Everybody, welcome to day two of the Cantor Global Healthcare Conference. Very happy to introduce Dean Schorno, the CFO of Rigel Pharmaceuticals, to the stage. Dean
Great.
Take it away.
Great. Thank you, Kristen, and thanks again for having us to your conference this year. Thank you all for your interest in Rigel. I am excited to tell the story today. There is a lot of great news from the company. Before I get started, I will be making some forward-looking statements today, so I would encourage you to look at our Investor site at rigel.com and our SEC filings. You will also see our complete corporate deck. There is more information I will be moving through today that you can see there. Rigel's transformational growth strategy. We are really proud and excited about the progress we are making. As we look at these four strategic imperatives, they are all interrelated. We have our growing our commercial business.
Before the launch of VEPPANU, which I will describe in more detail today, three commercial products growing nicely, and really a foundation to the rest of the business I describe. We had and have continued aspirations in in-licensing and business development. The VEPPANU transaction I will describe is really a key piece of progress in that initiative. Advancing the development pipeline. We have some opportunities in the development pipeline to really have transformational growth out into the future, primarily in our IRAK1/4 program and R289 in lower-risk MDS, and I will describe that today. But incremental opportunities beyond that. Wrapped around all of this is maintaining financial discipline. The last eight quarters we have been profitable. Those profits have allowed us to generate cash, and therefore our financial footing is extremely sound to fund the development opportunities and the business I described today.
Since our Q2 conference call, the big news is that VEPPANU is now available in the U.S.. We closed the transaction in mid-June. On August 13th, we announced that VEPPANU was available. Later that week, patients started to receive drugs. Very proud of the pace at which we brought VEPPANU to the market, 60 days from the close of the transaction. It is really a tribute to the efforts of our team, our ability and our experience in launching new drugs, now this is our fourth drug, as well as just our infrastructure, our ability to leverage our commercial organization, our MSL organization, our market access teams, to efficiently and effectively launch products. I will be talking about this more today.
At the beginning of the year, we shared this slide, and it is really a progression of Rigel going back to 2020, where we were a single-product company with a limited pipeline. In 2025, as we exit 2025, we had three commercial products. We had our IRAK1/4, R289 program in lower-risk MDS. We had become profitable. We had had a strong cash position. Our aspiration was to grow that commercial portfolio, we now have four products, VEPPANU, and then to have transformational pipeline development opportunities, and that is our R289 program. We are progressing nicely towards this 2030. Again, I will talk through two of the key components, the VEPPANU and IRAK1/4 program. Briefly on the commercial business Q2, we grew our net revenues 14% year-over-year, $8.1 million. You are seeing nice continued growth across our commercial portfolio.
Globally, we have got a great set of collaboration partners, a great global footprint. We had $11.7 million of collaboration revenues in Q2. That is driven off of sales of TAVALISSE globally with Grifols in Europe, with Kissei in Japan, as well as Medison in Canada and Israel. Knight is our partner in Latin America, and they are making great progress there. From a REZLIDHIA perspective, we have collaborations with Kissei, as well as Dr. Reddy's to make REZLIDHIA available internationally also. In licensing business development, the second strategic imperative, this really is where VEPPANU fits in, and we will move into that grow our commercial business. VEPPANU, vepdegestrant is indicated in adults with ER-positive, HER2-negative, estrogen receptor 1 mutated advanced or metastatic disease following a line of endocrine therapy. A large market opportunity I will describe. In a market where physicians are actively embracing new therapeutics to treat these patients.
We have said really since we have closed the deal in June that this can be a transformational asset for the business. Notably, this is the first and only FDA-approved PROTAC, and I will describe the PROTAC mechanism of action, which is differentiated from oral SERDs and other therapeutics, which is a key differentiator in our access to this market. I will describe the novel mechanism. From a launch perspective, our commercial organizations as well as our MSLs, market access, and all of our teams are ready for the launch, which is extremely important, and we have described that this can be our largest product, larger than TAVALISSE. An exciting opportunity for the company. The mechanism of action, as I said, is critical to the differentiation of the product. VEPPANU is a PROTAC, a proteolysis targeting chimera.
It's a heterobifunctional protein degrader, and this, kind of moving from left to right on this slide, the bifunctional design is such that the right side of the molecule first binds to the estrogen receptor that then recruits the E3 ligase complex, tags it with ubiquitin proteins that are recognized by the proteasome and then degraded. What's unique about VEPPANU is that the molecule is then released after degradation and then can attract other estrogen receptors and continue this catalytic process, which is differentiated from other mechanisms that a single molecule will degrade an estrogen receptor and then lose its function at that point in time. This is an important distinction that we'll be certainly educating the community on. From a market potential perspective, there's about 170,000 mostly women who have metastatic breast cancer. About 70% of those women are ER-positive, HER2- negative.
The typical therapy for these patients are endocrine therapy with a CDK 4/6 inhibitor. Many of them, we estimate 40% will develop an ESR1 mutation, so that's 47,000 patients. Then about 60% of them, we estimate, will be identified and treated, of which that subset, the second- and third- line is about 20,000 patients. So large market opportunity for us. We describe this as a billion-dollar-plus market opportunity. We think it could be well in excess of a billion dollars. So really an important opportunity for patients with the disease, but also for Rigel. As we look at the market dynamic, you see here on the left, you see the second- and third- line treatment, which is where we're indicated. The oral SERDs have been rapidly adopted, the blue lines here. So physicians are excited about and welcoming new therapeutics for this group of metastatic breast cancer patients.
You'll see on the left that the oral SERDs, it's the majority of treatment at this point. You'll see it's about 30% in the third- line. Then you'll see continued use of chemotherapy in both the second- and third- line. There's certainly opportunities to introduce a new mechanism of action, a new treatment paradigm into this. The other important thing to note here is that 80% of the patients are seen in the community setting, and the community setting is a bit slower in the adoption at this point in time. That's where our sales force, we have 40 sales representatives currently in our business who are calling on those community doctors. We have about 10 field sales representatives calling on the academic centers. This group is well-trained and ready to go to advance VEPPANU into these markets.
We believe that VEPPANU and what really excited us about VEPPANU when we in-licensed it is this can be a leading treatment in this segment of metastatic breast cancer. From an efficacy perspective, the VERITAC-2 phase III trial had the following response as VEPPANU was compared to fulvestrant. Improved progression-free survival, a 2.4-fold increase or 2.9 months, a very meaningful increase. We also saw, compared to fulvestrant, increases in ORR as well as clinical benefit rate. From a tolerability perspective, so we've talked about the mechanism of action being differentiated. Another key differentiation is the tolerability. When we announced the transaction, Dr. Erika Hamilton, who's the principal investigator on the VERITAC-2 trial, made some comments about the low gastrointestinal toxicity with respect to VEPPANU, as well as the low discontinuation rates and low dose reduction rates, the 2% and 3% rates with VEPPANU.
So that was all seen in the VERITAC-2 trial, important in the treatment paradigm, and again, we think a differentiating feature for VEPPANU. From a real-world applicability perspective, 100% of our patients in the VERITAC-2 trial were treated with both endocrine therapy as well as a CDK4/6 inhibitor. That's an important feature. Based on the totality of the evidence, the NCCN decided to include VEPPANU in their guidelines. From a readiness perspective, again, we closed in June. Over the next 60 days in advance of product availability, as well as through today, our teams have been ready and fully deployed. This now is our main focus of our commercial and medical affairs efforts.
We started with our collaboration partners and made sure that all of our partners were aligned throughout the process, really starting with Arvinas and Pfizer, who've been great partners in the process, all the way through to our distribution channel. We've leveraged our knowledge, our people to create the most successful launch possible. We then started coordinating again on day one with our key customers. We started to meet with KOLs and key customers as well as the payer community and across the spectrum. When products became available, people and processes were ready for VEPPANU. Then we leveraged our capabilities broadly, our incremental capabilities. So we had the veppanu.com ready. We had our sales force trained and ready to go. We also had our patient services, our variety of patient services and support networks ready to support patients as well as physicians.
The launch is on track. We're now several weeks into the launch. Each and every interaction we're having with patients, physicians, the payer community, we're analyzing, we're optimizing. From a resource perspective, our teams were ready. As soon as the transaction closed, we had the collateral materials and resources and capabilities to describe the now approved status of the product. We then moved into the phase where we were ready when the product was available to have those assets ready and those communications ready. We're now in that process. We're developing the true final branded campaign and processes to meet the different customers and constituents in a variety of manners through meeting materials as well as through our collateral materials. Moving on to the third element of strategic imperatives, developing the pipeline. There's now three opportunities here. I'll spend some time on R289.
That really is the large transformational opportunity that we're most focused on, and we'll see some data later this year. We're advancing R289 in lower- risk MDS. We expect to, by the end of the year, share the updated data of the dose expansion phase, which is a really important milestone for the business. Again, I'll describe that in more detail. Beyond that, we'll also, for R289, look at other potential indications, and we'll share that in the future. From a vepdegestrant perspective, from a VEPPANU perspective, there's ongoing studies that Pfizer and Arvinas had initiated, a variety of combination therapy studies listed here with abemaciclib, ribociclib, and others. That data we'll see in the future and will get reported out in the future. That will share some safety and efficacy in these combination therapies, which is of interest to us.
We'll share it in interest to the physician community. Once we see that, as we move it through our launch phase, we'll determine any next steps with respect to Rigel-led studies there or ISTs or otherwise. Then finally, with respect to olutasidenib, REZLIDHIA, there's a variety of strategic collaborations. We have a great collaboration with MD Anderson, where there's multiple studies that are studying mIDH1 disease in both monotherapy and combination therapy across a variety of disease states. That's a continued and exciting collaboration. We're doing work with the CONNECT Consortium in glioma as well as looking to initiate a study with MyeloMATCH in AML and MDS. Our portfolio of development opportunities is rich and recently expanded as a result of the vepdegestrant addition. Let me spend a little bit of time here on the lower- risk MDS update.
Again, this is information that in the back half of the year is really important to the business, and we're looking forward to this. From a value proposition in lower- risk MDS, this is a history of where we've been here. We know that there's a significant unmet medical need, 12,200 patients with lower- risk MDS. On the next slide, I'll describe the landscape. This is an area where there's still a need for improved therapeutics, and we think we have an opportunity here. From a mechanism of action perspective, IRAK1/4 is a unique mechanism of action really targeting the dysregulated inflammatory signaling process, and we've done work that shows that IRAK1/4 inhibition can be meaningful here.
In fact, as proof of concept, a study we did, we did an LPS challenge, we created a cytokine insult, and we showed that across a variety of cytokines, there was a marked suppression of those cytokines. That evidence is important to us. We have Fast Track designation, Orphan Drug designation, and an encouraging clinical profile. I'll describe in the dose escalation phase the data that we reported at ASH last year. Again, we'll have incremental data at the end of this year. The low-risk MDS landscape. MDS is a clonal disorder of hematopoietic stem cells. The therapeutic target here is you're trying to bring patients from transfusion dependence to transfusion independence. The current treatment paradigm is in first- line, ESAs are predominantly used, luspatercept's also indicated and used, and then lenalidomide in del(5q) deletion patients.
As you move past the post-ESA or ESA-ineligible, there's luspatercept and imetelstat. These are big markets, so $2 billion + market opportunities. Luspatercept and imetelstat work in 38%-40% of cases. There's still 60% of patients who are not responding to these therapies. You then move on to the hypomethylating agents that work in about 18%-20% of the patients. As I described in the study work we're doing, we think there's opportunities throughout this whole treatment paradigm for R289 to impact these patients. The work that we've done in R289 is we've done a dose escalation phase that you see on the left, and that data was largely reported at ASH last year. We then initiated a dose expansion phase where we're looking at 500 mg once a day and twice a day up to 20 patients.
So where we had six patients in each of those cohorts in the dose expansion phase, as you add up to 20 patients, 20 plus patients in each of those cohorts, that is a meaningful number that we will see later this year. The blue box below is important in that once we select the dose, we plan to initiate an exploratory cohort that is post-ESA or treatment-naive patients. So it is essentially in front of luspatercept. We are looking forward to initiating that study also. A brief review of the data that we saw at ASH from that dose escalation phase. R289 is generally well tolerated. Notably, it had a low incidence of Grade 3/4 cytopenias and infections. That is a key measure for physicians in our view. As we looked across the response rates in the 500 mg QD once a day and above, we had 18 patients in that cohort.
Six of them responded, so we had a 33% response rate. You will recall that HMAs work 18%-20% of the time. I would note that in these patients that we looked at, on average, they had three prior therapies. Many of them had had, the majority of them had had luspatercept, HMA, and they were far along in their treatment journey. These are really great results, and we are looking forward to seeing the incremental results that we see with that dose expansion phase that I described. What are the next steps? We will complete the enrollment dose expansion phase. We will select the recommended dose, again, in the back half of the year, and we will share the data by the end of the year and open up the exploratory cohort. Once we have done that, we will also initiate conversations with the FDA regarding a registrational trial.
We think there are other disease states that are appropriate for R289, and we are exploring those, and we will provide updates along the way on that. From a financial discipline perspective, continued strong sales growth. I have described the $67 million of Q2 net revenues, the $11.7 million of contract revenues. This revenue base on top of our cost structure has been really foundational to allowing us to invest in these development opportunities. We were able to pay for the upfront for the VEPPANU transaction with our cash, and so we are in a solid financial position as a result of this continued revenue growth. VEPPANU obviously will add significantly to this opportunity. On the left side, you see the three months ended, the Q2 quarter results. We had $24 million of pre-tax profits, $17 million of after-tax profits.
This, I call it the base business, the business before VEPPANU, strong revenue growth, great financial discipline from an operating expense perspective, and generating profit as well as generating cash. We ended the quarter with $95 million of cash. From an outlook perspective, we raised our guidance at the end of Q2 to $285 million-$295 million. We maintained the net product sales of $255 million-$265 million. Again, that is exclusive of VEPPANU, where we believe VEPPANU will be a key growth driver. Then we increased our contract revenues up to $30 million. A brief overview of the VEPPANU transaction economics. $70 million of upfront. We paid that in Q2, so that cash balance I just described is after payment of that upfront. We have $15 million more of near-term milestone payments that we will pay over the next several quarters based on certain transition activities.
We then have potential milestones, $320 million, regulatory of $60 million, as well as commercial milestones of $260 million. Then we have mid-teens to mid-20 royalty rates. We think that this whole suite at this cost structure is a very solid cost structure for Rigel as it relates to the potential revenue opportunity here. Then I described four combination studies. On top of that, the VERITAC-2 trial continues as we look to get the OS data, and there's hepatic studies. That whole suite of studies, Rigel will pay up to $40 million over four years to complete those studies. Beyond that, Rigel will fund those studies. Really strong economics. We've seen in our REZLIDHIA transaction, our GAVRETO transaction, those were rapidly accretive. We expect very strong economics from this transaction also.
Then to just wrap things up from a 2026 progress and priorities, we've talked about growing the commercial business. The pre-VEPPANU business growing nicely, 14% year-over-year in Q2. VEPPANU is going to certainly add to that revenue expansion. In licensed business development, we completed the VEPPANU transaction. We still have aspirations to continue to identify potential assets like we did with REZLIDHIA, GAVRETO, and now VEPPANU. We're in a unique position as a business that we can take these market opportunities. We can identify them, we can close the transaction, and then with our partners, we can convince them that our sales teams, our market access, our ability to move these products forward successfully is a real strength of Rigel. That'll continue to be an aspiration for us. From a development pipeline perspective, real important data, the end of this year.
Stay tuned for that, as well as other potential add-ons to R289 opportunities. Then we'll continue to maintain the financial discipline while making sure that we recognize that VEPPANU opportunity is a large one and we will invest adequately to make sure we capture that opportunity in the fullest way possible. Appreciate the interest in Rigel, the time. We're always available as you have questions, and thanks again, Kristen and the Cantor team for having us.