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Greetings, and welcome to the Rigel Pharmaceuticals Financial Conference Call for the Second Quarter of 2023. 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, Ray Furey, Rigel's Executive Vice President, General Counsel and Corporate Secretary. Thank you. Mr. Furey, you may begin.

Welcome to our second quarter 2023 financial results and business update conference call. The financial press release for the second quarter of 2023 was issued a short while ago and can be viewed along with the slides for this presentation in the News and Events section of our Investor Relations site on 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, 2022, and subsequent filings with the SEC including our second quarter report on Form 10-Q 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 Chief Executive Officer, Raul Rodriguez. Raul?

Thank you, Ray, and thank you everyone, for joining today. Also with me today are Dave Santos, our Chief Commercial Officer; and Dean Schorno, our Chief Financial Officer. Now beginning on Slide 4. We are pleased with the progress we’ve made in the first half of 2023 as we continue to build our hematology/oncology company with our commercially available products in our development programs. In the second quarter, we continued to see year-over-year growth and demand for our first approved product, TAVALISSE, for adult product ITP. We are also pleased with the progress that we've made on the launch of our second approved product, RE

Thank you, Raul. Now I'd like to take a few minutes to discuss our continued growth of TAVALISSE, during another record quarter and our progress with RE

Thank you, Dave. I will now summarize our development programs. Moving on to Slide 20. Thank you. We outlined our ongoing development programs. We are focusing on growing our heme/onc business with our internal development plans. We believe both fostamatinib and olutasidenib has potentially other diseases beyond their already approved indications, and we're currently evaluating several options. In addition, we are evaluating potential in license opportunities similar to the approach we took with RE

Thank you, Raul. I'm on slide 25. For the second quarter of 2023, we shipped 2,191 bottles of TAVALISSE to our specialty distributors, resulting in $30.2 million of gross product sales. 2,265 bottles of TAVALISSE were shipped to patients and clinics, while 74 bottles decreased the levels remaining in their distribution channels at the end of the quarter. For the second quarter of 2023, we shipped 200 bottles of RE

Thank you, Dean. As we reviewed on this call, we had a productive first half of the year, and we're focused on our 2023 catalyst. In Q2, we just exceeded our quarterly high for demand bottles for TAVALISSE, and we look forward to continue to drive momentum for TAVALISSE sales in ITP, both in the U.S and globally with our partners. We are executing on the launch of RE

[Operator Instructions] Thank you. Our first question is from Yigal Nochomovitz with Citi. Please proceed with your question.

Yes. Hi, Raul, and team. Thank you. I'm just trying to get a better understanding of how you're managing the business with respect to the path to profitability. I think this quarter was the closest to breakeven excluding some of the one-timers where you had net profit given collaboration or milestone. You mentioned that you're going to be potentially investing in new opportunities for fostamatinib, olutasidenib as well as in-licensing, but the top line obviously is growing too. And just -- and you mentioned the expense line might increase a little bit back to the 1Q '23 levels. So could you just talk about all that together? And how you're thinking about managing the business to get to the breakeven or beyond over the next coming years? Thanks.

Thank you, Yigal. Sure. Well, let me turn to Dean to give you an overview on how we're looking at this path towards breakeven and our investments further.

Hi, Yigal, and thanks for the question. So let me start with just the change in cash for the quarter which you highlighted a little bit in your question. So the cash increased by $5.6 million for the quarter. The basis of that increase in cash was really the strength of sales, which is offset by the operating expense. That operating expenses you highlight is a fairly low -- low-level of clinical spend. And that's simply a result of just timing of our activities. We -- as you look back a year, we wrapped up the warm autoimmune hemolytic anemia as well as the COVID Phase 3 efforts as well as there's some variability in our IRAK -- the timing of our IRAK spend. So that's -- that really resulted in about 100 -- the $32 million of operating expense for the quarter. The net loss for the quarter is $6.6 million. $2.5 million of which was noncash, also contributed to strengthen cash. And then finally we had a -- about an $8.5 million pickup in accounts receivable. So we had a slightly high accounts receivable balance in Q1, and that normalized in Q2. So all said, we are at about $5.6 million of increase. As you highlight in your question, getting to profitability and a path to profitability is important to us. And this quarter highlights the potential for that path to profitability. We do expect in the back half, as I said in my prepared comments, to get back to Q1 like operating expense levels, but we do expect that the revenues to continue to grow, we expect to continue to manage operating expense very effectively as we have. And that will ultimately, we believe lead us to profitability. All that said, we haven't given top line guidance, and therefore can't be specific on when will cross over. But again, I'll reiterate that the -- its certainly is the focus of the business to get to that profitability.

Thanks, Dean. The only thing I'd like to add further is that it's an important priority for us. But it also is important to fund the new opportunities that both our internal as well as things we might in-license, because that continues to be a priority for both of those things. We like the business, we like the growth of the business. We want it to grow and be even greater and bigger in the future.

Okay. Thank you very much.

Thank you, Yigal.

Thank you. Our next question is from Kristen Kluska with Cantor Fitzgerald. Please proceed with your question.

Hi, everyone. Thanks for taking my questions. I found it really helpful to understand a little bit more about what you're seeing in terms of new patients. So thanks for sharing now with us. So I wanted to see if you could talk about what the compliances you're seeing amongst the different lines of treatment. And also if the responses are pretty much in line with your own analysis, since you've been tracking this for a couple quarters now.

Yes, thank you for asking that question. We're excited to share some of that information. Dave?

Thanks, Kristen. I will say that it's we don't have an ability to kind of take the patients that are on therapy in the second and third and determine response rates, if that was your question. But I will comment on kind of what we've looked at in terms of persistency. And it is still early, but what we've looked at is a patient who started in Q4 of last year when we saw this higher percentage of third and fourth line patients. And we compared it to patients who started in Q4 of '21 and Q4 of 2020. And if you look at their persistency at 4 months and beyond versus the persistency of patients who were in '21 or '20, it is trending higher. And so, we do think this is a positive trend. Again, this has only been happening for three quarters. So it's going to take some time for this to reflect in a larger number of refills. But certainly we believe our business is going in the right direction.

Okay. Thank you for that. And then you mentioned for RE

Let me make a couple comments on that certainly. So, IDH positive patients in AML, there's numerous opportunities within IDH positive AML patients that we are looking at. Earlier line, for example, in certain sub segments we think are interesting to study further. Some already in the relapsed refractory area where we want more data. But we're also looking in areas outside of AML where there's been shown to have some opportunities for IDH positive, a product that is an IDH positive mutant product such as RE

Yes, I would just say that all of the patients in the Phase 2 if you consider outside of the pivotal cohort, I mean, some key populations that are really important to clinicians out there include patients who were enrolled with MDS versus AML. Patients who were enrolled treatment naive, and patients who were on combination therapy versus a single agent. Because as you know in our pivotal cohort, it was just mono therapy, and it was all relapsed refractory AML. So those are the populations that clinicians have expressed interest in. Some of the data has been presented, the combination data, but we're looking to make sure that the other cohorts that data is out there as well for clinicians to learn from.

And just to highlight, we did publish the post-Venetoclax data at the EHA meeting, which was very helpful. It was a question we frequently get. How do patients who have been through Venetoclax perform with your product? And the answer was very affirmative in that presentation.

Okay, thanks. And last question for me. I know you made it very clear that you're looking at a couple different options on the table here in terms of next opportunities, but one that comes up pretty consistently for us is GVHD. So I know you shared some promising data earlier this year. Just wondering what the next steps are for following up with those patients in that program, in particular, I know you haven't officially declared it as a next candidate, just one that you may consider. Thanks, again.

Sure. It's a very attractive opportunity. The data that our colleagues at Duke were able to present and publish, I think is very compelling data. It's a segment there's -- so continues to be important medical need and where fostamatinib may have a very good benefit. It takes a -- we're in the middle of evaluating that opportunity, but alongside other opportunities for olutasidenib, for example and weighing one against the others as well. So we'll have to make some decisions, and not of course, do everything. But GVHD is a very attractive one. And like I said, later this year, we'll come back to you and discuss how we're going forward with GVHD or other areas.

Thank you. Our next question is from Joe Pantginis with H.C. Wainwright. Please proceed with your question.

Hey, guys. Good afternoon. Thanks for all the details today. So first, Raul, I'm just wondering if you could share maybe the maturity levels of your discussions to potentially in-license?

Yes, I really cannot actually because I've learned I've been in business development for a long, long time. And until the contract is signed, the contracts not signed, all sorts of things happen. But needless to say, importantly, that we're looking for heme/onc opportunities in late stage either with data or at registration, or just launched as opportunities that we are very interested in, we're particularly interested in opportunities that are a good fit with the [indiscernible] physicians we call on. But if they're in a slightly adjacent area, say transplant, that actually may be a good opportunity as well. So we're looking at those types of opportunities a lot like with RE

No, absolutely. No, totally fair enough. Thank you. And then, look, I think the chart regarding the breakout in TAVALISSE population by quarter is extremely valuable. So I think, obviously, your goal is to continue to expand the population into earlier lines. Right now it appears on the chart that you're little over 30% in the second line population. So I guess, what would you define as your key inflection steps to be able to grow those percentage numbers?

I will ask Dave to comment on that, but let me before he does that, let me say we're delighted with the progress we've made here. Recall, quite a while ago when we launched this product, we were predominantly used in that later line, fourth plus. And now you see the evolution, it's really satisfying to see the range of patients that could benefit from TAVALISSE and hopefully they benefit profoundly.

Yes. So, Joe, let me just make sure I understand your question. So 75% of the post-steroid market is in second and third line. We've got approximately 70% based on our -- these are internal numbers of patients that we know of, and we have their backgrounds and we know what line of therapy they're on. So it represents a subset, but we've got about 70% or up to 75% of patients in second and third line. I think what you're saying is, the second line is relatively smaller than the third line, and are we going to be able to reverse that? And I think the answer is, yes, we think over time, that we'll continue to get more second line use, as you know that is much more challenging because clinicians have been very used to using [indiscernible] in that space for a long time. And I think, frankly, that the fact that a third of our patients that we are monitoring here are on TAVALISSE in the second line setting shows that we are making progress. I think that the key is -- for us is to get usage, where we can get it, meet clinician where they are with their patient. And when they see these results, they tend to move it up. And that's what our most loyal TAVALISSE prescribers tell us that, he really liked the drug. It's kind of you give the patient the dose they take it, their platelets go up over time, and they're very happy to move it up. And they see post-steroid patients as a great opportunity for TAVALISSE. And that's how we've gotten where we are. I mean, it's -- we do have a great team out there that's committed to talking about TAVALISSE each and every day. And I think once you saw that things had opened up post-COVID, our promotional efforts have been successful at getting more patients earlier in their treatment continuum. So I don't have a specific number we're trying to get to. We're not trying to necessarily get to that same proportion that 11,400 patients in the second line would represent. But yes, we're trying to grow our second line use, but we're also trying to make sure both second and third line are the predominant part of our business.

That's very helpful. And luckily we're not testing my short-term memory now. So that's good. But if I'm thinking long-term, Dave, if I heard you correctly, I mean, even going back a couple of years ago, I think you've now translated your initial wish list to actual data supporting what you wanted to do, being able to have patients get used to the drug, coming out of COVID had to be used to the drugs, seeing the refill rates based on the platelet data and what have you. So these are real data to look at versus the original wish list you had. So I appreciate it.

Absolutely. We're happy to see these results and provide them to you.

Thanks guys.

Thanks, Joe.

Thank you. Our next question is from Eun Yang with Jefferies. Please proceed with your question.

Thank you. So you showed us a number of [indiscernible] of TAVALISSE shipped to or sold per quarter. But can you actually talk about how many patients were on TAVALISSE at the end of the quarter? And then also based on the TAVALISSE patients by line of therapy, for second line, it's a little over 30% of TAVALISSE use. So based on the number of eligible patients, is it fair to assume that currently you have about mid-single-digit percentage penetration in second line -- about -- and about 15% in third line? Thank you.

I'm not sure I'm quite following your math there, Eun, but I will say that first of all, from a new patient perspective, we have more new patients last year -- clearly more new patients last year than we've ever had in the history of the brand and we're continuing that trend this year. So we don't share specific patient numbers. But we're very happy with our progress, our consistent progress in having new patients on the brand. And yes, I mean, this is our book of business. Our best estimate based on the patients we do capture, what their line of therapy is, but to project this over the entire market is, it's not something I would necessarily do right now. This is our own internal data that we're sharing. And we're very happy with the trend as opposed to necessarily the specific percentages there. But the trend is clear and that's why we wanted to share it with you.

And it's been over several quarters, which is why we didn't show it earlier. We wanted to make sure it was somewhat consistent and you see that it begins to approach that. And [indiscernible] some caveats, this is a subset of patients that go through R1 [ph], our hub. And so it's not all patients out there, we can't capture all patients out there. But the trend, I think, is clear, hopefully, continue to grow though and opportunity in further growth in the second line.

Thank you.

Thank you, Eun.

Thank you. Our next question is from Allison Bratzel with Piper Sandler. Please proceed with your question.

Thank you. Thanks for all the detail on today's call, and thanks for taking my question. Maybe first one on the pipeline just for R289 and lower-risk MDS and that initial readout slated for this year. Just considering that update should include the first few dose cohorts, could you kind of frame what you would view as a successful read out there. And then just second, following up on a prior question and prior discussion about cash burn and breakeven point, could you help us maybe understand what's gating to providing revenue guidance, at least on the TAVALISSE front now that it's in your [indiscernible] launch? How should we be thinking about that, the potential for that heading into next year and going forward? Thanks.

Okay. I will ask Dean to answer the second, let me try to answer the first one. So the low-risk MDS Phase 1b Study is ongoing and we've dosed -- completed enrollment of the required number and dose Cohort 1 and Cohort 2. And these two lower dose cohorts are still we think might be too low in terms of seeing any remarkable responses in terms of efficacy. They're primarily safety doses, there's some chance we'll see some benefit in some of the -- some of hematologic improvements. But more likely we want to see safety out of these first two cohorts. And so far, so good. And we're going to discuss with FDA to allow us to go into Cohort 3 and Cohort 4, where we think we're more likely to see some efficacious signals -- efficacy signals, and hopefully continued safety. So I think we hope to share this information at a meeting on the lower cohorts, since we've already had them enrolled in and we'll have further data on those by the end of the year. The other cohorts if we can get to enrolling those, you do need to wait a number of months, maybe up to 6 months for showing some efficacy signals in the higher dose groups. So that might not be and certainly not this year, and I think it'll be more likely next year in terms of the timing of that. Dean on in terms of guidance.

Sure. In terms of guidance, we've -- it's important to note that as we look at our top line, we've got TAVALISSE which to your point is growing consistently in a quarter-over-quarter consistent growth pattern. So we agree with you there that there's a potential to provide guidance with respect to that, that singular number. With respect to the rest of the top lines, we look at AML, still early in the launch phase, and we've talked about a lot of activities that are going to create momentum in that phase. We've got the royalty revenues, and then we've got the collaboration revenue. The collaboration, revenues, they can be periodic. Certainly over time, we've highlighted some of the large payments that we expect. But all of those elements, all factor into that top line guidance. And we don't plan to at least in the near-term provide a top line until we really see some of that specificity and clarity as it relates to RE

Great. Thank you.

Thank you, Allison.

Thank you. Our next question is from Kalpit Patel with B. Riley Securities. Please proceed with your question.

Yes. Hey, good afternoon. Thanks for taking the question. One more on R289. I know you just mentioned that the focus there is just on safety for the first two cohorts. But would you plan on showing any sort of biomarker data. Hemoglobin tends to increase early on with some of these competing agents. It just might be useful to see any sort of evidence of preliminary clinical activity, even if there's a trend.

Yes. It's just too early, we haven't actually analyzed all the data yet. And so we do want to share the information on the first two cohorts. So I can't make a comment because I don't know what we'll see there. But we certainly will share some of that as we get it. But like I said, I think really we'll just need to wait till next year to see Cohort 3, Cohort 4 data that, that'll be more compelling data.

Okay. And then for your plan to potentially in-license additional heme/onc assets, could you give us a little more color on how you might be thinking about financing or structuring such transactions, given your current balance sheet.

Yes. There's a number of options on the table for doing so. And so we're looking at a range of different possibilities for that. The important thing is that this be a late stage opportunity that is not requiring any substantive clinical type of investment. And so therefore, it's a quick tightening to get to an approval, and therefore to the market. And because we hope that this [indiscernible] going to expect that this product be highly synergistic that is fully leveraging our current commercial capability that is not required to build more, or any of substance, that it'll be accretive very quickly after launch. So those are important aspects to the product, but many products in heme/onc tends to be a multi niche category where there are many products in smaller category like a 1,000 patients like with RE

Okay, got it. And one last question on RE

We certainly have royalty payments that we will do make, and happy to make them. But I don't think there's anything of substance and certainly we'll look at it, but I don't recall anything of substance in the near-term.

Okay, thank you.

Great.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Mr. Raul Rodriguez for closing comments.

Thank you, operator for your help today. In closing, I'd like to thank everyone for joining us on the call and your continued interest in Rigel and what we're doing. But I'd also like to take a moment to thank our employees for their continued commitment to improving the lives of patients, some with diseases as awful as AML because everyday does count and they certainly keep that in their minds as they work very diligently and moving these products and projects forward. So thank you for that. I look forward to keeping you updating on future calls. Have a good afternoon or evening.