Rigel(RIGL) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the company's unaudited condensed financial statements and accompanying notes for the period Condensed Balance Sheets Key Balance Sheet Metrics | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--- | :--- | :--- | | Total Assets | $115,609 | $167,328 | | Total Current Assets | $110,440 | $154,467 | | Cash and cash equivalents | $29,866 | $18,890 | | Short-term investments | $51,776 | $106,077 | | Total Stockholders' Equity (Deficit) | $(19,834) | $30,374 | Condensed Statements of Operations Key Operations Metrics | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $22,410 | $21,543 | $68,964 | $128,827 | | Total Costs and Expenses | $40,813 | $41,328 | $126,593 | $119,905 | | Income (loss) from operations | $(18,403) | $(19,785) | $(57,629) | $8,922 | | Net income (loss) | $(19,037) | $(20,952) | $(59,974) | $4,727 | | Basic Net income (loss) per share | $(0.11) | $(0.12) | $(0.35) | $0.03 | | Diluted Net income (loss) per share | $(0.11) | $(0.12) | $(0.35) | $0.03 | Condensed Statements of Comprehensive Income (Loss) Key Comprehensive Income (Loss) Metrics | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $(19,037) | $(20,952) | $(59,974) | $4,727 | | Net unrealized gain (loss) on short term investments | $152 | $1 | $(184) | $12 | | Comprehensive income (loss) | $(18,885) | $(20,951) | $(60,158) | $4,739 | Condensed Statements of Stockholders' Equity (Deficit) Key Stockholders' Equity Metrics | Metric | Balance as of Jan 1, 2022 (in thousands) | Balance as of Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Total Stockholders' Equity (Deficit) | $30,374 | $(19,834) | | Net loss (9 months) | — | $(59,974) | | Stock-based compensation expense (9 months) | — | $8,305 | Condensed Statements of Cash Flows Key Cash Flow Metrics | Cash Flow Activity | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(51,849) | $24,964 | | Net cash provided by (used in) investing activities | $54,179 | $(86,524) | | Net cash provided by financing activities | $8,646 | $61,590 | | Net increase in cash and cash equivalents | $10,976 | $30 | | Cash and cash equivalents at end of period | $29,866 | $30,403 | Notes to Condensed Financial Statements 1. Organization and Summary of Significant Accounting Policies - Rigel Pharmaceuticals is a biotechnology company focused on discovering, developing, and providing novel small molecule drugs for hematologic disorders, cancer, and rare immune diseases[19] - TAVALISSE® (fostamatinib) is the company's first FDA-approved oral SYK inhibitor for chronic ITP in adult patients, also commercially available in Europe, UK, and Canada[19] - The portfolio includes olutasidenib (mIDH1 inhibitor for AML), fostamatinib in wAIHA (sNDA not expected), fostamatinib in COVID-19 (Phase 3 completed), and partnered IRAK and RIPK1 inhibitor programs[20][21][22] - As of September 30, 2022, the company had approximately $81.6 million in cash, cash equivalents, and short-term investments, which are believed to be sufficient to fund expenses for at least the next 12 months[28][29] 2. Net Income (Loss) Per Share Net Income (Loss) Per Share Calculation | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) (in thousands) | $(19,037) | $(20,952) | $(59,974) | $4,727 | | Weighted-average common shares outstanding (in thousands) | 172,836 | 170,886 | 172,256 | 170,297 | | Dilutive effect of stock options, restricted stock units and shares under Purchase Plan (in thousands) | — | — | — | 6,155 | | Weighted-average shares outstanding and common stock equivalents (in thousands) | 172,836 | 170,886 | 172,256 | 176,452 | - Potential common stock shares excluded from diluted EPS computation due to being antidilutive for the nine months ended September 30, 2022, totaled 34,259 thousand (stock options, restricted stock units, and Purchase Plan shares)[34] 3. Revenues Revenue by Category | Category | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Product sales, net | $19,188 | $16,012 | $53,935 | $45,441 | | Contract revenues from collaborations | $722 | $4,531 | $12,529 | $73,886 | | Government contract | $2,500 | $1,000 | $2,500 | $9,500 | | Total revenues | $22,410 | $21,543 | $68,964 | $128,827 | - Net product sales increased by 20% for the three months and 19% for the nine months ended September 30, 2022, primarily due to increased quantities sold and higher price per bottle of TAVALISSE, partially offset by increased revenue reserves[201][203] Revenue by Major Customer | Customer | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | McKesson Specialty Care Distribution Corporation | 44% | 35% | 38% | 17% | | Cardinal Healthcare | 27% | 18% | 22% | * | | ASD Healthcare and Oncology Supply | 25% | 25% | 21% | 15% | | Lilly | * | 12% | * | 56% | | Kissei | * | * | 11% | * | 4. Sponsored Research and License Agreements and Government Contract - Total future contingent payments from existing collaboration agreements could exceed $1.3 billion if all potential product candidates achieve payment triggering events[41][247] - The global exclusive license agreement with Lilly for RIPK1 inhibitors includes a $125.0 million upfront payment (received April 2021) and potential milestones up to $330.0 million for non-CNS products and $255.0 million for CNS products[46] - Rigel is committed to co-fund 20% of R552 development costs in the US, Europe, and Japan, up to a maximum of $65.0 million through April 1, 2024, with an outstanding financing liability to Lilly of $48.9 million as of September 30, 2022[44][48] - The Grifols license agreement for fostamatinib in Europe and Turkey includes a $30.0 million upfront payment, potential milestones up to $297.5 million, and tiered double-digit royalties up to 30% of net sales[52] - The Kissei license agreement for fostamatinib in Japan/Asia includes a $33.0 million upfront payment, potential milestones up to $147.0 million, and product transfer price payments in the mid- to upper twenty percent range[59] - A $5.0 million non-refundable milestone payment was received from Kissei in Q2 2022 following the NDA submission for fostamatinib in chronic ITP in Japan[65] - The Medison agreements for fostamatinib in Canada/Israel include a $5.0 million upfront payment for Canada, potential milestones of approximately $35.0 million, and royalties starting at 30% of net sales[66] - A commercial license agreement with Knight for fostamatinib in Latin America, entered in May 2022, included a $2.0 million upfront payment and potential milestones up to $20.0 million, plus tiered royalties[67][69] - Rigel was awarded up to $16.5 million by the US Department of Defense to support its Phase 3 clinical trial for fostamatinib in hospitalized COVID-19 patients, with $2.5 million recognized as revenue for the nine months ended September 30, 2022[71] - In July 2022, Rigel in-licensed olutasidenib from Forma Therapeutics, paying a $2.0 million upfront fee (expensed as IPR&D) and with potential for up to $67.5 million in development/regulatory milestones and $165.5 million in commercial milestones[72][75] - A $2.5 million near-term regulatory milestone for olutasidenib was met in October 2022 and will be recorded as R&D expense in Q4 2022[76] 5. Stock-Based Compensation Stock-Based Compensation Expense | Category | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Selling, general and administrative | $2,119 | $1,800 | $6,791 | $5,625 | | Research and development | $588 | $402 | $1,514 | $1,522 | | Total stock-based compensation expense | $2,707 | $2,202 | $8,305 | $7,147 | - An incremental stock-based compensation expense of approximately $0.8 million was recorded in Q1 2022 due to the extension of the exercise period for stock options granted to two former Board of Directors[77] - As of September 30, 2022, approximately $15.8 million of unrecognized stock-based compensation is expected to be recognized over a remaining weighted-average period of 2.75 years[82] 6. Inventories Inventory Breakdown | Category | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--- | :--- | :--- | | Raw materials | $4,555 | $5,142 | | Work in process | $1,244 | $162 | | Finished goods | $1,317 | $1,312 | | Total | $7,116 | $6,616 | 7. Cash, Cash Equivalents and Short-Term Investments Cash and Investments | Category | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $29,866 | $18,890 | | Short-term investments | $51,776 | $106,077 | | Total | $81,642 | $124,967 | - As of September 30, 2022, cash equivalents and short-term investments had gross unrealized losses of $290 thousand, primarily due to interest rate increases, which were determined to be temporary[88] 8. Fair Value Fair Value of Financial Instruments | Category | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Money market funds | $8,084 | $— | $— | $8,084 | | US treasury bills | $— | $17,160 | $— | $17,160 | | Government-sponsored enterprise securities | $— | $23,898 | $— | $23,898 | | Corporate bonds and commercial paper | $— | $28,795 | $— | $28,795 | | Total | $8,084 | $69,853 | $— | $77,937 | 9. Debt - Rigel has a $60.0 million term loan credit facility with MidCap Financial Trust, with an outstanding principal balance of $40.0 million as of September 30, 2022[91] - The maturity date for the term loans was extended to September 1, 2026, and the interest-only period was extended to October 1, 2024[96] - The interest rate benchmark was changed from LIBOR to SOFR plus an adjustment of 0.11448%, subject to a 1.50% floor, plus an applicable margin of 5.65%[96] Future Principal Payments | Year | Principal Amount (in thousands) | | :--- | :--- | | Remainder of 2022 | $— | | 2023 | $— | | 2024 | $5,000 | | 2025 | $20,000 | | 2026 | $15,000 | | Total Principal | $40,000 | 10. Leases - The current operating lease for research and office space expires in January 2023, with a weighted-average remaining term of 0.33 years as of September 30, 2022[102] Operating Lease Expense | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Fixed operating lease expense | $1,340 | $1,340 | $4,020 | $4,020 | | Variable operating lease expense | $211 | $259 | $602 | $651 | | Total operating lease expense | $1,551 | $1,599 | $4,622 | $4,671 | Future Minimum Lease Payments | Period | Operating Lease (in thousands) | Sublease Receipts (in thousands) | Net (in thousands) | | :--- | :--- | :--- | :--- | | Remainder of 2022 | $2,630 | $(1,183) | $1,447 | | 2023 | $877 | $(394) | $483 | | Total minimum payments required | $3,507 | $(1,577) | $1,930 | 11. Income Taxes - No provision for income taxes was recognized for the three and nine months ended September 30, 2022, due to pre-tax book losses and a full valuation allowance on deferred tax assets[108] Income Tax Provision | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Provision for (benefit from) income taxes | $— | $(136) | $— | $665 | 12. Subsequent Events - A workforce reduction was announced on October 10, 2022, primarily affecting development and administration groups, with restructuring charges expected in Q4 2022[109] - A new sublease agreement was entered on October 28, 2022, for approximately 13,670 square feet of office space in South San Francisco, with future lease payments of approximately $1.7 million, expected to serve as the new headquarters[110] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition, results of operations, and material cash requirements Overview - Rigel Pharmaceuticals is a biotechnology company focused on discovering, developing, and providing novel small molecule drugs for hematologic disorders, cancer, and rare immune diseases[114] - TAVALISSE® (fostamatinib) is the company's first FDA-approved oral SYK inhibitor for chronic ITP in adult patients, also commercially available in Europe, UK, and Canada[114] - The portfolio includes olutasidenib (mIDH1 inhibitor for AML), fostamatinib in wAIHA (sNDA not expected), fostamatinib in COVID-19 (Phase 3 completed), and partnered IRAK and RIPK1 inhibitor programs[115][116][118] Business Update - Net product sales of TAVALISSE for the nine months ended September 30, 2022, increased by 19% to $53.9 million, driven by increased quantities sold and price, partially offset by higher revenue reserves[119] - Rigel in-licensed olutasidenib, an mIDH1 inhibitor for AML, from Forma Therapeutics in July 2022; an NDA has been submitted to the FDA with a PDUFA action date of February 15, 2023[122][123] - The Phase 3 FORWARD study of fostamatinib in warm autoimmune hemolytic anemia (wAIHA) did not meet its primary efficacy endpoint, and Rigel does not expect to file a supplemental New Drug Application (sNDA) for this indication at this time[126] - The FOCUS Phase 3 clinical trial of fostamatinib for hospitalized high-risk COVID-19 patients completed enrollment and, as announced on November 1, 2022, approached but did not meet statistical significance (p=0.0603) in its primary efficacy endpoint[129] - Lilly continues to advance R552, a RIPK1 inhibitor, with an initial Phase 2 study in an immunologic disease indication anticipated to begin in the first half of 2023[134] - Rigel filed a patent infringement lawsuit against Annora Pharma Private Limited in July 2022 following Annora's submission of an Abbreviated New Drug Application (ANDA) for a generic version of TAVALISSE[135] - The COVID-19 pandemic continues to impact business operations, leading to reduced patient-doctor interactions and fewer sales visits, though virtual engagements are maintained[139] Our Product Portfolio Product Pipeline | Product/Program | Indication | Target | Pre-Clinical | Phase 1 | Phase 2 | Phase 3 | Approved | Partner | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Commercialized Products / Global Market Status | | | | | | | | | | TAVALISSE (fostamatinib) | Adult Chronic ITP | SYK | | | | | ☒ | | | TAVLESSE (fostamatinib) - Europe | Adult Chronic ITP | SYK | | | | | ☒ | GRIFOLS | | TAVALISSE (fostamatinib) - Canada/Israel | Adult Chronic ITP | SYK | | | | | ☒ | MEDISON | | Fostamatinib - Asia | Adult Chronic ITP | SYK | | | | | ☒ | KISSEI | | Fostamatinib - Latin America | Adult Chronic ITP | SYK | | | | | ☒ | KNIGHT | | In-Licensed Program | | | | | | | | | | Olutasidenib | R/R AML | mIDH1 | | | | ☒ | | | | Clinical Trials | | | | | | | | | | TAVALISSE (fostamatinib) | Warm AIHA | SYK | | | | ☒ | | | | Fostamatinib | COVID-19 | SYK | | | | ☒ | | | | Fostamatinib - NIH/NHLBI (ACTIV-4) | COVID-19 | SYK | | | | ☒ | | | | R289 | LR-MDS | IRAK1/4 | | ☒ | | | | | | Partnered Programs | | | | | | | | | | RAIN-32 (milademetan) / DS-3032 | Liposarcoma | MDM2 | | | ☒ | ☒ | | Daiichi-Sankyo | | BGB3234 | NSCLC & COVID-19 | AXL | | ☒ | ☒ | | | BerGenBio | | R552 (systemic) | Immune Diseases | RIPK1 | | ☒ | | | | Lilly | | RIP1 Inhibitor (brain penetrating) | CNS Diseases | RIPK1 | | ☒ | | | | Lilly | Commercial Product - TAVALISSE (fostamatinib) was approved by the FDA in April 2018 for the treatment of adult patients with chronic ITP who have had an insufficient response to a previous treatment[147] - Fostamatinib is an orally-available SYK inhibitor that blocks the activation of SYK inside immune cells, interrupting the destruction of platelets in ITP patients[144] - The company's commercial strategy for TAVALISSE in the US focuses on hematologists and hematologist-oncologists, supported by a fully integrated commercial team and the Rigel One Care (ROC) patient support program[150][151] - TAVALISSE competes with existing ITP therapies including corticosteroids, TPO-RAs (PROMACTA, Nplate, DOPTELET), splenectomy, and immunosuppressants, offering a distinct mechanism of action[153][154][155] - Global commercialization of fostamatinib is managed through license agreements with Grifols (Europe/Turkey), Kissei (Japan/Asia), Medison (Canada/Israel), and Knight (Latin America)[157][158][160][165][167] In-licensed Program - Olutasidenib is an oral, small molecule investigational drug designed to selectively bind to and inhibit mutated isocitrate dehydrogenase-1 (mIDH1) for the treatment of relapsed/refractory (R/R) acute myeloid leukemia (AML) and other malignancies[168] - Interim results from Forma's Phase 2 registrational trial for olutasidenib in mIDH1 R/R AML demonstrated a 35% composite complete remission (CR) or CR with partial hematologic recovery (CRh) rate with a median duration of 25.9 months[173] - An NDA for olutasidenib for the treatment of mIDH1 R/R AML has been submitted to the FDA, with a Prescription Drug User Fee Act (PDUFA) action date of February 15, 2023[172] Clinical Stage Programs - The Phase 3 FORWARD study of fostamatinib in warm autoimmune hemolytic anemia (wAIHA) did not demonstrate statistical significance in its primary efficacy endpoint, leading Rigel not to expect to file an sNDA for this indication at this time[180] - The Rigel-led FOCUS Phase 3 clinical trial of fostamatinib for hospitalized high-risk COVID-19 patients completed enrollment and, as announced on November 1, 2022, approached but did not meet statistical significance (p=0.0603) in the primary efficacy endpoint[183] - Fostamatinib has been selected for the NIH ACTIV-4 Host Tissue Trial in hospitalized COVID-19 patients, a randomized, placebo-controlled Phase 3 trial[187] - Rigel is advancing R289, an oral IRAK1/4 inhibitor, with FDA clearance for a Phase 1b study in low-risk myelodysplastic syndromes (MDS) and exploration of indications in rare immune diseases[194] Partnered Clinical Programs - BerGenBio initiated a Phase 1b/2a trial evaluating bemcentinib (BGB324, an AXL inhibitor) in combination therapy for first-line non-small cell lung cancer (NSCLC) patients with STK11 mutations[195] - Rain Therapeutics Inc (Rain) completed enrollment for its Phase 3 study of milademetan (DS-3032, an MDM2 inhibitor) in liposarcoma and commenced a second clinical trial for RAIN-32 in MDM2-amplified advanced solid tumors[197] - The agreement with AstraZeneca AB (AZ) for the JAK inhibitor AZ-D0449 was terminated in December 2021, with full rights returned to Rigel[198] Research/Preclinical Programs - Rigel is conducting proprietary research in inflammation/immunology, immuno-oncology, and cancers, focusing on identifying new product candidates and expanding the clinical utility of existing compounds[199] Commercialization and Sponsored Research and License Agreements - For detailed discussions of commercialization and sponsored research and license agreements, refer to Note 4 – Sponsored Research and License Agreements and Government Contract in Part I, Item 1[200] Results of Operations Revenues Revenue Breakdown | Category | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | Aggregate Change (in thousands) | | :--- | :--- | :--- | :--- | | Product sales, net | $19,188 | $16,012 | $3,176 | | Contract revenues from collaborations | $722 | $4,531 | $(3,809) | | Government contract | $2,500 | $1,000 | $1,500 | | Total revenues | $22,410 | $21,543 | $867 | - Net product sales of TAVALISSE increased by 20% for the three months ended September 30, 2022, primarily due to increased quantities sold and price, partially offset by higher revenue reserves from new PBM contracts and government program rebates[201][203] - Contract revenues from collaborations decreased significantly for the three months ended September 30, 2022, primarily due to lower revenue from the Lilly license agreement compared to the prior year[204] Cost of Product Sales Cost of Product Sales | Period | 2022 (in thousands) | 2021 (in thousands) | Aggregate Change (in thousands) | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30 | $250 | $151 | $99 | | 9 Months Ended Sep 30 | $1,407 | $596 | $811 | - Cost of product sales for TAVALISSE remains lower than anticipated due to manufacturing and related costs prior to FDA approval being charged to research and development expense, not capitalized[208] - The increase in cost of product sales for the nine months ended September 30, 2022, was primarily due to the delivery of drug supply to collaborative partners Grifols and Kissei[210] Research and Development Expense Research and Development Expense | Period | 2022 (in thousands) | 2021 (in thousands) | Aggregate Change (in thousands) | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30 | $14,666 | $18,300 | $(3,634) | | 9 Months Ended Sep 30 | $44,907 | $51,933 | $(7,026) | - The decrease in R&D expense for the three months ended September 30, 2022, was mainly due to lower costs in COVID-19 ($1.8M), AIHA ($0.9M), and IRAK1/4 inhibitor programs ($1.2M), and personnel-related costs ($0.8M) from early-stage research restructuring, partially offset by a $2.0 million upfront payment for olutasidenib[211] - For the nine months, R&D expense decreased due to lower personnel-related costs ($3.5M), other R&D expenses ($3.4M), and reduced costs in COVID-19 ($3.8M) and AIHA ($2.5M) studies, partially offset by increased IRAK 1/4 program costs ($3.0M) and the Forma upfront payment ($2.0M)[212] - Rigel exited early-stage research in November 2021 and announced further workforce reduction in October 2022 to focus resources on mid-to-late-stage development and commercialization, expecting cost savings[216] Selling, General and Administrative Expense Selling, General and Administrative Expense | Period | 2022 (in thousands) | 2021 (in thousands) | Aggregate Change (in thousands) | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30 | $25,897 | $22,877 | $3,020 | | 9 Months Ended Sep 30 | $80,279 | $67,376 | $12,903 | - The increase in SG&A expense for the three months ended September 30, 2022, was mainly due to higher personnel-related costs ($1.6M), recruitment fees, trainings, conferences, travel ($0.7M), commercial activities ($0.2M), and other SG&A costs ($0.5M)[228] - For the nine months, the increase was driven by personnel-related costs ($5.9M), commercial activities ($3.8M), trainings/travel ($2.4M), and stock-based compensation ($1.2M, including an incremental $0.8M charge)[229] - SG&A expense is expected to increase for the remainder of 2022 due to commercial expansion and potential olutasidenib launch, with some cost savings anticipated from recent workforce reductions in the administrative group[230][231] Interest Income and Interest Expense Interest Income and Expense | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Interest income | $192 | $14 | $255 | $31 | | Interest expense | $(826) | $(1,317) | $(2,600) | $(3,561) | - The decrease in interest expense for both periods was mainly due to the timing of accretion of interest on the outstanding financing liability, partially offset by higher interest on the term loan with MidCap due to increased outstanding balance[234] Provision for Income Taxes Income Tax Provision | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Provision for (benefit from) income taxes | $— | $(136) | $— | $665 | - No provision for income taxes was recognized for the three and nine months ended September 30, 2022, due to pre-tax book losses and a full valuation allowance on deferred tax assets, considering cumulative and forecasted losses[235] Critical Accounting Policies and Use of Estimates - No material changes to critical accounting policies were reported, except for accounting associated with the in-license agreement with Forma, as detailed in Note 4[239] Liquidity and Capital Resources Liquidity - As of September 30, 2022, cash, cash equivalents, and short-term investments totaled $81.6 million, a decrease from $125.0 million at December 31, 2021[241] Cash Flow Summary | Cash Flow Activity | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(51,849) | $24,964 | | Net cash provided by (used in) investing activities | $54,179 | $(86,524) | | Net cash provided by financing activities | $8,646 | $61,590 | | Net increase in cash and cash equivalents | $10,976 | $30 | - Net cash used in operating activities for the nine months ended September 30, 2022, was $51.8 million, a significant shift from $25.0 million provided in the prior year[242] - Net cash provided by investing activities for the nine months ended September 30, 2022, was $54.2 million, primarily due to net maturities of short-term investments[243] - Existing capital resources are believed to be sufficient to fund current and projected requirements for at least the next 12 months[245] Capital Resources - Operations have been financed primarily through sales of equity securities, debt financing, TAVALISSE sales, and contract payments from collaboration agreements[246] - Total future contingent payments from existing collaboration agreements could exceed $1.3 billion[247] - An additional $3.5 million is expected from the $16.5 million US Department of Defense award for the COVID-19 clinical trial[248] - The company has a $40.0 million principal term loan outstanding with MidCap and the ability to access an additional $20.0 million through March 31, 2023[252] - Future funding requirements are significant and will depend on factors such as commercialization success, clinical trial progress, regulatory approvals, and collaboration achievements, with potential financing through equity, debt, or licensing arrangements[255] Material Cash Requirements - Rigel is responsible for funding R552 development costs up to $65.0 million through April 1, 2024, under the Lilly collaboration, with $12.4 million already billed and paid[261] - The Forma license agreement for olutasidenib includes potential development and regulatory milestone payments up to $67.5 million and commercial milestones up to $165.5 million, with a $2.5 million regulatory milestone met in October 2022[262] - Contractual commitment for facilities lease expiring January 2023 amounts to $3.5 million, with a new sublease agreement for approximately $1.7 million in future lease payments commencing November 2022[263] - The outstanding principal of the MidCap term loan is $40.0 million, with no principal payments due within 12 months; future interest and final fee payments amount to $9.6 million, with approximately $3.0 million payable within 12 months[267] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section confirms no material changes to market risk disclosures, which primarily relate to interest rate sensitivities - No material changes to quantitative and qualitative disclosures about market risk were reported for the nine months ended September 30, 2022, compared to the Annual Report on Form 10-K[270] - Market risks primarily include interest rate sensitivities related to short-term investments and outstanding loans[270] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and reports no material changes in internal control - The company's disclosure controls and procedures were effective as of September 30, 2022[271] - There were no changes in internal control over financial reporting that materially affected or are reasonably likely to materially affect internal control over financial reporting during the quarter ended September 30, 2022[272] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section details a patent infringement lawsuit filed against Annora Pharma regarding a generic version of TAVALISSE - Rigel filed a patent infringement lawsuit on July 25, 2022, against Annora Pharma and its affiliates for infringement of US Patent Nos 7,449,458; 8,263,122; 8,652,492; 8,771,648; and 8,951,504 related to TAVALISSE[274] - The lawsuit followed Annora's Paragraph IV certification in its ANDA, asserting that these patents would not be infringed, are invalid, and/or are unenforceable[274] - Rigel intends to vigorously enforce and defend its intellectual property related to TAVALISSE[274] Item 1A. Risk Factors This section outlines significant risks to the business, including dependence on TAVALISSE, competition, and financial sustainability - Rigel's prospects are highly dependent on the commercial success of its first commercial product, TAVALISSE (fostamatinib)[279] - The evolving effects of the COVID-19 pandemic continue to adversely impact commercialization efforts, supply chain, regulatory, clinical development, and other business operations[279][287] - There is a high risk that drug discovery and development efforts may not generate successful product candidates, and clinical trials may fail to meet primary efficacy endpoints or achieve regulatory approval[279][299][303] - Products may face unfavorable pricing regulations, health technology assessments, third-party payor reimbursement practices, or labeling restrictions, which vary by country[279][339][496] - The approval of generic versions of TAVALISSE or competing products could significantly harm Rigel's business and financial condition[279][324][327] - Unforeseen safety issues with TAVALISSE post-approval could lead to changes in prescribing information, use limitations, or costly product liability litigation[279][328] - Rigel's success is dependent on its intellectual property rights and those of third parties, which are complex and subject to challenges, including patent infringement lawsuits[284][365][367] - The company has a history of operating losses and requires additional capital to fund operations and research, with future profitability being uncertain[343][358] - Indebtedness in the form of a term loan with MidCap could adversely affect financial condition and ability to respond to business changes, with potential limitations on accessing remaining credit facilities[345] - Delays in clinical testing, whether due to the COVID-19 pandemic, geopolitical conflicts, or other factors, could result in increased costs and prolonged product development timelines[438] - The transition away from LIBOR could affect the value of certain short-term investments and future borrowing costs, introducing financial uncertainty[522][526] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds were reported[528] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities to report for the period - No defaults upon senior securities were reported[529] Item 4. Mine Safety Disclosures This section states that the disclosure requirements for mine safety are not applicable to the company - Mine Safety Disclosures are not applicable to the registrant[530] Item 5. Other Information This section indicates that there is no other information to report for the period - No other information was reported[531] Item 6. Exhibits This section lists all exhibits filed or incorporated by reference as part of the Quarterly Report - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, License and Transition Services Agreement with Forma Therapeutics, Third Amendment to Credit and Security Agreement with MidCap Financial Trust, and various certifications[534] Signatures This section contains the official signatures of the company's certifying officers - The report was signed by Raul R Rodriguez (Chief Executive Officer) and Dean L Schorno (Chief Financial Officer) on November 3, 2022[542]