Rigel Pharmaceuticals, Inc. — Q2 2012 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2012. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted. Rigel is a clinical-stage drug developer and had no commercial product sales.
Financial results and liquidity
| Metric | Q2 2012 | Q2 2011 | Six months 2012 | Six months 2011 |
|---|---|---|---|---|
| Collaboration revenue | $1.50 | $0.40 | $2.25 | $0.40 |
| Research and development expense | $20.92 | $17.11 | $38.83 | $32.22 |
| General and administrative expense | $5.46 | $4.84 | $11.61 | $10.60 |
| Operating loss | $(24.88) | $(21.56) | $(48.19) | $(42.42) |
| Net loss | $(24.74) | $(21.47) | $(47.91) | $(42.26) |
| Net loss per share, basic and diluted | $(0.35) | $(0.37) | $(0.67) | $(0.76) |
- Revenue increased mainly from a $1.0 million AstraZeneca payment related to the R256 license, a $0.5 million BerGenBio payment, and a $0.75 million Daiichi payment in the first quarter. These collaboration receipts are not recurring product revenue.
- R&D spending rose 22% in Q2 and 21% for the first half, primarily reflecting R343 asthma and R333 lupus clinical programs. Management expected R&D expense to increase through 2012 as Phase 2 trials began and the R548 program progressed.
- At June 30, cash, cash equivalents and available-for-sale securities totaled $202.6 million, down from $247.6 million at year-end 2011. Total current assets were $206.4 million; current liabilities were $9.5 million. Stockholders’ equity was $195.8 million.
- Operating cash use was $44.0 million in the first half, versus $37.9 million a year earlier. Cash rose by $7.5 million during the period largely because investment maturities and sales exceeded purchases; this was portfolio activity, not operating cash generation. Capital expenditures were $2.4 million.
- The filing reports no material off-balance-sheet arrangements and no interest expense for the first half of 2012. It lists $82.8 million of facilities lease commitments, including $13.5 million due within one year.
Material changes, outlook and risks
- Net loss increased year over year, while loss per share narrowed because weighted-average shares increased substantially (71.5 million in Q2 2012 versus 58.3 million in Q2 2011).
- Management believed available capital would fund projected requirements for at least 12 months, but said future funding would be needed. Potential sources include equity or debt financing and licensing or collaboration deals; equity could dilute shareholders, and debt or licensing could impose restrictions or require rights concessions.
- AstraZeneca was conducting Phase 3 fostamatinib RA studies. OSKIRA-1 and OSKIRA-2 enrollment was complete; AZ expected results from OSKIRA-1, -2 and -3 in the first half of 2013, OSKIRA-4 data by late 2012, and U.S. and European regulatory filings in the second half of 2013. These were partner expectations, not guarantees.
- Rigel expected to begin Phase 2 studies of R343 for asthma and R333 for discoid lupus in 2012. R548 was in Phase 1 for transplant rejection and other immune disorders; Rigel also expected to initiate a clinical trial with one new molecule in late 2012 and said a muscle program might enter the clinic in 2013.
- Clinical development and regulatory approval remain uncertain. Fostamatinib’s earlier Phase 2b TASKi3 trial in patients who had failed biologic treatment did not meet its efficacy endpoints; reported adverse events in prior studies included diarrhea and hypertension. Rigel also relies on partners for key programs and on third parties for manufacturing and clinical-trial execution.
- A securities class-action dismissal was on appeal; oral argument occurred in February 2012. Rigel said it could not estimate potential costs and had not recorded a reserve. An adverse outcome could materially affect results, cash flows or financial position.
- Rigel reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress, safety findings and timing of AstraZeneca’s fostamatinib trials and anticipated regulatory filings.
- Actual R343 and R333 Phase 2 initiation and spending, and progress of the R548 and other internal programs.
- Cash burn and available liquidity relative to management’s stated 12-month funding horizon, including future financing needs and potential dilution.
- Timing and conditions of collaboration payments, including the R256 payment: the filing says the $1.0 million was paid in July 2012 but recognized as Q2 revenue.
- Status and potential financial exposure of the securities-litigation appeal, for which no reserve was recorded.