Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) Q1 2023 Earnings Call Transcript

Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) Q1 2023 Earnings Call Transcript May 2, 2023

Operator: Greetings, and welcome to the Rigel Pharmaceuticals Financial Conference Call for the First 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. 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.

Ray Furey: Hello. Welcome to our first quarter and 2023 financial results and business update conference call. The financial press release for the first 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 the 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 Q1 quarterly 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?

Raul Rodriguez: 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 5, we are pleased with our strong start to 2023 based on our first quarter, which was marked by significant progress on our commercial business. This positions us well for continued growth in the remainder of 2023 and beyond. Our first approved product, TAVALISSE and ITP had the highest number of bottles ships to patients in clinics in a quarter since launch in a meaningful quarter-over-quarter sales growth. Despite the typical Q1’s challenges such as those associated with reimbursement, we were able to provide continued momentum for TAVALISSE, which we believe is a testament to our commercial team’s commitment to patients with ITP.

We are also pleased to see the continued expansion of TAVALISSE in patients worldwide, most recently, with the launch of TAVALISSE in Japan by our partner Kissei, congratulations to them. In addition to TAVALISSE, we are executing on our key launched initiatives for REZLIDHIA in relapsed or refractory AML. Our commercial team has been driving awareness with key physicians groups, and will continue to do so, with a particular focus on AML specialists at key academic institutions. Beyond our commercial focus, we’re looking to expand our hematology-oncology business, further through our own internal development-stage programs, as well as in-licensing opportunities, similar to our approach with REZLIDHIA. I will provide further updates on the – in recent progress on our strategy in these efforts later on in this presentation.

With that, I’ll turn the call over to Dave for an overview of the quarter. Dave?

Dave Santos: Thank you, Raul. Now I’d like to take a few minutes to discuss our early progress with REZLIDHIA in the first three months of launch and then transition to our continued growth of TAVALISSE during our record Q1. On Slide 7, you will see our FDA-approved indication for REZLIDHIA, which is for adult patients with relapsed refractory acute myeloid leukemia with a susceptible IDH1 mutation as detected by an FDA-approved test. Moving to Slide 8, I would like to briefly review our view of the currently eligible patient population for REZLIDHIA. The American Cancer Society estimates that more than 20,000 patients will be diagnosed with AML in 2023. And of those patients, our research showed that whether patients are treated with intensive therapy or not most are refractory to treatment or relapse within two years.

Specifically, with 6% to 9% of patients having the IDH1 mutation, we believe we have a near-term opportunity to impact the lives of around 1,000 new mutant IDH1 patients in the relapsed refractory setting each year. Slide 9, depicts our first three months of progress on our journey towards that near-term opportunity to bring REZLIDHIA to those 1,000 mutant IDH1 relapsed/refractory AML patients. We shipped a total of 111 bottles of REZLIDHIA to patients in clinic since late December with 109 of those bottles shipped in Q1. This represents new and refill bottles to an estimated 32 patients, across 29 unique accounts or prescribers. Considering approximately a quarter of those 1,000 mutant IDH1, relapsed refractory patients were available in Q1, we Believe REZLIDHIA was used in more than 10% of our target patient population last quarter.

During the first quarter, we sold an additional 113 bottles to our distribution network, resulting in Q1 2023 net sales of $1.5 million. Since our product became available on December 22nd, we have sold 177 of bottles of REZLIDHIA resulting in $2.3 million in launch to-date net product sales. Moving to Slide 10, our team has continued to make excellent progress on our three priorities of driving awareness, maximizing access, and optimizing REZLIDHIA experience across both academic and leukemia, and community leukemia treaters. First, on the left, we continue to drive awareness among the more than 1,000 leukemia treaters by strengthening our medical evidence, broadening our KOL support and refining our materials in messaging. The medical evidence with REZLIDHIA is strongly supported by both the NCCN guidelines recommendation in relapsed refractory disease with an IDH1 mutation, as well as the recent publication of our phase two pivotal data in blood advances.

Our KOL support has also been broadening through different scientific forums where leukemia treatments are discussed and physician awareness and appreciation of REZLIDHIA’s clinical data will further be supported with last month’s launch of our Speakers Bureau. We have already planned several promotional speaker programs for Q2 and beyond. And importantly, along with this medical evidence and KOL support, our marketing materials and messaging continue to be refined. In fact, we’ve just launched our Transform Your Expectations campaign to HCPs and our sales force has already been trained to appropriately differentiate our product, through the delivery of our compelling, efficacy and safety messages in every interaction with their customers.

So we now have a full suite of materials and resources to deliver the message, identify appropriate patients, and support physicians and patients as they begin REZLIDHIA. In maximizing access for clinicians and patients, we made great progress in Q1. Our RIGEL ONECARE Hub processes patient enrollments as quickly as possible to ensure our limited pharmacy network can provide timely shipments for patients. We have confirmed published coverage for over 90% of Medicare lives and coverage parity to other relapsed/refractory targeted agents in the majority of National Commercial payer accounts. We continue to deliver our access messages to clinicians, and particularly encourage them to enroll their patients in RIGEL ONECARE to maximize responsiveness for both patients and clinicians who want to try REZLIDHIA.

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And lastly, on the right, we have made solid progress in optimizing REZLIDHIA experience across both academic and community leukemia treaters. Through q1, 3/4 of REZLIDHIA bottles were ordered through our direct channel by 21 unique accounts that are mostly academic institutions. More than half our bottles were direct shipments to academic institutions and 22% were shipped to community accounts. Overall about two-thirds of our REZLIDHIA business so far is in the academic setting and community usage makes up the other third. This is a solid start on our journey of optimizing experience across the community treaters, in both the academic and community settings. And we will continue to focus on driving awareness in both segments of our business to continue to expand the number of prescribers and ordering accounts.

Moving to slide 11. After our experience during the first full quarter of launch, we believe now, more than ever that REZLIDHIA has the potential to address many key patient and HCP needs in relapsed/refractory AML. It is a promising new treatment, targeting mutant IDH1 that has shown impressive durable responses in patients who have failed previous therapies. And as more clinicians review the demographics of our relapsed/refractory patient population in our pivotal cohort and put that together with the compelling efficacy of overall response in nearly half of patients, duration of CRCRH of 25.9 months and an estimated 18 months survival rate for CRCRH of 78%. They increasingly see the value of an agent like REZLIDHIA in their treatment armamentarium.

Combining that efficacy, with a well-characterized safety profile without the requirement for cardiac monitoring, it becomes even more compelling to adopt REZLIDHIA in their mutant IDH1 relapsed/refractory AML patients. Overall, we continue to see exciting potential to become a market-leading treatment in mutant IDH1, relapsed/refractory AML and are looking forward to continuing to execute the launch plan. My thanks to the entire team for all their efforts in Q1 with REZLIDHIA and I look forward to providing you additional updates as we move forward in our launch. Now onto growing sales of TAVALISSE, and ITP. I have a few brief comments on our continued momentum with TAVALISSE in Q1. On Slide 13, you will see our TAVALISSE FDA-approved indication, which is for adult patients with chronic immune thrombocytopenia or CITP, you’ve had an insufficient response to a previous treatment.

Moving to Slide 14, I’m very excited to announce that we achieved another new quarterly high in Q1 shipping 2,256 bottles to patients in clinics, representing 23% growth over Q1 of 2022. This continued, robust growth was again driven by strength in new patients starting TAVALISSE. Despite the typical headwinds during Q1, with coverage in reimbursement for all such specialty drugs, we are off to a solid start with TAVALISSE. Growing bottles shipped to patients in clinics another 3% over the record quarter we had in Q4 2022. For Q1, we achieved net sales of $22.3million, $6.1 million more than the same quarter last year, representing a 38% year-over-year increase. We are incredibly pleased with how we ended 2022 and are starting 2023 with continued strong year-over-year growth in ITP sales.

We will continue to focus on targeted clinicians to identify appropriate patients who can benefit from TAVALISSE to grow our new patient starts beyond the record levels we saw in 2022. I am grateful for the dedication and great collaborative work demonstrated every day across our entire team to continue our ITP growth with TAVALISSE, while successfully launching REZLIDHIA. Finally on Slide 15, an update of our global expansion of TAVALISSE. More recently, most recently, in April, our partner Kissei announced the launch of TAVALISSE for the treatment of chronic ITP in Japan. We remain committed to continuing to impact CITP patients around the globe with continued expansion of TAVALISSE’s commercial footprint through our partners. Thanks for your attention.

And I will now turn the call back over to Raul to provide a brief update on our development progress. Raul?

Raul Rodriguez: Thank you, Dave. I will briefly summarize our pipeline efforts. On to Slide 17, you can see – as you can see an overview of our ongoing programs, we are focused on growing our heme/onc business, starting with our internal development programs. Our ongoing Phase 1b Study of R289 in patients with lower risk MDS continues to progress well. And notably, we have finished – completed enrollment in the first dose group and are currently enrolling the second cohort. We also believe fostamatinib and olutasidenib have potential in other diseases beyond their approved indications. And we are currently evaluating several options. In addition, we are actively looking at new in-license opportunities to further bolster our heme/onc business.

I will touch more on these initiatives on the next slide. More opportunistically, our partner Eli Lilly is advancing R552, a RIPK1 inhibitor towards a phase 2a study in rheumatoid arthritis and we look forward to that study starting this quarter. Moving on to Slide 18. We are keenly focused on evaluating fostamatinib and olutasidenib in additional indications beyond their approved indications. As part of this process, we have – are engaged in several discussions with KOLs and with regulators across multiple indications, as well as conducting market research to help inform our plans going forward. We look forward to providing you additional updates on these initiatives later on in 2023. Regarding our business development efforts relating to in-licensing of new assets we are continually evaluating assets that are synergistic with our existing heme/onc business infrastructure, and that are complementary or adjacent to our already approved products.

We are focused on programs that are in late-stage clinical development in review for potential approval or in early stages of launch. We believe that our development capabilities and commercial infrastructure, we can grow our business with internal programs, as well as being the commercial partner of choice for in-license heme/onc opportunities. That concludes the development summary and I’ll turn the call over to Dean.

Dean Schorno: Thank you, Raul. I’m on Slide number 20. For the first quarter of 2023 we shipped 2,281 bottles of TAVALISSE to our specialty distributors resulting in $31.4 million of gross product sales. 2,256 bottles of TAVALISSE were shipped to patients at clinics, while 25 bottles increase the levels remaining in our distribution channels at the end of the quarter. For the first quarter of 2023, we shipped 113 bottles of REZLIDHIA to our specialty distributors resulting in $1.8 million of gross product sales, 109 bottles of REZLIDHIA were shipped to patients at clinics while four bottles increased the levels remaining in our distribution channels at the end of the quarter. We reported net product sales in TAVALISSE of $22.3 million in the first quarter of 2023, a 38% increase compared to the same period in 2022.

We reported net product sales from REZLIDHIA of $1.5 million in the first quarter of 2023. Our net product sales from TAVALISSE And REZLIDHIA for recorded net of estimated discounts chargebacks, rebates, returns, co-pay assistance and other allowances of $9.5 million. For the first quarter of 2023, our gross to net adjustment for TAVALISSE and REZLIDHIA was approximately 29% and 20% of gross product sales respectively. Before we move on from net product sales, let me review our expectations for the second quarter of 2023. We’re pleased with the strength of our business and expect to see continued growth in total net product sales as bottles shipped to patients and clinics continues to grow in ITP as we successfully continue our launch of REZLIDHIA.

Incrementally, we currently expect the gross to net adjustment in the second quarter of 2023 to be approximately 30% for TAVALISSE and approximately 20% to 22% for REZLIDHIA. As is typical with the newly launched product, our gross to net adjustment is dependent in part on our distribution channel mix. We will continue to provide updates as our launch phase progresses. On to the next slide, in addition to net product sales, our contract revenues from collaborations were $2.3 million in the first quarter of 2023. Contract revenues and collaborations consisted of $1.6 million in revenue from Grifols related to the delivery of drug supplies and $700,000 in royalty revenue. Moving on to cost and expenses, our cost of product sales was approximately $977,000 for the first quarter of 2023.

Our cost of product sales for the quarter were inclusive of a 15% royalty on our REZLIDHIA to net product sales and amortization of intangible assets. Total cost and expenses were $38.8 million, compared to $43 million in the same period for 2022. The decrease in cost and expenses was primarily due to decreased research and development costs related to the Phase 3 clinical trial fostamatinib for warm autoimmune, hemolytic anemias, the Phase 3 clinical trial of fostamatinib in high-risk hospitalized patients with COVID-19 and the IRAK1/4 inhibitor program. Lastly, we ended the quarter with cash, cash, equivalents and short-term Investments of $58.7 million. Incrementally in March of this year, we have accessed an additional $20 million term loan through our credit facility with MidCap Financial Trust.

With that, I’d like to turn the call back over to Raul. Raul?

Raul Rodriguez: Thank you, Dean. As we reviewed on this call, we had an exceptional first quarter and a very strong start to the year. We look forward to continuing to drive momentum in TAVALISSE sales in ITP both in the US and globally with our partners. While executing on the launch of REZLIDHIA in relapsed/refractory AML and identifying ex-US collaborators for this product, for the remainder of ‘23, we look forward to keeping you updated on R289 Phase 1b study and our evaluation of new potential opportunities for both fostamatinib and olutasidenib, as well as our partnered programs in our ongoing business development initiatives. So with that, thank you for your interest in our progress in the first quarter. And we will now open the call to your questions. Operator?

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Q&A Session

Operator: Our first question comes from the line of Eun Yang with Jefferies. Please proceed with your question.

Eun Yang : Thank you. So a question on the partnered program with Eli Lilly, with RIPK1 inhibitor. So, initially, I think you mentioned Lily was interested in psoriasis, but now they are going into rheumatoid – RA. So can you kind of comment on why the partner changed the indication there? And I understand that Lilly has the rights to CNS indications. Do you know when they might be going into CNS indications such as ALS or multiple sclerosis? Thank you,

Raul Rodriguez : Eun, thank you for your question. I can answer that. Lilly has always been interested in the broad applications of the RIP1 inhibitor program across immune indications including RA, psoriasis and others. So it’s never been a single focus of one indication program and always with the idea of going after more than one hopefully multiple areas. In psoriasis and RA, we’re always in that mix. I think their decision to go forward in RA makes a lot of sense. The opportunity is very good there. The need is great, especially as you know some setbacks with other mechanisms that have occurred. And so, I think, it’s a very exciting opportunity for them and they were clearly excited by it and are prioritizing RA. That’s not to say that they won’t pursue other indications in sequence, though.

It just hasn’t been revealed with FIB or fract when they might start those. But we’re looking forward to the RA trial starting. It’s a good robust trial. An area, like I said, a good medical need. And in addition, because these – there’s so many of these trials, it’s, you can compare cross trials to a degree and get a judgment on how the product might perform in other areas. So, we’re looking forward to their starting that trial very shortly. This is very important. And you’re absolutely right on the second question. CNS, Lily has rights to CNS program. We’ve delivered to them a basket of RIP kinase inhibitors that crossed the – barrier. And they’re deciding to move forward with one or multiple of those into various CNS indications. We’re not able to disclose what their priorities are in those areas, but we will in the future.

Eun Yang : Thank you. And I have just one more follow-up. So, in the first quarter, the cash you burn was like about, low-double-digit million dollars. So, how do you see your quarterly cash burn going forward? Probably question to Dean. Thank you.

Dean Schorno : Hi, Eun. So we ended the quarter with $58.7 million of cash and we noted in our last call that achieving cash flow breakeven was a priority for the business and that we’re comfortable with it. Our cash position at year end, as we just reported the results for Q1 are viewed in change as a result of those – of these results. So we continue to be pleased with our progress towards breakeven and we will continue to move in that direction.

Eun Yang : So, when do you aim to become breakeven?

Dean Schorno : We haven’t provided a top-line – top-line guidance which would enable us to crisply answer that question. On our last quarterly call, we kind of walked through some of the mechanics of our view of the growth in revenues, as well as the $160 million of operating expense and the reduction in operating expense from 2022. So we see a path towards breakeven. We haven’t been precise, again because of the lack of guidance that we’ve provided on the top-line.