Rigel Pharmaceuticals, Inc. — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015. This is an annual report, not a standalone quarterly filing; selected unaudited results for Q4 2015 are noted below. Financial statements were audited by Ernst & Young LLP, which gave an unqualified opinion.
Business context
Rigel is a clinical-stage biotechnology company developing targeted therapies in immunology, oncology and immuno-oncology. Its lead program, fostamatinib, was in Phase 3 trials for immune thrombocytopenic purpura (ITP) and Phase 2 trials for IgA nephropathy (IgAN); a Phase 2 trial for autoimmune hemolytic anemia (AIHA) began in February 2016. R348 was in Phase 2 development for dry eye associated with ocular graft-versus-host disease. Two oncology candidates were in Phase 1 development with partners.
Financial performance and liquidity
| Metric | 2015 | 2014 |
|---|---|---|
| Collaboration revenue | $28.9 million | $8.3 million |
| Research and development expense | $62.8 million | $67.7 million |
| General and administrative expense | $17.8 million | $22.5 million |
| Operating loss | $51.7 million | $91.2 million |
| Net loss | $51.5 million; $0.58 per share | $90.9 million; $1.04 per share |
| Cash, cash equivalents and short-term investments, year-end | $126.3 million | $143.2 million |
| Working capital, year-end | $95.2 million | $136.5 million |
Revenue primarily reflected collaboration payments: $16.6 million of recognized BMS upfront consideration, $822,000 of BMS research fees, and $11.5 million of upfront payments from other collaborators. The BMS agreement’s remaining deferred revenue was $13.4 million at year-end, expected to be recognized through September 2016. Rigel reported no product-sales or royalty revenue to date. Revenue was concentrated: BMS accounted for 60% of 2015 revenue, Aclaris 28%, and another third party 12%.
Net cash used in operating activities was $23.4 million, versus $69.8 million in 2014; investing activities provided $44.6 million, largely from net maturities of short-term investments; financing activities provided $7.1 million, including equity sales. The cash-flow statement reports a $28.3 million increase in cash and cash equivalents, while cash plus short-term investments declined by $16.9 million during the year.
Current assets were $129.0 million and current liabilities $33.8 million at year-end. The filing reports no off-balance-sheet arrangements and no debt borrowing balance. Lease commitments were $33.0 million gross, with $5.8 million of expected sublease receipts; net minimum lease payments were $27.2 million through January 2018. Management estimated existing capital would fund current and projected requirements into the third quarter of 2017, subject to assumptions and uncertainty.
Material changes and unusual items
- Revenue increased $20.6 million year over year, largely due to the 2015 BMS collaboration and Aclaris and third-party license payments.
- Net loss narrowed by $39.4 million. Lower R&D and G&A expenses and higher collaboration revenue contributed; 2014 also included a $9.3 million sublease loss and higher executive-related costs.
- R&D expense fell $4.9 million, primarily reflecting lower facilities costs, completion of a Phase 2 R348 dry-eye study and discontinuation of R118, partly offset by ITP Phase 3 costs.
- During 2015 Rigel received $41.5 million in aggregate upfront payments under collaboration agreements and raised $5.5 million net through its Cantor equity sales agreement.
- Q4 2015 revenue was $8.5 million and net loss was $12.7 million, or $0.14 per share; Q4 2014 revenue was $8.3 million and net loss was $22.3 million, or $0.25 per share.
Outlook, commentary and risks
Management expected R&D expense to increase through 2016 as ITP Phase 3 and IgAN Phase 2 trials progressed and the AIHA Phase 2 trial began. The first ITP Phase 3 study completed enrollment in January 2016; results were expected mid-2016, with the second study expected shortly thereafter. IgAN results were expected in the second half of 2016, AIHA Stage 1 results by year-end 2016, and R348 trial results during 2016. These are forward-looking expectations, not guaranteed outcomes.
Key risks include clinical-trial failure, delay or adverse safety findings; regulatory and commercial uncertainty; the need for additional capital and potential dilution or restrictive financing; dependence on collaborator decisions and milestone achievements; competition; reliance on third-party manufacturers; and intellectual-property and reimbursement risks. The potential $533.6 million or more in future contingent collaboration payments depends on partners achieving specified events and may never be received. Rigel had a history of operating losses, an accumulated deficit of $991.6 million, and fully valuation-allowed deferred tax assets. The filing states no legal proceedings were pending.
Important facts for investors to verify
- Results, safety and timing of the two fostamatinib Phase 3 ITP trials, and progress of the IgAN, AIHA and R348 studies.
- Cash burn, actual funding runway, and whether the estimated third-quarter 2017 runway remains achievable as trial costs evolve.
- Revenue quality and timing: recognition of deferred BMS consideration versus new upfront, milestone or royalty receipts.
- Availability and terms of future financing, including potential use of remaining capacity under the Cantor equity sales agreement.
- Partner development decisions, manufacturing supply, regulatory requirements and the competitive outlook for target indications.