NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization, Business, and Basis of Presentation
Organization and Business
Madrigal Pharmaceuticals, Inc. (the “Company” or “Madrigal”) is 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, the second leading cause of all liver transplantation in the United States, and the fastest-growing indication for liver transplantation in Europe. The Company’s 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. Following receipt of conditional marketing authorization from the European Commission (“EC”), the Company launched Rezdiffra in Germany in September 2025. Rezdiffra was the first 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). The Company is also evaluating Rezdiffra in patients with compensated MASH cirrhosis (consistent with F4c fibrosis) in its MAESTRO-NASH OUTCOMES trial, that, if successful, could expand the eligible patient population for Rezdiffra. In addition, the Company expects to evaluate its pipeline candidates with the goal of delivering best-in-disease therapies for the treatment of MASH.
Basis of Presentation
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by GAAP for complete annual financial statements. However, the Company believes that the disclosures included in these financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of such interim results. The interim results are not necessarily indicative of the results that the Company will have for the full year ending December 31, 2026 or any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those financial statements for the year ended December 31, 2025.
2. Summary of Significant Accounting Policies
Principle of Consolidation
The accompanying unaudited consolidated financial statements have been prepared in conformity with GAAP and include accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606 - Revenue from Contracts with Customers (“ASC 606”). Revenue is recognized at a point in time when the customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract;
(iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s).
Product Revenue, Net
On March 14, 2024, the Company announced that the FDA granted accelerated approval of Rezdiffra (resmetirom) in conjunction with diet and exercise for the treatment of adults with noncirrhotic MASH with moderate to advanced liver fibrosis (consistent with stages F2 to F3 fibrosis). In addition, the Company commercially launched Rezdiffra in Germany in September 2025 following receipt of Conditional Marketing Authorization from the EC. The Company enters into agreements with specialty pharmacies and specialty distributors (each a “Customer” and collectively the “Customers”) to sell Rezdiffra in the U.S. Revenues from product sales are recognized when the Customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the Customer.
Revenue is recorded net of variable consideration, which includes prompt pay discounts, returns, chargebacks, rebates and co-payment assistance. The variable consideration is estimated based on contractual terms as well as management assumptions and historical data. The amount of variable consideration is calculated by using the expected value method, which is the sum of probability-weighted amounts in a range of possible outcomes, or the most likely amount method, which is the single most likely amount in a range of possible outcomes. Estimates are reviewed quarterly and adjusted as necessary.
Accruals are established for gross to net deductions and actual amounts incurred are offset against applicable accruals. The Company reflects these accruals as either a reduction in the related account receivable from the customer or as a current liability, depending on the means by which the deduction is settled. Sales deductions are based on management’s estimates that involve a substantial degree of judgment.
Prompt Pay: Customers receive a prompt pay discount for payments made within a contractually agreed number of days before the due date. The discounts are accounted for as a reduction of the transaction price and recorded as a contra receivable.
Returns: The Company records allowances for product returns as a reduction of revenue at the time product sales are recorded. Product returns are estimated based on forecasted sales and historical and industry data. Returns are permitted in accordance with the return goods policy defined within each customer agreement. The returns reserve is recorded as an accrued liability.
Chargebacks: The Company estimates obligations resulting from contractual commitments with the government and other entities to sell products to qualified healthcare providers at prices lower than the list price charged to the customer who directly purchases from the Company. The customer charges the Company for the difference between what it pays to the Company for the product and the selling price to the qualified healthcare providers, with the difference recorded as a contra receivable.
Co-Payment Assistance: Co-payment assistance programs are offered to eligible end-users as price concessions and are recorded as accrued liabilities and a reduction of the transaction price. The Company uses a third-party to administer the co-payment program for pharmacy benefit claims.
Rebates: The Company’s rebates include amounts paid to Medicaid, Medicare, certain other payors and other rebate programs. Reserves for rebates are recorded in the same period the related product revenue is recognized, resulting in a reduction of product revenues and an accrued liability. The Company’s estimate for rebates is based on statutory or contractual discount rates, expected utilization or an estimated number of patients on treatment, as applicable.
Trade Receivables, Net
The Company's trade receivables relate to amounts due from Customers related to product sales and are recorded net of chargebacks, prompt pay discounts and other allowances. The Company assesses collectibility of overdue receivables and those determined to be uncollectible are written-off. As of March 31, 2026, there were no receivables written off. No allowance for credit loss was recognized as of March 31, 2026 or December 31, 2025.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. The carrying amount reported in the Company’s consolidated balance sheets for cash and cash equivalents approximates its fair value.
Marketable Securities
Marketable securities consist of available-for-sale debt securities that are presented as current assets in the Company’s consolidated balance sheets.
The Company adjusts the cost of available-for-sale debt securities for amortization of premiums and accretion of discounts to maturity. The Company includes such amortization and accretion as a component of interest income, net. Realized gains and losses and declines in value, if any, that the Company judges to be the result of impairment or as a result of recognizing an allowance for credit losses on available-for-sale securities are reported as a component of interest income. To determine whether an impairment exists, the Company considers whether it intends to sell the debt security and, if the Company does not intend to sell the debt security, it considers available evidence to assess whether it is more likely than not that it will be required to sell the security before the recovery of its amortized cost basis. During the three months ended March 31, 2026 and 2025, the Company determined it did not have any securities that were other-than-temporarily impaired.
Marketable securities are stated at fair value, including accrued interest, with their unrealized gains and losses included as a component of accumulated other comprehensive income or loss, which is a separate component of stockholders’ equity. The fair value of these securities is based on quoted prices and observable inputs on a recurring basis. Realized gains and losses are determined on the specific identification method. During the three months ended March 31, 2026 and 2025, realized gains and losses on marketable securities were not material to the consolidated financial statements.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments, which include cash equivalents and marketable securities, approximate their fair values. The fair value of the Company’s financial instruments reflects the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy has the following three levels:
Level 1—quoted prices in active markets for identical assets and liabilities.
Level 2—observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3—unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability.
Financial assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company measures the fair value of its marketable securities by taking into consideration valuations obtained from third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker-dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities and other observable inputs.
As of March 31, 2026, the Company’s financial assets valued based on Level 1 inputs consisted of cash and cash equivalents in a money market fund, its financial assets valued based on Level 2 inputs consisted of high-grade corporate and government agency bonds and commercial paper, and it had no financial assets valued based on Level 3 inputs. During the three months ended March 31, 2026 and 2025, the Company did not have any transfers of financial assets between Levels 1 and 2. As of March 31, 2026 and December 31, 2025, the Company did not have any financial liabilities that were recorded at fair value on a recurring basis on the balance sheet.
Inventory
Inventory, which consists of work in process and finished goods, is stated at the lower of cost or estimated net realizable value, using either actual or standard cost depending on the stage of inventory, based on a first-in, first-out method. The balance sheet classification of inventory as current or non-current is determined by whether the inventory will be consumed within the Company’s normal operating cycle. The Company analyzes its inventory levels quarterly and writes down inventory subject to expiry or in excess of expected requirements, or that has a cost basis in excess of its expected net realizable value. These write downs are charged to cost of sales in the accompanying Consolidated Statements
of Operations. The Company capitalizes inventory costs when future commercial sale in the ordinary course of business is probable.
The Company considered regulatory approval of its product candidate to be uncertain and product manufactured prior to regulatory approval could not have been sold unless regulatory approval was obtained. As such, the manufacturing costs incurred prior to regulatory approval were not capitalized as inventory, but rather were expensed as incurred as research and development expenses. The Company began capitalizing inventory in March 2024 after FDA accelerated approval was granted for Rezdiffra.
Cost of Sales
Cost of sales includes the cost of manufacturing and distribution of inventory related to sales of Rezdiffra, including salaries, benefits and stock-based compensation expense for employees dedicated to the production of Rezdiffra. Cost of sales also includes royalties payable to F. Hoffmann-La Roche AG (“Roche”) based on net sales of Rezdiffra. The Company estimates its annual royalty obligation and recognizes its related cost of sales at an estimated blended royalty rate each quarterly period.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs are comprised of costs incurred in performing research and development activities, including internal costs (including cash compensation and stock-based compensation paid to research and development employees), costs for consultants, upfront and 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 its drug, and conducted 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 clinical trials, completion of milestone 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.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries, benefits and stock-based compensation expenses for employees other than research and development employees and employees dedicated to the production of Rezdiffra, management costs, costs associated with obtaining and maintaining our patent portfolio, commercial and marketing activities, advertising, professional fees for accounting, auditing, consulting and legal services and allocated overhead expenses.
Leases
The Company determines if an arrangement is a lease at contract inception. All leases are classified as operating leases. Lease assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the leasing arrangement. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. When an implicit rate is not readily determinable, an incremental borrowing rate is estimated based on information available at commencement. Lease expense is recognized on a straight-line basis over the lease term. Short-term leases of 12 months or less at commencement date are expensed as incurred.
Patents
Costs to secure and defend patents are expensed as incurred and are classified as selling, general and administrative expense in the Company’s consolidated statements of operations.
Intangible Assets, Net
Intangible assets with finite lives consist of regulatory approval milestones, which are amortized to cost of sales over their estimated useful lives using the straight-line method. Intangible assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.
Stock-Based Compensation
The Company recognizes stock-based compensation expense based on the grant date fair value of stock options, restricted stock units, and other stock-based compensation awards granted to employees, officers, directors, and consultants. Awards that vest as the recipient provides service are expensed on a straight-line basis over the requisite service period.
The Company uses the Black-Scholes option pricing model to determine the grant date fair value of stock options 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. For the period ended March 31, 2026, the Company used the expected term based on historical Company data for determining the expected lives of options. The Company previously used the simplified method. Expected volatility is based upon an industry estimate, the Company’s historical trading activity, or a blended rate of the two. 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 re-evaluated at least annually and the forfeiture rate is adjusted as necessary.
For other stock-based compensation awards granted to employees and directors that vest based on market conditions, such as the trading price of the Company’s common stock achieving or exceeding certain price targets, the Company uses a Monte Carlo simulation model to estimate the grant date fair value and recognize stock compensation expense over the derived service period. The Monte Carlo simulation model requires key inputs for risk-free interest rate, dividend yield, volatility, and expected life.
The assumptions used in computing the fair value of equity awards reflect the Company’s best estimates but involve uncertainties related to market and other conditions. Changes in any of these assumptions may materially affect the fair value of awards granted and the amount of stock-based compensation recognized.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”, which prescribes the use of the liability method where deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that a portion or all of the deferred tax assets will not be realized based on the weight of available positive and negative evidence. The Company currently maintains a 100% valuation allowance on its deferred tax assets.
The Company recognizes the financial statement effects of a tax position when it is more likely than not (a likelihood of greater than 50%) that the position will be sustained upon examination by the relevant taxing authority, based on the technical merits of the position. Uncertain tax positions are recorded based upon certain recognition and measurement criteria. The Company re-evaluates uncertain tax positions at each reporting date and considers all available information, including, but not limited to, changes in tax laws or regulations, developments in case law, changes in the expected timing or outcome of audits, settlements with taxing authorities, and changes in facts or circumstances related to a particular tax position. Adjustments to recognized tax positions are recorded in the period in which new information becomes available. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense in the Company’s consolidated statements of operations.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The difference between the Company’s net income (loss) and comprehensive income (loss) includes changes in unrealized gains and losses on marketable securities and foreign currency translation adjustments.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies and adopted by the Company as of the specified effective date. Except as noted below, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its condensed consolidated financial statements and disclosures.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which applies to all public entities and requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. Public entities must adopt the new standard prospectively for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption and retrospective application are permitted. The Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which clarifies and aligns existing guidance related to accounting for certain costs incurred in connection with internal-use software, including updated guidance regarding agile and iterative software development methodologies. The standard applies to all entities that incur costs to develop internal-use software. ASU 2025-06 is effective for annual periods beginning after December 15, 2027, and interim periods within those annual periods. The Company early adopted ASU 2025-06 prospectively, effective January 1, 2026. The adoption did not have a material impact on its consolidated financial statements.
3. Liquidity and Uncertainties
The Company is subject to risks common to development stage companies and early commercial companies in the biopharmaceutical industry including, but not limited to, uncertainty of product development and commercialization, dependence on key personnel, uncertainty of market acceptance of products and product reimbursement, product liability, uncertain protection of proprietary technology, potential inability to raise additional financing necessary for development and commercialization, and compliance with the applicable regulations.
The Company has incurred losses since inception, including approximately $94.4 million for the three months ended March 31, 2026, resulting in an accumulated deficit of approximately $2,184.9 million as of March 31, 2026. The Company has historically funded its operations primarily through proceeds from sales of the Company’s capital stock and debt financings. In July 2025, the Company 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, the Company receives revenue from sales of Rezdiffra. Management expects to incur losses until the Company is able to generate sufficient revenue from Rezdiffra and any other approved products. The Company believes that its cash, cash equivalents and marketable securities at March 31, 2026 will be sufficient to fund operations past one year from the issuance of these financial statements. The Company’s future long-term liquidity requirements will be substantial and will depend on many factors, including the Company’s ability to effectively commercialize Rezdiffra, the Company’s decisions regarding future geographic expansion, the conduct of any future preclinical studies and clinical trials, the Company entering into any strategic transactions, the Company’s ability to maintain compliance with the liquidity covenant in the Financing Agreement (as defined in Note 8) and potential milestone payments payable pursuant to its license agreements. To meet its future capital needs, the Company may need to raise additional capital through debt or equity financings, collaborations, partnerships or other strategic transactions. However, there can be no assurance that the Company will be able to complete any such transactions on acceptable terms or otherwise. The inability of the Company to obtain sufficient funds on acceptable terms when needed, if at all, could have a material adverse effect on the Company’s business, results of operations and financial condition. The Company has 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.
4. Product Revenue, Net
The following table summarizes balances and activity for gross to net reserves (in thousands):
| | | | | | | | | | | | | | | | | |
| Chargebacks, Discounts for Prompt Pay and Other Allowances | | Rebates, Co-Pay Assistance, Returns, and Other | | Totals |
| Balance at December 31, 2025 | $ | 8,838 | | | $ | 90,504 | | | $ | 99,342 | |
| Provision related to sales in the current year | 37,824 | | | 128,950 | | | 166,774 | |
| Adjustments related to prior year sales | (1,978) | | | (2,367) | | | (4,345) | |
| Payments and customer credits issued | (23,850) | | | (94,359) | | | (118,209) | |
| Balance at March 31, 2026 | $ | 20,834 | | | $ | 122,728 | | | $ | 143,562 | |
Concentrations of Credit Risk and Significant Customers
The Company generates revenue from a small number of large, reputable customers. The following customers accounted for over 10% of total gross product revenue during the three months ended March 31, 2026 and 2025.
| | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| 2026 | | 2025 | | | | |
| | | | | | | |
Customer A | 31 | % | | 34 | % | | | | |
Customer B | 19 | % | | 23 | % | | | | |
Customer C | 13 | % | | 10 | % | | | | |
Customer D | 13 | % | | 3 | % | | | | |
Customer E | 12 | % | | 15 | % | | | | |
5. Cash, Cash Equivalents, Restricted Cash and Marketable Securities
The Company held restricted cash of $5.2 million and $5.1 million as of March 31, 2026 and December 31, 2025, respectively, predominately as collateral to its corporate credit card program.
A summary of cash, cash equivalents, restricted cash and available-for-sale marketable securities held by the Company as of March 31, 2026 and December 31, 2025 is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2026 |
| Cost | | Unrealized gains | | Unrealized losses | | Fair value |
| Cash, cash equivalents and restricted cash: | | | | | | | |
| Cash (Level 1) | $ | 83,555 | | | $ | — | | | $ | — | | | $ | 83,555 | |
| Money market funds (Level 1) | 63,621 | | | — | | | — | | | 63,621 | |
U.S. government and government sponsored entity (GSE) securities (Level 1) | 1,470 | | | — | | | — | | | 1,470 | |
| Corporate debt securities with original maturities of 3 months or less (Level 2) | 83,542 | | | — | | | — | | | 83,542 | |
| Total cash, cash equivalents and restricted cash | 232,188 | | | — | | | — | | | 232,188 | |
| Marketable securities: | | | | | | | |
| Corporate debt securities with original maturities of 1 year or less (Level 2) | 238,508 | | | 15 | | | (136) | | | 238,387 | |
| U.S. government and GSE securities with original maturities of 1 year or less (Level 2) | 257,024 | | | 135 | | | (32) | | | 257,127 | |
| U.S. government and GSE securities with original maturities of 1 to 2 years (Level 2) | 73,045 | | | 4 | | | (175) | | | 72,874 | |
| Corporate debt securities with original maturities of 1 to 2 years (Level 2) | 17,407 | | | 1 | | | (58) | | | 17,350 | |
Total cash, cash equivalents, restricted cash and marketable securities | $ | 818,172 | | | $ | 155 | | | $ | (401) | | | $ | 817,926 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2025 |
| Cost | | Unrealized gains | | Unrealized losses | | Fair value |
| Cash, cash equivalents and restricted cash: | | | | | | | |
| Cash (Level 1) | $ | 109,708 | | | $ | — | | | $ | — | | | $ | 109,708 | |
| Money market funds (Level 1) | 50,211 | | | — | | | — | | | 50,211 | |
U.S. government and government-sponsored entity (GSE) securities (Level 1) | 9,129 | | | — | | | — | | | 9,129 | |
Corporate debt securities with original maturities of 3 months or less (Level 2) | 34,735 | | | — | | | — | | | 34,735 | |
| Total cash, cash equivalents and restricted cash | 203,783 | | | — | | | — | | | 203,783 | |
| Marketable securities: | | | | | | | |
| Corporate debt securities with original maturities of 1 year or less (Level 2) | 372,096 | | | 178 | | | (16) | | | 372,258 | |
U.S. government and GSE securities with original maturities of 1 year or less (Level 2) | 298,007 | | | 460 | | | (1) | | | 298,466 | |
U.S. government and GSE securities with original maturities of 1 to 2 years (Level 2) | 91,936 | | | 211 | | | — | | | 92,147 | |
Corporate debt securities with original maturities of 1 to 2 years (Level 2) | 21,968 | | | 30 | | | (3) | | | 21,995 | |
| Total cash, cash equivalents, restricted cash and marketable securities | $ | 987,790 | | | $ | 879 | | | $ | (20) | | | $ | 988,649 | |
6. Inventory
The following table summarizes the Company's inventory balances as of March 31, 2026 and December 31, 2025 (in thousands):
| | | | | | | | | | | | |
| March 31, 2026 | | December 31, 2025 | |
Raw materials | $ | — | | | $ | — | | |
Work in process | 106,258 | | | 67,633 | | |
Finished goods | 5,812 | | | 7,208 | | |
Total inventory | $ | 112,070 | | | $ | 74,841 | | |
There was no provision for excess inventory recorded as of March 31, 2026 or December 31, 2025.
7. Accrued Liabilities
Accrued liabilities as of March 31, 2026 and December 31, 2025 consisted of the following (in thousands):
| | | | | | | | | | | |
| | March 31,
2026 | | December 31,
2025 |
| Rebates, returns and other revenue related reserves | $ | 120,750 | | | $ | 90,504 | |
Clinical study, manufacturing and drug supply | 36,862 | | | 26,907 | |
| Compensation and benefits | 34,330 | | | 69,211 | |
| Selling, general and administrative | 46,826 | | | 40,026 | |
| Other | 36,993 | | | 33,744 | |
| | | |
| | | |
| | | |
| Total accrued liabilities | $ | 275,761 | | | $ | 260,392 | |
8. Long Term Debt
Hercules Loan Facility
In May 2022, the Company entered into a $250.0 million senior secured loan facility (as amended from time to time, the “Hercules Loan Facility”) with the several banks and other financial institutions or entities party thereto (collectively, the “Hercules Lenders”), and Hercules Capital, Inc. (“Hercules”), in its capacity as administrative agent and collateral agent for itself and the Hercules Lenders. 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. In connection with the first tranche drawn at closing, the Company issued Hercules a warrant to purchase 14,899 shares of Company common stock, which had a Black-Scholes value of $0.6 million. In addition, the Company issued to Hercules and its affiliates warrants to purchase an aggregate of 4,555 shares of common stock, which had a Black-Scholes value of $0.9 million, following the closing of the second tranche.
On July 17, 2025, the Company used the proceeds of the Initial Term Loan under the Financing Agreement (each as defined below in this Note 8) 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 repaid by the Company 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 executed 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.
Financing Agreement
On July 17, 2025 (the “Closing Date”), the Company entered into a Financing Agreement (as amended from time to time, the “Financing Agreement”) with the Guarantors (as defined below in this Note 8), certain funds managed by Blue Owl Capital Corporation, as the lenders (the “Lenders”), and LSI Financing LLC, as the administrative agent for the Lenders (the “Administrative Agent”). Under the Financing Agreement, the Lenders have committed 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 loan commitments in an aggregate principal amount not to
exceed $150.0 million (the loans thereunder, if any, 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 loans thereunder, if any, the “Incremental Term Loans”, 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 the Company’s election from time to time after the Closing Date until December 31, 2027. Incremental Term Loans are available at the Company’s and the Lenders’ mutual consent from time to time after the Closing Date.
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 1.0% per annum floor) plus (ii) 4.75%. Accrued interest is payable quarterly following the funding of the Initial Term Loan on the Closing Date, on any date of prepayment or repayment of the Term Loans and at maturity. The outstanding balance of the Term Loans, if not repaid sooner, shall be due and payable in full on the maturity date thereof. The stated maturity date of the Term Loans is July 17, 2030.
The Company 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, the Company 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 the Company and its subsidiaries that are customary for financings of this type. The Company and the Guarantors 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 a change of control of the Company. Upon the occurrence of an event of default, the Lenders may, among other things, accelerate the Company’s obligations under the Financing Agreement. The obligations of the Company under the Financing Agreement are and will be guaranteed by certain of the Company’s 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, the Company, the Guarantors and the Administrative Agent entered into a Pledge and Security Agreement. As security for the obligations of the Company and the Guarantors, each of the Company 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 the assets of the Company and the Guarantors (including all equity interests owned or hereafter acquired by the Company and the Guarantors), subject to certain customary exceptions. On September 4, 2025, the parties amended the Financing Agreement to add certain of the Company’s subsidiaries as Guarantors.
As of March 31, 2026, the outstanding principal amount under the Financing Agreement was $350.0 million. The interest rate during the three months ended March 31, 2026 was 8.42%. Interest expense was $7.8 million and $3.3 million for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, the Company was in compliance with all loan covenants and provisions.
Future minimum payments, including interest and principal, under the loans payable outstanding as of March 31, 2026 were as follows (in thousands):
| | | | | |
| Period Ending March 31, 2026: | Amount |
| 2026 | $ | 22,591 | |
| 2027 | 29,984 | |
| 2028 | 30,067 | |
| 2029 | 29,984 | |
| 2030 | 366,266 | |
| $ | 478,892 | |
| Less amount representing interest | (128,892) | |
| Less unamortized discount | (9,670) | |
| Loan payable, net of discount | $ | 340,330 | |
9. Stockholders’ Equity
Common Stock
Each common stockholder is entitled to one vote for each share of common stock held. The common stock will vote together with all other classes and series of stock of the Company as a single class on all actions to be taken by the Company’s stockholders. Each share of common stock is entitled to receive dividends, as and when declared by the Company’s Board of Directors (the “Board”). The Company has never declared cash dividends on its common stock and does not expect to do so in the foreseeable future.
Preferred Stock
The Company’s Series A Convertible Preferred Stock and Series B Convertible Preferred Stock (together, the “Series A and B Preferred Stock”) have a par value of $0.0001 per share and are convertible into shares of the Company’s common stock at a one-to-one ratio, subject to adjustment as provided in the Certificates of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock that the Company filed with the Secretary of State of the State of Delaware on June 21, 2017 and December 22, 2022, respectively. The terms of the Series A and B Preferred Stock are set forth in such Certificates of Designation. Each share of the Series A and B Preferred Stock is convertible into shares of common stock following notice that may be given at the holder’s option. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, after the satisfaction in full of the debts of the Company and the payment of any liquidation preference owed to the holders of shares of capital stock of the Company ranking prior to the Series A and B Preferred Stock upon liquidation, the holders of the Series A and B Preferred Stock shall participate pari passu with the holders of the common stock (on an as-if-converted-to-common-stock basis) in the net assets of the Company. Shares of the Series A and B Preferred Stock will generally have no voting rights, except as required by law. Shares of the Series A and B Preferred Stock will be entitled to receive dividends before or concurrently with shares of any other class or series of capital stock of the Company (other than dividends in the form of the common stock) equal to the dividend payable on each share of the common stock, on an as-converted basis.
Pre-Funded Warrants
In connection with an underwritten public offering in September 2023, the Company issued pre-funded warrants (the “2023 Pre-Funded Warrants”) to purchase 2,048,098 shares of common stock at a public offering price of $151.6899 per 2023 Pre-Funded Warrant, which represents the per share public offering price for common stock less a $0.0001 per share exercise price for each such 2023 Pre-Funded Warrant. In addition, in connection with an underwritten public offering in March 2024, the Company issued pre-funded warrants (the “2024 Pre-Funded Warrants,” and together with the 2023 Pre-Funded Warrants, the “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 2024 Pre-Funded Warrant.
The Pre-Funded Warrants are generally exercisable at any time; however, a holder of Pre-Funded Warrants may not exercise the warrant to the extent that 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 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 the Company.
At-The-Market Issuance Sales Agreement
In May 2024, the Company entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”). Pursuant to the Sales Agreement, the Company is authorized to issue and sell up to $300.0 million in shares of the Company’s common stock, at the Company’s option, through Cowen as its sales agent. Sales of common stock through Cowen could be made by any method that is deemed an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including by means of ordinary brokers’ transactions at market prices, in block transactions or as otherwise agreed by the Company and Cowen. Subject to the terms and conditions of the Sales Agreement, Cowen would use commercially reasonable efforts consistent with its normal trading and sales practices to sell the common stock based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company imposed). The Company sold no shares in the three months ended March 31, 2026 or 2025 under the Sales Agreement.
10. Stock-based Compensation
2015 Stock Plan
The 2015 Stock Plan, as amended (the “2015 Stock Plan”), is the Company’s stockholder-approved incentive plan through which equity based grants are awarded. The 2015 Stock Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units and other stock-based compensation awards to employees, officers, directors, and consultants of the Company. The administration of the 2015 Stock Plan is under the general supervision of the Compensation Committee of the Board of Directors. The terms of stock options awarded under the 2015 Stock Plan, in general, are determined by the Compensation Committee, provided the exercise price per share generally shall not be set at less than the fair market value of a share of the common stock on the date of grant and the term shall not be greater than ten years from the date the option is granted. As of March 31, 2026, 211,145 shares were available for future issuance under the 2015 Stock Plan.
2023 Inducement Plan
In September 2023, the Company adopted the 2023 Inducement Plan (the “2023 Inducement Plan”), pursuant to which the Company from time to time was permitted to make equity grants to new employees as a material inducement to their employment. The 2023 Inducement Plan was adopted without stockholder approval, pursuant to Nasdaq Listing Rule 5635(c)(4), and was administered by the Compensation Committee of the Board. The 2023 Inducement Plan provided for the granting of non-statutory stock options, restricted stock, restricted stock units, performance stock units and other stock-based compensation awards to new employees, but did not allow for the granting of incentive stock options. The terms of the stock options under the 2023 Inducement Plan, in general, were determined by the Compensation Committee, provided the exercise price per share generally would not be set at less than the fair market value of a share of the common stock on the date of grant and the term would not be greater than ten years from the date the option or award was granted. A total of 500,000 shares of the Company’s common stock were reserved for issuance under the 2023 Inducement Plan. In June 2025, the Company terminated the 2023 Inducement Plan, and therefore no additional awards may be made from the 2023 Inducement Plan. Any awards outstanding under the 2023 Inducement Plan will continue to be governed by the terms thereof.
2025 Inducement Plan
In June 2025, the Company adopted the 2025 Inducement Plan (the “2025 Inducement Plan”), pursuant to which the Company may from time to time make equity grants to new employees as a material inducement to their employment. The 2025 Inducement Plan was adopted without stockholder approval, pursuant to Nasdaq Listing Rule 5635(c)(4), and is administered by the Compensation Committee of the Board. The 2025 Inducement Plan provides for the granting of non-statutory stock options, restricted stock, restricted stock units, performance stock units and other stock-based compensation awards to new employees, but does not allow for the granting of incentive stock options. The terms of the stock options under the 2025 Inducement Plan, in general, are determined by the Compensation Committee, provided the exercise price per share generally shall not be set at less than the fair market value of a share of the common stock on the date of grant and the term shall not be greater than ten years from the date the option or award is granted. A total of 100,000 shares of the Company’s common stock were initially reserved for issuance under the 2025 Inducement Plan. In September 2025, the 2025 Inducement Plan was amended to increase the aggregate number of shares reserved for issuance by an additional 300,000 shares. A total of 230,287 shares were available for future issuance as of March 31, 2026.
Stock Options
The following table summarizes stock option activity during the three months ended March 31, 2026:
| | | | | | | | | | | |
| | Shares | | Weighted average exercise price |
| Outstanding at December 31, 2025 | 979,861 | | $ | 155.25 | |
| Options granted | 102,652 | | 437.68 | |
| Options exercised | (58,815) | | 39.84 | |
| Options cancelled | (5,353) | | 231.67 | |
| Outstanding at March 31, 2026 | 1,018,345 | | $ | 189.98 | |
| Exercisable at March 31, 2026 | 716,129 | | $ | 126.50 | |
The total cash received by the Company as a result of stock option exercises was $2.3 million and $8.6 million for the three months ended March 31, 2026 and 2025, respectively. The total intrinsic value of options exercised was $27.6 million and $25.7 million for the three months ended March 31, 2026 and 2025, respectively.
The Company awards restricted stock units (“RSUs”) to employees, officers and directors of the Company. RSUs vest annually and are subject to forfeiture if employment or service terminates before vesting.
The following table summarizes RSU activity, excluding performance-based RSUs, during the three months ended March 31, 2026:
| | | | | | | | | | | |
| Shares | | Weighted average grant date fair value |
| Outstanding at December 31, 2025 | 798,422 | | $ | 307.85 | |
RSUs granted | 315,641 | | 439.07 | |
RSUs vested | (141,030) | | 299.16 | |
RSUs forfeited | (12,135) | | 304.20 | |
| Outstanding at March 31, 2026 | 960,898 | | $ | 352.28 | |
For the three months ended March 31, 2026 and 2025, the total fair value of RSUs vested was $65.3 million and $25.0 million, respectively.
Performance-Based Restricted Stock Units
The Company has granted various performance-based restricted stock units (“PSUs”) to certain senior members of leadership. Depending on the terms of the PSUs and the outcome of the pre-established performance criteria, which may include a market or performance condition, a recipient may ultimately earn the target number of PSUs granted or a specified multiple thereof at the end of the vesting period. The Company granted PSUs to the Company’s Chief Executive Officer (“CEO”) in connection with his hiring in September 2023. Such PSUs may be earned based on the achievement of three significant sustained stock price appreciation hurdles over a five-year period. The Company’s CEO achieved the first two hurdles in 2025 and earned 50,000 shares for each hurdle. The Company’s CEO is eligible to earn an additional 50,000 shares upon the achievement of the final hurdle. Earned PSUs are settled on a delayed basis notwithstanding the date of achievement of the stock price hurdle. Beginning in 2024, the Company issued PSUs to certain executives that may be earned based on the Company’s total shareholder return relative to a defined peer group over a three year period. Accordingly, any PSUs granted in 2024, 2025 and 2026 will vest, to the extent earned, in the first quarter of 2027, 2028 and 2029, respectively.
The following table summarizes PSU activity during the three months ended March 31, 2026:
| | | | | | | | | | | | | | | | | |
| PSUs | | Eligible to Earn PSUs | | Weighted average grant date fair value |
| Outstanding PSUs at December 31, 2025 | 103,244 | | | 256,488 | | | $ | 500.55 | |
| PSUs granted | 38,803 | | | 77,606 | | | 616.19 | |
| PSUs earned | — | | | — | | | — | |
| PSUs forfeited | (173) | | | (346) | | | 593.93 | |
| Outstanding at March 31, 2026 | 141,874 | | | 333,748 | | | $ | 532.06 | |
Outstanding PSUs excludes 100,000 shares underlying PSU awards that have been earned but are subject to delayed settlement as there is no longer a risk of forfeiture with respect to these awards.
Outstanding Awards
As of March 31, 2026, the Company had RSUs, PSUs, and options outstanding pursuant to which an aggregate of 2,312,991 shares of its common stock may be issued pursuant to the terms of all awards granted under the 2015 Stock Plan, 2023 Inducement Plan and 2025 Inducement Plan. Shares underlying PSU awards that have been earned but are subject to delayed settlement have been excluded from this amount as there is no longer a risk of forfeiture with respect to these awards.
Stock-Based Compensation Expense
Stock-based compensation expense during the three months ended March 31, 2026 and 2025 was as follows (in thousands):
| | | | | | | | | | | | | | |
| Three Months Ended March 31, | |
| 2026 | | 2025 | | | |
| Stock-based compensation expense by type of award: | | | | | | |
| Stock options | $ | 5,163 | | | $ | 5,439 | | | | |
| Restricted stock units | 24,490 | | | 11,788 | | | | |
| Performance-based restricted stock units | 4,365 | | | 3,704 | | | | |
| Total stock-based compensation expense | $ | 34,018 | | | $ | 20,931 | | | | |
| Effect of stock-based compensation expense by line item: | | | | | | |
Cost of sales | $ | 96 | | | $ | — | | | | |
| Research and development | 7,865 | | | 5,215 | | | | |
Selling, general and administrative | 26,057 | | | 15,716 | | | | |
| Total stock-based compensation expense included in net loss | $ | 34,018 | | | $ | 20,931 | | | | |
Unrecognized stock-based compensation expense as of March 31, 2026 was $377.1 million with a weighted average remaining period of 3.13 years.
11. Commitments and Contingencies
Licenses and Other Commitments
The Company has entered into customary contractual arrangements and letters of intent in preparation for and in support of operations in the normal course of business. As of March 31, 2026, the Company had approximately $222.9 million of obligations under these agreements related to active pharmaceutical ingredient, which is expected to be paid through 2029.
Roche Agreement
The Company has a Research, Development and Commercialization Agreement (as amended, the “Roche Agreement”) with Roche which grants the Company a sole and exclusive license to develop, use, sell, offer for sale and
import any Licensed Product (as defined in the Roche Agreement). In January 2026, the Company entered into an amendment to the Roche Agreement to provide the Company the full and exclusive right and discretion to control all patent term adjustments and patent term extensions applicable to Rezdiffra, including patents owned by Roche and jointly owned between the parties. In consideration of the foregoing, the royalty payable to Roche based on net sales of Rezdiffra will not be reduced until the expiration of certain patent term extensions that have been, or could have been, filed.
The Roche Agreement required certain milestone payments to Roche. In March 2024, upon receiving FDA approval of Rezdiffra, a milestone was achieved and $5.0 million was paid to Roche. In August 2025, upon receiving conditional marketing authorization from the EC, a milestone was achieved and $3.0 million was paid to Roche. Furthermore, a tiered single-digit royalty is payable on net sales of resmetirom or a product developed from resmetirom, subject to certain reductions. The Company began incurring royalty expense following its commercial launch of Rezdiffra in April 2024.
CSPC License (MGL-2086)
In July 2025, the Company entered into an exclusive global license agreement (the “CSPC License Agreement”) with CSPC Pharmaceutical Group Limited (“CSPC”) for MGL-2086 (formerly known as SYH2086), an oral small molecule GLP-1 receptor agonist. Pursuant to the CSPC License Agreement, CSPC has granted the Company an exclusive global license to develop, manufacture, and commercialize MGL-2086. The transaction closed in September 2025. The Company paid CSPC an upfront payment of $120.0 million in October 2025. CSPC is eligible to receive up to $2.0 billion in development, regulatory and commercial milestone payments, as well as royalties on net sales ranging from mid-single digits to low-double digits.
Pfizer License (ervogastat)
In December 2025, the Company entered into an exclusive global license agreement with Pfizer Inc. (the “Pfizer License Agreement”) to develop, manufacture and commercialize ervogastat, a Phase 2 oral DGAT-2 inhibitor, and two additional early-stage MASH assets. The Company paid Pfizer an upfront payment of $50.0 million in December 2025. In addition, Pfizer is eligible to receive up to $70.0 million in development and regulatory milestone payments related to ervogastat and low-double digit royalties on net sales of ervogastat. Pfizer is eligible to receive additional development, regulatory and commercial milestone payments and royalty payments on net sales of the two licensed early stage assets.
Ribocure License (siRNA programs)
In February 2026, the Company entered into an exclusive global license agreement (the “Ribocure License Agreement”) with Suzhou Ribo Life Science Co. Ltd. and Ribocure Pharmaceuticals AB (together, “Ribocure”) granting the Company exclusive global rights to develop, manufacture and commercialize six small interfering RNA (“siRNA”) programs. Pursuant to the Ribocure License Agreement, the Company paid Ribocure an upfront payment of $60.0 million. In addition, Ribocure is eligible to receive up to $4.4 billion in development, regulatory and commercial milestone payments across all programs, as well as royalties on net sales ranging from mid-single digits to low-double digits.
As of March 31, 2026, $48.3 million of the upfront payment was recorded to R&D expense and $11.7 million was capitalized as a prepaid asset and other asset to be recorded as research and development services are performed by Ribocure.
Arrowhead License (PNPLA3)
In May 2026, the Company entered into an exclusive global license agreement (the “Arrowhead License Agreement”) with Arrowhead Pharmaceuticals Inc. (“Arrowhead”) granting the Company an exclusive global license to ARO-PNPLA3. Pursuant to the Arrowhead License Agreement, the Company will pay Arrowhead an upfront payment of $25.0 million. In addition, Arrowhead is eligible to receive up to $975.0 million in development, regulatory and commercial milestone payments, as well as royalties on net sales ranging from high-single digits to the mid-teens.
Leases
In 2019, the Company entered into an operating lease for office space 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, the Company entered into the Fifth Amendment to the Office Lease (the “Fifth Lease Amendment”). The Fifth Lease Amendment extended the term of the Office Lease through November 2026. As a result of the Fifth Lease Amendment, an incremental $1.6 million right-of-use asset and lease liabilities 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, the Company 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 March 2026, the Company entered into an amendment to this lease, which modified the lease term and payment schedule. As a result, the right-of-use asset and lease liability balances were remeasured, resulting in balances of $4.0 million and $4.6 million as of March 31, 2026, respectively.
In September 2025, the Company entered into an operating lease for office space in Waltham, Massachusetts. The commencement date had not occurred as of March 31, 2026. Upon lease commencement, the Company expects to make total lease payments of $9.9 million over an 84-month lease term. As of March 31, 2026, the Company has recorded a $1.2 million prepaid lease payment related to approved change orders, which will be included in the measurement of the right-of-use asset upon commencement.
In February 2026, the Company entered into an operating lease for office space in Baar, Switzerland. The lease commenced on March 1, 2026 and has a term of 24 months. As a result, the Company recognized a right-of-use asset and corresponding lease liability of approximately $1.4 million upon commencement.
12. Segment Information
The Company operates as one reportable segment focused on delivering novel therapeutics for MASH. The Company's Chief Executive Officer, as the chief operating decision maker (“CODM”), leads the Company in support of four core values—focus on the patient, having an owner mindset, the relentless pursuit of innovation and commitment to collaboration. To best align the Company with these values, the CODM reviews consolidated financials, along with qualitative information, to evaluate performance, manage and allocate resources, make operating decisions, and assess planning and forecasting on a total company basis. Assets, liabilities and equity are reviewed and presented on the same level as the Company's consolidated balance sheet. Starting in the first quarter of 2026, the Company has further disaggregated its significant expense categories within research and development into four categories and selling, general and administrative into four categories. Prior periods have been recast to conform to the current period presentation.
Management does not segment business operations for internal reporting or decision making purposes. As the Company has a single reporting segment, the segment accounting policies are the same as those at the Company level, as described in Note 2 “Summary of Significant Accounting Policies.”
The following table presents net loss reported at the segment measure of profit and loss:
| | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | | |
| 2026 | | 2025 | | | | | |
| Product revenue, net | $ | 311,337 | | | $ | 137,250 | | | | | | |
| Cost of sales | (26,847) | | | (4,513) | | | | | | |
Research and development: | | | | | | | | |
Compensation and benefit-related expenses | (15,097) | | | (9,035) | | | | | | |
Stock-based compensation | (7,865) | | | (5,215) | | | | | | |
Professional fees and other external expenses | (84,547) | | | (28,797) | | | | | | |
Facility related and other internal expenses(1) | (1,183) | | | (1,125) | | | | | | |
Selling, general and administrative: | | | | | | | | |
Compensation and benefit-related expenses | (83,605) | | | (48,361) | | | | | | |
Stock-based compensation | (26,057) | | | (15,716) | | | | | | |
Professional fees and other external expenses | (131,252) | | | (88,014) | | | | | | |
Facility related and other internal expenses(1) | (27,607) | | | (15,785) | | | | | | |
Other segment (expense) income(2) | (1,668) | | | 6,073 | | | | | | |
| Net loss | $ | (94,391) | | | $ | (73,238) | | | | | | |
| | | | | | | | |
(1) Facility and other internal expenses includes occupancy, information technology, and other internal costs.
(2) Other segment (expense) income includes interest income, interest expense and other expense, net.
13. Net Loss per Share
Basic net loss per share is computed using the weighted average number of shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of shares outstanding and the weighted average dilutive potential shares outstanding using the treasury stock method. However, for the three months ended March 31, 2026 and 2025, diluted net loss per share is the same as basic net loss per share because the inclusion of weighted average shares of common stock issuable upon the exercise of stock options and warrants or vesting of restricted stock units would be anti-dilutive.
Weighted average common shares outstanding includes (i) the Pre-Funded Warrants, as the exercise price is negligible, and (ii) PSUs that have been earned but are subject to a delayed settlement feature, as the vesting conditions have been met but the shares will be settled at a later date. Series A and B Preferred Stock are also included in the calculation of net loss per share under the two-class method. The Series A and B Preferred Stock have no preferential treatment compared to shares of common stock and therefore, the Series A and B Preferred Stock are considered additional classes of common stock for purposes of calculating net loss per share. As the Series A and B Preferred Stock are convertible into shares of common stock at a one-to-one ratio, the basic and diluted net loss per share of the Series A and B Preferred Stock is the same as basic and diluted net loss per common share and, accordingly, the Company has not separately presented the basic and diluted net loss per share for each class, and has calculated the basic and diluted net loss per share by including all shares in the denominator.
The following table sets forth the computation of basic and diluted net loss per common, Series A, and Series B share (net loss in thousands):
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2026 | | As Revised
2025 |
Numerator: | | | |
Net loss | $ | (94,391) | | | $ | (73,238) | |
Denominator: | | | |
Weighted average common shares outstanding | 22,959,235 | | | 22,091,314 | |
Pre-funded warrants | 3,605,790 | | | 3,605,790 | |
Weighted average earned PSUs | 97,600 | | | 18,333 | |
Series A preferred stock | 1,969,797 | | | 1,969,797 | |
Series B preferred stock | 400,000 | | | 400,000 | |
Basic and diluted weighted average number of shares outstanding | 29,032,422 | | | 28,085,234 | |
| | | |
| Basic and diluted net loss per common, Series A preferred, and Series B preferred share | $ | (3.25) | | | $ | (2.61) | |
The following table summarizes outstanding securities not included in the computation of diluted net loss per common share, as their inclusion would be anti-dilutive:
| | | | | | | | | | | |
| Outstanding at March 31, |
| 2026 | | 2025 |
| Common stock options | 1,018,345 | | 1,526,018 |
| Restricted stock units | 960,898 | | 694,995 |
Unearned performance-based restricted stock units | 333,748 | | 292,970 |
| Warrants | 19,454 | | 19,454 |
Revision to previously issued financial statements
The Company previously concluded that its Pre-Funded Warrants and Series A and B Preferred Stock should be excluded from the calculation of basic and diluted net loss per share pursuant to the two-class method. In preparation of the financial statements for the three months ended March 31, 2026, the Company determined that the exercise of the Pre-Funded Warrants was not subject to a contingency, as previously concluded, and have a negligible exercise price of $0.0001. The Company also determined that the Series A and B Preferred Stock do not have preferential rights over the Company’s common stock and should therefore be considered additional classes of the Company’s common stock for the earnings per share calculations. As a result of the correction, the Pre-Funded Warrants and the Series A and B Preferred Stock should be included in basic and diluted net loss per share calculation.
The Company assessed the materiality of the change in the calculation of net loss per share, considering both quantitative and qualitative factors, and concluded that the effects of the change to the calculation and presentation of net loss per share are not material, individually or in the aggregate, to any previously reported quarterly or annual period and are not expected to be material to the current period annual financial statements. However, the Company has revised its presentation of net loss per share previously included in the Company’s consolidated financial statements to reflect the inclusion of the Pre-Funded Warrants and Series A and B Preferred Stock in basic and diluted weighted average shares outstanding for the three months ended March 31, 2025 and these revisions are reflected in this Form 10-Q. All related amounts have been updated to reflect the effects of the revision throughout the financial statements and related footnotes, as applicable. The Company will also revise its presentation of net loss per share consistent with the foregoing in its future filings, as applicable.
As the Series A and B Preferred Stock are convertible into shares of common stock at a one-to-one ratio, the basic and diluted net loss per share of the Series A and Series B Preferred Stock is the same as basic and diluted net loss per
common share and accordingly, the Company has not separately presented the basic and diluted net loss per share for each class, and has calculated the basic and diluted net loss per share by including all shares in the denominator.
The following tables summarize the impact of the revision on both the weighted average shares outstanding and net loss per share calculations for each of the relevant periods:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Weighted Average Shares Outstanding | | Net Loss per Share |
Period Impacted | | As Reported | | As Revised | | As Reported | | As Revised |
Year-ended 12/31/2025 | | 22,434,310 | | | 28,409,706 | | | $ | (12.85) | | | $ | (10.15) | |
Year-ended 12/31/2024 | | 21,272,962 | | | 26,908,070 | | | $ | (21.90) | | | $ | (17.31) | |
Year-ended 12/31/2023 | | 18,687,774 | | | 21,562,581 | | | $ | (19.99) | | | $ | (17.33) | |
| | | | | | | | |
Three months ended 3/31/25 | | 22,091,314 | | | 28,085,234 | | | $ | (3.32) | | | $ | (2.61) | |
Three months ended 6/30/25 | | 22,207,017 | | | 28,232,604 | | | $ | (1.90) | | | $ | (1.50) | |
Six months ended 6/30/25 | | 22,149,492 | | | 28,159,333 | | | $ | (5.22) | | | $ | (4.10) | |
Three months ended 9/30/25 | | 22,482,502 | | | 28,508,089 | | | $ | (5.08) | | | $ | (4.01) | |
Nine months ended 9/30/25 | | 22,261,718 | | | 28,276,865 | | | $ | (10.32) | | | $ | (8.12) | |
