Reata Pharmaceuticals Inc
NASDAQ:RETA
Earnings Call Analysis
Q1-2023 Analysis
Reata Pharmaceuticals Inc
SKYCLARYS, the first and only drug approved for Friedreich's ataxia (FA) in individuals 16 years and older, has demonstrated strong initial demand with around 500 patient start forms received from over 250 prescribing physicians. Despite manufacturing setbacks due to impurities, SKYCLARYS's commercial availability is expected by mid-August.
The company is hopeful to expand SKYCLARYS's treatment to pediatric patients younger than 16 and plans to discuss strategies with the FDA soon. A study to assess the drug in pediatric patients is slated for Q4 this year. They are also on track to respond to European Medicine Agency's (EMA) questions regarding marketing authorization for Omav in Europe by Q3 this year.
The company is preparing for IND filings for two new molecules in 2024 and initiating a Phase 2 trial for RTA 901 in patients with diabetic peripheral neuropathic pain (DPNP) in Q3 2023. They also reported discontinuing bardoxolone after it failed to show improvement in end-stage renal disease (ESRD) events.
A new $275 million debt facility has been established to extend the company's cash runway through the end of 2026, which alongside anticipated SKYCLARYS revenues, is expected to facilitate a path towards self-sustainability.
FA represents a significant commercial opportunity with an estimated 6,000 patients in the US, out of which 4,500 are addressable by SKYCLARYS. The company's commercial efforts this year are focused on about 2,500 healthcare providers treating FA patients.
With an effective and safe treatment position for SKYCLARYS, the company has received a strong early indication of demand, capturing over 10% of the current addressable market. They are actively educating healthcare providers on SKYCLARYS, ensuring accessibility, and implementing access strategies with payers to cover 90% of lives by the second half of 2023.
SKYCLARYS and other company molecules target mitochondrial dysfunction, neuroinflammation, and neurodegeneration. Nrf2 activation, a feature of their drugs, has been linked to potentially treating a variety of diseases including movement disorders and Alzheimer's disease.
Following bardoxolone's discontinuation due to disappointing AYAME study results, the company has redirected its resources towards neurology programs. The operational expenses have normalized to support targeted education of roughly 2,500 healthcare providers. Efforts are underway to make SKYCLARYS commercially available as quickly as possible, striving to maintain the momentum in the face of regulatory challenges and a clear path towards self-sustainability by reaching a breakeven point with approximately 1,000 patients.
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Thank you for standing by, and welcome to the Reata Pharmaceuticals First Quarter Financial Results Update on Operational Progress and 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. 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, May 10, 2023, 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. [Operator Instructions]
We are joined today by Warren Huff, Reata’s Chief Executive Officer; Manmeet Soni, President; Colin Meyer, Chief Innovation Officer; Dawn Bir, Chief Commercial Officer; Seemi Khan, Chief Medical Officer; and Andrea Loewen, Senior Vice President, Regulatory Affairs.
At this time, I would like to turn the call over to Warren Huff.
Good morning, everyone. We thank you for joining us today.
I’ll begin on Slide 4. On February the 28th, we announced that the FDA approved SKYCLARYS as the first and only FDA approved drug indicated for the treatment of Friedreich’s ataxia or FA, an adults and adolescents aged 16 years and older.
As Dawn Bir will share later in the call, our experienced and fully trained teams began engaging customers immediately following approval. We are pleased to share that we have seen strong initial demand for SKYCLARYS from patients and their healthcare providers.
We’ve received approximately 500 patient start forms through early May. The patient start forms were submitted by over 250 prescribing physicians, including neurologists, primary care physicians, and other healthcare providers providing a broad initial prescriber base. We’ve been working diligently to ensure we can get drug to the market as quickly as possible. We’ve completed the final stages of SKYCLARYS drug product manufacturing and packaging.
As we shared on the approval call in February, we observed a process-related drug substance impurity above the reporting threshold, which required us to update the drug substance specification prior to releasing final product. We are working collaboratively with the FDA to obtain an approval of the revised drug substance specification for the process impurity as quickly as possible. We now anticipate SKYCLARYS commercial drug availability to be available no later than mid-August. Andrea Loewen, our SVP of Regulatory Affairs, will provide an update on this process.
We understand that in some patients, symptoms of FA manifest early in life and SKYCLARYS is not currently indicated for patients younger than 16 years of age. Addressing this is a top priority for us and we are evaluating strategies to support label expansion for pediatric patients younger than 16 years of age. We are planning to request a meeting this quarter with the FDA to discuss our possible strategies. We are also planning to initiate a study to evaluate the safety, tolerability and pharmacokinetics of Omaveloxolone or Omav in pediatric patients in the fourth quarter of this year. Seemi will provide additional details on our plans later in the call.
Next slide. We submitted a marketing authorization application for Omav for patients with FA in Europe in the fourth quarter of last year and the application is currently under review. We recently received the day 120 list of questions and, as Andrea will outline later, we believe that we can adequately respond to the questions that have been raised. We are on track to provide the responses in the third quarter of this year.
Beyond Omav, we continue to pursue development of our Nrf2 activator platform and are advancing additional preclinical drug candidates. As Colin will discuss, we anticipate IND filings for two additional molecules in 2024.
Moving to our Hsp90 program, we are developing RTA 901 for patients with diabetic peripheral neuropathic pain or DPNP. We finalized the design for a randomized, double-blind, placebo controlled two part 12-week Phase 2 trial of RTA 901 in patients with DPNP and plan to initiate that study during the third quarter of this year.
Next slide. Earlier today, Kyowa Kirin reported results from AYAME, Kirin’s Phase 3 trial of bardoxolone in patients with diabetic kidney disease. As Colin will discuss, the study met the primary and key secondary endpoints and there were no significant safety issues identified in patients receiving bardoxolone.
However, there was no separation in end-stage renal disease or ESRD events between the active drug and placebo groups after three years of treatment. Because there was no improvement in ESRD events and the regulatory implications of that, we and KKC have decided to discontinue our bardoxolone development activities and we’ve decided to refocus our capital and resources on our other programs.
Lastly, we are pleased to announce this morning, a new non-dilutive $275 million debt facility, with funds managed by Pharmakon Advisors. As Manmeet will discuss, this new facility extends our cash runway to the end of 2026. And with the commercial launch of SKYCLARYS, puts us on a path to self sustainability.
With that summary, I’d now like to turn the call over to Dawn Bir, who will provide an update on our commercial launch for SKYCLARYS.
Thank you, Warren. Good morning. I’ll continue on Slide 8. Friedreich’s ataxia represents a significant commercial opportunity and we believe that there are approximately 6,000 patients in the United States living with FA today. Through ICD-10 claims data analyses, we see approximately 5,000 unique diagnosed FA patients that can be linked to healthcare providers, excluding approximately 10% of those diagnosed under the age of 18, the remaining 4,500 or approximately 90% represent our total on-label addressable market.
Most patients seek routine care by their local neurologist or primary care physician. Important commercial launch targets include CCRN centers or collaborative clinical research network sites, ataxia centers and HCP is currently treating FA patients. Through the evaluation of claims data, we’ve identified approximately 2,500 healthcare target providers treating patients with Friedreich’s ataxia. These HCPs and the diagnosed FA patients they treat are the primary focus of our commercial launch efforts this year.
Next slide, please. Patients and healthcare providers have long awaited and approved treatment for Friedreich’s ataxia. And this is evident through the demand we see for SKYCLARYS in only two months following approval.
Reata REACH is our single point of contact for our patient services program and serves as the intake center for all SKYCLARYS patient start forms. Start forms received by REACH are an early indicator of our launch progress. Through early May, we’ve received approximately 500 SKYCLARYS patient start forms submitted by over 250 prescribing physicians, including neurologists, PCPs and other healthcare providers. 500 FA patients represents over 10% of our current total addressable market. We are pleased with this quick uptake, which reflects strong demand. Patients are actively seeking treatment and healthcare providers are willing to prescribe SKYCLARYS.
Next slide. Our 2023 launch objective remains unchanged. Our goal is simple to establish SKYCLARYS as the first and only effective and safe treatment approved for Friedreich’s ataxia. Our commercial launch activities engage our three important stakeholders. This includes HCPs currently treating Friedreich’s ataxia with patients in their practice today, on-label patients diagnosed with FA and the payer community.
With our attention on physicians currently treating patients with FA, we continue to communicate the value of SKYCLARYS, the significance of our clinical data, and how this data translates to a clinically meaningful impact on the disease. Additionally, we are working to ensure all HCPs understand how to access SKYCLARYS for their patients and the programs we offer to support utilization.
FA patients and their caregivers are also important stakeholders because SKYCLARYS is the first and only drug approved for Friedreich’s ataxia. We continue to inform and educate patients and their families on this approval, and we encourage them to see their healthcare provider for treatment.
To support these educational efforts, we recently launched our branded patient and HCP campaigns, highlighting the recent approval and communicating that Friedreich’s ataxia previously untreatable is now a treatable disease. Immediately following approval, Reata created a strong market presence and engaged the FA community with our first branded booth at important Neurology Conferences, including the Muscular Dystrophy Association, the National Ataxia Foundation and the American Academy of Neurology.
Now approved digital, social, paid search and patient webcast were launched in March and April to drive the awareness of SKYCLARYS and provide clarity on how to access treatment.
Lastly, critical to our launch success and quarter, our patient promise, we continue to facilitate payer coverage, access and affordability through payer education and robust programs designed to minimize or eliminate patient out-of-pocket cost burden.
Continuing on Slide number 11. Reata’s field sales and market access teams are executing on our branded launch strategy, working to drive demand and facilitate payer coverage. Our experienced and fully trained teams began engaging customers immediately following approval on Monday, March 6.
The sales organization is working to reach and educate approximately 2,500 healthcare providers, who treat most of the diagnosed FA patients in the United States. They have also engaged FA treatment centers driving early utilization at each of the nine U.S. Centers of Excellence and implementing plans to support the needs of these highly important accounts.
Our field access team consists of national account directors focused on SKYCLARYS coverage by top national and regional payers, and a patient access liaison team, hired to educate practices on access requirements. Together, this team’s primary responsibility is to facilitate patient access to the drug by working to minimize and navigate payer criteria.
Since FDA approval of SKYCLARYS, the payer team has engaged all of the top U.S. payers representing 90% of covered lives. We anticipate that most commercial payer policies will be established during the second half of 2023 and that plans will place SKYCLARYS on their specialty tier along with most rare specialty therapeutics.
Our patient access liaison team has worked with local practices to educate on access requirements and facilitate rapid payer approvals through medical exception and prior authorization while awaiting payer policies. We are pleased with early payer coverage of SKYCLARYS tracking as we expected for a rare, progressive and devastating disease with no other approved treatment options.
I will now turn the call over to Andrea Loewen, our Senior VP and Head of Global Regulatory Affairs, for the regulatory update on drug availability and Omaveloxolone MAA status.
Thank you, Dawn. I’ll continue on Slide 13 to provide an update on SKYCLARYS availability. We are working collaboratively with the FDA to revise the drug substance impurity specification that is required for SKYCLARYS distribution to the market. We submitted a supplement to the NDA, which is being reviewed as a prior approval supplement referred to as a PAS or PAS, under expedited priority review.
As a PAS, FDA approval is needed before we can release finished our product to the commercial market and not within 30 days after submission as previously guided with respect to the CB-30 prior to its conversion by the FDA to a PAS. While the FDA’s approval target action date is in mid-August, for standard review timelines, the FDA stated that its review of the PAS is prioritized and approval should come before the goal date.
The approval and its timing are, of course, subject to FDA’s review of the supplement provided. There were no major deficiencies in the content of this mission, which we expect to know by mid-June. We believe that the information provided in the NDA supplement is sufficient to support the proposed updated specification limit for the process impurity.
We developed the submission content based on FDA and International Harmonized Regulatory Guidance as well as FDA’s internal review procedures and engaged with multiple experts to confirm the adequacy of the information to support the change.
Next slide. For more context, the FDA reviews each impurity limit on a case by case basis to determine its impact on product safety and known product characteristics. FDA guidance documents outline key elements required for this determination, which we believe we have provided.
For example, safety is of utmost importance. The limit for the proposed process impurity was set at the qualification threshold, which, per guidance, should not require toxicology qualification testing based upon the known characteristics of the identified impurity and patient dosages.
While not specifically required, we conducted multiple evaluations, including gene toxicology studies and In Silico Structural Analysis, which demonstrate no mutagenic potential. We’ve also been able to identify the impurity and its structure and it’s highly detectable with our validated analytical method. Further, there is no meaningful impact on the total impurities and there are no observed changes to any other properties of the drug substance. We believe we have provided a complete package to the FDA and anticipate that SKYCLARYS will be available to our specialty pharmacy no later than mid-August 2023.
Next slide. I would now like to share an update on our ongoing marketing authorization application in Europe. As you know, we submitted the MAA in the last quarter of 2022. We recently received the European Medicine Agency’s day 120 list of questions, which is the primary mechanism for questions and responses to be exchanged during the MAA review.
The EMA separates their questions into major and other categories. We are pleased that we should be able to provide thorough responses and requested information back to the EMA within a standard response period. With respect to major questions on clinical efficacy, the EMA invited us to discuss the robustness of the totality of efficacy results and suggested that the discussion could include the impact of imbalances in baseline characteristics on the pivotal study results and extrapolation of these results to patients with advanced disease and patient groups not included in the pivotal trial.
If you recall, in the pivotal Omav trial imbalances in baseline characteristics, such as history of cardiomyopathy and longer GAA1 Repeat Length, favored placebo patients with less sick and had less advanced disease. Since the imbalance favored placebo, the statistically significant results of the primary analysis favoring Omav treatment despite these imbalances indicate a robust efficacy outcome. The EMA also asked us to justify inclusion of [indiscernible] in the proposed labeled indication.
With respect to major questions on clinical safety, the EMA asked us to discuss the similarities between Nrf2 activators with respect to chemical structure and safety and to discuss suitable contraindications and warnings in the label for cardiac, renal, diabetic and other conditions, taking into account the population studied.
We believe that the recent bardoxolone AYAME safety data in Japanese patients with diabetic CKD will be very helpful to address potential bardoxolone and Nrf2 carryover safety questions for Omav. These data will also be helpful to discuss suitable warnings and precautions, which the EMA asked us to discuss in relation to the summary of product characteristics, which is the EU label.
With respect to major questions regarding drug product quality, the EMA requested us to provide additional clarification regarding the potential for neuroinflammation and to provide further information and justification for our active substance control strategies. A GMP certificate is also required for the quality control side used to provide microbiological testing of the drug product. Again, we believe that we can provide the EMA with required responses for the questions and are on track to do so in the third quarter of this year.
I will now turn the call over to Seemi.
Thanks, Andrea. Label expansion to pediatric patients with FA is of prime importance to us. As Warren mentioned, we have been evaluating various strategies to support the expansion of the Omaveloxolone label for pediatric patients younger than 16 years of age.
Last year in Europe, we received a positive opinion from pediatric committee on a proposed pediatric investigation plan. And as agreed in this plan, we have submitted a request for scientific advice for additional input on the design of a clinical study in pediatric patients between two and 16 years of age.
With respect to the U.S., we are completing briefing documents to submit this quarter to the FDA with a request for a meeting to discuss label expansion for younger pediatric patients who are not included in the approved SKYCLARYS label. We are also finalizing a protocol for a pediatrics study of Omaveloxolone to evaluate the safety, tolerability and pharmacokinetics of a single ascending dose of Omaveloxolone in pediatric patients between two and 16 years of age.
We expect to submit this study protocol to the FDA this quarter and plan to initiate this study in the fourth quarter of 2023. Based on feedback from the EMA and FDA, we will determine what additional pediatric studies will be required.
With that, I will now turn the call over to Colin.
Thank you, Seemi. Moving to Slide 19. Mitochondrial dysfunction, neuroinflammation and neurodegeneration are common features across a range of neurological diseases. While mitochondrial dysfunction may not be the initiating event, it appears to be a common downstream pathway that results in subsequent loss of function and regeneration in areas that are affected. This specific area of the brain that is affected results in the clinical symptomology, whether it be movement, balance or memory disturbances.
Genetic and pharmacologic activation of Nrf2 have demonstrated activity in multiple preclinical models that demonstrate effects a mitochondrial function, neuroinflammation, neurodegeneration and fibrosis, movement and coordination, memory and survival. Perhaps more importantly recent evidence from genetic studies in people have linked Nrf2 to susceptibility and/or progression of several diseases, including movement disorders and Alzheimer’s disease.
Next slide. We have advanced two next-generation Nrf2 activators, RTA 145 and RTA 417 to IND-directed studies based on our extensive in-house library of over 800 molecules and understanding of the structure activity relationship. The non-clinical profiles support advancement to clinical studies. We have shown broad activity and systemic and CNS models of inflammation, autoimmune disease and neurodegeneration with appropriate ADME/PK properties.
Our dose ranging toxicology studies demonstrate an expected profile based on our knowledge of the class and our late-stage IND-directed studies are underway or planned. We anticipate IND filings for both molecules in 2024.
Next slide. Cemdomespib also known as RTA 901 is a highly potent and selective, oral, small-molecule modulator of Hsp90. It is differentiated from m N-terminal Hsp90 inhibitors and that it binds at the C-terminus and promotes mitochondrial function. It affects mitochondrial function by promoting proper protein folding and reducing ROS-mediated inflammatory signaling.
The drug is active in preclinical models of painful and insensate diabetic neuropathy. It is differentiated from other molecules and that it not only reduces pain, but it also restores sensation and models associated with loss of sensation. Diabetic neuropathy is a serious complication of diabetes associated with substantial morbidity. Approximately, 4 million patients in the U.S. are affected with moderate or severe DPNP. Phase 1 studies in healthy volunteers are complete and demonstrate an acceptable profile. Cemdomespib was well tolerated with no safety signals, drug discontinuations or SAEs.
Moving to Slide 22. The Phase 2 trial that we are initiating is a randomized, double-blind, placebo controlled two-part, 12-week Phase 2 trial of Cemdomespib in patients with DPNP. The objective is to assess pain using the numeric pain rating scale or NPRS. We plan to enroll 192 patients randomized evenly across three arms in each part for a total of 384 patients. Patients are allowed to take up to one standard of care medication.
In order for patients to enroll, they must not have achieved adequate pain control upon entry with a NPRS pain intensity score of at least 4 on a 0 to 10-point scale at screening. We will conduct an Exposure Response Analysis using Part 1 data to select doses for Part 2. The primary endpoint is the change in average pain intensity assessed by NPRS at week 12. We plan to dose patients in the third quarter of this year.
Moving to our CKD programs and as shown on Slide 24, the AYAME trial was conducted to determine if eGFR improvements observed with bardoxolone could translate to reductions in ESRD. AYAME was a Phase 3, randomized, double-blind, placebo controlled trial in diabetic kidney disease patients conducted in Japan. Patients who had advanced CKD defined by eGFR values between 15 to 59 mill per minute were allowed to enroll. The minimum treatment duration was three years and the maximum was four years.
Upon completion of treatment, patients then participated in a 16-week observational period. The primary endpoint was time to onset of confirmed 30% decrease in eGFR from baseline or adjudicated ESRD. In an important secondary event was timed to ESRD, even though the trial was not powered for this endpoint.
Next slide. As Warren mentioned, the primary and key secondary composite endpoints of AYAME demonstrated statistical significance favoring Bardoxolone. These endpoints were driven by reductions in eGFR decline events. However, no separation in ESRD events was observed. This result appears to be explained by initial eGFR increases that were not maintained in patients who reached ESRD.
In regard to the impact of AYAME on our CKD programs, a major challenge for bardoxolone CK development program has been the use of eGFR as a surrogate that is intended to predict ESRD. The AYAME data show a disconnect in that eGFR improvements were observed, but they were not associated with reduced ESRD events. This poses a significant regulatory challenge. As a consequence, we and KKC are terminating our CKD programs. We will be communicating these plans with regulators and our clinical trial sites immediately.
Next slide. Despite the disappointing outcome of our CKD program, the safety data from AYAME provide important data for the broader Nrf2 activator class. From a safety perspective, there was no evidence of adverse renal safety, including hyper filtration or other adverse findings. There was also no evidence of adverse cardiovascular safety with no imbalances in deaths, adjudicated cardiovascular events or SAEs, fluid overload events or blood pressure. There was also no evidence of drug-induced liver injury and the AE profile was consistent with the established safety profile.
I’ll now turn the presentation over to Manmeet.
Thanks, Colin. Good morning, everyone. Today, I will provide an update on the following key topics. First, operational progress on the SKYCLARYS manufacturing; second, European commercial readiness activities; third, amendment on the Blackstone equipment; fourth, brief update on the $275 million non-diluted financing; and finally, first quarter 2023 financial update, including our updated cash guidance, which provides funding through the end of 2026 and allows the path to self sustainability.
I will continue on Slide 28 to provide update on SKYCLARYS manufacturing activities. As Andrea mentioned earlier, subject to regulatory approval, we anticipate SKYCLARYS bottles to be available through our specialty pharmacy for shipment to patients during August of 2023 or earlier.
From an operation standpoint, we have completed manufacturing and packaging of SKYCLARYS capsules. To remind everyone, in 2019, we reacquired ex-U.S. rights for Omav from AbbVie. Accordingly, we currently own the global commercial rights for Omav. In line with our plans to prepare for the potential label expansion in U.S. and global expansion opportunity for Omav, we have ramped up our production for re-supply of SKYCLARYS commercial drug supply.
Next slide. Following the submission of our MAA for Omav in Europe last year, we accelerated our build out of our European infrastructure outside the U. S. We have hired an European leadership team overseeing commercial, marketing, market access, medical affairs and supply chain activities in anticipation of Omav launch in the European countries.
Further, we initiated marketing activities, global value messaging and health technology assessment work screens for European countries. We have selected a third-party logistics or 3PL partner or product distribution in the Europe. If approved in Europe, we will be prepared for our European commercial launch for Omav during the second quarter of 2024.
Next slide. As we announced this morning, based on the results of AYAME and our decision to discontinue development of our Bard CKD programs, we have amended our development and commercialization funding agreement with Blackstone. Under the terms of the amended agreement, Blackstone has removed all obligations for Bard development and commercialization, removed all restrictions on any new debt and released all prior security interest.
Additionally, we have granted a low single-digit royalty on worldwide net sales of Omav for Friedreich’s ataxia. Our total royalty obligation on Omav, including our academic institutions, Blackstone and AbbVie, will be in the range of 5.5% to 7.5% of net product revenues based on the tiered product revenues.
While we are disappointed with AYAME results, our decision to discontinue by bardoxolone development and enter into the amended agreement with Blackstone allows us to refocus our resources and over $100 million in capital towards our future pipeline and programs that were previously planned for CKD development.
Next slide. This morning, we also announced a $275 million debt facility with funds managed by Pharmakon Advisors, LP. The aggregate $275 million in new non-dilutive funding will be advanced in four tranches. The first tranche of $75 million will be funded this week. This new non-dilutive debt facility of $275 million bolsters our strong balance sheet, which will enable us to extend our cash runway through the end of 2026.
Along with the savings from the firms previously planned for Bard development and our anticipated SKYCLARYS revenues, we believe that we are on a path to sell sustainability. I would also like to remind you that with the approval of SKYCLARYS, the FDA granted us a rare pediatric disease priority review voucher and we have the option to do nonverbal financing by monetizing this voucher in the future.
Next slide. We announced 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 and our operating expenses.
Let me start with our cash balance. As of march 31, 2023, we maintained a solid balance sheet with approximately $321 million in cash, cash equivalents and marketable debt securities. I would like to remind everyone the above $321 million as of March end excludes the $275 million debt financing announced this morning. And based on our current operational plan with the anticipated commercial launch of SKYCLARYS and our cash balance will enable us to fund operations through the end of 2026. We expect that this debt funding may allow us to reach the path of self sustainability barring any new pipeline expansion or in-licensing activity.
Moving to the first quarter of 2023 financial update. R&D expenses increased by $15.7 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. This increases due to an increase in certain ongoing clinical study cost and in stock-based compensation due to the vesting of certain performance-based equity grants upon FDA approval of SKYCLARYS.
SG&A expenses increased by $30 million for the three months ended March 31, 2023, compared to three months ended March 31, 2022. This increase was primarily due to increased commercial activities and increase in stock-based compensation due to vesting of certain performance-based equity grants upon FDA approval of SKYCLARYS.
On next slide, we have a reconciliation of GAAP to non-GAAP financial measures for the first quarter of 2023 compared to the first quarter of 2022. Non-GAAP R&D expenses increased by $9 million for the three months ended March 2023 compared to three months ended March 2022. This increases due to certain ongoing clinical study cost.
An ongoing SG&A expenses increased by $14.1 million as compared to the three months ended March 2022. This increase is due to an increase in commercial activities for SKYCLARYS.
With that, I will turn the call back over to Warren.
Thank you, Manmeet. In closing, we are pleased with the approval of SKYCLARYS, the first and only drug to treat patients with FA. We are encouraged by the significant interest from patients and healthcare providers to begin SKYCLARYS treatment and are working to have commercial drug in the channel as expedition as possible.
Further, we’re cooperating with the EMA and their review of our marketing application seeking approval for Omav in Europe. Of course, we’re disappointed with the results of the AYAME study and the need discontinued development of bardoxolone for the treatment of patients with CKD.
We put a lot of effort over the years in an attempt to produce a novel drug with a very meaningful clinical benefit to patients with CKD, who have seen little progress in the treatment of their disease. But the AYAME data made the decision straightforward and it permits us to focus our resources and future development on our neurology programs.
The Pharmakon debt facility of $275 million bolsters our strong balance sheet, which will enable us to extend our cash run rate through the end of 2026. Along with the savings from the funds planned for bardoxolone development and our anticipated SKYCLARYS revenues, we believe that we’re on a path to self sustainability. These resources will permit us to relentlessly pursue our mission to bring life-changing medicine to patients with severe diseases.
That concludes our prepared remarks. We’d like to thank everyone who dialed in. And I’ll now turn the call over to the operator for questions.
Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] Our first question today comes from Yigal Nochomovitz with Citi. Please go ahead.
Hi. Great. Thank you very much for taking the questions. On the SKYCLARYS launch, could you just give a little bit more granularity perhaps on the pace of the start from accrual since you had started accepting the forms on March 6, just curious if it was more of a bolus effect or if you’re seeing a steady ramp over time? And were there any pediatric applications that were off-label in that 500 number? Thanks.
Dawn, would you like to take that question?
Yes. Hi, Yigal, thanks so much for your question. We are really pleased with this early demand and expected that patients and HCPs would be actively engaged upon approval. And so, of course, we’re only looking at really a two-month window here where we’ve seen these 500 enrollment forms or patient start forms be submitted. So of course, that’s very quickly over a short amount of time. And it’s a bit early to say, is this just a bolus of patients or should it continue. But again, we were really anticipating that we would see this level of support and interest from the HCP and the patient community and that is really very encouraging.
As far as your second question around pediatric patients. Of course, our label is for adults and adolescents 16 years and older. And so we really do believe that payers are going to really look to this when they look to reinforce enrollment criteria. And so right now, it’s a bit early to really communicate on the number of patients and the demographics within the enrollment. But if you think about the trial enrollment criteria and then also what we expect to see from payers, you can imagine the demographics that we’re seeing.
Okay. Great. And then just one follow-up on the post-approval supplement as you discussed. You mentioned that the FDA maybe able to approve this earlier. Can you provide any more granularity on when earlier would be? And then are you planning to leverage a second source supplier to resolve this impurity for new batches or once you get the PAS cleared that’s really not necessary? And has EMA commented at all on this impurity question in their CMC review? Thank you.
Andrea, would you like to comment on those three questions?
Yes, I can take at least one of those questions. So the FDA has not provided any granularity on the timing of an earlier approval. They have just notified us that the review is prioritized and that it should come sooner provided, of course, any review issues. But we believe we’ve provided everything that we need to provide.
And then I think the question was on the – do we need to change the supplier network? Manmeet, do you want to take that?
Yes. Sure, Warren. Yigal, as you mentioned already, right, with – we have already completed manufacturing of our batches, current batches and capsules, and they have been completed and packaged right now. So we are just waiting for this path to be approved by the FDA for us to do that. We have enough quantity to supply for the near-term and for next several years already being – we are accelerating our effort to produce more re-supply capsules. Yes, in the long run, we would be looking at second supply source and other activities also.
Okay. And then just on the EMA, any comments there from their review of the CMC?
So I can address that. So the impurity was identified after we have submitted the MAA. So the EMA is not aware at this time of the impurity that we observed. So we plan to actively look to update the MAA, either pre-market or post-marketing, and we’re trying to do that as quickly as we can.
Got it. Thank you very much.
Our next question comes from Madhu Kumar with Goldman Sachs. Please go ahead. Your line is open.
Hey, everyone. Thanks for taking our questions. So maybe to think about the impurity situation, but thinking more about the cadence of kind of news flow between now and mid-August. So you mentioned in the prepared remarks that the timeline for the FDA suggesting substantial deficiencies would be in the kind of June timeframe. So should we think about it kind of from a no news, good news type perspective that it goes through June and there hasn’t been any no disclosure from you all about a deficiency that that should be kind of considered that things are running along smoothly? And then kind of practically from that, would you announce the kind of resolution of the PAS and kind of the official formal commercial launch of the drug?
Yes. I think I’ll just take that and Andrea, feel free to chime in. But yes, we wouldn’t expect to – we view it as a routine review. We wouldn’t expect – we think the filing is adequate. Yes, I would say no news is good news. They’re just proceeding with their review. I’m assuming we’re going to make an announcement when drugs available in the channel, particularly for the patients and for the healthcare providers. Is that correct, Manmeet?
Yes, that’s the plan.
Yes.
Okay. And then a follow-up question. So you guys are talking about certain expectations towards kind of getting to a breakeven status. And that has made certain assumptions around operating expenses that kind of just assume some level of bardoxolone investment. So given today’s discontinuation of bardoxolone CKD development, does that change what those metrics look like? What do you think maybe it’s kind of SKYCLARYS patient number that you think you to breakeven now versus before the official discontinuation of Bard and CKD?
Sure. Madhu, this is Manmeet. It’s a great question. As you know, we don’t guide on our operating expenses and our revenue yet. But if you do a calculation based on the U.S. pricing and you look at our current run rate of expenses, right, I’ll start with the expenses. Our expenses have been – quarterly expenses have been in the run rate of $70 million, $75 million a quarter, which equates to a $300 million a year expense rate.
And if you think to get to the self sustainable breakeven point, you need approximately 1,000 patients to SKYCLARYS patients, right, to reach that point. And as Dawn mentioned, since we’re very excited with the current full start and first two months to reach 500 patients, we believe that point could come pretty quickly after launch.
Okay. Great. Thanks very much, everybody.
The next question comes from Yatin Suneja with Guggenheim. Yatin, please go ahead.
Thank you for taking question. Sorry, asking more question again on this impurity issue. So it seems like I mean, if you read the press release, you are trying to ask the FDA to increase a certain acceptable threshold of the impurity. Is that the right way to read it? Have you actually resolved it? Can you just tell us what the impurity was? So that’s just on the impurity side.
I do have a question on Bard. I was curious, if you can comment on what did you see – did you see any worsening of albuminuria in that study. Just trying to understand what the retro would be to the broader pipeline for CKD – early-stage pipeline. Thanks.
Okay. Andrea, do you want to address the…
Yes. So yes, you are correct. We are proposing to increase the impurity – this specific impurity of specification to the – basically to the reporting threshold, above the reporting threshold, but not beyond the qualification threshold, which would require qualification, additional toxicology qualification. The impurity itself is an acetone adduct that is part of our normal process chemistry that basically forms in the presence of acetone. And so again, we saw that in our drug process validation and this is the appropriate control strategy to manage what is – what we believe to be inherent variability to our process.
And then, Colin, would you like to address the question about safety read-through proteinuria?
Yes. And so, Kirin and their KOLs will be presenting the data at a future medical meeting when we’ve publishing the results. But at a high level, I can say that we were pleased with the safety. Number one, there were no adverse cardiovascular finding. So no imbalances in deaths, adjudicated cardiovascular events, including CHF events, no differences in blood pressure.
From a renal safety perspective, I think it’s important to note that there is no evidence of hybrid filtration. There was no worsening kidney function relative to placebo. What was observed was that there was a modest increase in kidney function that was not sustained in the patients who reached ESRD. And so the drug just wasn’t enough drug or wasn’t able to meaningfully maintain that separation. And the albuminuria profile is consistent with what we’ve seen before. And lastly, there is no evidence of any liver injury. And so this is a large trial. It resolves some overhang from the BEACON trial. It shows that we can administer our drug safely to patients. And so we think it’s favorable as far as the read-through to the class.
Our next question comes from Charles Duncan with Cantor Fitzgerald. Please go ahead, Charles. Your line is open.
Yes, good morning. Thanks for all the color on the initial interest in SKYCLARYS and taking our question. I had a couple of questions. One is relative to the European process. I’m wondering Andrea provided a fair amount of information. But I’m wondering if your overall perspective would be that the questions were fundamentally different from those by the FDA and require any new analysis. Or do you believe that your – I guess preparation for the NDA really fully addresses all the questions from the EMEA, but for the impurity?
Hi, Charles. Yes, I’ll take this. Actually, we think that they’re very consistent with the questions that were addressed – raised by the FDA during the review process. I think they basically want a summary of the totality of the data, some of the things that we provided in the FDA review process were things like that Andrea mentioned like we looked at the imbalances and the baseline characteristics and showed that those favorite placebo and that when you adjusted for those actually strengthens the P value of the primary analysis.
I think that the FDA did a thorough review of where the drug should be used based on like the subgroup analyses and read-through to various groups including the pes cavus patients. So yes, I think we’re in very good shape to answer those questions, yes.
Okay. And then my follow-up is relative to pediatric expansion. I guess it seems to me like that’s a really important thing for the patient community. When could you anticipate that PK/PD study to be complete and file for an sNDA? And then I guess and an associated thing is PRB, I know it’s not directly related, but any current updates in terms of how to monetize that? Thanks.
Yes. So I’ll start with the first one and then Seemi feel free to chime in. With respect to the U.S. adjusting the label for pediatric patients in the United States, the forthcoming interaction with the FDA will be critical to understanding what that path is. We have a number of approaches to that. So I want to make clear. We don’t anticipate that the PK study alone would support. It maybe great if it did. But we haven’t yet had that interaction with the FDA. We’re actively in preparation for that to get their feedback on a number of approaches to expanding that label.
Having said that, when would we anticipate having the PK/PD data, Seemi?
So the level of interest is very high at the moment as we have discussed earlier on. So the PK/PD study will initiate last quarter Q4 this year. And as you mentioned, it’s short-term single dose study. We anticipate that within few months, we will be having the data. We are anticipating at the moment three to four months.
Yes, there’s been a high level of interest. We think it will enroll relatively rapidly. Manmeet, do you want to comment on the pediatric review voucher?
Sure. Charles, this is Manmeet. And yes, with the grant of this voucher, we always have the option to monetize that and we actively look into those options. But right now I think since with this new funding, there is no current need to do an instant monetization of anything. I think we are both self-funded and sufficiently funded for now.
Okay. Thanks for taking the questions.
Sure.
Our next question comes from Carter Gould with Barclays. Carter, please go ahead.
Great. Thank you for taking the question. Maybe first just for clarification, Andrea, I think in your comments you made some, I think I heard early some clients have heard some commentary around nitrosamine impurity. Can you just make – I want to make sure I get that that clarified.
And secondly, maybe just on the change in the Blackstone structure. Can you talk a little bit about the decision process to start offering or start – the switch to a royalty on Omav sales. My understanding was you kind of were under no obligation to do that. So we’d love to kind of just hear some background on how you guys sort of arrived at that. Thank you.
So yes. Hi, this is Andrea. So regarding the nitrosamine impurity, so that that is specifically related to a question that the EMA has asked to us, specifically wanting clarification on our nitrosamine risk assess adjustment such as clarifying the manufacturing steps that we basically have identified in that report as they match that up to the manufacturing steps in the MA itself.
So I think this is pretty much an expected question based upon the report that we put in and I think we can answer it – with no issues.
Carter, this is Manmeet. And I’ll take your second question regarding the Blackstone agreement. I think you’re right. We had no obligation on Omav towards Blackstone. Blackstone had full rights on bardoxolone development and commercialization. And as you know, we made this decision to discontinue bardoxolone program and it was in conjunction with Kyowa Kirin, our partner in Japan, and our collaboration partner, Blackstone. So it was all decided together.
And in order to discontinue our FALCON program and also to make sure we get released from all future obligations for Bard development and commercialization, and free from liens and security interest on our whole pipeline, we decided to do this Omav royalty. But it’s a slow low single-digit number and it’s also capped.
Our next question comes from Annabel Samimy with Stifel. Annabel, please go ahead.
Hi, thanks for taking my questions. Just a quick one with regard to the PS. Were there any patients who were on compassionate use that just transition to the PF and contribute to the big bolus of that you saw? And have you gotten any sense of the timing and transition approval. Our payers are approving these PDFs in a six to eight-week time frame and an expect a timeframe or have they not even considered until the product is released and available to deliver the patients? Thanks.
Hi, Annabel, I’ll take the first question. Not aware of any number of patients that we had in compassionate use, we do have a group of patients that are participating in – still participating in the open label extension study. For now, we’re continuing that study unchanged. And so, I mean, there may be a patient who have dropped out or something come up, but we wouldn’t really be aware of that. So I don’t believe that’s having any impact on the start form initiations that we’ve been seeing. Dawn, do you want to comment on the payer experience so far?
Yes. Happy to, Annabel. Thanks for the question. So we’ve engaged with payers really for the last year. And since approval, our payer team has reached all of the top U.S. payers responsible for 90% of covered lives And so what we do know about payer policy development is that generally takes three to six months, sometimes a little bit longer with payers with a rare specialty therapeutic.
And so we are expecting policies to be published in the second half of this year. Right now what we’re seeing are payer authorizations through medical exception and prior auth. And that’s really tracking as we had expected, so we’re very pleased with that as well.
Okay, great. Thank you.
Our next question comes from Maury Raycroft with Jefferies. Maury, please go ahead.
Hi, thanks for taking my questions. Just clarifying for SKYCLARYS, it sounds like there’s no need or plan in place to change the manufacturing process. Is that correct? And then for the DPNP study starting in third quarter, how long do you think it will take to enroll that study and get to data?
I’ll take the first one. We’re really not changing the process again just to reiterate the impurity that was identified was a known impurity, we’d observed it in the process. So it wasn’t from a change in the process steps or a new impurity. It had just been below the reporting threshold of basically 0.1%. It ticked up just above 0.1%. And so we needed to amend the specification now for it to bring it up to below 0.15, which is the qualification, which is the qualification limit. But essentially no change in the manufacturing process.
And then the second question was…
The DPNP study.
Oh, DPNP study. Seemi, do you want to comment on that? The enrollment? What we think about enrollment for the DPNP study for RTA 901?
Yes, I can take that Warren. We have guided that we will initiate the study in the third quarter. We have not guided yet on the timing as we complete enrollment, I think we’ll give some more clarity as we have.
I think we’re hopeful that we’ll see good enrollment there. There’s obviously a huge bolus of these patients and it’s very underserved.
And it’s only a 12-week study. And so…
Yeah. Got it. Thank you.
Completion of enrollment.
Yeah.
Our next question comes from Brian Skorney with Baird. Brian, please go ahead.
Hi. This is [Luke] on for Brian. On the preclinical Nrf, can you talk about how your understanding of the sciences changed maybe since bringing Omav and Bard to the clinic? And how you’re deciding what neuro indications on the list you provided you might want to go after first? Thanks.
Yes. Colin, you want to comment on that?
Sure. So we’ve been working with the top Nrf2 experts for over a decade now to collaborate and understand the role of Nrf2 and similar to CKD Nrf2 is broadly applicable in neurological diseases. And as I mentioned in my prepared remarks, there’s now a large amount of data in the literature that links polymorphisms in the Nrf2 pathway to susceptibility to diseases. Not surprisingly based upon our FA data, there’s relevance to many other movement disorders. There’s also a relevance to Alzheimer’s disease and other forms of dementia.
And so we’re deploying these assets in neurological diseases as well as potentially other therapeutic areas. And it’s really the wealth of data we have non-clinically and from the human studies that’s giving us a path. We’re having a way through the Inflation Reduction Act obviously to figure out how we triage the opportunities and that process is ongoing, but there are opportunities not only in rare forms of neurological disease, but common forms. And so we have multiple assets to address those types of indications.
I’d just add one thing, too. I think over the past probably five years or so is the biology around Nrf2 has become better understood. I think the role of Nrf2 on mitochondrial function has been very well delineated. And you may recall that prior to initiating our FA clinical trials, we did studies of FA patient fibroblast ex vivo and showed that they had, as you would expect, severely impaired mitochondrial function and Omav was able to restore that. We think that is a really important potential biomarker for selecting future indication. And we’ll be looking at that data like that for each of the selected indications.
Thank you.
Our next question comes from Matt Kaplan with Ladenburg. Please go ahead, Matt.
Hi. Good morning. Thanks for taking the questions. Just going back to the impurity for a minute. I guess, is the supply that you’ve manufactured put at risk at all by the discovery of this impurity?
We don’t believe so. Again, the impurity is well characterized. It’s easily measured. We’re requesting a very slight increase in the specification above the reporting limit, but below the qualification threshold. So we don’t expect also based on – you should comment on this, Andrea, the safety profile of the impurity.
Yes, exactly. This is part of our normal process chemistry, as I had stated earlier. So again, I think we’re confident that the control strategy of adding and increasing the specification limit for this specific impurity is the right thing. The safety testing that we have done, which includes genotoxicity testing as well as In Silico Structural Analysis. I’ll indicate that the impurity is non-mutagenic. And so at this time, I think we’re very confident in our manufacturing process and the lots produced. We just need to get through this PAS and we’ll be fine.
Okay. And did you – seriously, did you change your analytical methods when you discovered this level of impurity, or was it – were they consistent and you just discovered a higher level?
Yes. So they – we’re very fortunate that our analytical method – our validated analytical method is able to detect this. So we did not have to change per se that we obviously had to add in the specific impurity to look at that now and have that as part of the validated process and testing.
Okay. Thanks. And then last question in terms of understanding that you made strategic decision to discontinue bardoxolone. But yes, maybe a question for Colin. In the AYAME study, I guess, why do you think the improvement in eGFR that you observed did not translate into an impact on the end-stage renal disease events?
So what we noted in the data is that in the patients who reached ESRD, both drug and placebo, there is separation in eGFR for the first approximately two years. And then there was convergence and they overlap each other for the following two years. And we don’t have any clear answers for why, but we noted is that when patients had a 30% or 40% decline in eGFR, the vast majority of patients were still receiving placebo or bardoxolone.
But after that, we noted in the data that both bardoxolone and placebo-treated patients were discontinued from drug and the average duration was five to seven months until they reached ESRD. And so we don’t know if investigators had a difficult time managing patients as their kidney function approached ESRD if there were concerns about the large loss that was observed. But once again, we just – the eGFR increase was not maintained, which explains why. Initially, there was an increase, why there’s separation of 30% and 40% declines, but ultimately not in the ESRD events.
All right. That’s helpful. Thank you, and thanks for taking questions.
Thank you. Those are all the questions we have time for today. Again, thanks for your participation on today’s conference call. As a reminder, an audio recording of the call will be available shortly after the call on Reata’s website at reatapharma.com in the Investors section. Thank you very much for your participation. You may now disconnect.