(Adds analyst’s comments, details from conference call; share movement)
By Vidya L Nathan
BANGALORE, Feb 3 (Reuters) - Rigel Pharmaceuticals (RIGL.O) will cut 20 percent of its workforce and reduce its research programs in oncology and virology to conserve cash as it seeks a partner to develop its lead drug candidate for arthritis, sending its shares down 13 percent.
Rigel said it would delay partnership talks for its arthritis drug, R788, until results from mid-stage studies become available in July and August, in order to get a better deal.
“Progress of their products going forward is dependent on a partnership because otherwise they don’t have sufficient cash,” Collins Stewart analyst Salveen Kochnover said.
As of Dec. 31, 2008, the company had $134.5 million in cash, cash equivalents and available-for-sale securities.
Following Tuesday’s announcement, Rigel believes it has enough cash to maintain its current development priorities through the second quarter of 2010.
Regarding the company’s decision to delay partnership talks for its lead drug candidate, Chief Executive James Gower said, “One of the things that prompted our decision to go ahead and wait is that some of the deal terms had been getting more sticky and less lucrative.”
The company said it was looking at a co-development deal, with royalties from sales outside of North America, and a co-promotion and profit-sharing option for sales in North America.
Collins Stewart’s Kochnover, who called R788 a billion-dollar-drug, sees Rigel getting $100 million upfront in a partnership, if the results from the ongoing mid-stage trials show a good safety profile.
“We’ve seen some increases in blood pressure, some liver toxicity questions and some lowering in white-blood cell count. So the question is would this get worse in a larger and longer study, or does it get better,” Kochnover said.
The company said on the conference call that an independent data monitoring committee had not made any comments on the safety of R788 in its review.
R788 is being tested in patients with rheumatoid arthritis. The drug is also being tested as a treatment for lupus, blood cancer and low platelet count.
Rigel said possible partners were also interested in the drug for cancer indications, for which it is in mid-stage studies.
The clinical-stage drug development company said it was assessing restructuring and other charges related to the job cuts, and expects to record the charges in the first quarter of 2009.
The charges would not be material, Rigel said in a regulatory filing.
Shares of the company fell as much as 13 percent, but later pared some of their losses to trade down 71 cents at $6.46 Tuesday morning on Nasdaq. (Editing by Jarshad Kakkrakandy, Pratish Narayanan)