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

All right. Welcome, everyone, to day 2 of Cantor's Global Healthcare Conference. My name is Prakhar Agrawal. I'm a biotech analyst at Cantor. And for the next session, we are very excited to host the team of Madrigal. Joining us today, we have the entire management team, Bill, CEO; Mardi, CFO; and David, Chief Medical Officer. Thank you so much for taking the time to join our conference.

Thank you.

Maybe, Bill, we can start off with just level-setting expectations. Coming out of 2Q, what were some of the key highlights for you internally on Rezdiffra's performance and things that maybe Street fully underappreciated?

Yes. Well, first of all, thanks for having us, Prakhar. We're really happy to be here. Q2 was a great quarter for us. If you look at it from any of the metrics that we share, starting with $364 million in sales. That puts us in a very, very elite group when you take out some of the already mega blockbusters that exist. There's very few companies that could put up a quarter like that with some differences, and I'll get to that in a second. We also announced that we had greater than 49,000 patients. That was the end of Q2, but we also said that we crossed the 50,000 mark in July, which is a big -- it's a significant milestone when you cross 50,000. Now the other piece which is really interesting, and this is getting a little bit more to the what's underappreciated. I think that there's still a lack of appreciation for the market dynamics that exist in MASH. That 50,000 and that $364 million, just to put in context, we are in a disease that's about 10% diagnosed today and 10% penetration. So that's 1% of the opportunity. We are at the very beginning of what could be a big market. And the market growth dynamics are certainly exceptional. We reported at the end of '23 that there was about 315,000 patients that were sitting in the practices that we were going to be calling on our target prescribers, and that number grew to 460,000 at the end of '25, so almost 50% growth in 2 years. And what we're seeing through the first half of '26 is very robust market growth that's continuing. We said that we expect double-digit market growth for the foreseeable future, and that's certainly the case. So I think the market is treating us at times like it's a mature market where you're in a zero-sum game for market share, et cetera. Instead of looking and saying, this is a lot like some specialty markets that evolved over 20 to 30 years, RA, psoriasis, IBD, and those have become $20 billion, even $30 billion markets. And we feel that that's what's going to happen with the MASH market. The difference, we're the leaders. We have a first-mover advantage. And because of the success of the product, we've now built a pipeline which really leads to longer-term growth and success as well. So I think that it's sometimes when you look at something you say, is it too good to be true? Well, I mean, this is not too good to be true. This is true.

And -- there was a big debate that GLP-1s are going to impact the volume. But I mean, you've been constantly adding 6,000 to 7,000 net patient adds in the past few quarters. And I feel like since Wegovy's launch, the patient -- have actually accelerated a little bit. So what's driving some of that growth? Is it that -- being in the market, just increasing the diagnosis rate, treatment rate? Just maybe expand on that.

Yes. Well, look, a couple of things. I think any time you add a competitor or another launch to a market, it certainly helps with the growth of that market, and we're seeing that. I mean, as I said, we're seeing a really, really robust growth continuing with MASH with diagnosis, and Wegovy has helped that. Now what it hasn't done is it hasn't had any impact on the growth of Rezdiffra. And I think that really comes down to profiles. The Rezdiffra profile, you often hear me refer to it as kind of a holy grail profile, an effective, well-tolerated, safe, once-a-day pill. That is -- has kind of been the gold standard, at least in my 35 career -- in the 35-year career experience so far. And that's what I think is driving a lot of the uptake of Rezdiffra. People are seeing that -- it's got a great profile and even more importantly, the real-world evidence looks really good. We look like we are -- I think we look better than we did in clinical trials. That's the report that we got from physicians constantly are saying patients are doing really, really well, even better than I would have expected. So all of that leads to this steadily adding comment that we've been making really for a number of quarters now that we have steadily added and expect to continue to steadily add patients, which is what we're going for here. And you can't fight certain dynamics of a new market. Rarely, and in fact, I don't think I've ever seen in my career where first product launches and every single patient just gets treated out of the gates. It takes time. I mean each physician, each prescriber has to go through their own checklist. They have to make sure they've got the resource to pull through a prescription. They've got to make sure they know how to identify, how they source, how they create pathways. So it just takes some time. That's why we use benchmarking so frequently in our launch metrics. And on all the key metrics, we are at or near the top of those various metrics against other really, really successful specialty products.

Got it. And you've talked about the increase in diagnosis rate as well since the Rezdiffra launch. I guess, where can it go at peak? Are there any analogs that you look at internally to really understand that? And any further steps you could take to increase that?

Yes. I mean, look, as I said, some of that's just on a -- gradually, you increase that diagnosis rate. And that's why -- let me start with, that's why we were so specific and have been so specific about what the diagnosed population is that's at our target prescribers because that's ultimately what is the opportunity immediately in front of you. And I think -- and I'll get to the diagnosis in a second. But when you look at the 315,000 growing to 460,000 and growing well beyond that, that in itself represents an opportunity which is a big specialty market if you were not to at all increase the diagnosis rate. So it's a way to give surety that we have multiple paths to victory, so to speak. Now when you think about diagnosis rates, it really depends. You look at the real high end, cystic fibrosis is over 75%. If you look at something like cirrhosis -- psoriasis, sorry, you have the cirrhosis psoriasis. Psoriasis after almost 30 years of products on the market is still in the upper 20s, I believe. So where do we land? It's somewhere -- it's not going to be up at the 75-plus percent just because it's not as visible the disease and so forth. But all -- if you look at just even the lower end of that, you're talking about a population of diagnosed, which could exceed 1 million-plus people. So that's why us doing the counts and knowing who exactly is diagnosed and already there and building our approach around that to take advantage of that opportunity is the approach that we've taken. But look, where it's going to land, I'm not sure, but is it going to be a lot bigger than the 460,000 today? Absolutely. Is it showing signs of that today? Absolutely. When is it going to get there? It's going to take years, but we are going to make this -- this is a -- it's a big specialty market.

Okay. And I think in terms of the breadth of prescribing and depth of prescribing, you said that you've reached most of the 10,000-plus target physicians, focus is on the depth of prescribing. So maybe just talk about like the steps that you're taking to increase the depth of prescribing. And what are the constraints? Is it just a matter of time as physicians get comfortable with the drug?

Yes. So just to recall, we had originally targeted 14,000 prescribers and about 6,000 were the real high, high target where you had the highest potential. And we announced the 10,000. The 10,000 because 10,000 is a really important milestone that breadth becomes just a little less important because when you've got that many prescribers, if you can start to go deeper, you actually have set yourself up for what you need to do. So we kind of treated that as check the box, we're above 10,000. Now in reality, we're adding prescribers every day. So the number is north of 10,000. So we have enough prescribers driving depth now. There's a few things that drive it. One is time. People just get more familiar. Like I am picking up lay press now that talks about fatty liver that I had never seen before. So I think that's always just familiarity, having us on the market talking about it, having other companies as well. Then it becomes for each prescriber, the experience they have. Now as I said, the good news is that in the real world, people are reporting back, they're really satisfied, prescribers and patients with what Rezdiffra is offering, exceeding the clinical trial results. So that own personal experience is helpful, but we also use real-world evidence and other data that's generated. So you get this continuous feedback loop, and that just leads to more and more experience. And you see physicians -- prescribers, I should say, on a curve where they all start with one and then they add and add and add. So again, when we look at depth of prescribing, we're tracking extremely well. I said, at or near the top of the benchmarks that we're using. So it's time, it's experience, it's generation of data. It's ease of use as we refine our service model to make it easier to write a prescription and to make sure that the patient gets that prescription.

Okay. That's great. And maybe on access, I guess, when the GLP-1, like Wegovy was launching, there was a big debate on whether there will be step edits, more extensive prior authorization. You guys did contracting. We haven't seen much of that. I guess, firstly, how do you kind of convince the payers on getting such a broad access for Rezdiffra? And secondly, as we look forward, any reason to believe that it could change maybe into 2027 or beyond?

Yes, do you want me to take that?

Yes.

Great. Thanks, Prakhar. It's great to be here. Yes, we have excellent access, just as you said, even with the launch of Wegovy, which did put us in a position where we contracted with the commercial payers at the start of 2026. We are able to retain that first-line access, no step edits and improved utilization criteria. So it's something we take very seriously. We have a whole team that works on it. We think they've done an excellent job. We're also solving for 2045, right? So we're here for the long term. So everything we do, we want to protect that gross to net and make sure we maintain the best access that we can for these patients. So we think about it and work on it continually, and I think we've done a very good job. Now we talked about 2026 with respect to commercial contracting, and then looking ahead for 2027 and beyond. In 2027, we've talked about contracting with the Medicare payers, right? So you usually do your commercial contracting about a year later, it comes in with Medicare. We already have some Medicare that we're contracting with already. So we'll see some of that in 2027 and beyond. But honestly, where we are now with the access that we have, both commercial and the Medicare, we're feeling really good about accessing our gross to net.

And maybe the big hit to gross to net was for 2026. Do you still expect 2027 to increase, but maybe not to the same extent as what happened in 2026?

Yes. Generally, yes, that's correct. Because going from no contracting to stepping up from '25 to '26, yes, that was meaningful, and we talked about that quite a bit. So going forward, you still see some degradation to gross to net, just naturally as you do in the business on the commercial side, but we'll also have some of the Medicare impact as well. But generally, the biggest impact was in 2026.

Maybe just one comment as well about Wegovy and Rezdiffra. I mean first of all, our company view on GLP-1s is that for other indications, assuming the prescriber thinks it makes sense and it's on label that GLP-1s are great. For MASH, Rezdiffra, we believe, is the product that patients should be on. Are there combination therapy? Yes, there's -- look, we got our own oral GLP-1. So we're interested in can we get a little bit of weight loss in association in combination with Rezdiffra, we know we get a better effect. We haven't tried that through a pharmacologic intervention, but we think that's good. I think what it shows is real world profiles matter because when you look at the -- both products from a clinical trial perspective, there's -- they're quite similar. But when you look in the real world, that's where things change. And that's where our profile matters so much and is driving the uptake. And I think, payers, we've explained that to them that if someone has to stay on a drug for it to work, they know that this is an expensive disease and they want something that people are going to take and work. You can have something which costs much less. But if you can't get to the therapeutic dose or stay on it long enough to have the effect, you're going to end up paying for that later either in the form of somebody progressing or having to then switch to a Rezdiffra. So I think we've really hit the stable point of people understanding kind of where each product is appropriately used.

Okay. And we're in September right now almost getting close to end of the year. So people have already started talking about 2027. And I guess, any initial thoughts on how do you see 2027 panning out versus 2026? I mean, the drug will already be annualizing at $1.75 billion plus exiting based on where consensus sits right now. Any dynamics maybe apart from the contracting on the Medicare side that we should be aware of in 2027?

Well, I can answer that, yes. So we haven't talked a lot about 2027 yet. So we're not talking specifics, and we haven't given specific direction on that front. But I think everything that Bill said before is the setup for 2027, the rest of '26 and into '27, which is market growth, considerable market growth that we think continues to grow at double-digit rates. Market access we just talked about having good first-line access across the board. The depth of prescribing that we're seeing out there with Rezdiffra, and our IP patent life into 2045. So the setup is fantastic. We talked about robust sales growth for the rest of 2026, and we just think where we are on patient adds as well and where we are in the dynamics and the benchmarks and the analogs, it's a great setup for 2027 and beyond.

Okay. Got it. And with any large market, there's always more competition. So we have a few readouts coming in the next 12 to 18 months. Inventiva has a readout in 4Q. We have the FGF21 reading out sometime in 2027. I guess for you, Antony (sic) [ David ], is there any scenario out of these readouts where you think, all right, we need to up our game commercially because I mean, we have seen analogs in markets like we mentioned about psoriasis, any new drug increases the size of the market. So like -- but for any scenario from these readouts where you think, all right, we need to figure out a way to really expand commercially, like make sure that our infrastructure is right there because competitors are coming.

Well, I mean, look, I think you're right. In any time a product -- a new product launches, it helps the overall growth of the market. We've got a great profile. It's really hard for me to look ahead and see anything in the upcoming pipeline that offers something beyond Rezdiffra. Also, what no one has is over 50,000 patients that are on drug and has -- it will be 3-plus, 4 years of real-world experience. We continually up our game. So the way we launched, we continue to iterate on the services that we provide, how we interact with the community, how we partner with the community really. And that's just gotten better and better. So we will continue to do that regardless of whether there's competition or not. And I think if I take a look at 12 months ago, we had the -- that some were thinking the falling off the cliff of the world moment when Wegovy was approved. We're 12 months into their launch, and we haven't seen an impact on Rezdiffra. That's competing against one of the biggest pharmaceutical companies in the world. We feel we can compete against anybody.

Great. That's a good segue to the pipeline. I guess, firstly, there's a big focus on the F4c readout that's coming. What drives your confidence internally that this should be a positive readout for Rezdiffra?

Well, I think first of all, it starts with the data that we have in our hands. So -- we have a very rich experience with 122 patients in an open-label study. So all with F4 cirrhosis who have baseline characteristics that are very similar to the Phase III population in the MAESTRO-OUTCOMES study. So in that open-label study, we see compelling changes in some of the key measures of liver effects. So we see reductions in liver stiffness measurements over 2 years of 6.7 kilopascals. And just to put that into context, in cirrhosis, you usually work on the rule of 5 kilopascals. So if you increase your liver stiffness by 5 kilopascals, you're entering a new level of risk category with respect to portal hypertension. So a reduction of 6.7 kilopascals suggests that we're able to put a lot of patients into a lower risk category after a couple of years of therapy. And indeed, about 65% of patients who have clinically significant portal -- had clinically significant portal hypertension at baseline shifted to lower risk categories over that 2-year period. So that's the CSPH measures using liver stiffness measurements. But there are also other measures in that trial, including MR elastography, including liver enzymes and other biomarkers that all go in the right direction and give us a lot of confidence. And then last, again, these are sick patients with cirrhosis. And yet, what we see is a 2% to 3% annualized event rate in that open-label cohort. So a lower event rate than one would expect from natural history, which we would expect to be in the 5% to 10% range. So that kind of sets the sort of expectation that we're seeing a positive effect of the drug and gives us confidence about what we'll see in the Phase III trial.

Right. And so you mentioned about the placebo event rate 5% to 10%, it seems like a pretty wide range. So I guess like how was the trial powered? And like in terms of enrichment as well, like where do you think the placebo -- like the base case expectation of where the placebo lands?