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Table of Contents 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM        TO        

Commission File Number 0-29889

Rigel Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware

94-3248524

(State or other jurisdiction of incorporation or

(I.R.S. Employer Identification No.)

organization)

611 Gateway Boulevard, Suite 900,

South San Francisco, CA

94080

(Address of principal executive offices)

(Zip Code)

(650) 624-1100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common Stock, par value $0.001 per share

RIGL

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 

As of July 27, 2023, there were 174,364,286 shares of the registrant’s Common Stock outstanding.

Table of Contents 

RIGEL PHARMACEUTICALS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

INDEX

Page

PART I

FINANCIAL INFORMATION

3

Item 1.

Financial Statements

3

Condensed Balance Sheets (Unaudited) — June 30, 2023 and December 31, 2022

3

Condensed Statements of Operations (Unaudited) — three and six months ended June 30, 2023 and 2022

4

Condensed Statements of Comprehensive Loss (Unaudited) — three and six months ended June 30, 2023 and 2022

5

Condensed Statements of Stockholders’ (Deficit) Equity (Unaudited) — three and six months ended June 30, 2023 and 2022

6

Condensed Statements of Cash Flows (Unaudited) — six months ended June 30, 2023 and 2022

7

Notes to Condensed Financial Statements (Unaudited)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

45

Item 4.

Controls and Procedures

45

PART II

OTHER INFORMATION

46

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

47

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

91

Item 3.

Defaults Upon Senior Securities

91

Item 4.

Mine Safety Disclosures

91

Item 5.

Other Information

92

Item 6.

Exhibits

92

Signatures

94

2

Table of Contents 

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

RIGEL PHARMACEUTICALS, INC.

CONDENSED BALANCE SHEETS

(In thousands)

As of

June 30, 2023

    

December 31, 2022 (1)

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

48,812

$

24,459

Short-term investments

 

15,545

 

33,747

Accounts receivable, net

 

20,819

 

40,320

Inventories

10,782

 

9,118

Prepaid and other current assets

 

4,967

 

8,259

Total current assets

 

100,925

 

115,903

Property and equipment, net

 

215

 

857

Intangible asset, net

14,413

14,949

Operating lease right-of-use assets

997

1,930

Other assets

 

541

 

640

Total assets

$

117,091

$

134,279

Liabilities and stockholders’ deficit

Current liabilities:

Accounts payable

$

5,240

$

22,508

Accrued compensation

 

6,739

 

8,866

Accrued research and development

 

5,826

 

7,708

Revenue reserves and refund liability

13,684

12,145

Other accrued liabilities

 

5,013

 

6,485

Lease liabilities, current portion

466

1,133

Deferred revenue

1,355

1,369

Other long-term liabilities, current portion

5,700

4,997

Total current liabilities

 

44,023

 

65,211

Long-term portion of lease liabilities

 

628

 

972

Loans payable, net of discount

59,574

39,448

Other long-term liabilities

 

40,981

 

42,264

Total liabilities

145,206

147,895

Commitments

Stockholders’ deficit:

Preferred stock

 

 

Common stock

 

175

 

174

Additional paid-in capital

 

1,374,330

 

1,368,822

Accumulated other comprehensive loss

 

(25)

 

(153)

Accumulated deficit

 

(1,402,595)

 

(1,382,459)

Total stockholders’ deficit

 

(28,115)

 

(13,616)

Total liabilities and stockholders’ deficit

$

117,091

$

134,279

(1)The balance sheet as of December 31, 2022 has been derived from the audited financial statements included in Rigel’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (SEC) on March 7, 2023.

See Accompanying Notes to Condensed Financial Statements

3

Table of Contents 

RIGEL PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

    

2023

    

2022

Revenues:

Product sales, net

$

23,881

$

18,550

$

47,626

$

34,747

Contract revenues from collaborations

2,005

11,269

4,330

11,807

Government contract

1,000

1,000

Total revenues

26,886

29,819

52,956

46,554

Costs and expenses:

Cost of product sales

1,075

1,036

2,052

1,157

Research and development

 

4,772

 

14,767

14,861

 

30,241

Selling, general and administrative

 

26,306

 

26,981

54,035

 

54,382

Total costs and expenses

 

32,153

 

42,784

 

70,948

 

85,780

Loss from operations

 

(5,267)

 

(12,965)

 

(17,992)

 

(39,226)

Interest income

 

529

 

42

 

922

 

63

Interest expense

(1,862)

(569)

(3,066)

(1,774)

Net loss

$

(6,600)

$

(13,492)

$

(20,136)

$

(40,937)

Net loss per share, basic and diluted

$

(0.04)

$

(0.08)

$

(0.12)

$

(0.24)

Weighted average shares used in computing net loss per share, basic and diluted

173,748

172,147

173,659

171,961

See Accompanying Notes to Condensed Financial Statements

4

Table of Contents 

RIGEL PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

    

2023

    

2022

Net loss

$

(6,600)

$

(13,492)

$

(20,136)

$

(40,937)

Other comprehensive gain (loss):

Net unrealized gain (loss) on short-term investments

 

2

 

(22)

 

128

 

(336)

Comprehensive loss

$

(6,598)

$

(13,514)

$

(20,008)

$

(41,273)

See Accompanying Notes to Condensed Financial Statements

5

Table of Contents 

RIGEL PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(In thousands, except share amounts)

(unaudited)

Additional

Accumulated Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Deficit

Balance as of January 1, 2023

 

173,398,645

$

174

$

1,368,822

$

(153)

$

(1,382,459)

$

(13,616)

Net loss

 

(13,536)

 

(13,536)

Net change in unrealized gain on short-term investments

 

126

 

126

Issuance of common stock upon exercise of options

 

952

1

 

1

Issuance of common stock upon vesting of restricted stock units (RSUs)

266,256

Stock-based compensation expense

 

2,768

 

2,768

Balance as of March 31, 2023

 

173,665,853

174

1,371,591

(27)

(1,395,995)

(24,257)

Net loss

 

(6,600)

(6,600)

Net change in unrealized gain on short-term investments

 

2

2

Issuance of common stock upon exercise of options and participation in Purchase Plan

 

523,795

1

553

554

Issuance of common stock upon vesting of RSUs

168,750

Stock-based compensation expense

 

2,186

2,186

Balance as of June 30, 2023

174,358,398

$

175

$

1,374,330

$

(25)

$

(1,402,595)

$

(28,115)

Additional

Accumulated Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Equity (Deficit)

Balance as of January 1, 2022

    

171,602,226

$

172

$

1,354,190

$

(102)

$

(1,323,886)

$

30,374

Net loss

 

(27,445)

 

(27,445)

Net unrealized loss on short-term investments

 

(314)

 

(314)

Issuance of common stock upon exercise of options

 

420,521

940

 

940

Issuance of common stock upon vesting of RSUs

22,500

Stock-based compensation expense

 

3,243

 

3,243

Balance as of March 31, 2022

 

172,045,247

172

1,358,373

(416)

(1,351,331)

6,798

Net loss

 

(13,492)

(13,492)

Net unrealized loss on short-term investments

 

(22)

(22)

Issuance of common stock upon exercise of options and participation in Purchase Plan

 

609,839

1

598

599

Issuance of common stock upon vesting of RSUs

181,250

Stock-based compensation expense

 

2,440

2,440

Balance as of June 30, 2022

172,836,336

$

173

$

1,361,411

$

(438)

$

(1,364,823)

$

(3,677)

See Accompanying Notes to Condensed Financial Statements

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RIGEL PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Six Months Ended June 30, 

2023

    

2022

Operating activities

Net loss

$

(20,136)

$

(40,937)

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense

 

4,930

5,598

Loss (gain) on sale and disposal of fixed assets

398

(253)

Depreciation and amortization

 

653

474

Non-cash interest expense

682

Net amortization and accretion of discount on short-term investments and term loan

(114)

107

Changes in assets and liabilities:

Accounts receivable, net

 

19,501

(1,726)

Inventories

(1,640)

483

Prepaid and other current assets

 

3,292

(527)

Other assets

 

99

571

Right-of-use assets

 

933

4,458

Accounts payable

 

(2,268)

(1,585)

Accrued compensation

 

(2,127)

(3,165)

Accrued research and development

 

(1,882)

(1,171)

Revenue reserves and refund liability

1,539

2,316

Other accrued liabilities

 

(1,472)

1,878

Lease liability

(1,011)

(4,840)

Deferred revenue

(14)

(1,053)

Other current and long-term liabilities

 

1,175

 

142

Net cash provided by (used in) operating activities

 

1,856

 

(38,548)

Investing activities

Purchases of short-term investments

 

(8,780)

(6,997)

Maturities of short-term investments

 

27,400

50,645

Purchases of intangible asset

 

(15,000)

Proceeds from sale of property and equipment

127

264

Purchases of property and equipment

 

(188)

Net cash provided by investing activities

 

3,747

 

43,724

Financing activities

Cost share payments to a collaboration partner

(1,754)

(8,346)

Net proceeds from issuances of common stock upon exercise of options and participation in Purchase Plan

 

554

1,539

Net proceeds from term loan financing

19,950

9,942

Net cash provided by financing activities

 

18,750

 

3,135

Net increase in cash and cash equivalents

 

24,353

 

8,311

Cash and cash equivalents at beginning of period

 

24,459

18,890

Cash and cash equivalents at end of period

$

48,812

$

27,201

Supplemental disclosure of cash flow information

Interest paid

$

2,485

$

951

See Accompanying Notes to Condensed Financial Statements

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Rigel Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(unaudited)

In this report, “Rigel,” “we,” “us” and “our” refer to Rigel Pharmaceuticals, Inc.

1.

Organization and Summary of Significant Accounting Policies

Description of Business

We are a biotechnology company dedicated to discovering, developing and providing novel therapies that significantly improve the lives of patients with hematologic disorders and cancer. We focus on products that address signaling pathways that are critical to disease mechanisms.

Our first product approved by the US Food and Drug Administration (FDA) is TAVALISSE® (fostamatinib disodium hexahydrate) tablets, the only approved oral spleen tyrosine kinase (SYK) inhibitor for the treatment of adult patients with chronic immune thrombocytopenia (ITP) who have had an insufficient response to a previous treatment. The product is also commercially available in Europe and the United Kingdom (UK) (as TAVLESSE), and in Canada, Israel and Japan (as TAVALISSE) for the treatment of chronic ITP in adult patients.

Our second FDA approved product is REZLIDHIA® (olutasidenib) capsules for the treatment of adult patients with relapsed or refractory (R/R) acute myeloid leukemia (AML) with a susceptible isocitrate dehydrogenase-1 (IDH1) mutation as detected by an FDA-approved test. We began our commercialization of REZLIDHIA in December 2022. We in-licensed olutasidenib from Forma Therapeutics, Inc. (now Novo Nordisk), with exclusive, worldwide rights for its development, manufacturing and commercialization.

We continue to advance the development of our interleukin receptor-associated kinase (IRAK) 1/4 inhibitor program, in an open-label, Phase 1b trial to determine the tolerability and preliminary efficacy of the drug in patients with lower-risk myelodysplastic syndrome (MDS) who are refractory or resistant to prior therapies.

Our other ongoing clinical programs include a fostamatinib Phase 2/3 trial, the Accelerating COVID-19 Therapeutic Inventions and Vaccines Phase 2/3 trial (ACTIV-4 Host Tissue Trial), for the treatment of hospitalized high-risk patients with COVID-19 being conducted and sponsored by the National Institute of Health (NIH)/National Heart, Lung, and Blood Institute (NHLBI), and a receptor-interacting serine/threonine-protein kinase 1 (RIPK1) inhibitor program in clinical development with our partner Eli Lilly and Company (Lilly). We also have product candidates in clinical development with partners BerGenBio ASA (BerGenBio) and Daiichi Sankyo (Daiichi).

Basis of Presentation

Our accompanying unaudited condensed financial statements have been prepared in accordance with United States generally accepted accounting principles (US GAAP), for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1933, as amended (Securities Act). Accordingly, they do not include all the information and notes required by US GAAP for complete financial statements. These unaudited condensed financial statements include only normal and recurring adjustments that we believe are necessary to fairly state our financial position and the results of our operations and cash flows. Interim-period results are not necessarily indicative of results of operations or cash flows for a full-year or any subsequent interim period. The balance sheet as of December 31, 2022 has been derived from audited financial statements at that date but does not include all disclosures required by US GAAP for complete financial statements. Because certain disclosures required by US GAAP for complete financial statements are not included herein, these interim unaudited condensed financial statements and the notes accompanying them should be read in conjunction with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 7, 2023.

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Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates.

Significant Accounting Policies

Our significant accounting policies are described in “Note 1 – Description of Business and Summary of Significant Accounting Policies” to our “Notes to Financial Statements” contained in “Part II, Item 8, Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to these accounting policies.

Liquidity

As of June 30, 2023, we had approximately $64.4 million in cash, cash equivalents and short-term investments. Since inception, we have financed our operations primarily through sales of equity securities, debt financing, contract payments under our collaboration agreements and from product sales.

Based on our current operating plan, we believe that our existing cash, cash equivalents, and short-term investments will be sufficient to fund our expenses and capital expenditure requirements for at least the next 12 months from the date of issuance of this Form 10-Q.

Recently Issued Accounting Standards

Recently issued accounting guidance is either not applicable or did not have, or is not expected to have, a material impact to us.

2.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period and the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued. Potentially dilutive securities include stock options, RSUs and shares issuable under our Employee Stock Purchase Plan (Purchase Plan). The dilutive effect of these potentially dilutive securities is reflected in diluted earnings per share using the treasury stock method. Under the treasury stock method, an increase in the fair market value of our common stock can result in a greater dilutive effect from potentially dilutive securities.

The potential shares of common stock that were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive are as follows (in thousands):

Three Months Ended June 30, 

Six Months Ended June 30, 

2023

    

2022

2023

    

2022

Outstanding stock options

35,244

33,081

35,244

33,081

RSUs

1,963

1,191

1,963

1,191

Total

37,207

34,272

37,207

34,272

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3.

Revenues

Revenues disaggregated by category were as follows (in thousands):

Three Months Ended June 30, 

Six Months Ended June 30, 

2023

    

2022

2023

    

2022

Product sales:

Gross product sales

$

33,456

$

26,427

$

66,654

49,045

Discounts and allowances

(9,575)

(7,877)

(19,028)

(14,298)

Total product sales, net

23,881

18,550

47,626

34,747

Revenues from collaborations:

License revenues

2,337

2,545

Development milestones

5,000

5,000

Royalty, delivery of drug supplies and others

2,005

3,932

4,330

4,262

Total revenues from collaborations

2,005

11,269

4,330

11,807

Government contract

1,000

1,000

Total revenues

$

26,886

$

29,819

$

52,956

$

46,554

Revenue from product sales are related to sales of our commercial products, TAVALISSE and REZLIDHIA, to our specialty distributors. For detailed discussions of our revenues from collaboration and government contract, see “Note 4 – Sponsored Research and License Agreements and Government Contract”.

Our net product sales include gross product sales, net of chargebacks, discounts and fees, government and other rebates and returns. Of the total discounts and allowances from gross product sales for the six months ended June 30, 2023 and 2022, $18.6 million and $13.0 million, respectively, was accounted for as additions to revenue reserves and refund liability, and $0.4 million and $1.3 million, respectively, as reductions in accounts receivable (as it relates to allowance for prompt pay discount) and prepaid and other current assets (as it relates to certain chargebacks and other fees that were prepaid) in the condensed balance sheet. The following tables summarize the activities in chargebacks, discounts and fees, government and other rebates and returns that were accounted for within revenue reserves and refund liability, for each of the periods presented (in thousands):

Chargebacks,

Government

Discounts and

and Other

Fees

Rebates

Returns

Total

Balance as of January 1, 2023

    

$

6,213

$

2,636

$

3,296

$

12,145

Provision related to current period sales

14,439

3,725

395

18,559

Credit or payments made during the period

(13,139)

(3,765)

(116)

(17,020)

Balance as of June 30, 2023

 

$

7,513

$

2,596

$

3,575

$

13,684

Chargebacks,

Government

Discounts and

and Other

Fees

Rebates

Returns

Total

Balance as of January 1, 2022

    

$

3,404

$

2,494

$

2,017

$

7,915

Provision related to current period sales

9,680

2,711

613

13,004

Credit or payments made during the period

(7,748)

(2,901)

(39)

(10,688)

Balance as of June 30, 2022

 

$

5,336

$

2,304

$

2,591

$

10,231

The following table summarizes the percentages of revenues from each of our customers who individually accounted for 10% or more of the total net product sales and revenues from collaborations:

Three Months Ended June 30, 

Six Months Ended June 30, 

2023

    

2022

2023

    

2022

McKesson Specialty Care Distribution Corporation

44%

34%

45%

36%

Cardinal Healthcare

28%

16%

26%

20%

ASD Healthcare and Oncology Supply

19%

12%

21%

19%

Kissei

25%

16%

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4.

Sponsored Research and License Agreements and Government Contract

Sponsored Research and License Agreements

We conduct research and development programs independently and in connection with our corporate collaborators. As of June 30, 2023, we are a party to collaboration agreements with Lilly to develop and commercialize R552, a RIPK1 inhibitor, for the treatment of non-central nervous system (non-CNS) diseases and collaboration aimed at developing additional RIPK1 inhibitors for the treatment of central nervous system (CNS) diseases; with Grifols S.A. (Grifols) to commercialize fostamatinib for human diseases in all indications, including chronic ITP and autoimmune hemolytic anemia (AIHA), in Grifols territory which includes Europe, the UK, Turkey, the Middle East, North Africa and Russia (including Commonwealth of Independent States); with Kissei Pharmaceutical Co., Ltd. (Kissei) to develop and commercialize fostamatinib in Kissei territory which includes Japan, China, Taiwan and the Republic of Korea; with Medison Pharma Trading AG (Medison Canada) and Medison Pharma Ltd. (Medison Israel and, together with Medison Canada, Medison) to commercialize fostamatinib in all indications, including chronic ITP and AIHA, in Medison territory which includes Canada and Israel; and with Knight Therapeutics International SA (Knight) to commercialize fostamatinib in all indications, including chronic ITP and AIHA, in Knight territory which includes Latin America, consisting of Mexico, Central and South America, and the Caribbean (Knight territory).

Further, we are also a party to collaboration agreements, but do not have ongoing performance obligations with BerGenBio for the development and commercialization of AXL receptor tyrosine kinase (AXL) inhibitors in oncology, and with Daiichi to pursue research related to murine double minute 2 (MDM2) inhibitors, a novel class of drug targets called ligases.

Under the above existing agreements that we entered into in the ordinary course of business, we received or may be entitled to receive upfront cash payments, payments contingent upon specified events achieved by such partners and royalties on any net sales of products sold by such partners under the agreements. As of June 30, 2023, total future contingent payments to us under all of the above existing agreements, excluding terminated agreements, could exceed $1.3 billion if all potential product candidates achieved all of the payment triggering events under all of our current agreements. Of this amount, $279.5 million relates to the achievement of development events, $263.1 million relates to the achievement of regulatory events and $796.0 million relates to the achievement of certain commercial events. This estimated future contingent amount does not include any estimated royalties that could be due to us if the partners successfully commercialize any of the licensed products. Future events that may trigger payments to us under the agreements are based solely on our partners’ future efforts and achievements of specified development, regulatory and/or commercial events.

Global Exclusive License Agreement with Lilly

We have a global exclusive license agreement and strategic collaboration with Lilly (Lilly Agreement) entered in February 2021, which became effective on March 27, 2021, upon clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, to develop and commercialize R552 for the treatment of non-CNS diseases. In addition, the collaboration is aimed at developing additional RIPK1 inhibitors for the treatment of CNS diseases. Pursuant to the terms of the license agreement, we granted to Lilly exclusive rights to develop and commercialize R552 and related RIPK1 inhibitors in all indications worldwide. The parties’ collaboration is governed through a joint governance committee and appropriate subcommittees.

Under the terms of the Lilly Agreement, we were entitled to receive a non-refundable and non-creditable upfront cash payment amounting to $125.0 million, which we received in April 2021. We are also entitled to additional milestone payments for non-CNS disease products consisting of up to $330.0 million in milestone payments upon the achievement of specified development, regulatory and commercial milestones, and up to $100.0 million in sales milestone payments on a product-by-product basis. In addition, depending on the extent of our co-funding of R552 development activities, we would be entitled to receive tiered royalty payments on net sales of non-CNS disease products at percentages ranging from the mid-single digits to high-teens, subject to certain standard reductions and offsets. We are also eligible to receive milestone payments for CNS disease products consisting of up to $255.0 million in milestone payments upon the achievement of specified development, regulatory and commercial milestones, and up to $150.0 million in sales milestone payments on a product-by-product basis. We would be entitled to receive tiered royalty

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payments on net sales of CNS disease products up to low-double digits, subject to certain standard reductions and offsets.

We are responsible for performing and funding initial discovery and identification of CNS disease development candidates. Following candidate selection, Lilly will be responsible for performing and funding all future development and commercialization of the CNS disease development candidates.

Under the Lilly Agreement, we are responsible for 20% of development costs for R552 in the US, Europe, and Japan, up to a specified cap, and Lilly is responsible for funding the remainder of all development activities for R552 and other non-CNS disease development candidates. Pursuant to the terms of the Lilly Agreement, we have the right to opt-out of co-funding the R552 development activities at two different specified times. If we exercise our first opt-out right (no later than September 30, 2023), we are required to fund our share of the R552 development activities up to a maximum funding commitment of $65.0 million through April 1, 2024. If we decide not to exercise our opt-out rights, we will be required to share in global development costs of up to certain amounts at a specified cap, as provided for in the Lilly Agreement. Given our rights to opt-out from the development of R552, we believe at the minimum, we have a commitment to fund the development costs up to $65.0 million as discussed above. We considered this commitment to fund the development costs as a significant financing component of the contract, which we accounted for as a reduction of the upfront fee to derive the transaction price. This financing component was recorded as a liability at its net present value of approximately $57.9 million using a 6.4% discount rate. Interest expense is accreted on such liability over the expected commitment period, adjusted for timing of expected cost share payments. No interest was accreted during the six months ended June 30, 2023, and $0.7 million of interest was accreted during the six months ended June 30, 2022. Through June 30, 2023, Lilly billed us $16.9 million for our share of development costs under this agreement, and the amount was fully paid as of June 30, 2023. As of June 30, 2023 and December 31, 2022, the outstanding financing liability to Lilly was $44.5 million and $46.2 million, respectively, and included within other long-term liabilities, current portion, and other long-term liabilities in the condensed balance sheet.

We accounted for this agreement under ASC 606 and identified the following distinct performance obligations at inception of the agreement: (a) granting of the license rights over the non-CNS penetrant intellectual property (IP), and (b) granting of the license rights over the CNS penetrant IP which will be delivered to Lilly upon completion of the additional research and development efforts specified in the agreement. We concluded each of these performance obligations is distinct. We based our assessment on the assumption that Lilly can benefit from each of the licenses on its own by developing and commercializing the underlying product using its own resources.

We allocated the net transaction price of $67.1 million to each performance obligation based on our best estimate of its relative standalone selling price using the adjusted market assessment approach. The transaction price allocated to the non-CNS penetrant IP of $60.4 million was recognized as revenue upon delivery of the non-CNS penetrant IP to Lilly during the first quarter of 2021. The transaction price allocated to the CNS penetrant IP of $6.7 million was recognized as revenue from the effective date of the Lilly Agreement through the eventual acceptance by Lilly using the input method, since we were required to perform additional research and development efforts before the final acceptance of the license by Lilly. In June 2022, Lilly provided notice of continuance pursuant to the terms of the Lilly Agreement, whereby Lilly elected its option to lead the identification and selection of CNS penetrant lead candidate. As such, we recognized the remaining outstanding deferred revenue in the second quarter of 2022. For the three and six months ended June 30, 2022, we recognized $0.3 million and $0.5 million, respectively, of revenue associated with the delivery of CNS penetrant IP. No such revenue was recognized in the three and six months ended June 30, 2023.

The remaining future variable consideration related to future milestone payments as discussed above were fully constrained because we cannot conclude that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur, given the inherent uncertainty of success with these future milestones. For sales-based milestones and royalties, we determined that the license is the predominant item to which the royalties or sales-based milestones relate. Accordingly, we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

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Grifols License Agreement

We have an exclusive commercialization license agreement with Grifols entered in January 2019 with exclusive rights to commercialize fostamatinib for human diseases, including chronic ITP and AIHA, and non-exclusive rights to develop fostamatinib in Grifols territory. Under the agreement, we received an upfront payment of $30.0 million, with the potential for $297.5 million in total regulatory and commercial milestones. We are also entitled to receive stepped double-digit royalty payments based on tiered net sales which may reach 30% of net sales. The agreement also required us to continue to conduct our long-term open-label extension study on patients with ITP through European Medicines Agency (EMA) approval of ITP in Europe or until the study ends as well as conduct the Phase 3 trial of fostamatinib in AIHA.

In January 2020, the European Commission (EC) granted a centralized Marketing Authorization (MA) for fostamatinib valid throughout the European Union (EU) and in the UK after the departure of the UK from the EU for the treatment of chronic ITP in adult patients who are refractory to other treatments. With this approval, in February 2020, we received $20.0 million non-refundable payment, composed of a $17.5 million payment due upon Marketing Authorization Application (MAA) approval by the EMA of fostamatinib for the first indication and a $2.5 million creditable advance royalty payment, based on the terms of our collaboration agreement with Grifols. The above milestone payment was allocated to the distinct performance obligations in the collaboration agreement with Grifols.

We accounted for this agreement under ASC 606 and identified the following distinct performance obligations at inception of the agreement: (a) granting of the license, (b) performance of research and regulatory services related to our long-term open-label extension study on patients with ITP, and (c) performance of research services related to our Phase 3 study in AIHA. We allocated the transaction price to the distinct performance obligations in our collaboration agreement based on our best estimate of the relative standalone selling price, and recognized the corresponding revenue in the periods we satisfied the performance obligations. During the three and six months ended June 30, 2022, we recognized $0.2 million and $0.5 million, respectively, of revenue associated with the remaining performance obligation to perform research services. No such revenue was recognized during the three and six months ended June 30, 2023.

The remaining variable consideration related to future regulatory and commercial milestones were fully constrained because we cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, given the inherent uncertainty of success with these future milestones. We are recognizing revenues related to the research and regulatory services throughout the term of the respective clinical programs using the input method. For sales-based milestones and royalties, we determined that the license is the predominant item to which the royalties or sales-based milestones relate. Accordingly, we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

We entered into a Commercial Supply Agreement with Grifols in October 2020 to supply and sell our drug product priced at a certain markup specified in the agreement, in quantities Grifols order from us pursuant to and in accordance with the agreement. Prior to the Commercial Supply Agreement, we had a Drug Product Purchase Agreement with Grifols entered in December 2019. During the three and six months ended June 30, 2023, we recognized $1.2 million and $2.8 million, respectively, of revenue related to delivery of drug supply to Grifols. During the three and six months ended June 30, 2022, we recognized $1.2 million of revenue related to delivery of drug supply to Grifols.

We began recognizing royalty revenue from Grifols beginning in the third quarter of 2022. For the three and six months ended June 30, 2023, we recognized $0.8 million and $1.5 million, respectively, of royalty revenue from Grifols, and such amount was included within contract revenues from collaboration. No such revenue was recognized for the three and six months ended June 30, 2022.

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Kissei License Agreement

We have an exclusive license and supply agreement with Kissei entered in October 2018, to develop and commercialize fostamatinib in all current and potential indications in Kissei’s territory. Kissei is responsible for performing and funding all development activities for fostamatinib in the above-mentioned territories. We received an upfront cash payment of $33.0 million, with the potential for up to an additional $147.0 million in development, regulatory and commercial milestone payments, and will receive mid- to upper twenty percent, tiered, escalated net sales-based payments for the supply of fostamatinib. Under the agreement, we granted Kissei the license rights to fostamatinib in Kissei’s territory and are obligated to supply Kissei with drug product for use in clinical trials and pre-commercialization activities. We are also responsible for the manufacture and supply of fostamatinib for all future development and commercialization activities under the agreement.

We accounted for this agreement under ASC 606 and identified the following distinct performance obligations at inception of the agreement: (a) granting of the license, (b) supply of fostamatinib for clinical use and (c) material right associated with discounted fostamatinib that is supplied for use other than clinical or commercial. In addition, we will provide commercial product supply if the product is approved in the licensed territory. We concluded that each of these performance obligations is distinct. We determined that the upfront fee of $33.0 million represented the transaction price and was allocated to the performance obligations based on our best estimate of the relative standalone selling price and recognized the corresponding revenue in the period we satisfied the performance obligations. As of June 30, 2023 and December 31, 2022, the remaining deferred revenue was related to the material right associated with discounted fostamatinib supply which amounted to $1.4 million.

For the three and six months ended June 30, 2022, we recognized $2.5 million and $2.6 million, respectively, of revenue related to the delivery of fostamatinib supply to Kissei mainly for commercial use. No such revenue was recognized during the three and six months ended June 30, 2023.

In April 2022, Kissei announced that an NDA was submitted to Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) for fostamatinib in chronic ITP. With this milestone event, we received $5.0 million non-refundable and non-creditable payment from Kissei pursuant to the terms of our collaboration agreement, and such amount was recognized as revenue in the three and six months ended June 30, 2022. In December 2022, Kissei announced that Japan’s PMDA approved the NDA for fostamatinib in chronic ITP. With this milestone event, we were entitled to receive $20.0 million non-refundable and non-creditable payment from Kissei pursuant to the terms of our collaboration agreement, which we recognized as revenue in the fourth quarter of 2022. The amount was subsequently collected in January 2023.

The remaining variable consideration related to future development and regulatory milestones was fully constrained because we cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, given the inherent uncertainty of success with these future milestones. For sales-based milestones and tiered, escalated net sales-based payments for the supply of fostamatinib, we determined that the license is the predominant item to which the sales-based milestones relate to. Accordingly, we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the allocated costs for the tiered, escalated net sales-based payments has been satisfied (or partially satisfied). We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

Medison Commercial and License Agreements

We have two exclusive commercial and license agreements with Medison entered in October 2019 for the commercialization of fostamatinib for chronic ITP in Medison territory, pursuant to which, we received a $5.0 million upfront payment with respect to the agreement in Canada. We accounted for this agreement under ASC 606 and identified the following combined performance obligations at inception of the agreement: (a) granting of the license and (b) obtaining regulatory approval in Canada of fostamatinib in ITP. We determined that the non-refundable upfront fee of $5.0 million represented the transaction price. However, under the agreement, we have the option to buy back all rights to the product in Canada within six months from obtaining regulatory approval for the treatment of AIHA in Canada. The buyback option precludes us from transferring control of the license to Medison under ASC 606. We believed that the buyback provision, if exercised, will require us to repurchase the license at an amount equal to or more than the upfront $5.0 million. As such, this arrangement was accounted for as a financing arrangement. Interest expense

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was accreted on such liability over the expected buyback period. We also billed Medison for the delivery of fostamatinib supplies for clinical use which we previously deferred and included within the outstanding financing liability considering the buy-back provision.

The decision to exercise the buyback option is dependent of many factors including management’s cost and benefit assessments and the success of obtaining regulatory approval for the treatment of AIHA in Canada. In June 2022, we reported the top-line results from our Phase 3 trial of fostamatinib in warm autoimmune hemolytic anemia (wAIHA) which showed that the trial did not demonstrate statistical significance in the primary efficacy endpoint in the overall study population. We also announced in early October 2022 that we will not file a supplemental new drug application (sNDA) for wAIHA indication considering the top-line data results and the guidance received from the FDA. With these developments, we assessed our options path forward, including our buyback option right with regards to the Medison license agreement. Based on management’s assessment, the likelihood of exercising the buy-back option right was remote. As such, during the fourth quarter of 2022, we relieved the outstanding financing liability to Medison amounting to $5.7 million and recognized such amount as collaboration revenue in accordance with ASC 606. There was no outstanding financing liability to Medison as of June 30, 2023 and December 31, 2022.

Knight Commercial License and Supply Agreement

We have a commercial license and supply agreements with Knight entered in May 2022 for the commercialization of fostamatinib for approved indications in Knight territory. Pursuant to such commercial license agreement, we received a $2.0 million one-time, non-refundable, and non-creditable upfront payment, with potential for up to an additional $20.0 million in regulatory and sales-based commercial milestone payments, and will receive twenty- to mid-thirty percent, tiered, escalated net-sales based royalty payments for products sold in the Knight territory. We accounted for this agreement under ASC 606 and identified that the upfront payment was a consideration for granting Knight the license to commercialize fostamatinib for approved indication in the Knight territory, and no further material deliverables associated to such upfront payment. As such, we recognized the upfront payment as revenue during the three and six months ended June 30, 2022. Variable consideration related to future regulatory milestones was fully constrained because we cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, given the inherent uncertainty of success with these future milestones. For sales-based milestones and royalties, we determined that the license is the predominant item to which the royalties or sales-based milestones relate to. Accordingly, we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all the royalty has been allocated has been satisfied (or partially satisfied). We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. We are also responsible for the exclusive manufacture and supply of fostamatinib for all future development and commercialization activities under agreement. 

Government Contract - US Department of Defense’s JPEO-CBRND

In January 2021, we were awarded up to $16.5 million by the US Department of Defense to support our ongoing Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19. The amount of award we will receive from the US Department of Defense is subject to submission of proper documentation as evidence of completion of certain clinical trial events or milestones as specified in the agreement, and approval by the US Department of Defense that such events or milestones have been met. We record government contract revenue in the statement of operations in the period when it is probable that we will receive the award, which is when we comply with the conditions associated with the award and obtain approval from the US Department of Defense that such conditions have been met. For the three and six months ended June 30, 2023, we recognized $1.0 million of revenue related to this grant upon achievement of certain milestones. Through June 30, 2023, we received $16.0 million of the awards which we recognized as revenue in the respective periods, with remaining $0.5 million available, subject to us meeting certain milestone and approval by the US Department of Defense that such milestone has been met, as specified in the agreement.

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License and Transition Services Agreement with Forma (now Novo Nordisk)

We have a license and transition services agreement with Forma (now Novo Nordisk) entered in July 2022, for an exclusive license to develop, manufacture and commercialize olutasidenib, a proprietary inhibitor of mutated IDH1 (mIDH1), for any uses worldwide, including for the treatment of AML and other malignancies. Forma became a wholly owned subsidiary of Novo Nordisk following the closing of its acquisition by Novo Nordisk in October 2022. Pursuant to the terms of the license and transition services agreement, we paid an upfront fee of $2.0 million, with the potential to pay up to $67.5 million of additional payments upon achievement of specified development and regulatory milestones and up to $165.5 million of additional payments upon achievement of certain commercial milestones. In addition, subject to the terms and conditions of the license and transition services agreement, Forma (now Novo Nordisk) would be entitled to tiered royalty payments on net sales of licensed products at percentages ranging from low-teens to mid-thirties, as well as certain portion of our sublicensing revenue, subject to certain standard reductions and offsets.

The transaction was accounted for as an acquisition of asset under ASC 730, Research and Development. In accordance with the guidance, in a transaction accounted for as an asset acquisition, any acquired IPR&D that does not have alternative future use is charged to expense at the acquisition date. At the acquisition date, the acquired license asset was accounted for as IPR&D, and we anticipated no other economic benefit to be derived from such acquired licensed asset other than the primary indications. As such, we accounted for the upfront fee of $2.0 million as IPR&D and recorded such cost within research and development expense in the condensed statements of operations in the third quarter of 2022.

Under the accounting guidance, we account for contingent cash payments when it is probable that a liability is incurred and the amount can be reasonably estimated. We account for milestone payment obligations incurred at development stage and prior to a regulatory approval of an indication associated with the acquired licensed asset as research and development expense when the event requiring payment of the milestone occurs. Milestone payment obligations incurred upon and after a regulatory approval of an indication associated with the acquired licensed asset, and at the commercial stage, are recorded as intangible asset when the event requiring payment of the milestones occurs. The amount recorded as intangible asset is amortized over the estimated useful life of the acquired licensed asset. Royalty payments related to the acquired licensed asset is recorded as cost of sales when incurred. Prior to the FDA approval of REZLIDHIA in December 2022, we achieved certain regulatory milestone which entitled Forma (now Novo Nordisk) to receive a $2.5 million milestone payment. Because such milestone payment obligation was incurred prior to a regulatory approval of an indication associated with the acquired licensed asset, we recorded such amount as research and development expense in the fourth quarter of 2022. On December 1, 2022, the FDA approved REZLIDHIA capsules for the treatment of adult patients with R/R AML with susceptible IDH1 mutations as detected by an FDA-approved test. Following the FDA approval, we launched REZLIDHIA and made first shipments of the product to our customers in December 2022. With this FDA approval and first commercial sale of the product, Forma (now Novo Nordisk) was entitled to receive a total of $15.0 million milestone payments. Since such milestone payment obligations were incurred upon and after regulatory approval of the product, we recorded such amount as intangible asset on our condensed balance sheet in the fourth quarter of 2022. The $15.0 million milestone payment obligation was outstanding as of December 31, 2022 and included within accounts payable in our condensed balance sheet. Such amount was paid in the first quarter of 2023.

During the three and six months ended June 30, 2023, we recognized $0.3 million and $0.5 million, respectively, of amortization of intangible asset, and $