Hook / Thesis
Rigel Pharmaceuticals has made a clear transition in 2025 from an R&D-stage profile to an earnings-capable commercial biotech. The company reported Q3 2025 revenue of $69.46M, operating income of $28.42M and net income of $27.9M, while generating $24.03M of operating cash flow. That combination of recurring revenue, positive operating cash flow and a growing profit stream is rare for small-cap biotechs and gives Rigel room to be a catalyst-driven long into 2026.
My trade idea: go long RIGL with a tactical position ahead of the 01/12/2026 Q4 print and expected 2026 milestones tied to commercial traction and partner payments. The trade balances an attractive entry (current price ~ $37) against a disciplined stop and two target tiers tied to continued topline momentum and upside re-rating should growth persist.
What Rigel does and why the market should care
Rigel develops small-molecule therapies across immune, oncology and viral indications. The commercial anchor and near-term cash engine is TAVALISSE (fostamatinib), an oral SYK inhibitor, alongside partnered assets and milestone/royalty relationships (notably with AstraZeneca for a rheumatoid arthritis candidate). The company’s Q2 and Q3 2025 results show that revenues are now material and profitable: Q2 2025 revenue was $101.69M (net income $59.61M) and Q3 2025 revenue was $69.46M (net income $27.9M). Those are not drug-development line items alone; they reflect commercial sales, partner milestones and/or royalties becoming a reliable part of the cash flow profile.
Why that matters: most small-cap pharmas trade on binary trial or regulatory outcomes. Rigel is different today because it can grow revenue while retaining upside from pipeline milestones (royalties, license payments) and new approvals in geographies such as the Mexico regulatory approval noted for TAVALISSE in late 2024. A company that can compound top-line growth while remaining cash-positive materially reduces downside for an event-driven trade.
Recent financials - concrete numbers that support the case
- Q3 2025 (period ending 09/30/2025): Revenues $69.46M; gross profit $64.71M; operating income $28.42M; net income $27.9M; diluted EPS $1.46.
- Q2 2025 (period ending 06/30/2025): Revenues $101.69M; operating income $61.10M; net income $59.61M; diluted EPS $3.28. The step down in Q3 vs Q2 likely reflects timing of payments/mix rather than a structural decline — still, both quarters are profitable.
- Cash & balance sheet (Q3 2025): Cash $137.2M; long-term debt $60M. Net cash (cash minus long-term debt) approximately $77M on the balance sheet shown; liabilities $124.925M and equity $117.609M.
- Cash flow: Q3 2025 generated $24.03M of net cash from operating activities while investing activities were -$33.18M and financing +$4.27M, producing a small net cash flow deficit for the quarter of -$4.87M.
Valuation framing - rough, conservative arithmetic
There is no single market cap line in the filing data, but a reasonable proxy is diluted share count disclosed in the most recent quarter and the current price level. Diluted average shares in Q3 2025 are ~19.156M. At a share price around $37, that implies an approximate market capitalization in the low‑$700M range (19.156M * $37 ≈ $709M). Using the most recent quarterly diluted EPS ($1.46) annualized gives a back-of-envelope P/E materially below 10 (annualized EPS ~ $5.84 -> P/E ≈ 6.3 at $37). That suggests the stock is not priced for perfection; it is pricing in continued profitability or at least sustained revenue. For a biotech with commercial traction, a sub-10 P/E is a low bar for upside if revenue growth remains intact.
Trade idea (actionable)
- Trade direction: Long.
- Entry: $35.50 - $38.50 market order range. If you prefer a limit approach, place buy orders at $36 and $37 to scale in.
- Initial stop: 12% below entry (roughly $31 - $34 depending on true fill). I prefer a fixed-percent stop on this trade because operational and regulatory risks can cause sharp moves.
- Targets:
- Near-term target: $48 (≈ +30% from $37). This is achievable if Q4/2025 prints in line or beats revenue estimates and operating cash flow remains positive.
- Medium-term target: $65 (≈ +75% from $37). This is stretch upside if the market re-rates Rigel closer to higher-growth small-cap pharma multiples or if milestone payments and expanded geography sales continue to accelerate.
- Position sizing: Keep this as a tactical portion of a small-cap biotech sleeve (no more than 2-4% of total portfolio capital per trade) given liquidity and event risk.
Key catalysts to watch (2-5)
- 01/12/2026 quarterly report and conference call - Q4 2025 estimates: revenue ~$69.3M and EPS est. $1.1875 (earnings calendar). A beat on revenue or guidance lift materially supports the long case.
- Partner milestone payments / royalty disclosures - any announced milestones (AstraZeneca or other partners) would be straightforward upside and cash generators.
- Geographic rollouts / regulatory approvals for TAVALISSE (regional approvals and partner launches). Example: Mexico approval in 12/12/2024 by another partner suggests ongoing international expansion potential.
- Pipeline updates (clinical readouts, filings, or new partnerships) that de‑risk future revenue streams beyond the current commercial base.
Risks and counterarguments
- Concentration risk: revenues and cash flow are still concentrated in a small set of products and partner payments. If sales soften or a partner milestone slips, quarterly results could swing materially lower.
- Regulatory / commercial execution: international rollouts and reimbursement are non-trivial. Approval in one jurisdiction does not guarantee broad uptake; pricing and access issues could blunt growth.
- Debt & covenant risk: long-term debt is $60M. While cash of $137.2M covers this today, if operating cash flow were to reverse, the leverage could matter (especially if lending terms tighten).
- Binary pipeline risk: despite current profits, future upside depends on successful development/partnership milestones. Pipeline failures or setbacks would remove much of upside and could reintroduce volatility.
- Market sentiment / re-rating risk: the stock has already shown large swings historically (see the multi-step run in 2025). Even with good fundamentals, biotech sentiment can create large drawdowns unrelated to fundamentals.
Counterargument
A bearish view could argue that the recent profitability is lumpy, driven by one-time milestone/partner payments or product timing rather than recurring end-user demand, and therefore cannot be annualized. If that is true, the current implied valuation (even if low on a P/E basis) is still too aggressive because it assumes repeatable revenue. That scenario would make the current price vulnerable to disappointment in the next print.
Conclusion and what would change my mind
I am constructive on a tactical long into 01/12/2026 for RIGL because the company is producing cash and profit while retaining optionality from its pipeline and partner relationships. The trade is structured: scale in near $36-$37, use a 12% stop, take partial gains near $48 and let a smaller piece run to $65 if fundamental momentum persists.
What would change my mind? I would turn neutral or bearish if:
- Q4 2025 revenue or operating cash flow falls materially short of expectations (miss >15% vs consensus and management provides weak forward guidance).
- Key partner milestone payments are delayed or contract terms are materially revised.
- Material negative regulatory developments for commercialized products (withdrawal, major safety label) occur.
Conversely, my conviction would increase if Rigel prints another consecutive quarter of strong operating cash flow, announces additional non-dilutive milestones, or provides explicit guidance that supports sustainable growth above the current run-rate.
Note on assumptions: market capitalization is approximated using the most recent diluted share count (Q3 2025 diluted average shares ~19.156M) multiplied by current trading levels to give an indicative equity value. Use that as a valuation frame rather than a precise market cap as share counts and floats can vary with quarter-end reconciliation.
Bottom line: Rigel is a rare small-cap pharma that is profitable and generating operating cash. For disciplined traders, the near-term calendar and the company's cash-generative posture make a well-sized, risk-managed long worth considering into early 2026.