Madrigal Pharmaceuticals, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Madrigal is a clinical-stage biopharmaceutical company developing resmetirom (MGL-3196), led by its program in NASH. The company began a Phase 3 NASH trial in March 2019; it had no product revenue.
Financial performance and liquidity
- Revenue: $0, unchanged from Q1 2018.
- Expenses and loss: R&D expense was $12.4 million, up 138% from $5.2 million; G&A expense was $5.7 million, up 207% from $1.9 million. Operating loss was $18.1 million versus $7.1 million. Interest income rose to $3.0 million from $0.7 million, leaving net loss of $15.1 million versus $6.4 million. Basic and diluted loss per share was $0.98 versus $0.45. No operating margin is meaningful given the absence of revenue.
- Cash flow: Net cash used in operating activities was $6.5 million, compared with $8.6 million in Q1 2018. Investing activities used $3.5 million, primarily reflecting purchases of marketable securities largely offset by sales and maturities. Financing provided $0.1 million from option exercises. Cash and cash equivalents decreased $9.9 million to $47.5 million.
- Liquidity and balance sheet: Cash, cash equivalents and marketable securities totaled $477.8 million at March 31, 2019, versus $483.7 million at year-end 2018. Total assets were $479.6 million; total liabilities were $11.1 million, including $0.9 million of lease liabilities. The filing reports no borrowings. Accumulated deficit was $154.4 million.
- Stock compensation: Noncash stock-based compensation increased to $6.0 million from $1.2 million, materially contributing to expense growth.
Changes, outlook and material items
- R&D growth reflected Phase 3 trial initiation-related activity, increased headcount and higher stock compensation. G&A growth was primarily attributable to higher stock compensation. Management expects both R&D and G&A expenses to increase as development advances.
- The Phase 3 NASH study plans approximately 2,000 patients, randomized to placebo or resmetirom 80 mg or 100 mg. The week-52 biopsy in the first 900 patients is intended to support a potential subpart H accelerated-approval filing; patients are expected to remain in the study for approximately 54 months. These are plans, not demonstrated outcomes.
- Management expects ongoing losses and believes available cash and investments will fund operations past one year from issuance of the statements. Further capital may be needed; financing may be unavailable or dilutive, and debt could impose restrictive covenants.
- The Roche agreement includes up to $10 million in remaining development and regulatory milestone payments, plus single-digit royalties on future resmetirom net sales, subject to reductions. No additional milestones had been achieved as of the filing, and there were no product sales.
- The company adopted lease accounting in 2019 and recognized a right-of-use asset and lease liability. It reported no material change to previously disclosed risk factors, no material pending legal proceedings and no material change in internal control over financial reporting.
Key facts for investors to verify
- Progress, enrollment and timing of the Phase 3 NASH trial, and whether the planned week-52 endpoint and filing strategy remain achievable.
- Cash burn and the assumptions supporting management’s stated runway, particularly as clinical-trial spending is expected to rise.
- Future financing needs and potential dilution, as well as the timing and conditions of Roche milestone payments and royalties.
- The filing’s cash-flow discussion describes investing activity as being for “nine months,” although the presented statements cover the three months ended March 31; confirm the intended period. The lease note and contractual-obligations table also present different total lease-payment figures.