Madrigal Pharmaceuticals, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; filed August 8, 2023. Madrigal is a clinical-stage biopharmaceutical company developing resmetirom for nonalcoholic steatohepatitis (NASH). It had no product revenue and reported operating losses.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $68.6 million | $58.5 million | $130.8 million | $106.4 million |
| General and administrative | $17.8 million | $11.8 million | $34.0 million | $21.4 million |
| Net loss | $85.8 million | $70.7 million | $162.7 million | $128.2 million |
| Loss per share, basic and diluted | $4.69 | $4.14 | $8.91 | $7.50 |
Operating margins are not meaningful because the company had no revenue. Q2 operating expenses rose 23% year over year; six-month operating expenses increased 29% to $164.8 million. R&D growth reflected Phase 3 activity, including MAESTRO-NASH-OUTCOMES, increased headcount and stock compensation. G&A growth reflected commercialization preparation, headcount and stock compensation. Higher investment balances and rates increased interest income, while higher borrowings increased interest expense.
Cash, debt and liquidity
- At June 30, cash and cash equivalents were $77.2 million and marketable securities were $221.2 million, totaling approximately $298.4 million. This compares with $358.8 million at December 31, 2022.
- Six-month operating cash use was $159.4 million, versus $107.3 million in the prior-year period. Investing activities used $190.6 million, principally reflecting net purchases of marketable securities; financing provided $95.6 million, including $50.0 million of loan proceeds, $24.2 million from option exercises and $21.8 million of ATM offering proceeds.
- Accumulated deficit was $1.125 billion. Total liabilities were $199.0 million and stockholders’ equity was $103.5 million at quarter-end.
- Loan principal outstanding was $100 million, with a 10.70% rate at June 30, 2023; the facility matures in May 2026. The debt is secured by substantially all assets other than intellectual property. The company reported compliance with its covenants, including a minimum liquidity covenant of $35 million.
- The company said available cash, cash equivalents and marketable securities should fund operations for more than one year from issuance of the statements. It expects continuing losses and may seek additional capital; it may also delay research, clinical or commercialization spending if liquidity requires.
Developments, outlook and risks
- In July 2023, Madrigal announced completion of its rolling FDA NDA submission for resmetirom for adults with NASH and liver fibrosis and requested priority review. Approval was not assured as of the filing.
- In April 2023, resmetirom received FDA Breakthrough Therapy designation. The company also reported that the outcomes portion of the MAESTRO-NASH biopsy trial had completed enrollment; the overall study enrolled approximately 1,750 patients.
- The Phase 3 MAESTRO-NASH-OUTCOMES study, initiated in August 2022, is evaluating patients with early NASH cirrhosis. The company anticipates substantial ongoing development and commercial-preparation spending; it provided no quantified financial guidance.
- Key uncertainties include trial execution and results, FDA review and approval, manufacturing, market acceptance and reimbursement, competition, and access to future financing. Management cautioned that clinical and regulatory timing and outcomes are uncertain.
- The amended ATM program authorized up to an additional $200 million in stock sales; $177.6 million remained available at June 30. Sales are optional and could dilute shareholders.
- After quarter-end, Baker Bros.-affiliated funds obtained registration rights covering resale of up to 3,914,910 shares, approximately 18.8% of common shares on a fully converted basis as of July 31. The company receives no proceeds from those resales; potential sales or the perception of sales could pressure the share price.
- The filing reported no material pending legal proceedings, effective disclosure controls, and no material change in internal control over financial reporting. The board appointed Julian Baker independent chair and separated the chair and CEO roles in June.
Investor verification priorities
- Track FDA review milestones, the requested priority-review status and any approval decision for resmetirom.
- Assess clinical outcomes, safety and timelines for MAESTRO-NASH and MAESTRO-NASH-OUTCOMES.
- Monitor cash burn against the stated runway, the $35 million liquidity covenant, and the availability and terms of further financing.
- Review debt interest, repayment obligations, remaining borrowing availability and covenant compliance.
- Monitor dilution from the ATM, equity awards and potential Baker Bros. resales.