Greetings, and welcome to Rigel Pharmaceuticals Financial Conference Call for the Second Quarter 2019. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce our first speaker, Dolly Vance, who is Rigel's Executive Vice President, Corporate Affairs and General Counsel. Thank you. Ms. Vance, you may begin.

Welcome to our financial results and business update conference call. The financial press release for the second quarter of 2019 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 Web site at www.rigel.com. As a reminder, during today's call, we may make forward-looking statements regarding our financial outlook and their 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, and thank you for joining us on our second quarter 2019 financial and business update 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. I’d like to start with Slide 5. Rigel is focusing on developing opportunities that will drive both near-term and long-term value, and we have a clear path to creating this value for the company and its shareholders. Our main priority now is execution, so let me show you how we’re going to do that. From a commercial perspective, we brought TAVALISSE to the market approximately 12 months ago. TAVALISSE is the first approved SYK inhibitor for the treatment of ITP. TAVALISSE is highly differentiated as the only therapy that prevents the body’s immune system from destroying its own platelets, and so it addresses the underlying pathophysiology of this disease. Chronic adult ITP is a billion market in the U.S., and we are establishing ourselves in this rare disease market with important unmet medical need, and we are gaining market share. As we look at other opportunities for revenue generation, we are focusing on expanding the range of potential indications for TAVALISSE. We believe that SYK inhibition plays an important role in a number of other immune-mediated diseases. Our plan is to continue development efforts on new indications such as autoimmune hemolytic anemia and others. The investment is worthwhile since TAVALISSE has exclusivity until 2031. Our pipeline of opportunities come from Rigel’s proprietary research, the foundation of the company. We are proud of our research and development accomplishments to date and their contributions towards creating further long-term value for the company. Going on to Slide 6, we are executing to drive value for Rigel. Sales…

Thanks, Raul. It was a great quarter for TAVALISSE following a significant uptake in the first year of commercialization. Our Q2 product sales were strong with bottles shipped up 25% over Q2 bringing in 10.2 million in net revenues. Importantly, we continue to see strong persistency. Our patient refill rate for TAVALISSE at four months suggests that approximately half the patients are receiving a benefit with manageable side effects. As a product in its commercial infancy, we believe this is very encouraging. With further experience and knowledge of the product among ITPs as well as use in early lines of therapy, we believe there’s potential for this to improve over time. To that end, we continue to see trends toward use in earlier lines of therapy. The next two lines of therapy in the post steroid market comprised about 75% of the addressable market. So it’s critical that we capture a significant share of this subset of patients, and we believe it’s very achievable given the TAVALISSE product profile and the unmet need in this market. We’re also seeing expansion of the prescriber base, good repeat prescribers year-to-date and consistency of adding new prescribers quarter-over-quarter, all of which can be attributed to the positive results that physicians and patients are having with TAVALISSE as well as strong execution of our customer facing team. Next slide. When TAVALISSE entered the market as the first product in 10 years with a different mechanism of action, we had the challenge of changing the mindset and habits of physicians, patients, and payers. In just one year, we’ve seen our efforts have an impact on how physicians are thinking about ITP treatment, how patients are looking at their options, and how payers are valuing our product. Our core objectives have been to: number one, highlight…

Thank you, Eldon. I would like to walk you through our initiatives on the clinical development side that have the potential to create meaningful near-term value for Rigel. As an update, we remain on track with the EMA’s decision on our Marketing Authorization Application for fostamatinib in chronic ITP. We have been collaborating with Grifols as they prepare for the potential launch in Europe and with the lead time they have as well as the relationships and infrastructure they have established over the years, revenue generation in Europe could begin next year. Kissei is moving along as well working to finalize the trial protocol for a bridging study in Japan. Based on their expectations for the trial, they expect to be in a position to file an NDA at the end of the fourth quarter in 2021 or during the first quarter of 2022. We are also continuing to move forward with the next indication for TAVALISSE in the U.S., which is warm autoimmune hemolytic anemia. We have enrolled the first patients as planned and have several sites that are approved for participation. With enrollment up and running, we’re on track to complete enrollment in the middle of next year and have top line results in 2021. Next slide, Slide 16. Raul described why we’re so excited about the potential opportunity for TAVALISSE in warm autoimmune hemolytic anemia. This is a wide open market and our goal is to become the first FDA approved product. In order to achieve this goal, we need to be thorough but also efficient in our Phase 3 trial. We have been able to leverage our experience with ITP to help develop a strategy that we believe will enable us to enroll the trial in a timely manner. Our trial protocol calls for 80 patients,…

Thank you, Anne-Marie. Looking at Slide 18, for the second quarter of 2019, we shipped 1,270 bottles to our specialty distributors, resulting in $12.5 million of gross product sales. 1,163 of those bottles were shipped to patients at clinics, while 107 bottles remained in our distribution channels at the end of the quarter. As of June 30, a total of 436 bottles remained in our distribution channels. We reported net product sales from TAVALISSE of $10.2 million which was recorded net of estimated discounts, charge-backs, rebates, returns, co-pay assistance and other allowances of $2.3 million, our gross to net adjustment which is 18.5% of gross product sales. This 26% quarter-over-quarter increase in net product sales of TAVALISSE reflects the continuing growth of our business since commercial launch in May of 2018. As a reminder and as we expected, our first quarter sequential net product sales growth rate of 10% was impacted by typical first quarter reimbursement issues such as the reset in co-pays and the Medicare donut hole. As a result, our second quarter sequential net product sales growth rate of 26% was positively impacted. For the third quarter, this sequential growth rate is likely to moderate. On to the next slide. In addition to our net product sales, contract revenues from collaborations were $234,000 for the three months ended June 30, 2019, which were related to our collaboration agreements with Kissei Pharmaceutical Co., Ltd. and Grifols, S.A. There were no contract revenues from collaborations during the three months ended June 30, 2018. As a reminder, we entered into the collaboration agreement and license agreement with Grifols during the first quarter of 2019 to commercialize fostamatinib in Europe. In the first quarter, we discussed the revenue accounting as well as the key terms under the agreement. Moving on to costs and expenses. Our cost to product sales was approximately $311,000 for the second quarter of 2019. Overall, costs and expenses were $31.7 million versus $27.9 million in the second quarter of 2018. The increase in cost was primarily due to increased personnel costs for Rigel’s customer facing team and third party costs related to the commercial launch of TAVALISSE in chronic ITP as well as R&D costs related to our Phase 3 pivotal trial of TAVALISSE in patients with warm autoimmune hemolytic anemia, which was initiated during the quarter. We expect our costs and expenses to increase in the second half of 2019 compared to the first half as we continue to ramp up our activities in our Phase 3 study in warm autoimmune hemolytic anemia and as we continue our commercial expansion of TAVALISSE. We ended the quarter with cash and short-term investments of approximately $112.4 million. We currently expect our cash runway to extend into the second half of 2020 and provide for our continued commercial expansion as well as expansion of our clinical programs. With that, I’d like to turn the call back over to Raul.

Thank you, Dean. I am on Slide 21. I’d like to reemphasize how pleased we are with the performance of TAVALISSE in its first year on the market for the treatment of ITP. Our commercial team did an excellent job in preparing for the product launch and then executing on that plan, and these efforts are clearly paying off. For our first year, we generated over 32 million in net product revenues owing to steady double digit increase on sales quarter-over-quarter. That’s fantastic. And most importantly over 1,000 patients have been treated with TAVALISSE to date and many of them are succeeding on our product. The momentum and trends we are seeing as we emerge from the first year are incredibly encouraging. Slide 22. The results for the first half of 2019 speak for themselves, but let me remind you of our priorities for this entire year. Most importantly, continue growth of TAVALISSE. We are growing awareness in TAVALISSE amongst physicians and patients alike and importantly patients and physicians are gaining experience and becoming more educated on the product and its use and this will continue to drive increased usage and durability of treatment. For our next indication, AIHA, we are enrolling patients in the pivotal trial for TAVALISSE. We are also working to make fostamatinib available globally, including seeking EU approval for TAVALISSE in ITP and its launch potentially next year. In addition, we have been actively progressing our other pipeline initiatives and we expect to talk more about these in the coming quarters. With that, I’d like to turn the call over to the operator for your questions.

Thank you. Now we’ll be conducting a question-and-answer session. [Operator Instructions]. Our first question today is coming from Eun Yang from Jefferies. Your line is now live.

Thank you. I have a couple of questions. So last October you gave us the data pointing to about 16% second line use and about 25% third line use. Can you give us an updated number? And also what percent of patients currently are on TAVALISSE are post-TPO [ph] mimetic?

Yes. Hi, Eun. This is Eldon. I will answer your question the best I can. We haven’t revealed any specific metrics by line of therapy since then. I think, as I’ve mentioned on prior calls is it’s data that we are continuing to monitor and as we collect more data, and I think we’ll be able to report out on that in the future when we think we have sufficient data that those figures are reliable. I can tell you though, as we monitor it, we are seeing continued trend towards earlier treatment. So, we are being used across all lines, but we are seeing a gradual movement upward in line. Also, as you may understand about the market, there are many different styles of treatment, some doctors prefer to use rituximab or TPO drugs and there are many variations. There’s a lot of heterogeneity in disease and a lot of variability in treatment, and therefore there are many different entry points on how our drug can be used. So, the usage of our drug is across all lines for a number of reasons, but in part because physicians have different treatment styles and they see the value proposition enrolled for our product differently depending on how they prefer to treat the disease. So, I hope that helps.

What percent of patients are currently on TAVALISSE opposed to TPO mimetic?

Yes, I don’t think we have a reliable number for you. We could check and possibly follow up at another time.

Okay. And then another question is, the Doptelet was recently launched. It’s another TPO mimetic. Are you seeing any impact on TAVALISSE, and although it is probably really too early, but do you – more importantly do you factor that to have an impact on earlier use of TAVALISSE?

Let me try to answer that and then kick it over to Eldon. I think our view has been and continues to be that the value proposition of TAVALISSE is driven by its mechanism of action which is unique and different in the treatment of ITP addressing the underlying disease mechanism, and that has resonated quite well with physicians and many other healthcare providers. And so, that’s really the focus of us and for that it continues on unchanged even with the recent launch of avatrombopag. Eldon, you want to add some comments?

Yes, it goes along consistent with what I said before, I mean we are being used across all lines, and I think there are physicians that are using our product for more TPOs and physicians that are using our product after that. So, there are physicians that may choose to use TPO and they can pick one of their choice, but we believe that we are well differentiated from that class, and we think there’s a lot of rationale for using our product. When a TPO has not resulted in a good clinical response, it makes more sense to use a product with different mechanism of action like ours before moving on to yet another TPO. So again, of course as you said it’s way too early to see any impact there.

All right, thanks. And the last question is for autoimmune hemolytic anemia, patient enrollment is going to be – completion is going to be expected in the next year, and this is a 24-week study, so why not data earlier than May 2021? Thank you.

Thank you, Eun. So we initiated enrollment. We expect to have it enrolled mid next year and it is a rare disease, so keep in mind it is a challenging disease to enroll trial patients in this and the fact that we’re going to 22 countries is kind of a testament to that. And so, we nonetheless plan on having completion of enrollment by mid next year, mid is broadly defined sometime in the summer, most likely. With that, it’s a six-month study and couple more months of that after completion of the last patient, last visit. And so that could bring us into mid 2021.

All right. Thank you.

Thank you, Eun.

Thank you. Our next question today is coming from Chris Raymond from Piper Jaffray. Your line is now live.

Hi. This is Ally Bratzel on for Chris today. Thanks for taking the question. So we saw you guys took I think a 9.5% price increase on TAVALISSE effective late July. I think that’s the second price increase this year after a smaller one in January. So just hoping you guys could talk about the strategy there and what kind of net price tailwind we should think about as we model 2019 and 2020? And then related to that I think you mentioned that Q3 sequential growth trends are expected to moderate. Is that talking about sequential volume growth or does that include any price impact? Thanks.

Okay. I will talk about our thoughts on the pricing and our strategy there and then I’ll hand it over to Dean. First off, our pricing is in line with the category. In the ITP category we’ve seen year-over-year price increases from the range of 10% to 14% with price increases usually taken in early and midyear. Our price adjustment this year are within that range for the industry norm and the category, the ITP category. We believe that payer and patient access will be maintained prior to any pricing action. We ensure that any adjustment will maintain affordable access to patients and continues to deliver good value for payers. So we thoroughly assess a number of things working with physicians and payers making sure there is minimal to no impact to patient access, competition as well as well as overall just considering the costs that are required to make TAVALISSE available for patients. So that’s some overall thoughts on the pricing. And you also had a question about margin, about future growth.

Yes. With respect to the gross to net adjustment, during the quarter we reported 18.5% gross to net adjustment. And as you suggest we don’t capture the entirety of these price increases as a result of the mix of government and commercial payers. That said, we do think that gross to net rate will remain in the 19% area through the rest of the year. With respect to the comment on moderation of the sequential growth rate, that was intended to be around net revenues. I would remind everyone that we’re not intending to give guidance and therefore it is a general comment. We are excited about the 26% sequential growth in Q2. And as I said in the comments that that’s coming off of a 10% growth in Q1 that has the reimbursement headwinds. So as we think about Q3, we believe that we’ll continue to have robust growth which will be a combination of both model count as well as price increase.

Got it. Thank you.

Thank you, Ally.

Thank you. Our next question today is coming from Yigal Nochomovitz from Citigroup. Your line is now live.

Hi. Thanks for taking the question. Raul and team, I think you had in previous quarters you had given the statistic on the physicians with multiple patients. I didn’t see that for this quarter. Could you provide any color there? Thanks.

Sure. I’ll take that one. Eldon, again. So we’re seeing a positive trend for prescribers, I think that’s what you were referring to in the 20% range. We do expect this to gradually increase over the long run as more physicians become familiar with TAVALISSE and its value proposition and see a clinical benefit for the patient.

Okay, so it’s the 20% range, got it. And then, Eldon, I think you mentioned it in your comments that you’re educating yourselves on the market. And I was just curious what have you confirmed from your market research in the launch that is now consistent with your market research and what has been the sort of biggest misconception once you went live with the launch and how those learnings shaped your overall strategy?

Yes, I think initially when we did the market research, I think some of the unmet needs in the market were a little bit understated. Often when you’re doing market research well prior to launch and physicians aren’t as aware of what’s coming, they’re thinking about the unmet need in the framework of what they have and they’ve accepted things about products that may not be optimal or they like to see it change. And so I think that that was a little bit of a surprise on the positive side. I think also that one thing that we did get right I think is our positioning of the product. I don’t think I would change that going back and doing it again. I think we heard about the unmet need but we also heard about that as I sort of alluded to just now, but we heard about the unmet need relative to these and we heard something about platelet production as a pathophysiology. We heard a great deal about platelet destruction. That remains to be something that’s important to physicians and they like to address that underlying pathophysiology and I think that’s been validated. Some of the things that I was alluding to earlier about some of the things that doctors had accepted were things like lack of a food effect for our product. I think that was something that’s been perceived well. I think that we haven’t received as much concern about the eating profile. I think that’s been – the product profile has been well accepted by the physician community. So those are some things that are sort of on the positive and as expected. I hope that answers your question. But it’s something we continue to monitor of course as I mentioned in our advisory boards and our ongoing market research.

Okay. Thanks. And then just a question on the quarter, obviously good numbers. So Raul and team, I just want to understand if this is more of a reflection of just the relatively weaker comp in 1Q given the reimbursement headwinds that you alluded to or is there something that changed, are you doing something different on the commercial side that is ramping things better? Especially since the refill rate is the same, just wondered if you could comment a little more on that?

Yes, I think this is – I’ll let me colleagues also comment. I think it’s a mix of those things. I think clearly there was some benefit that we derive from a muted Q1 that helped this quarter out a bit. But in addition to that I think the story is resonating and doctors are trying the product, trying it in more patients. Patients are staying on the product longer. Especially as we tap into additional doctors, we hired additional reps early in the year and they’re clearly showing a benefit in terms of talking to new doctors. So it’s really driving and executing on the strategy overall that I think is the underlying results that causes this substantial increase.

Got it. All right. Thank you very much.

Thank you. Our next question today is coming from Joe Pantginis from H.C. Wainwright. Your line is now live.

Hi, guys. Good afternoon. I want to ask a question about your physician experience when you talked about the patient that had modest benefit then went on to titrate, stayed on therapy. So I wanted to go off of that and say, do you have any evidence regarding or do you see patients that have not necessarily stayed on therapy long enough that you believe could have received benefit? And if so, how are you addressing that?

You are asking for commercial experience.

Joe, hi. It’s Eldon. So I can tell you that one of the things that we messaged at launch is a rapid response. And so sometimes what we saw is some physicians discontinuing a little prematurely and not giving it the whole 12 weeks and also not escalating. So these are things that we’ve educated to as well and I think that’s helped with that. And so we did see in our clinical study and it was in our package insert that some patients took a little bit longer. So I think messaging that as general in addition to just getting comfortable with the drug has helped in that area.

Okay. And I’d like to ask a more macro question if you don’t mind. I’ve been discussing this point with multiple ITP players and physicians. When you look at the upcoming finalized guidance for ITP discussed coming out of ASH '18, how do you feel these guidelines could benefit TAVALISSE? But even more importantly do you think these guidelines will help in general because even though the indication is so heterogeneous?

I’ll comment and then I’ll ask Anne-Marie to comment as well. The guidelines currently existing are really quite outdated and they precede the approval and introduction of uptick of the TPO agent. So it’s good to have the guidelines being updated. And in particular we’re interested in the international working group guidelines is also updating in addition to the ASH guidelines being updated. And so we’re happy to be contributors to that. And I’ll let Anne-Marie maybe talk a little bit more about those.

Yes. We know that fostamatinib is going to be mentioned in the guidelines. What we don’t know yet exactly is what will be the position of fostamatinib. And so it will be eager to see how it’s positioned in the guidelines.

Understood. Okay. Thanks, guys.

Thank you. [Operator Instructions]. Our next question today is coming from Kristen Kluska from Cantor Fitzgerald. Your line is now live.

Hi. Good afternoon and thank you for taking my question. Could you talk about the breakdown of specific types of physicians who are prescribing TAVALISSE? And of this, how many do you expect might also have some experience in treating AIHA?

Sure. I will take a stab at that and anyone else might want to chime in. When you say different types, I’ll interpret that as in the best way that I can but feel free to follow up. We look at that and overall we are seeing very broad usage of the product. We’ve actually looked as carefully as we can based on the datasets that we have to see if there was any kind of a niche or a particular segment of physicians and we’re just not seeing that. We’re seeing as I said usage across the lines, usage before Rituxan, after Rituxan, before TPOs, after TPOs. So there’s a lot of experimentation with the drug. I think that also when you look at whether it’s academic or community based, were getting used in both settings. Additionally we’re looking at the deciles, if you will, of the prescribing by volume. And so sometimes the higher deciles of physicians prescribe the highest volumes can be the most difficult to penetrate, but we’re not seeing that either. We’re seeing usage across different deciles as well. And I think we’re doing a lot there with our customer facing team. We’ve added five more reps to 35 reps. We’re engaging with our field-based reimbursement team and as well of course as a supportive effort for education with the NFL [ph], so the combination of all of these things. And then I also did not mention our field-based marketing team. So we’ve been gradually adding more resources there to our customer facing team and they’re getting better and better at engaging. It will just take time.

And to the second question, which is whether physicians treating patients with ITP are also likely to see patients with autoimmune hemolytic anemia, the answer is clearly yes. This is the same specialty of hematology even for hemato-oncologist. They would likely see those two types of patients. However, autoimmune hemolytic anemia as we have mentioned is a rarer disease than is ITP. So they would see fewer such patients.

Great. Thank you very much.

Thank you, Kristen.

Thank you. We reached the end of our question-and-answer session. I’d like to turn the floor back over to Raul for any further or closing comments.

Thank you and thank you for your questions. It’s been a year since we launched this product and I can honestly say that we are delighted with how the launch has gone and how this year has progressed. I think just the numbers speak for themselves, 32 million in net revenue but most importantly over a 1,000 patients having tried TAVALISSE and many of them, nearly a half are showing a benefit in month four refills. That’s a fantastic outcome I think for the first year of the product. And I think we’re equally optimistic about what the next year is going to bring. I was at the PDSA, the Platelet Disorder Support Association meeting about 10 days ago. Every year they have an excellent meeting that is very patient focused and it’s one of my favorite meetings of the year, and this year was no different. Here you get to learn the patient’s struggle with this disease and I have to say more than even prior years, it was really a session that brought tears to many people in the audience on how difficult this disease is and what a toll it takes on the patients, but also their families. And so it was great to be able to say that we are bringing a new product to these patients with a different mechanism that hopefully will help some of them. And we’re so excited about being able to continue to do that in our second year of being on the market. So thank you and thank you for your support and look forward to keeping you updated.

Thank you. That does conclude today’s teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.