What changed in this filing

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Item 9A. Controls and Procedures

2022-02-24 compared with 2021-02-25 · 62 added, 76 removed, 581 unchanged (19% of the section changed)

7 unchanged sentences

Limitations on the Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

assurance of achieving the desired control objectives.

In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

57 unchanged sentences

Equity Agreements

Sales Agreement, dated November 5, 2020, by and between Madrigal Pharmaceuticals, Inc.

Sales Agreement, dated June 1, 2021, by and between Madrigal Pharmaceuticals, Inc.

and Cowen and Company, LLC (concerning at-the-market offerings of Madrigal common stock).

(Exhibit 1.1)

Exhibit Description

Incorporated by

Reference herein

Agreements with Respect to Collaborations, Licenses, Research and Development

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(Exhibit 10.5)

Exhibit Description

Incorporated by

Reference herein

Equity Compensation Plans

Amended 2015 Stock Plan

Definitive Proxy Statement (Annex A)

Form of Incentive Stock Option Agreement under Amended 2015 Stock Plan.

6 unchanged sentences

(Exhibit 10.1)

Agreements with Executive Officers and Directors

Letter Agreement, dated November 24, 2014, between Synta Pharmaceuticals Corp.

Non-Employee Director Equity Compensation Policy

(Exhibit 10.1)

Agreements with Executive Officers and Directors

Form of Indemnification Agreement between the Registrant and certain directors and executive officers.

(Exhibit 10.2)

Non-Qualified Stock Option Agreement (outside of the Amended and Restated 2006 Stock Plan), dated December 8, 2014, between the Registrant and Marc Schneebaum.

(Exhibit 10.46)

Letter Agreement, dated April 13, 2016, by and between the Company and Paul A.

5 unchanged sentences

Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.

Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit Description

1 unchanged sentence

Reference herein

Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below hereby constitutes and appoints Paul A.

Friedman, M.D., Marc R.

Schneebaum and Brian J.

Friedman, M.D., Alex G.

Howarth and Brian J.

Lynch, and each or either of them, acting individually, as his or her true and lawful attorney-in-fact

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February 24, 2022

Senior Vice President and Chief Financial Officer (Principal Accounting and Financial Officer)

Chief Financial Officer (Principal Accounting and Financial Officer)

February 24, 2022

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We believe that our audits provide a reasonable basis for our opinions.

Emphasis of Matter

As discussed in Note 3 to the consolidated financial statements, the Company will require additional financing to fund future operations.

Management’s evaluation of the events and conditions and plans to mitigate this matter are also described in Note 3.

Definition and Limitations of Internal Control over Financial Reporting

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Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls over management’s process relating to accruing research and development costs, including controls overestimating the costs incurred for services performed by vendors that have not yet been invoiced.

These procedures also included, among others, testing management’s process for estimating the research and development costs to accrue in the reporting period, evaluating the completeness and accuracy of underlying data used in management’s estimate by testing for consistency with a sample of contracts and invoices, testing the number of patients screened for and enrolled in the trial, testing the mathematical accuracy of the calculation of the accrual for research and development costs incurred, and evaluating the reasonableness of assumptions used in the estimate.

These procedures included testing the effectiveness of controls over management’s process relating to accruing research and development costs, including controls over estimating the costs incurred for services performed by vendors that have not yet been invoiced.

number of patients screened for and enrolled in the trial, testing the mathematical accuracy of the calculation of the accrual for research and development costs incurred, and evaluating the reasonableness of assumptions used in the estimate.

Evaluating the reasonableness of assumptions used in the estimate involved assessing management’s ability to reasonably estimate costs incurred that have not been invoiced by (i) performing a comparison of the estimated accrual to average procedure rates per contracts applied to the number of patients screened for and enrolled in the trial, and by (ii) performing a comparison of the estimated accrual to actual costs incurred on similar completed preclinical studies and clinical trials.

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Additional paid-in-capital

Accumulated other comprehensive gain

Accumulated other comprehensive gain (loss)

Accumulated deficit

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(in thousands, except share and per share amounts)

Preferred stock

comprehensive

1 unchanged sentence

stockholders’

Preferred stock

Balance at December 31, 2018

Issuance of common shares in equity offering, excluding to related parties, net of transaction costs

Sale of common shares to related parties and exercise of common stock options, net of transaction costs

Compensation expense related to stock options for services

Unrealized loss on marketable securities

Unrealized gain on marketable securities

Balance at December 31, 2019

Issuance of common shares in equity offering, excluding to related parties, net of transaction costs

Sale of common shares to related parties and exercise of common stock options, net of transaction costs

Compensation expense related to stock options for services

Unrealized gain on marketable securities

Unrealized loss on marketable securities

Balance at December 31, 2020

42 unchanged sentences

(the “Company” or “Madrigal”) is a clinical-stage pharmaceutical company developing novel, high-quality, small-molecule drugs addressing major unmet needs in cardiovascular, metabolic, and liver diseases.

The Company’s lead compound, MGL-3196

(resmetirom), is being advanced for non-alcoholic

The Company’s lead compound, resmetirom, is being advanced for non-alcoholic

steatohepatitis (“NASH”), a liver disease that commonly affects people with metabolic diseases such as obesity and diabetes, and non-alcoholic

1 unchanged sentence

The Company initiated two Phase 3 studies of resmetirom in NASH in 2019 that are ongoing.

The Company previously completed Phase 2 studies of resmetirom in NASH in May of 2018 and Heterozygous Familial Hypercholesterolemia (“HeFH”) in February of 2018.

Madrigal was originally incorporated as a private company (“Private Madrigal”) on August 19, 2011 and operations commenced in September 2011.

On July 22, 2016, Private Madrigal completed a reverse merger (the “Merger”) into Synta Pharmaceuticals Corp.

Upon the consummation of the Merger, the historical financial statements of Private Madrigal became the Company’s historical financial statements.

The Company announced certain topline results from the Phase 3 MAESTRO-NAFLD-1

safety study of resmetirom in January 2022.

Summary of Significant Accounting Policies

19 unchanged sentences

The Company includes such amortization and accretion as a component of interest income, net.

Realized gains and losses and declines in value, if any, that the Company judges to be other-than-temporary on available-for-sale

Realized gains and losses and declines in value, if any, that the Company judges to be other-

than-temporary on available-for-sale

securities are reported as a component of interest income.

23 unchanged sentences

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

In particular, the Company has conducted

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

clinical trials, all of which are considered research and development expenditures.

4 unchanged sentences

Costs to secure and defend patents are expensed as incurred and are classified as general and administrative expense in the Company’s statements of operations.

Patent expenses were approximately $ 353 thousand, $ 408 thousand and $ 226 thousand for the years ended December 31, 2020, 2019 and 2018, respectively.

Patent expenses were approximately $ 0.5 million, $ 0.4 million and $ 0.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Stock-Based Compensation

The Company recognizes stock-based compensation expense based on the grant date fair value of stock options granted to employees, officers and directors.

The Company recognizes

stock-based compensation expense based on the grant date fair value of stock options granted to employees, officers and directors.

The Company uses the Black-Scholes option pricing model to determine the grant date fair value as management believes it is the most appropriate valuation method for its option grants.

The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility and expected lives of the options.

The expected lives for options granted represent the

period of time that options granted are expected to be outstanding.

The expected lives for options granted represent the period of time that options granted are expected to be outstanding.

The Company uses the simplified method for determining the expected lives of options.

28 unchanged sentences

Liquidity and Uncertainties

The Company is subject to risks common to development stage companies in the Bio-Pharmaceutical

industry including, but not limited to, uncertainty of product development and commercialization, dependence on key personnel, uncertainty of market acceptance of products and product reimbursement, product liability, uncertain protection of proprietary technology, potential inability to raise additional financing necessary for development and commercialization, and compliance with the U.S.

The Company is subject to risks common to development stage companies in the biopharmaceutical industry including, but not limited to, uncertainty of product development and commercialization, dependence on key personnel, uncertainty of market acceptance of products and product reimbursement, product liability, uncertain protection of proprietary technology, potential inability to raise additional financing necessary for development and commercialization, and compliance with the U.S.

Food and Drug Administration and other government regulations.

1 unchanged sentence

Management expects to incur losses for the foreseeable future.

To date, the Company has funded its operations primarily through the issuance of convertible debt, the proceeds from the Merger on July 22, 2016, and proceeds from sales of the Company’s common and Series A Convertible Preferred Stock (see Note 6).

To date, the Company has funded its operations primarily through proceeds from sales of the Company’s capital stock.

The Company believes that its cash, cash equivalents and marketable securities at December 31, 2021 will be sufficient to fund operations past one year from the issuance of these financial statements.

2 unchanged sentences

The inability of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company has the ability to delay certain research activities and related clinical expenses if necessary due to liquidity concerns until a date in which those concerns are relieved.

The Company has 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.

Cash, Cash Equivalents and Marketable Securities

28 unchanged sentences

Each common stockholder is entitled to one vote for each share of common stock held.

The common stock will vote together with all other classes and series of stock of the Company as a single class on all actions to be taken by the Company’s stockholders.

The common stock will vote together with all other classes and series of stock of the Company as a single class on all actions to be

taken by the Company’s stockholders.

Each share of common stock is entitled to receive dividends, as and when declared by the Company’s board of directors.

13 unchanged sentences

In November 2020, the Company entered into an at-the-market

sales agreement (the “2020 Sales Agreement”), with Cowen and Company, LLC (“Cowen”), pursuant to which the Company may, from time to time, issue and sell shares of its common stock.

The Company is not obligated to make any sales of its common stock under the 2020 Sales Agreement.

Any shares sold will be sold pursuant to the

effective shelf registration statement on Form S-3,

(the “Registration Statement”), and the

prospectus supplement to the Registration Statement.

The Sales Agreement authorizes an aggregate offering of up to $ 200 million in shares of our common stock, from time to time, at the Company’s option, through Cowen as its sales agent.

Sales of common stock through Cowen may be made by any method that is deemed an “at-the-market”

sales agreement (the “2020 Sales Agreement”), with Cowen and Company, LLC (“Cowen”), pursuant to which the Company could, from time to time, issue and sell shares of its common stock.

The 2020 Sales Agreement authorized an aggregate offering of up to $ 200 million in shares of our common stock, at the Company’s option, through Cowen as its sales agent.

Sales of common stock through Cowen could be made by any method that is deemed an “at-the-market”

offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including by means of ordinary brokers’ transactions at market prices, in block transactions or as otherwise agreed by the Company and Cowen.

The 2020 Sales Agreement was terminated in June 2021 when the Company filed a new shelf registration statement.

Under the 2020 Sales Agreement the Company sold 1,126,733 shares for an aggregate of approximately $ 137.4 million in gross proceeds, with net proceeds to the Company of approximately $ 134.8 million after deducting commissions and other transaction costs.

Of those shares sold, 1,087,126 were sold in 2021, and 39,607 were sold in 2020.

In June 2021, the Company filed with the SEC and had declared effective a new shelf registration statement on Form S-3

and, in connection therewith, entered into a new at-the-market

sales agreement (the “2021 Sales Agreement”) with Cowen.

The terms of the 2021 Sales Agreement are substantially the same as the 2020 Sales Agreement.

The 2021 Sales Agreement authorizes an aggregate offering of up to $ 200 million in shares of our common stock, from time to time, at the Company’s option, through Cowen as its sales agent.

The 2021 Sales Agreement supersedes the 2020 Sales Agreement.

Subject to the terms and conditions of the 2021 Sales Agreement, Cowen will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the common stock based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose).

The 2020 Sales Agreement may be terminated by the Company at any time upon 10 days’ notice.

As of December 31, 2020, 39,607 shares have been sold under the 2020 Sales Agreement for an aggregate of approximately $ 4.8 million in gross proceeds.

Net proceeds to the Company were approximately $ 4.4 million after deducting commissions and other transaction costs.

Approximately $ 195.2 million remained reserved under the Company’s shelf registration statement and the applicable prospectus supplement for possible future issuance under the 2020 Sales Agreement.

June 2018 Registered Offering of Common Stock

In June 2018, the Company entered into an underwriting agreement with Goldman Sachs & Co.

LLC, as representative of the several underwriters named therein (the “June 2018 Underwriters”), relating to an underwritten public offering (the “June 2018 Offering”) of 1,079,580 shares of the Company’s common stock, including 95,973 shares of the Company’s common stock purchased by the June 2018 Underwriters pursuant to a 30 -day

option to purchase such additional shares granted therein, at a public offering price of $ 305.00 per share.

The June 2018 Offering resulted in gross proceeds to the Company of approximately $ 329.3 million, and net proceeds to the Company of approximately $ 311.8 million, after deducting the June 2018 Underwriters’ discount and other offering costs.

The June 2018 Offering closed on June 11, 2018.

As of December 31, 2021, 497,043 shares had been sold under the 2021 Sales Agreement for an aggregate of approximately $ 40.8 million in gross proceeds, with net proceeds to the Company of approximately

$ 39.8 million after deducting commissions and other transaction costs.

As of December 31, 2021, $ 159.2 million remained reserved and available for sale under the 2021 Sales Agreement and the Company’s related prospectus supplement.

Stock-based Compensation

The 2015 Stock Plan, as amended, is our primary plan through which equity based grants are awarded.

The 2015 Stock Plan, as amended, is our primary plan through which

equity based grants are awarded.

We ceased making new awards under the 2006 Stock Plan upon adoption of the 2015 Stock Plan.

3 unchanged sentences

The terms of stock options awarded under the 2015 Stock Plan, in general, are determined by the Compensation Committee, provided the exercise price per share generally shall not be set at less than the fair market value of a share of the common stock on the date of grant and the term shall not be greater than ten years from the date the option is granted.

As of December 31, 2020, the Company had options outstanding to purchase 1,837,540 shares of its common stock, which includes options outstanding under its 2006 Stock Plan.

As of December 31, 2021, the Company had options outstanding to purchase 2,301,574 shares of its common stock.

As of December 31, 2021, 1,661,293 shares were available for future issuance.

11 unchanged sentences

The total cash received by the Company as a result of stock option exercises was $ 1.0 million, $ 0.7 million and $ 0.2 million for the years ended December 31, 2021, 2020, and 2019.

The total intrinsic value of options exercised was $ 4.1 million in the year ended December 31, 2020.

The total intrinsic value of options exercised was $ 0.1 million $ 4.1 million and $ 2.2 million for the years ended December 31, 2021, 2020, and 2019.

The weighted-average grant date fair values, based on the Black-Scholes option model, of options granted during the year ended December 31, 2021, 2020 and 2019 was $ 73.29 , $ 68.07 , and $ 91.19 , respectively.

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As of December 31, 2021, the weighted average remaining operating lease term was 1.92 years and the weighted average discount rate used to determine the operating lease liabilities was 3.25 %.

Cash paid related to the lease liability was $ 303 and $ 297 thousand for years ended December 31, 2020 and 2019 respectively.

Operating lease costs during the year ended December 31, 2020 was $ 347 and $ 386 thousand for years ended December 31, 2020 and 2019 respectively.

Rent expense during the year ended December 31, 2020 and 2019 was $ 0 thousand and $ 239 thousand, respectively.

Short term and variable leases costs were immaterial during the years ended December 31, 2020, 2019 and 2018.

Cash paid related to the lease liability was $ 0.4 and $ 0.3 million for years ended December 31, 2021 and 2020 respectively.

Operating lease costs were $ 0.4 and $ 0.3 million for years ended December 31, 2021 and 2020 respectively.

Rent, short term and variable leases costs were immaterial during the years ended December 31, 2021, 2020 and 2019.

Commitments and Contingencies

4 unchanged sentences

Steatohepatitis (NASH), which triggered a $ 2 million milestone payment under the agreement.

Remaining milestones under

the agreement total $ 8 million and are earned by achieving specified objectives related to future regulatory approval in the United States and Europe of a product developed from resmetirom.

Remaining milestones under the agreement total $ 8 million and are earned by achieving specified objectives related to future regulatory approval in the United States and Europe of a product developed from resmetirom.

A single-digit royalty payment range is based on net sales of products developed from resmetirom, subject to certain reductions.

8 unchanged sentences

Although a formal analysis has not been completed, the Company has determined that an ownership change likely occurred for Madrigal during the year ended December 31, 2017.

The net operating losses are expected to be subject to an annual limitation;

however, none of these NOLs is expected to expire before becoming available to reduce future taxable income.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the deferred tax assets will not be realized.

39 unchanged sentences

Three months ended

March 31, 2020

June 30, 2020

September 30,

10 unchanged sentences

Three months ended

March 31, 2019

June 30, 2019

September 30,

9 unchanged sentences

Basic and diluted weighted average number of common shares outstanding

Subsequent Event

As of February 24

, 2021 the company has sold 549,617 shares under the 2020 Sales Agreement (described in Note 6) for an aggregate of approximately $ 67.8 million in gross proceeds in 2021 to date.

Net proceeds to the Company were approximately $ 66.5 million after deducting commissions and other transaction costs.

Approximately $ 127.3 million remained reserved under the Company’s shelf registration statement and the applicable prospectus supplement for possible future issuance under the 2020 Sales Agreement.

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 9A. Controls and Procedures