Rigel Pharmaceuticals, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Financial statements are unaudited and prepared under U.S. GAAP. Dollar amounts below are in millions unless otherwise noted.
Business context
Rigel is a biotechnology company with marketed products TAVALISSE for chronic immune thrombocytopenia (ITP) and REZLIDHIA for relapsed or refractory IDH1-mutated acute myeloid leukemia (AML). In February 2024, Rigel acquired U.S. rights to GAVRETO (pralsetinib); it expects to complete the transition and begin recording product sales in July 2024. Its development programs include R289 for lower-risk myelodysplastic syndrome (MDS), REZLIDHIA studies with MD Anderson and CONNECT, and Lilly’s RIPK1 inhibitor program.
Financial highlights
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Total revenue | $29.5 | $26.1; up $3.5 |
| Net product sales | $26.0 | $23.7; up $2.3 |
| Collaboration revenue | $3.5 | $2.3; up $1.2 |
| Operating loss | $(7.0) | $(12.7) |
| Net loss | $(8.2) | $(13.5) |
| Basic and diluted loss per share | $(0.05) | $(0.08) |
| Operating cash flow | $(5.0) | $(4.1) |
| Investing cash flow | $0.3 | $0.8 |
| Financing cash flow | $(2.5) | $19.1 |
TAVALISSE net sales were $21.1 million, down $1.2 million (5%), reflecting lower distributor channel inventory and higher government and private-payor rebates, partly offset by higher price per bottle. REZLIDHIA sales were $4.9 million, up $3.4 million, primarily from more patients on therapy, partly offset by higher government rebates. Collaboration revenue included $2.3 million of Kissei supply revenue and $1.1 million of Grifols royalties.
Research and development expense declined to $6.0 million from $10.1 million, chiefly due to trial timing and completion activities, lower personnel costs and lower allocated costs. Selling, general and administrative expense rose to $28.4 million from $27.7 million, primarily because stock-based compensation increased by $2.7 million. Cost of product sales was $2.0 million versus $1.0 million, mainly from higher REZLIDHIA royalties and partner supply deliveries. Interest expense increased to $1.9 million from $1.2 million, mainly reflecting the higher loan balance and interest costs.
Liquidity, debt and balance sheet
- Cash, cash equivalents and short-term investments totaled $49.6 million at March 31, 2024, down from $56.9 million at December 31, 2023. Cash and cash equivalents alone were $25.6 million.
- Total current assets were $92.5 million and current liabilities were $73.2 million. Total liabilities were $158.2 million; stockholders’ deficit was $31.7 million. Accumulated deficit was $1.416 billion.
- MidCap loan principal was $60.0 million ($59.7 million net of issuance costs). Rigel reported covenant compliance at March 31, 2024. On April 11, 2024, it amended the loan: maturity was extended to September 1, 2027, and the interest-only period to October 1, 2025. The rate changed to SOFR plus 0.11448%, subject to a 4.00% floor, plus a 6.50% margin; the exit fee increased to 4.25%. The filing estimates $19.3 million of future interest and final fee under the amendment, including approximately $6.6 million payable within 12 months.
- Management believes available cash and investments will fund operating and capital requirements for at least 12 months from the filing date, while cautioning that this estimate depends on assumptions. It also says additional funding will be needed in the foreseeable future.
Material developments, outlook and risks
- GAVRETO acquisition: Rigel acquired U.S. product rights from Blueprint for a $15.0 million purchase price, with $10.0 million due upon first commercial sale and $5.0 million due on the first anniversary, subject to conditions. Blueprint may receive up to $97.5 million in commercial milestones, $5.0 million in regulatory milestones, and tiered royalties of 10%–30%. Rigel also agreed to buy approximately $7.0 million of inventory; $3.1 million had been received by quarter-end. The asset was capitalized and is amortized over 12 years. Commercial transition and first sales are expected in July 2024. The thyroid cancer indication is under accelerated approval, with continued approval potentially contingent on confirmatory evidence of clinical benefit; FDA discussions are ongoing.
- Pipeline: Enrollment in the third R289 Phase 1b cohort is complete; Rigel plans two additional twice-daily dosing cohorts and expects preliminary data by year-end 2024. MD Anderson collaboration funding is $15.0 million over five years ($2.0 million provided by March 31); CONNECT funding may total $3.0 million over four years. Lilly has initiated a Phase 2a R552 trial in rheumatoid arthritis. Rigel’s amended Lilly cost-share cap was $22.6 million through April 1, 2024; an opt-in right could require renewed cost sharing.
- Development uncertainty: Rigel will continue significant R&D and commercial spending. Clinical-trial timing, efficacy, regulatory approval, adoption, reimbursement and third-party manufacturing are uncertain. Management expects commercial expenses to increase as it expands sales of its products and launches GAVRETO.
- Commercial and pricing exposure: Three distributors accounted for 88% of net product and collaboration revenue: McKesson 42%, Cardinal 23% and Cencora 23%. Product revenue reserves and rebates are significant and subject to estimation. TAVALISSE faces an ANDA patent challenge by Annora; litigation continues with no trial date set. Generic entry could materially pressure sales.
- Acquisition and financing risks: GAVRETO adds integration, supply, milestone and royalty obligations. Rigel’s $60 million loan is secured by its assets, including intellectual property; the amended interest-rate floor, margin and exit fee affect future financing costs. Additional financing may be required and could be dilutive or restrictive.
- Unusual clinical item: A corrected statistical analysis of Rigel’s completed Phase 3 hospitalized-COVID-19 trial indicated the primary endpoint was met, after an earlier CRO analysis error. However, a separate NIH-sponsored study arm was stopped following a low conditional likelihood of benefit, and Rigel decided not to seek an EUA or supplemental approval for the COVID-19 program.
- Other notable risks: REZLIDHIA carries a boxed warning for potentially fatal differentiation syndrome. The filing also identifies risks relating to safety, regulatory compliance, cybersecurity and privacy, drug pricing and rebates, clinical execution, product liability, intellectual property and market competition. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Whether the GAVRETO transition and July 2024 commercial launch occurred as planned, and the resulting sales, costs and patient access.
- Trends in TAVALISSE and REZLIDHIA demand, distributor inventory, gross-to-net deductions and rebate reserves.
- Cash burn and financing needs relative to management’s 12-month liquidity assessment, including the effects of the April loan amendment and covenants.
- R289 trial progress and year-end 2024 preliminary data, and progress of the MD Anderson, CONNECT and Lilly programs.
- Developments in the Annora patent litigation and any impact on TAVALISSE exclusivity or generic competition.
- Confirmatory-trial requirements for GAVRETO’s accelerated-approved thyroid cancer indication and the product’s milestone, royalty and inventory economics.