Rigel Pharmaceuticals, Inc. (RIGL) Q1 2015 Earnings Report, Transcript and Summary

Good afternoon. And welcome to Rigel Pharmaceuticals First Quarter 2015 Earnings Conference Call. [Operator Instructions] I would like to remind you that this call is being recorded for replay purposes from Rigel's website. And now I will turn the call over to our first speaker, Dolly Vance, who is Rigel's Executive Vice President, Corporate Affairs and General Counsel.

Hello, and welcome to our first quarterly earnings conference call. The first quarter 2015 financial press release was issued a short while ago and can be viewed on the news section of our website, www.rigel.com. As a reminder, during today's call, we may make forward-looking statements regarding our financial outlook and our regulatory and product development plans. These statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted. A description of these risks can be found in our most recent quarterly form in Form 10-Q on file with the SEC. Any forward-looking statements are made only as of today's date, and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances. At this time, I would like to turn the call over to Rigel's CEO, Raul Rodriguez.

Thank you, Dolly, and thank you, everyone, for joining us. In addition to Dolly, other members of the Rigel management team joining me today are: Ryan Maynard, Executive Vice President and CFO; and Don Payan, Executive Vice President of Discovery and Research. 2005 (sic) [2015] is a transformational year for Rigel. We entered 2005 (sic) [2015] with a lead product candidate in Phase III clinical studies, a significant new collaboration agreement with Bristol-Myers Squibb, and an R&D pipeline of significant dimension, now focused on immunology and oncology. I'd like to take the opportunity, during this call, to share our enthusiasm for these programs and to provide perspective on the status of some of these projects. In a minute, Ryan will review the first quarter financials, followed by Don who will provide an overview of some of the exciting immunology and oncology programs we have in the works, which have significant potential for both internal development or as partnerships, opportunities or both. In today's press release, you will note a change in the anticipated timing of the results for the ongoing Phase III program for fostamatinib in patients with immune thrombocytopenic purpura, or ITP. Enrollment in the study has been a bit slower than anticipated. We are actively working with the clinical sites and investigators to increase patient enrollment. We have implemented numerous efforts for expanded patient outreach. We have engaged with patient advocacy organizations and implemented social media campaigns, all with the purpose of increasing enrollment. In addition, we are expediting the opening of new sites worldwide. We are focused on having the Phase III program fully enrolled by the end of the year, with top line results from both studies in that program available in the middle of 2016. This project time line will enable us to still meet our original goal of filing an NDA for fostamatinib in the U.S. by the end of 2016. To that end, we are currently working on the safety and CMC sections of the NDA and expect to have those large sections to be ready by about the end of this calendar year. All that will remain for us to do is to prepare the clinical section of the NDA in 2016. We believe that fostamatinib generally and ITP specifically is an excellent opportunity for Rigel as we evolve as a company from an R&D-stage company to a commercial-stage company. And in so doing, we believe this will substantially increase shareholder value. And now I'd like to turn the call over to Ryan Maynard, Rigel's CFO, to provide the financial update.

Thank you, Raul, and good afternoon, everyone. For the first quarter ended March 31, 2015, we reported a net loss of $18.2 million or $0.21 per share compared to a net loss of $22.3 million or $0.25 per share in the first quarter of 2014. This February, we announced the collaboration with Bristol-Myers Squibb for the development and commercialization of potential TGF beta inhibitor therapeutics. As part of this agreement, BMS paid us $30 million upfront, which we are amortizing into revenue over an 18-month period, coinciding with the time line of our research efforts provided to BMS. We could potentially see another $17 million in additional payments from this and other partnerships in the next 12 months. For the first quarter of 2015, contract revenues from collaborations were $2.2 million, including $2.1 million from the amortization of the $30 million and $106,000 for our research activities as part of the BMS collaboration. There were no contract revenues from collaborations in the first quarter of 2014. We reported total operating expenses of $20.4 million in the first quarter of 2015 compared with $22.4 million in Q1 2014. This decrease is from savings achieved in our facilities cost from subleasing a portion of our space to Calico. We also had 2 development programs active in 2014 that are no longer ongoing in 2015. As of March 31, 2015, we had cash and cash equivalents and short-term investments of $161.2 million compared to $143.2 million in December, 2014. We expect to end this year with cash and investments in excess of $100 million, which should be sufficient to take us into the second quarter of 2017. This afternoon, we filed a universal shelf registration statement covering securities for up to $150 million. This is a housekeeping measure as our previous shelf expired last month. There are no immediate plans for the use of this shelf. Now I am going to turn the call over to Don Payan, Rigel's President of Research and Discovery, who will talk about our portfolio of oncology and immunology projects.

Thanks, Ryan, and good afternoon, everybody. Those of you who have followed Rigel for some time know that we have developed extensive expertise in the fields of immunology and oncology. And it bears mentioning that 2 of our long-standing partnerships, one with Daiichi Sankyo and the other one with BerGenBio, have produced 2 cancer-targeting product candidates which are currently in Phase I clinical studies. In addition our partner, AstraZeneca, has a Rigel-discovered small molecule inhibitor of cytokine signaling in inflammatory conditions of the lung that we expect to enter Phase I clinical studies in the near future. Important to our future direction is the recent collaboration with Bristol-Myers in the immuno-oncology field that is aimed at selecting on orally bioavailable TGF beta receptor inhibitor effective at altering the microenvironment of solid tumors. So these collaborations will select the breadth and depth of our research base, and we hope to deliver more of these collaborations over the near future or the next 12 to 18 months. Let me now focus on Rigel's preclinical and clinical development programs, which demonstrate our ongoing commitment to the convergence of these 2 fields in immunology and oncology. Our lead and most advanced asset is fostamatinib, and it has been evaluated for its activity to treat various immune disorders and certain types of lymphomas. The results of those advanced clinical studies have resulted in more than 4,000 patient years of information about fostamatinib and provided us with a tremendous amount of insight into its mechanism of action in those different disease areas. So our research and development team currently is focused on 7 projects for the treatment of oncology and immunology diseases, and each one of these projects is designed to maximize the assets that we already have in hand and take advantage of our expertise. The first 5 projects are opportunities to expand our fostamatinib franchise. This is already a Phase III product candidate. We know a lot about it, so we want to leverage it into new opportunities. And in work that has already been published, clinical studies have shown the fostamatinib to be effective in patients with chronic lymphocytic leukemia as well as certain forms of lymphomas where the B-cell activation cascade driven by the SYK kinase supports the proliferation of abnormal cells. Research by Rigel and others has shown that inhibiting the SYK kinase can inhibit the activation of B-cells and myeloid cells and may slow or arrest disease progression. So building on this clinical observation, there are 4 specific project areas that we are currently exploring in order to advance additional indications for this product. The first involves testing fostamatinib in patients who have failed or resistant to ibrutinib, which occurs in patients with CLL who have developed resistance to this drug over a period of 18 to 24 months. It has been suggested by a number of KOLs that their rate of resistance to this product will increase significantly, making room for other agents, including our SYK inhibitor, to provide the appropriate immune regulatory responses. A second area on which fostamatinib can be applied is in combination therapy with ibrutinib or other agents, focusing on diseases like follicular lymphoma, a B-cell lymphoma which is the most common indolent form of non-Hodgkin's lymphoma, and several key opinion leaders have strongly urged us to go forward in this area as they think it's a very novel opportunity for our product. The third area of focus is on the potential application in treating Waldenstrom's macroglobulinemia, a type of lymphoma that causes a buildup of IgM antibody in the blood, bone marrow and certain organs. And there's significant new and exciting preclinical data suggesting that fostamatinib might be quite effective in this condition. And finally, the last of these 4 projects that we are closely evaluating is in the potential use of fostamatinib in treating autoimmune hemolytic anemia. This is a disease where antibodies bind to the red blood cells and precipitate their destruction. There is a significant need for new therapies in this area as steroids are currently only partially effective therapy that's used. We have published the clinical data demonstrating fostamatinib's potential in preventing red blood cell destruction, and this clinical indication really builds on our experience with ITP. We will select opportunities from this list in advance them into the clinic as soon as we can. An important fifth project we are currently considering with fostamatinib is in the immuno-oncology area that focuses on fostamatinib in combination therapy aimed at solid tumors where B-cells and humoral immunity are implicated in modulating the immune microenvironment of tumors. Much of the news in immuno-oncology has been based around the activation of T-cells. We are focusing on B-cells and macrophages. And preclinical studies have shown that SYK and B-cell inhibition to be effective in reprogramming immunoresponses towards productive antitumor activity, suggesting a novel anticancer strategy when combined with other therapies such as checkpoint inhibitors. So building on our immuno-oncology pipeline that includes the Bristol-Myers collaboration, our newest immuno-oncology target focuses on the Mer tyrosine kinase inhibitor class. MERTK is a novel target and research suggests that Mer tyrosine kinase plays a role in modulating the macrophage and dendritic cell response in tumor growth. In other words, inhibiting MERTK would enhance the antitumor response in the body's immune system. So our approach in immuno-oncology is focusing on B-cells and macrophages. Finally in that context, I would like to finish by saying a few words about our IRAK inhibition project. We are exploring the potential of using IRAK inhibition in a number of inflammatory and oncology diseases. IRAK-1, 4 kinases are critical for the sealing of the IL-1 and toll-like receptor families and mediate inflammatory conditions in signals that cause cellular damage. Our aim is to block the signaling of these modulators in instances where they are overreactive, like in some forms of acute gout or lupus as well as in various hematologic malignancies. In fact, IRAK signaling, for example, has been shown to be activated in a number of mutations where the adaptive protein, MyD88, is associated with certain lymphomas and in the majority of patients with Waldenstrom's macroglobulinemia. Our team has nominated a product candidate, and we expect to have our first IRAK inhibitor in Phase I clinical studies in the first half of 2016. So thank you for your time today, and I'll turn it back to Raul.

Thank you, Don. In summary, I'd like to reiterate Rigel's main goal and objectives. Our goal is to transform Rigel into a commercial-stage company with an attractive, large R&D portfolio. We believe that doing so will deliver substantial value to our shareholders. In order to accomplish this, our objectives are: first, to continue to make good progress towards completion of the Phase III ITP studies. This is the highest priority for the company. Second, to have an ample financial runway to see this project through, and to facilitate this, we will continue to monetize select pipeline assets to extend our runway. The recent deal we closed with BMS is a great example of this. And finally, to continue to build an extensive R&D pipeline focused on oncology and immunology. This will provide attractive potential projects for internal development and for partnerships. So thank you very much. I'll now turn the call over to the operator for questions.

[Operator Instructions] Our first question comes from Eun Yang of Jefferies.

First on fostamatinib, patient enrollment. You revised the expectation of patient enrollment completion by year-end. Is that based on the current run rate or assuming opening new sites?

Thank you, Eun, for your question. The answer is both. It's the current run rate, and we are opening up additional new sites. We're doing both of those things to make sure we will meet that timeframe. We have, in one trial, I think, 30-some sites open, and we're going to open up a bit over 50. And the other sites, I think we have 17 of the 30 or so sites that are going to open. So we still have a number of sites left to open, and that is because we've added new countries and new sites to make sure that we meet our deadlines.

Okay. And then on BMY immuno-oncology program, can you kind of give us a rough time line for when Bristol might nominate a leader candidate and they can go into clinic and then potential milestones are associated with those events?

Sure. Well, we started the collaboration with BMS just a couple of months ago, so it is a little bit early still to be definitive in terms of the time frames. So I know we can say that the project is receiving very high level of support within the BMS organization, and they are very actively working with us and the team here. We have a parallel team here at Rigel that are working closely with them to identify a lead candidate in the near future. I think an IND will follow that. Later this year, we'll be able to give you a bit more of a direction in terms of the timeframe for that. But there's substantial amount of work directed at exactly that at both their facilities and ours.

So how about the milestone payment? When you nominate a leader candidate, is there a milestone associated with it as well as the initiation of a Phase I?

There are milestones associated with those. We haven't disclosed yet as to the size of those milestones, but there are.

[Operator Instructions] Our next question comes from Yaron Werber of Citi.

This is Kumar Raja in for Yaron. So I have a question on your IgA nephropathy Phase II program. So in this program, you're looking at changing proteinuria. So what magnitude of benefit do you expect in this trial? And what other endpoints are you looking in this trial?

Thank you for the question. We're looking at proteinuria at that endpoint, and this is a proof-of-concept Phase II trial, so really seeing if we have an improvement in proteinuria versus placebo. And even a 10% or 15% improvement would be very good. We're having patients come in with about a 0.5 gram of proteinuria per day, and we're going to compare what we do with placebo. So not a very significant gain, but it depends on what types of patients we enroll in the study at the end of the day.

And for ITP, will the clinical data be enough for a filing both in U.S. and Europe? And what are the differences in regulatory requirements in Europe?

Certainly it's sufficient for filing in the U.S., which is our highest priority. In Europe, we have had some interaction but not extensive interaction by any means with the regulatory agencies there. So we will need to figure that out a bit more closely as we get closer to that. In some cases in Europe, they do require comparative studies, which still needs to be done, most likely by a partner. We would hope that once we have these results, we will move forward with NDA filing in the U.S. and do so by the end of 2016, next year, still keeping with our original time frame or so doing. In Europe, our plan has been to and still is to find a partner for Europe that has expertise in this area. And there might be or may not be, I can't say definitively whether they will need to do additional trials there.

And at this time, I'm not showing any further questions. I will now turn the call over to Mr. Rodriguez.

Thank you, operator. I'd like to thank the listeners for their questions and for listening. This is our first quarterly conference call. We've done it for the purposes of being more transparent and facilitating communication. So I appreciate that. I'd like to thank you for listening. And we continue to look forward to keeping you informed on our progress on these projects. Good afternoon.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a wonderful day.