What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-02 compared with 2021-08-03 · 213 added, 181 removed, 407 unchanged (49% of the section changed)

1 unchanged sentence

This discussion and analysis should be read in conjunction with our financial statements and the accompanying notes included in this report and the audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Our financial results for the three and six months ended June 30, 2021 are not necessarily indicative of results that may occur in future interim periods or for the full fiscal year.

This Quarterly Report on Form 10-Q contains statements indicating expectations about future performance and other forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, that involve risks and uncertainties.

Our financial results for the three and nine months ended September 30, 2021 are not necessarily indicative of results that may occur in future interim periods or for the full fiscal year.

This Quarterly Report on Form 10-Q contains statements indicating expectations about future performance and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), that involve risks and uncertainties.

We usually use words such as “may,” “will,” “would,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” or the negative of these terms or similar expressions to identify these forward-looking statements.

These statements appear throughout this Quarterly Report on Form 10-Q and are statements regarding our current expectation, belief or intent, primarily with respect to our operations and related industry developments.

These statements appear throughout this Quarterly Report on Form 10-Q and are statements regarding our current expectations, beliefs or intent, primarily with respect to our operations and related industry developments.

Examples of these statements include, but are not limited to, statements regarding the following:

1 unchanged sentence

our business and scientific strategies;

risks and uncertainties associated with the commercialization and marketing of TAVALISSE;

risks and uncertainties associated with the commercialization and marketing of TAVALISSE in the U.S.

and in Europe;

risks that the FDA, EMA or other regulatory authorities may make adverse decisions regarding fostamatinib;

risks that the United States Food and Drug Administration (FDA), European Medicines Agency (EMA) or other regulatory authorities may make adverse decisions regarding fostamatinib;

the progress of our and our collaborators’ product development programs, including clinical testing, and the timing of results thereof;

8 unchanged sentences

Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including as a result of the risks and uncertainties discussed under the heading “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q.

Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

New factors emerge from time to time, and it is not possible for us to predict which factors will arise.

2 unchanged sentences

Our pioneering research focuses on signaling pathways that are critical to disease mechanisms.

Our first United States Food and Drug Administration (FDA) approved product is TAVALISSE ® (fostamatinib disodium hexahydrate) tablets, the only oral spleen tyrosine kinase (SYK) inhibitor, for the treatment of adult patients with chronic immune thrombocytopenia who have had an insufficient response to a previous treatment.

The product is also commercially available in Europe (TAVLESSE) and Canada (TAVALISSE) for the treatment of chronic immune thrombocytopenia in adult patients.

Our first product approved by the FDA is TAVALISSE® (fostamatinib disodium hexahydrate) tablets, the only oral spleen tyrosine kinase (SYK) inhibitor, for the treatment of adult patients with chronic immune thrombocytopenia (ITP) who have had an insufficient response to a previous treatment.

The product is also commercially available in Europe, the United Kingdom (TAVLESSE) and Canada (TAVALISSE) for the treatment of chronic ITP in adult patients.

Fostamatinib is currently being studied in a Phase 3 trial for the treatment of warm autoimmune hemolytic anemia (wAIHA);

a Phase 3 clinical trial for the treatment of hospitalized high-risk patients with COVID-19;

a Phase 3 trial sponsored by National Institute of Health (NIH)/National Heart, Lung, and Blood Institute (NHLBI), the ACTIV-4 Host Tissue Trial, is evaluating treatments, including fostamatinib in hospitalized patients with COVID-19;

a National Institute of Health (NIH)/National Heart, Lung, and Blood Institute (NHLBI) sponsored Phase 3 trial (ACTIV-4 Host Tissue Trial) for the treatment of COVID-19 in hospitalized patients;

and a Phase 2 trial for the treatment of COVID-19 being conducted by Imperial College London.

An NIH/ NHLBI-sponsored Phase 2 trial for the treatment of hospitalized patients with COVID-19, in collaboration with Inova Health System, was recently completed.

Our other clinical programs include our interleukin receptor-associated kinase (IRAK) inhibitor program, and a receptor-interacting serine/threonine-protein kinase (RIP1) inhibitor program in clinical development with partner Eli Lilly and Company (Lilly).

2 unchanged sentences

TAVALISSE IN ITP

In the first half of 2021, net product sales of TAVALISSE were $29.4 million, a 6% increase compared to the same period in 2020.

The increase was primarily driven by increase in net product sales during the second quarter of 2021 compared to the same period in 2020 due to increased quantities sold and price per bottle.

The increase was partially offset by lower product sales in the first quarter of 2021 compared to the same period in 2020 due to impacts of the COVID-19 pandemic as well as the typical first quarter reimbursement issues such as the resetting of co-pays and the Medicare donut hole, along with physician and patient access issues created by the COVID-19 pandemic.

Incrementally, our net product sales in the first quarter of 2021 were negatively impacted by the decrease in level of inventories remaining at our distribution channels.

For the nine months ended September 30, 2021, net product sales of TAVALISSE were $45.4 million, a 3% increase compared to the same period in 2020.

The increase in our net product sales was primarily driven by the increase in quantities sold particularly during the second quarter of 2021, as well as the increase in price per bottle of TAVALISSE.

Our net product sales during the nine months ended September 30, 2021 however, were negatively impacted by the decrease in level of inventories remaining at our distribution channels at the end of the third quarter of 2021, as well as higher government program rebates.

Incrementally, our first quarter 2021 net sales were impacted by the typical first quarter reimbursement issues such as the resetting of co-pays and the Medicare donut hole, along with physician and patient access issues due to COVID-19 pandemic.

Due to the evolving effects of the COVID-19 pandemic, we continue to deploy resources to enable our field-based employees to continue to engage virtually with health care providers.

These virtual engagements have enabled our field team to support existing prescribers, as well as develop new prescribers to identify appropriate patients for TAVALISSE.

We also conducted market research with chronic ITP (cITP) prescribers in 2020 to understand the impact of COVID on cITP management.

More than half of respondents reported that COVID had an impact on their management of cITP, and about a third of respondents anticipate a surge of patients post-COVID.

We also conducted market research with chronic ITP prescribers in 2020 to understand the impact of COVID on chronic ITP management.

More than half of respondents reported that COVID had an impact on their management of chronic ITP, and about a third of respondents anticipate a surge of patients post-COVID.

This is because clinicians have found it challenging to both start a therapy, and switch to new therapies.

In the second quarter of 2021, we began to see an increase in in-person engagements with health care providers, while maintaining our level of virtual engagements.

We believe that the increase in interactions led to an increase in sales.

Additionally, we are also expanding our sales force by increasing our territories which is expected to be in place by the second half of 2021.

A post-hoc analysis from our Phase 3 clinical program in adult patients with cITP, highlighting the potential benefit of using TAVALISSE in earlier lines of therapy, was published in the British Journal of Haematology in July 2020.

Starting in 2021, we began to see an increase in in-person engagements with health care providers, while maintaining our level of virtual engagements.

During the third quarter of 2021, we expanded our sales force by increasing our territories.

A post-hoc analysis from our Phase 3 clinical program in adult patients with chronic ITP, highlighting the potential benefit of using TAVALISSE in earlier lines of therapy, was published in the British Journal of Haematology in July 2020.

Inclusion in one of the leading peer-reviewed journals in the field of hematology underscores the significance of the 78% (25/32) response rate defined as at least one platelet count of at least 50,000/µL when TAVALISSE was used as a second-line therapy in our Phase 3 clinical program.

Adverse events were manageable and consistent with those previously reported with fostamatinib.

Our sales force is now sharing this data with physicians.

Our sales force is sharing this data with physicians.

Global Strategic Partnership with Lilly

In February 2021, we entered into a global exclusive license agreement and strategic collaboration with Lilly, to develop and commercialize R552, a RIP1 inhibitor, for the treatment of non-central nervous system (non-CNS) diseases.

In February 2021, we entered into a global exclusive license agreement and strategic collaboration with Lilly (the Lilly Agreement), to develop and commercialize R552, a RIP1 inhibitor, for the treatment of non-central nervous system (non-CNS) diseases.

In addition, the collaboration is aimed at developing additional RIP1 inhibitors for the treatment of central nervous system (CNS) diseases.

5 unchanged sentences

We have the right to opt- out of co-funding the R552 development activities in the U.S., Europe and Japan at two different specified times.

If we exercise our first opt-out right, we will continue to fund our share of the R552 development activities in the U.S., Europe, and Japan up to a maximum funding commitment of $65.0 million.

If we exercise our first opt- out right (no later than September 30, 2023), we are required to fund our share of the R552 development activities in the U.S., Europe, and Japan up to a maximum funding commitment of $65.0 million through April 1, 2024.

We are responsible for performing and funding initial discovery and identification of CNS disease development candidates.

Following candidate selection, Lilly will be responsible for performing and funding all future development and commercialization of the CNS disease development candidates.

Under the terms of the license agreement, we were entitled to receive an upfront cash payment of $125.0 million, which we received in April 2021, with the potential for an additional $330.0 million in milestone payments upon the achievement of specified development and regulatory milestones by non-CNS disease products and $255.0 million in milestone payments upon the achievement of specified development and regulatory milestones by CNS disease products.

Under the terms of the Lilly Agreement, we were entitled to receive an upfront cash payment of $125.0 million, which we received in April 2021, with the potential for an additional $330.0 million in milestone payments upon the achievement of specified development and regulatory milestones by non-CNS disease products and $255.0 million in milestone payments upon the achievement of specified development and regulatory milestones by CNS disease products.

We are also eligible to receive up to $100.0 million in sales milestone payments on a product-by-product basis for non-CNS disease products and up to $150.0 million in sales milestone payments on a product-by-product basis for CNS disease products.

2 unchanged sentences

Fostamatinib in Hospitalized COVID-19 patients

In April 2021, we reported positive topline results from a multi-center, Phase 2 clinical trial evaluating the safety of fostamatinib, our oral SYK inhibitor, for the treatment of hospitalized patients with COVID-19.

In April 2021, we reported positive topline results from a multi-center, Phase 2 clinical trial sponsored by the NIH/NHLBI, evaluating the safety of fostamatinib, our oral SYK inhibitor, for the treatment of hospitalized patients with COVID-19.

The trial met its primary endpoint of comparable safety than standard of care and showed broad and consistent improvement in numerous efficacy endpoints, including mortality, ordinal scale assessment, and number of days in the ICU.

This trial was conducted in collaboration with the National Heart, Lung, and Blood Institute (NHLBI), part of the National Institutes of Health (NIH), and Inova Health System.

The trial data were submitted as part of a request for an Emergency Use Authorization (EUA) from the FDA for the fostamatinib as a treatment for hospitalized patients with COVID-19.

In late-May 2021, the trial data were submitted as part of a request for an Emergency Use Authorization (EUA) from the FDA for the fostamatinib as a treatment for hospitalized patients with COVID-19.

In August 2021, the FDA informed us that the clinical data submitted from the NIH/NHLBI-sponsored Phase 2 trial of fostamatinib to treat hospitalized patients suffering from COVID-19 are insufficient to support an EUA.

We continue to focus on enrolling patients in our Phase 3 clinical trial and anticipates providing further safety and efficacy data from this larger trial of fostamatinib in COVID-19 patients.

If this trial meets its endpoints, we plan to resubmit an application for EUA with this additional data.

In September 2021, the data from the NIH/NHLBI-sponsored Phase 2 trial was published in Clinical Infectious Diseases, an official publication of the Infectious Disease Society of America.

In June 2021, we announced that fostamatinib has been selected for NIH ACTIV-4 (Accelerating COVID-19 Therapeutic Inventions and Vaccines) trial in hospitalized patients with COVID-19.

ACTIV-4 Host Tissue trial is a large, multi-site trial funded by NHLBI and coordinated by Vanderbilt University Medical Center.

The trial is evaluating treatments, including fostamatinib, that aim to protect and heal host tissues in hospitalized patients with COVID-19.

The ACTIV-4 Host Tissue study will evaluate fostamatinib in targeted 308 hospitalized patients with COVID-19.

The ACTIV-4 Host study, initiated and funded by NHLBI, is a randomized, placebo-controlled trial of therapies, including fostamatinib, targeting the host response to COVID-19 in hospitalized patients.

The ACTIV-4 Host Tissue study will evaluate fostamatinib in a population targeted to include approximately 300 hospitalized patients with COVID-19.

Update on Current and Potential Future Impact of COVID-19 on our Business

1 unchanged sentence

Although we have recently initiated the first phase of our return-to-work initiatives, the majority of our employees continue to work remotely .

Through our existing Crisis Management Team (CMT), we implemented and continue to monitor our

business continuity plans to prevent or minimize business disruption and ensure the safety and well-being of our personnel.

Through our existing Crisis Management Team (CMT), we implemented and continue to monitor our business continuity plans to prevent or minimize business disruption and ensure the safety and well-being of our personnel.

Our CMT meets regularly to assess the effectiveness of our business continuity plans and make adjustments accordingly as COVID-19 continues to evolve.

3 unchanged sentences

Other commercial related activities, such as our marketing programs, speaker bureaus, and market access initiatives that were in live forums have been conducted virtually, delayed or cancelled as a result of the COVID-19 pandemic.

In the second quarter of 2021, we began to see an increase in in-person engagements with health care providers.

Starting in 2021, we began to see an increase in in-person engagements

with health care providers.

We have plans in place to continue implementing both virtual and live initiatives to ensure we are able to meet the needs of health care providers as the pandemic continues to evolve.

Additionally, we are also expanding our sales force by increasing our territories which is expected to be in place by the second half of 2021.

Additionally, we recently completed our sales force expansion which increased the territories we cover.

With respect to our supply chain, we currently do not anticipate significant disruption in the supply chain for our commercial product, TAVALISSE.

23 unchanged sentences

In August 2015, the FDA granted our request for Orphan Drug designation for fostamatinib for the treatment of ITP.

In February 2020, Kissei was granted orphan drug designation from the Japanese Ministry of Health, Labor and Welfare for R788 (fostamatinib) in chronic idiopathic thrombocytopenic purpura.

In August 2016, we announced the results of the first FIT study, reporting that fostamatinib met the study’s primary efficacy endpoint.

1 unchanged sentence

In October 2016, we announced the results of the second FIT study, reporting that the response rate was consistent with the first study.

However, one patient in the placebo group (4%) achieved a stable platelet response, therefore the difference between those on treatment and those on placebo did not reach statistical significance (p=0.152) and the study did not meet its primary endpoint.

Using the most conservative sensitivity analysis, rather than the protocol’s prespecified analysis, one more patient in the second study is considered a non-responder, resulting in 8 of 50 (16%) responders on fostamatinib (p = 0.256 vs.

When the data from both studies are combined, however, this difference is statistically significant (p=0.007).

Patients from the FIT studies were given the option to enroll in a long-term open-label extension study and receive treatment with fostamatinib, also a Phase 3 trial.

A total of 123 patients enrolled in this study.

All the patients who responded to fostamatinib in the FIT studies and enrolled in the long-term open-label extension study maintained a median platelet count of 106,500/uL at a median of 16 months.

In addition, there were 44 placebo non-responders that enrolled in the long-term open-label extension study, 41 of which patients had at least 12 weeks of follow-up.

Of those, 9 patients (22%) have achieved a prospectively defined stable platelet response, which is statistically significant (p=0.0078) and similar to the response rate fostamatinib achieved in the parent studies.

A stable response was defined as a patient achieving platelet counts of greater than 50,000/uL on more than 4 of the 6 visits between weeks 14 and 24, without rescue medication.

In the post-study analysis we performed, a clinically-relevant platelet response was defined to include patients achieving one platelet count over 50,000/uL during the first 12 weeks of treatment, in absence of rescue medication, but who did not otherwise meet the stable response criteria.

Once the platelet count of greater than 50,000/uL is achieved, a loss of response was defined as two consecutive platelet counts of less than 30,000/uL in any subsequent visits.

In the combined dataset of both stable and clinically-relevant

platelet responders for the FIT studies, the response rate was 43% (43/101), compared to 14% (7/49) for placebo (p=0.0006).

In the ITP double-blind studies, the most commonly-reported adverse reactions occurring in at least 5% of patients treated with TAVALISSE were diarrhea, hypertension, nausea, dizziness, increased alanine aminotransferase (ALT), increased aspartate aminotransferase (AST), respiratory infection, rash, abdominal pain, fatigue, chest pain, and neutropenia.

1 unchanged sentence

TAVALISSE was approved by the FDA in April 2018 for the treatment of ITP in adult patients who have had an insufficient response to a previous treatment, and successfully launched in the U.S.

In January 2020, the EC granted our MAA in Europe for fostamatinib for the treatment of chronic ITP in adult patients who are refractory to other treatments.

In January 2020, the EC granted our Marketing Authorization Application (MAA) in Europe for fostamatinib for the treatment of chronic ITP in adult patients who are refractory to other treatments.

In February 2020, Kissei Pharmaceutical Co., Ltd.

(Kissei) was granted orphan drug designation from the Japanese Ministry of Health, Labor and Welfare for R788 (fostamatinib) in chronic idiopathic thrombocytopenic purpura.

Commercial activities, including sales and marketing

1 unchanged sentence

Specifically, our marketing and sales efforts are focused on hematologists and hematologist-oncologists in the U.S., who manage chronic adult ITP patients.

Grifols launched TAVLESSE in the United Kingdom (UK) and Germany in July 2020, and thereafter, expects a phased roll-out over the next 18 months across Europe.

In July 2020, Grifols S.A.

(Grifols) launched TAVLESSE in the United Kingdom (UK) and Germany.

In September 2021, Grifols announced that it began commercializing TAVLESSE in France, Italy and Spain.

The phased rollout across the rest of Europe planned over the following months will include the Czech Republic, Denmark, Finland, Norway and Sweden.

We have a fully integrated commercial team consisting of sales, marketing, market access, and commercial operations functions.

5 unchanged sentences

Also, to help ensure that all eligible patients in the U.S.

have appropriate access to TAVALISSE, we have established a reimbursement and patient support program called Rigel One Care (ROC).

have appropriate access to TAVALISSE, we have established a

reimbursement and patient support program called Rigel One Care (ROC).

Through ROC, we provide co-pay assistance to qualified, commercially insured patients to help minimize out-of-pocket costs and also provide free drug to uninsured or under-insured patients who meet certain established clinical and financial eligibility criteria.

20 unchanged sentences

We have entered into various license agreements to commercialize fostamatinib globally.

The following describes the arrangements we have in place with Grifols, Kissei and Medison.

The following describes the arrangements we have in place with Grifols, Kissei and Medison Pharma Trading AG (Medison Canada) and Medison Pharma Ltd.

(Medison Israel, and together with Medison Canada, Medison).

We retain the global rights to fostamatinib outside of the Grifols, Kissei and Medison territories.

5 unchanged sentences

We are responsible for performing and funding certain development activities for fostamatinib for ITP and AIHA and Grifols is responsible for all other development activities for fostamatinib in such territories.

We remain responsible for the manufacture and supply of fostamatinib for all development and commercialization activities under the agreement.

Under the terms of the agreement, we received an upfront cash payment of $30.0 million and will be eligible to receive regulatory and commercial milestones of up to $297.5 million, which included a $20.0 million non-refundable payment received in the first quarter of 2020, comprised of a $17.5 million payment for EMA approval of fostamatinib for the first indication and a $2.5 million creditable advance royalty payment due upon EMA approval of fostamatinib in the first indication.

responsible for the manufacture and supply of fostamatinib for all development and commercialization activities under the agreement.

Under the terms of the agreement, we received an upfront cash payment of $30.0 million and will be eligible to receive regulatory and commercial milestones of up to $297.5 million.

In January 2020, the European Commission granted a MA for fostamatinib for the treatment of chronic ITP in adult patients who are refractory to other treatments.

With this approval, we received a $20.0 million non-refundable milestone payment, comprised of a $17.5 million payment due upon MAA approval by the EMA of fostamatinib for the first indication and a $2.5 million creditable advance royalty payment due upon EMA approval of fostamatinib in the first indication.

We will also receive tiered royalty payments ranging from the mid-teens to 30% of net sales of fostamatinib in Europe and Turkey.

In January 2020, we received approval of our MAA for fostamatinib for the treatment of chronic ITP in adult patients who are refractory to other treatments.

With this approval, we received a $20.0 million payment as described above.

Grifols launched TAVLESSE in the UK and Germany in July 2020, and thereafter, expects a phased roll-out over the next 18 months across Europe .

In December 2020, the Scottish Medicines Consortium accepted TAVLESSE for use in NHS in Scotland.

Fostamatinib in Japan/Asia

9 unchanged sentences

Fostamatinib in Canada/Israel

In October 2019, we entered into exclusive commercialization license agreements with Medison to commercialize fostamatinib in all potential indications in Canada and Israel.

In October 2019, we entered into exclusive commercial and license agreements with Medison to commercialize fostamatinib in all potential indications in Canada and Israel.

Under the terms of the agreements, we received an upfront payment of $5.0 million with the potential for approximately $35.0 million in regulatory and commercial milestones.

4 unchanged sentences

In November 2020, Health Canada approved the New Drug Submission for TAVALISSE for the treatment of thrombocytopenia in adult patients with chronic ITP who have had an insufficient response to other treatments.

Medison is anticipating a decision on a New Drug Application in the third quarter of 2021.

In August 2021, Medison Israel received the licenses for registrational approval from the Ministry of Health, which triggered the first milestone that is the regulatory approval of the product in Israel for the first indication, for a non-refundable payment of $75,000.

Clinical Stage Programs

3 unchanged sentences

Symptoms can include fatigue, shortness of breath, rapid heartbeat, jaundice or enlarged spleen.

While no medical treatments are currently approved for AIHA, physicians generally treat acute and chronic cases of the disorder with corticosteroids, other immuno-suppressants, or splenectomy.

While no medical treatments are currently approved for AIHA, physicians generally treat acute and chronic cases of the disorder with corticosteroids,

other immuno-suppressants, or splenectomy.

Research has shown that inhibiting SYK with fostamatinib may reduce the destruction of red blood cells.

1 unchanged sentence

Orally-available fostamatinib program .

We completed our Phase 2 clinical trial, also known as the SOAR study in patients with warm AIHA.

This trial was an open-label, multi-center, two-stage study that evaluated the efficacy and safety of fostamatinib in patients with warm AIHA who had previously received treatment for the disorder but have relapsed.

We completed our Phase 2 clinical trial, also known as the SOAR study in patients with wAIHA.

This trial was an open-label, multi-center, two-stage study that evaluated the efficacy and safety of fostamatinib in patients with wAIHA who had previously received treatment for the disorder but have relapsed.

The primary efficacy endpoint of this study was to achieve increased hemoglobin levels by week 12 of greater than 10 g/dL, and greater than or equal to 2 g/dL higher than baseline.

In November 2019, we announced updated data that in a Phase 2 open-label study of fostamatinib in patients with warm AIHA, data showed that 44% (11/25) of evaluable patients met the primary efficacy endpoint of a Hgb level >10 g/dL with an increase of ≥2 g/dL from baseline by week 24.

In November 2019, we announced updated data that in a Phase 2 open-label study of fostamatinib in patients with wAIHA, data showed that 44% (11/25) of evaluable patients met the primary efficacy endpoint of a Hgb level >10 g/dL with an increase of ≥2 g/dL from baseline by week 24.

Including one late responder at week 30, the overall response rate was 48% (12/25).

Adverse events were manageable and consistent with those previously reported with fostamatinib.

In March 2019, we initiated our warm AIHA pivotal Phase 3 clinical study of fostamatinib, known as FORWARD study.

The clinical trial protocol calls for a placebo-controlled study of approximately 90 patients with primary or secondary warm AIHA who have failed at least one prior treatment.

In March 2019, we initiated our wAIHA pivotal Phase 3 clinical study of fostamatinib, known as FORWARD study.

The clinical trial protocol calls for a placebo-controlled study of approximately 90 patients with primary or secondary wAIHA who have failed at least one prior treatment.

The primary endpoint will be a durable Hgb response, defined as Hgb > 10 g/dL and > 2 g/dL increase from baseline and durability measure, with the response not being attributed to rescue therapy.

In May 2019, we enrolled the first patient in the FORWARD study.

As of August 2, 2021, we have enrolled 80 patients of the 90 patients targeted for enrollment.

The FORWARD study has over 90 clinical trial sites established across 22 countries and a limited number of clinical trial sites have resumed screening patients after a temporary pause due to the ongoing COVID-19 pandemic.

Given the uncertainty of the COVID-19 pandemic, we are experiencing slower than expected enrollment and are unable to provide an update on anticipated enrollment completion.

To date, we completed the enrollment of this study.

Following the six-month treatment period after the last patient enrollment, we expect to report topline data from the 24-week study in mid-2022 and proceed with regulatory filings if the data is positive.

If approved, TAVALISSE has the potential to be the first to market therapy for patients with wAIHA.

In November 2020, we reached an agreement with the FDA on the durable response measure for the primary efficacy endpoint of the study as well as the inclusion of additional secondary endpoints.

In January 2021, we announced that the FDA had granted Fast Track designation to TAVALISSE for the treatment of warm AIHA.

The FDA previously granted TAVALISSE Orphan Drug designation for the treatment of warm AIHA in January 2018.

In January 2021, we announced that the FDA had granted Fast Track designation to TAVALISSE for the treatment of wAIHA.

The FDA previously granted TAVALISSE Orphan Drug designation for the treatment of wAIHA in January 2018.

Fostamatinib—in Hospitalized COVID-19 Patients

1 unchanged sentence

COVID-19 is the infectious disease caused by Severe Acute Respiratory Syndrome Coronavirus-2 (SARS-CoV-2).

SARS-CoV-2 primarily infects the upper and lower respiratory tract and can lead to ARDS.

SARS-CoV-2 primarily infects the upper and lower respiratory tract and can lead to acute respiratory distress syndrome (ARDS).

Additionally, some patients develop other organ dysfunction including myocardial injury, acute kidney injury, shock resulting in endothelial dysfunction and subsequently micro and macrovascular thrombosis.

3 unchanged sentences

Furthermore, SYK inhibition in neutrophils and platelets may lead to decreased thromboinflammation, alleviating organ dysfunction in critically ill patients with COVID-19.

Orally-available fostamatinib program.

Rigel-led Phase 3 Trial.

In November 2020, we launched a Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients without respiratory failure that have certain high-risk prognostic factors.

4 unchanged sentences

The primary endpoint of this study is the proportion of subjects who progress to severe/critical disease within 29 days.

In addition, our COVID-19 program includes an investigator-sponsored trial currently being conducted by Imperial College London.

We are currently enrolling patients under this study.

As of November 1, 2021, we enrolled approximately 210 of the targeted 300 patients.

NIH/NHLBI-sponsored Phase 2 Trial.

In September 2020, we announced a Phase 2 clinical trial sponsored by the NIH/NHLBI in order to evaluate the safety of fostamatinib for the treatment of hospitalized COVID-19 patients.

This multi-center, double-blind, placebo-controlled study randomly assigned fostamatinib or matched placebo (1:1) to approximately 60 evaluable patients.

Treatment will be administered orally twice daily for 14 days.

There will be a follow-up period to day 60.

The primary endpoint of this study is cumulative incidence of SAE through day 29.

The trial also includes multiple secondary endpoints designed to assess the early efficacy and clinically relevant endpoints of disease course.

This multi-center, double-blind, placebo-controlled study randomly assigned fostamatinib or matched placebo (1:1) to 59

evaluable patients.

Treatment was administered orally twice daily for 14 days, and a follow-up period to day 60.

The primary endpoint of this study was cumulative incidence of SAE through day 29.

The trial also included multiple secondary endpoints designed to assess the early efficacy and clinically relevant endpoints of disease course.

The study completed the enrollment in March 2021 and in April 2021, w e announced that this Phase 2 clinical trial met its primary endpoint of safety.

Fostamatinib reduced the incidence of SAEs by half.

By day 29, there were three SAEs in the fostamatinib plus SOC group of 30 patients compared to six SAEs in the placebo plus SOC group of 29 patients (p=0.23).

Of these, there was a reduction for the disease related SAE of hypoxia in the fostamatinib group compared to placebo (1 vs 3, respectively;

These data were submitted as part of a request for EUA from the FDA for fostamatinib in hospitalized patients with COVID-19.

These data have been submitted for publication in a peer-reviewed medical journal.

Key findings from the NIH/NHLBI Phase 2 clinical data readout include:

In September 2021, the data from the NIH/NHLBI-Sponsored Phase 2 trial was published in Clinical Infectious Diseases, an official publication of the Infectious Disease Society of America.

Key findings within the fostamatinib Phase 2 trial include:

● The study met the primary endpoint showing fostamatinib did not increase the incidence of serious adverse events (SAEs) compared with placebo.

● The overall incidence of SAEs by Day 29 was approximately 50% less in the fostamatinib group (10.5%) compared with the placebo group (22.0%) (p=0.2).

The most frequent SAE reported by Day 29 was hypoxia, occurring in 1 patient receiving fostamatinib and 3 patients receiving placebo.

● At Day 29, in the overall population there were zero deaths in the fostamatinib group of 30 patients compared to three deaths in the placebo group of 29 patients (p=0.07).

2 unchanged sentences

Both patients in the fostamatinib group improved within 7 days and came off the ventilator, while both patients in the placebo group deceased.

● Fostamatinib was superior to placebo in accelerating improvement in clinical status by day 15 (mean

change -3.6 compared to -2.6, p=0.035) and by day 29 (mean change -4.2 compared to -3.3, p=0.12) using ordinal scale assessments.

● The median number of days in the ICU was reduced by 4 days, from 7 days in the placebo group to 3 days in the fostamatinib group (p=0.07).

● The median number of days on oxygen was 8 in the fostamatinib group compared to 20 in the placebo group (p=0.2).

The difference was even greater in more severe patients with the fostamatinib group at 10 days compared to placebo at 28 days (p=0.027).

● At Day 15, 65.5% of patients were free of supplemental oxygen in the fostamatinib group compared to 39.9% in the placebo group (p=0.08).

In more severe patients, the difference was 57.9% compared to 20% (p=0.016).

● Fostamatinib was superior to placebo in accelerating improvement in clinical status by day 15 (mean change -3.6 compared to -2.6, p=0.035) and by day 29 (mean change -4.2 compared to -3.3, p=0.12) using ordinal scale assessments.

● The median time to recovery was 8 days in both groups.

The greatest benefits were observed in more severe patients where the median time to recovery was reduced from 13 days in the placebo group to 10 days in the fostamatinib group.

● Despite general SOC use of both steroids and remdesivir in all 59 patients, there was a greater reduction in NETosis and other inflammatory biomarkers (CRP, Ferritin, D-Dimer, Fibrinogen) at most timepoints in the fostamatinib group as compared to the placebo group.

Following the recently completed NIH/NHLBI-sponsored Phase 2 study as discussed above, in June 2021, we announced that fostamatinib has been selected for an NIH ACTIV-4 (Accelerating COVID-19 Therapeutic Inventions and Vaccines) trial in hospitalized patients with COVID-19.

The ACTIV-4 Host Tissue trial is a large, multi-site trial funded by NHLBI and coordinated by Vanderbilt University Medical Center.

The trial is evaluating treatments, including fostamatinib, that aim to protect and heal host tissues in hospitalized patients with COVID-19.

The ACTIV-4 Host Tissue study will evaluate fostamatinib in hospitalized patients with COVID-19.

As of August 2, 2021, we enrolled approximately 150 of the targeted 308 patients and expects to complete enrollment by end of 2021.

In May 2021, the NIH/NHLBI Phase 2 clinical data were submitted as part of a request for EUA from the FDA for fostamatinib as a treatment for hospitalized patients with COVID-19.

We continue to focus on enrolling patients in our Rigel-led Phase 3 clinical trial.

We anticipate providing further safety and efficacy data from this larger trial of fostamatinib in COVID-19 patients.

If this trial meets its endpoints, we plan to resubmit our EUA application with this additional data.

ACTIV-4 Host Tissue Phase 3 Trial.

Following the completed NIH/NHLBI-sponsored Phase 2 study as discussed above, in June 2021, we announced that fostamatinib has been selected for an NIH ACTIV-4 (Accelerating COVID-19 Therapeutic Inventions and Vaccines) trial in hospitalized patients with COVID-19.

The ACTIV-4 Host

study, initiated and funded by NHLBI, is a randomized, placebo-controlled trial of therapies, including fostamatinib, targeting the host response to COVID-19 in hospitalized patients.

The master protocol for this study is designed to be flexible in the number of study arms, the use of a single placebo group, and the stopping and adding of new therapies.

Each active arm will include approximately 300 patients.

Eligible participants will include patients hospitalized for COVID-19 with laboratory-confirmed SARS-CoV-2 infection on oxygen therapy.

The primary outcome is oxygen-free days through day 28.

Secondary outcomes include hospital mortality, use of mechanical ventilation, and severity of disease as measured by World Health Organization scale scores.

Imperial College of London Phase 2 Trial.

In July 2020, we announced a Phase 2 clinical trial sponsored by Imperial College London to evaluate the efficacy of fostamatinib for the treatment of COVID-19 pneumonia.

3 unchanged sentences

In November 2020, we announced that the Imperial College London-sponsored clinical trial began enrolling patients, and we are currently enrolling patients under this study.

Researchers at MIT and Harvard led a recent screen to identify FDA-approved compounds that reduce MUC1 protein abundance.

Other Publications.

Researchers at MIT and Harvard led a screen to identify FDA-approved compounds that reduce MUC1 protein abundance.

MUC1 is a biomarker used to predict the development of ALI and ARDS and correlates with poor clinical outcomes.

In June 2020, the results were presented.

Of the 3,713 compounds that were screened, fostamatinib was the only compound identified which both decreased expression of MUC1 and is FDA approved.

In June 2020, the results were presented, and of the 3,713 compounds that were screened, fostamatinib was the only compound identified which both decreased expression of MUC1 and is FDA approved.

Fostamatinib demonstrated preferential depletion of MUC1 from epithelial cells without affecting cell viability.

The research was focused on drug repurposing for the much lower risk of toxicity and the ability of FDA-approved treatments to be delivered on a shortened timescale, which is critical for patients afflicted with lung disease resulting from COVID-19.

In addition, recent in vitro studies led by the Amsterdam University Medical Center at the University of Amsterdam, showed that R406, the active metabolite of fostamatinib, blocked macrophage hyperinflammatory responses to a combination of immune complexes formed by anti-Spike IgG in serum from severe COVID-19 patients.

In addition, the in vitro studies led by the Amsterdam University Medical Center at the University of Amsterdam, showed that R406, the active metabolite of fostamatinib, blocked macrophage hyperinflammatory responses to a combination of immune complexes formed by anti-Spike IgG in serum from severe COVID-19 patients.

Anti-Spike IgG levels are known to correlate with the severity of COVID-19.

8 unchanged sentences

This investigational candidate was an orally administered, potent and selective inhibitor of IRAK1 and IRAK4 that blocks inflammatory cytokine production in response to toll-like receptor (TLR) and the interleukin-1 (IL-1R) family receptor signaling.

TLRs and IL-1Rs play a critical role in the innate immune response and dysregulation of these pathways can lead to a variety of inflammatory conditions including psoriasis, rheumatoid arthritis, inflammatory bowel disease and gout

(among others).

R835 prevents cytokine release in response to TLR and IL-1R activation in vitro.

3 unchanged sentences

In October 2019, we announced results from a Phase 1 clinical trial of R835 in healthy subjects to assess safety, tolerability, PK and pharmacodynamics.

The Phase 1 study was a randomized, placebo-controlled, double-blind trial in 91 healthy subjects, ages 18 to 55.

The Phase 1 study was a randomized, placebo-controlled, double-blind trial in

91 healthy subjects, ages 18 to 55.

The Phase 1 trial showed positive tolerability and PK data as well as established proof-of-mechanism by demonstrating the inhibition of inflammatory cytokine production in response to a lipopolysaccharide (LPS) challenge.

6 unchanged sentences

BGB324 – BerGenBio

In June 2011, Rigel entered into an exclusive, worldwide research, development and commercialization agreement with BerGenBio for our investigational AXL receptor tyrosine kinase (AXL) inhibitor, BGB324/R428 (now referred to as bemcentinib).

We have an exclusive, worldwide research, development and commercialization agreement with BerGenBio for our investigational AXL receptor tyrosine kinase (AXL) inhibitor, BGB324/R428 (now referred to as bemcentinib).

The product is being investigated in two Phase 2 clinical trials for the treatment of hospitalized patients with COVID-19.

1 unchanged sentence

DS-3032 - Daiichi

DS-3032 is an investigational oral selective inhibitor of the murine double minute 2 (MDM2) protein currently being investigated by Daiichi in three Phase 1 clinical trials for solid and hematological malignancies including AML, acute lymphocytic leukemia, chronic myeloid leukemia in blast phase, lymphoma and MDS.

DS-3032 is an investigational oral selective inhibitor of the murine double minute 2 (MDM2) protein investigated by Daiichi in three Phase 1 clinical trials for solid and hematological malignancies including AML, acute lymphocytic leukemia, chronic myeloid leukemia in blast phase, lymphoma and MDS.

Preliminary safety and efficacy data from a Phase 1 study of DS-3032 suggests that DS-3032 may be a promising treatment for hematological malignancies including relapsed/refractory AML and high-risk MDS.

1 unchanged sentence

In July 2021, Rain announced that it initiated the Phase 3 study that will evaluate the efficacy and safety of milademetan (RAIN-32), a MDM2 inhibitor, for the treatment of de-differentiated liposarcoma, a rare cancer originating from fat cells located in the soft tissues of the body.

Rain also plans to commence two additional Phase 2 trials for RAIN-32 in late 2021 or early 2022, an open-label MDM2-amplified tumor-agnostic basket trial and an open-label trial in patients with intimal sarcoma, a rare sarcoma also exhibiting MDM2-amplification.

AZ-D0449 – AZ

We have an agreement with AZ for exclusive, worldwide rights to develop and commercialize our proprietary JAK inhibitor.

The JAK inhibitor, R256 (AZ-D099) is being pursued in patients with chronic asthma.

In preclinical studies, this molecule was shown to be a potent inhibitor of IL-13 and IL-4 signaling.

Inhibiting the IL-13 and IL-14 pathways could reduce the severity of inflammation and improve lung function by mechanisms associated with several hallmarks of asthma such as bronchoconstriction, mucus overproduction and airway remodeling.

AZ is currently conducting a Phase 1 study in healthy volunteers and patients with mild asthma to investigate the safety, anti-inflammatory effect of inhaled AZ-D0449.

4 unchanged sentences

Commercialization and Sponsored Research and License Agreements

For a discussion of our Commercialization and Sponsored Research and License Agreements, see Note 8 to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

For a discussion of our Sponsored Research and License Agreements and Government Contract, see Note 8 to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Results of Operations

Three and Six Months Ended June 30, 2021 and 2020

Three and Nine months Ended September 30, 2021 and 2020

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

ASD Healthcare and Oncology Supply

1 unchanged sentence

Cardinal Healthcare

Product sales during the three and six months ended June 30, 2021 and 2020 were related to sales of TAVALISSE in the U.S.

Product sales during the three and nine months ended September 30, 2021 and 2020 were related to sales of TAVALISSE in the U.S.

TAVALISSE has been prescribed across all lines of therapy in steroid refractory patients in ITP.

It has been utilized by an increasingly broad base of prescribers and community physicians, with growing early line use and continued strong refill rates.

It has been utilized by an increasingly broad base of prescribers and community physicians, with growing early line use and strong refill rates.

We recognize product sales, net of discounts and allowances.

For the three and six months ended June 30, 2021, our net product sales of TAVALISSE increased by 14% and 6%, respectively, compared to the same periods in 2020.

The increase was primarily driven by increased quantities sold and price per bottle.

In the first quarter of 2021, we experienced lower than anticipated sales of TAVALISSE due to impacts of the COVID-19 pandemic as well as the typical first quarter reimbursement issues such as the resetting of co-pays and the Medicare donut hole, along with physician and patient access issues created by the COVID-19 pandemic.

Incrementally, our net product sales in the first quarter of 2021 were negatively impacted by the decrease in level of inventories remaining at our distribution channels.

Contract revenues from collaborations of $3.7 million in the three months ended June 30, 2021 was comprised of $3.3 million in revenue related to our license agreement with Lilly and $381,000 in revenue related to the research and development services with Grifols.

Contract revenues from collaborations of $69.4 million in the six months ended June 30, 2021 was comprised of $63.9 million revenue related to our license agreement with Lilly, $4.0 million revenue related to grant of non-exclusive license of a certain patent to an unrelated third-party company, $1.0 million revenue for the delivery of drug supply under our collaboration agreement with Grifols and $381,000 in revenue related to the research and development services with Grifols.

Contract revenues from collaborations of $1.0 million and $44.1 million in the three and six months ended June 30, 2020, respectively, pertained to the revenue from upfront fee we previously received from Grifols in the first quarter of 2019, as well as the milestone payment received from Grifols in the first quarter of 2020 upon EC approval of the MAA for fostamatinib in Europe.

Government contract revenue for the three and six months ended June 30, 2021 of $5.5 million and $8.5 million, respectively, were related to the income we recognized from the $16.5 million government award granted to us, pursuant to the agreement we entered in January 2021 with the U.S.

For the three and nine months ended September 30, 2021, our net product sales of TAVALISSE decreased by 2% and increased by 3%, respectively, compared to the same periods in 2020.

Our net product sales for the three months ended September 30, 2021 decreased compared to the same period in 2020 mainly due to lower quantities sold, negatively impacted by the decrease in level of inventories remaining at our distribution channels, as well as higher government program rebates.

For the nine months ended September 30, 2021, our net product sales increased compared to the same period in 2020 primarily driven by the increase in quantities sold particularly during the second quarter of 2021, as well as the increase in price per bottle of TAVALISSE.

Our net product sales during the nine months ended September 30, 2021, however, were negatively impacted by the decrease in level of inventories remaining at our distribution channels at the end of the third quarter of 2021, as well as higher government program rebates.

Contract revenues from collaborations of $4.5 million in the three months ended September 30, 2021 were comprised of $2.4 million in revenue related to our license agreement with Lilly, $1.8 million in revenue related to a milestone payment under our collaboration agreement with Daiichi, $225,000 in revenue related to the research and development services with Grifols and $75,000 milestone payment under our commercial and license agreement with Medison.

Contract revenues from collaborations of $73.9 million in the nine months ended September 30, 2021 were comprised of $66.4 million revenue related to our license agreement with Lilly, $4.0 million revenue related to grant of

non-exclusive license of a certain patent to an unrelated third-party company, $1.8 million in revenue related to the achievement of milestone under our collaboration agreement with Daiichi, $1.0 million revenue for the delivery of drug supply under our collaboration agreement with Grifols, $605,000 in revenue related to the research and development services with Grifols and $75,000 milestone payment under our commercial and license agreement with Medison.

Contract revenues from collaborations of $2.1 million in the three months ended September 30, 2020 was related to a milestone payment under our collaboration agreement with Daiichi.

Contract revenues from collaborations of $46.2 million in the nine months ended September 30, 2020 comprised of $44.1 million revenue recognized from Grifols related to the upfront fee previously in the first quarter of 2019 and the milestone payment received in the first quarter of 2020 upon EC approval of the MAA for fostamatinib in Europe, and the $2.1 million in revenue from the milestone payment under our collaboration agreement with Daiichi.

Government contract revenue for the three and nine months ended September 30, 2021 of $1.0 million and $9.5 million, respectively, were related to the income we recognized from the $16.5 million government award granted to us, pursuant to the agreement we entered in January 2021 with the U.S.

Department of Defense to support our ongoing Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients.

2 unchanged sentences

W e cannot currently fully forecast the extent of the impacts that the COVID-19 pandemic may have on our product sales.

As of June 30, 2021, we had deferred revenues of $5.8 million, which we will recognize as revenue upon satisfaction of our remaining performance obligations under our collaboration agreements with Lilly, Grifols and Kissei.

As of September 30, 2021, we had deferred revenues of $3.2 million, which we will recognize as revenue upon satisfaction of our remaining performance obligations under our respective collaboration agreements.

Cost of Product Sales

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

Cost of product sales

The cost of product sales during the three and six months ended June 30, 2021 and 2020 were related to our product, TAVALISSE.

The cost of product sales during the three and nine months ended September 30, 2021 and 2020 were related to our product, TAVALISSE.

Prior to the FDA approval, manufacturing and related costs were charged to research and development expense.

Therefore, these costs were not capitalized and as a result, are not fully reflected in the costs of product sales during the three months ended June 30, 2021 and 2020.

We will continue to have a lower cost of product sales that excludes the cost of the active pharmaceutical ingredient (API) that was produced prior to FDA approval until we sell TAVALISSE that includes newly manufactured API.

Therefore, these costs were not capitalized and as a result, are not fully reflected in the costs of product sales during the three months ended September 30, 2021 and 2020.

We expect we will continue to have a lower cost of product sales that excludes the cost of the active pharmaceutical ingredient (API) that was produced prior to FDA approval until we sell TAVALISSE that includes newly manufactured API.

We expect that this will be the case for the near-term and as a result, our cost of product sales will be less than we anticipate it will be in future periods.

As we produce TAVALISSE in the future, our inventory cost in the Balance Sheet and Cost of Product Sales will increase reflecting the full cost of manufacturing.

The decrease in cost of product sales during the three months ended June 30, 2021 compared to the same period in 2021 was primarily due to the delivery of drug supply to Grifols for its commercialization in the second quarter of 2020.

The cost of product sales remained flat for the six months ended June 30, 2021 compared to the same period in 2020.

During the first quarter of 2021, we delivered drug supply to Grifols, which offsets the decrease in cost of product sales in the second quarter of 2021 as discussed above.

The cost of product sales remained flat for the three and nine months ended September 30, 2021 compared to the same periods in 2020.

Research and Development Expense

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

2 unchanged sentences

Stock-based compensation expense included in research and development expense

The increase in research and development expense for the three months ended June 30, 2021, compared to the same period in 2020, was primarily due to the increases in research and development costs related to our ongoing Phase 3 clinical trial on hospitalized COVID-19 patients of $4.0 million, development of our IRAK 1/4 inhibitor program of $401,000, and various other studies of $192,000, partially offset by decrease due to the completion of clinical trial in our RIP1 inhibitor program of $2.0 million.

The increase in research and development expense for the six months ended June 30, 2021, compared to the same period in 2020, was primarily due to the increase in research and development costs related to our ongoing Phase 3 clinical trial on hospitalized COVID-19 patients of $7.5 million and development of our IRAK 1/4 inhibitor program of $1.0 million, partially offset by decrease due to the completion of clinical trial in our RIP1 inhibitor program of $5.0

million and various other research and development costs of $230,000.

We expect our research and development expense for the remainder of 2021 to increase as we continue our activities in our Phase 3 warm AIHA and COVID-19 studies.

We have resumed new patient enrollment in certain clinical trial sites for our FORWARD study for warm AIHA and we expect to continue to incur expenses in managing the study and expenses related to measures to implement remote and virtual approaches, including delays in new patient enrollment, remote patient monitoring and other alternative course of actions to maintain our study in warm AIHA.

We have also recently initiated our Phase 3 clinical trial in hospitalized COVID-19 patients and expect to continue to enroll patients in 2021.

The increase in research and development expense for the three months ended September 30, 2021, compared to the same period in 2020, was primarily due to the increases in research and development costs related to our ongoing Phase 3 clinical trial on hospitalized COVID-19 patients of $3.8 million and development of our IRAK 1/4 inhibitor program of $1.3 million.

These increases were partially offset by decrease due to the completion of clinical trial in our RIP1 inhibitor program of $1.2 million and decrease in research and development costs in our other clinical studies of $200,000.

The increase in research and development expense for the nine months ended September 30, 2021, compared to the same period in 2020, was primarily due to the increase in research and development costs related to our ongoing Phase 3 clinical trial on hospitalized COVID-19 patients of $10.2 million, development of our IRAK 1/4 inhibitor program of $2.3 million, and other research and development costs in our other clinical studies of $670,000.

These increases were partially offset by decrease due to the completion of clinical trial in our RIP1 inhibitor program of $6.2 million .

Our research and development expenditures include costs related to preclinical and clinical trials, scientific personnel, supplies, equipment, consultants, sponsored research, stock-based compensation, and allocated facility costs.

We expect our research and development expense for the remainder of 2021 to increase as we continue our activities in our Phase 3 wAIHA and COVID-19 studies.

To date, we completed the enrollment of wAIHA study.

We also continue to enroll patients in our Phase 3 clinical trial of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19.

The $16.5 million grant awarded by the Department of Defense in January 2021 will partially fund our Phase 3 clinical trial for hospitalized COVID-19 patients.

We cannot currently fully forecast the scope the evolving effects of COVID-19 pandemic may have on our ability to continue to treat patients enrolled in our trials, enroll and assess new patients, supply study drug, obtain complete data points in accordance with the study protocol, and overall impact on, and timing of, clinical study results.

We do not track fully burdened research and development costs separately for each of our drug candidates.

20 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

From January 1, 2007*

to June 30, 2021

to September 30, 2021

* We started tracking research and development expense by category on January 1, 2007.

“Other” expenses mainly represent allocated facilities costs of approximately $1.5 million for each of the three months ended June 30, 2021 and 2020, and allocated stock-based compensation expense of approximately $534,000 and $458,000 for the three months ended June 30, 2021 and 2020, respectively.

For each of the six months ended June 30, 2021 and 2020, allocated facilities costs were approximately $3.0 million, and allocated stock-based compensation expense was approximately $1.1 million and $1.2 million, for the six months ended June 30, 2021 and 2020, respectively.

For the three and six months ended June 30, 2021, a major portion of our total research and development expense was associated with our COVID-19, AIHA and IRAK programs, personnel-related costs of our research and development personnel and allocated facilities costs.

For the three and six months ended June 30, 2020, a major portion of our total research and development expense was associated with our AIHA, RIP1, and IRAK programs, personnel-related costs of our research and development personnel and allocated facilities costs.

“Other” expenses for the three months ended September 30, 2021 and 2020 consisted of allocated facilities costs of $1.5 million for both periods, and allocated stock-based compensation expense of $402,000 and $532,000, respectively.

For the nine months ended September 30, 2021 and 2020, “other” expenses include allocated facilities costs of $4.5 million for both periods, and allocated stock-based compensation expense of $1.5 million and $1.7 million, respectively.

For the three and nine months ended September 30, 2021, a major portion of our total research and development expense was associated with our COVID-19, AIHA and IRAK programs, personnel-related costs of our research and development personnel and allocated facilities costs.

For the three and nine months ended September 30, 2020, a major portion of our total research and development expense was associated with our AIHA, RIP1, and IRAK programs, personnel-related costs of our research and development personnel and allocated facilities costs.

Selling, General and Administrative Expense

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

2 unchanged sentences

Stock-based compensation expense included in selling, general and administrative expense

The increase in selling, general and administrative expense for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to the increases in costs of consultants and third-party services of $1.6 million, commercial activities of $672,000, travel -related expenses of $483,000, stock-based compensation of $473,000, and other various sales, general and administrative costs of $230,000.

The increase in selling, general and administrative expense for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to the increases in costs of consultants and third-party services of $3.0 million, personnel-related costs of $1.1 million, stock-based compensation of $1.2 million, professional fees of $617,000, commercial activities of $535,000 and other various sales, general and administrative costs of $697,000.

We expect our selling, general and administrative expense for the remainder of 2021 to increase as we continue to expand our commercial activities, and assuming we will be able to fully resume in-person office visits and live engagements with healthcare providers.

The increase in selling, general and administrative expense for the three months ended September 30, 2021 compared to the same period in 2020 was primarily due to the increases in costs of commercial activities of $2.5 million, consultants and third-party services of $1.5 million, personnel-related costs of $408,000, stock-based compensation expense of $448,000, and other various sales, general and administrative costs of $591,000.

The increase in selling, general and administrative expense for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to the increases in costs of consultants and third-party services of $4.6 million, costs of commercial activities of $3.1 million, personnel-related costs of $1.5 million, stock-based compensation expense of $1.6 million, professional fees of $465,000, and other various sales, general and administrative costs of $1.3 million.

We expect our selling, general and administrative expense for the remainder of 2021 to increase as we continue to expand our commercial activities, including the effect of the recent sales force expansion.

In response to the limitations on in-person office visits during the ongoing COVID-19 pandemic, we continue to deploy resources to enable our field-based employees to continue to engage virtually with healthcare providers.

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

2 unchanged sentences

Interest income results from our interest-bearing cash and investment balances.

The decreases in interest income for the three and six months ended June 30, 2021 as compared to the same periods in 2020 were primarily due to decrease in interest rates on our investments.

The decreases in interest income for the three and nine months ended September 30, 2021 as compared to the same periods in 2020 were primarily due to decrease in interest rates on our investments.

Interest Expense

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

Interest expense

Interest expense for the three and six months ended June 30, 2021 was comprised of interest on the financing liability from our collaboration partners Lily and Medison, and interest on outstanding balance on our term loan from Midcap.

Interest expense for the three and six months ended June 30, 2020 was related to the outstanding balance on our term loan from Midcap.

The increase in interest expense in the three and six months ended June 30, 2021 compared with the same periods in 2020 were mainly due to the interest expense associated with the financing liability from our collaboration partners, and partly due to the increase in the outstanding term loan credit balance.

Interest expense for the three and nine months ended September 30, 2021 was comprised of interest on the financing liability from our collaboration partners Lilly and Medison, and interest on outstanding balance on our term loan from Midcap.

Interest expense for the three and nine months ended September 30, 2020 was related to the outstanding balance on our term loan from Midcap.

The increase in interest expense in the three and nine months ended September 30, 2021 compared with the same periods in 2020 was mainly due to the interest expense associated with the financing liability from our collaboration partners amounting to $886,000 and $2.3 million, respectively.

Incrementally, interest expense increased due to the increase in the outstanding term loan credit balance.

The principal balance of loan prior to May 2020 was the initial $10.0 million under Tranche 1.

In May 2020, we accessed the Tranche 2 for an additional $10.0 million loan.

See Note 13 to our “Notes to Condensed Financial Statements” in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Provision for Income Taxes

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

Provision for (benefit from) income taxes

The benefit from and the provision for income taxes for the three and six months ended June 30, 2021 were determined using our effective tax rate on our year-to-date income (loss).

The benefit from and the provision for income taxes for the three and nine months ended September 30, 2021 were determined using our effective tax rate on our year-to-date income (loss).

We estimated a state tax liability over our pre-tax income (loss) for 2021, and is primarily due to revenue recognized for the Lilly Agreement.

We do not expect to owe federal income taxes due to the sufficient net operating loss carryforwards that were generated prior to the enactment of the Tax Cuts and Jobs Act, as well as significant research and development credit carryforwards.

We do not expect to owe federal income taxes due to the sufficient net operating loss (NOL) carryforwards that were generated prior to the enactment of the Tax Cuts and Jobs Act (Tax Act), as well as significant research and development credit carryforwards.

We continue to record a full valuation allowance on our deferred tax assets considering our cumulative losses in prior years and forecasted losses in the future.

For the three and six months ended June 30, 2020, we did not record provision for income taxes due to our pre-tax book loss.

For the three and nine months ended September 30, 2020, we did not record provision for income taxes due to our pre-tax book loss.

Critical Accounting Policies and the Use of Estimates

2 unchanged sentences

The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

On an ongoing basis, we evaluate our estimates, including any potential impact of the COVID-19 pandemic to the carrying values of our assets and liabilities, those related to revenue recognition on product sales and collaboration agreements, recoverability of our assets, including accounts receivables and inventories, stock-based compensation, the probability of achievement of corporate performance-based milestone for our performance-based stock option awards, impairment issues, the estimated useful life of assets, estimated accruals, particularly research and development accruals, estimates related our valuation of the operating lease right-of-use asset and lease liability, including the incremental borrowing rate used, and net present value of our liability

related to our share in the development costs under the Lilly agreement, including the applicable discount rate.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

We believe that there have been no significant changes in our critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC.

Recent Accounting Pronouncements

3 unchanged sentences

Liquidity and Capital Resources

As of June 30, 2021, we had approximately $153.4 million in cash, cash equivalents and short-term investments, as compared to approximately $57.3 million as of December 31, 2020.

The increase of approximately $96.1 million was primarily attributable to the upfront cash payment of $125.0 million from Lilly, partially offset by cash used in our operating activities.

As of June 30, 2021 and December 31, 2020, we maintained investment portfolios primarily in money market funds, U.S.

As of September 30, 2021, we had approximately $143.1 million in cash, cash equivalents and short-term investments, as compared to approximately $57.3 million as of December 31, 2020.

The increase of approximately $85.8 million was primarily attributable to the upfront cash payment of $125.0 million from Lilly, partially offset by cash used in our other operating activities.

As of September 30, 2021 and December 31, 2020, we maintained investment portfolios primarily in money market funds, U.S.

treasury bills, government-sponsored enterprise securities, and corporate bonds and commercial paper.

4 unchanged sentences

Following summarizes our cash flow activity for the periods presented:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

4 unchanged sentences

Net increase in cash and cash equivalents

Net cash provided in operating activities was $35.3 million for the six months ended June 30, 2021, compared to net cash used in operating activities of $17.1 million for the six months ended June 30, 2020.

Net cash provided by operating activities for the six months ended June 30, 2021 was primarily due to the cash received from Lily for the portion allocated as net transaction price of $67.1 million, proceeds from sales of TAVALISSE, cash received from the awards granted by the U.S.

Department of Defense of $4.5 million, cash received related to a non-exclusive license agreement with an unrelated third party of $4.0 million, and cash received from Grifols of $1.0 million for a delivery of drug supply for its commercialization.

Net cash provided by operating activities was $25.0 million for the nine months ended September 30, 2021, compared to net cash used in operating activities of $36.6 million for the nine months ended September 30, 2020.

Net cash provided by operating activities for the nine months ended September 30, 2021 was primarily due to the cash received from Lilly for the portion allocated as net transaction price of $67.1 million, proceeds from sales of TAVALISSE, cash received from the awards granted by the U.S.

Department of Defense of $9.5 million, cash received

related to a non-exclusive license agreement with an unrelated third party of $4.0 million, and cash received from Grifols of $1.0 million for a delivery of drug supply for its commercialization.

These increases were partially offset by payments of our research and development programs and other operating expenses.

Net cash used in operating activities for the six months ended June 30, 2020 was primarily related to cash payments for our research and development programs and other operating expenses, partially offset by the $20.0 million payment received from Grifols and proceeds from sale of TAVALISSE.

Net cash used in investing activities was $42.1 million for the six months ended June 30, 2021, compared to net cash provided by investing activities of $19.2 million for the six months ended June 30, 2020.

Net cash used in investing activities during the six months ended June 30, 2021 was due to net purchases of short-term investments of $41.6 million and capital expenditures of $478,000.

Net cash provided by investing activities during the six months ended June 30, 2020 was due to net maturities of short-term investments of $19.8 million, partially offset by capital expenditures of $563,000.

Net cash provided by financing activities was approximately $61.3 million for the six months ended June 30, 2021, compared to approximately $11.9 million for the six months ended June 30, 2020.

Net cash provided by financing activities for the six months ended June 30, 2021 was primarily due to the cash received from Lily for the portion allocated as financing component amounting to $57.9 million, and proceeds from exercise of stock options and participation in the Purchase Plan.

Net cash provided by financing activities for the six months ended June 30, 2020 was related to the net proceeds from funding of the second tranche from our term loan credit facility with MidCap of $10.0 million and exercise of stock options and participation in the Purchase Plan of $1.9 million.

Net cash used in operating activities for the nine months ended September 30, 2020 was primarily related to cash payments for our research and development programs and other operating expenses, partially offset by the $20.0 million payment received from Grifols and proceeds from sale of TAVALISSE.

Net cash used in investing activities was $86.5 million for the nine months ended September 30, 2021, compared to net cash provided by investing activities of $38.8 million for the nine months ended September 30, 2020.

Net cash used in investing activities during the nine months ended September 30, 2021 was due to net purchases of short-term investments of $85.9 million and capital expenditures of $648,000.

Net cash provided by investing activities during the nine months ended September 30, 2020 was due to net maturities of short-term investments of $39.5 million, partially offset by capital expenditures of $758,000.

Net cash provided by financing activities was approximately $61.6 million for the nine months ended September 30, 2021, compared to approximately $11.9 million for the nine months ended September 30, 2020.

Net cash provided by financing activities for the nine months ended September 30, 2021 was primarily due to the cash received from Lilly for the portion allocated as financing component amounting to $57.9 million, and proceeds from exercise of stock options and participation in our Employee Stock Purchase Plan (Purchase Plan) amounting to $3.7 million.

Net cash provided by financing activities for the nine months ended September 30, 2020 was related to the net proceeds from funding of Tranche 2 from our term loan credit facility with MidCap of $10.0 million and exercise of stock options and participation in the Purchase Plan of $1.9 million.

We believe that our existing capital resources will be sufficient to support our current and projected funding requirements, including the continued commercialization of TAVALISSE, through at least the next 12 months from the Form 10-Q filing date.

4 unchanged sentences

We have consumed substantial amounts of capital resources to date as we continue our research and development activities, including preclinical studies and clinical trials and our ongoing commercial launch of TAVALISSE.

In addition to the upfront cash payment we received from Lilly under the G lobal E xclusive License Agreement, we may also be eligible for potential development, regulatory, and commercial milestone payments totaling up to an additional $835.0 million, as well as tiered royalties on net sales of non-CNS and CNS disease products up to low-double digits that will vary depending upon our clinical development investment.

In addition to the upfront cash payment we received from Lilly under the Lilly Agreement, we may also be eligible for potential development, regulatory, and commercial milestone payments totaling up to an additional $835.0 million, as well as tiered royalties on net sales of non-CNS and CNS disease products up to low-double digits that will vary depending upon our clinical development investment.

Further, under our other sponsored research and license agreements with Griffols, Kissei, Medison, AZ, BerGenBio and Daiichi, we may be entitled to receive upfront cash payments, payments contingent upon specified events achieved by such partners.

Total future contingent payments to us under such agreements (excluding Lilly) could exceed $500.0 million if all potential product candidates achieved all of the payment triggering events under such agreements (based on a single product candidate under each agreement).

See further discussions of our Commercialization and Sponsored Research and License Agreements and Government Grants in Note 8 to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

See further discussions of our Sponsored Research and License Agreements and Government Contract in Note 8 to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In January 2021, we were awarded $16.5 million by the U.S.

3 unchanged sentences

Department of Defense that such events or milestones have been met.

During the three and six months ended June 30, 2021, we recognized income from the awards from the U.S.

During the three and nine months ended September 30, 2021, we recognized income from the awards from the U.S.

Department of Defense of $1.0 million and $9.5 million, respectively.

4 unchanged sentences

From the time of implementation of the Open Market Sale Agreement through expiration of the registration statement, no sales of shares occurred.

A new shelf registration statement will be filed concurrent with the filing of this Quarterly Report on Form 10-Q to register the sale of additional shares under the Open Market Sale Agreement.

As of June 30, 2021, we have principal term loan outstanding with MidCap amounting to $20.0 million, pursuant to the Credit and Security Agreement (Credit Agreement) we entered in September 2019.

A new automatic shelf registration statement was filed on August 3, 2021 to register the sale of up to a maximum aggregate offering price of $100.0 million of shares of our common stock that may be issued and sold from time to time under the Open Market Sale Agreement.

As of September 30, 2021, we have principal term loan outstanding with MidCap amounting to $20.0 million, pursuant to the Credit and Security Agreement (Credit Agreement) we entered in September 2019.

The Credit Agreement provides for $60.0 million term loan credit facility.

1 unchanged sentence

We have a sublease agreement originally entered in December 2014, and subsequently amended in February 2017 and July 2017, with an unrelated third party to occupy a portion of our research and office space which expire in January 2023.

As of June 30, 2021, we expect to receive approximately $7.4 million in future sublease income (excluding our subtenant’s share of facility’s operating expenses) through January 2023.

As of September 30, 2021, we expect to receive approximately $6.2 million in future sublease income (excluding our subtenant’s share of facility’s operating expenses) through January 2023.

Our operations will require significant additional funding for the foreseeable future.

21 unchanged sentences

● expenses associated with any unforeseen litigation, including any arbitration and securities class action lawsuits.

Insufficient funds may require us to delay, scale back or eliminate some or all of our commercial efforts and/or research or development programs, to lose rights under existing licenses or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose or may

adversely affect our ability to operate as a going concern.

Material Cash Requirements

4 unchanged sentences

The timing of payments for any amounts owed under the respective agreements will depend on various factors including, but not limited to, patient enrollment and other progress of the clinical trial and various activities related to commercial launch.

We will continue to enter into contracts in the normal course of business with various third parties who support our clinical trials, support our preclinical research studies, and provide other services related to our operating purposes as well as our commercial launch of TAVALISSE.

We expect we will continue to enter into contracts in the normal course of business with various third parties who support our clinical trials, support our preclinical research studies, and provide other services related to our operating purposes as well as our commercial launch of TAVALISSE.

We can terminate these agreements at any time, and if terminated, we would not be liable for the full amount of the respective agreements.

3 unchanged sentences

We have the right to opt- out of co-funding of development costs at two different specified times.

If we decide not to exercise our opt-out rights, we will be required to share in global development costs up to certain amounts at a specified cap, specified in the agreement.

As of June 30, 2021, we do not have other material contractual commitments with respect to the arrangements discussed above nor we had off-balance sheet arrangements, but we had the following contractual commitments related to our facilities lease and credit facility:

If we decide not to exercise our opt-out rights, we will be required to share in global development costs up to certain amounts at a specified cap, as set forth in the agreement.

As of September 30, 2021, we do not have other material contractual commitments with respect to the arrangements discussed above nor we had off-balance sheet arrangements, but we had the following contractual commitments related to our facilities lease and credit facility:

Payment Due By Period

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis