MADRIGAL PHARMACEUTICALS, INC. 10-K

Item 9A. Controls and Procedures. Disclosure Controls and Procedures We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Under the supervision of our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. Based on that 66 Table of Contents evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2023. 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. 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. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Management’s Report On Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for our company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. This process includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management, including our principal executive officer and our principal financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, our management used the criteria set forth in the “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on its assessment under that framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2023. PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2023, as stated in its report, which is included herein. Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting during the year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting. Item 9B. Other Information. Director and Executive Officer Adoption of 10b5-1 Plans Our Section 16 officers and directors may enter into plans or arrangements for the purchase or sale of our securities that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act. Such plans and arrangements must comply in all respects with our insider trading policies, including our policy governing entry into and operation of 10b5-1 plans and arrangements. During the quarter ended December 31, 2023: the following Section 16 officers and directors adopted Rule 10b5-1 trading arrangements (as defined in Item 408 of Regulation S-K of the Exchange Act); and no plans were modified or terminated . All plans adopted covered sales of Madrigal common stock (including sales of Madrigal common stock following exercise of stock options). 67 Table of Contents Name of Director or Section 16 Officer Title of Director or Section 16 Officer Date of Adoption, Modification, or Termination Duration of the Plan Aggregate Number of Shares of Common Stock that may be Sold under the Plan Becky Taub, MD President of R&D, CMO and Director 11/27/2023 April 3, 2025 76,564 Kenneth Bate Director 11/16/2023 June 27, 2024 32,489 James Daly Director 11/16/2023 June 27, 2024 32,489 Paul Friedman, MD Director 11/27/2023 April 3, 2025 100,000 Richard Levy, MD Director 11/30/2023 June 16, 2025 26,000 68 Table of Contents PART III Certain information required by Part III is omitted from this Annual Report on Form 10-K because we intend to file our definitive Proxy Statement for our next Annual Meeting of Stockholders, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, or the 2024 Proxy Statement, no later than April 29, 2024, and certain information to be included in the 2024 Proxy Statement is incorporated herein by reference. Item 10. Directors, Executive Officers and Corporate Governance. The information required by this item concerning our directors, executive officers, Section 16 compliance and corporate governance matters is incorporated by reference in our 2024 Proxy Statement (excluding the information contained under the heading "Executive Officer and Director Compensation--Pay Versus Performance"). Item 11. Executive Compensation. The information required by this item regarding executive compensation is incorporated by reference in our 2024 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this item regarding security ownership of certain beneficial owners and management is incorporated by reference in our 2024 Proxy Statement. In addition, information about our equity compensation plans is incorporated herein by reference to our 2024 Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this item regarding certain relationships and related transactions is incorporated by reference in our 2024 Proxy Statement. Item 14. Principal Accountant Fees and Services The information required by this item regarding principal accounting fees and services is incorporated by reference in our 2024 Proxy Statement. 69 Table of Contents PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Item 15(a) The following documents are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K: Item 15(a)(1) and (2) The Consolidated Financial Statements beginning on page F-1 are filed as part of this Annual Report on Form 10-K. Other financial statement schedules have been omitted because the information required to be presented in them is not applicable or is shown in the financial statements or related notes. Item 15(a)(3) We have filed, or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed on the accompanying Exhibit Index. Item 15(b) See Item 15(a)(3) above. Item 15(c) See Item 15(a)(2) above. Exhibit Number Exhibit Description Filed Herewith Incorporated by Reference herein from Form or Schedule Filing Date SEC File / Registration Number 3.1 Restated Certificate of Incorporation of the Registrant. Form 10-K (Exhibit 3.1) 3/31/2017 001-33277 3.2 Certificate of Amendment to Restated Certificate of Incorporation of Madrigal Pharmaceuticals, Inc., as filed on June 16, 2023 with the Secretary of State of the State of Delaware Form 8-K (Exhibit 3.1) 6/20/2023 001-33277 3.3 Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock. Form 8-K (Exhibit 3.1) 6/21/2017 001-33277 3.4 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock Form 8-K (Exhibit 3.1) 12/23/2022 001-33277 3.5 Bylaws of the Registrant, as amended April 13, 2016. DEFA14A; Form 8-K (Exhibit 3.1) 4/14/2016 001-33277 4.1 Form of Warrant Agreement, dated May 9, 2022, between the Registrant and Hercules Capital, Inc. and affiliates. Form 10-Q (Exhibit 4.1) 08/04/2022 001-33277 4.2† Form of Tranche 2 Warrant Agreement, dated February 3, 2023, by and among the Registrant and Hercules Capital, Inc. and affiliates. Form 8-K (Exhibit 4.1) 2/9/2023 001-33277 4.3 Form of Pre-Funded Warrant of the Registrant Form 8-K (Exhibit 4.1) 10/2/2023 001-33277 4.4 Description of Securities of the Registrant Form 10-K (Exhibit 4.3) 2/23/2023 001-33277 Equity Agreements 10.1 Securities Purchase Agreement, dated June 20, 2017, by and among the Registrant and the investors party thereto, including the Registration Rights Agreement attached as Exhibit B thereto. Form 8-K (Exhibit 10.1) 6/21/2017 001-33277 10.2 Amendment No. 2, dated December 22, 2022, to Securities Purchase Agreement, dated June 20, 2017, by and among the Registrant and the investors listed on the signature pages thereto. Form 8-K (Exhibit 10.2) 12/23/2022 001-33277 10.3 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). Form 8-K (Exhibit 1.1) 6/1/2021 001-33277 10.4 Securities Purchase Agreement, dated December 21, 2022, by and among the Registrant and the institutional investors listed on the signature pages thereto. Form 8-K (Exhibit 10.1) 12/23/2022 001-33277 70 Table of Contents Exhibit Number Exhibit Description Filed Herewith Incorporated by Reference herein from Form or Schedule Filing Date SEC File / Registration Number 10.5 Amendment No. 1 to Sales Agreement, dated May 9, 2023, by and between Madrigal Pharmaceuticals, Inc. and Cowen and Company, LLC. Form 8-K (Exhibit 1.1) 5/9/2023 001-33277 10.6 Registration Rights Agreement, dated August 7, 2023, by and among Madrigal Pharmaceuticals, Inc., 667, L.P. and Baker Brothers Life Sciences, L.P. Form 10-Q (Exhibit 10.2) 8/8/2023 001-33277 Debt Agreements 10.7† Loan and Security Agreement, dated May 9, 2022, as amended by the First Amendment to Loan and Security Agreement, dated February 3, 2023, by and among the Registrant, Canticle Pharmaceuticals, Inc., the several banks and other financial institutions or entities from time to time party thereto and Hercules Capital, Inc. Form 8-K (Exhibit 10.1) 2/09/2023 001-33277 Agreements with Respect to Collaborations, Licenses, Research and Development 10.8 Research, Development and Commercialization Agreement, dated December 18, 2008, by and between Hoffmann-La Roche, Inc., F. Hoffmann-La Roche Ltd and the Registrant.† Form 10-Q (Exhibit 10.5) 11/14/2016 001-33277 Equity Compensation Plans 10.9* Amended 2015 Stock Plan Definitive Proxy Statement (Annex A) 4/30/2021 001-33277 10.10* Form of Incentive Stock Option Agreement under Amended 2015 Stock Plan. Form 10-K (Exhibit 10.10) 3/31/2017 001-33277 10.11* Form of Nonqualified Stock Option Agreement under Amended 2015 Stock Plan. Form 10-K (Exhibit 10.11) 3/31/2017 001-33277 10.12* Form of Nonqualified Stock Option Agreement for Directors under Amended 2015 Stock Plan (pre-2023) . Form 10-K (Exhibit 10.13) 3/31/2017 001-33277 10.13* Non-Employee Director Equity Compensation Policy Form 10-Q (Exhibit 10.1) 5/6/2021 001-33277 10.14* Form of RSU Agreement for Directors under Amended 2015 Stock Plan Form 10-Q (Exhibit 10.3) 8/8/2023 001-33277 10.15* Form of RSU Agreement for Executive Officers (2023) under Amended 2015 Stock Plan Form 10-Q (Exhibit 10.4) 8/8/2023 001-33277 10.16* Form of RSU Agreement for Employees under Amended 2015 Stock Plan Form 10-Q (Exhibit 10.5) 8/8/2023 001-33277 10.17*† 2023 Inducement Plan Form S-8 9/11/2023 333-27445 10.18*† Form of Stock Option Agreement under 2023 Inducement Plan Form S-8 9/11/2023 333-27445 10.19*† Form of Restricted Stock Unit Agreement under 2023 Inducement Plan Form S-8 9/11/2023 333-27445 Agreements with Executive Officers and Directors 10.20* Form of Indemnification Agreement between the Registrant and certain directors and executive officers. X 10.21* Letter Agreement, dated April 13, 2016, by and between the Company and Rebecca Taub, M.D. Form 8-K (Exhibit 10.4) 7/22/2016 001-33277 10.22*† Letter Agreement (including agreements attached as exhibits thereto), dated September 7, 2023, by and between Madrigal Pharmaceuticals, Inc. and William J. Sibold Form 8-K (Exhibit 10.1) 9/13/2023 001-33277 21.1 List of Subsidiaries. Form 10-K (Exhibit 21.1) 2/23/2023 001-33277 23.1 Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm. X 71 Table of Contents Exhibit Number Exhibit Description Filed Herewith Incorporated by Reference herein from Form or Schedule Filing Date SEC File / Registration Number 31.1 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. X 31.2 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. X 32.1** Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 97.1 Incentive Compensation Recovery Policy X 101.INS Inline XBRL Instance Document. X 101.SCH Inline XBRL Taxonomy Extension Schema Document. X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. X 104 Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set. X _____________ * Indicates a management contract, compensatory plan or arrangement. ** The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K are not deemed filed with the SEC and are not to be incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, regardless of any general incorporation language contained in any filing. † Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. Item 16. Form 10-K Summary. None. 72 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. MADRIGAL PHARMACEUTICALS INC. Date: February 28, 2024 By: /s/ WILLIAM J. SIBOLD William J. Sibold President and Chief Executive Officer (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below hereby constitutes and appoints William J. Sibold, 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 and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorney-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or any of them, or their or his or her substitutes, may lawfully do or cause to be done or by virtue hereof. Pursuant to the requirements of the Exchange Act, as amended, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signatures Title Date /s/ WILLIAM J. SIBOLD President and Chief Executive Officer (Principal Executive Officer) February 28, 2024 William J. Sibold /s/ ALEX G. HOWARTH Chief Financial Officer (Principal Accounting and Financial Officer) February 28, 2024 Alex G. Howarth /s/ JULIAN C. BAKER Director February 28, 2024 Julian C. Baker /s/ REBECCA TAUB, M.D. Director February 28, 2024 Rebecca Taub, M.D. /s/ FRED B. CRAVES, PH.D. Director February 28, 2024 Fred B. Craves, Ph.D. /s/ KENNETH M. BATE Director February 28, 2024 Kenneth M. Bate /s/ PAUL A. FRIEDMAN, M.D. Director February 28, 2024 Paul A. Friedman, M.D. /s/ RAYMOND CHEONG Director February 28, 2024 Raymond Cheong 73 Table of Contents Signatures Title Date /s/ RICHARD S. LEVY, M.D. Director February 28, 2024 Richard S. Levy, M.D. /s/ JAMES M. DALY Director February 28, 2024 James M. Daly 74 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm F- 2 Consolidated Financial Statements: Consolidated Balance Sheets F- 4 Consolidated Statements of Operations F- 5 Consolidated Statements of Comprehensive Loss F- 6 Consolidated Statements of Stockholders’ Equity F- 7 Consolidated Statements of Cash Flows F- 8 Notes to Consolidated Financial Statements F- 9 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Madrigal Pharmaceuticals, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Madrigal Pharmaceuticals, Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report On Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. 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 may 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 A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and F-2 Table of Contents directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Research and Development Costs As described in Notes 2 and 5 to the consolidated financial statements, 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 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. Total research and development costs incurred during the year ended December 31, 2023 were $272.4 million and research and development costs accrued were $50.7 million as of December 31, 2023. The principal considerations for our determination that performing procedures relating to research and development costs is a critical audit matter are (i) the significant judgment by management when estimating the research and development costs to accrue in the reporting period; and (ii) the high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to using contracted site and patient costs applied to the number of patients screened for and enrolled in the trials to estimate costs incurred that have not been invoiced. 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 over estimating 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 invoices and assessing whether there were significant changes in contracts, 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. Evaluating the reasonableness of assumptions used in the estimate involved assessing management’s ability to estimate costs incurred that have not been invoiced by performing a comparison of the estimated accrual to contracted costs applied to the number of patients screened for and enrolled in the trials. /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania February 28, 2024 We have served as the Company’s auditor since 2016. F-3 Table of Contents MADRIGAL PHARMACEUTICALS, INC. Consolidated Balance Sheets (in thousands, except share and per share amounts) December 31, 2023 December 31, 2022 Assets Current assets: Cash and cash equivalents $ 99,915 $ 331,549 Marketable securities 534,216 27,225 Prepaid expenses and other current assets 3,150 2,595 Total current assets 637,281 361,369 Property and equipment, net 1,553 601 Right-of-use asset 1,713 602 Total assets $ 640,547 $ 362,572 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 28,041 $ 23,831 Accrued expenses 89,980 91,461 Lease liability 527 602 Total current liabilities 118,548 115,894 Long term liabilities: Loan payable, net of discount 115,480 49,289 Lease liability 1,186 — Total long term liabilities 116,666 49,289 Total liabilities 235,214 165,183 Stockholders’ equity: Preferred stock, par value $ 0.0001 per share authorized: 5,000,000 shares at December 31, 2023 and December 31, 2022; 2,369,797 and 2,369,797 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively — — Common stock, par value $ 0.0001 per share authorized: 200,000,000 at December 31, 2023 and December 31, 2022; 19,875,427 and 18,102,523 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively 2 2 Additional paid-in-capital 1,741,153 1,160,079 Accumulated other comprehensive income (loss) 468 ( 32 ) Accumulated deficit ( 1,336,290 ) ( 962,660 ) Total stockholders’ equity 405,333 197,389 Total liabilities and stockholders’ equity $ 640,547 $ 362,572 See accompanying notes to consolidated financial statements. F-4 Table of Contents MADRIGAL PHARMACEUTICALS, INC. Consolidated Statements of Operations (in thousands, except share and per share amounts) Year Ended December 31, 2023 2022 2021 Revenues: Total revenues $ — $ — $ — Operating expenses: Research and development 272,350 245,441 205,164 General and administrative 108,146 48,130 37,318 Total operating expenses 380,496 293,571 242,482 Loss from operations ( 380,496 ) ( 293,571 ) ( 242,482 ) Interest income 19,578 2,185 363 Interest expense ( 12,712 ) ( 3,964 ) — Other income — — 273 Net loss $ ( 373,630 ) $ ( 295,350 ) $ ( 241,846 ) Net loss per common share: Basic and diluted net loss per common share $ ( 19.99 ) $ ( 17.23 ) $ ( 14.63 ) Basic and diluted weighted average number of common shares outstanding 18,687,774 17,137,201 16,535,188 See accompanying notes to consolidated financial statements. F-5 Table of Contents MADRIGAL PHARMACEUTICALS, INC. Consolidated Statements of Comprehensive Loss (in thousands, except share and per share amounts) Year Ended December 31, 2023 2022 2021 Net Loss $ ( 373,630 ) $ ( 295,350 ) $ ( 241,846 ) Other comprehensive income (loss): Unrealized gain (loss) on available-for-sale securities 500 48 ( 127 ) Comprehensive loss $ ( 373,130 ) $ ( 295,302 ) $ ( 241,973 ) See accompanying notes to consolidated financial statements. F-6 Table of Contents MADRIGAL PHARMACEUTICALS, INC. Consolidated Statements of Stockholders’ Equity (in thousands, except share and per share amounts) Preferred stock Common stock Additional paid-in Capital Accumulated other comprehensive income (loss) Accumulated deficit Total stockholders’ equity Shares Amount Shares Amount Balance at December 31, 2020 1,969,797 $ — 15,508,146 $ 2 $ 665,385 $ 47 $ ( 425,464 ) $ 239,970 Issuance of common shares in equity offering, excluding to related parties, net of transaction costs — — 1,584,169 — 170,207 — — 170,207 Sale of common shares to related parties and exercise of common stock options, net of transaction costs — — 11,080 — 1,030 — — 1,030 Compensation expense related to stock options for services — — — — 26,873 — — 26,873 Unrealized loss on marketable securities — — — — — ( 127 ) — ( 127 ) Net loss — — — — — — ( 241,846 ) ( 241,846 ) Balance at December 31, 2021 1,969,797 $ — 17,103,395 $ 2 $ 863,495 $ ( 80 ) $ ( 667,310 ) $ 196,107 Issuance of common and preferred shares in equity offerings, excluding to related parties, net of transaction costs 400,000 — 783,344 — 255,382 — — 255,382 Sale of common shares to related parties and exercise of common stock options, net of transaction costs — — 215,784 — 8,955 — — 8,955 Compensation expense related to stock options for services — — — — 31,625 — — 31,625 Unrealized gain on marketable securities — — — — — 48 — 48 Hercules warrant — — — — 622 — — 622 Net loss — — — — — — ( 295,350 ) ( 295,350 ) Balance at December 31, 2022 2,369,797 $ — 18,102,523 $ 2 $ 1,160,079 $ ( 32 ) $ ( 962,660 ) $ 197,389 Issuance of common and preferred shares in equity offerings, excluding to related parties, net of transaction costs — — 1,346,199 — 260,187 — — 260,187 Sale of warrants and common shares to related parties and exercise of common stock options, net of transaction costs — — 426,705 — 270,292 — — 270,292 Compensation expense related to stock options for services — — — — 49,735 — — 49,735 Unrealized gain on marketable securities — — — — 500 — 500 Hercules warrant — — — — 860 — — 860 Net loss — — — — — — ( 373,630 ) ( 373,630 ) Balance at December 31, 2023 2,369,797 — 19,875,427 $ 2 $ 1,741,153 $ 468 $ ( 1,336,290 ) $ 405,333 See accompanying notes to consolidated financial statements. F-7 Table of Contents MADRIGAL PHARMACEUTICALS, INC. Consolidated Statements of Cash Flows (in thousands, except share and per share amounts) Year Ended December 31, 2023 2022 2021 Cash flows from operating activities: Net loss $ ( 373,630 ) $ ( 295,350 ) $ ( 241,846 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 49,735 31,625 26,873 Depreciation and amortization expense 527 467 405 Amortization of debt issuance costs and discount 2,414 797 — Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 555 ) ( 1,257 ) ( 325 ) Accounts payable 4,210 2,451 20,363 Accrued expense ( 1,481 ) 36,413 9,826 Accrued interest, net of interest received on maturity of investments ( 5,450 ) ( 3 ) 787 Net cash used in operating activities ( 324,230 ) ( 224,857 ) ( 183,917 ) Cash flows from investing activities: Purchases of marketable securities ( 834,439 ) ( 143,478 ) ( 394,120 ) Sales and maturities of marketable securities 333,398 350,381 389,274 Purchases of property and equipment, net of disposals ( 1,479 ) ( 217 ) ( 209 ) Net cash provided by (used in) investing activities ( 502,520 ) 206,686 ( 5,055 ) Cash flows from financing activities: Proceeds from issuances of stock, excluding related parties, net of transaction costs 260,187 255,382 170,207 Proceeds from the sale of related party warrants and stock and exercise of common stock options, net of transaction costs 270,292 8,955 1,030 Proceeds from issuance of loan payable 65,000 50,000 — Payment of debt issuance costs ( 363 ) ( 886 ) — Net cash provided by financing activities 595,116 313,451 171,237 Net increase (decrease) in cash and cash equivalents ( 231,634 ) 295,280 ( 17,735 ) Cash and cash equivalents at beginning of period 331,549 36,269 54,004 Cash and cash equivalents at end of period $ 99,915 $ 331,549 $ 36,269 Supplemental disclosure of cash flow information: Obtaining a right-of-use asset in exchange for a lease liability $ 1,628 $ 583 $ 376 See accompanying notes to consolidated financial statements. F-8 Table of Contents MADRIGAL PHARMACEUTICALS, INC. Notes to Consolidated Financial Statements 1. Organization, Business and Basis of Presentation Organization and Business 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. The Company's lead candidate, resmetirom, a once-daily, oral, liver-directed thyroid hormone receptor-β (“THR-β”) agonist designed to target key underlying causes of NASH, is in registration status following review acceptance by the U.S. Food and Drug Administration (the “FDA”) for its New Drug Application (“NDA”) in September 2023. Basis of Presentation Certain prior period amounts have been reclassified to align with current period presentation. 2. Summary of Significant Accounting Policies Principle of Consolidation The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash in bank accounts, the balance of which, at times, exceeds Federal Deposit Insurance Corporation insured limits. The primary objective of the Company’s investment activities is to preserve its capital for the purpose of funding operations and the Company does not enter into investments for trading or speculative purposes. The Company’s cash is deposited in highly rated financial institutions in the United States. The Company invests in money market funds and high-grade, commercial paper and corporate bonds, which management believes are subject to minimal credit and market risk. Marketable Securities Marketable securities consist of investments in high-grade corporate obligations, and government and government agency obligations that are classified as available-for-sale. Since these securities are available to fund current operations they are classified as current assets on the consolidated balance sheets. The Company adjusts the cost of available-for-sale 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, 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 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 years ended December 31, 2023, 2022 and 2021, the Company determined it did not have any securities that were other-than-temporarily impaired. F-9 Table of Contents 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. The fair value of these securities is based on quoted prices and observable inputs on a recurring basis. Realized gains and losses are determined on the specific identification method. During the years ended December 31, 2023, 2022 and 2021, the Company did no t have any realized gains or losses on marketable securities. Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, which include cash equivalents, and marketable securities, approximate their fair values. The fair value of the Company’s financial instruments reflects the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy has the following three levels: Level 1—quoted prices in active markets for identical assets and liabilities. Level 2—observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. Level 3—unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company measures the fair value of its marketable securities by taking into consideration valuations obtained from third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. 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 December 31, 2023 and 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 years ended December 31, 2023, 2022 and 2021, the Company did not have any transfers of financials assets between Levels 1 and 2. As of December 31, 2023 and 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 Research and development costs are expensed as incurred. 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 its 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 clinical trials, completion of milestones 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. Patents 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 $ 0.9 million, $ 0.5 million and $ 0.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. Stock-Based Compensation The Company recognizes stock-based compensation expense based on the grant date fair value of stock options, restricted stock units, and other stock-based compensation awards granted to employees, officers, directors, and consultants. Awards that vest as the recipient provides service are expensed on a straight-line basis over the requisite service period. F-10 Table of Contents 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. 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. Expected volatility is based upon an industry estimate or blended rate including the Company’s historical trading activity. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Company estimates the forfeiture rate based on historical data. This analysis is re-evaluated at least annually and the forfeiture rate is adjusted as necessary. For other stock-based compensation awards granted to employees and directors that vest based on market conditions, such as the trading price of the Company’s common stock achieving or exceeding certain price targets, the Company uses a Monte Carlo simulation model to estimate the grant date fair value and recognize stock compensation expense over the derived service period. The Monte Carlo simulation model requires key inputs for risk-free interest rate, dividend yield, volatility, and expected life. The assumptions used in computing the fair value of equity awards reflect the Company’s best estimates but involve uncertainties related to market and other conditions. Changes in any of these assumptions may materially affect the fair value of awards granted and the amount of stock-based compensation recognized. 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. Income Taxes The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the Company’s financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. The Company currently maintains a 100 % valuation allowance on its deferred tax assets. Comprehensive Loss Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Changes in unrealized gains and losses on marketable securities represent the only difference between the Company’s net loss and comprehensive loss. 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. 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 years ended December 31, 2023, 2022 and 2021, diluted net loss per share is the same as basic net loss per share because F-11 Table of Contents 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: As of December 31, 2023 2022 2021 Common stock options 2,355,779 2,857,054 2,301,574 Restricted stock units 376,117 — — Performance-based restricted stock units 150,000 — — Preferred stock 2,369,797 2,369,797 1,969,797 Warrants 2,067,552 14,899 — Recent Accounting Pronouncements Not Yet Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances the disclosures required for operating segments in the Company's annual and interim consolidated financial statements. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-07 on its financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the disclosures required for income taxes in the Company's annual consolidated financial statements. The amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its financial statements. 3. Liquidity and Uncertainties 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. The Company has incurred losses since inception, including approximately $ 373.6 million for the year ended December 31, 2023, resulting in an accumulated deficit of approximately $ 1,336.3 million and $ 962.7 million as of December 31, 2023 and 2022, respectively. 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 and debt financings. In October 2023, the Company completed a public offering and received approximately $ 472.0 million net cash proceeds. The Company believes that its cash, cash equivalents and marketable securities at December 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 may need 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, if at all, 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 planned commercialization costs, product manufacturing, research activities and related clinical expenses if necessary due to liquidity concerns until a date when those concerns are relieved. F-12 Table of Contents 4. Cash, Cash Equivalents and Marketable Securities A summary of cash, cash equivalents and available-for-sale marketable securities held by the Company as of December 31, 2023 and 2022 is as follows (in thousands): December 31, 2023 Cost Unrealized gains Unrealized losses Fair value Cash and cash equivalents: Cash (Level 1) $ 2,729 $ — $ — $ 2,729 Money market funds (Level 1) 78,555 — — 78,555 US government and government sponsored entities (Level 1) 14,967 — — 14,967 Corporate debt securities due within 3 months of date of purchase (Level 2) 3,664 — — 3,664 Total cash and cash equivalents 99,915 — — 99,915 Marketable securities: Corporate debt securities due within 1 year of date of purchase (Level 2) 382,028 195 ( 7 ) 382,216 US government and government sponsored entities due within 1 year of date of purchase (Level 2) 150,743 280 ( 1 ) 151,022 Corporate debt securities due within 1 to 2 years of date of purchase (Level 2) $ 977 $ 1 $ — $ 978 Total cash, cash equivalents and marketable securities $ 633,663 $ 476 $ ( 8 ) $ 634,131 December 31, 2022 Cost Unrealized gains Unrealized losses Fair value Cash and cash equivalents: Cash (Level 1) $ 15,100 $ — $ — $ 15,100 Money market funds (Level 1) 316,449 — — 316,449 Total cash and cash equivalents 331,549 — — 331,549 Marketable securities: Corporate debt securities due within 1 year of date of purchase (Level 2) 27,257 7 ( 39 ) 27,225 Total cash, cash equivalents and marketable securities $ 358,806 $ 7 $ ( 39 ) $ 358,774 F-13 Table of Contents 5. Accrued Liabilities Accrued liabilities as of December 31, 2023 and 2022 consisted of the following (in thousands): December 31, 2023 December 31, 2022 Contract research organization costs $ 50,737 $ 53,119 Other clinical study related costs 3,724 6,582 Manufacturing and drug supply 9,705 11,262 Compensation and benefits 17,030 14,864 Professional fees 6,814 4,867 Other 1,970 767 Total accrued liabilities $ 89,980 $ 91,461 6. Long Term Debt In May 2022 the Company and its wholly-owned subsidiary, Canticle Pharmaceuticals, Inc., entered into the $ 250.0 million Loan Facility (the “Loan Facility”) with several banks and other financial institutions or entities party thereto (each, a “Lender” and collectively referred to as the “Lenders”), and Hercules Capital, Inc. (“Hercules”), in its capacity as administrative agent and collateral agent for itself and the Lenders. 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 had a minimum interest rate of 7.45 % and adjusted with changes in the prime rate. The Company will pay interest-only monthly payments of accrued interest under the Loan Facility through May 1, 2025, for a period of 36 months, which period may be extended to May 1, 2026 and May 3, 2027, upon the achievement of regulatory approval milestones and future revenue covenants, subject to compliance with applicable covenants. The Loan Facility matures in May 2026 and may be extended an additional year upon the achievement of certain regulatory milestones. The Loan Facility is secured by a security interest in substantially all of the Company’s assets, other than intellectual property. 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. 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. An additional $ 15.0 million was drawn under Tranche 2 in June of 2023. The remaining $ 15.0 million available under Tranche 2 was drawn in September of 2023 in accordance with the Amended Loan Facility. 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 $ 15.0 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 Tranche 2 at the closing of the Amendment, $ 15.0 million drawn in June of 2023, and $ 15.0 million drawn in September of 2023, the Company issued to Hercules and affiliates Tranche 2 Warrants to purchase an aggregate of 4,555 shares of common stock, which had a Black-Scholes value of $ 0.9 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 which commenced 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. The Loan Facility contains event of default provisions for: the Company’s failure to make required payments or maintain compliance with covenants under the Loan Facility; the Company’s breach of certain representations or default under certain obligations outside the Loan Facility; insolvency, attachment or judgment events affecting the Company; and any circumstance which has occurred or could reasonably be expected to have a material F-14 Table of Contents adverse effect on the Company, provided that, any failure to achieve approval or certain other milestones 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 December 31, 2023, the outstanding principal under the Loan Facility was $ 115.0 million. The interest rate as of December 31, 2023 was 10.95 %. As of December 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 December 31, 2023 are as follows (in thousands): Period Ending December 31, 2023: Amount 2024 $ 12,802 2025 79,604 2026 53,387 $ 145,793 Less amount representing interest ( 24,641 ) Less unamortized discount ( 5,672 ) Loans payable, net of discount $ 115,480 7. Stockholders’ Equity Common Stock 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 ("The Board"). The Company has never declared cash dividends on its common stock and does not expect to do so in the foreseeable future. Preferred Stock 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 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 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 basis. 2023 Public Offering On September 28, 2023, the Company entered into an Underwriting Agreement with Goldman Sachs & Co. LLC, as representative of the several underwriters named therein, pursuant to which the Company sold to the underwriters in an underwritten public offering (the “2023 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 F-15 Table of Contents for the common stock less a $ 0.0001 per share exercise price for each such Pre-Funded Warrant. The 2023 Offering closed on October 3, 2023. The gross proceeds of the 2023 Offering was $ 500.0 million, and the Company received net proceeds, after deducting the underwriting discount and commissions and other estimated offering expenses payable by the Company, of approximately $ 472.0 million. The Company intends to use the net proceeds from the Offering for its 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. 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 the Company. 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 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 $ 200.0 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 entered into an at-the-market sales agreement (the “Original 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. The Original 2021 Sales Agreement authorized an aggregate offering of up to $ 200.0 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. Subject to the terms and conditions of the Original 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 Original 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 Original 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 on Form S-3 ( the F-16 Table of Contents "Registration Statement") and the prospectus supplement relating thereto. As of December 31, 2023, no amounts remained reserved and available for sale under the Original 2021 Sales Agreement and the related prospectus supplement. In May 2023, the Company amended the 2021 Agreement (the “Sales Agreement Amendment”), with Cowen, pursuant to which the Company may, from time to time, issue and sell an additional $ 200.0 million in 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 Registration Statement and prospectus supplement filed pursuant to the Registration Statement. The Sales Agreement Amendment authorizes sales of shares of the Company’s 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. During the three months ended December 31, 2023, under the Sales Agreement Amendment, the Company sold no shares. During the year ended December 31, 2023, and in total under the Sales Agreement Amendment, the Company 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 the Company’s effective Registration Statement and the prospectus supplement relating thereto. As of December 31, 2023, $ 174.8 million remained reserved and available for sale under the 2023 Sales Agreement Amendment and the Company’s related prospectus supplement. 8. Stock-based Compensation 2015 Stock Plan The 2015 Stock Plan, as amended (the “2015 Stock Plan”), is our shareholder-approved incentive plan through which equity based grants are awarded. The 2015 Stock Plan provides for the grant of incentive stock options, non-statutory 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 December 31, 2023, 711,054 shares were available for future issuance under the 2015 Stock Plan. 2023 Inducement Plan In September 2023, the Company adopted the 2023 Inducement Plan (the “Inducement Plan”), pursuant to which the Company may from time to time make equity grants to new employees as a material inducement to their employment. The Inducement Plan was adopted without stockholder approval, pursuant to Nasdaq Listing Rule 5635(c)(4), and is administered by the Compensation Committee of the Board. The Inducement Plan provides for the granting of non-statutory stock options, restricted stock, restricted stock units, performance stock units and other stock-based compensation awards to new employees, but does not allow for the granting of incentive stock options. The terms of the stock options under the Inducement 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 or award is granted. A total of 500,000 shares of the Company’s common stock were reserved for issuance under the Inducement Plan. As of December 31, 2023, 193,392 shares were available for future issuance under the 2023 Inducement Plan. F-17 Table of Contents Stock Options The following table summarizes stock option activity during the year ended December 31, 2023: Shares Weighted average exercise price Weighted average remaining contractual life (years) Aggregate intrinsic value (in thousands) Outstanding at January 1, 2023 2,857,054 $ 81.78 Options granted 31,111 190.91 Options exercised ( 460,385 ) 88.83 Options cancelled ( 72,001 ) 144.24 Outstanding at December 31, 2023 2,355,779 $ 79.94 5.51 $ 359,861 Exercisable at December 31, 2023 1,774,976 $ 74.49 4.71 $ 281,400 The total cash received by the Company as a result of stock option exercises was $ 34.0 million, $ 9.0 million and $ 1.0 million for the years ended December 31, 2023, 2022, and 2021. The total intrinsic value of options exercised was $ 70.4 million $ 47.3 million and $ 0.1 million for the years ended December 31, 2023, 2022, and 2021. The weighted-average grant date fair values, based on the Black-Scholes option model, of options granted during the year ended December 31, 2023, 2022 and 2021 was $ 149.15 , $ 54.68 , and $ 73.29 , respectively. Restricted Stock Units The Company’s 2015 Stock Plan provides for awards of restricted stock units (“RSUs”) to employees, officers, directors and consultants to the Company. The Company’s Inducement Plan provides for awards of RSUs to new employees. RSUs vest over a period of months or years, or upon the occurrence of certain performance criteria or the attainment of stated goals or events, and are subject to forfeiture if employment or service terminates before vesting. The following table summarizes RSU activity, excluding performance-based RSUs, during the year ended December 31, 2023: Shares Weighted average grant date fair value Unvested at January 1, 2023 — $ — RSUs granted 398,600 243.81 RSUs vested ( 356 ) 299.98 RSUs forfeited ( 22,127 ) 283.05 Unvested at December 31, 2023 376,117 $ 241.45 Performance-Based Restricted Stock Units The Company has granted various performance-based restricted stock units (“PSUs”) to certain senior leadership. Depending on the terms of the PSUs and the outcome of the pre-established performance criteria, which may include a market and/or performance condition, a recipient may ultimately earn the target number of PSUs granted or a specified multiple thereof at the end of the vesting period. As of December 31, 2023, the Company granted 50,000 PSUs. The maximum number of PSUs eligible to be earned of 150,000 are outstanding under the Inducement Plan as of December 31, 2023, with a weighted average grant date fair value of $ 146.37 per unit. F-18 Table of Contents Outstanding Awards As of December 31, 2023, the Company had restricted stock units, performance stock units, and options outstanding pursuant to which an aggregate of 2,881,896 shares of its common stock may be issued pursuant to the terms of all awards granted under the 2015 Stock Plan and Inducement Plan. Stock-Based Compensation Expense Stock-based compensation expense during the years ended December 31, 2023, 2022 and 2021 was as follows (in thousands): Year Ended December 31, 2023 2022 2021 Stock-based compensation expense by type of award: Stock options $ 30,613 $ 31,625 $ 26,873 Restricted stock units 14,974 — — Performance-based restricted stock units 4,148 — — Total stock-based compensation expense $ 49,735 $ 31,625 $ 26,873 Effect of stock-based compensation expense by line item: Research and development $ 20,864 $ 13,876 $ 10,698 General and administrative 28,871 17,749 16,175 Total stock-based compensation expense included in net loss $ 49,735 $ 31,625 $ 26,873 Unrecognized stock-based compensation expense as of December 31, 2023 was $ 118.2 million with a weighted average remaining period of 2.66 years. 9. Leases In 2019, the Company entered into an operating lease for office space, which was renewed and extended in 2020. The Company adopted ASU 2016-02, “Leases,” on January 1, 2019 requiring, among other changes, operating and finance leases with terms exceeding twelve months to be recognized as a right-of-use asset (or “ROU”) and lease liabilities on the balance sheet. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The lease term is determined to be the non-cancelable period including any lessee renewal options that are considered reasonably certain of exercise. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company used judgment to determine an appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term in a similar economic environment. In August 2023, The Company entered into the Fifth Amendment to its 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 year ended December 31, 2023. Future minimum payments under the Company’s operating leases related to the ROU asset and lease liability as of December 31, 2023 was as follows (in thousand): Operating Leases 2024 937 2025 478 2026 446 Total minimum payments $ 1,861 Less: imputed interest ( 148 ) Present value of lease liabilities $ 1,713 F-19 Table of Contents As of December 31, 2023, the weighted average remaining operating lease term was 2.9 years and the weighted average discount rate used to determine the operating lease liabilities was 10.95 %. Cash paid related to the lease liability was $ 1.1 million and $ 0.7 million for years ended December 31, 2023 and 2022 respectively. Operating lease costs were $ 1.1 million and $ 0.8 million for years ended December 31, 2023 and 2022 respectively. Rent, short term and variable leases costs were immaterial during the years ended December 31, 2023, 2022 and 2021. 10. Commitments and Contingencies The Company has a Research, Development and Commercialization Agreement with Hoffmann-La Roche (“Roche”) which grants the Company a sole and exclusive license to develop, use, sell, offer for sale and import any Licensed Product as defined by the agreement. The agreement requires future milestone payments to Roche. Remaining milestones under the agreement total $ 8.0 million and are earned by achieving specified objectives related to future regulatory approval in the United States and Europe of resmetirom or a product developed from resmetirom. 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 years ended December 31, 2023, 2022 and 2021. In August 2023, The Company entered into the Fifth Amendment to the 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 year ended December 31, 2023. The Company has entered into customary contractual arrangements and letters of intent in preparation for and in support of the clinical trials. 11. Income Taxes At December 31, 2023, the Company had federal net operating loss (“NOL”) carryforwards of approximately $ 489.0 million available to reduce future taxable income, of which $ 40.4 million will expire between 2031 and 2037. The Company also has state operating loss carryforwards of approximately $ 477.6 million, available to reduce future taxable income, which expire between 2031 and 2042. The Company has unused federal research and development carryforwards of approximately $ 46.1 million which will begin to expire in 2031. The Internal Revenue Code (“IRC”) limits the amounts of NOL carryforwards that a Company may use in any one year in the event of certain cumulative changes in ownership over a three-year period as described in Section 382 of the IRC. Such change in ownership could limit the Company’s utilization of the NOL, and could be triggered by subsequent sales of securities by the Company or stockholders. The deferred tax asset related to the NOL reflected on the financial statements could be affected by this limitation. 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 estimated to be subject to an annual limitation, of which none are 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. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. As there is no assurance of future taxable income, a full valuation allowance has been established to offset the deferred tax assets. The valuation allowance increased $ 112.0 million for the year ended December 31, 2023. Changes in the deferred tax asset will be recorded as an income tax benefit or expense on the accompanying consolidated statements of operations. Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of December 31, 2023 there were no uncertain positions. The 2019 through 2023 tax returns are open to review by the IRS and state taxing authorities. Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision. There was no income tax related interest and penalties included in the income tax provision for 2023. F-20 Table of Contents Temporary differences that give rise to deferred tax assets and liabilities are as follows (in thousands): For the years ended December 31, 2023 2022 2021 Deferred Tax Liabilities Unrealized gains on investments $ 117 $ — $ — Total Deferred Tax Liabilities $ 117 $ — $ — Deferred Tax Assets Charitable contributions $ 37 $ 45 $ 53 Accrued expenses 3,857 2,398 1,857 Intangibles 503 589 783 Stock compensation 33,976 27,226 24,335 Property, plant & equipment 95 106 80 Unrealized loss on investment — 8 23 Net operating losses 121,552 68,305 47,864 Capitalized R&D 175,145 137,328 112,848 R&D credit 48,074 35,103 23,799 Total deferred tax assets before valuation allowance 383,239 271,108 211,642 Valuation allowance ( 383,122 ) ( 271,108 ) ( 211,642 ) Total deferred tax assets 117 — — Net deferred tax assets $ — $ — $ — Differences between the effective income tax rate and the US statutory rate were as follows (in thousands): For the years ended December 31, 2023 2022 2021 Tax benefit at U.S. federal statutory rate $ ( 78,462 ) $ ( 62,023 ) $ ( 50,788 ) Stock based compensation ( 8,287 ) ( 7,844 ) — 162M limitation 3,183 7,996 22 Other nondeductible expenses 53 16 5 State income taxes benefit before valuation allowance, net of federal benefit ( 16,246 ) 13,090 ( 19,622 ) Increase in domestic valuation allowance 112,606 59,466 79,258 Research and development credit ( 12,971 ) ( 10,712 ) ( 9,002 ) Other adjustments 124 11 127 Income tax expense (benefit) $ — $ — $ — F-21 Table of Contents 12. Quarterly Financial Data (unaudited) The following tables present a summary of quarterly results of operations for 2023 and 2022 (in thousands, except shares and per share data): Three months ended March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Revenues: Total revenues $ — $ — $ — $ — Operating expenses: Research and development 62,154 68,605 70,951 70,640 General and administrative 16,182 17,845 27,583 46,536 Total operating expenses 78,336 86,450 98,534 117,176 Loss from operations ( 78,336 ) ( 86,450 ) ( 98,534 ) ( 117,176 ) Interest income 3,776 3,551 3,298 8,953 Interest expense ( 2,336 ) ( 2,901 ) ( 3,504 ) ( 3,971 ) Other income — — — — Net loss $ ( 76,896 ) $ ( 85,800 ) $ ( 98,740 ) $ ( 112,194 ) Net loss per common share: Basic and diluted net loss per common share $ ( 4.23 ) $ ( 4.69 ) $ ( 5.34 ) $ ( 5.68 ) Basic and diluted weighted average number of common shares outstanding 18,187,924 18,310,952 18,476,414 19,760,842 Three months ended March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 Revenues: Total revenues $ — $ — $ — $ — Operating expenses: Research and development 47,929 58,499 68,271 70,742 General and administrative 9,658 11,774 12,141 14,557 Total operating expenses 57,587 70,273 80,412 85,299 Loss from operations ( 57,587 ) ( 70,273 ) ( 80,412 ) ( 85,299 ) Interest income 69 323 717 1,076 Interest expense — ( 780 ) ( 1,502 ) ( 1,682 ) Other income — — — — Net loss $ ( 57,518 ) $ ( 70,730 ) $ ( 81,197 ) $ ( 85,905 ) Net loss per common share: Basic and diluted net loss per common share $ ( 3.36 ) $ ( 4.14 ) $ ( 4.75 ) $ ( 4.98 ) Basic and diluted weighted average number of common shares outstanding 17,103,395 17,103,395 17,103,395 17,237,517 13. Subsequent Event None. F-22