Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) Q1 2024 Earnings Call Transcript

Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) Q1 2024 Earnings Call Transcript May 7, 2024

Madrigal Pharmaceuticals, Inc. misses on earnings expectations. Reported EPS is $-7.38 EPS, expectations were $-6.06. MDGL isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and thank you for standing by. Welcome to Madrigal Pharmaceuticals First Quarter 2024 Earnings Conference Call. [Operator Instructions]. As a reminder, today’s conference is being recorded. I would now like to introduce Ms. Tina Ventura, Chief Investor Relations Officer. Please go ahead.

Tina Ventura: Thank you, Lisa. Good morning, everyone, and thank you for joining us to discuss Madrigal’s first quarter 2024 earnings call. We issued a press release this morning. There’s also a supplementary slide deck that accompanies this webcast and that will post immediately following the call on the Investor Relations section of our website. On the call with me today is Bill Sibold, Chief Executive Officer; and Mardi Dier, Chief Financial Officer. They’ll provide prepared remarks, and then we’ll take your questions. We’re shooting to keep today’s call to about 45 minutes. Please note we’ll be making certain forward-looking statements today. We refer you to our SEC filings for a discussion of the risks that may cause actual results to differ from the forward-looking statements. With that, I will now turn the call over to Bill.

Bill Sibold: Well, thanks, Tina. Good morning, and thanks to everyone for joining the call today. Before we begin, I wanted to take a moment to acknowledge Dr. Stephen Harrison, who passed away at the end of April. Becky and I attended his celebration of life last week. Stephen was a leader in the field and a great partner with Madrigal as our principal investigator for the MAESTRO-NASH trial. He worked closely with Becky and had the same tenacity and determination to bring Rezdiffra through clinical development and ultimately FDA approval as the first medicine approved for NASH. We’re grateful for his years of dedication that advance this field and our thoughts go out to his family, friends and colleagues. I know that many of you listening to our call today know Stephen well.

I’ll now move to our earnings call and an update on the business. We are off to a terrific start in 2024 and have made substantial progress against our goal to establish Madrigal as the clear leader in NASH. We achieved U.S. FDA approval on March 14, this followed the landmark publication of our Phase III trial in the New England Journal of Medicine. Following approval, our field teams were deployed and magical patient support program was up and running. In April, we started shipping product to our specialty pharmacy network and most importantly, patients started receiving Rezdiffra. From a supply perspective, we are confident in our ability to fully meet demand. As we work to expand our leading position in NASH, we’re also focused on maximizing the value and future growth of Rezdiffra.

To that end, so far this year, we submitted Rezdiffra for approval in Europe our MAA was validated and we expect a decision in the first half of 2025. We continue to advance the MAESTRO-NASH outcomes trial in F2/F3 patients and we have the potential to provide first in disease outcomes data years ahead of others. We continue to enroll our outcomes trial in NASH patients with cirrhosis to expand the eligible patient population, which has the potential to double the Rezdiffra opportunity. And finally, we raised $690 million in gross proceeds from our public offering. As of March 31, we had $1.1 billion in cash on our balance sheet, enabling us to fully resource the launch. So we’ve accomplished a great deal through the first quarter of this year and are laser focused on a successful U.S. launch of Rezdiffra.

You’ve heard my enthusiasm since I joined Madrigal about this opportunity, the clear unmet need, the product profile and the strong label. And my reason to believe has only been reinforced with the launch. I’ve been out in the field since approval engaging with the community and the feedback has been overwhelmingly positive. My sample size isn’t small. I’ve met with more than 100 prescribers at their offices in the field with our reps at our speaker training and at conferences. And as I think back on the launches that I’ve led in my career, I haven’t seen this level of anticipation for any new drug launch that I’ve been part of. I’m more confident today that Rezdiffra will be a significant success for Madrigal and especially for the patients that have been waiting for this therapy.

Much of the positive feedback has been about the Rezdiffra product profile. On Slide 4, as we discussed on our approval call, whereas Rezdiffra has the best case label that positions it as a foundational therapy in NASH. We have a great indication statement. Rezdiffra is indicated in NASH patients with moderate to advanced fibrosis, exactly the patients we studied in our trials. There is no biopsy requirements. It’s a liver-directed oral once-daily pill with simple weight-based dosing. And there are no contraindications no box warning and no monitoring requirements beyond standard of care. We have the enviable position of being the first to market in NASH, which we believe will give us a strong and sustainable competitive advantage. First-to-market medicines usually achieve and maintain higher market share versus subsequent entrants.

We intend to take full advantage of this opportunity, positioning ourselves for long-term leadership. As we’re first to market with the product profile that’s incredibly strong as you can see on Slide 5. It’s a liver-directed medicine that has set a high bar for efficacy. The only medicine to achieve statistically significant results on both endpoints in Phase III, NASH resolution and fibrosis improvement. Importantly, Rezdiffra stops or improves fibrosis in more than 80% of patients after only 2 weeks or 1 year of therapy. It’s well tolerated with safety data in more than 2,000 patients. And we’ve resourced to launch the right way to build toward our aspirations for peak sales. So while Madrigal, the company might be launching its first ever medicine, our commercial and medical leaders are veterans.

Each has more than 25 years of industry experience and have launched dozens of blockbuster medicines. Our field team averages nearly 20 years of experience with strong hepatologists and gastroenterologists relationships. We have the team, the talent and the resources to make this launch a success. With this product profile and first-to-market advantage as seen on Slide 6, we believe Rezdiffra will be positioned as the foundational therapy for NASH patients F2/F3 fibrosis, now as the only FDA-approved medicine for NASH and for many years to come. The unmet need is significant, and it’s urgent. There are 315,000 F2/F3 patients diagnosed today under care of the specialists we are calling on who need a liver-directed, well-tolerated therapy like Rezdiffra that will stop or reverse their disease.

These patients are on the cusp of cirrhosis are at a 10 to 17x higher risk of liver-related mortality and don’t have time to wait. Our trial in F4 patients with well-compensated cirrhosis is underway to expand Rezdiffra’s indication to even more severe patients. Let’s move to the Rezdiffra launch progress on Slide 7. As we discussed on our approval call in March, over the first 12 months of launch, we are focused on wiring the system. With a first-in-disease medicine, it’s about spending the necessary time upfront with physicians and their office staff to create the care pathways for patients. This work builds the strong foundation needed to support the future volume of prescriptions we expect. We are making great progress. Rezdiffra has been added to the compendia and subsequently to many electronic medical record systems so that it can be more efficiently prescribed.

Our field team was trained on the Rezdiffra label post approval, enabling them to start calling on their target positions. Our teams are educating providers on the disease and Rezdiffra as well as the operational aspects of prescribing and ensuring access for patients. This often takes additional calls upfront to familiarize all key staff at the practice with these details and address their questions. This process will become more and more established as we progress through the year, particularly as commercial payers continue to make Rezdiffra coverage decisions and as physician offices become educated on those payer requirements. And we expect full Medicare coverage in place beginning early next year, which is another step towards having patients flow more efficiently through the offices.

So to evaluate our early progress, we are measuring a number of leading indicators as seen on Slide 8. It’s about targeting the right doctors with the right level of frequency to build the breadth and depth of prescribers needed to achieve our aspirations. The metrics so far are very encouraging, especially since we’re less than a month out from when product was shipped. We are driving breadth and depth. Our sales teams has already reached more than 80% of their top position targets. There is remarkable interest and our reps are getting access to physicians that typically don’t see reps. They are engaging with the staff to ensure that many of those wiring the system activities I just discussed are completed to allow an office to more efficiently prescribe Rezdiffra.

And as payers increase their coverage of Rezdiffra, and physician offices build their understanding of the coverage requirements, the volume and pace of prescriptions will increase. We are targeting the right physicians, 75% of prescriptions to date are coming from our top targets. We are on our efforts from the top down as well as from the bottom up. Wiring the system extends beyond individual practices to the large health systems, the IDNs, GI super groups, the really large systems across the country. We have an experienced team that has strong relationships across these key accounts, and they are all interested in establishing care pathways for NASH patients that are at various stages of implementation. This means that a physician through their EMR system has a clear guideline to identify, diagnose and treat their NASH patients with moderate to advanced fibrosis.

Importantly, these pathways filter down to the associated individual practices, another proof point that not just at a practice level, but at a system level, the launch is progressing well. We are educating health care providers on Rezdiffra to drive clinical conviction for the medicine. We sell speaker training meetings, national broadcast, symposia conferences and local programs across the country. There is phenomenal interest to attend these meetings. More than 1,200 prescribers attended the national broadcast, a very high turnout compared to industry benchmarks. We are engaging with payers. To that end, coverage is in place for 30% of commercial lives, tracking right in line with our goal to achieve 80% by year-end. Our reimbursement team continues to have active dialogue with payers with a focus on the comprehensive Rezdiffra clinical data set and the use of noninvasive tests or NITs as a means for patient identification and monitoring.

We expect many of the larger plans to begin to cover Rezdiffra in the months ahead as they work through the typical P&T committee processes and determined prior authorization criteria. The criteria we’re discussing with payers and what we are seeing in early coverage are generally aligned with our label. We also expect medical societies, such as the AASLD to publish updated NASH treatment guidelines that will include Rezdiffra and help reinforce for both physicians and payers how and when to use the medicine. Of course, we know you’re interested in patient numbers, and we’ll share more details on patients on our next quarterly call. What we’ve seen to date is really encouraging. Patient growth is accelerating, which correlates well with the leading indicators we just described and the progress our team is making as we continue to call on more prescribers, spend time with the staff and activate more accounts.

The positive momentum we’re seeing is also confirmed by market research as noted on Slide 9. 90% of physicians familiar with Rezdiffra believe it offers high clinical utility. More than 80% are enthusiastic about Rezdiffra’s final label and cited its efficacy, no biopsy requirement and simple dosing as the top 3 reasons. And in our most recent wave of research with our top physician targets, 78% of respondents said they have prescribed or intend to prescribe Rezdiffra within the next 1 to 2 months. Spherix, an independent market research firm reported similar findings with more than 75% of providers expecting to prescribe Rezdiffra within 6 months of launch. We’re engaging diagnosed patients in a very targeted way as well. Our direct-to-patient disease education campaign on Slide 10 has been underway for a little over a year now to provide patients with NASH information and resources.

Post approval, the team is now focused on activating those patients to ask their doctor about Rezdiffra. Patients are engaged and 50% of those who registered on the site have downloaded a doctor discussion guide. In addition to the U.S. launch of Rezdiffra, we are making progress in other areas that will extend our leadership, including maintaining our scientific presence at key medical meetings. On Slide 11, you can see we are building on our strong HEOR foundation with additional publications. At the recent AMCP scientific meeting, we received recognition for our abstract that showed NASH patients were progressing even more rapidly than we thought to advance liver states like cirrhosis, liver cancer, liver transplant and death. In fact, of those that progressed, 80% progressed directly to decompensated cirrhosis instead of cirrhosis as one would expect.

The results are particularly impactful because this data is from an Optum database, which includes commercially insured patients that are likely receiving better care and are of higher socioeconomic status compared to NASH patients and other care settings. The annual cost per patient that progressed was twofold higher when compared to those that didn’t with the cost gap increasing over time. The conclusion, therapies like Rezdiffra that helps stop or improve fibrosis may help alleviate the financial burden of NASH. We will also have a strong presence at the upcoming DDW meeting in D.C. later this month and at the EASL Congress in Milan in June, where 11 abstracts have been accepted. As I referenced at the start of the call, we look to further differentiate and expand the Rezdiffra label with data from the outcomes portion of our pivotal Phase III MAESTRO-NASH trial and our MAESTRO-NASH outcomes trial in well-compensated cirrhosis for F4 patients.

As noted on Slide 12, these studies will allow us to generate outcomes data, years in advance of any potential competitor outcomes data, expand our indication and further extend our leadership in NASH. MAESTRO-NASH outcomes is an event-driven trial enrolling approximately 700 F4 patients with a composite primary endpoint that assesses conversion to decompensated cirrhosis. There is an even higher urgency to treat F4 patients because of their elevated risk of developing serious and costly liver-related complications. Data from this study is anticipated in the 2026, 2027 time frame, and an indication in the F4 patient population could double the opportunity for Rezdiffra in the U.S. The potential for MAESTRO-NASH outcomes trial is supported by data we’ve shown to date in 180 patients with compensated NASH cirrhosis studied in the Phase III MAESTRO-NAFLD-1 and MAESTRO-NAFLD-OLE trials.

Before passing it over to Mardi to cover the financials, let me wrap up with a brief summary of the launch. It’s really remarkable how much we’ve accomplished in such a short period of time. We were able to achieve FDA approval in March with a best-case label and a first-to-market medicine. We had product in the channel in April and our teams are out in the field executing. The feedback we’re hearing from our customers is overwhelmingly positive. There is high interest. They have the patients and they are prescribing Rezdiffra. I’m really encouraged by the early progress so far and even more confident today in the blockbuster potential of this medicine. I’ll now turn the call over to Mardi.

Mardi Dier: Thank you, Bill. The press release we issued earlier today contains our full financial results, so I’ll provide a few highlights for the first quarter of 2024. As we discussed on the launch call, initial Rezdiffra shipments to our specialty distribution network began in April. So we recorded no Rezdiffra revenue for the first quarter. As Bill discussed, there is good momentum with the launch, and given the need to wire the system early on and our expectation for it to take 60 days on average to fill a prescription through the first 6 months of launch, we expect revenue to be weighted to the back half of the year with modest sales in the second quarter. We are still in the early days of the Rezdiffra launch, and we look forward to sharing more about our progress in the coming quarters.

R&D expenses for the first quarter 2024 were $71 million compared to $62 million for the first quarter of 2023. This increase was related to timing of manufacturing, headcount growth, activities in our [indiscernible] group and stock compensation expense. We would anticipate a relatively steady level of R&D expense for the rest of the year. SG&A expenses were $81 million compared to $16 million for the first quarter of 2023 and an increase sequentially from $47 million in the fourth quarter of 2023. This significant increase is as expected due to the scale-up of our commercial operations in anticipation of the March FDA approval Rezdiffra. We hired the field team in January and February, so the second quarter will be more reflective of a full quarter of spend.

Moving to our balance sheet. We announced an oversubscribed public offering that grow $690 million for the company and further strengthen our financial position. Our net cash balance as of March 31, 2024, stood at $1.1 billion. Note that the green shoot from the offering was executed in early April and therefore, an additional $86 million in net cash will be recognized in the second quarter. We are fully resourced to support a successful multiyear launch of Rezdiffra. Now I’ll turn the call back over to Tina.

Tina Ventura: Thanks, Mardi. Let’s move into the Q&A portion of the call. We’d ask that you limit your questions to 1 as our goal is to wrap up the call by 8:45. So Lisa, please provide instructions for the Q&A session.

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Q&A Session

Operator: [Operator Instructions]. Our first question today will be coming from Yasmeen Rahimi of Piper Sandler.

Yasmeen Rahimi : Thank you for the update. And maybe before I go with my question, I want to express my sincere condolences to see you and the entire team of Madrigal for Dr. Stephen Harrison, who will be greatly miss of what he has done for the space. On my question, I guess, team, it would be wonderful if you could maybe highlight whether there is heterogeneity in the payers’ discussions or if it seems that majority of the payers are aligned in terms of their requirements of just simple blood-based tests. If you could just talk about how many payers you have spoken with, the heterogeneity, et cetera, and I’ll walk back into the queue.

Bill Sibold: Thanks for the question. Thanks for the comments about Stephen. Look, regarding the payer discussions, first of all, I think it’s still really early. We’re out having conversations. Remember, we’ve been having conversations for a year with the payers. And I can tell you some of the themes. Some of the themes are, first of all, from a clinical perspective, there is tremendous interest in Rezdiffra in NASH. People are aware of the unmet need. They’re very aware the payers are on the cost that NASH patients have to bound. So great interest in learning about the product, learning about our outcomes, just learning about our approach. And the reason why I say the approach, what’s resonated very well with payers is the fact that we’re focusing on 315,000 patients.

We are focused on those that are diagnosed that are in the office of specials, which is also important for them. So that has been the starting point of all of our conversations. And whether it be a regional or a national player, we’re out meeting with them. P&T committee meetings have been scheduled. We’re getting some reads early on as you heard in the prepared remarks, we’re at about 30% of covered lives now commercial covered lives. Well on the way to our target of 80% by the year-end. And I would say that at this point, there’s no real surprises that we’re having in these conversations, especially with the bigger with the bigger plans. We expect to get this resolved. Patients are still getting drug. That’s really the great thing. While this is going on, patients are moving through.

We’re getting prescriptions. Prior authorizations are required, medical necessity, in some cases, right where we are right now is where I would expect it to be. I’m happy with the 30%. We’re well on the way to be 80%. There’s always going to be some outliers that I talked about even before we launched. We’re seeing a little bit of that, but that’s certainly by no means the trend.

Operator: And our next question is coming from Eli Merle of UBS.

Eli Merle : You mentioned that 75% of prescriptions have been written by top targets. Can you give us any color on what proportion of your top physician targets have written a prescription. And then just in terms of the prescriptions that have been written, could you give us any color on physician feedback on the medical exception process and are most physicians going through medical exceptions at this plate when they prescribe Rezdiffra.

Bill Sibold: Thanks, Eli. So on the latter, I would say that most are going through medical exceptions at this point. That’s completely what we would expect. In fact, if any aren’t going through medical exception, that would be more of a surprise. Because there just isn’t the established pathways yet. So just to give you the lay out the prescribers and where we’re seeing, where we’re focusing and where we’re seeing the prescriptions. So the universe of physicians is about 14,000. Our target physicians are about 6,000 of that. And that’s where we’ve said that we’ve seen — we’ve had great success in seeing those physicians, the reps have been out and had interactions, sometimes a couple or 3 interactions with those high prescribers.

And this is exactly what you’d expect in any launch is that those target physicians should drive the majority of your prescription. In this case, we’re really encouraged by the 75% of the prescriptions coming from that group. We haven’t said how many have prescribed anything yet, but these are all some stats as we get further along into the launch. I mean, again, we’ve only had product out in the market for less than a month. It’s still really, really early and difficult to project from such a short period of time. But all leading indicators. And that’s why we went with the leading indicators are very supportive of things going really, really well for us.

Operator: And our next question will be coming from Liisa Bayko of Evercore.

Liisa Bayko: I wanted to ask about the VA along the lines of an earlier question about heterogeneity here I wanted to understand their requirement for a liver biopsy. And can you talk about how you interpret that? What you can do to lift that? And also what percentage of the 315,000 patients are part of the VA.

Bill Sibold: Thanks for the question, Liisa. And look, the VA is pretty particular, right, in that if you’re going to launch a product inside of a budget year, it’s difficult because they have a fixed budget. And that requires congressional approval every year. So any changes to the budget are actually kind of problematic for them. So look, we are disappointed in the decision. It certainly isn’t great for patients. It certainly is countered to any guideline that’s been written anywhere, that says the use of NITs is adequate. And that’s certainly what we believe the field is. So however, the facts are the facts, that’s where we are at this point. Now as we look forward to ’25, then it’s a new budget year, we’re going to be working with the VA to have that corrected.

We think that certainly the guidelines and the medical community. And certainly, the patient community is on our side to have that happen. But this is just one of those things, as I said, the 12 months that you’re wiring the system, sometimes you have to rewire portions of it. And in this case, this is one of those examples where just based on a number of those reasons, we’re — we find — that’s the decision that they made.

Mardi Dier: Sorry, Lisa, just jumping in, in terms of the number of patients that VA covers, it’s very small. So when we do a product mix, and we have that 10% that’s Medicaid and VA patients, it’s in the single digit. So it’s not going to be a large impact at this point, particularly in ’24.

Operator: Our next question is coming from Jay Olson of Oppenheimer.

Jay Olson: Congrats on the launch progress. Can you just talk about some of the work you’re doing to prepare for launch in the EU and also how — what your strategy is for launching in the EU and how that may impact your operating expenses?