MADRIGAL PHARMACEUTICALS, INC. (MDGL) FY 2023 MD&A

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Risk Factors in Part I, Item 1A and disclosures under “Cautionary Note Regarding Forward-Looking Statements” within this Annual Report on Form 10-K, the audited financial statements and accompanying notes, included elsewhere in this Annual Report on Form 10-K, and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together. In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act of 1934, as amended, or the Exchange Act, that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As disclosed in this report, our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Cautionary Note Regarding Forward-Looking Statements” and in the “Risk Factors” sections contained in Part I, Item 1A in this Annual Report on Form 10-K.

About Madrigal Pharmaceuticals, Inc.

We are a clinical-stage biopharmaceutical company pursuing novel therapeutics for nonalcoholic steatohepatitis, or NASH, a liver disease with high unmet medical need. Our lead candidate, resmetirom, is a once-daily, oral, liver-directed thyroid hormone receptor-ß (THR-ß), agonist designed to target key underlying causes of NASH.

NASH Disease State Overview. NASH is a more advanced form of nonalcoholic fatty liver disease (NAFLD). NAFLD has become the most common liver disease in the United States and other developed countries and is characterized by an accumulation of fat in the liver with no other apparent causes. NASH can progress to cirrhosis or liver failure, require liver transplantation and can also result in liver cancer. NASH is the leading cause of liver transplants in the U.S. for women, and is expected to soon be the leading cause of liver transplants overall. Additionally, patients with NASH, especially those with more advanced metabolic risk factors (hypertension, concomitant type 2 diabetes), are at increased risk for adverse cardiovascular events and increased morbidity and mortality. Once patients progress to NASH with significant fibrosis (consistent with fibrosis stages 2 and 3), the risk of adverse liver outcomes increases substantially.

NASH is also known as metabolic dysfunction-associated steatohepatitis (“MASH”) following a change in disease nomenclature introduced by hepatology medical societies in 2023.

Our Patient Focus. Madrigal estimates that approximately 1.5 million patients have been diagnosed with NASH in the U.S., of which approximately 525,000 have NASH with significant fibrosis. Madrigal estimates that approximately 315,000 diagnosed patients with NASH with significant fibrosis are under the care of the liver specialist physicians Madrigal will be targeting during the planned launch of resmetirom following approval.

Our Clinical Development Program. Madrigal is currently conducting multiple Phase 3 clinical trials to evaluate the safety and efficacy of resmetirom for the treatment of NASH, including the pivotal MAESTRO-NASH biopsy study in patients with significant fibrosis, the MAESTRO-NASH Outcomes study in patients with NASH with compensated cirrhosis and the MAESTRO-NAFLD-1 safety study. Positive results from the pivotal MAESTRO-NASH biopsy study were published in the New England Journal of Medicine in February 2024.

Data from the 52-week first 1,000 patient portion of MAESTRO-NASH, together with data from MAESTRO-NAFLD-1, the open-label extension of the MAESTRO-NAFLD-1 study, Phase 2 and Phase 1 data, including safety parameters, formed the basis for Madrigal’s subpart H submission to the FDA for accelerated approval of resmetirom for treatment of NASH with liver fibrosis.

Key Developments

In February 2024, primary results from the MAESTRO-NASH study were published in the New England Journal of Medicine.

In September 2023, Madrigal announced we had commenced a public underwritten offering of common stock and pre-funded warrants to purchase common stock (the “Offering”). The Offering closed in October 2023. We received gross proceeds totaling $500.0 million. Our net proceeds were $472.0 million, after deducting fees and commissions. We intend to use the net proceeds from the Offering for our clinical and commercial activities in preparation for a potential launch of resmetirom in the U.S. and for general corporate purposes, including, without limitation, research and development expenditures, clinical trial expenditures, manufacture and supply of drug substance and drug products, potential acquisitions or licensing of new technologies, capital expenditures and working capital.

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Also in September 2023, Madrigal announced our Board of Directors (the “Board”) appointed Bill Sibold as the President and Chief Executive Officer of the Company. In connection with this appointment, the size of the Board was increased to nine, and Mr. Sibold was also appointed a member of the Board. On Mr. Sibold’s start date, he assumed the duties and responsibilities of the Company’s principal executive officer from Paul Friedman, M.D., who previously served as the Chief Executive Officer since July of 2016. Dr. Friedman continues to serve on the Board as a director of the Company.

Additionally in September 2023, the U.S. Food and Drug Administration (the “FDA”) informed Madrigal that it accepted for review our New Drug Application (“NDA”) for resmetirom for the treatment of adult patients with NASH with liver fibrosis and granted a Priority Review designation. The FDA has assigned a Prescription Drug User Fee Act (“PDUFA”) date of March 14, 2024, the target date by which the FDA intends to complete its review and take action on the NDA. The FDA noted in its September 2023 correspondence that it is not currently planning to hold an advisory committee meeting to discuss our application.

In April 2023, Madrigal announced that resmetirom has received Breakthrough Therapy designation from the FDA for the treatment of patients with NASH with liver fibrosis. Breakthrough Therapy designation is a process intended to expedite the development and review of drugs for serious or life-threatening conditions. The criteria for breakthrough therapy designation require preliminary clinical evidence that demonstrates the drug may have substantial improvement on at least one clinically significant endpoint over available therapy, or over placebo if there is no available therapy. A drug that receives Breakthrough Therapy designation is eligible for more intensive guidance on an efficient drug development program and organizational commitment involving senior managers from FDA.

Also in April 2023, Madrigal announced that the outcomes portion of the Phase 3 MAESTRO-NASH biopsy trial has completed enrollment. Enrollment of the MAESTRO-NASH study was closed at approximately 1,750 patients based on the enrollment target of the 54-month long-term clinical outcome portion of the study.

Basis of Presentation

Research and Development Expenses

Research and development expenses primarily consist of costs associated with our research activities, including the preclinical and clinical development of our product candidate, resmetirom. We expense our research and development expenses as incurred. We contract with clinical research organizations to manage our clinical trials under agreed upon budgets for each study, with oversight by our clinical program managers. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received. Manufacturing expense includes costs associated with drug formulation development and clinical drug production. We do not track employee and facility related research and development costs by project, as we typically use our employee and infrastructure resources across multiple research and development programs. We believe that the allocation of such costs would be arbitrary and not be meaningful.

Our research and development expenses consist primarily of:

•salaries and related expense, including stock-based compensation;

•external expenses paid to clinical trial sites, contract research organizations, laboratories, database software and consultants that conduct clinical trials;

•expenses related to development and the production of nonclinical and clinical trial supplies, including fees paid to contract manufacturers;

•expenses related to preclinical studies;

•expenses related to compliance with drug development regulatory requirements; and

•other allocated expenses, which include direct and allocated expenses for depreciation of equipment and other supplies.

We expect to continue to incur substantial expenses related to our development activities for the foreseeable future as we conduct our clinical studies programs, manufacturing and toxicology studies. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials, additional drug manufacturing requirements, and later stage toxicology studies such as carcinogenicity studies. Our research and development expenses have increased year over year in each of 2021, 2022, and 2023 and we expect that our research and development expenses may increase in the future. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly

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and time consuming. The probability of success for each product candidate is affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability and commercial viability. Accordingly, we may never succeed in achieving marketing approval for any of our product candidates.

Completion dates and costs for our clinical development programs as well as our research program can vary significantly for each current and future product candidate and are difficult to predict. As a result, we cannot estimate with any degree of certainty the costs we will incur in connection with the development of our product candidates at this point in time. We expect that we will make determinations as to which programs and product candidates to pursue and how much funding to direct to each program and product candidate on an ongoing basis in response to the scientific success of research, results of ongoing and future clinical trials, potential collaborative agreements with respect to programs or potential product candidates, as well as ongoing assessments as to each current or future product candidate’s commercial potential.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, benefits and stock-based compensation expenses for employees, management costs, costs associated with obtaining and maintaining our patent portfolio, professional fees for accounting, auditing, consulting and legal services, and allocated overhead expenses.

We expect that our general and administrative expenses will increase in the future as we expand our operating activities, maintain and expand our patent portfolio and incur additional costs associated with being a public company and maintaining compliance with exchange listing and SEC requirements. We expect these potential increases will likely include management costs, legal fees, accounting fees, directors’ and officers’ liability insurance premiums and expenses associated with investor relations.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development expenses and stock-based compensation expenses. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

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 stock-based compensation), costs for consultants, milestone payments under licensing agreements, and other costs associated with our preclinical and clinical programs. In particular, we have conducted safety studies in animals, optimized and implemented the manufacturing of our drug, and conducted Phase 1-3 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 preclinical studies and clinical trials, completion of milestones 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 our estimates. Our historical estimates for research and development costs have not been materially different from the actual costs.

Stock-Based Compensation

We recognize 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. We use 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. We use the simplified method for determining the expected lives of options. Expected volatility is based upon an industry estimate or blended rate including our historical trading activity.

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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. We estimate 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 our common stock achieving or exceeding certain price targets, we use 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 that are subject to uncertainty for risk-free interest rate, dividend yield, volatility, and expected life.

The assumptions used in computing the fair value of equity awards reflect our 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.

Certain of the employee stock options we grant are structured to qualify as incentive stock options (ISOs). Under current tax regulations, we do not receive a tax deduction for the issuance, exercise or disposition of ISOs if the employee meets certain holding requirements. If the employee does not meet the holding requirements, a disqualifying disposition occurs, at which time we may receive a tax deduction. We do not record tax benefits related to ISOs unless and until a disqualifying disposition is reported. In the event of a disqualifying disposition, the entire tax benefit is recorded as a reduction of income tax expense. We have not recognized any income tax benefit for its share-based compensation arrangements due to the fact that we do not believe it is more likely than not we will realize the related deferred tax assets.

Results of Operations

Comparison of the Years Ended December 31, 2023 and 2022

Revenue

We did not generate any revenue during the years ended December 31, 2023 and 2022, respectively.

Operating Expenses

The following table provides comparative results of our operating expenses for the years ended December 31, 2023 and 2022 (in thousands):

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Research and Development Expense

The following represents our research and development expenses for the years ended December 31, 2023 and 2022 (in thousands):

Our research and development expenses were $272.4 million for the year ended December 31, 2023 compared to $245.4 million for the year ended December 31, 2022. Research and development expenses increased by $26.9 million in 2023 due primarily to a scale up of manufacturing activities, an increase in headcount, and an increase in stock compensation expense.

General and Administrative Expense

Our general and administrative expenses were $108.1 million for the year ended December 31, 2023 compared to $48.1 million for the year ended December 31, 2022. General and administrative expenses increased by $60.0 million in 2023 due primarily to increases in commercial preparation activities, including a corresponding increase in headcount, and an increase in stock compensation expense. We believe our general and administrative expenses will increase over time as we prepare for commercialization and expand our operating activities, which will result in an increase in our headcount, consulting services, and related overhead needed to support those efforts.

Interest Income

Our interest income was $19.6 million for the year ended December 31, 2023 compared to $2.2 million for the year ended December 31, 2022. The increase in interest income was due primarily to a higher average principal balance in our investment account in 2023, along with increased interest rates in 2023.

Interest Expense

Our interest expense was $12.7 million for the year ended December 31, 2023, compared to $4.0 million for the year ended December 31, 2022. The increase in interest expense was primarily a result of higher outstanding principal balances during the period under the Loan Facility with Hercules.

Comparison of the Years Ended December 31, 2022 and 2021

Revenue

We did not generate any revenue during the years ended December 31, 2022 and 2021, respectively.

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Operating Expenses

The following table provides comparative results of our operating expenses for the years ended December 31, 2022 and 2021 (in thousands):

Research and Development Expense

The following represents our research and development expenses for the years ended December 31, 2022 and 2021 (in thousands):

Our research and development expenses were $245.4 million for the year ended December 31, 2022 compared to $205.2 million for the year ended December 31, 2021. Research and development expenses increased by $40.3 million in the 2022 period due primarily to the additional activities related to our Phase 3 clinical trials, an increase in headcount, and an increase in stock compensation expense.

General and Administrative Expense

Our general and administrative expenses were $48.1 million for the year ended December 31, 2022 compared to $37.3 million for the year ended December 31, 2021. General and administrative expenses increased by $10.8 million in the 2022 period due primarily to increases in commercial preparation activities, including a corresponding increase in headcount, and an increase in stock compensation expense.

Interest Income

Our interest income was $2.2 million for the year ended December 31, 2022 compared to $0.4 million for the year ended December 31, 2021. The increase in interest income was due primarily to a higher average principal balance in our investment account in 2022 and increased interest rates.

Interest Expense

Our interest expense was $4.0 million for year ended December 31, 2022, compared to $0.0 million for the year ended December 31, 2021. The increase in interest expense was as a result of the Loan and Security Agreement (“Loan Facility”) we entered into with Hercules during the second quarter of 2022.

Liquidity and Capital Resources

Since inception, we have incurred significant net losses and we have funded our operations primarily through the issuance of shares of our common stock, shares of our convertible preferred stock, issuances of pre-funded warrants, borrowings under the Loan Facility with Hercules, the issuance of convertible debt and the proceeds from the merger with Synta Pharmaceuticals Corp. Our most significant use of capital pertains to salaries and benefits for our employees, including commercial, clinical, scientific, operational, financial and management personnel, along with manufacturing costs and commercialization costs to support a potential U.S. approval.

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As of December 31, 2023, we had cash, cash equivalents and marketable securities totaling $634.1 million compared to $358.8 million as of December 31, 2022, with the increase primarily attributable to our October 2023 public offering which provided $472.0 million net cash proceeds, partially offset by funding of operations. Our cash and investment balances are held in a variety of interest-bearing instruments, including obligations of U.S. government agencies, U.S. Treasury debt securities, corporate debt securities and money market funds. Cash in excess of immediate requirements is invested in accordance with our investment policy with a view toward capital preservation and liquidity.

We anticipate continuing to incur operating losses for the foreseeable future. While our rate of cash usage will likely increase in the future, in particular to support our preparation for commercialization, we believe our available cash resources are sufficient to fund our operations past one year from the issuance of the financial statements contained herein. Our future long-term liquidity requirements will be substantial and will depend on many factors. To meet future long-term liquidity requirements, as well as maintain compliance with certain of our Loan Facility covenants, we may need to raise additional capital to fund our operations through equity or debt financings, collaborations, partnerships or other strategic transactions. We regularly consider fundraising opportunities and may decide, from time to time, to raise capital based on various factors, including market conditions and our plans of operation. Additional capital, if needed, may not be available on terms acceptable to us, or at all. We also have the ability to delay certain research activities and related clinical expenses, as well as commercial preparation investments, if necessary due to liquidity concerns until a date when those concerns are relieved. If adequate funds are not available, or if the terms of potential funding sources are unfavorable, our business and our ability to develop our product candidates would be harmed. Furthermore, any sales of additional equity securities may result in dilution to our stockholders, and any debt financing may include covenants that restrict our business.

At-the-Market Sales Agreement

On May 9, 2023, we entered into Amendment No. 1 (the “Sales Agreement Amendment”) to the June 2021 Sales Agreement (the “2021 Sales Agreement”) with Cowen, which provided for up to an additional $200.0 million in the amount of common stock that can be issued and sold by us from time to time through or to Cowen under the 2021 Sales Agreement, acting as agent or principal.

Sales of our common stock, if any, under the Sales Agreement will be made by any method that is deemed to be an “at the market” offering as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended. We have no obligation to sell any common stock and may at any time suspend offers under the Sales Agreement or terminate the Sales Agreement pursuant to its terms.

During the three months ended December 31, 2023, under the Sales Agreement Amendment, we sold no shares. During the year ended December 31, 2023, and in total under the Sales Agreement Amendment, we sold 98,101 shares for an aggregate of $25.2 million in gross proceeds, with net proceeds of approximately $24.5 million after deducting commissions and other transaction costs. All shares were sold pursuant to our effective Registration Statement and the prospectus supplement relating thereto. As of December 31, 2023, $174.8 million remained reserved and available for sale under the 2023 Sales Agreement Amendment and our related prospectus supplement.

Loan Facility

In May 2022 we entered into the $250.0 million Loan Facility (the “Loan Facility”) with Hercules Capital, Inc. (“Hercules”). On February 3, 2023, we entered into the First Amendment (the “Amendment”) to the Loan Facility (as amended, the “Amended Loan Facility”). Under the terms of the Loan Facility, the first $50.0 million tranche (“Tranche 1”) was drawn at closing. Under the Amended Loan Facility, $65.0 million was drawn in 2023 under the second tranche (“Tranche 2”). The third tranche (“Tranche 3”) of $75.0 million is available, subject to us obtaining a certain FDA approval for resmetirom. The fourth tranche (“Tranche 4”) of $60.0 million is available subject to Hercules’ sole discretion. In connection with Tranche 1, in 2022 we issued Hercules warrants to purchase 14,899 shares of our common stock, which had a Black-Scholes value of $0.6 million. In connection with Tranche 2, in 2023 we issued to Hercules warrants to purchase an aggregate of 4,555 shares of common stock, which had a Black-Scholes value of $0.9 million.

The Loan Facility had a minimum interest rate of 7.45% and adjusted with changes in the prime rate. The Amendment reduced the interest rate under the Amended Loan Facility to the greater of (i) the prime rate as reported in The Wall Street Journal plus 2.45% and (ii) 8.25%. We will pay interest-only monthly payments of accrued interest under the Loan Facility through May 1, 2025, for a period of 36 months, which period may be extended to May 1, 2026 and May 3, 2027, upon the achievement of regulatory approval milestones and future revenue covenants, subject to compliance with applicable covenants. The Loan Facility matures in May 2026 and may be extended an additional year upon the achievement of certain regulatory milestones. The Loan Facility is secured by a security interest in substantially all of our

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assets, other than intellectual property. It includes an end of term charge of 5.35% of the aggregate principal amount, which is accounted for in the loan discount.

The Loan Facility includes affirmative and restrictive financial covenants which commenced on January 1, 2023, including maintenance of a minimum cash, cash equivalents and liquid funds covenant of $35.0 million, which may decrease in certain circumstances if we achieve certain clinical milestones and a revenue milestone, and a revenue-based covenant that could apply commencing at or after the time that financial reporting is due for the quarter ending September 30, 2024. The Loan Facility contains event of default provisions for: our failure to make required payments or maintain compliance with covenants under the Loan Facility; our breach of certain representations or default under certain obligations outside the Loan Facility; insolvency, attachment or judgment events affecting us; and any circumstance which has occurred or could reasonably be expected to have a material adverse effect on us, provided that, any failure to achieve approval or certain other milestones under the Loan Facility shall not in and of itself constitute a material adverse effect. The Loan Facility also includes customary covenants associated with a secured loan facility, including covenants concerning financial reporting obligations, and certain limitations on indebtedness, liens (including a negative pledge on intellectual property and other assets), investments, distributions (including dividends), collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, and deposit accounts.

As of December 31, 2023, the outstanding principal under the Loan Facility was $115.0 million. The interest rate as of December 31, 2023 was 10.95%. As of December 31, 2023, we were in compliance with all loan covenants and provisions.

2023 Public Offering

On September 28, 2023, we entered into an Underwriting Agreement with Goldman Sachs & Co. LLC, as representative of the several underwriters named therein, pursuant to which we sold to the underwriters in an underwritten public offering (the “Offering”): (i) 1,248,098 shares of common stock at a public offering price of $151.69 per share, and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase 2,048,098 shares of common stock at a public offering price of $151.6899 per Pre-Funded Warrant, which represents the per share public offering price for the common stock less a $0.0001 per share exercise price for each such Pre-Funded Warrant. The Offering closed on October 3, 2023.

The gross proceeds of the Offering was $500.0 million, and we received net proceeds, after deducting the underwriting discount and commissions and other estimated offering expenses payable by us, of approximately $472.0 million. We intend to use the net proceeds from the Offering for our clinical and commercial activities in preparation for a potential launch of resmetirom in the U.S. and for general corporate purposes, including, without limitation, research and development expenditures, clinical trial expenditures, manufacture and supply of drug substance and drug products, potential acquisitions or licensing of new technologies, capital expenditures and working capital.

The Pre-Funded Warrants are exercisable at any time after the date of issuance. A holder of Pre-Funded Warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise. A holder of Pre-Funded Warrants may increase or decrease this percentage, but not in excess of 19.99%, by providing at least 61 days prior notice to us.

Cash Flows

The following table summarizes our net cash flow activity (in thousands):

Operating Activities

Net cash used in operating activities was $324.2 million, $224.9 million, and $183.9 million for the years ended December 31, 2023, 2022 and 2021, respectively. The use of cash in these periods resulted primarily from our losses from

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operations, as adjusted for non-cash charges for stock-based compensation, and changes in our working capital accounts. Net cash used in the year ended December 31, 2023 increased from prior years predominately due to the build out of our commercial operations in anticipation of our potential commercial launch.

Investing Activities

Net cash used in investing activities was $502.5 million for the year ended December 31, 2023 and consisted primarily of $834.4 million of purchases of marketable securities for our investment portfolio, partially offset by $333.4 million from sales and maturities of marketable securities from our investment portfolio.

Net cash used in investing activities was $206.7 million for the year ended December 31, 2022 and consisted primarily of $350.4 million from sales and maturities of marketable securities, partially offset by $143.5 million of purchase of marketable securities for our investment portfolio.

Net cash used in investing activities was $5.1 million for the year ended December 31, 2021 and consisted primarily of $394.1 million of purchase of marketable securities for our investment portfolio, partially offset by $389.3 million from sales and maturities of marketable securities.

Financing Activities

Net cash provided by financing activities was $595.1 million for the year ended December 31, 2023 and consisted primarily of $472.0 million in proceeds from our October 2023 public offering, in addition to $65.0 million in borrowings under the Loan Facility, $34.0 million from proceeds from the exercise of common stock options, and $24.5 million from sales of our common stock under the 2023 Sales Agreement, partially offset by $0.4 million of loan issuance costs.

Net cash provided by financing activities was $313.5 million for the year ended December 31, 2022 and consisted primarily of sales of our common stock under the 2021 Sales Agreement and a registered direct offering of Series B Convertible Preferred Stock and common stock in December, and debt borrowings under our Loan Facility.

Net cash provided by financing activities was $171.2 million for the year ended December 31, 2021 and consisted primarily of sales of our common stock under the 2021 Sales Agreement and the exercise of stock options.

Contractual Obligations and Commercial Commitments

As of December 31, 2023, we had contractual obligations and commercial commitments as follows (in thousands):

Operating leases relate to our corporate headquarters facility located in West Conshohocken, Pennsylvania.

In August 2023, we entered into the Fifth Amendment to our Office Lease (the “Lease Amendment”). The Lease Amendment extends the term of the lease through November 2026. As a result of the Lease Amendment, an incremental $1.6 million ROU asset and lease liabilities were recorded during the year ended December 31, 2023.

In May 2022 we entered into the $250.0 million Loan Facility with the several banks and other financial institutions or entities party thereto (each, a “Lender” and collectively referred to as the “Lenders”), and Hercules Capital, Inc. (“Hercules”), in its capacity as administrative agent and collateral agent for itself and the Lenders. As of December 31, 2023, we had drawn $115.0 million under the facility. We are scheduled to pay interest-only monthly payments of accrued interest under the Loan Facility through May 1, 2025, which period may be extended to May 1, 2026 and May 3, 2027 upon the achievement of our regulatory approval milestone and future revenue milestones, and subject to compliance with applicable covenants.

The Company has entered into customary contractual arrangements in support of the Phase 3 clinical trials.

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Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Recent Accounting Pronouncements

Refer to Note 2, “Summary of Significant Accounting Policies,” in the accompanying notes to the consolidated financial statements for a discussion of recent accounting pronouncements.