Rigel Pharmaceuticals, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unaudited results; amounts below are in millions of dollars unless noted.
Business context
Rigel is a biotechnology company focused on hematologic disorders, cancer and rare immune diseases. Its commercial product is TAVALISSE (fostamatinib) for chronic immune thrombocytopenia (ITP). The company is also developing fostamatinib for warm autoimmune hemolytic anemia (wAIHA) and hospitalized COVID-19, and has partnered and proprietary pipeline programs.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $16.7 | $81.0 |
| Product sales, net | $16.2 | $12.4 |
| Collaboration revenue | $0.5 | $65.6 |
| Government contract revenue | — | $3.0 |
| Research and development expense | $15.5 | $16.8 |
| Selling, general and administrative expense | $27.4 | $22.1 |
| Operating income (loss) | $(26.3) | $41.8 |
| Net income (loss) | $(27.4) | $39.5 |
| Net income (loss) per diluted share | $(0.16) | $0.22 |
| Cash used in operating activities | $(25.6) | $(20.0) |
- TAVALISSE net sales increased 31% year over year, driven by higher quantities sold and price per bottle, partly offset by increased rebates and other revenue reserves.
- The sharp revenue decline primarily reflects $60.6 million of Lilly license revenue recognized in Q1 2021, plus a $4.0 million third-party license fee and $3.0 million of government contract revenue that did not recur in Q1 2022.
- SG&A rose $5.3 million, mainly from commercial expansion, personnel and activity costs. R&D fell $1.4 million, reflecting lower personnel and trial costs, partly offset by increased spending on the IRAK program.
- Reported product cost of sales was $0.1 million. The filing cautions that manufacturing costs incurred before TAVALISSE approval were expensed as R&D rather than capitalized, so current product cost is not representative of expected future manufacturing costs.
At March 31, 2022, cash and cash equivalents were $24.7 million and short-term investments were $82.8 million, totaling $107.5 million, versus $125.0 million at December 31, 2021. Current assets were $138.9 million and current liabilities were $59.2 million. Stockholders’ equity declined to $6.8 million from $30.4 million, primarily reflecting the quarterly net loss.
Operating cash outflow was $25.6 million. Investing activities provided $22.6 million, primarily from net maturities of short-term investments; financing activities provided $8.8 million, including $10.0 million of term-loan proceeds, partly offset by a $2.1 million Lilly cost-share payment.
Outstanding MidCap loan principal was $30.0 million; the balance net of discount was $29.8 million. The loan bears interest at one-month LIBOR (or a replacement index) plus 5.65%, subject to a 1.50% floor. Up to $30.0 million of additional facilities remained available subject to conditions. Rigel reported that it was in compliance with loan covenants. The balance sheet also included lease liabilities of $8.3 million current and no long-term lease liability at quarter-end.
Changes, outlook and notable items
- Management said existing cash, cash equivalents and short-term investments were expected to fund expenses and capital requirements for at least 12 months from the filing’s issuance date, while cautioning that actual cash needs could be higher. It expects continued losses and significant R&D spending; no specific revenue or earnings guidance was provided.
- Management expected Q2 2022 top-line results from the completed wAIHA Phase 3 treatment period in mid-2022, with regulatory filings if results were positive. The filing describes a potential 2023 first-to-market opportunity if approved.
- As of May 2, 2022, Rigel had enrolled approximately 268 of 308 targeted patients in its COVID-19 Phase 3 trial. Due to fewer hospitalizations, it was evaluating completing enrollment with fewer patients, with topline results targeted before year-end 2022. The FDA had previously found the Phase 2 data insufficient to support an EUA.
- In April 2022, Imperial College London reported that its independent monitoring committee found the fostamatinib arm of the MATIS COVID-19 study did not meet prespecified criteria to continue; no safety concerns were identified. The study remained blinded.
- In April 2022, Kissei submitted a Japanese application for fostamatinib in chronic ITP. AstraZeneca’s termination of its JAK inhibitor agreement became effective April 19, 2022, returning rights to Rigel.
- A March 2022 stock-option modification for two directors generated approximately $0.8 million of incremental SG&A stock-based compensation. Short-term investments had $0.4 million of unrealized losses, which Rigel attributed to interest-rate increases and assessed as temporary.
- Key risks include reliance on TAVALISSE, commercialization and reimbursement uncertainty, clinical-trial and regulatory failure or delay, COVID-19 and geopolitical disruption, dependence on third-party manufacturing, and potential need for additional capital. The company noted that it may seek equity, debt or collaboration financing; additional equity could dilute shareholders. It reported no legal proceedings in this filing.
Important facts for investors to verify
- Whether TAVALISSE sales growth continues and how rebate, discount and reimbursement trends affect net sales.
- Results and timing of the wAIHA and COVID-19 programs, including enrollment and trial-completion plans.
- Cash burn, available liquidity and the conditions, covenants and repayment schedule governing remaining MidCap loan tranches.
- Whether collaboration milestones, royalties or the remaining $6.0 million government award are achieved and received.
- Potential dilution and financing needs, as well as future product manufacturing costs and commercial spending.