Reata Pharmaceuticals, Inc (NASDAQ:RETA) Q4 2019 Earnings Conference Call February 19, 2020 4:30 PM ET
Vinny Jindal – Vice President of Strategy
Warren Huff – Chief Executive Officer
Colin Meyer – Chief Medical Officer
Manmeet Soni – Chief Financial Officer
Conference Call Participants
Maury Raycroft – Jefferies
Adam Walsh – Stifel
Brian Skorney – Baird
Charles Duncan – Cantor Fitzgerald
Joseph Schwartz – SVB Leerink
Ladies and gentlemen, thank you for standing by, and welcome to Reata Fourth Quarter and Full Year 2019 Financial Results and update on Development Programs Conference Call. [Operator Instructions] An audio recording of today’s webcast will be available shortly after the call today on Reata’s website at reatapharma.com in the investor section.
Before the company proceeds with its remarks, please note the forward-looking statements disclosure in the company’s press release. The company will be making forward-looking statements on today’s call. There are many factors that could cause results to differ from expectations, including those noted in the company’s SEC filings.
Today’s statements are not guarantees of future outcomes. Please also note that any comments made on today’s call speak only as of today, February 19, 2020, and may no longer be accurate at the time of any webcast replay or transcript rereading. Following the prepared remarks, we will open the call up for questions. We ask that you please limit yourself to one question and one follow-up so that we can accommodate as many questions as possible.
At this time, I would like to turn the call over to Vinny Jindal, Vice President of Strategy. Thank you. Please go ahead.
Thank you. Good afternoon, and welcome to Reata Management’s call to discuss fourth quarter and full year 2019 financial results, and to provide a review of our development programs. This afternoon, we issued a press release with a summary of these results, and the press release can be found on the Investors section of our website at reatapharma.com. I’m joined today by our Chief Executive Officer, Warren Huff; our Chief Medical Officer, Colin Meyer; and our Chief Financial Officer, Manmeet Soni. I’ll now turn the call over to Manmeet.
Thanks, Vinny. Good morning, everyone, and thank you for joining us. I’d like to begin our call today by reviewing the progress we made in 2019.
Starting with our development pipeline, last year, we announced positive results from pivotal clinical studies in CKD and neurology. In CKD, we reported positive top-line one-year results from the pivotal CARDINAL Phase III study of bardoxolone and patients with Alport Syndrome. In neurology, we reported positive top line results from the pivotal MOXIe study of Omaveloxolone in patients with Friedreich’s Ataxia. There are no approved therapies for patients with Alport Syndrome, or FA, and we’re the first to produce positive clinical data for a novel interventional therapy in each disease. Additionally, we expanded our development program for bardoxolone for rare forms of CKD with the launch of FALCON, which is studying bardoxolone in patients with autosomal dominant polycystic kidney disease or ADPKD.
We also completed enrollment in CATALYST, a pivotal study of bardoxolone in a severe form of pulmonary disease called connective tissue disease associated pulmonary arterial hypertension or CTD-PAH.
As a result of a recent agreement with AbbVie, we now own worldwide commercial and development rights for all of our pipeline assets, except for certain Asian territories have licensed to Kyowa Kirin for bardoxolone. We maintain robust IP protection for these assets and a build an experienced commercial leadership team capable of launching bardoxolone and omaveloxolone globally.
Beyond our lead indicators, Riata has numerous development opportunities that fit within our strategic priorities and we intend to pursue. In CKD as we’ve said previously, we plan to commercially pursue the diseases in which we observe strong proof of concept data in the face to PHOENIX study. IgA nephropathy, FSGS and CKD caused by Type 1 diabetes. We also plan to launch studies for omaveloxolone in neurological conditions, which like FA, are driven by neural inflammation, oxidative stress, an impaired Nrf2 activity. We generated preclinical proof of concept data with our Nrf2 activators in a number of neurological diseases that fit this profile.
Our earlier stage pipeline includes two wholly owned molecules RTA-901 and RTA-1701, which have completed Phase 3 studies which have both orphan and broad market applications. We expect to continue developing RCA-901, the lead product candidate from our HSP-90 modulator program for the treatment of neurologic diseases such as diabetic neuropathy.
RTA-1701 is a potent and selective inhibitor of ROR-gamma T, the transcription factor involved in the pathogenesis of many autoimmune and inflammatory diseases. We’re excited about the prospects for both programs.
Because of the results we’ve observed with our Nrf2 activators across multiple organ systems and diseases, I’d like to briefly touch on the pharmacology of Nrf2 activation, and why we believe it can be applied to a broad set of diseases. This is important now that we acquired worldwide development rights to the program. Activation of the transcription factor Nrf2 restores mitochondrial function, inhibits pro inflammatory signaling and reduces fibrosis. These are three hallmarks of many diseases that occur in numerous organs and tissue types.
In addition to activity in CKD and neurologic disease, our Nrf2 activators have been studied and demonstrated activity in models of liver, auto immune, cardiovascular and metabolic diseases as well as diseases of the eye. Therefore, we believe the Nrf2 activators are platform technology with significant expansion opportunities.
Of course, we’re developing bardoxolone for the treatment of patients with CKD caused by Alport Syndrome, ADPKD and other rare forms of CKD, but in the aggregate affect more than 700,000 patients in the United States. Few are no effective therapies are currently approved for treatment of these diseases. And we believe bardoxolone can become an important therapeutic option for many of these patients.
The lead indication and our CKD franchises Alport Syndrome, which is a rare hereditary and severe form of CKD, affecting approximately 30,000 to 60,000 patients in the United States. The ongoing Phase III portion of CARDINAL is the largest global interventional study ever conducted an Alport Syndrome. Secondary endpoint for CARDINAL is the off treatment analysis of week 52. And in this analysis, patients treated with bardoxolone demonstrated a statistically significant placebo corrected 5.14 millimeter permitted improvement compared to placebo with a P value of 0.0012.
Based on these positive results and, of course, subject to discussions with regulatory authorities, we plan to proceed with the submission of regulatory filings this year for marketing approval in the United States. We’ll not be commenting in the call or Q&A on our ongoing interactions with the regulatory agencies.
Our lead indication in neurology is Friedreich’s ataxia, an ultra-rare orphan disease that affects approximately 22,000 patients worldwide and approximately 5,000 patients in the United States. The pivotal MOXIe study of omav in FA was the largest global interventional study ever conducted in FA, and successfully met its primary endpoint of change in the modified Friedreich’s ataxia rating scale relative to placebo after 48 weeks of treatment. Patients treated with omav demonstrated a statistically significant placebo contracted 2.4 point improvement in the mFARS compared to placebo after 48 weeks of treatment with the P value of 0.014. Based on these positive results, and of course, subject to discussions with regulatory authorities, we plan to proceed with the submission of regulatory filings this year for marketing approvals in United States, as with bardoxolone, we will not be commenting in the call or Q&A on our ongoing interactions with the regulatory agencies.
I’d like to make one additional pointed about the MOXIe results. We believe that the results are also important because they provide proof of concept at improvements in mitochondrial function from omav treatment may provide a therapeutic benefit into several other neurologic diseases. The processes of neural inflammation and impaired cellular energy production that Nrf2 activation can resolve occur in other regions of the brain causing other rare and debilitating neurologic diseases. We’ve observed promising preclinical results with omav and related molecules and models of Parkinson’s disease, dementia, epilepsy, Huntington’s disease, ALS and Alzheimer’s disease. We plan to develop omav clinically for one or more of these diseases.
In 2019, we completed enrollment in the pivotal CATALYST study of bardoxolone in connective tissue disease associated pulmonary arterial hypertension or CTD-PAH. Catalyst is an international randomized double blind placebo controlled trial examining the safety, tolerability and efficacy of bardoxolone and patients with CTD-PAH when added to standard of care based vasodilator therapy. The primary endpoint of the study is the change from baseline and six minute walk distance relative to placebo with 24.
Based on the results observed in our Phase II LARIAT study in the design of the CATALYST trial, we believe bardoxolone has the potential to become the first therapy approved, specifically for patients with CTD-PAH. We expect to release top line results from the studying midyear.
Our goal is to make bardoxolone and omav available for patients as soon as possible. And accordingly, I want to provide a high level summary of our pre-launch efforts. Subject, of course, to approve from the FDA and other regulatory agencies, we’re actively preparing for the commercial launch of bardoxolone for patients with Alport Syndrome and have omav for patients with FA. We have a seasoned commercial leadership team that previously played key commercial roles the company’s successful launching drugs for rare and orphan diseases. In addition, our CMC team is in place and we’re building redundancy and suppliers to support the supply needs for ourselves and our collaborators.
I’ll now turn the call over to Manmeet to provide a summary of our financials for the fourth quarter and full year 2019.
Thanks, Warren, and good afternoon, everyone. Please refer to our press release issued earlier today for a summary of our financial results for the fourth quarter and full year of 2019.
Let me start with our cash balance. We maintained a solid balance sheet ending 2019, with approximately $664 million in cash and cash equivalents. This includes cash proceeds coming from our financing completed in November 2019, amounting to approximately $492 million in net proceeds.
Our GAAP net loss for the quarter — fourth quarter of 2019 was $186.9 million or $5.91 per share on both basic and diluted basis as compared to a net loss of $25.6 million or $0.86 per share on both basic and diluted basis for 2018.
Our GAAP net loss for the year ended December 31, 2019, was $290.2 million or $9.54 per share on both basic and diluted basis, as compared to a net loss of $80.5 billion or $2.91 per share on both basic and diluted basis for the prior year. The increase in GAAP net loss for the quarter and the year was primarily due to an expense of $124.4 million. The quarter recorded as reacquired licensed rights than the P&L, resulting from our agreement entered in October 2019 with AbbVie to reaquire the license rights. This expense is calculated as a net present value of $330 million payments related to reacquisition of license rights offset by a deferred revenue balance remaining under the AbbVie collaboration agreement.
In addition, our R&D expenses increased due to higher personal and equity compensation expenses, with increase in headcount and manufacturing expenses associated with our late stage programs as we continue to expand and advance our development pipeline.
Our G&A expenses increases were driven by an increase in personal and rent expenses to support growth in our development activities, in addition to commercial readiness activities.
Moving to revenues, our collaboration revenues were $2.7 billion during the fourth quarter of 2019 as compared to $8.5 million in the fourth quarter of 2018. This reduction in collaboration revenue was related to accounting of the reacquisition of the license rights from AbbVie, towhich resulted in recognition of deferred revenue related to AbbVie as an offset to expenses.
Moving to non-GAAP measures, which excludes stock-based compensation and reacquired license rights expenses.
Our non-GAAP R&D expenses were $36.7 million for the fourth quarter of 2019 as compared to $24.3 million for the same period of the year prior. Our non-GAAP G&A expenses were $13.4 million for the fourth quarter of 2019 as compared to $6.2 million for the same period of the year prior.
To summarize, our non-GAAP operating expenses were $50.4 million during the fourth quarter of 2019 with four pivotal development programs in pipeline and several ugly stage preclinical activities. This highlights our financial discipline and efficient capital allocation to manage our cash funds. We expect our current cash balance of $664 million to fund our operations through the end of 2021.
With that, I will turn the call back over the Warren.
Thanks, Manmeet. As our presentation today indicates we’re making progress on our programs on Alport Syndrome, ADPKD, FA and CTD-PAH, and have significant expansion opportunities for bardoxolone and CKD and for omav and neurology, also excited to move forward with our promising early stage programs RTA 901 and RTA 1701.
With a strong balance sheet and the seasons and growing commercial team, we’re well positioned to commercialize our groundbreaking therapies for underserved orphan diseases in the coming years. We look forward to updating you soon on our progress.
That concludes our prepared remarks. And I’d like to thank everyone who dialed in. I’ll now turn the call over to the operator for questions.
[Operator Instructions] May I ask you that please keep your questions to one question and one follow-up maybe just the time. Our first question comes from Yigal Nochomovitz from Citigroup. Your line is now open.
Hi, this is Samantha on for Yigal. Thanks very much for taking our questions. We appreciate the update in the detailed financial analysis. First, I guess, I just curious on how the enrollment cadence for ADPKD has been progressing? And when we can expect a top-line data readout for this program?
We announced last year that we initiated an enrollment in the FALCON trial, ADPKD and we have not yet provided guidance on completion of enrollment and when will have data?
Okay. Understood. And then turning to the Phase III CATALYST study, the readout expected the summer of May 2020. What are the risks associated with this program? And what are the reasons to believe at ship work?
So, we have ample of evidence that the drug mechanistically could affect pathways that are relevant to relevant to CTD-PAH. As you know bardoxolone targets bioenergetic and inflammatory components of PAH. These patients experience mitochondrial dysfunction, increased NF-kappa B activity and related inflammatory pathways involved in ROS muted signaling, cellular proliferation, and fibrosis. Through bardoxolone’s effects on induction of Nrf2 and suppression of NF-kappa B, it has the potential for inflammatory and progress signaling. This was signaling that’s associate with the downstream fibrosis. And these pathways are not directly affected by available therapies. And so the trial obviously is underway. And we think its power based upon the Phase 2 data.
Thank you. Our next question comes from Maury Raycroft with Jefferies. Your line is now open.
So I guess you can comment on ongoing interactions with the regulatory agencies, but can you comment on timing for when you could file for bardoxolone and omav? And then whether you’ll provide an update to the street post pre-NDA meetings?
Sure, Maury. So as Warren noted in his prepared remarks, we’re planning to file the NDA in the U.S. for both bardoxolone in Alport Syndrome and omav in FA this year. We will not comment on ongoing regulatory actions other than that.
Okay. And then also as you approach to filing for bardoxolone and Alport Syndrome, do you have a better sense of how much to your data or how many patients you will have to your data on for when you file?
We’re not going to comment on the two year data.
Thank you. Our next question comes from Adam Walsh with Stifel. Your line is now open.
My first one is just on resource allocation. You’ve obviously had good data in the PHOENIX trial with IgA nephropathy and Type 1 diabetic CKD. And for omav, you talked about potentially expanding into new neurological indications like ALS or Huntington’s. What’s holding you back presently, now you’ve raised money? Was it a financial constraint? Is it a kind of a resource internal constraint? And do you think we’ll be able to get more visibility on when these programs will move forward over the next year or so? Thanks.
Yes, well at the appropriate time will definitely provide guidance about which pivotal programs are going to come next, and what we expect the timing to be. I would say we’ve been managing our both financial and human resources very carefully as a company. And I think if you look at our — if you look at the opportunity for development across our portfolio, I mean, as you said there’s an opportunity to begin a number of additional registrational studies in rare forms of CKD, we have a number of really good opportunities for our Nrf2 activators that Omavm and neurologic disease. And we actually have two other really solid Phase 2 ready assets behind that with novel mechanisms and broad applications. And so we’ve got a really deep pipeline, and we definitely are feel regularly constrained by the availability of both human and financial resources to pursue all of the things that we’d like to do.
All right, that’s fair. And then, really quickly on PAH. If and when let’s say you get data that’s approved. Would you expect to build out a commercial sales force to target pulmonologists? Or would you just market it in CKD and let the city stand on its own? How would you approach commercial and PAH?
It’s a good question, but I’m not really going to speculate about it until we would actually have to see the data, the quality of the data. And what the clinical benefit was in all that before we could really evaluate make meaningful decisions about how we would go about the commercialization event.
Thank you. Our next question comes from Brian Skorney with Baird. Your line is now open.
Just maybe ask kind of follow-up on the enrollment in the FALCON study. If I just look at the CARDINAL Phase III portion, and it looks like about a year for you guys to enroll, fewer number of patients and study, but pulling from a much smaller patient pool. Is there anything that we should be considering relative to the two studies and indications to keep in mind when thinking about enrollment time line? Nothing, knowing nothing besides just there kind of sample size and the patient populations or be relatively similar in enrollment timelines.
Yeah, as I mentioned the trial initiated enrollment last year, as we said enrollments ongoing and. So we have to provide any more visibility today.
And then, just when we think about empowering assumptions for the CATALYST study, we have a broad range of placebos and sort of the general PAH, what should we kind of be thinking about and what are your assumptions underline what placebo would look like on six-minute walk in this subgroup of PAH patients?
Yeah. So our powering assumptions are not only based upon data available in the literature from – in the numerous trials have been conducted, but also from the observed data within our Lariat phased program. And so in synthesizing all that, the trial can detect a difference of approximately 12.5 meters based upon the segregation assumptions and others calculations.
Our next question comes from Charles Duncan with Cantor Fitzgerald.
Thanks guys for taking my question Warren and team, congrats on a really fantastic year of progress. I’ll stick with questions in — on the neurology side of the house, I guess with regard to omav and finally in the U.S. for Friedreich’s ataxia. Is the data that you have necessary and sufficient to file? Or is the rate limiting staff discussion with agency or some other kind of clinical or nonclinical work that you’re doing with that drug?
So I think, Charles, as you know previous to launch as part two of the MOXIe study the FDA provided us whose guidance that mFARS is acceptable as a primary endpoint for part to the MOXIe study, and didn’t they consider either accelerator or full approval based on the overall results of the trial and strength of the data? So as we mentioned multiple times now on the call, we’re in discussions with FDA regarding the next regulatory steps and are continuing with our preparations to submit an NDA. We’re not going to provide any additional detail of this time.
Okay, that’s fair. And then when you think about the build-out of the commercial infrastructure for Alport versus Friedreich’s, I guess, I’m wondering, are there synergies that you can realize in that approach, maybe its back office work or would it make sense to consider two different call it sales forces? And then as an add-on to that when you’re thinking about omav and moving forward with other indications, when could we see initial clinical activity first call it, next steps beyond Friedreich’s?
Sure. So Charles, this is Manmeet. I’ll take the first question regarding the synergies on commercial sales force and others. So the answer is yes. And certainly, there are synergies as you would see not only just back office, but also on market access and sales operation activities and planning activities, so all that have synergies. The only thing which would have is a different sales team for omav versus bard because they will have different targets. But still, as you know, we have a very — this is a rare disease and we are not expecting a huge sales force for both of those indications. So there are synergies. On top of that, there will be very limited sales force to expand and to further add. I would also say that omav is certainly Friedreich’s ataxia that’s so such well diagnosed population, and with nine centers of FAs. Centers of excellence and
Other FA centers, I think they’re very concentrated with a few places. So we will not need even — like not more than couple – dozens of sales force over there. So yes, to answer your question, there are a lot of synergies of the back office and on the marketing side. Anything else Warren you would like to add.
I’ll add in to your second question, Charles. And so as you know, the underlying biology and pharmacology of omav is not specific to Friedreich’s ataxia. And we’ve demonstrated preclinical activity in a wide range of models including Parkinson’s disease, various forms of dementia, epilepsy, Huntington’s disease, ALS, even Alzheimer’s disease. We have data from ex-vivo patient biopsy samples demonstrating that omav can restore mitochondrial dysfunction, which is suppressed in several different forms of neurological disease beyond FA. And so right now we’re going to actively triaging what the next clinical trials would be. I think we publicly stated that and we plan to initiate one or more trials in the next few years with omav. So we expect to have some discussion about that in the future, but we’re really excited about the opportunity for omav. And it had activity in a very difficult patient population FA where there’ve been approximately 15 prior failed trials. And we think that, once again, the underlying pharmacology is relevant to many settings. And so I guess, stay tuned for more discussions and concrete guidance about our next clinical progressive event.
Thank you. [Operator Instructions] Our next question comes from Joseph Schwartz with SVB Leerink. Your line is now open.
Great. Thanks so much and congrats on the progress as well. I was wondering if you could give us an update on the status of the ongoing CKD study for bardoxolone in Japan. Can you remind us of the timeline for that? And is the work being done there, does it differ materially from what was done and speaking and being?
Sure. Kyowa Kirin trial called AYAME is a Phase III outcomes trial in diabetic CKD. It’s different from the BEACON trial, which we conducted years ago in several ways. Number one, excludes patients at risk for fluid retention; number two, they’re enrolling a much broader range of CKD patients; number three, the endpoint is different. And so the primary endpoint of the trial is compositive first of time to a 30% reduction in EGFR that’s confirmed for dialysis. As far as timing, they’ve publicly stated that enrollment was completed last year. And they’ve publicly dive into data availability from the trial in the first half of ’22.
And then you’ve noted your robust IP for both bard and omav. I was just wondering if you could touch upon that and highlight the claims that you think are most robust? And what your expectations for LOE are?
Yeah, sure. So starting with bardoxolone, it’s protected by a battery of claims that include composition of matter on the novel amorphic form of the drug, which has a very significant impact on the dosing. The novel amorphic form, I believe, is of about 4.5 fold more potent than the other crystalline forms. And also there is very broadly worded method of use patents that I think, basically go to use of bardoxolone to improve kidney function in patients with CKD, which would basically be essentially right on the label. And let me correct me, but I think that we estimate that kind of with extensions based on the development history that the protection would be essentially on those from 2034, 2033 to 2034, we would have exclusivity.
That’s the bardoxolone. And omav to get up to 2035 in the U.S. And 2036 in Europe.
Yes, on its composition of matter claims.
Thank you. And I’m showing no further questions in the queue at this time. Ladies and gentlemen, thanks for your participation on today’s conference. As a reminder, an audio recording of the call will be available shortly after the conference call on Reata’s website at reatapharma.com in the Investors section. Thank you very much for your participation. You may now disconnect.