Rigel Pharmaceuticals, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; quarterly figures below include Q4 2020. Rigel is a commercial-stage biotechnology company whose lead product, TAVALISSE (fostamatinib), is approved for certain adults with chronic immune thrombocytopenia (ITP). The filing was signed March 2, 2021.
Financial performance and liquidity
| Metric | FY2020 | FY2019 | Change / context |
|---|---|---|---|
| Total revenue | $108.6 million | $59.3 million | Up $49.3 million |
| Net TAVALISSE product sales | $61.7 million | $43.8 million | Up 41%, primarily from sales volume; annual price increases contributed to a lesser extent |
| Collaboration revenue | $46.9 million | $15.5 million | Included Grifols-related revenue and a $2.1 million Daiichi milestone |
| Research and development | $60.1 million | $52.9 million | Higher spending included COVID-19 trials and RIP1, IRAK and warm-AIHA programs |
| Selling, general and administrative | $76.6 million | $74.6 million | Higher personnel and other costs were partly offset by lower travel expense |
| Operating loss | $29.0 million | $69.1 million | Improved, but operations remained loss-making |
| Net loss / diluted loss per share | $29.7 million / $0.18 | $66.9 million / $0.40 | Annual net loss narrowed |
| Operating cash flow | $(52.2) million | $(41.5) million | Cash used increased |
| Cash, cash equivalents and short-term investments | $57.3 million | $98.1 million | Down $40.8 million |
| Working capital | $48.1 million | $60.8 million | Decreased year over year |
| Term-loan balance | $20.0 million principal; $19.8 million net of discount | $10.0 million principal; $9.8 million net of discount | MidCap facility; additional draws subject to conditions |
Q4 2020: Revenue was $18.45 million versus $15.40 million in Q4 2019; reported gross profit was $17.43 million versus $13.65 million; net loss was $19.24 million versus $17.20 million; and loss per share was $0.11 versus $0.10. The filing does not provide quarterly cash-flow figures here. Reported product gross profit is not a full measure of future product economics: some pre-approval manufacturing costs were expensed as R&D rather than included in cost of sales.
FY2020 revenue growth included collaboration-related items and should not be viewed as wholly recurring product revenue. Grifols accounted for 41% of gross revenue; the two named U.S. specialty distributors accounted for 30% and 23%. Rigel reported $6.1 million of net liabilities for product sales allowances and discounts at year-end. The auditor identified estimation of these allowances as a critical audit matter.
Business developments, outlook and risks
- Commercial product: U.S. TAVALISSE sales rose to $61.7 million. The European Commission approved fostamatinib for chronic ITP in January 2020; Grifols launched TAVLESSE in the UK and Germany in July. Health Canada approved TAVALISSE for chronic ITP in November. Grifols’s broader European rollout was expected over the following 18 months.
- Pipeline: The pivotal Phase 3 warm-AIHA study had enrolled 66 of 90 targeted patients at year-end; COVID-19-related delays slowed enrollment. Fostamatinib Phase 2 and Phase 3 studies for hospitalized COVID-19 patients were underway. R835 (IRAK1/4) and R552 (RIP1) were in development.
- Subsequent events: In January 2021, Rigel was awarded $16.5 million by the U.S. Department of Defense to support the Phase 3 COVID-19 trial. In February 2021, Rigel signed a global Lilly agreement for R552 and related RIP1 inhibitors, including a stated $125 million upfront payment and up to $835 million of potential development, regulatory and sales milestones, plus royalties. The transaction was subject to customary closing conditions, including HSR clearance. These amounts were not year-end cash or FY2020 revenue. Rigel also disclosed a February 2021 non-exclusive patent license expected to provide a one-time $4.0 million fee.
- Management outlook: Management expected R&D expense to increase in 2021 as warm-AIHA and COVID-19 trials continued, and SG&A to increase with expanded TAVALISSE commercial activity. It stated existing resources, together with expected DoD and Lilly proceeds, would fund current and projected needs for at least 12 months from the filing date. This estimate depends on assumptions and does not remove the need for additional funding over time.
- Principal risks: Dependence on TAVALISSE and partner commercialization; pandemic-related effects on sales, trial enrollment and operations; pricing, reimbursement and generic competition; clinical, regulatory and safety uncertainty; reliance on third-party manufacturing and distribution; concentrated customers and collaboration revenue; debt covenants and access to additional financing; and patent, privacy and cybersecurity risks. Rigel reported no legal proceedings in the designated section, but disclosed general litigation and contingency risks.
Important facts for investors to verify
- Whether TAVALISSE sales growth and refill trends continue, and how the pandemic and channel inventory affect near-term sales.
- Cash use, liquidity runway and ability to meet MidCap covenants or access remaining loan tranches; verify the timing and conditions of Lilly and DoD proceeds.
- Completion, enrollment progress and results of the warm-AIHA and COVID-19 trials, including whether timelines or spending change.
- Grifols’s international launch progress and the timing and terms of future partner milestones, royalties and supply arrangements.
- Product-sales allowance estimates, customer concentration, and the effect of future manufacturing costs on product margins.