Rigel Pharmaceuticals, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. Rigel is a clinical-stage biotechnology company developing targeted medicines in immunology, oncology and immuno-oncology. Financial amounts below are in millions unless otherwise noted.
Financial performance and position
| Metric | Q1 2017 | Q1 2016 / prior date |
|---|---|---|
| Collaboration revenue | $3.6 | $5.0 |
| Research and development expense | $12.4 | $18.2 |
| General and administrative expense | $7.4 | $4.4 |
| Operating loss | $(16.2) | $(17.6) |
| Net loss | $(15.3) | $(17.5) |
| Basic and diluted net loss per share | $(0.13) | $(0.19) |
| Net cash used in operating activities | $(20.8) | $(22.4) |
| Cash, cash equivalents and short-term investments | $98.1 at March 31, 2017 | $74.8 at December 31, 2016 |
| Total assets / stockholders’ equity | $101.3 / $84.1 at March 31, 2017 | $78.1 / $55.0 at December 31, 2016 |
Q1 revenue primarily included a $3.3 million BerGenBio milestone payment after its licensed AXL inhibitor advanced to Phase 2. The prior-year quarter included $4.8 million of BMS upfront-payment amortization and $195,000 of research fees. No product sales or gross margin are reported. The filing does not disclose interest-bearing debt; reported liabilities are principally operating and lease-related.
Operating cash use was partly offset by the BerGenBio payment. Financing provided $43.4 million, including approximately $43.0 million net proceeds from a February offering of 23.0 million shares at $2.00 per share. Cash and equivalents increased $22.5 million during the quarter.
Changes versus the prior comparable period
- Revenue fell $1.4 million, while R&D expense declined $5.8 million, mainly due to the 2016 workforce reduction and lower personnel, research and stock-compensation costs. NDA preparation costs partially offset the decline.
- G&A expense rose $3.0 million, primarily from preparation for a potential Tavalisse launch and a $495,000 additional sublease loss.
- Net loss narrowed by $2.2 million. A $732,000 gain on disposal of fully depreciated assets and higher interest income also benefited the quarter.
- Weighted-average shares increased to 113.6 million from 90.6 million, reflecting equity issuance and other share activity; 122.4 million shares were outstanding on April 26, 2017.
Outlook, programs and key risks
- Rigel submitted an NDA for fostamatinib (Tavalisse) for chronic and persistent ITP in April 2017, after quarter-end. FDA acceptance and approval are uncertain; the second Phase 3 FIT study did not meet its primary endpoint, although the first did and the combined studies showed a statistically significant difference.
- Management expects existing resources to fund current plans, including preparation for a potential U.S. launch, for at least 12 months from the filing’s assessment. It expects R&D expense to remain relatively consistent quarter to quarter for the rest of 2017 and G&A expense to increase with launch preparation. Future financing may be needed; equity financing could dilute shareholders.
- The IgAN Phase 2 study’s second cohort was enrolling, with enrollment expected to finish in 2017 and results expected in 2018. The AIHA Phase 2 study was enrolling, with Stage 1 results expected in 2017. These are management expectations, not guarantees.
- Potential collaboration milestones exceeding $533.3 million are contingent on partners’ future achievements and may never be received. Royalties are also uncertain; Rigel reported no royalty revenue from commercial drug sales to date.
- Other notable items: the company recorded a $495,000 sublease loss; it may owe $1.5–$4.0 million under a consulting agreement if regulatory milestones occur, but considered none probable at quarter-end. Management plans to adopt the new revenue standard in 2018 and said adoption may materially affect financial statements, including the timing of some contingent revenue recognition.
- Key risks include clinical and regulatory outcomes, commercialization and reimbursement, the need for additional capital, reliance on collaborators and third-party manufacturers, and competition. The filing reported no legal proceedings and no off-balance-sheet arrangements.
Important facts for investors to verify
- FDA’s acceptance, review timeline and ultimate decision on the fostamatinib ITP NDA, including whether additional trials are required.
- Cash burn and funding runway as launch-preparation expenses rise, and the potential dilution from future capital raises.
- Progress and data timing for the IgAN and AIHA trials, and whether collaboration milestones become payable.
- Commercial-launch spending, the company’s ability to build sales capabilities, and prospective product access, pricing and reimbursement.
- Effect of the new revenue-recognition standard on collaboration revenue timing and reported results.