Madrigal Pharmaceuticals, Inc. (MDGL) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us on the last day of our conference. I'm Andrea Tan, biotech analyst at Goldman Sachs. And I'm pleased to have with us the team from Madrigal, Paul Friedman, CEO; Becky Taub, CMO and President of R&D; Remy Sukhija, CCO; and newly appointed CFO, Alex Howarth. With that, maybe, Paul, I'll start with you and turn it over for opening remarks.

Sure. Andrea, we're pleased to be here. Appreciate your recent positive coverage of Madrigal. For those of you who may not be familiar with Madrigal, before beginning the Q&A, we have a few high-level slides to share as a brief introduction to our company and resmetirom, our liver-directed thyroid receptor beta agonist. Can we see Slide 2, please? Okay. So this is our fine print regarding forward-looking statements, and you can peruse it at your leisure. Next slide. To begin, Madrigal has an experienced management team with proven track records in bringing multiple drugs through discovery, development and onto the market. Becky is widely recognized as a leading expert in liver disease in NASH. I was CEO of Incyte, where there and before that at Merck and at Dupont, led the development of multiple commercially successful novel therapeutics. And Remy, our Chief Scientific Officer, has launched more than a dozen drugs. So we're quite confident we have the scientific clinical and commercial resources to bring resmetirom to market and emerge as a leader in the treatment of NASH. And there certainly is a significant unmet need for a safe and effective treatment for this clinical situation. No drug has made it over the finish line to approval yet. Resmetirom, a once-daily oral therapy is well into Phase III studies and has first to market potential. Our Phase II clinical trial results demonstrated compelling efficacy and an attractive safety profile, and the current extensive Phase III program includes 2 trials MAESTRO-NAFLD-1 and MAESTRO-NASH, which Becky will shortly describe. We're confident that the Phase III program is well powered and of sufficient duration to determine therapeutic benefit and statistical significance of our primary and key secondary endpoints as well as to provide an adequate safety database. We're targeting an NDA submission for the second half of next year. And finally, our plan is to commercialize resmetirom on our own in the U.S. and secure a partner or partners for commercializing ex U.S. Next slide, please. So this is a busy slide, but just bear with me. On the left side are depictions of macro and microscopic degrees of what is nonalcoholic fatty liver disease, which covers the spectrum of simple fatty liver through NASH cirrhosis. And what you see is from simple fatty liver, you can have different degrees of fibrosis and inflammation. And on biopsy, the designations of levels of fibrosis, microscopically or F0, where there's minimal to no fibrosis through F4, which is frank cirrhosis of the liver. In addition to scar tissue being laid down due to the harmful lipotoxic fat that hepatocytes have to deal with, you see ongoing inflammation, and at the bottom, you see hepatocytes that have what's called a ballooning characteristic on the microscope, which is indicative of pre-apoptotic and apototic hepatocyte situation. On the right side, just to repeat that NAFLD results from the accumulation of excessive fat unrelated to alcohol use. Some patients with NAFLD have NASH, which is nonalcoholic steatohepatitis. And steatohepatitis is the key word because it is a hepatitis with final common pathologic pathway on biopsy, looking -- although it has certain individual features, it has a commonality with other hepatitides like alcoholic hepatitis and viral hepatitis. And as you know, if you stop drinking, and/or you're treated with antivirals to cure hepatitis C virus, the inflammation goes away, the hepatocytes become healthy and the liver can regenerate, including a decrease or elimination of fibrosis. And that's the same situation here where fat -- lipotoxic fat is the main driver of the hepatitis. A lot of people have NAFLD in the western world with the high incidence of obesity, metabolic syndrome and Type 2 diabetes, estimated at 25% to 30%. Somewhere between 3% and 12% actually have NASH. And NASH with significant fibrosis F2 or F3 on biopsy, is felt to be prevalent at greater than 5 million people in the United States. NAFLD leads to an increased risk of morbidity and mortality. As you might expect, with Type 2 diabetes, obesity and metabolic syndrome, the actual leading cause of morbidity and mortality in this population is cardiovascular risk and disease. And it's interesting because resmetirom, in addition to removing a significant amount of fat from the liver, by itself, an individual atherogenic risk also lowers clinically significantly LDL-cholesterol triglycerides as well as Lp(a). There are, of course, liver-related events as you move through the spectrum on the left side of the slide, and it should be noted that over 10% of advanced NASH patients will progress to frank cirrhosis over a 15-year period. That's a lot of people when you consider the number of people with NASH in the United States. It also should be noted that it either is or soon will be -- NASH will soon will be the most common reason for requirement for a liver transplant. And with that, I'll turn the podium over to Remy.

Thank you, Paul. Next slide, please. So there is a ton of information out there around NASH, the disease, how the physicians look at it, how to think about it. To set up the context, and what I'm going to talk to you about, there's 2 things to remember. One, we're talking about for our commercial planning purposes, the patient population that Paul described, which is NASH with significant liver fibrosis. So that's F2, F3 patient population, F2, F3 stage patient population. So that is the population we have in mind as we are studying it in our pivotal trials. And secondly, thinking around NASH, from a commercial perspective and dynamics in the market is very -- when you think about the overall sort of physician population, we are laser-focused on -- when it comes to our commercial planning, to the physicians, what we're calling NASH specialists. So physicians that are HEPs, GIs, select endos that even today, without lack of any sort of FDA-approved therapies, are managing at least 20 to 30 NASH with liver fibrosis patients. So these are the physicians that are living the NASH disease today where their patients are managing it. So some of our insights, some of our plans may be a bit surprising for you relative to what you've been hearing in the public domain. But our proprietary information is based on a different look at the commercial landscape. So some of the highlights here. We do believe that NASH with significant liver fibrosis therapeutic category is highly attractive. And why do we think that? When we think about the patient population, what is the total size, Paul mentioned the best sort of prevalence estimates are on 5 million people potentially in the U.S. And it's also understood based on published data, around 11% of those patients, potential patients or people living with that disease are already identified, and they've been identified using noninvasive techniques. And we've looked at insurance claims data, and it corroborates this level of patients being available for drugs as they enter the market. So a long way of saying that as we think about resmetirom entering the market, based on Phase III program, there's going to be a few hundred thousand patients that physicians can look at and decide whether they're appropriate for treatment with resmetirom when it's approved, assuming that -- assuming there's an approval. So that's very positive when we think about launch planning. There's a solid landing ground. And when we talk to these physicians about unmet needs in this patient population, they perceive it to be quite high. To give you an idea, there are no treatments for this patient population right now, but they have about 1/4 of those patients on some sort of off-label treatment to just do something for their NASH and liver fibrosis, significant liver fibrosis. They are not satisfied. These physicians are not satisfied with these treatments, but they want to do something for these patients. As with any other category, we expect that the diagnosis, treatment rates for NASH will increase over time, potentially matched Type 2 diabetes, hyperlipidemia, dyslipidemia, 60%, 80% level in the coming years. But we feel that when it comes to the introduction of resmetirom assuming approval, it's going to have a very solid landing place, which gives us a lot of confidence in the market attractiveness. Next slide, please. So we have a lot of confidence in what we will read out in Phase III relative to resmetirom. And we put what we are considering the target profile of resmetirom in front of the NASH specialists. So physicians who treat NASH with significant fibrosis patients today, at least 20 or 30 of them per month. And we believe that based on Phase III data, we have confidence that resmetirom is going to show a depth of liver efficacy. So what does that mean? We expect it to resolve the underlying disease of NASH. We expect it to improve fibrosis, we expect that it's going to have a beneficial effect on LDL. The favorable safety profile based on data is very attractive. And of course, it's once-a-day oral. So when you put it all together, and we put that in front of who we expect to be the initial treaters of NASH with FDA approved drugs, they're finding that profile very attractive. So I've had the opportunity being in our business for about 27 years, been involved in 12 launches in our industry, I've never seen what's on the left side of the screen, which is the clinical utility or the overall utility grade of extremely high, about 91% of the physicians, the type of physicians we effect to target. And these physicians have a very high level of understanding of NASH. They understand the pathophysiology. They understand the role of resolving the underlying disease of NASH to improve fibrosis to get better liver outcomes over time. As a matter of fact, when asked directly about surrogate endpoints of fibrosis improvement NASH resolution, they rate them about the same, if anything, favoring NASH resolution. And lastly, I would say, before I turn it over to Becky, these physicians when asked about this profile and what their intent to prescribe may be, assuming resmetirom actual label and Phase III data is in line with our profile that we're projecting, nearly half of them said in this research that they will prescribe it right away in vast majority of the NASH with significant fibrosis patients, F2, F3 stage patients. And that's -- and significant in their mind, when asked, presenting from 60% to 80% of their patient population that fits the patients they see that are in line with the patients that were studied. And this research, I've been talking to you about or these insights are based on research with around 1,000 HEPs, GIs and endos. So we think it's a good book of work to give us confidence in what we are perceiving at this point. Becky?

Yes. So thanks. So this slide, I'm going to go through very quickly. And you've heard that Madrigal sourced resmetirom had a successful Phase II NASH study. The primary endpoint liver fat reduction on MRI-PDFF was achieved. And what you see in the slide and the figure on the left is that the higher doses, 80 to 100 milligrams a day, which are the Phase III doses, achieves levels of liver fat reduction that was readily seen within a few weeks, and predicted the Phase III endpoint achievement, resolution of NASH and fibrosis improvement on biopsy. The other important parameters established in this study and continued in the Phase III is the use of noninvasive monitoring of patient benefits. And we'll talk about that in -- relative to the Phase III, but there are a variety of different imaging and biomarker effects of resmetirom that can be used to show patient response. Next slide. This shows the overall design of the 2 Phase III studies, MAESTRO-NASH and MAESTRO-NAFLD. They're both 52-week Phase III trials, and they provide a comprehensive data set in more than 2,000 NASH patients to support the efficacy and safety of resmetirom, and that's consistent with regulatory requirements to support accelerated approval of resmetirom for the treatments of patients with NASH and significant liver fibrosis. Both trials employ noninvasive readouts that provide a framework for monitoring patients treatment response to resmetirom. And you can see here on this diagram that we're demonstrating in addition to the liver biopsy in MAESTRO-NASH, the serial liver biopsy, we were also showing noninvasive measures of efficacy, such as MRI-PDFF, Fibroscan, serum biomarkers for fibrosis and important cardiovascular benefits, such as LDL cholesterol lowering. The open-label arm of MAESTRO-NAFLD provides ongoing data readouts, supporting the safety and potential benefits of resmetirom treatment. And those data will be discussed at the upcoming EASL conference. And we'll talk about our data readouts on the next slide. So this shows you the important upcoming data events in MAESTRO-NAFLD, which is the real-life NASH study in more than 1,200 patients. As mentioned, we'll be presenting data from noncirrhotic NASH patients at 52 weeks in from the open-label arm and also some initial open-label arm data from NASH cirrhotic patients. We will be reading out by the end of 2021, the top line data for the double blind, placebo-controlled arms of the study. And in total, as I mentioned, this is about 1,200 patients, including the open-label and blinded arms. Then MAESTRO-NASH, which is a serial liver biopsy study, has gotten to the end of enrollment for the portion of the study that is supporting the accelerated approval, and that will be reading out 52 weeks, a little over 52 weeks from now. And that study will establish the primary endpoint of NASH resolution, the key secondary endpoints of reduction in liver fibrosis and LDL cholesterol lowering. MAESTRO-NAFLD, in terms of its endpoints, it is a primary safety study to support the safety database, but also has key secondary endpoints that we believe will result in additional data in the drug label, such as lipid-lowering, PDFF lowering or liver fat reduction and potentially other endpoints of that study. So just the key messages, just to finish off here, MAESTRO-NAFLD will support safety, tolerability and inform reductions in fibrosis by elastography methods, MRE and Fibroscan and confirm endpoints from Phase II such as PDFF, liver enzymes and lipid reduction. And this data will also provide guidance to treating physicians as how best to identify and monitor patients on resmetirom in real-world practice. So we're providing guidance on identification of patients with NASH and following those patients. And in addition, the data secondary endpoints from MAESTRO-NASH will also help support the non-invasive patient identification and monitoring at launch. So we'll stop there, and Andrea will follow-up with some questions.

Perfect. That was a really nice comprehensive overview. Maybe 1 question for the team to start here, just on the overall NASH space. Over the last couple of years, we have seen a number of setbacks as recently as a few weeks ago. You've been involved in this space now. What sets Madrigal apart? What sets resmetirom apart as you look to bringing this product forward?

Paul, you're on.

Sorry, I was saying Becky may want to add to what I'm going to say here. But I mean drugs fail for various reasons. I mean the most obvious are inadequate efficacy and/or they have an unsafety -- an unacceptable safety profile. But other types of things that bury a program are inadequate safety database. I suspect that's what has happened to date with Intercept to obtain regulatory approval. I mean poor study design like underpowering and the like. So in this space, I mean, we think there are a number of compounds in earlier development that could be interesting and they could be effective, but they haven't been put through their paces yet. By contrast, the compounds that have made it, all of them that have made it to later stages of development, all had one or more of the issues that I've mentioned. Now with resmetirom, on the other hand, as Becky pointed out, we're using the exact primary endpoint we used in Phase II and made NASH resolution with at least a 2-point reduction in NAS. And we made that endpoint, even though the Phase II study was a small study and in that study, about half the patients were on an active but not adequate dose of 60 milligrams a day. The Phase III has only 80 and 100 milligram arms. It's 10x larger than the Phase II, and it runs 3 months longer. So we have great confidence that we'll make this endpoint as well as the 2 key secondaries of LDL lowering and fibrosis improvement, where we use very conservative power calculations in designing the study size. And just the other characteristics of resmetirom that I think are important are -- it has a great safety profile. It should decrease cardiovascular risk, and we hopefully have that lipid data in the label. It's a once-a-day oral and with these 2 large studies, as Becky pointed out, using both 80 and 100 milligrams, we should have an adequate safety database.

Great. That's helpful. So maybe digging into that MAESTRO-NASH study and your expectations as you head into the pivotal data next year. Just help us understand how confident you are? And you've spoken about the Phase II data, how that does lend confidence, but if you could speak maybe more on the fibrosis endpoint and how much of a -- how important that is?

Yes. So the fibrosis endpoint, which is a 1 point reduction in fibrosis is a key secondary endpoint of our study, NASH resolution being the primary endpoint. And the other key secondary endpoint LDL-cholesterol lowering will be readily achieved by resmetirom. So the fibrosis reduction that we saw in Phase II, as we stated, we found that patients who were on the adequate dose of resmetirom and had at least a 30% reduction in liver fat had a high rate of NASH resolution and fibrosis reduction. So they achieved both endpoints. And we expect to see that same coincidence of the 2 endpoints achieved in Phase III. In fact, we showed that patients with that PDFF reduction achieved every endpoint -- reduced all components of NASH, including cyatosis, ballooning, inflammation and fibrosis. We also have very significant reductions in other measures of liver fibrosis, such as reduction in the Fibroscan, which is a measure of fibrosis stage. We showed reduction in MRE, which is even a more sophisticated imaging measure of liver fibrosis. We showed using a more advanced AI technology review of liver biopsies in Phase II that the liver fibrosis endpoint was achieved in Phase II. The biopsy itself was not powered to achieve the fibrosis endpoint in Phase II but as Paul said, at those same rates of fibrosis reduction that we observed in Phase II, the Phase III study is powered to show the fibrosis endpoint. So I think that that's an important point about the fibrosis reduction. But as Remy said, the world has changed a lot. It used to be that people were focused on the fibrosis endpoint. There were a bunch of studies in NASH that only focused on that. And that has changed. There's now a greater recognition that resolution of NASH and treatment of NASH and a treatment of the underlying hepatitis is really critical to improving the patient's health and ultimately, fibrosis is a response to liver inflammation. So if you treat the underlying disease, the fibrosis will either improve over time as the liver regenerates or even if it doesn't get worse, the patient is not going to get worse. They're not going to progress. So I think either way, we've got it covered. We expect to make both endpoints. And those are the data that we're relying on.

Perfect. Maybe one follow-up question on the fibrosis there and the biopsy endpoint. Just how are you thinking about the variability that is inherent to biopsies? And what steps are you taking to mitigate that?

As so I've talked about this a little bit. It does get fairly technical, but the biopsy is a very small snippet of the liver. And the main variability, when it comes to fibrosis, relates to the variability across the liver. It's not that pathologists disagree about the stage of fibrosis. There are some pretty good landmarks for measuring fibrosis so that a decent degree of concordance on fibrosis. And we showed this with our 2 central readers in Phase II. But what has been shown is that different areas of the liver, one area, maybe F1, another F2, another F3, another F4. And so that's where the variability is. And it's a fairly high number that can change your endpoint. And so -- and the powering of the endpoints. So in order to get -- overcome variability, you need to study more patients. And that's really what it comes down to. And we've seen some bad luck, I think, recently with that level of variability. I would also say that there's less variability as NASH gets more advanced. So the F3, you're going to see less variability. There's a lot more fibrosis in F3 than in F1 and F2. And we've also enrolled a preponderance of F3 in our MAESTRO-NASH study to get -- help get around that issue.

Great. And then as you think about NASH resolution, you are doing this 2-point reduction. Maybe just talk about that decision and how those discussions with the FDA have gone around that endpoint?

Yes. So the -- so first of all, the FDA always thought the endpoint was fine. There was never anything -- there was never any pushback at all, or questions or anything. They thought it was a more robust endpoint. And we noted early on, and I'd say, if anything other -- additional data has confirmed us that the NASH resolution when you start with a very low NAS, a low activity score. So when the so-called few balloon cells, Stage 1 or Grade 1 ballooning, what happens is that you can get so-called NASH resolution with simply a drop in ballooning from 1 to 0 and no other change on the biopsy. And we know that if you just section across the liver, and different slides from the same biopsy, you can have that happen just within a tiny little fragment. So ballooning by itself, 1 grade change in ballooning is a very small change. And you're really inviting variability with that endpoint because there are a significant number NASH patients in every study who have low-NAS at baseline. And so we made the endpoint more robust and that will help us reduce the variability and observe the resmetirom effect, treatment effect more reliably.

Perfect. So as you think about the data that you'll have at EASL in the next coming weeks, maybe help us understand what we'll see and provide some context just based off of what you were able to present last year?

Yes. So what we focused on for EASL. And obviously, I won't -- I'm not going to say today what the data are. But what we focus on for EASL is 2 updates and open-label arms of our MAESTRO-NAFLD study, and we also have a company presentation by 3 NASH experts. So the data that you asked about is -- it's an update of the noncirrhotic open-label arm, 100 milligrams in MAESTRO-NAFLD, focuses on their 52 week data. So these are patients enrolled in the open-label arm who have completed all 52 weeks. It's not the whole study, but it is a substantial number of completers. And what this allowed us to do was to look at the imaging that compared to baseline, the MRE, the Fibroscan, the MRI-PDFF. So these really critical parameters that can assess response as well, of course, other fibrosis markers, liver enzymes and things like that. I think it's going to be a convincing data set in terms of the response to resmetirom, both from an efficacy and a safety perspective. In cirrhosis patients we enrolled what's called [indiscernible] the patients who do not -- who have compensated cirrhosis, NASH cirrhosis. And this is a safety study, but of course, it also allows us to look to better characterize these patients using some sophisticated technology. We do the same MREs, MRI-PDFF, Fibroscans and biomarkers assessment in these patients. And I think that in itself is a really important and interesting data set and some early data on treatment effects of resmetirom in that patient population as well as safety.

Perfect. And then with the blinded data that is expected by the end of this year, how should we be thinking about that in terms of read-through to the MAESTRO-NASH trial? And how much confidence in terms of the noninvasive testing methods?

I think it's going to be quite similar in the sense of -- to what we're doing with the open-label arm of the study. However, we do have both Phase III doses. So we'll have 80 mg and 100 mg as well as placebo. So we'll have all the noninvasive readouts, and we'll get some sense on the doses as well. Now we know the drug is well tolerated at all the doses. And we'll get a sense about whether there's any difference, for example, between 80 mg and 100 mg in terms of the efficacy readouts as well. And we have shown from Phase II a tight connection between response on some of these imaging parameters, especially the MRI-PDFF in Phase II and the NASH endpoints. The reduction in fibrosis as well as NASH resolution.

Perfect. Remy, maybe changing over to the commercialization and your thoughts about how to create this NASH therapeutics market. What steps are you working on right now? What's going to be done later when the are data available?

Yes. Yes, really good question. So let's talk about the starting point as well. So to have commercial success, you have to have the following 3 things, no matter what you're trying to do, no matter what category, no matter what product, which is you've got to have a sense of unmet need out there with your customer type, the physicians you expect to target for the treatment. And we've got that in our situation. We discussed it. You have to have a emerging profile, that's highly attractive. We talked about how -- about half of the physicians we expect to target are those kinds of physicians, are already finding reasons to prescribe the drug. If it meets -- the profile, is in line with Phase III data and approved label are in line with our profile, they expect to prescribe that day 1 for a vast major to their patients. And then we haven't talked about this a lot yet, which is the payer feedback. So payer feedback has been that they see a clear unmet need to treat NASH with significant fibrosis F2, F3 population. They see less need to treat earlier stage patients with therapeutics. But for the patients that we are studying, there's a clear realization among payers. They realize, "Hey, listen, these patients are being identified with noninvasives. And if at all possible, this should be identified with noninvasive tools when the FDA-approved drugs are available." And they've also mentioned that in our research that they're going to find it hard not to cover the first approved NASH drugs considering the unmet need, again barring any sort of ridiculous sort of pricing methodologies by manufacturers. So we have that going. That is needed to start with. So your real question is, what are you going to do to build upon it, right? So there's a whole host of things we have to do to help create this market. I mean, we're quite realistic about this. So in the interest of time, I'll mention maybe one thing per key stakeholder. When it comes to ACPs. Becky mentioned this. Our MAESTRO-NAFLD-1, MAESTRO-NASH trials, I mean they're going to be treasure troves of noninvasive data. We likely, as a company, have more noninvasive data in NASH significant fibrosis than anybody else out there. And that data is going to be instrumental in us working with KOLs to help define how these patients should be identified, treated, monitored with NASH drugs. That's the work we have to do. We feel up to it. I think we can -- or we think we can. Secondly, for patients, these patients are dealing with a lot of things. And they're dealing with a lot of co-morbidities. So our job there is now create the NASH market is to help them understand the value of liver health. So there's work to be done there with patient advocates. Lastly, on the payer side, they are all about what's in the label. We talk about pricing and things of that sort. What's also very primary for them is who are the patients in their covered plans in their patient populations and their members, they should identify and have treated with drugs like resmetirom. And that's the work we have to do with them.

Perfect. Maybe a follow-up there. So you said at the 50% or almost 50% of responders who said they would immediately put their patients on resmetirom, what do you think the other half of the responders are waiting to see -- to really be convinced to use this drug?

Yes. Yes. I mean, you find this in pretty much any sort of a product launch, which is you have a portion of physicians that are early adopters. It's usually 10% to 15%, 20%, right? We're seeing 50%, and we're using the profile that we're using. The ones that are not saying they're going to prescribe day 1, I mean, the answers that you would expect they want to see trial by "what they consider more specialized physicians". That's something that endos are saying, "Listen, I want to treat the liver, but why don't we let some of the HEPs and GIs have the first shot at this and then I will jump in." So it's your typical sort of adoption of innovation curve. It's just that the early adopters, the population is very significant relative to what you commonly see, and then also the amount of patients that they're thinking that they want to put on the drug, assuming that the label is in line with the profile that we're expecting.

Perfect. And then remind us how you're thinking about potential pricing here and particularly in the context of how some other competitors have discussed pricing. Just what are some initial thoughts here?

Yes. Yes, way too early for us to talk about pricing for resmetirom, we have to look at the data. But I will share with you with some of the insights we have as we think about the topic to do justice to your question here. We've talked to around -- we talked to 40 medical directors, pharmacy directors, and they together account for maybe 80%, 90% of the covered insured population in the U.S. So the understanding that we have is based on a good comprehensive book of work. They see clear unmet need, they see the noninvasives being used. Regarding pricing, they are picturing NASH drugs to be likely priced at specialty drug like pricing levels. So that's the sort of mindset that they have. They're aware of ICER's review of OCA, [ 1,520K ]. So regarding how we think about the pricing for the drug, I mean, it's one of those things, we have to look at the data. We have to look at the value, the innovation delivered by resmetirom based on Phase III data, based on its actual label for our key stakeholders, not just payers, but physicians and patients as potentially the first drug to truly modify the disease. So that's what I can share for now.

Perfect. Well, with that, thank you all for the time. Thanks, everyone, for joining us, and have a good day.

Thank you.

See you. Bye-bye.

Bye-bye.