Madrigal Pharmaceuticals, Inc. — Q3 2017 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2017; unaudited. Madrigal is a clinical-stage biopharmaceutical company with no product revenue. Its lead candidate, MGL-3196, is being developed for NASH and dyslipidemias.
Key financial results
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $6.7m | $7.8m | $17.9m | $10.4m |
| General and administrative | $2.0m | $6.3m | $5.3m | $7.1m |
| Net loss | $8.4m | $14.0m | $22.7m | $18.6m |
| Net loss per share, basic and diluted | $0.68 | $1.59 | $1.87 | $6.04 |
| Operating cash used | $16.4m | $12.3m |
Margins are not meaningful because the company reported no revenue. Net loss for Q3 improved year over year, while the nine-month loss increased. Q3 operating expenses were $8.6m; nine-month operating expenses were $23.2m.
At September 30, 2017, cash and cash equivalents were $13.0m and marketable securities were $49.2m, totaling $62.1m, compared with $40.5m at December 31, 2016. Total assets were $62.8m, current liabilities and total liabilities were $8.5m, and stockholders’ equity was $54.3m. The balance sheet reports no debt. Nine-month net cash used in investing was $28.1m, primarily reflecting purchases of marketable securities; financing provided $38.3m.
Material changes and financing
- Nine-month R&D increased $7.5m (72%), principally due to clinical research organization costs for the two MGL-3196 Phase 2 studies, which increased $8.2m. Management expects development spending to rise as programs advance.
- Q3 R&D decreased year over year largely because 2016 included one-time merger-related change-in-control stock compensation; excluding that item, other costs increased to support the trials.
- G&A fell year over year because 2016 included one-time merger costs, partly offset by higher 2017 public-company and compensation costs.
- In June 2017, a private placement of common and Series A convertible preferred stock generated approximately $35.0m gross and $34.9m net proceeds. The company also received net proceeds from at-the-market common stock sales. At September 30, approximately $90.4m remained available under the sales agreement’s offering capacity.
Outlook, risks and contingencies
- The NASH Phase 2 study (125 patients) and HeFH Phase 2 study (116 patients) were fully enrolled. Madrigal planned a proof-of-concept study in homozygous FH. The filing provides no specific results-release timetable or financial guidance.
- Management said available cash, cash equivalents and marketable securities were expected to fund operations for more than one year from issuance of the financial statements. Beyond that period, additional capital may be needed; financing availability and terms are uncertain. The company may delay research or reduce or suspend programs if funding is inadequate.
- Management expects substantial future R&D expenditures and potentially higher G&A. Clinical success, regulatory approval, commercialization, reimbursement, competition, manufacturing and financing are material uncertainties.
- The Roche license has $10m of remaining milestone payments tied to Phase 3 commencement and U.S. and European regulatory approvals, plus single-digit royalties on eventual product sales, subject to reductions. A Phase 2 start had already triggered a milestone payment; no licensed-product sales were reported.
- Series A preferred stock is convertible one-for-one into common stock, subject to adjustment. The filing reports 1,969,797 preferred shares outstanding at quarter-end. No material legal proceedings or material changes to previously disclosed risk factors were reported.
Most important facts to verify
- Clinical trial results, timing and next development steps for MGL-3196 in NASH and HeFH, and plans for the HoFH study.
- Cash runway assumptions, quarterly operating cash use and the timing or terms of any future financing.
- Potential dilution from preferred-stock conversion, options and further at-the-market share sales.
- Roche milestone triggers and royalty obligations as development progresses.