Business context and reporting period
Rani Therapeutics Holdings, Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2023. The clinical-stage biotherapeutics company is developing the RaniPill oral-delivery platform as an alternative to injections. RaniPill GO is designed for doses up to 3 mg; the higher-capacity RaniPill HC, designed for up to 20 mg, remains in preclinical development. The company has no approved products and has not generated commercial product revenue.
In June 2023, Rani entered into a license and supply agreement with Celltrion for an adalimumab biosimilar used in RT-105 development. Celltrion has a right of first negotiation for development and commercialization rights after a Phase 1 trial meets its primary endpoint(s).
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data. Revenue and gross margin are not applicable to the reported periods; the filing reports no commercial product sales.
| Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 |
|---|---|---|---|---|
| Research and development expense | $11.1 | $9.5 | $20.8 | $17.1 |
| General and administrative expense | $7.2 | $6.3 | $14.0 | $12.5 |
| Total operating expenses | $18.3 | $15.8 | $34.8 | $29.6 |
| Net loss | $18.7 | $16.0 | $35.5 | $29.8 |
| Net loss attributable to Rani Holdings | $9.3 | $7.6 | $17.7 | $13.8 |
| Loss per Class A share, basic and diluted | $0.37 | $0.31 | $0.70 | $0.60 |
- Operating cash use was $24.5 million in the first half of 2023, versus $19.7 million in the first half of 2022. Capital expenditures were $0.6 million; investing cash flow was positive $4.9 million, principally reflecting net marketable-security maturities and purchases. Financing cash flow was positive $0.1 million.
- At June 30, 2023, cash and cash equivalents were $7.6 million, marketable securities were $67.1 million, and total cash, cash equivalents and marketable securities were $74.6 million. Total current assets were $76.4 million and total current liabilities were $5.7 million.
- Long-term debt had a carrying value of $29.3 million; principal outstanding was $30.0 million. The debt bears a variable rate subject to a 10.35% floor; its effective rate was 15.34% at June 30, 2023. Principal repayment is scheduled to begin in September 2024, with possible extension to March 2025 under specified conditions. The facility is secured by substantially all company assets.
- Management stated that available cash, cash equivalents and marketable securities were expected to fund operations for at least 12 months from issuance of the statements. This is an estimate and depends on assumptions about spending and access to financing.
Material changes versus the prior comparable period
- Second-quarter operating expenses rose 15.4% year over year; first-half operating expenses rose 17.5%. R&D expense increased 16.4% in the quarter and 21.5% in the first half, mainly from higher compensation and headcount, with first-half increases also reflecting preclinical and clinical development-related facilities, materials and supplies.
- G&A expense increased 14.1% in the quarter and 12.0% in the first half, primarily due to compensation and stock-based compensation increases, partly offset by lower third-party services costs.
- First-half net loss increased to $35.5 million from $29.8 million. Net loss attributable to Rani Holdings increased to $17.7 million from $13.8 million.
- Interest income increased with investment in marketable securities, but was more than offset by debt interest expense. First-half interest income and other, net was $1.8 million and interest expense and other, net was $2.5 million; comparable 2022 amounts were each minimal or nil.
- Cash, cash equivalents and marketable securities declined to $74.6 million from $98.5 million at December 31, 2022. The company reported no sales under its $150 million at-the-market equity program as of June 30, 2023.
Outlook, risks, contingencies and unusual items
- Rani expects ongoing operating losses and negative operating cash flows as it develops RaniPill and its product candidates. It expects R&D and G&A spending to increase; the filing does not provide specific financial guidance or a revenue forecast.
- Management expects additional capital will be needed. Potential sources include equity or debt offerings, collaborations and licensing arrangements; they may be unavailable or on unfavorable or dilutive terms. The remaining $15 million tranche under the lender facility is uncommitted and subject to conditions and lender approval.
- Development and commercialization depend on successful formulation, preclinical work, clinical trials, regulatory approval, manufacturing scale-up and third-party suppliers. The company identifies single-source suppliers and potential delays, trial setbacks, manufacturing constraints and funding shortfalls as risks.
- Four European patents are subject to opposition proceedings brought by Novo Nordisk. Some proceedings have resulted in amended or revoked claims and are under appeal; another oral proceeding was scheduled for October 2023. Management said loss was not probable or reasonably estimable, but adverse outcomes could weaken patent protection in Europe.
- No Tax Receivable Agreement liability was recorded because realization of the relevant tax benefits was not considered probable. If benefits are realized, potential payments were estimated to range from zero to $22.9 million as of June 30, 2023; the agreement provides certain LLC owners 85% of applicable tax benefits.
- Related-party arrangements with InCube Labs, an entity affiliated with the Chairman, include facilities and personnel services. Net charges were $0.7 million for the first half of 2023. The filing also notes that company facilities are owned or leased by an entity affiliated with the Chairman.
- Management reported that disclosure controls and procedures were effective at a reasonable assurance level at June 30, 2023, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the company’s $74.6 million of cash and marketable securities and stated 12-month runway remain adequate as development spending continues.
- Quarterly cash burn, operating expense growth and any subsequent financing, ATM sales, or draw on the conditional debt tranche.
- Progress and results for RT-105, RT-111 and other programs, including clinical milestones, Celltrion’s potential negotiation rights, and RaniPill HC development.
- Debt terms, variable interest costs, repayment timing, covenant compliance and the potential final payment under the loan agreement.
- Developments in Novo Nordisk’s European patent opposition proceedings and any changes in the potential TRA obligation.
- Whether related-party facility and service arrangements, supplier dependencies and future manufacturing investment change materially.