Greetings, and welcome to Rigel Pharmaceuticals' Financial Conference Call for the Third Quarter 2019. [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 third quarter of 2019 was issued a short while ago and can be viewed, along with the accompanying slides for this presentation in the News and 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 timing 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 in our third quarter 2019 financial call. Also joining me today are Eldon Mayer, our Chief Commercial Officer; and Dean Schorno, our Chief Financial Officer. Today, we're going to review the achievements of our commercial team and recap some of the exciting pipeline opportunities we discussed at our recent investor call. If you hadn't had a chance to listen to our recent call, I would encourage you to do so. We discussed some exciting developments in our clinical pipeline, including the introduction of our newest program focused on RIP1 inhibition, which has now entered a Phase I clinical trial. We also had the pleasure of being joined by Dr. Ivy Altomare of Duke University, who is a KOL in the hematology oncology space and who provided some valuable insights on the ITP treatment landscape. I would like to begin on Slide 5. We have four key value drivers which underlie our business strategy at Rigel. We'll take you through each of these today and show you how we're executing across all of them. As this slide shows, these value drivers are built upon strong financial position, which we had further solidified this quarter. The first value driver is our TAVALISSE commercial business in the U.S., which Eldon will discuss in greater detail in a few moments. We continue to grow the U.S. sales of TAVALISSE in patients with ITP, and we have exceeded a 4% market share on an annualized basis on -- in this $1 billion category. An excellent achievement in just the fifth quarter on the market and we're excited about the substantial opportunity to grow this share further. Outside of the U.S., we are continuing our efforts to provide fostamatinib to ITP patients worldwide and have put in…

Thanks, Raul. Moving on to Slide 8. I'm pleased to report in Q3, we generated $11.7 million in net revenue, which represents approximately 15% growth from the prior quarter. This growth has been realized by increasing awareness and understanding of the several key product attributes, including, number one, the mechanism of action for TAVALISSE, which is well-differentiated from other ITP therapies; number two, the TAVALISSE efficacy profile, which is appealing to ITP treatment physicians; and number three, a safety and tolerability profile that physicians view as suitable for long-term usage in treating this chronic disease. Our customer-facing teams continue to educate physicians about these benefits and as a result, there is a growing body of physicians who had clinical experience in TAVALISSE, which we continue to leverage through our peer-to-peer programs. We are also pleased to continually have seen improvement in the persistency rate at the 4-month time period, which importantly surpassed 50% in Q3. We believe this is a result of several factors, including the continuous movement of TAVALISSE up in the lines of therapy to treat patients with a higher likelihood of staying on therapy as well as supporting optimal dosing and management of adverse events. Slide 9. During the recent Rigel investor call, Dr. Ivy Altomare from Duke University presented this slide that shows how the various ITP treatments are differentiated and explained that TAVALISSE works in a completely different manner than anything else. It's this unique and important mechanism that addresses the underlying pathophysiology of ITP, which we believe is the basis for a compelling value proposition to clinicians because it targets the key pathway in ITP, which is immune-mediated platelet destruction. And because TAVALISSE works differently, it can provide an efficacy profile that is different from other therapies. The safety profile of TAVALISSE is also…

Thank you, Eldon. Great job. Now on Slide 14. As Eldon discussed, TAVALISSE has been well-received by patients and physicians here in the U.S. We believe that globally, TAVALISSE fostamatinib will have the same impact. Outside of the U.S., we are targeting an $800 million market, which currently includes TPO agents and RITUXAN. Like in the U.S., we have potential to be -- provide a differentiated product, which for the first time, allows doctors to address the underlying pathophysiology of ITP. On a recent call, we mentioned the twin goals we have for TAVALISSE fostamatinib in ITP and Global Markets. First is to make it available to as many patients as possible around the world. And second, to retain a significant part of the product's value. And we're making great progress on both goals. As you're probably aware, in mid-October, we received a positive trend vote from the European CHMP, which we believe positions us well for a positive opinion at the CHMP meeting in mid-November. This opinion advises the European Commission on product approval. And while there is no guarantee that a positive CHMP opinion will lead to an approval, we do think it's highly likely. This approval, as you may know, will add another $20 million in the form of a milestone from our partner. Our partner, Grifols, plans to make fostamatinib available to ITP patients in all the major European countries and to launch first in Germany. Germany is the most populous country in Europe with the largest market for ITP patients, a great place to start. Our partner in Japan, Kissei Pharmaceuticals, has initiated a phase -- a Japanese clinical trial in ITP as it works towards an approval of its NDA in Japan. For the Canadian and Israeli market, we recently established collaboration with a…

Thank you, Raul. Turning now Slide 20. For the third quarter of 2019, we shipped 1,355 bottles to our specialty distributors, resulting in $14.4 million of gross product sales. 1,291 of those bottles were shipped to patients and clinics while 64 bottles remained in our distribution channels at the end of the quarter. As of September 30, a total of 500 bottles remained in our distribution channels. We reported net product sales from TAVALISSE of $11.7 million, which was recorded net of estimated discounts, chargebacks, rebates, returns, co-pay assistance and other allowances of $2.7 million, our gross to net adjustment, which is approximately 18.5% of gross product sales. This was an increase in net product sales of 15% from the previous quarter and 141% from the third quarter of 2018. Also notable is the progress we have made to-date. Since launch, we have shipped 5,438 total bottles and generated $44 million in net product sales. This reflects the tremendous growth of our business since our commercial launch in May of 2018. On to the next slide. In addition to product sales, Rigel's contract revenues from collaborations was $9.1 million for the 3 months ended September 30, 2019. During the quarter, Rigel recognized $4 million relating to a development milestone from Aclaris Therapeutics, $3.8 million related to a commercial launch milestone payment from Impact Biomedicines, which was subsequently acquired by Celgene, and $1.3 million from our collaboration agreements with Grifols and Kissei related to performance of certain research and development services. Moving on to costs and expenses. Our cost of product sales was approximately $310,000 for the third quarter of 2019. Overall cost and expenses were $32.9 million in the third quarter of 2019 compared to $29.2 million in the third quarter of 2018. The increase in cost was primarily due…

Thank you, Dean. Before we turn the call over to your questions, I'd like to reiterate the 4 key areas that continue to drive value for Rigel. The first is our current commercial business in the U.S., which we continue to grow, and we will support further with post-hoc data analysis providing insight on earlier use of our product. This data will be expected -- is expected to be presented at the upcoming ASH conference, which takes place in early December. Second, outside of the U.S., there is a substantial market opportunity, and we are making fostamatinib available to patients worldwide beginning in Europe next year. Third, we are capitalizing on the potential of TAVALISSE to treat warm autoimmune hemolytic anemia. Not only is this a dynamic opportunity for Rigel because of a lack of FDA-approved therapies but there are tremendous synergies with our current ITP business. And then fourth, the cornerstone of our company is the productivity of our R&D team and our pipeline of attractive opportunities that they have produced. Our SYK, RIP1 and IRAK1/4 programs are attractive value drivers for Rigel in the long term and in the short term via our own commercialization and via partnerships. With that, let me turn the call over to your questions. Operator?

[Operator Instructions] Our first question comes from Chris Raymond with Piper Jaffray.

This is Ally Bratzel on for Chris today. So first, I was just wondering if you could talk about any expected seasonality trends for TAVALISSE that we should be thinking about as we get into Q4 and the beginning of 2020. I know the sector can be impacted by seasonal tailwinds at the end of the year and headwinds at the beginning of the year. So any color on what to expect for TAVALISSE over the coming quarters and also any potential dynamics from fluctuations in distributor inventory will be helpful. And then could you also just give us some color on gross to net going forward. So I think you said it was around 18.5% this quarter, which seemed in line with your expectations for this year, but just going into next year, I know you took a 10% price increase in July, so how should we think about this maybe directionally going forward?

Sure. Thank you, Ally. Appreciate that. Eldon and I and then Dean will answer your third question. There is seasonality in this business as you saw. Remember, Q1 is typically a down quarter a bit, there was some growth. We were delighted with that, that we showed -- as insurance resets and Medicare donut hole issues play a role in that. Second quarter was excellent, and that's a corollary to the first quarter, strong second quarter. And you do see seasonality, and we expect some seasonality. However, as we said at our last -- on our investor call, we ended Q3 in September with a strong -- in a strong way, very good daily patient demand numbers. And we are seeing that continue into the first few weeks of this quarter. So we expect a good strong quarter as well this year. Eldon, any other...?

No, I think you touch on all the points there. Second question was on inventory. I would just say that we would expect to see a mild increase in inventory that's consistent with the increasing demand, as we have seen in the past. So that's all I would add to that. Dean, would you want to comment on that GTN?

Yes. I think Eldon has the inventory right there. We would expect on inventory that as the distribution channels scales and really gets -- starts to mature, then we could see a bit of fluctuation in those inventory levels. As it compares to the overall clinic and patient demand, we think it will be a very small element of our total volume. With respect to the gross to net, the 18.5% -- 18.5%, 19% for the remainder of '18 is -- I'm sorry of '19 is what we expect. As we move into '20, the price increases really baked into that 18%, 19% that we have seen in the back half of this year, and therefore, we'd expect to see that carry into 2020.

Our next question comes from Yigal Nochomovitz with Citi.

This is Carly on for Yigal. So we had one on your RIP1 program. Just wanted to get your thoughts on how you feel it might be differentiated from competitors in the space, particularly given the recent failure of GSK's RIP1 in pancreatic cancer?

Hi, Carly. Thank you for your question on the RIP1 program. It's a really exciting program. I'd say the opportunity there is tremendous, large indication, small indications and we're really delighted to have that program. And as I mentioned, one of the leading programs in this area, glad to be in the clinic -- we haven't revealed a lot of information as yet on that program. It's still in Phase I, so we're learning more about it. Early signs are very positive, and we're very enthusiastic about it. And we'll be seeing a little bit more as we get through the Phase I clinical trial and talk about the exposure levels and what we see as some of the really useful and attractive features of our lead molecule, 552.

Our next question comes from Do Kim with BMO Capital Markets.

Back on your investor call, the KOL talked about indicators to predict whether a patient will respond to TAVALISSE. Just wanted to see or learn more about your efforts there and how close you're getting -- how important is finding a biomarker assay to identify responders?

Thank you, Do.

I'm not -- this is Eldon. I assume that, that question was related to research on biomarkers, is that correct?

Yes.

Okay. Just wanted to make sure I understood that. Yes, I think there has been work there. I don't think that work -- from what I heard from the KOL community and from scientists who are doing research in that area, I don't think that, that has yielded anything that would help clinicians predict who might be a responder to our product or any other product, for that matter. Anything?

Yes. It's a difficult -- it's a challenge, what you bring up is a real challenge for all the molecules in this area. And doctors tell us frequently, "I wish I knew what would work in the patient that walked in the door." And right now, obviously, they reflexively use steroids and those have a fairly high toxicity especially at higher doses. And after that, it really is driven by a variety of factors but certainly, unfortunately, for the whole sector none of those is a clear biomarker for TPO agents, Rituxan or our product in terms of this is the -- you keep the patients for which that agent will work. It is a challenge. And given the heterogeneity of these patients, it's a challenge for them as well. I think -- what we bring is a product that fairly quickly reveals its benefits. And that's a real usefulness because you could try the product. And frankly, the platelets are in some ways, its own biomarker. You see the platelets go up relatively quickly. And that's a real benefit of our product, and I think helpful especially with -- relative to different products, say, Rituxan, that does take quite some time to show a benefit. And so while there isn't such a thing as the definitive biomarker, there's work going on this at -- it's serious by the way. Yet it really hasn't yielded what everyone would like. But like I said, with having a quick onset of benefit in many cases, we have the next best thing and in fact, probably superior things, but platelets themselves going up.

I would just add to that -- it's a great point. I would add to that, of course, consistent with any physician's goal of doing no harm with a patient, when you look at this disease that it is benign hematology and although it is a serious disease, it must be treated -- when they look at the profile of our product, and I -- this is what I alluded to earlier, and the safety profile that our product offers relative to some of the potential safety concerns with other products, I think it adds to the value proposition of why not try our product earlier combined with the benefits that we provide and what Raul mentioned. I think that doctors understand that and a lot of the benefits that we provide now that they have another option in the market. So I realize that wasn't your question but I would -- did want to bring that back around. Because it is a reason that physicians are using our product. Thanks.

Yes, that's great. And then just to follow up on that. In the upcoming ASH presentation, on the less refractory patients from the Phase III study, do you anticipate a commercial impact from that data? Or how can you leverage those results in your marketing efforts?

Sure. Well, we do plan on communicating that those outcomes, we believe that they are consistent with the label. They're coming out of our Phase III study and it's the same product and dosage and everything else. So we think we'll be able to communicate that. Additionally, as I mentioned, we are planning to publish on that. I don't have a specific time line but perhaps in the first half of next year, we'll see. So those are some ways in addition to all the other channels, through which we communicate with physician, peer-to-peer, speaker programs, educational programs, especially once it gets to the domain. But we have known and doctors understand that the patient population that was treated in our pivotal studies was a relatively advanced refractory, more severe, long-standing disease patient population. So when they see our efficacy, they understand that. And so it's long been suspected from physicians, and this is feedback that we heard in our advisory boards and other channels, that earlier line patients would probably see a better response rate. So I think it's an expectation that is consistent -- excuse me, an outcome that's consistent with the expectation for our products, so I don't think it will be any surprise. But I think it will be very meaningful to physicians that like our product profile and are looking for validation that they have a good clinical reason to do that. So we will be communicating that through a number of ways. I wish I could tell you more at this point, but that data is, of course, embargoed. But we are excited about it. Anything else you want to add there?

Yes, well, you bring up a very good point. The earlier lines of -- our label allows to treat a wide range of patients. And we'd like to have our product available and be part of the decision at every one of those entry points, immediately after steroids, after that, after that and after that. And these patients, as you may know, do substantial amount of cycling in and out of products. They try a product for a few months and then they don't -- something doesn't happen and then they try something different. It allows us tremendous number of entry points. And we would like to be part of that decision. And this data in earlier patients solidifies our ability to make that argument well. And from our own clinical trials, we will be presenting some data. You'll see that shortly. And then other sources of data, including real-world data and maybe other studies that we will work on will provide that basis. So it continues to be a focus of ours because I think that's an important objective for the company to get patients -- broad range of patients to try our product. So I think many of them will succeed.

Congrats on the progress.

Thank you, Do.

Our next question comes from Tessa Romero with JP Morgan.

I think as previously mentioned, you guys will have an ASH presentation coming up here in December. Just wondering -- was any abstract released? But I think they're on tap for tomorrow. We might just expect to see any data in there, or will we have to wait until the full presentation at the conference? And then my second question, and I may have asked this before, but wondering if you all might be able to update us on how many patients have been treated with TAVALISSE to date, and also how repeat prescribing its tracking in the quarter?

Thank you, Tessa. Appreciate that. Yes, I think you're absolutely right. The ASH abstracts come out tomorrow. And so definitely keep an eye out for that. I think that it will be very exciting. I can't tell you what's in them, though, because that's -- we will get our hands slapped. So just wait a day, I think you'll see that. But definitely look out for those. Eldon, on the second question?

Sure. Yes. Although we haven't been revealing specific numbers of patients treated, I can tell you that we're very pleased with the traction that we're seeing and seen inconsistent growth across all of our metrics: new patient starts, new prescribers, repeat prescribers. We're implementing, as I alluded to earlier, programs to drive continued growth across all of these. And we're also seeing, especially strong growth in large practices, where we have an increased focus due to the programs we put in place. So I can't tell you that specific number -- it would just -- it's still maturing in those numbers of patients, but consistent with -- excuse me, we're pleased with the growth we're seeing across all of those.

[Operator Instructions] Our next question comes from Kristen Kluska with Cantor Fitzgerald.

Touching on the patient example you provided on Slide 11, I wanted to hear what physician thoughts you hear are going into place when deciding when appropriate during the treatment paradigm, when to either increase or decrease the dose of TAVALISSE?

Sure. Well, we recommend that physicians give a patient at least a 3-month trial before discontinuing treatment. And treatment in this disease is very much individualized. So often, physicians -- although in our clinical studies, roughly 85% of patients did escalate to the 150 milligrams BID dosage, physicians will handle that on a case-by-case basis. So we do recommend a dose escalation along the way, if they are tolerating it. But many physicians do choose to maintain patients at the 100-milligram dose, if they are seeing a response and clinical response that's adequate. First, they're monitoring not just platelets counts, but the clinical response. Launch to date, we're seeing still the majority of patients being maintained on the 100 milligrams dose. So we'll continue to monitor that. Does seem to be moving up gradually but we know -- we don't -- probably would not see that reach the point -- that of 85% in the clinical study, but we will see what happens over time.

Yes, just a final point on that patient, really remarkable, failed everything else, very difficult patient to treat. And now they have a treatment that allows them to be maintained well with -- AEs well-managed as well at 100. It is just tremendous success for that patient getting to 200,000 platelets, just awesome. I mean I think it's something that -- you see something like that and then the doctor tries the product in the second and third and fourth patient and in fact, earlier patients as well. And that's a very good objective and we're delighted with that.

Great. And then outside of reporting platelet count and safety profile, can you talk about some of the quality of life measures that you are hearing from physicians on these patients?

Yes. I mean anecdotally, we hear -- I mean, first of all, as I mentioned before, platelets are the primary measure, which is tracked and reported and often has become the language that is used to discuss and describe the efficacy of these products. But in speaking to physicians more and more, of course, what they're really interested in is a clinical benefit, which includes -- which is primarily focused on reduced bleeding events, which, of course, has a major impact on their quality of life -- bruising. Just leading an everyday lifestyle, whether they're brushing their teeth or they start -- it limits the amount of activities that they can have because of fear of getting a bruise or scratch or anything else that could cause any kind of bleeding, which is not a problem for most normal folks. But the other point is about -- and we're seeing that and hearing that, as you have asked. We also see this as outcomes from our studies. But additionally, from use of rescue meds, which require patients to go back in to see their daughter and perhaps get an infusion or injection or -- which can not only have an impact on quality of life from that procedure but also from the side effects of the drug. We also hear anecdotally, of course, about the reduction in fatigue which seems to be well correlated with this disease, although you don't hear as much about that. It's certainly something that patients hear about and although we don't have any specific outcomes on that yet, it's something that we'll look to study in the future. I hope that answers your question.

There are no further questions at this time. I would like to turn the floor back over to Mr. Raul Rodriguez for closing remarks. Thank you.

Thank you, everyone, and thank you for your interest in Rigel. It's been -- this is the last call for the year, so -- it's been a great year across all of these areas of Rigel in terms of commercial launch of the product and then execution. It's great to see tremendous acceptance of the product and acceptance broadly and tremendous progress on that front, progress in outside deals outside the U.S. and putting collaborations in place. We put 3 of them in the last 12 months with very good parties across the major territories of the world and have made great progress in making the product approval happen. And shortly, we'll hopefully see one -- the first one of those in Europe, the second largest market in the world for ITP treatment. So that's fantastic. Launching and now enrolling our AIHA trial, a tremendous opportunity, highly synergistic. Again, a tremendous advancement there as well. And then the pipeline, I mean, that pipeline is something until recently, we really hadn't discussed very much and we're delighted with the progress made there with both our IRAK and our RIP1 programs. Very good progress, exciting opportunities, tremendously large opportunities. And across the board, I think all of those have gone incredibly well in the last 12 months. Again, the foundation of solid financial foundation for the company as well. And I think there, we've made tremendous progress as well. So we exit the year, I think, on an incredibly sure footing with tremendous potential. Thank you for your support.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.