Good afternoon and welcome to Rigel Pharmaceuticals Financial Conference Call for the First Quarter 2019. All participants are in listen only mode. We will be facilitating a question-and-answer session at the end of today's conference. [Operator Instructions] I would like to remind you that this call is being recorded for replay purposes from Rigel's website. [Operator Instructions] And now, I will turn this conference over to our first speaker Dolly Vance, who is Rigel's Executive Vice President, Corporate Affairs and General Counsel.

Welcome to our financial results and business update conference call. The financial press release for the first quarter of 2019 was issued a short while ago and can be viewed along with the accompanying slides for this presentation in the News & Events section of our Investor Relations page on our website at www.rigel.com. As a reminder, during today's call, we may make forward-looking statements regarding our financial outlook and our plans and timings 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 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 CEO, Raul Rodriguez.

Thank you, Dolly and thank you for joining us on our first quarter 2019 financial and business update call. Also joining me today on the call are Eldon Mayer, our Chief Commercial Officer; Anne-Marie Duliege, our Chief Medical Officer; and Dean Schorno, our Chief Financial Officer. Reviewing today's agenda on slide six, we will provide you with updates on a number of key Rigel objectives, including the progress we're making on the launch of TAVALISSE, clinical and regulatory advances we've made, and Dean will provide an overview of the financials before I conclude the call. Starting on slide eight, on today's call, we'd like to tell you about the large opportunities for TAVALISSE in our pipeline and how we're executing on this. In 2019 -- 2019 is the year of execution a number of key areas; growing the TAVALISSE in the U.S., enrolling our Phase 3 AIHA trial, working towards commercialization in next U.S. markets, and continuing our pipeline development. We are gaining strong traction with TAVALISSE and we are seeing very good uptick in the $1 billion plus U.S. ITP market. This is driven by the differentiated value proposition of TAVALISSE including its novel mechanism of action. Outside of the U.S., the opportunity is estimated at over $800 million and we have laid the groundwork to enter these markets. In early Q1, we announced a second ex-U.S. collaboration with Grifols for the EU territories and Turkey. Grifols and Kissei, our partner in Japan, are well-suited to make fostamatinib success in their territories. They have strong relationships with our key prescribers, a well-developed distribution infrastructure, and we'll make our product a priority in their portfolios. Importantly, these collaborations cover the two largest markets for ITP outside of the U.S. On AIHA, we've also made great progress. We have opened up…

Thank you, Raul. I'm pleased to provide you with an update today on the progress of the launch of TAVALISSE. We saw continued growth in the first quarter of 2019. The broad label value proposition pricing and safety profile of TAVALISSE is gaining adoption with a wide range of physicians and we believe TAVALISSE is changing how doctors treat ITP. After three, four quarters, TAVALISSE launch continues to go very well. We've executed on our strategy which has led to a solid performance in multiple key indicators. In the first quarter of 2019, net sales were $8.1 million, driven by a 13% increase in total bottles shipped from our 3PL to special distributors from the previous quarter. This is very encouraging given the variables that typically put pressure on sales of prescription products during the first quarter of the calendar year. Receptivity of TAVALISSE by the physician, payer, and patient communities has been promising. Patient refill rate or persistence rate remains more than 45% at four months. The prescriber base continues to grow as well as the repeat prescriber rate which has increased over 20% in Q1. This is an important metric in which we expect to see continued growth. Now, I'd like to walk you through a couple of real world examples of our physician's journey. These are physicians that are treating more than one of their patients with TAVALISSE and using it as an early line of therapy. Slide 12, shown here are three actual cases of patients under the same community Hem/Onc and a large group practice. On the far left of this slide, it shows how this physician typically treated ITP prior to TAVALISSE launch. And in the middle of the slide, we have three cases he treated over the course of time since the launch…

Thank you, Eldon. Turning to slide 17, we have now opened the initial site for our Phase 3 clinical trial in autoimmune hemolytic anemia screening for participants. The trial will enroll a total of 80 patients. Given that this is a rare disease and based on our experience with the Phase 3 trial in ITP, we plan to enlist over 90 trials sites so that we can complete enrollment over the next 12 months. Conversations and interactions with physicians and our CRL have been extremely positive and we expect the first patient to enroll this month. As I mentioned on our last call, we have received 120 deep questions from the European regulatory authorities. Thanks to the efforts of our entire team, we submitted our responses to the EMA in a timely manner and we're thorough in answering the question and providing any additional materials that were needed. During this process, we have been very fortunate to have a team with a wealth of experience that is making sure that we stay on our planned timeline. Regarding our collaboration, we're very happy with how our relationships with Grifols and Kissei are developing. Both companies are aligned with our vision of profitability long-term potential and the clinical development plan. Just recently we had the Grifols' team in our office for two days of meetings to educate them and provide our experiences. It really was great to spend time with them and see the excitement that they have in bringing fostamatinib to European markets and how well they are utilizing the lead-time to approval. Kissei is currently focused on getting to market in Japan and is in discussions with PMDA to determine the requirements for a bridging study. As Kissei define its path forward, we expect that it will provide information as it is appropriate. As we begin our Phase 3 trial in autoimmune hemolytic anemia, I wanted to quickly remind you of our trial protocol which we describe on slide 18. As I mentioned a minute ago, this will be an 80% trial consisting of two arms with 40 patients each. One arm will be receiving TAVALISSE and the other will get placebo. These patients must have a baseline hemoglobin count below 10 grams per deciliter. The primary endpoint will be a durable hemoglobin response by week 24 which is defined as hemoglobin count greater than 10 grams per deciliter and an increase of actually 2 gram per deciliter. Second, a response that cannot be attributable to rescue therapy and three, must meet the criteria for durability of response. The first patients would be enrolled in the near-term. So, assuming that a trial will take 12 months to enroll and the study itself will last about six months, we're on the path to report topline results in the first half of 2021. With that I will not turn the call over to Dean.

Thank you, Anne-Marie. Looking to slide 20, for the first quarter of 2019, 1,019 bottles were shipped to our specialty distributors, resulting in $9.9 million of gross product sales. 928 of those bottles were shipped to patients at clinics, while 91 of those bottles remained in our distribution channels at the end of the first quarter. As of March 31st, a total of 329 bottles remained in our distribution channels. We reported net product sales from TAVALISSE of $8.1 million which was recorded net of estimated discounts, chargeback, rebates, returns, copay assistance, and other allowances of $1.8 million our gross to net adjustment. This is 10% quarter-over-quarter increase in net product sales of TAVALISSE, reflects the continuing growth of our business since commercial launch in May 2018. Progressing on to the next slide. In addition to our net product sales, we recognize contract revenues from collaborations of $4.6 million from the $30 million upfront payment that we receive from Grifols in January of 2019. This represented approximately 90% of $5 million of the upfront payment and we would expect to recognize those contract revenues approximately 90% of the remaining $25 million of the upfront payment upon EMA approval. We would expect to recognize the deferred portion of these payments in 2020 and beyond. As a reminder, if after the second anniversary of the agreement, fostamatinib has not been approved by the EMA for the treatment of ITP in Europe, Grifols will have the option during a six-month timeframe to terminate the entire agreement which would terminate all of the rights ITP, autoimmune hemolytic anemia, and all other indications. In this limited circumstance, we will pay Grifols $25 million and regain all rights to fostamatinib in Europe and other Grifols' territories. Moving on to costs and expenses, our cost to product…

Thank you, Dean. And going onto slide 24, I'd like to take a few minutes to discuss our pipeline. We have extremely attractive opportunities in the near term with TAVALISSE in ITP and potentially AIHA. But a key driver of Rigel's incremental growth over the long term is our pipeline. What is often overlooked is the breadth and quality of our internally discovered pipeline. We have a valuable suite of assets consisting of six molecules currently in clinical trials. Two are being developed by Rigel which are fostamatinib and our IRAK inhibitor, RA35. And four are in trials with biopharmaceutical partners. ATI501, ATI502 is a JAK inhibitor partnered with Aclaris for autoimmune dermatological conditions. Bemcentinib is an AXL inhibitor partnered with BerGenBio for hematologic and solid tumors. DS3032 is an MDM2 inhibitor partnered with Daiichi Sankyo, also for hematologic and solid tumors. And ASN0449 is a second JAK inhibitor partnered with AstraZeneca for allergic asthma. These partnered assets are in mid clinical stage development and demonstrate the discovery capabilities and success we've had in finding novel molecules for the treatment of immune diseases and in hematology and oncology. We believe also that fostamatinib merits further clinical study given the important role that SYK signaling and its inhibition plays in immune-mediated diseases and in Hem/Onc conditions. Just as a reminder, we have a long window of opportunity with fostamatinib with expected exclusivity until at least 2031. The number of clinical opportunities in Rigel's and our partner demonstrate the robustness of our pipeline. These pipeline assets and future ones will create significant options for Rigel as we move forward. Now moving to slide 25, we began 2019 with a focused list of priorities for the year. The key to our success is execution and I'm happy to say that we've made, continue to execute well across the Board. Our commercial team is firing on all cylinders and is doing a great job of building awareness in use of TAVALISSE. The European Approval Process is progressing nicely and we are on track for a decision from EMA by the end of the year in ITP. And we are working closely with Grifols to ensure a smooth, potential commercial launch in Europe. We have opened up several sites for our Phase 3 AIHA trial and we are looking to announce the first patient enrolled later this month. And finally, our research and clinical teams are making great progress and we have potential near-term opportunities to move into clinical development. So, thank you for taking the time to listen today and we will now open up the call to your questions. Operator?

Thank you. [Operator Instructions] And our first question comes from the line of Kyung Yang with Jefferies. Your line is now open.

Thank you. Dean, I have a question for you. It seems like in the first quarter, the inventory level has increased compared to the end of last year. Can you talk about the reason for the increase? And also, with that, do you think there could be some inventory drawdown in the second quarter?

Hi, Kyung. Sure. So, the inventory level did increase by 91 bottles in Q1 as you described. We do expect to see variability in that number. So, as our business grows, we could see that number creep up. That said we don't have visibility into where that number ultimately will normalize. I wouldn't expect it to go down significantly, but we will see some variation in that number over time.

Okay. And then second question is on ITP market in general. As the [Indiscernible] mentioned it's about a $1 billion market in the U.S. alone. And when you look at PROMACTA sales, last year the sales grew like 30% year-over-year. And I know that PROMACTA has other indications, but I would assume most of the sales are coming from ITP. So, can you talk about what is driving such sales growth with PROMACTA?

This is Raul. How are you, Kyung? Eldon and I will tackle that one. PROMACTA has continued to increase. I think the primary driver of their growth is other indications, but even within ITP, we are seeing additional growth. And we think that's driven by more patients using the product. The product is maybe about 10 years old, so quite some ago that it was introduced. But surprisingly, it still continued to grow nicely. Nplate as you know as well, which has a more restricted indication only for ITP, also continues to grow. And so it's growing, what we saw, not just in price, but also in terms of volume. And so we believe that there is still potential in ITP as patients, even those have been on the market a while, continue to avail themselves of those products. So, good potential growth and I think the billion-dollar market in the U.S. is a very attractive market. Growth there overall, those two are the major products there. Rituxan is a player, but also obviously now we're making inroads.

Okay. Do you know what percent of PROMACTA sales are from ITP?

It's the vast majority, but I can get you the number more specifically, because we've purchased a couple of reports.

Okay. Then the last question is, you mentioned that your current cash is sufficient into the second half of 2020. But between now and then, what other kind of potential milestones are there that you can expect from your partners?

Dean and I can answer that. We're expecting a milestone at the end of this year, towards the end of this year, when we have EMA approval for ITP, fostamatinib ITP. And that will be a meaningful milestone. I think its $20 million. So that will be very useful. We're also -- our other partners as I mentioned on the call, we have four other partners working on a range of different products and indications so some of those also have some milestones. But a little bit more difficult to predict because those are a little bit more out of our control, as you would appreciate.

What would be the milestone payment upon Japanese approval?

I think the Japanese approval, as you know; the process for getting a Japanese approval will require a further clinical trial in Japan. And so our partner there, Kissei, is meeting with the PMDA as Anne-Marie mentioned. And they will highlight the timing on that. But it's a little bit further out than that and if there is a milestone there, it's a little bit smaller.

Okay, but then your cash guidance does not include that $20 million that you may expect by the end of this year from European approval, correct?

We do expect that within the window of time we're talking about, Kyung, we do expect that $20 million and we do expect it later this year upon EMA approval. So, it is included, yes.

Okay. Thank you very much.

Thank you, Kyung.

Thank you. And our next question comes from the line of Anupam Rama with JPMorgan. Your line is now open.

Hi, guys, this is Tessa filling in for Anupam tonight. Thank you for taking our questions and congratulations from us on all the progress. Curious on the most recent anecdotal feedback on the TAVALISSE profile that you have heard from the field, from physicians. What are you hearing specifically that's driving the momentum with respect to repeat prescribers? And then relatable, and maybe more generally, how has the overall rhetoric changed that you've heard about TAVALISSE differentiation since the launch a couple of quarters ago? And then my second question is just on gross to net. I think it was 18.8% this quarter. How should we be thinking about how this might trend in 2019? Thanks so much, guys.

Hi, this is Eldon. I would say, first of all I'd just like to remind that we have roughly 3/4 of data into the launch. So it is still very early and we continue to expand our reach in frequency and work on other educational efforts. So at this point, we're still raising awareness with the product and delivering the value proposition. I think the feedback that we have heard has not really changed. It's been pretty steady and I think it's been favorable overall on the value proposition that we have overall. I think we continue to hear positive feedback about the mechanism of action and that it's different than other therapies, particularly than the platelet growth factors that are out there, the TPOs. We continue to hear good feedback on the tolerability of the drug and doctors seem to be comfortable with that profile and the class of drug and how to manage that. I think that particularly as I mentioned, doctors are gradually moving it up in the lines of therapy. So, I think that's based on positive clinical response and good tolerability overall. So I would say overall, still early, but not a lot of change, just continued positive feedback overall on the product. And I'll have Dean comment on looking forward.

On that, the gross to net, the 18.1% we saw this quarter, we expect to see in Q2 through Q4, gross to net to remain in that 18%, 19% range.

Great. Thanks so much for taking our questions.

Thank you, Tessa.

Thank you. And our next question comes from the line of Ally Bratzel with Piper Jaffray. Your line is now open.

Hi, thanks for taking the questions. So first, just on the drivers of TAVALISSE continuation, just hoping you could generally talk about what you're seeing there, maybe help us understand what share of discontinuations are actually stemming from lack of response versus GI side effects versus maybe issues with access. And then also on the dose, I think the last time we got an update was at your R&D Day and you indicated about a quarter of patients were on the higher dose. Has that changed sort of directionally? Do you expect that to continue trending upward as the launch progresses? Thanks. [Technical Difficulty]

Participants, please stand by. And the speakers have joined.

Sorry about that, we had a little technical glitch. Ally, would you repeat your question? You were cut off in the middle of a sentence.

Okay, yes, thanks, guys. So, the first question was on TAVALISSE discontinuations, if you guys could just generally talk about what you're seeing there and help us understand what share of discontinuations are stemming from a lack of response versus GI side effects versus maybe issues with access. And then on the dose, I think the last update we got was at your R&D Day when you said about a quarter of your patients were on the higher dose. Has that changed sort of directionally? Do you expect that to continue turning upward as the launch progresses? Thanks.

Sure. Okay. Hi, this is Eldon again, so I'll take those questions and then my colleagues, feel free to jump in. First thing is, on the discontinuations, let me just again reiterate. What we're seeing right now is at four months we have in the mid to high 40s which we are pleased with that overall. And so keep in mind that as you may know, when we launched this product, most of the patients that we were getting were highly refractory. And those patients are, although we had a mix of patients, mostly it was that. Those patients are relatively unlikely to respond to therapy. So, when you look at that segment of patients, we have had some discontinuations over last year toward the end of the year, early into this year. As we move up into the lines of therapy gradually, we do expect that to improve over time. So, although I don't want to give any numbers at this point, I can tell you that there has been a cohort of patients that discontinued. They do tend to discontinue in the first few months of therapy. Having said that, at the same time, as I mentioned on the call, one of the areas that we are working to educate physicians is with the optimal dosing. So we had had some cases where doctors prematurely discontinued with prior to escalating the dose and not giving the full three months to gauge a response. That's another area. Fortunately, we think that's something that we can again make some headway with. Additionally, there have been some AEs, but that's a very small number. But again, over time as physicians get more comfortable with this product and we continue to educate them about what AEs they can expect and how to manage them, we do expect that to get a little bit better. Lastly, with Medicare Part D, there is a significant portion of patients who although they are within the donut hole and they do rely upon copay assistance through foundations, that is limited and there are some cases where patients do run out of copay assistance. Although I can't give you any members on the split of all of those, probably a little bit more on the lack of efficacy, but a lot of the discontinuations have been due to Medicare and the limited copay assistance that's inherent in this market. Moving onto your second question on the doses, yes, we have seen a continual build in the proportion of patients that are on the 150 mg. So right now, it's about 60/40 100 to 150. We would probably expect to see some additional movement toward the 150 over time, but we'll just have to see where that stabilizes.

Thank you.

Thank you, Ally.

[Operator Instructions] And our next question comes from the line of Yigal Nochomovitz with Citi. Your line is now open.

Thank you. Hi. Thanks for taking the questions. Just wanted to dig in a bit more on this phenomenon around the multiple prescriptions or multiple patients being prescribed by one physician. First off, could you provide us with the number, the subscriber base that you have currently? I don't know if you mentioned that specifically. How many docs are currently prescribing it as compared to prior quarters?

We did not mention that number and I can tell you that our prescriber base has continued to grow and we are seeing an increase in prescribers in multiple patients. At this point, we're not going to be sharing a specific number of prescribers, but we have seen, we have seen continued growth there due to greater awareness generated by a number of things, our promotion, educational forums, publications, et cetera.

Got it. So then I guess what I'm trying to get at is, with the 15% -- I think it was 15% last quarter that were the sort of multiple prescribers, now it's 20%. Could you just talk a bit about how that's evolving and where you see that number going? And what percent of the scripts currently respond to this higher prescribing segment? And then for the docs that are still prescribing only one, is it just a matter of them waiting to see if that first patient responds before adding another patient that they're prescribing, or is there something else at play there? Thanks.

Sure. So, I can tell you that the number of, with the physician experience overall, we've stated in the past that the majority of physicians had one patient on drug. And so there are certainly a number of those cases where they had prescribed a drug for a more refractory patient and perhaps did not respond. So that physician, our effort there is to continually go in and remind the physician that TAVALISSE is available and remind them of the benefits of the product. Then it's waiting for a patient, another patient to not respond to a therapy that they're on or a new patient that's coming off steroids that's not doing well. So, that just takes time to do that. We're not going to provide specific numbers on your other questions, but I can tell you that we are, and it's with the prescriber base overall, we are seeing quarter-over-quarter a gradual build of pre-prescribers and prescribers using product on more than one patient. We're comfortable with the trend we're seeing there. We'll continue to monitor that over time.

Okay. And then I just had a question on the AIHA Phase 3. It was interesting. It seems like the endpoint that you ended up agreeing to is actually quite a bit simpler than what I was anticipating. So, I thought there was some discussion at one point in time around having multiple time points during the 24 weeks where you'd have to be above a certain hemoglobin threshold. But it seems like as far as I understand it, unless I'm missing something, it's just the week 24 that's the only criterion here.

Let me clarify that. No, indeed, we are having an endpoint that has multiple time points during the 24-week trial that needs to be above the threshold of correction of anemia. This is a durable response and one single time point wouldn't make it.

Okay.

It's what you thought previously, it hasn't changed.

Okay, so there are multiples, but you haven't specified what those time points are at this point in time?

That's right. We're not providing the specifics of the endpoint at this time.

Okay, understood. Thank you very much. Appreciate it.

Thank you, Yigal.

Thank you. And that does conclude today's question and answer session. I would now like to turn the call back over to Raul Rodriguez for the concluding statement.

Thank you for your questions and for listening in. It's been a really good quarter for us. We're very happy with the progress we've made across really all fronts. TAVALISSE in the U.S., I think very good progress there. And TAVALISSE or fostamatinib availability in Europe, very good progress there with Grifols and our own EMA filing progressing on that front. AIHA as well. We're delighted to start that trial. I think it's a very accretive indication to ITP so we're very happy there. And good progress in the early pipeline as well. And like I said, Dean said we have money to do what we plan to do and money into the second half of next year. So, all-in-all, I think it's been a fantastic start of the year and look forward to further progress in upcoming quarters. Thank you again.

Ladies and gentlemen, that does conclude today's conference. You may disconnect. Everyone, have a great day.