Rigel Pharmaceuticals, Inc. — Q3 2016 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2016. Rigel is a clinical-stage biotechnology company developing targeted drug candidates in immunology, oncology and immuno-oncology.
Financial performance and position
Amounts below are in millions of dollars except per-share data.
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Collaboration revenue | $3.8 | $13.0 | $17.4 | $20.4 |
| Research and development expense | $16.2 | $15.5 | $51.8 | $46.3 |
| General and administrative expense | $4.6 | $4.3 | $13.8 | $13.1 |
| Restructuring charges | $5.8 | — | $5.8 | — |
| Operating loss | $22.7 | $6.8 | $54.0 | $39.0 |
| Net loss | $22.6 | $6.7 | $53.6 | $38.8 |
| Basic and diluted net loss per share | $0.24 | $0.08 | $0.58 | $0.44 |
Gross margin is not applicable to the reported collaboration revenue; the filing does not present a gross-margin measure. Revenue was primarily collaboration-related, rather than product sales.
- Cash and liquidity: Cash, cash equivalents and short-term investments totaled $85.3 million at September 30, 2016, down from $126.3 million at December 31, 2015. Current assets were $86.5 million and current liabilities $20.6 million.
- Cash flows, nine months: Operating activities used $63.4 million, investing activities provided $22.8 million, and financing activities provided $23.1 million. Cash and cash equivalents ended at $26.0 million, versus $43.5 million at year-end 2015.
- Capital raising: Rigel sold shares under its controlled equity offering; the filing reports $22.2 million net financing proceeds for the nine months. The $30 million offering capacity was fully used by September 30.
- Debt: The balance sheet does not list borrowings or debt; no debt balance is disclosed in the provided filing text. Total stockholders’ equity was $65.9 million, down from $91.4 million at year-end 2015.
Material changes versus the prior comparable period
- Q3 collaboration revenue declined $9.2 million year over year, mainly because the prior-year quarter included Aclaris’s $8.0 million upfront payment; 2016 revenue largely reflected the final amortization of BMS’s upfront payment.
- Nine-month revenue fell $3.0 million year over year, while net loss widened by $14.8 million. Higher R&D spending and the absence of prior-year upfront collaboration revenue contributed to the change.
- Operating cash use increased to $63.4 million from $9.6 million in the prior-year period. The filing attributes the comparison in part to prior-year BMS and Aclaris upfront payments and 2016 operating and severance cash outflows.
- Rigel reduced its workforce by 46 positions, mostly in research, and recorded $5.8 million of restructuring charges, including $5.0 million of severance, $0.3 million of asset impairment and $0.5 million of non-cash stock compensation.
Outlook, programs and risks
- Liquidity outlook: Management believed available capital would fund current and projected needs, including preparation for a potential U.S. fostamatinib ITP launch, through the end of 2017. Management cautioned that assumptions could prove incorrect and that additional capital would be needed for future operations. No committed future funding was reported apart from potential collaboration payments.
- Expense outlook: Rigel expected R&D expense to decrease in Q4 2016 and in 2017, reflecting the restructuring and completion of the randomized portion of the ITP Phase 3 trials.
- Fostamatinib in ITP: The first Phase 3 study met its primary endpoint: stable platelet response was 18% with fostamatinib versus 0% with placebo (p=0.0261). The second study, announced October 20, did not meet its endpoint: response was 18% versus 4% (p=0.152). Combined-study results were statistically significant (p=0.007). Rigel planned to discuss the results and a possible NDA submission with the FDA; regulatory acceptance, approval and any need for further trials remained uncertain.
- Other programs: The IgAN Phase 2 first-cohort results were expected by year-end 2016; Stage 1 AIHA results were expected in 2017. Rigel discontinued R348 for ocular GvHD after its Phase 2 primary endpoint was not met. The company expected to file an IND for its IRAK program in 2017.
- Partner economics: Potential future contingent payments under current collaborations could exceed $531.9 million, excluding royalties, but depend on partners achieving specified milestones. Rigel cautioned that payments may never be received.
- Key risks: Clinical and regulatory uncertainty, especially the mixed ITP Phase 3 results and potential NDA review; continuing cash burn and need for additional financing; dependence on collaborators and milestone payments; and risks in commercial launch readiness, trial execution and drug development.
Important facts for investors to verify
- FDA feedback on the ITP Phase 3 results, whether Rigel submits an NDA, and whether additional trials are required.
- Actual cash burn, spending reductions and runway relative to management’s end-2017 funding estimate.
- Progress and results from the IgAN and AIHA trials and the planned IRAK IND filing.
- Whether partners achieve development, regulatory or commercial milestones that generate contingent payments or royalties.
- Timing and amount of restructuring-related cash payments; approximately $1.4 million remained accrued at quarter-end, substantially payable in Q4 2016.