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

Thanks, everyone, for joining us. I'm really pleased to be joined this morning by Bill Sibold, CEO, Mardi Dier, CFO, and David Soergel, MD, CMO of Madrigal. Thank you, guys, all for joining us.

Thanks for having us.

Bill, maybe I'll start with you here. We're sitting here now over 1 year into the launch of Rezdiffra. It's been an incredible launch to see to date. What have you been most encouraged by as it relates to patients, physicians, payer coverage? And what have been the biggest learning?

Well, objectively, it's been an outstanding launch. And thank you for recognizing that. I mean we are -- if you look back a year, as you say, there was nothing, right? There wasn't an approved product. There weren't pathways. Nobody had ever written a prescription. There was no clear path to reimbursement, et cetera. And on each of those measures based on, I would say, our team's experience, planning and execution, we've removed these hurdles, and we're off to a really great start. We're comparing ourselves against some of the best launches in the last 10 years in the specialty space. And looking at all the metrics we are tracking at -- near the top or at the top on each of those metrics. That's why I say it's subjectively a great launch. So I look back over the year, I'd say some of the learnings are that, experience matters. We had a team that knew what to do. We are starting obviously from having a great product. But I think we took all the steps to wire the system, if you will, and to make sure that there was going to be a product that was available that people were educated that there were pathways within each practice that they understood how to use NITs, which NITs to use. The pathway with payers was cleared early. In fact, over 80% of commercial lives covered at the 6-month mark. The 9-month marker was considered to be a stretch to do it in 6 months. So that combination of planning, execution and now what we've seen is we have a product that has -- there were over 17,000 patients on it at the end of March, going from almost zero, a year ago when you're looking at a launch in April. And I think that not only it gives us confidence about what lies ahead with F2, F3, but the whole way has been paved now for us for F4c. So we're really encouraged by the data there. We'll talk maybe a little bit more about that later. But assuming to have a positive outcome and we get approved, it's just snap the finger, and we are already wired ready to go. And that's going to be something which anyone else that is starting is going to have to build from scratch, and it's going to take a long time.

You referenced 17,000 patients. And when you think about that in the context of the 315,000 targeted patients that you identified and you know are diagnosed to launch. It's only 5%. How do you get the remaining 95%?

Yes, it is. We are at the very beginning here. I mean this is -- again, I don't think everyone always appreciates the -- just incredibly favorable market dynamics that there are in MASH. We talked about 315,000 diagnosed patients. Others talk about prevalent populations, which are many, many multiples of that. But that 315,000, we're only 5% of the way through, and a lot of it is continuing to do what we're doing. We've built a nice breadth of prescribers. We talked about over 70% of our 6,000 key targets having written the product and over 50% of the top 14,000 that have written a prescription already. So we continue to increase the number of prescribers and go deeper into each prescriber. It's really a team executing day-to-day, making sure market that market is available, making sure that physicians are educated. We've done more DTC now where there's more patients that are being educated and coming to prescribers and inquiring about Rezdiffra. So all those things continue to build and the one element that we don't always talk about is time. It just takes time to become familiar with the disease, familiar with the product, familiar with how to use it. And then it is now becoming really standard of care. So it's just much easier. So we just continue to see that 5% growth. Also, when we have new competitors come in, those -- that always accelerates market growth. So we actually welcome other products coming in because it will ultimately help us as the market leader, you benefit the most in that situation.

When you think about -- you just mentioned it takes time. How should we think about the shape of the curve and the shape of the adoption curve essentially here?

Yes. Look, we've been talking about steadily adding prescribers and steadily adding patients and that continues to be the case. We see a lot of years of continued growth ahead of us. We are at the infancy of this market. I think that you're going to look like other specialty markets, you can look out 10, 15, 20 years. And I still think this is going to be an emerging growing evolving market. And there is a benefit to being first, and there is even a bigger benefit to being first with the product profile that we have.

Great. You were speaking about the prescribing -- the breadth of prescribing that you're seeing. Maybe speak a little bit more about the depth then. And your top physicians, how deeply penetrated are they within their patient population?

I would say there's not a prescriber in the country that is anywhere close to fully penetrated. Right? There are some -- there's a wide scale of those that adopted early have very systematically looked to put patients on. And then there's others that are still writing their first prescription. Everyone has room to grow. And I think, again, as familiarity increases as they establish their pathways that it allows them to put more and more patients on drug. Now I think one of the key drivers of that is the experience that they have. Feedback from the community has been exceptionally strong about their interactions with the company. and what we've been able to provide from a service perspective. But as importantly, even more importantly, is the experience with Rezdiffra. And the early feedback though it's only 1 year in is very favorable from an outcomes perspective.

Great. Maybe as a follow-up there, what are you hearing on compliance persistency? Maybe speak to the value of proposition of Rezdiffra really driving that compliance?

Yes. I mean, look, this is behaving like a well-tolerated oral. Now it's a little early to know exactly what persistency looks like because we -- product was available in April of last year. So there's very few patients that have made that 1-year mark. But so far, what we've seen is that it's performing like a well-tolerated oral. And that makes a big difference. You have to be on a drug for it to work. And the feedback that we're getting is that patients are tolerating the product that first 4 weeks, 5 weeks is when we're hearing physicians say, that's the time to follow up, watch the patient, help them through any kind of tolerability challenges they may experience. But overall, feedback has been really strong about that. And that's the benefit of this of a once-a-day pill.

And as you are coming up on patients being on this drug coming up on 1 year. Some have reached it, many more, will reach it in the coming months. Remind us where things stand with reauthorization. What are your expectations there? And how you view that process?

Yes. Look, reauthorization is a reality for certainly all the products that I've worked on. We don't see it as being a challenge. First of all, I think that the reauthorization criteria are very fair. Generally, it is physicians either a testing that there's been a stabilization or improvement or some objective measures. And so we think that, that seems to be fair. Also coupled with what we're hearing in the real world, we don't see it as a challenge. So, so far, so good.

Great. Maybe we can touch on IP here really quickly. We sit here in 2025. Many have looked at loss of exclusivity potentially in 2033. But what are your plans here as it relates to life cycle management and being able to extend that IP runway?

Yes. So look, we're increasingly optimistic about having IP extend into the 2040s. And that is a monotherapy Rezdiffra into 2040s. Now this is part of a larger strategy, which we've been saying now since launch, which is we're aggressively pursuing new IP to extend our IP position. The first success of that was with our last year, we had an Orange Book-listed patent, a new one for dosing, and that was extending to '33 with a pediatric extension to '34, and that might be what you're referencing. So that was the first. More to come. Now as it relates to life cycle management, the two key areas of focus on life cycle management are our MAESTRO-NASH trial and MAESTRO-NASH OUTCOMES. However, we're getting a lot of interest in the community to study distinct populations and look for where might Rezdiffra be able to work or populations where there have been something like a post transplant, et cetera. So that's happening. And what we're seeing is people are really grasping on to this or are starting with this Rezdiffra as a foundational therapy and what can you do beyond that. So we have a lot of exciting plans in the future for life cycle management, the key being reading out the 2 trials that are ongoing. And as I said, we feel we have long runway with the product.

It reminds me, you had data last year at EASL in unmet ALD population. Is that a potential indication you'd be interested in exploring?

Yes. I mean as far as I know, that's the most complete data that exists right now. I mean it was a 75-patient cohort within our MAESTRO-NASH trials that look to qualify for that definition. That's certainly a population to consider. I think that the regulatory pathway for that is still a little bit murky. There's a lot of interest in it. But that could be one of the things that we would consider. And we were actually very encouraged by the data. It showed that there was an effect that was as good as and consistent as with the rest of the population.

Maybe one of the debates that continues to persist here is what the impact will be in the NASH field as semaglutide receives an expanded label. Do you think the debate over the need for a liver-directed therapy has been put to bed? Or do we still need to wait to see?

Look, again, we're -- I'll go back to -- we're at the very beginning of this journey in MASH, 5% penetration. It's not going to be a winner take all market, but we have the best profile. And as I look in the pipeline ahead, I don't see anyone with a profile that's better than us in F2, F3 or F4c right? So we're starting from a very, very strong position. We welcome having more products in the space. I mean, I think the thing with GLP-1s is they're not new. They've been in the market for over 10 years now. We still have this increasing prevalence of MASH. So clearly, just the way they've been used that hasn't solved the problem. Now with the new -- looking at higher doses, et cetera, we'll see what the label ultimately looks like, but we're anticipating approval of sema later this year. And we see it as a market growth opportunity. We talked about the 315,000 that you've referenced. Others have spoken about there being millions of patients. 22 million U.S., EU5 in Japan is a number that's been used by Novo. That translates down into multiples of the 315,000 in the U.S. that are F2, F3. So we look at that as an opportunity. right? We see a path to success with the 315,000, and we certainly see another path to success with if you put a zero behind that. So at the end of the day, profiles matter. We've got, as we talked about, a once-a-day pill, well tolerated, showing really positive signs in the real world from an efficacy perspective. sema data, I mean the trial looked good. But we also know that compliance is a challenge in that you have to be on a drug for it to work. So we see it as a market expansion opportunity, and we're actually really excited about that.

Remind us here, I mean, what you're seeing in the real world. There's definitely a proportion of your patients who are on background therapy right now?

Yes, essential -- so I mean, to finish that, yes, about 25% of patients are currently on a GLP-1 in combination with Rezdiffra, and it's 50% of patients have been previously exposed to a GLP-1. So it's not as though it's introducing something that isn't already being used. The real-world experience has been really positive. Oftentimes, you don't know what's going to happen between clinical trials, well-controlled setting, to the real world. And we have received very positive feedback from the community from prescribers and from patients about the effect. They're seeing the broad effects of whether it be liver stiffness, fat, LFTs, lipids. Across the board, people are seeing effect of the drug, which makes sense, right? A regulatory endpoint, a composite regulatory endpoint is not way people treat patients in the real world. They're looking to see, is it having an impact on these base measures? And that's what we're hearing. We're hearing that it's working fast and it's working well. And that is across the board, the feedback that we're getting. So that's a great position to be in that people see us, not only they had expectations, but it's meeting or exceeding expectations. So we're excited about it.

And that underpins your confidence that this is truly going to be a chronic therapy then?

Yes.

Okay. Maybe as we think about competition, Mardi, I'll turn this one to you. You've talked about beginning to contract for access with an eye towards what the competitive landscape could look like. Maybe give us an update on those efforts.

Sorry, I just want to make sure I understand that -- on the contracting?

On the contract.

You're talking about [indiscernible]. Do you want to start off with the answer?

Maybe the context is that when we launched the product, we weren't thinking about just a quarter or a year, we were looking into the future to say we're going to have this product for a long time, what's the implications of our strategy in 1, 3, 5 years, knowing that there's going to be competition, knowing that we're going to have expanded indication and so forth. And we have been extremely, extremely conscious and focused on gross to net. It Is something which is precious. You have to guard it. You have to be careful with it. We started off not contracting. However, we've always anticipated that we would contract. That's part of being a good partner with the payers as well. And so that's what we started in April, not everywhere, not all at once, but it's something that we'll continue. And maybe, Mardi, do you want to provide the content?

Yes, I can give a little more context. As Bill said, all of this is anticipated and what we've discussed previously with respect to gross to net and particularly in 2025 with the initiation of our contracting here in the second quarter. We see gross to net discount step up through the year, but really be within this band. We've discussed that is very typical for specialty medicines that are launching at this period. So we feel very good about where we are in gross to net, it's already taken into our expectations, and we've already talked about the robust growth that we expect for 2025.

Great. Dave, maybe I'll bring you in here. Welcome to the Madrigal team. It's nice to meet you. Maybe introduce -- maybe spend a few minutes introducing yourself, and then if you may, talk about the recent data that was presented at EASL and what the key takeaways were?

Sure. Happy to. Yes. Great to be here. So my name is David Soergel. I'm the Chief Medical Officer, recently joined Madrigal. I joined from Novartis, where I was Head of Cardiovascular Renal Metabolism Development. And my job there was basically to get drugs approved, build evidence basis to support launch drugs and to build the pipeline. And after 7 great years there, I saw a fantastic opportunity at Madrigal to really enter a space where there's a huge amount of unmet medical need and a need to bring new therapies to patients. So I thought this would be the right place to come. And of course, working with these folks makes it even more exciting for me. So turning to the EASL presentation, I guess the best way to talk about this is to talk about, first, the 122 patient open-label experience that we presented at EASL. And then second, to talk about how that experience makes us even more confident in the MAESTRO-OUTCOME study in the F4c population, which is our ongoing Phase III study. So first, the 122 patient experience in the F4c group, I mean, this is a patient population who's kind of right on the doorstep of a catastrophic life event, i.e., decompensation of cirrhotic liver disease, which ultimately leads either to high degrees of morbidity or liver transplant or death. So this is a patient population that's very sick and has progressive disease. And what we saw in this open-label experience is that we could reverse what was previously thought to be very difficult to reverse disease processes, i.e., continued fibrosis and kind of end-stage liver pathophysiology. And the way we measured that was by looking at liver stiffness measurements by VCTE where we saw clinically significant and statistically significant reduction in liver stiffness measures in this population. And also when we looked at MRE and even more rigorous measure of liver stiffness, we saw an important reduction in stiffness and that -- with that measure as well. So the second important piece of information we got from that trial was in patients who had -- were on even the further spectrum of the compensated liver disease population and had evidence of portal hypertension. We showed that in the 35% of the patients who had that phenotype, we could reverse that phenotype in 65% of those individuals. So again, a population that you didn't think you could reverse these physiology in and you could actually do it with Rezdiffra. So, and the last piece of important information from this open-label experience was that we saw a very low hepatic decompensation rate. So the rate that we saw over that 2-year time period of dosing was between 2% and 3%. And in this patient population, you expect something like 7% to 10% annual decompensation rate. So very low events, with the caveats, it's an open-label experience and so forth. So now if we translate that experience to what we expect from MAESTRO OUTCOMES, the patient population that we enrolled in that open-label experience looks very much like the MAESTRO OUTCOMES patient population in terms of baseline characteristics and so forth. So that gives us a lot more confidence that we're going to be able to see a significant treatment effect of Rezdiffra in that group.

It's exciting data, and I would say the feedback from the community across the world have been extremely complementary, supportive and excited about it.

Maybe to that point, based off of the feedback that you've been hearing from the community at EASL when you presented the data. How do they see Rezdiffra stacking up against other agents that are being developed also in the F4c space?

Yes. So I mean, the first comment of the presentation was Laurent Costera from France, who stood up and said, data looks like a [ carol. ] And we believe that we've got the best profile and we're going to have the best product in that space. I think we haven't been given the credit for F4c. We haven't talked about it that much, but I think now that we have this 122 patients, again, with all the caveats open-label study, et cetera, you expect a low placebo response rate in this population. And so we think looking at it with active drug, it looks very positive. So we consider ourselves not just an F2, F3 product. We're F4c, and we consider ourselves the leader from F2 to F4c period. So we think our profile is the best profile. And the one thing just for consideration, people don't think about this. By the time in '27 when we get our results of MAESTRO-NASH OUTCOMES and assuming approval follows. We will have had tens of thousands of patients on the drug. We have a system which is 4 years wired. We have great familiarity with the people in the company, with the product, how to use it, it's just a matter of changing a prescription. That is a very difficult environment for somebody to come in and start from scratch. When you've got a profile starting with our profile, once-a-day pill that works really well, not only in F2, F3, but is promising in F4c. So as I said, we think that we win F2 to F4c.

The first to market, clearly having an advantage here.

And this profile. Profiles matter.

Dave, maybe I can ask you here. You touched on VCTE. Just remind us of the literature that really underpins the ability of VCTE to then predict clinical outcomes? Particularly as we start to think about MAESTRO-NASH OUTCOMES?

Yes, it's a great question. So there's a large prospective experience that was published in JAMA that shows that a reduction in VCTE by 25% can improve -- shows an improvement in liver outcomes. So that's a very large sort of data set. But maybe just thinking about the fundamental kind of connections to start with. So what we know for sure is that increasing fibrosis predicts worse morbidity mortality, worse liver outcomes. So as you go from F0 to F1 to F4 your increase in risk goes up by about 12-fold to having an adverse liver outcome. And so the question then is, is VCTE liver stiffness measurement, a good surrogate for figuring out whether or not you have F2, F3 or F4 fibrosis. And the answer is yes. Increasingly, it's become the standard clinical tool to measure fibrosis. And in the patient population. As I said, MRE is even better, but of course, it's less accessible because it's MRI-based.

So you see good read-through from the data you've had to this outcome?

Yes.

Okay. Maybe I can ask you here. You've spoken more recently and openly about an interest in BD, augmenting your pipeline. What can you share in terms of what you're interested in? What makes sense for Madrigal to bring on right now?

Yes. Well, you've also heard me say that. We're in this very, I would say, fortunate and rare position where most companies have a pipeline looking for a great product. We have a great product. Now we can thoughtfully build a pipeline. We are interested in extending our leadership in MASH, and we are looking at every mechanism of action that can potentially be the next best mechanism of action in the space or something that could be used in combination with Rezdiffra. So our efforts have been, I would say, very broad looking across everything from very early stage to late stage. And when we identify the thing that we think is the next to add or things to add, we will perceive with that. But we are in no rush because we don't have to be so we can be highly selective. We're not going to do a bet the company strategy. Like we don't -- that would just be irresponsible to do. Because we have such a great profile. I mean we have a growth story for within F2, F3, but then we have a whole other indication to move into an F4c with a single product, which we see as the best profile that there is now and in the future. So we'll be selective, thoughtful, something that's going to make it a difference to extend our leadership and we'll report out when we have something to report out on.

Great. Well, maybe a follow-up here. As you think about the type of deal you might want to do, naturally, the next question is, what is the magnitude, what is the size of the deal that Madrigal would be able to really transact on? Mardi, please speak to us on that front.

Yes, sure. So in terms of our capacity, just to reiterate what Bill said, we're not going to bet the company on any BD that we're pursuing. But BD is definitely a piece of our key strategy. So we are very focused on it. But our capacity, we're in great shape. So not only do we have a growing top line. But from a balance sheet perspective, we continue to be very strong. So we had last quarter, $848 million in cash, and we only have $115 million in debt outstanding. So we're very clean in terms of the balance sheet. And then so we have plenty of capacity to do what we want to do going forward.

Is there the appetite just to restart this whole clinical development pathway in NASH. If you were to bring in an early stage asset, you would essentially be taking on all of those expenses. What is the appetite to do that?

Yes. I mean if it's the right bet to place, of course. I mean, look, one of the things that we have, which most of the other companies don't, is a top line to support it. We also have expertise. We're the only one that's been successful to get something over the finish line. I remind people, this is not for the faint of heart. There are 23 failures before us. And we think that we are experts in the space. And we are going to use that expertise to not only identify what we think is the best bet to place, but also how are we going to develop it to get as early a read as possible to know is it something worth carrying into late-stage development where you have your big expenses. So we feel like we are exceptionally well positioned with the capabilities that we have, the experience that we have to be able to make calls quickly on whatever we bring in assuming it's not already late stage.

Got it. And as you think the remainder of this year, you do have an upcoming approval hopefully, in Europe. Where do things stand just in terms of the interactions there and your expectations for receiving an announcement?

Yes. So look, we said midyear CHMP opinion, and with the launch in the second half of the year in Germany. European approval that we anticipate, but it's a country-by-country decision on how we launch and where we launch. Germany is the first country. We've substantially built out our resources there or our team there. And I have to say, very encouraged by the team we've put together. We brought really top-notch people in just like we did with the U.S., there's tremendous interest in magical, tremendous interest in Rezdiffra and joining that team. So we think we have a great team that we've put in place. And we take a little bit of the blueprint from the U.S. and apply it to each country, taking into consideration the particularities of each country. So we are on schedule for everything that we've talked about.

And when you think about the treating community in Europe, how does that compare to the physicians in the U.S. in terms of their receptivity?

Yes. I mean it's interesting. I would say that Europe is far better prepared than the U.S. was. In the U.S when we got approval, I would say that clinicians weren't sure whether a NASH product was ever getting approved. And so they didn't take any steps to plan for how they were going to treat patients. So we were really starting other than with a handful of practices on what your pathway going to be. And that's been this since last March 14. That's been the journey that we've been on helping to build that. Europe on other hand saw the U.S. approval, so started to speculate, there's going to be a product available. They went as far as -- and I've never seen this in any other disease with any other product, adding Rezdiffra to the treatment guidelines a year before it was even going to get approved. So they've had time to think about it. Anticipation seems very high. We've heard people say that always asking, when is it coming? When is it coming? I'm going to use it, looking forward to it. But you have to remember, it's just like with any other launch, day 1, not everyone puts every patient on. It takes time. And so that's what we expect to see in Europe as well. But anticipation is high. I think their preparedness is probably better than the U.S. So we're really excited.

You've taken a strategic approach in the U.S. to go out of 315,000 [indiscernible] that were identified, diagnosed, how does that number compare in Europe?

Remarkably, the numbers are fairly consistent between Europe and the [ U.S. ]. There's plenty of patients that are going to be in Europe and available to us.

And then similarly, as you think about the number of prescribers that could potentially be out there how concentrated are these physicians? And how well equipped is your sales force to essentially be able to target the appropriate physicians here?

Yes, we feel very confident that we can target the appropriate physicians -- if you think about Germany, it's much more of a GI with some hepatology. But we've mapped that out, and it's reasonably standard to be able to figure out what type of sales force effort you're going to need against the target physicians that you have. So it's exactly the same type of process that we went through in the U.S. So we know who it is that we're going to be calling on and then we build the team accordingly to be able to make those calls.

And what is your current expectation right now around the requirement for a biopsy?

Look, that was a huge speculation in the U.S. Remember when I first got here, people said, "Oh, the label is going to have a biopsy requirement. And if they -- even if that doesn't, payers are going to require it." Well, I think we've proven that, that's not the case. We have the same expectations in Europe. Certainly, standard of care is not a biopsy. But you're always going to have institutions or physicians that have their own standard of care. And so we expect it to be the exception rather than the rule.

And maybe one last question here. As we do think about launching in Europe, there's such uncertainty right now around MFN, potential impacts that could have, how are you thinking about pricing in Europe?

Yes. So look, we're still optimistic that Europe will recognize innovation. Now clearly, MFN is something which we haven't heard the last of -- we haven't heard the first of in many ways, and we're waiting to see a what more information exists. The great news is we have nothing to wind. We don't have a price, we don't have products that are already generating revenue that we're going to have to react to MFN. We've got a chance to prospectively look at it. And we're going to hear what it -- how it unfolds, and we will approach each country in Europe based on the information that we have. So we're in a really good position because we haven't been approved yet, we haven't launched yet.

But good things to look forward to.

Very much so.

Well, thank you both. Thank you for joining us this morning. Thanks, everyone.

Thanks for having us.