Earnings Call Transcript
RIGEL PHARMACEUTICALS INC (RIGL)
Earnings Call Transcript - RIGL Q4 2020
Operator, Operator
Greetings, and welcome to the Rigel Pharmaceuticals’ Financial Conference Call for the Fourth Quarter and Year-End 2020. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. It’s now my pleasure to introduce our first speaker, Dolly Vance, who is Rigel’s Executive Vice President, Corporate Affairs and General Counsel. Thank you, Ms. Vance. You may begin.
Dolly Vance, Executive Vice President, Corporate Affairs and General Counsel
Welcome to our fourth quarter and year-end 2020 financial results and business update conference call. The financial press release for the fourth quarter and year end was issued a short while ago and can be viewed along with the accompanying slides for this presentation on our website. 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, 2020 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.
Raul Rodriguez, CEO
Thank you, Dolly, and thank you for joining us on our fourth quarter and year-end 2020 call. Also, joining me today are Dave Santos, our Chief Commercial Officer; Wolfgang Dummer, our Chief Medical Officer; Esteban Masuda, our Executive Vice President of Research; and Dean Schorno, our CFO. Now, starting on Slide 5. Let me tell you a little bit about Rigel and what we have accomplished and what we look to accomplish in the coming year and beyond. We have four key value drivers at Rigel, and although 2020 was a difficult and challenging year, perhaps the most challenging we’ve had as an industry, we continued to make very good progress across all of these drivers. And in turn, other opportunities emerged. We will also tell you about each of those. Our first priority is to continue to grow the use of our product TAVALISSE in the treatment of chronic ITP. In early 2020, we pulled our sales organization from the field and moved our interactions to a mostly virtual basis. This did not stop our growth. Our team grew sales to $61.7 million in 2020, a 41% increase over 2019. This is a very good result given the backdrop of this pandemic. I have no doubt that we would have done much better had we been in the field, and we look forward to going back into the field later in 2021. Starting in 2020, continuing to this year, we focused on supporting and educating on the early-line use of our product. We will tell you a bit more about this in a minute. Outside of the U.S., we made very good progress in 2020. We received approvals in both Europe and Canada. Our partner, Grifols, launched our product in the UK and Germany in 2020, and more country launches are planned for 2021. ITP is a tremendous opportunity on a global basis, about a $2 billion market, $1.1 billion of this in the U.S. and $900 million outside of the U.S., a very attractive and growing market. The companion indication to ITP is warm autoimmune hemolytic anemia. Here, we continue to make progress in 2020. However, the second wave of the pandemic is having an impact on our enrollment; we have 66 patients enrolled out of the 90 targeted. Our goal here is to be the first product to be approved for the treatment of warm autoimmune hemolytic anemia. In fact, we continue to be the first and most advanced product in clinical development with the built-in advantage of already being on the market. We will tell you more about that in a second. AIHA is a tremendous opportunity, about a $1 billion market in the U.S., and we aim to be the first to gain approval and to capture a substantial share of that market. A year ago, we did not have a COVID program, and now, a year into it, we have a very comprehensive COVID program. Fostamatinib has tremendous support preclinically for its use in treating COVID-19, including publications from numerous colleagues at MIT, NIH, Harvard, and the University of Amsterdam, all supporting this use. We will tell you more about this during our presentation as it’s very exciting. This year, the NIH launched a Phase 2 study of fostamatinib in 60 hospitalized COVID-19 patients. The Imperial College of London also launched a Phase 2 study of fostamatinib in over 450 hospitalized COVID patients. In addition, we’ve now launched our own Phase 3 study, a tremendous opportunity to address this public health crisis. Lastly, our pipeline continues to make very good progress. We have two Phase 1 clinical programs; our RIP1 and our IRAK1/4 inhibitor programs. Wolfgang will speak more about the IRAK program later in this presentation. Before I pass the call over to Dave for a commercial update, let me take a minute to highlight the details of our recently announced collaboration with Eli Lilly on a RIP1 program. On Slide 6, a little bit of background on the RIP program. There’s been tremendous interest in RIP1 inhibition as it has the potential to treat multiple inflammatory diseases mediated by TNF and the Th2 pathways. These include psoriasis, psoriatic arthritis, ankylosing spondylitis, IBD, RA, and others. To give you an idea of the potential of this space, there are numerous drugs that currently generate billions of dollars in revenue annually that work by blocking either TNF or Th2 pathways. If our molecule were to show benefit in these patients with these indications, the opportunity is tremendous. The convenience of oral administration may also prove to be a very attractive feature. In addition, there's a broader opportunity with RIP1 inhibition; while our Phase 1 product is systemic, we are also exploring molecules that cross the blood-brain barrier to potentially treat a variety of neurodegenerative diseases, including Alzheimer’s and ALS. Given the breadth of these opportunities, it was clear to us that we needed to find a partner to advance this. We thought carefully about who would be the ideal partner for this program. Lilly came to the top. Lilly has a major focus on immune diseases and a proven track record of developing and commercializing these worldwide. In addition, Lilly has a tremendous history and successes in the CNS field; pain drugs, such as Prozac, Zyprexa, Cymbalta, and recent advances in Alzheimer’s. In our discussions with them, we share a mutual appreciation of the tremendous opportunity of RIP1 inhibitors. Now we have the resources necessary to develop these molecules as rapidly as possible and then commercialize them. All of this makes Lilly the ideal partner for this program. Moving on to Slide 7, I’d like to highlight a few key aspects of this collaboration. Lilly and Rigel will co-develop and commercialize Rigel’s RIP1 inhibitor 552 for all indications, focusing on autoimmune and inflammatory diseases. Lilly will lead the clinical development of the brain-penetrating RIP1 inhibitors in CNS. Rigel will receive a $125 million upfront payment from Lilly and up to an additional $835 million in potential future milestones, as well as tiered royalties on net sales. Development costs for R552 will be shared between Lilly and Rigel, subject to certain opt-out provisions for Rigel. This partnership has the potential to bring forth a new class of compounds in both immune and CNS indications that address very large and important unmet medical needs. We are very excited to explore this opportunity and partnership with Lilly. With that, I’d like to turn the call over to Dave for a commercial update. Dave?
Dave Santos, Chief Commercial Officer
Thank you, Raul. I’m glad to be with all of you today to review our commercial results as we close 2020. I want to express my thanks to the entire commercial team for their commitment and persistence throughout the many challenges of the year. I’m very proud of the results that the team achieved working together to grow TAVALISSE. On Slide 9, you’ll see our FDA approved indication, which is for adult patients with chronic immune thrombocytopenia or cITP, who’ve had an insufficient response to a previous treatment. So, I’d like to begin my discussion on Slide 10. We ended 2020 by continuing to grow TAVALISSE sales in the U.S. In the fourth quarter, we grew quarter-over-quarter net product sales by 9% to $17.8 million, enabling us to reach total net sales of $61.7 million in 2020, a 41% increase over our total 2019 net sales of $43.8 million. Achieving that 41% growth during the year when COVID-19 significantly impacted our ability to see clinicians and increase awareness of TAVALISSE required a strong focus on both starting new patients and keeping existing patients on TAVALISSE. In 2020, that focus resulted in our persistency growing to 56%. As a reminder, persistency is defined as the percentage of patients on therapy at four months. This growth in persistency was important in increasing our carryover or the percentage of our business each quarter that is driven by patients who began therapy in or before the prior quarter. By the fourth quarter of 2020, our carryover had grown to approximately 75% of our business. This strong carryover combined with steady new patient starts in the fourth quarter propelled our demand for bottles shipped to patients in clinics to 9% over Q3 of 2020 and a total of 30% over 2019 to 6,264 bottles. This enabled us, with the effects of increasing inventory of bottles remaining in the distribution channel and price, to achieve net sales growth of 41% versus 2019 to $61.7 million. In 2021, we are continuing our focus on improving persistency while growing the number of patients who begin therapy on TAVALISSE. Moving to Slide 11, I’d just like to review how much opportunity we have to grow the number of patients on TAVALISSE, particularly as we begin to move beyond the challenges of COVID-19. We conducted quantitative market research in Q4 to refresh our outlook at the opportunity in the adult cITP market and better understand how COVID-19 has impacted treatment, especially in the post-steroid setting. In terms of the opportunity in the market, our research revealed that clinicians believed they would act to treat a higher percentage of ITP patients with the available therapies today. Applying their treatment rates to the 81,300 ITP patients from claims data results in more than 44,000 patients that could be actively treated in a year, with approximately 24,000 of them being treated after steroids. Importantly, as we’ve stated in the past, three quarters of the available patients in the post-steroid setting are in the second and third line. We are continuing our efforts to broaden awareness of TAVALISSE’s differentiated mechanism of action, efficacy in earlier lines, and durability of response in the virtual environment during COVID to increase use in these patients. Additionally, our research revealed some important factors to consider related to COVID-19 about the opportunity ahead: half of the treaters indicated that COVID-19 presented challenges in both starting new patients on therapy and switching patients last year. We believe that the patient numbers in the graph to the left were reduced by the pandemic year, resulting in fewer new patients available for TAVALISSE and other therapies. Secondly, and very importantly, about a third of clinicians in our research indicated that they anticipate a surge of patients requiring new therapy as we return to normal. This bodes well for an acceleration of new ITP patients once they are visiting their clinicians more freely. If we’re able to improve TAVALISSE awareness with more access to those clinicians, we expect our new patients on TAVALISSE to accelerate as the patient numbers surge. We are poised to take advantage of the new patient surge opportunity ahead with continued messaging of TAVALISSE’s higher response rates in earlier lines, and our continued efforts in medical affairs to both publish and generate new evidence differentiating TAVALISSE in the treatment of ITP. This is why we are so enthusiastic about the potential of TAVALISSE. While we currently remain strategically focused on our ITP business, we are capable and ready to leverage our talented sales, marketing, market access, and business operations teams as new and exciting opportunities become available to us. Wolfgang will now review two of these potential opportunities, namely AIHA and COVID-19. Wolfgang?
Wolfgang Dummer, Chief Medical Officer
Thank you, Dave. Let me start on Slide 13 by reminding you why autoimmune hemolytic anemia (AIHA) is such an exciting opportunity for Rigel. As you know, the market size and commercial opportunity for us in AIHA is quite substantial and likely even larger than ITP. We estimate that there are about 10,000 to 13,000 candidate patients with this condition in the U.S. alone, with no competing or FDA approved therapies, and a significant unmet medical need remains, so the opportunity is large. Fostamatinib is the only product currently in Phase 3 development and would be first to market in this indication. The FDA has acknowledged this unmet need as well and granted fast track designation for the product in December after reviewing our encouraging Phase 2 data in AIHA, which is really the first solid dataset in this indication. AIHA has many synergies with ITP, including the customer infrastructure already in place because the physicians treating ITP are the same physicians who will treat AIHA. Therefore, a lot of awareness and familiarity with fostamatinib already exists, and we’ll be right at launch in AIHA. Slide 14 gives you a brief update on our Phase 3 study in AIHA. It’s seen broadly across the industry that many other clinical programs have had an impact on our enrollment numbers with the second wave of the COVID-19 pandemic in the last couple of months. Nevertheless, we continue to randomize patients into the trial. As of today, we have 66 patients randomized of our targeted 90 patients. 39 of those patients have already reached week 24, and 100% of those have rolled over into the extension study. While we were unable to reliably predict enrollment completion at this time due to the uncertain course of the pandemic, we remain confident that we are well positioned to keep or even expand the lead for TAVALISSE to become the first drug approved for this indication. Let’s move on to Slide 16 and our plan with fostamatinib as a potential treatment option for COVID-19. As we have mentioned before, we see a strong scientific rationale for seeking inhibition in COVID-19, or not just one but multiple levels of the disease. Fostamatinib can inhibit hyperinflammatory cytokines, and importantly, can reduce hypercoagulation and thrombosis. At this point, I would like to give you a heads-up on an upcoming peer-reviewed publication we are submitting that demonstrates a very low risk of thrombosis in ITP patients treated with fostamatinib as opposed to a widely published increased thrombosis risk with other ITP drugs. That’s great news for fostamatinib in ITP, but it could also be very beneficial for COVID-19 patients. Finally, fostamatinib can also inhibit NETosis—a very relevant mechanism in severe disease. Esteban will elaborate on this further during his scientific portion of the presentation. With that in mind, we launched and grew a comprehensive clinical program for fostamatinib in COVID-19 in a very short time. TAVALISSE is now in three clinical trials in COVID-19. We recently launched our right response phase 3 trial and you have seen our recent announcement that we were awarded $16.5 million from the Department of Defense to support our phase 3 efforts, which will pay for the lion’s share of the external trial costs and really underscores the broad interest and enthusiasm about fostamatinib in this health crisis. In addition, we have two investigator-sponsored trials, one with the NIH and the other with the Imperial College of London. I will get to those in a minute. As you know, TAVALISSE is a commercially available product with a well-established safety database of over 4,800 patients treated in clinical trials, and it could be rapidly repurposed as a treatment for COVID-19. Even though we are slowly moving forward with vaccinations, we believe that there will continue to be a need for treatments for those who contract the virus, as well as for various mutants that may follow. Given that the exclusivity for TAVALISSE is expected until 2032, we could leverage the data with TAVALISSE in COVID-19 to potentially expand development into non-COVID related areas. Slide 17 shows you the various patient populations covered with our clinical program. The NIH study includes patients with a score of five, six, or seven rating on the widely used eight-point ordinal scale, meaning they focus on the effect of fostamatinib to accelerate recovery in severe patients. The Imperial College of London study, as well as our phase 3 clinical trial, include mild patients with a score of three or four, and will investigate the progression of mild patients to severe disease—a approach that could also be taken in an outpatient setting as a potential next step. Hence, we are covering almost the entire spectrum of COVID-19 patients with our three trials. Slide 18 shows you the study at the National Heart, Lung, and Blood Institute at the NIH. With 57 out of approximately 60 patients, randomized enrollment is almost complete. NIH has incorporated very powerful translational research tools that can generate valuable new mechanistic data on fostamatinib in COVID-19. The NIH team has established a necrosis assay that can directly study the effect of fostamatinib on that aspect of the disease. We expect top-line results from this study as early as April, which is very exciting. Slide 19 shows you the second phase 2 IST that is ongoing at the Imperial College of London, also known as MATIS. This is a three-arm trial with fostamatinib versus the ruxolitinib JAK inhibitor plus standard of care compared to standard of care alone. The first stage of the study will randomize 57 patients per arm for a total of 171 patients. At that point, an interim analysis will be conducted. With the interim look at the substantive datasets, we hope to gain further understanding of the effects of fostamatinib in COVID-19. That trial is also progressing well and has currently 106 patients enrolled. Finally, on Slide 20, we are excited to have initiated our own Rigel phase 3 clinical trial. This study includes hospitalized patients with mild disease who have certain risk factors to develop more severe disease. We will randomize approximately 308 patients one-to-one to either fostamatinib plus standard of care or placebo plus standard of care. The primary outcome measure is prevention of progression to severe disease as measured with the ordinal scale. If positive, this trial could be the basis for potential approval of fostamatinib to treat patients with COVID-19. So in summary, we have a multi-pronged approach to COVID-19 and we are excited by the possibility to come up with a safe and effective treatment that is still desperately needed. With that, I’d like to turn the call over to Esteban, who will elaborate further on some distinct mechanisms of action that make fostamatinib a great candidate for treating COVID.
Esteban Masuda, Executive Vice President of Research
Thank you, Wolfgang. Glad to be here. I’m delighted to talk about the scientific rationale for TAVALISSE in COVID-19. I’ll start on Slide 22 with some insights into SYK in this disease. Numerous investigations have uncovered two receptor systems mediated by SYK, which play a role in the activation of multiple cell types resulting in cytokine release, exuberant inflammation, and excessive blood clotting. This can eventually lead to respiratory distress, organ damage, and thrombotic complications. The two receptor systems are the FcγR; on the right are the C-type lectin receptor or CLRs, which are engaged by DAMPs and PAMPs that are released during viral infections. On the left are the Fcγ receptors or FcγRs, which are engaged by immune complexes of viral particles bound by antibodies. Fostamatinib, by inhibiting SYK, has the potential to block these processes and their sequelae. Much has been discussed about cytokine storms, but less is known about NETosis and its role in coagulopathy. On Slide 23, we believe fostamatinib, in addition to addressing the cytokine storm, can uniquely and specifically address NETosis. Moving on to Slide 24. So, what is NETosis? NETosis is a process where neutrophils are activated to release NETs, otherwise known as neutrophil extracellular traps that are designed to trap and immobilize pathogens. These NETs consist of dependent chromatin fibers bound to citrullinated histones and various degrading enzymes like myeloperoxidases and elastases. Slide 25. So, how does NETosis relate to COVID-19? Early characterizations of autopsies of COVID-19 patients revealed that severe disease was associated with a large infiltration of neutrophils into the lungs. Soon, evidence of NETosis was reported not only in the alveoli highlighted here by the orange circle but also in the microvasculature, where clots or thrombosis were found containing neutrophils, NETs, and platelets, highlighted by the green circle. In fact, markers of NETosis were detected in the blood of COVID-19 patients. The amount of markers, such as citrullinated histones or cell-free DNA, correlated with the severity of disease, as shown on the right of the slide. Patients in the ICU (Intensive Care Unit) or the red dots show the highest level of NETosis markers. Moving to slide 26, as Wolfgang mentioned, scientists around the world have expressed high interest in treating COVID-19 with fostamatinib, leading to our two ongoing ISTs. Our colleagues at the NIH were particularly intrigued by the NETosis angle and set up this fascinating study to test it. First, they induced NETosis by overlaying plasma from severely-ill COVID-19 patients on neutrophils. NETs were detected using a green fluorescent probe shown in the middle panels on the left. Then, they showed that R406, the active component of fostamatinib, profoundly inhibited NETosis, adding to the compelling rationale for moving fostamatinib into COVID-19 shown by the right micrograph panels and quantitatively in the figure on the right. Interestingly, on slide 27, as clinical observations of this new disease have evolved over the last year, it has not been lost on us that the severe thrombotic complications in COVID patients have striking resemblance to observations in another disease called heparin-induced thrombocytopenia or HIT. It turns out that the pathophysiology of HIT involves the activation of both platelets and neutrophils by antibody PF4-heparin complexes. This is similar to the activation of platelets and neutrophils in COVID-19. On slide 28, we postulate that fostamatinib has the potential to inhibit thrombosis without affecting bleeding or hemostasis due to its specific and targeted inhibition of SYK-dependent activation of both platelets and neutrophils. Of note, on slide 30, in our clinical experience with fostamatinib in ITP phase 3 trials, we observed a low incidence of thrombotic events in patients treated with fostamatinib, with only one thromboembolic event that resolved spontaneously. This contrasts with similar studies, where ITP treatments showed thromboembolic events in up to 9% of patients. As Wolfgang mentioned, we have a comprehensive clinical program to evaluate the effect of fostamatinib in COVID-19. We are very excited about the potential to benefit patients with TAVALISSE, an approved drug that was discovered in our labs. We are also keenly interested in the continued exploration of the depth and breadth of inhibiting SYK. The investigators for the NIH study will also be looking into inflammatory cytokine and NETosis markers in their COVID-19 patients. With that, I will now turn back the call to Wolfgang for an update on our equally exciting IRAK program from our labs.
Wolfgang Dummer, Chief Medical Officer
Thank you, Esteban. Let me provide a brief status update on IRAK. On slide 32, with a new partnership in place for our RIP1 program and Eli Lilly leading the operational aspects of development, we are now fully focused on the further development of our IRAK 1/4 inhibitor. We have solid preclinical data in various models that demonstrate the ability of R835 to block key inflammatory cytokines in response to toll-like receptors and IL-1 receptor signaling. That opens the door to numerous clinical indications, both in the immunology space as well as in heme-onc, aligning well with Rigel’s development strategy. Not only do we have animal data, but we have also generated some early human data in healthy volunteers, where our molecule profoundly inhibited inflammatory cytokines in response to an LPS challenge. Slide 33 shows you the human data I was referring to on the previous slide. What you can see is that placebo patients challenged with LPS produced a number of pro-inflammatory cytokines, such as TNF alpha shown on the left, and also IL-6 subjects who were treated with R835 showed clear inhibition of this inflammatory response demonstrating early proof-of-concept in humans. Slide 34, as mentioned, there is fairly strong rationale in the literature for a role of IRAK inhibition in heme-onc indications, with low-risk MDS shown here as an example. I won’t go through the figure on the left in great detail; I just want to point out that low-risk MDS is considered to be an inflammatory condition of the bone marrow that can lead to all kinds of blood anomalies, and the very cytokines that are elevated in these patients are inhibited by IRAK inhibition as you can see in the panel to the right for TNF alpha, IL-6, and IL-12. As a consequence, we are evaluating our IRAK 1/4 program, both for rare immunology indications, such as palmoplantar pustular psoriasis or hidradenitis suppurativa, as well as good fits in the heme-onc space—all indications that could be developed by Rigel alone. With that, I will hand the call over to Dean Schorno. Dean?
Dean Schorno, CFO
Thank you, Wolfgang. I’m on slide 36. For the fourth quarter of 2020, we shipped 1,899 bottles to our specialty distributors resulting in $17.8 million of gross product sales. 1,725 of those bottles were shipped to patients and clinics, while 174 bottles remained in our distribution channels at the end of the quarter. As of December 31, a total of 984 bottles remained in our distribution channels. We reported net product sales from TAVALISSE of $17.8 million, a 28% increase compared to the fourth quarter of 2019. Our net product sales from TAVALISSE were reported net of estimated discounts, chargebacks, rebates, returns, co-pay assistance, and other allowances of $4.7 million. Our gross to net adjustment is approximately 20.8% of gross product sales. For the full year, our gross to net adjustment was approximately 19.3% of gross product sales. Before we move on from net product sales, let me review our expectations for the first quarter of 2021. During the first two months of this quarter, we’ve seen a reduction in our daily shipments to patients and clinics as compared to the daily shipments to patients and clinics in the fourth quarter of 2020. While we experienced a sequential reduction in bottles shipped to patients in clinics last year, resulting from the typical first quarter reimbursement issues confronting our industry, such as the resetting of co-pays and the Medicare donut hole. This year’s reduction impacted by additional factors such as physician and patient access issues created by the COVID-19 pandemic, increased levels of uninsured and under-insured patients, and most recently, inclement weather throughout much of the United States. Similar to last year, we do expect some recovery in our bottles shipped to patients at clinics in March, but because of the decreased patient demand volume already seen in January and February, and a possible reduction in the bottles remaining in our distribution channels at the end of the first quarter, we expect our sequential net product sales to be down as compared to the fourth quarter of 2020. Incrementally, we currently expect our gross to net adjustment to be approximately 24% in the first quarter of 2021. As we move past the seasonality of the first quarter and the various impacts caused by COVID-19, we anticipate sequential net product sales growth to resume. On to the next slide, in addition to net product sales, Rigel’s contract revenues from collaborations were $697,000 for the three months ended December 31, 2020, which consisted of $500,000 from Grifols related to an option for commercialization in additional territories and $197,000 in revenues earned from performing certain research and development services from Rigel’s collaboration agreement with Grifols. Moving on to costs and expenses, our cost of product sales was approximately $321,000 for the fourth quarter of 2020. Total costs and expenses were $37.3 million in the fourth quarter of 2020 versus $32.7 million in the fourth quarter of 2019. The net increase in costs was primarily due to increases in research and development costs related to our various ongoing clinical studies. As we look towards 2021, we expect our total costs and expenses to increase by approximately 15% as compared to 2020, as we expect to expand our commercial activities as COVID-19 pandemic conditions normalize and also progress our clinical programs forward. With that, I’d like to turn the call back over to Raul.
Raul Rodriguez, CEO
Thank you, Dean. And now on to slide 38, here’s what we have to look forward to in 2021. I’m sorry; here’s what we are looking forward to in 2021: continuing to drive ITP sales in the U.S., particularly once conditions normalize later this year; supporting our partners as they make TAVALISSE available to ITP patients across the globe; completion of our phase three enrollment in AIHA as we continue to focus on being first to market; top-line results from our COVID study with the NIH; continuing enrollment and interim results from Imperial College of London’s COVID-19 study, as well as data from our own phase 3 COVID study and a potential application for an emergency use authorization that is supported by these data. Lastly, advancing our RIP1 inhibitor program with Lilly in both immune and CNS diseases, and our IRAK 1/4 program in heme-onc and rare immune diseases. I think it’s going to be a tremendous year. With that, why don’t we open up the call to your questions?
Operator, Operator
Our first question today is coming from Yigal Nochomovitz from Citigroup. Your line is now live.
Yigal Nochomovitz, Analyst
Hi, Raul and team. Thank you very much for taking the questions. I just had a question with respect to the powering for the Rigel phase 3 in COVID-19. Obviously, it’s a relatively small phase 3. So, I’m assuming you must be assuming a relatively large treatment delta with respect to a progression to severe disease. So, is that a correct statement? And if so, could you comment on what that assumed treatment delta is in this study? Thanks.
Wolfgang Dummer, Chief Medical Officer
Is this question for me?
Yigal Nochomovitz, Analyst
It is Wolfgang.
Wolfgang Dummer, Chief Medical Officer
Yes. So, good question. We have underlined an assumption of a roughly 30% progression rate in the placebo patients receiving standard of care alone. We believe if we show a difference of 15% to 16%, which I think is realistic, we have 80% power to demonstrate statistically significant results.
Yigal Nochomovitz, Analyst
Okay, great. Thank you very much. And then Raul, just a question on partnering; could you comment at all on your level of interest in partnering the IRAK program as well? And then just one technical question on the Lilly deal, I’m just wondering what would trigger you to opt-out of certain development costs for R552?
Raul Rodriguez, CEO
Sure. So thank you for those questions, Yigal. We have two programs, both very attractive and both at roughly the same stage: RIP and IRAK. We looked at both, and the opportunities with the RIP program are very large—that’s in TNF-like opportunities, Th2 pathway type opportunities—that really require tremendous amounts of financial and organizational resources, which are beyond our means to fulfill the potential of RIP inhibition. Given that we have one of the leading programs in this area—a real horse race with a couple of other programs, all with large pharma companies and ourselves—partnering that one made a lot of sense, especially because there was tremendous interest in that program from large pharma companies who very much liked the potential of RIP inhibition, even if it requires hundreds of millions of dollars in development expenses, perhaps even $2 billion—large numbers. Partnering that was made a lot more sense. Now, to answer your second question quickly: We really believe that this program has tremendous opportunity, and we’d like to co-invest with Lilly as part of it. We’re able to do so. These opportunities may be such that we don’t want to have further investment at some point in the future, and we have the ability to exit at two different points—these are well laid into the future. We get to see some of the cards play out, and based on that, we can make a decision on whether to continue or not. This could involve both financial and commercial considerations, as well as the data we see in the Phase 2 trials that tell us whether to opt-out or stay in. With IRAK, it’s also at a similar stage, but the opportunities are much more focused on rare immune opportunities, which we are very interested in. Since it has that type of opportunity, at this point, we’re going to make progress with the program ourselves. We’re well capitalized now, so there’s no need from a balance sheet perspective to necessarily partner this. I think we can make very good progress with these molecules on the IRAK side. Eventually, we may partner, but for now, we can devote our full attention to the IRAK program and build value.
Yigal Nochomovitz, Analyst
Thank you very much.
Operator, Operator
Thank you. Next question today is coming from Eun Yang from Jefferies. Your line is now live.
Eun Yang, Analyst
Thank you. So, I have a question on the Phase 3 study COVID that you’re running. So, according to clinicaltrials.gov, the study completion is in October 2021. So, are we expecting to see the data this year?
Raul Rodriguez, CEO
Wolfgang, could you take that?
Wolfgang Dummer, Chief Medical Officer
Yes, of course. At this point, it has to be an estimate. We are right now in the process of opening a number of sites—up to 40 in the U.S. as well as in some Latin American countries. As you know, it’s very hard to predict how the pandemic will develop. But we are looking forward to picking up enrollment swiftly, and we’ll make every attempt to conclude the study as quickly as possible. We have a 28-day primary endpoint—so, from the last patient in to data available in 28 days. I’d expect that the study should enroll in summer to fall of this year—that’s the current projection.
Eun Yang, Analyst
Great, thank you. And then the NIH study for COVID-19. If I heard you correctly, the data could be as early as April; does it then mean that it could have been later than April?
Raul Rodriguez, CEO
Yes. Go ahead, Wolfgang.
Wolfgang Dummer, Chief Medical Officer
Yes, as I mentioned, we have 57 patients randomized. We plan to randomize approximately 60. Currently, we’re in early March. The primary endpoint is at 28 days. That takes you into April. Of course, there needs to be a database lock, and the data must be cleaned and all sorts of steps involved. I’m pretty confident the data should be available in April; however, it could always slip into May. But I’m optimistic we will see data in the April timeframe.
Eun Yang, Analyst
Right. And then, obviously, the NIH study focuses on safety, with a secondary endpoint looking at the number of days in the ICU, hospitalization, things like that. Should we expect to have some clinical outcome data from the trial?
Wolfgang Dummer, Chief Medical Officer
Yes, the primary endpoint is in safety, so that’s straightforward—incident of serious adverse events in both treatment arms. But of course, we are going to look at the secondary endpoints, which are efficacy-related, as well as some of these translational aspects. I would say, with 50 patients, if we see trends pointing in the right direction, even if they don’t hit statistically significant—the p-values might reach .06 or .07, even up to .1—that would be quite strong, especially if corroborated by some inflammatory biomarkers. While the sample size is small, we could see trends, and the totality of the data package pointing in the right direction is certainly something to consider and discuss.
Eun Yang, Analyst
Yes, thank you. So last question for both trials: TAVALISSE is added to standard of care—essentially, it’s comparing TAVALISSE to placebo in the background of standard care; does that mean that steroids are allowed as a standard of care in both trials?
Raul Rodriguez, CEO
Yes, so steroids are committed; dexamethasone is mostly used. Remdesivir is certainly used widely—that’s allowed. We will stratify for those factors. There may be more patients in the U.S. than in Latin America; the balance between placebo and treatment arms should be similar, and we will take measures to avoid imbalances in the background standard of care medications.
Eun Yang, Analyst
Great. Thank you very much.
Raul Rodriguez, CEO
Thank you.
Operator, Operator
Thank you. Next question today is coming from Do Kim from BMO Capital Markets. Your line is now live.
Do Kim, Analyst
Hi, good afternoon and thanks for taking my questions. Congrats on the Eli Lilly deal. I wanted to know if you had thoughts on if you do go co-commercialize R552, what kind of role do you see yourself having in the commercialization?
Raul Rodriguez, CEO
Sure. A good deal of that decision will be based on what area or indications it’s found to be useful, obviously in phase 2, and then subsequently in phase 3. If Rigel can add value to that effort beyond what Lilly does, and if it’s a therapeutic area of interest at that time—this will be numerous years from now—the current focus of Rigel will still be heme-onc, and there aren’t a lot of opportunities in RIP for heme-oncology. So, it would largely be in immunology and other inflammatory conditions. There are many of those which I tend to think we wouldn’t be able to add much in terms of commercializing beyond Lilly’s capabilities, but in more niche indications, more rare immune indications where RIP may have potential, I think it could be more challenging. There, we might be able to add value and co-commercialize. It’s hard to say at this point whether we would or wouldn’t do it, simply because we need to see how things play out in each of the various indications the partnership will explore.
Do Kim, Analyst
Great, understand that. And a question for Dean: any thoughts on how you’re going to account for the upfront payment from Lilly and the DoD award?
Dean Schorno, CFO
Yes. Hi, Do. There will be a level of complexity with this regarding Lilly accounting, so I’d encourage you to look at the 8-K that we filed as well as future quarterly reports for more detail. Essentially, once we have HSR clearance, we expect to then receive shortly thereafter the $125 million upfront; we’ll recognize collaboration revenues of a bit more than $60 million in the quarter we get HSR clearance of that $125 million. Incrementally, we’d expect to recognize $2 million or $3 million in incremental revenue over the upcoming quarters as we deliver on certain of our CNS commitments. With respect to the Department of Defense accounting perspective, the $16.5 million will have a variety of milestones that will be earned over the period of our phase 3 COVID work. We will get paid cash and will recognize the revenue over that time period.
Do Kim, Analyst
Okay. Thanks for that.
Raul Rodriguez, CEO
Thank you, Do.
Operator, Operator
Thank you. Next question is coming from Chris Raymond from Piper Sandler. Your line is now live.
Chris Raymond, Analyst
Thanks for taking the question. Can you guys hear me okay?
Raul Rodriguez, CEO
Yes, how are you, Chris?
Chris Raymond, Analyst
Yes. Hey guys, I love all the detail on slide 11 with respect to the market. I guess one of the questions we've had for a while and are wondering about is at what point you'll be in a position to provide a little bit more breakdown of the use of TAVALISSE by line. And then maybe, a second question: the FORTE observational study in the second line; I think you initiated that recently and talked about enrollment possibly this year—obviously, COVID has thrown a wrench into a lot of things—but when will we see data from that study?
Raul Rodriguez, CEO
Sure. I’ll ask Dave to comment on the usage or breakdown by line, and then Wolfgang can comment on FORTE enrollment and when we might have some data from that trial. Dave?
Dave Santos, Chief Commercial Officer
Sure. Great questions, Chris. I’m glad you like the detail we’re providing on the market and our research conducted in Q4. In terms of usage by line of therapy, it’s a bit hard right now—we’re still in what I believe to be launch phase. We got out there in 2018, and then we got new data in second line in 2020, but we have not been able to gauge what the effect of this data was on clinicians as they heard it. Our research last year showed that clinicians do respond positively to this data. As we move forward and grow our business base, I think evaluating breakdowns will be easier. The bulk of our available patients is in the second and third lines, and we’re positioned perfectly to address that. Our business is driven by three factors: getting patients on therapy, ensuring they stay on long-term, and increasing the number of prescribers. We haven’t fully capitalized yet on the prescriber uptake impacted by COVID. So when we can get our team out there, I believe we’ll be able to speak more clearly about uptake.
Wolfgang Dummer, Chief Medical Officer
I’ll take a stab at FORTE. The pandemic has affected enrollment; patients are hesitant to go into clinics. It has had an impact, and we sense that. The fortunate part is that this year, we’re focusing specifically on our second line data, which we know is impactful. We have yet to fully leverage this data; there’s still a lot we need to do to share it with physicians. You talked a bit about the thrombotic benefit of fostamatinib and the new publication on its lack of thrombotic incidents. We have more to share about this and the second line data with bolstering patient interactions.
Chris Raymond, Analyst
Got it. If I could ask maybe a follow-up, sort of a commercial question: can you characterize the key objections you run into with doctors considering using TAVALISSE in the second line? I mean, it’s not labeled obviously, right? So, what is the objection?
Raul Rodriguez, CEO
Sure. Dave, do you want to pick that up?
Dave Santos, Chief Commercial Officer
Absolutely, I mean, since I’ve been here, I’ve listened to many doctors talk about TAVALISSE. Their primary objections arise from two areas: general awareness and product familiarity. We have a differentiated mechanism of action that addresses platelet destruction at its root cause. Once clinicians hear and understand this, along with the dosing regime and efficacy potentials, their objections tend to fall away. Most hesitations come from entrenched habits; they have years of experience with products like rituximab or TPO-RAs. Still, I see the enthusiasm growing as we came across the product through virtual meetings, and validating their results is hugely important. Once we can get the team back in the field, we will capitalize on these interactions.
Chris Raymond, Analyst
Got it. Thank you very much.
Raul Rodriguez, CEO
Thank you, Chris.
Operator, Operator
Thank you. Next question is coming from Kristen Kluska from Cantor Fitzgerald. Your line is now live.
Kristen Kluska, Analyst
Hi, everyone. Thanks for taking my questions. I just wanted to follow up on the last point and looking at some of the patients you’ve treated for chronic ITP. Last month at ASH, you had a poster talking about safety profile and some of the side effects improving after the first few months of usage. I wanted to ask if you could discuss that a little bit further and if you think that’s another key selling point based on the experience you’ve had commercially so far.
Raul Rodriguez, CEO
Thank you, Kristen. I’ll ask Dave to comment on that, and Wolfgang may have subsequent comments.
Dave Santos, Chief Commercial Officer
Absolutely. It’s vital to communicate with each patient about the importance of sticking to the treatment plan through periods of side effects. We launched a new program called TAVALISSE TOGETHER that works with adults who are either interested in taking TAVALISSE or already on it. It partners with them throughout their journey with assistance through texts or emails, helping ensure success. Patients can enroll easily, generating strong patient engagement, and we believe it will aid in both new starts and support continuity for long-term patients.
Kristen Kluska, Analyst
Great. Thank you. Then as it relates to the ongoing COVID-19 trials across the three of them, the landscape has changed considerably with new mutant strains. I’m wondering across these trials if you think you’ll have a diversified patient population to consider some of these changes that we’ve seen in the world.
Raul Rodriguez, CEO
Yes. Wolfgang, do you want to discuss that?
Wolfgang Dummer, Chief Medical Officer
Yes, I believe we have a diversified patient group now. Regardless of the strains, COVID-19 disease is mostly caused by the immune system rather than the virus itself. Severe cases are typically due to a hyperactive immune system, thrombosis, and NETosis rather than the specific viral variant. Since fostamatinib addresses the immune response—particularly the hyperactive one—we anticipate that it should still work regardless of the variant—it should still provide value.
Raul Rodriguez, CEO
The benefit of conducting trials in diverse countries is that we’ll see that and demonstrate precisely what Wolfgang just articulated.
Kristen Kluska, Analyst
Great. Thanks to everyone.
Raul Rodriguez, CEO
Thank you, Kristen.
Operator, Operator
Thank you. We’ve reached the end of our question-and-answer session. I’d like to turn the floor back over to Raul for any further closing comments.
Raul Rodriguez, CEO
Thank you. I’d like to thank all of you for your support, and I appreciate your interest. We’ve made very good progress in calendar year 2020, and the early part of this year has also seen significant strides. We have numerous attractive and exciting milestones coming in 2021. We look forward to sharing those with you and keeping you updated on our progress throughout the year. Take care, and stay safe.
Operator, Operator
Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.