Rigel Pharmaceuticals, Inc. — Q2 2013 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2013. Rigel is a clinical-stage drug developer with no marketed products; it reported collaboration revenue and continued operating losses.
Financial performance and position
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Collaboration revenue | $1.4 million | $1.5 million | $1.4 million | $2.25 million |
| Research and development | $19.4 million | $20.9 million | $39.7 million | $38.8 million |
| General and administrative | $4.9 million | $5.5 million | $10.3 million | $11.6 million |
| Net loss | $22.8 million | $24.7 million | $48.3 million | $47.9 million |
| Net loss per share | $0.26 | $0.35 | $0.55 | $0.67 |
| Operating cash used | — | — | $46.4 million | $44.0 million |
- At June 30, cash, cash equivalents and available-for-sale securities totaled $251.6 million, down from $298.2 million at year-end 2012. Cash and cash equivalents alone were $21.9 million.
- Total assets were $261.7 million and stockholders’ equity was $245.1 million. No borrowings are listed on the balance sheet; lease commitments totaled $69.2 million.
- Current liabilities were $8.5 million against current assets of $254.6 million. Rigel reported no off-balance-sheet arrangements creating potential material risk.
- Q2 operating loss was $22.9 million; six-month operating loss was $48.6 million. Profitability and meaningful operating margins were absent. Interest income was $0.1 million for Q2 and $0.3 million for the first half.
Changes and material developments
- Q2 net loss narrowed year over year, primarily alongside lower operating expenses; first-half net loss increased modestly despite lower G&A and higher R&D. The first-half revenue decline reflected fewer collaboration payments than in 2012.
- In June, AstraZeneca (AZ) decided not to file for regulatory approval of fostamatinib for rheumatoid arthritis and will return the rights to Rigel. AZ reported statistically significant ACR20 results in two of three Phase 3 studies, but fostamatinib missed the structural-damage endpoint in OSKIRA-1 and one dose failed the ACR20 endpoint in OSKIRA-3. AZ is responsible for transfer costs within the specified 180-day period.
- Q2 collaboration revenue was the $1.4 million Daiichi Sankyo payment for an oncology IND filing. No deferred revenue was reported at June 30.
- Cash used in operations rose to $46.4 million from $44.0 million in the first half of 2012. Cash and securities declined by $46.6 million from year-end, primarily due to operating expenses.
Outlook, risks and contingencies
- Management said existing resources were expected to fund current and projected requirements for at least 12 months, while cautioning that assumptions could prove wrong. The company expects to need significant additional funding and may pursue equity, debt, or collaboration/licensing arrangements.
- Rigel expected R&D expense to increase through the rest of 2013 as Phase 2 studies of R343, R333 and R348 progressed. At filing, results were expected in Q3 2013 for the R343 SITAR study and Q4 2013 for the R333 SKINDLE study. The R348 Phase 2 study began in July, with results expected in the first half of 2014.
- Management was reviewing fostamatinib data and had not determined the next development path. Further development could require Rigel to fund the program itself, secure another partner, or discontinue it.
- Potential future collaboration payments could exceed $160 million if all specified milestones were achieved, but are uncertain, partner-controlled and may never be received.
- Key risks include clinical failure or delay, regulatory uncertainty, dependence on third-party collaborators and manufacturers, and the need for additional capital. Financing may dilute shareholders or require restrictive debt terms or concessions on product rights. Rigel had an accumulated deficit of $808.6 million.
- Management reported effective disclosure controls. No legal proceedings were reported, and the filing states no material changes to market-risk disclosures.
Important facts for investors to verify
- Subsequent clinical results and management’s development decision for fostamatinib following AZ’s return of rights.
- Whether Rigel’s cash runway remains consistent with management’s at-least-12-month estimate, particularly as R&D spending rises and partnership funding changes.
- Actual outcomes and timing for R343 and R333 Phase 2 trials, and progress of R348.
- Availability and terms of future financing or collaboration agreements, and any resulting dilution or loss of product rights.
- Realization of contingent collaboration milestones; the stated potential payments are not guaranteed.