Rani Therapeutics Holdings, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Unaudited consolidated results include Rani Therapeutics, LLC. Rani is a clinical-stage biotherapeutics company developing the RaniPill oral drug-delivery platform; it has no products approved for sale and reported no commercial product revenue.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 / prior period |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $9.7 million | $7.6 million |
| General and administrative expense | $6.8 million | $6.2 million |
| Total operating expenses / operating loss | $16.5 million | $13.8 million |
| Net loss | $16.8 million | $13.8 million |
| Net loss attributable to Rani Holdings | $8.4 million | $6.2 million |
| Basic and diluted loss per Class A share | $(0.33) | $(0.29) |
| Operating cash flow | $(12.2) million | $(9.4) million |
| Cash, cash equivalents and marketable securities | $86.8 million at March 31, 2023 | $98.5 million at December 31, 2022 |
| Long-term debt | $29.2 million carrying value; $30.0 million principal | $29.1 million carrying value at December 31, 2022 |
Margins are not meaningful because the company reported no revenue. Cash, cash equivalents and marketable securities declined by $11.7 million from year-end; the separate cash-flow measure of cash, cash equivalents and restricted cash ended at $19.5 million, including $0.5 million of restricted cash. Current assets were $89.0 million and current liabilities $5.2 million. No material profitability or operating margin was reported.
Changes versus the prior comparable period
- Net loss increased 21.7%; operating expenses rose 19.9%.
- R&D expense increased 27.9%, principally due to higher compensation and increased facilities, materials and supplies costs. G&A expense increased 9.9%; higher stock-based compensation was partly offset by lower third-party services.
- Interest income increased to $0.9 million, while interest expense was $1.2 million, primarily reflecting the debt facility. The company reported net other expense of approximately $0.3 million, versus de minimis other income in Q1 2022.
- Operating cash use increased to $12.2 million from $9.4 million. Investing activities provided $4.1 million, mainly reflecting maturities of marketable securities; financing activities provided a net $8,000.
Outlook, risks and notable items
- Management expects continuing losses and negative operating cash flows as it develops the RaniPill platform. It states that available cash, cash equivalents and marketable securities are expected to fund operations for at least 12 months from issuance of the financial statements; this estimate depends on assumptions that could prove incorrect.
- The RaniPill GO is designed for payloads up to 3 mg; the RaniPill HC, intended for payloads up to 20 mg, remains preclinical. Following FDA pre-IND feedback, the company considers a 505(b)(2) pathway suitable for RT-102 and expects to initiate a Phase 2 trial in the second half of 2023.
- Under a January 2023 agreement, Celltrion licensed and supplies an ustekinumab biosimilar for RT-111 development and commercialization. Celltrion has a right of first negotiation after a Phase 1 trial that meets its primary endpoint(s).
- The Avenue debt bears a variable rate subject to a 10.35% floor; its effective rate was 14.78% at March 31, 2023. Principal repayments begin in September 2024, with possible extension to March 2025 under specified conditions. The debt is secured by substantially all company assets; the company reported covenant compliance and no defaults.
- A further $15 million debt tranche is uncommitted and requires lender approval. The company also has an unused ATM facility allowing up to $150 million of share sales, which could dilute shareholders. Management says future financing may be needed and may not be available on favorable terms, or at all.
- Potential Tax Receivable Agreement payments equal 85% of certain realized tax benefits. No liability was recorded because realization was not considered probable; the potential payable was estimated at zero to $22.9 million.
- The company is involved in several European Patent Office opposition proceedings brought by Novo Nordisk. Management said a loss was not probable or reasonably estimable, but the proceedings could affect its ability to prevent similar products from being commercialized in Europe.
- Related-party arrangements with InCube Labs include facility use and services; net charges were $382,000 in Q1 2023. The filing states all facilities are owned or leased by an entity affiliated with the Chairman. Certain suppliers are single-source suppliers.
Important facts for investors to verify
- Whether cash burn, clinical spending and the stated 12-month liquidity runway remain consistent with management’s assumptions.
- RT-102 Phase 2 timing and FDA requirements, and the progress and milestones for RT-111 and RaniPill HC.
- Debt interest-rate exposure, repayment terms, covenant compliance and availability of the uncommitted tranche.
- Potential dilution from the ATM, equity awards, warrants and exchangeable LLC interests; the filing reports 33.3 million potentially dilutive securities excluded from diluted EPS as anti-dilutive.
- Developments in the Novo Nordisk patent oppositions, related-party arrangements and any future TRA liability recognition.