CS: Rigel Pharmaceuticals Inc. (RIGL) Outperform [V] M. Aberman
CP: US$ 25.09 TP: US$ 37 CAP: US$ 863.6m
2Q08 Earnings Non-Event - Outperform; Lowering Estimates
• Conclusion: Rigel has moved forward its R788 program in rheumatoid arthritis this quarter with the initiation of TASKi2 and
TASKi3, two Phase IIb trials. In addition, we were encouraged by the top-line data of R788 in NHL released earlier this year,
showing a 55% response rate in the SLL/CLL cohort, a 24% response rate in the DLBCL cohort, and a manageable safety
profile in a heavily pretreated population. The next data points for Rigel include presentation of the full data set for R788 in
RA at ACR this year, including additional safety data from the open label extension trial. In addition, the full lymphoma data
will be presented at the American Society of Hematology meeting in December.
• What's New? Rigel reported 2Q08 EPS of ($0.93) vs. our estimate of ($0.77) and consensus of ($0.69). The lower than
expected earnings was a result of the company reporting no revenue vs. consensus estimates of $2.1 M. Additionally, Rigel
reported to have $185.0 M in cash/equivalents on the balance sheet, representing a cash burn of ~$25 M for the quarter.
• Implication: We have updated our model and reduced our 2008 and 2009 EPS estimates to reflect the quarter and rolled our
valuation period forward in our probability adjusted NPV model, which keeps us at our existing price target of $37. We
continue to believe that Rigel is undervalued given its proof of concept efficacy in RA, ITP, and non-Hodgkin's lymphoma.
The Phase II data set of R788 in RA, including one year of safety data, should be another positive for the stock when it is
presented at ACR in October, and we view a strong partnership as another potential positive catalyst in late 2008/early 2009. |
