What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-31 compared with 2024-08-07 · 104 added, 94 removed, 189 unchanged (51% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with our audited financial statements and accompanying notes for year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are included in our Annual Report on Form 10-K.

The consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with our audited financial statements and accompanying notes for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are included in our Annual Report on Form 10-K.

In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions.

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About Madrigal Pharmaceuticals, Inc.

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.

We are 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.

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

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

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.

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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.

We estimate 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.

We estimate that approximately 315,000 diagnosed patients with NASH with moderate to advanced fibrosis are under the care of specialist physicians which we are targeting during the commercial 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.

We are 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 moderate to advanced liver fibrosis.

Food & Drug Administration (“FDA”) for accelerated approval of Rezdiffra for treatment of NASH with moderate to advanced liver fibrosis.

Key Developments

On October 21, 2024, we announced that we completed enrollment in the MAESTRO-NASH OUTCOMES trial evaluating resmetirom for the treatment of patients with compensated NASH cirrhosis.

MAESTRO-NASH OUTCOMES is a Phase 3, double-blind, randomized, placebo-controlled study that noninvasively measures progression to liver decompensation events.

The study duration is expected to be two to three years for accrual of the required number of composite clinical outcome events.

On September 30, 2024, we announced publication of health-related quality of life results from the Phase 3 MAESTRO-NASH trial of Rezdiffra.

Patients treated with Rezdiffra experienced clinically meaningful and statistically significant improvements in emotional well-being and health distress.

The results were published in the journal Hepatology .

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.

Our key Rezdiffra presentations at the EASL Congress included (i) a late-breaking artificial intelligence-based analysis of MAESTRO-NASH biopsy data;

(ii) noninvasive test data that demonstrated durable treatment response to Rezdiffra;

(iii) the first analysis of health-related quality of life data from MAESTRO-NASH;

and (iv) the first analysis of Rezdiffra treatment in metabolic dysfunction and alcohol-associated liver disease (MetALD).

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”).

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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.

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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 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.

Basis of Presentation

Product Revenue, Net

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).

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in April 2024.

Cost of Sales

Cost of sales includes the cost of manufacturing and distribution of inventory related to sales of Rezdiffra.

We expect cost of sales to increase in the future, as manufacturing costs incurred prior to regulatory approval were expensed to research and development rather than capitalized as inventory, as approval was considered uncertain.

Research and Development Expenses

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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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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, 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.

Selling, general and administrative expenses consist primarily of salaries, benefits and stock-based compensation expenses for employees, management costs, costs associated with commercial activities, 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, continue commercialization efforts, including evaluating expansion plans, 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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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.

assets and liabilities that are not readily apparent from other sources.

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

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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.

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.

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Results of Operations

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 September 30, 2024 and 2023

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

Three Months Ended

June 30, Increase / (Decrease)

September 30, Increase / (Decrease)

2024 2023 $ %

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We began selling Rezdiffra in April 2024.

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

For the three months ended September 30, 2024, we recorded $62.2 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.

For the three months ended September 30, 2024, we recorded $2.2 million of cost of sales.

Research and Development Expenses

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

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

Three Months Ended September 30, Increase / Decrease

Personnel and Internal Expense

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$ 68,742 $ 70,951 $ (2,209) (3) %

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.

Our research and development expenses were $68.7 million for the three months ended September 30, 2024, compared to $71.0 million in the corresponding period in 2023.

Research and development expenses decreased by $2.2 million in the 2024 period primarily due to the change in accounting for inventory costs following FDA approval of Rezdiffra in March 2024, partially offset by increases in headcount.

Selling, General and Administrative Expenses

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.

Our selling, general and administrative expenses were $107.6 million for the three months ended September 30, 2024, compared to $27.6 million in the corresponding period in 2023.

Selling, general and administrative expenses increased by $80.0 million in the 2024 period due primarily to increases for commercial launch activities for Rezdiffra, including a corresponding increase in headcount, and an increase in stock compensation expense.

Interest Income

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.

Our net interest income was $13.0 million for the three months ended September 30, 2024, compared to $3.3 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 $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)

Our interest expense was $3.7 million for the three months ended September 30, 2024, compared to $3.5 million in the corresponding period in 2023.

The increase of $0.2 million was primarily the result of a higher average outstanding principal balance during the period under the Loan Facility with Hercules.

Nine Months Ended September 30, 2024 and 2023

Nine Months Ended September 30, Increase / (Decrease)

2024 2023 $ %

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Research and development 211,070 201,710 9,360 5 %

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

Selling, general and administrative 293,834 61,610 232,224 377 %

Interest income (35,575) (10,625) 24,950 235 %

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We began selling Rezdiffra in April 2024.

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

For the nine months ended September 30, 2024, we recorded $76.8 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.

For the nine months ended September 30, 2024, we recorded $2.8 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

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

Nine Months Ended September 30, Increase / Decrease

Personnel and Internal Expense

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$ 211,070 $ 201,710 $ 9,360 5 %

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.

Our research and development expenses were $211.1 million for the nine months ended September 30, 2024, compared to $201.7 million in the corresponding period in 2023.

Research and development expenses increased by $9.4 million in the 2024 period due primarily to an increase in headcount and a corresponding increase in stock compensation expense, partially offset by a reduction in external expense due to the change in accounting for inventory costs following FDA approval of Rezdiffra in March 2024.

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.

Our selling, general and administrative expenses were $293.8 million for the nine months ended September 30, 2024, compared to $61.6 million in the corresponding period in 2023.

Selling, general and administrative expenses

increased by $232.2 million in the 2024 period due primarily to increases in commercial preparation and launch activities for Rezdiffra, including a corresponding increase in headcount, and an increase in stock compensation expense.

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.

Our net interest income was $35.6 million for the nine months ended September 30, 2024, compared to $10.6 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 $7.5 million for the six months ended June 30, 2024, compared to $5.2 million in the corresponding period in 2023.

Our interest expense was $11.2 million for the nine months ended September 30, 2024, compared to $8.7 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

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

Our most significant use of capital pertains to salaries and benefits for our employees, including clinical, scientific, operational, financial and management personnel, and external research and development expenses, such as clinical trials and preclinical activity related to our product candidates.

As of June 30, 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.

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

government agencies, U.S.

Treasury debt securities, corporate debt securities and money market funds.

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

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.

Since inception, we have incurred significant net losses and we have funded our operations primarily through proceeds from sales of our capital stock and debt financings.

As of September 30, 2024, we had cash, cash equivalents, restricted cash, and marketable securities totaling $1,003.6 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, and net proceeds of approximately $85.9 million in April 2024 as a result of the underwriters’ exercise in full of their option to purchase additional shares as part of the March 2024 offering.

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 efforts and geographic expansion 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.

We regularly consider fundraising opportunities and may decide, from time to time, to raise capital based on various factors, including market conditions and our plans of operation.

Additional capital, 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 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.

Furthermore, any sales of additional equity securities may result in dilution to our stockholders, and any debt financing may include covenants that restrict our business.

If adequate funds are not available, or if the terms of potential funding sources are unfavorable, it could have a material adverse effect on our business, results of operations, and financial condition.

We have 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.

At-the-Market Sales Agreement

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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.

We sold no shares during 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.

As of September 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.

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(“Hercules”).

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.

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

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

On August 22, 2024, we 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, our borrowing capacity available under Tranche 4 is increased to include the $75.0 million available under Tranche 3 that was not utilized by us.

After such increase, our current borrowing capacity $135.0 million under Tranche 4, which 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.

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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 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 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 we maintain 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:

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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 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.

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, we were in compliance with all loan covenants and provisions.

March 2024 Public Offering

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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.

We intend to use the net proceeds from the 2024 Offering for our commercial activities in connection with the commercial 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.

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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.

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 us.

2023 Public Offering

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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.

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.

A holder of 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):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities $ (351,086) $ (244,297)

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$ 137,769 $ (269,494)

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.

Operating Activities

Net cash used in operating activities was $351.1 million for the nine months ended September 30, 2024, compared to $244.3 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 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.

Investing Activities

Net cash used in investing activities was $226.4 million for the nine months ended September 30, 2024, compared to $140.4 million used in for the corresponding period in 2023.

Net cash used in investing activities for the nine months ended September 30, 2024 primarily consisted of $781.0 million of purchases of marketable securities for our investment

portfolio, partially offset by $560.9 million from sales and maturities of marketable securities.

Net cash used in investing activities for the corresponding period in 2023 primarily consisted of $359.5 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 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.

Financing Activities

Net cash provided by financing activities was $715.3 million for the nine months ended September 30, 2024, compared to $115.2 million for the corresponding period in 2023.

Financing activities for the nine months ended September 30, 2024 consisted of $574.0 million of net proceeds from our March 2024 public offering, $85.9 million of net proceeds from the Underwriter’s Option in April 2024, and $57.1 million from exercises of stock options.

Net cash provided by financing activities for the corresponding period in 2023 consisted primarily of $65.0 million from issuance of the Loan Facility, $26.2 million from proceeds from the exercise of common stock options and $24.5 million from sales of our common stock under the 2023 Sales Agreement.

Contractual Obligations and Commitments

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

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

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

In 2019, we entered into an operating lease for office space in certain premises located in West Conshohocken, PA (the “Office Lease), which was further amended by three amendments entered into from 2019 to 2022.

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

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

The Fifth Lease Amendment extends 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, we 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 available in the same premises under the Office Lease.

The lease for such 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 ending September 30, 2024.

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

The leases for the additional office space under the Eighth and Ninth Lease Amendment did not commence as of September 30, 2024, therefore there is no impact to the financial statements during the period ending September 30, 2024.

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

As of June 30, 2024, we had drawn $115.0 million under the facility.

As of September 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.

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 have a Research, Development and Commercialization Agreement with Hoffmann-La Roche (“Roche”) which grants us 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 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.

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 nine months ended September 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