What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2023-11-06 · 143 added, 140 removed, 72 unchanged (80% 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, this Quarterly Report on Form 10-Q and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

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

As used herein, “Rezdiffra” refers to resmetirom approved by the FDA for the treatment of adults with NASH with moderate to advanced liver fibrosis, and “resmetirom” refers to, where applicable, Rezdiffra as well as resmetirom for the treatment of indications beyond NASH with moderate to advanced liver fibrosis.

About Madrigal Pharmaceuticals, Inc.

We are a clinical-stage biopharmaceutical company pursuing novel therapeutics for nonalcoholic steatohepatitis, or NASH.

Our lead product candidate, resmetirom, is a proprietary, liver-directed, selective thyroid hormone receptor-ß, or THR-ß, agonist being developed as a once-daily oral pill for the treatment of NASH.

Our Patient Market Opportunity.

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

We are a biopharmaceutical company dedicated to transforming care for patients with NASH, a serious liver disease that can lead to cirrhosis, liver failure and premature mortality.

Our medication, Rezdiffra (resmetirom), is a once-daily, oral, liver-directed THR-β agonist designed to target key underlying causes of NASH.

In March 2024, Rezdiffra became the first and only FDA-approved therapy for patients with NASH.

Rezdiffra is indicated in conjunction with diet and exercise for the treatment of adults with noncirrhotic NASH with moderate to advanced liver fibrosis (consistent with stages F2 to F3 fibrosis).

NASH Disease State Overview.

NASH is a more advanced form of nonalcoholic fatty liver disease (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.

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

Our Completed Studies.

For NASH, we enrolled 125 patients in a Phase 2 clinical trial with resmetirom.

We achieved the 12-week primary endpoint for this Phase 2 clinical trial and reported the results in December 2017, and we reported positive topline 36-week results at the conclusion of the Phase 2 clinical trial in May 2018.

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 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.

Secondary endpoints include LDL cholesterol, lipid biomarkers, MRI-PDFF, NASH and fibrosis biomarkers.

Except for serial liver biopsies, the study protocol is similar to the MAESTRO-NASH study (discussed below under “—Our Ongoing and Planned Studies”), with resmetirom doses of 80 mg or 100 mg or placebo.

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

Using noninvasive measures, MAESTRO-NAFLD-1 was designed to provide incremental safety information to support the NASH indication as well as provide additional data regarding clinically relevant key secondary efficacy endpoints to better characterize the potential clinical benefits of resmetirom on cardiovascular- and liver-related endpoints.

In November of 2021, we reported data from the open label non-cirrhotic arm of MAESTRO-NAFLD-1, and in January 2022 we announced that we achieved primary and secondary endpoints for the double-blind portion of MAESTRO-NAFLD-1.

An additional open-label active treatment arm in 180 patients with early (well-compensated) NASH cirrhosis was conducted.

Resmetirom was safe and well tolerated in the MAESTRO-NAFLD-1 open-label cohort of patients with well-compensated NASH cirrhosis.

As observed in patients with noncirrhotic NASH, mild GI adverse events were seen at the beginning of therapy.

Resmetirom reduced LDL-C, other atherogenic lipids and lipoproteins, and MRI-PDFF in patients with NASH cirrhosis and also reduced liver and spleen volume.

Our Ongoing and Planned Studies.

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 (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.

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.

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

resmetirom achieved both primary endpoints with both daily oral doses, 80 mg and 100 mg, relative to placebo, as summarized in “- Key Developments” in our Annual Report on Form 10-K for the year ended December 31, 2022.

On July 13, 2021 we announced first patient dosed in a planned 52-week open label active treatment extension study of MAESTRO-NAFLD-1, named MAESTRO-NAFLD-Open Label Extension (OLE).

The OLE study allows patients who complete MAESTRO-NAFLD-1 to consent to 52 weeks of active treatment with resmetirom, making this treatment available to both patients who were assigned to placebo in MAESTRO-NAFLD-1 and patients who were on resmetirom in MAESTRO-NAFLD-1.

In August 2022, Madrigal initiated MAESTRO-NASH-OUTCOMES, a randomized double-blind placebo-controlled study in approximately 700 patients with early NASH cirrhosis to allow for noninvasive monitoring of progression to liver decompensation events.

A positive outcome is expected to support the full approval of resmetirom for noncirrhotic NASH, potentially accelerating the timeline to full approval.

In addition, this study has the potential to support an additional indication for resmetirom in patients with well-compensated NASH cirrhosis.

NASH is the leading cause of liver transplants in the U.S.

for women, and is expected to soon be the leading cause of liver transplants overall.

Additionally, patients with NASH, especially those with more advanced metabolic risk factors (hypertension, concomitant type 2 diabetes), are at increased risk for adverse cardiovascular events and increased morbidity and mortality.

Once patients progress to NASH with moderate to advanced fibrosis (consistent with fibrosis stages F2 and F3), the risk of adverse liver outcomes increases substantially.

NASH is also known as metabolic dysfunction-associated steatohepatitis (“MASH”) following a change in disease nomenclature introduced by hepatology medical societies in 2023.

Our Patient Focus.

Madrigal estimates that approximately 1.5 million patients have been diagnosed with NASH in the U.S., of which approximately 525,000 have NASH with moderate to advanced fibrosis.

Madrigal estimates that approximately 315,000 diagnosed patients with NASH with moderate to advanced fibrosis are under the care of specialist physicians Madrigal will be targeting during the launch of Rezdiffra.

Our Clinical Development Program.

Madrigal is currently conducting multiple Phase 3 clinical trials to evaluate the safety and efficacy of Rezdiffra for the treatment of NASH, including the pivotal MAESTRO-NASH biopsy study in patients with significant fibrosis, the MAESTRO-NASH Outcomes study in patients with NASH with compensated cirrhosis and the MAESTRO-NAFLD-1 OLE safety study.

Positive results from the pivotal MAESTRO-NASH biopsy study were published in the New England Journal of Medicine in February 2024.

Data from the 52-week first 1,000 patient portion of MAESTRO-NASH, together with data from MAESTRO-NAFLD-1, the open-label extension of the MAESTRO-NAFLD-1 study, Phase 2 and Phase 1 data, including safety parameters, formed the basis for Madrigal’s successful subpart H submission to the FDA for accelerated approval of Rezdiffra for treatment of NASH with liver fibrosis.

Key Developments

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.

Breakthrough Therapy designation is a process intended to expedite the development and review of drugs for serious or life-threatening conditions.

The criteria for breakthrough therapy designation require preliminary clinical evidence that demonstrates the drug may have substantial improvement on at least one clinically significant endpoint over available therapy, or over placebo if there is no available therapy.

A drug that receives Breakthrough Therapy designation is eligible for more intensive guidance on an efficient drug development program and organizational commitment involving senior managers from FDA.

Also in April 2023, Madrigal announced that the outcomes portion of the Phase 3 MAESTRO-NASH biopsy trial has completed enrollment.

Enrollment of the MAESTRO-NASH study was closed at approximately 1,750 patients based on the enrollment target of the 54-month long-term clinical outcome portion of the study.

On March 18, 2024, we announced we had commenced an underwritten public offering of $500.0 million in shares of our common stock and pre-funded warrants to purchase shares of our common stock.

The size of the offering was

increased by $100.0 million subsequent to the initial announcement, for a total of approximately $600.0 million gross proceeds before underwriting discounts, commissions, and other expenses.

The $600.0 million offering closed on March 21, 2024, and we received net proceeds totaling approximately $574.0 million in the three months ended March, 31, 2024.

The underwriters exercised in full their 30-day option to purchase additional shares of common stock, resulting in an additional $90.0 million gross proceeds.

The exercise of the underwriters' option closed on April 2, 2024 and we received net proceeds totaling approximately $85.9 million.

We collectively sold an aggregate of 1,096,153 shares of our common stock and pre-funded warrants to purchase 1,557,692 shares of our common stock in the underwritten offering.

On March 14, 2024, we announced that the U.S.

Food and Drug Administration (“FDA”) granted accelerated approval of Rezdiffra (resmetirom) in conjunction with diet and exercise for the treatment of adults with noncirrhotic nonalcoholic steatohepatitis (“NASH”) with moderate to advanced liver fibrosis (consistent with stages F2 to F3 fibrosis).

On February 28, 2024, we announced the appointment of Mardi C.

Dier as Chief Financial Officer, effective as of March 11, 2024.

In February 2024, primary results from the MAESTRO-NASH study were published in the New England Journal of Medicine.

Basis of Presentation

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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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Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials, additional drug manufacturing requirements, and later stage toxicology studies such as carcinogenicity studies.

Our research and development expenses have increased period over period in each of 2023 and 2022 and we expect that our research and development expenses may increase in the future.

The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming.

The probability of success for each product candidate is affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability and commercial viability.

Accordingly, we may never succeed in achieving marketing approval for any of our product candidates.

Completion dates and costs for our clinical development programs as well as our research program can vary significantly for each current and future product candidate and are difficult to predict.

As a result, we cannot estimate with any degree of certainty the costs we will incur in connection with the development of our product candidates at this point in time.

We expect that we will make determinations as to which programs and product candidates to pursue and how much funding to direct to each program and product candidate on an ongoing basis in response to the scientific success of research, results of ongoing and future clinical trials, potential collaborative agreements with respect to programs or potential product candidates, as well as ongoing assessments as to each current or future product candidate’s commercial potential.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, benefits and stock-based compensation expenses for employees, management costs, costs associated with obtaining and maintaining our patent portfolio, professional fees for accounting, auditing, consulting and legal services, and allocated overhead expenses.

We expect that our general and administrative expenses will increase in the future as we expand our operating activities, prepare for commercialization, maintain and expand our patent portfolio and incur additional costs associated with being a public company and maintaining compliance with exchange listing and SEC requirements.

potential product candidates, as well as ongoing assessments as to each current or future product candidate’s commercial potential.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries, benefits and stock-based compensation expenses for employees, management costs, costs associated with obtaining and maintaining our patent portfolio, professional fees for accounting, auditing, consulting and legal services, and allocated overhead expenses.

We expect that our selling, general and administrative expenses will increase in the future as we expand our operating activities, prepare for commercialization, maintain and expand our patent portfolio and incur additional costs associated with being a public company and maintaining compliance with exchange listing and SEC requirements.

We expect these potential increases will likely include management costs, legal fees, accounting fees, directors’ and officers’ liability insurance premiums and expenses associated with investor relations.

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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 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.

There have been no material changes in our critical accounting policies and significant judgments and estimates during three months ended March 31, 2024, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 28, 2024.

Results of Operations

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)

Research and Development Expenses

General and Administrative Expenses

Interest (Income)

Interest Expense

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

Research and Development Expenses

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.

We expect our research and development expenses to increase as we advance our clinical and preclinical development programs for resmetirom.

General and Administrative Expenses

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 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 $3.3 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 $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.

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)

Research and Development Expenses

General and Administrative Expenses

Three Months Ended March 31, 2024 and 2023

The following table provides comparative unaudited results of operations for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended March 31, Increase / (Decrease)

2024 2023 $ %

Research and development $ 71,237 $ 62,154 $ 9,083 15 %

Selling, general and administrative 80,800 16,182 64,618 399 %

Interest income (8,334) (3,776) 4,558 121 %

Interest expense 3,838 2,336 1,502 64 %

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

$ 147,541 $ 76,896 $ 70,645 92 %

We had no revenue for the three months ended March 31, 2024 and 2023.

Rezdiffra became available in the United States in April 2024.

Research and Development Expenses

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.

We expect our research and development expenses to increase as we advance our clinical and preclinical development programs for resmetirom.

General and Administrative Expenses

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.

The following table represents our research and development expenses for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended March 31, Increase / Decrease

Personnel and Internal Expense

$ 16,716 $ 12,259 $ 4,457 36 %

External Expense

54,521 49,895 4,626 9 %

$ 71,237 $ 62,154 $ 9,083 15 %

Our research and development expenses were $71.2 million for the three months ended March 31, 2024, compared to $62.2 million in the corresponding period in 2023.

Research and development expenses increased by $9.1 million in the 2024 period due primarily to an increase related to timing of manufacturing, an increase in headcount, and a corresponding increase in stock compensation expense.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses were $80.8 million for the three months ended March 31, 2024, compared to $16.2 million in the corresponding period in 2023.

Selling, general and administrative expenses increased by $64.6 million in the 2024 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 selling, general and administrative expenses may increase over time as we continue with commercialization activities and expand our operating activities.

Interest Income

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.

Our net interest income was $8.3 million for the three months ended March 31, 2024, compared to $3.8 million in the corresponding period in 2023.

The increase in interest income was due primarily to higher principal balances and interest rates in 2024.

Interest Expense

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.

Our interest expense was $3.8 million for the three months ended March 31, 2024, compared to $2.3 million in the corresponding period in 2023.

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

Liquidity and Capital Resources

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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 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.

As of March 31, 2024, we had cash, cash equivalents and marketable securities totaling $1,059.1 million compared to $634.1 million as of December 31, 2023, with this increase attributable to our 2024 public offering, where we received net proceeds of approximately $574.0 million in the three months ended March 31, 2024.

Additionally, in April 2024 we received net proceeds of approximately $85.9 million as a result of the underwriters’ exercise in full of their option to purchase additional shares as part of the March 2024 Offering.

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

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Cash in excess of immediate requirements is invested in accordance with our investment policy with a view toward capital preservation and liquidity.

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 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.

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 commercialization activities, 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, including our ability to effectively

commercialize Rezdiffra.

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.

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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.

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

If adequate funds are not available, or if the terms of potential funding sources are unfavorable, our business and our ability to develop our product candidates would be harmed.

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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.

During the three months ended March 31, 2024, under the Sales Agreement Amendment, we sold no shares.

As of March 31, 2024, $174.8 million remained reserved and available for sale under the 2023 Sales Agreement Amendment and our related prospectus supplement.

Loan Facility

Please see “Note 6 – Long Term Debt” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for information on our Loan Facility with Hercules.

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

Nine Months Ended September 30,

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

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 $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 $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

In May 2022 we entered into the $250.0 million Loan Facility (the “Loan Facility”) with Hercules Capital, Inc.

(“Hercules”).

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

Under the terms of the Loan Facility, the first $50.0 million tranche (“Tranche 1”) was drawn at closing.

Under the Amended Loan Facility, $65.0 million was drawn in 2023 under the second tranche (“Tranche 2”).

The third tranche (“Tranche 3”) of $75.0 million became available to us when we obtained FDA approval for Rezdiffra in March 2024.

We have until June 12, 2024 to draw on Tranche 3.

As of March 31, 2024, we have not drawn down on Tranche 3.

The fourth tranche (“Tranche 4”) of $60.0 million is available subject to Hercules’ sole discretion.

In connection with Tranche 1, in 2022 we issued Hercules warrants to purchase 14,899 shares of our common stock, which had a Black-Scholes value of $0.6 million.

In connection with Tranche 2, in 2023 we issued to Hercules warrants to purchase an aggregate of 4,555 shares of common stock, which had a Black-Scholes value of $0.9 million.

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

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%.

We were to originally pay interest-only monthly payments of accrued interest under the Loan Facility through May 1, 2025, for a period of 36 months.

That period was extended in March 2024 to May 1, 2026 upon achievement of a milestone related to FDA approval.

The period can further be extended to May 3, 2027, upon the achievement of a future revenue milestone, subject to compliance with applicable covenants.

The Loan Facility originally matured in May 2026, but was extended to May 2027 upon the achievement a milestone related to FDA approval.

The Loan Facility is secured by a security interest in substantially all of our 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.

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 we achieve 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:

our failure to make required payments or maintain compliance with covenants under the Loan Facility;

our breach of certain representations or default under certain obligations outside the Loan Facility;

insolvency, attachment or judgment events affecting us;

and any circumstance which has occurred or could reasonably be expected to have a material adverse effect on us, 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 March 31, 2024, the outstanding principal under the Loan Facility was $115.0 million.

The interest rate as of March 31, 2024 was 10.95%.

As of March 31, 2024, we were in compliance with all loan covenants and provisions.

March 2024 Public Offering

On March 18, 2024, we entered into an Underwriting Agreement with Goldman Sachs & Co.

LLC, Jefferies LLC, Cowen and Company, LLC, Evercore Group L.L.C.

and Piper Sandler & Co, as representatives of the several underwriters named therein (the “2024 Underwriters”), pursuant to which we sold to the 2024 Underwriters in an underwritten public offering (the “2024 Offering”):

(i) 750,000 shares of common stock at a public offering price of $260.00 per share, (ii) pre-funded warrants (the “2024 Pre-Funded Warrants”) to purchase 1,557,692 shares of common stock at a public offering price of $259.9999 per 2024 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, and (iii) a 30-day option for the 2024 Underwriters to purchase up to 346,153 additional shares of common stock at the public offering price of $260.00 per share (the “Underwriters’ Option”).

The 2024 Offering closed on March 21, 2024.

The gross proceeds of the 2024 Offering was $600.0 million, and we received net proceeds, after deducting the underwriting discount and commissions and other estimated offering expenses payable by us, of approximately $574.0 million.

The Underwriters’ Option was later exercised in full, and closed on April 2, 2024.

We received net proceeds for the exercise of the Underwriters’ Option, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, of approximately $85.9 million.

We intend to use the net proceeds from the 2024 Offering for our commercial activities in connection with the launch of Rezdiffra in the U.S.

and for general corporate purposes, including, without limitation, research and development expenditures, ongoing clinical trial expenditures, manufacture and supply of drug substance and drug products, potential ex-U.S.

commercialization or partnering opportunities, potential acquisitions or licensing of new technologies, capital expenditures and working capital.

The 2024 Pre-Funded Warrants are exercisable at any time afte r the date of issuance.

A holder of 2024 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 2024 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.

2023 Public Offering

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

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The gross proceeds of the 2023 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.

We intend to use the net proceeds from the 2023 Offering for our clinical and commercial activities for the launch of resmetirom in the U.S.

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A holder of 2023 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.

2023 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.

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

Three Months Ended March 31,

Net cash used in operating activities $ (149,157) $ (84,067)

Net cash provided by (used in) investing activities 98,053 (186,864)

Net cash provided by financing activities 573,706 52,690

Net increase (decrease) in cash, cash equivalents, and restricted cash

$ 522,602 $ (218,241)

Net cash used in operating activities was $149.2 million for the three months ended March 31, 2024, compared to $84.1 million for the corresponding period in 2023.

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 provided by investing activities was $98.1 million for the three months ended March 31, 2024, compared to $186.9 million used in for the corresponding period in 2023.

Net cash provided by investing activities for the three months ended March 31, 2024 primarily consisted of $182.6 million from sales and maturities of marketable securities, partially offset by $84.2 million of purchases of marketable securities for our investment portfolio.

Net cash used in investing activities for the corresponding period in 2023 primarily consisted of $198.8 million of purchases of marketable securities for our investment portfolio, partially offset by $12.0 million from sales and maturities of marketable securities.

Net cash provided by financing activities was $573.7 million for the three months ended March 31, 2024, compared to $52.7 million for the corresponding period in 2023.

Financing activities for the three months ended March 31, 2024 consisted of $574.0 million of proceeds from our March 2024 public offering.

Net cash provided by financing activities for the corresponding period in 2023 consisted primarily of $35.0 million from issuance of the Loan Facility and $17.9 million from proceeds from the exercise of common stock options.

Contractual Obligations and Commitments

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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.

As a result of the Lease Amendment, an incremental $1.6 million million ROU asset and lease liabilities were recorded during the year ended December 31, 2023.

In May 2022 we entered into the $250.0 million Loan Facility.

As of March 31, 2024, we had drawn $115.0 million under the facility.

We are scheduled to pay interest-only monthly payments of accrued interest under the Loan Facility through May 1, 2026, which period may be extended to May 3, 2027 upon the achievement of future revenue milestones, and subject to compliance with applicable covenants.

We have 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.

We received FDA approval for Rezdiffra in March 2024.

A tiered single-digit royalty is payable to Roche on net sales of Rezdiffra, subject to certain reductions.

Except as noted above and the future minimum payments due on the Loan Facility with Hercules set forth in “Note 7 – 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 three months ended March 31, 2024, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 28, 2024.

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