Rigel Pharmaceuticals, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Financial statement amounts below are in millions of dollars unless otherwise noted. Rigel is a biotechnology company commercializing TAVALISSE for chronic ITP and REZLIDHIA for relapsed or refractory IDH1-mutated AML, while advancing clinical programs and partnered drug candidates.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $28.1 | $22.4 | $81.1 | $69.0 |
| Net product sales | $27.1 | $19.2 | $74.8 | $53.9 |
| Research and development | $6.5 | $14.7 | $21.3 | $44.9 |
| Selling, general and administrative | $24.9 | $25.9 | $78.9 | $80.3 |
| Operating loss | $(4.5) | $(18.4) | $(22.5) | $(57.6) |
| Net loss | $(5.7) | $(19.0) | $(25.8) | $(60.0) |
| Net loss per share | $(0.03) | $(0.11) | $(0.15) | $(0.35) |
- Product sales increased 41% in Q3 and 39% for the first nine months year over year. Nine-month TAVALISSE sales were $68.1 million, up 26%; REZLIDHIA contributed $6.7 million since its December 2022 launch.
- Nine-month collaboration revenue declined to $5.3 million from $12.5 million, while government contract revenue declined to $1.0 million from $2.5 million. Prior-year collaboration revenue included Kissei milestone and supply revenue, Knight revenue, and Lilly revenue.
- Cost of product sales was $3.3 million for nine months, including REZLIDHIA amortization, royalties and inventory reserves. Management cautions that costs include inventory produced or acquired before approval whose costs were previously expensed as R&D; reported product margins therefore may not reflect ongoing full inventory costs.
- Cash and cash equivalents were $45.4 million and short-term investments $16.9 million at September 30, totaling $62.4 million, versus $58.2 million at year-end 2022. Current assets were $95.0 million and current liabilities $48.3 million; the calculated current ratio was approximately 2.0.
- Nine-month operating cash flow was positive $0.5 million, compared with negative $51.8 million in 2022. The 2023 result included a $16.8 million reduction in accounts receivable and cash receipts including a $20.0 million Kissei milestone. Investing cash flow was positive $2.6 million, including a $15.0 million intangible-asset payment offset by net investment maturities. Financing cash flow was positive $17.9 million, primarily from new borrowing.
- Outstanding term-loan principal was $60.0 million, net book value $59.7 million, with no further borrowing capacity. The loan matures September 1, 2026; interest-only payments run through October 1, 2024. The rate is one-month SOFR plus 0.11448%, subject to a 1.50% floor, plus a 5.65% margin. No covenant violation was reported. Total liabilities were $147.2 million and stockholders’ deficit was $31.8 million.
Material changes, outlook and commentary
- Improved revenue and lower operating losses reflected higher product sales and substantially lower R&D spending, partly due to completion or reduced activity in COVID-19 and wAIHA trials and the absence of the prior-year $2.0 million olutasidenib upfront R&D charge. Interest expense increased to $5.0 million for nine months from $2.6 million, driven by higher debt and interest rates.
- Management believes current cash, cash equivalents and short-term investments will fund expenses and capital requirements for at least 12 months from the filing date. It also says operations will require significant additional funding in the foreseeable future; actual cash needs may exceed estimates. Potential financing includes equity, debt or collaborations, with possible dilution, restrictive covenants or less favorable licensing terms.
- Rigel amended its Lilly agreement and gave notice on September 29, 2023 to opt out of its first R552 cost-sharing commitment. Its remaining share is capped at $22.6 million through April 1, 2024; $17.7 million had been billed and paid by quarter-end. The amendment permits a limited opt-in under specified conditions, which could reinstate cost-sharing and increase royalties.
- R289 Phase 1b enrollment was underway in the third cohort; preliminary results are expected by mid-2024. Lilly has initiated a Phase 2a R552 rheumatoid arthritis trial.
- COVID-19 program developments are mixed. After correcting a CRO statistical-stratification error, Rigel reported that its completed FOCUS Phase 3 trial met its primary endpoint (mean days on oxygen 4.8 versus 7.6; p=0.0136). Nevertheless, the company decided not to seek EUA or sNDA based on the end of the federal emergency and feedback about regulatory requirements, cost, timing and prospects. Separately, the NIH/NHLBI DSMB recommended stopping enrollment in its ACTIV-4 fostamatinib arm, citing an extremely low likelihood of benefit; no safety concern was identified.
- Material risks include commercialization, reimbursement and customer concentration: McKesson represented 49% of Q3 revenue, Cardinal 28%, and ASD Healthcare/Oncology Supply 18%. Revenue reserves and refund liability rose to $14.5 million from $12.1 million at year-end.
- Annora has challenged patents covering TAVALISSE in an ANDA-related lawsuit; litigation continued, with a Markman hearing expected early the following year. A generic launch, if permitted, could materially reduce TAVALISSE sales. The filing does not provide a clear estimate of potential loss or a resolution timeline.
- The filing identifies clinical, regulatory, pricing, manufacturing and supply, intellectual-property, financing, cybersecurity/privacy, and partner-execution risks. TAVALISSE faces existing therapies and generic risk; REZLIDHIA competes with another approved IDH1 inhibitor. REZLIDHIA’s label includes a boxed warning for potentially fatal differentiation syndrome.
Important facts for investors to verify
- Whether TAVALISSE and REZLIDHIA sales growth continues after accounting for rebates, discounts, returns and full ongoing product costs.
- Cash use, financing needs and compliance with MidCap minimum-cash and trailing-net-revenue covenants as the $60.0 million loan approaches amortization after October 2024.
- Progress and results of the R289 trial and Lilly’s R552 program, including any exercise of Rigel’s amended opt-in right and resulting cost exposure.
- The outcome and timing of the Annora patent litigation and the potential effect of generic competition on TAVALISSE.
- Whether collaboration milestones or royalties materialize: the filing cites more than $1.3 billion of possible contingent future payments, dependent on partners achieving specified events and not assured.
- How commercial uptake, customer concentration and government rebate estimates affect revenue quality and liquidity.