Rigel Pharmaceuticals, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016. Rigel is a clinical-stage biotechnology company developing targeted therapies in immunology, oncology and immuno-oncology. Amounts below are in U.S. dollars; financial statement figures are in thousands unless noted.
Financial performance and liquidity
| Metric | Q1 2016 | Q1 2015 / prior year-end |
|---|---|---|
| Collaboration revenue | $5.0 million | $2.2 million |
| Research and development expense | $18.2 million | $15.7 million |
| General and administrative expense | $4.4 million | $4.7 million |
| Operating loss | $17.6 million | $18.2 million |
| Net loss | $17.5 million; $0.19 per share | $18.2 million; $0.21 per share |
| Operating cash flow | $(22.4) million | $18.0 million provided |
| Cash, cash equivalents and short-term investments | $103.6 million | $126.3 million at Dec. 31, 2015 |
| Total assets / stockholders’ equity | $108.3 million / $75.5 million | $131.7 million / $91.4 million at Dec. 31, 2015 |
Revenue consisted of BMS collaboration revenue: $4.8 million of amortized upfront payment and $195,000 of research fees. The remaining deferred revenue from BMS’s $30 million upfront payment was $8.6 million at quarter-end and was expected to be recognized through Q3 2016. Rigel reported no product sales or operating profit. The filing does not provide a clear standalone margin measure.
Operating cash use reflected R&D program spending. Q1 2015 operating cash flow was positive principally because Rigel received BMS’s $30 million upfront payment in March 2015. Investing activities used $6.8 million in Q1 2016, mainly due to net purchases of short-term investments and capital expenditures; financing provided $4,000. Cash and equivalents alone were $14.3 million at quarter-end, alongside $89.4 million of short-term investments.
No borrowings or conventional funded debt are reported in the presented balance sheet. Rigel had $29.2 million of facilities lease obligations, and separately disclosed deferred sublease liabilities. Current liabilities were $27.7 million. Accumulated deficit was approximately $1.0 billion.
Changes versus the comparable period
- Collaboration revenue rose $2.9 million, primarily because more of the BMS upfront payment was recognized in Q1 2016.
- R&D expense increased $2.5 million, mainly due to fostamatinib ITP and AIHA program costs; management expected R&D expense to rise through 2016 as trials advanced.
- G&A expense fell $294,000, principally due to lower stock-based compensation and patent costs.
- Net loss narrowed by $729,000, while loss per share improved from $0.21 to $0.19.
- Operating cash flow shifted from $18.0 million provided to $22.4 million used, largely reflecting the prior-year BMS upfront cash receipt.
Outlook, management commentary and risks
- Management estimated existing capital resources would fund current and projected requirements into Q3 2017, while cautioning that assumptions could prove wrong. The company expects significant additional funding needs and has no committed future funding beyond potential contingent collaboration payments.
- Rigel may seek equity or debt financing, collaborations or licensing arrangements. Equity could dilute shareholders; debt may impose restrictive covenants; partnerships could require rights concessions. The Cantor equity sales agreement allowed up to $30 million in stock sales; approximately $24.3 million remained available, and no shares were sold under it during Q1.
- Fostamatinib’s two Phase 3 ITP trials completed enrollment by April 1, 2016. Results were expected around mid-2016 and shortly thereafter; an FDA application was planned for Q1 2017, subject to positive results. Fostamatinib also remained in Phase 2 studies for IgAN and AIHA; initial cohort or Stage 1 results were expected by year-end 2016.
- The Phase 2 R348 study in ocular graft-versus-host disease was ongoing, with results expected in 2016. Separately, the filing states that R348 failed to meet primary or secondary endpoints in a prior Phase 2 dry-eye disease trial.
- Partner programs may generate substantial contingent payments, but timing and achievement are controlled by partners and are uncertain. Potential payments are not assured and may never be received.
- Key risks include clinical-trial failure, enrollment or development delays, regulatory uncertainty, dependence on third-party manufacturers and collaborators, need for additional capital, competition, and lack of commercial products or royalty revenue. Rigel reported no legal proceedings and no off-balance-sheet arrangements. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Timing and results of the fostamatinib ITP Phase 3 trials, and whether results support the planned Q1 2017 FDA filing.
- Progress and reported results for the IgAN, AIHA and ocular GvHD studies, and implications of the prior R348 dry-eye trial failure.
- Cash burn, investment liquidity and whether the stated runway into Q3 2017 remains achievable as R&D spending increases.
- Availability, terms and dilution impact of future financing, including any use of the remaining Cantor sales capacity.
- Recognition of remaining BMS deferred revenue through Q3 2016 and whether partners achieve milestones that could generate additional payments.