Tuesday, Rodman & Renshaw initiated coverage of Rigel Pharmaceuticals, Inc. (RIGL) stock with an Outperform rating and a price target of $33.
Analyst Simos Simeonidis said that his thesis is based on his view that Rigel's lead compound, R788, a novel oral agent for the treatment of Rheumatoid Arthritis, has the potential to become a significant player in the very large RA, due to its efficacy, disease-modifying potential and oral administration. R788 is currently in two randomized Phase IIb trials, TASKi2 and TASKi3, with top line data expected in July 2009.
The analyst's expectation, based on the profile of the drug, and the data he has seen thus far in its trial, is that the data will be positive, and will reinforce the view that R788 is an approvable, novel oral agent in RA, with the potential to take significant market share from the currently marketed injectable biologics, and become a multi-billion dollar drug. In addition to RA, R788 has shown promising efficacy in both ITP and B-cell lymphoma.
The analyst said that Rigel announced Phase II data (TASKi1) at the 2008 ACR meeting last October and the market reacted very negatively, mainly on a hypertension signal observed in a very small number of patients and on potential data inconsistencies between US and Mexican trial sites. The analyst believes that this reaction was unwarranted, given the data, and he believes was mostly due to the general sentiment of panic during turmoil facing the markets at the time.
The analyst expects top line data from the two Phase IIb trials to be announced in early to mid July, with (the more relevant because of its larger size) TASKi2 trial reading out first in early July, followed by TASKi3, a week or so later. The analyst believes that the data from these much larger Phase IIb trials, will confirm that R788 is a very effective agent in RA and that the safety concerns will also be successfully addressed.
The analyst noted that Rigel has an end-of-Phase II meeting with the FDA scheduled for October. Assuming a positive outcome from the phase IIb studies, the analyst expects partnership talks to intensify following the release of the data and to continue throughout the fall. The analyst believes that potential partners would prefer to wait until after the FDA meeting before signing on the dotted line, so he would expect a partnership at some point in late fourth quarter of 2009 or early in 2010.
Currently, RIGL is up $0.52 or 5.46% and trading at $10.05.
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