Rigel Pharmaceuticals, Inc. — 2012 Form 10-K
Reporting period: Fiscal year ended December 31, 2012. The filing also provides unaudited fourth-quarter results. Rigel is a clinical-stage drug developer; it had no approved products, product sales, or royalty revenue.
Business context and pipeline
Rigel develops small-molecule treatments for inflammatory and autoimmune diseases and muscle disorders. Its principal programs were fostamatinib, partnered with AstraZeneca (AZ) and in Phase 3 for rheumatoid arthritis (RA); R343 for asthma and R333 for discoid lupus, both in Phase 2; and R348 for chronic dry eye, in Phase 1. Rigel discontinued development of oral JAK3 inhibitor R548 in December 2012.
Financial results and liquidity
| Metric (USD millions, except per-share data) | 2012 | 2011 |
|---|---|---|
| Collaboration revenue | 2.250 | 4.750 |
| Research and development expense | 78.778 | 69.350 |
| General and administrative expense | 22.849 | 21.768 |
| Operating loss | (99.377) | (86.368) |
| Net loss | (98.840) | (85.973) |
| Net loss per share, diluted | (1.32) | (1.36) |
| Cash used in operating activities | (85.192) | (69.375) |
Revenue fell 53%, mainly because 2011 included a $4.3 million Merck Serono payment. R&D expense rose 14%, primarily with increased work on R343 and topical JAK/SYK programs. The 2012 operating loss widened by $13.0 million. Product gross margin is not applicable; the filing does not report a meaningful product margin.
At year-end, cash, cash equivalents, and available-for-sale securities totaled $298.241 million, versus $247.640 million in 2011. Working capital was $290.254 million; current assets were $302.458 million and current liabilities $12.204 million. Total assets were $310.043 million and stockholders’ equity $289.096 million. Rigel reported no capital lease obligations, no off-balance-sheet arrangements creating material risk, and no accounts receivable. Operating cash use was offset by $139.094 million of financing cash inflow, including approximately $135.7 million net proceeds from an October stock offering. The company reported no debt balance; the filing does disclose $76.123 million of future facility lease payments.
Fourth quarter: Revenue was zero, net loss was $25.472 million, and basic and diluted loss per share was $0.30. The comparable 2011 quarter also had zero revenue, a $25.787 million net loss, and loss per share of $0.36.
Developments, outlook, and risks
- AZ reported fostamatinib Phase 3 OSKIRA studies were on course, with top-line results expected in Q2 2013 and U.S. and E.U. regulatory filings anticipated by year-end 2013. AZ’s OSKIRA-4 Phase 2b monotherapy study met its placebo-superiority objective for certain doses at six weeks, but fostamatinib did not meet non-inferiority to adalimumab at 24 weeks; all tested fostamatinib doses were inferior on the reported measure.
- Rigel expected results from the R343 and R333 Phase 2 studies in the second half of 2013, and planned to begin a Phase 2 R348 study in the first half of 2013. It expected R&D expense to increase in 2013 as these programs advanced.
- Management believed existing capital resources would fund current and projected requirements through at least the next 12 months, while cautioning that assumptions could prove wrong. The company expected to need significant additional funding and might seek equity, debt, or new collaborations; future equity issuance could dilute shareholders.
- Potential fostamatinib payments include up to $320 million for specified development, regulatory, and launch events, up to $800 million tied to post-launch sales levels, and royalties. These are contingent on AZ’s future efforts and are not assured. Other collaborations also include contingent payments that may never be received.
- Key risks include clinical-trial failure or delay, fostamatinib safety and efficacy uncertainties (including previously observed diarrhea and hypertension), regulatory approval and commercialization uncertainty, reliance on partners and contract manufacturers, competition, and ongoing operating losses. Rigel reported an accumulated deficit of $760.247 million.
- A prior securities class action was dismissed; the Ninth Circuit affirmed, rehearing was denied, and the plaintiff did not seek Supreme Court review by the deadline. The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting.
Most important facts for investors to verify
- Whether the fostamatinib Phase 3 results and regulatory timetable met the stated expectations, particularly in light of the mixed OSKIRA-4 findings.
- Actual trial progress, results, safety signals, and spending for R343, R333, and R348.
- Cash consumption and funding needs relative to management’s minimum 12-month liquidity estimate, including the impact of rising R&D expense.
- Whether collaboration milestones, royalties, or other contingent payments become earned; headline potential payment amounts are not guaranteed revenue.
- Share dilution and equity-compensation overhang: 87.141 million shares were outstanding at year-end, with 13.604 million options outstanding.