2023-05-26 02:03:10 ET
Summary
- Tavalisse's robust growth in Q1, with record shipments and a 23% YoY increase, positions it as a preferred treatment for third-line patients, potentially expanding its market share.
- Rezlidhia, since its launch in December, demonstrated market acceptance with 111 bottles shipped, indicating potential revenue growth and the ability to impact around 1,000 new patients annually.
- Financially, Rigel's Q1 report revealed cost-cutting measures, reduced losses, and a longer cash runway, reflecting improved operational efficiency.
- Securing a $20 million term loan in March 2023 showcases Rigel's strategic approach to funding growth, ensuring resources for R&D and drug launch initiatives.
- While maintaining a "Hold" rating, investors should monitor Rigel Pharmaceuticals closely for positive signs of further sales growth and cost optimization. Continued progress could lead to a potential rating upgrade in the future.
Introduction
Rigel Pharmaceuticals ( RIGL ) is a biotech firm focused on creating, advancing, and delivering innovative small molecule drugs. These drugs are designed to significantly enhance the quality of life for individuals suffering from blood disorders, cancer, and rare immune diseases. The company has successfully developed two drugs, Tavalisse and Rezlidhia. These drugs have been granted FDA approval to treat adult patients with chronic immune thrombocytopenia [ITP] who did not respond adequately to prior treatments and adults with relapsed or refractory Acute Myeloid Leukemia [AML] with a specific IDH1 mutation, respectively.
In my recent analysis , I identified potential opportunities in Rigel's niche drugs, namely Rezlidhia and Tavalisse. However, I had reservations due to uncertainties surrounding their financial prospects and the market conditions. While I predicted modest revenue for Tavalisse, the future of Rezlidhia seemed uncertain given the evolving landscape of treatments. Moreover, Rigel's financial situation raised concerns as their cash runway was limited despite a revenue increase in Q4 2022. Consequently, I concluded that Rigel needed to address these issues before I would consider investing, and I assigned RIGL stock a "Hold" rating, citing potential downside risks. Subsequent to my recommendation indicating a higher probability of downside, Rigel's shares have experienced a 26% decline in trading.
Recently, the company revealed Q1 earnings, discussed in detail below:
Q1 2023 Financials
In Q1 2023, Rigel reported a net loss of $13.5 million ($0.08 per share), a decrease from Q1 2022's net loss of $27.4 million ($0.16 per share). Total revenues for Q1 2023 were $26.1 million, including $22.3 million from Tavalisse sales (a 38% increase from Q1 2022), $1.5 million from Rezlidhia sales, and $2.3 million from partnership contracts, primarily with Grifols S.A. Expenses in Q1 2023 were $38.8 million, a decrease from $43.0 million in Q1 2022, primarily due to reduced research and development costs. As of March 31, 2023, Rigel had $58.7 million in cash and short-term investments, slightly up from $58.2 million at the end of 2022. They also secured an additional $20.0 million term loan in March 2023.
Earnings Call Review
Rigel Pharmaceuticals expressed pleasure with the early progress of Rezlidhia and the continued growth of Tavalisse in Q1. For Rezlidhia, the FDA-approved drug for adult patients with relapsed refractory acute myeloid leukemia, 111 bottles were shipped to patients since its December launch, which resulted in Q1 2023 net sales of $1.5 million. Rigel sees a near-term opportunity to impact the lives of around 1,000 new mutant IDH1 patients each year. Their Tavalisse product saw robust growth in Q1, achieving a new quarterly high with 2,256 bottles shipped, representing a 23% growth over Q1 2022. Tavalisse net sales reached $22.3 million, marking a 38% year-over-year increase. Finally, Rigel's partner Kissei recently launched Tavalisse for chronic ITP treatment in Japan, contributing to the global expansion of Tavalisse.
My Analysis & Recommendation
Rigel Pharmaceuticals continues to demonstrate progress, particularly in their Q1 2023 earnings report. Despite maintaining my "Hold" rating for the company, my outlook has become increasingly optimistic due to various indicators.
Most notably, Tavalisse's robust growth in treating ITP is encouraging, solidifying its place as the preferred treatment for third-line patients. With Q1 shipments reaching a new record of 2,256 bottles, marking a 23% growth over Q1 2022, the demand for Tavalisse is growing. This uptick, coupled with the fact that Rigel's partner Kissei launched Tavalisse in Japan, could open up global markets and further enhance revenue.
Rezlidhia, another promising asset, showed decent progress since its December launch. With 111 bottles shipped to patients, it's a clear indication of market acceptance and potential revenue growth. Additionally, Rigel's objective to impact around 1,000 new mutant IDH1 patients each year with Rezlidhia is a plausible near-term goal that could add significant value to the company.
In terms of finances, Rigel's Q1 report showcased their initiative to cut costs, reduce losses, and lengthen their cash runway. A net loss decrease from $27.4 million in Q1 2022 to $13.5 million in Q1 2023 is notable, reflecting improved operational efficiency.
Rigel's move to secure an additional $20 million term loan in March 2023 signals a strategic approach to financial management and funding future growth. This step helps ensure they have the necessary resources to continue R&D efforts, as well as the launch and marketing of their drugs.
Even though Rigel's shares are trading 26% lower since my last "Hold" recommendation, the Q1 results and the evident progress on its key drugs present a potential turnaround scenario. Therefore, while I maintain a "Hold" rating on Rigel, I recommend investors keep a close eye on this company for positive signs in the future. If the company continues to deliver on its promises and shows further sales growth and cost optimization, a rating upgrade could be in order.
Please note that investing in microcap companies, like Rigel Pharmaceuticals, comes with risks such as limited liquidity, higher volatility, and potential challenges in accessing accurate and timely information. Investors should carefully consider these risks before making any investment decisions.
For further details see:
Rigel Pharmaceuticals Shows Promise With Q1 Earnings: Tavalisse And Rezlidhia Drive Growth