Rani Therapeutics Holdings, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. The unaudited consolidated results cover a clinical-stage biotherapeutics company developing the RaniPill oral drug-delivery platform. Rani had no approved products and no commercial product revenue.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Contract revenue | $0 | $2.0 million | $0 | $2.7 million |
| Research and development | $9.5 million | $3.8 million | $17.1 million | $7.1 million |
| General and administrative | $6.3 million | $3.5 million | $12.5 million | $6.1 million |
| Net loss, consolidated | $16.0 million | $5.5 million | $29.8 million | $11.1 million |
| Net loss attributable to Rani Holdings | $7.6 million | Not applicable | $13.8 million | Not applicable |
| Loss per Class A share | $0.31 | Not presented | $0.60 | Not presented |
- Revenue was entirely contract revenue from an evaluation agreement with Takeda; no revenue was recognized in 2022. The Takeda agreement had ended in 2021.
- Operating expenses rose substantially year over year, driven by increased headcount and equity compensation, third-party development services, and facility costs. Equity-based compensation expense was $4.0 million in Q2 and $6.9 million for the first half.
- Operating loss was $15.8 million for Q2 and $29.6 million for the first half. No meaningful operating margin is available because the company had no current-period revenue.
- Cash and cash equivalents were $97.2 million at June 30, down from $117.5 million at December 31, 2021. Cash used in operations was $19.7 million for the first half, versus $9.7 million a year earlier; capital expenditures were $0.6 million. No debt was reported on the June 30 balance sheet.
- Total assets were $104.3 million, total liabilities $5.7 million, and stockholders’ equity $98.7 million at June 30. Management said cash was expected to fund operations for at least 12 months from issuance of the financial statements; it also expects continuing losses and negative operating cash flows.
Material changes and developments
- Compared with the first half of 2021, consolidated net loss increased to $29.8 million from $11.1 million, while operating cash use approximately doubled. The absence of Takeda contract revenue also contributed to the year-over-year deterioration.
- Research and development increased 141% and general and administrative expense increased 106% for the first half, reflecting investment in development and a larger organization, including public-company and patent-related costs.
- Rani reported that the single-ascending-dose portion of its Phase 1 RT-102 study was completed, with generally favorable tolerability and reported oral bioavailability of PTH analog 300%–400% greater than the subcutaneous comparator. The company had begun a seven-day repeat-dosing portion. These are company-reported early-stage findings, not evidence of established efficacy or approval.
- In August 2022, after quarter-end, Rani entered a loan agreement for up to $45 million: $30 million was committed, including $15 million funded at closing and $15 million available to draw later in 2022; a further $15 million is uncommitted and subject to lender approval and conditions. The loan bears interest at the greater of prime plus 5.60% or 10.35%, matures August 2026, and has principal repayments scheduled to begin in September 2024, subject to possible extension.
Outlook, risks, and contingencies
- Management expects research and development and general and administrative expenses to increase as it advances the current RaniPill and preclinical RaniPill HC, expands clinical work, and develops manufacturing capacity. The company cannot estimate the timing or cost of completing development or obtaining regulatory approvals and expects to need additional capital.
- The August loan is secured by substantially all company assets and includes restrictive covenants. Beginning one year after closing, a covenant requires at least two drug products using the platform to be in clinical development, unless market capitalization exceeds $650 million. Warrants for 76,336 Class A shares were issued at an $11.79 exercise price.
- Four Rani European patents face opposition proceedings initiated by Novo Nordisk at the European Patent Office. Outcomes could affect patent protection and commercialization in Europe; the company said a loss was not probable or reasonably estimable.
- Under the tax receivable agreement, eligible continuing LLC owners are entitled to 85% of certain realized tax benefits. No liability was recorded at June 30 because realization was not considered probable; potential payments were estimated at zero to $20.4 million.
- Rani relies on third parties for some materials, active ingredients, and development and manufacturing services; some suppliers are single source. The company cited potential clinical, regulatory, manufacturing, financing, competition, intellectual-property, and COVID-19-related risks.
- Related-party arrangements include facility and personnel services with InCube Labs, an entity affiliated with the company’s founder and chairman. Net charges from InCube were $0.6 million for the first half of 2022. Management reported disclosure controls were effective at a reasonable assurance level and no material change in internal control over financial reporting during Q2.
Important facts for investors to verify
- Cash burn and runway assumptions, including the timing and availability of the undrawn loan tranches and any additional financing needs.
- RT-102 repeat-dose results, the basis and limitations of the reported bioavailability comparison, and subsequent clinical progress for the platform and RaniPill HC.
- Loan interest, collateral, covenants, repayment terms, and the conditions and lender discretion governing additional draws.
- Status and potential consequences of the Novo Nordisk patent oppositions, and any changes to the estimated exposure under the tax receivable agreement.
- Continued growth in operating expenses, equity-based compensation, and reliance on related-party facilities and third-party or single-source suppliers.