Rigel Pharmaceuticals, Inc. — Q2 2017 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2017. Rigel is a clinical-stage biotechnology company developing small-molecule therapies; it had no approved commercial product revenue in the period. Financial amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Collaboration revenue | $0 | $8.6 million | $3.6 million | $13.6 million |
| Research and development | $11.5 million | $17.5 million | $23.9 million | $35.6 million |
| General and administrative | $7.8 million | $4.8 million | $15.2 million | $9.2 million |
| Net loss | $19.1 million | $13.5 million | $34.5 million | $31.0 million |
| Net loss per share | $0.16 | $0.15 | $0.29 | $0.34 |
- Q2 had no collaboration revenue. First-half 2017 revenue was primarily the $3.3 million BerGenBio milestone payment after its AXL inhibitor entered Phase 2.
- Operating loss was $19.3 million in Q2 and $35.5 million for the first half. Profit margins are not meaningful given the absence of product sales and continuing operating losses.
- Cash, cash equivalents and short-term investments totaled $82.3 million at June 30, 2017, versus $74.8 million at December 31, 2016. Current assets were $83.8 million and current liabilities $15.9 million. The filing reports no debt.
- First-half operating cash use was $40.2 million, investing activities provided $8.2 million (primarily net investment maturities), and financing provided $47.0 million. Financing included approximately $43.0 million net from a February public offering and $3.1 million net from Cantor at-the-market sales.
Material changes and business developments
- R&D expense declined 34% in Q2 and 33% in the first half year over year, mainly due to the 2016 workforce reduction, lower facility and stock-compensation costs, and completion of pivotal ITP trials; NDA submission costs partly offset the reductions.
- G&A increased 64% in Q2 and 66% in the first half, primarily from staffing and other preparation for a potential U.S. fostamatinib launch.
- Weighted-average shares rose to 122.5 million in Q2 from 92.5 million, reflecting equity issuance. The February offering sold 23 million shares at $2.00 each.
- Rigel exercised a five-year extension of its facility lease through 2023. Its subtenant also exercised a five-year extension through 2023; the company recorded a $495,000 sublease loss in Q1 2017. Remaining facility lease commitments were $9.5 million, before expected sublease income.
Outlook, commentary and key risks
- The FDA accepted Rigel’s fostamatinib (TAVALISSE) NDA for chronic or persistent immune thrombocytopenia (ITP) in June 2017. The PDUFA action date is April 17, 2018. Rigel said it intends to commercialize in the U.S. in 2018 if approved, while seeking ex-U.S. partners; launch preparation is expected to increase G&A during the rest of 2017, while R&D was expected to remain relatively consistent quarter to quarter.
- Management believed existing capital would fund current plans, including U.S. launch preparation, for at least 12 months from the filing. It cautioned that estimates rely on assumptions and that additional capital will be needed for the foreseeable future; further equity financing could dilute shareholders.
- ITP efficacy evidence was mixed: one pivotal Phase 3 trial met its primary endpoint, while the second did not achieve statistical significance. The combined trial results were statistically significant, but FDA approval is uncertain and additional analyses or trials could be required. The filing cited gastrointestinal adverse events and no new or unusual safety issues in the trials.
- Other pipeline updates: the second cohort of the Phase 2 IgAN study was enrolling, with results expected in 2018; Stage 1 AIHA results were expected by year-end 2017; Rigel expected to begin IRAK inhibitor clinical trials in the first half of 2018.
- Potential partner milestone payments exceed $533.3 million in aggregate if specified events occur, but depend on partners’ future achievements and may never be received. A separate consulting agreement could require $1.5–$4.0 million upon regulatory milestones; none was considered probable and no expense was recorded.
- Additional risks include clinical and regulatory failure, commercialization and reimbursement challenges, competition, reliance on third-party manufacturers and collaborators, and future financing needs. The company reported no legal proceedings in the filing’s Legal Proceedings item and no off-balance-sheet arrangements.
Important facts for investors to verify
- FDA review status and outcome for the fostamatinib NDA, including any requests for additional evidence and the April 17, 2018 action date.
- Cash burn, launch-related spending, and whether the stated minimum 12-month funding runway remains adequate.
- Further equity issuance under the remaining Cantor sales authorization and its potential dilution.
- Progress, results and timelines for the IgAN, AIHA and IRAK programs, and whether partner milestones or royalties become payable.
- Lease and sublease economics through 2023, including the terms still being negotiated with the landlord.