Madrigal Pharmaceuticals, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Madrigal is a clinical-stage biopharmaceutical company developing resmetirom for NASH and other metabolic and liver diseases. It had no product revenue and remains dependent on external financing.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $47.9 million | $45.8 million; up 5% |
| General and administrative expense | $9.7 million | $7.2 million; up 34% |
| Total operating expense / operating loss | $57.6 million | $53.0 million; expenses up about 9% |
| Net loss | $57.5 million | $52.5 million; loss increased about 9% |
| Basic and diluted loss per share | $3.36 | $3.32 |
| Cash and cash equivalents | $42.3 million | $36.3 million at Dec. 31, 2021 |
| Marketable securities | $177.7 million | $234.1 million at Dec. 31, 2021 |
| Operating cash use | $49.9 million | $43.4 million |
| Total liabilities | $76.9 million | $77.2 million at Dec. 31, 2021 |
Cash, cash equivalents and marketable securities totaled approximately $220.0 million at quarter-end, down from $270.3 million at year-end. Cash flow from investing was positive $55.9 million, primarily because maturities and sales of securities exceeded purchases; this was portfolio activity, not operating cash generation. Financing cash flow was zero in Q1 2022, versus $67.1 million of equity-related proceeds in Q1 2021. The filing reports no conventional product gross margin because Madrigal had no revenue. It had no term debt at March 31; reported liabilities were mainly accounts payable, accrued expenses and lease liabilities.
Stock-based compensation was $7.5 million, compared with $6.1 million a year earlier. The accumulated deficit was $724.8 million at quarter-end. Management stated that available cash and investments were expected to fund operations for more than one year from issuance of the financial statements, while anticipating continued losses and higher cash use.
Business developments, outlook and risks
- Clinical program: Two Phase 3 resmetirom studies were ongoing. Madrigal reported in January 2022 that the double-blind portion of MAESTRO-NAFLD-1 achieved specified primary and key secondary endpoints. Additional safety-study results announced in May 2022 are post-quarter updates; the filing describes resmetirom as generally well-tolerated and reports reductions in liver-fat measures and atherogenic lipids.
- Planned development: Management planned a second NASH outcomes study, MAESTRO-NASH Outcomes, in about 700 patients with early NASH cirrhosis. The company expected research and development and general and administrative expenses to rise as clinical development and commercial preparation expanded. The filing also notes a May 2022 change to the MAESTRO-NASH endpoint hierarchy; this is a post-quarter development.
- Subsequent financing: In May 2022, Madrigal entered a term-loan facility of up to $250 million with Hercules Capital and drew $50 million at closing. Further tranches depend on clinical/regulatory milestones or lender approval. Initial interest was 7.95%, with a 7.45% floor; the loan matures in May 2026, subject to possible extension. The facility is secured by substantially all assets other than intellectual property and includes restrictive covenants, including a minimum-liquidity covenant beginning in 2023 and a possible revenue covenant beginning in 2024.
- Funding and execution risks: The company may need additional debt, equity, collaboration or other financing; availability and terms are uncertain, and equity issuance may dilute shareholders. Management said some research and clinical spending could be delayed if liquidity concerns arise. Clinical efficacy, safety, enrollment, regulatory approval and commercialization remain uncertain, and expanded studies may increase costs without achieving their intended objectives.
- Other matters: Madrigal reported no material pending legal proceedings and no material change in internal control over financial reporting. Management concluded disclosure controls were effective at the reasonable-assurance level.
Key facts for investors to verify
- Quarter-end cash and investment balances, the expected runway, and the assumptions behind management’s greater-than-one-year liquidity estimate.
- Resmetirom trial enrollment, endpoints, timing and full efficacy and safety data; distinguish post-quarter announcements from Q1 results.
- Actual borrowing, interest expense, availability of additional Hercules tranches, collateral and covenant compliance.
- Whether planned clinical expansion and commercial preparation drive expenses or cash use above current expectations.
- Potential financing needs, use of the remaining $159.2 million capacity under the ATM agreement as of March 31, 2022, and resulting dilution or debt constraints.