Rigel Pharmaceuticals, Inc. — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013; financial statements are unaudited. Rigel is a clinical-stage drug developer focused on inflammatory and autoimmune diseases and muscle disorders. It had no marketed products and relied on collaborations and investment income for potential revenue.
Financial results and liquidity
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Collaboration revenue | $0 | $0.75 million |
| Research and development expense | $20.315 million | $17.904 million |
| General and administrative expense | $5.395 million | $6.156 million |
| Operating loss | $25.710 million | $23.310 million |
| Net loss | $25.574 million | $23.174 million |
| Net loss per share | $0.29 | $0.32 |
| Net cash used in operating activities | $25.111 million | $23.273 million |
- At March 31, cash, cash equivalents and available-for-sale securities totaled $272.450 million, down from $298.241 million at December 31, 2012. Cash and cash equivalents alone were $34.159 million.
- Current assets were $275.405 million and current liabilities were $9.158 million. Total liabilities were approximately $17.6 million, principally deferred rent; the balance sheet reports no borrowings or other debt.
- Investing activities provided $25.786 million, primarily reflecting net maturities and sales of marketable securities; financing activities provided no cash. Cash increased by $0.675 million during the quarter.
- Management said existing capital resources should fund current and projected needs for at least 12 months, while noting that estimates depend on uncertain assumptions. No operating margin is meaningful given the absence of revenue in Q1 2013.
Changes versus the prior year
- Revenue fell by $0.750 million to zero; the prior-year amount was a Daiichi payment relating to an oncology compound.
- R&D expense rose $2.411 million, primarily due to R348, R343 and R333 programs. Development-category R&D increased from $5.975 million to $8.313 million.
- G&A expense declined $0.761 million, largely because stock-based compensation expense decreased. Total stock-based compensation fell from $3.098 million to $1.793 million.
- Net loss increased $2.400 million, although loss per share decreased from $0.32 to $0.29 because weighted-average shares increased to 87.141 million from 71.422 million.
Outlook, developments and risks
- Management expected R&D expense to increase through the rest of 2013 as the R343 and R333 Phase 2 trials progressed and a Phase 2 trial for R348 was planned for Q2 2013. R343 results were expected in Q3 2013, R333 results in the second half of 2013, and an AMPK muscle-endurance program was expected to enter clinical testing by year-end.
- In April 2013, AstraZeneca reported OSKIRA-1 Phase 3 results for fostamatinib: both dose regimens improved ACR20 response versus placebo at 24 weeks, but neither showed a statistically significant benefit on the mTSS X-ray endpoint. OSKIRA-2 and OSKIRA-3 results were expected later in Q2 2013. In the OSKIRA-4 Phase 2b study, fostamatinib met its placebo-comparison objective at six weeks for two regimens, but all tested regimens were inferior to adalimumab at 24 weeks.
- AstraZeneca funds and controls future development of most oral SYK inhibitors, including fostamatinib. Potential milestone payments, sales-based payments and royalties are contingent on partner actions and successful development or commercialization; receipt is uncertain. The filing also describes over $160 million in potential contingent payments across other collaborations, none assured.
- Rigel had an accumulated deficit of $785.821 million and expected continued operating losses. It may need additional capital; equity financing could dilute shareholders, debt could impose restrictive covenants, and licensing arrangements could require surrendering rights.
- Key risks include clinical failure or delays, regulatory uncertainty, reliance on collaborators and third-party manufacturers, competition, intellectual-property disputes, and the uncertain availability and cost of future financing. The company reported no material off-balance-sheet arrangements.
- A securities class action was dismissed after the Ninth Circuit ruled in Rigel’s favor and the plaintiff did not seek further review by the stated deadline; no liability was recorded. Facilities lease commitments totaled $72.705 million, including $13.944 million due within one year.
Investor verification points
- Check subsequent OSKIRA-2 and OSKIRA-3 results and AstraZeneca’s development plans for fostamatinib, considering OSKIRA-1’s mixed endpoints and OSKIRA-4’s comparison with adalimumab.
- Track enrollment, timing and results for R343, R333 and R348, and whether R348’s planned Phase 2 trial and the AMPK program proceeded on schedule.
- Monitor quarterly cash and investment balances against operating cash use, rising R&D spending and management’s stated minimum 12-month funding runway.
- Verify whether collaboration milestones or royalties become payable; the filing cautions that potential payments are uncertain and partner-controlled.
- Review the full risk-factor disclosures and lease obligations, and confirm that no new litigation, financing needs or material changes to the clinical pipeline have emerged.