Rigel Pharmaceuticals, Inc. (RIGL) Q1 2018 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Rigel’s Pharmaceuticals' Financial Conference Call for the First Quarter of 2018. All participants are in a listen-only mode. We will be facilitating a question-and-answer session at the end of today's conference. [Operator Instructions]. And now, I would turn this conference over to our first speaker, Dolly Vance, who is Rigel's Executive Vice President, Corporate Affairs and General Counsel.

Welcome to our financial results and business update conference call. The financial press release for the first quarter of 2018 was issued a short while ago and can be viewed in the News & Events section of our Investor Relations page on our website, www.rigel.com. As a reminder, during today's call we may make forward-looking statements regarding our financial outlook, and our plans and timings for regulatory and product development. 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 report on 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 our CEO, Raul Rodriguez.

Thank you, Dolly. Also joining me on the call today in addition to Dolly are Anne-Marie Duliege, our Chief Medical Officer; Eldon Mayer, our Chief Commercial Officer; Nelson Cabatuan, our VP of Finance and Gio Matthews our Executive Director of Market Access. So we have a very important and useful agenda today for you, where we will outline the need for TAVALISSE in this patient population, provide you information on our patient support, market access and pricing to make TAVALISSE available to these patients, our market launch preparations and finally, our financial position. Some of you on the call today are new listeners, so by way of background our introduction to Rigel, we are focusing on discovering, developing and soon providing novel drugs to patients with substantial needs in the areas of immunology, hematology, cancers and rare diseases. In terms of highlights and obviously in first, we are very proud to have achieved the U.S. FDA approval of TAVALISSE, fostamatinib disodium hexahydrate for adults with chronic ITP who have had an insufficient response to a previous treatment. This is something that we worked towards for many years and we elated to make it available to these patients and their healthcare providers. In addition to our approval of TAVALISSE this quarter, we completed an important financing for the company which furthered our runway substantially. We had top line data from our proof of concept Phase II study with fostamatinib in patients with IgA nephropathy, showing a positive trend in patients with higher levels of proteinuria at base line. We also provided an updated to stage one of our Phase II study with fostamatinib in autoimmune hemolytic anemia which showed a very good response rate. I will now turn the call over to Anne-Marie Duliege to provide you with an overview of the medical need in ITP.

Thank you, Raul. So what is ITP? ITP is an auto immune disease characterized by a low platelet count, usually less than 100,000 platelets by microreader and the prevalence in the U.S. is approximately 65,000 adults. The most frequent clinical manifestations include petechia, bruises, epistaxis, but patients with a more severe form a disease when platelet counts drops below 30,000, they have more serious episodes of bleeding, including gastrointestinal and rarely but seriously risk cerebral hemorrhage which may result in death. So there is an important medical need in adults with chronic ITP. As I said, it’s a rare autoimmune condition that arises from various disease mechanisms of platelet destruction and the ability to identify a biomarker that predicts the patient's likelihood of response remains elusive. Adult patients who progress to chronic disease after failure to respond to a variety of treatment, including corticosteroids, typically cycle to existing therapies, which do not always confer durable response, and so it not uncommon to see adult patients who after a few years of success loose a response to treatment. Therefore there is a pool of patients who require new treatment options. Clearly ideally, treatment options with a favorable thorough bleeding profile that provides a clinically meaningful and durable platelet response in ITP. So this therapy should be convenient to patients and ideally act to an alternative mechanism of actions that specifically target platelet destruction. I will now provide an overview of TAVALISSE in patients with adult chronic ITP. On slide 15, we have highlighted the mechanism of action of TAVALISSE. ITP is a heterogeneous disease, predominantly thought to be immune-mediated platelet destruction. This heterogeneity is important because it makes it difficult to predict which patients will respond to which disease. TAVALISSE of fostamatinib is designed to inhibit the spleen tyrosine kinase, which is a key signaling component in the body’s immune process that leads to platelet destruction in ITP patents by macrophages. TAVALISSE may address the underlying autoimmune cause of ITP by reducing platelet destruction via the SYK inhibition signal. By way of background, on slide 17 I’m providing the median platelet counts for the responder patients in both trials Phase I and Phase II was timely, robust and enduring compared to the non-responders or the placebo patients. Over 60% of the responders did so in the first two weeks with a median time to respond of 15 days. The increase in platelet counts were significant and the median platelet counts for the responder patients is 92,000 and the last and important point was the durability of response. The majority of stable responders maintained the response for at least a year and some in the majority of cases for more than two years. The key point is that this platelet response was long lasting. In fact the median duration of response has not been reached and as of now sits in 28 months. Of note, one patient in the control group had bumps in unstable platelets from very low levels to high levels and coming back to baseline without any intervention. Slide 23, provides the frequency of bleeding episodes reported as adverse events comparing the TAVALISSE group versus the placebo group and you can see that fostamatinib or TAVALISSE treaded patients had few bleeding episodes than placebo patients. In fact, this was even more striking among the fostamatinib responders who had no serious adverse events of bleeding in this category of responder patients. There are also fewer risk to medications in the fostamatinib treated patients, especially among the responder patients. Slide 22, provides a summary of the most frequent adverse events observed in the in Phase I and Phase II programs, both studies both together comparing the TAVALISSE recipients to the placebo recipients. There was no new safety signal in the program compared to what we had observed in earlier development programs, specifically the most frequent adverse events are diarrhea, hypertension, nausea and increase in ALT. In the vast majority of cases as indicated on the slide, these events are mild or moderate, and the important point is that they can be managed by regular medical monitoring of the patients. Either adding the symptomatic treatment when necessary or in some rare cases reducing the dose or temporary interrupting treatment. So a well identified, manageable, safety profile. As a result of these three studies, the fostamatinib was recently approved by the FDA, and the label indicate that TAVALISSE is a kind of inhibitors indicated for the treatment of thrombocytopenia in adult patients with chronic immune thrombocytopenia who have had an insufficient response to a previous treatment. This is a very good label. This is what we were hoping for and it’s similar to that of other approved products and it allows the company to make TAVALISSE available to a wider range of patients who have failed other treatments. So in summary, on slide 24, ITP is a clinically heterogeneous and difficult to manage condition. There is a pool of patients that are refractory to treatment and that are in need of a treatment of a new novel option. Therefore TAVALISSE represents an additional option for these patients. It has the targets of previously unexplored pathogenic mechanism of platelet destruction; it presents a convenient option to patients with a favorable therapeutic profile and provides a clinically meaningful and durable platelet response. Eldon?

Thank you, Anne-Marie. I’m happy to have the opportunity to provide some additional information and updated you on some of our commercial plans. In particular some of the topics that I would like to cover are, number one, some additional perspective on the unmet need and adults with chronic ITP; the value proposition and addressable population; pricing and market access strategy, as well as some overview on our commercial readiness and launch strategy. But first, I would like to provide an overview of the ITP patient landscape and addressable market for TAVALISSE. From our market analysis, we estimate approximately 65,000 patients exists, adult patients that is in the U.S. with chronic ITP and this analysis also reveals that in any given year approximately 50% or 32,500 of those patients are not actively treated for their disease. However, over a longer period of time a portion of those patients would expect to join the treated population. For the other half of the 65,000 patients that are on treatment, we estimate that roughly 15,100 receive steroids during a given year and the remaining 17,400 of the treated patients are known as steroid refractory. And they would receive treatments such as NIT 20 monoclonal antibody, TPO agents etcetera and these patients represent the addressable market for TAVALISSE. Next, I would like to review some other aspects of the unmet need for this addressable market. As Anne-Marie mentioned, ITP is a complex chronic disease and we know from our marker research that patients and physicians do recognize the need for new treatment. So on the slide we’ve shown some of the areas of unmet needs before TAVALISSE was available. First, existing treatment guidelines do not provide clear sequencing of therapy after steroids and this results in wide variations and protocols used, so really no clear treatment algorithm exists. Secondly, existing therapies do not target the immune-mediated platelet destruction through SYK pathway. And third, patients do experience very often suboptimal response to existing treatments. And again, this is due in the complex heterogeneous nature of the disease. And lastly some patients experience tolerability challenge with various therapies. So on the next slide you can see that we’ve outline some of the potential benefits that TAVALISSE can offer the patients and these are appealing to both physicians and payers as well. So what that means is for the value proposition for TAVALISSE, that it gives patients a chance for rapid, robust and durable response, while providing convenience of oral dosing, while the option of talking it with or without food, along with a manageable safety profile. In addition, because of its rapid onset of efficacy, the physician should know quickly whether a patient will be a responder, and if not they can quickly switch them to another therapy. This next slide I’ll go over the pricing for TAVALISSE. As you can see, the monthly list price or wholesale acquisition cost for TAVALISSE is $9,450 or $113,400 annually and this is for either 100 or 150 milligram doses, so this is what is known as flat pricing and this price is in parity to the existing oral TPO treatment, which has a dose based pricing that ranges from $8,255 per month for the 50 milligram dose to $12,382 for the 75 milligram dose. With this price and our access and support programs we expect patient access to be similar to other drugs in the same class and of course, our goal is to ensure good access to TAVALISSE through our patient and practice support center Rigel One Care. I’ll discuss this program in more detail in a moment. Now I would like to transition to talking about our customer facing team. We’ve been fortunate enough to obtain a team with extensive experience in oncology, rare disease, launch, as well as a market access team with experience in distribution, patient services, health solutions, as well as payer engagements. And to help support access to payers we have national account managers calling on payers along with medical affairs colleagues as part of that clinical exchange, and of course our sales team. We will launch with a team of 30 sales reps in addition to the company and sales management of course. Plus in addition to our home office marketing team we have some field based marketing personnel to execute our regional marketing programs to help us engage with key physicians. And lastly, although not part of the commercial teams, it is important to note that our medical affairs team will have approximately 10 medical science liaisons to help educate payers and healthcare providers about ITP and TAVALISSE. Now I would lie to provide some brief comments about our overall approach to this launch. In general, our initial goals are to gain awareness, access and to foster trial of TAVALISSE and towards that goal our core efforts will be to focus on characterizing the unmet needs in ITP, educating about the science and clinical profile of TAVALISSE and highlighting appropriate candidates for treatment. For physicians and KOLs we are focused on reaching hematologists and oncologist who treat roughly 85% of the addressable population. We will also have ongoing engagements with key opinion leaders, including a team of MSLs as I already mentioned. For patients we will have some direct patient outreach and education, as well as we will be engaging with patient and the organization to help get the world out and support access where needed. And then lastly, for accessing distribution, we will have a distribution network focused on providing patient access to TAVALISSE regardless of provider source, as well as a robust offering of patient and practice support service. So with respect to timing, we do intent to official promote, begin promoting TAVALISSE on May 29 and the ASCO meeting in early June provides an excellent opportunity for us to engage with the hematology, oncology community to continue to introduce Rigel and begin to execute on all these areas that I’ve reviewed. And finally I’d like to talk a little bit more about our efforts to support access for TAVALISSE. Our commitments to provide compressive support to patient and providers, which is why we created Rigel One Care. This patient and practice support center has been designed to meet with patients as they progress in their therapy and to meet their providers and to assist in this process. So whether a patient is just starting therapy, if they have recently changed insurance, if they have lost insurance or if they need additional information on the disease state, reimbursement or how to access a product or maybe need assistance with co-pay, Rigel One Care will be there to provide the support. So in summary, I’ve outlined there is a need, an unmet need that is for adult chronic ITP patients and for additional treatments. Clearly TAVALISSE provides a good value for patients and for healthcare providers. We have some excellent programs in place for market access and to support that with our services and of course, we will be launch ready on May 29 and look forward to getting rolling. So with that, I’ll turn the call over to Nelson for our Q1 financial review.

Thank you, Eldon. We recently completed a successful financing of 60 million shares last month with over $58 million in net proceeds. This allows us to extend our runway into Q4 2019, including our commercial launch cost for TAVALISSE. We ended Q1, 2018 with cash and short term investments of over $94 million. We continue to evaluate partnerships with TAVALISSE and expect to have a European partner in Q4 2018. We continue to prepare for our product launch by the end of this month and look forward to reporting product revenues for TAVALISSE in the future earnings call. We have completed the implementation of our financial systems to support the successful commercial launch, as well as the system for aggregate spend and transparency reporting. Some highlights on our Q1 ’18 financial results. We reported the net loss of $24.4 million or $0.17 per share in Q1 ’18 compared to a net loss of $15.3 million or $0.13 per share in Q1 ’17. There were no contract revenues from collaborations in the first quarter of 2018 compared to $3.6 million in the first quarter of 2017, which was related to the payment received pursuant to a collaboration agreement with BerGenBio. We reported total cost and expense of $24.7 million in the first quarter of 2018 compared to $19.8 million in the first quarter of 2017 or an increase of $4.9 million, primarily due to a commercial launch preparation cost, including the hiring of our sales force. Back to you, Raul.

Thank you, Nelson. In all, I think this has been a very good year for the company, one of our best. So let me remind you on our business strategy. We are delivering on that business strategy. We conducted a Phase III program in ITP with successful results submitted at the NDA. Now it has the approval of that NDA and soon we will be commercializing TAVALISSE in the U.S. so I look forward to that. So let me just summarize for you quickly what we covered on this call. One, there is an important medical need in the treatment of adult chronic ITP. Two, we believe that TAVALISSE provides an attractive package which addresses many of those needs. A unique mechanism of action that address the underlying pathophysiology of ITP; a rapid response in platelets, a robust response in that platelets getting patients to a safe zone, a durable response that endures over many month, manageable safety profile, all in a convenience oral delivery form with no dietary restrictions. We are working on making TAVALISSE accessible to patients for which its indicated and we have chosen a price that achieves that and it reflects the value that the product delivers and we have built the commercial organization with tremendous expertise in this area and we have a strategy I believe for successful entry into the market and for long term growth of the product. So with that, I’d like to turn it over to your questions.

Thank you. [Operator Instructions] Your first question comes from Kyung Yang from Jefferies. Your line is now open.

Thank you. I have three questions. One, first on that net in ITP; current consensus for this year is a little over $5 million and next year is a little over $40 million. So I want to ask you how you feel about the consensus numbers and two, in terms of the second indication autoimmune hemolytic anemia, are you planning to apply for a breakthrough designation or have you applied and third one is, you are scheduled to meet with the FDA for the second indication and hopefully provide us with an update, but what should we expect when you update us from the FDA meeting. Thank you.

Thank you Kyung, I appreciate that. So in terms of the forecast, revenue forecast for this year we haven’t as yet provided any guidance, so let us consider that and come back at a later point on that topic.

Sure, and then this is Eldon, I just would chime in there of course and just reinforce a couple of things. One is that as you know we’ll be launching essentially mid-year. So what we will have is partial year sales and so looking forward over the years, as we have patients which we would hope would stay on therapy and do well in the product. Going forward those sales would carry over time and continue to accumulate. So for this year, because of that it represents a relatively short period of time on therapy for each of those. In addition, one of our support programs that we will be offering is a free trial program which will offer short term therapies after perhaps one month to assist with the access process. So that could have a very short term effect you know given if only [inaudible]. So that’s just one thing I wanted to add with that.

So let us come back to you on this topic. On the second question on hemolytic anemia and our planned FDA interactions…

So we are planning to – we have asked for a meeting with the FDA which quite likely will happen sort of mid this year and we will provide an update on the regulatory strategy after we meet with the FDA.

Yes, breakthrough designation?

We are still considering that Kyung and we haven’t made a decision on that.

Thank you.

And our next question comes from the line of Anupam Rama of J.P. Morgan. Your line is open.

Hi, guys. This is Tessa filling in for Anupam this evening. Thank you for taking our question and congratulations on all the progress. So maybe one from us, given the broad label, what does your market research tell you about product positioning and line of use for TAVALISSE out of the gate. Does that market research suggest there is any difference between how TAVALISSE will be incorporated into the treatment paradigm between academics and the community setting? And then maybe one more related to this if I could, has anything changed in terms of your strategy in physician education given the broader label. Thanks so much guys.

So I will try to address these questions separately. First is on the market research in sharing our product profile with physicians. Overall the response in looking at the overall product profile, efficacy, safety and convenience and things you have mentioned, we were delighted by the response overall and what we heard is over time, because of the benefits that the product can provide, physicians do intend and would like to use it across all lines of therapy, keeping in mind there are many different approaches to treatment. So different doctors with different approaches will use them, but then overall they would like to have access to it across all lines of therapy ultimately. Now we have a label that supports that so that’s what we would expect to see over time. Of course initially during the launch in diseases like this, many physicians will start using it later on because they are more accustomed to using a therapy they have, but with continued exposure and good experience we would expect that they will gradually begin moving that up. With that, of course as I mentioned as far as academic or community, we didn’t really dissect the data in that way and so I don’t know that I can comment about different up take but we know that some academically based physicians may prefer to use TPIAO’s so they may chose to our products following TPIAO’s, but again that’s going to be highly variable. As far as our strategy of launch with the broad label, no I can’t say that that would change anything. I think this is the label that we were expecting and hoping for, so you know we’ve had quite a bit of time to plan forward. So no surprises there or change to our overall strategy. We think our pricing and our access and our support programs and our promotional efforts are all connected and all tied together with a cohesive approach, so yeah, thanks for your question.

Hey Tessa, just to remind you, I think we are comfortable the product works across a broad segments or subgroups of the audience, so we are delighted by that. So their label hopefully is consistent with that.

Great, thank you so much for taking our questions.

Thank you.

Our next question comes from the line of Do Kim from BMO Capital Markets. Your line is now open.

Hi, thanks for taking my question. For your commercial efforts, do you – can you guess what proportion of the amounts you could reach with your sales force and whether your able to determine who the highest prescribers from accolade are?

Sure, the way I am looking at your question to talk about how we selected the physicians that we’ll be targeting and how many of them and give you some descriptions around those and then I could try to address your question about access. So we did purchase data, different types of data sources and took a look at how are the prescribers of ITP, drugs that are used in treating ITP and essentially divided them up into low, medium and high prescribers and that’s an overall, it’s a generality on that approach. So in looking at that, selecting out the medium to high volume prescribers, we see that there are about 3,200 – 3,250 to be exact. 350 of them are hematologist and the remaining 2,000 are hematologist and oncologist, so that’s how we essentially targeted. So with our 30 reps they will each get a number of doctors and of course this will be somewhat fluid over time. We will also target them based on a number of things, are they accessible, do they manage a number of – a significant number of IPT patients or look to validate that. And then third, what is the response to our produce profile and our approach. So I think with that, in order to maximize access, which is always a challenge in this day and age, we have hired a sales team with extensive experience in oncology and hematology who have access and relationship with these doctors and so that was critical important for us, as well as some other members of our customer facing team to help us engage. So, although I can’t give you specific predictions for access, we are certainly looking to do everything possible to maximize that. So hope that answers your question.

Yes great, thank you. And I was also hoping if you could give us a sense of what you would expect the payer mix to be and possibly what the gross net would be also?

Sure, I’m going to provide a comment overall on the payer mix and then I’ll ask my colleague Gio Matthews to chime in there on the payer mix. So first of all, let me say that we have spent significant time researching this in different ways doing secondary research analysis and primarily research with payers. In general we see that the commercial based on this data, the commercial payers represent roughly 50% and that the government payers, including all of them represent another 50% roughly. So, we will of course see what happens with our product and you know and maybe be able to report more about that in the future. So with that let me ask Gio, if he would like to provide any additional color to that?

Thank you, Eldon. I think absolute that our research has gained insight into that mix. We are conducting an additional research specifically to understand exactly what that exact mix will be for our patient population, but we anticipate that being similar in our patient population and certainly can report back once we have a better understanding as we see patients coming through.

Right. Thank you for taking my questions.

[Operator Instructions]. And our next question comes from the line of Chris Raymond from Piper Jaffray. Your line is now open. Q – Unidentified Participant : Hi, this is [Inaudible] for Chris today. Thanks for talking the question. So I think you guys have said in the past that the PROMACTA launched is a good proxy for the TAVALISSE launch trajectory. So I guess our question is why the PROMACTA launch is still a good guide just considering the ITP market has changed since PROMACTA was launching. Now there is two approved TPIAO in the market. So maybe you could just talk about changes in the overall ITP market since the TPIAO was entered and maybe how hat impacts your own launch effort?

Sure. So this is Eldon, I’ll take that. Well we chose PROMACTA as a benchmark because it’s an oral drug that’s approved for ITP obviously, but also it will be managed through the same reimbursement channel which is a pharmacy benefit, so it was the closest thing. Of course that was launched a very long time ago and the market was very different. So, I’m looking and as you probably know, we are not going to give any sort of forward looking guidance on market shares or anything like that. But I can tell you that given the fact that the market is more competitive now, we’ve taken that and then taken a discount from that in terms of uptake and share and all of that. But we do expect similar treatment with our pricing and with our approach from the payers and we expect similar access to PROMACTA. So that’s one comment I can provide on that.

No, I think that’s right. Thank you Eli.

And I’m seeing no further questions. I will now like to turn the call back to Raul for closing remarks.

Well, I first want to thank you for your support over these years. I think it’s been an interesting and in some cases long journey. I think I’m glad to say we finally have arrived with an approval and soon with the lunch of this product. I think it lends to the company a very different trajectory and I’m delighted to be part of it and most of all I’m grateful for you for providing us the resources to allow us to do this. And look forward to reporting further promising results for you in the near future. Thank you.

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