Madrigal Pharmaceuticals, Inc. (MDGL) Earnings

Management highlights

- Core Market & Product Positioning * MASH is a high unmet need disease with a rapidly expanding patient population and low current diagnosis/treatment rates, creating a long-term multi-decade growth opportunity. * ResDifera is positioned as the foundational, first-in-class approved MASH therapy: it is an oral, once-daily, liver-directed medication with demonstrated efficacy across all MASH subgroups and strong real-world tolerability and performance. * The U.S. addressable F2/F3 MASH market grew nearly 50% from 315,000 diagnosed patients at YE2023 to 460,000 at YE2025, and management expects the overall MASH market to expand at a double-digit annual rate for the foreseeable future, eventually reaching over $20 billion in annual sales, similar to other large chronic disease categories. * Current penetration is only ~1% of the total potential MASH market, leaving enormous room for long-term growth. The untapped F4C (well-compensated MASH cirrhosis) indication could double ResDifera's total addressable opportunity, with ~245,000 existing patients under specialist care in the U.S. and no currently approved therapies. - Commercial Execution * ResDifera ended Q2 2026 with over 49,000 active patients, more than doubling the patient count year-over-year. The 50,000 active patient milestone was crossed in early July 2026 (Q3 2026). * More than 10,000 total prescribers have adopted ResDifera. New prescription growth is increasingly driven by deeper prescribing from existing prescribers, as they gain experience with the product and work through their patient pools. * Endocrinology field force expansion was completed in Q4 2025, and the segment remains in early stages of adoption with strong long-term potential. * Three new patents were secured this quarter: two additional patents reinforce F2/F3 IP protection, and one new patent supports the potential F4C indication, extending intellectual property protection into the 2040s alongside the existing 2045 F2/F3 patent. * Early access programs are active in a small number of European markets, with high prescriber and patient interest, but reimbursement negotiations remain ongoing with negligible near-term revenue contribution expected. - Clinical & Pipeline Progress * New clinical data presented at EASL 2026 confirmed ResDifera improves risk stratification for F4C patients, reduces cardiovascular risk markers (ApoB, LpA, LDL) regardless of baseline statin use, and demonstrates strong real-world efficacy (nearly half of patients achieved ≥25% reduction in liver stiffness after ~9 months of treatment in a large practice analysis). * The company has built an industry-leading MASH pipeline of over 10 programs in under a year, with four clinical-stage assets. A Phase I single ascending dose study for the company's oral GLP-1 (MGL-2086) initiated dosing in June 2026. * Three new Phase II combination trials (with ResDifera as the foundational backbone) are expected to initiate in 2027: oral GLP-1 MGL-2086, DGAT2 inhibitor Avergastat, and siRNA PNPLA3 MGL0795 licensed from Arrowhead. The first preclinical candidate from the RiboCure in-licensed siRNA portfolio has been nominated for IND-enabling studies. * Two ongoing Phase III trials for ResDifera: the F4C Maestro outcomes trial is expected to read out in 2027, and the F2/F3 Maestro NASH study is expected to read out in 2028.

Guidance

- Management maintained that full-year 2026 gross-to-net discounts will remain in the mid-to-high 30% range, in line with prior guidance, and Q2 2026 performance was within this expected range. - Full-year 2026 R&D expenses are expected to be roughly flat compared to 2025, including the one-time upfront business development payments for strategic in-licensed programs. - Full-year 2026 SG&A expenses are expected to increase year-over-year, driven by annualization of the endocrinology field force expansion and ongoing commercial investment to support ResDifera's launch. - Management confirmed they are comfortable with consensus consensus quarterly net sales growth expectations for Q3 2026 and Q4 2026, and expects robust full-year 2026 net sales growth and continued steady patient additions through the end of the year. - The Phase III F4C Maestro outcomes trial remains on track to read out in 2027, with no change to prior timing guidance. All three planned pipeline Phase II trials remain on track to initiate in 2027.

Segment performance

Magical Pharmaceuticals has one primary commercial product segment: ResDifera, the first approved therapy for MASH. Q2 2026 net sales for ResDifera were $364.3 million, representing 71% year-over-year growth, and accounting for 100% of the company's reported net sales. Trailing 12-month net sales for ResDifera totaled nearly $1.3 billion as of Q2 2026. International (Europe) contribution to total revenue and patient counts was negligible in the quarter, and is expected to remain negligible for full-year 2026. Cost breakdown for the overall company in Q2 2026: Cost of sales was $40 million (up from $9.1 million YoY), R&D expenses were $91.2 million (up from $54.1 million YoY), SG&A expenses were $289.4 million (up from $196.9 million YoY). Net loss for Q2 2026 was $57.9 million, compared to a $42.3 million net loss YoY.

Risks & headwinds

- Reimbursement negotiations in European markets remain uncertain, with regulatory and pricing systems still adjusting to the first approved MASH therapy, creating uncertainty around the timing and magnitude of international revenue contributions. - The F4C MASH outcomes trial is the first of its kind in the space; event accumulation depends on natural disease progression, which can vary from initial projections, creating uncertainty around the exact timing of data readout. - The company is operating with a net loss, and while it is preparing for future profitability, sustained investment in commercial launch and pipeline development will continue to require significant capital outlays in the near term. - Competitor approvals could create market fragmentation, though management notes ResDifera's first-mover position, real-world experience, and differentiated product profile create significant competitive barriers. - Off-label use of ResDifera in F4C MASH (prior to trial readout and approval) creates potential reputational and clinical risk if adverse events occur in the unapproved indication.

Analyst Q&A

• Q: What are Q3 patient growth trends, consensus expectations, and early uptake from the expanded endocrinology segment? /

  A: Management reports Q3 2026 is off to a strong start, with 50,000 active patients reached in early July, and confirms the company is comfortable with current consensus net sales growth expectations for the second half of 2026. Patient growth is expected to continue at the same steady rate seen in Q2. Growth is still primarily driven by hepatologists and gastroenterologists, the traditional core MASH prescriber base. Endocrinology expansion was completed only in Q4 2025, so the segment remains in an early launch phase, with strong long-term potential but minimal near-term contribution.

• Q: What is driving accelerating patient growth, and what is the current status and timing of the F4C Phase III trial? /

  A: Patient growth acceleration reflects consistent strong demand and a growing base of experienced prescribers; patient persistency remains healthy at 60-70% at the one-year mark, in line with expectations for a well-tolerated oral therapy, with no signs of growth slowing. For the F4C trial, events are accruing as projected, and the trial remains on track to read out in 2027. Exact timing cannot be narrowed further at this stage, as it is the first event-driven outcomes trial in F4C MASH and event accumulation follows variable natural disease progression.

• Q: What is the contribution of Europe to 2026 revenue, and how are gross-to-net trends progressing? /

  A: Gross-to-net discounts in Q2 2026 were in-line with the guided mid-to-high 30% range, and this guidance is maintained for the full year 2026, with no unexpected inventory dynamics. European revenue contribution is expected to remain negligible in 2026, as reimbursement negotiations are still ongoing and there is broad uncertainty around pricing in European public healthcare systems. This is an industry-wide issue, not company-specific, and high prescriber/patient interest exists pending resolution of pricing.

• Q: When will the Phase II trial for the Arrowhead-licensed PNPLA3 siRNA (MGL0795) initiate, and what is the company's pipeline strategy? /

  A: All three pipeline assets (oral GLP-1, DGAT2 inhibitor Avergastat, MGL0795) are on track to initiate Phase II combination trials with ResDifera in 2027, after completion of initial safety and drug-drug interaction studies and regulatory consultations. The company's pipeline strategy is built around ResDifera as the foundational MASH therapy, with all new assets developed as complementary combinations to boost efficacy, rather than standalone replacements, giving Magical a first-mover advantage in the emerging combination therapy market.