Rigel Pharmaceuticals, Inc. — FY2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017; filed March 6, 2018. Rigel is a clinical-stage biotechnology company developing small-molecule therapies. Its lead candidate, fostamatinib, was under FDA review for chronic immune thrombocytopenia (ITP). The filing also reports fourth-quarter results, but is an annual report.
Key financial metrics
| Metric | FY2017 | FY2016 |
|---|---|---|
| Collaboration revenue | $4.5 million | $20.4 million |
| Research and development expense | $46.3 million | $63.4 million |
| General and administrative expense | $37.8 million | $20.9 million |
| Operating loss | $79.6 million | $69.7 million |
| Net loss | $78.0 million | $69.2 million |
| Net loss per share, basic and diluted | $0.62 | $0.73 |
| Cash, cash equivalents and short-term investments at year-end | $115.8 million | $74.8 million |
| Working capital at year-end | $99.1 million | $53.6 million |
- FY2017 operating cash use was $77.6 million; investing cash use was $19.5 million; financing cash inflow was $117.7 million. Financing was primarily from public offerings and equity sales.
- Total assets were $119.1 million and stockholders’ equity was $100.6 million. No debt is reported on the balance sheet; the company reported no off-balance-sheet arrangements.
- Operating margins are not meaningful in context: Rigel reported operating losses and collaboration revenue rather than commercial product sales.
- At December 31, 2017, 146.8 million common shares were outstanding, versus 99.3 million a year earlier. A further 147.1 million shares were outstanding as of February 27, 2018.
Material changes versus prior period
- Revenue fell $15.9 million year over year, principally because prior-period revenue included amortization of BMS’s upfront payment and collaboration milestones. FY2017 revenue comprised a $3.3 million BerGenBio milestone and $1.2 million from another license agreement.
- Net loss increased $8.8 million. R&D expense declined $17.2 million, mainly after the 2016 workforce reduction and completion of pivotal ITP trials; G&A rose $16.9 million, including $8.1 million for potential ITP commercialization and higher personnel costs.
- Cash and investments increased by $41.0 million, primarily following two 2017 public offerings that generated approximately $108.3 million in net proceeds, plus $5.7 million in net proceeds from an equity sales agreement.
- Fourth-quarter 2017 revenue was zero and net loss was $25.9 million, compared with revenue of $3.0 million and net loss of $15.6 million in fourth-quarter 2016.
Outlook, risks and unusual items
- Management said existing capital resources were expected to fund current and projected requirements, including preparation for a potential U.S. fostamatinib launch, for at least the next 12 months. The estimate depends on assumptions; additional capital is expected to be needed over time.
- The FDA accepted the fostamatinib ITP NDA in June 2017 and set an April 17, 2018 action date. The FDA did not plan an advisory committee meeting. Approval was not assured: one of the two pivotal Phase 3 trials failed to meet its primary endpoint, although pooled results were statistically significant.
- Management planned a U.S. commercial launch in 2018, subject to approval, and expected 2018 G&A to increase as commercial staffing and launch preparations continued. R&D expense was expected to remain relatively consistent with 2017.
- Fostamatinib programs included Phase 2 studies in IgA nephropathy (enrollment completed; study expected to conclude by April 2018) and warm AIHA (Stage 1 met its primary endpoint on a preliminary basis; Stage 2 enrollment began). The filing’s February 2018 update reported responses in 9 of 17 evaluable AIHA patients.
- Principal risks include regulatory and clinical-development uncertainty, future financing needs and potential shareholder dilution, competition and market access/reimbursement, reliance on third-party manufacturers and collaborators, and commercial-launch execution. Potential collaboration payments exceeding $532.4 million are contingent on partners’ future achievements and may never be received.
- Facility lease commitments totaled $50.1 million through 2023, partly offset by expected sublease receipts of approximately $22.1 million. A $1.5 million consulting milestone expense was accrued in 2017 as probable; additional milestone amounts were not considered probable.
- The company reported an accumulated deficit of $1.14 billion and operating losses in most years since inception. FY2017 included a provisional $117.3 million deferred-tax remeasurement charge, fully offset by a valuation allowance, with no expected net impact on deferred tax balances.
- Auditors issued an unqualified opinion on the financial statements and internal control over financial reporting; management also concluded disclosure controls and internal controls were effective.
Important facts for investors to verify
- Subsequent FDA action and the eventual approval status, label, safety requirements and launch timing for fostamatinib in ITP.
- Commercial uptake, pricing, reimbursement, and resulting cash burn if fostamatinib is approved and launched.
- Cash runway assumptions and the timing, terms and dilution effects of any additional financing.
- Final results and development plans for the IgAN and AIHA trials, and progress of partnered programs and the IRAK candidate.
- Whether collaboration milestones or royalties materialize; the stated contingent-payment potential is not committed or assured revenue.
- Manufacturing supply continuity, lease and sublease economics, and any material changes in liabilities or contingencies.