Business context and reporting period
Rani Therapeutics Holdings, Inc. filed this unaudited Form 10-Q for the quarter ended June 30, 2021. The parent company was formed in April 2021 and had only $10 of cash and total assets at quarter-end; the operating results and cash flows summarized below are for its clinical-stage subsidiary, Rani Therapeutics, LLC.
Rani is developing the RaniPill capsule, intended to deliver biologic medicines orally. It had no approved products or commercial product sales. In August 2021, after the reporting period, Holdings completed its IPO and became Rani LLC’s sole managing member.
Key financial metrics
Amounts below are in millions, except per-unit data. Revenue was contract revenue from evaluation services, not product sales.
| Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 |
|---|---|---|---|---|
| Contract revenue | $1.961 | $0.060 | $2.717 | $0.143 |
| Research and development | $3.759 | $2.558 | $7.106 | $6.618 |
| General and administrative | $3.460 | $0.892 | $6.067 | $2.299 |
| Total operating expenses | $7.219 | $3.450 | $13.173 | $8.917 |
| Operating loss | $(5.258) | $(3.390) | $(10.456) | $(8.774) |
| Net loss | $(5.485) | $(2.714) | $(11.083) | $(8.064) |
| Basic and diluted net loss per unit | $(0.12) | $(0.06) | $(0.24) | $(0.17) |
Cash flow and liquidity: Cash and cash equivalents were $69.314 million at June 30, 2021, down from $73.058 million at December 31, 2020. For the six months, operating cash use was $9.676 million, investing cash use was $0.235 million, and financing provided $6.167 million; cash declined $3.744 million overall. Accumulated deficit was $125.086 million.
Debt: Reported debt carrying value was $3.884 million, classified as current at June 30. Rani repaid its $3.0 million Avenue loan plus approximately $0.5 million of final payment and fees in July 2021, and repaid the approximately $1.3 million PPP loan in September 2021.
IPO, subsequent to quarter-end: Holdings sold 7,666,667 Class A shares at $11 per share and reported approximately $73.7 million in net proceeds. Management said June 30 cash together with IPO proceeds was expected to fund operations and capital needs through at least the next 12 months.
Material changes versus the prior comparable period
- Second-quarter contract revenue increased to $1.961 million from $0.060 million; first-half revenue rose to $2.717 million from $0.143 million. The increase primarily reflected Takeda evaluation work and recognition of remaining deferred revenue when Takeda gave notice of termination.
- Second-quarter net loss widened to $5.485 million from $2.714 million; first-half net loss widened to $11.083 million from $8.064 million. Higher payroll and headcount, public-company preparation costs, and other operating expenses contributed.
- General and administrative expense rose substantially, reflecting increased professional and consulting costs related to the IPO and higher payroll. R&D expense increased more modestly for the first half, as higher personnel and laboratory costs were partly offset by lower third-party manufacturing-process development costs.
- Operating cash use increased to $9.676 million from $8.930 million for the first half. Financing cash flow included Series E preferred-unit proceeds and repayment of a related-party note receivable, partly offset by deferred IPO costs.
Outlook, risks and unusual items
- Takeda notified Rani in May 2021 that it intended to terminate its evaluation agreement for convenience. Rani recognized the remaining $2.0 million of deferred revenue in the second quarter; there were no active evaluation agreements at June 30.
- Management expected continued operating losses and negative operating cash flows for the foreseeable future, with R&D and public-company costs expected to increase. Rani anticipated needing substantial additional capital over time; the IPO proceeds were not expected to fund pivotal trials.
- Clinical and regulatory execution is a key risk: RT-101 was in early clinical development, other candidates were preclinical, and the company had not conducted Phase 2 or Phase 3 trials or submitted an IND to the FDA, according to the filing. Management described plans to initiate Phase 1 trials for certain candidates in 2022 and 2023.
- Other material risks include reliance on third-party and some single-source suppliers, manufacturing scale-up, uncertainty about regulatory requirements for the novel biologic-device platform, and potential COVID-19-related disruption to suppliers, research, and clinical timelines.
- Rani was involved in several European Patent Office opposition proceedings brought by Novo Nordisk. Management said a loss was not probable or reasonably estimable, but the proceedings could affect commercialization in Europe.
- The post-IPO structure includes dual-class voting: Class B shares carry 10 votes per share versus one vote for Class A. A tax receivable agreement requires payment to certain continuing LLC owners of 85% of specified realized or deemed tax benefits; future amounts were not quantifiable and could be substantial.
- The company relies on related-party services, facilities, and intellectual-property arrangements with InCube Labs, which is affiliated with the founder and executive chairman. It reported disclosure controls effective at a reasonable assurance level as of June 30, 2021.
Important facts for investors to verify
- Whether the IPO proceeds and June 30 cash support the stated runway under actual clinical, manufacturing, and capital-spending needs.
- How the Takeda termination affects future collaboration revenue, and whether replacement partnerships are secured.
- Progress, timing, and results for RT-101 and planned clinical programs, including any FDA feedback and required studies.
- Repayment and final accounting for Avenue and PPP debt, along with any remaining financing obligations.
- Potential outcomes of the Novo Nordisk patent oppositions and the scope and economics of the ICL licenses and Tax Receivable Agreement.
- Expected dilution and voting effects from LLC-interest exchanges, outstanding awards, and the dual-class share structure.