Madrigal Pharmaceuticals, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. Madrigal is a clinical-stage biopharmaceutical company with no product revenue; its lead candidate, MGL-3196, is being developed for NASH and dyslipidemia.
Financial performance and position
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $5.2 million | $4.4 million; up 19% |
| General and administrative expense | $1.9 million | $1.7 million; up 10% |
| Operating loss | $7.1 million | $6.1 million |
| Interest income | $0.7 million | $0.1 million |
| Net loss | $6.4 million | $6.0 million |
| Net loss per share, basic and diluted | $0.45 | $0.50 |
| Cash, cash equivalents and marketable securities | $182.8 million at March 31 | $191.5 million at December 31, 2017 |
| Operating cash used | $8.6 million | $3.8 million |
Q1 comprehensive loss was $6.5 million, including a $0.1 million unrealized loss on available-for-sale securities. Total liabilities were $6.3 million, consisting of accounts payable and accrued expenses; no debt is presented on the balance sheet. There were no meaningful revenue-based margins to report. Accumulated deficit was $112.8 million.
Material changes and cash flows
- R&D expense increased $0.8 million, primarily due to higher non-cash stock compensation and third-party consulting and study costs. G&A expense rose $0.2 million, mainly due to stock compensation.
- Interest income increased to $0.7 million from $0.1 million, primarily reflecting a higher average investment balance.
- Cash and cash equivalents fell from $148.6 million to $38.1 million, while marketable securities rose from $42.9 million to $144.7 million. The shift largely reflects $122.2 million of securities purchases, partially offset by $20.1 million of sales and maturities; total cash and investments declined by $8.7 million.
- Financing provided $0.3 million, primarily from stock-option exercises, versus $3.4 million in Q1 2017. Stock-based compensation expense increased to $1.2 million from $0.6 million.
Outlook, developments and risks
- Management expects continuing operating losses and substantial development spending, with R&D expense expected to increase as programs advance. It believes March 31 cash, cash equivalents and marketable securities will fund operations for more than one year from the financial statement issuance date.
- MGL-3196’s 125-patient NASH Phase 2 study was nearing completion; the company had achieved the 12-week primary endpoint and reported those results in December 2017. The 116-patient HeFH Phase 2 study was completed, with results reported in February 2018.
- Management may seek additional capital through equity or debt financing, collaborations, partnerships or other strategic transactions. Availability and acceptable terms are not assured; equity financing could dilute shareholders, and debt could impose restrictive covenants. The company says it could delay certain research and clinical expenses if liquidity concerns arise.
- Risks include clinical and regulatory uncertainty, commercialization and reimbursement uncertainty, reliance on financing, competition, manufacturing, intellectual-property protection and dependence on key personnel. No material change to previously disclosed risk factors was reported. No material pending legal proceedings or off-balance-sheet arrangements were reported.
- The Roche agreement includes up to $10 million in remaining development and regulatory milestone payments, plus single-digit royalties on net sales of products developed from MGL-3196. No product sales were reported.
Key facts for investors to verify
- Progress, timing and results of the NASH program following the Phase 2 12-week endpoint, and implications of the completed HeFH study.
- Whether the reported cash runway remains adequate as clinical, manufacturing and other development costs rise; assess potential future financing and dilution.
- Drivers of operating cash use, including working-capital movements, and the composition and liquidity of the investment portfolio.
- Potential dilution from 1,969,797 convertible preferred shares and outstanding options; 14,250,726 common shares were outstanding as of May 3, 2018.
- Timing and conditions for Roche milestone obligations and any future royalty exposure.