Rigel Pharmaceuticals, Inc. — Q2 2022 Form 10-Q
Business context and reporting period
Quarter ended June 30, 2022; filed August 2, 2022. Rigel is a biotechnology company commercializing TAVALISSE for chronic immune thrombocytopenia (ITP) and developing candidates for hematologic, cancer and immune diseases. Financial amounts below are in millions of dollars unless noted.
Financial results and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $29.8 | $26.3 | $46.6 | $107.3 |
| Net product sales | $18.6 | $17.1 | $34.7 | $29.4 |
| Collaboration revenue | $11.3 | $3.7 | $11.8 | $69.4 |
| Operating income (loss) | $(13.0) | $(13.0) | $(39.2) | $28.7 |
| Net income (loss) | $(13.5) | $(13.8) | $(40.9) | $25.7 |
| Net loss per share | $(0.08) | $(0.08) | $(0.24) | $0.15 |
| Operating cash flow | Not separately presented | Not separately presented | $(38.5) | $35.3 |
- At June 30, cash, cash equivalents and short-term investments totaled $89.2 million, down from $125.0 million at December 31, 2021. Current assets were $120.5 million and current liabilities $55.0 million.
- Cash and cash equivalents increased by $8.3 million in the first half, reflecting $43.7 million of net investing cash inflow, principally investment maturities, and $3.1 million of financing cash inflow, offset by operating cash use.
- Term-loan principal was $30.0 million at June 30; the balance-sheet carrying amount, net of discount, was $29.8 million. The loan bore interest at one-month LIBOR plus 5.65%, subject to a 1.50% floor. The company reported compliance with its covenants.
- The filing does not provide a comparable operating margin measure. Product-sales cost was $1.0 million in Q2 and $1.2 million for the first half; management cautioned that historical inventory costs were not fully reflected, so current product cost may understate future costs.
Material changes versus prior comparable periods
- Q2 revenue increased 14% year over year, with TAVALISSE sales up 9%. First-half TAVALISSE sales increased 18%, attributed mainly to higher volumes and price, partly offset by increased rebates and revenue reserves.
- First-half revenue fell 57% year over year. The comparison is heavily affected by $69.4 million of collaboration revenue in first-half 2021, including substantial Lilly license revenue, and $8.5 million of government-contract revenue; neither government-contract revenue nor comparable Lilly license revenue was recognized in first-half 2022.
- Q2 collaboration revenue rose to $11.3 million, primarily reflecting a $5.0 million Kissei milestone, Kissei supply revenue and the $2.0 million Knight license upfront payment. The first-half collaboration comparison also reflects these items and the prior-year Lilly-related revenue.
- First-half operating cash flow shifted from $35.3 million provided to $38.5 million used, primarily reflecting operating expenses and the absence of the prior-year Lilly cash receipt.
- For the first half, R&D expense declined 10% to $30.2 million, while selling, general and administrative expense rose 22% to $54.4 million, reflecting commercial activity, personnel and recruitment costs, among other items.
Outlook, management commentary and risks
- Management stated that available cash, cash equivalents and short-term investments were expected to fund expenses and capital requirements for at least 12 months from the filing date, while noting that estimates rely on assumptions and additional capital may be needed.
- The Phase 3 FORWARD trial of fostamatinib in warm autoimmune hemolytic anemia (wAIHA) did not meet statistical significance on its primary durable hemoglobin-response endpoint. Rigel was analyzing results and planned to discuss the path forward with the FDA; 71 of 90 trial participants entered an ongoing open-label extension.
- Rigel completed enrollment of 280 patients in its Phase 3 hospitalized COVID-19 trial in July 2022 and expected top-line results in Q4 2022; a positive result could support an FDA emergency-use authorization request. The FDA had previously found data from an earlier Phase 2 study insufficient to support an EUA. A separate Imperial College trial’s interim analysis did not meet continuation criteria for its fostamatinib arm.
- After quarter-end, Rigel licensed olutasidenib from Forma for $2.0 million upfront, with up to $67.5 million in development and regulatory milestones, up to $165.5 million in commercial milestones, tiered royalties and a share of certain sublicensing revenue. Forma’s NDA had an FDA action date of February 15, 2023.
- After quarter-end, Rigel amended its MidCap credit facility: maturity was extended to September 1, 2026, the interest-only period to October 1, 2024, the benchmark changed from LIBOR to SOFR, and MidCap received a lien on intellectual property. A further $10.0 million tranche was funded July 27, bringing principal to $40.0 million; up to $20.0 million more remained available subject to conditions.
- Rigel sued Annora and related entities on July 25, 2022, following an ANDA challenge to patents covering TAVALISSE. The outcome and timing of any generic competition are uncertain.
- Key risks include reliance on TAVALISSE, competitive and potential generic pressure, pricing and rebate changes, clinical and regulatory uncertainty, third-party manufacturing and distribution dependence, collaboration-partner execution, financing needs, and COVID-19-related business or trial disruption. Future collaboration milestones are contingent: the filing estimates more than $1.3 billion in potential payments across agreements if specified events occur, excluding royalties; these amounts are not assured.
Important facts for investors to verify
- Whether TAVALISSE sales growth persists and how rebates, payer contracts and price changes affect net sales.
- COVID-19 Phase 3 top-line results and any subsequent regulatory action; the filing’s Q4 2022 timing was management’s expectation, not a guarantee.
- Further analysis and FDA discussions regarding the failed primary endpoint in the wAIHA FORWARD trial.
- Olutasidenib’s FDA review outcome, milestone and royalty obligations, and the costs of integrating the product if approved.
- Terms, covenant compliance and collateral implications of the amended MidCap loan, including the IP lien and remaining conditional borrowing capacity.
- Progress and potential financial impact of the Annora patent litigation and any other generic challenges to TAVALISSE.
- Cash use, additional financing requirements and whether management’s stated 12-month liquidity expectation remains supportable.