What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-06 compared with 2023-08-08 · 79 added, 51 removed, 133 unchanged (49% of the section changed)

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As disclosed in this report under “Cautionary Note Regarding Forward-Looking Statements,” our actual results could differ materially from those discussed in these forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections contained in our Annual Report on Form 10-K for the year ended December 31, 2022.

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

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NASH is a serious inflammatory form of nonalcoholic fatty liver disease, or NAFLD.

NAFLD has become the most common liver disease in the United States and other developed countries and is characterized by an accumulation of fat in the liver with no other apparent causes.

NASH can progress to cirrhosis or liver failure, require liver transplantation and can also result in liver cancer.

Progression of NASH to end stage liver disease will soon surpass all other causes of liver failure requiring liver transplantation.

Importantly, beyond these critical conditions, NASH and NAFLD patients additionally suffer heightened cardiovascular risk and, in fact, die more frequently from cardiovascular events than from liver disease.

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

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 22 million people in the United States by 2024, 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.

Once a patient with NASH develops significant liver fibrosis (F2/F3), the risk of liver-related mortality increases substantially.

Our Completed Studies.

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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.

On December 18, 2019 the Company announced it had opened for enrollment MAESTRO-NAFLD-1, a 52-week, 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.

On December 18, 2019 we announced we had opened for enrollment MAESTRO-NAFLD-1, a 52-week, 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.

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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, we announced that we 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 220 sites in the United States and the rest of the world.

MAESTRO-NASH is a

multicenter, randomized, double-blind, placebo-controlled Phase 3 study of resmetirom in patients with liver biopsy-confirmed NASH and was initiated in March 2019.

The subpart H portion of the study enrolled more than 1,000 patients with biopsy-proven NASH (at least half with F3 (advanced) fibrosis, the remainder F2 or F1B (moderate fibrosis) with a few earlier F1 patients), randomized 1:1:1 to receive once-daily resmetirom 80 mg, resmetirom 100 mg, or placebo.

MAESTRO-NASH is a multicenter, randomized, double-blind, placebo-controlled Phase 3 study of resmetirom in patients with liver biopsy-confirmed NASH and was initiated in March 2019.

The subpart H portion of the study enrolled more than 1,000 patients with biopsy-proven NASH (with the majority having significant liver fibrosis (F2/F3)), randomized 1:1:1 to receive once-daily resmetirom 80 mg, resmetirom 100 mg, or placebo.

After 52 weeks of treatment, a second liver biopsy is performed.

The dual primary surrogate endpoints on biopsy are NASH resolution with ≥2-point reduction in NAS (NAFLD Activity Score), and with no worsening of fibrosis OR a 1-point decrease in fibrosis with no worsening of NAS.

Achievement of either primary endpoint is considered a successful trial outcome.

Achievement of either primary

endpoint is considered a successful trial outcome.

A key secondary endpoint is lowering of LDL-C.

All patients enrolled in the

MAESTRO-NASH study (approximately 1,750) continue on therapy after the initial 52-week treatment period for up to 54 months to accrue and measure hepatic clinical outcome events including progression to cirrhosis on biopsy (52 weeks and 54 months) and hepatic decompensation events, as well as all-cause mortality.

All patients enrolled in the MAESTRO-NASH study (approximately 1,750) continue on therapy after the initial 52-week treatment period for up to 54 months to accrue and measure hepatic clinical outcome events including progression to cirrhosis on biopsy (52 weeks and 54 months) and hepatic decompensation events, as well as all-cause mortality.

In December 2022, we reported topline results from the subpart H portion of the study:

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Key Developments

In July 2023, Madrigal announced the completion of the rolling submission of its New Drug Application (NDA) to the FDA for resmetirom for the treatment of adults with NASH with liver fibrosis, a disease with no approved therapy.

Madrigal has requested a priority review of the resmetirom NDA.

In September 2023, Madrigal announced we had commenced a public underwritten offering of common stock and pre-funded warrants to purchase common stock (the “Offering”).

The Offering closed in October 2023.

We received gross proceeds totaling $500.0 million.

Our net proceeds were $472.0 million, after deducting fees and commissions.

We intend to use the net proceeds from the Offering for our clinical and commercial activities in preparation for a potential launch of resmetirom in the U.S.

and for general corporate purposes, including, without limitation, research and development expenditures, clinical trial expenditures, manufacture and supply of drug substance and drug products, potential acquisitions or licensing of new technologies, capital expenditures and working capital.

Also in September 2023, Madrigal announced our Board of Directors (the “Board”) appointed William Sibold as the President and Chief Executive Officer of the Company.

In connection with this appointment, the size of the Board was increased to nine, and Mr.

Sibold was also appointed a member of the Board.

Sibold’s start date, he assumed the duties and responsibilities of the Company’s principal executive officer from Paul Friedman, M.D., who served as the Chief Executive Officer since July of 2016.

Friedman continues to serve on the Board as a director of the Company.

Additionally in September 2023, the U.S.

Food and Drug Administration (the “FDA”) informed Madrigal that it has accepted for review our New Drug Application (“NDA”) for resmetirom for the treatment of adult patients with NASH with liver fibrosis and granted a Priority Review designation.

The FDA has assigned a Prescription Drug User Fee Act (“PDUFA”) date of March 14, 2024, the target date by which the FDA intends to complete its review and take action on the NDA.

The FDA noted in its September 2023 correspondence that it is not currently planning to hold an advisory committee meeting to discuss our application.

In April 2023, Madrigal announced that resmetirom has received Breakthrough Therapy designation from the FDA for the treatment of patients with NASH with liver fibrosis.

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We contract with clinical research organizations to manage our clinical trials under agreed upon budgets for each study, with oversight by our clinical program managers.

We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received.

We account for nonrefundable advance payments for goods and services that will be used in future research and

development activities as expenses when the service has been performed or when the goods have been received.

Manufacturing expense includes costs associated with drug formulation development and clinical drug production.

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

There have been no material changes in our critical accounting policies and significant judgments and estimates during the six months ended June 30, 2023, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 23, 2023.

There have been no material changes in our critical accounting policies and significant judgments and estimates during the nine months ended September 30, 2023, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 23, 2023.

Results of Operations

Three Months Ended June 30, 2023 and 2022

The following table provides comparative unaudited results of operations for the three months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30,

Three Months Ended September 30, 2023 and 2022

The following table provides comparative unaudited results of operations for the three months ended September 30, 2023 and 2022 (in thousands):

Three Months Ended September 30,

Increase / (Decrease)

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Interest Expense

We had no revenue for the three months ended June 30, 2023 and 2022.

We had no revenue for the three months ended September 30, 2023 and 2022.

Research and Development Expenses

Our research and development expenses were $68.6 million for the three months ended June 30, 2023, compared to $58.5 million in the corresponding period in 2022.

Our research and development expenses were $71.0 million for the three months ended September 30, 2023, compared to $68.3 million in the corresponding period in 2022.

Research and development expenses increased by $2.7 million in the 2023 period due primarily to the additional activities related to our Phase 3 clinical trials, including MAESTRO-NASH Outcomes, an increase in headcount, and an increase in stock compensation expense.

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General and Administrative Expenses

Our general and administrative expenses were $17.8 million for the three months ended June 30, 2023, compared to $11.8 million in the corresponding period in 2022.

Our general and administrative expenses were $27.6 million for the three months ended September 30, 2023, compared to $12.1 million in the corresponding period in 2022.

General and administrative expenses increased by $15.4 million in the 2023 period due primarily to increases in commercial preparation activities, including a corresponding increase in headcount, and an increase in stock compensation expense.

We believe our general and administrative expenses may increase over time as we advance our clinical and preclinical development programs for resmetirom, prepare for commercialization, 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.

We believe our general and administrative expenses may increase over time as we prepare for commercialization, and expand our operating activities, which will likely result in an increase in our headcount, consulting services, and related overhead needed to support those efforts.

Interest Income

Our net interest income was $3.6 million for the three months ended June 30, 2023, compared to $0.3 million in the corresponding period in 2022.

Our net interest income was $3.3 million for the three months ended September 30, 2023, compared to $0.7 million in the corresponding period in 2022.

The increase in interest income was due primarily to higher principal balances and interest rates in 2023.

Interest Expense

Our interest expense was $2.9 million for the three months ended June 30, 2023, compared to $0.8 million in the corresponding period in 2022.

Our interest expense was $3.5 million for the three months ended September 30, 2023, compared to $1.5 million in the corresponding period in 2022.

The increase in interest expense was primarily as a result of higher outstanding principal balances during the period under the Loan Facility with Hercules.

Six Months Ended June 30, 2023 and 2022

The following table provides comparative unaudited results of operations for the six months ended June 30, 2023 and 2022 (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30, 2023 and 2022

The following table provides comparative unaudited results of operations for the nine months ended September 30, 2023 and 2022 (in thousands):

Nine Months Ended September 30,

Increase / (Decrease)

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Interest Expense

We had no revenue for the six months ended June 30, 2023 and 2022.

We had no revenue for the nine months ended September 30, 2023 and 2022.

Research and Development Expenses

Our research and development expenses were $130.8 million for the six months ended June 30, 2023, compared to $106.4 million in the corresponding period in 2022.

Our research and development expenses were $201.7 million for the nine months ended September 30, 2023, compared to $174.7 million in the corresponding period in 2022.

Research and development expenses increased by $27.0 million in the 2023 period due primarily to the additional activities related to our Phase 3 clinical trials, including MAESTRO-NASH Outcomes, an increase in headcount, and an increase in stock compensation expense.

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General and Administrative Expenses

Our general and administrative expenses were $34.0 million for the six months ended June 30, 2023, compared to $21.4 million in the corresponding period in 2022.

Our general and administrative expenses were $61.6 million for the nine months ended September 30, 2023, compared to $33.6 million in the corresponding period in 2022.

General and administrative expenses increased by $28.0 million in the 2023 period due primarily to increases in commercial preparation activities, including a corresponding increase in headcount, and an increase in stock compensation expense.

Interest Income

Our net interest income was $7.3 million for the six months ended June 30, 2023, compared to $0.4 million in the corresponding period in 2022.

Our net interest income was $10.6 million for the nine months ended September 30, 2023, compared to $1.1 million in the corresponding period in 2022.

The increase in interest income was due primarily to higher principal balances and interest rates in 2023.

Interest Expense

Our interest expense was $5.2 million for the six months ended June 30, 2023, compared to $0.8 million in the corresponding period in 2022.

Our interest expense was $8.7 million for the nine months ended September 30, 2023, compared to $2.3 million in the corresponding period in 2022.

The increase in interest expense was primarily as a result of higher outstanding principal balances during the period under the Loan Facility with Hercules.

Liquidity and Capital Resources

Since inception, we have incurred significant net losses and we have funded our operations primarily through the issuance of shares of our common stock and shares of our preferred stock, borrowings under the Loan Facility with Hercules, the issuance of convertible debt and the proceeds from the merger with Synta Pharmaceuticals Corp.

Since inception, we have incurred significant net losses and we have funded our operations primarily through the issuance of shares of our common stock, shares of our Preferred Stock, issuances of pre-funded warrants, borrowings under the Loan Facility with Hercules, the issuance of convertible debt and the proceeds from the merger with Synta Pharmaceuticals Corp.

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 June 30, 2023, we had cash, cash equivalents and marketable securities totaling $298.4 million compared to $358.8 million as of December 31, 2022, with this decrease attributable to funding of operations, partially offset by $50.0 million drawn from the Loan Facility with Hercules, proceeds from the exercise of stock options, and proceeds from the at-the-market sales agreement with Cowen and Company, LLC (“Cowen”).

As of September 30, 2023, we had cash, cash equivalents and marketable securities totaling $232.4 million compared to $358.8 million as of December 31, 2022, with this decrease attributable to funding of operations, partially offset by $65.0 million drawn from the Loan Facility with Hercules, proceeds from the exercise of stock options, and proceeds from the at-the-market sales agreement with Cowen and Company, LLC (“Cowen”).

In October 2023, we completed a public offering and received an additional $472.0 million net cash proceeds.

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

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

While our rate of cash usage will likely increase in the future, in particular to support our product development and clinical trial efforts, as well as preparation for commercialization, we believe our available cash resources as of June 30, 2023 will be sufficient to fund our operations past one year from the issuance of the financial statements contained herein.

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

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

To meet future long-term liquidity requirements, as well as maintain compliance with certain of our Loan Facility covenants, we will need to raise additional capital to fund our operations through equity or debt financings, collaborations, partnerships or other strategic transactions.

To meet future long-term liquidity requirements, as well as maintain compliance with certain of our Loan Facility covenants, we may 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.

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

Additional capital, if needed, 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, as well as commercial preparation investments, if necessary due to liquidity concerns until a date when those concerns are relieved.

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On May 9, 2023, the Company entered into Amendment No.

1 (the “Amendment”) to the Sales Agreement, dated June 1, 2021 (as amended, the “Sales Agreement”) with Cowen, which Amendment increased by up to an additional $200,000,000 the amount of common stock that can be issued and sold by the Company from time to time through or to Cowen under the Sales Agreement, acting as agent or principal.

1 (the “Sales Agreement Amendment”) to the June 2021 Sales Agreement (the “2021 Sales Agreement”) with Cowen, which the Sales Agreement Amendment increased by up to an additional $200.0 million the amount of common stock that can be issued and sold by the Company from time to time through or to Cowen under the 2021 Sales Agreement, acting as agent or principal.

Sales of our common stock, if any, under the Sales Agreement will be made by any method that is deemed to be an “at the market” offering as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended.

The Company has no obligation to sell any common stock and may at any time suspend offers under the Sales Agreement or terminate the Sales Agreement pursuant to its terms.

We have no obligation to sell any common stock and may at any time suspend offers under the Sales Agreement or terminate the Sales Agreement pursuant to its terms.

During the three months ended September 30, 2023, under the Sales Agreement Amendment, we sold 12,200 shares for an aggregate of $2.8 million in gross proceeds, with net proceeds of approximately $2.7 million after deducting commissions and other transaction costs.

During the nine months ended September 30, 2023, and in total under the Sales Agreement Amendment, we sold 98,101 shares for an aggregate of $25.2 million in gross proceeds, with net proceeds to the Company of approximately $24.5 million after deducting commissions and other transaction costs.

All shares were sold pursuant to our effective Registration Statement and the prospectus supplement relating thereto.

As of September 30, 2023, $174.8 million remained reserved and available for sale under the 2023 Sales Agreement Amendment and our related prospectus supplement.

Loan Facility

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

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities

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Net increase (decrease) in cash and cash equivalents

Net cash used in operating activities was $159.4 million for the six months ended June 30, 2023, compared to $107.3 million for the corresponding period in 2022.

Net cash used in operating activities was $244.3 million for the nine months ended September 30, 2023, compared to $166.3 million for the corresponding period in 2022.

The use of cash in these periods resulted primarily from our losses from operations, as adjusted for non-cash charges for stock-based compensation, and changes in our working capital accounts.

Net cash used in investing activities was $190.6 million for the six months ended June 30, 2023, compared to $75.2 million provided by for the corresponding period in 2022.

Net cash used in investing activities for the six months ended June 30, 2023 primarily consisted of $290.7 million of purchases of marketable securities for our investment portfolio, partially offset by $100.2 million from sales and maturities of marketable securities.

Net cash used in investing activities was $140.4 million for the nine months ended September 30, 2023, compared to $140.3 million provided by for the corresponding period in 2022.

Net cash used in investing activities for the nine months ended September 30, 2023 primarily consisted of $359.6 million of purchases of marketable securities for our investment portfolio, partially offset by $219.6 million from sales and maturities of marketable securities.

Net cash provided by investing activities for the corresponding period in 2022 primarily consisted of $271.2 million from sales and maturities of marketable securities, partially offset by $130.7 million of purchases of marketable securities for our investment portfolio.

Net cash provided by financing activities was $95.6 million for the six months ended June 30, 2023, compared to $49.1 million for the corresponding period in 2022.

Financing activities for the six months ended June 30, 2023 consisted of $50.0 million from borrowings under the Loan Facility, $24.2 million of proceeds from the exercise of common stock options, and $21.8 million from sales of our common stock under the 2023 Sales Agreement, partially offset by $0.3 million of loan issuance costs.

Net cash provided by financing activities was $115.2 million for the nine months ended September 30, 2023, compared to $49.1 million for the corresponding period in 2022.

Financing activities for the nine months ended September 30, 2023 consisted of $65.0 million from borrowings under the Loan Facility, $26.1 million of proceeds from the exercise of common stock options, and $24.5 million from sales of our common stock under the 2023 Sales Agreement, partially offset by $0.4 million of loan issuance costs.

Net cash provided by for the corresponding period in 2022 consisted of $50.0 million from borrowings under the Loan Facility, partially offset by $0.9 million of loan issuance costs.

Underwritten Public Offering Completed on October 3, 2023

On September 28, 2023, we entered into an Underwriting Agreement with Goldman Sachs & Co.

LLC, as representative of the several underwriters named therein, pursuant to which we sold to the underwriters in an underwritten public offering (the “Offering”):

(i) 1,248,098 shares of common stock at a public offering price of $151.69 per share, and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase 2,048,098 shares of common stock at a public offering price of $151.6899 per Pre-Funded Warrant, which represents the per share public offering price for the common stock less a $0.0001 per share exercise price for each such Pre-Funded Warrant.

The Offering closed on October 3, 2023.

The gross proceeds of the Offering was $500.0 million, and we received net proceeds, after deducting the underwriting discount and commissions and other estimated offering expenses payable by us, of approximately $472.0 million.

We intend to use the net proceeds from the Offering for our clinical and commercial activities in preparation for a potential launch of resmetirom in the U.S.

The Pre-Funded Warrants are exercisable at any time after the date of issuance.

A holder of Pre-Funded Warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise.

A holder of Pre-Funded Warrants may increase or decrease this percentage, but not in excess of 19.99%, by providing at least 61 days prior notice to us.

Contractual Obligations and Commitments

Except for the future minimum payments due on the Loan Facility with Hercules set forth in “Note 6 – Long Term Debt” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, no significant changes to contractual obligations and commitments occurred during the six months ended June 30, 2023, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 23, 2023.

In August 2023, we entered into the Fifth Amendment to our Office Lease (the “Lease Amendment”).

The Lease Amendment extends the term of the lease through November 2026.

As a result of the Lease Amendment, an incremental $1.6 million ROU asset and lease liabilities were recorded during the nine months ended September 30, 2023.

Except as noted above and the future minimum payments due on the Loan Facility with Hercules set forth in “Note 6 – Long Term Debt” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, no significant changes to contractual obligations and commitments occurred during the nine months ended September 30, 2023, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 23, 2023.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis