Have you ever started at a company that turned out to be completely different than when you interviewed? Not a pleasant surprise—unless you’re talking about biotech, where you want that to happen. A company can toil for years without a marketable product, only to one day get it approved by the Food and Drug Administration.
“Then you’re a new company,” according to Mardi Dier, CFO of Madrigal Pharmaceuticals. “All of a sudden, it’s full-on marketing and commercialization.”
Dier started in late February, just two weeks before the FDA gave the green light to Madrigal’s drug, Rezdiffra, the first to win approval to treat a form of liver disease called metabolic dysfunction-associated steatohepatitis, or MASH, which affects millions of people in the US, according to the agency. She spoke with CFO Brew about financing the transition from R&D to commercialization, and how she’s thinking about cash management as the company expands.
This conversation has been edited for length and clarity
Can you talk about how Rezdiffra was developed, and what you’ve been working on to launch the product?
There were 10 years before [approval] and a lot of money spent to develop this drug. It was developed by our founder, Becky Taub, who’s been working on this molecule for over 10 years. The drug’s been in close to 2,000 patients among all [its] clinical trials.
And then we [got] the drug approved. So you go from this research and development shop of fewer than 100 people 12 months ago to now, we’re almost 600 people and commercializing this drug in the marketplace. You have to build a complete commercial sales force, because it’s not just the boots on the ground selling the drug. You have the medical folks to educate physicians, you have your marketing folks, you have market access. So you have a whole commercial envelope that you need now to promote and launch the drug.
From a CFO perspective, it’s tricky, because you have to finance at risk to build your commercial organization before approval by the FDA in order to be ready to launch the drug. It’s a really fun time to be a finance executive or just to be an executive of a company, but it’s a major transformation for the company once we go from R&D to commercial.
How do you finance that transformation?
Biotech [has] a unique business model, because we’re basically a checkbook. We spend a lot of money, and we don’t have money coming in on the top line until we’re approved. So a big part of my job is thinking strategically on how to keep the company financed and make sure we have enough cash in the balance sheet to meet the upcoming spend. [We] try to keep at least 12 to 24 months of cash on the balance sheet at all times.
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We’re a public company…so it allows us to finance the company through equity raises. Once we were approved, which reduced the risk quite a bit for investors because [we had] an approved product, we were able to access the public markets again and raised $690 million. The last couple quarters, we’ve had over a billion dollars in cash on the balance sheet. That serves to support a successful launch in the US and Europe, and hopefully get us to the point where we’re bringing in more money than we’re spending.
How do you think about the trade-offs of equity raises and what goes into deciding on the right time to raise more capital?
We spent a lot of time on exactly this question. You want to be parsimonious with your equity, because equity drives value, and if you give too much away, it can dilute your value. But there’s a balance. You need to spend in order to grow and drive value. Particularly in biotech, sometimes you’re valued not so much just on the top line, but on certain catalysts of clinical development and certain data points. So you need to manage that.
It’s a constant evaluation; I’m working with advisors and internally with our board of directors and other executives, [to] figure out when the right time is to bring in additional capital, and when to not and just operate. We feel good about where we are right now, so we can focus on operations and less about capital formation at this point, but it’s always a series of planning and understanding the dynamics of the markets. That’s whether you want to raise equity, or you want to think about debt, or more structured financial alternatives.
How do you scale up manufacturing so quickly after approval?
Our drug is a pill that you take daily, and it’s fairly easy to manufacture and fairly inexpensive per pill, so we are able to efficiently have enough supply when we need it to meet the forecasted demand. We use third parties called contract manufacturing organizations, but we have very good relationships with them, and it’s a constant flow of planning, taking risks, building inventory, etc. The good news with Rezdiffra as well is that it doesn’t expire very quickly, so we can keep it on the shelf and distribute it when needed. So we’re in really good shape from the supply side.