Rigel Pharmaceuticals, Inc. (RIGL) Q4 2021 Earnings Report, Transcript and Summary

Greetings, and welcome to the Rigel Pharmaceuticals Financial Conference Call for the Fourth Quarter and Year-End 2021. At this time, all participants are in a 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, please go ahead.

Welcome to our fourth quarter and year-end 2021 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 site on 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, 2021 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 President and CEO, Raul Rodriguez.

Thank you, Dolly, and thank you everyone for joining today. Also with me today are Dr. Wolfgang Dummer, our Chief Medical Officer; Dave Santos, our Chief Commercial Officer; and Dean Schorno, our Chief Financial Officer. Beginning on Slide 5. I'd like to discuss the strategic steps we took in 2021 to grow our hematology/oncology commercial capabilities and to advance our late stage clinical programs. Importantly, we undertook a sales force expansion with the goal of broadening our reach, improving efficiency and increasing in-person interactions in the field. We also announced plans to focus our resources on our mid to late-stage programs and our overall clinical efforts. We believe this will strengthen our ability to build value for shareholders in 2022 by executing on the near-term value drivers, as shown on this slide. First, I want to reiterate the progress we made with our first value driver, growing sales in ITP. In the fourth quarter, we shipped the highest number of bottles of TAVALISSE to patients and clinics in any quarter since launch, and our new patient starts continue to grow. Dave will provide further details later on in the call. In just a moment, Wolfgang will walk us through a review and timelines of our near-term pivotal Phase 3 readouts for TAVALISSE in warm autoimmune hemolytic anemia and COVID-19, as well as advancements of our IRAK1/4 and RIP1 programs. I would like to provide a few highlights. From our second value driver, warm autoimmune hemolytic anemia, the pivotal Phase 3 FORWARD trial completed enrollment in the fourth quarter of 2021. We expect to report top line data from this study in mid 2022. And if the data is positive, we expect to move forward to regulatory filings. An approved indication for warm autoimmune hemolytic anemia would be the first approved therapy of this kind for this patient population, and would be a synergistic tie-in to our TAVALISSE commercial efforts, giving our sales force another indication to market to this physician segment. Our pivotal Phase 3 COVID-19 trial continues to progress, and we remain on track to complete enrollment and report top line data in mid 2022. TAVALISSE is also being evaluated in a Phase 3 trial sponsored by NIH/NHLBI, the ACTIV-4 Host Tissue study as a potential treatment for patients hospitalized with COVID-19. We look forward to enhancing our understanding of the clinical profile of TAVALISSE in this important setting. Lastly, our advancing pipeline programs. I am pleased that our Phase 1b trial evaluating our IRAK1/4 inhibitor in low-risk MDS patients is being initiated. R289, our dual of IRAK1 and 4 inhibitor, has the potential to provide better suppression of the pro-inflammatory environment that causes low-risk MDS, and we look forward to keeping you updated on this trial as it progresses. Our RIP1 inhibitor being developed in collaboration with our partner Eli Lilly is also expected to advance into Phase 2 development in psoriasis in the first half of 2022. Now before I turn the call over to Wolfgang for a deeper dive into our clinical programs, I want to take a moment to provide some further context on the opportunity in warm autoimmune hemolytic anemia and why we're so excited about this? On Slide 7, warm autoimmune hemolytic anemia is an indication that shares the same customer base as our current ITP indication, but lacks any approved therapy post steroids. We believe we are uniquely positioned to leverage our knowledge and experience in this market to significantly build the top of this franchise upon potential FDA approval and launch in warm autoimmune hemolytic anemia. I will not turn the call over to Wolfgang to discuss warm autoimmune hemolytic anemia from a clinician's perspective and how a targeted therapy like TAVALISSE would be an important advancement for patients suffering from this disease. Then later, Dave will provide some perspective on the current treatment landscape and potential market opportunity for TAVALISSE in warm autoimmune hemolytic anemia. Wolfgang?

Thank you, Raul. Slide 8, warm autoimmune hemolytic anemia is a rare disorder caused by the destruction of red blood cells, leading to low hemoglobin levels and showing measures of hemolysis. Due to decreased ability to transport oxygen in the blood, clinical manifestations develop like fatigue, dyspnea, palpitations, or severe weakness. Moreover, splenomegaly, hepatomegaly or even heart failure can occur. There's also a risk of dangerous thromboembolic events. And finally, the overall mortality risk is approximately 8% to 11%. Taken together, warm AIHA remains a clinically significant disease with a high unmet medical need for new, safe and effective therapies. Slide 9, there are currently no approved therapies for warm AIHA. The current first treatment for almost all patients is to initiate systemic oral corticosteroids at relatively high doses. Although steroids can be tapered off a while, many patients still require dose levels for long periods of time that lead to side effects such as diabetes, osteoporosis, hypertension, and many others. Another treatment currently being used is rituximab. Rituximab works by depleting all B cells in a patient for many months, and thereby decreasing all the antibody production against red blood cells. But prolonged B cell depletion is also immunosuppressive and carries increased risks, particularly infections and a decreased response to vaccines. Splenectomy is still offered by some clinicians, but it means getting a major surgery and an irreversible removal of an organ from the body. For all these reasons, we believe that a safe and effective oral treatment such as TAVALISSE for AIHA could represent a very compelling treatment option for physicians and patients. Slide 10 explains how and why TAVALISSE should work in warm AIHA. Very similar to ITP, in AIHA the human body begins to produce autoantibodies that bind to components of the red blood cells. The constant Fc region of those antibodies then bind to cells that carry Fc receptors, for example, macrophages. This leads to opsonization and destruction of the red blood cells, resulting in low hemoglobin levels. The intracellular signaling cascade downstream from the Fc receptor is dependent upon spleen tyrosine kinase, SYK, that leads to phagocytosis of the antibody bearing red blood cells. As some of the destroyed blood cell antigens are presented by antigen presenting macrophages to CD4 positive T helper cells, more B cells in the process may be primed to make more autoantibodies and perpetuate the disease further. This B cell activation and differentiation process is also mediated by SYK and inhibited by fostamatinib. Hence, there is compelling scientific rationale to expect that fostamatinib works in AIHA and should not lead to broad immune suppression, which is consistent with the safety experience in the large safety database of almost 5,000 patients. Slide 11. The sound scientific rationale has led Rigel to conduct a Phase 2 open-label study in patients with warm AIHA which has provided the first clinical data set. In this first study, adults with warm AIHA who had hemoglobin levels of less than 10 grams per deciliter and who had failed at least one prior treatment were treated with fostamatinib twice a day. 11 of 24 patients, 46%, achieved the hemoglobin levels of greater than 10 and increased from baseline of greater than 2 by week 24 without rescue therapy or transfusions. There were substantial increases in median hemoglobin levels detected as early as week two and sustained over time. The safety profile was favorable and consistent with the experience in previous ITP in rheumatoid arthritis trials. Now as you know, we have discussed with the FDA the primary endpoint for our Phase 3 trial and agreed on three consecutive available time points with a hemoglobin of greater or equal than 10 grams per deciliter and an increase from baseline of at least 2. If we applied those criteria retrospectively to our Phase 2 data, about 29% of patients on fostamatinib have met those criteria. Since this endpoint is a very high bar, very few placebo patients are expected to meet that goal. A low placebo response rate helps the powering of our Phase 3 study, so that with 90 patients we are adequately well powered to demonstrate statistical significance in Phase 3. Slide 12. As you know, our pivotal Phase 3 study has completed enrollment. Patients are treated with active or placebo for 24 weeks. After week 24, patients have the option to roll over into an open-label extension study. The vast majority of patients who reached week 24 indeed took that option, and some patients have now been treated for two and a half years in this trial. I mentioned on the previous slide, the primary endpoint is a very high bar to meet. Let me emphasize that there are additional clinically meaningful measures of benefits, such as a reduced use of risk therapy, steroid sparing potential or quality of life improvement. These benefits are captured through pre-specified secondary and tertiary endpoints in the protocol. Taking these additional endpoints into account, the percentage of patients with tangible clinically meaningful benefit beyond the primary endpoint should be higher than 29%. This comprehensive totality of the data package will be available soon with top line results by mid-year 2022. With that, I will now hand the microphone over to Dave. Dave?

Thank you, Wolfgang. I'd like to just briefly build on Raul's and Wolfgang's comments on warm autoimmune hemolytic anemia, or wAIHA, and give you a sense of why we are very excited about the commercial opportunity ahead of us. Moving to Slide 14, we believe that wAIHA is a very attractive market opportunity for TAVALISSE, especially when you look at the patients who move beyond first-line therapy. In 2021, we conducted both qualitative and quantitative research to get the most updated look at the market. And I wanted to review that information for you today. The prevalence of autoimmune hemolytic anemia is approximately 17 per 100,000 or 45,000 adults with AIHA. Of those patients, the majority or about 80% of them are warm. And that's how we get to the 36,000 patients Raul mentioned earlier. The remainder have cold agglutinin disease. In our quantitative research last year, we found that about 35% or 13,000 patients are not actively treated for their disease, leaving approximately 65% or about 23,000 patients who are treated. And of those 23,000 patients being treated each year, about 9,000 patients are treated with first-line therapy, and they overwhelmingly received steroids. That leaves a significant patient population of up to 14,000 patients each year who are looking for additional options. This is a large treatable population and that represents an exciting opportunity for TAVALISSE. On Slide 15, the results of our latest quantitative research from last year show how wAIHA patients in each line of therapy are currently treated. In conducting this research, we asked 150 clinicians to think about their wAIHA patients in each line of therapy and then assign percentages for the treatments they utilized in those patients. The results show multiple entry points for TAVALISSE in wAIHA, especially because of the heterogeneity of treatments. In all lines of therapy, the bars add up to more than 100% because combinations are also used in this disease. For instance, a patient might get steroids first and then be re-challenged with steroids and Rituxan and still be considered first line. So determining a patient's line of therapy and choice of therapy can be complex. Thus, you will see steroids and Rituxan used throughout the treatment continuum. Also, as you look at the grey and dark blue portions of the bar, you see that splenectomy and other cytotoxics and immunosuppressives like cyclophosphamide and azathioprine makeup significant portions of second-line, third-line and fourth-line and later therapy. That becomes an immediate opportunity for TAVALISSE once we have approval. And on Slide 16, you see this lines up very well with how physicians perceive a need for a new approved therapy in warm autoimmune hemolytic anemia. They perceive higher unmet need in third line and later, where they do resort to cytotoxics, immunosuppressants and splenectomy. We believe adoption of TAVALISSE will be faster in patients who are third line and later, because of this perception. It will be our goal at launch to quickly drive awareness and approach appropriate patient selection, so we can become the standard of care here to satisfy that high unmet need. The real opportunity will be to elevate the value of our first approved, targeted agent, used chronically instead of cyclically and dominate the second-line space. Being first to market will be a great advantage for us to differentiate TAVALISSE from other agents. That said, changing perceptions from using cyclical therapies in this disease to using a chronic one will be an important challenge to overcome. I look forward to further discussions with you on how we plan to capitalize on this second-line opportunity in future calls. Now, I will cover our commercial progress with ITP in 2021. On Slide 18, you will 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. Moving to Slide 19, we achieved net sales of $17.6 million in Q4 totaling $63 million for the year. Importantly, we achieved our highest bottles shipped to patients and clinics in Q4, driving our annual 8% growth over 2020. Despite the continuing evolution of the pandemic with the Omicron surge, we were encouraged by the trends and activities we saw in Q4. On Slide 20, you see how our customer interactions grew to the highest level of the year in Q4. Importantly, we had 37% more in-person interactions with clinicians in Q4 than we did in Q3. This was an early result of the implementation of our sales force expansion as well as access to clinicians significantly improving as we moved into November prior to the Omicron surge. In fact, November in-person interactions were 50% higher than what we had seen prior to the sales force expansion. This increased activity correlated very nicely to the increased demand we saw in November, driven by new patients and new prescribers. Achieving two thirds of all of our interactions in-person in Q4 compared to 57% in Q3 gives us great confidence in being able to continue spreading the word as we move past the Omicron surge and return to COVID levels we saw in November. Lastly, our in-person speaker programs also reached the highest level of the year in Q4 as more customers were willing to come out to meetings with our expanded team. Lastly, on Slide 21, in early December, we were very happy to be able to participate in the first live ASH meeting since 2019. Our commercial and medical affairs teams did an excellent job preparing for and executing a very productive meeting as we continue to raise TAVALISSE awareness with our Rigel presence throughout the weekend. We heard from many customers that the meeting environment really began to feel back to normal. And since then, several other conferences have elected to either postpone or move forward with in-person meetings rather than move to a virtual platform. We've been quite happy to hear that, as it bodes well for continued growth of in-person interactions. Additionally, as we ended the year, we significantly improved access for commercial patients. And at the start of the year, we announced that TAVALISSE is now preferred on two key national formularies. Because the clinical bar is high to get preferred status on key formularies, this reinforces that TAVALISSE possesses proven efficacy and safety. Also, preferred status truly strengthens reimbursement competence by significantly reducing any hassle factor for clinicians. We are quickly spreading the news of preferred formulary status via our sales force and other non-personal tactics and customer feedback has been highly positive. We have already seen several examples of new patients benefiting from improved commercial coverage based on this formulary change. So in conclusion, we are confident that with our significant progress during 2021 to expand the team and improve access of TAVALISSE for patients, we will capitalize on every opportunity to interact with customers and spread awareness of the durable efficacy of TAVALISSE, particularly in earlier lives. Overall, we're poised to accelerate growth as the Omicron surge subsides and we see more customers this year. I'll now hand it back over to Wolfgang to discuss the progress we've made with our pipeline. Wolfgang?

Thanks, Dave. I would now like to give you a quick update on our COVID-19 program. Slide 23. We have taken you a few times through the very compelling scientific rationale for TAVALISSE in COVID-19, supported by several pieces of external research at independent institutions. That scientific rationale was confirmed by very positive clinical data from NIH, which was published in September in the journal Clinical Infectious Diseases. There are additional studies ongoing, most importantly our own Phase 3 trial, which neared enrollment completion and will generate a robust data package. If positive, the data should be sufficient for approval of TAVALISSE in this indication. Given persistent resistance to vaccination in some places and the possibility of new virus variants, we believe a need for effective treatment options for severely ill patients remains. If approved, TAVALISSE would be available immediately for commercial use. Slide 24 shows you our Rigel Phase 3 study design. The study started out with hospitalized patients with mild disease. However, it turns out that mostly patients were enrolled who were on the brink of severe disease already. Therefore, we have adjusted inclusion criteria to shift the focus on more severe patients and along with that, changed the primary endpoint to days on oxygen for more sensitive measure and better comparison to other trials, such as the NIH ACTIV trials. As mentioned in prior discussions with FDA, this trial could be the basis for potential label extension for fostamatinib to treat patients with COVID-19 if the data is positive. Enrollment is at over 85% at this point, and we continue to expect the data readout around mid-year. On Slide 25, you can see an overview of the NIH ACTIV-4 trial. The trial is evaluating fostamatinib and other compounds in a patient population similar to the NIH Phase 2 study and will enroll approximately 300 patients in each arm. This large data set could provide additional significant and powerful information on safety and efficacy of fostamatinib in hospitalized patients with COVID-19. So now let's turn to our pipeline programs, IRAK1/4 and RIP1, starting on Slide 27. Toll-like receptors and IL-1 receptors are important in immunity and this regulation of these pathways can lead to a variety of inflammatory conditions. Interleukin receptor-associated kinases 1 and 4 are critical for signaling downstream of most TLRs and IL-1 receptors in production of pro inflammatory cytokines. IRAK inhibition has great potential in treating inflammatory disease. In early stage testing, we found that dual inhibition of IRAK1 and IRAK4 provides up to 100% suppression of cytokine release in in vitro cell-based assays compared to about 40% to 80% inhibition of IRAK4 alone. So we know we do have a promising compound in our hand with powerful ability to inhibit inflammatory cytokines. This opens the door to attractive disease targets in oncology and rare disease immunology. We have selected low-risk myelodysplastic syndrome as the first clinical disease indication for R289. An explanation of the scientific rationale for low-risk MDS is on Slide 28. Low-risk MDS is a disease of older age, driven by bone marrow inflammation. Aging results in increased mutations in bone marrow, hematopoietic stem cells, eventually leading to expansion of mutated inflammatory MDS stem cells at the expense of normal hematopoiesis. These mutated MDS themselves induce bone marrow inflammation due to DAMPs and PAMPs as well as inflammatory cytokines. This information then causes more damage to the normal stem cells and causes IRAK mediated Pyroptosis. Pyroptosis is a form of IRAK in inflammasome mediated program [ph] and further contributes to the decline in bone marrow quality and the MDS typical cytopenias. R289, our IRAK inhibitor, blocks PAMP and DAMP induced signaling via TLRs in IL- receptors and prevents inflammatory cytokines and Pyroptosis in the bone marrow. In summary, given the mostly inflammatory complex pathology of low-risk MDS, there's a compelling rationale for the treatment with a potent IRAK inhibitor such as R289. Slide 29 summarizes the current treatment approach to low-risk MDS in the clinic. Interventional treatment of low-risk MDS is usually initiated when there is deterioration of anemia, requiring transfusions, thrombocytopenia, and the decline of life quality. Depending on which blood cell is most affected, certain medications are being tried. For example, if anemia is the key issue, then erythrocytes stimulating factors and blood transfusions are given. If the patient is a candidate for a targeted approach, then lenalidomide would be used to verify Q mutations or luspatercept for patients with ring sideroblasts. If thrombocytopenia is predominant, cheaper [ph] drugs can be administered. Finally, several hypomethylating agents are being used, which have significant side effects and may lose effectiveness quickly, leading to rapid progression of disease and an overall survival of only 12 to 14 months. There are currently no standard therapies for these patients. This delineates a clear unmet medical need for novel therapeutic approaches for patients with low-risk MDS, who are refractory resistant to current therapies. Slide 30. This is our Phase 1b trial for patients with low-risk MDS. As we have indicated in previous calls, we have collaborated with FDA to reach agreement and have received the safe to proceed from the agency. The study has two parts. Part one is a dose escalation phase with a commonly used 3 x 3 approach. The [indiscernible] dose levels are being supported by our favorable safety data from already completed studies in healthy volunteers. After dose escalation and thorough evaluation of all data for safety, clinical activity, PK and biomarkers, we will take a dose into an extension pace to obtain more longer term safety and preliminary efficacy data to support a larger registration of study. As Raul mentioned earlier, study startup activities are currently ongoing. Slide 31. Finally, a quick update on the other very important value driver for Rigel, our RIP1 inhibitor program that we have partnered with Eli Lilly. R552, the oral systemic RIP1 inhibitor for inflammatory conditions is on track for initiating the first Phase 2 study in psoriasis. We continue to be very excited about the broad potential for RIP1 inhibitors in numerous large indications. In addition, Rigel is currently working on selecting a RIP1 inhibitor candidate that can cross the blood-brain barrier. Lilly will then take the lead on development of the brain penetrating RIP1 inhibitors in CNS diseases. With our huge expertise in all the immune and CNS diseases, Lilly is the ideal partner to collaborate on these very exciting opportunities. With that, I will turn the call over to Dean. Dean?

Thank you, Wolfgang. I'm on Slide 33. For the fourth quarter of 2021, we shipped 1,814 bottles to our specialty distributors, resulting in $22.5 million of gross product sales. 1,785 of those bottles were shipped to patients and clinics, while 29 bottles were made in our distribution channels at the end of the quarter. As of December 31, a total of 937 bottles remained in our distribution channels. We reported net product sales from TAVALISSE of $17.6 million, a 1% decrease compared to the fourth quarter of 2020. Our net product sales from TAVALISSE were recorded net of estimated discounts, charge-backs, rebates, returns, co-pay assistance and other allowances of $4.9 million. Our gross to net adjustment is approximately 21.9% of gross product sales. For the full year, our gross to net adjustment was approximately 22.4% of gross product sales. Before we move on from net product sales, let me review our expectations for the first quarter of 2022. As we've experienced in the past, during the first two months in the 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 2021, resulting from the typical first quarter reimbursement issues confronting our industry, such as the resetting of co-pays and the Medicare doughnut hole. We're also experiencing the continued impact of COVID-19 with the Omicron variant. Also, as we have seen in the past, we expect to see increases in our bottles shipped to patients and clinics in March. Given these factors and despite prior year's sequential decreases in bottles shipped to patients at clinics in the first quarter, we expect to see a small increase in bottles shipped to patients and clinics in the first quarter of this year. Given these first quarter dynamics, coupled with an increase in our gross to net adjustment from the market access programs expansion Dave discussed, we expect our sequential net product sales to be down as compared to the fourth quarter of 2021. As we move past the seasonality of the first quarter and the continued impact caused by COVID-19, we anticipate sequential net product sales growth to resume. Incrementally, we currently expect our gross to net adjustment to be approximately 30% in the first quarter of 2022. Onto the next slide. In addition to net product sales, Rigel's contract revenues from collaborations were $1.8 million for the three months ended December 31, 2021, which consisted of $200,000 from Lilly for accomplishing performance obligations under our license agreement, $1.3 million from Grifols for delivery of supplies and R&D services, and $300,000 from Kissei for delivery of drug supplies. Contract revenue of $1 million was related to income we recognize pursuant to our agreement with the U.S. Department of Defense for our ongoing Phase 3 clinical trial of fostamatinib in COVID-19. Moving on to cost and expenses, the cost of product sales was approximately $487,000 for the fourth quarter of 2021. Total costs and expenses were $41.8 million in the fourth quarter of 2021 versus $37.3 million in the fourth quarter of 2020. The increase in costs and expenses was primarily due to the research and development costs related to our ongoing Phase 3 clinical trial for the treatment of hospitalized patients with COVID-19, increased commercial activities including the recent sales force expansion and restructuring charges due to the exit of our early stage research and development. As we look towards 2022, we expect only a small increase in our total cost and expenses for the full year of 2022 as compared to 2021. Finally, we ended the quarter with cash, cash equivalents and short-term investments of $125 million. Incrementally in February this year, we accessed an additional $10 million of term loan to our credit facility with MidCap Financial and amended the terms of the agreement to extend our option to access the remaining $30 million of principal available on this credit facility through March 31, 2023. With that, I'd like to turn the call back over to Raul.

Thank you, Dean. And moving on to the next slide, Slide 35, as we have reviewed on this call, in 2021, the Rigel team advanced all our commercial and clinical priorities. This sets us up for what we believe will be a transformational year in 2022. Our priorities for this year are rooted in our key value drivers; growing sales in ITP with our expanded sales force, increasing the market opportunity for TAVALISSE with pivotal Phase 3 trial readouts in both warm autoimmune hemolytic anemia and COVID-19. And lastly, advancing our IRAK1/4 and RIP1 programs in the clinic. We are very excited about the significant commercial initiatives and clinical milestones coming in 2022, and the potential to really transform our business. Thank you again for your interest on our progress this quarter and throughout 2021. With that, we'll turn the call over to your questions. Operator?

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question today is coming from Do Kim from Piper Sandler. Your line is now live.

Good afternoon, everyone. Thanks for taking my question. First, on the wAIHA Phase 3 data, could you remind us what level of details we could expect when you put the data out? Are we going to get the durable response rate numbers and any of the secondary endpoints?

Do, how are you? Thank you so much. I'll ask Wolfgang to comment on that.

Yes, sure. Thanks, Do, for your question. Yes, once we present top line results, which is expected to happen in the June timeframe, we will have the primary endpoint as well as the pre-specified secondary endpoint available along with crucial and key safety information that will be required to understand the data. So you should get a pretty comprehensive picture upon data unblinding.

Thanks, Wolfgang. And a follow-up question. Just based on your discussions with physicians, how important is it to them on this primary endpoint that a patient has a durable response? Would they put more weight on it over just 2 grams per deciliter increase or achieving a hemoglobin level greater than 10? How much emphasis do you think we should put on that durable endpoint?

Let me --

Well, we -- sorry.

No, go ahead, Wolfgang.

I wouldn’t put too much weight on the three prime points in the primary endpoint. It is first and foremost a regulatory requirement that we have discussed with FDA. Of course, physicians will wonder, well, does the drug work? And if the drug works, is the response sustained? So that is an important question. But there are so many other ways to describe clinical benefit. For example, just the mere fact if somebody gets his hemoglobin up by 2 units, say from 6 to 8, that is a very, very positive clinical benefit. But primary endpoint definition, it doesn't make the cut. So that person wouldn't be responding according to our primary endpoint. The other things that are important are quality of life improvements, such as fatigue improvements or just an overall improvement in hemoglobin over time, and we will slice and dice the data when it becomes available. And the totality of the data is what's going to be most important for the clinicians.

Thanks. That's helpful. And last question for Dean. In the first quarter, gross to net in 2022, what's driving this higher number versus prior quarter first quarters?

Let me ask Dave just to start with the answer there, and then I'll follow up.

Thanks, Dean. I think the really important thing that I mentioned during my comments and Dean mentioned during his is that we want patients to get TAVALISSE if their clinicians prescribe it. And we don't want coverage decisions to get in the way of that. And that's why we have patient assistance programs in place to help patients when their coverage falls short. And when we looked at where our challenges were in commercial coverage, it was actually in those plans where there were either formulary exclusions or blocks. And while providers could still get TAVALISSE for their patients, it represented some hassle factors for them as they had to supply additional backup and support their decision to use TAVALISSE. So that's what happened. Our market access team worked with key PBMs to improve that situation, and that's how we got preferred status. And to achieve that, we had to demonstrate that TAVALISSE was safe and effective, and we had to differentiate our mechanism of action. And frankly, we think it's a huge benefit for us being preferred, because it gives the providers an important proof source of efficacy and safety. And we needed to be competitive, of course, in terms of costs, because even a rare disease like ITP is reviewed by the payers. So in the end, this is the driver of our gross to net. But we fully believe by improving commercial coverage for patients with preferred status, we'll be able to now fully realize our opportunity in ITP, accelerate our new prescribers and accelerate new patient growth. So I think overall, all of us were aligned that it wasn't just the right thing to do for patients, but it was the right investment at the right time. Hope that helps kind of set the stage on the gross to net, Do.

So, Do, with the 30%, that estimate is always dependent on the mix of patient type as well as pricing changes and a variety of factors, but the majority of that shift is a result of the programs that Dave just described.

Great, very helpful. Congrats on the progress and thanks for taking my questions.

Thank you, Do.

Thank you. The next question is coming from Eun Yang from Jefferies. Your line is now live.

Thank you. For the Phase 3 FORWARD study, so the primary endpoint is hemoglobin response on fully consecutive or variable visits during the 24-week period. So how often is the visit? Is that every two weeks?

It is, Eun. Over that 24-week period, they come to the clinic every other week.

Okay, thanks. And then a second question is on TAVALISSE sales. So you did mention that the first quarter is going to be down from the fourth quarter last year for the seasonality issues. But I know you don't give guidance, but last year you have expanded your sales force. So when I look at the consensus number, it's around 92 million. But from 4Q, run rate is about 70 million. So how do you feel about the consensus of 92 million for this year? Thank you.

Sure. Thank you for that. I'll ask Dean to comment as well. We don't give guidance. We give some discussion or description of what we see. But don't expect guidance from us. The business is just too early, and with COVID little too difficult to predict as yet. But Dean, do you want to comment?

No. I think that's right, Raul. And as we've historically done, we've given a view of what Q1 looks like. And I think Dave described some favorable trends, and we think we've got a good setup and a foundation for the business with the programs that Dave described. And hopefully we'll be moving into greater post COVID access as the year progresses. I would note that we've seen historically as we come off of the impact on bottle shipped to patients and clinics causing the first quarter due to resets and in the Medicare doughnut hole that the second quarter we typically see as a strong quarter relative to the first quarter.

Thank you.

And I think we see good growth for the balance of the year. I think we're excited about what the year will look like with the larger sales force, improved access, more and more in-person interactions, which are just so much more effective. Combine those three things together and they're synergistic one to the other. And we're very positive on the balance of the year, especially as this Omicron variant fades rather quickly even now.

Great. Thank you.

Thank you.

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

Hi, everybody. Good afternoon. Thanks for taking the question. So my first question regarding wAIHA. I don't think this is a stretch too much. So when you look at Slide 15, the prescribing landscape that you put out there, if you were to essentially remove all of the labels from this chart, it would look very characteristic with the ITP landscape being very heterogeneous. So I guess the question is, how do you expect your sales force to be able to leverage their experience in marketing TAVALISSE for ITP in a very similar heterogeneous market when they get wAIHA in their bag hopefully?

Sure. Let me ask Dave to comment, and I'll add a comment afterwards.

Yes, that's a great question, Joe. And I think that's our biggest strength here, because we're learning every day in ITP in terms of awareness. And by the way, we've actually made good progress in our awareness in ITP where we're nearly at the same level of [indiscernible] I think where we have some work to do and that's both aided and unaided awareness. I think where we have some work to do is to increase our unaided awareness, and we're doing that. And I think it's just a matter of time opening up and we've got more people on the team now. We'd get great messages, as I said, with that -- especially with preferred formulary status on some key formularies. All of these messages, everything's coming to place. But this is why we're the experts here now in warm autoimmune hemolytic anemia. We'll be the first one to launch. We'll be able to really tell that story of steroids, Rituxan, some of those issues, and then all the other options out there that are unproven and not labeled in the disease. And so I think we're doing a lot of research in this space. And we want to -- we know we can definitely own this space in the third-line setting, but really what we're really talking about is how do we really focus on this opportunity with Rituxan, what's the reason clinicians are using it, because even in ITP, Rituxan retains the highest awareness of any product in ITP. And so that's the same in warm autoimmune hemolytic anemia. I think the beauty is going to be that we don't have a whole bunch of promoted products trying to get into the -- kind of confuse the message. We'll be the first and we'll be able to shape that. So I think we got a lot of opportunity, a lot of synergies. There may be different docs treating the different diseases at different times, but it's highly synergistic. And I think our team is going to do a great job leveraging what we learned in ITP to really launching strong in warm autoimmune hemolytic anemia.

Got it. No, that's very helpful color. And if I just stick with ITP for a second, especially as you talk about going to earlier lines. I guess in prior calls, and I'll preface this by saying obviously COVID has had a real impact on my question. On prior calls, you talked about your desire to provide a good sense of visibility as to the kind of traction you're getting into earlier lines of ITP. I guess how is that looking right now with regard to what you're seeing and when you think you might be able to share more data on that?

Yes, I'll have to say that our ability to determine use by line of therapy is a bit limited. But from what clinicians tell us, and we just had a speakers training program this past weekend with over 40 clinicians on the line. And this included physicians, advanced practice providers as well as [indiscernible]. They told us that in their experience when they're talking to clinicians, they do. They start late because if they need more comfort, they move it up. And I think that's what we're looking for as we move forward. You have to recognize that we still feel like we are in launch because of COVID. And some providers are getting their first run, especially now that we've improved our coverage, commercial coverage. They're just getting their first patients on the brand. And it takes some experience and they move up in line once they get more comfortable with that. And so I don't have that data for you today. But I do think that as we move forward and we get more patients on the brand, more and more of them will move upfront -- not upfront, I'm sorry, in second line, especially because we have equal footing to the [indiscernible] now with that preferred status.

Great. Thanks, guys. I appreciate the details.

Sure.

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

Hi, everyone. Thank you very much for taking the questions. Regarding the potential label in COVID, do you think you can get a label as either of the Phase 3 works or do you at least need the Rigel sponsored study to work? And if the NIH study works, that would be a bonus. Or do you think you could get a label if just the NIH trial works? And then would the label look any different if both worked versus only one of the trials, because obviously these trials are enrolling highly overlapping patient populations.

Hello, Yigal. Good question. Thank you. I'll ask Wolfgang to comment and then I'll add a comment.

Yes, thanks for the question. So number one, if the Rigel-sponsored focus Phase 3 study is positive, that together with the already existing NIH Phase 2 study should give us a label. That's something we have discussed. And we have been in interactions with FDA and that agreement about that. Now if the Rigel focus study for whatever reason does not fit, but the ACTIV-4 study is very positive, then despite the fact that it's not Rigel sponsored, it's a large Phase 3 like study run by the NIH in the severe patient population, I would have a hard time to believe that that is not critical information, supporting the use of fostamatinib in this more severe patient population. And your last part was if both studies are positive? Well, they have differences in the patients that they included in general, they are all done and hospitalized patients who need some sort of oxygen. And I would say that should be what I would envision the label should be hospitalized patients with COVID-19, maybe requiring some oxygen, maybe just hospitalized. I hope that helps answer the question.

Yes, that’s helpful.

We expect our readout to be in mid-year and I think the ACTIV-4 probably is afterwards. So obviously, we'll have the first answer -- our own answer first. And we'll proceed from there.

Okay. And then, Raul, just thinking about your partner in Japan, Kissei. So assuming your Phase 3 AIHA works, which we hope it does obviously, do you think that Kissei could leverage your data or do you think they need to run their own Japanese Phase 3 wAIHA in the same way that they did their own ITP trial?

We believe they will need to do their own trial there. It's typically what the regulatory authorities asked for. So it'd be a bit of a surprise if that was not the case. So they probably will. But obviously, it's -- our own data would be very, very useful. Recall for ITP they conducted their own smaller Phase 3 trial with positive results in Q4 to support our data and our larger Phase 3 trial I imagine be exactly the same. They're excited about the opportunity in AIHA just as they are with moving forward to an NDA filing in Japan with ITP.

Okay. And then just one question on IRAK4, I know in the past you've talked about partnering. Can you discuss what indications you'd like to explore with a partner? You just don't have the resources to do independently.

The good thing about an IRAK, and particularly an IRAK1 and 4 inhibitor is that it's so broadly suppressive of so many key signaling pathways, and therefore tremendous opportunity here with an IRAK1/4 for a wide range of diseases, those being severe diseases like low-risk MDS and less severe diseases as well. So it's a real opportunity to do a good deal with this molecule. Our first objective is to launch this -- we're launching this low-risk MDS trial, and then come back with more specificity in terms of the next indication for an immune side, probably a more rare disease to move forward with. At some point, we might partner this. It's not the priority right now, but we might find a partner for it. It might be different than the RIP partnership, because it's a very different opportunity here, one where there are indications that fit nicely with our own strategy in the heme-onc space, it may be in rare immune diseases. So that's a bit later to come, but it might be useful to see some data.

Thank you.

Thank you. Our next question is coming from Gary Nachman from BMO Capital Markets. Your line is now live.

Good afternoon. This is Denis [ph] on for Gary. Thank you for taking our questions. The first is on the COVID trial. Assuming a positive readout and increased demand, can you confirm that you're going to be able to fully handle all exponential increases in supply? Secondly, could you comment more about how the sales force interactions have been in January and February of this year? And then finally, any comment on how your partner Grifols is doing in the EU? Thanks so much.

Sure. Let me address the COVID supply. We have ample supply. We can make more. We have a very good position in terms of supply for TAVALISSE. You said, can you meet all demands? The answer is I don't know what the demands are. And it depends where the pandemic is in the future. And obviously, we have the ability to make more. So we're comfortable with the addition we have in terms of supply and our ability to meet demand should the COVID trials read out positively. And in the future, we'll make more as needed. The good thing about having a molecule that they have a good deal of experience that is commercialized is that it could very readily be made into something that's commercially available for COVID patients. And that's something that I think sets us apart from many agents in clinical trials. On the sales force issue, what is the interaction receptivity in January, February? I'll ask Dave to comment.

Yes. Sure, absolutely. There's actually some good news here. As everybody knows, the current search is subsiding. Anecdotally, we are seeing more opening. And actually our call activity, at least that through February, shows that it is in fact slowly building back to where we were in November. And I think that bodes well for the end of this quarter and certainly as we move into the spring. So I can say that we have improved our interactions of late, particularly in February, and we're almost at the level that we were at in November.

Denis, I apologize. Your third question was what?

Just any commentary about how your partner Grifols is doing in the EU?

Sure, absolutely. So our partner Grifols is working hard in EU. The product is approved and they've been working on getting pricing approvals throughout the countries in Europe. Last year, they were very successful and have approvals in all the large countries and a few of the smaller ones. And now they're working on the remaining of the smaller ones. And like the U.S., this pandemic has weighed in terms of ability to communicate with their customers, but it's lifting there as it is here. And that bodes very well in terms of the uptake in Europe. So we like them are very enthusiastic about it. They're also very enthusiastic about autoimmune hemolytic anemia and having that data coming as well, because obviously it's completely additive there as well. So we share their enthusiasm and look forward to continuing progress there and increasing the sales level.

Great. Thank you so much.

Absolutely, Denis. Thank you.

Thank you. The next question today is coming from Kristen Kluska from Cantor Fitzgerald. Your line is now live.

Hi, everyone. Thanks for taking the question. So on wAIHA, it looks like over a third of the prevalent patients are currently not actively treated. So what do you believe are some of the main drivers behind that and how an approved therapy such as TAVALISSE could help penetrate this specific opportunity alone? And then in the survey you conducted, it took place in May 2021. So wondering how much of these responses and the different lines you think are also influenced by the COVID-19 pandemic environment, given some physicians are trying to avoid use of immunosuppressants?

That's very good questions, Kristen. Thank you. I'll ask Dave to comment.

Yes. So the patients who aren't actively being traded, those are clinicians who either the clinician or the patient has determined that they didn't want to be treated at this time. And so it does call into question, a, if they do have low hemoglobin and they are potentially interested in being treated, but don't want steroids, but don't want Rituxan or any of these other products, maybe a chronic treatment like TAVALISSE could make it more appealing. But our focus hasn't been on that patient population, because those are patients who are cycling in and out and for various reasons. So I'm not sure that that's our focus right now. But we'll certainly as we continue to look at the patient journey, we'll definitely understand those reasons a little bit more about why patients aren't being treated. But I do want to talk a little bit about your second question. And I think it's an important one, because actually even this weekend during the speakers training, as we were talking, it came up that clinicians can be very uncomfortable about using Rituxan and immunosuppressants during this time. And we don't think that's necessarily just for this period in time. We think it's going to be potentially longer term. And so I do think there's an opportunity there. Now whether that swayed their kind of shares that they attributed to each of these products, I can't really say. It could have, because we did ask them and a snapshot in time, which patients are on which products, what percentage of patients are on which products. So certainly that could have if they had elected to stay away from or Rituxan during that period, that could be the case. But again, we don't think that that's necessarily something that isn't going to stick around as we move forward. And frankly, I think it could be a real differentiator for TAVALISSE.

Okay, thank you. I appreciate that. And then lastly, I just wanted to ask about your IP strategy. I saw on your 10-K filing, you reiterated that you have the potential for certain patents that are filed I believe through 2034. So just wanted to see if you had any color about ways you're looking to expand beyond where it's at today? Thanks, again.

Absolutely. Thank you, Kristen. We always evaluate our IP strategy and feel that we have a very strong composition of matter and in addition various formulations, manufacturing patents, et cetera, in addition to that might explain that further. So we continue to work at that to provide ample. Obviously, 2032, 2034 is a decade. So we have tremendous opportunity and runway in order to make this product a success. And we will continue to see if the further patents that we file allow us to continue to further that.

Thank you.

Thank you, Kristen.

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

Absolutely. Thank you. And in closing, I'd like to thank you for joining us on this call today and for your interest in Rigel. We expect 2022 to be a year of continued progress and momentum for the company. In closing, I'd also like to thank our employees for their constant commitment to improving the lives of patients, our first value. And we look forward to keeping you updated on our progress on all of these programs in future calls. Have a great day.

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.