Zacks Small Cap Research – RANI: Third Quarter Update – Technologist

By John Vandermosten, CFA

NASDAQ:RANI

READ THE FULL RANI RESEARCH REPORT

Rani Therapeutics Holdings, Inc. (NASDAQ:RANI) reported third quarter 2024 results on November 14^th

, 2024. Since the second quarter report, Rani has participated in multiple investor conferences, raised an additional $10 million and reported data for a GLP-1 incretin triagonist, which we review below. We are looking ahead to the completion of the preclinical work in preparation for the Phase I RT-114 study which is expected to begin in 2025. The other important anticipated event is a deal with an established biopharmaceutical company which may include upfronts, milestones and royalties for Rani. Management has shared that there are conversations underway to conclude a transaction but has not indicated when they may be realized.

Third Quarter 2024 Operational and Financial Results

Rani reported 3Q:24 results in a

press release

and

Form 10-Q

filing with the SEC on November 14^th

. The company did not hold a conference call. For the quarter ending September 30, 2024, revenues were zero, matching prior year amounts. Operating expense was $11.8 million and net loss per share for Class A shareholders was ($0.24).

• 
  Research and development expenses totaled $6.2 million, down 45% from $11.2 million mostly due to lower payroll. Lower compensation cost was a result of the workforce reduction announced in November of 2023. Other year over year reductions were related to third-party service costs and materials and supplies expense;
• 
  General & Administrative expenses were $5.6 million, falling 15% from $6.6 million on account of a reduction in the workforce, lower directors’ and officers’ insurance premiums partially offset by higher facility costs;
• 
  Interest income was cut in half due to lower cash balances while interest expense was relatively stable;
• 
  Non-controlling interest was ($5.9) million vs. ($9.1) million;
• 
  Net loss for Class A shareholders was ($6.8) million vs. ($9.2) million or ($0.24) and ($0.36) per share.

As of September 30, 2024, cash and marketable securities totaled $30.4 million. This amount compares to the $48.5 million balance held at the end of 2023. Long-term debt was held on the balance sheet at $28.3 million. 3Q:24 cash used in operations and for capital expenditures was ($8.5) million versus ($14.8) million for the comparable period in the prior year. For the first nine months of the year, cash burn was ($27.1) million vs. ($39.8) million. Following the end of the quarter and in October 2024, Rani sold securities to raise an additional $10 million in gross proceeds. Management expects cash to be sufficient to support operations until 3Q:25.

RT-114 (GLP-1/GLP-2 dual agonist) ProGen Collaboration

With the triagonist preclinical effort complete, attention turns to the preclinical work necessary to begin the Phase Ia/Ic trial with RT-114. A PK study is required before going into the clinic and will also dose canines. However, the Rani Pill will be used rather than transenteric delivery in order to gain additional insight. Beyond the PK animal study, chemistry, manufacturing and controls (CMC) work must be completed, which is expected to be done before year end. The Phase Ia/Ic trial is on track for an early 2025 launch.

ProGen Collaboration Details

On June 24^th

, Rani

announced

a collaboration with

ProGen

Co., Ltd. to develop an oral obesity treatment combining ProGen’s FC Fusion protein conjugated GLP-1/GLP-2 dual agonist PG-102 with Rani’s Rani Pill HC. The

press release

describing the deal was followed by a

conference call

held the morning of June 24^th

, 2024. Rani has entered into a definitive agreement with this South Korean firm to develop a new product designated RT-114. RT-114 is an oral dose of ProGen’s PG-102, a GLP-1/GLP-2 dual agonist for treatment of obesity. The companies will equally share the costs of development and divide geographies between them. Details of the arrangement between the two companies can be found in the second quarter 2024

Form 10-Q

.^[1]

Rani and ProGen’s collaboration seeks to advance a GLP-1/GLP-2 dual agonist for the treatment of obesity. While GLP-1 agonists have been thoroughly discussed in recent years there are other less well-known incretin hormones that are involved in intestinal growth and function. GLP-2s are less well publicized but offer several complementary benefits to GLP-1 agonists for weight loss. Rani is looking beyond the approved generation of therapy to a new one that will address existing drawbacks including side effects and loss of muscle mass. The collaboration agreement between the two companies will develop the Rani Pill high capacity (HC) capsule containing ProGen’s PG-102 for weight management. The 50/50 worldwide revenue and cost share effort will initially focus on commercialization of major markets. No initial payments will be made between the parties. Rani holds rights to commercialize in the United States, Europe, the United Kingdom, Canada and Australia. ProGen holds rights for all other areas, most importantly, Asia. Each party can sublicense in its territories. ProGen will manufacture the drug substance and Rani will manufacture the Rani Pill drug product.

The agreement with ProGen does not prevent Rani from pursuing other obesity and diabetes collaborations or partnerships. Management has ongoing contact with undisclosed prospects and a deal could be announced at any time not only for this category but others as well.

Next Steps

Following the deal between Rani and ProGen, the partners are looking forward to further development trials for the GLP-1/GLP-2 dual agonist. ProGen has a Phase I trial underway for PG-102 designed as a multiple ascending dose study that will help identify the optimal dosing to be used in both ProGen’s next stage of work and to inform the appropriate dose levels for the RT-114 program. ProGen has shared the results from the Phase Ia study which is evaluating subcutaneous delivery of PG-102. The study tested four dosing schemes which produced no gastrointestinal (GI) side effects in the first three doses and 30% incidence of GI side effects in the highest dose.^[2]

Additional data is expected in 2025. Rani is conducting a local toxicity study that should be complete around year end, followed by the start of the Phase Ia clinical trials next year. RT-114 will be the subject of this 30-person open label safety study that will also examine pharmacokinetic and pharmacodynamic markers. Based on a preliminary view, a 15 mg and 30 mg pill will be compared to subcutaneous injection of 15 mg of PG-102 with each group evenly distributed. The study is expected to last from four to five months. A Phase Ic is also planned which will enroll 40 obese, non-diabetic subjects in another open label trial that is examining PK and PD parameters. This study will look at repeat doses for four to seven weeks with a follow up. Trial duration is estimated at six to nine months with a start in 2025. The cost of the two Phase I studies is expected to range from $3 to $5 million with the costs split evenly between the partners.

A Phase IIa for obese patients providing 12 weeks of treatment is expected to follow the Phase I studies in 2026. Other studies will follow, including a pivotal study that will provide the data necessary for FDA and other regulatory body approval. Rani will be able to lean heavily on ProGen’s work to support this effort. Based on our understanding of the partners’ positions, we could see an FDA biologic license application (BLA) submission by 2029.

Capital Raise

On October 15^th

, Rani

announced

pricing of a $10 million capital raise which has since closed. The transaction includes 3,000,000 shares of Rani Class A common stock and 333,333 pre-funded warrants to purchase Rani Class A common stock. Each share or pre-funded warrant included a common warrant with an exercise price of $3.00 per share with a life of five years. Each share and warrant were sold at a purchase price of $3.00. Along with the capital raise transaction, Rani has entered into an agreement with an investor to cancel all outstanding Series A common warrants issued on July 22, 2024. This totals 3,246,753 warrants. The deal closed shortly after the announcement and the funds have been added to the balance sheet.

Milestones

• 
  Topline
  
  results
  
  for RT-111 Phase I study – February 2024
• 
  
  Presentations
  
  of ustekinumab RT-111 data at Digestive Disease Week – May 2024
• 
  Expiration of exclusive negotiation period with Celltrion – June 2024
• 
  Launch of RT-102 Phase II study – 2024
• 
  
  Participation
  
  in H.C. Wainwright Global Investment Conference – September 2024
• 
  
  Participation
  
  in Cantor Global Healthcare Conference – September 2024
• 
  
  Participation
  
  in Maxim Healthcare Virtual Summit (
  
  webcast
  
  ) – October 2024
• 
  $10 million registered direct offering – October 2024
• 
  Partnership development – 2024
• 
  Launch of Phase I trial for RT-114 – 2025

Rani Therapeutics

September 2024 Corporate Presentation

Summary

Rani reported third quarter results following a period where it released preclinical data for a new candidate, and raised additional capital while it continues talks for a deal with an established pharmaceutical company. Management noted progress on its preclinical work for RT-114 and the announced that the follow-on Phase Ia/Ic trial will start in early 2025. We maintain our valuation of $12.00 per share.

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