Why Rigel Pharmaceuticals Shares Were Shellacked

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Rigel Pharmaceuticals (NASDAQ: RIGL  ) , a clinical-stage small molecule drug company focused on inflammatory and autoimmune disorders, dropped as much as 21% after the company resumed full responsibility for its rheumatoid arthritis pill, Fostamatinib, and reported topline data from two late-stage studies involving the drug.

So what: It probably wouldn't have been such a bad day had licensing partner AstraZeneca (NYSE: AZN  ) decided that, based on the data from the two Oskira studies, and previous clinical findings, it would take a $140 million charge and return all rights of Fostamatinib back to Rigel. Essentially, AstraZeneca feels there's little reason to waste additional research funds since it wasn't planning to seek a new drug application filing anyway based on the data. The actual top-line data demonstrated a statistically significant ACR20 response rate at 24 weeks in the 100mg dosage group in both trials; however, the treatment group receiving the once-daily 150mg dose following four weeks at 100mg in the Oskira-3 trial didn't show a statistical significance.

Now what: Rigel has been put between a rock and a hard place. It has plenty of statistical data to be combed through and a drug with a potential benefit for rheumatoid arthritis sufferers, but probably not enough to get approved by the Food and Drug Administration, nor to compete against AbbVie's blockbuster Humira or Pfizer's newer medication, Xeljanz. With no drugs currently approved, it appears as if Rigel is going to burn more cash as it decides what next to do with Fostamatinib. For Humira, it means continued smooth sailing, at least until its patents run out in late 2016, and for Xeljanz it likely means its portion of the pie will grow unabated as well. As has been the case all along, I'd suggest keeping a good distance away from Rigel.

Craving more input? Start by adding Rigel Pharmaceuticals to your free and personalized watchlist so you can keep up on the latest news with the company.

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