Rigel Pharmaceuticals, Inc. — Q3 2013 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2013. Rigel is a clinical-stage drug development company focused on small-molecule treatments for inflammatory and autoimmune diseases and muscle disorders. Financial amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Collaboration revenue | $0 | $0 | $1.4 million | $2.25 million |
| Research and development expense | $17.6 million | $20.2 million | $57.3 million | $59.0 million |
| General and administrative expense | $4.7 million | $5.4 million | $15.0 million | $17.0 million |
| Restructuring charges | $1.7 million | $0 | $1.7 million | $0 |
| Net loss | $23.8 million | $25.5 million | $72.2 million | $73.4 million |
| Basic and diluted loss per share | $0.27 | $0.36 | $0.83 | $1.03 |
| Operating cash used | Not provided for quarter | Not provided for quarter | $67.2 million | $63.6 million |
- At September 30, cash, cash equivalents and available-for-sale securities totaled $230.9 million, down $67.3 million from December 31, 2012. Cash and cash equivalents were $16.0 million; available-for-sale securities were $214.9 million.
- Current assets were $233.0 million and current liabilities were $8.3 million. The balance sheet reports no borrowings or other financial debt; liabilities included deferred rent. Total assets were $239.5 million and stockholders’ equity was $223.4 million.
- Nine-month investing cash inflow was $48.9 million, mainly reflecting security maturities and sales net of purchases; financing cash inflow was $0.8 million. Cash and cash equivalents declined by $17.5 million over the period.
- No meaningful operating margin is presented because collaboration revenue was nil in Q3 and modest year to date against substantial operating expenses.
- Contractual facilities lease commitments totaled $65.8 million, including $14.2 million due within one year. The company reported no material off-balance-sheet arrangements.
Changes and material developments
- Q3 net loss narrowed by $1.6 million year over year; nine-month net loss narrowed by $1.2 million. Lower R&D and G&A expenses were partly offset by the new restructuring charge. Year-to-date collaboration revenue fell $0.85 million, principally because prior-year payments included AstraZeneca and BerGenBio receipts.
- R&D expense declined year over year, mainly due to lower stock-based compensation and bonus accruals, partly offset by higher preclinical and clinical costs. G&A expense also declined, largely due to lower stock compensation and bonuses.
- In September, Rigel reduced its workforce by 30 positions, or 18%, mostly in drug discovery, to prioritize programs and conserve working capital. The $1.7 million charge included about $1.5 million cash costs and $239,000 non-cash stock compensation.
- AstraZeneca decided not to pursue regulatory filings for fostamatinib in rheumatoid arthritis and returned the rights to Rigel. Rigel discontinued development in rheumatoid arthritis and lymphoma after insufficient efficacy findings and due to competition.
- R343 did not meet primary or secondary endpoints in a Phase 2 asthma study; Rigel decided not to proceed. R333 did not meet its primary endpoint in a Phase 2 discoid lupus study; Rigel discontinued that indication.
Outlook, commentary and risks
- Rigel expected to initiate two pivotal Phase 3 fostamatinib studies in immune thrombocytopenic purpura (ITP) in the first half of 2014, with top-line results expected in 2015. The company had met with the FDA for an end-of-Phase 2 discussion.
- R348 was in a Phase 2 dry-eye study, with results expected in the second half of 2014. Rigel expected to begin clinical testing of its AMPK activator program, R118, in early 2014.
- Management believed existing capital would fund current and projected needs for at least 12 months, but cautioned that assumptions could prove incorrect. It expected R&D spending to increase through the remainder of 2013 as R348 advanced and preparations continued for the planned ITP trials.
- Rigel had no product sales or royalty revenue and depended on collaboration milestones, licensing, financing, and investment income. Potential contingent collaboration payments exceeding $160 million are highly uncertain, depend on partners’ actions and achievements, and may never be received.
- Key risks include substantial future funding needs, possible dilution or restrictive debt terms, clinical and regulatory failure or delay, reliance on collaborators and third-party manufacturers, competition, and uncertainty in protecting intellectual property. Rigel reported an accumulated deficit of $832.4 million.
Most important facts for investors to verify
- Whether the planned ITP Phase 3 trials began on schedule, their costs, and subsequent clinical and regulatory results.
- Cash burn and available liquidity relative to management’s stated 12-month funding estimate, including the impact of planned trial spending.
- Progress and funding potential from active collaborations, given the return of fostamatinib rights and the uncertain nature of contingent payments.
- Clinical progress of R348 and R118, and whether further program prioritization or workforce actions were required.
- Any later financing, dilution, changes in lease commitments, or material developments in contingencies and risks.