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

I'm Ellie Merle. Thank you, everyone, for joining us at the UBS Global Healthcare Conference. Very excited to have Madrigal here with us today for a fireside chat. Joining us from Madrigal is Bill Sibold, Chief Executive Officer. Bill, thank you so much for joining us.

Maybe to kick it off, you just reported your third quarter earnings a few weeks ago. Can you give us an update on the latest at Madrigal and yes, how the Rezdiffra launch is going?

Sure. Well, Ellie, first of all, thanks for having us. It's always a pleasure to spend some time with you. Had a great quarter. We're off to a great start. We are now 2 full quarters into launch. We reported out $62 million in revenue, which was an extremely, extremely strong quarter for us. And when you look across all the metrics of the launch, we really are in a strong position as well. I mean just we're not just judging that based upon our own internal forecast and objectives. We're looking at a group of about 10 blockbuster, mega blockbusters over the last 10 years and compare literally every metric to see how we're doing, and we're tracking extremely well with them. I'll come to that in a minute. Thinking about it in kind of the key areas, patients, we reported that there were greater than 6,800 patients on drug at the end of the quarter. That's versus the 2,000 that we mentioned at the end of Q2. And just to confirm with you what that is, that is as of the end of the quarter, how many patients were on drug. So that is the net of anyone who's come in, gone out along and through the quarter. So it's the most strict measure that you can use. So we're really happy about that continued growth in patient numbers. From a physician prescriber perspective, we are about 40% of the way penetrated into that target list of 6,000. It was 20% when we went back a quarter. So we're making good progress steadily adding patients -- pardon me, steadily adding prescribers and not only going from a breadth perspective, but from a depth perspective. And then I think the other exciting news is really the impact we've had with payers. So we had a goal, a very aggressive goal of 80% of commercial lives covered by the end of the year, and we pulled that a full quarter ahead. And another exciting piece is less than 5% require a biopsy. So as we had said all along, we don't think biopsies are going to be a story here and they're not. So we look at that across all measures, I think we're doing great. And we also are looking at growth with that set of blockbusters that we're comparing ourselves to. And when you're looking at that third quarter, so the quarter-to-quarter growth, it's in the 50% zone that we're expecting as we move into the fourth quarter.

It's pretty meaningful, but okay, I'll leave it there. But maybe just -- can you provide some commentary on gross to net so far in the launch and expectations going forward?

Yes. So the first 2 quarters, we were favorable with gross to net. That was predominantly driven by utilization of the co-pay assistance program. So co-pay assistance is the real single biggest contributor to gross to net. And as patients are starting to understand how to access and practices understand how to access the various services and offerings that we have, it was a little lower utilization, but we would expect that, that would continue. Remember, at the launch meeting that we did or not the launch meeting, but the launch call, we talked gross to net is going to be choppy for the first 12 months anyways with the new launch. It's just people coming online, you're at different points of the utilization of co-pay, et cetera. Then you have a Q1 reset that everyone is subject to. It will be the same thing for us as well with reauthorization, et cetera, and the IRA included. So as we get into Q4, we would expect more utilization of co-pay assistance. So a little bit an increase in the gross to net. And as we get into Q1, obviously, there's the Q1 effect and for next year. We would start to move more towards kind of the specialty product range.

That's helpful. And as we think about growth from here, I guess, what are you seeing in terms of the mix of gastroenterologists versus hepatologists prescribing? And anything you can share in terms of the penetration into each of those groups within your target prescribers?

Yes. So maybe just backing out to the total number of prescribers that we're focused on, it's about 14,000 in the U.S. Now the targets are 6,000. And when you look at the composition of that, there's less than 1,000 hepatologists in the country. So the overwhelming majority of those target physicians are gastroenterologists. Now with the hepatologists, they're certainly the most familiar with the liver. I mean that is their organ that they focus on. So a little quicker uptake. They were anticipating the approval and understood the disease and the product a little bit better. But the bulk of the prescriptions do come from and will continue to come from gastroenterologists. They were starting -- as most of the community was, whether you were a hep or GI kind of from standing still until the product was approved. And with the GIs, it's been really great to see them establishing pathways within their practices. A lot of times, they are so focused on scoping in the practice that they have to think about how will a NASH patient navigate that. So they need to train their staff, typically APPs higher, in some cases, APPs. So they're working through their model for NASH. But they've -- we've seen steady increases of new prescribers coming from both heps and GIs and getting their pathways in place. And probably my point in-time comparison would be at the ACG meeting this year, which was a couple of weeks ago in Philadelphia versus last year in Vancouver. And you see and hear that the practices are going to those extra steps such as procuring equipment to be able to do imaging, FibroScan for instance, in their practice. They've done the hiring where they're starting to do the hiring and the training. So this all falls under the wiring, the system. And that's what we've been focused on. And we're seeing really good results of that in that hep and GI group. But it takes a little bit longer for the GIs just because that wasn't their primary focus.

Interesting. And what's the latest on what proportion of practices have the FibroScan sort of in-house and how easy this is to do. I know at EASL, we all got our FibroScans for free. They are very quick.

You can come to San Diego and have another one for free, I'm pretty sure at AASLD starting this week.

Cool.

But look, I think actual numbers haven't communicated that, but it's not an impediment to launch. There's access to NITs. And what we're seeing with most of the payers as well is it isn't a specific NIT. It gives the physician the choice. So the choice will be what their preference is and also what they can access in their area. And we're also seeing that it's not just purely imaging, it's imaging and blood.

Makes sense. And I guess, you mentioned sort of your target number of prescribers as we kind of try to understand the breadth versus depth of prescribing, I guess, are most physicians you're now seeing prescribing Rezdiffra repeat prescribers? And I guess what's your strategy for reaching physicians that have not yet prescribed Rezdiffra?

Yes. Look, it's one of those things where there's this -- you would hope there's this intellectual belief saying, well, something is available, so doesn't everyone just start right away? And the answer is no. And this is why you use a comparative set of products as well. It just takes time, especially when it's a new first treatment in a disease that's never had anything. It takes time. So we're just -- we're continuing breadth and depth. You typically see it takes sometimes years to get to your full prescriber penetration. We're really happy where we are right now, and we compare extremely favorably especially on the number of new prescribers that we have each week. So each week, we're steadily adding prescribers, those that are prescribing or adding patients as well. So we're not at even a baseline yet of a full prescriber base. But we're right on track with all of the other products that we're measuring against from a blockbuster mega blockbuster perspective. How do you get people? A lot of it is -- everyone moves at a different pace. Some people come out of the gates day 1, they want to get started. Others, it takes time. As I said, with the gastroenterologist, it's how do they establish that pathway and appropriately train their staff and then when they're ready, they will begin to prescribe. So -- and some will designate within their practice, one person who's writing the prescriptions. So you may have a group of 5 gastroenterologists. It's not that the practice isn't using. It's just that they've designated that one person is going to take the bulk. So that's why you have this steady increase over time.

Makes sense. And as we think about how long patients will be on Rezdiffra, I guess, what are you hearing physicians say in terms of how they plan to evaluate the response to Rezdiffra and at what point in time? We've heard some physicians question whether payers will continue to support long-term access to Rezdiffra without a demonstration of patient response. What do you think about this?

Well, I think framing it out of the gates here, it's a 54-month study. So the 52 weeks was a really early look. And as you know, the FDA even commented that it was very early to see an effect on fibrosis, which was part of the reason why we got approved. So I think there's still the answer is what is the appropriate length of treatment for the -- for Rezdiffra. I think what you're hearing more is people saying, what would be the reasons to stop it, and that would be if there's clearly a worsening that's taking place. And we know, for instance, from the trials that you don't really see that we at EASL had our 3-year data, which showed that 91% of patients when looking at liver stiffness, had either stopped any progression or reversed liver stiffness. So at the moment, there isn't a real clear answer on when you stop. Now like all specialty medicines, there's usually a 12-month reauthorization that takes place. Overwhelming majority of them are physician discretion, what's the physician believe. I think physicians for lack of the outcomes from 54 months, we'll look as well to the guidelines. There are guidances that are out there, EASL, expert panel and even AASLD updated guidance. And those again say if there's a clear worsening, that's reason for consideration to stop, otherwise physician discretion and look and see how they're doing on all the various metrics. So I think we don't see that this is going to be a short-term solution that patients unless they fundamentally change the risk factors associated with NASH and continue to hold those off, they're likely going to stay on this product, especially since it's a once-a-day pill that's really easy to take.

Yes. I mean I would almost think the reverse like if someone has not improved, those are especially the patients that you would want to keep on. We've heard some physicians talking about looking for a response to keep patients on. Maybe just -- you've mentioned you've had a lot of payer discussions. Any feedback from the payers in terms of what they might look for reauthorization?

Well, a lot of times it's just what does the physician believe in that, what metrics can the physician show. Some of them are a little bit more specific and they will say, show either some kind of an effect on fat or in some cases, fibrosis, either a halting or reversal of it. But -- and there are all 12 months, there's an outlier that may look at 6 months. But there's nothing there that from my perspective, is unique or challenging with this product or this launch. It's just part of -- it's part of what you have to go through with a specialty medicine. Just like a prior authorization, you have a 1-year reauthorization.

Makes sense. And you mentioned on the earnings call that you think that Novo could grow the market substantially due to their focus on undiagnosed patients. And it seems like this could be a positive for you guys. But I guess curious, specifically, how you would capitalize on the entrant of a competitor like Novo, would you need to invest in further manufacturing or commercial sales force and how you think about the potential entrant of a competitor?

Yes. Well, maybe just jumping to manufacturing. We are well covered for all of our scenarios of growth. This -- and you don't hear that too often certainly in this space, but you don't hear that too often in the industry where a company launches and can support the demand in front of it. And we were very, very deliberate to make sure that we had demand covered and multiple scenarios as well. So I'll take that off the table. Look new entrants in the market help. Why do they help because it increases the awareness. Instead of having one rep in an office, you have perhaps multiple reps from companies in an office or different companies that just make the disease top of mind and really help with those practices taking action. So by virtue of any competitor coming in, it's helpful. I think in this case, in particular, with Novo, and you've heard and we showed it on the call, what -- how they assessed the population that the prevalent population of NASH. Our focus has always been on the diagnosed. We treated it as if a patient isn't diagnosed, they don't, they're not an opportunity at the moment. And there are plenty 315,000 that if we just focus on that, it's a good specialty market for us. On the other hand, with a GLP-1, you need much bigger pools of patients. The real focus is 115 million obese people in the U.S. That's where the real market is. NASH is a subset of that or almost a subset of that. You just need the volume in order to drive growth off the multibillion quarters that they have. It's even exacerbated further since it's a leaky bucket. 70% of patients discontinue within the first year according to the Novo Capital Markets Day. And if that's the case, it means you've got to add even more and more. And that's a good thing for us Firstly, it's a good thing for patients. It's great. You're going to have more diagnosed patients, more treated patients. But a benefactor as well is us because if people were to even start on a GLP-1, we know so many are going to flow through and be available and still need their NASH taken care of. And I think as the only approved product that has a great profile, we're a great place for them to be. And we're -- I think we're very well staffed right now. Of course, we can dial up or dial back different tools, DTC. We have our field force and not just sales, but we have a comprehensive field organization that helps everything from pulling through prescriptions, working with the payers, et cetera, to working with accounts to help them with their pathways. We have our medical teams, et cetera. So it's a comprehensive footprint that we have, but we can dial according to what the needs are.

What do you see sort of as the key levers of the increasing diagnosis? And maybe just any anecdotes of maybe what you're seeing today? And how this is changing. And particularly, if there is another player in the market like Novo that maybe has a large emphasis on diagnosing and screening patient livers. Like where do you see this going in 5, 10 years from now in terms of this 315,000 patients that you say are currently diagnosed?

Well, I mean, look, that's a great question. And right now, it's estimated somewhere between 10% to 15% diagnosis rate. So you have to see how successful they are in increasing diagnosis. I would say that it takes a little time, though. So it's not day 1 that somebody comes in, in the market just all of a sudden grows. It takes time for people to ultimately get a referral to a hepatologist or gastroenterologist. I think some of the early indicators that we'll see are, does it take longer to get a referral, et cetera. And right now, we've seen the market growing at a pretty steady state, haven't seen signs yet of this new concentrated effort on NASH. So we'll have to keep an eye on that. And remember, there's kind of a couple of different components. There's -- you have diagnosis. But then there's the willingness to treat, which really is what goes into the top of the funnel and then do they get on drug? And there's successive drop-offs along the way of who actually ever gets drug in the end, whether it be insurance, change of mind, et cetera. And then the treatment rates are really important concept as well. Different diseases have different treatment rates, and that usually takes years to evolve. So when you think of something like rheumatoid arthritis, it's like 65% of patients get treated. If you look at psoriasis after 30 years, almost it's only in the mid-20s. So what's going to be the ultimate treatment rate of that diagnosed prevalent population. And that's another variable to keep in mind as the market continues to grow. Either way, I think the key takeaway is that we can be successful with 315,000 patients that are only diagnosed. In order for Rezdiffra to be a meaningful product, we don't need any further diagnosis. And there -- that is why I say having competitors come in who build upon that, it ends up being a good thing for us.

Yes, I absolutely agree. And we've talked about the U.S. market. But turning to Europe, you've noted that the F2/F3 opportunity is approximately the same size as the U.S., I guess, pending approval in the second half of next year. What's your launch strategy in Europe? And I mean, what are your top priorities there? And how might some of the dynamics differ in Europe versus the U.S. in terms of the MASH market?

Yes. So the -- from a size perspective, thinking of the patient population, we think as you look across Europe at this 525,000 that we have in the U.S. is -- approximates what's available in Europe. Now the next step for us is as we look country by country and who are the prescribers in each country, how many of those sit in those practices, which would get you to the equivalent of the 315,000. So that's work to come. As we think about Europe, it is a great opportunity. And there was this, I think, by some misbelief that, well, NASH doesn't exist in Europe. It's a different population people, it's not as obese population, et cetera. Well, as I said, that's just not accurate. We're going to be very focused in our approach there. So what we're not doing is we're not going and building infrastructure everywhere out of the gates. We are going to look at country by country, what's going to be the appropriate effort. And we will hold a very, very -- take a very disciplined approach and say that we need to have a positive contribution in 2 to 3 years. So it is not -- when we say we're going to Europe, we've made the decision based upon the fact that we expect approval at the next year. And then it becomes a country-by-country view. Germany is the obvious first start, and we've started to build our infrastructure, both from a regional perspective and within the country. So we're taking a lot of the learnings from the U.S. and leveraging those in Europe. One of the real positive prognosticators in Europe is that I would say they're much further ahead in planning than the U.S. was. And I think that has to do with the fact that since they knew or they know the product got approved at the FDA. There's an expectation that EMA will approve. So they've started to take action. First sign of that was the guidelines that we saw that came out in June, which were really a year ahead of any approved product. So they're ready. Obviously, we'll go country by country from a reimbursement perspective. We still believe that innovation will be recognized in Europe. And certainly with the recent launches that I've done, that's been the case where there's been true innovation. So stay tuned as we have more details on the countries and how we're launching, we'll provide those updates.

Great. And I don't know if you've heard of the ESSENCE trial recently. But maybe just what your thoughts are on that data, how 15% compared at 72 weeks compares to your 12% at 52 weeks. And then as we head into AASLD this weekend, what other questions you might have or what you're looking for in the full data?

Yes. Look, I'm aware of the data, aware of it. I think we still have a lot of questions, very top line view that we received. And top line results and headlines don't always translate into labels very well. So we have to understand kind of the statistical analysis that was used, how are discontinuations handled, how many patients got to the 2.4 milligram dose, high placebo rate, why was that, et cetera. So we were a 52-week studies, theirs 72 and we feel like we're in a really good place from an efficacy perspective. You have to think about it in terms of also the problem you're trying to solve here. You've got people F2s, F3s, they're 1 to 2 steps away from cirrhosis. We know that they're 10 to 17x higher likelihood of a liver-related mortality. This is a serious disease. Time is not your friend. So having a product that has that demonstrated efficacy Rezdiffra at 52 weeks is actually quite meaningful versus waiting another essentially 6 months to see if it works. If you just do a comparison and if you do like an active to placebo ratio, on fibrosis, we're at 1.9x and 2.7x on NASH resolution, which is better than what they've showed. It's just another way to look at it. So we think that from a profile perspective, we're in a really good spot. We'll have to see more what they show later this week and as their review of assuming they submit shows as well. But I think no real surprise there from our perspective. And again, as all the dynamics that we talked about, it's a positive net-net for patients and ultimately for Madrigal and Rezdiffra.

Yes, absolutely. And you talked about this a bit on the earnings call, but can you kind of tell us more about what you're seeing in terms of combination used in the real world already with GLP-1, the proportion you're seeing, is this coming more from diabetics, obese patients and the mix there. And just long term, your expectations for the proportion of patients on Rezdiffra that will also be on a GLP-1 or a GLP-1-based mechanism?

Yes. So we kind of always knew that there was going to be combination use and depending on for what reason. So in the MAESTRO-NASH trial, it was about 14% of patients were on a background GLP-1 tended to be -- it was diabetes dose, and it was stable, right? And there was no treatment effect difference when Rezdiffra was added, you still have the same positive effect. What our data has shown is that about 25% of patients that are on Rezdiffra are also on a GLP-1. Now when we did market research and we asked how many have -- are either on or have been on one, that jumps to about 50%. So a lot of the patients already are being treated for comorbidities with the GLP-1. And I think that it's -- as time goes on, there's just going to be more and more that have been exposed at some point. So that's what the early results are showing, and we would expect that that's just going to increase as they further penetrate into other areas of treatment. Now I think the important thing to consider there is despite many of these patients being on a background GLP-1, they still ended up in a hepatologist or GI office for their NASH/MASH. So clearly, there's an unmet need regardless of what background therapy you're on.

Yes, that's a great point. Maybe just in terms of some of the synergistic effects that we've seen preclinically from a mechanism perspective with GLP-1. Can you elaborate on some of the data that's been seen there?

So look, some of that's preclinical data, and I think you have to see how it translates into humans and in the real world. Presumably, what we know about Rezdiffra because our expertise is Rezdiffra. In the presence of greater than 5% weight loss, you have a beneficial effect of Rezdiffra or an increased benefit of Rezdiffra. Presumably, whether that's from diet and exercise or some kind of pharmacologic intervention. So I think more data will emerge about what is the potential impact of a combination effect. But I think overall, as you look at MASH, as there's more mechanisms that become available, I suspect you're going to see an interest in looking at various combinations. Now we consider ourselves -- well, we are since we are the only product, we are the foundation. We are the foundational therapy. And I think with the profile that we have, we become the ideal product to add to rather than the substitute because of the ease of use, et cetera. So I think more to come on the whole combo space, I think there'll be data that ultimately is available. But right now, it's -- there's not a large amount of it.

And in terms of your BD strategy, I guess, what kind of BD would make the most sense for Madrigal. Would you primarily be focused on the liver and NASH? Or is obesity something that you would consider?

Well, look, we are in this enviable position. Most companies have a pipeline in search for a meaningful product and very few of them are very successful. We have a very successful product. And as a company, we're starting to think about what's the right pipeline to have. And I think that is a great position of strength to be in, especially in a market where you're first and you have great expertise in the space. Hopefully, it allows us to pick what is next that makes the most sense. So I think we are, as I said, an incredibly strong position. We're looking at everything, right? We're looking at everything. And one of the really good signs is that a lot of people come to us. And I always consider yourself a leader in a space when from a BD perspective, third parties come to you looking to partner with you. And I think we're in that space at the moment. So we're going to be selective. Everything is on the table. When you think about what would be the priority, we're the leader in NASH, that's not a position that I have any interest in giving up for a very long time. I think far too often you see companies, they hit one disease then move to the next. And since we're at the beginning and there is really decades of growth available in this space, it's a great place for us to even further establish our leadership. Now are there adjacencies that come with various mechanisms, perhaps and we'll explore those. What we wouldn't -- what you wouldn't expect us to see -- to do is to jump to a completely different disease, different organ, et cetera. If you're looking for great assets, which is what drives this industry, I think the area that we're in the best position to pick what makes sense is in this MASH area. We don't have a particular expertise somewhere else. So we're going to stay focused here, enhance our leadership position and really, we want to be the MASH company for years and years to come.

Absolutely. Makes sense. And from an IP perspective, can you remind us of some of the latest updates here and where you stand?

Yes. So we've got kind of the 2 -- we started out with the 2 key patents, which is a composition of matter, which is a 2026, if you were to put patent term extension on it, that takes you to '31 and with pediatrics would take you to '32. We also have the Form-1 polymorph, which is 2033, where if you assign the PTE 2 that would get you to 2038. Our goal has been to aggressively pursue IP and new IP to feel confident in putting the PTE on the Form 1 polymorph. We've subsequently had a dosing patent that was Orange Book listed, which is a patent that gets us to 2033 with a 6-month pediatric that gets us to 2034. So with that patent, it makes it very -- to me, even further assured that we would assign the PTE to the 2033 to get us to 2038. So look, we've been extremely aggressive. We have an outstanding team working on it. And by virtue of even showing that we've made progress, we have the dosing patent that is new, and we'll continue to look at IP, which gets us beyond even '38. So we feel really good about our IP.

Yes. That's interesting, helpful context. And in terms of your outcome study, so you just finished enrollment, this is a very, very important study for you. What gives you confidence that this will be successful?

Well, I think there's a number of reasons. First of all, I mean, let's just -- the problem we're trying to solve. Cirrhosis is even more of an unmet need than the F2/F3 patients. And as you know, it's again, the graveyard of drug development. These patients are really headed to bad outcomes. We talked about 10 to 17x higher likelihood of a liver-related mortality. It's 42x once you become F4. We had, in our NAFLD-1 study and the open-label extension of that a cohort of about 180 patients, that are very similar to who we've enrolled in this trial. And from what we saw there, it gave us confidence to move forward with this development program. And we think that it's an opportunity to significantly grow the market opportunity. You could even double it, not as many patients, but you would expect higher penetration rates within that. And also, I think some of the literature is showing that THR-beta is a master regulator of fibrosis, which would give us confidence again as well that we could have an effect there. So this is -- it's a huge question for the field, right? I mean one of the great parts of what we're doing is we are helping to drive a whole field forward with understanding. Cirrhosis is a key one, and we feel that we are in a really strong position based on the over enrollment that we had. I mean just by virtue of that, it shows how much interest there is out there, especially with our profile and that we have a noninvasive outcome measure. There are no biopsies in it. So we feel we're in a really strong position, but the data will be the data and we got to wait and see.

Yes, absolutely a very high unmet need population. And maybe just in terms of if you have full approval, what does that mean for other companies developing drugs in the NASH space from there?

They got a lot of catching up to do. I mean it is -- we are -- our goal will be to continue to advance the ball ahead of everyone else that we are always going to be in a being chased rather than chasing position. And that makes a big difference. The preponderance of evidence that we're going to have, the perhaps labeling advantages that we are going to have, will put us, we believe, well ahead of any competition in the future.

Great. Well, with that, I think we're at time. But Bill, thank you so much. A pleasure as always.

Thank you. Really enjoyed it.