QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
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(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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Item |
Description |
Page |
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Part I. Financial Information |
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Item 1. |
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Item 2. |
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Item 3. |
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Item 4. |
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Part II. Other Information |
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Item 1. |
17 |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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20 |
March 31, 2020 |
December 31, 2019 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ | |
$ | |
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Marketable securities |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use asset |
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Total assets |
$ | |
$ | |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
$ | |
$ | |
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Accrued expenses |
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Lease liability |
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Total current liabilities |
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Long term liabilities: |
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Lease liability |
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Total long term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, par value $ |
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Common stock, par value $ |
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Additional paid-in-capital |
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Accumulated other comprehensive gain (loss) |
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Accumulated deficit |
( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ | |
$ | |
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Three Months Ended March 31, |
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2020 |
2019 |
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Revenues: |
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Total revenues |
$ | — |
$ | — |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
( |
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Interest income |
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Net loss |
$ | ( |
) | $ | ( |
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Net loss per common share: |
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Basic and diluted net loss per common share |
$ | ( |
) | $ | ( |
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Basic and diluted weighted average number of common shares outstanding |
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Three Months Ended March 31, |
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2020 |
2019 |
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Net Loss |
( |
) | $ | ( |
) | |||
Other comprehensive income (loss): |
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Unrealized gain on available-for-sale securities |
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Comprehensive loss |
$ | ( |
) | $ | ( |
) | ||
Preferred stock |
Common stock |
Additional paid-in Capital |
Accumulated other comprehensive income (loss) |
Accumulated deficit |
Total stockholders’ equity |
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Shares |
Amount |
Shares |
Amount |
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Balance at December 31, 2019 |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
( |
) |
$ |
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Compensation expense related to stock options for services |
— |
— |
— |
— |
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— |
— |
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Unrealized gain on marketable securities |
— |
— |
— |
— |
— |
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— |
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Net loss |
— |
— |
— |
— |
— |
— |
( |
) |
( |
) | ||||||||||||||||||||||
Balance at March 31, 2020 |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
( |
) |
$ |
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Balance at December 31, 2018 |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
) |
$ |
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Exercise of common stock options |
— |
— |
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— |
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— |
— |
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Compensation expense related to stock options for services |
— |
— |
— |
— |
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— |
— |
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Unrealized gain on marketable securities |
— |
— |
— |
— |
— |
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— |
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Net loss |
— |
— |
— |
— |
— |
— |
( |
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( |
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Balance at March 31, 2019 |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Three Months Ended March 31, |
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2020 |
2019 |
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Cash flows from operating activities: |
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Net loss |
$ | ( |
) | $ | ( |
) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation expense |
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Depreciation and amortization expense |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Accounts payable |
( |
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Accrued expense |
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( |
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Accrued interest, net of interest received on maturity of investments |
( |
) | ( |
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Net cash used in operating activities |
( |
) | ( |
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Cash flows from investing activities: |
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Purchases of marketable securities |
( |
) | ( |
) | ||||
Sales and maturities of marketable securities |
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Purchases of property and equipment, net of disposals |
( |
) | ( |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities: |
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Proceeds from the sale of related party stock and exercise of common stock options, net of transaction costs |
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Net cash provided by financing activities |
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Net increase (decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
$ | |
$ | |
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Supplemental disclosure of cash flow information: |
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Obtaining a right-of-use asset in exchange for a lease liability |
$ | |
$ | |
Three Months Ended |
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March 31, |
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2020 |
2019 |
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Common stock options |
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Unvested restricted common stock |
— |
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Preferred stock |
March 31, 2020 |
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Cost |
Unrealized |
Unrealized |
Fair |
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gains |
losses |
value |
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Cash and cash equivalents: |
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Cash (Level 1) |
$ | $ | — |
$ | — |
$ | ||||||||||
Money market funds (Level 1) |
— |
— |
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Corporate debt securities due within |
— |
— |
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Total cash and cash equivalents |
— |
— |
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Marketable securities: |
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Corporate debt securities due within |
( |
) | ||||||||||||||
Corporate debt securities due within (Level 2) |
( |
) | ||||||||||||||
Total cash, cash equivalents and marketable securities |
$ | $ | $ | ( |
) | $ | ||||||||||
December 31, 2019 |
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Cost |
Unrealized |
Unrealized |
Fair |
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gains |
losses |
value |
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Cash and cash equivalents: |
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Cash (Level 1) |
$ | $ | — |
$ | — |
$ | ||||||||||
Money market funds (Level 1) |
— |
— |
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Corporate debt securities due within |
— |
— |
— |
— |
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Total cash and cash equivalents |
— |
— |
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Marketable securities: |
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Corporate debt securities due within |
( |
) | ||||||||||||||
Corporate debt securities due within (Level 2) |
( |
) | ||||||||||||||
Total cash, cash equivalents and marketable securities |
$ | $ | $ | ( |
) | $ | ||||||||||
March 31, |
December 31, |
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2020 |
2019 |
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Accrued contract research costs |
$ | $ | ||||||
Compensation and benefits |
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Professional fees |
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Other |
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$ | $ | |||||||
Shares |
Weighted average exercise price |
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Outstanding at January 1, 2020 |
$ | |||||||
Options granted |
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Outstanding at March 31, 2020 |
$ | |||||||
Exercisable at March 31, 2020 |
$ |
Three Months Ended March 31, |
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2020 |
2019 |
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Stock-based compensation expense by type of award: |
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Stock options |
$ | $ | ||||||
Restricted stock |
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Total stock-based compensation expense |
$ | $ | ||||||
Effect of stock-based compensation expense by line item: |
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Research and development |
$ | $ | ||||||
General and administrative |
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Total stock-based compensation expense included in net loss |
$ | $ | ||||||
• | salaries and related expense, including stock-based compensation; |
• | external expenses paid to clinical trial sites, contract research organizations, laboratories, database software and consultants that conduct clinical trials; |
• | expenses related to development and the production of nonclinical and clinical trial supplies, including fees paid to contract manufacturers; |
• | expenses related to preclinical studies; |
• | expenses related to compliance with drug development regulatory requirements; and |
• | other allocated expenses, which include direct and allocated expenses for depreciation of equipment and other supplies. |
Three Months Ended March 31, |
Increase / (Decrease) |
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2020 |
2019 |
$ |
% |
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Research and Development Expenses |
$ | 33,400 |
$ | 12,373 |
21,027 |
170 |
% | |||||||||
General and Administrative Expenses |
4,605 |
5,746 |
(1,141 |
) | (20 |
%) | ||||||||||
Interest (Income) |
(1,870 |
) | (3,039 |
) | (1,169 |
) | (38 |
%) | ||||||||
$ | 36,135 |
$ | 15,080 |
21,055 |
140 |
% |
Three Months Ended March 31, |
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2020 |
2019 |
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Net cash used in operating activities |
$ | (30,506 |
) | $ | (6,478 |
) | ||
Net cash (used in) provided by investing activities |
50,460 |
(3,491 |
) | |||||
Net cash provided by financing activities |
— |
83 |
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Net (decrease) increase in cash and cash equivalents |
$ | 19,954 |
$ | (9,886 |
) |
Exhibit |
Incorporated by Reference |
Filed |
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Number |
Exhibit Description |
Form |
File No. |
Exhibit |
Filing Date |
Herewith |
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31.1 |
X |
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31.2 |
X |
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32.1** |
X |
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101.INS |
Inline XBRL Instance Document. |
X |
||||||||||||||||||||||
101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
X |
||||||||||||||||||||||
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
X |
||||||||||||||||||||||
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
X |
||||||||||||||||||||||
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
X |
||||||||||||||||||||||
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
X |
||||||||||||||||||||||
104 |
Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set. |
* | Certain portions of this exhibit have been redacted in accordance with Item 601(b)(10) of Regulation S-K. |
** | The certifications attached as Exhibit 32.1 that accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, shall not be deemed “filed” by the registrant for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into any of the registrant’s filings under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in any such filing. |
MADRIGAL PHARMACEUTICALS, INC. | ||||||
Date: May 7, 2020 |
By: |
/s/ Paul A. Friedman, M.D. | ||||
Paul A. Friedman, M.D. | ||||||
Chief Executive Officer (Principal Executive Officer) | ||||||
Date: May 7, 2020 |
By: |
/s/ Marc R. Schneebaum | ||||
Marc R. Schneebaum | ||||||
Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul A. Friedman, M.D., certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Madrigal Pharmaceuticals, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and | |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ Paul A. Friedman, M.D. |
Paul A. Friedman, M.D. |
Chief Executive Officer and Chairman of the Board |
(Principal Executive Officer) |
Date: May 7, 2020 |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Marc R. Schneebaum, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Madrigal Pharmaceuticals, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and | |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ Marc R. Schneebaum |
Marc R. Schneebaum |
Senior Vice President and Chief Financial Officer |
(Principal Financial and Accounting Officer) |
Date: May 7, 2020 |
Exhibit 32.1
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350)), each of the undersigned officers of Madrigal Pharmaceuticals, Inc., a Delaware corporation (the Company), does hereby certify, to such officers knowledge, that:
The Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 (the Form 10-Q) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: May 7, 2020 | /s/ Paul A. Friedman, M.D. | |||||
Paul A. Friedman, M.D. | ||||||
Chief Executive Officer and Chairman of the Board | ||||||
(Principal Executive Officer) |
Dated: May 7, 2020 | /s/ Marc R. Schneebaum | |||||
Marc R. Schneebaum | ||||||
Senior Vice President and Chief Financial Officer | ||||||
(Principal Financial and Accounting Officer) |
These certifications accompany the Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 1,969,797 | 1,969,797 |
Preferred stock, shares outstanding | 1,969,797 | 1,969,797 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 15,429,154 | 15,429,154 |
Common stock, shares outstanding | 15,429,154 | 15,429,154 |
Stock-based Compensation (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of stock option activity | The following table summarizes stock option activity during the three months ended March 31, 2020:
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Schedule of stock-based compensation expense | Stock-based compensation expense during the three months ended March 31, 2020 and 2019 was as follows (in thousands):
|
Commitments and Contingencies (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Commitments and Contingencies | ||
Licensed product sales | $ 0 | $ 0 |
Research, Development and Commercialization Agreement | Hoffmann-La Roche ("Roche") | ||
Commitments and Contingencies | ||
Remainder of future milestone payments | $ 8,000,000 |
Accrued Liabilities |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities, Current [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities | 5. Accrued Liabilities Accrued liabilities as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands) :
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Summary of Significant Accounting Policies (Policies) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principle of Consolidation | Principle of Consolidation The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany balances have been eliminated in consolidation. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates. |
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Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash in bank accounts, the balance of which, at times, exceeds Federal Deposit Insurance Corporation insured limits. The primary objective of the Company’s investment activities is to preserve its capital for the purpose of funding operations and the Company does not enter into investments for trading or speculative purposes. The Company’s cash is deposited in highly rated financial institutions in the United States. The Company invests in money market funds and high-grade, commercial paper and corporate bonds, which management believes are subject to minimal credit and market risk. |
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Marketable Securities | Marketable Securities Marketable securities consist of investments in high-grade corporate obligations and government and government agency obligations that are classified as available-for-sale. Since these securities are available to fund current operations, they are classified as current assets on the consolidated balance sheets. The Company adjusts the cost of available-for-sale debt securities for amortization of premiums and accretion of discounts to maturity. The Company includes such amortization and accretion as a component of interest income, net. Realized gains and losses and declines in value, if any, that the Company judges to be other-than-temporary on available-for-sale securities are reported as a component of interest income, net. To determine whether an other-than-temporary impairment exists, the Company considers whether it intends to sell the debt security and, if the Company does not intend to sell the debt security, it considers available evidence to assess whether it is more likely than not that it will be required to sell the security before the recovery of its amortized cost basis. During the three months ended March 31, 2020 and 2019, the Company determined it did not have any securities that were other-than-temporarily impaired.Marketable securities are stated at fair value, including accrued interest, with their unrealized gains and losses included as a component of accumulated other comprehensive income or loss, which is a separate component of stockholders’ equity. The fair value of these securities is based on quoted prices and observable inputs on a recurring basis. Realized gains and losses are determined on the specific identification method. During the three months ended March 31, 2020 and 2019, the Company did not have any realized gains or losses on marketable securities. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, which include cash equivalents, and marketable securities, approximate their fair values. The fair value of the Company’s financial instruments reflects the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy has the following three levels: Level 1—quoted prices in active markets for identical assets and liabilities. Level 2—observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. Level 3—unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company measures the fair value of its marketable securities by taking into consideration valuations obtained from third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker-dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities and other observable inputs. As of March 31, 2020, the Company’s financial assets valued based on Level 1 inputs consisted of cash and cash equivalents in a money market fund and its financial assets valued based on Level 2 inputs consisted of high-grade corporate bonds and commercial paper. During the three months ended March 31, 2020 and 2019, the Company did not have any transfers of financial assets between Levels 1 and 2. As of March 31, 2020 and December 31, 2019, the Company did not have any financial liabilities that were recorded at fair value on a recurring basis on the balance sheet. |
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Research and Development Costs | Research and Development Costs Research and development costs are expensed as incurred. Research and development costs are comprised of costs incurred in performing research and development activities, including internal costs (including stock-based compensation), costs for consultants, milestone payments under licensing agreements, and other costs associated with the Company’s preclinical and clinical programs. In particular, the Company has conducted safety studies in animals, optimized and implemented the manufacturing of our drug, and conducted Phase
1-3 clinical trials, all of which are considered research and development expenditures. Management uses significant judgment in estimating the amount of research and development costs recognized in each reporting period. Management analyzes and estimates the progress of its preclinical studies and clinical trials, completion of milestones events per underlying agreements, invoices received and contracted costs when estimating the research and development costs to accrue in each reporting period. Actual results could differ from the Company’s estimates. The Company’s historical estimates for research and development costs have not been materially different from the actual costs. |
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Patents | Patents Costs to secure and defend patents are expensed as incurred and are classified as general and administrative expense in the Company’s consolidated statements of operations. |
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Stock-Based Compensation | Stock-Based Compensation The Company recognizes stock-based compensation expense based on the grant date fair value of stock options granted to employees, officers, and directors. The Company uses the Black-Scholes option pricing model to determine the grant date fair value as management believes it is the most appropriate valuation method for its option grants. The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility and expected lives of the options. The expected lives for options granted represent the period of time that options granted are expected to be outstanding. The Company uses the simplified method for determining the expected lives of options. Expected volatility is based upon an industry estimate or blended rate including the Company’s historical trading activity. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Company estimates the forfeiture rate based on historical data. This analysis is re-evaluated at least annually and the forfeiture rate is adjusted as necessary.Certain of the employee stock options granted by the Company are structured to qualify as incentive stock options (“ISOs”). Under current tax regulations, the Company does not receive a tax deduction for the issuance, exercise or disposition of ISOs if the employee meets certain holding requirements. If the employee does not meet the holding requirements, a disqualifying disposition occurs, at which time the Company may receive a tax deduction. The Company does not record tax benefits related to ISOs unless and until a disqualifying disposition is reported. In the event of a disqualifying disposition, the entire tax benefit is recorded as a reduction of income tax expense. The Company has not recognized any income tax benefit for its share-based compensation arrangements due to the fact that the Company does not believe it is more likely than not it will realize the related deferred tax assets. |
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Income Taxes | Income Taxes The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the Company’s financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. The Company currently maintains a 100% valuation allowance on its deferred tax assets. |
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Comprehensive Loss | Comprehensive Loss Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from
non-owner sources. Changes in unrealized gains and losses on marketable securities represent the only difference between the Company’s net loss and comprehensive loss. |
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Basic and Diluted Loss Per Common Share | Basic and Diluted Loss Per Common Share Basic net loss per share is computed using the weighted average number of common shares outstanding during the period, excluding restricted stock that has been issued but is not yet vested. Diluted net loss per common share is computed using the weighted average number of common shares outstanding and the weighted average dilutive potential common shares outstanding using the treasury stock method. However, for the three months ended March 31, 2020 and 2019, diluted net loss per share is the same as basic net loss per share because the inclusion of weighted average shares of unvested restricted common stock, common stock issuable upon the exercise of stock options, and common stock issuable upon the conversion of preferred stock would be anti-dilutive. The following table summarizes outstanding securities not included in the computation of diluted net loss per common share, as their inclusion would be anti-dilutive:
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2016, the FASB issued ASU
2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires all or a portion of the amortized cost basis of a financial asset to be written off when it is deemed uncollectible. For public business entities that do not qualif y as a smaller reporting company, ASU 2016-13 is effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted ASU 2016-13 effective January 1, 2020. There was no significant impact from the adoption. |
Stock-based Compensation - Unrecognized Expense (Details) - Stock options $ in Millions |
3 Months Ended |
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Mar. 31, 2020
USD ($)
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Unrecognized stock-based compensation expense | |
Unrecognized stock compensation expense | $ 44.2 |
Weighted average remaining period (in years) | 3 years |
Stockholders' Equity |
3 Months Ended |
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Mar. 31, 2020 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | 6. Stockholders’ Equity Common Stock Each common stockholder is entitled to one vote for each share of common stock held. Each share of common stock is entitled to receive dividends, as and when declared by the Company’s board of directors. The Company has never declared cash dividends on its common stock and does not expect to do so in the foreseeable future. Preferred Stock The Series A Preferred Stock has a par value of $0.0001 per share and is convertible into shares of the common stock at a
one-to-one ratio, subject certain limitations and to adjustment provisions as provided in the Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, that the Company filed with the Secretary of State of the State of Delaware on June 21, 2017 (the “Series A Certificate”). The terms of the Series A Preferred Stock are set forth in the Series A Certificate. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, after the satisfaction in full of the debts of the Company and the payment of any liquidation preference owed to the holders of shares of capital stock of the Company ranking prior to the Series A Preferred Stock upon liquidation, the holders of the Series A Preferred Stock shall participate pari passu with the holders of the Common Stock (on an as-if-converted-to -Common-StockStock will generally have no voting rights, except as required by law. Shares of the Series A Preferred Stock will be entitled to receive dividends before shares of any other class or series of capital stock of the Company (other than dividends in the form of the Common Stock) generally equal to the dividend payable on each share of the Common Stock, on an as-converted basis. |
Summary of Significant Accounting Policies (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the outstanding securities not included in the computation of diluted net loss per common share as their inclusion would be anti-dilutive | The following table summarizes outstanding securities not included in the computation of diluted net loss per common share, as their inclusion would be anti-dilutive:
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Stock-based Compensation - Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2020 |
Mar. 31, 2019 |
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Stock-based compensation expense | ||
Stock-based compensation expense | $ 4,846 | $ 6,022 |
Research and development | ||
Stock-based compensation expense | ||
Stock-based compensation expense | 2,078 | 1,877 |
General and administrative | ||
Stock-based compensation expense | ||
Stock-based compensation expense | 2,768 | 4,145 |
Stock options | ||
Stock-based compensation expense | ||
Stock-based compensation expense | 4,846 | 5,901 |
Unvested restricted common stock | ||
Stock-based compensation expense | ||
Stock-based compensation expense | $ 0 | $ 121 |
Summary of Significant Accounting Policies - Income Taxes (Details) |
3 Months Ended |
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Mar. 31, 2020 | |
Income Taxes | |
Valuation allowance on deferred tax assets (as a percent) | 100.00% |
Accrued Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
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Accrued Liabilities, Current [Abstract] | ||
Accrued contract research costs | $ 18,105 | $ 13,775 |
Compensation and benefits | 1,124 | 2,779 |
Professional fees | 816 | 1,177 |
Other | 4,224 | 5,906 |
Total | $ 24,269 | $ 23,637 |
Cash, Cash Equivalents and Marketable Securities |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Marketable Securities | 4. Cash, Cash Equivalents and Marketable Securities A summary of cash, cash equivalents and
available-for-sale marketable securities held by the Company as of March 31, 2020 and December 31, 2019 is as follows (in thousands):
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Commitments and Contingencies |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 8 . Commitments and Contingencies The Company has a Research, Development and Commercialization Agreement with Hoffmann-La Roche (“Roche”) which grants the Company a sole and exclusive license to develop, use, sell, offer for sale and import any Licensed Product as defined by the agreement.The agreement requires future milestone payments to Roche. Remaining milestones under the agreement total $8 million and are earned by achieving specified objectives related to future regulatory approval in the United States and Europe of a product developed from resmetirom. A single-digit royalty payment range is based on net sales of products developed from resmetirom, subject to certain reductions. Except as described above, the Company has not achieved any additional product development or regulatory milestones and had no Licensed Product sales for the three months ended March 31, 2020 and 2019. The Company has entered into customary contractual arrangements and letters of intent in support of its Phase 3 clinical trials. |
Accrued Liabilities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities, Current [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Liabilities | Accrued liabilities as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands) :
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Organization, Business and Basis of Presentation |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization, Business and Basis of Presentation | 1. Organization, Business, and Basis of Presentation Organization and Business Madrigal Pharmaceuticals, Inc. (the “Company” or “Madrigal”) is a clinical-stage pharmaceutical company developing novel, high-quality, small-molecule drugs addressing major unmet needs in cardiovascular, metabolic, and liver diseases. The Company’s lead compound, MGL-3196 (resmetirom), is being advanced for non-alcoholic steatohepatitis (“NASH”), a liver disease that commonly affects people with metabolic diseases such as obesity and diabetes, and non-alcoholic fatty liver disease (“NAFLD”). The Company initiated two Phase 3 studies of resmetirom in NASH in 2019. The Company previously completed Phase 2 studies of resmetirom in NASH in May of 2018 and Heterozygous Familial Hypercholesterolemia in February of 2018.Madrigal was originally incorporated as a private company (“Private Madrigal”) on August 19, 2011 and operations commenced in September 2011. On July 22, 2016, Private Madrigal completed a reverse merger (the “Merger”) into Synta Pharmaceuticals Corp. (“Synta”). Upon the consummation of the Merger, the historical financial statements of Private Madrigal became the Company’s historical financial statements. Basis of Presentation Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by GAAP for complete annual financial statements. However, we believe that the disclosures included in these financial statements are adequate to make the information presented not misleading. The unaudited condensed financial statements, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of such interim results. The interim results are not necessarily indicative of the results that we will have for the full year ending December 31, 2020 or any subsequent period. These unaudited condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2019. |
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Operating expenses: | ||
Research and development | $ 33,400 | $ 12,373 |
General and administrative | 4,605 | 5,746 |
Total operating expenses | 38,005 | 18,119 |
Loss from operations | (38,005) | (18,119) |
Interest income | 1,870 | 3,039 |
Net loss | $ (36,135) | $ (15,080) |
Net loss per common share: | ||
Basic and diluted net loss per common share (in dollars per share) | $ (2.34) | $ (0.98) |
Basic and diluted weighted average number of common shares outstanding | 15,429,154 | 15,364,465 |
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Liquidity and Uncertainties (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
Dec. 31, 2019 |
|
Liquidity and Uncertainties | |||
Net loss | $ 36,135 | $ 15,080 | |
Accumulated deficit | $ 259,355 | $ 223,220 |
Stockholders' Equity - Preferred Stock (Details) |
1 Months Ended | ||
---|---|---|---|
Jun. 30, 2017
Vote
$ / shares
shares
|
Mar. 31, 2020
$ / shares
|
Dec. 31, 2019
$ / shares
|
|
Stockholders' Equity (Deficit) | |||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | |
Series A Convertible Preferred Stock | |||
Stockholders' Equity (Deficit) | |||
Preferred stock, par value (in dollars per share) | $ 0.0001 | ||
Preferred stock conversion ratio | shares | 1 | ||
Preferred shares number voting rights | Vote | 0 |
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