rkr
(Mark One)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-29889
RIGEL PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
1180 Veterans Blvd.
South San Francisco, California
(Address of principal executive offices)
94-3248524
(IRS Employer
Identification No.)
94080
(Zip Code)
(650) 624-1100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Common Stock, par value $.001 per share
Name of each exchange on which registered:
The Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting
company)
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
The approximate aggregate market value of the Common Stock held by non- affiliates of the registrant, based upon the closing price of the registrant’s Common
Stock as reported on the Nasdaq Global Market on June 30, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, was $337,811,691.
Shares of the registrant’s outstanding Common Stock held by each executive officer, director and affiliates of the registrant’s outstanding Common Stock have been
excluded. The determination of affiliate status for the purposes of this calculation is not necessarily a conclusive determination for other purposes.
As of February 27, 2018, there were 147,107,882 shares of the registrant’s Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K incorporate information by reference from the definitive proxy statement for the
registrant’s 2017 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end
of the fiscal year covered by this Annual Report on Form 10-K.
TABLE OF CONTENTS
PART I
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Selected Financial Data
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Signatures
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains statements indicating expectations about future performance and
other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the
Securities Act), Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private
Securities Litigation Reform Act of 1995, that involve risks and uncertainties. We usually use words such as “may,”
“will,” “should,” “could,” “expect,” “plan,” “anticipate,” “might,” “believe,” “estimate,” “predict,” “intend” or the
negative of these terms or similar expressions to identify these forward- looking statements. These statements appear
throughout this Annual Report on Form 10-K and are statements regarding our current intent, belief or expectation,
primarily with respect to our operations and related industry developments. Examples of these statements include, but are
not limited to, statements regarding the following: our business and scientific strategies; the progress of our product
development programs, including clinical testing, and the timing of commencement and results thereof; our corporate
collaborations, and revenues that may be received from collaborations and the timing of those potential payments; our
drug discovery technologies; our research and development expenses; protection of our intellectual property; and
sufficiency of our cash resources and need for additional capital. You should not place undue reliance on these
forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking
statements for many reasons, including as a result of the risks and uncertainties discussed under the heading “Risk
Factors” in Part I, Item 1A of this Annual Report on Form 10-K. A forward- looking statement speaks only as of the date
on which it is made, and, except as required by law, we undertake no obligation to update any forward-looking statement
to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will
arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements.
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Item 1. Business
Overview
PART I
Rigel Pharmaceuticals, Inc. was incorporated in Delaware in June 1996, and is based in South San Francisco,
California. We are a biotechnology company dedicated to discovering, developing and providing novel small molecule
drugs that significantly improve the lives of patients with immune and hematologic disorders, cancer and rare diseases.
Our pioneering research focuses on signaling pathways that are critical to disease mechanisms. Our current clinical
programs include clinical trials of fostamatinib, an oral spleen tyrosine kinase (SYK) inhibitor, in a number of
indications. We have a New Drug Application (NDA) under review with the FDA for fostamatinib in patients with
chronic immune thrombocytopenia (ITP). In addition, we have product candidates in development with partners
BerGenBio AS, Daiichi Sankyo and Aclaris Therapeutics.
Since the beginning of 2017, we have experienced the following significant events:
Business Events
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In November 2017, we announced that we completed enrollment of the second cohort of our Phase 2 study
of fostamatinib in IgA Nephropathy (IgAN).
In October 2017, we reported the following:
i.)
the Food and Drug Administration (FDA) completed its mid-cycle review and indicated that it did not
plan on holding an Oncology Drugs Advisory Committee (ODAC) meeting to discuss our NDA for
fostamatinib in patients with chronic ITP;
ii.) we completed enrollment of Stage 1 of our Phase 2, open-label, multi-center, two-stage study of our
investigational drug fostamatinib for the treatment of patients with warm Autoimmune Hemolytic
Anemia (AIHA) and that on a preliminary basis, the study has achieved its pre-specified endpoints for
Stage 1; and
iii.) we completed an underwritten public offering in which we sold 20,815,000 shares of our common
stock pursuant to an effective registration statement at a price to the public of $3.35 per share and
received net proceeds of approximately $65.3 million after deducting underwriting discounts and
commissions and estimated offering expenses payable by us.
In August 2017, we announced that we have selected a molecule from our Interleukin-1 receptor-associated
kinase (IRAK) program for preclinical development.
In June 2017, we announced that the FDA accepted our NDA for the use of fostamatinib disodium in
patients with chronic ITP. We also announced that the FDA set an expected action date of April 17, 2018
to complete its review of fostamatinib under the Prescription Drug User Fee Act (PDUFA).
In April 2017, we announced the following:
i.) we submitted an NDA with the FDA for the use of fostamatinib in patients with chronic ITP; and
ii.) the FDA conditionally accepted the proprietary name TAVALISSE™ for our investigational product
candidate, fostamatinib disodium, an oral spleen tyrosine kinase (SYK) inhibitor.
In February 2017, we completed an underwritten public offering in which we sold 23,000,000 shares of our
common stock pursuant to an effective registration statement at a price to the public of $2.00 per share. We
received net proceeds of approximately $43.0 million after deducting underwriting discounts and
commissions and estimated offering expenses payable by us.
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Executive Team and Board of Directors
In December 2017, we announced the resignation of Ryan Maynard, executive vice president and chief
financial officer and that Nelson D. Cabatuan, vice president, finance will serve as the Company's interim
principal accounting officer. We are actively recruiting for a new chief financial officer, who will bring
extensive biotechnology and commercialization experience to Rigel in his/her new role.
In November 2017, Gregg Lapointe, CPA, MBA was appointed to the Company’s board of directors.
In August 2017, Brian L. Kotzin, M.D. was appointed to the Company’s board of directors.
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Strategy
Our goal is to become a commercial stage and growing company actively involved in innovative drug
discovery, development and commercialization, and become well-respected in the hematology space with healthcare
providers, investors and within the biotech industry. We are building a strong commercial team to execute successfully
on our commercialization plan for fostamatinib in ITP.
Our research team is focused on creating a portfolio of product candidates that may be developed as
therapeutics for our own proprietary programs or developed by potential collaborative partners. We recognize that the
product development process is subject to both high costs and a high risk of failure. We believe that identifying a variety
of product candidates and strategically partnering with other pharmaceutical companies may minimize the risk of failure,
fill the product pipeline gap at major pharmaceutical companies, and ultimately increase the likelihood of advancing
clinical development and potential commercialization of the product candidates.
The key elements to our business and scientific strategy are to:
• Capitalize on the opportunity to potentially commercialize fostamatinib in the United States, where we
believe a company our size can successfully compete;
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outlicense European, Asian and rest of the world rights to fostamatinib;
develop and commercialize fostamatinib for possible additional indications, including AIHA and IgAN;
develop a diverse portfolio of drug candidates that address a focused brand of therapeutic indications or
that represent significant market opportunities;
utilize our discovery engine to discover and validate new product candidates in a focused range of
therapeutic indications; and
develop drug candidates and establish strategic collaborations with pharmaceutical and biotechnology
companies to further develop and market our product candidates.
Product Development Programs
Our product development portfolio features multiple novel, targeted drug candidates in the therapeutic areas of
immunology, oncology and immuno-oncology.
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Pipeline
Fostamatinib—Oral SYK Inhibitor
Current Stage
Status
Immune Thrombocytopenic Purpura
NDA
We submitted an NDA for fostamatinib in ITP in April
(ITP)
Review
2017, which was accepted by the FDA in June 2017. The
action date for the FDA to complete its review is April 17,
2018, under the PDUFA. We are also conducting an on-
going long-term open-label extension study of certain
patients from the first two completed pivotal Phase 3
clinical studies and who opted to receive treatment with
fostamatinib.
IgA Nephropathy (IgAN)
Phase 2
We completed the enrollment for the two cohorts of the
Autoimmune Hemolytic Anemia
Phase 2
(AIHA)
Partnered Clinical Programs
ATI-50001 and ATI-50002 – JAK
Phase 2
Inhibitors (Aclaris)
BGB324 – Oral AXL Inhibitor
Phase 1
(BerGenBio)
DS-3032 – MDM2 Inhibitor (Daiichi)
Phase 1
Phase 2 study of fostamatinib in IgAN and we expect the
study to be completed by April 2018.
The trial is an open-label, multi-center, Simon two-stage
study of fostamatinib for the treatment of warm AIHA. In
October 2017, we completed the enrollment of Stage 1 and
reported preliminary results. We are currently enrolling
patients in the Stage 2 of the study.
The two inhibitors are currently initiating Phase 2 trials for
the potential treatment of alopecia areata (AA) and non-
segmental vitiligo of the face with results expected in the
first half of 2018.
BerGenBio is currently planning Phase 2 studies with
BGB324 as a single agent in relapsed acute myeloid
leukaemia (AML) and myelodysplastic syndrome (MDS);
and in combination with erlotinib (Tarceva®) in advanced
(EGFR-positive) NSCLC. BerGenBio is also opening Phase
2 studies with BGB324 in combination with
KEYTRUDA® (pembrolizumab) in non-small cell
adenocarcinoma of the lung and triple negative breast
cancer (TNBC) in collaboration with another company.
Daiichi is currently conducting Phase 1 for the treatment of
solid and hematological malignancies including acute
myeloid leukemia (AML), acute lymphocytic leukemia
(ALL), chronic myeloid leukemia (CML) in blast phase,
lymphoma and myelodysplastic syndrome (MDS).
Fostamatinib—Immune Thrombocytopenic Purpura
Disease background. Chronic ITP affects an estimated 65,000 adult patients in the U.S. In patients with ITP,
the immune system attacks and destroys the body’s own blood platelets, which play an active role in blood clotting and
healing. ITP patients can suffer extraordinary bruising, bleeding and fatigue as a result of low platelet counts. Current
therapies for ITP include steroids, blood platelet production boosters that imitate thrombopoietin (TPOs) and
splenectomy.
Orally-available fostamatinib program. Taken in tablet form, fostamatinib blocks the activation of SYK inside
immune cells. ITP is typically characterized by the body producing antibodies that attach to healthy platelets in the blood
stream. Immune cells recognize these antibodies and affix to them, which activates the SYK enzyme inside the immune
cell, and triggers the destruction of the antibody and the attached platelet. When SYK is inhibited by fostamatinib, it
interrupts this immune cell function and allows the platelets to escape destruction. The results of our Phase 2 clinical
trial, in which fostamatinib was orally administered to sixteen adults with chronic ITP, published in Blood, showed that
fostamatinib significantly increased the platelet counts of certain ITP patients, including those who had failed other
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currently available agents.
We met with the FDA for an end-of-Phase 2 meeting for fostamatinib in ITP. Based on that meeting, we
designed a Phase 3 clinical program, called fostamatinib in thrombocytopenia (FIT), in which a total of 150 ITP patients
were randomized into two identical multi-center, double-blind, placebo-controlled clinical trials. The patients were
diagnosed with persistent or chronic ITP, and had blood platelet counts consistently below 30,000 per microliter of
blood. Two-thirds of the subjects received fostamatinib orally at 100 mg bid (twice daily) and the other third received
placebo on the same schedule. Subjects were expected to remain on treatment for up to 24 weeks. At week four of
treatment, subjects who failed to meet certain platelet count and met certain tolerability thresholds could have their
dosage of fostamatinib (or corresponding placebo) increased to 150 mg bid. The primary efficacy endpoint of this
program was a stable platelet response by week 24 with platelet counts at or above 50,000 per microliter of blood for at
least four of the final six qualifying blood draws. In August 2015, the FDA granted our request for Orphan Drug
designation for fostamatinib for the treatment of ITP. On April 1, 2016, we announced that we completed enrollment in
the FIT Phase 3 clinical program.
On August 30, 2016, we announced the results of the first study, reporting that fostamatinib met the study’s
primary efficacy endpoint. The study showed that 18% of patients receiving fostamatinib achieved a stable platelet
response compared to none receiving a placebo control (p=0.0261). On October 20, 2016, we announced the results of
the second study, reporting that the response rate was 18%, consistent with the first study. However, one patient in the
placebo group (4%) achieved a stable platelet response, therefore the difference between those on treatment and those on
placebo did not reach statistical significance (p=0.152) and the study did not meet its primary endpoint. When the data
from both studies are combined, however, this difference is statistically significant (p=0.007). In the combined datasets
for the FIT studies, patients who met the primary endpoint had their platelet counts increase from a median of 18,500/uL
of blood at baseline to more than 100,000/uL at week 24 of treatment. These patients had improvements in platelet count
and typically did so within weeks of initiating treatment, providing early feedback as to whether fostamatinib may be a
viable option for treating their ITP. In the combined datasets, the frequency of patients who achieved a stable platelet
response was statistically superior in the fostamatinib group versus the placebo group in the following subgroups: prior
splenectomy or not; prior exposure to TPO agents or not; platelet counts below or above 15,000/uL of blood at baseline,
demonstrating that the effect of fostamatinib is consistent across various clinical and treatment backgrounds.
Patients from the FIT studies were given the option to enroll in a long-term open-label extension study and
receive treatment with fostamatinib, also a Phase 3 trial. A total of 123 patients enrolled in this study. All the patients
who responded to fostamatinib in the FIT studies and enrolled in the long-term open-label extension study maintained a
median platelet count of 106,500/uL at a median of 16 months. In addition, there were 44 placebo non-responders that
enrolled in the long-term open-label extension study. 41 of these patients had at least 12 weeks of follow-up. Of those, 9
patients (22%) have achieved a prospectively defined stable platelet response, which is statistically significant
(p=0.0078) and similar to the response rate fostamatinib achieved in the parent studies.
A stable response was defined as a patient achieving platelet counts of greater than 50,000/uL on more than 4 of
the 6 visits between weeks 14 and 24, without rescue medication. In the post-study analysis performed by the Company,
a clinically-relevant platelet response was defined to include patients achieving one platelet count over 50,000/uL during
the first 12 weeks of treatment, in absence of rescue medication, but who did not otherwise meet the stable response
criteria. Once the platelet count of greater than 50,000/uL is achieved, a loss of response was defined as two consecutive
platelet counts of less than 30,000/uL in any subsequent visits. In the combined dataset of both stable and clinically-
relevant platelet responders for the FIT studies, the response rate was 43% (43/101), compared to 14% (7/49) for placebo
(p=0.0006).
The most frequent adverse events were gastrointestinal-related, and the safety profile of the product was
consistent with prior clinical experience, with no new or unusual safety issues uncovered. We submitted an NDA for
fostamatinib in ITP in April 2017, which was accepted by the FDA in June 2017, with an action date for the FDA to
complete its review by April 17, 2018, under the PDUFA. On October 2, 2017, we announced that the FDA did not plan
on holding an ODAC meeting to discuss the NDA for fostamatinib in ITP. Additionally, the FDA indicated that the
review of fostamatinib is proceeding according to the standard internal review timeline as described in the Guidance on
Good Review Management Principles and Practices for PDUFA Products.
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Commercial launch activities, including sales and marketing
We intend to commercialize fostamatinib in ITP in the U.S. on our own in 2018, subject to FDA approval. We
plan to enter into partnerships with third parties to commercialize fostamatinib in Europe, Asia and rest of the world. A
significant portion of our operating expenses in 2018 will be related to our commercial launch activities for fostamatinib
in ITP. Specifically, our marketing and sales efforts will be focused on targeting approximately 3,000 hematologists and
hematologist-oncologists in the United States, who manage chronic adult ITP patients. We expect to continue to hire and
recruit experienced commercial professionals, including sales representatives in the hematology area, and commercial
operations, marketing, and market access professionals to support these efforts.
Competitive landscape for fostamatinib in ITP
Our industry is intensely competitive and subject to rapid and significant technological change. Fostamatinib
will be competing with existing therapies. In addition, a number of companies are pursuing the development of
pharmaceuticals that target the same diseases and conditions that we are targeting. For example, there are existing
therapies and drug candidates in development for the treatment of ITP that may be alternative therapies to fostamatinib,
if it is ultimately approved for commercialization.
Currently, corticosteriods remain the most common first line therapy for ITP, occasionally in conjunction with
intravenous immuglobulin (IVIg) or anti-Rh(D) as added agents to help further augment platelet count recovery,
particularly in emergency situations. However, it has been estimated that frontline agents lead to durable remissions in
only a small percentage of newly-diagnosed adults with ITP. Moreover, concerns with steroid-related side effects often
restrict therapy to approximately 4 weeks. As such, many patients progress to persistent or chronic ITP, requiring other
forms of therapeutic intervention.
Other approaches to treat ITP are varied in their mechanism of action, and there is no consensus about the
sequence of their use, according to the most recent ITP guideline from the American Society of Hematology. Options
include splenectomy, thrombopoietin receptor agonists (TPO-RAs) and various immunosuppressants (such as
rituximab). The response rate criteria of the abovementioned options vary, precluding a comparison of response rates for
individual therapies.
Even with the above treatment options, a significant number of patients remain severely thrombocytopenic for
long durations and are subject to risk of spontaneous or trauma-induced hemorrhage. The addition of fostamatinib to the
treatment options could theoretically be beneficial since it has a different mechanism of action than the thrombopoietin
(TPO) agonists. Fostamatinib is a potent and relatively selective SYK inhibitor, and its inhibition of Fc receptors and B-
cell receptors signaling pathways make it a potentially broad immunomodulatory agent.
Other products in the U.S. that are approved by the FDA to increase platelet production through binding and
TPO receptors on megakaryocyte precursors include PROMACTA® (Novartis) and Nplate® (Amgen, Inc.).
Clinical Stage Programs
Fostamatinib—IgAN
Disease background. Immunoglobulin A Nephropathy (IgAN) is an autoimmune disease that severely affects
the functioning of the kidneys. An estimated 12,000 Americans are diagnosed with this type of glomerulonephritis each
year, with 25% of whom will eventually require dialysis and/or kidney transplantation over time. IgAN is characterized
by the deposition of IgA immune complexes in the glomeruli of the kidneys leading to an inflammatory response and
subsequent tissue damage that ultimately disrupts the normal filtering function of the kidneys. By inhibiting SYK in
kidney cells, fostamatinib may block the signaling of IgA immune complex receptors, reduce the deposition of IgA
immune complexes and arrest or slow destruction of the glomeruli.
Orally-available fostamatinib program. Our Phase 2 clinical trial in patients with IgAN, called SIGN (SYK
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Inhibition for Glomerulonephritis) completed enrollment for its first and second cohorts. In January 2017, we announced
that the first cohort in the Phase 2 study of fostamatinib in IgAN was completed in various centers throughout Asia, the
U.S. and Europe. This cohort evaluated the efficacy, safety, and tolerability of the lower dose of fostamatinib (100mg
BID, n=26; placebo n=12) as measured by change in proteinuria, renal function, and histology (comparing the pre- and
post-study renal biopsies). The primary efficacy endpoint was the mean change in proteinuria from baseline at 24 weeks.
The study found that at 24 weeks, fostamatinib was well tolerated with a good safety profile. The initial data suggest a
trend towards a greater reduction in proteinuria in fostamatinib treated patients relative to placebo. The second cohort
evaluates a higher dose of fostamatinib (150mg BID) and completed enrollment in August 2017. We expect the study to
be completed by April 2018.
Fostamatinib—AIHA
Disease background. AIHA is a rare, serious blood disorder where the immune system produces antibodies that
result in the destruction of the body's own red blood cells. Symptoms can include fatigue, shortness of breath, rapid
heartbeat, jaundice or enlarged spleen. While no medical treatments are currently approved for AIHA, physicians
generally treat acute and chronic cases of the disorder with corticosteroids, other immuno-suppressants, or splenectomy.
Research has shown that inhibiting SYK with fostamatinib may reduce the destruction of red blood cells. This disorder
affects an estimated 40,000 Americans, for whom no approved treatment options currently exist.
Orally available fostamatinib program. Our Phase 2 clinical trial, also known as SOAR study, is currently
enrolling patients with warm AIHA in the second stage of the trial. The trial is an open-label, multi-center, two-stage
study that will evaluate the efficacy and safety of fostamatinib in patients with warm AIHA who have previously
received treatment for the disorder, but have relapsed. Stage 1 recently completed enrollment for 19 patients (17 patients
evaluable for efficacy) who received 150 mg of fostamatinib orally twice a day for a period of 12 weeks, with an option
of entering into a long-term extension study. The patients returned to the clinic every two weeks for blood draws and
medical assessment. The primary efficacy endpoint of this study was to achieve increased hemoglobin levels by week 12
of greater than 10 g/dL, and greater than or equal to 2 g/dL higher than baseline.
In October 2017, we announced that, on a top-line, preliminary basis, Stage 1 of the AIHA study enrolled 17
patients who have had at least one post-baseline hemoglobin measure. In January 2018, we also announced the updated
top-line data as of December 2017 for this open-label study of which 47% of these patients (8 patients out of 17) have
responded to fostamatinib treatment. Of the 17, six patients, including the last two patients enrolled, responded during
the 12-week evaluation period and an additional two patients met the response criteria in the extension study after 12
weeks of dosing. In February 2018, an additional patient in the Stage 1 extension study met the response criteria. As of
February 2018, 53% of evaluable patients (9 of 17) have responded to fostamatinib treatment. The safety profile was
consistent with the existing fostamatinib safety database. This will be presented at the Thrombosis and Hemostasis
Societies of North America meeting in San Diego, California in March 2018. Given that the Stage 1 of the study met its
primary efficacy endpoint, we have begun enrollment of Stage 2 of this study, in which 20 patients will be enrolled under
the same protocol. In January 2018, the FDA granted our request for Orphan Drug designation for fostamatinib for the
treatment of AIHA.
Partnered Clinical Programs
R548 (ATI-50001 and ATI-50002) - Aclaris
Aclaris is developing ATI-50001 and ATI-50002 an oral and topical Janus Kinase (JAK) 1/3 inhibitor. ATI-
50001 is being developed as an oral treatment for patients with AA, including the more severe forms of AA that result in
total scalp hair loss, known as alopecia totalis, and total hair loss on the scalp and body, known as alopecia universalis.
This Phase 1 cross-over trial was conducted in 12 healthy volunteers at one investigational center in the U.S. to assess
the safety, bioavailability, and pharmacodynamics of ATI-50001.
In the trial, treatment with ATI-50001 capsules was well tolerated, with a safety profile similar to placebo. No
clinically significant laboratory abnormalities were observed. These data are consistent with results from an earlier Phase
1 clinical trial in 44 healthy volunteers in which the study drug was well tolerated at all doses, with a safety profile
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similar to placebo. During the fourth quarter of 2017, three Phase 2 studies with the topical treatment ATI-50002 in AA
and Vitilago were initiated with results expected in 2018.
BGB324 - BerGenBio
BerGenBio’s first-in-class selective AXL kinase inhibitor, BGB324, has demonstrated compelling efficacy as a
single agent, and in combination with standard of care cancer therapies and checkpoint inhibitors, thereby supporting
clinical utility across multiple cancers in preclinical studies. Early clinical studies in healthy volunteers and cancer
patients have shown BGB324 to be well-tolerated with a favorable safety profile, and encouraging evidence of single
agent and combination activity in AML and NSCLC. A strong correlation has also been observed with predictive
biomarkers and the patients that respond. BGB324 has received Orphan Drug Designation in the U.S. for AML.
BerGenBio is currently planning Phase 2 studies with BGB324 as a single agent in relapsed acute myeloid
leukaemia (AML) and myelodysplastic syndrome (MDS); and in combination with erlotinib (Tarceva®) in advanced
(EGFR-positive) NSCLC. BerGenBio is also opening Phase 2 studies with BGB324 in combination with KEYTRUDA®
(pembrolizumab) in non-small cell adenocarcinoma of the lung and triple negative breast cancer (TNBC) in
collaboration with another company.
DS-3032 - Daiichi
DS-3032 is an investigational oral selective inhibitor of the murine double minute 2 (MDM2) protein currently
being investigated by Daiichi in three Phase 1 clinical trials for solid and hematological malignancies including acute
myeloid leukemia (AML), acute lymphocytic leukemia (ALL), chronic myeloid leukemia (CML) in blast phase,
lymphoma and myelodysplastic syndrome (MDS). DS-3032 has not been approved by any regulatory authority for uses
under investigation.
Preliminary safety and efficacy data from a Phase 1 study of DS-3032 suggests that DS-3032 may be a
promising treatment for hematological malignancies including relapsed/refractory AML and high-risk MDS. Evaluation
of additional dosing schedules of DS-3032 is underway and combination studies currently being planned by Daiichi.
Research/Preclinical Programs
We are conducting proprietary research in the broad disease areas of inflammation/immunology, immuno-
oncology and cancers. Within each disease area, our researchers are investigating mechanisms of action as well as
screening compounds against potential novel targets and optimizing those leads that appear to have the greatest potential.
During the second quarter of 2017, we selected a molecule from our IRAK program for preclinical
development. The molecule was selected for development based on its ability to inhibit both the IRAK 1 and IRAK 4
signaling pathways in preclinical studies, potentially providing a clinical benefit in autoimmune and inflammatory
diseases such as psoriasis, lupus, gout, psoriatic arthritis and multiple sclerosis. We expect to initiate clinical trials in
2018.
Sponsored Research and License Agreements
We conduct research and development programs independently and in connection with our corporate
collaborators. We are a party to collaboration agreements, but do not have ongoing participation, with BMS for the
discovery, development and commercialization of cancer immunotherapies based on our small molecule TGF beta
receptor kinase inhibitors, Aclaris Therapeutics International Limited (Aclaris) for the development and
commercialization of certain JAK inhibitors for the treatment of alopecia areata and other dermatological conditions,
AstraZeneca (AZ) for the development and commercialization of R256, an inhaled JAK inhibitor, BerGenBio for the
development and commercialization of AXL inhibitors in oncology, and Daiichi to pursue research related to MDM2
inhibitors, a novel class of drug targets called ligases. Under these agreements, which we entered into in the ordinary
course of business, we received or may be entitled to receive upfront cash payments, payments contingent upon specified
events achieved by such partners and royalties on any net sales of products sold by such partners under the agreements.
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Total future contingent payments to us under all of these current agreements could exceed $532.4 million if all potential
product candidates achieved all of the payment triggering events under all of our current agreements (based on a single
product candidate under each agreement). Of this amount, up to $145.5 million relates to the achievement of
development events, up to $345.6 million relates to the achievement of regulatory events and up to $41.3 million relates
to the achievement of certain commercial or launch events. This estimated future contingent amount does not include any
estimated royalties that could be due to us if the partners successfully commercialize any of the licensed products. Future
events that may trigger payments to us under the agreements are based solely on our partners’ future efforts and
achievements of specified development, regulatory and/or commercial events. Because we do not control the research,
development or commercialization of the product candidates generated under these agreements, we are not able to
reasonably estimate when, if at all, any contingent payments would become payable to us. As such, the contingent
payments we could receive thereunder involve a substantial degree of risk to achieve and may never be received in the
next 12 months or thereafter. Accordingly, we do not expect, and investors should not assume, that we will receive all of
the potential contingent payments provided for under these agreements and it is possible that we may never receive any
additional significant contingent payments or royalties under these agreements.
In October 2015, we entered into a non-exclusive license agreement with a third party, pursuant to which we
received a payment in the single-digit millions in exchange for granting a non-exclusive license to certain limited
intellectual property rights. We concluded that the granting of the license, which was fully delivered to such third party
in the fourth quarter of 2015, represents the sole deliverable under this agreement. Accordingly, we recognized the
payment as revenue during the year ended December 31, 2015.
In August 2015, we entered into a license agreement with Aclaris, pursuant to which Aclaris will have exclusive
rights and will assume responsibility for the continued development of certain JAK inhibitor compounds for the
treatment of alopecia areata and other dermatological conditions. Under the license agreement, we received a
noncreditable and non-refundable upfront payment of $8.0 million in September 2015. We are also entitled to receive
development and regulatory contingent fees that could exceed $80.0 million for a successful compound approved in
certain indications. In addition, we are also eligible to receive tiered royalties on the net sales of any products under the
agreement. We concluded that the granting of the license, which has been fully delivered to Aclaris in the third quarter of
2015, represents the sole deliverable under this agreement. Accordingly, we recognized the $8.0 million payment as
revenue during the year ended December 31, 2015.
In February 2015, we entered into a collaboration agreement with BMS for the discovery, development and
commercialization of cancer immunotherapies based on our extensive portfolio of small molecule TGF beta receptor
kinase inhibitors. Under the collaboration agreement, BMS will have exclusive rights and will be solely responsible for
the clinical development and commercialization of any products. Pursuant to the collaboration agreement with BMS, we
received a noncreditable and non-refundable upfront payment of $30.0 million in March 2015. We are also entitled to
receive development and regulatory contingent fees that could exceed $309.0 million for a successful compound
approved in certain indications. In addition, we are also eligible to receive tiered royalties on the net sales of any
products from the collaboration. BMS shall also reimburse us for agreed upon costs based on a contractual cost per full-
time equivalent employee in connection with the performance of research activities during the research term. Under the
collaboration agreement, we were obligated to provide the following deliverables: (i) granting of license rights to our
program, (ii) participation in the Joint Research Committee, and (iii) performance of research activities. We concluded
that these deliverables were a single unit of accounting as the license did not have stand-alone value apart from the other
deliverables. Accordingly, the $30.0 million upfront payment was recognized ratably as revenue from the effective date
of the agreement and was fully amortized in September 2016, the end of the research term. We believed that straight-line
recognition of this revenue was appropriate as the research was performed ratably over the research period. During the
years ended December 31, 2016 and 2015, we recognized revenue of $13.4 million and $16.6 million, respectively,
relating to the upfront payment, and $290,000 and $822,000, respectively, relating to the research activities we
performed. At the end of the initial research term, we were not notified by BMS of its intention to extend the initial
research term under which we would perform research activities. As of September 30, 2016, all deliverables under the
agreement had been delivered. In November 2016, we were notified by BMS that it has designated one compound as an
early drug candidate and received $3.0 million in December 2016, triggered by this development event.
In June 2011, we entered into an exclusive license agreement with BerGenBio for the development and
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commercialization of an oncology program. BerGenBio is responsible for all activities it wishes to perform under the
license we granted to it. In February 2017, we received $3.3 million from BerGenBio as a result of BerGenBio
advancing BGB324, an AXL kinase inhibitor licensed under the agreement, to a Phase 2 clinical study. In June 2016, we
received contingent payments of $1.7 million relating to a time-based non-refundable fee and $2.0 million relating to
BerGenBio’s exercise of certain option rights before the prescription period to exercise the rights expired. All
deliverables under the agreement had been previously delivered, as such, the above payments of $3.3 million in 2017 and
$3.7 million in 2016, triggered by the above time-based and contingent events were recognized as revenue in the first
quarter of 2017 and second quarter of 2016, respectively.
Our Discovery Engine
The approaches that we use in connection with both our proprietary product development programs and our
corporate collaborations are designed to identify protein targets for compound screening and validate the role of those
targets in the disease process. Unlike genomics-based approaches, which begin by identifying genes and then searching
for their functions, our approach identifies proteins that are demonstrated to have an important role in a specific disease
pathway. By understanding the disease pathway, we attempt to avoid studying genes that will not make good drug
targets and focus only on the subset of expressed proteins of genes that we believe are specifically implicated in the
disease process.
We begin by developing assays that model the key events in a disease process at the cellular level. We then
identify potential protein targets. In addition, we identify the proteins involved in the intracellular process and prepare a
map of their interactions, thus giving us a comprehensive picture of the intracellular disease pathway. We believe that
our approach has a number of advantages, including:
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improved target identification: it focuses only on the subset of expressed proteins of genes believed to be
specifically implicated in the disease process;
rapid validation of protein targets: it produces validated protein targets quickly because it uses key events
in the disease process as the basis to design the functional, disease-based screen;
improved disease pathway mapping: it produces a comprehensive map of the intracellular disease
pathway, enabling the identification of a large number of potential protein targets;
informed target selection: it provides a variety of different types of targets and information concerning the
role each plays in their endogenous state to better select targets more susceptible to pharmaceutical
intervention;
efficient compound screening: it increases the probability and speed with which compound screening will
identify “hits” because it provides detailed knowledge of the target that can be used to guide the design of
the compound screen; and
risk reduction: it may reduce the risk of failure in the product development process due to serious side
effects, including toxicity or other reasons, by selecting only targets that are specific to the disease in
question and that have no apparent role in other cell types or signaling pathways.
Because of the very large numbers of screens employed, our technology is labor intensive. The complexity of
our technology requires a high degree of skill and diligence to perform successfully. We believe we have been and will
continue to be able to meet these challenges successfully and increase our ability to identify targets for drug discovery.
Pharmacology and Preclinical Development
We believe that the rapid characterization and optimization of compounds identified in high-throughput
screening (HTS) will generate high quality preclinical development candidates. Our pharmacology and preclinical
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development group facilitates lead optimization by characterizing lead compounds with respect to pharmacokinetics,
potency, efficacy and selectivity. The generation of proof-of-principle data in animals and the establishment of standard
pharmacological models with which to assess lead compounds represent integral components of lead optimization. As
programs move through the lead optimization stage, our pharmacology and preclinical development groups support our
chemists and biologists by performing the necessary studies, including toxicology, for IND application submissions.
Clinical Development
We have assembled a team of experts in drug development to design and implement clinical trials and to
analyze the data derived from these trials. The clinical development group possesses expertise in project management
and regulatory affairs. We work with external clinical research organizations with expertise in managing clinical trials,
drug formulation, and the manufacture of clinical trial supplies to support our drug development efforts.
Intellectual Property
We are able to protect our technology from unauthorized use by third parties only to the extent that it is covered
by valid and enforceable patents or is effectively maintained as a trade secret. Accordingly, patents and other proprietary
rights are an essential element of our business. As of December 31, 2017, we had 58 pending patent applications and 366
issued and active patents in the United States, as well as corresponding pending foreign patent applications and issued
foreign patents. Our policy is to file patent applications to protect technology, inventions and improvements to
inventions that are commercially important to the development of our business. We seek U.S. and international patent
protection for a variety of technologies, including new screening methodologies and other research tools, target
molecules that are associated with disease states identified in our screens, and lead compounds that can affect disease
pathways. We also intend to seek patent protection or rely upon trade secret rights to protect other technologies that may
be used to discover and validate targets and that may be used to identify and develop novel drugs. We seek protection, in
part, through confidentiality and proprietary information agreements. We are a party to various license agreements that
give us rights to use technologies in our research and development.
Our patents extend for varying periods according to the date of patent filing or grant and the legal term of
patents in the various countries where patent protection is obtained. Our material patents relate to compositions of matter
covering specific drug candidates in clinical trials that target SYK. These patents will expire, excluding patent term
extensions, in 2023, 2024 and 2026. Several of these patents will have patent term extensions, depending on the length of
time required to conduct clinical trials.
We currently hold a number of issued patents in the United States, as well as corresponding applications that
allow us to pursue patents in other countries, some of which have been allowed and/or granted and others of which we
expect to be granted. Specifically, in most cases where we hold a U.S. issued patent, the subject matter is covered at least
by an application filed under the Patent Cooperation Treaty (PCT), which is then used or has been used to pursue
protection in certain countries that are members of the treaty. Our material patents relate to fostamatinib, an oral SYK
inhibitor, and R406, the active metabolite of fostamatinib.
Fostamatinib. Fostamatinib is covered as a composition of matter in a U.S. issued patent that has an expiration
date in September 2026, after taking into account a patent term adjustment, and may be granted further protection under
the patent term extension rules related to conducting clinical trials. Fostamatinib is also covered under broader
composition of matter claims in a U.S. issued patent that has an expiration date in March 2026, after taking into account
a patent term adjustment. Methods of using fostamatinib to treat various indications, methods of making fostamatinib,
and compositions of matter covering certain intermediates used to make fostamatinib are also covered, respectively, in
three U.S. issued patents; the earliest expiration date of any of these patents is in April 2023 and the latest expiration date
is in June 2026, after taking into account patent term adjustments. Corresponding applications have been filed in foreign
jurisdictions under the PCT, and are at various stages of prosecution. Of note, a patent covering fostamatinib as a
composition of matter and in compositions for use treating various diseases has been granted by the European Patent
Office.
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R406. R406 is covered as a composition of matter in a U.S. issued patent and, with a patent term adjustment,
has an expiration date in February 2025. R406 is also covered under two broader composition of matter patents issued in
the U.S. expiring in February 2023 and July 2024. Methods of using R406 to treat various indications and compositions
of matter covering certain intermediates used to make R406 are also covered under patents described above.
Corresponding applications have been filed in foreign jurisdictions under the PCT and are at various stages of
prosecution.
Competition
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant
technological change. Many of the drugs that we are attempting to discover will be competing with existing therapies. In
addition, a number of companies are pursuing the development of pharmaceuticals that target the same diseases and
conditions that we are targeting. For example, there are existing therapies and drug candidates in development for the
treatment of ITP that may be alternative therapies to fostamatinib, if it is ultimately approved for commercialization. We
face, and will continue to face, intense competition from pharmaceutical and biotechnology companies, as well as from
academic and research institutions and government agencies, both in the United States and abroad. Some of these
competitors are pursuing the development of pharmaceuticals that target the same diseases and conditions as our research
programs. Our major competitors include fully integrated pharmaceutical companies that have extensive drug discovery
efforts and are developing novel small molecule pharmaceuticals. We also face significant competition from
organizations that are pursuing the same or similar technologies, including the discovery of targets that are useful in
compound screening, as the technologies used by us in our drug discovery efforts.
Competition may also arise from:
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new or better methods of target identification or validation;
other drug development technologies and methods of preventing or reducing the incidence of disease;
new small molecules; or
other classes of therapeutic agents.
Our competitors or their collaborative partners may utilize discovery technologies and techniques or partner
with collaborators in order to develop products more rapidly or successfully than we or our collaborators are able to do.
Many of our competitors, particularly large pharmaceutical companies, have substantially greater financial, technical and
human resources and larger research and development staffs than we do. In addition, academic institutions, government
agencies and other public and private organizations conducting research may seek patent protection with respect to
potentially competitive products or technologies and may establish exclusive collaborative or licensing relationships with
our competitors.
We believe that our ability to compete is dependent, in part, upon our ability to create, maintain and license
scientifically advanced technology and upon our and our collaborators’ ability to develop and commercialize
pharmaceutical products based on this technology, as well as our ability to attract and retain qualified personnel, obtain
patent protection or otherwise develop proprietary technology or processes and secure sufficient capital resources for the
expected substantial time period between technological conception and commercial sales of products based upon our
technology. The failure by any of our collaborators or us in any of those areas may prevent the successful
commercialization of our potential drug targets.
Many of our competitors, either alone or together with their collaborative partners, have significantly greater
experience than we do in:
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identifying and validating targets;
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screening compounds against targets; and
undertaking preclinical testing and clinical trials.
Accordingly, our competitors may succeed in obtaining patent protection, identifying or validating new targets
or discovering new drug compounds before we do.
Our competitors might develop technologies and drugs that are more effective or less costly than any that are
being developed by us or that would render our technology and product candidates obsolete and noncompetitive. In
addition, our competitors may succeed in obtaining the approval of the FDA or other regulatory agencies for product
candidates more rapidly. Companies that complete clinical trials, obtain required regulatory agency approvals and
commence commercial sale of their drugs before us may achieve a significant competitive advantage, including certain
patent and FDA marketing exclusivity rights that would delay or prevent our ability to market certain products. Any
drugs resulting from our research and development efforts, or from our joint efforts with our existing or future
collaborative partners, might not be able to compete successfully with competitors’ existing or future products or obtain
regulatory approval in the United States or elsewhere.
We face and will continue to face intense competition from other companies for collaborative arrangements
with pharmaceutical and biotechnology companies, for establishing relationships with academic and research institutions
and for licenses to additional technologies. These competitors, either alone or with their collaborative partners, may
succeed in developing technologies or products that are more effective than ours.
Our ability to compete successfully will depend, in part, on our ability to:
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identify and validate targets;
discover candidate drug compounds that interact with the targets we identify;
attract and retain scientific and product development personnel;
obtain patent or other proprietary protection for our new drug compounds and technologies; and
enter commercialization agreements for our new drug compounds.
Operating Expenses
A significant portion of our operating expenses is related to research and development and costs for potential
commercial launch of fostamatinib in ITP. We intend to maintain our strong commitment to research and
development. We also expect to continue to hire and recruit experienced commercial professionals, including sales
representatives in the hematology area, and commercial operations, marketing, and market access professionals in
preparation for the commercial launch of fostamatinib in ITP in the U.S. See “Item 8. Financial Statements and
Supplementary Data” of this Annual Report on Form 10-K for costs and expenses related to research and development,
and other financial information for each of the fiscal years 2017, 2016 and 2015.
Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries and
jurisdictions, extensively regulate, among other things, the research, development, testing, manufacture, quality control,
approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, sales, post-
approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining
regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance
with applicable statutes and regulations, require the expenditure of substantial time and financial resources.
Review and Approval of Drugs in the United States
In the United States, the FDA approves and regulates drugs under the Federal Food, Drug, and Cosmetic Act, or
FDCA, and implementing regulations. The failure to comply with requirements under the FDCA and other applicable
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laws at any time during the product development process, approval process or after approval may subject an applicant
and/or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve pending
applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of
letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines,
refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties.
A drug product candidate must be approved by the FDA through the new drug application, or NDA. An applicant
seeking approval to market and distribute a new drug product in the United States must typically undertake the
following:
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completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the
FDA’s good laboratory practice, or GLP, regulations;
submission to the FDA of an IND, which must take effect before human clinical trials may begin;
approval by an independent institutional review board, or IRB, for each clinical site before each clinical
trial may be initiated;
performance of adequate and well-controlled human clinical trials in accordance with good clinical
practices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication;
preparation and submission to the FDA of an NDA requesting marketing for one or more proposed
indications;
review by an FDA advisory committee, if requested by the FDA;
satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which
the product, or components thereof, are produced to assess compliance with current Good Manufacturing
Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to
preserve the product’s identity, strength, quality and purity;
satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the
integrity of the clinical data;
payment of user fees and securing FDA approval of the NDA; and
compliance with any post-approval requirements, including the potential requirement to implement a Risk
Evaluation and Mitigation Strategy, or REMS, and potentially post-market requirement, or PMR, and
commitment, or PMC, studies.
Before an applicant begins testing a compound with potential therapeutic value in humans, the drug candidate
enters the preclinical testing stage. Preclinical studies include laboratory evaluation as well as in vitro and animal studies
to assess the safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use.
The results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data
or literature and plans for clinical studies, among other things, are submitted to the FDA as part of an IND. Some long-
term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, and long term toxicity
studies, may continue after the IND is submitted.
In support of the IND, applicants must submit a protocol for each clinical trial and any subsequent protocol
amendments. In addition, the results of the preclinical tests, together with manufacturing information, analytical data,
any available clinical data or literature, among other things, are submitted to the FDA as part of an IND. The FDA
requires a 30-day waiting period after the submission of each IND before clinical trials may begin. At any time during
this 30-day period, or thereafter, the FDA may raise concerns or questions about the conduct of the trials as outlined in
the IND and impose a clinical hold or partial clinical hold. In this case, the IND sponsor and the FDA must resolve any
outstanding concerns before clinical trials can begin or resume. An IRB representing each institution participating in the
clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB
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must conduct continuing review and reapprove the study at least annually. An IRB can suspend or terminate approval of
a clinical trial.
Clinical trials involve the administration of the investigational product to human subjects under the supervision of
qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all
research subjects provide their informed consent in writing before their participation in any clinical trial. Human clinical
trials are typically conducted in sequential phases, which may overlap or be combined:
• Phase 1. The drug is initially introduced into a small number of healthy human subjects or, in certain
indications such as cancer, patients with the target disease or condition and tested for safety, dosage
tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its
effectiveness and to determine optimal dosage.
• Phase 2. The drug is administered to a limited patient population to identify possible adverse effects and
safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to
determine dosage tolerance and optimal dosage.
• Phase 3. These clinical trials are commonly referred to as “pivotal” studies, which denote a study that
presents the data that the FDA or other relevant regulatory agency will use to determine whether or not to
approve a drug. The drug is administered to an expanded patient population, generally at geographically
dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate
the efficacy and safety of the product for approval, identify adverse effects, establish the overall risk-
benefit profile of the product and to provide adequate information for the labeling of the product.
• Phase 4. Post-approval studies may be conducted after initial marketing approval. These studies are used to
gain additional experience from the treatment of patients in the intended therapeutic indication.
The FDA or the sponsor or the data monitoring committee may suspend or terminate a clinical trial at any time on
various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk.
Review of an NDA by the FDA
If clinical trials are successful, the next step in the drug development process is the preparation and submission to
the FDA of a NDA. The NDA is the vehicle through which drug applicants formally propose that the FDA approve a
new drug for marketing and sale in the United States for one or more indications. The NDA must contain a description of
the manufacturing process and quality control methods, as well as results of preclinical tests, toxicology studies, clinical
trials and proposed labeling, among other things. The submission of most NDAs is subject to an application user fee and
the sponsor of an approved NDA is also subject to annual product and establishment user fees. These fees are typically
increased annually.
Following submission of an NDA, the FDA conducts a preliminary review of an NDA to determine whether the
application is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA
begins an in-depth substantive review. The FDA has agreed to goals to review and act within ten months from filing for
standard review NDAs and within six months for NDAs that have been designated for “priority review”.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be
manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and
facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within
required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites
to assure compliance with GCP. In addition, as a condition of approval, the FDA may require an applicant to develop a
REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product
outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population
likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment,
seriousness of known or potential adverse events, and whether the product is a new molecular entity.
The FDA is required to refer an application for a novel drug to an advisory committee or explain why such referral
was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other
scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be
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approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it
considers such recommendations carefully when making decisions.
On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the
inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An
approval letter authorizes commercial marketing of the product with specific prescribing information for specific
indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial
additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have
been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter.
If the FDA approves a product, it may limit the approved indications for use for the product, require that
contraindications, warnings or precautions be included in the product labeling, require that post-approval studies,
including Phase 4 clinical trials, be conducted to further assess the drug’s safety after approval, require testing and
surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution
restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market
and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of
post-market studies or surveillance programs. After approval, many types of changes to the approved product, such as
adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements
and FDA review and approval.
Post-Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation
by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling
and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most
changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA
review and approval. In addition, drug manufacturers and other entities involved in the manufacture and distribution of
approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic
unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the
manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA
regulations also require investigation and correction of any deviations from cGMP and impose reporting and
documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use.
Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality
control to maintain cGMP compliance.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and
standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously
unknown problems with a product, including adverse events of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved
labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or
imposition of distribution or other restrictions under a REMS program.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the
market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved
label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses,
and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing
Act, or PDMA, and its implementing regulations, as well as the Drug Supply Chain Security Act, or DSCA, which
regulate the distribution and tracing of prescription drugs and prescription drug samples at the federal level, and set
minimum standards for the regulation of drug distributors by the states. The PDMA, its implementing regulations and
state laws limit the distribution of prescription pharmaceutical product samples, and the DSCA imposes requirements to
ensure accountability in distribution and to identify and remove counterfeit and other illegitimate products from the
market.
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Orphan Drug Designation and Exclusivity
Under the Orphan Drug Act, the FDA may designate a drug product as an “orphan drug” if it is intended to treat a
rare disease or condition, generally meaning that it affects fewer than 200,000 individuals in the United States, or more
in cases in which there is no reasonable expectation that the cost of developing and making a drug product available in
the United States for treatment of the disease or condition will be recovered from sales of the product. A company must
request orphan drug designation before submitting an NDA for the drug and rare disease or condition. Orphan drug
designation does not shorten the goal dates for the regulatory review and approval process, although it does convey
certain advantages such as tax benefits and exemption from the application fee.
If a product with orphan designation receives the first FDA approval for the disease or condition for which it has
such designation, the product generally will receive orphan drug exclusivity. Orphan drug exclusivity means that the
FDA may not approve another sponsor’s marketing application for the same drug for the same indication for seven years,
except in certain limited circumstances. Orphan exclusivity does not block the approval of a different drug for the same
rare disease or condition, nor does it block the approval of the same drug for different indications. If a drug designated as
an orphan drug ultimately receives marketing approval for an indication broader than what was designated in its orphan
drug application, it may not be entitled to exclusivity. Orphan exclusivity will not bar approval of another product under
certain circumstances, including if a subsequent product with the same drug for the same indication is shown to be
clinically superior to the approved product on the basis of greater efficacy or safety, or providing a major contribution to
patient care, or if the company with orphan drug exclusivity is not able to meet market demand.
Pharmaceutical Coverage, Pricing and Reimbursement
In the United States and markets in other countries, patients who are prescribed treatments for their conditions and
providers performing the prescribed services generally rely on third-party payors or government to reimburse all or part
of the associated healthcare costs. Significant uncertainty exists as to the coverage and reimbursement status of products
approved by the FDA and other government authorities. For example, there have been several recent U.S. Congressional
inquiries and proposed federal legislation designed to, among other things, bring more transparency to drug pricing,
review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare,
and reform government program reimbursement methodologies for drugs. Further, Congress and the Trump
administration have each indicated that it will continue to seek new legislative and/or administrative measures to control
drug costs. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to
control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts,
restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, to
encourage importation from other countries and bulk purchasing. Thus, even if a product candidate is approved, sales of
the product will depend, in part, on the extent to which third-party payors, including government health programs in the
United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide
coverage, and establish adequate reimbursement levels for, the product. The process for determining whether a payor
will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the
payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices
charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and
imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, also
known as a formulary, which might not include all of the approved products for a particular indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may
need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-
effectiveness of the product, in addition to the costs required to obtain FDA or other comparable marketing approvals.
Nonetheless, product candidates may not be considered medically necessary or cost effective. A decision by a third-party
payor not to cover a product candidate could reduce physician utilization once the product is approved and have a
material adverse effect on sales, results of operations and financial condition. Additionally, a payor’s decision to provide
coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s
determination to provide coverage for a drug product does not assure that other payors will also provide coverage and
reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor.
The containment of healthcare costs also has become a priority of federal, state and foreign governments and the
prices of drugs have been a focus in this effort. Governments have shown significant interest in implementing cost-
containment programs, including price controls, restrictions on reimbursement and requirements for substitution of
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generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in
jurisdictions with existing controls and measures, could further limit a company’s revenue generated from the sale of any
approved products. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable
coverage and reimbursement status is attained for one or more products for which a company or its collaborators receive
marketing approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Healthcare Law and Regulation
Healthcare providers and third-party payors play a primary role in the recommendation and prescription of drug
products that are granted marketing approval. Arrangements with providers, consultants, third-party payors and
customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims laws, reporting of payments to
physicians and teaching physicians and patient privacy laws and regulations and other healthcare laws and regulations
that may constrain business and/or financial arrangements. Restrictions under applicable federal and state healthcare
laws and regulations, include the following:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from
knowingly and willfully soliciting, offering, paying, receiving or providing remuneration, directly or
indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase,
order or recommendation of, any good or service, for which payment may be made, in whole or in part,
under a federal healthcare program such as Medicare and Medicaid;
the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary
penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or
causing to be presented, to the federal government, claims for payment that are false, fictitious or
fraudulent or knowingly making, using or causing to made or used a false record or statement to avoid,
decrease or conceal an obligation to pay money to the federal government.
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the
Health Information Technology for Economic and Clinical Health Act, and their respective implementing
regulations, which impose obligations, including mandatory contractual terms, with respect to safeguarding
the privacy, security and transmission of individually identifiable health information;
the federal transparency requirements known as the federal Physician Payments Sunshine Act, which
requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the
Centers for Medicare & Medicaid Services, or CMS, within the United States Department of Health and
Human Services, information related to payments and other transfers of value made by that entity to
physicians and teaching hospitals, as well as ownership and investment interests held by physicians and
their immediate family members; and
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which
may apply to healthcare items or services that are reimbursed by non-governmental third-party payors,
including private insurers.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to
requiring drug manufacturers to report information related to payments to physicians and other health care providers or
marketing expenditures.
Healthcare Reform
The United States and state governments continue to propose and pass legislation designed to reduce the cost of
healthcare. In March 2010, the United States Congress enacted the Patient Protection and Affordable Care Act and the
Health Care and Education Reconciliation Act, or the Affordable Care Act, which included changes to the coverage and
payment for drug products under government health care programs. Some of the provisions of the Affordable Care Act
have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the
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Affordable Care Act, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the
Affordable Care Act. Since January 2017, President Trump has signed two Executive Orders designed to delay the
implementation of certain provisions of the Affordable Care Act or otherwise circumvent some of the requirements for
health insurance mandated by the Affordable Care Act. Concurrently, Congress has considered legislation that would
repeal or repeal and replace all or part of the Affordable Care Act. While Congress has not passed comprehensive repeal
legislation, two bills affecting the implementation of certain taxes under the Affordable Care Act have been enacted. The
Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared
responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health
coverage for all or part of a year that is commonly referred to as the “individual mandate”. Additionally, on January 22,
2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the
implementation of certain mandated fees under the Affordable Care Act, including the so-called “Cadillac” tax on certain
high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on
market share, and the medical device excise tax on non-exempt medical devices. Congress also could consider additional
legislation to repeal or replace other elements of the Affordable Care Act.
Outside the United States, ensuring adequate coverage and payment for our products will face challenges. Pricing
of prescription pharmaceuticals is subject to governmental control in many countries. Pricing negotiations with
governmental authorities can extend well beyond the receipt of regulatory approval for a product and may require us to
conduct a clinical trial that compares the cost effectiveness of our product candidates or products to other available
therapies. The conduct of such a clinical trial could be expensive and result in delays in our commercialization efforts.
Third-party payors are challenging the prices charged for medical products and services, and many third-party payors
limit reimbursement for newly-approved health care products. Recent budgetary pressures in many European Union
countries are also causing governments to consider or implement various cost-containment measures, such as price
freezes, increased price cuts and rebates. If budget pressures continue, governments may implement additional cost-
containment measures. Cost-control initiatives could decrease the price we might establish for products that we may
develop or sell, which would result in lower product revenues or royalties payable to us. There can be no assurance that
any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable
reimbursement and pricing arrangements for any of our products.
Manufacturing and Raw Materials
We do not own or operate manufacturing or distribution facilities or resources for clinical or commercial
production and distribution of our product for commercial launch or for preclinical and clinical trials. We assign internal
personnel to manage and oversee third parties working on our behalf under contract. These third parties manufacture raw
materials, the active pharmaceutical ingredient, or API, and finished drug product for potential commercial distribution
and for use in clinical studies. We currently rely on, and will continue to rely on these third-party contract manufacturers
to produce sufficient quantities of our products.
Employees
As of December 31, 2017, we had 103 employees. None of our employees are represented by a collective
bargaining arrangement, and we believe our relationship with our employees is good. Recruiting and retaining
experienced and qualified sales and marketing personnel to successfully launch our product and scientific personnel to
continue to perform research and development work in the future will be critical to our business success. We may not be
able to attract and retain personnel on acceptable terms given the competition among pharmaceutical and biotechnology
companies, academic and research institutions and government agencies for experienced scientists. Additionally, as we
intend to commercialize fostamatinib in ITP in the U.S. on our own in 2018, subject to FDA approval, we will continue
to hire and recruit experienced commercial professionals, including sales management, marketing, and market access
professionals to support these efforts.
Scientific and Medical Advisors
We utilize scientists, key opinion leaders and physicians to advise us on scientific and medical matters as part of
our ongoing research and product development efforts, including experts in clinical trial design, preclinical development
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work, chemistry, biology, immunology, oncology and immuno-oncology. Certain of our consultants receive
non-employee options to purchase our common stock and certain of our scientific and medical advisors receive
honorarium for time spent assisting us.
Available Information
Our website is located at www.rigel.com. The information found on our website is not part of or incorporated by
reference into this Annual Report on Form 10-K. We electronically file with the Securities and Exchange Commission
(SEC) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to the reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. We make available
free of charge on or through our website copies of these reports as soon as reasonably practicable after we electronically
file these reports with, or furnish them to, the SEC. Further, copies of these reports are available at the SEC’s Public
Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference
Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains
reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at
www.sec.gov.
Item 1A. Risk Factors
In evaluating our business, you should carefully consider the following risks, as well as the other information
contained in this Annual Report on Form 10-K. These risk factors could cause our actual results to differ materially
from those contained in forward-looking statements we have made in this Annual Report on Form 10-K and those we
may make from time to time. If any of the following risks actually occurs, our business, financial condition and operating
results could be harmed. The risks and uncertainties described below are not the only ones facing us. Additional risks
and uncertainties not presently known to us, or that we currently see as immaterial, may also harm our business.
We might not be able to commercialize our product candidates successfully if problems arise in the clinical testing
and approval process.
Commercialization of our product candidates depends upon successful completion of extensive preclinical
studies and clinical trials to demonstrate their safety and efficacy for humans. Preclinical testing and clinical
development are long, expensive and uncertain processes.
In connection with clinical trials of our product candidates, we face the risks that:
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the product candidate may not prove to be effective;
the product candidate may cause harmful side effects;
the clinical results may not replicate the results of earlier, smaller trials;
• we, or the FDA or similar foreign regulatory authorities, may terminate or suspend the trials;
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our results may not be statistically significant;
patient recruitment and enrollment may be slower than expected;
patients may drop out of the trials; and
regulatory and clinical trial requirements, interpretations or guidance may change.
We do not know whether we will be permitted to undertake clinical trials of potential products beyond the trials
already concluded and the trials currently in process. It will take us, or our collaborative partners several years to
complete any such testing, and failure can occur at any stage of testing. Interim results of trials do not necessarily predict
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final results, and acceptable results in early trials may not be repeated in later trials. A number of companies in the
pharmaceutical industry, including biotechnology companies, have suffered significant setbacks in advanced clinical
trials, even after achieving promising results in earlier trials. For example, in October 2016, we announced that our
second Phase 3 study in our FIT Phase 3 clinical program did not meet its primary endpoint. Moreover, we or our
collaborative partners or regulators may decide to discontinue development of any or all of these projects at any time for
commercial, scientific or other reasons. Further, in August 2014, we discontinued our indirect AMPK activator program,
R118, due to its side-effect profile in Phase 1 clinical trials.
We cannot assure you that we will be able to successfully complete the clinical development of our product
candidates or receive regulatory approval to ultimately commercialize any of our other product candidates. For example,
if we are unable to ultimately commercialize fostamatinib, our business will be harmed.
If we are unable to obtain regulatory approval to market products in the United States and foreign jurisdictions, we
will not be permitted to commercialize products we or our collaborative partners may develop.
We cannot predict whether regulatory clearance will be obtained for any product that we, or our collaborative
partners, hope to develop. Satisfaction of regulatory requirements typically takes many years, is dependent upon the type,
complexity and novelty of the product and requires the expenditure of substantial resources. Of particular significance to
us are the requirements relating to research and development and testing.
Before commencing clinical trials in humans in the United States, we, or our collaborative partners, will need to
submit and receive approval from the FDA of an IND. Clinical trials are subject to oversight by institutional review
boards and the FDA and:
• must be conducted in conformance with the FDA’s good clinical practices and other applicable regulations;
• must meet requirements for institutional review board oversight;
• must meet requirements for informed consent;
•
are subject to continuing FDA and regulatory oversight;
• may require large numbers of test subjects; and
• may be suspended by us, our collaborators or the FDA at any time if it is believed that the subjects
participating in these trials are being exposed to unacceptable health risks or if the FDA finds deficiencies
in the IND or the conduct of these trials.
While we have stated that we intend to file additional INDs for future product candidates, this is only a
statement of intent, and we may not be able to do so because we may not be able to identify potential product candidates.
In addition, the FDA may not approve any IND we or our collaborative partners may submit in a timely manner, or at all.
Before receiving FDA approval to market a product, we must demonstrate with substantial clinical evidence
that the product is safe and effective in the patient population and the indication that will be treated. Data obtained from
preclinical and clinical activities are susceptible to varying interpretations that could delay, limit or prevent regulatory
approvals. In addition, delays or rejections may be encountered based upon additional government regulation from future
legislation or administrative action or changes in FDA policy during the period of product development, clinical trials
and FDA regulatory review. Failure to comply with applicable FDA or other applicable regulatory requirements may
result in criminal prosecution, civil penalties, recall or seizure of products, total or partial suspension of production or
injunction, adverse publicity, as well as other regulatory action against our potential products or us. Additionally, we
have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approval.
If regulatory approval of a product is granted, this approval will be limited to those indications or disease states
and conditions for which the product is demonstrated through clinical trials to be safe and efficacious. We cannot assure
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you that any compound developed by us, alone or with others, will prove to be safe and efficacious in clinical trials and
will meet all of the applicable regulatory requirements needed to receive marketing approval.
Outside the United States, our ability, or that of our collaborative partners, to market a product is contingent
upon receiving a marketing authorization from the appropriate regulatory authorities. This foreign regulatory approval
process typically includes all of the risks and costs associated with FDA approval described above and may also include
additional risks and costs, such as the risk that such foreign regulatory authorities, which often have different regulatory
and clinical trial requirements, interpretations and guidance from the FDA, may require additional clinical trials or
results for approval of a product candidate, any of which could result in delays, significant additional costs or failure to
obtain such regulatory approval. For example, there can be no assurance that we or our collaborative partners will not
have to provide additional information or analysis, or conduct additional clinical trials, before receiving approval to
market product candidates.
Even if we obtain regulatory approval for fostamatinib in ITP or any of our other product candidates, we or our
collaborative partners will still face extensive regulatory requirements and our products may face future development
and regulatory difficulties.
Even if we obtain regulatory approval for fostamatinib or any of our other product candidates in the United
States, the FDA may still impose significant restrictions on the indicated uses or marketing of our product candidates, or
impose ongoing requirements for potentially costly post-approval trials or post-market surveillance. Additionally, the
labeling ultimately approved for fostamatinib in ITP and any of our product candidates may likely include restrictions on
their uses and may be subject to ongoing FDA requirements governing the labeling, packaging, storage, distribution,
safety surveillance, advertising, promotion, record-keeping and reporting of safety and other post-market information.
The holder of an approved NDA is obligated to monitor and report adverse events and any failure of a product to meet
the specifications in the NDA. The holder of an approved NDA must also submit new or supplemental applications and
obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process.
Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other
potentially applicable federal and state laws.
In addition, manufacturers of drug products and their facilities are subject to payment of user fees and continual
review and periodic inspections by the FDA and other regulatory authorities for compliance with current good
manufacturing practices, or cGMP, and adherence to commitments made in the NDA. If we, or a regulatory agency,
discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or
problems with the facility where the product is manufactured, a regulatory agency may impose restrictions relative to
that product or the manufacturing facility, including requiring recall or withdrawal of the product from the market or
suspension of manufacturing.
If we fail to comply with applicable regulatory requirements following approval of our product candidate, a
regulatory agency may:
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issue a warning letter asserting that we are in violation of the law;
seek an injunction or impose civil or criminal penalties or monetary fines;
suspend or withdraw regulatory approval;
suspend any ongoing clinical trials;
refuse to approve a pending NDA or supplements to an NDA submitted by us;
seize product; or
refuse to allow us to enter into supply contracts, including government contracts.
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Any government investigation of alleged violations of law could require us to expend significant time and
resources in response and could generate negative publicity. The occurrence of any event or penalty described above
may delay or inhibit our ability to successfully commercialize our products and generate revenues.
Even if we, or any of our collaborative partners, are able to commercialize any product candidate that we, or they,
develop, the product may become subject to unfavorable pricing regulations, third-party payor reimbursement
practices or labeling restrictions, any of which could harm our business.
The commercial success of any of product candidates will depend substantially on the extent to which the costs
of our product candidates will be paid by third-party payors, including government health care programs and private
health insurers. If coverage is not available, or reimbursement is limited, we, or any of our collaborative partners, may
not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved
reimbursement amount may not be high enough to allow us, or any of our collaborative partners, to establish or maintain
pricing sufficient to realize a sufficient return on our or their investments. In the United States, no uniform policy of
coverage and reimbursement for products exists among third-party payors and coverage and reimbursement levels for
products can differ significantly from payor to payor. As a result, the coverage determination process is often a time
consuming and costly process that may require us to provide scientific and clinical support for the use of our products to
each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or
obtained in the first instance.
There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved
drugs. Marketing approvals, pricing and reimbursement for new drug products vary widely from country to country.
Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing
review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription
pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a
result, we, or any of our collaborative partners, might obtain marketing approval for a product in a particular country, but
then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which
may negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing
limitations may hinder our ability or the ability of any future collaborators to recoup our or their investment in one or
more product candidates, even if our product candidates obtain marketing approval.
Patients who are provided medical treatment for their conditions generally rely on third-party payors to
reimburse all or part of the costs associated with their treatment. Therefore, our ability, and the ability of any of our
collaborative partners, to commercialize successfully any of our product candidates will depend in part on the extent to
which coverage and adequate reimbursement for these products and related treatments will be available from third-party
payors.
Additionally, the labeling ultimately approved for any of our product candidates may include restrictions on their
uses and may be subject to ongoing FDA requirements governing the labeling, packaging, storage, distribution, safety
surveillance, advertising, promotion, record-keeping and reporting of safety and other post-market information. If we or
any of our collaborative partners do not timely obtain or comply with the labeling approval by the FDA on any of our
product candidates, it may delay or inhibit our ability to successfully commercialize our products and generate revenues.
Enacted or future legislation, including potentially unfavorable pricing regulations or other healthcare reform
initiatives, may increase the difficulty and cost for us to obtain regulatory approval of and commercialize our product
candidates and affect the prices we may set or obtain.
The regulations that govern, among other things, regulatory approvals, coverage, pricing and reimbursement for
new drug products vary widely from country to country. In the United States and some foreign jurisdictions, there have
been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could
prevent or delay regulatory approval of our product candidates, restrict or regulate post-approval activities and affect our
ability to successfully sell any product candidates for which we obtain regulatory approval. In particular, in March 2010,
the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act,
collectively, the Affordable Care Act, was enacted, which substantially changes the way health care is financed by both
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governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The Affordable Care Act
and its implementing regulations, among other things, addressed a new methodology by which rebates owed by
manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including our
product candidates, that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates
owed by manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to
utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to
new annual fees and taxes for certain branded prescription drugs, provided incentives to programs that increase the
federal government’s comparative effectiveness research and established a new Medicare Part D coverage gap discount
program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable
brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient
drugs to be covered under Medicare Part D.
Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act
was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending
reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit
reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering
the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare
payments to providers of 2% per fiscal year, which went into effect in April 2013, and will remain in effect through 2025
unless additional Congressional action is taken. In January 2013, President Obama signed into law the American
Taxpayer Relief Act of 2012, or the ATRA, which, among other things, further reduced Medicare payments to several
providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the
government to recover overpayments to providers from three to five years.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and
state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We
cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance
companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare
and/or impose price controls may adversely affect:
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the demand for our product candidates, if we obtain regulatory approval;
our ability to set a price that we believe is fair for our products;
our ability to generate revenue and achieve or maintain profitability;
the level of taxes that we are required to pay; and
the availability of capital.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction
in payments from private payors, which may adversely affect our future profitability.
Since its enactment, there have been judicial and Congressional challenges to numerous provisions of the
Affordable Care Act, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the
Affordable Care Act. Since January 2017, President Trump has signed two Executive Orders designed to delay the
implementation of certain provisions of the Affordable Care Act or otherwise circumvent some of the requirements for
health insurance mandated by the Affordable Care Act. Concurrently, Congress has considered legislation that would
repeal or repeal and replace all or part of the Affordable Care Act. While Congress has not passed comprehensive repeal
legislation, two bills affecting the implementation of certain taxes under the Affordable Care Act have been enacted. The
Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared
responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health
coverage for all or part of a year that is commonly referred to as the “individual mandate”. Additionally, on January 22,
2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the
implementation of certain mandated fees under the Affordable Care Act, including the so-called “Cadillac” tax on certain
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high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on
market share, and the medical device excise tax on non-exempt medical devices. Congress may consider other legislation
to repeal and replace elements of the Affordable Care Act. Any repeal and replace legislation may have the effect of
limiting the amounts that government agencies will pay for healthcare products and services, which could result in
reduced demand for our products or additional pricing pressure, or may lead to significant deregulation, which could
make the introduction of competing products and technologies much easier. Policy changes, including potential
modification or repeal of all or parts of the Affordable Care Act or the implementation of new health care legislation
could result in significant changes to the health care system, which could have a material adverse effect on our business,
results of operations and financial condition.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales
and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be
enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such
changes on the regulatory approvals of our product candidates, if any, may be.
In the United States, the European Union and other potentially significant markets for our product candidates,
government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical
products and services, particularly for new and innovative products and therapies, which has resulted in lower average
selling prices. For example, in the United States, there have been several recent Congressional inquiries and proposed
bills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing
and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. Further,
Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or
administrative measures to control drug costs. At the state level, legislatures have increasingly passed legislation and
implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient
reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and
transparency measures, and, in some cases, to encourage importation from other countries and bulk purchasing.
Furthermore, the increased emphasis on managed healthcare in the United States and on country and regional pricing and
reimbursement controls in the European Union will put additional pressure on product pricing, reimbursement and usage,
which may adversely affect our future product sales and results of operations. These pressures can arise from rules and
practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare,
Medicaid and healthcare reform, pharmaceutical reimbursement policies and pricing in general.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws and
other federal and state healthcare laws, and the failure to comply with such laws could result in substantial penalties.
Our employees, independent contractors, consultants, principal investigators, CROs, commercial partners and
vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards
and requirements.
We are exposed to the risk of fraud, misconduct or other illegal activity by our employees, independent
contractors, consultants, principal investigators, CROs, commercial partners and vendors. Misconduct by these parties
could include intentional, reckless and/or negligent conduct that fails to: comply with the laws of the FDA and other
similar foreign regulatory bodies; provide true, complete and accurate information to the FDA and other similar foreign
regulatory bodies; comply with manufacturing standards we have established; comply with federal and state data
privacy, security, fraud and abuse and other healthcare laws and regulations in the United States and similar foreign
fraudulent misconduct laws; or report financial information or data accurately or to disclose unauthorized activities to us.
If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United
States, our potential exposure under such laws would increase significantly, and our costs associated with compliance
with such laws would likely also increase. These laws may impact, among other things, our current activities with
principal investigators and research patients, as well as proposed and future sales, marketing and education programs. In
particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements
in the healthcare industry, are subject to extensive laws and regulations intended to prevent fraud, misconduct,
kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of
pricing, discounting, marketing and promotion, including off-label uses of our products, structuring and commission(s),
certain customer incentive programs and other business arrangements generally. Activities subject to these laws also
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involve the improper use or misrepresentation of information obtained in the course of patient recruitment for clinical
trials, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of drug product,
which could result in regulatory sanctions and cause serious harm to our reputation. The laws that may affect our ability
to operate include, but are not limited to:
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the Federal Anti-Kickback Statute, which prohibits, among other things, individuals and entities from
knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback,
bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either
the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or
service for which payment may be made, in whole or in part, under a federal healthcare program, such as the
Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the statute or
specific intent to violate it in order to have committed a violation;
federal civil and criminal false claims laws and civil monetary penalty laws, including the civil False Claims
Act, which impose criminal and civil penalties, through government, civil whistleblower or qui tam actions, on
individuals and entities for, among other things, knowingly presenting, or causing to be presented, claims for
payment or approval from Medicare, Medicaid, or other third-party payors that are false, fictitious or fraudulent,
or knowingly making, using or causing to be made or used, a false statement to avoid, decrease or conceal an
obligation to pay money to the federal government. In addition, the government may assert that a claim
including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false
or fraudulent claim for purposes of the False Claims Act;
the Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal
and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a
scheme to defraud or to obtain any healthcare benefit program or obtain, by means of false or fraudulent
pretenses, representations, or promises, any of the money or property owned by, or under the custody or control
of, any healthcare benefit program, regardless of the payor (e.g., public or private), willfully obstructing a
criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up
by any trick or device a material fact or making any materially false, fictitious or fraudulent statements in
connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare
matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge
of the statute or specific intent to violate it in order to have committed a violation;
• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or
HITECH, and their respective implementing regulations, which impose requirements on certain covered
healthcare providers, health plans, and healthcare clearinghouses, as well as their respective business associates
that perform services for them that involve the creation, use, maintenance or disclosure of, individually
identifiable health information, relating to the privacy, security and transmission of individually identifiable
health information without appropriate authorization;
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the federal physician payment transparency requirements, sometimes referred to as the “Physician Payments
Sunshine Act,” created under the Patient Protection and Affordable Care Act, as amended by the Health Care
and Education Reconciliation Act, collectively the Affordable Care Act, and its implementing regulations,
which require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is
available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to
report annually to the United States Department of Health and Human Services, or HHS, information related to
payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists,
podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by
physicians and their immediate family members;
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the U.S. Federal Food, Drug and Cosmetic Act, or FDCA, which prohibits, among other things, the adulteration
or misbranding of drugs and medical devices; and
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federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and
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activities that potentially harm consumers.
Additionally, we are subject to state and foreign equivalents of each of the healthcare fraud and abuse laws
described above, among others, some of which may be broader in scope and may apply regardless of the payor. We may
also be subject to state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical
industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal
government or otherwise restrict payments that may be made to healthcare providers; and to report information related to
payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. We may
also be subject to state and foreign laws governing the privacy and security of health information in certain
circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus
complicating compliance efforts.
It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and
prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting
us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such
laws or regulations. We are also subject to the risk that a person or government could allege such fraud or other
misconduct, even if none occurred. Efforts to ensure that our business arrangements will comply with applicable
healthcare laws and regulations will involve substantial costs. It is possible that governmental and enforcement
authorities will conclude that our business practices may not comply with current or future statutes, regulations or case
law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted
against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant
impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement,
monetary fines, individual imprisonment, additional reporting obligations and oversight if we become subject to a
corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, possible
exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages,
reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations, any of
which could adversely affect our ability to operate our business and our results of operations. In addition, the approval
and commercialization of any of our product candidates outside the United States will also likely subject us to foreign
equivalents of the healthcare laws mentioned above, among other foreign laws.
Our activities and drugs will still be subject to extensive post-marketing regulation if approved.
Following regulatory approval of any of our drug candidates, we and our collaborators will be subject to
ongoing obligations and continued regulatory review from the FDA and other applicable regulatory agencies, such as
continued adverse event reporting requirements. There may also be additional post-marketing obligations imposed by the
FDA or other regulatory agencies. These obligations may result in significant expense and limit the ability to
commercialize such drugs.
The FDA or other regulatory agencies may also require that the sponsor of the NDA or foreign equivalent, as
applicable, conduct additional clinical trials to further assess approved drugs after approval under a post-approval
commitment. Such additional studies may be costly and may impact the commercialization of the drug. Along with being
costly and time consuming, a delay or unfavorable results from these trials could negatively impact market acceptance of
our product candidates; limit the revenues we generate from sales; result in withdrawal from the market; and result in
litigation.
The FDA or other regulatory agencies may also impose significant restrictions on the indicated uses for which a
drug may be marketed. Additionally, the FDA may require a Risk Evaluation and Mitigation Strategies, or REMS, study,
including in connection with a drug’s approval, to help ensure that the benefits of the drug outweigh its risks. A REMS
may be required to include various elements, such as a medication guide or patient package insert, a communication plan
to educate healthcare providers of the drug’s risks, limitations on who may prescribe or dispense the drug, requirements
that patients enroll in a registry or undergo certain health evaluations or other measures that the FDA deems necessary to
ensure the safe use of the drug.
With regard to any of drug that receives regulatory approval, the labeling, packaging, adverse event reporting,
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storage, advertising and promotion for the drug will be subject to extensive regulatory requirements. We and the
manufacturers of our products are also required to comply with Good Manufacturing Practices (cGMP) regulations,
which include requirements relating to quality control and quality assurance, as well as the corresponding maintenance
of records and documentation. Further, regulatory agencies must approve these manufacturing facilities before they can
be used to manufacture our products, and these facilities are subject to ongoing regulatory inspections. In addition,
regulatory agencies subject a drug, its manufacturer and the manufacturer’s facilities to continual review and inspections.
The subsequent discovery of previously unknown problems with a drug, including adverse events of unanticipated
severity or frequency, or problems with the facility where the drug is manufactured, may result in restrictions on the
marketing of that drug, up to and including withdrawal of the drug from the market. In the United States, the DEA and
comparable state-level agencies also heavily regulate the manufacturing, holding, processing, security, recordkeeping
and distribution of drugs that are considered controlled substances, and the DEA periodically inspects facilities for
compliance with its rules and regulations.
Even if our product candidates receive regulatory approval, they may fail to achieve the degree of market acceptance
by physicians, patients, healthcare payors and others in the medical community necessary for commercial success, in
which case we may not generate significant revenues or become profitable.
If any of our product candidates receive regulatory approval, they may nonetheless fail to gain sufficient market
acceptance by physicians, hospital administrators, patients, healthcare payors and others in the medical community. The
degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of
factors, including the following:
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relative convenience and ease of administration;
the willingness of the target patient population to try new therapies and of physicians to prescribe these
therapies;
the willingness of physicians to change their current treatment practices;
the willingness of hospitals and hospital systems to include our product candidates as treatment options;
demonstration of efficacy and safety in clinical trials;
the prevalence and severity of any side effects;
the ability to offer product candidates for sale at competitive prices;
the price we charge for our product candidates;
the strength of marketing and distribution support; and
the availability of third-party coverage or reimbursement.
Efforts to educate the physicians, patients, healthcare payors and others in the medical community on the
benefits of our product candidates may require significant resources and may not be successful. If any of our product
candidates are approved, if at all, but do not achieve an adequate level of acceptance, we may not generate significant
product revenue and we may not become profitable on a sustained basis.
We are in the process of developing our sales, marketing and distribution capabilities for potential commercial launch
of our product candidates. If we are unable to develop effective sales, marketing and distribution capabilities on our
own or through collaborations or other marketing partners, we will not be successful in commercializing one or more
of our product candidates.
We are in the process of developing our sales and marketing infrastructure for potential commercial launch of
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our product candidates and have never sold, marketed or distributed therapeutic products. To achieve commercial
success for any of our product candidates, if at all approved, we must either develop a sales and marketing organization
or outsource these functions to third parties. There are risks involved with establishing our own sales and marketing
capabilities, as well as entering into arrangements with third parties to perform these services. Developing an internal
sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of one or
more of our product candidates for which we recruit a sales force and establish marketing capabilities is delayed or does
not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This
may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel. On
the other hand, if we enter into arrangements with third parties to perform sales, marketing and distribution services, our
product revenues will be lower than if we market and sell any products that we develop ourselves.
We also may not be successful entering into arrangements with third parties to sell and market one or more of
our product candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over
such third parties, and any of them may fail to devote the necessary resources and attention to sell and market one or
more of our product candidates effectively, which could damage our reputation. If we do not establish sales and
marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in
commercializing our product candidates.
If our recently submitted NDA is not approved by the FDA, this would have a material adverse effect on our business,
financial performance and results of operations.
In August 2016, we announced the results of the first Phase 3 FIT study of fostamatinib in ITP, reporting that
fostamatinib met its primary efficacy endpoint. The study showed that 18% of patients receiving fostamatinib achieved a
stable platelet response compared to none receiving a placebo control. In October 2016, we announced the results of the
second study, reporting that the response rate was 18% consistent with the first study. However, one patient in the
placebo group achieved a stable platelet response, therefore the difference between groups did not reach statistical
significance. Additionally, we have announced updates on the results of the ongoing open label long term extension
study of fostamatinib in ITP. We submitted an NDA for fostamatinib in ITP in April 2017. In June 2017, we announced
that the FDA accepted our NDA submission for the use of fostamatinib in patients with chronic ITP. Our NDA
submission included, among others, data on both FIT trials as well as the ongoing open label long-term extension study,
a number of post-study analyses including an overall response rate for the FIT studies, which combined stable and
intermediate responders, and a large safety database from previous trials of fostamatinib. In October 2017, we announced
that the FDA was not planning on holding an ODAC meeting to discuss the NDA for fostamatinib in ITP. Although the
FDA accepted our NDA submission, given that our second FIT trial did not meet its primary endpoint, there is a risk that
the FDA may not approve the submission for any reason as the FDA has substantial discretion in evaluating the results
of our clinical trials. For example, notwithstanding our view to the contrary, the FDA may determine that the efficacy
data and/or safety data from our earlier clinical trials do not support approval of our NDA. Clinical data often is
susceptible to varying interpretations and many companies that have believed that their products performed satisfactorily
in clinical trials have nonetheless failed to obtain FDA approval for their products. The FDA may disagree with our trial
design and our interpretation of data from nonclinical studies and clinical trials. Any such decision would have a material
adverse effect on our ability to generate revenue from the sales of fostamatinib in ITP. An inability to generate such
revenue would have a material adverse effect on our business, financial performance and results of operations.
Forecasting potential sales for any of our product candidates will be difficult, and if our projections are inaccurate,
our business may be harmed and our stock price may be adversely affected.
Our business planning requires us to forecast or make assumptions regarding product demand and revenues for
any of our product candidates if they are approved despite numerous uncertainties. These uncertainties may be increased
if we rely on our collaborators or other third parties to conduct commercial activities in certain geographies and provide
us with accurate and timely information. Actual results may differ materially from projected results for various reasons,
including the following, as well as risks identified in other risk factors:
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the efficacy and safety of any of our product candidates, including as relative to marketed products and
product candidates in development by third parties;
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pricing (including discounting or other promotions), reimbursement, product returns or recalls, competition,
labeling, adverse events and other items that impact commercialization;
the rate of adoption in the particular market, including fluctuations in demand for various reasons;
lack of patient and physician familiarity with the drug;
lack of patient use and physician prescribing history;
lack of commercialization experience with the drug;
actual sales to patients may significantly differ from expectations based on sales to wholesalers; and
uncertainty relating to when the drug may become commercially available to patients and rate of adoption
in other territories.
We expect that our revenues from sales of any of our product candidates will continue to be based in part on
estimates, judgment and accounting policies. Any incorrect estimates or disagreements with regulators or others
regarding such estimates or accounting policies may result in changes to our guidance, projections or previously reported
results. Expected and actual product sales and quarterly and other results may greatly fluctuate, including in the near-
term, and such fluctuations can adversely affect the price of our common stock, perceptions of our ability
to forecast demand and revenues, and our ability to maintain and fund our operations.
We will need additional capital in the future to sufficiently fund our operations and research.
We have consumed substantial amounts of capital to date as we continue our research and development
activities, including preclinical studies and clinical trials and our preparation for potential commercial launch of
fostamatinib in ITP. We may seek another collaborator or licensee in the future for further clinical development and
commercialization of fostamatinib, as well as our other clinical programs, which we may not be able to obtain on
commercially reasonable terms or at all. We also continue to evaluate ex-U.S. partnerships for fostamatinib and other
partnering opportunities across our pipeline. We believe that our existing capital resources will be sufficient to support
our current and projected funding requirements, including the potential commercial launch of fostamatinib in ITP in the
U.S., through at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and
we could utilize our available capital resources sooner than we currently expect. Because of the numerous risks and
uncertainties associated with the development of our product candidates and other research and development activities,
we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures associated
with our current and anticipated clinical trials and other research and development activities.
We will continue to need additional capital and the amount of future capital needed will depend largely on the
success of our potential commercial launch of fostamatinib in ITP and the success of our internally developed programs
as they proceed in later and more expensive clinical trials, including any additional clinical trials that we may decide to
conduct with respect to fostamatinib. Unless and until we are able to generate a sufficient amount of product, royalty or
milestone revenue, which may never occur, we expect to finance future cash needs through public and/or private
offerings of equity securities, debt financings or collaboration and licensing arrangements, as well as through interest
income earned on the investment of our cash balances and short-term investments. With the exception of contingent and
royalty payments that we may receive under our existing collaborations, we do not currently have any commitments for
future funding. We do not know whether additional financing will be available when needed, or that, if available, we will
obtain financing on reasonable terms. To the extent we raise additional capital by issuing equity securities in the future,
our stockholders could at that time experience substantial dilution. In addition, we have a significant number of stock
options outstanding. To the extent that outstanding stock options have been or may be exercised or other shares issued,
our stockholders may experience further dilution. Further, we may choose to raise additional capital due to market
conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating
plans, including through an “at-the-market” equity offering program. Any debt financing that we are able to obtain may
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involve operating covenants that restrict our business. To the extent that we raise additional funds through any new
collaboration and licensing arrangements, we may be required to relinquish some rights to our technologies or product
candidates, or grant licenses on terms that are not favorable to us.
Our future funding requirements will depend on many uncertain factors.
Our future funding requirements will depend upon many factors, many of which are beyond our control,
including, but not limited to:
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the successful regulatory approval of our recently submitted NDA;
the costs to commercialize fostamatinib or any other future product candidates, if any such candidate
receives regulatory approval for commercial sale;
the progress and success of clinical trials and preclinical activities (including studies and manufacture of
materials) of our product candidates conducted by us;
the progress of research and development programs carried out by us and our collaborative partners;
the costs and timing of regulatory filings and approvals by us and our collaborators;
any changes in the breadth of our research and development programs;
the ability to achieve the events identified in our collaborative agreements that may trigger payments to us
from our collaboration partners;
our ability to acquire or license other technologies or compounds that we may seek to pursue;
our ability to manage our growth;
competing technological and market developments;
the costs and timing of obtaining, enforcing and defending our patent and other intellectual property rights;
and
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expenses associated with any unforeseen litigation, including any securities class action lawsuits.
Insufficient funds may require us to delay, scale back or eliminate some or all of our research and development
programs, to reduce personnel and operating expenses, to lose rights under existing licenses or to relinquish greater or all
rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise
choose or may adversely affect our ability to operate as a going concern.
There is a high risk that drug discovery and development efforts might not generate successful product candidates.
At the present time, a significant portion of our operations are focused on various stages of drug identification
and development. We currently have various product candidates in the clinical testing stage. In our industry, it is
statistically unlikely that the limited number of compounds that we have identified as potential product candidates will
actually lead to successful product development efforts. We have invested a significant portion of our efforts and
financial resources into the development of fostamatinib. Our ability to generate product revenue, which will not occur
until after regulatory approval, if ever, will depend on the successful development, regulatory approval and eventual
commercialization of one of our product candidates.
Our compounds in clinical trials and our future leads for potential drug compounds are subject to the risks and
failures inherent in the development of pharmaceutical products. These risks include, but are not limited to, the inherent
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difficulty in selecting the right drug and drug target and avoiding unwanted side effects, as well as unanticipated
problems relating to product development, testing, enrollment, obtaining regulatory approvals, maintaining regulatory
compliance, manufacturing, competition and costs and expenses that may exceed current estimates. In future clinical
trials, we or our partners may discover additional side effects and/or higher frequency of side effects than those observed
in previously completed clinical trials. The results of preliminary and mid-stage clinical trials do not necessarily predict
clinical or commercial success, and larger later-stage clinical trials may fail to confirm the results observed in the
previous clinical trials. Similarly, a clinical trial may show that a product candidate is safe and effective for certain
patient populations in a particular indication, but other clinical trials may fail to confirm those results in a subset of that
population or in a different patient population, which may limit the potential market for that product candidate. With
respect to our own compounds in development, we have established anticipated timelines with respect to the initiation of
clinical trials based on existing knowledge of the compounds. However, we cannot provide assurance that we will meet
any of these timelines for clinical development. Additionally, the initial results of a completed earlier clinical trial of a
product candidate do not necessarily predict final results and the results may not be repeated in later clinical trials.
Because of the uncertainty of whether the accumulated preclinical evidence (pharmacokinetic,
pharmacodynamic, safety and/or other factors) or early clinical results will be observed in later clinical trials, we can
make no assurances regarding the likely results from our future clinical trials or the impact of those results on our
business. If our clinical trials fail to meet the primary efficacy endpoints, the commercial prospects of our business may
be harmed, our ability to generate product revenues may be delayed or eliminated or we may be forced to undertake
other strategic alternatives that are in our shareholders’ best interests, including cost reduction measures. If we are unable
to obtain adequate financing or engage in a strategic transaction on commercially reasonable terms or at all, we may be
required to implement further cost reduction strategies which could significantly impact activities related to our research
and development of our future product candidates, and could significantly harm our business, financial condition and
results of operations. In addition, these cost reduction strategies could cause us to further curtail our operations or take
other actions that would adversely impact our shareholders.
Delays in clinical testing could result in increased costs to us.
We may not be able to initiate or continue clinical studies or trials for our product candidates if we are unable to
locate and enroll a sufficient number of eligible patients to participate in these clinical trials as required by the FDA or
other regulatory authorities. Even if we are able to enroll a sufficient number of patients in our clinical trials, if the pace
of enrollment is slower than we expect, the development costs for our product candidates may increase and the
completion of our clinical trials may be delayed or our clinical trials could become too expensive to complete.
Significant delays in clinical testing could materially impact our product development costs and timing. Our estimates
regarding timing are based on a number of assumptions, including assumptions based on past experience with our other
clinical programs. If we are unable to enroll the patients in these trials at the projected rate, the completion of the clinical
program could be delayed and the costs of conducting the program could increase, either of which could harm our
business.
Clinical trials can be delayed for a variety of reasons, including delays in obtaining regulatory approval to
commence a study, delays from scaling up of a study, delays in reaching agreement on acceptable clinical trial agreement
terms with prospective clinical sites, delays in obtaining institutional review board approval to conduct a study at a
prospective clinical site or delays in recruiting subjects to participate in a study. In addition, we typically rely on third-
party clinical investigators to conduct our clinical trials and other third-party organizations to oversee the operations of
such trials and to perform data collection and analysis. The clinical investigators are not our employees, and we cannot
control the amount or timing of resources that they devote to our programs. Failure of the third-party organizations to
meet their obligations could adversely affect clinical development of our products. As a result, we may face additional
delaying factors outside our control if these parties do not perform their obligations in a timely fashion. For example, any
number of those issues could arise with our clinical trials causing a delay. Delays of this sort could occur for the reasons
identified above or other reasons. If we have delays in conducting the clinical trials or obtaining regulatory approvals,
our product development costs will increase. For example, we may need to make additional payments to third-party
investigators and organizations to retain their services or we may need to pay recruitment incentives. If the delays are
significant, our financial results and the commercial prospects for our product candidates will be harmed, and our ability
to become profitable will be delayed. Moreover, these third-party investigators and organizations may also have
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relationships with other commercial entities, some of which may compete with us. If these third-party investigators and
organizations assist our competitors at our expense, it could harm our competitive position.
We lack the capability to manufacture compounds for clinical development and we intend to rely on third parties for
commercial supply, manufacturing and distribution if any of our product candidates which receive regulatory
approval and we may be unable to obtain required material or product in a timely manner, at an acceptable cost or at
a quality level required to receive regulatory approval.
We currently do not have the manufacturing capabilities or experience necessary to produce fostamatinib in ITP
or any product candidates for clinical trials, including fostamatinib in AIHA and IgAN. We currently use one
manufacturer of fostamatinib. We do not currently have, nor do we plan to acquire the infrastructure or capability to
supply, manufacture or distribute preclinical, clinical or commercial quantities of drug substances or products. For each
clinical trial of our unpartnered product candidates, we rely on third-party manufacturers for the active pharmaceutical
ingredients, as well as various manufacturers to manufacture starting components, excipients and formulated drug
products. Our ability to develop our product candidates, and our ability to commercially supply our products will
depend, in part, on our ability to successfully obtain the APIs and other substances and materials used in our product
candidates from third parties and to have finished products manufactured by third parties in accordance with regulatory
requirements and in sufficient quantities for preclinical and clinical testing and commercialization. If we fail to develop
and maintain supply relationships with these third parties, we may be unable to continue to develop or commercialize our
product candidates.
We rely and will continue to rely on certain third parties as the sole source of the materials they supply or the
finished products they manufacture. The drug substances and other materials used in our product candidates are currently
available only from one supplier and one manufacturer and certain of our finished product candidates are manufactured
by one or a limited number of contract manufacturers. Any of these existing supplier or manufacturer may:
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fail to supply us with product on a timely basis or in the requested amount due to unexpected damage to or
destruction of facilities or equipment or otherwise;
fail to increase manufacturing capacity and produce drug product and components in larger quantities and
at higher yields in a timely or cost-effective manner, or at all, to sufficiently meet our commercial needs;
be unable to meet our production demands due to issues related to their reliance on sole-source suppliers
and manufacturers;
supply us with product that fails to meet regulatory requirements;
become unavailable through business interruption or financial insolvency;
lose regulatory status as an approved source;
be unable or unwilling to renew current supply agreements when such agreements expire on a timely basis,
on acceptable terms or at all; or
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discontinue production or manufacturing of necessary drug substances or products.
Our current and anticipated future dependence upon these third-party manufacturers may adversely affect our
ability to develop and commercialize product candidates on a timely and competitive basis, which could have a material
adverse effect on sales, results of operations and financial condition. If we were required to transfer manufacturing
processes to other third-party manufacturers and we were able to identify an alternative manufacturer, we would still
need to satisfy various regulatory requirements. Satisfaction of these requirements could cause us to experience
significant delays in receiving an adequate supply of our products and products in development and could be costly.
Moreover, we may not be able to transfer processes that are proprietary to the manufacturer, if any. These manufacturers
may not be able to produce material on a timely basis or manufacture material at the quality level or in the quantity
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required to meet our development timelines and applicable regulatory requirements and may also experience a shortage
in qualified personnel. We may not be able to maintain or renew our existing third-party manufacturing arrangements, or
enter into new arrangements, on acceptable terms, or at all. Our third-party manufacturers could terminate or decline to
renew our manufacturing arrangements based on their own business priorities, at a time that is costly or inconvenient for
us. If we are unable to contract for the production of materials in sufficient quantity and of sufficient quality on
acceptable terms, our planned clinical trials may be significantly delayed. Manufacturing delays could postpone the
filing of our IND applications and/or the initiation or completion of clinical trials that we have currently planned or may
plan in the future.
Drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the Drug
Enforcement Administration, and other federal and state agencies to ensure strict compliance with cGMP and other
government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’
compliance with these regulations and standards and they may not be able to comply. Switching manufacturers may be
difficult because the number of potential manufacturers is limited. It may be difficult or impossible for us to find a
replacement manufacturer quickly on acceptable terms, or at all. Additionally, if we are required to enter into new supply
arrangements, we may not be able to obtain approval from the FDA of any alternate supplier in a timely manner, or at
all, which could delay or prevent the clinical development and commercialization of any related product candidates.
Failure of our third-party manufacturers or us to comply with applicable regulations could result in sanctions being
imposed on us, including fines, civil penalties, delays in or failure to grant marketing approval of our product candidates,
injunctions, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products and
compounds, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our
business.
We have obtained orphan drug designation from the FDA for fostamatinib for the treatment of ITP and AIHA, but
we may not be able to obtain or maintain orphan drug designation or exclusivity for fostamatinib for the treatment of
ITP, warm AIHA or our other product candidates, or we may be unable to maintain the benefits associated with
orphan drug designation, including the potential for market exclusivity.
We have obtained orphan drug designation in the United States for fostamatinib for the treatment of ITP and
AIHA. We may seek orphan drug designation for other product candidates in the future. Under the Orphan Drug Act, the
FDA may grant orphan drug designation to a drug or biologic intended to treat a rare disease or condition, which is
defined as one occurring in a patient population of fewer than 200,000 in the United States, or a patient population
greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug
will be recovered from sales in the United States. In the United States, orphan drug designation entitles a party to
financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee
waivers. In addition, if a product that has orphan drug designation subsequently receives the first FDA approval for the
disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA
may not approve any other applications, including a full NDA, to market the same drug for the same indication for seven
years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug
exclusivity or where the manufacturer is unable to assure sufficient product quantity.
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We cannot assure you that any future application for orphan drug designation with respect to any other product
candidate will be granted. If we are unable to obtain orphan drug designation with respect to other product candidates in
the United States, we will not be eligible to obtain the period of market exclusivity that could result from orphan drug
designation or be afforded the financial incentives associated with orphan drug designation. Even though we have
received orphan drug designation for fostamatinib for the treatment of ITP and warm AIHA, we may not be the first to
obtain marketing approval for the orphan-designated indication due to the uncertainties associated with developing
pharmaceutical products. In addition, exclusive marketing rights in the United States for fostamatinib for the treatment of
ITP, AIHA or any future product candidate may be limited if we seek approval for an indication broader than the orphan-
designated indication or may be lost if the FDA later determines that the request for designation was materially defective
or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare
disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not
effectively protect the product from competition because different drugs with different active moieties can be approved
for the same condition. Even after an orphan product is approved, the FDA can subsequently approve the same drug with
the same active moiety for the same condition if the FDA concludes that the later drug is safer, more effective, or makes
a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review
time of a drug nor gives the drug any advantage in the regulatory review or approval process.
Our research and development efforts will be seriously jeopardized if we are unable to attract and retain key
employees and relationships.
As a small company, our success depends on the continued contributions of our principal management and
scientific personnel and on our ability to develop and maintain important relationships with leading academic
institutions, scientists and companies in the face of intense competition for such personnel. In particular, our research
programs depend on our ability to attract and retain highly skilled chemists, other scientists, and development, regulatory
and clinical personnel. If we lose the services of any of our key personnel, our research and development efforts could be
seriously and adversely affected. Our employees can terminate their employment with us at any time.
Our success as a company is uncertain due to our history of operating losses and the uncertainty of any future
profitability.
We incurred a loss from operations of approximately $79.6 million for the year ended December 31, 2017.
Other than for 2010, we have historically incurred losses from operations each year since we were incorporated in
June 1996, due in large part to the significant research and development expenditures required to identify and validate
new product candidates and pursue our development efforts, and recently our significant expenses related to the costs
associated with the potential commercial launch of fostamatinib in ITP. We expect to continue to incur losses from
operations, at least in the next twelve months, and there can be no assurance that we will generate operating income in
the foreseeable future. Currently, our only potential sources of revenues are upfront payments, research and development
contingent payments and royalty payments pursuant to our collaboration arrangements, which may never materialize if
our collaborators do not achieve certain events or generate net sales to which these contingent payments are dependent
on. If our drug candidates fail or do not gain regulatory approval, or if our drugs do not achieve market acceptance, we
may not be profitable. As of December 31, 2017, we had an accumulated deficit of approximately $1.1 billion. The
extent of our future losses or profitability, if any, is highly uncertain.
If our corporate collaborations or license agreements are unsuccessful, or if we fail to form new corporate
collaborations or license agreements, our research and development efforts could be delayed.
Our strategy depends upon the formation and sustainability of multiple collaborative arrangements and license
agreements with third parties now and in the future. We rely on these arrangements for not only financial resources, but
also for expertise we need now and in the future relating to clinical trials, manufacturing, sales and marketing, and for
licenses to technology rights. To date, we have entered into several such arrangements with corporate collaborators;
however, we do not know if these collaborations or additional collaborations with third parties, if any, will dedicate
sufficient resources or if any development or commercialization efforts by third parties will be successful. In addition,
our corporate collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a
clinical trial or abandon a drug candidate or development program. Should a collaborative partner fail to develop or
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commercialize a compound or product to which it has rights from us for any reason, including corporate restructuring,
such failure might delay our ongoing research and development efforts, because we might not receive any future
payments, and we would not receive any royalties associated with such compound or product. We conducted a Phase 3
clinical program to study fostamatinib in ITP on our own. We may seek another collaborator or licensee in the future for
clinical development and commercialization of fostamatinib, as well as our other clinical programs, which we may not
be able to obtain on commercially reasonable terms or at all. If we are unable to form new collaborations or enter into
new license agreements, our research and development efforts could be delayed. In addition, the continuation of some of
our partnered drug discovery and development programs may be dependent on the periodic renewal of our corporate
collaborations.
Each of our collaborations could be terminated by the other party at any time, and we may not be able to renew
these collaborations on acceptable terms, if at all, or negotiate additional corporate collaborations on acceptable terms, if
at all. If these collaborations terminate or are not renewed, any resultant loss of revenues from these collaborations or
loss of the resources and expertise of our collaborative partners could adversely affect our business.
Conflicts also might arise with collaborative partners concerning proprietary rights to particular compounds.
While our existing collaborative agreements typically provide that we retain milestone payments and royalty rights with
respect to drugs developed from certain derivative compounds, any such payments or royalty rights may be at reduced
rates, and disputes may arise over the application of derivative payment provisions to such drugs, and we may not be
successful in such disputes. Additionally, the management teams of our collaborators may change for various reasons
including due to being acquired. Different management teams or an acquiring company of our collaborators may have
different priorities which may have adverse results on the collaboration with us.
We are also a party to various license agreements that give us rights to use specified technologies in our
research and development processes. The agreements pursuant to which we have in-licensed technology permit our
licensors to terminate the agreements under certain circumstances. If we are not able to continue to license these and
future technologies on commercially reasonable terms, our product development and research may be delayed or
otherwise adversely affected.
If conflicts arise between our collaborators or advisors and us, any of them may act in their self-interest, which may
be adverse to our stockholders’ interests.
If conflicts arise between us and our corporate collaborators or scientific advisors, the other party may act in its
self-interest and not in the interest of our stockholders. Some of our corporate collaborators are conducting multiple
product development efforts within each disease area that is the subject of the collaboration with us or may be acquired
or merged with a company having a competing program. In some of our collaborations, we have agreed not to conduct,
independently or with any third party, any research that is competitive with the research conducted under our
collaborations. Our collaborators, however, may develop, either alone or with others, products in related fields that are
competitive with the products or potential products that are the subject of these collaborations. Competing products,
either developed by our collaborators or to which our collaborators have rights, may result in their withdrawal of support
for our product candidates.
If any of our corporate collaborators were to breach or terminate its agreement with us or otherwise fail to
conduct the collaborative activities successfully and in a timely manner, the preclinical or clinical development or
commercialization of the affected product candidates or research programs could be delayed or terminated. We generally
do not control the amount and timing of resources that our corporate collaborators devote to our programs or potential
products. We do not know whether current or future collaborative partners, if any, might pursue alternative technologies
or develop alternative products either on their own or in collaboration with others, including our competitors, as a means
for developing treatments for the diseases targeted by collaborative arrangements with us.
Our success is dependent on intellectual property rights held by us and third parties, and our interest in such rights is
complex and uncertain.
Our success will depend to a large part on our own, our licensees’ and our licensors’ ability to obtain and
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defend patents for each party’s respective technologies and the compounds and other products, if any, resulting from the
application of such technologies. As of December 31, 2017, we had 58 pending patent applications and 366 issued and
active patents in the United States, as well as corresponding pending foreign patent applications and issued foreign
patents. In the future, our patent position might be highly uncertain and involve complex legal and factual questions. For
example, we may be involved in post-grant proceedings before the United States Patent and Trademark Office. Post-
grant proceedings are complex and expensive legal proceedings and there is no assurance we will be successful in any
such proceedings. A post-grant proceeding could result in our losing our patent rights and/or our freedom to operate
and/or require us to pay significant royalties. Additional uncertainty may result because no consistent policy regarding
the breadth of legal claims allowed in biotechnology patents has emerged to date. Accordingly, we cannot predict the
breadth of claims allowed in our or other companies’ patents.
Because the degree of future protection for our proprietary rights is uncertain, we cannot assure you that:
• we were the first to make the inventions covered by each of our pending patent applications;
• we were the first to file patent applications for these inventions;
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•
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others will not independently develop similar or alternative technologies or duplicate any of our
technologies;
any of our pending patent applications will result in issued patents;
any patents issued to us or our collaborators will provide a basis for commercially-viable products or will
provide us with any competitive advantages or will not be challenged by third parties;
• we will develop additional proprietary technologies that are patentable; or
•
the patents of others will not have a negative effect on our ability to do business.
We rely on trade secrets to protect technology where we believe patent protection is not appropriate or
obtainable; however, trade secrets are difficult to protect. While we require employees, collaborators and consultants to
enter into confidentiality agreements, we may not be able to adequately protect our trade secrets or other proprietary
information in the event of any unauthorized use or disclosure or the lawful development by others of such information.
We are a party to certain in-license agreements that are important to our business, and we generally do not
control the prosecution of in-licensed technology. Accordingly, we are unable to exercise the same degree of control
over this intellectual property as we exercise over our internally-developed technology. Moreover, some of our academic
institution licensors, research collaborators and scientific advisors have rights to publish data and information in which
we have rights. If we cannot maintain the confidentiality of our technology and other confidential information in
connection with our collaborations, our ability to receive patent protection or protect our proprietary information may
otherwise be impaired. In addition, some of the technology we have licensed relies on patented inventions developed
using U.S. government resources.
The U.S. government retains certain rights, as defined by law, in such patents, and may choose to exercise such
rights. Certain of our in-licenses may be terminated if we fail to meet specified obligations. If we fail to meet such
obligations and any of our licensors exercise their termination rights, we could lose our rights under those agreements. If
we lose any of our rights, it may adversely affect the way we conduct our business. In addition, because certain of our
licenses are sublicenses, the actions of our licensors may affect our rights under those licenses.
If a dispute arises regarding the infringement or misappropriation of the proprietary rights of others, such dispute
could be costly and result in delays in our research and development activities and partnering.
Our success will depend, in part, on our ability to operate without infringing or misappropriating the proprietary
rights of others. There are many issued patents and patent applications filed by third parties relating to products or
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processes that are similar or identical to our licensors or ours, and others may be filed in the future. There may also be
copyrights or trademarks that third parties hold. There can be no assurance that our activities, or those of our licensors,
will not violate intellectual property rights of others. We believe that there may be significant litigation in the industry
regarding patent and other intellectual property rights, and we do not know if our collaborators or we would be
successful in any such litigation. Any legal action against our collaborators or us claiming damages or seeking to enjoin
commercial activities relating to the affected products, our methods or processes could:
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require our collaborators or us to obtain a license to continue to use, manufacture or market the affected
products, methods or processes, which may not be available on commercially reasonable terms, if at all;
prevent us from using the subject matter claimed in the patents held by others;
subject us to potential liability for damages;
consume a substantial portion of our managerial and financial resources; and
result in litigation or administrative proceedings that may be costly, whether we win or lose.
The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.
On December 22, 2017, President Trump signed into law new tax legislation, or the Tax Act, which
significantly reforms the Internal Revenue Code of 1986, as amended. The Tax Act, among other things, contains
significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to
a flat rate of 21%; limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain
small businesses); limitation of the deduction for net operating losses generated after 2017 to 80% of current year taxable
income, indefinite carryforward of net operating losses and elimination of net operating loss carrybacks; changes in the
treatment of offshore earnings regardless of whether they are repatriated; mandatory capitalization of research and
development expenses beginning in 2022; immediate deductions for certain new investments instead of deductions for
depreciation expense over time; further deduction limits on executive compensation; and modifying, repealing and
creating many other business deductions and credits, including the reduction in the orphan drug credit from 50% to 25%
of qualifying expenditures. Our federal net operating loss carryovers will be carried forward indefinitely pursuant to the
Tax Act. We continue to examine the impact this tax reform legislation may have on our business. Notwithstanding the
reduction in the corporate income tax rate, the overall impact of the Tax Act is uncertain and our business and financial
condition could be adversely affected. The impact of this tax reform on holders of our common stock is also uncertain
and could be adverse. This periodic report does not discuss any such tax legislation or the manner in which it might
affect us or our stockholders in the future. We urge our stockholders to consult with their legal and tax advisors with
respect to such legislation.
Our ability to use net operating losses and certain other tax attributes is uncertain and may be limited.
Our ability to use our federal and state net operating losses to offset potential future taxable income and related
income taxes that would otherwise be due is dependent upon our generation of future taxable income before the
expiration dates of the net operating losses, and we cannot predict with certainty when, or whether, we will generate
sufficient taxable income to use all of our net operating losses. Federal net operating losses generated prior to 2018 will
continue to be governed by the net operating loss tax rules as they existed prior to the adoption of the new Tax Act,
which means that generally they will expire 20 years after they were generated if not used prior thereto. Many states
have similar laws. Accordingly, our federal and state net operating losses could expire unused and be unavailable to
offset future income tax liabilities. Under the newly enacted Tax Act, federal net operating losses incurred in 2018 and
in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited to
80% of current year taxable income. It is uncertain if and to what extent various states will conform to the newly
enacted federal tax law. In addition, utilization of net operating losses to offset potential future taxable income and
related income taxes that would otherwise be due is subject to annual limitations under the “ownership change”
provisions of Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (Internal Revenue Code) and
similar state provisions, which may result in the expiration of net operating losses before future utilization. In general,
39
under the Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by
value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating losses
and other pre-change tax attributes (such as research and development credit carryforwards) to offset its post-change
taxable income or taxes may be limited. Our equity offerings and other changes in our stock ownership, some of which
are outside of our control, may have resulted or could in the future result in an ownership change. Although we have
completed studies to provide reasonable assurance that an ownership change limitation would not apply, we cannot be
certain that a taxing authority would reach the same conclusion. If, after a review or audit, an ownership change
limitation were to apply, utilization of our domestic net operating losses and tax credit carryforwards could be limited in
future periods and a portion of the carryforwards could expire before being available to reduce future income tax
liabilities.
Because we expect to be dependent upon collaborative and license agreements, we might not meet our strategic
objectives.
Our ability to generate revenue in the near term depends on the timing of recognition of certain upfront
payments, achievement of certain payment triggering events with our existing collaboration agreements and our ability to
enter into additional collaborative agreements with third parties. Our ability to enter into new collaborations and the
revenue, if any, that may be recognized under these collaborations is highly uncertain. If we are unable to enter into one
or more new collaborations, our business prospects could be harmed, which could have an immediate adverse effect on
our ability to continue to develop our compounds and on the trading price of our stock. Our ability to enter into a
collaboration may be dependent on many factors, such as the results of our clinical trials, competitive factors and the fit
of one of our programs with another company’s risk tolerance, including toward regulatory issues, patent portfolio,
clinical pipeline, the stage of the available data, particularly if it is early, overall corporate goals and financial position.
To date, a portion of our revenues have been related to the research or transition phase of each of our
collaborative agreements. Such revenues are for specified periods, and the impact of such revenues on our results of
operations is at least partially offset by corresponding research costs. Following the completion of the research or
transition phase of each collaborative agreement, additional revenues may come only from payments triggered by
milestones and/or the achievement of other contingent events, and royalties, which may not be paid, if at all, until certain
conditions are met. This risk is heightened due to the fact that unsuccessful research efforts may preclude us from
receiving any contingent payments under these agreements. Our receipt of revenues from collaborative arrangements is
also significantly affected by the timing of efforts expended by us and our collaborators and the timing of lead compound
identification. We have received payments from our collaborations with Aclaris, BMS, AZ, BerGenBio, Janssen
Pharmaceutica N.V., a division of Johnson & Johnson, Novartis Pharma A.G., Daiichi, Merck & Co., Inc., Merck Serono
and Pfizer. Under many agreements, future payments may not be earned until the collaborator has advanced product
candidates into clinical testing, which may never occur or may not occur until some time well into the future. If we are
not able to generate revenue under our collaborations when and in accordance with our expectations or the expectations
of industry analysts, this failure could harm our business and have an immediate adverse effect on the trading price of
our common stock.
Our business requires us to generate meaningful revenue from royalties and licensing agreements. To date, we
have not received any revenue from royalties for the commercial sale of drugs, and we do not know when we will
receive any such revenue, if at all.
Securities class action lawsuits or other litigation could result in substantial damages and may divert management’s
time and attention from our business.
We have been subject to class action lawsuits in the past, including a securities class action lawsuit commenced
in the United States District Court for the Northern District of California in February 2009, that was ultimately dismissed
in November 2012. However, we may be subject to similar or completely unrelated claims in the future, such as those
that might occur if there was to be a change in our corporate strategy. These and other lawsuits are subject to inherent
uncertainties, and the actual costs to be incurred relating to the lawsuit will depend upon many unknown factors. The
outcome of litigation is necessarily uncertain, and we could be forced to expend significant resources in the defense of
such suits, and we may not prevail. Monitoring and defending against legal actions is time-consuming for our
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management and detracts from our ability to fully focus our internal resources on our business activities. In addition, we
may incur substantial legal fees and costs in connection with any such litigation. We have not established any reserves
for any potential liability relating to any such potential lawsuits. It is possible that we could, in the future, incur
judgments or enter into settlements of claims for monetary damages. A decision adverse to our interests on any such
actions could result in the payment of substantial damages, or possibly fines, and could have a material adverse effect on
our cash flow, results of operations and financial position.
If our competitors develop technologies that are more effective than ours, our commercial opportunity will be reduced
or eliminated.
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant
technological change. Many of the drugs that we are attempting to discover will be competing with existing therapies. In
addition, a number of companies are pursuing the development of pharmaceuticals that target the same diseases and
conditions that we are targeting. For example, there are existing therapies and drug candidates in development for the
treatment of ITP that may be alternative therapies to fostamatinib, if it is ultimately approved for commercialization. We
face, and will continue to face, intense competition from pharmaceutical and biotechnology companies, as well as from
academic and research institutions and government agencies, both in the United States and abroad. Some of these
competitors are pursuing the development of pharmaceuticals that target the same diseases and conditions as our research
programs. Our major competitors include fully integrated pharmaceutical companies that have extensive drug discovery
efforts and are developing novel small-molecule pharmaceuticals. We also face significant competition from
organizations that are pursuing the same or similar technologies, including the discovery of targets that are useful in
compound screening, as the technologies used by us in our drug discovery efforts.
Competition may also arise from:
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new or better methods of target identification or validation;
other drug development technologies and methods of preventing or reducing the incidence of disease;
new small molecules; or
other classes of therapeutic agents.
Our competitors or their collaborative partners may utilize discovery technologies and techniques or partner
with collaborators in order to develop products more rapidly or successfully than we or our collaborators are able to do.
Many of our competitors, particularly large pharmaceutical companies, have substantially greater financial, technical and
human resources and larger research and development staffs than we do. In addition, academic institutions, government
agencies and other public and private organizations conducting research may seek patent protection with respect to
potentially competitive products or technologies and may establish exclusive collaborative or licensing relationships with
our competitors.
We believe that our ability to compete is dependent, in part, upon our ability to create, maintain and license
scientifically-advanced technology and upon our and our collaborators’ ability to develop and commercialize
pharmaceutical products based on this technology, as well as our ability to attract and retain qualified personnel, obtain
patent protection or otherwise develop proprietary technology or processes and secure sufficient capital resources for the
expected substantial time period between technological conception and commercial sales of products based upon our
technology. The failure by any of our collaborators or us in any of those areas may prevent the successful
commercialization of our potential drug targets.
Many of our competitors, either alone or together with their collaborative partners, have significantly greater
experience than we do in:
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identifying and validating targets;
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screening compounds against targets; and
undertaking preclinical testing and clinical trials.
Accordingly, our competitors may succeed in obtaining patent protection, identifying or validating new targets
or discovering new drug compounds before we do.
Our competitors might develop technologies and drugs that are more effective or less costly than any that are
being developed by us or that would render our technology and product candidates obsolete and noncompetitive. In
addition, our competitors may succeed in obtaining the approval of the FDA or other regulatory agencies for product
candidates more rapidly. Companies that complete clinical trials, obtain required regulatory agency approvals and
commence commercial sale of their drugs before us may achieve a significant competitive advantage, including certain
patent and FDA marketing exclusivity rights that would delay or prevent our ability to market certain products. Any
drugs resulting from our research and development efforts, or from our joint efforts with our existing or future
collaborative partners, might not be able to compete successfully with competitors’ existing or future products or obtain
regulatory approval in the United States or elsewhere.
We face and will continue to face intense competition from other companies for collaborative arrangements
with pharmaceutical and biotechnology companies, for establishing relationships with academic and research institutions
and for licenses to additional technologies. These competitors, either alone or with their collaborative partners, may
succeed in developing technologies or products that are more effective than ours.
Our ability to compete successfully will depend, in part, on our ability to:
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identify and validate targets;
discover candidate drug compounds that interact with the targets we identify;
attract and retain scientific and product development personnel;
obtain patent or other proprietary protection for our new drug compounds and technologies; and
enter commercialization agreements for our new drug compounds.
Our stock price may be volatile, and our stockholders’ investment in our common stock could decline in value.
The market prices for our common stock and the securities of other biotechnology companies have been highly
volatile and may continue to be highly volatile in the future. The following factors, in addition to other risk factors
described in this section, may have a significant impact on the market price of our common stock:
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the successful regulatory approval of our recently submitted NDA;
the progress and success of our clinical trials and preclinical activities (including studies and manufacture
of materials) of our product candidates conducted by us;
the receipt or failure to receive the additional funding necessary to conduct our business;
selling by large stockholders;
presentations of detailed clinical trial data at medical and scientific conferences and investor perception
thereof;
announcements of technological innovations or new commercial products by our competitors or us;
developments concerning proprietary rights, including patents;
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developments concerning our collaborations;
publicity regarding actual or potential medical results relating to products under development by our
competitors or us;
regulatory developments in the United States and foreign countries;
litigation or arbitration;
economic and other external factors or other disaster or crisis; and
period-to-period fluctuations in financial results.
If we fail to continue to meet the listing standards of Nasdaq, our common stock may be delisted, which could have a
material adverse effect on the liquidity of our common stock.
Our common stock is currently listed on the Nasdaq Global Market. The Nasdaq Stock Market LLC has
requirements that a company must meet in order to remain listed on Nasdaq. In particular, Nasdaq rules require us to
maintain a minimum bid price of $1.00 per share of our common stock. If the closing bid price of our common stock
were to fall below $1.00 per share for 30 consecutive trading days or we do not meet other listing requirements, we
would fail to be in compliance with Nasdaq listing standards. There can be no assurance that we will continue to meet
the minimum bid price requirement, or any other requirement in the future. If we fail to meet the minimum bid price
requirement, The Nasdaq Stock Market LLC may initiate the delisting process with a notification letter. If we were to
receive such a notification, we would be afforded a grace period of 180 calendar days to regain compliance with the
minimum bid price requirement. In order to regain compliance, shares of our common stock would need to maintain a
minimum closing bid price of at least $1.00 per share for a minimum of 10 consecutive trading days. In addition, we may
be unable to meet other applicable Nasdaq listing requirements, including maintaining minimum levels of stockholders’
equity or market values of our common stock in which case, our common stock could be delisted. If our common stock
were to be delisted, the liquidity of our common stock would be adversely affected and the market price of our common
stock could decrease.
The vote by the United Kingdom (U.K.) electorate in favor of the U.K.’s exit from the European Union (E.U.) could
adversely impact our business, results of operations and financial condition.
The passage of the referendum on the U.K.’s membership in the E.U., referred to as “Brexit,” in June 2016
resulted in a determination that the U.K. should exit the E.U. In March 2017, the U.K. government initiated the
withdrawal process, with the U.K. scheduled to exit the E.U. by April 2019. Such an exit from the E.U. could cause
uncertainty in the credit markets and financial services industry which could result to lower interest paid on certain of
our investments and the value of certain securities we hold may decline in the future, which could negatively affect our
financial condition, results of operations and cash flow, as well as limit our future access to the capital markets. The
Brexit could also cause disruptions to and create uncertainty surrounding the business environment in which we operate.
For example, we conduct clinical trials in the U.K. and other E.U. member states. Although the terms of U.K.’s exit from
and its future relationship with E.U. are unknown, it is possible that there will be increased regulatory complexities
which can disrupt the timing of our clinical trials and regulatory approvals, if any, of our current and future product
candidates.
Our ability to generate revenues will be diminished if we or our collaborative partners fail to obtain acceptable prices
or an adequate level of reimbursement for products from third-party payers or government agencies.
The drugs we hope to develop may be rejected by the marketplace due to many factors, including cost. Our
ability to commercially exploit a drug may be limited due to the continuing efforts of government and third-party payers
to contain or reduce the costs of health care through various means. For example, in some foreign markets, pricing and
profitability of prescription pharmaceuticals are subject to government control. In the United States, we expect that there
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will continue to be a number of federal and state proposals to implement similar government control. In addition,
increasing emphasis on managed care in the United States will likely continue to put pressure on the pricing of
pharmaceutical products. Cost control initiatives could decrease the price that we or any of our collaborators would
receive for any products in the future. Further, cost control initiatives could adversely affect our and our collaborators’
ability to commercialize our products and our ability to realize royalties from this commercialization.
Our ability to commercialize pharmaceutical products with collaborators may depend, in part, on the extent to
which reimbursement for the products will be available from:
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government and health administration authorities;
private health insurers; and
other third-party payers.
Significant uncertainty exists as to the reimbursement status of newly-approved healthcare products. Third-
party payers, including Medicare, are challenging the prices charged for medical products and services. Government and
other third-party payers increasingly are attempting to contain healthcare costs by limiting both coverage and the level of
reimbursement for new drugs and by refusing, in some cases, to provide coverage for uses of approved products for
disease indications for which the FDA has not granted labeling approval. Third-party insurance coverage may not be
available to patients for any products we discover and develop, alone or with collaborators. If government and other
third-party payers do not provide adequate coverage and reimbursement levels for our products, the market acceptance of
these products may be reduced.
If product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be
required to limit commercialization of our products.
The testing and marketing of medical products and the sale of any products for which we obtain marketing
approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by
consumers, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with our
products. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities
or be required to limit commercialization of our products. We carry product liability insurance that is limited in scope
and amount and may not be adequate to fully protect us against product liability claims. If and when we obtain marketing
approval for our product candidates, we intend to expand our insurance coverage to include the sale of commercial
products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in
adequate amounts. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against
potential product liability claims could prevent or inhibit the commercialization of pharmaceutical products we develop,
alone or with corporate collaborators. We, or our corporate collaborators, might not be able to obtain insurance at a
reasonable cost, if at all. While under various circumstances we are entitled to be indemnified against losses by our
corporate collaborators, indemnification may not be available or adequate should any claim arise.
We depend on various scientific consultants and advisors for the success and continuation of our research and
development efforts.
We work extensively with various scientific consultants and advisors. The potential success of our drug
discovery and development programs depends, in part, on continued collaborations with certain of these consultants and
advisors. We, and various members of our management and research staff, rely on certain of these consultants and
advisors for expertise in our research, regulatory and clinical efforts. Our scientific advisors are not our employees and
may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us.
We do not know if we will be able to maintain such consulting agreements or that such scientific advisors will not enter
into consulting arrangements, exclusive or otherwise, with competing pharmaceutical or biotechnology companies, any
of which would have a detrimental impact on our research objectives and could have a material adverse effect on our
business, financial condition and results of operations.
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If we use biological and hazardous materials in a manner that causes injury or violates laws, we may be liable for
damages, penalties or fines.
Our research and development activities involve the controlled use of potentially harmful biological materials as
well as hazardous materials, chemicals and various radioactive compounds. We cannot completely eliminate the risk of
accidental contamination or injury from the use, storage, handling or disposal of these materials. In the event of
contamination or injury, we could be held liable for damages that result or for penalties or fines that may be imposed,
and such liability could exceed our resources. We are also subject to federal, state and local laws and regulations
governing the use, storage, handling and disposal of these materials and specified waste products. The cost of
compliance with, or any potential violation of, these laws and regulations could be significant.
Our internal computer systems, or those used by our contract research organizations or other contractors or
consultants, may fail or suffer security breaches.
Despite the implementation of security measures, our internal computer systems and those of our contract
research organizations and other contractors and consultants are vulnerable to damage from computer viruses,
unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not
experienced any such system failure, accident or security breach to date, if such an event were to occur and cause
interruptions in our operations, it could result in a disruption of our drug development programs. For example, the loss of
clinical trial data from completed or ongoing clinical trials for a product candidate could result in delays in our
regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any
disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure
of confidential or proprietary information, we could incur liability and the further development of any product candidates
could be delayed.
Our facilities are located near known earthquake fault zones, and the occurrence of an earthquake or other
catastrophic disaster could cause damage to our facilities and equipment, which could require us to cease or curtail
operations.
Our facilities are located in the San Francisco Bay Area near known earthquake fault zones and are vulnerable
to significant damage from earthquakes. We are also vulnerable to damage from other types of disasters, including fires,
floods, power loss, communications failures and similar events. If any disaster were to occur, our ability to operate our
business at our facilities would be seriously, or potentially completely, impaired, and our research could be lost or
destroyed. In addition, the unique nature of our research activities and of much of our equipment could make it difficult
for us to recover from a disaster. The insurance we maintain may not be adequate to cover our losses resulting from
disasters or other business interruptions.
Future equity issuances or a sale of a substantial number of shares of our common stock may cause the price of our
common stock to decline.
Because we will continue to need additional capital in the future to continue to expand our business and our
research and development activities, among other things, we may conduct additional equity offerings. For example, in
October 2017, we completed an underwritten public offering in which we sold 20,815,000 shares of our common stock
pursuant to an effective registration statement. If we or our stockholders sell, or if it is perceived that we or they will sell,
substantial amounts of our common stock (including shares issued upon the exercise of options and warrants) in the
public market, the market price of our common stock could fall. A decline in the market price of our common stock
could make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem
appropriate. Furthermore, if we obtain funds through a credit facility or through the issuance of debt or preferred
securities, these securities would likely have rights senior to the rights of our common stockholders, which could impair
the value of our common stock.
45
Anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of us, which
may be beneficial to our stockholders, more difficult.
Provisions of our amended and restated certificate of incorporation and bylaws, as well as provisions of
Delaware law, could make it more difficult for a third party to acquire us, even if doing so would benefit our
stockholders. These provisions:
•
•
•
•
•
•
•
establish that members of the board of directors may be removed only for cause upon the affirmative vote
of stockholders owning a majority of our capital stock;
authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to
increase the number of outstanding shares and thwart a takeover attempt;
limit who may call a special meeting of stockholders;
prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a
meeting of our stockholders;
establish advance notice requirements for nominations for election to the board of directors or for
proposing matters that can be acted upon at stockholder meetings;
provide for a board of directors with staggered terms; and
provide that the authorized number of directors may be changed only by a resolution of our board of
directors.
In addition, Section 203 of the Delaware General Corporation Law, which imposes certain restrictions relating
to transactions with major stockholders, may discourage, delay or prevent a third party from acquiring us.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We currently lease facilities consisting of approximately 147,000 square feet of research and office space
located at 1180 Veterans Boulevard, South San Francisco, California, of which, commencing in December 2014, we
sublet approximately 57,000 square feet of our research and office space to an unrelated third party. In February 2017,
we entered into an amendment to the sublease agreement to increase the subleased research and office space for an
additional 9,328 square feet under the same term of the sublease. In July 2017, we exercised our option to extend the
term of our lease for another five years. Accordingly, we also extended the term of our sublease to an unrelated party.
Both the lease and the sublease expire in January 2023. We believe our facilities are in good operating condition and that
the leased real property that we still occupy is adequate for all present and near term uses.
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
Not applicable.
46
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common stock commenced trading publicly under the symbol “RIGL” on December 7, 2000. The
following table sets forth, for the periods indicated, the high and low intraday sales prices of our common stock as
reported on the Nasdaq Global Market:
Year Ended December 31, 2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year Ended December 31, 2017
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High Low
$ 2.97 $ 1.94
$ 2.93 $ 2.16
$ 3.93 $ 2.13
$ 4.01 $ 2.38
$ 3.43 $ 1.96
$ 3.29 $ 2.29
$ 2.78 $ 2.18
$ 4.30 $ 3.23
On February 27, 2018, the last reported sale price for our common stock on the Nasdaq Global Market was
$3.79 per share.
Holders
As of February 27, 2018, there were approximately 90 stockholders of record of our common stock.
Dividends
We have not paid any cash dividends on our common stock and currently do not plan to pay any cash dividends
in the foreseeable future.
Performance Measurement Comparison
The graph below shows the cumulative total stockholder return of an investment of $100 (and the reinvestment
of any dividends thereafter) on December 31, 2012 in (i) our common stock, (ii) the Nasdaq Composite Index and
(iii) the Nasdaq Biotechnology Index. The Nasdaq Biotechnology Index is a modified-capitalization weighted index that
includes securities of Nasdaq-listed companies classified according to the Industry Classification Benchmark as either
Biotechnology or Pharmaceuticals and which also meet other eligibility criteria. Our stock price performance shown in
the graph below is based upon historical data and is not indicative of future stock price performance.
47
The following graph and related information shall not be deemed “soliciting material” or be deemed to be
“filed” with the SEC, nor shall such information be incorporated by reference into any future filing, except to the extent
that we specifically incorporate it by reference into such filing.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Rigel Pharmaceuticals, Inc., the Nasdaq Composite Index
and the Nasdaq Biotechnology Index
*
$100 invested on December 31, 2012 in stock or index, including reinvestment of dividends at fiscal year
ending December 31.
48
Item 6. Selected Financial Data
The following selected financial data have been derived from our audited financial statements. The information
set forth below is not necessarily indicative of our results of future operations and should be read in conjunction with
“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8.
Financial Statements and Supplementary Data” included elsewhere in this Annual Report on Form 10- K.
Statements of Operations Data:
Contract revenues from collaborations
Costs and expenses:
Research and development
General and administrative
Restructuring charges
Loss on sublease
Total costs and expenses
Loss from operations
Interest income
Gain on disposal of assets
Net loss
Net loss per share, basic and diluted
Weighted average shares used in computing net loss per
2017
Fiscal Year Ended December 31,
2014
2015
2016
(in thousands, except per share amounts)
2013
$
4,484 $ 20,383 $ 28,895 $
8,250 $
7,150
63,446
20,908
5,770
—
90,124
(69,741)
437
88
46,269
37,831
—
—
84,100
(79,616)
892
732
75,328
19,612
1,679
—
96,619
(89,469)
426
16
$ (77,992) $ (69,216) $ (51,464) $ (90,908) $ (89,027)
(1.02)
$
62,825
17,813
—
—
80,638
(51,743)
222
57
67,696
22,501
—
9,302
99,499
(91,249)
243
98
(1.04) $
(0.58) $
(0.73) $
(0.62) $
share, basic and diluted
126,324
94,387
88,434
87,662
87,288
2017
2016
2015
2014
2013
As of December 31,
(in thousands)
Balance Sheet Data:
Cash, cash equivalents and short-term
investments
Working capital
Total assets
Accumulated deficit
Total stockholders’ equity
$
115,751 $
99,096
119,111
(1,138,854)
100,646
74,766 $ 126,276 $ 143,159 $ 211,975
209,781
53,626
226,058
78,134
(849,274)
(1,060,862)
208,251
55,027
95,228
131,747
(991,646)
91,381
136,512
154,135
(940,182)
128,246
See Note 1 to the Financial Statements for description of the number of shares used in the computation of basic
and diluted loss per share.
49
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a biotechnology company dedicated to discovering, developing and providing novel small molecule
drugs that significantly improve the lives of patients with immune and hematologic disorders, cancer and rare diseases.
Our pioneering research focuses on signaling pathways that are critical to disease mechanisms. Our current clinical
programs include clinical trials of fostamatinib, an oral spleen tyrosine kinase (SYK) inhibitor, in a number of
indications. We have an NDA under review with the FDA for fostamatinib in patients with chronic immune
thrombocytopenia (ITP). In addition, we have product candidates in development with partners BerGenBio AS, Daiichi
Sankyo and Aclaris Therapeutics.
Since inception, we have financed our operations primarily through the sale of equity securities, and contract
payments under our collaboration agreements. Our research and development activities, including preclinical studies and
clinical trials, consume substantial amounts of capital. As of December 31, 2017, we had approximately $115.8 million
in cash, cash equivalents and short-term investments. In February 2017, we completed an underwritten public offering in
which we sold 23,000,000 shares of our common stock pursuant to an effective registration statement at a price to the
public of $2.00 per share for net proceeds of approximately $43.0 million, net of underwriting discounts and
commissions and offering expenses payable by us. In October 2017, we completed another underwritten public offering
in which we sold 20,815,000 shares of our common stock pursuant to an effective registration statement at a price to the
public of $3.35 per share for net proceeds of approximately $65.3 million, net of underwriting discounts and
commissions and offering expenses payable by us. We believe that our existing capital resources will be sufficient to
support our current and projected funding requirements, including the potential commercial launch of fostamatinib in
ITP in the U.S., through at least the next 12 months. We also continue to evaluate ex-U.S. partnerships for fostamatinib
and other partnering opportunities across our pipelines. During the year ended December 31, 2017, we received an
aggregate of $4.5 million in payments pursuant to our agreements with our collaborative partners, $5.7 million under the
Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. (Cantor), and approximately $4.9 million of
sublease income and reimbursements under a sublease agreement with an unrelated third party.
Our revenues have consisted primarily of revenues from sponsored research and license agreements with our
corporate collaborators. We earned contract revenues from collaborations of $4.5 million during the year ended
December 31, 2017, which is comprised of the $3.3 million payment we received from BerGenBio pursuant to
advancing a licensed AXL kinase inhibitor to Phase 2 clinical study and a $1.2 million payment we earned pursuant to a
license agreement with a third party.
Within our product development portfolio, our most advanced program is fostamatinib in ITP. We submitted an
NDA for fostamatinib in ITP in April 2017, which was accepted by the FDA in June 2017, with an action date for the
FDA to complete its review by April 17, 2018, under the PDUFA. In April 2017, we announced that we received the
conditional acceptance by the U.S Food & Drug Administration (FDA) of the proprietary name TAVALISSETM for
fostamatinib disodium, our lead investigational product candidate. In October 2017, we announced that the FDA was not
planning on holding an Oncology Drugs Advisory Committee (ODAC) meeting to discuss the NDA for fostamatinib in
ITP. Additionally, the FDA indicated that the review of fostamatinib is proceeding according to the standard internal
review timeline as described in the Guidance on Good Review Management Principles and Practices for PDUFA
Products.
Product Development Programs
Our product development portfolio features multiple novel, targeted drug candidates in the therapeutic areas of
immunology, oncology and immuno-oncology. Please refer to “Part I. Item 1. Business—Product Development
Programs” for a detailed discussion of our multiple product candidates in development.
50
Corporate Collaborations
We conduct research and development programs independently and in connection with our corporate
collaborators. Please refer to “Part I. Item 1. Business—Corporate Collaborations” for a detailed discussion of our
corporate collaborations.
Research and Development Expenses
Our research and development expenditures include costs related to preclinical and clinical trials, scientific
personnel, supplies, equipment, consultants, sponsored research, stock based compensation, and allocated facility costs.
We do not track fully burdened research and development costs separately for each of our drug candidates. We
review our research and development expenses by focusing on three categories: research, development, and other. Our
research team is focused on creating a portfolio of product candidates that can be developed into small molecule
therapeutics in our own proprietary programs or with potential collaborative partners and utilizes our robust discovery
engine to rapidly discover and validate new product candidates in our focused range of therapeutic indications.
“Research” expenses relate primarily to personnel expenses, lab supplies, fees to third party research consultants and
compounds. Our development group leads the implementation of our clinical and regulatory strategies and prioritizes
disease indications in which our compounds may be studied in clinical trials. “Development” expenses relate primarily to
clinical trials, personnel expenses, costs related to the submission and management of our NDA, lab supplies and fees to
third party research consultants. “Other” expenses primarily consist of allocated facilities costs and allocated stock based
compensation expense relating to personnel in research and development groups.
In addition to reviewing the three categories of research and development expenses described in the preceding
paragraph, we principally consider qualitative factors in making decisions regarding our research and development
programs, which include enrollment in clinical trials and the results thereof, the clinical and commercial potential for our
drug candidates and competitive dynamics. We also make our research and development decisions in the context of our
overall business strategy, which includes the evaluation of potential collaborations for the development of our drug
candidates.
We do not have reliable estimates regarding the timing of our clinical trials. Preclinical testing and clinical
development are long, expensive and uncertain processes. In general, biopharmaceutical development involves a series
of steps, beginning with identification of a potential target and including, among others, proof of concept in animals and
Phase 1, 2 and 3 clinical trials in humans. Significant delays in clinical testing could materially impact our product
development costs and timing of completion of the clinical trials. We do not know whether planned clinical trials will
begin on time, will need to be halted or revamped or will be completed on schedule, or at all. Clinical trials can be
delayed for a variety of reasons, including delays in obtaining regulatory approval to commence a trial, delays from scale
up, delays in reaching agreement on acceptable clinical trial agreement terms with prospective clinical sites, delays in
obtaining institutional review board approval to conduct a clinical trial at a prospective clinical site or delays in
recruiting subjects to participate in a clinical trial.
We currently do not have reliable estimates of total costs for a particular drug candidate to reach the market.
Our potential products are subject to a lengthy and uncertain regulatory process that may involve unanticipated
additional clinical trials and may not result in receipt of the necessary regulatory approvals. Failure to receive the
necessary regulatory approvals would prevent us from commercializing the product candidates affected. In addition,
clinical trials of our potential products may fail to demonstrate safety and efficacy, which could prevent or significantly
delay regulatory approval.
51
The following table presents our total research and development expenses by category.
Categories:
Research
Development
Other
Year Ended December 31,
2016
2015
2017
From January 1, 2007*
to December 31, 2017
(in thousands)
$
9,958
27,936
8,375
$ 46,269
$ 19,909
30,951
12,586
$ 63,446
$ 21,904 $
25,988
14,933
$ 62,825 $
226,366
342,169
230,326
798,861
*
We started tracking research and development expenses by category on January 1, 2007.
“Other” expenses mainly represent allocated facilities costs of approximately $6.9 million, $9.5 million and
$10.8 million for the years ended December 31, 2017, 2016 and 2015, respectively, and allocated stock-based
compensation expenses of approximately $1.5 million, $3.1 million and $4.1 million for the years ended December 31,
2017, 2016 and 2015, respectively.
For the year ended December 31, 2017, a major portion of our total research and development expense was
associated with salaries of our research and development personnel costs related to the submission of our NDA for
fostamatinib in ITP, research and development expense for our ITP, IRAK, IgAN and AIHA programs and allocated
facilities costs. For the year ended December 31, 2016, a major portion of our total research and development expense
was associated with research and development expense for our ITP, IgAN and AIHA programs, salaries of our research
and development personnel and allocated facilities costs. For the year ended December 31, 2015 a major portion of our
total research and development expense was associated with salaries of our research and development personnel,
allocated facilities costs, and research and development expense for our ITP and IgAN programs.
For further discussion on research and development activities, see “Research and Development Expense” under
“Results of Operations” below.
Critical Accounting Policies and the Use of Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our financial
statements, which have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP).
The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. We evaluate our estimates, including those related to our
stock based compensation and the probability of achievement of corporate performance-based milestone for our
performance-based stock option awards, impairment issues, the estimated useful life of assets, and estimated accruals,
particularly research and development accruals, on an ongoing basis. We base our estimates on historical experience and
on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that there
were no significant changes in our critical accounting policies during the year ended December 31, 2017 as compared to
those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016. We believe the
following critical accounting policies affect our more significant judgments and estimates used in the preparation of our
financial statements:
Revenue Recognition
We present revenue from our collaboration arrangements under the FASB ASC 808, Collaboration
Arrangements. The terms of these agreements generally contain multiple elements, or deliverables, which may include
(i) granting of license rights to our program, (ii) participation in a joint research committee, (iii) performance of research
activities, and (iv) clinical supply and materials. The payments we receive under these arrangements typically include
one or more of the following: non-refundable, up-front fees; funding of research and/or development efforts; contingent
52
fees due upon the achievement of specified triggering events; and/or royalties on future product sales. We recognize
revenue for the performance of services or the delivery of products when each of the following four criteria is met: (i)
persuasive evidence of an arrangement exists; (ii) products are delivered or as services are rendered; (iii) the sales price
is fixed or determinable; and (iv) collectability is reasonably assured.
Our revenue arrangements with multiple elements are evaluated under FASB ASC 605-25, Multiple Element
Arrangements, and are divided into separate units of accounting if certain criteria are met, including whether the
deliverables have stand-alone value, based on the relevant facts and circumstances for each arrangement. The
consideration we receive under collaboration arrangements is allocated among the separate units of accounting based on
the selling price hierarchy, and the applicable revenue recognition criteria is applied to each of the separate units. We
make significant judgments and estimates in the allocation of the consideration among the deliverables under the
agreement, as well as the determination of the periods the units will be delivered to our collaborators. If there are
deliverables in an arrangement that are not separable from other aspects of the contractual relationship, they are treated
as a combined unit of accounting, with the allocated revenue for the combined unit recognized in a manner consistent
with the revenue recognition applicable to the final deliverable in the combined unit. Payments received prior to
satisfying the relevant revenue recognition criteria are recorded as deferred revenue in the accompanying balance sheets
and recognized as revenue when the revenue recognition criteria are met.
We typically receive non-refundable, up-front payments when licensing our intellectual property, which often
occurs in conjunction with a research and development agreement. If we believe that the license to our intellectual
property has stand-alone value, we generally recognize revenue attributed to the license upon delivery provided that
there are no future performance requirements for use of the license. When we believe that the license to our intellectual
property does not have stand-alone value, we would recognize revenue attributed to the license ratably from the effective
date of the agreement or the delivery of the license up to the estimated completion date of the undelivered performance
obligation. Revenues related to the research services with our corporate collaborators are recognized as research services
are performed over the related research period. Under these agreements, we are required to perform research activities as
specified in the agreement. The payments received are not refundable and are based on a contractual cost per full-time
equivalent employee working on the project. Our research and development expenses under the collaborative research
agreements approximate the revenue recognized under such agreements over the research period.
Revenues associated with substantive, at-risk milestones pursuant to collaborative agreements are recognized
upon achievement of the milestones. We consider a milestone to be substantive at the inception of the arrangement if it is
commensurate with either our performance to achieve the milestone or the enhancement of the value of the delivered
item as a result of a specific outcome resulting from our performance to achieve the milestone, it relates solely to past
performance and it is reasonable relative to all of the deliverables and payment terms within the arrangement. Non-
refundable contingent future amounts receivable in connection with future events specified in collaboration agreements
that are not considered milestones such as payments contingent solely upon the passage of time or the result of our
collaborator's performance will be recognized as revenue when the recognition criteria discussed above are met.
Stock-Based Compensation
We grant options to purchase our common stock to our officers, directors and all other employees and
consultants under our stock option plans. Eligible employees can also purchase shares of our common stock at a price per
share equal to the lesser of 85% of the fair market value on the first day of the offering period or 85% of the fair market
value on the purchase date under our employee stock purchase plan (Purchase Plan). The benefits provided under these
plans are stock-based payments subject to the provisions of FASB ASC 718. We adopted the use of the straight-line
attribution method over the requisite service period for each entire stock award. In connection with the adoption of ASU
No. 2016-09—Improvements to Employee Share-Based Payment Accounting, on January 1, 2017, we have elected to
account for forfeitures as they occur.
The determination of the fair value of stock-based payment awards on the date of grant using the Black-Scholes
option-pricing model is affected by our stock price, as well as assumptions regarding a number of complex and
subjective variables. These variables include, but are not limited to, volatility, expected term, risk-free interest rate and
dividends. We estimate volatility over the expected term of the option using historical share price performance. For
53
expected term, among other things, we take into consideration our historical data of options exercised, cancelled and
expired. The risk-free rate is based on the U.S. Treasury constant maturity rate. We have not paid and do not expect to
pay dividends in the foreseeable future. In order to calculate stock-based compensation expense, we also estimate the
forfeiture rate using our historical experience with options that cancel before they vest.
We granted performance-based stock options to purchase shares of our common stock which will vest upon the
achievement of certain corporate performance-based milestones. We determined the fair values of these performance-
based stock options using the Black-Scholes option pricing model at the date of grant. For the portion of the
performance-based stock options of which the performance condition is considered probable of achievement, we
recognize stock-based compensation expense on the related estimated fair value of such options on a straight-line basis
from the date of grant up to the date when we expect the performance condition will be achieved. For the performance
conditions that are not considered probable of achievement at the grant date or upon quarterly re-evaluation, prior to the
event actually occurring, we recognize the related stock-based compensation expense when the event occurs or when we
can determine that the performance condition is probable of achievement. In those cases, we recognize the change in
estimate at the time we determine the condition is probable of achievement (by recognizing stock-based compensation
expense as cumulative catch-up adjustment as if we had estimated at the grant date that the performance condition would
have been achieved) and recognize the remaining compensation cost up to the date when we expect the performance
condition will be achieved, if any. During the years ended December 31, 2017 and 2016, we recognized $1.1 million
and $1.8 million, respectively, of stock-based compensation expense relating to certain performance-based stock options
in which the corresponding corporate performance-based milestones have been achieved or were considered probable of
achievement as of December 31, 2017 and 2016, respectively. At December 31, 2017, total unrecognized compensation
cost related to outstanding performance-based stock options, with various performance conditions, was $993,000.
Research and Development Accruals
We have various contracts with third parties related to our research and development activities. Costs that are
incurred for services rendered, but not billed to us, as of the end of the period are estimated and accrued. We make
estimates of the amounts incurred in each period based on the information available to us and our knowledge of the
nature of the contractual activities generating such costs. Expenses related to other research and development contracts,
such as research contracts, toxicology study contracts and manufacturing contracts are estimated to be incurred generally
on a straight-line basis over the duration of the contracts. Raw materials and study materials purchased for us by third
parties are expensed at the time of purchase. Many of our estimates are based significantly or in part on information
provided for us by third parties. If such information were not reported properly, our research and development expense
amounts could be misstated.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09—Revenue from Contracts with Customers, which supersedes
the revenue recognition requirements under ASC Topic 605, Revenue Recognition, and most industry-specific guidance
under the ASC. The core principle of ASU No. 2014-09 is that an entity should recognize revenue when it transfers
promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. ASU No. 2014-09 defines a five-step process to achieve this core
principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition
process than required under existing U.S. GAAP including identifying performance obligations in the contract,
estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to
each separate performance obligation. ASU No. 2014-09 also requires additional disclosures to enable users of financial
statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer
contracts. ASU No. 2014-09 allows for either full retrospective or modified retrospective adoption. In July 2015, the
FASB deferred by one year the effective date of ASU No. 2014-09 with the new effective date beginning after
December 15, 2017, and the interim periods within that year and allowed for early adoption for all entities as of the
original effective date for public business entities, which was annual reporting periods beginning after December 15,
2016. We adopted this new standard on January 1, 2018 using the modified retrospective approach.
To date, our revenues have been derived from license and collaboration agreements. The consideration we are
54
eligible to receive under these agreements includes upfront payments, progress dependent contingent payments on events
achieved by our collaboration partners, and royalties on net sales of products sold by such partners under the agreements.
Each license and collaboration agreement is unique and will need to be assessed separately under the five-step process of
the new standard. ASU No. 2014-09 differs from the current accounting standard in many respects, such as in the
accounting for variable consideration, including milestone payments or contingent payments. Under our current
accounting policy, we recognize contingent payments as revenue in the period that the payment-triggering event
occurred or is achieved. However, under the new accounting standard, it is possible to start to recognize contingent
payments before the payment-triggering event is completely achieved, subject to management’s assessment of whether it
is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the
uncertainty associated with the variable consideration is subsequently resolved. We assessed the impact of the new
standard on our active license and collaboration agreements and have identified the revenue streams. The adoption of this
standard will not have a material impact on our financial statements as we do not have any unrecognized transaction
price, other than future potential contingent payments that are not currently considered probable of occurring, or any
remaining performance obligations under our collaboration agreements as of the initial adoption date. In connection with
our adoption of ASU No. 2014-09, we do not expect to have an adjustment on the opening balance of Accumulated
Deficit balance as of January 1, 2018.
In February 2016, the FASB issued ASU No. 2016-02—Leases, which is aimed at making leasing activities
more transparent, and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use
asset and corresponding lease liability, including leases currently accounted for as operating leases. The guidance is
effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted.
We plan to adopt this new standard on January 1, 2019. We are currently evaluating the potential impact of the adoption
of ASU No. 2016-02 on our financial statements and cannot estimate the impact of adoption at this time.
In March 2016, the FASB issued ASU No. 2016-09—Improvements to Employee Share-Based Payment
Accounting, which is intended to simplify several aspects of the accounting for share-based payment award transactions,
including the income tax consequences, an option to recognize gross stock compensation expense with actual forfeitures
recognized as they occur, as well as certain classifications on the statement of cash flows. We adopted ASU No. 2016-09
on January 1, 2017. Under this guidance, on a prospective basis, companies will no longer record excess tax benefits and
certain tax deficiencies in additional paid-in capital. Instead, companies will record all excess tax benefits and tax
deficiencies as income tax expense or benefit in the income statement. In addition, the guidance eliminates the
requirement that excess tax benefits be realized before companies can recognize them. The ASU requires a cumulative-
effect adjustment for previously unrecognized excess tax benefits in opening retained earnings in the annual period of
adoption. Upon adoption, we recognized additional excess tax benefit of $4.1 million (federal) and $1.4 million (state) as
a deferred tax asset with a corresponding increase to our deferred tax asset valuation allowance, as a deferred tax asset
with a corresponding increase to our deferred tax asset valuation allowance, which did not result in a net impact to
accumulated deficit. Additionally, as provided for under this new guidance, we elected to account for forfeitures as they
occur. The adoption of this aspect of the guidance did not have a material impact on our financial statements.
Results of Operations
Year Ended December 31, 2017, 2016 and 2015
Revenues
Contract revenues from collaborations
Year Ended December 31,
2016
2017
2015
(in thousands)
$ 4,484 $ 20,383 $ 28,895 $
Aggregate
Change
Aggregate
Change
2017 from 2016 2016 from 2015
(15,899) $
(8,512)
Contract revenues from collaborations of $4.5 million during the year ended December 31, 2017 is comprised
of the $3.3 million payment we received from BerGenBio pursuant to advancing a licensed AXL kinase inhibitor to
Phase 2 clinical study and a $1.2 million payment we earned pursuant to a license agreement with a third party. Contract
revenues from collaborations of $20.4 million in 2016 were comprised of the $13.4 million amortization of the
55
$30.0 million upfront payment, contingent payment of $3.0 million, and the research service fees we earned from BMS
of $290,000, as well as the contingent payment of $3.7 million we received from BerGenBio. Contract revenues from
collaborations of $28.9 million in 2015 were comprised of the $16.6 million amortization of the $30.0 million upfront
payment from BMS and the research service fees we earned from BMS of $822,000, as well as the upfront payments
received from our other collaborative partners in the aggregate of $11.5 million.
Our potential future revenues may include product revenues, royalty payments, and contingent payments from
our current partners and from new partners with whom we enter into agreements in the future, if any, the timing and
amount of which is unknown at this time.
Research and Development Expenses
Research and development expense
Stock-based compensation expense included in
Year Ended December 31,
2016
2017
2015
(in thousands)
$ 46,269 $ 63,446 $ 62,825 $
Aggregate
Change
Aggregate
Change
2017 from 2016 2016 from 2015
(17,177) $
621
research and development expense
$ 1,497 $ 3,103 $ 4,100 $
(1,606) $
(997)
The decrease in research and development expense for the year ended December 31, 2017, compared to the
same period in 2016, were primarily due to the decreases in personnel and personnel-related costs of $4.3 million,
research supplies of $3.6 million, stock-based compensation expense of $1.6 million and facility costs of $2.7 million as
a result of the reduction in workforce in September 2016, as well as the decrease in clinical trial costs of $3.4 million
primarily due to the completion of the pivotal Phase 3 clinical trials in ITP, partially offset by the increase in costs
related to the submission of our NDA for fostamatinib in ITP and advancement of our IRAK program. The increase in
research and development expense for the year ended December 31, 2016, compared to the same period in 2015, was
primarily due to the increase in research and development costs related to our fostamatinib in ITP and AIHA programs,
partially offset by the decreases in personnel costs and stock based compensation due to the reduction in workforce in
September 2016.
We expect our research and development expense in 2018 to remain relatively consistent with 2017.
General and Administrative Expense
General and administrative expense
Stock-based compensation expense included in
Year Ended December 31,
2016
2017
2015
(in thousands)
$ 37,831 $ 20,908 $ 17,813 $
Aggregate
Change
Aggregate
Change
2017 from 2016 2016 from 2015
16,923 $
3,095
general and administrative expense
$ 4,490 $ 4,230 $ 3,303 $
260 $
927
The increase in general and administrative expense for the year ended December 31, 2017, compared to the
same period in 2016, was primarily due to the costs incurred for a potential commercial launch of fostamatinib in ITP of
$8.1 million, personnel-related costs of $4.9 million, allocated facility costs of $1.3 million and various other costs. The
increase in general and administrative expense for the year ended December 31, 2016, compared to the same period in
2015, was due to the costs incurred in preparation for a potential commercial launch of fostamatinib in ITP, as well as
the recognition of stock-based compensation expense relating to certain performance-based stock options in which the
corresponding corporate performance-based milestones have been achieved or were considered probable of achievement
as of December 31, 2016.
We expect our general and administrative expense in 2018 to increase as we as continue our efforts in the
potential commercial launch of fostamatinib in ITP, including hiring experienced commercial professionals, as well as
sales representatives in the hematology and hematology-oncology area, and commercial operations, marketing and
market access professionals to support these efforts.
56
Restructuring Charges
Restructuring charges
Stock-based compensation expense included
in restructuring charges
Year Ended
December 31,
2016
2015
Aggregate
Change
Aggregate
Change
2017 from 2016 2016 from 2015
2017
$ — $ 5,770 $ — $
(5,770) $
5,770
(in thousands)
$ — $ 499 $ — $
(499) $
499
In September 2016, we announced that we had reduced our workforce by 46 positions, mostly in the research
area. We also announced that effective September 15, 2016, Donald G. Payan, M.D., retired from the board of directors
and from his position as Executive Vice President and President of Discovery and Research. We recorded restructuring
charges during the third quarter of 2016 of approximately $5.8 million, which included $5.0 million of severance costs
paid in cash, $319,000 impairment of certain property and equipment, and $499,000 of non-cash stock-based
compensation expense as a result of the modification of our former executive’s stock options.
Year Ended
December 31,
2016
2015
Aggregate
Change
2017 from 2016
Aggregate
Change
2016 from 2015
2017
(in thousands)
Interest income
$ 892 $ 437 $ 222 $
455 $
215
Interest income results from our interest-bearing cash and investment balances. The increases in interest income
for the years ended December 31, 2017 and 2016, as compared to the same periods in 2016 and 2015, respectively, and
was primarily due to the higher yield on our investments.
Liquidity and Capital Resources
Cash Requirements
From inception, we have financed our operations primarily through sales of equity securities and contract
payments under our collaboration agreements. We have consumed substantial amounts of capital to date as we continue
our research and development activities, including preclinical studies and clinical trials and our preparation for potential
commercial launch of fostamatinib in ITP.
As of December 31, 2017, we had approximately $115.8 million in cash, cash equivalents and short-term
investments, as compared to approximately $74.8 million as of December 31, 2016, an increase of approximately
$41.0 million. The increase was primarily attributable to the completed underwritten public offerings in February and
October 2017 in which we sold a total of 43,815,000 shares of our common stock pursuant to an effective registration
statement and received net proceeds of approximately $108.3 million, net of underwriting discounts and commissions
and offering expenses payable by us, partially offset by the payments associated with funding our operating expenses
during the year ended December 31, 2017.
In February 2017, we received a payment from BerGenBio of $3.3 million pursuant to our exclusive license
agreement which we signed in June 2011. In May 2017, we entered into an Amended Sales Agreement with Cantor,
pursuant to which we may offer and sell, through Cantor additional shares of our common stock, up to an aggregate
offering price of $40.0 million. During the year ended December 31, 2017, 2,166,093 shares of common stock were sold
under the Amended Sales Agreement, with aggregate net proceeds of $5.7 million. In October 2017, we terminated the
Amended Sales Agreement with Cantor.
In December 2014, we entered into a sublease agreement with an unrelated third party to occupy a portion of
our research and office space. This sublease agreement was amended in February 2017 to sublease additional research
and office space. Effective July 2017, the sublease agreement was amended primarily to extend the term of the sublease
57
through January 2023. During the year ended December 31, 2017, we received approximately $4.9 million of sublease
income and reimbursements. We expect to receive approximately $22.1 million in future sublease income (excluding our
subtenant’s share of facility’s operating expenses) through January 2023.
We believe that our existing capital resources will be sufficient to support our current and projected funding
requirements, including the preparation for potential commercial launch of fostamatinib in ITP in the U.S., through at
least the next 12 months. We also continue to evaluate ex-U.S. partnerships for fostamatinib and other partnering
opportunities across our pipelines. We have based this estimate on assumptions that may prove to be wrong, and we
could utilize our available capital resources sooner than we currently expect. Because of the numerous risks and
uncertainties associated with the development of our product candidates and other research and development activities,
we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures associated
with our current and anticipated clinical trials and other research and development activities.
Our operations will require significant additional funding for the foreseeable future. Unless and until we are
able to generate a sufficient amount of product, royalty or milestone revenue, we expect to finance future cash needs
through public and/or private offerings of equity securities, debt financings and/or collaboration and licensing
arrangements, and to a much lesser extent through interest income earned on the investment of our excess cash balances
and short-term investments. With the exception of contingent and royalty payments that we may receive under our
existing collaborations, we do not currently have any committed future funding. To the extent we raise additional capital
by issuing equity securities, our stockholders could at that time experience substantial dilution. Any debt financing that
we are able to obtain may involve operating covenants that restrict our business. To the extent that we raise additional
funds through collaboration and licensing arrangements, we may be required to relinquish some of our rights to our
technologies or product candidates, or grant licenses on terms that are not favorable to us.
Our future funding requirements will depend upon many factors, including, but not limited to:
•
•
•
•
•
•
•
•
•
•
•
the successful regulatory approval of our recently submitted NDA;
the costs to commercialize fostamatinib or any other future product candidates, if any such candidate
receives regulatory approval for commercial sale;
the progress and success of our clinical trials and preclinical activities (including studies and manufacture
of materials) of our product candidates conducted by us;
the progress of research and development programs carried out by us and our collaborative partners;
the costs and timing of regulatory filings and approvals by us and our collaborators;
any changes in the breadth of our research and development programs;
the ability to achieve the events identified in our collaborative agreements that may trigger payments to us
from our collaboration partners;
our ability to acquire or license other technologies or compounds that we may seek to pursue;
our ability to manage our growth;
competing technological and market developments;
the costs and timing of obtaining, enforcing and defending our patent and other intellectual property rights;
and
•
expenses associated with any unforeseen litigation, including any securities class action lawsuits.
58
Insufficient funds may require us to delay, scale back or eliminate some or all of our research or development
programs and activities related to commercial launch, to lose rights under existing licenses or to relinquish greater or all
rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise
choose or may adversely affect our ability to operate as a going concern.
For the years ended December 31, 2017 and 2016, we maintained an investment portfolio primarily in money
market funds, U.S. treasury bills, government-sponsored enterprise securities, and corporate bonds and commercial
paper. Cash in excess of immediate requirements is invested with regard to liquidity and capital preservation. Wherever
possible, we seek to minimize the potential effects of concentration and degrees of risk. We will continue to monitor the
impact of the changes in the conditions of the credit and financial markets to our investment portfolio and assess if future
changes in our investment strategy are necessary.
Cash Flows from Operating, Investing and Financing Activities
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Net increase (decrease) in cash and cash equivalents
2017
Year Ended December 31,
2016
(in thousands)
2015
$ (77,557)
(19,473)
117,688
20,658
$
$ (75,889)
24,881
25,184
$ (25,824)
$
$
(23,413)
44,613
7,053
28,253
Net cash used in operating activities was approximately $77.6 million in 2017 compared to approximately
$75.9 million and $23.4 million in 2016 and 2015, respectively.
Net cash used in operating activities in 2017 was primarily due to the cash payments related to our research and
development programs, which include costs related to the submission of our NDA for fostamatinib in ITP, and
commercial launch preparation costs, partially offset by the $4.5 million payment we received from our collaborative
partners. Net cash used in operating activities in 2016 was primarily due to the cash payments related to our research and
development programs and severance payments as a result of the reduction in workforce in September 2016, partially
offset by the $3.7 million and $3.0 million payments we received from BerGenBio and BMS, respectively. Net cash used
in operating activities in 2015 was primarily due to the cash payments related to our research and development programs,
partially offset by the $41.5 million payment we received in 2015 from our collaborative partners. The timing of cash
requirements may vary from period to period depending on our research and development activities, including our
planned preclinical and clinical trials, and future requirements to establish commercial capabilities for any products that
we may develop.
Net cash used in investing activities was approximately $19.5 million in 2017 compared to net cash provided by
investing of activities of approximately $24.9 million and $44.6 million in 2016 and 2015, respectively. Net cash used in
investing activities in 2017 related to net purchases of short-term investments and capital expenditures, partially offset by
the $732,000 proceeds from disposal of assets. Net cash provided by investing activities in 2016 and 2015 related to net
maturities of short-term investments, partially offset by capital expenditures. Capital expenditures were approximately
$164,000, $804,000 and $546,000 in 2017, 2016 and 2015, respectively.
Net cash provided by financing activities was approximately $117.7 million in 2017 compared to approximately
$25.2 million and $7.1 million in 2016 and 2015, respectively. Net cash provided by financing activities in 2017
consisted of net proceeds of $108.3 million from issuance of common stock pursuant to the underwritten public offerings
we completed in February and October 2017, $5.7 million from issuance of shares under our Amended Sales Agreement
with Cantor and proceeds from exercise of stock options and participation in the Purchase Plan. Net cash provided by
financing activities in 2016 and 2015 consisted of net proceeds from issuance of shares under the Controlled Equity
Offering Sales Agreement of $23.6 million and $5.3 million, respectively, as well as proceeds from exercise of
outstanding options and issuance of shares under the Purchase Plan of $1.6 million and $1.8 million, respectively.
59
Off-Balance Sheet Arrangements
As of December 31, 2017, we had no off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of
Regulation S-K under the Exchange Act).
Contractual Obligations
We conduct our research and development programs internally and through third parties that include, among
others, arrangements with universities, consultants and contract research organizations (CRO). We have contractual
arrangements with these parties, however our contracts with them are cancelable generally on reasonable notice within
one year and our obligations under these contracts are primarily based on services performed. We do not have any
purchase commitments under any collaboration arrangements.
We have agreements with certain CROs to conduct our clinical trials and with third parties relative to our
potential commercial launch of fostamatinib. The timing of payments for any amounts owed under the respective
agreements will depend on various factors including, but not limited to, patient enrollment and other progress of the
clinical trial and various activities related to commercial launch. We will continue to enter into contracts in the normal
course of business with various third parties who support our clinical trials, support our preclinical research studies, and
provide other services related to our operating purposes as well as our potential commercial launch of fostamatinib in
ITP. We can terminate these agreements at any time, and if terminated, we would not be liable for the full amount of the
respective agreements. Instead, we will be liable for services provided through the termination date plus certain
cancellation charges, if any, as defined in each of the respective agreements. In addition, these agreements may, from
time to time, be subjected to amendments as a result of any change orders executed by the parties. As of December 31,
2017, we had the following contractual commitments:
Total
More than
Less than Payment Due By Period
1 Year 1 - 3 Years 3 - 5 Years 5 Years
(in thousands)
Facilities lease (1)
$ 50,052 $ 9,593 $ 19,015 $ 20,567 $
877
(1)
In December 2014, we entered into a sublease agreement, which was amended in 2017, with an unrelated third
party to lease up a portion of the research and office space. The facilities lease obligations above do not include
the sublease income of approximately $22.1 million which we expect to receive over the term of the sublease
through 2023.
We are also subject to claims related to the patent protection of certain of our technologies, as well as purported
securities class action lawsuit, other litigations, and other contractual agreements. We are required to assess the
likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A
determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each
individual matter.
In the first quarter of 2017, we entered into a consulting agreement with a third party, pursuant to which we may
be required to pay amounts ranging from $1.5 million to $4.0 million if certain future milestone events occur. As of
December 31, 2017, we concluded that one of the future milestone events is probable of achievement and recognized
$1.5 million in contingent fee which we recorded as part of General and administrative expenses in the Statements of
Operations. We do not consider the other future milestone events as probable of occurring as of December 31, 2017.
Recent Developments
Changes in Executive Team and Board of Directors
In August 2017 and November 2017, Brian L. Kotzin, M.D. and Gregg Lapointe, respectively, were appointed
to the Company’s board of directors.
60
Effective December 31, 2017, Ryan D. Maynard resigned from his position as executive vice president and
chief financial officer. Nelson D. Cabatuan, vice president, finance will serve as the Company's interim principal
accounting officer.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The primary objective of our investment activities is to preserve principal while at the same time maximizing
the income we receive from our investments without significantly increasing risk. Some of the securities in which we
invest may have market risk. This means that a change in prevailing interest rates may cause the fair value amount of the
investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing
rate and the prevailing interest rate later rises, the market value amount of our investment will decline. To minimize this
risk, we maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including money
market funds and government and non-government debt securities and the maturities of each of these instruments is less
than one year. In 2017, we maintained an investment portfolio primarily in money market funds, U.S. treasury bills,
government-sponsored enterprise securities, and corporate bonds and commercial paper. Due to the primarily short-term
nature and low interest rate yields of these investments, we believe we do not have a material exposure to interest rate
risk and market risk arising from our investments. Therefore, no quantitative tabular disclosure is provided.
We have operated primarily in the United States, and all funding activities with our contract research
organizations to date have been made in U.S. dollars. Accordingly, we have not had any significant exposure to foreign
currency rate fluctuations.
61
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Rigel Pharmaceuticals, Inc.
Report of Independent Registered Public Accounting Firm
Balance Sheets
Statements of Operations
Statements of Comprehensive Loss
Statements of Stockholders’ Equity
Statements of Cash Flows
Notes to Financial Statements
Page
63
64
65
66
67
68
69
62
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Rigel Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Rigel Pharmaceuticals, Inc. (the Company) as of December 31,
2017 and 2016, the related statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of
the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report dated March 6, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1998.
Redwood City, California
March 6, 2018
63
RIGEL PHARMACEUTICALS, INC.
BALANCE SHEETS
(In thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Prepaid and other current assets
Total current assets
Property and equipment, net
Other assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
Accrued compensation
Accrued research and development
Other accrued liabilities
Deferred liability – sublease, current portion
Deferred rent, current portion
Total current liabilities
Long-term portion of deferred liability – sublease
Long-term portion of deferred rent
Other long-term liabilities
Commitments
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued and
outstanding as of December 31, 2017 and 2016
Common stock, $0.001 par value; 200,000,000 shares authorized; 146,814,906 and
99,269,418 shares issued and outstanding as of December 31, 2017 and 2016,
respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity
See accompanying notes.
64
December 31,
2017
2016
$
$
$
38,290 $
77,461
1,682
117,433
875
803
119,111 $
2,636 $
7,059
5,028
3,330
284
—
18,337
—
90
38
17,632
57,134
1,448
76,214
1,156
764
78,134
5,563
4,085
5,881
1,033
3,222
2,804
22,588
238
279
2
—
—
147
1,239,435
(82)
(1,138,854)
100,646
119,111 $
100
1,115,807
(18)
(1,060,862)
55,027
78,134
$
RIGEL PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Contract revenues from collaborations
Costs and expenses:
Research and development
General and administrative
Restructuring charges
Total costs and expenses
Loss from operations
Interest income
Gain on disposal of assets
Net loss
Year Ended December 31,
2016
$ 20,383
2017
4,484
2015
$ 28,895
$
46,269
37,831
—
84,100
63,446
20,908
5,770
90,124
62,825
17,813
—
80,638
(79,616)
892
732
$ (77,992)
(69,741)
437
88
$ (69,216)
(51,743)
222
57
$ (51,464)
Net loss per share, basic and diluted
$
(0.62)
$
(0.73)
$
(0.58)
Weighted average shares used in computing net loss per share, basic and
diluted
126,324
94,387
88,434
See accompanying notes.
65
RIGEL PHARMACEUTICALS, INC.
STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
Net loss
Other comprehensive income (loss):
Year Ended December 31,
2016
$ (77,992) $ (69,216) $ (51,464)
2015
2017
Net unrealized gain (loss) on short-term investments
(64)
26
(37)
Comprehensive loss
$ (78,056) $ (69,190) $ (51,501)
See accompanying notes.
66
Balance at January 1, 2015
Net loss
Net change in unrealized loss on
short-term investments
Issuance of common stock upon
exercise of options and
participation in Purchase Plan
Issuance of common stock, net of
offering costs
Stock compensation expense
Balance at December 31, 2015
Net loss
Net change in unrealized loss on
short-term investments
Issuance of common stock upon
exercise of options and
participation in Purchase Plan
Issuance of common stock, net of
offering costs
Stock compensation expense
Balance at December 31, 2016
Net loss
Net change in unrealized loss on
short-term investments
Issuance of common stock upon
exercise of options and
participation in Purchase Plan
Issuance of common stock, net of
offering costs
Stock compensation expense
Balance at December 31, 2017
RIGEL PHARMACEUTICALS, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share and per share amounts)
Additional
Accumulated
Other
Paid-in
Amount Capital
Comprehensive Accumulated
Income (Loss)
Common Stock
Shares
88,041,445
—
88
—
1,068,347
—
Total
Stockholders’
Equity
128,246
(51,464)
Deficit
(940,182)
(51,464)
—
—
—
790,832
1
1,760
1,722,312
—
90,554,589
—
2
—
91
—
5,470
7,403
1,082,980
—
—
—
—
819,266
1
1,597
7,895,563
—
99,269,418
—
8
—
100
—
23,398
7,832
1,115,807
—
—
—
—
(7)
—
(37)
—
—
—
(44)
—
26
—
—
—
(18)
—
(64)
—
(37)
—
1,761
—
—
(991,646)
(69,216)
5,472
7,403
91,381
(69,216)
—
26
—
1,598
—
—
(1,060,862)
(77,992)
23,406
7,832
55,027
(77,992)
—
(64)
1,564,395
1
3,507
—
—
3,508
45,981,093
—
46
—
146,814,906 $ 147 $ 1,239,435 $
114,134
5,987
114,180
—
—
5,987
(82) $ (1,138,854) $ 100,646
—
—
See accompanying notes.
67
RIGEL PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2016
2015
2017
Operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
Gain on disposal of assets
Loss on sublease
Depreciation and amortization
Non-cash restructuring charges
Net amortization of premium on short-term investment
Changes in assets and liabilities:
Accounts receivable
Prepaid and other current assets
Other assets
Accounts payable
Accrued compensation
Accrued research and development
Other accrued liabilities
Deferred revenue
Deferred rent and other long term liabilities
Net cash used in operating activities
Investing activities
Purchases of short-term investments
Maturities of short-term investments
Proceeds from disposal of assets
Capital expenditures
Net cash provided by (used in) investing activities
Financing activities
Net proceeds from issuances of common stock upon exercise of options and
participation in employee stock purchase plan
Proceeds from sale and issuance of common stock, net of offering costs
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
See accompanying notes.
$ (77,992) $ (69,216) $ (51,464)
5,987
(732)
495
465
—
(350)
7,333
(88)
—
941
818
115
7,403
(57)
—
1,439
—
—
—
(197)
130
(2,947)
2,974
(853)
2,236
—
(6,773)
(77,557)
203
1,097
167
2,800
(2,166)
928
(100)
(13,427)
(5,294)
(75,889)
5,547
(917)
159
1,150
3,419
960
599
13,427
(5,078)
(23,413)
(116,861)
96,820
732
(164)
(19,473)
(103,053)
128,650
88
(804)
24,881
(151,763)
196,862
60
(546)
44,613
3,508
1,598
1,761
114,180
23,586
5,292
117,688
25,184
7,053
20,658
(25,824)
28,253
15,203
43,456
17,632
$ 38,290 $ 17,632 $ 43,456
68
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
In this Annual Report on Form 10-K, “Rigel,” “we,” “us” and “our” refer to Rigel Pharmaceuticals, Inc. and
“common stock” refers to Rigel’s common stock, par value $0.001 per share.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations and basis of presentation
We were incorporated in the state of Delaware on June 14, 1996. We are engaged in the discovery and
development of novel small molecule drugs that significantly improve the lives of patients with immune and
hematological disorders, cancer and rare diseases.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant
estimates and assumptions made by management include those relating to our stock based compensation and the
probability of achievement of corporate performance-based milestone for our performance-based stock option awards,
impairment issues, the estimated useful life of assets, and estimated accruals, particularly research and development
accruals. We believe that the estimates and judgments upon which we rely are reasonable based upon information
available to us at the time that these estimates and judgments are made, however actual results could differ from these
estimates. To the extent there are material differences between these estimates and actual results, our financial statements
will be affected.
Stock award plans
We have four stock option plans, our 2011 Equity Incentive Plan (2011 Plan), 2000 Equity Incentive Plan (2000
Plan), 2000 Non-Employee Directors Stock Option Plan (Directors’ Plan) and Inducement Plan. The 2011 Plan, 2000
Plan and Directors’ Plan provide for granting to our officers, directors and all other employees and consultants options to
purchase shares of our common stock. The Inducement Plan is intended mainly to provide an inducement material for
certain individuals to enter into employment with the Company. We also have our Employee Stock Purchase Plan
(Purchase Plan), where eligible employees can purchase shares of our common stock at a price per share equal to the
lesser of 85% of the fair market value on the first day of the offering period or 85% of the fair market value on the
purchase date. The fair value of each option award is estimated on the date of grant using the Black-Scholes option
pricing model which considered our stock price, as well as assumptions regarding a number of complex and subjective
variables. These variables include, but are not limited to, volatility, expected term, risk-free interest rate and dividends.
We estimate volatility over the expected term of the option using historical share price performance. For expected term,
we take into consideration our historical data of options exercised, cancelled and expired. The risk-free rate is based on
the U.S. Treasury constant maturity rate. We have not paid and do not expect to pay dividends in the foreseeable future.
We use the straight-line attribution method over the requisite employee service period for the entire award in recognizing
stock-based compensation expense. In connection with the adoption of ASU No. 2016-09 on January 1, 2017, we have
elected to account for forfeitures as they occur.
We granted performance-based stock options to purchase shares of our common stock which will vest upon the
achievement of certain corporate performance-based milestones. We determined the fair values of these performance-
based stock options using the Black-Scholes option pricing model at the date of grant. For the portion of the
performance-based stock options of which the performance condition is considered probable of achievement, we
recognize stock-based compensation expense on the related estimated fair value of such options on a straight-line basis
from the date of grant up to the date when we expect the performance condition will be achieved. For the performance
conditions that are not considered probable of achievement at the grant date or upon quarterly re-evaluation, prior to the
event actually occurring, we recognize the related stock-based compensation expense when the event occurs or when we
69
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
can determine that the performance condition is probable of achievement. In those cases, we recognize the change in
estimate at the time we determine the condition is probable of achievement (by recognizing stock-based compensation
expense as cumulative catch-up adjustment as if we had estimated at the grant date that the performance condition would
have been achieved) and recognize the remaining compensation cost up to the date when we expect the performance
condition will be achieved, if any.
Cash, cash equivalents and short-term investments
We consider all highly liquid investments in debt securities with maturity from the date of purchase of 90 days
or less to be cash equivalents. Cash equivalents consist of money market funds, U.S. treasury bills, corporate bonds and
commercial paper and investments in government-sponsored enterprises. Our short-term investments include U.S.
treasury bills, obligations of government- sponsored enterprises and corporate bonds and commercial paper. By policy,
we limit the concentration of credit risk by diversifying our investments among a variety of high credit-quality issuers.
We view our short-term investments portfolio as available for use in current operations. Accordingly, we have classified
certain securities as short-term investments on our balance sheet even though the stated maturity date of these securities
may be more than one year from the current balance sheet date.
All cash equivalents and short-term investments are classified as available-for-sale securities. Available-for-sale
securities are carried at fair value at December 31, 2017 and 2016. Unrealized gains (losses) are reported in the
statements of stockholders’ equity and comprehensive loss. Fair value is estimated based on available market
information or valuation methodologies. The cost of securities sold is based on the specific identification method. See
Note 5 for a summary of available-for-sale securities at December 31, 2017 and 2016.
Fair value of financial instruments
The carrying values of cash, prepaid and other current assets, accounts payable and accrued liabilities
approximate fair value due to the short-term maturity of those instruments. Cash equivalents and short-term investments
are carried at fair value at December 31, 2017 and 2016.
Concentration of credit risk
Financial instruments that potentially subject us to concentrations of credit risk are primarily cash and cash
equivalents, short-term investments and accounts receivable. Cash equivalents and short-term investments primarily
consist of money market funds, U.S. treasury bills, government-sponsored enterprise securities, and corporate bonds and
commercial paper. Due to the short-term nature of these investments, we believe we do not have a material exposure to
credit risk arising from our investments. All cash and cash equivalents and short-term investments are maintained with
financial institutions that management believes are creditworthy.
Property and equipment
Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets, which range from three to seven years.
Revenue recognition
We present revenue from our collaboration arrangements under the FASB ASC 808, Collaboration
Arrangements. The terms of these agreements generally contain multiple elements, or deliverables, which may include
(i) granting of license rights to our program, (ii) participation in a joint research committee, (iii) performance of research
activities, and (iv) clinical supply and materials. The payments we receive under these arrangements typically include
one or more of the following: non-refundable, up-front fees; funding of research and/or development efforts; contingent
70
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
fees due upon the achievement of specified triggering events; and/or royalties on future product sales. We recognize
revenue for the performance of services or the delivery of products when each of the following four criteria is met: (i)
persuasive evidence of an arrangement exists; (ii) products are delivered or as services are rendered; (iii) the sales price
is fixed or determinable; and (iv) collectability is reasonably assured.
Our revenue arrangements with multiple elements are evaluated under FASB ASC 605-25, Multiple Element
Arrangements, and are divided into separate units of accounting if certain criteria are met, including whether the
deliverables have stand-alone value, based on the relevant facts and circumstances for each arrangement. The
consideration we receive under collaboration arrangements is allocated among the separate units of accounting based on
the selling price hierarchy, and the applicable revenue recognition criteria is applied to each of the separate units. We
make significant judgments and estimates in the allocation of the consideration among the deliverables under the
agreement, as well as the determination of the periods the units will be delivered to our collaborators. If there are
deliverables in an arrangement that are not separable from other aspects of the contractual relationship, they are treated
as a combined unit of accounting, with the allocated revenue for the combined unit recognized in a manner consistent
with the revenue recognition applicable to the final deliverable in the combined unit. Payments received prior to
satisfying the relevant revenue recognition criteria are recorded as deferred revenue in the accompanying balance sheets
and recognized as revenue when the revenue recognition criteria are met.
We typically receive non-refundable, up-front payments when licensing our intellectual property, which often
occurs in conjunction with a research and development agreement. If we believe that the license to our intellectual
property has stand-alone value, we generally recognize revenue attributed to the license upon delivery provided that
there are no future performance requirements for use of the license. When we believe that the license to our intellectual
property does not have stand-alone value, we would recognize revenue attributed to the license ratably from the effective
date of the agreement or the delivery of the license up to the estimated completion date of the undelivered performance
obligation. Revenues related to the research services with our corporate collaborators are recognized as research services
are performed over the related research period. Under these agreements, we are required to perform research activities as
specified in the agreement. The payments received are not refundable and are based on a contractual cost per full-time
equivalent employee working on the project. Our research and development expenses under the collaborative research
agreements approximate the revenue recognized under such agreements over the research period.
Revenues associated with substantive, at-risk milestones pursuant to collaborative agreements are recognized
upon achievement of the milestones. We consider a milestone to be substantive at the inception of the arrangement if it is
commensurate with either our performance to achieve the milestone or the enhancement of the value of the delivered
item as a result of a specific outcome resulting from our performance to achieve the milestone, it relates solely to past
performance and it is reasonable relative to all of the deliverables and payment terms within the arrangement. Non-
refundable contingent future amounts receivable in connection with future events specified in collaboration agreements
that are not considered milestones such as payments contingent solely upon the passage of time or the result of our
collaborator's performance will be recognized as revenue when the recognition criteria discussed above are met.
Research and development expenses
Research and development expenses include costs for scientific personnel, supplies, equipment, consultants,
research sponsored by us, allocated facility costs, costs related to pre-clinical and clinical trials, including raw materials,
and stock-based compensation expense. All such costs are charged to research and development expense as incurred and
at the time raw materials are purchased.
Research and development accruals
We have various contracts with third parties related to our research and development activities. Costs that are
incurred for services rendered, but not billed to us, as of the end of the period are estimated and accrued. We make
71
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
estimates of the amounts incurred in each period based on the information available to us and our knowledge of the
nature of the contractual activities generating such costs. Expenses related to other research and development contracts,
such as research contracts, toxicology study contracts and manufacturing contracts are estimated to be incurred generally
on a straight-line basis over the duration of the contracts. Raw materials and study materials purchased for us by third
parties are expensed at the time of purchase.
Contingencies
In the first quarter of 2017, we entered into a consulting agreement with a third party, pursuant to which we may
be required to pay amounts ranging from $1.5 million to $4.0 million if certain future milestone events occur. As of
December 31, 2017, we concluded that one of the future milestone events is probable of achievement and recognized
$1.5 million in contingent fee which we recorded as part of General and administrative expenses in the Statements of
Operations.. We do not consider the other future milestone events as probable of occurring as of December 31, 2017.
Leases
We currently lease our research and office space under a noncancelable lease agreement with our landlord
through 2023. In December 2014, we entered into a sublease agreement with an unrelated third party to occupy a portion
of our research and office space through 2023. We record rent expense on a straight-line basis for our lease, net of
sublease income, wherein such arrangements contain scheduled rent increases over the term of the lease and sublease,
respectively. For our sublease arrangement which we classified as an operating lease, our loss on the sublease is
comprised of the present value of our future payments to our landlord less the present value of our future rent payments
expected from our subtenant over the term of the sublease. The present value factor, which also affects the level of
accreted interest expense that we will recognize as additional charges over the term of the lease, was based on our
estimate of our credit-risk adjusted borrowing rate at the time the initial sublease liability was calculated. Our estimate of
our credit-risk adjusted borrowing rate was based on our comparison of the rates used by other companies of our size,
our financial condition at the time we entered into such sublease agreement, as well as other factors that would affect our
credit worthiness.
Income taxes
We use the asset and liability method to account for income taxes. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from
a change in tax rates is recognized in income in the period the change is enacted. A valuation allowance is established to
reduce deferred tax assets to an amount whose realization is more likely than not.
Net loss per share
Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common
stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average
number of shares of common stock outstanding during the period and the number of additional shares of common stock
that would have been outstanding if potentially dilutive securities had been issued. Potentially dilutive securities include
warrant and stock options and shares issuable under our Purchase Plan. The dilutive effect of these potentially dilutive
securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock
method, an increase in the fair market value of our common stock can result in a greater dilutive effect from potentially
dilutive securities.
72
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per
share amounts):
Year Ended December 31,
2016
2015
2017
EPS Numerator:
Net loss
EPS Denominator—Basic and Diluted:
Weighted-average common shares outstanding
Net loss per common share:
Basic and diluted
$ (77,992) $ (69,216) $ (51,464)
126,324
94,387
88,434
$
(0.62) $
(0.73) $
(0.58)
During the periods presented, we had securities which could potentially dilute basic loss per share, but were
excluded from the computation of diluted net loss per share for all periods presented, as their effect would have been
antidilutive. These securities consist of the following (in thousands except per share data):
Outstanding stock options
Warrant to purchase common stock
Weighted average exercise price of options
Weighted average exercise price of warrant
Recent accounting pronouncements
December 31,
2016
20,257
32
2017
20,408
—
2015
19,106
200
$ 5.45 $ 6.25 $ 7.08
— $ 6.61 $ 6.61
$
In May 2014, the FASB issued ASU No. 2014-09—Revenue from Contracts with Customers, which supersedes
the revenue recognition requirements under ASC Topic 605, Revenue Recognition, and most industry-specific guidance
under the ASC. The core principle of ASU No. 2014-09 is that an entity should recognize revenue when it transfers
promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. ASU No. 2014-09 defines a five-step process to achieve this core
principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition
process than required under existing U.S. GAAP including identifying performance obligations in the contract,
estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to
each separate performance obligation. ASU No. 2014-09 also requires additional disclosures to enable users of financial
statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer
contracts. ASU No. 2014-09 allows for either full retrospective or modified retrospective adoption. In July 2015, the
FASB deferred by one year the effective date of ASU No. 2014-09 with the new effective date beginning after
December 15, 2017, and the interim periods within that year and allowed for early adoption for all entities as of the
original effective date for public business entities, which was annual reporting periods beginning after December 15,
2016. We adopted this new standard on January 1, 2018 using the modified retrospective approach.
To date, our revenues have been derived from license and collaboration agreements. The consideration we are
eligible to receive under these agreements includes upfront payments, progress dependent contingent payments on events
achieved by our collaboration partners, and royalties on net sales of products sold by such partners under the agreements.
Each license and collaboration agreement is unique and will need to be assessed separately under the five-step process of
the new standard. ASU No. 2014-09 differs from the current accounting standard in many respects, such as in the
accounting for variable consideration, including milestone payments or contingent payments. Under our current
accounting policy, we recognize contingent payments as revenue in the period that the payment-triggering event
occurred or is achieved. However, under the new accounting standard, it is possible to start to recognize contingent
payments before the payment-triggering event is completely achieved, subject to management’s assessment of whether it
73
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the
uncertainty associated with the variable consideration is subsequently resolved. We assessed the impact of the new
standard on our active license and collaboration agreements and have identified the revenue streams. The adoption of this
standard will not have a material impact on our financial statements as we do not have any unrecognized transaction
price, other than future potential contingent payments, that are not currently considered probable of occurring, or any
remaining performance obligations under our collaboration agreements as of the initial adoption date. In connection with
our adoption of ASU No. 2014-09, we do not expect to have an adjustment on the opening balance of Accumulated
Deficit balance as of January 1, 2018.
In February 2016, the FASB issued ASU No. 2016-02—Leases, which is aimed at making leasing activities
more transparent, and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use
asset and corresponding lease liability, including leases currently accounted for as operating leases. The guidance is
effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted.
We plan to adopt this new standard on January 1, 2019. We are currently evaluating the potential impact of the adoption
of ASU No. 2016-02 on our financial statements and cannot estimate the impact of adoption at this time.
In March 2016, the FASB issued ASU No. 2016-09—Improvements to Employee Share-Based Payment
Accounting, which is intended to simplify several aspects of the accounting for share-based payment award transactions,
including the income tax consequences, an option to recognize gross stock compensation expense with actual forfeitures
recognized as they occur, as well as certain classifications on the statement of cash flows. We adopted ASU No. 2016-09
on January 1, 2017. Under this guidance, on a prospective basis, companies will no longer record excess tax benefits and
certain tax deficiencies in additional paid-in capital. Instead, companies will record all excess tax benefits and tax
deficiencies as income tax expense or benefit in the income statement. In addition, the guidance eliminates the
requirement that excess tax benefits be realized before companies can recognize them. The ASU requires a cumulative-
effect adjustment for previously unrecognized excess tax benefits in opening retained earnings in the annual period of
adoption. Upon adoption, we recognized additional excess tax benefit of $4.1 million (federal) and $1.4 million (state) as
a deferred tax asset with a corresponding increase to our deferred tax asset valuation allowance, which did not result in a
net impact to accumulated deficit. Additionally, as provided for under this new guidance, we elected to account for
forfeitures as they occur. The adoption of this aspect of the guidance did not have a material impact on our financial
statements.
2. SPONSORED RESEARCH AND LICENSE AGREEMENTS
We conduct research and development programs independently and in connection with our corporate
collaborators. Currently, we are a party to collaboration agreements, but do not have ongoing participation, with BMS
for the discovery, development and commercialization of cancer immunotherapies based on our small molecule TGF
beta receptor kinase inhibitors, Aclaris for the development and commercialization of JAK inhibitors for the treatment of
alopecia areata and other dermatological conditions, AZ for the development and commercialization of R256, an inhaled
JAK inhibitor, BerGenBio for the development and commercialization of AXL inhibitors in oncology, and Daiichi to
pursue research related to MDM2 inhibitors, a novel class of drug targets called ligases. Under these agreements, which
we entered into in the ordinary course of business, we received or may be entitled to receive upfront cash payments,
payments contingent upon specified events achieved by such partners and royalties on any net sales of products sold by
such partners under the agreements. Total future contingent payments to us under all of these current agreements could
exceed $532.4 million if all potential product candidates achieved all of the payment triggering events under all of our
current agreements (based on a single product candidate under each agreement). Of this amount, up to $145.5 million
relates to the achievement of development events, up to $345.6 million relates to the achievement of regulatory events
and up to $41.3 million relates to the achievement of certain commercial or launch events. This estimated future
contingent amount does not include any estimated royalties that could be due to us if the partners successfully
commercialize any of the licensed products. Future events that may trigger payments to us under the agreements are
74
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
based solely on our partners’ future efforts and achievements of specified development, regulatory and/or commercial
events.
In October 2015, we entered into a non-exclusive license agreement with a third party, pursuant to which we
received a payment in the single-digit millions in exchange for granting a non-exclusive license to certain limited
intellectual property rights. We concluded that the granting of the license, which was fully delivered to such third party
in the fourth quarter of 2015, represents the sole deliverable under this agreement. Accordingly, we recognized the
payment as revenue during the year ended December 31, 2015.
In August 2015, we entered into a license agreement with Aclaris, pursuant to which Aclaris will have exclusive
rights and will assume responsibility for the continued development of certain JAK inhibitor compounds for the
treatment of alopecia areata and other dermatological conditions. Under the license agreement, we received a
noncreditable and non-refundable upfront payment of $8.0 million in September 2015. We are also entitled to receive
development and regulatory contingent fees that could exceed $80.0 million for a successful compound approved in
certain indications. In addition, we are also eligible to receive tiered royalties on the net sales of any products under the
agreement. We concluded that the granting of the license, which has been fully delivered to Aclaris in the third quarter of
2015, represents the sole deliverable under this agreement. Accordingly, we recognized the $8.0 million payment as
revenue during the year ended December 2015.
In February 2015, we entered into a collaboration agreement with BMS for the discovery, development and
commercialization of cancer immunotherapies based on our extensive portfolio of small molecule TGF beta receptor
kinase inhibitors. Under the collaboration agreement, BMS will have exclusive rights and will be solely responsible for
the clinical development and commercialization of any products. Pursuant to the collaboration agreement with BMS, we
received a noncreditable and non-refundable upfront payment of $30.0 million in March 2015. We are also entitled to
receive development and regulatory contingent fees that could exceed $309.0 million for a successful compound
approved in certain indications. In addition, we are also eligible to receive tiered royalties on the net sales of any
products from the collaboration. BMS shall also reimburse us for agreed upon costs based on a contractual cost per full-
time equivalent employee in connection with the performance of research activities during the research term. Under the
collaboration agreement, we were obligated to provide the following deliverables: (i) granting of license rights to our
program, (ii) participation in the Joint Research Committee, and (iii) performance of research activities. We concluded
that these deliverables were a single unit of accounting as the license did not have stand-alone value apart from the other
deliverables. Accordingly, the $30.0 million upfront payment was recognized ratably as revenue from the effective date
of the agreement and was fully amortized in September 2016, the end of the research term. We believed that straight-line
recognition of this revenue was appropriate as the research was performed ratably over the research period. During the
years ended December 31, 2016 and 2015, we recognized revenue of $13.4 million and $16.6 million, respectively,
relating to the upfront payment, and $290,000 and $822,000, respectively, relating to the research activities we
performed. At the end of the initial research term, we were not notified by BMS of its intention to extend the initial
research term under which we would perform research activities. As of September 30, 2016, all deliverables under the
agreement had been delivered. In November 2016, we were notified by BMS that it has designated one compound as an
early drug candidate and received $3.0 million in December 2016, triggered by this development event.
In June 2011, we entered into an exclusive license agreement with BerGenBio for the development and
commercialization of an oncology program. BerGenBio is responsible for all activities it wishes to perform under the
license we granted to it. In February 2017, we received $3.3 million from BerGenBio as a result of BerGenBio
advancing BGB324, an AXL kinase inhibitor licensed under the agreement, to a Phase 2 clinical study. In June 2016, we
received contingent payments of $1.7 million relating to a time-based non-refundable fee and $2.0 million relating to
BerGenBio’s exercise of certain option rights before the prescription period to exercise the rights expired. All
deliverables under the agreement had been previously delivered, as such, the above payments of $3.3 million in 2017 and
$3.7 million in 2016, triggered by the above time-based and contingent events were recognized as revenue in the first
quarter of 2017 and second quarter of 2016, respectively.
75
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
3. SIGNIFICANT CONCENTRATIONS
For the year ended December 31, 2017, BerGenBio and another unrelated third party accounted for 74% and
26% of our revenues, respectively. For the year ended December 31, 2016, BMS and BerGenBio accounted for 82% and
18% of our revenues, respectively. For the year ended December 31, 2015, BMS, Aclaris and another third party
accounted for 60%, 28% and 12% of our revenues, respectively. As of December 31, 2017 and 2016, we had no accounts
receivable.
4. STOCK-BASED COMPENSATION
Total stock-based compensation expense related to all of our stock-based awards was as follows (in thousands):
Year Ended December 31,
2016
2015
2017
General and administrative
Research and development
Restructuring charges
Total stock-based compensation expense
$ 4,490 $ 4,230 $ 3,303
4,100
1,497
—
—
$ 5,987 $ 7,832 $ 7,403
3,103
499
In 2017 and 2016, we entered into severance agreements. As part of the severance arrangements we offered, we
extended the date through which certain employee(s) had the right to exercise their vested options. In addition, we also
accelerated the vesting period of certain unvested stock options. As a result of these modifications, we recorded an
incremental stock-based compensation expense of approximately $1.4 million and $1.1 million during the years ended
December 31, 2017and 2016, respectively. The incremental compensation expenses were computed based on the fair
values of the modified awards on the respective modification dates. These amounts are included as part of “General and
administrative expense” in the accompanying 2017 Statement of Operations and “General and administrative expense”
and “Restructuring charges” in the accompanying 2016 Statement of Operations.
Employee Stock Option Plans
We have four stock option plans, our 2011 Equity Incentive Plan (2011 Plan), 2000 Equity Incentive Plan (2000
Plan), 2000 Non-Employee Directors Stock Option Plan (Directors’ Plan) and Inducement Plan. The 2011 Plan, 2000
Plan and Directors’ Plan provide for granting to our officers, directors and all other employees and consultants options to
purchase shares of our common stock. The Inducement Plan is intended mainly to provide an inducement material for
certain individuals to enter into employment with the Company.
Options granted under our 2011 Plan expire no later than ten years from the date of grant. Options may be
granted with different vesting terms from time to time, ranging from zero to five years. As of December 31, 2017, a total
of 16,174,599 shares of common stock were authorized for issuance under the 2011 Plan. Options under the 2000 Plan
may be granted with different vesting terms from time to time, ranging from zero to five years. As of December 31,
2017, a total of 12,142,055 shares of common stock were authorized for issuance under the 2000 Plan. Options under the
Directors’ Plan may be granted for a maximum term of 10 years. As of December 31, 2017, a total of 1,988,182 shares
of common stock were authorized for issuance under the Directors’ Plan. Options granted under our Inducement Grant
expire no later than ten years from the date of grant and may be granted with different vesting terms from time to time.
As of December 31, 2017, a total of 1,800,000 shares of common stock were authorized for issuance under the
Inducement Plan.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing
model. We have segregated option awards into the following three homogenous groups for the purposes of determining
fair values of options: officers and directors, all other employees, and consultants.
76
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
We determined weighted-average valuation assumptions separately for each of these groups as follows:
• Volatility—We estimated volatility using the historical share price performance over the expected life of
the option up to the point where we have historical market data. We also considered other factors, such as
implied volatility, our current clinical trials and other company activities that may affect the volatility of
our stock in the future. We determined that at this time historical volatility is more indicative of our
expected future stock performance than implied volatility.
• Expected term—For options granted to consultants, we use the contractual term of the option, which is
generally ten years, for the initial valuation of the option and the remaining contractual term of the option
for the succeeding periods. We worked with various historical data to determine the applicable expected
term for each of the other option groups. This data included: (1) for exercised options, the term of the
options from option grant date to exercise date; (2) for cancelled options, the term of the options from
option grant date to cancellation date, excluding nonvested option forfeitures; and (3) for options that
remained outstanding at the balance sheet date, the term of the options from option grant date to the end of
the reporting period and the estimated remaining term of the options. The consideration and calculation of
the above data gave us reasonable estimates of the expected term for each employee group. We also
considered the vesting schedules of the options granted and factors surrounding exercise behavior of the
option groups, our current market price and company activity that may affect our market price. In addition,
we considered the optionee type (i.e., officers and directors or all other employees) and other factors that
may affect the expected term of the option.
• Risk-free interest rate—The risk-free interest rate is based on U.S. Treasury constant maturity rates with
similar terms to the expected term of the options for each option group.
• Dividend yield—The expected dividend yield is 0% as we have not paid and do not expect to pay dividends
in the future.
In connection with the adoption of ASU No. 2016-09 on January 1, 2017, we have elected to account for
forfeitures as they occur and its adoption did not have a material impact on our financial statements.
The following table summarizes the weighted-average assumptions relating to options granted pursuant to our
equity incentive plans for the years ended December 31, 2017, 2016 and 2015:
Risk-free interest rate
Expected term (in years)
Dividend yield
Expected volatility
Year Ended
December 31,
2017 2016 2015
2.2 % 1.8 % 1.8 %
6.6
6.2
0.0 % 0.0 % 0.0 %
63.5 % 61.1 % 65.0 %
6.5
The exercise price of stock options is determined to be the market price of our common stock on the date
immediately preceding the date of grant. These stock options become exercisable at varying dates and generally expire
ten years from the date of grant. At December 31, 2017, options to purchase 11,696,696 shares of common stock were
available for grant and 32,104,836 reserved shares of common stock were available for future issuance under our stock
option plans.
77
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
Stock-Based Compensation Award Activity
Option activity under our equity incentive plans was as follows:
Weighted-
Average
Remaining
Shares Available Number of Shares
Weighted-Average Contractual Term Aggregate
For Grant
Underlying Options Exercise Price
(in years)
Intrinsic Value
Outstanding at January 1, 2017
Authorized for grant
Granted
Exercised
Cancelled
Outstanding at December 31, 2017
Vested and expected to vest at
December 31, 2017
Exercisable at December 31, 2017
6,548,696
6,460,000
(4,048,675)
—
2,736,675
11,696,696
20,257,233 $
—
4,048,675 $
(1,161,093) $
(2,736,675) $
20,408,140 $
20,408,140 $
15,742,515 $
6.24
2.42
2.30
8.18
5.45
5.45
6.25
5.23 $ 13,736,285
4.16 $
8,298,096
We granted options to purchase 4,048,675, 5,251,185 and 3,875,170 shares of common stock during the years
ended December 31, 2017, 2016 and 2015, respectively. The weighted-average grant date fair value of options granted
during 2017, 2016 and 2015 was $1.48, $1.72 and $1.40, respectively. In 2016, we had 700,000 options related to
performance-based stock option awards with a grant date fair value of $1.1 million which will vest upon the achievement
of a corporate performance-based milestone. We considered the achievement of the corresponding corporate-based
milestone as probable as of December 31, 2016. Accordingly, we recognized the $1.1 million as stock-based
compensation expense during 2016. As of December 31, 2017, we have 1,460,000 shares related to outstanding
performance-based stock option awards with a grant date fair value of $2.2 million and will vest upon achievement of
certain corporate performance-based milestones. Of this amount, 1,160,000 shares related to performance-based stock
option awards wherein the achievement of the corresponding corporate-based milestones was probable as of
December 31, 2017. Accordingly, we recognized $1.1 million as stock-based compensation expense during 2017. As of
December 31, 2017, there were approximately $993,000 unrecognized compensation cost related to these outstanding
performance stock options.
The aggregate intrinsic value of the stock options in the table above is calculated as the difference between the
exercise price of the underlying awards and the quoted price of our common stock for the options that were in-the-money
at December 31, 2017. At December 31, 2017 and 2016, we had 4,665,624 and 3,668,891, respectively, of nonvested
stock options, with approximately $5.4 million and $31,000 intrinsic value at December 31, 2017 and 2016, respectively.
During the years ended December 31, 2017 and 2016, aggregate intrinsic value of options exercised under our stock
option plans was approximately $1.2 million and $253,000, respectively, determined as of the date of the stock option
exercise.
As of December 31, 2017, there was approximately $6.2 million of total unrecognized compensation cost
related to nonvested stock-based compensation arrangements granted under our stock option plans and approximately
$91,000 of total unamortized compensation cost related to our Purchase Plan. The unamortized compensation cost
related to our stock option plans and our Purchase Plan is expected to be recognized over a weighted- average period of
approximately 2.3 years and 0.5 years, respectively. For the years ended December 31, 2017 and 2016, there were
2,844,690 and 4,215,058 shares vested, respectively, with weighted-average exercise price of $2.86 and $2.70,
respectively.
78
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
Details of our stock options by exercise price are as follows as of December 31, 2017:
Options Outstanding
Options Exercisable
Exercise Price
$1.68 - $2.14
$2.27 - $2.74
$2.89 - $3.67
$3.79 - $6.51
$6.55 - $9.62
$9.80 - $26.45
$1.68 - $26.45
Number of
Outstanding
Options
4,351,726
3,682,677
3,449,971
3,831,410
4,068,512
1,023,844
20,408,140
Weighted-Average
Remaining
Weighted-Average Number of
Contractual Life (in years) Exercise Price
Options
Weighted-Average
Exercise Price
7.25 $
7.83
5.57
4.63
2.29
0.13
5.23
2,389,173 $
2.12
2,439,679
2.60
2,859,448
3.49
2,961,860
5.62
4,068,512
7.90
26.02
1,023,844
5.45 15,742,516
2.14
2.68
3.46
6.13
7.90
26.02
6.25
Employee Stock Purchase Plan
Our Purchase Plan permits eligible employees to purchase common stock at a discount through payroll
deductions during defined offering periods. The price at which the stock is purchased is equal to the lesser of 85% of the
fair market value of the common stock on the first day of the offering or 85% of the fair market value of our common
stock on the purchase date. The initial offering period commenced on the effective date of our initial public offering. We
issued 403,302, 482,746 and 576,537 shares of common stock during 2017, 2016 and 2015, respectively, pursuant to the
Purchase Plan at an average price of $1.87, $1.89 and $2.03, respectively. For 2017, 2016 and 2015, the weighted
average fair value of awards granted under our Purchase Plan was $0.99, $0.98 and $1.05, respectively. As of
December 31, 2017, we had 2,115,568 reserved shares of common stock available for future issuance under the Purchase
Plan.
The fair value of awards granted under our Purchase Plan is estimated on the date of grant using the
Black-Scholes option pricing model, which uses weighted- average assumptions. Our Purchase Plan provides for a 24-
month offering period comprised of four six-month purchase periods with a look-back option. A look-back option is a
provision in our Purchase Plan under which eligible employees can purchase shares of our common stock at a price per
share equal to the lesser of 85% of the fair market value on the first day of the offering period or 85% of the fair market
value on the purchase date. Our Purchase Plan also includes a feature that provides for a new offering period to begin
when the fair market value of our common stock on any purchase date during an offering period falls below the fair
market value of our common stock on the first day of such offering period. This feature is called a “reset.” Participants
are automatically enrolled in the new offering period. We had a “reset” on January 2, 2015 because the fair market value
of our stock on December 31, 2014 was lower than the fair market value of our stock on July 1, 2014, the first day of
another offering period. We applied modification accounting in accordance with ASC Topic No. 718, Stock
Compensation, to determine the incremental fair value associated with this Purchase Plan “reset” and recognized the
related stock-based compensation expense according to FASB ASC Subtopic No. 718-50, Employee Share Purchase
Plans. The total incremental fair value associated with this Purchase Plan “reset” was approximately $792,000 which
was recognized as expense during the period from January 2, 2015 to December 31, 2016. We had another “reset” on
July 1, 2016 because the fair market value of our stock on June 30, 2016 was lower than the fair market value of our
stock on January 5, 2015, the first day of the offering period. We applied modification accounting in accordance with the
relevant accounting guidance. The total incremental fair value associated with this Purchase Plan “reset” was
approximately $1.0 million and will be recognized as expense from the period from July 1, 2016 to June 30, 2018.
The following table summarizes the weighted-average assumptions related to our Purchase Plan for the years
ended December 31, 2017, 2016 and 2015. Expected volatilities for our Purchase Plan are based on the two-year
historical volatility of our stock. Expected term represents the weighted- average of the purchase periods within the
79
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
offering period. The risk-free interest rate for periods within the expected term is based on U.S. Treasury constant
maturity rates.
Year Ended
December 31,
2016
2015
2017
Risk-free interest rate
Expected term (in years)
Dividend yield
Expected volatility
0.5 %
1.5
0.5 %
1.5
0.0 % 0.0 % 0.0 %
63.1 % 62.9 % 61.2 %
0.6 %
1.5
5. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash, cash equivalents and short-term investments consist of the following (in thousands):
December 31,
2017
2016
Cash
Money market funds
U.S. treasury bills
Government-sponsored enterprise securities
Corporate bonds and commercial paper
Reported as:
Cash and cash equivalents
Short-term investments
$
582 $
240
9,496
4,300
16,459
44,271
$ 115,751 $ 74,766
2,795
6,726
7,826
97,822
$ 38,290 $ 17,632
57,134
$ 115,751 $ 74,766
77,461
Cash equivalents and short-term investments included the following securities with gross unrealized gains and
losses (in thousands):
December 31, 2017
U.S. treasury bills
Government-sponsored enterprise securities
Corporate bonds and commercial paper
Total
December 31, 2016
U.S. treasury bills
Government-sponsored enterprise securities
Corporate bonds and commercial paper
Total
Amortized
$
Cost
6,733 $
7,835
97,888
$ 112,456 $
Gross
Gross
Unrealized Unrealized
Gains
Losses
— $
—
1
1 $
Fair Value
(7) $
6,726
(9)
7,826
97,822
(67)
(83) $ 112,374
Amortized
Cost
4,300 $
$
16,457
44,291
$ 65,048 $
Gross
Gross
Unrealized Unrealized
Gains
Losses
— $
3
2
5 $
Fair Value
4,300
— $
16,459
(1)
44,271
(22)
(23) $ 65,030
As of December 31, 2017, our cash equivalents and short-term investments, which have contractual maturities
within one year, had a weighted-average time to maturity of approximately 110 days. We view our short-term
investments portfolio as available for use in current operations. We have the ability to hold all investments as of
80
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2017 through their respective maturity dates. At December 31, 2017, we had no investments that had been
in a continuous unrealized loss position for more than 12 months. As of December 31, 2017, a total of 38 individual
securities had been in an unrealized loss position for 12 months or less and the losses were deemed to be temporary. The
gross unrealized losses above were caused by interest rate increases. No significant facts or circumstances have arisen to
indicate that there has been any deterioration in the creditworthiness of the issuers of the securities held by us. Based on
our review of these securities, including the assessment of the duration and severity of the unrealized losses and our
ability and intent to hold the investments until maturity, there were no other-than-temporary impairments for these
securities at December 31, 2017.
The following table shows the fair value and gross unrealized losses of our investments in individual securities
that are in an unrealized loss position, aggregated by investment category (in thousands):
December 31, 2017
U. S. treasury bills
Government-sponsored enterprise securities
Corporate bonds and commercial paper
Total
6. FAIR VALUE
Fair Value Unrealized Losses
(7)
$ 6,726 $
(9)
7,826
(67)
46,191
(83)
$ 60,743 $
Under FASB ASC 820, Fair Value Measurements and Disclosures, fair value is defined as the price at which an
asset could be exchanged or a liability transferred in a transaction between knowledgeable, willing parties in the
principal or most advantageous market for the asset or liability. Where available, fair value is based on observable
market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not
available, valuation models are applied.
Assets and liabilities recorded at fair value in our financial statements are categorized based upon the level of
judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of
subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets at the reporting date. Active
markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to
provide pricing information on an ongoing basis.
The fair valued assets we hold that are generally included under this Level 1 are money market securities where
fair value is based on publicly quoted prices.
Level 2—Are inputs, other than quoted prices included in Level 1, that are either directly or indirectly
observable for the asset or liability through correlation with market data at the reporting date and for the
duration of the instrument’s anticipated life.
The fair valued assets we hold that are generally assessed under Level 2 included government-sponsored
enterprise securities, U.S. treasury bills and corporate bonds and commercial paper. We utilize third party
pricing services in developing fair value measurements where fair value is based on valuation methodologies
such as models using observable market inputs, including benchmark yields, reported trades, broker/dealer
quotes, bids, offers and other reference data. We use quotes from external pricing service providers and other
on-line quotation systems to verify the fair value of investments provided by our third-party pricing service
providers. We review independent auditor’s reports from our third-party pricing service providers particularly
regarding the controls over pricing and valuation of financial instruments and ensure that our internal controls
address certain control deficiencies, if any, and complementary user entity controls are in place.
81
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the
fair value of the assets or liabilities and which reflect management’s best estimate of what market participants
would use in pricing the asset or liability at the reporting date. Consideration is given to the risk inherent in the
valuation technique and the risk inherent in the inputs to the model.
We do not have fair valued assets classified under Level 3.
Fair Value on a Recurring Basis
Financial assets measured at fair value on a recurring basis are categorized in the tables below based upon the
lowest level of significant input to the valuations (in thousands):
Money market funds
U.S. treasury bills
Government-sponsored enterprise securities
Corporate bonds and commercial paper
Total
Money market funds
U.S. treasury bills
Government-sponsored enterprise securities
Corporate bonds and commercial paper
Total
7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
Laboratory equipment
Computer and software
Furniture and equipment
Total property and equipment
Less accumulated depreciation and amortization
Property and equipment, net
Assets at Fair Value as of December 31, 2017
Level 1
Level 2
Level 3
$
$
2,795 $
—
—
—
2,795 $
— $
6,726
7,826
97,822
112,374 $
— $
—
—
—
— $
Total
2,795
6,726
7,826
97,822
115,169
Assets at Fair Value as of December 31, 2016
Level 1
$
9,496 $
—
—
—
9,496 $
$
Level 2
Level 3
Total
— $
4,300
16,459
44,271
65,030 $
— $
—
—
—
— $
9,496
4,300
16,459
44,271
74,526
December 31,
2017
2016
1,320
711
$ 11,122 $ 17,986
1,280
682
$ 13,153 $ 19,948
(18,792)
875 $ 1,156
(12,278)
$
During 2017 and 2016, we disposed of approximately $7.0 million and $618,000, respectively, of fully
depreciated assets.
Total depreciation and amortization expense was $465,000, $941,000 and $1.4 million for the years ended
December 31, 2017, 2016 and 2015, respectively. During the year ended December 31, 2016, we recognized an
impairment loss on certain property and equipment of $319,000 (see Note 11) and recorded this as part of Restructuring
Charges in the Statements of Operations.
82
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
8. LEASE AGREEMENTS
We currently lease our research and office space under a noncancelable lease agreement with our landlord, HCP
BTC, LLC (formerly known as Slough BTC, LLC) which was set to expire in 2018. The lease term provides for renewal
option for up to two additional periods of five years each. In July 2017, we exercised our option to extend the term of our
lease for another five years through January 2023 and modified the amount of monthly base rent during such renewal
period. We reevaluated our lease classification and continue to classify our lease as operating lease during the renewal
period.
In December 2014, we entered into a sublease agreement, which was amended in 2017, with an unrelated third
party to occupy approximately 57,000 square feet of our research and office space. In February 2017, we entered into an
amendment to the sublease agreement to increase the subleased research and office space for an additional 9,328 square
feet under the same term of the sublease. Effective July 2017, the sublease agreement was amended primarily to extend
the term of the sublease through January 2023 and modified the monthly base rent to equal the amount we will pay our
landlord. Because the future sublease income under the extended sublease agreement is the same as the amount we will
pay our landlord, we did not recognize any loss on sublease relative to this amendment. We expect to receive
approximately $22.1 million in future sublease income (excluding our subtenant’s share of facilities operating expenses)
through January 2023.
We record rent expense on a straight-line basis for our lease, net of sublease income. For our sublease
arrangement which we classified as an operating lease, our loss on the sublease was comprised of the present value of
our future payments to our landlord less the present value of our future rent payments expected from our subtenant over
the term of the sublease. Further, in conjunction with our facilities lease, we have previously issued to our landlord
warrants to purchase our common stock. We have previously capitalized the fair value of these warrants at issuance as
part of our other long-term assets and they are being amortized up to January 31, 2018. The liability arising from this
sublease agreement was determined using a credit-adjusted risk-free rate to discount the estimated future net cash flows.
The changes in the liability related to the sublease agreement during the years ended December 31, 2017, 2016 and 2015
were as follows (in thousands):
Balance at January 1, 2015
Accretion of deferred liability
Amortization of deferred liability
Balance at December 31, 2015
Accretion of deferred liability
Amortization of deferred liability
Balance at December 31, 2016
Increase in deferred liability
Accretion of deferred liability
Amortization of deferred liability
Balance at December 31, 2017
$
$
9,269
559
(3,363)
6,465
357
(3,362)
3,460
495
157
(3,828)
284
83
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
At December 31, 2017, future minimum lease payments and obligations under our noncancelable operating
lease, net of expected sublease receipts, were as follows (in thousands):
Operating
Sublease
For years ending December 31,
2018
2019
2020
2021
2022 and thereafter
Total minimum payments required
Net
Lease
Receipts
$ 9,593 $ (3,942) $ 5,651
5,129
5,334
5,548
6,252
$ 50,052 $ (22,138) $ 27,914
(4,192)
(4,360)
(4,534)
(5,110)
9,321
9,694
10,082
11,362
Rent expense under our operating lease amounted to approximately $6.9 million, $8.3 million and $8.9 million
for the years ended December 31, 2017, 2016 and 2015, respectively. The rent expense during the years ended
December 31, 2017, 2016 and 2015 were net of sublease income, subtenant’s share of certain facilities operating expense
and amortization of deferred liability in the aggregate total of $8.0 million, $6.5 million and $6.3 million, respectively.
9. STOCKHOLDERS’ EQUITY
Preferred Stock
We are authorized to issue 10,000,000 shares of preferred stock. As of December 31, 2017 and 2016, there were
no issued and outstanding shares of preferred stock. Our board of directors is authorized to fix or alter the designation,
powers, preferences and rights of the shares of each series of preferred shares, and the qualifications, limitations or
restrictions of any wholly unissued shares, to establish from time to time the number of shares constituting any such
series, and to increase or decrease the number of shares, if any.
Controlled Equity Offering
In August 2015, we entered into a Controlled Equity OfferingSM Sales Agreement (Original Sales Agreement)
with Cantor Fitzgerald & Co. (Cantor), as sales agent, pursuant to which we may sell, through Cantor, up to an aggregate
of $30.0 million in shares of our common stock. As of December 31, 2016, 9,617,875 shares of our common stock had
been issued under the Original Sales Agreement with aggregate gross proceeds of $30.0 million. As of December 31,
2016, there are no amounts remaining for future sales under the Original Sales Agreement. In May 2017, we entered into
an Amendment No. 1 (Amended Sales Agreement) to the Controlled Equity OfferingSM Sales Agreement pursuant to
which we may offer and sell, through Cantor, additional shares of our common stock, up to an aggregate offering price
of $40.0 million. These shares are in addition to the shares of common stock sold under the Original Sales Agreement.
During the year ended December 31, 2017, 2,166,093 shares of common stock were sold under the Amended Sales
Agreement, with an aggregate net proceeds of $5.7 million. In October 2017, we terminated the Amended Sales
Agreement with Cantor.
All sales of our common stock were made pursuant to a shelf registration statement filed by us in May 2015 and
declared effective by the Securities and Exchange Commission (SEC) in July 2015. Cantor acted as our sole sales agent
for all sales made under the Amended Sales Agreement for a low single-digit commission on gross proceeds. The
common stock was sold at prevailing market prices at the time of the sale.
Underwritten Public Offerings
In February 2017, we completed an underwritten public offering in which we sold 23,000,000 shares of our
84
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
common stock pursuant to an effective registration statement at a price to the public of $2.00 per share. We received
proceeds of approximately $43.0 million, net of underwriting discounts and commissions and offering expenses payable
by us. In October 2017, we completed another underwritten public offering in which we sold 20,815,000 shares of our
common stock pursuant to an effective registration statement at a price to the public of $3.35 per share. We received
proceeds of approximately $65.3 million, net of underwriting discounts and commissions and offering expenses payable
by us.
10. INCOME TAXES
For the years ended December 31, 2017, 2016 and 2015, our loss before income taxes was from domestic
operations. For the years ended December 31, 2017, 2016 and 2015, we did not record a provision for income taxes due
to our net loss.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant
components of our deferred tax assets are as follows (in thousands):
December 31,
2017
2016
Deferred tax assets
Net operating loss carryforwards
Orphan drug and research and development credits
Deferred compensation
Capitalized research and development expenses
Other, net
Total deferred tax assets
Valuation allowance
Net deferred tax assets
$ 212,153 $ 297,445
44,348
21,618
1,877
3,069
368,357
(368,357)
—
51,744
12,261
4,690
815
281,663
(281,663)
— $
$
The reconciliation of the statutory federal income tax rate to the effective tax rate was as follows:
Year Ended December 31,
2015
2016
2017
Federal statutory tax rate
Federal statutory rate reduction
Valuation allowance
Stock compensation
Orphan drug and research and development credits
Other, net
Effective tax rate
(34.0) % (34.0) % (34.0) %
—
160.2 %
—
(126.5) % 35.0 % 31.3 %
8.3 %
5.0 %
5.7 %
(3.6) % (7.3) % (5.6) %
— %
1.3 %
(1.8) %
0.0 % 0.0 % 0.0 %
On December 22, 2017, the Tax Act was signed into law making significant changes to the Internal Revenue
Code. Changes include, but are not limited to, a corporate tax rate decrease from 34% to 21% effective for tax years
beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a
territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as
of December 31, 2017. In December 2017, the Staff Accounting Bulletin No. 118 (SAB 118) was issued to address the
application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or
analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the
Tax Act. In accordance with SAB 118, we have determined that $117.3 million of the deferred tax expense offset by a
full valuation allowance) recorded in connection with the remeasurement of certain deferred tax assets and liabilities was
85
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
a provisional amount and a reasonable estimate at December 31, 2017. This amount is subject to revisions as we
complete our analysis of the Tax Act and interpret any additional guidance issued by the U.S. Treasury Department, IRS,
FASB, and other standard-setting and regulatory bodies. Our accounting for the tax effects of the Tax Act will be
completed during the measurement period. We do not expect any impact on recorded deferred tax balances as the
remeasurement of net deferred tax assets will be fully offset by a change in valuation allowance.
In general, under Section 382 of the Internal Revenue Code (Section 382), a corporation that undergoes an
ownership change is subject to limitations on its ability to utilize its pre-change net operating loss carryovers and tax
credits to offset future taxable income. Our existing net operating loss carryforwards and tax credits are subject to
limitations arising from ownership changes which occurred in previous periods. We finalized our analysis of potential
ownership changes and concluded our Section 382 owner shift analysis during the year ended December 31, 2012. We
have updated our net operating loss carryforwards to reflect the results of the Section 382 owner shift analysis as of
December 31, 2017. We did not experience any significant changes in ownership in 2017 and 2016. Future changes in
our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382
and result in additional limitations.
As of December 31, 2017, we had net operating loss carryforwards for federal income tax purposes of
approximately $902.1 million, which expire beginning in the year 2019 and state net operating loss carryforwards of
approximately $321.4 million, which expire beginning in the year 2028.
We have general business credits of approximately $37.1 million, which will expire beginning in 2023, if not
utilized, and is comprised of research and development credits and orphan drug credits. We also have state research and
development tax credits of approximately$26.9 million, which have no expiration date.
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are
uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation
allowance decreased by approximately $86.7 million and increased by approximately $25.9 million for the years ended
December 31, 2017 and 2016, respectively.
The following table summarizes the activity related to our gross unrecognized tax benefits (in thousands):
Year Ended December 31,
Balance at the beginning of the year
Increase related to prior year tax positions
Increase related to current year tax positions
Balance at the end of the year
$
$
2016
2017
6,903 $ 17,278
(11,332)
957
6,903
—
527
7,430 $
Included in the balance of unrecognized tax benefits at December 31, 2017 and 2016, respectively, are
$5.8 million and $5.4 million of tax benefits that, if recognized, would result in adjustments to other tax accounts,
primarily deferred taxes. No income tax benefit would be realized due to our valuation allowance position. We do not
anticipate a significant change to the unrecognized tax benefits over the next twelve months.
We are subject to taxation in the United States and in California. Because of net operating loss and research
credit carryovers, substantially all of our tax years remain open to examination.
Our policy is that we recognize interest and penalties accrued on any unrecognized tax benefits as a component
of income tax expense. We currently have no tax positions that would be subject to interest or penalties.
86
Rigel Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
11. RESTRUCTURING CHARGES
In September 2016, we announced that we had reduced our workforce by 46 positions, mostly in the research
area. We also announced that effective September 15, 2016, Donald G. Payan, M.D, has retired from the board of
directors and from his position as Executive Vice President and President of Discovery and Research. We recorded
restructuring charges during the three months ended September 30, 2016 of approximately $5.8 million within
Restructuring Charges in the accompanying Statement of Operations, which included $5.0 million of severance costs
paid in cash, $319,000 impairment of certain property and equipment, and $499,000 of non-cash stock-based
compensation expense as a result of the modification of our former executive’s stock options (see Note 4). At
December 31, 2017, we have no accrued restructuring liability.
12. SELECTED QUARTERLY FINANCIAL DATA
Year Ended December 31, 2017
Year Ended December 31, 2016
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Revenue
Net loss
Net loss per share, basic
and diluted
Weighted average shares
used in computing net
loss per share, basic and
diluted
(unaudited, in thousands, except per share amounts)
$
3,000
— $
$ (15,314) $ (19,147) $ (17,660) $ (25,871) $ (17,464) $ (13,533) $ (22,629) $ (15,590)
5,029 $
3,760 $
8,594 $
3,584 $
900 $
— $
$
(0.13) $
(0.16) $
(0.14) $
(0.18) $
(0.19) $
(0.15) $
(0.24) $
(0.16)
113,598
122,500
124,628
144,252
90,555
92,495
95,454
98,981
87
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer
and principal accounting officer, we conducted an evaluation of our disclosure controls and procedures, as such term is
defined under Rule 13a-15(e) promulgated under the Exchange Act. Based on this evaluation, our principal executive
officer and our principal accounting officer concluded that our disclosure controls and procedures were effective as of
the end of the period covered by this Annual Report.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of
our management, including our principal executive officer and principal accounting officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework). Based on our evaluation under the framework in Internal Control—Integrated Framework, our management
concluded that our internal control over financial reporting was effective as of December 31, 2017.
The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by
Ernst & Young LLP, an independent registered public accounting firm, as stated in its attestation report which is set forth
below in this Annual Report on Form 10-K.
88
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Rigel Pharmaceuticals, Inc.
Opinion on the Internal Control over Financial Reporting
We have audited Rigel Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2017, based
on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Rigel Pharmaceuticals, Inc. (the
Company) maintained, in all material respects, effective internal control over financial reporting as of December 31,
2017, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the accompanying balance sheets of the Company as of December 31, 2017 and 2016, the related
statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the
period ended December 31, 2017, and the related notes, and our report dated March 6, 2018 expressed an unqualified
opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Ernst & Young LLP
Redwood City, California
March 6, 2018
89
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the fourth quarter of
2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls
and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are
resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls
and procedures relative to their costs.
Item 9B. Other Information
None.
90
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Information regarding our directors, executive officers and corporate governance is incorporated by reference to
the information set forth under the captions “Election of Directors” and “Management—Executive Officers” in our
Proxy Statement for the 2018 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31,
2017. Such information is incorporated herein by reference.
In 2003, we adopted a code of ethics, the Rigel Pharmaceuticals, Inc. Code of Conduct, which applies to our
principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing
similar functions. Our Code of Conduct is on our website at http://ir.rigel.com/phoenix.zhtml?c=120936&p=irol-
govhighlights. If we make any amendments to the code or grant any waiver from a provision of the code applicable to
any executive officer or director, we intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K by
disclosing the nature of the amendment or waiver on our website at the address and the location specified above.
Information regarding compliance with Section 16(a) of the Exchange Act is incorporated by reference to the
information set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy
Statement for the 2018 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2017.
Such information is incorporated herein by reference.
Item 11. Executive Compensation
Information regarding executive and director compensation is incorporated by reference to the information set
forth under the captions “Compensation Discussion and Analysis,” “Executive Compensation” and “Director
Compensation” in our Proxy Statement for the 2018 Annual Meeting of Stockholders to be filed with the SEC within
120 days of December 31, 2017. Such information is incorporated herein by reference.
Information regarding Compensation Committee interlocks and insider participation is incorporated by
reference to the information set forth under the caption “Compensation Committee Interlocks and Insider Participation”
in our Proxy Statement for the 2018 Annual Meeting of Stockholders to be filed with the SEC within 120 days of
December 31, 2017. Such information is incorporated herein by reference.
Information regarding our Compensation Committee’s review and discussion of our Compensation Discussion
and Analysis is incorporated by reference to the information set forth under the caption “Compensation Committee
Report” in our Proxy Statement for the 2018 Annual Meeting of Stockholders to be filed with the SEC within 120 days
of December 31, 2017. Such information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information regarding security ownership of certain beneficial owners and management and securities
authorized for issuance under our equity compensation plans is incorporated by reference to the information set forth
under the caption “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”
and “Equity Compensation Plan Information” in our Proxy Statement for the 2018 Annual Meeting of Stockholders to be
filed with the SEC within 120 days of December 31, 2017. Such information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information regarding certain relationships and related transactions and director independence is incorporated
by reference to the information set forth under the captions “Transactions with Related Persons” and “Information
Regarding the Board of Directors and Corporate Governance” in our Proxy Statement for the 2018 Annual Meeting of
Stockholders to be filed with the SEC within 120 days of December 31, 2017. Such information is incorporated herein
by reference.
91
Item 14. Principal Accounting Fees and Services
Information regarding principal accounting fees and services is incorporated by reference to the information set
forth under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in our Proxy
Statement for the 2018 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2017.
Such information is incorporated herein by reference.
92
Item 15. Exhibits, Financial Statement Schedules
PART IV
(a)
The following documents are being filed as part of this Annual Report on Form 10-K:
1.
2.
3.
Financial Statements—Index to Financial Statements in Item 8 of this Annual Report on Form 10-K
including selected quarterly financial data for the last two years in Note 12.
Financial Statement Schedules—None—As all required disclosures have been made in the footnotes to
the financial statements.
See Exhibit Index at the end of this Annual Report, which is incorporated herein by reference. The
Exhibits listed in the accompanying Exhibit Index are filed as part of this report.
93
EXHIBIT INDEX
3.1 Amended and Restated Certificate of Incorporation (filed as an exhibit to Rigel’s Current Report on
Form 8- K (No. 000-29889) dated May 29, 2012, and incorporated herein by reference).
3.2 Amended and Restated Bylaws (filed as an exhibit to Rigel’s Current Report on Form 8-K
(No. 000- 29889), dated February 2, 2007, and incorporated herein by reference).
4.1 Form of warrant to purchase shares of common stock (filed as an exhibit to Rigel’s Registration Statement
on Form S-1 (No. 333-45864), as amended, and incorporated herein by reference).
4.2 Specimen Common Stock Certificate (filed as an exhibit to Rigel’s Current Report on Form 8-K
(No. 000-29889) dated June 24, 2003, and incorporated herein by reference).
4.3 Warrant issued to HCP BTC, LLC for the purchase of shares of common stock (filed as an exhibit to Rigel’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (No. 000-29889) and incorporated
herein by reference).
10.1+ Form of Stock Option Agreement pursuant to 2000 Equity Incentive Plan (filed as an exhibit to Rigel’s
Registration Statement on Form S-1 (No. 333-45864), as amended, and incorporated herein by reference).
10.2 Collaboration Agreement between Rigel and Janssen Pharmaceutical N.V., dated December 4, 1998 (filed
as an exhibit to Rigel’s Registration Statement on Form S-1 (No. 333-45864), as amended, and incorporated
herein by reference).
10.3 Collaborative Research and License Agreement between Rigel and Pfizer Inc., dated January 31, 1999 (filed
as an exhibit to Rigel’s Registration Statement on Form S-1 (No. 333-45864), as amended, and incorporated
herein by reference).
10.4 Collaboration Agreement between Rigel and Novartis Pharma AG, dated May 26, 1999 (filed as an exhibit
to Rigel’s Registration Statement on Form S-1 (No. 333-45864), as amended, and incorporated herein by
reference).
10.5 Build-to-Suit Lease between Rigel and Slough BTC, LLC, dated May 16, 2001 (filed as an exhibit to
Rigel’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 (No. 000-29889) and
incorporated herein by reference).
10.6* Amendment to Build-to-Suit Lease between Rigel and Slough BTC, LLC, dated October 18, 2002 (filed as
an exhibit to Rigel’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31,
2002 (No. 000-29889) and incorporated herein by reference).
10.7 Amendment No. Two to Build-to-Suit Lease between Rigel and Slough BTC, LLC, dated January 31, 2005
(filed as an exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009
(No. 000-29889) and incorporated herein by reference).
10.8 Amendment No. Three to Build-to-Suit Lease between Rigel and Slough BTC, LLC, dated January 31,
2005 (filed as an exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2009 (No. 000-29889) and incorporated herein by reference).
10.9 Amendment No. Four to Build-to-Suit Lease between Rigel and HCP BTC, LLC, dated February 1, 2009
(filed as an exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009
(No. 000-29889) and incorporated herein by reference).
94
10.10 First Amendment to the Collaboration Agreement between Rigel and Novartis Pharma AG, dated May 18,
2001 (filed as an exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001
(No. 000- 29889) and incorporated herein by reference).
10.11* Second Amendment to the Collaboration Agreement between Rigel and Novartis Pharma AG, dated July 6,
2001 (filed as an exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2001 (No. 000-29889) and incorporated herein by reference).
10.12 First Amendment to the Collaboration Agreement by and between Rigel and Janssen Pharmaceutical N.V.,
dated June 30, 2000 (filed as an exhibit to Rigel’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 (No. 000-29889) and incorporated herein by reference).
10.13 Second Amendment to the Collaboration Agreement by and between Rigel and Janssen
Pharmaceutical N.V., dated December 4, 2001 (filed as an exhibit to Rigel’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2001 (No. 000-29889) and incorporated herein by reference).
10.14* Collaboration Agreement between Rigel and Daiichi Pharmaceutical Co., Ltd., dated August 1, 2002 (filed
as an exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002
(No. 000-29889) and incorporated herein by reference).
10.15+ Employment Agreement between Rigel and Elliott B. Grossbard, dated as of March 18, 2002 (filed as an
exhibit to Rigel’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2002
(No. 000- 29889) and incorporated herein by reference).
10.16+ Separation Agreement by and between Rigel and Elliot Grossbard, M.D., dated June 30, 2016 (filed as an
exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 (No. 000-29889) filed
on August 2, 2016 and incorporated herein by reference).
10.17+ Clinical Research Consulting Agreement by and between Rigel and Elliot Grossbard, M.D., dated June 27,
2016 (filed as an exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016
(No. 000-29889) filed on August 2, 2016 and incorporated herein by reference).
10.18+ Offer Letter from Rigel to Anne-Marie Duliege, dated February 4, 2016 (filed as an exhibit to Rigel’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (No. 000-29889) filed on May 3,
2016 and incorporated herein by reference).
10.19+* Offer Letter from Rigel Pharmaceuticals, Inc. to Eldon C. Mayer III, dated September 12, 2016 (filed as an
exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (No. 000
29889) filed on November 1, 2016 and incorporated herein by reference).
10.20+* Offer Letter from Rigel Pharmaceuticals, Inc. to Joseph Lasaga, dated September 26, 2016 (filed as an
exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (No. 000
29889) filed on November 1, 2016 and incorporated herein by reference).
10.21* Collaborative Research and License Agreement by and between Rigel and Pfizer Inc., dated January 18,
2005 (filed as an exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005
(No. 000-29889) and incorporated herein by reference).
10.22+ Form of Indemnity Agreement (filed as an exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2007 (No. 000-29889), as amended, and incorporated herein by reference).
10.23+ 2000 Equity Incentive Plan, as amended (filed as an exhibit to Rigel’s Registration Statement on Form S-8
(No. 333-189523) filed on June 21, 2013 and incorporated herein by reference).
95
10.24+ 2000 Non-Employee Directors’ Stock Option Plan, as amended (filed as an exhibit to Rigel’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2017 (No. 000-29889) filed on August 21, 2017 and
incorporated herein by reference).
10.25+ Amended and Restated Employment Agreement between Rigel and Donald G. Payan, effective January 1,
2011 (filed as an exhibit to Rigel’s Annual Report on Form 10-K for the fiscal year ended December 31,
2010 (No. 000-29889) and incorporated herein by reference).
10.26+ Separation Agreement by and between Rigel Pharmaceuticals, Inc. and Donald G. Payan, M.D., dated
September 15, 2016 (filed as an exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2016 (No. 000-29889) filed on November 1, 2016 and incorporated herein by reference).
10.27+ Amended and Restated Change of Control Severance Plan (filed as an exhibit to Rigel’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2010 (No. 000-29889) and incorporated herein by
reference).
10.28+ 2000 Employee Stock Purchase Plan, as amended (filed as an exhibit to Rigel’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2010 (No. 000-29889) and incorporated herein by reference).
10.29* License and Collaboration Agreement between Rigel and AstraZeneca AB, dated February 15, 2010 (filed
as an exhibit to Rigel’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010
(No. 000-29889) and incorporated herein by reference).
10.30+ 2011 Equity Incentive Plan, as amended (filed as an exhibit to Rigel’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2017 (No. 000-29889) filed on August 21, 2017 and incorporated herein by
reference).
10.31* Termination Agreement between Rigel and Pfizer, Inc., dated May 2, 2011 (filed as an exhibit to Rigel’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (No. 000-29889) and incorporated
herein by reference).
10.32+ Form of Stock Option Agreement pursuant to 2011 Equity Incentive Plan (filed as an exhibit to Rigel’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 (No. 000-29889) and
incorporated herein by reference).
10.33+ 2012 Cash Incentive Plan (filed as an exhibit to Rigel’s Current Report on Form 8-K (No. 000-29889) filed
on February 8, 2012, and incorporated herein by reference).
10.34+ 2013 Cash Incentive Plan (filed as an exhibit to Rigel’s Current Report on Form 8-K (No. 000-29889) filed
on February 14, 2013, and incorporated herein by reference).
10.35+ 2014 Cash Incentive Plan (filed as an exhibit to Rigel’s Current Report on Form 8-K (No. 000-29889) filed
on May 20, 2014, and incorporated herein by reference).
10.36+ 2015 Cash Incentive Plan (filed as an exhibit to Rigel’s Current Report on Form 8-K (No. 000-29889) filed
on January 30, 2015, and incorporated herein by reference).
10.37+ 2016 Cash Incentive Plan (filed as an exhibit to Rigel’s Current Report on Form 8-K (No. 000-29889) filed
on January 26, 2016, and incorporated herein by reference).
10.38+ 2017 Cash Incentive Plan (filed as an exhibit to Rigel’s Current Report on Form 8-K (No. 000 29889) filed
on February 8, 2017, and incorporated herein by reference).
10.39+# Rigel Pharmaceuticals, Inc. Inducement Plan, as amended.
96
10.40+ Form of Stock Option Grant Notice, Option Agreement and Notice of Exercise under the Rigel Inducement
Plan (filed as an exhibit to Rigel’s Current Report on Form 8-K (No. 000-29889) filed on October 11, 2016,
and incorporated herein by reference).
10.41# Amendment No. Five to Build-to-Suit Lease between Rigel Pharmaceuticals, Inc. and HCP BTC, LLC,
dated July 24, 2017.
10.42+# Transition and Separation Agreement between Rigel Pharmaceuticals, Inc. and Ryan Maynard dated
December 14, 2017.
23.1# Consent of Independent Registered Public Accounting Firm.
24.1# Power of Attorney (included on signature page).
31.1# Certification required by Rule 13a-14(a) or Rule 15d-14(a).
31.2# Certification required by Rule 13a-14(a) or Rule 15d-14(a).
32.1• Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350).
101.INS# XBRL Instance Document
101.SCH# XBRL Taxonomy Extension Schema Document
101.CAL# XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB# XBRL Taxonomy Extension Labels Linkbase Document
101.PRE# XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF# XBRL Taxonomy Extension Definition Linkbase Document
+
*
#
•
Management contract or compensatory plan.
Confidential treatment requested as to specific portions, which portions are omitted and filed separately with the
Securities and Exchange Commission.
Filed herewith.
The certification attached as Exhibit 32.1 accompanies the Annual Report on Form 10-K pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended.
97
Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of South San Francisco, State of California, on March 6, 2018.
SIGNATURES
RIGEL PHARMACEUTICALS, INC.
By:
By:
/s/ RAUL R. RODRIGUEZ
Raul R. Rodriguez
Chief Executive Officer
/s/ NELSON D. CABATUAN
Nelson D. Cabatuan
Interim Principal Accounting Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Raul R. Rodriguez and Nelson D. Cabatuan, and each of them, as his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has
been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ RAUL R. RODRIGUEZ
Raul R. Rodriguez
Chief Executive Officer and Director
(Principal Executive Officer)
March 6, 2018
/s/ NELSON D. CABATUAN
Nelson D. Cabatuan
Interim Principal Accounting Officer
(Principal Finance and Accounting Officer)
March 6, 2018
/s/ GARY A. LYONS
Gary A. Lyons
/s/ BRADFORD S. GOODWIN
Bradford S. Goodwin
/s/ KEITH A. KATKIN
Keith A. Katkin
/s/ WALTER H. MOOS
Walter H. Moos
/s/ PETER S. RINGROSE
Peter S. Ringrose
/s/ BRIAN L. KOTZIN
Brian L. Kotzin
/s/ GREGG LAPOINTE
Gregg Lapointe
Chairman of the Board
March 6, 2018
Director
Director
Director
Director
Director
Director
98
March 6, 2018
March 6, 2018
March 6, 2018
March 6, 2018
March 6, 2018
March 6, 2018