Rani Therapeutics Holdings, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited consolidated financial statements. Amounts below are in millions, except per-share data.
Business context and reporting period
Rani is a clinical-stage biotherapeutics company developing the RaniPill platform to deliver drugs, including biologics, orally. The current capsule is designed for payloads up to 3 mg; the preclinical RaniPill HC is intended to support payloads up to 20 mg. The company has no approved products and no commercial product revenue.
Key financial metrics
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $2.7 |
| Research and development expense | $9.1 | $12.0 | $26.2 | $19.1 |
| General and administrative expense | $7.2 | $15.8 | $19.7 | $21.9 |
| Net loss | $(16.2) | $(28.7) | $(46.0) | $(39.8) |
| Net loss attributable to Rani Holdings | $(8.0) | $(3.1) | $(21.8) | $(3.1) |
| Loss per Class A share, basic and diluted | $(0.33) | $(0.16) | $(0.93) | $(0.16) |
- At September 30, cash and cash equivalents were $27.2; marketable securities were $71.0 and restricted cash was $0.5. Total cash, cash equivalents, restricted cash and marketable securities were $98.7.
- Nine-month operating cash use was $31.9, investing cash use was $72.0 (primarily purchases of marketable securities), and financing cash provided was $14.1. Cash and restricted cash declined by $89.7 during the period.
- Total assets were $108.2, total liabilities $21.6, and stockholders’ equity $86.6. Long-term debt was $14.1 net of discount; contractual debt principal was $15.0. Current liabilities were $7.2 versus current assets of $100.7.
- Gross margin is not applicable to the reported periods because the company had no revenue in Q3 2022 or the first nine months of 2022.
Material changes versus prior comparable periods
- Q3 operating expenses fell 41% year over year and net loss narrowed 44%, mainly because Q3 2021 included substantial one-time equity-based compensation associated with the IPO and organizational transactions.
- For the first nine months, operating expenses rose 12% and net loss widened 16%. R&D expense increased 38%, reflecting higher staffing, clinical and preclinical services, facilities, materials and supplies. The prior-year period included $2.7 million of Takeda contract revenue; none was recognized in 2022.
- Loss attributable to Rani Holdings increased substantially year over year in both comparisons, while consolidated losses are allocated partly to non-controlling LLC owners. The company held approximately 49% of Rani LLC at September 30, 2022.
- Cash and cash equivalents fell from $117.5 million at year-end 2021, while the company invested $70.9 million in marketable securities. Total cash, restricted cash and marketable securities were $98.7 million at quarter-end.
Outlook, management commentary, risks and unusual items
- Management said available cash, cash equivalents, restricted cash and marketable securities were expected to fund operations for at least 12 months from issuance of the financial statements. It expects ongoing operating losses and negative operating cash flows and anticipates needing additional capital; financing may be dilutive or unavailable on acceptable terms.
- In August 2022, Rani entered a debt facility of up to $45 million. $15 million was funded at closing; another $15 million was committed and available to draw from October through December 2022, subject to the agreement. A further $15 million was uncommitted and subject to lender approval. The loan is secured by substantially all company assets, bears interest at the greater of prime plus 5.60% or 10.35%, and had a reported effective rate of 14.09% at quarter-end. The company reported covenant compliance.
- The debt agreement includes restrictive covenants and, beginning one year after closing, requires at least two drug products using the oral delivery technology to be in clinical development, unless market capitalization exceeds $650 million. Default provisions include potential acceleration and remedies against collateral.
- An at-the-market equity sales agreement permits up to $150 million of Class A shares to be sold. No sales had occurred by September 30, 2022.
- Clinical update: Rani reported positive topline Part 1 Phase 1 RT-102 results in August, with oral PTH bioavailability reported at 300–400% greater than subcutaneous Forteo in the study. At filing, it anticipated Part 2 topline results in Q4 2022 and planned an RT-102 IND and Phase 2 initiation in the second half of 2023. It also planned Phase 1 studies of RT-105, RT-110 and RT-111 in 2023, and intended Q4 2022 in-vivo studies with an autonomous RaniPill HC. These were expectations, not reported outcomes.
- Following a strategic review, the company stopped active development of RT-109, while remaining open to partnering. It also said it would not initiate a separate repeat-dose platform study in 2022; repeat dosing was incorporated into the RT-102 study design.
- Key risks include clinical and regulatory uncertainty, manufacturing scale-up and reliance on some single-source suppliers, future financing needs, and possible trial delays. COVID-19 had caused vendor, shipment, cost and scheduling disruptions, although the company reported no material business impact through September 30, 2022.
- Novo Nordisk challenged four European patents in opposition proceedings. The company reported amended claims for two patents and revocation of another, with appeals pending; the outcome could affect commercialization in Europe. Management said a material loss was not probable or reasonably estimable.
- Related-party arrangements with InCube Labs (ICL), an entity affiliated with the chairman, cover personnel services and facilities used for office, R&D and manufacturing. ICL-related charges, net, were $1.0 million for the first nine months of 2022. The company also has a tax receivable agreement under which it may owe certain LLC owners 85% of specified realized tax benefits; no liability was recorded, but the potential payable was estimated to range from zero to $20.8 million.
Most important facts for investors to verify
- Whether the company’s stated 12-month liquidity runway remains adequate given its operating cash use, development plans and financing needs.
- Whether the additional committed debt tranche was drawn by December 31, 2022, and whether any lender-approved uncommitted tranche became available; review debt cost, collateral and covenants.
- Actual results and timing for RT-102 repeat dosing, the planned IND and Phase 2, RaniPill HC studies, and the proposed 2023 clinical programs.
- Progress and final outcomes of the Novo Nordisk European patent proceedings, including appeal decisions and any effect on commercial rights.
- Any ATM share sales, future equity issuance, LLC-interest exchanges and potential tax receivable agreement payments that could affect dilution or liquidity.