Rigel Pharmaceuticals, Inc. — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012; comparative period is Q1 2011. Rigel is a clinical-stage drug discovery and development company focused on inflammatory and autoimmune diseases and muscle disorders. It had no marketed products.
Financial performance and position
| Metric | Q1 2012 | Q1 2011 / prior date |
|---|---|---|
| Collaboration revenue | $0.75 million | $0 |
| Research and development expense | $17.90 million | $15.11 million |
| General and administrative expense | $6.16 million | $5.75 million |
| Operating loss | $23.31 million | $20.86 million |
| Net loss | $23.17 million | $20.78 million |
| Net loss per share, basic and diluted | $0.32 | $0.40 |
| Net cash used in operating activities | $23.27 million | $20.76 million |
| Cash and cash equivalents | $22.03 million | $18.63 million at Dec. 31, 2011 |
| Available-for-sale securities | $201.27 million | $229.01 million at Dec. 31, 2011 |
| Total assets | $233.91 million | $257.11 million at Dec. 31, 2011 |
| Current liabilities | $8.04 million | $11.53 million at Dec. 31, 2011 |
Combined cash, cash equivalents and available-for-sale securities were $223.30 million at quarter-end, down $24.34 million from year-end. The company reported no interest expense in Q1 2012 and no outstanding financial debt is identified in the filing. A separate facilities lease commitment totaled $86.11 million, including $13.41 million due within one year. The filing reports no off-balance-sheet arrangements creating potential material risks. No gross margin is presented; revenue was collaboration-based, not product sales.
Investing activities provided $26.19 million, mainly reflecting net maturities and sales of securities; financing activities provided $0.49 million, primarily from stock-option exercises. Cash and cash equivalents increased $3.40 million during the quarter. Accumulated deficit was $684.58 million.
Material changes versus Q1 2011
- Revenue rose from zero to $0.75 million, entirely from a Daiichi payment tied to an oncology compound in preclinical testing.
- R&D expense increased $2.80 million, principally due to activity on R343, R548 and R333; lower R&D stock-based compensation partly offset the increase.
- Operating loss and net loss increased year over year. Loss per share improved from $0.40 to $0.32 because weighted-average shares increased to 71.42 million from 52.28 million.
- Operating cash use increased $2.51 million. The investment portfolio declined as securities matured or were sold, while cash and cash equivalents alone rose.
Outlook, management commentary and risks
- Management said existing capital resources were expected to fund current and projected needs for at least the next 12 months, but noted estimates depend on assumptions and funding may be consumed sooner. It expected operating losses for at least the next two years.
- Rigel expected R&D expense to increase during 2012, with planned Phase 2 studies of R343 for asthma and R333 for discoid lupus in summer 2012, and continued progress in the R548 program. Management also expected to initiate clinical trials with one new inflammation/immunology molecule in each of 2012 and 2013.
- AstraZeneca was conducting and funding fostamatinib development; its Phase 3 RA studies were continuing as planned, and AZ expected to file a U.S. NDA and European equivalent in the second half of 2013. These are partner expectations, not guaranteed outcomes. Rigel could receive substantial contingent milestones and royalties, but none are assured.
- Principal risks include clinical failure or delays, regulatory uncertainty, dependence on collaborators and third-party manufacturers, future financing needs and potential dilution or restrictive debt terms. The company had not commercialized a drug and had received no product royalties.
- A purported securities class-action case was dismissed in 2010, but the plaintiff appealed; the appellate court heard arguments in February 2012. Rigel said it intended to defend the case, could not estimate potential costs or damages, and had recorded no reserve. An adverse outcome could materially affect its finances.
- Available-for-sale securities had $32,000 of gross unrealized losses, which management considered temporary. Management noted that further deterioration in credit and financial markets could affect investments.
Most important facts for investors to verify
- Quarter-end liquidity: $223.30 million in cash, cash equivalents and securities, versus $23.27 million of quarterly operating cash use; assess the pace of future cash consumption.
- Execution and results of planned R343 and R333 Phase 2 trials, R548 development, and AZ’s fostamatinib Phase 3 program and projected 2013 filing.
- Timing and likelihood of future collaboration milestones, royalties or new financing; contingent partner payments are not assured.
- Developments in the securities-litigation appeal, including any change in estimated exposure or reserve status.
- Whether the $86.11 million facilities lease commitment and planned clinical spending remain consistent with management’s funding horizon.