Rigel Pharmaceuticals, Inc. (RIGL) Q4 2020 Earnings Report, Transcript and Summary

Greetings, and welcome to the Rigel Pharmaceuticals’ Financial Conference Call for the Fourth Quarter and Year-End 2020. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It’s 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 fourth quarter and year-end 2020 financial results and business update conference call. The financial press release for the fourth quarter and year end 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 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 Annual Report on Form 10-K for the year ended December 31, 2020 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 year-end 2020 call. Also, joining me today are Dave Santos, our Chief Commercial Officer; Wolfgang Dummer, our Chief Medical Officer; Esteban Masuda, our Executive Vice President of Research; and Dean Schorno, our CFO. Now, starting on Slide 5. Let me tell you a little bit about Rigel, and we have accomplished and what we look to accomplish in the coming year and beyond. We have four key value drivers at Rigel, and although 2020 was a difficult and challenging year, perhaps the most challenging we’ve had as an industry, we continue to make very good progress across all of these drivers. And in turn, other opportunities emerged. we will also tell you – we will tell you about each of those. Our first priority is to continue to grow the use of our product TAVALISSE in the treatment of chronic ITP. In early 2020, we pulled our sales organization from the field and moved our interactions to a mostly virtual basis. This did not stop our growth. Our team grew sales to $61.7 million in 2020, a 41% increase over 2019. This is a very good result given the backdrop of this pandemic. And I have no doubt that we would have done much better had we been in the field, and we look forward to going back into the field later in 2021. Starting in 2020, continuing to this year, we focused on supporting and educating on the early-line use of our product. We will tell you a bit more about this in a minute. Outside of the U.S., we made very good progress in 2020. We received approvals in both Europe and Canada. Our partner, Grifols launched our product in the UK and Germany in 2020, and more country launches are planned for 2021. ITP is a tremendous opportunity on a global basis about a $2 billion market, $1.1 billion of this in the U.S. and $900 million outside of the U.S., a very attractive and growing market. The companion indication to ITP is warm autoimmune hemolytic anemia. And here, we continue to make progress in 2020. However, the second wave of the pandemic is having an impact on our enrollment; we have 66 patients enrolled out of the 90 targeted. The goal here is to be the first product to be approved for the treatment of warm autoimmune hemolytic anemia. And in fact, we continue to be the first and most advanced product in clinical development with the built-in advantage of already being on the market. We will tell you more about that in a second. AIHA is a tremendous opportunity about a $1 billion market in the U.S. and we aim to be the first to gain approval and to capture a substantial share of that market. A year ago, we did not have a COVID program. And now, a year into it, we have a very comprehensive COVID program. Fostamatinib has tremendous support preclinically for its use in treating COVID-19, including publications from our – by numerous colleagues at MIT, NIH, Harvard, and the University of Amsterdam, all supporting this use. We would tell you more about this during our presentation as it’s very exciting. This year, the NIH launched a Phase 2 study of fostamatinib in 60 hospitalized COVID-19 patients. And the Imperial College of London also launched the Phase 2 study of fostamatinib in over 450 hospitalized COVID patients. In addition, we’ve now launched our own Phase 3 study, a tremendous opportunity to address this public health crisis. And lastly, our pipeline continues to make very good progress. We have two Phase 1 clinical programs; our RIP1 and our IRAK1/4 inhibitor programs. Wolfgang will speak more about the IRAK program later in this presentation. But before I pass the call over to Dave for a commercial update, let me take a minute to highlight the details of our recently announced collaboration with Eli Lilly on a RIP1 program. On Slide 6, a little bit of background on the RIP program. There’s been tremendous interest in RIP1 inhibition as it has potential to treat multiple inflammatory diseases mediated by TNF and the Th2 pathways. These include psoriasis, psoriatic arthritis, ankylosing spondylitis, IBD, RA, and others. To give you an idea of the potential of this space, there are numerous drugs that currently generate billions of dollars in revenue annually that work by blocking either TNF or Th2 pathways. If our molecule were to show benefit in these patients – with these indications, the opportunity is tremendous. And the convenience of oral administration may also prove to be a very attractive feature. In addition, there’s a broader opportunity with RIP1 inhibition, while our Phase 1 product is systemic. We are also exploring molecules that cross the blood-brain barrier to potentially treat a variety of neurodegenerative diseases, including Alzheimer’s and ALS. Given this size of breadth of these opportunities, it was clear to us that we needed to find a partner to advance this. We indicate thought to who would be the ideal partner for this program. Lily came to the top. Lily has a major focus on immune diseases and a proven track record of developing and commercializing these worldwide. In addition, Lily has tremendous history and successes in the CNS field; pain drugs, such as Prozac, Zyprexa, Cymbalta and recent advances in Alzheimer’s. In our discussion, one discussions with them, one thing that we and Lily both share is an appreciation of the tremendous opportunity of RIP1 inhibitors. And now, we have the resources necessary to develop these molecules as rapidly as possible, and then commercialize them. All of this makes Lilly the ideal partner for this program. Moving on to Slide 7, I’d like to highlight a few key aspects of this collaboration. Lilly and Rigel will co-develop in commercialize Rigel’s RIP1 inhibitor 552 – R552 for all indications, focusing on autoimmune and inflammatory diseases. Lilly will lead the clinical development of the brain-penetrating RIP1 inhibitors in CNS. Rigel will receive a $125 million upfront payment from Lilly and up to an additional $835 million in potential future milestones, as well as tiered royalties on net sales. Development costs for R552 will be shared between Lilly and Rigel subject to certain opt-out provisions for Rigel. This partner has the potential to bring forth a new class of compounds in both immune and CNS indications, which address very large and important unmet medical needs. We are very excited to explore this opportunity and partnership with Lilly. And with that, I’d like to turn the call over Dave for a commercial update. Dave?

Thank you, Raul. I’m glad to be with all of you today to review our commercial results as we close 2020. I want to express my thanks to the entire commercial team for their commitment and persistence throughout the many challenges of the year. I’m very proud of the results that team achieved working together to grow TAVALISSE. On Slide 9, you’ll see our FDA approved indication, which is for adult patients with chronic immune thrombocytopenia or cITP, who’ve had an insufficient response to a previous treatment. So, I’d like to begin my discussion on Slide 10. We ended 2020 by continuing to grow TAVALISSE sales in the U.S. In the fourth quarter, we grew quarter-over-quarter net product sales by 9% to $17.8 million, enabling us to reach total net sales of $61.7 million in 2020, 41% over our total 2000 net – 2019 net sales of $43.8 million. Achieving that 41% growth during the year when COVID-19 significantly impacted our ability to see clinicians and increase awareness of TAVALISSE required strong focus on both starting new patients and keeping existing patients on TAVALISSE. In 2020, that focus resulted in our persistency growing to 56%. As a reminder, persistency is defined as the percentage of patients on therapy at four buds. this growth in persistency was important in increasing our carryover or the percentage of our business each quarter that is driven by patients, who began therapy in or before the prior quarter. And by the fourth quarter of 2020, our carryover had grown to approximately 75% of our business. This strong carryover combined with steady new patients starts in the fourth quarter, propelled our demand bottles, shipped the patients in clinic to 9% over Q3 of 2020 and a total of 30% over 2019 to 6,264 bottles. This enabled us with the effects of increasing inventory of bottles remaining in the distribution channel and price to achieve net sales growth of 41% versus 2019 to $61.7 million. In 2021, we are continuing our focus on improving persistency while growing the number of patients, who begin therapy on TAVALISSE. Moving to slide 11. I’d just like to review how much opportunity we have to grow the number of patients on TAVALISSE, particularly as we begin to move beyond the challenges of COVID-19. We conducted quantitative market research in Q4 to refresh our outlook at the opportunity, any adults CITP market, and better understand how COVID-19 has impacted treatment, especially in the post-steroid setting. In terms of the opportunity in the market, our research revealed that clinicians believed they would act if we treat a higher percentage of ITP patients with the available therapies today. And in fact, applying their treatment rates to the 81,300 ITP patients from claims data results in more than 44,000 patients that could be actively treated in a year with approximately 24,000 of them being treated after steroids. Importantly, as we’ve stated in the past, three quarters of the available patients in the post-steroid setting are in the second and third line. We are continuing our efforts to broaden awareness of TAVALISSE’s differentiated mechanism of action, efficacy and earlier lines, and durability of response in the virtual environment during COVID to increase use in these patients. In addition, our research revealed some important factors to consider related to COVID-19 about the opportunity ahead. Half of the treaters indicated that COVID-19 presented challenges in both starting new patients on therapy and switching patients last year. So, we believe that the patient numbers in the graph to the left were reduced by the pandemic year resulting in fewer new patients available for TAVALISSE and other therapies. Secondly, and very importantly, about a third of clinicians in our research indicated that they anticipate a surge of patients requiring new therapy as we’ve returned to normal. This bodes well for an acceleration of new ITP patients, once they are visiting their clinicians more freely. And if we’re able to improve TAVALISSE awareness with more access to those clinicians, we would expect our new patients on TAVALISSE to accelerate as the patient numbers surge. We are poised to take advantage of the new patient surge opportunity ahead with continued messaging of TAVALISSE is higher response rates in earlier lines, and our continued efforts on the medical affairs spread to both publish and generate new evidence differentiating TAVALISSE in the treatment of ITP. This is why we are so enthusiastic about the potential of TAVALISSE. While we currently remain strategically focused on our ITP business, we are capable and ready to leverage our talented sales, marketing, market access and business operations teams as new and exciting opportunities become available to us. Wolfgang will now review two of these potential opportunities, namely AIHA and COVID-19. Wolfgang?

Thank you, Dave. Let me start on Slide 13 by reminding you why autoimmune hemolytic anemia is such an exciting opportunity for Rigel. As you know, the market size and commercial opportunity for us in AIHA is quite substantial and likely, even larger than ITP. We estimate that there are about 10,000 to 13,000 candidate patients with this condition in the U.S. alone with no competing or FDA approved therapies, a significant unmet medical need remains and the opportunity is large. Fostamatinib is the only product currently in Phase 3 development and would be first to market in this indication. The FDA has acknowledged this unmet need as well and granted fast track designation for the product in December after reviewing our encouraging Phase 2 data in AIHA, which is really the first solid data set in this indication. AIHA has many synergies with ITP, including the customer infrastructure that’s already in place, because the physician tuning ITP, or the same physicians, who will treat AIHA. Therefore a lot of awareness and familiarity with fostamatinib already exists and we’ll be there right at launch in AIHA. Slide 14 gives you a brief update on our Phase 3 study in AIHA. It’s seen broadly across the industry with many other clinical programs. There was an impact on our enrollment numbers with the second wave of the COVID-19 pandemic in the last couple of months. Nevertheless, we continue to randomize patients into the trial. As of today, we have 66 patients randomized of our targeted 90 patients. In 39 of those patients have already reached week 24 and a 100% of those have rolled over into the extension study. Why we were unable to reliably predict enrollment completion at this time due to the uncertain cause of the pandemic, we remain confident that we are well positioned to keep or even expand the lead for TAVALISSE to become the first drug approved for this indication. Let’s move on to Slide 16. And our plan with fostamatinib is a potential treatment option for COVID-19. As we have mentioned before, we see a strong scientific rationale for seeking inhibition in COVID-19 or not just one, but multiple levels of the disease. Fostamatinib can inhibit hyperinflammatory cytokines, and importantly, can reduce hypercoagulation and thrombosis. At this point, I would like to give you a heads-up on an upcoming peer-reviewed publication we are submitting that demonstrates a very low risk of thrombosis in ITP patients treated with fostamatinib as opposed to a widely published increased thrombosis risk with other ITP drugs. That’s great news for fostamatinib in ITP, but it could also be very beneficial for COVID-19 patients. Finally, fostamatinib can also inhibit NETosis, a very irrelevant mechanism in severe disease. Esteban will elaborate on this further during his scientific portion of the presentation. With that in mind, we launched and grew a comprehensive clinical program for fostamatinib in COVID-19 in a very short time. TAVALISSE is now in three clinical trials in COVID-19. We recently launched our right response at phase 3 trial, and you have seen our recent announcement that we were awarded $16.5 million from the Department of Defense to support our phase 3 efforts, which will pay for the lion’s share of the external trial costs and really underscores the broad interest and enthusiasm about fostamatinib in this health crisis. In addition, we have two investigator-sponsored trials, one with the NIH and the other with the Imperial College of London. I will get to those in a minute. As you know, TAVALISSE is a commercially available product with a well-established safety database of more than 4,800 patients treated in clinical trials and it could be rapidly re-proposed as a treatment for COVID-19. Even though we are slowly moving forward with vaccinations, we believe that will continue to be a need for treatments for those who contract the virus. Well, one of the various mutants that may follow. and finally, given that TAVALISSE – given the exclusivity for TAVALISSE is expected until 2032, we could leverage the data with TAVALISSE in COVID-19 to potentially expand development, induced in non-COVID related areas. slide 17, this slide shows you the various patient populations covered with our clinical program. The NIH study includes patients with a score of five, six or seven rating on the widely used eight point ordinal scale, meaning they focus on the effect of fostamatinib to accelerate recovery in severe patients. The Imperial college of London study, as well as our phase 3 clinical trial include mild patients with a score of three or four, and we’ll investigate the progression of mild patients to severe disease and approach that could also be taken in an outpatient setting as a potential next step. Hence we are covering almost the entire spectrum of COVID-19 patients with our three trials. slide 18 shows you the study at the national Heart, Lung, and Blood Institute at the NIH. with 57 of approximately 60 patients, randomized enrollment is almost complete. NIH has incorporated very powerful translational research tools that can generate valuable new mechanistic data on fostamatinib in COVID-19. For example, you have – they have established a necrosis assay that can directly study the effect of fostamatinib on that aspect of the disease. We expect top-line results from this study as early as April, which is very exciting. Slide 19 shows you the other phase 2 IST that is ongoing at the Imperial college of London, also known as MATIS. This is a three arm trial with fostamatinib versus ruxolitinib JAK inhibitor plus standard of care compared to standard of care alone, the first stage of the study will randomize 57 patients per arm for a total of 171 patients. at that point, an interim analysis will be conducted. with the interim look at the substantive datasets we hope to gain further understanding of the effects of fostamatinib in COVID-19. that trial is also progressing well and has currently 106 patients enrolled. Finally on slide 20, we are excited to have initiated our own Rigel phase 3 clinical trial. This study includes hospitalized patients with mild disease, who have certain risk factors to develop more severe disease. We will randomize approximately 308 patients one-to-one to either fostamatinib plus standard of care or placebo plus standard of care. The primary outcome measure is prevention of progression to severe disease as measured with the ordinal scale. If positive, this trial could be the basis for potential approval of fostamatinib to treat patients with COVID-19. So in summary, we have a multi-pronged approach to COVID-19 and we are excited by the possibility to come up with a safe and effective treatment that is still desperately needed. with that, I’d like to turn the call over to Esteban, who will elaborate further on some distinct mechanisms of action that make fostamatinib a great candidate for treating COVID. Esteban?

Thank you, Wolfgang. Glad to be here. I’m delighted to talk about the scientific rationale for TAVALISSE in COVID-19. I’ll start on slide 22 with some insights into SYK in this disease. Numerous investigations have uncovered two receptor systems mediated by SYK, which play a role in the activation of multiple cell types resulting in cytokine release, exuberant inflammation, and excessive blood clotting. This can eventually lead to respiratory distress, organ damage and thrombotic complications. The two receptor systems are the FcγR; on the right are the c-type lectin receptor or CLRs, which are engaged by DAMPs and PAMPs that are released during the Vita infections. on the left are the Fc receptors or FcγRs, which are engaged by immune complexes, consistent or Ab-viral particles bound by antibodies. Fostamatinib by inhibiting SYK has the potential to block these processes and the sequelar [ph]. much has been discussed about cytokine storms, but less is known about NETosis and its role in coagulopathy. on slide 23, we believe fostamatinib in addition to addressing the cytokine storm can uniquely and specifically address NETosis. moving on to slide 24. So, what is NETosis? NETosis series is a process, where neutrophils are activated to release NETs, otherwise known as neutrophil extracellular traps that are designed to trap an immobilized pathogen. These NETs consist of dependent chromatin fibres bound to citrullinated histones and to various degrading enzymes like myeloperoxidases and elastases. Slide 25. So, how does these NETosis relate to COVID-19? Well, early in the characterization of the autopsies of COVID-19 patients, it became clear that severe disease was associated with a large infiltration of neutrophils into the lungs. Soon, after evidence of NETosis was reported not only in the alveoli highlighted here by the orange circle, but also in the microvasculature, where clots or thrombosis were form containing neutrophils, NETs and platelets, highlighted FcγR [ph] by the green circle. In fact, markers of NETosis could be detected in the stipulation of COVID-19 patients. the amount of markers, such as citrullinated histones or cell-free DNA, correlated with the severity of disease as shown on the right of the slide. that is patients in the ICU or the red dots show the highest level of NETosis markets. moving to slide 26, as Wolfgang mentioned, scientists around the world expressed high interest in treating COVID-19 with fostamatinib leading to our two ongoing ISPs. Our colleagues at the NIH were particularly intrigued by the NETosis angle and set up this fascinating study to test it. First, they induced NETosis by overlaying plasma from severely-ill COVID-19 patients on neutrophils. NETs were detected using a green fluorescent probe shown in the middle panels on the left. Then, they showed that R406, the active component of fostamatinib, profoundly inhibited NETosis, adding to the compelling rationale for moving fostamatinib into COVID-19 shown by the right micrograph panels and quantitative in the figure on the right. Interestingly, on slide 27, as clinical observations of this new disease would have been last year. It was not lost on us that the severe thrombotic complications in the extremities of COVID patients were stripling resemblance to observations in another disease called heparin-induced thrombocytopenia or HIT. It turns out that the pathophysiology of HIT involves the activation of both platelets and neutrophils by antibody PF4-heparin complexes. This is similar to the activation of platelets and neutrophils in COVID-19. on slide 28, picking a platelet activation by new complexes. Back in 2011, our collaborators published the innovation by fostamatinib or such platelet activation via Fc receptors. as shown here, ATP secretion and platelet aggregation induced by PF4-heparin antibody complexes were potently and those dependently blocked by R406. On slide 29, that we postulate fostamatinib has the potential to inhibit thrombosis without affecting bleeding or hemostasis due to a specific and targeted innovation or SYK dependent activation of both platelets and neutrophils. Of note, on slide 30, in our clinical experience with fostamatinib in ITP phase 3 trials, we observed low incidence of thrombotic events in patients treated with fostamatinib with only one thromboembolic event that resolved spontaneously. This is in contrast to similar studies; we call it, ITP treatments, showing thromboembolic events in up to 9% of patients. Now, as Wolfgang mentioned, we have a comprehensive clinical program to evaluate the effect of fostamatinib in COVID-19. We are very excited about the potential to benefit patients with TAVALISSE, an approved drug that was discovered in our labs. We are also keenly interested in the continued exploration of the depth and breadth of inhibiting SYK. the investigators for the NIH study for example, we’ll be looking into inflammatory cytokine and NETosis markers in their COVID-19 patients. with that, I will now turn back the call to Wolfgang for an update on our equally exciting IRAK program also from our labs. Wolfgang?

Thank you, Esteban. Let me provide a brief status update on IRAK. on slide 32, with a new partnership in place for our RIP1 program and Eli Lilly leading the operational aspects of development, we are now fully focused on the further development of our IRAK 1/4 inhibitor. We have solid preclinical data in various models that demonstrate the ability of R835 to block key inflammatory cytokines in response to toll-like receptors and IL-1 receptor signaling. that opens the door to numerous clinical indications, both in the immunology space, as well as in heme-onc aligning well with Rigel’s development strategy. Not only do we have animal data, but we have also generated some early human data in healthy volunteers, where our molecule profoundly inhibited inflammatory cytokines in response to an LPs challenge. slide 33 shows you the human data I was referring to on the previous slide. What you can see is that placebo patients challenged with LPS produced the number of pro-inflammatory cytokines, such as TNF alpha shown on the left, and also IL6 subjects, who were treated with R835 showed clear inhibition of this inflammatory response demonstrating an early proof-of-concept in humans. Slide 34, as mentioned, there is fairly strong rationale in the literature for a role of IRAK inhibition in heme-onc indications, low-risk MDS is shown here as an example. I won’t go through the figure on the left in great detail. I just want to point out that low-risk MDS is considered to be an inflammatory condition of the bone marrow that can lead to all kinds of blood anomalies, and that the very cytokines that are elevated in these patients are inhibited by IRAK inhibition as you can see in the panel to the right for TNF alpha, IL6, and IL12. As a consequence, we are evaluating our IRAK 1/4 program, both for rare immunology indications, such as palmoplantar pustular psoriasis or hidradenitis suppurativa as well as good fits in the heme-onc space all indications that could be developed by Rigel alone. With that, I will hand the call over to Dean Schorno. Dean?

Thank you, Wolfgang. I’m on slide 36. for the fourth quarter of 2020, we shipped 1,899 bottles to our specialty distributors resulting in $17.8 million of gross product sales, 1,725 of those bottles were shipped to patients and clinics while 174 bottles remained in our distribution channels at the end of the quarter. as of December 31, a total of 984 bottles remained in our distribution channels. We reported net product sales from TAVALISSE of $17.8 million, a 28% increase compared to the fourth quarter of 2019. Our net product sales from TAVALISSE were recorded net of estimated discounts, chargebacks, rebates, returns, co-pay assistance, and other allowances of $4.7 million. our gross to net adjustment is approximately $20.8 million – 20.8% of gross product sales. For the full year, our gross to net adjustment was approximately 19.3% of gross product sales. Before we move on from net product sales, let me review our expectations for the first quarter of 2021. During the first two months of this quarter, we’ve seen a reduction in our daily shipments to patients and clinics as compared to the daily shipments to patients and clinics in the fourth quarter of 2020, while we experienced a sequential reduction in bottles shipped to patients in clinics last year, resulting from the typical first quarter reimbursement issues confronting our industry such as the resetting of co-pays and the Medicare donut hole. This year’s reduction impacted by additional factors, such as physician and patient access issues created by the COVID-19 pandemic, increased levels of uninsured and under-insured patients and most recently, inclement weather throughout much of the United States. Similar to last year, we do expect summer covering our bottle, shipped to patients at clinics in March, but because of the decreased patient demand volume already seen in January and February and a possible reduction in the bottles remaining in their distribution channels. At the end of the first quarter, we expect our sequential net product sales to be down as compared to the fourth quarter of 2020. incrementally, we currently expect our gross to net adjustment to be approximately 24% in the first quarter of 2021. As we move past the seasonality first quarter and the various impacts caused by COVID-19, we anticipate sequential net product sales growth to resume. On to the next slide, in addition to net product sales, Rigel’s contract revenues from collaborations were $697,000 for the three months ended December 31, 2020, which consisted of $500,000 from Grifols related to an option for commercialization and additional territories and $197,000 in revenues earned from the performance of certain research and development services from Rigel’s collaboration agreement with Grifols. Moving on to cost and expenses. our cost of product sales was approximately $321,000 for the fourth quarter of 2020. Total costs and expenses were $37.3 million in the fourth quarter of 2020 versus $32.7 million in the fourth quarter of 2019. The net increase in costs was primarily due to increases, in research and development costs related to our various ongoing clinical studies. As we look towards 2021, we expect our total costs and expenses to increase by approximately 15% as compared to 2020, as we expect to expand our commercial activities as COVID-19 pandemic conditions normalize and also progress our clinical programs forward. With that, I’d like to turn the call back over to Raul.

Thank you, Dean. And now on to slide 38, here’s what we have to look forward to in 2021. I’m sorry – here’s what we are looking forward to in 2021, continuing to drive ITP sales in the U.S. particularly once conditions normalize later this year. supporting our partners as they make TAVALISSE available to ITP patients across the globe. completion of our phase three enrollment in AIHA as we continue to focus on being first to market, also top-line results from our COVID study with the NIH continuing enrollment in interim results from Imperial college of London’s COVID-19 study, as well as data from our own phase 3 COVID study and a potential application for an emergency use authorization that is supported by these data. Lastly, advancing our RIP1 inhibitor program with Lilly in both immune and CNS diseases, and our IRAK 1/4 program in heme-onc in rare immune diseases. I think it’s going to be a tremendous year. with that, why don’t we open up the call to your questions?

[Operator Instructions] Our first question today is coming from Yigal Nochomovitz from Citigroup. Your line is now live.

Hi, Raul and team. Thank you very much for taking the questions. I just had a question with respect to the powering for the Rigel phase 3 in COVID-19. Obviously, it’s a relatively small phase 3. So, I’m assuming – you must be assuming a relatively large treatment delta with respect to a progression to severe disease. So, is that a correct statement? And if so, could you comment on what that assumed treatment delta is in this study? Thanks.

Is this question for me?

It is Wolfgang.

Yes. So, good question. We have underlied an assumption of a 30% – roughly 30% progression rate in the placebo patients, standard of care alone. Because as I told you, we have identified a number of risk factors that makes this – these patients more susceptible to become severe patients. If we show a difference of 15% to 16%, which I think is realistic; we have 80% power to demonstrate statistically significant results.

Okay, great. Thank you very much. And then Raul, just a question on partnering, could you comment at all on your level of interest in partnering the IRAK program as well? And then just one technical question on the Lilly deal, I’m just wondering what would trigger you or you to opt out a feature development costs for R552?

Sure. So thank you for those questions, Yigal. We had two programs, both very attractive and both at roughly the same stage RIP and IRAK. And we looked at both and the opportunities with the RIP program were very large, in TNF-like opportunities, Th2 pathway type opportunities, that really required tremendous amounts of resources financially and organizationally, and they were beyond our means to do those, to make that program and fulfil the potential of RIP inhibition. keeping like we have one of the leading programs in this area, where it’s a real horse race, a bit and a couple other programs, all with large pharma companies and ourselves. And so partnering that one made a lot of sense, especially because there was tremendous interest in that program at – from large pharma companies, who very much liked something as potential in that even as those has – even if it requires hundreds and hundreds of billions of development expenses, perhaps even $2 billion, I mean, large numbers. So, partnering that was made a lot more sense. And we went ahead and did so, and I’ll answer your second question first. We really believe that this program has tremendous opportunity and like to co-invest with Lilly as part of it and the – and we have the ability to do so. Now, these opportunities may be such that we don’t want to have further investment at some point in the future, and we have the ability to exit at two different points and the important things about these points that they’re well led into the future. And we get to see some of the cards play out. And so be seeing some of these cards play out, you can make a decision. Do we want to continue, or do we not want to continue. And it could be both financial, commercial as well as simply the data itself that we see in the phase 2 trials that tells us to opt out or stay in. And we have the option and it’s nice having that of degree of latitude with the RIP program. with IRAK, it’s also at similar stage, but the opportunities are much – more, very heme-onc opportunities, which we’re very interested in and rare immune opportunities, which we’re very interested in. And given that it has that type of opportunity. at this point, we’re going to make progress with the program ourselves. We’re very well capitalized now. So, there isn’t a need from a balance sheet perspective to necessarily partner this. And I think we can make very good progress in these – with these molecules and on the IRAK side, on our own for now. eventually we may partner. It may be at some point, it never precludes such a thing. It might be a different type of partnering than what we did with Lilly perhaps a more geographic split perhaps. So eventually, we probably would do that. but for now, I think we have both the focus now that, one partner is in good hands with Lilly and the other is ours alone. So, we could devote our full measure of attention to the IRAK program and make advances there and, and build value, and figure out where the best applications for this – these compounds are heme-onc immune diseases, I mean, which ones specifically.

Thank you very much.

Sure.

Thank you. Next question today is coming from Eun Yang from Jefferies. Your line is now live.

Thank you. So, I have a question on Phase 3 study COVID that you’re running. So, according to clinicaltrials.gov study completion is in October 2021. So, are we expect to – are we expecting to see the data this year?

Wolfgang if you would take a stab at that? I think just as what you put into clinical trials.gov obviously, is an estimate now, but go ahead, Wolfgang now let that for the color.

Yes, of course. At this point, it has to be an estimate. We are right now in the process of opening a number of sites up to 40 in the U.S. as well as in some Latin American countries. As you know, it’s very hard to predict how the pandemic is going to develop. but we are looking forward to picking up enrollment swiftly and we’ll make every attempt to involve the study as quickly as possible. Accurately, we have a 28-day primary endpoint. So, from the last patient in two data available in 28 days, would expect that to some, that the study would enroll sometime around the summer to the fall of this year, that’s the current projection.

Great, thank you. And then the NIA...

Just a quick point on that, keep in mind that we are going to 40 some sites across the globe, U.S., Latin America, where the pandemic is still at very high levels.

Great. And then the NIH study for COVID-19. If I heard you correctly, the data could be as early as April; does it then mean that it could have been later than April?

Yes. Go ahead, Wolfgang.

Yes. I told you we have 57 patients currently randomized. We said we would randomize approximately 16. So now, you can take your calendar and your calculator, we are in early March. Primary endpoint is at 28 days. That takes you into April. Of course, there needs to be a database lock and the data needs to be cleaned and all of these type of types of things, that way, I’m pretty confident the data should be available in the April timeframe. Of course, it can always slip into may. but I’m optimistic we see data in the April timeframe.

right. And then obviously, the NIH study, the safety, kind of like a looking at adverse events, but there are a secondary end points and looking at number of days in ICU, hospitalization, things like that. So, should we expect to have some clinical outcome data from the trial?

Yes. As you say, the primary endpoint is in this safety. So that’s pretty straightforward incident of serious adverse events in both treatment arms. But of course, we are going to look at the secondary endpoints, which are efficacy related as well as some of these translational aspects. And I would say with 50 patients, if we see trends pointing in the right direction, even if they don’t hit statistically significant – statistically significant, but if you have trends in several endpoints of the 0.06, 0.07, even 0.1 p-value, that would be quite strong in particular, if that is corroborated by some of these new courses, STDs [ph] and other inflammatory biomarkers. So, so while the sample size is small and we can’t expect the world out a bit. We could, well, see some trends and the totality of the data package is pointing in the right direction that’s certainly something to consider and to talk about.

Yes. Thank you. So last question for both trials, TAVALISSE is edited to standard of care, it’s just a – basically, it’s comparing TAVALISSE to placebo in the background of a standard of care, does then mean that steroid is allowed as a standard of care in the both trial?

Yes. So, steroids are committed, dexamethasone is mostly used. Also, remdesivir is certainly used widely, that’s allowed and we will stratify for these factors. So, it could mean that there’s more patients, for example in the U.S. to get vandetanib in Latin America, but the balance between placebo and treatment arm should be similar, and we will avoid. we have taken measures to avoid that there are imbalances in this background to standard of care medications.

Great. Thank you very much.

Thank you.

Thank you. next question today is coming from Do Kim from BMO Capital Markets. Your line is now live.

Hi, good afternoon and thanks for taking my questions. Congrats on the Eli Lilly deal. I wanted to know if you had thought about – if you do go and co-commercialized R552, what kind of role do you see – you’re having in the commercialization.

Sure. A good deal of that decision will be based on what area – what indications are it’s found to be useful, obviously in phase 2, and then subsequently in phase 3. And if Rigel can add value to that effort beyond what Lilly does, and if it’s a therapeutic area of interest to Rigel at the time, this will be numerous years from now, the current embodiment of Rigel, we’re still a heme-onc focused company, and there’s not a lot of opportunities in RIP for heme-onc. So, it would largely be an immunology and other inflammatory conditions. There are many of those that are very large, which I tend to think we wouldn’t be able to add too much in terms of commercializing beyond Lilly’s capabilities, but in more niche indication, more rare immune indications, where RIP may also have some potential. I think that’s a little more challenging. There, we might be able to add value and co-commercialize. It really is hard to say at this point that we would or wouldn’t do it, simply because we really need to see cards play out in each of the various indications that the partnership will try the product and then see if there’s a benefit of the product in various indications and the commitment from the partnership is to explore this in multiple indications to figure that out in the short – in the first part of the collaboration.

Great, understand that. And a question for Dean, any thoughts to how you’re going to treat accounting for the upfront payment from Lilly and the DoD award?

Yes. Hi, Do. So from a Lilly accounting perspective, so there will be a level of complexity with this. So, I’d encourage you to look at the 8-K that we filed as well as the future Qs on this for more detail. But essentially, once we have HSR clearance, we expect to then receive the – shortly thereafter, the $125 million of upfront; we’ll then recognize collaboration revenues a bit more than $60 million. In the quarter, we get HSR clearance of that $125 million. incrementally, we’d expect to recognize $2 million or $3 million of incremental revenue over the upcoming quarters as we deliver on certain of our CNS commitments. with respect to the balance, we will not recognize collaboration revenue nor have operating expense associated with the R552 co-development commitment that goes up to $65 million. So, you won’t see that piece of the transaction flow through our P&L. again, there’s incremental complexity that you’ll see in the queue, but that’s a – that’s an overview of how the accounting will work from a Lilly perspective. And then from a department of defense accounting perspective, so $16.5 million, there’s a variety of milestones that will be earned over the period of our phase 3 COVID work. We’ll get paid the cash and we’ll recognize the revenue over that period of time. So, it’s going to be over the upcoming multiple quarters that we’ll see that $16.5 million, both flow into our – the cash flow in, but also be recognized as revenue.

Okay. Thanks for that.

Thank you, Do.

Thank you. Next question is coming from Chris Raymond from Piper Sandler. Your line is now live.

Thanks for taking the question. Can you guys hear me okay?

Yes. How are you, Chris?

Yes. Hey guys, I love all the detail on slide 11 with respect to the market. I guess one of the questions that we’ve had for awhile and wondering at what point, you’re – you’ll be in a position to provide it is a little bit more breakdown of the use of TAVALISSE by line. And then maybe, a second question the FORTE observational study in the second line, I think you initiated that recently and talked about enrollment possibly this year. obviously, COVID is kind of thrown a wrench in a lot of things, but when will we see data from that study and just maybe, contextualize that with the really impressive data that you guys had in the second line that was at ASH a couple of years ago. Thanks.

So, when I ask Dave to comment on the usage or with in line, and maybe, comment on that and then maybe, Wolfgang if you can maybe comment on FORTE enrollment and when we might have some data from that trial. Dave?

Sure. Great questions, Chris. And I’m glad that you like the detail we’re providing on the market and our research that was conducted in Q4. In terms of by line of therapy, I think the hard part is right now, we are still in what I believe to be launch phase. I mean, at the end of the day, we got out there in 2018 and then we got a new data in second line in 2020, but we have not been able, which is why we did the research last year, really to kind of gauge what the effect of this data was on clinicians as they heard it. And what we saw is very positive that clinicians do respond to this data. So, I think as we move forward and we get better uptake, I think the shares would be kind of very difficult to read right now. I think it’s more important to kind of think about how do we continue to grow our base of business and look at that. But I certainly think from a standpoint of where the market is, we know where the opportunity is, it’s across all lines. but obviously, the bulk of it is in the second and third line and that’s where we’re perfectly positioned. I think, there’s three drivers to our business, right? It’s getting patients on therapy, it’s ensuring they stay on long and it’s increasing the number of prescribers to use the product. And then that last piece is what we haven’t fully been able to capitalize on yet, because of COVID. And I think when we do – we’ll probably be able to kind of speak more clearly about our uptake in different lines of therapy. And Wolfgang, did you want to answer the question on FORTE?

I can take a stab at that. At the pandemic, it’s certainly affected the enrollment in FORTE; I think as patients just don’t want to go into the clinic. So, it has had that impact already and we could sense it. The fortunate thing is that this year, we’re focusing primarily on the second line data, as Dave mentioned as a key driver, and we know that data is impactful. It’s also impactful in the sense that we’ve yet not made full use of that data. And there’s still a lot of time that we need to devote to making use of that data. In addition to that, you’ve heard a little bit today on the thrombotic benefit of fostamatinib and that covers both COVID, but also ITP, and the poster that we mentioned previously at ASH on thrombotic incidents or lack thereof for fostamatinib, and a new publication that’s coming in that area. So, we actually have a good deal to talk about with doctors as limited as their interactions are relative to the second line data and that thrombosis benefit with fostamatinib. And that’s really the focus for the short-term. In the longer term, maybe next year, when we hope to have FORTE data, that’s when we’ll begin getting new data, but we have plenty to talk about between now and sometime next year.

Wolfgang, do you have any other comments?

Yes, sorry. I didn’t find my unmute button earlier. Yes. So, we are in the process of activating sites. The sites are roots, as you pointed out some of the sites are impacted by COVID more than others. but generally, they are very much interested. And remember, this is an observational study with 45 patients, and we can certainly generate data streams based on less than 45 patients. So, while we need some time to get the whole data set of 45 patients in, we can certainly have positions, where we look at 15 to 20 patients. And if there’s anything that’s meaningful, then we have the option to take it to a scientific meeting and things like that.

Okay. If I could ask maybe a follow-up, sort of commercial question and I guess in the interim, as you’re waiting for FORTE data, what – you could maybe, sort of characterize the key objections, I guess, that you run into with docs considering using TAVALISSE in second line, I mean, it’s not labeling obviously, right. So, what is the objection?

Sure. Dave, you want to pick a sector?

Absolutely, I mean, that’s – since I’ve been here, I’ve been listening to a lot of docs talk about TAVALISSE and mostly, it’s just they’re not – they’re not as aware. I mean, we have a different mechanism of action that really taught, that really addresses the underlying cause of platelet destruction. And so once they hear that and then they kind of understand our dosing and the ability to take it without regard to food and the results that it can have over a long period of time with patients, they don’t have many objectives – objections. It’s really Chris about the habits that they’ve developed over many years of going to other products such as rituximab or TPO-RAs that it’s just simply hard to break. And that’s why I’m so kind of looking forward to unleashing our entire team out there when things get back to normal to really talk about this. because I have seen it in numerous interactions, where clinicians become quite enthralled and these are virtual with the product. And then when they give it a try, I think they’re seeing results that are quite impressive to them. So that’s what we have a product that can compete. It’s just unfortunate that when we got the data in second line, which really gave us that efficacy that we weren’t able to reach as many docs with that message as we had hoped, and we’re doing the best we can in a virtual environment. But that’s why I’m excited. I mean, if you think of our ability to get out there again, when things open up and the fact that docs told us they haven’t been able to switch patients or start new patient. I mean, that’s why we’re very excited about what will happen when we start to get back to the normal.

Got it. Thank you very much.

Thank you, Chris.

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

Hi, everyone. Thanks for taking my questions. So, I just wanted to follow up on the last point and looking at some of the patients you’ve treated for chronic ITP. So, last month at ASH – two months ago, excuse me at ASH, you had a poster talking about safety profile and some of the side effects improving after the first few months of usage. So, I wanted to ask if you could discuss that a little bit further and if you think that’s another key selling point based off of the experience you’ve had commercially so far.

Thank you, Kristen. Why don’t I ask Dave to comment on that, maybe Wolfgang if there’s any subsequent comments?

I mean, it’s part of our messaging to really talk about each individual patient and how they can get started and the importance of sticking with the product to get through these periods of side-effects. And I mean, to that point, we just launched in March a new program called TAVALISSE TOGETHER. It’s a program for adults with ITP, who are either interested in taking TAVALISSE or who are already taking it. And it partners with them throughout their entire treatment journal – journey with either texts or emails, and helps them become a more successful with their ITP treatment. And the beauty of it is patients can enroll by scanning a QR code, texting a number to join, or just visiting our website of TAVALISSE TOGETHER. And so these are the kinds of things, we’ve been doing already in terms of educating clinicians and patients on how to best get started and we’re improving that with programs like this one TAVALISSE TOGETHER, which we think can help not only start new patients, but also patients, who’ve been on product for a long time help them as well.

Great. Thank you. And then as it relates to the ongoing COVID-19 trials of the three of them, obviously, the landscape has changed quite a bit in terms of new mutant strain. So, I guess just wondering across these trials, whether you think you’ll have a diversified patient population to consider some of these changes that we’ve seen in the world?

Yes. Wolfgang, do you want to take a stab at that question?

Yes. So I think, I heard you say the various streams I don’t know coming into a play. Yes. So, I give you my personal opinion. Regardless of the stream, COVID-19 disease is basically mostly caused by the immune system rather than the virus itself. So, those patients who will get really lent on that on a ventilator and later on die, they die because of a hyperactive immune system, a thrombosis and NETosis, and things like this rather than the specific virus. So, since fostamatinib is addressing the immune response – the hyperactive immune response against the virus, my prediction is it shouldn’t matter, which variant, the severe diseases is caused by and should still work if the drug performs.

Thank you. The good thing about doing the trials in the diverse countries we’re trying is, we’ll see that diversity and we’ll demonstrate exactly what Wolfgang just said.

Great. Thanks to everyone.

Thank you, Kristen.

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

Good afternoon, guys. This is Emanuela on for Joe. Thank you for taking my questions. A couple of questions on COVID-19. Now, your data on the thrombosis are very interesting, and I was wondering if you will be able to look at thrombotic events in the upcoming NHLBI trial?

Wolfgang, do you want to comment on that?

Yes. So, the short answer is yes. Thrombotic events would be reported most likely as an adverse event, but we are targeting specifically to see what the incidents of thrombotic events are. With regards to the NIH trial, I would just manage expectations around that a little bit, because – while thrombotic events are clearly increased in COVID-19 patients with 50 patients, it may be difficult to demonstrate the difference in actual thrombotic events in that study. However, we’re also looking at certain thrombosis markers like Alzheimer’s [ph] for example. And of course, as I said, we are collecting information on actual thrombotic events and we will check the report out on that.

Got it. Thank you. And as – like a more general question, like as the COVID-19 program is also, do you anticipate any capacity constraints or needs if it’s going to be a tool or are you ready to go?

One thing about, I’ll answer that. One thing about being a commercial stage product is that you have a manufacturing process and place in the distribution system in placing; if anything you’ve seen the value of a distribution system with vision as the troubles with our distribution of vaccines. We have those in place. We have the product available to hospitals. If today, a doctor and the hospital wanted to use TAVALISSE. he or she would just simply have to write it. And it’s likely, that hospital has TAVALISSE on their shelf. If not, we could send it to that hospital overnight to get it to them quickly. That’s the benefit of being a commercial stage company as that those things exist. We have substantial supplies of material are able to make this product in relatively short order if we need to make more of it. And so I think we’re in very good shape in terms of potentially addressing the situation, where there’s a substantial need. Because we definitely would like to meet that in a shorter period of time as possible.

Got it. Thank you. Thank you for that. You mentioned in your prepared remarks the potential additional territories that to be open from Grifols. I was wondering what are the ongoing deliverables for Grifols to open up additional territories?

Yes. So, our partner, Grifols is working hard on gaining approvals in individual countries specific to pricing, et cetera, the European situation, a little bit different than the U.S. you get approval for all of Europe. And then you go to each individual country to negotiate the terms, the prices et cetera for that specific countries. They are in Germany and that’s fantastic as Germany, as you may know, is the largest by population and certainly by pharmaceutical market size in Europe, and they’re also in the UK. They will later this year, hopefully, be available in the other major European countries, UK, I mean France, Italy, and Spain, and other countries as well. So, they’re working very hard on that. It’s a weird time there as it is here in terms of this pandemic, but they’ve made very good progress on those things. And then the product will be more easily available in those other territories, followed by others, other smaller territories.

Got it. Thank you very much.

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

Thank you. All right. Thank you for your questions. I’d like to thank all of you for your support. I’d like to thank you for your interest. I think we’ve made a very good progress in a calendar year 2020, and early part of this year already. And I think we have numerous, attractive and exciting milestones coming in 2021. So, we look forward to sharing those with you and then briefing you on them, and they need to – on our progress as this year progresses. Take care, and stay safe.

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