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

Good morning, and thank you for standing by. Welcome to Madrigal Pharmaceuticals Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to introduce Ms. Tina Ventura, Chief Investor Relations Officer. Please go ahead.

Good morning, everyone, and thank you for joining us to discuss Madrigal's Second Quarter 2026 results. We issued a press release this morning and posted a slide deck to accompany this webcast on the Investor Relations section of our website. On the call with me today is Bill Sibold, Chief Executive Officer; Dave Soergel, Chief Medical Officer; and Mardi Dier, Chief Financial Officer. They will provide prepared remarks followed by Q&A. Please note on Slide 2. We will be making certain forward-looking statements today. We refer you to our SEC filings for a discussion of the risks that may cause actual results to differ from the forward-looking statements. With that, I will now turn the call over to Bill on Slide 3.

Thanks, Tina, and thank you all for joining. Before we review our second quarter results, let me remind you why we're so excited about MASH and why we believe Madrigal is uniquely positioned to lead this market. The market fundamentals are exceptional. MASH is a high unmet need disease with the potential for decades of growth given today's low diagnosis and treatment rates and a rapidly expanding patient population. We are at the forefront of one of the most attractive growth opportunities in the industry. We also have what we believe is the foundational therapy. Rezdiffra is the first approved medicine for MASH, a liver-directed once-daily oral medication with demonstrated efficacy across each MASH subgroup and an outstanding real-world profile. Add to that, our commercial execution, our experienced team and our industry-leading pipeline. We believe Madrigal is exceptionally well positioned to lead in MASH today and define where this market goes over the long term. Slide 4 summarizes how we're executing on our 2 strategic growth priorities. Maximizing the value of Rezdiffra and advancing our pipeline. Rezdiffra continues to exceed expectations as we steadily add patients quarter-over-quarter. Over the last 12 months, Rezdiffra has generated nearly $1.3 billion in net sales, reinforcing its mega blockbuster potential. We're also strengthening the long-term value of the franchise. A key pillar of that strategy has been to build a robust patent estate. Last year, we secured our pivotal 2045 F2-F3 patent. This month, we built on that foundation with 3 additional patents, 2 that reinforce our protection in F2-F3 and 1 supporting our potential F4c indication. As we've done successfully to date, we'll continue pursuing IP that protects the future of Rezdiffra. And because we believe Rezdiffra is the foundational therapy in what will become a large specialty market, we're investing behind it. In less than a year, we built what we believe is the industry-leading MASH pipeline, adding more than 10 programs. We now have 4 clinical stage assets following the initiation of the Phase I study of our oral GLP-1 last month. Each of our programs is designed to build on Rezdiffra's foundation and extend our leadership in MASH for years to come. We've accomplished a tremendous amount in a short period of time, but we're just getting started. Our team continues to execute on these priorities to strengthen the leadership position we've established. Let's move to our Q2 results, where I'll provide an update on Rezdiffra. Dave will discuss our pipeline and Mardi will close with a review of our financials. Turning to Slide 6 and net sales. We are continuing to see strong demand for Rezdiffra. Second quarter 2026 net sales were $364 million, representing year-over-year growth of 71%. This performance continues to reinforce that Rezdiffra is tracking in line with, and in many cases, exceeding the best-in-class specialty launches we compare ourselves to. Our strong performance is a result of successful launch execution. It's driving our near-term results and building the foundation for the long-term growth. We have effectively wired the system to build a broad and durable prescriber base. And importantly, prescribers continue to tell us that Rezdiffra is performing even better in the real world, and that experience is translating into action. Today, our target specialists are prescribing Rezdiffra more often, which is driving greater depth across our prescriber base. That growing depth, combined with broad first-line commercial access, Rezdiffra's differentiated profile and strong patient adherence continues to drive patient growth. That's why we've steadily added patients ending the second quarter with more than 49,000 active patients on Rezdiffra, more than double a year ago. Importantly, momentum remains strong as we progress through the third quarter where we surpassed the 50,000 patient milestone earlier this month, a significant accomplishment in any launch. One of the things we're most excited about is how quickly this market is developing, as shown on Slide 8. From year-end 2023 to year-end 2025, the U.S. addressable market has grown nearly 50% from 315,000 diagnosed F2/F3 patients at our target specialists to 460,000. That's remarkable growth in just 2 years, and it's being driven by exactly what you'd expect in a new therapeutic category, greater disease awareness, increasing diagnosis, more patients being referred to specialists, a growing urgency to treat and increased investment by multiple companies. We have continued to see strong market growth again this year and expect the MASH market to expand at a double-digit pace for the foreseeable future. In fact, we see parallels between MASH and other large chronic disease markets like rheumatoid arthritis, IBD and psoriasis as shown on Slide 9, each started with 1 or 2 therapies and evolved into markets supporting more than a dozen products and more than [ $20 ] billion in annual sales. We believe that MASH will follow the same path and that Rezdiffra has a stronger profile than the first products that launched in any of those categories. And today, we're only about 10% penetrated in a market with a roughly 10% diagnosis rate. Think about that, 10% of 10%, that's 1% of the total potential market. Yet even from that starting point, as shown on Slide 11, Rezdiffra is already generating north of $1 billion in trailing 12-month net sales. That's why we're so excited about the future. We are still at the beginning of what we believe will become one of the largest specialty markets in the industry where we have a first-to-market medicine with a best-in-disease profile. Everything I've discussed so far speaks to the strength and opportunity of Rezdiffra in F2/F3 MASH, but there is another significant unmet need ahead of us in well-compensated MASH cirrhosis, or F4c, as noted on Slide 12. It's an untapped market with no approved therapies and a much higher urgency to treat. With approximately 245,000 patients under specialist care in the U.S., we believe F4c could double Rezdiffra's opportunity. We have an event-driven outcome trial underway in F4c that if positive, is expected to support expansion into this indication and support full approval across F2 to F4c. And we see the market evolving beyond these initial stages as noted on Slide 13. Like other complex chronic diseases, treatment will evolve to include multiple mechanisms, combination regimens and increasingly personalized approaches. That's why we've strategically invested in building the industry-leading MASH pipeline. Rezdiffra gives us a foundation no one else has, allowing us to thoughtfully add complementary mechanisms that can provide even more efficacy, broaden patient reach and define the next generation of MASH therapies. And one of the reasons we believe Rezdiffra foundational is what we've heard consistently from prescribers over the last 2 years of launch. They not only value its liver-directed efficacy, well-tolerated profile and once-daily dosing, but appreciate that Rezdiffra works across each patient's subgroup in clinical practice. That breadth and consistency across patients subgroups is exactly what you want in a foundational medicine, and it's unique to Rezdiffra. Dave will talk more about this in his section and share key data demonstrating Rezdiffra's broad efficacy. So with that, I'll turn it over to Dave.

Thanks, Bill. As Bill just mentioned, for a therapy to be truly foundational, it should work effectively across patient subgroups. This is especially true in a heterogeneous disease like MASH. The [indiscernible] on Slide 14, with data from our Phase III MAESTRO-NASH clinical trial demonstrates exactly that. Patients on risk differ consistently demonstrated improvements across key subgroups, including fibrosis stage, diabetes status, BMI and genetic background, risk factors that may expedite disease progression. This is another way in which we are differentiating ourselves from the competition and why health care providers overwhelmingly prescribe Rezdiffra when a patient is diagnosed with F2 or F3 MASH. But we're not standing still. Leadership means continuing to advance the science and generating evidence that supports Rezdiffra's clinical benefit well beyond approval. It's an ongoing effort to better understand Rezdiffra, answer important clinical questions and continue to raise the bar for what's possible in MASH. At EASL this year, we presented more MASH abstracts than any other company. I'll highlight 3 presentations that reinforce our belief that Rezdiffra is the foundational therapy in MASH. First is our F4c analysis on Slide 15 using the anticipated NASH risk model. Anticipate NASH is a validated model developed specifically for patients with MASH cirrhosis. It estimates the patient's likelihood of developing clinically significant portal hypertension or CSPH, and future liver-related events. The MASH field is rapidly evolving, and this model has become increasingly accepted tool for assessing risk in patients with compensated matched cirrhosis. This is an emerging area of science, and we are an early adopter of this new tool. That's an important part of how we approach leadership at Madrigal. We're not simply following the evolution of the field, but we're helping pioneer new ways to understand treatment response and disease progression. We applied the anticipated NASH model to the 122 patient 2-year open-label cohort from our Phase III MAESTRO-NAFLD-1 trial. The proportion of patients classified as higher risk for CSPH, declined from 75% at baseline to 55% at 2 years of resmetirom treatment. Why is this important? The development of portal hypertension is the key pathophysiological inflection point in compensated cirrhosis. Once patients progress to CSPH, their risk of decompensation and other serious liver-related events increases by approximately fivefold. These findings further strengthen our confidence that resmetirom has the potential to delay disease progression and improve long-term outcomes in patients with F4c MASH. The second data set extends our understanding of Rezdiffra beyond the liver. Patients with F2/F3 MASH don't just have liver disease, they also carry substantial cardiometabolic risk. In fact, cardiovascular disease remains the leading cause of death in this population and MASH itself is an independent driver of cardiovascular risk. Our secondary analysis from MAESTRO-NASH and MAESTRO-NAFLD-1 showed significant reductions in the ApoB, including Lp(a) and LDL, regardless of baseline statin use. Taken together, these data suggest is different may positively impact both liver disease and cardiovascular risk. Slide 17 highlights differs performance in the real world. Clinical trials establish efficacy, real-world experience builds prescriber confidence. After treating tens of thousands of patients, prescribers continue to tell us Rezdiffra IS performing even better than they expected. The data at EASL support those observations. In one large gastroenterology practice over a mean follow-up period of approximately 9 months, nearly half the patients achieved at least a 25% reduction in liver stiffness, a key measure of treatment response. Real-world evidence like this complements what we've already seen in our clinical trials and reinforces Rezdiffra's best-in-disease profile. To deepen our understanding of Rezdiffra's full clinical potential, we're broadening our evidence generation efforts across real-world studies, investigator-initiated research in company-sponsored trials. We will continue to pursue the questions that matter most to physicians and patients and work to generate new data that can further inform how MASH is diagnosed, treated and managed. Putting it all together on Slide 19, we have translated our leadership into action. In just 1 year, we built the industry's leading MASH pipeline with more than 10 programs, including 4 clinical stage assets, all anchored by Rezdiffra. This momentum will continue into 2027 when we expect to initiate 3 Phase II trials. The first, we'll evaluate MGL-2086, our oral GLP-1 in combination with resmetirom. Our goal is to potentiate resmetirom's antifibrotic effect. We began dosing MGL-2086 in a Phase I single ascending dose study in June. Results from this first-in-human study will inform the Phase II trial. We also plan to initiate a Phase II study of our DGAT-2 inhibitor of Ervogastat in combination with resmetirom. And we'll engage with regulatory authorities on the design of a Phase II trial combining resmetirom with [indiscernible], our siRNA targeting PNPLA3 in license from Arrowhead in May. We're also progressing 1 of the 6 preclinical siRNA assets that we had licensed from [indiscernible]. We recently nominated the first candidate to move into IND-enabling studies. All of this is advancing alongside our 2 ongoing Phase III Rezdiffra trials. First, our F4c MAESTRO outcome study, which is an event-driven trial that we expect to read out in 2027. And second, the F2/F3 MAESTRO-NASH study, which is primarily histology driven with data expected in 2028. We've made significant progress in a very short period of time. With Rezdiffra's foundation and long-term patent production providing the runway to invest and innovate, we have an opportunity to define the future of MASH care and meaningfully improve the lives of patients. With that, I'll hand it over to Mardi.

Thank you, Dave. Turning to Slide 20 and a summary of our financial results. We delivered another strong quarter, with second quarter 2026 net sales of $364.3 million, representing 71% growth year-over-year. Demand for Rezdiffra remain strong. We once again steadily added patients, more than doubling patients on Rezdiffra compared to a year ago. We also continue to effectively manage growth to net and continue to expect our gross to net discount to be in the mid- to high 30s for this year. Taken together, these fundamentals support our expectation for continued steady patient adds and robust net sales growth. Moving to operating expenses, which included a total of $35.4 million of noncash stock-based compensation expense in the quarter compared to $25.2 million in the prior year period. Cost of sales for the second quarter of 2026 was $49 million compared to $9.1 million for the prior year period. Cost of sales was primarily driven by an increase in royalties payable to Roche and a write-down of certain work-in-process inventory. R&D expenses for the second quarter of 2026 were $91.2 million compared to $54.1 million for the prior year period. The increase was primarily due to a onetime upfront business development expense of $25 million related to the in-licensing of MGL-0795, a clinical stage siRNA program from Arrowhead. SG&A expenses for the second quarter of 2026 were $289.4 million compared to $196.9 million for the prior year period. The increase was primarily due to continued investment in commercial activities for Rezdiffra including head count for the endocrinology, field force expansion that occurred in the fourth quarter of 2025 as well as marketing efforts, including our DTC campaign. Looking ahead, we expect full year 2026 R&D expenses to be roughly the same as 2025, which is inclusive of the onetime upfront payments we've announced for strategic business development investments in both periods. We expect a full year 2026 SG&A expenses to increase compared to 2025 with the annualization of the Endo sales force as we continue to support the launch of Rezdiffra and build the foundation for long-term growth. Net loss for the second quarter of 2026 was $57.9 million compared to $42.3 million for the prior year period. Net loss for the second quarter was inclusive of a onetime upfront business development expense of $25 million. While our focus remains on supporting our top line growth and building our pipeline, we are also preparing for profitability. Turning to our balance sheet. We ended the second quarter of 2026 with $838.9 million in cash, cash equivalents, restricted cash and marketable securities, compared to $988.6 million at year-end 2025. With a strong cash position, we continue to be well resourced to support the ongoing launch of Rezdiffra, the advancement of multiple pipeline programs and continued business development. So to conclude, on Slide 21, we believe Madrigal is exceptionally well positioned for continued value creation with nearly $1.3 billion in trailing 12 months net sales, Rezdiffra is on its way to a mega blockbuster status. And as Bill said, the third quarter is off to a great start. We've more than doubled the number of patients on therapy over the past year, while the addressable NASH market itself has expanded by nearly 50% in just 2 years, and we believe it's still in the early stages of what will be decades of growth. We're building on Rezdiffra's foundation with the industry-leading pipeline of more than 10 programs. We look forward to multiple future data readouts, including our Phase III F4c trial. We're investing from a position of strength with an R&D strategy designed to extend our leadership and create long-term value. Taken together, we believe Madrigal is exceptionally well positioned, not only for continued growth in 2026, but for sustained value creation for many years to come. I'll now turn the call back over to Tina to begin the Q&A session.

Thanks, Mardi. Let's move into the Q&A portion of the call. Operator, please go ahead and provide instructions for the Q&A session.

[Operator Instructions] Our first question comes from the line of Prakhar Agrawal of Cantor Fitzgerald.

Congrats on the quarter. I had 2. Firstly, I wanted to ask about the 3Q trends. What are you seeing and expectations for net patient adds for the remainder of the year? Just wanted to get a little bit of better color on what segments are going to drive further growth here. And how do you feel about where the consensus is sitting for 3Q and full year 2026? And second question, you have started targeting endocrinologists last year. Any initial thoughts on what you are seeing on the uptake among endocrinologists. Could that be a meaningful growth segment? Or is it more niche right now?

Thanks for the question, Prakhar. It's Bill. Maybe just a comment on where we are year-to-date here. We had really, I think, an exceptional quarter in Q2. That was driven by exceptional execution, exceptional market dynamics. And I think that is really the best indicator of where we're headed for the future. The fundamentals of the business are terrific. We have great access. 2026 is going to be another great year. As you know, we exceeded Q2 expectations. Q3 is off to a great start. We have said and we continue to steadily add patients with over 49,000 patients at the end of Q2, more than doubling year-over-year patient numbers. And we did announce this 50,000 milestone, which -- that is a really remarkable number in any launch. I don't care whether you're in a specialty launch, nonspecial launch, 50,000 represents great progress. And that's something that we got across that in July. So we continue now looking forward to Q3 and beyond to steadily add patients. We've been steadily adding. We're going to continue to steadily add patients through third quarter and through the rest of the year. So I think we're set up really well for '26. But Mardi, do you want to talk maybe a little bit about some of the specifics.

Yes, absolutely. And Prakhar. As Bill said, we're off to a great start in the third quarter, and we're going to expect to steal the outpatients as he just discussed. And with respect to third quarter and fourth quarter, what we'd like to say is that, yes, we're comfortable with the consensus quarterly growth rate for the rest of the year. So what that means from going the growth rate -- the consistent growth rate from second quarter to third quarter and then again, the consensus growth rate from third quarter to fourth quarter. So taken together, just as we said, robust sales growth for 2026.

And Prakhar, just to talk about kind of the segments where it's coming from. This continues to be driven by [indiscernible] for the most part. That's just where the prescriptions happen where we would expect that they're going to continue. You also asked about endocrinology. Endocrinology was a fourth quarter 2025 focus of ours. So we're still really early into that. And you have to remember, endocrinologists, just I'll make 2 real quick points about them. Number one, they've been using GLP-1s for great decade, and they still are seeing lots of MASH and want to talk about Rezdiffra, check that box. Number two, they just got started really in the fourth quarter of last year. So there -- in kind of that first year of launch and HexonGI, they have to take their own time to wire the system, know how they're going to access their NITs, what's the pathway they have for their practice. So lots of potential in endocrinology in time, but you have to just know where they are. They're kind of 9 months into the launch really at this point. But certainly very promising.

Our next question comes from the line of Ellie Merle of Barclays.

Congrats on the strong performance. Just in terms of patient growth, it seemed to accelerate versus the first quarter. I guess what are the drivers of this and your expectations for patient growth from here? And then just in terms of F4c, I guess, how is the event rate tracking in that study? And any clarity on FY '27 you might expect to release the data. I recognize you might not comment, but figured I would try.

Thanks, Ellie. Thanks for the question. On the patient growth, now I just want to make sure just [indiscernible] the way we report patient numbers is the number of patients that are on Rezdiffra on the last day of the quarter. And that is the net of patients that are coming in the top of the funnel, and patients that are going at the bottom of the funnel, right? I mean as you get a bigger and bigger denominator, you have more and more patients exposed to potentially dropping off. Now the great news this year is that we continue to steadily add patients as I've said. And we don't see that slowing down at all. But remember, you really have to work a lot harder on the top of the funnel as you have a bigger denominator that patients can fall out of. We're seeing persistency like a well-tolerated oral, well-tolerated oral at the 1-year mark is in that 60% to 70% range. No changes there. Product has been performing exceptionally well. When we talk to the community, we hear stories of persistence, which are even higher than that. So we have focused our efforts with our internal teams on how do you address persistency to have more patients stay on longer. And then how do we work with specialty pharmacy -- pharmacies, et cetera, to get that same result. So it's a real focus of ours to drive the top of the funnel, adding new patients and to keep patients on and then we get to that net number. And we think that we have a really good approach, and that's why we continue to say we expect to steadily add. Maybe Dave, I'll return to you [indiscernible].

Yes, sure. Yes, a quick update. So I mean clearly, MAESTRO outcomes is an important trial for the field given the unmet medical need and the fact that this is going to be the first outcomes trial in that foresee to read out with outcomes, which is a big thing for the field. So the good news is we're seeing events accrue in the trial. However, as we said in the past, this isn't like, for example, a cardiovascular outcome study where you have a large number of target events. So in this case, precision is very difficult. And when we can be more precise, we'll provide an update at that point. But right now, we're tracking to 2027, as we said.

Our next question comes from the line of Thomas Smith.

Congrats on the nice quarter here. I was wondering if you could clarify and maybe expand on the comments regarding gross to net and inventory dynamics in the quarter and how you see those evolving through the balance of '26. And then could you also clarify the contribution of Europe to the worldwide revenues and patient numbers. We saw there was an early access program that launched in France during the quarter. Anecdotally from some KOLs, it sounded like there's been some nice early uptake there. But can you just comment on that program and how you think about Europe contribution for the year?

Great. Tom, thanks. Mardi, do you want to talk about personnel?

Yes, absolutely. So gross to net, as we said last quarter, our gross to net projected for 2026 is in the mid- to high 30s. And we are right in that zone for 2Q, and that's what we expect for the rest of the year. And that's really balanced with a mostly with a high demand quarter with respect to inventory just as we have with every quarter, no big changes there. So overall, everything is going well for the rest of the year in 2026, as we've discussed, what we believe the growth rate is for the rest of the year. In Europe, do you want me?

[indiscernible] Thanks for the question, Tom. Look, contribution of Europe is negligible in the quarter, and we would expect that to be for the year. Now let me just talk a little bit just with ex U.S. in general. We've launched in Germany. And as you say, we have the early access program in France and we received approval in the U.K. A couple of observations. This is not a U.S. disease. It's a global disease. There's a high unmet need. Interest is really high firm prescribers and from patients. Reimbursement is challenged. You have to remember, we're in an MFN context here, where there is still uncertainty about where that all lands. And I think we're going to be in a period in the next 12, 18 months where things are still settling down. So systems have not -- when I say systems, other countries have not yet adopted what the ask is of the administration in FM, which is paying U.S. prices. So that's something that we're at the table. We're talking with all of the governments there about this. I'm really hopeful for a long-term solution. But as I said, in this time where it's just kind of really dynamic and a lot of uncertainty as to where policy lands and so forth, that's why we say it's going to be negligible. But remember, we've only launched in Germany. That's where we've done our build. We've been extremely disciplined about the building we spend there. So more to come in the following quarters. But as I said, it's certainly -- there certainly is a high unmet need. It's just we've got to solve the reimbursement piece. And this isn't a Madrigal's specific issue. This is an industry issue overall.

Our next question comes from the line of Ritu Baral of TD Cowen.

I wanted to drill down a little further on outcomes foresee timing and sort of the drivers there for the data. Can you guys confirm that per your design publication that you're still aiming for that 92 event threshold? Or is there a possibility that you might want to boost powering based on what you're seeing. And based on further just based on our conversations with KOLs, they indicate to us that like events in F4 tend to be almost more asymptotic in the sense that they accumulate much, much more rapidly and barely at all in the first part of the trial versus more sort of linear cardiac outcome study event accumulation. Can you comment on what the natural history tells you on that event accumulation curve and how that contributes to how you're approaching giving us additional clarity and narrowing of data timing guidance?

Great. Thanks, Ritu. I'll pass that over to Dave.

Yes. Thanks, Ritu. I think the first thing to comment on is we haven't actually confirmed the target number of events. So what we've said generally is there's a publication by Harrison that's a few years old that was sort of evaluating an earlier version of the protocol. And we've heard other numbers out there. What we said in general is that most of these numbers are in the ballpark, but we haven't confirmed the actual number. I think to your point about accumulation of events, look, I mean we're pioneering in this space. This -- as we've said many times before, this is really the first well-controlled F4c outcomes trial with a therapeutic agent. So what we -- we've heard the same thing from KOLs that the possibility is that events accelerate over time as patients sort of age through the F4c pathophysiology and the patent development, for example. I think the good news is, like I said, we're seeing events accrue. They're in line with our projected completion date in 2027. So when we can be more precise, we'll provide more precision. But I think what you're highlighting is one of the questions that's out there, right? So it's what -- how does the placebo sort of evolve over time within a controlled trial.

Our next question comes from the line of Andy Chen of Wolfe Research.

So we noticed that you provided a time line guidance on the oral GLP-1 and DGAT-2. Just curious if -- can you maybe tell us a bit more about the Arrowhead asset when it's Phase II going to begin. And then with the oral GLP-1, the SAD has initiated. Is it reasonable to maybe predict that maybe we're going to get data next year?

Great. Thanks, Andy. Dave?