Rigel Pharmaceuticals, Inc. — Q3 2012 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2012. Rigel is a clinical-stage drug discovery and development company focused on inflammatory and autoimmune diseases and muscle disorders. It had no product sales; reported revenue was from collaborations. Amounts below are in millions of dollars unless otherwise noted.
Financial performance and position
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Collaboration revenue | $0 | $4.355 | $2.250 | $4.750 |
| Research and development | $20.186 | $17.316 | $59.014 | $49.531 |
| General and administrative | $5.383 | $5.080 | $16.997 | $15.677 |
| Operating loss | $(25.569) | $(18.041) | $(73.761) | $(60.458) |
| Net loss | $(25.456) | $(17.931) | $(73.368) | $(60.186) |
| Basic and diluted loss per share | $(0.36) | $(0.25) | $(1.03) | $(0.99) |
- At September 30, cash, cash equivalents and available-for-sale securities totaled $183.9 million, down from $247.6 million at December 31, 2011. Current assets were $186.6 million and current liabilities $10.6 million.
- Operating cash use for the first nine months was $63.6 million, versus $50.7 million a year earlier. Investing activities provided $69.2 million, mainly reflecting net maturities and sales of securities; financing provided $2.6 million. Cash increased $8.2 million during the period.
- No interest-bearing debt is reported on the balance sheet. Deferred rent was $9.4 million in total; contractual facilities lease payments totaled $79.5 million, including $13.7 million due within one year. Stockholders’ equity was $174.8 million.
- In October 2012, after quarter-end, Rigel sold 15.24 million shares at $9.50 per share and received approximately $135.7 million net. This offering materially increased funding but diluted shareholders. At October 31, 87.0 million shares were outstanding.
Changes versus the prior comparable period
- Q3 collaboration revenue fell to zero from $4.4 million, principally because the prior-year quarter included a $4.3 million final Merck Serono payment. Nine-month revenue declined $2.5 million year over year; 2012 revenue included payments from AstraZeneca ($1.0 million), Daiichi ($0.75 million) and BerGenBio ($0.5 million).
- Research and development expense rose 16.6% in Q3 and 19.1% for the nine months, driven mainly by clinical work on R343, R548 and topical JAK/SYK programs. General and administrative expense increased 6.0% in Q3 and 8.4% for the nine months.
- Net loss increased by $7.5 million in Q3 and $13.2 million for the nine months. Operating cash use also increased year over year. Financing cash inflow was much lower than in 2011, when Rigel raised approximately $140.5 million net in a public offering.
Outlook, programs, risks and unusual items
- Management said available capital at September 30, together with the subsequent October offering, was expected to fund current and projected requirements through at least the next 12 months. The estimate depends on uncertain clinical-development costs; Rigel expects to need significant additional funding and may pursue equity, debt or collaboration arrangements.
- Management expected R&D expense to increase through the remainder of 2012 as Phase 2 studies of R343 for asthma and R333 for discoid lupus, and Phase 1 work on R548, progressed. Rigel expected to complete the R343 and R333 Phase 2 studies in 2013.
- AstraZeneca was conducting and funding fostamatinib development. It expected to report OSKIRA-1, -2 and -3 Phase 3 results in the first half of 2013, OSKIRA-4 data by late 2012, and to submit U.S. and European applications in the second half of 2013. These were collaborator expectations, not guaranteed outcomes.
- Rigel licensed R256, an inhaled JAK inhibitor for asthma, to AstraZeneca in June 2012. AstraZeneca is responsible for its clinical development and commercialization. Potential milestone and royalty receipts across collaborations are uncertain and depend substantially on partners’ future actions.
- Key risks include clinical failure or adverse effects, regulatory delays, reliance on collaborators and third-party manufacturers, future financing needs and potential dilution. Rigel had accumulated losses of $734.8 million and stated it expected operating losses for at least the next two years.
- A securities class-action lawsuit concerning statements about fostamatinib trial results was dismissed; the Ninth Circuit affirmed the dismissal on September 6, 2012, and denied rehearing on October 25, 2012. Rigel had not recorded a litigation reserve. The filing says the possible cost could not be estimated.
- There were no material changes to market-risk disclosures, no material changes to internal control over financial reporting, and no material off-balance-sheet arrangements reported.
Most important facts for investors to verify
- Whether the October offering proceeds and the stated 12-month funding outlook adequately cover planned clinical and operating spending.
- Upcoming clinical results and timelines, especially fostamatinib Phase 3 and the R343 and R333 Phase 2 programs.
- Whether increased R&D spending and ongoing losses change the pace or scope of Rigel’s programs or require further financing.
- Actual milestone, royalty and collaboration receipts, which are contingent and not assured.
- Potential effects of clinical safety, regulatory, manufacturing, litigation and share dilution risks.