Use these links to rapidly review the documentTABLE OF CONTENTS Item 8. Financial Statements and Supplementary Data

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549



FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




Commission file number 0-29889

RIGEL PHARMACEUTICALS, INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

94-3248524(IRS Employer
Identification No.)1180 Veterans Blvd.
South San Francisco, California(Address of principal executive offices)

94080(Zip Code)


(650) 624-1100(Registrant's telephone number, including area code)

Securities
registered pursuant to Section 12(b) of the Act:

Title of each class:

Name of each exchange on which registered:Common Stock, par value $.001 per share

The Nasdaq Global Market


Securities
registered pursuant to Section 12(g) of the Act:None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o    No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. o

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act).

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a
smaller reporting company)

Smaller reporting company o


Indicate
by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o    No ý

The approximate aggregate market value of the Common Stock held by non-affiliates of the registrant, based upon the closing price of the registrant's
Common Stock as reported on the Nasdaq Global Market on June 30, 2010, the last business day of the registrant's most recently completed second fiscal quarter, was $372,591,482. Shares of the
registrant's outstanding Common Stock held by each executive officer, director and affiliates of the registrant's outstanding Common Stock have been excluded. The determination of affiliate status for
the purposes of this calculation is not necessarily a conclusive determination for other purposes.

As
of February 23, 2011, there were 52,273,484 shares of the registrant's Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Items 10, 11, 12, 13 and 14 of Part III incorporate information by reference from the definitive proxy statement for the registrant's 2011 Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual
Report on Form 10-K.



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TABLE OF CONTENTS



PagePART IItem 1.

Business


1Item 1A.

Risk Factors


14Item 1B.

Unresolved Staff Comments


28Item 2.

Properties


29Item 3.

Legal Proceedings


29Item 4.

Reserved


29PART IIItem 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


30Item 6.

Selected Financial Data


32Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations


33Item 7A.

Quantitative and Qualitative Disclosures about Market Risk


44Item 8.

Financial Statements and Supplementary Data


46Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure


74Item 9A.

Controls and Procedures


74Item 9B.

Other Information


76PART IIIItem 10.

Directors, Executive Officers and Corporate Governance


76Item 11.

Executive Compensation


76Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


76Item 13.

Certain Relationships and Related Transactions, and Director Independence


76Item 14.

Principal Accounting Fees and Services


77PART IVItem 15.

Exhibits, Financial Statement Schedules


77Signatures


81


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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains statements indicating expectations about future performance and other
forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), that involve risks and uncertainties. We usually use words
such as "may," "will," "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 Annual Report on Form 10-K and are statements regarding our current intent, belief or expectation, primarily with
respect to our operations and related industry developments. Examples of these statements include, but are not limited to, statements regarding the following: our business and scientific strategies;
the progress of our product development programs, including clinical testing, and the timing of results thereof; our corporate collaborations, and revenues that may be received from collaborations;
our drug discovery technologies; our research and development expenses; protection of our intellectual property; sufficiency of our cash resources; and our operations and legal risks. You should not
place undue reliance on these forward-looking statements. 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 Part I, Item 1A of this Annual Report on Form 10-K. A 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. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward- looking statements.

PART I

Item 1.    Business

Overview

Rigel Pharmaceuticals, Inc. was incorporated in Delaware in June 1996, and is based in South San Francisco, California. We are a
clinical-stage drug development company that discovers and develops novel, small-molecule drugs for the treatment of inflammatory and autoimmune diseases, as well as for muscle disorders. Our
pioneering research focuses on intracellular signaling pathways and related targets that are critical to disease mechanisms. Our productivity has resulted in strategic collaborations with large
pharmaceutical partners to develop and market our product candidates. Current product development programs include fostamatinib (previously referred to as R788), an oral syk inhibitor that has started
its phase 3 clinical trial program for rheumatoid arthritis (RA) (partnered with AstraZeneca AB (AZ)), and R343, an inhaled syk inhibitor that is in clinical trials for asthma (partnered with
Pfizer, Inc. (Pfizer)).

During
2010, we:



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Strategy

Our research team is focused on creating a portfolio of product candidates that may be developed as small molecule therapeutics for our
own proprietary programs and/or for development by potential collaborative partners. We recognize that the product development process is subject to both high costs and a high risk of failure. We
believe that identifying a variety of product candidates and working in conjunction with other pharmaceutical partners may minimize the risk of failure, fill the product pipeline gap at major
pharmaceutical companies and ultimately, increase the likelihood of advancing clinical development and potential commercialization of the product candidates.

The
key elements to our scientific and business strategy are to:



Product Development Programs

Our product development portfolio features multiple novel, small-molecule drugs for the treatment of inflammatory and autoimmune
diseases, as well as for muscle disorders.

Partnered Clinical Programs



Disease background.RA is a systemic autoimmune inflammatory disease that causes damage to the joints and other organs, affecting
approximately 1 in
100 people in the U.S. It is a major cause of disability and is also associated with reduced life expectancy, especially if it is not adequately treated. Despite current treatment options, many
patients still experience significant disease activity, including continued joint destruction leading to pain and disability, so new treatment options are needed.

The
current treatment options for RA have significant potential side effects and other shortfalls, including gastrointestinal complications and kidney damage. RA patients may receive
multiple drugs depending on the extent and aggressiveness of their disease. Most RA patients eventually require some form of disease modifying anti-rheumatic drugs (DMARDs). This category
of drugs includes methotrexate and a variety of intravenously-delivered immunomodulatory agents (anti-tumor necrosis factor (TNF) inhibitors and co-stimulation inhibitors).

Orally-available syk inhibitor program.Fostamatinib is an orally bio-available syk inhibitor. It has a novel mechanism of action for
the
treatment of RA in which it reversibly blocks signaling in multiple cell types involved in inflammation and tissue degradation (e.g., macrophages, osteoclasts, mast cells and B cells). RA is an
autoimmune disease characterized by chronic inflammation that affects multiple tissues, but typically produces its most pronounced symptoms in the joints.

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In July 2009, we announced that fostamatinib produced significant clinical improvement in RA patients in the TASKi2Phase 2b clinical
trial, which evaluated 457 RA patients for up to six months.TASKi2was
a multi-center, randomized, double-blind, placebo-controlled, parallel-dose clinical trial involving RA patients in the U.S., Latin America and Europe who had failed to respond to
methotrexate alone. Patients received either 100 mg of fostamatinib b.i.d. (twice a day), 150 mg q.d. (once a day) or placebo.

Efficacy
assessments for each participant were based on the American College of Rheumatology (ACR) criteria, which denotes at least 20% (ACR 20), at least 50% (ACR 50), or at least 70%
(ACR 70) improvement, in addition to improvement denoted in the Disease Activity Score (DAS28), from each patient's baseline assessment at the end of the six month treatment period. The
groups treated with 100 mg of fostamatinib b.i.d. and 150 mg q.d. reported higher response rates than the placebo group in all aforementioned criteria levels. The efficacy results for the two dosing
groups were comparable, although the response rates for the 100 mg b.i.d. group were uniformly greater.

Consistent
with the previous Phase 2a clinical trial(TASKi1), the onset effect of fostamatinib occurred within one week after the
initiation of therapy and was maintained. The most frequent adverse events were expected based on results fromTASKi1and appeared to be manageable. The
most common clinically meaningful drug-related adverse events noted inTASKi2were diarrhea and hypertension. Dose reduction options were
pre-specified in the trial protocol and, in cases where doses were reduced, patients generally completed the clinical trial with minimal safety issues. The mean increase in blood pressure
at six months from baseline, using a last observation carry forward methodology, was less than 0.5 mmHg for the 150 mg q.d. dose group and approximately 1 mmHg for the 100 mg b.i.d. dose group. On the
patients that had a history of high blood pressure, an elevated blood pressure level at screening or baseline, or were on blood pressure medication, approximately 29% in the 150 mg q.d. dose and 39%
in the 100 mg b.i.d. dose groups, had blood pressure medication adjusted or initiated during the course of the study, compared with 12% of similar patients from the placebo group. On the patients that
did not have a history of high blood pressure, were not on blood pressure medication or did not have an elevated blood pressure level at screening or baseline, approximately 4% from the 150 mg q.d.
dose and 9% from the 100 mg b.i.d. dose groups had blood pressure medication initiated during the course of the study, compared with 3% of similar patients from the placebo group. For those patients
who had their dose of blood pressure medications adjusted or initiated, their blood pressure was successfully reduced and was generally well controlled throughout the remainder of the trial. The blood
pressure medications were standard doses of common blood pressure medication, such as angiotensin-converting enzyme (ACE) inhibitors or diuretics.

The
most common adverse events in the trial overall were related to infections, though these were generally evenly distributed among the placebo and fostamatinib groups.

Data
forTASKi2was published in theNew England Journal of Medicinein September 2010.



In July 2009, we also announced results for theTASKi3Phase 2b clinical trial
involving 219 RA patients who had failed to respond to at least one biologic treatment. In theTASKi3clinical trial, patients received either 100 mg of
fostamatinib b.i.d. or placebo b.i.d. for up to three months. The group treated with fostamatinib did not report significantly higher ACR 20, ACR 50, ACR 70 and DAS28 response rates than the placebo
group at three months, and therefore, the trial failed to meet its efficacy endpoints. The objective components (C-Reactive Protein and Erythrocyte Sedimentation Rate) of these ACR scores
did show a statistically significant difference; however, the subjective reported response rate components did not show a statistically significant difference as compared to placebo. Although the ACR
scores for the fostamatinib group were within the expected range in this

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patient
population, the reported placebo response rates were considerably higher than seen in any other previous study of RA biologic failure patients and rose unaccountably between week six (at which
point the reported response rates between fostamatinib and placebo were significantly different) and month three (when such reported response rates were no longer significantly different).

TASKi3was the first clinical trial for fostamatinib in which anatomical changes in the patients' wrists and hands were evaluated using
Magnetic Resonance Imaging and scored using the RAMRIS (Rheumatoid Arthritis Magnetic Resonance Imaging Scoring) system. Those results showed improvements in the treated group versus the placebo group
in the Synovitis and Osteitis scores, while the Erosion scores, known to be the slowest to change, showed no significant effect at three months.

Similar
toTASKi2, the most common clinically meaningful drug-related adverse events noted in TASKi3were diarrhea and hypertension. Dose reduction options were
pre-specified in the trial protocol and, in cases where doses were
reduced, patients generally completed the clinical trial with minimal safety issues. The mean increase in blood pressure from baseline at three months, using a last observation carry forward
methodology, was 3.2 - 3.6 mmHg for the fostamatinib group. InTASKi3, approximately 26% of the patients that had a history of
high blood pressure, had an elevated blood pressure level at screening or baseline, or were on blood pressure medication, had their blood pressure medication adjusted or initiated during the course of
the study, compared with 14% of similar patients in the placebo group. Approximately 5% of the patients with a history of high blood pressure, or who were not on blood pressure medication or did not
have an elevated blood pressure level at screening or baseline, had their blood pressure medication initiated during the course of the study, compared with 3% of similar patients from the placebo
group. For those patients who had dosages of blood pressure medications adjusted or initiated, their blood pressure was successfully reduced and was generally well controlled throughout the remainder
of the trial. The blood pressure medications were standard doses of common blood pressure medications such as ACE inhibitors or diuretics.

The
most common adverse events in the trial overall were related to infections, though these were generally evenly distributed among the placebo and fostamatinib groups.



The OSKIRA (Oral Syk Inhibition in Rheumatoid Arthritis) Phase 3 clinical trial program is designed to investigate fostamatinib
as a treatment for RA in patients with an inadequate response to DMARDs, including methotrexate (MTX). AZ announced that the OSKIRA clinical trial program will include three pivotal Phase 3
studies assessing the efficacy and tolerability of fostamatinib: two 12-month studies examining the effect of fostamatinib on patients responding inadequately to DMARDs (including MTX),
and a six-month study assessing the effect of fostamatinib on patients who have previously responded inadequately to anti-TNF therapy. In September 2010, the first patient was
enrolled in the OSKIRA clinical trial program. The OSKIRA clinical trial program also includes a fourth clinical trial, which is a six-month study for the evaluation of efficacy and safety
of fostamatinib monotherapy in patients who are DMARD naïve, DMARD intolerant or have inadequate response to DMARDs. The fostamatinib clinical trial program is also expected to include
long-term safety extension studies involving more than 2,000 of the patients recruited during the course of the Phase 2 and 3 clinical trial programs. The first anticipated filings
of new drug applications with the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) based on the OSKIRA clinical trial program are planned for 2013.



In addition to RA, fostamatinib has been studied in patients with other immune disorders and some cancers. Our collaboration with AZ
gives AZ sole responsibility for all development decisions for all indications except for one solid tumor oncology study, which was announced in June 2009 and is

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funded,
designed and implemented by the National Cancer Institute (NCI). Any decisions regarding this study are the responsibility of the NCI.



Disease background.Allergic asthma is a chronic inflammatory disorder of the airways. Asthma affects the lower respiratory tract and is
marked by
episodic flare-ups, or attacks, that can be life threatening. In some patients, allergens, such as pollen, trigger the production of immunoglobulin E (IgE) antibodies, which then
bind to mast cells and cause an intracellular signal that results in the release of various chemical mediators. When this process occurs repeatedly over time, it creates persistent inflammation of the
airway passages, resulting in the chronic congestion and airway obstruction associated with allergic rhinitis and asthma, respectively.

Inhaled syk inhibitor program.R343 is a potent syk inhibitor that blocks IgE receptor signaling. Mast cells play important roles in
both early and
late phase allergic reactions, and syk inhibitors could potentially prevent both phases.

In
the first quarter of 2005, we announced a collaborative research and license agreement with Pfizer for the development of inhaled products for the treatment of allergic asthma and
other respiratory diseases, such as chronic obstructive pulmonary disease. The collaboration was focused on our pre-clinical small molecule compounds, which inhibit syk. R343 is the oral
syk inhibitor small molecule at the center of this collaboration. Pfizer has completed the Phase 1a clinical trial of an inhaled formulation of R343, which commenced in December 2007 and
resulted in a milestone payment of $5.0 million to us. Pfizer completed an initial Phase 1b allergen challenge clinical trial. Pfizer has informed us that they plan on conducting an
additional allergen challenge trial in 2011.

Research/Preclinical Programs

We are conducting proprietary research in the broad disease areas of inflammation/immunology and muscle wasting/muscle endurance.
Within each disease area, our researchers are investigating mechanisms of action as well as screening compounds against potential novel targets and optimizing those leads that appear to have the
greatest potential.

In
the area of inflammation /immunology, we have a lead candidate in our oral janus kinase 3 (Jak3) inhibitor program and expect to begin clinical studies by the end of 2011. This
program is focused on the treatment of transplant rejection, but could also extend to indications including RA and psoriasis. We also have a lead candidate in our ophthalmological Jak3 program and
expect to begin clinical studies for this program in 2011. This program is expected to focus on Sjögren's disease (keratoconjunctivitis sicca, or KS). Additionally, we expect to select
a compound for preclinical development in 2011 from our protein kinase C theta (PKCQ) inhibitor program, initially focusing on multiple sclerosis.

In
the area of muscle atrophy and muscle endurance, we are focusing on several signaling pathways that are important for muscle homeostasis. We have developed a series of orally
bioavailable compounds that activate AMP-activate protein kinase (AMPK), a critical enzyme that regulates metabolic/energy pathways in cells. Activation of AMPK has been shown to improve
measurements of muscle endurance in animal models, and our molecules have demonstrated efficacy in animal models of endurance as well as diabetes. Our ongoing efforts are to determine
structure/activity relationships of compounds and examine their experimental physiology. We expect to enter the clinic with this program in late 2012 or 2013 for the potential treatment of patients
with congestive heart failure or chronic obstructive pulmonary disease who exhibit exercise intolerance.

We
also have an active small molecule discovery program in muscle wasting. Muscle atrophy, or the loss of muscle mass, is associated with several disease states. Excessive loss of muscle
in the context

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of
illness can contribute significantly to both morbidity and mortality rates. Many conditions that have associated muscle loss, including cancer, chronic heart failure, chronic kidney disease,
mechanical ventilation and aging (sarcopenia), have significant patient populations that may benefit from therapeutics that counter such muscle loss. One of our core programs in this area is focused
on myostatin signaling. Myostatin is a cytokine that signals via the type II activin receptors (ACVR2A and ACVR2B) and has been shown to inhibit muscle growth. We are currently performing
structure activity relationship studies on several promising molecules from initial ACVR2A/2B screens, and are developing new screens and models for this program. We expect to enter the clinic with
this program in the late 2012 or 2013 for the potential indication of ventilator associated disuse atrophy.

Corporate Collaborations

We conduct research and development programs independently and in conjunction with our corporate collaborators. We currently have the
following active collaborations with three major pharmaceutical/biotechnology companies: AZ, relating to the use of fostamatinib for the treatment of RA and other indications; Pfizer, relating to the
use of R343 intrapulmonary (inhaled) asthma and allergy therapeutics; and Daiichi Sankyo Co., Ltd., in the field of oncology. None of these
collaborations currently provide us with regular research reimbursement. In each of these collaborations, if certain conditions are met, we are entitled to receive future milestone payments and
royalties. We cannot guarantee that these conditions will be met, or that research and development efforts will be successful. As a result, we may not receive any further milestone payments or
royalties under these agreements.



In February 2010, we entered into an exclusive worldwide license agreement with AZ for the development and commercialization of our
oral syk inhibitors for the treatment of human diseases other than those primarily involving respiratory or pulmonary dysfunction. The agreement includes a license of rights to fostamatinib,
previously known as R788, our late-stage investigational product candidate for the treatment of RA and other indications. AZ is responsible for conducting and funding all future
development, regulatory filings, manufacturing and global commercialization of products containing most of our oral syk inhibitors. The agreement became effective on March 26, 2010 and we
received an upfront payment from AZ of $100.0 million in April 2010.

Under
the licensing agreement, our deliverables were: (i) granting a license of rights to fostamatinib, (ii) transfer of technology (know-how) related to
fostamatinib, and (iii) conducting, at our expense, the fostamatinib open label extension study until it was transferred to AZ on September 25, 2010. We concluded that these deliverables
should be accounted for as one single unit of accounting and we recognized the $100.0 million upfront payment received in April 2010 from AZ ratably over the performance period from
March 26, 2010, the effective date of the agreement, through September 25, 2010, the completion date of the last deliverable, which was the transfer of the fostamatinib
long-term open label extension study to AZ. We elected a straight-line method for recognition of this upfront payment as the effort to advance and transfer the study was fairly
consistent over the transition period.

On
September 29, 2010, we announced that we earned $25.0 million from AZ in consideration for the fulfillment of two major milestones in the agreement. The first milestone
was the initiation of the Phase 3 clinical trial program with fostamatinib in patients with RA that was announced by AZ on September 29, 2010. The second milestone was the completion of
the transfer of the fostamatinib long-term open label extension study to AZ, which was also completed in September 2010. AZ is required to pay us up to an additional $320.0 million
if specified development, regulatory and launch milestones are achieved for fostamatinib. We are also eligible to receive up to an additional $800.0 million if specified sales performance
milestones are achieved for fostamatinib, as well as significant stepped double-digit royalties on net worldwide sales, if any.

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Either party may terminate the agreement if the other party materially breaches the agreement and such breach remains uncured within 60 days from the date
of notice, or in the event of insolvency of the other party. We may also terminate the agreement in its entirety if AZ challenges the validity, enforceability or scope of any of our patents licensed
to AZ by us under the agreement. AZ may also terminate the agreement either without cause upon 180 days' written notice, or in the event of any change of control of Rigel upon 30 days'
written notice. If neither party terminates the agreement, then the agreement will remain in effect until the cessation of all commercial sales of all products subject to the agreement, including
fostamatinib.



In January 2005, we entered into a research collaboration with Pfizer that has a license component. The collaboration is for the
development of inhaled products for the treatment of allergic asthma and other respiratory diseases such as chronic obstructive pulmonary disease. The collaboration was primarily focused on our
preclinical small molecule compounds, which inhibit IgE receptor signaling in respiratory tract mast cells by blocking the signaling enzyme syk. A goal of the collaboration was for Pfizer to nominate
a licensed compound to commence advanced preclinical development. Pfizer is responsible for the manufacture of all preclinical and clinical materials for each compound/product and all costs associated
with development and commercialization.
We did not have any further obligations to Pfizer after the research phase of the collaboration ended in February 2007.

In
connection with this collaboration, Pfizer paid us upfront fees of $10.0 million and purchased $5.0 million of our common stock at a premium in 2005. We have earned and
will continue to earn milestone payments in connection with certain clinical events, should they occur, as well as royalties from sales of the resulting products upon marketing approval, if any. Under
the terms of the collaboration agreement, the aggregate of potential milestone amounts payable to us is $175.0 million and mid-single-digit to low double-digit royalties on sales.
In May 2006, we achieved the first milestone upon selection of the licensed compound and received a $5.0 million milestone payment when Pfizer nominated R343 to commence advanced preclinical
development in allergic asthma. In December 2007, we received a second milestone payment of $5.0 million when Pfizer initiated a Phase 1 clinical trial on R343. No milestone payments
were received in 2008, 2009 and 2010 as no further milestones were achieved. Pfizer completed an initial Phase 1b allergen challenge clinical trial. Pfizer has informed us that they plan on
conducting an additional allergen challenge trial in 2011. Pfizer remains obligated to pay us various milestones and royalties in the future if certain conditions are achieved.

Pfizer
may terminate the collaboration agreement for any reason upon prior written notice to us, for cause if we materially breach the agreement and such breach remains uncured, or if we
become insolvent. We may terminate the collaboration agreement for cause if Pfizer fails to meet certain diligence efforts, materially breaches the agreement and such breach remains uncured, or
becomes insolvent. If neither party exercises its option to terminate the collaboration agreement, then the agreement automatically terminates on the later of: (1) the last valid claim to
expire covering a licensed product and (2) after a specified period from the launch of a licensed product.



In August 2002, we signed an agreement for a collaboration with Daiichi Sankyo (Daiichi) to pursue research related to a specific
target from a novel class of drug targets called ligases that control cancer cell proliferation through protein degradation. Daiichi paid us $0.9 million at the time we entered into the
agreement. Under the terms of the collaboration agreement, the aggregate of potential milestone amounts payable to us is $33.9 million and we are entitled to receive royalties on any
commercialized products to emerge from the collaboration at low to mid-single-digit royalties on sales. We have earned to date milestone payments totaling $5.7 million, including a
milestone payment of $750,000 for the first designation of a rational design lead compound that we received in December

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2009,
and may earn additional milestone payments in connection with certain clinical events. The research phase of this three-year collaboration expired in August 2005. Under the terms
of the agreement, we retain the rights to co-develop and co-promote certain products resulting from this collaboration in North America, while Daiichi retains
co-development and promotion rights in the remainder of the world.

Either
party may terminate the collaboration agreement if the other party materially breaches the agreement and such breach remains uncured, or after a specified period from the end of a
designated research period if no product is commercialized (unless the parties agree to extend the collaboration). The collaboration agreement can also be terminated by mutual written consent of the
parties. If neither party exercises its option to terminate the collaboration agreement, then the agreement automatically terminates on the later of (1) the expiration of the last patent with a
claim that covers the composition of matter of a product (or manufacture or use of a product under certain circumstances) and (2) after a specified period from the initial commercialization of
a licensed product.

Our Discovery Engine

The technologies that we use in connection with both our proprietary product development programs and our corporate collaborations are
designed to identify protein targets for compound screening and validate the role of those targets in the disease process. Unlike genomics-based approaches, which begin by identifying genes and then
searching for their functions, our approach identifies proteins that are demonstrated to have an important role in a specific disease pathway. By understanding the disease pathway, we attempt to avoid
studying genes that will not make good drug targets and focus only on the subset of expressed proteins of genes that we believe are specifically implicated in the disease process.

We
begin by developing assays that model the key events in a disease process at the cellular level. We then search hundreds of millions of cells to identify potential protein targets. In
addition, we identify the proteins involved in the intracellular process and prepare a map of their interactions, thus giving us a comprehensive picture of the intracellular disease pathway. We
believe that our approach has a number of advantages, including:



Because
of the very large number of cells and proteins employed, our technology is labor intensive. The complexity of our technology requires a high degree of skill and diligence to
perform successfully.

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In
addition, successful application of our technology depends on a highly diverse collection of proteins to test in cells. We believe we have been and will continue to be able to meet these challenges
successfully and increase our ability to identify targets for drug discovery. Although other companies may utilize technologies similar to certain aspects of our technology, we are unaware of any
other company that employs the same combination of technologies that we do.

Pharmacology and Preclinical Development

We believe that the rapid characterization and optimization of lead compounds identified in high throughput screening (HTS) will
generate high quality preclinical development candidates. Our pharmacology and preclinical development group facilitates lead optimization by characterizing lead compounds with respect to
pharmacokinetics, potency, efficacy and selectivity. The generation of proof-of-principle data in animals and the establishment of standard pharmacological models with which to
assess lead compounds represent integral components of lead optimization. As programs move through the lead optimization stage, our pharmacology and preclinical development groups support our chemists
and biologists by performing the necessary studies, including toxicology, for investigational new drug (IND) application submissions.

Clinical Development

We have assembled a team of experts in drug development to design and implement clinical trials and to analyze the data derived from
these trials. The clinical development group possesses expertise in project management and regulatory affairs.

Intellectual Property

We are able to protect our technology from unauthorized use by third parties only to the extent that it is covered by valid and
enforceable patents or is effectively maintained as a trade secret. Accordingly, patents and other proprietary rights are an essential element of our business. We have over 95 pending patent
applications and over 185 issued patents in the United States, as well as pending corresponding foreign patent applications and issued foreign patents. Our policy is to file patent applications to
protect technology, inventions and improvements to inventions that are commercially important to the development of our business. We seek United States and international patent protection for a
variety of technologies, including new screening methodologies and other research tools, target molecules that are associated with disease states identified in our screens, and lead compounds that can
affect disease pathways. We also intend to seek patent protection or rely upon trade secret rights to protect other technologies that may be used to discover and validate targets and that may be used
to identify and develop novel drugs. We seek protection, in part, through confidentiality and proprietary information agreements. We are a party to various license agreements that give us rights to
use technologies in our research and development.

Our
patents extend for varying periods according to the date of patent filing or grant and the legal term of patents in the various countries where patent protection is obtained. Our
material patents relate to compositions of matter covering specific drug candidates in clinical trials that target syk. These patents will expire, excluding patent term adjustments and extensions, in
2023, 2024 and 2026. Several of these patents will have patent term adjustments and extensions depending on the length of time required to conduct clinical trials.

We
currently hold a number of issued patents in the United States, as well as corresponding applications that allow us to pursue patents in other countries, some of which have been
allowed and/or granted and others of which we expect to be granted. Specifically, in most cases where we hold a U.S. issued patent, the subject matter is covered at least by an application filed under
the Patent Cooperation Treaty (PCT), which is then used or has been used to pursue protection in certain

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countries
that are members of the treaty. Our material patents relate to fostamatinib, an oral syk inhibitor, and R406, the active metabolite of fostamatinib.

Fostamatinib.Fostamatinib is covered as a composition of matter in a U.S. issued patent that has an expiration date in September 2026,
after taking
into account a patent term adjustment, and may be granted further protection under the patent term extension rules related to conducting clinical trials. Fostamatinib is also covered under broader
composition of matter claims in a U.S. issued patent that has an expiration date in March 2026, after taking into account a patent term adjustment. Methods of using fostamatinib to treat various
indications, methods of making fostamatinib, and compositions of matter covering certain intermediates used to make fostamatinib are also covered, respectively, in three U.S. issued patents; the
earliest expiration date of any of these patents is in April 2023 and the latest expiration date is in June 2026, after taking into account patent term adjustments. Corresponding applications have
been filed in foreign jurisdictions under the PCT, and are at various stages of prosecution. Of note, a patent covering fostamatinib as a composition of matter and in compositions for use treating
various diseases has been granted by the European Patent Office.

R406.R406 is covered as a composition of matter in a U.S. issued patent and, with a patent term adjustment, currently has an
expiration date in
February 2025. R406 is also covered under two broader composition of matter patents issued in the U.S. expiring in February 2023 and July 2024. Methods of using R406 to treat various indications and
compositions of matter covering certain intermediates used to make R406 are also covered under patents described above. Corresponding applications have been filed in foreign jurisdictions under the
PCT, and are at various stages of prosecution.

Competition

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change.
Many of the drugs that we are attempting to discover will be competing with existing therapies. In addition, a number of companies are pursuing the development of pharmaceuticals that target the same
diseases and conditions that we are targeting. We face, and will continue to face, intense competition from pharmaceutical and biotechnology companies, as well as from academic and research
institutions and government agencies, both in the United States and abroad. Some of these competitors are pursuing the development of pharmaceuticals that target the same diseases and conditions as
our research programs. Our major competitors include fully integrated pharmaceutical companies that have extensive drug discovery efforts and are developing novel small molecule pharmaceuticals. We
also face significant competition from organizations that are pursuing the same or similar technologies, including the discovery of targets that are useful in compound screening, as the technologies
used by us in our drug discovery efforts.

Competition
may also arise from:



Our
competitors or their collaborative partners may utilize discovery technologies and techniques or partner with collaborators in order to develop products more rapidly or successfully
than we or our collaborators are able to do. Many of our competitors, particularly large pharmaceutical companies, have substantially greater financial, technical and human resources and larger
research and development staffs than we do. In addition, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection with
respect to

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potentially
competitive products or technologies and may establish exclusive collaborative or licensing relationships with our competitors.

We
believe that our ability to compete is dependent, in part, upon our ability to create, maintain and license scientifically-advanced technology and upon our and our collaborators'
ability to develop and commercialize pharmaceutical products based on this technology, as well as our ability to attract and retain qualified personnel, obtain patent protection or otherwise develop
proprietary technology or processes and secure sufficient capital resources for the expected substantial time period between technological conception and commercial sales of products based upon our
technology. The failure by any of our collaborators or us in any of those areas may prevent the successful commercialization of our potential drug targets.

Many
of our competitors, either alone or together with their collaborative partners, have significantly greater experience than we do in:



Accordingly,
our competitors may succeed in obtaining patent protection, identifying or validating new targets or discovering new drug compounds before we do.

Our
competitors might develop technologies and drugs that are more effective or less costly than any that are being developed by us or that would render our technology and product
candidates obsolete and noncompetitive. In addition, our competitors may succeed in obtaining the approval of the FDA or other regulatory agencies for product candidates more rapidly. Companies that
complete clinical trials, obtain required regulatory agency approvals and commence commercial sale of their drugs before their competitors may achieve a significant competitive advantage, including
certain patent and FDA marketing exclusivity rights that would delay or prevent our ability to market certain products. Any drugs resulting from our research and development efforts, or from our joint
efforts with our existing or future collaborative partners, might not be able to compete successfully with competitors' existing or future products or obtain regulatory approval in the United States
or elsewhere.

We
face and will continue to face intense competition from other companies for collaborative arrangements with pharmaceutical and biotechnology companies, for establishing relationships
with academic and research institutions and for licenses to additional technologies. These competitors, either alone or with their collaborative partners, may succeed in developing technologies or
products that are more effective than ours.

Our
ability to compete successfully will depend, in part, on our ability to:



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Research and Development Expenses

A significant portion of our operating expenses is related to research and development and we intend to maintain our strong commitment
to research and development. See "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for costs and expenses related to research and
development, and other financial information for fiscal years 2010, 2009, and 2008.

Government Regulation

Our ongoing development activities are and will continue to be subject to extensive regulation by numerous governmental authorities in
the United States and other countries, including the FDA, under the Federal Food, Drug and Cosmetic Act. The regulatory review and approval process is expensive and uncertain. Securing FDA approval
requires the submission of extensive preclinical and clinical data and supporting information to the FDA for each indication to establish a product candidate's safety and efficacy.

Preclinical
studies generally are conducted in laboratory animals to evaluate the potential safety and the efficacy of a product. Drug developers submit the results of preclinical
studies to the FDA as part of an IND application that must be approved before clinical trials can begin in humans. Typically, clinical evaluation involves a time consuming and costly three-phase
process.



The
approval process takes many years, requires the expenditure of substantial resources and may involve ongoing requirements for post-marketing studies. Clinical trials are
subject to oversight by institutional review boards and the FDA. In addition, clinical trials:



Even
if we are able to achieve success in our clinical testing, we, or our collaborative partners, must provide the FDA and foreign regulatory authorities with clinical data that
demonstrates the safety and efficacy of our products in humans before they can be approved for commercial sale. We do not know whether any future clinical trials will demonstrate sufficient safety and
efficacy necessary to obtain the requisite regulatory approvals or will result in marketable products. Our failure, or the failure of our strategic partners, to adequately demonstrate the safety and
efficacy of our products under development will prevent receipt of FDA and similar foreign regulatory approval and, ultimately, commercialization of our products.

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Any
clinical trial may fail to produce results satisfactory to the FDA. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory
approval. Negative or inconclusive results or adverse medical events during a clinical trial could cause a clinical trial to be repeated or a program to be terminated. In addition, delays or
rejections may be encountered based upon additional government regulation from future legislation or administrative action or changes in FDA policy or interpretation during the period of product
development, clinical trials and FDA regulatory review. Failure to comply with applicable FDA or other applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or
seizure of products, total or partial suspension of production or injunction, as well as other regulatory action against our potential products, collaborative partners or us.

Outside
the United States, our ability to market a product is contingent upon receiving a marketing authorization from the appropriate regulatory authorities. The requirements governing
the conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country. At present, foreign marketing authorizations are applied for at a national
level, although within the European Union (EU), registration procedures are available to companies wishing to market a product in more than one EU member state. If the regulatory authority is
satisfied that adequate evidence of safety, quality and efficacy has been presented, a marketing authorization will be granted. This foreign regulatory approval process involves all of the risks
associated with FDA clearance.

Manufacturing and Raw Materials

We currently rely on, and will continue to rely on, third party contract manufacturers to produce sufficient quantities of our product
candidates for use in our preclinical and anticipated clinical trials.

Employees

As of December 31, 2010, we had 145 employees. None of our employees are represented by a collective bargaining arrangement, and
we believe our relationship with our employees is good. Recruiting and retaining qualified scientific personnel to perform research and development work in the future will be critical to our success.
We may not be able to attract and retain personnel on acceptable terms given the competition among pharmaceutical and biotechnology companies, academic and research institutions and government
agencies for experienced scientists.

Scientific and Medical Advisors

We utilize scientists and physicians to advise us on scientific and medical matters as part of our ongoing research and product
development efforts, including experts in clinical trial design, preclinical development work, chemistry, biology, infectious diseases, immunology and oncology. Certain of our scientific and medical
advisors and consultants receive an option to purchase our common stock and an honorarium for time spent assisting us.

Available Information

Our website is located atwww.rigel.com. The information found on our website is not
incorporated by reference into this Annual Report on Form 10-K. We electronically file with the Securities and Exchange Commission (SEC) our Annual Report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, our director and officers' Section 16 reports and other SEC
filings and amendments to the reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. We make available free of charge on or through our website copies of these
reports as soon as reasonably practicable after we electronically file these reports with, or furnish them to, the SEC. Further, a copy of these reports is located at the SEC's Public Reference Room
at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained

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by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC atwww.sec.gov.

Item 1A.    Risk Factors

In evaluating our business, you should carefully consider the following risks, as well as the other information
contained in this Annual Report on Form 10-K. These risk factors could cause our actual results to differ materially from those contained in forward-looking statements we have made
in this Annual Report on Form 10-K and those we may make from time to time. If any of the following risks actually occurs, our business, financial condition and operating results
could be harmed. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us, or that we currently see as immaterial, may
also harm our business.

If our corporate collaborations or license agreements are unsuccessful, our research and development efforts could be delayed.

Our strategy depends upon the formation and sustainability of multiple collaborative arrangements and license agreements with third
parties now and in the future. We rely on these arrangements for not only financial resources, but also for expertise we need now and in the future relating to clinical trials, manufacturing, sales
and marketing, and for licenses to technology rights. To date, we have entered into several such arrangements with corporate collaborators; however, we do not know if these collaborations or
additional third parties with which we may collaborate, if any, will dedicate sufficient resources or if any development or commercialization efforts by third parties will be successful. In addition,
our corporate collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a drug candidate. Although Pfizer has informed us
that they plan to conduct an allergen challenge trial in 2011, they may later decide to delay or discontinue the trial. Should a collaborative partner fail to develop or commercialize a compound or
product to which it has rights from us for any reason, including corporate restructuring, such failure might delay our ongoing research and development efforts, because we might not receive any future
milestone payments, and we would not receive any royalties associated with such compound or product. In addition, the continuation of some of our partnered drug discovery and development programs may
be dependent on the periodic renewal of our corporate collaborations.

In
February 2010, we entered into an exclusive worldwide license agreement with AZ for the global development and commercialization of our oral syk inhibitors for the treatment of human
diseases other than those primarily involving respiratory or pulmonary dysfunction. The agreement includes a license of rights to fostamatinib, our late-stage investigational product
candidate for the treatment of RA and other indications. AZ started its Phase 3 clinical trial program in patients in RA in September 2010. Our collaboration agreement with AZ does not include
a research phase. The research phase of our collaboration with Johnson & Johnson ended in 2003, and the research phases conducted at our facilities under our broad collaboration with Novartis
Pharma AG (Novartis) ended in 2004. The research phase of our collaboration agreement with Daiichi ended in 2005. In 2004, we signed a new collaboration agreement with
Merck & Co., Inc. (Merck), and the research phase of this collaboration ended in May 2007. In 2005, we signed a new collaboration agreement with Pfizer, and the research phase of
this collaboration ended in February 2007. Our collaboration agreement with Merck Serono, which, as of February 2010, is no longer active, did not include a research phase. Each of our collaborations
could be terminated by the other party at any time, and we may not be able to renew these collaborations on acceptable terms, if at all, or negotiate additional corporate collaborations on acceptable
terms, if at all. If these collaborations terminate or are not renewed, any resultant loss of revenues from these collaborations or loss of the resources and expertise of our collaborative partners
could adversely affect our business.

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Conflicts also might arise with collaborative partners concerning proprietary rights to particular compounds. While our existing collaborative agreements
typically provide that we retain milestone payments and royalty rights with respect to drugs developed from certain derivative compounds, any such payments or royalty rights may be at reduced rates,
and disputes may arise over the application of derivative payment provisions to such drugs, and we may not be successful in such disputes.

We
are also a party to various license agreements that give us rights to use specified technologies in our research and development processes. The agreements pursuant to which we have
in-licensed technology permit our licensors to terminate the agreements under certain circumstances. If we are not able to continue to license these and future technologies on commercially
reasonable terms, our product development and research may be delayed or otherwise adversely affected.

If conflicts arise between our collaborators or advisors and us, any of them may act in their self-interest, which may be adverse to our stockholders' interests.

If conflicts arise between us and our corporate collaborators or scientific advisors, the other party may act in its
self-interest and not in the interest of our stockholders. Some of our corporate collaborators are conducting multiple product development efforts
within each disease area that is the subject of the collaboration with us or may be acquired or merged with a company having a competing program. In some of our collaborations, we have agreed not to
conduct, independently or with any third party, any research that is competitive with the research conducted under our collaborations. Our collaborators, however, may develop, either alone or with
others, products in related fields that are competitive with the products or potential products that are the subject of these collaborations. Competing products, either developed by our collaborators
or to which our collaborators have rights, may result in their withdrawal of support for our product candidates.

If
any of our corporate collaborators were to breach or terminate its agreement with us or otherwise fail to conduct the collaborative activities successfully and in a timely manner, the
preclinical or clinical development or commercialization of the affected product candidates or research programs could be delayed or terminated. We generally do not control the amount and timing of
resources that our corporate collaborators devote to our programs or potential products. We do not know whether current or future collaborative partners, if any, might pursue alternative technologies
or develop alternative products either on their own or in collaboration with others, including our competitors, as a means for developing treatments for the diseases targeted by collaborative
arrangements with us.

If we are unable to obtain regulatory approval to market products in the United States and foreign jurisdictions, we will not be permitted to commercialize products from our
research and development.

We cannot predict whether regulatory clearance will be obtained for any product that we, or our collaborative partners, hope to
develop. Satisfaction of regulatory requirements typically takes many years, is dependent upon the type, complexity and novelty of the product and requires the expenditure of substantial resources. Of
particular significance to us are the requirements relating to research and development and testing.

Before
commencing clinical trials in humans in the United States, we, or our collaborative partners, will need to submit and receive approval from the FDA of an IND. Clinical trials are
subject to oversight by institutional review boards and the FDA and:



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While
we have stated that we intend to file additional INDs, this is only a statement of intent, and we may not be able to do so because we may not be able to identify potential product
candidates. In addition, the FDA may not approve any IND in a timely manner, or at all.

Before
receiving FDA approval to market a product, we must demonstrate with substantial clinical evidence that the product is safe and effective in the patient population and the
indication that will be treated. Data obtained from preclinical and clinical activities are susceptible to varying interpretations that could delay, limit or prevent regulatory approvals. In addition,
delays or rejections may be encountered based upon additional government regulation from future legislation or administrative action or changes in FDA policy during the period of product development,
clinical trials and FDA regulatory review. Failure to comply with applicable FDA or other applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or seizure of
products, total or partial suspension of production or injunction, adverse publicity, as well as other regulatory action against our potential products or us. Additionally, we have limited experience
in conducting and managing the clinical trials necessary to obtain regulatory approval.

If
regulatory approval of a product is granted, this approval will be limited to those indications or disease states and conditions for which the product is demonstrated through clinical
trials to be safe and efficacious. We cannot ensure that any compound developed by us, alone or with others, will prove to be safe and efficacious in clinical trials and will meet all of the
applicable regulatory requirements needed to receive marketing approval.

Outside
the United States, our ability, or that of our collaborative partners, to market a product is contingent upon receiving a marketing authorization from the appropriate regulatory
authorities. This foreign regulatory approval process typically includes all of the risks and costs associated with FDA approval described above and may also include additional risks and costs.

We might not be able to commercialize our product candidates successfully if problems arise in the clinical testing and approval process.

Commercialization of our product candidates depends upon successful completion of extensive preclinical studies and clinical trials to
demonstrate their safety and efficacy for humans. Preclinical testing and clinical development are long, expensive and uncertain processes.

In
connection with clinical trials of our product candidates, we face the risks that:



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We
do not know whether we, or any of our collaborative partners, will be permitted to undertake clinical trials of potential products beyond the trials already concluded and the trials
currently in process. It will take us, or our collaborative partners several years to complete any such testing, and failure can occur at any stage of testing. Interim results of trials do not
necessarily predict final results, and acceptable results in early trials may not be repeated in later trials. A number of companies in the pharmaceutical industry, including biotechnology companies,
have suffered significant setbacks in advanced clinical trials, even after achieving promising results in earlier trials. Moreover, we or our collaborative partners or regulators may decide to
discontinue development of any or all of these projects at any time for commercial, scientific or other reasons.

There is a high risk that drug discovery and development efforts might not successfully generate good product candidates.

At the present time, the majority of our operations are in various stages of drug identification and development. We currently have two
product compounds in the clinical testing stage: one with indications for RA, as well as for certain solid tumors that is being implemented by the NCI, all of which indications are subject to a
collaboration agreement with AZ; and one in Phase 1b testing and intended for allergic asthma, which is subject to a collaboration agreement with
Pfizer. In our industry, it is statistically unlikely that the limited number of compounds that we have identified as potential product candidates will actually lead to successful product development
efforts, and we do not expect any drugs resulting from our research to be commercially available for several years, if at all.

Our
compounds in clinical trials and our future leads for potential drug compounds are subject to the risks and failures inherent in the development of pharmaceutical products. These
risks include, but are not limited to, the inherent difficulty in selecting the right drug and drug target and avoiding unwanted side effects, as well as unanticipated problems relating to product
development, testing, obtaining regulatory approvals, maintaining regulatory compliance, manufacturing, competition and costs and expenses that may exceed current estimates. For example, in our two
Phase 2b clinical trials for fostamatinib in RA,TASKi2andTASKi3, the most common clinically
meaningful drug-related adverse events noted were diarrhea and hypertension. In both ourTASKi2and TASKi3Phase 2b clinical trials, a meaningfully
higher percentage of patients in the fostamatinib treatment groups had blood pressure medication
adjusted or initiated during the course of the clinical trials as compared to the placebo group. In larger future clinical trials, we may discover additional side effects and/or higher frequency of
side effects than those observed in completed clinical trials. If approved by the FDA, the side effect profile of fostamatinib may also result in a narrowly approved indication for use of the product,
especially in light of other drugs currently available to treat RA, dependent on the safety profile of fostamatinib relative to those drugs.

The
results of preliminary and mid-stage studies do not necessarily predict clinical or commercial success, and larger later-stage clinical trials may fail to confirm the
results observed in the previous studies. Similarly, a clinical trial may show that a product candidate is safe and effective for certain patient populations in a particular indication, but other
clinical trials may fail to confirm those results in a subset of that population or in a different patient population, which may limit the potential market for that product candidate. For example,
fostamatinib produced significant clinical improvement in RA patients who had failed to respond to methotrexate alone in ourTASKi2Phase 2b
clinical trial, but ourTASKi3Phase 2b clinical trial failed to meet its efficacy endpoints in RA patients who had failed to respond to at least
one biologic treatment. In addition, if we were to repeat either of theTASKi2andTASKi3Phase 2b clinical trials, any such additional trials may not confirm the results observed in the original trials. The Phase 3 clinical program evaluating fostamatinib in RA patients,
initiated by our partner, AZ, may not show fostamatinib to be safe and effective for the treatment of RA patients. Finally, with respect to our own compounds in development, we have established
anticipated timelines

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with
respect to the initiation of clinical studies based on existing knowledge of the compound. However, we cannot provide assurance that we will meet any of these timelines for clinical development.

Because
of the uncertainty of whether the accumulated preclinical evidence (pharmacokinetic, pharmacodynamic, safety and/or other factors) or early clinical results will be observed in
later clinical trials, we can make no assurances regarding the likely results from our future clinical trials or the impact of those results on our business.

Our success is dependent on intellectual property rights held by us and third parties, and our interest in such rights is complex and uncertain.

Our success will depend to a large part on our own, our licensees' and our licensors' ability to obtain and defend patents for each
party's respective technologies and the compounds and other products, if any, resulting from the application of such technologies. We have over 95 pending patent applications and over 185 issued
patents in the United States, as well as pending corresponding foreign patent applications and issued foreign patents. In the future, our patent position might be highly uncertain and involve complex
legal and factual questions. For example, we may be involved in interferences before the United States Patent and Trademark Office. Interferences are complex and expensive legal proceedings and there
is no assurance we will be successful in any such proceedings. An interference could result in our losing our patent rights and/or our freedom to operate and/or require us to pay significant
royalties. Additional uncertainty may result because no consistent policy regarding the breadth of legal claims allowed in biotechnology patents has emerged to date. Accordingly, we cannot predict the
breadth of claims allowed in our or other companies' patents.

Because
the degree of future protection for our proprietary rights is uncertain, we cannot ensure that:



We
rely on trade secrets to protect technology where we believe patent protection is not appropriate or obtainable; however, trade secrets are difficult to protect. While we require
employees, collaborators and consultants to enter into confidentiality agreements, we may not be able to adequately protect our trade secrets or other proprietary information in the event of any
unauthorized use or disclosure or the lawful development by others of such information.

We
are a party to certain in-license agreements that are important to our business, and we generally do not control the prosecution of in-licensed technology.
Accordingly, we are unable to exercise the same degree of control over this intellectual property as we exercise over our internally-developed technology. Moreover, some of our academic institution
licensors, research collaborators and scientific advisors have rights to publish data and information in which we have rights. If we cannot maintain the confidentiality of our technology and other
confidential information in connection with our collaborations, our ability to receive patent protection or protect our proprietary information may

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otherwise
be impaired. In addition, some of the technology we have licensed relies on patented inventions developed using U.S. government resources. The U.S. government retains certain rights, as
defined by law, in such patents, and may choose to exercise such rights. Certain of our in-licenses may be terminated if we fail to meet specified obligations. If we fail to meet such
obligations and any of our licensors exercise their termination rights, we could lose our rights under those agreements. If we lose any of our rights, it may adversely affect the way we conduct our
business. In addition, because certain of our licenses are sublicenses, the actions of our licensors may affect our rights under those licenses.

If a dispute arises regarding the infringement or misappropriation of the proprietary rights of others, such dispute could be costly and result in delays in our research and
development activities and partnering.

Our success will depend, in part, on our ability to operate without infringing or misappropriating the proprietary rights of others.
There are many issued patents and patent applications filed by third parties relating to products or processes that are similar or identical to our licensors or ours, and others may be filed in the
future. There can be no assurance that our activities, or those of our licensors, will not infringe patents owned by others. We believe that there may be significant litigation in the industry
regarding patent and other intellectual property rights, and we do not know if our collaborators or we would be successful in any such litigation. Any legal action against our collaborators or us
claiming damages or seeking to enjoin commercial activities relating to the affected products, our methods or processes could:



We will need additional capital in the future to sufficiently fund our operations and research.

We have consumed substantial amounts of capital to date as we continue our research and development activities, including preclinical
studies and clinical trials. In February 2010, we entered into an exclusive worldwide license agreement with AZ for the global development and commercialization of our oral syk inhibitors for the
treatment of human diseases other than those primarily involving respiratory or pulmonary dysfunction. The agreement includes a license of rights to fostamatinib, our late-stage
investigational product candidate for the treatment of RA and other indications. The agreement became effective on March 26, 2010 and, in connection with the effectiveness of the agreement, we
received an upfront payment of $100.0 million in April 2010 from AZ. In October 2010, we received $25.0 million from AZ in connection with the fulfillment of two major milestones in the
agreement. The first milestone payment received was for initiation of the Phase 3 clinical program with fostamatinib in patients with RA that was announced by AZ in September 2010. The second
milestone payment received was for the completion of the transfer of the fostamatinib long-term open label extension study to AZ. AZ is required to pay us up to an additional
$320.0 million if specified development, regulatory and launch milestones are achieved for fostamatinib. We are also eligible to receive up to an additional $800.0 million if specified
sales performance milestones are achieved for fostamatinib, as well as significant stepped double-digit royalties on net sales worldwide. We believe that our existing capital resources and the
anticipated proceeds from our current collaborations will be sufficient to support our current and projected funding requirements through at least the next 12 months. We may need additional
funds in the future and the amount of future funds needed will

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depend
largely on the success of our internally developed programs as they proceed in later and more expensive clinical trials. Unless and until we are able to generate a sufficient amount of product
and royalty revenue, we expect to finance future cash needs through public and/or private offerings of equity securities, debt financings or collaboration and licensing arrangements, as well as
through interest income earned on the investment of our cash balances and short-term investments. With the exception of milestone and royalty payments that we may receive under our
existing collaborations, we do not currently have any commitments for future funding. We do not know whether additional financing will be available when needed, or that, if available, we will obtain
financing on reasonable terms.

To
the extent we raise additional capital by issuing equity securities, our stockholders could at that time experience substantial dilution. Any debt financing that we are able to obtain
may involve operating covenants that restrict our business. To the extent that we raise additional funds through any new collaboration and licensing arrangements, we may be required to relinquish some
rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us.

Our future funding requirements will depend on many uncertain factors.

Our future funding requirements will depend upon many factors, including, but not limited to:



Insufficient
funds may require us to delay, scale back or eliminate some or all of our research and 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.

Our success as a company is uncertain due to our history of operating losses and the uncertainty of future profitability.

Although we generated operating income of approximately $35.3 million for the year ended December 31, 2010, this resulted
from the one-time upfront payment from AZ received in April 2010, as well as two milestone payments received from AZ in October 2010. We have historically operated at

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a
loss each year since we were incorporated in June 1996, due in large part to the significant research and development expenditures required to identify and validate new product candidates and pursue
our development efforts. We expect to continue to incur net operating losses in the next three years and there can be no assurance that we will generate operating income in the future. For the years
ended December 31, 2009 and 2008, we incurred net losses of approximately $111.5 million and $132.3 million, respectively. Currently, our only potential source of revenues is
upfront payments, research and development milestone and royalty payments pursuant to our collaboration arrangements. If our drug candidates fail or do not gain regulatory approval, or if our drugs do
not achieve market acceptance,
we may not be profitable. As of December 31, 2010, we had an accumulated deficit of approximately $575.4 million. The extent of our future losses or profitability is highly uncertain.

Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.

In general, under Section 382 of the Internal Revenue Code, a corporation that undergoes an "ownership change" is subject to
limitations on its ability to utilize its pre-change net operating losses to offset future taxable income. Our existing net operating losses and credits may be subject to limitations
arising from previous and future ownership changes under Section 382 of the Internal Revenue Code. To the extent we cannot completely utilize net operating loss carryforwards or tax credits in
our financial statements to offset future taxable income, our tax expense may increase in future periods.

Because we expect to be dependent upon collaborative and license agreements, we might not meet our strategic objectives.

Our ability to generate revenue in the near term depends on the timing of recognition of certain upfront payments, achievement of
certain milestone triggering events with our existing collaboration agreements and our ability to enter into additional collaborative agreements with third parties. Our ability to enter into new
collaborations and the revenue, if any, that may be recognized under these collaborations is highly uncertain. If we are unable to enter into one or more new collaborations, our business prospects
could be harmed, which could have an immediate adverse effect on our ability to continue to develop our compounds and on the trading price of our stock. Our ability to enter into a collaboration may
be dependent on many factors, such as the results of our clinical trials, competitive factors and the fit of one of our programs with another company's risk tolerance, including toward regulatory
issues, patent portfolio, clinical pipeline, the stage of the available data, particularly if it is early, overall corporate goals and financial position.

To
date, a portion of our revenues have been related to the research or transition phase of each of our collaborative agreements. Such revenues are for specified periods, and the impact
of such revenues on our results of operations is at least partially offset by corresponding research costs. Following the completion of the research or transition phase of each collaborative
agreement, additional revenues may come only from milestone payments and royalties, which may not be paid, if at all, until certain conditions are met. This risk is heightened due to the fact that
unsuccessful research efforts may preclude us from receiving any milestone payments under these agreements. Our receipt of revenues from collaborative arrangements is also significantly affected by
the timing of efforts expended by us and our collaborators and the timing of lead compound identification. We have received milestone payments from our collaborations with Janssen
Pharmaceutica N.V., a division of Johnson & Johnson, Novartis, Daiichi, Merck, Merck Serono and Pfizer. We received an upfront payment of $100.0 million in April 2010 and received
milestone payments of $25.0 million in October 2010 from AZ. Under many agreements, however, milestone payments may not be earned until the collaborator has advanced
product candidates into clinical testing, which may never occur or may not occur until some time well into the future. If we are not able to generate revenue under our collaborations when and in
accordance with our expectations or the expectations of industry analysts, this failure could harm our business and have an immediate adverse effect on the trading price of our common stock.

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Our business requires us to generate meaningful revenue from royalties and licensing agreements. To date, we have not received any revenue from royalties for the
commercial sale of drugs, and we do not know when we will receive any such revenue, if at all.

Delays in clinical testing could result in increased costs to us.

Significant delays in clinical testing could materially impact our product development costs and timing. We do not know whether planned
clinical trials will begin on time, will need to be halted or redesigned or will be completed on schedule, or at all. In addition, clinical trials can be delayed for a variety of reasons, including
delays in obtaining regulatory approval to commence a study, delays from scaling up of a study, delays in reaching agreement on acceptable clinical study agreement terms with prospective clinical
sites, delays in obtaining institutional review board approval to conduct a study at a prospective clinical site or delays in recruiting subjects to participate in a study.

In
addition, we typically rely on third-party clinical investigators to conduct our clinical trials and other third-party organizations to oversee the operations of such trials and to
perform data collection and analysis. The clinical investigators are not our employees, and we cannot control the amount or timing of resources that they devote to our programs. Failure of the third-
party organizations to meet their obligations could adversely affect clinical development of our products. As a result, we may face
additional delaying factors outside our control if these parties do not perform their obligations in a timely fashion. While we have not yet experienced delays that have materially impacted our
clinical trials or product development costs, delays of this sort could occur for the reasons identified above or other reasons. If we have delays in testing or obtaining regulatory approvals, our
product development costs will increase. For example, we may need to make additional payments to third-party investigators and organizations to retain their services or we may need to pay recruitment
incentives. If the delays are significant, our financial results and the commercial prospects for our product candidates will be harmed, and our ability to become profitable will be delayed. Moreover,
these third-party investigators and organizations may also have relationships with other commercial entities, some of which may compete with us. If these third-party investigators and organizations
assist our competitors at our expense, it could harm our competitive position.

We have been named a defendant in a purported securities class action lawsuit. This, and potential similar or related litigation, could result in substantial damages and may
divert management's time and attention from our business.

On February 6, 2009, a purported securities class action lawsuit was commenced in the United States District Court for the
Northern District of California, naming as defendants us and certain of our officers, directors and underwriters for our February 2008 public offering of common stock (the Stock Offering). An
additional purported securities class action lawsuit containing similar allegations was subsequently filed in the United States District Court for the Northern District of California on
February 20, 2009. By order of the Court dated March 19, 2009, the two lawsuits were consolidated into a single action. On June 9, 2009, the Court issued an order naming the
Inter-Local Pension Fund GCC/IBT as lead plaintiff and Robbins Geller Rudman & Dowd LLP (formerly Coughlin Stoia) as lead counsel. The lead plaintiff filed a consolidated complaint on
July 24, 2009. We filed a motion to dismiss on September 8, 2009. On December 21, 2009, the Court granted our motion and dismissed the consolidated complaint with leave to amend.
Plaintiff filed its consolidated amended complaint on January 27, 2010. The lawsuit alleged violations of the Securities Act of 1933, as amended (the Securities Act), and the Exchange Act in
connection with allegedly false and misleading statements made by us related to the results of the Phase 2a clinical trial of our product candidate fostamatinib (then known as R788). The
plaintiff sought damages, including rescission or rescissory damages for purchasers in the Stock Offering, an award of their costs and injunctive and/or equitable relief for purchasers of our common
stock during the period between December 13, 2007 and February 9, 2009,

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including
purchasers in the Stock Offering. We filed a motion to dismiss the consolidated amended complaint on February 16, 2010. On August 24, 2010, the Court issued an order granting
our motion and dismissed the consolidated complaint with leave to amend. On September 22, 2010, plaintiff filed a notice informing the Court that it will not amend its complaint and requested
that the Court enter a final judgment. On October 28, 2010, the plaintiff submitted a proposed judgment requesting entry of such judgment in favor of the defendants. On November 1, 2010,
judgment was entered dismissing the action. The plaintiff filed a notice of appeal on November 15, 2010, appealing the district court's order granting our motion to dismiss the consolidated
amended complaint. The plaintiff filed its opening brief on February 23, 2011. Our opposition brief is due on or before March 25, 2011.

We
believe that we have meritorious defenses and intend to defend the lawsuit vigorously. This lawsuit and any other related lawsuits are subject to inherent uncertainties, and the
actual costs to be incurred relating to the lawsuit will depend upon many unknown factors. The outcome of the litigation is necessarily uncertain, and we could be forced to expend significant
resources in the defense of this suit, and we may not prevail. Monitoring and defending against legal actions is time-consuming for our management and detracts from our ability to fully
focus our internal resources on our business activities. In addition, we may incur substantial legal fees and costs in connection with the litigation. We are not currently able to estimate the
possible cost to us from this matter, and we cannot be certain how long it may take to resolve this matter or the possible amount of any damages that we may be required to pay. We have not established
any reserves for any potential liability relating to this lawsuit. It is possible that we could, in the future, incur judgments or enter into settlements of claims for monetary damages. A decision
adverse to our interests on this action could result in the payment of substantial damages, or possibly fines, and could have a material adverse effect on our cash flow, results of operations and
financial position. In addition, the uncertainty of the currently pending litigation could lead to increased volatility in our stock price.

We lack the capability to manufacture compounds for development and rely on third parties to manufacture our product candidates, and we may be unable to obtain required
material in a timely manner, at an acceptable cost or at a quality level required to receive regulatory approval.

We currently do not have the manufacturing capabilities or experience necessary to produce our product candidates for clinical testing.
For each clinical trial of our unpartnered product candidates, we rely on third-party manufacturers for the active pharmaceutical ingredients, as well as various manufacturers to manufacture starting
components, excipients and formulated drug products. We rely on manufacturers to produce and deliver all of the materials required for our clinical trials, and many of our preclinical efforts, on a
timely basis and to comply with applicable regulatory requirements, including the FDA's current Good Manufacturing Practices (cGMP). In addition, we rely on our suppliers to deliver sufficient
quantities of materials produced under cGMP conditions to enable us to conduct planned preclinical studies and clinical trials.

Our
current and anticipated future dependence upon these third-party manufacturers may adversely affect our ability to develop and commercialize product candidates on a timely and
competitive basis. These manufacturers may not be able to produce material on a timely basis or manufacture material at the quality level or in the quantity required to meet our development timelines
and applicable regulatory requirements and may also experience a shortage in qualified personnel. We may not be able to maintain or renew our existing third-party manufacturing arrangements, or enter
into new arrangements, on acceptable terms, or at all. Our third-party manufacturers could terminate or decline to renew our manufacturing arrangements based on their own business priorities, at a
time that is costly or inconvenient for us. If we are unable to contract for the production of materials in sufficient quantity and of sufficient quality on acceptable terms, our planned clinical
trials may be significantly delayed. Manufacturing delays could postpone the filing of our IND applications and/or the initiation of clinical trials that we have currently planned.

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Drug
manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the Drug Enforcement Administration, and other federal and state agencies to ensure strict
compliance with cGMP and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers' compliance with these regulations and standards and
they may not be able to comply. Switching manufacturers may be difficult because the number of potential manufacturers is limited. It may be difficult or impossible for us to find a replacement
manufacturer quickly on acceptable terms, or at all. Additionally, if we are required to enter into new supply arrangements, we may not be able to obtain approval from the FDA of any alternate
supplier in a timely manner, or at all, which could delay or prevent the clinical development and commercialization of any related product candidates. Failure of our third- party manufacturers or us
to comply with applicable regulations could result in sanctions being imposed on us, including fines, civil penalties, delays in or failure to grant marketing approval of our product candidates,
injunctions, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products and compounds, operating restrictions and criminal prosecutions, any of which could
significantly and adversely affect our business.

If our competitors develop technologies that are more effective than ours, our commercial opportunity will be reduced or eliminated.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change.
Many of the drugs that we are attempting to discover will be competing with existing therapies. In addition, a number of companies are pursuing the development of pharmaceuticals that target the same
diseases and conditions that we are targeting. We face, and will continue to face, intense competition from pharmaceutical and biotechnology companies, as well as from academic and research
institutions and government agencies, both in the United States and abroad. Some of these competitors are pursuing the development of pharmaceuticals that target the same diseases and conditions as
our research programs. Our major competitors include fully integrated pharmaceutical companies that have extensive drug discovery efforts and are developing novel small molecule pharmaceuticals. We
also face significant competition from organizations that are pursuing the same or similar technologies, including the discovery of targets that are useful in compound screening, as the technologies
used by us in our drug discovery efforts.

Competition
may also arise from:



Our
competitors or their collaborative partners may utilize discovery technologies and techniques or partner with collaborators in order to develop products more rapidly or successfully
than we or our collaborators are able to do. Many of our competitors, particularly large pharmaceutical companies, have substantially greater financial, technical and human resources and larger
research and development staffs than we do. In addition, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection with
respect to potentially competitive products or technologies and may establish exclusive collaborative or licensing relationships with our competitors.

We
believe that our ability to compete is dependent, in part, upon our ability to create, maintain and license scientifically-advanced technology and upon our and our collaborators'
ability to develop and commercialize pharmaceutical products based on this technology, as well as our ability to attract

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and
retain qualified personnel, obtain patent protection or otherwise develop proprietary technology or processes and secure sufficient capital resources for the expected substantial time period
between technological conception and commercial sales of products based upon our technology. The failure by any of our collaborators or us in any of those areas may prevent the successful
commercialization of our potential drug targets.

Many
of our competitors, either alone or together with their collaborative partners, have significantly greater experience than we do in:



Accordingly,
our competitors may succeed in obtaining patent protection, identifying or validating new targets or discovering new drug compounds before we do.

Our
competitors might develop technologies and drugs that are more effective or less costly than any that are being developed by us or that would render our technology and product
candidates obsolete and noncompetitive. In addition, our competitors may succeed in obtaining the approval of the FDA or other regulatory agencies for product candidates more rapidly. Companies that
complete clinical trials, obtain required regulatory agency approvals and commence commercial sale of their drugs before their competitors may achieve a significant competitive advantage, including
certain patent and FDA marketing exclusivity rights that would delay or prevent our ability to market certain products. Any drugs resulting from our research and development efforts, or from our joint
efforts with our existing or future collaborative partners, might not be able to compete successfully with competitors' existing or future products or obtain regulatory approval in the United States
or elsewhere.

We
face and will continue to face intense competition from other companies for collaborative arrangements with pharmaceutical and biotechnology companies, for establishing relationships
with academic and research institutions and for licenses to additional technologies. These competitors, either alone or with their collaborative partners, may succeed in developing technologies or
products that are more effective than ours.

Our ability to generate revenues will be diminished if our collaborative partners fail to obtain acceptable prices or an adequate level of reimbursement for products from
third-party payors or government agencies.

The drugs we hope to develop may be rejected by the marketplace due to many factors, including cost. Our ability to commercially
exploit a drug may be limited due to the continuing efforts of government and third-party payors to contain or reduce the costs of health care through various means. For example, in some foreign
markets, pricing and profitability of prescription pharmaceuticals are subject to government control. In the United States, we expect that there will continue to be a number of federal and state
proposals to implement similar government control. In addition, increasing emphasis on managed care in the United States will likely continue to put pressure
on the pricing of pharmaceutical products. Cost control initiatives could decrease the price that any of our collaborators would receive for any products in the future. Further, cost control
initiatives could adversely affect our collaborators' ability to commercialize our products and our ability to realize royalties from this commercialization.

Our
ability to commercialize pharmaceutical products with collaborators may depend, in part, on the extent to which reimbursement for the products will be available
from:



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Significant
uncertainty exists as to the reimbursement status of newly- approved healthcare products. Third-party payors, including Medicare, are challenging the prices charged for
medical products and services. Government and other third-party payors increasingly are attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for new drugs
and by refusing, in some cases, to provide coverage for uses of approved products for disease indications for which the FDA has not granted labeling approval. Third- party insurance coverage may not
be available to patients for any products we discover and develop, alone or with collaborators. If government and other third-party payors do not provide adequate coverage and reimbursement levels for
our products, the market acceptance of these products may be reduced.

If product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit commercialization of our products.

The testing and marketing of medical products entail an inherent risk of product liability. If we cannot successfully defend ourselves
against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our products. We carry product liability insurance that is limited in scope and
amount and may not be adequate to fully protect us against product liability claims. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential
product liability claims could prevent or inhibit the commercialization of pharmaceutical products we develop, alone or with corporate collaborators. We, or our corporate collaborators, might not be
able to obtain insurance at a reasonable cost, if at all. While under various circumstances we are entitled to be indemnified against losses by our corporate collaborators, indemnification may not be
available or adequate should any claim arise.

Our research and development efforts will be seriously jeopardized, if we are unable to attract and retain key employees and relationships.

As a small company, our success depends on the continued contributions of our principal management and scientific personnel and on our
ability to develop and maintain important relationships with leading academic institutions, scientists and companies in the face of intense competition for such personnel. In particular, our research
programs depend on our ability to attract and retain highly skilled chemists, other scientists, and development, regulatory and clinical personnel. If we lose the services of any of our key personnel,
our research and development efforts could be seriously and adversely affected. Our employees can terminate their employment with us at any time.

We depend on various scientific consultants and advisors for the success and continuation of our research and development efforts.

We work extensively with various scientific consultants and advisors. The potential success of our drug discovery and development
programs depends, in part, on continued collaborations with certain of these consultants and advisors. We, and various members of our management and research staff, rely on certain of these
consultants and advisors for expertise in our research, regulatory and clinical efforts. Our scientific advisors are not our employees and may have commitments to, or consulting or advisory contracts
with, other entities that may limit their availability to us. We do not know if we will be able to maintain such consulting agreements or that such scientific advisors will not enter into consulting
arrangements, exclusive or otherwise, with competing pharmaceutical or biotechnology companies, any of which would have a detrimental impact on our research objectives and could have a material
adverse effect on our business, financial condition and results of operations.

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If we use biological and hazardous materials in a manner that causes injury or violates laws, we may be liable for damages.

Our research and development activities involve the controlled use of potentially harmful biological materials as well as hazardous
materials, chemicals and various radioactive compounds. We cannot completely eliminate the risk of accidental contamination or injury from the use, storage, handling or disposal of these materials. In
the event of contamination or injury, we could be held liable for damages that result, and such liability could exceed our resources. We are also subject to federal, state and local laws and
regulations governing the use, storage, handling and disposal of these materials and specified waste products. The cost of compliance with, or any potential violation of, these laws and regulations
could be significant.

Our facilities are located near known earthquake fault zones, and the occurrence of an earthquake or other catastrophic disaster could cause damage to our facilities and
equipment, which could require us to cease or curtail operations.

Our facilities are located in the San Francisco Bay Area near known earthquake fault zones and are vulnerable to significant damage
from earthquakes. We are also
vulnerable to damage from other types of disasters, including fires, floods, power loss, communications failures and similar events. If any disaster were to occur, our ability to operate our business
at our facilities would be seriously, or potentially completely, impaired, and our research could be lost or destroyed. In addition, the unique nature of our research activities and of much of our
equipment could make it difficult for us to recover from a disaster. The insurance we maintain may not be adequate to cover our losses resulting from disasters or other business interruptions.

Future interest income and value of our investments may be impacted by further declines in interest rates and the broader effects of the recent turmoil in the global credit
markets.

Recently, the credit markets and the financial services industry have been experiencing a period of unprecedented turmoil and upheaval.
As a result of this turmoil, the interest paid on certain of our investments may decrease and the value of certain securities we hold may decline in the future, which could negatively affect our
financial condition, cash flows and reported earnings.

Our stock price may be volatile, and our stockholders' investment in our stock could decline in value.

The market prices for our common stock and the securities of other biotechnology companies have been highly volatile and may continue
to be highly volatile in the future. The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our common
stock:



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Future equity issuances or a sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

Because we may need to raise additional capital in the future to continue to expand our business and our research and development
activities, among other things, we may conduct additional equity offerings. If we or our stockholders sell substantial amounts of our common stock (including shares issued upon the exercise of options
and warrants) in the public market, the market price of our common stock could fall. A decline in the market price of our common stock could make it more difficult for us to sell equity or
equity-related securities in the future at a time and price that we deem appropriate.

Anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of us, which may be beneficial to our stockholders, more
difficult.

Provisions of our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it
more difficult for a third party to acquire us, even if doing so would benefit our stockholders. These provisions:



In
addition, Section 203 of the Delaware General Corporation Law, which imposes certain restrictions relating to transactions with major stockholders, may discourage, delay or
prevent a third party from acquiring us.

Item 1B.    Unresolved Staff Comments

None.

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Table of Contents

Item 2.    Properties

We currently lease facilities consisting of approximately 147,000 square feet of research and office space located at 1180 Veterans
Boulevard, South San Francisco, California. The lease expires in January 2018. We believe our facilities are in good operating condition and that the leased real property is adequate for all present
and near term uses.

Item 3.    Legal Proceedings

On February 6, 2009, a purported securities class action lawsuit was commenced in the United States District Court for the
Northern District of California, naming as defendants us and certain of our officers, directors and underwriters for the Stock Offering. An additional purported securities class action lawsuit
containing similar allegations was subsequently filed in the United States District Court for the Northern District of California on February 20, 2009. By order of the Court dated
March 19, 2009, the two lawsuits were consolidated into a single action. On June 9, 2009, the Court issued an order naming the Inter-Local Pension Fund GCC/IBT as lead plaintiff and
Robbins Geller Rudman & Dowd LLP (formerly Coughlin Stoia) as lead counsel. The lead plaintiff filed a consolidated complaint on July 24, 2009. We filed a motion to dismiss on
September 8, 2009. On December 21, 2009, the Court granted our motion and dismissed the consolidated complaint with leave to amend. Plaintiff filed its consolidated amended complaint on
January 27, 2010. The lawsuit alleged violations of the Securities Act and the Exchange Act in connection with allegedly false and misleading statements made by us related to the results of the
Phase 2a clinical trial of our product candidate fostamatinib (then known as R788). The plaintiff sought damages, including rescission or rescissory damages for purchasers in the Stock
Offering, an award of their costs and injunctive and/or equitable relief for purchasers of our common stock during the period between December 13, 2007 and February 9, 2009, including
purchasers in the Stock Offering. We filed a motion to dismiss the consolidated amended complaint on February 16, 2010. On August 24, 2010, the Court issued an order granting our motion
and dismissed the consolidated complaint with leave to amend. On September 22, 2010, plaintiff filed a notice informing the Court that it will not amend its complaint and requested that the
Court enter a final judgment. On October 28, 2010, the plaintiff submitted a proposed judgment requesting entry of such judgment in favor of the defendants. On November 1, 2010, judgment
was entered dismissing the action. The plaintiff filed a notice of appeal on November 15, 2010, appealing the district court's order granting our motion to dismiss the consolidated amended
complaint. The plaintiff filed its opening brief on February 23, 2011. Our opposition brief is due on or before March 25, 2011.

We
believe that we have meritorious defenses and intend to defend the lawsuit vigorously. This lawsuit and any other related lawsuits are subject to inherent uncertainties, and the
actual costs to be incurred relating to the lawsuit will depend upon many unknown factors. The outcome of the litigation is necessarily uncertain, and we could be forced to expend significant
resources in the defense of this suit, and we may not prevail. Monitoring and defending against legal actions is
time-consuming for our management and detracts from our ability to fully focus our internal resources on our business activities. In addition, we may incur substantial legal fees and costs
in connection with the litigation. We are not currently able to estimate the possible cost to us from this matter, and we cannot be certain how long it may take to resolve this matter or the possible
amount of any damages that we may be required to pay. We have not established any reserves for any potential liability relating to this lawsuit. It is possible that we could, in the future, incur
judgments or enter into settlements of claims for monetary damages. A decision adverse to our interests on this action could result in the payment of substantial damages, or possibly fines, and could
have a material adverse effect on our cash flow, results of operations and financial position. In addition, the uncertainty of the currently pending litigation could lead to increased volatility in
our stock price.

Item 4.    Reserved

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock commenced trading publicly on a predecessor to the Nasdaq Global Market under the symbol "RIGL" on
December 7, 2000. The following table sets forth, for the periods indicated, the high and low intraday sales prices of our common stock as reported on the Nasdaq Global Market:

High

LowYear Ended December 31, 2009First Quarter

$
8.85

$
4.19Second Quarter

$
13.32

$
5.39Third Quarter

$
14.75

$
6.58Fourth Quarter

$
10.15

$
6.03Year Ended December 31, 2010First Quarter

$
10.03

$
7.21Second Quarter

$
8.49

$
6.02Third Quarter

$
8.83

$
6.79Fourth Quarter

$
8.78

$
7.45


On
February 23, 2011, the last reported sale price for our common stock on the Nasdaq Global Market was $6.73 per share.

Holders

As of February 23, 2011, there were approximately 121 stockholders of record of our common stock.

Dividends

We have not paid any cash dividends on our common stock and currently do not plan to pay any cash dividends in the foreseeable future.

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Performance Measurement Comparison

The graph below shows the cumulative total stockholder return of an investment of $100 (and the reinvestment of any dividends
thereafter) on December 31, 2005 in (i) our common stock, (ii) the Nasdaq Composite Index and (iii) the Nasdaq Biotechnology Index. The Nasdaq Biotechnology Index is a
modified-capitalization weighted index that includes securities of Nasdaq-listed companies classified according to the Industry Classification Benchmark as either Biotechnology or Pharmaceuticals and
which also meet other eligibility criteria. Our stock price performance shown in the graph below is based upon historical data and is not indicative of future stock price performance.

The
following graph and related information shall not be deemed "soliciting material" or be deemed to be "filed" with the SEC, nor shall such information be incorporated by reference
into any future filing, except to the extent that we specifically incorporate it by reference into such filing.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Rigel Pharmaceuticals, Inc., the NASDAQ Composite Index  and the NASDAQ Biotechnology Index

GRAPHIC

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Item 6.    Selected Financial Data

The following selected financial data have been derived from our audited financial statements. The information set forth below is not
necessarily indicative of our results of future operations and should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations"
and "Item 8. Financial Statements and Supplementary Data" included elsewhere in this Annual Report on Form 10-K.

Fiscal Years Ended December 31,2010

2009

2008

2007

2006(in thousands, except per share amounts)Statements of Operations Data:Contract revenues from collaborations

$
125,000

$
750

$


$
12,600

$
33,473Costs and expenses:Research and development


64,392


90,743


109,670


70,364


56,968General and administrative


25,291


20,903


27,044


21,763


19,552Restructuring charges





1,141








Total costs and expenses


89,683


112,787


136,714


92,127


76,520Income (loss) from operations


35,317


(112,037
)

(136,714
)

(79,527
)

(43,047
)Other income


2,361











Interest income


303


600


4,439


5,476


5,700Interest expense


(91
)

(203
)

(160
)

(221
)

(290
)Income (loss) before income taxes


37,890


(111,640
)

(132,435
)

(74,272
)

(37,637
)Income tax benefit





93


89





Net income (loss)


37,890


(111,547
)

(132,346
)

(74,272
)

(37,637
)Net income (loss) per share:Basic

$
0.73

$
(2.73
)
$
(3.67
)
$
(2.57
)
$
(1.51
)Diluted

$
0.72

$
(2.73
)
$
(3.67
)
$
(2.57
)
$
(1.51
)Weighted average shares used incomputing net income (loss) per share:Basic


52,055


40,876


36,025


28,936


24,936Diluted


52,573


40,876


36,025


28,936


24,936




As of December 31,2010

2009

2008

2007

2006(in thousands)Balance Sheet Data:Cash, cash equivalents and available-for-sale securities

$
177,295

$
133,318

$
134,477

$
108,296

$
104,471Working capital


168,600


118,195


113,936


95,018


96,776Total assets


186,695


140,744


143,858


115,789


113,240Capital lease obligations, less current portion


45


883


2,053


784


1,082Accumulated deficit


(575,434
)

(613,324
)

(501,777
)

(369,431
)

(295,159
)Total stockholders' equity


166,131


109,867


104,165


82,182


87,229


See
Note 1 to the Financial Statements for description of the number of shares used in the computation of basic and diluted income (loss) per share.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a clinical-stage drug development company that discovers and develops novel, small-molecule drugs for the treatment of
inflammatory and autoimmune diseases, as well as for muscle disorders. Our pioneering research focuses on intracellular signaling pathways and related targets that are critical to disease mechanisms.
Our productivity has resulted in strategic
collaborations with large pharmaceutical partners to develop and market our product candidates. Current product development programs include fostamatinib, an oral syk inhibitor that has started its
phase 3 clinical trial program for RA (partnered with AZ), and R343, an inhaled syk inhibitor that is in clinical trials for asthma (partnered with Pfizer).

Since
inception, we have financed our operations primarily through the sale of equity securities, contract payments under our collaboration agreements and equipment financing
arrangements. Our research and development activities, including preclinical studies and clinical trials, consume substantial amounts of capital. As of December 31, 2010, we had approximately
$177.3 million in cash, cash equivalents and available-for-sale securities. We believe that our existing capital resources will be sufficient to support our current and
projected funding requirements through at least the next twelve months. Until we are able to generate sufficient amounts of product and royalty revenues, we expect to finance future cash needs through
collaboration and licensing arrangements or public and/or private equity or debt offerings, as well as through interest income earned on the investment of our cash balances and short-term
investments.

Product Development Programs

Our product development portfolio features multiple novel, small-molecule drug candidates whose specialized mechanisms of action are
intended to provide therapeutic benefit for a range of inflammatory and autoimmune disorders, as well as for muscle disorders. Please refer to "Part I. Item 1. Business-Product
Development Programs" for a detailed discussion of our multiple product candidates in development.

Corporate Collaborations

We conduct research and development programs independently and in connection with our corporate collaborators. Please refer to
"Part I. Item 1. BusinessCorporate Collaborations" for a detailed discussion of our corporate collaborations.

Research and Development Expenses

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
do not track fully burdened research and development costs separately for each of our drug candidates. We review our research and development expense by focusing on three categories:
research, development, and other. Our research team is focused on creating a portfolio of product candidates that can be developed into small molecule therapeutics in our own proprietary programs or
with potential collaborative partners and utilizes our robust discovery engine to rapidly discover and validate new product candidates in our focused range of therapeutic indications. "Research"
expenses relate primarily to personnel expenses, lab supplies, fees to third party research consultants, and compounds. Our development group leads the implementation of our clinical and regulatory
strategies and prioritizes disease indications in which our compounds may be studied in clinical trials. "Development" expenses relate primarily to clinical trials, personnel expenses, lab supplies,
and fees to third party

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research
consultants. "Other" expenses primarily include allocated stock-based compensation expense relating to personnel in research and development groups and allocated facilities costs.

In
addition to reviewing the three categories of research and development expense described in the preceding paragraph, we principally consider qualitative factors in making decisions
regarding our research and development programs, which include enrollment in clinical trials and the results thereof, the clinical and commercial potential for our drug candidates and competitive
dynamics. We also make our research and development decisions in the context of our overall business strategy, which includes the evaluation of potential collaborations for the development of our drug
candidates.

The
following table presents our total research and development expense by category.

Years Ended December 31,2010

2009

2008(in thousands)Categories:Research

$
20,082

$
18,845

$
23,446Development


19,000


46,226


57,173Other


25,310


25,672


29,051$
64,392

$
90,743

$
109,670


"Other"
expenses mainly represent allocated stock-based compensation expenses of approximately $9.0 million, $8.9 million and $12.3 million for the years ended
December 31, 2010, 2009 and 2008, respectively, and allocated facilities costs of approximately $16.3 million for the year ended December 31, 2010 and $16.7 million for
each of the years ended December 31, 2009 and 2008.

For
the period from January 1, 2007 to December 31, 2010, total research and development expense by category was $86.3 million, $146.6 million, and
$102.3 million, for research, development, and other, respectively.

For
the year ended December 31, 2010, the major portion of our research and development expense was related to the extension trials in RA patients and the oral Jak3 inhibitor
program. For the years ended December 31, 2009 and 2008, the major portion of our research and development expense was
associated with our two Phase 2b clinical trials (TASKi2 and TASKi3), as well as the related extension trials in RA patients. The expenses for these programs are included under "Development" in
the table above.

The
Phase 2 clinical trials of fostamatinib in RA were completed in 2009. We licensed the rights to fostamatinib to AZ in February 2010. On September 29, 2010, AZ announced
the enrollment of the first patient in the Phase 3 clinical program for fostamatinib, referred to as OSKIRA. The first anticipated filings of new drug applications with the FDA and the EMA
based on the OSKIRA clinical trial program are planned for 2013. AZ will be responsible for conducting and funding all future development, regulatory filings, manufacturing and global
commercialization of products containing oral syk inhibitors.

The
scope and magnitude of future research and development expense are difficult to predict given the number of clinical trials that we will need to conduct for any of our potential
products, as well as our limited capital resources. Preclinical testing and clinical development are long, expensive and uncertain processes. In general, biopharmaceutical development involves a
series of steps, beginning with identification of a potential target and including, among others, proof of concept in animals and Phase 1, 2 and 3 clinical trials in humans. Each of these steps
is typically more expensive than the previous step. Success in early stages of development often results in increasing expenditures for a given product candidate. Significant delays in clinical
testing could materially impact our product development costs and timing of completion of the clinical trials. We do not know whether planned

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clinical
trials will begin on time, will need to be halted or revamped or will be completed on schedule, or at all. Clinical trials can be delayed for a variety of reasons, including delays in
obtaining regulatory approval to commence a trial, delays from scale up, delays in reaching agreement on acceptable clinical trial agreement terms with prospective clinical sites, delays in obtaining
institutional review board approval to conduct a clinical trial at a prospective clinical site or delays in recruiting subjects to participate in a clinical study.

We
currently do not have reliable estimates of total costs for a particular drug candidate to reach the market. Our potential products are subject to a lengthy and uncertain regulatory
process that may involve unanticipated additional clinical trials and may not result in receipt of the necessary regulatory approvals. Failure to receive the necessary regulatory approvals would
prevent us from commercializing the product candidates affected. In addition, clinical trials of our potential products may fail to demonstrate safety and efficacy, which could prevent or
significantly delay regulatory approval. We do not have a reasonable basis to determine when or if material net cash inflows from the commercialization and sale of our drug candidates will occur.
Commercialization of our product candidates depends upon successful completion of extensive preclinical studies and clinical trials to demonstrate their safety and efficacy for humans. We do not know
whether we, or any of our current or potential future collaborative partners, will undertake clinical trials of potential products beyond the trials already concluded and the trials currently in
process. It will take us, or our current or potential future collaborative partners, several years to complete any such testing, and failure can occur at any stage of testing. Interim results of
trials do not necessarily predict final results, and acceptable results in early trials may not be repeated in later trials. Moreover, we or our current or potential future
collaborative partners may decide to discontinue development of any project at any time for regulatory, commercial, scientific or other reasons. To date, we have not commercialized any of our drug
candidates, and we may never do so.

For
a discussion of the risks and uncertainties associated with the timing and costs of completing the development of our drug candidates, see "Part I. Item 1A. Risk
Factors," including in particular the following risks:



For
further discussion on research and development activities, see "Research and Development Expense" under "Results of Operations" below.

Critical Accounting Policies and the Use of Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have
been prepared in accordance with U.S. generally accepted accounting

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principles
(GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to the terms of our research and development collaborations (i.e. revenue recognition of
upfront fees and certain milestone payments), investments, stock-based compensation, impairment issues, the estimated useful life of assets, estimated accruals and contingencies, on an
on-going basis. 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 were no significant changes in our critical accounting policies during the year ended December 31, 2010 as compared to those previously
disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009. We believe the following critical accounting policies affect our more significant judgments
and estimates used in the preparation of our financial statements:

Revenue Recognition

We present revenue from our collaboration arrangements under Financial Accounting Standards Board (FASB) Accounting Standards
Codification (ASC) 808,Collaboration Arrangements. Our revenue arrangements with multiple elements are evaluated under FASB ASC 605-25, Multiple-Element
Arrangements, and are divided into separate units of accounting if certain criteria are met, including whether the delivered element
has stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of any undelivered items. The consideration we receive is allocated among the separate
units based on their respective fair values, and the applicable revenue recognition criteria are applied to each of the separate units. Advance payments received in excess of amounts earned are
classified as deferred revenue until earned.

Non-refundable,
up-front payments received in connection with research and development collaboration agreements, including technology access fees, are deferred
and recognized on a straight-line basis over the relevant periods of continuing involvement, generally the research term. When a research term is not specified, we estimate the time it
will take us to complete our deliverables under the contract and recognize the upfront fee using the straight-line method over that time period. We review our estimates every quarter for
reasonableness.

Revenues
related to collaborative research with our corporate collaborators are recognized as research services are performed over the related development periods for each agreement.
Under these agreements, we are required to perform research and development activities as specified in each respective agreement. The payments received are not refundable and are generally based on a
contractual cost per full-time equivalent employee working on the project. Our research and development expenses under the collaborative research agreements approximate the revenue
recognized under such agreements over the term of the respective agreements. It is our policy to recognize revenue based on our level of effort expended, however, revenue recognized will not exceed
amounts billable under the agreement.

Revenues
associated with substantive, at-risk milestones pursuant to collaborative agreements are recognized upon achievement of the applicable milestones.

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Stock-Based Compensation

Total stock-based compensation expense related to our officers, directors and all other employees and consultants stock option plans
that we recognized for the year ended December 31, 2010, 2009 and 2008 was comprised as follows:

Years Ended December 31,

Aggregate Change

Aggregate Change2010

2009

2008

2010 from 2009

2009 from 2008(in thousands)Stock-based compensation expense from:Officer, director and employee options

$
16,405

$
13,217

$
23,565

$
3,188

$
(10,348
)Consultant options


31


99


194


(68
)

(95
)Restructuring charges





122





(122
)

122Total

$
16,436

$
13,438

$
23,759

$
2,998

$
(10,321
)


We
grant options to purchase our common stock to our officers, directors and all other employees and consultants under our stock option plans. Eligible employees can also purchase shares
of our common stock at a price per share equal to the lesser of 85% of the fair market value on the first day of the offering period or 85% of the fair market value on the purchase date under our
employee stock purchase plan (Purchase Plan). The benefits provided under these plans are stock-based payments subject to the provisions of FASB ASC 718. We adopted the use of the
straight-line attribution method over the requisite service period for the entire award. In addition, we estimate the amount of expected forfeitures when calculating compensation costs,
then record actual forfeitures as they occur. We review our forfeiture rates each quarter and make any necessary changes to our estimates.

The
increase in stock-based compensation expense for the year ended December 31, 2010, as compared to the same period in 2009, was primarily due to the stock-based compensation
expense amortization resulting from the increase in the number of options granted in the second quarter of 2010, as compared to the same period in 2009, as well as an additional full quarter of
stock-based compensation expense amortization in the first quarter of 2010 related to options granted in late March of 2009, which were fully amortized as of the end of the first quarter of 2010. The
decrease in stock-based compensation expense for the year ended December 31, 2009, as compared to the same period in 2008, was primarily due to the lower valuation of options granted in the
first quarter of 2009 and only three quarters of the stock-based compensation expense related to these grants being recognized in 2009 because of a late March 2009 grant date.

In
February 2009, we announced that we cut our research programs in virology and oncology as well as terminated certain related development and administrative staff, which resulted in
the dismissal of 36 employees, or approximately 20% of our workforce. This measure was intended to maintain our emphasis on our active preclinical and clinical programs, while conserving our
resources. As part of a package we offered the terminated employees, we extended the date the terminated employees had to exercise their vested options to December 31, 2009 rather than
90 days from the termination date as is typically required under our equity incentive plan. We recorded $122,000 of non-cash stock-based compensation expense incurred in connection
with this modification in the first quarter of 2009.

The
determination of the fair value of stock-based payment awards on the date of grant using the Black-Scholes option-pricing model is affected by our stock price, as well as assumptions
regarding a number of complex and subjective variables. These variables include, but are not limited to, volatility, expected term, risk-free interest rate and dividends. We estimate
volatility over the expected term of the option using historical share price performance. For expected term, among other things, we take into consideration our historical data of options exercised,
cancelled and expired. The risk-free rate is based on the U.S. Treasury constant maturity rate. We have not paid and do not expect to pay

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dividends
in the foreseeable future. In order to calculate stock-based compensation expense, we also estimate the forfeiture rate using our historical experience with options that cancel before they
vest.

We
also record charges associated with options granted to consultants reflecting the fair value and periodic fair value re-measurement of outstanding consultant options under
FASB ASC 505-50. The valuation is based upon the current market value of our common stock and other assumptions, including the expected future volatility of our stock price,
risk-free interest rate and expected term. We amortize stock-based compensation related to consultants using a straight-line attribution method consistent with the method used
for employees and with the attribution election we made upon adoption of FASB ASC 718.

Research and Development Accruals

We have various contracts with third parties related to our research and development activities. Costs that are incurred but not billed
to us as of the end of the period are accrued. We make estimates of the amounts incurred in each period based on the information available to us and our knowledge of the nature of the contractual
activities generating such costs. Clinical trial contract expenses are accrued based on units of activity reported by third parties. Expenses related to other research and development contracts, such
as research contracts, toxicology study contracts and manufacturing contracts are estimated to be incurred generally on a straight-line basis over the duration of the contracts. Raw
materials and study materials purchased by third parties are expensed at the time of purchase. Many of our estimates are based significantly or in part on information provided by third parties. If
such information were not reported properly, our research and development expense amounts could be misstated.

Results of Operations

Years Ended December 31, 2010, 2009 and 2008

Revenues

Years Ended December 31,

Aggregate Change

Aggregate Change2010

2009

2008

2010 from 2009

2009 from 2008(in thousands)Contract revenues from collaborations

$
125,000

$
750

$


$
124,250

$
750


Revenues
by collaborator were:

Years Ended December 31,

Aggregate Change

Aggregate Change2010

2009

2008

2010 from 2009

2009 from 2008(in thousands)AstraZeneca

$
125,000

$


$


$
125,000

$
Daiichi Sankyo





750





(750
)

750Total

$
125,000

$
750

$


$
124,250

$
750


Contract
revenues of $125.0 million in 2010 consisted of the $100.0 million upfront payment from AZ pursuant to the exclusive worldwide license agreement for fostamatinib
and $25.0 million in milestone payments earned under the agreement for the initiation of the Phase 3 clinical program with fostamatinib in patients with RA and for the completion of
transferring the fostamatinib long-term open label extension study to AZ. Contract revenues of $750,000 in 2009
consisted of a milestone payment from Daiichi for the first designation of a rational design lead compound. There were no contract revenues reported during the year ended December 31, 2008.

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The
increase in revenues for the year ended December 31, 2010, as compared to the similar period in 2009, was due to the recognition of the upfront payment and milestone payments
from AZ in 2010 as discussed above. The increase in revenues for the year ended December 31, 2009, as compared to the similar period in 2008, was due to the recognition of the milestone payment
from Daiichi in December 2009. We had no deferred revenue as of December 31, 2010. Our potential future revenues in 2011 may include certain milestone payments from our current collaboration
partners and upfront and milestone payments from new collaboration partners we enter into agreements with in the future.

Research and Development Expense

Years Ended December 31,

Aggregate Change

Aggregate Change2010

2009

2008

2010 from 2009

2009 from 2008(in thousands)Research and development expense

$
64,392

$
90,743

$
109,670

$
(26,351
)
$
(18,927
)Stock-based compensation expense included in research and development expense

$
9,025

$
8,937

$
12,272

$
88

$
(3,335
)


The
decrease in research and development expense for the year ended December 31, 2010, compared to the same period in 2009, was primarily due to the completion of our two
Phase 2b clinical trials,TASKi2andTASKi3, in July 2009, as well as the completion of the
transfer of the fostamatinib open label extension study to AZ in September 2010, partially offset by the increase in costs related to the oral Jak3 inhibitor program. The decrease in research and
development expenses for the year ended December 31, 2009, compared to the same period in 2008, was primarily due to a decrease in clinical trial costs as a result of the completion of TASKi2andTASKi3in July 2009, the decrease in stock-based compensation expense discussed under
"Stock-Based Compensation" above, and cost savings resulting from the restructuring implemented in the first quarter of 2009, as discussed under "Restructuring Charges" below.

General and Administrative Expense

Years Ended December 31,

Aggregate Change

Aggregate Change2010

2009

2008

2010 from 2009

2009 from 2008(in thousands)General and administrative expense

$
25,291

$
20,903

$
27,044

$
4,388

$
(6,141
)Stock-based compensation expense included in general and administrative expense

$
7,411

$
4,379

$
11,487

$
3,032

$
(7,108
)


The
increase in general and administrative expense for the year ended December 31, 2010, as compared to the same period in 2009, was primarily due to the increase in stock-based
compensation expense discussed under "Stock-Based Compensation Expense" above, and certain one-time investment banking fees associated with the closing of our transaction with AZ. The
decrease in general and administrative expenses for the year ended December 31, 2009, as compared to the same period in 2008, was primarily attributable to a decrease in stock-based
compensation expense discussed under "Stock-Based Compensation" above, partially offset by the increase in bonus expense for 2009.

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Restructuring Charges

Years Ended December 31,

Aggregate Change

Aggregate Change2010

2009

2008

2010 from 2009

2009 from 2008(in thousands)Restructuring charges

$


$
1,141

$


$
(1,141
)
$
1,141Stock-based compensation expense included in restructuring charges

$


$
122

$


$
(122
)
$
122


In
February 2009, we announced that we cut our research programs in virology and oncology as well as terminated certain related development and administrative staff, which resulted in
the dismissal of 36 employees, or approximately 20% of our workforce. This measure was intended to maintain our emphasis on our active preclinical and clinical programs, while conserving our
resources. As a result of the restructuring implemented in the first quarter of 2009, we recorded restructuring charges of $1.1 million, including $1.0 million of workforce reduction
costs (which had been paid as of December 31, 2009) and $122,000 of non-cash stock-based compensation expense incurred in connection with the extension of the date the terminated
employees had to exercise their vested options to December 31, 2009 rather than 90 days from the termination date as is typically required under our equity incentive plan.

Other income

Years Ended December 31,

Aggregate Change

Aggregate Change2010

2009

2008

2010 from 2009

2009 from 2008(in thousands)Other income

$
2,361

$


$


$
2,361

$



Other
income in 2010 consists of our total cash grant from the Internal Revenue Service of approximately $2.4 million related to the previously filed applications under the
Qualifying Therapeutic Discovery Projects (Section 48D of the Internal Revenue Code). Of this amount, $2.1 million was received in 2010 and the remainder is expected to be received in
2011.

Interest income

Years Ended December 31,

Aggregate Change

Aggregate Change2010

2009

2008

2010 from 2009

2009 from 2008(in thousands)Interest income

$
303

$
600

$
4,439

$
(297
)
$
(3,839
)


Interest
income results from our interest-bearing cash and investment balances. The decrease in interest income for the year ended December 31, 2010, as compared to the same
period in 2009, was due to lower interest rates in 2010. The decrease in interest income for the year ended December 31, 2009, as compared to the same period in 2008, was due to lower average
cash balances and lower interest rates earned on our investments in 2009.

Interest expense

Years Ended December 31,

Aggregate Change

Aggregate Change2010

2009

2008

2010 from 2009

2009 from 2008(in thousands)Interest expense

$
(91
)
$
(203
)
$
(160
)
$
112

$
(43
)


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Interest
expense primarily results from our capital lease obligations associated with fixed asset acquisitions. The decrease in interest expense for the year ended December 31,
2010, as compared to the same period in 2009, was primarily due to the lower average outstanding balance of capital lease obligations in 2010, as compared to the same period in 2009. Interest expense
was relatively flat for the years 2009 and 2008.

Income tax benefit

Years Ended
December 31,

Aggregate Change

Aggregate Change2010

2009

2008

2010 from 2009

2009 from 2008(in thousands)Income tax benefit

$


$
93

$
89

$
(93
)
$
4


Income
tax benefit in 2009 resulted from a federal refundable tax credit in accordance with the provisions of the American Recovery and Reinvestment Act of 2009. Income tax benefit in
2008 resulted from a federal refundable tax credit in accordance with the provisions of the Housing and Economic Recovery Act of 2008. These benefits under the Acts expired as of December 31,
2009.

Recent Accounting Pronouncements

In April 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-17 thereby amending ASC 605 for revenue
recognition related to the milestone method of revenue recognition. ASU No. 2010-17 provides guidance on defining a milestone and determining when it may be appropriate to apply the
milestone method of revenue recognition for research or development arrangements. A company may make an accounting policy election to use the milestone method of revenue recognition for transactions
within the scope of the amendments. The amendments will be effective in fiscal years beginning on or after June 15, 2010, and
early adoption is permitted. We will adopt the amendments on January 1, 2011 on a prospective basis. We evaluated the impact of adopting ASU No. 2010-17 and believe it will
have no material effect on our financial statements.

In
October 2009, the FASB issued ASU No. 2009-13 (formerly Emerging Issues Task Force, or EITF, No. 08-1) on ASC 605 for revenue recognition related
to multiple-deliverable revenue arrangements. ASU No. 2009-13 provides amendments to the existing criteria for separating consideration in multiple-deliverable arrangements. The
amendments establish a selling price hierarchy for determining the selling price of a deliverable, eliminate the residual method of allocation of arrangement consideration to all deliverables and
require the use of the relative selling price method in the allocation of arrangement consideration to all deliverables, require the determination of the best estimate of a selling price in a
consistent manner, and significantly expand the disclosures related to the multiple-deliverable revenue arrangements. The amendments will be effective in fiscal years beginning on or after
June 15, 2010, and early adoption is permitted. We will adopt the amendments on January 1, 2011 on a prospective basis. We evaluated the impact of adopting ASU
No. 2009-13 and believe it will have no material effect on our financial statements.

Liquidity and Capital Resources

Cash Requirements

From inception, we have financed our operations primarily through sales of equity securities, contract payments under our collaboration
agreements and equipment financing arrangements. We have consumed substantial amounts of capital to date as we continue our research and development activities, including preclinical studies and
clinical trials. In February 2010, we entered into an exclusive worldwide license agreement with AZ for the global development and commercialization of our oral syk inhibitors for the treatment of
human diseases other than those primarily involving respiratory or

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pulmonary
dysfunction. AZ is responsible for conducting and funding all future development, regulatory filings, manufacturing and global commercialization of products containing oral syk inhibitors.
The agreement became effective on March 26, 2010 and, in connection with the effectiveness of the agreement, we received an upfront payment from AZ of $100.0 million in April 2010. In
October 2010, we received $25.0 million from AZ for the fulfillment of two major milestones under the
worldwide license agreement for the initiation of the Phase 3 clinical trial program of fostamatinib in patients with RA and for the completion of the transfer of the fostamatinib
long-term open label extension study to AZ. AZ is required to pay us up to an additional $320.0 million if specified development, regulatory and launch milestones are achieved for
fostamatinib. We will also be eligible to receive up to an additional $800.0 million if specified sales performance milestones are achieved for fostamatinib, as well as significant stepped
double-digit royalties on net sales worldwide.

In
October 2010, we were notified by the Internal Revenue Service that we have been certified to receive a total cash grant of approximately $2.4 million related to the previously
filed applications under the Qualifying Therapeutic Discovery Projects (Section 48D of the Internal Revenue Code). Of this amount, approximately $2.1 million was received in November
2010 and the remainder is expected to be received in 2011.

As
of December 31, 2010, we had approximately $177.3 million in cash, cash equivalents and available-for-sale securities, as compared to
approximately $133.3 million as of December 31, 2009, an increase of approximately $44.0 million. The increase was primarily attributable to the receipt of the
$125.0 million in upfront and milestone payments from AZ, partially offset by operating expenses for the year ended December 31, 2010. We believe that our existing capital resources will
be sufficient to support our current and projected funding requirements through at least the next twelve months. We have based this estimate on assumptions that may prove to be wrong, and we could
utilize our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of our product candidates and other research
and development activities, including risks and uncertainties that could impact the rate of progress of our development activities, we are unable to estimate with certainty the amounts of increased
capital outlays and operating expenditures associated with our current and anticipated clinical trials and other research and development activities.

Our
operations will require significant additional funding for the foreseeable future. Until we are able to generate sufficient amounts of product revenues and/or royalty revenues, we
expect to finance future cash needs through public and/or private equity offerings, debt financings or collaboration and licensing arrangements, as well as through interest income earned on the
investment of our cash balances and short-term investments. To the extent we raise additional capital by issuing equity securities, our stockholders could at that time experience
substantial dilution. Any debt financing that we are able to obtain may involve operating covenants that restrict our business. To the extent that we raise additional funds through collaboration and
licensing arrangements, we may be required to relinquish some of our rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us.

Our
future funding requirements will depend upon many factors, including, but not limited to:



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Insufficient
funds may require us to delay, scale back or eliminate some or all of our 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. For
the years ended December 31, 2010 and 2009, we maintained an investment portfolio primarily in money market funds, U.S. treasury bills, government-sponsored enterprise securities, and corporate
bonds and commercial paper. Cash in excess of immediate requirements is invested with regard to liquidity and capital preservation. Wherever possible, we seek to minimize the potential effects of
concentration and degrees of risk.

Cash Flows from Operating, Investing and Financing Activities

Years Ended December 31,2010

2009

2008(in thousands)Net cash provided by (used in):Operating activities

$
46,743

$
(102,779
)
$
(103,518
)Investing activities


(53,403
)

(30,664
)

(26,970
)Financing activities


820


102,155


131,990Net (decrease) increase in cash and cash equivalents

$
(5,840
)
$
(31,288
)
$
1,502


Net
cash provided by operating activities was approximately $46.7 million in 2010 compared to net cash used in operating activities of approximately $102.8 million and
$103.5 million in 2009 and 2008, respectively. The increase in net cash provided by operating activities in 2010 compared with 2009 was mainly due to the receipt from AZ of the
$100.0 million upfront payment in April 2010 and $25.0 million in milestone payments in October 2010, partially offset by the cash payments related to our research and development
programs. The decrease in net cash used in operating activities in 2009 compared with 2008 was primarily due to the decrease in cash payments related to our research and development programs. The
timing of cash requirements may vary from period to period depending on our research and development activities, including our planned preclinical and clinical trials, and future requirements to
establish commercial capabilities for any products that we may develop.

Net
cash used in investing activities was approximately $53.4 million in 2010 compared to approximately $30.7 million and $26.9 million in 2009 and 2008,
respectively. The increase in net cash used in investing activities in 2010 compared with 2009 related primarily to purchases of available-for-sale securities of approximately
$266.1 million, partially offset by maturities of available-for-sale securities of approximately $216.2 million. The increase in net cash used in investing
activities in 2009 compared with 2008 related primarily to purchases of available-for-sale securities of

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approximately
$169.9 million, partially offset by maturities of available-for-sale securities of approximately $131.2 million and sale of
available-for-sale securities of approximately $8.2 million. Capital expenditures were approximately $3.6 million in 2010 compared to $141,000 in 2009 and
$2.5 million in 2008.

Net
cash provided by financing activities was approximately $820,000 in 2010 compared to approximately $102.2 million and $132.0 million in 2009 and 2008, respectively. Net
cash provided by financing activities in 2010 included proceeds from the exercise of outstanding options and the issuance of shares under our Purchase Plan of approximately $2.0 million. Net
cash provided by financing activities in 2009 and 2008 was mainly due to the public offerings we completed in those years. In the third quarter of 2009, we completed a public offering in which we
received net proceeds of approximately $101.5 million. In the first quarter of 2008, we completed a public offering in which we received net proceeds of approximately $127.5 million. Net
cash provided by financing activities also included proceeds from the exercise of outstanding options and the issuance of shares under our Purchase Plan of approximately $2.1 million and
$2.8 million in 2009 and 2008, respectively. We did not have proceeds from capital lease financing in 2010 and 2009 compared to approximately $2.9 million in 2008. Net cash provided by
financing activities was partially offset by payments on capital lease obligations of approximately $1.1 million, $1.4 million and $1.2 million in 2010, 2009 and 2008,
respectively.

Off-Balance Sheet Arrangements

As of December 31, 2010, we had no off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of
Regulation S-K under the Exchange Act) that create potential material risks for us and that are not recognized on our balance sheets.

Contractual Obligations

As of December 31, 2010, we had the following contractual commitments:

Payment Due By PeriodTotal

Less than
1 Year

1 - 3
Years

3 - 5
Years

More than
5 years(in thousands)Capital Lease obligations(1)

$
821

$
776

$
45

$


$
Facilities lease


102,152


12,756


27,081


29,281


33,034Total

$
102,973

$
13,532

$
27,126

$
29,281

$
33,034


(1)As
of December 31, 2010, we had approximately $821,000 in capital lease obligations (including the interest portion) associated with our equipment.
All existing capital lease agreements as of December 31, 2010 are secured by the equipment financed, bear interest at rates between 4.99% and 7.41% and are due in monthly installments through
2012.


Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive
from our investments without significantly increasing risk. Some of the securities in which we invest may have market risk. This means that a change in prevailing interest rates may cause the fair
value amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the prevailing interest rate
later rises, the market value amount of our investment will decline. To minimize this risk in the future, we intend to maintain our portfolio of cash equivalents and
available-for-sale securities in a variety of securities, including money market funds and government and non-government debt securities. In 2010,

44

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2009
and 2008, we maintained an investment portfolio primarily in money market funds, U. S. treasury bills, government-sponsored enterprise securities, and corporate bonds and commercial paper. Due to
the primarily short-term nature of these investments, we believe we do not have a material exposure to interest rate risk arising from our investments. In addition, we believe we have no
incremental or new risk related to recent credit market volatility. Therefore, no quantitative tabular disclosure is provided.

We
have operated primarily in the United States, and all funding activities with our collaborators to date have been made in U.S. dollars. Accordingly, we have not had any significant
exposure to foreign currency rate fluctuations.

45

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Item 8.    Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS  Rigel Pharmaceuticals, Inc.



PageReport of Independent Registered Public Accounting Firm

47Balance Sheets

48Statements of Operations

49Statement of Stockholders' Equity

50Statements of Cash Flows

51Notes to Financial Statements

52


46

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Table of Contents

Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders
Rigel Pharmaceuticals, Inc.

We
have audited the accompanying balance sheets of Rigel Pharmaceuticals, Inc. as of December 31, 2010 and 2009, and the related statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rigel Pharmaceuticals, Inc. at December 31,
2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting
principles.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Rigel Pharmaceuticals, Inc.'s internal control over
financial reporting as of December 31, 2010, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated March 1, 2011 expressed an unqualified opinion thereon.



Palo
Alto, California
March 1, 2011

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Table of Contents

RIGEL PHARMACEUTICALS, INC.        BALANCE SHEETS        (In thousands, except share and per share amounts)

December 31,2010

2009AssetsCurrent assets:Cash and cash equivalents

$
8,877

$
14,717Available-for-sale securities


168,418


118,601Prepaid expenses and other current assets


2,631


2,650Total current assets


179,926


135,968Property and equipment, net


4,534


2,291Other assets


2,235


2,485$
186,695

$
140,744Liabilities and stockholders' equityCurrent liabilities:Accounts payable

$
1,403

$
3,154Accrued compensation


4,811


6,840Other accrued liabilities


4,357


6,718Capital lease obligations


755


1,061Total current liabilities


11,326


17,773Long-term portion of capital lease obligations


45


883Long-term portion of deferred rent


9,056


12,064Other long-term liabilities


137


157Commitments and contingenciesStockholders' equity:Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued and outstanding as of December 31, 2010 and 2009





Common stock, $0.001 par value; 100,000,000 shares authorized; 52,271,184 and 51,956,140 shares issued and outstanding as of December 31, 2010 and
2009, respectively


52


52Additional paid-in capital


741,551


723,151Accumulated other comprehensive loss


(38
)

(12
)Accumulated deficit


(575,434
)

(613,324
)Total stockholders' equity


166,131


109,867$
186,695

$
140,744


See
accompanying notes.

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RIGEL PHARMACEUTICALS, INC.        STATEMENTS OF OPERATIONS        (In thousands, except per share amounts)

Years Ended December 31,2010

2009

2008Contract revenues from collaborations

$
125,000

$
750

$
Costs and expenses:Research and development


64,392


90,743


109,670General and administrative


25,291


20,903


27,044Restructuring charges





1,141


Total costs and expenses


89,683


112,787


136,714Income (loss) from operations


35,317


(112,037
)

(136,714
)Other income


2,361





Interest income


303


600


4,439Interest expense


(91
)

(203
)

(160
)Income (loss) before income taxes


37,890


(111,640
)

(132,435
)Income tax benefit





93


89Net income (loss)

$
37,890

$
(111,547
)
$
(132,346
)Net income (loss) per share:Basic

$
0.73

$
(2.73
)
$
(3.67
)Diluted

$
0.72

$
(2.73
)
$
(3.67
)Weighted average shares used in computing net income (loss) per share:Basic


52,055


40,876


36,025Diluted


52,573


40,876


36,025


See
accompanying notes.

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Table of Contents

RIGEL PHARMACEUTICALS, INC.        STATEMENT OF STOCKHOLDERS' EQUITY        (In thousands, except share and per share amounts)

Common Stock



Accumulated
Other
Comprehensive
Income (Loss)Additional
Paid-in
Capital

Accumulated
Deficit

Total
Stockholders'
EquityShares

AmountBalance at December 31, 2007


31,381,774

$
31

$
451,384

$
198

$
(369,431
)
$
82,182Net loss














(132,346
)

(132,346
)Change in unrealized gain on available-for-sale securities











198





198Comprehensive loss

















(132,148
)Issuance of common stock at $27.00 per share for cash, net of issuance costs


5,000,000


5


127,535








127,540Issuance of common stock upon exercise of options and participation in Purchase Plan


264,623


1


2,831








2,832Stock compensation expense








23,759








23,759Balance at December 31, 2008


36,646,397


37


605,509


396


(501,777
)

104,165Net loss














(111,547
)

(111,547
)Change in unrealized loss on available-for-sale securities











(408
)




(408
)Comprehensive loss

















(111,955
)Issuance of common stock at $7.25 per share for cash, net of issuance costs


14,950,000


15


101,445








101,460Issuance of common stock upon exercise of options and participation in Purchase Plan


359,743





2,143








2,143Stock compensation expense








13,438








13,438Warrants issued with lease amendment4








616








616Balance at December 31, 2009


51,956,140

$
52

$
723,151

$
(12
)
$
(613,324
)
$
109,867Net income














37,890


37,890Change in unrealized loss on available-for-sale securities











(26
)




(26
)Comprehensive income

















37,864Issuance of common stock upon exercise of options and participation in Purchase Plan


315,044





1,964








1,964Stock compensation expense








16,436








16,436Balance at December 31, 2010


52,271,184

$
52

$
741,551

$
(38
)
$
(575,434
)
$
166,131


See accompanying notes.

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RIGEL PHARMACEUTICALS, INC.        STATEMENTS OF CASH FLOWS        (In thousands)

Years Ended December 31,2010

2009

2008Operating activitiesNet income (loss)

$
37,890

$
(111,547
)
$
(132,346
)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Depreciation and amortization


1,317


1,403


1,425Stock-based compensation expense


16,436


13,438


23,759Changes in assets and liabilities:Prepaid expenses and other current assets


19


960


(776
)Other assets


250


335


(105
)Accounts payable


(1,751
)

(2,830
)

1,721Accrued compensation


(2,029
)

5,215


(6,508
)Other accrued liabilities


(2,361
)

(5,311
)

9,998Deferred rent and other long term liabilities


(3,028
)

(4,442
)

(686
)Net cash provided by (used in) operating activities


46,743


(102,779
)

(103,518
)Investing activitiesPurchases of available-for-sale securities


(266,092
)

(169,928
)

(194,603
)Maturities and sales of available-for-sale securities


216,249


139,391


170,122Proceeds from the sale of property and equipment





14


18Capital expenditures


(3,560
)

(141
)

(2,507
)Net cash used in investing activities


(53,403
)

(30,664
)

(26,970
)Financing activitiesProceeds from capital lease financing








2,862Payments on capital lease obligations


(1,144
)

(1,448
)

(1,244
)Net proceeds from issuances of common stock and warrants


1,964


103,603


130,372Net cash provided by financing activities


820


102,155


131,990Net (decrease) increase in cash and cash equivalents


(5,840
)

(31,288
)

1,502Cash and cash equivalents at beginning of period


14,717


46,005


44,503Cash and cash equivalents at end of period

$
8,877

$
14,717

$
46,005Supplemental disclosure of cash flow informationInterest paid

$
84

$
176

$
172Income tax refund

$
98

$
88

$
Schedule of non cash transactionsIssuance of warrant with lease amendment

$


$
616

$



See
accompanying notes.

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Rigel Pharmaceuticals, Inc.        NOTES TO FINANCIAL STATEMENTS

In this Annual Report on Form 10-K, "Rigel," "we," "us" and "our" refer to Rigel Pharmaceuticals, Inc. and "common stock" refers to
Rigel's common stock, par value $0.001 per share.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations and basis of presentation

We were incorporated in the state of Delaware on June 14, 1996. We are engaged in the discovery and development of novel,
small-molecule drugs for the treatment of inflammatory and autoimmune diseases, as well as for muscle disorders.

Financial statement preparation

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates and assumptions made by management include those relating to the
terms of our research and development collaborations (i.e. revenue recognition of upfront fees and certain milestone payments), investments, stock-based compensation, impairment issues, the
estimated useful life of assets, estimated accruals and contingencies. We believe that the estimates and judgments upon which we rely are reasonable based upon information available to us at the time
that these estimates and judgments are made, however
actual results could differ from these estimates. To the extent there are material differences between these estimates and actual results, our financial statements will be affected.

Stock award plans

We have two stock option plans, the 2000 Equity Incentive Plan (2000 Plan) and 2000 Non-Employee Directors Stock Option
Plan (Directors' Plan), that provide for granting to our officers, directors and all other employees and consultants options to purchase shares of our common stock. Under the plans, we may issue
non-qualified options or incentive stock options. We also have an employee stock purchase plan, or Purchase Plan, where eligible employees can purchase shares of our common stock at a
price per share equal to the lesser of 85% of the fair market value on the first day of the offering period or 85% of the fair market value on the purchase date. The benefits provided under these
plans are stock-based payments subject to the provisions of FASB ASC 718 and guidance under the Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 107 and
SAB No. 110.

Cash, cash equivalents and available-for-sale securities

We consider all highly liquid investments in debt securities with maturity from the date of purchase of 90 days or less to be
cash equivalents. Cash equivalents consist of money market funds, U.S. treasury bills, corporate bonds and commercial paper and investments in government-sponsored enterprises. Our
short-term investments include obligations of government-sponsored enterprises and corporate bonds and commercial paper. By policy, we limit the concentration of credit risk by
diversifying our investments among a variety of high credit-quality issuers.

All
cash equivalents and short-term investments are classified as available-for-sale securities. Available-for-sale securities
are carried at fair value at December 31, 2010 and 2009. Unrealized gains (losses) are reported in stockholders' equity and included in other comprehensive income (loss). Fair value is
estimated based on available market information. The cost of securities sold is based on the

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Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

specific
identification method. See Note 5 for a summary of available-for-sale securities at December 31, 2010 and 2009.

Fair value of financial instruments

The carrying values of cash, cash equivalents, accounts payable and accrued liabilities approximate fair value due to the short
maturity of those instruments. Available-for-sale securities are carried at fair value at December 31, 2010 and 2009. The carrying values of capital lease obligations
approximate fair value due to similar financing arrangements being available to us at market interest rates.

Concentration of credit risk

Financial instruments that potentially subject us to concentrations of credit risk are primarily cash and cash equivalents and
available-for-sale securities. Cash equivalents and available-for-sale securities primarily consist of money market funds, U. S. treasury bills,
government-sponsored enterprise securities, and corporate bonds and commercial paper. Due to the mostly short-term nature of these investments, we believe we do not have a material
exposure to credit risk arising from our investments. All cash and cash equivalents and available-for-sale securities are maintained with financial institutions that management
believes are creditworthy.

Property and equipment

Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets, which range from three to seven years. Leasehold improvements, if any, are amortized using the straight-line method over the estimated useful lives of the
assets or the term of the lease, whichever is shorter.

Revenue recognition

We present revenue from our collaboration arrangements under FASB ASC 808,Collaboration
Arrangements. Our revenue arrangements with multiple elements are evaluated under FASB ASC 605-25,Multiple-Element
Arrangements, and are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the customer and
whether there is objective and reliable evidence of the fair value of any undelivered items. The consideration we receive is allocated among the separate units based on their respective fair values,
and the applicable revenue recognition criteria are applied to each of the separate units. Advance payments received in excess of amounts earned are classified as deferred revenue until earned.

Non-refundable,
up-front payments received in connection with research and development collaboration agreements, including technology access fees, are deferred
and recognized on a straight-line basis over the relevant periods of continuing involvement, generally the research term. When a research term is not specified, we estimate the time it
will take us to complete our deliverables under the contract and recognize the upfront fee using the straight-line method over that time period. We review our estimates every quarter for
reasonableness.

Revenues
related to collaborative research with our corporate collaborators are recognized as research services are performed over the related development periods for each agreement.
Under these agreements, we are required to perform research and development activities as specified in each

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Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

respective
agreement. The payments received are not refundable and are generally based on a contractual cost per full-time equivalent employee working on the project. Our research and
development expenses under the collaborative research agreements approximate the revenue recognized under such agreements over the term of the respective agreements. It is our policy to recognize
revenue based on our level of effort expended, however, revenue recognized will not exceed amounts billable under the agreement.

Revenues
associated with substantive, at-risk milestones pursuant to collaborative agreements are recognized upon achievement of the milestones.

Research and development expenses

Research and development expenses include costs for scientific personnel, supplies, equipment, consultants, research sponsored by us,
allocated facility costs, costs related to pre-clinical and clinical trials, and stock-based compensation expense. All such costs are charged to research and development expense as
incurred. Collaboration agreements generally specify minimum levels of research effort required to be performed by us.

Research and development accruals

We have various contracts with third parties related to our research and development activities. Costs that are incurred but not billed
to us as of the end of the period are accrued. We make estimates of the amounts incurred in each period based on the information available to us and our knowledge of the nature of the contractual
activities generating such costs. Clinical trial contract expenses are accrued based on units of activity reported by third parties. Expenses related to other research and development contracts, such
as research contracts, toxicology study contracts and manufacturing contracts are estimated to be incurred generally on a straight-line basis over the duration of the contracts. Raw
materials and study materials purchased by third parties are expensed at the time of purchase.

Contingencies

We are subject to claims related to the patent protection of certain of our technologies, as well as a purported securities class
action lawsuit and other litigation. We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of
the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue.

Income Taxes

We use the asset and liability method to account for income taxes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities from a change in tax rates is recognized in income in the period the change is enacted. A valuation allowance is established to reduce deferred tax assets to an amount whose
realization is more likely than not.

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Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Net income (loss) per share

Basic earnings per share (EPS) is computed by dividing net income (loss) by the weighted-average number of shares of common stock
outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period and the
number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued. Potentially dilutive securities include stock options and warrants and
shares under our Purchase Plan. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock
method, an increase in the fair market value of our common stock can result in a greater dilutive effect from potentially dilutive securities.

The
following table sets forth the computation of basic and diluted earnings per share (in thousands except per share amounts):

Year Ended December 31,2010

2009

2008EPS Numerator:Net income (loss)

$
37,890

$
(111,547
)
$
(132,346
)EPS DenominatorBasic:Weighted-average common shares outstanding


52,055


40,876


36,025EPS DenominatorDiluted:Weighted-average common shares outstanding


52,055


40,876


36,025Dilutive effect of stock options, shares under Purchase Plan and warrant


518





Weighted-average shares outstanding and common stock equivalents


52,573


40,876


36,025Net income (loss) per common share:Basic

$
0.73

$
(2.73
)
$
(3.67
)Diluted

$
0.72

$
(2.73
)
$
(3.67
)


During
all periods presented, we had securities outstanding which could potentially dilute basic earnings (loss) per share, but were excluded from the computation of diluted net income
(loss) per share, as their effect would have been antidilutive. These outstanding securities consist of the following (in thousands, except per share amounts):

December 31,2010

2009

2008Outstanding options


7,536


7,915


6,387Warrants





200


100Weighted average exercise price of options

$
15.08

$
14.32

$
16.82Weighted average exercise price of warrants

$


$
6.61

$
10.57


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Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent accounting pronouncements

In April 2010, the FASB issued ASU No. 2010-17 thereby amending ASC 605 for revenue recognition related to
the milestone method of revenue recognition. ASU No. 2010-17 provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of
revenue recognition for research or development arrangements. A company may make an accounting policy election to use the milestone method of revenue recognition for transactions within the scope of
the amendments. The amendments will be effective in fiscal years beginning on or after June 15, 2010, and early adoption is permitted. We will adopt the amendments on January 1, 2011 on
a prospective basis. We evaluated the impact of adopting ASU No. 2010-17 and believe it will have no material effect on our financial statements.

In
October 2009, the FASB issued ASU No. 2009-13 (formerly Emerging Issues Task Force, or EITF, No. 08-1) on ASC 605 for revenue recognition
related to multiple-deliverable revenue arrangements. ASU No. 2009-13 provides amendments to the existing criteria for separating consideration in multiple-deliverable arrangements.
The amendments establish a selling price hierarchy for determining the selling price of a deliverable, eliminate the residual method of allocation of arrangement consideration to all deliverables and
require the use of the relative selling price method in the allocation of arrangement consideration to all deliverables, require the determination of the best estimate of a selling price in a
consistent manner, and significantly expand the disclosures related to the multiple-deliverable revenue arrangements. The amendments will be effective in fiscal years beginning on or after
June 15, 2010, and early adoption is permitted. We will adopt the amendments on January 1, 2011 on a prospective basis. We evaluated the impact of adopting ASU
No. 2009-13 and believe it will have no material effect on our financial statements.

2. SPONSORED RESEARCH AND LICENSE AGREEMENTS



In February 2010, we entered into an exclusive worldwide license agreement with AZ for the development and commercialization of our
oral syk inhibitors for the treatment of human diseases other than those primarily involving respiratory or pulmonary dysfunction. The agreement includes a license of rights to fostamatinib,
previously known as R788, our late-stage investigational product candidate for the treatment of RA and other indications. AZ is responsible for conducting and funding all future
development, regulatory filings, manufacturing and global commercialization of products containing most of our oral syk inhibitors. The agreement became effective on March 26, 2010 and we
received an upfront payment from AZ of $100.0 million in April 2010.

Under
the licensing agreement, our deliverables were: (i) granting a license of rights to fostamatinib, (ii) transfer of technology (know-how) related to
fostamatinib, and (iii) conducting, at our expense, the fostamatinib open label extension study until it was transferred to AZ on September 25, 2010. We concluded that these deliverables
should be accounted for as one single unit of accounting and we recognized the $100.0 million upfront payment received in April 2010 from AZ ratably over the performance period from
March 26, 2010, the effective date of the agreement, through September 25, 2010, the completion date of the last deliverable, which was the transfer of the fostamatinib
long-term open label extension study to AZ. We elected a straight-line method for recognition of this upfront payment as the effort to advance and transfer the study was fairly
consistent over the transition period.

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Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

2. SPONSORED RESEARCH AND LICENSE AGREEMENTS (Continued)

On
September 29, 2010, we announced that we earned $25.0 million from AZ in consideration for the fulfillment of two major milestones in the agreement. The first milestone
was the initiation of the Phase 3 clinical trial program with fostamatinib in patients with RA that was announced by AZ on September 29, 2010. The second milestone was the completion of
the transfer of the fostamatinib long-term open label extension study to AZ, which was also completed in September 2010. AZ is required to pay us up to an additional $320.0 million
if specified development, regulatory and launch milestones are achieved for fostamatinib. We are also eligible to receive up to an additional $800.0 million if specified sales performance
milestones are achieved for fostamatinib, as well as significant stepped double-digit royalties on net worldwide sales, if any.

Either
party may terminate the agreement if the other party materially breaches the agreement and such breach remains uncured within 60 days from the date of notice, or in the
event of insolvency of the other party. We may also terminate the agreement in its entirety if AZ challenges the validity, enforceability or scope of any of our patents licensed to AZ by us under the
agreement. AZ may also
terminate the agreement either without cause upon 180 days' written notice, or in the event of any change of control of Rigel upon 30 days' written notice. If neither party terminates
the agreement, then the agreement will remain in effect until the cessation of all commercial sales of all products subject to the agreement, including fostamatinib.



In January 2005, we entered into a research collaboration with Pfizer that has a license component. The collaboration is for the
development of inhaled products for the treatment of allergic asthma and other respiratory diseases such as chronic obstructive pulmonary disease. The collaboration was primarily focused on our
preclinical small molecule compounds, which inhibit IgE receptor signaling in respiratory tract mast cells by blocking the signaling enzyme syk. A goal of the collaboration was for Pfizer to nominate
a licensed compound to commence advanced preclinical development. Pfizer is responsible for the manufacture of all preclinical and clinical materials for each compound/product and all costs associated
with development and commercialization. We did not have any further obligations to Pfizer after the research phase of the collaboration ended in February 2007.

In
connection with this collaboration, Pfizer paid us upfront fees of $10.0 million and purchased $5.0 million of our common stock at a premium in 2005. We have earned and
will continue to earn milestone payments in connection with certain clinical events, should they occur, as well as royalties from sales of the resulting products upon marketing approval, if any. Under
the terms of the collaboration agreement, the aggregate of potential milestone amounts payable to us is $175.0 million and mid-single-digit to low double-digit royalties on sales.
In May 2006, we achieved the first milestone upon selection of the licensed compound and received a $5.0 million milestone payment when Pfizer nominated R343 to commence advanced preclinical
development in allergic asthma. In December 2007, we received a second milestone payment of $5.0 million when Pfizer initiated a Phase 1 clinical trial on R343. No milestone payments
were received in 2008, 2009 and 2010 as no further milestones were achieved. Pfizer completed an initial Phase 1b allergen challenge clinical trial. Pfizer has informed us that they plan on
conducting an additional allergen challenge trial in 2011. Pfizer remains obligated to pay us various milestones and royalties in the future if certain conditions are achieved.

Pfizer
may terminate the collaboration agreement for any reason upon prior written notice to us, for cause if we materially breach the agreement and such breach remains uncured, or if we
become

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Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

2. SPONSORED RESEARCH AND LICENSE AGREEMENTS (Continued)

insolvent.
We may terminate the collaboration agreement for cause if Pfizer fails to meet certain diligence efforts, materially breaches the agreement and such breach remains uncured, or becomes
insolvent. If neither party exercises its option to terminate the collaboration agreement, then the
agreement automatically terminates on the later of: (1) the last valid claim to expire covering a licensed product and (2) after a specified period from the launch of a licensed product.



In August 2002, we signed an agreement for a collaboration with Daiichi Sankyo, or Daiichi, to pursue research related to a specific
target from a novel class of drug targets called ligases that control cancer cell proliferation through protein degradation. Daiichi paid us $0.9 million at the time we entered into the
agreement. Under the terms of the collaboration agreement, the aggregate of potential milestone amounts payable to us is $33.9 million and low to mid-single-digit royalties on
sales. We have earned to date milestone payments totaling $5.7 million, including a milestone payment of $750,000 for the first designation of a rational design lead compound that we received
in December 2009, and may earn additional milestone payments in connection with certain clinical events. The research phase of this three-year collaboration expired in August 2005. Under
the terms of the agreement, we retain the rights to co-develop and co-promote certain products resulting from this collaboration in North America, while Daiichi retains
co-development and promotion rights in the remainder of the world. Daiichi may become obligated to pay us certain other milestone payments, and we are also entitled to receive royalties on
any commercialized products to emerge from the collaboration.

Either
party may terminate the collaboration agreement if the other party materially breaches the agreement and such breach remains uncured, or after a specified period from the end of a
designated research period if no product is commercialized (unless the parties agree to extend the collaboration). The collaboration agreement can also be terminated by mutual written consent of the
parties. If neither party exercises its option to terminate the collaboration agreement, then the agreement automatically terminates on the later of (1) the expiration of the last patent with a
claim that covers the composition of matter of a product (or manufacture or use of a product under certain circumstances) and (2) after a specified period from the initial commercialization of
a licensed product.

3. SIGNIFICANT CONCENTRATIONS

For the year ended December 31, 2010, AstraZeneca accounted for 100% of our revenues. For the year ended December 31, 2009, Daiichi accounted for 100% of our revenues.
There were no contract revenues reported during 2008. At December 31, 2010 and 2009, we had no accounts receivable. We do not require collateral or other security for accounts receivable.

4. STOCK-BASED COMPENSATION

Total stock-based compensation expense related to all of our stock-based awards was as follows (in thousands):

Year Ended December 31,2010

2009

2008Research and development

$
9,025

$
8,937

$
12,272General and administrative


7,411


4,379


11,487Restructuring charges





122


Stock-based compensation expense

$
16,436

$
13,438

$
23,759


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Table of Contents

Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

4. STOCK-BASED COMPENSATION (Continued)

In February 2009, we announced that we cut our research programs in virology and oncology as well as terminated certain related development and administrative staff, which resulted in
the dismissal of 36 employees, or approximately 20% of our workforce. This measure was intended to maintain our emphasis on our active preclinical and clinical programs, while conserving our
resources. As part of a package we offered the terminated employees, we extended the date the terminated employees had to exercise their vested options to December 31, 2009 rather than
90 days from the termination date as is typically required under our 2000 Plan. We recorded $122,000 of non-cash stock-based compensation expense related to this modification in the
first quarter of 2009.

Employee stock option plans

In 2008, an amendment to the 2000 Plan was approved primarily to increase the number of shares authorized for issuance by 3,350,000
shares. In 2010, the 2000 Plan was amended, primarily to increase the number of shares authorized for issuance by 1,250,000 shares to an aggregate total of 13,010,403 shares. Options granted under our
2000 Plan expire no later than ten years from the date of grant. The option price of each incentive stock option is at least 100% of the fair value on the date of grant, and the option price for each
nonstatutory stock option is not less than 85% of the fair value on the date of grant, as determined by the board of directors. Options may be granted with different vesting terms from time to time,
ranging from zero to five years. As of December 31, 2010, a total of 11,339,889 shares of common stock were authorized for issuance under the 2000 Plan. Options to purchase 86,459 shares were
exercised during the year ended December 31, 2010.

In
2008, the Directors' Plan was amended, primarily to increase the number of shares authorized for issuance by 100,000 shares to an aggregate total of 535,000 shares. In 2010, the
Directors' Plan was amended, primarily to increase the number of shares authorized for issuance by 350,000 shares to an aggregate total of 885,000 shares. The exercise price of options under the
Directors' Plan is equal to the fair market value of the common stock on the date of grant. The maximum term of the options granted under the Directors' Plan is ten years. As of December 31,
2010, a total of 882,211 shares of common stock were authorized for issuance under the Directors' Plan. No options to purchase shares were exercised during the year ended December 31, 2010.

In
December 2007, we adopted a Change of Control Severance Plan for employees serving at or above the level of Vice President. Under this plan, under certain conditions, primarily upon a
change in control of the Company, eligible employees would receive the payment of certain benefits, including accelerated vesting of all their outstanding stock options and an extension of the period
to exercise outstanding options to the earlier of the original option expiration date or the one year anniversary of the triggering event. There was no stock-based compensation expense incurred due to
the adoption of the Change of Control Severance Plan.

Pursuant
to FASB ASC 718, we are required to estimate the amount of expected forfeitures when calculating compensation costs. We estimated the forfeiture rate using our historical
experience with pre-vesting options. We adjust our stock-based compensation expense as actual forfeitures occur, review our estimated forfeiture rates each quarter and make changes to our
estimate as appropriate.

The
fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. We have segregated option awards into three homogenous groups,
officers and directors, all other employees, and consultants, for purposes of determining fair values of options.

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Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

4. STOCK-BASED COMPENSATION (Continued)

We
determined weighted-average valuation assumptions separately for each of these groups as follows:



The
following table summarizes the weighted-average assumptions relating to options granted pursuant to our equity incentive plans for the years ended December 31, 2010, 2009 and
2008:

Stock Option Plans
Year Ended December 31,2010

2009

2008Risk-free interest rate


2.3
%

1.8
%

2.8
%Expected term (in years)


5.3


4.4


4.5Dividend yield


0.0
%

0.0
%

0.0
%Expected volatility


90.1
%

98.4
%

93.0
%


Options
are priced at the market price of our common stock on the date immediately preceding the date of grant, become exercisable at varying dates and generally expire ten years from
the date of grant. At December 31, 2010, options to purchase 2,528,099 shares of common stock were available for grant and 12,222,100 reserved shares of common stock were available for future
issuance under our stock option plans.

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Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

4. STOCK-BASED COMPENSATION (Continued)

We
recorded stock-based compensation expense of approximately $31,000, $99,000 and $194,000 for the years ended December 31, 2010, 2009 and 2008, respectively, associated with
options granted to consultants reflecting the fair value valuation and periodic fair value re-measurement of outstanding consultant options under FASB ASC 505-50. The valuation
is based upon the current market value of our common stock and other assumptions, including the expected future volatility of our stock price, risk-free interest rate and expected term. We
amortized stock-based compensation related to consultants using a straight-line attribution method consistent with the method used for employees and with the attribution election we made
upon adoption of FASB ASC 718. No options to purchase shares granted to consultants were exercised during the year ended December 31, 2010.

Stock-Based Compensation Award Activity

Option activity under our equity incentive plans was as follows:

Shares
Available
For Grant

Number of
Shares
Underlying
Options

Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic
ValueOutstanding at January 1, 2008


2,506,656


5,079,917

$
13.91Authorized for grant


3,450,000


Granted


(1,534,865
)

1,534,865

$
25.81Exercised





(164,309
)
$
10.19Cancelled


63,848


(63,848
)
$
18.63Outstanding at December 31, 2008


4,485,639


6,386,625

$
16.82Authorized for grant





Granted


(2,066,708
)

2,066,708

$
6.55Exercised





(163,705
)
$
5.11Cancelled


374,759


(374,759
)
$
18.04Outstanding at December 31, 2009


2,793,690


7,914,869

$
14.32Authorized for grant


1,600,000


Granted


(1,957,020
)

1,957,020

$
8.60Exercised





(86,459
)
$
6.60Cancelled


91,429


(91,429
)
$
16.04Outstanding at December 31, 2010


2,528,099


9,694,001

$
13.22


6.51

$
2,462,021Vested and expected to vest at December 31, 2010





9,654,039

$
13.28Exercisable at December 31, 2010





8,934,275

$
13.34


6.33

$
2,206,534Exercisable at December 31, 2009





6,840,324

$
14.57Exercisable at December 31, 2008





5,262,038

$
16.03


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Table of Contents

Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

4. STOCK-BASED COMPENSATION (Continued)

Weighted-average grant date fair value of options granted during 2010, 2009 and 2008 was $6.14, $4.65 and $17.97, respectively.

The
aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock for the options that were
in-the-money at December 31, 2010. During the years ended December 31, 2010, 2009 and 2008, the aggregate intrinsic value of options exercised under our stock
option plans
was approximately $122,000, $619,000 and $2.4 million, respectively, determined as of the date of option exercise. As of December 31, 2010, there was approximately $5.0 million of
total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock-based compensation arrangements granted under our stock option plans and approximately $868,000 of total
unamortized compensation cost related to our Purchase Plan. The unamortized compensation cost related to our stock option plans and our Purchase Plan is expected to be recognized over a
weighted-average period of approximately 1.47 years and 1.50 years, respectively. We also had approximately 760,000 of unvested stock options at December 31, 2010. Future option
grants and their valuation will increase our compensation cost in the future as the options are granted, valued and expensed ratably according to their vesting periods.

Details
of our stock options by exercise price are as follows as of December 31, 2010:

Options OutstandingOptions ExercisableWeighted-Average
Remaining
Contractual Life
(in years)Exercise Price

Number of
Outstanding
Options

Weighted-Average
Exercise Price

Number of
Options

Weighted-Average
Exercise Price$  6.48 - $  6.49


1,829,673


8.25

$
6.49


1,728,750

$
6.49$  6.55 - $  7.88


1,104,487


7.73


7.07


903,452


7.13$  8.12 - $  9.59


1,341,757


3.60


8.41


1,283,725


8.41$  9.62 - $11.23


1,616,930


8.23


9.79


1,382,996


9.81$11.36 - $17.66


1,160,092


5.28


13.52


1,156,146


13.53$18.35 - $24.56


1,386,276


4.71


23.45


1,348,511


23.46$25.36 - $37.80


1,254,786


7.07


26.45


1,130,695


26.45$  6.48 - $37.80


9,694,001


6.51

$
13.22


8,934,275

$
13.34


Employee Stock Purchase Plan

In August 2000, we adopted the Purchase Plan which was approved in September 2000 by our stockholders. The Purchase Plan permits
eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods. The price at which the stock is purchased is equal to the lesser of 85% of the
fair market value of the common stock on the first day of the offering or 85% of the fair market value of our common stock on the purchase date. The initial offering period commenced on the effective
date of our initial public offering. We issued 228,585, 196,038 and 100,314 shares of common stock during 2010, 2009 and 2008, respectively, pursuant to the Purchase Plan at an average price of $6.09,
$6.67 and $11.54 per share,
respectively. For 2010, 2009 and 2008, the weighted average fair value of stock purchased under the Purchase Plan was $3.73, $4.84 and $13.88, respectively. The number of shares reserved for future
issuance under the Purchase Plan was increased by 1,500,000 in 2008. As of December 31, 2010, we had 985,308 reserved shares of common stock available for future issuance under the Purchase
Plan.

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Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

4. STOCK-BASED COMPENSATION (Continued)

The
fair value of awards granted under our Purchase Plan is estimated on the date of grant using the Black-Scholes option pricing model, which uses weighted-average assumptions. Our
Purchase Plan provides for a twenty-four month offering period comprised of four six-month purchase periods with a look-back option. A look-back option
is a provision in our Purchase Plan under which eligible employees can purchase shares of our common stock at a price per share equal to the lesser of 85% of the fair market value on the first day of
the offering period or 85% of the fair market value on the purchase date. Our Purchase Plan also includes a feature that provides for a new offering period to begin when the fair market value of our
common stock on any purchase date during an offering period falls below the fair market value of our common stock on the first day of such offering period. This feature is called a "reset."
Participants are automatically enrolled in the new offering period. We had a "reset" on July 1, 2010 because the fair market value of our stock on June 30, 2010 was lower than the fair
market value of our stock on January 2, 2009, the first day of the offering period. We applied modification accounting in accordance with ASC Topic No. 718,Stock
Compensation, to determine the incremental fair value associated with this Purchase Plan "reset" and recognized the related stock-based compensation expense according to the
FASB ASC Subtopic No. 718-50,Employee Share Purchase Plan. The total incremental fair value for this Purchase Plan "reset" was
approximately $1.4 million, and is being recognized from July 1, 2010 to June 30, 2012.

The
following table summarizes the weighted-average assumptions related to our Purchase Plan for the years ended December 31, 2010, 2009 and 2008. Expected volatilities for our
Purchase Plan are based on the historical volatility of our stock. Expected term represents the weighted-average of the purchase periods within the offering period. The risk-free interest
rate for periods within the expected term is based on U.S. Treasury constant maturity rates. There have been no significant changes in the assumptions before and after the "reset" of our Purchase Plan
in July 2010.

Employee Stock
Purchase Plan
Year Ended
December 31,2010

2009

2008Risk-free interest rate


0.7
%

1.1
%

2.1
%Expected term (in years)


1.4


1.3


1.3Dividend yield


0.0
%

0.0
%

0.0
%Expected volatility


81.1
%

112.0
%

99.0
%


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Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

5. CASH, CASH EQUIVALENTS AND AVAILABLE-FOR-SALE SECURITIES

Cash, cash equivalents and available-for-sale securities consist of the following (in thousands):

December 31,
2010

December 31,
2009Checking account

$
344

$
158Money market funds


8,533


8,859U. S. treasury bills


8,940


44,483Government-sponsored enterprise securities


77,909


39,167Corporate bonds and commercial paper


81,569


40,651$
177,295

$
133,318Reported as:Cash and cash equivalents

$
8,877

$
14,717Available-for-sale securities


168,418


118,601$
177,295

$
133,318


Cash
equivalents and available-for-sale securities included the following securities with unrealized gains and losses (in thousands):

December 31, 2010

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair ValueU. S. treasury bills

$
8,941

$


$
(1
)
$
8,940Government-sponsored enterprise securities


77,934


7


(32
)

77,909Corporate bonds and commercial paper


81,581


19


(31
)

81,569Total

$
168,456

$
26

$
(64
)
$
168,418




December 31, 2009

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair ValueU. S. treasury bills

$
44,489

$
3

$
(9
)
$
44,483Government-sponsored enterprise securities


39,184


7


(24
)

39,167Corporate bonds and commercial paper


40,640


12


(1
)

40,651Total

$
124,313

$
22

$
(34
)
$
124,301


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Table of Contents

Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

5. CASH, CASH EQUIVALENTS AND AVAILABLE-FOR-SALE SECURITIES (Continued)

As
of December 31, 2010, the contractual maturities of our cash equivalents and available-for-sale securities were (in thousands):

Years to MaturityWithin One
Year

After One Year
Through
Five YearsU. S. treasury bills

$
8,940

$
Government-sponsored enterprise securities


66,754


11,155Corporate bonds and commercial paper


81,569


$
157,263

$
11,155


As
of December 31, 2010, our cash equivalents and available-for-sale securities had a weighted-average time to maturity of approximately 183 days.
We view our available-for-sale portfolio as available for use in current operations. Accordingly, we have classified certain investments as
available-for-sale securities on our balance sheet even though the stated maturity date of these securities may be more than one year from the current balance sheet date. We
have the ability to hold all investments as of December 31, 2010 to maturity. At December 31, 2010 and 2009, we had no investments that had been in a continuous unrealized loss position
for more than twelve months. As of December 31, 2010, a total of 30 individual securities had been in an unrealized loss position for twelve months or less and the losses were deemed to be
temporary.

The
following table shows the fair value and gross unrealized losses of our investments in individual securities that are in an unrealized loss position, aggregated by investment
category (in thousands):

December 31, 2010

Fair Value

Unrealized
LossesU. S. treasury bills

$
6,428

$
(1
)Government-sponsored enterprise securities


47,245


(32
)Corporate bonds and commercial paper


25,881


(31
)Total

$
79,554

$
(64
)


6. FAIR VALUE

Under FASB ASC 820,Fair Value Measurements and Disclosures, fair value is defined as the price at which an asset could be exchanged or a
liability transferred in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on
observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not available, valuation models are applied.

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Table of Contents

Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

6. FAIR VALUE (Continued)

Assets and liabilities recorded at fair value in our financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value.
Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:



Fair Value on a Recurring Basis

Financial assets measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of
significant input to the valuations (in thousands):

Assets at Fair Value as of December 31, 2010Level 1

Level 2

Level 3

TotalMoney market funds

$
8,533

$


$


$
8,533U. S. treasury bills





8,940





8,940Government-sponsored enterprise securities





77,909





77,909Corporate bonds and commercial paper





81,569





81,569Total

$
8,533

$
168,418

$


$
176,951


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Table of Contents

Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

6. FAIR VALUE (Continued)



Assets at Fair Value as of December 31, 2009Level 1

Level 2

Level 3

TotalMoney market funds

$
8,859

$


$


$
8,859U. S. treasury bills





44,483





44,483Government-sponsored enterprise securities





39,167





39,167Corporate bonds and commercial paper





40,651





40,651Total

$
8,859

$
124,301

$


$
133,160


Fair Value on a Non-Recurring Basis

On March 31, 2009, we issued a warrant granting our landlord the right to purchase 200,000 shares of common stock, and cancelled
an existing warrant to purchase 100,000 shares of common stock, in connection with the amendment of our build-to-suit lease agreement (see Notes 8 and 9 below for more
details). We used the Black-Scholes option-pricing model and calculated an incremental fair market value of $616,000 related to the new warrant. The new warrant was categorized as level 3 under
FASB ASC 820 due to the unobservable inputs we used in the Black Scholes option-pricing model.

The
following table summarizes the assumptions used relating to the valuation of the new warrant:

Risk-free interest rate


2.2
%Expected term (in years)


7.0Dividend yield


0.0
%Expected volatility


99.2
%


7. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

Years Ended
December 31,2010

2009Laboratory and office equipment

$
21,005

$
18,331Less accumulated depreciation and amortization


(16,471
)

(16,040
)Property and equipment, net

$
4,534

$
2,291


During
2010, we disposed of approximately $886,000 of fully depreciated assets. During 2009, we disposed of approximately $834,000 of assets with related accumulated depreciation of
approximately $819,000.

At
December 31, 2010 and 2009, equipment under capital leases included in property and equipment had a cost of approximately $2.9 million and $3.8 million,
respectively. Total depreciation expense, which includes amortization of equipment under capital leases, was $1.3 million, $1.4 million and $1.4 million for the years ended
December 31, 2010, 2009 and 2008, respectively.

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Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

8. LONG-TERM OBLIGATIONS

At December 31, 2010, future minimum lease payments and obligations under all noncancelable leases were as follows (in thousands):

Capital
Leases

Operating
LeasesFor years ending December 31,2011

$
776

$
12,7562012


45


13,2722013





13,8092014





14,3512015 and thereafter





47,964Total minimum payments required


821

$
102,152Less amount representing interest


(21
)Present value of future lease payments


800Less current portion


(755
)Noncurrent obligations under capital leases

$
45


In
March 2009, we amended our build-to-suit lease agreement with our landlord, HCP BTC, LLC (formerly known as Slough BTC, LLC), to defer certain
rental obligations in the aggregate amount of $6.9 million for a period of up to seventeen months. Under the terms of this amendment, we were obligated to repay the deferred rental amounts,
including interest accruing at 12% during the deferral period, based on a timeline that could vary depending upon the occurrence of certain financing or collaborative transactions. We reevaluated the
lease amendment under FASB ASC 840 and determined that the amended lease still qualified as an operating lease. In addition, the amendment to the lease agreement also provided for the cancellation of
an existing warrant granting HCP Estates USA Inc. (an affiliate of our landlord) the right to purchase 100,000 shares of common stock and the issuance of a new warrant granting our landlord the
right to purchase 200,000 shares of common stock. The exercise price per share of the new warrant is $6.61, which is the average closing price of our common stock for the three business days
immediately preceding the execution of the amendment to the lease agreement. The new warrant remains exercisable for 7 years from the date of issuance. We applied modification accounting and
calculated an incremental fair market value of the new warrant of $616,000. This amount has been deferred in other long-term assets and is being amortized into rent expense over the
remaining term of the lease. On September 22, 2009, we completed an underwritten public offering and received net proceeds of approximately $101.5 million after deducting underwriting
discounts and commissions and offering expenses. As a result of this financing, we paid our landlord $3.7 million, or 50% of the deferred rental amounts, plus interest at 12%, in November 2009.
In February 2010, we entered into a worldwide license agreement with AZ in which we received an upfront payment of $100.0 million in April 2010. As a result of this additional cash received, we
paid our landlord $3.9 million, or the remaining 50% of the deferred rental amounts, plus interest at 12%, in April 2010.

In
May 2007, we subleased approximately 6,180 square feet of our space to a tenant. The sublease was terminated in March 2008. Rent expense, net of sublease income in 2008, under all
operating leases amounted to approximately $15.2 million, $15.6 million and $14.5 million for the years ended December 31, 2010, 2009 and 2008, respectively.

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Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

8. LONG-TERM OBLIGATIONS (Continued)

In 2008, we obtained an equipment lease line with a borrowing capability of $3.2 million. Our ability to draw down on this line expired at the end of 2008. The repayment period
from this line is three years beginning on the date of each draw down, with the interest rate on the line fixed at each draw down. Each draw down has a bargain purchase buyout provision of $1. During
the year 2008, we drew down approximately $2.9 million, which was included in our capital lease obligations on our balance sheet. As of December 31, 2010, the outstanding principal
balance under the credit lines was approximately $800,000.

Obligations
under all capital leases are secured by the assets financed under the leases.

9. STOCKHOLDERS' EQUITY

Preferred Stock

We are authorized to issue 10,000,000 shares of preferred stock. As of December 31, 2010 and 2009, there were no issued and
outstanding shares of preferred stock. Our board of directors is authorized to fix or alter the designation, powers, preferences and rights of the shares of each such series of preferred shares, and
the qualifications, limitations or restrictions of any wholly unissued shares, to establish from time to time the number of shares constituting any such series, and to increase or decrease the number
of shares, if any.

Common Stock

On September 22, 2009, we completed an underwritten public offering in which we sold 14,950,000 shares of our common stock at a
price to the public of $7.25 per share. We received net proceeds of approximately $101.5 million after deducting underwriting discounts and commissions and offering expenses.

Warrants

In conjunction with the facilities lease entered into in May 2001, we issued a warrant to the lessor to purchase 16,666 shares of our
common stock at an exercise price of $80.21 per share, a 15% premium to market at the time of issuance. This warrant expired in May 2006. The fair market value of this warrant, as determined using the
Black-Scholes valuation model, was approximately $683,000. This amount has been capitalized in other long-term assets and is being amortized into expense over the life of the lease. As of
December 31, 2010, approximately $322,000 remained to be amortized over the term of the lease.

In
conjunction with the facilities lease amendment in October 2002, we issued a warrant to the lessor to purchase 55,555 shares of our common stock at an exercise price of $17.73 per
share. The warrant expired in October 2007. The fair value of this warrant, as determined using the Black-Scholes valuation model, was approximately $565,000. This amount has been capitalized in other
long-term assets and is being amortized into expense over the life of the lease. As of December 31, 2010, approximately $267,000 remained to be amortized over the term of the lease.

In
conjunction with the facilities lease amendment in July 2006, we issued a warrant to the lessor to purchase 100,000 shares of our common stock at an exercise price of $10.57 per
share. The fair value of this warrant, as determined using the Black-Scholes valuation model, was approximately $801,000. This amount has been included in other long-term assets and is
being amortized into expense

69

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Table of Contents

Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

9. STOCKHOLDERS' EQUITY (Continued)

over
the term of the lease. As of December 31, 2010, approximately $490,000 remained to be amortized over the term of the lease. The build-to-suit lease agreement was
further amended in March 2009. The lease amendment provided for the cancellation of the abovementioned warrant to purchase 100,000 shares of common stock and the issuance of a new warrant granting our
landlord the right to purchase 200,000 shares of common stock. The exercise price per share of the new warrant is $6.61. The new warrant is outstanding as of December 31, 2010 and remains
exercisable at any time up to February 2016. We applied modification accounting and determined the fair value of this warrant using the Black-Scholes valuation model. The incremental fair market value
of the new warrant as a result of the modification is $616,000. This amount has been included in other long-term assets and is being amortized into expense over the term of the lease. As
of December 31, 2010, approximately $494,000 remained to be amortized over the term of the lease.

As
of December 31, 2010, we had reserved shares of common stock for future issuance as follows:

Warrants


200,000Incentive Stock Plans


12,222,100Purchase Plan


985,308Total


13,407,408


10. INCOME TAXES

For the years ended December 31, 2010, 2009 and 2008, our income (loss) before income taxes was from domestic operations. For the year ended December 31, 2010, we did not
record a provision for income taxes because of the utilization of net operating loss carryforwards for federal tax purposes and manufacturing investment credits for state tax purposes. For the years
ended December 31, 2009 and 2008, we recorded an income tax benefit of approximately $93,000 and $89,000, respectively, related to a refund of research tax credits as provided by the American
Recovery and Reinvestment Act of 2009 and the Housing and Economic Recovery Act of 2008, respectively.

Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of our deferred tax assets are as follows (in thousands):

December 31,2010

2009Deferred tax assetsNet operating loss carryforwards

$
135,211

$
152,077Research and development credits


16,976


14,234Capitalized research and development expenses


18,541


21,786Deferred compensation


22,277


17,613Other, net


4,035


5,228Total deferred tax assets


197,040


210,938Valuation allowance


(197,040
)

(210,938
)Net deferred tax assets

$


$



70

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Table of Contents

Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

10. INCOME TAXES (Continued)

The
reconciliation of the statutory federal income tax rate to the effective tax rate was as follows:

Years Ended
December 31,2010

2009Federal statutory tax rate


34.0
%

(34.0
)%Valuation allowance


(33.6
)%

31.5
%Other


(0.4
)%

2.5
%Effective tax rate


0.0
%

0.0
%


As
of December 31, 2010, we had net operating loss carryforwards for federal income tax purposes of approximately $368.6 million, which expire beginning in the year 2023
and state net operating loss carryforwards of approximately $169.8 million, which expire beginning in the year 2018.

We
also have federal research and development tax credits of approximately $7.5 million, which begin to expire in the year 2018 and state research and development tax credits of
approximately $14.3 million, which have no expiration date.

Realization
of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully
offset by a valuation allowance. The valuation allowance decreased by approximately $13.9 million and $3.0 million for the years ended December 31, 2010 and 2009, respectively.

Included
in the valuation allowance balance at December 31, 2010 is approximately $2.5 million of tax deductions related to the exercise of stock options prior to the
adoption of ASC 718 which are not reflected as an expense for financial reporting purposes. Accordingly, any future reduction in the valuation allowance relating to this amount will be credited
directly to equity and not reflected as an
income tax benefit in the statement of operations. As a result of certain realization requirements, the table of deferred tax assets and liabilities shown above does not include loss carryforward tax
assets of approximately $1.7 million at December 31, 2010 and 2009 that arose directly from (or the use of which was postponed by) tax deductions related to s compensation expense in
excess of compensation expense recognized for financial reporting. Equity will be increased by approximately $1.7 million if and when such deferred tax assets are ultimately realized.

Utilization
of our net operating losses may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state
provisions. Such an annual limitation could result in the expiration of the net operating losses before utilization.

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Table of Contents

Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

10. INCOME TAXES (Continued)

The
following table summarizes the activity related to our gross unrecognized tax benefits (in thousands):

Years Ended
December 31,2010

2009Balance at the beginning of the year

$
1,500

$
3,400Decrease related to prior year tax positions





(1,900
)Increase related to current year tax positions





Balance at the end of the year

$
1,500

$
1,500


We
do not anticipate a significant change to the unrecognized tax benefits over the next twelve months.

We
are subject to taxation in the U.S. and in California. Because of net operating loss and research credit carryovers, substantially all of our tax years remain open to examination.

Our
policy is that we recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We currently have no tax positions that would be
subject to interest or penalties.

11. CONTINGENCIES

On February 6, 2009, a purported securities class action lawsuit was commenced in the United States District Court for the Northern District of California, naming as defendants us
and certain of our officers, directors and underwriters for our February 2008 public offering of common stock (Stock Offering). An additional purported securities class action lawsuit containing
similar allegations was subsequently filed in the United States District Court for the Northern District of California on February 20, 2009. By order of the Court dated March 19, 2009,
the two lawsuits were consolidated into a single action. On June 9, 2009, the Court issued an order naming the Inter-Local Pension Fund GCC/IBT as lead plaintiff and Robbins Geller
Rudman & Dowd LLP (formerly Coughlin Stoia) as lead counsel. The lead plaintiff filed a consolidated complaint on July 24, 2009. We filed a motion to dismiss on
September 8, 2009. On December 21, 2009, the Court granted our motion and dismissed the consolidated complaint with leave to amend. Plaintiff filed its consolidated amended complaint on
January 27, 2010. The lawsuit alleged violations of the Securities Act and the Exchange Act in connection with allegedly false and misleading statements made by us related to the results of the
Phase 2a clinical trial of our product candidate fostamatinib (then known as R788). The plaintiff sought damages, including rescission or rescissory damages for purchasers in the Stock
Offering, an award of their costs and injunctive and/or equitable relief for purchasers of our common stock during the period between December 13, 2007 and February 9, 2009, including
purchasers in the Stock Offering. We filed a motion to dismiss the consolidated amended complaint on February 16, 2010. On August 24, 2010, the Court issued an order granting our motion
and dismissed the consolidated complaint with leave to amend. On September 22, 2010, plaintiff filed a notice informing the Court that it will not amend its complaint and requested that the
Court enter a final judgment. On October 28, 2010, the plaintiff submitted a proposed judgment requesting entry of such judgment in favor of the defendants. On November 1, 2010, judgment
was entered dismissing the action. The plaintiff filed a notice of appeal on

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Table of Contents

Rigel Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

11. CONTINGENCIES (Continued)

November 15,
2010, appealing the district court's order granting our motion to dismiss the consolidated amended complaint. The plaintiff filed its opening brief on February 23, 2011. Our
opposition brief is due on or before March 25, 2011.

We
believe that we have meritorious defenses and intend to defend this lawsuit vigorously. This lawsuit and any other related lawsuits are subject to inherent uncertainties, and the
actual costs to be incurred relating to the lawsuit will depend upon many unknown factors. The outcome of the litigation is necessarily uncertain and we could be forced to expend significant resources
in the defense of this suit, and we may not prevail. Monitoring and defending legal actions is time consuming for our management and detracts from our ability to fully focus our internal resources on
our business activities. In addition, we may incur substantial legal fees and costs in connection with the litigation. We are not currently able to estimate the possible cost to us from this matter,
and we cannot be certain how long it may take to resolve this matter or the possible amount of any damages that we may be required to pay. We have not established any reserves for any potential
liability relating to this lawsuit.

A
reserve may be required in the future due to new developments with respect to the pending lawsuit or patent claims or changes in approach such as a change in or establishment of a
settlement strategy in dealing with these matters.

12. QUALIFYING THERAPEUTIC DISCOVERY PROJECT GRANTS

In October 2010, we were notified by the Internal Revenue Service that we have been certified to receive a total cash grant of approximately $2.4 million related to the previously
filed applications under the Qualifying Therapeutic Discovery Projects (Section 48D of the Internal Revenue Code). Of this amount, approximately $2.1 million was received in 2010 and the
remainder is expected to be received in 2011. We recognized the total grant of $2.4 million as other income in our 2010 statement of operations. As of December 31, 2010, there are no
unfulfilled conditions attached to the grants.

13. SELECTED QUARTERLY FINANCIAL DATA

Year Ended December 31, 2010

Year Ended December 31, 2009Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4(unaudited, in thousands, except per share amounts)Revenue

$
3,261

$
49,457

$
72,282

$


$


$


$


$
750Net income (loss)

$
(22,333
)
$
27,029

$
50,433

$
(17,239
)
$
(29,922
)
$
(29,881
)
$
(26,651
)
$
(25,093
)Net income (loss) per share:Basic

$
(0.43
)
$
0.52

$
0.97

$
(0.33
)
$
(0.82
)
$
(0.81
)
$
(0.70
)
$
(0.48
)Diluted

$
(0.43
)
$
0.51

$
0.96

$
(0.33
)
$
(0.82
)
$
(0.81
)
$
(0.70
)
$
(0.48
)Weighted average shares used in computing net income (loss) per share:Basic


51,964


51,974


52,127


52,152


36,699


36,704


38,135


51,828Diluted


51,964


52,511


52,769


52,152


36,699


36,704


38,135


51,828


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Table of Contents

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.    Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial
officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (the Exchange Act). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the
end of the period covered by this Annual Report.

Management's Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial
officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework inInternal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework inInternal
ControlIntegrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2010.

The
effectiveness of our internal control over financial reporting as of December 31, 2010 has been audited by Ernst & Young LLP, an independent registered public
accounting firm, as stated in its attestation report which is set forth below in this Annual Report on Form 10-K.

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Table of Contents

Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders of Rigel Pharmaceuticals, Inc.

We
have audited Rigel Pharmaceuticals, Inc.'s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Rigel Pharmaceuticals Inc.'s management is
responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, Rigel Pharmaceuticals, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the
COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets of Rigel Pharmaceuticals, Inc. as of
December 31, 2010 and 2009, and the related statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2010 of Rigel
Pharmaceuticals, Inc. and our report dated March 1, 2011 expressed an unqualified opinion thereon.

/s/ERNST & YOUNG LLPPalo Alto, California
March 1, 2011


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Table of Contents

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information

None.

PART III

Item 10.    Directors, Executive Officers and Corporate Governance

Information regarding our directors, executive officers and corporate governance is incorporated by reference to the information set
forth under the captions "Election of Directors" and "ManagementExecutive Officers" in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed with the SEC within
120 days of December 31, 2010. Such information is incorporated herein by reference.

In
2003, we adopted a code of ethics, the Rigel Pharmaceuticals, Inc. Code of Conduct, which applies to our principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions. Our Code of Conduct is on our website at
http://media.corporate-ir.net/media_files/IROL/12/120936/corpgov/codeofconduct.pdf. If we make any substantive amendments to the code or grant any waiver from a provision of the code
applicable to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on a Form 8-K.

Item 11.    Executive Compensation

Information regarding executive compensation is incorporated by reference to the information set forth under the caption "Executive
Compensation" in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2010. Such information is incorporated herein by
reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by
reference to the information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" and "Equity Compensation Plan Information" in
our Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2010. Such information is incorporated herein by reference.

Item 13.    Certain Relationships and Related Transactions, and Director Independence

Information regarding certain relationships and related transactions and director independence is incorporated by reference to the
information set forth under the captions "Transactions with Related PersonsCertain Transactions" and "Information Regarding the Board of Directors and Corporate Governance" in our Proxy
Statement for the 2011 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2010. Such information is incorporated herein by reference.

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Table of Contents

Item 14.    Principal Accounting Fees and Services

Information regarding principal accounting fees and services is incorporated by reference to the information set forth under the
caption "Ratification of Selection of Independent Registered Public Accounting Firm" in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed with the SEC within 120 days
of December 31, 2010. Such information is incorporated herein by reference.

PART IV

Item 15.    Exhibits, Financial Statement Schedules

3.1

Amended and Restated Certificate of Incorporation (filed as an exhibit to Rigel's Current Report on Form 8-K (No. 000-29889) dated June 24, 2003, and incorporated herein by reference).3.2

Amended and Restated Bylaws (filed as an exhibit to Rigel's Current Report on Form 8-K (No. 000-29889), dated February 2, 2007, and incorporated herein by reference).4.1

Form of warrant to purchase shares of common stock (filed as an exhibit to Rigel's Registration Statement on Form S-1 (No. 333-45864), as amended, and incorporated herein by reference).4.2

Specimen Common Stock Certificate (filed as an exhibit to Rigel's Current Report on Form 8-K (No. 000-29889) dated June 24, 2003, and incorporated herein by reference).4.3

Warrant issued to Kwacker Limited for the purchase of shares of common stock (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (No. 000-29889), as
amended, and incorporated herein by reference).4.4

Warrant issued to HCP BTC, LLC for the purchase of shares of common stock (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (No. 000-29889) and
incorporated herein by reference).10.1
+
Form of Stock Option Agreement pursuant to 2000 Equity Incentive Plan (filed as an exhibit to Rigel's Registration Statement on Form S-1 (No. 333-45864), as amended, and incorporated herein by
reference).10.2

Collaboration Agreement between Rigel and Janssen Pharmaceutical N.V., dated December 4, 1998 (filed as an exhibit to Rigel's Registration Statement on Form S-1 (No. 333-45864), as amended, and
incorporated herein by reference).10.3

Collaborative Research and License Agreement between Rigel and Pfizer Inc., dated January 31, 1999 (filed as an exhibit to Rigel's Registration Statement on Form S-1 (No. 333-45864), as amended, and
incorporated herein by reference).


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Table of Contents

10.4

Collaboration Agreement between Rigel and Novartis Pharma AG, dated May 26, 1999 (filed as an exhibit to Rigel's Registration Statement on Form S-1 (No. 333-45864), as amended, and incorporated herein by
reference).10.5

Build-to-Suit Lease between Rigel and Slough BTC, LLC, dated May 16, 2001 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 (No. 000-29889) and
incorporated herein by reference).10.6
*
Amendment to Build-to-Suit Lease between Rigel and Slough BTC, LLC, dated October 18, 2002 (filed as an exhibit to Rigel's Annual Report on Form 10-K, as amended, for the fiscal year ended December 31,
2002 (No. 000-29889) and incorporated herein by reference).10.7

Amendment No. Two to Build-to-Suit Lease between Rigel and Slough BTC, LLC, dated January 31, 2005 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009
(No. 000-29889) and incorporated herein by reference).10.8

Amendment No. Three to Build-to-Suit Lease between Rigel and Slough BTC, LLC, dated January 31, 2005 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended September 30,
2009 (No. 000-29889) and incorporated herein by reference).10.9

Amendment No. Four to Build-to-Suit Lease between Rigel and HCP BTC, LLC, dated February 1, 2009 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2009
(No. 000-29889) and incorporated herein by reference).10.10

First Amendment to the Collaboration Agreement between Rigel and Novartis Pharma AG, dated May 18, 2001 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001
(No. 000-29889) and incorporated herein by reference).10.11
*
Second Amendment to the Collaboration Agreement between Rigel and Novartis Pharma AG, dated July 6, 2001 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended September 30,
 2001 (No. 000-29889) and incorporated herein by reference).10.12

First Amendment to the Collaboration Agreement by and between Rigel and Janssen Pharmaceutical N.V., dated June 30, 2000 (filed as an exhibit to Rigel's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 (No. 000-29889) and incorporated herein by reference).10.13

Second Amendment to the Collaboration Agreement by and between Rigel and Janssen Pharmaceutical N.V., dated December 4, 2001 (filed as an exhibit to Rigel's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 (No. 000-29889) and incorporated herein by reference).10.14

Loan and Security Agreement between Rigel and Comerica BankCalifornia, dated July 12, 2002 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002
(No. 000-29889) and incorporated herein by reference).10.15
*
Collaboration Agreement between Rigel and Daiichi Pharmaceutical Co., Ltd., dated August 1, 2002 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended September 30,
2002 (No. 000-29889) and incorporated herein by reference).


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Table of Contents

10.16
+
Employment Agreement between Rigel and Elliott B. Grossbard, dated as of March 18, 2002 (filed as an exhibit to Rigel's Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2002
(No. 000-29889) and incorporated herein by reference).10.17
*
Collaborative Research and License Agreement by and between Rigel and Pfizer Inc., dated January 18, 2005 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31,
2005 (No. 000-29889) and incorporated herein by reference).10.18
+
Form of Indemnity Agreement (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (No. 000-29889), as amended, and incorporated herein by reference).10.19
+
2000 Equity Incentive Plan, as amended (filed as an exhibit to Rigel's Current Report on Form 8-K (No. 000-29889) , filed on June 1, 2010 and incorporated herein by reference).10.20
+
2008 Cash Incentive Compensation Plan (filed as an exhibit to Rigel's Current on Form 8-K (No. 000-29889) filed on February 26, 2008 and incorporated herein by reference).10.21
+
2009 Cash Incentive Compensation Plan (filed as an exhibit to Rigel's Current on Form 8-K (No. 000-29889) filed on April 1, 2009 and incorporated herein by reference).10.22
+
2000 Non-Employee Directors' Stock Option Plan, as amended (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (No. 000-29889) and incorporated herein by
reference).10.23
+#
Amended and Restated Employment Agreement between Rigel and Donald G. Payan, effective January 1, 2011.10.24
+#
Amended and Restated Change of Control Severance Plan.10.25
+
2000 Employee Stock Purchase Plan, as amended (filed as an exhibit to Rigel's Annual Report on Form 10-Q for the quarter ended March 31, 2010 (No. 000-29889) and incorporated herein by
reference).10.26
+
2008 Base Salaries for Named Executive Officers (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (No. 000-29889) and incorporated herein by
reference).10.27
+
2009 Base Salaries for Named Executive Officers (filed as an exhibit to Rigel's Annual Report on Form 10-K for the year ended December 31, 2009 (No. 000-29889) and incorporated herein by
reference).10.28
+
2010 Base Salaries for Named Executive Officers (filed as an exhibit to Rigel's Annual Report on Form 10-K for the year ended December 31, 2009 (No. 000-29889) and incorporated herein by
reference).10.29
*
License and Collaboration Agreement between Rigel and AstraZeneca AB, dated February 15, 2010 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010
(No. 000-29889) and incorporated herein by reference).10.30
+
2010 Cash Incentive Plan (filed as an exhibit to Rigel's Current Report on Form 8-K (No. 000-29889) filed on June 1, 2010 and incorporated herein by reference).10.31
+
2011 Cash Incentive Plan (filed as an exhibit to Rigel's Current Report on Form 8-K (No. 000-29889) filed on February 9, 2011 and incorporated herein by reference).23.1
#
Consent of Independent Registered Public Accounting Firm.


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Table of Contents

24.1

Power of Attorney (included on signature page).31.1
#
Certification required by Rule 13a-14(a) or Rule 15d-14(a).31.2
#
Certification required by Rule 13a-14(a) or Rule 15d-14(a).32.1

Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).


+Management
contract or compensatory plan.*Confidential
treatment requested as to specific portions, which portions are omitted and filed separately with the Securities and Exchange Commission.#Filed
herewith.The
certification attached as Exhibit 32.1 accompanies the Annual Report on Form 10-K pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 and shall not be deemed "filed" by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.


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SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of South San Francisco, State of California, on March 1,
2011.

RIGEL PHARMACEUTICALS, INC.By:

/s/ JAMES M. GOWER James M. Gower Chairman of the Board and Chief Executive OfficerBy:

/s/ RYAN D. MAYNARD Ryan D. Maynard Executive Vice President and Chief Financial Officer


POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James M. Gower and Ryan D.
Maynard, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead,
in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that all said
attorneys-in-fact and agents, or any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

Signature

Title

Date/s/ JAMES M. GOWER James M. Gower

Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer)

March 1, 2011/s/ RYAN D. MAYNARD Ryan D. Maynard

Executive Vice President and Chief Financial Officer (Principal Finance and Accounting Officer)

March 1, 2011


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Table of Contents

Signature

Title

Date/s/ DONALD G. PAYAN Donald G. Payan

Executive Vice President, President of Discovery and Research

March 1, 2011/s/ JEAN DELEAGE Jean Deleage

Director

March 1, 2011/s/ BRADFORD S. GOODWIN Bradford S. Goodwin

Director

March 1, 2011/s/ GARY A. LYONS Gary A. Lyons

Director

March 1, 2011/s/ WALTER H. MOOS Walter H. Moos

Director

March 1, 2011/s/ HOLLINGS C. RENTON Hollings C. Renton

Director

March 1, 2011/s/ PETER S. RINGROSE Peter S. Ringrose

Director

March 1, 2011/s/ STEPHEN A. SHERWIN Stephen A. Sherwin

Director

March 1, 2011


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EXHIBIT INDEX

3.1

Amended and Restated Certificate of Incorporation (filed as an exhibit to Rigel's Current Report on Form 8-K (No. 000-29889) dated June 24, 2003, and incorporated herein by reference).3.2

Amended and Restated Bylaws (filed as an exhibit to Rigel's Current Report on Form 8-K (No. 000-29889), dated February 2, 2007, and incorporated herein by reference).4.1

Form of warrant to purchase shares of common stock (filed as an exhibit to Rigel's Registration Statement on Form S-1 (No. 333-45864), as amended, and incorporated herein by reference).4.2

Specimen Common Stock Certificate (filed as an exhibit to Rigel's Current Report on Form 8-K (No. 000-29889) dated June 24, 2003, and incorporated herein by reference).4.3

Warrant issued to Kwacker Limited for the purchase of shares of common stock (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (No. 000-29889), as
amended, and incorporated herein by reference).4.4

Warrant issued to HCP BTC, LLC for the purchase of shares of common stock (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (No. 000-29889) and
incorporated herein by reference).10.1
+
Form of Stock Option Agreement pursuant to 2000 Equity Incentive Plan (filed as an exhibit to Rigel's Registration Statement on Form S-1 (No. 333-45864), as amended, and incorporated herein by
reference).10.2

Collaboration Agreement between Rigel and Janssen Pharmaceutical N.V., dated December 4, 1998 (filed as an exhibit to Rigel's Registration Statement on Form S-1 (No. 333-45864), as amended, and
incorporated herein by reference).10.3

Collaborative Research and License Agreement between Rigel and Pfizer Inc., dated January 31, 1999 (filed as an exhibit to Rigel's Registration Statement on Form S-1 (No. 333-45864), as amended, and
incorporated herein by reference).10.4

Collaboration Agreement between Rigel and Novartis Pharma AG, dated May 26, 1999 (filed as an exhibit to Rigel's Registration Statement on Form S-1 (No. 333-45864), as amended, and incorporated herein by
reference).10.5

Build-to-Suit Lease between Rigel and Slough BTC, LLC, dated May 16, 2001 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 (No. 000-29889) and
incorporated herein by reference).10.6
*
Amendment to Build-to-Suit Lease between Rigel and Slough BTC, LLC, dated October 18, 2002 (filed as an exhibit to Rigel's Annual Report on Form 10-K, as amended, for the fiscal year ended December 31,
2002 (No. 000-29889) and incorporated herein by reference).10.7

Amendment No. Two to Build-to-Suit Lease between Rigel and Slough BTC, LLC, dated January 31, 2005 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009
(No. 000-29889) and incorporated herein by reference).10.8

Amendment No. Three to Build-to-Suit Lease between Rigel and Slough BTC, LLC, dated January 31, 2005 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended September 30,
2009 (No. 000-29889) and incorporated herein by reference).


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10.9

Amendment No. Four to Build-to-Suit Lease between Rigel and HCP BTC, LLC, dated February 1, 2009 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2009
(No. 000-29889) and incorporated herein by reference).10.10

First Amendment to the Collaboration Agreement between Rigel and Novartis Pharma AG, dated May 18, 2001 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001
(No. 000-29889) and incorporated herein by reference).10.11
*
Second Amendment to the Collaboration Agreement between Rigel and Novartis Pharma AG, dated July 6, 2001 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended September 30,
 2001 (No. 000-29889) and incorporated herein by reference).10.12

First Amendment to the Collaboration Agreement by and between Rigel and Janssen Pharmaceutical N.V., dated June 30, 2000 (filed as an exhibit to Rigel's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 (No. 000-29889) and incorporated herein by reference).10.13

Second Amendment to the Collaboration Agreement by and between Rigel and Janssen Pharmaceutical N.V., dated December 4, 2001 (filed as an exhibit to Rigel's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 (No. 000-29889) and incorporated herein by reference).10.14

Loan and Security Agreement between Rigel and Comerica BankCalifornia, dated July 12, 2002 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002
(No. 000-29889) and incorporated herein by reference).10.15
*
Collaboration Agreement between Rigel and Daiichi Pharmaceutical Co., Ltd., dated August 1, 2002 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended September 30,
2002 (No. 000-29889) and incorporated herein by reference).10.16
+
Employment Agreement between Rigel and Elliott B. Grossbard, dated as of March 18, 2002 (filed as an exhibit to Rigel's Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2002
(No. 000-29889) and incorporated herein by reference).10.17
*
Collaborative Research and License Agreement by and between Rigel and Pfizer Inc., dated January 18, 2005 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31,
2005 (No. 000-29889) and incorporated herein by reference).10.18
+
Form of Indemnity Agreement (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (No. 000-29889), as amended, and incorporated herein by reference).10.19
+
2000 Equity Incentive Plan, as amended (filed as an exhibit to Rigel's Current Report on Form 8-K (No. 000-29889) filed on June 1, 2010 and incorporated herein by reference).10.20
+
2008 Cash Incentive Compensation Plan (filed as an exhibit to Rigel's Current on Form 8-K (No. 000-29889) filed on February 26, 2008 and incorporated herein by reference).10.21
+
2009 Cash Incentive Compensation Plan (filed as an exhibit to Rigel's Current on Form 8-K (No. 000-29889) filed on April 1, 2009 and incorporated herein by reference).


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10.22
+
2000 Non-Employee Directors' Stock Option Plan, as amended (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (No. 000-29889) and incorporated herein by
reference).10.23
+#
Amended and Restated Employment Agreement between Rigel and Donald G. Payan, effective January 1, 2011.10.24
+#
Amended and Restated Change of Control Severance Plan.10.25
+
2000 Employee Stock Purchase Plan, as amended (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 (No. 000-29889) and incorporated herein by
reference).10.26
+
2008 Base Salaries for Named Executive Officers (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (No. 000-29889) and incorporated herein by
reference).10.27
+
2009 Base Salaries for Named Executive Officers (filed as an exhibit to Rigel's Annual Report on Form 10-K for the year ended December 31, 2009 (No. 000-29889) and incorporated herein by
reference).10.28
+
2010 Base Salaries for Named Executive Officers (filed as an exhibit to Rigel's Annual Report on Form 10-K for the year ended December 31, 2009 (No. 000-29889) and incorporated herein by
reference).10.29
*
License and Collaboration Agreement between Rigel and AstraZeneca AB, dated February 15, 2010 (filed as an exhibit to Rigel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010
(No. 000-29889) and incorporated herein by reference).10.30
+
2010 Cash Incentive Plan (filed as an exhibit to Rigel's Current Report on Form 8-K (No. 000-29889) filed on June 1, 2010 and incorporated herein by reference).10.31
+
2011 Cash Incentive Plan (filed as an exhibit to Rigel's Current Report on Form 8-K (No. 000-29889) filed on February 9, 2011 and incorporated herein by reference).23.1
#
Consent of Independent Registered Public Accounting Firm.24.1

Power of Attorney (included on signature page).31.1
#
Certification required by Rule 13a-14(a) or Rule 15d-14(a).31.2
#
Certification required by Rule 13a-14(a) or Rule 15d-14(a).32.1

Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).


+Management
contract or compensatory plan.*Confidential
treatment requested as to specific portions, which portions are omitted and filed separately with the Securities and Exchange Commission.#Filed
herewith.The
certification attached as Exhibit 32.1 accompanies the Annual Report on Form 10-K pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 and shall not be deemed "filed" by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.


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