Rigel Pharmaceuticals, Inc. — Q3 2015 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2015. Rigel is a clinical-stage biotechnology company developing small-molecule therapies for inflammatory, autoimmune and cancer indications. Amounts below are in U.S. dollars; financial statement figures are in millions unless stated otherwise.
Financial performance and position
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Collaboration revenue | $13.0 | $0 | $20.4 | $0 |
| Research and development expense | $15.5 | $16.2 | $46.3 | $53.1 |
| General and administrative expense | $4.3 | $4.9 | $13.1 | $15.8 |
| Operating loss | $(6.8) | $(21.0) | $(39.0) | $(68.9) |
| Net loss | $(6.7) | $(20.9) | $(38.8) | $(68.6) |
| Net loss per share | $(0.08) | $(0.24) | $(0.44) | $(0.78) |
| Operating cash flow | Not separately provided | Not separately provided | $(9.6) | $(54.7) |
- Collaboration revenue was driven by the $8.0 million Aclaris upfront license payment recognized in September and BMS revenue, including ratable recognition of its upfront payment and research-service fees. The filing reports no gross profit or gross margin measure.
- At September 30, cash and cash equivalents were $38.6 million and short-term investments were $95.8 million, totaling $134.4 million, down from $143.2 million at December 31, 2014. Current assets were $136.2 million and current liabilities $34.8 million. Stockholders’ equity was $96.4 million.
- The filing reports no debt balance. It lists $36.8 million of facilities lease commitments, including $15.4 million due within one year; the commitment figure excludes expected sublease income.
- Cash and cash equivalents increased $23.4 million during the first nine months, reflecting $31.9 million of investing cash inflow, $1.1 million of financing inflow and $9.6 million of operating cash use. Investing inflow primarily reflected net maturities of short-term investments.
Changes versus prior comparable periods
- Revenue rose from zero, reflecting the new BMS and Aclaris agreements. The $30.0 million BMS upfront payment is recognized over the estimated research term through September 2016; $18.3 million remained deferred at quarter-end. Aclaris’s $8.0 million upfront payment was recognized when its license was delivered.
- Q3 net loss narrowed to $6.7 million from $20.9 million; nine-month net loss narrowed to $38.8 million from $68.6 million. Lower operating expenses and collaboration revenue contributed to the improvement.
- Nine-month R&D expense decreased $6.8 million, primarily due to lower facilities costs following the sublease, completion of an R348 Phase 2 study in 2014, and discontinuation of the R118 program, partly offset by increased spending on fostamatinib Phase 3 trials. G&A declined $2.7 million, primarily due to lower facilities and personnel costs.
- Nine-month operating cash use fell to $9.6 million from $54.7 million, partly because of the BMS and Aclaris upfront cash receipts. Cash, cash equivalents and investments nevertheless declined $8.8 million from year-end.
Outlook, operations and risks
- Management believed existing capital resources would fund current and projected requirements into the second quarter of 2017, but cautioned that assumptions could prove wrong. Rigel expects to need significant additional funding; financing may require equity issuance and dilution, debt with restrictive covenants, or collaboration terms that surrender rights.
- Management expected R&D expense to increase through the remainder of 2015 as the fostamatinib ITP Phase 3 program and Phase 2 trials in IgA nephropathy and ocular GvHD progressed.
- Fostamatinib’s two ITP Phase 3 trials were enrolling; top-line results were expected separately, beginning in mid-2016. FDA orphan-drug designation for ITP was granted in August 2015. The company expected IgAN Phase 2 results by the end of 2016 and R348 ocular GvHD Phase 2 results in 2016.
- Rigel’s BMS collaboration covers TGF-beta receptor kinase inhibitors; BMS controls clinical development and commercialization. The agreement includes potential development and regulatory payments exceeding $309 million for a successful compound in certain indications, plus royalties. The Aclaris license includes potential development and regulatory payments exceeding $80 million, plus royalties. These contingent payments are uncertain and may never be received.
- Key risks include clinical failure, trial delays or enrollment challenges, regulatory uncertainty, dependence on collaborators and third-party manufacturers, future capital needs, intellectual-property disputes and competition. The filing notes that R348 did not meet primary or secondary endpoints in a completed Phase 2 dry-eye trial. Rigel has historically incurred losses and reported an accumulated deficit of $979.0 million.
- No legal proceedings were reported. Management stated disclosure controls were effective and there were no material changes in internal control over financial reporting during the quarter. The filing reports no off-balance-sheet arrangements.
Important facts for investors to verify
- Progress, enrollment and results of the two fostamatinib ITP Phase 3 trials, and the timing and outcomes of the IgAN and ocular GvHD studies.
- Whether cash use, trial spending and collaboration receipts remain consistent with management’s stated runway into Q2 2017, and what additional financing may be required.
- Revenue recognition and remaining deferred revenue under the BMS agreement, as well as the terms and future performance obligations of collaboration and license agreements.
- Actual achievement of contingent milestones and royalties; the filing’s potential payment totals are not committed or assured funding.
- Potential dilution from the $30.0 million controlled equity offering facility with Cantor; no shares had been sold under it as of September 30, 2015.