j. birchenough; 12/13, 12/4 and 11/21 reports - - interesting chronology ; some charts don’t appear; pm me if you want reports; on 11/21, he had a 2% probability that today’s results would occur - - sales
12/13
December 13, 2007
Rigel Pharmaceuticals (RIGL - US$ 8.00) 2-Equal weight
Company Update
R788 Results in RA Better Than Expected
Investment Conclusion
While RIGL has traded up significantly this
morning on positive randomized phase 2 results
for R788 in rheumatoid arthritis (RA), we believe
that results were much better than expected and
could warrant further upside. We expect a
conference call that the company will host at
12:30PM EST today with the primary investigator
for the trial will confirm positive results. Our
estimates for RIGL are currently under review.
Summary
À‰ While we will ultimately want to see radiographic
responses from future trials with R788, today's
results for R788 in RA are comparable to or better
than those that have been demonstrated by ant-
TNF agents (e.g. Enbrel) and appear to even
exceed phase 2 data for Pfizer's oral Janus kinase
3 (JAK3) inhibitor, CP-690,550, which were the
best reported to date for a small molecule.
À‰ With regards to safety and tolerability, the 100mg
side effect profile was tolerable and included just
4% (2/49) rates each of diarrhea, upper GI side
effects, and hypertension, and there were no
cases elevated liver enzymes (ALT >3x ULN). The
10% (5/49) rate of neutropenia observed in the
100mg dose group was manageable with dose
reductions and most importantly with no infections.
United States of America
Healthcare
Biotechnology
Reuters RIGL
Bloomberg RIGL
ADR
EPS (US$) (FY Dec)
2006 2007 2008 % Change
Actual Old New St. Est. Old New St. Est. 2007 2008
1Q N/A -0.68A -0.68A -0.68A N/A N/A -0.53E N/A N/A
2Q N/A -0.68A -0.68A -0.68A N/A N/A -0.64E N/A N/A
3Q N/A -0.61A -0.61A -0.61A N/A N/A -0.59E N/A N/A
4Q N/A -0.39E -0.39E -0.45E N/A N/A -0.61E N/A N/A
Year N/A -2.33E -2.33E -2.41E -2.12E -2.12E -2.29E N/A 9%
P/E N/M N/M
Market Data
Market Cap (Mil.) 248
Shares Outstanding (Mil.) 31.04
Float (%) 99
Dividend Yield 0.00
Convertible No
52 Week Range 12.46 - 6.64
Financial Summary
Revenue FY07 (Mil.) 12.6
Five-Year EPS CAGR N/A
Return on Equity N/A
Current BVPS 3.04
Debt To Capital (%) N/A
Stock Overview
RIGEL PHARMS. 12/12/07
6
7
8
9
10
11
12
13
0
2000
4000
VOLUME
Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Stock Rating Target Price
New: 2-Equal weight New: US$ 7.25
Old: 2-Equal weight Old: US$ 7.25
Sector View: 2-Neutral
À‰
RIGL released topline results this morning from a phase 2 trial in rheumatoid arthritis (RA) for lead product candidate/oral Syk kinase
inhibitor R788. The placebo-controlled, randomized, double-blind study evaluated three doses of R788 (50 mg bid, 100 mg bid, and 150 mg
bid) versus placebo in combination with weekly methotrexate (MTX) in 189 RA patients who had RA for at least 12 months and had active
disease despite receiving adequate stable doses of methotrexate over the preceding 6 months. All patients continued to receive their same
stable dose of methotrexate throughout the clinical trial period and extension. The primary endpoint of the study was ACR 20 responder
analysis at the end of week 12. (Note: ACR scores correspond to the following – if a study reported that 55% of patients achieved ACR 20,
that means 55% of patients in the study achieved a 20% improvement in tender or swollen joint counts as well as 20% improvement in three
of the other five criteria.) Secondary endpoints include safety of the three doses in combination with MTX as well as ACR 50 and ACR 70
responses, DAS scores, patient global assessment, and biomarker analysis (CRP levels).
ACR 20, 50 and 70 response rates for patients in the 100mg and 150mg po bid dose groups were significantly greater than those for
patients on placebo, as seen below:
Efficacy Results – R788 Phase 2 RA Trial*
Treatment Assigned po bid Number
(N)
ACR 20
% (N)
ACR 50
% (N)
ACR 70
% (N)
DAS28-CRP
<2.6,
% (N)
Placebo 47 38% (18) 19% (9) 4% (2) 17% (8)
50 mg 46 32% (15) 17% (8) 2% (1) 20% (9)
100 mg 49 65% (32)
(p=.008)
49% (24)
(p=.002)
33% (16)
(p<.001)
35% (17)
(p=.005)
150 mg 47 72% (34)
(p<.001)
57% (27)
(p<.001)
40% (19)
(p<.001)
47% (22)
(p<.001)
Note: At 12 weeks. All patients were on stable doses of methotrexate throughout the clinical trial and extension.
*The results presented are based on an intention to treat analysis that includes all randomized patients, regardless of how long treatment
lasted. Any patient who dropped out of the study for any reason, or for whom week 12 data was unavailable, was considered a treatment
failure (ACR non-responder). Disease Activity Scores are based on a 28 joint count and CRP at week 12.
Source: Company reports
Topline data seem to indicate a tolerable safety profile for R788, at the 100mg po BID dose in particular. The most common clinically
meaningful adverse events noted in the clinical trial were dose-related neutropenia, mild elevations of liver function tests, and
gastrointestinal (GI) side effects. Dose reduction (to one half the assigned dose, by taking the drug once per day) was pre-specified in the
protocol, contingent on neutrophil counts and/or liver function tests. Notably, a vast majority of the patients (19 out of 21) who had their dose
reduced, successfully completed the clinical trial with minimal safety issues.
Safety Results – R788 Phase 2 RA Trial
Placebo
po BID N=47
50mg
po BID N=46
100mg
po BID N=49
150mg
po BID N=47
Completed Study at
Reduced Dose (N) 1 0 5 13
Dropouts (N):
Withdrew Consent
Adverse Event
Other
11
6
2
3
6
3
1
2
6
2
3
1
8
1
6
1
Placebo
po BID N=47
50mg
po BID N=46
100mg
po BID N=49
150mg
po BID N=47
Neutropenia (N)
Requiring dose reduction 0 0 5 10
ALT > 3XULN (N) 2 0 0 3
Diarrhea (N)
(severity moderate or greater) 0 3 2 10
Upper GI side effects (N)
(gastritis, nausea, dyspepsia)
(severity moderate or greater)
2 1 2 12
Hypertension (N)
(severity moderate or greater) 0 0 2 0
Note: At 12 weeks. All patients were on stable doses of methotrexate throughout the clinical trial period and extension.
Source: Company reports
12/4
December 04, 2007
Rigel Pharmaceuticals (RIGL - US$ 6.67) 2-Equal weight
Company Update
Incrementally Negative Update on R788
Investment Conclusion
We reiterate our 2-EW rating on RIGL following a
conference call this afternoon reviewing phase 2
data for lead drug R788 in immune thrombocytopenic
purpura (ITP). With results released
previously, we believe that commentary from
Principal Investigator Dr. Bussel today was
incrementally negative in characterizing R788 as
having a narrow therapeutic index and highlights
our concerns going into phase 2 data in RA
(please see our note dated Nov 21 for an in-depth
preview of RA data expected mid-December).
Summary
À‰ RIGL presented further detail this afternoon on
results that were previously released in an
abstract on November 9 and will be viewable in a
poster presentation this Saturday at the American
Society of Hematology (ASH) meeting in Atlanta.
À‰ While the call confirmed promising activity for
R788 in a highly refractory group of patients with
ITP (platelet count increased by >20K to >30K on
at least 75% of study visits for 8/16 patients over
~6 months of treatment), the number of patients
studied was noted to be small and beyond
significant GI toxicity, additional adverse reactions
revealed today included systolic blood pressure
increases and weight gain.
United States of America
Healthcare
Biotechnology
Reuters RIGL
Bloomberg RIGL
ADR
EPS (US$) (FY Dec)
2006 2007 2008 % Change
Actual Old New St. Est. Old New St. Est. 2007 2008
1Q N/A -0.68A -0.68A -0.68A N/A N/A -0.53E N/A N/A
2Q N/A -0.68A -0.68A -0.68A N/A N/A -0.64E N/A N/A
3Q N/A -0.61A -0.61A -0.61A N/A N/A -0.59E N/A N/A
4Q N/A -0.39E -0.39E -0.45E N/A N/A -0.61E N/A N/A
Year N/A -2.33E -2.33E -2.43E -2.12E -2.12E -2.31E N/A 9%
P/E -2.9 -3.1
Market Data
Market Cap (Mil.) 207
Shares Outstanding (Mil.) 31.04
Float (%) 99
Dividend Yield 0.00
Convertible No
52 Week Range 12.46 - 6.67
Financial Summary
Revenue FY07 (Mil.) 12.6
Five-Year EPS CAGR N/A
Return on Equity N/A
Current BVPS 3.04
Debt To Capital (%) N/A
Stock Overview
RIGEL PHARMS. 3/12/07
7
8
9
10
11
12
13
0
2000
4000
VOLUME
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Stock Rating Target Price
New: 2-Equal weight New: US$ 7.25
Old: 2-Equal weight Old: US$ 7.25
Sector View: 2-Neutral
À‰
R788 Phase 2 Trial in ITP
Study Design
• Adult patients with chronic refractory ITP
• Primary Efficacy: Platelet counts increased by 20K from baseline, to over 30K platelets
• Dosing: treated with 75 - 175 mg PO BID of R788
• Duration: 30 days dosing with extension, most responders treated for 20-30 weeks
Patient baseline characteristics
• Older population
• Highly refractory ITP
– ITP for 10 years (median)
– All tried at least 3 prior treatments
– All not controlled w/steroids
– 13 failed Rituxan
– 5 failed TPO agents
– 12 had failed splenectomy
• Very difficult population to treat
• Frequent ITP related health issues
Source: Company presentation
Efficacy Results
• Clinically-significant response was seen in 12/16 (75%) patients
– Increased platelet counts
– Reduced need for IVIg treatment
– Steroid tapering
– Durable response (platelet count increased by >20K to at least 30K on at least 75% of study visits) was seen in 8/16 people
• 4 patients were withdrawn from the study due to failure to respond
• 1 patient withdrew despite adequate platelet response, due to hospitalization for UTI and subsequent DVT
• 1 patient withdrew despite adequate platelet response due to nausea and vomiting but was re-enrolled with concomitant anti-nausea meds
R788 Phase 2 Trial in ITP – Efficacy Results
Source: Company presentation
R788 Phase 2 Trial in ITP – Safety
Source: Company presentation
11/21
November 21, 2007
Rigel Pharmaceuticals (RIGL - US$ 7.92) 2-Equal weight
Change of Price Target
Previewing RA Data in Mid-December
Investment Conclusion
We are lowering our price target to $7.25 from
$13.00 and maintaining our 2-Equal weight rating
on RIGL. We assign a low 5% likelihood of
success for R788 phase 2 data in rheumatoid
arthritis (RA) in mid-December and while we
expect continued weakness in the stock on recent
safety concerns and could see an extreme
reaction from investors on negative results, we do
believe that a niche opportunity for R788 in
immune thrombocytopenic purpura (ITP) and the
value of early stage pipeline candidates, along
with $3.60/share in cash, could provide longerterm
value for holders.
Summary
À‰ We expect adverse GI effects and overall safety
for R788 will come under close scrutiny in RA
patients. Beyond safety, R788 also faces a very
high hurdle with regards to efficacy given the
benchmark set by existing agents.
À‰ If phase 2 data is positive we view significant
upside potential for RIGL shares depending on the
strength of the data. Our low probability estimates
point to upside to $13 based on a probabilityadjusted
product NPV that has an increased 60%
likelihood of ultimate success for R788 in RA, and
further upside to $20+ in a best case scenario.
United States of America
Healthcare
Biotechnology
Reuters RIGL
Bloomberg RIGL
ADR
EPS (US$) (FY Dec)
2006 2007 2008 % Change
Actual Old New St. Est. Old New St. Est. 2007 2008
1Q N/A -0.68A -0.68A -0.68A N/A N/A -0.53E N/A N/A
2Q N/A -0.68A -0.68A -0.68A N/A N/A -0.64E N/A N/A
3Q N/A -0.61A -0.61A -0.61A N/A N/A -0.59E N/A N/A
4Q N/A -0.39E -0.39E -0.45E N/A N/A -0.61E N/A N/A
Year N/A -2.33E -2.33E -2.43E -2.12E -2.12E -2.31E N/A 9%
P/E -3.4 -3.7
Market Data
Market Cap (Mil.) 246
Shares Outstanding (Mil.) 31.02
Float (%) 81
Dividend Yield 0.00
Convertible No
52 Week Range 12.46 - 7.50
Financial Summary
Revenue FY07 (Mil.) 12.6
Five-Year EPS CAGR N/A
Return on Equity N/A
Current BVPS 3.04
Debt To Capital (%) N/A
Stock Overview
RIGEL PHARMS. 20/11/07
7
8
9
10
11
12
13
0
2000
4000
VOLUME
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Stock Rating Target Price
New: 2-Equal weight New: US$ 7.25
Old: 2-Equal weight Old: US$ 13.00
Sector View: 2-Neutral
À‰
RA Data Expected in Mid-December – Randomized Phase 2 Trial Design
We expect RIGL to release topline results from a phase 2 trial in rheumatoid arthritis (RA) for lead product candidate/oral Syk kinase
inhibitor R788 in mid-December. The company has guided toward a press release on or around December 13. The placebo-controlled,
randomized, double-blind study is evaluating three doses of R788 (50 mg bid, 100 mg bid, and 150 mg bid) in combination with weekly
methotrexate (MTX) in 180 RA patients who fail to respond to MTX. The primary endpoint of the study is ACR20 responder analysis at three
months. Secondary endpoints include safety of the three doses in combination with MTX as well as ACR50 responses, DAS scores, patient
global assessment, and biomarker analysis (CRP levels). The trial is 90% powered to demonstrate a >10% difference in ACR20 score over
methotrexate. (Note: ACR scores correspond to the following – if a study reported that 55% of patients achieved ACR 20, that means 55% of patients in the study achieved a 20% improvement in tender or swollen joint counts as well as 20% improvement in three of the other five
criteria.)
Framework for Interpreting Results – Benchmark Set by Ant-TNF Agents is Very High,
We believe that a >20% difference in ACR20 scores at 3 months for R788 over MTX alone, which on average is seen to range from the lowto
mid-20's, or a high 40's response rate for R788 approaching ACR20 scores in the mid-50's to 60’s for tumor necrosis factor (TNF)
inhibitors, would be considered clinically meaningful for an oral agent. As a comparison, the most recently approved disease-modifying
antirheumatic drug (DMARD), leflunomide (Arava, marketed by Aventis), plus MTX demonstrated a 46% ACR20 response vs. 19.5% for
MTX alone at 24 weeks (Kremer et al, Ann Intern Med. 2002;137(9):726-733). Pfizer’s oral Janus kinase 3 (JAK3) inhibitor, CP-690,550,
has also set a very high bar for R788 with ACR responses that are the best reported to date for a small molecule in a phase 2 dose-ranging
study. At six weeks, ACR20 scores for CP-690,550 ranged from 70% to 81%, ACR50 from 33% to 54%, and ACR70 from 13% to 28%.
ACR Levels of Efficacy from Current Anti-TNF Agents
Author TNF Inhibitor (dose) ACR20
(%)
ACR50
(%)
ACR70
(%) Comments
Maini et al (1999) Remicade (3 mg/kg 8 weekly, IV) w/ MTX 50 27 7 ATTRACT study results at week 30
Methotrexate (MTX) alone 20 5 0
Lipsky et al (2000) Infliximab (3 mg/kg 8 weekly, IV) w/ MTX 42 21 10 ATTRACT study results at week 54
Methotrexate (MTX) alone 17 8 2
Moreland et al (1999) Enbrel (25 mg twice weekly, subcu), no MTX 59 40 9 Pbo-controlled study at 6 months
Placebo 11 5 -
Weinblatt et al (1999) Enbrel (25 mg twice weekly, subcu) w/ MTX 71 39 15 Results at 24 weeks
Methotrexate (MTX) alone 27 3 0
Bathon et al (2000) Enbrel (25 mg twice weekly, subcu) 72 49 25 Results at 12 months in MTX naïve patients
Methotrexate (MTX) alone 65 41 2
Weinblatt et al (2003) Humira (40 mg every second week, subcu) w/ MTX 67 55 27 ARMADA results at 24 weeks
Methotrexate (MTX) alone 14 8 5
Source: McColl G., Aust Prescr 2004;27:43–6
Treatment Alternatives for RA
+ Qualitative assessment of relative differentiation and benefit: “More +’s the better”. Source: Product Labels, Lehman estimates
Safety Will Also Be Significant Clinically
The safety profile of Pfizer’s compound is of concern, however, with dose-dependent increases in lipids (LDL and HDL) and declines in
neutrophil counts, high rates of infections, as well as reversible increases in serum creatinine levels. Achieving an optimal therapeutic
window has been the major hurdle that has plagued development of other oral drugs, such as PDE4, p38 MAP Kinase, and TNF-alpha convertase (TACE) inhibitors. The adverse event profile for R788 will bear monitoring following recent phase 2 data in ITP: gastrointestinal
(GI) symptoms (vomiting, diarrhea) were seen in 5 of 14 patients and lead 2 patients to withdraw; mild elevations in ALT seen in 2 patients
(2 >2XULN, one of whom had pre-existing hepatitis). Safety will play a major factor in determining clinical significance for RA patients.
Will Want to See Radiographic Responses from Future Trials with R788
If R788 were to demonstrate very strong signs and symptoms of efficacy with a tolerable side effect profile, the third leg of the stool, namely
radiographic response, would need to be addressed before product positioning could be assessed. If the product positioning is to compete
directly with an anti-TNF, an inhibition of structural damage claim must be achieved. Even with this claim the anti-TNFs have been used for
a decade and as a class have been shown to improve overall mortality, cardiovascular mortality as well as data suggesting a reduction in
risk of death from colorectal, breast and prostate cancer. Anti-TNF products offer weekly, bi-monthly and with JNJ’s Golimumab monthly SC
dosing as well as Remicade providing an IV option. In short we think the anti-TNF class presents an impenetrable hurdle without vastly
superior safety and efficacy with an oral agent.
If Ultimately Successful, We See R788 Most Likely Being Positioned Before Anti-TNFs
An alternative scenario would be for R788 to show a middle of the road response with ACR scores better than MTX alone but less than anti-
TNFs, where product positioning could be to use R788 before anti-TNFs. In reality this would require RIGL to create a new market, which
we think is probably easier than taking the biologic market. If R788 + MTX shows a modest improvement in signs and symptoms as well as
structural protection over MTX, especially when it is combined with another non-biologic DMARD such as sulphasalazine, RIGL would be
able to create an attractive proposition to insurance companies that adding a 3 month trial of R788 is less expensive than adding an anti-
TNF, yet convincing both rheumatologists and patients that R788 provides a genuine step-up in efficacy.
We expect R788 would most likely be positioned in this way, before anti-TNFs, and assign a 5% likelihood of success at this time,
generating an NPV of $0.50/share with R788 for RA. If R788 does produce ACR20 scores in the mid-to-high 40s with a tolerable safety
profile, we would estimate an incremental NPV of $5.75, for a total product NPV of $13.00, based on an improved outlook with a 60%
probability of success of R788 making it to market for RA. Our peak sales estimates for R788 in RA are $1.2B in the U.S. and $790M ex-
U.S, on both of which we assume RIGL will receive a 20% royalty rate.
Solid Early Stage Pipeline Provide Long Term Value
RIGL does have its own oral JAK3 inhibitor, R348, which is more selective than the aforementioned Pfizer compound. R348 is expected to
enter the clinic by YE07 as a targeted therapy for autoimmune diseases such as transplant rejection, multiple sclerosis (MS), RA, graft-vs.-
host disease, and psoriasis. We expect this early stage program could provide significant long term value to investors. In addition, partnered
programs including the PFE syk kinase inhibitor program in asthma (R343), currently undergoing scale-up for entry into the clinic expected
by YE07, and the Aurora kinase inhibitor program with Serono in phase I for solid tumors (initiated 3Q06), hematologic malignancies
(initiated February 2007), and as combination therapy in advanced malignancies (initiated July 2007), provide further value for investors.
Trading Commentary – Stock is Likely to Move Significantly
Ultimately while positive results in RA are a very low probability event in our opinion in the face of high efficacy and safety hurdles and we
could envision an extreme reaction from investors on negative results that could see the stock trading down to the $5 range and in a worst
case scenario to just above cash levels of $3.60/share, we do believe longer-term value should be supported fundamentally by our 12-
month $7.25/share price target, which is based on our current probability-adjusted NPV for R788 in ITP (60% likelihood of success) and RA
(5% likelihood of success). As we outlined above, while very low probability in our opinion, we believe that fair value on a favorable outcome
with R788 producing ACR20 scores in the mid-to-high 40s with a tolerable safety profile raises the ultimate probability of success with R788
in RA to 60%, yielding an incremental NPV of $5.75, for a total product NPV of $13.00. In the even less likely scenario of R788 posting
ACR20 scores in the high 50s to 60s or above, which would make it competitive with anti-TNF agents, again with a tolerable safety profile,
we could see the stock trading up to as high as $20+ based on a $3+ billion peak sales opportunity for R788 in RA alone.
Scenario Estimated Stock
Price Probability
Worst case: severe adverse events, no efficacy (ACR20 scores are not at least 10% greater than those seen with
methotrexate alone), jeopardy beyond RA to the ITP opportunity for R788 - stock trades to just above cash levels
of $3.60/share
$4 8%
ACR20 scores are 10% to 20% greater than those seen with methotrexate alone and clinically meaningful, but
adverse events are of concern $5 -$6 85%
ACR20 scores are at least 20% greater than those seen with methotrexate alone and clinically meaningful, with a
tolerable safety profile $13 5%
Best case: ACR20 scores in the high 50% to 60% range or above, competitive with anti-TNF agents, and with a
tolerable safety profile $20+ 2%
Source: Lehman Brothers Research
December Options Pricing in Implied Volatility in the 170-180% Range for RIGL
The options market had been steadily bidding up December options till last week in anticipation of the catalyst, though they have cheapened
somewhat this week. ATM implied volatility for the Dec07 expiration is currently in the 170-180% range. Based on the prices of calls and
puts struck closest to the money, the Dec07 7.5 strike put is offered at $1.50, which breaks even for a move to lower than $6.00 by
December 21. On the upside, the $1.15 offer on the Dec07 10 strike calls indicates a breakeven beyond $11.10, more than 40% above the
stock’s Nov 20th close ($7.92).
Valuation Methodology: We arrive at our new $7.25 price target based on our product NPV analysis, which includes the estimated present
value of probability-weighted cash flows for R788 discounted at 15%. We arrived at our previous $13 price target by applying a 35x multiple
to our prior 2012 EPS estimate of $1.20 and discounting at 35%.
R788 NPV Analysis
Peak Royalty Peak Likelihood Discount Total NPV
Assumed Sales Rate Roy./Sales of Rate NPV per share
Product Indication Market Launch ($) ($) Success ($M) ($)
R788 ITP U.S. 2011 176.0 100.0% 176.0 60.0% 15.0% 128.3 4.11
R788 ITP Ex-U.S. 2012 117.3 100.0% 117.3 60.0% 15.0% 82.7 2.65
R788 Rheumatoid Arthritis U.S. 2013 1,185.3 20.0% 237.1 5.0% 15.0% 9.4 0.30
R788 Rheumatoid Arthritis Ex-U.S. 2014 790.2 20.0% 158.0 5.0% 15.0% 5.9 0.19
Total NPV $ 226.3
Net Cash 110.2
Total NPV (incl. Cash) $ 336.5
Per Share Calculations
Total NPV of Product Pipeline $ 7.25
Total NPV of Product Pipeline (inc. Cash) 10.78
Source: Lehman Brothers Research
Rigel Pharmaceuticals (RIGL)
Projected Income Statement Lehman Brothers
Dollars in 000's
Except per share data
Fiscal Year Ends Dec. 31
2007E 2008E 2009E 2010E 2011E 2012E 2013E 2014E 2015E
Revenues:
Product Sales $ - $ - $ - $ - $ 20.0 $ 80.0 $ 200.0 $ 240.0 $ 266.7
Product Royalties - - - - - - 25.4 79.8 126.9
Total Product Revenue $ - $ - $ - $ - $ 20.0 $ 80.0 $ 225.4 $ 319.8 $ 393.5
Milestones and Other 12.6 20.0 25.0 40.0 15.0 25.0 25.0 25.0 25.0
Total Revenue $ 12.6 $ 20.0 $ 25.0 $ 40.0 $ 35.0 $ 105.0 $ 250.4 $ 344.8 $ 418.5
Expenses
Cost of Goods Sold $ - $ - $ - $ - $ 2.0 $ 8.0 $ 20.0 $ 24.0 $ 26.7
R&D Expense 64.5 75.0 80.0 82.0 90.0 95.0 90.0 85.0 85.0
Stock-based compensation - - - - - - - - -
SG&A Expense 20.9 22.4 27.0 35.0 40.0 60.0 65.0 65.0 70.0
Total Expenses 85.4 97.4 107.0 117.0 132.0 163.0 175.0 174.0 181.7
Operating Income (72.8) (77.4) (82.0) (77.0) (97.0) (58.0) 75.4 170.8 236.9
Depreciation and amortization - - - - - - - - -
EBIT (72.8) (77.4) (82.0) (77.0) (97.0) (58.0) 75.4 170.8 236.9
Interest and Other Income (Expense) 5.4 5.2 5.4 7.0 8.4 10.8 10.8 10.8 10.8
Pre-Tax Income (67.4) (72.2) (76.6) (70.0) (88.6) (47.2) 86.2 181.6 247.7
Income taxes - - - - - - - 45.0 71.7
Recurring Net Income $ (67.4) $ (72.2) $ (76.6) $ (70.0) $ (88.6) $ (47.2) $ 86.2 $ 136.6 $ 176.0
Non-Recurring Items (inc. extraordinary, net of taxes) - - - - - - - - -
Reported Net Income $ (67.4) $ (72.2) $ (76.6) $ (70.0) $ (88.6) $ (47.2) $ 86.2 $ 136.6 $ 176.0
Recurring EPS $ (2.33) $ (2.12) $ (2.05) $ (1.52) $ (1.88) $ (0.88) $ 1.44 $ 2.05 $ 2.40
Extraordinary item (net of taxes) - - - - - - - - -
Reported EPS (2.33) (2.12) (2.05) (1.52) (1.88) (0.88) 1.44 2.05 2.40
Fully Diluted Shares Outstanding 28.9 34.1 37.3 46.1 47.1 53.4 60.0 66.6 73.4
Source: Lehman Brothers Research and company reports
R788 RA Market Model
2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
Rheumatoid Arthritis
Total RA Patients (U.S.) 3,007,404 3,034,470 3,061,781 3,089,337 3,117,141 3,145,195 3,173,502 3,202,063 3 ,230,882
y-o-y growth % 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% 0.90%
Severe RA Market Analysis
% Severe 20% 20% 20% 20% 20% 20% 20% 20% 20%
Total Severe RA Patients 601,481 606,894 612,356 617,867 623,428 629,039 634,700 640,413 6 46,176
% w/ Medicare coverage 51% 51% 51% 51% 51% 51% 51% 51% 51%
Addressable Severe RA Patient Population 297,549 300,226 302,929 305,655 308,406 311,181 313,982 316,808 319,659
R788 Penetration of Severe RA Market 0.0% 2.3% 4.0% 6.0% 8.0% 10.0% 12.0% 13.0% 14.0%
Total Severe RA Patients on R788 - 6 ,755 12,117 18,339 24,672 31,118 37,678 4 1,185 44,752
Cost of therapy $0 $12,000 $12,600 $13,230 $13,892 $14,586 $15,315 $16,081 $16,885
Severe RA R788 Revenues $0 $81,061 $152,676 $242,629 $342,738 $453,892 $577,050 $662,302 $755,651
Moderate RA Market Analysis
% Moderate 45% 45% 45% 45% 45% 45% 45% 45% 45%
Total Moderate RA Patients 1 ,353,332 1,365,512 1,377,801 1,390,201 1,402,713 1,415,338 1,428,076 1,440,928 1 ,453,897
% w/ Medicare coverage 25% 25% 25% 25% 25% 25% 25% 25% 25%
Addressable Moderate RA Patient Population 1,014,999 1,024,134 1,033,351 1,042,651 1,052,035 1,061,503 1,071,057 1,080,696 1,090,423
R788 Penetration of Severe RA Market 0.0% 0.4% 0.7% 1.0% 1.3% 1.7% 2.0% 2.2% 2.3%
Total Moderate RA Patients on R788 - 3,841 6 ,889 10,427 14,027 17,692 21,421 2 3,415 25,443
Cost of therapy $0 $12,000 $12,600 $13,230 $13,892 $14,586 $15,315 $16,081 $16,885
Moderate RA R788 Revenues $0 $46,086 $86,801 $137,943 $194,858 $258,053 $328,073 $376,541 $429,614
Total Moderate/Severe RA Revenue $0 $127,147 $239,477 $380,572 $537,595 $711,944 $905,123 $1,038,844 $1,185,265
Royalties to RIGL - 20% $0 $25,429 $47,895 $76,114 $107,519 $142,389 $181,025 $207,769 $237,053
Source: Lehman Brothers Research
R788 ITP Market Model
2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
ITP
Patients with ITP (U.S.) 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000
Growth rate 0.0%
Incidence 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000
Attrition 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000
Total ITP Patients 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000
R788
% Steroid-Refractory 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
R788 Eligible Population 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
R788 Penetration 3.0% 6.0% 8.0% 9.0% 10.0% 11.0% 11.0% 11.0% 11.0% 11.0%
Total R788 Patients 1,500 3,000 4,000 4,500 5,000 5,500 5,500 5,500 5,500 5,500
Pricing $32,000 $32,000 $32,000 $32,000 $32,000 $32,000 $32,000 $32,000 $32,000 $32,000
Total R788 U.S. Sales (M) $20.0 $80.0 $120.0 $144.0 $160.0 $176.0 $176.0 $176.0 $176.0 $176.0
Royalty Rate 100.0%
Total R788 U.S. Revenues (M $20.0 $80.0 $120.0 $144.0 $160.0 $176.0 $176.0 $176.0 $176.0 $176.0
Source: Lehman Brothers Research
RIGL - Milestones
Product Event Timeframe Endpoints/Details
R788
oral syk kinase
inhibitor for autoinflammatory
diseases
Topline phase II data in rheumatoid
arthritis (RA)
Second week of
December
An ascending dose phase II trial for R788 in rheumatoid arthritis (RA) patients who fail to respond to
methotrexate (MTX). The placebo-controlled, randomized, double-blind study is evaluating
three doses of R788 (50 mg bid, 100 mg bid, and 150 mg bid) in combination with weekly MTX. The primary
endpoint of the study is ACR20 responder analysis at three months. Secondary endpoints include safety of
the three doses in combination with MTX as well as ACR50 responses, DAS scores, patient global
assessment, biomarker analysis (CRP levels). The trial is 90% powered to demonstrate a >10% difference in
ACR20 score over methotrexate. A >20% difference in ACR20 scores for R788 over methotrexate, which on
average is in the mid-20's, or high 40's response rate approaching ACR 20 scores at 3 months in the mid-
50's for anti-TNF agents, would be considered clinically meaningful.
RIGL has completed pre-clinical development demonstrating disease modifying (DMARD) effect in the
collagen induced RA model in rats which was comparable to that seen with widely used anti-TNF drugs like
Enbrel and Remicade. RIGL has also completed a phase I multi-dose study in healthy volunteers which
identified a therapeutic dose of 200mg BID, demonstrated no significant adverse effects up to 10-fold the
proposed therapeutic dose with the exception of an early signal of neutropenia at the highest dose, and
produced biomarker data with significant TNF suppression as well as monocyte inhibition.
Phase II data in immune
thrombocytopenic purpura (ITP) at
ASH meeting
Abstract
released:
November 9th
R788 phase 2 data in ITP demonstrated encouraging activity: 9/14 (64%) highly refractory pts responded to
treatment with stable platelet counts > 30,000/ul, including 2 pts who had failed multiple other treatments, and
with 6 pts achieving platelet levels of >100,000/ul. Adverse events were tolerable for a highly refractory ITP
population but do bear monitoring with RA results in December: GI symptoms (vomiting, diarrhea) were seen
in 5 of 14 pts and lead 2 pts to withdraw; mild elevations in ALT seen in 2 pts (2 >2XULN, one of whom had
pre-existing hepatitis)
Phase II results in B-cell lymphoma 2008 RIGL has initiated a phase II trial for R788 in B-cell lymphoma. The open-label study will enroll 60 patients
with mostly refractory diffuse large, follicular and mantle B-cell lymphomas and will dose R788 up to 200mg
BID. The primary endpoint is overall response rate and secondary endpoints include pharmacodynamics and
safety. RIGL has completed enrollment of the phase 1 portion of the trial with the first 12 patients Results will
likely be seen in 2008.
R343
Syk kinase
inhibitor for IgE
mediated asthma
Initiate phase I with Pfizer YE07 The PFE syk kinase inhibitor program in asthma is currently undergoing scale-up for entry into the clinic
expected by YE07. In January 2005, RIGL signed a partnership agreement with PFE to develop and
commercialize Syk kinase inhibitors for asthma and COPD. While terms of the deal have not been disclosed
we believe that RIGL received $25-35mln upfront, with royalties averaging 15% and milestone payments
between $150-200mln. As part of the agreement RIGL provided PFE access to 80 molecules with favorable
drug attributes amenable to a dry powder inhaler including poor ability to attract moisture and fine milling
capacity. PFE is precluded from developing any Syk kinase inhibitor for allergy and is restricted solely to
asthma and COPD.
R763
Aurora kinase
inhibitor for
oncology
Phase I interim results in solid
tumors
ASCO 2008
May 30 - June
3rd
The Aurora kinase inhibitor program with Merck Serono continues in phase I for solid tumors (initiated 3Q06).
The study will evaluate R763 as a single agent therapy for the treatment of refractory solid tumors. The multicenter,
U.S. study will enroll 60 to 80 patients with refractory tumors who have exhausted standard
therapeutic options and volunteered for an experimental agent. The primary endpoints of the study are safety
and tolerability. The study will also look at the pharmacokinetic profile of R763, and will measure biomarkers
to determine the activity of the compound against the target kinase and on signaling networks.
Aurora kinase is thought to be a central modulator of multiple cancer cell cycle events and inhibition has been
shown to both prevent cell proliferative activity and promote pre-programmed cell death, or apoptosis. Aurora
kinase upregulated in a number of difficult to treat cancer types like gastric, neuroblastoma and pancreatic
cancer . In the case of R763 RIGL has established inhibition of Aurora kinase with EC50 in the low
nanomolar range, with near full inhibition of downstream targets like C-Raf in the low micromolar range.
Phase I interim results in
hematological malignancies -
possibly at ASH meeting
1H08
(initiated Feb '07)
This phase I, open-label, dose-escalation study is designed to evaluate safety and tolerability at 2 different
dosing regimens of R763. Up to 54 subjects with acute or chronic myeloid leukemia (AML or CML) or
myelodysplastic syndrome (MDS) will be enrolled in each regimen and dosed orally with R763.
Phase I combination study in
advanced malignancies
ongoing
(initiated July '07)
This phase I, multi-center, open-label, and dose escalating study is designed to determine the maximum
tolerated dose, safety and dosing regimen of R763/AS703569 in combination with gemcitabine. The study will
evaluate 2 different treatment regimens whereby the study drug will be given in sequence with the
gemcitabine over 21 day cycles. As many as 72 patients with advanced malignancies, including, pancreatic,
ovarian, breast, non-small cell lung and colorectal, will be evaluated.
R348,
oral Janus
kinase 3 (JAK3)
inhibitor
Enter phase I for autoimmune
diseases
YE07 R348, an oral Janus kinase 3 (JAK3) inhibitor, is expected to enter the clinic by YE07 as a targeted therapy
for autoimmune diseases such as transplant rejection, multiple sclerosis, rheumatoid arthritis, graft-versushost
disease, and psoriasis.
Source: Lehman Brothers Research and company reports |
