What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2022-11-03 · 156 added, 164 removed, 286 unchanged (53% of the section changed)

3 unchanged sentences

in thousands, except share and per share amounts)

September 30,

Current assets:

12 unchanged sentences

Loan payable, net of discount

Lease liability

Total long term liabilities

2 unchanged sentences

Preferred stock, par value $ 0.0001 per share authorized:

5,000,000 shares at September 30, 2022 and December 31, 2021;

1,969,797 shares issued and outstanding at September 30, 2022 and December 31, 2021

5,000,000 shares at March 31, 2023 and December 31, 2022;

2,369,797 and 2,369,797 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Common stock, par value $ 0.0001 per share authorized:

200,000,000 at September 30, 2022 and December 31, 2021;

17,103,395 and 17,103,395 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

200,000,000 at March 31, 2023 and December 31, 2022;

18,283,074 and 18,102,523 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in-capital

7 unchanged sentences

in thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Total revenues

13 unchanged sentences

in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale

Unrealized loss on available-for-sale

Comprehensive loss

8 unchanged sentences

Balance at December 31, 2022

Compensation expense related to stock options for services

Unrealized loss on marketable securities

Balance at March 31, 2022

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

1 unchanged sentence

Hercules warrant

Balance at June 30, 2022

Compensation expense related to stock options for services

Unrealized loss on marketable securities

Balance at September 30, 2022

Balance at March 31, 2023

Balance at December 31, 2021

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

1 unchanged sentence

Balance at March 31, 2022

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

Compensation expense related to stock options for services

Unrealized gain on marketable securities

Balance at June 30, 2021

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

Balance at September 30, 2021

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

15 unchanged sentences

Cash flows from financing activities:

Proceeds from issuances of stock, excluding related parties, net of transaction costs

Proceeds from the exercise of common stock options

Proceeds from the sale of related party stock and exercise of common stock options, net of transaction costs

Proceeds from issuance of loan payable

4 unchanged sentences

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

Obtaining a right-of-use

asset in exchange for a lease liability

See accompanying notes to condensed consolidated financial statements.

4 unchanged sentences

Madrigal Pharmaceuticals, Inc.

(the “Company” or “Madrigal”) is a clinical-stage biopharmaceutical company pursuing novel therapeutics for nonalcoholic steatohepatitis (NASH), a liver disease with high unmet medical need.

Madrigal’s lead candidate, resmetirom, is a once daily, oral, thyroid hormone receptor (THR)-ß selective agonist designed to target key underlying causes of NASH in the liver.

Resmetirom is currently being evaluated in two Phase 3 clinical studies (MAESTRO-NASH and MAESTRO-NAFLD-1)

designed to demonstrate multiple benefits in patients with NASH.

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

safety study of resmetirom in 2022.

(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, 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

fatty liver disease (“NAFLD”).

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

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

safety study of resmetirom in January 2022 and the MAESTRO-NASH study in December 2022.

In August 2022, Madrigal initiated a third study, MAESTRO-NASH-OUTCOMES.

Basis of Presentation

25 unchanged sentences

debt securities for amortization of premiums and accretion of discounts to maturity.

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

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

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 the result of impairment or as a result of recognizing an allowance for credit losses on available-for-sale

securities are reported as a component of interest income.

To determine whether an other-than-temporary impairment exists, the Company considers whether it intends to sell the debt security and, if the Company does not intend to sell the debt security, it considers available evidence to assess whether it is more likely than not that it will be required to sell the security before the recovery of its amortized cost basis.

During the nine months ended September 30, 2022 and 2021, the Company determined it did not have any securities that were other-than-temporarily impaired.

To determine whether an impairment exists, the Company considers whether it intends to sell the debt security and, if the Company does not intend to sell the debt security, it considers available evidence to assess whether it is more likely than not that it will be required to sell the security before the recovery of its amortized cost basis.

During the three months ended March 31, 2023 and 2022, the Company determined it did not have any securities that were other-than-temporarily impaired.

Marketable securities are stated at fair value, including accrued interest, with their unrealized gains and losses included as a component of accumulated other comprehensive income or loss, which is a separate component of stockholders’ equity.

1 unchanged sentence

Realized gains and losses are determined on the specific identification method.

During the nine months ended September 30, 2022 and 2021, the Company did not have any realized gains or losses on marketable securities.

During the three months ended March 31, 2023 and 2022, the Company did not have any realized gains or losses on marketable securities.

Fair Value of Financial Instruments

10 unchanged sentences

These inputs include reported trades of and broker-dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities and other observable inputs.

As of September 30, 2022, the Company’s financial assets valued based on Level 1 inputs consisted of cash and cash equivalents in a money market fund, its financial assets valued based on Level 2 inputs consisted of high-grade corporate and government agency bonds and commercial paper, and it had no financial assets valued based on Level 3 inputs.

During the nine months ended September 30, 2022 and 2021, the Company did not have any transfers of financial assets between Levels 1 and 2.

As of September 30, 2022 and December 31, 2021, the Company did not have any financial liabilities that were recorded at fair value on a recurring basis on the balance sheet.

As of March 31, 2023, the Company’s financial assets valued based on Level 1 inputs consisted of cash and cash equivalents in a money market fund, its financial assets valued based on Level 2 inputs consisted of high-grade corporate and government agency bonds and commercial paper, and it had no financial assets valued based on Level 3 inputs.

During the three months ended March 31, 2023 and 2022, the Company did not have any transfers of financial assets between Levels 1 and 2.

As of March 31, 2023 and December 31, 2022, the Company did not have any financial liabilities that were recorded at fair value on a recurring basis on the balance sheet.

Research and Development Costs

1 unchanged sentence

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

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

In particular, the Company has conducted safety studies in animals, optimized and implemented the manufacturing of our drug, and conducted clinical trials, all of which are considered research and development expenditures.

Management uses significant judgment in estimating the amount of research and development costs recognized in each reporting period.

Management analyzes and estimates the progress of its preclinical studies and clinical trials, completion of milestone events per underlying agreements, invoices received and contracted costs when estimating the research and development costs to accrue in each reporting period.

Management analyzes and estimates the progress of its clinical trials, completion of milestone events per underlying agreements, invoices received and contracted costs when estimating the research and development costs to accrue in each reporting period.

Actual results could differ from the Company’s estimates.

1 unchanged sentence

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

Awards that vest as the recipient provides service are expensed on a straight-line basis over the requisite service period.

The Company uses the Black-Scholes option pricing model to determine the grant date fair value of stock options 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.

7 unchanged sentences

at least annually and the forfeiture rate is adjusted as necessary.

Certain of the employee stock options granted by the Company are structured to qualify as incentive stock options (“ISOs”).

Under current tax regulations, the Company does not receive a tax deduction for the issuance, exercise or disposition of ISOs if the employee meets certain holding requirements.

If the employee does not meet the holding requirements, a disqualifying disposition occurs, at which time the Company may receive a tax deduction.

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.

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.

The Company uses the asset and liability method to account for income taxes.

5 unchanged sentences

Basic and Diluted Loss Per Common Share

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period, excluding any restricted stock that has been issued but is not yet vested.

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period.

Diluted net loss per common share is computed using the weighted average number of common shares outstanding and the weighted average dilutive potential common shares outstanding using the treasury stock method.

However, for the nine months ended September 30, 2022 and 2021, diluted net loss per share is the same as basic net loss per share because the inclusion of weighted average shares of unvested restricted common stock, common stock issuable upon the exercise of stock options, and common stock issuable upon the conversion of preferred stock would be anti-dilutive.

However, for the three months ended March 31, 2023 and 2022, diluted net loss per share is the same as basic net loss per share because the inclusion of weighted average shares of common stock issuable upon the exercise of stock options and warrants or vesting of restricted stock units, and common stock issuable upon the conversion of preferred stock would be anti-dilutive.

The following table summarizes outstanding securities not included in the computation of diluted net loss per common share, as their inclusion would be anti-dilutive:

Nine Months Ended September 30,

Three Months Ended March 31,

Common stock options

Restricted stock units

Preferred stock

3 unchanged sentences

Food and Drug Administration (FDA) and other government regulations.

The Company has incurred losses since inception, including approximately $ 209.4 million for the nine months ended September 30, 2022, resulting in an accumulated deficit of approximately $ 876.8 million as of September 30, 2022.

The Company has incurred losses since inception, including approximately $ 76.9 million for the three months ended March 31, 2023, resulting in an accumulated deficit of approximately $ 1,040 million as of March 31, 2023.

Management expects to incur losses for the foreseeable future.

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

In addition, the Company entered into a Loan and Security Agreement (the “Loan Facility”) with Hercules Capital, Inc.

and the several banks and other financial institutions or entities party thereto in May 2022 which provides for an aggregate of up to $ 250.0 million in term loans, which will be available in four tranches, subject to the Company’s achievement of certain milestones and conditions.

The first $ 50.0 million tranche was drawn at closing of the Loan Facility (see Note 6 – Long Term Debt).

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

The Company believes that its cash, cash equivalents and marketable securities at March 31, 2023 will be sufficient to fund operations past one year from the issuance of these financial statements.

To meet its future capital needs, the Company intends to raise additional capital through debt or equity financings, collaborations, partnerships or other strategic transactions.

However, there can be no assurance that the Company will be able to complete any such transactions on acceptable terms or otherwise.

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 believes it has the ability to delay certain clinical and pre-commercialization activities and related expenses if necessary due to liquidity concerns until a date when those concerns are relieved.

Company is unable to obtain funding, the Company:

could be forced to delay, reduce or eliminate some or all of its clinical studies or pre-commercialization

efforts, which could adversely affect its business prospects;

could adversely affect liquidity;

and could affect the Company’s ability to maintain compliance with covenants under the Loan Facility.

In accordance with ASC 205-40,

Going Concern (“ASC 205-40”), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

Based upon current operating plans and the Company’s cash, cash equivalents and marketable securities

totaling $ 153.2 million as of September 30, 2022, the Company expects, that such resources will not be sufficient to fund our operating expenses and capital requirements through the one year anniversary of the filing of this Quarterly Report

These conditions raise substantial doubt about the Company’s ability to

continue as a going concern under ASC 205-40.

Under ASC 205-40,

management may not consider the potential for future capital raises through debt or equity financings, collaborations, partnerships or other strategic transactions, or management plans to reduce costs that are not considered probable within the meaning of such accounting standards.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all.

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

A summary of cash, cash equivalents and available-for-sale

marketable securities held by the Company as of September 30, 2022 and December 31, 2021 is as follows (in thousands):

September 30, 2022

marketable securities held by the Company as of March 31, 2023 and December 31, 2022 is as follows (in thousands):

March 31, 2023

Cash and cash equivalents:

Cash (Level 1)

Money market funds (Level 1)

7 unchanged sentences

Cash and cash equivalents:

Cash (Level 1)

Money market funds (Level 1)

2 unchanged sentences

Corporate debt securities due within 1 year of date of purchase (Level 2)

Corporate debt securities due within 1 to 2 years of date of purchase

Total cash, cash equivalents and marketable securities

Accrued Liabilities

Accrued liabilities as of September 30, 2022 and December 31, 2021 consisted of the following (in thousands):

September 30,

Accrued liabilities as of March 31, 2023 and December 31, 2022 consisted of the following (in thousands):

Contract research organization costs

Other clinical study related costs

Manufacturing and drug supply

Compensation and benefits

5 unchanged sentences

Under the terms of the Loan Facility, the first $ 50.0 million tranche was drawn at closing.

The Company may also draw up to an additional $ 125.0 million in two separate tranches upon achievement of certain resmetirom clinical and regulatory milestones.

A fourth tranche of $ 75.0 million may be drawn by the Company, subject to the approval of Hercules.

The Loan Facility has a minimum interest rate of 7.45 % and adjusts with changes in the prime rate.

The Company also could draw up to an additional $ 125.0 million in two separate tranches upon achievement of certain resmetirom clinical and regulatory milestones.

A fourth tranche of $ 75.0 million could be drawn by the Company, subject to the approval of Hercules.

The Loan Facility had a minimum interest rate of 7.45 % and adjusts with changes in the prime rate.

The Company will pay interest-only monthly payments of accrued interest under the Loan Facility for a period of 30 months, which period may be extended to 36, 48, and 60 months upon the successive achievement of certain clinical and regulatory milestones and if the Company maintains compliance with applicable covenants.

2 unchanged sentences

It includes an end of term charge of 5.35 % of the aggregate principal amount, which is accounted for in the loan discount.

In connection with the first tranche drawn at closing, the Company issued Hercules a warrant to purchase 14,899 shares of Company common stock, which had a Black-Scholes value of

$ 0.6 million.

In connection with the first tranche drawn at closing, the Company issued Hercules a warrant to purchase 14,899 shares of Company common stock, which had a Black-Scholes value of $ 0.6 million.

On February 3, 2023, the Company entered into the First Amendment (the “Amendment”) to the Loan Facility (as amended, the “Amended Loan Facility”).

Under the Amended Loan Facility, an additional $ 35.0 million was drawn under a second, expanded, $ 65.0 million tranche (“Tranche 2”) in February of 2023 following the Company’s achievement of the Phase 3 clinical development milestone.

The Company has the ability to draw an additional $ 15.0 million under Tranche 2 by June 19, 2023 and an additional $ 15.0 million under Tranche 2 by September 30, 2023 (for a total of $ 30.0 million in additional committed Tranche 2 capacity).

The third tranche (“Tranche 3”) of $ 75.0 million remains unchanged by the Amendment, and such borrowings are available subject to the Company obtaining a certain FDA approval for resmetirom.

Coincident with the expansion of Tranche 2 borrowing capacity by $ 15 million, the Amendment reduced the fourth tranche under the Loan Facility (“Tranche 4”) by $ 15.0 million to $ 60.0 million , which amount is available subject to Hercules’ sole discretion.

In connection with the $ 35.0 million drawn under the second tranche at the closing of the Amendment, the Company issued to Hercules and affiliates Tranche 2 Warrants to purchase 2,453 shares of common stock, which had a Black-Scholes value of $ 0.5 million.

The Amendment reduced the interest rate under the Amended Loan Facility to the greater of (i) the prime rate as reported in The Wall Street Journal plus 2.45 % and (ii) 8.25 %.

The Amendment and the Amended Loan Facility summary terms were disclosed in the Company’s Current Report on Form 8-K

filed with the Securities and Exchange Commission on February 9, 2023.

The Loan Facility includes affirmative and restrictive financial covenants commencing on January 1, 2023, including maintenance of a minimum cash, cash equivalents and liquid funds covenant of $ 35.0 million, which may decrease in certain circumstances if the Company achieves certain clinical milestones and a revenue milestone, and a revenue-based covenant that could apply commencing at or after the time that financial reporting is due for the quarter ending September 30, 2024 .

3 unchanged sentences

insolvency, attachment or judgment events affecting the Company;

any circumstance which has occurred or could reasonably be expected to have a material adverse effect on the Company, provided that, any failure to achieve a clinical milestone or approval milestone under the Loan Facility shall not in and of itself constitute a material adverse effect.

The Loan Facility also includes customary

covenants associated with a secured loan facility, including covenants concerning financial reporting obligations, and certain limitations on indebtedness, liens (including a negative pledge on intellectual property and other assets), investments, distributions (including dividends), collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, and deposit accounts.

As of September 30, 2022, the outstanding principal under the Loan Facility was $ 50.0 million.

The interest rate as of September 30, 2022 was 10.20 %.

As of September 30, 2022, the Company was in compliance with all loan covenants and provisions.

Future minimum payments, including interest and principal, under the loans payable outstanding as of September 30, 2022 are as follows (in thousands):

Period Ending September 30, 2022:

2022 (remaining three months)

and any circumstance which has occurred or could reasonably be expected to have a material adverse effect on the Company, provided that, any failure to achieve a clinical milestone or approval milestone under the Loan Facility shall not in and of itself constitute a material adverse effect.

The Loan Facility also includes customary covenants associated with a secured loan facility, including covenants concerning financial reporting obligations, and certain limitations on indebtedness, liens (including a negative pledge on intellectual property and other assets), investments, distributions (including dividends), collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, and deposit accounts.

As of March 31, 2023, the outstanding principal under the Loan Facility was $ 85.0 million.

The interest rate as of March 31, 2023 was 10.45 %.

As of March 31, 2023, the Company was in compliance with all loan covenants and provisions.

Future minimum payments, including interest and principal, under the loans payable outstanding as of March 31, 2023 are as follows (in thousands):

Period Ending March 31, 2023:

Less amount representing interest

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Stockholders’ Equity

Each common stockholder generally is entitled to one vote for each share of common stock held, subject to limitations as may be established for certain other classes and series of stock of the Company from time to time.

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.

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

1 unchanged sentence

Preferred Stock

The Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”) has a par value of $0.0001 per share and is convertible into shares of the Common Stock at a one -to-one

ratio, subject to adjustment as provided in the Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, that the Company filed with the Secretary of State of the State of Delaware on June 21, 2017 (the “Series A Certificate”).

The terms of the Series A Preferred Stock are set forth in the Series A Certificate.

Each share of the Series A Preferred Stock is convertible into shares of Common Stock following notice that may be given at the holder’s option.

The Series A and B Preferred Stock have a par value of $ 0.0001 per share and are convertible into shares of the common stock at a one -to-one

ratio, subject to adjustment as provided in the Certificates of Designation of Preferences, Rights and Limitations of Series A Preferred Stock and Series B Preferred Stock that the Company filed with the Secretary of State of the State of Delaware on June 21, 2017 and December 22, 2022, respectively.

The terms of the Series A and B Preferred Stock are set forth in such Certificates of Designation.

Each share of the Series A and B Preferred Stock is convertible into shares of Common Stock following notice that may be given at the holder’s option.

Upon any liquidation, dissolution or winding-up

of the Company, whether voluntary or involuntary, after the satisfaction in full of the debts of the Company and the payment of any liquidation preference owed to the holders of shares of capital stock of the Company ranking prior to the Series A Preferred Stock upon liquidation, the holders of the Series A Preferred Stock shall participate pari passu with the holders of the Common Stock (on an as-if-converted-to-Common-Stock

of the Company, whether voluntary or involuntary, after the satisfaction in full of the debts of the Company and the payment of any liquidation preference owed to the holders of shares of capital stock of the Company ranking prior to the Series A and B Preferred Stock upon liquidation, the holders of the Series A and B Preferred Stock shall participate pari passu with the holders of the Common Stock (on an as-if-converted-to-Common-Stock

basis) in the net assets of the Company.

Shares of the Series A Preferred Stock will generally have no voting rights, except as required by law.

Shares of the Series A Preferred Stock will be entitled to receive dividends before shares of any other class or series of capital stock of the Company (other than dividends in the form of the Common Stock) equal to the dividend payable on each share of the Common Stock, on an as-converted

Shares of the Series A and B Preferred Stock will generally have no voting rights, except as required by law.

Shares of the Series A and B Preferred Stock will be entitled to receive dividends before shares of any other class or series of capital stock of the Company (other than dividends in the form of the Common Stock) equal to the dividend payable on each share of the Common Stock, on an as-converted

December 2022 Registered Direct Offering

In December 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a group of institutional accredited investors, who were existing, non-controlling

stockholders of the Company, pursuant to which the Company sold securities to the Investors in an offering that was registered under the Company’s existing shelf registration statement (the “2022 Registered Direct Offering”).

Under the terms of the Purchase Agreement, the Company sold 44,444 shares of its common stock at a price of $ 225 per share, and 400,000 shares of its Series B Convertible Preferred Stock at a price of $ 225 per share.

The 2022 Registered Direct Offering resulted in gross proceeds to the Company of approximately $ 100.0 million, and net proceeds to the Company of approximately $ 99.5 million.

The 2022 Registered Direct Offering closed on December 23, 2022.

At-The-Market

Issuance Sales Agreement

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

In June 2021, the Company entered into an at-the-market

sales agreement (the “2021 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.

2 unchanged sentences

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.

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).

As of September 30, 2022, 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.

All of those shares were sold in 2021.

As of September 30, 2022, $ 159.2 million remained reserved and available for sale under the 2021 Sales Agreement and the Company’s related prospectus supplement.

Subject to the terms and conditions of the 2021 Sales Agreement, Cowen would 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 imposed).

In December 2022, the Company sold 738,900 shares under the 2021 Sales Agreement for an aggregate of $ 159.1 million in gross proceeds, with net proceeds to the Company of $ 155.9 million after deducting commissions and other transaction costs.

In total, under the 2021 Sales Agreement the Company sold 1,235,943 shares for an aggregate of $ 199.9 million in gross proceeds, with net proceeds to the Company of approximately $ 195.8 million after deducting commissions and other transaction costs.

Of those shares sold, 738,900 were sold in 2022, and 497,043 were sold in 2021.

All shares were sold pursuant to the Company’s effective shelf registration statement and the prospectus supplement relating thereto.

As of March 31, 2023, no amounts remained reserved and available for sale under the 2021 Sales Agreement and the related prospectus supplement.

Stock-based Compensation

1 unchanged sentence

The 2015 Stock Plan provides for the grant of incentive stock options, non-statutory

stock options, restricted stock and other stock-based compensation awards to employees, officers, directors, and consultants of the Company.

stock options, restricted stock, restricted stock units and other stock-based compensation awards to employees, officers, directors, and consultants of the Company.

The administration of the 2015 Stock Plan is under the general supervision of the Compensation Committee of the Board of Directors.

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 September 30, 2022, the Company had options outstanding to purchase 3,026,163 shares of its common stock, which includes options outstanding under its prior incentive compensation plan, the 2006 Stock Plan.

As of September 30, 2022, 936,704 shares were available for future issuance under the 2015 Stock Plan.

The following table summarizes stock option activity during the nine months ended September 30, 2022:

As of March 31, 2023, the Company had restricted stock units and options outstanding to purchase 2,875,723 shares of its common stock, which includes options outstanding under its prior incentive compensation plan, the 2006 Stock Plan.

As of March 31, 2023, 690,809 shares were available for future issuance under the 2015 Stock Plan.

Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2023:

average exercise

1 unchanged sentence

Options granted

Options exercised

Options cancelled

Outstanding at September 30, 2022

Exercisable at September 30, 2022

The total cash received by the Company as a result of stock option exercises was $ 0 million and $ 0.5 million, respectively, for the nine months ended September 30, 2022 and 2021.

The total intrinsic value of options exercised was $ 0 million and $ 0.1 million, respectively, for the nine months ended September 30, 2022 and 2021.

The weighted-average grant date fair values, based on the Black-Scholes option model, of options granted during the nine months ended September 30, 2022 and 2021 were $ 55.14 and $ 75.71 , respectively.

Outstanding at March 31, 2023

Exercisable at March 31, 2023

The total cash received by the Company as a result of stock option exercises was $ 17.9 million and $ 0 million, respectively, for the three months ended March 31, 2023 and 2022.

The total intrinsic value of options exercised was $ 32.5 million and $ 0 million, respectively, for the three months ended March 31, 2023 and 2022.

The weighted-average grant date fair values, based on the Black-Scholes option model, of options granted during the three months ended March 31, 2023 and 2022 were $ 219.02 and $ 59.63 , respectively.

Restricted Stock Units

The Company’s share-based compensation plan provides for awards of restricted stock units to employees, officers, directors and consultants to the Company.

Restricted stock units vest over the service period, and are subject to forfeiture if employment or service terminates before vesting.

As of March 31, 2023, the Company had 199,125 restricted stock units outstanding, with a weighted average grant date fair value of $ 297.18 per unit.,

Stock-Based Compensation Expense

Stock-based compensation expense during the nine months ended September 30, 2022 and 2021 was as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Stock-based compensation expense during the three months ended March 31, 2023 and 2022 was as follows (in thousands):

Three Months Ended March 31,

Stock-based compensation expense by type of award:

Stock options

Restricted stock units

Total stock-based compensation expense

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Total stock-based compensation expense included in net loss

Unrecognized stock-based compensation expense on stock options as of September 30, 2022 was $ 64.2 million with a weighted average remaining period of 2.80 years.

Unrecognized stock-based compensation expense on stock options as of March 31, 2023 was $ 52.3 million with a weighted average remaining period of 2.42 years.

Commitments and Contingencies

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Furthermore, a tiered single-digit royalty is payable on net sales of resmetirom or a product developed from resmetirom, subject to certain reductions.

The Company has not achieved any additional product development or regulatory milestones and had no Licensed Product sales for the nine months ended September 30, 2022 and 2021.

The Company has entered into customary contractual arrangements and letters of intent in preparation for and in support of the Phase 3 clinical trials.

The Company has not achieved any additional product development or regulatory milestones and had no Licensed Product sales for the three months ended March 31, 2023 and 2022.

The Company has entered into customary contractual arrangements and letters of intent in preparation for and in support of the clinical trials.

Subsequent Event

In May 2023, the Company amended the 2021 Agreement (the “2023 Sales Agreement Amendment”), with 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 this arrangement.

Any shares sold will be sold pursuant to the Company’s effective shelf registration statement on Form S-3 (the “Registration Statement”) and a prospectus supplement filed pursuant to the Registration Statement.

The Sales Agreement Amendment authorizes an additional 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” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, and as described in the prospectus supplement.

********** END OF FINANCIAL STATEMENTS **********

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, that are based on our beliefs and assumptions and on information currently available to us, but are subject to factors beyond our control.

Forward-looking statements:

This Quarterly Report on Form 10-Q

includes “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, that are based on our beliefs and assumptions and on information currently available to us, but are subject to factors beyond our control Forward-looking statements:

reflect management’s current knowledge, assumptions, judgment and expectations regarding future performance or events;

include all statements that are not historical facts;

and can be identified by terms such as “accelerate,” “achieve,” “allow,” “anticipates,” “appear,” “be,” “believe,” “believes,” “can,” “continue,” “could,” “demonstrates,” ”design,” “estimates,” “expects,” “expectation,” “forecasts,” “future,” “goal,” “help,” “hopeful,” “inform,” “intends,” “may,” “might,” “on track,” “planned,” “planning,” “plans,” “positions,” “potential,” “powers,” “predicts,” ”predictive,” “projects,” “seeks,” “should,” “will,” “will be,” “will achieve,” “would” or similar expressions and the negatives of those terms.

and can be identified by terms such as “accelerate,” “achieve,” “allow,” “anticipates,” “appear,” “be,” “believes,” “can,” “continue,” “confidence,” “could,” “demonstrates,” “design,” “estimates,” “expectation,” “expects,” “forecasts,” “future,” “goal,” “help,” “hopeful,” “inform,” “informed,” “intends,” “may,” “might,” “on track,” “planned,” “planning,” “plans,” “positions,” “potential,” “powers,” “predicts,” ”predictive,” “projects,” “seeks,” “should,” “will,” “will achieve,” “will be,” “would” or similar expressions and the negatives of those terms.

In particular, forward-looking statements contained in or incorporated by reference to this Quarterly Report relate to, among other things,

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Our ability to delay certain research activities and related clinical expenses as necessary;

Our historic operating costs and financial resources at September 30, 2022 indicate substantial doubt exists related to our ability to continue as a going concern under ASC 205-40 without the completion of future debt or equity financings, collaborations, partnerships or other strategic transactions;

absent completion of a financing transaction to address such shortfall on acceptable terms when needed, the Company could be subjected to the adverse effects described in this document under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations ;

Liquidity and Capital Resources;”

Our projected resources and sufficiency of capital to fund our operating expenses through the projected commercial launch of resmetirom, assuming Food and Drug Administration (“FDA”) approval is obtained;

Our clinical trials, including the anticipated timing of disclosure, presentations of data from, or outcomes from our trials,

Research and development activities, and the timing and results associated with the future development of our lead product candidate, resmetirom (formerly known as MGL-3196), including projected market size, sector leadership, and patient treatment estimates for non-alcoholic steatohepatitis (“NASH”) and non-alcoholic fatty liver disease (“NAFLD”) patients;

The timing and completion of projected future clinical milestone events, including enrollment, additional studies, top-line data and open label projections;

Plans, objectives and timing for making a Subpart H (Accelerated Approval of New Drugs for Serious or Life-Threatening Illnesses) submission to FDA;

Projections or objectives for obtaining accelerated or full approval for resmetirom for non-cirrhotic NASH patients and NASH patients with compensated cirrhosis;

Research and development activities, and the timing and results associated with the future development of our lead product candidate, resmetirom (formerly known as MGL-3196),

including projected market size, sector leadership, and patient treatment estimates for non-alcoholic

steatohepatitis (“NASH”) and nonalcoholic fatty liver disease (“NAFLD”) patients,

The timing and completion of projected future clinical milestone events, including enrollment, additional studies, top-line

data and open label projections,

Resmetirom’s potential to be a cost-effective specialty therapy for NASH patients with significant liver fibrosis,

Plans, objectives and timing for making a Subpart H (Accelerated Approval of New Drugs for Serious or Life-Threatening Illnesses) submission to the FDA,

Projections or objectives for obtaining accelerated or full approval for resmetirom for NASH patients with significant fibrosis (or non-cirrhotic

NASH patients) and NASH patients with compensated cirrhosis,

Our primary and key secondary study endpoints for resmetirom, and the potential for achieving such endpoints and projections, including NASH resolution, safety, fibrosis treatment, cardiovascular effects and lipid treatment with resmetirom,

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Our ability to address the unmet needs of patients suffering from NASH with significant fibrosis,

The potential efficacy and safety of resmetirom for non-cirrhotic NASH patients and cirrhotic NASH patients;

The potential for resmetirom to become the best-in-class and/or first-to-market treatment option for patients with NASH and liver fibrosis;

The potential efficacy and safety of resmetirom for non-cirrhotic

NASH patients and cirrhotic NASH patients,

The potential for resmetirom to become the best-in-class

and/or first-to-market

treatment option for patients with NASH and liver fibrosis;

Anticipated or estimated future results of operations and expenses as we expand our resmetirom clinical development program and our commercial development program;

launch/partnering plans,

The ability to develop clinical evidence demonstrating the utility of non-invasive tools and techniques to screen and diagnose NASH and/or NAFLD patients;

The predictive power of liver fat reduction with resmetirom, as measured by non-invasive tests, on NASH resolution and/or fibrosis reduction or improvement, and potential NASH or NAFLD patient risk profile benefits with resmetirom;

The ability to develop clinical evidence demonstrating the utility of non-invasive

tools and techniques to screen and diagnose NASH and/or NAFLD patients,

The predictive power of liver fat reduction with resmetirom, as measured by non-invasive

tests, on NASH resolution and/or fibrosis reduction or improvement, and potential NASH or NAFLD patient risk profile benefits with resmetirom,

The predictive power of liver fat, liver volume changes or MAST scores for NASH and/or NAFLD patients,

The predictive power of NASH resolution and/or liver fibrosis reduction or improvement with resmetirom using non-invasive tests, including the use of ELF, FibroScan, MRE and/or MRI-PDFF;

The predictive power of non-invasive tests generally, including for purposes of diagnosing NASH, monitoring patient response to resmetirom, or recruiting and conducting a NASH clinical trial;

The predictive power of NASH resolution and/or liver fibrosis reduction with resmetirom or improvement using non-invasive

tests, including the use of ELF, FibroScan, MRE and/or MRI-PDFF,

The predictive power of non-invasive

tests generally, including for purposes of diagnosing NASH, monitoring patient response to resmetirom, or recruiting and conducting a NASH clinical trial,

Market demand for and acceptance of our products,

Research, development and commercialization of new products,

The potential for resmetirom to be an effective treatment for other disease indications,

Obtaining and maintaining regulatory approvals, including, but not limited to, potential regulatory delays or rejections,

Risks associated with meeting the objectives of our clinical studies, including, but not limited to our ability to achieve enrollment objectives concerning patient numbers (including an adequate safety database), outcomes objectives and/or timing objectives for our studies, any delays or failures in enrollment, the occurrence of adverse safety events, and the risks of successfully conducting trials that are substantially larger, and have patients with different disease states, than our past trials,

Risks related to the effects of resmetirom’s mechanism of action and our ability to accomplish our business and business development objectives and realize the anticipated benefit of any such transactions;

our continued reliance on third-party contract manufacturers for the manufacture of our product candidates, including resmetirom,

Assumptions underlying any of the foregoing.

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our clinical and commercial development of resmetirom;

enrollment and trial outlook uncertainties, generally, based on blinded, locked or limited trial data and in relation to COVID-19 related measures and individual precautionary measures that may be implemented or continued for an uncertain period of time;

our potential inability to raise sufficient capital to fund our ongoing operations as currently planned, continue as a going concern and to obtain financings on terms similar to those we have arranged in the past;

enrollment and trial outlook uncertainties, generally, based on blinded, locked or limited trial data and in relation to COVID-19-related

measures and individual precautionary measures that may be implemented or continued for an uncertain period of time;

our potential inability to raise sufficient capital to fund our ongoing operations as currently planned or to obtain financings on terms similar to those we have arranged in the past;

our ability to service our indebtedness and otherwise comply with our debt covenants;

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the risks of achieving potential benefits in studies that includes substantially more patients, and patients with different disease states, than our prior studies;

limitations associated with early stage or non-placebo controlled study data;

limitations associated with early stage or non-placebo

controlled study data;

the timing and outcomes of clinical studies of resmetirom;

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Securities and Exchange Commission for more detailed information regarding these risks and uncertainties and other factors that may cause actual results to differ materially from those expressed or implied.

We specifically discuss these risks and uncertainties in greater detail in the section appearing in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022 (the “2021 Form 10-K”), as updated by the risk factors discussed in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 filed with the SEC on May 9, 2022 (the “1Q 2022 Form 10-Q”), as well as in our other filings with the SEC.

You should read the 2021 Form 10-K, the 1Q 2022 Form 10-Q, this Quarterly Report, and the other documents that we file or have filed with the SEC, with the understanding that our actual future results may be materially different from the results expressed or implied by these forward-looking statements.

We specifically discuss these risks and uncertainties in greater detail in the section appearing in Part I, Item 1A of our Annual Report on Form 10-K

for the year ended December 31, 2022, filed with the SEC on February 23, 2023 (the “2022 Form 10-K”),

as well as in our other filings with the SEC.

You should read the 2022 Form 10-K,

this Quarterly Report, and the other documents that we file or have filed with the SEC, with the understanding that our actual future results may be materially different from the results expressed or implied by these forward-looking statements.

Moreover, we operate in an evolving environment.

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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 1. Financial Statements