Disappointments, New Prospects for Rigel Pharmaceuticals
When Rigel Pharmaceuticals of South San Francisco took the stage at the annual JP Morgan Healthcare conference in January, the 16-year-old biotechnology company hoped to soon introduce its first two approved drugs—both of them designed to treat major health problems.
At the time, London-based AstraZeneca was funding late-stage trials on Rigel’s drug candidate for rheumatoid arthritis, and Rigel’s second leading compound was in mid-stage trials for another common disorder, allergic asthma.
But Rigel’s vision of near-term success evaporated over the summer, when both the company’s frontrunners fell short of expectations. Rigel (NASDAQ: RIGL) recently said it is cutting 18 percent of its staff and refocusing on three back-burner projects for less common conditions, and its shares have lost about half their value since the beginning of the year. The company, founded in 1996, is back in the earlier stages of clinical development again.
The lasting benefit of Rigel’s season of high hopes, however, is a cash trove that amounted to $251 million at the end of June, bolstered by equity financings completed before the disappointing news from clinical trials started to land. That cash cushion gives Rigel time to test its stable of experimental drugs against three less common autoimmune disorders, in smaller, less expensive trials that it can fund independently, says chief operating officer Raul Rodriguez.
“We’re in a good financial position to decide where to go,” Rodriguez says. The company estimates that its war chest will cover operations into 2016, when it might file for FDA approval for one or possibly two new drugs if all goes well, Rodriguez says.
Any eventual profits from these drugs for smaller populations, however, will be shared by a greater number of investors. Rigel added more than 31 million new shares in 2011 and 2012 as it raised its cash reserve.
Going forward, Rigel will continue to focus on compounds that inhibit cell proteins called SYK (spleen tyrosine kinase) and JAK (janus kinases), which are implicated in inflammation and in destructive autoimmune processes in which the body attacks its own cells.
Both targets are being actively pursued by other biotechnology companies and pharmaceutical giants. In late 2012, Pfizer launched its JAK inhibitor tofacitinib (Xeljanz) in the United States as a treatment for moderate to severe rheumatoid arthritis. Rigel’s neighbor in South San Francisco, Portola Pharmaceuticals (NASDAQ: PTLA), has teamed up with Weston, MA-based Biogen Idec to test an SYK inhibitor, PRT2607, as a drug candidate in inflammatory disorders including allergic asthma. Portola also filed for FDA clearance this year to begin clinical trials for its dual SYK/JAK inhibitor, PRT2070, in hematologic cancers.
Rigel’s SYK inhibitor, fostamatinib, had shown modest benefit in rheumatoid arthritis. But after spending millions on two Phase 3 trials, AstraZeneca decided in June to drop the project and return fostamatinib to Rigel. Rigel announced Sept. 5 that it would not pursue approval of fostamatinib in rheumatoid arthritis on its own. That announcement, and the news on August 26 that Rigel’s drug candidate for allergic asthma, R343, failed to meet goals set in a mid-stage trial, led to the company’s latest stock plunge. Rigel, whose shares sold above $90 in 2001, is now trading at around $3.50.
Rigel now has the task of building confidence in the change of focus it unveiled. Company officials decided against further efforts in rheumatoid arthritis because fostamatinib could not match the efficacy of AbbVie’s Humira, Rodriguez says.
“The product worked, just not well enough,” Rodriguez says. Further trials in rheumatoid arthritis would have cost more than $50 million and required as many as 400 participants, he says.
Instead, Rigel is planning a Phase 3 trial of fostamatinib in immune thrombocytopenic purpura (ITP), an autoimmune disorder that depletes the number of blood platelets needed for healing and blood clotting. In 2008, the company had reported encouraging data from a Phase 2 trial in ITP, but had set the project aside while awaiting results in rheumatoid arthritis. The Phase 3 trial in ITP that Rigel is now preparing for would cost about $25 million, and could yield results by mid-2015, Rodriguez estimates.
Rodriguez sees a market opportunity in ITP of $300 to $400 million for Rigel—about the current revenue range for two ITP treatments already approved, GlaxoSmithKline’s Promacta and Amgen’s Nplate. These drugs boost the production of platelets, while Rigel’s fostamatinib interferes with immune cells that destroy existing platelets, Rodriguez says. About half of the estimated 100,000 US patients with ITP don’t benefit from currently available treatments, he says.
Investors will soon see data on one of the two other lead programs Rigel has identified. The company’s compound R333, an SYK/JAK inhibitor, is being tested against discoid lupus erythematosus, a disfiguring skin disorder that afflicts about 300,000 people in the United States. Rodriguez doesn’t see any currently available treatment setting a high bar for R333 in this indication.
“Even if it works OK, it would be a big advance,” he says. Results of a Phase 2 trial could come out as soon as next month.
The third compound in Rigel’s newly prioritized program is R348, a topical preparation for dry eye, a chronic eye inflammation that affects about 5 million US patients. Allergan’s preparation of cyclosporine for the eye, Restasis, already serves this population, but Rodriguez sees it as vulnerable to a superior competitor. Rigel expects Phase 2 results for R348, another SYK/JAK inhibitor, in the second half of 2014.
If both the dry eye and the lupus trial results look good, Rigel expects to have the resources to advance only one into Phase 3 studies, unless it can partner up on a second drug, Rodriguez says. Each of those late-stage trials would cost about $20 million. Meanwhile, the company is eliminating 30 positions, leaving a staff of about 130.
For the time being, Rigel has let go its visions of a blockbuster first drug. Success in any of its three main programs would yield revenues of under a billion dollars.
But “For a Rigel-size company, that’s actually quite attractive,” Rodriguez says.