I attended the stockholder's meeting, equipped with my laptop so that I could take copious notes. Here's what I recorded.
James Gower, the CEO, seemed rather stiff. He wore a double-breasted suit, with a blue dress shirt and expensive-looking silk blue tie. He was way overdressed for this forum. A curious fellow.
The headquarters building is a bit on the opulent side too. It is a 3-4 story (approximately) modern building with prominent “Rigel” signage across the exterior of the top floor. The main lobby is huge, with a functioning pendulum swinging suspended from the ceiling. It was only slightly smaller than the one I remember seeing at the Planetarium.
About 30 people were in the audience. At first I thought that this was just a good turnout by individual investors like myself, but it turned out that all but two of us were employees. Only us two non-employee stockholders asked any questions.
Gower's Statements During6His Presentation of Resolutions Submitted to Stockholders for Approval (in what follows, SI is interpreting my MS Word bullets as "?" symbols):
 There are approximately 46 million shares outstanding.
 A rights offering is a component of the financing.
 Private placement of 71,874,999 share plus warrants for 14,374,997 shares over a 5-year period, all for a purchase price of $0.64/sh. The warrants can be exercised immediately, but he'd expect the warrant holders to wait for greater appreciation down the road before exercising.
 The Reverse stock split is necessary in order to complete the private placement. Rigel does not have enough authorized shares to issue 71M more shares, so it would have to either amend its certificate of incorporation to authorize additional shares or do a reverse stock split.
? There are differences of opinion among the board members as to what the reverse stock split ratio should be, so Gower would not venture any guess as to what will be determined on that score.
 The Rights Offering, if approved by the SEC, will allow Rigel to issue $10M in additional shares on a pro rata basis to all existing shareholders as of April 29th. That price would be $0.64 per share. The mailing of the offer would be sent out when SEC approves the rights offering. Pricing ($0.64/share) is the same as what the new investors get in the privat placement.
 WallStreet keeps saying, “nice pipeline, but not enough cash.”
 The Board will meet next week and by the end of the next week they will announce the reverse stock split.
Gower’s PowerPoint Presentation
 Using Functional Genomics to Create Small Molecule Drugs
 Today’s financing puts Rigel at an inflexion point.
 The lead investor in the new private placement, MPM Capital, is a major VC player. Rigel is delighted to have them as an investor.
 The company has a very significant pipeline
 The first product, R112, is already in the clinic.
 Two more will enter the clinic in the nest twelve months: One for HCV and one for Rheumatoid Arthritis (RA).
 Rigel is leading research in ligases: an important potential new class of immunology/cancer drugs
 The company will have about $70M in cash after the current financing. These funds will be sufficient to allow the company to reach proof of efficacy in humans (i.e., completion of phase IIB trial)
 The company has an excellent group of investors.
 Major pharma collaborations are ongoing and will help leverage internal development. None of Rigel's big-pharma collaborators has elected to terminate a program.
 All the drugs came out of the research that Don Payan (Chief Science Officer) started 4 years ago. No in-licensing has been needed.
 R112 for allergy/asthma is nearing the end of its Phase 1B/2A trial.
 HCV: they are doing final tox work to allow filing an IND this fall
 Rigel’s tumor growth inhibitor is almost ready for preclinical
 Over next year Rigel will start work on another asthma drug
 Efficacy results for R112’s Phase 1B trial in asthma/allergy will be released within a month or so. It is a blinded study.
 HCV drug candidate will file IND probably early 4th Q. Trial should be fairly short.
 RA IND to be filed early 04 for R112 or one of its close cousins.
 They can do an IND at a rate of one each six months.
 Rigel’s small molecule drugs for immune-related disorders leverage the company’s mast cell knowledge and its primary cell assay system
 Rigel is looking at both IgE and IgG signaling intracellular mechanisms.
 All of Rigel’s drugs are small moleucules.
 R112 for asthma/allergy is administered intranasally or inhaled. It triggers a receptor on the mast cell. Critical molecule is Syk.
? Mast cells are responsible in airway disease for release of inflammatory mediators.
 Two other pathways are triggered by the same signal: Cytokine synthesis and leukotine synthesis. These two are a little later in the process than histamines. Cytokine synthesis is the last thing that happens in this cascade from the IgE trigger. Currently, only the use of steroids can block this process.
 R112 blocks the process by binding to Syk molecule. Stops the process completely.
 Being a small molecule, it passes into the cell through the cell membrane. Onset of activity is extremely rapid. Within minutes.
 20 years ago, everyone was focused on extra-cellular receptors for treatment of allergic responses.
 Allergy and asthma are huge markets. Over 40M in the US have allergic disorders, of which 20M have asthma.
 $5B in 2001 sales of WW for anti-asthmatic and allergy relief medications. $2B just for steroid nasal sprays for allergic rhinitis alone in US.
 Xolair has recently been recommended for approval by FDA panel for treatment of asthma. It validates the approach of inhibiting the IgE pathway. But Xolair is an injectable!
 R112 Clinical plan for Allergic Rhinitis, in Phase 1B
 The protocol calls for treating patients with known allergies; they are exposed to to allergens and given drug or placebo. There is a three-week washout period. Then boosted again with either placebo or drug, but the reverse from before, so every patient will have had both placebo and drug.
 Needs to be followed up with a much larger Phase 2B study.
 RA afflicts 2.1M Americans, mostly women. It is a debilitating and progressive disease. Therapies of last few years have helped a lot. There are three injectable antibodies, Embrel, Remicade, and Humira, their US sales in 2003 are about $1.38B each
 Syk Kinase Inhibitors are critical in RA too. But in RA, IgG is the counterpart of IgE in respiratory immune disorders. Lead molecule was R091, but it is not potent enough. A different more potent cousin will go into the clinic.
 DMAM (disease modifying arthritis medicine).
 Embrel also modulates the destruction of bone: the main symptom of RA. R091 remained dramatic in reduction of bone loss in rats even 23 days after administration.
 R091 is still in preclinical development. It will be orally available. Evaluating candidates for pharmacology. Will choose lead candidate by early 2004.
 HCV is perhaps the most exciting of Rigel’s programs, especially from the perspective of patients’ needs. 170M people infected worldwide. 4M people in US. For the most part, it never goes away – only 15% of patients ever get well. 20% progress to cirrhosis of the liver (almost as high as alcohol-caused cirrhosis in US.) Many develop liver cancer in late stage disease.
 Only indirect treatment is currently available. No direct antiviral.
? Looking for places to interfere with viral replication. Two basic approaches have had some success. Rigel attacks viral replication. Rigel’s drug is 20 times more specific than any competitor’s drug that has hit the clinic. Does not inhibit related RNA viruses and it does not interfere with critical cellular functions.
 Oral administration, rapid onset of antiviral action, active in blocking HCV live virus replication, significant therapeutic window in cell-based assays, and no toxicity observed in animal studies.
 There are no animal models for HCV.
 Inhibition of positive strand of HCV RNA.
 Key clinical centers have been lined up. Expect to file IND in 4Q03
 Ligase systems are proving to be real work horses for drug discovery.
 Rigel has a commanding lead in ligases, one of the hottest fields for drug discovery.
 Ligases have similar potential as kinases.
 Large number of drug targets relating to different diseases
 Greater specificity than kinases
 Potentially greater applicability
 Daiichi collaboration: provides validation
 Clinical correlate: Velcade, treating multiple myeloma
 Velcade acts further back in the pathway
 Velcade has less specificity than Rigel products under development.
 Twofold overall structure. Risk and drug development go together. Need big enough pipeline not to be dependent on any single drug. Need to seek a partner for a compound after it completes Phase 2. Partner then conducts later stage trials and commercialization.
 Focus primarily on chronic disease markets, using small molecule therapeutics. For the most part, the oncology field is too crowded.
 Early stage collaborations are providing about 30% of development costs. None of these early partners has dropped out. J&J, Pfizer, Novartis (four programs), and Daiichi (signed last August for a protein degradation oncology target aimed at tumor growth)
 Cash was $22M, but there will be about $46M additional funding from the new private placement, and about $10M from the rights offering.
 Three INDs within next 18 months
 Four programs: allergy/asthma, HCV, RA, oncology
Q&A Session
 The company has deliberately not focused on oncology, because that market is too crowded.
 Since 1980, the major pharmas have consolidated from about 40 to just 6.
 There are lots of antibody companies going after RA, but not many have developed small molecule drugs.
 The potential for side effects in large population studies is there – it cannot be avoided.
Marc |
