What changed in this filing

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Item 1. Financial Statements

2024-10-31 compared with 2024-08-07 · 152 added, 111 removed, 513 unchanged (34% of the section changed)

3 unchanged sentences

in thousands, except share and per share amounts)

September 30,

2024 December 31,

13 unchanged sentences

Accounts payable $ 45,966 $ 28,041

Accrued expenses 115,611 89,980

Accrued liabilities 131,003 89,980

Lease liability 878 527

7 unchanged sentences

Preferred stock, par value $ 0.0001 per share authorized:

5,000,000 shares at June 30, 2024 and December 31, 2023;

2,369,797 and 2,369,797 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

5,000,000 shares at September 30, 2024 and December 31, 2023;

2,369,797 and 2,369,797 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Common stock, par value $ 0.0001 per share authorized:

200,000,000 at June 30, 2024 and December 31, 2023;

21,700,893 and 19,875,427 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

200,000,000 at September 30, 2024 and December 31, 2023;

21,806,436 and 19,875,427 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in-capital 2,518,648 1,741,153

Accumulated other comprehensive income (loss) ( 368 ) 468

Accumulated other comprehensive income 1,271 468

Accumulated deficit ( 1,742,766 ) ( 1,336,290 )

5 unchanged sentences

in thousands, except share and per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

3 unchanged sentences

Cost of sales

2,152 — 2,788 —

Research and development 68,742 70,951 211,070 201,710

12 unchanged sentences

in thousands)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Net Loss $ ( 106,964 ) $ ( 98,740 ) $ ( 406,476 ) $ ( 261,436 )

Other comprehensive loss:

Unrealized loss on available-for-sale securities ( 196 ) ( 3 ) ( 836 ) ( 57 )

Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale securities 1,639 47 803 ( 10 )

Comprehensive loss $ ( 105,325 ) $ ( 98,693 ) $ ( 405,673 ) $ ( 261,446 )

19 unchanged sentences

Stock-based compensation expense related to equity-classified awards

— — — — 24,404 — — 24,404

Unrealized loss on marketable securities — — — — — ( 196 ) — ( 196 )

1 unchanged sentence

Balance at June 30, 2024

2,369,797 $ — 21,700,893 $ 2 $ 2,493,288 $ ( 368 ) $ ( 1,635,802 ) $ 857,120

Sale of common shares to related parties and exercise of common stock options, net of transaction costs — — 105,543 — 7,462 — — 7,462

Stock-based compensation expense related to equity-classified awards — — — — 17,898 — — 17,898

Unrealized gain on marketable securities — — — — — 1,639 — 1,639

Net loss — — — — — — ( 106,964 ) ( 106,964 )

Balance at September 30, 2024 2,369,797 $ — 21,806,436 $ 2 $ 2,518,648 $ 1,271 $ ( 1,742,766 ) $ 777,155

Balance at December 31, 2022 2,369,797 $ — 18,102,523 $ 2 $ 1,160,079 $ ( 32 ) $ ( 962,660 ) $ 197,389

6 unchanged sentences

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

— — 85,901 — 21,754 — — 21,754

Sale of common shares to related parties and exercise of common stock options, net of transaction costs

— — 90,058 — 6,251 — — 6,251

Compensation expense related to stock options for services

— — — — 10,973 — — 10,973

Unrealized loss on marketable securities

— — — — — ( 3 ) — ( 3 )

Hercules warrant

— — — — 195 — — 195

Net loss — — — — — — ( 85,800 ) ( 85,800 )

Balance at June 30, 2023

2,369,797 $ — 18,459,033 $ 2 $ 1,228,949 $ ( 89 ) $ ( 1,125,356 ) $ 103,506

Issuance of common shares in equity offering, excluding to related parties, net of transaction costs — — 12,200 — 2,731 — — 2,731

Sale of common shares to related parties and exercise of common stock options, net of transaction costs — — 22,959 — 1,924 — — 1,924

Compensation expense related to stock options for services — — — — 12,660 — — 12,660

Unrealized gain on marketable securities

— — — — — 47 — 47

Hercules warrant — — — — 121 — — 121

Net loss — — — — — — ( 98,740 ) ( 98,740 )

Balance at September 30, 2023 2,369,797 $ — 18,494,192 $ 2 $ 1,246,385 $ ( 42 ) $ ( 1,224,096 ) $ 22,249

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

4 unchanged sentences

Amortization of debt issuance costs and discount 1,607 1,661

Amortization and interest accretion related to operating leases ( 458 ) —

Changes in operating assets and liabilities:

2 unchanged sentences

Accounts payable 17,925 ( 7,289 )

Accrued expense 25,631 ( 9,700 )

Accrued liabilities 41,023 ( 8,851 )

Accrued interest, net of interest received on maturity of investments ( 10,755 ) ( 3,127 )

16 unchanged sentences

Cash, cash equivalents, and restricted cash at end of period $ 237,684 $ 62,055

Supplemental disclosure of cash flow information:

Obtaining a right-of-use asset in exchange for a lease liability $ 1,168 $ 1,628

See accompanying notes to condensed consolidated financial statements.

4 unchanged sentences

Madrigal Pharmaceuticals, Inc.

(the “Company” or “Madrigal”) is a biopharmaceutical company dedicated to transforming care for patients with nonalcoholic steatohepatitis (“NASH”), a serious liver disease that can lead to cirrhosis, liver failure and premature mortality.

(the “Company” or “Madrigal”) is a biopharmaceutical company focused on delivering novel therapeutics for nonalcoholic steatohepatitis (“NASH”), a serious liver disease with high unmet medical need that can lead to cirrhosis, liver failure and premature mortality.

NASH is expected to become the leading cause of liver transplantation in the U.S.

and is already the leading cause of liver transplantation among women in the U.S.

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

27 unchanged sentences

and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s).

Revenue from product sales is recorded net of adjustments for estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns, and other deductions.

Accruals are established for these deductions, and actual amounts incurred are offset against applicable accruals.

The Company reflects these accruals as either a reduction in the related account receivable from the customer or as an accrued liability, depending on the means by

which the deduction is settled.

Sales deductions are based on management’s estimates that involve a substantial degree of judgment.

Net Product Revenue

Product Revenue, Net

On March 14, 2024, the Company 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).

F3 fibrosis).

The Company enters into agreements with specialty pharmacies and specialty distributors, each a “Customer” and collectively the “Customers”, to sell Rezdiffra in the U.S.

4 unchanged sentences

Estimates are reviewed quarterly and adjusted as necessary.

Accruals are established for gross to net deductions and actual amounts incurred are offset against applicable accruals.

The Company reflects these accruals as either a reduction in the related account receivable from the customer or as an accrued liability, depending on the means by which the deduction is settled.

Sales deductions are based on management’s estimates that involve a substantial degree of judgment.

Customers receive a prompt pay discount for payments made within a contractually agreed number of days before the due date.

2 unchanged sentences

Product returns are estimated based on forecasted sales and historical and industry data.

Returns are permitted under certain contractual circumstances, including product expiration date.

Returns are permitted in accordance with the return goods policy defined within each customer agreement.

A returns reserve is recorded as an accrued liability.

Chargebacks :

Chargebacks are reserved for from eligible healthcare providers, resulting from discounted sales prices offered to qualified customers.

The Company is charged back for the difference between the sale price and the discounted price, which is recorded as a contra receivable.

The Company estimates obligations resulting from contractual commitments with the government and other entities to sell products to qualified healthcare providers at prices lower than the list prices charged to the customer who directly purchases from the Company.

The customer charges the Company for the difference between what it pays to the Company for the product and the selling price to the qualified healthcare providers, with the difference recorded as a contra receivable.

Co-Payment Assistance :

Co-payment assistant programs are offered to eligible end-users as price concessions and are recorded as accrued liabilities and a reduction of the transaction price.

Co-payment assistance programs are offered to eligible end-users as price concessions and are recorded as accrued liabilities and a reduction of the transaction price.

The Company uses a third-party to administer the co-payment program for pharmacy benefit claims.

Rebates include mandated discounts relating to the Medicaid Drug Rebate Program and Medicare coverage gap rebates.

The discount obligations result in decreases to revenue and are recorded to accrued liabilities.

The Company is subject to discount obligations under government programs, including Medicaid and Medicare.

Reserves for rebates are recorded in the same period the related product revenue is recognized, resulting in a reduction of product revenues and a current liability that is included in accrued expenses on the consolidated balance sheet.

The Company’s estimate for rebates is based on statutory discount rates, expected utilization or an estimated number of patients on treatment, as applicable.

Concentrations of Credit Risk and Significant Customers

The Company generates revenue from a small number of large, reputable customers.

The following customers accounted for over 10% of total gross product revenue during three months ended June 30, 2024.

As the Company launched Rezdiffra in April 2024, there were no sales and no corresponding customer concentrations in prior periods.

Three Months Ended June 30,

The following customers accounted for over 10% of total gross product revenue during three and nine months ended September 30, 2024.

As Rezdiffra was made commercially available in April 2024, there were no sales and no corresponding customer concentrations in 2023.

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

38 % — % 38 % — %

21 % — % 21 % — %

16 % — % 16 % — %

11 % — % 12 % — %

Cash and Cash Equivalents

2 unchanged sentences

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’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.

6 unchanged sentences

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 six months ended June 30, 2024 and 2023, the Company determined it did not have any securities that were other-than-temporarily impaired.

During the nine months ended September 30, 2024 and 2023, the Company determined it did not have any securities that were other-than-temporarily impaired.

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

1 unchanged sentence

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

During the six months ended June 30, 2024 and 2023, the Company did no t have any realized gains or losses on marketable securities.

During the nine months ended September 30, 2024 and 2023, realized gains and losses on marketable securities were no t material.

Fair Value of Financial Instruments

10 unchanged sentences

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

As of June 30, 2024, 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 six months ended June 30, 2024 and 2023, the Company did not have any transfers of financial assets between Levels 1 and 2.

As of June 30, 2024 and December 31, 2023, the Company did not have any financial liabilities that were recorded at fair value on a recurring basis on the balance sheet.

Inventory is stated at the lower of cost or estimated net realizable value, using actual cost, based on a first-in, first-out (“FIFO”) method.

The Company analyzes its inventory levels quarterly and writes down inventory subject to expiry or

in excess of expected requirements, or that has a cost basis in excess of its expected net realizable value.

These write downs are charged to cost of goods sold in the accompanying Consolidated Statements of Income.

As of September 30, 2024, the Company’s financial assets valued based on Level 1 inputs consisted of cash and cash equivalents in a money market fund, its financial assets valued based on Level 2 inputs consisted of high-grade corporate and government agency bonds and commercial paper, and it had no financial assets valued based on Level 3 inputs.

During the nine months ended September 30, 2024 and 2023, the Company did not have any transfers of financial assets between Levels 1 and 2.

As of September 30, 2024 and December 31, 2023, the Company did not have any financial liabilities that were recorded at fair value on a recurring basis on the balance sheet.

Inventory, which consists of work in process and finished goods, is stated at the lower of cost or estimated net realizable value, using actual cost, based on a first-in, first-out (“FIFO”) method.

The balance sheet classification of inventory as current or non-current is determined by whether it will be consumed within the Company’s normal operating cycle.

The Company analyzes its inventory levels quarterly and writes down inventory subject to expiry or in excess of expected requirements, or that has a cost basis in excess of its expected net realizable value.

These write downs are charged to cost of sales in the accompanying Consolidated Statements of Income.

The Company capitalizes inventory costs when future commercial sale in the ordinary course of business is probable.

The Company considered regulatory approval of its product candidate to be uncertain and product manufactured prior to regulatory approval could not have been sold unless regulatory approval was obtained.

As such, the manufacturing costs incurred prior to regulatory approval were not capitalized as inventory, but were expensed as incurred as research and development expenses.

As such, the manufacturing costs incurred prior to regulatory approval were not capitalized as inventory, rather were expensed as incurred as research and development expenses.

The Company began capitalizing inventory in March 2024 after FDA approval was granted.

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.

Research and development costs are comprised of costs incurred in performing research and development activities, including internal costs (including cash compensation and 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.

4 unchanged sentences

Intangible Assets

Intangible assets with finite lives are amortized to cost of goods sold over their estimated useful lives using the straight-line method.

Intangible assets with finite lives are amortized to cost of sales over their estimated useful lives using the straight-line method.

Intangible assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

17 unchanged sentences

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.

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

The Company does not record tax benefits related to ISOs unless and until a disqualifying disposition is reported.

In the event of a disqualifying disposition, the entire tax benefit is recorded as a reduction of income tax expense.

The Company has not recognized any income tax benefit for its share-based compensation arrangements due to the fact that the Company does not believe it is more likely than not it will realize the related deferred tax assets.

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

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 has not recognized any income tax benefit for its stock-based compensation arrangements due to the fact that the Company does not believe it is more likely than not it will realize the related deferred tax assets.

The Company accounts for income taxes in accordance with ASC 740, "Income Taxes", which prescribes the use of the liability method where deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that a portion or all of the deferred tax assets will not be realized based on the weight of available positive and negative evidence.

The Company currently maintains a 100 % valuation allowance on its deferred tax assets.

5 unchanged sentences

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 six months ended June 30, 2024 and 2023, diluted net loss per share is the same as basic net loss per share because the inclusion of weighted average shares of common stock issuable upon the exercise of stock options and warrants or vesting of restricted stock units, and common stock issuable upon the conversion of preferred stock would be anti-dilutive.

However, for the nine months ended September 30, 2024 and 2023, diluted net loss per share is the same as basic net loss per share because the inclusion of weighted average shares of common stock issuable upon the exercise of stock options and warrants or vesting of restricted stock units, and common stock issuable upon the conversion of preferred stock would be anti-dilutive.

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

Outstanding at June 30,

Outstanding at September 30,

Common stock options 1,701,618 2,518,612

7 unchanged sentences

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.

The Company does not expect the adoption of ASU 2023-07 to have a significant impact 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.

Improvements to Income Tax Disclosures, which enhances the disclosures required for income taxes in the Company's annual consolidated financial

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.

The Company does not expect the adoption of ASU 2023-09 to have a significant impact on its financial statements.

Liquidity and Uncertainties

The Company is subject to risks common to development stage companies and early commercial 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 (“FDA”) and other government regulations.

The Company has incurred losses since inception, including approximately $ 299.5 million for the six months ended June 30, 2024, resulting in an accumulated deficit of approximately $ 1,635.8 million as of June 30, 2024.

The Company has incurred losses since inception, including approximately $ 406.5 million for the nine months ended September 30, 2024, resulting in an accumulated deficit of approximately $ 1,742.8 million as of September 30, 2024.

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

10 unchanged sentences

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 research activities and related clinical expenses if necessary due to liquidity concerns until a date when those concerns are relieved.

The Company has the ability to delay certain commercial activities, geographic expansion activities, and certain research activities and related clinical expenses if necessary due to liquidity concerns until a date when those concerns are relieved.

Cash, Cash Equivalents and Marketable Securities

The Company held restricted cash of $ 5.0 million as of June 30, 2024 as collateral to its corporate credit card program.

The Company held restricted cash of $ 5.0 million as of September 30, 2024 as collateral to its corporate credit card program.

The Company had no restricted cash as of December 31, 2023.

A summary of cash, cash equivalents and available-for-sale marketable securities held by the Company as of June 30, 2024 and December 31, 2023 is as follows (in thousands):

June 30, 2024

A summary of cash, cash equivalents and available-for-sale marketable securities held by the Company as of September 30, 2024 and December 31, 2023 is as follows (in thousands):

September 30, 2024

Cost Unrealized

2 unchanged sentences

Money market funds (Level 1) 86,060 — — 86,060

government and government sponsored entities due within 3 months (Level 1) 67,541 — — 67,541

Corporate debt securities due within 3 months of date of purchase (Level 2)

6 unchanged sentences

297,160 411 ( 7 ) 297,564

government and government sponsored entities due within 1 to 2 years of date of purchase (Level 2) 31,235 320 ( 1 ) 31,554

Total cash, cash equivalents, restricted cash, and marketable securities $ 1,002,356 $ 1,304 $ ( 33 ) $ 1,003,627

15 unchanged sentences

Total cash, cash equivalents and marketable securities $ 633,663 $ 476 $ ( 8 ) $ 634,131

The following table summarizes the Company's inventory balances as of June 30, 2024 and December 31, 2023 (in thousands):

June 30, 2024 December 31, 2023

The following table summarizes the Company's inventory balances as of September 30, 2024 and December 31, 2023 (in thousands):

September 30, 2024 December 31, 2023

Raw materials

2 unchanged sentences

Accrued Liabilities

Accrued liabilities as of June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

Accrued liabilities as of September 30, 2024 and December 31, 2023 consisted of the following (in thousands):

September 30,

2024 December 31,

4 unchanged sentences

Professional fees 23,095 6,814

Gross to net accrued expenses

Gross to net accrued liabilities

Other 6,812 1,970

4 unchanged sentences

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

The Company also could draw up to an additional $ 125.0 million in two separate

tranches upon achievement of certain resmetirom clinical and regulatory milestones.

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

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

12 unchanged sentences

The third tranche (“Tranche 3”) of $ 75.0 million was unchanged by the First Amendment, and such borrowings became available when the Company achieved a milestone with FDA approval for Rezdiffra in March 2024.

The Company did not elect to draw Tranche 3 before it expired in June 2024.

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.

In connection with the $ 35.0 million drawn under Tranche 2 at the closing of the First 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 Company did not elect to draw Tranche 3 before it expired in June 2024, but subsequently entered into an amendment to extend the availability of these funds in August 2024.

Coincident with the expansion of Tranche 2 borrowing capacity by $ 15.0 million, the First Amendment reduced the fourth tranche under the Loan Facility (“Tranche 4”) by $ 15.0 million to $ 60.0 million.

In connection with the $ 35.0 million drawn under Tranche 2 at the closing of the First Amendment, $ 15.0 million drawn in June of 2023, and $ 15.0 million drawn in September 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 First 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 First Amendment and the Amended Loan Facility summary terms were disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 9, 2023.

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

On August 22, 2024, the Company entered into the Second Amendment (the “Second Amendment”) to the Loan Facility (as amended by the First Amendment and the Second Amendment, the “Second Amended Loan Facility”).

Under the Second Amended Loan Facility, the Company’s borrowing capacity available under Tranche 4 is increased to include the $ 75.0 million available under Tranche 3 that was not utilized by the Company.

After such increase, the Company’s current borrowing capacity is $ 135.0 million under Tranche 4, which is available subject to Hercules’ sole discretion.

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

The Loan Facility contains event of default provisions for:

4 unchanged sentences

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 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, 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 June 30, 2024 are as follows (in thousands):

Period Ending June 30, 2024:

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

The interest rate as of September 30, 2024 was 10.45 %.

As of September 30, 2024, the Company was in compliance with all loan covenants and provisions.

Future minimum payments, including interest and principal, under the loans payable outstanding as of September 30, 2024 are as follows (in thousands):

Period Ending September 30, 2024:

Thereafter 53,247

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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 t he net proceeds from the Offering for its clinical and commercial activities in preparation for the launch of resmetirom in the U.S.

The Company intends to use t he net proceeds from the Offering for its clinical and

commercial activities in preparation for the 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.

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The Company is authorized to issue and sell up to $ 300.0 million in shares of the Company’s common stock under the 2024 Sales Agreement.

The Company 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.

The Company sold no shares in the three and nine months ended September 30, 2024 under either the 2021 Sales Agreement, as amended by the Sales Agreement Amendment, or the 2024 Sales Agreement.

Stock-based Compensation

4 unchanged sentences

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.

On June 25, 2024, the Company’s stockholders approved an amendment to the 2015 Stock Plan to increase the total number of shares of common stock available for issuance by 750,000 and extend its duration by 10 years until April 23, 2035.

As of June 30, 2024, 1,264,199 shares were available for future issuance under the 2015 Stock Plan.

On June 25, 2024, the Company’s stockholders approved an amendment to the 2015 Stock Plan to increase the total number of shares of common stock

available for issuance by 750,000 and extend its duration by ten years until April 23, 2035.

As of September 30, 2024, 1,233,829 shares were available for future issuance under the 2015 Stock Plan.

2023 Inducement Plan

4 unchanged sentences

A total of 500,000 shares of the Company’s common stock were reserved for issuance under the Inducement Plan.

As of June 30, 2024, 19,097 shares were available for future issuance under the 2023 Inducement Plan.

As of September 30, 2024, 21,193 shares were available for future issuance under the 2023 Inducement Plan.

Stock Options

The following table summarizes stock option activity during the six months ended June 30, 2024:

The following table summarizes stock option activity during the nine months ended September 30, 2024:

average exercise

3 unchanged sentences

Options cancelled ( 68,535 ) 121.89

Outstanding at June 30, 2024 1,772,807 $ 93.76

Exercisable at June 30, 2024 1,323,994 $ 79.14

The total cash received by the Company as a result of stock option exercises was $ 49.7 million and $ 21.8 million, respectively, for the six months ended June 30, 2024 and 2023.

The total intrinsic value of options exercised was $ 121.1 million and $ 48.9 million, respectively, for the six months ended June 30, 2024 and 2023.

The weighted-average grant date fair values, based on the Black-Scholes option model, of options granted during the six months ended June 30, 2024 and 2023 were $ 153.98 and $ 219.02 , respectively.

Outstanding at September 30, 2024 1,701,618 $ 94.62

Exercisable at September 30, 2024 1,297,563 $ 78.45

The total cash received by the Company as a result of stock option exercises was $ 57.1 million and $ 26.2 million, respectively, for the nine months ended September 30, 2024 and 2023.

The total intrinsic value of options exercised was $ 132.5 million and $ 51.0 million, respectively, for the nine months ended September 30, 2024 and 2023.

The weighted-average grant date fair values, based on the Black-Scholes option model, of options granted during the nine months ended September 30, 2024 and 2023 were $ 155.41 and $ 219.02 , respectively.

Restricted Stock Units

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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.

As of June 30, 2024, the Company had 508,947 restricted stock units outstanding, with a weighted average grant date fair value of $ 230.61 per unit.

The following table summarizes RSU activity, excluding performance-based RSUs, during the six months ended June 30, 2024:

As of September 30, 2024, the Company had 502,867 restricted stock units outstanding, with a weighted average grant date fair value of $ 233.42 per unit.

The following table summarizes RSU activity, excluding performance-based RSUs, during the nine months ended September 30, 2024:

Weighted average grant date fair value

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( 55,356 ) 244.45

Outstanding at June 30, 2024 508,947 $ 230.61

Outstanding at September 30, 2024 502,867 $ 233.42

Performance-Based Restricted Stock Units

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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.

The following table summarizes PSU activity during the six months ended June 30, 2024:

The following table summarizes PSU activity during the nine months ended September 30, 2024:

PSUs Eligible to Earn PSUs Weighted average grant date fair value

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PSUs forfeited ( 8,442 ) ( 16,884 ) 388.02

Outstanding at June 30, 2024 92,760 235,520 $ 257.77

Outstanding at September 30, 2024 92,760 235,520 $ 257.77

Outstanding Awards

As of June 30, 2024, the Company had restricted stock units, performance stock units, and options outstanding pursuant to which an aggregate of 2,517,274 shares of its common stock may be issued pursuant to the terms of all awards granted under the 2015 Stock Plan and Inducement Plan.

As of September 30, 2024, the Company had restricted stock units, performance stock units, and options outstanding pursuant to which an aggregate of 2,440,005 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 three and six months ended June 30, 2024 and 2023 was as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Stock-based compensation expense during the three and nine months ended September 30, 2024 and 2023 was as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

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Total stock-based compensation expense included in net loss $ 17,898 $ 12,660 $ 62,204 $ 34,883

Unrecognized stock-based compensation expense as of June 30, 2024 was $ 149.1 million with a weighted average remaining period of 2.09 years.

Unrecognized stock-based compensation expense as of September 30, 2024 was $ 139.1 million with a weighted average remaining period of 2.71 years.

Commitments and Contingencies

The Company has entered into customary contractual arrangements and letters of intent in preparation for and in support of operations in the normal course of business.

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.

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

The Company launched Rezdiffra in the U.S.

in April 2024.

The company did no t achieve any product development or regulatory milestones for the six months ended June 30, 2023.

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

The Company began accruing for royalty payments following its commercial launch of Rezdiffra in April 2024.

The Company did no t achieve any product development or regulatory milestones for the nine months ended September 30, 2023.

In 2019, the Company entered into an operating lease for office space located in West Conshohocken, PA (the “Office Lease”), which was later updated by three amendments entered into from 2019 to 2022.

In May 2023, the Company entered into the Fourth Amendment to the Office Lease (the “Fourth Lease Amendment”), which did not have a financial impact.

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

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

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 April 2024 and May 2024, the Company entered into the Sixth (the “Sixth Lease Amendment”) and Seventh (the “Seventh Lease Amendment”) Amendments to the Office Lease, respectively, expanding the amount of office space available in the same premises.

The lease commencement date had not yet occurred as of June 30, 2024 and therefore there was no impact to the financial statements.

The Fifth Lease Amendment extended the term of the Office Lease through November 2026.

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

In April 2024 and May 2024, the Company entered into the Sixth Amendment (the “Sixth Lease Amendment”) and the Seventh Amendment (the “Seventh Lease Amendment”) to the Office Lease, respectively, leasing additional office space in the same premises under the Office Lease.

The lease for the additional office space commenced in September 2024 and resulted in an incremental $ 1.2 million right-of-use asset and lease liability being recorded for the quarter ended September 30, 2024.

In August 2024, the Company entered into the Eighth (the “Eighth Lease Amendment”) and in October 2024, the Company entered into the Ninth Amendment (the “Ninth Lease Amendment”) to the Office Lease further expanding the amount of office space in the same premises.

The commencement date of the Eighth and Ninth Lease Amendments did not occur as of September 30, 2024, therefore had no impact to the financial statements.

Subsequent Events

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• Post-approval requirements and commitments, including verification of a clinical benefit in confirmatory trials;

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

• Our ability to delay certain commercial expansion activities and research activities and related expenses, as necessary;

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

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• Projections or objectives for obtaining full approval for resmetirom for NASH patients with significant fibrosis (or non-cirrhotic NASH patients) and NASH patients with compensated cirrhosis, including all statements concerning potential clinical benefit to support approval and/or potential approval;

• Estimates of patients diagnosed with NASH;

• Estimates of patients diagnosed with NASH, the relationship between NASH progression and adverse patient outcomes and the estimated clinical burden of uncontrolled NASH;

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

• Optimal dosing levels for resmetirom and projections regarding potential NASH or NAFLD and potential patient benefits with resmetirom, including future NASH resolution, safety, fibrosis treatment, cardiovascular effects, lipid treatment and/or biomarker effects with resmetirom;

• The relationship between NASH progression and adverse patient outcomes;

• The estimated clinical burden of uncontrolled NASH;

• Analyses for patients with NASH with significant fibrosis concerning potential progression to cirrhosis, decompensated cirrhosis, liver transplant or death, and cardiovascular risks, comorbidities and outcomes;

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

We specifically discuss these risks and uncertainties in greater detail in the section appearing in Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024 (the “2023 Form

10-K”), as well as in our other filings with the SEC.

You should read the 2023 Form 10-K, this Quarterly Report, and the other documents that we file or have filed with the SEC, with the understanding that our actual future results may be materially different from the results expressed or implied by these forward-looking statements.

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

What changed 10-Q

Item 1. Financial Statements