Rigel Pharmaceuticals, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unaudited financial statements; amounts below are in U.S. dollars. Rigel is a biotechnology company whose marketed product is TAVALISSE (fostamatinib) for adult chronic ITP, with additional clinical programs and licensing collaborations.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $21.5m | $18.4m | $128.8m | $90.2m |
| Net product sales | $16.0m | $16.3m | $45.4m | $43.9m |
| Operating income (loss) | $(19.8)m | $(13.8)m | $8.9m | $(10.1)m |
| Net income (loss) | $(21.0)m | $(14.2)m | $4.7m | $(10.5)m |
| Operating cash flow | Not separately provided | Not separately provided | $25.0m | $(36.6)m |
- Q3 revenue increased 17% year over year, while the net loss widened by $6.8m. Nine-month revenue rose 43%; the period moved from a net loss to net income, primarily reflecting collaboration and grant revenue rather than a comparable increase in product sales.
- For the first nine months, research and development expense was $51.9m, up $7.0m, and selling, general and administrative expense was $67.4m, up $12.6m. Q3 expenses were $18.3m and $22.9m, respectively. Q3 and nine-month interest expense was $1.3m and $3.6m.
- Product sales were nearly flat in Q3 and up 3% for nine months. Management attributed nine-month growth to sales volume and price, partly offset by lower channel inventory and higher government rebates. Product-sales cost was only $0.6m for nine months; previously expensed pre-approval manufacturing costs mean this is not representative of expected full manufacturing costs as newer inventory is sold.
- At September 30, cash and cash equivalents were $30.4m and short-term investments $112.7m, totaling $143.1m, versus $57.3m at year-end 2020. Current assets were $171.1m and current liabilities $59.3m.
- Cash from operations was $25.0m for nine months, versus $36.6m used in the prior-year period. Investing used $86.5m, mainly net purchases of short-term investments; financing provided $61.6m, principally the $57.9m Lilly collaboration cost-share advance and $3.7m of equity-plan proceeds. Cash and cash equivalents increased only $0.03m.
- Term-loan carrying value was $19.9m (principal $20.0m); the interest-only period was extended through October 1, 2022, with final payment due no later than September 1, 2024. Rigel reported compliance with its covenants. Separately, the Lilly cost-sharing financing liability was $59.8m and the Medison financing liability $5.5m; these are reported as other long-term liabilities, not as the MidCap term loan.
Material changes and notable items
- The Lilly agreement generated a $125.0m upfront cash payment in April. Rigel treated $57.9m as a financing component and recognized a net transaction price of $67.1m: $60.4m of non-CNS license revenue in Q1 and $6.0m of CNS license revenue over time through September. Up to $835m in development, regulatory and sales milestones are possible, but contingent amounts are not assured. Rigel may owe up to $65m toward specified R552 development costs through April 2024 if it exercises its first opt-out.
- Revenue included $9.5m recognized under a Department of Defense award of up to $16.5m for the COVID-19 Phase 3 trial; $7.0m remained subject to trial milestones and government approval. Collaboration revenue also included a $4.0m patent-license fee and a $1.8m Daiichi milestone during the nine-month period.
- Deferred revenue was $3.2m at September 30. Collaboration and government payments make reported revenue and earnings timing-sensitive.
Outlook, commentary and risks
- Management said existing capital resources were expected to support current and projected needs, including TAVALISSE commercialization, for at least 12 months from the filing date. It cautioned that the estimate depends on assumptions and that additional funding may be needed. The company expected R&D and SG&A expense to increase during the remainder of 2021.
- Management expected mid-2022 topline results from the completed-enrollment Phase 3 wAIHA study, following the six-month treatment period; regulatory filings were contingent on positive results. The company was continuing its Phase 3 hospitalized-COVID-19 trial, with enrollment approximately 210 of a targeted 300 patients as of November 1, 2021.
- The FDA informed Rigel in August 2021 that data from the NIH/NHLBI Phase 2 COVID-19 trial were insufficient to support an EUA. Rigel said it would consider resubmission if the Phase 3 study meets its endpoints. This is a material regulatory and clinical uncertainty.
- COVID-19 continued to affect patient-provider interactions, commercial activity and clinical-trial operations; management could not fully forecast impacts on sales, enrollment, supply, or timing of results. Other key risks include TAVALISSE uptake, pricing and reimbursement, competition, reliance on third-party manufacturers and distributors, clinical-trial outcomes, collaboration execution, financing needs, and intellectual-property protection.
- Legal proceedings: Item 1 reports none. Disclosure controls were assessed as effective, with no material quarterly change in internal control over financial reporting.
Investor verification priorities
- Separate recurring TAVALISSE sales and underlying operating costs from one-time or milestone-driven collaboration and government revenue; verify recognition and cash timing under the Lilly agreement.
- Track TAVALISSE demand, channel inventory, rebates and discounts, and the impact of the expanded sales force; assess future product margins as post-approval inventory costs flow through cost of sales.
- Monitor COVID-19 Phase 3 enrollment and results, the wAIHA Phase 3 readout, and regulatory decisions, including the consequences of the FDA’s rejection of the Phase 2 EUA package as insufficient.
- Reconcile available liquidity against operating cash needs, R552 cost-sharing commitments, the Lilly and Medison financing liabilities, MidCap debt service, and any future equity issuance or borrowing.
- Review collaboration milestone conditions, partner commercialization progress, clinical and supply-chain dependencies, and the potential for dilution or additional financing if projected cash needs change.