Raul Rodriguez - Chief Executive Officer Eldon Mayer - Chief Commercial Officer Anne-Marie Duliege - Chief Medical Officer Dean Schorno - Chief Financial Officer Dolly Vance - Executive Vice President, Corporate Affairs and General Counsel

Good afternoon, and welcome to Rigel Pharmaceuticals' Financial Conference Call for the Fourth Quarter and Year End 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] I would like to remind you that this call is being recorded for replay purposes from Rigel's website. [Operator Instructions]. And now, I like to turn the 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 fourth quarter and full year of 2018 was issued a short while ago and can be viewed along with the accompanying slides for this presentation 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 annual report on Form 10-K 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, and thank you for joining us on our fourth quarter and full year 2018 financial call. Also joining me on the call today are Eldon Mayer, our Chief Commercial Officer; Anne-Marie Duliege, our Chief Medical Officer; and Dean Schorno, our Chief Financial Officer. Reviewing today's agenda on slide six, we will provide you with updates on a number of key Rigel objectives, including the launch of TAVALISSE with which we have been very pleased, the progress that is being made by our clinical and regulatory team, and Dean will give an overview of the financials. I will then make some concluding remarks and then open the call to your questions. On slide eight, I can say that 2018 was Rigel’s most successful year ever. We accomplished very significant milestones and took Rigel to a much more advanced stage as a company. Our first product TAVALISSE was approved by the U.S. FDA for the treatment of adult chronic immune thrombocytopenia or ITP. This was a tremendous accomplishment and one that we've been striving towards for many years. This enabled us to provide TAVALISSE to ITP patients across the U.S. It was the first novel class of drug SYK inhibitors to be approved. TAVALISSE was also the first new treatment for chronic ITP to be approved in nearly a decade. We then built a new, but very experienced commercial organization which in turn introduced TAVALISSE to treating healthcare providers and generated nearly $14 million in net product sales in just seven months on the market. While the U.S. market for chronic ITP is the largest, there is substantial opportunity outside the U.S. as well. So in parallel with our U.S. efforts we put in place major collaborations for commercializing fostamatinib in the largest ex-U.S. market. In addition, we filed…

Thanks Raul. I'm pleased to provide you with an update today in the launch and progress of TAVALISSE. Slide 12, just seven months in the market the launch continues to go very well and the execution of our strategies have led to very favorable performance as demonstrated with multiple key performance indicators. Total bottles shipped from our 3PL to special distributors in those seven months of 2018 were 1,794 and quarterly bottles shipped grew from 649 in Q3 to 903 in Q4. This demand resulted in gross sales of almost $17 million in 2018 with approximately $8.5 million of that Q4, and the response to TAVALISSE continues to be positive from physicians, payers and patients. Physician awareness, familiarity, and usage continues to grow. We continue to see strong reimbursement with a prior authorization approval rate of approximately 90% and the patient refill rate or persistence rate is approximately 45% at four months. Now on slide 13. The recent ITP claims analysis we conducted in September of 2018 revealed that the ITP market is showing modest yet steady growth. This indicates the addressable market for TAVALISSE is now approximately 18,700, which is slightly larger than our prior estimates. Our strategies continue to focus on penetrating the market, encouraging usage of TAVALISSE across all lines of therapy, including early lines where the largest and less heavily treated portions of patients exist. Slide 14. As you may recall from our market analysis prior to lunch, we believe the chronic adult ITP market offers good opportunity for TAVALISSE use across all lines of post steroid [ph] therapy. This is based on a number of factors, including the fact that ITP is a heterogeneous disease with no standard treatment paradigm in the post steroid setting, which leads to great variability in how clinicians select therapies…

Thank you, Eldon. I would like to review all of the exciting things we were doing was fostamatinib and how we are supporting the efforts of our commercial team with the TAVALISSE launch in the U.S., while also working to make fostamatinib available to patients globally and expose utility. I will begin on slide 21. In December of last we presented data from our ongoing extension study of TAVALISSE in chronic ITP at the American Society of Hematology in an oral presentation. I will highlight these in just a moment, but overall the receptivity to our data at the conference was very encouraging. It was a great opportunity to meet with physicians face-to-face and help educate them on our product and its noble mechanism of action. Along with presentations at major medical conferences, our support for the commercial team includes leveraging our database and relationship with key opinion leaders to draft manuscript for publication in preview tunnel. Most recently the manuscript offered by Dr. Jim Vessel from Cornel, analyzing the long term data for fostamatinib in chronic ITP was accepted for publication in the American Journal of Hematology. We're also in the midst of planning for real world data collection as part of our post marketing strategy. Collectively this information will function as a tool for our sales force to further educate and drive interest within the physicians’ community. As we have previously mentioned, in October of last year our marketing authorization application for fostamatinib in ITP was validated by the European medicine Agency, which began the EMA review process. The first milestone is the day 120 question which we have received and are in the process of responding to. While we cannot comment on specific questions, I can say that there were no surprise in any types of question…

Thank you, Anne-Marie. Starting on slide 30, here is some of the highlights from the quarter. For the fourth quarter of 2018, 903 bottles were shipped to our specialty distributors’ results in $8.5 million of gross product sales. 869 of those bottles were shipped to patients and clinics, while 34 of those bottles remain in our distribution channel at the end of the fourth quarter. For the full year of 2018, to begin with our launch on May 29, 1,794 bottles were shipped to our specialty distributors, resulting in $16.9 million of gross product sales. As of December 31 a total of 238 bottles remained in our distribution channels. For the fourth quarter of 2018, we reported net products sales from TAVALISSE of $7.3 million, which was recorded net of estimated discounts, chargebacks, rebates, returns, co-pay assistance and other allowances of $1.2 million of gross to net adjustment. For the full year of 2018 we reported net product sales form TAVALISSE of $13.9 million, which again was recorded net of estimated discounts, chargebacks, rebates, returns, co-pay assistance, other allowances of $3 million. Let me note that our growth to net adjustments for the fourth quarter was approximately 15% of gross product sales. For the full year 2018 our gross to net adjustment was approximately 18% of gross product sales. While we are continuing to gain experience with both private and public payers, and we may see some fluctuations during the first quarter of 2019, we currently expect our gross-to-net adjustment will remain around 18% during 2019. Before we move on from product sales, let me review our expectations for the first quarter of 2019. While we do not plan to provide guidance for 2019 full year, as we are still two quarters into our launch phase, we do anticipate a…

Thank you, Dean. A good year! Before we open the call to your questions, I'd like to summarize some of our key priorities for 2019. We will continue to build on our early success for TAVALISSE in the U.S. making TAVALISSE available to more patients. We will expand the availability globally of TAVALISSE and we hope to gain approval in Europe in ITP and potentially launch in 2020 with our partner Grifols in Europe. We will initiate enrollment of our global Phase 3 trial for autoimmune hemolytic anemia, and finally we will broaden our portfolio of opportunities with fostamatinib; indications are IRAK molecule and new molecules and partnerships. I think this will be our best year ever. So with that, let me turn the call over to your questions.

Thank you. [Operator Instructions] Our first question comes from Anupam Rama of JPMorgan. Your line is open.

Hey guys, thanks for taking the question and congrats on all the progress. On the call you guys talked a lot about TAVALISSE awareness metrics. I'm wondering if I could ask the question a little bit different, in terms of how the top decile account penetration is tracking relative to your expectations and then how you are thinking about penetration into some of the other tiered accounts of focus. Thanks so much.

Sure, and let me just characterize those awareness levels from a broad survey. However, yeah, I don't have the specific decile numbers in front of me, but I can tell you with you know a great degree of confidence that we've seen good adoption over all the deciles that there are, which was actually quite – we're very pleased to see that, because we know that as I’m sure you do that, a lot of the higher volume prescribers in the upper deciles can be you know more difficult to access and therefore more difficult to penetrate. So we have seen good adoption across all the deciles, which we think is very encouraging. I'd say that due to a number of factors, the value proposition as I said before which is resonating, the unmet need in the marketplace, doctors are – it’s been a long time as I'm sure you know that since there's been a new product. But I have to give you know the credit to the customer facing team. We had – you know we were able to get a very experienced sales force that has you know a lot of experience and therefore some good relationships and access with accounts. So I think that you know basic block and tackle with that would be the primary, not the only, but the primary thing. It's still very early of course, right. So these are figures based on seven months of launch, and it just takes time to get the levels of access, which with the bigger accounts you know can be of course limited to get the level of frequency required to change prescribing behavior and really communicate the benefits of the product. But with that you know access in the office can be difficult. We attend many regional conferences and more definitely we're going to be stepping up more and more, so we do access physicians there, because they go there to learn of course about new medical information and engage with their colleagues. Additionally, we're having a larger and larger presence at the larger conferences. So at ASH for example we sponsored two CME symposia that was very well attended and well received. But another area and I'll just mention and I'll turn it back, but is we've been – we had some great success with our peer-to-peer speaker bureau. We launched the bureau right after launch and we were able to conduct about 100 programs last year and so again, I think that bodes well for the future. We do plan on expanding our bureau and doing more programs. And the last thing I will mention is, I mentioned we did expand our sales force. So we think that will help as well, as well as incrementally we’ll be adding some additional members of the customer facing team, marketing, account management to further increase access. So I hope that answers your question.

Thanks so much for taking the question.

Thank you, Anupam.

Thank you. Our next question comes from the line of Kyung Yang with Jefferies. Your line is open.

Hey guys. This is Sooji [ph] filling in for Eun, thanks for taking my question. I have two questions if I may. The first one is if you guys have seen any off label uses of TAVALISSE in [inaudible] so far. And then second question is, can you guys provide some updates on TAVALISSE for IgA nephropathy. Is the partner at Kissei going to be doing additional trials in Asia to get approval in Asia? Thank you.

Yeah, this is Eldon, I’ll take the first one. We have not seen any off label use in hemolytic anemia as of yet. We do have good visibility into about 60% of our demand and you know we have not seen that. There is 40% of our demand in the so called IOD channel that we don’t have that level of visibility, but based on what we’ve seen, we haven’t seen that as of yet.

I could answer the second quarter on IgA nephropathy relative to our partners. As you know, we received the results from our Phase 2 study of IgA nephropathy and decided not to proceed ourselves in the U.S. for a variety of reasons, just the size of the trials required after interacting with the FDA. However our partner in Asia, Kissei is interested in this area and the opportunity there may be a bit larger given the higher substantially higher prevalence of IgA nephropathy in Asia, and they might proceed with that. They haven't made a decision as to that as yet, but the opportunity there is much more substantive than in the U.S. relatively speaking. Thank you for your question.

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

Hi, thanks for taking my questions. First question on your European partnership. When does Grifols take over responsibility of TAVALISSE in Europe? Are they involved in the EMEA interactions for the ITP filing or do they just start with the reimbursement negotiations after approval?

The latter. So when we put together the partnership with Grifols in Europe we really allocated the responsibility for the party best position to do that amount of work. In the case of filing the MAA and then moving it forward towards approval, we are really better position to do that given that we have just accomplished successful that with the U.S. FDA and we're best positioned to execute on that. And so we are responsible for the regulatory interactions, leading to an approval for ITP in Europe. They will be responsible then for all the pricing engagements in Europe and getting the price to rise most likely in 2020 in the various countries, as you know that requires some infrastructure and capabilities in the various countries of Europe. We will do what we're best at and they will definitely do what's best for them. Importantly, we were able to sign the deal early enough that they have almost a full year to prepare for the launch in Europe and that's a real advantage, because it allows them to think about the launch plan and how they are going to position the product in that territory. And when the approval does come in Europe, they will be well positioned to execute on it and have a faster uptake as a result.

Great, great, that's helpful. And a question about the addition in sales reps. Are you adding more sales people because there were gaps in the coverage? Do you anticipate expanding more in your sales force and do you think you can give some indication of what operating expenses will be for 2019?

So yeah, I'll take the one on the sales force. Yeah, there was a little bit of a white space, those areas that were not covered before with the expansion, so there was some of that. I would say roughly 20% in the expansion, 25%, but more additionally it was to provide a more manageable size of the territory for some of the folks that we did have, that were covering a very dense area in terms of number of accounts and number of patients treated and number of prescribers. So this will enable those folks and the folks around them that were affected by this small expansion to spend less time driving and traveling and more time interacting with our customers and you know there is a fatigue factor as well with the larger territory. So it was a little bit of the covering territories, but mostly just for getting a more efficient territory increasing our region frequency with doing that.

And then with respect to operating expense in 2019, so we don't plan to give full year guidance, but I can give a little bit more clarity from what I said in our prepared comments. So we did see an uptick in operating expense from Q3 to Q4 of ‘18 of $6.1 million. Last year we saw a drop into Q1 of about $1.5 million. So we’d expect to see that drop again going into 2019. It could be a little bit larger than the $1.5 million, say $2 million. We then expect that to continue for a few quarters before we see a bit of an uptick in Q4. So hopefully that gives you some direction of from where we are at today to where we’ll be going into 2019.

Yes, that’s very helpful. Congrats on the progress. Thank you.

Thank you.

Our next question comes from the line of Joe Pantginis with H.C. Wainwright. Your line is open.

Hey guys, good afternoon, and nice to see the increased attraction of TAVALISSE. I wanted to preference my question, but the topic is the reorder rates and preference my question by saying obviously you are still in the early days of the launch and building experience for the drug, but especially with the commentary in the prepared remarks a lot of heterogeneity to the different lines and the types of patients its being used in. So with that introduction, sorry for the length, just curious for the reasons for lack of reorders at this point with regard to you know combinations of efficacy, side effects, you know what have you. Just curious about the kind of data you might have?

Sure, Joe this is probably Eldon as you can tell. Yeah, I mean we’re again – as I said I don't want to be repetitive, but it is very early still of course in the launch and you know we're tracking and when you say reorders, I assume you mean with prescribers and that's something that we're tracking very closely. There is a caveat I did want to provide that there are you know such as the with – and I mentioned this earlier, with the so called IOD portion of our business, so we can provide some directional updates here, but that's a segment of our business that we do not have full visibility in and that represents 40%. So we can say though that you know we've seen a growth in our prescriber base, but a lot of our prescribers started with one to two patients on therapy and we do expect that as they become more comfortable with the product this will increase over time. But it takes time for them to evaluate how a patient is responding, and so we think that will be a key driver of sales volume going forward. You know we actually are pleased that so far we have about 15% roughly of physicians that have multiple patients on drug in their subset that were you know even more productive. So we do expect that to grow. As physicians gain more experience, we think they'll be using it more across all lines moving it gradually into earlier lines where there are larger patient populations that have been less heavily treated. So I hope that addresses your question. I don’t know if that’s specifically what you are asking but...

No, it really does help a lot, and I was just curious like if they're like specifics where you are not seeing a particular reorder from a physician based on say an adverse events profile or just lack of efficacy as an example.

No, I don't – there are no signals there Joe that concern us, but as we stated before, I mean the product is being used across all lines, including earlier lines. But of course initially we are seeing the majority of our patients in later lines and we also know that with many rare disease products, there is a – can be a pent-up demand phenomenon right where you have a significant quantity of patients that had exhausted treatment options and are typically you know very, very refractory as an example of the one that I provided earlier and so there are, you know the number of physicians who did have a patient that was very refractory, did not respond and so this is an area where our sales force will go back in and talk about the benefits of the product and what are the right patient candidates. So some of that is very normal, with launches in this type of markets, so you know again, not anything concerning for us.

Got it. No, I appreciate the added details. Thanks a lot.

Thank you. Our next question comes from the land Allison Bratzel with Piper Jaffray. Your line is open.

Hi, thanks for taking the question. Kind of a follow- up actually on the last question. The label recommends a three-month trial before discontinuation of patient, don't have a sufficient response. So I guess now that you're, you know several months into launch, how does that look in practice. Are docs actually waiting three months before discontinuing or should we expect to see more churn as sort of the first wave of patients hits the three month mark?

Okay, yeah, good question. So first of all let me just restate that we have a 45%, you know refill rate or persistence rate which we actually believe is very strong given what I just mentioned, that the majority of patients are more refractory. So we expect that again, given how early is in launch, as physicians gain more experience with the drug and learn how to use the drug better and so how are they dose modifying for example; how are they managing AE such as diarrhea and as we get better at supporting them with that, we think that – and then additionally as we move the product up line into earlier line of patients that you know we believe are more likely to stay on therapy, that we’ll see that improve. Having said all that as background, yeah when we launched the product there one of our key messages was a rapid response and that is seen, but there were some physicians who we believe and we heard anecdotally who did discontinue before giving them the full three months and maybe did not dose escalated. So this goes back to what I said before about physicians learning how best to use this drug and for us to support them. So this is an area of normal learning’s in early stages of launch. We have a great opportunity for us to go back with those physicians and support them and making sure they understand how best to use this drug and so we think that is an opportunity going forward. That wasn’t a significant portion of our patients and I don't have any numbers for you, but yeah, we did see a little bit of that but I don't think it's anything that is concerning. I think it's also actually an opportunity for us going forward and the patients to get the right treatment, of course.

No, we are very happy with that 45% at the fourth month. I think that’s a very good indicator of patients clearly having a benefit, because they wouldn't stay on that long if they didn't derive a benefit and clearly the AEs are – they encountered – if they were going to encounter any and that's obviously not a deterrent and obviously the reimbursement is not an issue. So we're very happy with that 45% and I think as doctors get more experience we expect that to creep up words, which is fantastic. Also as Eldon mentioned, as we get used in earlier lives of therapy more, we expect that response rates and others to help improve that as well. So we're looking forward to sharing that with you as we progress.

Thank you.

[Operator Instructions] Our next question comes from the line of Yigal Nochomovitz from Citi. Your line is open.

Hi, this is Samantha on for Yigal. Thanks for taking our question. Again, just to follow up on some of the earlier question. You mentioned that you have about 15% of prescribers that have multiple patients on drugs. I assume that's more than two patients. I was wondering if you could just provide a little bit of -- do you have any insight into the trend that throughout the whole launch or is that just a snapshot at that one survey that you did in October?

Yes, okay. That percentage is not from our survey. That is specifically from the demand trends that we have visibility to in the specialty pharmacy channel, so which is the 60%, represent 60% of our demand. And again, the remaining 40% in the IOD channel, we see bottles shipped to those accounts, but we don't know how many prescribers and how productive they are. So that’s just a caveat for that. But no, that’s an overall number for 2018. So again, these are of the many, many metrics that we are very closely monitoring and analyzing, that is one of them. So I think it's too early to comment on any trends there again. We think it's encouraging. I can say you know early in Q1 we are very encouraged with the trends we are seeing overall as well.

Thank you, that's helpful. And just switching gears a little bit, I'm curious for your thoughts on which of your partner programs you think is perhaps the most long term for potential value for Rigel and what are the catalysts that we will see over the next one to three years that will help the market begin to recognize that value?

That’s a very good question. I think all our children are very good children. All our partnerships I think are very good partnerships and we are very happy with all of them for different reasons. The two we put in place most recently with Kissei for Asia, Japan commercialization of fostamatinib and with Grifols for commercialization of fostamatinib in Europe and Turkey. I think those are partnerships that really allow the product to be used in the very large ex-U.S. market, and in the case of Grifols the opportunity is really proximate. We hope we can get approval for this product at the end of this calendar year 2019, and the product will be in patients in 2020 with Grifols. So the immediacy of that is really outstanding and as Dean mentioned, the royalty rates are important and attractive for that partnership. So they are excited about it as are we, our partners at Kissei are actually equally excited. They are working with the PMDA in discussing how best to advance towards an approval in Japan first and then the other Asian countries and they are very enthusiastic about that. Again, it’s close to the finish, not as close perhaps as Grifols there and that's fantastic because of that. Our earlier collaborations are making very good progress, broadly speaking from Aclaris and AstraZeneca now in the clinic. They are all at clinical stages, various clinical stages and different ones will progress at different rates, but we are very pleased with all of those at this point.

Thank you, thanks for talking the question.

Thank you. I'm showing for the question. I will now turn the call over to Raul for closing remarks.

Well, thank you. I'd like to thank you for listening in and your questions. Most importantly I’d like to thank you for your support as we move this product forward and have gotten it to an approval and now to patients. And the reason I’d say that, we hear from patients on a weekly and monthly basis and their doctors about the product and how its benefiting those patients, and I assure you that this is a product that is very valued by those patients whose lives are made better and they are ITP improved because of your support, and having allowed us to do this, so thank you for that. And I appreciate it, and will keep you abreast of our other advances throughout the year. Take care.

Ladies and gentlemen, thank you for participating in today's call. Everyone have a wonderful day! You may now disconnect.