Reata Pharmaceuticals, Inc. (NASDAQ:RETA) Q3 2022 Earnings Call Transcript

Reata Pharmaceuticals, Inc. (NASDAQ:RETA) Q3 2022 Earnings Call Transcript November 8, 2022

Reata Pharmaceuticals, Inc. beats earnings expectations. Reported EPS is $-2.16, expectations were $-2.18.

Operator: Thank you for standing by, and welcome to the Reata Pharmaceuticals Third Quarter 2022 Financial Results and Update on Development Programs Conference Call. An audio recording of today’s webcast will be available shortly after the call in the Investor section of Reata’s website at reatapharma.com. Before the Company proceeds with its remarks, please note the forward-looking statements disclosure in the Company’s press release. There are many factors that could cause results to differ from expectations, including those noted in the Company’s SEC filings. On today’s conference call, non-GAAP financial measures will be used to help investors understand the business performance. These non-GAAP financial measures are reconciled with comparable GAAP financial measures in the Reata’s earnings release and presentation from today, which again can be found in Reata’s website.

Photo by National Cancer Institute on Unsplash

Today’s statements are not guarantees of future outcomes. Please also note that any comments made on today’s call apply only as of today, November 8, 2022, 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 are joined today by Warren Huff, Reata’s Chief Executive Officer; Manmeet Soni, President; Colin Meyer, Chief Innovation Officer; Seemi Khan, Chief Medical Officer; and Dawn Bir, Chief Commercial Officer. At this time, I would like to turn the call over to Warren Huff.

Warren Huff: Good morning, everyone. We thank you for joining us today for our quarterly update. I’ll start on Slide 4. Since Reata’s founding in 2002, our scientific mission has been to identify, develop and commercialize therapeutics with novel mechanisms of action for the treatment of severe life-threatening diseases that have few or no approved therapies. Toward that goal, we’re developing omaveloxolone, or omav, a small molecule activator or Nrf2 for the treatment of patients with Friedreich’s Ataxia or FA. FA is a relentlessly progressive and debilitating neuromuscular disorder, which affects approximately 4,000 diagnosed patients in the United States. There are no approved therapies for these patients and FA patients typically become dependent on walkers and then wheelchairs in their mid-20s and unfortunately, they pass away from the disease in their mid-30s.

We began developing omav in FA over eight years ago, initiating the dose-ranging Part 1 portion of the MOXIe trial in September of 2014. Following encouraging results from Part 1, we initiated MOXIe Part 2, one of the largest completed international trials in FA. We reported positive data from the MOXIe Part 2 study in October of 2019. We initiated a series of interactions with the FDA leading to a pre-NDA meeting with the FDA in the third quarter of 2021. During the first quarter of this year, we completed the rolling submission of our NDA and in May 2022, the FDA accepted our NDA for filing and granted priority review designation. As we reported in our last earnings call, in the third quarter of this year, we completed a mid-cycle communication meeting with the FDA and submitted additional data and analysis to the FDA in response to their comments.

The FDA determined that these submissions were a major amendment to our NDA and extended the Prescription Drug User Fee Act or PDUFA date by three months to provide time for a full review of the new data and analyses. The PDUFA date is now February 28, 2023. Next slide. We recently completed a late-cycle meeting with the FDA. The purpose of the late-cycle meeting is for the FDA to discuss any substantive issues identified in the division’s objectives for the remainder of the review. The meeting does not address the final regulatory decision for the NDA. While we have not received formal minutes from the FDA, in the preliminary agenda four and during the late-cycle meeting, the FDA stated that they continue to review the analyses and data included in our recent NDA submissions.

The FDA did not request any additional data or analyses but stated that additional data may be requested as reviews are ongoing. The FDA confirmed that no information requests were outstanding and reiterated that they do not currently plan to hold an advisory committee meeting. The FDA stated that no issues related to risk management have been identified. During the meeting, the FDA indicated that post-marketing requirements and label review are ongoing. With respect to post-marketing requirements and commitments, FDA stated that if Omav is approved, they anticipate requiring a drug-drug interaction trial with CYP3A4 modulators, a thorough QT trial and an evaluation of pregnancy outcomes. FDA stated that other post-marketing requirements and commitments may be to label review, during the meeting, we noted that the original proceeds included in the amendments to the NDA and that we have updated it in connection with the planned filing of our Marketing Authorization Application or MAA in Europe later this year.

We committed to submit the updated proposed label language to the NDA. The FDA indicated that post-marketing requirements and label comments will be communicated in early 2023. Next slide. We’re also making progress in the preparation of our marketing authorization application for omav in Europe. We received a positive opinion from the pediatric committee on our pediatric investigation plan with a commitment to seek scientific advice for additional input on the protocol time. We’ve received EMA follow-up protocol assistance feedback regarding our nonclinical and CMC programs. The EMA feedback indicated that there were no impediments to our planned MAA submission. We also received agreement that certain nonclinical studies, including two-year carcinogenicity study data may be submitted after approval.

We recently completed our pre-submission meeting and are nearing completion of the MAA. We plan to submit the application before the end of this year. Next slide. Turning to our program with bardoxolone in chronic kidney disease. We continue to enroll patients in our ongoing Phase III FALCON trial in patients with Autosomal Dominant Polycystic Kidney Disease, or ADPKD. ADPKD is a rare and progressive hereditary form of CKD that affects both men and women of all racial and ethnic groups. ADPKD is the leading inheritable cause of kidney failure with an estimated diagnosed population of 140,000 patients in the United States. The FDA has confirmed that the primary endpoint of eGFR change from baseline to week 108, which is eight weeks after the planned drug discontinuation at week 100 is reasonable since the available data suggests that bardoxolone’s acute pharmacodynamic effects on eGFR should be largely resolved by that time.

We currently enrolled more than 605 patients in the FALCON trial. Finally, our strategic collaborator in Japan, Kyowa Kirin, is sponsoring the AYAME trial, a large Phase III clinical trial in patients with diabetic kidney disease. The primary endpoint is time to onset of greater than or equal to 30% decline in eGFR or end-stage kidney disease. If the results of this trial are positive, it could provide clinical evidence that improvements in eGFR observed in Bard-treated patients do, in fact, delay progression to kidney failure. The AYAME trial enrolled over 1,000 patients with stage three and four diabetic CKD with over three years of data being collected for all patients in the trial. Kyowa Kirin expects to complete the last study visit in the second half of this year and has provided guidance that top line data will be available in the first half of 2023.

With that, I would now like to turn the call over to Colin Meyer, who will provide an overview of the key clinical efficacy data for omav and FA. Dawn Bir will then provide an update on our recent progress in our commercial preparation activities for omav. And finally, Manmeet Soni will provide an update on our financials and operations.

Colin Meyer: Thanks, Warren. I’ll continue on Slide 9. This morning, I would like to review the key lines of evidence we have generated supporting the efficacy of omaveloxolone in patients with FA. The primary evidence for omav in FA comes from the pivotal Part 2 MOXIe study, a double-blind, placebo-controlled, randomized international study, 103 patients were enrolled across a wide and representative range of age and disease severity. MOXIe Part 2 met its primary endpoint with patients treated with omav experiencing a statistically significant placebo-corrected 2.4-point improvement in mFARS compared to placebo after 48 weeks of treatment with a p-value of 0.014. We believe this 2.4 point change is inherently clinically meaningful as patients treated with omav on average did not progress and recovered some function during the 48-week period.

whereas placebo-treated patients progressed at a rate consistent with the literature. We observed improvements relative to placebo in all subsections of the mFARS scale, all major subgroups and all analysis populations. Next slide. Beyond the primary evidence from the pivotal MOXIe Part 2 trial, we have provided additional lines of confirmatory evidence to the FDA supporting the efficacy of omav in patients with FA. We have provided mechanistic evidence to the division linking for tax and deficiency with NrF2 suppression in impaired mitochondrial function. — deficits and mitochondrial respiration and ATP production are observed in cells and tissues isolated from patients with FA. For example, maximum mitochondrial respiration and spare mitochondrial respiratory capacity is assessed by oxygen consumption rate were lower in fibroblasts from patients with FA than in fibroblast from healthy control subjects.

Additionally, a study conducted in 42 patients compared peak oxygen consumption, which is reflective of mitochondrial function with the Friedreich’s Ataxia Rating Scale score and found that reduced mitochondrial function correlated with reduced neurological function. Taken together, these data demonstrate a clear link between reduced mitochondrial function in FA and reduced neurological function in FA patients. Next slide. We enter academic collaborators have spent several years to demonstrate the relevance of omav to impacting the underlying pathophysiology of FA — as shown in the left figure, Omav has been demonstrated to restore Nrf2 protein levels in FA patient fibroblast. In the middle panel, you can see that this restoration of Nrf2 is associated with restoration of mitochondrial energy production in FA disease models and patient samples.

In the panel on the right, we performed a tertile analysis of mFARS and changes in the Nrf2-target genes, ferritin and GGT, comparing changes at week 48 in the pivotal MOXIe Part 2 trial. This analysis shows that Feratin and GGT increases are associated with mFARS improvements in patients with FA. As shown in this plot, the patients with the largest clinical improvement or largest decrease in mFARS at week 48, as shown on the right, were also to patients with the largest increases in Feratin and GGT. To summarize, these data provide additional context for the relevance between FA pathophysiology, Nrf2 induction in clinical benefit in FA patients. Moving to Slide 12. To assess the treatment effect of omav, more formally in the MOXIe extension and to provide additional clinical evidence, we performed a post hoc propensity match analysis of the MOXIe extension data to the largest, most robust FA natural history study, FA-COMS.

FA-COMS is a global multicenter longitudinal prospective observational study that has enrolled more than 1,250 patients. Clinical outcome measures, including mFARS are assessed annually and patients are followed for up to 25 years. Patients from FA-COMS were matched to MOXIe extension patients using propensity scores based on five covariants, including sex, baseline age, age of FA onset, baseline mFARS score and baseline gate score. Selection of these covariants was made in collaboration with the principal investigator and statistician for FACOMS based on clinical relevance, the relevance as prognostic indicators for disease progression and availability in those studies. The change from baseline in mFARS at year three for MOXIe extension patients compared to the propensity score matched FA-COMS patients was analyzed as the primary efficacy endpoint using the same mixed model repeated measures or MMRM analysis as we used for the primary analysis for MOXIe Part 2.

Results for the primary pool population of 136 patients in the MOXIe extension compared to 136 patients in FA-COMS is displayed in the plot on the left. In this population, patients in the FA-COMS matched set progressed approximately 6.6 mFARS points by year three, whereas patients treated with omav in MOXIe Extension progressed only three points, representing a significant slowing in IO of 0.0001 HERE 01. In summary, the propensity matched analyses provide a robust assessment of the effect of Omav in the ongoing extension study. The propensity match analysis includes 136 patients who have been treated with omav for up to three years to match FA-COMS patients, and all analysis populations demonstrated a significant slowing of progression for patients treated with omav with multiple subgroups in all Empire subsections favoring omav.

In conclusion, to supplement the efficacy results of MOXIe Part 2, we have provided FDA with additional evidence supporting the efficacy of Omav. These include mechanistic data showing how Omav directly affects the underlying pathophysiology of FA the post-hot propensity match analysis of patients in the MOXIe Extension compared to patients from FA-COMS, demonstrating a significant long in disease progression and results from the post-hoc delayed start analysis, which are consistent with omav having a disease-modifying profile and a persistent effect on the course of disease. With that, I’ll now turn the call over to Dawn.

Dawn Bir: Thank you, Colin. Good morning. I’ll continue on Slide 14. Reata’s development of omaveloxolone for the treatment of Friedreich’s Ataxia and potential FDA approval represent advancement and hope for an underserved patient community. There are no approved therapies and only symptomatic treatment is available today. If approved, omaveloxolone will be the first product to treat Friedreich’s Ataxia with the potential to slow disease progression. The commercial opportunity is significant. FA is a rare disease with very low prevalence, a devastating and life-shortening disease affecting approximately 4,000 diagnosed patients in the United States. Like many rare diseases, some patients may go undiagnosed until a specific treatment becomes available.

We believe that most U.S. Friedrich’s ataxia patients have been diagnosed, and this is our target market at approval. The undiagnosed patient estimate reflects potential future market growth. HCP’s treating diagnosed FA patients today have been identified, providing focus for our commercial launch plan. Patients are connected through community, social media, podcasts and advocacy, all platforms for disease education and information sharing. Actively engaged in research over 1,000 U.S. FA patients participated in FA-COMS or FA clinical outcome measures. This voluntary study evaluates measures and monitors the natural progression of the disease, quantifying the change in progression over time. This highly engaged patient community has eagerly awaited a treatment.

Turning to Slide 15. We’ve recently accelerated our U.S. launch preparation. Our commercial leadership team is in place, representing all core commercial functions, including marketing, market access, sales and operations. We’ve hired the sales leadership team. Brand strategy development is underway, and our launch priorities are clear. For over two years, our disease awareness and educational campaigns have highlighted the severe rare disease and the urgent need for treatment. As we prepare for launch, our focus shifts to creating a brand, educating HCPs, empowering patients to seek treatment and creating access to therapy. Next slide. Our focus that approval will be to reach and educate HCPs with diagnosed FA patients in their practices. Through claims data analysis, we’ve identified approximately 2,500 HCPs treating at least one FA patient.

We’ve also included ataxia centers managing FA patients in our list of target accounts and nine U.S. CCRN centers. These collaborative clinical research network accounts are part of an international network of FA research centers where physicians, researchers and patients work together to advance treatments and best practices for disease management. U.S. sites include the Children’s Hospital of Philadelphia, UCLA, St. Jude Children’s Research Hospital and the University of South Florida in Tampa to name just a few. With FA targets identified, our commercial focus at approval will focus on reaching and educating these most important HCPs. Our commercial team will expand to 55 to 60 employees next year, including our field-based sales and access teams.

We plan to hire the sales organization in Q1. They will be trained and deployed following approval in late Q1. Turning to Slide 17. A best practice for successful rare disease specialty product launches includes a comprehensive patient access and distribution program. We are pleased to introduce Reata REACH or the Reata education, access and care health line. REACH will serve as the single point of contact for both patients and physicians and will support access programs, including the management of new patient starts and benefits verification, commercial co-pay assistance, uninsured patient support and tailored patient adherence and compliance programs. REACH will include an integrated and exclusive specialty pharmacy and be supported by a field-based patient access liaison team.

a guiding light for the development of these services includes putting the patient experience at the front and center of what we do and working towards reducing the burden of patient out-of-pocket cost as a barrier to accessing treatment. The Reata REACH program will go live at approval. Thank you. I’ll now turn the call over to Manny for our financial update.

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Manmeet Soni: Thank you, Dawn, and good morning, everyone. We released our financials and filed our 10-Q earlier this morning. I would like to highlight a few financial items this quarter, including our strong cash position, operating expenses and collaboration deferred revenue. I will then provide an outline for our operational readiness for a potential commercial launch in the United States and the European region if omav is approved in those territories. Let me start with our cash balance on Slide 19. As of September 30, we maintained a solid balance sheet with approximately $435.9 million in cash, cash equivalents and marketable debt securities. Based on our current plan, our cash balance will enable us to fund operations through the end of 2024.

I wanted to highlight that since we repaid our prior debt from Oxford and Silicon Valley Bank in 2020, we have a clean balance sheet and we have no existing debt or loans. In addition, liabilities related to our potential Blackstone royalty obligation in our balance sheet are only payable on bardoxolone revenues if bardoxolone is approved. Blackstone has no rights on omav revenues. Moving to expenses. R&D expense increased by $4.1 million for the three quarter — for the three months ended September 30, September 2022 as compared to the three months ended September 30, 2021. The increase is due to personnel and personnel-related costs to support our product development activities. G&A expenses increased by $1.5 million or 6% for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

The increase was primarily due to rent expenses related to the new headquarters building. Both our GAAP and non-GAAP operating expenses slightly increased as compared to the second quarter of 2022. As mentioned on the last quarter call, we have recognized all of the deferred revenues related to milestones achieved earlier under the Kyowa Kirin agreement in the second quarter of 2022. As a result, we have not recognized any deferred revenues during the third quarter of 2022, and any future revenues will be recognized once future milestone or collaboration revenues are earned. We continue to work on completing the manufacturing of omav’s commercial drug supply in anticipation of a launch in the United States. We have begun to hire resources, build processes and systems to enable us to record product revenues, track receivables, report government pricing and other related compliance requirements.

As we are preparing to submit an MAA for omav during this quarter, we have initiated a buildup of our European infrastructure to support the potential commercial launch of omav in the European region by early 2024, if approved. Finally, I would like to highlight that we have strong intellectual property protection for omav, including three different patent families. If omav receives FDA approval in early 2023, we anticipate that composition of matter and patent production could be extended to early 2037 in the United States. Additionally, composition of matter of patents claiming omav have been granted in Europe, Japan, China and more than 20 other territories. With that, I will turn the call back over to Warren.

Warren Huff: Thank you, Manmeet. In closing, we’ve made substantial progress in our omav program. This includes the submission of additional information and analysis to the FDA, which we believe strengthens the efficacy of evidence demonstrating the effectiveness of omav in FA and the completion of the late-cycle meeting. If approved, omav will be the first drug available for this severe disease, and we’re actively working on commercial preparations to be in a position to potentially launch it early next year. Next slide. That concludes our prepared remarks. We’d like to thank everyone who dialed in. I’ll now turn the call over to the operator for questions.

Q&A Session

Operator: Ladies and Gentlemen, we will now begin the question-and-answer session. At this time, we will pause momentarily to symbol a roster. Our first question comes from Yigal Nochomovitz from Citigroup.

Yigal Nochomovitz: Are, thank you very much for taking the question. So around the labeling commentary in the press release and on the call, can you just please clarify, are you actually in labeling discussions with the agency, meaning has the FDA actually sent the Company a proposed label yet? Or has it only been Reata sending the FDA proposed label language.

Warren Huff: Yes. FDA stated in the agenda for the late cycle meeting that label review was underway. We had a discussion in the meeting where we noted that the original proposed label language by us submitted in the NDA was now stale because of the amendments that we had made to the NDA, and we asked them if they would like us to submit amended language, which we’ve developed for our MAA submission in Europe to the NDA. And they said, yes, they’d like us to submit that to the NDA. And then they’ve also indicated in the late cycle meeting that they would be providing us with comments on both the label and post-marketing commitments in early 2023.

Yigal Nochomovitz: Okay. Got it. So just to clarify, so when you submitted updated label, will that be a new indication statement? Or will it simply be an amended label that reflects the updated data submitted earlier in the year for the major amendment? And could you please say when do we expect this updated proposed label to be submitted to the agency given that they say they’re going to be reviewing it in early 2023.

Warren Huff: Yes. So it will — it’s obviously going to reflect the additional data and analysis submitted to the NDA. So that can be taken account — taken into account in the label. That will be the primary change. We will be submitting it very soon because we’ve already developed that language for our MAA submission.

Operator: Our next question today comes from Madhu Kumar from Goldman Sachs.

Madhu Kumar: Yes. So I guess kind of our first one relates to kind of thinking about the timing for the late cycle meeting and the communication through early ’23. I guess kind of at a high level, how should we think about the kind of issues that need to be sorted to — are they really just about assessment of the data you had submitted a few months ago? Or is there anything else beyond kind of the clinical data that needs to be looked at as part of the review process.

Warren Huff: I think that the main focus, obviously, will be to just continue the review, wrap it up on the FDA side to reach a conclusion. And then obviously, there’s a process to go through if they decide to approve the drug, there is a process to go through to work out the details of the post-marketing requirements and the label. Those will be the main activities if it’s on a track to approval.

Madhu Kumar: Right. And then I guess just following…