Rigel Pharmceuticals' (NASDAQ:RIGL) shares have lost almost half their value this week since the release of fresh data from a phase II study of its lead product, R788 in rheumatoid arthritis, which considering the new information was neither overwhelmingly negative, nor entirely new, seems an overly severe reaction.
The plunge is probably partly down to the current jittery markets, whilst also reflecting the huge expectations attached to the product. Consensus for sales in 2014 is $442m, very lofty considering the immunosuppressant has not yet started late stage trials, and hopes for a significant licensing deal are high. Therefore while the share price fall looks like a well-needed reality check, it also indicates a significant loss of confidence in the drug, a conclusion that may prove premature.
Concerns about hypertensive and cardiovascular side effects and an odd result in Mexico caused the alarm. To an extent, it is understandable why the data was construed as worrying, considering the more conservative stance on safety that has been adopted by regulators.
While hypertension has already been identified as a risk of the drug, the study revealed by how much blood pressure was raised. The detail, of a 4 millimeter increase, lead to concerns about the need for longer term studies.
The market chose to ignore the fact that blood pressure returned to normal with treatment or discontinuation, and that no patient dropped out of the trial because of it. Also brushed aside were placatory comments from analysts, who pointed out that Roche’s Actemra had been approved despite a similar side effect, and that RA has a higher risk tolerance compared to other indications.
On the other issues, the company said the result from Mexico was not a concern, because the dose that will be carried forward into phase III trials produced the expected read out, while claims that irregular heartbeats were found was flatly denied by the company's chief executive.
When the initial results from this trial were announced late last year, Rigel’s share price more than tripled in one day, jumping from $8 to $26 (Rigel mimics namesake and shines like a star, December 14, 2007 ). This data, from an extension of that trial, has sent the shares back down to $8.
The strong efficacy of the drug caused the initial optimism, and this new data has not changed that outlook. Not only has it significantly alleviated the symptoms of RA, R788 is delivered orally, making it an attractive prospect.
Further phase II trials are underway, with full data due mid-2009. Potential partners might want to wait to see those results, but the value of the project has probably not declined to the extent the market is indicating.
However, analysts’ sales figures do look ambitious, given the stage of the drug’s development, with sales figures commencing in 2010. The fact that 70% of phase II drugs fail should also be remembered.
Therefore, these lofty expectations probably need to be tempered, but the company has made good progress with the drug over the last six months and R788 may yet prove to be Rigel’s star.