Rigel Pharmaceuticals Inc (RIGL) 2022 Q1 法說會逐字稿

Greetings. Welcome to Rigel Pharmaceuticals Financial Conference Call for the First Quarter 2022. (Operator Instructions) As a reminder, this conference is being recorded. It is 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 now begin.

Thank you. Welcome to our first quarter 2020 financial results and business update conference call. The financial press release for the first quarter 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 site www.rigel.com.

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 31st, 2021, and subsequent filings with the SEC, including our Q1 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 President and CEO, Raul Rodriguez. Raul?

Thank you, Dolly, and thank you, everyone, for joining today. Also with me today are Dave Santos, our Chief Commercial Officer; Dr. Wolfgang Dummer, our Chief Medical Officer; and Dean Schorno, our Chief Financial Officer.

Moving on to Slide 5. We are also thrilled to introduce you to Caroline Piatek M.D., who is joining us on the call today. Dr. Piatek is Associate Professor of Clinical Medicine at the Jane Anne Nohl Division of Hematology at USC's Keck School of Medicine. She has deep expertise in ITP and warm autoimmune hemolytic anemia or warm AIHA.

She's also an investigator on the FORWARD trial, Rigel's Phase III clinical trial in warm AIHA. During this call, Dr. Piatek will discuss the disease state, treatment landscape, and patient journey in warm AIHA. She will also provide clinical insights into how she treats warm AIHA patients and her experience in treating patients with ITP with TAVALISSE. Lastly, she will discuss how she views the opportunity for TAVALISSE in warm AIHA. I'd like to thank Dr. Piatek for joining us today and look forward to her perspectives.

Beginning on Slide 6, we have made significant progress growing our commercial hematology oncology organization, while executing several near-term value drivers in our late and mid-stage pipeline.

Starting with the first value driver, growing ITP sales. During the first quarter, we began to see momentum build for TAVALISSE sales in ITP with the highest quarterly demand since launch. We believe this is a direct result of our commercial initiatives. As you may recall, last year, we undertook a sales force expansion to broaden our reach, improve efficiency and increase in person interactions. We also secured preferred status on 3 major national formularies. We are pleased to see that these initiatives have translated into a positive growth trend in both bottle demand and new patient starts for TAVALISSE. We believe that we have built a foundation that will enable continued growth and also positions us favorably for a potential launch of TAVALISSE in warm AIHA.

In global new -- ITP news, our collaboration partner, Kissei, has submitted their NDA in Japan for fostamatinib in ITP. We look forward to news on the approval in Q1 of 2023. We're also on track for topline data from our pivotal Phase III FORWARD trial in warm AIHA in mid-2022. If the data is positive, we expect to move forward with regulatory filings and commercial launch preparations. With no currently approved therapy in this indication, we believe there's a tremendous opportunity for TAVALISSE to improve the outcomes of patients with this disease.

Importantly, and approved indication for warm AIHA would be synergistic with our current TAVALISSE commercial efforts, providing another treatment to market with our -- to our current physician segment. In just a moment, Dave will provide perspective on the market opportunity for TAVALISSE in warm AIHA, followed by Wolfgang, who will provide a brief overview of the previous Phase II results and the current Phase III study. Dr. Piatek will then share her experience and insight treating patients with warm AIHA.

In COVID-19, our pivotal Phase III trial continues to progress. As you may know, COVID hospitalizations have slowed, and we now anticipate completing enrollment and reporting topline data by year-end. Fostamatinib is also being evaluated in a Phase III trial sponsored by NIH and NHLBI, as the potential -- as a potential treatment for high-risk patients with hospitalized with COVID-19. These trials have the potential to show the benefit of fostamatinib, as a potential treatment for patients with severe COVID-19. Wolfgang will discuss our COVID-19 program later on the call.

Lastly, during our -- turning to our earlier-stage pipeline programs. Start-up activities for our Phase Ib trial evaluating R289, our IRAK1/4 inhibitor in low-risk MDS patients are ongoing. R289 has the potential to provide a better suppression of the pro-inflammatory environment that causes low-risk MDS. We look forward to keeping you updated, as this trial progresses.

We're also excited about the advancement of our RIPK1 inhibitor being developed in collaboration with our partner, Eli Lilly, into Phase II development. Wolfgang will also provide an update on this program.

Now, I'd like to turn the call over to Dave to discuss our commercial progress in ITP and opportunities in warm AIHA. Dave?

Thank you, Raul. On Slide 8, you will see our FDA-approved indication, which is for adult patients with chronic immune thrombocytopenia, or cITP, who had an insufficient response to a previous treatment.

Moving to Slide 9, Q1 was the second quarter in a row that we achieved a new high-end bottles shipped to patients and clinics. Achieving this new high during the quarter, where we have declined over the past 2 years was particularly good to see, especially given the typical Q1 challenges associated with reimbursement and access limitations due to COVID. We view this as a highly positive side that we are back on a growth trajectory.

Our 1,836 bottles shipped to patients and clinics represented 15% growth over Q1 last year and were driven by more new patient starts than any other quarter during COVID, particularly, as we move into the latter part of the quarter. We achieved net sales of $16.2 million, a 31% increase over the same quarter last year. Although, the increase compared to a year ago was partially driven by the absence of an inventory drawdown, we are pleased with the positive momentum we're seeing in ITP sales.

So on Slide 10, you'll see how our customer interactions continue to grow above where they were in Q4 despite starting the quarter with major access challenges due to Omicron. Our team accelerated our in-person customer interactions in Q1 to more than 5x the number of in-person interactions that we did a year earlier. As Omicron faded, and we moved into March, we were able to have more in-person interactions than ever during the past 2 years, exceeding our previous high in November by more than 25%. So moving forward, we expect to see a continued increase in in-person interactions, creating more opportunities for us to positively impact our customers.

We believe these increased interactions were a major driver of our growing new patient starts in the latter part of Q1, and we are optimistic that the trend will continue to grow, as we move through Q2. Additionally, our in-person speaker programs have continued to be an important part of spreading TAVALISSE awareness and education, and we executed significantly more programs in Q1 of this year than we did in Q1 of last year.

And lastly, on Slide 11, we have several additional initiatives to expand awareness of TAVALISSE and access for patients this quarter. In June, we'll attend our first live ASCO Meeting since 2019. We will have solid commercial and medical affairs presence there, just as we did at ASH in December, and we are planning many activities to interact with customers throughout the meeting. Additionally, in our efforts to expand our patient access globally, our partner, Kissei recently submitted an NDA for fostamatinib in ITP to Japan's PMDA.

And lastly, in the first quarter, we continued to improve access for commercial patients in the U.S. TAVALISSE is now preferred on the national formularies of 3 key PBMs, continuing to improve our broad coverage of commercial lives. We're extremely proud of these achievements, and our ability to provide broader patient access to TAVALISSE, with easier reimbursement processes for clinicians.

We are quickly spreading the news of preferred formulary status via our sales force and other nonpersonal tactics, and customer feedback continues to be positive. Overall, we continue to leverage our expanded commercial team to grow awareness of TAVALISSE and cITP among our customers, as the reopening continues. We are pleased that we are increasing our in-person interactions and look forward to continued growth of new patients and demand, as we move through Q2.

Now, I'd like to provide a brief overview of the commercial opportunity in warm autoimmune hemolytic anemia. Moving to Slide 13, we believe that wAIHA is a very attractive market opportunity for TAVALISSE. Our qualitative and quantitative research found that 45,000 adults with autoimmune hemolytic anemia, 20% of them have cold Agglutinin disease, leaving 36,000 patients with warm autoimmune hemolytic anemia.

In our quantitative research last year, we found that approximately 65% of those patients or about 23,000 are treated each year. And of those, about 9,000 are treated with first-line therapy, which overwhelmingly includes steroids. That leaves a significant patient population of up to 14,000 patients each year, who are looking for additional options, and that represents an exciting opportunity for TAVALISSE.

On Slide 14, the results of our latest quantitative research from last year's show, how wAIHA patients in each line of therapy are currently treated and further highlights the complexities around the current prescribing landscape. In conducting this research, we asked 150 clinicians to think about their wAIHA patients in each line of therapy, and then assign a percentage for the treatments they utilize in those patients. As previously discussed, there is no currently approved targeted therapy for the treatment of wAIHA and treated patients using the existing therapies can be challenging. This often results in a mix-and-match approach taken by physicians, as illustrated by the bars in each line of therapy, adding up to more than 100%. Further confounding prescribing landscape are a variety of treatment approaches from chronic to intermittent use of these therapies.

Also, as you look at the gray and dark blue portions of the bar, you see that splenectomy and other cytotoxics and immunosuppressive like cyclophosphamide and azathioprine make up significant portions of second line, third line and fourth line and later therapies. Given the burdensome effect of these treatments, it is important to consider patient characteristics such as preexisting conditions when analyzing lines of therapy.

Our research shows that determining a patient's line of therapy and chose a therapy can be complex. However, we view this data as showing multiple entry points for TAVALISSE in wAIHA, especially because the heterogeneity treatment beyond the first line. Particularly, we view TAVALISSE has the potential to significantly change the treatment landscape with its well-established side effect profile and significantly reduce the treatment burden on patients associated with the current therapies.

On Slide 15, you see this lines up very well with how physicians perceive a need for a new approved therapy in warm autoimmune hemolytic anemia. They perceive a very high unmet need in third line and later, where they do resort to cytotoxics, immunosuppressants and Splenectomy. We believe adoption of TAVALISSE will be faster in patients, who are third line and later because of this perception, and it will be our goal at launch to quickly drive awareness and appropriate patient selection, so we can become the standard of care here to satisfy that high unmet need.

The real opportunity will be to elevate the value of a first approved targeted agent used chronically instead of cyclically and move earlier in treatment. Being first to market will be a great advantage for us to differentiate TAVALISSE from other agents. That said, changing perceptions from using cyclical therapies in this disease to using a chronic one will be a challenge to overcome. And we're continuing to understand the wAIHA treatment journey through claims analysis and market research, with wAIHA treaters that we are currently conducting. An early finding of that claims analysis showed that approximately 56% of wAIHA patients received multiple therapies in the first 6 months following diagnosis.

We have also seen in early market research interviews that physicians appear to be receptive to using chronic therapies, as many have acknowledged the need for a long-term, tolerable treatment option for wAIHA patients, who are refractory to or unsatisfied with steroids. And our claims analysis revealed that treatment duration can last multiple years, so TAVALISSE could really fulfill the needs of both physicians and patients. I am confident that our continuing efforts to gain further wAIHA treatment insights this year will enable us to leverage the many opportunities ahead and address any challenges to rapid TAVALISSE adoption in treating wAIHA patients.

Now I'll turn the call over to Wolfgang to talk about the wAIHA Phase II trial results and Phase III trial design. Wolfgang?

Thank you for that overview, Dave. I'd like to reiterate our excitement, as we are getting close to topline results from our pivotal Phase III FORWARD trial with TAVALISSE in AIHA. I'll remind you of TAVALISSE's targeted mechanism of action, our Phase II clinical trial results and the design of the FORWARD trial on the next few slides.

Slide 17 pretty much explains how and why TAVALISSE should work in AIHA. Very similar to ITP, in AIHA, the human body begins to produce auto antibodies that bind the components of the red blood cells. The constant region of those antibodies for the Fc region then binds to cells that carry Fc receptors, for example, macrophages. The intracellular signaling downstream from the Fc receptor is SYK dependent and leads to phagocytosis and destruction of the antibody bearing red blood cells.

Some of the destroyed red blood cell antigens are presented to CD4-positive T helper cells, which in turn, again, prime more B cells to make even more antibodies, thus, perpetuating the disease further. This B-cell activation and differentiation process is also mediated by SYK and inhibited by fostamatinib. Taken together, there is compelling scientific rationale to expect that fostamatinib works in AIHA and should not leads to broad immunosuppression, as immunosuppression is not an issue in a large safety database of almost 5,000 patients treated with TAVALISSE.

Slide 18, in this first clinical data set, we evaluated TAVALISSE in adult patients with warm AIHA in a Phase II study. 11 of 24 patients, 46%, achieved a hemoglobin level greater than 10 and an increase from baseline of greater than plus 2 grams per deciliter by week 24. We saw substantial increases in median hemoglobin levels detected as early as week 2 and sustained over time. The safety profile was favorable and consistent with the experience in previous ITP and rheumatoid arthritis trial. This data was recently published in the American Journal of Hematology.

When we looked at this Phase II data to see how many subjects would have met the FDA agreed approvable primary endpoint, which is great or equal than 10 and great or equal than plus 2 from baseline on 3 consecutive available time points, we see that about 29% of patients on fostamatinib did meet those criteria. This endpoint is quite a high bar, so we expect very few placebo patients to meet that goal and to live with mainly patients, we are adequately powered to demonstrate statistically significance in Phase III.

Moving to Slide 19, as you know, our pivotal Phase III study has completed enrollment. Patients are treated with active or placebo for 24 weeks. After week 24, patients have the option to roll over into an open-label extension study. The vast majority of patients, who reached week 24 indeed took the option of continuing in the open-label extension. Some patients have been treated now for 2.5 years.

As I mentioned on the previous slide, the primary endpoint is a high bar to meet, but let me emphasize that this primary endpoint alone does not capture the entire clinical benefit. There are other important benefits for patients such as reduced use of rescue therapy, steroids bearing potential or quality of life improvements. These benefits are captured through prespecified secondary endpoints in the protocol. Taking these additional endpoints into account in the totality of the data set, we believe TAVALISSE can provide clinically meaningful benefit to a substantial percentage of patients. We're looking forward to reporting data from this trial around midyear.

With that, I now hand the call over to my colleague and clinical expert, Dr. Caroline Piatek to discuss her experience and insights treating AIHA patients. To kick things off, I'm interested to hear your thoughts on these endpoints and how clinicians might use them to determine, which of their patients may benefit from this therapy. Dr. Piatek.

Thank you. I would mention that while achieving statistical significance with a primary endpoint is a regulatory bar for success, it's really the totality of the data that will provide physicians with the full picture of which patients will derive meaningful benefit from the therapy. I would like to point out the significance of the secondary endpoints and improvement in hemoglobin defined in the secondary endpoints, and no need for rescue therapies are clinically meaningful. Improved hemoglobin values in this disease mean our patients feel better, need less frequent monitoring, less use of rescue medications or transfusions and less frequent hospitalization.

Next Slide. Okay. So let's talk some more about wAIHA. There are approximately 36,000 adults with wAIHA in the U.S. with approximately 9,000 receiving first-line treatment. There are about 14,300 patients requiring second or later lines of treatment. Similar to ITP patients are cycling on and off of treatment and we'll discuss more about this in a few moments.

WAIHA is an autoimmune disorder characterized by low hemoglobin levels and laboratory evidence of hemolysis. The severity of symptoms is related to the degree of anemia and includes fatigue, severe weakness, dyspnea, jaundice, Splenomegaly, palpitations and other cardiovascular complications. There's an increased risk of thromboembolic events with an incidence of TEE highest early after diagnosis and more common in patients with severe hemolysis.

The mortality rate is reported at 8% to 11%, which is related to vascular events, including pulmonary embolism myocardial infarction and stroke as well as infection or sepsis related to wAIHA treatments. Based on this description, you can see that these are our SYK patients. For ITP, we often manage relapses in the outpatient setting. However, wAIHA patients often require hospitalization and diagnosis as well as relapse, and it can take days to potentially several weeks to get some of these patients to achieve a stable improvement in hemoglobin with rescue medications and transfusion.

Next Slide. wAIHA is a chronic heterogeneous disease with several immunologic mechanisms involved in its pathogenesis, making it challenging to treat. It's thought to be mediated by accelerated clearance of circulating IgG coated red blood cells by immunoglobulin Fc receptor bearing macrophages in the spleen and liver, which is the pathway that's targeted by fostamatinib.

The type and extent of immune dysregulation may be different in each patient and they change over time, often resulting in an unpredictable clinical course. There are currently no approved treatments for wAIHA. There are new therapies under active development, which will offer increased therapeutic opportunities to treat this disease.

Next Slide. As we talk about the current treatment landscape for wAIHA, I will again mention that there are no approved treatments for this disease. The available therapies are limited by waning efficacy over time, as well as their side effect profiles, which add to the patient's symptom burden. As Dave pointed out earlier in his presentation, the lines of therapy are not clearly defined and various therapies can be used in combination.

Steroids are the standard first-line therapy for newly diagnosed patients. They work by reducing antibody production, which results in decreased red blood cell destruction. While the initial response rates are high, most patients relapse upon discontinuation. Additionally, there are a number of short and long-term adverse events, which limit their tolerability and use. Steroids are also often used as rescue therapy at times of relapse to raise the hemoglobin and to allow time to bridge to another therapy.

Rituximab has long been used as an off-label treatment for wAIHA. It's a monoclonal anti-CD20 antibody that works by depleting B-cells. Among its side effect profile, it notably is associated with an increased risk of infection. Additionally, it impairs vaccine response for at least 6 months, which has become -- which have come into particular focus during the COVID era.

While the initial response rates are high in wAIHA, it also takes time to see the response to rituximab therapy with responses noted out to as far out as 16 weeks. Rituximab is typically used in the second-line setting, but it can also be used in combination with steroids in the frontline settings as well and at times of relapse.

Now let's talk about Splenectomy, just the spleen is the major site of red blood cell destruction, removing the spleen can be an effective treatment for wAIHA. However, the complete response rate is around 40%. There are also risks of surgical complications. Patients may have prolonged recovery. There's also a long-term increased risk of thromboembolic events, as well as serious infection. With this in mind, splenectomy may not be tolerated in those, who are older with significant comorbidities or those who are otherwise be conditioned. Splenectomy remains an option following rituximab therapy. In practice, splenectomy is often deferred because of its -- because of the short and long-term risk associated with it.

Other immunosuppressive and cytotoxic medications can be used with limited data regarding their efficacy, and notably, immunosuppressive therapies carry a risk of infection. Again, patients are cycling on and off in -- of treatment and in between treatments through the course of their disease. Lines of therapy are not clearly defined and therapies may be used in combination.

Next Slide. The severity of anemia initial presentation of wAIHA is a strong predictor of outcome. The patient and symptoms vary and depend on the rate of onset, degree of hemolysis, as well as underlying disorders. Quality of life may be negatively impacted by the symptoms of the disease as well as the side effects associated with current therapies. About 50% of cases relapse after first-line therapy. Well, my usual approach is to use steroids often in combination with rituximab in the frontline setting for severe cases. In the past, some of the severe cases treated at our center have also had the addition of cyclophosphamide into the regimen, as you'll see in a moment. The approach following relapse includes repeating prior therapy depending on the duration of prior response or use of alternative immunosuppressants, such as azathioprine.

Next Slide. With that setup, I'm going to go through a few cases with you from my clinical practice. The first case illustrates the cycling through various treatments that we've touched on a few times now and highlights the long clinical journey experience by some patients with this disease. So this is a 45-year-old woman, with a history of Graves’ disease, previously treated with radioactive iodine ablation in 2013. In 2013, she was also diagnosed with Evans Syndrome, which is the combination of ITP and wAIHA. At the time of presentation, she had both ITP and wAIHA. She was treated with steroids and because of disease severity was escalated to combination therapy with rituximab, cyclophosphamide and dexamethasone.

While this was effective for her wAIHA, her ITP was still not controlled and thus was treated with prednisone, romiplostim and eventually splenectomy. She did well for several years until 2017 when she presented with relapsed wAIHA. At that time, she was retreated with combination therapy of rituximab, cyclophosphamide and dexamethasone, given the duration of her prior response, which was followed by a prednisone taper. She did well for several years again until she relapsed this past year. She was given a pulse of dexamethasone to control hemolysis.

And so as we look at this case, I would point out that there's a couple of times during this patient's journey, where fostamatinib could have been a reasonable option. Fostamatinib certainly could have been an option for the management of her ITP in 2014. Additionally, it would have been an option for her wAIHA at her relapse in 2017 and her most recent relapse.

The second case is that of a 33-year old woman with primary wAIHA diagnosed in 2019. On initial presentation, she was treated with steroids and rituximab. However, following the steroid taper, she continued to have ongoing hemolysis and azathioprine was initiated. This led to some stabilization of the hemoglobin, but still with some ongoing hemolysis on relapse. Eventually, her hemoglobin method threshold for treatment change.

So as we review this case, there's also several time points, where this patient were -- excuse me, where fostamatinib could have been used for this patient. It was an option instead of azathioprine, as well as after azathioprine therapy. So both cases demonstrate that the currently available therapies are not sufficient in treating patients with this disease even when used in combination, emphasizing the need for additional therapies, such as fostamatinib for wAIHA.

Next Slide. Now let's turn to talk about fostamatinib, as a potential treatment for wAIHA. In contrast to malignant hematology, where response rates are the primary driver of treatment selection, wAIHA is considered a chronic benign disease that requires treatment over years. So it's off greater importance here to have a therapy that will manage the disease consistently with a favorable long-term safety profile.

If fostamatinib is approved for this indication, it will follow -- it would offer the following potential advantages. Fostamatinib has a unique mechanism of action, targeting the underlying pathophysiology of the disease. It's an oral therapy, which is not immunosuppressive, which has come into particular focus during the COVID era. The safety profile is well characterized. It has a rapid response, which is durable. From the clinical perspective, a rapid and durable response results in less use of rescue medications and decreased need for hospitalization. Additionally, since it is approved for ITP, physicians already have experience using this therapy and having another indication will likely reinforce its use in ITP.

I will finish by saying that from a years in clinical practice treating wAIHA and other serious blood disorders, I know firsthand that the available treatments for wAIHA are insufficient, and there's a clear unmet need for new therapies in this disease. Thank you.

Thank you, Dr. Piatek. Shifting gears now to a quick update on our COVID disease program. Moving to Slide 28, we continue to believe that fostamatinib can provide therapeutic benefit in COVID-19. There are several scientific pieces of external research at independent institutions. Most importantly, last year, we reported positive clinical data from the NIH/NHLBI Phase II study in hospitalized patients with severe COVID. That data was published last fall. Additional data will be presented by collaborators at this year's ATS conference in May.

Given persistent, resistance to vaccination in some places and the possibility of new virus variants, we believe a need for effective treatment options for severely ill patients remains. We have 2 ongoing Phase III studies that will provide us with pivotal data and if approved in this indication, TAVALISSE would be available for immediate use for these patients.

Slide 29. Before I discuss our pivotal Phase III study, I would like to provide an update on 2 other trials from collaborators. The MATIS Phase II study at the Imperial College of London, and the ACTIV-4 Host Tissue Phase III study from NIH. Regarding MATIS, an independent data review board recommended not to continue fostamatinib into the second phase of the trial. That recommendation was not due to any safety concern. The focus of this study was the prevention of progression of mild to severe disease.

Regarding the NIH ACTIV-4 study, an interim analysis was run on 2 of the 3 experimental drug arms of the study and enrollment was discontinued for both. So fostamatinib is now the only remaining active arm on the study and continues to enroll patients.

Rigel's own amended Phase III trial is also continuing. As mentioned earlier this year, we updated the inclusion criteria for the trial to focus on more severe patients and change the primary endpoint to days on oxygen for a more sensitive measure and better comparison to the NIH ACTIV trials. Both studies now focus on fostamatinib, as a treatment for COVID rather than a preventive agent.

As Raul mentioned earlier, due to the recent decline in COVID-19 hospitalizations, enrollment has been slower than anticipated. To-date, we have 268 patients nearly 90% of our targeted enrollment. We are reviewing strategies to complete enrollment and report topline results by year-end, including potentially completing the trial with fewer patients than the initially targeted 308.

Now, let's turn to our pipeline programs, IRAK1, IRAK4 and RIPK1 inhibitor starting on Slide 31. We have shared with you before we are evaluating R289,our IRAK1 and IRAK4 dual inhibitor initially in low-risk MDS. We believe R289 has the potential to provide effective suppression of the proinflammatory environment that causes low risk MDS.

Slide 32 shows our Phase Ib trial for patients with low risk MDS. The study has 2 parts. Part 1 is a dose escalation phase with a commonly used 3x3 approach before those levels are being supported by our favorable safety data from already completed studies in healthy volunteers. After dose escalation and thorough evaluation of all safety, clinical activity, PK and biomarker data, we will take a dose into an extension phase to obtain more longer-term safety and preliminary efficacy data to support a larger registrational study. Study start-up activities are currently ongoing, and we are targeting the second quarter of the year to achieve study initiation.

Moving to Slide 33, our RIPK1 inhibitor program developed together with our partner, Eli Lilly is another important value driver for Rigel. We see a mechanistic and clinical scientific rationale for R552 in several large indications, and we continue to prepare for a Phase II clinical trial in an immunologic disease indication. As we noted in our press release, the initial Phase II study is now anticipated to start in Q1, 2023. As is common in drug development, we encountered opportunities for formulation optimization that we plan to leverage and take forward into the program, that results being a delay in the timing for the first indication, which really we will disclose closer to the initiation of the study.

Additionally, we are advancing our work to select the RIPK1 inhibitor candidate that can cross the blood-brain barrier for the treatment of central nervous system diseases. Lilly will then lead the clinical development of these brain penetrating RIPK1 inhibitors. We are pleased to collaborate with Lilly on those very exciting opportunities knowing their deep expertise in the CNS therapeutic areas. That concludes my development summary. And I will now turn the call over to Dean. Dean?

Thank you, Wolfgang. I'm on Slide 36. For the first quarter of 2022, we shipped 1,824 bottles to our specialty distributors, resulting in $22.6 million of gross product sales. 1,836 of those bottles were shipped to patients and clinics, while 925 bottles remained in our distribution channels at the end of the quarter.

We reported net product sales from TAVALISSE of $16.2 million, a 31% increase compared to the same period in 2021. Our net product sales from TAVALISSE were recorded net of estimated discounts, chargebacks, rebates, returns, co-pay assistance and other allowances of $6.4 million. Our gross-to-net adjustment is approximately 28.4% of gross product sales for the first quarter of 2022.

Before I move on to net product sales, let me review our expectations for the second quarter of 2022. We are pleased with the strength of our bottle shipped to patients at clinics at the end of the first quarter that Dave described and expect growth to continue as access to physicians and new patient starts continues to expand. Incrementally, we currently expect our gross-to-net adjustment to be approximately 30% in the second quarter of 2022.

But we don't typically comment on potential collaboration milestone payments due to payment variability and uncertainty, we wanted to provide a brief financial update, as it relates to Kissei's NDA filing in Japan that Raul highlighted. With this filing, we expect to receive a $5 million milestone in the current quarter. If approved, we would expect to receive an incremental $20 million milestone in the first quarter of 2023. We'll continue to provide updates on Kissei's progress, this important filing.

On to the next slide. In addition to net product sales, Rigel's contract revenues from collaborations were $500,000 for the 3 months ended March 31st, 2022, which consisted of $200,000 from our license agreement with Lilly and $300,000 from our collaboration agreement with Grifols.

Moving on to costs and expenses. Our cost of product sales was approximately $121,000 for the first quarter of 2022. Total cost and expenses were $43 million in the first quarter of 2022 versus $39.3 million in the first quarter of 2021. The increase in cost and expenses was primarily due to increased commercial activities related to the sales force expansion in late 2021, increased research and development costs for the development of Rigel's IRAK1/4 inhibitor program and increased personnel-related costs and stock-based compensation expense, partially offset by decreased research and development costs related to our Phase III clinical trial of fostamatinib for warm autoimmune hemolytic anemia, and our ongoing Phase III clinical trial of fostamatinib in hospitalized patients with COVID-19. Finally, we ended the quarter with cash, cash equivalents and short-term investments of $107.5 million.

With that, I'd like to turn the call back over to Raul.

Thank you, Dean. Rigel's performance in the first quarter has given us a strong start to the year, and we will continue to execute on our strategic priorities, as you see here. Looking forward, we expect the momentum that we were seeing in the commercial front to continue into the upcoming quarters, facilitating ITP sales growth. Most importantly is our upcoming Phase III trial readout in warm AIHA. We're excited about this readout because it is a key step in building our heme/onc portfolio. Warm AIHA is complementary to our current commercial focus and so will be highly synergistic and accretive. It will be great to be able to deliver a new and helpful medicine for the first time to patients suffering from warm AIHA and to do so as early as 2023.

Now let's open the call to your questions, and given that Dr. Piatek is with us, let's prioritize warm AIHA related questions. Operator?

(Operator Instructions) Our first question is from the line of Eun Kyung Yang with Jefferies.

I have one question to Dr. Piatek. So in [Phase III] for the trial, if I remember it correctly, patients have active hemolysis and also they are on some background therapy. So with the entry criteria, what do you expect the placebo response to be according to Phase III primary endpoint?

Thank you, Eun. Dr. Piatek?

I'd like Wolfgang's input on this as well. But I would anticipate there would be a low response rate for placebo and the correlate here is that in the Phase II data, the nonresponders did not achieve a hemoglobin response. So kind of using that here, we would anticipate a low response rate and placebo for the Phase III.

Yes. I would agree with that. We do not see patients generally just bounce up and down 2 units. That's a pretty large jump up from any baseline and to stay there for 3 consecutive visits would be very surprising unless the patient is on an effective therapy.

Okay. And I have a question to the Company. So in Phase II, I think about 38% of patients, who are second-line and the remainder of the patients, who are third and fourth-line late -- line of therapies. And although the overall response rate was over 40 -- around 45%, I think there was a higher response in second-line patients. So my question to the Company is that in terms of baseline patient characteristics by the line of therapy in Phase III, is that kind of similar to Phase II?

Yes. I'll ask Wolfgang to comment. Yes. So in general, I would say, we have probably somewhat more patients in earlier lines because as you all aware, we are conducting this trial in the United States, but also in a number of countries in Europe, including Eastern Europe, where compounds such as Rituxan, for example, are a little bit less used or available. So in general, it's most like a similar patient population, but maybe somewhat earlier line. And we do expect certainly comparable or even slightly better data from Phase III than what we have seen in Phase II.

Our next question is from the line of Yigal Nochomovitz with Citi.

This is Carly on for Yigal. We have one for Dr. Piatek. We're wondering how the 46% response rate and the 29% durable responder rate seen in the Phase II study compared to experience with rituximab and other therapies currently used post steroids. And I guess, if the Phase II data are largely replicated in the Phase III, could you go into a bit more detail on how you would think about using TAVALISSE in your practice in terms of line of therapy.

Thank you, Carly. Dr. Piatek?

So I mean, I think if TAVALISSE is approved, it would be the only approved medication for this indication. I think in the third-line setting, there's a clear role. In the second-line setting, it would also be a reasonable choice. And I would like to see with -- in the baseline demographics for the Phase III, we see a lot of patients, who have not received prior rituximab. So it would be beneficial to see the data there to see which -- how these patients benefit. But our anticipation similar to the ITP data is that the earlier arm we used, TAVALISSE, the higher, the efficacy would be suggesting a role in the second-line setting.

And go ahead, and Wolfgang if you can comment.

Yes. I would just add to that, and we've sort of elaborated a little bit on this. Again, that the primary endpoint that was required by regulatory agencies is a very high bar, but we have a number of secondary endpoints that also capture clinical benefit. So we really think there's a substantial percentage of patients that can have a clinical benefit. And it's going to be a totality of the data, and Dr. Piatek will confirm that the totality of the data that will make a treatment decision and also in collaboration with the patient, patient might want to have an oral drug over an infusion or vice versa. So I think we are well positioned to play an important role there.

The last comment that I want to make is when you refer to other compounds such as Rituxan, if you want to make comparisons, feel free to do so, but you need to be very, very stringent in really understanding what the endpoints were and how it's not apples-to-apples when you talk about overall response rates versus our primary endpoint is -- that's not comparable. So I believe we can certainly come out in a similar ballpark.

And then just one sort of housekeeping question for the Company. Are you able to refine the timing guidance at all for the forward data from midyear to maybe around which month this summer, we could expect to see the data.

I can clarify that. I think we could tell you that it's going to be in June to be more specific, not more specific than that though. So it's (inaudible) in the upcoming month.

Our next question comes from the line of Gary Nachman with BMO Capital Markets.

For Dr. Piatek. First, when you see TAVALISSE fitting into the treatment paradigm for warm AIHA, will there be a lot of combination use with this product? And do you envision any challenges in terms of access with that? And what would it take for the product to potentially be a first-line drug. Is that even a possibility over time.

Thank you. I'll ask Dr. Piatek to comment, but also Dave comment because we've done some market research in that area. Go ahead.

Yes. So we don't have any data to confirm on combination use. The clinical trials do have washout periods and time for stability on steroids. So the potential is that it would be overlapped more closely with steroids with the effort for it to be a steroid-sparing agent. We do not have any data in the first-line setting. There is a role for steroids in wAIHA just as ITP. So I -- it's hard to go beyond that.

Thank you. Dave?

Yes. Gary, one thing I would like to mention here is that it depends on where patients are relapsing. If they are in acute setting in the hospital, sometimes it's very difficult, as we've learned from recent market research for clinicians to prescribe Rituxan and administered in the inpatient setting. So they have to wait for the patient to be discharged and use it in the outpatient segment. It's not everywhere, but certainly in the community that is happening. And so you think about a drug like fostamatinib, which could be used starting in the inpatient setting, patient takes it and moves it into the outpatient setting. And then because of its potentially rapid response, the ability then to taper steroids, and that appears to be very interesting to clinicians, as we talk to them now.

And you saw in the slides that Dave provided earlier, there's substantial mixing and matching, including in first-line therapies with AIHA. It's a little bit different than ITP in that regard.

And then I guess for both Dr. Piatek and the Company, for the [14,300] addressable patients in second-line plus, how many of these are easy to tap into? And will there be challenges getting to any of these patients to get treated in the later lines or are they readily available for the most part. So I'm curious how much of an effort is required to increase awareness for wAIHA? Or is it well known and the clinicians are treating most of these patients already?

Thanks, Gary. I'll ask Dave to comment first, and then, Dr. Piatek, if you would like to as well.

Yes. So what I would say, Gary, is that it is 14,000 patients out there, who are actively undergoing treatment every year, but it will require us to reach a broad number of physicians because particularly in the community, it's pretty evident that clinicians see a handful of these patients over time. And they manage them and some will be on treatment and some won't. So I think they're aware of patients that are out there. They know that if they do relapse that they -- they're going to need to treat them, but we will have to reach a large number of prescribers in order to get that awareness out there.

Keep in mind on that point before I ask Dr. Piatek to comment also is that it's not unlike ITP, where it's a rare disease of hematology, benign hematology, and these doctors see a small number of these patients. When you add these 2 indications together, it becomes a much more substantial patient population within that doctor visit. As I said, substantial, almost complete overlap and the doctors treat both of these indications. So it's something that we're knowledgeable of and experience in handling. Dr. Piatek, any -- anything to add beyond that?

I think that was fairly covered everything that I would have said. I would just add that the multiply refractory patients often get referred to an academic center. And in that setting then fostamatinib would probably have a higher awareness.

The next question is coming from the line of Do Kim with Piper Sandler.

This is Ike on for Do. Thanks for taking the question and congrats on the continued progress. For Dr. Piatek, just a quick one. I don't know, if I might have missed it. But if you can speak on your belief on the receptivity of your colleagues himself of TAVALISSE in warm AIHA, given the current dynamics of how you're treating patients and the relapse rate. I don't know if there is a kind of entrenchment of source with the current therapies, and your colleagues are looking for something novel or just -- just brief thoughts on it would be helpful for us.

Sure.

Dr. Piatek if you comment (inaudible).

Okay. So I would say that there is definitely a clinical need for targeted therapies in this disease. You can see from some of the cases we discussed that -- the -- especially in those multiply refractory patients, who really just don't know how to treat these patients and it leads to that cycling through therapies with unclear efficacy. So it kind of -- it's challenging for the patients as well as the physicians to treat these types of patients. During the COVID times, we found that a preference towards oral therapies, keeping our patients out of infusion centers when possible and the patient preference for oral treatment. So I think there definitely is a need. And the targeted mechanism of action is compelling and is of interest to treating physicians.

And just a quick...

Go ahead, Ike.

Sorry. So just a quick follow-up on the available treatment or emerging treatment. I don't know if you have any experience with some of the different therapies that are coming down the pipe such as like the FcRn antagonist. If you are, I don't know, if you can kind of speak to what you think about the mechanisms of action for those therapies compared to TAVALISSE.

Dr. Piatek.

Sure. So I think what we're seeing is that this is heterogeneous disease and some patients may respond to some therapy versus another. I think it's clear that we're moving to an era of targeted therapy in this disease, but to really to contrast the different mechanisms is sort of a little bit beyond the data that we have right now.

Yes. One thing to add on (inaudible) is that many of these doctors -- and the objective for us is to have the doctors that are already using TAVALISSE for ITP. So they already know the product. They know its mechanism. They have some experience with it. And I think that will help the receptivity for a new indication AIHA, where there's even less available treatments for that indication. So I think that should help in terms of the receptivity. In part the reason we expanded the commercial organization last year is to raise that awareness for TAVALISSE in ITP, so as to facilitate the receptivity for AIHA.

Okay. Great. Thanks for that Raul. Just one last question for Dean. Can you tell us what happened with the nonrecognition of the government revenues, [they] believe there's $6 million is left within those contracts and I didn't see anything in the Q. is there correlation with the time lines of the current -- your COVID sponsored trial? Or is it completely distinct from that?

Yes. Thanks, EK, for the question. So just to remind you everyone, we had a $16.5 million overall grant from the DoD, which is supportive of our Phase III study in COVID, which largely pays for the cost or external cost of that study. To-date, we've recognized $10 million of revenue and collected $10 million of cash. That contract specifies that over the course of the study, there are certain milestones that we get paid for. And therefore, as you point out, EK, we've got [$6.56] million remaining of that $16.5 million that we'll incur during the future of the study. We'll recognize the revenue and collect the cash over the course of the remainder of the study. So stay tuned that will come out in future quarters. But there was no recognition, no milestone in Q1, as you highlight.

The next question is coming from the line of Kalpit Patel with B. Riley.

I'll start with Dr. Piatek. For the Phase III trial, what is the delta that you're looking for between the active arm and the placebo arm that would be clinically meaningful in your view? I mean is there a percentage, like 20%, 30% that you would view as impressive in addition to hitting stat sig? And then I have a follow-up. Dr. Piatek, do you have a comment?

There isn't a specific delta that I'm looking for in the Phase III. What I'm interested in is seeing that there's a clear group of responders with durable responses and trying to parse out, which patients derive benefit from fostamatinib and kind of sorting out those characteristics. And again, just kind of highlighting that through secondary endpoints, a number of them are clinically meaningful in clinical practice.

And then I know the protocol allows the use of rescue therapies, but the patients that receive the rescue therapies, they won't be counted, as a responder if it's received within a certain time period. So I guess my question for you, Doctor, is that if you were to receive an RBC transfusion, how long is the hemoglobin improvement good for in the real world?

So the red blood cells that these patients are transfused are also hemolyzed. So it would -- it varies a little bit, but it could be -- you can see no response to maybe a response that lasts for several days, but it does not last the same duration, as somebody, who is transfused for another reason without hemolysis.

And that reminds you of -- sorry, I just want to remind you that you have to be off of that rescue therapy for at least 4 weeks after it stops before you can start counting as a responder again, if that's clear. So like a response after -- for a few days or even a couple of weeks after transfusion is very unlikely making a durable responder possible.

Okay. And then one question for the Company. Now that you have 3 years of experience launching TAVALISSE, do you have any metrics on the median duration of treatment with real world patients? And then, if you can also break down the new starts versus continued treatment in your sales metric for the latest quarter, that would be useful?

Thanks so much. Dave to comment. I'm not sure that we provided the latter as yet. So maybe you can comment on the first, how long the longevity perhaps of patients on ITP did?

Yes. So currently, we have in the mid-50s is our persistency rate, which we've maintained for quite a while for patients at 4 months of therapy. So generally, about 5 bottles is what you would say that most patients would get on therapy if you averaged it out over all the patients. And all I would say is when we saw this growth in Q1, it was clearly that we were putting more patients in the top of the funnel than we were actually -- that patients were going out at the bottom of the funnel and say we're coming off drug. So although, we're not telling you the percent of our business that is new patients right now, it's a growing percentage.

As you saw this...

I hope it’s helpful.

Yes. As you saw good, good increase in new patient starts, which I think bodes really well for future quarters, as we see that entering. So we're excited about having achieved that in Q1, which is really a good place to start the year.

The next question is coming from the line of Joe Pantginis with H.C. Wainwright.

Just wanted to ask Dr. Piatek, the sort of a combination of the questions that's been asked and also Raul made a comment earlier about a lot of the same treating physicians that use TAVALISSE now will also look to potentially dose TAVALISSE for these patients. So I want to look at it of how you look at the evolution of the market, and you did touch upon it in certain ways. But the way I want to approach it is if you look at the Slide 14, now this is the one that has the different bar graphs for the different lines of treatment and how heterogeneous it is. The numbers might be different, obviously, but the typical view of this chart is virtually identical to what is seen in ITP with multiple approved therapies, and it took quite some time to be able to have the ITP community agree on different treatment guidelines. So even though TAVALISSE might be the first approved drug, which could gain obviously, good traction presumably. Do you see the heterogeneity still remaining for a while.

Thank you. Thanks for the question, Joe. I'll ask Dave to comment, and I'll add a comment after.

Yes. I can just say that -- and we were currently conducting market research on this on a daily basis at this point talking to clinicians, and they are very interested in having something that they can use in this disease. It's not -- even though it has similarities to ITP, it is -- it concerns the more and sometimes these patients can get into a lot of trouble, and so they want to have new options. But I think there's going to be a lot of very willing people to listen to the message that we're going to bring, as we're shaping that message now to clinicians if we do have approval. And I think it's going to be very solid add to their armamentarium, which is probably a little bit different than an ITP, where they had TPOs existing for quite a while and probably the unmet need was not very as high.

Yes. But maybe somewhat similar to the ITP market pre-TPOs...

Exact.

Are the place to start, and you saw how the market evolved there with the TPOs gaining a predominant or a very substantial share of the ITP market over the course of years. So if we could achieve anything nearly that, we'd be tremendously happy.

That's definitely a good analogy.

Our next question is from the line of Bert Hazlett with BTIG.

It's for Dr. Piatek. And as we consider the Phase III data upcoming, you mentioned during your initial comments, a focus on the secondary endpoints is being material as well. I'd love to get you to elaborate just a bit with regard to what might be important significant out of the secondary endpoints that we've seen previously, is the repetitive response, the magnitude or even the use of rescue meds, but a little elaboration there would be helpful?

Sure. I'll let Dr. Piatek.

Sure. So I think the secondary endpoints are a little bit interwoven. So basically, meaning that if you're seeing these hemoglobin responses, this in turn leads to less need of rescue medications. So if you're roughly thinking of a hemoglobin of 7, as the usual transfusion threshold basically that's the threshold of where people are starting to feel bad. If we're getting people up closer well above that transfusion threshold, that's clinically meaningful. An improvement from baseline means less intensive therapy, less potential need for transfusion. So what we're trying to do is kind of get our patients out of the hospital and feeling like they can do their activities of daily living or -- if not more than that. So the further we can get from these numbers around 7 the better and for longer periods of time.

Thank you. There are no further questions at this time. And I would like to turn the floor back to Mr. Raul Rodriguez for closing comments.

Thank you, Ryan, and thank you, everyone, for joining and for your questions on this and your continued interest in Rigel. In addition, I'd like to thank Dr. Piatek for joining us on the call and giving us her thoughts on warm autoimmune hemolytic anemia and TAVALISSE very much appreciated and very helpful to all of us.

As you know, we've made great progress this past quarter, and we have exciting milestones coming most importantly, Phase III milestone in AIHA in the very near term, as you know. I'd also like to thank our employees for their consistent constant commitment to improving the lives of these patients. Thank you. We look forward to updating you on our progress in future calls. Have a great day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.