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Rigel Pharmaceuticals: Plenty Of Risk, Less Reward

 December 14, 2012 04:18 PM

(By Mani) Rigel Pharmaceuticals, Inc. (NASDAQ: RIGL) and partner AstraZeneca Plc (NYSE: AZN) reported mixed mid-stage OSKIRA-4 results for fostamatinib in rheumatoid arthritis (RA) patients naive or refractory to DMARDs.

OSKIRA-4 was a six month study evaluating improvements in signs and symptoms of RA in 280 patients who had never previously used a disease-modifying anti-rheumatic drug (DMARD), were DMARD intolerant or had an inadequate response to DMARDs and were randomised to receive fostamatinib as a monotherapy, adalimumab as a monotherapy, or placebo.

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Although the drug demonstrated superior DAS28 improvement vs. placebo, it showed inferior DAS28 improvement versus Abbott Laboratories' (NYSE: ABT) Humira.

"We now see increased risk that fostamatinib will not demonstrate competitive efficacy in the ph.III trials and are lowering the program's probability of success to 50% (from 65%)," Oppenheimer analyst David Ferreiro said in a client note.

On the positive side, although OSKIRA-4 suggests fostmatinib has inferior efficacy to anti-TNFs, it confirms for the third time that the drug is superior versus placebo and is likely an active agent.

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"We believe efficacy inferior to anti-TNFs, but superior to placebo, in ph.III results would drive upside from current depressed levels," Ferreiro said.

Regulatory filings in the US and EU for use in combination with a DMARD based on the OSKIRA Phase III program are expected in the second half of 2013.

Though analysts believe fostamatinib has blockbuster potential, the drug has become controversial after the mixed phase II results.

On the news, shares of Rigel Pharma plunged 35 percent to $5.51 on Thursday. However, during Friday's session, it recouped some of its losses and rose as much as 17 percent to $6.43.

"Following the sell-off in RIGL, we believe RIGL currently reflects only ~25% of fostamatinib cash flows. Further, this is based on only $2.5B peak fostamatinib sales, which is less than half of what the major TNFs currently generate in RA," the analyst noted.

Meanwhile, Rheumatoid Arthritis is a painful, systemic, chronic inflammatory disease which can cause damage to the joints and vital organs as well as affecting other parts of the musculoskeletal system such as connective tissues, muscles and tendons. The disease affects approximately one in 100 people worldwide.

In the US alone, the total annual societal cost of RA is estimated to amount to $39.2 billion, with even greater indirect costs to individuals and society including costs from diminished work capacity, loss of productivity, loss in earnings and loss in tax contributions.



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