Associate

In today's financial environment, it can take quite an effort to raise sizable chunks of funding. Rigel Pharmaceuticals Inc. did what it had to do in order to bring in the $46 million needed to get its products to the partnering stage.

South San Francisco-based Rigel got definitive agreements from private investors to sell about 72 million shares at 64 cents per share. Investors also will receive warrants to purchase another 14.4 million shares at the same price. After the transaction closes, Rigel would offer existing shareholders non-transferable rights to purchase up to $10 million of newly issued common stock, also at 64 cents per share. By doing the math, the financing could end up grossing about $65.3 million.

Money, said Rigel Chief Financial Officer Jim Welch, that should be enough to turn the company's pipeline into a generator of funds.

"We have three distinct products," he told BioWorld Today. "One is in a Phase Ib and we want to get that through a Phase II. And we have two additional products we want to get into the clinic over the next 12 months."

The company isn't commenting publicly on clinical timelines or how long the funding should last, but Welch said that it "takes our three products into and through Phase II." Following Rigel's business model, the company will look to link the products to pharmaceutical partners after Phase II.

The 64-cents-per-share selling price is based on a 15 percent discount to Rigel's average closing price for 30 trading days preceding the agreement. Rigel's stock (NASDAQ:RIGL) fell 14 cents Wednesday, or 13.9 percent, to close at 87 cents. Rigel reported about 45 million shares outstanding as of Dec. 31. Few companies prefer to sell stock at a discount, but Welch noted it's the overall result that is important.

"Given the size and magnitude of it, we are happy to get this kind of money and support," he said, but acknowledged that "the price we were forced to do at a discount because of the size [of the offering] and how liquid the stock has been."

The lead product to benefit from the financing is R112, in a Phase Ib trial for allergic rhinitis. Data should be available "sometime over the summer," Welch said, and the small molecule should enter Phase II trials in "the last part of this year," depending on the data.

Its product for hepatitis C, now called R803, should be the focus of an investigational new drug application in the "last half of this year," he said, and its rheumatoid arthritis product is expected to enter the clinic in "the next 12 months or so."

Beyond that, Rigel is working with several collaborators, the newest edition being Daiichi Pharmaceuticals Co. Ltd., of Tokyo. Made public in August, the collaboration focuses on protein degradation related to cancer. Welch said Rigel just reached a screening milestone in the partnership.

Rigel also is working with Pfizer Inc., of New York, in allergy. Pfizer has accepted targets stemming from the collaboration and is evaluating which ones it wants to take forward. Rigel is working in oncology with the J&J unit, Johnson & Johnson Pharmaceutical Research & Development LLC.

Rigel has reduced its work force - like many other biotechnology companies - in the recent past in order to tighten its focus. As of Dec. 31, it had cash, cash equivalents and short-term investments of $27.3 million. For 2002, it posted a net loss of $37 million. With the agreements for funding in hand, Rigel seems to have what it needs for its business plan. (See BioWorld Today, Feb. 3, 2003.)

"[The funding] provides us with a long enough runway to get our primary products into the clinic and get resulting data so that we can partner with large pharmaceutical partners," Welch said.

The investors in the private placement were led by MPM Capital LP, of San Francisco, and include Frazier & Co., of Seattle; Alta Partners, of San Francisco; and HBM BioVentures AG, of Zurich, Switzerland. When the financing closes, MPM will have the right to appoint two representatives to Rigel's board, expanding the board to nine members.