Rigel Pharmaceuticals, Inc. — Q2 2018 Form 10-Q
Reporting period: Three and six months ended June 30, 2018. Unaudited results; comparisons are with the same 2017 periods. Rigel is a biotechnology company whose first approved product, TAVALISSE (fostamatinib), launched in the U.S. in May 2018 for certain adults with chronic ITP.
Financial results and liquidity
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $1.8m | $0 | $1.8m | $3.6m |
| Research and development | $10.8m | $11.5m | $22.0m | $23.9m |
| Selling, general and administrative | $17.1m | $7.8m | $30.6m | $15.2m |
| Operating loss | $26.1m | $19.3m | $50.8m | $35.5m |
| Net loss | $25.6m | $19.1m | $49.9m | $34.5m |
| Net loss per share | $0.16 | $0.16 | $0.32 | $0.29 |
- Q2 product revenue was $1.8m from TAVALISSE; H1 revenue fell year over year because the 2017 period included collaboration revenue, primarily a $3.3m BerGenBio milestone.
- Q2 and H1 cost of product sales was $30,000. This is not a mature gross-margin indicator: some pre-approval manufacturing costs had already been expensed as R&D, and the company said near-term product costs would be below expected future costs.
- SG&A increased substantially with hiring and other commercial-launch spending. R&D declined as ITP Phase 3 trials and the associated NDA work were completed, partly offset by spending on AIHA and IRAK.
- Cash and cash equivalents were $65.1m; short-term investments were $69.9m, totaling $135.0m at June 30, versus $115.8m at December 31, 2017. Current assets were $139.1m and current liabilities $17.4m. No debt is reported in the provided financial statements.
- For H1, operating cash use was $50.4m, investing activities provided $7.0m, and financing activities provided $70.2m. Financing included $67.2m net proceeds from a public offering of 18.4m shares and $3.0m from employee option exercises and the stock purchase plan. Cash increased $26.8m.
- Accumulated deficit was $1.19bn. The company reported $45.0m in future facilities lease payments, before approximately $20.2m of expected sublease income through January 2023.
Material developments and outlook
- The FDA approved TAVALISSE in April 2018; U.S. commercial sales began in May. The company was building its sales and medical-affairs teams and planned to pursue partners for Europe and Asia.
- Management said existing capital resources were expected to fund current and projected requirements, including the U.S. launch, for at least 12 months from the filing date. It also cautioned that this estimate depends on assumptions and that additional capital will be needed for the foreseeable future.
- Management expected R&D expense to increase in the second half of 2018 and quarterly SG&A to remain relatively consistent. No specific revenue or profitability guidance was provided.
- Pipeline: the Phase 2 IgA nephropathy study missed its primary endpoint; a pre-specified subgroup showed a non-statistically significant signal, with further analyses expected in late 2018 and an FDA meeting planned for August. AIHA Phase 2 Stage 1 met its primary endpoint, and Stage 2 enrollment was underway; the company expected to initiate a pivotal AIHA program by year-end. A Phase 1 study of R835, its IRAK inhibitor, began in Q2.
- After quarter-end, in July 2018, Bristol-Myers Squibb notified Rigel that it would terminate its preclinical collaboration. Potential contingent payments under remaining/current collaborations could exceed $532.4m if specified milestones are achieved; these are uncertain and exclude royalties.
- Key risks include uncertain TAVALISSE uptake, pricing and reimbursement, competition, reliance on third-party manufacturing and distribution, clinical and regulatory setbacks, and the need for additional financing, which could dilute shareholders. Rigel also noted its history of losses and no assurance of future profitability.
Investor verification priorities
- Track TAVALISSE prescriptions, net sales, payer coverage, rebates and returns, and the effect of launch spending on cash burn.
- Confirm the IgAN follow-up analyses and regulatory path, AIHA Stage 2/pivotal plans, and R835 Phase 1 progress.
- Assess cash runway against operating cash use and planned R&D and commercialization costs; monitor potential financing and dilution.
- Verify the implications of the BMS termination and the timing and probability of any collaboration milestones.
- Review future product cost of sales as inventory made after approval is sold, and assess lease obligations net of expected sublease receipts.