Assistant Managing Editor

Armed with some big pharma muscle in the form of a potential $1 billion-plus deal with AstraZeneca plc, Rigel Pharmaceuticals Inc. is hot on Pfizer Inc.'s heels in the race for an oral, disease-modifying rheumatoid arthritis drug.

London-based AstraZeneca licensed worldwide rights to R788 (fostamatinib disodium), a spleen tyrosine kinase (Syk) inhibitor that has completed Phase II testing, in exchange for a $100 million up-front payment, along with $25 million in anticipated milestones this year.

On top of that, Rigel is eligible for up to $345 million in development, regulatory and initial sales milestones, plus up to $800 million in commercial milestones and a stepped, double-digit royalty on net sales that allows the firm "significant participation" in downstream revenues, James Gower, chairman and CEO of the South San Francisco-based firm, told investors during a conference call.

The deal is on par with other recent agreements for earlier-stage products in the RA space, such as Wilmington, Del.-based Incyte Corp.'s December partnership with Eli Lilly and Co. Incyte earned a $90 million up-front payment from the Indianapolis-based pharma firm, and is eligible for $655 million in milestones and a co-development option that could yield a high-20 percent royalty rate for Phase IIa-stage oral JAK inhibitor INCB28050. (See BioWorld Today, Dec. 22, 2009.)

A month earlier, privately held Alder Biopharmaceuticals Inc., of Bothell, Wash., licensed rights to IL-6 drug ALD518 to New York-based Bristol-Myers Squibb Co. in exchange for $85 million up front and up to $764 million in milestones (across various indications) plus royalties. ALD518 is set to enter a dose-ranging Phase II study this year. (See BioWorld Today, Nov. 11, 2009.)

In addition to the up-front and near-term milestone payments, AstraZeneca also is taking on all future development costs, leaving Rigel sufficient funding to advance other parts of its pipeline. Those payments, plus the company's existing cash - about $156.1 million in the bank as of Sept. 30 - should fund operations for at least three years, said Ryan Maynard, chief financial officer.

But for Rigel, financial terms weren't the only consideration. With potential competitor Pfizer already well under way with a Phase III program with oral JAK inhibitor CP-690,550, speed was a factor as well.

"No other company that we met with" during partnership negotiations, was "best able to start the Phase III program faster than AstraZeneca," said Raul Rodriguez, chief operating officer.

The pharma firm is set to initiate the pivotal program for R788 in the second half of this year. While a specific start date wasn't provided, Rodriguez later clarified that the companies were "only a few months away."

Still, news of the deal sent shares of Rigel (NASDAQ:RIGL) down 87 cents, or 9 percent, to close Tuesday at $8.56, surprising analysts such as Simos Simeonidis, of Rodman & Renshaw, who called the deal terms "solid," and maintained that R788 has blockbuster potential.

Simeonidis attributed at least part of the slide to short-term profit-taking, though he speculated in a research note that investors might have questioned AstraZeneca as an obvious partner or have been looking for an acquisition instead. He also noted the lack of major milestones in 2010.

Rigel has focused most of its efforts on R788, trimming staff a year ago to concentrate resources on finishing up Phase II development. Among those included two Phase IIb studies, one testing the drug in 457 RA patients who had inadequate responses to methotrexate, which met its primary endpoint of ACR 20 improvement, and the second study evaluating R788 in 219 patients who had failed biologic therapy, which fell short of statistical significance. (See BioWorld Today, July 27, 2009.)

The failure of that second study led some to wonder about the drug's future, though Simeonidis has maintained that reaction to those data were "an overreaction," adding that "any early signs of confirmation of its efficacy and safety in the Phase III program would make Rigel an obvious acquisition target" by its new partner.

Assuming a positive Phase III program, the companies anticipate filing for approval in both the U.S. and Europe in 2013 and hope that R788's quick onset of action and potential for once-daily dosing will help differentiate it from Pfizer's drug. There's also been early evidence that R788 can protect bone, "so some study may highlight that particular feature," Rigel's Rodriguez said.

Specific details of the Phase III program have not yet been disclosed, but Rodriguez told investors it likely would be "not all that different" from Pfizer's development plan.

The pharma firm has a 750-patient trial in patients with active RA on background methotrexate and a 400-patient study testing CP-690,550 in patients with active RA on background methotrexate with inadequate response to tumor necrosis factor inhibitors.

The effect of CP-690,550 vs. placebo as measured using ACR 20 response rates is the primary endpoint for both studies.

While the $13 billion RA market will be AstraZeneca's first target for R788, the drug also has shown early efficacy in lymphoma and idiopathic thrombocytopenic purpura and may have potential as a lupus treatment. Partnership terms also give the pharma firm rights to Rigel's portfolio of backup Syk inhibitors for RA and other indications.

Published  February 17, 2010