What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-07 · 121 added, 53 removed, 162 unchanged (52% of the section changed)

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

Rezdiffra became commercially available in the United States in April 2024.

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).

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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

On June 6, 2024, we announced new data from the Phase 3 MAESTRO-NASH study of Rezdiffra presented at the European Association for the Study of the Liver (EASL) Congress.

Our key Rezdiffra presentations at the EASL Congress

included (i) a late-breaking artificial intelligence-based analysis of MAESTRO-NASH biopsy data that demonstrated Rezdiffra improved key fibrotic features that are predictive of progression to decompensated cirrhosis;

(ii) noninvasive test data through three years of treatment that demonstrated durable treatment response to Rezdiffra, with 91% of patients achieving improvement or stabilization of liver stiffness;

(iii) the first analysis of health-related quality of life data from MAESTRO-NASH, which demonstrated Rezdiffra improved patient worry, health distress and stigma;

and (iv) the first analysis of Rezdiffra treatment in metabolic dysfunction and alcohol-associated liver disease (MetALD), which demonstrated patients achieved similar rates of fibrosis improvement and steatohepatitis resolution compared to the NASH population.

Additionally, we presented multiple health economics outcomes research abstracts at the EASL Congress highlighting the clinical and economic burden of NASH.

On May 7, 2024, we entered into a Sales Agreement (the “2024 Sales Agreement”) with TD Securities (USA) LLC, (“TD Cowen”), pursuant to which we may issue and sell through or to TD Cowen, acting as agent or principal, shares of our common stock, par value $0.0001 per share (the “Common Stock”), from time to time having an aggregate sales price of up to $300.0 million (the “ATM Offering”).

The 2024 Sales Agreement replaces and supersedes the prior sales agreement, dated June 1, 2021 and amended on May 9, 2023, between the us and Cowen and Company, LLC, an affiliate of TD Cowen (the “Prior Sales Agreement”), which was terminated effective upon the entry into the 2024 Sales Agreement.

We sold 1,334,044 shares of Common Stock having an aggregate offering price of $225.1 million pursuant to the Prior Sales Agreement.

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 April 9, 2024, we announced U.S.

availability of Rezdiffra for the treatment of patients with noncirrhotic NASH with moderate to advanced liver fibrosis.

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 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.

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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.

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

In March 2024, the FDA approved Rezdiffra for the treatment of noncirrhotic NASH with moderate to advanced liver fibrosis (consistent with stages F2 to F3 fibrosis).

Rezdiffra is a once-daily, oral, liver-directed, THR-ß agonist designed to target key underlying causes of NASH.

Rezdiffra was launched for sale in the U.S.

in April 2024.

Research and Development Expenses

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• other allocated expenses, which include direct and allocated expenses for depreciation of equipment and other supplies.

We expect to continue to incur substantial expenses related to our development activities for the foreseeable future as we conduct our clinical studies programs, manufacturing and toxicology studies.

We expect to continue to incur substantial expenses related to our development activities for the foreseeable future as we conduct our clinical study programs, manufacturing and toxicology studies.

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.

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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.

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 that our selling, general and administrative expenses will increase in the future as we expand our operating activities, continue 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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The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities as of the date of the financial statements.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development expenses and stock-based compensation expense.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development expenses, stock-based compensation expense, gross to net expenses, and inventory valuation.

We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

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 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.

There have been no material changes in our critical accounting policies and significant judgments and estimates 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, aside from the addition of estimates related to revenue recognition and inventory valuation.

Refer to Note 2 to the condensed consolidated financial statements for details of accounting policies over revenue and inventory.

Revenue Recognition

Our accounting policy over revenue recognition has a significant impact on the financial results and involves substantial judgement and estimation.

The amount of revenue we recognize is impacted by variable consideration, as described in Note 2.

Our gross to net estimates are based on contracts with customers, government agencies, healthcare providers, industry data, historical information, and other factors.

The judgements and estimates involved in determining

variable consideration are reviewed each reporting period, as all are subject to adjustments as new information becomes available.

We value our inventories at the lower of cost or estimated net realizable value using the first-in, first-out (“FIFO”) method, as described in Note 2.

The value of our inventories is impacted by excess, slow-moving, and obsolete items, which could lead to write downs in value.

We periodically review our inventory for factors that could impact the future recoverability and realization of future sales, which requires estimates and judgements.

Results of Operations

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)

Three Months Ended June 30, 2024 and 2023

The following table provides comparative unaudited results of operations for the three months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended

June 30, Increase / (Decrease)

2024 2023 $ %

Product revenue, net $ 14,638 $ — $ 14,638 100 %

Operating expenses:

Cost of sales

636 — 636 100 %

Research and development 71,091 68,605 2,486 4 %

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$ (151,971) $ (85,800) $ (66,171) 77 %

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

Rezdiffra became available in the United States in April 2024.

We began selling Rezdiffra in April 2024.

For the three months ended June 30, 2024, we recorded $14.6 million of product revenue, net.

Cost of Sales

Cost of sales were incurred as a result of sales of Rezdiffra.

For the three months ended June 30, 2024, we recorded $0.6 million of cost of sales.

We expect cost of sales to increase in the future, as a portion of the inventory sold was previously expensed to research and development costs prior to achieving regulatory approval, as approval was considered uncertain.

Research and Development Expenses

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

The following table represents our research and development expenses for the three months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended June 30, Increase / Decrease

Personnel and Internal Expense

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$ 71,091 $ 68,605 $ 2,486 4 %

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.

Our research and development expenses were $71.1 million for the three months ended June 30, 2024, compared to $68.6 million in the corresponding period in 2023.

Research and development expenses increased by $2.5 million in the 2024 period due primarily to an increase in headcount and timing of clinical studies.

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.

Our selling, general and administrative expenses were $105.4 million for the three months ended June 30, 2024, compared to $17.8 million in the corresponding period in 2023.

Selling, general and administrative expenses increased by $87.6 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 $8.3 million for the three months ended March 31, 2024, compared to $3.8 million in the corresponding period in 2023.

Our net interest income was $14.2 million for the three months ended June 30, 2024, compared to $3.6 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 $3.8 million for the three months ended March 31, 2024, compared to $2.3 million in the corresponding period in 2023.

Our interest expense was $3.7 million for the three months ended June 30, 2024, compared to $2.9 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.

Six Months Ended June 30, 2024 and 2023

Six Months Ended June 30,

Increase / (Decrease)

2024 2023 $ %

Product revenue, net $ 14,638 $ — $ 14,638 100 %

Operating expenses:

Cost of sales 636 — 636 100 %

Research and development 142,328 130,759 11,569 9 %

General and administrative 186,249 34,027 152,222 447 %

Interest income (22,556) (7,327) 15,229 208 %

Interest expense 7,493 5,237 2,256 43 %

$ (299,512) $ (162,696) $ (136,816) 84 %

We began selling Rezdiffra in April 2024.

For the six months ended June 30, 2024, we recorded $14.6 million of product revenue, net.

Cost of Sales

Cost of sales were incurred as a result of sales of Rezdiffra.

For the six months ended June 30, 2024, we recorded $0.6 million of cost of sales.

Research and Development Expenses

The following table represents our research and development expenses for the six months ended June 30, 2024 and 2023 (in thousands):

Six Months Ended June 30, Increase / Decrease

Personnel and Internal Expense

$ 34,011 $ 24,910 $ 9,101 37 %

External Expense

108,317 105,849 2,468 2 %

$ 142,328 $ 130,759 $ 11,569 9 %

Our research and development expenses were $142.3 million for the six months ended June 30, 2024, compared to $130.8 million in the corresponding period in 2023.

Research and development expenses increased by $11.6 million in the 2024 period due primarily to an increase related to timing of manufacturing, an increase in headcount, and timing of clinical studies.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses were $186.2 million for the six months ended June 30, 2024, compared to $34.0 million in the corresponding period in 2023.

Selling, general and administrative expenses increased by $152.2 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 will likely increase over time as we continue with commercialization activities and expand our operating activities.

Interest Income

Our net interest income was $22.6 million for the six months ended June 30, 2024, compared to $7.3 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 $7.5 million for the six months ended June 30, 2024, compared to $5.2 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 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.

As of June 30, 2024, we had cash, cash equivalents, restricted cash, and marketable securities totaling $1,062.8 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 March 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.

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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.

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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At-the-Market Sales Agreement

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

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

In May 2023, we entered into Amendment No.

1 (the “Sales Agreement Amendment”) to our existing sales agreement (the “2021 Sales Agreement”) with Cowen, which was subsequently terminated in May 2024 when we entered into a Sales Agreement (the “2024 Sales Agreement”) with Cowen, replacing and superseding the 2021 Sales Agreement, as amended by the Sales Agreement Amendment.

We are authorized to issue and sell up to $300.0 million in shares of our common stock under the 2024 Sales Agreement.

We sold no shares in the three and six months ended June 30, 2024 under either the 2021 Sales Agreement, as amended by the Sales Agreement Amendment or the 2024 Sales Agreement.

As of June 30, 2024, $300.0 million remained reserved and available for sale under the 2024 Sales Agreement and our related prospectus supplement.

Sales of our common stock, if any, under the 2024 Sales Agreement will be made by any method that is deemed to be an “at the market” offering as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended.

We have no obligation to sell any common stock and may at any time suspend offers under the 2024 Sales Agreement or terminate the 2024 Sales Agreement pursuant to its terms.

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

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(“Hercules”).

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

On February 3, 2023, we entered into the First Amendment (the “First 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.

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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.

We did not draw on Tranche 3 prior to its expiration in June 2024.

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.

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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.

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.

As of June 30, 2024, the outstanding principal under the Loan Facility was $115.0 million.

The interest rate as of June 30, 2024 was 10.95%.

As of June 30, 2024, we were in compliance with all loan covenants and provisions.

March 2024 Public Offering

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

Three Months Ended March 31,

Six Months Ended June 30,

Net cash used in operating activities $ (284,102) $ (159,377)

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

Net cash used in investing activities (24,045) (190,596)

Net cash provided by financing activities 707,829 95,620

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$ 399,682 $ (254,353)

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.

Net cash used in operating activities was $284.1 million for the six months ended June 30, 2024, compared to $159.4 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 was $24.0 million for the six months ended June 30, 2024, compared to $190.6 million used in for the corresponding period in 2023.

Net cash used in investing activities for the six months ended June 30, 2024 primarily consisted of $365.0 million of purchases of marketable securities for our investment portfolio, partially offset by $346.4 million from sales and maturities of marketable securities.

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

Net cash 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.

Net cash provided by financing activities was $707.8 million for the six months ended June 30, 2024, compared to $95.6 million for the corresponding period in 2023.

Financing activities for the six months ended June 30, 2024 consisted of $574.0 million of proceeds from our March 2024 public offering, $85.9 million of net proceeds from the Underwriter’s Option in April 2024, and $49.7 million from exercises of stock options.

Net cash provided by financing activities for the corresponding period in 2023 consisted primarily of $50.0 million from issuance of the Loan Facility, $24.2 million from proceeds from the exercise of common stock options and $21.8 million from sales of our common stock under the 2023 Sales Agreement.

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 million ROU asset and lease liabilities were recorded during the year ended December 31, 2023.

As a result of the Lease Amendment, an incremental $1.6 million right-of-use 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.

As of June 30, 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.

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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.

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 six months ended June 30, 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