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Item 7. Management’s Discussion and Analysis

2025-02-26 compared with 2024-02-28 · 187 added, 197 removed, 80 unchanged (83% of the section changed)

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

The Risk Factors in Part I, Item 1A and disclosures under “Cautionary Note Regarding Forward-Looking Statements” within this Annual Report on Form 10-K, the audited financial statements and accompanying notes, included elsewhere in this Annual Report on Form 10-K, and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together.

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 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.

As disclosed in this report, our actual results could differ materially from those discussed in these forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Cautionary Note Regarding Forward-Looking Statements” and in the “Risk Factors” sections contained in Part I, Item 1A in this Annual Report on Form 10-K.

About Madrigal Pharmaceuticals, Inc.

We are a clinical-stage biopharmaceutical company pursuing novel therapeutics for nonalcoholic steatohepatitis, or NASH, a liver disease with high unmet medical need.

Our lead candidate, resmetirom, is a once-daily, oral, liver-directed thyroid hormone receptor-ß (THR-ß), agonist designed to target key underlying causes of NASH.

NASH Disease State Overview.

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

NAFLD has become the most common liver disease in the United States and other developed countries and is characterized by an accumulation of fat in the liver with no other apparent causes.

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

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

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

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

Once patients progress to NASH with significant fibrosis (consistent with fibrosis stages 2 and 3), the risk of adverse liver outcomes increases substantially.

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

Our Patient Focus.

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

Madrigal estimates that approximately 315,000 diagnosed patients with NASH with significant fibrosis are under the care of the liver specialist physicians Madrigal will be targeting during the planned launch of resmetirom following approval.

Our Clinical Development Program.

Madrigal is currently conducting multiple Phase 3 clinical trials to evaluate the safety and efficacy of resmetirom 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 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 subpart H submission to the FDA for accelerated approval of resmetirom for treatment of NASH with liver fibrosis.

Key Developments

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

In September 2023, Madrigal announced we had commenced a public underwritten offering of common stock and pre-funded warrants to purchase common stock (the “Offering”).

The Offering closed in October 2023.

We received gross proceeds totaling $500.0 million.

Our net proceeds were $472.0 million, after deducting fees and commissions.

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

and for general corporate purposes, including, without limitation, research and development expenditures, clinical trial expenditures, manufacture and supply of drug substance and drug products, potential acquisitions or licensing of new technologies, capital expenditures and working capital.

Also in September 2023, Madrigal announced our Board of Directors (the “Board”) appointed Bill Sibold as the President and Chief Executive Officer of the Company.

In connection with this appointment, the size of the Board was increased to nine, and Mr.

Sibold was also appointed a member of the Board.

Sibold’s start date, he assumed the duties and responsibilities of the Company’s principal executive officer from Paul Friedman, M.D., who previously served as the Chief Executive Officer since July of 2016.

Friedman continues to serve on the Board as a director of the Company.

Additionally in September 2023, the U.S.

Food and Drug Administration (the “FDA”) informed Madrigal that it accepted for review our New Drug Application (“NDA”) for resmetirom for the treatment of adult patients with NASH with liver fibrosis and granted a Priority Review designation.

The FDA has assigned a Prescription Drug User Fee Act (“PDUFA”) date of March 14, 2024, the target date by which the FDA intends to complete its review and take action on the NDA.

The FDA noted in its September 2023 correspondence that it is not currently planning to hold an advisory committee meeting to discuss our application.

In April 2023, Madrigal announced that resmetirom has received Breakthrough Therapy designation from the FDA for the treatment of patients with NASH with liver fibrosis.

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

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

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

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

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

Basis of Presentation

The following discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto contained elsewhere in this Annual Report on Form 10-K (this “Annual Report”).

This discussion contains forward-looking statements that involve risks and uncertainties.

As a result of many factors, such as those set forth under the sections titled “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements” and elsewhere herein, our actual results may differ materially from those anticipated in these forward-looking statements.

Executive Overview

We are a biopharmaceutical company focused on delivering novel therapeutics for metabolic dysfunction-associated steatohepatitis (“MASH”), a serious liver disease with high unmet medical need that can lead to cirrhosis, liver failure and premature mortality.

MASH is expected to become the leading cause of liver transplantation in the United States and is already the leading cause of liver transplantation among women in the United States.

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

In March 2024, Rezdiffra became the first and only therapy approved by the U.S.

Food and Drug Administration (the “FDA”) for patients with MASH and was commercially available in the United States beginning in April 2024.

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

See “Part I, Item 1.

Business” for a summary of our commercial and clinical activities.

Financial Overview

We have incurred losses since inception resulting in an accumulated deficit of $1,802.2 million as of December 31, 2024.

Prior to generating product revenue from sales of Rezdiffra beginning in April 2024, we financed our operations primarily through public and private offerings of our equity securities and through our loan facility (“Loan Facility”) with Hercules Capital, Inc.

(“Hercules”).

We have generated losses principally from costs associated with research and development activities, acquiring, filing and expanding intellectual property rights, establishing a commercial infrastructure to support the launch of Rezdiffra and selling, general and administrative expenses.

As a result of planned expenditures to commercialize Rezdiffra, expand our commercial operations to Europe (subject to receipt of regulatory approval), continue research and development activities, manage and grow our intellectual property portfolio, engage in potential business development transactions and costs associated with general corporate activities, we expect to incur additional operating losses.

Our ability to reduce operating losses and begin to generate positive cash flow from operations depends on our ability to successfully commercialize Rezdiffra and achieve positive results from our post-approval trials in order to obtain full approval of Rezdiffra in the United States and potentially expand the eligible patient population.

Our financial results may fluctuate from quarter to quarter and will depend on, among other factors, the net sales of Rezdiffra;

the scope and progress of our research and development efforts and the timing of certain expenses.

See the section titled “Risk Factors—Risks Related to Our Financial Position and Need for Capital.” in this Annual Report for additional information.

Key Components of Our Operating Results

Product Revenue, Net

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

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

Rezdiffra was launched for sale in the United States in April 2024.

As described in the “Critical Accounting Policies and Estimates” section below, revenue is recorded net of variable consideration, which includes prompt pay discounts, service fees, returns, chargebacks, government rebates and co-payment assistance.

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

Research and development expenses primarily consist of costs associated with our research activities, including the preclinical and clinical development of our product candidate, resmetirom.

Research and development expenses primarily consist of costs associated with our research activities, including the clinical development of our product candidates.

We expense our research and development expenses as incurred.

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 contract with clinical research organizations to manage our clinical trials under agreed upon budgets for each trial, 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.

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• external expenses paid to clinical trial sites, contract research organizations, laboratories, database software and consultants that conduct clinical trials;

• expenses related to development and the production of nonclinical and clinical trial supplies, including fees paid to contract manufacturers;

• expenses related to development and the production of non-clinical and clinical trial supplies, including fees paid to contract manufacturers;

• expenses related to preclinical studies;

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

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

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

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

Our research and development expenses have increased year over year in each of 2021, 2022, and 2023 and we expect that our research and development expenses may increase in the future.

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

and time consuming.

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

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

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

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

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

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

General and Administrative Expenses

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

We expect that our general and administrative expenses will increase in the future as we expand our operating activities, 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.

Critical Accounting Estimates

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

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

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

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries, benefits and stock-based compensation expenses for employees, management costs, costs associated with obtaining and maintaining our patent portfolio, commercial and marketing activities, corporate insurance, 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 extending operations into new geographies (if approved), 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.

Interest Income

Interest income consists primarily of interest and dividend income earned on cash equivalents and marketable securities.

Interest Expense

Interest expense consists primarily of interest accrued on principal balances under the Loan Facility with Hercules.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements which have been prepared in accordance with generally accepted accounting principles in the United States.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements.

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

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements.

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

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

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

Research and Development Costs

Research and development costs are expensed as incurred.

Research and development costs are comprised of costs incurred in performing research and development activities, including internal costs (including stock-based compensation), costs for consultants, milestone payments under licensing agreements, and other costs associated with our preclinical and clinical programs.

In particular, we have conducted safety studies in animals, optimized and implemented the manufacturing of our drug, and conducted Phase 1-3 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 preclinical studies and clinical trials, completion of milestones 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 our estimates.

Our historical estimates for research and development costs have not been materially different from the actual costs.

Stock-Based Compensation

We recognize 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.

We use 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.

We use the simplified method for determining the expected lives of options.

Expected volatility is based upon an industry estimate or blended rate including our 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.

We estimate 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 our common stock achieving or exceeding certain price targets, we use 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 that are subject to uncertainty for risk-free interest rate, dividend yield, volatility, and expected life.

The assumptions used in computing the fair value of equity awards reflect our 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 we grant are structured to qualify as incentive stock options (ISOs).

Under current tax regulations, we do 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 we may receive a tax deduction.

We do 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.

We have not recognized any income tax benefit for its share-based compensation arrangements due to the fact that we do not believe it is more likely than not we will realize the related deferred tax assets.

Revenue Recognition

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

The amount of revenue we recognize is impacted by variable consideration, as described in Note 2, “Summary of Significant Accounting Policies,” in the accompanying notes to the consolidated financial statements.

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

The judgements and estimates involved in determining variable consideration are reviewed each reporting period, as all are subject to adjustments as new information becomes available.

We recognize 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 we determine are within the scope of ASC 606, we perform 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) we satisfy its performance obligation(s).

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.

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

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

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

The discounts are accounted for as a reduction of the transaction price and recorded as a contra receivable.

We record 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 :

We estimate 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 us.

The customer charges us for the difference between what it pays to us 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.

We use a third-party to administer the co-payment program for pharmacy benefit claims.

We are 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.

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

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 method.

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

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

We analyze our inventory levels quarterly and write down inventory subject to expiry, 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.

We capitalize inventory costs when future commercial sale in the ordinary course of business is probable.

Results of Operations

Comparison of the Years Ended December 31, 2023 and 2022

We did not generate any revenue during the years ended December 31, 2023 and 2022, respectively.

Discussion of Results of Operations

The following table provides comparative results of operations for the years ended December 31, 2024, 2023 and 2022 (in thousands):

Year Ended December 31, 2024 vs 2023

2024 2023 2022 $

Product revenue, net $ 180,133 $ — $ — $ 180,133 100 % $ — — %

Operating expenses:

The following table provides comparative results of our operating expenses for the years ended December 31, 2023 and 2022 (in thousands):

Year Ended December 31, Increase / (Decrease)

Research and Development Expenses $ 272,350 $ 245,441 26,909 11 %

General and Administrative Expenses 108,146 48,130 60,016 125 %

Cost of sales

6,233 — — 6,233 100 % — — %

Research and development 236,718 272,350 245,441 (35,632) (13) % 26,909 11 %

Selling, general and administrative 435,057 108,146 48,130 326,911 302 % 60,016 125 %

Total operating expenses 678,008 380,496 293,571 297,512 78 % 86,925 30 %

Loss from operations (497,875) (380,496) (293,571) (117,379) 31 % (86,925) 30 %

Interest income 46,654 19,578 2,185 27,076 138 % 17,393 796 %

Interest expense (14,671) (12,712) (3,964) (1,959) 15 % (8,748) 221 %

$ 373,630 $ 295,350 78,280 27 %

Net loss $ (465,892) $ (373,630) $ (295,350) $ (92,262) 25 % $ (78,280) 27 %

We began selling Rezdiffra in April 2024.

For the year ended December 31, 2024, we recorded $180.1 million of product revenue, net.

Cost of Sales

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

For the year ended December 31, 2024, we recorded $6.2 million of cost of sales.

Research and Development Expense

The following represents our research and development expenses for the years ended December 31, 2024, 2023 and 2022 (in thousands):

Year Ended December 31, Increase / (Decrease)

Year Ended December 31, 2024 vs 2023

2024 2023 2022 $

Personnel and Internal Expense

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Our research and development expenses were $236.7 million for the year ended December 31, 2024 compared to $272.4 million for the year ended December 31, 2023.

Research and development expenses increased by $26.9 million in 2023 due primarily to a scale up of manufacturing activities, an increase in headcount, and an increase in stock compensation expense.

General and Administrative Expense

Our general and administrative expenses were $108.1 million for the year ended December 31, 2023 compared to $48.1 million for the year ended December 31, 2022.

General and administrative expenses increased by $60.0 million in 2023 due primarily to increases in commercial preparation activities, including a corresponding increase in headcount, and an increase in stock compensation expense.

We believe our general and administrative expenses will increase over time as we prepare for commercialization and expand our operating activities, which will result in an increase in our headcount, consulting services, and related overhead needed to support those efforts.

Research and development expenses decreased by $35.6 million in 2024 primarily due to a reduction in clinical trial expense and 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 Expense

Our selling, general and administrative expenses were $435.1 million for the year ended December 31, 2024 compared to $108.1 million for the year ended December 31, 2023.

Selling, general and administrative expenses increased by $326.9 million in 2024 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 interest income was $46.7 million for the year ended December 31, 2024 compared to $19.6 million for the year ended December 31, 2023.

The increase in interest income was due primarily to a higher average principal balance in our investment account in 2023, along with increased interest rates 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 $14.7 million for the year ended December 31, 2024, compared to $12.7 million for the year ended December 31, 2023.

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

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

Comparison of the Years Ended December 31, 2023 and 2022

We did not generate any revenue during the years ended December 31, 2022 and 2021, respectively.

Operating Expenses

The following table provides comparative results of our operating expenses for the years ended December 31, 2022 and 2021 (in thousands):

Year Ended December 31, Increase / (Decrease)

Research and Development Expenses $ 245,441 $ 205,164 40,277 20 %

General and Administrative Expenses 48,130 37,318 10,812 29 %

Interest (Income) (2,185) (363) 1,822 502 %

Interest Expense

3,964 — 3,964 100 %

Other (income) — (273) (273) (100 %)

$ 295,350 $ 241,846 53,504 22 %

Research and Development Expense

The following represents our research and development expenses for the years ended December 31, 2022 and 2021 (in thousands):

Year Ended December 31, Increase / (Decrease)

Personnel and Internal Expense

$ 39,121 $ 26,232 12,889 49 %

External Expense 206,320 178,932 27,388 15 %

Total $ 245,441 $ 205,164 40,277 20 %

Our research and development expenses were $245.4 million for the year ended December 31, 2022 compared to $205.2 million for the year ended December 31, 2021.

Research and development expenses increased by $40.3 million in the 2022 period due primarily to the additional activities related to our Phase 3 clinical trials, an increase in headcount, and an increase in stock compensation expense.

General and Administrative Expense

Our general and administrative expenses were $48.1 million for the year ended December 31, 2022 compared to $37.3 million for the year ended December 31, 2021.

General and administrative expenses increased by $10.8 million in the 2022 period due primarily to increases in commercial preparation activities, including a corresponding increase in headcount, and an increase in stock compensation expense.

Interest Income

Our interest income was $2.2 million for the year ended December 31, 2022 compared to $0.4 million for the year ended December 31, 2021.

The increase in interest income was due primarily to a higher average principal balance in our investment account in 2022 and increased interest rates.

Interest Expense

Our interest expense was $4.0 million for year ended December 31, 2022, compared to $0.0 million for the year ended December 31, 2021.

The increase in interest expense was as a result of the Loan and Security Agreement (“Loan Facility”) we entered into with Hercules during the second quarter of 2022.

For discussion of our 2023 results and a comparison with 2022 results please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 that was filed with the SEC on February 28, 2024.

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 convertible 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 commercial, clinical, scientific, operational, financial and management personnel, along with manufacturing costs and commercialization costs to support a potential U.S.

As of December 31, 2023, we had cash, cash equivalents and marketable securities totaling $634.1 million compared to $358.8 million as of December 31, 2022, with the increase primarily attributable to our October 2023 public offering which provided $472.0 million net cash proceeds, partially offset by funding of operations.

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.

We anticipate continuing to incur operating losses for the foreseeable future.

While our rate of cash usage will likely increase in the future, in particular to support our preparation for commercialization, we believe our available cash resources are sufficient to fund our operations past one year from the issuance of the financial statements contained herein.

Our future long-term liquidity requirements will be substantial and will depend on many factors.

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 December 31, 2024, we had cash, cash equivalents, restricted cash and marketable securities totaling $931.3 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 $659.9 million.

Until we are able to generate sufficient revenue from Rezdiffra and any other approved products, we anticipate that we will continue to incur significant losses.

While our rate of cash usage will likely increase in the future, in particular to support our product development and clinical trial efforts, our commercialization efforts and geographic expansion activities and our business development goals, we believe our available cash resources are sufficient to fund our operations past one year from the issuance of the financial statements contained herein.

Our future long-term liquidity requirements will be substantial and will depend on many factors, including our ability to effectively commercialize Rezdiffra, our decisions regarding future geographic expansion, the conduct of any future preclinical studies and clinical trials and our entry into any strategic transactions.

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 preparation 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, this 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

On May 9, 2023, we entered into Amendment No.

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

In May 2023, we entered into Amendment No.

1 (the “Sales Agreement Amendment”) to our prior sales agreement (the “2021 Sales Agreement”) with Cowen and Company, LLC, an affiliate of TD Securities (USA) LLC (“Cowen”), which was subsequently terminated in May 2024 when we entered into a Sales Agreement (the “2024 Sales Agreement”) with Cowen, replacing and superseding the 2021 Sales Agreement, as amended by the Sales Agreement Amendment.

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

We sold no shares during the year ended December 31, 2024 under either the 2021 Sales Agreement, as amended by the Sales Agreement Amendment, or the 2024 Sales Agreement.

Since the entry into the Sales Agreement Amendment in May 2023, we 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 us of approximately $24.5 million after deducting commissions and other transaction costs.

All shares were sold pursuant to our effective Registration Statement and the prospectus supplement relating thereto.

In total, we 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.

As of December 31, 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 Sales Agreement will be made by any method that is deemed to be an “at the market” offering as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended.

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

During the three months ended December 31, 2023, under the Sales Agreement Amendment, we sold no shares.

During the year ended December 31, 2023, and in total under the Sales Agreement Amendment, we sold 98,101 shares for an aggregate of $25.2 million in gross proceeds, with net proceeds of approximately $24.5 million after deducting commissions and other transaction costs.

All shares were sold pursuant to our effective Registration Statement and the prospectus supplement relating thereto.

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

Loan Facility

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

(“Hercules”).

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

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

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”).

The third tranche (“Tranche 3”) of $75.0 million is available, subject to us obtaining a certain FDA approval for resmetirom.

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

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

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 increased to include the $75.0 million available under Tranche 3 that was not utilized by us.

After such increase, our current borrowing capacity is $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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The Loan Facility had a minimum interest rate of 7.45% and adjusted with changes in the prime rate.

The Amendment reduced the interest rate under the Amended Loan Facility to the greater of (i) the prime rate as reported in The Wall Street Journal plus 2.45% and (ii) 8.25%.

We will pay interest-only monthly payments of accrued interest under the Loan Facility through May 1, 2025, for a period of 36 months, which period may be extended to May 1, 2026 and May 3, 2027, upon the achievement of regulatory approval milestones and future revenue covenants, subject to compliance with applicable covenants.

The Loan Facility matures in May 2026 and may be extended an additional year upon the achievement of certain regulatory milestones.

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

assets, other than intellectual property.

It includes an end of term charge of 5.35% of the aggregate principal amount, which is accounted for in the loan discount.

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

The 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%.

We were 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 we achieved a milestone when Rezdiffra received FDA approval.

The interest-only period can be further extended to May 3, 2027, upon the achievement of regulatory approval milestones and future revenue covenants, subject to compliance with applicable covenants.

The Loan Facility originally matured in May 2026, but the maturity date was extended to May 2027 when we achieved a milestone upon receipt of FDA approval in March 2024.

The Loan Facility is secured by a security interest in substantially all of our assets, other than intellectual property.

The Loan Facility 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 also includes a revenue-based covenant that could apply commencing at or after the time that the financial reporting became due for the quarter ended September 30, 2024, however the revenue-based covenant will be automatically waived pursuant to

the terms of the Loan Facility at any time in which we maintain, as measured monthly, (i) a certain level of cash, cash equivalents and liquid funds relative to debt outstanding under the Loan Facility or (ii) a market capitalization of at least $1.2 billion.

The Loan Facility contains event of default provisions for:

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

March 2024 Public Offering

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

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

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

(i) 750,000 shares of common stock at a public offering price of $260.00 per share, (ii) pre-funded warrants (the “2024 Pre-Funded Warrants”) to purchase 1,557,692 shares of common stock at a public offering price of $259.9999 per 2024 Pre-Funded Warrant, which represents the per share public offering price for the common stock less a $0.0001 per share exercise price for each such Pre-Funded Warrant and (iii) a 30-day option for the 2024 Underwriters to purchase up to 346,153 additional shares of common stock at the public offering price of $260.00 per share (the “Underwriters’ Option”).

The 2024 Offering closed on March 21, 2024.

The net proceeds of the 2024 Offering, after deducting the underwriting discount and commissions and other estimated offering expenses payable by us, were approximately $659.9 million .

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

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

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

A holder of 2024 Pre-Funded Warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise.

A holder of 2024 Pre-Funded Warrants may increase or decrease this percentage, but not in excess of 19.99% , by providing at least 61 days prior notice to us.

2023 Public Offering

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The gross proceeds of the 2023 Offering was $500.0 million , and we received net proceeds, after deducting the underwriting discount and commissions and other estimated offering expenses payable by us, of approximately $472.0 million .

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

We intend to use the net proceeds from the 2023 Offering for our clinical and commercial activities in preparation for a potential launch of resmetirom in the United States 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 after 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 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.

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 summarizes our net cash flow activity (in thousands):

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Net cash used in operating activities was $455.6 million, $324.2 million, and $224.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

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 the year ended December 31, 2023 increased from prior years predominately due to the build out of our commercial operations in anticipation of our potential commercial launch.

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.

Investing Activities

Net cash used in investing activities was $274.4 million for the year ended December 31, 2024 and consisted primarily of $1,131.2 million of purchases of marketable securities for our investment portfolio, partially offset by $863.3 million from sales and maturities of marketable securities from our investment portfolio.

Net cash used in investing activities was $206.7 million for the year ended December 31, 2022 and consisted primarily of $350.4 million from sales and maturities of marketable securities, partially offset by $143.5 million of purchase of marketable securities for our investment portfolio.

Net cash used in investing activities was $5.1 million for the year ended December 31, 2021 and consisted primarily of $394.1 million of purchase of marketable securities for our investment portfolio, partially offset by $389.3 million from sales and maturities of marketable securities.

Net cash used in investing activities was $502.5 million for the year ended December 31, 2023 and consisted primarily of $834.4 million of purchases of marketable securities for our investment portfolio, partially offset by $333.4 million from sales and maturities of marketable securities.

Net cash provided by investing activities was $206.7 million for the year ended December 31, 2022 and consisted primarily of $350.4 million from sales and maturities of marketable securities, partially offset by $143.5 million of purchase of marketable securities for our investment portfolio.

Financing Activities

Net cash provided by financing activities was $595.1 million for the year ended December 31, 2023 and consisted primarily of $472.0 million in proceeds from our October 2023 public offering, in addition to $65.0 million in borrowings under the Loan Facility, $34.0 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, partially offset by $0.4 million of loan issuance costs.

Net cash provided by financing activities was $735.1 million for the year ended December 31, 2024 and consisted primarily of $659.9 million in proceeds from the 2024 Offering, in addition to $76.9 million from proceeds from the exercise of common stock options.

Net cash provided by financing activities was $595.1 million for the year ended December 31, 2023 and consisted primarily of $472.0 million in proceeds from our 2023 Offering, in addition to $65.0 million in borrowings under the Loan Facility, $34.0 million from proceeds from the exercise of common stock options, and $24.5 million from sales of our common stock under the 2021 Sales Agreement, partially offset by $0.4 million of loan issuance costs.

Net cash provided by financing activities was $313.5 million for the year ended December 31, 2022 and consisted primarily of sales of our common stock under the 2021 Sales Agreement and a registered direct offering of Series B Convertible Preferred Stock and common stock in December 2022, and debt borrowings under our Loan Facility.

Net cash provided by financing activities was $171.2 million for the year ended December 31, 2021 and consisted primarily of sales of our common stock under the 2021 Sales Agreement and the exercise of stock options.

Contractual Obligations and Commercial Commitments

As of December 31, 2023, we had contractual obligations and commercial commitments as follows (in thousands):

Payments Due by Period

Contractual Obligations Total Less Than

1 Year 1 - 3 Years 4 - 5 Years More Than

Operating Leases 1,861 937 924 — —

Total contractual Obligations 1,861 937 924 — —

Operating leases relate to our corporate headquarters facility located in West Conshohocken, Pennsylvania.

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

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

As of December 31, 2023, 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, 2025, which period may be extended to May 1, 2026 and May 3, 2027 upon the achievement of our regulatory approval milestone and future revenue milestones, and subject to compliance with applicable covenants.

The Company has entered into customary contractual arrangements in support of the Phase 3 clinical trials.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

We have contractual obligations relating to operating leases at our corporate headquarters facility located in West Conshohocken, Pennsylvania.

Non-lease rent payments relate to a short-term lease in Waltham, Massachusetts.

The Company also entered into a lease agreement on December 17, 2024 in Switzerland.

As the lease commencement date had not yet occurred as of December 31, 2024, there is no impact to the financial statements.

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”).

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.

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, further expanding the amount of office space in the same premises.

The lease for the additional office space under the Eighth Lease Amendment and Ninth Lease Amendment commenced in November 2024 and resulted in an incremental $0.2 million right-of-use asset and lease liability recorded.

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

As of December 31, 2024, we had drawn $115.0 million under the Loan 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.

The Roche Agreement grants us a sole and exclusive license to develop, use, sell, offer for sale and import any Licensed Product, as defined in the Roche 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.

We have entered into customary contractual arrangements in support of the Phase 3 clinical trials as well as manufacturing costs of Rezdiffra.

Recent Accounting Pronouncements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis