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Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-02-25 · 59 added, 58 removed, 185 unchanged (39% of the section changed)

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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.

prior to the consummation of the Merger described herein.

Unless otherwise indicated, references to the terms “Madrigal,” the “Company,” “we,” “our” and “us” refer to Private Madrigal prior to the consummation of the Merger described herein and Madrigal Pharmaceuticals, Inc.

(formerly known as Synta Pharmaceuticals Corp.) upon the consummation of the Merger described herein.

About Madrigal Pharmaceuticals, Inc.

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, 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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NASH and NAFLD have grown as a consequence of rising worldwide obesity-related disorders.

In the United States alone, NAFLD is estimated to affect approximately 27% to 34% of the population, or an estimated 86 million to 108 million people, and approximately 10% to 20% of this population is projected to progress from NAFLD to NASH.

Current estimates place NASH prevalence at approximately 9 million to 15 million people in the United States, or three percent to five percent of the population, with similar prevalence in Europe and Asia.

In the United States, NAFLD is estimated to affect approximately 25% of the population, and approximately 25% of those will progress from NAFLD to NASH.

Current estimates place NASH prevalence at approximately 20 million people in the United States, or five to six percent of the adult population, with similar prevalence in Europe and Asia.

The prevalence of NASH is also increasing in developing regions due to the adoption of a more sedentary lifestyle and a diet consisting of processed foods with high fat and fructose content.

Our Completed Studies.

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results at the conclusion of the Phase 2 clinical trial in May 2018.

We have completed treatment in a 36-week,

open-label extension study in 31 participating NASH patients from our Phase 2 clinical trial, which includes 14 patients who received placebo in the main study.

We also completed a 36-week,

open-label extension study in 31 participating NASH patients from our Phase 2 clinical trial, which included 14 patients who received placebo in the main study.

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 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.

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.

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 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.

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

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),

the primary endpoint pertains to 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),

associated with at least a 2-point

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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 as 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 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,

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.

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 and includes key secondary lipid, MRI-PDFF

and NASH biomarker endpoints.

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

non-invasive,

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

Key endpoints are safety, including safety biomarkers.

Secondary endpoints include LDL cholesterol, lipid biomarkers, MRI-PDFF,

NASH and fibrosis biomarkers.

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.

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

The MAESTRO-NAFLD-1

study will help support the adequacy of the safety database at the time of NDA submission for subpart H approval for treatment of NASH in patients with F2 or F3 fibrosis (MAESTRO-NASH, NASH resolution surrogate endpoint).

Recent Developments

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.”

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.

study will help support the adequacy of the safety database at the time of NDA submission for Subpart H approval for treatment of NASH in patients with F2 or F3 fibrosis.

On July 13, 2021 we announced first patient dosed in a planned 52-week

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

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.

Key Developments

In January 2022, Madrigal announced topline results from the Phase 3 MAESTRO-NAFLD-1

safety study of resmetirom.

Madrigal reported that resmetirom demonstrated statistical significance for primary and key secondary endpoints summarized above under “Business:

Key Developments.”

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

at impacted sites were put in place for our 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

Reverse Merger

On July 22, 2016, Synta completed its business combination with Private Madrigal in accordance with the terms of an Agreement and Plan of Merger and Reorganization, dated as of April 13, 2016, or the Merger Agreement.

Pursuant to the Merger Agreement, Synta formed a wholly-owned subsidiary that merged with and into Private Madrigal, with Private Madrigal surviving the merger and becoming a wholly-owned subsidiary of Synta, or the Merger.

In connection with, and prior to the consummation of, the Merger, Synta effected a 1-for-35

reverse stock split of its common stock, or the Reverse Stock Split, and, following the Merger, changed its name to “Madrigal Pharmaceuticals, Inc.” All shares and per share amounts have been retrospectively adjusted to give effect to the Reverse Stock Split, except as otherwise disclosed.

Following the consummation of the Merger, our business became the business conducted by Private Madrigal prior to the consummation of the Merger.

Following a 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, our conduct of the MAESTRO-NAFLD-1

study or our liquidity for previous periods.

However, COVID-19

did introduce clinical trial and operational risks and uncertainties that are both general in nature and relate specifically to our MAESTRO-NASH study.

In addition, at the height of COVID-19,

MAESTRO-NAFLD-1

double blind patients had an average of two missed visits and two dose interruptions, with the dose interruptions primarily related to third-parties.

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 on Form 10-K.

Basis of Presentation

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The Company does not record tax benefits related to ISOs unless and until a disqualifying disposition is reported.

In the event of a disqualifying disposition, the entire tax benefit is recorded as a reduction of income tax expense.

In the event of a disqualifying disposition, the entire tax benefit is recorded as a reduction of income

The Company has not recognized any income tax benefit for its share-based compensation arrangements due to the fact that the Company does not believe it is more likely than not it will realize the related deferred tax assets.

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Year ended December 31,

Increase / (Decrease)

Research and Development Expenses

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Our general and administrative expenses were $37.3 million for the year ended December 31, 2021 compared to $21.9 million for the year ended December 31, 2020.

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.

General and administrative expenses increased by $15.5 million in the 2021 period due primarily to an increase in non-cash

stock compensation from stock option awards and increase 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.

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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.

General and administrative expenses decreased by $0.8 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 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.

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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.

Liquidity and Capital Resources

Since inception, we have incurred significant net losses and we have funded our operations primarily through the issuance of convertible debt, the issuance of shares of our common stock and shares of our preferred stock, and the proceeds from the merger.

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

Our most significant use of capital pertains to salaries and benefits for

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

As of December 31, 2021, we had cash, cash equivalents and marketable securities totaling $270.3 million compared to $284.1 million as of December 31, 2020, with the decrease attributable to the funding of operations.

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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.

pandemic risks, including risks and uncertainties beyond our control, see Part I, 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.

To meet future long-term liquidity requirements, we will need to raise additional capital to fund our operations through equity or debt financings, collaborations, partnerships or other strategic transactions.

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.

sales agreement entered into in June of 2021, with Cowen and Company, LLC (the “2021 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.

We also have the ability to delay certain research activities and related clinical expenses if necessary due to liquidity concerns until a date when those concerns are relieved.

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.

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Investing Activities

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 $5.1 million for the year ended December 31, 2021 and consisted primarily of $394.1 million of purchase of marketable securities for our investment portfolio, partially offset by $389.3 million from sales and maturities of marketable securities.

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 in 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 purchase of marketable securities for our investment portfolio.

Financing Activities

Net cash provided by financing activities was $171.2 million for the year ended December 31, 2021 and consisted primarily of sales of our common stock under the 2020 and 2021 Sales Agreement with Cowen and Company, LLC and the exercise of stock options.

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.

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