared to $5.5 million in the corresponding period in 2020.

General and administrative expenses increased by $2.8 million in the 2021 period due primarily to increases in commercial preparation activities, including a corresponding increase in head count, and an increase in stock compensation expense.

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Interest Income

Our net interest income was $0.1 million for the three months ended June 30, 2021, compared to $1.2 million in the corresponding period in 2020.

Our net interest income was $0.1 million for the three months ended September 30, 2021, compared to $0.8 million in the corresponding period in 2020.

The decrease in interest income was due primarily to decreased interest rates over the period.

Six months Ended June 30, 2021 and 2020

The following table provides comparative unaudited results of operations for the six months ended June 30, 2021 and 2020 (in thousands):

Six Months Ended June 30,

Nine months Ended September 30, 2021 and 2020

The following table provides comparative unaudited results of operations for the nine months ended September 30, 2021 and 2020 (in thousands):

Nine Months Ended September 30,

Increase / (Decrease)

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Other (income)

We had no revenue for the six months ended June 30, 2021 and 2020.

We had no revenue for the nine months ended September 30, 2021 and 2020.

Research and Development Expenses

Our research and development expenses were $97.4 million for the six months ended June 30, 2021, compared to $78.1 million in the corresponding period in 2020.

Our research and development expenses were $152.3 million for the nine months ended September 30, 2021, compared to $131.4 million in the corresponding period in 2020.

Research and development expenses increased by $20.9 million in the 2021 period due primarily to the additional activities related to the Phase 3 clinical trials, an increase in head count, and an increase in stock compensation expense.

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General and Administrative Expenses

Our general and administrative expenses were $17.3 million for the six months ended June 30, 2021, compared to $10.2 million in the corresponding period in 2020.

Our general and administrative expenses were $25.6 million for the nine months ended September 30, 2021, compared to $15.8 million in the corresponding period in 2020.

General and administrative expenses increased by $9.9 million in the 2021 period due primarily to increases in commercial preparation activities, including a corresponding increase in head count, and an increase in stock compensation expense.

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Interest Income

Our net interest income was $0.3 million for the six months ended June 30, 2021, compared to $3.1 million in the corresponding period in 2020.

Our net interest income was $0.3 million for the nine months ended September 30, 2021, compared to $3.9 million in the corresponding period in 2020.

The decrease in interest income was due primarily to decreased interest rates over the period.

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Since inception, we have incurred significant net losses and we have funded our operations primarily through the issuance of shares of our capital stock.

Our most significant use of capital pertains to salaries and benefits for our employees, including clinical, scientific,

operational, commercial, financial and management personnel, and external research and development expenses, such as clinical trials and preclinical activity related to our product candidates.

As of June 30, 2021, we had cash, cash equivalents and marketable securities totaling $323.8 million compared to $284.1 million as of December 31, 2020, with the increase attributable to net proceeds of $130.2 million (reflecting $2.4 million in commissions plus other transaction expenses) raised from the sale of 1,087,126 shares under our at-the-market

sales agreement, partially offset by funding of operations.

Our most significant use of capital pertains to salaries and benefits for our employees, including clinical, scientific, operational, commercial, financial and management personnel, and external research and development expenses, such as clinical trials and preclinical activity related to our product candidates.

As of September 30, 2021, we had cash, cash equivalents and marketable securities totaling $299.1 million compared to $284.1 million as of December 31, 2020, with the increase attributable to net proceeds of $151.2 million raised from the sale of 1,347,290 shares under our at-the-market

(ATM) sales agreements, partially offset by funding of operations.

Our cash and investment balances are held in a variety of interest bearing instruments, including obligations of U.S.

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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 June 30, 2021 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

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 September 30, 2021 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

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If adequate funds are not available, or if the terms of potential funding sources are unfavorable, our business and our ability to develop our product candidates would be harmed.

Furthermore, any sales of additional equity securities may result in dilution to our stockholders, and any debt financing may include covenants that restrict our business.

Furthermore, any sales of additional equity securities may result in dilution to our stockholders, and any non-equity

financing may include covenants that restrict our business.

The following table provides a summary of our net cash flow activity (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities

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Net (decrease) increase in cash and cash equivalents

Net cash used in operating activities was $90.3 million for the six months ended June 30, 2021, compared to $54.8 million for the corresponding period in 2020.

Net cash used in operating activities was $135.9 million for the nine months ended September 30, 2021, compared to $102.6 million for the corresponding period in 2020.

The use of cash in these periods resulted primarily from our losses from operations, as adjusted for non-cash

charges for stock-based compensation, and changes in our working capital accounts.

Net cash used in investing activities was $60.8 million for the six months ended June 30, 2021, compared to $69.8 million provided for the corresponding period in 2020.

Net cash used in investing activities for the six months ended June 30, 2021 consisted of $224.1 million of purchases of marketable securities for our investment portfolio, partially offset by $163.3 million from sales and maturities of marketable securities.

Net cash provided by investing activities for the six months ended June 30, 2020 consisted of $224.0 million from sales and maturities of marketable securities, partially offset by $153.9 million of purchases of marketable securities for our investment portfolio and $0.3 million of purchases of property and equipment.

Net cash provided by financing activities was $130.6 million for the six months ended June 30, 2021, which consisted of $130.2 million from net proceeds from issuances of stock under our ATM and proceeds from the exercise of stock options.

Net cash used in investing activities was $20.7 million for the nine months ended September 30, 2021, compared to $164.6 million provided for the corresponding period in 2020.

Net cash used in investing activities for the nine months ended September 30, 2021 consisted of $339.4 million of purchases of marketable securities for our investment portfolio and $0.1 million of purchases of property and equipment, partially offset by $318.8 million from sales and maturities of marketable securities.

Net cash provided by investing activities for the nine months ended September 30, 2020 consisted of $378.1 million from sales and maturities of marketable securities, partially offset by $213.2 million of purchases of marketable securities for our investment portfolio and $0.3 million of purchases of property and equipment.

Net cash provided by financing activities was $151.7 million for the nine months ended September 30, 2021, which consisted of $151.2 million from net proceeds from issuances of stock under our At The Market (ATM) sales agreements and $0.5 million of proceeds from the exercise of stock options.

Financing activities for the corresponding period in 2020 consisted of proceeds from the exercise of stock options.

Contractual Obligations and Commitments

No significant changes to contractual obligations and commitments occurred during the six months ended June 30, 2021, as compared to those disclosed in our Annual Report on Form 10-K

No significant changes to contractual obligations and commitments occurred during the nine months ended September 30, 2021, as compared to those disclosed in our Annual Report on Form 10-K

for the fiscal year ended December 31, 2020 filed with the SEC on February 25, 2021.

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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-Q

Item 2. Management’s Discussion and Analysis