Madrigal Pharmaceuticals Inc.

11/04/2025 | Press release | Distributed by Public on 11/04/2025 08:13

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read together with our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and accompanying notes for the year ended December 31, 2024 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
About Madrigal Pharmaceuticals, Inc.
We are a biopharmaceutical company focused on delivering novel therapeutics for metabolic dysfunction-associated steatohepatitis ("MASH"), a serious liver disease with high unmet medical need that can lead to cirrhosis, liver failure, liver cancer, need for liver transplantation and premature mortality. MASH was previously known as nonalcoholic steatohepatitis ("NASH"). MASH is the leading cause of liver transplantation in women and the second leading cause of all liver transplantation in the United States, and the fastest-growing indication for liver transplantation in Europe. Our medication, Rezdiffra (resmetirom), is a once-daily, oral, liver-directed thyroid hormone receptor beta ("THR-β") agonist designed to target key underlying causes of MASH. In March 2024, Rezdiffra became the first therapy approved by the U.S. Food and Drug Administration ("FDA") for patients with MASH and was commercially available in the United States beginning in April 2024. In August 2025, the European Commission ("EC") approved Rezdiffra and we launched Rezdiffra in Germany in September 2025. Rezdiffra is the first and only medication approved by both the FDA and EC for the treatment of adults with noncirrhotic MASH with moderate to advanced liver fibrosis (F2 to F3 fibrosis). We are also evaluating Rezdiffra in patients with compensated MASH cirrhosis (consistent with F4c fibrosis) in our MAESTRO-NASH OUTCOMES trial, that, if successful, could expand the eligible patient population for Rezdiffra.
The FDA's accelerated approval and the EC's conditional marketing authorization, as well as Rezdiffra's approved prescribing information, were supported by 52-week data from our Phase 3 MAESTRO-NASH trial in which both 100 mg and 80 mg doses of Rezdiffra demonstrated statistically significant improvement compared to placebo on (i) MASH resolution with no worsening of fibrosis and (ii) an improvement in fibrosis by at least one stage with no worsening of the nonalcoholic fatty liver disease ("NAFLD") activity score. MAESTRO-NASH remains ongoing as an outcomes trial where we are generating confirmatory outcomes data to 54-months that, if positive, is expected to verify a clinical benefit and support the full FDA approval of Rezdiffra to treat noncirrhotic MASH. We expect outcomes data from this trial in 2028. In addition, full FDA approval of Rezdiffra to treat noncirrhotic MASH could also be based on results from our Phase 3 MAESTRO-NASH OUTCOMES trial. In this trial, we are assessing progression to liver decompensation events in patients with compensated MASH cirrhosis treated with Rezdiffra versus placebo. A positive outcome in this trial is also expected to support the full FDA approval of Rezdiffra for noncirrhotic MASH, and expand the eligible patient population for Rezdiffra with an additional indication in patients with compensated MASH cirrhosis. We expect results from the MAESTRO-NASH OUTCOMES trial in 2027. We have agreed to submit results from these trials to the European Medicines Agency ("EMA") in support of full approval of Rezdiffra in the European Union.
MASH Disease State Overview.MASH is a more advanced form of metabolic dysfunction-associated fatty liver disease ("MASLD"). MASLD 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. MASH can progress to cirrhosis or liver failure, can require liver transplantation and can also result in liver cancer. Patients with MASH, especially those with more advanced metabolic risk factors (hypertension, concomitant type 2 diabetes), are at increased risk for adverse cardiovascular events and increased morbidity and mortality. In addition, MASH patients with moderate to advanced fibrosis (consistent with fibrosis stages F2 and F3) have a 10-to-17 times higher risk of liver-related mortality. Patients with compensated MASH cirrhosis (consistent with F4c fibrosis) have a 42-times higher risk of liver-related mortality, underscoring the need to treat MASH before complications of cirrhosis develop. MASH is also an independent driver of cardiovascular disease, which is the leading cause of mortality for patients.
Our Patient Focus. Based on published epidemiology data and an analysis of medical claims using ICD-10 disease diagnosis codes, we estimate that approximately 1.5 million patients have been diagnosed with MASH in the United States, of which approximately 525,000 have MASH with moderate to advanced fibrosis. We estimate that approximately 315,000 diagnosed patients with MASH with moderate to advanced fibrosis are under the care of approximately 14,000 specialist prescribers in the U.S. which we are targeting during the commercial launch of Rezdiffra. In addition, we estimate that approximately 370,000 patients with MASH with moderate to advanced fibrosis are currently diagnosed and under the care of a liver specialist across Europe. Over time, as disease awareness improves and disease prevalence increases, we expect the number of identified MASH patients with moderate to advanced fibrosis eligible for treatment to grow. In addition, an estimated 245,000 patients with compensated MASH cirrhosis (consistent with F4c fibrosis) are currently under the care of liver specialists in the U.S.
We continue to focus our efforts on educating healthcare providers and patients on the risks of MASH and the potential clinical benefits and appropriate use of Rezdiffra. We are also supporting the creation of care pathways for
patients at physician offices, driving breadth and depth of Rezdiffra prescribers and engaging with payors to support patient access to therapy.
In June 2025, we received a positive opinion from the Committee for Medicinal Products for Human Use ("CHMP") of EMA recommending approval of resmetirom for the treatment of adults with noncirrhotic MASH with moderate to advanced liver fibrosis. The EC granted conditional marketing authorization for Rezdiffra in August 2025 and we launched Rezdiffra in Germany in September 2025. The EC decision is valid in all 27 member states of the European Union, as well as in Iceland, Liechtenstein and Norway. The timing for access to Rezdiffra in individual countries will depend on multiple factors, including the completion of reimbursement procedures.
Corporate Development: We plan to selectively in-license or acquire rights to programs at all stages of development to take advantage of our drug development and commercial capabilities. With a goal of building a well-balanced and diversified portfolio, we assess a variety of factors for potential product candidates and technologies. Our criteria for possible acquisition or in-licensing opportunities include the rationale for addressing the targeted disease, likelihood of regulatory approval, commercial viability, intellectual property protection, prospects for favorable pricing and reimbursement and competition. We intend to be opportunistic in our business development activities to achieve our long-term strategic goals.
Key Developments
In August 2025, we announced that the EC granted conditional marketing authorization for Rezdiffra for the treatment of MASH with moderate to advanced liver fibrosis. We launched Rezdiffra in Germany in September 2025. Rezdiffra is now the first and only medication approved for patients with MASH in the European Union and is included in the European MASH treatment guidelines.
In August 2025, we announced that Daniel Brennan was appointed to our Board of Directors. Mr. Brennan most recently served as Executive Vice President and Chief Financial Officer of Boston Scientific Corporation ("Boston Scientific"). At Boston Scientific, Mr. Brennan was responsible for several company functions, including global controllership, global internal audit, corporate finance, treasury, corporate tax, investor relations, and corporate business development.
In July 2025, we entered into an exclusive global license agreement (the "CSPC License Agreement") with CSPC Pharmaceutical Group Limited ("CSPC") for MGL-2086 (formerly SYH2086), a preclinical oral small molecule glucagon-like peptide-1 (GLP-1) receptor agonist. Pursuant to the CSPC License Agreement, CSPC has granted us an exclusive global license to develop, manufacture, and commercialize MGL-2086. The transaction closed in September 2025. We paid CSPC an upfront payment of $120.0 million in October 2025. CSPC is eligible to receive up to $2.0 billion in milestone payments if certain development, regulatory and commercial milestones are achieved, as well as tiered royalties on net sales. We expect to initiate clinical development of MGL-2086 in the first half of 2026.
In July 2025, we, as the borrower, and our wholly owned subsidiary Canticle Pharmaceuticals, Inc. ("Canticle"), as a guarantor, entered into a Financing Agreement (as amended, the "Financing Agreement") with certain funds managed by Blue Owl Capital Corporation, as the lenders (the "Lenders"), and LSI Financing LLC as the administrative agent for the Lenders. Under the Financing Agreement, the Lenders have agreed to commit up to $500.0 million in senior secured credit facilities, consisting of (a) an initial term loan in an aggregate principal amount equal to $350.0 million (the "Initial Term Loan") and (b) delayed draw term loans in an aggregate principal amount not to exceed $150.0 million (the "Delayed Draw Term Loans"). In addition, the Financing Agreement includes an uncommitted incremental facility in an aggregate principal amount not to exceed $250.0 million (the "Incremental Term Loans"), subject to the satisfaction of certain terms and conditions set forth in the Financing Agreement. The Initial Term Loan was funded on July 17, 2025. Delayed Draw Term Loans are available at our election from time to time until December 31, 2027. Incremental Term Loans are available at our and the Lenders' mutual consent from time to time.
In July 2025, we announced that we received a Notice of Allowance from the U.S. Patent and Trademark Office for a new U.S. patent covering the FDA-approved use of Rezdiffra. The patent, which was issued on August 5, 2025, includes claims directed to Rezdiffra's commercial weight-threshold dosing regimen as prescribed in the FDA-approved label. The U.S. patent provides protection to February 2045 and was listed in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book, in August 2025.
Basis of Presentation
Product Revenue, Net
In March 2024, the FDA approved Rezdiffra for the treatment of noncirrhotic MASH with moderate to advanced liver fibrosis (consistent with stages F2 to F3 fibrosis). Rezdiffra is a once-daily, oral, liver-directed, THR-ß agonist designed to target key underlying causes of MASH. We began generating revenue from sales of Rezdiffra in the United
States in April 2024. In addition, we launched Rezdiffra in Germany in September 2025. Revenue is recorded net of variable consideration, which includes prompt pay discounts, returns, chargebacks, rebates, and co-payment assistance.
Cost of Sales
Cost of sales includes the cost of manufacturing and distribution of inventory related to sales of Rezdiffra. We expect cost of sales to increase in the future, as manufacturing costs incurred prior to regulatory approval were expensed to research and development rather than capitalized as inventory, as approval was considered uncertain.
Research and Development Expenses
Research and development expenses primarily consist of costs associated with our research activities, including the clinical development of our product candidates. We expense our research and development expenses as incurred. We contract with clinical research organizations to manage our clinical trials under agreed upon budgets for each trial, with oversight by our clinical program managers. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received. Manufacturing expense includes costs associated with drug formulation development and clinical drug production. We do not track employee and facility related research and development costs by project, as we typically use our employee and infrastructure resources across multiple research and development programs. We believe that the allocation of such costs would be arbitrary and not be meaningful.
Our research and development expenses consist primarily of:
•salaries and related expense, including stock-based compensation;
•external expenses paid to clinical trial sites, contract research organizations, laboratories, database software and consultants that conduct clinical trials;
•expenses related to development and the production of clinical trial supplies, including fees paid to contract manufacturers;
•expenses related to compliance with drug development regulatory requirements;
•other allocated expenses, which include direct and allocated expenses for depreciation of equipment and other supplies; and
•certain milestone payments payable pursuant to the CSPC License Agreement.
We expect to continue to incur substantial expenses related to our development activities for the foreseeable future as we conduct our clinical trial programs, manufacturing and toxicology studies. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials, additional drug manufacturing requirements, and later stage toxicology studies such as carcinogenicity studies. The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. The probability of success for each product candidate is affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability and commercial viability.
Completion dates and costs for our clinical development programs as well as our research program can vary significantly for any future product candidate and are difficult to predict. As a result, we cannot estimate with any degree of certainty the costs we will incur in connection with the development of our product candidates at this point in time. We expect that we will make determinations as to which programs and product candidates to pursue and how much funding to direct to each program and product candidate on an ongoing basis in response to the scientific success of research, results of ongoing and future clinical trials, potential collaborative agreements with respect to programs or potential product candidates and ongoing assessments as to each product candidate's commercial potential.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries, benefits and stock-based compensation expenses for employees, management costs, costs associated with commercial activities, costs associated with obtaining and maintaining our patent portfolio, commercial and marketing activities, corporate insurance, professional fees for accounting, auditing, consulting and legal services, and allocated overhead expenses.
We expect that our selling, general and administrative expenses will increase in the future as we expand our operating activities, continue commercialization efforts, including extending operations into new geographies (if approved), maintain and expand our patent portfolio and incur additional costs associated with being a public company and maintaining compliance with exchange listing and U.S. Securities and Exchange Commission ("SEC") requirements.
Interest Income
Interest income consists primarily of interest and dividend income earned on cash equivalents and marketable securities.
Interest Expense
Interest expense consists primarily of interest accrued on principal balances that were outstanding under our Financing Agreement. For the three months ended September 30, 2025, we also accrued interest on loans outstanding under the loan facility (the "Hercules Loan Facility") with Hercules Capital, Inc. ("Hercules") until the Hercules Loan Facility was repaid in full and terminated in July 2025.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenue, and expenses and the disclosure of contingent assets and liabilities as of the date of the financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to gross to net expenses, inventory valuation, accrued research and development expenses and stock-based compensation expenses. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. There have been no material changes in our critical accounting policies and significant judgments and estimates as compared to those disclosed in "Part II, Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on February 26, 2025. Refer to Note 2 to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for details of accounting policies over revenue and inventory.
Results of Operations
Three Months Ended September 30, 2025 and 2024
The following table provides comparative unaudited results of operations for the three months ended September 30, 2025 and 2024 (in thousands):
Three Months Ended
September 30, 		Increase / (Decrease)
2025 2024 $ %
Product revenue, net $ 287,268 $ 62,175 $ 225,093 362 %
Operating expenses:
Cost of sales
18,122 2,152 15,970 742 %
Research and development 174,004 68,742 105,262 153 %
Selling, general and administrative 209,117 107,585 101,532 94 %
Total operating expenses 401,243 178,479 222,764 125 %
Loss from operations (113,975) (116,304) (2,329) 2 %
Interest income 10,308 13,019 (2,711) (21) %
Interest expense (7,451) (3,679) 3,772 (103) %
Loss on extinguishment of debt
(2,779) - 2,779 100 %
Other expense, net (293) - (293) 100 %
Net loss $ (114,190) $ (106,964) $ (7,226) 7 %
Revenue
We recorded $287.3 million of product revenue, net for the three months ended September 30, 2025, compared to $62.2 million in the corresponding period in 2024. The increase was due to increased demand for Rezdiffra in 2025.
Cost of Sales
Cost of sales were incurred as a result of sales of Rezdiffra. For the three months ended September 30, 2025, we recorded $18.1 million of cost of sales compared to $2.2 million in the corresponding period in 2024.
Research and Development Expenses
The following table represents our research and development expenses for the three months ended September 30, 2025 and 2024 (in thousands):
Three Months Ended September 30,
Increase / Decrease
2025 2024
$
%
Personnel and Internal Expense
$ 21,084 $ 17,911 $ 3,173 18 %
External Expense
152,920 50,831 102,089 201 %
Total
$ 174,004 $ 68,742 $ 105,262 153 %
Our research and development expenses were $174.0 million for the three months ended September 30, 2025, compared to $68.7 million in the corresponding period in 2024. Research and development expenses increased by $105.3 million in the 2025 period primarily due to the $120.0 million upfront expense under the CSPC License Agreement, $117.3 million of which was recognized upon the closing of the transaction in September 2025, partially offset by a reduction in expenses related to clinical trials.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses were $209.1 million for the three months ended September 30, 2025, compared to $107.6 million in the corresponding period in 2024. Selling, general and administrative expenses increased by $101.5 million in the 2025 period, primarily due to an increase in commercial activities for Rezdiffra, including a corresponding increase in headcount to support our commercialization efforts.
Interest Income
Our net interest income was $10.3 million for the three months ended September 30, 2025, compared to $13.0 million in the corresponding period in 2024. The decrease in interest income was primarily due to lower interest rates compared to the corresponding period in 2024.
Interest Expense
Our interest expense was $7.5 million for the three months ended September 30, 2025, compared to $3.7 million in the corresponding period in 2024. The increase of $3.8 million was primarily the result of a higher average outstanding principal balance after entering into the Financing Agreement.
Nine Months Ended September 30, 2025 and 2024
Nine Months Ended September 30, Increase / (Decrease)
2025 2024 $ %
Product revenue, net $ 637,320 $ 76,813 $ 560,507 730 %
Operating expenses:
Cost of sales 31,700 2,788 28,912 1037 %
Research and development 272,257 211,070 61,187 29 %
Selling, general and administrative
573,851 293,834 280,017 95 %
Total operating expenses 877,808 507,692 370,116 73 %
Loss from operations (240,488) (430,879) (190,391) 44 %
Interest income 27,905 35,575 (7,670) (22) %
Interest expense (14,012) (11,172) 2,840 (25) %
Loss on extinguishment of debt
(2,779) - 2,779 100 %
Other expense, net (335) - (335) 100 %
Net Loss
$ (229,709) $ (406,476) $ 176,767 (43) %
Revenue
We recorded $637.3 million of product revenue, net for the nine months ended September 30, 2025, compared to $76.8 million in the corresponding period in 2024. The increase was due to a full nine months of sales in 2025, as we began selling Rezdiffra in April 2024, as well as increased demand for Rezdiffra in 2025.
Cost of Sales
Cost of sales were incurred as a result of sales of Rezdiffra. For the nine months ended September 30, 2025, we recorded $31.7 million of cost of sales compared to $2.8 million in the corresponding period in 2024.
Research and Development Expenses
The following table represents our research and development expenses for the nine months ended September 30, 2025 and 2024 (in thousands):
Nine Months Ended September 30,
Increase / Decrease
2025 2024
$
%
Personnel and Internal Expense
$ 51,109 $ 51,923 $ (814) (2) %
External Expense
221,148 159,147 62,001 39 %
Total
$ 272,257 $ 211,070 $ 61,187 29 %
Our research and development expenses were $272.3 million for the nine months ended September 30, 2025, compared to $211.1 million in the corresponding period in 2024. Research and development expenses increased by $61.2 million in the 2025 period primarily due to the $120.0 million upfront expense under the CSPC License Agreement, $117.3 million of which was recognized upon the closing of the transaction in September 2025, partially offset by a change in accounting for inventory costs following FDA approval of Rezdiffra in March 2024 and a reduction in expenses related to clinical trials.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses were $573.9 million for the nine months ended September 30, 2025, compared to $293.8 million in the corresponding period in 2024. Selling, general and administrative expenses
increased by $280.0 million in the 2025 period primarily due to increases for commercial activities for Rezdiffra, including a corresponding increase in headcount to support our commercialization efforts.
Interest Income
Our net interest income was $27.9 million for the nine months ended September 30, 2025, compared to $35.6 million in the corresponding period in 2024. The decrease in interest income was primarily due to lower interest rates in 2025 as compared to the same period in 2024.
Interest Expense
Our interest expense was $14.0 million for the nine months ended September 30, 2025, compared to $11.2 million in the corresponding period in 2024. The increase of $2.8 million was primarily the result of a higher average outstanding principal balance after entering into the Financing Agreement.
Macroeconomic Events
Changes in, and uncertainties related to, global trade or other economic policies, including tariffs or other restrictions imposed by the United States government or governments of other nations, may have an adverse effect on us, our partners and the pharmaceutical industry as a whole. Based on our current manufacturing locations, supply chain operations and inventory, we believe that the current tariff policies will not have a material impact on our business, results of operations or financial condition. Our U.S. commercial and clinical supply of resmetirom is currently manufactured in the United States. In addition, we have engaged a European manufacturer to produce our commercial supply of drug product for European commercialization. Additional changes to the policies of the United States or other nations that affect the geopolitical landscape or global trade, economy or market conditions, and other direct or indirect impacts of such policies, are uncertain and unpredictable, and could, in the future, have an adverse effect on our business, results of operations or financial condition.
Liquidity and Capital Resources
As of September 30, 2025, we had cash, cash equivalents, restricted cash, and marketable securities totaling $1,114.7 million compared to $931.3 million as of December 31, 2024. We have historically funded our operations primarily through proceeds from sales of our capital stock and debt financings. In July 2025, we entered into a senior secured credit facility that provides up to $500.0 million. See Note 8 "Long Term Debt" for additional details. In addition, following FDA and EC approval, we receive revenue from sales of Rezdiffra.
Until we are able to generate sufficient revenue from Rezdiffra and any other future approved products, we anticipate that we will continue to incur significant losses. While our rate of cash usage will likely increase in the future, in particular to support our product development and clinical trial efforts, our commercialization efforts and geographic expansion activities and our business development goals, we believe our available cash resources are sufficient to fund our operations past one year from the issuance of the financial statements contained herein. Our future long-term liquidity requirements will be substantial and will depend on many factors, including our ability to effectively commercialize Rezdiffra, our decisions regarding future geographic expansion, the conduct of any future preclinical studies and clinical trials, our entry into any strategic transactions, our ability to maintain compliance with the liquidity covenant in the Financing Agreement and potential milestone payments payable pursuant to the CSPC License Agreement. To meet future long-term liquidity requirements, we may need to raise additional capital to fund our operations through equity or debt financings, collaborations, partnerships or other strategic transactions. Additional capital, if needed, 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, this could have a material adverse effect on our business, results of operations and financial condition. We have the ability to delay certain commercial activities, geographic expansion activities and certain research activities and related clinical expenses, if necessary, due to liquidity concerns until a date when those concerns are relieved.
At-the-Market Sales Agreement
In May 2024, we entered into a Sales Agreement (the "2024 Sales Agreement") with Cowen and Company, LLC, an affiliate of TD Securities (USA) LLC ("Cowen"), replacing and superseding our sales agreement from 2021. We are authorized to issue and sell up to $300.0 million of shares of our common stock under the 2024 Sales Agreement. Sales of our common stock, if any, under the 2024 Sales Agreement will be made by any method that is deemed to be an "at the market" offering as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended. We have no obligation to sell any
common stock and may at any time suspend offers under the 2024 Sales Agreement or terminate the 2024 Sales Agreement pursuant to its terms.
We did not make any sales under the 2024 Sales Agreement during the three and nine months ended September 30, 2025. As of September 30, 2025, $300.0 million remained available for sale under the 2024 Sales Agreement and our related prospectus supplement.
Hercules Loan Facility
In May 2022 we entered into the $250.0 million Hercules Loan Facility. Interest on the Hercules Loan Facility was the greater of (i) the prime rate plus 2.45% and (ii) 8.25%. The Hercules Loan Facility included an end-of-term charge of 5.35% of the aggregate principal amount, which was accounted for in the loan discount.
On July 17, 2025, we used the proceeds received from the Financing Agreement to repay all outstanding obligations under the Hercules Loan Facility, totaling $121.7 million, and upon such repayment, terminated the Hercules Loan Facility. The amount we repaid included $115.0 million of outstanding indebtedness plus accrued and unpaid interest as of the repayment date and exit fees. As a result of the termination, all credit commitments under the Hercules Loan Facility were terminated and all security interests and guarantees in connection with the Hercules Loan Facility were released. The repayment resulted in a $2.8 million loss on extinguishment of debt, primarily due to the write off of unamortized debt issuance costs.
Blue Owl Credit Facility
On July 17, 2025 (the "Closing Date"), we, as the borrower, and Canticle, as a guarantor (the "Guarantor"), entered the Financing Agreement with the Lenders and the Administrative Agent. Under the Financing Agreement, the Lenders have committed up to $500.0 million in senior secured credit facilities, consisting of (a) the Initial Term Loan in an aggregate principal amount equal to $350.0 million and (b) Delayed Draw Term Loans in an aggregate principal amount not to exceed $150.0 million. In addition, the Financing Agreement includes uncommitted Incremental Term Loans in an aggregate principal amount not to exceed $250.0 million (together with the Initial Term Loan and any Delayed Draw Term Loans, collectively the "Term Loans"), subject to the satisfaction of certain terms and conditions set forth in the Financing Agreement. The Initial Term Loan was funded on the Closing Date. Delayed Draw Term Loans are available at our election from time to time after the Closing Date until December 31, 2027. Incremental Term Loans are available at our and the Lenders' mutual consent from time to time after the Closing Date. The proceeds from the Financing Agreement are expected to primarily support our business development activities.
Any outstanding principal on the Term Loans will bear interest at a rate per annum on the basis of a 360-day year equal to the sum of (i) the three-month forward-looking term secured overnight financing rate administered by the Federal Reserve Bank of New York (subject to a 1.0% per annum floor) plus (ii) 4.75%. Accrued interest is payable (i) quarterly following the funding of the Initial Term Loan on the Closing Date, (ii) on any date of prepayment or repayment of the Term Loans and (iii) at maturity. The outstanding balance of the Term Loans, if not repaid sooner, shall be due and payable in full on July 17, 2030.
We may prepay the Term Loans at any time (in whole or in part) and may be required to make mandatory prepayments upon the occurrence of certain customary prepayment events. In certain instances and during certain time periods, these prepayments will be subject to customary prepayment fees. If the Term Loans are prepaid on or prior to the one-year anniversary of the original issuance, we must pay a make-whole amount equal to the greater of (i) 3.00% of the Term Loans being prepaid at such time and (ii) the present value of all remaining interest payments on the amount repaid through the one-year anniversary of the original issuance of such Term Loans, calculated using a discount rate. Thereafter, the amount of any such prepayment fee may vary, but the maximum amount that may be due with any such prepayment would be an amount equal to 3.00% of the Term Loans being prepaid at such time, with such prepayment fee stepping down on each anniversary of the original issuance of such Term Loans.
The Financing Agreement contains affirmative covenants and negative covenants applicable to us and our subsidiaries that are customary for financings of this type. We and the Guarantors (as defined below) are also required to maintain a minimum unrestricted cash balance of $100.0 million at all times. The Financing Agreement also includes representations, warranties, indemnities and events of default that are customary for financings of this type, including an event of default relating to us experiencing a change of control. Upon the occurrence of an event of default, the Lenders may, among other things, accelerate our obligations under the Financing Agreement. Our obligations under the Financing Agreement are and will be guaranteed by certain of our existing and future direct and indirect subsidiaries, subject to certain exceptions (such subsidiaries, collectively, the "Guarantors").
On July 17, 2025, concurrently with the entry into the Financing Agreement, we, the Guarantor and the Administrative Agent entered into a Pledge and Security Agreement. As security for our obligations under the Financing Agreement, we and the Guarantors are required to grant to the Administrative Agent, for the benefit of the Lenders and secured parties, a continuing first priority security interest in substantially all of our and the Guarantors' assets (including all equity interests owned or hereafter acquired by us and the Guarantors), subject to certain customary exceptions. On September 4, 2025, the parties amended the Financing Agreement to add certain of our subsidiaries as Guarantors.
March 2024 Public Offering
In March 2024, we entered into an Underwriting Agreement with Goldman Sachs & Co. LLC, Jefferies LLC, Cowen and Company, LLC, Evercore Group L.L.C. and Piper Sandler & Co, as representatives of the several underwriters named therein (the "2024 Underwriters"), pursuant to which we sold to the 2024 Underwriters in an underwritten public offering (the "2024 Offering"): (i) 750,000 shares of common stock at a public offering price of $260.00 per share, (ii) pre-funded warrants (the "2024 Pre-Funded Warrants") to purchase 1,557,692 shares of common stock at a public offering price of $259.9999 per 2024 Pre-Funded Warrant, which represents the per share public offering price for the common stock less a $0.0001 per share exercise price for each such Pre-Funded Warrant, and (iii) a 30-day option for the 2024 Underwriters to purchase up to 346,153 additional shares of common stock at the public offering price of $260.00 per share (the "Underwriters' Option"). The 2024 Offering closed on March 21, 2024.
The net proceeds of the 2024 Offering after deducting the underwriting discount and commissions and other estimated offering expenses payable by us, were approximately $659.9 million.
The 2024 Pre-Funded Warrants are exercisable at any time after the date of issuance. A holder of 2024 Pre-Funded Warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 9.99%of the number of shares of common stock outstanding immediately after giving effect to such exercise. A holder of 2024 Pre-Funded Warrants may increase or decrease this percentage, but not in excess of 19.99%, by providing at least 61 days prior notice to us.
Cash Flows
The following table provides a summary of our net cash flow activity (in thousands):
Nine Months Ended September 30,
2025 2024
Net cash used in operating activities $ (56,093) $ (351,086)
Net cash provided by (used in) investing activities 4,740 (226,436)
Net cash provided by financing activities 247,028 715,291
Net increase in cash, cash equivalents, and restricted cash $ 195,675 $ 137,769
Operating Activities
Net cash used in operating activities was $56.1 million for the nine months ended September 30, 2025, compared to $351.1 million for the corresponding period in 2024. The use of cash in these periods resulted primarily from our losses from operations, as adjusted for non-cash charges for stock-based compensation, and changes in our working capital accounts.
Investing Activities
Net cash provided by investing activities was $4.7 million for the nine months ended September 30, 2025, compared to net cash used in investing activities of $226.4 million for the corresponding period in 2024. Net cash provided by investing activities for the nine months ended September 30, 2025 primarily consisted of $843.2 million from sales and maturities of marketable securities, partially offset by $834.6 million of purchases of marketable securities for our investment portfolio and a $3.0 million acquisition of an intangible asset. Net cash used in investing activities for the corresponding period in 2024 primarily consisted of $781.0 million of purchases of marketable securities and a $5.0 million acquisition of an intangible asset, partially offset by $560.9 million from sales and maturities of marketable securities in our investment portfolio.
Financing Activities
Net cash provided by financing activities was $247.0 million for the nine months ended September 30, 2025, compared to $715.3 million for the corresponding period in 2024. Net cash provided by financing activities for the nine months ended September 30, 2025 consisted of $350.0 million of proceeds from the Initial Term Loan under the Financing Agreement and $28.1 million from the exercise of stock options, partially offset by a repayment of $121.7 million under the Hercules Loan Facility and $9.4 million of debt issuance costs. Net cash provided by financing activities for the corresponding period in 2024 consisted primarily of $659.9 millionof net proceeds from our 2024 Offering and $57.1 millionfrom the exercise of stock options.
Contractual Obligations and Commitments
In 2019, we entered into an operating lease for office space in certain premises located in West Conshohocken, Pennsylvania (the "Office Lease"), which was further amended by four amendments entered into from 2019 to May 2023. In August 2023, we entered into the Fifth Amendment to the Office Lease (the "Fifth Lease Amendment") pursuant to which the term of the Office Lease was extended through November 2026. As a result of the Fifth Lease Amendment, an incremental $1.6 million right-of-use asset and lease liability were recorded during the year ended December 31, 2023. In 2024, we entered into the Sixth Seventh, Eighth, and Ninth Amendments to the Office Lease, leasing additional office space available in the same premises under the Office Lease, which resulted in an incremental $1.3 million right-of-use asset and lease liability recorded.
In April 2025, we entered into an operating lease for additional office space in West Conshohocken, Pennsylvania. The lease commenced in May 2025 and resulted in a $4.0 million right-of-use asset and lease liability.
In September 2025, we entered into an operating lease for office space in Waltham, Massachusetts. The commencement date did not occur as of September 30, 2025 and therefore the new lease had no impact on the financial statements.
In May 2022, we entered into the $250.0 million Hercules Loan Facility. On July 17, 2025, we entered into the Financing Agreement and used the proceeds to repay all outstanding obligations under the Hercules Loan Facility, totaling $121.7 million, and upon such repayment, terminated the Hercules Loan Facility. The amount we repaid included $115.0 million of outstanding indebtedness plus accrued and unpaid interest as of the repayment date and exit fees. Accrued interest under the Financing Agreement is payable quarterly, on any date of prepayment or repayment of the term loans outstanding thereunder and at maturity. We are not required to repay any principal amounts outstanding under the Financing Agreement until maturity in July 2030, subject to certain prepayment events set forth in the Financing Agreement. See Note 8 "Long Term Debt" to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding the Financing Agreement.
We have a Research, Development and Commercialization Agreement (the "Roche Agreement") with Hoffmann-La Roche ("Roche") which grants us a sole and exclusive license to develop, use, sell, offer for sale and import any Licensed Product (as defined in the Roche Agreement). We received FDA approval for Rezdiffra in March 2024 and EC approval for Rezdiffra in August 2025. A tiered single-digit royalty is payable to Roche on net sales of Rezdiffra, subject to certain reductions.
In July 2025, we entered into the CSPC License Agreement for MGL-2086 (formerly known as SYH2086), a preclinical oral small molecule glucagon-like peptide-1 (GLP-1) receptor agonist. Pursuant to the CSPC License Agreement, CSPC has granted us an exclusive global license to develop, manufacture, and commercialize MGL-2086. The transaction closed in September 2025. We paid CSPC an upfront payment of $120.0 million in October 2025. CSPC is eligible to receive up to $2.0 billion in milestone payments if certain development, regulatory and commercial milestones are achieved, as well as tiered royalties on net sales.
We have entered into customary contractual agreements in support of the Phase 3 clinical trials and in connection with manufacturing Rezdiffra. As of September 30, 2025, we had approximately $187.6 million of obligations under these agreements related to active pharmaceutical ingredient, which is expected to be paid through December 2027.
Except as noted above, no significant changes to contractual obligations and commitments occurred during the nine months ended September 30, 2025, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on February 26, 2025.
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