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Biotech / Medical : Rigel Pharmaceuticals, Inc. (RIGL)
RIGL 37.83+33.7%3:54 PM EST
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From: mopgcw9/10/2008 12:16:22 PM
   of 566
 
Citi: 26 August 2008 - 44 pages

Rigel (RIGL) Initiation of
Initiating Coverage with a Buy Rating and $32 Price Target coverage Y

* Initiating Coverage - We are initiating coverage of
Rigel Pharmaceuticals (Rigel) with a Buy/Speculative (1S)
rating and a 12-month target price of $32 per share, which
is based on applying a 34 x P/E multiple to our 2014 fully
taxed EPS estimate with a discount rate of 30% per year.

* Tamatinib (R788), the lead product, has shown promising
signal in a Phase IIa trial - Tamatinib is currently in
two Phase IIb trials for rheumatoid arthritis (RA). We
expect positive data that will be at least sufficient to
advance the program into Phase III. We believe that the
risk to the RA program is not greater than that of the
average biotech company, but the potential upside for
Tamatinib is better than most new drugs.

* RA is a large and established market with room for
effective oral therapies - We have estimated only
Tamatinib revenues in the RA indication for our model,
with US sales estimates growing from $284M to $992M from
2012-14, respectively. Rigel expects to copromote the drug
in the US and receive royalties on potential ex-US sales.

* Tamatinib in Additional Indications Provide Upside to
Our Estimates - Tamatinib is also in development for four
other indications, but we have not included revenue
contribution from these potential additional indications
or early stage pipeline drugs, such as R343 for Allergic
Asthma in our model.

* Key Catalysts - Partnership announcement is expected in
1H09, followed with data from the two Phase IIb studies in
RA in 2H09.
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