The news from long-suffering biotech Rigel Pharmaceuticals (Nasdaq:RIGL) just continues to get worse. Rigel has already seen AstraZeneca (NYSE: AZN) return the rights to R788, its Syk kinase inhibitor for rheumatoid arthritis, and with Monday's announcement of the failure of R343 in allergic asthma, it's worth asking whether there's any real value left in the company's Syk inhibitor program. Although the company still has a couple of clinical trials ongoing, as well as $250 million in cash, these shares are looking more and more like a spin of the roulette wheel than any sort of real investment opportunity.
Another Syk Failure
Seeing as Rigel's market cap was less than $320 million on Friday, it's difficult to say that the Street had robust expectations for Rigel's Phase II allergic asthma drug R343. While allergic asthma (of varying degrees of severity) affects an estimated 10 million people in the U.S., it's a moot point now as the drug failed to meet both primary and secondary endpoints, leading management to terminate the program. 

SEE: Will Immunotheraphy Disrupt The Oncology Market?

What's Next?
With R343 off the table, attention now shifts to R333, a topical JAK3/Syk inhibitor in a Phase II trial for the treatment of discoid lupus. Discoid lupus is a chronic skin condition that causes inflammation, sores, and scarring of the skin – particularly on the face, ears, and scalp. The musician Seal suffered from this condition earlier in his life, and while it appears to be in remission now it caused significant facial scarring and hair loss.
The market potential of an effective treatment for discoid lupus is likely worthwhile, as there are more than 50,000 people in the U.S. estimated to have this condition. That potential may be moot, though, as the company's failures thus far in developing effective Syk inhibitors raises the question of whether they really have a firm understanding of the relevant mechanism(s) of action and the resulting ability to design effective drugs.
Rigel also has R348 in clinical development as a treatment for dry eye. Given how difficult this condition is to treat, Allergan's (NYSE:AGN) Restasis is the only approved drug specifically targeting this indication, R348 has to be considered a long-shot at best.
Still Awaiting Word On R788
Rigel has yet to make a final determination of its plans for R788 (aka fostamatinib), the oral Syk kinse inhibitor it has explored for the treatment of rheumatoid arthritis. After a largely disappointing clinical development history, AstraZeneca opted to return this drug to Rigel and walk away from the partnership.
Although R788 has shown some signs of efficacy, and could theoretically have a role in patients who fail DMARD therapy, I think you have to consider AstraZeneca's own desperation for growth when evaluating the potential of R788 – if there were any serious, credible market opportunity for R788, I highly doubt AstraZeneca would have abandoned it. That said, Rigel could still elect to try to submit an NDA, at which point the company would still need to find a marketing partner for a drug whose clinical data package suggests that a major marketing effort would be needed to generate meaningful sales.
The Bottom Line
Rigel shares are trading at about 15% to 20% above cash value per share, and I think that's a fair price considering the circumstances. The company has yet to demonstrate that it has a commercially viable product candidate in its pipeline, and pursuing a Phase III study for either discoid lupus or dry eye could well consume half (or more) of the current cash balance. Given the paucity of data on either of those drugs, buying Rigel today is basically just a nearly blind bet on one or both of those Phase II trials delivering positive data. That's gambling, not investing, and I don't see a compelling reason to bother with Rigel shares today.
Disclosure – At the time of writing, the author did not own shares of any company mentioned in this article.

Related Articles
  1. Investing News

    Will Immunotherapy Disrupt The Oncology Market?

    Immunotherapy could radically change the treatment of cancer, and the revenue opportunities for pharmaceutical companies.
  2. Stock Analysis

    The Biggest Risks of Investing in Pfizer Stock

    Learn the biggest potential risks that may affect the price of Pfizer's stock, complete with a fundamental analysis and review of other external factors.
  3. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  4. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  5. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  6. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  7. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  8. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  9. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  10. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center