Rigel Pharmaceuticals, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; compared with the three months ended March 31, 2022. Unless stated otherwise, amounts are in millions of dollars.
Business context
Rigel is a biotechnology company commercializing TAVALISSE for chronic ITP and REZLIDHIA for relapsed or refractory AML with susceptible IDH1 mutations. REZLIDHIA launched in December 2022. The company also has clinical programs and collaboration agreements, including with Lilly, Grifols and Kissei.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Total revenue | $26.1 | $16.7; up $9.3 (56%) |
| Net product sales | $23.7 | $16.2; up 47% |
| Collaboration revenue | $2.3 | $0.5 |
| Operating expenses | $38.8 | $43.0 |
| Operating loss | $(12.7) | $(26.3) |
| Net loss | $(13.5) | $(27.4) |
| Net loss per share | $(0.08) | $(0.16) |
| Operating cash used | $(4.1) | $(25.6) |
- TAVALISSE sales were $22.3 million, up 38%; REZLIDHIA sales were $1.5 million. Higher TAVALISSE volume and price contributed to growth, partly offset by increased rebates and other sales deductions.
- Collaboration revenue primarily included $1.6 million for Grifols drug supply and $0.7 million in Grifols royalties.
- Research and development expense fell to $10.1 million from $15.5 million, mainly as Phase 3 COVID-19 and wAIHA trial activity wound down and IRAK-program spending timing changed. Selling, general and administrative expense was $27.7 million, versus $27.4 million.
- Cost of product sales was $1.0 million versus $0.1 million. Reported product costs remain affected by inventory produced or acquired before regulatory approval, when costs were expensed as R&D; therefore, the reported cost base and gross margin may not represent future product economics.
- Cash, cash equivalents and short-term investments totaled $58.7 million at March 31, 2023, broadly unchanged from $58.2 million at year-end. Cash and equivalents alone were $40.3 million. Accounts receivable declined to $29.4 million from $40.3 million.
- Rigel received $20.0 million net proceeds from a new MidCap loan tranche. Outstanding loan principal was $60.0 million; carrying value, net of discount, was $59.5 million. The loan matures September 2026, with interest-only payments through October 2024. No principal was due within 12 months, and the company reported covenant compliance.
- Total liabilities were $147.9 million and stockholders’ deficit was $24.3 million. Accumulated deficit was approximately $1.4 billion.
Changes, outlook and material risks
- Management said existing cash, cash equivalents and investments were expected to fund operating expenses and capital needs for at least 12 months from the filing date. It also cautioned that estimates rely on assumptions and that additional capital may be needed; future financing could dilute shareholders or impose restrictive terms.
- Rigel’s first Phase 3 COVID-19 trial approached but did not achieve statistical significance on its primary endpoint (p=0.0603). The company was evaluating next steps with the FDA and the Department of Defense. A separate NIH/NHLBI-sponsored trial was continuing after an interim review recommended continuation.
- The Phase 3 wAIHA trial did not meet its primary endpoint; following FDA feedback, Rigel did not file a supplemental application for that indication.
- Lilly’s Phase 2a R552 rheumatoid arthritis trial was anticipated to begin in Q2 2023, with analysis expected by the end of 2024. Rigel may opt out of specified R552 co-funding by September 30, 2023; its stated funding commitment could reach $65 million through April 1, 2024. It had paid $15.9 million through March 31.
- Rigel reported more than $1.3 billion of potential future contingent payments under existing collaborations if all specified milestones were achieved; these amounts are conditional, partner-dependent and exclude potential royalties.
- Material risks include commercialization and reimbursement uncertainty, reliance on third-party manufacturers and distributors, clinical and regulatory uncertainty, and the need for future funding. Three distributors accounted for 91% of product and collaboration revenue. An Annora ANDA seeking approval for generic TAVALISSE is subject to patent litigation; outcome and timing are uncertain.
- Rigel stated its SVB/First Citizens deposits were not material relative to total liquid resources, remained accessible, and were not expected to result in losses. It also cited broader financial-market and banking risks.
Important facts for investors to verify
- Whether TAVALISSE sales growth and REZLIDHIA uptake continue, and how rebates, discounts and reimbursement affect net sales.
- Developments in the Annora generic challenge and the enforceability of TAVALISSE patents.
- Cash burn, access to additional financing, MidCap loan terms and covenant compliance.
- Rigel’s R552 co-funding decision and Lilly’s clinical-development progress; progress and results in the ACTIV-4 trial and R289 study.
- Whether collaboration milestones and royalties materialize; they are contingent and are not assured revenue.