MADRIGAL PHARMACEUTICALS, INC. 10-Q

Item 1. Financial Statements. MADRIGAL PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited; in thousands, except share and per share amounts) September 30, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 232,684 $ 99,915 Restricted cash 5,000 — Marketable securities 765,943 534,216 Trade receivables, net 30,463 — Inventory 8,715 — Prepaid expenses and other current assets 20,861 3,150 Total current assets 1,063,666 637,281 Property and equipment, net 2,268 1,553 Intangible assets, net 4,819 — Right-of-use asset 2,512 1,713 Total assets $ 1,073,265 $ 640,547 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 45,966 $ 28,041 Accrued liabilities 131,003 89,980 Lease liability 878 527 Total current liabilities 177,847 118,548 Long term liabilities: Loan payable, net of discount 117,087 115,480 Lease liability 1,176 1,186 Total long term liabilities 118,263 116,666 Total liabilities 296,110 235,214 Stockholders’ equity: Preferred stock, par value $ 0.0001 per share authorized: 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 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 2 2 Additional paid-in-capital 2,518,648 1,741,153 Accumulated other comprehensive income 1,271 468 Accumulated deficit ( 1,742,766 ) ( 1,336,290 ) Total stockholders’ equity 777,155 405,333 Total liabilities and stockholders’ equity $ 1,073,265 $ 640,547 See accompanying notes to condensed consolidated financial statements. 3 Table of Contents MADRIGAL PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited; in thousands, except share and per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues: Product revenue, net $ 62,175 $ — $ 76,813 $ — Operating expenses: Cost of sales 2,152 — 2,788 — Research and development 68,742 70,951 211,070 201,710 Selling, general and administrative 107,585 27,583 293,834 61,610 Total operating expenses 178,479 98,534 507,692 263,320 Loss from operations ( 116,304 ) ( 98,534 ) ( 430,879 ) ( 263,320 ) Interest income 13,019 3,298 35,575 10,625 Interest expense ( 3,679 ) ( 3,504 ) ( 11,172 ) ( 8,741 ) Net loss $ ( 106,964 ) $ ( 98,740 ) $ ( 406,476 ) $ ( 261,436 ) Net loss per common share: Basic and diluted net loss per common share $ ( 4.92 ) $ ( 5.34 ) $ ( 19.31 ) $ ( 14.27 ) Basic and diluted weighted average number of common shares outstanding 21,745,929 18,476,414 21,052,544 18,326,154 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents MADRIGAL PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited; in thousands) 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 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 ) See accompanying notes to condensed consolidated financial statements. 5 Table of Contents MADRIGAL PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited; in thousands, except share and per share amounts) Additional paid-in Capital Accumulated other comprehensive income (loss) Accumulated deficit Total stockholders’ equity Preferred stock Common stock Shares Amount Shares Amount Balance at December 31, 2023 2,369,797 $ — 19,875,427 $ 2 $ 1,741,153 $ 468 $ ( 1,336,290 ) $ 405,333 Issuance of common shares and sale of warrants in equity offerings, excluding to related parties, net of transaction costs — — 750,000 — 311,560 — — 311,560 Sale of warrants to related parties in equity offerings, exercise of common stock options, and restricted stock vesting, net of transaction costs — — 59,236 — 262,145 — — 262,145 Stock-based compensation expense related to equity-classified awards — — — — 19,902 — — 19,902 Unrealized loss on marketable securities — — — — — ( 640 ) — ( 640 ) Net loss — — — — — — ( 147,541 ) ( 147,541 ) Balance at March 31, 2024 2,369,797 $ — 20,684,663 $ 2 $ 2,334,760 $ ( 172 ) $ ( 1,483,831 ) $ 850,759 Issuance of common shares in equity offering, excluding to related parties, net of transaction costs — — 346,153 — 85,950 — — 85,950 Sale of common shares to related parties and exercise of common stock options, net of transaction costs — — 670,077 — 48,174 — — 48,174 Stock-based compensation expense related to equity-classified awards — — — — 24,404 — — 24,404 Unrealized loss on marketable securities — — — — — ( 196 ) — ( 196 ) Net loss — — — — — — ( 151,971 ) ( 151,971 ) 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 6 Table of Contents Balance at December 31, 2022 2,369,797 $ — 18,102,523 $ 2 $ 1,160,079 $ ( 32 ) $ ( 962,660 ) $ 197,389 Sale of common shares to related parties and exercise of common stock options, net of transaction costs — — 180,551 — 17,903 — — 17,903 Stock-based compensation expense related to equity-classified awards — — — — 11,250 — — 11,250 Unrealized loss on marketable securities — — — — — ( 54 ) — ( 54 ) Hercules warrant — — — — 544 — — 544 Net loss — — — — — — ( 76,896 ) ( 76,896 ) Balance at March 31, 2023 2,369,797 $ — 18,283,074 $ 2 $ 1,189,776 $ ( 86 ) $ ( 1,039,556 ) $ 150,136 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. 7 Table of Contents MADRIGAL PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; in thousands) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net loss $ ( 406,476 ) $ ( 261,436 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 62,204 34,883 Depreciation and amortization expense 733 385 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: Trade receivables, net ( 30,463 ) — Prepaid expenses and other current assets ( 17,711 ) ( 523 ) Inventory ( 8,715 ) — Accounts payable 17,925 ( 7,289 ) Accrued liabilities 41,023 ( 8,851 ) Accrued interest, net of interest received on maturity of investments ( 10,755 ) ( 3,127 ) Net cash used in operating activities ( 351,086 ) ( 244,297 ) Cash flows from investing activities: Purchases of marketable securities ( 781,021 ) ( 359,549 ) Sales and maturities of marketable securities 560,852 219,595 Acquisition of intangible asset ( 5,000 ) — Purchases of property and equipment, net of disposals ( 1,267 ) ( 443 ) Net cash used in investing activities ( 226,436 ) ( 140,397 ) Cash flows from financing activities: Proceeds from issuances of stock, excluding related parties, net of transaction costs 397,510 24,484 Proceeds from related parties - warrants, exercise of common stock options, net of transaction costs 317,781 26,079 Proceeds from issuance of loan payable — 65,000 Payment of debt issuance costs — ( 363 ) Net cash provided by financing activities 715,291 115,200 Net increase (decrease) in cash, cash equivalents, and restricted cash 137,769 ( 269,494 ) Cash, cash equivalents, and restricted cash at beginning of period 99,915 331,549 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. 8 Table of Contents MADRIGAL PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Organization, Business, and Basis of Presentation Organization and Business Madrigal Pharmaceuticals, Inc. (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. 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). Basis of Presentation Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by GAAP for complete annual financial statements. However, the Company believes that the disclosures included in these financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of such interim results. The interim results are not necessarily indicative of the results that the Company will have for the full year ending December 31, 2024 or any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2023. 2. Summary of Significant Accounting Policies Principle of Consolidation The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates. Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 606 - Revenue from Contracts with Customers. Revenue is recognized at a point in time when the customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s). 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 9 Table of Contents 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. Revenues from product sales are recognized when the Customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the Customer. Revenue is recorded net of variable consideration, which includes prompt pay discounts, returns, chargebacks, rebates, and co-payment assistance. The variable consideration is estimated based on contractual terms as well as management assumptions. The amount of variable consideration is calculated by using the expected value method, which is the sum of probability-weighted amounts in a range of possible outcomes, or the most likely amount method, which is the single most likely amount in a range of possible outcomes. 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. Prompt Pay : Customers receive a prompt pay discount for payments made within a contractually agreed number of days before the due date. The discounts are accounted for as a reduction of the transaction price and recorded as a contra receivable. Returns : The Company records allowances for product returns as a reduction of revenue at the time product sales are recorded. Product returns are estimated based on forecasted sales and historical and industry data. 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 : 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 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 : 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 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 Customer A 38 % — % 38 % — % Customer B 21 % — % 21 % — % Customer C 16 % — % 16 % — % Customer D 11 % — % 12 % — % 10 Table of Contents Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash in bank accounts, the balance of which, at times, exceeds Federal Deposit Insurance Corporation insured limits. The primary objective of the Company’s investment activities is to preserve its capital for the purpose of funding operations and the Company does not enter into investments for trading or speculative purposes. The Company’s cash is deposited in highly rated financial institutions in the United States. The Company invests in money market funds and high-grade, commercial paper and corporate bonds, which management believes are subject to minimal credit and market risk. Marketable Securities Marketable securities consist of investments in high-grade corporate obligations and government and government agency obligations that are classified as available-for-sale. Since these securities are available to fund current operations, they are classified as current assets on the consolidated balance sheets. The Company adjusts the cost of available-for-sale debt securities for amortization of premiums and accretion of discounts to maturity. The Company includes such amortization and accretion as a component of interest income, net. Realized gains and losses and declines in value, if any, that the Company judges to be the result of impairment or as a result of recognizing an allowance for credit losses on available-for-sale securities are reported as a component of interest income. To determine whether an impairment exists, the Company considers whether it intends to sell the debt security and, if the Company does not intend to sell the debt security, it considers available evidence to assess whether it is more likely than not that it will be required to sell the security before the recovery of its amortized cost basis. During the 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. The fair value of these securities is based on quoted prices and observable inputs on a recurring basis. Realized gains and losses are determined on the specific identification method. During the nine months ended September 30, 2024 and 2023, realized gains and losses on marketable securities were no t material. Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, which include cash equivalents and marketable securities, approximate their fair values. The fair value of the Company’s financial instruments reflects the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy has the following three levels: Level 1—quoted prices in active markets for identical assets and liabilities. Level 2—observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. Level 3—unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company measures the fair value of its marketable securities by taking into consideration valuations obtained from third- party pricing sources. The pricing services utilize industry standard valuation models, including both income and market based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker-dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities and other observable inputs. As of 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. 11 Table of Contents Inventory 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, 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 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. Management uses significant judgment in estimating the amount of research and development costs recognized in each reporting period. Management analyzes and estimates the progress of its clinical trials, completion of milestone events per underlying agreements, invoices received and contracted costs when estimating the research and development costs to accrue in each reporting period. Actual results could differ from the Company’s estimates. Patents Costs to secure and defend patents are expensed as incurred and are classified as selling, general and administrative expense in the Company’s consolidated statements of operations. Intangible Assets 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. Stock-Based Compensation The Company recognizes stock-based compensation expense based on the grant date fair value of stock options, restricted stock units, and other stock-based compensation awards granted to employees, officers, directors, and consultants. Awards that vest as the recipient provides service are expensed on a straight-line basis over the requisite service period. The Company uses the Black-Scholes option pricing model to determine the grant date fair value of stock options as management believes it is the most appropriate valuation method for its option grants. The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility and expected lives of the options. The expected lives for options granted represent the period of time that options granted are expected to be outstanding. The Company uses the simplified method for determining the expected lives of options. Expected volatility is based upon an industry estimate or blended rate including the Company’s historical trading activity. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Company estimates the forfeiture rate based on historical data. This analysis is re-evaluated at least annually and the forfeiture rate is adjusted as necessary. For other stock-based compensation awards granted to employees and directors that vest based on market conditions, such as the trading price of the Company’s common stock achieving or exceeding certain price targets, the Company uses a Monte Carlo simulation model to estimate the grant date fair value and recognize stock compensation expense over the derived service period. The Monte Carlo simulation model requires key inputs for risk-free interest rate, dividend yield, volatility, and expected life. 12 Table of Contents The assumptions used in computing the fair value of equity awards reflect the Company’s best estimates but involve uncertainties related to market and other conditions. Changes in any of these assumptions may materially affect the fair value of awards granted and the amount of stock-based compensation recognized. Certain of the employee stock options granted by the Company are structured to qualify as incentive stock options (ISOs). Under current tax regulations, the Company does not receive a tax deduction for the issuance, exercise or disposition of ISOs if the employee meets certain holding requirements. If the employee does not meet the holding requirements, a disqualifying disposition occurs, at which time the Company may receive a tax deduction. The Company does not record tax benefits related to ISOs unless and until a disqualifying disposition is reported. In the event of a disqualifying disposition, the entire tax benefit is recorded as a reduction of income tax expense. The Company has not recognized any income tax benefit for its 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. Income Taxes 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. Comprehensive Loss Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Changes in unrealized gains and losses on marketable securities represent the only difference between the Company’s net loss and comprehensive loss. Basic and Diluted Loss Per Common Share Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed using the weighted average number of common shares outstanding and the weighted average dilutive potential common shares outstanding using the treasury stock method. However, for the 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 September 30, 2024 2023 Common stock options 1,701,618 2,518,612 Restricted stock units 502,867 311,767 Performance-based restricted stock units 235,520 150,000 Preferred stock 2,369,797 2,369,797 Warrants 3,625,244 19,454 Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances the disclosures required for operating segments in the Company's annual and interim consolidated financial statements. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. 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 13 Table of Contents statements. The amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company does not expect the adoption of ASU 2023-09 to have a significant impact on its financial statements. 3. 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 FDA and other government regulations. 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. In March 2024, the FDA approved Rezdiffra in the U.S. for the treatment of adults with noncirrhotic NASH with moderate to advanced liver fibrosis (consistent with stages F2 to F3 fibrosis). Rezdiffra became commercially available in the U.S. in April 2024. In March 2024, the Company completed a public offering and received approximately $ 574.0 million net cash proceeds. In April 2024, underwriters exercised in full their option to purchase additional shares as part of the public offering, resulting in additional net cash proceeds of approximately $ 85.9 million. The Company believes that its cash, cash equivalents and marketable securities will be sufficient to fund operations past one year from the issuance of these financial statements. The Company’s future long-term liquidity requirements will be substantial and will depend on many factors, including the Company’s ability to effectively commercialize Rezdiffra. To meet its future capital needs, the Company may need to raise additional capital through debt or equity financings, collaborations, partnerships or other strategic transactions. However, there can be no assurance that the Company will be able to complete any such transactions on acceptable terms or otherwise. The inability of the Company to obtain sufficient funds on acceptable terms when needed, if at all, could have a material adverse effect on the Company’s business, results of operations and financial condition. The Company has the ability to delay certain 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. 14 Table of Contents 4. Cash, Cash Equivalents and Marketable Securities 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 September 30, 2024 and December 31, 2023 is as follows (in thousands): September 30, 2024 Cost Unrealized gains Unrealized losses Fair value Cash and cash equivalents: Cash (Level 1) $ 25,242 $ — $ — $ 25,242 Money market funds (Level 1) 86,060 — — 86,060 U.S. 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) 58,841 — — 58,841 Total cash and cash equivalents 237,684 — — 237,684 Marketable securities: Corporate debt securities due within 1 year of date of purchase (Level 2) 436,277 573 ( 25 ) 436,825 U.S. government and government sponsored entities due within 1 year of date of purchase (Level 2) 297,160 411 ( 7 ) 297,564 U.S. 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 December 31, 2023 Cost Unrealized gains Unrealized losses Fair value Cash and cash equivalents: Cash (Level 1) $ 2,729 $ — $ — $ 2,729 Money market funds (Level 1) 78,555 — — 78,555 US government and government sponsored entities (Level 1) 14,967 — — 14,967 Corporate debt securities due within 3 months of date of purchase (Level 2) 3,664 — — 3,664 Total cash and cash equivalents 99,915 — — 99,915 Marketable securities: Corporate debt securities due within 1 year of date of purchase (Level 2) 382,028 195 ( 7 ) 382,216 US government and government sponsored entities due within 1 year of date of purchase (Level 2) 150,743 280 ( 1 ) 151,022 Corporate debt securities due within 1 to 2 years of date of purchase (Level 2) 977 1 — 978 Total cash, cash equivalents and marketable securities $ 633,663 $ 476 $ ( 8 ) $ 634,131 5. Inventory The following table summarizes the Company's inventory balances as of September 30, 2024 and December 31, 2023 (in thousands): 15 Table of Contents September 30, 2024 December 31, 2023 Raw materials $ — $ — Work in process 5,389 — Finished goods 3,326 — Total $ 8,715 $ — 6. Accrued Liabilities Accrued liabilities as of September 30, 2024 and December 31, 2023 consisted of the following (in thousands): September 30, 2024 December 31, 2023 Contract research organization costs $ 59,809 $ 50,737 Other clinical study related costs 1,496 3,724 Manufacturing and drug supply 2,291 9,705 Compensation and benefits 29,684 17,030 Professional fees 23,095 6,814 Gross to net accrued liabilities 7,816 — Other 6,812 1,970 Total accrued liabilities $ 131,003 $ 89,980 7. Long Term Debt In May 2022, the Company and its wholly-owned subsidiary, Canticle Pharmaceuticals, Inc., entered into the $ 250.0 million Loan Facility with the several banks and other financial institutions or entities party thereto (each, a “Lender” and collectively referred to as the “Lenders”), and Hercules Capital, Inc. (“Hercules”), in its capacity as administrative agent and collateral agent for itself and the Lenders. Under the terms of the Loan Facility, the first $ 50.0 million tranche was drawn at closing. The Company 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. The Loan Facility had a minimum interest rate of 7.45 % and adjusted with changes in the prime rate. The Company was originally scheduled to pay interest-only monthly payments of accrued interest under the Loan Facility through May 1, 2025, for a period of 36 months. In March 2024, the interest-only period was extended to May 1, 2026 when the Company achieved a milestone when Rezdiffra received FDA approval. The interest only period can further be extended to May 3, 2027, upon the achievement of future revenue milestones, subject to compliance with applicable covenants. The Loan Facility originally matured in May 2026, but the maturity date was extended to May 2027 when the Company achieved a milestone upon receipt of FDA approval in March 2024. The Loan Facility is secured by a security interest in substantially all of the Company’s assets, other than intellectual property. It includes an end of term charge of 5.35 % of the aggregate principal amount, which is accounted for in the loan discount. In connection with the first tranche drawn at closing, the Company issued Hercules a warrant to purchase 14,899 shares of Company common stock, which had a Black-Scholes value of $ 0.6 million. On February 3, 2023, the Company entered into the First Amendment (the “First Amendment”) to the Loan Facility (as amended, the “Amended Loan Facility”). Under the Amended Loan Facility, an additional $ 35.0 million was drawn under a second, expanded, $ 65.0 million tranche (“Tranche 2”) in February of 2023 following the Company’s achievement of the Phase 3 clinical development milestone. An additional $ 15.0 million was drawn under Tranche 2 in June of 2023. The remaining $ 15.0 million available under Tranche 2 was drawn in September of 2023 in accordance with the Amended Loan Facility. The third tranche (“Tranche 3”) of $ 75.0 million 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, 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. 16 Table of Contents 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. 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: the Company’s failure to make required payments or maintain compliance with covenants under the Loan Facility; the Company’s breach of certain representations or default under certain obligations outside the Loan Facility; insolvency, attachment or judgment events affecting the Company; and any circumstance which has occurred or could reasonably be expected to have a material adverse effect on the Company, provided that, any failure to achieve a clinical milestone or approval milestone 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 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: Amount 2024 $ 3,067 2025 12,184 2026 79,197 Thereafter 53,247 $ 147,695 Less amount representing interest ( 26,542 ) Less unamortized discount ( 4,066 ) Loans payable, net of discount $ 117,087 8. Stockholders’ Equity Common Stock Each common stockholder is entitled to one vote for each share of common stock held. The common stock will vote together with all other classes and series of stock of the Company as a single class on all actions to be taken by the Company’s stockholders. Each share of common stock is entitled to receive dividends, as and when declared by the Company’s Board of Directors (the “Board”). The Company has never declared cash dividends on its common stock and does not expect to do so in the foreseeable future. 17 Table of Contents Preferred Stock The Series A and B Preferred Stock have a par value of $ 0.0001 per share and are convertible into shares of the common stock at a one -to-one ratio, subject to adjustment as provided in the Certificates of Designation of Preferences, Rights and Limitations of Series A Preferred Stock and Series B Preferred Stock that the Company filed with the Secretary of State of the State of Delaware on June 21, 2017 and December 22, 2022, respectively. The terms of the Series A and B Preferred Stock are set forth in such Certificates of Designation. Each share of the Series A and B Preferred Stock is convertible into shares of common stock following notice that may be given at the holder’s option. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, after the satisfaction in full of the debts of the Company and the payment of any liquidation preference owed to the holders of shares of capital stock of the Company ranking prior to the Series A and B Preferred Stock upon liquidation, the holders of the Series A and B Preferred Stock shall participate pari passu with the holders of the common stock (on an as-if-converted-to-Common-Stock basis) in the net assets of the Company. Shares of the Series A and B Preferred Stock will generally have no voting rights, except as required by law. Shares of the Series A and B Preferred Stock will be entitled to receive dividends before shares of any other class or series of capital stock of the Company (other than dividends in the form of the common stock) equal to the dividend payable on each share of the common stock, on an as-converted basis. 2024 Public Offering On March 18, 2024, the Company entered into an Underwriting Agreement with Goldman Sachs & Co. LLC, Jefferies LLC, Cowen and Company, LLC, Evercore Group L.L.C. and Piper Sandler & Co, as representatives of the several underwriters named therein (the “2024 Underwriters”), pursuant to which the Company sold to the 2024 Underwriters in an underwritten public offering (the “2024 Offering”): (i) 750,000 shares of common stock at a public offering price of $ 260.00 per share, (ii) pre-funded warrants (the “2024 Pre-Funded Warrants”) to purchase 1,557,692 shares of common stock at a public offering price of $ 259.9999 per 2024 Pre-Funded Warrant, which represents the per share public offering price for the common stock less a $ 0.0001 per share exercise price for each such Pre-Funded Warrant, and (iii) a 30-day option for the 2024 Underwriters to purchase up to 346,153 additional shares of common stock at the public offering price of $ 260.00 per share (the “Underwriters’ Option”). The 2024 Offering closed on March 21, 2024. The gross proceeds of the 2024 Offering was $ 600.0 million, and the Company received net proceeds, after deducting the underwriting discount and commissions and other estimated offering expenses payable by the Company, of approximately $ 574.0 million. The Underwriters’ Option was later exercised in full, and closed on April 2, 2024. The net proceeds to the Company for the exercise of the Underwriters’ Option, after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company, was approximately $ 85.9 million. The Company intends to use the net proceeds from the 2024 Offering for its commercial activities in connection with the launch of Rezdiffra in the U.S. and for general corporate purposes, including, without limitation, research and development expenditures, ongoing clinical trial expenditures, manufacture and supply of drug substance and drug products, potential ex-U.S. commercialization or partnering opportunities, potential acquisitions or licensing of new technologies, capital expenditures and working capital. The 2024 Pre-Funded Warrants are exercisable at any time after the date of issuance. A holder of 2024 Pre-Funded Warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 9.99 % of the number of shares of common stock outstanding immediately after giving effect to such exercise. A holder of 2024 Pre-Funded Warrants may increase or decrease this percentage, but not in excess of 19.99 %, by providing at least 61 days prior notice to the Company. 2023 Public Offering On September 28, 2023, the Company entered into an Underwriting Agreement with Goldman Sachs & Co. LLC, as representative of the several underwriters named therein (the “2023 Underwriters”), pursuant to which the Company sold to the 2023 Underwriters in an underwritten public offering (the “2023 Offering”): (i) 1,248,098 shares of common stock at a public offering price of $ 151.69 per share, and (ii) pre-funded warrants (the “2023 Pre-Funded Warrants”) to purchase 2,048,098 shares of common stock at a public offering price of $ 151.6899 per 2023 Pre-Funded Warrant, which represents the per share public offering price for the common stock less a $ 0.0001 per share exercise price for each such 2023 Pre-Funded Warrant. The 2023 Offering closed on October 3, 2023. The gross proceeds of the 2023 Offering was $ 500.0 million , and the Company received net proceeds, after deducting the underwriting discount and commissions and other estimated offering expenses payable by the Company, of approximately $ 472.0 million . The Company intends to use t he net proceeds from the Offering for its clinical and 18 Table of Contents 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. The 2023 Pre-Funded Warrants are exercisable at any time afte r the date of issuance. A holder of 2023 Pre-Funded Warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 9.99 % of the number of shares of common stock outstanding immediately after giving effect to such exercise. A holder of 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 the Company. At-The-Market Issuance Sales Agreement In June 2021, the Company entered into an at-the-market sales agreement (the “2021 Sales Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which the Company could, from time to time, issue and sell shares of its common stock. The 2021 Sales Agreement initially authorized an aggregate offering of up to $ 200.0 million in shares of the Company’s common stock, at the Company’s option, through Cowen as its sales agent. Sales of common stock through Cowen could be made by any method that is deemed an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including by means of ordinary brokers’ transactions at market prices, in block transactions or as otherwise agreed by the Company and Cowen. Subject to the terms and conditions of the 2021 Sales Agreement, Cowen would use commercially reasonable efforts consistent with its normal trading and sales practices to sell the common stock based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company imposed). In May 2023, the Company entered into an amendment to the 2021 Sales Agreement (the “Sales Agreement Amendment”), with Cowen, pursuant to which the Company could, from time to time, issue and sell an additional $ 200.0 million in shares of its common stock, until it was terminated in May 2024. The Company was not obligated to make any sales of its common stock under this arrangement. Any shares sold would be sold pursuant to the Registration Statement and prospectus supplement filed pursuant to the Registration Statement. The 2021 Sales Agreement, as amended by the Sales Agreement Amendment, authorized sales of shares of the Company’s common stock, from time to time, at the Company’s option, through Cowen as its sales agent. Sales of common stock through Cowen may be made by any method that is deemed an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, and as described in the prospectus supplement. Since the entry into the Sales Agreement Amendment in May 2023, the Company sold 98,101 shares in total under the 2021 Sales Agreement, as amended by the Sales Agreement Amendment, for an aggregate of $ 25.2 million in gross proceeds, with net proceeds to the Company of approximately $ 24.5 million after deducting commissions and other transaction costs. All shares were sold pursuant to the Company’s effective Registration Statement and the prospectus supplement relating thereto. In total, the Company sold 1,334,044 shares of Common Stock having an aggregate offering price of $ 225.1 million pursuant to the 2021 Sales Agreement, as amended by the Sales Agreement Amendment. In May 2024, the Company 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 which was terminated effective upon the entry into the 2024 Sales Agreement. 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 nine months ended September 30, 2024 under either the 2021 Sales Agreement, as amended by the Sales Agreement Amendment, or the 2024 Sales Agreement. 9. Stock-based Compensation 2015 Stock Plan The Company’s 2015 Stock Plan, as amended (the “2015 Stock Plan”), is one of the Company’s equity incentive compensation plans through which equity based grants are awarded. The 2015 Stock Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units and other stock-based compensation awards to employees, officers, directors, and consultants of the Company. The administration of the 2015 Stock Plan is under the general supervision of the Compensation Committee of the Board. 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 19 Table of Contents 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 In September 2023, the Company adopted the 2023 Inducement Plan (the “Inducement Plan”), pursuant to which the Company may from time to time make equity grants to new employees as a material inducement to their employment. The Inducement Plan was adopted without stockholder approval, pursuant to Nasdaq Listing Rule 5635(c)(4), and is administered by the Compensation Committee of the Board. The Inducement Plan provides for the granting of non-statutory stock options, restricted stock, restricted stock units, performance stock units and other stock-based compensation awards to new employees, but does not allow for the granting of incentive stock options. The terms of the stock options under the Inducement Plan, in general, are determined by the Compensation Committee, provided the exercise price per share generally shall not be set at less than the fair market value of a share of the common stock on the date of grant and the term shall not be greater than ten years from the date the option or award is granted. A total of 500,000 shares of the Company’s common stock were reserved for issuance under the Inducement Plan. As of 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 nine months ended September 30, 2024: Shares Weighted average exercise price Outstanding at December 31, 2023 2,355,779 $ 79.94 Options granted 162,517 234.84 Options exercised ( 748,143 ) 76.35 Options cancelled ( 68,535 ) 121.89 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 The Company’s 2015 Stock Plan provides for awards of restricted stock units (“RSUs”) to employees, officers, directors and consultants to the Company. The Company’s Inducement Plan provides for awards of RSUs to new employees. RSUs vest over a period of months or years, or upon the occurrence of certain performance criteria or the attainment of stated goals or events, and are subject to forfeiture if employment or service terminates before vesting. 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. 20 Table of Contents The following table summarizes RSU activity, excluding performance-based RSUs, during the nine months ended September 30, 2024: Shares Weighted average grant date fair value Outstanding at December 31, 2023 376,117 $ 241.45 RSUs granted 275,278 234.64 RSUs vested ( 93,172 ) 262.91 RSUs forfeited ( 55,356 ) 244.45 Outstanding at September 30, 2024 502,867 $ 233.42 Performance-Based Restricted Stock Units The Company has granted various performance-based restricted stock units (“PSUs”) to certain members of senior leadership. Depending on the terms of the PSUs and the outcome of the pre-established performance criteria, which may include a market and/or performance condition, a recipient may ultimately earn the target number of PSUs granted or a specified multiple thereof at the end of the vesting period. 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 Outstanding PSUs at December 31, 2023 50,000 150,000 $ 146.37 PSUs granted 51,202 102,404 388.02 PSUs attained — — — PSUs forfeited ( 8,442 ) ( 16,884 ) 388.02 Outstanding at September 30, 2024 92,760 235,520 $ 257.77 Outstanding Awards 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 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 Stock-based compensation expense by type of award: Stock options $ 4,978 $ 8,375 $ 21,891 $ 24,404 Restricted stock units 8,292 3,652 26,835 9,846 Performance-based restricted stock units 4,628 633 13,478 633 Total stock-based compensation expense $ 17,898 $ 12,660 $ 62,204 $ 34,883 Effect of stock-based compensation expense by line item: Research and development $ 5,570 $ 5,133 $ 17,059 $ 15,703 Selling, general and administrative 12,328 7,527 45,145 19,180 Total stock-based compensation expense included in net loss $ 17,898 $ 12,660 $ 62,204 $ 34,883 21 Table of Contents Unrecognized stock-based compensation expense as of September 30, 2024 was $ 139.1 million with a weighted average remaining period of 2.71 years. 10. 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. The agreement requires future milestone payments to Roche. In March 2024, upon receiving FDA approval of Rezdiffra, a milestone was achieved and $ 5.0 million became due to Roche. Remaining milestones under the agreement total $ 3.0 million and are payable upon the Company achieving specified objectives related to future regulatory approval in Europe of resmetirom or a product developed from resmetirom. Furthermore, a tiered single-digit royalty is payable on net sales of resmetirom or a product developed from resmetirom, subject to certain reductions. The Company 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 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. 11. Subsequent Events None. ********** END OF FINANCIAL STATEMENTS ********** 22 Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q includes “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, that are based on our beliefs and assumptions and on information currently available to us, but are subject to factors beyond our control Forward-looking statements: reflect management’s current knowledge, assumptions, judgment and expectations regarding future performance or events; include all statements that are not historical facts; and can be identified by terms such as “accelerate,” “achieve,” “allow,” “anticipates,” “appear,” “be,” “believes,” “can,” “continue,” “could,” “demonstrates,” “design,” “estimates,” “expectation,” “expects,” “forecasts,” “future,” “goal,” “help,” “hopeful,” “inform,” “informed,” “intends,” “may,” “might,” “on track,” “planned,” “planning,” “plans,” “positions,” “potential,” “powers,” “predicts,” ”predictive,” “projects,” “seeks,” “should,” “will,” “will achieve,” “will be,” “would” or similar expressions and the negatives of those terms. In particular, forward-looking statements contained in or incorporated by reference to this Quarterly Report relate to, among other things: • Anticipated or estimated future results, including the risks and uncertainties associated with our future operating performance and financial position; • Our possible or assumed future results of operations and expenses, business strategies and plans (including potential ex-U.S. commercial or partnering opportunities), capital needs and financing plans, including incurrence of indebtedness and compliance with debt covenants under the Loan and Security Agreement with Hercules Capital, Inc., as agent and lender, market trends, market sizing, competitive position, industry environment and potential growth opportunities, among other things; • Post-approval requirements and commitments, including verification of a clinical benefit in confirmatory trials; • 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; • Research and development activities, and the timing and results associated with the future development of our Rezdiffra/resmetirom, including projected market size, sector leadership, and patient treatment estimates for NASH and nonalcoholic fatty liver disease (“NAFLD”) patients; • The timing and completion of projected future clinical milestone events, including enrollment, additional studies, top-line data and open label projections; • Rezdiffra’s potential to be a cost-effective specialty therapy for NASH patients with significant liver fibrosis (consistent with fibrosis stages 2 and 3); • 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, 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; • 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; • Our ability to address the unmet needs of patients suffering from NASH with significant fibrosis, • The potential efficacy and safety of resmetirom for non-cirrhotic NASH patients and cirrhotic NASH patients, • The potential for resmetirom to become the best-in-class treatment option for patients with NASH and significant fibrosis; • The ability to develop clinical evidence demonstrating the utility of non-invasive tools and techniques to screen and diagnose NASH and/or NAFLD patients; 23 Table of Contents • The predictive power of liver fat reduction with resmetirom, as measured by non-invasive tests, on NASH resolution and/or fibrosis reduction or improvement, and potential NASH or NAFLD patient risk profile benefits with resmetirom; • The predictive power of liver fat, liver volume changes or MAST scores for NASH and/or NAFLD patients; • The predictive power of NASH resolution and/or fibrosis reduction with resmetirom or improvement using non-invasive tests, including the use of ELF, FibroScan, MRE and/or MRI-PDFF; • The predictive power of non-invasive tests generally, including for purposes of diagnosing NASH, monitoring patient response to resmetirom, or recruiting and conducting a NASH clinical trial; • Market demand for and acceptance of our products; • Research, development and commercialization of new products; • The potential for resmetirom to be an effective treatment for other disease indications; • Obtaining and maintaining regulatory approvals, including, but not limited to, potential regulatory delays or rejections; • Risks associated with meeting the objectives of our clinical studies, including, but not limited to our ability to achieve enrollment objectives concerning patient numbers (including an adequate safety database), outcomes objectives and/or timing objectives for our studies, any delays or failures in enrollment, the occurrence of adverse safety events, and the risks of successfully conducting trials that are substantially larger, and have patients with different disease states, than our past trials; • The potential impact of cyber attacks and other security incidents on our operations or business; • Our continued reliance on third-party contract manufacturers for the manufacture of our product candidates, including resmetirom; • Risks related to the effects of resmetirom’s mechanism of action and our ability to accomplish our business and business development objectives and realize the anticipated benefit of any such transactions; and • Assumptions underlying any of the foregoing. We caution you that the foregoing list may not include all of the forward-looking statements made in this Quarterly Report. Although management presently believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct and you should be aware that actual results could differ materially from those contained in the forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties including, but not limited to: our clinical and commercial development of resmetirom; the challenges with the commercial launch of a new product, particularly for a company that does not have commercial experience; enrollment and trial outlook uncertainties, generally, based on blinded, locked or limited trial data; our potential inability to raise sufficient capital to fund our ongoing operations as currently planned or to obtain financings on terms similar to those we have arranged in the past; our ability to meet post-approval commitments and requirements, including completion of enrollment of—and ability to obtain positive data from—any confirmatory studies required by the FDA; our ability to service our indebtedness and otherwise comply with our debt covenants; outcomes or trends from competitive studies; future topline data timing or results; the risks of achieving potential benefits in studies that includes substantially more patients, and patients with different disease states, than our prior studies; our ability to prevent and/or mitigate cybersecurity attacks, unauthorized exfiltration of data or other security incidents; limitations associated with early stage or non-placebo controlled study data; the timing and outcomes of clinical studies of resmetirom; and the uncertainties inherent in clinical testing; and uncertainties concerning analyses or assessments outside of a controlled clinical trial. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Madrigal undertakes no obligation to update any forward-looking statements to reflect new information, events or circumstances after the date they are made, or to reflect the occurrence of unanticipated events. Please refer to Madrigal’s submissions filed or furnished with the U.S. 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. 24 Table of Contents Moreover, we operate in an evolving environment. New risks and uncertainties emerge from time to time and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual future results to be materially different from those expressed or implied by any forward-looking statements. Except as required by applicable law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. We qualify all of our forward-looking statements by these cautionary statements. 25 Table of Contents