Madrigal Pharmaceuticals, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. Madrigal is a clinical-stage biopharmaceutical company with no product revenue. Its lead candidate, resmetirom, is in Phase 3 development for NASH.
Financial performance and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $44.7 million | $15.6 million | $78.1 million | $28.0 million |
| General and administrative expense | $5.6 million | $7.1 million | $10.2 million | $12.9 million |
| Net loss | $49.0 million | $19.7 million | $85.2 million | $34.8 million |
| Net loss per share | $3.18 | $1.28 | $5.52 | $2.26 |
For the six months, operating cash use was $54.8 million, versus $18.0 million in 2019. Cash and cash equivalents were $61.9 million; marketable securities were $322.5 million, for combined liquidity of $384.4 million at June 30, 2020, down from $439.0 million at December 31, 2019. Management stated those resources were expected to fund operations for more than one year from issuance of the financial statements.
Total assets were $388.4 million and total liabilities were $45.5 million at June 30, 2020. Liabilities included $0.5 million in lease liabilities; the filing reports no material financial debt. There is no meaningful operating margin given the absence of revenue. Interest income was $1.2 million for Q2 and $3.1 million for the first half, both lower than the prior-year periods.
Changes and operating developments
- Q2 R&D expense rose 187% year over year; first-half R&D increased 179%, mainly from Phase 3 trial activity and increased headcount. First-half growth also reflected higher stock-based compensation.
- G&A expense declined 21% in Q2 and 20% for the first half, primarily because of lower non-cash stock compensation.
- Net loss increased substantially year over year, reflecting higher development spending and lower interest income.
- Accrued expenses increased to $39.9 million from $23.6 million at year-end, principally from accrued contract research costs, which rose to $32.2 million.
Outlook, risks, and contingencies
- Management expects continued losses and substantial R&D spending, with R&D expenses expected to increase as clinical programs advance. The company may need additional capital; financing may be unavailable or unfavorable and could dilute shareholders or impose restrictive covenants.
- MAESTRO-NASH and MAESTRO-NAFLD-1 Phase 3 studies were continuing. COVID-19 had no material adverse impact on results, MAESTRO-NAFLD-1, or liquidity through June 30, but screening and enrollment in MAESTRO-NASH were negatively affected. Site closures, biopsy access, patient recruitment, trial execution, suppliers, and regulatory interactions remained risks. The company described mitigation efforts, including more sites and alternate biopsy/MRI locations.
- The Roche agreement includes $8 million of remaining regulatory milestones and single-digit royalties on future resmetirom net sales, subject to reductions. There were no licensed-product sales in the periods presented.
- No material pending legal proceedings were reported. Management concluded disclosure controls were effective; no material change in internal control over financial reporting was reported.
Investor verification points
- Track MAESTRO-NASH enrollment and the effects of COVID-19 on trial timing and data quality.
- Verify the pace of R&D spending, operating cash use, and whether liquidity remains adequate relative to management’s stated runway.
- Monitor future financing needs and potential dilution or debt restrictions.
- Assess the clinical, regulatory, and commercial uncertainties for resmetirom, including Roche milestone and royalty obligations.