FORM

Commission file number:

Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(g) of the Exchange Act:

☐

☐

☒

☒

☐

 S-T

☒

☐

non-accelerated

 12b-2

 12b-2

☐

non-affiliates

As of February 21, 2020 the registrant had 15,429,154 shares of common stock outstanding.

 10-14

 10-K

 10-K,

 10-K

120-day

 

This Annual Report on Form for the fiscal year ended December 31, 2019, includes “forward-looking statements” within the meaning of the federal securities laws, which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements in this Annual Report can be identified by words such as “anticipates,” “believes,” “seeks,” “estimates,” “expects,” “future,” “intends,” “may,” “might,” “plans,” “potential,” “predicts, “projects,” “forecasts,” “goal,” “continue,” “should,” “could,” “will,” “would,” or other forms of these words or similar words or expressions or the negative expression thereof. In particular, forward-looking statements contained in or incorporated by reference to this Annual Report relate to, among other things,

Part I, Item 1A of this Annual Report, as well as in our other filings with the SEC. You should read this Annual Report, and the other documents that we file or have filed with the SEC, with the understanding that our actual future results may be materially different from the results expressed or implied by these forward-looking statements.

Moreover, we operate in an evolving environment. New risks and uncertainties emerge from time to time and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual future results to be materially different from those expressed or implied by any forward-looking statements.

Except as required by applicable law or the rules of the NASDAQ Stock Market, or NASDAQ, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. We qualify all of our forward-looking statements by these cautionary statements.

 

 

 

We are a clinical-stage biopharmaceutical company pursuing novel therapeutics that target a specific thyroid hormone receptor pathway in the liver, which is a key regulatory mechanism common to a spectrum of cardio-metabolic and fatty liver diseases with high unmet medical need. Our lead product candidate, (resmetirom), is a proprietary, orally administered, small molecule, liver-directed, thyroid hormone receptor-ß ß) selective agonist being developed as a once-daily oral pill that can potentially be used to treat a number of disease states including steatohepatitis, or NASH. A Phase 2 clinical trial has been completed and the primary and secondary endpoints were achieved in the main study, results were reported in December 2017, and positive topline results were reported at the conclusion of the Phase 2 clinical trial in May 2018. There was an extension study in a subset of the patients that completed the main study, which was completed in 2019.

On March 28, 2019 the Company announced that it had initiated the MAESTRO-NASH Phase 3 trial with its once daily, oral thyroid hormone receptor beta selective agonist, resmetirom. This double-blind, placebo-controlled study is currently being conducted at more than 150 sites in the United States and the rest of the world. Patients with liver biopsy confirmed NASH with stage 2 or 3 fibrosis are be randomized 1:1:1 to receive a single oral daily dose of placebo, resmetirom 80 mg or resmetirom 100 mg. A second liver biopsy at Week 52 in the first 900 patients will be the basis of filing for subpart approval; the primary endpoint will be the percent of patients treated with either dose of resmetirom as compared with placebo who achieve NASH resolution on the Week 52 liver biopsy, defined as the absence of hepatocyte ballooning (score=0), and minimal lobular inflammation (score associated with at least a 2 point reduction in NAS, and no worsening of fibrosis stage. Two key secondary endpoints are reduction in and a or more improvement in fibrosis stage on the week 52 biopsy with no worsening of NASH. Patients will continue in the study for a total of approximately 54 months and will be evaluated for a composite clinical outcome including cirrhosis on liver biopsy, or a liver related event such a hepatic decompensation. The total anticipated enrollment is approximately 2,000 patients and will include up to 15% high risk F1 fibrosis stage NASH patients whose efficacy responses will be evaluated as exploratory endpoints.

On December 10, 2019 the Company announced it had opened for enrollment a double-blind, placebo controlled Phase 3 clinical study in 700 patients with biopsy-confirmed or presumed NASH recruited from sites in the U.S. Key endpoints are safety, including safety biomarkers, LDL cholesterol, lipid biomarkers, and fibrosis biomarkers. Except for serial liver biopsies, the study protocol is similar to the MAESTRO-NASH study with resmetirom doses of 80 mg or 100 mg or placebo and includes key secondary lipid, and NASH biomarker endpoints. In addition, includes an open label arm in which up to 100 patients will be dosed with 100 mg resmetirom. The MAESTRO study will help support the adequacy of the safety database at the time of NDA submission for subpart H approval for treatment of NASH in patients with F2 or F3 fibrosis (MAESTRO-NASH, NASH resolution surrogate endpoint).

balance study, a single dose relative bioavailability study of tablet formulations versus capsule formulation, and a multiple dose drug interaction and food effect study. Further, we have initiated a Phase 1 trial to study patients with varying degrees of hepatic impairment (including patients with mild, moderate and severe hepatic impairment) and NASH patients.

MGL-3745,

MGL-3196

H-accelerated

0-1),

LDL-cholesterol

1-point

MAESTRO-NAFLD-1,

52-week,

MRI-PDFF

MAESTRO-NAFLD-1

-NAFLD-1

The Company successfully completed a Phase 2 clinical trial in NASH in 2018. In this clinical trial, resmetirom demonstrated statistical significance in the primary endpoint (p<0.0001), the relative reduction of liver fat compared with baseline on magnetic resonance imaging-estimated proton density fat fraction, or at which was reported in December 2017, and statistically significant results in multiple endpoints, including key secondary endpoints, reduction and resolution of NASH on liver biopsy as set forth in the table below, which was reported in May 2018. This clinical trial was published in the Lancet in November, 2019.

 

 

 

Resmetirom treated patients with greater than or equal to 30% fat reduction on at demonstrated a higher percentage of nonalcoholic fatty liver disease activity score, or NAS, reduction and NASH resolution. In patients with NASH resolution, 35% of resmetirom treated patients and no placebo patients had a baseline NAS greater than or equal to five. In resmetirom patients with NASH resolution, fibrosis also resolved in 50% of such patients and was decreased statistically significantly relative to all placebo patients.

Further, results from our Phase 2 clinical trial in NASH showed:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

top-line

LDL-C

LDL-C

LDL-C

 (25-31%),

(26-33%)

Resmetirom has been well-tolerated with mostly mild AEs and some moderate AEs, the numbers of which are balanced between placebo and drug-treatment groups. Fewer than seven percent of patients did not complete the study, and patients who discontinued for AEs, all mild to moderate, were balanced between drug-treated and placebo patients. There were two serious AEs in the study, both considered unrelated to treatment, one in a placebo and one in a drug-treated patient.

Lead Product (resmetirom)

We believe that resmetirom may be the first product candidate in development for NASH that selectively targets the THR-ß pathway. Active thyroid hormone, known as T3, interacts with two nuclear receptors, THR-, which is the predominant receptor expressed in most human tissues, including heart and bone, and THR-ß, which has more restricted tissue expression, and is the predominant receptor responsible for metabolic actions in the liver, including both cholesterol- and Selective activation of the THR-ß receptor in liver tissue is believed to favorably affect cholesterol and lipoprotein levels via multiple mechanisms, which may be complementary to those of other lipid-lowering therapies such as statin drugs. We believe that these characteristics of THR-ß activation by resmetirom will in turn lead to clinically meaningful reductions in and plasma and liver TGs.

We believe that resmetirom is the first selective small molecule THR-ß agonist compound. Resmetirom, along with a potential backup compound to resmetirom, was discovered at Roche, or Roche, in Nutley, New Jersey, by utilizing a novel functional assay that, unlike a simple receptor binding assay, assessed the functional activity of compounds which interacted with thyroid hormone receptors. In a published study by Madrigal and Roche in the Journal of Medicinal Chemistry using this functional assay, resmetirom was shown to be highly selective for the THR-ß receptor, with almost no effect on THR-, unlike other compounds purported in published studies to be ß -selective based on binding affinity, but which were shown to equally activate THR- and THR-ß in the novel functional assay.

We believe that the ß-selectivity and liver-targeting properties of resmetirom are critically important for resmetirom’s beneficial metabolic actions in the liver, and enable avoidance of safety issues associated with THR- activation by thyroid hormone and/or less selective THR agonists in tissues such as heart and bone. In a variety of preclinical animal model studies, resmetirom showed enhanced safety relative to T3 or other thyroid agonists. In animal models, resmetirom demonstrated cholesterol lowering, liver TG lowering, and reduction of markers of NASH-related liver inflammation and fibrosis at drug levels similar to those that lowered in human clinical trials, providing data to support the advancement of resmetirom into NASH and FH clinical trials. In chronic animal toxicology studies in dogs and rats, no effects on bone or cartilage histology were seen at any resmetirom dose in either species.

To date, we have completed a series of Phase 1 and 2 clinical studies, Phase preclinical good laboratory practice, or GLP, toxicology studies, and drug manufacturing studies to support further clinical development, including active pharmaceutical ingredient, or API, manufacturing and drug product development studies, drug metabolism studies, acute, subchronic and chronic animal toxicology studies, and other safety pharmacology and toxicology studies.

We have completed Phase 1 studies with resmetirom in a total of 219 subjects to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamic effects of resmetirom. Our Phase 1 studies included randomized, placebo-controlled, double-blind, single and multiple-dose escalation studies, drug-interaction studies with statins, with the antidiabetic agent pioglitazone, and with the antiplatelet agent clopidogrel. In addition, a study using radiolabeled resmetirom, a study of a tablet versus capsule formulation of resmetirom, and a multiple dose drug interaction and food effect study have also been completed. In Phase 1 studies, resmetirom appeared safe and was well-tolerated up to 200 mg once daily. The results of these studies suggest that resmetirom is suitable for once-daily oral dosing. Currently there is an ongoing Phase 1 hepatic impairment study to characterize the safety and pharmacokinetics of resmetirom in patients with hepatic impairment.

In a Phase 1 multiple ascending dose study in healthy subjects, the effects of resmetirom on lipid parameters were assessed as initial markers of pharmacodynamic activity (Atherosclerosis 2013). As illustrated in the figure below, daily doses of resmetirom ranging from 50 to 200 mg showed highly statistically significant reductions relative to placebo of up to 30% for (range, 28% for density lipoprotein cholesterol, or (range, p and 24% for ApoB (range, p and statistical trends of up to 60% reduction in TG (range, p The near maximal lipid effects were observed at a resmetirom dose of 80 mg once-daily. Resmetirom was well-tolerated at all doses, with no dose-related adverse events or liver enzyme, electrocardiography, or vital-sign changes. At the highest dose of resmetirom (200 mg), there was a reversible reduction of 20% in the level of a precursor hormone to T3, free T4, which was significantly different from placebo (p < 0.0001) that may be explained by increased liver metabolism of free T4. There was no change in thyrotropin, a pituitary hormone that regulates the level and production of thyroid hormone by the thyroid gland or T3, or other evidence of central thyroid axis dysfunction at any dose of resmetirom.

 

LDL-C,

Non-HDL-C,

non-HDL

with HeFH 

LDL-C

two-thirds

LDL-C

LDL-C

LDL-C

 (25-31%),

 (26-33%)

MRI-PDFF,

MRI-PDFF

MRI-PDFF

LDL-C

 

 

 

 

NASH is a serious inflammatory form of nonalcoholic fatty liver disease, or NAFLD. NAFLD has become the most common liver disease in the United States and other developed countries and is characterized by an accumulation of fat in the liver with no other apparent causes. The rising worldwide prevalence of obesity-related disorders has contributed to a rapid increase in the global prevalence of NASH and NAFLD. In the United States, NAFLD is estimated to affect approximately 27% to 34% of the population, or an estimated 86 million to 108 million people, and approximately 10% to 20% of those will progress from NAFLD to NASH. Current estimates place NASH prevalence at approximately 9 million to 15 million people in the United States, or three percent to five percent of the population, with similar prevalence in Europe and Asia. The prevalence of NASH is also increasing in developing regions due to the adoption of a more sedentary lifestyle and a diet consisting of processed foods with high fat and fructose content.

type-2

The Centers for Disease Control and Prevention projects the prevalence of obesity to increase from 34% of the United States population to 42% of the United States population by 2030. Driven by this epidemic of obesity, NASH is projected to become the leading cause of liver transplants by 2020. Given the extremely limited availability of organ donors and high transplant costs, NASH patients who require transplantation will place a significant economic burden on the healthcare system. As such, there is a significant unmet medical need for well-tolerated oral treatments for NASH. Because there are currently no therapeutic products approved for the treatment of NASH, the market size is difficult to estimate. However, based on our analysis of multiple market assessments, we estimate that the addressable NASH population is several million patients worldwide, and that NASH could become a multi-billion dollar market able to support multiple approved drug products.

We are developing resmetirom for NASH. Based on the scientific literature in human and animal studies, we believe that NASH livers in humans frequently have a deficiency in THR-ß activity that leads to features of NASH, including fatty liver, inflammation and fibrosis, and that treatment with resmetirom will replace this hormone deficiency and be an effective NASH treatment. We believe that resmetirom is an excellent candidate for the chronic treatment of NASH because of its safety and tolerability profile observed to date in healthy subjects, its effects in reducing cardiovascular risk factors such as and TGs in early-stage clinical trials, and its multiple beneficial effects in animal models of NASH. CVD is the most common cause of death in patients with NASH. We have completed multiple studies in animal models of metabolic diseases, dyslipidemia and NASH in which resmetirom demonstrated a statistically significant reduction in liver TGs, insulin resistance, liver enzymes (which may be elevated in NASH), and markers of inflammation and fibrosis. We believe that resmetirom will treat the underlying lipotoxicity that drives the inflammation and liver cell damage observed in NASH patients, and after the underlying lipotoxicity is treated, NASH-related liver fibrosis will resolve as the liver regenerates.

In October 2016, we initiated a Phase 2 proof of concept clinical trial in patients with liver biopsy documented NASH, including those with diabetes, dyslipidemia and hypertension. In the study we randomized 125 NASH patients 2:1, resmetirom or placebo QD in a double-blind, placebo-controlled, study of once-daily resmetirom versus placebo in patients with NASH, including those with diabetes. Patients continued treatment through 36 weeks. The study was conducted in the United States. The primary endpoint was to evaluate the efficacy of resmetirom as measured by the reduction of liver fat at 12 weeks, and the secondary endpoint was to evaluate the efficacy of resmetirom as measured by a reduction of NASH, which was assessed by liver biopsy, at 36 weeks. Other secondary and exploratory endpoints included safety and tolerability, and effects on serum biomarkers at 12 and 36 weeks, lipid parameters, and biomarker measures of insulin sensitivity. We reached our analysis of the primary endpoint in December 2017, and we reached our analysis of the secondary endpoint (NASH assessment on liver biopsy) in May 2018. There was an extension study in a subset of the patients that completed the main study which was completed in 2019.

In March 2019 the Company announced that it had initiated a Phase 3 trial in NASH with its once daily, oral thyroid hormone receptor beta selective agonist, (resmetirom). This double-blind, placebo-controlled study will be conducted at more than 150 sites in the United States and the rest of the world. Patients with liver biopsy confirmed NASH with stage 2 or 3 fibrosis will be randomized 1:1:1 to receive a single oral daily dose of placebo, resmetirom 80 mg or resmetirom 100 mg. A second liver biopsy at week 52 in the first 900 patients will be the basis of filing for subpart approval; the primary endpoint will be the percent of patients treated with either dose of resmetirom as compared with placebo who achieve NASH resolution on the week 52 liver biopsy, defined as the absence of hepatocyte ballooning (score=0), and minimal lobular inflammation (score associated with at least a 2 point reduction in NAS, and no worsening of fibrosis stage. Two key secondary endpoints are reduction in and a or more improvement in fibrosis stage on the week 52 biopsy with no worsening of NASH. Patients will continue in the study for a total of approximately 54 months and will be evaluated for a composite clinical outcome including cirrhosis on liver biopsy, or a liver related event such a hepatic decompensation. The total anticipated enrollment is approximately 2,000 patients and will include up to 15% high risk F1 fibrosis stage NASH patients whose efficacy responses will be evaluated as exploratory endpoints.

In December 2019 the Company announced it had opened for enrollment a double-blind, placebo controlled Phase 3 clinical study in 700 patients with biopsy-confirmed or presumed NASH recruited from sites in the U.S. Key endpoints are safety, including safety biomarkers, LDL cholesterol, lipid biomarkers, and fibrosis biomarkers. Except for serial liver biopsies, the study protocol is similar to the MAESTRO-NASH study with resmetirom doses of 80 mg or 100 mg or placebo and includes key secondary lipid, and NASH biomarker endpoints. In addition, includes an open label arm in which up to 100 patients will be dosed with 100 mg resmetirom. The MAESTRO study will help support the adequacy of the safety database at the time of NDA submission for subpart H approval for treatment of NASH in patients with F2 or F3 fibrosis (MAESTRO-NASH, NASH resolution surrogate endpoint).

Patients with NASH, and its more prevalent precursor, NAFLD, are at heightened cardiovascular risk. Patients suffering from these conditions die more frequently from cardiovascular events than from their liver disease. Multiple factors contribute to this risk, including elevated levels of and other atherogenic lipoproteins. Excess liver fat itself is also a significant cardiovascular risk factor. Patients with NASH and NAFLD, however, may not undergo a biopsy to confirm a NASH diagnosis until they reach the more advanced stages of fibrosis (F2 - F4). A significant segment of this large group of patients also suffer from diabetes and metabolic syndrome, and have lipid levels that are above target despite treatment with established therapies. These patients may benefit from therapy to lower their lipid levels in addition to excess liver fat, in order to reduce their cardiovascular risk.

We believe our studies to date in patients with NASH and patients with HeFH, have demonstrated the pleiotropic activity of resmetirom and the potential of the drug to reduce an array of atherogenic lipoproteins, including ApoB, TG, ApoCIII, and Lp(a). As a result, we intend to also focus our development of resmetirom on patients with NASH who have elevated lipid levels, because it is unlikely that liver biopsy will be required to diagnose NASH, there is a potential for resmetirom to address patients across the entire NASH spectrum including patients with earlier stages of NASH and NASH-fibrosis..

FH is a genetic disorder characterized by aggressive and early onset CVD. In people with FH, genetic mutations make the liver incapable of metabolizing or removing excess causing very high levels in the blood. There are two forms of FH: HoFH, a less common condition where mutation is inherited from both parents, and HeFH, a more common condition where mutation is inherited from just one parent. The vast majority of the cholesterol circulating in a person’s body is produced by the liver. Cholesterol is a necessary component in the structure and function of human cells. Individuals with FH are unable to recycle this natural supply of cholesterol that their bodies are constantly producing. Therefore, the cholesterol levels of an individual with FH are exceedingly high. Over time, the elevated blood cholesterol can lead to blockages in the arteries of the heart and/or brain. The longer a person experiences high the more likely he or she will be to experience a cardiovascular event (, heart attack or stroke).

In preclinical animal studies resmetirom lowered in a variety of species as a monotherapy and also when dosed in combination with statins. Resmetirom also showed the potential to lower Lp(a), a severely atherogenic particle that is frequently elevated in patients with FH. A previous THR agonist, eprotirome, demonstrated clinical proof of concept for the THR target in Phase 3 FH clinical trials by significantly lowering and Lp(a) in patients with HeFH who were on standard treatments such as statins and ezetimibe. The development of eprotirome ceased during the Phase 3 FH trial due to liver toxicity observed in the trial as well as eprotirome-induced cartilage damage seen in chronic toxicology studies in dogs. Because of its high level of THR-ß selectivity, its liver-targeting properties, and its absence of findings in chronic animal toxicology studies, we believe that resmetirom will avoid the toxicity issues of previous THR agonist compounds and may be a beneficial treatment for FH patients.

In February 2017, we initiated a Phase 2 clinical trial of resmetirom for the treatment of HeFH. In the study we randomized HeFH patients 2:1, resmetirom or placebo QD in double-blind, placebo-controlled fashion. Patients continued treatment through 12 weeks. The study was conducted in Europe. In this 12 week clinical trial, the primary endpoint was to evaluate the efficacy of resmetirom as measured by the percent reduction in as compared with placebo. Secondary endpoints included safety and tolerability, and evaluated the efficacy of resmetirom to reduce a variety of lipid parameters, including ApoB, TGs, Lp(a), apoA/B, and lipoprotein particles. In February 2018, we announced positive results from the 12 week Phase 2 clinical trial of resmetirom for the treatment of HeFH. Resmetirom treated patients achieved highly significant reductions in ApoB, TG, ApoCIII, and Lp(a) in all patients and prespecified subgroups.

VIA Pharmaceuticals, Inc., or VIA, entered into a research, development and commercialization agreement, or the Roche Agreement, with Roche, on December 18, 2008. We subsequently assumed all of VIA’s rights in, to and under, and all of VIA’s obligations under, the Roche Agreement pursuant to an asset purchase agreement, dated September 14, 2011. Pursuant to the terms of the Roche Agreement, we, as to VIA, assumed control of all development and commercialization of (resmetirom) and will hold exclusive worldwide rights for all potential indications. Under the Roche Agreement, Roche exclusively licensed certain patent rights and relating to resmetirom in exchange for consideration consisting of an upfront payment, milestone payments, the remainder of which total $8 million and are tied to regulatory approval in the United States and Europe of resmetirom or any derivative product, and single-digit royalty payments based on net sales of resmetirom and any derivative products, subject to certain reductions. In 2011, we commenced Phase 1 clinical trials and subsequently paid Roche a related milestone payment. In October 2016, we commenced a Phase 2 study in NASH and subsequently paid Roche a related milestone payment. In 2019, we commenced a Phase 3 study in NASH and subsequently paid Roche a $2 million related milestone payment. Except as described above, we have not achieved any additional product development or regulatory milestones under the Roche Agreement and have generated no net sales of products developed from resmetirom.

There are currently no therapeutic products approved for the treatment of NASH. There are several commercially available products that are currently used for NASH, such as vitamin E, an antioxidant, insulin sensitizers, such as pioglitazone, anti-hyperlipidemic agents, such as gemfibrozil, pentoxifylline, ursodiol and others. In addition, there are numerous drugs in development for the treatment of NASH. Intercept Pharmaceuticals, Inc. submitted a NDA in September 2019 and MAA in December 2019 for obeticholic acid for the treatment of patients with fibrosis due to NASH. We are aware of several companies that have product candidates in clinical development for the treatment of NASH, including Gilead Sciences, Inc., Galectin Therapeutics, Inc., Allergan plc / Tobira Pharmaceuticals, Inc., Galmed Medical Research Ltd., Genfit Corp., Cirius Therapeutics, Novartis AG, Novo Nordisk A/S, Takeda, Inventiva, Boehringer Ingelheim GmbH, Bristol-Myers Squibb, Pfizer, Inc., Sanofi S.A., NGM Biopharmaceutical, Viking Therapeutics, Akero Therapeutics, and MedImmune LLC, and there are other companies with candidates in earlier stages of development. Given resmetirom’s actions on the underlying biological pathways across the spectrum of early to late stages of NASH, its CV beneficial effects, and its complementary mechanism to other therapies, we believe that resmetirom has the potential to be used alone or in combination with some of these potential NASH products.

There are several marketed products, both generic and proprietary, available for the treatment of HoFH and HeFH. We believe that resmetirom has the potential to be used in combination with several of these products. Available marketed products include: various statins, Merck’s ezetimibe, Aegerion’s lomitapide, Ionis’ mipomersen, Amgen’s evolocumab and Sanofi/Regeneron’s alirocumab. In addition, there are multiple drugs in development for the treatment of FH, including Gemphire’s gemcabene, Merck’s anacetrapib, Esperion’s and drugs at an earlier stage of development. Given resmetirom’s pleoitropic lipid-lowering actions, its complementary mechanism to statins and other lipid-lowering drugs, and its potential for lowering Lp(a), we believe that resmetirom has the potential to be used in combination with the standard of care to treat patients with HoFH and HeFH.

We will be able to protect our technology and products from unauthorized use by third parties only to the extent we are covered by valid and enforceable patents or such knowledge is effectively maintained as trade secrets. Patents and other proprietary rights are thus an essential element of our business. We also rely on trade secrets, continuing technological innovation and licensing opportunities to develop and maintain our competitive position.

Our success will depend in part on our ability to obtain and maintain patent and other proprietary protection for our current and future product candidates, technology and to operate without infringing on the proprietary rights of others, and to prevent others from infringing our proprietary rights. We seek to protect our proprietary position by, among other methods, filing United States and foreign patent applications related to our proprietary technology, and maintaining the confidentiality of inventions and improvements that are important to the development of our business.

We own or three United States and 15 foreign issued patents and allowed patent applications; and one United States and 36 foreign pending patent applications, each of which relates to of resmetirom, including certain dosage forms, and its use in the treatment of key disease indications. Our current patent portfolio covers the United States and certain other jurisdictions worldwide. In addition, pursuant to the Roche Agreement, Roche granted us an exclusive license to certain United States and foreign patents and patent applications owned by Roche and Roche relating to resmetirom. The Roche Agreement imposes various diligence, milestone payment, royalty payment, insurance, indemnification, and other obligations on us.

Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing and export and import of products such as those we are developing. A new drug must be approved by the FDA through the new drug application, or NDA, process before it may be legally marketed in the United States, and must be approved by foreign regulatory authorities via various procedures before it can be marketed in the applicable country. The animal and other data and the results of human clinical trials performed under an Investigational New Drug application, or IND, and under similar foreign applications will become part of the NDA.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

the first phase of the clinical trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacy evaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the time period, places the clinical trial on a clinical hold or a partial clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or or other reasons.

 

 

 

The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDA conducts a preliminary review of all NDAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an substantive review. The FDA may refer the NDA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimately decide that the NDA does not satisfy the regulatory criteria for approval. Data obtained from clinical trials are not always conclusive, and the FDA may interpret data differently than we interpret the same data. The FDA may issue a complete response letter, which generally outlines the deficiencies in the submission and may require additional clinical or other data or impose other conditions that must be met in order to secure final approval of the NDA, or an approval letter following satisfactory completion of all aspects of the review process. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity, strength, quality and purity. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured. In addition, the FDA often will conduct a bioresearch monitoring inspection of the clinical trial sites involved in conducting pivotal studies to ensure data integrity and compliance with applicable GCP requirements.

 

The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act, or PREA, which requires a sponsor to conduct pediatric studies for most drugs and biologics, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs and supplements thereto must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA may request a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the drug or biologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected before the pediatric studies begin. After April 2013, the FDA must send a letter to any sponsor that fails to submit the required assessment, keep a deferral current or fails to submit a request for approval of a pediatric formulation.

Depending upon the timing, duration and specifics of FDA approval of our product candidates, some of our United States patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally the time between the effective date of an IND, and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application, except that the period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved drug is eligible for the extension, and the extension must be applied for prior to expiration of the patent and within 60 days of approval. The United States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of its products. Whether or not we obtain FDA approval for a product, we must obtain approval by the comparable regulatory authorities of foreign countries or economic areas, such as the European Union, before we may commence clinical trials or market products in those countries or areas. The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter than that required for FDA approval.

As in the United States, it may be possible in foreign countries to obtain a period of market and/or data exclusivity that would have the effect of postponing the entry into the marketplace of a competitor’s generic product. For example, in the EU, if any of our products receive marketing approval in the European Economic Area, or EEA, which is comprised of the 28 member states of the EU plus Norway, Iceland and Liechtenstein, we expect that we will benefit from eight years of data exclusivity and an additional two years of marketing exclusivity. An additional extension of marketing exclusivity is possible if during the data exclusivity period we obtain an authorization for one or more new therapeutic indications that is deemed to bring a significant clinical benefit compared to existing therapies. The data exclusivity period begins on the date of the product’s first marketing authorization in the EU and prevents biosimilars from relying on the holder of the marketing authorization for the reference biological medicine’s pharmacological, toxicological and clinical data for a period of eight years. After eight years, a biosimilar product application may be submitted and the sponsoring companies may rely on the marketing authorization holder’s data. However, a biosimilar medicine cannot launch until 2 years later (or a total of ten years after the first marketing authorization in the EU of the innovator product), or 3 years later (or a total of eleven years after the first marketing authorization in the EU of the innovator product) if the marketing authorization holder obtains marketing authorization for a new indication with significant clinical benefit within the eight year data exclusivity period.

managed care providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the reimbursement rate that the payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list which might not include all of the products for a particular indication. Moreover, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

 10-K.

 10-K

 10-Q

 8-K

 

 

 

 

 

MGL-3196

We currently generate no revenue from product sales, and we may never be able to commercialize resmetirom or other future product candidates. We do not currently have the required approvals to market resmetirom or any other future product candidates, and we may never receive them. We may not be profitable even if we or any of our future development partners succeed in commercializing any of our product candidates. Because of the numerous risks and uncertainties associated with developing and commercializing our product candidates, we are unable to predict the extent of any future losses or when we will become profitable, if at all.

To date, the sole focus of our product development has been resmetirom, a liver-directed selective thyroid hormone receptor beta agonist for potential use in steatohepatitis, or NASH, and familial hypercholesterolemia, or FH. Successful continued development and ultimate regulatory approval of resmetirom for NASH or dyslipidemia is critical to the future success of our business. We have invested, and will continue to invest, a significant portion of our time and financial resources in the clinical development of resmetirom. We will need to raise sufficient funds to successfully complete our clinical development program for resmetirom in NASH and dyslipidemia. The future regulatory and commercial success of resmetirom is subject to a number of risks, including the following: 

 

 

 

 

 

 

 

 

 

 

Of the large number of drugs in development in the pharmaceutical industry, only a small percentage results in the submission of a new drug application, or NDA, to the FDA and even fewer are approved for commercialization. Furthermore, even if we do receive regulatory approval to market resmetirom, any such approval may be subject to limitations on the indicated uses or patient populations for which we may market the products. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development programs, we may be unable to successfully develop or commercialize resmetirom. If we or any of our future

 

Once an NDA or marketing authorization application outside the United States is approved, the product covered thereby becomes a “listed drug” that can, in turn, be cited by potential competitors in support of approval of an abbreviated new drug application in the United States. Agency regulations and other applicable regulations and policies provide incentives to manufacturers to create modified, versions of a drug to facilitate the approval of an abbreviated new drug application or other application for generic substitutes in the United States and in nearly every pharmaceutical market around the world. These manufacturers might only be required to conduct a relatively inexpensive study to show that their product has the same active ingredient(s), dosage form, strength, route of administration and conditions of use, or labeling, as our product and that the

 

Although the development and commercialization of resmetirom is our primary focus, as part of our longer-term growth strategy, we plan to evaluate the development and commercialization of other therapies related to thyroid hormone, orphan and other diseases. We will evaluate internal opportunities from our compound libraries, and also may choose to or acquire other product candidates as well as commercial products to treat patients suffering from thyroid hormone, orphan or other disorders with high unmet medical needs and limited treatment options. These other product candidates may require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, clinical trials and approval by the FDA and/or applicable foreign regulatory authorities. All product candidates are prone to the risks of failure that are inherent in pharmaceutical product development, including the possibility that the product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot assure you that any such products that are approved will be manufactured or produced economically, be successfully commercialized, be widely accepted in the marketplace, or be more effective than other commercially available alternatives.

With respect to our existing and future product candidates, we may choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or as an alternative to our own sales force and distribution systems. To the extent that we enter into or other licensing arrangements, our product revenue may be lower than if we directly marketed or sold any approved products. In addition, any revenue we receive will depend in whole or in part upon the efforts of these third parties, which may not be successful and are generally not within our control. If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to successfully commercialize any approved products. If we are not successful in commercializing any approved products, either on our own or through collaborations with one or more third parties, our future product revenue will suffer and we may incur significant additional losses.

Our strategy includes filing for orphan drug designation where available for our product candidates. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug or biologic intended to treat a rare disease or condition, which is defined as one occurring in a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug or biologic will be recovered from sales in the United States. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and waivers. In addition, if a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including a full NDA, to market the same drug or biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product quantity.

Most states also have statutes or regulations similar to these federal laws, which may apply to items such as pharmaceutical products and services reimbursed by private insurers. We and/or our partners may be subject to administrative, civil and criminal sanctions for violations of any of these federal and state laws. Pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of promotional and marketing activities, such as: providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in promotion; and submitting inflated best price information to the Medicaid Rebate Program to reduce liability for Medicaid rebates.

Our internal computer systems and those of our current or future third-party collaborators, service providers, contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Attacks on information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and they are being conducted by increasingly sophisticated and organized groups and individuals with a wide range of motives and expertise. In addition to extracting sensitive information, such attacks could include the deployment of harmful malware, ransomware, attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. The prevalent use of mobile devices also increases the risk of data security incidents. While we have not experienced any material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations or the operations of third-party collaborators, service providers, contractors and consultants, it could result in a material disruption of our development programs and significant reputational, financial, legal, regulatory, business or operational harm. For example, the loss of clinical trial data for our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications or other data or applications relating to our technology or product candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the further development of our product candidates could be delayed. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related breaches.

We entered into a Research, Development and Commercialization Agreement, or the Roche Agreement, with Roche, or Roche, on December 18, 2008. Pursuant to the terms of the Roche Agreement, we assumed control of all development and commercialization of resmetirom and hold exclusive worldwide rights for all potential indications. Under the Roche Agreement, Roche exclusively licensed certain patent rights and relating to resmetirom in exchange for consideration consisting of an upfront payment, milestone payments tied to the achievement of product development and regulatory milestones, and royalty payments based on net sales of products containing resmetirom or another licensed product, subject to certain reductions. We must use commercially reasonable efforts to conduct clinical and commercial development programs for products containing resmetirom. If we determine that it is not reasonable to continue clinical trials or other development of resmetirom, we may elect to cease further development and Roche may terminate the license. If we determine not to pursue the development or commercialization of resmetirom in certain jurisdictions, including the United States, Roche may terminate the license for such territories. The Roche Agreement will expire, unless earlier terminated pursuant to other provisions thereof, on the last to occur of (i) the expiration of the last valid claim of a licensed patent covering the manufacture, use or sale of products containing resmetirom, or (ii) ten years after the first sale of a product containing resmetirom.

 

 

 

 

 

 

We can provide no assurance that our patent applications or those of our licensors will result in additional patents being issued or that issued patents will afford sufficient protection against competitors with similar technologies, nor can we provide any assurance that the patents issued will not be infringed, designed around or invalidated by third parties. Even issued patents may later be found unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. The degree of future protection for our proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage. This failure to properly protect the intellectual property rights relating to our product candidates could have a material adverse effect on our financial condition and results of operations. patents on the biological or chemical active pharmaceutical ingredients are generally considered to offer the strongest protection of intellectual property and provide the broadest scope of patent protection for pharmaceutical products, as such patents provide protection without regard to any method of use or any method of manufacturing. While we have licensed rights to issued patents in the United States and other jurisdictions for resmetirom, we cannot be certain that the claims in issued patents will not be found invalid or unenforceable if challenged. We cannot be certain that the claims in owned and licensed patent applications covering our product candidates will be considered patentable by the United States Patent and Trademark Office, or USPTO, and valid by courts in the United States or by the patent offices and courts in foreign jurisdictions. Even if we owned and licensed patent applications covering our product candidates, the patents may not be enforced against competitors. For example, a formulation patent will not be enforced against those making and marketing a product that has the same active pharmaceutical ingredient in a different formulation that is not claimed in the formulation patent. patents protect the use of a product for the specified method or for treatment of a particular indication. This type of patent may not be enforced against competitors making and marketing a product that has the same active pharmaceutical ingredient but is used for a method not claimed in the patent. Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products Although prescriptions may infringe or contribute to the infringement of patents, the practice is common and such infringement is difficult to prevent or prosecute.

Our licensed patent licensed from Roche for resmetirom is expected to expire in the United States in 2026. Our patents and pending patent applications that cover our particular solid form, dosage, method of manufacturing, and uses of resmetirom to treat various indications are expected to expire in 2033. While patent term adjustments or patent term extensions could result in later expiration dates for each of these patents, there can be no assurances that we will receive any patent adjustments or patent term extensions. The patent application process and patent maintenance and enforcement are subject to numerous risks and uncertainties, and there can be no assurance that we or any of our future development partners will be successful in protecting our product candidates by obtaining and defending patents. These risks and uncertainties include the following:

 

 

 

 

 

 

 

 

 

 

 

 

In addition, we rely on the protection of our trade secrets and proprietary Although we have taken steps to protect our trade secrets and unpatented including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants and advisors, we cannot provide any assurances that any of these parties would not breach the agreements to disclose any proprietary information, including trade secrets, and we may not be able to obtain adequate remedies for such breaches. Further, third parties may still obtain this information by other means, such as breaches of our physical or computer security systems. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. Moreover, third parties may come upon this or similar information lawfully and independently. We would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. Further, intellectual property rights have limitations and do not necessarily address all potential threats to our competitive position. If any of these events occurs or if we otherwise lose protection for our trade secrets or proprietary our business may be harmed.

submit prior art before the issuance of a patent by the USPTO, and a patent may become subject to post-grant proceedings including opposition, derivation, reexamination, review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Moreover, we may be subject to a third party preissuance submission of prior art to the USPTO or in addition to interference proceedings, may become involved in opposition, derivation, reexamination, review, post-grant review or other post-grant proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third party patent rights. In addition, if the breadth or strength of protection provided by our

If we or any of our future development partners were to initiate legal proceedings against a third party to enforce a patent directed at one of our product candidates, or one of our future product candidates, the defendant could counterclaim that our patent is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or insufficient written description. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. Third parties may also raise similar claims before the USPTO, even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on such product candidate. Such a loss of patent protection would have a material adverse impact on our business

We currently have rights to the intellectual property, through licenses from third parties and under patents that we own or to develop our product candidates. Because our programs may require the use of proprietary rights held by third parties, the growth of our business may depend in part on our ability to acquire, or use these proprietary rights. For example, our product candidates may require specific formulations to work effectively and efficiently and the rights to these formulations may be held by others. We may be unable to acquire or any compositions, methods of use, processes, or other third party intellectual property rights from third parties that we identify as necessary for our product candidates. The licensing and acquisition of third party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources, and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a

While we have licensed from Roche issued patents directed at resmetirom in the United States and other countries, filing, prosecuting and defending patents on resmetirom in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries may not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing their inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States. These products may compete with resmetirom, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

We have not sold any products, and we do not expect to sell or derive revenue from any product sales for the foreseeable future. We may seek additional funding through future debt and equity financings, as well as potential additional collaborations or strategic partnerships with other companies or through financings. Additional funding may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. In addition, the issuance of additional shares by us, or the possibility of such issuance, may cause the market price of our shares to decline.

Our net operating losses have been fully offset by a valuation allowance due to uncertainties surrounding our ability to realize these tax benefits. Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three year period), the corporation’s ability to use its net operating loss carryforwards and other tax attributes to offset its post-change income may be limited. Similar rules may apply under state tax laws. We have not performed a detailed analysis to determine whether an ownership change under Section 382 of the Code, or similar state provisions, has previously occurred. As a result, if we earn net taxable income, our ability to use our net operating loss carryforwards to offset U.S. federal taxable income may become subject to limitations, which could potentially result in increased future tax liability to us and may be substantial.

 

 

 

 

In addition, due to one or more of the foregoing factors in one or more future quarters, our results of operations may fall below the expectations of securities analysts and investors. In that event, the market price of our common stock could materially decline.

Certain stockholders affiliated and associated with our officers and directors collectively own approximately 33.3% of our outstanding common stock as of December 31, 2019 and acting together, may have the ability to substantially affect matters submitted to our stockholders for approval. This concentration of ownership may have the effect of delaying, deferring or preventing a strategic transaction, even if such a transaction would benefit other stockholders.

Provisions in our charter and bylaws may delay or prevent a merger, acquisition or other change of control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions include a classified board of directors. In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us. Although we believe these provisions together provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if the offer may be considered beneficial by some stockholders.

We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.

As of December 31, 2019, there were: 1,969,797 shares of Series A Convertible Preferred stock outstanding, all of which were readily convertible into a like number of shares of our common stock at the option of the holders (the “Common Shares Underlying Our Preferred Stock”); an additional 1,461,987 shares of our common stock issuable upon the exercise of outstanding stock options (the “Common Shares Underlying Our Stock

Item 1B.

Unresolved Staff Comments

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4.

Mine Safety Disclosures

The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock.

 

 

 

THR-

non-alcoholic

12-week

36-week

36-week,

On March 28, 2019, the Company announced that it had initiated MAESTRO-NASH, a Phase 3 trial in NASH with its once daily, oral thyroid hormone receptor beta selective agonist, resmetirom. This double-blind, placebo-controlled study will be conducted at more than 150 sites in the United States and the rest of the world. Patients with liver biopsy confirmed NASH with stage 2 or 3 fibrosis will

be randomized 1:1:1 to receive a single oral daily dose of placebo, resmetirom 80 mg or resmetirom 100 mg. A second liver biopsy at week 52 in the first 900 patients will be the basis of filing for subpart approval; the primary endpoint will be the percent of patients treated with either dose of resmetirom as compared with placebo who achieve NASH resolution on the week 52 liver biopsy, defined as the absence of hepatocyte ballooning (score=0), and minimal lobular inflammation (score associated with at least a reduction in NAS, and no worsening of fibrosis stage. Two key secondary endpoints are reduction in and a or more improvement in fibrosis stage on the week 52 biopsy with no worsening of NASH. Patients will continue in the study for a total of approximately 54 months, and will be evaluated for a composite clinical outcome including cirrhosis on liver biopsy, or a liver related event such a hepatic decompensation. The total anticipated enrollment is approximately 2,000 patients, and will include up to 15% high risk F1 fibrosis stage NASH patients whose efficacy responses will be evaluated as exploratory endpoints.

On December 10, 2019 the Company announced it had opened for enrollment a double-blind, placebo controlled Phase 3 clinical study in 700 patients with biopsy-confirmed or presumed NASH recruited from sites in the U.S. Key endpoints are safety, including safety biomarkers, LDL cholesterol, lipid biomarkers, and fibrosis biomarkers. Except for serial liver biopsies, the study protocol is similar to the MAESTRO-NASH study with resmetirom doses of 80 mg or 100 mg or placebo and includes key secondary lipid, and NASH biomarker endpoints. In addition, includes an open label arm in which up to 100 patients will be dosed with 100 mg resmetirom. The MAESTRO study will help support the adequacy of the safety database at the time of NDA submission for subpart H approval for treatment of NASH in patients with F2 or F3 fibrosis (MAESTRO-NASH, NASH resolution surrogate endpoint).

In March of 2019 we initiated a Phase 3 trial in NASH, described in detail above under “About Madrigal; Our Ongoing and Planned Studies.” In the second quarter, the Phase 3 NASH trial triggered a $2 million milestone payment under our Research, Development and Commercialization Agreement with Roche (“Roche”).

In October 2016, we initiated a Phase 2 clinical trial in NASH ([NCT02912260] at www.ClinicalTrials.gov). The randomized, double-blind, placebo-controlled, multi-center Phase 2 study enrolled 125 patients 18 years of age and older with biopsy-confirmed NASH. Patients were randomized to receive either placebo or resmetirom, twice as many receiving resmetirom as placebo. Efficacy was confirmed at the end of the trial (36 weeks) by repeat Magnetic Resonance Imaging—Proton Density Fat Fraction, or and conventional liver biopsy to examine histological evidence for the resolution of NASH. Recent published data show a high correlation of reduction of liver fat measured by to NASH scoring on liver biopsy. Other secondary endpoints included changes in clinically relevant biomarkers at 12 and 36 weeks, improvement in fibrosis by at least one

stage with no worsening of steatohepatitis, and safety and tolerability. We reached our analysis of the primary endpoint in December 2017, and we reached our analysis of multiple endpoints, including key secondary endpoints, reduction and resolution of NASH on liver biopsy, in May 2018.

In February 2017, we initiated a Phase 2 clinical trial in HeFH ([NCT03038022] at www.ClinicalTrials.gov). The randomized, double-blind, placebo-controlled, multi-center Phase 2 clinical trial enrolled 116 patients with HeFH in several European countries. Patients were randomized in a 2:1 ratio to receive either resmetirom or placebo, in addition to their current drug regimen (including high dose statins and/or ezetimibe). The primary endpoint of the study was reduction of LDL cholesterol, with secondary endpoints including reductions in TGs, Lp(a), and ApoB, as well as safety. Lp(a) is a severely atherogenic lipid particle, commonly elevated in familial hypercholesterolemia patients, the levels of which are not adequately reduced by existing lipid lowering therapies. THR-ß agonism is one of the few therapeutic approaches that can substantially lower Lp(a). In February 2018, we announced positive results from the 12 week Phase 2 clinical trial in HeFH.

On July 22, 2016, Synta completed its business combination with Private Madrigal in accordance with the terms of an Agreement and Plan of Merger and Reorganization, dated as of April 13, 2016, or the Merger Agreement. Pursuant to the Merger Agreement, Synta formed a wholly-owned subsidiary that merged with and into Private Madrigal, with Private Madrigal surviving the merger and becoming a wholly-owned subsidiary of Synta, or the Merger. In connection with, and prior to the consummation of, the Merger, Synta effected a reverse stock split of its common stock, or the Reverse Stock Split, and, following the Merger, changed its name to “Madrigal Pharmaceuticals, Inc.” All shares and per share amounts have been retrospectively adjusted to give effect to the Reverse Stock Split, except as otherwise disclosed. Following the consummation of the Merger, our business became the business conducted by Private Madrigal prior to the consummation of the Merger.

based compensation), costs for consultants, milestone payments under licensing agreements, and other costs associated with the Company’s preclinical and clinical programs. In particular, the Company has conducted safety studies in animals, optimized and implemented the manufacturing of our drug, and conducted Phase clinical trials, all of which are considered research and development expenditures. Management uses significant judgment in estimating the amount of research and development costs recognized in each reporting period. Management analyzes and estimates the progress of its preclinical studies and clinical trials, completion of milestones events per underlying agreements, invoices received and contracted costs when estimating the research and development costs to accrue in each reporting period. Actual results could differ from the Company’s estimates. The Company’s historical estimates for research and development costs have not been materially different from the actual costs.

The Company recognizes stock-based compensation expense based on the grant date fair value of stock options granted to employees, officers and directors. The Company uses the Black-Scholes option pricing model to determine the grant date fair value as management believes it is the most appropriate valuation method for its option grants. The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility and expected lives of the options. The expected lives for options granted represent the period of time that options granted are expected to be outstanding. The Company uses the simplified method for determining the expected lives of options. Expected volatility is based upon an industry estimate or blended rate including the Company’s historical trading activity. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Company estimates the forfeiture rate based on historical data. This analysis is at least annually and the forfeiture rate is adjusted as necessary.

Our research and development expenses were $72.3 million for the year ended December 31, 2019 compared to $25.4 million for the year ended December 31, 2018. Research and development expenses increased by $46.9 million in the 2019 period due primarily to the additional activities related to the initiation of the Phase 3 clinical trial in NASH, including a payment due related to a milestone achieved under our agreement with Roche, an increase in head count, and an increase in stock compensation from stock option awards. We expect our research and development expenses to increase over the next several years as we advance our clinical and preclinical development programs for resmetirom and as we increase our research and development efforts in connection therewith.

Our general and administrative expenses were $22.6 million for the year ended December 31, 2019 compared to $15.3 million for the year ended December 31, 2018. General and administrative expenses increased by $7.4 million in the 2019 period due primarily to an increase in stock compensation from stock option awards. We expect our general and administrative expenses to increase over the next several years as we advance our clinical and preclinical development programs for resmetirom and continue operating as a public company, both of which will likely result in an increase in our headcount, consulting services, and certain overhead needed to support those efforts.

Our research and development expenses were $25.4 million for the year ended December 31, 2018 compared to $24.4 million for the year ended December 31, 2017. Research and development expenses increased by $1.0 million in the 2018 period due primarily to an increase in stock compensation from stock option awards partially offset by a decrease related to our Phase 2 clinical trials due to the completion of treatment in 2018. We expect our research and development expenses to increase over the next several years as we advance our clinical and preclinical development programs for resmetirom and as we increase our research and development efforts in connection therewith.

non-cash

Our interest income was $7.7 million for the year ended December 31, 2018 compared to $0.6 million for the year ended December 31, 2017. The increase in interest income was due primarily to a higher average principal balance in our investment account in 2018 and increased interest rates.

Since inception, we have incurred significant net losses and we have funded our operations primarily through the issuance of convertible debt, the issuance of shares of our common stock and shares of our preferred stock, and the proceeds from the Merger. Our most significant use of capital pertains to salaries and benefits for our employees, including clinical, scientific, operational, financial and management personnel, and external research and development expenses, such as clinical trials and preclinical activity related to our product candidates.

As of December 31, 2019, we had cash, cash equivalents and marketable securities totaling $439.0 million compared to $483.7 million as of December 31, 2018, with the decrease attributable to the funding of operations. Our cash and investment balances are held in a variety of interest bearing instruments, including obligations of U.S. government agencies, U.S. Treasury debt securities, corporate debt securities and money market funds. Cash in excess of immediate requirements is invested in accordance with our investment policy with a view toward capital preservation and liquidity.

We anticipate continuing to incur operating losses for the foreseeable future. While our rate of cash usage will likely increase in the future, in particular to support our product development and clinical trial efforts, we believe our available cash resources as of December 31, 2019 will be sufficient to fund our operations past one year from the issuance of the financial statements contained herein. Future capital requirements will be substantial and will depend on many factors. To meet future capital requirements, we will need to raise additional capital to fund our operations through equity or debt financing. We regularly consider fundraising opportunities and may decide, from time to time, to raise capital based on various factors, including market conditions and our plans of operation. Additional capital may not be available on terms acceptable to us, or at all. If adequate funds are not available, or if the terms of potential funding sources are unfavorable, our business and our ability to develop our product candidates would be harmed. Furthermore, any sales of additional equity securities may result in dilution to our stockholders, and any debt financing may include covenants that restrict our business.

The following table summarizes our net cash flow activity (in thousands):

non-cash

Net cash provided by investing activities was $30.7 million for the year ended December 31, 2019 and consisted primarily of $650.2 million from sales and maturities of marketable securities, partially offset by $619.3 million of purchases of marketable securities for our investment portfolio.

Net cash used in investing activities was $380.1 million for the year ended December 31, 2018 and consisted primarily of $614.4 million of purchases of marketable securities for our investment portfolio, partially offset by $234.3 million from sales and maturities of marketable securities.

Net cash used in investing activities was $22.0 million for the year ended December 31, 2017 and consisted primarily of $70.2 million of purchases of marketable securities for our investment portfolio, partially offset by $48.3 million from sales and maturities of marketable securities.

Net cash provided by financing activities was $0.2 million for the year ended December 31, 2019 and consisted primarily of proceeds from the exercise of stock options.

Net cash provided by financing activities was $314.3 million for the year ended December 31, 2018 and consisted primarily of sales of our common stock in the June 2018 Registered Offering and the exercise of stock options.

Net cash provided by financing activities was $173.8 million for the year ended December 31, 2017 and consisted primarily of net proceeds from sales of our common stock under the October 2015 Sales Agreement, sales of our common stock and our preferred stock in the June 2017 Offering, and sales of our common stock in the December 2017 Registered Offering.

As of December 31, 2019, we had contractual obligations and commercial commitments as follows (in thousands):

Operating leases relates to our corporate headquarters facility located in West Conshohocken, Pennsylvania.

The Company has entered into customary contractual arrangements in support of the Phase 3 clinical trials.

We do not have any off balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation

 

 

The information required by this Item 8 is referred to in Item 15, listed in the Index to Financial Statements as a part of this Annual Report on Form and is incorporated herein by this reference.

 

 

We maintain disclosure controls and procedures (as defined in Rules and under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision of our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. Based on that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2019.

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 13a-15(f)

15d-15(f)

Our management, including our principal executive officer and our principal financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, our management used the criteria set forth in the “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on its assessment under that framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2019.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2019, as stated in its report, which is included herein.

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.