With Much Riding On Fostamatinib, Rigel Awaits The Phase III Results

Dependent on revenues from AstraZeneca-partnered fostamatinib to fund its growth, Rigel has built a diverse and innovative portfolio. But disappointing results from a Phase IIb dose-ranging trial of fostamatinib – three other pivotal trials will report out soon – could signal trouble for the biopharma. Rigel execs Jim Gower and Raul Rodriguez share perspectives on the AstraZeneca deal and fostamatinib’s prospects.

Disappointing results from a Phase IIb trial of fostamatinib, the oral SYK (spleen tyrosine kinase) inhibitor in development for rheumatoid arthritis came as nail-biting news for its originator Rigel Pharmaceuticals Inc. Failure of the drug, or lackluster pivotal results, would not only put its royalties at risk and its pipeline plans on hold, but could also cast a cloud over its other assets sharing the SYK mechanism.

Rigel’s partner AstraZeneca PLC announced on Dec.13 that fostamatinib given as monotherapy met its first primary endpoint of superiority to placebo in OSKIRA-4; but failed its second primary endpoint of non-inferiority against Humira (adalimumab) at 24 weeks based on the DAS28 score (a composite endpoint assessing signs and symptoms of RA).

For Rigel, which over the past decade has created a diverse, high-science portfolio that the company has begun to monetize through canny deal-making, the news underscored a challenge facing even the most experienced and forward-looking biopharmas (Also see "Rigel R&D Strategy Emphasizes Early Pipeline, Led By Asthma Drug" - Pink Sheet, 1 Nov, 2011.). The road to riches runs through a prosaic necessity: find a big, deep-pocketed partner for the first compound, and milk it to fund future growth [See Deal].

Some analysts discounted the OSKIRA-4 results, noting the unprecedentedly high performance of adalimumab (59% ACR20; ACR20 is a measure of how many patients achieved 20% improvement in tender or swollen joint counts as well as 20% improvement in other criteria). Marko Kozul, biotech analyst at Leerink Swann, said that the highest ACR20 adalimumab rate his team found across comparable populations was 39% t0 48%. “Our medical statistician’s best guess,” said Kozul, “based on multiple comparisons across similar small-arm (55 patients/arm) trials, was that there was probably a type 1 error – possibly a randomization error or some other chance issue – that had an overly large impact on the final statistical analysis.”

The OSKIRA Phase III program will report out in the first half of 2013 the top line results of three pivotal trials testing fostamatinib in patients who respond inadequately to a DMARD (disease modifying anti-rheumatic drug) or a TNF inhibitor (tumor necrosis factor), the dominant therapeutic class in RA. These three trials are expected to form the basis of regulatory filings in the U.S. and EU in the second half of 2013. Should these trials show efficacy against poor-responders to anti-TNFs, the drug could still carve out a respectable share of the $16 billion global RA market.

And if fostamatinib, which not only mitigates the inflammatory process, but also has a direct effect on RANKL signaling and osteoclast inhibition, demonstrates an upside surprise of faster or even more profound remission of structural damage – a claim that Pfizer Inc.plans to make for its RA drug Xeljanz (tofacitinib), albeit about six months behind AZ and Rigel – then Rigel and its partner could have a game changer on their hands. The soon-to-report OSKIRA-1 Phase III trial has a co-primary endpoint of improving bone erosion according to X-ray measurement.

Rigel’s stock has pretty much held steady through the OSKIRA-4 news. As analysts await OSKIRA Phase III results, “The Pink Sheet” spoke with Rigel’s CEO Jim Gower and President and Chief Operating Officer Raul Rodriguez to get perspective on the deal-making calculations behind the partnership with AZ and the implications of fostamatinib’s Phase III results for Rigel’s future growth.

CEO Jim Gower

Rigel Pharmaceuticals, Inc.

President and COO Raul Rodriguez

Rigel Pharmaceuticals, Inc.

Gower was a senior VP at Genentech Inc. from 1981-1991, and was CEO of Tularik (acquired by Amgen Inc. in 2004) from 1992-1996 (Also see "Amgen Paying $1.3 Bil. For Tularik; Deal Brings Two Late-Stage Oncologics" - Pink Sheet, 5 Apr, 2004.). He joined Rigel’s board in 1997, and began as CEO in 2001. Rodriguez joined Rigel in 2000, rising through a series of senior positions in business development. He had previously held executive positions at Ontogeny, Inc. and Scios, Inc.

“The Pink Sheet”: How do you see fostamatinib stacking up next to Pfizer’s Xeljanz?

Jim Gower: The studies thus far have been quite similar in terms of the global aspects of efficacy. There are slight differences in the side effect profile, but they don’t look particularly different. Blood pressure for us, lipids for them – they end up being cardiovascular endpoints. The same thing as far as FDA is concerned: you’re looking at cardiac event rates and cardiac mortality.

“The Pink Sheet”: And where do you think the opportunity lies for fostamatinib?

Jim Gower: In the U.S. and EU we typically cycle people through two sometimes three injectable TNF inhibitors. You don’t do that if you have a choice. What makes more sense, if only 40% of patients that started on anti-TNFs are maintained on the same one they started on, it makes more sense to cycle through the first novel mechanism drugs we’ve had in quite a while.

It’s not the fact that they’re oral that drives that decision, it’s the different mechanism. If we work on the B cell side, and [Xeljanz, a JAK3 inhibitor] works on the T cell side, different patients respond differently. But we won’t know about that until fostamatinib is on the market. The important thing is that there’s room for more than one different mechanism.

Raul Rodriguez: The real opportunity is not us versus the Pfizer molecule. It’s us versus all the anti-TNFs. That’s where the majority of patients are.

“The Pink Sheet”: Are there any significant differentiators, as regards efficacy, that may emerge in the remaining OSKIRA Phase III trials? Were there any signals that you saw in Phase II?

Jim Gower: We know that SYK has a differential role in osteoclast activation. So we not only block the cytokines that drive inflammation and start the bone damage, but SYK also blocks the activity of osteoclasts, and thereby also prevents bone destruction.

We’ve already shown this mechanistically. We now need to show in the clinic that it means something, that you can get a quicker time to remission, or more profound remission in the same period of time.

Raul Rodriguez: We have evidence of this from the Phase II trial. It was a major reason AZ was attracted to the opportunity, and a major reason they frankly upped the size of the clinical trial in order to make sure we were able to nail down this bone benefit.

“The Pink Sheet”: I notice that you did not come away with territorial rights for fostamatinib in your deal with AZ. Was that because you felt it was too big an ask?

Jim Gower: We didn’t put it in there because we didn’t really care. I’ve done a few co-promotes, and there’s not much in them. Back when investors didn’t know any better, you’d think it actually meant you were marketing, and it sounded okay. With AZ, the trials are phenomenally expensive. They are putting hundreds of millions of dollars at risk over a very short time. They do have a global structure already in place. In return, we get JV type returns, though they’re expressed in the form of royalties. And we don’t have any costs beyond taking it through Phase IIb. So we can focus on our pipeline and keep some programs for ourselves.

“The Pink Sheet”: So you basically swapped territory for better deal economics?

Raul Rodriguez: We actually asked for a co-promote in the U.S. We discussed it and it was a negotiation piece for us. But for us, what’s important is the economics of the partnership. As Jim points out, usually when you ask for territorial rights, say in the U.S., you have to co-fund the development of the product in a substantial way. Eli Lilly & Co. and Incyte Corp. have a deal for a JAK inhibitor against RA where Incyte has some co-promotion rights in the U.S. However, they have to pay about a third of the development expenses for that product. In a therapeutic area like RA, that could end up being over $150 million in terms of Incyte’s commitment to the product (Also see "With Lilly JAK Tie-up, Incyte Aims To Chase Pfizer In Rheumatoid Arthritis" - Pink Sheet, 21 Dec, 2009.).

“The Pink Sheet”: What sort of post-launch payout did Rigel negotiate for fostamatinib?

Raul Rodriguez: Incyte receives a profit-share arrangement in the U.S. We have equally attractive economics in the U.S., and it’s a healthy percentage ex-U.S. In addition, we don’t have to pay anything in terms of development of the product. AZ basically said, “If you get out of our way, we’ll give you the economics you want.” I wouldn’t trade my deal for Incyte’s deal. They get to market the product, but why would you necessarily want to do that?

“The Pink Sheet”: There’s been a lot of flux at AZ – senior management changes, plant closures, R&D cuts (Also see "AstraZeneca’s Executive Shakeup Includes Global Strategist To Be Named Later" - Pink Sheet, 15 Jan, 2013.). Were you able to negotiate language in the fostamatinib agreement guaranteeing that AZ will not back-burner or otherwise disadvantage the drug?

Raul Rodriguez: It’s something I worry about, but it’s a very difficult thing to get into a contract. Now, if the product is small and not successful, and they want to focus on other things, they’re going to do that. But economically, it’s not useful to force them to do it. They’ll find a way around it, maybe put it in third-position detail or have an inferior sales force call for it. And if it’s a big success, then it doesn’t matter. It’s almost impossible to get pharma to agree to these provisions, and you’d have to give something up to get it.

“The Pink Sheet”: The Phase IIb OSKIRA-4 trial turned in mixed results. If the pivotal trials OSKIRA-1, 2, and 3 likewise post lackluster results, not only will your royalty revenues from fostamatinib not materialize, but it may make it harder to partner R343, your Phase II inhaled SYK inhibitor against allergic asthma. Do you agree (Also see "R&D Shuffle Pushes Pfizer To Return Asthma Drug To Rigel Pharmaceuticals" - Pink Sheet, 6 May, 2011.)?

Raul Rodriguez: I disagree. They are different indications and different molecules. We’ll find out if SYK in the lung will work or not by around August. But it won’t have any bearing on fostamatinib. R343 has no systemic exposure. We’re giving patients 2 mg in the lung. It’s a much lower level of exposure.

The Pink Sheet”: SYK inhibition is a novel mechanism. Do you think some potential partners for R343 might be watching fostamatinib and not making a move until the full Phase III data are in?

Raul Rodriguez: We have deferred conversations with people on R343 already, pharma partners, because we want to have its Phase II results in hand first.

Jim Gower: In terms of performance, R343 is competitive with the steroids. We think we can achieve FEV1 [forced expiratory volume in one second, a measure of volume exhaled from the lungs] of 10% to 15%, same as the steroids. Merck’s Singulair, a leukotriene inhibitor, is about 8% FEV1. But compliance with the steroids is a nightmare. So, potentially, ‘343 is a little less challenging as a regimen to keep patients on the drug to maintain suppression of inflammation, which is what’s causing the basic problem. We’ll partner that one and probably structure the deal much like the RA drug because the cost elements are similar. Unless, of course, we find a subset of responder patients that we can identify using biomarkers, then we’ll further define that and maybe not partner.

The Pink Sheet”: Looking out over the next three years, where do you see Rigel?

Jim Gower: We finished 2012 with about $300 million in cash. And we’re eligible for anywhere between $100 million to $200 million in milestones. But we’ve got enough to get our other programs at least through proof of concept, if not further, with the cash on hand. We own everything after fostamatinib. That’s fairly luxurious for a biotech; it’s kind of nice when you’ve got your fate in your own hands. Now, if we get results out of fostamatinib then that will sustain a royalty stream allowing us to do even more than the five programs we’ve got in the clinic now.

Raul Rodriguez: It’s a matter of how successful fostamatinib is going to be. I think it will generate the kind of revenue that we’re counting on. The downside [would be] that it’s not as big a product as we hope, maybe generating $50 million to $100 million. But even if it’s a small product, I think it doesn’t stop what we’re doing as a company. It simply delays it.