Madrigal Pharmaceuticals, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Madrigal is a clinical-stage biopharmaceutical company developing resmetirom for NASH; it reported no revenue and had no product sales.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $33.4 million | $12.4 million |
| General and administrative expense | $4.6 million | $5.7 million |
| Operating loss | $38.0 million | $18.1 million |
| Interest income | $1.9 million | $3.0 million |
| Net loss | $36.1 million; $2.34 per share | $15.1 million; $0.98 per share |
| Net cash used in operating activities | $30.5 million | $6.5 million |
At March 31, 2020, cash, cash equivalents and marketable securities totaled $408.5 million, down from $439.0 million at December 31, 2019. Total assets were $411.5 million; current liabilities were $25.7 million. The filing reports no debt; liabilities consisted mainly of accrued expenses and lease obligations. Accumulated deficit was $259.4 million. The company had no revenue, so operating margins are not meaningful.
Changes versus prior period
- R&D expense rose $21.0 million, or 170%, primarily reflecting Phase 3 trial activity, increased headcount and stock compensation.
- G&A expense fell $1.1 million, or 20%, mainly due to lower non-cash stock compensation.
- Net loss increased $21.1 million, or 140%. Interest income declined $1.2 million, partly due to lower average investment balances and interest rates.
- Operating cash use increased to $30.5 million from $6.5 million. Investing activities provided $50.5 million, chiefly from marketable-security sales and maturities; financing provided no cash.
Outlook, risks and contingencies
- Management expects operating losses and substantial development spending to continue, with R&D expense expected to increase as resmetirom development advances. Cash and investments were expected to fund operations for more than one year from issuance of the statements; future financing may still be required and is not assured.
- MAESTRO-NASH and MAESTRO-NAFLD-1 Phase 3 trials were ongoing. In April 2020, the company said COVID-19 measures were in place at affected sites and the trials could continue without protocol changes; a Data Monitoring Committee recommended proceeding without modification. The filing cautions that the pandemic could disrupt enrollment, trial operations, supply, regulatory work and timelines.
- Under its Roche agreement, up to $8 million in future milestones are tied to specified U.S. and European regulatory objectives, in addition to single-digit royalties on future net sales, subject to reductions.
- No material pending legal proceedings were reported. The company reported no material changes to previously disclosed risk factors other than adding COVID-19-related risks. Management stated disclosure controls were effective.
Key facts for investors to verify
- Clinical-trial enrollment, execution and data milestones for both Phase 3 studies, including any further COVID-19 effects.
- Cash burn and whether the stated runway remains adequate as development costs rise; availability and terms of any future financing.
- Resmetirom’s clinical and regulatory prospects, including the conditions for the Roche milestone payments and potential royalties.
- The filing’s balance-sheet comparison is presented as March 31, 2020 versus December 31, 2019; an apparent December 31, 2020 reference in the table of contents appears inconsistent with the financial statements.