Biotehc firm Rigel’s (RIGL) rheumatoid arthritis drug candidate R788 did not meet its primary endpoint in Phase IIb clinical trial, probably putting in question the company’s goal of securing a R788 partner by the first half of 2010.

In a odd twist, the main reason R788 failed the efficacy portion of the 219-patient study is because of unexplained improvement seen in the placebo group. Patients taking the placebo started showing RA symptom improvement in week six, and again after the third month of the trial.

The placebo group consistently beat out the group receiving the drug. Improvement in RA symptoms was recorded using a scale developed by the American College of Rheumatology. In three subgroups – patients seeing score improvement of at least 20 percent, 50 percent, and at least 70 percent — the placebo beat R788.

When looked at a different way in the Phase IIb trial, R788 did significantly better than the placebo group when blood tests were used to test inflammation reduction among patients.

What is confounding is that R788 did well vs. placebo in other trials. In a separate Phase II study, it showed consistent efficacy, and also managed to set aside worries about potential blood pressure side effects.

Why the big improvement among placebo-takers, other than R788 simply doesn’t work? It may never be known. Possible explanations could be a poor trial setup, problems with the scale, or poor monitoring of patients, all of which were previously on other RA drugs.

The way the drug failed the trial likely means that more trials are forthcoming. It almost certainly won’t be the last study of R788.

For one, R788 is being tested as a treatment for other conditions, including lupus and B-cell lymphoma.

But the big market for the drug clearly is RA, which affects more than 2 million Americans. In all its forms, arthritis is the leading cause of disability in the U.S, and one that affects more than half of seniors.

It would seem likely that a Phase III trial for R788 in RA will still be lined up.

What appears to have happened is Rigel executives collectively stuck out their necks in a risky trial that tried to show statistically significant efficacy in patients that did not respond to other RA drugs.

In a very strange way, the plan backfired. But that does not appear to rule out R788 as a potential RA treatment.

Mike Tarsala

Rigel Pharmaceutical Inc. (Nasdaq: RIGL) shares are down sharply after its rheumatoid arthritis candidate missed its efficacy endpoint in a trial.

Microsoft Corp. (Nasdaq: MSFT) are the most active in the premarket, after it reported  lower-than-expected revenue that fell 17.3% from the same period last year.

SunPower Corp. (Nasdaq: SPWR) shares are among the biggest premarket gainers after the company posted a 10-cent a shre earnings beat, and gave upside guidance.

Align Technology Inc. (Nasdaq: ALGN) shares also are on the rise, after an earnings beat.

Amazon.com Inc. (Nasdaq: AMZN) shares are down nearly 6 percent as one of the most active decliners, after it reported in-line EPS.

Juniper Networks Inc. (Nasdaq: JNPR) shares are down on strong premarket volume despite better-than-expected earnings results, as gross margins were disappointing.

LM Ericsson Telephone Co. (Nasdaq: ERIC) shares are down 7 percent after it reported earnings this morning.

Sepracor Inc. (Nasdaq: SEPR) shares are up on strong volume following its earnings and raised fiscal 2009 guidance.

-The 24/7 Wall St. Team

Rigel Pharmaceuticals Inc.’s (NASDAQ: RIGL) Phase IIb trial results Thursday morning of its rheumatoid arthritis candidate R788, is boosting its stock on speculation it may help the company attract a clinical partner.

Biogen Idec Inc. (NASDAQ: BIIB) is enjoying a second day of gains after its new PEGylated interferon beta-1a (BIIB017) for relapsing multiple sclerosis (RMS) received an FDA Fast Track designation.  This might be a game-changing event for the company with some risks as well.

Array BioPharma Inc. (Nasdaq: ARRY) now says it will discontinue development of ARRY-797 in chronic inflammatory diseases. Attention may now turn to Array’s ARRY-162, another anti-inflammatory that showed much more promising efficacy.

Also, see our in-depth feature this week on five fast-growing biotechs with improving analyst estimates: Alnylam Pharmaceuticals Inc. (Nasdaq: ALNY), Amicus Therapeutics Inc. (Nasdaq: FOLD), Halozyme Therapeutics Inc. (Nasdaq: HALO), American Oriental Bioengineering Inc. (NYSE: AOB), and Stemcells Inc. (Nasdaq: STEM).

-The 24/7 Wall St. Team

• Alcoa Inc. (NYSE: AA) shares are ones to watch for a volume spike higher after the company beat Q2 expectations by 12 cents a share and saw signs of auto market stability. Also watch rival Century Aluminum (Nasdaq: CENX) for possible upside.
• NetApp Inc. (Nasdaq: NTAP) shares are pointing higher as the company saved some dough, and actually made a little, by losing its bid for data storage company Data Domain Inc. (Nasdaq: DDUP) to EMC Corp. (NYSE: EMC).
• Rigel Pharmaceuticals Inc. (Nasdaq: RIGL) shares are up very strongly on clinical trial data that raised expectations for a partnership.
• Novavax Inc. (Nasdaq: NVAX) shares are up more than 10 percent with nearly 100,000 shares traded in the pre-market after the company announced a joint venture in India with Cadila Pharmaceuticals, called CPL Biologicals.
• Human Genome Sciences Inc. (Nasdaq: HGSI) shares are rising on strong volume on a New England Journal of Medicine publication regarding its Raxibacumab as a treatment for anthrax.
• California Pizza Kitchen Inc. (Nasdaq: CPKI) shares will be ones to watch for a potential volume spike higher after the company guided Q2 profit higher.
• ScanSource Inc. (Nasdaq: SCSC) shares could be active in early Thursday trading after the company guided higher for its fiscal Q4, ended in June.

-The 24/7 Wall St. Team

• Exponent (EXPO) Started as Buy at SunTrust.
• eHealth (EHTH) Started as Buy at Merriman Curhan Ford.
• Incyte (INCY) Started as Buy at Citigroup.
• Rigel (RIGL) Started as Buy at Citigroup.
• Wimm-Bill-Dann Foods (WBD) Raised to Buy at UBS.
• AMR (AMR) Cut to Sell at Citigroup.
• Amylin Pharma (AMLN) Cut to Neutral at Baird.
• BankUnited (BKUNA) Cut To Sell at Stifel Nicolaus.
• National Grid (NGG) Cut to Equal Weight at Lehman.

Jon C. Ogg
August 27, 2008

• Applied Materials (AMAT) reports earnings after close; estimates are $0.29 EPS & R$2.38B.
• BEA Systems (BEAS) said it expects to submit SEC filings tomorrow to regain compliance.
• Canadian Solar (CSIQ) trading up over 25% after beating earnings and raising guidance.
• CDC Corp. (CHINA) announced that its CDC Software expects record revenues this quarter.
• E*Trade (ETFC) trading up another 3% pre-market.
• GigaMedia (GIGM) $0.17 EPS vs $0.14 est.
• HSBC Holdings plc (HBC) taking a $3.4 Billion charge on bad loans in U.S.
• Meridian BioScience (VIVO) $0.16 EPS vs $0.15 est.
• MetroPCS (PCS) $0.15 EPS vs $0.13 est.
• Northstar Neuroscience (NSTR) now expects to unblind EVEREST data and announce primary endpoint results in Jan-2008 and submit PMA early in Q2-2008; for stroke motor recovery and its planned PMA submission; after FDA communications.
• Pepsico (PEP) reaffirmed guidance of $3.39 EPS for 2007 and cash flows of $7 Billion.
• Qualcomm (QCOM) hosts its analyst day, Dutch court dismissed one of Nokia’s patent claims against Qualcomm; announced acquisition of Firethorn for mobile banking.
• Rigel Pharms (RIGL) said that Merck-Serono exercised an option to R763/AS703569 and Aurora Kinase inhibitors in Japan.
• Rockwell Collins (COL) increased its buyback plan by $300 million.
• Taser (TASR) reported 3 large orders that will ship this quarter.

Jon C. Ogg
November 14, 2007

Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.