Rigel Pharmaceuticals, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Financial statement amounts below are in millions of dollars unless noted. Rigel is a commercial-stage biotechnology company selling TAVALISSE for chronic ITP and REZLIDHIA for IDH1-mutated relapsed or refractory AML.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $26.9 | $29.8 | $53.0 | $46.6 |
| Net product sales | $23.9 | $18.6 | $47.6 | $34.7 |
| Operating loss | $(5.3) | $(13.0) | $(18.0) | $(39.2) |
| Net loss | $(6.6) | $(13.5) | $(20.1) | $(40.9) |
| Net loss per share | $(0.04) | $(0.08) | $(0.12) | $(0.24) |
- Q2 total revenue declined 10% year over year as collaboration revenue fell to $2.0 million from $11.3 million, largely reflecting prior-year license and milestone revenue. For the first half, revenue rose 14% as product sales growth more than offset lower collaboration revenue.
- Net product sales increased 29% in Q2 and 37% in the first half. TAVALISSE sales were $43.6 million for the first half, up 26%; REZLIDHIA contributed $4.0 million for the first half.
- Q2 research and development expense was $4.8 million versus $14.8 million; first-half expense was $14.9 million versus $30.2 million. Management attributed the decreases mainly to timing and completion of clinical-trial activities. SG&A was comparatively stable at $26.3 million in Q2 and $54.0 million for the first half.
- Reported product gross margin is not a clean measure of ongoing economics: cost of product sales includes low-cost inventory produced or acquired before approval, and REZLIDHIA costs include amortization and royalties.
- First-half operating cash flow was positive $1.9 million, versus use of $38.5 million in 2022, helped by collections of receivables and collaboration/government receipts. Investing cash flow was positive $3.7 million, including investment maturities partly offset by a $15.0 million intangible-asset milestone payment. Financing cash flow was positive $18.8 million, primarily from $20.0 million of term-loan proceeds.
- At June 30, cash, cash equivalents and short-term investments totaled $64.4 million, compared with $58.2 million at year-end. Current assets were $100.9 million and current liabilities $44.0 million. Total liabilities were $145.2 million; stockholders’ deficit was $28.1 million.
- MidCap loan principal was $60.0 million, with $59.6 million recorded net of discount. The loan matures September 2026, with interest-only payments through October 2024; no principal payments are due within 12 months. The facility is fully drawn and secured by company assets, including intellectual property. Rigel reported no covenant violation.
Material changes, outlook and risks
- Management believes existing cash and investments will fund operating expenses and capital requirements for at least 12 months from filing, while cautioning that estimates depend on assumptions and funding needs could arise sooner. Rigel expects continued significant R&D and commercial spending; it gave no specific revenue or earnings guidance.
- Rigel’s Phase 3 FOCUS COVID-19 trial initially appeared not to meet its primary endpoint. After identifying and correcting a contract research organization’s statistical-stratification error, Rigel reported fewer mean days on oxygen with fostamatinib than placebo (4.8 versus 7.6; p=0.0136). Despite the revised analysis, the company decided not to seek EUA or supplemental approval, citing the end of the federal public health emergency and regulatory, cost, timing and success considerations. An NIH/NHLBI-sponsored trial continued after an interim review.
- The Phase 3 fostamatinib trial in warm autoimmune hemolytic anemia did not meet its primary endpoint; Rigel did not file for supplemental approval. R289’s Phase 1b lower-risk MDS trial continued, with enrollment in its second cohort complete and a third cohort expected to begin.
- Rigel had a first opt-out deadline of September 30, 2023 for co-funding R552 development with Lilly. Its minimum stated funding commitment was up to $65 million through April 2024; $16.9 million had been billed and paid by June 30. The company also reported more than $1.3 billion of possible future contingent partner payments, dependent on partners achieving specified milestones and not assured.
- Key risks include the uncertain uptake and reimbursement of both marketed products, competition and pricing pressure, reliance on third-party manufacturing and distribution, clinical and regulatory uncertainty, and the need for additional capital beyond the stated 12-month runway. Three wholesale distributors accounted for substantial portions of first-half revenue. A generic TAVALISSE applicant, Annora, is litigating patent validity and infringement; a Markman hearing was expected later in 2023.
- Controls and procedures were reported effective, with no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether TAVALISSE and REZLIDHIA sales growth continues after discounts, rebates, returns and distributor inventory effects; revenue reserves and refund liability were $13.7 million at June 30.
- Whether operating cash generation is sustainable after the one-time receivable collections and milestone receipts, and whether the stated cash runway remains adequate given commercial, R&D and debt-service needs.
- The status and potential impact of Annora’s generic TAVALISSE patent litigation, including any developments affecting market entry.
- Further clinical and regulatory developments for R289, the NIH-sponsored COVID-19 study and Lilly’s R552 program, including Rigel’s co-funding decision and obligations.
- The terms and potential dilution associated with financing needs: 35.2 million stock options and 2.0 million RSUs were outstanding at June 30, 2023.