Shares of the nonviral liver disease specialist Madrigal Pharmaceuticals (NASDAQ: MDGL) plunged by as much as 12.8% during the early portion of Tuesday's trading session. The clinical-stage biotech's stock has since rebounded, but it was still down by 3.5% as of 12:30 p.m. ET Tuesday afternoon.

What's behind this sell-off? Ahead of the opening bell, Madrigal released its 2023 first-quarter earnings. Apparently, short-sellers were expecting the company to post a sizable net loss for the quarter, based on the stock's early trading behavior. While Madrigal did report a net loss of approximately $77 million for the three-month period, its cash position only dipped by roughly $29.3 million during the quarter due to an influx of cash via financing and option exercise activities.

With $329.5 million in cash and cash equivalents at the end of the first quarter, Madrigal is on sound financial footing. It's true that the pre-commercial-stage biotech will likely have to start spending on building a sales force from scratch and ramping up inventory levels ahead of a possible launch for its drug candidate resmetirom as a treatment for nonalcoholic steatohepatitis (NASH). But a potential cash crunch doesn't seem likely within the next 12 months.

Continue reading

Source Fool.com