Rigel Pharmaceuticals, Inc. — Q2 2015 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2015. Rigel is a clinical-stage biotechnology company developing small-molecule drugs for inflammatory, autoimmune and cancer indications; it had no commercialized products.
Financial performance and liquidity
| Metric | Q2 2015 | Six months 2015 | Comparable 2014 |
|---|---|---|---|
| Collaboration revenue | $5.2 million | $7.4 million | None reported |
| Research and development expense | $15.1 million | $30.8 million | $20.1 million / $36.9 million |
| General and administrative expense | $4.1 million | $8.8 million | $5.4 million / $10.9 million |
| Net loss | $13.9 million | $32.1 million | $25.4 million / $47.7 million |
| Basic and diluted loss per share | $0.16 | $0.36 | $0.29 / $0.54 |
- At June 30, cash and cash equivalents were $17.3 million and short-term investments were $126.7 million, totaling $143.9 million, versus $143.2 million at December 31, 2014. Total current assets were $145.5 million and current liabilities $34.2 million.
- Operating cash use was $0.2 million for the first half, compared with $36.4 million in 2014. The 2015 figure was substantially affected by the $30.0 million BMS upfront payment and $23.1 million of deferred revenue; it should not be read as a representative operating burn rate. Cash and cash equivalents increased $2.1 million.
- No interest-bearing debt is listed on the balance sheet. Facilities lease commitments totaled $40.5 million; these do not include expected sublease income.
- Accumulated deficit was $972.3 million. Operating margins are not meaningful as collaboration revenue is limited and the company remains loss-making.
Changes and key developments
- Revenue began in 2015 under the February BMS collaboration. Rigel received a nonrefundable $30.0 million upfront payment in March and recognizes it ratably through the estimated research term ending September 2016. Q2 revenue included $4.8 million of upfront-payment recognition and $0.35 million for research services.
- R&D expense fell 25% in Q2 and 17% for the first half year over year, primarily due to lower facilities costs under a sublease, prior-year fostamatinib Phase 3 start-up costs, completion of an R348 dry-eye Phase 2 study, and discontinuation of R118. Management expects R&D expense to rise through 2015 as clinical trials progress.
- G&A expense declined year over year, mainly from lower facilities and personnel costs following the former CEO’s retirement.
- Rigel’s principal internal programs were fostamatinib in Phase 3 for immune thrombocytopenic purpura (ITP) and Phase 2 for IgA nephropathy, and R348 in Phase 2 for dry eye associated with ocular graft-versus-host disease. Oncology programs and other research were partnered.
Outlook, risks and contingencies
- Management said existing capital resources were expected to fund current and projected requirements into the second quarter of 2017. This estimate depends on assumptions that could prove wrong; Rigel said additional funding would be needed for the foreseeable future and had no committed future funding beyond potential collaboration payments.
- Rigel expected top-line results from its two Phase 3 fostamatinib ITP trials in mid-2016 and, if positive, to file a U.S. NDA by the end of 2016. Results from the R348 ocular GvHD Phase 2 trial were expected in Q2 2016.
- BMS may owe development and regulatory contingent payments exceeding $309 million for a successful compound approved in certain indications, plus tiered royalties. Across current collaborations, potential contingent payments could exceed $453.5 million, excluding royalties. These amounts depend on uncertain partner-led development and regulatory events and may never be received.
- Major risks include clinical failure or delay, regulatory uncertainty, continued operating losses, need for additional capital and potential dilution, dependence on collaborators and third-party manufacturers, and intellectual-property and competitive risks. Rigel disclosed that R348 did not meet primary or secondary endpoints in a completed Phase 2 dry-eye trial, and R118 was discontinued after Phase 1 side-effect concerns.
- No legal proceedings were reported. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress, enrollment and timing of the fostamatinib ITP Phase 3 trials, and the expected mid-2016 results and potential NDA timing.
- R348 ocular GvHD Phase 2 results and whether the prior dry-eye trial failure affects development prospects.
- Cash burn excluding the BMS upfront payment and deferred-revenue effects, and whether the stated Q2 2017 funding runway remains achievable.
- Recognition of the BMS upfront payment through September 2016, ongoing research reimbursements, and the uncertain timing and likelihood of milestone or royalty receipts.
- Expected increase in R&D spending, lease costs net of sublease receipts, and potential need for additional financing and dilution.