Rani Therapeutics Holdings, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Rani is a clinical-stage biotherapeutics company developing its RaniPill platform to deliver biologic medicines orally. It has no approved products and has not generated commercial product revenue.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Contract revenue | $0 | $0.8 million |
| Research and development expense | $7.6 million | $3.3 million |
| General and administrative expense | $6.2 million | $2.6 million |
| Operating loss | $13.8 million | $5.2 million |
| Net loss | $13.8 million | $5.6 million |
| Net cash used in operations | $9.4 million | $4.0 million |
At March 31, 2022, cash and cash equivalents were $107.8 million, down $9.6 million from year-end 2021. Total assets were $115.3 million, current liabilities were $4.2 million, and total liabilities were $4.7 million. The filing reports no outstanding debt at quarter-end; the company had repaid its convertible loan and PPP loan in 2021. Gross margin is not applicable to the reported period because there was no revenue in Q1 2022.
Management expects cash to fund operations through at least 12 months from issuance of the financial statements, but anticipates continuing losses and negative operating cash flow and expects to need substantial additional capital. The company’s estimate depends on assumptions that may prove inaccurate.
Changes versus the prior-year quarter
- Revenue fell from $0.8 million to zero after the Takeda evaluation agreement ended; no active evaluation agreements remained at March 31, 2022.
- Operating expenses increased 131%: R&D rose 127% and G&A rose 137%. Management attributed much of the increase to higher headcount and related compensation, including equity-based compensation.
- Net loss increased to $13.8 million from $5.6 million. Q1 2022 includes $2.9 million of equity-based compensation expense.
- Operating cash use increased to $9.4 million from $4.0 million. There was no financing cash flow in Q1 2022, compared with $7.8 million provided in Q1 2021.
Outlook, risks and unusual items
- The current RaniPill is designed for payloads up to 3 mg; RaniPill HC is in preclinical development and is intended for payloads up to 20 mg. The company expects R&D and G&A spending to increase as development advances, while providing no specific financial guidance or timeline for profitability.
- Key uncertainties include clinical and preclinical outcomes, regulatory approval, manufacturing scale-up, reliance on third-party suppliers (including some single-source suppliers), and the ability to obtain financing or partnerships on acceptable terms.
- The company reports opposition proceedings at the European Patent Office brought by Novo Nordisk. Management says a loss is not probable or reasonably estimable, but the proceedings could affect commercialization in Europe.
- Exchanges of LLC interests generated a $17.4 million deferred tax asset, fully offset by a valuation allowance. No Tax Receivable Agreement liability was recorded because realization of the associated tax benefits was not considered probable; potential payments were estimated at zero to $19.9 million.
- About 52% of Rani LLC’s outstanding Class A units were held by continuing LLC owners, with the company holding about 48%; the resulting non-controlling interest received $7.6 million of Q1 net loss allocation. Related-party InCube Labs provides services and facility access; charges, net, were $0.3 million for the quarter.
- Adoption of lease accounting in January 2022 added $1.3 million of right-of-use assets and lease liabilities, with no reported impact on earnings or cash flows. Management reported disclosure controls effective at a reasonable assurance level and no material change in internal control over financial reporting.
Important facts for investors to verify
- Cash runway assumptions and whether future development spending or financing needs differ from management’s estimate.
- Progress, timing, costs and results of RaniPill and RaniPill HC studies, including manufacturing readiness and regulatory requirements.
- Whether Rani secures new collaboration revenue or other financing after the Takeda agreement ended.
- Outcome and potential commercial impact of the Novo Nordisk patent opposition proceedings, and any future Tax Receivable Agreement liability.
- Related-party service and facility arrangements, LLC-owner exchanges, and the associated effects on ownership, dilution and non-controlling interest.