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Good day, ladies and gentlemen, and welcome to Reata Pharmaceuticals' 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 Investors & News section.
Before the company proceeds with its remarks, please note the forward-looking statement 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, May 9, 2018, 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 your questions. [Operator Instructions]
I would now like to introduce your host for today's conference, Mr. Vinny Jindal, Vice President of Strategy. Please go ahead, sir.
Thanks, Christie. Good morning, and welcome to Reata management team's conference call to provide an update on our development programs and our financial results from the first quarter of 2018.
Yesterday afternoon, we issued a press release with our first quarter 2018 financial results, along with recent company highlights, upcoming milestones and progress on our corporate strategy. The press release can be found on the Investors & News section of our website at reatapharma.com.
I'm joined today by our CEO, Warren Huff; our CFO, Jason Wilson; and our Chief Medical Officer, Colin Meyer. I'll now turn the call over to Warren.
Thanks, Vinny. Good morning, everyone, and thank you for joining us.
It's been a busy start to the year, and we've made significant progress in executing against key priorities for Reata in 2018.
I'll begin with an update on CATALYST, our pivotal Phase III trial for bardoxolone in the severe form pulmonary arterial hypertension that occurs in patients with scleroderma, lupus and other forms of connective tissue disease.
In designing CATALYST, we prospectively included a one-time, pooled and blinded sample size recalculation as a way to safeguard against the inherent variability that can occur in large, long-term international trials. The use of a sample size recalculation in pivotal trials is becoming a common feature, because it ensures that the underlying statistical design of the study is preserved based on actual observed data during the course of the study. The primary endpoint for the CATALYST trial is the placebo-corrected change in 6-minute walk distance following 24 weeks of treatment. Based on data from the Phase II LARIAT trial of bardoxolone, we set the sample size range for CATALYST to fall between 130 and 200 patients. We specified that the final sample size would be determined through a sample size recalculation procedure after enrollment of at least 100 patients, whose baseline characteristics, observed 6-minute walk distance variability and drop-out rate could be used for the recalculation.
This analysis was recently performed, and it demonstrated that we've enrolled patients with baseline characteristics in standard-of-care therapies similar to the patients in our Phase II LARIAT study. The observed variability upon study entry and post randomization as well as other model inputs are within our original prespecified expectations, albeit at the upper end of the range. The analysis indicated that a sample size of 200 patients will be sufficient to support the initial statistical assumptions and preserve the statistical power of the study to detect the placebo-corrected improvement of 12.5 meters. The sample size recalculation was performed on a blinded basis and there was no assessment of treatment effect in any patient or subgroup. Accordingly, no statistical penalty was incurred towards the primary endpoint of the study. Importantly, the sample size recalculation is a statistical exercise to control for variability in variation in baseline characteristics and has no predictive value on the outcome of the study. As a result of the sample size recalculation, Reata expects that it will require a minimum of 12 months to complete enrollment of the study. And we now expect top line data from CATALYST during the first half of 2020. Though this will extend the duration of CATALYST, it also enhances the prospect that bardoxolone may become the first therapy approved specifically for this severe and underserved disease.
Turning now to our development programs for bardoxolone in chronic kidney disease. I'm pleased to report that enrollment in the Phase II PHOENIX study in 4 rare forms of CKD is proceeding more rapidly than anticipated. We now expect an enrollment of patients with autosomal dominant polycystic kidney disease, IgA nephropathy and CKD caused by type 1 diabetes, will be completed this month, and that full primary endpoint data from these 3 cohorts will be available during the third quarter of this year. We expect to have full data on the primary endpoint for the cohort of FSGS patients in the first half of 2019.
We believe the rapid enrollment rate observed in PHOENIX is a result of the enthusiasm of our clinical investigators for the study, many of whom participated in previous studies of bardoxolone, where meaningful improvements in kidney function were observed. We submitted an abstract with interim data for the PKD and IgA nephropathy cohorts of PHOENIX to the ERA-EDTA Congress to be held in Copenhagen from May 24 through the 27th. It's the largest nephrology conference outside the United States.
Our abstract has been accepted as a late-breaking presentation and it will be made on May 25. Although the indications being studied in PHOENIX have different underlying causes, we believe that the loss of kidney function in each of these rare forms of CKD is driven by pro-inflammatory and pro-fibrotic pathways that are addressed by the mechanism of action of bardoxolone methyl. We believe that the results of these and the other PHOENIX cohorts will provide important data in determining whether or not bardoxolone has the potential to address the wide array of genetic, autoimmune and metabolic forms of CKD. Turning to CARDINAL, our Phase II/III trial of bardoxolone in Alport syndrome patients, enrollment in the Phase III portion of the study is proceeding as planned, and we expect to have top line data in the second half of next year.
The key endpoint for accelerated approval in CARDINAL is the difference between bardoxolone and placebo on the retained benefit that follows 48 weeks of treatment and 4 weeks of drug withdrawal. This retained benefit analysis compared to baseline will be performed on patients from the Phase II portion of the study, and the results of this analysis will be announced in the third quarter of this year. It's worth noting that the recent release of 9-month data from the Phase II portion of CARDINAL has been received very positively by the community of Alport syndrome patients, families and clinicians.
In addition to our CARDINAL program and our other rare CKD programs, our development partner, Kyowa Hakko Kirin, is planning to initiate their Phase III study in diabetic nephropathy later this year.
Finally, our third registrational trial, the MOXIe study of omaveloxolone in Friedreich's ataxia, is also proceeding as planned, and we expect to have top line data available in the second half of 2019. Recent preclinical and clinical data have added to the body of evidence supporting omav's ability to address the bioenergetic impairments, inflammation and fibrosis that drive a wide variety of neurological and neuromuscular diseases. And we continue to triage additional potential indications for omav after we complete MOXIe.
I'll now turn the call over to Jason Wilson, our Chief Financial Officer, to comment on our financial highlights for the first quarter.
Thanks, Warren. As you know, yesterday afternoon, we reported financial results for the first quarter of 2018. At a high level, net income was approximately $4.1 million or $0.16 per share, and our cash balance was $105.9 million. Beyond that, I would like to note that our expenses and use of cash in the first quarter were in line with our expectations and that we have cash runway through top line data from both the registrational CARDINAL and MOXIe trials in the second half of 2019. We would, of course, plan to ensure that we maintain adequate capital reserves along the way, by raising funds through one or other means.
On the revenue side of things, this was the first period in which we, and other companies, implemented the new revenue recognition rules. And these rules drive some different patterns in how revenue is recognized and may produce confusion in interpreting financial results. For us, the most significant change from the new rules is that in January 2018, we recognized part of a $30 million milestone we expect to receive later in 2018 from Kyowa Hakko Kirin. Because revenue from this milestone must be recognized over the entire expected term of the performance obligation for the contract, a catch-up adjustment of $24.8 million was required initially in January, followed by additional in-quarter recognition of about $200,000 related to the remaining portion of the milestone, totaling $25.1 million in the quarter. Recognizing this revenue resulted in net income of $4.1 million or $0.16 per share, as I mentioned earlier. Without this $25.1 million in revenue recognized under the new guidance, we would have had a net loss of approximately $21 million or $0.80 per share. Warren, would you like to make some closing remarks?
Sure, Jason.
In summary, over the next 24 months, Reata's pipeline will produce data from 3 pivotal trials and 4 Phase II studies in severe orphan diseases where few or no effective therapies are approved. In addition, our development partner, Kyowa Hakko Kirin, will be launching a pivotal trial for bardoxolone in diabetic CKD in Japan this year. Near term, we expect to have significant news flow from our programs studying bardoxolone in rare forms of CKD, including: interim data from polycystic kidney disease and IgA nephropathy at ERA-EDTA Congress later this month; one-year retained benefit data from the Phase II trial of CARDINAL in Alport syndrome in the third quarter; and also, full data from polycystic kidney disease, IgA nephropathy and CKD caused by type 1 diabetes in the third quarter. With that summary, I'll now turn the call over to Vinny for the question-and-answer session.
Christie, could we open the line for questions, please?
[Operator Instructions] Our first question is from Maury Raycroft of Jefferies.
Very exciting with the accelerated time lines with PHOENIX and getting to see this data pretty soon. So to start, for the 12-week PHOENIX data at the ERA-EDTA meeting, can you comment on how many patients we'll see and provide some general thoughts on how the data will compare, potentially on magnitude of eGFR benefit to 12-week CARDINAL data in Alport syndrome?
Maury, thanks for your thoughts. At this point, we cannot comment specifically about the data. But we think the amount of data provided will be sufficient to make a reasonable assessment of how the drug is behaving.
And Maury, just on the second part of your question, in each case, we're looking for a signal of significant improvement from baseline in estimated GFR. I'm sure, as you know, in all of these categories of patients, they have been -- their eGFR has been chronically declining over years. And what we want to see is a acute reversal of that course, which is the signature of suppressing the inflammatory processes in the kidney's glomerulus.
Got it. Very helpful. And then maybe just from a general perspective, if you can discuss the implications of the 12-week data from PHOENIX and CARDINAL and how this relates to longer-term time points, particularly when considering the collective kidney disease data for CARDINAL, BEAM and BEACON?
Yes, good comment. And so as you know, in 2 prior trials in diabetic CKD, BEAM and BEACON, we demonstrated that the change or the increase in eGFR at week 12 correlated very strongly and predicted change at 1 year, on and off drug. So in the ongoing CARDINAL trial in patients with Alport syndrome, as you know, we reported data last October at ASN, demonstrating that bardoxolone increases eGFR significantly by 12 weeks of treatment. And then, a few weeks ago, we updated everyone on the data and have shown durability through 9 months. And so in PHOENIX trial, we believe the week-12 data will be really important to determine if we are observing an increase in eGFR. And if so, that would obviously provide us with understanding of what the longer-term effect may be and would help us design a subsequent trial.
Our next question is from Yigal Nochomovitz of Citigroup.
I'm just curious a little bit on the enthusiasm for the PHOENIX cohorts. I know Colin, at one point earlier in the year, or last year, you had done a lot of work engaging the top nephrology KOLs with respect to introducing them to the bardoxolone story and getting them up to speed on the latest data in Alport. Are those conversations driving the additional enthusiasm and is there overlap with those KOLs in the PHOENIX investigators? Or is it -- has the message gotten out more broadly than that?
Yigal, good question, I think. The answer is, yes. And so we believe that the message is getting out more broadly about the profile of bardoxolone. Over the course of many years, starting back when we were conducting trials in diabetic CKD, there were questions about the mechanism and the clinical profile of bardoxolone. As you know, we've been able to characterize the mechanism preclinically to show that the drug increases surface area in the kidney, and it is not associated with increase in pressure and our drug is actually [Audio Gap] of increased pressure in the kidney. And because of that, it protects against remodeling and fibrosis in many different animal models. And clinically, the acute increases in kidney function as I just described are durable for 1 year in our prior trials. They're associated in BEACON trial with less progression, using newly validated outcomes. Importantly, in the BEAM and BEACON trials, they are associated with an improvement relative to placebo after withdrawal. I think a lot of that information wasn't known to the community, 6 or 9 months ago. But the information is becoming more widely appreciated since it's in the scientific literature. And as far as the enthusiasm for PHOENIX, I think it's in part driven by that, as well as the experience of the nephrologists who have treated patients with bardoxolone. While if you may speak to a nephrologist who has never used bardoxolone, they may have questions about the profile. If you actually speak to someone who has treated a patient, you get a very clear picture of what the drug does and does not do. And so we have observed a lot of enthusiasm amongst investigators, including those who have used the drug and new investigators who are aware of all this information. And that's driven the very rapid enrollment in the PHOENIX trial that's exceeded our expectations.
Okay. And then I know you're -- you are obviously -- when you did the sample size reassessment, you were blinded to everything, it was a pooled analysis. I'm just wondering, if the DSMB can sort of look at that and look at the specific sites that may have been sort of more culpable with respect to variability, and could say that these sites maybe should no longer enroll, or you should enroll other sites more aggressively. Is that possible? Or is that just everything goes on according to the original site selection and enrollment?
Yes, that's not possible. And so to maintain the integrity of the trial, the Data and Safety Monitoring Board, which meets quarterly, oversees safety. They don't provide any recommendations or comments on operational aspects of the trial. And I think it's important to emphasize, with this sample size recalculation, we set the sample size within the original prespecified range that we defined before we started the trial. So unlike another recent example, where a company had to greatly increase the sample size outside the prespecified range, the variability that we observed, it was within it, albeit a little bit higher, of course, than would support the midpoint of the range. So we're pretty comfortable that all the trial sites are performing as they would be expected. And because of that, we're continuing with the trial, once again, set the sample size at the upper end of the prespecified range.
Yes, I'd just add one clarification, too. The sample size analysis was not performed by the DSMB. They are unblinded to the data for purposes of monitoring the safety of the trial. The actual external analysis was done by independent statisticians separate from the DSMB. So nobody involved in the process was unblinded to the data.
Our next question is from Adam Walsh of Stifel.
I have a couple. My first one, I guess, maybe both of them, could be for Colin, but the first one certainly is. Can you just remind us, Colin, of what the annual decline in eGFR is for ADPKD and IgA nephropathy so that we can have a framework to think about the data, when they come out at the medical meeting?
Sure. And so it's a good question. And when you look across many forms of chronic kidney disease, the annual decline is actually pretty similar. Of course, it's influenced by certain factors and comorbidities, but for PKD and IgA, it's not that different than Alport syndrome and diabetic CKD. There is, of course, as you may know, because of the trials conducted with tolvaptan recently, the decline is very well characterized for polycystic kidney disease. It's about 3, maybe 4 mil per minute, depending upon patient, and IgA is similar. And so once again, fairly similar to what we would expect with Alport syndrome.
Okay, that's helpful. And then I noticed that the enrollment time lines and the full data release from the PKD, the IgA nephropathy and the type 1 diabetic CKD are all similar, and yet at the upcoming meeting, you're presenting data on ADPKD and IgA nephropathy, but not type 1 diabetic CKD. Should we read into that in any way?
Not at all. So all 3 of them enrolled very rapidly. And so certain sites had more PKD patients perhaps than other patients. And the type 1 diabetic patients were primarily enrolled by diabetologists, and so a little different subset of investigator. And so they all enrolled, of course, at slightly different rates independently of one another, but all 3 of them very rapidly. We just made a decision not to submit interim data for the type 1 cohort, because we didn't think there was sufficient information at that time when we had to submit the abstract.
Our next question is from Joseph Schwartz of Leerink Partners.
So as the data comes in from PHOENIX, how will you be using this information strategically to determine whether you want to prioritize any particular indications? For example, do you have a number of indications in mind now that you want to pursue further in Phase III at this point? Or are you just going in with an open mind and you'll determine that at a later point? How are you thinking about strategy and you could potentially have a lot of indications that could look interesting?
Yes, so good questions. Obviously, we cannot comment on the data right now, so stay tuned for another few weeks. But I think, at a high level, we're looking for activity in these settings, that would be of large magnitude, similar to what we've seen in Alport syndrome or diabetic CKD. As we've discussed on this call, changes at week 12 have been predictive of longer-term changes. And so we think it will be helpful to really understand what the change is at 12 weeks. And then when looking at what we do next, we obviously have to balance unmet need, rate of enrollment, patient population that we can access. And all the indications in PHOENIX are of interest to us when comparing them versus some of the other indications. For CTEPH, we estimate there is about 12,000 patients in the U.S.; but for PKD, there is, we estimate 116,000 diagnosed and potentially up to 0.5 million patients. And that's probably a reason why that cohort enrolled so quickly, because there are a lot of patients. Similarly, IgA nephropathy, we estimate over 100,000 patients. And so we'll need to look at, obviously, the data, including efficacy and safety, and then determine how best to proceed. But we think all these opportunities are quite interesting and attractive to us and so stay tuned.
Yes, I'll just -- let me just add to that. We started the PHOENIX -- each of the PHOENIX cohorts because they, while caused by different initiating events, we believe that the mechanism of action would have a good chance of impacting the disease. We're really just going to execute with respect to each one of these, a plan that follows really what we have done with Alport syndrome: so do the acute study, look for a large-magnitude, reversal of course of the disease, the 12-week signature improvement in GFR. If we see it, then that will tell us that we should then -- help us triage our regulatory interactions. And with respect to that, we'll need guidance from the FDA, the EMA and the other regulators about endpoints. But we believe that the -- a design similar to the CARDINAL Phase III design would support approval in any of these rare forms of CKD. And you're probably aware, the recent approval of tolvaptan, for example, in PKD was based on a study with a retained benefit analysis, similar to what we're doing in CARDINAL. So we use the data to triage the regulatory interactions, and then obviously, the follow-on pivotal study, where we see activity.
That's helpful. And do you think that at any point you could do like a basket study to get economies of scale, and that way you're not reinventing the wheel, however many times for however many indications you want to pursue?
It's an interesting question. We've talked about it internally. It probably would take longer to convince the regulatory agencies to do something like that then to just do the independent studies. One thing we really like about this area is that the acute response data really gives you high confidence in the long-term data. And the Ns are not that large in, really, in each one of these studies. And I would imagine that the regulators would want you, in any kind of pooled study, to do a population large enough in each indication that they could reach a conclusion about each one of those indications. So I'm not sure we would gain much. And because the effect of the drug, for example, the treatment response that we've seen in Alport syndrome, is so clear, powering for efficacy is just doesn't require a large study. So it's an interesting question, and I think at some point, there will be a conclusion that this mechanism is generalizable across these various forms of CKD. But at least for now, we're planning to ladder out the whole series of label expansion studies. I'd also note, too, these line up right behind -- we're on track with the Alport Phase III study. We reiterated our guidance on that, and we're expecting to have the pivotal data in the second half of '19. And then hopefully, we'll see activity in one or more of these cohorts and we'll be laddering out these studies for the next several years.
[Operator Instructions] Our next question is from Brian Skorney of Baird.
I guess to start off, I was hoping you could just kind of walk us through in a little more detail, what sort of -- what exactly points of variability you're seeing in the CATALYST data push to the higher range of patients? And is this actually around the primary endpoint of 6-minute walk over the course of the 24 weeks? Or is it baseline 6-minute walk that is coming in more variable? Just help us understand what the prospective analysis entails.
Sure, so good set of questions, Brian. So recall, the sample size recalculation was prespecified, it was blinded, it was pooled. We submitted plans to the FDA prior to the analysis. And as Warren mentioned, the committee was fully blinded and primarily composed of statisticians. And so we looked at multiple parameters in the analysis. And it was done after 100 patients had been enrolled. Importantly, not immediately after, just at some point after. And so the group looked at baseline characteristics, dropout rate and variability of 6-minute walk distance on a pooled basis and so -- and tried to compare it to the Phase II data, making sure that patients had similar, once again, based on characteristics, distribution of 6-minute walk, they are on similar standard of care and they recommended, once again, the 200. We thought it was unlikely that we would ever really land on a sample size less than the midpoint. And so the 200 number isn't that different than the 160 that we may have contemplated. And to provide some more context, a sample size of 200 patients is really at the low end of the range for registrational PH trials that use 6-minute walk distance as the primary endpoint. So if you look in the literature, at prior trials with the vasodilators, you will note that many of them enroll patients outside the U.S. and in territories where either there were no approved agents or standard of care is different. So we made sure that we enroll patients in regions that have a similar standard of care to the U.S., that patients were on stable doses of background therapies, and we only used sites that have participated previously in global registrational trials. And so because of that, we have seen variability that's within our expectations, once again, at the upper end of the range we prespecify of 200. But most trials in this space are really in the 300-plus range. And so we think that the variability isn't that high, and we're comforted by the analysis.
Great, that's helpful. And just a follow-up question. In terms of the CATALYST study and kind of the baseline characteristics of the CTD-PAH patients, I mean, did these patients have impaired eGFR at baseline? And I'm just asking, because I'm wondering, obviously, bardoxolone's hallmark trait is improved eGFR. I'm just wondering if those improvements could lead to some extent on the treating physician having an understanding of who's on drug and who's on placebo?
These patients can have impaired kidney function. It's typically, their baseline eGFR is much higher than our ongoing CKD trials and Alport syndrome as well as in the PHOENIX indications. And so I think it's probably unclear to the individual patient, from the investigator's perspective, if they are on drug or not. We previously reported the drug does improve kidney function for up to 2 years in PH patients. And so we think that, that effect is potentially meaningful to the patient, because these patients have too much fluid that backs up into the heart. So we think that's an important aspect of the pharmacology, but I don't think it would unblind individual patients in the trial.
I would just add that there's recent work, independent from us, looking at across the broad range of PH patients that essentially acute declines -- decline events in GFR are associated with increased risk of mortality, and that's probably because of this effect that Colin mentioned, where the lowering of cardiac function drives a decline in GFR perfused at the kidney and that in turn increases fluid load on the heart, basically a cardiorenal syndrome that's associated with bad outcomes for these patients. So rather than their absolute GFR, the decline events seem to be the most important clinical aspects of the disease in these patients.
Our next question is from Yigal Nochomovitz of Citigroup.
I just had one quick follow-up. With respect to the KHK plans for the Phase III in diabetic CKD, presumably that's in type 2. I'm wondering if they have given any consideration, in watching your development with the PHOENIX program, to initiate a similar set of earlier-stage studies along the lines of PHOENIX in Japan for type 1 CKD, IgA nephropathy and ADPKD.
Yes, so good questions, Yigal. And so their Phase III trial that they've announced will begin this year, will include type 2 diabetics as well as type 1. They have not provided any more specifics yet. We assume they will once they initiate the trial. We actively work with them and partner with them in our planning, and as you may know, we are actually enrolling our Alport syndrome trial in Japan. And so the CARDINAL trial is a global trial. We are already working with them on that form of CKD. And we would expect that they would have interest in these additional indications being studied in PHOENIX, and that if successful, that they would potentially want to join us in a global Phase III trial. And so because of that, we really wouldn't expect them to launch a parallel Phase II trial. But we do think that they would have potential interest in joining us in a subsequent Phase III trial.
And that does conclude our Q&A session for today. I would like to turn the call back over to Mr. Vinny Jindal for any further remarks.
Thanks, Christie, and thanks, everyone, for participating in today's call. Please feel free to reach out to us directly with questions following the call as well. Thanks very much.
Ladies and gentlemen, thank you for participating in today's conference. An audio recording will be available shortly after this conference call on Reata's website at reatapharma.com in the Investors & News section. This does conclude today's program and you may all disconnect. Everyone, have a great day.