Madrigal Pharmaceuticals, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; financial statements are unaudited. Madrigal is a clinical-stage biopharmaceutical company with no product revenue. Its lead candidate, MGL-3196, is being developed for NASH and dyslipidemia. The company began a Phase 2 NASH study in October 2016 and a Phase 2 HeFH study in February 2017.
Financial highlights
Amounts below are in millions of dollars, except per-share data.
| Metric | Q1 2017 | Q1 2016 / prior date |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $4.38 | $0.52 |
| General and administrative expense | $1.70 | $0.22 |
| Operating loss | $6.08 | $0.74 |
| Net loss | $6.00 | $1.71 |
| Basic and diluted loss per share | $0.50 | $9.72 |
| Net cash used in operating activities | $3.77 | $0.44 |
| Cash and cash equivalents, March 31 | $8.22 | $19.15 at December 31, 2016 |
| Marketable securities, March 31 | $31.91 | $21.36 at December 31, 2016 |
| Total current assets, March 31 | $40.35 | $41.21 at December 31, 2016 |
| Total liabilities, March 31 | $5.91 | $4.80 at December 31, 2016 |
There was no revenue, so a revenue margin is not applicable. The company reported no operating profit or positive net income. Interest income was $0.08 million in Q1 2017; Q1 2016 included $0.98 million of interest expense. The filing reports no outstanding debt at March 31; legacy related-party convertible notes had converted to equity in the 2016 merger. Accumulated deficit was $81.31 million.
Changes and cash position
- R&D expense rose by $3.86 million, primarily reflecting costs supporting the two Phase 2 studies, including a $2.1 million increase in contract research organization costs. The filing also attributes $0.6 million of increased R&D expense to compensation following hiring.
- G&A expense increased by $1.47 million, primarily due to $0.9 million of increased compensation and additional public-company costs.
- Operating cash use increased to $3.77 million. Investing cash use was $10.56 million, mainly from buying marketable securities; financing provided $3.40 million, principally net ATM stock-sale proceeds. Cash and cash equivalents fell by $10.93 million, while the company shifted funds into marketable securities.
- During Q1, Madrigal sold 215,539 shares under its at-the-market program for approximately $3.5 million gross and $3.4 million net proceeds. Approximately $90.4 million remained available under the program, subject to its terms.
Outlook, risks and other matters
- Management expects substantial operating losses and increased R&D spending as clinical and preclinical programs advance. The company stated that cash, cash equivalents and marketable securities at March 31 were expected to fund operations for more than one year from issuance of the financial statements.
- Beyond that assessment period, additional capital may be needed through equity or debt financing, collaborations, partnerships or other strategic transactions. Availability and terms are uncertain; insufficient financing could delay or curtail programs. Management said it could defer certain research and clinical spending if needed.
- Under the Roche agreement, up to $10 million in remaining milestone payments may be triggered by clinical-development and regulatory events; single-digit royalties may apply to future product sales. No licensed-product sales had occurred. The filing says the Phase 2 NASH study triggered a milestone payment.
- Key risks include clinical and regulatory uncertainty, ability to raise capital, product development and commercialization, market acceptance and reimbursement, intellectual-property protection, and dependence on key personnel. No material changes to the prior annual report’s risk factors were reported.
- No material legal proceedings or off-balance-sheet arrangements were reported. Management assessed disclosure controls as effective at quarter-end and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Progress, timing and results of the MGL-3196 Phase 2 NASH and HeFH studies, and plans for a HoFH proof-of-concept study.
- Cash runway assumptions and expected spending relative to the $40.1 million in cash, cash equivalents and marketable securities.
- Future dilution and remaining capacity under the ATM program, as well as the terms and availability of any additional financing.
- Roche milestone triggers and potential royalty obligations, and the reported milestone payment associated with the NASH Phase 2 study.
- Clinical, regulatory, manufacturing and commercialization risks; the filing cautions that interim results are not necessarily indicative of full-year results.