MADRIGAL PHARMACEUTICAL Q3 2026 EARNINGS CALL - MADRIGAL PHARMACEUTICALS INC

Financial Performance:

• Q3 2026 net sales reached $431.3 million, representing a 50% year-over-year increase.
• Year-to-date net sales exceeded $1 billion; sales are annualizing at over $1.7 billion.
• Company reported its first quarter of profitability with net income of $55.4 million, compared to a net loss of $114.2 million in the prior year period.
• Cash position ended the quarter at $961.8 million; operating cash flow has been positive for two consecutive quarters.
• Gross-to-net ratio expected to close Q3 2026 at the low end of the mid-to-high 30s range for the full year; projected to be slightly higher (plus or minus high end of range) for 2027 due to Medicare Part D contracts.
• Operating expenses included $38.9 million in non-cash stock-based compensation; R&D expenses decreased to $71.8 million from $174 million due to one-time prior-year business development costs.
• SG&A expenses rose to $265.7 million due to continued commercial investment in ResDifera.
• Patient count on active therapy reached 55,850 at quarter-end, nearly double the 29,500 recorded a year ago.

Guidance and Future Outlook:

• Market growth for U.S. F2-F3 MASH is accelerating, expected to exceed 30% in 2026, with the diagnosed population estimated at over 530,000.
• Long-term market penetration remains low at approximately 1% (10% diagnosis rate x 10% treatment penetration), indicating significant runway.
• 2027 revenue is expected to maintain strong growth momentum, though specific guidance is not being issued; Q1 2027 will face typical seasonal dip similar to other specialty drugs.
• Management projects the business to potentially "dip in and out of profitability" in the near term due to reinvestment in pipeline and commercial activities, despite the current positive operating cash flow.
• The F4C addressable market is estimated at 360,000 patients, a 45% increase from previous estimates and larger than the F2-F3 market at launch.

Business Segments and Product Lines:

• ResDifera (RISDIFERA): Established as the foundational therapy in MASH with a strong real-world safety profile; currently generating over $1.7B annualized revenue.
• F4C Program: Advancing the "Maestro NASH Outcomes" Phase 3 trial (845 patients) with a readout expected in late 2027; a second "Maestro CSPH" Phase 3 trial is planned to initiate in H1 2027 to enrich for portal hypertension.
• Combination Pipeline: Advancing over 10 combination programs; three Phase II trials planned for 2027 involving ResDifera paired with DGAT2 inhibitor (Virgostat), GLP-1 agonist (MGL-2086), and sRNA TMPLA-3 (MGL-0795).
• Early Pipeline: Six siRNA programs and three exploratory assets advancing in parallel.
• Real-World Evidence: Highlighted at ASLD with 13 abstracts, including the largest real-world study covering nearly 12,000 patients.

Market and Competitive Landscape:

• ResDifera holds an estimated 10% market share within the diagnosed F2-F3 population; the total opportunity is growing rapidly due to increased diagnosis and guideline emphasis.
• Competition from Wivigo has had no discernible negative impact on ResDifera's growth; the company notes a competitive lead of at least 15 quarters against the next potential entrant.
• Competitor programs for F4C have faced delays, with the earliest potential competitor not expected until 2030, widening Madrigal's lead.
• The MASH market is evolving toward non-invasive diagnosis and monitoring; Madrigal is actively validating biomarkers and non-invasive endpoints for F4C treatment.

Risks and Challenges:

• Profitability volatility in the near term due to strategic reinvestment and one-time business development expenses.
• Dependence on continued market acceleration and diagnosis rates; current diagnosis rate is only ~10%.
• Future competition, particularly in F4C, though Madrigal believes current pipeline advantage mitigates this risk.
• Regulatory reliance on biopsy for clinical trials, despite industry trends toward non-invasive methods; Madrigal is participating in consortia to change this standard.
• Potential impact of GLP-1 agonists as background therapy, though current data suggests they do not hinder ResDifera uptake and may complement the market growth.

Management Commentary and Tone:

• Tone is highly confident and aggressive, repeatedly using terms like "mega-blockbuster," "first and best," and "firing on all cylinders."
• Management emphasizes the "practice-shaping" nature of their new F4C trial strategy to set the industry standard.
• CEO Bill Sibbild characterized the launch as one of the best in the last decade, citing strong prescriber adherence and real-world effectiveness.
• CFO Marty Deer reinforced the self-funding capability, stating the operating model is working and allowing for strategic, sustained value creation.

Analyst Questions and Answers:

• Q4 Trends: Management confirmed steady patient additions and consistent growth rates into Q4, with no anticipated pulls or pushes disrupting the momentum.
• F4C Trial Design: The new Maestro CSPH trial will enrich the population for patients with clinically significant portal hypertension (CSPH), leveraging 5 years of F4 data to increase event rates and differentiate the study from competitors.
• Maestro NASH Readout: Readout timing remains late 2027; event accrual is tracking well, with dropout rates within expectations.
• GLP-1 Interaction: Approximately 25-30% of Maestro NASH participants are on stable GLP-1 therapy; these are excluded from trial if started as a new intervention, but they are viewed as a background therapy that does not negatively impact ResDifera adoption.
• Medicare Contracts: Medicare Part D contracts for 2027 are currently being negotiated; management expects a slight increase in gross-to-net impact from the previous year but remains well-managed.
• Non-Invasive Monitoring: Madrigal plans to validate non-invasive biomarkers for CSPH monitoring within their trial data to provide tools for clinical practice.
• Mega-Blockbuster Definition: Management defines "mega-blockbuster" based on the unique unmet need, high patient volume, and the potential for F4C to double the F2-F3 opportunity.

Other Key Points:

• Patent protection for ResDifera is expected to extend into 2045.
• The company is actively engaging with the FDA to finalize the protocol for the Maestro CSPH trial to ensure potential for differentiated labeling.
• Endocrinology practices are showing rapid adoption rates, with converting physicians often demonstrating deeper prescribing depth than gastroenterologists.
• Management emphasized that the combination of two outcome trials (Maestro NASH Outcomes and Maestro CSPH) provides a unique "data moat" against competitors.