MADRIGAL PHARMACEUTICALS, INC.MDGL
MADRIGAL PHARMACEUTICALS, INC. Stock Compensation Disclosure
Stock-based Compensation
Unrecognized stock-based compensation expense as of December 31, 2025 was $238.8 million with a weighted average remaining period of 2.81 years.
2015 Stock Plan
The 2015 Stock Plan, as amended (the “2015 Stock Plan”), is our shareholder-approved incentive plan through which equity based grants are awarded. The 2015 Stock Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units and other stock-based compensation awards to employees, officers, directors, and consultants of the Company. The administration of the 2015 Stock Plan is under the general supervision of the Compensation Committee of the Board of Directors. The terms of stock options awarded under the 2015 Stock Plan, in general, are determined by the Compensation Committee, provided the exercise price per share generally shall not be set at less than the fair market value of a share of the common stock on the date of grant and the term shall not be greater than ten years from the date the option is granted. As of December 31, 2025, 654,994 shares were available for future issuance under the 2015 Stock Plan.
2023 Inducement Plan
In September 2023, the Company adopted the 2023 Inducement Plan (the “2023 Inducement Plan”), pursuant to which the Company from time to time was permitted to make equity grants to new employees as a material inducement to their employment. The 2023 Inducement Plan was adopted without stockholder approval, pursuant to Nasdaq Listing Rule 5635(c)(4), and was administered by the Compensation Committee of the Board. The 2023 Inducement Plan provided for the granting of non-statutory stock options, restricted stock, restricted stock units, performance stock units and other stock-based compensation awards to new employees, but did not allow for the granting of incentive stock options. The terms of the stock options under the 2023 Inducement Plan, in general, were determined by the Compensation Committee, provided the exercise price per share generally would not be set at less than the fair market value of a share of the common stock on the date of grant and the term would not be greater than ten years from the date the option or award was granted. A total of 500,000 shares of the Company’s common stock were reserved for issuance under the 2023 Inducement Plan. In June 2025, the Company terminated the 2023 Inducement Plan, and therefore no additional awards may be made from the 2023 Inducement Plan. Any awards outstanding under the 2023 Inducement Plan will continue to be governed by the terms thereof.
2025 Inducement Plan
In June 2025, the Company adopted the 2025 Inducement Plan (the “2025 Inducement Plan”), pursuant to which the Company may from time to time make equity grants to new employees as a material inducement to their employment. The 2025 Inducement Plan was adopted without stockholder approval, pursuant to Nasdaq Listing Rule 5635(c)(4), and is administered by the Compensation Committee of the Board. The 2025 Inducement Plan provides for the granting of non-statutory stock options, restricted stock, restricted stock units, performance stock units and other stock-based compensation awards to new employees, but does not allow for the granting of incentive stock options. The terms of the stock options under the 2025 Inducement Plan, in general, are determined by the Compensation Committee, provided the exercise price per share generally shall not be set at less than the fair market value of a share of the common stock on the date of grant and the term shall not be greater than ten years from the date the option or award is granted. A total of 100,000 shares of the Company’s common stock were initially reserved for issuance under the 2025 Inducement Plan. In September 2025, the 2025 Inducement Plan was amended to increase the aggregate number of shares reserved for issuance by an additional 300,000 shares. A total of 267,451 shares were available for future issuance as of December 31, 2025.
Stock Options
The following table summarizes stock option activity during the year ended December 31, 2025:
Shares | Weighted average exercise price | Weighted average remaining contractual life (years) | Aggregate intrinsic value (in thousands) | ||||||||||||||||||||
| Outstanding at December 31, 2024 | 1,528,143 | $ | 93.57 | ||||||||||||||||||||
| Options granted | 145,219 | 340.27 | |||||||||||||||||||||
| Options exercised | (681,134) | 55.91 | |||||||||||||||||||||
| Options cancelled | (12,367) | 177.52 | |||||||||||||||||||||
| Outstanding at December 31, 2025 | 979,861 | $ | 155.25 | 5.19 | $ | 418,487 | |||||||||||||||||
| Exercisable at December 31, 2025 | 715,046 | $ | 112.02 | 4.28 | $ | 336,297 | |||||||||||||||||
The total cash received by the Company as a result of stock option exercises was $38.1 million, $76.9 million and $34.0 million for the years ended December 31, 2025, 2024, and 2023. The total intrinsic value of options exercised was $227.5 million, $167.8 million, and $70.4 million for the years ended December 31, 2025, 2024, and 2023. The weighted-average grant date fair values, based on the Black-Scholes option model, of options granted during the year ended December 31, 2025, 2024 and 2023 was $200.55, $155.42, and $149.15, respectively.
The following table summarizes the weighted average values of the assumptions used in computing the fair value of option grants during 2025, 2024, and 2023.
| 2025 | 2024 | 2023 | |||||||||||||||
Risk-free interest rate | 4.1 | % | 4.1 | % | 4.4 | % | |||||||||||
Expected dividend yield | — | % | — | % | — | % | |||||||||||
Expected option life | 6.2 years | 4.7 years | 6.3 years | ||||||||||||||
Expected volatility | 58 | % | 82 | % | 92 | % | |||||||||||
Restricted Stock Units
The Company awards restricted stock units (“RSUs”) to employees, officers, directors and consultants to the Company. RSUs vest over a period of years and are subject to forfeiture if employment or service terminates before vesting.
The following table summarizes RSU activity, excluding performance-based RSUs, during the year ended December 31, 2025:
| Shares | Weighted average grant date fair value | ||||||||||
| Outstanding at December 31, 2024 | 499,559 | $ | 237.07 | ||||||||
RSUs granted | 491,079 | 357.36 | |||||||||
RSUs vested | (151,464) | 239.43 | |||||||||
RSUs forfeited | (40,752) | 291.04 | |||||||||
| Outstanding at December 31, 2025 | 798,422 | $ | 307.85 | ||||||||
For the years ended December 31, 2025 and 2024 the total fair value of RSUs vested was $54.3 million, $28.9 million, respectively. For the year ended December 31, 2023 the fair value of RSUs vested was immaterial. For the years
ended December 31, 2025, 2024, and 2023, the weighted-average grant date fair value of RSUs granted was $357.36, $236.90, and $243.81, respectively.
Performance-Based Restricted Stock Units
The Company has granted various performance-based restricted stock units (“PSUs”) to certain senior leadership. Depending on the terms of the PSUs and the outcome of the pre-established performance criteria, which may include a market and/or performance condition, a recipient may ultimately earn the target number of PSUs granted or a specified multiple thereof at the end of the vesting period.
The following table summarizes PSU activity during the year ended December 31, 2025:
| PSUs | Eligible to Earn PSUs | Weighted average grant date fair value | |||||||||||||||
| Outstanding PSUs at December 31, 2024 | 92,760 | 235,520 | $ | 257.77 | |||||||||||||
| PSUs granted | 61,717 | 123,434 | 580.38 | ||||||||||||||
| PSUs attained | (50,000) | (100,000) | 146.37 | ||||||||||||||
| PSUs forfeited | (1,233) | (2,466) | 593.93 | ||||||||||||||
| Outstanding at December 31, 2025 | 103,244 | 256,488 | $ | 500.55 | |||||||||||||
| Exercisable at December 31, 2025 | — | — | $ | — | |||||||||||||
For the years ended December 31, 2025, 2024, and 2023, the weighted average grant date fair value of PSUs granted was $580.38, $388.02, and $146.37, respectively.
Outstanding Awards
As of December 31, 2025, the Company had RSUs, PSUs and options outstanding pursuant to which an aggregate of 2,034,771 shares of its common stock may be issued pursuant to the terms of all awards granted under the 2015 Stock Plan, 2023 Inducement Plan and 2025 Inducement Plan.
Stock-Based Compensation Expense
Stock-based compensation expense during the years ended December 31, 2025, 2024 and 2023 was as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Stock-based compensation expense by type of award: | |||||||||||||||||
| Stock options | $ | 21,328 | $ | 26,977 | $ | 30,613 | |||||||||||
Restricted stock units | 58,610 | 35,136 | 14,974 | ||||||||||||||
Performance-based restricted stock units | 18,192 | 17,767 | 4,148 | ||||||||||||||
| Total stock-based compensation expense | $ | 98,130 | $ | 79,880 | $ | 49,735 | |||||||||||
| Effect of stock-based compensation expense by line item: | |||||||||||||||||
| Research and development | $ | 22,147 | $ | 22,158 | $ | 20,864 | |||||||||||
| Selling, general and administrative | 75,983 | 57,722 | 28,871 | ||||||||||||||
| Total stock-based compensation expense included in net loss | $ | 98,130 | $ | 79,880 | $ | 49,735 | |||||||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.