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

Hi. Good morning, everyone. My name is Denise Liu. I'm an associate here with the JPMorgan Healthcare Investment Banking team. We're super excited today to be joined by Madrigal Pharmaceuticals, where we'll hear from Bill Sibold, CEO; and be joined by Mardi Dier, CFO, for the Q&A portion. So without further ado, please welcome Bill.

Thank you, Denise, and thank you for everyone for being here today. I know it's a busy schedule, so we appreciate you taking a little bit of time to sit here and listen about Madrigal, which I believe is the most exciting opportunity that there is in health care, and I look forward to talking to you a little bit about that today. We're the leader in MASH, which is a very serious life-threatening liver disease. We have the extraordinary opportunity really to transform lives and really give people hope for a future that, up until March of last year, they didn't have. It's the first and only approved product in the space, Rezdiffra, and we've made really great progress in the last 9 months of launch. In fact, when I think about sitting here a year ago, it's amazing how far we've come in such a short period of time. The launch has been incredibly successful. We're building a market. We're very proud of what we've done. We've secured Rezdiffra's position as a foundational medicine in MASH, and this is an area which is continuing to get increased interest, and we expect that we are going to be the leader for many years to come. On Monday, we announced another exceptional quarter of performance, provided our fourth year and full year net sales and some other statistics on our cash balance and patient numbers, and we'll get into that as we move forward in the presentation. But first, let me remind you that I'll be making forward-looking statements. Please refer to our SEC filings for a complete discussion of the risks and uncertainties that could impact our business. Next slide, please. So our purpose at Madrigal, it's very clear, it's to lead the fight against MASH. And this purpose is in everything that we do. It's how we have approached development, it's how we will approach future activities with the community, and we are going to be here for a very long time doing that. As I said, this is a very serious disease. It's the #1 cause of liver-related deaths, #1 cause of liver transplants for women and #2 for men actually; it's soon to be #1. This is a disease which is continuing to make terrible inroads into the outcomes of patients. With Rezdiffra, we're targeting moderate to advanced MASH. And that's consistent with F2, F3 fibrosis. And it's really serious, once you cross over in your F2 or F3, you have a 10 to 17x higher likelihood of liver-related mortality, so very serious. Next slide, please. And just really to bring it into perspective, the reason why we do this. What is it we're trying to solve? We're trying to help patients. We're trying to help patients like Jennifer. She was diagnosed with F2 MASH in 2021 and prescribed Rezdiffra in August 2024. For her, it's a real problem because she saw family members pass away from this disease, family members that suffer from this disease. And in her early 20s, she was told that, "You have fatty liver, don't worry about it. You have fatty liver, kind of don't worry about it, it's fine." Now unfortunately, over those next 30 years, as I said, she saw family members who developed it, passed away, et cetera. And it was in August of 2024 when a physician said to her, "Look, I have something that can potentially treat this disease and keep you from having the outcome that your family members did." And sure enough, she was prescribed. And as you can see, her quote here, "Living with MASH felt like having a time bomb in my body. Rezdiffra gave me back hope and my life." Within 6 weeks, her cholesterol and triglycerides significantly improved. Her fatigue lessened and she became more active, losing weight in the process. So recently, she found out that her fibrosis has improved, and that she has a really promising future ahead of her. So that's what we always come back to. And to hear directly from the patient like that gives us great hope, but also great conviction in what we're doing every day. Next slide, please. So I was here a year ago and can say with absolute confidence that we've continued to make progress on absolutely every front. Everything that we said that we were going to do, we have done, either meeting or exceeding all those goals. We built an expert team to support the launch of Rezdiffra and Madrigal's long-term aspirations. In a matter of months, we hired a highly skilled field team to launch the product on day 1. We published our groundbreaking Phase III data in the New England Journal of Medicine. Later on, it was later chosen as one of the journal's 14 notable articles of 2024. So as a company, we are driving the science forward. On March 14, which is really a landmark day in MASH, and I think landmark day in the industry, after many, many failures, we were approved and we were approved with really a best case label. So you think about who drives innovation in the industry, it was Madrigal after 15 years, a small company that wasn't the favorite, so to speak, and we made it to the end, and we brought this promising therapy forward. This was all validated by 2 top-tier liver societies in Europe and the U.S., both updating their guidelines and making the recommendation that Rezdiffra would be a first-line therapy. We also made significant progress in expanding our reach both geographically and clinically. We submitted Rezdiffra in Europe and began to build a European infrastructure. We also completed enrollment looking forward in our MAESTRO-NASH trial in F4 cirrhosis patients. And positive results from this trial could position Rezdiffra as the first and only treatment approved to treat F2 to F4 MASH patients and the only therapy with OUTCOMES data before the end of the decade. So really, any way you look at that, an incredible year, and we've really pushed the science forward, and we're helping patients. Next slide, please. And earlier this week, we demonstrated how these accomplishments are translating into meaningful commercial success. Our preliminary fourth quarter net sales are expected to be in the range of $100 million to $103 million, representing quarter-over-quarter growth of more than 60%. And I will ask you to look at any launch, and in the third quarter of launch, to be at $100 million puts us in a very rare space. It is a tremendous performance. And that puts us in the range of $177 million to $180 million for the year. But I also remind you that our year is only 9 months in 2024. So this impressive net sales performance is really, I think, a result of the execution of the unmet need and just how the community is accepting Rezdiffra as the standard of care. And I've been in this industry a long time, launched over 25 products. Some of them are some of the biggest products that are out there today. And by far, for me, this is the best launch that I've been associated with. We've had to start from scratch. There wasn't a market in place, it wasn't a matter of switching patients from one therapy to another, this was building everything from scratch. And it's been a lot of hard work, but the teams that we have had have done just a remarkable job. We've engaged providers. We've driven clinical practice changes. We've worked with payers. We've wired the system. We're continuing to wire the system. That's something that we said was going to take us through the first 4 quarters of launch, and we'll continue to do minor wiring after that as well. We'll always be reacting to the market. Feedback continues to be really, really strong from the community. I think, again, that is a testament to the unmet need that exists and now there's hope for patients. And speaking of patients, we announced that, as of year-end, we had more than 11,800 patients on therapy at the end of Q4. That is a big number, that's a significant milestone when you cross through 10,000, and we've enjoyed consistent steady growth throughout the quarter and since launch. Now we don't want to just believe our own forecast and our own assessment. What we do is we benchmark ourselves against a series of launches in the last 10 years, about 10 products that have launched in the specialty space. All these products are blockbusters and many of them are becoming household names. And as we look across all of our key performance metrics, we are tracking exceptionally well with them. But we're just at the beginning still. And the one thing I would say is the beginning is really important whenever you have a launch. The first 2 to 3 quarters are good predictors of what the launch trajectory is and where you end up. And any way you look at our results, from a sales perspective, patient perspective, breadth and depth of prescribers, we are tracking exceptionally well with those other blockbusters. So we're very confident about the future. And really, what's driving this? Well, one of the main reasons is the great profile that Rezdiffra has. I've often said that great companies are built on great assets, and this is a perfect example of that. We have a liver-directed medicine, and it set a high bar for efficacy and safety. It's demonstrated the ability to halt or improve liver stiffness, which is a proxy for liver fibrosis, in 91% of patients out to 3 years, so very strong sustainable efficacy. I've described the product profile in the past as the holy grail. In my career, you always say, "What would you like in a product? A once-a-day pill that's well tolerated, effective and safe." And usually, it takes years into the development of treatments for a disease that you achieve that. And that's where we're starting, which is something which puts us in, I think, again, rare air. Next slide, please. As we look to the market opportunity with Rezdiffra, we believe that the strong profile and first-mover advantage is really going to play out well for us in the future. We've discussed in the past that we're focused on 315,000 diagnosed patients that are in the 14,000 specialist prescribers that we're targeting. That, in itself, is a very sizable and attractive specialty market, and there's certainly plenty of room for growth. As we announced the patient numbers, that results in a less than 4% patient penetration as of the end of 2024. So within that group alone, having been in a lot of specialty markets, that is a great size to be targeting, and there's plenty of opportunity for us there. However, if we look at the next slide here, this is before thinking about what kind of impact new entrants will have in the market, including the GLP-1s. GLP-1s are focused on a significantly larger market of both diagnosed and undiagnosed patients, and that's many multiples of the 315,000. So what we're expecting is that competitive entrants are going to expand the market, which will most importantly benefit MASH patients, because we think you need more than one mechanism in the space. It's going to increase awareness, patient screening, diagnosis and treatment. And market expansion is ultimately going to benefit Rezdiffra both as the foundational first-line therapy and from the high real-world discontinuation rate of GLP-1s. So there's clearly room in this large underpenetrated market for multiple mechanisms. And as we've discussed, we expect that combination therapy could become a reality in the future as well. In fact, as we take a look at patients on Rezdiffra today, about 25% are on a GLP-1 at the same time, and it's upwards of 50% that have been exposed to a GLP-1. And we would expect that, that will increase in time just as more people are on GLP-1s. So we're optimistic about the evolution of the market and see really multiple paths to success for Rezdiffra and for Madrigal overall. So our goal is to be the leader in MASH for many years to come, and our long-term strategy builds on the success of our launch, and that's going to be accelerated by geographical expansion and new indications. In Europe, we're preparing for the potential launch of Rezdiffra this year, pending EMA approval, and excited about that opportunity. Europe has about the similar prevalence of MASH patients as the U.S. and there's a strong anticipation. And I think a lot of that's based upon seeing the success of approval in the U.S. Whereas the U.S. physicians didn't know whether a product would be approved, European physicians see that the product has been approved so that they are anticipating approval in Europe. We also did a lot of clinical work in Europe. Approximately 125 of our trial sites were in Europe, and that represented about 1/3 of our clinical trial patients. And I think this familiarity led the EASL group to publish guidelines really a year in advance of a product being approved, saying that, if approved, it would be used as a first-line therapy for MASH. To support the expansion in Europe, we've started building our infrastructure, including hiring a Head of International to lead efforts in Europe. And assuming approval, we will take a targeted country-by-country approach. It will start in Germany in the second half of this year. And as we build our operations in Europe, we want to be able to generate a positive contribution over a 2- to 3-year time frame, so very disciplined in the way that we are going to invest in each of the countries in Europe as they meet the criteria for us. We're also advancing Rezdiffra for patients with MASH cirrhosis. And in October, we completed enrollment in our MAESTRO-NASH OUTCOMES trial. That was 845 patients that we enrolled in that trial. And this event-driven trial is expected to deliver results in the 2027 time frame. And pending regulatory approval, positive outcomes could make Rezdiffra the only treatment from F2 to F4 MASH patients and has the potential to double the opportunity for Rezdiffra. So this is an important trial for us. And cirrhosis, when you have advanced to an even more dangerous phase of the disease, you heard me say F2, F3 patients have a ten- to seventeen-fold higher risk of liver-related mortality, F4 patients have a staggering 42-fold increase. So this becomes a real problem, a real challenge, and that's why we're looking and we're actually quite hopeful with our results in that trial. Maybe the next slide, please. So this is one of the many reasons that we think that Madrigal is a unique investment opportunity. As leaders in the therapeutic category that's still in its infancy, we're uniquely positioned to capitalize on the significant growth in this untapped market. We believe our first-to-market status and best-in-disease real-world profile will provide a durable competitive advantage. And history really shows that first movers often capture and sustain disproportionate market share over years. And if you look 10 years out, the data is actually quite compelling. We are really delivering a highly successful launch. We have an expert team that we've put together. These are the best of the best. They've built big products, they know what to do, and that's what's going to drive us forward in the future. And then looking ahead, we aim to extend our leadership through, as I said, geographic and indication expansion. In 2025, we expect to deliver continued growth in the U.S., secure EMA approval, launch in Germany. And as we've discussed, we also plan to build a pipeline beyond Rezdiffra. I think most companies that you're going to be seeing here today have a pipeline that is looking for a great product. We have a great product already, and now we have the ability to build a pipeline that makes sense. And so that's something that we'll be focusing on, and that will fortify our leadership position in MASH for many, many years. So in summary, we had an outstanding year in 2024, any way you look at it. We announced a very strong preliminary fourth quarter net sales range of $100 million to $103 million, resulting in full year net sales of $177 million to $180 million, which includes just 9 months of revenue. We have a strong balance sheet and a robust cash position of $931 million at the end of the year. And most importantly, we're making meaningful differences in the lives of MASH patients with greater than 11,800 patients on Rezdiffra at the end of 2024. So looking ahead to '25, we'll continue to execute on our U.S. launch as the first and only approved therapy in MASH. We are preparing for a potential launch in Europe as we pursue geographic expansion. And beyond 2025, we're looking ahead to the MAESTRO-NASH OUTCOMES trial in compensated cirrhosis, which could position Rezdiffra as the only treatment for F2 to F4 NASH. So we have confidence that we're building not only a great MASH company, but a great company for the industry overall. It's a real privilege to be able to lead this company through this exciting phase. And thank you for listening, and we'll look forward to answering any questions you may have in the Q&A. Thank you.

Thank you, Bill. If anyone has a question, just please put your hand up so we can get a mic over to you. I can kick it off. We actually have a question on the iPad. Someone online asks, can you remind us of the design of your F4 study? And what would you consider a success in that study?

Well, so look, the F4 study, the reason why we're doing the F4 study is because we had a 180-patient cohort of cirrhosis patients that were in an earlier trial. Based on the promising results, we decided to pursue an F4, a well-compensated cirrhosis study. Now we are not doing a biopsy study. We're doing an outcomes study. We think that is really the best way to conduct that study. We're expecting results in the '27 time frame. So as I said previously, assuming a successful trial, we would have F2 to F4 and outcomes data in this decade years in advance of anyone else.

And a follow-up on that, can you share anything in terms of what you're seeing regarding baseline characteristics of the patients who are coming on to drugs?

I mean, look, we published the baseline characteristics. I think we're really pioneers in the space here. I'm looking at this population, others have failed, I will say that now. When you're designing a trial like this, patient selection is really important. You don't want people that are too advanced so that the biological process is beyond recovery. You don't want people too early since it's an event-driven trial that it's going to take too many years. You want it just right. And we think that our inclusion criteria has hit the right mark. But we're pioneers in the space. We're really looking forward to the results of this study. There's a lot of expectation in the community for this.

And this is certainly a very exciting opportunity, and you said that before. Can you just elaborate a little bit why that's the case?

Yes. Look, I've been in the industry a long time, and you know great potential when you see it after years. It starts with an unmet disease. This is a high-unmet-need disease. It's a graveyard of drug development prior to Rezdiffra. Many companies have tried but failed. So when you have a high-unmet-need disease, you have a significant number of patients. As I said, it's 315,000 that are diagnosed sitting in the practices that we're calling on or the physicians that we're targeting. There is no competition and you have a great product profile, it doesn't get any better than that. You've got a supportive Board, you've got supportive investors to build a company for the future. And that makes a huge difference. You don't see that every day. So for me, when this opportunity was put in front of me, after first reacting to the fact that it was a NASH product, and I said, "Oh my God, not NASH, it's the graveyard of drug development," after looking within to see the quality of the clinical trials, the quality of the results, the quality of the people, the quality throughout, it was a very quick decision because you don't see opportunities like this. I would argue that there is nothing else like it in the industry, that has those dynamics. And I think for us, probably the biggest surprise for me was the asymmetry on what kind of outside investors would see versus people within the NASH community about the unmet need and the fact that there's patients there. And I think what we've demonstrated over the first 3 quarters is that there's a market, you can be successful in it, and there's tons of potential ahead. And I think over time, more products will enter the market, and we think that's a very good thing. More products help patients and it helps grow the market. You heard me with the GLP-1 example. GLP-1s need millions of patients. They don't need 315,000. They will drive more awareness and diagnosis. And we know, with the product profiles they have where you have a high discontinuation rate, Wegovy is something like 70% at 1 year in a 72-week trial that ESSENCE was. We feel we're in an exceptional position to benefit from our strategy, which has been the 315,000, or others growing the market, attempting one of those products, probably failing and us to be able to catch them afterwards. That is unlike anything I have had the opportunity to participate in, and that's why we're so excited about it. But I think it's going to take time for the external world to start believing the doubts that they had, which was, is this a market, can you compete, et cetera. And I feel like we've started doing that through the first 9 months of launch.

We have a question in the back. Sorry, the mic is getting to you right now.

I was just hoping you could clarify your comment on building the pipeline beyond Rezdiffra. Do you mean looking at Rezdiffra in other indications? Are you looking for M&A to bring new products in-house? Do you have internal R&D? I guess just more color on that comment.

Yes. So look, I mean we have our life cycle management activities as we'll extend into the F4 population, and then we'll have outcomes from the 54-month MAESTRO-NASH trial. But no, we very much want to build a pipeline. As I said, we're in this unique position that we are going to have a significant asset. So now what do you want to put around that to secure long-term market leadership? Well, we are looking across all the companies and products that are doing trials in MASH, who either are early stage or late stage, and the criteria will really be, is there a next best mechanism of action or is there a combination that would make Rezdiffra better, keeping in mind that we believe Rezdiffra is the foundational therapy. So we're looking across. As everyone knows here, it's a process when you're doing any kind of business development. And what we aren't going to do is we aren't going to do a bet-the-company strategy. We're not going to do something which just hinders us so much. We will be very thoughtful and make sure that it's something that we're excited about that's going to fit the criteria and that there's something that can be done. By that, I mean a deal of some kind. It takes two, so to speak, to tango, so that's why BD takes so long. But we're really confident that we can build a pipeline that gives us that enduring leadership in this space. And I think that's again another reason why this is such an exciting opportunity because the table hasn't been set yet, and it's something that we feel that we're in a unique position to do.

Can you talk about the diagnostic methods for MASH? And what's the status quo? And do you see any future trend to a maybe more favorable method?

Yes. No, thanks for the question. As I said a little bit earlier, there was speculation that biopsy would be required in the label and then from a payer perspective for diagnosis. And that's something that we just haven't seen. Greater than 95% of plans do not require a biopsy. So noninvasive tests are really the way that patients are diagnosed, followed, et cetera. And you've kind of got two sides of that. You've got blood tests that can be done and then you've got various measures of liver stiffness through imaging, et cetera, ultrasound. And this is, I would say, an emerging field. I would say that the standard of care at the moment tends to be a test called FIB-4 blood test and other variables that you add to that. And then one other NIT is called a FibroScan. Now there's others, there's Velacur, there's a number that are emerging. Right now, I think the community is still working through what's the best combination in sequence and then what new is coming to the market. So the physicians, the prescribers, I should say, that we're calling on have access to a variety of the NITs, and the payers typically are allowing one or some or all of those that they have access to. Now I think, though, that there is going to be a lot of development in that space. I think that we'll be better in 1, 2, 3, 5 years from now, knowing what's the best sequence in combination of the various NITs to have the most accurate diagnosis and ability to monitor. So it's one of those things, because there is a therapy now, there's certainly much more interest and I would say progress and evolution on the NIT side.

What a great presentation. I was wondering if you were looking in the earlier stage as you might think about delaying or preventing liver disease in addition to treating it. And then I was also just wondering about the number of hepatologists. Are there enough doctors as the interest in this expands and particularly among patient communities?

Yes. No, thanks for the question. So first of all, on the target, I mean we're crystal clear right now, we studied in F2, F3, and that's the patient population that we're focused on. Now for Rezdiffra, as we have it, that's where really the benefit lies. That's why I said the patients are 10 to 17x more likely to have a liver-related mortality. So that's where we think the real value proposition is. Our efforts are going to focus, I would say, in that F2 to F4 range. We think that's again where the highest unmet need is. We think that something like a GLP-1 would be beneficial to try to prevent. But we also know that GLP-1s aren't rapidly solving the obesity problem in the United States. That's something that we feel that there's going to be plenty of patients that aren't on a GLP-1 or have a result that is going to prevent the progression to F2 or F3. So we want to stay in that F2 to F4 range as a priority because that's where the highest unmet need is. Regarding the hepatologists, well, let me step back and say who are we targeting: 14,000 prescribers. In the U.S., there's less than 1,000 hepatologists. When you start backing out transplant surgeons, et cetera, it gets you closer to around 700. So of that 14,000, 6,000 are our high targets where we think the majority of the business will come from. In fact, in previous quarters, we've said in that target group, about 75% of the prescriptions come out of that group. So with that 6,000, that is plenty to drive the ambitions that we have. Now we also reported in the third quarter, we haven't provided any update yet because we're saving some things for our earnings call that's coming up, but that of the 6,000 targets, there's 40% penetration. That means 40% have written the first prescription. That continues to grow. And the best, I guess, benchmark I can give you is the group of 10 blockbusters that we look towards. One of the key metrics is breadth of prescribing and depth of prescribing. And from a breadth perspective and from a depth perspective, we're tracking extremely well with all of those products, so again, giving us a good independent view on how we're doing with the launch.