MADRIGAL PHARMACEUTICALS, INC. quarterly report, Q1 FY2021

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

MetricQ1 2021Q1 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.