Madrigal Pharmaceuticals, Inc. (MDGL) Earnings Call Transcript

Hi. Good afternoon, everyone. My name is Edward Nash, Senior Biotech Analyst here at Canaccord Genuity. It is my pleasure to have with us today the management team from Madrigal Pharmaceuticals. Joining us from the company, we have Mardi Dier, the Chief Financial Officer; Carole Huntsman, Chief Commercial Officer; and we also have David Soergel, who is the Chief Medical Officer. Thank you all for joining us today.

So from at least in the biotech world, we usually -- I would say Madrigal doesn't need any introductions because they were the company that got the first drug approved for a very large indication out there known as MASH. You've had a really impressive second quarter and with continued strong growth. Although the company does not provide specific revenue guidance, could you maybe talk to us a little bit about the commercial growth of Rezdiffra since its launch in April of '24? And how Madrigal positions Rezdiffra from a perspective of the long-term expectations?

Yes. Great. Thanks, Ed, and thanks for having us. We really appreciate being here. Yes, we'll take -- I'll take a stab at answering that question. So at Madrigal, we've had excellent commercial growth since our launch in the first quarter of 2024, and we're focused very much on our 2 top priorities, which is building value for Rezdiffra, getting Rezdiffra to as many patients as we can and building our pipeline so we can maintain our leadership position in MASH. And if we talk about the quarter specifically, we announced in 2Q at the end of July, and we had excellent top line growth. We announced $364 million in revenue, which was 71% increase year-over-year, looking at the same quarter a year ago. And if you look at our trailing 12 months in revenue, we're on a run rate of approximately $1.3 billion. So this is really putting -- that's only after 9 quarters of launch. So this is putting us on a trajectory of a mega blockbuster, which is exactly what we think Rezdiffra is. And we do give KPIs every quarter and we look at our patient adds and how many patients that we have on Rezdiffra, and 9 quarters in, and we look at this as active patients at the end of each quarter. And at the end of Q2 2026, we had over 49,000 patients on Rezdiffra. And we're very excited about achieving a significant threshold. We crossed the 50,000 patient mark in the early July time point. So any launch, specialty or otherwise, that's a significant milestone. So we really think that the growth of the company will continue, and we talked a little bit about what we expect for third and fourth quarter. And we acknowledge that we're comfortable with the consensus growth rate from second quarter to third quarter and then third quarter to fourth quarter 2026, and that will result in robust sales growth for 2026. And we see that growth continuing. So if we look at -- so that's sort of the execution of Q2. But a lot of the growth in the future growth is going to be driven by the market dynamics and then the growth of our pipeline. And the market dynamics are just right for an exceptional launch and continued growth of Rezdiffra. This market is at its infancy. Basically, we are only 10% penetrated into a market that has 10% diagnosis rate. So 10% of 10%, we are just 1% penetrated into what we think can be a significant market. And we're definitely in the leadership position and expect continued growth. And we really liken our growth prospects to some of the large therapeutic areas in categories such as rheumatoid arthritis or IBD, et cetera, where you see these categories at the $20 billion mark and growing multiple decades after the first product launch. So we think there's significant growth opportunity for Rezdiffra, and we think the MASH market is going to continue to grow in the future. And we're just at the beginning of seeing where that growth is. And with that, we want to continue to build on our leadership position within MASH and build out our pipeline. So we've talked about and we have announced that we have IP protection of Rezdiffra to 2045. So we're building for the long term. What can we do? We have a once-in-a-lifetime medicine with Rezdiffra. And what can we do possibly in building out F2-F3 and F4c with Rezdiffra? What we can do to transform the efficacy of Rezdiffra through combination therapies? And with that, we've built out our pipeline of potential assets that we can combine with Rezdiffra and continue to grow the market. So in the last year plus, we've added -- we had a pipeline of one drug, Rezdiffra in 2 indications, and we've added -- now we have a pipeline of 10 assets. And we're very capital efficient. We spent less than $300 million upfront to build out this pipeline. But it's setting us up to really take advantage of our leadership position in MASH, the growing market, our excellent execution, and so we're pretty excited about the long-term prospects for the drug and the company.

Fantastic. So Rezdiffra has been in the market now for a little bit over 2 years. Could you talk a little bit about if there's been any real physician evolution in how their sentiment, overall sentiment on Rezdiffra, especially as we've seen an additional competitor come in the market, and we may likely see another one come next year into the market. What's been the company's kind of interaction with physicians on that?

Great question. Thank you. So we, early on in launch, we built a broad base of prescribers. And actually, that is one of the best predictors of long-term success. We actually, last year, announced a milestone of more than 10,000 prescribers, and we've continued to add on a weekly basis even new prescribers to that number. So now we're more focused on depth, depth of prescribing. So where we are right now as it relates to our best-in-class specialty launch analogs is we're right aligned with those analogs in terms of depth. And you may ask why we're getting great breadth and depth. It's really how the product is performing and the positive experience that providers are having with the product. We are hearing really on a regular basis that Rezdiffra is overperforming expectations in the clinic with its best-in-class profile, liver-directed efficacy, well-tolerated once-daily pill. It's really -- they're having a great experience with it. So would I say that physician sentiment has changed? No, not really. But I think there may even be more excitement today about the broad efficacy of Rezdiffra. Dave shared a forest plot during our earnings call that showed how all of the patient subtypes performed on Rezdiffra, and the efficacy was strong regardless of that patient subtype. And that's actually a really significant competitive advantage for Rezdiffra relative to the product that's approved and on the market today as well as to the products that are coming on the market. So that efficacy in each of those patient subtypes. And speaking of competition in the marketplace, we are now at 1 year after the approval of Wegovy in MASH, and we continue to steadily add patients. We continue to have very favorable market access positioning for Rezdiffra. So we're not seeing a significant impact. There is utilization of Wegovy. However, not to the detriment of Rezdiffra. We see Wegovy more as a background therapy. And in fact, if you look at Wegovy prescriptions on a weekly basis, less than 1% are prescriptions written by hepatologists or GIs for patients or in patients with MASH. So we welcome competition. Competition helps grow the market. Competition invests more in education of providers and patients. And in the end, that benefits the leader and the foundational therapy that Rezdiffra is.

And obviously, with Wegovy's approval that we obviously know GLP-1s are very effective in the treatment of MASH. And Mardi, to your comment about expanding your pipeline, GLP-1 was your first -- the first step in that process. Could you talk a little bit about 2086 as the clinical data or the data, I should say, we have to date that would show that a combination of that GLP-1 with resmetirom makes sense?

Yes. It's a great point. So we licensed in MGL-2086 last July, I think, about a year ago. And so 2086 is a orforglipron scaffold GLP-1 small molecule agonist. And what we know -- the reason why we're interested in this mechanism is because we know from the MAESTRO-NASH study that patients who lose just a little bit of body weight, so 5% body weight loss, see a potentiated effect of resmetirom on fibrosis. So you see better antifibrotic efficacy if you can just dial in a little bit of body weight loss. So with 2086, we're not going for 20% weight loss. We're going for just tweaking enough weight loss to be able to get more efficacy out of resmetirom. And so this is sort of consistent with our entire pipeline strategy where resmetirom, Rezdiffra is in the middle of that strategy. Everything that we've in-licensed is built around Rezdiffra and has scientific rationale for being a combination approach. So that's the existing data with GLP-1 and resmetirom. And so what we announced just at our last earnings call is that we initiated our first time in human study with 2086. So it's a novel molecular entity, so it requires going first in human. And then next year, we'll anticipate running a combination study with resmetirom in NASH patients to test its efficacy. So a very exciting time. That was our first in-licensing opportunity. But as Carole mentioned, we've got a whole stable now of agents to combine with resmetirom and build that next generation of medicines.

So in addition to the GLP-1 asset, during the past year, you've also taken in ervogastat, which is a DGAT-2 inhibitor, an siRNA targeting PNPLA3 as well as additional siRNAs for 6 undisclosed targets. Could you maybe highlight briefly the rationale behind this expansion decision? You made these acquisitions very rapidly, probably much quicker than I think of any biotech, not just not just in MASH, but in general, with multiple different mechanisms. And I know the one thing that physicians we've talked to all agree on is that this is going to be a multi-mechanistic approach in MASH. So clearly, you guys are on the right path. But maybe you could just talk us a little bit behind that rationale and expansion for the exact assets that you acquired?

Yes. We moved quickly because the opportunity was there to do a really good deal and get a great asset. So ervogastat, first, as you pointed out, we licensed in from Pfizer last year. They had actually run this medicine up through Phase IIb. So we had already some very good evidence, Pfizer quality evidence, showing that ervogastat has efficacy in patients with MASH, and very effective reducer on its own of liver fat, which, of course, is one of the substrates for the development of MASH. And so the feeling -- the other thing that we know about resmetirom is that the more you can reduce liver fat, the more you can reduce PDFF, the more antifibrotic efficacy you get with resmetirom. And so the combination of these 2 mechanisms, THR-beta with resmetirom and a de novo lipogenesis inhibitor with the DGAT-2 inhibitor gives us an opportunity to boost resmetirom's efficacy in terms of antifibrosis as well. So 2 approaches, GLP-1 and DGAT, with the same sort of foundational strategy, right, looking to combine another mechanism, complementary mechanism with resmetirom and deliver a better profile, better efficacy with the great safety and tolerability we've already seen with resmetirom. So that's the approach that we've taken with ervogastat. And that will be entering a Phase I study, drug-drug interaction study later this year and then a Phase II program anticipated next year. PNPLA3 was licensed in earlier this year. We licensed it in from Arrowhead Pharmaceuticals. And they had been previously partnered with J&J. So there was actually quite a bit of work done in early phase development with this siRNA therapy. As you probably are all well aware, siRNAs are great because they're highly specific to the target and they're very durable. So you can give them quarterly or semiannually, and sometimes even annually for some of these medicines. So the science has really progressed substantially with siRNAs and they are sort of a great modality for chronic diseases like MASH. And so the rationale for combining these 2 mechanisms with resmetirom plus PNPLA3 is PNPLA3 is known to be one of the major genetic drivers of MASH severity, especially in Hispanic patients, up to 30% of Hispanic patients have PNPLA3 mutations that are amenable to downregulation or silencing with an siRNA. So again, in these higher risk patients with PNPLA mutation delivering better efficacy might be an important clinical benefit for those individuals. So that combination rationale is to basically deliver PNPLA3, siRNA quarterly or semiannually, and then have as a baseline therapy resmetirom. So developing as a combination of regimen as opposed to a fixed dose combination.

So will the prioritization of these programs will be driven by the clinical data themselves or it will be, as opposed to you guys don't internally think this is really where things are going to move, and this is the one that we're really kind of crossing our fingers and hoping works out. Or is it just a matter of we get them in and whatever shows the most robust, I know that fits hand in hand. But just kind of curious how you guys are thinking about the mechanisms.

Yes. I mean, I would say the priority -- the near-term priority is to generate the data, right? So run the combination trial. So we'll have 3 combination studies in Phase II starting next year, we anticipate, and we have to talk to the agency about that first. But that's the plan. And once we see those data, we'll have a decision to make about which ones we -- which we bring forward into Phase III. And as we've talked about, resmetirom is already a great drug. I mean, it delivers great broad efficacy across all subgroups. And so the bar for us is actually quite high. So this is not a situation where we have to develop a pipeline of assets because we're running up against a constraint like IP constraint because we have IP out to 2045 with resmetirom. But it really is an opportunity that's been created by the success of resmetirom that allows us to build a pipeline and deliver the next generation of treatments. But the bar is high for us. Like it's got to be a transformative medicine for us to bring it forward.

And just one comment on that. We're very cost effective in building the pipeline, and it's creating the optionality to move the whole sector forward. That's the underlying strategy with our BD.