Rigel Pharmaceuticals, Inc. — FY2014 Form 10-K
Reporting period: Fiscal year ended December 31, 2014; filed March 3, 2015. The filing also reports fourth-quarter results. Rigel is a clinical-stage drug developer with no commercialized products; revenue is primarily collaboration-based.
Financial performance and position
| Metric | FY2014 | FY2013 |
|---|---|---|
| Collaboration revenue | $8.25 million | $7.15 million |
| Research and development expense | $67.70 million | $75.33 million |
| General and administrative expense | $22.50 million | $19.61 million |
| Operating loss | $91.25 million | $89.47 million |
| Net loss | $90.91 million | $89.03 million |
| Basic and diluted loss per share | $1.04 | $1.02 |
| Cash, cash equivalents and short-term investments, year-end | $143.16 million | $211.98 million |
| Working capital, year-end | $136.51 million | $209.78 million |
| Total assets / stockholders’ equity, year-end | $154.14 million / $128.25 million | $226.06 million / $208.25 million |
FY2014 operating cash use was $69.75 million, versus $86.08 million in FY2013. Investing activities provided $62.93 million, largely from maturities of short-term investments; financing activities provided $1.17 million. Cash and cash equivalents alone were $15.20 million at year-end. The filing reports no material off-balance-sheet arrangements and no conventional borrowings; it does disclose substantial operating-lease commitments.
FY2014 revenue was entirely from AstraZeneca (AZ). Gross margin is not meaningful for this development-stage company, which reported no product sales. Q4 2014 revenue was $8.25 million, net loss was $22.27 million, and loss per share was $0.25.
Material changes versus FY2013
- Collaboration revenue rose $1.10 million, reflecting an AZ $2.5 million milestone for R256 and partly offset by no Daiichi revenue in 2014.
- R&D expense fell $7.63 million, mainly following completed studies and discontinuation of R118, partly offset by increased spending on fostamatinib for ITP and IgAN.
- Net loss increased $1.88 million. A $9.30 million noncash loss recognized on the December 2014 sublease and higher G&A, including CEO-related costs, contributed to the increase.
- Liquid resources fell $68.82 million to $143.16 million; working capital declined $73.27 million. The accumulated deficit reached $940.18 million.
Outlook, commentary and key risks
- Management estimated existing capital would fund projected requirements into the first quarter of 2017, based on assumptions that may prove wrong. It expects R&D expense to increase through 2016 as clinical programs advance; additional funding may be needed, with potential dilution or unfavorable financing terms.
- Fostamatinib’s Phase 3 ITP studies were enrolling, with first and second study results expected in Q1 and Q2 2016, respectively. A Phase 2 IgAN study and Phase 2 R348 study in dry eye associated with ocular GvHD were also underway; results were expected in the first half of 2016 and Q1 2016, respectively.
- R348 failed primary and secondary endpoints in a separate Phase 2 dry-eye disease study; Rigel discontinued development for that indication. R118 was discontinued due to its Phase 1 side-effect profile. AZ had returned fostamatinib rights after disappointing rheumatoid arthritis trial results; Rigel chose not to pursue RA or lymphoma.
- In February 2015, after year-end, Rigel signed a BMS immuno-oncology collaboration providing a $30 million upfront payment and potential development and regulatory milestones exceeding $309 million, plus royalties. These amounts were not FY2014 revenue or year-end cash.
- AZ accounted for all FY2014 revenue, creating partner concentration. Potential collaboration milestones exceeding $144 million are contingent on partners’ future achievements and may never be received.
- Rigel subleased about 39% of its premises through January 2018. It expects more than $14 million in sublease income and operating-cost reimbursements over the term, but recognized a $9.3 million loss at inception. Remaining gross lease payments were $47.96 million, partly offset by $8.00 million of disclosed sublease receipts.
- Other principal risks include clinical-trial failure or delay, dependence on external manufacturers and collaborators, competition, intellectual-property uncertainty, and future capital needs. Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting.
Investor facts to verify
- Whether the stated cash runway through Q1 2017 remains reasonable given planned trial costs and the timing and use of the BMS upfront payment.
- Enrollment, trial execution, safety and results for fostamatinib ITP and IgAN and R348 in ocular GvHD, including whether reported timelines were achieved.
- AZ’s R256 development progress, the collection and timing of the $5.8 million receivable, and the likelihood of further collaboration revenue.
- The sublease’s realized cash receipts and expenses, and the relationship between the $9.3 million accounting loss and future net lease costs.
- Potential dilution from equity financing and outstanding options; the filing reported 16.97 million options outstanding at a weighted-average exercise price of $9.07.