Madrigal Pharmaceuticals, Inc.

Good morning, and thank you for standing by. Welcome to the Magical Pharmaceuticals Third Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. As a reminder, today's conference call is being recorded. I'd like to introduce Ms. Tina Ventura, Chief Investor Relations Officer. Please go ahead.

Thanks, Marvin. Good morning, everyone, and thank you for joining us to discuss Madrigal's third quarter 2025 earnings. We issued a press release this morning and posted a slide deck that accompanies this webcast on the investor relations section of our website. On the call with me today is Bill Sibyl, Chief Executive Officer, Dave Sorgel, Chief Medical Officer, and Marty Deer, Chief Financial Officer. They will provide prepared remarks, and then we'll take your questions. Please note on slide two, we will be making certain forward-looking statements today. We refer you to our SEC filings for a discussion of the risks that may cause actual results to differ from the forward-looking statements. With that, I will now turn the call over to Bill.

Thanks, Tina. Good morning and thanks for joining us. We have delivered another excellent quarter as we continue to execute on our strategic priorities. We're maximizing the value of ResDifera and building our pipeline, which sets us up for continued value creation. ResDifera is quickly becoming one of the most successful specialty launches in the industry, with sales now annualizing at greater than $1 billion in only its sixth quarter of launch. More than 29,500 patients are being treated with ResDifera, and more than 10,000 healthcare providers have prescribed it. We've made great progress on our 2026 payer contracting strategy for first-line access. Our new U.S. ResDiffer patent was listed in the Orange Book. It extends ResDiffer's value into 2045. And we're expanding globally with our launch in Germany following European approval. On the pipeline front, we're advancing our Phase III Maestro NASH outcomes trial in F4C, where we could once again be first to market, this time for compensated NASH cirrhosis. We look forward to sharing more from our F4C open label cohort at AASLD later this week. We're executing on our ResDiffer combination strategy, where we completed the transaction of our new oral GLP-1, and we continue to evaluate opportunities to add additional assets to our pipeline through business development. So today, we'll focus on our two key priorities, our top line and our pipeline. Starting with ResDifera's third quarter performance on slide four, we delivered net sales of $287 million, up 35% quarter over quarter. The significant demand we're generating is driven by the positive response to ResDifera from prescribers and patients and the strong execution by our team. As shown on slide five, we ended the third quarter with more than 29,500 patients on ResDifera, up from more than 23,000 patients at the end of the second quarter. This number represents patients actively on therapy, accounting for any discontinuations. As we've discussed since the beginning of our launch, we've been steadily adding patients each quarter, and we expect that to continue going forward. It's incredibly gratifying to see ResDiff are already making a meaningful difference for so many patients, but what's most exciting is that we've only just begun. More than 90% of our 315,000 target population remains untreated. That leaves tremendous room for growth driven by ResDifera's highly differentiated profile and our clear first mover advantage. Moving to slide six in our continued progress on physician penetration. As I've said before, building a strong prescriber base early in a launch is one of the best indicators of long-term success. That's why the pace of adoption has been so encouraging. This quarter, we hit another launch milestone, more than 10,000 prescribers. This breadth achieved this quickly is at the high end of the benchmarks we track, and it reflects the work we've done to wire the system. Looking ahead, our focus will increasingly shift to depth. This metric is already tracking at the high end of best in class launches. We're also continuing to enhance our targeting. While our efforts have mostly centered on hepatologists and gastroenterologists, we're seeing growing interest from endocrinologists. These are specialists with a deep expertise in metabolic health who are interested in res difference mechanism and its potential in MASH. In response, we've expanded our field team to further target this group. These efforts substantially started in the fourth quarter. On slide seven, let's take a look at how we see the MASH market evolving. We see clear parallels between MASH and other large chronic disease markets like IBD, rheumatoid arthritis, and psoriasis. Each of these evolved into multi-billion dollar categories through continuous innovation driven by new mechanisms and tailored treatment regimens that address diverse patient needs. We believe MASH will follow that same path. Today, this market is still in its early stages, essentially where those categories were two decades ago, but with one important difference, ResDifera's profile. As an effective, liver-directed, well-tolerated oral medicine, it far surpasses that of the other first-to-market products in those diseases. We believe this gives us a durable advantage and a unique opportunity to lead and shape the market's evolution, first with ResDifera, and next with the pipeline we are building. So, we welcome new entrants to this evolving market. WGOVI's recent approval in MASH adds momentum to a market that's just starting to take shape. As seen on slide eight, our focus remains on the 315,000 diagnosed patients with moderate to advanced fibrosis. NOVA was targeting a much larger population, which will raise awareness and drive more screening, diagnosis, and treatment. As a reminder, GLP-1s aren't new. They've been available for over a decade and are already used to treat the metabolic comorbidities that oftentimes accompany MASH. As we've reported, about 50% of ResDiffer patients are currently on or have previously been on a GLP-1. We also understand the limitations of GLP-1 monotherapy in MASH. Few patients reach and sustain a therapeutic dose and tolerability remains a real challenge. Real-world data show that 70% of obese patients discontinue within one year. New data to be presented at AASLD show similar discontinuation rates in patients with MASLD. So, looking ahead, we expect ResDiffra to benefit in two ways, as first-line therapy in a market that will expand and from the high real-world discontinuation rates of GLP-1s. We're in a strong position and are confident in ResDiffra's growth potential going forward. As we've already mentioned, it's ResDifera's best-in-class profile that gives us such strong confidence as summarized on slide 9. It is a liver-directed medicine that delivers consistent efficacy across F2F3 fibrosis, BMI, genetic makeup in patient subtypes, including those with type 2 diabetes, who comprise approximately 60% of the MASH population. It's also simple to use. It's a once-daily, well-tolerated pill with no titration requirements. That simplicity matters to providers, to patients, and ultimately to adherence. We continue to see strong adherence consistent with other well-tolerated oral therapies. The seriousness of MASH and ResDiffers compelling profile continue to resonate with payers. Our objective is to provide first-line access to patients, preserving treatment choice for patients and providers. And we're pleased to share an update on slide 10. We're making great progress with our payer negotiations for 2026, which to date have resulted in contracts for broad first-line access, no step-edit requirements, and improvements in utilization management criteria that are better aligned with clinical practice. Overall, the dialogue has been collaborative and productive, and discussions are progressing really well. Payers understand the seriousness of the disease, the unique clinical value of ResDepra, and the importance of access and choice for patients and providers. We've already achieved favorable outcomes with several national payers while continuing constructive dialogue with others. We're encouraged by the progress and expect contracts to be finalized by the end of the year covering the vast majority of commercial lives. Gross-to-net management remains a core component of our strategy and guides how we approach payer contracting. We started contracting in April of this year, and as we've said, It wasn't everywhere and wasn't all at once. In fact, through the third quarter, contracting had a minimal impact on gross to net, reflecting our disciplined approach. Now that we expect to have payer contracts finalized in the fourth quarter for either an immediate or a January 1st implementation, we expect the fourth quarter gross to net to be at the midpoint of the 20% to 30% range we had previously discussed. Starting in the first quarter and continuing throughout 2026, we expect our gross to net impact to be in the high 30% range, which is consistent with other innovative multi-billion dollar specialty medicines. So, objectively, we're in a great position. We are executing on one of the most successful specialty launches in the industry. With less than 10% of our target market treated, the growth opportunity ahead is substantial. We have taken a thoughtful approach to contracting, which provides for outstanding patient access and durable long-term growth. In short, this strategy paves our path to peak sales. Beyond the U.S., we are expanding access to ResDifera as shown on slide 11. We're taking a focused country-by-country approach in Europe and launched in Germany at the end of September. Just like in the U.S., the team is wiring the system for a first-in-disease launch. This requires educating physicians on the risks of MASH and the urgency to treat. We are also driving change in clinical practice to develop processes for patient identification, diagnosis, and use of non-invasive tests. This work happens practice by practice to help develop the infrastructure for sustained adoption. The team is off to a great start, and we anticipate our efforts will start to make an impact in 2026. Now, I'll turn it to Dave to discuss the second pillar of our strategy, expanding our pipeline to extend our leadership and build long-term value. Dave?

Thanks, Bill. It's an incredibly exciting time to be at Madrigal. Over the past six months, I've had the opportunity to work closely with this exceptional team. And the more I've dug into our programs, the more energized I've become about what we're building. We're not just advancing a pipeline. We're laying the foundation to transform how MASH is treated. As shown on slide 12, we already have a robust clinical program for risdifera. Our phase three Maestro-NASH outcomes trial in compensated MASH cirrhosis, or F4C, is expected to read out in 2027. Positive results could make risdifera the first approved therapy for F4C and support full approval in F2-F3. Our ongoing phase three Maestro-NASH trial in F2-F3 MASH is expected to read out in 2028 and would also support full FDA approval. Beyond ResDifera, we're building a pipeline through our business development efforts. To date, we've added an oral GLP-1, now called MGL-2086, which we intend to develop in combination with ResMedirom to deliver a best-in-disease, well-tolerated oral combination. As we think about how to build our pipeline further, we're looking for mechanisms that fit scientifically, strategically, and commercially, those with complementary biology and combination potential. Continued success in treating patients will come from combining mechanisms and tailoring treatment regimens to specific risk factors, much like what we've seen in other chronic complex diseases. With resiferous patent protection into 2045, we can be thoughtful and disciplined and build the right kind of pipeline that will define the future of MASH care. The combination of our oral GLP-1 and THR beta agonist is a great example of this approach to building the pipeline. From MaestroNash, we know that even a modest amount of weight loss enhances resmediram's efficacy. So unlike in creatine monotherapies that strive for double-digit weight loss, we've seen that as little as 5% weight loss can enhance resdifer's efficacy in MASH. This will allow us to dose escalate the MGL-2086 component of the combination with the goal of optimizing both efficacy and tolerability in a once-daily oral pill. It is also important to note that with the combination, patients would be on an effective dose of resmedirum on day one as the MGL-2086 dose is being adjusted, in contrast to injectable and creatine monotherapies that require a lengthy titration period. On slide 13, we see how these mechanisms could work well together. GLP-1 works from the outside in, improving systemic metabolism, insulin sensitivity, and weight loss. Resdifro works from the inside out, reversing hypothyroidism in the liver, restoring mitochondrial function, and increasing fat processing through beta-oxidation. The combined mechanisms lead to lower levels of inflammation and inhibition of stellate cell activation and downstream fibrosis. By combining these complementary mechanisms, we expect to see greater reductions in both liver fat and fibrosis. We plan to start a Phase I trial for MGL-2086 in the first half of next year. Next, let's move to our Phase III maestro-NASH outcomes trial in compensated MASH cirrhosis, or F4C, on slide 14. People living with F4C MASH today have no effective treatment options that prevent progression of their disease to decompensated cirrhosis. Our two-year open-label extension data presented at EASL earlier this year demonstrates sustained efficacy of resdifera in this population and supports our confidence in the ongoing maestro-NASH outcomes trials. Knee liver stiffness decreased by 6.7 kilopascals at two years, a statistically significant reduction from baseline. More than half the patients achieved at least a 25% reduction in liver stiffness, a level tied to improved outcomes. And 65% of patients with clinically significant portal hypertension, or CSPH, at baseline moved to a lower risk category by year two. CSPH is a key driver of the most severe outcomes of cirrhosis and marks the tipping point into decompensated disease. Improvement in CSTH suggests ResDiffer could delay or even prevent life-threatening complications. We'll be presenting new data from this two-year open-label F4C cohort at ASLD later this week, as noted on slide 15. And what I'm really excited about is that this data shows promising efficacy in even the most advanced F4C patients who are on the cusp of progressing to liver decompensation. This is the first time any data will be shown in such a severe population which gives us additional confidence in our outcomes trial. Also at AASLD, from our Phase III Maestro NEFLD I trial, we'll highlight how F2F3 patients regress when resdifera treatment is interrupted, demonstrating the importance of staying on therapy. We'll also share multiple posters that examine early real-world experience with resdifera and the burden of uncontrolled MASH across health systems. In total, MASH will have 15 abstracts, including two oral presentations and two posters of distinctions. With that, I'll hand over to Marty.

Yes, thank you, Dave. Turning to slide 16 in a summary of our financials. Third quarter 2025 net sales totaled $287.3 million, up 35% from the second quarter of 2025. This was another strong demand quarter. As Bill mentioned, we're making great progress with our contracting discussions for continued broad first-line access to RESDFRA in 2026. With no net sales, no step-through requirements, and improved utilization management criteria. As a reminder, there are several components to gross to net, including commercial rebates, government rebates, copay assistance costs, and channel distribution costs. Across the board, the team has done an exceptional job managing these dynamics, and we're seeing minimal impact through the third quarter of this year. As certain contracts take effect in the fourth quarter, we anticipate a step-up in the gross to net impact to the midpoint of our 20 to 30% range, resulting in a full year average near the low end of that range, a great outcome for 2025. Looking ahead to 2026, we expect the full effect of our payer agreements to begin January 1st, bringing our total gross to net impact into the high 30% range, consistent with specialty medicine analogs. As noted, we are confident that we will continue to steadily add risdifera patients, and we expect robust net sales growth for risdifera in 2026 and beyond. R&D expenses for the third quarter of 2025 were $174 million compared to $68.7 million in the third quarter of 2024. The increase was primarily due to the one-time $117 million expense associated with the Global Licensing Agreement for MGL 2086. This was expensed in the third quarter and will impact fourth quarter cash flows. SG&A expenses for the third quarter of 2025 were $209.1 million compared to $107.6 million in the third quarter of 2024. The increase primarily reflects the annualization of higher commercial investment to support the RISDFRA launch. Looking ahead, we expect fourth quarter R&D expenses to be modestly higher than third quarter levels, excluding the third quarter one-time expense for our oral GLP-1, and expect fourth quarter SG&A expenses to continue to increase quarter over quarter as we continue to support the launch of RISDFRA. Turning to our balance sheet, we ended the third quarter of 2025 with $1.1 billion in cash, cash equivalents, restricted cash, and marketable securities. The increase reflects the $350 million initial term loan under our senior secured credit facility, a portion of which was used to repay all outstanding obligations under the Hercules loan facility, offset by the funding of operations. With this strong cash position, we continue to be well-resourced to support the ongoing launch of ResDefra and advance multiple pipeline programs. With that, on slide 17, let me briefly recap our third quarter progress where we remain focused on our top line and our pipeline. We are driving strong performance in our sixth quarter of our launch with RISDFRA now annualizing over a billion dollars in net sales and expect continued strong growth in 2026 and beyond. More than 29,500 patients are on therapy and we expect to continue to steadily add patients going forward. We've reached another major launch milestone with greater than 10,000 prescribers. Our payer discussions are progressing very well, and we expect continued strong access for patients in 2026. And we're working to further expand our pipeline to solidify our leadership in F2 to F4C BASH. And now I'll turn the call back over to Tina and open up the Q&A session.

Thanks, Marty. Let's move into the Q&A portion of the call. Marvin, please go ahead and provide instructions for the Q&A session.

We will now open the lines for questions. To open your line, please press star 11 and you'll be added to queue on the call. Our first question comes from the line of Yasmeen Rahimi of Piper Sandler. Your line is now open.

Good morning, team, and congrats to a great quarter. Team with ASLD right around the corner would love to learn sort of how this two-year data, especially the NID-driven responses, could further de-risk ISTRO NASH outcome, which is reading out in 2028. And also, maybe also some color on what visibility do you guys get in terms of that it's on track based on event rates to come in at that time point. And I'll jump back in the queue.

Great, yes. Thanks for the call. And look, we're really, really excited about ASLD. I'll tell you, you know, we're just coming off of the ACG meeting in Phoenix. I guess it was just last week. And what a difference a year makes when you think about the progress that we've made with the gastroenterologists. I mean, a year ago, people didn't know about NITs. They were still putting their pathways in place, and now we're seeing that Red Differ has really moved to being the foundational therapy standard of care with that audience and a lot of positive feedback. So, you know, we're headed into the Super Bowl this week with AASLD. We're really excited about it. We have a lot going on, but maybe, Dave, you want to provide a little bit of context around some of the data and so forth?

Yeah, I think your question, yeah, has had to do with... the data that we're reading out at ASLD and how it reflects on maestro outcomes. Is that correct?

That's correct.

Okay, great. Yeah. So, as we presented at EASL and as we showed in the presentation, we have an open label cohort of individuals from the maestro NAFLD study where we've been able to show sustained efficacy of risdifera in this cohort, both on liver stiffness and on a variety of biomarkers, including you know, LFTs and so forth. So at ASLD, we're looking more deeply into this cohort and examining some of the more severe patients within this cohort and understanding whether, you know, res difference efficacy in this group as well. And what we see is really exciting and gives us a lot of confidence about Meister outcomes. And so the reason why this is important is because when you think about Meister outcomes and you think about this open label cohort, the patient populations are really very similar. So the baseline characteristics are similar. And so when we see efficacy in the open label group, it gives us evidence and a lot of confidence that the outcomes trial will end up being positive as well.

Great. Thanks, Yaz. Marvin, next question, please.

Thank you. One moment for our next question. Our next question comes from the line of Jay Olson of Oppenheimer. Your line is now open.

Oh, hey, congrats on the quarter, and thanks for taking the question. Can you talk about the pros and cons of combining resmeteron with MGL 2086 versus some other oral GLP-1, like orpaglipron, and then any other potential mechanisms beyond GLP-1 that might be synergistic with resmeteron? Thank you.

Jay, thanks for the question. You know, just for clarification as well, our oral GLP-1 is an orthoglyperon derivative. So we were very, very specific in the criteria that we had for selecting a oral GLP-1, and we wanted to be in an orthoglyperon derivative. But maybe, Dave, do you want to talk a little bit about it and a little bit about the future mechanisms and just how we're thinking in general about potential combinations?

Yeah, so I mean, first is the GLP-1 mechanism and why one would combine, you know, resmeteron with a GLP-1. So what we know from... from Maestro Nash, from the 52-week experience of Maestro Nash, is just a little bit of weight loss enhances res medarum's efficacy. So we see better anti-fibrotic effects with res medarum in people who lose as little as 5% of their body weight. So it's a natural sort of extension of that to consider combining with the GLP-1 that can produce a bit of weight loss, have some metabolic benefits, and enhance res medarum's efficacy in a fixed-dose combination. So that's the rationale for combining with the GLP-1. But your point's a great one. There are other mechanisms that may also be attractive to combine resmeteron with, and there are multiple pathways in this very complex disease of MASH that lead to hepatic steatosis, fibrosis, and ultimately poor outcomes in patients. So, you know, as we've said before, we're looking at pretty much every mechanism of action to potentially combine with Rizmetiram, where there's a good scientific rationale for it and where we believe that the combined efficacy is going to be an advantage to patients. So, you know, we're casting the net wide, and we're looking for the best opportunities.

Yeah, Jay, and just also a little context as well here. With the IP to 2045, that gives us time to really thoughtfully think about building this pipeline. You know, we're not in a rush just to try to fix a problem of a pending patent cliff. we can thoughtfully think about building a franchise that's durable because starting with the 2045 IP for Red Stifra. Thanks for the question.

Next question, please, Marvin.

Thank you, Wilma, for the next question. Our next question comes from the line of Michael DeFore of Evercore SI. Your line is now open.

Hi, guys. Thanks for taking my question and congrats on the continued progress. Just two quick ones for me. In light of the recent M&A in the space, I would love to get your thoughts on Madrigal's future competitive positioning and market access once large pharma inevitably bundles their MASH assets if approved. And the second question I have is just any thoughts on Sajamet's plans for testing Denny Fanstat with ResDifera. I realize your priority is focusing on the combination therapy with your own GLP-1, but would Madrigal be open in principle to combinations such as this, or is this just too early at this stage? Thank you.

Yeah, Mike, thanks for the question. Let me start with that one. We don't know what Sajma is doing. We haven't spoken with them, don't know any of the plans, so is it a combination that makes sense? Maybe, but we're not involved in that and don't really know, so that's all I'll comment at the moment there. You know, look, the recent M&A really for us is a validation of the match market. You know, ultimately what you see happening in these markets, and, you know, we talked about IBD, RA, and psoriasis. You would have, and we're a little bit like that, where you have a company shows that there is a market and an attractive opportunity, and then the investment in innovation, science, and ultimately more products really accelerates, and that's what we think is going to happen in MASH. We're leading the way in this case. Now, the recent moves of Big Pharma to get an FGF21, we think validates that, and we're excited about it because that means there's going to be more attention on the space, which ultimately leads to greater diagnosis, treatment, and with the profile that we have with ResDifera, we think it ultimately favors us. so we in creating our market access strategy you know we've taken a very long-term approach just like we did from day one when we you know announced approval of the product you almost have to start with 2045 where as different as ip goes out to that we're going to have f4c that we're going to have a pipeline and there's going to be other products that enter so everything's been thoughtfully designed with that end in mind to preserve the most value for not only ResDifera, but for our franchise of the future. So we feel we're in a really strong place. Now, Dave just talked a little bit about F4C. We're really excited about the data that we've seen, and we're very confident about hitting in our Maestro Nash outcome study, which we're reading out in 2027. Of course, we've got to read out. It's an event-driven study, and we'll anticipate those results. We think that from a competitive perspective, our data is going to be the leading data in that space with that population so that we will be the leaders not only in F2, F3, but from F2 to F4C. So all of this is thought out. We're thinking of things in the long term. We think of that how we build a pipeline, how we evolve gross to net, and how we interact with the community. Let me just be crystal clear. Our goal is to not be leaders in the short term, but to have long-term leadership in MASH.

Great. Thanks, Mike, for the question. Marvin, next question, please.

Thank you. One moment for our next question. Our next question comes from the line of Akash Tiwari of Jefferies. Your line is now open.

Hey, thanks so much. So we're hearing feedback that Rezifra's adherence rate is meaningfully higher than the kind of 40 to 60% your team cited for drugs in this category, more in the order of 80% plus. Can you confirm that? And then also, how should we think about Rezifra net pricing? I know you've talked about GLP, you know, we've heard GLP-1 players talk about mid-single digit net price declines annually. Is that a similar dynamic for resifera, or should we see stable net pricing after you get into the high 30s range on gross to net next year? Thank you.

Thanks for the question, Akash. Look, first of all, on the adherence, I think what we've said at the one-year rate, well-tolerated orals are in that 60% to 70% range. So that hasn't changed our view. And the data that we have today, remember, there's still only... so many patients that are getting to that one-year mark that we are similar to well-tolerated orals. And like you, we've heard very positive feedback from a lot of clinicians that are treating patients and seeing very strong adherence. And I think that, again, goes back to the profile of the product. So all encouraging and as we would expect. To the question of gross to net and what we would expect to see, Look, I think that you, looking ahead to the future, you know, gross to net only goes in one direction, right? And the difference after 26, you don't have this zero to contracting effect. After 26, you know, we'll have contracting right now, we're going to be bidding on 2027 Medicare. We have some Medicare in place for 26. So, you know, you expect to see some future declining gross to net because that's just what happens. But again, you know, we had this effect of zero to contracting as we entered 2026. So, you know, look, we think that we are in a really great place. You know, our strategy is for broad first-line access, no step edits, and improved utilization management criteria. That was the goal. That's what we're achieving. So we're really, really excited about where we are entering 2026. In fact, I would say in my experience, I really believe that this is as good as you could possibly be for a product of this stature at this point in launch. In fact, I would go as far as to say I think this is the best market access from a criteria perspective and everything that I've seen with any of the launches that I've done.

Thanks. Great. Thanks, Akash. Marvin, next question, please.

Thank you. One moment for our next question. Our next question comes from the line of Thomas Smith of LeRinc Partners. Your line is now open.

Hey, guys. Good morning. Thanks for taking the questions, and let me add my congrats on the really strong quarter. Another one on coverage, I appreciate the high-level comments here on the payer contracting efforts. I think everyone saw the recent Aetna formulary coverage decision. Could you just comment specifically on that and the potential impact of non-covered decisions? And then any comments on kind of where you are with respect to the contracting for commercial lives next year? Is there an explicit goal or expectation for what percent of commercial lives you think will continue to have that broad first-line access to ResDev for 2026?

Thanks so much. Yeah, thanks, Tom. Maybe I'll start there. Look, we're expecting broad commercial live coverage. So we feel really good about that at this point. As it relates to Aetna, you know, let me start with res differ wasn't on formulary in 2025, and it's not again in 2026. So that is really no change. So, you know, we don't expect to see a meaningful impact here. It'll be available through prior authorization or medical exception. And so that's not a practical change in access for patients. And our magical patient support team are really experts at helping patients navigate and helping practices navigate through that. So, yeah, no change, no effect.

Great. Next question, please.

Thank you. One moment for our next question. Our next question comes from the line of Andrea Newkirk of Goldman Sachs. Your line is now open.

Good morning. Thanks for taking the question. Bill, recognizing it's still early here, but just curious if you've observed any signs of Novo's marketing campaign broadening the pool of addressable patients to date. Do you still believe that 315,000 patients is the accurate number for ResDiffers target population? And then, Marty, if I can just ask quickly, just in the context of the successful launch that you've seen to date, how are you thinking about the path to profitability from here? Thanks so much.

Thanks, Andrea. Well, you know, look, this is the first quarter where we've had Novo in the market and you saw that we continued to steadily add patients and I think by all measures had an absolutely outstanding quarter. So three months in we haven't really seen too much. You know, we know that they seem to be educating PCPs and trying to drive diagnosis, which we think is ultimately great for patients in the market. You know, we're starting to hear some practices say, and this is very anecdotal at this point, that they're reporting more referrals that are coming in. But it's a little early to quantify if there is additional growth to the market as we get through the end of the year and be able to do a more proper analysis. We'll come back with any real growth rates. Now, the $315,000, great question. Look, let's just remind people, The 315,000 are the diagnosed patients in the 14,000 prescribers that we're targeting. And we know that we have patients that are on ResDiffer now that weren't part of that 315 that they were newly diagnosed. And we also know that the diagnosis rate at the moment remains quite low. Originally, we saw it as around 10% diagnosis rate. So we know that there are more prevalent patients out there. And I think what we will see and what we're excited about is having somebody else that is going to help us carry the load of increasing diagnosis. It's not something that's been a focus of ours. It still remains not a focus of ours. But when we have somebody else who needs to have literally millions of patients that are diagnosed in order to serve their needs, that ultimately helps us. That's why we said in the script it's the 315,000 that we win from and the increased diagnosis and ultimately people that can't tolerate or have an effect with a new competitor that will ultimately come to us. So a little early to quantify. We'll do so in later quarters, but we see some signs that we're starting to see additional growth. Novo, we just don't really have a lot of information, haven't seen them too much out there, but clearly they are there and starting to drive a little bit more diagnosis. Thanks.

Great. Yeah, go ahead. Oh, yes. Thanks, Andrea, for the question on the path to profitability. And, you know, our focus right now and into 2026 is really focused on driving our top line and then building our pipeline, which Dave described. That's going to be our focus going forward. It doesn't mean profitability won't happen at some point. But again, we're focused on the top line and building out R&D and continuing to support our efforts in building out the MASH, our leadership in MASH.

Good. Thanks, Andrea, for the question.

Marvin, next question, please.

Thank you. One moment for our next question. Our next question comes from the line of Andy Chang of Wolf Research. Your line is now open.

Hi, it's Emma on for Andy. Thanks for taking our question. Resdifera uptake has been strong so far, and you mentioned the strong 60% to 70% adherence rate. I know it's still very early days in the launch, but I guess how do these dynamics inform your view of the drugs chronic use potential and just steady state demand over the long term. Thank you.

Thanks, Emma. Look, I think that this is where we win. We have a profile once a day pill that is well tolerated and the feedback, you know, some have reported extremely high adherence rates. So we feel extremely well positioned for this to be a long-term chronic therapy. It's really one of the exciting parts of ResDifera. And as I said, versus other categories which have become really multi-billion, over $20 billion categories, the profiles, especially the profiles initially of products to launch, were kind of hairy. They weren't orals. They had tolerability issues, sometimes safety issues. We feel that we have got, and you've heard me refer to it in the past as what I believe is kind of like a holy grail profile. That's something which is where we win in this category, frankly. At the end of the day, profiles matter. This is a product which is really designed for chronic use. So we feel really good.

Thanks. Can I just add on one thing? The other part that also, of course, matters is sustained efficacy. And I think, you know, what we're showing at ASLD gives us a lot of confidence in the sustained efficacy of res medirom in this group. And in fact, what we show in the F2F3 population is that if you come off of therapy, you have reversion of your disease, which is, of course, a big challenge. So I think You know, those two facets, both the efficacy, sustained efficacy, and the sustained tolerability are two big things. Thanks for that, Dave.

Great. Thanks so much. Next question, please, Marvin.

Thank you. One moment for our next question. Our next question comes from the line of Ritu Barah of TD Calendly. The line is now open.

Good morning, guys. Thanks for taking the question. I wanted to ask, well, one and a half questions. One on this growth forward given the two strategies, Bill, that you outlined. One, Salesforce expansion and marketing to the endocrinologists. But at the same time, you mentioned that you want depth in the going forward marketing strategy. So can you help us reconcile the two and what sort of metrics and current targets for depth that you hope to report and how GLP-1's figure into all of this. And this is a very quick email that we've been getting from clients. We're having a problem sort of stretching the patient numbers with the revenue numbers. Are there any elements to either stocking or Europe or some other aspect of those numbers that need to be addressed in our models to reconcile everything reported this morning? Thanks.

Yeah, for the quarter, nothing to do with inventory, nothing to do with Europe. I mean, just be crystal clear, U.S. demand is the driver of the success of the quarter. So let me take that one. Next, let's talk about growth going forward and your question about how do we manage expansion, if you will, into endocrinology and death. Otherwise, you know, we can walk and chew gum at the same time, so to speak. We have to continue to be building for the future as well. Remember, we've got 20 years ahead of us from an IP perspective. So we are going to look for where to currently focus and where do we want to explore. And that's exactly what we're doing here. We've already from, and you know we've been always looking at a basket of products in the last 10 years that have been great specialty launches. And we look at each metric and we're kind of at or near the top on number of those reps we're doing great as well but you need to continue to grow your depth of prescribing right I mean we have 10,000 plus prescribers now your next step and I consider that like a check check mark now you go deeper and deeper into that set of core physicians which are gastroenterologists and hepatologists now the pursuit now of the endocrinologists. We had endocrinologists targeted as part of the 14,000, but what we've seen is additional endocrinologists have come forward and said, you know what, I'm still seeing a lot of MASH and would like to learn more about ResDifera. So there is enough interest that we said, let's put a dedicated team on that opportunity. You know, just to give you a sense, it's not a huge number. It's a couple thousand physicians that we add to the target list. And, you know, that can be handled with a very concentrated, dedicated effort. And, you know, we'll see how that evolves. One of the interesting things is, as you talk about GLP-1s, if GLP-1s were truly solving MASH, there wouldn't be a need in this prescriber group that uses GLP-1s predominantly, that another product would be needed. So I think that that is a very good sign for us as well that GLP-1s aren't the solution. They've been on the market for over 10 years. You've got a specialty that uses them, and they still are looking for ResDiffra. So we're putting an effort there. So this is a little bit of a – we have our present focus, which is driving breadth, And we are starting with these endocrinologists, which you have to wind the clock back to even before 24 because they're not familiar with NITs. They don't have their system wired at all. So that's going to take a very long time for them to really catch up to where gastroenterologists and hepatologists are now. But we think it's worth effort, resource, and we think there's promise for the future there as well. Great. Thanks.

Thanks so much. Next question, please, Marvin.

Thank you. One moment for our next question. Our next question comes from the line of John Wolden of Citizens. Your line is now open.

Hey, thanks for taking the question. Bill, I'm wondering if you could comment a little bit as we look down the road at expected GLP price erosion and how that might affect access and payer decisions for ResDefra.

Thanks, John. Well, look, I think if you, you know, I'll take you back to the comments that we made on the call that, you know, in January, we would expect to be in the high 30% range. That is in the presence of a rapidly, I would say, eroding gross to net of GLP-1s. So, you know, we believe that we're well positioned for the future. As I said, gross to net only goes in one direction. But I think you have to start with the problem that we're trying to solve This is an expensive disease. I think if you take a look at ICER recently, commented again on products that they have recently reviewed, and we're seeing that, once again, ResDifera is highlighted as a product that is looked at as cost-effective. and really is offsetting the, you know, very costly disease without intervention. So, you know, I think that you have to start with the problem you're trying to solve. This is an expensive disease. I think payers understand that. Certainly the system is starting to understand that. So you're always going to have products that have different prices. within the category. And we've seen, even with the categories that I mentioned today, IBD, RA, and psoriasis, there's huge variability. But there's a need for more than one medication. There's a need for multiple mechanisms. And you ultimately have to try to solve the problem in front. And, you know, we, through an independent third party, ICER, have proven twice now about the cost-effectiveness of ResDifera.

Great. Thanks so much. Next question, please.

Thank you. One moment for our next question. Our next question comes from the line of Parker Agrawal of Cantor Fitzgerald. Your line is now open.

Hi. Thank you for taking my questions, and congrats on another strong quarter. So I appreciate the clarity on the growth to net for 4Q and 2026, but maybe if we can talk about your expectations for 4Q growth and comfort around 2026 consensus estimates with the set. And maybe second question, what percentage of residual volume currently is Medicare, and how are you thinking about the implications of semaglutide IRA pricing decision on the long-term prospects for that channel. Thank you.

Great. So let me just give you – I'll give you the quick answer on what the distribution is. We're anticipating it's 50% to 55% commercial, 30% to 35% Medicare, and then about 10% Medicaid and other. We're still – remember, we're at less than 10% penetration here. So that's going to evolve a little bit in time, but we're staying in that range at the moment. Maybe, Marty, do you want to talk about Q4?

Yes, definitely. Hypercar, thanks for the question. So, you know, listen, we've had a great 2025 so far. In fourth quarter, we expect that to continue in terms of steadily adding patients, really sort of the driver for our business. We don't see any change there. You know, we did have a very high base in our revenue coming into third quarter that was significant. You know, very much patient demand. We just have some favorability in gross net, which we discussed in a high demand quarter from an inventory standpoint. So we're in a very strong position. But going into fourth quarter, working off that base and taking into effect that there's fewer selling days in the fourth quarter in general. And as we discussed, the growth to net begins to, we'll see the commercial rebating starting to take effect in the fourth quarter, so we'll be at the midpoint of that 20 to 30% range. All that put together, we think we'll see high single-digit growth quarter over quarter going into the fourth quarter, but still a very strong quarter. And of course, we're on over a billion dollar run rate in revenue, so fantastic. Good. Great.

And then, Prakash, maybe just one comment there as well. Yeah, I think more and more the measure turns to patients and patients being treated. And as you can see, we are doing really, really great in our steadily adding patients, and that's something that is going to, we've said, remain to be steadily adding in the future and feel really, really great. Again, where we are, it's less than 10% penetration. There's a ton of patients that are out there that still need to be treated, and that represents a great opportunity for us.

Yeah, and I just wanted to come back to 2026 that Prakhar asked about too. So again, everything Bill just said for the steadily adding patients, we see that going into 2026 as well. So steadily adding patients, we anticipate and we said in the script robust net sales growth in 2026. But if you think about, you know, just think about the phasing, right? So we're going to have the impact of the growth to net starting in January and right at the beginning of the year. So you're going to see that step up from the contracting and will be in the high 30s. And of course, we always have the Q1 effect on top of that, right? So in terms of the phasing, you'll see some of that play through in 2026. But net-net, we see robust growth going into 2026. Great. Thanks, Marty. Operator, next question, please.

Thank you. One moment for our next question. Our next question comes online. Your line is now open.

Thank you so much for taking my question and congratulations on the quarter. I was wondering if you can talk a little bit on the expected cadence for EU launch and how that, you know, when we think about 2026, that might add to the growth. I know it takes time for EU launches. And also the SG&A that was reported, does that include Salesforce in Europe, or should we be thinking about, you know, slight increase in SG&A over the next several months to reflect Salesforce on the ground in Europe? Thank you.

Marty, do you want to answer that first?

Yeah, I'll definitely answer the SG&A question first, and we can talk about just EU launch in general. So SG&A for building out Germany, right, because we're only launching there as of right now, is included in our SG&A expenses, and you'll continue to see that included in SG&A. But as we said, when we move into country by country, we're going to be very disciplined, and we look at a two- to three-year positive contribution metric for each country. So the spend will increase with Europe, but again, we're mindful with each country. And then just the EU launch, let's just talk about that. I'll start, and Bill, I don't know if you want to add, but we did start launching in the third quarter, but really we were just testing the channel. So just the minimum amount of revenue for 2025, we believe, and where we said we can start seeing some impact in 2026. So I would say the robust sales growth that we're talking about 2026 is by far and predominantly the U.S. sales growth and adding patients, which we've discussed. And Europe, again, you know, it's going to play out. It is slow. We have to build the system. We have to wire the system in countries in Europe. It'll just be Germany next year. So it'll be, it'll add, but not a significant amount.

Yeah, I think that's really, really great comment. You know, it is Germany right now, and we're really excited. I mean, first of all, we've hired an outstanding team there. The team is great. The feedback that we're getting is that MASH needs to be treated. It's prevalent, very similar to the U.S. in that sense. But it takes time, right? You know, you've got to wire the system. It's practice by practice, prescriber by prescriber. And we're taking all the steps in the usual next countries to look at as well. We've started putting teams in place that are evaluating the market and our launch strategy there. And again, just absolutely high-quality team that's in place. So we feel really good about the long-term prospects. But we also know that there's a lot of wiring to do, and we've got to navigate the reimbursement process in each country, which, you know, takes some time. But, you know, we've got a great team to do that. Thanks.

Thanks, Bill. Operator, we have time for one more question, please.

Thank you. One moment for our next question. Our next question comes from the line of Kaveri Pullman of Clear Street. Your line is not open.

Great. Good morning. Congrats on the progress, and thank you for taking my questions. Are there any systemic differences or challenges in insurance approval rates for res diffra depending on whether the prescription comes from an endocrinologist versus a hepatologist or gastroenterologist? And maybe just like a connected question to that. You know, besides the clinical data that you showed on slide 14, Is there any real-world evidence that you have collected or, you know, showing that resgifra can prevent or delay the progression of F4 cirrhosis, perhaps based on the feedback from, you know, its current use by physicians? In other words, is there, like, any evidence leading to preference of resgifra or GLP-1s in F2F3 MASH patients? Thank you.

Yeah, thanks for the question. Maybe starting there. We're seeing more and more real-world evidence that's coming to light. Some of it will be presented at AASLD this week or this week into next week. And we expect as more patients start to hit the one-year mark and beyond that there will be more. Anecdotally, we're hearing really, really great feedback. You know, when you launch a product, you never know what's going to happen in the real world. You have your clinical data and you're not sure what real-world experience is going to be. So far, the anecdotal feedback has been extremely strong feedback. by prescribers, and they're seeing effects on, obviously, liver fat. They're seeing effects on fibrosis and all the other myriad of other things, LFTs, lipids, et cetera. So we're really excited about the real-world evidence reading out, and we've done work with claims databases, et cetera. So more to come, but early indicators are extremely strong, so really excited about that. you know, to your first question, it really is pair to pair about this is this utilization management criteria, you know, who can prescribe, et cetera. And for the most part, it is, it refers to specialists. And in the specialists, that can be hepatologists and gastroenterologists. And then in some cases, it may or may not name endocrinologists. So it's usually either requirement to be prescribed by a specialist or in consultation with a specialist. But again, that's something which really varies on a plan-by-plan basis. We don't see that as any kind of a hindrance now. And remember, our focus is the specialists. We believe Red Dipper should be prescribed by these specialists. Now, in time, that may change. But we think that this is a very serious disease. It is a very serious disease. And we want to have the specialists get experience with res differ and treating these patients before it would ever extend beyond that. And that's crystal clear. We make that crystal clear with the payers as well. That is our intent.

Great. Thanks, Bill. And thank you all for your time and interest today. This now concludes our call. A replay of this webcast will be available on our website in approximately two hours. Thanks for joining us.

Ladies and gentlemen, thank you for participation in today's conference. You may now disconnect. Have a wonderful day.