Rigel Pharmaceuticals, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021; filed August 3, 2021. Amounts below are in U.S. dollars; financial statement amounts are in millions unless otherwise noted. Rigel is a biotechnology company whose marketed product is TAVALISSE (fostamatinib) for chronic immune thrombocytopenia (ITP), alongside partnered and internally funded clinical programs.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $26.3 | $16.0 | $107.3 | $71.8 |
| Net product sales | $17.1 | $15.0 | $29.4 | $27.7 |
| Operating income (loss) | ($13.0) | ($17.4) | $28.7 | $3.6 |
| Net income (loss) | ($13.8) | ($17.6) | $25.7 | $3.7 |
| Diluted EPS | ($0.08) | ($0.10) | $0.15 | $0.02 |
- Q2 revenue rose about 64% year over year; net product sales increased 14%. First-half revenue rose about 49%, and product sales increased 6%.
- First-half collaboration revenue was $69.4 million, including $63.9 million related to Lilly, versus $44.1 million in the prior-year period, which included $39.9 million of Grifols license revenue. The first-half 2021 profit therefore reflects significant collaboration/license revenue and should not be read as recurring product profitability.
- Q2 research and development expense was $16.8 million and selling, general and administrative expense was $22.4 million; both increased year over year. First-half totals were $33.6 million and $44.5 million, respectively. Management expected both categories to increase during the remainder of 2021.
- Reported Q2 cost of product sales was $0.1 million against $17.1 million of net product sales. This is not a normalized product margin: some manufacturing costs, including costs for active pharmaceutical ingredient made before FDA approval, had previously been expensed as R&D. The filing says product costs are expected to rise as newly manufactured product is sold.
- Cash, cash equivalents and short-term investments totaled $153.4 million at June 30, versus $57.3 million at December 31, 2020. Current assets were $184.2 million and current liabilities $59.5 million.
- For the first half, operating cash flow was positive $35.3 million, investing cash flow was negative $42.1 million and financing cash flow was positive $61.3 million; cash and cash equivalents increased $54.5 million. Financing included a $57.9 million Lilly cost-share advance, treated as financing because of the related development-cost commitment.
- Term-loan balance, net of discount, was $19.9 million; principal outstanding was $20.0 million. The interest-only period was extended through October 1, 2022, with final payment due no later than September 1, 2024. The balance sheet also includes collaboration-related financing liabilities, including $59.0 million associated with Lilly and $5.5 million associated with Medison. Rigel was in compliance with debt covenants at quarter-end.
Material developments and outlook
- In March 2021, Rigel’s Lilly RIP1-inhibitor license became effective; the company received a $125 million upfront payment in April. Rigel recognized $60.4 million for delivered non-CNS license rights and is recognizing the allocated $6.7 million for CNS-related work over time. The agreement includes potential development, regulatory and sales milestones and royalties, subject to achievement and other terms. Rigel is responsible for a share of R552 development costs, with a stated minimum commitment of up to $65 million through April 2024 if it exercises its first opt-out right.
- Rigel received a U.S. Department of Defense award of up to $16.5 million to support its Phase 3 hospitalized-COVID-19 trial. It recognized $8.5 million through June 30 and reported $8.0 million remaining, conditional on milestone completion and approval.
- Management stated that existing capital resources were expected to fund current and projected requirements, including TAVALISSE commercialization, for at least 12 months from the filing date. This estimate depends on assumptions and management cautioned that capital could be used sooner than expected. The company also said it may seek additional equity, debt or collaboration financing; a new shelf registration was to be filed with the 10-Q, including registration of up to $100 million under its Jefferies at-the-market agreement. No shares had been sold under the prior agreement.
- Management reported positive topline results from a Phase 2 COVID-19 study, including its safety primary endpoint and favorable observations on some efficacy measures. An EUA request was submitted; approval was uncertain, and the filing notes the FDA may require Phase 3 or additional evidence. A separate Phase 3 COVID-19 study and an NIH ACTIV-4 study were ongoing. As of August 2, 2021, approximately 150 of 308 targeted ACTIV-4 patients had enrolled, with completion expected by year-end.
- The Phase 3 warm autoimmune hemolytic anemia (wAIHA) study had enrolled 80 of 90 targeted patients as of August 2, 2021. Enrollment was slower than expected amid COVID-19 effects, and management could not provide an expected completion date.
- COVID-19-related reduced patient-provider interactions and clinical-site disruptions affected sales and trial enrollment. Rigel reported some recovery in in-person provider engagement in Q2, planned to expand U.S. sales territories in the second half of 2021, and did not anticipate significant commercial-supply disruption at that time; prolonged pandemic effects remained uncertain.
- Risk factors include dependence on TAVALISSE as the only U.S.-approved product, uncertain commercialization and reimbursement, clinical and regulatory failure or delay, reliance on third-party manufacturing and distribution, partner execution, intellectual-property risks, and potential future financing needs and dilution. The filing reports no legal proceedings in Part II, Item 1.
Key facts investors should verify
- How much of reported revenue and earnings is recurring TAVALISSE sales versus license, milestone, grant and other collaboration income.
- Whether TAVALISSE sales growth persists, considering COVID-19 disruption, reimbursement effects, inventory changes and reliance on a small number of distributors.
- Progress, enrollment, results and regulatory decisions for the wAIHA and COVID-19 trials, including the status of the EUA request and conditional DoD funding.
- Cash use, the timing and amount of Lilly development-cost obligations, collaboration financing liabilities, debt covenants and any future equity issuance.
- Whether manufacturing costs increase as previously expensed inventory is replaced, and the resulting effect on product margins.