Rigel Pharmaceuticals, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed March 1, 2022. This is an annual report, not a standalone fourth-quarter report. Amounts are in U.S. dollars.
Business context
Rigel is a commercial-stage biotechnology company. Its principal marketed product is TAVALISSE (fostamatinib) for adults with chronic immune thrombocytopenia (ITP). Fostamatinib is also in Phase 3 development for warm autoimmune hemolytic anemia (wAIHA) and hospitalized COVID-19 patients. Other programs include an IRAK inhibitor and partnered RIPK1, AXL and MDM2 programs.
Financial performance and liquidity
| Metric | 2021 | 2020 | Change / context |
|---|---|---|---|
| Total revenue | $149.2 million | $108.6 million | Up $40.6 million (37%) |
| TAVALISSE net product sales | $63.0 million | $61.7 million | Up 2%; higher volume and price partly offset by increased rebates |
| Collaboration revenue | $75.7 million | $46.9 million | Includes $66.6 million recognized under the Lilly agreement |
| Government contract revenue | $10.5 million | — | Recognized under the $16.5 million U.S. Department of Defense award |
| Operating loss | $12.5 million | $29.0 million | Improved by $16.5 million |
| Net loss | $17.9 million | $29.7 million | Loss per share was $0.11, versus $0.18 |
| Operating and net margins | (8.4%) and (12.0%) | (26.7%) and (27.4%) | Calculated from reported revenue and losses |
| Operating cash flow | $5.9 million provided | $52.2 million used | 2021 benefited substantially from collaboration and government receipts |
| Cash, cash equivalents and short-term investments | $125.0 million | $57.3 million | Current assets $154.5 million; current liabilities $63.6 million |
| MidCap term-loan principal | $20.0 million | $20.0 million | Separate from collaboration-related financing liabilities |
Reported product cost of sales was $1.1 million, but Rigel notes that some manufacturing costs for TAVALISSE were expensed as research and development before approval. Accordingly, the resulting product gross margin is not representative of the full ongoing manufacturing cost. Lilly’s $125.0 million upfront payment included a $57.9 million financing component associated with Rigel’s development-cost commitment; the net transaction price was $67.1 million.
Material changes versus 2020
- Revenue growth was driven mainly by the Lilly collaboration and the new DoD award, rather than a comparable increase in product sales.
- Research and development expense rose to $65.2 million from $60.1 million, primarily due to the Phase 3 COVID-19 trial; SG&A rose to $91.9 million from $76.6 million, reflecting expanded commercial operations.
- Rigel recorded $3.5 million of restructuring charges after announcing a workforce reduction focused mainly on early-stage research. It said it would exit early-stage research and prioritize mid-to-late-stage development and commercialization.
- Cash from operations moved to positive, while net loss narrowed. Cash and investments increased primarily because of the Lilly payment; the company also made substantial purchases of short-term investments.
Outlook, commentary and risks
- Management stated that existing capital resources were expected to fund current and projected requirements for at least 12 months from the filing date, while cautioning that estimates rely on assumptions and additional funding may be needed.
- Management expected 2022 SG&A to increase as commercial activities continued to expand, and anticipated research-cost savings from the workforce reduction while continuing significant clinical-development spending.
- Rigel completed enrollment in the wAIHA Phase 3 FORWARD study in November 2021 and expected topline results in mid-2022, with regulatory filings contemplated if results were positive.
- The FDA determined in August 2021 that the Phase 2 COVID-19 data were insufficient to support an Emergency Use Authorization. Rigel continued its Phase 3 trial; as of February 28, 2022, approximately 265 of 308 targeted evaluable patients had been enrolled. The filing describes any future EUA as conditional on additional evidence and FDA action.
- The Lilly agreement provides potential development, regulatory and sales milestones and royalties, but these are contingent and not assured. Rigel is responsible for a share of R552 development costs, subject to contractual limits and opt-out rights.
- Key risks include dependence on TAVALISSE and uncertain adoption, COVID-related effects on sales and trials, clinical and regulatory failure, pricing and reimbursement pressure, generic competition, reliance on third-party manufacturing and distribution, and the need for future capital. The company cited potential generic ANDA filings for TAVALISSE beginning April 2022.
- On February 11, 2022, after year-end, Rigel amended its MidCap facility and drew a further $10.0 million tranche. Additional borrowing remains subject to timing, revenue and covenant conditions.
Most important facts for investors to verify
- Whether TAVALISSE sales growth can improve beyond 2% and how higher rebates affect net revenue; year-end product-sales allowance and discount liabilities were $7.9 million.
- How much reported revenue and cash generation depend on non-recurring collaboration, milestone and government receipts; Lilly represented 48% of 2021 gross revenues.
- Results and timing of the wAIHA and COVID-19 Phase 3 trials, including regulatory implications and any subsequent updates.
- Liquidity, operating cash use, debt and the terms and conditions for drawing remaining MidCap tranches; also monitor collaboration-related financing liabilities.
- Potential dilution: 30.0 million stock options were outstanding at year-end, and Rigel had registered up to $100.0 million of common stock for possible at-the-market sales.