Madrigal Pharmaceuticals, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Financial amounts below are in U.S. dollars; millions unless noted.
Business context
Madrigal is a clinical-stage biopharmaceutical company with no product revenue. Its lead candidate, resmetirom (MGL-3196), is being developed for NASH. Two Phase 3 studies were ongoing: MAESTRO-NASH and MAESTRO-NAFLD-1.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $45.8 | $33.4; up 37% |
| General and administrative expense | $7.2 | $4.6; up 57% |
| Operating loss | $(53.0) | $(38.0) |
| Net loss | $(52.5) | $(36.1); up 45% |
| Basic and diluted loss per share | $(3.32) | $(2.34) |
| Net cash used in operating activities | $(43.4) | $(30.5) |
| Cash and cash equivalents | $44.2 at March 31 | $54.0 at December 31, 2020 |
| Marketable securities | $263.0 at March 31 | $230.1 at December 31, 2020 |
| Cash, cash equivalents and marketable securities | $307.2 at March 31 | $284.1 at December 31, 2020 |
Operating expenses and losses increased primarily because of Phase 3 trial activity, increased headcount, and commercial preparation. Interest income declined to $0.2 million from $1.9 million, mainly due to lower interest rates and a lower average investment balance. No meaningful revenue margin is available to assess.
Financing activities provided $67.1 million, primarily from $66.6 million net proceeds from ATM share sales and $0.5 million from option exercises. Investing activities used $33.5 million, principally reflecting purchases of marketable securities net of sales and maturities. Cash and cash equivalents decreased by $9.8 million during the quarter. Total liabilities were $49.2 million, including $0.7 million of lease liabilities; the filing reports no conventional borrowings.
Material changes and notable items
- Under the ATM agreement, the company sold 550,803 shares in Q1 for approximately $66.6 million net proceeds. As of March 31, cumulative sales under the agreement were 590,410 shares, producing approximately $71.0 million net proceeds.
- After quarter-end through May 4, 2021, the company sold another 521,426 shares for approximately $61.9 million net proceeds. These post-quarter sales are not included in March 31 balances.
- Accumulated deficit was $478.0 million at March 31, 2021. Stock-based compensation expense was $6.1 million, compared with $4.8 million a year earlier.
Outlook, risks and contingencies
- Management expects operating losses and substantial R&D expenses to continue and anticipates R&D expense will increase as resmetirom development advances. G&A may also rise with commercial preparation and expanded operations. The filing provides no specific revenue or earnings guidance.
- Management stated that cash, cash equivalents and marketable securities at March 31, 2021 were expected to fund operations for more than one year from issuance of the financial statements. Longer-term needs are substantial; future financing may be required, may be unavailable on acceptable terms, and equity financing may dilute shareholders.
- MAESTRO-NASH was a Phase 3 study targeting approximately 2,000 patients. MAESTRO-NAFLD-1 had enrolled approximately 1,200 patients, exceeding its original target, and completed enrollment in October 2020. Clinical outcomes, enrollment, safety, regulatory approval and development timing remain uncertain.
- The company reported no material adverse COVID-19 impact on operating results, MAESTRO-NAFLD-1 or liquidity for the periods discussed, but noted continuing trial and operational risks, including potential enrollment disruption.
- Remaining Roche development and regulatory milestones total $8 million, contingent on specified future objectives; the agreement also provides for single-digit royalties on future net sales. No material legal proceedings were reported, and the company reported no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Progress, enrollment, timing and results for both Phase 3 resmetirom studies, and any effects of COVID-19 or other operational disruptions.
- Cash burn and runway relative to the company’s planned clinical, manufacturing and commercial-preparation spending.
- Further ATM share sales, remaining offering capacity, and resulting dilution; separately account for the post-quarter sales through May 4.
- Regulatory and clinical risks, including whether trial endpoints and safety requirements are met and whether approvals are obtained.
- Potential Roche milestone payments and royalties, and the availability and terms of any future financing.